| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : BGC RESIDENTIAL PTY LTD -v- FAIRWATER PTY LTD [2011] WADC 76 (S) CORAM : WAGER DCJ HEARD : 21-25 FEBRUARY 2011 DELIVERED : 3 JUNE 2011 SUPPLEMENTARY
DECISION : 30 AUGUST 2011 FILE NO/S : CIV 1912 of 2007 BETWEEN : BGC RESIDENTIAL PTY LTD Plaintiff
AND
FAIRWATER PTY LTD
Defendant
QBE INSURANCE (AUSTRALIA) LTD
Third Party
Catchwords: Costs - Substantive claim dismissed - Plaintiff awarded nominal damages only - Calderbank offer - Order 66 r 3(2) Rules of the Supreme Court 1971 - Third party costs - Turns on own facts
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Legislation: Civil Liability Act 2002
District Court of Western Australia Act 1969
Rules of the Supreme Court 1971 Result: Costs orders made Representation: Counsel:
Plaintiff : Mr G C Northmore
Defendant : Mr D J Pratt
Third Party : Mr A Basile
Solicitors:
Plaintiff : Greenland Legal Pty Ltd
Defendant : Jackson McDonald
Third Party : SRB Legal
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1975] 3 All ER 333
Crown Insurance Services Pty Ltd v National Mutual Association of Australasia Ltd [2005] VSCA 280
Ford Motor Company v Lo Presti (2009) 41 WAR 1
Hazeldene's Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435
Keays v JP Morgan Administrative Services Australia Ltd (No 2) [2011] FCA 547
Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 1149
NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77
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1 WAGER DCJ: By decision dated 3 June 2011 the plaintiff's claim in this matter was dismissed except for an award of nominal damages in the sum of $200 in respect of the defendant's breach of contract. The defendant's claim against the third party was dismissed.
2 The parties now seek orders in relation to costs and have filed written submissions in support of their applications.
The action 3 The plaintiff was successful in its plea that the defendant breached the special conditions of contract because it failed to provide the required security service at the time of a fire event that occurred in the plaintiff's display home. Although I found that the required contracted security service had not been provided by the defendant in breach of contract, the plaintiff's claim against the defendant in relation to causation in respect of the fire event was dismissed. The plaintiff's claim was only in relation to breach of contract. The claim relevant to causation was $400,000 plus interest. 4 The defendant also pleaded that s 5C(1)(a) of the Civil Liability Act 2002 applied to contractual causation in this case and, further, that the defendant was acting merely as the plaintiff's agent in relation to the provision of security services consistent with the defendant's interpretation of cl 8 of the contract between the plaintiff and defendant. Neither contention was successful at trial. 5 Given my findings in relation to the issue of causation the defendant's claim against the third party was dismissed.
Application for costs 6 It is accepted that the costs of any action or proceeding shall be paid by or apportioned between the parties in such a manner as the court directs and, in default of such direction, shall abide the event; s 64(1) District Court of Western Australia Act 1969. Usually, pursuant to O 66 r 1(1) Rules of the Supreme Court 1971 the court will exercise its discretion in favour of the successful party. The court will attempt to do substantial justice between the parties. 7 Although nominal damages were awarded to the plaintiff, the defendant submits that this finding alone is insufficient for the plaintiff to be deemed the successful party when the judgment as a whole is considered. (Page 4)
8 The defendant accepts that an award of costs to a party that receives nominal damages only may be appropriate where some other right is vindicated by the judgment, such as where a declaration is made. The defendant submits that Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 1149 [52] was such a case, but it submits that in the present case there is no such vindication. For the purposes of exercising any cost discretion an award of nominal damages is not enough for the party to be considered successful. 9 It is accepted in this case that no declaration was made in favour of the plaintiff. The plaintiff does not challenge the defendant's submission. The plaintiff however argues that this case is analogous to the decision of Crown Insurance Services Pty Ltd v National Mutual Association of Australasia Ltd [2005] VSCA 280 (30 November 2005) a case where the costs order made reflected the time and effort involved at trial as a result of unsuccessful argument. The plaintiff submits that because the defendant in this case unsuccessfully pursued the Civil Liability Act argument and the agency argument and because both arguments required considerable time, effort and cost (having to be investigated factually, researched legally, addressed and ultimately defeated at trial) the plaintiff should be deemed to be the successful party in the action. 10 I accept that the Civil Liability Act argument and the agency argument raised by the defendant had to be addressed by submissions at trial and ultimately in the judgment, however the issues did not add to the number of witnesses required to be called or to the substance of the evidence that was given that primarily addressed the issue of causation. The main thrust of the plaintiff's case related to the issue of causation. Ultimately the plaintiff was unsuccessful in this claim. 11 The court dismissed the plaintiff's claim for $400,000 plus interest of $87,302.68 and awarded the plaintiff nominal damages of $200. The plaintiff did not seek to have any rights other than damages vindicated. The plaintiff has not had substantial success in the proceedings in light of the claim that was brought and the matters that were canvassed in evidence that were ultimately reflected in the judgment.
