Costs Awarded on Indemnity Basis After Rejected Calderbank Offer

The court awarded the claimant's costs on an indemnity basis after the defendant's Calderbank offer was rejected. The claimant had achieved a better result than the offer suggested, leading to the costs award.

Supreme Court New South Wales

Medium Neutral Citation: Wollongong Coal Limited v [COMPANY] (No 2) [2020] NSWSC 534 Hearing dates: On the papers; submissions 3 and 27 April 2020, 6 May 2020 Date of orders: 11 May 2020 Decision date: 11 May 2020 Jurisdiction: Equity - Commercial Arbitration List Before: Stevenson J Decision: The defendant/cross-claimant pay the plaintiff/cross-defendant's costs of the Cross-Claim in relation to paragraphs 6 to 27 of the Amended Commercial Arbitration List Cross Claim Statement on a party-party basis from 5 July 2019 up to and including 21 January 2020 and thereafter on an indemnity basis, other than the costs of the plaintiff/cross-defendant's notice of motion of 12 February 2020 and the plaintiff/cross-defendant's application for a gross sum costs order.

Application for gross sum costs order refused. Catchwords: COSTS – Calderbank offer – plaintiff achieved better result – whether unreasonable of defendant not to accept the offer Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Wollongong Coal Ltd v PCL (Shipping) Pte Ltd [2020] NSWSC 184 Category: Costs Parties: [COMPANY] (Plaintiff/Cross Defendant) [COMPANY] (Defendant/Cross Claimant) Representation: Counsel: [redacted] [NAME] with [NAME] (Defendant)

Solicitors: [redacted] [NAME] (Defendant) File Number(s): 2017/00186881

Judgment 1. I gave judgment in this matter on 5 March 2020, Wollongong Coal Ltd v PCL (Shipping) Pte Ltd [2020] NSWSC 184. This judgment deals with the question of costs. These reasons assume familiarity with my judgment of 5 March 2020. I shall use the same abbreviations.

2. I determined what the parties described as the "Bills of Lading Claim".

3. The other issues in the proceeding were settled during the course of the hearing and are the subject of a Deed of Settlement and Release dated 19 February 2019. 4. [NAME] succeeded on the Bills of Lading Claim by reason of my conclusions concerning the cancelling of the August Bills.

5. There is no dispute that in these circumstances [NAME] must pay [NAME]'s costs. 6. [NAME] contends that [NAME] should pay its costs on an indemnity basis from 21 January 2020 by reason of a Calderbank offer it made that day to settle the proceedings on the basis that they be dismissed and that [NAME] pay [NAME] an amount of $125,000 on account of its costs. 7. [NAME] accepts that [NAME] has done better at trial than in the Calderbank offer.

8. Nonetheless, [NAME] contends that it should not have to pay [NAME]'s costs on an indemnity basis from the date of the Calderbank offer because it was reasonable for [NAME] to have not accepted the offer: "…where [NAME] succeeded on a basis that was not articulated in the Calderbank offer and was not made, or not apparent, from the pleadings filed or in the draft form to be filed when the offer was made."

1. The Calderbank offer included the following: "2 Substituted Bills of Lading 2.1 In any event, there is a fatal problem with the Original Bills on which [NAME] relies for its amended claim. 2.2 On 24 September 2013, [NAME] indicated that the Charterer, Gujarat India, required that 10 of the Original bills be switched and replaced with new bills of lading (Switch Bills). The relevant correspondence is enclosed, together with copies of the Switch Bills. 2.3 It is clear Original Bills 1 to 10 were ultimately surrendered and cancelled and substituted with the Switch Bills (see enclosed email dated 5 October 2013). 2.4 The shipper named in the Switch Bills (being the only extant bills of lading in respect of the cargo the subject of Original Bills 1 to 10) is another company, [COMPANY]. 2.5 By reason of the surrender and cancellation of Original Bills 1 to 10 and the issue of the Switch Bills on or about 5 October 2013, [NAME] is not party to any contract with [NAME].

