District Court New South Wales Medium Neutral Citation: C&V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2019] NSWDC 323 Hearing dates: 3 June 2019 Date of orders: 12 July 2019 Decision date: 12 July 2019 Jurisdiction: Civil Before: Montgomery DCJ Decision: (1) Order 2 made 3 June 2019 be varied as follows: "Plaintiff to pay the defendant's cost of the proceedings on the normal basis up to and including 30 October 2018, and thereafter on an indemnity basis"; and (2) I order the exhibits be returned Catchwords: COSTS- indemnity basis - Offers of Compromise Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), Civil Procedure Act 2005 (NSW) Cases Cited: Leichardt Municipal Council v Green [2004] NSWCA 341 Calderbank v Calderbank [1975] 2 All ER 333 Arcos Industries Pty Ltd v Electoral Commission of NSW [1973] 2 NSWLR 186 Category: Costs Parties: Plaintiff: C&V Engineering Services Pty Ltd Defendant: Hamilton & Marino Builders Pty Ltd Representation: Counsel: Mr G Campbell (Plaintiff) Mr M Sheldon (Defendant) Solicitors: Daniel Massey (Plaintiff) Vincent Young (Defendant) File Number(s): 2018/151422 Publication restriction: N/A Judgment Approach to Costs 1. The Court having received the parties written submissions as to costs, by arrangement with the parties, these reasons were forwarded to them on a preliminary basis and with an invitation to make oral submissions if required. Both parties informed the Court that they did not seek to make oral submissions. 2. The plaintiff's action was for damages to compensate it for loss of the bargain of a lump sum contract made with the defendant, which damages it expressed as the loss of profit, calculated in its closing submissions, in the sum of $111,511.00. 3. In my principle Judgment, I determined that the parties did not agree a lump sum contract, that the defendant did not breach the contract actually made, and the plaintiff's action for damages failed. 4. The defendant seeks that its costs of the proceedings be paid by the defendant on an indemnity basis: CPA s 98; UCPR r 42.5. The plaintiff concedes only the costs be paid on the ordinary basis, following the event: UCPR r 42.1. The defendant promotes its application by reference to general principles of public policy of an offer, the court imposing cost consequences in circumstances where the unsuccessful party has rejected the successful party's reasonable offers. With reference to Leichardt Municipal Council v Green [2004] NSWCA 341 at [9], the defendant identifies the following grounds for its application: 1. The quantum in dispute was relatively modest; 2. The defendant was forced into protracted litigation at the plaintiff's election; 3. At all times, including prior to proceedings being commenced, the defendant acted reasonably and responsibly and sought to avoid the costs of litigation; and 4. The defendant made multiple genuine offers of compromise that were better than the result the plaintiff achieved and which, as demonstrated by the Judgment, were unreasonably rejected. 1. What the defendant's submission refers to as "genuine offers of compromise" are communications attempting to resolve the matter. The defendant does not rely on formal offers of compromise made pursuant to UCPR r 20.26. 2. Each of the defendant's communications, which are discussed in more detail below, offered a more favourable result than the plaintiff achieved in the Judgment. 3. By its written submission dated 14 June 2019, the defendant claims that it was successful on the question of interpretation of the contract and that that question was "the threshold question". The defendant's submission misstates the reasoning in the Judgment delivered 3 June 2019. The central question determined was whether or not the contract expressed in the plaintiff's email of 10 April 2015 (referred to as the "Offer") was, as claimed by the plaintiff, a lump sum contract. Determination of that question was closely related to the separate question of whether or not the parties intended to be immediately bound at the time of the defendant's email on 13 April 2015. The plaintiff claimed that email to be an acceptance of the Offer. The defendant denied acceptance, and that the parties entered into a lump sum contract. The defendant ran the case on the basis that its email of 13 April 2015 was a counter offer and not an acceptance. Whilst nothing expressed here is intended to be read as qualifying or contrary to the reasons for Judgment, I did find that the defendant's email of 13 April 2015 was an acceptance of the contract contained in the Offer. The plaintiff was successful on that issue. I construed the contract as expressly providing other than an agreement of lump sum contract. 