Buttsworth Trainor P/L v Robert Duncanson

[2003] NSWLC 16

Local Court of New South Wales

CITATION:	Buttsworth Trainor P/L v Robert Duncanson [2003] NSWLC 16
JURISDICTION:	Civil
PARTIES:	Buttsworth Trainor Pty Ltd Robert Roy Duncanson Sally Duncanson
FILE NUMBER:	221 of 1998; 164 of 2002
PLACE OF HEARING:	Burwood Local Court
DATE OF DECISION:	20/02/2003
MAGISTRATE:	Magistrate
CATCHWORDS:	Costs against non party - indemnity costs - whether presumption in favour when Calderbank offer not bettered
LEGISLATION CITED:	Local Court (Civil Claims) Act 1970 s 34 Local Court (Civil Claims) Rules Part 31A rule 20 Part 6 rule j8
CASES CITED:	Multicon Engineering v Federal Airports Corporation (1996) 138 ALR 425 Quirk v Bawden 112 ACTR 1 ACCC v Amcor Printing Papers Group [2000] FCA 163 Sanki Steamship v Sumitomo Australia (Federal Court 7.2.96 unreported) Grynberg v Muller Estate late M Bilfeld [2002] NSWSC 350 SMEC Testing Services v Campbelltown City Council [2000] NSWSC 323 Norbis v Norbis (1986) 161 CLR 513 at 537 Oshlack v Richmond River Council (1998) 193 CLR 72 Regata v Westpac (unreported) 5.2.93 Davies J Hayes & Associates v Kimberley Clark Australia (1994) 52 FCR 201 AFCO v Tobacco Institute (1991) 100 ALR 586 Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 Knight v F.P Special Assets (1992) 174 CLR 178 Oz B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128 Yates v Boland [2000] FCA 1895 Dragosavlevic v Serbian Orthodox Church St. Knez Lazar Inc & Ors [2002] ACTSC 19 New South Wales Ministerial Corporation v Edkins (1998) 45 NSWLR 8
REPRESENTATION:	Mr M Hutchings of Council Mr T L Goldberg Solicitor
ORDERS:	The Plaintiff and each of Mark Buttsworth and Bernard Trainor pay the defendant's costs of the action, such costs to be on an indemnity basis from 7th October 1999, and on a party/party basis before that date. The plaintiff and Messrs Buttsworth and Trainor to pay the defendant's costs of the application on a party/party basis. In all cases, Plaintiff and Messrs Buttswoth and Trainor to be jointly and severally liable.

Reasons for Decision

The defendants are the applicants for costs on an indemnity basis. Certainly they are generally entitled to a costs order, at least on a party/party basis. They also seek that the order for costs be directed to Mr. Trainor and Mr. Buttsworth personally.

The claim itself was one for surveyors' fees associated with work on a subdivision of the defendants' rural property at Honeyman's Hill Estate near Orange. The plaintiff had a contractual obligation to facilitate the subdivision and in particular to prepare a Development Application. These things it failed to do, largely because Mr. Trainor, who had carriage of the matter for the plaintiff, became ill with a brain tumour. The plaintiff took about twice as long as it should have done to reach the stage where a DA might be obtained, and in the end one was obtained by someone other than the plaintiff. In fact, it was obtained by one Peter Johnson, who was himself a surveyor and whose company bought the property from the defendants.

The defendants were in a parlous financial position, and had to sell privately. They could not wait for the plaintiff to eventually get round to preparing the DA and having it approved. The plaintiff argued that their actions in selling outside their agreement constituted a breach of an implied term not to, in effect, 'pull the plug' on the agreement in such a fashion.

The plaintiff needed to and did allege an implied obligation on the defendants’ part not to delay or 'pull the plug' on the subdivision, but, as explained below, alleged that the implied term included a requirement if breached that the defendants pay a 20% premium on the fees otherwise payable.

I found for the defendants on the Claim, taking the view amongst other things that, since an implication that a premium be paid could not be supported, the only way the plaintiff could succeed was if it had indeed conducted its case to allege such an obligation without any requirement to pay a premium, and also that if there was any such implied term in the parties' contract there would have been a reciprocal implication that the plaintiff not itself make that pursuit of the subdivision impossible by its own delay in producing a Development Application.

