Fardi v Loveday (No 2) - [2010] SADC 82

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
FARDI v LOVEDAY (NO. 2)
[2010] SADC 82
Judgment of His Honour Judge Nicholson
25 June 2010
PROCEDURE - COSTS
Unrepresented plaintiff failed at trial - damaging credit findings - consideration of whether defendant's costs should be taxed on a solicitor and own client basis.
HELD: Plaintiff to pay the defendant's costs on a party and party basis.
District Court Act 1991, referred to.
Cretazzo v Lombardi (1975) 13 SASR 4; Donald Campbell & Co. v Pollak [1927] AC 732; Hamod v New South Wales (2002) 188 ALR 659; Colgate-Palmolive Co. & Anor v Cussons Pty Ltd (1993) 46 FCR 225; Spalla v St George Motor Finance Ltd and Ors (No. 8) [2006] FCA 1537, considered.

FARDI v LOVEDAY (NO. 2)
[2010] SADC 82

In the principal judgment delivered in this matter,[1] I dismissed the plaintiff’s application for damages in circumstances where liability had been admitted in connection with a slow speed, low impact motor vehicle accident involving the plaintiff as the driver of one car and the defendant as the driver of the other. Ordinarily, the costs of the trial would follow the event and an order made that the plaintiff pay the defendant’s costs of trial on a party and party basis. However, the defendant has applied for an order that the plaintiff pay her costs of trial on a solicitor and own client basis.
[1] Fardi v Loveday [2010] SADC 25.
In dismissing the plaintiff’s claim, I came to the following conclusion:[2]
In [the] circumstances, the plaintiff is not entitled to any damages award for non-economic loss. Furthermore, I am not satisfied that the plaintiff suffered any loss of earning capacity as a result of, that is, caused by, the accident. The plaintiff has not established that he has suffered any other financial loss as a result of, that is, caused by, the accident.
[2] At [206].
Prior to arriving at that conclusion, I made a number of findings of fact many of which were extremely critical of the plaintiff’s credit and as to the plaintiff’s behaviour with respect to the litigation itself but also, in particular, with respect to his dealings with various medical practitioners and financial organisations with whom he had engaged over many years between shortly prior to the accident in 2000 and the trial period. Those findings are either referred to or set out in paragraph [205] of the principal judgment and in the defendant’s written submission in support of her costs argument filed 23 March 2010. I will not set out those findings again here.
Section 42 of the District Court Act 1991 provides that, subject to the Rules, costs in any proceedings in the Civil Division will be in the discretion of the Court. Costs ordinarily follow the event and a successful party usually will receive a costs order in their favour. Furthermore, costs ordinarily will be awarded on a party and party basis unless there are special circumstances that warrant a court departing from this practice by the making of some other order. In Cretazzo v Lombardi[3] Bray CJ adopted the well known observation of the House of Lords in Donald Campbell & Co. v Pollak:[4]
that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation.
[3] (1975) 13 SASR 4 at 11.
[4] [1927] AC 732.
The purpose of a solicitor and own client or indemnity based costs order has been stated in various ways. However, in Hamod v New South Wales[5] Gray J, with whom Carr and Goldberg JJ agreed, said:
Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.
[5] (2002) 188 ALR 659 at [20]
Where a claim is made for costs on a solicitor and own client or indemnity basis, the starting point remains the observations of Sheppard J in Colgate-Palmolive Co. & Anor v Cussons Pty Ltd:[6]
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1.The problem arises in adversary litigation, ie litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2.The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. … In many cases the result will be that the amount recovered by the successful party … will fall short of (in many cases well short of) a complete indemnity.
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission (supra) and Handley JA in Cachia v Hanes (supra) on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at p 6) similar views in Ragata (supra).
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 and 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountaion and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestly JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of case are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6.It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
[6] (1993) 46 FCR 225 at 232-233.
In reliance on the various findings made in the principal judgment, particularly those concerning the plaintiff’s credit, the defendant maintains that, inter alia:
(i)the trial was greatly extended because the defendant was put to formal proof of matters that should have been conceded;
(ii)the plaintiff’s case was one where, properly advised, he should have known that he had no chance of success such that it should be presumed that the action was commenced or continued for some ulterior motive or because of some wilful disregard of known facts or clearly established law;
(iii)it is not necessary for there to have been a finding of fraud or of some collateral purpose before a special costs order could be made and that it is sufficient to enliven the discretion that, for whatever reason, the plaintiff persisted in what should on proper consideration be seen to have been a hopeless case.
(iv)the plaintiff made allegations that ought never have been made such that the case was unduly prolonged by groundless contentions; and
(v)the plaintiff’s case was presented on a fundamentally dishonest basis.
I recognise that a finding of fraud or similar is not a necessary pre-condition to the making of a special costs order. In this case, whilst my findings against the plaintiff were extremely critical of and damaging to his credit and his evidence generally and whilst I was satisfied that he engaged, repeatedly, in dishonest conduct, I drew short of a finding that the claim brought against the defendant for damages arising out of the motor vehicle accident was fraudulent. I expressly left open the possibility that the plaintiff continues to suffer from depression and that he has done so for many years. However, I was not satisfied that any such depression had been caused or exacerbated, directly or indirectly, by any physical injuries suffered by the plaintiff in the accident. Further, I was not satisfied that any psychiatric illness or incapacity or any consequential inability to earn an income, if any, was caused by or could be attributable to the accident in question.
