Gleeson v Hammerton (No 2) - [2004] SADC 153

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GLEESON v HAMMERTON (No 2)
Judgment of His Honour Judge Kitchen
4 November 2004
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - COSTS OF ISSUES
Rules offer by plaintiff – withdrawn before trial; subsequent offer by way of Calderbank letter made by plaintiff – also withdrawn before trial. Award exceeding the rules offer and equal to the Calderbank offer. Whether plaintiff should recover indemnity costs for whole or part of the proceedings. Plaintiff unsuccessful as to two issues – whether plaintiff should be deprived of costs, and pay the defendant’s costs, of those issues.
De Facto Relationships Act 1996; Limitations of Actions Act 1936; District Court Act 1991 s42(1), referred to.
Cretazzo v Lombardi (1975) 13 SASR 4; Re Elgindata Ltd (No. 2) (1993) 1 All ER 232; Garner v Cleggs (1983) 2 All ER 398; Callaghan v Callaghan (No. 2) (SCSA) Jud No. S5562 (unreported); Sheahan v Hertz Australia Pty Ltd (1995) 181 LSJS 147; Casley-Smith & Ors v Evans & Sons 148 LSJS 483 at 488, considered.

GLEESON v HAMMERTON (No 2)
[2004] SADC 153

After the trial of the plaintiff’s claim against the defendant seeking an order for the division of property pursuant to the De Facto Relationships Act 1996 an order was made that the defendant pay to the plaintiff a lump sum of $200,000. In the same proceedings the plaintiff sought an extension of time pursuant to the Limitations of Actions Act 1936 in respect of her claim against the defendant for damages for an alleged assault; that application was refused.
There are applications by the parties on the question of the costs of the proceedings.
On 9^th August 2002 the plaintiff lodged with the Registrar of the Court an offer to accept $150,000; the offer is not before the Court but the submissions of counsel with respect to it proceeded on the footing that it complied with Rule 41.01. On about 30^th October 2002 the action was set for trial on 6^th May 2003; it was not reached. On 21^st May 2003 the plaintiff withdrew her Rule 41.01 offer. A new date for trial on 6^th November 2003 was allocated.
On 2^nd October 2003 the defendant lodged a Rule 40 offer in the sum of $85,000. On 22^nd October 2003, the trial date being less than 21 days hence, the plaintiff in a letter to the defendant (referred to by both counsel as a Calderbank letter) offered to accept $200,000 in settlement of her claim. That offer was withdrawn by the plaintiff on 29^th October 2003.
The plaintiff’s application is for an order that the defendant pay her costs of action on a solicitor and client basis, or alternatively that there be such an order in respect of the plaintiff’s costs incurred until 21^st May 2003, the date of the withdrawal of her Rule 41.01 offer. The plaintiff also contends that the Court should award to her costs on a solicitor and client basis having regard to the Calderbank letter.
The defendant opposes the application and applies for an order that the plaintiff pay his costs incurred, or at least the plaintiff be deprived of her costs, in relation to issues, agitated at the trial, upon which the plaintiff did not succeed. They were:
·the plaintiff’s application for an extension of time in relation to her claim for damages for assault allegedly committed by the defendant;
·that aspect of the plaintiff’s case in which it was alleged, and maintained, that the defendant had failed to disclose, and was hiding, assets.
Subject to the Rules, costs in any proceedings in the Civil Division of the Court are in the discretion of the Court; District Court Act 1991, s42(1). The discretion of course must be exercised judicially and not on grounds unconnected with the litigation; Cretazzo v Lombardi (1975) 13 SASR 4. Costs should follow the event except when it appears in all the circumstances of the case some other order should be made; simple failure by a successful party as to some issues or allegations raised by him does not negate the general rule, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or part of his costs. If a successful party raises issues or makes allegations improperly or unreasonably, then not only may he be deprived of his costs he may be ordered to pay the whole or part of the unsuccessful party’s costs; in Re Elgindata Ltd (No. 2) (1993) 1 All ER 232.
The plaintiff’s application
Rule 41.01 provides that at any time up to 21 days prior to trial, a plaintiff may lodge with the Registrar and serve on the other parties an offer to accept an amount, together with costs, in satisfaction of the plaintiff’s causes of action. At any time up to seven days prior to the trial, a defendant may file and serve a notice of acceptance of the offer (Rule 41.02). If the offer is not accepted and the plaintiff recovers a sum equal to, or greater than, the amount contained in the plaintiff’s offer, the court, unless it thinks proper to order otherwise, shall order the defendant to pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client (Rule 41.04).
