Aoukar & Aoukar v Riobran Pty Ltd Trading as Stiles, Slate & Stone No. DCCIV-00-643

[2002] SADC 61

AOUKAR & AOUKAR v RIOBRAN PTY LTD TRADING AS
STILES, SLATE & STONE
[2002] SADC 61

Judge Rice
Civil

1. This ruling relates to the question of costs concerning an action where the matter had been set for trial but settled a short time before the date of trial.  The present dispute relates to the date up to which the plaintiffs are entitled to their costs.  Both before and after the commencement of the action, the original claim was the subject of negotiations between the solicitors acting for the parties.  It will be necessary to refer to some of the letters of negotiation.

2. A little needs to be said about the facts of the matter.  The plaintiffs are the owners of a house property at Bellevue Heights.  In about November, 1996, the plaintiffs contracted with the defendant for the defendant to supply, install and seal sandstone tiles at the property of the plaintiffs.  The defendant completed the work but it was seriously defective.  Many of the tiles were cracked.  The problem could only be remedied by re-tiling the whole area using a flexible adhesive, expansion and control joints, none of which were originally used.

3. There is no need to refer to all of the correspondence whereby the parties endeavoured to reach a negotiated settlement.  As has already been observed, the matter was eventually settled a short time before the date set for trial.

4. On behalf of the plaintiffs, it is submitted that the actual terms of settlement were essentially the same as a letter of demand dated 4th February, 2000 to the defendant, which demand was rejected and a counter offer made.  The plaintiffs submit that they should be entitled to all of their costs up to the date of settlement.

5. On behalf of the defendant it is submitted that the plaintiffs rejected an offer of settlement dated 21st July, 2000, which offer, it is said, is essentially the same as the eventual settlement.  In that situation, so it is submitted, the plaintiffs are only entitled to their costs up to about two weeks after the date of the offer that they rejected.

6. The plaintiffs respond that the settlement offer of 21st July, 2000, for reasons upon which I will expand, is not a document to which I may have regard.  In any event, it is submitted that the offer of settlement of 21st July, 2000 is substantially less in terms of conditions than the final settlement and the plaintiffs were right to reject it.

7. One thing that is clear from the correspondence emanating from the plaintiffs’ solicitors is that the plaintiffs were very dissatisfied with the workmanship of the defendant and basically did not want the defendant on their property doing any further work.  The plaintiffs had, for very good reasons, lost complete faith in the workmanship of the defendant.

8. Before proceeding further, I consider the question of what use, if any, I can make of the letter of offer of 21st July, 2000 from the defendant’s solicitor.  The plaintiffs argue that I cannot have regard to that letter because it is not expressed to be an open offer and therefore should be construed as a “without prejudice” letter.  If on its proper construction the letter should be construed as a “without prejudice” letter, the plaintiffs submit that the defendant is not entitled to refer to it in argument on this point.  In part, reliance for that approach was placed upon Davies and Davies v Nyland and O’Neil (1974-75) 10 SASR 76.

9. In this regard the plaintiffs rely upon the previous correspondence whereby the defendant expressed letters to be either an open letter or a “without prejudice” letter.  Although the letter of 21st July expressed neither, it is submitted that it should be construed as without prejudice bearing in mind the nature and history of the correspondence between the parties and therefore not able to be used by me in this argument.

10. As mentioned, the plaintiffs rely upon Davies and Davies v Nyland and O’Neil (supra).  This was an appeal from Wells J to the Full Court comprising Bray CJ, Zelling and Sangster JJ.  On appeal Bray CJ and Sangster J dismissed the appeal;  Zelling J would have allowed it (discharging the injunction).  There was some discussion by Wells J at first instance (at 88-90) concerning the superscription “without prejudice”.  As I read His Honour’s remarks, relying upon and accepting a passage from Wigmore, the status of correspondence neither expressed to be open nor without prejudice depends upon the circumstances of the compromise negotiations.  Neither Bray CJ nor Sangster J express any view on the matter (at 101 and 114-115 respectively).  Zelling J, on the other hand, deals with this topic by way of obiter.  His Honour considered the law went beyond the quotation from Wigmore that was accepted by Wells J, and put it in this fashion (at 105):-

    “....the usual practice in this State is for the ‘without prejudice’ protection to be affixed to all conversations and mutual communings which go on with the purpose of trying to settle a dispute between parties.”

11. However, as I read the remainder of His Honour’s discussion on this point in the context of the case, there is no absolute rule and, as I have said, much will depend upon the individual circumstances.

12. In the event that I find that the letter from the defendant’s solicitors of 21st July, 2000 should be construed as “without prejudice”, reliance is placed on Calderbank v Calderbank [1975] 3 All ER 333 to the effect that the letter must be ignored in a consideration of costs.

13. The correspondence from the defendant’s solicitors up to the 21st July (and including that date) does not adopt a consistent approach.  Of the correspondence provided to me, the letters of 15th February and 7th March, 2000 are expressed to be “open”, the letter of 30th May, 2000 is expressed to be “without prejudice” and the letter of 21st July, 2000 refers to neither.  The letter of the 21st July puts a “....final alternative offer for consideration by your client.”  The terms of the offer are preceded by the words, “....in full and final settlement of this matter inclusive of costs....”  Bearing in mind the nature and terms of this letter, it was intended to be an open letter.  Perhaps the inclusion of a sentence to that effect was an oversight or perhaps it was thought to be obvious and unnecessary to state.  I also bear in mind that proceedings were issued on the 17th May, 2000.  It is also plain from the correspondence that any defence to the claim was going to be without substantial merit.  The letter of 21st July was designed to bring these proceedings to an end, if it could.  For that reason it was effectively an open letter.  In my view, I should regard it as an open letter.

14. In the context of this case, having decided to have regard to the letter of 21st July, 2000 for the purposes of this argument, the parties are agreed that the test is whether the plaintiffs’ refusal of the offer contained in the letter of 21st July, 2000 was unreasonable.

15. Mr Hutton, counsel for the plaintiffs, prepared a chart comparing the original letter of demand of 4th February, 2000, the offer of the defendant of 21st July, 2000 and the eventual terms of settlement immediately prior to the trial date.  The debate concentrated upon a comparison of the offer of the defendant of 21st July with the final settlement.  Certainly the offer of 21st July failed to specify certain terms that were part of the settlement.  Mr Ross-Smith, counsel for the defendant, argues that the failure of the letter of 21st July to deal with certain matters is that they were necessarily implied in any event and did not need to be specified.

16. However, the real and substantial impediment to settlement as at 21st July was that the defendant was stipulating that it return and perform any remedial work.  The plaintiffs refused to permit that because they had completely lost faith in the defendant.  The plaintiffs wanted agreement that the work be done in accordance with the requirements of their building expert, Mr Goldfinch.  In my view it was not unreasonable for the plaintiffs to adopt the stance they did in relation to the offer of 21st July.  In fact, it was quite reasonable to require that the work be done by somebody in accord with the requirements of Mr Goldfinch and, once it was agreed by the defendant that Mr Goldfinch could supervise the work, then it was acceptable, at that stage, for the plaintiffs to accept a settlement with that condition.

17. I also observe that, in accordance with the Rules, there is an element of discretion in the Court when making an order for costs.  The defendant was quite obdurate when there was no substantial merit in its position.

18. I order that the plaintiffs have their costs of the action on a party/party basis to be agreed or taxed.  The plaintiffs also to have their costs with respect to the argument in this matter and today’s attendance.