CATCHWORDS
PRACTICE AND PROCEDURE - COSTS - application for indemnity costs - wide discretion to be exercised judicially - s 43 Federal Court of Australia Act 1976 - O 23 r 11 Federal Court Rules 1979 - relevance of Calderbank offer - nature of proceedings and late formal amendment to pleading not relevant - Calderbank principle discussed - applicant's offer reasonable - indemnity costs awarded following Calderbank offer.
Federal Court of Australia Act 1976 (Cth) s 43
Federal Court Rules 1979 (Cth) O 23 r 11
Colgate-Palmolive Company v Cussons Pty Limited (1993)
46 FCR 225, applied
Calderbank v Calderbank (1975) 3 WLR 586, cited
Messiter v Hutchinson (1987) 10 NSWLR 525, cited
McDonnell v McDonnell [1977] 1 WLR 34, applied
Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721, applied
Henderson v Amadio Pty Ltd (unreported, Federal Court, Heerey J, 22 March 1996) cited
MOWIE FISHERIES PTY LIMITED v
SWITZERLAND INSURANCE AUSTRALIA LIMITED
No NG750 of 1994
Tamberlin J
Sydney
30 October 1996
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 750 of 1994
GENERAL DIVISION )
IN ADMIRALTY
BETWEEN: MOWIE FISHERIES PTY LIMITED
Applicant
AND: SWITZERLAND INSURANCE AUSTRALIA LIMITED
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 30 OCTOBER 1996
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. The respondent pay the applicant's costs from 1 July 1996 on an indemnity basis.
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. NG 750 OF 1994
GENERAL DIVISION )
IN ADMIRALTY
BETWEEN: MOWIE FISHERIES PTY LIMITED
Applicant
AND: SWITZERLAND INSURANCE
AUSTRALIA LIMITED
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 30 OCTOBER 1996
REASONS FOR JUDGMENT
In this matter I have awarded costs to the successful applicant.
There remains unresolved a dispute as to whether a proportion of those costs should be on an indemnity or party party basis.
The relevant principles as to the award of indemnity costs are summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233-234 as follows:
"4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course ... there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice ....
5. ... it is useful to note some of the circumstances which have been thought to warrant the exercise of discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud ... evidence of particular misconduct that causes loss of time to the Court and to other parties... the fact that the proceedings were commenced or continued for some ulterior motive ... or in wilful disregard of known facts or clearly established law ... the making of allegations which ought never to have never been made or the undue prolongation of a case by groundless contentions ... an imprudent refusal of an offer to compromise ..." (Emphasis added)
The Court has a wide discretion and the categories in which the discretion may be exercised are not closed. The power conferred to award costs is cast in wide and unrestricted terms. However, it must be exercised judicially.
The relevant general jurisdiction to award costs is found in s43 of the Federal Court of Australia Act 1976 (Cth). Order 23 r11(4) of the Federal Court Rules 1979 (Cth) provides:
"(4) If:
(a) an offer is made by the applicant and not accepted by the respondent; and
(b) 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:
(c) up to and including the day the offer was made - taxed on a party and party basis; and
(d) after that day - taxed on an indemnity basis."
In the present case, the applicant did not make an offer which complied with the formal requests of O23 rr3 and 4 but it sent what is known as a "Calderbank letter" two weeks before the hearing began. See Calderbank v Calderbank [1975] 3 WLR 586
Three matters are raised by the applicant to support the application for indemnity costs.
Firstly, is the letter of 21 June 1996 which was sent from the applicant's solicitors to the respondent's solicitors offering to settle the matter for total payment of $770,000 plus costs, was raised.
The letter reads:
"Dear Sirs,
MOWIE FISHERIES PTY LIMITED
We have had a lengthy discussion with our client today.
As we understand it Mr Lucas' claim will comprise of the following:
(a) Loss of the vessel value $640,000.
(b) Interest on the loss from the date of loss to the date of settlement calculating in accordance with the Court scale.
(c) Interest accruing on the principal loan to the Commonwealth Development Bank arising from non-operation of the boat $130,000.
(d) Income lost $250,000.
On a without prejudice basis save as to costs we are instructed to offer to settle this matter for a sum of $770,000 plus costs.
