| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : ALSANTO NOMINEES PTY LTD -v- BOWEN [2009] WADC 130 (S) CORAM : STAUDE DCJ HEARD : 26 AUGUST 2009, 21 JULY 2011 DELIVERED : 26 AUGUST 2009 SUPPLEMENTARY
DECISION : 10 AUGUST 2011 FILE NO/S : CIV 1461 of 2007 BETWEEN : ALSANTO NOMINEES PTY LTD Plaintiff
AND
NIELS BOWEN
First Named Defendant
JAYNE ELIZABETH CANNON
Second Named Defendant
Catchwords: Costs - Issue remitted by Court of Appeal for determination by trial judge - Whether defendants should be deprived of part of the costs of trial - Whether issue on which defendants failed is discrete and severable and added to costs in a significant and discernible way
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Legislation: Rules of the Supreme Court 1971, O 66 r 1(3) Result: Plaintiff to pay defendants' costs of action to be assessed on basis of uninterrupted five day trial Representation: Counsel:
Plaintiff : Mr P A Monaco
First Named Defendant : Mr S K Shepherd
Second Named Defendant : Mr S K Shepherd
Solicitors:
Plaintiff : GV Lawyers
First Named Defendant : Tottle Partners
Second Named Defendant : Tottle Partners
Case(s) referred to in judgment(s):
Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130
Amaca Pty Ltd v Hannell [2007] WASCA 158 (S)
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602
McConnell v Nationwide News Pty Ltd; Prue v Nationwide News Pty Ltd (Unreported, WASC, Library No 920670, 10 December 1992)
Mickelberg v The State of Western Australia [2007] WASC 140 (S)
Townsend v Collova [2005] WASC 4 (S)
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Introduction 1 The issue of the costs of the trial has been remitted for my determination as the trial judge by order of the Court of Appeal dated 7 April 2011: Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S). 2 The original decision was in favour of the plaintiff. I awarded damages for breach of contract: Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130. That decision was successfully appealed by the defendants. The Court of Appeal found that the defendants had not, as I had found, waived the benefit of a condition precedent, referred to in my reasons as 'the approvals condition'. 3 The plaintiff contends that the defendants should be deprived to some extent of their costs of the trial (the submission is as to 80%), invoking O 66 r 1(3) of the Rules of the Supreme Court 1971 (RSC) which provides: Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues. 4 After holding that the defendants should have their costs of the appeal, the Court of Appeal held [10]: The costs of the trial raise different considerations. It would ordinarily follow from the finding of this court on the appeal that the appellants would be entitled to their costs of the trial. However, it appears from the comments of the primary judge [8] - [11] that the conduct of the appellants in amending their defence during the trial may have caused significant unnecessary costs to be incurred. In view of his finding that the respondent was entitled to judgment, and therefore to the costs of the action, it was unnecessary for the primary judge to give separate consideration to that question. Clearly, however, if the appellants caused unnecessary costs to be incurred that would have an important bearing on whether, or to what extent, the appellants' entitlement to the costs of the trial should be reduced. Regrettably, this court is not in a position to determine whether that was the case and, if it was, the significance of those costs in the overall context of the trial. It is therefore necessary for the question of the costs of the trial to be remitted to the primary judge. 5 I do not consider that the Court of Appeal's decision not to apportion the costs of the appeal, even though the appellant defendants failed on the (Page 4)
formation ground, inhibits my discretion with respect to the costs of the trial. The considerations which bore upon the Court of Appeal's discretion in determining liability for the costs of the appeal are quite different from those which affect the discretion to be exercised with respect to the costs of the trial.
