New South Wales Supreme Court CITATION : The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 877 HEARING DATE(S) : 22/03/10, 23/03/10, 29/06/10 Written submissions on costs: 10/05/10, 28/05/10 JUDGMENT DATE : 6 August 2010 JURISDICTION : Equity Division JUDGMENT OF : Barrett J DECISION : Order that the plaintiff pay the defendants' costs of the proceedings, such costs to be assessed on the ordinary basis up to and including 18 September 2009 and on the indemnity basis after 18 September 2009. CATCHWORDS : PROCEDURE - costs - whether unsuccessful plaintiff should be ordered to pay costs on the indemnity basis - whether costs order already made and beyond court's power to vary - held not - defendants seek to rely on offer of compromise - plaintiff says disclosure of offer is breach of contract warranting exclusion under Evidence Act, s 135(a) - held no breach of contract - plaintiff says such disclosure precluded by Civil Procedure Act, s 30(4) - held not as section applies only to court ordered mediation - plaintiff says non-acceptance of offer not unreasonable where defendants' evidence not served when offer made - but plaintiff actively rejected offer and made counter-offer despite absence of defendants' evidence - non-acceptance of defendants' offer by plaintiff unreasonable - indemnity costs ordered Civil Procedure Act 2005, ss 14, 25, 30(4) LEGISLATION CITED : Evidence Act 1995, ss 131, 135(a) Uniform Civil Procedure Rules 2005, rule 36.16 CATEGORY : Principal judgment Calderbank v Calderbank [1976] Fam 93 Malouf v Prince (No 2) [2010] NSWCA 51 CASES CITED : Mitchell v Tucker [2010] NSWSC 672 The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 1070 The Leasing Centre (Aust) Pty Limited - Plaintiff PARTIES : Rollpress Proplate Group Pty Limited - First Defendant RPG Australia Pty Limited - Second Defendant FILE NUMBER(S) : SC 2008/279009 Mr P T Taylor SC/Mr D L Cook - Plaintiff COUNSEL : Mr J G Duncan - Defendants SOLICITORS : Swaab Attorneys - Plaintiff Middletons as agent for McCullough Robertson Lawyers - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY, 6 AUGUST 2010 2008/279009 THE LEASING CENTRE (AUST) PTY LIMITED v ROLLPRESS PROPLATE GROUP PTY LIMITED & ANOR JUDGMENT 1 I am dealing with the question of costs consequent upon my decision of 16 April 2010: The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282. In accordance with directions, written submissions on costs were filed. I then heard oral argument on 29 June 2010. 2 The defendants seek an order that the plaintiff pay their costs of the proceedings and an order that those costs be assessed on the indemnity basis from 19 September 2009. The plaintiff resists any such outcome with respect to costs. 3 In addressing the plaintiff's submissions, it is necessary to refer to aspects of events between 16 April 2010 and 29 April 2010. 4 On 16 April 2010, I read aloud in open court the content of paragraphs [152] to [155] of the reasons I then published: "[152] Upon the further amended statement of claim, there will be judgment for the first defendant and the second defendant. [153] Upon the amended cross-claim, there will be judgment against the plaintiff/cross-defendant and in favour of the first defendant/cross-claimant in the sum of $52,768.20 together with interest at the rates specified in Schedule 5 to the Uniform Civil Procedure Rules 2005: (a) on $10,766.64 from 12 June 2007 to the date of judgment; (b) on $10,553.64 from 12 July 2007 to the date of judgment; (c) on $10,553.64 from 13 August 2007 to the date of judgment; (d) on $10,553.64 from 12 September 2007 to the date of judgment; and (e) on $10,553.64 from 12 October 2007 to the date of judgment. [154] There will also be an order that the plaintiff pay the costs of the first defendant and the second defendant of the proceedings. [155] Because of the need to make the interest calculations, I will ask that the parties agree short minutes of orders and deliver them to my Associate within seven days, with a view to the making of orders on a particular date a few days after delivery. The calculations should be made accordingly." 5 It appears that the words thus spoken by me were, on 16 April 2010, recorded in the court's computerised court record system. 6 By letter dated 28 April 2010 addressed to my Associate (and copied to the plaintiff's solicitors), the solicitors for the defendants forwarded short minutes of order and stated that their clients sought an opportunity to make an application for a special costs order on the basis of the plaintiff's rejection of a settlement offer. They said that the plaintiff did not consent to a timetable for submissions on costs. 7 On the following day, 29 April 2010, orders in accordance with those short minutes were both made in chambers and recorded in the court's computerised court record system. They were in these terms: "1. Upon further amended statement of claim, judgment for the first defendant and the second defendant. 