Alstom Ltd v Yokogawa Australia Pty Ltd (No 9)
[2012] SASC 163
•19 September 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ALSTOM LTD v YOKOGAWA AUSTRALIA PTY LTD & ANOR (No 9)
[2012] SASC 163
Judgment of The Honourable Justice Bleby
19 September 2012
PROCEDURE - COSTS - PRACTICE MATTERS - TIME TO MAKE ORDERS
Judgment finally determining questions of liability – order for payment of liquidated sum – declarations of liability and adjournment of damages and value of contract variations to be assessed – whether order for costs in favour of successful party should be deferred until after assessment.
Held: Appropriate to make order for costs to date.
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PAYMENT INTO COURT, AND OFFERS TO SETTLE OR CONSENT TO JUDGMENT
INTERPRETATION OF “COSTS AS BETWEEN SOLICITOR AND CLIENT”
Successful party in substantive proceedings applied for payment of its costs of the action to date – successful party served an offer of settlement pursuant to r 41.01 Supreme Court Rules 1987 for a total amount that was less than the amount awarded at trial – whether a direction should be given indicating that the scale of costs does not apply to an award of costs as between solicitor and client pursuant to r 41.04 – interpretation of “costs as between solicitor and client” – whether prescribed scales of costs apply to adjudication – whether scales apply only to costs as between party and party.
Held: Relevant scales of costs apply to party and party costs only and not to solicitor and client costs – only qualification on an award of costs on solicitor and client basis is that the costs be reasonably incurred in respect of the litigation – reasonableness applies both to quantum of costs and nature of work performed – direction not necessary – on proper construction of rr 41.04 and 101.07 the scale does not apply.
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES
Successful party in substantive proceedings applied for payment of its costs of the action to date – successful party served an offer of settlement pursuant to r 41.01 Supreme Court Rules 1987 for a total amount that was less than the amount awarded at trial – whether successful party entitled to an order for costs in accordance with r 41.04 Supreme Court Rules 1987 on a solicitor and client basis – whether in the exercise of the Court’s discretion such an order should be limited to costs of the trial – lengthy adjournment due to indisposition of successful party’s counsel – costs of adjournment previously refused.
Held: No justification for limiting successful party’s entitlement to solicitor and client costs of whole action – costs of the adjournment should not be granted to the unsuccessful party as the indisposition of counsel was one of the exigencies of a long trial and is not an event which requires the exercise of the Court’s discretion to modify the effect of r 41.04.
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES
Previous interlocutory application by unsuccessful party for determination of preliminary questions – application refused by reason of successful party’s pleas under Trade Practices Act – applicant ordered to pay respondent’s costs of application – Trade Practices Act pleas abandoned late in trial – whether costs of successful party should be offset by relieving unsuccessful party of burden of previous costs order – whether previous application would have been refused on other grounds.
Held: Unsuccessful party entitled to costs of abandoned plea thrown away – not entitled to costs offset in respect of previous unsuccessful application.
Supreme Court Rules 1987 (SA) r 41.01, r 41.02, r 41.04, r 101.07; Supreme Court Civil Rules 2006 (SA) r 2, r 8, r 188, r 263, r 264, r 265; Supreme Court Act 1935 (SA) s 40; Legal Practitioners Act 1981 (SA) s 42(6); Trade Practices Act 1974 (Cth) s 51AA, s 52, s 87(2)(ba), referred to.
Flourit Holdings Pty Ltd v Sebastian Builders & Developers Pty Ltd [2009] NSWCA 411; George Zoltan Ajkay v Hickey & Co Pty Ltd [2011] NSWSC 822; Loiero (aka Lero) v Adel Sportswear Pty Ltd (No 2) [2010] NSWSC 1208, applied.
In re Marsland & Marsland [1902] St R Qd 219, distinguished.
South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd (Unreported, 13 December 2007, Action 286 of 1997), not followed.
Catto v Hampton Australia Ltd (In Liquidation) (2008) 257 LSJS 245; Shaw v Jarldorn (1999) 76 SASR 28; Alstom Power Ltd v Yokogawa Australia P/L & Ors (No 4) [2006] SASC 298; Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 7) [2012] SASC 49, discussed.
Davies & Ors v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197; Whitehead v Maas (1991) 56 SASR 362, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"costs as between solicitor and client"
ALSTOM LTD v YOKOGAWA AUSTRALIA PTY LTD & ANOR (No 9)
[2012] SASC 163Civil
BLEBY J.
