Challita v Hughes

[2006] NSWLC 31

Local Court of New South Wales

CITATION:	Challita v Hughes [2006] NSWLC 31
JURISDICTION:	Civil
PARTIES:	Albert Challita Robert Bruce Hughes Jacqueline Hughes t/a Nostalgic Automobilia
FILE NUMBER:	1477/00
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	09/12/2006
MAGISTRATE:	Magistrate H Dillon
CATCHWORDS:	Costs - Whether unsuccessful plaintiff some or all of successful third parties' costs - Whether plaintiff shold pay one set of costs only - Whether defendants and third parties duplicated costs - Whether defendant and third parties should bear some or all of their own costs because of duplication of costs - Whether third parties' costs should be assessed on indemnity basis - Whether interest should be ordered on costs
LEGISLATION CITED:
CASES CITED:	Furber v Stacey [2005] NSWCA 242 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 388 Lombard Insurance Co. (Australia) Ltd v Pastro (1994) 175 LSJS 448 Statham v Shepherd (No.2) (1974) 23 FLR 244
REPRESENTATION:	Mr J Armfield - Counsel Milford Haseldine & Williams - Solicitors Mr M Perry - Counsel Carneys - Solicitors Mr P Kulevski - Counsel (1st third party) Lewis & Weir - Solicitors Mr A Foel - Counsel ( 2nd third party) Colin Biggars & Paisley - Solicitors
ORDERS:	The plaintiff is to pay 75 per cent of the defendant's costs, 50 percent of Crossover's costs and 40 percent of Mr Stannus's costs in sums agreed or assessed on the party and party basis. The defendants are to pay 25 per cent of Crossover's costs and 45 percent of Mr Stannus's costs in sums agreed or assessed on the party and party basis. Those costs will include the costs of the arbitration and any reasonable costs incurred by parties and witnesses travelling from interstate to attend the arbitration and trial. In relation to the costs awarded to Mr Stannus, interest is to be paid on the amounts ordered from the dates when the amounts in respect of costs were paid by him.

JUDGMENT

1. This is an application for costs. On 12 December 2005, I delivered judgment in the substantive proceedings. Verdicts were entered for the defendants in the action between the plaintiff and the defendants and for the two third parties (as they were then described under the old Rules) in the third party proceedings.

The costs applications

2. The plaintiff concedes that he is liable for the defendants’ costs but argues that he should not have to pay more than one set of costs, the third parties having been joined by the successful defendants and they having made common cause against him in the proceedings with the defendants.

3. The defendants resist an order against them in favour of the third parties, arguing that they had denied liability to indemnify the defendants or make contribution in respect of any verdict entered against the defendants but had barely, if at all, raised the issue during the trial. I apprehend, however, that this argument is not strongly pressed.

4. The third parties claim orders for costs against the defendants. They submit also that the orders should be on the indemnity basis. The second third party also seeks an order for interest upon the costs assessed.

5. The defendants’ submit that the third parties’ costs ought be paid by the plaintiff. The third parties argue that that is a discrete issue between the plaintiff and defendants in which they have no direct interest.

6. In summary, the principal issues for resolution are, therefore:

first, whether the plaintiff should be required to pay more than one set of costs;
second, whether the defendants should be required to pay some or all of the third parties’ costs;
third, whether, conversely the third parties and defendants ought bear some or all of their own costs because of coincident interests and a duplication of costs on their part; and
fourth, whether any costs orders made in favour of either or both third parties should be on the indemnity basis; and, last, whether an order for interest on any costs ordered in favour of Mr Stannus ought be made.

The proceedings

7. On 11 October 2000, the plaintiff, Mr Challita, filed an ordinary statement of claim at the Bankstown Local Court. The substance of his causes of action is outlined in my written judgment of 12 December 2005. The defendants filed their defence on or about 21 February 2001. Third party notices, however, were not filed until July 2003. The third parties notices merely repeated the plaintiff’s allegations against the defendants and claimed indemnity or contribution for any judgments recovered by the plaintiff as against the defendants.

8. The matter was arbitrated and reheard in the Local Court on over five days on 6 and 7 June and 9, 10 and 11 November 2005.

