Galea v Farrugia (No 2)
[2012] NSWSC 863
•02 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Galea v Farrugia (No 2) [2012] NSWSC 863 Hearing dates: 19 July 2012 Decision date: 02 August 2012 Before: Hislop J Decision: 1. Order 2 in para [166] of the principal judgment herein dated 21 February 2012 is vacated.
2. In lieu thereof I order:
(a) The plaintiffs to pay the first and second defendants' costs of the principal action on the ordinary basis to 11.00am on 22 December 2010 and thereafter on an indemnity basis.
(b) The plaintiffs to pay the third and fourth defendants' costs of the principal action subject to the third and fourth defendants paying the plaintiffs' costs of and incidental to the late service of affidavit material served between 14 and 16 October 2011; and the costs of the plaintiffs arising from the application to adjourn the proceedings from approximately 11.00am on 18 October 2010 to 2.00pm on 21 October 2010.
I further order:
(a) The plaintiffs to pay the first and second defendants' costs of the notice of motion filed by the first and second defendants on 2 March 2012.
(b) The third and fourth defendants to pay the costs of the plaintiffs and Lepipi Pty Limited in respect of the notice of motion filed by the third and fourth defendants on 5 March 2012.
(c) The third and fourth defendants to pay the costs of the plaintiffs in respect of the amended notice of motion filed by the plaintiffs on 19 July 2012.
(d) The plaintiffs to pay the costs of the first and second defendants to the amended notice of motion filed by the plaintiffs on 19 July 2012.
Catchwords: Common law - costs Cases Cited: Barakat v Bazdarova [2012] NSWCA 140
Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109
Morgan v Johnson (1998) 44 NSWLR 578
Tomanovic v Global Mortgage Equity Corporation Pty Limited (No 2) [2011] NSWCA 256
James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296
Permanent Building Society v Wheeler (No 2) (1992) 10 WAR 569Category: Costs Parties: 1st Plaintiff: Paul Galea
2nd Plaintiff: Mary Galea
1st Defendant: David Farrugia
2nd Defendant: Mary Farrugia
3rd Defendant: J & L Cauchi Pty Limited
4th Defendant: Joe Cauchi1st Cross Claim:
Cross Claimant: J & L Cauchi Pty Limited
1st Cross Defendant: Paul Galea
2nd Cross Defendant: Lepipi Pty Limited2nd Cross Claim:
3rd Cross Claim:
1st Cross Claimant: David Farrugia
2nd Cross Claimant: Mary Farrugia
1st Cross Defendant: J & L Cauchi Pty Ltd
2nd Cross Defendant: Joe Cauchi
Cross Claimant: Lepipi Pty Limited
1st Cross Defendant: David Farrugia
2nd Cross Defendant: Mary Farrugia
3rd Cross Defendant: J & L Cauchi Pty Limited
4th Cross Defendant: Joe CauchiRepresentation: Plaintiffs: M.J. Neil QC/J. Drummond
1st & 2nd Defendants: P. Barham
3rd & 4th Defendant: J. Hogan-Doran
Plaintiffs: Mosca & Scott
1st & 2nd Defendants: NSW Compensation Lawyers
3rd & 4th Defendants: Balmain Lawyers
File Number(s): 2003/91314
Judgment
The plaintiffs, by statement of claim filed herein, sought to recover the cost of the removal of asbestos contaminated fill from their land from the defendants. The action was unsuccessful. Judgment was entered against them. They were ordered to pay the defendants' costs.
A similar claim by the plaintiffs' family company, Lepipi Pty Limited ("Lepipi"), was made in the third cross claim. It was unsuccessful. Lepipi was ordered to pay the defendants' costs.
The parties have now sought special costs orders in lieu of some of the costs orders previously made. They are discussed below.
The first and second defendants
The first and second defendants by notice of motion filed on 2 March 2012 sought indemnity costs from the plaintiffs. They relied upon a notice of offer of compromise served on the plaintiffs on 21 December 2010 which offered to settle on the following basis:
(i) Judgment be entered for the first and second defendants;
(ii) that the plaintiffs bear their own costs of these proceedings and that the first and second defendants bear their own costs of these proceedings.
An accompanying letter made an offer in the same terms. Neither offer was accepted. The first and second defendants obtained an order or judgment more favourable to them than the offer.
