Bastas v Hodes (No 3)

[2009] NSWSC 1191

CITATION:	Bastas v Hodes (No 3) [2009] NSWSC 1191
HEARING DATE(S):	28 October 2009
JUDGMENT OF:	Gzell J
EX TEMPORE JUDGMENT DATE:	28 October 2009
DECISION:	Indemnity costs ordered. No order for interest on costs.
CATCHWORDS:	PROCEDURE - Costs - offer not accepted and judgment more favourable to defendant - whether exceptional circumstances shown to avoid indemnity costs under the Uniform Civil Procedure Rules 2005 Pt 42 r 42.15A - whether interest on costs under the Civil Procedure Act 2005, s 101(4) is limited to payment under orders for costs or extends to payments made by a party to his solicitors
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 Fair Trading Act 1987 Civil Procedure Act 2005
CATEGORY:	Procedural and other rulings
CASES CITED:	Morgan v Johnson (1998) 44 NSWLR 578 Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339 South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 Lahoud v Lahoud [2006] NSWSC 126
PARTIES:	Elias Bastas (First Plaintiff) David Millard Lawson (Second Plaintiff) David Rooney (Third Plaintiff) John Edward Hodes (Defendant)
FILE NUMBER(S):	SC 3346/07
COUNSEL:	J Stephenson (Plaintiffs) A McInerney (Defendant)
SOLICITORS:	JGP Lawyers (Plaintiffs) HWL Ebsworth Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

WEDNESDAY 28 OCTOBER 2009

3346/07 ELIAS BASTAS & ORS v JOHN EDWARD HODES (NO 3)

EX TEMPORE JUDGMENT

1 An issue arises with respect to the costs that the court should order in this matter, the defendant having been successful to the extent that the proceedings have been struck out with a proposed order for costs in his favour.

2 An offer was made on 22 November 2007 that there be a verdict for the defendant on the basis that each party in the proceedings bore his own costs. A claim for indemnity costs from that date is made in terms of the Uniform Civil Procedure Rules 2005, Pt 42 r 42.15A.

3 In Morgan v Johnson (1998) 44 NSWLR 578, Mason P derived a number of principles from his analysis of the leading cases on costs under District Court rules equivalent to the Uniform Civil Procedure Rules, Pt 42 r 42.15 which applies where a defendant makes an offer not accepted by the plaintiff who obtains a judgment not more favourable. The first principle was that the purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation. In my view those principles apply equally to Pt 42 r 42.15A.

4 In Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339, Beazley JA at [15], in considering the situation where a plaintiff makes an offer not accepted by a defendant, to which the Uniform Civil Procedure Rules, Pt 42 r 42.14 applies, said that the court would only deviate from the general rule and make a different order if it found that there were exceptional circumstances for doing so. Her Honour referred to what Hunt AJA had said in South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 at [83]:

“The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff’s entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff’s case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposition of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff’s entitlement.”

5 See also Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [33]-[37].

6 Counsel for the plaintiffs accept that exceptional circumstances need to be demonstrated in order to avoid an order for indemnity costs.

7 The proceedings were commenced on 3 August 2007 and an exchange of particulars followed. Discovery was only completed on 7 November 2007 and the offer was made two weeks later before an adequate time had elapsed, in the submission of the plaintiffs, for proper consideration to be given to the documents produced on discovery by the defendant.

8 As of 22 November 2007, the defendant had not served his evidence and no expert’s reports had been exchanged.

9 The defendant did not until 27 June 2008 attempt to alert the plaintiffs as to the difficulties of the case.

10 It was submitted that these matters constitute exceptional circumstances. I reject that submission. In my view, both the contract case and the Fair Trading Act case had negligible prospects of success. A period of almost six years had elapsed since the sale by Mr Hodes of his practice to the then partners. The claim that Mr Hodes had failed to “transfer“ the goodwill of the practice to the purchasers, whatever that might mean, had the errors to which I referred in the substantive judgment.

11 In my view, an order should be made under the Uniform Civil Procedure Rules, Pt 42 r 42.15A and I propose to make the order in terms of paragraph 1 of the short minutes of order proposed by the defendant, that is, an order that the plaintiffs pay the defendant’s costs on an ordinary basis to 22 November 2007 and from 23 November 2007 on an indemnity basis.

12 Paragraph 2 of the proposed orders is not opposed by the plaintiffs if it is limited to 24 November 2009. Counsel for the defendant accepts that. I will therefore make an order that the plaintiffs pay the defendant’s costs, on an indemnity basis, of and incidental to the claim for loss of profits which was abandoned by the plaintiffs on 24 April 2009 and formally discontinued on 14 September 2009, up to 24 April 2009.

13 An order for costs on an assumed basis that the claim of the plaintiffs was a specified amount is not opposed by the plaintiffs. I make an order that any costs assessment proceed on the assumption that the amount claimed by the plaintiffs was $880,000, plus interest thereon, amounting to $1,100,000, inclusive of interest.

14 A claim for interest on costs is made under the Civil Procedure Act 2005, s 101(4). It provides that the court may order that interest is to be paid on any amount payable under an order for the payment of costs. Section 101(5) provides that interest under subsection (4) is to be calculated at the prescribed rate or at such other rate as the court may order as from the date or dates on which the costs concerned were paid, or such later date as the court may order.

15 An affidavit of John Edward Hodes sworn on 28 October 2009 was read. It swore to various payments under invoices received by Mr Hodes from his solicitors and the payments that he made thereunder.

16 There is no evidence of any orders for costs against Mr Hodes or any payment under such an order.

17 Reference was made to Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 and Lahoud v Lahoud [2006] NSWSC 126 to justify the claim for interest on the disbursements made by Mr Hodes to his solicitors.

18 It does not seem to me that the power under the Civil Procedure Act, s 101(4) extends so far. The clear words of the section limit it to any amount payable under an order for the payment of costs. That does not include, in my view, payments made by a party to that party’s solicitor.

19 I therefore decline to make the order for interest on costs in paragraph 4 of the proposed orders.

20 There is no need for me to deal with the alternative orders sought in paragraphs 5 and 6 of the proposed orders.

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