Principles 6 In McConnell v Nationwide News Pty Ltd; Prue v Nationwide News Pty Ltd (Unreported, WASC, Library No 920670, 10 December 1992) Owen J stated: Order 66 r 1(3) only applies where the failed issue has increased the costs. The term 'issue' does not mean a precise issue in the technical pleading sense, but any disputed question of fact or issue of law, and a party will not be awarded costs merely because of his success on particular issues: Cretazzo v Lombardi (1975) 13 SASR 4 at 12, 16. Because of court delays and the high cost of litigation, courts should always exercise the discretion to award the costs of issues on which parties fail in such a way that they will come to realise they will not necessarily recover the whole of their costs of raising a discrete issue, and therefore carefully consider what matters they will raise: Commission of Australian Federal Police v Razzi (1991) 101 ALR 425 at 430. 7 In Townsend v Collova [2005] WASC 4 (S) Le Miere J found that for the purposes of O 66 r 1(3) an issue is introduced where a defendant denies a fact asserted by the plaintiff and leads evidence to support the defendant's contention in relation to that fact. 8 The applicable principle was enunciated by the Court of Appeal in Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) [7] - [8]: The power to depart from the general rule to the effect that costs follow the event and to instead adjust the costs order to be made by reference to the failure of the generally successful party on specific and particular issues within the litigation is recognised by practice, authority and the express provisions of O 66 r 1(3). However, its application depends upon the identification of discrete and severable issues, the litigation of which has increased the costs of conducting the proceedings. Established practice in this state, and the authorities, suggest that the exercise of this power should be approached broadly, and as a matter of impression, and without an attempt at "mathematical precision" which is likely to prove illusory – see, for example, J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (Western Australian Branch) [No 2] (1993) 46 RR 301. (Page 5)
Accordingly, the power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the costs of the proceedings in a significant and readily discernable way. In a case in which the generally successful party has failed on only a minor issue, which did not add materially to the cost of the conduct of the proceedings, it would not ordinarily be appropriate to depart from the general rule, unless the conduct of the generally successful party in relation to that issue had been unreasonable. In the event of unreasonableness, different considerations may apply. 9 In Amaca the plaintiff was successful at first instance, but lost on appeal. There were four substantive and discrete issues, namely, foreseeability, duty of care, breach and causation. The Court of Appeal held that the 'factual and evidentiary substratum' to each of these issues was common to all of them. At trial the knowledge of the appellant as to the risk of contracting mesothelioma as a result of the use of materials containing asbestos fibre bore directly upon the issues of foreseeability, duty of care and breach, and was central to the issue of causation. 10 The Court of Appeal concluded that the major part of the time spent at trial was concerned with evidence which spanned all four identified issues and that it was reasonable for the defendant to put the plaintiff to the proof of all of the issues necessary to establish the cause of action. Consequently, there should be no departure from the general rule. A different outcome was reached with respect to the costs of the appeal because a good deal of the argument on appeal was directed to issues upon which the appellant failed. 11 The Court will not ordinarily descend to an issue by issue analysis for the purpose of awarding costs. There are, nevertheless, cases in which it is appropriate to apply O 66 r 1. The cases to which I have referred support the principle that the usual order for costs may be departed from in circumstances where there are discrete and severable issues upon which the generally successful party has failed which have added to the costs of the proceedings in a significant and readily discernible way. In a case where those issues have the same factual and evidential substratum costs would not necessarily be increased. 12 Neither O 66 r 1(3) nor the cases require the court to be satisfied that the conduct of the generally successful party be unreasonable or inappropriate. As appears from the dicta in Amaca at [8], unreasonableness is a consideration where the successful party fails on a (Page 6)
minor issue which does not significantly add to the costs of the proceedings. 13 In Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd(No 2) [2000] FCA 602 [54], cited by Newnes J in Mickelberg v The State of Western Australia [2007] WASC 140 (S) [36], Goldberg J put it this way: A court should not be too ready to disallow costs simply because a party has failed upon an issue unless it is a quite separate and distinct issue from the issues in respect of which it succeeded or unless there be an element of unreasonableness or inappropriate conduct in relation to that issue. (citation omitted) 14 In Mickelberg Newnes J held at [43] that it was not necessary that the issue concerned was raised unreasonably, but unreasonable or inappropriate conduct by a party in relation to that issue may be a ground for depriving that party of costs.