The first and second defendants submitted they were entitled to an order against the plaintiffs under UCPR 42.15A for indemnity costs from 11.00am on 22 December 2010 and that the Court should not "order otherwise" pursuant to UCPR 42.15A(2). The first and second defendants did not seek an order for indemnity costs against Lepipi.
The plaintiffs conceded the first and second defendants were entitled to the order sought unless the Court "ordered otherwise".
In Barakat v Bazdarova [2012] NSWCA 140 the Court of Appeal observed [48]:
"There appears to be a conflict of opinion in this Court as to whether a court can otherwise order for the purpose of the indemnity costs rule in the absence of exceptional circumstances."
The court held [50]:
"...it is unnecessary in the circumstances of the present case to confuse the issue further by determining which line of authority to follow..."
The Court, at [46], quoted the comments of McColl JA in Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109 where her Honour said:
"[35] The onus is on the respondent to demonstrate why the Court should not order the respondent to pay the appellants' costs on an indemnity basis. In particular, the respondent must establish that it had given serious thought to the risks involved in not accepting the offers, had assessed the appellants' case properly and in the context of the relevant rules and the achievement of their purpose as outlined in Morgan. Generally, exceptional circumstances are required to justify such an order denying the appellants' entitlement."
The plaintiffs submitted the Court should order otherwise as the offer was made in late December 2010, six weeks after the last day of the first phase of the evidence and thus before Christmas and was to expire on or about 21 January 2011. At the time the first defendant was part heard in cross-examination and due to resume his evidence in March 2011. The proceedings involved two "sets" of defendants. There was a great deal of interplay between the cases brought against both sets of defendants. At the time the offer was made by the first and second defendants it was not accompanied by an offer from the third and fourth defendants. The absence of such an offer meant it was not possible for the plaintiffs to make an assessment of the offer made by the first and second defendants in the context of the whole of the proceedings and to have regard to the pragmatics of the situation.
In Morgan v Johnson (1998) 44 NSWLR 578 at 581 the following principles were extracted from earlier authorities:
"(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation...
(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance...
(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party...This is because, from the time of non-acceptance 'notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise'...
(4) Lying behind the rule is the common knowledge that 'litigation is inescapably chancy'...For this reason, the ordinary provision is expected to apply in the ordinary case...The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule...
(5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind..."
The plaintiffs would have been aware of the third and fourth defendants' attitude to the claim from the correspondence commencing in approximately 2005 and continuing thereafter. If not, they could have inquired of the third and fourth defendants. If necessary, an extension of the time for responding to the notice of offer of compromise could have been sought. The circumstances of the case were not exceptional nor such as to make it appropriate to "order otherwise".
In my opinion no basis for the Court to "order otherwise" has been demonstrated. The first and second defendants are entitled to the order sought.
The third and fourth defendants
The third and fourth defendants, by notice of motion filed on 5 March 2012, sought indemnity costs from the plaintiffs and Lepipi.
A number of alternative bases for the orders were stated in the notice of motion though at the hearing counsel for the third and fourth defendants expressly confined himself to a letter written by the third and fourth defendants' solicitor to the plaintiffs' solicitor dated 3 June 2009.
The letter, relevantly, stated:
"Any reasonable observant person reading the evidence and the evidence of the plaintiffs in the proceedings must come to the conclusion that the evidence is overwhelming in its support of the pleadings of the third and fourth defendants and proves, well and truly to the balance of probability that the third and fourth defendants did not take contaminated material onto the Galeas' property or to Lepipi's property.
It must be clear to your clients, counsel assisting you and yourself that having regard to the evidence of the third and fourth defendants the plaintiffs' claim against the third and fourth defendants can only be described as non-existent or hopeless.
In the light of the evidence of the third and fourth defendants, it is time that someone from the plaintiffs' 'team' evaluated carefully the evidence and as a consequence, the proceedings be brought to an end and quickly with little or no further cost being occasioned to the parties.
It must be clear that this matter should be brought to an end, immediately with your client paying the third and fourth defendants reasonable costs and the amount owed to the third defendant in respect of the removal of material from the Galeas' property which has not been paid for."