The plaintiff pleaded an implication that a premium of 20% would be paid if the plug was pulled. There could be no implied term to pay a premium. I should say that there was a premium payable, but it was to be found in the express terms of the contract, and I believe, on a proper interpretation of the contract, was only payable if the plaintiff fulfilled its part of the bargain, something it failed to do. As a result, the plaintiff failed.

It is convenient to deal first with the question of indemnity costs.

Indemnity Costs

The applicants' submission might be very loosely summarised as follows: Having made a Calderbank offer, and the plaintiff/respondent having refused that offer and been unwilling or slow to mediate, indemnity costs should follow once the plaintiff was found to be unsuccessful in its claim. There are other arguments, considered below, but this is the main thrust of the applicants' submission.

The respondent essentially says that the usual order is for party/party costs and that is all the applicants should have. It makes a particular point of asserting that there is no prima facie entitlement to indemnity costs merely because the Calderbank offer was not bettered. (I should say that although it was disputed there can in my view be no doubt that in fact the letter containing the offer was written and received. The previous solicitor for the defendants swore an affidavit that he sent it, and produced fax records to support what he said. I accept that evidence).

It is easier to address the contentious point whether there is such a prima facie entitlement before turning to other arguments.

Is there a prima facie entitlement merely because the Calderbank offer was not bettered?

The Rules (Part 31A rule 20(3) - (7) strictly have no application. They do provide a mechanism for indemnity costs where a plaintiff makes an offer, but not when one is made by a defendant. A defendant who makes an offer obtains only party/party costs, and then only if the plaintiff is at least partly successful, obtaining something but less than the amount offered.

Our own Rules are similar to those in the Supreme Court. In that court it has been held that there is a common law jurisdiction, which I believe to be an implied as well as an inherent jurisdiction. This Court has an express statutory jurisdiction to order indemnity costs, contained in section 34 of the Local Courts (Civil Claims) Act and in the Rules, and I believe also has implied powers to order indemnity costs.

Although our Rules do not expressly provide for indemnity costs where a defendant makes an offer, the Rules are worth looking at. Part 31A is in more ways than one a useful indicator of the legislative policy. One might have thought that the provisions were a code and that there was no room left for implied or inherent powers (the latter available in any event only in superior courts), in those cases where, because the plaintiff was not successful at all, the Rules did not apply to confer a jurisdiction. However, the implied or inherent jurisdiction to award indemnity costs in spite of the existence of such provisions is now well established. The express power is enshrined in section 34.

What is interesting is what is not contained in the Rules. Providing as they do for indemnity costs in some cases, their omission in others, including the case of offers by defendants, seems very pointed.

It is extremely interesting to see what is provided for by sub-rule (4). That provision does automatically (subject to the court "otherwise ordering" - something it presumably does only for good reason) allow a plaintiff indemnity costs if he makes a formal offer which is not accepted and ultimately obtains that much or better. That is plainly a presumption in favour of indemnity costs in such a case.

However, sub-rule (6) evinces a wholly different policy when a defendant makes an offer and the plaintiff does not better it. In that case, the defendant is to have his costs from the date of the offer, but they are expressly confined to party/party costs. In my view, there is no other possible interpretation than that the legislature or the Minister when framing the rule intended to draw a distinction - to allow indemnity costs when a plaintiff made a formal offer not accepted, but only party/party costs where a defendant does the same thing. No doubt, a defendant, in those jurisdictions which allow it, has the more satisfactory option of paying money into court. There is no power to do so in the Local Court. Of course, there is nothing to stop a defendant from paying money into a specific purpose trust account, and so achieving a similar effect. When the Rules do not strictly apply, as here, (because the plaintiff was wholly unsuccessful and the Rules do not in that case provide for indemnity costs or otherwise) it would be surprising indeed if there were a prima facie entitlement to indemnity costs when a Calderbank offer is not bettered. It would have been easy for the legislature to so provide had it wished.

I therefore think that if the correct rule for our own matter were in doubt or the arguments for and against finely balanced, one might lean against any notion that there should be a prima facie entitlement to indemnity costs in such a case.