9. The arbitration took two days in August 2004 with the third party actions not being considered at that stage. I am unaware of how the evidence was taken in the arbitration hearing except for what is revealed in the affidavit dated 12 December 2005 of Mr Banjo Stanton, Mr Stannus’s solicitor, which annexed an offer of compromise dated 26 October 2004. In the letter containing the offer, which was tendered on the question of costs only, and to which no objection was taken nor any evidence put to the contrary, Mr Stanton stated, among other things, “The only aspects of the proceedings that can concern our client are the allegations concerning the conversion of the subject vehicle from left hand to right hand drive. The Plaintiff failed at arbitration on this point without the need for evidence from the Third Parties in defence of the allegations.”

The relevant principles

10. The starting point for a consideration of the relevant principles in relation to costs where third party proceedings have been joined is the rationale for third party proceedings, namely, the avoidance of a multiplicity of related proceedings. Third parties are bound by the decision as between the plaintiff and defendants. This has important procedural consequences. In particular, a third party, having participated in the proceedings, is estopped from challenging findings of fact and may well also be bound by an Anshun estoppel. The questions arising as between the third party and defendants are generally most efficiently and accurately dealt with by joining the parties in the original action. This will generally also be beneficial to the parties and the community in terms of costs, allocation of court resources and so on.

11. The prima facie principle that costs follow the event in relation to an action between the plaintiff and defendants applies equally to the actions between the defendants and the third parties. This, of course, is subject to the court’s broad discretion to make further or other orders as required to achieve a just result.

12. In Lombard Insurance Co. (Australia) Ltd. v. Pastro (1994) 175 LSJS 448, King CJ summarised what he considered were the relevant principles concerning costs in proceedings involving third party actions in the following way:

In many cases, the nature of the plaintiff's claim or the allegations in support of it make it reasonable, even necessary, for the defendants to bring in the third party. The plaintiff's case, if established, would be the foundation of a successful claim against the third party. It is essential, in such circumstances, for the defendants to have the third party bound by findings in favour of the plaintiff. If it is not so bound, the defendants might be unable, perhaps due to non co-operation of the plaintiffs in the first proceedings, to establish the plaintiff's allegations in subsequent proceedings against the third party. The defendants might be left in the position of being found liable to the plaintiff, but of being unable, in subsequent proceedings, to recover from the third party, notwithstanding that the foundation of the defendant’s liability to the plaintiff would also establish the third party's liability to the defendants. Such a prospect makes it entirely reasonable, even necessary, for the defendants to institute third party proceedings. The defendants, in such cases, is virtually forced by the plaintiff's allegations, in order to protect itself, to bring in the third party

If in the circumstances postulated, the plaintiff fails to sustain its allegations, in consequence of which the third party claim is dismissed with costs, the defendants has incurred the costs of the third party claim by reason of the unfounded allegations of the plaintiff. It seems to be fair and just, in those circumstances, that the plaintiff should be required to indemnify the defendants in respect of those costs.

I think that a guiding principle for the exercise of the discretion in such cases may be formulated as follows. Where the nature of the plaintiff's claim, or allegations in support thereof, render it reasonable, having regard to the purposes of third party procedure, to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the relevant allegations, the defendants should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendants is ordered to pay to the third party. The emphasis is on the word "ordinarily". The discretion is unfettered and a variety of factors may properly enter into the exercise of it.

13. In Furber v Stacey [2005] NSWCA 242., however, the Court of Appeal held that this guiding principle was only one of a number of “guiding principles” and that it needed to be qualified as Finn J had done in GEC Marconi Systems Pty. Ltd v BHP Information Technology Pty. Ltd [2003] FCA 688, 201 ALR 55..

