Supreme Court New South Wales Medium Neutral Citation: Liu v Cooper [2017] NSWSC 1706 Hearing dates: On the Papers Date of orders: 07 December 2017 Decision date: 07 December 2017 Jurisdiction: Common Law Before: Wilson J Decision: (1) Further to Order (2) of 2 November 2017, Mr Liu is to pay Mr Cooper's costs: (a) On an ordinary basis to 30 August 2016; (b) On an indemnity basis thereafter, including costs of these proceedings Catchwords: COSTS – indemnity costs – calderbank offers – offers of compromise Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Barakat v Bazdarova [2012] NSWCA 140 Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 Fabre v Lui (No 2) [2015] NSWCA 312 GIO General Ltd v ABB Installation and Service Pty Ltd [2000] NSWCA 118 Houatchanthara v Bednarczyk [1996] NSWCA 253 Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 Leichhardt Municipal Council v Green [2004] NSWCA 341 Liu v Cooper [2017] NSWSC 1490 Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 Prospect Resources Ltd v Molyneaux [2015] NSWCA 171 Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Shepis v Commonwealth of Australia [2013] NSWCA 354 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706 Category: Costs Parties: Dejiang Liu – Plaintiff Barry Cooper – Defendant Representation: Counsel: Mr MK Condon SC – Plaintiff Dr AL Connolly – Defendant Solicitors: Juris Cor Group Pty Ltd – Plaintiff Court Solicitors & Barristers – Defendant File Number(s): 2016/00228670 Publication restriction: None Judgment 1. HER HONOUR: This costs judgment arises from a Local Court appeal brought to this Court by Mr Liu against the decision of Magistrate Railton in the substantive proceedings of 1 July 2016. The proceedings were in relation to a contractual dispute over the sale of a business between the applicant Mr Liu and the defendant Mr Cooper. 2. Mr Cooper began proceedings in the Local Court to recover an outstanding amount of $12,000 owed to him by Mr Liu after the sale of his petrol station business. Mr Liu filed a cross claim against Mr Cooper for $100,000 in damages, claiming that he relied on misrepresentations made by Mr Cooper. 3. After three non-consecutive hearing days, on 1 July 2016, Railton LCM made the following orders (for summary of his Honour's reasons, see Liu v Cooper [2017] NSWSC 1490 [59] – [75]): "1. Verdict for the Plaintiff on the Statement of Claim [Cooper] Judgment in the amount of $12,000.00 Plus interest at rate of 12.9% per month from 13.7.2015 Twelve months from 13.6.15 to 13.6.16 @ $1548.00 per month $18,576.00 Daily interest from 13.6.15 to 13.6.16 @ $51.60 per day $877.20 Costs $794.00 Total $31,453.20 2. The Cross-Claim [Liu] is dismissed and I enter judgment for the Cross-Defendant [Cooper] on the Cross-Claim. I make the usual costs order in favour of the Cross-Defendant as agreed or costed. However, should either party request, I shall relist the matter for further argument and submissions in respect of costs." 1. On 29 July 2016 Mr Liu made an application to the Supreme Court as of right and relied upon an amended summons which was given leave to be filed in Court on 1 September 2017 at the commencement of the proceedings before me. Mr Lui sought the decision of Railton LCM to be set aside and to have the matter remitted to the Local Court for retrial. 2. On 2 November 2017, the Court made the following orders: 1. "The amended summons dated 1 September is dismissed. 2. Mr Liu is to pay Mr Coopers costs, subject to any further application by Mr Cooper for indemnity costs. 3. Any such application is to be filed and served by 4pm on 8 November 2017 and any response to be filed and served within 7 days thereafter. 4. Any such application will be dealt with on the papers in Chambers." 1. On 8 November counsel for Mr Cooper filed and served material in accordance with the orders made on 2 November 2017, seeking an order for indemnity costs for the Supreme Court appeal (including an interlocutory decision of Fagan J on 11 December 2016). As at 6 December 2017, no material in response has been received on behalf on Mr Liu, and I proceed on that basis. 2. The application is brought on two bases; the first being a Calderbank offer made on 30 August 2016; and the second, an Offer of Compromise ("OOC") under rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) ("the Rules" or "UCPR") served on 16 September 2016. Mr Cooper submits that the outcome of the appeal is no less favourable to him than each of these offers. 3. The general presumption that costs follow the event is a way in which the courts can encourage settlement and, in effect, facilitate the just, quick, and cheap resolution of matters. The indemnity basis upon which costs can be awarded following Calderbank and Offers of Compromise provide further incentives for parties to settle matters outside of court and to act as a disincentive in the litigation of hopeless cases. 