Dalrymple Holdings P/L and Anor. v Gohl, M.A. and Ors.

[1993] FCA 247

IN THE FEDERAL COURT OF AUSTRALIA	1
9UEENSLAND DISTRICT REGISTRY	) No. QG290 of 1988
-GENERAL DIVISION	)

BETWEEN: DALRYMPLE HOLDINGS PTY LTD

First Applicant

AND: MILGLADE PTY LTD

Second Applicant

AND: MARTIN ANDREW GOHL and WENDY GOHL

First Respondent

AND: O'KELLY HOLDINGS PTY LTD

Second Respondent

AND: CLIVE VINCENT O'KELLY

Third Respondent

AND: SANDRA O'KELLY

Fourth Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:  Spender J.

2 7 APR 1993

DATE OF ORDER:  23 April 1993

AUSTRALIA

WHERE MADE:	Brisbane	PRINCIPAL
REQISTRY
THE COURT ORDERS THAT:

1.   There be judgment for the applicants in the proceedings against the first respondents in the amount of fifty-five thousand two hundred dollars ($55,200.00).

NOTE:	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

2.   The applicants pay the respondents' costs thrown away in relation to the issues raised by paragraphs 25 to 34 of the further amended statement of claim.

3.   The respondents pay the applicants1 costs of the proceedings, without reduction.

IN THE FEDERAL COURT OF AUSTRALIA	)
9UEENSLAND DISTRICT REGISTRY	) No. QG290 of 1988
GENERAL DIVISION	)

BETWEEN: DALRYMPLE HOLDINGS PTY LTD

First Applicant

AND: MILGLADE PTY LTD

Second Applicant

AND: MARTIN ANDREW GOHL and WENDY GOHL

First Respondent

AND: O'KELLY HOLDINGS PTY LTD

Second Respondent

AND: CLIVE VINCENT O'KELLY

Third Respondent

AND: SANDRA O'KELLY

Fourth Respondent

CORAM:	Spender J.
PLACE	: Brisbane
DATE :	23 April 1993

REASONS FOR JUDGMENT

On 31 March 1993 I gave judgment against each of the

second, third and fourth respondents in the sum of $55,200.00.

I then indicated that I would hear the parties on costs, and

as to any further orders I should make.

By a letter dated 1 April 1993 the second to fourth respondents, through their solicitor, asked that I make any necessary findings of fact to enable the resolution of what were said to be outstanding issues, namely:

1. The purpose for which the boarding-house was acquired.

2. Whether the applicants failed to elect between inconsistent causes of action and, if so, the consequences of this.

3. Whether the onsale at a profit meant in law that no damages had been sustained.

4. If the applicants had made a relevant election, whether they failed to mitigate their damages.

On 7 April 1993 an affidavit of Neil Sadler, a member of the firm of Lees Marshal1 & Warnick, solicitors for the second, third and fourth respondents, was filed which rehearsed much of the history of the matter. It is unnecessary to repeat that here. Of present significance is paragraph 3 of his affidavit, which says:

" Pursuant	t o the a p p l i c a t i o n damages were sought
pursuant	t o S e c t i o n s 52 and 53A o f the Trade

P r a c t i c e s A c t , i n the a l t e r n a t i v e for

f r a u d u l e n t or n e g l i g e n t m i s r e p r e s e n t a t i o n , and

i n the a l t e r n a t i v e f o r b reaches o f c o n t r a c t i n

r e l a t i o n t o a Management Agreement be tween the

Second Respondent and the F i r s t A p p l i c a n t . "

The significance is that the paragraph reflects an under- standing that the claims were alternative.

On 13 August 1990 Pincus J. ordered the trial of preliminary issues. Of relevance on the question of orders against the first respondents and costs orders that might be made against them were Directions 5 and 6 of his Honour, namely:

" 5. That the F i r s t Respondents may p a r t i c i p a t e

i n the	h e a r i n g	of	such	t r i a l	to	such
e x t e n t	a s	they may	be	a d v i s e d ,	b u t	have

l e a v e t o withdraw and a b s t a i n from

p a r t i c i p a t i n g i n such hear ing .

