Federal Court of Australia

Ponraj v Wycombe Services Pty Ltd (No 2) [2023] FCA 272

ORDERS

THE COURT ORDERS THAT:

1.    There be judgment for the respondent/cross-claimant against the applicant/cross-respondent in the sum of $615,020.23, comprising judgment of $574,248.58 and interest of $40,771.65 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), which judgment carries interest 60 days from the date of this order at the rate prescribed in r 39.06(a) and (b) of the Federal Court Rules 2011 (Cth).

2.    The applicant/cross-respondent pay the respondent/cross-claimant’s costs of the claim and cross-claim:

(a)    on a party and party basis up to 10.59 am on 1 June 2022 pursuant to r 40.01 of the Federal Court Rules 2011 (Cth); and

(b)    on an indemnity basis from 11 am on 1 June 2022, pursuant to r 25.14 of the Federal Court Rules 2011 (Cth).

3.    The assessment of the costs orders in order 2 is to be made by way of the lump sum costs procedure pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

4.    The Registrar of the Court is directed to determine the amount of the respondent/cross-claimant’s costs in such manner as the Registrar deems fit, and shall then make an order for fixing the amount of those costs, which are to be payable within 28 days of such orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MCELWAINE J:

1    I published my reasons for judgment in this matter on 22 February 2023: Ponraj v Wycombe Services Pty Ltd [2023] FCA 118. I dismissed the claim of Dr Ponraj, determined that the respondent is entitled to judgment on the cross-claim and adjourned for further submissions the assessment of interest on that claim and costs. I have received submissions from the respondent but none from Dr Ponraj.

2    Dealing first with the cross-claim, I am satisfied that the respondent is entitled to pre-judgment interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) (Act) as sought and in the amount of $40,771.65 calculated upon the principal amount of the cross-claim of $574,248.58.

3    As to the costs of the proceeding, there is no reason why costs should not follow the respective events of the claim and the cross-claim. The question that requires more detailed consideration is whether the respondent should have its costs of each assessed on an indemnity basis and in a lump sum pursuant to s 43(3)(g) of the Act and r 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules). In support of submissions to that effect, the respondent relies upon affidavit evidence from its solicitor Rebecca Julie Brediceanu which attaches a number of settlement proposals which were put by the respondent to Dr Ponraj at various time points in this proceeding. In summary:

(1)    On 22 July 2021, the respondent proposed settlement with Dr Ponraj pursuant to alternative options: one, that Dr Ponraj pay to the respondent a total amount of $400,000 in 16 instalments of $25,000 per month and the other, that Dr Ponraj pay to the respondent an amount of $350,000 comprising a lump sum of $150,000 with the balance in eight instalments of $25,000 per month. If accepted, the parties were required to enter into a deed of release containing mutual releases, confidentiality and non-disparagement clauses and the claim and cross-claim were to each be discontinued by consent with no order as to costs.

(2)    On 28 July 2021, solicitors then acting for Dr Ponraj rejected the offer of 22 July 2021 and put a counter-proposal to the effect that Dr Ponraj pay to the respondent $175,000 in quarterly instalments of $25,000, subject to entry into a deed of mutual release and discharge and that the proceeding be dismissed with no order as to costs. That offer was not accepted.

(3)    On 30 May 2022, the respondent served a Notice of Offer to Compromise pursuant to r 25 of the Rules together with a covering Calderbank letter (named after the decision in Calderbank v Calderbank [1975] 3 All ER 333). At that time Dr Ponraj was unrepresented. The offer was open for acceptance until 13 June 2022. The respondent offered to pay to Dr Ponraj $150,000 inclusive of costs in the amount of $50,000 on the claim and, on the cross-claim, Dr Ponraj pay to the respondent $480,000 inclusive of costs of $30,000. The offer proposed that each amount be set-off such that Dr Ponraj would pay to the respondent the amount of $330,000. The Calderbank correspondence set out the respondent’s view at that stage that the claim would fail and that the cross-claim would succeed. That offer was not accepted.

