Dr Douglass v Lawton Pty Ltd (No 2)

[2007] NSWCA 90

New South Wales

Court of Appeal

CITATION:	Dr Bronte Douglass v Lawton Pty Limited (No 2) [2007] NSWCA 90
HEARING DATE(S):	7 December 2006
JUDGMENT DATE:	18 April 2007
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 31; Basten JA at 32
DECISION:	The Summons for Leave to Appeal is dismissed with costs.
CATCHWORDS:	Costs – application to amend defence on day of trial – matter adjourned as unable to be heard within allotted time – whether trial judge erred in making costs orders against defendant - Costs – primary purpose of costs not to punish unsuccessful party but to indemnify successful party – whether trial judge applied wrong principle in exercising discretion to order costs
CASES CITED:	Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
PARTIES:	Dr Bronte Douglass (Appellant) Lawton Pty Limited (Respondent)
FILE NUMBER(S):	CA 40161/06
COUNSEL:	M Einfeld QC; M Sneddon (Appellant) D Higgs SC; F Assaf (Respondent)
SOLICITORS:	Gadens (Appellant) Jackson Smith (Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 2975/04
LOWER COURT JUDICIAL OFFICER:	Gibson DCJ
LOWER COURT DATE OF DECISION:	5 December 2005

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CA 40161/06

BEAZLEY JA
HODGSON JA
BASTEN JA

18 April 2007

DR BRONTE DOUGLASS v LAWTON PTY LIMITED

Judgment (No 2)

1 BEAZLEY JA: This is a Summons for Leave to Appeal against an order made by her Honour Judge Gibson on 5 December 2005 in which her Honour ordered the appellant to pay the costs of the respondent thrown away by reason of an adjournment of the proceedings when first listed for hearing before her in the District Court.

2 The Summons for Leave to Appeal and, if granted, the appeal, have been heard concurrently. These proceedings are related to proceedings CA 40385/06. For that reason, it is convenient to call Dr Douglass the appellant and Lawton Pty Limited the respondent.

3 The hearing of the proceedings had been set down before her Honour for 4 days. On the first day of the hearing the appellant made an application to amend the defence. The proposed amendment alleged first that the area of the leased premises was less than 1,000m2 and that there had been a breach of the covenant as to quiet enjoyment. The proposed amendment reflected the contents of an expert’s report, as well as the contents of an affidavit by the appellant, both being evidence which the appellant intended to adduce in the proceedings if the amendment was allowed.

4 There was considerable argument as to the proposed amendment up until the luncheon adjournment, including, at one stage, the question whether the appellant in fact needed to amend, or whether these assertions could be made notwithstanding that they had not been expressly raised in the defence.

5 The position which had been reached by the luncheon adjournment was that the appellant’s counsel had accepted that a formal amendment was necessary. Her Honour directed the appellant to draft the amendment and to return after the luncheon adjournment. She indicated that it would be necessary to then determine whether or not the respondent would be prejudiced by the late amendment. She indicated that if there was prejudice, then there would be a question of whether the amendment would be allowed, or whether an adjournment would be necessary.

6 After lunch, senior counsel for the respondent informed the Court that the respondent opposed the proposed amendment because the draft alleged conclusions rather than the facts upon which those conclusions were based. Senior counsel also informed her Honour that the respondent was prejudiced, but would be more prejudiced if the matter was to be adjourned. He informed her Honour that “his clients” (referring to principals of the respondent) were elderly and not well and that the case “had been around for a long time”. During the course of that discussion, her Honour made the comment “[w]hat about if there was a really big costs order?”.

7 In a continuing long exchange with counsel, her Honour indicated that there were time constraints in her hearing the matter. She observed that the matter had been set down for four days and that most of the first day had been taken up with an argument about the amendment. She also indicated that she had in fact only three days of that week to deal with the matter and could have allocated some further time to it on the Monday and Tuesday of the following week, when she otherwise had a jury trial.

8 Her Honour expressed the view that she needed to balance the interests of both parties in determining what to do. She was concerned that the appellant’s counsel, in the short time over the luncheon adjournment, had not been able to properly formulate the defence, the essence of which she considered “probably for the first time … [puts Nargol and the appellant] on some kind of secure footing”. Her Honour said this had to be balanced against the prejudice to the respondent.

