Freehill Hollingdale & Page (a firm) v Development Ventures Pty Ltd
[2004] VSCA 174
•23 September 2004
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 6276 of 2001
| FREEHILL HOLLINGDALE & PAGE (A FIRM) | |
| Appellant | |
| v. | |
| DEVELOPMENT VENTURES PTY. LTD. | Respondent |
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JUDGES: | VINCENT and NETTLE, JJ.A. and HANSEN, A.J.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 22 September 2004 | |
DATE OF JUDGMENT: | 23 September 2004 | |
MEDIUM NEUTRAL CITATION: | [2004] VSCA 174 | |
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Practice and procedure – Costs – Third party defence to plaintiff’s statement of claim amended on first day of trial – Plaintiff desists in case, saying amendment meant case must fail – Order that plaintiff pay third party’s costs until initial defence – Appeal - Whether discretion properly exercised.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant For the Respondent | Mr G. McEwen Mr S.M. Anderson | Minter Ellison Rigby Cooke |
VINCENT, J.A.:
I invite Hansen, A.J.A. to deliver the first judgment.
HANSEN, A.J.A.:
This appeal is brought by leave from an order for costs made by a judge in the Common Law Division on 10 April 2003. The judge had sat on 1 April 2003 to try a case brought by Development Ventures Pty Ltd as plaintiff against Bayside Health as defendant and to which Freehill Hollingdale and Page was a third party. The parties to the appeal are the third party, as appellant, and Development Ventures, as respondent.
The background to the case is this, as appears in the statement of claim and other pleadings. The predecessor of Bayside Health owned the Chevron Hotel site adjacent to the Alfred Hospital on the corner of Commercial and St Kilda Roads, Melbourne . In May 1997 it sold the property by a tender process to the respondent. The contract was settled on 30 June 1998. The appellant acted as solicitor for the vendor and in that connection prepared the statement of the vendor required under s.32 of the Sale of Land Act 1962. Section 32(2)(e) required disclosure of any notice, order, declaration, report or recommendation of a public authority or government department affecting the land.
In June 2001, almost three years after completing the purchase, the respondent commenced the proceeding against Bayside Health seeking declarations and damages. It was alleged that various representations and warranties were made in a sales brochure prepared by an estate agent for the vendor and provided to the respondent in or about February 1997, a property report prepared by the agent and provided to the respondent in or about March 1997, and in the s.32 statement. The respondent also based its claim on negligent misrepresentation and misleading and deceptive conduct under the Trade Practices Act or the Fair Trading Act.
In an early part of the statement of claim it was alleged that in January 1997 the vendor had instructed valuers that -
"The Alfred Hospital operates a 'trauma unit' and utilises a helipad over Commercial Road on adjoining land. The Civil Aviation Authority has recommended that any future development of the site be restricted to three or four storeys. It is acknowledged that this is purely a recommendation only and is not enforceable through the Civil Aviation Act or any other legislation."
There are other references to a Civil Aviation Authority recommendation, which was not enforceable. It was alleged that the s.32 statement represented and warranted that there were no recommendations of a government department affecting the land. It is common ground that the s.32 statement did not disclose the alleged recommendation of the Civil Aviation Authority. What appears to be the concern is that the recommendation that development of the site be limited by reason of a helicopter flight path affected the height of any development on the land and therefore the value of the land; thus the recommendation should have been disclosed.
On 20 July 2001 Bayside Health filed a defence. The defence admitted that the Civil Aviation Authority had made the recommendation set out in the quote, or to that effect.
On 23 July 2001 Bayside Health filed a third party notice by which the appellant was made a third party to the proceeding. The notice claimed damages and an indemnity in respect of any judgment the plaintiff may obtain. The basis of the claim was the allegation in the statement of claim as to the failure to disclose the recommendations of the Civil Aviation Authority. It was alleged that the appellant had advised there was nothing to disclose.
The appellant took the course permitted by the rules of filing a defence to the plaintiff 's statement of claim. The defence set out the statement of the recommendation of the Civil Aviation Authority in the property report, namely that as a result of the flight path and location of the helipad, there should be limitations to any future development of the Chevron Hotel site, and that the recommendation was only that and was not enforceable. The defence also disputed liability to the plaintiff on grounds not raised by Bayside Health in its defence.
The appellant also filed a defence to the third party statement of claim in which it denied the allegations of the plaintiff .
