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- Unreported Judgment
Murphy Farming Pty Ltd v Gralike (No 2) QDC 155
DISTRICT COURT OF QUEENSLAND
Murphy Farming Pty Ltd as Trustee for the Murphy Farming Trust v Gralike & Ors (No 2)  QDC 155
MURPHY FARMING PTY LTD (ACN 072 818 056)
JEREMY SHAUN GRALIKE
STANLEY ALEXANDER GRALIKE
SUE BARBARA GRALIKE
JCJ LAWYERS PTY LTD (ACN 169 633 112) TRADING AS JEFFERY CUDDIHY & JOYCE SOLICITORS
BRENDAN MICHAEL CUDDIHY TRADING AS JEFFERY CUDDIHY & JOYCE SOLICITORS (ABN 42 298 298 821)
BRENDAN MICHAEL CUDDIHY
CHRISTOPHER DAVID ANDERSON
10 June 2016, ex tempore (orders made 13 June 2016)
10 and 13 June 2016
Bowskill QC DCJ
Orders as per paragraph  below.
COSTS – where it was found the first defendant neither engaged nor instructed the non-party solicitors to act on his behalf – whether the non-parties should pay the plaintiff’s costs of the proceeding thrown away as a result – whether costs should be awarded on the indemnity basis
COSTS – where the plaintiff made an offer to settle directed to the second and third defendants shortly before trial – whether offer represented a genuine compromise, such that r 360 of the Uniform Civil Procedure Rules was engaged
INTEREST – relevance of delay in prosecuting claim to recovery of interest up to judgment
Civil Proceedings Act 2011, s 58
Uniform Civil Procedure Rules, r 360
Interchase Corporation Limited v ACN 010 087 573 Pty Ltd  QCA 191
Jones v Millward  1 Qd R 498
McKewins Hairdressing & Beauty Supplies Pty Ltd v Deputy Commissioner of Taxation (2000) 34 ACSR 129
Nominal Defendant v Kisse  QDC 290
Rolls v Radford  QSC 170
Schlieske v Overseas Construction Co Pty Ltd  VR 195
Tyler v Krause  QCA 544
Zimmerman Holdings Pty Ltd v Wales  NSWSC 447
J Bremhorst for the Plaintiff
No appearance for the Second and Third Defendants
S Gerber for the First, Second, Third and Fourth Non-Parties
Mills Oakley for the Plaintiff
Jeffery Cuddihy & Joyce for the First, Second, Third and Fourth Non-Parties
Reasons given ex tempore on 10 June 2016, in relation to the plaintiff’s applications for interest and costs
- On 1 June 2016, I delivered my reasons for giving judgment for the plaintiff, Murphy Farming, against the second and third defendants, Stanley and Sue Gralike, and dismissing the plaintiff’s claim against the first defendant, Jeremy Gralike.
- One of the issues that remains to be dealt with is the interest to be recovered by the plaintiff on the judgment sum of $130,030. The plaintiff has sought interest calculated on that amount for the whole of the period from 17 March 2008, which is a few days after the plaintiff originally made a demand for payment, and, therefore, when the cause of action is said to have arisen.
- The Court has a discretion to make an order that a judgment include interest, and that includes for all or part of the period from when the cause of action arose to judgment: s 58 of the Civil Proceedings Act 2011. Interest is awarded to compensate a plaintiff for having been kept out of money to which it is entitled as a result of a defendant’s wrong. However, delay can be relevant to the exercise of the discretion: Interchase Corporation Limited v ACN 010 087 573 Pty Ltd  QCA 191 at  to .