Counsel for the third and fourth defendants referred to the corroboration provided to them by the business records of the third defendant, the pleadings, and various parts of the judgment and the dubious quality of the evidence of the plaintiffs' witness, Mr Leibeck. Counsel submitted:
"that there is an unusual feature of this case that warrants an indemnity costs order, namely plaintiffs persisted in the face of evidence that they could not challenge and did not challenge at trial that fatally undermined significant propositions on which the plaintiffs' case depended...For those reasons I submit that from when the defendants' evidence was served in April of 2009, that at least by June 2009 it should have been plain to the plaintiffs that they could not succeed and in the face of that, nevertheless, they persisted..."
The plaintiffs contended, inter alia, that the matters referred to by the defendants had been hotly in dispute; the third defendant's records were inadequate and some were not available. At worst Mr Leibeck's evidence could not be totally rejected and his value as a witness could only be assessed in the witness box.
The plaintiffs submitted the letter dated 3 June 2009 was not a notice of an offer of compromise (which the third and fourth defendants conceded) and not effective as a Calderbank letter as:
(a) it did not follow the form of a Calderbank letter;
(b) it required payment of money sought in a cross-claim against the first plaintiff and Lepipi by the third defendant in which the plaintiff and Lepipi succeeded;
(c) there was no element of compromise in the offer. It was just an invitation to capitulate;
(d) it was the plaintiffs' position when the offer was received which was relevant, not the position after judgment had been given.
In reply counsel for the third and fourth defendants stated "I don't propose to rely upon the letter of 3 June 2009 as a Calderbank letter. It's simply a date in time."
Instead he sought indemnity costs on the basis that the
"action had been commenced or continued in circumstances where 'the applicant, properly advised, should have known that he had no chance of success...'
...'for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case'. An indemnity costs order will be warranted where proceedings were maintained by a party having 'no reasonable prospects of success'." - See the authorities collected in Chainia v Alvaro Homes Pty Limited [2008] NSWCA 353 at [107]-[108].
The third and fourth defendants sought to extend the "date in time" to the commencement of the hearing. This was opposed by the plaintiffs on the grounds of prejudice. The plaintiffs' submission was accepted and the application refused.
In my opinion, it cannot be said that the plaintiffs, properly advised, should have known they had no chance of success in June 2009 or at the commencement of the hearing. The third and fourth defendants' application for an order for indemnity costs against the plaintiffs and/or Lepipi fails.
The plaintiffs
The plaintiffs, by amended notice of motion filed on 19 July 2012, sought orders against the first and second defendants that:
(a) the first and second defendants pay the plaintiffs' costs of and incidental to and arising from the late service of affidavit material between 14 and 16 October 2011;
(b) the first and second defendants pay the costs of the plaintiffs arising from the application to adjourn the proceedings from approximately 11.00am on 18 October 2010 to 2.00pm on 21 October 2010; and
(c) subject to (a) and (b) above, the plaintiffs pay the first and second defendants' costs of the proceedings on a party/party basis.
The plaintiffs sought similar orders against the third and fourth defendants in the amended notice of motion together with an additional order in the following terms:
"(c) That the third and fourth defendants pay the plaintiffs' costs including the costs incurred by the plaintiffs in preparation of their objections to evidence in or about June 2010 arising from and incidental to the redaction from the third and fourth defendants of its affidavit evidence prior to 1 October 2010."
The proceedings were case managed. The court ordered written evidence in the form of affidavits. The court was assured that all written evidence was before the court before the hearing date of 18 October 2010 was set. On 14 and 16 October 2010 four new affidavits were served by the first and second defendants on the plaintiffs and five were served by the third and fourth defendants on the plaintiffs. No explanation was proffered for the late service.
When the matter came on for hearing on 18 October 2010 senior counsel for the plaintiffs informed the Court:
"I can't meet the material at this time and I do want to argue that it should not be allowed in under the principles of AON or, alternatively, that there should be some orders and directions, and I apply for an adjournment for two days, regrettably, on that basis."
Counsel for the first and second defendants conceded the affidavits were late and stated he had no difficulty with the matter being adjourned but there was a question as to fault. He said he appreciated that senior counsel for the plaintiffs "needs some time" but "by Thursday - I think we would be twiddling our thumbs by Thursday".
