Sommerfield v O'Keefe[2016] QDC 281

DISTRICT COURT OF QUEENSLAND

1. [1]
   Judgment was given in the proceeding of Sommerfield & Anor v O'Keefe & Ors [2016] QDC 222 on 9 September 2016. Following delivery of the judgment written submissions were received from the parties as to costs.

2. [2]
   Judgment was given in favour of the plaintiffs against the first defendant in the sum of $153,947.72 and against the third defendant in the sum of $409,321.68. The court dismissed the plaintiffs’ claim against the second defendant and allowed the counterclaim of the second defendant for an amount of $7,480 which had been paid under protest by the second defendant. The second defendant failed in a counterclaim for breach of contract and/or negligence against the plaintiffs.

3. [3]
   The parties are agreed that the interest payable by the first defendant pursuant to the Civil Proceedings Act 2011 (Qld) on the judgment sum is $12,838.55 and interest payable by the third defendant is $35,061.67.

4. [4]
   The parties acknowledged in their submissions that under r 681 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) costs of a proceeding are in the discretion of the court but follow the event unless the court orders otherwise. Rule 684(1) permits the court to make an order for costs “in relation to a particular question in, or a particular part of, a proceeding”. The judgment on a counterclaim may be treated as a separate event from the judgment on the claim.^[1]

Submissions

5. [5]
   The plaintiffs submit that as they were entirely successful against the first and third defendants and entirely successful in defending the second defendant’s counterclaim it would be an affront to common sense to suggest that any of the defendants have been successful. They submit that the plaintiff should therefore have their costs of the proceedings.

6. [6]
   The defendants submit that the first and third defendants should pay the plaintiffs’ costs of the claim and the plaintiffs pay the second defendant’s costs of defending the claim. They further submit that the outcome of the counterclaim was evenly balanced and accordingly no order should be made as to the costs of the counterclaim.

7. [7]
   In addition the plaintiffs seek indemnity costs. They rely on a formal offer made on 31 March 2016 which was not accepted by the defendants. They submit that the plaintiffs obtained a judgment no less favourable than the formal offer in respect of the second defendant. In response the defendants submit that the offer failed to comply with the requirements of the UCPR and was not sufficiently certain to be capable of acceptance. The defendants submit it was not imprudent for them to reject the offer as it had been made to them collectively. They argued costs should be assessed on the standard basis.

Consideration

8. [8]
   Both parties accept that as the plaintiffs were successful in their claims against the first and third defendants they should have their costs of the claim in respect of those two defendants. Furthermore, it is not controversial that the first and third defendants should pay the interest calculated in accordance with the Civil Proceedings Act 2011 (Qld).

9. [9]
   The determination of costs orders as between the plaintiffs and the second defendant requires consideration of the plaintiffs’ claim and the second defendant’s counterclaims.

10. [10]
    The court made an order dismissing the plaintiffs’ claim against the second defendant for payment of debts. That order was merely the formal resolution of a dispute that had substantially resolved by the time of trial. The second defendant had met all outstanding debts with the sole exception of a dispute over a sum of $7,480.21 already paid in protest. That sum was the subject of a counterclaim by the second defendant and related to a dispute about who was responsible for training and transportation costs for a particular horse, Miss Cover Girl. That issue was resolved in favour of the second defendant. As the plaintiffs’ claim involved no issue other than that litigated on the counterclaim, the defendants’ entitlement to costs in respect of the Miss Cover Girl issue can be appropriately accommodated by an order in respect to costs of the counterclaim.

11. [11]
    The second defendant’s counterclaim involved three separate components. The first was the counterclaim in respect of the Miss Cover Girl issue discussed above. The second component related to the recovery of possession of horses owned by the second defendant but held by the plaintiffs under a purported lien. The Court found the lien could only be maintained if there was an amount still owing by the second defendant. The only possible debt was the $7,480.21 relating to the Miss Cover Girl claim. As that issue was resolved in favour of the second defendant there remained no grounds, on the view taken by the Court, upon which a lien over the horses could be maintained.

12. [12]
    Thus the first and second components of the second defendant’s counterclaim turned on the entitlement to a relatively trivial sum of money and, so far as I am able to ascertain, would not have involved significant additional costs.

