Aubrey v Armit[2005] QDC 382

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   The plaintiff commenced this action against his former solicitor’s, the first and second defendants. On the second day of trial, the action was settled whereby the defendants agreed to pay a judgment sum of $47,000.00 to the plaintiff plus interest. The defendants had acted for the plaintiff on the sale of his lease to a third party. The value of the sale was to be $50,000.00. The judgment sum represented that sum less some adjustments which are not relevant for present consideration.

2. [2]
   There was an argument in relation to the amount of interest payable. Reasons have been given in that regard. Interest was allowed at the rate of 8% per annum from January 2001 and that the total sum be paid by 21 December 2005. An offer of $60,000.00 had been made by the plaintiff. However, pursuant to rule 362(2) of the UCPR, interest is not allowed from the date of the offer in considering the amount obtained. The judgment for the purposes of r360 is $56,394.85. Interest on the sum of $47,000.00 was allowed plus interest of 8% from 15 January 2001 to 16 July 2003. The net effect of this is that the plaintiff recovered a sum less favourable than the offer he made.

Issues for determination

3. [3]
   The issues which remain for determination are as follows:

1. Which party is to pay the costs reserved on 16 August 2004 when the trial was adjourned.
2. Whether the plaintiff should pay the costs incidental to his abandonment of a claim for pain and suffering and related issues as claimed in the prayer for relief items 3 to 13 of the Amended Statement of Claim.
3. Whether the plaintiff is entitled to indemnity costs.

Costs occasioned by the adjournment on 16 August 2004

4. [4]
   The matter was set down for hearing on that day before her honour Judge Dick. After commencing the opening, counsel for the plaintiff referred her honour to two letters being Exhibit 1 and 2 in the present action. Relevantly, by a letter dated 3 August 2004^[1], the solicitors for the defendants gave notice that they would be asserting that “the value of the Plaintiff’s business decreased or alternatively the business became worthless in both circumstances due to the acts or omissions of the Plaintiff”.  The also admitted that the value of the business as at 12 December 1997 was $50,000.

5. [5]
   The effect of this notice was to cause the plaintiff’s counsel to ask for the trial to be split. Liability would be determined in the first instance and the matter adjourned to allow valuation evidence to be given about the value of the business post 12 December. Counsel for the defendants opposed splitting the case as questions of credit would be relevant on both issues including the conduct of the plaintiff after 12 December.

6. [6]
   Counsel for the defendants also suggested that the measure of damages was for breach of a tort or negligence. In any event, it was clear that there were grounds for not splitting the case. In my view, it was the conduct of the defendants challenging the valuation which necessitated the adjournment. The issue should have been specifically pleaded pursuant to r150, that is, what conduct of the plaintiff may have contributed to the loss. The plaintiff was content to sue for the $47,000.00 being the balance of the contract price. On the defence case as raised as late as 3 August, a valuation relating to the post 12 December period was necessary. As it has turned out the defendants have accepted the $47,000.000 as a proper basis for compensation. They should pay the costs occasioned by the adjournment on 16 August 2004.

Abandonment of personal injuries claim

7. [7]
   The relevant paragraphs of the Amended Statement of Claim sought general damages for loss of amenities and related issues^[2].  The prayer for relief claimed $35,000.00 for general damages and $190,000.00 for past economic loss.  There were other related claims.  This part of the action was abandoned by the plaintiff when it filed the requisite notice on 19 February 2004.  It is common ground that the defendants received informal notice of the abandonment on 18 December 2003.

8. [8]
   There was no real objection to the submissions of the defendants on this aspect. The costs thrown away by the claims for relief made in items 3 to 13 of the Amended Statement of Claim ought to be paid by the plaintiff on a standard basis up to 18 December 2003 on the appropriate District Court scale where the amount claimed exceeds $50,000.00: rr 304(1) and 307(2). There is no basis suggested which justifies costs other than on the District Court scale.

Whether the plaintiff is entitled to indemnity costs

9. [9]
   The plaintiff relies on the general discretion in this respect. Rule 704 gives power to a court to order costs on an indemnity basis. The grounds relied upon by the plaintiff in the present case are as follows^[3]:

1. The defendant did not have appropriate file notes or records.

This relates to the failure of the first defendant to have proper diary notes in relation to conversations between himself and the plaintiff.  One of the main issues in the case related to a conversation alleged by the plaintiff to have occurred prior to his allowing the purchaser to take possession of the premises in January 1998.  Of course, the first defendant would not have had a diary note of a conversation which he denied occurred.  However, that is not the end of the matter.  A solicitor owes a general duty to advise the client about the transaction as alleged in paragraph 16(d) of the Amended Statement of Claim. There was no diary note evidencing any instructions about possession.  There was a diary note exhibited to the report of Mr. Gregory.  Reference is made there “he wants to let them in” and “he thinks renovations proceeding (sic) means OK”.   A prudent solicitor should have advised the client not to allow the purchaser into possession particularly where no contract had been signed and the deposit paid.  The inference that the solicitor has been negligent is more readily drawn where there is a failure to note the conversation. 