The ruling of Rolfe J in Multicon Engineering v. Federal Airports Corporation (1996) 138 ALR 425 was indeed that there is a presumption in favour of indemnity costs when a Calderbank offer is not bettered and the plaintiff in fact fails completely. There was not an automatic entitlement (page 453.10), but there was a presumption in favour. His Honour reviewed a very large number of authorities, and reached a view that there had been a marked trend in this State, mostly in unreported decisions, to allow of such a presumption. It is a very helpful judgment, and I refer to it again below, but the presumption itself cannot now be supported. However, the reason it cannot be supported is not the reason or the authorities argued for by the plaintiff.

The plaintiff's written submissions cited the A.C.T. decision of Quirk v. Bawden 112 ACTR 1 to the effect that there is no presumption, but that decision pre-dated Multicon, and in any event could not bind me in the teeth of a decision of our own Supreme Court. The plaintiff also cited ACCC v. Amcor Printing Papers Group [2000] FCA 163 for the view that the mere rejection of a Calderbank offer cannot be decisive of the issue of indemnity costs. However, the view favoured by Rolfe J in Multicon which is very persuasive indeed and would certainly have found favour with me - had it not been overruled, was not that such a rejection of an offer should be decisive but only that it should raise a presumption.

At pp. 449 and 450 of Multicon, Rolfe J referred to suggestions by Sheppard J in Sanko Steamship v. Sumitomo Australia (Federal Court, 7.2.96, unreported) placing emphasis on the ordinary rule that costs should be paid on a party/party basis, and his Honour's comment that that rule "should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable". Rolfe J., at page page 449.40, found a conflict in that approach with his own view that a Calderbank letter should prima facie attract indemnity costs if the offer is not bettered.

However, Rolfe J found himself constrained to express the view that the approach of Sheppard J was wrong, in that it puts the emphasis in the wrong place. (Plainly his Honour meant that one should rather start with the prima facie assumption that costs should be ordered on an indemnity basis if the Calderbank offer is not bettered). Rolfe J thought that legal and factual difficulties (such difficulties having been present in Sanko and relied on by Mr. Justice Sheppard) should attract settlement offers rather than detract from them, and that was one of very many reasons why his Honour thought there should be a presumption in favour.

As his Honour said, if the approach taken by Sheppard J is correct there is no purpose in making an offer of compromise in complicated commercial litigation because it can hardly ever be said that there is no chance of success or that the rejection of an offer is plainly unreasonable. (Page 451).

Rolfe J also said that "an important, if not the ultimate, question must be whether the refusal of a Calderbank offer is reasonable in all the circumstances". (Page 453). As his Honour implied, one way in which the refusal would be reasonable is where the plaintiff merely offers to take an amount close to what he sued for.

Helpful though his Honour's judgment is, one reason the presumption cannot stand is a series of cases culminating in the decision of Hamilton J in Grynberg v. Muller; Estate late M. Bilfeld [2002] NSWSC 350, an odd and exotic case involving an application to set aside a consent judgment, something which one might think would always be difficult. Hamilton J said at paragraph 35 of the internet version of the decision that -

"It is wrong to say, as stated in the second defendant's written submissions, that 'it is now trite law that [there is] a presumption that an order for indemnity costs should be made if an offer of settlement was made, rejected and not bettered".

His Honour expressly declined to follow Rolfe J in Multicon in this respect, taking the view that Rolfe J's interpretation could not stand in light of a number of cases, but particularly the Court of Appeal decision in SMEC Testing Services v. Campbelltown City Council, [2000] NSWSC 323 . Hamilton J said (at paragraph 35) that Multicon was not mentioned in that decision. That is not, in fact, correct. It is expressly considered at paragraph 45 of the SMEC internet judgment, Gyles JA making the observation that there had been in that case no argument that the court could not have regard to the offers of compromise. It is puzzling to me that the Court of Appeal should have given such short shrift to the long and very carefully considered decision in Multicon, but I think I am bound to follow Hamilton J's view of it that Multicon can no longer stand on this point. (It is, I should say, all the more puzzling since Rolfe J, acting as a justice of appeal, himself sat in the SMEC case. Perhaps not surprisingly he dissented, but he did not refer to Multicon although he did rely on much of the same reasoning he employed in that case).