Introduction
On 23 July 2012 I made final orders in this matter after a trial. Those orders included orders for the payment of money by the plaintiff (“Alstom”) to the defendants (“YDRML”) in the amount of $7,451,696.26, including interest to the date of judgment. In respect of other matters I made declaratory orders as to liability and adjourned the assessment of YDRML’s damages and claims for variation to the contract. YDRML applies for an order for payment of its costs of the action to date.
On 16 November 2009 YDRML filed and served a notice offering to accept an amount of $5.5 million in satisfaction of all of its claims by counterclaim and after giving credit for all the claims of Alstom by its statement of claim. The offer was filed pursuant to r 41.01 of the Supreme Court Rules 1987 (SA) (“the 1987 Rules”). The offer was not accepted within the time prescribed by r 41.02 of the 1987 Rules.
Alstom concedes that the amount of the filed offer, disregarding interest that accrued after the date of the offer,[1] is less than the amount of the judgment and interest to that date which has been awarded.
[1] See Davies & Ors v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197, [30].
Several issues have now been argued as affecting YDRML’s entitlement to an order for costs in accordance with the provisions of r 41.04 of the 1987 Rules. That rule provides:
Plaintiff bettering offer
41.04Where a defendant has not accepted a plaintiff’s offer made pursuant to this Rule and the sum recovered or, as the case may be, the proportion of the debt or damages or the relief recovered by the plaintiff is equal to or greater than that contained in the plaintiff’s offer, the Court, unless it thinks proper to order otherwise, shall order the defendant to pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client.
Whether an order for costs should be deferred
Alstom argues that, in view of the fact that in respect of some issues I have only made declaratory orders and there are outstanding issues of quantification, I should not make an order for costs at this stage of the proceedings because they are incomplete and have only dealt with the issue of liability.
This case has proceeded under the 1987 Rules in accordance with the requirements of the repeal and transitional provisions contained in Part 5 of the Supreme Court Civil Rules 2006 (SA) (“the 2006 Rules”). Rule 8 of the 2006 Rules relevantly provides:
8—Transitional provision
(1)The general principle is that the old rules continue to apply to—
(a) a primary action commenced before the commencement date; and
(b) a secondary action introduced into a primary action commenced before the commencement date; and
(c) appellate proceedings commenced before the commencement date.
(2)The general principle is, however, subject to the following exceptions and qualifications—
(a) Chapter 12 (Costs) applies, from the commencement date, to an action or appellate proceedings commenced before, on or after the commencement date unless proceedings for the adjudication on costs in the relevant action or proceedings had been commenced before the commencement date; and
(b) the Court may, in a particular case, give a direction displacing the general principle to the extent the Court thinks fit.
As can be seen, the general principle that the 1987 Rules continue is subject to an exception in respect of costs in that Chapter 12 of the 2006 Rules applies to the proceedings.
Section 40 of the Supreme Court Act 1991 (SA) confers a very wide discretion upon the Court to award costs. Rule 265 of the 2006 Rules provides:
265—Time for making and enforcing orders for costs
(1)The Court may deal with costs at any stage of proceedings (before or after final judgment has been given).
(2)However, subject to any order of the Court to the contrary—
(a) a Schedule of costs is not to be adjudicated upon until after the principal proceedings have been concluded; and
(b) an order for costs is not to be enforced until after the principal proceedings have been concluded.
Whatever subrule (2) may say about when a schedule of costs may or may not be adjudicated, there is nothing to prevent the Court from dealing with costs at any stage of the proceedings. That includes the making of orders as to who is to bear costs and any qualifications on such order.
The Court will sometimes direct the hearing and disposal of a separate question which arises in the course of an action. In such circumstances it is not unusual to award costs of that discrete question notwithstanding that the final hearing may produce a different result. In Floruit Holdings Pty Ltd v Sebastian – Builders & Developers Pty Ltd,[2] the District Court of New South Wales had heard and determined a separate question which became the subject of a successful appeal to the New South Wales Court of Appeal. The successful appellant applied for costs of the appeal and of the hearing of the separate question before the District Court. The respondents argued that the appellant’s cross-claim was doomed to fail and that costs should not be awarded. However, Bergin CJ in Eq, with whom Allsop P and Young JA agreed, said:[3]
The fact that the appellants may not be successful in the main case in the District Court, by reason of a failure to prove causation or for any other reason, does not in my view disentitle them to their costs of the hearing in relation to the separate question, which was a discrete issue. The appellants should have their costs of the hearing of the separate question in the District Court. The appellants were successful in the appeal and costs should follow the event.
