Cash Resources Australia P/L v Reid (No 3) - [2010] SADC 63

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CASH RESOURCES AUSTRALIA P/L v REID & ORS (No 3)
[2010] SADC 63
Judgment of His Honour Judge David Smith
11 May 2010
PROCEDURE - COSTS
Plaintiff successful against the fourth but not the third defendant – discussion of whether the unsuccessful third defendant should bear the plaintiff’s liability to pay the costs of the successful third defendant – discussion of the discretionary considerations relevant to making a Sanderson Order requiring unsuccessful defendant directly to pay the costs of the successful defendant – consideration of whether the District Court Civil Rules 2006 applied.
Held: the 2006 Rules applied and held also that a Sanderson Order should be made – third defendant ordered to pay to the fourth defendant directly its costs of action to be agreed or taxed.
District Court Act 1991 s 42, referred to.
Cash Resources Australia Pty Ltd v Reid & Ors (No 1) [2006] SADC 45; Cash Resources Australia Pty Ltd v Reid & Ors (No 2) [2010] SADC 39; Bullock v London General Omnibus Co [1907] 1 KB 264; Sanderson v Blyth Theatre Co [1903] 2 KB 533; Vance v Cheynes Beach Whaling Co [1966] WAR 16; Fennell v Supervision & Engineering Services Holdings Pty Ltd (1988) 47 SASR 6; Gould v Vaggelas (1984) 157 CLR 215; Altamura v Victorian Railways Commissioners [1974] VR 33, considered.