- Here, there is a significant gap in time between when the cause of action arose in March 2008 and when the proceedings were issued against the second and third defendants in July 2013. But in relation to that approximately five year period, as to the first part of it, it is apparent that, whereas the proceedings were initially instituted only against Jeremy Gralike, the son of Stanley and Sue, that was on the basis of instructions given by Stanley and Sue to the solicitors, Jeffery Cuddihy & Joyce. So to that extent, Stanley and Sue Gralike’s own actions resulted in the proceeding continuing down that path for a period of time. But following that, although it became apparent in November 2010 that those solicitors did not act for Jeremy Gralike, there is then a further delay until the middle of 2013 before the proceedings were issued against Stanley and Sue Gralike. That includes a lengthy period which resulted in the need to make an application to renew the claim in August 2012.
- So although the initial delay, I accept, was not the fault of the plaintiff, the subsequent delay in prosecuting its claim, in my view, ought to be reflected to some extent in the interest calculations. For that reason, as I have indicated, I would propose that the calculations relied on by the plaintiff not include the amounts for the year ended 2011 and the following periods up to 30 June 2013, so this represents a deduction in the interest claimed of some $31,673.88.
- Turning then to the issue of costs, there are two aspects to the plaintiff’s application for costs. First, its application for costs to be paid by one or more of the so-called “non-parties” which are Mr Brendan Cuddihy, Mr Chris Anderson and two entities related to the practice Jeffery Cuddihy & Joyce. The second aspect is the application for costs made against the second and third defendants.
- Dealing first with the non-parties, it is apparent when I look at the previous proceedings in this matter, that when the matter was before Judge Robertson on 30 October 2015, the issue about whether or not Jeremy Gralike had engaged or instructed Jeffery Cuddihy & Joyce was raised, and an order made permitting the parties to adduce evidence at trial in relation to that. On that occasion, counsel for the plaintiff flagged that, although in a sense the plaintiff was caught in the middle of that dispute, there may be a costs claim by the plaintiff coming towards Jeffery Cuddihy & Joyce.
- When the matter was next before the Court, on 4 December 2015, detailed directions were made in respect of the trial itself, but also providing for a preliminary issue to be determined as to whether or not Jeremy Gralike had engaged or instructed Jeffery Cuddihy & Joyce. It is apparent from those orders, which were not objected to by Mr Anderson from Jeffery Cuddihy & Joyce, who appeared on that occasion, that it was contemplated that the plaintiff would be actively involved in that issue and I refer, for example, to orders 16, 25 and 26 made on 4 December 2015.
- Earlier this year, on 22 April 2016, Judge Robertson dealt with an application for leave to file an amended claim and statement of claim which added the “non-parties”, once again, in contemplation of a costs application being made.
- I dealt with that preliminary issue when the trial was called on on 23 May 2016, giving my reasons in respect of it the following day. I found that Jeremy Gralike had not engaged or instructed Jeffery Cuddihy & Joyce, based on the evidence that I heard in relation to that issue.
- It is not in dispute that the Court’s broad power to make an order for costs includes making an order against a non-party.
- In so far as the plaintiff seeks an order that the non-parties pay its costs of the proceeding from March 2008 to 12 November 2010 (that is the period up to when their lack of authority became known), for the plaintiff, the principle relied upon is that a solicitor who acts for a party to a proceeding (here, the first defendant), without authority to do so may be held personally responsible for the costs incurred by the other party (here, the plaintiff). The rationale for this has been explained on the basis that, by their actions, the solicitor is taken to represent to the plaintiff that they have authority to act for the first defendant in that proceeding, and the plaintiff, or their lawyers, on the faith of that representation go on dealing with them and incurring costs accordingly: see Schlieske v Overseas Construction Co Pty Ltd  VR 195 at 197 per Scholl J, and also Nominal Defendant v Kisse  QDC 290 at  to  per Judge McGill SC which I note was referred to with approval by the Court of Appeal in Tyler v Krause  QCA 544 at .
- Having regard to the findings that I made in dealing with the preliminary issue on 24 May 2016, I consider it entirely appropriate that the plaintiff recover its costs incurred up to 12 November 2010 from an appropriate one or more of the non-parties.
- As I have indicated today, I consider that those costs ought not to include the initial costs of preparing the claim and the statement of claim which cannot be said to have been wasted or thrown away as a result of any conduct on the part of Jeffery Cuddihy & Joyce.