That decision was applied in George Zoltan Ajkay v Hickey & Co Pty Ltd[4] where Pembroke J held that as a matter of policy, unless there are compelling reasons to the contrary, orders for costs of a separate question should be made at the time that the separate question is determined and should not await the conclusion of the proceedings. His Honour applied the decision of Ball J in Loiero (aka Lero) v Adel Sportswear Pty Ltd (No 2)[5] in holding that the determination of a separate question is an “event” for the purpose of the general costs rule that “costs follow the event”.[6]
[2] [2009] NSWCA 411.
[3] Ibid, [7].
[4] [2011] NSWSC 822.
[5] [2010] NSWSC 1208.
[6] See George Zoltan Ajkay v Hickey & Co Pty Ltd [2011] NSWSC 822, [21]-[22].
The circumstances in which a final declaratory order is made, including a final order for payment of money, is even more compelling. The whole of the contested factual issues in dispute as to liability have now been determined. YDRML has been almost entirely successful in the multitude of claims and counterclaims in dispute. It should have its costs of the liability hearing. It is inconceivable that a hearing as to quantification of other losses could somehow impact upon YDRML’s entitlement to costs of the liability hearing.
As will be seen, Alstom seeks to have the Court exercise its discretion to order otherwise under r 41.04 of the 1987 Rules. If such a discretion is to be exercised, it is better exercised by the Judge who conducted the trial of the issue in question rather than by a Judge unfamiliar with the issues which may affect the exercise of such a discretion. This case has already taken me 15 months beyond my statutory retirement. The determination of the assessment of YDRML’s loss and damage on the outstanding matters will be by another Judge. That renders it even more compelling that I should, at first instance, make orders with respect to costs of the discrete question of liability between the parties.
The applicability of r 41.04
As mentioned above, the action has proceeded under the 1987 Rules. The 2006 Rules commenced on 4 September 2006.[7] Rule 8, to which reference has already been made, provides that Chapter 12 of the 2006 Rules relating to costs applies to this action. Chapter 12 imposes obligations to keep records as to costs,[8] makes provision as to how the Court’s discretion as to costs is to be exercised,[9] and provides a process for adjudication upon costs.[10] It says nothing about the consequences of a plaintiff succeeding to a greater extent than the amount of a filed offer to accept a stated amount. That is the subject of r 188 of the 2006 Rules and, for an action which commenced before the commencement of the 2006 Rules, r 41.04 of the 1987 Rules. That rule has already been set out in full.
[7] 2006 Rules, r 2.
[8] Part 1.
[9] Part 2.
[10] Part 3.
The only modification that must be made to r 41.04 is that the reference to costs being “taxed” as between solicitor and client must now be taken as a reference to costs being “adjudicated” in accordance with Chapter 12 of the 2006 Rules.
The meaning of the expression “as between solicitor and client”
Subject to the exercise of the discretion to order otherwise under r 41.04, the Court is obliged to order that the whole of the YDRML’s costs of action be adjudicated “as between solicitor and client”. That is the order that would usually be made. However, in this case counsel for YDRML submitted that I should also order that the scales of costs provided by the rules should not apply. Whether such an order should be made depends on the proper interpretation of the phrase “as between solicitor and client”.
As the obligation to order the adjudication of costs as between solicitor and client arises under r 41.04 of the 1987 Rules, it is necessary to construe those rules in order to ascertain the intended meaning of that expression.
So far as is relevant, r 101.07 provides:
101.07(1)(a)Subject to Rule 101A in respect of work done on and after the commencement of these Rules costs shall be allowed and paid in accordance with the scale of costs in the Second Schedule to these Rules.
Costs to be increased by a percentage
(b)That the costs allowed pursuant to subrule (a) above shall be increased as shown in the preamble to the Second Schedule to these Rules.
Costs for work done prior to the commencement date
(c)Notwithstanding Rule 1.07 costs shall be allowed and paid in respect of work done prior to the commencement of these Rules in accordance with the provisions of the Supreme Court Rules 1947-1986.
Taxation of costs for work done prior to the commencement date
(d)Rule 101 shall apply to the taxation of bills of costs lodged for taxation on and after the commencement of these Rules even though the whole or some part of the work charged for or disbursements claimed in such bills was done or incurred prior to the commencement of these Rules.