2. Upon the amended cross-claim, judgment against the plaintiff/cross-defendant and in favour of the first defendant/cross-claimant in the sum of $52,768.20 together with $13,605.95 interest calculated in accordance with Schedule 5 to the Uniform Civil Procedure Rules 2005." 8 Also on 29 April 2010, I had my Associate send to the respective solicitors an email asking for an agreed timetable for submissions on costs. Such a timetable was received on 7 May 2010. 9 The first submission made by the plaintiff in relation to costs is that the court has already dealt with the matter and has no power to vary the order made. This submission is based on the proposition that, when the words in paragraph [154] set out at paragraph [4] above were spoken in open court, the court made an order; that the only power to set aside or vary that order is conferred by rule 36.16 of the Uniform Civil Procedure Rules 2005; and that none of the provisions of that rule allows variation or setting aside of the order. It follows, so the submission runs, that an order with respect to costs has been made and that the court, being functus officio, cannot change or supplement that order. 10 Although entered in the court's computerised court record system, the words spoken on 16 April 2010 were not, in terms, judgments or orders. Each form of words included "there will be" and was thus a statement of intended future outcome. This was confirmed by later words ("I will ask that the parties"). The preparation of short minutes of order was requested. This was consistent with an intention that orders actually be made in the future in the terms, as to substantial outcome, foreshadowed by the words spoken in court. 11 The relevant words as to costs (in paragraph [154]) referred to an order to be made or intended to be made, in the same way as the words regarding the claims in the statement of claim and the cross-claim (in paragraphs [152] and [153]) referred to judgment to be ordered or intended to be ordered. 12 The intentions so indicated were implemented in relation to the paragraph [152] and [153] matters by the orders made in chambers on 29 April 2010 and entered on that day. No corresponding action was taken or entry made in relation to the paragraph [154] matter. 13 It is clear that no order with respect to costs has been made at this point. The question whether an existing costs order may be varied therefore does not arise. 14 I would add, however, that even if the speaking of the paragraph [154] words on 16 April 2010 had amounted to the making of an order which was entered on 16 April 2010, the notification of 28 April 2010 – that is, twelve days after 16 April 2010 – being notification both to my Associate and to the solicitors for the other party, must be accepted as compliance in substance, if not in form, with rule 36.16(3A): "If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered." 15 Such compliance in principle would have made it appropriate to exercise the discretion under s 14 of the Civil Procedure Act 2005 to dispense with the need for a notice of motion under that rule. The letter of 28 April 2010 forwarded to the Associate and copied to the plaintiff's solicitors within fourteen days after the entry of the order would have been a substitute for a notice of motion, thus warranting that dispensation: Malouf v Prince (No 2) [2010] NSWCA 51; Mitchell v Tucker [2010] NSWSC 672. 16 Except for the matter with which I have just dealt, the plaintiff does not make any submission against the proposition that it should be ordered to pay the defendants' costs. It does, however, submit that there should be no order concerning assessment on the indemnity basis. 17 In pressing for an order for assessment on the indemnity basis from 19 September 2009, the defendants seek to rely on an offer or proposal conveyed by a letter of 4 September 2009 from the defendants' solicitors to the plaintiff's solicitors. 18 The plaintiff says that the defendants are precluded from putting that letter into evidence and that there is accordingly no evidentiary basis for the finding that would be necessary to the making of the order the defendants seek. 19 The letter in question begins: "We refer to the mediation that took place between the parties at your offices on 28 July 2009. As highlighted in the mediation, our clients are confident in defending your client's claim and successfully prosecuting their cross claim against your client. If this matter proceeds to trial, your client's conduct in the transaction will be under significant scrutiny. In particular we note the following:" 20 The following six numbered paragraphs go to the merits of the case and the plaintiff's views about those merits. 21 The offer is then set out: "Notwithstanding our client's defences and other issues involved in the matter, our client is prepared to make a without prejudice offer to pay your client $50,000 for full and final settlement of the matter on the following terms: (a) each party bears their own legal costs; and (b) your client signs a deed of settlement drafted by us. Our client's offer of settlement includes our client discontinuing their cross claim for $52,981.20 plus interest. Our client's offer represents an overall amount of $102,981.20 ($52,981.20 previously paid) being paid to your client for equipment of which our client has never had possession. This offer of settlement is open for acceptance until 18 September 2009." 