In Norbis v. Norbis (1986) 161 CLR 513 at 537, cited approvingly in Oshlack v. Richmond River Council (1998) 193 CLR 72, Brennan J said that:

"It is one thing to say that principles may be expressed to guide the exercise of a discretion; it is another thing to say that the principles may harden into legal rules which would confine the discretion more narrowly than the Parliament intended. The width of a statutory discretion is determined by the statute; it cannot be narrowed by a legal rule devised by the court to control its exercise."

Perhaps it was in that sense and for that type of reason - an unwillingness to fetter a discretion - that Hamilton J declined to accept the view stated by Rolfe J to the effect that ordinarily non-acceptance of a Calderbank offer not bettered in the decision will indeed raise a presumption in favour of indemnity costs.

However, one need not err in the opposite direction either. The plaintiff's submissions argue that "The usual order should not be departed from in the absence of evidence of unreasonable conduct, a relevant delinquency or special circumstances". I believe that submission falls into the trap of seeking to circumscribe the conditions which will attract an order - when once again there is a discretion to make an order on an indemnity basis which discretion should not be hemmed about or negated by judicially invented rules or considerations.

I explore below the question whether there must be unreasonable conduct or a relevant delinquency; in my view the result of the authorities is that such conduct or delinquency, if present, is a factor to consider but is not the only factor which might be decisive or relevant and is certainly not essential to the making of an indemnity order.

"Special circumstances" also means in my view no more than that there will be present one or more factors which warrant an order - to assert they must be special is, I think, to impermissibly circumscribe the discretion. Any circumstances will do, and special ones are not required.

When the plaintiff said in its submissions that one of the requirements for indemnity costs would be 'special circumstances', a view it expressed in the alternative in that other considerations might also be relevant, it relied on Ragata v. Westpac, 5th Feb, 1993, a decision of Davies J, but that decision, as appears from paragraphs 6 and 7 of the internet version of the judgment, turned on the provisions of the Federal Court Rules, providing as they did that a taxing officer might not make an allowance which rewarded overcaution or unusual expenses and the like. It was in that context that Davies J said, at paragraph 7, that an award of costs on an indemnity basis may be made only in a special case. I think his Honour meant no more than that in a sense a case attracting such an order will be special to justify departing from the Rule, but I do not believe he was attempting to lay down a rule that a particular factor justifying an order must itself be special. Davies J himself recognized that in New South Wales indemnity orders are commonly made following an imprudent refusal of an offer of compromise. (paragraph 9 of his decision).

I should acknowledge that there are other observations of superior courts to the effect that indemnity costs may be awarded when there is some special or unusual feature of the case justifying it. In Amcor Sackville J referred to such an observation in John S. Hayes & Associates v. Kimberley-Clark Australia (1994) 52 FCR 201 at 203, but Sackville J also made a point of referring to a cautionary note sounded by other justices in that case warning that care must be taken not to circumscribe the discretion by reference to closed categories.

There might be a combination of fairly ordinary reasons/features of the case which together justify an order, and I think it does not help to start with a proposition that there must be shown to be a 'special case' before there can be an order. However, as appears later on in these reasons, I think that in this matter there are circumstances which warrant an order, and if they must be described as 'special' so be it.

I turn now to consider in more detail the question whether to attract an order there must be either unreasonable conduct or a delinquency.

Unreasonable conduct or delinquency

The plaintiff submitted that an indemnity costs order would only be made if there were shown to be unreasonable conduct or delinquency by the party against whom the order was sought. In my view, the balance of authority is against such a view.

In AFCO v. Tobacco Institute (1991) 100 ALR 586 Morling J said that there is no general rule that there must be positive misconduct on the part of the defendant to warrant an order for indemnity costs. In that case both the refusal of a reasonable offer of settlement and the fact that the successful party had taken action in the public interest were deemed sufficient to warrant an order.