14. In GEC Marconi At [72]-[75]., Finn J had considered King CJ’s observations but had remarked that, if the ultimate question was whether in the circumstances of the case the successful third party’s costs “ought fairly to be borne” by the unsuccessful plaintiff, a number of factors had first to be taken into account:

73 A common consideration in the cases is whether it was "reasonable" or "appropriate" for a respondent to make the third party claim: cf Victoria University of Technology v Tulleth and Tokyo (Victoria) Ltd (unreported, SC of Vic, Beach J, 29 August 1994); Lombard Insurance Co (Australia) Ltd v Pastro (above) per Bollen J. The care that needs to be taken with this is that, while the making of the third party claim may have been justifiable, it may nonetheless be quite inappropriate to pass on the costs of a successful third party to the original applicant. As was observed by Tadgell J in Australian Guarantee Corporation Ltd v De Jager [1994] VR 483 at 500, "[i]t cannot be the inevitable rule that every successful plaintiff will be required to bear the costs of any third party the defendants sees fit to join". A common instance of where the third party costs will not be passed on is where the third party claim raised "private issues" and the third party was not necessarily joined because of the applicant's claim: eg Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 Qd R 162 at 175; see also Paron v Fry (No 2) [1990] 1 Qd R 550.

74 A distinct consideration has been whether the applicant's claim was the catalyst for the third party claim. In Thomas v Times Book Co Ltd [1966] 1 WLR 911 at 920, Plowman J considered that the plaintiff's claim rendered the third party proceedings "inevitable": see also Fertinova Australia Pty Ltd v Samardzija (unreported, SC of Qld, MacKenzie J, 10 July 1995). The caution to be sounded with this consideration is that causation alone without regard to the nature of the cross-claim itself seems hardly sufficient to justify a pass on order.

75 The third, and perhaps the most significant, consideration is the relationship of the nature of the original application to that of the cross-claim being brought. This nexus has been expressed in various ways: for example, does the nature of an applicant's claim, or do allegations in support of it render it reasonable for the respondent to make in turn the cross-claim that it does: cf the Lombard Insurance Co (Australia) Ltd case, per King CJ; or does the third party claim raise issues private to the parties to it: Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd (above). Illustrative of the significance of this consideration are the observations made about "string of contracts cases" in L E Cattan Ltd v A Michaelides & Co [1958] 2 All ER 125 at 128:

"In the ordinary way, however, where damages are claimed for breach of contract on one contract in a string of contracts, and the seller brings in his immediate seller as a third party, and the third party brings in his immediate seller as a fourth party, then, provided that the contracts are the same or substantially the same so that the issue whether the goods comply with a description is the same, the defendants (in this case it was the plaintiffs, because it was a counterclaim), if successful, should recover against the plaintiffs not only his costs but any costs of the third party which he has been ordered to pay: the third party in like manner should recover from the defendants his own costs and any costs of the fourth party which he has been compelled to pay, and so on down the string. That is the normal way in which costs should be dealt with in this kind of action where there is a string of contracts in substantially the same terms."

15. In Furber, Hodgson JA, having considered the remarks of King CJ and Finn J, enlarged the considerations to be taken into account. He said At [33].:

I would also add that a cross-defendants may be left to bear some or all of its own costs, for example if it chooses to contest the plaintiff’s claim where it would have been reasonable to leave this entirely to the defendants ( In Re Salmon (1889) 42 Ch.D. 351) or incurs costs only on issues raised against the defendants which it loses ( Gold Coast Bakeries ). There may also be cases in which the considerations discussed by Woodward J in Statham v. Shephard (No.2) (1974) 23 FLR 244 at 246-7…apply in relation to a defendants and cross-defendants, as well as to multiple defendants.

16. In Statham At 246-7., the question for the court was whether to order one or more sets of costs in favour of successful multiple defendants. Woodward J considered the principles that ought be taken into account. The basic principle was “that the court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases”. To this principle, however, he added three provisoes. First, “if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between defendants.”

17. Second, he considered that there could be circumstances in which, although defendants were united against the plaintiff, “their relationship to each other might be such that they would be acting reasonably in remaining at arm’s length during the general course of the litigation.”

18. Third, he said that “even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.”

19. Einstein J At [119]., agreeing with Hodgson JA in Furber, noted “even where the making of a third party claim can be said to have been justifiable this is not sufficient to make it appropriate to pass the costs of a successful party on to the plaintiff.” The mere fact that the plaintiff’s claim is causative of the commencement of the third party action may be insufficient of itself to justify passing the costs of a successful third party to the plaintiff. He took the view that when third parties are joined to actions by defendants it is reasonable to require those parties to take such steps as are open to ascertain what, if any, conflict of interest will exist between them in terms of the issues to be litigated and the extent to which it may nonetheless be reasonable for them to act in concert in litigating certain issues so as to avoid unnecessary duplication of costs.