Issues 15 The questions to be asked are: 16 In attempting to resolve these issues, I am bound to consider whether it was reasonable for the defendants to put the plaintiff to proof of all elements of its claim by putting in issue the formation of the contract, an issue upon which they failed. 17 In my reasons for decision I made the following observations from [3]: The statement of claim pleads simply that the Offer to Lease formed an enforceable agreement which the defendants breached by failing, within a period of time stipulated in a notice of default, to pay a deposit, provide a bank guarantee and enter into a formal lease, as agreed. The original defence admitted the agreement and all but two of the pleaded terms, but went on to allege that: (a) "it was the common intention of the parties that the leased premises would be used by Warren Conway as a pharmacy and that (Page 7)
Mr Conway would relocate his existing pharmacy from Shop 12, Woolstores, Fremantle, to the leased premises"; (b) the agreement on its true construction was conditional upon the defendants obtaining "such Medicare, Pharmaceutical Council of Western Australia and local council approvals as were necessary to enable the pharmacy to be relocated"; and (c) the National Health (Australian Community PharmacyRules) Amendment Determination 2007 (No 1) published on 27 March 2007 provided that pharmacies in large shopping centres could only be relocated to premises which were at least 500 metres from all other approved pharmacies, and therefore prevented the relocation of Mr Conway's pharmacy to the premises, thus entitling the defendants to treat the agreement as being at an end. The complexion of the dispute deepened when leave was granted to the defendants prior to trial to amend their defence to deny the fact of an agreement to lease and to aver that the defendants did not intend to enter a lease of the premises, rather that any lease of the premises would be between the plaintiff and Warren Conway, and that, in effect, the Offer to Lease merely amounted to an agreement that the second named defendant would use her best endeavours to have Mr Conway enter into a lease of the premises. The defendants otherwise maintained, in the alternative, that any agreement was conditional on certain approvals being obtained of the relocation of Mr Conway's pharmacy to the premises, which did not occur. The amended defence is dated 25 July 2008. It led to a reply being filed which pleaded numerous facts evidencing acceptance and contended that by taking possession of the premises the defendants waived the benefit of the "approvals" condition. On the second day of trial leave was granted to the defendants to file a substituted defence to accommodate further amendments. In this version of the defence the defendants pleaded that there was no agreement because the document relied on by the plaintiff was in fact a counter-offer which the defendants did not accept (par 7). Alternatively, it was pleaded that: 1. the document did not identify the lessee (par 18); 2. the document provided by cl 18(d) that the parties "use reasonable endeavours to agree a final form of lease and have it executed "in line with the intent" of this agreement" (par 15); 3. "the intent of the document was to afford the second named defendant an opportunity to make arrangements for lease of the premises by a pharmaceutical chemist who could trade from the premises as 'Chemist Outlet – Fremantle' " (par 16); (Page 8)
4. no final form of lease was agreed (par 17); and 5. accordingly, no "binding or concluded agreement" was made (par 20). The substituted defence went on to plead that the plaintiff knew that the defendants did not intend to enter a lease and that any lease "to be negotiated … would be between the plaintiff and Warren Conroy, the proprietor of a pharmacy in Fremantle" (par 21), and otherwise iterated the point that if there were an agreement it was to the effect that the second named defendant would exercise best endeavours to facilitate the negotiation of a lease between the plaintiff and Mr Conway and that the agreement was conditional on the stated approvals for relocation were obtained. The substitution of a fresh defence resulted in an adjournment of the trial to 14 October 2008. An amended reply was filed on 26 September 2008 and a rejoinder on 1 October 2008. When the trial resumed on 14 October 2008 the statement of claim was further amended in two minor respects. The effect of the amendment and augmentation of the pleadings after entry for trial and, indeed, during the course of the trial, was that the field of dispute was widened rather than narrowed with the result that the trial was longer than it might have been. The principal reason for this was that once issue was joined on the formation of the alleged contract, evidence became relevant which would not have been if the only issue was one of construction. Senior counsel for the plaintiff, on the authority of Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352, Toll (FGCT) P/L v Alphapharm P/L (2004) 219 CLR 165 at [35] and other cases, objected to evidence of the defendants' subjective intentions in relation to the transaction. Whilst this objection was appropriately taken in relation to matters of construction, I was bound to rule that the issues finally joined with respect to formation, particularly as to whether there was acceptance, whether the contract fell within either of the first two classes of agreement identified in Masters v Cameron (1954) 91 CLR 353, whether the special condition with respect to approvals required for the relocation of a pharmacy to the premises was a condition precedent to either formation or performance, and other incidental and related issues, necessitated an inclusive approach to the evidence. Even with respect to issues of construction, it was necessary in this context to bear in mind the principle that the determination of what a reasonable person would have understood the parties to mean "requires consideration not only of the text, but of the surrounding circumstances known to the parties, and the purpose and object of the transaction": Pacific Carriers (Page 9)