The 'Calderbank' offer 12 By letter dated 14 November 2008 the defendant wrote to the plaintiff on a 'without prejudice' basis save as to costs. The substance of the correspondence is: We refer to our letter dated 13 November 2008. (Page 5)
Pursuant to Calderbank v Calderbank [1975] 3 All ER 333 our client offers to settle your client's action ('the action') on the following terms: 1. Our client will pay your client $50,000 inclusive of costs and disbursements in full and final settlement of the action. 2. The offer expires 28 November 2008. 3. If your client rejects this offer and the outcome of the trial is less favourable to your client than the offer our client will seek indemnity costs from 28 November 2008. Yours faithfully Jackson McDonald 13 The defendant submits that given that the offer was not accepted an order for indemnity costs from 28 November 2008 is appropriate. 14 In Ford Motor Company v Lo Presti (2009) 41 WAR 1, Buss JA considered the issue of costs following the rejection of a Calderbank offer made by a successful litigant. In that case his Honour adopted the factors noted by the Court of Appeal of Victoria in Hazeldene's Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435 [23] as being the appropriate factors to which regard should be had. Buss JA said: As the Court of Appeal of Victoria noted in Hazeldene's Chicken Farm, deciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression [24]. Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, the Court of Appeal said that, ordinarily, regard should be had to, at least, the following: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for … indemnity costs in the event of the offeree's rejecting it [16]. (Page 6)
15 In the present case the offer was made early in the proceedings nearly two years before the plaintiff sought admission of facts in relation to matters relevant to the fire event. Although it is desirable to settle matters as early as possible it is not clear to me whether the parties had considered the material that was ultimately the subject of the notice to admit facts being expert evidence and police depositions. It is therefore difficult to assess the offeree's prospects of success, assessed as at the date of the offer. 16 The sum offered by way of compromise being $50,000 was significantly less than the $400,000 plus interest that the plaintiff claimed at trial. Although it should have been apparent by February 2011 that the plaintiff's claim was unlikely to succeed this assessment was unlikely to have been possible in 2008. It is not appropriate to look back and in hindsight consider whether the offer should have been accepted in light of the evidence that was ultimately led at trial and the court's ruling. 17 Although the offer refers to a foreshadowed application for indemnity costs the reasons for the offer are not clearly expressed. 18 Recently, in Keays v JP Morgan Administrative Services Australia Ltd (No 2) [2011] FCA 547 the court considered the issue of what constitutes a Calderbank offer in the context of a determination of costs. At [19] the court cited with approval the dictum of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd(No 11) (2001) 109 FCR 77: No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, if the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs. … The requirements of 'sufficient particularity' and 'inevitability of failure' are important. In their absence, it would be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope that if it ultimately finds favour with the court, an award of indemnity costs will follow. If this was correct, one might ask rhetorically, 'Why write a letter as distinct from simply relying on the pleadings?'. 19 The offer made by the defendant in its letter dated 14 November 2008 does not state with any particularity why the plaintiff's case must fail. It is not suggested that the defendant's letter dated 13 November 2008 that is referred to in the correspondence particularises why the plaintiff ought to accept the offer of 14 November 2008. (Page 7)
20 Further, there is no suggestion of compromise in the correspondence. Although the defendant's offer refers to the decision of Calderbank v Calderbank [1975] 3 All ER 333, I do not consider that the offer encompasses the matters raised by Lindgren J that were adopted by the court in Keays v JP Morgan Administrative Services Australia Ltd (No 2). The plaintiff's conduct was reasonable and an order for costs on an indemnity basis is not appropriate. 21 However although indemnity costs are not appropriate, I accept that the plaintiff's substantive claim was dismissed. The offer was put within about 13 months of the action being commenced and after discovery had been provided by the plaintiff and defendant and after a pre-trial conference. It is submitted by the defendant that at the time of its offer the plaintiff ought not to have incurred significant costs. The plaintiff had incurred loss and damage in the form of material damage to its house and resultant loss of sales and that some legal and investigative costs had been incurred but I accept that the costs incurred by the plaintiff after the offer was made and up to and including trial would have been more significant than the costs incurred prior to and up to the expiration of the defendant's offer on 28 November 2008.