4. The Court deals with these two "offer" categories differently. In respect of the Offer of Compromise under the Rules, the presumption is that the issuing party is entitled to an order pursuant to r 42.15A: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [28]; Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [6]). The Court, however, must be satisfied in respect of the Calderbank offer that it is appropriate to make an order for indemnity costs: Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) at [6]. The Offer of Compromise 1. I begin with this offer first despite it being the second chronological offer on the appeal. 2. On 16 September 2016, Mr Cooper served Mr Liu with an Offer of Compromise ("OOC") in which Mr Cooper proposed that the appeal be dismissed with no order as to costs. This is an OOC known as a "walk away" offer where the offeror expresses a willingness to settle the matter on the basis that each party bears their own costs. This type of offer can be made in accordance with r 20.26(3)(a)(i) of the Rules. 3. As a genuine OOC under r 20.26(3)(a) of the UCPR (in accordance with r 43.13), r 42.15A is enlivened, which is (relevantly) as follows: "42.15A Where offer not accepted and judgment no less favourable to defendant (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 1. Mr Cooper obtained an order which is no less favourable to the terms of the OOC and so his application is made having satisfied the conditions of r 42.15A above. He submits that he is entitled to the orders sought. The Court proceeds on the prima facie basis that Mr Cooper is entitled to indemnity costs under r 42.15A. 2. For the Court to award the indemnity costs sought, it must be satisfied that the OOC involved a "real and genuine element of compromise": The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706 at [8]; Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [14]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [9]; Barakat v Bazdarova [2012] NSWCA 140 at [51(e)]; Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 at [108]–[109]. 3. This is an objective test and one which must be made in reference to the circumstances of the offer being made: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [41], [42]; Fabre v Lui (No 2) [2015] NSWCA 312 at [6]-[8]; bearing in mind that an offer to settle a weak plaintiff's case need not be substantial: Leichhardt Municipal Council v Green [2004] NSWCA 341. 4. A genuine offer of compromise is both fact dependant and a matter of impression: Prospect Resources Ltd v Molyneaux [2015] NSWCA 171 at [92] & [94]. A walk away offer where the parties agree to settle on the grounds that each party bears their own costs is capable of being a genuine offer of compromise: Leach (No 2) at [50]-[51]; GIO General Ltd v ABB Installation and Service Pty Ltd [2000] NSWCA 118. UCPR r 20.26(3)(a)(i) enables a walk away offer to be made in an OOC: Shepis v Commonwealth of Australia [2013] NSWCA 354 at [33]. 5. In the context of this case, substantial costs were incurred in the Local Court, the magistrate made note that the costs for each party was around $40,000. Whilst there is no evidence as to the exact cost the defendant had incurred as at 16 September 2016, it is likely to have been more than nominal. The amount now may have doubled. I am satisfied that the defendant's offer to forgo the costs that he would have been entitled to is real and genuine in respect of an appeal that was wholly without merit. 6. At the relevant time the case was well known to both parties, and the appeal points initially advanced by the plaintiff were ultimately abandoned, leading to, a conclusion without evidence to the contrary, that the plaintiff was aware of the deficiencies in his appeal. Even if the amount incurred by the defendant was minimal at that point in time, to settle a weak plaintiff case, which this was, the offer need not be substantial: Leichhardt Municipal Council v Green [2004] NSWCA 341. 7. I am satisfied that r 42.15A UCPR is enlivened and that the Court has discretion to order indemnity costs in accordance with that rule, the prima facie position being that, unless the Court otherwise orders, the defendant is entitled to costs on an indemnity basis. I am unpersuaded that the Court should "otherwise order". 8. In respect of the Offer of Compromise under the Rules, the presumption is that he is entitled to an order pursuant to rule 42.15A of the Rules: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [28]; Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [6]). 