Supreme Court New South Wales Medium Neutral Citation: Hamilton v Carter (No. 2) [2011] NSWSC 1497 Hearing dates: 5 December 2011 Decision date: 05 December 2011 Jurisdiction: Equity Division Before: Davies J Decision: (1) The Plaintiff is to pay the Defendant's costs of the substantive proceedings on the ordinary basis. (2) The Defendant is to pay the costs of the costs hearing. Catchwords: PROCEDURE - costs - Offer of Compromise inclusive of costs - effect of Calderbank offer inclusive of costs - whether respondent unreasonably rejected offer - key witness refusing statement in advance of hearing. Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: Elite Protective Personnel Pty Limited v Salmon (2007) NSWCA 322 Category: Costs Parties: Phillip Hamilton (suing as administrator and tutor of Norma June Carter) (Plaintiff) Albert Barrington Carter (Defendant) Representation: M Klooster (Plaintiff) FFF Salama (Defendant) David Davis & Associates (Plaintiff) Dwyer Robinson Pty Ltd (Defendant) File Number(s): 2009/327359 Judgment 1I gave judgment in this matter on 23 September 2011. I found that the Plaintiff had not made out her case either that the Defendant had exercised undue influence or that the Defendant had been guilty of unconscionable conduct, that is in taking advantage of a known position of disadvantage that the Plaintiff was in at the time the transfer was signed or, indeed, in the months leading up to that. As a result, I dismissed the proceedings and I ordered that the Plaintiff was to pay the Defendant's costs. 2The Defendant has now sought that costs be payable on an indemnity basis from 29 July 2010 by reason of an Offer of Compromise that was served by the Defendant's solicitors on 28 July. That Offer of Compromise said this: "In accordance with rule 20.26 of Part 20 of the Uniform Civil Procedure Rules 2005, the Defendant offers to compromise these proceedings (inclusive of costs) on the basis that the Defendant pays to the Plaintiff the sum of $40,000 in full and final settlement of all and any claims arising out of the matters which are the subject of these proceedings." 3The Plaintiff did not accept the offer contained in that document. 4On 8 October 2010 the solicitors for the Defendant wrote a lengthy letter to the Plaintiff's solicitors. The letter was said to be an open letter and would be used in relation to the question of costs in the proceedings. The letter examined the material that was then available and provided a commentary upon it to the effect that it was unlikely the Plaintiff would succeed because of that material. In particular, the letter drew attention to various file notes of the solicitor, Mr Basset, as well as affidavits that had been sworn by Merl Barker, Emily Dallas and Jeanette Saunders. The conclusions that were drawn from that material were then set out and those conclusions, it must be said, were fairly closely aligned to the conclusions to which I came in my judgment. 5The letter concluded by noting that in the view of the Defendant's solicitors, an "exceedingly generous offer", to use their words, to resolve the proceedings had been made. The letter went on to say: "The time for accepting that offer has now expired. Should your client now wish to accept that offer, we will seek further instructions from our client as to whether he is prepared to re-put that offer to your client." 6The offer at the end of that letter was not accepted. 7On 15 March 2011 the Plaintiff's solicitors served an Offer of Compromise, the details of which are not material on this application. 8It is apparent that the so-called Offer of Compromise served on 28 July 2010 did not comply with the rules because it was made inclusive of costs. That may be because the solicitors acting for the Defendants were solicitors who practised in Victoria and they may not have been fully familiar with the rules in New South Wales and the decisions on those parts of the rules concerned with Offers of Compromise. 9The Defendant submits alternatively that the offer of 28 July ought to be seen as a Calderbank offer even if it cannot be strictly regarded as an Offer of Compromise. I am prepared to assume for the purpose of these reasons that the 28 July offer could be regarded as a Calderbank offer, although I note submissions from the Plaintiff that it could not because of the clearly expressed intention in that document. 10It seems to me that the Defendant runs into a few problems in being able to obtain an order for indemnity costs even if that offer is regarded as a Calderbank offer. In Elite Protective Personnel Pty Limited v Salmon (2007) NSWCA 322 McColl JA set out a fairly exhaustive examination of the authorities in New South Wales and some of the other states in relation to Calderbank offers where inclusive of costs offers were made. Her conclusions were in substance that in most cases a Calderbank offer which is made inclusive of costs would not manage to establish that the other party was unreasonable in not accepting it because of the difficulty of separating out the costs issue. She concluded by saying this: [115 I agree with Allsop J that S mallacombe does not lay down a "definitive rule" that an "all-in" Calderbank offer can never be considered on the question of indemnity costs. The Court cannot fetter the s 98 discretion by legal rules: Oshlack (at [35]). Smallacombe does, however, afford guidance as to the exercise of the s 98(1) discretion. It informs the question of the reasonableness of an offeree's refusal to accept an "all-in" offer. In my view it has a sound practical basis. While I accept each case should be considered on its facts, Smallacombe provides sound reasons to discourage offerors from drafting Calderbank letters on an "all-in" basis. [116] Further, Smallacombe reflects the policy considerations which, no doubt, led to the adoption of UCPR 20.26(2). Requiring Calderbank offers to be exclusive of costs prevents a court from becoming embroiled in collateral issues, such as the offeree's ability to assess the quantum of the costs component of an offer or the reasonableness of the opinion as to this issue an offeree formed at the time of rejection/non-acceptance. In this respect Calderbank offers which are exclusive of costs assist the Court in facilitating the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) Civil Procedure Act. 11The second factor which provides a difficulty for the Defendant in asserting that the Plaintiff was unreasonable not to have accepted its offer of July 2010 was that the solicitor Mr Basset consistently refused to provide assistance to either party in the litigation apart from the provision of his file. A great deal of time was taken at the hearing in taking Mr Basset through various parts of his file by counsel for the Plaintiff who called him in the proceedings. There was some further cross-examination about it. What emerged fairly clearly was that Mr Basset's evidence at the trial went beyond what was contained in his file. 12It was very largely from my acceptance of Mr Basset's evidence that I came to the conclusion that undue influence and unconscionable dealing on the part of the Defendant were not demonstrated by the Plaintiff. The Plaintiff did not in July 2010 have the benefit of that material from his evidence to make an informed decision. 13The third matter, and associated with the previous consideration, is this: Under the terms of the offer in July 2010 the Plaintiff had 28 days to accept what was put. It was not until 8 October 2010 that the solicitors for the Defendant set out in the detail that I have mentioned the evidence then available to suggest that the Plaintiff would not succeed in the proceedings. Even that, however, was deficient, and I do not say that in a critical sense, because Mr Basset had refused to provide a statement to either the Defendant or the Plaintiff in the proceedings. For all of these reasons it does not seem to me that it was unreasonable for the Plaintiff to have rejected the offer of 28 July 2010. 14The letter of October 2010 did not re-put the offer. In fact it said that the time for accepting it had expired. It did, however, make an offer that if the Plaintiff wished to accept, the Defendant would seek instructions as to whether he was prepared to re-put the offer. That is far too conditional in my opinion to suggest that it was any sort of offer to settle for the amount earlier put. 15For all these reasons, the only order that should be made in the matter is that the Plaintiff should pay the Defendant's costs of the proceedings. That order was made at the conclusion of my judgment on 23 September. 16The Defendant should pay the costs of this costs hearing. oOo 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: 06 December 2011