Bayeux Investments P/L v Wellington Chambers P/L & Christopher Jessop Fox No.2
[2008] SADC 141
•31 October 2008
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BAYEUX INVESTMENTS P/L v WELLINGTON CHAMBERS P/L & CHRISTOPHER JESSOP FOX NO.2
[2008] SADC 141
Judgment of His Honour Judge Soulio
31 October 2008
PROCEDURE - COSTS
Application for indemnity costs.
District Court Rules 1987 r 41; District Court Civil Rules 2006 r 8, r 264, referred to.
Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers - Western Australian Branch & Ors (1992) 111 ALR 377; Pirrotta v Citibank Ltd & Ors (1998) 72 SASR 259; Packer v Meagher [1984] 3 NSWLR 486; Singleton v Macquarie Broadcasting Ltd (1991) 24 NSWLR 103; TGM Civil Pty Ltd v Resourceso Pty Ltd (No. 2) [2008] SADC 109; Sheahan v Northern Australia Land and Agency Co Ltd (SCSA Perry J, 4 November 1997 unreported); Cretazzo v Lombardi (1975) 13 SASR 4; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81ALR 397, considered.
BAYEUX INVESTMENTS P/L v WELLINGTON CHAMBERS P/L & CHRISTOPHER JESSOP FOX NO.2
[2008] SADC 141
On 15 August 2008 judgment was entered for the plaintiff against both defendants, following the publication of reasons for decision in [2008] SADC 102.
The plaintiff has applied for an order for indemnity costs for the whole of the proceedings against both defendants.
The Proceedings
The claim against the defendants was for recovery of a payment of $131,000 by the plaintiff to the first defendant, in respect of GST said to be payable on the sale of premises at Wellington Square North Adelaide. In addition the plaintiff claimed professional fees of $9,210 incurred in setting aside an administrative penalty of $32,750 imposed by the Australian Taxation Office (ATO) relating to a claim by the plaintiff for an input tax credit of the GST amount, plus interest and costs.
The defendants amended their defence at trial to assert that the first defendant had a contractual obligation only, to repay to the plaintiff the GST amount plus interest.
The trial however proceeded in relation to the other issues particularly given that the plaintiff was not prepared to accept a promise to pay made by the first defendant, a corporate entity of unknown means.
On 5 March 2007, well after the conclusion of the evidence at trial the first defendant tendered payment to the plaintiff of $150,246.23 being the GST amount plus interest.
The plaintiff succeeded in its action. Judgment was subsequently entered for the plaintiff in the sum of $10,650, representing the professional fees incurred by the plaintiff, together with interest.
I found for the plaintiff against both defendants for the judgment sum, and would have found both defendants liable for payment of the GST amount and interest had payment of those amounts not been tendered by the first defendant.
The Applicable Rules
The proceedings were instituted on 21 April 2006.
The District Court Civil Rules 2006 commenced operation on 4 September 2006. Pursuant to 6DCR 8 the District Court Rules 1987 continue to apply to a primary action commenced before the commencement date. Chapter 12 of the 2006 Rules, relating to costs, applies from the commencement date to an action 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.[1]
[1] 6DCR 8(2).
The Rules relating to offers of compromise are contained in Chapter 7 of the 2006 Rules. Accordingly the 1987 Rules govern the operation of such offers. The 2006 Rules otherwise apply to my consideration of the application for costs.
Discretion as to the Award of Costs
The ordinary rule is that the order for costs in favour of a successful party to litigation, will be on a party and party basis. The Court has, however, a wide discretion as to the award of costs.[2]
[2] Cretazzo v Lombardi (1975) 13 SASR 4 at 11.
That includes a discretion to order costs on a solicitor/client basis where appropriate,[3] or to order costs on an indemnity basis.[4]
[3] Packer v Meagher [1984] 3 NSWLR 486.
[4] Singleton v Macquarie Broadcasting Ltd (1991) 24 NSWLR 103.
Indeed Chapter 12 of the 2006 Rules specifically provides a discretion to award costs on any basis considered appropriate, including as between solicitor and client, or on the basis of indemnity.[5]
[5] 6 DCR 264.
I bear in mind that the circumstances of the case must be such as to warrant departing from the usual course; that is that there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice.[6] It may be sufficient to enliven the discretion to award indemnity costs for a party to persist in what should on proper consideration have been seen to be a hopeless case.[7] The writing of a Calderbank letter is one factor, albeit a significant factor, to be weighed by a court when considering whether to order indemnity costs.[8]
[6] Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248 at 256-7 per Sheppard J.
[7] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers – Western Australia Branch & Ors (1992) 111 ALR 377.
[8] Pirrotta v Citibank Ltd & Ors (1998) 72 SASR 259.
The Plaintiff’s Rules Offer
Pursuant to 1987 DCR41 a party is entitled to lodge with the Registrar, and serve on the opposing party, an offer of settlement, no less than 21 days before the date fixed for trial.
On 18 December 2006 the plaintiff served on the defendants an offer to accept an amount of $148,473.27 inclusive of interest, plus its costs of action to be taxed. In the letter accompanying that offer, the offer was expressed to be made pursuant to r41 of the 1987 Rules. The plaintiff had not lodged that offer with the Registrar as required.
