Hamed Yarmohammad by next friend Frouzan Yarmohammad v Popal - [2020] WADC 3

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   HAMED YARMOHAMMAD by next friend FROUZAN YARMOHAMMAD -v- POPAL [2020] WADC 3
CORAM:   LEMONIS DCJ
HEARD:   11 SEPTEMBER 2019 & 3 DECEMBER 2019
FILE NO/S:   CIV 635 of 2016
BETWEEN:   HAMED YARMOHAMMAD by next friend FROUZAN YARMOHAMMAD
First Plaintiff
FROUZAN YARMOHAMMAD
Second Plaintiff
AND
FARID POPAL
Defendant

Catchwords:

Indemnity costs sought as a result of adjournment of trial

Legislation:

District Court Rules 2005 (WA)
Rules of the Supreme Court 1971 (WA)

Result:

Application for indemnity costs declined

Representation:

Counsel:

First Plaintiff	:	Ms A Dowley
Second Plaintiff	:	Ms A Dowley
Defendant	:	Mr P Mariotto

Solicitors:

First Plaintiff	:	Encore Legal
Second Plaintiff	:	Encore Legal
Defendant	:	Hale Legal

Case(s) referred to in decision(s):

Flotilla Nominees Pty Ltd v WA Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95
Hancock Family Memorial Foundation Ltd v Porteous [2000] WASC 61
Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242
Oshlack v Richmond River Council [1998] HCA 11
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S)
Tey v Optima Financial Group [2012] WASCA 192
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190

LEMONIS DCJ:

Introduction

These proceedings relate to the construction by the defendant (Mr Popal) of a two-storey house for the plaintiffs (the Yarmohammads).
Mr Yarmohammad is represented in the proceedings by Mrs Yarmohammad as his next friend. Mrs Yarmohammad is also a plaintiff in her own right.
In short, the Yarmohammads' claim is for damages arising in respect of a building contract they made with Mr Popal for the construction of the house. The Yarmohammads allege Mr Popal repudiated the contract, which repudiation the Yarmohammads accepted, thus terminating the contract. The principal aspects of the Yarmohammads' damages claim are for the cost of completing allegedly defective works and for the cost of completing works allegedly incomplete at the time of termination.
To establish these claims for damages, it was necessary for the Yarmohammads to adduce evidence at trial directed to the cost of completing the requisite works.
The proceedings were listed for a trial before me commencing on 21 March 2019. During the trial, the Yarmohammads were represented by different solicitors and counsel to those who represent them now.
On 19 March 2019, the Yarmohammads' former solicitors provided to Mr Popal's solicitors, for the first time, the expert evidence relied on by the Yarmohammads as to the quantum of their damages claim. Ultimately, for reasons which will be explained, the trial had to be adjourned. As a consequence of the adjournment, and the matters giving rise to it, Mr Popal sought certain costs orders against the Yarmohammads by an application for costs dated 27 May 2019 (Costs Application). The Costs Application is supported by an affidavit of Travis Wayne Preece affirmed 29 May 2019. Mr Preece is a solicitor employed by Mr Popal's solicitors.
By an order made by consent on 23 July 2019 (the Costs Order), the Yarmohammads were ordered to pay Mr Popal's costs as follows:
1.The plaintiffs pay the defendant's costs:
(a)thrown away by reason of the adjournment of the trial listed for hearing on 21, 22, 25, 26, 27, 28 and 29 March 2019 and reserved costs incidental thereto;
(b)of the plaintiffs' Chamber Summons for Leave to Adduce further Evidence at Trial dated 12 March 2019;
(c)of the plaintiffs' Chamber Summons for Orders as to Seperate Trials of Issues dated 22 March 2019;
(d)of the defendant's application for costs dated 27 May 2019 up to and including 17 June 2019;
to be taxed or agreed, any such taxation to be after the determination of the application the subject of order 2.
Paragraph 5 of the Costs Order provides that the costs the subject of order 1 are payable forthwith.
Mr Popal applies for each of the categories of costs set out at par 1(a), par 1(b) and par 1(c) of the Costs Order to be payable on an indemnity basis. Mr Popal also seeks the costs of the Costs Application incurred after 17 June 2019. The parties were not able to reach agreement on these matters and pursuant to order 2 of the Costs Order, these matters were referred to me for determination.

