Bradken Resources Pty Limited v AW PARKER'S Enterprises Pty Ltd
[2018] WADC 170
•10 DECEMBER 2018
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: BRADKEN RESOURCES PTY LIMITED -v- AW PARKER'S ENTERPRISES PTY LTD [2018] WADC 170
CORAM: HERRON DCJ
HEARD: ON THE PAPERS
DELIVERED : 10 DECEMBER 2018
FILE NO/S: CIV 4456 of 2016
BETWEEN: BRADKEN RESOURCES PTY LIMITED
Plaintiff
AND
AW PARKER'S ENTERPRISES PTY LTD
Defendant
Catchwords:
Costs - Indemnity - Pursuant to contract - Calderbank v Calderbank
Legislation:
District Court of Western Australia Act 1969 (WA)
District Court Rules 2005 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
Plaintiff awarded indemnity costs
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Turks Legal |
| Defendant | : | Not applicable |
Case(s) referred to in decision(s):
Calderbank v Calderbank (1975) 3 All ER 333
Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 5) [2009] WASC 141
Frigger v Clavey Legal Pty Ltd [2015] WADC 21 (S)
Rumball v Mortimore [2000] WASC 126
Wenpac Pty Ltd v Allied Westralian Finance Ltd (1994) FLR 1
HERRON DCJ:
The trial in this matter proceeded to hearing before me from 25 September to 27 September 2018, following which I reserved my reasons for decision.
On 12 October 2018 I orally delivered reserved reasons for decision.
Mr Parker, pursuant to leave, represented the defendant company at the trial. Although he was advised of the date on which I was to deliver the reasons for decision, he failed to attend on 12 October 2018 and I delivered the reasons for decision in his absence.
I found for the plaintiff and awarded judgment for the plaintiff. I also ordered that the defendant's counterclaim be dismissed.
In accordance with the plaintiff's minute of proposed orders I made orders in terms of pars 1 and 2 as follows:
1.The defendant pay the plaintiff the sum of $109,440.
2.The defendant pay interest to the plaintiff in the sum of $3,617.41.
Paragraph 3 sought an order in the following terms:
The defendant pay the plaintiff's costs of the action including reserved costs on an indemnity basis, such costs to be taxed if not agreed.
I made an order that the defendant pay the plaintiff's costs of the action, including reserved costs, such costs to be taxed if not agreed. In relation to the claim for costs to be awarded on an indemnity basis I reserved my decision and ordered the plaintiff to file written submissions in support of such an order being made within 10 days and ordered the defendant provide written submissions in response within a further 10 days.
In accordance with those orders written submissions on behalf of the plaintiff were filed on 22 October 2018, together with an affidavit sworn by Timothy John James dated 18 October 2018 annexing letters purporting to make offers to the defendant through its then solicitors, Birman and Ride, in accordance with the principles of Calderbank v Calderbank (1975) 3 All ER 333.
I have not received any written submissions from the defendant. The transcript of my oral reasons for decision were provided to each of the parties by email dated 12 October 2018, together with confirmation regarding the order for the filing of written submissions by each of the parties. In separate emails dated 27 November my associate advised Mr Parker of the orders made for the filing of submissions and extended the time for him to file submissions on behalf of the defendant for a further seven days to 4 December 2018. No response was received to the later email.
Entitlement to costs pursuant to contract
The plaintiff seeks an order for indemnity costs principally based upon the terms of the credit application dated 27 June 2012 which expressly provide for the defendant to pay indemnity costs.
Clause 6 (c) of the terms and conditions provides that:
All losses, expenses and costs (including legal fees on an indemnity basis) consequent upon the Buyer's failure to pay on the due date, are payable by the Buyer upon demand and recoverable from the Buyer by CMS as a liquidated debt.
By par 6 of its statement of claim the plaintiff expressly pleads that pursuant to cl 6(c) of the agreement the defendant is liable to indemnify the plaintiff for all costs on an indemnity basis. Further, in its particulars of damages filed pursuant to the District Court Rules 2005 (WA) on 4 December 2017 the plaintiff claimed indemnity costs pursuant to cl 6(c).
The making of an order for costs is in the discretion of the court: Supreme Court Act 1935 (WA) s 37(1), District Court of Western Australia Act 1969 (WA) s 64 and O 66 r 1 of the Rules of the Supreme Court 1971 (WA).
Where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a specified basis, a court should ordinarily exercise its discretion in a manner consistent with the contractual provisions. I adopt the summary of the relevant principles which apply in awarding costs on a contractual basis as explained by Owen J in Rumball v Mortimore [2000] WASC 126 [15] - [17]:
15.The Court has a broad discretion over the basis upon which it orders the costs of an action. However, where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a certain basis, the Court should ordinarily exercise its discretion in a manner consistent with the contractual provisions: see Citibank Savings Ltd v Nicholson, unreported; FCt SCt of SA; 1 April 1998; Bank of Western Australia Limited v Ponga; Gomba Holdings (UK) Ltd v Minories Finance Pty Ltd (No 2) [1992] 4 All ER 588. In Citibank Savings Williams J (with whom Cox and Mullighan JJ agreed) said, with particular reference to proceedings between mortgagee and mortgagor, at 3:
"[T]he terms of any costs order in favour of a successful mortgagee should ordinarily reflect the terms of any special bargain contained in the mortgage contract … [T]here will [however] be special occasions where policy considerations may call in question the enforceability of a particular contractual provision …"
16.In ANZ Banking Group (New Zealand) Ltd v Gibson [1986] 1 NZLR 556 the New Zealand Court of Appeal was dealing with a provision in a guarantee allowing for costs to be paid by a guarantor on a solicitor/client basis. Richardson J said, at 566:
"enforcement on a solicitor/client basis is in my view an extending provision intended to entitle the Bank to indemnity with respect to legal expenses properly incurred by it in relation to a recovery action under the guarantee. Clearly that contractual obligation is enforceable unless contrary to public policy and I am unable to see how this contractual arrangement could be said to impede the administration of justice or otherwise be contrary to any discernible public policy considerations. To put the point affirmatively, why should a lender be out of pocket as a result of a failure to pay when the parties have expressly provided that they should be indemnified in the event of default by the other."
