Clancy v Prince and 2 Ors

[2001] NSWSC 164

CITATION:	Clancy v Prince & 2 Ors [2001] NSWSC 164 revised - 28/03/2001
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 2184/98
HEARING DATE(S):	13 March 2001
JUDGMENT DATE:	13 March 2001
PARTIES :	Estelle Muriel Clancy (Plaintiff; Defendant to First Cross-Claim) Colin Prince (First Defendant; Cross-Claimant (First and Second Cross-Claim); Defendant to Third Cross-Claim) Lorie Corrigan Real Estate Pty Ltd ACN 068 351 477 (Second Defendant;; First Defendant to Second Cross-Claim; Cross-Claimant (Third Cross-Claim)) Loriena Mavis Corrigan (Third Defendant; Second Defendant to Second Cross-Claim)
JUDGMENT OF:	Santow J

COUNSEL :	C F Hodgson (Plaintiff) P E King (First Defendant) P T Taylor (Second and Third Defendants)
SOLICITORS:	Mark Fraser (Plaintiff) Heidtman & Co (First Defendant) Murray Stewart & Fogarty (Second and Third Defendants)
CATCHWORDS:	COSTS — Pt 52A r33 of Supreme Court Rules not applicable in circumstances where declaratory orders sought and s55(2A) of Conveyancing Act involved and where legal question of complexity and novelty relating to contribution — Principles applicable to indemnity costs — Relevance of Calderbank type letter not within Pt 22 of Supreme Court Rules — Ambiguity in offer of settlement goes against indemnity costs — Relevance of adequate time to consider and closeness to case commencing.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) s55(2A) Supreme Court Act 1970 s63 Supreme Court Rules Pt 22; Pt 52A r33
CASES CITED:	Colgate Palmolive Co. & Anor v Cussons Pty. Limited (1993) 118 ALR 248 McDonnell v Hayes (Victorian Full Court, 23 August 1973, unreported) Nobrager v Trustees of the Roman Catholic Church of the Archdiocese of Sydney (No 2) (NSWCA 133, 21 May 1999, unreported) Varga Group Investments No.8 Pty. Limited v. Geebung Investments Pty. Limited (NSWSC - Abadee J, 15 November, 1994 unreported) Webb v Kunich (Supreme Court New South Wales (Equity Division 3172/78) Master Cohen, 23 October 1978, unreported)
DECISION:	Costs recoverable on party/party basis by purchaser.

REVISED — 28 March, 2001
IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 2184/98
Estelle Muriel Clancy
Plaintiff

Colin Prince
First Defendant
Lorie Corrigan Real Estate Pty Ltd ACN 068 351 477
Second Defendant
Loriena Mavis Corrigan
Third Defendant

Colin Prince
Cross-Claimant (First Cross-Claim)

Estelle Muriel Clancy
Defendant to First Cross-Claim

Colin Prince
Cross-Claimant (Second Cross-Claim)

Lorie Corrigan Real Estate Pty Ltd ACN 068 351 477
First Defendant to Second Cross-Claim

Loriena Mavis Corrigan
Second Defendant to Second Cross-Claim

Lorie Corrigan Real Estate Pty Ltd ACN 068 351 477
Cross-Claimant (Third Cross-Claim)

Colin Prince
Defendant to Third Cross-Claim

JUDGMENT — ex tempore

INTRODUCTION

1    What follows pertains solely to costs in relation to orders and declarations made to-day which are themselves not controversial insofar as it is accepted that declarations and orders contained in paras 1 to 6 followed from the judgment. I will also deal with the third cross-claim so far as procedural directions are concerned.

RESOLUTION OF COST ISSUES

2    The Plaintiff claims costs against the First Defendant on an indemnity basis and against the Second and Third Defendants on a party/party basis up to and including 7 August 2000 and from 8 August 2000 upon an indemnity basis.

3 The First Defendant submits firstly that no order as to costs should be made against it on the basis that Pt 52A r33 of Supreme Court Rules applies such that the proceedings should have been brought in the District Court.

4    The First Defendant submits that in any event any cost order against it should not be on an indemnity basis as the stringent test for the application of indemnity costs is not made out.

