Evans & Evans v Rivett Arboricultural & Waste Equipment Hire P/L & Ors - [2006] SADC 13

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
EVANS & EVANS v RIVETT ARBORICULTURAL & WASTE EQUIPMENT HIRE P/L & ORS
Judgment of His Honour Judge Chivell
22 February 2006
PROCEDURE - COSTS
Costs – offer to consent to judgment by plaintiff – not accepted – whether offer out of time – failure by defendants to adopt procedure under r40.06 – plaintiff recovers in excess of offer – whether entitled to indemnity costs – solicitor/client costs for whole of trial ordered – whether expenses associated with the Law Society Litigation Assistance Fund recoverable – costs as between defendants – Calderbank offers.
Acts Interpretation Act s27; District Court Rules 1992 r41.01, r41.01(1), r41.04, r40.06, r101.02(1), r101.02(2)(d), referred to.
Pomeroy v Starejko (No 2) D3739 delivered 23 December 1997; ET Petroleum Holdings Pty Ltd v Clarenden Pty Ltd (No 2) [2005] NSWSC 562, considered.

EVANS & EVANS v RIVETT ARBORICULTURAL & WASTE EQUIPMENT HIRE P/L & ORS
[2006] SADC 13

On 23 December 2005 I entered judgment in favour of the first plaintiff against the defendants for the sum of $1,084,451.53, and in favour of the second plaintiff for the sum of $20,000. There was no reduction for contributory negligence. The first and second defendants were ordered to contribute 70% and the third defendant (first third party) 30%. The actions against the second, third and fourth third parties were dismissed.
In relation to the first plaintiff, both liability and quantum remained in dispute throughout the trial. In relation to the second plaintiff, liability remained in dispute, but the quantum of his damages was agreed.
On 11 July 2005 the solicitors for the first plaintiff lodged a notice offering to consent to judgment in the sum of $900,000 plus costs of the action pursuant to r41.01(1). The notice was dated 11 June 2005, but was not lodged until 11 July 2005, and was not served until 12 July 2005. The notice also contained an offer to accept a 90% apportionment of liability in his favour pursuant to r41.01(2), but it is unnecessary to consider that offer separately. The judgment bettered both offers.
Rule 41.01(1) states:
A plaintiff may at any time up to 21 days prior to trial lodge with the Registrar and serve on all other parties a notice offering to accept a stated amount, or a judgment for a stated amount where it is necessary to enter judgment, together with his costs of action, in satisfaction of the plaintiff’s cause of action or where there are more causes of action than one, of one, some or all designated causes of action.
The offer was not accepted. If the offer was effective, since the judgment sum bettered the offer, r41.04 would apply:
Where a defendant has not accepted a plaintiff’s offer made pursuant to this Rule and the sum recovered or, as the case may be, the proportion of the debt or damages or the relief recovered by the plaintiff is equal to or greater than that contained in the plaintiff’s offer, the Court, unless it thinks proper to order otherwise, shall order the defendant to pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client.
The trial commenced on Monday 1 August 2005. Mr Eriksen, counsel for the plaintiffs, eventually conceded that the offer was served one day out of time. Counsel for the defendants, Mr Bell and Mr Crocker, both argued that it was more than that, but in my opinion, having regard to s27 of the Acts Interpretation Act, Mr Eriksen’s concession is correct.
None of the defendants availed themselves of the procedure in r40.06 which, pursuant to r41.05, applies “mutatis mutandis” to r41 offers. Rule 40.06 states:
(1) A party who is served with an offer or an acceptance under this Rule which that party considers is ineffective because it is out of time under this Rule must give immediate notice of that to the party serving the offer or the acceptance.
(2) The Court may upon an application summarily determine whether an offer or an acceptance under this Rule has been lodged or filed in accordance with the rules and whether it is therefore effective.
Rule 40.06 is expressed in mandatory terms. In my opinion, the defendants’ failure to adopt the procedure now precludes them from arguing that the offer was ineffective. To rule otherwise would enable a litigant to “ambush” the opponent by sitting on an argument such as this until the end of the trial. This is clearly against the policy behind the rule, which is to provide an incentive to settle. The clear intent of the Rule is that the effectiveness or otherwise of the offer should be determined prior to trial. If it is ineffective, there is power in r3.04 to extend or abridge the time limit. In the absence of prejudice to the defendants, I think it likely that such an order would have been made in this case.
