Supreme Court New South Wales Medium Neutral Citation: Lahoud v Lahoud [2011] NSWSC 1186 Hearing dates: 7 October 2011 Decision date: 07 October 2011 Jurisdiction: Equity Division Before: Campbell JA Decision: Notice of Motion dismissed with costs Catchwords: COSTS - indemnity costs - offer of compromise - Calderbank letter - whether unreasonable for the offeree not to accept the offer of compromise - long history of disputation between parties - whether ambiguities in the offer that made it not unreasonable to fail to accept the offer Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: Calderbank v Calderbank [1975] 3 WLR 586 Commonwealth of Australia v Gretin [2008] NSWCA 717 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 Jones v Bradley (No 2) [2003] NSWCA 258 Joseph Lahoud v Victor Lahoud [2006] NSWSC 126 Lahoud v Lahoud [2011] NSWSC 994 Leichhardt Municipal Council v Green [2004] NSWCA 341 SMEC Testing Services v Campbelltown [2000] NSWCA 323 Category: Costs Parties: Joseph Lahoud (Applicant) Victor Lahoud (Respondent) Representation: Counsel I M Neil SC (Applicant) S Philips (Respondent) Solicitors Verekers Lawyers (Applicant) McLachlan Thorpe Partners (Respondent) File Number(s): 2007/255809 Publication restriction: Nil Decision under appeal Jurisdiction: 9111 Judgment 1CAMPBELL JA : On 10 March 2006 I made orders (" the Costs Orders "). They included the following provision for interest to be payable on certain costs: Joseph Lahoud v Victor Lahoud [2006] NSWSC 126. "3. In this order: X - equals the total amount of costs and disbursements which the Plaintiffs have paid or are liable to pay to their legal advisers in connection with these proceedings. Y - equals the total amount of costs and disbursements allowed on assessment to the Plaintiffs in connection with these proceedings. The Allowed Percentage equals ((Y/X) x 100)% Order the Defendants to pay to the Plaintiffs interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules , on the Allowed Percentage of each amount of costs and disbursements actually paid by the Plaintiffs, from the date of payment by the Plaintiffs of each such amount of costs and disbursements until the first to occur of: (a) such time as the Defendants have paid the costs due to the Plaintiffs under any order made in these proceedings, or (b) any further order relating to interest on costs in these proceedings. 4. Reserve further consideration of whether interest on costs should continue to run": 2I gave judgment in two notices of motion in this matter on 1 September 2011: Lahoud v Lahoud [2011] NSWSC 994. I will refer to that judgment as the September 2011 judgment. This judgment uses the same terminology as the September 2011 judgment. 3At the time of delivering the September 2011 judgment I orally pronounced an order numbered (4). "Order Victor Lahoud to pay 33% of the costs as agreed or assessed of Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd concerning the two Notices of Motion." 4By a notice of motion filed on 15 September 2011 the JL Parties seek the following substantive order. "1. An order that the order numbered (4) for costs made on 1 September 2011 be varied and in lieu thereof the following order be made: (a) Order Victor Lahoud to pay 33% of the costs as agreed or assessed of Joseph Lahoud and Joseph Lahoud and Associates Pty Limited concerning the two Notices of Motion up to and including 7 June 2011; (b) Order Victor Lahoud to pay the costs on an indemnity basis as agreed or assessed of Joseph Lahoud and Joseph Lahoud and Associates Pty Limited concerning the two Notices of Motion on and after 8 June 2011." 5The basis on which that order is sought is that the JL Parties' solicitor made a Calderbank offer to the VL Parties' solicitor by letter dated 30 May 2011. The offer was to settle the notices of motion on the following terms: "1. In respect of the Joseph Lahoud parties' claim for interest on costs and disbursements required to be paid by the Victor Lahoud parties under paragraphs 1 and 2 of the Orders made by Campbell J on 10 March 2006: (a) interest be calculated and paid on the Allowed Percentage (as defined in the Orders) excluding GST from the date of each payment (as set out in the Interest Schedule annexed hereto marked "WP - Offer of Compromise") to 30 June 2010 at the rates formerly prescribed by Schedule 5 of the Uniform Civil Procedure Rules ; plus (b) interest be calculated and paid from 1 July 2010 to the date of payment at the rates prescribed by UCPR 36.7; but no interest be payable on the paid costs and disbursements in respect of the period from 1 July 2007 to 30 June 2008. 2. The Judgment for the Joseph Lahoud parties in favour of the Victor Lahoud parties entered 17 November 2010 in proceedings no. 348443 of 2010 be set aside noting interest will continue to accrue on the Allowed Percentage from 18 November 2010 to the date of payment at the rate prescribed by UCPR 36.7. 3. The Amended Notice of Motion filed by the Victor Lahoud parties on 31 January 2011 be dismissed. 4. The Notice of Motion filed by the Joseph Lahoud parties on 7 December 2010 be otherwise dismissed. 5. Each party bear their own costs of the said notices of motion." 