Michael Biernacki v Dianne Patricia Klenka [1988] ACTSC 24 (6 May 1988)

SUPREME COURT OF THE ACT

MICHAEL BIERNACKI v DIANNE PATRICIA KLENKA
S.C. No. 49 of 1985
Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIA CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Practice and procedure - Rules of Supreme Court ACT - Order for costs against defendant - Reasonable offer on costs made and rejected - Bill of costs taxed at less than amount of offer - "Calderbank" letter - Whether defendant entitled to the costs of taxation

Australian Capital Territory Supreme Court Act 1933, s.15(1) & (2)

Rules of the Supreme Court of the A.C.T. - 0.65, rr.43, 53, 58 & 66

Calderbank v. Calderbank 1976 ram. 93

Messiter v. Hutchinson, unreported, Rogers J, Supreme Court of New South Wales, 13 August 1987

The Edison (No.2) 1934 P. 115

WORDS & PHRASES - "Unnecessary"

HEARING

CANBERRA
6:5:1988

ORDER

The application be dismissed.

The applicant/defendant pay the respondent/plaintiff's costs of and incidental to the application, those costs to be taxed.

DECISION

This is an application under 0.65, r.66 for an order to review the taxation of some disputed items, numbered 180-196 inclusive, in the bill of costs filed by the plaintiff in the action following judgment by consent in his favour. It comes before me as a Judge at Chambers. The rule provides that upon such an application "the Judge may make such order as the Judge thinks just".

2. The parties' solicitors, in an attempt to agree upon costs, engaged in correspondence to most of which it is unnecessary to refer. On 12 June 1987, however, the defendant's solicitors wrote to the plaintiff's solicitors and said:-

we are not prepared to go beyond our

offer on costs put in our letter of 14 April
1987. That offer is $4,000.00 inclusive of
disbursements.

If you are not prepared to accept that offer
we would be grateful if you would prepare a
bill of costs for taxation.

We reserve the right to refer to this letter
on the question of costs at the taxation of
the same if this becomes necessary."

3. In due course the plaintiff's solicitors filed a bill of costs which was taxed in January 1988. Towards the end of the taxation the defendant's solicitors submitted that, as the taxed costs and disbursements totalled an amount less than the amount of the offer of 12 June 1987, items 180-196 (those concerned with the preparation and taxation of the bill of costs) should be disallowed and that the plaintiff should pay the defendant's costs (agreed at $250) incurred after that letter.

4. The Australian Capital Territory Supreme Court Act 1933 (the Act) deals with the question of costs, so far as is relevant to this case, as follows:-

"15. (1) The Supreme Court, and the Judge
sitting in Chambers, shall have jurisdiction
to award costs in all matters brought before
the Court, including matters dismissed for
want of jurisdiction.

(2) Subject to Rules of Court, to any
Ordinance and to the express provisions of
any other Act, the costs of and incidental to
all proceedings in the Supreme Court,
including the administration of estates and
trusts, shall be in the discretion of the
Court or Judge, and the Court or Judge shall
have full power to determine by whom and to
what extent the costs are to be paid."

5. The following rules, part of 0.65, were referred to during the hearing of the application:-

"1.(1) Subject to the provisions of any Act
and these Rules, the costs of and incidental
to all proceedings in the Court and in
Chambers, including the administration of
estates and trusts, shall be in the
discretion of the Court or Judge."

"43. The Court or Judge may, at the hearing
of any cause ..., or upon any application or
proceeding in any cause or matter at
Chambers, and whether the same is objected to
or not, direct the costs of any bills of
costs, or any part thereof, which is
improper, vexatious, unnecessary, or
caused by misconduct or negligence, to be
disallowed, or may direct the taxing officer
to look into the same and to disallow the
costs thereof, or of such part thereof as he
finds to be improper, unnecessary, vexatious,
or to be caused by misconduct or
negligence, and in such case the party whose
costs are so disallowed shall pay the costs
occasioned thereby to the other parties, and
in any case where such question has not been
raised before and dealt with by the Court or
Judge the taxing officer shall look into the
same for the purpose aforesaid, and
thereupon the same consequences shall ensue
as if he had been specially directed to do
so.

"53. On every taxation the taxing officer
shall allow all such costs, charges, and
expenses as appear to him to have been
necessary or proper for the attainment of
justice or for enforcing or defending the
rights of any party, but save as against the
party who incurred the same, costs shall not
be allowed which appear to the taxing officer
to have been incurred or increased through
over caution, negligence, or mistake, or by
payment of special fees to counsel or special
charges or expenses to witnesses or other
persons, or by other unusual expenses."

