Court of Appeal Supreme Court New South Wales Medium Neutral Citation: HP Mercantile Pty Ltd v Dierickx (No 2) [2014] NSWCA 118 Hearing dates: On the papers Decision date: 11 April 2014 Before: Beazley P; Meagher JA; Emmett JA Decision: (1) The notice of motion filed on 6 January 2014 be dismissed otherwise than in respect of orders made by consent. (2) The applicant pay the respondents' costs of the motion in so far as it relates to indemnity costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PROCEDURE - judgments and orders - amending, varying and setting aside PROCEDURE - costs - order for costs on indemnity basis - offers of compromise - whether it was unreasonable not to accept offers Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 36.16(3A), 36.17 Cases Cited: Calderbank v Calderbank [1975] All ER 333 HP Mercantile Pty Limited v Dierickx [2013] NSWCA 479 Category: Consequential orders Parties: HP Mercantile Pty Limited (Appellant) Ludo Victor Dierickx (First Respondent) Wendy Anne Dierickx (Second Respondent) Tumut River Orchard Management Limited (in liq) (Third Respondent) Representation: Counsel: P Knowles (Appellant) S Fendekian (First and Second Respondents) Solicitors: Versace McKenzie Lawyers (Appellant) Piper Alderman (First and Second Respondents) File Number(s): 2012/290553 Publication restriction: Nil Decision under appeal Jurisdiction: 9111 Citation: [2012] NSWSC 1005 Date of Decision: 2012-08-31 00:00:00 Before: White J File Number(s): 2006/294773 Judgment 1THE COURT: On 23 December 2013, for reasons published on that day (the Principal Reasons), the Court made orders that the appeal in these proceedings be allowed and that the orders made by the primary judge on 31 August 2012 be set aside (see HP Mercantile Pty Limited v Dierickx [2013] NSWCA 479). The Court ordered that, in lieu of the primary judge's orders, judgment be entered in favour of HP Mercantile against Mr and Mrs Dierickx for the balance of the principal of the loan made under the agreement entered into between them. The Court ordered that Mr and Mrs Dierickx pay HP Mercantile's costs of the appeal and of the proceedings at first instance. 2By notice of motion filed on 6 January 2014, HP Mercantile has applied, under UCPR 36.16(3A) or UCPR 36.17, for variation of the orders made on 23 December 2013. Most of the variations are formal and have been agreed to by the parties. Orders in accordance with that agreement were made on 31 January 2014 and 2 April 2014. However, HP Mercantile has also applied for an order that its costs be paid on an indemnity basis. It postulates four alternative dates from which it asks that its costs be paid on such a basis. Mr and Mrs Dierickx oppose any such order as to costs. 3The proceedings consisted of a claim by HP Mercantile for recovery of the balance of the loan owing by Mr and Mrs Dierickx. HP Mercantile's application is based on four separate offers, made in accordance with the principles of Calderbank v Calderbank [1975] All ER 333, to Mr and Mrs Dierickx prior to the commencement of the trial in the proceedings. Each of the offers was to accept a sum significantly less than the amount that was due and owing at the time of the offer. HP Mercantile contends that each offer was a genuine offer of compromise and that it was unreasonable of Mr and Mrs Dierickx not to have accepted each of the offers prior to any subsequent offer being made. 4The dates of the offers, the amounts of the offers, and the amount due at the respective dates of the offers are as follows: Date of offer Offer amount Amount due at the date of the offer 11 February 2008 $75,000.00 inclusive of costs $93,684.44 27 August 2008 $83,000.00 inclusive of costs $103,515.63 15 March 2011 $126,700.00 plus costs as agreed or assessed $158,403.65 24 October 2011 $83,000.00 plus costs as agreed or assessed $184,354.60 It appears to be common ground that each of the offers was a genuine offer of compromise, since Mr and Mrs Dierickx have made no submission to the contrary. 5As will be apparent from the Principal Reasons, the proceedings involved complex issues of both fact and law. HP Mercantile was ultimately successful in this Court. However, it was unsuccessful in respect of a number of issues, both in the proceedings at first instance and in this Court. Mr and Mrs Dierickx have not suggested that the entitlement of HP Mercantile to costs should be reduced by reference to issues on which it achieved no success. 6The proceedings at first instance were commenced in 2006. The first of the offers in question was made in February 2008. Thus, all four offers were made well after the proceedings had commenced. While HP Mercantile had made offers prior to 11 February 2008, it does not rely on those offers directly as giving rise to any entitlement to indemnity costs. However, it contends that those offers should be taken into account as indicative of HP Mercantile's wish to settle the proceedings. On the other hand, Mr and Mrs Dierickx also rely on offers that they made from time to time as indicative of their preparedness to compromise. 