5    The Second and Third Defendants submit that no cost order should be made against them notwithstanding that judgment is ordered against the Second and Third Defendants as also the First Defendant. This is because order 6 provides for the satisfaction of the judgment out of a sum already deposited with the First Defendant’s solicitor as stake-holder being, in that sense, essentially the reimbursement of the deposit held by the First Defendant and to cover the items of damage.

6    I should note at this point that the Plaintiff relies upon a Calderbank type letter dated 8 August 2000 in the following terms:

“Heidtman & Co
Solicitors
DX 13013
SYDNEY MARKET STREET
8 August 2000
By facsimile: 02 9267 3688
Your Ref: KS:JLH
WITHOUT PREJUDICE EXCEPT AS TO COSTS
Dear Sirs
Re: Clancy -v- Prince & Ors
I advise that the Plaintiff is prepared to settle these proceedings upon the following basis:
1. There be judgment for the Plaintiff against the Defendants for $50,500.00 plus costs.
2. The First Cross-Claim be dismissed with costs.
3. There be liberty to apply on 7 days notice regarding disbursement of the monies held by the solicitors of the First Defendant in account with Citibank Limited, being account numbered 0-251593-414.
The plaintiff calculates the total of her claim to be approximately the sum of $56,000.00, inclusive of interest.
This offer remains open for acceptance until 5.00pm on 9 August, 2000. If it is not accepted It will be relied upon by the Plaintiff in relation to the issue of costs.
If the Plaintiff’s claim is settled upon the above basis, the Plaintiff will make herself available for cross-examination if requested and will take all reasonable steps to also make available for cross-examination such of the deponents of affidavits served on her behalf who are also required for cross-examination, at the hearing of the Cross-Claims between the Defendants.
Enclosed is a copy of a letter of today’s date sent to the solicitors for the second and third defendants making an identical offer to that put herein. I respectfully suggest that you contact them to discuss this offer as all Defendants will need to agree to accept the offer if the Plaintiff’s claim is to be settled in accordance with the above proposal.
Should you have any questions, please call.
Yours faithfully”

7 Self-evidently, that Calderbank letter is not one which satisfies Pt 22 as an offer of compromise made under the relevant Division of Supreme Court Rules. Nonetheless the Plaintiff seeks to rely upon it as a factor of some weight in the Court’s discretion in determining whether it was unreasonable or imprudent for the First Defendant in the first case and the Second and Third Defendants in the second case to have declined that offer and proceeded to defend these proceedings against the Plaintiff.

8 I shall deal first with whether the proceedings should have been commenced in the District Court such that Pt 52A r33 Supreme Court Rules was rendered applicable. I am satisfied that there is no basis for that contention. The Plaintiff’s claims and indeed that of the First Defendant included an application for declaratory relief, not available in the District Court. Furthermore, the Plaintiff brought a claim under s55(2A) of the Conveyancing Act 1919 (NSW) for return of the deposit. Though in the events that happened I did not need to determine the application of that section, it was relied upon by the Plaintiff from the time of the original Statement of Claim, quite explicably, though the actual application for relief at the conclusion did not refer specifically to that section until the Statement of Claim was amended on around 11 August 2000. Jurisdiction with respect to such a claim does not reside in the District Court the matter being one for the Supreme Court, as has been the subject of a number of unreported decisions; McDonnell v Hayes (Victorian Full Court, 23 August 1973, unreported); Webb v Kunich (Supreme Court New South Wales (Equity Division 3172/78) Master Cohen, 23 October 1978, unreported).

9 Apart from these considerations which are themselves sufficient to exclude the application of Pt 52A r33, the proceedings involved questions that are still novel and legally complex in relation to contribution as between the Defendants; see my judgment at paras 92 to 102. To my mind that would itself have justified retaining the proceedings in the Supreme Court. It matters not that the complexity relates to proceedings as between the Defendants since of necessity this Court is enjoined to resolve all matters of controversy between the parties; see s63 of the Supreme Court Act 1970.

