Golotta v Incroft Pty Ltd
[2001] NTSC 90
•22 October 2001
Golotta v Incroft Pty Ltd & Anor [2001] NTSC 90
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
DELIVERED: 22 October 2001
HEARING DATES: 23 July 2001 to 26 July 2001
JUDGMENT OF: MARTIN CJ
CATCHWORDS:
PROCEDURE
Costs – indemnity costs – whether plaintiff ought to pay costs on an indemnity basis as a consequence of their conduct during the proceedings – late amendment to pleadings – failure to comply with procedural rules and orders.
Supreme Court Rules 1979 (NT), O 63
Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225, applied
All Services v Titanic (2000) 171 ALR 320, applied
REPRESENTATION:
Counsel:
Plaintiffs:J Waters QC
First Defendant: -
Second Defendant: S Walsh QC
Solicitors:
Plaintiffs:Caroline Scicluna & Assoc
First Defendant: -
Second Defendant: Cridlands
Judgment category classification: B
Judgment ID Number: mar0130
Number of pages: 11
Mar0130
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINGolotta v Incroft Pty Ltd & Anor [2001] NTSC 90
No. 25 of 1997
BETWEEN:
CARMELO GOLOTTA & 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 22 October 2001)
Application for an order that the plaintiffs pay costs to the second defendant on an indemnity basis as a consequence of conduct by the plaintiffs during the interlocutory stages of these proceedings, shortly prior to and at the commencement of the first day of the trial at Alice Springs.
As between the plaintiffs and the second defendant, a practicing company under the Legal Practitioners (Incorporation) Act 1989 (NT), the claim is that in about April 1996, in breach of an alleged duty, the second defendant failed to advise the plaintiffs that a proposed agreement relating to their purchase of a business from the first defendant did not contain a restraint of trade clause such that they purchased the business and suffered loss as a result of the first defendant trading in competition with them.
They sought damages from the second defendant and at par 15 of the Statement of Claim said that full particulars of their loss of trade and consequent damage would be provided following discovery from the first defendant.
In October 1997, in answer to a request for particulars, the plaintiffs again said they would provide particulars following inspection of the first defendant’s documents.
As of 26 March 1998 the plaintiffs claimed a loss of $150,000 for the 1997 financial year. As to the 1998 financial year, it was said that full particulars would be provided prior to the hearing. The amount claimed was on the basis of the first defendant’s tax return as discovered and the plaintiff’s tax return to 30 June 1997 (see answers to interrogatories).
On 11 May the solicitor for the plaintiffs said that they would not be claiming $150,000 for the 1999 financial year, but approximately $80,000. They were not then in a position to assess the claim for “ongoing loss of trade”.
On 24 June 1998 the plaintiffs were ordered to provide further particulars of their claim. On 19 August of that year the solicitor for the plaintiffs deposed that they were unable to properly quantify their claim without further discovery from the first defendant, and on 25 August they provisionally put the loss to 30 June 1998 at $46,008.32 (discovery for the first defendant had not been completed and they obtained orders against the first defendant in that regard).
On 2 September the Master adjourned an application by the second defendant to have the plaintiffs claim dismissed for failure to comply with the order for particulars within 14 days. On 15 September a formal document “Further and Better Particulars of Paragraph 15 of the Statement of Claim” was filed which calculated the “plaintiffs loss of trade and damages” at $46,088.32. The calculations were for the year ended 30 June 1997. No indication was there given that the claim extended beyond that date.
The matter was again before the Master on 11 November 1998. Counsel for the plaintiffs said that the first defendant had not responded to the order for further and better discovery, especially in relation to its trade in competition with the plaintiffs. In answer to the Master, counsel said that the plaintiffs’ loss was not continuing, the first defendant had sold the competing business (there was some uncertainty as to just when that event occurred), but it was obviously prior to 11 November 1998. The Master referred to “ a closed period”, counsel agreed, and in the course of further discussion, counsel said “It’s unlikely that the ultimate figure is going to exceed $100,000”. The particulars then given were regarded as being the best available, but counsel hoped that they might improve if documents were obtained from the first defendant as to its “trading during the damage period”.
