CATCHWORDS
COSTS - Indemnity costs - Effect of offer of compromise in course of proceedings - whether any real element of compromise - whether any substantial benefit offered - principles as to award of indemnity costs where formal compromise offer made - Federal Court Rules 1979 O23 r11(4).
Federal Court Rules 1979 O23, r1, r2, r11(4)
Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353
Hobartville Stud v Union Assurance Co Limited (1991)
25 NSWLR 358
Australian Federation of Consumer Organisations Inc. v Tobacco Institute of Australia Ltd (1991) 13 ATPR 52
Quirk v Bawden (1992) 111 FLR 115
ANTHONY CHRISTOPHER WILLIAMS, EUNICE ELIZABETH KELLY, PRESEARTH PTY LTD & NOMMACK (No 198) PTY LTD v COMMONWEALTH BANK OF AUSTRALIA & Ors
No NG 898 of 1992
Tamberlin J
Sydney
30 November 1995
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. G898 of 1992
GENERAL DIVISION )
BETWEEN: ANTHONY CHRISTOPHER WILLIAMS
First Applicant
EUNICE ELIZABETH KELLY
Second Applicant
PRESEARTH PTY LTD (ACN 003 402 166)
Third Applicant
NOMMACK (NO 198) PTY LIMITED
(ACN 003 107 659)
Fourth Applicant
AND: COMMONWEALTH BANK OF AUSTRALIA
(ACN 123 123 124)
Respondent/Cross Claimant
PRESEARTH PTY LIMITED
First Cross Respondent
NOMMACK (No 198) PTY LIMITED
Second Cross Respondent
ANTHONY CHRISTOPHER WILLIAMS
Third Cross Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 30 NOVEMBER 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicants to pay the respondent's costs of the application in the following manner:-
(a) to the extent referred to in the Orders made by the Court on 5 May, 1995, on an indemnity basis and
(b) otherwise, on a party/party basis, as taxed or agreed.
3. Judgment for the cross-claimant on the cross-claim as against the first, second and third cross-respondents.
4. Judgment in the sum of $4,934,888.83 for the cross-claimant on the cross-claim as against the first, second and third cross-respondents.
5. The third cross-respondent is to give the cross-claimant forthwith possession of the land set out hereunder:-
(a) the whole of the land and premises known as 31 MacDonald Street, Vaucluse in the State of New South Wales, being the whole of the land in Folio Identifiers 33/165043 and 34/165043 ("the Vaucluse property"); and
(b) the whole of the land and premises known as 27 Darling Street, Glebe in the State of New South Wales, being the whole of the land contained in Certificate of Title Volume 15532 Folio 157 ("the Glebe property").
6. Leave is granted to the cross-claimant to forthwith issue Writs of Possession in respect of the Vaucluse property and the Glebe property.
7. The first, second and third cross-respondents pay the cross-claimant's costs of the cross-claim on a party/party basis, as taxed or agreed.
8. The respondent to pay the applicants' and cross-respondents' costs of the application for indemnity costs.
9. Exhibits be returned.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. G898 of 1992
GENERAL DIVISION )
BETWEEN: ANTHONY CHRISTOPHER WILLIAMS
First Applicant
EUNICE ELIZABETH KELLY
Second Applicant
PRESEARTH PTY LTD (ACN 003 402 166)
Third Applicant
NOMMACK (NO 198) PTY LIMITED
(ACN 003 107 659)
Fourth Applicant
AND: COMMONWEALTH BANK OF AUSTRALIA
(ACN 123 123 124)
Respondent/Cross Claimant
PRESEARTH PTY LIMITED
First Cross Respondent
NOMMACK (No 198) PTY LIMITED
Second Cross Respondent
ANTHONY CHRISTOPHER WILLIAMS
Third Cross Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 30 NOVEMBER 1995
REASONS FOR JUDGMENT
In this matter I gave my reasons on 20 October 1995. I then directed the parties to bring in Short Minutes to give effect to those reasons.
The parties have now brought in draft Short Minutes of Orders. There remains an outstanding dispute relating to costs. The substance of the dispute is that the respondent Bank claims part of its costs on an indemnity basis. The indemnity costs claimed were those incurred on and from 24 June 1995 in respect to both the application and the cross-claim.