20. It would seem then that the relevant principles may be distilled to these:

21. First, a court, when exercising its broad discretion in relation to costs, will seek to do justice as between the parties. This may mean that the ordinary, prima facie rule that costs follow the event will be varied in particular cases. The court will have regard to “the particular circumstances, including the evidence adduced, the parties’ conduct and the ultimate result.” Furber v Stacey [2005] NSWCA 242 per Einstein J at [119].

22. Second, subject to qualifications that follow, if a defendants is “virtually forced” by the plaintiff’s claim to join a third party and, because the plaintiff has failed to substantiate its allegations, the defendants is unsuccessful in its third party action, the defendants ought ordinarily recover the costs of the third party action from the plaintiff.

23. Third, where the third party action raises “private” issues as between the defendants and third party, the plaintiff will not be liable to an order for costs in respect of those matters.

24. Fourth, where a third party chooses to contest a plaintiff’s when it would have been reasonable for it to leave the contest entirely to the defendants, the third party may be required to bear some or all of its own costs.

25. Fifth, where the defendants and third party have a coincidence of interests or their conflict of interest is merely theoretical rather than real, it may be appropriate to allow only one set of costs.

26. Sixth, if there is a theoretical possibility of conflict but that possibility is low, the defendants and third party should seek to ascertain from the plaintiff how its case is put if this would resolve the question whether there is a material conflict of interests to be litigated.

27. Seventh, even if there are substantial reasons for defendants and third parties maintaining an arm’s length relationship, an unsuccessful plaintiff may not be required to bear those costs that are unreasonably generated by a third party duplicating the costs of a defendants or vice-versa.

28. Eighth, whether, in such a case, the costs are borne by the third party or the defendants will depend on the circumstances. In short, where there is a coincidence of interests as between the third party and the defendants, they are expected to co-operate to avoid duplication of costs. The party that unnecessarily duplicates the costs of the other will ordinarily be expected to bear those costs, not the plaintiff.

Applying the principles

29. There is no argument that in relation to the action between the plaintiff and the defendants the plaintiff must pay the defendants’ costs or some significant portion of them. The real issues are whether the plaintiff should bear all or some of the third parties’ costs; whether the defendants should bear all or only some of the the third parties costs; and the third parties ought bear some or all of their own costs. In short, the question is how to achieve justice as between the parties in the apportionment of costs in circumstances where the ordinarily rule that costs follow the event may not apply.

Was it reasonable to join the third parties?

30. The first question is whether it was reasonable in the circumstances for the defendants to join either or both third parties. Counsel for Mr Stannus submitted that he should never have been joined to the proceedings and, once joined, ought, at least once the arbitration had taken place, have been let out of the proceedings by the defendants. In summary, the bases of the argument were, first, that when Mr Stannus was joined by the defendants they were unable to particularise the case against him; second, that Mr Stannus had played only a minor role in the conversion process and the defendants were well-protected having joined Cross-over; third, that the plaintiff’s case was so inherently weak, as became apparent at the arbitration, that there was no need for the third parties to be joined to add weight to the defence; and, fourth, that the plaintiff was bound to fail because he had failed to mitigate his damages by accepting Crossover’s offers of rectification and the use of a replacement vehicle while the repairs were carried out.

31. Counsel for Crossover submitted that it was unreasonable to have joined it because the third party action, as pleaded, had no prospect of success. He pointed to the fact that the pleading was, as he put it, a “carbon” copy of the statement of claim, even including an allegation of unconscionable conduct as one of the causes of action.

32. The essence of the plaintiff’s action was that the defendants had breached their contract with him by selling him a badly engineered car converted from left-hand to right-hand drive. The facts and evidence in the matter are set out in my judgment of 12 December 2005. Suffice it to say at this point that the Crossover was joined because it had carried out the conversion pursuant to a contract with the defendants and Mr Stannus because he had certified that the car complied with the relevant design rules, thus enabling the car to be registered to be driven in Australia. It was open to the plaintiff to join the third parties himself. It appears that he or his advisers made the forensic decision not to do so.