(4)    On 19 August 2022, the respondent sent further Calderbank correspondence to Dr Ponraj. Again the respondent set out in some detail the history of offers and the respondent’s view that Dr Ponraj would not succeed on his claim or his defence of the cross-claim. Despite those views, the respondent offered to settle the proceeding “for the sole purpose of reaching a commercially sensible resolution” and without admission of liability, on the basis that Dr Ponraj would pay to it $250,000 in full and final settlement and that the claim and the cross-claim would each be dismissed with no order as to costs.

(5)    On 23 August 2022, Dr Ponraj responded to the Calderbank correspondence of 19 August 2022. He did not accept the proposal. By way of counter-offer he proposed that he be paid $150,000 and that he would enter into a new services to practitioner agreement for a period of 12 months upon similar terms as the agreement the subject of the respondent’s cross-claim. He expressed his “confident” view that he would succeed on his claim and the defence of the cross-claim but did not explain why.

(6)    On 24 August 2022, the respondent rejected the offer made by Dr Ponraj and put a further counter-proposal to the effect that it would pay an amount of $30,000 in settlement of the claim and would discontinue the cross-claim on the basis that Dr Ponraj agreed to enter into a new services to practitioner agreement with the respondent for a period of 2.5 years.

(7)    On 26 August 2022, Dr Ponraj responded. He did not accept the offer of settlement. He made one final offer to the effect that he be paid the sum of $100,000 upon the claim. By necessary implication he must be taken to have also proposed that the cross-claim be dismissed with no order as to costs. That offer was not accepted.

4    The respondent in each of its offers clearly stated that failing acceptance, an application for indemnity costs would be made in the event that the claim was dismissed and/or the cross-claim was upheld.

5    The principles that inform the exercise of the discretion to depart from the usual party and party basis for an award of costs are well understood and need not be recited in detail. See, for example Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No2) [2018] FCAFC 112 at [5]–[7], Nicholas, Yates and Beach JJ and Zibara v Ultra Management (Sports) Pty Ltd [2021] FCAFC 4 at [168]–[178], McKerracher and Anderson JJ. Further, in this particular case, there is the Notice of Offer to Compromise that attracts the cost consequences set out at r 25.14 of the Rules if Dr Ponraj unreasonably failed to accept one or more of the offers made by the respondent in circumstances where his claim was dismissed. If so, r 25.14(2) confers an entitlement in favour of the respondent to an order for costs on an indemnity basis from 11 am on the second business day after the offer was served, unless the operation of the rule is displaced pursuant to r 1.34. The unreasonableness question is self-evidently objective and is to be assessed in accordance with what was known and what a reasonable person would have done in the position of Dr Ponraj when each offer was made. A retrospective analysis is not to be engaged in.

6    In my view this is an appropriate case for an award of indemnity costs on the claim and the cross-claim in favour of the respondent. Dr Ponraj imprudently did not accept the various settlement proposals that were put to him. His refusal to do so was unreasonable. Why that is so is as follows:

(1)    The various offers were made commencing on 22 July 2021, when it ought to have been clear to Dr Ponraj that he then had sufficient information to understand the relative strength of his claim and that of the cross-claim in order to make an informed decision as to the reasonableness of the extent of the compromise proposed for each. The Calderbank correspondence of 30 May 2022 sought to explain to Dr Ponraj why his discrimination claim lacked merit and that his defence to the cross-claim would not succeed. Similar explanations of relative merit were set out in the offers of 19 and 24 August 2022. Acting reasonably, Dr Ponraj ought to have given mature consideration to the lack of merit in his discrimination claim and of his defence to the cross-claim for breach of contract.

(2)    Each offer allowed for a reasonable time for consideration and acceptance: 14 days for the first, seven for the second and two for the third (it having been made at a late stage of the proceeding - the trial commenced on 12 September 2022).

(3)    The respondent in each offer proposed to substantially compromise upon its cross-claim which was readily capable of mathematical calculation in accordance with the terms of the services to practitioner agreement in the amount of $574,248.58 being the total of the aggregate “upfront” payments made by the respondent to Dr Ponraj, less an allowance for the period of time during which Dr Ponraj performed the agreement in accordance with its terms. The respondent commenced by offering to compromise its claim in the amount of $400,000 payable by instalments or alternatively $350,000 by way of a combination of lump sum and instalments on 22 July 2021, and thereafter further compromised its claim to receive payment in the set-off amount of $330,000 pursuant to the Notice of Offer to Compromise on 30 May 2022, $250,000 in the offer of 19 August 2022 and finally by agreeing to not pursue the cross-claim, pay to Dr Ponraj $30,000 and enter into a new services to practitioner agreement pursuant to the offer of 24 August 2022. Each offer made by the respondent represented a very significant compromise of the extent of its damages claim for breach of contract. Each offer reflected the lack of merit in the discrimination claim.