…
(6)In any rule or order unless the contrary meaning is indicated by the context or other factors:
Bases of assessment of costs
(a)costs as between party and party, or a like expression, means only the costs which have been necessarily and reasonably incurred by the party in the conduct of the litigation;
(b)costs, or a like expression, means costs as between party and party;
(c)costs as between solicitor and client, or a like expression, means all costs reasonably incurred by the party in respect of the litigation and having regard to the proper interests of the persons who will ultimately bear the burden of such costs;
(d)costs as between solicitor and own client, or a like expression, means costs as a complete indemnity against the costs incurred by the party in respect of the litigation provided that they are not to include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them;
(e)indemnity costs, or a like expression, mean the same as costs as between solicitor and own client.
It will be noted that there is a definition of “costs” in subrule (6)(b). That would apply to the expression “costs” in r 101.07(1) unless some contrary meaning is indicated. None was suggested and I cannot see any reason to interpret the expression in r 101.07(1) otherwise. That would suggest that the relevant scales apply to costs as between party and party, but not to other bases mentioned in subrule (6). If it were intended that scales should apply to the other composite expressions of the basis for awarding costs, such a definition would not have been necessary. The scales would then have applied to each of the possible bases for awarding costs.
So interpreted, the expression “costs of action to be taxed as between solicitor and client” in r 41.04 has the meaning attributed to it by r 101.07(6)(c). That must mean that one takes the costs actually incurred as the starting point and one then examines them to see whether they were –
(a)“reasonably” incurred “having regard to the proper interests of the persons who will ultimately bear the burden of such costs”; and
(b)incurred “in respect of the litigation”.
It is not clear that, in this case, the qualification on the expression “reasonably incurred” in paragraph (a) has any application or that it adds to the definition in any material way. It has been omitted from the corresponding expression in the 2006 Rules. It probably relates to the situation where costs as between solicitor and client are ordered to be paid from a fund in which all parties to the litigation have an interest or a fund in which the party entitled to costs has no interest.
The interpretation I favour is supported by the decision of the Full Court in Catto v Hampton Australia Ltd (In Liquidation).[11]The trial Judge had ordered that the successful defendants should have their costs on an indemnity basis. The rules in force at the time of the judgment were the 1987 Rules. The plaintiff argued that the expression “costs incurred” in r 101.07(6)(d) referred only to costs which a litigant has been, or is, legally liable to pay, in the sense that the litigant’s liability to pay those costs could be enforced against it by its solicitors. The Court rejected that contention, and held that it was capable of being construed so as to refer to amounts actually expended by a party for costs.[12]
[11] [2008] SASC 231; (2008) 257 LSJS 245.
[12] Ibid, [32].
White J, with whom Vanstone and Anderson JJ concurred, said of r 101.07(6):[13]
Party and party costs are specified as the costs “necessarily and reasonable (sic) incurred” by the party in the litigation (sub-r (6)(a)); costs between solicitor and client are defined to be all costs “reasonably incurred” by the party in the litigation (sub-r (6)(c)); while in relation to solicitor – own client or indemnity costs, sub-r (6)(d) refers only to “the costs incurred”, ie, without any qualifying adjective but subject to the proviso. That is, in order to be recoverable, party and party costs must not only have been incurred, but have been incurred necessarily and reasonably; solicitor and client costs must have been incurred and incurred reasonably, whereas in relation to indemnity costs, apart from the proviso, there is no such limitation.
It is reasonable to suppose that the word “incurred” has the same meaning in relation to each of the three categories of costs to which r 101.07(6) refers. If the plaintiffs’ present submission be correct, the word “incurred” in sub-r 6(a) would be otiose, because one would expect that an amount which was not legally enforceable against the litigant could not, in any event, be held to have been “necessarily” incurred. A construction which would result in the word “incurred” being otiose in one of its usages should not be preferred.
Further, in analogous circumstances litigants have been held to be entitled to recover costs already paid in connection with litigation, even though their solicitors could not have enforced the claim for those costs. The cases involving uncertificated solicitors provide an example.
His Honour then referred to a number of examples.[14]
[13] Ibid, [35]-[37].
[14] Ibid, [38]-[41].
