Used Cars Plus Pty Ltd v Ultimate Car Rentals Australia Pty Ltd [2018] NSWSC 476

Supreme Court New South Wales

Medium Neutral Citation: Used Cars Plus Pty Ltd v Ultimate Car Rentals Australia Pty Ltd [2018] NSWSC 476 Hearing dates: 17 April 2018 Decision date: 17 April 2018 Jurisdiction: Common Law Before: Adamson J Decision: See paragraph [10] Catchwords: SECURITY FOR COSTS – application on the basis that there was reason to believe that the plaintiff could not pay a costs order – terms resolved – costs of application – Calderbank letter – costs on indemnity basis ordered – no question of principle Legislation Cited: Civil Procedure Act 2005 (NSW) s 98(1) Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Category: Procedural and other rulings Parties: Used Cars Plus Pty Ltd (Plaintiff) Ultimate Car Rentals Australia Pty Ltd (First Defendant) Fotis Zervas (Second Defendant) Fabio Alves (Third Defendant) Representation: Counsel: A Byrne (Plaintiff) G McDonald (Defendants)

Solicitors: Somerville Legal (Plaintiff) Gavin Parsons & Associates (Defendants) File Number(s): 2017/367007

Judgment: EX TEMPORE 1. By notice of motion filed on 12 February 2018 the defendants sought an order for security for costs against the plaintiff. After a half day hearing of the notice of motion I indicated that I was minded to make an order for security for costs. During the luncheon adjournment, the representatives for the parties have agreed on draft short minutes of order and have indicated that they do not require me to give reasons for ordering security. In these circumstances I make orders by consent in terms of paragraphs 1, 2, 3, 4, 5, 6, 7 and 9 of the short minutes of order and I note paragraph 10, that the amount of security for costs is to provide for the period up to the date on which the proceedings are set down for hearing. 2. The only residual matter in issue is the appropriate costs order. The plaintiff proposes an order in terms of paragraph 8 of the draft short minutes, that the plaintiff pay the costs of, and incidental to, the notice of notion filed on 12 February 2018. The defendants sought an order that the plaintiff pay the defendants' costs on an ordinary basis up to 15 February 2018 and on an indemnity basis thereafter. 3. In support of the defendants' application for costs on a higher basis, Mr McDonald, who appears on behalf of the defendants, tendered a letter dated 15 February 2018 from the defendants' solicitors to the plaintiff's solicitors. The letter was expressed to be without prejudice save as to costs. The author of that letter set out the previous correspondence between the parties and the amount sought in the notice of motion. That amount was derived from an affidavit which was sworn by Mr Parsons, the defendants' solicitor, who deposed as to a figure in the order of $129,000 as the amount sought by the defendants as security for costs. The letter proposed that the plaintiff pay into court or provide a bank guarantee in an amount of $60,981.35 as security for the defendants' costs for the period from the commencement of the proceedings up until the first date the proceedings are listed for hearing. Further matters were outlined, including that the defendants have liberty to apply for further security for costs. At the conclusion of the letter, Mr Rappoport indicated to the plaintiff's solicitors that the offer was made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and that, if the defendants obtain an outcome more favourable following a hearing of the motion, the defendants will seek costs of the motion on an indemnity basis. The offer was expressed to be open until 5.00pm on 8 May 2018, which was some three weeks after the date of that letter. 4. It was accepted by the parties that it was incumbent on the defendants to persuade me that the plaintiff's rejection of the Calderbank offer was unreasonable before any order that costs be paid on a higher basis than the ordinary basis ought be made. 5. Mr Byrne of counsel, who appeared on behalf of the plaintiff, submitted that it was not unreasonable for the plaintiff to refuse the offer proposed in the letter of 15 February 2018. He submitted that the only material available to the plaintiff at the time the offer was made was the affidavit of Mr Parsons which included the underlying figures, which in total gave rise to the figure of about $129,000, and that this was insufficient to make rejection of the offer unreasonable. Mr Byrne submitted that there were several matters raised at the hearing of the notice of motion which were not known or not in reasonable contemplation of the plaintiff at the time of the offer of 15 February 2018. He also submitted that the matters relating to the plaintiff's financial position emerged through evidence in the hearing, including through matters in Mr Marsh's affidavit, to which the defendants were not privy at the date when the plaintiff received the offer. 6. Mr McDonald submitted that it was appropriate to consider, not merely the material which the defendants had served on the plaintiff, but also what can be inferred to have been within the knowledge of the plaintiff at the time it received the offer. Mr McDonald submitted that, at the time the plaintiff received the offer, its director, Mr Marsh, would have been aware of the contents of the last set of accounts prepared for the plaintiff, being those for the financial year ended 30 June 2016, which were signed off on in May 2017. He added that Mr Marsh must also have been aware that the plaintiff had ceased to trade in 2017 and he must be taken to have known of the plaintiff's financial position, which was the subject of admissions made by him in an affidavit sworn on 23 March 2018. 7. In my view, the submissions made by Mr McDonald are well founded. When the plaintiff's solicitor received the offer of 15 February 2018 it must have been plain to the plaintiff that the amount sought by way of compromise up to the allocation of the hearing date was an amount less than half the amount of security the subject of Mr Parsons' affidavit. It also must have been plain that the amount proposed by way of a first tranche in the order of $61,000, which covered the period to the date on which a hearing date would be allocated, was a compromise on the amount of $129,000 sought for the whole proceedings. According to Mr Parsons' calculations, the lion's share of the costs would be incurred prior to the date on which the proceedings were to be allocated a hearing date. 8. I also infer from the evidence of Mr Marsh, which was served subsequently, and from what the evidence revealed about what must have been within Mr Marsh's knowledge at the time of 15 February 2018, that Mr Marsh would reasonably have appreciated that the threshold for making an order for security for costs (that there was reason to believe that the plaintiff would be unable to pay the defendants' costs of the proceedings) would be reached if the motion were contested. 9. In these circumstances I am satisfied that the plaintiff's rejection of the offer of compromise dated 15 February 2018 was unreasonable. I have a general discretion as to costs under s 98(1) of the Civil Procedure Act 2005 (NSW). It seems to me in light of the Calderbank offer and its terms, and the agreed position reflected in the draft short minutes of order provided by the parties, that it is appropriate in the exercise of my discretion to make the order sought by Mr McDonald.