Golotta v Incroft Pty Ltd - [2002] NTSC 54

Golotta v Incroft Pty Ltd & Anor [2002] NTSC 54
PARTIES:GOLOTTA, Carmelo & GOLOTTA, Mattia
v

INCROFT PTY LTD
and

BUCKSTON PTY LTD

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:25 of 1997 (9711680)
DELIVERED:  11 September 2002
HEARING DATES:  23 – 26 July 2001, 4 –8 March 2002
JUDGMENT OF:  MARTIN CJ
REPRESENTATION:
Counsel:
Plaintiffs:J. Waters QC
Second Defendant:  S. Walsh QC
Solicitors:
Plaintiffs:Caroline Scicluna & Associates
Second Defendant:  Cridlands Lawyers
Judgment category classification:        C
Judgment ID Number:  mar0225
Number of pages:  8

Mar0225
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Golotta v Incroft Pty Ltd & Anor [2002] NTSC 54
No. 25 of 1997 (9711680)

BETWEEN:
CARMELO GOLOTT & MATTIA GOLOTTA

Plaintiffs
AND:
INCROFT PTY LTD (ACN 053 555 338)

First Defendant
AND:
BUCKSTON PTY LTD (ACN 009 637 398)
Second Defendant

CORAM: MARTIN CJ
REASONS FOR JUDGMENT
(Delivered 11 September 2002)