- Therefore, I would consider that the appropriate timeframe ought to be from 7 April 2008 to 12 November 2010, 7 April 2008 being the date when Jeffery Cuddihy & Joyce wrote to the plaintiff’s solicitors advising that they had instructions to accept service.
- As to the basis on which those costs ought to be assessed, in my view, it is appropriate that they be assessed on the indemnity basis. Although the solicitors’ conduct may be explained by their reliance upon what Stanley and Sue Gralike told them, and their receipt of an apparently signed costs agreement, it does not excuse the conduct in so far as the plaintiff is concerned. As I found, the solicitors did not speak directly to Jeremy Gralike, did not take instructions from him or take a statement from him before accepting service of proceedings issued directly to him in his name and filing a defence as well as taking various other steps.
- An order on this basis, the indemnity basis, is, in my view, supported by the authorities I have already referred to, as well as Zimmerman Holdings Pty Ltd v Wales  NSWSC 447 and the statement of principle by Gummow J in McKewins Hairdressing & Beauty Supplies Pty Ltd v Deputy Commissioner of Taxation (2000) 34 ACSR 129 at  as to the importance of solicitors observing the basic professional requirement and obligation to the Courts that they not conduct litigation otherwise than on instructions by the party for whom they purport to act.
- This is not a case where I am considering whether an order should be made against solicitors who have acted for a party in circumstances where it is suggested that their conduct of the case, by virtue of some abuse of process or dereliction of duty, or the like, has resulted in the opposing party unreasonably being required to incur additional costs. I contrast in this regard the decision relied upon by the non-parties, Lemoto v Able Technical Pty Ltd  NSWCA 153. This is a very specific circumstance where a solicitor has been found to have acted without authority to do so, and that circumstance is the subject of cases establishing a principle that such a solicitor can expect to be held liable for the costs thrown away by the opposing party as a result of that.
- I turn, then, to the costs of the preliminary issue. Firstly, I do not accept the non-parties’ submission that the preliminary issue was something only relating to the first defendant and themselves. It was plainly something that the plaintiff would be affected by, immediately in terms of the withdrawal of admissions, and subsequently in terms of the foreshadowed costs application. The plaintiff’s active involvement in that issue was contemplated from the outset without objection by the non-parties.
- Rule 681 of the Uniform Civil Procedure Rules provides that unless the Court otherwise orders, costs follow the event; and rule 684 permits the Court to make an order in relation to a particular question in, or part of a proceeding.
- I did consider, in so far as the preliminary issue is concerned, what the “event” might be described as. That might be more readily explained as between the first defendant and the non-parties. But even in so far as the plaintiff is concerned I am persuaded that the plaintiff had a direct interest in that issue. It was contemplated that it would be actively involved in it. In circumstances where the first defendant was unrepresented, the role played by the plaintiff was appropriate and pragmatic and of assistance to the Court, and in all of the circumstances, on balance, in my view, it is appropriate that the plaintiff recover its costs of dealing with the preliminary issue from the appropriate non-parties.
- However, in my view, those costs ought to be assessed on the standard basis. I do not accept there is any basis put forward why those costs should be paid on the indemnity basis. The issue relating to the costs up to November 2010 does not justify such a conclusion.
- Finally, in so far as the second and third defendants are concerned, it is appropriate that the plaintiff recover its costs of the proceeding against them from July 2013 when they were joined to the proceeding, on the standard basis. Although the plaintiff has sought an order that it recover its costs on the indemnity basis, I am not satisfied that that is appropriate. The plaintiff relies on its having been wholly successful but that, in itself, does not warrant an order for indemnity costs. The plaintiff also relies on an offer to settle the proceeding made on 6 April 2016. The offer was directed to each of the second and third defendants, served on Jeffery Cuddihy & Joyce who were still at that time the solicitors on the record for them. The offer was one to settle the matter on the basis of payment of $127,500, plus interest from 4 March 2008 and payment of the plaintiff’s costs on an indemnity basis up to the date of the offer.