22 The plaintiff says that the defendants are bound by contract to keep confidential the content of the letter of 4 September 2009 and that the court's power to exclude under s 135(a) of the Evidence Act 1995 should be exercised in relation to it. The argument is that disclosure and use of the letter in the present context amounts to a breach of contract by the defendants as against the plaintiff and that that itself is unfairly prejudicial to the plaintiff. 23 As the quoted extracts make clear, the plaintiff and the defendants attempted to settle their differences with the aid of a mediator before trial. They did so under provisions recorded in an agreement the parties to which were the plaintiff, the first defendant and the mediator. The provisions of the agreement on which the plaintiff now relies are clauses 8.1 and 8.2: "Information is Confidential. Information, whether oral or in writing, disclosed to the Mediator by a Party or its advisers in the absence of the other Party/Parties and his/her/its advisers will be confidential, but it may be disclosed by the Mediator to the other Party/Parties with the permission of the first Party. Agreement About Use Of Confidential Information. In relation to all information including documents disclosed to them during the Mediation, including the preliminary steps, the parties and the Mediator agree that they will: (a) keep that information confidential; (b) not disclose any of that information, whether expressly or by implication, except, and subject to clause 8, to a Party or a representative of a Party participating in the Mediation, or if compelled by law to do so; and (c) not use that information for a purpose other than the Mediation." 24 In the context of the mediation agreement, each of the plaintiff and the first defendant was a "Party". 25 Clause 8.1 of the mediation agreement operates upon information "disclosed to the Mediator by a Party or its advisers in the absence of the other Party/Parties and or his/her/its advisers". The clause thus catches particular information only if it is information that a "Party" or the "Party's" advisers "disclosed" to the mediator and all of the other "Party" and its "advisers" were absent when the information was so disclosed. 26 Clause 8.2 operates upon information disclosed to a "Party" if the disclosure occurred "during the Mediation, including the preliminary steps". 27 Each clause imposes a contractual obligation of confidentiality in relation to the information with which it deals. 28 Looking at the letter of 4 September 2009, it can be said at once that its first paragraph does not contain information within either clause 8.1 or clause 8.2. In terms of conveying information, it does no more than refer to the fact that a mediation took place on a particular day at a particular place. That is not information "disclosed" to the mediator or during the mediation. One cannot "disclose" to someone something they already know: see the discussion in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 1070 at [10] and following. 29 Nor, in my opinion, does the second paragraph of the letter contain information "disclosed" to the mediator or during the mediation, even if the first defendant or its advisers conveyed to the mediator or during the mediation the message that the first defendant and its related company (the second defendant) were confident in defending the plaintiff's claim and successfully prosecuting the cross-claim. A party's confident frame of mind about the strength of its case, as expressed to the opposing party in proceedings in which pleadings had closed and issue had been joined, is not to my mind "information" that that party "discloses", even if given oral expression at a mediation conference. Such an expression of confidence is an assertion of attitude and no more. 30 There was brief reference in submissions to s 131 of the Evidence Act and the exclusion it effects in relation to evidence of settlement negotiations. It was accepted, however, that in the present context of argument on costs the operation of the exclusion in relation to the letter of 4 September 2009 is displaced by s 131(2)(h) which makes otherwise excluded material admissible if "relevant to determining liability for costs". 31 The plaintiff also referred to s 30(4) of the Civil Procedure Act 2005 which makes inadmissible anything said "in a mediation session". This section is irrelevant to the present dispute. The expression "mediation session" used in s 30(4) takes its meaning from s 25. It is a meeting arranged for a structured negotiation process in which "the mediator" assists the parties to a dispute to achieve their own resolution of the dispute. In the particular context, "mediator" means "a person to whom the court has referred a matter for mediation": see s 25. It follows that there is, for the purposes of s 30(4), no "mediation session" unless a particular mediation meeting involves a mediator acting as a result of a referral by the court. That was not the case in relation to the mediation in this matter. 