17.In both Citibank Savings and Gibson the court made reference to "policy considerations" which may militate against the court exercising its discretion to make a costs order in accordance with the basis provided for in the contract. In general, a costs order will not allow a party to recover costs which were improperly or unreasonably incurred or improper or unreasonable in amount, notwithstanding what is provided for by the contract: see Gomba Holdings at 601 - 602. Furthermore, a mortgagee will forfeit his contractual right to his general costs of an action on the mortgage if his conduct has been "[so] … inequitable … as [to] amount to violation or culpable neglect of his duty under the contract": per Lord Selbourne LC in Cotterell v Stratton [1872] LR 8 Ch App 295 at 302 (followed in Union Finance Association Ltd v Howarth (1903) 4 SR (NSW) 31; Re Shanahan (1941) 58 WN (NSW) 132; Shercliffe v Engadine Acceptance Corporation Pty Ltd (No 2) (1982) 3 BPR 9207; Sandtara Pty Ltd v Australian European Finance Corporation Ltd (1990) 20 NSWLR 82; Gomba Holdings; Citibank Savings).
The plaintiff further submits:
13.Where the terms of a contract provide for a party to pay legal costs in consequence of any default by it, the claim for legal costs is a claim pursuant to the contract. The onus rests on the claimant to prove the amount of the claim against the party in default. The claim differs from the usual entitlement of a successful party in litigation where the right to costs derives from the order of the court and the quantification of costs is subject to assessment by the taxation process.[1]
14.The Supreme Court of Western Australia has stated that if one party is liable by agreement to indemnify another in respect of all costs reasonably incurred by the first in respect of proceedings, the appropriate order is for the payment of such costs which are to be awarded on an indemnity basis.[2]
[1] Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 5) [2009] WASC 141 at [12].
[2] Wenpac Pty Ltd v Allied Westralian Finance Ltd (1994) FLR 1 at 69; BC9401476.
I accept the plaintiff's submissions are an accurate summary of the principles which apply and which guide me in the exercise of my discretion regarding the appropriate order for costs.
I also acknowledge the observation of Owen J in Rumball v Mortimore above at [17] that a general costs order will not allow a party to recover costs which were improperly or unreasonably incurred or improper or in an unreasonable amount, notwithstanding what is provided for by the contract. The quantification of costs to which the plaintiff is entitled is subject to assessment by a registrar in the taxation process and during the process the registrar will be required to assess the plaintiff's quantification of its costs and determine that only costs which were properly and reasonably incurred are recoverable. I am of course at this stage not required to determine what costs have been properly and reasonably incurred by the plaintiff which they are entitled to recover in accordance with the order for costs I am about to make.
Having regard to my reasons for decision in granting judgment for the plaintiff and dismissing the defendant's counterclaim I am satisfied that by cl 6(c) of the agreement the plaintiff is entitled to all its costs properly and reasonably incurred in prosecuting its action against the defendant and in defending the defendant's counterclaim.
Calderbank offers
I now turn to consider the alternative submission that the plaintiff is entitled to an order for indemnity costs on the basis of offers purportedly made on the basis of Calderbank v Calderbank.
Legal principles of a Calderbank offer
I adopt, without repeating, my reasons in Frigger v Clavey Legal Pty Ltd [2015] WADC 21 (S), [38] - [44], governing the discretion to award indemnity costs pursuant to a successful Calderbank offer.
I am satisfied the two letters sent by the plaintiff's solicitors to the defendant's then solicitors on 5 September 2017 and 21 May 2018 are Calderbank offers. The first offer, dated 5 September 2017, offered to settle the proceedings between the parties by the defendant paying the sum of $85,000 inclusive of costs and interest. The offer was open for acceptance until 13 September 2017. The second offer dated 21 May 2018, offered to settle the proceedings between the parties on the basis of the defendant paying the plaintiff the sum of $90,000 which was expressed to be open for acceptance until 28 May 2018. The first offer proposed the settlement sum being paid in three separate instalments. The second offer proposed the settlement sum be paid in one payment.
I am satisfied that the defendant's rejection of the plaintiff's Calderbank offers was unreasonable.
Each of the offers was made to the defendant when the defendant was represented by solicitors. Each of the offers was made at a sufficiently early stage in the court proceedings, which if the offer had been accepted, would have avoided the considerable costs incurred by the plaintiff in proceeding to trial. I am satisfied the offers were left open for a sufficient length of time for the defendant to properly consider the offers.
The extent of the comprise offered, which were expressed as commercial offers, represented a significant comprise of the plaintiff's claim as reflected in the judgment now entered in favour of the plaintiff.
I am satisfied the two offers were expressed in clear and unambiguous terms. Had either offer been accepted there would have been a substantial saving as to costs.
I am therefore satisfied the defendant's rejection of each of the plaintiff's Calderbank offers was unreasonable. Therefore in those circumstances and on this further basis, I also conclude the defendant is entitled to an order in its favour for indemnity costs from the time its first offer was open for acceptance, that is, from 13 September 2017. I accordingly make such an order. I am satisfied it is proper and reasonable that the defendant be ordered to pay the plaintiff's costs on an indemnity basis from the date when the first Calderbank offer expired on 13 September 2017.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
KG
ASSOCIATE TO JUDGE HERRON10 DECEMBER 2018
0
5
4