If the matter does not settle on the above basis and the Court awards a judgment sum in excess of the sum sought, we will seek costs on an indemnity basis as from today's date.
We assess our costs to date at $55,000.
....."
In the proceedings before me the applicant was awarded $859,401.81 plus costs.
The second matter related to two incidents in the conduct of the proceeding. The first was that it was not until the second day of the hearing that there was an admission by the respondent that the loss was due to "an insured peril". It was also said that there was a belated amendment to the respondent's defence, which was only formally made on the last day, although notice had been previously given.
Thirdly, the nature of the proceedings, in that it was an application seeking an indemnity under an insurance contract was raised. The issue, it is said, was clear cut as to whether there should be an indemnity or not. There was no room for any apportionment of the amount claimed. The insured was either entitled to be indemnified or it was not.
I do not think there is any substance in the second and third matters relied on.
The nature of the proceedings does not in my opinion bear on the question of indemnity costs in the present case.
The admission on the second day of the six day hearing in relation to "insured peril" was made after evidence was adduced from the Master, Mr Wicks, which was given late. This made no material difference to the duration of the hearing. The formality relied on in relation to the pleading amendment, made by the respondent on the last day, is not of importance as it was well and truly signalled before that date. There was no significant prejudice in my view, as a result of these incidents.
The matter really turns on the costs consequences which should flow from the letter of 21 June 1996.
As a matter of principle a Calderbank letter will be taken into account by the Court in determining whether a special order displacing the normal order should be made. See Rogers J, Messiter v Hutchinson (1987) 10 NSWLR 525 at 528-9.
However, as Ormrod LJ pointed out in McDonnell v McDonnell [1977] 1 WLR 34 at 38:
"... It would be wrong, ... to equate an offer of compromise in proceedings such as these precisely to a payment into court. I see no advantage to the court surrendering its discretion in these matters as it has to all intents and purposes done where a payment into Court has been made. A Calderbank offer should influence but not govern the exercise of discretion." (Emphasis added)
This much is common ground.
The respondent points out that in the letter of 21 June 1996, the applicant outlines its claim to include interest in accordance with the Court's scale on a simple interest basis and also claims interest accruing to the Commonwealth Development Bank of $130,000. The applicant, it is said, could not recover full interest on both grounds. There is also a claim for lost income of $250,000 which was not pursued.
The substantive offer is to settle the matter for $770,000 plus costs. It is not indicated whether costs on this settlement are as taxed or to be agreed. The offer simply states that the applicant's costs to that date amount to $55,000. It appears to contemplate an agreed assessment.
The weight to be given to the offer should be considered having regard to the underlying principles. The Calderbank principle is a salutary one, being designed to bring home to the parties the need to carefully consider the consequences of proceeding further with their dispute. As the New South Wales Court of Appeal observed in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 724, in relation to Part 52 r17(4) of the Supreme Court Rules 1970, which expressly provides for taxation on an indemnity basis after an offer of compromise, (and which corresponds to this Court's O23 r11(41)), the objects of the rule are:
"1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation." (Emphasis added)
These considerations apply with equal force and relevance to the offer made in the present case. Notwithstanding that the applicant did not follow the requirements of O23 rr3 and 4, it is not, in my view, precluded from reliance on the letter. See the remarks of Heerey J in Henderson v Amadio Pty Ltd (1996) (Unreported, Federal Court, 22 March 1996 at 501-510)
The offer of the applicant has been shown to have been a reasonable one.
In the present case, the applicant has been awarded in the order of $90,000 in excess of the amount which it offered by way of compromise in the letter.
Having regard to the above matters, I am satisfied that it is appropriate that the applicant should have its costs on and after 1 July 1996 on an indemnity basis and prior to that date on a party party basis. I consider that ten days from the date of the offer was an appropriate period to permit the respondent to consider the offer and seek advice.
I certify that this and
the preceding eight (8)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 30 October 1996
Counsel for Applicant: Mr A W Street
Solicitor for Applicant: Allen Allen & Hemsley
Counsel for Respondent: Mr G Nell
Solicitor for Respondent: Ebsworth & Ebsworth
Date of Hearing: 28 October 1996
Date Judgment Delivered: 30 October 1996