The starting point must therefore necessarily be the costs actually incurred by the party, whether those costs be according to the scales contained in the rules or pursuant to a costs agreement on one of the three bases provided for in s 42(6) of the Legal Practitioners Act 1981 (SA). Because of the definition of “costs” in r 101.07(6)(b) and its application to subrule (1)(a), costs as between party and party must be assessed against the scales of costs. However, that limitation does not apply to the other bases of assessment.
The same result appears to have been perpetuated in the 2006 Rules. Rule 264 relevantly provides:
264—Basis for awarding costs
(1)The Court may, in the exercise of its discretion as to costs, award costs on any basis the Court considers appropriate.
(2)As a general rule, however, costs are awarded as between party and party (that is, on the basis that the party entitled to the costs will be reimbursed for costs reasonably incurred by the party in the conduct of the litigation to an extent determined by reference to the scale of costs in force, under these rules or the previous rules, when the costs were incurred).
(3)(a) The scale of costs for work done in the period commencing on 4 September 2006 and concluding on 30 June 2011 is fixed by Schedule 1;
(b) The scale of costs for work done on and after 1 July 2011 is fixed by Schedule 2.
…
(4)The Court may depart from either scale if there is good reason to do so.
Example—
The Court might allow a fee greater than allowed by either scale for a pleading if satisfied that the fee is justified by the difficulty of the case.
(5)In exercising its general discretion as to costs, the Court may—
(a) award costs as between solicitor and client (that is, on the basis that the party will be fully reimbursed for costs reasonably incurred by the party in the conduct of the litigation); or
(b) award costs on the basis of an indemnity (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred); or
(c) award costs by way of lump sum; or
(d) award costs on any other basis the Court considers appropriate.
…
Rule 264 would seem to apply the scales only to party and party costs under subrule (2).
Counsel for the plaintiff sought to rely on a decision of Judge Withers in South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd[15] in which his Honour decided that an order that a plaintiff’s costs be paid “on a solicitor and client basis” required that the costs be adjudicated according to the relevant scales. In so deciding, his Honour relied on a decision of the Full Court of Queensland in In re Marsland & Marsland.[16] In that case Griffith CJ, with whom Real and Power JJ agreed, said:[17]
There has been a good deal of discussion before the Court as to supposed different principles of taxation on taxations as between party and party and as between solicitor and client. In my judgment the rule is that for the same work there must be the same remuneration on whichever basis the taxation is had; but there is much work properly chargeable as between solicitor and client, which ought not to be allowed as between party and party. For that additional work the client is bound to pay his solicitor a proper remuneration; but for the same work there should be the same measure of remuneration.
[15] Unreported, 13 December 2007, Action Number 286 of 1997.
[16] [1902] St R Qd 219.
[17] Ibid, 235.
In other words, the only additional latitude allowed in an adjudication of costs as between solicitor and client would be additional work performed which is not justified as between party and party, but on the same scale. In the South Parklands case, Judge Withers held that solicitor and client costs do not incorporate costs payable by a client to his or her solicitor pursuant to a retainer agreement where the quantum of those costs or the method of calculation departs from the requirements of the relevant court scale.
The only relevant qualification in r 101.07(6)(a) is that the costs be “reasonably incurred … in respect of the litigation”. It is not a qualification limited to the nature and extent of the work performed. Reasonableness will apply also to the amount of the charge in all the circumstances and cannot be confined by a particular scale. That is specifically recognised in the 2006 Rules by r 264(4), enabling the Court to depart from a scale applicable to party and party costs if there is good reason to do so. Rule 264 would apply to an adjudication of costs as between party and party in these proceedings, and even then, subrule (4) would apply to such an adjudication.
To the extent that Judge Withers relied on the Marsland case, it led him into error. Marsland is to be distinguished as having no application under the 1987 or 2006 Rules.
I therefore do not accede to the request of counsel for YDRML that I direct that the relevant scale of costs not apply. In my view it is not necessary. To the extent that a costs agreement is relied on by YDRML, the adjudicating officer will no doubt consider the reasonableness of its terms and of the nature and extent of the work performed in respect of the litigation.
Principles relevant to the application of r 41.04
As already observed, r 41.04 requires the Court to order Alstom to pay the whole of YDRML’s costs of action to be taxed as between solicitor and client “unless it thinks proper to order otherwise”. In Shaw v Jarldorn[18] Perry J considered the construction of the rule by the Full Court in Whitehead v Maas[19] and continued:[20]
[18] [1999] SASC 529; (1999) 76 SASR 28.
