Todrell Pty Ltd v Finch[2007] QSC 386

SUPREME COURT OF QUEENSLAND

[1] When I gave judgment in these matters on 4 December 2007 the parties sought and were given leave to deliver written submissions of the question of costs, which I have received and considered.  I order that the plaintiff in Action 1308 of 2007, Todrell Pty Ltd, pay the defendants’ costs of and incidental to the action to be assessed in accordance with Division 3 of Chapter 17A of the Uniform Civil Procedure Rules (UCPR)on the indemnity basis but limited to a trial of one day’s duration.

[2] I further order the defendants in that action to pay the plaintiff’s costs of the issue of fact, whether the parties made a concluded oral agreement, those costs to be assessed on the standard basis.

[3] In Action 7786 of 2007 I order the first defendant, Todrell Pty Ltd to pay the plaintiff’s, Croydon Capital Ltd’s, costs of the action to be assessed in accordance with Division 3 of Chapter 17A on the standard basis.  I order that there be no order as to the costs of the second defendants.

[4] The defendants in Action 1308 of 2007 (‘the Finchs) seek their costs of the trial which lasted four days on the indemnity basis.  They do so on reliance upon the authorities which establish that, other things being equal, commencing proceedings in wilful disregard of clear law will result in an order for costs on the indemnity basis.  The authorities include Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and Di Carlo v Dubois (2002) QCA 225.  Rosniak v Governor Insurance Office (1997) 41 NSWLR 608 at 616 decided that it was not necessary for a party seeking indemnity costs to establish ethical or moral delinquency by its opponent.  It was enough that the opponent conducted itself unreasonably in some way.  In Emanuel Management Pty Ltd (in liquidation) v Fosters Brewing Group Ltd & Ors [2003] QSC 299 I pointed out that that test is inexact.  The test which I myself adopted in that case, and others, was whether there was something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis.  It is, of course, irresponsible to commence proceedings which cannot succeed because of a known legal impediment. 

[5] I think it is right to say that the action was doomed to fail.  I do not regard either of the two bases on which I have found against the plaintiff as novel or difficult.  It is right to characterise the relevant law as ‘clear’.  The document which was signed by Ms Finch was clearly inadequate as a memorandum of the agreement sued on.  It could not be connected on its face with the comprehensive document produced later. Looking at the two documents without the tutelage of oral evidence one could not say they referred one to the other so as to constitute, together, a sufficient memorandum.  On their separate faces they referred to two transactions, not one.  Neither referred to the other, or the same transaction.

[6] The other point was equally clear.  The option agreement could not become effective until signed and therefore dated.  It is no answer to say that the agreement was to take effect from the making of the oral agreement.  There was no evidence that such a term was agreed and it is inconsistent with the written term as to commencement of the option period in the document on which the plaintiff relied to satisfy s 59.  The short point is that the document on which the plaintiff had to rely for its case showed that the agreement was not to take effect until signed and dated.

[7] The plaintiff had an agreement binding only in honour.  Once Mr Romano knew that the Finchs would not honour their agreement he had to rely upon his rights at law and it should have been apparent that the law gave him no right to enforce the agreement.

[8] It was, therefore, ‘irresponsible’ to commence the proceedings and an award of indemnity costs is appropriate.

[9] There is, though, a real question as to whether the Finchs should recover all their costs on that basis.  Three of the four days of the trial were taken up with the factual dispute as to the existence of the oral agreement.  That point was concluded against the Finchs and, it must be said, on the basis that their evidence was not candid.  It was not, I thought, a case of differing honest recollections.  The Finchs put forward a version of the facts which they must have known was false. 

[10] Todrell relies on this point for its submission that the Finchs should pay its costs of that disputed question of fact. 

[11] UCPR 684 (formerly 682) provides that the court may make an order for costs in relation to a particular question in or a particular part of a proceeding and may declare what percentage of the costs of the proceeding is attributable to that question or part.  Todrell submits that the factual dispute was a question in, or a particular part of, the action and that its costs in relation to that question or part should be paid by the Finchs.

[12] I think it right to designate the factual dispute as a question or part for the purposes of the rule.  The former Rules of the Supreme Court (O91r3) provided that:

‘When several issues, whether of fact or law are raised upon a claim … the costs of the several issues respectively, both in law and fact, shall, unless otherwise ordered, follow the event.’

