WP Kidd Pty Ltd v Panwell Pty Ltd (No 2)
[2008] QSC 8
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- Unreported Judgment
- WP Kidd Pty Ltd v Panwell Pty Ltd (No 2)[2008] QSC 8
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WP Kidd Pty Ltd v Panwell Pty Ltd (No 2)[2008] QSC 8
WP Kidd Pty Ltd v Panwell Pty Ltd (No 2)[2008] QSC 8
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Costs |
ORIGINATING COURT: | |
DELIVERED ON: | 7 February 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 1 February 2008 |
JUDGE: | McMeekin J |
ORDERS: | 1.Paragraph 4 of the orders made on 18 December 2007 be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest. 2.That the second and third defendants pay the plaintiffs’ costs of the proceedings on the standard basis; 3.That the plaintiffs pay the first, sixth, and seventh defendants’ costs of the proceedings brought by the plaintiffs against them on the standard basis; 4.That the first plaintiff pay the first defendant’s costs on the first defendant’s counter-claim against the first plaintiff on the standard basis; 5.That the first, sixth, and seventh defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis; 6.That the eighth and ninth defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up until 5 April 2007 and thereafter on the indemnity basis. 7.That otherwise there be no order as to costs in respect of the third party claims brought by the defendants. |
CATCHWORDS: | PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – CORRECTION UNDER ‘SLIP RULE’ – error in order rectified – rent and interest noted – GST component taken into consideration PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON AN INDEMNITY BASIS – where a defendant is protected from costs by an order on the indemnity basis – where defendant’s limited involvement in the hearing did not limit costs against other parties PROCEDURE – COSTS – THIRD PARTIES – whether costs could be passed by unsuccessful cross-claimants to plaintiffs – where actions of cross-claimants against third party considered UCPR rr 388, 704 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 considered Di Carlo v Dubois & Ors [2002] QCA 225 applied Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 considered Furber v Stacy [2005] NSWCA 242 cited GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 applied Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 QDR 162 distinguished Johnson v Ribbins [1977] 1 WLR 1458 at 1464 cited Rosniac v Government Insurance Office (1997) 41 NSWLR 608 considered Todrell Pty Ltd v Finch & Ors [2007] QSC 386 applied |
COUNSEL: | N Sadler for the plaintiffs and 8th and 9th defendants RS Ashton for the 1st, 6th and 7th defendants S Kingston (sol) for the 2nd and 3rd defendants T Macklin for the 4th defendant |
SOLICITORS: | McDonnells for the plaintiffs and 8th and 9th defendants Baker O'Brien & Toll for the 1st, 6th and 7th defendants Kerrin & Co Lawyers for the 2nd and 3rd defendants HQF Lawyers for the 4th defendant |
[1] McMEEKIN J: In this matter I delivered judgment on 18 December 2007. There are two matters now raised – an application by the first, sixth, and seventh defendants under the slip rule and submissions as to costs.
The Slip Rule Application – Rent & GST
[2] The first, sixth, and seventh defendants seek an amendment to paragraph 4 of the orders under the slip rule.[1] The first defendant counter-claimed against the first plaintiff for an amount of rent owing under the lease and for interest. The first defendant was successful in that counter-claim and I gave judgment in its favour against the first plaintiff in the sum of $218,733 together with $53,345 for interest. I relied upon an expert report tendered as Exhibit 33.[2] Mr Ashton who appears for the first defendant informs me that the parties are agreed that the calculation there carried out was inaccurate. It is now agreed that the accurate amount of rent owing under the terms of the lease was $257,075.52.[3]
[3] The interest allowed on the claim will also need to be amended accordingly. I will allow interest in the sum of $68,085.[4]
[4] Mr Ashton has also pointed out that the calculation that he proffered as Exhibit 37 does not include the GST component which the plaintiff is liable to pay to the first defendant under the terms of the lease. I will allow one eleventh of the total rent deficit shown in Exhibit 37 as the GST component - $23,370.50.
[5] Paragraph 4 of the orders that I previously made must therefore be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest.
Costs
[6] There is no dispute that:
(a) The plaintiffs should recover their costs against the second and third defendants on the standard basis;
(b) That the first, sixth, and seventh defendants should recover their costs incurred in defending the claim brought by the plaintiffs against them; and
(c) That the first defendant should have its costs in respect of the counter-claim that it brought against the first plaintiff.
[7] There are disputes however relating to the fourth defendant. First, it seeks that its costs be paid on the indemnity basis. Secondly, those exposed to paying its costs (the first, sixth, and seventh defendants and the eighth and ninth defendants) contend that its costs should be limited to only a percentage of the total. Thirdly, the first, sixth, and seventh defendants contend that any liability they have to the Fourth Defendant’s costs should be passed on to the plaintiffs.
The position of the fourth defendant
[8] As I mentioned in the reasons for judgment the plaintiffs settled with the fourth defendant prior to trial. In the course of submissions relating to the costs issue I was informed from the bar table that that settlement had been reached some time prior to April 2006. That month the parties came before Mullins J. The plaintiffs had filed a Notice of Discontinuance against the fourth defendant. The first, sixth, and seventh defendants and the eighth and ninth defendants contended that it would be inappropriate to permit the fourth defendant to be discharged from the action in circumstances where there were claims made against the fourth defendant by them. Her Honour accepted that contention.
[9] The plaintiff subsequently settled with the eighth and ninth defendants and the terms of settlement were tendered.[5] As part of those terms the plaintiffs agreed to indemnify the eighth and ninth defendants in respect of any order made against them in these proceedings. At trial the eighth and ninth defendants were represented by the counsel and solicitors representing the plaintiff.
