Armstrong v Rokich
[2008] WADC 182 (S)
•23 DECEMBER 2008
ARMSTRONG & ANOR -v- ROKICH & ANOR [2008] WADC 182 (S)
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WADC 182 (S) | |
| Case No: | CIV:167/2008 | 15-18 & 29 SEPTEMBER 2008 & 25 JANUARY 2010 | |
| Coram: | STAUDE DCJ | 23/12/08 | |
| PERTH | 9/04/10 | ||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Order for indemnity costs | ||
| PDF Version |
| Parties: | ASHLEY JOHN ARMSTRONG NIGEL FRANCIS ARMSTRONG ANTHONY JOHN ROKICH VIOLET ROKICH TABANI NOMINEES PTY LTD LYNTON THOMAS SAUNDERS |
Catchwords: | Costs Indemnity costs application by plaintiffs Principles to be applied Whether defendants' conduct warrants indemnity costs order |
Legislation: | District Court of Western Australia Act 1969, s 64 Rules of the Supreme Court 1971, O 66 |
Case References: | Armstrong & Anor v Rokich & Anor [2008] WADC 182 Calderbank v Calderbank [1976] Fam 93 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Collins v Westralian Sands Ltd (1993) 9 WAR 56 Commissioner of State Revenue v Artistic Pty Ltd [2008] WASCA 24(S) Dobb v Hacket (1993) 10 WAR 532 Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Gove v Black & Ors [2006] WASC 298(S) Re Malleson Stewart Stawell & Nankivell [1931] VLR 127 Stewart v Biodiesel Producers Ltd [2009] WASC 145(S) Tranchita v Danehill Nominees Pty Ltd [No 2] [2007] WASC 248 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
SUPPLEMENTARY
DECISION : 9 APRIL 2010 FILE NO/S : CIV 167 of 2008 BETWEEN : ASHLEY JOHN ARMSTRONG
- NIGEL FRANCIS ARMSTRONG
Plaintiffs
AND
ANTHONY JOHN ROKICH
VIOLET ROKICH
Defendants
TABANI NOMINEES PTY LTD
First Third Party
LYNTON THOMAS SAUNDERS
Second Third Party
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Catchwords:
Costs - Indemnity costs application by plaintiffs - Principles to be applied - Whether defendants' conduct warrants indemnity costs order
Legislation:
District Court of Western Australia Act 1969, s 64
Rules of the Supreme Court 1971, O 66
Result:
Order for indemnity costs
Representation:
Counsel:
Plaintiffs : Mr J A Thomson
Defendants : Mr S V Forbes
First Third Party : No appearance
Second Third Party : No appearance
Solicitors:
Plaintiffs : Maxim Litigation Consultants
Defendants : Hotchkin Hanly
First Third Party : Downings Legal
Second Third Party : Downings Legal
Case(s) referred to in judgment(s):
Armstrong & Anor v Rokich & Anor [2008] WADC 182
Calderbank v Calderbank [1976] Fam 93
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins v Westralian Sands Ltd (1993) 9 WAR 56
Commissioner of State Revenue v Artistic Pty Ltd [2008] WASCA 24(S)
Dobb v Hacket (1993) 10 WAR 532
Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Gove v Black & Ors [2006] WASC 298(S)
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Re Malleson Stewart Stawell & Nankivell [1931] VLR 127
Stewart v Biodiesel Producers Ltd [2009] WASC 145(S)
Tranchita v Danehill Nominees Pty Ltd [No 2] [2007] WASC 248
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190
(Page 4)
1 STAUDE DCJ: On 22 December 2008 judgment in this action was given for the plaintiffs against the defendants for $350,000: Armstrong & Anor v Rokich & Anor [2008] WADC 182. The plaintiffs now apply by chamber summons dated 19 August 2009 for a special costs order as follows:
"1. That the defendants do pay the plaintiffs' costs of the action on an indemnity basis:
(a) from 14 June 2004, alternatively 25 April 2008 – being the dates when the offers of compromise expired;
(b) alternatively, in respect of:
(i) the preparation of the expert evidence of Russell Coupe and the costs of calling Russell Coupe to give evidence at trial;
(ii) the preparation of the expert evidence of Les Crane and the cost of calling Les Crane to give evidence at trial;
(iii) the application to issue a subpoena to Ms McEvoy, the costs of reviewing the documents provided by Ms McEvoy in response to the subpoena and the costs of preparing to call Ms McEvoy at trial;
(iv) the application to lead evidence by video link;
(v) the getting up for trial; and
(iv) the appearance at trial."