13. [13]
    The third component of the second defendant’s counterclaim alleged breach of contract and/or negligence in respect of the death of a colt, the progeny of the race horse Tolart. That issue consumed a “significant portion of the trial”.^[2]The second defendant’s original pleadings sought damages of $400,000 for breach of contract and/or negligence but that claim was deleted by amendment on 15 February 2016. The evidence adduced at trial by the second defendant contended the colt had a value of $75,000. The Court assessed potential damages at $45,000. Resolution of this claim in respect of the death of the Tolart Colt was the primary component of the counterclaim both in terms of value and in time expended during the trial. The plaintiffs were successful in resisting the counterclaim on this issue and the award of costs should reflect that success.

14. [14]
    The defendants submit that given the success of the second defendant on the first two components, the overall outcome of the counterclaim was evenly balanced and therefore no orders should be made as to costs of the counterclaim.

15. [15]
    I am not persuaded that that would fairly allocate costs as between the parties. The first and second components were less in value and consumed much less trial time than the third component. The defendants’ submission emphasising the value of the returned horses overlooks the fact that there was no challenge to their ownership. They would have eventually had to be returned once a debt of relatively minor value was repaid. To proceed on the basis that the issues were evenly balanced would be to do an injustice, in my view, to the plaintiffs. The component of the counterclaim regarding the loss of the Tolart Colt was distinct from the rest of the issues litigated on the trial and amounted in effect to a separate trial within the trial.

16. [16]
    An order should be made in favour of the plaintiffs for their success in resisting the third component of the counterclaim involving the death of the Tolart Colt. The second defendant should have its costs following its success on the first and second components of its counterclaim.

17. [17]
    For the reasons I have already expressed, it is unnecessary for any order to be made in respect of the plaintiffs’ claim against the second defendant on the Miss Cover Girl issue. Costs in favour of the second defendant on the counterclaim will suffice.

Indemnity costs

18. [18]
    On 31 March 2016 the plaintiffs made a formal offer to settle in the following terms:

“TAKE NOTICE that the Plaintiffs in this proceeding is [sic] making an offer to settle the Plaintiffs’ claim pursuant to Uniform Civil Procedure Rules, Chapter 9 Part 5 in the following terms:

1. That the Defendants pay the amount of $550,000 to the Plaintiffs in full and final settlement of the debts owing upon the Claim and further debts accrued since filing of the Claim for continued agistment, immediately upon acceptance.

2. That the Defendants pay the amount of $16,546.20 to the Plaintiffs in payment of the costs awarded 4 February 2016, immediately upon acceptance.

3. That the Defendants pay the Plaintiffs’ legal costs of the proceedings upon the standard basis, up to and including the date of acceptance, as agreed, or as assessed by a court appointed cost assessor chosen by the Defendants from a panel of 3 nominated by the Plaintiffs. …”

The offer was not accepted by the defendants.

19. [19]
    Rule 360(1) of the UCPR reads:

“360(1)If –

1. (a)
   the plaintiff makes an offer that is not accepted by the defendant and the plaintiff obtains an order no less favourable than the offer; and

2. (b)
   the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;

the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.”

20. [20]
    The plaintiffs rely on r 360 and contend they obtained orders no less favourable than the offer.

21. [21]
    The plaintiffs obtained favourable money orders against the first and third defendants for debts owing totalling $563,271.40. An order was made against the plaintiffs for a payment of $7,480.24 to the second defendant. Deducting that amount, the plaintiffs received money orders in their favour totalling $555,791.16. In addition to that sum awarded for debts owing, the plaintiffs were also awarded interest on that amount. I am satisfied that the orders in favour of the plaintiffs on their claim are no less favourable than the offer made on 31 March 2016.

22. [22]
    The defendants submit the offer failed to comply with the requirements of r 353 of the UCPR in that “it was not an offer to settle every dispute or matter in the document constituting the claim”. The defendants cite Charter Pacific Corp Ltd v Belrida Enterprises Pty Ltd^[3]in support of this submission.

23. [23]
    Rule 353 reads:

“353(1)A party to a proceeding may serve on another party to the proceeding an offer to settle 1 or more of the claims in the proceeding on the conditions specified in the offer.

(2)A party may serve more than one offer.

(3)An offer must be in writing and must contain a statement that it is made under this part.”

24. [24]
    In Charter Pacific this rule was subjected to scrutiny by Fryberg J who concluded that the offer must be for settlement of all matters in a claim. As at 31 March 2016 the plaintiffs’ claim filed 11 March 2015 not only claimed amounts of debt owing but also claimed interest and costs.