4. Accordingly, the defendant was successful because the plaintiff failed on its case of lump sum contract. The defendant was not successful on the basis of "proper interpretation of the Contract" advanced by it at the Hearing. Defendant Offers 1. The defendant's offer by email of 31 July 2015 did not express the consequence of a special order for costs in proceedings in the event that it was not accepted as required by application of principles expressed in Calderbank v Calderbank [1975] 2 All ER 333. It was however, further evidence of the fact identified in the reasons for Judgment delivered 3 June 2019 of the plaintiff's refusal to participate in communication with the defendant toward achieving a commercial result of the dispute. 2. The defendant's offer by email of Messrs Vincent Young, Lawyers, dated 28 August 2015 did at [4] and [55] present to the plaintiff a commercial basis for resolution of the dispute and the consequence that in the event of the plaintiff's failure to so resolve, the letter would be relied upon "in any future proceedings" for the purpose of the defendant seeking indemnity costs. The compromise sum of $21,648.00, was put on the basis of payment for work performed plus for the 400 plates which the plaintiff had purchased. Because the letter preceded commencement of proceedings, it was not unreasonable for the defendant to have not included in the offer a sum for costs. 3. At [6], the letter explained the two premises upon which the offer was advanced; of, denial of a lump sum contract, and that the agreement was a "schedule of rates contract". Whilst in the running of the case the defendant was unsuccessful in its denials of acceptance of the plaintiff's Offer and of an immediate intention of the parties to contract on 13 April 2015, the plaintiff did fail to prove a lump sum contract. The express provisions for variation of contract, found in the reasons for Judgment, describe a very different contractual arrangement in this case than was considered by Jacobs P in Arcos Industries Pty Ltd v Electoral Commission of NSW [1973] 2 NSWLR 186, upon which case the substance of the offer was posed. The finding of acceptance of the Offer by the defendant's email of 13 April 2015 is opposite the denial of acceptance at [28] of the letter of offer. Indeed, the "ancillary terms and conditions" were attached to that email of acceptance and were accepted. 4. In my opinion, the defendant's email of 28 August 2015 pressed what at [3b] it described as confirming "the true nature of the agreement…[to be]…a schedule of rates contract". In the subsequent proceedings, by its Defence and in the running of the trial, the defendant did not put a case of "schedule of rates contract". As already observed, it denied that a contract in the terms and conditions of the plaintiff's Offer was agreed. In the Judgment of 3 June 2019, I found, against the defendant, that contract. The email expressly did not offer a compromise for the loss of bargain claimed by the plaintiff but expressed itself as offering a reasonable commercial resolution for work and goods supplied by the plaintiff to the defendant on a "schedule of rates contract" basis. The offer was expressed to remain open "indefinitely" and therefore did not stipulate a time when the consequence of indemnity costs would follow. By reasonable inference, that time would be at the commencement of proceedings. In any event, after subtracting the agreed rate for the 400 plates, the offer provided little value by way of compromise of the dispute which concerned the loss of the balance of the contracted transaction. 5. In my opinion, it was not unreasonable for the plaintiff not to accept the defendant's offer conveyed by email dated 28 August 2015, prior to the commencement of the proceedings, because it offered a commercial resolution calculating the sum offered on the bases of a "schedule of rates contract" not run in the hearing, accepted the fact of mutual intention to contract on 13 April 2015 for the whole of the works, which fact was denied by the defendant in the proceedings, and because it did not convey a real and genuine offer to compromise the plaintiff's claim for loss of bargain damages. 6. The Statement of Claim was filed 15 May 2018. 