This sufficiently describes the context in which the parties came to court for the trial. It was then, however, that a surprising turn of events occurred. Counsel for the respondent informed the judge that the third party wished to amend its defence to the plaintiff's statement of claim, notice of amendment having been given a few days earlier on 28 March. The appellant had also provided a witness statement of an officer of the Civil Aviation Safety Authority Australia on Monday 31 March 2003, Mr Walker. In summary, the amendment was that there never was a Civil Aviation Authority recommendation as alleged or otherwise affecting the land, and that no flight path affected the land by reason of any recommendation or other act within the meaning of s.32(2)(e) of the Sale of Land Act. The amendment raised other issues that separately went to the defence of the plaintiff 's claim.
On counsel for the appellant stating that he persisted in the application to amend, counsel for the respondent told the judge that if the application was successful, it was apparent, having regard to the amendment and to the evidence that was sought to be led by the third party in support of it, that the plaintiff could not win the case. The amendment was opposed, but, counsel said, it was apparent it would be allowed; but that should be on terms that the appellant pay indemnity costs from the date of the initial defence to the plaintiff's statement of claim.
Counsel for the respondent then explained to the judge how the matter came about. He said that the respondent knew about a recommendation of the Civil Aviation Authority, that it was not referred to in the s.32 statement, but - and this was the gravamen of the complaint - the vendor did not disclose that there was a flight path that would impact on the development of the Chevron site. Now, he said, for the first time it is alleged that there never was a recommendation. If that was true, the plaintiff could have no basis for alleging default in not disclosing a recommendation. For that reason, the plaintiff could not be successful in the case.
After the judge heard counsel for the appellant in support of the application, counsel for the respondent briefly replied. He said that the respondent was not prejudiced by the amendment in the sense that time was needed to consider it; they had considered it and taken advice. The application was opposed, but there was nothing he could say as to why it should not be allowed.
The judge then allowed the amendment.
At this point counsel for the respondent addressed the judge. He stated that the respondent had accepted advice that it could not succeed against the defendant and that it would not continue with the proceeding. The judge then ordered there be judgment for the defendant and that the proceeding against the defendant and the proceeding against the third party be dismissed. He then heard argument as to costs and that argument continued into the next day.
As between the respondent and the defendant, the defendant sought its costs and on an indemnity basis from 8 October 2002 when it had made an offer of compromise. The third party sought its costs from the respondent. The judge records that counsel for the respondent submitted that having regard to the substance and late notice of the amendment, it was appropriate to order:
(a)that the third party have no costs after the delivery of its initial defence to the respondent's statement of claim;
(b)that the third party indemnify the respondent with respect to its costs since the date of the initial third party defence;
(c)that either the defendant should not recover its costs against the respondent, having regard to its mutual interest with the third party, or the third party should indemnify the respondent against any costs ordered to be paid to the defendant after the initial third party defence.
The judge, in his reasons published on 10 April 2003, resolved these issues as follows. He ordered that the respondent pay the defendant's costs on a party and party basis until the date of the offer of compromise and thereafter on an indemnity basis. He ordered that the respondent pay the appellant's costs, but only until the date of its initial defence.
The appellant appeals against the latter order, contending that the order for costs should have extended to its costs of the proceeding generally. To succeed in the appeal the appellant must establish error in the exercise of the judge's discretion on costs in accordance with the principles stated in House v. R (1936) 55 C.L.R. 499 at 504-505; Australian Coal & Shale Employees’ Federation v. Commonwealth (1953) 94 C.L.R. 621 at 627, among other authorities. There is a strong presumption in favour of the correctness of the decision which will not be set aside merely because the appeal court considers it would have taken a different course. The decision will be affirmed unless it is clearly wrong. If in making the decision the judge acted on a wrong principle or was guided or affected by extraneous or irrelevant matters, or was mistaken as to the facts, or did not take into account some material consideration, or the result is so unreasonable or plainly unjust that it may be inferred that there has been a failure to properly exercise the discretion, the decision should be reviewed and the appeal court can exercise its own discretion and substitute its decision for that of the judge.
