Fitch v S & a Gallo Pty Ltd - [2013] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
FITCH v S & A GALLO PTY LTD
[2013] SASC 144
Judgment of The Honourable Justice Blue
13 September 2013
PROCEDURE - COSTS - APPEALS AS TO COSTS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES - DEMAND, OFFER AND CONSENT
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES - CONDUCT TENDING TO LITIGATION
S & A Gallo Pty Ltd sued David and Mathew Fitch in the Magistrates Court. Gallo claimed $25,058 said to be the balance owing for building works undertaken at the Fitchs’ house property.
The Fitchs defended the claim on the basis that the building works were defective, claiming rectification work was required. The Fitchs later counterclaimed for the cost of rectification works to be undertaken.
At the commencement of trial, the parties agreed that consent judgment be entered in favour of Gallo for $20,000 on the claim and in favour of the Fitchs for $16,200 on the counterclaim. No agreement was reached as to costs. The Fitchs sought an order that their costs of action be paid by Gallo. The Magistrate rejected the application and made an order that each party bear their own costs.
The Fitchs seek permission to appeal against the Magistrate’s order.
Held (dismissing the appeal):
1.      Permission to appeal on all grounds is granted (at [25]).
2.      When an action is compromised, there are difficulties in a court being asked to award costs and commonly each party bears its own costs, unless there is an obvious basis on which to award costs in favour of one party (at [21]).
3.      The Magistrate correctly identified the principles relevant to the assessment of costs when an action is compromised (at [30]).
4.    There was no basis established by the Fitchs for finding that Gallo was responsible for the action or that the Fitchs' postion in the action was necessarily vindicated by the result (at [34], [35] and [41]).
5.      (a) The offers before action were not substantive offers. They were only offers to negotiate (at [49]-[50]).
(b) There is no basis to find that there would have been a resolution of the dispute if a meeting had taken place, given the breakdown in the relationship between the parties to that point and what transpired subsequently (at [50]).
6.      The matters identified by the Fitchs are not sufficient in all of the circumstances to make out unreasonable conduct by Gallo of the type which results in a party being ordered to pay costs independently of the result (at [56]).
Building Work Contractors Act 1995 (SA) s 37(6); Magistrates Court Civil Rules 2006 (SA) s 37(1); Supreme Court Civil Rules 2006 (SA) rr 288(1)(b), 292(6); Worker's Liens Act 1893 (SA), referred to.
Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284, discussed.
Advance Resource Services Pty Ltd v Charlton [2008] SASC 118; (2008) 100 SASR 388; Boscaini Investments Pty Ltd v Corporation…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] SASC 144
Decision Date: 13 September 2013

CaseChat Overview and Summary

Fitch v S & a Gallo Pty Ltd concerned a dispute between the Fitchs and Gallo regarding a contract for the installation of a rainwater storage and storm water drainage system. After a long-running dispute, the parties reached a settlement whereby Gallo was to receive a net judgment for $3,800. The Fitchs sought to appeal against the Magistrate's order that each party bear their own costs. The legal issue was whether the Magistrate erred in refusing to award costs to the Fitchs despite the settlement in their favour. The appeal raised questions about the principles governing the award of costs in cases where actions are settled, and whether the conduct of the parties warranted an order for costs in favour of the Fitchs.

The court held that when actions are compromised, courts face difficulties in awarding costs, and typically each party bears its own costs unless there is a clear basis for awarding costs in favour of one party. The court found that the Magistrate correctly applied the relevant principles. There was insufficient evidence to conclude that Gallo was at fault or that the Fitchs' position was necessarily vindicated by the result. The court also found that the offers made by the parties before action were not substantive offers to resolve the dispute. The matters identified by the Fitchs did not amount to unreasonable conduct warranting an order for costs independently of the result. The appeal was dismissed.

The court held that permission to appeal was granted, the Magistrate correctly identified the relevant principles, and there was no basis for awarding costs to the Fitchs. The settlement did not provide a clear basis for awarding costs in favour of the Fitchs. The court found that the offers made by the parties were not substantive offers to resolve the dispute and that the matters identified by the Fitchs did not amount to unreasonable conduct warranting an order for costs independently of the result. The appeal was dismissed.

Orders

Orders of the court

Held (dismissing the appeal):

1. Permission to appeal on all grounds is granted (at [25]).

2. When an action is compromised, there are difficulties in a court being asked to award costs and commonly each party bears its own costs, unless there is an obvious basis on which to award costs in favour of one party (at [21]).