If it were to be the case that the plaintiff has suffered for 10 years or more from depression, even though as I said in the principal judgment the onset of any such depression is likely to have pre-dated the accident, I was not prepared to reject the possibility that the plaintiff had a belief that the car accident was related in some way to his ongoing depression.
Had the plaintiff been represented throughout the period of preparation for trial and the trial itself such that he should have had available to him appropriate legal advice, there is a real likelihood that I would have allowed the defendant’s application for a costs order to be taxed on a solicitor and own client basis. However, for the last 15 months or so, prior to the commencement of the trial, and throughout the trial itself, the plaintiff was unrepresented. I am not aware of any legal advice that may have been provided to the plaintiff prior to him assuming conduct of the proceedings himself. I am not aware of all of the reasons why the plaintiff may have proceeded to conduct the matter and the trial without legal representation other than the plaintiff’s assertions during the trial, from time to time, that he could not afford legal representation. In these circumstances, I am mindful of a general reluctance in the Courts to order solicitor and client or indemnity costs against unrepresented litigants.
In Spalla v St George Motor Finance Ltd and Ors (No. 8)[7] Kenny J said this:
On the one hand, litigants in person, even if partially assisted by lawyers, often produce significant difficulties and unnecessary expense for the parties against whom they proceed. These difficulties arise from their lack of knowledge of the law, unfamiliarly with court practice and, sometimes, lack of objectivity and want of lawyerly skills in reading and writing. … There may be other factors too that compound a self represented litigant’s inability to utilise court procedures appropriately. On the other hand, a person’s capacity to gain redress for legal wrongs in the Courts should not depend on his or her ability to pay for legal representation. In seeking to balance these considerations, the Courts have been generally more reluctant to make orders for indemnity costs against self represented litigants than against legally represented litigants. (citations omitted)
[7] [2006] FCA 1537 at [20]
I am troubled in this case by the following considerations:
(i)Whilst the trial did proceed for an inordinately long period of time much of which was as a result of the defendant’s comprehensive challenge to the plaintiff’s evidence and his credit both with respect to trial issues and generally, significant time also was taken up as a result of the fact that the plaintiff was representing himself, the fact that he had a most limited facility with English and the need for a full interpreting service.
(ii)In addition, it was apparent throughout the trial, that the plaintiff had a complete lack of understanding of the cultural imperatives which, in part, underpin our system of civil litigation. To put this matter more bluntly, the plaintiff appeared to have no understanding of the practical reality that, should he be shown to have acted dishonestly in other areas of his life, such as in his dealings with finance organisations, this would bear significantly on whether or not his evidence concerning the accident and the effects that the accident were alleged to have had on him physically and psychiatrically would be accepted.
(iii)A further concern arising from the plaintiff’s lack of English and lack of understanding of the legal system in Australia, is that not only was it extremely difficult for the plaintiff to conduct the proceedings but he was in no position to stand back and provide himself with objective advice as to the prospects of success or to assess the prospects of success. In this sense, the characterisation of the situation as one where the plaintiff, properly advised, should have known that he had no chance of success, has an air of unreality about it. And this is all the more so where the primary reason why the plaintiff failed was because his credit was not accepted.
(iv)In addition, I have no evidence before me that the weaknesses in the plaintiff’s case, and the damage that the defendant expected to inflict on the plaintiff’s credit, was ever explained to the plaintiff. I have no evidence that the plaintiff was put on notice that, in the event the plaintiff were to fail comprehensively, an application for solicitor and own client or indemnity costs would be made. I understand, that where credit is an issue tactical considerations loom large when a party is considering how much of their case they will disclose to the other side with a view to attempting to resolve the matter early. It is not at all uncommon for a defendant not to reveal that they expect to mount a significant attack on the plaintiff’s credit and the means by which they intend to attempt this but to save it for the trial. Nevertheless, in my view, the case for an indemnity costs order would have been stronger had some form of warning been provided to the plaintiff, particularly, given that he was unrepresented.
(v)Finally, I left open the possibility that the plaintiff has indeed been suffering from depression since prior to the accident. If so, this might help to explain why the plaintiff appears to have obsessively pursued a weak or hopeless claim, whilst unrepresented and without the benefit of objective professional advice.
In all of the circumstances I am not prepared to find that it was unreasonable for the plaintiff to have subjected the defendant to the expenditure of legal costs with respect to this trial. I am not satisfied that the plaintiff, in this case, pressed on with his trial with an appropriate appreciation that his case was likely to fail comprehensively and that an indemnity costs order was likely to result.
For these reasons, the defendant’s claim for costs to be taxed on a solicitor and own client basis is refused. I order that the plaintiff pay the defendant’s costs which, if not agreed, are to be taxed on a party and party basis.