[13] The new rule is to the similar, general, effect though the change in wording is no doubt deliberate and confers a wider discretion than the former rule which was limited to ‘issues’, a word which itself gave rise to difficulty.

[14] In Forster v Farquhar [1893] 1 QB 564 Bowen LJ (570) discussed the English equivalent of the former rule.  The case was one in which the plaintiff claimed damages for illness caused by a contractor’s negligent draining of his property.  He proved the contractor’s negligence and some loss but failed to prove that the illness was caused by it.  Bowen LJ said (569-570):

‘But why should any burden in respect of this portion of the plaintiff’s claim be cast upon the defendants?  It is said … that the various items of damage claimed do not create separate issues in the pleader’s sense, nor for purposes of taxation.  That is perfectly true;  but it is a mere technicality of pleading and of the taxing office, which has survived … from the time when pleadings were more accurate … .  The real controversy in the present action was as to the damage suffered, and the question as to damage, though not an issue in the pleaders sense of the word, was a matter in controversy and one which could be split up into separate heads, each involving a different class of evidence.  For all purposes of justice the separate heads of controversy were different issues, though not different issues … in the sense in which the pleaders use the term.  Why should the defendants, whose defence has succeeded on the most expensive and the most important of these heads of controversy, bear the cost of litigating it. If by making a special order as to costs the judge could apply distributively to these heads of controversy the maxim that he who loses pays, was it not fair and reasonable so to direct?  It seems to us that it was.’

[15] With reference to this passage Thomas J said in Colburt v Beard [1992] 2 Qd R 67 at 70 said:

‘In short Bowen LJ favoured a discretion whereunder the court may identify heads of controversy as units of the litigation, and give directions to the Taxing Master in relation to them.  The identification of such units should not be circumscribed by limiting them to pleaders’ issues, courses of action or issues capable in themselves of leading to the grant of relief.  Such a view allows the court greater scope for framing costs orders to meet the justice of the particular case having regard to the way it was conducted.’

[16] This approach was said to have ‘much to commend’ it by the Full Court in Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd R 156 at 208.

[17] I would conclude that the question of fact, did the parties reach a binding oral agreement for the sale of the land, which they litigated, was a part or question for the purposes of the rule.  It was a head of controversy or unit of the litigation, so the court has a discretion to separately award the costs incurred in relation to that question.  The cases suggest that the party which lost it, the Finchs, should pay the costs.

[18] One has to, however, sound a note of caution.  The Finchs were defendants who were successful in resisting the plaintiff’s claim.  The cases referred to, Forster, Colburt and Thiess were all cases in which a plaintiff enjoyed partial success in its litigation but the defendants successfully resisted the bulk of the claims respectively brought against them.  In each case the most expensive part of the litigation was that which the defendants won. 

[19] As I understand the authorities it will be a rare case indeed in which a successful defendant will not be awarded costs.  The case frequently cited for the proposition is Donald Campbell & Co v Pollak [1927] AC 732.  At 809-810 Lord Chancellor Cave said, referring to Ritter v Godfrey [1920] 2 KB 47:

‘Atkin LJ took a more decided view, saying:  ‘In the case of a wholly successful defendant … the judge must give the defendant his costs unless there is evidence the defendant (1) brought about the litigation, or   (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains … .  I am aware of the inconvenience of fettering by rules the exercise of what in terms appears to be an unfettered discretion.  But it is too late to contend for an arbitrary discretion over costs:  some rules undoubtedly there are that control the discretion:  and it seems hard to require a judge to exercise his discretion according to rule, and yet not to be able to state what the rule is. …

Eve J took a similar view, holding that a judge, however much he might disapprove of the defendant’s behaviour, was not entitled to refuse him his costs unless he had material upon which he was prepared to hold judicially that the defendant had thereby created a mistaken belief in the plaintiff’s mind, or that his misconduct was the real cause of the action being brought.’

[20] In Emanuel I expressed the opinion (at para [85]) that UCPR 684 is ‘more likely to find application where a plaintiff has been partially successful.  The defendant who has restricted the plaintiff’s success may have an argument … that it should pay only part of the costs or indeed be paid part of the costs.  Where, however, a defendant has been completely successful it would be unusual to require it to pay any part of the plaintiff’s costs.  There may be exceptional cases where the defendant by its conduct has made it appropriate that it should be deprived of its costs or even pay its opponent’s costs, but cases in which a successful defendant has not recovered costs are rare.’

