Faris v Savage (No 3)
[2021] ACTSC 60
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Faris v Savage (No 3) |
Citation: | [2021] ACTSC 60 |
Hearing Date(s): | 30 September 2020 |
DecisionDate: | 14 April 2021 |
Before: | Loukas-Karlsson J |
Decision: | See [58] |
Catchwords: | COSTS – Application for indemnity costs following appeal – where respondent was successful in substantive proceedings – whether indemnity costs warranted |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 1010, 1721, 1752, 1753 |
Cases Cited: | Beagle v Australian Capital Territory and Southern New South Wales Rugby Union Limited (No 2) [2017] ACTCA 40 Brymount Pty Limited t/as Watson Toyota v Cummins (No 2) [2005] NSWCA 69 Southwell v Staite (No 2) [2019] ACTSC 83 |
Parties: | Rabea Hatem Faris (Appellant) Gail Savage (Respondent) |
Representation: | Counsel J Moffett (Appellant) S Russell-Uren (Respondent) |
| Solicitors Snedden, Hall & Gallop (Appellant) Aulich Law (Respondent) | |
File Number(s): | SCA 47 of 2018 |
Decision under appeal: | Court/Tribunal: ACT Magistrates Court Before: Magistrate Fryar Date of Decision: 24 August 2018 Case Title: Savage v Faris Citation: [2018] ACTMC 17 |
LOUKAS-KARLSSON J
Introduction
Mr Rabea Faris (the appellant) brought an appeal in relation to proceedings initiated by Ms Gail Savage (the respondent) in the Magistrates Court. The Magistrates Court proceedings related to building and landscaping works carried out by the appellant at the respondent’s residential property. The respondent was successful in her claim: see Savage v Faris [2018] ACTMC 17. The sole basis of the appeal to this court was the claim that the appellant’s former solicitor had been incompetent in the Magistrates Court proceedings to such a degree that it had caused a miscarriage of justice.
On 11 August 2020 I made orders dismissing the appellant’s appeal. A further order was made directing the appellant to pay the respondent’s costs of the appeal. Any party seeking a different order on costs was to notify my Associate by 18 August 2020: Faris v Savage (No 2) [2020] ACTSC 219 (Faris v Savage (No 2)).
The respondent now seeks an order for the costs of the appeal proceedings to be awarded on an indemnity basis. The respondent’s application had originally sought costs in relation to the Magistrates Court proceedings, and various interlocutory applications in proceedings the subject of the appeal, however the application in relation to those proceedings was later withdrawn. The application for indemnity costs in relation to the appeal proper, that is, the appeal itself remains: (T3-4.1-12; 9.12.20). I further note that indemnity costs were not sought at the Magistrates Court, nor before Burns J.
Power to make orders for costs
The statutory source of the discretion of this Court to award costs is found in r 1752 of the Court Procedures Rules 2006 (ACT) (the Rules) which states:
1752 Costs —assessed on solicitor and client etc basis
(1) The court may order costs to be assessed—
(a) on a solicitor and client basis; or
(b) on an indemnity basis; or
(c) on any other basis it considers appropriate.
Note Pt 6.2 (Applications in proceedings) applies to an application for an order under this rule.
(2) Without limiting subrule (1), the court may order that costs be assessed on a solicitor and client basis if it orders payment of costs—
(a) out of a fund; or
(b) to a party who sues or is sued as a trustee; or
(c) of an application in a proceeding brought for—
(i) noncompliance with an order of the court; or
(ii) breach of an undertaking given to the court.
(3) In assessing costs on a solicitor and client basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to—
(a) the costs allowable under rule 1722 (Costs—solicitors’ costs generally); and
(b) charges ordinarily payable by a client to a solicitor for the work.
(4) In assessing costs on an indemnity basis, the registrar—
(a) must allow all costs other than costs unreasonably incurred (with the party paying the costs having the onus of proving that the costs were unreasonably incurred); and
(b) may have regard to any costs agreement between the party to whom the costs are payable and the party’s solicitor.
Procedural History
The hearing at first instance proceeded before Magistrate Fryar on 21 and 22 August 2017. Her Honour delivered a decision and reasons on 24 August 2018. The appellant lodged his appeal on 21 September 2018.
The appellant’s appeal involved an application for leave to adduce fresh evidence on appeal. This application was heard by Burns J 28 October 2019. The decision and reasons were published on 6 December 2019.