That view is referred to with evident approval by Rolfe J at page 442 of Multicon. On that page his Honour gains support from other decisions including Baltic Shipping Co. v. Dillon, (1991) 22 NSWLR 1, and notes that Kirby P there adopted a similar approach. Gleeson C.J. agreed with Kirby P. Kirby P had expressly rejected a view of the trial judge that indemnity costs should not have been ordered because there was nothing to indicate a lack of merit on the part of the defendant.

In the teeth of such eminent authority it seems to me to be near impossible to argue successfully that there must be misconduct or a delinquency for an applicant to achieve an order for indemnity costs.

In its submissions the plaintiff nevertheless ran such an an argument. It relied on Oshlack. However, that is not what Oshlack ruled. At page 89 Gaudron and Gummow JJ, upon whose judgment the plaintiff relies, said that in some cases where there had in fact been a relevant delinquency there may be an indemnity order or a solicitor and client costs order. Their Honours said that much to point up that such an order was nonetheless a compensatory one, to more fully compensate, but not to punish. This is a long way from ruling that there must always be delinquency to justify an indemnity costs order.

It is true that Sanko Steamship, referred to above, contained remarks of Sheppard J which seem to suggest the party/party rule should only be departed from where unreasonable conduct has occurred. However, those comments are in conflict with many other binding authorities, including AFCO, and I believe cannot be followed.

I believe the authorities show that there need not be a delinquency, nor unreasonable conduct, nor need the case be a 'special' one. There may be a multitude of reasons why an indemnity order should be made, and delinquencies or unreasonable behaviour will be one factor, as will a refusal of a reasonable Calderbank offer.

If these considerations are not decisive or at least not essential, what will suffice? I believe that there is a wide range of factors which should be considered. The authorities indicate that unreasonable behaviour or delinquency might indeed help to ground an order, but so might other things. In Regata, at paragraphs 8 and 9, Davies J listed a number of cases which had attracted an order. These ranged from unreasonable behaviour, such as wilful disregard of the known facts, to cases which are seen as test cases - which one can understand might be thought to more readily attract indemnity orders.

In Oshlack the High Court declined to find fault with Stein J, as he then was, who at first instance had taken account of a number of factors, listed at page 80 of the High Court report, of which (iii), (iv) and (v) were, loosely summarised, that the appellant in that case was motivated by a desire to preserve the habitat of an endangered Koala, to ensure obedience to the law and that a significant number of the public shared the stance of the appellant. Also that the basis of the challenge was arguable and had raised significant issues.

In my view, the High Court's willingness to accept that Stein J was right to have regard to such matters well illustrates how wide is the range of matters which will be relevant.

Correct principle is to have regard to a wide range of factors

I believe that the authorities show very clearly that one should have regard to a wide range of matters, and it will not be essential that there be shown to be misconduct or the like. I propose to have regard to the fact that there was a Calderbank offer made by the defendants and that it was unwisely rejected. I decline to find that there must be a special case before I can properly make an order. I similarly decline to accept that I must find unreasonable behaviour or delinquency on the part of the plaintiff, although I accept such factors are relevant, and there was a failure of obligation on the part of the plaintiff which is not delinquency but which is not too far removed from it or from the notion of unreasonable behaviour. The failure of obligation in this matter was the failure of the plaintiff to prepare the plans for the DA within a reasonable time, and its unreasonable persistence in a case which sought to lay the blame for delay in that regard at the feet of the defendants, as more fully explained below.

It is relevant in my view that the plaintiff failed to mediate, but that is a factor which is entitled to little weight. Of the two men who basically stood behind the plaintiff company, Mr. Trainor was the one who had the carriage of the matter. He was afflicted with a brain tumour, and it probably affected his ability to respond to offers of mediation. I accept that the defendants themselves attempted mediation, but then allowed the matter to drift, as did the plaintiff. I don't find it necessary to decide whether the plaintiff outright rejected mediation, as the defendants argue.

Of most relevance, in my view, apart from the refusal of the Calderbank offer, is the fact that the plaintiff's case was pleaded and run in such a fashion that, in the way that I have referred to throughout, it could not succeed. What might otherwise have been an arguable case was stymied by those limitations.