The offer was lodged with the Registrar and re-served on the defendants on 9 January 2007.
The offer was not accepted by the defendants.
I reject the defendants’ contention that the offer was a nullity because it had not been lodged. The important issue is notification of the offer to the opposing party. The defendants had notice of the offer on 18 December 2006.
By virtue of the payment tendered by the first defendant in the sum of $150,246.23, and by reason of my judgment and findings in this action, the plaintiff has bettered its offer of settlement.
1987 DCR 41.04 provides:
Where 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.
I am of the view that there is no reason to order otherwise than that pursuant to 1987 DCR 41 the plaintiff be entitled to its cost of action for the whole action, on a solicitor/client basis.
Even if I am wrong about the operation of 1987 DCR 41 regarding the late lodgement of the offer, I regard the communication of the offer on 18 December 2006 and the reiteration of the offer on 9 January 2007 as matters I am able to take into account in exercising my discretion as to the basis upon which costs should be awarded.[9]
[9] Pirrotta v Citibank Ltd & Ors (1998) 72 SASR 259.
Calderbank Letter
The plaintiff wrote to the defendant and the defendants’ solicitors on a number of occasions proposing resolution of the action.
By letter of 7 December 2005 the plaintiff’s solicitors wrote separately to the first and second defendants setting out the basis of the claim and seeking a total sum of $190,720 which included the administrative penalty of $32,750 imposed by the ATO, and still payable at that time. The claim also included interest on that amount, and an amount for costs. The amount sought by the plaintiff’s solicitors, less the penalty sum, interest on the penalty sum, and costs, was a claim for less than that ultimately recovered by the combination of payment during the action, and the judgment sum, to which I have already referred.
The response by Mr Fox, on the letterhead of Fox Finance Corporation Pty Ltd, raised a number of issues in response to the detail of the claim, but did not, as was pointed out in the letter dated 9 December 2005 from the plaintiff’s solicitors, respond to the issue as to whether the defendants contended that GST was payable on the sale of the land, or whether Wellington or any associated entity had remitted the GST amount to the ATO.
The letter written on behalf of the plaintiff and dated 7 December 2005 was expressed to be a letter before action in accordance with the Rules. Following the expiration of 90 days from the date of that letter the plaintiff’s solicitors again wrote to the defendants stating that there had not been a response, and advising that if there was no response within a further two days proceedings would be instituted. The inquiry in relation to whether the GST amount had been remitted was again made. The only response was an email from the second defendant stating “look forward to this, will defend with vigour”. Proceedings were then served under cover of a letter from the plaintiff’s solicitors dated 21 April 2006.
Under cover of letter of 18 December 2006 the plaintiff’s formal (but unlodged) offer was served. That letter set out the basis of the plaintiff’s claim. The amount which the plaintiff was prepared to accept was, as I have said, $148,473.27 inclusive of interest. By a letter of 19 December 2006 the plaintiff again offered to accept that amount, and said that it would rely on that letter, in support of an application for indemnity costs. The offer was expressed to be open until 22 December 2006 and was said to be written “without prejudice, save as to costs, pursuant to Calderbank v Calderbank.”
The Defendants’ Conduct
I have made certain findings in relation to the conduct of the defendants prior to trial which I will not repeat[10].
[10] Bayeux Investments Pty Ltd v Wellington Chambers Pty Ltd & Fox [2008] SADC 102 paras 29, 47, 53-57, 61-64, 65, 66.
The plaintiff’s claim succeeded at trial against the defendants on the basis suggested by the plaintiff in the pre-trial letters of offer. I regard the defendants’ conduct in rejecting the offers made by letter, and in continuing to defend the proceedings, as unreasonable.[11]
[11] Pirrotta v Citibank (1998) 72 SASR 259 at 266-267.
Despite the second defendant’s assertion that the proceedings would be defended with vigour, no witnesses were called for the defendants, no evidence was tendered, and the second defendant did not himself give evidence, despite it being apparent that there were a number of issues which, if to be seen in a light other than that contended for by the plaintiff, would have to be illuminated by evidence from the second defendant. That is a matter I take into account.[12]
[12] Sheahan v Northern Australia Land and Agency Co Ltd (SCSA Perry J, 4 November 1997 unreported).
The basis of the defence, both as initially pleaded, and as subsequently found, was entirely without foundation. I take that into account.[13] In my view the plaintiff’s informal offers, the unmeritorious defence of the action by the defendants, and the conduct of the defendants to which I have referred, constitute circumstances which warrant an order that the defendants pay the plaintiff’s costs on a solicitor/client basis.
[13] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401.
Conclusion
Given the provisions of 6DCR 264(5), it appears that for the purposes of an action in this court, solicitor/client costs may be equated with indemnity costs:
...except that the onus of persuading the Master that a particular item of costs was reasonably incurred falls upon the moving party in the case of solicitor/client costs, and on the party liable to pay in the case of indemnity costs.[14]
[14] TGM Civil Pty Ltd v Resourceco Pty Ltd (No.2) [2008] SADC 109 per Judge Chivell.
I am of the view that it is appropriate that the onus of persuading the Master on taxation should be on the defendants, and I award the plaintiff its costs of the action (including the costs of this application) against the defendants on an indemnity basis.
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