Cavaiuolo & Cavaiuolo v Tinlins Wines Pty Ltd - [2007] SADC 73

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
CAVAIUOLO & CAVAIUOLO v TINLINS WINES PTY LTD
[2007] SADC 73
Judgment of His Honour Judge Barrett
15 March 2007
PROCEDURE - COSTS - SCALES OF COSTS - DISCRETION TO VARY SCALE
Application by defendant for indemnity costs - consideration of circumstances in which such orders may be made - Held: circumstances do not warrant a departure from the usual course of ordering costs on a party and party basis.
District Court Act 1991 s 42(1), referred to.
Colgate Palmolive v Cussons (1993) 118 ALR 248; JM Properties Pty Ltd v Strata Corporation No 13975 Inc and Ors (No 3) 28 April 2006; Pozzan v Gibbons (No 2) [2006] SASC 182, considered.

CAVAIUOLO & CAVAIUOLO v TINLINS WINES PTY LTD
[2007] SADC 73

Following the trial in this matter I found that the plaintiffs had not made out their claims against the defendant. On the 3 August 2006 I dismissed the claims and entered judgment for the defendant. I published my reasons.
The defendant company applies for costs, not on a party and party basis, but on an indemnity basis. The plaintiffs do not oppose an order for costs on the former basis but they do submit that I should not order indemnity costs.
It is agreed between the parties that, while there appears no relevant difference for the purposes of this application between the “old” District Court Rules relating to costs and the “new” rules which came into operation on 4 September 2006, it is the “new” rules which apply to this case. The trial concluded and judgment was delivered before the “new” rules came into operation.
Section 42(1) of the District Court Act 1991 provides for an unfettered discretion as to costs. The discretion is unfettered but must be exercised judicially.
The ordinary rule is that the successful party will be granted an order for costs on a party and party basis (Colgate Palmolive v Cussons (1993) 118 ALR 248 at 256 – principle number 1). A court will depart from the ordinary rule, or the usual course, only where the circumstances of the case warrant such departure (ibid principle number 4).
A number of circumstances have been recognised as potentially giving rise to an order for indemnity costs. The categories of circumstances are not closed (ibid at page 257 – principle number 5).
The existence of one of the recognised categories does not of itself lead to an order for indemnity costs. The discretion to make such an order will only be exercised if the facts of the case warrant it (ibid principle number 6).
Counsel for the defendant, Mr McCarthy, submitted that one of the recognised categories does exist here, namely, that the plaintiffs imprudently refused an offer to compromise. Mr McCarthy submitted that the facts warranted a favourable exercise of the discretion for his client.
He submitted that the plaintiffs had been wholly unsuccessful in their claim. They had failed in their claim alleging an oral contract and also in the claim for relief under the Trade Practices Act arising from alleged misleading and perceptive conduct. Counsel could not and did not suggest that that result would justify departure from the usual order of party and party costs.
He submitted two further related circumstances. First, he argued that the plaintiffs ought to have realised that their case was hopeless. He drew attention to conversations and correspondence passing between the respective solicitors before the trial began which should, in his submission, have made it clear to the plaintiffs that the result which occurred was inevitable. Second, he drew attention to what he described as a Calderbank letter dated 29 August 2005, sent by the defendant’s solicitors to the plaintiffs’ solicitors. The letter proposed a resolution of the matter on the basis that the plaintiffs discontinue their proceedings and each party would bear their own costs. He also drew attention to an offer to consent to judgment in the sum of $5,000 filed by the defendant on 9 September 2005 (the plaintiffs’ claim was for close to $262,000). The plaintiffs did not accept either of the proposals for settlement. The trial began on 4 October 2005.
In those circumstances, the defendant submits that there was an imprudent refusal of an offer to compromise. This is one of the categories recognised by Sheppard J in Colgate Palmolive v Cussons (ibid at page 257 line 28).
Mr McCarthy submitted further that the law had developed to the point where a Calderbank offer will justify an award for indemnity costs. In support of that proposition he drew my attention to two recent cases – J.M. Properties Pty Ltd v Strata Corporation No. 13975 Inc. and Ors (No. 3) a judgment of Simpson DCJ delivered on 28 April 2006, and Pozzan v Gibbons (No. 2) [2006] SASC 182 a judgment of Perry J delivered on 22 June 2006.
Each of those cases resulted in an award of indemnity costs. In my view, however, neither case is authority for the proposition claimed by Mr McCarthy. In the former case Her Honour Judge Simpson discussed in detail the authorities on costs but nowhere did she enunciate the principle that a Calderbank letter will justify an award for indemnity costs. Her Honour listed more than six circumstances justifying a departure from the usual course of ordering only party and party costs. While not specifically identifying the accumulation of those circumstances as an imprudent refusal of an offer to compromise I think it is fair to say that that is what the enumerated circumstances amount to. I will not set out the circumstances but they appear in paragraphs [94] to [96] inclusive of Her Honour’s judgment. In total they make a much more compelling reason for departing from the usual course than the circumstances in this case.
In Pozzan v Gibbons (ibid) Perry J referred to a Calderbank letter that had been sent by the plaintiff to the defendant. His Honour described the offer in that letter as “very favourable to the defendant”. His Honour ordered costs on an indemnity basis but did not enunciate the principle claimed by Mr McCarthy. His Honour said :
While the Court encourages plaintiffs to make offers of settlement in accordance with the rules, more particularly SCR r41, a Calderbank letter, as letters of this kind are sometimes described, may in an appropriate case be relied upon to justify the award of a higher rate of costs than party and party costs [para 34]. (emphasis added)
His Honour did not explicitly describe the defendant’s conduct as an imprudent refusal of an offer to compromise but I accept that that may well be how His Honour saw it.
Again, I think that the facts of this case are distinguishable from those in the present case. In particular, the terms of the plaintiffs’ offer were quite close to the sum awarded to the defendant. The offer was $300,000 and the judgment sum was just over $390,000.
The plaintiffs’ counsel, Mr Simpson, questioned whether the letter sent by the defendant could really be described as a Calderbank letter. For present purposes I am willing to accept that it may be so described. Mr Simpson submitted that the result in the present case turned significantly on issues of credit whose outcome was not reasonably foreseeable. He submitted that in all the circumstances there was no sufficient reason to depart from the usual order as to costs.
In my view, the defendant has not shown sufficient reason for me to depart from the usual order for costs. While some of the documents produced by the defendant to the plaintiffs might have shown on their face that there was no ongoing contract between the plaintiffs and the defendant, the plaintiffs always asserted the contract was an oral one. Much therefore depended on the view I formed about the accounts given by the parties as to their conversations and dealings. In the end, I found that the totality of the evidence favoured the account given by the defendant but that would not have been obvious at the outset of the trial. No documentation would have assisted in the predicting the outcome of the claim under the Trade Practices Act.
Further, the letter and the offer to consent to judgment were in effect proposals that the matter be resolved by the plaintiffs discontinuing their proceedings.
I find that the circumstances of this case are distinguishable from those cases cited to me and I find no reason to depart from the usual order for costs.
I order that the plaintiffs pay the costs of the defendant on a party and party basis.