32 I am satisfied that the letter of 4 September 2009 is admissible in relation to determination of the costs argument and that the statements in it about the mediation do not form a basis for the making of an order under s 135(a) of the Evidence Act in relation to it. 33 I refer next to a letter of 22 September 2009 from the plaintiff's solicitors to the defendants' solicitors. That letter begins by referring to "Your letter dated 4 September 2009" and is a reply to that letter. After stating that consideration has been given to the matters in the six numbered paragraphs of the 4 September 2009 letter and that the plaintiff's solicitors "do not believe that any of them give rise to a defence to our client's claim", the letter says: "Please be aware that your client's offer contained in your letter of 4 September 2009 is rejected." 34 A counter-offer is then set out. 35 The plaintiff says that the letter of 22 September 2009 should be excluded under s 135(a) of the Evidence Act because of its intimate connection to the letter of 4 September 2009. The decision that such an order is not appropriate in relation to the earlier letter means that there will be no order in relation to the later letter either. Both are properly taken into account on the question of costs. 36 The defendant says that the letter of 4 September 2009 was (or should be treated as) a Calderbank letter (Calderbank v Calderbank [1976] Fam 93). The plaintiff points out, however, that, while the letter was headed "Without Prejudice", it did not say that the defendants would rely on the letter in relation to the question of costs if the offer was not accepted and the defendants achieved a better result. 37 In light of s 131(2)(h) of the Evidence Act, the unconditional "Without Prejudice" marking on the letter has the same effect as if the letter was marked "Without Prejudice Except as to Costs". The statutory provision makes it admissible on the question of costs. The making of the offer by the defendants, in the terms in which it was made, and the response of the plaintiff are matters properly to be taken into account on the question of costs. 38 The ultimate question, therefore, is whether the plaintiff acted unreasonably in declining to accept the 4 September 2009 offer. The plaintiff says that, for one particular and powerful reason, it did not act unreasonably: as at 18 September 2009 (the deadline for acceptance) the defendants had not served any of their affidavits, so that the plaintiff was not in a position to make a fully informed decision on the question of settlement. Affidavits were, it is said, served on 25 September 2009, 7 October 2009 and 22 October 2009. 39 The defendants' response is that, on the facts, the absence of these affidavits did not render the plaintiff unable to make the relevant decision. This is because, by the letter of 22 September 2009, the plaintiff rejected the offer of 4 September 2009. The plaintiff did not say that it was unable to make a decision on the 4 September 2009 offer because it did not have the defendants' affidavits. Rather, it showed itself perfectly able and willing not only to make a negative decision with respect to the defendants' offer of 4 September 2009 but also to make a detailed counter-offer which, of necessity, reflected views and assessments concerning the possible or likely outcome of the litigation. 40 One is therefore left with the result that it was those views and assessments of the plaintiff that caused the proceedings to continue to trial and judgment when, from the plaintiff's viewpoint, the proceedings could have been settled on a significantly more advantageous basis in September 2009. In the final result, the plaintiff obtained no relief, suffered judgment on the cross-claim to the extent of $52,768.20 plus interest and incurred a prima facie liability for the defendants' costs (as well as having to pay its own costs in full) when it could have retired from the field with $50,000 in its pocket and a liability for its own costs only, up to September 2009. 41 These circumstances are sufficient to warrant a conclusion of relevantly unreasonable conduct of the plaintiff and, therefore, to justify the exercise of the court's discretion as to indemnity costs in the way the defendants seek. I do not need to consider the other matters put forward by the defendants in support of their claim for indemnity costs. 42 In addition to the orders made on 29 April 2010, I make the following order: Order that the plaintiff pay the defendants' costs of the proceedings, such costs to be assessed on the ordinary basis up to and including 18 September 2009 and on the indemnity basis after 18 September 2009. ********** 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.