I turn then to the judge's reasons for concluding as he did on the appellant's costs. He first noted a concession by counsel for the respondent that but for the history of the pleadings, he could not have resisted an order that the respondent pay the appellant's costs of the proceeding. The amendment to the appellant's defence had put in issue a threshold issue of fact, namely whether the Civil Aviation Authority had made a recommendation affecting the land as the respondent alleged. The judge said, in para.30, that in his opinion that threshold issue of fact was:
(a) an allegation which, if it were true, would render the claim of the respondent not maintainable; and
(b)if not pleaded specifically by the appellant might have taken the respondent by surprise having regard to the course of the pleadings.
The finding in (a) was critical to his Honour's conclusion. It was the basis of his statements in the succeeding paras [31] and [32] of his judgment which I quote together with para.[33] by which his Honour expressed his ultimate conclusion.
"[31] It follows that the amendment materially changed the case which the plaintiff faced. It is not to the point that the plaintiff may have in any event failed or that aspects of the plaintiff 's claim are asserted by the third party to be manifestly misconceived. Nor is to the point that correspondence from the third party's solicitor to the plaintiff 's solicitor concerning discovery questioned the existence of a CAA recommendation in writing.
[32] The amended pleading materially changed the complexion of the case the plaintiff was required to meet. Indeed it was presumably for precisely this reason that the third party sought leave to amend.
[33] In these circumstances, it is proper to deny the third party its costs from the date of the initial third party defence. This is so because it is apparent that the amended pleading of threshold fact may well, and probably would, have led to the resolution of the matter if it had occurred at the time of the initial third party defence."
In the remainder of his judgment his Honour dealt with, and refused, the respondent's application that the appellant indemnify it for its own costs, and any costs payable to the defendant, subsequent to the appellant's initial defence to the respondent's statement of claim.
In the ordinary case when an amendment is sought at a late stage, it will be for the opposite party to state its attitude to the application; is it opposed and, if so, is there prejudice that can not be met by terms such as an adjournment and costs? As the interests of justice require that all matters in issue (meaning those matters which the parties seek adjudication upon) should be determined in the proceeding, leave to amend or rely on a new point that under the pleading rules should have been raised earlier, will be permitted. The approach is indicated in the cases referred to by the appellant: Bright v. Sampson & Duncan Enterprises Pty Ltd [1985] 1 N.S.W.L.R. 346 at 352-353; and Inre Robinson's Settlement [1912] 1 Ch. 717 at 728. Hence, in the present case, on the respondent stating there was no prejudice in meeting the point, the trial could have proceeded without an adjournment and the costs of the amendment and further pleadings in consequence would have been borne by the appellant. The costs of the proceeding would have been dealt with in light of the ultimate disposition of the case and other relevant circumstances.
Moreover, if, speaking generally, counsel announces at the outset of a trial that the plaintiff accepts that it has no case and will not proceed, it must usually be that the proceeding will then be dismissed and with costs unless good reason to the contrary be established. When, in this case, counsel for the respondent made the submission as to costs concerning the appellant, he did so by reference to the change produced by the amendment, that is, if it were not for the amendment the respondent must have paid the appellant's costs. The question for the judge was whether the making of the amendment rendered it just that the discretion be exercised as the respondent sought or, indeed, as his Honour ordered.
It is necessary then to consider the reasons set out in paras [30] to [33] of the judgment. It is apparent that the finding in para.[30](a) is critical and that what is said in paras [31] and [32] follow from it. Para. 33 is conclusionary and follows from the previous paragraphs, although it also contains an additional finding.
Commencing then with para.30(a), it is important to note that this represents a finding by the judge as to the effect of the allegation in the proceeding. This was a significant step for the judge to take. It meant he did not base his judgment on the mere fact of a change in pleadings which changed what the respondent called a common ground, but that he had considered the merits on the pleadings and in effect, in my view, found that for the reason now alleged the respondent's case was not maintainable. The respondent's counsel conceded to this Court that that was the proper understanding of the finding.
The difficulty with the finding is that it involved the judge considering the pleadings, aided by a number of documents that were tendered in the course of the submissions, but without actually hearing the evidence in the case. As a result, he had to rely on the submissions of counsel and the documentary material that was provided to him in the course of the submissions. Hence, the materials he had were limited and provided no satisfactory basis on which he could have formed an overall informed assessment of the merits of the various issues in the pleadings, which issues went beyond the mere issue whether there had been a recommendation. For instance, there was an issue whether, even if there had been a recommendation, it affected the land and should have been advised in the s.32 statement. Further, and perhaps more importantly, the respondent called none of its officers or advisers who could speak of the efforts of the respondent to check whether a recommendation had been made, or as to their view of the merits of the proceeding in relation to a recommendation, and as to the time of these matters. Furthermore, the judge was requested by counsel for the defendant and the appellant not to get into the merits. Nevertheless, it is apparent that the judge entertained a canvassing of the issues.