7. By email dated 4 June 2018, the defendant increased its offer to $50,000.00 plus costs of $3,000.00. Plainly that sum was reasonable against the result achieved by the plaintiff in this case. The offer was open for only 11 days. 8. At [5], the defendant expressed that the offer was conveyed pursuant to the principles articulated in Calderbank v Calderbank [1975] 2 All ER 333. The letter referred to an "email letter dated 17 October 2017" which is not before me. The plaintiff rightly complains that although the offer was made 2 weeks before service of the Defence, it was only open to a date 3 days before the defendant served its Defence. Because the defendant expressed the expiration of its offer immediately preceding the filing of its Defence, in my view, the defendant is not entitled to a special order as to costs on the basis of its email of 4 June 2018. Plainly, the substance of the contest in the proceedings could not be known to the plaintiff until parties joined in the discipline of pleading their cases and by that, identify the real issues. The Defence did not plead a "schedule of rates contract" made 13 April 2015 but rather a case, the running of which I have described above. In those circumstances, in my view it was unreasonable for the defendant by its offer of 4 June 2018 to have not extended the time available for acceptance of the offer until at least two weeks following service of the Defence. 9. This brings me to the last offer relied on by the defendant in its application for indemnity costs. By its email of 2 October 2018, the Defendant again offered $21,648.00 to settle the proceedings. The attachments to the email included both the defendant's earlier email of 28 August 2015 and what it referred to as its "previous offer of compromise" dated 4 June 2018. The plaintiff properly points to the failure of the letter to describe a period for acceptance and that it was not in the form of a Calderbank letter, nor did it express that it would be relied on in an application for indemnity costs. The email, on its face, is to be properly criticised for those deficiencies; however, from the annexures to it and to which I have referred, in my view, a legal practitioner on receipt of it would understand it to have conveyed a settlement proposal bearing those consequences. As has been seen, that earlier correspondence did express the consequence of indemnity costs. 10. At the time of receipt of the email dated 2 October 2018, the plaintiff was aware of the case pleaded in the Defence and run at trial. Whilst the offer might be criticised for its reference to the earlier correspondence of 28 August 2015 as characterising its repeat of the offer of $21,648.00 as a commercial resolution on a "schedule of rates contract"; the offer was available to the plaintiff to be accepted as made on the basis of the case pleaded. 11. The defendant by its Defence had changed its position significantly from the offer of 28 August 2015. It no longer pleaded a "schedule of rates contract" and it denied a contract was made on 13 April 2015 for the whole of the works. By its Defence, it maintained its denial of the plaintiff's case for lump sum contract. 12. At the time of the offer, the sum of $21,648.00 was modest against the $176,000.00 quantum sought in the Statement of Claim for damages for loss of profit and, in the absence of a separate allowance for costs, was to be considered to be a costs inclusive offer. However, the sum offered was significantly less modest when viewed in comparison to damages assessed in the Judgment of 3 June 2018 in the sum of $45,036.00, had the plaintiff been successful. The email referred to the timetable for service of evidence ordered by the Court on 31 July 2018. The plaintiff's evidence was not due for service until 4 October 2018. The email acknowledged extension of that time to 19 October 2018. This indicates that the offer was made at a very early stage in the plaintiff's conduct of the proceedings and when the plaintiff's costs were likely to have been modest. 13. Given that the plaintiff was unsuccessful on its case that the contract was for a lump sum bargain, the defendant's offer of 2 October 2018 was a genuine offer for resolution of the proceedings which, in my opinion, it was unreasonable for the plaintiff to reject. In the result, that a closed period for acceptance was not expressed, can only mean the offer was open for a reasonable period. 14. In my opinion, the defendant is entitled for costs of an indemnity basis after 30 October 2018, 28 days being a reasonable period for the plaintiff to have accepted the offer. ORDERS: 1. Order 2 made 3 June 2019 be varied as follows: "Plaintiff to pay the defendant's cost of the proceedings on the normal basis up to and including 30 October 2018, and thereafter on an indemnity basis"; and 1. I order the exhibits be returned. ********** 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: 12 July 2019