It was acknowledged during the course of both the application before Burns J and in the appeal proper, that the appellant would be required to pay the respondent’s costs of the appeal. Unsurprisingly, the relevant costs orders were made.
The appellant accepted that there were a number of offers made to the appellant to “compromise his case”. The appellant submitted that all of these offers were made before the filing of the notice of appeal, and all but one before the hearing of the matter before Magistrate Fryar.
The appeal was on the basis of a miscarriage of justice due to the incompetence of the appellant’s counsel at first instance.
The ultimate finding on appeal was that the incompetence did not amount to a miscarriage of justice in accordance with the authorities.
The appellant submitted that the respondent did not make any offer of compromise in accordance with the Rules or make any Calderbank v Calderbank [1975] 2 All ER (Calderbank) offer with respect to the application to adduce fresh evidence or the appeal proper.
Offers of Settlement
The respondent referred to numerous attempts to resolve the litigation, by way of offers of settlement, made at first instance, including:
(1)On 17 February 2017, an offer to settle proceedings for $81,000.00 and costs and disbursements, as agreed or assessed on a party and party basis (but capped at $66,842.32).
(2)On 6 July 2017, an offer of compromise, pursuant to pt 2.10 of the Rules for $80,000.00 plus costs as agreed or assessed; and
(3)On 14 August 2017, an offer of compromise, pursuant to pt 2.10 of the Rules for $75,000.00 plus costs as agreed or assessed.
The respondent submits that each of these offers was:
(1)An offer of compromise, and put in a manner consistent with pt 2.10 of the Rules;
(2) Not accepted by the appellant; and
(3) For an amount less than the respondent achieved at first instance (by between $40,000.00 to $50,000.00).
I interpolate here to note that the result at first instance was $107,819.24 plus costs: see Faris v Savage (No 2) at [1].
The respondent submitted that each of the offers at first instance are relevant to the exercise of the discretion: Ettingshausen v Australian Consolidated Press Ltd (1995) NSWLR 404. Further, the respondent referred to the following passage in Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; 46 NSWLR 194 in which Stein JA stated at [33]:
It seems to me that the starting point for consideration of the proper costs order in this appeal is to accept that the offer of compromise continues to have cost consequences for an appeal (Ettinghausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410). It follows that it is a relevant factor to consider on the question of costs. It was not an extraneous consideration.
On 20 September 2018, the respondent made a further offer of settlement in accordance with the principles enunciated in Calderbank. This offer was made after the Magistrates Court orders were made at first instance, and before the appeal had been commenced. This offer was for $200,000.00, inclusive of costs and disbursements. The offer remained open until 25 October 2018 and was not accepted by the appellant. I interpolate here to note that the appeal was lodged on 21 September 2018.
The respondent submitted that an offer made at this time militates strongly towards the exercise of the costs discretion, citing Brymount Pty Limited t/as Watson Toyota v Cummins (No 2) [2005] NSWCA 69 at [27]-[30]; McKeith v Royal Bank of Scotland [2016] NSWCA 260 at [31]-[36].
Submissions of Respondent (Applicant on costs)
The respondent’s submissions were supported by the affidavit of Mr Russell-Uren, affirmed 16 September 2020, and Exhibit 1 in these costs proceedings (the Russell-Uren Affidavit).
The respondent accepted that it is well established that the costs discretion should be exercised only where some “special or unusual feature” exists: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 801; 46 FCR 225. Nevertheless, the respondent submitted that these features are not limited to closed categories, and relied on three broad circumstances in support of the application, as follows:
(1)The various offers of settlement made by the respondent at first instance, and in the appeal;
(2)The pursuit, amendment, and abandonment of hopeless grounds contained in the Notice of Appeal filed by the appellant; and
(3)The appellant’s procedural delinquency.
The respondent’s ultimate submission was that the Court’s discretion to award indemnity costs pursuant to r 1752 of the Rules is enlivened by the following:
(1)The appellant’s failure to accept offers of compromise;
(2)The pursuit of a hopeless appeal and the procedural delinquency displayed by the appellant
The respondent submitted that there is “overwhelming support” for an indemnity costs order.
Submissions of Appellant (Respondent on costs)
The appellant acknowledged that the offers of settlement were relevant to the question of costs on the appeal, but submitted that they needed to be considered in the context of the appellant’s application to adduce further evidence on appeal, and the appeal itself.
The appellant submitted that it is important to note that the respondent never made an offer of compromise purportedly in accordance with the Rules, or a Calberbank offer, with respect to the further evidence application or the appeal.