Accordingly, the assignment of rights by [NAME] to [NAME], even if effective, is of no benefit to [NAME] in this litigation."

1. The "fatal problem" that the Calderbank offer identified was, in substance, the basis upon which I determined the proceedings in favour of [NAME].

2. On behalf of [NAME] it was submitted that the manner in which [NAME] pleaded this issue in its Further Amended Commercial List Cross-Claim Response differed from the manner in which it put the matter at trial.

3. At trial [NAME] advanced the submission that the cancellation of the August Bills and the issue of the Switch Bills was done at [NAME]'s request. 4. [NAME] submitted that this allegation was not foreshadowed at the time of the Calderbank offer.

5. Assuming for the purposes of argument that this was the case, I do not see that it follows from this that [NAME] has shown that it was not unreasonable for it not to accept the Calderbank offer.

6. The relevant question was not so much whether [NAME] "requested" novation of the Bills, but whether it consented to that novation. I found [NAME] did so consent as "evidenced by its common seal and [NAME]'s signature on the reverse of the August Bills" (at [51] of the judgment). That evidence was evidently in [NAME]'s possession at the time it received the Calderbank offer although not yet produced to [NAME].

7. In my opinion, the substance of the matter is that by making the Calderbank offer, [NAME] alerted [NAME] to the difficulties it faced in relation to the issues on which [NAME] was ultimately successful.

8. In my opinion, that warrants an order that [NAME] pay [NAME]'s costs from the date of the Calderbank offer on an indemnity basis. 9. [NAME] seeks a gross sum costs order under s 98(4) of the Civil Procedure Act 2005 (NSW).

10. In general, a gross sum costs order is made where the assessment of costs will be protracted and expensive, where the party obliged to pay the costs, here [NAME], would not be able to meet the liability that would result from an assessment, including the costs of assessment, and where the assessment of costs was likely to be a lengthy or complex exercise.

11. That does not appear to me to be this case.

12. Although the circumstances in which a gross sum costs order may be made are not closed, it should not be assumed that an order will be made as a matter of course. The usual rule is that costs be assessed: r 42.2 Uniform Civil Procedure Rules 2005 (NSW).

13. There is nothing about that aspect of this case that was, from a costs assessment perspective, unusual or complex. It was a commercial dispute, albeit in a maritime context, that was determined largely by reference to a relatively small number of documents and the unchallenged evidence of a small number of witnesses.

14. If a gross sum costs order were to be made in this case, it could be made in almost every case heard in this list. That would have the effect of transferring the costs assessment function from trained and skilled costs assessors to judges of the Court. That is not a desirable outcome.

15. I am not persuaded I should make a gross sum costs order.

16. Nor am I persuaded that [NAME] should have its costs of applying for such an order. 17. [NAME] seeks its costs in relation to [NAME]'s unsuccessful application made on 12 February 2020 to adjourn the proceedings on the basis of [NAME]'s unavailability to give evidence in Sydney.

18. I refused that application. It later emerged that [NAME] was available to appear by audio-visual link from India although, ultimately, he was not required for cross-examination.

19. As I refused the adjournment application, [NAME] should not have its costs of that application.

20. However, as [NAME] has, overall, been unsuccessful, I am not persuaded that it should have its costs of these applications.

21. I make the following order:

1. The defendant/cross-claimant pay the plaintiff/cross-defendant's costs of the Cross-Claim in relation to paragraphs 6 to 27 of the Amended Commercial Arbitration List Cross Claim Statement on a party-party basis from 5 July 2019 up to and including 21 January 2020 and thereafter on an indemnity basis, other than: 1. the costs of the plaintiff/cross-defendant's notice of motion of 12 February 2020; 2. the costs of the plaintiff/cross defendant's application for a gross sum costs order.

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Amendments 12 May 2020 - [21] L1 - "is" amended to "are" [22] L1 - addition of the word "case" 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 May 2020