[19] (1991) 56 SASR 362.
[20] [1999] SASC 529, [34]-[35]; (1999) 76 SASR 28, 33-34.
It is apparent from a reading of the judgment in Whitehead v Maas that the Court took a narrow view of the circumstances in which a defendant might escape what was described as the “penal” effect of an order made under the rule. At the same time the Court emphasised the undesirability of saddling the court, in considering the application of the rule, with a lengthy inquiry as to what material might have been in the hands of the parties during the time when the offer might have been accepted.
In addressing the construction of the rule in its present form, the fact that any reference to the reasonableness of the defendant's failure to accept the offer has disappeared must mean that that is not a consideration which is now relevant to the exercise.
Doyle CJ agreed with the reasons of Perry J and added further comments on the rule:[21]
The power to “order otherwise” confers upon the Court an unfettered discretion. But it is a discretion which, if exercised, is exercised to displace what will otherwise be the required effect of r 41.04, which is that the defendant pay the whole of the plaintiff's costs of action as between solicitor and client. In other words, it will be proper for the Court to order otherwise only if, in the exercise of that wide discretion, there is good reason to order that the rule is not to have its usual effect. In considering whether there is good reason to so order, it is necessary to bear in mind the manner in which the rule operates, and the context in which it operates.
The rule expressly contemplates that a defendant who does not accept an offer that the plaintiff ultimately betters, will pay the whole of the plaintiff's costs of action as between solicitor and client. It is part of the ordinary operation of the rule that it affects the amount to be paid by way of costs in respect of steps in the action that precede the making of the offer. That is an aspect of the incentive, deliberately created, to respond to an offer, rather than to continue to litigate in the hope of achieving a better outcome. In this respect the operation of the rule can be said to be penal, in the manner that the predecessor rule was described in Whitehead v Maas (1991) 56 SASR 362 at 367. But this operation of the rule cannot, of itself, be a reason to order otherwise. It is part of the very scheme of the rule.
… [I]t will not usually be to the point, in submitting that the Court should order otherwise, for the defendant to submit that there were reasons why it might not have anticipated the Court awarding as much as it did.
The Chief Justice continued:[22]
In deciding whether to exercise the power to order otherwise, things that happened earlier in the course of the litigation will be of limited, if any, relevance. The Court decides whether to order otherwise by reference to the offer as made and when made by the plaintiff. Difficulty experienced by the defendant in assessing the plaintiff's offer is simply a usual aspect of litigation. That is not to say that earlier events will always be irrelevant. Something might have happened which means that when the offer is made the defendant could not be expected to make a proper assessment of the offer. Like Perry J, I incline to the view that only something such as a breach of the rules, affecting disclosure of information, would be relevant on this basis. Ordinarily the Court will assess things as at the time of the offer without regard to what has happened earlier. Likewise, events that occur after the offer is made will be of limited weight, unless they demonstrate that the amount of the judgment that the plaintiff ultimately recovers was materially affected by subsequent events that the defendant could not reasonably have anticipated. …
Having regard to the purpose of the rule and the manner in which it operates, it will only be in limited circumstances that a defendant will be able to demonstrate that it is proper for the Court to order that the plaintiff should not recover costs as between solicitor and client.
[21] Ibid, [4]-[6].
[22] Ibid, [8]-[9].
In the exercise of my discretion under r 41.04 Alstom argued that I should order that YDRML’s costs as between solicitor and client should be limited to the costs of the trial. YDRML’s offer had only been filed shortly before the trial began. Shortly after the first of the plaintiff’s witnesses began in cross-examination the trial had to be adjourned for some months because of the indisposition of Senior Counsel for YDRML. Counsel was obliged to return the brief and fresh counsel had to be retained. Alstom applied for costs of the adjournment at the time. I refused that application on the basis that, unfortunate as the adjournment was, it was not caused by any act or default of YDRML, and the indisposition of counsel after the trial began was one of the exigencies of a long trial.
Alstom’s submission on this occasion was that limiting YDRML’s solicitor and client costs to those of the trial would provide some rough compensation to Alstom for the additional costs incurred by reason of the adjournment. I reject that argument for the same reasons as I rejected Alstom’s application for costs of the adjournment at the time. Indisposition of counsel is an unfortunate event when it occurs and disrupts the trial to the extent that it did in this case. However, it is an exigency of any trial and an unfortunate cost when it occurs. It is not an event which requires the exercise of the Court’s discretion to modify the effect of r 41.04.