33. Nevertheless, apart from a question of unconscionable conduct, which merely cluttered the pleadings and was not pursued in any significant fashion by the plaintiff, it must have been abundantly self-evident to the third parties that the fundamental issues were always to do with the quality of the work done by Crossover and Mr Stannus. There could have been no other reason for the defendants to have joined them whatever the shortcomings of the third party notices. It was the plaintiff’s case that the defendants had sold him a car which, in fact, did not comply with the relevant design rules and which was inexpertly and negligently constructed. There was no suggestion that the defendants had done any substantial work on the car except to change the dashboard back to the original.

34. It is not true to say that the defendant’s did not know their case against the third parties. It was obvious from the pleadings that the defendants denied the plaintiff’s allegations but brought in the third parties as their fallback. While it is true, as Mr Stannus’s legal representatives argued, that the defendants did not provide particulars for some time, this was because the particulars of defective workmanship and so on had to come from the plaintiff. This, in itself, must have made it transparently plain to the third parties that defendants’ case against them was simply that if the plaintiff succeeded against them it was because of defective work on the part of Crossover and negligence on the part of Mr Stannus.

35. Crossover’s argument that its success in the third party action was inevitable on the basis of the pleading of the third party notice depends, in my view, on a very narrow reading of the pleadings. It was quite apparent that the third party notice merely repeated the allegations made by the plaintiff in order to put the third parties on notice of the plaintiff’s case and the fact that, if the plaintiff was successful, the defendants would seek indemnification or contribution. Properly read in its context, the third party notice did not assert unconscionable conduct on the part of the third parties as against the defendants or anyone else. It merely picked up an allegation made by the plaintiff against the defendants. It was almost self-evident that that part of the pleadings was mere surplusage and the fact that no time was spent on that allegation at the trial demonstrates this. In reality it caused the third parties (and the defendants) no embarrassment or prejudice whatsoever.

36. It could not have been apparent when the defendants received the statement of claim that the evidence brought against them by Mr Challita’s experts would be found to be fundamentally flawed. They would not have known, at that stage, what the evidence was and the weight it would be given by the arbitrator or the court. Whether the plaintiff’s case was inherently weak could only be discovered by testing it. In any event, the weakness of the plaintiff’s case might only have been discovered by virtue of the expertise provided by Crossover’s own engineers.

37. It is notable that the defendants never sought a verdict at the end of the plaintiff’s case on the basis that it was so inherently weak that the claim could not be substantiated. Nor did the third parties, or either of them, seek a verdict on the third party notices on the basis that the defendants must fail in the third party actions because the plaintiff had failed in his action against the defendants. In circumstances where the defendants had not made an application it would, I suppose, have been an unusually bold step to have taken but it was a course open to the third parties. It can be inferred that at that stage the defendants and third parties did not necessarily regard the result as a foregone conclusion. If there was some doubt about the defendants’ position then it was, prima facie, reasonable for them in the circumstances of the case to have joined the third parties.

38. Mr Stannus’s legal representatives emphasised in the costs application that the defendants had succeeded at the arbitration without the need to call evidence from the third parties as a fact demonstrating the lack of need to join the third parties, Mr Stannus especially. In my view, however, whether or not the plaintiff failed at the arbitration without the defendants needing to call upon the third parties to give evidence is irrelevant here. It does not prove that the plaintiff’s case was weak, let alone fatally flawed. It simply proves that that was the view taken by the arbitrator on the evidence presented on that occasion. Nor does it prove or even suggest that the third parties, or either of them, were unreasonably joined. A plaintiff’s case can appear strong on paper but be proved to be weak when tested. Hindsight is not available before the test is applied.

39. Moreover, whatever the findings of the arbitrator, the plaintiff was entitled upon obtaining a rehearing to run its case in an entirely new way “as if it had never been referred to an arbitrator”: s.18B(1) Arbitration (Civil Actions) Act 1983. He could have discarded his original experts and sought new ones entirely. The evidence relied upon by the plaintiff could have been improved or added to by the time of the rehearing. Even if, with the benefit of hindsight, it seems that joinder of the third parties was possibly unnecessary up to the time of the arbitration, that argument, if accepted, would not demonstrate that it was unreasonable to join the third parties for the rehearing.