Pursuant to r41.04, I order that the defendants pay the whole of the first plaintiff’s costs of action to be taxed as between solicitor and client.
In case I am wrong about that, I indicate that I would have exercised my general discretion as to costs in the same way as is laid down in r41.04 for the following reasons:
·the extent to which the offer was out of time was minimal and could not have prejudiced the defendants;
·the defendants failed to raise the suggestion that the offer was ineffective at the time;
·having regard to the correspondence tendered before me, there was no prospect that the offer would have been accepted by any of the defendants at that stage of the proceedings, because they could not resolve their conflicting views as to their respective risks. Little consideration appears to have been given to settling either liability on quantum with the plaintiff, thereby avoiding considerable costs, and litigating the issue of contribution separately, until much later in the proceedings.
During the hearing of argument about costs, the plaintiffs’ solicitors filed a notice for specific directions seeking a “nunc pro tunc” extension of time in relation to the offer. I indicated that I thought that application was misconceived and it was not pursued. I dismiss that application.
Costs on a full indemnity basis
Mr Eriksen applied for costs on a full indemnity basis. He sought to justify that submission on the basis that the first plaintiff had formulated his claim early (19 February 2003), that he sought mediation and negotiation throughout, and that the first and second defendants in particular were unreasonably unresponsive to these approaches. I will deal with these issues again in more detail when considering costs as between defendants.
It is sufficient for present purposes to say that I do not consider that there is justification for the order sought. In the detailed analysis of these issues in Lunn, Civil Procedure South Australia, pages 10,702-3, it is apparent that there must be something unusual and even discreditable about the conduct of a party before a full indemnity costs order is called for. That is not the case here. The first and second defendants were largely, but not wholly unsuccessful, and even though they may have unrealistically assessed their risks herein, their conduct was not such as to justify a full indemnity costs order.
Costs associated with assistance from the Law Society Litigation Assistance Fund
The affidavit evidence before me establishes that the plaintiffs were impecunious, and had no alternative but to apply to the Litigation Assistance Fund. Notice was given to all defendants, although it was given to the third defendant later than the others. Assistance was granted on the basis that there be an “uplift” of 100% of the disbursements outlaid. There was also a contingency fee agreement entered into between the plaintiffs and their legal representatives which entitled them to charge a similar “uplift” in the event they were successful. It was submitted that these additional charges were reasonably incurred, and hence should be paid by the defendants.
Counsel for the plaintiffs have helpfully brought to my attention the decision of former Chief Judge Brebner in Pomeroy v Starejko (No. 2), judgment no. D3739 given on 23 December 1997. Similar arguments were advanced in that case. His Honour said at page 4:
In my opinion, the introduction of contingency fee arrangements has not affected the proper interpretation and application of the Rule. (His Honour was referring to r41.04)
In my opinion, the defendant is liable only for such sum for the plaintiff’s costs as those costs would have been established if taxed as between solicitor and client on the scale contained in the Fourth Schedule to the Rules. I order and direct accordingly.
It is true that his Honour’s reasoning included the fact that the defendant is “not able to be aware” of the fact that a plaintiff may be in this position when considering the extent of his risk. The defendants were put on notice that the plaintiffs had entered into such arrangements. However, I do not think that this factor changes the ordinary meaning of the Rule. It may be that these “uplifts” would be covered by an order for costs on a full indemnity basis – it is not necessary to decide that here. For the moment, I express the view that they not be recoverable as part of an order for solicitor/client costs.
Two counsel
I certify that this was a case in which it was appropriate that two counsel appeared for the plaintiffs and, for that matter, the other parties to the action having regard to the size and complexity of the case.
Adjournments
Mr Crocker, counsel for the third defendants and the third parties, submitted that adjournments on 3, 5 and 15 August 2005 were necessitated by “late provision of material” by both the plaintiffs and the first and second defendants. He submitted that his clients should have their costs thrown away by these adjournments. He referred to r101.02(2)(d) which states:
Costs of adjournment an adjournment made necessary by the default of a party shall be borne by that party.
I am not prepared to make specific orders for costs of those adjournments. It is not possible to determine on the state of the evidence who was the party in default. There was no application for costs made at the time of the adjournments, although I acknowledge that Mr Walsh QC did foreshadow such an issue at T693. There was allegation and counter allegation about whether the plaintiffs should have sought better discovery before trial, about whether the first and second defendants had complied with their obligations to discover, and about when various requests were made and assurances given. None of these issues can be the subject of firm findings of fact, and it is not appropriate to conduct an inquiry into those matters now. When the documents were eventually before the court, the third defendant was content to make use of them as it was entitled to do. The third defendant could have sought further and better discovery before trial as well.
