Supreme Court New South Wales Medium Neutral Citation: Gresham Property Investments Limited v Global Consulting Services Pty Limited; Global Consulting Services Pty Limited v Gresham Property Investments Limited (No 2) [2018] NSWSC 433 Hearing dates: On the papers Decision date: 11 April 2018 Jurisdiction: Equity - Commercial List Before: Ball J Decision: (1) The first defendant/first cross-claimant and second defendant/second cross-claimant pay the plaintiff/first cross-defendant's costs of the proceeding: (a) on the ordinary basis up to 25 July 2017; and (b) on the indemnity basis after 25 July 2017, in each case, as agreed or assessed. (2) The first defendant/first cross-claimant and second defendant/second cross-claimant are not entitled to the costs of proving any facts the subject of their notice to admit facts dated 11 May 2017. Catchwords: COSTS – Party/Party – Exceptions to general rule that costs follow the event – Calderbank offers – Reasonableness of rejecting a Calderbank offer COSTS – Party/Party – Specific court rules in relation to costs – Whether the court should depart from the ordinary rule in Uniform Civil Procedure Rules 2005 (NSW) r 42.8(2) Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Gresham Property Investments Limited v Global Consulting Services Pty Limited [2018] NSWSC 141 Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340 Category: Costs Parties: Gresham Property Investments Limited (ACN 078 108 086) (Plaintiff | First Cross-Defendant) Global Consulting Services Pty Limited (ACN 053 280 489) (First Defendant | First Cross-Claimant) RGN Pty Limited (ACN 121 372 183) (Second Defendant | Second Cross-Claimant) Pierora Pty Limited (In Liq) (Receivers & Managers Appointed) (Controller Appointed) (ACN 081 095 409) (Third Defendant | Third Cross-Defendant) PVS5 Holding Co Pty Limited (Receivers & Managers Appointed) (Controller Appointed) (ACN 154 301 596) (Fourth Defendant | Fourth Cross-Defendant) Pentridge Village Pty Limited (Receivers And Managers Appointed) (In Liquidation) (ACN 087 151 068) (Second Cross Defendant) Representation: Counsel: IR Pike SC with J Anderson (Plaintiff | First Cross Defendant) PG Willis SC with R Scheelings (First & Second Defendants | First & Second Cross Claimants) Submitting Appearance (Third & Fourth Defendants | Third & Fourth Cross Defendants) Solicitors: Baker McKenzie (Plaintiff | First Cross Defendant) Key Point Law (First & Second Defendants | First & Second Cross Claimants) Arnold Bloch Leibler (Third & Fourth Defendants | Third & Fourth Cross Defendants) File Number(s): 2016/37916 Publication restriction: None Judgment Introduction 1. I delivered judgment in this matter on 21 February 2018 (see Gresham Property Investments Limited v Global Consulting Services Pty Limited [2018] NSWSC 141) and made orders giving effect to that judgment on 19 March 2018. Under the terms of those orders, the question of costs was to be determined on the papers. This judgment deals with that question. It assumes familiarity with my earlier judgment and uses the same abbreviations as were used in that judgment. 2. Gresham was substantially successful in the proceedings and it is common ground that generally, in accordance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rr 42.1 and 42.2, it is entitled to an order that GCS and RGN (together the Active Defendants) pay its costs and that those costs be assessed on the ordinary basis. However, each of Gresham and the Active Defendants contend that an exception should be made to that general principle in this case. Gresham submits, relying on a Calderbank offer it made on 18 July 2017, that it should have its costs on an indemnity basis from 25 July 2017. The Active Defendants, relying on a notice to admit facts which was disputed by Gresham, submits that they should have their costs of proving certain disputed facts on an indemnity basis. The Calderbank Offer 1. It is common ground that the Court has power to order a party to pay costs on an indemnity basis and one circumstance in which a court may make such an order is where a defendant unreasonably rejects a genuine offer of compromise: see Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340 at [30] per Beazley P, Meagher and Payne JJA. 2. In the present case, by a letter dated 18 July 2017 from its solicitors to the solicitors for the Active Defendants, Gresham proposed that the proceeds of sale of property held by PV, Pierora and PVS5 be pooled and distributed as to 55 per cent to Gresham and as to 45 per cent to the Active Defendants. The offer was expressed to be open until 5.00pm on 25 July 2017. On 26 July 2017, the solicitors for the Active Defendants replied stating that they had only received a further affidavit from Gresham on 20 July 2017 and that they would respond by 5.00pm on 28 July 2017. On 28 July 2017, the Active Defendants rejected the offer. It appears that the solicitors for the Active Defendants mistakenly believed that Gresham's offer expired on 26 July 2017. 