The appellant accepted that he sought to amend his appeal on a number of occasions, and that there “may well be some persuasion in the respondent’s argument that the ordinary rule of costs to be assessed on a party and party basis pursuant to r 1751 should not be followed with respect to those amendments”. The appellant submitted that this should, at its highest, be assessed on a solicitor and client basis pursuant to r 1752(1)(a), rather than on an indemnity basis. The appellant accepted that apart from this exception, the respondent is entitled to its costs on a party/party basis, and noted that the appellant conceded this at the hearing of the application and appeal.
The appellant ultimately submitted that there is nothing special, or exceptional, about the appeal warranting a departure from the usual order as to costs.
Rule 1010
Rule 1010 was referred to by the parties in written submissions. It is relevant therefore to refer to r 1010 of the Rules. Rule 1010 provides as follows:
1010 Offer not accepted and judgment no less favourable to plaintiff
(1) This rule applies if an offer is made by the plaintiff in relation to a claim, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in relation to the claim —
(a) if the claim is a personal injury claim—assessed on a solicitor and client basis for the whole of the proceeding; or
(b) in any other case—
(i) assessed on a party and party basis up to the time when the costs are to be assessed on a solicitor and client basis under subparagraph (ii); and
(ii) assessed on a solicitor and client basis—
(A) if the offer was made before the first day of the trial—from the day the period for acceptance of the offer ends; and
(B) if the offer was made on or after the first day of the trial—at and from 11 am on the day after the offer was made.
Rule 1010 of the Rules does not apply where an offer of compromise has been made by a plaintiff before a hearing, and not accepted, and subsequently on appeal obtains a result better than the offer, unless that offer was renewed: Koundouris v Owners – Unit Plan No 1917 (No 2) [2017] ACTCA 47 at [42].
The correct approach in relation to the rule was explained by Hunt AJA in Shellharbour City Council v Johnson (No 2) [2006] NSWCA 114; 67 NSWLR 308 at [19]:
…the onus is on the defendant to persuade the Court that an order should not be made that the costs be assessed on an indemnity basis. The defendant must demonstrate the basis on which such an order should not be made. The defendant must establish that serious thought had been given to the risk involved in non-acceptance of the offer, and that the plaintiff’s case had been assessed properly and in the context of the rule and the achievement of its purpose — to encourage the proper compromise of litigation in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. The decision to award or withhold indemnity costs where a plaintiff’s offer of compromise has not been accepted by the defendant involves a discretion to be exercised by reference to all of the circumstances of the case, not by applying a fixed mathematical formula…
Consideration
Law
Exceptional circumstances are generally required for a special costs order: Nominal Defendant v Hawkins [2011] NSWCA 93; 58 MVR 362 at [56]. ‘Exceptional circumstances’ may simply mean that there are circumstances justifying departure from the general rule: Consolidated Lawyers Limited v Abu-Mahmoud [2016] NSWCA 4 at [64].
The principles applicable to Calderbank offers have been set out comprehensively in Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki v Walton (No 2) at [13]-[16]. A number of the relevant considerations have been referred to in Southwell v Staite (No 2) [2019] ACTSC 83 at [7]-[17].
I note what has been stated in relation to indemnity costs and Calberbank offers in Jones v Walker [2013] ACTSC 71 at [31].
Grounds of appeal – Respondent (Applicant on Costs)
The respondent submitted that the Notice of Appeal underwent repeated formulation, having been originally formulated when the respondent was self-represented. The respondent submitted that until 25 October 2019, the notice was “doomed to fail”. The grounds which the respondent takes particular issue with were as follows:
Her Honour erred in accepting the expert evidence tendered on behalf of the plaintiff… in disregarding the evidence of the defendant in its entirety… [and in] failing to take judicial notice and accepting the amount allowed for the removal work was manifestly excessive.
The respondent submitted that while there is nothing “special or unusual” with respect to a poorly drafted pleading, the “special or usual feature” upon which the respondent does rely, is the pursuit of those grounds during the period of 31 January 2019 to 25 October 2019 when the appellant had legal representation. An Amended Notice of Appeal, and a Further Amended Notice of Appeal were filed on 14 and 22 March 2019 respectively, both of which preserved the substance of the impugned grounds.
