Beeck v Kohlen
[2013] WASC 166 (S)
•2 AUGUST 2013
BEECK -v- KOHLEN [2013] WASC 166 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 166 (S) | |
| Case No: | CIV:1467/2011 | 21 MAY 2013 | |
| Coram: | ALLANSON J | 2/08/13 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Costs apportioned Defendants to have 75% of the costs of the action | ||
| B | |||
| PDF Version |
| Parties: | MARTIN HARRY BEECK PETER JOSEPH KOHLEN SUSAN KAY FLEMING |
Catchwords: | Costs Separate issues Separate causes of action Apportionment of costs Costs Claim for indemnity costs Refusal to agree to conduct trial of preliminary issue Not unreasonable |
Legislation: | Rules of the Supreme Court 1971 (WA), O 32 r 4, O 66 r 2 Transfer of Land Act 1893 (WA), s 138B |
Case References: | Adamson v The Pharmacy Board of Tasmania (No 4) [2004] TASSC 112 Cretazzo v Lombardi (1975) 13 SASR 4 Keet v Ward [2011] WASCA 139 Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134 Landsdale Pty Ltd v Moore [2009] WASCA 176 S v State of New South Wales (No 2) [2008] NSWSC 1116 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
PETER JOSEPH KOHLEN
First Defendant
SUSAN KAY FLEMING
Second Defendant
Catchwords:
Costs - Separate issues - Separate causes of action - Apportionment of costs
Costs - Claim for indemnity costs - Refusal to agree to conduct trial of preliminary issue - Not unreasonable
Legislation:
Rules of the Supreme Court 1971 (WA), O 32 r 4, O 66 r 2
Transfer of Land Act 1893 (WA), s 138B
Result:
Costs apportioned
Defendants to have 75% of the costs of the action
Category: B
Representation:
Counsel:
Plaintiff : Mr G J Carter
First Defendant : Mr S Macdonald
Second Defendant : Mr S Macdonald
Solicitors:
Plaintiff : Optima Legal
First Defendant : Macdonald Rudder
Second Defendant : Macdonald Rudder
Case(s) referred to in judgment(s):
Adamson v The Pharmacy Board of Tasmania (No 4) [2004] TASSC 112
Cretazzo v Lombardi (1975) 13 SASR 4
Keet v Ward [2011] WASCA 139
Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134
Landsdale Pty Ltd v Moore [2009] WASCA 176
S v State of New South Wales (No 2) [2008] NSWSC 1116
1 ALLANSON J: To resolve the issue of who should pay costs in this matter, it is necessary to chart its comparatively short but quite complicated history. The facts are found in detail in the primary judgment.
2 The proceedings in this court began on 11 March 2011 in the related action CIV 1394 of 2011, where the plaintiff applied for an order under s 138B of the Transfer of Land Act 1893 (WA), extending the operation of a caveat. On 15 March, the court granted the extension but a condition of the order was that the plaintiff commenced proceedings on his claim for specific performance.
3 The plaintiff commenced this action on 22 March. In a writ with an endorsement of claim, he claimed that the defendant had repudiated and refused to settle on a contract for sale of land. He claimed relief including:
1. rectification of the description of the land in the contract – an issue which did not prove controversial;
2. a declaration that the defendants held the property on trusts for him;
3. specific performance of the contract; and
4. damages;
5. interest compounded at commercial rates on the damages.
4 The statement of claim was filed on 21 April 2011. The defence and counterclaim was filed on 20 May 2011. The defendants denied breach of contract. They specifically pleaded that the contract was conditional on the finance condition, which had been the stated ground in their notice of termination. In addition, the defendants pleaded:
1. The contract was conditional on satisfaction of the requirements of cl 13 of the general conditions of contract, within the times prescribed in that clause (this clause relates to the sale of land that is not a lot at the time of contract).
2. Alternatively, the contract was void for uncertainty if it did contain the finance condition alleged.
3. The plaintiff owed to them a fiduciary duty and breached this duty in various ways. The defendants, by counterclaim, claimed equitable compensation for breach of fiduciary duty.
5 A reply and defence to counterclaim was filed on 17 June 2011. The plaintiff pleaded that on its proper construction, the contract was not subject to the finance condition. Alternatively, the plaintiff pleaded that the defendants affirmed the contract and were estopped from contending that they were entitled to terminate the contract. Alternatively, the plaintiff pleaded an election by the defendants to keep the contract on foot.
6 The plaintiff pleaded that cl 13 did not apply, alternatively that there was an estoppel by affirmation, or an election by the defendants to keep the contract on foot notwithstanding non-compliance with cl 13. The plaintiff denied the allegation regarding breach of fiduciary duty.