6The letter of 30 May 2011 explained the offer: "You will note that the effect of this offer is to compromise both the issues at the interest rate applicable to the costs paid by or on behalf of the Joseph Lahoud parties, the time period for which such interest should be payable and the present entered judgment. Of course, our clients will be at liberty to file for judgment their Certificates of Determination for past assessed costs awarded to them and for interest calculated as above once the said Certificates have finally issued following the determination of your clients' appeal from the Review Panel and any consequent further review. Should this offer not be accepted, and our clients obtain a result at least as favourable as the terms of this offer, we will provide this letter to the court in support of an application by our clients for our indemnity costs in this matter from 7 June 2011 which is the date on which this matter could have been disposed of so far as our clients are concerned. In this regard we refer you to the principles enunciated in Calderbank v Calderbank [1975] 3 WLR 586." 7The letter that made the offer had a spreadsheet attached to it comprising 146 lines and nineteen columns that occupied three densely typed pages. This was the Interest Schedule referred to in para 1 of the offer. It calculated an amount of interest in the following fashion. It commenced by stating the amount of costs that had been allowed by the Review Panel and by the assessor, in the proceedings as they stood to that date. That amount was $784,897.39 excluding GST. It identified that amount as being the "Y" in the orders I had made on 10 March 2006. 8The spreadsheet divided the time period between 1 September 2001 and 17 November 2010 into five time periods, namely 1 September 2001 to 28 February 2002, 1 March 2002 to 31 December 2006, 1 January 2007 to 5 March 2009, 6 March 2009 to 20 June 2010 and 1 July 2010 to 17 November 2010. Those are the dates at which, in accordance with the principles for calculation of post judgment interest that I had decided were correct in the September 2011 judgment, there was a change in the applicable rates of post judgment interest. 9The spreadsheet then listed each payment of costs and disbursements that had been made. It ascertained the total of those amounts including GST. It then ascertained the total of those amounts excluding GST. It was the latter amount that it identified as the X for the purpose of the application of the formula that had been ordered to apply to the calculation of interest on costs. 10The spreadsheet calculated interest on each of the payments of costs and disbursements at the rates that I have earlier identified. The way in which that calculation was performed was that if a particular amount had been paid before the start of one of the periods for calculation of interest, then interest was calculated on that amount for the whole of the period. If an amount had been paid part way through one of the interest periods, interest on the amount was calculated from the date of payment as shown on the bank statements to the end of the appropriate period. 11Concerning any particular payment there was shown both the amount of costs and disbursements that had been paid including GST and the amount of costs and disbursements that had been paid excluding GST. There had been a dispute between the parties about whether interest should run from the payment dates as shown in the bank statements of the person or entity that paid the costs and disbursements in question, or from an earlier date. By adopting the payment dates in the bank statements the JL Parties were adopting a method of calculation that was unfavourable to themselves by reference to the contention that they had earlier advanced. 12By division, the Y over X figure was calculated. It resulted in a figure of 66.65% as the Allowed Percentage. That percentage was applied to each amount of costs and disbursements. It is not readily apparent on the face of the document whether the calculation of the Allowed Percentage of each amount of costs and disbursements was done by reference to the amount of costs and disbursements including GST, or the amount of costs and disbursements excluding GST but which of those alternatives had been applied in calculating the table would be readily ascertainable by simple arithmetic performed on any line of the table. 13There has been no dispute today about the principles upon which a court makes an indemnity costs order following the service of a Calderbank offer. It is accepted on both sides that the making of a Calderbank offer does not automatically result in a favourable costs order notwithstanding that a judgment is more favourable to the party making the offer than the terms of the offer: Commonwealth of Australia v Gretin [2008] NSWCA 717 per Beazley JA at [43]. Rather, the question is whether the circumstances of the making of the offer and the failure to accept it warrants departure from the ordinary rule as to costs: Commonwealth v Gretin at [43] and [114]; SMEC Testing Services v Campbelltown [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]. In particular, it is common ground that a failure to accept a Calderbank offer will only justify an order for indemnity costs if it constituted a genuine offer of compromise, and it was unreasonable for the offeree not to accept it: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99]; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [46]. 