9 During the course of expressing her thinking on these matters, her Honour added:

“[Counsel for the appellant] is going to have an uphill battle persuading me that he shouldn’t be facing a very large costs order if I have to adjourn the case.”

10 Her Honour articulated the claim which she understood the appellant wished to make in the amended defence. Counsel for the appellant agreed with her Honour’s formulation. Her Honour then said:

“If that’s their argument, it’s disgraceful that they’re bringing it on the [day] of a trial and they should be punished firmly by a nasty costs order .” (Emphasis added)

11 Senior counsel for the respondent continued to resist the amendment, but then asked for a short adjournment. Her Honour granted that request, making the comment:

“You can and you can have a serious talk to Mr Sneddon about what particularly painful costs order you would like in the event that he wants to persist with this amendment.” (Emphasis added)

12 On resumption, senior counsel for the respondent indicated that he would try to meet the appellant’s case overnight. Her Honour then referred to the length that the hearing would then take if the amendment was allowed. She offered to see whether another judge could hear the case. Having made enquiries of the list judge and obtaining the assessment of both parties that the case was probably a five day case and stating that she did not have the time to hear it, her Honour also indicated, in response to another application by the appellant for the case to proceed and to go over part heard, that the Court “did not proceed in that manner”.

13 At that point, it was obvious that the matter was going to be adjourned and the question of costs was raised. Counsel for the appellant raised the question whether the costs order that her Honour was contemplating was costs thrown away by reason of the vacation of the hearing date, or whether it was costs thrown away by reason of the amendment. Her Honour indicated that the latter costs, at the least, would be ordered and that “that was the usual rule”. Her Honour added:

“What you must accept is that this case is not proceeding today in circumstances where this is because your client should have put this evidence on a very long time ago.”

14 Counsel then asked whether her Honour had in mind a costs order for one day or four days and submitted that the costs should be limited to one day. Her Honour said:

“… I think it’s a matter for the assessing officer, the order that is routinely made in this Court is that the party whose late amendment has occasioned the adjournment should pay the costs thrown away by reason [of] vacating the hearing date, and you can fight out with the costs assessor whether that’s one or four days. It’s not my fault, not my problem.”

15 Her Honour rejected an application to exercise her discretion to expressly limit the costs order to one day.

16 Her Honour then made the following orders:

“On the application of the [appellant] for leave to amend the defence to include paragraph 19A to reflect the contents of the expert’s report of 26 October and the affidavit of the [respondent] of 11 November 2005, such application granted on the following conditions: (a) hearing date be vacated, (b) [the appellant] to pay [the respondent’s] costs occasioned by reason of the vacating of the hearing date and by reason of the amendment, such costs to be assessable forthwith.”

17 The appellant contends that her Honour erred in the exercise of her discretion in ordering an adjournment of the proceedings on her own motion and in ordering the appellant to pay the costs in circumstances where:

“3.1 neither the [appellant], nor the [respondent] requested nor wished, that the hearing be adjourned;

3.2 this was not a case where the amended defence raised a matter that ‘necessitated’ the adjournment of the hearing;

3.3 the hearing should have proceeded on the date fixed for hearing and, if necessary, should have gone over part-heard if the case was not concluded in the time estimated;

3.4 her Honour’s discretion in relation to costs miscarried;

3.5 her Honour, in her reasons, made the Costs Order to ‘punish’ the [appellant] for the proposed amended defence.”

18 Her Honour did not deliver a judgment in the matter. Accordingly, the challenge to her Honour’s orders is based upon the exchanges between her Honour and counsel to which I have referred.

Did her Honour err in granting the adjournment?

19 The appellant contends that this was not a case where the amended defence raised a matter that “necessitated the adjournment of the hearing”. The appellant submits that her Honour effectively required the matter to be adjourned in circumstances where neither party sought that result. The appellant actively resisted it, and the respondent indicated to her Honour that it would be more prejudiced if the adjournment was granted.

20 This is an application for leave to appeal. The adjournment was granted and the matter has now been heard. For that reason, I would refuse leave to appeal against the order for the adjournment of the proceedings. However, as discussed below, the grant of the adjournment is relevant, on the appellant’s argument, to the costs issue.