Pty Ltd v BNP Paribas (2004) 218 CLR 451 at [22]. See also Allen v Carbone (1975) 132 CLR 528 at 531. … With respect to the key issues of formation and construction most of the evidence was contextual. As to the material facts there was relatively little controversy, albeit that by the length of the cross-examination of the witnesses one might have thought so. Despite the enormous volume of legal and evidential material with which the court was provided, the case was, in the final analysis, and somewhat ironically, no more complex than the original pleadings indicated. It was, however, more cumbersome and time-consuming than it might have been. 18 Needless to say, those comments were not made lightly. They reflected my consideration of the pleadings, the evidence and the course of the trial. 19 In this case, the feature of the proceedings identified by the plaintiff as significant, and the subject of my observations in the reasons, is the defendants' denial of the agreement to lease. The issues around the question of formation of the agreement upon which the generally successful defendants failed were issues that they introduced during trial. Formation was not in issue until the trial. Hitherto it had been admitted, on the pleadings and by the conduct of the defendants themselves. 20 It is submitted on behalf of the defendants, and I accept, that the plaintiff has been compensated for the costs of the amendments. Accordingly, the issue before me should be addressed on the basis that the defence substituted at trial was at all times the defence, that formation was in issue from the outset. 21 The defendants submit further that evidence of the circumstances of the formation of the contract would have been necessary in order to deal with the construction and waiver issues. I was taken to the observations of McLure P at [19] where her Honour indicated that it was necessary to have regard to the terms of the lease and all of the 'surrounding circumstances' to determine whether the defendants had waived the approval condition, and to [25] where her Honour held that it was the intention of the parties that the lessee would be a third party, in support of this submission. 22 I accept that the issues relating to construction and waiver required some examination of the circumstances of surrounding the formation of the contract, 'the factual matrix', and acknowledged as much in my (Page 10)
reasons, but such evidence as was necessary for that purpose was not contentious and would not, in my opinion, have substantially increased the length of the trial if formation as a legal fact were not put in issue. I do not accept that, as in Amaca, 'the factual and evidentiary substratum' of the main issues was the same. I stand by the observations I made in my reasons for decision. The issue by the evidential and factual questions it created and the legal argument it generated added to the length, and therefore the cost, of the trial in a significant and discernible way. 23 These issues on which the defendants failed were severable and discrete from the issues upon which the plaintiff failed and did substantially increase the costs of the proceedings. I am satisfied that the ventilation of the formation issue did not bear upon or assist the determination of the issue of whether there was a waiver of the approval condition which is the question on which the trial turned. 24 I am not concerned with the issues on which the plaintiff failed as the costs order to be made will otherwise compensate the defendants for the costs of those issues. However, I am particularly mindful of the extent to which the defendants have been put to the expense by the issues raised by the amended reply in considering to what extent there should be an apportionment of the costs of the issue on which they failed. 25 The defendants contend that the plaintiff has been adequately compensated by an order for costs thrown away by reason of the amendment of the defence. With respect, I do not consider that such an order would normally have the effect of depriving the generally successful party of costs. It does not, in my opinion, affect the operation of the usual order that costs follow the event. That much seems to have been conceded by Mr Shepherd before Principal Registrar Gething on 23 July 2008 (ts 48). 26 Nevertheless, I take the view that the costs of the second day of the trial 23 September 2008 are the plaintiffs by virtue of the order I made that day that the defendants pay the plaintiff's costs of the adjournment and any costs thrown away. The hearing that day was taken up by the amendment application. 27 While recognising that, in the interests of consistency and predictability, a court should be reluctant to depart from the general rule that costs follow the event, I am satisfied that my discretion should be exercised so as to limit the costs recoverable by the defendants to those (Page 11)
allowable for a trial lasting five days, being the anticipated length of trial when it commenced. 28 This apportionment is based on a broad view of the proceedings as a whole. It would be contrary to principle, impractical and unhelpful to attempt a detailed quantification by reference to sitting time. 29 I do not intend by this order to derogate from the effect of the order I made on 23 September regarding the costs of the adjournment and costs thrown away. In the event that any clarification is required by the taxing officer I grant liberty to apply. 30 So the orders will be: |