14With this common basis of principle the argument of the parties focused upon whether it was unreasonable for the VL Parties not to accept the offer that was made. 15There was no question about the reasonableness of the period of 8 June 2011 that was fixed for the acceptance of the offer, nor was there any dispute about the formal adequacy of the letter that had been sent for invoking the principles in Calderbank v Calderbank [1975] 3 WLR 586. 16The JL Parties submit that the offer, if accepted, would have put the VL Parties in a better position than that from which they ultimately emerged as a result of the September 2011 judgment. They submit that the rate of interest on costs contained in the offer was precisely the rate of interest that was ultimately decided to be correct in the September 2011 judgment. They submit that the offer to set aside the judgment of 17 November 2010 was precisely what was achieved following the September 2011 judgment. However, they submit that the offer would have put the VL Parties in a considerably better position than they ultimately achieved under the September 2011 judgment because it excluded a year of running of interest, and the judgment held that interest should run during that year. 17The VL Parties submit that there are aspects of the offer which made it not unreasonable for them to fail to accept the offer. They submit that there are ambiguities in the offer that would have created significant problems. They point to the fact that these parties have been in very heated litigious dispute for many years as a relevant factor, not for construction of the offer, but for determining whether it was unreasonable to decline to accept it. I agree that is a relevant factor, but not as weighty as other matters on which the VL Parties rely. 18The VL Parties point, in substance, to three areas in which they submit the offer contains significant ambiguities. In deciding whether an offer contains an ambiguity of a type that makes it not unreasonable for a party to whom it is addressed not to accept it, one should in my view approach the offer on the basis of a person who is trying to understand it, not on the basis of a person who is on the lookout for fault, and is trying to misunderstand it, or at least to find fault with it. 19One way in which the VL Parties submit that the offer contains an unacceptable ambiguity concerns the period during which interest is to run. The spreadsheet calculated interest for periods that included the period from 1 July 2007, yet the final portion of para 1 of the offer said that no interest was to be payable in respect of the period from 1 July 2007 to 30 June 2008. 20If that were the only difficulty with the offer I would not regard it as a reason for it being reasonable to fail to accept the offer. It seems to me to be fairly clear that what the offer does is to treat the spreadsheet as illustrating a manner in which interest is to be calculated, but then qualifying that by saying that a further calculation, beyond that in the spreadsheet, must be performed to exclude interest in respect of the period from 1 July 2007 to 30 June 2008. 21However, in my view there are other problems concerning the role that the spreadsheet plays in the offer, that give rise to such ambiguity that it became reasonable for the VL Parties not to accept the offer. It will be recalled that the Allowed Percentage is an amount that is calculated by reference to two factors, X and Y. X is the total amount of costs and disbursements which the plaintiffs have paid or are liable to pay to their legal advisers. Y is then calculated by reference to the total amount of costs and disbursements allowed on assessment to the plaintiffs in connection with the proceedings. It is far from clear what is meant by the portion of the offer that says that interest is to be calculated and paid "on the Allowed Percentage (as defined in the Orders) excluding GST." 22A percentage is, in itself, not the sort of thing from which it is possible to deduct an amount of money. GST is, at least in the context in which it is used in 1(a) of the offer, an amount of money. I do not think it could reasonably be said that GST in that context meant the percentage rate at which GST is chargeable, and indeed neither party made any such submission to me. 23It is unclear, from the wording of 1(a), whether the Allowed Percentage is to be calculated by excluding GST from the amount that makes up the X, or from the amounts that make up both the X and Y. No doubt that unclarity could be resolved by simple arithmetic on the figures contained in the schedule. As I understand it from Mr Neil SC, counsel for the JL Parties, the schedule is calculated by deducting the GST from the amount actually paid for costs and disbursements. Further, the amount that is included as the amount allowed of the costs and disbursements is an amount ascertained after the deduction of GST. 24If the Allowed Percentage is calculated by deducting GST from the X, a larger Allowed Percentage is arrived at that would be arrived at if GST was not deducted from the X. There is ample room for dispute, that it is not appropriate for me to seek to resolve here, about whether that is indeed the correct construction of the Costs Orders. 