Background The parties had been involved in acrimonious litigation for several years, involving two sets of proceedings and a counter-claim. Following judgement, competing costs applications were made. The plaintiff submitted his costs should be paid on an indemnity basis, on the grounds the first defendant had unreasonably rejected a Calderbank offer, defended the action while having no prospects of success, and engaged in conduct in the course of the proceedings that was improper or unreasonable. The plaintiff alternatively sought an order for the costs to be assessed without regard to the limits (both in terms of hourly rate and hours) set under the Legal Profession (Supreme Court) (Contentious Business) Determination (Scale). Decision Legal principles Indemnity costs Le Miere J noted the principle that a Calderbank offer does not justify the awarding of indemnity costs unless the rejection of the offer was unreasonable. His Honour referred to the authority of Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115, in relation to the factors to be taken into account when assessing whether a rejection was unreasonable: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree’s prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it. His Honour further observed: An indemnity costs order may be made against a party who persists in a defence which he knows, or ought to have known if he had competent legal advice, to be hopeless and who, in doing so, thereby causes unnecessary expense and cost to the plaintiff. An indemnity costs order may be appropriate against a defendant who engages in misconduct in connection with the litigation. An unexplained failure to discover an important document or other misconduct may, but does not automatically, justify an indemnity costs order. An indemnity costs order aims to compensate an opponent for unnecessary costs being incurred as a result of the misconduct. Special costs order Section 280(2) of the Legal Profession Act 2008 (WA) provides that, where a court considers the amount of costs allowable under the Scale is inadequate due to the matter’s unusual difficulty, complexity, or importance, it may: order the payment of costs above those fixed by the determinations; fix higher limits of costs than those fixed in the determination; remove limits on costs fixed in the determination; make any order or any give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed. Findings Indemnity costs His Honour observed the Calderbank offer was made a month before the trial, at which point the first defendant was aware of the evidence and the legal basis for the plaintiff’s claim. The first defendant was ultimately worse off than he would have been having accepted the offer. Notwithstanding this, the rejection of the offer was not unreasonable because inter alia, the first defendant’s legal advisors had considered the evidence and were of the view that he was likely to be successful. While a rejection could nonetheless be unreasonable, where the factual or legal reasons for rejection were inadequate, His Honour observed: I am not satisfied that a reasonable person in Graeme’s [the first defendant’s] position, giving proper consideration to the evidence to be adduced and properly advised about the law, should have assessed his prospects of success to be so low that it was unreasonable to reject the offer. Special costs order His Honour observed the matter was one of unusual difficulty, involving substantial questions of law about the application of principles of proprietary estoppel. It also was of unusual complexity, involving a dispute over family matters over a period of ten years, and of substantial importance. His Honour concluded that the costs allowable under the Scale were inadequate because of the unusual difficulty, complexity and importance of the matter. The plaintiff engaged senior practitioners, including two Senior Counsel, whose usual hourly rates were above the Scale rates. His Honour considered that it was appropriate for the plaintiff to do so, given that these elements of the matter were unusual. Accordingly, the plaintiff’s costs were to be taxed without regard to the Scale limits. In addition, the limitation in the Scale hourly rate was to be removed for the two Senior Counsel and the experienced senior practitioner with conduct of the file. Implications of decision This decision reinforces the principle that the rejection of a Calderbank will not entitle a party to indemnity costs unless that rejection was unreasonable. This requires consideration of a number of factors, with the assessment of these factors to be as at the date the offer was made (that is, without the benefit of hindsight). The decision also confirms that the Scale limit and hourly rates will be lifted, where appropriate – for instance, where the matter is one of unusual difficulty, complexity, or importance. Only one of these elements is generally necessary to trigger these limits, though His Honour found all three elements to apply in this case.
