Oliveprince Pty Ltd v Corum Group Limited (No 2) [2011] NSWSC 310

Supreme Court New South Wales

Medium Neutral Citation: Oliveprince Pty Ltd v Corum Group Limited (No 2) [2011] NSWSC 310 Hearing dates: 25 March 2011 Decision date: 01 April 2011 Jurisdiction: Common Law Before: Latham J Decision: 1.Costs on an indemnity basis awarded to the plaintiff in respect of the remainder of the proceedings as and from 27 November 2010. 2.The defendant is otherwise to pay the plaintiff's costs on the usual basis. Catchwords: COSTS - whether plaintiff entitled to costs on an indemnity basis Cases Cited: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Category: Costs Parties: Oliveprince Pty Ltd - (Plaintiff) Corum Group Limited - (Defendant) Representation: Counsel: R Gration - (Plaintiff) RE Steele - (Defendant) Solicitors: Leon M Ratner & Associates (Plaintiff) Sullivans Solicitors - (Defendant) File Number(s): 2009/296893

Judgment 1On 25 March 2011, I delivered judgment in favour of the plaintiff in these proceedings, arising out of the disputed construction of a contract formalising a consultancy arrangement. A further aspect of the pleadings, that is, the plaintiff's entitlement to payment pursuant to a convertible notes subscription agreement, was settled shortly before trial, when the plaintiff accepted an Amended Offer of Compromise. The plaintiff has submitted that an order for costs on an indemnity basis was appropriate, with respect to each aspect of the plaintiff's claim, for the following reasons :- (i) The plaintiff received a more favourable result than it would have received under an offer of compromise made on 26 November 2010 (UCPR 42.14). That offer was for the amount of $650,000, exclusive of costs, and inclusive of the convertible notes issue in the proceedings. The damages awarded to the plaintiff on the breach of contract issue alone amounted to $627,656.50, plus interest and the costs incurred for the failed arbitration. (ii) The defence to the convertible notes aspect of the Statement of Claim had no prospects of success. In particular, the defendant's Chairman verified the Defence, [20] of which asserted that "the Defendant does not know and cannot admit pars 26 to 32 of the Statement of Claim." Those pars pleaded the breach of the unsecured convertible note subscription agreement, whereby the defendant was required to pay the plaintiff $100,000 plus accrued interest on 30 September 2008. The defendant's Amended Offer of Compromise on 29 November 2010 effectively conceded the whole of the plaintiff's claim with respect to the convertible notes issue. The offer related solely to that issue and amounted to payment of the $100,000 plus the accrued interest as at the date of the offer (see UCPR 42.13A(2)(b)). (iii) The defendant's conduct of the proceedings was unreasonable and generally contributed to the expense and delay occasioned to the plaintiff. 2The defendant maintains that there was no unreasonable conduct on its part and that the plaintiff's offer of compromise was not left open for a time that was reasonable in all the circumstances (see UCPR 20.26(7)(b)). 3With respect to (ii) above, the defendant's submissions in response failed to provide a satisfactory explanation for essentially denying any knowledge of the relevant agreement. Whatever the Chairman's personal knowledge (he being the only officer of the defendant to give evidence), I do not accept that the existence and terms of the agreement were not known to, and understood by, the defendant. The convertible notes subscription agreement stood apart from, and was unrelated to, the construction of the consultancy agreement. In those circumstances, I accept the plaintiff's submissions and award costs on an indemnity basis with respect to that aspect of the Statement of Claim. 4With respect to (iii) above, it might be said that the conduct of the proceedings on the part of the defendant fell short of the ideal, in the sense that the defence appeared to be internally inconsistent. On the one hand, the Defence contended that the Consultancy Agreement was no longer in force as at April 2008, whilst on the other, the defendant maintained at trial that the Agreement ran its course and ended on 31 August 2009. However, I am not persuaded that there was the relevant "delinquency" of which the authorities speak that justifies an order for indemnity costs on this basis. 5With respect to (i) above, the issue that falls to be determined is whether the offer made by the plaintiff was left open for a reasonable time, in circumstances where it was delivered to the defendant, a public company, on the Friday afternoon before the commencement of the trial on Tuesday 30 November. The offer was left open until 8am on Monday 29 November. As I have already noted, the defendant responded with a counter offer at 3pm on that day. 6This question of what constitutes a reasonable time in the circumstances was discussed by Basten JA in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85. The following is relevant to the instant application :- "20 In considering whether the time allowed for acceptance is 'reasonable in all the circumstances' once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation." 7In relation to the first factor, it should be accepted that by the day before the hearing, in commercial litigation involving experienced counsel and solicitors, the legal representatives would have been able to give the client an immediate assessment of: (a) the approximate costs incurred to date; (b) the likely length of the trial; (c) the approximate amount of costs assessed on an indemnity basis if the matter proceeded to trial; and (d) the most likely outcome, which may involve a range as to quantum; (e) It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response. 8Basten JA went on to note at [22] that "The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offeror must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it. The actual circumstances of the recipient, unknown to the offeror, may be relevant to an application that the Court otherwise order in relation to costs of a valid unaccepted offer, but so might evidence as to whether the recipient took any steps to bring such matters to the notice of the offeror." 9In the instant case, where the plaintiff filed the Statement of Claim on 9 November 2009, the Defence was filed on 15 January 2010, and the evidence was filed and served by the end of August 2010, there was, in my view, little or no impediment to the defendant's full appreciation of the strengths and weaknesses of its case and the costs involved in the maintenance of the proceedings. I do not regard the fact that the Defendant is a public company as a factor in this case that would realistically have hindered a timely response to the plaintiff's offer. The issues were not especially complex and there was no evidence to suggest that the Chairman of the defendant, or some other relevant officer, was not available to give instructions between the delivery of the offer and the start of the trial. 10I therefore regard the time allowed by the plaintiff as reasonable in all the circumstances. 11Accordingly, I award costs on an indemnity basis to the plaintiff in respect of the remainder of the proceedings as and from 27 November 2010. 12The defendant is otherwise to pay the plaintiff's costs on the usual basis.