By Rule 41.01(4) at any time up to 21 days prior to trial, and before the offer is accepted, the plaintiff may by notice increase, reduce or withdraw the offer. It would seem that where a trial is not reached, as in this case, Rule 41.05 permits, inter alia, the withdrawal of the offer up to 21 days prior to the new date set for trial.
No provision is made in the Rules for the costs incurred in the period after a Rule 41.01 offer is made and before it is withdrawn. A possible approach is that once such a offer is withdrawn its one time existence is disregarded as being irrelevant to any later decision upon the question of costs. That was the substance of the decision by a judge at first instance who considered the circumstance where a defendant paid into court a sum of money in satisfaction of the plaintiff’s claim, but before trial and by leave of the court, the defendant withdrew the amount paid in. At trial the plaintiff was awarded less than the defendant had paid in. The defendant applied for an order that the plaintiff pay the defendant’s costs incurred after the payment in; the trial judge rejected the application holding that the taking out of court the money paid in nullified the payment in. The defendant appealed; Garner v Cleggs (1983) 2 All ER 398.
The plaintiff cites Garner’s case in support of the submission that at the least, the defendant should pay the plaintiff’s solicitor/client costs incurred between the date of the Rule 40.01 offer and its withdrawal.
In Garner’s case the relevant rules relating to payment in were RSC Ord. 22 Rule 1(1), (3) and (5), which, in brief summary, provided that in an action for debt or damages a defendant may pay into court a sum of money in satisfaction of the plaintiff’s cause of action and may increase the payment but may not withdraw or amend it without the leave of the court which may be granted on terms. Within 21 days of the payment in, but in any case before trial, the plaintiff can take the money out of court.
Lawton LJ, with whom Oliver LJ agreed, observed that where the plaintiff did not within the 21 day period take the money out of court, the usual order was that he be permitted to do so on condition he paid all the costs which the defendant had incurred after the payment in.
Lawton LJ referred to a further rule as being relevant to the question before the Court of Appeal, namely RSC Ord. 62 Rule 5 which provided:
“The court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account ... (b) any payment of money into court and the amount of such payment.”
He went on (at p404):
“In the ordinary course of litigation, where money is paid into court and is not taken out there is no difficulty about applying Ord 62, r5(b). But the complication arises in this case where money was in court, was not taken out by the plaintiff but after some time was taken out by the defendant. To what extent, if any, should the court take into account the fact that money had been paid into court and the plaintiff had had an opportunity of taking the money out but had lost it before the trial began?
It is important, in my judgment, that we should bear in mind that these rules are rules of practice. They have got to be complied with, but the court should apply them in the light of what tends to happen.”
In the result it was held that the trial judge erred in disregarding the payment in; the court determined that the trial judge should have had regard to the fact that for the period commencing 21 days from the date of the service of the notice of payment in (11^th August 1981) until the date, 13^th October 1981, when the defendant discovered facts on the basis of which it subsequently obtained leave to withdraw the payment in, the plaintiff “was taking a gamble” and in relation to that period the judge might have ordered the plaintiff to pay the defendant’s costs.
The analogy which the plaintiff seeks to draw with Garner’s case is superficially attractive, but in my opinion it is a false analogy because Lawton LJ specifically identified, as being relevant to the appeal, the provisions of Order 65 Rule 5(b). In my view, but for that rule the trial judge would not have been held to be in error in disregarding altogether the payment into court.
Rule 39 and 40 respectively of this Court’s rules deal with payments into court and offers by defendants to consent to judgment. The precursor to those Rules was Order 22 of the 1947 Rules. By Order 22 Rule 6A(2)(b), where an offer to consent to judgment was withdrawn “it shall be deemed never to have been made”. That rule, or an equivalent, does not appear in the present rules. Rule 41 was introduced in 1987; that Rule is also silent on the question of what is the effect upon the question of costs if an offer made by a plaintiff is withdrawn.
I consider that the absence from the present Rules of an equivalent to the former Order 22 Rule 6A(2)(d) is not a sufficient reason to conclude that an offer by a plaintiff pursuant to Rule 41, which is subsequently withdrawn, is enlivened for all purposes on an issue of costs in the event the plaintiff recovers more than the withdrawn offer. As Perry J observed in Callaghan v Callaghan (No. 2) (SCSA) Jud No S5562, 3^rd May 1996 (unreported):
“... there seems to be a growing tendency for trial judges to be confronted by arguments that, for one reason or another, the ordinary incidence of costs, .... should not apply. The court should be slow to yield to such arguments when there are adequate procedures under the rules for formal offers in settlement to be made, which, once made, are accompanied by clear cost sanctions.”