Counsel for the third and fourth defendants stated:
"I have indicated to my friend that as he did get the affidavits very recently I accept that he needed time to look at them, to take whatever position he thought was appropriate, and it would ill behove us to argue about that ... the affidavits have been prepared recently. In the real world we have to face the consequences of the evidence being slow."
The proceedings were adjourned on the application of senior counsel for the plaintiffs on the morning of 18 October 2010. The hearing resumed on 21 October 2010. The plaintiffs also sought costs against the third and fourth defendants being costs incurred responding to a redaction of the affidavits of witnesses for the third and fourth defendants.
In Tomanovic v Global Mortgage Equity Corporation Pty Limited (No 2) [2011] NSWCA 256 it was held:
"It will rarely be appropriate to attempt to support an application for a special costs order in relation to particular issues by a minutely detailed quantification of the scope of the affidavits, oral evidence and submissions related to particular issues."
In James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 it was held:
"The discretionary assessment involved in the application of the general principle, and its acknowledged qualifications, is a matter of impressionistic discretionary evaluation. In the exercise of such a discretion mathematical precision in the appropriate apportionment of costs is not to be expected."
As observed in Permanent Building Society v Wheeler (No 2) (1992) 10 WAR 569:
"The court will always look at the realities of the case and attempt to do substantial justice...Where there is the situation there will usually be one order for the general costs of the action, moulded as necessary to ensure that, however rough and ready it may be, substantial justice is done."
The first and second defendants submitted their late-served affidavits were short and in reply; they did not occasion the plaintiffs any prejudice and were part of the give and take of litigation particularly in a lengthy matter such as this. They should not occasion a special costs order. There was evidence the plaintiffs had also introduced late material and had occasioned loss of court time.
The third and fourth defendants submitted the orders sought should not be made. Regard should be had to the swings and roundabouts of a long trial and that the redactions saved time in court by reducing the areas in dispute. Senior counsel for the plaintiffs conceded that, as a result of the redactions, it was likely the hearing time would be reduced.
I have had regard to the principles set out above. In my opinion:
(i) there has been a failure by the third and fourth defendants to comply with the timetable set by the court and no explanation for that failure was forthcoming. The late-served affidavits included new material and directly resulted in significant loss of hearing time as well as necessitating considerable additional work by the plaintiffs, resulting in additional costs being incurred. It is appropriate that orders (a) and (b) (see paras [24] and [25] hereof) be made against the third and fourth defendants;
(ii) the matters sought to ground order (c) (see para [25] hereof) should be regarded as part of the give and take of the litigation and should not be reflected in any special costs order;
(iii) the first and second defendants' involvement was minor and is properly categorised as part of the give and take of the litigation. I make no special costs orders against the first and second defendants.
I do not consider it appropriate to make an order that the third and fourth defendants should be denied costs of the days during which adjournments occurred. It is a matter for the costs assessor to determine whether any chargeable work was performed during this period by the legal representatives of the third and fourth defendants.
Orders
I make the following orders:
1. Order 2 in para [166] of the principal judgment herein dated 21 February 2012 is vacated.
2. In lieu thereof I order:
(a) The plaintiffs to pay the first and second defendants' costs of the principal action on the ordinary basis to 11.00am on 22 December 2010 and thereafter on an indemnity basis.
(b) The plaintiffs to pay the third and fourth defendants' costs of the principal action subject to the third and fourth defendants paying the plaintiffs' costs of and incidental to the late service of affidavit material served between 14 and 16 October 2011; and the costs of the plaintiffs arising from the application to adjourn the proceedings from approximately 11.00 am on 18 October 2010 to 2.00 pm on 21 October 2010.
I further order:
(a) The plaintiffs to pay the first and second defendants' costs of the notice of motion filed by the first and second defendants on 2 March 2012.
(b) The third and fourth defendants to pay the costs of the plaintiffs and Lepipi Pty Limited in respect of the notice of motion filed by the third and fourth defendants on 5 March 2012.
(c) The third and fourth defendants to pay the costs of the plaintiffs in respect of the amended notice of motion filed by the plaintiffs on 19 July 2012.
(d) The plaintiffs to pay the costs of the first and second defendants to the amended notice of motion filed by the plaintiffs on 19 July 2012.
**********
Decision last updated: 02 August 2012
0
5
0