(4)    When each offer was made, acting reasonably, Dr Ponraj ought to have appreciated that he had slim prospects of success upon his claim and virtually no prospect of success in defending the cross-claim. The fundamental problems with his discrimination claims were that the respondent did not treat Dr Ponraj differently in circumstances that were not materially different on the direct discrimination claim and nor did it impose a disadvantaging requirement on the indirect discrimination claim.

(5)    Each offer made by the respondent to compromise was clearly expressed and contained no ambiguity as to the respondent’s position.

(6)    Each offer foreshadowed that an application for indemnity costs would be made in the event of non-acceptance.

(7)    And, for the reasons that I have given, Dr Ponraj unreasonably failed to accept the Notice of Offer to Compromise that was made in relation to his claim.

7    In my view, the respondent has established an entitlement to an indemnity costs order. It secured an outcome by trial significantly better than the various attempts that it made to compromise this proceeding in circumstances where Dr Ponraj ought, acting reasonably, have accepted one or more of the settlement proposals put to him.

8    The next question is whether that order should be made upon the claim and the cross-claim and, in each case, from what date? The respondent submits that it ought to receive its costs of the claim and the cross-claim on a party and party basis to 10.59 am on 1 June 2022 pursuant to r 40.01 of the Rules and on an indemnity basis thereafter pursuant to r 25.14. It might have been thought that the respondent had a reasonable basis for contending that it ought to receive an award of indemnity costs at an earlier point in time, having regard to the various settlement proposals that it put to Dr Ponraj prior to the Notice of Offer to Compromise of 30 May 2022. Having regard to the history of offers before that date, my conclusion is that Dr Ponraj unreasonably refused to accept one or more of the offers made to him and having regard to the effect of r 25.14(2) and each of my findings on the Calderbank offers, I am satisfied that indemnity costs ought to be awarded for the claim and the cross-claim from 11 am on 1 June 2022.

9    Finally, the respondent submits that costs ought to be awarded in a lump sum having regard to the factors set out in Part 4 of the Costs Practice Note (GPN-COSTS) and the general purpose that such costs orders are made to avoid the expense, delay and difficulty that is usually attendant upon an order that costs be taxed: Coshott v Prentice (No 2) [2018] FCAFC 221 at [4]–[5], Kerr, Farrell and Gleeson JJ. I accept that submission. Despite the lack of merit in the claim and the defence to the cross-claim, this proceeding was relatively time and resource consuming in the pre-trial steps and the conduct of the trial. It is clearly desirable to avoid further protracted disputes about the respondent’s costs claim.

10    Accordingly, I make the following orders:

1.    There be judgment for the respondent/cross-claimant against the applicant/cross-respondent in the sum of $615,020.23, comprising judgment of $574,248.58 and interest of $40,771.65 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), which judgment carries interest 60 days from the date of this order at the rate prescribed in r 39.06(a) and (b) of the Federal Court Rules 2011 (Cth).

2.    The applicant/cross-respondent pay the respondent/cross-claimant’s costs of the claim and cross-claim:

(a)    on a party and party basis up to 10.59 am on 1 June 2022 pursuant to r 40.01 of the Federal Court Rules 2011 (Cth); and

(b)    on an indemnity basis from 11 am on 1 June 2022, pursuant to r 25.14 of the Federal Court Rules 2011 (Cth).

3.    The assessment of the costs orders in order 2 is to be made by way of the lump sum costs procedure pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

4.    The Registrar of the Court is directed to determine the amount of the respondent/cross-claimant’s costs in such manner as the Registrar deems fit, and shall then make an order for fixing the amount of those costs, which are to be payable within 28 days of such orders.

Associate:

Dated:    27 March 2023