40. Mr Stannus’s representatives also raised the question of mitigation of damages. A failure to mitigate damages is not necessarily a complete defence to a plaintiff’s claim. Apart from the fact that mitigation generally only goes to the issue of quantum rather than liability, where a failure to mitigate is alleged the issues will ordinarily be whether there was a failure at all and, if so, whether it was reasonable in the circumstances. The outcome of that debate in this case was not inevitable.

41. Mr Stannus’s argument that, if the defendants needed a third party at all, it would have been sufficient for them to have joined Crossover, makes the heroic assumption that Crossover was a viable business entity able to indemnify the defendants if they were defeated by the plaintiff. There simply was no evidence of Crossover’s financial position put before the court on this application. The defendants joined both the parties by whom they were owed a duty of care in relation to the car. There was no particular injustice or unreasonableness in seeking to ensure that they were jointly or severally indemnified by the third parties.

42. Counsel for Mr Stannus also contended that if Crossover had been required to indemnify the defendants and had wished to seek recourse against Mr Stannus it could have brought a separate action against him after the primary actions were concluded. This seems to miss the point that third party actions are brought in order to avoid a multiplicity of actions.

43. It was, in my view, almost inevitable that, if the defendants were adequately to defend the proceedings and the plaintiff did not join Crossover, the defendants would have to join Crossover. Mr Stannus played a small but crucial part in the conversion process. Without certification from an independent inspector, the vehicle was unable to be registered or sold as an on-road vehicle. If there had been proof of negligence on his part, short as his involvement with the vehicle might have been, it is likely that the plaintiff would have succeeded and the defendants would certainly have sought to be indemnified by him.

44. The nature of the plaintiff’s case was such that the defendants, unless they held some evidence that would defeat the plaintiff without recourse to the evidence of the third parties, evidence that was not made apparent to me, they were “virtually forced” to bring in the third parties. At the very least, it was necessary to involve Crossover in the action. Although the defendants perhaps took something of a “belt-and-braces” approach in joining Mr Stannus, it was nonetheless reasonable in the circumstances.

Was there a conflict or coincidence of interests between defendants and third parties ?

45. Once the third parties were brought into the action, the question for the defendants and third parties was whether they had a conflict or conflicts of interests and, if so, whether it they were merely theoretical or whether, practically speaking, the parties’ interests coincided.

46. There were obvious theoretical conflicts of interests between the third parties and the defendants. Crossover had contractual obligations to the defendants and Mr Stannus owed them a duty of care. If the plaintiff was to succeed, he had to prove, in effect, that Crossover had breached its contract with the defendants. There is a strong possibility that, had he succeeded, this would have entailed a finding that Mr Stannus had breached his duty of care to the defendants.

47. Nevertheless, the conflicts remained in practice at an entirely theoretical level. The reality was that if the plaintiff succeeded against the defendants, the third parties were also likely to fall like dominoes because the defendants were simply the suppliers and on-sellers of a car prepared by Crossover and certified as compliant with the relevant regulations by Mr Stannus. In actuality there was a coincidence of interest between the third parties and the defendants. The defendants never sought to join forces with the plaintiff against the third parties; rather, they joined forces against the plaintiff with the third parties. As far as I could see, no “private” issues, that is, matters arising only between the defendants and third parties, were litigated during the trial. Nor did there appear to be any private issues agitated as between the two third parties.

48. As far as I am aware, there was no suggestion by Crossover to the defendants that it be let out of the proceedings. Mr Stannus, on the other hand, sought by his offer of compromise to be let out but the defendants refused. Like it or not he remained joined. The defendants and third parties had coincident interests and were bound together until the end of the trial. It was incumbent upon them, consequently, to take reasonable steps to minimise unnecessary duplication of effort or face the prospect of having to bear some of their own costs.

How did the defendants and third parties conduct the proceedings ?

46. The defendants and third parties were separately represented by counsel and by solicitors. In the trial of the matter, each of the counsel for the defendants and third parties cross-examined the witnesses for the plaintiffs. There was some overlap in the questioning although, as far as I could make out, counsel took care not to duplicate cross-examination unnecessarily.