CASH RESOURCES AUSTRALIA P/L v REID & ORS (No 3)
[2010] SADC 63

I am here deciding what costs orders should be made in respect of both the liability and quantum trials which have taken place in this action[1].
[1] Cash Resources Australia Pty Ltd v Reid & Ors (No 1) [2006] SADC 45; Cash Resources Australia Pty Ltd v Reid & Ors (No 2) [2010] SADC 39.
There have been the following outcomes.
·The plaintiff, Cash Resources Australia Pty Ltd (“CRA”), has succeeded in its action against the fourth defendant, Paul Shields (“Shields”), for damages for deceit, misrepresentation and misleading or deceptive conduct.
·On the 31^st March 2010 a judgment was entered in favour of CRA against Shields in the sum of $23,588.02 which sum included prejudgment interest.
·CRA’s action against the third defendant, Ches Pty Ltd (“Ches”), in which it sought to recover an alleged equitably assigned debt and its alternative claim that Ches was estopped from denying the existence of and assignment of the debt, was dismissed on the 28 April 2006 on the basis that the debt was a fabrication.
·Ches’ counterclaim against CRA for damages for conversion was compromised in the course of the liability trial on the basis that it was agreed that CRA was indebted to Ches in the sum of $2,000 and a consent judgment in that sum was entered in favour of Ches against CRA on the 18 March 2010. Prejudgment interest was later fixed at $560.
First of all, in the exercise of my discretion as to costs, I regard this Court as an appropriate forum for this litigation notwithstanding the modest sums which were ultimately the subject of the judgments. Therefore, the costs, which I am about to order, are to be those dictated by the District Court scale. My reasons for so deciding are as follows:
·First, when CRA instituted these proceedings the claims were in excess of $100,000. When the first trial commenced on the 3 February 2005 CRA’s claims were still in excess of $100,000 and, on the findings I have ultimately made, were justifiably so. It was not until after the commencement of the trial that the quantum of the claim reduced. In particular, CRA reached an agreement with the liquidator of Gemstone Mining Pty Ltd whereby in about August or July of 2005 approximately $124,000 was paid by the liquidator to CRA thereby reducing the quantum claimable. That sum was approximately 50 per cent of the proceeds of the forced sale of mining plant and equipment belonging to the Reid interests (see Exhibits P8 and D19).
·Secondly, the issues in both the liability and quantum trials were complex.
·Thirdly, though the quantum of the counterclaim judgment is a meagre $2,000 it was a sum in addition to other sums which had been, by agreement, paid by CRA to Ches as certain café and bakery plant and equipment was sold.
·Finally, though the quantum of the counterclaim was always going to be a modest sum, the parties, namely CRA and Ches, by their legal representatives, agreed that the best way to resolve, what was then an intractable dispute about who had superior title to the chattels seized from the bakery and the café, was to attach a counterclaim raising that issue to this action.
For all those reasons, I consider that no party should suffer any detriment by reason of the fact that the Magistrates Court had jurisdiction to entertain the litigation.
It is clear that CRA is entitled to its costs of action against Shields and likewise Ches is entitled to its costs of the counterclaim against CRA. So too, Ches is entitled to its costs for successfully defending the claim against it by CRA in the main action. The issue is whether the unsuccessful defendant Shields should be ordered to pay the costs of the successful defendant Ches.
Certainly the Court has jurisdiction to order an unsuccessful defendant to reimburse or indemnify a plaintiff for the costs of a successful defendant (Bullock Order)[2], or order an unsuccessful defendant to pay directly the costs of a successful defendant (Sanderson Order)[3]. The modern practice is to employ the more direct Sanderson Order unless circumstances, such as the insolvency of the unsuccessful defendant, dictate otherwise[4].
[2] See Bullock v London General Omnibus Co [1907] 1 KB 264.
[3] See Sanderson v Blyth Theatre Co [1903] 2 KB 533.
[4] (Ibid) per Stirling LJ at 543; Vance v Cheynes Beach Whaling Co [1966] WAR 16 per D’Arcy J at 24.
The jurisdiction to make such orders is not inherent but must be derived from Statute[5]. In this case the foundation of the Court’s jurisdiction is s 42 of the District Court Act 1991. In particular, pursuant to sub‑s (1) of s 42, costs are in the discretion of the Court “... and may be awarded against any person ...”[6] The relevant Rules of Court implementing the statutory power are found in Chapter 12 of the District Court Civil Rules 2006. There was a suggestion in argument that the old Rules of court applied. I do not agree. It is true that the general principle is that the old rules apply to actions commenced before the commencement date of the new rules which is 4 September 2006 (see sub‑rule (1) of 6DCR 8). However, despite the general principle Ch 12 (costs) of the new 2006 Rules applies because notwithstanding that both the main action and the counterclaim were instituted before the commencement date of the new rules, namely 4 September 2006 there have been no “... proceedings for the adjudication on costs ... commenced before that commencement date ...” (see sub-rule (2) of 6DCR 8; see also definition of “adjudication” in 6R 4). Therefore, the general principle is not applicable and sub‑rule (2) of 6DCR 8 requires that Ch 12 of the new rules apply.
[5] Law of Costs 2^nd ed GE Dal Pont at [11.17].
[6] See s 42(1) of the said Act.
Accordingly, in addition to s 42(1) of the District Court Act sub-rule (2) of 6R 266 empowers the making of a Sanderson Order.
I note that the power to make the order sought is in the old rules and the applicable discretionary considerations are the same for both.
What then are the relevant considerations or the principles which guide the exercise of this broad discretion?
A Sanderson Order will be justified when a plaintiff, quite reasonably, is uncertain about who of two defendants is responsible and accordingly sues both. In such a circumstance the successful plaintiff should be compensated for all the costs occurred in procuring the judgment including those of a successful defendant. In Fennell v Supervision & Engineering Services Holdings Pty Ltd[7] King CJ explained the above rationale in the following terms:
The unsuccessful defendant has caused the litigation by his wrongful act and by disputing liability for it. He therefore ought to pay all costs reasonably incurred by the plaintiff in connection with the litigation. If it was reasonable, as between the plaintiff and the unsuccessful defendant, for the plaintiff to sue the successful defendant, the unsuccessful defendant ought therefore in justice be liable to indemnify the plaintiff against the costs of so doing, including those which he is ordered to pay to the successful defendant.
[7] (1988) 47 SASR 6 at 7.
Further, the authorities suggest a second consideration namely whether the conduct of the successful defendant after the joinder continued to leave the plaintiff in a state of uncertainty about where the responsibility lay[8].
[8] Gould v Vaggelas (1984) 157 CLR 215 per Gibbs CJ at 229; see also Fennell (supra) per King CJ at 8.
If the causes of action pleaded against the defendants differ that will not necessarily bar the making of a Sanderson Order. In this case, the pleaded causes of action against Shields, on the one hand, and Ches, on the other, differed. CRA sued Ches claiming the debt which it alleged had been assigned to it by the Reids and in the alternative it contended also that if there was in fact no debt established then because of its representations Ches was estopped from denying that such was the case. CRA sued Shields, who was the sole director and shareholder of Ches, for misrepresenting that Ches was so indebted. The fact that there are such separate and, in a sense, independent causes of action, will not prevent the making of the said order if there is a “connection” and/or the claims arise from “the same factual situation”. In such circumstances, justice may still demand that the unsuccessful defendant pay the costs of the successful defendant[9].
[9] See Altamura v Victorian Railways Commissioners [1974] VR 33 per Kaye J at 37.
With those principles in mind, I turn to the exercise of discretion.
I refer to in adopt the Summary of Claim as set out in [8] to [12] of Cash Resources (No 1). Further, I refer to and adopt the Findings as set out in [13] to [70] of Cash Resources (No 1).
First, it is clear that it was reasonable for CRA to proceed against both the third and fourth defendants. There was an inextricable linking or connection between the two. There was a justified uncertainty about the proving of the debt and hence the misrepresentation and estoppel claims emerged to deal with that. Both defendants on my findings falsely represented that a debt existed. Shields did so and Ches did so through Shields. Secondly, those circumstances which underpinned the reasonableness of the joinder did not change in the course of the litigation. Both defendants defended the claims by contending that there was a consignment of opals to Ches by the Reids.
Finally, it is relevant that both the third and fourth defendants in this case were represented by the same solicitors and counsel. Their interests were the same, in that they both contended that the parcel of opal was not sold to Ches by the Reids but was “on consignment”.
Accordingly, this is an obvious case for the making of a so‑called Sanderson Order.
Final Orders as to Costs
I make the following orders as to costs:
1.I order that the fourth defendant, Paul Shields, pay the costs of and incidental to the action of the plaintiff Cash Resources Australia Pty Ltd, if not agreed then to be taxed.
2.I order that the fourth defendant, Paul Shields, also pay the costs of Ches Pty Ltd of the main action to be agreed or taxed.
3.Ches Pty Ltd is to have the costs of and incidental to the compromised counterclaim against Cash Resources which costs, if not agreed, are to be taxed.