Evison & Williams v Conway Lilly & Anor (No 2) No. DCCIV-96-1647 Judgment No. D3758

[1998] SADC 3955

EVISON & WILLIAMS v CONWAY, LILLY & ACTIVE PLACEMENTS PTY LTD

Civil
Judge Brebner

In this action the plaintiffs claimed damages from the defendants alleging breach of contract, misleading or deceptive conduct, misrepresentation, negligence and unconscionable conduct in connection with the sale of a business by  the defendants to the plaintiffs.

The action proceeded to trial on the 11, 12 and 14 November 1997.  As I said in the Reasons for Judgment which I published on 17 December1997:-

“Shortly before the action came on for trial, the defendants made a series of formal admissions.  I need not now record them in detail.  Suffice it to say that the defendants admitted that they had informed the plaintiffs that they wanted to recoup what they had paid for the business and a sum to cover ‘improvement expenses’, that, while negotiations were in progress, they had informed the plaintiffs that the ‘asking price’ for the business at the time when the defendants had purchased it had been $260,000 and that they had paid $220,000 for the business.  They further admitted that the asking price for the business actually had been $200,000 and that the purchase price paid by the defendants for the business had been $130,000.  It was also admitted that the defendants knew or ought to have known that the plaintiffs would rely on the representations made by the defendants and that the plaintiffs had in fact relied upon them.  I shall, except where otherwise necessary, not distinguish between the defendants in this judgment.  As I understand it, they admit joint and several liability for any moneys which may be found to be recoverable by the plaintiffs.”

I found that the true value of the subject business on the date of the sale by the defendants to the plaintiffs had been $140,000.  That finding enabled the parties to agree upon the outcome of certain consequential claims that had been made by the plaintiffs.  In the result, on the 18th December 1997, I entered judgment for the plaintiffs on their claim for the sum of $105,877. 06.  That sum was inclusive of interest.

The defendants had filed a counterclaim about which there was no dispute.  It raised but a minor matter, but it was agreed that there should be judgment for the defendants on the counterclaim for the sum of $3,392. 30. In essence, however, the plaintiffs succeeded in their action.

At the request of counsel, I reserved the question of costs.  It was agreed at that time that counsel would provide me with written submissions on this aspect of the case.  Both did so just prior to the commencement of the summer vacation on 24th December 1997.

In his submission, counsel for the plaintiffs argued that the plaintiffs should recover from the defendants costs on a solicitor and client basis in respect of the issue of the misrepresentations made by the defendants to the plaintiffs with reference to  the sale of the business.   I respect of the remainder of the plaintiffs’ costs, he sought an order that they be agreed or taxed on a party and party basis.

Counsel for the plaintiffs contended that the defendants had, until the last few days before the trial, sought to maintain a defence which was “groundless” to the knowledge of the defendants.  He pointed out that the misrepresentations related to matters directly within the knowledge of the defendants and outside the knowledge of the plaintiffs.  The defendants’ unfounded denials had meant, he said,  that the plaintiffs had been bound to spend time and expense in investigating matters and preparing for trial on issues which should not have been disputed by the defendants.

In my opinion, there is considerable force in the contentions advanced by counsel.  The admissions by the defendants as to the true facts were only made one week before the case was to proceed to trial.

Counsel for the plaintiffs referred me to a number of cases in which trial judges had departed from the normal rule that party and party costs are to be awarded to a successful party.

Counsel for the defendants accepted the authority of the cases cited by counsel for the plaintiffs, but argued that there were not sufficient grounds in the present case to warrant a departure from the general rule.   He contended that parties should always be encouraged to make proper admissions and that, if the order sought by the plaintiffs were to be made, it would prejudice  the achievement of that goal.

The question as to the order for costs to be made in any action is always within the discretion of the court.  That general proposition is reinforced by rule 101.01 of the District Court Rules.  The discretion must, of course, be exercised judicially.  The customary order is that the unsuccessful party will be ordered to pay the costs of the successful party on a party and party basis.  The meaning of that expression is well established.

It is, however, clearly within the power of the court to order that the successful party to an action recover from the unsuccessful party costs on a solicitor and own client basis or costs on an indemnity basis; for an example, see Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd (1986) 71 ALR 287 at 288 where Woodward J said:-

“That discretion is ‘absolute and unfettered’, but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). Courts in both the United Kingdom and Australia have long accepted that solicitor and clients cost can properly be awarded in appropriate cases where ‘there is some special or unusual feature in the case to justify the court exercising its discretion in that way’ (Preston v Preston [1982] 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court’s discretion - for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 6 LR Ch App 133; Forester v Read (1870) 6 LR Ch App 40; Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354.

Another case cited in argument was Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 where (at 502) Tadgell J allowed solicitor and client costs because he found the pursuit of the action to have been ‘a high-handed presumption’.”

There have been a good number of cases in which solicitor and own client costs have been awarded where the unsuccessful party had had no real chance of success in the action:  see for example, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) ALR 397 in which Woodward J applied his own statement of the law, to which reference has been made above . See also Sheahan and Anor v Northern Australian  Land and Agency Co Ltd. and Ors, an unreported decision of the Full Court delivered on the 18 December 1995 (Judgment S5363) and Sheahan v Hertz Australia Pty Ltd (1994) 177 LSJS 428.

In the present case, the defendants asserted in their defence facts which they knew to be false.  They set about putting the plaintiffs to proof of matters which they well knew would be fatal to the defence mounted by them.  They knowingly maintained a position which was entirely false until but a few days before the action went to trial.  As Olsson J said in Casley-Smith and Ors v S S Evans Pty Ltd and Anor (6) (1989) 148 LSJS 483 at page 488:-

“In general, whenever it appears that an action has been commenced or continued in circumstances where the party, properly advised, should have known that he had no chance of success, a solicitor and client order may be warranted.  This is because ‘In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some awful disregard of the known facts or the clearly established law.’ ”

In the present case,  their formal admissions having been made, none of the defendants gave evidence at the trial.  No explanation was given then, or since, for the lateness of their admissions as to the true facts of what was a key issue in the case.  The defendants must have known that their false denials would put the plaintiffs to the expense involved in marshalling the evidence necessary to prove the assertions that had been falsely denied.

In my opinion, the circumstances are such that the making of the order sought is well warranted in this case.  Accordingly, there will be an order that the defendants pay the plaintiffs’ costs of action to be taxed, if not agreed, upon the basis of solicitor and own client costs in relation to the plaintiffs’ preparation for a trial on the issues formally admitted by the defendants on the 30 October  1997 and upon the basis of party and party costs on all other issues.