Background

It is necessary to commence with the relevant background giving rise to the adjournment of the trial. It is as follows:
1.On 19 January 2018, a consent order was made in the proceedings giving the parties leave to adduce expert evidence. The order required the parties by 23 February 2018 to serve on each other the expert reports they relied on, or to disclose in writing the substance of the expert evidence they intended to adduce at trial.
2.On 14 August 2018, the Yarmohammads' former solicitors filed a notice of acting. On 6 September 2018, the Yarmohammads' trial counsel signed and filed a lawyers' certificate pursuant to r 43 of the District Court Rules 2005 stating, amongst other matters, that:
There is no matter known to me that is likely to interfere with the trial being conducted efficiently, economically or expeditiously.
3.On 4 October 2018, the State Administrative Tribunal made an order appointing Mrs Yarmohammad as the plenary administrator of Mr Yarmohammad's estate.
4.On 22 October 2018, an order was made that by 26 January 2019 the parties serve on each other a signed and dated written statement of the proposed evidence-in-chief for each witness to be called by the party. By order made 4 February 2019, the time for compliance by the Yarmohammads with the orders made 22 October 2018 was extended to 18 February 2019.
5.On 12 March 2019, the Yarmohammads' former solicitors filed a chamber summons dated that day for leave to adduce further evidence. This was referred through to me as the trial judge. The chamber summons sought leave to adduce evidence from Mr Alan Ewen.
6.On 19 March 2019, the Yarmohammads' former solicitors provided to Mr Popal's solicitors a report from Mr Machell directed to the quantum of the Yarmohammads' damages claim. Mr Machell's report presented a substantially different claim for damages than that set out in the scott schedule filed in the proceedings.
7.On 20 March 2019, Mr Popal's solicitors sent a letter to the Yarmohammads' former solicitors stating that they objected to reliance on Mr Machell's report and to any adjournment of the trial. Further, the letter stated that if an adjournment is granted Mr Popal 'will press for special costs orders, including but not limited to costs thrown away, such costs to be payable forthwith'.
8.The Yarmohammads were represented at trial by counsel, who from my review of the court file had been the solicitor with the conduct of the matter. Mrs Yamohammad attended each day of the trial.
9.On the first day of the trial (21 March 2019), the Yarmohammads' counsel moved for an order granting them leave to adduce expert evidence from Mr Machell in substance as set out in his report. By the start of the trial, the Yarmohammads' solicitors had not provided to Mr Popal's solicitors a copy of Mr Ewen's report directed to the issue of the quantum of damages.
10.On 21 March 2019, I heard and determined the Yarmohammads' application. I declined the application to the extent it applied to Mr Machell's report. In my ex tempore reasons delivered that day, I set out that in the period since August 2018, there had been five listing conferences where the Yarmohammads' former solicitors had not raised the issue of expert evidence being required as to the quantum of the damages claim. Furthermore, I held there was no plausible explanation put forward as to the delay in obtaining the expert evidence, nor as to why the issue was not raised with the court at those listing conferences. On the hearing of the application, the Yarmohammads by their counsel conceded that they had had a sufficient opportunity to present their case. In my ex tempore reasons I stated:
The necessity to prove loss and damage in a case such as this is not an unusual factor of the case which will have come as a surprise to the plaintiffs. That the cost of doing the requisite work, if not agreed, would need to be established by evidence is obvious.
11.I adjourned consideration of the question of leave to adduce evidence from Mr Ewen.
12.On 22 March 2019, the Yarmohammads filed an application which was in effect for the questions of liability and quantum to be heard and determined separately. This application ultimately was not pursued.
13.On 25 March 2019, I heard the Yarmohammads' application to adduce evidence from Mr Ewen, whose report was provided to Mr Popal's solicitors that morning. I declined leave, because in my view Mr Ewen's proposed evidence did not sufficiently reveal his reasoning in a way that enabled it to be tested and a judgment made about its reliability.
14.The parties then entered into without prejudice settlement negotiations, which ultimately did not result in a concluded agreement, although I was informed the parties had come close.[1]
15.I was then informed by the Yarmohammads' trial counsel that the Yarmohammads' former solicitors had ceased to act. Mrs Yarmohammad confirmed this. There was confusion as to whether the former solicitors had resigned, or Mrs Yarmohammad had terminated their retainer, although it seemed clear that Mrs Yarmohammad wanted to seek separate legal advice.[2] It also seemed clear from the exchanges I had with Mrs Yarmohammad and her counsel that there was a breakdown of the relationship between them.[3]
16.On 26 March 2019, the Yarmohammads' former solicitors made an application to cease acting, which I granted.
17.Pursuant to O 70 r 2(3) of the Rules of the Supreme Court 1971 (WA), a next friend must act by a solicitor. Accordingly, by reason of the Yarmohammads' former solicitors ceasing to act, I took the view that the matter had to be adjourned to regularise the position in respect of Mr Yarmohammad.
18.It ultimately became apparent that the position regarding Mrs Yarmohammad's representation of Mr Yarmohammad had not been regularised prior to the trial. Accordingly, on 7 June 2019, I made an order that Mrs Yarmohammad be appointed Mr Yarmohammad's next friend in the proceedings, with such appointment to take effect from and including 4 October 2008.
[1] ts 92 - ts 93.
[2] ts 92 - ts 96.
[3] This is confirmed by par 25 of the Yarmohammads’ written submissions dated 16 August 2019.