It is relevant too that the defendant Robert Duncanson continually pressed the plaintiff to perform its part of their contract. The plaintiff had an obligation to prepare the subdivision and have the development application processed. It failed in that obligation. It is difficult to see it as any kind of misbehaviour, given Mr. Trainor's terrible health problems, but it was a failure of obligation, and it was one not picked up by Mr. Buttsworth. It was this delay which ultimately forced the Duncansons to abandon their agreement with the plaintiff and sell to meet their debts. If the plaintiff had prepared the DA promptly the Duncansons would probably not have been forced to abandon the subdivision and sell outside their agreement. The failure on Mr. Trainor's part to prepare the subdivision and the DA could not be 'misconduct', nor really delinquency (even if the term 'delinquency' were interpreted to mean no more than delay without fault).

To be delinquent when one is so hamstrung by serious health problems I think there must be shown to have been advertence to the needs of the matter - the preparation of the DA and subdivision - and there must have been shown a capacity to attend to them, and that capacity was lacking because of Mr. Trainor’s health. There was a failure on Mr. Buttsworth's part to supervise what was going on with Mr. Trainor's matters and himself to attend to what needed to be done. It was a failure of obligation on Mr. Buttsworth’s part, and in a very loose sense could be seen to be a delinquency. What is really relevant is that it was a failure of obligation which ought to bear on the question of costs. It bears much less on the liability of Mr. Trainor than that of Mr. Buttsworth, but as I explain further below I believe there is enough in Mr. Trainor’s actions to attract an order to him as well – he might have had difficulty attending to the DA, but he should at least have appreciated the need to take the $5,000.00 offered in what was a hopeless case. If his health problems were so severe that he was not even in a position to get advice from his solicitor or to evaluate it, there ought to have been some better evidence of the effect of his illness on his capacity. I am not a medical practitioner, and I can’t guess at how much he was affected.

Because it was a direct result of the plaintiff's failure to prepare the DA within a reasonable time (and of its failure to plead and argue a breach of an appropriate implied term, as indicated throughout these reasons), that the losses and difficulties occurred, it especially behove the plaintiff to accept an offer such as that which was made by the defendants. It did not, and it ran its case in a way that prevented it having any chance of success. To succeed it needed to allege and prove an implied term that the defendants did not proceed to develop the estate once they got the DA approved. Paragraph 14 of the Amended Claim does allege such a thing, but the DA there spoken of was one obtained not by the plaintiff (something which the plaintiff had contracted to do) but one separately obtained by one Johnson, the ultimate purchaser of the estate.

Neither paragraph 8 or 14 nor any part of the Amended Claim was apt to pick up such a state of affairs. It might have been pleaded differently, to allege an obligation on the part of the defendants to pursue the subdivision once a DA, howsoever obtained, had been approved, but it was not. And, as I have said, there would in any event have been an obligation on the part of the plaintiff itself to facilitate the defendants' pursuit of the subdivision, which the plaintiff failed to do, taking about twice as long as was reasonable to prepare the DA which they had a duty to prepare. Their failure to do so is something directly relevant to indemnity costs.

Mr. Foster, for the plaintiff, argued at the hearing that there was an implied term pleaded in paragraph 8 of the Amended Claim, to the effect that the defendants would not 'pull the plug' on the subdivision, but that paragraph also pleaded a term that the defendant would pay the proper cost of the subject work and a premium of 20%. As appears from page 89 of the (very rough) transcript with which I was supplied, that wasn't so. What was alleged in paragraph 8 was a specific implied contractual obligation to pay a 20% premium, and there was in my view no warrant for implying such a term. To persist in such a claim further tended to delay and derail the proceedings.

Even if the pleading question could be overcome the plaintiff would still have failed, because there was a mutuality of obligation. Any obligation on the defendants' part to pursue the subdivision to finality, was certainly in my view subject to a reciprocal implied term that the plaintiff itself would not make that pursuit impossible by failing to have the DA approved. I repeat once more, as I said at the hearing of the claim itself, that I am well aware this is not a court of strict pleading, but the pleadings reflected the way in which the matter was run, and procedural fairness requires that the plaintiff abide by the way it chose to both plead and run its case unless a switch of tack is sought and acceded to. The plaintiff did not seek to put its case differently, or to seek an adjournment for that purpose.

