New South Wales Supreme Court CITATION : Howe v Australian International Optimist Dinghy Assoc Inc [2007] NSWSC 788 HEARING DATE(S) : 10 July 2007 JUDGMENT DATE : 10 July 2007 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Successful defendant's application for indemnity costs refused. CATCHWORDS : PROCEDURE [574] - Costs - Departing from the general rule - Order for costs on indemnity basis - Factors relevant to exercise of court's discretion – "Calderbank" letter – Four days for acceptance of offer – Whether plaintiff's non acceptance of offer reasonable. CASES CITED : Howe v Australian International Optimist Dinghy Assoc Inc [2007] NSWSC 524 MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 PARTIES : Nicholas Andrew William Howe by his tutor Andrew McDonald Howe (P) Australian International Optimist Dinghy Association Inc (D) FILE NUMBER(S) : SC 1621/07 COUNSEL : K A Rees (P) N Obrart (D) SOLICITORS : Mallesons Stephen Jaques (P) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J TUESDAY, 10 JULY 2007 1621/07 NICHOLAS ALEXANDER WILLIAM HOWE by his tutor ANDREW MACDONALD HOWE v AUSTRALIAN INTERNATIONAL OPTIMIST DINGHY ASSOCIATION INC JUDGMENT re application for indemnity costs 1 HIS HONOUR: In this matter I delivered my substantive judgment on 24 May 2007: Howe v Australian International Optimist Dinghy Assoc Inc [2007] NSWSC 524. It was clear when judgment was delivered in favour of the defendant that the plaintiff must pay the defendant's costs at least on the ordinary basis. The matter was stood over to today to permit the defendant to apply for costs on the indemnity basis. 2 Today Miss Obrart, of counsel for the defendant, has maintained an application before me for costs of the whole or part of the proceedings on the indemnity basis. The plaintiff has put on affidavit evidence in opposition to that application. The application is made today on two grounds. 3 One ground is a clause in a release and assumption of risk deed between the plaintiff and defendant dated 9 March 2007. Clause 9 of that deed is referred to. I do not think that that clause applies to the costs of proceedings such as the present and indemnity costs will not be awarded on the basis of that clause. 4 The other ground advanced for an order for indemnity costs for the whole or at least part of the proceedings is a Calderbank letter in the form of an email sent by the defendant to the plaintiff's solicitor at 2pm on 3 March 2007. That was only four days before the commencement of the trial, including two weekend days. The terms of the offer were that the proceedings should be disposed of as follows, proceedings dismissed, plaintiff to pay the defendant's costs. 5 The plaintiff's case is that this time was too short for it to be said that failure to accept the offer rather than to proceed to trial was unreasonable. The plaintiff's affidavit evidence deposes to a course of negotiation in the latter stages leading up to trial conducted by both parties through an intermediary. The plaintiff's solicitor, whose word I have no reason to doubt, deposes that as of 30 April 2007 certainly she believed that a settlement was going to occur and that the breakdown of the negotiation did not, in fact, become apparent until 2 May 2007, the day before which the Calderbank letter was sent. 6 I have been referred to, and it is not necessary for the purpose of deciding this application to go beyond, the decision of Lindgren J in the Federal Court in MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236. His Honour referred (at 239) to the well known principle that the mere making of an offer by a Calderbank letter and its non acceptance, followed by a result more favourable (no less favourable) to the offeror, will not automatically lead to the making of an order for payment of costs on the indemnity basis. 7 Questions of the reasonableness of the offeree's action in the face of the offer arise. The question in the forefront in this case, as in the MGICA case, relates to the time within which the offer might be accepted. In that case it was four days only. The same is true in this case. In this case those were the four days immediately preceding the day on which the trial was fixed to commence. Those days were undoubtedly days in which the plaintiff's attention needed to be focused upon getting ready to commence the trial and would have been so focused in any event. This would have been all the more so because of the plaintiff's solicitor's preceding belief that the matter was likely to be settled. However, I do not need to rely on the belief as to settlement to come to the conclusion to which I come. 8 Ms Obrart has pressed on me, and it is certainly a factor to be borne in mind, that the time considerations in this case were always foreshortened by the fact that the proceedings had commenced as recently as 26 February 2007 and were to be heard on an expedited basis, because they dealt with the selection of an Australian team for an overseas sailing event to occur in July 2007. 9 Nonetheless, in all the circumstances, I have come to the conclusion that, in view of the short time the plaintiff was given to consider the situation, it could not be said that the plaintiff acted unreasonably in failing to accept the offer. In those circumstances, there will be no order for indemnity costs as a result of the delivery and non acceptance of the Calderbank offer. 10 It would follow that the order would simply be that the plaintiff pay the defendant's costs of the proceedings. If the order is made in that form, the costs, of course, will be assessed on the ordinary basis. Ms Rees, of counsel for the plaintiff, in view of the plaintiff's success on the argument today, has asked that the costs ordered in the defendant's favour should not include the costs of today and that request I deem reasonable. 11 The order will, therefore, be that the plaintiff pay the defendant's costs of the proceedings not including the costs of the argument on 10 July 2007 concerning the payment of indemnity costs and of preparation for that argument. ********** 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. 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