7 The allegation of breach of fiduciary duty was a serious one, relating to the plaintiff's performance in his professional role and alleging conduct which, essentially, was dishonest.
8 A substituted reply and defence to counterclaim was filed on 5 October 2011. On 31 October 2011, on the defendants' application, I struck out that part of the reply and defence to counterclaim pleading estoppel, but gave leave to re-plead.
9 On 25 November 2011, the defendants proposed that the following issue be tried as a preliminary issue in the action:
(a) Was the contract, upon a proper construction, subject to terms to the effect of those pleaded by the defendants, that is, that the contract was subject to a finance condition requiring the plaintiff to both obtain finance, approval and notify the defendants that he had either obtained or failed to obtain that finance?
(b) If yes to question one,
(i) was the contract validly terminated by the defendants by a notice in August 2010 and
(ii) is the contract now at an end?
(c) If no to question one, is the contract void for uncertainty?
10 The plaintiff opposed a separate trial of a preliminary issue. The matter was discussed in correspondence between the solicitors for the parties. The plaintiff's position was that the facts relating to other agreements between the parties, and whether there was a fiduciary relationship between them, may be relevant to the construction of the finance clause.
11 On 25 November 2011, the plaintiff filed an amended reply and defence to counterclaim. In this pleading the plaintiff contended, in effect, that, if the finance condition applied, on its proper construction it obliged him to obtain finance approval within three months after the date of the contract. The defendants were obliged to terminate the contract by notice no later than 14 days after that three months. The plaintiff pleaded that the defendants failed to exercise the right to terminate within the required time, alternatively failed to give a default notice requiring the plaintiff to remedy the default before purporting to terminate. None of these pleas were ultimately pursued at trial. The defendants did not press the question of a preliminary issue.
12 Because of the timetabling with interlocutory steps regarding pleading, the matter had moved slowly. Discovery was only given in February and March 2012. Witness statements were filed in July and August. On 28 September 2012, I listed the matter for trial for three days beginning on 12 February 2013.
13 On 19 December 2012, the defendants filed an amended defence and counterclaim, although the amendments were limited in scope.
14 On 6 February 2013, the plaintiff filed an amended statement of claim and an amended reply and defence to counterclaim. The plaintiff's amendments reduced the scope of the issues for trial. In particular, the issue regarding the finance clause was now confined to a question of construction, and, if the clause did apply, when was a reasonable time within which the plaintiff was to comply. The plaintiff no longer pleaded an obligation on the defendants to give notice of default.
15 The defendants at trial abandoned their claim for equitable compensation for breach of fiduciary duty. They relied on that breach, however, as a ground for resisting specific performance.
16 The trial took four days, between 12 and 15 February 2013. On 9 May, I delivered judgment dismissing the plaintiff's claim. I also dismissed the defendants' counterclaim, to the extent that the defendant claimed breach of fiduciary duty. The issue regarding the effect of cl 13 of the general conditions did not affect the result, but in making findings I determined that question in favour of the plaintiff.
17 In short, the defendants succeeded on the issue of the construction regarding whether the contract was subject to a finance clause and the effect of that clause. That issue entitled them to judgment.
The defendants' position on costs
18 The defendants ask for an order that the plaintiff pay their costs on the basis that they were successful. They also submit that the evidence on the issues on which they did not succeed was required by the plaintiff's position on the issue of construction. The defendants recognise that there may be an exception to this general proposition: the evidence about whether the plaintiff caused unauthorised improvements to be made would not have been required but for the counterclaim. But otherwise, the evidence was either asserted by the plaintiff to be relevant to construction, or in fact relevant to determining the 'latest time' for the plaintiff to comply with the finance condition, an issue on which the defendants succeeded.
19 The defendants rely, in particular, on two letters from the plaintiff's solicitors, dated 21 November 2011 and 23 November 2011, opposing the defendants' proposal for the trial of a preliminary issue. In those letters, the plaintiff asserted that evidence of surrounding circumstances, including the circumstances relied upon by the defendants in claiming the plaintiff was under a fiduciary duty, was relevant to the construction of the contract and to determining the 'latest time' for the plaintiff to comply with the finance condition.
20 Accordingly, the defendants submit that any apportionment of costs in favour of the plaintiff should be very limited.
21 The defendants also request an order that the plaintiff pay their costs on an indemnity basis from 25 November 2011, when they proposed and the plaintiff did not agree to a preliminary trial of the issue of construction. The defendants say that the plaintiff's conduct in opposing the trial of the preliminary issue was, in the circumstances, so unreasonable that it warrants a special order for costs.