10    Nor indeed is it even established that costs in the District Court would have been of a lesser amount had the matter proceeded there. This is apart from any question of whether it would have been possible to obtain a special fixture, the latter being not to my mind a consideration of any particular weight in the event.

Conclusion

11 One may accept that there was no onus on the Defendants to have sought to transfer the matter to the District Court. But that does not alter the conclusion that Pt 52A r33 of Supreme Court Rules does not apply in the circumstances. In particular I am satisfied that the Plaintiff should not be adversely affected in its claims for costs by having brought her proceedings in the Supreme Court, being the only court with jurisdiction to resolve all issues in controversy between the parties.

12    I turn now to the matter of indemnity costs first as against the First Defendant.

13    The principles applicable to the award of indemnity costs are well established.

In Colgate Palmolive Co. & Anor v Cussons Pty. Limited (1993) 118 ALR 248, Sheppard J stated the position regarding the discretion to award indemnity costs in the following manner, at 256-7:

“4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 ChD at 141) said that the court had a general and discretionary power to award costs as between solicitor and client ‘as and when the justice of the case might so require’. Woodward J in Fountain Selected Meats (Fountain Selected Meats (Sales) Pty. Limited v. International Produce Merchants Pty. Limited (1988) 81 ALR 397) appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo (Tetijo Holdings Pty. Limited v. Keeprite Australia Pty. Limited - Federal C of A, 4 May, 1991, unreported): ‘The categories in which the discretion may be exercised are not closed’. Davies J expressed (at 6) similar views in Ragata (Ragata Developments Pty. Limited v. Westpac Banking Corporation - Federal C of A, 5 March, 1993, unreported).
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion ... the fact that proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain ...); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise ...”
In Varga Group Investments No.8 Pty. Limited v. Geebung Investments Pty. Limited (NSWSC - Abadee J, 15 November, 1994 unreported), his Honour said (at 17):

“In Baillieu Knight Frank (NSW) Pty. Limited v. Ted Manny Real Estate Pty. Limited (1992) 30 NSWLR 359 at 362, Powell J, as he then was, indicated the circumstances which warranted a departure from the established principle to which I have made reference. His Honour considered that indemnity costs could be awarded in circumstances where there was an abuse of process of the Court, and as I understand it, in the particular sense that the Court’s time and litigants’ money have been wasted on totally frivolous and unjustified defences.
In support of his application for indemnity costs, Mr. Gray did not submit in ‘terms’ that these proceedings in the present case involved an abuse of the process of the Court, as such is generally understood. I did not take him to be submitting that if the circumstances suggested that in the instant case the defendants had been involved in totally frivolous and thoroughly unjustified defences, that such jointly, severally or in combination would not warrant the making of an order for indemnity costs. The principles were related to indemnity costs and have been considered by Sheppard J in Colgate Palmolive Co. & Anor. v. Cussens Pty. Limited 118 ALR 248 at 256-257 inclusive. Indeed, his Honour appears to have had regard to six principles or guidelines, one of which included the applicability of the principle stated by Woodward J in Fountain Selected Meats (Sales) Pty. Limited v. International Produce Merchants Pty. Limited & Ors . (1988) 81 ALR 397 at 401. Mr. Justice Woodward said (at 401): ‘I believe that it is appropriate to consider awarding solicitor and client or ‘indemnity’ costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard to known facts or the clearly established law’.”
In Varga , Abadee J made an order for indemnity costs, not from the commencement of the proceedings, but from the time (by reference to the filing of affidavit evidence) that the defendants, properly advised, should have known that they had no chance of success in the proceedings (see p.19).

14    Taking first the position overall, the Plaintiff sought to rely upon the combination of the following circumstances:

(i) The findings against the First Defendant that he was deliberately deceptive and responsible for a deliberately concealed trap in circumstances where he well knew the true position regarding rear lane access (see Judgment paragraphs 69, 70 and earlier 24, 25).

(ii) The failure of the First Defendant to accept what the Plaintiff describes as settlement proposals put by the Plaintiff by letters from her solicitors to the First Defendant’s then solicitors, concededly relying principally upon the letter of 16 December 1997 (though including earlier letters) proposing that the First Defendant pay for the grant of a right-of-way and the associated legal costs and disbursements.

