Court of Appeal Supreme Court New South Wales Medium Neutral Citation: "N" v "A" [2012] NSWCA 318 Hearing dates: 28 September 2012 Decision date: 28 September 2012 Before: Meagher JA (at [1] and [24], Barrett JA (at [2]) Decision: (1)Grant leave to appeal against orders (1)(iii) and (1)(iv) made by Ward J on 22 May 2012. (2)Otherwise dismiss the summons seeking leave to appeal. (3)Order that the costs of the summons for leave to appeal be costs in the appeal. Catchwords: LEAVE TO APPEAL - appeal against costs orders only - where Calderbank offers and other proposals and requests made - question of principle raised - serious question whether certain of the orders were plainly unreasonable and discretion miscarried - substantial costs sums at stake - as to other orders, error, if any, goes only to weight afforded to factors taken into account Legislation Cited: Supreme Court Act 1970, s 101(2)(c) Cases Cited: "A" v "N" [2012] NSWSC 354 "A" v "N" [2012] NSWSC 549 Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513 Maiden v Maiden [1909] HCA 16; (1909) 7 CLR 727 Category: Principal judgment Parties: "N" - Applicant "A" - First Respondent "E" - Second Respondent Representation: Mr S S Ahmed - Applicant Mr D M Roberts - First Respondent Mr C Zucker - Second Respondent Buttar, Caldwell & Co - Applicant Hunt & Hunt - First Respondent Zucker Legal - Second Respondent File Number(s): 2012/191519 Judgment 1MEAGHER JA: I will ask Justice Barrett to give the first judgment. 2BARRETT JA: In complex proceedings determined in April 2012 ("A" v "N" [2012] NSWSC 354), Ward J decided that "A" was entitled to declaratory relief and an order for specific performance against "N"; that "A" was not entitled to certain other relief against "N"; that "N" was not entitled to declaratory relief against "A"; and that "A" was not entitled to declaratory relief against "E". The claim involving "E" was, in a real sense, subsidiary and, as her Honour said in her costs judgment of 18 May 2012 ("A" v "N" [2012] NSWSC 549), "as between "A" and "N" it was "A" who was substantially successful in her claim". 3Orders for costs were made as follows as between "A" and "N": Order that "N" pay "A"'s costs of the proceedings up to 10 March 2009 on the ordinary basis (order (1)(i)); Order that "A" pay "N"'s costs of the proceedings from 11 March 2009 to 1 May 2009 on the indemnity basis (order (1)(ii)); Order that "N" pay "A"'s costs of the proceedings from 2 May 2009 on the ordinary basis (order (1)(iii)); Order that "N" pay "A"'s costs of the cross-claim on the ordinary basis (order (1)(iv)). 4Thus, the indemnity costs order in favour of "N" and against "A" from 11 March 2009 was cut short on 2 May 2009 and later reversed 5In relation to aspects involving "E", there were costs orders as follows: Order that "A" pay "E"'s costs of pleading to a certain abandoned claim (order (2)(i)); Order that "N" pay the balance of "E"'s costs of the proceedings (order (2)(ii)). 6"N" seeks leave to appeal against certain of these costs orders. She contends that orders (1)(iii), (1)(iv), (2)(i) and 2(ii) should be set aside and that other orders should be made in their place. 7"N" says that, as between "A" and herself, orders (1)(iii) and (1)(iv) should be replaced by: (a)an order that "A" pay "N"'s costs on the indemnity basis from 2 May 2009, such costs to include "N"'s costs of the cross claim; (b)alternatively, an order that "A" pay "N"'s costs on the ordinary basis from 2 May 2009, such costs to include "N"'s costs of the cross claim; (c)alternatively, an order that, from 2 May 2009, each of "A" and "N" bear her own costs; (d)alternatively, an order that, from 2 May 2009, "N" pay 25% of "A"'s costs assessed on the ordinary basis. 8"N" further says that, as regards the aspects involving "E", the order should be that "A" pay "E"'s costs or, alternatively, that "A" and "N" pay "E"'s costs in equal shares. 9The significance of the date 2 May 2009 is that, on 1 May 2009, "A" made a written proposal to which "N" made no positive response, from which the primary judge inferred refusal of "N" to agree to dispose of the proceedings on the terms proposed. Her Honour regarded that as a matter to be taken into account when determining as a matter of fairness what costs orders should be made (since it suggested to her that by then, "N" was not prepared to resolve the matter other than by reference to her own claims). The 1 May 2009 letter was, in terms, not an offer but a request that "N" do certain things with respect to the subject matter of the proceedings. 10The primary judge's treatment of the proposal of 1 May 2009 followed a description of a number of earlier offers or settlement proposals some in "Calderbank" form, others not, at least one oral only and one (like that of 1 May 2009) seen by the judge as not being an offer in the sense of something calling for simple acceptance or rejection. 11The other material date in the orders is 10 March 2009. On that day, "N" made an offer that the judge held to be a Calderbank offer. 12The findings concerning these communications that were central to the decision on costs were stated as follows (at [63]): "For the reasons set out above, I consider that it was unreasonable for 'A' not to accept the initial Calderbank offer made in March 2009 [ie, 10 March 2009] but that 'N''s conduct from shortly thereafter was inconsistent with the maintenance of a willingness to settle on that basis and that 'N' herself then not only eschewed an opportunity in May 2009 [given by the 1 May 2009 letter] to dispose of the substantive dispute on effectively the same terms (leaving to be determined by the Court solely the issue of costs) but escalated the dispute by raising the matters she did by way of defence and cross-claim." 13Her Honour then said (at [67]): "As to the position between 'A' and 'N', but for the events surrounding the proposed short minutes submitted to 'N' on 1 May 2009 I would have found that the failure of 'A' to accept the initial Calderbank offer warranted an order that she pay "N"'s costs of the ultimate proceedings at least on a party/party basis (and most likely on an indemnity basis), since the consequence of that refusal was that 'A' was thereafter pursuing the claim solely to secure payment of a relatively small amount of costs ('N' having agreed to the substantive relief sought)." 