The plaintiffs action against the second defendant, a legal practitioner, based on a breach of contract was not successful. Judgment was given in favour of the second defendant with costs. I found that the plaintiffs had failed to make out the essential element in their claim, that is, that the second defendant had not advised them that a written contract to which they were parties as purchasers of a business, did not contain a restraint of trade undertaking on the part of the vendor. I found that the second defendant did so advise and that the plaintiffs had decided to enter into the contract and proceed to completion, notwithstanding that advice. They preferred to rely on oral representations made by the first defendant (which had in the meantime been struck off the register).
The outcome of the case depended largely upon assessment of the credibility of witnesses. In all material respects I preferred the evidence in the witness box by the defendants' witnesses to that of the principal witness for the plaintiffs, Mr Carmelo Golotta.
The second defendant applies for an order that its costs be taxed and allowed on an indemnity basis from 29 October 1999 on which date it made a "Calderbank offer" to the plaintiffs (Calderbank v Calderbank (1975) 3 WLR 586). In that letter the second defendant canvassed directly its views as to the plaintiffs' credit in the light of documentary and other evidence it proposed to rely upon if the matter went to trial. As at that date there had been a number of costs orders in favour of the second defendant against the plaintiffs and the plaintiffs were invited to discontinue their claim against the second defendant upon the basis that there would be no costs due to either party. Warning was given that if the second defendant succeeded in the action, costs would be sought on an indemnity basis. The offer was not accepted. A further costs order was made against the plaintiffs in favour of the second defendant on 19 May 2000.
The hearing of the action commenced in Alice Springs on 23 July 2001 and it was limited to the plaintiffs' case on liability. The further hearing was adjourned to Darwin to a date to be fixed. The date was 4 March 2002. In the meantime, on 18 February 2002, the second defendant renewed its attempt to settle the matter on the basis that the parties would "walk away" with no further costs order being made. Warning was given that the second defendant was about to incur significant further costs in preparation for the resumption of the hearing. Reference was made to the plaintiffs evidence, particularly that of Mr Golotta, which it was said was "inconsistent, uncertain, improbable and incredible". A fair assessment in my view after hearing from all witnesses.
It was pointed out that the plaintiffs had the answers to interrogatories given on behalf of the second defendant disclosing it's case and as well as the benefit of knowing the second defendant's case through the cross-examination of Mr Golotta. It was asserted that the plaintiffs had "little or no prospect of success". That offer was rejected on 28 February 2002.
The second defendant made a further offer on 28 February 2002. It was prepared to forego the benefit of the costs orders already made in return for consent judgment. That offer was not accepted. There is no evidence that the plaintiffs attempted to settle on any other basis.
The Rules in this Court as to costs are to be found in O 63. Rule 63.03(1) provides that subject to the Rules and any other law in force in the Territory, the costs of a proceeding are in the discretion of the court and except as otherwise provided, costs are to be taxed on what is called the standard basis, r 63.28(1). On a taxation of costs on the standard basis, there shall be allowed a reasonable amount in respect of all costs reasonably incurred, and any doubts which the Taxing Master has as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party, r 63.36.
However, on a taxation of costs on the indemnity basis, all costs shall be allowed except to the extent that they are of an unreasonable amount or have been unreasonably incurred, and any doubts which the Taxing Master has as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party (r 63.27).
The scales of cost contained in the Appendix to the Rules apply in relation to all taxation of costs (r 63.32).
Unlike the Victorian Rules, upon which much of this Court's Rules are modelled, there is no express provision for ordering costs to be paid by one party to another on a solicitor and client basis, and it seems to me that in this jurisdiction an order for payment of costs on a indemnity basis may not be the same as an order for payment of costs on a solicitor and client basis. The cases in the Federal Court of Australia may be misleading if not considered bearing in mind the difference between the provisions relating to costs operating in that Court and under the Rules of this Court (see for example the extensive review of the Federal Court provisions by Sheppard J in Colgate Palmolive v Cussons (1993) 118 ALR 248).
Nevertheless, with respect, I consider that guidance is available from the cases in that and other jurisdictions where the question has arisen as to the circumstances in which it may be appropriate to order costs to be paid by one party to another on a basis other than the usual basis so that the paying party is obliged to make a payment to larger measure. Sound grounds must be established to justify departure from the norm.
The second defendant relies particularly upon the following passage from the judgment of Woodward J in Fountain Select Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Others (1988) 81 ALR 397 at 401:
"I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or a clearly established law. Such cases are, fortunately, rare. But when they occur the court will need to consider how it should exercise its unfettered discretion."
After referring to this passage, Justice Sheppard, commencing at p 254 of Colgate Palmolive, referred to a number of cases in which it was considered and at p 256 proposed a number of principles or guidelines which could be distilled from them, including that drawn from Woodward J concerning the commencement or continuance of proceedings in wilful disregard of known facts or clearly established law. His Honour went on, however, to observe that in such a case a Judge is not necessarily obliged to exercise the discretion to make such an order.
The second defendant's offers were such that a payment into court by it was not available and accordingly it may be taken into account in considering the appropriate costs order (Messiter v Hutchinson (1987) 10 NSWLR 525). The plaintiffs advanced no reason why any of the offers were refused based upon their terms, because of insufficient time to consider any of them or otherwise. The plaintiffs have suffered a judgment that is far less favourable to them than the terms of the offer.
The second defendant submits that pursuant to the 1999 offer it held out substantially valuable consideration, namely release from existing costs orders and release from the potential of further liability for costs which, as it turns out, the plaintiffs must now bear. They submit that it should have been realised that the offer was worth many thousands of dollars in the release of actual liabilities to meet existing costs orders. It is also submitted, and I accept, that the reasons published for giving judgment in favour of the second defendant were substantially the same as the reasons put forward by the second defendant in its offers and they submit that those difficulties should have been obvious to the plaintiffs at all times after the process of discovery, inspection and interrogation had been completed and, I might add, after Mr Golotta had given his evidence. It was submitted that by that time the plaintiffs should have realised that their case was "hopeless" see J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) No 2 (1993) 46 IR 301 at 303.
For the plaintiffs it is submitted that it is open to find, when the offers were made, that the plaintiffs' case was hopeless. That could only be determined after there had been a full hearing. They criticise the second defendant for suggesting that, at a time prior to determination by the court, it should ventilate its opinions about the believability of Mr Carmelo Golotta coupled with the suggestion that the plaintiffs should capitulate. At the time those suggestions were made it did not necessarily follow that the plaintiffs must fail. The second defendant had not at that stage gone into trial evidence. They proceed:
"There is nothing special or unusual about a contest of witnesses in that all contests of witnesses are resolved in favour of one side or the other."
I do not think that the second defendant has made out a case justifying the order it seeks. As already indicated this was a case decided on the Court's assessment of the credibility of witnesses. Matters were advanced in cross-examination by the plaintiffs by which they attempted to demonstrate that the principal witnesses for the second defendant, the solicitor who actually advised them and the vendor's agent, should not be accepted in preference to the plaintiffs. Findings were required as to what was said by whom, on what occasion, in what circumstances and in whose presence. The absence of written confirmatory advice by the solicitor to the plaintiffs in relation to the critical issue could have leant weight to the plaintiffs evidence. Much depended on the demeanour of witnesses.
In the end result the plaintiffs failed on all counts, but in my opinion it was not predictable that the plaintiffs had no change of success or that the case was hopeless. The facts as found could not be "known" until judgment. It is one thing for a party to litigation to be aware of the evidence upon which the other side proposes to rely, but when that foreshadowed evidence relates to verbal exchanges to a significant extent, and there is dispute as to the circumstances and content of those exchanges, then I do not consider that a departure from the usual order as to costs is justified.
The second defendants application that the costs in this case be taxed and allowed on the indemnity basis is refused.

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