[10] The claims brought against the fourth defendant essentially depended upon the proposition that the fourth defendant was under an obligation to correct misleading information made by a salesman, Mr Stanley, at a time when Mr Stanley was employed by others namely the eighth and ninth defendants. I analysed the claims made by the first, sixth, and seventh defendants at paragraphs [126] – [131] of my reasons for judgment and those made by the eighth and ninth defendants at paragraph [137] of those reasons. It is fair to say that those claims comprehensively failed.
Indemnity Costs
[11] The fourth defendant contends that it should have it costs assessed on an indemnity basis. Its submission essentially is not only that the claims brought against it failed, but those proceedings were always doomed to fail there being no factual or legal basis for them, and further that it made an offer on an open basis on 7 December 2006 to the first, sixth, and seventh defendants’ solicitors and on 29 March 2007 to the eighth and ninth defendants’ solicitors that their respective actions be discontinued against the fourth defendant and that each party bear their own costs. In each case the offers were, obviously, not accepted. Indeed the solicitors for the eighth and ninth defendants insisted that the sum of $40,000 be paid to their client as a condition of settlement.[6] The offers were not made under the Uniform Civil Procedure Rules 1999 because the rules do not apply to a situation where the plaintiff (which is the position of these defendants vis-à-vis the fourth defendant) fails entirely.
[12] Mr Ashton for the first, sixth, and seventh defendants argues that whilst the making of an offer to settle, as the fourth defendant did, is a very relevant circumstance to be taken into account when exercising the discretion in relation to costs there are significant countervailing circumstances here. He submits that the fourth defendant’s offer “was never meaningful or workable” and it was therefore not unreasonable to reject it because at the time of the offer there were proceedings by the eighth and ninth defendants against both the first, sixth, and seventh defendants and against the fourth defendant which were maintained on the basis that the first, sixth, and seventh defendants were vicariously liable for the conduct of the salesman Mr Stanley and in each case advancing the facts alleged in the plaintiffs’ Statement of Claim as the basis for the allegations. He submits that no provision was made for dealing with the eighth and ninth defendants’ claims which indeed were maintained until judgment. The end result, he submits, is that had the offer been accepted the fourth defendant would not have been amenable to the claim but the first, sixth, and seventh defendants themselves would have remained subject to the identical allegations being advanced by the eighth and ninth defendants on the one hand and the plaintiffs on the other.
[13] Some guidance as to when an order ought to be made on an indemnity basis was provided by the Court of Appeal in Di Carlo v Dubois & Ors [2002] QCA 225. White J, who gave the judgment for the court, concluded:
“[40]It is important that applications for the award of costs on the indemnity basis not be seen as too readily available when a particular party against whom the order is sought is seen to carry responsibility for the state of affairs calling for a costs order without some further facts analogous to those mentioned in Colgate and other considered decisions.”
[14] The reference to “Colgate” is a reference to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. Other decisions considered by her Honour include Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, a decision of Woodward J and in Rosniac v Government Insurance Office (1997) 41 NSWLR 608, a decision of the New South Wales Court of Appeal.
[15] In Fountain Woodward J said at 637 that there needs to be some special or unusual feature in the case to justify a court departing from the ordinary practice.
[16] Sheppard J in Colgate considered that the indemnity costs would be justified in cases where there had been allegations of fraud knowing them to be false; the making of the irrelevant allegations of fraud; misconduct that causes loss of time to the court and the other party; the fact that the proceedings were commenced at or continued for some ulterior motive; or in wilful disregard of known facts; or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and the imprudent refusal of an offer to compromise.
[17] In Rosniac the New South Wales Court of Appeal indicated that the court required some evidence of “unreasonable conduct”.
[18] In the course of his submissions counsel for the fourth defendant referred me to a decision of Chesterman J in Todrell Pty Ltd v Finch & Ors [2007] QSC 386 at [4] where his Honour said:
“[4]The defendants in action 1308 of 2007... 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 v Cussons Pty Ltd (1993) 46 FCR 225 and Di Carlo Dubis [2002] QCA 225. Rosniac v Government Insurance Office (1997) 41 NSW R 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 but 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.”
[19] In my view it is appropriate that the fourth defendant be protected by way of an order on the indemnity basis. The factors which lead me to that view are:
(a) The unattractive features of the argument brought against the fourth defendant that I have referred to in my reasons for judgment. Effectively no basis in either fact or law could be advanced at the end of the trial to justify the claims brought against the fourth defendant. All the defendants offered was mere assertion as to the remedy that they sought against the fourth defendants;
(b) The lack of any basis for the claims should have been evident long before trial and certainly by the time the fourth defendant made its offers to settle;
(c) The advantageous terms (to the defendants) of the offers made by the fourth defendant;
(d) The case advanced by the first sixth and seventh defendants involved separate and distinct arguments to that advanced by the eighth and ninth defendants – it is not accurate to assert that the cases all stood on the same footing;
(e) The plaintiffs had sought to discontinue against the fourth defendant April 2006. Thus there appeared to be recognition by the plaintiffs that the case against the fourth defendant was not viable. The fourth defendant remained in the action at the express insistence of these defendants now exposed to his costs. Any argument premised on the ground that the plaintiffs initially made the allegations is considerably weakened because of this;
(f) Effectively Mr Ashton’s submission comes down to the contention that because other parties were making claims against the fourth defendant (and I would interpolate – of obviously doubtful merit) it was appropriate for his client to do so and to maintain them despite the receipt of a reasonable offer. His submission might have had some force if his instructing solicitors had written to the other parties in the action pointing out that it was appropriate to let the fourth defendant out of the action and that they would do so if the other parties would join in doing so. That was not the response that was given to the offer to settle.[7]
[20] It seems to me to that these factors take this case outside the usual rule provided for in rule 703 of the UCPR and enlivens the discretion provided for in rule 704 of the UCPR. Taken together these facts demonstrate to my mind unreasonable conduct as explained in Colgate, Rosniac and Di Carlo.