25There is a further problem that arises from the role of the schedule in the offer. It will be seen that it presupposes that various particular amounts of costs and disbursements paid go to make up both the X and the Y. I would accept that the way in which the Allowed Percentage is to be calculated pursuant to the Costs Orders includes in the X all amounts actually paid by the plaintiffs to their legal advisers in connection with the proceedings, even if the totality of one or more of those amounts might be disallowed on assessment. However, in calculating the Y, the JL Parties adopted a particular amount that had been allowed on assessment, as things stood at the date of the making of the offer. That creates a problem, because at the date of making the offer, there was an extant District Court appeal concerning the correctness of the amount that had been allowed on assessment. Further, it is now known that by consent that appeal was allowed, and the amount of assessment is still the subject of an ongoing review process. Did the offer require the VL Parties to accept that the amounts that made up the Y were the dollar amounts shown in the spreadsheet, and thus forego the opportunity to alter the amount of costs allowed on assessment, through succeeding in the District Court appeal? 26Mr Neil submits that the role of the schedule was not to tie the VL Parties to a particular amount for the Y integer, nor to preclude them from running the District Court appeal that they had on foot. Rather, he submits, it was intended to be illustrative of a process of calculation. He submits that, by the reference to the term "Allowed Percentage (as defined in the Orders)" in para 1(a) of the offer, it was made clear that the offer was not seeking to foreclose what might ultimately be the "Y" that goes into the calculation of the Allowed Percentage. I do not agree that that is clear. It seems to me that a fairly arguable construction is that "as set out in the Interest Schedule" is an essential characteristic of how the Allowed Percentage is to be calculated in accordance with the offer. 27Mr Neil also submits that the phrase "(as set out in the Interest Schedule annexed hereto marked 'WP-Offer of Compromise')" is an expression that qualifies "the date of each payment." To my mind, it is far from clear that that is the correct construction. It seems to me that there is a syntactic ambiguity in the expression, and that it is a real possibility that the phrase in parenthesis might qualify "each payment." If that were so, the offer would have as an integral part of it acceptance of the amount for Y upon which the offer was based. 28When there were these ambiguities, in my view it is not unreasonable for the VL Parties to decline to accept the offer. 29Mr Neil has submitted that the sentence of the offer "you will note that the effect of this offer is to compromise both the issues at the interest rate applicable to the costs paid by or on behalf of the Joseph Lahoud parties, the time period for which such interest should be payable and the present entered judgment" makes clear that it was addressed to the three topics that were the subject of the two notices of motion concerning which the September 2011 judgment was given. While I agree that that sentence shows that it was indeed the three topics of the notices of motion that were addressed by the offer, it does not resolve the question of the precise manner in which the offer is proposing to compromise those issues, and in particular whether it is seeking to tie the offer to a particular amount for Y. 30The order concerning which this notice of motion is brought was, as I have said, orally pronounced on 1 September 2011. UCPR 36.11 requires a judgment or order to be entered, and provides that unless the court orders otherwise, a judgment or order is taken to be entered when it is recorded in the court's computerised court record system. In this case, there was no "order otherwise" and so the date of entry is the date of entry in the court's computerised record system. 31A search this morning has shown that the order is indeed in the computerised system of the court. The search shows, correctly, that the orders were made on 1 September 2011. 32Uniform Civil Procedure Rule 36.16 provides: "(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. ... (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." 33Because the order has been entered, UCPR 36.16(1) would not be an available source of power to modify the order. Thus, the orders the JL Parties sought could have been made only in accordance with UCPR 36.16(3A). 34In the present case, the notice of motion was filed on 15 September 2011. Whether it is within time would be calculated using the provisions of UCPR 1.11, under which, in particular, if a time of one day or longer is to be reckoned by reference to a given event, the day of the given event is not to be counted. 35Because of the conclusions I have come to so far, whether the notice of motion of the JL Parties was filed in time is not a matter that will affect the outcome of the case. However it is of some importance to note that it is not possible, by search of the computer records of the court, to ascertain the date on which an order has been entered. When substantive rights of a party, such as those arising under UCPR 36.16(3A), are dependent upon the date of entry of an order, the situation is highly unsatisfactory that the court is left in a situation where a judge cannot ascertain, by the type of search that a skilled associate can perform, the date on which an order has been entered. 36For these reasons I order that the notice of motion be dismissed with costs. ********** 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. Decision last updated: 14 October 2011