Factor Constructions Pty Ltd T/A Factor Utb v Kirribilly Wines Pty Ltd - [2004] SADC 182

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
FACTOR CONSTRUCTIONS PTY LTD T/A FACTOR UTB v KIRRIBILLY WINES PTY LTD
Decision of His Honour Judge Bright
16 December 2004
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
Application for costs

FACTOR CONSTRUCTIONS PTY LTD T/A FACTOR UTB v KIRRIBILLY WINES PTY LTD
[2004] SADC 182

This is a judgment about who must pay the costs of a bitterly disputed action, which was ended by a combination of consent and default judgments at trial. The plaintiff was the designer of certain equipment. It entered a contract with the defendant to do so. There was no significant dispute as to the terms of the contract. The defendant arranged for construction of that equipment. Difficulties arose and the parties fell out.
The plaintiff sought payment of the contract sum ($98,000) plus a large number of extra, or variation claims which the plaintiff alleged were either the result of specific instructions or the results of defaults by the defendant which caused the plaintiff to perform extra work.
The defendant accepted the contract and its terms, but alleged that the plaintiff’s design was for equipment which would not work, did not meet the defendant’s requirements and which caused the defendant to incur substantial expense in modification and replacement of the equipment and in staff costs and production losses while trying to cope with its defects, for which the defendant counterclaimed.
After 17 days of trial a compromise was reached. The defendant admitted liability for the original contract sum and interest, together with a further sum towards the claim for extras and variations which was not expressed to be in respect of any identified variations or extras, but which brought the total to $150,000. Judgment was entered for the plaintiff for that figure. The defendant intimated that it would call no evidence on its counterclaim. The counterclaim was dismissed. By consent no order was made for the costs of the counterclaim.
In the course of pre-trial procedures a number of costs orders (usually in favour of the defendant) were made. Those orders are to stand, unaffected by this judgment.
During the trial, I granted two adjournments to the defendant. On the first, I allowed a day to enable counsel for the defendant to examine the source documentation alleged to support the variation claims. A schedule setting out the claims had long been disclosed and was the basis for “Annexure A” to the Particulars of Claim. The documentation in support had not been produced or discovered. It should have been.
The second adjournment followed the discovery that notes of communications between the plaintiff’s managing director (and principal witness) and the plaintiff’s main expert witness existed and had not been discovered. It should have been.
Counsel for the plaintiff asserts that the information contained in those documents was not significant, nor so voluminous as to make it necessary to allow adjournments. I am assured by counsel for the defendant that the adjournments were necessary for him to prepare his case. In all the circumstances, I am prepared to accept that assurance. I do not require evidence about it. Two and a half days were lost, in total. The costs of and incidental to those adjournments are to be paid by the plaintiff to the defendant.
I now turn to the main question of the costs of the whole action, apart from the counterclaim. In briefest terms, the plaintiff asserts that it “won” judgment for $150,000. No offers were made by the defendant. The plaintiff should have costs of the action.
The defendant says that the situation is not that simple. It says it always admitted the contract, but disputed the extras and variations. Only when discovery was made during trial of the source documents supporting those claims could it properly assess them. It did so and the matter soon settled. If, asserts the defendant, one breaks down the judgment, one would take out the contract sum and the interest that should be allowed on it. That leaves a component of around $33,000 (inclusive of interest) for the extras and variations. They were claimed at various amounts during the dispute, varying from $100,000 to $300,000 (approximately). An allowance of $30,000 (exclusive of interest) in respect of such a claim is actually a big win for the defendant, rather than for the plaintiff.
Bound up with this is the defendant’s proposition that, since it always admitted the contract, no time was needed at trial to deal with that – all the evidence was to deal with either the “failed” claim for extras and variations, or with the counterclaim, in respect of which no costs are to be ordered. Further, it is asserted, the time taken by Mr Gibbs to explain his claim was unnecessary and excessive.