2. Admitted liability at the last moment, partway through a trial

This is not an unusual feature of litigation.  The plaintiff had been cross examined on the quantum aspect.  He presented as a reliable and forthright person.  Having heard his evidence, the defence may have made a tactical decision to settle liability on the second day.

3. By admitting liability, the defendants admitted that the facts were as ultimately sworn by the plaintiff

Certainly, some of the allegations in the pleading may be admitted which justify that suggestion.   However, there cannot be specific findings by the court on credit issues touching upon costs where the issue has not be the subject of a finding by the court.   In a general sense liability is admitted in terms of the pleadings.  In so far as an application for indemnity costs is concerned, absent evidence one cannot then proceed to make adverse findings about the conduct of the first defendant.^[4]   To the extent that the facts are non controversial, then reliance can be placed upon certain features of the case e.g. the suggestion by the first defendant that there were no problems even though a contract had not been signed, and the failure to hand over diary notes when the file was given to the plaintiff’s present solicitors.  It should be noted that the diary notes as such were discovered.  This case can be contrasted to Notras & Anor v Hugh.^[5]  In that case a party was neither candid nor forthright in the production of documents, was the cause of unreasonable delay and had little prospects of success.

4. The first defendant “forced  his client to take the expensive process of litigation, and to face cross-examination”

A party to litigation is entitled to test the evidence particularly where one’s recollection of conversations may have been imperfect.  The failure to keep diary notes or spell out the terms of the retainer would make the process more difficult for a solicitor.^[6]  It does not follow in the present case that there were no prospects of success.

Relevant principles

10. [10]
    The principles to be applied have been discussed in cases such as Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors^[7]; Colgate-Palmolive Company and Anor. v Cussons^[8]; Di Carlo v Dubois & Ors^[9].  The starting point is the statement of Woodward J. in Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd^[10]  which is quoted by his honour in the Fountain Selected Meats case (p.4):

“That discretion is ‘absolute and unfettered’, but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207).  Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where ‘there is some special or unusual feature in the case to justify the exercising its discretion in that way’ (Preston v Preston [1982] 1 ALL ER 41 at 58).  It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but in all cases I have considered there has been some further factor which has influenced the exercise of the court’s discretion – for example, the allegations of fraud have been made knowing them to be false or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App 40; Christie  v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd. (in liq) v Wright (No.2) [1983] 2 NSWLR 354. 

Another case cited in argument was Australian Guarantee Corp Ltd. v De Jager [1984] VR 483 where at (502) Tadgell J allowed solicitor and client costs because he found the pursuit of the action to have been ‘a high –handed presumption’.”

11. [11]
    Perhaps the most illustrative principle in this area can be found in the Colgate-Palmolive Company case.   Sheppard J. after commenting that the “categories in which the discretion may be exercised are not closed” stated at 233:

“Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion.  I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152;  evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra);  the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata);  an imprudent refusal of an offer to compromise…”

12. [12]
    As Sheppard J. remarked, the question must always be whether the particular facts and circumstances of the case warrant the making of an order for costs other than on a party and party basis. In the present case I am not persuaded that the order for indemnity costs is warranted. The action was for professional negligence. There were aspects of the case which strongly supported the case for the plaintiff. This included a failure to warn the plaintiff not to allow the purchasers into possession and a failure to keep proper diary notes. However, those breaches do not fall into the category of being so unusual or special to warrant an order. The failure to provide the diary notes initially was remedied on discovery. There is no evidence that the defence were delaying matters in a contumacious way. There is no basis for finding that the defence were making groundless contentions or delaying the proceedings unduly. The offer by the plaintiff exceeded the final sum relevant under the rules for allowing an indemnity costs. There has been no misconduct which in my view justifies the type of order made in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd.^[11]

Magistrates Court Costs

13. [13]
    It was suggested by the defendants in their written submissions^[12] that the costs be on the Magistrates Court scale.  This matter was of some complexity.  On 16 August 2004, the defendants were arguing that the measure of damages was on a tortious basis.  This may have allowed a greater sum than $50,000.00 to be claimed by the plaintiff.  Apart from that point, the nature of the action, the question of damages and the findings of fact which may have been made against a solicitor justify the action being heard in the District Court.

Orders

1. It is ordered that the defendants do pay the plaintiff’s costs occasioned by the adjournment of the trial on 16 August 2004.
2. It is ordered that the plaintiff do pay to the defendants the costs to 18 December 2003 occasioned by the allegation in paragraphs 3 to 13 of the prayer for relief in the Statement of Claim filed on 8 December 2000.
3. It is ordered that the defendants do pay to the plaintiff the costs of and incidental to the action to be assessed on the appropriate District Court scale where the amount recovered exceeds $50,000.