47. It was open to the third parties and defendants to consult together to determine how to streamline the case and avoid duplication of costs, especially in relation to the attack upon the plaintiff’s expert evidence and the presentation of the evidence upon which the defendants would principally rely, namely, the evidence of the Crossover witnesses and Mr Stannus.

48. In Furber, both Hodgson JA At [33]. and Einstein J At [119]. raised the prospect of a third party being deprived of its costs (or some part of them) if it chooses to engage the plaintiff directly rather than leaving the fight to the defendants or if it did not take reasonable steps to avoid duplicating costs. It would seem that, where defendants and third parties have coincident interests, third parties choosing to fire their own artillery rather than acting as powder monkeys for the defendants are risking the prospect of paying some or all of their costs.

49. Nevertheless, that principle is no more immutable than the guiding principle expressed by King CJ in Lombard Insurance. If there are coincident interests as between defendants and third parties, it may be that there is just as much responsibility thrown upon a defendants to seek to streamline the proceedings as the Court of Appeal in Furber suggested falls upon third parties. Woodward J’s remarks in Statham are as apposite in third party cases as in relation to multiple defendants. If a defendant allows or even encourages a third party to take the lead in the attack upon the plaintiff’s case, it can hardly complain when, the third party having played a significant role in defeating the plaintiff and the defendant having succeeded as a result, it is required to bear some or all of the third party’s costs.

50. In these proceedings, Crossover’s assault upon the plaintiff appeared to me to be full-blooded. Counsel for Crossover was in the vanguard in prosecuting not only Crossover’s case but the defence position as a whole. My impression is that he adduced more evidence, cross-examined longer, made more legal arguments and generally led the attack on the plaintiff’s case. This, no doubt, was because he represented the party with most technical knowledge and expertise on what I would loosely call the “defence” side. For that reason he had more ammunition to work with but it was striking that he chose to lead the charge. I formed the view that counsel for the defendants was content to let Crossover take over the effective management of the defence case for quite lengthy stretches of time. This was not, I think because he was a “shrinking violet”, but probably because he recognised that the coincidence of interests as between Crossover and the defendants was particularly strong and that counsel for Crossover was in a better position, being instructed by engineering experts, to attack the plaintiff than the defendants were.

51. Counsel for Mr Stannus, in keeping with his client’s significantly lesser role than those of Crossover and the defendants, was relatively economical and focussed in his interventions but, of course, was present throughout the trial with his instructing solicitor. Costs therefore accrued.

52. My strong impression is that the defendants and third parties, notwithstanding their coincident interests, gave little time or thought to the questions of co-operation and streamlining of the case to prevent duplication of costs, at least until the time of the trial itself. Certainly no evidence has been presented to me to suggest otherwise. This impression is reinforced by the fact that the plaintiff faced a battery of counsel and solicitors ranged against him. While there may have been some co-operation during the trial itself, to the extent that it came about it was, apparently, on an ad hoc basis, rather than as a result of some considered and negotiated decision to minimise duplication of effort and costs.

Should there be one set of costs only paid by the plaintiff?

53. The plaintiff submits that, given the practical coincidence of the interests of the defendants and third parties that it would be unfair to the plaintiff if he had to bear the entire costs of all the other parties. His counsel contended that in certain circumstances, and this was such a case, it was open to, and appropriate for, a court to order that there be only one set of costs paid by the losing the party.

54. There is no doubt that it is open to the court to take the course proposed by the plaintiff but, in my view, it would not be appropriate to do so for the simple reason that the very nature of his claim made it virtually inevitable that one or both third parties would be joined and this would have been or should have been evident to him or his advisers from the beginning of the proceedings and beforehand.

Should the third parties be made to pay their own costs?

55. The defendants made what I would regard as a bold submission that the third parties, having denied liability to indemnify or contribute but not having argued that issue, should not get their costs or that, at best, they should only receive a nominal award of costs.

56. The Court’s first duty is to do justice between the parties. To accept that submission would come nowhere close to doing justice in the circumstances of this case. Just as I dismissed the suggestions of the third parties to the effect that they were unreasonably joined I dismiss this suggestion. There must always be a risk of costs in joining an unwilling party. The defendants cannot now say that the real issue in the third party proceedings was indemnification and it was not argued. To reiterate what I said above, the issues concerning the third parties were defective work and negligence and all parties argued those. The defendants, indeed, benefited substantially from the support they gained from the third parties in attacking the plaintiff’s case.