There was a failure to plead and allege an implied term shorn of any insistence on payment of a 20% premium, and moreover the facts would not support the implication of such a term. Because the facts would not support it the case was a hopeless one, such that the plaintiff could not succeed, and that too is a reason, taken with other reasons, for ordering indemnity costs. The defendants, confronted with the plaintiff's crippling delays - and having no obligation under the contract on which the plaintiff could rely to sheet home to them the responsibility for any critical part of that delay - were deprived of any real choice other than to sell up to meet their own considerable debts. A plaintiff who is largely responsible for such a state of affairs ought in my view to have accepted the offer made by the defendants.

For all the foregoing reasons, I think that costs should be allowed on an indemnity basis from the date of the Calderbank letter.

Whether order for costs should be made against Mr. Buttsworth and Mr. Trainor

There is a wide power to order costs against non-parties. In Knight v. F.P. Special Assets (1992) 174 C.L.R. 178 Mason C.J. and Deane J explored in detail the history of such a power. Most of that history relates to special cases, such as a power to order solicitors to pay costs and other special types of cases. Knight was a case against a receiver of a company, and, in making a useful statement of general principle, Mason C.J. and Deane J. said that -

"Where a party to litigation is an insolvent person or man of straw, a non-party who has played an active part in the conduct of the litigation and who has ... an interest in the subject of the litigation is liable to have an order for costs made against him if the interests of justice require that it be made."

In Oz B & S Pty. Ltd. v. Elders IXL Ltd. (1993) 117 A.L.R. 128, Einfeld J allowed such costs against a company director. The circumstances were a little unusual, in that the costs sought were only costs of an application by motion, and part of the reason for the order was a need to protect the other party from the ongoing costs, but his Honour did apply Knight, and took the view that the principal director and shareholder, one Anthony Croke, was the real force behind the action. The company had no money. Einfeld J thought that he must have spent his own money, and would scarcely have done so unless he had a special personal interest in the litigation and could gain an individual benefit from its success.

There are obvious parallels with this present matter. It is agreed that the plaintiff company itself has no real assets, other than debts due to it from Mr. Trainor and Mr. Buttsworth. The reality is that there is little chance that either of them would meet that debt if the company were the subject of an order it could not meet, and no real indication that Mr. Buttsworth, who has since taken over the obligations of Mr. Trainor, would still be in funds himself and able to meet any such request, although he does have assets at this time. I therefore approach the matter on the basis that the company is, practically speaking, without funds.

Yates v. Boland [2000] FCA 1895 was likewise a case where the Court thought that a person standing behind a company might attract a costs order to himself. I discuss that decision in more detail later on in these reasons. The primary judge had there found that Mr. Yates had played an active part in the conduct of the litigation and stood to gain from it. Her Honour was also prepared to take account of the fact that the respondents in that matter had failed to apply for security for costs, which she said would ordinarily be relevant. In the present matter, of course, there was such an application, although it was not successful.

The submissions of Mr. Hutchings, counsel for the plaintiff/respondent, sought to rely on Dragosavljevic v. Serbian Orthodox Church St. Knez Lazar Inc. & Ors. [2002] ACTSC 19. That, however, was a case of an application for security for costs arising out of the sale of land contrary to the wishes and without the knowledge of the chief 'patriarch' of the Serbian church in Mawson, a suburb of Canberra. Our own matter is not one of security for costs, and I don't gain any assistance from that decision.

Mr. Hutchings also submitted that no order should be made against his clients because the defendants did not comply with a direction to provide by affidavit an estimate of the amount of their costs. I believe that is of some small relevance, but is not a factor which should be given much weight.

Written submissions for the defendants collected relevant material, including that Mr. Buttsworth said that the only reason the plaintiff existed was to fight the case, and that the entirety of the cost was being funded by him. I think those are good arguments, and point up the likelihood that Buttsworth, and Trainor too, who was active in the prosecution of the claim, are non-parties who played an active part in the litigation and who stood to gain from the result.