A number of other matters were relied on by Alstom in seeking to reduce its liability for costs. However, they are matters which, if successful, would qualify any order for costs in favour of YDRML. They are not relevant for the purposes of r 41.04.
The qualifications sought by Alstom
The interlocutory proceedings before Debelle J
This action began by Alstom seeking, among other things, orders that the defendant companies replace certain bank guarantees required under the EC&I contract known as the Performance Security and Retainage Security. Each guarantee had remained in force until 1 September 2004 when they expired. Article 5.4.16 of the EC&I contract required an expiring security to be replaced with a replacement letter of credit for a term of at least one year. The securities had not been replaced. YDRML filed a defence and counterclaim denying liability on the ground that Alstom had not acted in accordance with certain representations made in the pre-contract and that it had not complied with its obligations under the pre-contract and the EC&I contract. Those pleas were the ones on which YDRML largely succeeded at trial. However, YDRML also pleaded by way of set off claims for damages for alleged misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). The misleading and deceptive conduct was said to be in respect of misrepresentations alleged to have been made in the course of the works. YDRML also alleged unconscionable conduct in breach of s 51AA of the Trade Practices Act. In particular, the prayers for relief in the defence and counterclaim included a claim for an order pursuant to s 87(2)(ba) of the Trade Practices Act refusing to enforce certain articles of the EC&I contract including article 5.4. YDRML was therefore alleging that Alstom was not entitled to enforce the right to have the securities replaced.
On the application of Alstom, Debelle J referred the following questions for determination:[23]
1.Are the allegations of the defendants in their respective defences and counterclaims that:
(a) that the plaintiff has contravened the Trade Practices Act 1974 (Cth) and seek an order declaring that the EC&I subcontract is void or unenforceable, or will not be enforced;
(b) that the plaintiff has acted or will act in breach of the EC&I subcontract; and
(c) that, in the exercise of its discretion, the Court should deny the relief on the grounds listed in paragraphs 95-101 of the defence of the first, third and fourth defendants (paragraphs 104-109 of the defence of the second defendant)
or any of them a sufficient answer to the relief that the plaintiff claims in paragraphs 1 and 2 of the prayers for relief in its statement of claim?
2.If the answer to question 1 is No, is the plaintiff entitled to the relief it claims in paragraphs 1 and 2 of the prayers for relief in its statement of claim?
[23] Alstom Power Ltd v Yokogawa Australia P/L & Ors (No 4) [2006] SASC 298, [17].
After hearing argument on those two questions, Debelle J rejected an argument that, given the autonomy of performance securities of that kind and their commercial purpose, it was appropriate to make an order that the joint venture parties comply with the obligation under article 5.4.16 to replace the securities. He said:[24]
The obligation which Alstom now seeks to enforce is an obligation altogether different from the strict undertaking attaching to a bond in the form of the securities by the joint venture parties. The terms in which those securities are expressed imposes an unconditional undertaking on the bank to pay. By contrast, the obligation of the joint venture parties to replace the securities is contractual. The bank acts upon its unconditional undertaking to pay. That is an entirely different kind of obligation from the contractual obligation of each of the joint venture parties to replace the bond. In other words, Alstom is seeking to enforce the contract. It is not enforcing the terms of a bond. Because Alstom seeks to enforce a contractual obligation, Alstom’s claim is subject to any relevant defence available to answer a claim to enforce a contract. Those defences include s 51AA of the Trade Practices Act on which the joint venture parties rely. The relief which the joint venture parties seek attacks the footing on which rests the contractual right which Alstom seeks to enforce.
(Emphasis added)
His Honour went on to hold that there was no ground on which it was proper for it to grant Alstom the summary relief it sought. Accordingly, he answered the questions as follows:[25]
1.The question whether the allegations are a sufficient answer to the relief which Alstom claims in paragraphs 1 and 2 of the prayers for relief in its Statement of Claim cannot be answered until the trial of the action.
2.Not until after the trial of the action.
He awarded costs in favour of YDRML.
[24] Ibid, [24].
[25] Ibid, [28].
At the end of the trial and before addresses began YDRML abandoned any claims it had under the Trade Practices Act. Alstom therefore argued before me on this occasion that because YDRML had abandoned its reliance on the Trade Practices Act defences, Alstom should be relieved of the burden of the costs order made by Debelle J in favour of YDRML as a consequence of answering questions the way he did. It was argued that the foundation on which the order was made was ultimately baseless.