[21] That remains my opinion.  The weight of authority is against not awarding a successful defendant its costs even where it has raised unnecessary or unsuccessful defences.  There is a useful review of the cases by Einstein J in Mobile Innovations Ltd v Vodafone Pacific Ltd [2003] NSWSC 423 in which his Honour said:

‘Notwithstanding that the court has power to deprive a successful party of costs, or even order a successful party to pay costs, that is a course to be taken in unusual cases and with a degree of hesitancy.’

His Honour noted Cretazzo v Lombardi (1975) 13 SASR 4 where Jacobs J said (at 16):

‘…trials occur daily in which the party, who in the end is wholly … successful nevertheless fails along the way on particular issues of fact or law.  The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to a decision of the case. …’

[22] In Waters v PC Henderson (Aust) Pty Ltd (1994) NSWCA 40678/91, Kirby, Mahoney and Priestley JJA said:

‘Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others.  Particularly is this so where, for example, a defendant succeeds on issues that occupy the bulk of the time taken by the proceedings.  Nevertheless unless a particular issue … is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.’

[23] See also Australian Conservation Foundation v Forestry Commission of Tasmania 81 ALR 166 at 169 in which Burchett J said:

‘A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and opposed to his adversary only the barrier of one hopeful argument:  he is entitled to raise his earthworks at a reasonable point along the path of assault.’

[24] Notwithstanding these stern warnings, which I accept are appropriate, this does appear to me to be an exceptional case.  The Finchs failed on the only contested question of fact which took up three quarters of the time at trial.  It was both dominant and separable.  That by itself may not, I apprehend, justify an order depriving them of their costs or obliging them to pay their opponents.  The real point is that their defence to that issue was baseless and they must have known it had no substance.  They put their opponent to the costs of proving an issue, expensive as it turned out, on which the justice of the case was against them.  Essentially the fact is that their opposition to the plaintiff on that point was not genuine.  Moreover it remains disturbing that their defence should have utilised the invented evidence of their solicitor.

[25] I have not found it easy to determine whether that consideration should deprive them of their costs of that issue or whether it should result in an order that they pay the plaintiff’s costs of that issue.  I have in the end decided on the latter course.  I am conscious of the warnings against depriving successful defendants of their costs, and of the need for caution and hesitancy.  The defendants’ conduct, and that of their solicitor should be sanctioned, and the order that they pay costs is an appropriate sanction.  If they are in no way to blame for Mr Williams’ conduct they have their remedy against him.   

[26] I think therefore costs should be ordered on the basis on what should have happened.  The defendants should have resisted the plaintiff’s claim, which I have categorised as irresponsible, on the points of law on which they won.  Such a trial would have lasted one day.  The defendants should therefore have their costs of a one day trial on the indemnity basis.  The other issue of fact which they fought and lost and which they must have known was artificial and which for they relied upon tainted evidence, should be paid by them to the plaintiff.  Those costs should be assessed on the standard basis.  That issue was the only issue of fact in the trial.  It took up three days or thereabouts and was separable from the questions of law on which the case turned. 

[27] The successful plaintiff in Action 7786 of 2007 also seeks an order for costs.  This, I think, is inevitable.  It is unfortunate that the costs of this action should be so large.  It was heard with the other action and lasted four days as well.  But it was appropriate that the two be heard together so that all parties were bound by findings of facts relevant to the actions.  The defendant, Todrell Pty Ltd, could have reduced  the costs by admitting the claim by Croydon Capital Pty Ltd subject only to the success of its action against the Finchs.  That was the reality but was not admitted until the last stages of the trial.  Had that been done there would have been no need for Croydon Capital Pty Ltd to be represented.  The outcome of its action would have depended entirely upon the outcome of Action 1308 of 2007.

[28] As between plaintiff and defendant in Action 7786 of 2007 there is no basis for not awarding them to the successful party.  Although the Finchs were made second defendants to this action no relief was sought against them and it was unnecessary for them to participate in it.  They supported the claim by Croydon Capital Pty Ltd and had no adverse interest to it.  Accordingly it is appropriate to make no order as to their costs with respect to this action.