[21] The orders that I propose are that the first, sixth, and seventh defendants will pay the costs of the fourth defendant in respect of their proceedings against the fourth defendant on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis.
[22] As against the eighth and ninth defendants I order that the eighth and ninth defendants pay the fourth defendant’s costs of their proceedings against the fourth defendant on the standard basis up and until 5 April 2007 and thereafter on the indemnity basis.
The fourth defendant’s limited involvement
[23] It was submitted by Mr Sadler on behalf of the plaintiffs and the eighth and ninth defendants and by Mr Ashton on behalf of the first, sixth, and seventh defendants that any liability that their respective clients might have in relation to the fourth defendant’s costs ought to be limited because in truth there was only a small area of dispute between these parties which involved the fourth defendant and therefore it was not necessary for the fourth defendant to be represented by an instructing solicitor and counsel for the whole of the two week trial.
[24] Mr Sadler attempted an analysis of the involvement of the fourth defendant’s counsel (Mr Woods) in the trial in his submission on costs. Mr Sadler pointed out:
(a) Mr Woods was involved to some extent in the opening of the trial, made closing submissions, and conducted a cross-examination of the sixth and seventh defendants on day five of the trial;
(b) Mr Woods called no witnesses;
(c) There was only one question addressed to Mr Kidd by Mr Woods and that was in relation to the issue of reliance or causation at the end of day three;
(d) There was a short cross-examination of Mr Bradley (a solicitor who acted for Mr Kidd at one time) again directed apparently to the issue of reliance or causation;
(e) There was one question directed to Mr O'Rourke on the issue of Mr Stanley’s attendance at a meeting;
(f) There was a short cross-examination of a number of witnesses going to the allegations of alleged miss-management which issues were canvassed at length by Mr Ashton and Mr Marks and in respect of which the fourth defendant would have had an identical interest to the defendants represented by those counsel.
[25] Mr Sadler’s submission was that it is desirable that the defendants act in concert so as to limit the costs incurred relying on comments in the New South Wales Court of Appeal decision of Furber v Stacy [2005] NSWCA 242.
[26] Mr Sadler submitted that the fourth defendant should be limited in its claim for costs to those costs necessarily incurred with respect to the cross-examination of Mr and Mrs Keating and preparation of the final address.
[27] I think there is no difficulty with the submission that the fourth defendant ought to be limited in some way if it chose to contest aspects of the plaintiffs’ claims where it would have been reasonable to leave this entirely to other defendants, especially as the fourth defendant had by the time of trial settled with the plaintiffs. Support for this can be found in Furber at [33] per Hodgson JA and at [119] per Einstein J. Mr Woods was careful to limit his involvement in the case to the issues of direct concern to his client. I do not think that any significant time was spent by him canvassing issues that he should have left to other defendants. Quite to the contrary. The fact was that two sets of defendants were attempting to saddle the fourth defendant with the whole of the damages. He had every right to contest the claim.
[28] Further, whilst such a submission might have some force coming from the plaintiffs, it seems to me it has little or no force coming from the first, sixth, and seventh defendants or from the eighth and ninth defendants. Both parties made no submission either at the outset of the trial or at any time during the trial that it was inappropriate or a waste of costs for Mr Woods to be present throughout the trial. Whilst a losing plaintiff might well contend that the defendants ought to have collaborated in dealing with the issues that were to be litigated I cannot see that it lies in the mouths of the first, sixth, and seventh defendants on the one hand and the eighth and ninth defendants on the other to criticise the fourth defendant for failing to collaborate with them without any invitation that he do so – again things might be very different if it could be shown that there was an attempt to have the fourth defendant do so which attempt was rebuffed. No indication was made by either set of defendants to the fourth defendant, so as far as the material before me shows, that he ought not to be represented throughout the whole of the trial or that his involvement in the trial could be limited in some way by some agreement concerning witnesses and the like.
[29] It seems to me the fourth defendant had every right to be present through the trial to defend his interests against the cases brought by the first, sixth, and seventh defendants and by the eighth and ninth defendants. It is all very well to say that Mr Woods had little to ask of most of the witnesses but this judgment had to be made with foresight not hindsight and I cannot see that the fourth defendant acted inappropriately in being represented at the trial given the claims that were being pursued by the two sets of defendants against it.
[30] The fact is here that the fourth defendant remained in the action after April 2006 because five defendants (the first, sixth, seventh, eighth and ninth) asked Mullins J not to allow him out. Thereafter the fourth defendant made an offer to settle to each set of defendants seeking that they be allowed out of the action with no order as to costs be made either way. Those offers were rejected. I cannot see how in fairness and justice the fourth defendant, in these circumstances, should have its costs limited.
“Pass On” order against the plaintiff
[31] The first, sixth, and seventh defendants seek an order that the costs that they be ordered to pay to the fourth defendant be passed on to the plaintiffs. The plaintiffs resist such an order being made.