The respondent noted that the appellant’s Further Amended Grounds of Appeal were considered by McWilliam AsJ in the context of a security for costs application in Faris v Savage [2019] ACTSC 94 at [31]:
In short, having traversed the grounds of appeal, there is sufficient doubt about the merits of each that I consider that, combined with the other factors referred to above which slightly favour Ms Savage’s application, an order for security for costs is warranted.
On 2 May 2019 the Court made orders permitting the appellant to file a Second Further Amended Notice of Appeal by 30 May 2019. This Second Further Amended Notice of Appeal was filed on 13 August 2019, retaining the Impugned Grounds, and raising incompetency of counsel at first instance as an additional ground of appeal for the first time.
On 9 September 2019, the respondent requested the appellant file a Third Further Amended Notice of Appeal, withdrawing the Impugned Grounds. The respondent notified the appellant that an application to strike out the Notice of Appeal would be brought, and costs on an indemnity basis would be pursued against the appellant’s legal representative pursuant to r 1753 of the Rules if this did not occur.
On 25 October 2019 the appellant filed a Third Further Amended Notice of Appeal, withdrawing the Impugned Grounds.
The respondent submitted that the appellant’s pursuit of the Impugned Grounds was unreasonable and constitutes a “special or unreasonable feature”. It was further submitted that those grounds were without substance, and the appeal doomed to fail until the Third Further Amended Notice of Appeal was filed.
The respondent further submitted that the pursuit of a hopeless case, or the abandonment of a weak appeal at a late stage warrants the exercise of the discretion as to costs, and that both circumstances arise in this appeal.
Grounds of Appeal – Appellant (Respondent on Costs)
The appellant conceded that the ‘impugned grounds’ outlined in the respondent’s submissions “could not in all the circumstances be properly argued”. The appellant submitted that the addition, and abandonment of, particular grounds of appeal does not represent a ‘special or unusual feature’ and is a usual occurrence in perfecting a pleading prior to determination by a court.
The appellant submitted that it is “somewhat incongruous" that the respondent seeks a special order for costs, while submitting that the appeal as drafted prior to the filing of the Third Further Amended Notice of Appeal was doomed to fail. The appellant submitted that no evidence of work performed as a consequence of the reformulation of the appeal has been served or substantiated. The appellant submitted that the respondent’s submission in this regard should be rejected.
The appellant submitted more generally that the appeal was not a hopeless one, and was properly and appropriately argued. It was submitted that Burns J had accepted the proposition that the admission of further evidence may have affected the assessment of the quantum in the hearing proper: Faris v Savage [2019] ACTSC 339 at [22].
The appellant submits further that given a level of incompetence was acknowledged on appeal, albeit not one which gave rise to a miscarriage justice to the standard required in civil litigation, that this was simply a case in which an appeal point had been argued unsuccessfully and as such costs should follow the event on the usual basis.
Procedural Delinquency – Respondent (Applicant on Costs)
The respondent submitted that the appeal proceedings were conducted by the appellant in an unreasonable manner, which caused unnecessary delay, and cost to the respondent. The respondent submitted that these circumstances are set out comprehensively in the Russell-Uren affidavit and the bench sheets, but noted the following in particular:
(a)The appeal was filed on 21 September 2018, but not served until 8 November 2018;
(b)The transcript of proceedings at first instance was not served until 13 June 2019;
(c)The appellant failed to seek a stay of orders made at first instance until 24 May 2019;
(d)The Notice of Appeal was amended five times;
(e)The Second Further Amended Notice of Appeal was filed 2 months late;
(f)The ground of appeal ultimately relied upon was not raised until 11 months after the appeal was commenced;
(g)The appellant did not begin to collate the Appeal Index until 13 August 2019;
(h)The appellant sought orders against his former solicitor IG, without bringing the application in a manner which would allow IG to be heard: see Faris v Savage [2019] ACTSC 339; and
(i)The appellant repeatedly changed representation, reformulating the appeal on each occasion.
The respondent conceded that each of the events particularised above would be incapable of warranting the exercise of the cost discretion in isolation. However, the respondent submitted that their cumulative effect tends towards its exercise, in accordance with Palmer v Gold Coast Publications Pty Ltd & Anor [2013] QSC 352 (Palmer).
The respondent also referred generally to Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 and Pham v Enterprise ICT Pty Ltd [2020] NSWSC 1089.