"58. Where it is directed that costs shall be
taxed, in case the parties differ about the
same, the party claiming the costs shall bring
the bill of costs into the office of the
taxing officer, and give notice of his having
so done to the other party, and at any time
within eight days after such notice such other
party may inspect the same without fee, if he
thinks fit. At or before the expiration of
the eight days, or such further time as the
taxing officer in his discretion allows, such
other party shall either agree to pay the
costs or signify his dissent therefrom, and
may thereupon tender a sum of money for the
costs, but where he makes no such tender, or
where the party claiming the costs refuses to
accept the sum so tendered, the taxing officer
shall proceed to tax the costs, and where the
taxed costs do not exceed the sum tendered the
costs of the taxation shall be borne by the
party claiming the costs."

"66. Any party who is dissatisfied
with the certificate or allocatur of the
taxing officer as to any item or part of an
item which has been objected to, may, within
fourteen days from the date of the certificate
or allocatur, or such other time as the Court
or Judge, or the taxing officer at the time he
signs his certificate or allocatur, allows,
apply to the Judge at Chambers for an order to
review the taxation as to the same item or
part of an item, and the Judge may thereupon
make such order as the Judge thinks just, but
the certificate or allocatur of the taxing
officer shall be final and conclusive as to
all matters which have not been objected to in
the manner provided in this Order."

6. Rules 43 and 53 had their counterpart, for all practical purposes the same, in sub-rules 20 and 29 of Order LXV., r.27 of the English Rules of the Supreme Court in the form they took in 1934.

7. The defendant's solicitors' letter of 12 June 1987 was described as a "Calderbank" letter. In Calderbank v. Calderbank 1976 Fam. 93, a wife's solicitors had written to her husband's solicitors making an offer substantially greater than the amount which the Court eventually awarded him. Although the letter was drawn to her attention, Heilbron J made no order as to costs. Immediately after the hearing before her it was discovered that the letter had been written "without prejudice" and, ironically, having regard to the now generally used description of such a letter, the actual dispute as to costs was decided upon the basis of another offer contained in an affidavit sworn by the wife which indicated her willingness to make over to the husband a house the value of which was also more than the amount of the lump sum awarded the husband.

8. During the course of the hearing the wife's counsel indicated the difficulty that a party might be in in proceedings when he was willing to accede to some extent to an application that had been made and desired to obtain the advantages that could be obtained in an ordinary action for debt or damages by a payment into court, that not being a course which would be appropriate in the particular proceedings. Cairns LJ said at p.105 that there were various other types of proceedings well known to the Court where protection has been able to be afforded to a party who wants to make a compromise of that kind and where payment in is not an appropriate method.

9. Counsel for the defendant contended that the preparation of the plaintiff's bill of costs and its taxation were unnecessary. He relied on Calderbank v. Calderbank (supra) and upon Messiter v. Hutchinson, an unreported judgment handed down on 13 August 1987 by Rogers J in the Supreme Court, New South Wales.

10. It is convenient to go first to the latter case. Its essential facts may be put shortly. The plaintiff sued the defendant on a policy, of insurance in respect of a thoroughbred colt which had had to be destroyed. On its death the plaintiff was entitled to receive the colt's "actual value" up to a maximum of $200,000. When the matter came before the Court for directions it emerged that the only issue was as to the actual value of the horse at the date when it was destroyed. The parties agreed to have this issue determined by an arbitrator or referee. On 3 April 1987 the defendant's solicitors wrote to the plaintiff's solicitors a letter headed "Without Prejudice" and offered to settle the plaintiff's claim for $120,000 inclusive of interest plus agreed or taxed costs provided that the offer was accepted before 4 p.m. on the following Wednesday, 8 April 1987. The letter also contained a paragraph to the effect that the defendant intended to rely upon the making of the offer if and when the question of costs arose and intended to bring the letter to the attention of the arbitrator or the Court in those circumstances. There was no response to the letter. The arbitrator determined the actual value of the horse at the relevant date at $100,000. It was agreed that even with interest the amount payable under his award would have been less than the offer. The defendant, the nominee of a syndicate of underwriters, thereupon sought an order that he should pay the plaintiff's costs up to and including 8 April and that the plaintiff should pay his costs thereafter.

11. Rogers J first considered the general powers of the Supreme Court of New South Wales regarding costs and referred to the New South Wales equivalent of s.15(1) and (2) of the Act. He referred also to the rules regarding payment in, pointing out that, as in this Territory, payment into Court is permissible only in respect of claims for debt or damages.

12. Although there are differences between the procedures applicable in each Court in respect of payment in, the general scheme of the rules of each Court relating to payment in is much the same.