The Rules provide that an offer pursuant to Rule 41 may be withdrawn. In the present case the plaintiff complied with Rule 41 in relation to her offer to take $150,000 in settlement of her claim, including exercising her right to withdraw the offer.
In Callaghan, on 31^st March 1996 the defendant lodged an offer to consent to judgment, purportedly pursuant to Rule 40.01, less than 21 days prior to the trial which began on 10^th April 1996; the offer was withdrawn on 14^th April 1996. On 7^th April 1996 the defendant made a further, increased offer which was stipulated to remain open only until 5pm on the 11^th April 1996. Both offers represented a better result for the plaintiff than the plaintiff achieved at trial. Perry J referred to Sheahan v Hertz Australia Pty Ltd (1995) 181 LSJS 147 in which the plaintiff purported to file an offer pursuant to the Rules. It was out of time. The plaintiff obtained a judgment greater than the amount of his offer, and was awarded costs against the defendant on an indemnity basis; the defendant appealed against that order (inter alia). King CJ (with whom the other members of the Court agreed) wrote (at p.155):
“As this offer was out of time it is not determinative on the issue of costs, but the failure to respond to it is a relevant consideration in determining whether the defendant has placed an undue and unnecessary burden upon the other party.”
The appeal was dismissed.
Perry J (in Callaghan) considered that “how much weight may be given to such a purported rules of court offer depends upon the circumstances of the case”. He concluded on the facts before him that the plaintiff should not be deprived of an order for costs against the defendant. His Honour’s approach, and Sheahan’s case, might suggest that a complying rules of court offer which is withdrawn is not to be disregarded, but should be considered having regard to all the circumstances of the case in light of the court’s general discretion as to costs.
I do not consider a withdrawn offer should have that effect, however on the footing it is appropriate to have regard to such an offer, in my opinion there are not sufficient grounds to depart from the usual order of party and party costs. An order for solicitor/client costs “can be awarded in appropriate cases where there is some special or unusual feature in the case to justify the court exercising its discretion in that way … in most instances, the proper rationale for such an exceptional order will, in fact, be expressed in terms of either improper motive or conduct on the part of the party concerned, which has inevitably imposed an undue burden upon some other party”. Casley-Smith & Ors v Evans & Sons 148 LSJS 483 at 488, which was referred to with approval in Sheahan’s case. In the instant case nothing of that sort has emerged.
For similar reasons the plaintiff’s withdrawn Calderbank letter cannot justify any order for solicitor/client costs.
The defendant’s application
The events upon which the plaintiff relied in claiming that the defendant assaulted her, and in relation to which she sought an extension of time, resulted in injury to the plaintiff’s right hand. The injury to the hand and its on-going consequences were relevant to the subject matter of the plaintiff’s principal claim, that is for a division of property; accordingly evidence relating to the nature and the extent of the injury and the resulting disability, including the calling of Mr Michael Hayes, the surgeon whom the plaintiff consulted, was relevant to the principal claim. The time taken at trial on the topic of the incident which caused the injury to the plaintiff’s hand, was in my judgment, so relatively short as to be of insignificant effect upon the length of the trial as a whole. There is no reason to deprive the plaintiff of her costs of this issue.
The issue of whether or not the defendant had failed to disclose, and was hiding, assets did occupy a significant portion of the trial. However, implicit in that issue was the defendant’s use of his income; the absence of banking records for the years 1992-1998 relating to the three accounts conducted by the defendant with Westpac contributed to the time which was spent at trial on the issue of the defendant’s assets.
My assessment of the evidence is that the plaintiff was informed of, and knew, very little about the defendant’s income from time to time or his financial position. Except that the plaintiff during cohabitation with the defendant received from the defendant, or through a service trust associated with his medical practice, moneys for household and her personal expenditure and there were frequent trips overseas and by the parties, Mr Clark in arriving at his view the defendant’s assets should have been higher than the defendant disclosed, was limited to the defendant’s records. Those records, and a reasonable interpretation of them, showed in 1992-2003 more income than was accounted for by expenses and payments. The defendant said his expenditure was extravagant during the period the parties cohabitated, and after the sale of the Hill Street house. In his evidence the defendant was vague about many financial matters including payments of cash he made to the plaintiff.
Having regard to all the evidence, and although I was not persuaded the plaintiff had proved the claim that there were, or should be, further assets than those disclosed by the defendant, in my view it is not appropriate to deprive the plaintiff of her costs of that issue.
In my opinion the plaintiff did not improperly or unreasonably raise the issue of the defendant’s assets, and even if I had acceded to the defendant’s application that the plaintiff be deprived of her costs of that issue, I would have refused the defendant’s application that his costs of the issue be paid by the plaintiff.