25. [25]
    The defendants submit as follows:

“Although the opening words of the offer states that it is ‘an offer to settle the plaintiffs’ claim’ the wording at paragraph 1 of the offer constricts and narrows its terms by proposing that the defendant should pay $550,000 ‘in full and final settlement of the debts owing upon the claim and further debts accrued since filing of the claim for continued agistment’. The offer was not an offer to settle the entire claim. At best, it was an offer to settle the plaintiffs’ debt claim.”

26. [26]
    The resolution of this submission turns on the construction given to the terms of the settlement offer.

27. [27]
    The document states it is an offer to settle the claim. There were two claims in the present proceedings: the original claim and the counterclaim. The offer refers to the original claim. The defendants contend the terms of the offer qualify the otherwise clear initial statement that it is an offer to “settle the plaintiffs’ claim”. On its face that would seem to be an offer to settle the claim contained in the formal document filed on 11 March 2015.

28. [28]
    The terms of the offer constitute an expression of willingness by the plaintiffs to forego their claim in return for the payment of $550,000 with costs as specified in the offer. That they did not specifically detail that it included foregoing interest does not detract from the clear meaning of the words contained in the offer.^[4]

29. [29]
    In my view, the offer should be construed as an offer to forego the claim in its entirety. It does not fail for uncertainty.

30. [30]
    The defendants further submit that as the offer was made to “the Defendants” it was only open to joint acceptance. It is submitted it would have been imprudent for an individual defendant to accept on that basis.

31. [31]
    The offer to all defendants was properly made under r 363. As the claim did not allege the defendants to be jointly or jointly and severally liable, r 363(2) did not apply. Under r 363(1) the plaintiff may make an offer to settle with any one or all of a number of defendants.

32. [32]
    In considering whether refusal by each defendant to reject the offer was reasonable and prudent it is necessary to have regard to the close relationship between the three defendants. The first defendant was director, secretary and shareholder of each of the other two defendants and the only person the plaintiffs dealt with in respect of the horses owned by those entities. The three defendants have the same legal representation. In those circumstances apportionment by the defendants between themselves of the sum to be paid upon acceptance of the offer would not have been an unreasonable course.

33. [33]
    Once it is accepted the offer was made in accordance with the terms of Chapter 9, Part 5 of the UCPR, it is required that the court order costs on an indemnity basis “unless the defendant shows another order for costs is appropriate in the circumstances”.^[5]

34. [34]
    I am not persuaded that the defendants have shown that acceptance of the offer would have been unreasonable or imprudent. Nor has any other basis been advanced sufficient to displace the statutory obligation in r 360 for the award of indemnity costs. The costs orders against the first and third defendants should be granted on an indemnity basis.

35. [35]
    The settlement offer did not incorporate the counterclaim. Accordingly the plaintiffs’ success on the issue involving the Tolart Colt will attract costs on the standard basis.

Orders

36. [36]
    The orders of the court will be as follows:

1. The first defendant pay to the plaintiffs interest on the judgment sum in the amount of $12,838.55 pursuant to s 58 of the Civil Proceedings Act 2011 (Qld).

2. The third defendant pay to the plaintiffs interest on the judgment sum in the amount of $35,061.67 pursuant to s 58 of the Civil Proceedings Act 2011 (Qld).

3. The first and third defendants pay the plaintiffs’ costs of the claim, to be assessed on an indemnity basis.

4. The plaintiffs pay the second defendant’s costs of the issues raised upon paragraph 13 of the Fourth Amended Defence, and the relief sought in paragraphs 3 and 4 of the claims for relief in the Fourth Amended Counterclaim, to be assessed on the standard basis.

5. The second defendant pay the plaintiffs’ costs of the issues raised upon paragraphs 1 to 11 of the Fourth Amended Defence, and the relief sought in paragraphs 1 and 2 of the claims for relief in the Fourth Amended Counterclaim, to be assessed on the standard basis.

6. The plaintiffs pay the second defendants’ costs of the issues raised on paragraphs 17, 18 and 20 of the Fourth Amended Defence and paragraph 12 of the Fourth Amended Counterclaim, and the relief sought in paragraph 3 of the claims for relief in the Fourth Amended Counterclaim, to be assessed on the standard basis.