Costs: Calderbank offers & multiple plaintiffs

Bert & Ors v Red 5 Limited & Anor [2017] QSC 8

Applegarth J

In 2016, the claim for damages by each of the plaintiffs was dismissed by Applegarth J in Bert v Red 5 Ltd [2016] QSC 302. The application concerned whether costs should be ordered against all plaintiffs and whether those costs should be ordered on an indemnity basis.

The defendants relied on r 681 of the Uniform Civil Procedure Rules 1999 (Qld) which provides that generally, costs follow the event. The first plaintiff submitted that he initiated proceedings on his own initiative and as such the second, third and fourth plaintiffs should have no costs order made against them.

Costs against all plaintiffs

In deciding whether costs should be made against all plaintiffs, Applegarth J held:

[11] The defendants point to authority that where there are multiple plaintiffs or defendants, an order for costs ought generally to be made against all of them on a joint and several basis if they are unsuccessful. The defendants submit that such an order is particularly appropriate in this case where the second, third and fourth plaintiffs appear to have been entirely supportive of the first plaintiff’s carriage of the litigation

[13] The fact that the first plaintiff was in charge of the family’s financial affairs and investment decisions and, in one sense, the pursuit of this litigation was a matter which related to the financial affairs of the family, does not mean that the defendants should not look to the second, third and fourth plaintiffs to compensate them for at least part of their costs of defending the proceedings after the relevant plaintiffs were joined…However, if his advice about the prospects of the proceedings was wrong, then the second, third and fourth plaintiffs should look to the first plaintiff to indemnify them in relation to any costs order made against them.

However, his Honour went on to find:

[13] … Even so, I do not consider that it is an appropriate exercise of my discretion in all the circumstances to make the second, third or fourth plaintiff jointly liable for all of the costs incurred in defending the proceedings after they were joined.  A substantial part of the proceeding related to the first cause of action which was brought only by the first plaintiff.  He was the major claimant (in terms of quantum) in respect of the “new claim” brought over the second and third causes of action.  A very large part of the costs of preparing for trial and in conducting the trial would have been incurred if the first plaintiff had been the only plaintiff.

His Honour held that costs be ordered against each plaintiff, as detailed below.

Indemnity basis

The defendants had made an offer to settle, which was rejected by the first plaintiff, exposing the plaintiffs to an adverse costs order. As to whether costs were to be calculated on an indemnity basis, his Honour held:

[22] Where a wholly successful defendant has made an offer to settle under the rules and seeks an order for indemnity costs, r 361 of the UCPR does not apply, and it is appropriate to apply the general principles relating to Calderbank offers. The non acceptance of a Calderbank offer is a factor in the discretion as to costs. However, the mere making of a Calderbank offer and its rejection does not justify an order for costs in favour of the offeror. A critical question is whether the rejection of the offer was unreasonable in the circumstances. Expressed differently, a relevant factor is whether rejection of the offer was reasonable.  That will include consideration of a number of factors which have been identified in the authorities, including the extent of the compromise offered and the offeree’s prospects of success, assessed as at the date of the offer.

[25] In determining whether it was reasonable for an offeree to reject a Calderbank offer, care must be taken to avoid hindsight bias. The offeree’s prospects of success should be assessed as at the date of the offer, conscious that the outcome of litigation is uncertain.  One should not simply compare the outcome of litigation in which a claim has been dismissed and the claimant ordered to pay costs with the defendants’ offer to pay a substantial amount. Viewed in hindsight, an offer by a defendant to pay a substantial amount to settle a claim may appear generous in circumstances in which the risk of the plaintiff losing a case has eventuated.

[27] The plaintiffs have not pointed to a satisfactory reason for not accepting the offer.  If properly advised, or if subjecting his case to critical scrutiny, the first plaintiff would have realised the obstacles which his first cause of action presented.  These need not be detailed, but include that the plaintiff was informed about the purpose of the capital raising.  Rather than confront these difficulties, the first plaintiff constructed and persisted in a claim which was deeply flawed.  The second and third causes of action litigated by the first plaintiff, and in which the second, third and fourth defendants joined, had poor prospects of success in the light of the previewed defences, the matters raised in the Calderbank letter and the absence of a foundation in the evidence to support the assertion that the presence of groundwater should have been disclosed.

Accordingly, Applegarth J ordered that the first plaintiff pay the defendants’ costs of and incidental to the proceeding on a standard basis up to and including 25 December 2015, and thereafter on the indemnity basis.

The second, third and fourth plaintiffs were ordered to pay 10%, 5% and 5% respectively of the defendants’ costs on a standard basis.

David Cormack – Brisbane Barrister & Mediator

 

 

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