The Master concluded that the figures supplied were the best which the plaintiffs could provide; if the plaintiffs obtained further documents which could show increased loss then that would have to be dealt with at the time.
With a degree of prescience counsel for the second defendant on that occasion expressed his concern that he did not wish to find in six months time that the “$40,000 or $50,000 case is in fact a $200,000 case”. Counsel for the plaintiffs responded that if documents or evidence of some sort turned up on the morning of the hearing which altered the claim, the plaintiffs would be entitled to amend (see [15] below).
In the view that I take of the matter the plaintiffs’ then position was that their damages were to be assessed by reference to a loss during the period the first defendant competed with them, they had particularised their claim to 30 June 1997 and were still hoping to obtain information from the first defendant which would enable them to particularise it from that date until the date upon which the first defendant sold the competing business. There was no suggestion that the plaintiffs would seek to have their loss assessed by reference to any period after the date of that sale.
On 10 October 2000 the matter was listed for hearing for five days commencing on 23 July 2001. On 20 June 2001 I conducted a hearing to review preparedness for trial. The plaintiffs and second defendant were represented by their respective solicitors and estimated the length of trial at five days. Given the above history, it was ordered that the plaintiffs inform the defendants by close of business on Thursday 21 June whether there would be any claim for damages beyond those particularised. There were no other matters raised by any party to indicate that the trial would not commence as planned, nine months previously.
On 29 June the solicitor for the plaintiffs provided details of the loss claimed to the solicitors for the second defendant. It covered an amended period to 30 June 2000 and amounted to $154,328.28. It was based upon comparisons between the first defendant’s trading profits prior to the sale to the plaintiffs, and the plaintiffs’ profits thereafter. It was not projected beyond that date.
At the commencement of trial the plaintiffs advanced fresh particulars based upon an accountant’s report assessing their loss to 30 June 2000 at about $110,000 for reduction in value of the business, $319,796 for unrealised profits and interest thereon at $47,769 plus the undetermined shortfall of profits for the year to 30 June 2001. Those figures had been provided by a chartered accountant in a report dated 12 July 2001 and provided to the second defendant the following day.
Senior counsel rightly accepted that the plaintiffs would have to bear any consequences arising from what they then sought to do, that is, rely on the expert, whose report had not been served in accordance with O 44, and for the altered basis for assessment of damages then put forward.
Over objection from senior counsel for the second defendant I decided to allow the plaintiffs to proceed upon that basis and granted an adjournment so that the second defendant could seek instructions as to the conduct of the trial, for example, whether to then proceed with the hearing on liability and take up quantum at a later stage.
Upon resumption, the plaintiffs had, as suggested by me, drawn an amended Statement of Claim to deal with the question of the damages then sought. However, in addition they sought leave to amend by alleging that there was a duty on the second defendant to advise the plaintiffs of the desirability and commercial merits of a restraint of trade clause and that had the plaintiffs been so advised they would have insisted upon its incorporation into the agreement or they would have declined to proceed with the proposed purchase.
Those proposed amendments also introduced the notion of reasonableness in a restraint of trade clause and that such a restraint provision should protect the plaintiffs from competition from the successors in business of the first defendant.
The matter was adjourned to the following day to enable the plaintiffs to consider redrawing the proposed amended Statement of Claim to take into account questions raised in the course of argument and to enable the second defendant to seek further instructions as to prejudice.
The references in the Statement of Claim above are to that as further refined during the course of that adjournment.
It is convenient to mention here that on the day the trial was to commence the solicitors for the first defendant filed a Notice of Ceasing to Act, the evidence showing that their client company had been deregistered. The former Directors, the people with whom the plaintiffs say they had discussions prior to the sale, were said to have departed Australia and to be living in Vanuatu. Senior counsel for the second defendant submitted that in the light of those circumstances and the proposed amendments it would be desirable in the interests of the second defendant that efforts be made to locate and proof those people.
The following orders were made:
· Leave to amend the Statement of Claim in accordance with the draft handed up on 24 July 2001 granted.