There will be no specific orders in relation to the costs of adjournments.
Liability for first plaintiff’s costs
Mr Bell, counsel for the first and second defendants, submitted that the third defendant should pay 50% of the first plaintiff’s costs. I see no reason to depart from the usual practice whereby the defendants pay the plaintiffs costs in the same proportions as they are liable for damages. I order that the contributions of the defendants should be to the extent of 70% by the first and second defendants, and 30% by the third defendant.
Costs between defendants
Mr Crocker on behalf of the third defendant sought costs against the first and second defendants on a full indemnity basis, alternatively on a solicitor/client basis.
I see no justification for an order for full indemnity or solicitor/client costs between defendants. A refusal to mediate is not a sufficient ground to justify such an order unless it can be shown that the refusal was unreasonable – it is not always unreasonable to refuse (ET Petroleum Holdings Pty Ltd v Clarenden Pty Ltd (No. 2) [2005] NSWSC 562). I do not know enough about the background circumstances (there have been references to liquidators having custody of documents, for example) to make such a finding.
Mr Crocker argued that the first and second defendants adopted an unreasonable position at all stages during negotiations. The correspondence suggests that they were perhaps unrealistically optimistic of their chances, but that is not sufficient to justify other than the usual costs order (see the references in ET Petroleum to NMFN Property Pty Ltd v City Garage Ltd at [19]).
Mr Crocker referred to a number of “Calderbank offers” made to the first and second defendants. On 28 July 2005, the third defendant offered to accept 25% of the plaintiff’s damages, and to settle the plaintiff’s claim for $900,000 plus costs on the basis that they would pay 25% thereof. The offers remained open for less than two days, to expire the Friday before the trial. The offers were not bettered.
On Friday, 5 August 2005 the third defendant offered by letter to settle the plaintiff’s claim for $950,000 plus costs leaving open contributory negligence and liability generally. The plaintiffs had previously indicated a willingness to accept such a figure. The refusal by the first and second defendants to accept that offer put the first plaintiff to proof on quantum. The first and second defendants should pay the first plaintiff’s costs and the third defendant’s costs on a solicitor/client basis in relation to the quantum of the first plaintiff’s claim. Seven days was an adequate time for the first and second defendants to consider the third defendant’s offer, so the costs affected by this order are those incurred on and after Friday, 12 August 2005.
Third parties costs
The first and second defendants were unsuccessful in seeking indemnity/contribution from the second, third and fourth third parties. Costs should follow the event (Rule 101.02(1)). There is no justification for solicitor/client or indemnity costs orders here. The second, third and fourth third parties should have their costs on a party/party basis.
Costs of second plaintiff
The second plaintiff lodged an offer to consent to judgment on 11 July 2005 for $30,000 plus costs. The quantum of his claim was eventually agreed at $20,000. I agree with Mr Crocker that the second plaintiff should receive his costs on a party/party basis, from all defendants, and that as between defendants the first and second defendants should contribute 70% and the third defendant 30%.
Orders
1.The defendants pay the whole of the first plaintiff’s costs of action to be taxed as between solicitor and client.
2.As to the first plaintiff’s costs to prove liability, as between defendants, the first and second defendants contribute 70% and the third defendant 30%.
3.As to the first plaintiff’s costs incurred to prove the quantum of his damages, as between defendants, the first and second defendants contribute 70% of those costs incurred before Friday, 12 August 2005, and the third defendant 30%.
4.As to the first plaintiff’s costs in relation to the quantum of his damages, as between defendants, the first and second defendants pay 100% of those costs incurred on and after Friday, 12 August 2005 to be taxed as between solicitor and client.
5.The first and second defendants pay the second, third and fourth third parties’ costs of action taxed as between party and party.
6.The defendants pay the second plaintiff’s costs of action to be taxed as between party and party. As between defendants, the first and second defendants contribute 70% and the third defendant 30%.
7.If the plaintiff recovers from any defendant a proportion of the damages and costs in excess of the contribution for which such defendant has been found liable, then the defendant from whom such excess shall have been recovered may enter judgment for such excess against the other defendants together with the costs of entering such judgment.