The plaintiff's notice to admit facts 22 The plaintiff first issued its notice to admit facts on 11 October 2010 and sought a response from the defendant within 28 days. The defendant did not file and serve its response until 11 February 2011. The defendant submits that it responded to the plaintiff's notice to admit facts within a reasonable period of time because it conferred with both the plaintiff and third party regarding the admissions that were sought by the plaintiff (affidavit of Robert Lelio Marando dated 13 June 2011, attachments RLM-12 to RLM-22). 23 The plaintiff submits (and I accept the submission for the purposes of this application) that, as a result of the defendant's failure to respond to its notice to admit facts it arranged for 18 witnesses to be subpoenaed and ordered to attend court to give evidence. The admissions were made only three days before the trial commenced on 14 February 2011 and as a result of the defendant's admissions 12 witnesses were no longer required. I accept that the 12 witnesses' evidence related directly to proving the nature and timing of the fire. I accept that these issues, without the defendant's admissions, would have had to have been the subject of evidence in order for the plaintiff to properly put its case. The nature and timing of the fire would have required expert evidence had admissions not been made. I accept that the plaintiff appropriately obtained expert (Page 8)
reports from Maurie Tong and Michael Dyer that were provided to the defendant and the third party on 23 December 2010, being approximately six weeks before the admissions were made. 24 The defendant did not admit all of the facts that the plaintiff sought to have admitted. The defendant, in its outline of submissions on trial costs, has provided a schedule setting out the admissions sought by the plaintiff and the defendant's response. The following admissions sought were not admitted and as a result of the findings were not proved in any event:
Plaintiff's sought admissions | Defendant's response | Court's findings | | 9. Prior to 26 March 2004 Roberts knew that Hooper's (and the other four builders') interests in the village would be confined to his/their own display home(s), but that Hooper (and the other builders) would expect the protection would be 'divided' between all the display homes in the village | Not admitted. | The plaintiff's commercial intention was for lots on the estate to be purchased by its clients in order for houses to be built [109]. | | 10. Prior to 26 March 2004 Roberts knew that Hooper (and the other four builders including the plaintiff) would not expect that the protection would be 'divided' between the village and the rest of Corondale Estate (as defined at par 19) | 34. Not admitted. | [11] – [13], [104] – [110]. [109] Further, the plaintiff's commercial intention was for lots on the estate to be purchased by its client in order for houses to be built. | | 11. Roberts therefore drafted two proposed clauses (the proposed protection clauses) to be added to the offer and acceptance documents between the defendant and builders and showed them to Hooper for his approval. | 35. Not admitted. | Mr Hooper drafted and added cl 7 and cl 8 to the contract [16]. | (Page 9)
| 12. Hooper approved the proposed protection clauses. | 36. Not admitted. | Mr Hooper drafted and added cl 7 and cl 8 to the contract [16]. | | 13. Roberts then copied the proposed protection clauses verbatim into the sales contract of each of the builders at cl 7 and cl 8. | 37. Not admitted. | It was found that each of the contracts relevant to the sale and purchase of the display home lots contained the same special conditions, cl 7 and cl 8 [17]. No findings in relation to who copied the clauses. | | 18. Butchart did not confine his security patrol to the village and would, roughly hourly, conduct a vehicular patrol of about five minutes' duration of the area within the perimeter of: (a) Seville Dr (between the roundabout and Chidzey Dr and the creek only); (b) The north-western boundary of Cecil Andrews Senior High School; (c) A creek which borders part of Viana Lp, Granada Lp and Salamanca Blvd (cumulatively Corondale Estate). | Not admitted. | Mr Butchart's usual procedure was accepted, however precise details of the route taken were not the subject of comment in reasons. | | 19. Before and on 17 July 2005, Butchart's practice, whenever he saw any suspicious or illegal activity on Corondale Estate, was to drive up to the persons performing the activity, and in every instance when he did this, the person(s) departed the area. | Not admitted. | Mr Butchart's usual practice was to wait five minutes … [37]. Mr Butchart would not confront or apprehend a person who appeared to be involved in the commission of a criminal offence [117]. | (Page 10)