3. The Magistrate correctly identified the principles relevant to the assessment of costs when an action is compromised (at [30]).

4. There was no basis established by the Fitchs for finding that Gallo was responsible for the action or that the Fitchs' postion in the action was necessarily vindicated by the result (at [34], [35] and [41]).

5. (a) The offers before action were not substantive offers. They were only offers to negotiate (at [49]-[50]).

(b) There is no basis to find that there would have been a resolution of the dispute if a meeting had taken place, given the breakdown in the relationship between the parties to that point and what transpired subsequently (at [50]).

6. The matters identified by the Fitchs are not sufficient in all of the circumstances to make out unreasonable conduct by Gallo of the type which results in a party being ordered to pay costs independently of the result (at [56]).

Background

Background to the litigation

The Fitchs seek permission to appeal against the Magistrate’s order that each party bear their own costs. Background In May 2009, the Fitchs entered into a contract with Gallo for the installation of a rainwater storage and storm water drainage system and the laying of pavers over the pipes installed in the ground. The contract price was $65,000 payable by three instalments with the last instalment of $20,000 payable on completion of the works.[2][2] All dollar figures quoted herein are inclusive of GST. In September-October 2009, Gallo issued to the Fitchs an invoice for $20,000, being the final instalment for the works, and claimed $5,058 for variations. Written communications followed between the parties, debating whether the work was defective and whether Gallo was entitled to payment for variations. In November 2009, Gallo’s solicitors issued to the Fitchs a formal demand under the Worker’s Liens Act 1893 (SA) for $25,058. Further communications ensued. In December 2009, Gallo issued a claim in the Magistrates Court for $25,058. In January 2010, the Fitchs filed a defence alleging defective work and disputing the variations. Although they did not file a counterclaim, they sought relief as part of the defence, including an order that Gallo undertake remedial works. In May 2010, a court appointed building expert, Mr Robinson, provided an independent report in relation to the alleged defects. He considered that some of the alleged defects should be remedied, one should not and several other defects should be the subject of further investigation or expert report. In July 2011, the Fitchs obtained a report by Mr Deans, a quantity surveyor, which assessed the cost of rectification (assuming all defects as alleged by the Fitchs) at $36,652. In September 2011, the Fitchs obtained an expert report by Mr Kokkinakis, an engineer, involving an alternative less extensive method of rectification. In October 2011, the Fitchs filed a counterclaim. They sought an order that they be paid the cost of carrying out remedial works, but did not quantify their cost. They abandoned the claim contained in their original defence for an order that Gallo undertake remedial works. In November 2011, the Fitchs obtained a further report by Mr Deans estimating the cost of undertaking the rectification works recommended by Mr Kokkinakis at $17,182. In August 2012, Gallo served an expert report by a quantity surveyor, Mr Centofanti, estimating the cost of undertaking the works recommended by Mr Kokkinakis at $9,989.46. In September 2012, the cost of rectification work recommended by Mr Kokkinakis was agreed at $16,200. On 17 December 2012, at the outset of trial, consent judgments were entered for Gallo of $20,000 and the Fitchs of $16,200.The Magistrate’s reasoning The Magistrate considered that, when parties settle an action without agreeing on costs, there needs to be a sufficiently clear basis on which to award costs in favour of one party or the other. It was not sufficiently clear that Gallo was the villain and the Fitchs were the victims such that Gallo should pay the Fitchs’ costs. He did not have sufficient material upon which he could determine that Gallo was at fault in the sense that it should be responsible for the Fitchs’ costs. The outcome of the settlement, being a net judgment in favour of Gallo, did not lead to an inference of such fault.Awarding costs when actions settle

Evidence

Evidence Before The Court

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Decision

Reasons for decision

I have considered all strands of the Fitchs’ arguments on appeal, and all grounds of appeal, in conjunction. On the material before the Magistrate, it is not possible to conclude that there was an obvious basis on which to award costs in favour of the Fitchs and there was not a sufficiently clear basis on which to do so. The matters identified by the Fitchs are not sufficient to make out unreasonable conduct by Gallo of the type which results in a party being ordered to pay costs independently of the result.Conclusion I dismiss the appeal. I will hear the parties as to consequential orders.

Ratio Decidendi

Legal Principle Established

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