13. During the course of his reasons, Rogers J referred to Cutts v. Head 1984 1 Ch 290 where the Court of Appeal held that a Calderbank letter may be relied on in proceedings in any division of the Court, not just in family disputes. His Honour then said:-

"However, Lord Justice Oliver who delivered
the principal judgment, repeatedly said
(pp.301, 309, 310, 312) that the procedure
may be adopted only where the facility of the
payment into Court is not available. His

Lordship concluded, in a passage which had
the explicit concurrence of Fox LJ (p 317)
that (p 312):

'I would add only one word of caution. The
qualification imposed on the without
prejudice nature of the Calderbank letter
is, as I have held, sufficient to enable it
to be taken into account on the question of
costs; but it should not be thought that
this involves the consequence that such a
letter can now be used as a substitute for a
payment into court, where a payment into
court is appropriate. In the case of the
simple money claim, a defendant who wishes
to avail himself of the protection afforded
by an offer must, in the ordinary way, back
his offer with cash by making a payment in
and, speaking for myself, I should not, as
at present advised, be disposed in such a
case to treat a Calderbank offer as carrying
the same consequences as payment in.'
In the subsequent decision of the Court of
Appeal in Corby District Council v HoIst and
Co Limited 1985 1 AER 321 where again the
judgment of the court was that of Lord
Justice Oliver, His Lordship said (p 326):

'The costs of legal proceedings are by
statute left to the discretion of the court
and that discretion is to be exercised in
accordance with the rules. One of the
matters which may be taken into account,
and, indeed, ordinarily would be, is an open
offer by the defendant of everything to
which the plaintiff ultimately shows himself
entitled. Whether, however, such an offer is
to be treated for all purposes in the same
way as a payment into court must itself be a
matter on which the judge of trial will have
to make up his own mind in the exercise of
his discretion. So far as payment in is
concerned, that is specifically dealt with
in RSC Ord 62, r 5, which merely provides
that such a payment shall to such extent, if
any, as may be appropriate in the
circumstances be taken into account. But,
whether what the judge has before him is an
offer or a payment in, the effect of it is
left to his discretion.'

It is relevant to note that the Rule
Committee in England has accepted the
qualification laid down by Oliver LJ in
Cutts (supra). Although it has now, in Ord
22 r 14, sanctioned the use of written
offers endorsed (without prejudice save as
to costs' the proviso to sub-rule (2)
excludes from consideration on the question
of costs such letter from a party who could
have made a payment into court.

There are good reasons why, generally
speaking, in order to get the benefit of an
offer of payment, a defendant should be
required to comply with the provisions of pt
72. It is no longer necessary that the
defendant should actually be out of pocket by
paying into court the requisite sum of money;
the provision of security is sufficient
However, the Rules rightly take the view
that, all other things being equal, a
plaintiff who is desirous of accepting an
offer should not be left to look for the
actual amount from a possibly impecunious
defendant. The fundamental difference
between a Calderbank letter and a payment
into court is that the latter is backed
either by a deposit of money in the court or
the bond of an authorised person (see Pt 22 r
14). Counsel for the plaintiff in the
present case submitted that, as a matter of
principle, for the reasons which prompted
Oliver LJ and the Rule Committee in England,
the court should not have regard to a
Calderbank letter in circumstances where
payment into court can be effected under the
Rules."

14. Rogers J concluded that there was no reason why the Court should not foster all means whereby parties may properly attempt to dispose of their disputes prior to actual hearing. He thought that so long as it might fairly be done the Court should do nothing which would dissuade or discourage a party from making bona fide offers of settlement, no matter how late. He accepted that delay in making an offer might entail consequences in the precise order made but should not automatically demand a complete disregard of the offer of settlement.

15. It will be noted that, given the conditions precedent set out therein, 0.65, r.58 provides for a method of settlement of a dispute as to costs akin to that of payment in in respect of a claim for damages or debt. Except in one respect, to which I will shortly give more consideration, refusal to accept a tender which proves to be greater than the amount of taxed costs has much the same sort of consequence as a refusal to accept an offer of payment in generally carries with it when the final decision results in a judgment for the amount or less than the amount paid in to Court.

16. Counsel for the defendant conceded that Messiter v. Hutchinson (supra) was an extension of Cutts v. Head (supra) because Rogers J refused to accept that the discretion of the Court as to costs should be fettered by the rules as to payment in to the point where a Calderbank letter might not be taken into account on the question of costs. By parity of reasoning, the same considerations should apply, counsel submitted, to a Calderbank letter making an offer in respect of costs ordered to be paid even though 0.65, r.58 was not complied with.