3. There can be no question that the offer made by Gresham was a genuine offer of compromise and that Gresham did better than the offer as a result of the judgment it obtained. 4. The Active Defendants submit that no special costs order should be made in this case because it was not unreasonable for them to reject the offer. They advance two reasons. First, Gresham succeeded for reasons unrelated to those advanced in its letter making the offer. Second, the Active Defendants' position was a serious and arguable case on a relatively untested and undeveloped aspect of the law and it was not unreasonable for the Active Defendants to reject the offer and instead put its case to the test. 5. I do not accept those submissions. The question is not whether the claim succeeded for the reasons advanced by Gresham. The question is whether, at the time the offer was made, the Active Defendants had sufficient information concerning the claim that they could reasonably assess the offer. In this case, the Active Defendants were able to form their own views on the relevant legal principles and knew the relevant facts. Consequently, they were in a position to consider the offer. The outcome of the case turned largely on the application of established exceptions to the principle that co-sureties were equally liable for the guaranteed debt. The Active Defendants bore the onus of proof in relation to the factual matters that attracted the application of one or more of those exceptions. They were in a position to make a reasonable assessment of whether they would be able to discharge that onus. The fact that they may have had a reasonably arguable case does not of itself establish that it was reasonable for them to reject the offer. In this case, the offer provided the Active Defendants with significant benefits which could reasonably be seen as reflecting their prospects of success. 6. The Active Defendants did not accept the offer within the period for which it was open. After the offer had expired, they wrote to Gresham seeking an extension. No extension was granted. The Active Defendants contend that the timeframe for which the offer was open was unreasonable because they had only received a further affidavit from Gresham on 20 July 2017. However, they do not explain how that affidavit affected their consideration or why further time was required. 7. Accordingly, Gresham is entitled to its costs on an indemnity basis from 26 July 2017. The notice to admit facts 1. Under UCPR r 42.8, where a party serves a notice to admit facts which is disputed and the facts are subsequently proved, then, unless the Court orders otherwise, the party who disputed the facts must pay the costs of the party seeking the admission in proving the facts on an indemnity basis. 2. In the present case, the Active Defendants served a lengthy notice to admit facts on 11 May 2017 consisting of 68 numbered paragraphs. Gresham served a notice disputing facts on 25 May 2017. It disputed all facts save for two. The Active Defendants contend that a large number of facts the subject of the notice were found by the Court. It seeks the costs incurred in proving those facts on an indemnity basis. 3. In my opinion, this is a case where it is appropriate to order otherwise. 4. In general, the facts in respect of which admissions were sought and were subsequently proved were expressed at a level of generality that could not make them useful without further evidence and were part of the background that would need to have been given in any affidavit addressing the issues in the case. As a result, in many cases, it is difficult to see what costs would have been saved if the facts had been admitted since evidence would still need to have been adduced by the same witnesses in relation to the same broad matters that were the subject of the notice to admit facts. In addition, in many cases, the relevant facts were proved by the tender of documents which it is likely would have had to have been tendered in any event. It is not necessary to identify each relevant fact. However, the point can be made by taking a number of examples. The notice to admit facts sought the following admissions, among others: 1. Pentridge acted as a participant in, custodian for and manager of a joint venture known as the Pentridge Village Joint Venture (Pentridge Village Joint Venture). 2. The business of the Pentridge Village Joint Venture was to develop for sale land at Coburg, Melbourne, held for the Joint Venture. 3. As such custodian and manager, Pentridge held title to all the real property of the Pentridge Village Joint Venture while it was being developed by the Joint Venture and until sold. 4. No other entity held title to real property of the Joint Venture. 