9. In Houatchanthara v Bednarczyk [1996] NSWCA 253, Clarke JA (with Handley JA and Santow AJA agreeing) expressed that: "[i]t is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk." (2) 1. In this case, the plaintiff's appeal approached "something of the character of being frivolous or vexatious": Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31] cited and followed in Leach (No 2) at [51], it had very limited prospects of succeeding. The Calderbank Offer 1. On 30 August 2016, Mr Cooper made a Calderbank offer to Mr Liu to settle the Supreme Court appeal proceedings proposing that the appeal be dismissed with no orders as to cost, and that the parties enter into a deed in relation to the outstanding aspects of the Local Court Proceedings. The offer was made in the following context: 1. Mr Cooper had obtained judgment in the Local Court for $32,247.20. 2. As Mr Liu had not paid the judgment amount within 28 days of the judgment having been handed down on [1] July 2016, as at 30 August 2016 Mr Cooper was entitled to post-judgment interest pursuant to s 101 of the Civil Procedure Act 2005. 3. Mr Cooper had had the Local Court Proceedings relisted on 19 August 2016 in order to pursue an application for indemnity costs and interest on costs (but that listing was vacated by the Local Court). 4. That application, so far as it related to indemnity costs, was based on a Calderbank offered dated 20 November 2015 (shortly after the first day of trial) and a further Calderbank offer dated 2 February 2016 (shortly after the second day of trial). In those offers, Mr Cooper had made substantial compromises. Mr Cooper obtained a result in the Local Court Proceedings more favourable to himself that the terms of his offers. There was therefore a real possibility that his application for indemnity costs in the Local Court would be successful. The outcomes in the Local Court and the Supreme Court and the progress of Mr Liu's cross-claim on each of the first two days of the Local Court trial support the reasonableness of Mr Cooper's assessment of Mr Liu's case and his offers of 20 November 2015 and 2 February 2016. 1. The Calderbank offer of 30 August 2016 provided the following compromises, which Mr Cooper submits are both genuine and substantial: 1. "Mr Cooper would bear his own costs in the appeal. 2. The judgment amount in the Local Court proceedings would be reduced from $32,247.20 to a fixed amount of $26,453.20 (a reduction of approximately 18%). Mr Cooper was offering to give up an amount to which he was entitled under the judgment of the Local Court and that was not subject to challenge in the appeal. 3. Mr Cooper would abandon his application for costs on the indemnity basis and for interest on costs in the Local Court Proceedings." 1. Mr Liu did not accept this Calderbank offer. It is submitted on behalf of Mr Cooper that this refusal was unreasonable (Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [16]) for the following reasons: 1. at the time the offer was made, the issues on the appeal were clear and their resolution depended on evidence of the Local Court proceedings which was already known to both parties; 2. the time provided to accept was sufficient; 3. the offer provided for a real compromise; 4. Mr Liu had poor prospects of success (as outlined in the Calderbank offer) which he must have known – demonstrated by his abandonment and reworking of the grounds of appeal, the ultimate judgment rejecting the appeal; and 5. the fact that the Local Court proceedings depended largely on adverse findings as to the credit of Mr Liu. 1. Furthermore, the offer was clear, it set out the terms of the agreement which did not require amendment or any negotiation, and outlined that if Mr Liu were not to accept, Mr Cooper would be able to pursue costs on an indemnity basis. The Calderbank offer was, in substance and form, sufficient. 2. Despite Mr Liu being unrepresented at the time of receiving the Calderbank offer, he had received two Calderbank offers during the proceedings in the Local Court whilst he was legally represented. There is no evidence to suggest that his former representatives did not explain to him the merits of accepting these offers or their disadvantageous effects subsequent to an unfavourable outcome. Mr Liu represented himself on the final day of the hearing in the Local Court, and put on an application to this Court appeal the decision, without representation. 3. The decision to award indemnity costs in regards to Calderbank offers is within the Court's discretionary powers. Unlike the OOC where r 42.15A in enlivened and thus a presumption in favour of indemnity. At a starting point, there is no presumption that indemnity costs will be awarded. 4. It is appropriate to order costs on an indemnity basis from the time the Calderbank offer was made. orders 1. Further to Order (2) of 2 November 2017, Mr Liu is to pay Mr Cooper's costs: 1. On an ordinary basis to 30 August 2016; 2. On an indemnity basis thereafter, including costs of these proceedings. ********** 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: 07 December 2017