Deverson v Sherrin & Ors (No 2) No. DCCIV-96-1662 Judgment No. D44

[1999] SADC 44

DEVERSON v M J SHERRIN PTY LTD; M J SHERRIN PTY LTD v DEVERSON & EXECUTOR TRUSTEE AUSTRALIA LTD (NO 2)
[1999] SADC 44

Judge Lunn
Civil

APPLICATION BY PLAINTIFF FOR COSTS OF ACTION ON A SOLICITOR AND CLIENT SCALE

1. By reasons published on 11 March 1999, [1999] SADC 23, I assessed the plaintiff’s damages at $204,988 and dismissed the defendant’s third party proceedings. The plaintiff and the third parties then applied for costs on a solicitor and client scale. The defendant did not dispute that they were entitled to an order for costs, but contended they should be on the normal party and party scale.

2. Initially the plaintiff made her application under Rule 41.04 based on an offer served on 22 April 1998.  However, she subsequently conceded that she could not succeed under R41 because the form of her offer did not comply with the Rule in that it was to consent to judgment for $185,000 in addition to interest.  (If the pre-judgment interest which I allowed until judgment had been included it would have produced an offer of $204,660, but I leave open whether the true amount of any such offer should have been limited to interest accrued only to 14 days after the service of the offer.)  The plaintiff then renewed her application for solicitor and client costs under the general discretion of the Court to award them pursuant to R101.  There was a dispute about whether I could have regard to the terms of the offer of 22 April 1998 as one factor in the exercise of the discretion under R101 or whether it was a nullity and had to be disregarded for all purposes.

3. The discretion to order solicitor and client costs in favour of the plaintiffs under R101 was recently considered by the Full Court in Pirrotta v Citibank Ltd, Full Court, 4/11/98, Jud No S6922, unreported.  There the question was whether the Court should act on a “Calderbank” letter in the exercise of the discretion to award such costs.  The primary issue there was the nature of the discretion but that is not the point here.  The Full Court dealt with the inter-relationship between R41 and the use of “Calderbank” letters and held that “Calderbank” letters could be used at least in multi-party and complex litigation where there were situations which did not fall precisely within R41.  It accepted that Calderbank letters could have a significant field of operation, but it did not spell out the precise line of demarcation between such letters and RR40 and 41.  It did not exclude the possibility that regard could be had to both R41 offers and “Calderbank” letters in the overall exercise of the same discretion as to costs.  It did not refer to an earlier decision of Mullighan J in Duke Group Ltd v Pilmer (No 8), 1/6/98, Jud No S6699, unreported, where it was said that in the exercise of the discretion under R101 about ordering costs on a solicitor and client scale it was relevant that a plaintiff had not availed itself of the procedure under R41.  In Pirrotta there was no reference to a line of cases which had held that the Court would only act on informal offers in exceptional cases where there was some good reason for not having used the formal procedures provided by RR40 or 41: Re Vitch (No 2) (1988) 147 LSJS 279; Biernacki v Kalenka (1988) 80 ACTR 1; Ashby v Marshall, Mohr J, 28/11/91, Jud No S3133, unreported; Callaghan v Callaghan (No 2), Perry J, 3/5/96, Jud No S5562, unreported.

4. In the application before me the plaintiff’s counsel argued in effect that the defective offer under R41 could be treated as a defacto “Calderbank” type offer which could have enabled the defendant to have settled the action for about the ultimate judgment sum.  For present purposes I am prepared to accept, without deciding, that as a matter of contract the offer contained in the Notice of 22 April 1998 could have been accepted by the defendant and the Court would have given effect to it by assessing the pre-judgment interest.

5. If this argument is correct, it is inconsistent with a number of earlier decisions about the effect of purported offers which did not comply with RR40 or 41.  (For the present purposes there is no material difference between the operations of RR40 and 41.)  In Jaber v City of Woodville (1990) 156 LSJS 454 and Flavel v Mason (No 2) (1994) 178 LSJS 340 District Court Judges have held that such documents of offer were nullities. In Normington v Frost (1982) 104 LSJS 180 it was held that an offer of a monetary amount plus unspecified special damages did not come within R40 and it was not suggested that regard could be had to this invalid offer. There is an authority which may be to the contrary of Sheahan v Hertz Aust Pty Ltd (1995) 181 LSJS 147 at 155 where the Full Court held that regard could be had to an R41 offer which was made out of time in the exercise of the general discretion on costs. Under R41.05 the provisions of R40.06 about offers served out of time applied to this R41 offer which suggests that it was not a nullity if its only defect was that it was out of time. The Full Court did not there appear to be overruling the cases mentioned earlier on offers whose terms were outside of the Rules, and it is distinguishable on the grounds that it was concerned only with a time point.

6. I consider that I should follow the authorities which have held that offers under RR40 and 41 which are in a form which cannot be accepted under the relevant Rule are nullities, and thus no regard should be had to them on the exercise of the general discretion as to costs.  There is nothing in Pirrotta’s case which is contrary to this.  In my view proper compliance with RR40 and 41 should be insisted upon and parties who do not comply for other than exceptional reasons should not be treated by indirect means as if they had complied.  Accordingly, I disregard the Notice of 22 April 1998.

7. The discretion under R101 is only to be exercised to award costs on a solicitor and client basis where there is some special feature justifying such an award:  “Civil Procedure South Australia”, para [R101.01.10].  The plaintiff’s counsel pointed to some delays in the progress of the case caused by the defendant mounting its third party claim.  While the third party claim failed, it was not a hopeless cause of action.  The action did not satisfy the timetable under DCR2.03, but that is nothing unusual and is not in itself a ground to award solicitor and client costs in favour of the successful party.  Insofar as the action has been unduly delayed the plaintiff has been recompensed by the order for pre-judgment interest.  In the history of the matter there are no factors sufficient to justify an order for solicitor and client costs in favour of the plaintiff or the third parties.

8. The order of the Court is that the defendant pay to the plaintiff and the third parties their respective costs of action as agreed or taxed.  “Costs” for this purpose are defined by R101.07(6)(b).  The plaintiff is to pay to the defendant its costs as agreed or taxed of the application for solicitor and client costs.