District Court New South Wales Medium Neutral Citation: Bailey v BMW Sydney Pty Limited & Anor (No. 2) [2020] NSWDC 139 Hearing dates: 22 April 2020 Date of orders: 29 April 2020 Decision date: 29 April 2020 Jurisdiction: Civil Before: Russell SC DCJ Decision: (1) Dismiss the defendants' application for an indemnity costs order. (2) Order the defendants to pay the plaintiff's costs in relation to defendants' application for an indemnity costs order. Catchwords: COSTS – Calderbank offers made by the defendants – defendants insisted upon a non-disparagement and confidentiality clause – not part of relief sought in proceedings – rejection by the plaintiff was not unreasonable COSTS – offers made at confidential mediation – mediation agreement made any such offers confidential – defendants not entitled to indemnity costs from settlement discussions during mediation COSTS – offer of monetary settlement "subject to a settlement deed" – no terms proposed for deed in offer – offer not complete and thus not capable of acceptance or consideration Legislation Cited: Civil Procedure Act 2005 (NSW) s 62(3)(d) Cases Cited: Jones v Bradley (No. 2) [2003] NSWCA 258 Category: Costs Parties: Bailey Bailey (Plaintiff) BMW Sydney Pty Limited (First Defendant) BMW Australia Finance Limited (Second Defendant) Representation: Counsel: A Macinnis (solicitor) (Plaintiff) M Gunning (Defendants) Solicitors: Stevens Vuaran (Plaintiff) Mills Oakley (Defendants) File Number(s): 2018/30297 Judgment Introduction 1. On 19 March 2020 I gave judgment for the defendants in these proceedings and I ordered the plaintiff to pay the costs of both defendants. I gave a monetary judgment in favour of the cross-claimant (the second defendant) and ordered the cross-defendant (the plaintiff) to pay the costs of the cross-claimant. The successful parties indicated that they sought indemnity costs orders. 2. I made directions for the filing of affidavits and written submissions (MFI 13 and MFI 14). The parties made their oral submissions on 22 April 2020. Pursuant to s 62(3)(d) of the Civil Procedure Act 2005 (NSW) each party was limited to 15 minutes for their oral submissions, as I already had the benefit of detailed written submissions. Affidavit evidence in relation to Costs 1. The defendants filed the affidavit of Ms Randazzo, solicitor, dated 26 March 2020 (DX7). 2. The defendants made a Calderbank offer to the plaintiff by letter dated 14 March 2018. The offer was to settle on the following basis: "(a) The parties enter into a formal deed of settlement which includes, among others, a non-disparagement and confidentiality clause. (b) Within one day of entering into the deed of settlement, your client returns the vehicle to BMW Sydney in a state similar to that in which it was in when BMW Sydney was last in possession of the vehicle; and (c) The balance of your client's loan, which as at today's date is $75,175.09, is written off." 1. The plaintiff filed an affidavit of Mr Macinnis, solicitor, dated 3 April 2020 (PX 7). Mr Macinnis pointed out that the Calderbank offer was made: 1. before the discovery of documents by the defendant (which was later provided on 18 July 2018 and 19 December 2018); and 2. before the parties had served any lay or expert evidence. 1. A second Calderbank offer was made by the defendants on 23 April 2018. This reopened the first Calderbank offer for acceptance up to 21 May 2018. Mr Macinnis pointed out that this second Calderbank offer was also made: 1. before the discovery of documents by the defendants; and 2. before the parties had served any lay or expert evidence. 1. In par 8 of her affidavit, Ms Randazzo disclosed three offers made by the defendants at a mediation held on 27 September 2018. Mr Macinnis pointed out that those offers were made on a without prejudice basis during a mediation, and further, that by the mediation agreement, the parties agreed that: 1. the parties would not disclose to anyone any information or document given to them during the mediation; 2. the parties agreed that any settlement proposal would be privileged and would not be disclosed in any proceedings in respect of the dispute. 1. Finally, Ms Randazzo deposed that on 10 October 2019 she conveyed a verbal offer to the solicitor for the plaintiff and confirmed it by an email. The offer "subject to the execution of a settlement deed" was as follows: 1. The second defendant to retain the vehicle; 2. The plaintiff to pay $20,000 to the defendants; 3. The second defendant to write off the balance of the loan; and 4. The proceedings to be dismissed with no order as to costs. 1. Mr Macinnis points out in his affidavit that this offer was made before the defendants had served any lay or expert evidence. The Calderbank offers made on 14 March and 23 April 2018 1. A Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable – Jones v Bradley (No. 2) [2003] NSWCA 258. A relevant matter is the extent to which a party is worse off because the Calderbank offer was not accepted. 2. In the present case the plaintiff is substantially worse off in money terms through not accepting the early Calderbank offers. Instead of the residual payment of over $70,000 due on the chattel mortgage being waived (as proposed in the Calderbank offers), the final judgment required the plaintiff to pay this amount to the second defendant. 3. However, as Mr Macinnis pointed out in his submissions, the Calderbank offers contained an additional provision, being the requirement to enter into a formal deed of settlement which included "a non-disparagement and confidentiality clause". This was not relief sought in the cross-claim. 