25 The defendant made partial admissions or did not admit a number of facts that ultimately were not challenged at trial. The plaintiff submits that the cost of proving the alleged facts was not significant. 26 I make the following comments in relation to the admissions sought by the plaintiff.
Plaintiff's sought admissions | Defendant's response | Comments | | 3. At all material times Malcolm Roberts (Roberts) was the defendant's disclosed sales agent or was the director, employee or agent of the defendant's disclosed sales agent. | 27. Partial admission. | Mr Roberts' evidence on this point was not challenged. If challenged the plaintiff could have proved the fact through Mr Roberts in re-examination. | | 4. At all material times Aidan Hooper (Hooper) was a director of Homebuyers Centre Pty Ltd which was the largest of the six building companies/contractors of the proposed display homes at lots 334 to 339 inclusive (the village) | Partial admission. | The fact that Homebuyers Centre Pty Ltd was the most active/largest of the six building companies was not challenged. Evidence could have been led through Mr Hooper in re-examination to confirm this if challenged. | | 6. Before 26 March 2004 Roberts knew that Hooper was very concerned about security of his (company's) display homes, especially in areas where theft and malicious damage were prevalent. | Not admitted. | Admission sought proved [81]. No material challenge by the defendant. Mr Roberts was required to give evidence in any event. | | 7. The village was located in an area where theft and malicious damage were prevalent. | 31. Not admitted. | Admission proved [26]. Not challenged by the defendant. No evidence called specifically in relation to crime statistics, theft and malicious damage on behalf of the plaintiff. | (Page 11)
| 8. Prior to 26 March 2004 Roberts knew that to get Hooper to join the village Roberts needed to convince him that any display home Hooper caused to be constructed in the village would be adequately protected against theft and malicious damage by static security arranged by the defendant (protection). | 32. Not admitted. | Admission proved [81]. | | 15. By fax dated 31 January 2005 Whelpdale contracted with Verdenius with the intention of discharging the defendant's obligations to the plaintiff pursuant to cl 8 of the contract. | Partial admission. | The admissions sought by the plaintiff proven [111]. Challenged by third party not by defendant. | 27 The defendant was unable to make three admissions sought by the plaintiff given that the third party had not admitted the sought admission. 28 Order 66 r 3(2) Rules of the Supreme Court states: If a party on whom a notice to admit facts is served under O 30 r 2 refuses or neglects to admit facts within seven days after the service on him of the notice or such longer time as may be allowed by the court, the costs of proving the facts shall be paid by him, unless the court orders otherwise. 29 I am satisfied that the admissions made by the defendant on 11 February 2011 related to facts that would have been in issue at trial and that the plaintiff properly subpoenaed, proofed and arranged for witnesses, expert witnesses and for expert reports in relation to the witnesses who were ultimately not called. 30 Although the plaintiff may have had copies of sworn witness statements (taken by the police) which evidenced that the fire occurred between 5.30 am and 6.00 am on 17 July 2005 (RLM-5 to RLM-11) it was still appropriate for the plaintiff to seek expert evidence in relation to the timing of the fire event because the defendant had not indicated that the sworn witness statements would not be challenged at trial. (Page 12)
31 For the reasons outlined in my comments in relation to the admissions sought that were not admitted by the defendant I do not accept that the defendant was put to additional expense in relation to the facts that were never admitted by the defendant but that were subsequently found at trial. 32 I do not accept that the defendant has provided a reasonable explanation as to why the defendant could not have made the admissions it ultimately made on 11 February 2011 by 9 November 2010. 33 The defendant is required to pay the plaintiff's costs relevant to the 12 witnesses for the period 9 November 2010 to 11 February 2011. The plaintiff's costs in relation to the preparation of expert evidence, including the preparation of expert reports prior to 9 November 2010 does not fall within the period 9 November 2010 to 11 February 2011.
Defendant's notice to admit facts 34 The defendant sought five admissions from the plaintiff. The plaintiff did not make any of the admissions sought prior to trial. I do not consider it necessary to set out the admissions sought but note that I consider that it was open to the plaintiff to make a partial admission in respect of admission 1, to admit admission 2, to make a partial admission in respect of admission 3, to admit admission 4 in light of Mr Roberts' prepared weekly reports that were known to the plaintiff and to admit admission 5. Failure by the plaintiff to make full or partial admission has, however, not contributed significantly to the defendant's costs at trial. Most of the court's findings in relation to the admissions sought came from the unchallenged evidence led by the plaintiff in any event.
Third party's costs 35 Given that the third party was wholly successful the usual course would be to order that it recover its costs from the defendant; O 66 r 1 Rules of the Supreme Court. The defendant, however, submits that the third party ought to pay the defendant's costs for the third party proceedings on all issues other than the issue of causation. 36 The position between the defendant and the third party can be distinguished from that between the plaintiff and the defendant because the plaintiff's action against the defendant was only in relation to contract whereas the defendant proceeded against the third party in contract and in tort. (Page 13)
37 Although the reasons for decision indicated that the third party owed the defendant a duty of care to provide its security service with due care and skill [170] and that the third party breached the owed duty because it left the site unguarded between 5.30 am and 6.00 am on 17 July 2005 [171], the defendant did not prove that the loss the subject of the trial was caused by the third party's breach. 38 Further, given that the defendant's claim against the third party was in both contract and in tort, the Civil Liability Act would have applied to the tortious claim. I adopt the reasoning of [121] - [132]. I note that my findings on the Civil Liability Act were in relation to a pleading based solely in breach of contract being the action between the plaintiff and the defendant. Given that the plaintiff chose not to proceed against the third party because it recognised that a tortious claim would be likely to fail, I do not accept that the plaintiff should be liable to pay or contribute towards the costs incurred by the third party. 39 The defendant has failed to show any exceptional circumstances or special grounds to persuade me to exercise my discretion against the order that would usually be made. The defendant is to pay the third party's costs of the third party proceedings on all issues (including reserved costs). 40 Accordingly, I make the following orders: 1. The plaintiff pay the defendant's costs of the action on a party/party basis to be taxed if not agreed. 2. The defendant pay the plaintiff's costs incurred between 9 November 2010 and 11 February 2011 in relation to the proof of facts numbers 1, 2, 5, 14, 16, 22, 23 and 24 contained in its notice to admit facts dated 7 February 2011 (deemed served on 11 October 2010). 3. The defendant pay the third party's costs of the third party proceedings on all issues (including reserved costs) to be taxed if not agreed. 4. The defendant pay the third party's costs relevant to this application for costs to be taxed if not agreed. 5. There are no further orders as to costs in respect of this costs application.
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