[32] The question is whether in the circumstances the costs of the successful third party (as that is what the fourth defendant is vis-à-vis the plaintiffs) “ought fairly to be borne” by the plaintiffs who were unsuccessful in their claims against the first, sixth, and seventh defendants. (See Johnson v Ribbins [1977] 1 WLR 1458 at 1464 and the judgment of Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [72]).
[33] Finn J summarised a number of relevant factors in GEC Marconi including whether it was “reasonable” or “appropriate” for a respondent to have made the third party claim; whether the third party claim raised “private issues” e.g. liability under the insurance policy: Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 QDR 162 at 175; whether the applicants’ claim was the “catalyst” for the third party claim; the relationship of the nature of the original application to that of the cross-claim being brought e.g. does the nature of the applicants’ claim or the allegations in support of it render it reasonable for the respondent to make in turn the cross-claim that it does.
[34] Here there is no suggestion of any “private issues” as were relevant in the Gold Coast Bakeries case. There is no doubt here that the plaintiffs’ claim against the fourth defendant was the catalyst for the bringing of proceedings by the first, sixth, and seventh defendants against the fourth defendant. I think it arguable that at the time proceedings were brought it was “reasonable” or “appropriate” for the first, sixth, and seventh defendants to pursue the fourth defendant. Initially one aspect of the claim being advanced by the plaintiffs was that Mr Stanley was acting as agent for the fourth defendant at the relevant times, that the first, sixth and seventh defendants were the principals of the fourth defendant, and that thereby they came under a duty to disabuse the plaintiffs of the alleged misrepresentation right up until the time of settlement on 25 July 2000 and their failure to do so constituted an active misrepresentation. The first, sixth and seventh defendants weren’t in a position to know the true state of affairs concerning the fourth defendant’s engagement of the fifth defendant at that time.
[35] Mr Ashton’s strongest point is that in their pleading the plaintiffs allege that the fourth and fifth defendants “as agents for the first defendant” did not merely fail to correct representations that had been made by the fifth defendant Mr Stanley but thereby impliedly and actively asserted them up to and including the date of settlement on 25 July 2000. The plaintiffs allege that this constituted a breach of s 52 by the first defendant and that the third, fourth and fifth defendants were knowingly concerned in it. It was submitted that all the first, sixth, and seventh defendants were doing in making a cross-claim against the fourth defendant was repeating the allegations which the plaintiffs themselves were making.
[36] However, it seems to me that there are very significant factors against any submission that it was reasonable to persist with the proceedings against the fourth defendant to trial. Firstly the plaintiff settled with the fourth defendant. They did so some 18 months prior to trial. This fact was known to the first, sixth, and seventh defendants. As I have mentioned those defendants were active in ensuring that the fourth defendant was not discharged from the matter when it came before Mullins J in April 2006.
[37] Secondly, a significant difficulty with this submission is that it overlooks those “unattractive features” that I explained in paragraph [127] to [129] of the reasons for judgment. The legal basis for the claim brought by first, sixth, and seventh defendants against the fourth defendant was far more tenuous than the basis for the plaintiffs’ claims.
[38] This is not a case where the first, sixth, and seventh defendants have failed against the fourth defendant merely because the plaintiff has failed against them. As I have already mentioned, it seems to me that there was no factual or legal basis for the claim being pursued against the fourth defendant. As time went on the first, sixth, and seventh defendants were in as good a position as any of the parties to make that determination. Nonetheless it sought to pursue the fourth defendant.
[39] It seems to me that these considerations as well meet Mr Ashton’s contentions that his clients’ claim against the fourth defendant was in the nature of a “reflexive” claim as described in Finn J in Marconi at [56].
[40] Whilst it may have been reasonable at the outset to join the fourth defendant in a cross-claim when all the facts were not known save that assertions were made by the plaintiffs, with the passage of time it should have become apparent that the proceedings against the fourth defendant were deeply flawed. The plaintiffs themselves recognised this and abandoned the claim. Given that the first, sixth, and seventh defendants sought to keep the fourth defendant in the action it would seem to me to be quite unjust to sheet home to the plaintiffs the costs incurred by the first, sixth, and seventh defendants in doing so.
Summary and orders
[41] As to the remaining cross claims/third party claims effectively each of the defendant third parties succeeded against those pursuing them, and they each pursued the other. Thus each has both won and lost against the other. These various claims added nothing to the length of the trial. It seems to me that in these circumstances there should be no order as to costs between these various cross claimants. In any case, as I understood the submissions, that was the view of the eighth and ninth defendants and the second and third defendants.
[42] I make the following orders as to costs:
(a) That paragraph 4 of the orders made on 18 December 2007 be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest.
(b) That the second and third defendants pay the plaintiffs’ costs of the proceedings on the standard basis;
(c) That the plaintiffs pay the first, sixth, and seventh defendants costs of the proceedings brought by the plaintiffs against them on the standard basis;
(d) That the first plaintiff pay the first defendants’ costs on the first defendants’ counter-claim against the first plaintiff on the standard basis;
(e) That the first, sixth, and seventh defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis;
(f) That the eighth and ninth defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up until 5 April 2007 and thereafter on the indemnity basis.
(g) That otherwise there be no order as to costs in respect of the third party claims brought by the defendants.
Footnotes
[1] See Rule 388 UCPR.
[2] See para [125] of the Reasons for Judgment.
[3] See Exhibit 37.
[4] ($144,110.62 x 10% x 3 years) + ($112,964.90 x 10% x 2.2 years).
[5] See Exhibit 12.
[6] See the letter of Carter Newell of 22 March 2007 which is part of Exhibit 40.