(iii) The Calderbank type letter earlier quoted of 8 August 2000 as against the First Plaintiff (and a similar letter so far as the Second and Third Defendants are concerned of the same date).

15    Though the case is close to the line, I am satisfied that I should not award indemnity costs against the First Defendant, nor indeed against the Second and Third Defendants. While a finding of fraudulent misrepresentation concededly could not suffice to warrant indemnity costs, it does not, even cumulatively with the other matters in (ii) and (iii) above, tip the balance.

16    As has been decided recently by the court of Appeal in Nobrager v Trustees of the Roman Catholic Church of the Archdiocese of Sydney (No 2) (NSWCA 133, 21 May 1999, unreported) while the refusal to accept a Calderbank type letter offer may in some circumstances be categorised as imprudent, Powell JA at para 21 confirmed yet again the principle that

“The ordinary rule is that costs when ordered in adversary litigation are to be recovered on the party and party basis. Any attempt to disturb that situation needs to be carefully considered. It should only be departed from where the conduct of the party against whom the order is sought, is plainly unreasonable.”

17    The question in those terms is whether the conduct of the First Defendant was so plainly unreasonable in defending these proceedings that the exceptional order of indemnity costs should be made.

18    I do not consider that the first two factors earlier identified suffice. The letter of 16 December 1997 was not framed in terms which allowed the First Defendant to conclude that the offer was for a release in return for refund of the deposit. I have hesitated in concluding that the ambiguity works sufficiently in the First Defendant’s favour because the first Defendant could readily have sought clarification of what was admittedly an ambiguous offer and chose not to. However, the test for indemnity cost remains a stringent one and it behoves those who seek to invoke such costs to leave no room for ambiguity in their offers of settlement.

19    The third factor is again one which has caused me some hesitation. The offer to be compared with what the Plaintiff ultimately succeeded in obtaining needs some adjustment to take into account the different time periods when the letter of 8 August 2000 was written as compared to damage calculated by reference to the date of the Schedule appended to the judgment. It must also take into account that legal costs attendant upon the circumstances of “investigating the laneway, etc.” were treated as damages and so understood. However, making those adjustments it is fair to say that the Plaintiff offered the First Defendant a more favourable outcome by some $5,500 than the damages award which I have now made.

20    However the letter of 8 August 2000 was made just before the case started and this was not without its complexities for the First Defendant. Yet he was given a mere 24 hours by the terms of the letter not only to settle upon its basis but to reach agreement with the Second and Third Defendants. They, it is true, did respond positively, but two days later on 10 August 2000; see DCX 1, being a letter of 10 August 2000 from the Second and Third Defendants’ solicitors to the First Defendant’s solicitors. That was a day too late. Regrettably the time period set by the original offer of settlement of 8 August 2000 was simply too tight to accommodate the necessary orchestration of a tripartite settlement on the Defendants’ part with the Plaintiff and earlier between them, especially so close to the case commencing in Court.

21    It is as I have said, a case which is close to the line and one might even say that the First Defendant was fortunate to avoid an indemnity cost order.

22    So far as the Second and Third Defendants are concerned the only issue is whether they should be liable for any cost order and in particular one on a party/party basis. The argument for their escaping that liability is to my mind a flimsy one though ingeniously put. I am satisfied the Second and Third Defendants have no basis for escaping liability for misleading conduct. While the retained deposit has conveniently provided a fund provided only by the First Defendant, and is partly to satisfy the damages as the Second and Third Defendants contend, that can be no basis for excusing the Second and Third Defendants from the ordinary consequence of costs following the event, so far as they were concerned.

23    I have separately made the orders. I note that the last three orders in the draft which have been deleted in handwriting are the subject of further submissions affecting the Defendants’ inter se but not the Plaintiff and concern the third cross-claim.

24    So far as the costs of to-day are concerned insofar as they pertain to cost orders and argument thereon, the Plaintiff in all the circumstances and taking account my earlier reasons should have those costs against all three Defendants on an equal basis.

**********

Last Modified: 04/02/2001