New South Wales Supreme Court CITATION : Ateco Automotive Pty Limited v Business Bytes Pty Limited Business Bytes Pty Limited v Ateco Automotive Pty Limited [2003] NSWSC 283 HEARING DATE(S) : 3 April 2003 JUDGMENT DATE : 3 April 2003 JURISDICTION: Equity Division Commercial List JUDGMENT OF : McClellan J DECISION : Ateco to pay Business Bytes' costs on an indemnity basis CATCHWORDS : COSTS - indemnity costs - Calderbank letter - whether all evidence must be served when offer made - reasonable offer CASES CITED : Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Smits v Roach, 6 August 2002, NSWSC 663 Ateco Automotive Pty Limited (Pltf) PARTIES : Business Bytes Pty Limited (1D) Maurice Patrick Villari (2D) FILE NUMBER(S) : SC 50146/01; 50171/01 COUNSEL : G A Sirtes (Pltf) F P Donohoe (Defs) SOLICITORS : Letherbarrow Lawyers (Pltf) Lenehan & Co (Defs) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McCLELLAN J THURSDAY 3 APRIL 2003 50146/01 ATECO AUTOMOTIVE PTY LIMITED v BUSINESS BYTES PTY LIMITED 50171/01 BUSINESS BYTES PTY LIMITED v ATECO AUTOMOTIVE PTY LIMITED JUDGMENT 1 HIS HONOUR: The parties have, at my direction, brought forward short minutes providing the orders which are appropriate in both of these proceedings. Although there is no dispute that in both proceedings Ateco must suffer an order for costs, Business Bytes claims an order for indemnity costs from 12 June 2002. 2 On that day the solicitors for Bytes forwarded a letter, in the nature of a Calderbank letter, to the solicitors for Ateco. In the letter the solicitors indicated that Bytes would accept a compromise of its claim with interest in the proceedings in which it was the plaintiff and a verdict in Bytes' favour in the proceedings in which it was the defendant. It was said that the offer was open for a period of 21 days. 3 By the time the offer was made lay evidence in the matter had been served but it was not complete. However, the substantial evidence upon which Bytes relied had been served and Ateco was in a position to evaluate the evidence which would be given by Bytes detailing the history of the dealings between the parties. 4 The letter from the solicitors indicated that if the offer was not accepted, it would be necessary for Bytes to proceed to incur further costs of the preparation of an expert report. As it happened, the offer was not accepted and the report of the expert (Mr White) was obtained and served some time in August. 5 That expert's report became significant in the ultimate reasons for my decision in the matter. It had the effect of confirming the position put forward by Bytes in the evidence it had previously served. In particular the evidence of Mr Villari, the principal of Bytes, which was critical to an understanding of the relationship between the parties and its consequences was confirmed by Mr White. 6 I have recently considered the principles appropriate in relation to an application for costs on an indemnity basis in Smits v Roach 6 August 2002 NSWSC 663. As Justice Rolfe indicated in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425: "There is a strong and consistent body of authority in this Court favouring the predisposition towards an order for indemnity costs if an offer of settlement has been made rejected and not bettered in the litigation." 7 As his Honour pointed out, this fundamental approach to an application for indemnity costs needs to be considered having regard to all of the circumstances of the particular matter. 8 Counsel for Ateco says that an order is not appropriate in the present matter for the reason that the lay evidence of Bytes was not served until shortly before the 12 June letter. The evidence to which he refers is that of Mr Villari. However, in my opinion that evidence was served at a time which would have allowed Ateco to have formed an appreciation of its affect and receive advice in relation to it. 9 Secondly, it is submitted that because the evidence of Mr White was not received until after the time provided in the letter had expired, it is unreasonable to expect Ateco to have negotiated within the time frame provided in the solicitor's letter. 10 In my opinion, although the White evidence played an important part in my reasons for judgment, the fact that the report had not been served when the letter was forwarded is not a reason to deny Bytes costs on an indemnity basis. One of the purposes for the court making orders for costs on an indemnity basis is to encourage parties to consider their position and the possible compromise of litigation so that costs to both the parties and court administration can be minimised. That purpose could be defeated if an order for costs on an indemnity basis is only to be made when an offer is made after all the evidence has been filed. 11 In my opinion, even without the expert evidence, the facts relevant to the issues in these proceedings were well known to officers of Ateco and, after the evidence of Mr Villari had been received, Ateco was in a good position to evaluate the matter. 12 Finally it is submitted that the offer made by Ateco was not a true offer of compromise. In effect, the offer provided for Bytes to accept a reduction of approximately $33,000 in the sum of its total claim including interest. Plainly this was a compromise and in the circumstances of this case, in my opinion, the extent of that compromise was reasonable. 13 Accordingly, I am of the view that it is appropriate for me to provide for an order for indemnity costs after 12 June 2002. I make orders in terms of the short minutes in each matter which I have initialled and dated. ********** Last Modified: 04/24/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.