5. In or about 2005, title to the land known as Lots 802 – 811, S7, D Division and 8 car parks lots were transferred out of the Pentridge Village Joint Venture by Pentridge to Pierora for an arm's length consideration. 6. Pierora was not a participant in the Pentridge Village Joint Venture. … 17 In or about 2005, Pentridge (as borrower on behalf of itself and the participants in the Pentridge Village Joint Venture) entered into a credit facility agreement with Capital Finance Australia Limited (ACN 069 663 136) (CFAL) and others for a facility limit of $85 million. 18 On or about 15 November 2010, Pentridge (as borrower on behalf of itself and the participants in the Pentridge Village Joint Venture) entered into a further credit facility agreement with Capital Finance Australian Limited (ACN 069 663 136) (CFAL) and others, with effect from June 2010 (CFAL Facility). … 23 From in or about September 2011, Pentridge developed a proposal to buy itself, or to find a friendly buyer for, the CFAL Facility at a discount to its face value. … 34 A minority of the participants in the Pentridge Village Joint Venture did not agree with the proposal that Pentridge acquire the CFAL Facility. … 37 Daimleigh required funding to acquire the CFAL Facility. 38 Daimleigh required funding of the new money facility. … 42 By letter dated 27 June 2012, from CVS Lane to Daimleigh, CVS Lane offered Daimleigh a Senior Bridge Facility of $15 million on the terms and conditions of the letter and its attached Credit Approved Term Sheet (CVS Senior Facility). … 50 GCS agreed to provide a facility of $2 million towards the new money facility. … 66 In entering its loan agreement with Daimleigh on or about 16 October 2012 (Gresham loan agreement), Gresham accepted that neither PVS5 nor Pierora provided it with a guarantee or security for the loan agreement. 1. Paragraphs 1 to 4 provide very general information about the Pentridge Village Joint Venture. On any view, they needed to be supplemented with more details about the Joint Venture. Given that, it is difficult to see what benefits would have flowed if the admissions had been made. 2. Paragraphs 5 and 6 give some general information about Pierora. However, again, it was relevant to know that Pierora was a Chiavaroli-controlled company, but that was not something that was the subject of the notice to admit facts. Consequently, some evidence needed to be given about Pierora. It was not important to know which lots were acquired by Pierora. In any event, that could have been proved by the simple tender of documents. Consequently, the additional costs of proving the facts that are the subject of paras 5 and 6 of the notice to admit facts are likely to have been insignificant. 3. Paragraphs 17 and 18 provide information about the CFAL Facility. The relevant facts were proved by tender of the relevant agreements and it seems likely that the agreements would have needed to have been tendered whether or not the admissions were made. Consequently, the failure to admit those facts added nothing to the costs of the case. 4. Paragraph 23 again is a generalised statement which of itself conveys very little useful information. Admission of that fact would not obviate the need to give further evidence in relation to the proposal. The same is true of paras 34, 37 and 38. 5. The facts stated in paras 42 and 50 were proved by the tender of relevant documents and it is difficult to see how admission of those facts would have obviated the need to tender those documents. 6. I do not accept that a finding was made in terms of para 66 or that Gresham's acceptance of anything was relevant to the case. What was relevant to the case was the effect of the relevant agreements. That was best proved by the tender of the agreements. 7. In my opinion, the same points can be made in respect of each of the facts that was not admitted but said to have been proved. Consequently, the failure of Gresham to admit the relevant facts added little if anything to the costs of the case. In addition, given that the witnesses who proved those facts would have to have prepared affidavits in any event, it is difficult to see how, on assessment, the costs of proving the facts in respect of which admissions were sought could be determined. For those reasons, I would make an order that the Active Defendants not have their costs of proving the facts the subject of the notice to admit facts. Orders 1. The orders of the Court are: 1. The first defendant/first cross-claimant and second defendant/second cross-claimant pay the plaintiff/first cross-defendant's costs of the proceeding: 1. on the ordinary basis up to 25 July 2017; and 2. on the indemnity basis after 25 July 2017, in each case, as agreed or assessed. 1. The first defendant/first cross-claimant and second defendant/second cross-claimant are not entitled to the costs of proving any facts the subject of their notice to admit facts dated 11 May 2017. ********** 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 2018