Williams v Rex (No. 2)[2007] QDC 309

DISTRICT COURT OF QUEENSLAND

HIS HONOUR:  The defendants have asked for costs on an indemnity basis.  They are entitled to a cost order in their favour as the plaintiff lost and they succeeded in the action.  See my judgment delivered on the 23rd of October 2007.

The normal order for costs is on the standard basis, and "some special reason is required for any departure from that."  An order for indemnity costs will be considered if there is an "imprudent refusal of an offer to compromise", "some evidence of unreasonable conduct, albeit that it need not rise as high as vexation", where "the proceedings had no reasonable prospect of success" or "little prospect of success", where a party "persists in a hopeless case", where a party "advanced a case which was wholly without any arguable merit", or where a party advanced "plainly untenable claims."  See Smits v Tabone [2007] QCA337, 12 October 2007, paragraphs [43] to [48] and [53].

Calderbank letters are relied on by the defendants for their submission that the plaintiff should not have proceeded to trial and acted unreasonably in refusing to accept one of the six offers of settlement made to her between the 1st of October 2004 and the 14th of August 2007.  The last offer was a payment by the defendants to the plaintiff of $5,000 inclusive of costs. 

The defendants submit that the failure to accept at least this offer should be categorised as unreasonable by reference to the result at trial and should, in effect, attract the "penalty rule as to costs."  In simple terms, that may, with the benefit of hindsight, appear warranted but in my view there are other factors that also need to be considered in deciding whether the plaintiff has acted unreasonably in refusing such an offer.  These include the amount she was claiming, the strength of her case looked at both subjectively and objectively at the time the offer or offers were made and considered, and the basis upon which the plaintiff failed at trial.

Her claim was for some $53,000 plus interest.  She failed because I found her witness, Mrs Elizabeth Williams, to be mistaken on the crucial issue of whether Mrs Bila was, effectively, a party to and overheard an offer by Mrs Williams to Ms Faye Kotsis, and failed to convey that offer to the plaintiff.  I found Mrs Elizabeth Williams to be mistaken and preferred the evidence of Mrs Bila and Alan Myall on that issue.  I found they supported each other on the issue.  I also remarked that Mr Myall, a defence witness, was not a satisfactory witness on other evidence he gave. 

Mr Kidson, for the defendants, conceded that Mrs Williams impressed as an essentially honest witness.  I made the following relevant findings in relation to her evidence:

1. (1)
   I accepted her account of the conversation she had with Ms Kotsis.

2. (2)
   All of the parties including Mrs Williams were "duped" by Myall, Kotsis and Vendor Director Qld Pty Ltd.

3. (3)
   Mrs Williams did not know that the plaintiff had listed her unit with the second defendant for $158,000.

4. (4)
   Events of the 18th of February were "quite unusual" and "novel" for Mrs Williams and likely to generally be recalled by her.

5. (5)
   I found her to be independent and disinterested and not dishonest. 

6. (6)
   I found she was mistaken about Mrs Bila overhearing her conversation with Ms Kotsis.  This was why the plaintiff failed. 

As to whether it was unreasonable for the plaintiff to not accept the offers made by the defendants, it is relevant that those offers were made on the basis only that the defendants would succeed in the action and not that they would succeed because Mrs Williams (whom they did not know of) would not be believed.  In deciding whether to award indemnity costs on the basis contended for by the defendants, one must have regard to whether or not the offer amounted to a genuine offer to compromise the proceeding.  In this case, the plaintiff had a claim for more than $50,000 and the offers made by the defendants were as follows (taken from paragraph 9 of the defendant's written submissions):

"

*This offer was served with the request for trial."

The trial commenced on 4 October 2007.

I am not satisfied in circumstances where the credit of a witness was a vital consideration that the last offer made by the defendants was such that the plaintiff acted unreasonably in not accepting it.

For a party to be penalised by indemnity costs for refusing to accept an offer made by the other side, the offer should be seen to be a genuine attempt to compromise the proceeding having regard to the issues and the evidentiary factors involved.  I am not satisfied that the offers made by the defendants here could be said to be genuine and realistic attempts to compromise the proceeding, especially having regard to the facts that the determining issue involved questions of credit, in particular, the credit of one witness.  Of course, the credit of Myall and Mrs Bila was also relevant.

In my view, Ms McClymont, for the plaintiff, put the matter correctly in her written submissions on costs as follows:

"4.Resolution of the case required determination of competing evidence as to the critical issue of

fact. Evidence was lead in the plaintiff's case from an independent witness, found to be a

witness of truth. It was simply found that this witness was mistaken as to the crucial issue.

5. In those circumstances the plaintiff's case could not have been described as "hopeless" at the time the plaintiff decided to reject the defendants' offer and proceed instead to trial."

In the alternative, the defendants asked for their costs of defending the plaintiff's misrepresentation claim on an indemnity basis.  This claim was based on an allegation that the defendant's represented the property as worth only $152,000 when, in fact, it was worth at least $170,000.  The defendants submit that this claim ought never to have been made, or was groundless and led to the undue prolongation of the case.  See Colgate Palmolive Company v Cussons Proprietary Limited (1993) 46FCR, 225.

Ms McClymont submitted that this claim was based on the defendants' knowledge of the offer by Mrs Elizabeth Williams to purchase the unit for $170,000, and that no other evidence was relied upon.  That may not be entirely correct (see, for example, paragraph 4 of the statement of claim) but notwithstanding what the defendants say in paragraph 12 of their written submission in reply, the claim was, though, dependent to a large extent on the sale to Mrs Elizabeth Williams of the unit for $170,000, and the defendants' knowledge of and involvement in that sale.  To that extent, there was, like the rest of the plaintiff's claim, reliance for this claim on the evidence of Mrs Elizabeth Williams. 

In all of the circumstances, I am not satisfied that when the claim was made, having regard to the evidence then possessed by the plaintiff, that "it could be said that it ought never to have been made" or was "groundless."  In any event, I do not think that it led to any "undue prolongation" of the case.  Any marketing evidence given by the first defendant, Mrs Bila and Mr Paterson, did not, in my view, have this effect.

Finally, the plaintiff seeks to have the defendants' costs limited to three, not four days, and an order that the defendant pay the plaintiff's costs of the fourth day.  The plaintiff relies on the fact that the defendants opened three witnesses and called six.   In my view, the additional witnesses were required primarily because of the evidence of Mrs Elizabeth Williams and related contract and commission issues, and no sufficient basis has been shown to make the orders sought by the plaintiff or either of them.

In the result, the defendants are entitled to their costs of a four day trial on the standard basis.

I order that the plaintiff pay the defendants' costs of and incidental to the proceeding to be assessed on the standard basis unless otherwise agreed.