17. Counsel for the plaintiff, on the other hand, contended that there was a procedure laid down by 0.65, r.58, that that procedure should have been followed and no lesser procedure, and specifically no Calderbank letter, should have any effect. Where the rules provided a specific procedure, it alone should be followed. As with a notice of payment in the parties were safeguarded because the consequences of failure to accept the tender were clearly spelt out. It could not be said that there had been a tender by the defendant. I agree, for reasons into which I do not think it necessary to go, that there was no tender. I note, incidentally, that no question that the letter of 12 June 1987 was written "without prejudice" (see Scott Paper Co. v. Drayton Paper Works Ltd (1927) 44 RPC 151) and hence might not be used on that account was raised. In this I think the parties acted correctly.

18. Counsel for the plaintiff also contended that, because of discretionary items in a bill of costs, it was extremely difficult to make an accurate assessment of costs before the bill was prepared. I am unable to accept that submission. It seems to me that any assessment of costs must necessarily involve a reasonably detailed consideration of the value of the work done on behalf of the party whose costs are being assessed. I think that the same problem is faced by a party to whom a tender is made under r.58. He or she has to make up his or her mind (and very quickly at that) in respect of all the costs in the bill including the discretionary items in it.

19. Counsel also contended that the taxing officer had no discretion under r.58 and that where there was a dispute as to costs and the party required to pay them made no tender, the taxing officer was required to proceed to tax the costs. Only when the taxed costs did not exceed the sum tendered could the party claiming costs be fixed with the costs of the taxation. Clearly that interpretation of r.58 is available. It must then be asked whether the duty cast upon the taxing officer by rr.43 and 53 overrides the apparent effect of r.58.

20. The first question is whether the costs in dispute were unnecessary. In The Edison (No.2) 1934 P. 115, the Court of Appeal considered the meaning of the word "unnecessary' where used in Order LXV., r.27, sub-r.20, the equivalent of 0.65, r.43 of the rules of this Court. At pp. 131-2, Maugham LJ considered the meaning of the word "unnecessary". He said:-

"What is the meaning of the phrase (Improper,
vexatious, unnecessary, or vexatious, or to
contain unnecessary matter, etc.? It is
true it contains the word (unnecessary,' but
does the word (unnecessary' there get no
colour from the context? I think it is quite
plain that it does, because if something is
improper, it is obviously unnecessary as
regards the other side, and so is vexatious.
(Unnecessary' there does not mean, and cannot
possibly mean, any matter without which the
party whose costs are being taxed could not
proceed to trial. It must be very much less
wide than that. .... as a matter of
construction I am satisfied that the word
(unnecessary' there must be read ejusdem
generis with the other words in connection
with which it is found in two places -
namely, unnecessary in the sense of being
improper, vexatious or unreasonable;"

21. Because I think that the stand taken by the plaintiff was unreasonable, I am satisfied that the disputed items were costs unnecessarily incurred and so might ordinarily be disallowed under rr.43 and 53. However, I think that the general duty cast upon the taxing officer by those rules must yield to the particular duty laid down in r.58. That does not necessarily dispose of the matter because the application comes before me under r.66 and my task is to make such order as I think just in the circumstances.

22. It seems to me that Messiter v. Hutchinson (supra) is distinguishable Rogers J was dealing with an offer which had to do with the subject matter of the action. The question he had to consider related to a situation where he had to exercise the discretion of the Court as to costs in much the same way as if a payment in had been made. It is unnecessary for me to form any concluded opinion as to whether, given the facts he was dealing with, I should approach the question of discretion in the way he did. But I am not to be taken as disagreeing with his view that the Court should foster all proper means for the disposition of disputes before hearing.

23. On the other hand, I am considering a case where the taxing officer had, in my opinion, no discretion at all because 0.65, r.58 does not provide for one. It seems to me clearly to override the taxing officer's discretionary powers under rr.43 and 53, providing as it does for specific disallowance Such a provision demonstrates a clear intention that costs of taxation may, in such circumstances, be disallowed only in one way. It is this lack of discretion which differentiates the tender provided for in r.58 from an ordinary payment into Court.

24. I do not think it would be just to vary the taxing officer's decision as to the disputed items on the basis of some supervisory discretion which would be exercised to vary a decision properly arrived at. Nor do I think that s.is of the Act is applicable to this case. It seems to me to relate to the Courts power to award costs on the determination of matters but if it is applicable it is to be noted that s.15(2) is subject to the Rules of Court, including, of course, 0.65, r.58.

25. Although the disputed costs were unnecessarily incurred, I see no injustice in the result. The defendant chose to use a novel procedure, not provided for by the rules. In doing so she took the chance that it might not be successful, choosing, one would think, deliberately not to use the simple specific procedure for which 0.65, r.58 provides and which would have achieved the end she sought.

26. The application is refused with costs.