7The first offer remained open for 14 days and the second offer remained open for seven days. The last two offers remained open for 28 days. Mr and Mrs Dierickx suggest, in their written submissions, that the first two offers were not open for a reasonable time, but they make no such submission in respect of the third and fourth offers. 8HP Mercantile asserts that, at the time that the offers were made, Mr and Mrs Dierickx's prospects of success were not good. It also says that the only basis for the success of Mr and Mrs Dierickx before the primary judge was their claim of misleading and deceptive conduct and breach of fiduciary duty, but that, at the time that the offers were rejected, those matters had not been raised on the pleadings. That assertion cannot be supported. The fourth offer was made on 24 October 2011. On 23 September 2011, Mr and Mrs Dierickx had filed a notice of motion seeking leave to file an amended defence pleading the claims that were successful before the primary judge. Leave was granted on 14 October 2011 to file an amended defence and the amended defence including those claims was filed on 20 October 2011, four days prior to the making of the fourth offer. 9Further, as at the time of the first offer and the second offer, HP Mercantile had not pleaded estoppel in support of the alleged first assignment. But for that estoppel being upheld, HP Mercantile's claim would have failed. Thus, at the time of the first offer and the second offer, it is reasonable to conclude that Mr and Mrs Dierickx's prospects of success were reasonably sound. They would in fact have been successful on the basis of the pleadings at those stages. In those circumstances, it was not unreasonable for them to reject those offers. It could not be said, at the time of those offers, that failure on the part of Mr and Mrs Dierickx was reasonably foreseeable. Indeed, Mr and Mrs Dierickx succeeded at first instance and the decision in the Court of Appeal was by majority only. It was not unreasonable for Mr and Mrs Dierickx to reject each of the first offer and the second offer. It would be rare, if ever, that an offer for compromise would found a special costs order when the issues on which a party succeeded had not, at the time of making the offer, been pleaded. 10Each of the third offer and the fourth offer was complicated by the fact that it contained offers to settle proceedings between the parties other than the proceedings in question. Each of those two offers provided for "Option 1" and "Option 2". The offers were in much the same terms, apart from amounts, and each was prefaced by reference to three separate loan balances owing by Mr and Mrs Dierickx to HP Mercantile in relation to different projects. Option 1 appears to be a proposal that the three claims be settled. Option 2 appears to be a proposal that Mr and Mrs Dierickx might exit the three projects involved. 11However, there is a degree of ambiguity in Option 1, in so far as it is preceded by a reference to HP Mercantile's preparedness to "settle each claim separately" and then refers to Mr and Mrs Dierickx settling "all claims and the entire proceedings". It is by no means entirely clear that HP Mercantile was making an offer in respect of the relevant proceedings involving the Tumut River Orchard project, which was capable of acceptance without reference to the other two projects. That ambiguity is a sufficient basis for rejecting the contention that it was unreasonable to reject the offers. 12A further matter advanced on behalf of Mr and Mrs Dierickx as supporting the reasonableness of their stance is that, following the fourth offer, which was that HP Mercantile would accept $83,000 plus costs as agreed or assessed, the solicitors for Mr and Mrs Dierickx asked HP Mercantile's solicitors to provide an estimate of the costs, so that they could assess the offers. There was no response giving any estimate. In those circumstances, it was not unreasonable not to accept that offer. Having regard to the complexity of the proceedings, the Court does not consider that it was unreasonable to reject either of the last two offers without some information as to the likely quantum of costs. 13The Court is not persuaded that the circumstances surrounding any of the offers are such that it was unreasonable for Mr and Mrs Dierickx not to accept the offer. HP Mercantile's application for a special order as to indemnity costs should be rejected. HP Mercantile should pay Mr and Mrs Dierickx's costs of the motion in so far as it relates to indemnity costs. Subject to making the variations agreed to by the parties, the notice of motion should be otherwise dismissed with no further order as to costs. 14The orders of the Court will be as follows: (1) The notice of motion filed on 6 January 2014 be dismissed otherwise than in respect of orders made by consent.(2) The applicant pay the respondents' costs of the motion in so far as it relates to indemnity 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: 11 April 2014