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3 Order 66 r 11(3) provides:
"Subject to the provisions of the Legal Profession Act 2008 permitting legal practices to make costs agreements with their clients, and to the provisions of these rules, the fees allowed under any relevant scale shall apply both as between party and party, and solicitor and client …"
4 The costs recoverable by a successful party against another are therefore limited to those allowed by the Supreme Court Scale and, as a matter of principle, to be taxed on the basis that only those costs will be allowed which are necessary to conduct the litigation, the question for the taxing officer in a party - party taxation being whether the costs, charges and expenses were necessary and proper for the attainment of justice or for defending rights: Re Malleson Stewart Stawell & Nankivell [1931] VLR 127 at 131 - 132. Generally speaking, an order for costs in favour of a successful party will result in a substantial, but not complete, indemnity against that party's liability for its solicitor's costs.
5 The significance of an order for indemnity costs is that it permits the taxing officer to assess the successful party's actual costs, except in so far as they are of an unreasonable amount or have been unreasonably incurred. An order for costs on this basis is intended to provide a successful party with a complete indemnity. Indemnity costs may be equated with the costs that would be allowed on taxation as between solicitor and own client: Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190 at 191. On a solicitor and client taxation the taxing officer may allow all reasonable costs incurred pursuant to the terms of the retainer.
6 The distinction between indemnity costs and party - party costs has most effect where the taxing party has incurred costs pursuant to a costs agreement.
7 In Unioil (supra), at 191, Ipp J observed:
"The usual costs order is one for party and party costs. An order for indemnity costs will only be made if there is some special or unusual feature in the case to justify a departure from the ordinary practice: see Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 at 233 (per Sheppard J). The court has a wide discretion. As French J remarked in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported); Federal Court;
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- 3 May 1991: 'The categories in which the discretion may be exercised are not closed'."
8 In Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 Pullin J held that the court has jurisdiction to make an indemnity costs order whenever justice requires such an order, citing Unioil and Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. His Honour observed that most examples of cases where an indemnity costs order has been made involved some element of improper, or at least unreasonable, conduct on the part of the parties or their legal advisers. His Honour observed at [9]:
"… Thus, the making of allegations of fraud knowing them to be false, or the commencement of proceedings for some ulterior motive, or in wilful disregard of known facts or the established law, or the making of allegations which ought never to have been made, or the undue prolongation of a case on groundless contentions, and even an unreasonable refusal to accept an offer of compromise, may lead to indemnity costs orders…"
9 As to this Court's jurisdiction to make such an order there is no issue. Section 64(1) of the District Court of Western Australia Act 1969 provides that a District Court judge has the same power in relation to the payment of costs by any party as a judge of the Supreme Court.
10 The benefit to the plaintiffs of an indemnity costs order would be the assessment of their costs of the action on the basis of two costs agreements which they entered with their solicitors, the first being an agreement with Michael Whyte & Co dated 23 April 2002 and the second an agreement with their present solicitors, Maxim Litigation Consultants, dated 22 January 2007. A comparison between the schedules to these agreements setting out the rates of which professional work and services would be charged and the Supreme Court Scale during the periods in which each schedule applied, reveals that the charge rates of each firm were higher than those allowed by the scale.
