Edwards v Legalese Pty Ltd T/A Peter Scragg & Associates (No.2) - [2012] SADC 110

District Court of South Australia
(Civil)
EDWARDS & ORS v LEGALESE PTY LTD T/A PETER SCRAGG & ASSOCIATES (NO.2)
[2012] SADC 110
Reasons of His Honour Judge Beazley (ex tempore)
30 August 2012
PROCEDURE - COSTS
Costs - claim for professional negligence against defendant solicitor - plaintiffs' claims dismissed - nothing in conduct of the defendant to alter position that costs ought follow the event - defendant seeks order certifying the costs as fit for two counsel - discussion of principles for such certification - application for certification of two counsel refused in exercise of the discretion.
Held - plaintiffs must pay the defendant's costs of action on a party/party basis to be agreed or taxed.
District Court Act 1991 s 42; District Court Rules 1991, 6 DCR 188 and 263, referred to.
Stanley v Phillips (1996) 115 CLR 470; Cretazzo v Lombardi (1975) 13 SASR 4; Sands v Channel Seven Adelaide Pty Ltd (No.2) (2009) SASC 365; Hughes v Western Australian Cricket Association (1986) ATPR 40, 748; Oshlack v Richmond River Council (1998) 193 CLR 72; Cromer v Harry Richards' Tivoli Theatres Limited (1921) SASR 325; Bryant Bros v Thiele (1923) SASR 393; Asic v West (2008) 100 SASR 496; In Re Fuller Holdings Pty Ltd (1979) 21 SASR 212; Bush v Condon & Barrett [1975] 1 NSWLR 260; Maha-Ashi Pty Ltd v Innes [2011] SASCFC 72; NRMA v Checchia (2011) 80 NSWLR 1; Regency Media Pty Ltd v AAV Australia Pty Ltd (2009) NSWCA 368, considered.

EDWARDS & ORS v LEGALESE PTY LTD T/A PETER SCRAGG & ASSOCIATES (NO.2)
[2012] SADC 110
Introduction

On 26 July 2012, I published my reasons for decision in the principal proceedings,[1] which involved a claim for alleged professional negligence instituted by the plaintiffs against the defendant solicitors.
[1] [2012] SADC 95
I made an order that the plaintiffs’ claim be dismissed. I then adjourned further consideration until today to enable the parties to consider those reasons, and any issues as to costs.
In those published reasons I set out at length the history of the action. There are various costs orders which had been reserved in respect of a number of applications, including those for amendments to the pleadings, leave to obtain expert reports, and consequential adjournments.
In written submissions the defendant has sought the following orders:
1That the plaintiffs do pay to the defendant its costs of action; and
2That the matter be certified as fit for two counsel.
The Costs Generally
I do not propose to detail those submissions. As is apparent from my reasons in the principal proceedings, the plaintiffs failed on each of their claims against the defendant. I was informed that the defendant had filed an offer to consent to judgment in the sum of $75,000 plus costs. There was an issue, which does not now need to be resolved, as to whether that offer was governed by the previous Rules of Court. In the subject case it does not matter whether the previous District Court Rules, or the current District Court Rules apply. The same principles relevantly apply. I do however note the dicta of Bleby J in Sands v Channel Seven Adelaide Pty Ltd (No 2), in which his Honour concluded that pursuant to the transitional provisions in 6 DCR Rule 8(2)(a); Chapter 12 of the 2006 Rules ought apply.[2]
[2] [2009] SASC 365 at [8]
The current Rules of Court provide for the consequences of a failure of a party to exceed a filed offer in Rule 6 DCR 188. It differentiates as to the consequences of failing to accept an offer as between a plaintiff and a defendant. That rule, in a different context, was considered recently by the Full Court in BHP Billiton Ltd v Parker (2012) SASCFC 73 and in Maha-Ashi Pty Ltd v Innes (2011) SASCFC 72.
In the event the defendant, very properly, did not seek an order for indemnity costs, nor an order for solicitor/client costs pursuant to the Court’s discretion. It merely sought an order for the party/party costs of action.
The principles of law
The principles upon which a court should act in resolving disputes as to costs are not in doubt. The court has a very wide discretion, save that the discretion must be exercised judicially.
In Forlyle Pty Ltd v Tiver,[3] Debelle J, in determining an appeal from a decision in respect of which a partially successful party had been denied an order for costs, said:
The general rule is that a successful party has a reasonable expectation of obtaining an order for costs unless for some reason connected with the case a different order was specially warranted.
[3] [2007] SASC 464 at [29]
In Cretazzo v Lombardi[4] Bray CJ said:
The general discretion is absolute and unfettered except it must be exercised judicially, not arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation.