Procedural Delinquency – Appellant (Respondent on Costs)
The appellant submitted that the decision of Palmer, relied upon by the respondent in the submissions, can be distinguished from the present circumstances. The appellant submitted that the Palmer proceedings involved the plaintiff in that case discontinuing the proceedings without explanation, and failing to accept a genuine and reasonable Calderbank offer in the proceeding.
It was submitted by the appellant that in the present case, there was no Calderbank offer made once the appeal had been initiated, and the matter was substantially argued on appeal. The appellant acknowledged that ‘procedural irregularities’ occurred due to changes in legal representation, however it was submitted that these irregularities did not amount to ‘procedural delinquency’.
Conclusion
Despite the costs discretion conferred upon courts, it is settled practice that, absent any special circumstances, a successful litigant is entitled to recover their costs from the opposing party: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 (Oshlack) at [34]-[36]; Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 at [92]. An order to this effect is commonly described as “costs follow the event”: Singer v Berghouse (1993) 114 ALR 521 at [5] per Gaudron J. Ordinarily, costs follow the event and are awarded on a party/party basis: r 1751 of the Rules. See Hulanicki v Walton (No 2) at [11].
Costs are in the discretion of the Court: r 1721 of the Rules. The discretion is wide and must be exercised judicially, in accordance with established principle and the statutory context: Oshlack at [35]; [65]. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party: EMI Songs Australia Pty Ltdv Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].
Indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs: Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA at [57]; Dunstan v Rickwood (No 2) [2007] NSWCA 266; 38 Fam LR 491 at [44]. Indemnity costs may be ordered where an offer is made under the Rules, or where a Calderbank offer is made.
The Court must consider whether there is an offer made under the Rules: Rule 1010. Offers of compromise should not be view with excessive formality or technicality, but rather with a view to giving effect to the spirit of the Rules. The Court does not look to the form of the orders, but rather to their substance: Pettitford v Whicker [2005] NSWCA 370 at [15]; Re Williams; Smith v Thwaites (No 2) [2017] VSC 771 at [29].
The Court must also consider the question of Calderbank offers. See Hulanicki v Walton (No 2) at [13]-[16]. Specifically, at [13] the Court stated the following:
The acceptance of reasonable offers of compromise is in the interests of litigants and the public; it minimises the personal and financial costs to litigants and it enables the courts to focus resources on claims that are not amenable to compromise. “The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs”: Stewart v Atco Controls Pty Ltd (In Liquidation) (No 2) (2014) 252 CLR 331 at [4]. On the other hand, it is critical that litigants have ready access to justice and do not feel unreasonably constrained to compromise cases.
Having considered all relevant matters, including the submissions set out above, I am not persuaded that this an appropriate case for the award of indemnity costs. Nevertheless, I am persuaded that this is an appropriate case for the award of costs on a solicitor and client basis for the appeal before me, the appeal proper. In coming to this conclusion I note that the offers of settlement are relevant to the question of costs on the appeal, as conceded by the appellant (respondent on costs). I have relevantly considered these offers in the context of the application to adduce further evidence and the appeal itself: see [22]. I have also taken into account that the respondent (applicant on costs) did not make an offer of compromise in accordance with the Rules, or a Calderbank offer with respect to the appeal. I also note the caution expressed in relation to this factor in Beagle v Australian Capital Territory and Southern New South Wales Rugby Union Limited (No 2) [2017] ACTCA 40 at [23]-[25].
I also note that the appellant (respondent on costs) submitted that I may come to the conclusion that party and party costs should not apply to the appeal amendments: see [24]. I also note that the appeal, while not necessarily doomed to failure, could not be said to have had good prospects of success, noting the relevant authorities discussed in the appeal judgment: Faris v Savage (No 2) at [43]-[54]. It was, it must be said, a difficult ground of appeal on which to succeed.
Costs are always ultimately at the discretion of the Court. That discretion should be exercised to achieve a just result: SMA v John XXIII College (No 3) [2020] ACTSC 236 at [27]. As stated by the High Court in Gray v Richards (No 2) [2014] HCA 47; 89 ALJR 113 at [2]:
The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.
(Citations omitted)
In my view, taking all matters discussed above into account, justice requires that solicitor and client costs be awarded on the appeal proper. I am not persuaded that justice requires an award of indemnity costs.
Orders
I make the following orders:
(1) Orders 2 and 3 made on 11 August 2020 are discharged.
(2) The appellant is to pay the respondent’s costs of the appeal proceedings on a solicitor and client basis.
| I certify that the preceding fifty-eight [58] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Loukas-Karlsson. Associate: Date: |
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