Igloo Homes v Sammut Constructions [2005] NSWSC 85

New South Wales Supreme Court

CITATION : Igloo Homes v Sammut Constructions [2005] NSWSC 85

HEARING DATE(S) : 17 February 2005

JUDGMENT DATE : 17 February 2005

JURISDICTION : Equity

JUDGMENT OF : Campbell J

DECISION : Indemnity costs not ordered

CATCHWORDS : PRACTICE - costs - application for indemnity costs - offer of compromise made at a time when both parties mistakenly believed amount in issue was $225,000 - amount in issue later found to be $250,000 - whether the offer involved a real compromise to be judged by reference to parties' mistaken common belief

LEGISLATION CITED : Supreme Court Rules

Igloo Homes v Sammut Constructions [2004] NSWSC 1213 CASES CITED : Tickell v Trifleska Pty Ltd (1991) 25 NSWLR 353

Igloo Homes Pty Limited - Plaintiff/Cross Defendant PARTIES : Sammut Constructions Pty Ltd - Defendant/Cross Claimant

FILE NUMBER(S) : SC 3201/04

A S Martin SC; S Wells - Plaintiff/Cross Defendant COUNSEL : K Tapsell, solicitor - Defendant/Cross Claimant

Salmon & Co - Plaintiff/Cross Defendant SOLICITORS : Watkins Tapsell - Defendant/Cross Claimant

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

THURSDAY 17 FEBRUARY 2005

3201/04 IGLOO HOMES PTY LTD v SAMMUT CONSTRUCTIONS PTY LTD JUDGMENT – Ex Tempore 1 HIS HONOUR: There are two live issues before me now. The first one is a claim by the cross-claimant for indemnity costs. That claim is put upon two bases; one is a Calderbank letter written on 14 May 2004, offering to settle for $224,000. That offer was made before the proceedings were started, on 1 June. 2 Before an offer of compromise is able to trigger any consequences so far as the costs payable are concerned, under the rules it is necessary for it to involve a genuine compromise, not a merely token one: Tickell v Trifleska Pty Ltd (1991) 25 NSWLR 353. 3 The same applies to Calderbank offers. At the time that the Calderbank letter was written, it was the view of everyone involved in the transaction that if GST was, indeed, payable on the contracts, the amount which had been paid at settlement was $225,000 short. Whether GST was payable was the only topic of disagreement involved in the litigation. 4 One of the policies which the court is seeks to effect in making indemnity cost orders when a reasonable offer of compromise is refused, is to encourage the settlement of disputes when a reasonable offer is made. In deciding whether an offer is reasonable, one must, therefore, look at the issues as they are likely to have appeared to the parties at the time that the offer was made. 5 In the present case, the amount underpaid at settlement was, in fact, $250,000. I mentioned that circumstance at paragraph [67] of my judgment of 15 December 2004, Igloo Homes v Sammut Constructions [2004] NSWSC 1213. I would not regard the object of the practice of awarding indemnity costs as being advanced by measuring the offer of settlement of $224,000 against the amount of $250,000, which the parties much later realised was in fact the amount which would have been underpaid if GST was payable. 6 For those reasons, I do not make any order for indemnity costs on the basis of the letter of 14 May. 7 On 27 August 2004 an offer of compromise, purporting to be made under the provisions of Part 22, Supreme Court Rules, was posted. It was an offer which offered to settle for $234,000 plus costs, and stated that it remained open for acceptance until 24 September 2004. 8 Whether that was a real offer of compromise must, likewise, be judged by reference to the facts as they appeared at the time. If an amount of $225,000 had been short paid on settlement, interest accruing at 10 per cent under the contract would have brought the amount owing, as at 27 August, to a little over $233,000. I do not regard an offer to accept $234,000 as a real compromise of the dispute as it appeared to the parties at the time. 9 For that reason, I decline to make any order for indemnity costs on the basis of the offer of compromise. It follows that the order for the payment of costs will be that the plaintiff pay the costs of the defendant of the proceedings. 10 The plaintiff also seeks an order for payment of interest on costs. The making of such orders is provided for by section 95(4) Supreme Court Act 1970. The making of such an order is dependent upon the court being persuaded that it is likely that amounts on account of costs were, in fact, paid before the date the judgment takes effect. 11 There is affidavit evidence that certain tax invoices have been issued by the cross-claimant's solicitor to the cross-claimant. Those invoices are not attached to the affidavit, nor is there any statement that the amounts paid are in any way connected with the present proceedings. I was invited to draw an inference from the context in which the statement occurs, that they relate to the present proceedings. 12 When it is so easy to put the correct position before the court, I am not inclined to draw any such inference. For that reason I decline to make any order for interest on costs. 13 Mr Martin SC submitted that if amounts were to be allowed on assessment from any amounts which have already been paid by the cross-claimant to its solicitors, application for interest on costs can be made at that stage. I reserve liberty to make such an application. 14 I make the following orders in addition to those made on 15 December 2004: