Bond Brewing New South Wales Limited v Whitehouse Properties Pty Limited

[1992] HCATrans 360

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S73 of 1992

B e t w e e n -

BOND BREWING NEW SOUTH WALES

LIMITED

Applicant

and

WHITEHOUSE PROPERTIES PTY

LIMITED

Respondent

Application for special leave

to appeal

MASON CJ
DEANE J

GAUDRON J

Bond 1 10/12/92

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 10 DECEMBER 1992, AT 12.47 PM

Copyright in the High Court of Australia

MR A.J.L. BANNON:  If it please the Court, I appear with my

learned friend, MS R. SOFRONIOU, for the applicant.

(instructed by Corrs Chambers Westgarth)

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friend, MR D.J. HAMMERSCHLAG, for the

respondent. (instructed by Dunhill Madden Butler)

MASON CJ: Yes, Mr Bannon.

MR BANNON: 

Your Honour, this application relates primarily,

in the first instance, to a question of
construction of what we submit are very important
rules of a supreme court relating to questions of

cost in circumstances where offers of compromise so

called in the supreme court rules are involved.

Rules relating to the offers of compromise were introduced relatively contemporaneously around

the States of Australia between 1987 and 1991.

Those dates appear from the various annexures to

the application. In New South Wales and other
States these rules replaced the rules as to payment

into court, with the following important

differences: with a payment into court that could

only be made by a defendant; payments into court
were limited to money claims and not to other forms

of relief; under these rules money need not be paid

in; and, lastly, an offer of compromise can be

served before a notice of appearance is entered by

a defendant and, indeed, with the writ.

We submit one can infer from this scheme of

rules around the country that it reflects a general

concern with rule-making bodies of promoting

settlements, clearing court lists and, importantly,

providing a limitation on legal costs which,

unfortunately one must recognize, are deplorably

high and not compensated by ordinary orders for

costs.

MASON CJ:  Can I ask you this question: how identical or

similar	are the rules in other jurisdictions to the
similar	rules in question here - that is 17(4),
17(5)?	I am looking at the table or schedule that
appears	at 149 of the application book.

MR BANNON: At least in some of the States they are

virtually identical, in so far as they visit

differential cost consequences depending on whether

it is a plaintiff or a defendant who makes the

offer for a compromise; and secondly, they use the

expressions ttplaintifftt and ttdefendanttt in those

terms; and I can take Your Honours to some

examples.

Bond 2 10/12/92

MASON CJ: Well, there is no need to do that. I was rather

concerned to know whether, in a number of cases,

there is, as it were, the division that is made by

rule 17(4) and (5).

MR BANNON:  Yes, Your Honour, there is.

MASON CJ: There is?

MR BANNON:	Yes.
MASON CJ:	Thank you.
MR BANNON:	The reflected concern is also a concern with the question of legal costs and the cost of justice
which, we submit, it may be taken as a matter of
significant public importance, particularly in the
present climate. Rule 17 in part of rule 52 works
in conjunction with part 22, the offers of
compromise, and we submit that it is designed to
provide, as much as possible, some certainty for
litigants who may desire to bring litigation to an
end by making an offer for compromise.

The certainty is not absolute because in the

relevant rules in New South Wales and in other

rules there is a provision that the court may

otherwise order, but at least there is a starting

prima facie position from which a litigant may feel

some comfort in knowing provided he can understand

the application of the rule.

That concern for certainty is reflected in the

judgment of the trial judge, Mr Justice Giles, at

page 25 of the appeal book. His Honour makes a

reference to that. And the general concern about

the significance of these rules, it may be thought,
was reflected in the fact that the Court of Appeal

itself granted leave to appeal on the decision on

the question of costs.

MASON CJ: Are there any inconsistent decisions in New South

Wales or in other States; that is, decisions inconsistent with the decision of the Court of

Appeal in this case?

MR BANNON:  So far as New South Wales is concerned, no, and

indeed this is the only decision which really deals

with this question in any detail and this is the only decision of which we are aware in which the court has indicated that plaintiff and defendant in

these rules means other than plaintiff so-called or

defendant so-called.

MASON CJ: There is another decision, is there not, which

indicates that, though in a different context, a

decision in which the rules or the words are

Bond 3 10/12/92

applied to appellant and respondent in an appellate

context?

MR BANNON:  Yes, well, I am not personally aware of that

decision.

MASON CJ:  I do not think it bears on this case.

MR BANNON: Well, we would submit not, Your Honour. There

is one matter which has not been referred to in the

application which should be referred to. Part 6,

rule 6 of the Supreme Court Rules deals with cross

claims and that says, "For the purposes of the

rules, cross claims shall be treated as an

originating process." And for that purpose, cross-claimant equates with a plaintiff, and cross-defendant equates with a defendant.

So that we would say that when one applies

that provision to Part 22 and Part 52 rule 17, one

can see that there is, on our case, an element of

certainty in identifying, simply by reference to

court pleadings, who we are talking about. That

provision in relation to cross claims is not needed

in some of the other States because the particular

rules commence with an expression that "plaintiff"

means "plaintiff or cross claimant" and "defendant"

means "defendant or cross defendant".

We submit that the approach of the Court of

Appeal is productive of alarming uncertainty as to

the question of costs and the consequences and

subverts, we submit, the purpose of the rules. And

we submit that the uncertainty which can arise is
well exemplified by attempting to apply the Court

of Appeal approach to this case.

I should add - and this appears from page 56

of the appeal book in His Honour

Mr Justice Handley's judgment at line 5 - that this

is a matter which, unfortunately, was not developed

or raised in oral argument and His Honour says:

referred to obliquely in ..... written

submissions -

and my understanding of the matter is that it

simply was not developed in any way by the parties

so that it comes to this Court in the unfortunate

circumstance that the matters which I have referred

to and will refer to have not been put to the court

so that that may be a matter which ought to be

taken into account.

The present case involved a claim for an

estoppel which was raised in the defence. It was

pleaded in the defence - and this appears at page

Bond 4 10/12/92

59 of the application book, line 15 - as an

equitable estoppel. Very briefly, the nature of
the estoppel was that the defendant took an
assignment of a lease of a hotel, the lease

providing no security for tenure, terminable either

at will or on monthly notice, and paid a

substantial amount for good will.

It was accepted by the parties that the

purchase, or at least the acquisition of the lease,

was on an assumption that if Bond Brewing sought

possession it would pay proper compensation and

that was based on a decision of Mr Justice Waddell

in B.ond Brewing v Reffell Party Ice, which is

unreported, where His Honour found that estoppel to

exist. It is not entirely clear, we would submit -

and this is one of the problems of certainty

involved - while the facts are clear it is not

entirely clear whether His Honour was saying that

it was an equitable estoppel or an estoppel which

sounded at common law as well.

On one view of the way in which it was treated

it may be treated as a conventional estoppal, the

parties operated on a certain assumed state of

affairs, namely the terms on which the possession

would be taken. Against that view, it might be

said that that involved questions of law and might

more properly be regarded as a form of equitable

estoppel.

In Commonwealth v Verwayen, Your Honour the

Chief Justice and Mr Justice Deane both expressed

views, we submit, which indicated that the proper

approach is that there is but one body of estoppal

which sounds both in common law and equity under a

fused system. If that view is right - I say that

in the sense that it does not appear to have been

accepted, expressly at least, by other members of

the Court in that judgment - that would have the

consequence, we would submit, that any form of

estoppal may be raised as a defence and should be

so regarded in substance as a defence.

MASON CJ: It seems to be a very small tail wagging a very

large dog if, in order to determine the outcome of

questions of costs, you have got to work out all

these questions of equity in order to decide

whether a party is a plaintiff or a defendant

within the meaning of these rules.

MR BANNON:  We would respectfully agree with that,

Your Honour, and particularly when one looks at or

accepts the fact that the rules were enacted

against a background of section 59 of the Supreme

Court Act which is referred to in the Court of

Bond 10/12/92

Appeal judgment which provides that estoppels, in

effect, such as these can be raised as defences.

MASON CJ:  Is there not an earlier rule? I had an idea

there was an almost immediately preceding rule

which defined "plaintiff" and "defendant" in terms

of a person who commenced proceedings and a person

against whom proceedings were brought.

MR BANNON: There is a definition of "plaintiff" and

"defendant" in the Act but in the early rules it

says that - it simply operates on an assumption

that the plaintiff is the party who commences the

proceedings. It says, "The plaintiff may commence

by statement of claim or the plaintiff may commence

by summons" and then the defendant can do certain

things. We would submit there cannot be any doubt

about whom the rules are referring to in those

rules and, indeed, there is a myriad of rules

throughout the rules which make an assumption that

people know whom one is talking about when one

refers to "plaintiff" and "defendant".

MASON CJ:  Mr Bannon, before we adjourn, there is one

problem about the case from your point of view and

that is this: it relates to a question of costs and

traditionally the Court does not grant special leave in relation to questions of costs unless

there is some fundamental principle involved; and

the other aspect of the case is, it is not only a
question of costs but it is a question of costs
that depends upon the interpretation of the rules

of the supreme court.

MR BANNON:  Yes, I accept those difficulties stand in our

way but we say in response to them firstly that

notwithstanding that general position taken by the

Court, New South Wales certainly is now saddled

with a decision, a unanimous decision, which

provides, we submit, a direction into complete

uncertainty about rules which are of great

importance. It is hard to conceive of anything

which is of more significance and of greater wide

public concern than the question of the costs of

justice and when, around the States, there is an

attempt made to try and deal with that approach,

certainty must be at the forefront and it does

raise, in that sense, a matter of public

importance, which, the way things have panned out,

only this Court can rectify, if we are right.

MASON CJ: Well, we will adjourn now and we will resume at

2 o'clock.

Bond 6 10/12/92

The provisions relating to plaintiff and

defendant that I had in mind were in the Act. They

are sections 19 and 78 in the Supreme Court Act and

they are in the terms that you indicated.

AT 1.02 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.00 PM:

MASON CJ: Yes, Mr Bannon.

MR BANNON:  Thank you, Your Honour. Your Honour, in terms

of the general importance, the uncertainty in the

rules in relation to the costs, we submit, is

likely to be productive of a reduction in the

attractiveness and effectiveness of these rules

which promote compromise. That is a matter, albeit

founded in the rules of the courts of the various

States, in which this Court has an interest both in

the general promotion of resolution by consensus of

proceedings where there is a sensible proposal and,

indeed, in the self-interest of minimizing or

reducing the number of applications which may need

to be decided by this Court.

The ramifications of the Court of Appeal's

decision are likely to be felt in other States,
there being no other appellate court or even single

instance decision of which we are aware dealing

with this subject-matter. Lastly, the

ramifications, although they presently are related

extend to other rules and could run amok through	specifically to the rules relating to costs, may	those rules every time a rule refers to a plaintiff
or defendant.

The other alternative approach we rely upon in

terms of a question which is deserving of special
leave, we say this: that if one accepts the
construction of the rules adopted by the Court of

Appeal, one then has to determine the question of whether or not the raising of this defence makes

the defendant in substance a defendant. We submit

that raises some important questions of principle

which are yet unresolved, at least in a final

sense, such as: is this estoppel an equitable

estoppel or, in truth, a common law estoppel,

because we would say that if it was a common law

estoppel one must regard it as a defence in truth

and in substance.

Bond 10/12/92

MASON CJ: But really this case would be a very unsuitable

vehicle for the Court to explore those difficult

questions.

MR BANNON: 

It would be suitable in so far as the facts are

not in issue, although we accept that it would be
something of a side wind in which the matter would

be brought before the Court, to say the least.

MASON CJ:  Mr Bannon, I was going to ask you: was the

exercise of discretion agitated at all during the

course of argument in the Court of Appeal, because

it did seem to me that the discretion, if

exercised, might have been exercised in a way so as

to achieve this very result? I know that does not

detract from the criticisms you have made of the

interpretation given to the rules.

MR BANNON:  The discretion, I think, actually was - - -

GAUDRON J: It was raised at first instance, certainly.

MR BANNON: 

It was certainly raised at first instance but

not in a context where it might need to be
exercised in circumstances where a defendant was
saying that rule 52 17(4), should be interpreted in
the way the Court of Appeal suggested.

MASON CJ: 

No.

MR BANNON: 

And, indeed, the plaintiff did not have the

opportunity to run that argument, we say, in the

Court of Appeal either, in other words, rely on

their discretionary power to avoid this result.	We
would submit, too, that the discretionary power would not be a satisfactory way of overcoming the

effect of the Court of Appeal decision because that

would put one straight back into the position we

submit the rules were designed to avoid, namely

having no prima facie position of certainty.

MASON CJ:  No, I appreciate that from the point of view of the interpretation of the rules. I was thinking

only of the outcome in this particular case; namely
that the discretion could be exercised in order to

achieve this very result.

MR BANNON:  I have to accept, Your Honour, that that was a

possibility but it was not raised for the reasons I

have mentioned. That is all we wish to put,

Your Honours.

MASON CJ: Yes, Mr Jackson.

MR JACKSON:  Your Honours, may I say one thing before going

to the three submissions which we wish to make,

that is that the issue which the Court will be

Bond 10/12/92

asked to resolve, if special leave is granted, is
whether the applicant should have the costs of the

last three days of the trial on an indemnity rather

than on a party and party basis. Your Honour

the Chief Justice referred to the tail this

morning. That is the size of the tail.

Your Honours, may I move then to the three

submission which we would make in opposition to the

grant of special leave. The first is whether the

Court of Appeal was or was not in error in treating

the relevant source of power as being rule 17(5)

rather than rule 17(4). The result at which that

court arrived was manifestly, we would submit with

respect, the right result.

Your Honours, what I mean by that is that even

if rule 17(4) was the correct rule to apply, the

present respondent was in substance the plaintiff,

the moving party in the proceedings. It was an

appropriate case for the court to otherwise order,

in terms of rule 17(4), and the appropriate other

order in such a case would be to adopt the prima

facie principle set out in rule 17(5).

Your Honours, that the present respondent was

in substance the plaintiff in the proceedings may

be readily seen from a few passages in the reasons

for judgment of the members of the Court of Appeal,

and may I take Your Honours to those, very briefly.

The first is in the reasons for judgment of

Mr Justice Priestley, at page 43 lines 1 to 5 where

His Honour said just that. The second,

Your Honours, is in - there are some passages in

Mr Justice Handley. The first is at page 46

lines 8 to 14 where His Honour set out the nature

of the proceedings in brief, and I will come to

that in a little more detail in just a moment.	The
second is at page 50 lines 19 to 21 and

Your Honours will see that His Honour there said:

The issue here was the quantum of compensation

payable to the defendant. Subject to this the
plaintiff's claim for possession was

undefended. '

So the issue was the amount of compensation we

should be paying. At page 53 lines 1 to 11,

Your Honours, when dealing with the type of case,

His Honour drew the analogy with a claim for a bill

in equity and at page 54 line 31 through to page 55

line 9 Your Honours will see that His Honour said,

at the top of page 55:

the earlier analysis of the claims in the

proceedings demonstrates that both in form and

Bond 9 10/12/92

in substance the appellant was in the position

of a plaintiff -

and His Honour goes on down to line 9.

Your Honours, assuming for the purpose of the

argument that it is not correct to say that in form

the respondent was a plaintiff in the proceedings,

it was certainly correct to say that it was in

substance a plaintiff in the proceedings.

Your Honours, if it be that the correct

provision to apply was rule 17(4), one would have
thought, we would submit with respect, that bearing
in mind the presence of rule 17(5) and its terms,
the most obvious case where the court should
otherwise order under rule 17(4) would be a case

where the defendant, in terms of rule 17(5), was in

substance the plaintiff.

So, Your Honours, we would submit that the

result arrived at by the Court of Appeal was a

perfectly appropriate result and the case is not

attended by sufficient doubt to merit the grant of

special leave.

MASON CJ:  We need not trouble you further, Mr Jackson. Do

you wish to reply, Mr Bannon?

MR BANNON:  Yes, Your Honour. In relation to the last point

being addressed by my learned friend, we submit

that they were matters which would go to the

exercise of the discretion which was exercised in a

particular way by Mr Justice Giles and that

exercise of the discretion was not upset by the

Court of Appeal, and that the question which would

come before this Court would not involve any - - -

DEANE J: But if discretion was open in the Court of Appeal

and if one were of the view that there is great

force in what Mr Jackson has said about it, it

creates a situation where, if we granted leave and

you succeeded, the result of your success would be

for the matter to go back to the Court of Appeal,

no doubt, with some comments along the line of what

Mr Jackson has said which would mean, apart from

the important question of the costs of the appeal,

that you would really be back to where you started

from.

MR BANNON:  Your Honour, that would involve some assumptions as to how the Court of Appeal may exercise - - -

DEANE J: It involves some big assumptions, yes.

MR BANNON:  - - - its discretion but the position really put

by my learned friend is to subvert the prima facie

position in the rules and we would submit it does

Bond 10 10/12/92

not at all follow that the paradigm case for the

court to otherwise order is the circumstance where

one looks at the substance because -

DEANE J:  But even if what you say is correct and what

Mr Jackson has said is no more than strongly

arguable it is relevant to whether this Court

should subject the party on the other side to an

appeal to the High Court and going back to the

Court of Appeal on a question about involving only these costs.

MR BANNON:  Perhaps could I say two things in response to

that, Your Honours: firstly, that that may be a

response to the particular facts of this case but

still leave the community with the decision of the

Court of Appeal in the unsatisfactory way in which

we put it which we say would not be a satisfactory

response to the request for special leave.

Secondly, we say that we challenge vigorously

the suggestion that the defendant was in substance
the plaintiff in the proceedings. The defendant

could never bring a claim for compensation. Its

right was only to restrain, assuming you could

bring a claim in equity, the plaintiff proceeding

on any basis other than the basis for which it is

sought and it was only open to the plaintiff not to

pay any compensation if the order came to a figure

which was too high by simply not seeking

possession.

So that in every sense of both substance and form the whole right of the defendant to get any

money was dependent upon the plaintiff exercising

its right as a plaintiff to possession and that

there was no equity which granted the defendant any

right to bring a claim independently, either

plaintiff pursuing its right to possession for a	independently at all or independently of the
monetary sum.

The mere fact that the result of the action is

that money is paid to the defendant does not make,

in the circumstances I have indicated, the

defendant the plaintiff if it was part and parcel

of the debate between the parties as to,

effectively, the conditions or terms of the lease

and, ultimately, if it was an action in law and one

was not involved with estoppels, maybe one can by

analogy refer to a debate as to what the terms of

this lease were .. rf the debate centred on what

amount of money should be paid according to

interpretation to the terms of the lease, that

would not render the recipient of the money, in

substance, the plaintiff, in circumstances where

Bond 11 10/12/92

the primary right being sought to exercise was a

right to possession. May it please the Court.

MASON CJ:  Thank you, Mr Bannon. The Court has given

consideration to the clear and able submissions

presented by Mr Bannon. However, the Court has

come to the conclusion that the applicant's

prospects of ultimately obtaining an order for

costs on an indemnity basis are not sufficiently

strong to warrant the grant of special leave.	The
application is therefore refused.

MR JACKSON:  We ask for costs of the application.

MASON CJ: Yes, you cannot oppose that, Mr Bannon? The

application is refused with costs.

AT 2.16 PM THE MATTER WAS ADJOURNED SINE DIE

Bond 12 10/12/92