In my view, it is entirely artificial to say that the contract was always admitted and that the case proceeded only in relation to the extras and variations. Yes, most of the terms of the contract were admitted, but liability to pay anything pursuant to the contract was vigorously denied. Paragraphs 37 to 44 of the amended Particulars of Defence go into great detail, setting out the various alleged faults in the plaintiff’s design and performance which, it is asserted, entitled the defendant to refuse to pay the plaintiff. Paragraph 44 asserts that the plaintiff is not entitled to payment of the balance of the contract sum or to any part of that balance. In paragraph 106 the defendant asserts that the plaintiff is not entitled to the relief sought or any relief. These matters were not pleaded by way of set off. They were eventually incorporated in the counterclaim. They first appear as matters pleaded in defence of liability to pay the contract sum. It is specifically pleaded that the design was incompetent, unsuitable for the defendant’s purposes, and did not function to specification. At page 33.7 of the transcript, counsel for the defendant intimated that there was “serious dispute … about contract terms, and who was obliged to do what. It’s a main topic.”
In those circumstances the plaintiff had to depose to the way in which the defendant’s requirements were ascertained, how the plant was to work, how the design was to meet the required capacity, whether it worked or, if not, why not, and whose fault that was.
In my view, the evidence led was substantially directed to these issues. They were complex and Mr Gibbs had to be detailed and very careful in his evidence. Perhaps he was, at times, over alert to the possibility that defence counsel might be trying to trick him, and on some occasions was arguably prolix in his answers. That was not the usual case. I do not regard any such prolixity as significant to the issue of costs. I thought he was a good witness. The depth into which he had to descend to explain quite complex design parameters and problems was not extravagant.
The evidence about the variations and extras was also detailed. It consisted of a large number of, in many cases, small items. They were recorded in the plaintiff’s computer system. Print outs, in great detail, were shown to the defendant at an early date. I was told from the bar table that the print out was not left with the defendant. That print out was the basis for “Annexure A” to the Particulars of Claim. The nature of the claim was obvious from an early date.
What was not provided was the documentation – diary notes, invoices, telephone records, and the like, to back up the print out. That was not produced until trial. It is the case that the claim varied in total from time to time and to a substantial degree. In both claim and counterclaim each party “threw the book” at the other.
Mr Edwards, CEO of the defendant, deposes to having been unable to make a commercial judgment about the merits of the plaintiff’s claim, even to the extent of trying to make some sort of offer to settle. In my experience, offers, counter offers and other negotiations often proceed and often succeed when neither party has definitive information about the other’s case. Offers are often filed at a time when investigation and discovery are not complete. I do not accept that Mr Edwards was so completely in the dark that he could not have negotiated and made offers if he had wished to do so. The nature of the offer eventually made and accepted demonstrates that it was the result of a “broad axe” rather than a minute analysis. One does not know whether it would have been acceptable if made at an earlier date, or whether it was accepted only because the parties had reached a state of exhaustion. Whether acceptable or not, an offer could have been filed. No offer was made.
In the end, I do not accept that the only issue for me to consider is an amount of $30,000 in respect of a claim for $300,000. The plaintiff recovered a judgment for $150,000, in a case in which there was no admission of liability for any part of that sum.
The defendant points to trial and pre-trial delays caused by the plaintiff being late with various documents and procedures. Those delays have been addressed in the pre-trial costs orders and in the costs of the adjournments at trial. There is no reason to make a further allowance.
I accept that some part of the trial and pre-trial costs of the plaintiff relate to the defendant’s counterclaim. A high proportion of those costs were not additional to those needed to prove the validity and reasonableness of the plaintiff’s claim. Many of the assertions raised in the counterclaim duplicated those raised in the defence.
It would be ridiculously expensive to try to separate out the costs of the counterclaim with any exactness. I propose to take a broad approach. I will order that the defendant pay to the plaintiff the plaintiff’s costs of the action, to be taxed if not agreed within 21 days. Those costs are to be reduced by 15% to allow for costs attributable to the counterclaim.
The plaintiff is to receive 100% of its costs of and incidental to this application for costs.