6 . That , whether o r n o t t h e F i r s t Respondents

wi thdraw and a b s t a i n from p a r t i c i p a t i n g i n

t h e t r i a l o f t h e i s s u e s r e f e r r e d t o i n

paragraph 1 o f t h i s Order , t h e y and a l l

o t h e r	p a r t i e s	t o	t h i s	a c t i o n	s h a l l	be
bound	by	t h e	d e t e r m i n a t i o n	o f	such	i s s u e s

i n a l l r e s p e c t s a s i f t h e same were heard

and de termined a t a t r i a l i n which t h e y

p a r t i c i p a t e d . "

That trial of preliminary issues was held by me on 1 November 1990. On 22 November 1990 I found in favour of the applicants and ordered that the second, third and fourth respondents pay the costs of the preliminary hearing on a party and party basis, but that the costs thrown away by an amendment to the defence of the second and fourth respondents be paid by them on a solicitor/client basis.

A further amended application and statement of claim were filed on behalf of the applicants on 19 June 1991. That statement of claim jettisoned a claim for breach of contract of the management agreement. The damages identified in the amended statement of claim appear in paragraph 24 of that

the applicants have lost the difference between the actual	statement of claim. In summary, that paragraph alleges that
value and the contract price and claims that amount, together with interest at the rate of 20%, together with the difference between stamp duty and legal fees on the purchase price compared with those items on the actual value, and also asserts that the applicants have lost the profits that they would have made had the property complied with the representations pleaded in paragraphs 10 and 11 of the statement of claim, less the actual profits made. They claim also the difference in interest payments and loan fees between what would be the case on the actual value of the property and the purchase price, and that paragraph further pleads that the applicants have suffered consequential losses in refinancing the purchase price of the property, which they would not have expended had the purchase przce of the property been the actual value of the property at the time of purchase.
In summary, the paragraph rolls up elements of damage assessed on a tortious basis with an element of reliance loss.
The applicants nonetheless at the conclusion of the amended statement of claim claim the relief specified in the further amended application. That further amended application claims damages under S. 82 of the Trade Practices Act 1974 together with interest thereon and "further or in the a1 ternative" damages for fraudulent or negligent
misrepresentation together with interest thereon and "further or in the alternative" damages suffered by the applicants or
either of them for breach of warranty, together with interest thereon, and by paragraph 4A, "further or in the alternative" exemplary damages from the second, third and fourth respondents by reason of the facts and matters referred to in the statement of claim.

- - - M r Sadler's affidavit refers to a report provided

shortly before trial of the principal proceedings from a chartered accountant, Mr Calabro which, inter alia, claimed the difference between the purported actual value of the property and the contract price and interest on that difference, and other amounts being related to legal fees, loan costs, stamp duty and refinancing costs and an item of $70,235.00 for loss of profits.

It is convenient to deal with the further findings sought by the second to fourth respondents.

What is asserted on their behalf is that the boarding-house was purchased with the intention of making a capital profit on resale and was not bought, as Mr Murphy alleged, to live off the income. The circumstances that some two years later it was sold for a very large profit has the consequence that the applicants in fact suffered no loss.

Mr Murphy was asked in cross-examination in the

proceedings of August 1992, by Mr Cooper, counsel for the

second to fourth respondents:

" Can you j u s t e x p l a i n to m e what a r e t h e . . .heads

o f damages t h a t you a r e s eek ing t o r e c o v e r . "

To which Mr Murphy said:

"	W e l l ,	t h e f a c t	t h a t we	paid	a c e r t a i n amount	o f
money	t o b u y a	p r o p e r t y	which	we	s a y was	n o t

worth what we paid f o r i t . "

and after some discussion about that aspect of the matter Mr

Murphy was asked:

"

" And what other c l a i m s a r e you making?

to which he replied:

" I think p r o b a b l y we ' re mak ing a c l a i m for

b r e a c h o f con t r a c t . "

Mr Cooper asked:

" F o r what? "

and Mr Murphy replied:

" F o r O r K e l l y when I asked h i m to . . . t h a t I t o l d

h i m t h a t there was no way I was b u y i n g the

p r o p e r t y u n l e s s I was p o s i t i v e it was g i v i n g

t h a t i ncome . "

M r Cooper:

l' Y e s .

Mr Murphy:

" And t h a t the two p i e c e s o f paper he had g i v e n

me w e r e n ' t s u f f i c i e n t t o s a t i s f y me o f t h a t and

I needed more . "

And later:

" What d o you s a y y o u r losses a r e t h a t you a r e

cl a iming? "

He replied:

l' I 'm s a y i n g t h a t we l o s t c a p i t a l v a l u e o f the

p r o p e r t y	and	we	h a v e	los t	income	from	the
p r o p e r t y .	"

Mr Murphy conceded that a claim for management

losses was not being persevered with.