11 For example, the Supreme Court Scale applicable in June 2002 (shortly after the first costs agreement was entered into) provided an hourly rate of $313 (inclusive of GST) for a senior practitioner and $209 for a junior practitioner. The schedule to the Michael Whyte & Co costs agreement provided a range of $230 - $320 per hour for a partner or senior practitioner and $180 - $250 for a solicitor admitted for less than five years (GST exclusive).
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12 With respect to the Maxim Litigation Consultants costs agreement schedule the Supreme Court Scale applicable at the time (2006 Determination) provided a maximum hourly rate for a senior practitioner of $363 and for a junior practitioner $253 (inclusive of GST). The schedule rates were $390 - $430 for senior associates, consultants, counsel and principals and $230 - $290 for solicitors (GST exclusive).
13 So it may be seen that an order for indemnity costs would permit the recovery of costs not only on a solicitor and client basis, that is, of all costs reasonably incurred, but at the rates agreed between the plaintiffs and their solicitors from time to time, subject of course to the proviso that they were not of an unreasonable amount or unreasonably incurred. The application of that proviso is a matter for the taxing officer and does not bear on the exercise of my discretion.
14 The plaintiffs contend that an indemnity costs order is appropriate in this case as a mark of disapproval of improper or unreasonable conduct on the part of the defendants in the course of the action by reference to a number of factual findings and observations contained in my reasons for decision and the defendants' conduct in maintaining an untenable defence and unreasonably refusing to compromise the action.
15 The findings in my reasons for decision relied upon by the plaintiffs are that:
1. the defendants purposefully misled the plaintiffs as to the number of arable acres of Cooladdi Farm (at [170] - [172]);
2. the defendants' son "cynically manipulated" the paddock sizes shown on the farm map in order to justify the sale price (at [174]);
3. the defendants' conduct was unworthy (at [173]); and
4. the defendants acted unreasonably in requiring the plaintiffs to settle on the purchase after their misrepresentation was discovered (at [178]).
16 The plaintiffs also submit that the defendants' conduct in the litigation was unreasonable in that:
(a) the defendants did not admit what they knew to be correct, namely, that the area of arable land was less than they had represented;
(b) the defendants unreasonably refused an offer of compromise made pursuant to O 24A of the Rules of the Supreme Court on 10 May 2004 for $280,000, substantially less than the judgment sum; and
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- (c) the defendants at no time prior to trial admitted that no further land on the farm could be cleared, so putting the plaintiffs to the expense of having to subpoena documents and arrange for evidence to be called from the Department of Environment and Conservation.
17 Counsel for the plaintiffs made it clear in his submission that the plaintiffs' application is not based on a contention that the normal order for costs would be inadequate to compensate them for their liability for costs, but rather that the defendants' conduct warrants a fuller recovery of costs than the usual order would permit. As I understand the plaintiffs' submissions there are three aspects of the defendants' conduct on which it bases its application: first, the egregious nature of the misrepresentation and the defendants' conduct in relation to it, including holding the plaintiffs to the agreement to purchase after it was clear that the area of cleared land had been misrepresented; second, the defendants' conduct in relation to the litigation, which included the defendants' unreasonable refusal to admit the misrepresentation and their refusal to compromise on reasonable terms at an early stage; and third, prior to trial, refusing to admit the fact that no more land could be cleared on the farm.
18 The alternative form of order sought by the plaintiffs' application reflects the approach taken by Ipp J in Unioil wherein his Honour held that although the facts of that case did not warrant the making of an indemnity costs order in respect of all of the plaintiffs' costs, such an order was appropriate with respect to certain aspects of the getting up of the case for trial because the defendant's uncooperative behaviour in relation to some matters of evidence resulted in the plaintiffs being put to the significant costs. In that case, his Honour held that the creation of false issues by tactical denials or failures to admit is a ground for making special costs orders. His Honour observed at 194:
"In my view, inherent in the case management system now in operation in this jurisdiction there is a general duty upon lawyers, in appropriate circumstances, to co-operate so as to avoid needless disputes. Appropriate costs orders may be made when the aggressive, discourteous and non-co-operative behaviour leads to the incurring of delay, inconvenience and needless costs."