· Issues of liability and quantum be dealt with separately.
· The plaintiffs should call their witnesses as to liability as they were living in Alice Springs and the hearing proceed in the usual manner to the close of the plaintiffs case.
· If time was available the defendant to open and proceed in its case on liability to the completion of the available court time the following Friday (the case had been set down to conclude by then and it was necessary for me to return to Darwin immediately thereafter).
· Further hearing of the case be adjourned to a date to be fixed either in Darwin or Alice Springs depending upon the circumstances. The plaintiffs’ accountant was in Darwin and it was likely that any engaged by the defendant would also be there.
· The defendant to have the right to have any of the plaintiffs or their witnesses recalled for further cross-examination in relation to any matter arising as a consequence of instructions received in relation to the late amendments and experts report.
It was noted that the plaintiffs had undertaken that if they were required for further cross-examination at a resumed hearing in Darwin then they would attend there at their own expense.
The question of costs was adjourned for further submission in writing.
Although not the subject of debate, it seems to me that the defendant was entitled to particulars of the loss claimed by the plaintiffs. They offered them in the Statement of Claim and provided them during interlocutory steps (in various ways). They claimed to have suffered loss which was special to them, that is, the profits incurred through the breach of contract as between them and the second defendant. Those losses were capable of calculation and the facts alleged to support the calculations ought to have been available. They were special damages. They were necessary to show the case which the second defendant had to meet and to enable it to compute a payment into court, if desired. In my opinion the circumstances of this case called for those particulars to be supplied.
It is not suggested that the plaintiffs ought to be relieved of the obligation to pay the costs of and occasioned by the amendment and costs thrown away because of the amendment, r 63.11(7).
The statement of the accountant was subject to O 44. It had not been filed and served within the time required. An extension of time was necessary and the plaintiffs are obliged to pay the costs of and occasioned by the application (r 63.11(5)). Furthermore, the costs of and incidental to an adjournment made necessary by that default are to be borne by the plaintiffs, r 63.11(8).
Costs of proceedings are in the discretion of the court, O 63.03(1), they may be taxed on the standard basis or the indemnity basis, O 63.25, O 63.26, O 63.27, O 63.29(1). The jurisdiction of a court to order costs on an indemnity basis in this case is not called in question.
The decision often referred to in this connection is that of Sheppard J in Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 where after discussing the reasons for the tension between the award of costs on the standard or party and party basis, and on an indemnity or solicitor/client basis, his Honour reviewed many of the cases and commencing at p 232 sets out the principles or guidelines which he considered can be distilled from them. Amongst them is that the ordinary rule or order is made on a party and party basis. That has been the general practice in this Court.
So long as the ordinary rule prevails, there must be found some particular facts or circumstances which justify departure from it or some special or unusual feature. Examples include allegation of fraud, knowing them to be false, commencing or continuing a hopeless case or for an ulterior purpose and undue prolongation of a case by groundless contentions. None of those prevail here. The second defendant refers particularly, however, to “particular misconduct that causes loss of time to the court and to other parties”.
I am not satisfied that there has been any relevant prolongation in this case beyond that which will be occasioned by the present adjournment. Nor do I consider that there has been any litigious misconduct causing loss of time. What there has been constitutes a common enough feature of civil litigation in this Court, namely late amendment to pleadings and failure to comply with procedural rules and orders.
Regretfully, there is nothing in those defaults which carry the case into the accepted realms of being particular, special or unusual or so as to amount to misconduct in the relevant sense. I do not suggest that the category of cases in which an indemnity might be ordered is closed, but feel constrained by the ordinary orders made in this Court. Justice Sheppard was of the view that that could only be altered, in circumstances such as have arisen in this case, by the Court of Appeal or amendment to the rules (p 233).
The application that the costs be taxed on an indemnity basis is refused. No sufficient reason has been shown to justify the making of an order under r 63.04(3). Order that the costs not be taxed until the conclusion of the proceedings. The second defendant must wait until the conclusion of the proceedings (Keifel J All Services v Titanic (2000) 171 ALR 330 par 11).
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