I reject that argument for two reasons. The issue of the requirement to provide substitute securities was settled before trial and no longer featured as an issue for determination. More importantly, however, although Debelle J decided the issue on the basis of YDRML’s pleaded defence under the Trade Practices Act and it was not necessary for him to consider YDRML’s allegations of breach of contract, the remedy was refused because Alstom was relying on an alleged breach of contract by YDRML and was seeking to enforce YDRML’s contractual obligations. It was not seeking to enforce the bond. As his Honour held, Alstom’s claim was subject to any relevant defence available to answer a claim to enforce the contract. That included YDRML’s other allegations of breach of contract by Alstom and its counterclaim. Even without the Trade Practices Act defences, in my view it was inevitable that Debelle J would have reached the same conclusion by merely taking into account the contractual defences pleaded by YDRML.
However, as YDRML’s claims for relief under the Trade Practices Act were abandoned late in the trial, and as I dismissed that aspect of the counterclaim, Alstom is entitled to an offsetting order for any costs incurred in defending that claim to the extent that those costs did not form part of the costs of defending YDRML’s claims for breaches of contract.
Alstom’s costs associated with YDRML’s tender bundle
YDRML delivered to Alstom’s solicitors a tender bundle consisting of many lever arch folders of documents which were not tendered as such, and which it is said did not form part of YDRML’s case at trial. However, a large number of the documents were tendered as attachments to witness statements or separately at the trial.
It is not appropriate that I make a ruling on that question. The tender bundle is not formally before me. Whether or not it was justified is a matter for the adjudicating officer.
Alstom’s costs of and incidental to my order of 19 May 2011 relating to amendment of the pleadings
By order dated 19 May 2011 I granted permission to YDRML to amend its pleadings. That was very late in the trial. I gave reasons for granting permission for that amendment in Schedule 1 to the reasons I published on 2 April 2012.[26]
[26] Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 7) [2012] SASC 49.
Alstom relied on r 263(2)(a) of the 2006 Rules, which provides that the general rule that costs are to follow the event is subject to an exception that “the costs of an amendment are to be awarded against the party making the amendment”.
Rule 263(2)(a) speaks of the costs of making the amendment and its pleading and any other consequences. It does not speak of the costs of an unsuccessful opposition to an application for permission to amend. While Alstom is entitled to the costs of and incidental to the amendment, it is not entitled to the costs of its unsuccessful opposition to the application for permission to amend.
Alstom’s costs of and incidental to the hearing of the trial in Canberra
For two weeks the Court sat in Canberra to hear the evidence of Mr Everett, the principal witness for YDRML. That was because Mr Everett lived in Cooma with his invalid wife for whom he was the sole carer. Alstom claimed entitlement to an order for payment of the additional costs incurred as a result of having to sit in Canberra. The application to sit in Canberra was not opposed by Alstom at the time. No submission was made that Mr Everett’s evidence could have been satisfactorily taken by video link. The need to sit in Canberra was not as a result of any act or default on the part of YDRML but in order to accommodate the reasonable needs of the witness and his wife. That too is one of exigencies of a trial, and Alstom’s application must be rejected.
The costs of quantifying YDRML’s loss
While it is appropriate to order that Alstom pay the costs of the trial to date, it is not appropriate that I include in that order any costs relevant to the quantification of YDRML’s claim for damages or of its claim for variations where the amounts claimed were not agreed. Counsel for YDRML acknowledged that such costs should be excluded from any orders which I now make.
Conclusion
For the foregoing reasons I make the following orders:
1.That, subject to orders 2, 3 and 4, the plaintiff pay the defendants’ costs of action to date as between solicitor and client.
2.That, to the extent that they are not costs of defending any other claim of the defendants, the defendants pay the plaintiff’s costs as between party and party of the defendants’ claim of alleged contravention of the Trade Practices Act 1974 (Cth).
3.That the defendants pay the plaintiff’s costs as between party and party of and incidental to the amendment of the defence pursuant to permission granted on 19 May 2011 other than the costs of opposing the application for permission to amend.
4.That for the purposes of order 1 the defendants’ costs in respect of the quantification of claims the subject of paragraphs 15, 17 and 18 of the orders made on 23 July 2012 do not form part of the defendants’ costs of action to date.
2
8
1