As with the judge, this Court has been addressed on the issues, particularly by counsel for the appellant. But that was understandable in view of the judge's reasons. I consider, however, that it is not necessary to undertake an analysis of the issues in the pleadings or, indeed, that it is appropriate to do so. That is because, in my view, in expressing the finding at para.30(a) the judge erred in his understanding of the issues. It is sufficient to say that this became evident in the course of the submissions when the respondent's counsel conceded that the judge could not have made findings on the allegations as to the vendor's knowledge in para.11 of the statement of claim and that the respondent would have lost the case if it had failed to establish the allegation in para.11(a)(i) that the vendor knew or ought to have known that there was a flight path over the land to the helipad. In short, the respondent could have lost the case quite apart from whether there was a recommendation by the Civil Aviation Authority. It follows, in my view, that the judge made an error of law which was a foundation of his decision. That error was the basis of the statements in paras [31] and [32].
As to para.[31] I would add this. In my view, it was to the point on costs that the respondent may have failed or that aspects of the claim may have been misconceived. The error, as I think it was, was in confining the factors relevant to the discretion by excluding such factors which, in my view, properly went to the overall assessment of that which was just in the circumstances. Moreover, a contrast is to be drawn with the judge's statement in para.21(a), made in dealing with the defendant's costs, that it could not be said that the respondent would have succeeded if a Civil Aviation Authority recommendation did exist, and that such a conclusion would require a full hearing of the matter.
In these circumstances, it is unnecessary to say anything about the judge's reasons in para.[32]. I would merely observe that the judge relied on the change in the pleadings but had no evidence from a witness which actually exposed the respondent's state of knowledge at the time when the proceeding commenced, and subsequently, as to the existence and effect of a recommendation and the merits of the case. It seems extraordinary that the respondent did not check with the Civil Aviation Authority, as the appellant ultimately did, yet this factor was not mentioned by the judge. It was, after all, the respondent's case and the proposition seemed to be that one is not responsible for one's own oversight, assuming that that be a correct description of the respondent's position.
Then, in para.[33] the judge engaged in speculation in stating that the amended pleading may well have, and probably would have, led to the resolution of the matter earlier. Without evidence as to what the respondent would or may have done, along with what knowledge the respondent had at any particular time, his Honour could not venture that finding.
For these reasons I am of the view that his Honour's discretion miscarried. I
have not found it necessary to refer to every matter in the grounds of appeal. In particular, I have not discussed the ground that the result was so unreasonable or plainly unjust that it may be inferred there was a failure to properly exercise the discretion. In the circumstances I merely say as to that ground, without a need to express a conclusion on it, that the treatment afforded the appellant seems odd and
hard to reconcile with the fact that the respondent brought and pressed to trial a case that was always a loser, the defendant did not do its work on the point in question, and the appellant, which ultimately made the obvious check whether there ever had been a recommendation and ascertained the fact, was punished in costs when it brought the true position forward. The question for the judge was, what was the just and equitable order on costs in all of the circumstances regarding the matter overall. In that consideration the pleading point was one thing, but the real and immediate issue was the terms as to costs when the respondent withdrew from a case that was doomed from the outset and with which it had vexed a defendant and third party for a considerable time.
The judge's discretion having miscarried, it falls on this Court to substitute its judgment on the question of costs. In my view, having regard to all of the circumstances of the case and all that counsel submitted, the plaintiff should pay the third party's costs without limitation. I would allow the appeal with costs and vary para.2 of the orders made on 10 April 2003 by deleting the words therein "up until the date of the third party's initial defence being 31 August 2001".
VINCENT, J.A.:
I agree. I do so for the reasons advanced by Hansen A.J.A.
NETTLE, J.A.:
I also agree for the reasons given by Hansen A.J.A.
VINCENT, J.A.:
The order of the Court will be as announced by Hansen A.J.A.
MR ANDERSON: If the Court pleases, in the circumstances of the judgment delivered by the Court, his Honour's discretion having miscarried, I would seek on behalf of the respondent an indemnity certificate under s.4 of the Appeals Costs Act.
VINCENT, J.A.:
Yes, very well.
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