[4] (1975) 13 SASR 4 at [11]
While affirming the “general rule” as to costs, namely that costs follow the event, 6 DCR 263 relevantly provides:
(c) the costs of an application that should have been (but was not) made at an earlier stage of the proceedings are to be awarded against the applicant;
(d) the costs of an adjournment arising from a party’s default are to be awarded against the party in default.
It is trite that a successful party may be deprived of costs or “even may be ordered to pay costs if he or she has been guilty of some sort of misconduct, relating to the litigation. See Oshlack v Richmond River Council (1998) 193 CLR 72 at [69] and [134]; and NRMA v Checchia (2011) 80 NSWLR 1 at 35-36.
In Hughes v Western Australian Cricket Association[5] Toohey J said:
A successful party who has failed on certain issues may not only be deprived of the cost of those issues but may be ordered as well to pay the other party’s costs of them. In that sense “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.
[5] (1986) ATPR 40, 748 at 48, 136
In Cretazzo’s case, supra, Jacobs J expanded somewhat upon the remarks of the Chief Justice, supra, saying:
Trials occur daily in which the party who in the end is wholly or substantially successful nevertheless fails along the way on particular issues of fact or law. The ultimate end of justice may not be served, if a party is dissuaded, by the risk of costs, from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case including, in particular, the severability of the issues and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes, ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded based merely upon his success in those particular issues.
That latter dicta was adopted and applied in Duke Group (In Liquidation) v Pilmer (No 8) (1998) SASC 6699; Robinson v Australian Association of Social Workers Limited (2000) SASC 239, and Burnie Port Corporation v Bank of Western Australia (No 3) (2003) 12 TAS LR 325.
Submissions as to costs generally
In brief, the defendant submitted that as it had succeeded on every issue in dispute at the trial, I ought to award it the costs of action without any reduction for any criticisms made of the defendant in my reasons in the principal proceedings.
The plaintiffs contend that in light of the adverse findings as to the failure of Mr Scragg to keep proper records, and his evidence as to discussions with Mr Caporaso, an order ought be made that each party bear its own costs of the action. The plaintiffs assert that had proper records been kept, at the very least, the trial would have taken less time, and the tender list would no longer have been as voluminous.
The plaintiffs’ counsel also submitted that the plaintiffs had instituted and conducted the within proceedings as a consequence of implicit “admissions” contained in the letter from Mr Caporaso to the receiver on 22 July 1999. They submitted that, until Mr Scragg had attempted to distance himself from such admissions when giving evidence, it was entirely appropriate for the plaintiffs to proceed the way they did.
He also submitted, implicitly that some of the amendments to the plaintiffs’ Statement of Claim were caused by the absence of a specific note of the crucial attendance of 22 April 1999.
I have already set out the principles of law which govern “special cost orders” being made in light of adverse conduct by the successful party. Counsel for the plaintiffs also referred to the cases of Cromer v Harry Rickard’s Tivoli Theatres Ltd (1921) SASR 325 at 336 and Bryant Bros v Thiele and Ors (1923) SASR 393 at pp.406 and 407, which contain principles of law consistent with those later authorities.
Discussion
Although the defendant did not press the significance of the filed offer in respect of solicitor/client costs in this case, it remains a matter relevant to the general discretion as to costs. One factor relevant to that issue would be whether there had been a genuine offer of compromise. The offer which was ultimately filed by the defendant of $75,000 plus costs bore no relationship to the quantum of the plaintiff’s claim had it succeeded, even after apportionment by way of contributory negligence.
The Court of Appeal (NSW) has recognised as a principle, in Regency Media Pty Ltd v AAV Australia Pty Ltd (2009) NSWCA 368 at para.16, that for an offer to be effective in respect of a general discretion – or even one which is made pursuant to the equivalent of Rules 187 and 188, or under the former Rules – it must be a genuine offer of compromise and not merely made so as to trigger a cost consequence under the Rules.
I do not need, in the event, to consider whether such a principle applies in this State, nor whether the defendant’s offer was a genuine offer of compromise. I do not accept that any order ought be made other than that costs ought follow the event of these proceedings.
I do not accept that the failure to keep proper records, nor the criticisms as to one part of Mr Scragg’s evidence ought result in any reduction of the defendant’s costs. The delays of the plaintiffs since 1999 have been the substantial cause of the difficulties faced by the parties in this action. I have no doubt that the plaintiffs would have produced similar voluminous documents in an effort to establish the manner in which the business had survived against the odds for 10 years.
I also do not propose to detail individual orders that were reserved to, or by me as the trial judge. In my opinion, the proper order is that the plaintiffs ought pay to the defendant the costs of action, including any reserved costs, on a party/party basis. Accordingly the formal order, in the exercise of my discretion is that the plaintiffs must pay to the defendant the costs of action on a party/party basis to be agreed or taxed.