[7] See the letter from Baker O'Brien Toll Solicitors to HQF Lawyers, 11 January 2007 which is part of Exhibit 39.
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Costs |
ORIGINATING COURT: | |
DELIVERED ON: | 7 February 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 1 February 2008 |
JUDGE: | McMeekin J |
ORDERS: | 1.Paragraph 4 of the orders made on 18 December 2007 be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest. 2.That the second and third defendants pay the plaintiffs’ costs of the proceedings on the standard basis; 3.That the plaintiffs pay the first, sixth, and seventh defendants’ costs of the proceedings brought by the plaintiffs against them on the standard basis; 4.That the first plaintiff pay the first defendant’s costs on the first defendant’s counter-claim against the first plaintiff on the standard basis; 5.That the first, sixth, and seventh defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis; 6.That the eighth and ninth defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up until 5 April 2007 and thereafter on the indemnity basis. 7.That otherwise there be no order as to costs in respect of the third party claims brought by the defendants. |
CATCHWORDS: | PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – CORRECTION UNDER ‘SLIP RULE’ – error in order rectified – rent and interest noted – GST component taken into consideration PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON AN INDEMNITY BASIS – where a defendant is protected from costs by an order on the indemnity basis – where defendant’s limited involvement in the hearing did not limit costs against other parties PROCEDURE – COSTS – THIRD PARTIES – whether costs could be passed by unsuccessful cross-claimants to plaintiffs – where actions of cross-claimants against third party considered UCPR rr 388, 704 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 considered Di Carlo v Dubois & Ors [2002] QCA 225 applied Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 considered Furber v Stacy [2005] NSWCA 242 cited GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 applied Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 QDR 162 distinguished Johnson v Ribbins [1977] 1 WLR 1458 at 1464 cited Rosniac v Government Insurance Office (1997) 41 NSWLR 608 considered Todrell Pty Ltd v Finch & Ors [2007] QSC 386 applied |
COUNSEL: | N Sadler for the plaintiffs and 8th and 9th defendants RS Ashton for the 1st, 6th and 7th defendants S Kingston (sol) for the 2nd and 3rd defendants T Macklin for the 4th defendant |
SOLICITORS: | McDonnells for the plaintiffs and 8th and 9th defendants Baker O'Brien & Toll for the 1st, 6th and 7th defendants Kerrin & Co Lawyers for the 2nd and 3rd defendants HQF Lawyers for the 4th defendant |
[1] McMEEKIN J: In this matter I delivered judgment on 18 December 2007. There are two matters now raised – an application by the first, sixth, and seventh defendants under the slip rule and submissions as to costs.
The Slip Rule Application – Rent & GST
[2] The first, sixth, and seventh defendants seek an amendment to paragraph 4 of the orders under the slip rule.[1] The first defendant counter-claimed against the first plaintiff for an amount of rent owing under the lease and for interest. The first defendant was successful in that counter-claim and I gave judgment in its favour against the first plaintiff in the sum of $218,733 together with $53,345 for interest. I relied upon an expert report tendered as Exhibit 33.[2] Mr Ashton who appears for the first defendant informs me that the parties are agreed that the calculation there carried out was inaccurate. It is now agreed that the accurate amount of rent owing under the terms of the lease was $257,075.52.[3]
[3] The interest allowed on the claim will also need to be amended accordingly. I will allow interest in the sum of $68,085.[4]
[4] Mr Ashton has also pointed out that the calculation that he proffered as Exhibit 37 does not include the GST component which the plaintiff is liable to pay to the first defendant under the terms of the lease. I will allow one eleventh of the total rent deficit shown in Exhibit 37 as the GST component - $23,370.50.
[5] Paragraph 4 of the orders that I previously made must therefore be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest.
Costs
[6] There is no dispute that:
(a) The plaintiffs should recover their costs against the second and third defendants on the standard basis;
(b) That the first, sixth, and seventh defendants should recover their costs incurred in defending the claim brought by the plaintiffs against them; and
(c) That the first defendant should have its costs in respect of the counter-claim that it brought against the first plaintiff.
[7] There are disputes however relating to the fourth defendant. First, it seeks that its costs be paid on the indemnity basis. Secondly, those exposed to paying its costs (the first, sixth, and seventh defendants and the eighth and ninth defendants) contend that its costs should be limited to only a percentage of the total. Thirdly, the first, sixth, and seventh defendants contend that any liability they have to the Fourth Defendant’s costs should be passed on to the plaintiffs.
The position of the fourth defendant
[8] As I mentioned in the reasons for judgment the plaintiffs settled with the fourth defendant prior to trial. In the course of submissions relating to the costs issue I was informed from the bar table that that settlement had been reached some time prior to April 2006. That month the parties came before Mullins J. The plaintiffs had filed a Notice of Discontinuance against the fourth defendant. The first, sixth, and seventh defendants and the eighth and ninth defendants contended that it would be inappropriate to permit the fourth defendant to be discharged from the action in circumstances where there were claims made against the fourth defendant by them. Her Honour accepted that contention.
[9] The plaintiff subsequently settled with the eighth and ninth defendants and the terms of settlement were tendered.[5] As part of those terms the plaintiffs agreed to indemnify the eighth and ninth defendants in respect of any order made against them in these proceedings. At trial the eighth and ninth defendants were represented by the counsel and solicitors representing the plaintiff.
[10] The claims brought against the fourth defendant essentially depended upon the proposition that the fourth defendant was under an obligation to correct misleading information made by a salesman, Mr Stanley, at a time when Mr Stanley was employed by others namely the eighth and ninth defendants. I analysed the claims made by the first, sixth, and seventh defendants at paragraphs [126] – [131] of my reasons for judgment and those made by the eighth and ninth defendants at paragraph [137] of those reasons. It is fair to say that those claims comprehensively failed.