19 It is also appropriate to note in relation to Unioil that Ipp J was disinclined to make an indemnity costs order where the usual party and party costs order would provide adequate compensation (at 193 and 194). This approach accorded with his Honour's statement in Collins v
(Page 9)
- Westralian Sands Ltd (1993) 9 WAR 56 at 64 that where no written costs agreement had been entered into there should be no difference between the items and amounts allowed under a party and party bill of costs and those allowed under a solicitor and client bill of costs. The present case is not in that category.
20 In Flotilla Nominees (supra),Pullin J similarly observed that where there is no costs agreement there should not often be any need for an indemnity costs order. However, he considered that if a special costs order were made it should preferably be formulated in a way which allowed the recovery of costs for work not covered by the relevant scale, specified higher hourly rates than provided by the scale, or allowed compensation for more time than allowed by the scale: [20] - [23].
21 At [24] - [26] his Honour stated:
"The consequence is that if a properly formulated special costs order is made, there should be little need for an indemnity costs order to try and recover costs incurred above the scale.
Having said all of that, however, there is still a place for indemnity costs orders. It will be appropriate in cases where there has been improper or unreasonable conduct on the part of a party or his legal advisors. An order for an indemnity costs order is a mark of disapproval on the part of the court about the improper or unreasonable conduct of litigation, even though there should not be much difference in the costs recovered under such an order compared with recovery under a properly formulated special costs order. If the conditions warrant an indemnity costs order, it is likely that the Judge making the order will be more inclined to allow an increase in the hourly rates or an increase in the limits. An order detailing those increases should, in my opinion, be made even where indemnity costs orders are made.
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party."
22 I have been referred to three recent cases, including a decision by the Court of Appeal, in which applications for indemnity costs orders have been unsuccessful: Tranchita v Danehill Nominees Pty Ltd [No 2] [2007]
(Page 10)
- WASC 248, Commissioner of State Revenue v Artistic Pty Ltd [2008] WASCA 24(S) and Stewart v Biodiesel Producers Ltd [2009] WASC 145(S). I have also had regard to Gove v Black & Ors [2006] WASC 298(S) and Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. These turn on their own circumstances, but usefully illustrate, in my view, that the courts are generally reluctant of the courts to impose costs sanctions unless the justice of the case demands otherwise and that a party litigating in good faith can expect the ordinary costs rules to be applied.
23 In relation to the availability of an indemnity costs order following the rejection of an offer to compromise pursuant to O 24A of the Rules of the Supreme Court 1971 or a Calderbank offer (Calderbank v Calderbank [1976] Fam 93), I observe that:
(a) Order 24A r 10, since its amendment in March 2007, no longer creates a presumptive entitlement on the part of a plaintiff to indemnity costs where the results at trial was less favourable to the defendant than the terms of an offer to compromise made under that rule; and
(b) "the critical question in deciding whether to avoid indemnity costs against a party who has rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances": Ford Motor Company of Australia Ltd (supra) at [23].
24 The making of indemnity costs orders in appropriate circumstances has the effect of preserving "in the minds of litigants the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement before trial": Dobb v Hacket (1993) 10 WAR 532 per Murray J at 540.
25 The defendants submit that it cannot be said that their case was so bad that they should have known that they had no chance of success and that the court's rejection of their defence does not put this case in any different category from others where the defendant is unsuccessful. It is also submitted that the O 24A offer made by the defendants serves no purpose in terms of costs by reason of the provisions of r 10 in its current form.
26 As to the Calderbank offer made on 28 March 2008, the defendants submit that the plaintiffs have not shown that the defendants' failure to accept the offer was unreasonable. It is also submitted that the offer of the
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- plaintiffs did not necessarily represent a more favourable result than the eventual award.
27 Finally, it is submitted that the plaintiffs have not shown that the usual order for costs would not be sufficient to compensate the plaintiffs for costs reasonably incurred in relation to the items set out in par 1(b) of the chamber summons.