22 I am not satisfied that at the time when the proposal was put forward, the plaintiff did act unreasonably.
23 First, the authorities urge caution upon the court in deciding whether or not a question should be set aside for preliminary determination under O 32 r 4 of the Rules of the Supreme Court 1971 (WA): see Landsdale Pty Ltd v Moore [2009] WASCA 176 [19] - [21].
24 Second, the issue of construction, decided favourably to the defendants, would not in itself have determined the action. It was also necessary to determine the latest time at which the plaintiff could obtain finance and give notice, no time being specified. That question required consideration of all of the circumstances at the time when performance was alleged to have been due. The proposed question, whether the contract had been validly terminated in August 2010, was not solely a question of construction.
25 Third, at the time the defendants proposed the separate determination of the construction issue, the plaintiff relied on matters other than construction. It was only in February 2013 that the plaintiff abandoned the plea that the defendant had not exercised the right to terminate in accordance with the contract. While that plea was maintained, it would not have been appropriate to try the proposed preliminary question.
26 Fourth, it was only in their eleventh hour amendments that the defendants pleaded, as an alternative, that the plaintiff had failed to obtain finance approval before 17 August 2010. Until that amendment on 19 December 2012, the defendants had pleaded a failure to give notice required by the contract. There is, in my opinion, a potentially significant difference between non-fulfilment of a contingency, and breach by the plaintiff as purchaser to meet his obligation to give notice. While this was not pursued at trial, it bears on the reasonableness of the plaintiff's conduct in November 2011.
27 Fifth, the defendants had, by counterclaim, alleged breach of fiduciary duty and claimed compensation. The separate determination of the construction issue would split, but not necessarily shorten, the trial or lead to any significant savings.
28 Finally, while I held in favour of the defendants I do not consider the plaintiff's case on construction and the latest time to be so obviously wrong that it was unreasonable to maintain it.
29 Accordingly, while the defendants are entitled to costs (subject to what I say below), this is not a case where a special order is justified.
The plaintiff's application for part of the costs
30 The plaintiff asks for an order that he be entitled to part of the costs of trial. He submits that the issues raised by the defendants upon which they were not successful, and in particular the fiduciary duty issue, contributed substantially to the time taken at trial and the costs of trial.
31 The court has a wide discretion in relation to costs. Ordinarily the court does not attempt to differentiate the issues upon which each party was successful or unsuccessful and to apportion costs according to success or failure on the various issues of fact or law that arise in the course of a trial: see Cretazzo v Lombardi (1975) 13 SASR 4, 16. But if an issue is clearly separate or readily distinguishable from the grounds or basis of the ultimate determination of the action, it may be appropriate to make a separate costs order: see Adamson v The Pharmacy Board of Tasmania (No 4) [2004] TASSC 112; S v State of New South Wales (No 2) [2008] NSWSC 1116.
32 Reference must also be made to O 66 r 2, under which, in the absence of any special order, where a statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought. The application of this rule was discussed in Keet v Ward [2011] WASCA 139, where at [24] the court set out a series of propositions from the cases. Relevantly, the court said that the rule does not prescribe a mandatory approach to the awarding of costs where there are multiple causes of action, but retains the discretion to make a special order departing from the rule: see also Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134 [12] - [15]. The court should always attempt to do substantial justice in the circumstances.
33 In the present matter I first take into account that the plea of breach of fiduciary duty was a substantial matter raised by the defendants and pleaded by them from the outset. It was only at trial that the defendants abandoned the claim to equitable compensation and limited their reliance on the fiduciary duty point to it being a reason for refusing specific performance.
34 Second, the evidence of the builder (Mr Cottle) was required solely for the purpose of this issue. While the defendants did not call expert evidence on the value of the improvements, they exchanged expert evidence on the issue.
35 Third, the defendants alleged a serious breach of the plaintiff's professional obligations and conduct that was, in essence, dishonest.
36 For these reasons I am satisfied that the proper exercise of my discretion requires an order that the plaintiff have his costs on this issue. It is not satisfactory to make an adjustment simply by looking at the time spent on particular issues at the hearing and arriving at a proportion. While the evidence going to breach of fiduciary duty was largely discrete, the evidence about the parties' relationship leading up to the making of the contract was relied on by both parties more generally.
37 I am not satisfied that I can compartmentalise the evidence on each issue, or carry out a detailed assessment of where each party has succeeded or failed. I must make a more broad brush assessment. The defendants have substantially succeeded, and I have refused to order specific performance. They should have 75% of the costs of the action.
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