Did her Honour err in making the costs order?

21 The appellant accepted the broad statutory discretion which resides in the Court in making a costs order. However, he submitted that that discretion is not unqualified and it must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In particular, it was submitted that the discretion cannot be exercised capriciously and that costs are not imposed by way of “punishment”: see Oshlack v Richmond River Council (1998) 193 CLR 72 at 96; [1998] HCA 11 at [65].

22 In Oshlack, in a passage upon which the appellant particularly relies in this case, McHugh J, at [67], pointed out that costs are not awarded to punish an unsuccessful party. Rather, the primary purpose of an award of costs was to indemnify the successful party. That statement was made in circumstances where the Court was dealing with concluded litigation. However, the underlying principle remains valid for all costs orders.

23 The appellant submitted that the amended defence did not necessitate an adjournment and the adjournment of the matter was effectively forced upon the parties. Senior counsel submitted to this Court that the parties had agreed that the hearing could be concluded within four days, even if the amendment was allowed. It followed, on this submission, that in making a costs order against the appellant, her Honour’s discretion miscarried, because the costs order was based upon a wrong factual basis, namely, that the matter could not be heard within the allotted time, when in fact it could.

24 This submission does not accurately record her Honour’s explanation of the situation she considered had arisen. During the course of discussion between counsel and her Honour, her Honour said that if the amendment was allowed, then, as it had been indicated that there would be five extra witnesses, she considered that a realistic assessment of the hearing was probably five days. Counsel for the appellant agreed, as did senior counsel for the respondent. By that time, much of the first day allocated for the hearing had been lost. Her Honour considered that if she allowed the amendment and commenced the hearing, it was likely that the matter would have to go over part heard into the following year as she had no available time until then. She had indicated anyway that the practice in the Court was not to permit matters to become part heard.

25 The appellant also argued that her Honour’s approach was inconsistent, as she had said that she could have completed the matter, if it only had four days in it, by using the three days of the allocated hearing time remaining and then using portion of two days in the following week when she could get time away from her jury trial. This submission appears to have been made on the basis that, even with the amendment, the matter would only take four days, so that the adjournment was, in effect, one forced on the parties to suit her Honour. I have already rejected the argument that the matter remained a four day matter if the amendment was allowed.

26 For the reasons I have given, I do not think it is correct to say that the adjournment was made because of the exigencies of her Honour’s hearing obligations. Rather, those exigencies arose because the application for the amendment had been made and took most of the first day to sort out. An examination of the transcript reveals that there was no error in the manner in which her Honour dealt with the application for adjournment.

27 That then leaves the question whether her Honour applied a wrong principle in the exercise of her discretion to order costs against the appellant. This argument principally focussed upon her Honour’s use of language which indicated that there was some “punitive aspect” in the costs order that she was proposing. Whilst her Honour’s language to which I have referred above was unfortunate, in my opinion, it meant no more than an indication by her Honour that if a late application for amendment was made, there would be costs consequences. It would be fair to say, to coin another expression, that her Honour was ‘shaking her finger at an errant schoolchild’.

28 The proof of the underlying approach of her Honour in making the costs order is to be found in the order actually made. It was not “punitive” in its terms. It was a typical order made by a court when one party makes an application such as was made here and which had a consequence such as flowed here, namely, the need for an adjournment because the time in which the case was to be heard was extended by reason of the amendment.

29 In my opinion, no error has been shown in the order for costs which was made. Her Honour’s comments, about which complaint is made, do not raise any question of principle, although as I have already noted, they do not appropriately reflect the principles upon which a court determines whether a costs order should or should not be made and what such order should be. However, in circumstances where no error has been shown in the orders which were made, I consider that her Honour’s statements should be seen as no more than ‘throw-away comments’ made during the course of an application which was clearly going to cause hearing and/or listing difficulties. In those circumstances, I am of the opinion that leave should be refused on this aspect also.

30 Accordingly, the order I propose is that the Summons for Leave to Appeal be dismissed with costs.

31 HODGSON JA: I agree with Beazley JA.

32 BASTEN JA: I agree with Beazley JA.

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