Gnomon Technologies Pty Ltd v Element Engineering Pty Ltd (No 4) - [2012] SASC 175

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
GNOMON TECHNOLOGIES PTY LTD & ANOR v ELEMENT ENGINEERING PTY LTD & ANOR (No 4)
[2012] SASC 175
Judgment of Judge Lunn a Master of the Supreme Court
28 September 2012
PROCEDURE - COSTS
Order for costs in favour of plaintiffs and to be paid forthwith ("the 1st costs order") - subsequent orders for costs in favour of defendants but not ordered to be paid forthwith ("the 2nd costs order") - costs on the 1st cost order not yet adjudicated - application by defendants under R 266 to set off costs under 2nd costs order against 1st costs order - interpretation of "set off" in 1st costs order - whether set off should be allowed - held should be off setting of all costs ordered in the action to date as between the plaintiffs and the defendants.

GNOMON TECHNOLOGIES PTY LTD & ANOR v ELEMENT ENGINEERING PTY LTD & ANOR (No 4)
[2012] SASC 175
JUDGE LUNN:
Reasons on defendants’ application to set off costs orders

On 31 January 2012 I gave ex tempore reasons for making a costs order on FDN8 which was an application by the plaintiffs for summary judgment for part of the relief claimed, and which was contested, but successful.[1] The relevant part of my fiat on 31 January 2012 was as follows:
[1] See my reasons published on 18 January 2012 (FDN19).
Remarks
The pltfs are to have their costs of FDN8. I consider there was no reasonable basis for the defts to maintain their defences of liens and so those costs should be payable on an indemnity basis. As it was a discrete issue, those costs should also be exempted from R265 and be payable forthwith, but subject to any further application to set them off against the counterclaim if and when it is made… On FDN3 the second pltf is to have its costs, but there is no proper basis for them to be either indemnity costs or payable forthwith.
…
Order
…
5.The defts are to pay the pltfs on an indemnity basis and forthwith subject to any setoff their costs of FDN8 as agreed or adjudicated.
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8. The defts are to pay the second pltf its costs as between party and party of the application for security for costs against it and R265 is to apply to those costs.
…[2]
[2] The order was subsequently sealed (FDN31) but the relevant wording is as stated above in the fiat.
This was an order for costs on FDN8 in favour of both plaintiffs and against both defendants. In paragraph 5 of the fiat the order was made “subject to any setoff”. This is to be interpreted in the light of the passage in the remarks “but subject to any further application to set them off against the counterclaim if and when it is made”.
As at 31 January 2012 no counterclaim had been filed[3], but some reference had been made to it in the defendants’ affidavits and submissions. It was a counterclaim only by the first defendant and only against the first plaintiff for $184,925 plus GST. At 31 January 2012 I envisaged that it was possible that a set off could be raised against the defendants’ liability for costs under paragraph 5 of the fiat. At that time the only anticipated liability which could be the subject of a set off was the proposed counterclaim. By its defence to counterclaim[4] the first plaintiff has denied any liability on the counterclaim. That liability will be determined at the trial of the action at some indeterminate time in the future. It may be that in making the reference to the possibility of a set off I was contemplating that some part of the counterclaim might be admitted by the plaintiffs.
[3] It was only filed on 9 March 2012 (FDN20).
[4] FDN38 filed on 15 June 2012.
I do not interpret the fiat of 31 January 2012 to mean that the liability of the defendants in paragraph 5 to pay costs forthwith could be subject to a set off against a disputed liability which will only be resolved on the trial of the action. If this was intended, it would have been inconsistent with the exercise of the discretion under 6R 265(2) to make the costs payable forthwith, and not only after judgment at the trial.
On 3 August 2012 I ordered that the defendants have their costs of the plaintiffs’ application (FDN36) which was an unsuccessful application to amend the statement of claim.[5] I did not order those costs be payable forthwith, but did give the defendants liberty to apply for any supplementary costs orders on FDN36. I now have an oral application from the defendants that those costs should be set off against the costs in paragraph 5 of the fiat of 31 January 2012. The defendants have not applied under 6R 265(2) that those costs should be payable forthwith.
[5] Reasons FDN41 published on 3 August 2012.
The plaintiffs have also failed in a subsequent application (FDN43) for a further amendment of their statement of claim and the defendants are to have their costs of that application.[6]
[6] I do not know whether the defendants will make any application that these costs be payable forthwith.
I find that my fiat of 31 January 2012 was intended to make the costs order in favour of the plaintiffs subject to any proper set off under 6R 266 which might arise before the costs under that paragraph 5 were adjudicated and became payable. Although I did not expressly refer to it in my ex tempore reasons, I would have encompassed within the possibility of a set off costs orders made in the action in favour of the defendants even if they were not ordered to be payable forthwith if they arose before the plaintiffs’ costs were adjudicated. Thus any set offs of the costs orders under FDN36 and FDN43, if they can otherwise be properly set off, are encompassed by the qualification about set off in paragraph 5 of the fiat of 31 January 2012.
By 6R 266 the Court has a wide power to direct set offs of costs. It is part of the inherent jurisdiction of the Court over costs and is not limited by the legal or equitable rules relating to other types of set offs.[7]
[7] Civil Procedure South Australia Volume 1 [6R 266.1]; Dal Pont Law of Costs 2nd Edition [8.13]–[8.15].
As the defendants have been put to significant expense in successfully defending FDN36 and FDN43 it is just in the circumstances that the costs ordered in their favour be set off. Thus I would allow the set off sought. If the plaintiffs contend that even after such set offs there will be a balance of costs under the order of 30 January 2012 payable to them, I will direct that the defendants be permitted to have their costs of FDN36 and FDN43 adjudicated in conjunction with those of FDN8.
In paragraph 8 of the fiat of 31 January 2012 the defendants were ordered to pay costs to the second plaintiff but Rule 265 was directed to apply to those costs which meant that they would not be payable until after judgment. As I am directing that all costs orders in the action made to date be brought into account in what, if anything, is payable under the fiat of 31 January 2012, it is only just that the second plaintiff should be entitled to bring the costs payable under that paragraph 8 into account. Thus I will direct that the second plaintiff may have those costs adjudicated in conjunction with the costs ordered in paragraph 5 and brought into account in any balance of costs which is payable on the order on paragraph 5.
I have today made the following orders:
1Subject to paragraph 2 below the defendants be permitted to set off against the costs ordered against them on 31 January 2012 on paragraph 5 of FDN8 the costs ordered to be paid by the plaintiffs on FDN36 and FDN43 and this order.
2If the plaintiffs seek a balance allocatur in their favour after the set off in paragraph 1:
a.the defendants are to be at liberty to have the quantum of their costs on FDN36 and FDN43 and this order adjudicated in conjunction with the plaintiffs adjudications; and
b.the second plaintiff may adjudicate the costs in its favour on paragraph 8 of the fiat of 31 January 2012 and these costs may be brought into account in favour of the plaintiffs on any balance order in favour of the plaintiffs.
3The plaintiffs are to pay to the defendants their costs of the oral application for set off.
4Set off argument certified fit for counsel.
5All further costs questions adjourned to a directions hearing on Tuesday 30 October 2012 at 9.30 am.