Supreme Court New South Wales Medium Neutral Citation: Rahme v Satouris (No 2) [2019] NSWSC 208 Hearing dates: On the papers Decision date: 07 March 2019 Jurisdiction: Common Law Before: Emmett AJA Decision: Order that the plaintiffs pay the costs of the second defendant on the ordinary basis up to 31 October 2017 and on the indemnity basis from 1 November 2017 and that the plaintiffs pay the costs of the fourth defendant on the indemnity basis from 14 June 2018. Catchwords: COSTS – party/party – bases of quantification – indemnity basis – rejection by the plaintiffs of a no less favourable offer of compromise – further offers of compromise following joinder of another defendant – defendants insured under single policy of insurance Legislation Cited: Civil Procedure Act 2005 (NSW), s 98(1) Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law Contracts Review Act 1980 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 36.16(1), 36.16(3A) 42.15A(2), 42.5 Cases Cited: Rahme v Satouris [2018] NSWSC 1753 Category: Costs Parties: Dana Rahme (First Plaintiff) Gabriel Rahme (Second Plaintiff) Benjamin & Khoury Pty Ltd (Second Defendant) Dieb P Khoury (Fourth Defendant) Representation: Counsel: D A Allen (Plaintiffs) M O'Brien (Second and Fourth Defendants) Solicitors: Kekatos Lawyers (Plaintiffs) Sparke Helmore Lawyers (Second and Fourth Defendants) File Number(s): 2015/300814 Judgment 1. EMMETT AJA: On 21 November 2018, for reasons published on that day, (the Principal Reasons [1] ), I directed the entry of judgment for the second and fourth defendants and ordered the plaintiffs to pay the costs of the second and fourth defendants. By notice of motion filed on 5 December 2018 (the Costs Motion), the second defendant and fourth defendant seek a variation of the orders for costs. In these reasons, I shall use the terms in the way defined in the Principal Reasons. 2. In the proceedings, Mrs Rahme and Mr Rahme alleged that B & K and Mr Khoury acted negligently, in breach of contract, in breach of fiduciary duties and in contravention of the Australian Consumer Law. They also sought relief under the Contracts Review Act 1980 (NSW). By the Costs Motion, B & K and Mr Khoury seek a variation of the order made on 21 November 2018 by adding the following: "The second and fourth defendants' costs of the proceedings are to be assessed: (a) on the ordinary basis up to 31 October 2017; and (b) on the indemnity basis from 1 November 2017." The application to vary the order was made within the period of 14 days from the date of the orders in compliance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.16(1) and r 36.16(3A). 1. The present application is based on an offer of compromise under UCPR r 20.26 (the Compromise Offer) made on 31 October 2017 on behalf of B & K and on behalf of Mr Soulos, the then third defendant, who was separately represented. At the time of the Compromise Offer, Mr Khoury was not a party to the proceedings. He was added as a defendant on 14 June 2018. 2. In the events that happened, Mr Soulos entered into a settlement agreement with Mrs Rahme and Mr Rahme and orders reflecting consent judgment pursuant to the settlement agreement were made on 27 August 2018. The terms of the orders were that there be a verdict and judgment for the third defendant, with no order as to costs. Under the settlement agreement, Mr Soulos was to pay the sum of $100,000 to the solicitors for Mr Rahme and Mrs Rahme. The entirety of that sum was applied on account of costs and disbursements owed by Mrs Rahme and Mr Rahme to their solicitors. 3. On 31 October 2017, Mr Cameron, a partner of Sparke Helmore, the solicitors for B & K and Mr Khoury, sent an email to Kekatos Lawyers, the solicitors for Mr and Mrs Rahme. Attached to the email was the Compromise Offer, which offered to compromise the whole of the claims in the proceedings by Mrs Rahme and Mr Rahme on the following terms: 1. judgment for the plaintiffs against the second and third defendants in the sum of $100,000; 2. costs as agreed or assessed up to the time the offer was made be paid by the second and third defendants; and 3. the offer was open for acceptance for 28 days. 1. On 21 November 2018, Mr Cameron wrote to Kekatos Lawyers, saying that B & K was entitled to its costs on the indemnity basis from 1 November 2017. There was no response to that email. 2. The validity of the Compromise Offer has not been impugned by Mrs Rahme and Mr Rahme, and it is not disputed that B & K is entitled to an order for indemnity costs from 1 November 2017 pursuant to UCPR r 42.15A(2). Under that rule, where a defendant's offer is rejected and the defendant obtains a judgment no less favourable to the defendant than the offer, the defendant is entitled to costs on an ordinary basis until the date of offer and on the indemnity basis thereafter, unless the court otherwise orders. As I have indicated, judgment was entered for B & K. Clearly, B & K obtained a judgment no less favourable than the terms of the Compromise Offer, which involved a real and genuine element of compromise, given that Mrs Rahme and Mr Rahme sought damages in the sum of $342,193.69. Nothing has been advanced on behalf of Mrs Rahme and Mr Rahme to suggest that B & K is not entitled to its costs on that basis. 3. The position of Mr Khoury, however, is not as straightforward. Mr Khoury asks that the Court exercise its discretion under s 98(1) of the Civil Procedure Act 2005 (NSW) and UCPR r 42.5 to order that Mr Khoury be paid his costs on the indemnity basis. 4. As I have said, Mr Khoury was joined as a defendant on 14 June 2018, when the second further amended statement of claim was filed. Thus, Mr Khoury was not a party to the proceedings at the time when the Compromise Offer was made. Further offers of compromise were made after Mr Khoury was joined and he was a party to those offers. 5. Mr Khoury is the principal of B & K and the interests of B & K and Mr Khoury in defending the proceedings were coterminous. B & K and Mr Khoury are insured under a single policy of insurance and the insurer has conducted the proceedings on behalf of B & K from when it was first sued and on behalf of Mr Khoury when he was joined. Following the joinder of Mr Khoury, B & K and Mr Khoury were jointly represented and maintained precisely the same stance in defence of the claims made by Mrs Rahme and Mr Rahme. 6. Mr Khoury did not incur costs over and above the costs incurred by B & K other than the costs incurred in preparing his defence to the second further amended statement of claim. The costs incurred after the joinder of Mr Khoury were to a very significant degree incurred jointly. Additional costs incurred as a result of Mr Khoury being named as a party are not likely to have been significant. In all the circumstances, I consider that the appropriate order is that both the plaintiffs pay the costs of the second defendant on the ordinary basis up to 31 October 2017 and on the indemnity basis from 1 November 2017 and that they pay the costs of the fourth defendant on the indemnity basis from 14 June 2018. ********** Endnote 1. See Rahme v Satouris [2018] NSWSC 1753. 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 March 2019