I am satisfied that the applicants acquired 'Linden Lodge' as an investment. The question of returns on that investment was an important matter. That finding is corroborated by the calculations performed by Mr Murphy on the rear of Exhibit 1, disclosing a yield on the proposed investment of the order of slightly more than 20 percent. I am sure that the question of capital gain was not an irrelevant matter in the decision to purchase, but the decision to purchase was in a large measure based on the trading figures supplied to the applicants in Exhibit 1. The presentation of those figures misled the applicants as to the value of what they were acquiring and they are entitled to be compensated as to their primary loss on the difference between the purchase price and the value of what they were induced to acquire. The fact that some considerable time later there was a handsome capital gain made on the property does not affect their entitlement to damages in respect of the conduct in contravention of the Trade Practices Act.

As to the suggestion that there were inconsistent
remedies pursued, in my opinion, as the amended application

makes plain, what was sought on behalf of the applicants was

based on the contravention of S. 52 of the Trade Practices	sought either in the alternative or in addition to damages
m. There was not in my opinion a failure to elect between
inconsistent causes of action nor on any view of the evidence has there been a failure to mitigate their damages.
It is not disputed that the applicants should pay to the second, third and fourth respondents the costs thrown away by the abandonment of the issues raised in paragraphs 25-34 of the further amended statement of claim and I so order.
Subject to that matter, the applicants submitted that they should have their costs from the second, third and fourth respondents on an indemnity basis. There is no doubt that the court has jurisdiction to make such an order. Section 43 of the Federal Court of Australia Act 1975 relevantly provides:

" ( l ) . . . t h e Court or a Judge h a s j u r i s d i c t i o n t o

o r d e r c o s t s i n a l l p roceed ings before t h e

C o u r t . . . o t h e r than proceed ings i n r e s p e c t o f

which a n y Act p r o v i d e s t h a t costs w i l l n o t be

a warded.

(2) Except a s prov ided by a n y o t h e r A c t , t h e

award o f costs i s i n t h e d i s c r e t i o n o f t h e

Court o r Judge. "

One can cite instances of the exercise of the power

in a court to make such an order: Thors v. Weekes (1989) 92
A.L.R. 131 at 151-2 per Gummow J.; Australian Guarantee
Cor~oration v. De Jaaer [l9841 V.R. 483 at 502 per Tadgell J.;
Deamam Ptv Ltd (In Liu.1 v. wriaht (No. 21 [l9831 2 N.S.W.L.R.

Christie (1872) L.R. 8 Ch. App. 499; and see also Australian	354; Forester v. Read (1880) L.R. 6 Ch.A. 40; Christie v.
TransDort Insurance Ptv Ltd v. Graeme Phillius Road TranSDort Insurance Ptv Ltd (1986) 10 F.C.R. 177 at 178; Sinaleton v. Macauarie Broadcastina Holdinas Ltd (1991) 24 N.S.W.L.R. 103 and LJP Investments Ptv Ltd v. Howard Chia Investments Ptv Ltd (1991) 24 N.S.W.L.R. 499 at 508-9.

- .. ...	In the applicants' claim for indemnity costs, they say that not only did the O'Kellys commit a blatant fraud in the production of the document which became Exhibit 2, but they set out deliberately to fabricate a document which they intended to adduce in evidence to support their defence in circumstances where they knew that that defence carried with it the' assertion that the applicants' case was dishonest and itself based on deliberately concocted evidence.
In my reasons for judgment on the preliminary issue, I said that the document given to M r Murphy and propounded by the second, third and fourth respondents, "was n o t bona f i d e
and has been s u b j e c t e d to m a n i p u l a t i o n " . I said:

" I f i n d i t i m p o s s i b l e t o a v o i d t h e conc lus ion

t h a t [ t h e f a b r i c a t e d document] came about a s a

r e s u l t o f t h e e f f o r t s o f Mr O ' K e l l y and /or Mrs

O ' K e l l y . "