4. A non-disparagement and confidentiality clause was obviously an important matter to the defendants. In the letter dated 14 March 2018 which contained the first Calderbank offer (DX 7, BER-1), the solicitors for the defendants referred to emails from Mr Bailey to BMW, "many of which contained threats made by your client". The letter reproduced the contents of one email, in which the plaintiff threatened to go to the media in relation to the car and its problems. The letter continued: "We consider that the media campaign foreshadowed by your client, and his actions to date with regard to the images he has placed on the vehicle, are specifically designed to place undue pressure on our client." 1. In response to that letter, the solicitors for the plaintiff rejected the Calderbank offer by letter dated 26 March 2018 (DX 7, BER-2). In that letter the solicitors for the plaintiff made an offer of their own for $256,910.73 to be paid to the plaintiff. The letter also said: "Each party must use reasonable endeavours to not disparage, or otherwise bring into disrepute, any other party (or any of their employees, agents or officers)." 1. In response the solicitors for the defendants wrote by letter dated 23 April 2013 (DX 7, BER-3). This was the letter effectively extending the period for acceptance for the Calderbank offer. That letter said: "Your client has previously threatened to commence an adverse publicity campaign against our clients. In the light of this past conduct, a "reasonable endeavours" obligation to not disparage falls well short of what our clients require in any settlement agreement." 1. Counsel for the defendants acknowledged (MFI 13, par 23) that even though protection in relation to non-disparagement and confidentiality could not have been obtained by way of a court order in the present case, the requirement in the offer for such a condition did not invalidate the offer. I accept this submission. I also accept the submission of the solicitor for the plaintiff (MFI 14, par 11) that where an offer includes relief which could not be obtained in the proceedings, that is a relevant factor in determining whether the refusal to accept such an offer is unreasonable. 2. While I understand why the defendants wished to have a deed including a non-disparagement and confidentiality clause, the inclusion of that matter in the Calderbank offers makes it difficult to determine whether or not it was unreasonable for the plaintiff to reject the offer. Clearly such protection had a significant value to the defendants. The defendants, for their own valid commercial reasons, were seeking to impose a restriction upon the plaintiff, over and above any relief they could have obtained in the proceedings. The plaintiff did offer an alternative "reasonable endeavours" confidentiality provision, but that was not acceptable to the defendants. 3. In light of the fact that the defendants were insistent at that time that there would be no monetary settlement without a non-disparagement and confidentiality clause, I cannot find that it was unreasonable to reject the two Calderbank offers made in March and April 2018. 4. I find that the defendants should not have an indemnity costs order based upon the Calderbank offers made in March and April 2018. The offers made at the mediation 1. The parties attended a mediation on 27 April 2018. Without prejudice discussions occurred during the mediation. The parties signed a Mediation Agreement which specifically provided that any settlement proposal, whether made by a party or the mediator, was privileged and would not be disclosed in any proceedings in respect of the dispute. 2. Mediations are conducted on the basis that anything and everything said during the mediation is confidential. If it were otherwise, there would be no point in holding a mediation for the parties to lay their cards on the table. The confidential nature of the mediation was clearly set out in the Mediation Agreement. 3. I am strongly of the view that the evidence concerning offers made at the mediation should never have been put on affidavit. I propose to completely ignore that evidence. 4. I find that the defendants are not entitled to an indemnity costs order because of anything said or done at the mediation. The email offer made on 10 October 2019 1. The email dated 10 October 2019 making an offer of settlement (DX 7, BER-5) is headed "Without Prejudice – Save as to Costs". It said: "As discussed, our clients are prepared to settle the dispute on the following terms, subject to the execution of a settlement deed: 1. BMW to keep the vehicle (which is not to be encumbered by your client); 2. Your client to pay $20k; 3. BMW to write-off balance of loan (approx. $85k as at today's date); and 4. Proceeding to be dismissed with no order as to costs." 1. The email concluded: "Please let me know when you have obtained your client's instructions." 1. The reference to "subject to the execution of a settlement deed" means that this email was not an offer, but was part of a negotiation which may have led to an offer which may have led to a settlement. It was not an offer capable of acceptance, as there was no detail about the terms of any proposed settlement deed. If for example the defendants had required that any settlement deed should contain a non-disparagement and confidentiality clause, and if the plaintiff still refused to agree to such a term, then there was no prospect of settlement. 2. I find that the email dated 10 October 2019 did not contain the final version of an offer, was not capable of acceptance, and does not entitle the defendants to an indemnity costs order. Conclusions and Orders 1. The defendants have failed in their application for indemnity costs orders. The defendants should pay the plaintiff's costs of this dispute about costs. 2. My orders are: 1. Dismiss the defendants' application for an indemnity costs order. 2. Order the defendants to pay the plaintiff's costs in relation to defendants' application for an indemnity costs order. ********** 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: 29 April 2020