Eastern Garden Pty Ltd v Sangster & Ors (No 2) No. Scciv-02-701

[2004] SASC 66

EASTERN GARDEN PTY LTD v SANGSTER & ORS (NO. 2)
[2004] SASC 66

Civil

1. VANSTONE J:     On 25 February 2004 I gave judgment in this matter.  The plaintiff succeeded against the first defendant but failed against the second and third defendants.  Argument in relation to the matter of costs was deferred until 4 March.  On that occasion Mr Morcombe of Senior Counsel for the plaintiff sought costs against the first defendant and he also sought a Bullock order as against the first defendant in respect of costs which the plaintiff becomes liable to pay to the second and third defendants.

2. For his part Mr Harris QC for the second and third defendants sought a costs order in favour of his clients.  In relation to the second defendant, Dr Stone, he sought an order on a party and party basis.  In relation to the third defendant, Ms Holmes, he sought costs on an indemnity, or solicitor and own client basis.

3. Mr Sangster, who now lives in Western Australia, was given notice of the hearing but indicated he would not be attending.

4. The plaintiff does not oppose an order in favour of the second and third defendants on a party and party basis, but argues against an order on any other basis. 

5. It is clear that the plaintiff should have a costs order in its favour as against the first defendant, Mr Sangster.  I shall make that order, as well as an order in favour of the second defendant, Dr Stone, as against the plaintiff, on a party and party basis.  I deal then with the question of whether the order in favour of Ms Holmes, the third defendant, should be on an indemnity basis. 

6. The applications are made pursuant to section 40(1) Supreme Court Act 1935 and Supreme Court Rule 101.01.  The making of such an order is a matter of discretion.  In Colgate Palmolive Company & Anorv Cussons Pty Limited (1993) 118 ALR 248 Sheppard J undertook a survey of a number of the authorities which deal with the circumstances in which it is appropriate to award costs on an indemnity basis. His Honour set out in summary form the principles which could be drawn from those authorities and which might guide the exercise of the discretion in a particular case. He acknowledged that usually an order for payment of costs should be on a party and party basis and that to justify a departure from that usual rule there should normally be some special or unusual feature attending the case. Examples of such features might be wilful disregard of known facts or clearly established law, or the making of allegations which ought never to have been made.

7. In support of his application on behalf of Ms Holmes, Mr Harris pointed to a number of matters.  In essence he suggested that the plaintiff never had a case against Ms Holmes.  That was demonstrated by the fact that almost none of the plaintiff’s evidence touched her, that when she gave evidence a case was not put to her and that in fact the case against her was abandoned at the commencement of the plaintiff’s final address.  Mr Harris put that the inference was available that the plaintiff proceeded against her in the “vain hope that the case against her would gather substance as the trial progressed”.  The case against Ms Holmes, and indeed against Dr Stone, was pitched as both breach of contract and misleading and deceptive conduct.  I found that there was no contract between the plaintiff and the second and third defendants.  The conduct of the defendants said to be misleading was in the nature of silence.  I found that their conduct was neither misleading nor deceptive and that in any event, no reliance was shown.  In addition to those matters I found that a number of the allegations made in the Statement of Claim failed.  I mentioned some of those matters in paragraph 49 of my judgment.  But importantly, in almost every instance they failed, not because of a rejection of the plaintiff’s evidence but simply because on the undisputed facts there was never any basis for them.  It can certainly be said that these were allegations that should never have been made. 

8. In his defence of this application Mr Morcombe pointed to Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, a decision of the New South Wales Court of Appeal. That was a case where an appeal was abandoned at the eleventh hour and indemnity costs were sought against the appellant. The Court warned against a too ready grant of indemnity costs on the basis that it could discourage the responsible advocacy which might underpin a late abandonment. Mr Morcombe drew an analogy with the late abandonment of the case against Ms Holmes. He also argued that this was not a case where the plaintiff had been put on notice by the solicitors for Ms Holmes that costs on an indemnity basis might be sought. Whilst those solicitors did foreshadow such an application, it was in relation to alleged deficiencies in the Statement of Claim which were indeed remedied. I note that those very amendments tended to highlight the deficiencies in the case against Ms Holmes; but nonetheless Mr Morcombe’s point is correct. Mr Morcombe also argued that the factors put by Mr Harris in relation to Ms Holmes go to some extent to the case against Dr Stone as well. That is so. As I have observed, a number of the allegations in the Statement of Claim were wholly without foundation. To some extent they echoed earlier correspondence from the plaintiff’s solicitor to the defendants.

9. I am persuaded that this is something of a special case.  Ms Holmes was brought into litigation in circumstances where there was never a case against her.  The plaintiff failed to ensure that the company who took possession of its premises entered into a memorandum of lease with the plaintiff and failed to ensure that directors' guarantees, or any guarantees, were executed.  It tried to cover its own failing by dragging the shareholders of the lessee company into litigation.  Certainly in relation to Ms Holmes there was never any justification for that and that must have been plain to the plaintiff.  I am prepared to make the order sought.

10. I turn then to the question of the Bullock order.  Mr Morcombe supported his application for an order of this nature by reference to conduct of the unsuccessful first defendant.  He pointed to evidence given by Mr Kaldis, the financial manager of the plaintiff company, concerning a conversation with the first defendant.  Mr Kaldis said that on the morning of 8 October 2001 he learned that the tenant had vacated the premises surreptitiously.  He attended the premises to observe the scene and whilst there took a telephone call from the first defendant.  During that call Mr Sangster told him that a letter had been sent to the plaintiff’s solicitor explaining the situation.  Mr Kaldis related that Mr Sangster said he was “sorry that this had to happen to me as, like me, he is only the man in the middle”.  It was put by Mr Morcombe that this statement justified the suit against the second and third defendants. 

11. Mr Morcombe further argued that inasmuch as the first defendant’s unsuccessful defence of the action involved factual arguments in the nature of a set-off and, since these were time consuming and occupied extra time both in interlocutory hearings and in the trial and that these issues had no impact on the claim against the second and third defendants, that too justified the order sought. 

12. Dealing with the second matter first, I do not incline to the view that, at least in the trial, Mr Sangster’s defence was put other than in a concise and succinct manner.  Nor am I convinced that the matters he argued could not ultimately have had any affect on the claim against the second and third defendant.  Anyway, I do not see that aspect as being persuasive in terms of a Bullock order.

13. In relation to Mr Morcombe’s submissions arising out of the conduct of the first defendant, Mr Morcombe referred to Gould & Anor v Vaggelas & Ors (1984) 157 CLR 215. In that case Gibbs CJ made some observations concerning the principle governing the making of such an order. He referred to two important factors; first, whether the proceedings against the successful defendant were reasonable and second, whether the conduct of the unsuccessful defendant was such as to make it fair to impose some liability on it for the costs of the successful defendant.

14. In my view the suit against the second and third defendants was not at any stage reasonable.  I say that notwithstanding Mr Kaldis’ evidence of the comment by Mr Sangster on the occasion I mentioned.  Again, the decision whether or not to make an order of this nature is a discretionary matter.  I am not persuaded on the basis of the reasons advanced that the order should be made.

1. Accordingly the orders that I make are:

   1that the first defendant pay the plaintiff’s costs of action against him on a party and party basis;

   2that the plaintiff pay the second defendant’s costs of action on a party and party basis;

   3that the plaintiff pay the third defendant’s costs of action on an indemnity basis.