It was pointed out by the Full Federal Court in Yates v. Boland that sometimes a relevant factor will be whether the party seeking costs could have joined the non-party. I do not think that could have been done here. There was nothing such as would have enabled this Court to approve such a joinder. Part 6, and in particular rule 8, is the relevant portion of the Rules, and it does not provide for joinder in a case like this.

In Yates it was also said that such considerations as whether the non-party funded the proceedings will not be conclusive. No one criterion will be decisive. In the end, an order will be made only if the interests of justice so require. In Yates itself, however, the fact of the non-party having had much to gain and having stood behind the litigation was heavily relied on. It seems likely that such factors will usually be among the most decisive ones, as they are here.

One very significant matter is that the plaintiff made groundless allegations which unduly prolonged the claim. Those were the allegations in the first place that there was to be implied a term that the defendants should pay a premium if they pulled the plug on the subdivision, and in the second place persisting in such an allegation though knowing that any implied term would have to include a pre-requisite that the plaintiff itself proceed with despatch to obtain the DA, which it did not do. The trial judge in Yates thought the making of groundless allegations which delayed the hearing was relevant, and the Full Court had no criticism to make of her view in that regard.

In most of the authorities the costs ordered against someone standing behind a party are made against one individual, some one person who effectively dominated the litigation. In our case there are two. I can understand that in some cases, where costs are sought against more than one, there might be problems arising from the fact perhaps that their reasons for acting as they did and the actions themselves were different one from another and that they bore differing levels of responsibility for the action. Also, perhaps, that their levels of 'culpability', to the extent that culpability in a loose sense might be relevant, would often be different. In this present matter, notwithstanding Mr. Trainor’s illness which must have impacted on his ability to act and hence his responsibility, I think that in a practical sense both Mr. Buttsworth and Mr. Trainor stand in a similar position vis-a-vis one another, and attract equal responsibility for costs.

I should say that I have read New South Wales Ministerial Corporation v. Edkins (1998) 45 NSWLR 8, relied on by the applicant defendants, but that was a case turning on a question whether the operation of particular provisions of the District Court Act prevented any jurisdiction to award costs against a non-party. The Court held there was jurisdiction, but that is not an issue here, and there is nothing else in that decision which assists me.

In Yates v. Boland, as the plaintiff points out, it was suggested that to be successful the defendants must have notified Mr. Buttsworth and Mr. Trainor that the application would be made. They did so, by letter dated 29th November, 2000. I agree with the defendants that there is nothing in this submission.

Conclusion

In the result, I think Mr. Buttsworth and Mr. Trainor, having played an active part in this litigation and having much to gain from it, and having run arguments relating to implied terms which could not be supported, and keeping in mind the practical reality that the plaintiff itself will have no realisable assets, should be personally responsible for costs. Such a view is required in the interests of justice.

There will be an order that the plaintiff and each of Mr. Buttsworth and Mr. Trainor pay the defendants' costs, being jointly and severally liable, and that such costs should be on an indemnity basis from 7th October, 1999. Before that date they should be assessed on a party/party basis. They should also on a party/party basis be ordered to pay the costs of this application, being again jointly and severally liable. The applicant defendants did ask for costs of this application on an indemnity basis, but there were reasonable arguments on both sides and I do not see that costs should be ordered beyond party/party costs.

All such costs will be as agreed or assessed.

I should add that the transcript with which I was supplied by the parties is very rough. It is really only the last thirty pages or so which need to be read for the purposes of this application, and those pages are not too bad, but even they contain numerous errors which in places make it hard to follow what went on. The large bulk of material preceding that is quite a mess, and I believe should not be relied upon unless someone first listens to the tape and checks and corrects it word for word.

I should note that failure on my part to specifically deal in these reasons with every individual argument put by the parties in their extensive submissions does not mean that I have not considered them.

In this matter the parties' solicitors have continually addressed correspondence to me personally. On 19th July last at my request they were expressly told by the Clerk that correspondence should not be addressed personally to magistrates. They still continue to do so. On 18th December McIntosh McPhillamy & Co addressed a fax to "Registrar Pierce". I would be grateful if the solicitors, in the event that there needs to be any further correspondence in this or any other matter, please write to the Clerk rather than to me.

DATED this 20th day of February, 2003.

(W. G. Pierce) (Magistrate)