- In so far as the claim is concerned, that represents only about a $2500 reduction in the whole of the claim. In my view, an offer in those terms was not a genuine offer of compromise. I refer to the decision of the Court of Appeal in Jones v Millward  1 Qd R 498 in which her Honour, at that time, Justice Holmes noted that “an offer under the rules must be one that contains a genuine offer of compromise”.
- Even though there is a small reduction in the claim, I note that in Rolls v Radford  QSC 170, an unreported decision of Justice Philippides, as her Honour then was, on 27 April 2012, her Honour expressed a similar view where there was a small reduction in the amount of the claim in making the offer.
- Based on both of those decisions, in my view, that offer made in April this year does not give rise to the operation of rule 360 of the Uniform Civil Procedure Rules and therefore I do not propose to order that the costs be assessed on the indemnity basis.
Orders made, following further hearing on 13 June 2016
- At the end of the ex tempore reasons given above, the orders proposed to be made, giving effect to those reasons, were read out and subsequently sent in draft to the representatives of the plaintiff and the non-parties for their consideration prior to being made.
- Following a brief further hearing on 13 June 2016, the orders made by the court on that date were as set out in paragraph  below.
- I will briefly record that the only order the subject of any further detailed argument was order 5 (the costs of the preliminary hearing). In that regard, the order is intended (as now expressly stated) to include the plaintiff’s costs of the preliminary hearing itself, as well as preparation for that hearing. However, the order does not include the plaintiff’s costs of each of the applications/hearings on 30 October 2015, 4 December 2015, 22 April 2016 and 20 May 2016. Although counsel for the plaintiff sought an order for recover of its costs, or so much of them as can be said to be related to the preliminary issue, of those applications, I was not satisfied that was appropriate. The extent to which costs incurred by the plaintiff on those previous occasions could be said to relate to the preliminary hearing and, if so, the apportionment of those costs, is not entirely straightforward, given that those previous hearings dealt with preparation of the matter for trial, and that in some respects additional work the plaintiff’s legal representatives were required to do was as a result of the one active party being unrepresented (as opposed to being the fault of the non-parties). It is my view that, in all the circumstances, the order made, which gives the plaintiff its costs of the hearing of the preliminary issue, and preparation for it, is fair and just.
- The orders made were as follows:
THE JUDGMENT OF THE COURT IS THAT:
- Judgment for the plaintiff against the second and third defendants for the amount of $190,601.06 (comprising $130,030.00 for claim, and $60,571.06 for interest).
- The plaintiff’s claim against the first defendant is dismissed.
THE ORDER OF THE COURT IS THAT:
- The second, third and fourth non-parties pay the plaintiff’s costs of the proceeding, thrown away as a result of the first defendant not engaging or instructing the non-parties, from 7 April 2008 to 12 November 2010 (excluding the costs relating to the claim and statement of claim), to be assessed on the indemnity basis.
- Subject to orders 5, 6 and 7, the second and third defendants pay the plaintiff’s costs of the proceedings, from June 2013 (including the costs of the amended claim and statement of claim filed on 30 July 2013), to be assessed on the standard basis.
- The first, second, third and fourth non-parties pay the plaintiff’s costs of the hearing of the preliminary issue, including preparation for the hearing, to be assessed on the standard basis.
- The first, second, third and fourth non-parties pay half the plaintiff’s costs of today’s application, to be assessed on the standard basis.
- The second and third defendants pay half the plaintiff’s costs of today’s application, to be assessed on the standard basis.
 See Mio Art Pty Ltd v Macequest Pty Ltd (No 2)  QSC 271 at  and .
- Published Case Name:
Murphy Farming Pty Ltd as Trustee for the Murphy Farming Trust v Gralike & Ors (No 2)
- Shortened Case Name:
Murphy Farming Pty Ltd v Gralike (No 2)
 QDC 155
13 Jun 2016