28 The discretion to make other than the usual order for costs is unfettered, but must be exercised judicially. In this regard, I am satisfied that I may take into account whether there has been improper or unreasonable conduct on the part of the defendants in the conduct of the defence, but I do not believe it is appropriate to sanction by means of a special costs order the defendants' conduct giving rise to the action as the plaintiffs have been duly compensated in damages in this respect.
29 I consider that the relevant considerations bearing on the exercise of my discretion are:
(a) whether the defence was untenable such that the defendants, properly advised, should have known that it had no chance of success;
(b) whether it was unreasonable for the defendants to reject the plaintiffs' O 24A offer of 10 May 2004, or alternatively their Calderbank offer of 28 March 2008; and
(c) whether there were any matters of fact which the defendants unreasonably failed to concede and which put the plaintiffs to unnecessary expense.
30 In considering the determination of the application on this basis, it is not necessary to be satisfied that the plaintiffs did in fact incur greater costs than would be allowed on a party - party basis. In any event, however, I have evidence that the plaintiffs' solicitors' costs agreements would have resulted in their incurring greater costs than those allowed by the relevant scale.
31 In my reasons for decision I found in effect that the defendants contrived with their son to misrepresent the cleared and croppable area of Cooladdi Farm by using the word "arable" to mean land that could be cleared and cropped. Once the actual area of cleared and croppable land was established it was in my opinion unreasonable and improper for the defendants to maintain that there had been no misrepresentation. Furthermore, it was idle to contend that the plaintiffs should have known
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- from a cursory visual inspection of the property that what the defendants told them was untrue and unreasonable not to admit that no more land could be cleared. In my opinion, the defence had no reasonable prospect of success.
32 In light of this conclusion, I turn to the attempts made by the plaintiffs to compromise the action. The O 24A offer of $280,000 plus costs made on 10 May 2004 does not have the effect, despite the verdict being less favourable to the defendants, of entitling the plaintiff automatically to indemnity costs. However, O 24A r 10(4) contains the proviso "unless the court otherwise orders" which clearly preserves the general discretion as to costs.
33 In respect of this offer, which in all relevant respects is analogous to a Calderbank offer, the question is whether it was unreasonably refused. As my findings demonstrate, there was a direct relation between the market rate for cleared land and the purchase price. The plaintiffs' offer to compromise, which clearly represented the measurable difference in value due to the misrepresentation, accorded with the defendants' method of calculation of the purchase price: Armstrong & Anor v Rokich & Anor (supra) at [137] - [138].
34 I do not consider that the defendants' offer to compromise dated 17 May 2004 for $100,000 with no order for costs can be relied upon as indicating any reasonableness on their part. The defendants' offer has no meaning in the context of an untenable defence and a clear-cut means of assessing the reduced value of the property.
35 I do not consider it necessary to draw any conclusions in relation to the defendants' rejection of the plaintiffs' Calderbank offer of 28 March 2008 given what I have found in relation to the rejection of the O 24A offer.
36 I am satisfied, therefore, that the maintenance of the defence and the rejection of the plaintiffs' O 24A offer in the circumstances of this case constitute conduct which would warrant the imposition of an indemnity costs order. I also take into account, although it is of less significance, that the defendants did not concede until shortly before trial that the plaintiffs were not allowed to clear more land, and required the plaintiffs to call other evidence which was, or should have been, non-contentious.
37 I accept the defendants' submission that in every action which proceeds to trial the losing party is liable to be criticised and may well be shown to have acted unreasonably. In this case, however, I consider that
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- the defendants' conduct in resisting the claim of the plaintiffs was exceptional and does warrant an order which reflects the Court's disapproval.
38 The interests of justice will be served, in my opinion, by orders as follows:
1. The defendants do pay the plaintiffs' costs of the action to be taxed.
2. The plaintiffs' costs be taxed on a party – party basis to 10 May 2004; thereafter on an indemnity basis, ie, as between solicitor and own client.
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