57. Furthermore, the third parties could not get out of the case and had even less scope and flexibility in relation to settling than the defendants, let alone the plaintiff. It would be unjust if the third parties were sent away bearing their own costs.

Conclusions on the question of apportionment of costs

58. Having made those findings, it follows that the guiding principle enunciated by King CJ ought not in this case be strictly adhered to. In any event, it is a guideline not a rule. Nor in the peculiar circumstances of this case can justice be done by the easy recital of the refrain “costs follow the event.”

59. In my view, more could and should have been done, not only by the third parties but by the defendants to minimise duplication of costs. As the plaintiff’s case made it virtually inevitable that Crossover if not Mr Stannus would be joined, it is just and reasonable that he ultimately bear some significant portion of the third parties’ costs.

60. Although it is not appropriate in this case, in my opinion, that the plaintiff face only one set of costs, I think also that it is inappropriate that he ultimately pay all the costs. It is inappropriate because the defendants and third parties did not take all reasonable steps to minimise the duplication of costs.

61. It is also inappropriate that the third parties recover all their costs from the defendants because they did not, in my view, take all reasonable steps to minimise the duplication of effort and costs.

62. The orders therefore will be, first, that the plaintiff to pay 75 per cent of the defendants’ costs, 50 per cent of Crossover’s costs and 40 per cent of Mr Stannus’s costs. Second, I will order that the defendants pay 25 per cent of Crossover’s costs and 45 per cent of Mr Stannus’s costs. To eliminate any room for doubt, my intention is that the defendants and Crossover will bear 25 per cent of their own costs because they failed to take adequate steps to minimise the duplication of costs. Mr Stannus will bear 15 per cent of his own costs for that reason too.

63. Those costs will include the costs of the arbitration and any reasonable costs incurred by parties and witnesses travelling from interstate to attend the arbitration and trial.

Should the third parties’ costs be awarded on the indemnity basis?

64. The third parties each made application that the costs awarded to them be on the indemnity basis. From the outline of reasons given above it will be evident by now that there are insufficient grounds upon which I think it would be appropriate to base such an order.

65. In relation to Mr Stannus there is another reason why costs ought not be award on the indemnity basis. His counsel makes much of the failure of the defendants to press their implicit claim of negligence against Mr Stannus. That avoids the point, however, that it was not the defendants who, in reality, asserted Mr Stannus was negligent but the plaintiff whose claim implied such a breach of a duty of care owed by Mr Stannus to Crossover, the defendants and, ultimately, the purchaser of the vehicle, Mr Challita. It was the expert evidence of the plaintiff that implied that Mr Stannus had been negligent. As I have previously emphasised, the interests of Mr Stannus were coincident with those of the defendants. It was not necessary and, indeed, would have been against their own interests for the defendants to have joined the plaintiff’s attack on Crossover and Mr Stannus. The attack on the defendants in this respect is, in my view, misconceived.

Interest on costs?

66. Mr Stannus, although not other parties, made an application for an order that interest be paid on the costs already paid by Mr Stannus. I understand that application is opposed but there was no lengthy argument on the topic.

67. The proceedings have been long and protracted, not to say expensive. Although such an order is unusual in the Local Court, given that the proceedings were commenced in 2000 and the third party notice was served on Mr Stannus in 2003 and costs have been incurred and paid by him over the last three years approximately, such an order seems reasonable in the circumstances.

Orders

68. The plaintiff is to pay 75 per cent of the defendants’ costs, 50 per cent of Crossover’s costs and 40 per cent of Mr Stannus’s costs in sums agreed or assessed on the party and party basis.

69. The defendants are to pay 25 per cent of Crossover’s costs and 45 per cent of Mr Stannus’s costs in sums agreed or assessed on the party and party basis.

70. Those costs will include the costs of the arbitration and any reasonable costs incurred by parties and witnesses travelling from interstate to attend the arbitration and trial.

71. In relation to the costs awarded to Mr Stannus, interest is to be paid on the amounts ordered from the dates when the amounts in respect of costs were paid by him.

Hugh Dillon