Indemnity Costs
[11] The fourth defendant contends that it should have it costs assessed on an indemnity basis. Its submission essentially is not only that the claims brought against it failed, but those proceedings were always doomed to fail there being no factual or legal basis for them, and further that it made an offer on an open basis on 7 December 2006 to the first, sixth, and seventh defendants’ solicitors and on 29 March 2007 to the eighth and ninth defendants’ solicitors that their respective actions be discontinued against the fourth defendant and that each party bear their own costs. In each case the offers were, obviously, not accepted. Indeed the solicitors for the eighth and ninth defendants insisted that the sum of $40,000 be paid to their client as a condition of settlement.[6] The offers were not made under the Uniform Civil Procedure Rules 1999 because the rules do not apply to a situation where the plaintiff (which is the position of these defendants vis-à-vis the fourth defendant) fails entirely.
[12] Mr Ashton for the first, sixth, and seventh defendants argues that whilst the making of an offer to settle, as the fourth defendant did, is a very relevant circumstance to be taken into account when exercising the discretion in relation to costs there are significant countervailing circumstances here. He submits that the fourth defendant’s offer “was never meaningful or workable” and it was therefore not unreasonable to reject it because at the time of the offer there were proceedings by the eighth and ninth defendants against both the first, sixth, and seventh defendants and against the fourth defendant which were maintained on the basis that the first, sixth, and seventh defendants were vicariously liable for the conduct of the salesman Mr Stanley and in each case advancing the facts alleged in the plaintiffs’ Statement of Claim as the basis for the allegations. He submits that no provision was made for dealing with the eighth and ninth defendants’ claims which indeed were maintained until judgment. The end result, he submits, is that had the offer been accepted the fourth defendant would not have been amenable to the claim but the first, sixth, and seventh defendants themselves would have remained subject to the identical allegations being advanced by the eighth and ninth defendants on the one hand and the plaintiffs on the other.
[13] Some guidance as to when an order ought to be made on an indemnity basis was provided by the Court of Appeal in Di Carlo v Dubois & Ors [2002] QCA 225. White J, who gave the judgment for the court, concluded:
“[40]It is important that applications for the award of costs on the indemnity basis not be seen as too readily available when a particular party against whom the order is sought is seen to carry responsibility for the state of affairs calling for a costs order without some further facts analogous to those mentioned in Colgate and other considered decisions.”
[14] The reference to “Colgate” is a reference to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. Other decisions considered by her Honour include Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, a decision of Woodward J and in Rosniac v Government Insurance Office (1997) 41 NSWLR 608, a decision of the New South Wales Court of Appeal.
[15] In Fountain Woodward J said at 637 that there needs to be some special or unusual feature in the case to justify a court departing from the ordinary practice.
[16] Sheppard J in Colgate considered that the indemnity costs would be justified in cases where there had been allegations of fraud knowing them to be false; the making of the irrelevant allegations of fraud; misconduct that causes loss of time to the court and the other party; the fact that the proceedings were commenced at or continued for some ulterior motive; or in wilful disregard of known facts; or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and the imprudent refusal of an offer to compromise.
[17] In Rosniac the New South Wales Court of Appeal indicated that the court required some evidence of “unreasonable conduct”.
[18] In the course of his submissions counsel for the fourth defendant referred me to a decision of Chesterman J in Todrell Pty Ltd v Finch & Ors [2007] QSC 386 at [4] where his Honour said:
“[4]The defendants in action 1308 of 2007... 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 v Cussons Pty Ltd (1993) 46 FCR 225 and Di Carlo Dubis [2002] QCA 225. Rosniac v Government Insurance Office (1997) 41 NSW R 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 but 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.”
[19] In my view it is appropriate that the fourth defendant be protected by way of an order on the indemnity basis. The factors which lead me to that view are:
(a) The unattractive features of the argument brought against the fourth defendant that I have referred to in my reasons for judgment. Effectively no basis in either fact or law could be advanced at the end of the trial to justify the claims brought against the fourth defendant. All the defendants offered was mere assertion as to the remedy that they sought against the fourth defendants;
(b) The lack of any basis for the claims should have been evident long before trial and certainly by the time the fourth defendant made its offers to settle;
(c) The advantageous terms (to the defendants) of the offers made by the fourth defendant;
(d) The case advanced by the first sixth and seventh defendants involved separate and distinct arguments to that advanced by the eighth and ninth defendants – it is not accurate to assert that the cases all stood on the same footing;
(e) The plaintiffs had sought to discontinue against the fourth defendant April 2006. Thus there appeared to be recognition by the plaintiffs that the case against the fourth defendant was not viable. The fourth defendant remained in the action at the express insistence of these defendants now exposed to his costs. Any argument premised on the ground that the plaintiffs initially made the allegations is considerably weakened because of this;
(f) Effectively Mr Ashton’s submission comes down to the contention that because other parties were making claims against the fourth defendant (and I would interpolate – of obviously doubtful merit) it was appropriate for his client to do so and to maintain them despite the receipt of a reasonable offer. His submission might have had some force if his instructing solicitors had written to the other parties in the action pointing out that it was appropriate to let the fourth defendant out of the action and that they would do so if the other parties would join in doing so. That was not the response that was given to the offer to settle.[7]
[20] It seems to me to that these factors take this case outside the usual rule provided for in rule 703 of the UCPR and enlivens the discretion provided for in rule 704 of the UCPR. Taken together these facts demonstrate to my mind unreasonable conduct as explained in Colgate, Rosniac and Di Carlo.
