Exxon v Chadtech

[1999] NSWSC 613

CITATION:	Exxon v Chadtech [1999] NSWSC 613
CURRENT JURISDICTION:	Equity Division - Construction List
FILE NUMBER(S):	55044/98
HEARING DATE(S):	22 June 1999
JUDGMENT DATE:	22 June 1999
PARTIES :	Exxon Coal Australia Ltd (formerly White Industries Ltd) (Plaintiff) Chadtech Pty Limited (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	P.R. Callaghan SC (Plaintiff) D.R. Sibtain (Defendant)
SOLICITORS:	Mallesons Stephen Jaques (Plaintiff) Clayton Utz (Defendant)
CATCHWORDS:
CASES CITED:	Calderbank v Calderbank [1975] 3 All ER 333 Huntsman Chemical Company v International Pools Australia (1995) 36 NSWLR 242
DECISION:	1. Summons dismissed.; 2. The plaintiff is to pay the defendant’s costs in relation to the issue raised by paragraph C11 of the contentions in the summons on an indemnity basis and the plaintiff is otherwise to pay the defendant’s costs on a party party basis.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION - CONSTRUCTION LIST

EINSTEIN J

Sydney 22 June 1999 - ex tempore
Revised 2 July 1999

55044/98: EXXON (AUSTRALIA) LTD (FORMERLY WHITE INDUSTRIES LIMITED) v CHADTECH PTY LTD

JUDGMENT

1    In proceedings number 55044 of 1998 judgment was delivered on 11 June 1999. The parties have addressed on costs. The defendant seeks an order for the payment by the plaintiff of the defendant’s costs of the whole of the proceedings on an indemnity basis. The defendant’s written submissions in paragraphs 2, 3 and 4 read as follows:

‘2. In its summons, the plaintiff contended that the arbitrator was guilty of misconduct in that he had spoken at an industry body seminar held at the offices of Clayton Utz, solicitors for the defendant in the arbitration. The plaintiff did not abandon this claim until after the filing and service of affidavits, notwithstanding an invitation from the defendant, prior to the first directions hearing, to discontinue. A substantial part of the defendant’s evidence addressed the allegations raised by the plaintiff in paragraph C11. This allegation of bias had no real prospect of success.
3. The balance of the plaintiff’s misconduct case concerned whether or not certain matters had been ventilated at the arbitration and whether or not the plaintiff had been denied natural justice. The plaintiff did not avail itself of the defendant’s early invitation to discontinue. At the hearing of the summons, the plaintiff abandoned one of its four contentions of misconduct, as it had no real prospect of success. In respect of the remaining three contentions, the Court foreshadowed the appropriateness of an indemnity costs order on the basis that it should be clear to the parties whether or not a matter was raised at the arbitration (see p 24 lines 13-45 of the transcript). It is respectfully submitted that the reasons for judgment handed down by the Court recognise the absence of substance in the plaintiff’s claim. It is submitted that an order for costs on an indemnity basis ought be made.
4. The plaintiff did not avail itself of the defendant’s early invitation to discontinue. Given the high threshold which a plaintiff must overcome in order to obtain leave to appeal from an arbitral award, it is submitted that the leave application was bound to fail given:
(a) the nature of the errors contended for by the plaintiff;
(b) the weakness of the plaintiff’s case;
(c) the lack of utility in granting leave in respect of an outdated form of contract;
(d) the age of the arbitration proceedings; and
(e) the quantum of the award.
In the circumstances, the plaintiff ought to have been alive to the futility of seeking leave and its prospects of success. It is submited that this is the kind of leave application in respect of which an indemnity costs order ought be made.’

2    The plaintiff does not oppose an order that it pay the defendant’s costs but submits that those costs ought not be on an indemnity basis but ought simply be on a party party basis. 3    Paragraphs 2 to 5 of the defendant’s written submissions on costs are in the following terms:

‘2. The letter of 3 November 1998 had no sufficient measure of compromise about it. Agreement to discontinuance carried no compromise. Agreement not to seek costs carried virtually none, as minimal costs would have been incurred, the Summons having only just been served. See Hobartville Stud v Union Insurance (1991) 25 NSWLR 358 at 367C-368D.
3. Summons paragraph 11. By letter dated 2 March 1999 the Plaintiff’s Solicitors advised that “the Plaintiff has decided not to proceed with the matters raised in paragraph C11”. The Plaintiff did not, and does not, accept that this claim could be categorised as “hopeless”. The Plaintiff’s decision followed the opportunity to consider the Defendant’s evidence on this issue.
3[sic]. Summons paragraph 12(c) (misconduct). This was not pressed in circumstances put in the Plaintiff’s written submissions at the hearing (and see transcript (T) 50 line (1.) 25:
“It is now apparent that the Arbitrator did raise this issue (transcript Tab 74 p.72, letter 16 July 1998 Tab 63 p.2) for the consideration of the parties and whilst they did not address it, it can no longer be contended that there was a denial of natural justice involved. This claim is accordingly withdrawn but see Summons par.14(i).”
The same matters however were pressed in respect of Summons paragraph 14(i) (leave to appeal) (T52 1.52).
4. Summons paragraph 14(f) and (g). Paragraph 14(g) was not pressed in the Plaintiff’s written submissions (par.9). Paragraph 14(f) was not pressed at the hearing (T61 1.26). Paragraph 14(e) was pressed (T61 1.10) and indeed, was dealt with in the judgment pars. 100-103; the suggestion in par.68 of the judgment that it was not pressed was, with respect, in error.
5. Whilst an issue which is not pressed must carry the penalty of costs, there is no authority which suggests it should necessarily carry indemnity costs (cf. Rouse v Shepherd (No. 2) 35 NSWLR 2777). A responsible decision not to press an issue should be rewarded, not penalised. It is also to the point that multiple issues were involved in the proceedings and paragraphs 12(e), 14(f) and 14(g) could not be singled out as carrying any special or individual costs.’’

4    There has been read on the costs argument, an affidavit by Mr F.P. Hicks of 18 June 1999, which annexes correspondence between the parties dealing with the question of costs. 5    It is plain from that affidavit and that correspondence that the defendant, having reviewed paragraph C11 of the summons, was content to deny the contention contended therein. It is also plain that from 3rd November 1998 Clayton Utz for the defendant, made plain to the plaintiff’s solicitors Mallesons Stephen Jaques, that the plaintiff was invited to discontinue the proceedings and that Calderbank v Calderbank [1975] 3 All ER 333 would be relied upon in the event of the defendant’s success. 6 Having given the matter some close consideration, it seems to me that the significant point is that by the letter of 2 March 1999, the plaintiff notified the defendant that it no longer intended to press the allegation of misconduct against the arbitrator raised in paragraph C11. 7 In those circumstances, to my mind the appropriate order is that the plaintiff pay the defendant’s costs on an indemnity basis of the issue raised by paragraph C11 to the summons. 8 The plaintiff, having elected no longer to press that sub paragraph, to my mind the proper inference is that the plaintiff ought not to have commenced the proceedings with that paragraph included and had no case in relation to that matter. Cf Huntsman Chemical Company v International Pools Australia (1995) 36 NSWLR 242 at 251 per Mahoney JA. 9 I do not see it as a situation in which the plaintiff ought be excused from that conduct. 10 The Court orders are:

1. Summons dismissed.
2. The plaintiff is to pay the defendant’s costs in relation to the issue raised by paragraph C11 of the contentions in the summons on an indemnity basis and the plaintiff is otherwise to pay the defendant’s costs on a party party basis.

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