Certify for two counsel
The remaining issue is whether I ought to certify the matter on behalf of the defendant as fit for two counsel.
In practice the question of whether the successful party ought be awarded the costs of two counsel or be certified fit for Senior Counsel, was usually referred to the Taxing Master of the court. See Stanley v Phillips (1966) 115 CLR 470; In re Fuller Holdings (1979) 21 SASR 212 and Bush v Condon & Barrett [1975] 1 NSWLR 260. However, in the case of ASIC v West (2008) 100 SASR 496 Gray J said, at para.220-221, of a matter which was extremely complex and far removed from the facts of this case:
“ASIC sought a certificate that the matter was fit for senior counsel. It is well established that a trial judge has power to certify for senior counsel. The test as to whether fees are to be allowed for senior counsel was laid down by the Full Court in Beasley v Marshall (No3) as being whether a reasonable litigant at the proper time for the delivery of the brief would consider it necessary or prudent to brief Queen’s Counsel for the adequate presentation of his case. King CJ, with whom Prior J agreed, considered that the following factors were relevant to the exercise of the discretion to certify for senior counsel:
The primary considerations are undoubtedly the difficulty of the case, the complexity of the issues of fact or law, and any demands which the case makes to the exercise of special professional skills. But I do not think the Taxing Master is required to ignore what is at stake for the party in the litigation.
In my view, given the complexity of the issues arising in the within proceedings, the requirement to assess, marshal and present voluminous evidentiary material, the significant assets involved and the substantial sums of money at stake, the impact of the proceedings on the rights and liabilities of a number of people, and the public interest in the proper conduct of the proceedings, this is an appropriate case in which to certify for two counsel, including senior counsel.”
The defendant submitted that the facts of this case fall directly within the above dicta. It may well, it was submitted, have justified certification for senior counsel, and that, in effect, this alone would have justified the certification for two counsel. I have not however overlooked the fact that senior counsel now appear as a matter of routine without junior counsel.
In Stanley v Phillips, supra, Barwick CJ at pp.478-479 said:
“The question is not whether a man who is seeking his own maximum advantage would be imprudent not to engage counsel of the particular experience or skill. The question is whether the services of more than one counsel are reasonably necessary for the adequate presentation of the case…. Of course a litigant must make for himself a judgment on this question at the time he decides to incur the expenditure. He cannot be required however to do more than act reasonably and prudently in relation to that matter. Consequently in determining what is necessary or proper, the Taxing Master must consider whether it was reasonable or proper in the sense I’ve indicated for the litigant, at an appropriate time in the course of litigation, to engage more than one counsel. Many and varied circumstances may yield an answer favourable to the successful litigant. I take the reference of Griffith CJ to the need for a careful cross-examination to be a reference not to the need to employ a counsel skilled in cross-examination, but the need for careful preparation to cross-examine either involving the exertion of two counsel or a division of labour thus diverting one counsel’s efforts from other parts of the preparation or presentation of the case.’
Discussion
In the subject case, each party was represented by two counsel. There were voluminous documents. There were some difficult points of law, which would have been apparent at the time of delivery of the brief, but which ultimately did not need to be resolved.
I readily accept that the claim was a significant one. On the plaintiff’s case, it involved a question of the professional duty of the defendant, and an assessment of damages asserted to exceed the sum of $1 million.
Prima facie these matters would suggest that the subject case does fall within the dicta set out in the above authorities
I have no doubt, however, that the major reason for the “need” for two counsel was that the senior of the two counsel, in each case, was engaged late, and was obliged to absorb a great deal of information so as to familiarise himself with the brief within a short time span. In addition there was, at times, a real risk that at least one of those counsel may have been absent on other matters from time to time.
Very properly, both parties, in the circumstances, felt that it would have been imprudent not to brief two counsel. The question, however, in my opinion, is not merely one of prudence, but whether in light of the brief, on a taxation, the unsuccessful party ought to be burdened with the additional costs of two counsel on a party/party award of costs. In the ordinary course of events I would have referred this question to the Taxing Master. However, both parties were content to have the issue resolved by this Court.
The exercise of the discretion in this case is extremely difficult. I note that despite the voluminous documents, and the dearth of critical notes by the defendant solicitors, only one of the defence counsel conducted all of the cross-examination. But for the difficulties associated with the short time span before the litigation commenced, I am confident that no application for certification of two counsel would have been made, or justified.
Ultimately, and by a short margin, I have reached the conclusion that I ought refuse the application, in the exercise of my discretion, to certify for two counsel in this case.
Formal Orders
I order that:
1The plaintiffs do pay to the defendant its costs of the action, including this hearing, on a party/party basis to be taxed or agreed.
2That the application by the defendant for the certification for two counsel is refused.