[21] The orders that I propose are that the first, sixth, and seventh defendants will pay the costs of the fourth defendant in respect of their proceedings against the fourth defendant on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis.
[22] As against the eighth and ninth defendants I order that the eighth and ninth defendants pay the fourth defendant’s costs of their proceedings against the fourth defendant on the standard basis up and until 5 April 2007 and thereafter on the indemnity basis.
The fourth defendant’s limited involvement
[23] It was submitted by Mr Sadler on behalf of the plaintiffs and the eighth and ninth defendants and by Mr Ashton on behalf of the first, sixth, and seventh defendants that any liability that their respective clients might have in relation to the fourth defendant’s costs ought to be limited because in truth there was only a small area of dispute between these parties which involved the fourth defendant and therefore it was not necessary for the fourth defendant to be represented by an instructing solicitor and counsel for the whole of the two week trial.
[24] Mr Sadler attempted an analysis of the involvement of the fourth defendant’s counsel (Mr Woods) in the trial in his submission on costs. Mr Sadler pointed out:
(a) Mr Woods was involved to some extent in the opening of the trial, made closing submissions, and conducted a cross-examination of the sixth and seventh defendants on day five of the trial;
(b) Mr Woods called no witnesses;
(c) There was only one question addressed to Mr Kidd by Mr Woods and that was in relation to the issue of reliance or causation at the end of day three;
(d) There was a short cross-examination of Mr Bradley (a solicitor who acted for Mr Kidd at one time) again directed apparently to the issue of reliance or causation;
(e) There was one question directed to Mr O'Rourke on the issue of Mr Stanley’s attendance at a meeting;
(f) There was a short cross-examination of a number of witnesses going to the allegations of alleged miss-management which issues were canvassed at length by Mr Ashton and Mr Marks and in respect of which the fourth defendant would have had an identical interest to the defendants represented by those counsel.
[25] Mr Sadler’s submission was that it is desirable that the defendants act in concert so as to limit the costs incurred relying on comments in the New South Wales Court of Appeal decision of Furber v Stacy [2005] NSWCA 242.
[26] Mr Sadler submitted that the fourth defendant should be limited in its claim for costs to those costs necessarily incurred with respect to the cross-examination of Mr and Mrs Keating and preparation of the final address.
[27] I think there is no difficulty with the submission that the fourth defendant ought to be limited in some way if it chose to contest aspects of the plaintiffs’ claims where it would have been reasonable to leave this entirely to other defendants, especially as the fourth defendant had by the time of trial settled with the plaintiffs. Support for this can be found in Furber at [33] per Hodgson JA and at [119] per Einstein J. Mr Woods was careful to limit his involvement in the case to the issues of direct concern to his client. I do not think that any significant time was spent by him canvassing issues that he should have left to other defendants. Quite to the contrary. The fact was that two sets of defendants were attempting to saddle the fourth defendant with the whole of the damages. He had every right to contest the claim.
[28] Further, whilst such a submission might have some force coming from the plaintiffs, it seems to me it has little or no force coming from the first, sixth, and seventh defendants or from the eighth and ninth defendants. Both parties made no submission either at the outset of the trial or at any time during the trial that it was inappropriate or a waste of costs for Mr Woods to be present throughout the trial. Whilst a losing plaintiff might well contend that the defendants ought to have collaborated in dealing with the issues that were to be litigated I cannot see that it lies in the mouths of the first, sixth, and seventh defendants on the one hand and the eighth and ninth defendants on the other to criticise the fourth defendant for failing to collaborate with them without any invitation that he do so – again things might be very different if it could be shown that there was an attempt to have the fourth defendant do so which attempt was rebuffed. No indication was made by either set of defendants to the fourth defendant, so as far as the material before me shows, that he ought not to be represented throughout the whole of the trial or that his involvement in the trial could be limited in some way by some agreement concerning witnesses and the like.
[29] It seems to me the fourth defendant had every right to be present through the trial to defend his interests against the cases brought by the first, sixth, and seventh defendants and by the eighth and ninth defendants. It is all very well to say that Mr Woods had little to ask of most of the witnesses but this judgment had to be made with foresight not hindsight and I cannot see that the fourth defendant acted inappropriately in being represented at the trial given the claims that were being pursued by the two sets of defendants against it.
[30] The fact is here that the fourth defendant remained in the action after April 2006 because five defendants (the first, sixth, seventh, eighth and ninth) asked Mullins J not to allow him out. Thereafter the fourth defendant made an offer to settle to each set of defendants seeking that they be allowed out of the action with no order as to costs be made either way. Those offers were rejected. I cannot see how in fairness and justice the fourth defendant, in these circumstances, should have its costs limited.
“Pass On” order against the plaintiff
[31] The first, sixth, and seventh defendants seek an order that the costs that they be ordered to pay to the fourth defendant be passed on to the plaintiffs. The plaintiffs resist such an order being made.
[32] The question is whether in the circumstances the costs of the successful third party (as that is what the fourth defendant is vis-à-vis the plaintiffs) “ought fairly to be borne” by the plaintiffs who were unsuccessful in their claims against the first, sixth, and seventh defendants. (See Johnson v Ribbins [1977] 1 WLR 1458 at 1464 and the judgment of Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [72]).