As earlier indicated, I ordered that the costs

thrown away by the need to replead ought be on a solicitor-

client basis but otherwise ordered costs be paid by the	second, third and fourth respondents (the implication being
that they be on a party and party basis). It has to be accepted that the second, third and fourth respondents were the agents for the first respondent, and have little personal pecuniary interest in the dealings with which these proceedings are concerned.
There is force in the submissions on behalf of the applicants but the essential features on which they rely remain much as they were as at November 1990, although I am conscious that there has been, in a sense, a maintenance of the position on which they relied at the time of the preliminary hearing. I was conscious then, as I am now, of the matters to which the applicants point, but in all the circumstances, I am not persuaded that I should order costs other than on the usual basis in respect of the principal proceedings.
The next matter concerns the claim by the second to fourth respondents that the applicants should not recover the full amount of their costs.
The nature of the discretion vested in a trial judge as to the award of costs and the principles which guide the exercise of the discretion are set out by Toohey J. in Huahes v. Western Australian Cricket Association (Inc.) (1986) ATPR

" Subsection 43(2) o f the Federal Court o f Australia Act 1976 vests the award o f costs ' i n the discretion o f the Court or Judge'. The Federal Court Rules do not purport t o quali fy
that discretion. The onlv rule t o which	a

reference i s necessary i s 0. 52 r. 15 whereby, when costs are reserved, those costs follow the event 'unless the Court or a Judge otherwise

orders ' .

The discretion m u s t o f course be exercised judicially. There are decisions, both o f Australian and English courts, that throw l igh t on the way i n which the discretion i s t o be exercised. I shall not r e f e r t o those

d e c i s i o n s i n a n y d e t a i l ;	I	s h a l l	s i m p l y set	o u t
i n a	summary way what	I	u n d e r s t a n d t o be	their

e f f e c t .

1 . O r d i n a r i l y , costs f o l l o w the event and a

s u c c e s s f u l l i t i g a n t receives his costs i n the

a b s e n c e o f s p e c i a l c i r c u m s t a n c e s j u s t i f y i n g

some	other	o r d e r .	R i t t e r	v.	G o d f r e y	( 1 9 2 0 )	2
K . B .	4 7 .

2 . Where a l i t i g a n t h a s s u c c e e d e d only upon a

p o r t i o n o f his c l a i m , the c i r c u m s t a n c e s may

make i t r e a s o n a b l e t h a t he b e a r the e x p e n s e o f

l i t i g a t i n g	t h a t	p o r t i o n	upon	w h i c h	he	h a s
f a i l e d .	F o r s t e r v.	Farauhar	( 1 8 9 3 )	1	Q.B.	564 .

3. A s u c c e s s f u l p a r t y who h a s f a i l e d on

c e r t a i n i s s u e s may not only be d e p r i v e d o f the

costs o f those i s s u e s b u t m a y be o r d e r e d a s

w e l l t o p a y the o t h e r p a r t y ' s costs o f them.

In t h i s sense, ' i s s u e ' d o e s not mean a p r e c i s e

i s s u e	i n	the	t e c h n i c a l	p l e a d i n g	sense	b u t	a n y
d i s p u t e d	q u e s t i o n	o f	f a c t	or	o f	l a w .	C r e t a z z o

v. Lombardi ( 1 9 7 5 ) 1 3 S . A . S . R . 4 a t p . 1 2 . "

I n t h i s c a s e , the amount o f damages c l a i m e d was

c o n s i d e r a b l y g r e a t e r t h a n the sum awarded , but there was no

payment i n t o court u n d e r 0 . 2 3 o f the F e d e r a l C o u r t R u l e s .

T h i s	i s	the	a p p r o p r i a t e	c o u r s e	i f a	r e s p o n d e n t	believes	a n
a p p l i c a n t ' s	m o n e t a r y	c l a i m	i s	a n	o v e r - r e a c h i n g	one.	I f	a

p a r t y recovers even s l i g h t l y more t h a n the amount paid it,

they would be e n t i t l e d t o a l l o f the ir cos t s i n the

p r o c e e d i n g s :  Hadz iaeora iou v . O ' S u l l i v a n [l9831 1 Qd.R. 5 5 .

T h e b a s i s o f the h i g h e r amount o f damages c l a i m e d

had	s u p p o r t ,	so	f a r	a s	i t s components	w e r e	c o n c e r n e d ,	i n the
e v i d e n c e	o f	M r	C a l a b r o ,	who	was	not	c r o s s - e x a m i n e d .	T h i s

a s p e c t o f the p r o c e e d i n g s d o e s n o t c o n s t i t u t e a proper b a s i s

o n w h i c h the successful p a r t i e s ' cos t s s h o u l d be r e d u c e d .