The ground on which the claim for indemnity costs is made is that on 23 June 1995, an offer of compromise was made by the Respondent pursuant to O23 of the Federal Court Rules 1979. In O23 r1, "an applicant" is defined to include a cross-claimant. By r2(1) a party may make an offer to another party to compromise any claim in the proceedings on the terms set out in the Offer.
Rule 11(4) provides that if an offer is made by an applicant (cross-claimant) and is not accepted by the respondent and the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer, then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim. This entitlement is in respect to costs up to and including the day on which the offer was made, on a party and party basis, and thereafter on an indemnity basis.
The applicants commenced proceedings against the respondent under s 52 of the Trade Practices Act and also in contract and tort based on allegations of misleading or deceptive conduct, breach of contract and negligence. There were also claims based on unconscionable conduct and undue influence. None of these succeeded.
The Bank responded with a cross-claim for monies owing under securities.
This is not a case where the applicants or any of them made an offer which was not accepted by the respondent and so O23 r11(4) does not apply in respect of the application but it does apply in relation to the cross-claim.
In my view, it would be artificial in the extreme to consider the present application on the basis of the cross-claim alone. The compromise offered by the respondent related both to the application and the cross-claim. It required consent by certain of the applicants to judgment in the sum of $4,630,860 which sum included interest of $2,683,734. It also required abandonment and release of the applicants' claims.
As is stated in the decisions in Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 355 and Hobartville Stud v Union Insurance Co Limited (1991) 25 NSWLR 358 at 367, it is necessary in considering an application such as the present to take into account whether in the totality of the circumstances the offer by the plaintiff represented any real element of compromise, or whether it was a formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis. See Tickell (supra) at 355, per Rogers CJ. This was applied by Giles J in Hobartville Stud (supra) at 367-368. See also Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 13 ATPR 52, 735, Morling J and Quirk v Bawden (1992) 111 FLR 115 at 119. In deciding whether to award indemnity costs the Court has an unfettered discretion but this discretion must be exercised judicially. Cf Tobacco Institute of Australia at 52, 740.
In the instant case I am satisfied that the compromise offered in relation to the application did not offer substantial benefits to the applicants when compared to the possible final outcome. The offer required judgment on the application against all applicants also that the individual applicants pay their own costs and in the case of the corporate applicants pay the costs of the respondents.
Likewise on the cross-claim the first and second cross-respondents were required to consent to judgment for more than $4.68 million together with interest and costs. These offers did not call for any significant compromise. They called rather for capitulation.
The amount of the judgment against each of the applicants is in excess of $4.6 million. They will all have to pay costs in any event on a party/party basis. Their claims were not without some foundation although they did not ultimately succeed. It is also important to bear in mind although looked at with the benefit of hindsight, one may conclude that there was not a great deal of substance in the case brought by the applicants, nevertheless, there is involved a consideration as to whether the compromise ought to have been accepted as at the time when it was made without risking indemnity costs.
In relation to the first applicant/third respondent, the position is different. However, having regard to the very substantial amounts claimed by the applicants and to the fact that it appears that there was a genuine triable claim by the third respondent for a sum of up to $3 million, I do not think that an indemnity order is appropriate.
The position in which the first applicant, Mr Williams, found himself was that he was offered effectively a benefit in the order of $170,000 together with a significant benefit in respect of costs and no judgment against him provided that he abandoned what he saw as a legitimate claim to an amount in the order of up to $3 million.
Even if the compromise had been accepted by Mr Williams there was no guarantee that the proceedings would not have continued on the part of Mrs Kelly or the fourth applicant, and so the costs of the proceedings may well have been incurred in any event.
The application took up virtually all of the hearing time as compared with the cross-claim and so far as the application was concerned the proposed compromise was not in any sense a significant offer of compromise.
Weighing the above considerations, I exercise my discretion against awarding costs on an indemnity basis in this matter with the exception of course of the costs order made on 5 May 1995.
I therefore dismiss the application for indemnity costs and order the respondents to pay the applicants' and cross-respondents' costs of this application.
I certify that this and
the preceding five (5)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 30 November 1995
Counsel for Applicant: Mr D E Baran
Solicitor for Applicant: Hovan & Co
Counsel for Respondent: Mr D R Fredericks
Solicitor for Respondent: Shaw McDonald
Date of Hearing: 29 November 1995
Date Judgment Delivered: 30 November 1995