[33] Finn J summarised a number of relevant factors in GEC Marconi including whether it was “reasonable” or “appropriate” for a respondent to have made the third party claim; whether the third party claim raised “private issues” e.g. liability under the insurance policy: Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 QDR 162 at 175; whether the applicants’ claim was the “catalyst” for the third party claim; the relationship of the nature of the original application to that of the cross-claim being brought e.g. does the nature of the applicants’ claim or the allegations in support of it render it reasonable for the respondent to make in turn the cross-claim that it does.
[34] Here there is no suggestion of any “private issues” as were relevant in the Gold Coast Bakeries case. There is no doubt here that the plaintiffs’ claim against the fourth defendant was the catalyst for the bringing of proceedings by the first, sixth, and seventh defendants against the fourth defendant. I think it arguable that at the time proceedings were brought it was “reasonable” or “appropriate” for the first, sixth, and seventh defendants to pursue the fourth defendant. Initially one aspect of the claim being advanced by the plaintiffs was that Mr Stanley was acting as agent for the fourth defendant at the relevant times, that the first, sixth and seventh defendants were the principals of the fourth defendant, and that thereby they came under a duty to disabuse the plaintiffs of the alleged misrepresentation right up until the time of settlement on 25 July 2000 and their failure to do so constituted an active misrepresentation. The first, sixth and seventh defendants weren’t in a position to know the true state of affairs concerning the fourth defendant’s engagement of the fifth defendant at that time.
[35] Mr Ashton’s strongest point is that in their pleading the plaintiffs allege that the fourth and fifth defendants “as agents for the first defendant” did not merely fail to correct representations that had been made by the fifth defendant Mr Stanley but thereby impliedly and actively asserted them up to and including the date of settlement on 25 July 2000. The plaintiffs allege that this constituted a breach of s 52 by the first defendant and that the third, fourth and fifth defendants were knowingly concerned in it. It was submitted that all the first, sixth, and seventh defendants were doing in making a cross-claim against the fourth defendant was repeating the allegations which the plaintiffs themselves were making.
[36] However, it seems to me that there are very significant factors against any submission that it was reasonable to persist with the proceedings against the fourth defendant to trial. Firstly the plaintiff settled with the fourth defendant. They did so some 18 months prior to trial. This fact was known to the first, sixth, and seventh defendants. As I have mentioned those defendants were active in ensuring that the fourth defendant was not discharged from the matter when it came before Mullins J in April 2006.
[37] Secondly, a significant difficulty with this submission is that it overlooks those “unattractive features” that I explained in paragraph [127] to [129] of the reasons for judgment. The legal basis for the claim brought by first, sixth, and seventh defendants against the fourth defendant was far more tenuous than the basis for the plaintiffs’ claims.
[38] This is not a case where the first, sixth, and seventh defendants have failed against the fourth defendant merely because the plaintiff has failed against them. As I have already mentioned, it seems to me that there was no factual or legal basis for the claim being pursued against the fourth defendant. As time went on the first, sixth, and seventh defendants were in as good a position as any of the parties to make that determination. Nonetheless it sought to pursue the fourth defendant.
[39] It seems to me that these considerations as well meet Mr Ashton’s contentions that his clients’ claim against the fourth defendant was in the nature of a “reflexive” claim as described in Finn J in Marconi at [56].
[40] Whilst it may have been reasonable at the outset to join the fourth defendant in a cross-claim when all the facts were not known save that assertions were made by the plaintiffs, with the passage of time it should have become apparent that the proceedings against the fourth defendant were deeply flawed. The plaintiffs themselves recognised this and abandoned the claim. Given that the first, sixth, and seventh defendants sought to keep the fourth defendant in the action it would seem to me to be quite unjust to sheet home to the plaintiffs the costs incurred by the first, sixth, and seventh defendants in doing so.
Summary and orders
[41] As to the remaining cross claims/third party claims effectively each of the defendant third parties succeeded against those pursuing them, and they each pursued the other. Thus each has both won and lost against the other. These various claims added nothing to the length of the trial. It seems to me that in these circumstances there should be no order as to costs between these various cross claimants. In any case, as I understood the submissions, that was the view of the eighth and ninth defendants and the second and third defendants.
[42] I make the following orders as to costs:
(a) That paragraph 4 of the orders made on 18 December 2007 be amended so that it reads judgment for the first defendant against the first plaintiff on its counter-claim in the sum of $280,446.02 and $68,085 for interest.
(b) That the second and third defendants pay the plaintiffs’ costs of the proceedings on the standard basis;
(c) That the plaintiffs pay the first, sixth, and seventh defendants costs of the proceedings brought by the plaintiffs against them on the standard basis;
(d) That the first plaintiff pay the first defendants’ costs on the first defendants’ counter-claim against the first plaintiff on the standard basis;
(e) That the first, sixth, and seventh defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up and until 11 January 2007 and thereafter on the indemnity basis;
(f) That the eighth and ninth defendants pay the fourth defendant’s costs of the cross-claim brought against the fourth defendant by them on the standard basis up until 5 April 2007 and thereafter on the indemnity basis.
(g) That otherwise there be no order as to costs in respect of the third party claims brought by the defendants.
Footnotes
[1] See Rule 388 UCPR.
[2] See para [125] of the Reasons for Judgment.
[3] See Exhibit 37.
[4] ($144,110.62 x 10% x 3 years) + ($112,964.90 x 10% x 2.2 years).
[5] See Exhibit 12.
[6] See the letter of Carter Newell of 22 March 2007 which is part of Exhibit 40.
[7] See the letter from Baker O'Brien Toll Solicitors to HQF Lawyers, 11 January 2007 which is part of Exhibit 39.