Putting aside the question of exemplary damages, which I did not consider appropriate in the circumstances, the same damages awarded under the Trade Practices Act claim would have been awarded in deceit or for negligence. The claim based on a collateral contract did not occupy a great deal of time. As well as the quantum of individual items, the nature of the issue on which the applicants failed, which essentially is whether it was competent for the applicants to claim both compensatory and reliance losses, is not so distinct and so significant in tens of time and expense as to make it just to depart from the usual order as to costs in favour of the party which has succeeded: Windsurfina International, Inc. v. Petit (1987) A.I.P.C. 90-441 at 37,863 per Waddell J.

The final matter is the level of costs, having regard to the provisions of 0. 62 r. 36A(1). This rule provides :

" Where a p a r t y i s awarded judgment f o r less than

$100,000 on a c l a i m ( n o t i n c l u d i n g a c r o s s -

c l a i m ) for a money sum or damages any c o s t s

ordered t o be p a i d , i n c l u d i n g d i sbursements ,

w i l l be reduced by o n e - t h i r d o f t h e amount

o t h e r w i s e a l l o w a b l e under t h i s Order u n l e s s t h e

Court o r a Judge o t h e r w i s e o r d e r s . "

I gave judgment on 31 March against the second, third and fourth respondents in the sum of $55,200. Thls amount included a component for interest, awarded under S. 51A of the Federal Court of Australia Act 1976.

The increase to the sum of $100.000 from $50,000 only took effect from 1 January 1993, which is after the trial of the principal proceedings but before judgment. Section 51A(1) permits the court or a judge on application, unless good cause is shown to the contrary, to order that there be included in the sum for which iudqment is aiven interest at

'

such rate as the court or judge, as the case may be, thinks fit [my emphasis]. Interest awarded pursuant to S. 51A is part of the judgment sum.

This interpretation is consistent with the judgment of the N.S.W. Court of Appeal in Fire & All Risks Insurance Co. Ltd v. Rousianos (1989) 19 N.S.W.L.R. 57; the judgment of the Full Court of the Victorian Supreme Court in Mur~hy v. Murphv [l9631 V.R. 610; and Hadziaeoraiou v. O'Sullivan [l9831 1 Qd. R. 55.

It therefore is the case that at the time of the
trial in the principal proceedings the judgment would have
exceeded the threshold which called for the application of 0. 62 r. 36A. In the circumstances of this case the

applicants are entitled to their party and party costs without reduction. Out of an abundance of caution, I order that there be no reduction in the costs ordered to be paid in the amount of costs otherwise allowable.

As to the position of the first respondents, they
admitted in their defence filed 3 November 1989 the allegation
of agency in the amended statement of claim filed 5 December

1988. That admission is confirmed by the evidence of M r

O'Kelly. A real estate agent has implied authority to make representations concerning the property the subject of the agency so that the agent's principal is liable for the agent's fraud; see Petersen v. Molonev (1951) 84 C.L.R. 91 at 94; and Llovd v. Grace. Smith & Co. [l9121 A.C. 716.

Here the directions of Pincus J. made on 13 August 1990, to which I have already referred, make it plain that the first respondents are bound by the findings made at the preliminary trial. They did not appear at the trial of the principal proceedings, but in all the circumstances, it is right that the applicants should have judgment against the Gohls with costs. In the light of these reasons, the court makes the following orders:

1.	There be judgment for the applicants in the proceedings against the first respondents in the amount of fifty-five thousand two hundred dollars ($55,200.00).
2.	The applicants pay the respondents' costs thrown away in relation to the issues raised by paragraphs 25 to 34 of the further amended statement of claim.
3.	The respondents pay the applicants' costs of the proceedings, without reduction.

I c e r t i f y t h a t t h i s and the

preceding	t h i r t e e n	( 1 3 )	pages
a r e a	t r u e copy	of	t h e reasons
for

Counsel for the applicants:  M r J. C. Sheahan

-- . .

instructed by:	Feez Ruthning
Counsel for the second to
fourth respondents:	m-  D. cooper
instructed by:	Lees Marshal1 & Warnick
Date of Hearing:	19 April 1993