14At paragraph [69], the judge stated a particular evaluation of the 1 May 2009 letter: "Moreover, N's failure to consent to or participate in the proposed disposal of the proceedings on the basis outlined in the 1 May 2009 letter, even though that does not appear to be an offer invoking the Calderbank principles as such, makes clear that by May 2009 (whatever her position as at March or even April 2009), N was no longer prepared to resolve the proceedings on the basis initially offered and was, in a very real sense, responsible for costs thereafter being incurred in relation to the issues raised in the defence/cross-claim (that had not been in the contemplation of the parties or at least articulated in the proceedings at the time of the first Calderbank offer or the subsequent offers)." 15In relation to the aspect concerning "E", both "A" and "N" accept that "E" was a necessary party. Initially, "E" was cast in the role of a necessary but essentially inactive party. It was "A" who joined "E" as a party. Both "A" and "N" accepted that "E" is entitled to costs on the ordinary basis. They took different views as to who should pay those costs. 16The judge's conclusion was that issues involving "E" multiplied after the initiation of the litigation and that "nearly all of the evidence and cross examination of "A"'s witnesses and in the case of "N" was generally concerned with "E"'s capacity to enter into the March deed" - a matter that formed part of "N"'s case and on which "N" was unsuccessful. It was on that basis that the judge ordered that "N" pay "E"'s costs. 17"N" accepts that the appeal she wishes to bring lies only with leave (Supreme Court Act 1970, s 101(2)(c)) and that, because costs are always in the discretion of the court, a party seeking review of a costs order bears a heavy onus. Appellate intervention will generally be warranted only if the primary tribunal's decision was affected by an erroneous view of the law or the facts, by failure to take relevant considerations into account or by the taking of irrelevant considerations into account; or if the result is plainly unreasonable or unjust: Maiden v Maiden [1909] HCA 16; (1909) 7 CLR 727; Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513. 18"N" says that, as regards the position between herself and "A", leave to appeal should be granted because questions of importance are involved, as set out in Mr Ahmed's written submissions as follows, at paragraph 15: "(a)Whether trial judge erred in her discretion in relation to costs when she ceased the advantageous indemnity cost order in favour 'N' (which was ordered because she offered to capitulate very early in the proceedings; and because it was unreasonable of 'A' not to accept it) because 'A' made a similar proposal. (b)Or paragraph (a) put another way, if X makes a Calderbank offer to Y for X to capitulate early in the proceedings (but does not offer to pay Y's costs) which Y rejects and the Court makes an indemnity cost order in favour of X that offer; and Y a few months later makes a similar 'proposal' (not a Calderbank Offer and not even an offer capable of acceptance) for X to capitulate (thereby no compromise), but X rejects it; should the previously awarded indemnity cost order in favour of X cease for such a rejection. (c)Further to (b) above, whether a party should benefit from a 'proposal' which is not an offer. In other words did Ward J err in cutting short 'N''s indemnity cost order for rejecting a proposal which was not capable of acceptance; especially in circumstances where cost order are not meant to punish parties, but are to be compensatory: Latoudis v Casey (1990) CLR 534." 19These may be accepted as questions of general importance. In the particular circumstances (which involve substantial sums for costs running into hundreds of thousands of dollars), the particular questions give rise to an overarching question concerning the way in which a court dealing with the discretionary question of costs should view a party's response (or lack of response) to a communication that is not couched as an offer or is not conveyed in terms showing its intended significance so far as costs consequences are concerned. 20There is a serious question whether, in the particular circumstances, the discretion with respect to costs miscarried so as to produce a result that is plainly unreasonable or unjust. That being so, the several questions of principle raised, viewed in their context, warrant the grant of leave to appeal concerning the orders (1)(iii) and (1)(iv). 21In relation to the orders (2)(i) and (2)(ii) involving "E", "N" says that the basis on which the judge ordered that she pay "E"'s costs overlooks the fact that, during the course of the litigation, "A" "sought to vastly enlarge her case" against "E" so as to cause him to become a "real defendant". 22This contention does not warrant a grant of leave to appeal. The judge was obviously aware of all the aspects of the complex litigation and was well able to assess and balance their significance in the overall course that the pre-trial phase and the trial itself took. The error of principle alleged is, in reality, one going to weight, not that some material matter was not taken into account. The prospects of successful challenge to the exercise of the judge's discretion regarding "E"'s costs are insufficient to allow that challenge to be pursued on appeal. 23In my opinion, the following orders should be made: (1)Grant leave to appeal against orders (1)(iii) and (1)(iv) made by Ward J on 22 May 2012. (2)Otherwise dismiss the summons seeking leave to appeal. (3)Order that the costs of the summons for leave to appeal be costs in the appeal. 24MEAGHER JA: I agree that the orders Justice Barrett proposes should be made for the reasons he has given. ********** 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: 28 September 2012