General principles

The principles applicable to an application for indemnity costs have been summarised by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [10]. For the purposes of this application, important aspects to be discerned from the decision in Swansdale Pty Ltd v Whitecrest Pty Ltd are:
1.the court has a discretion as to whether to make an indemnity costs order, which discretion must be exercised judicially;
2.such an order may be appropriate in situations which are shown to involve some element of improper or at least unreasonable conduct by a party or their legal advisors;
3.where a party has by its conduct unnecessarily increased the costs of litigation, it is appropriate that the party so acting should bear that increased cost;
4.an indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under a standard order for party/party costs or under a special order; and
5.a relevant discretionary consideration is the making of an appropriate sanction marking the disapproval of improper or unreasonable conduct.
In Tey v Optima Financial Group [2012] WASCA 192 [23], the Court of Appeal recognised the exercise of the discretion requires consideration as to whether an order is necessary to enable the applicant for the order to recover costs that would not be recoverable under the applicable scale of costs.[4]
[4] See also Flotilla Nominees Pty Ltd v WA Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [11] and Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 at 193, 194.
Further to these matters, in the decision Oshlack v Richmond River Council [1998] HCA 11 [44] (Gaudron and Gummow JJ) stated:
It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a 'solicitor and client' basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.
(Footnotes omitted)

In my view, while an aspect of the making of an order for indemnity costs is to impose a sanction for the subject conduct, it is not a sanction for sanction's sake. Rather, the sanction is so as to more fully or adequately compensate the party seeking the costs order.
In addition, where an order for indemnity costs is made, it is usually subject to the proviso that it does not authorise the recovery of costs of an unreasonable amount, or which have been unreasonably incurred.[5]
[5] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [17].

Respective categories of indemnity costs sought

I propose to deal first with the indemnity costs application in respect of the Yarmohammads' application for leave to adduce further evidence and their application for an order for separate trials on the issues of liability and quantum. I will then address the indemnity costs application in respect of the costs thrown away by reason of the adjournment of the trial.

Application for leave to adduce further evidence

As I have explained above, I dismissed the Yarmohammads' application to adduce evidence from Mr Machell and Mr Ewen directed to the Yarmohammads' damages claim.
In respect of the application directed to Mr Machell's evidence, on 21 March 2019 I stated that my preliminary view was that the Yarmohammads' should pay Mr Popal's costs of the application. No‑one sought to be heard on that order.[6] Further, on 25 March 2019, on dismissing the application in respect of Mr Ewen, I made orders in respect of the Yarmohammads' application as follows:
1.The application be dismissed.
2.The Yarmohammads' pay Mr Popal's costs of the application to be fixed, taxed, or agreed.
3.Reserve the position as to whether or not the costs should be payable forthwith or in any event.[7]
[6] ts 29.
[7] ts 87.
In my view, the issue of costs in respect of the application for leave to adduce further evidence has already been dealt with by way of the orders that were made on 25 March 2019. The reservation was directed to whether the costs should be payable forthwith, to which the Yarmohammads have now agreed by the terms of the Costs Order. I do not see any reason why the orders I made on 25 March 2019 should now be revisited.
In any event, I consider both aspects of the application to adduce further evidence were arguable. I dismissed the application in respect of Mr Machell's evidence primarily because of the prejudice to Mr Popal, given that Mr Machell's evidence presented the Yarmohammads' damages case in a substantially different manner to that reflected by the scott schedule. I dismissed the application in respect of Mr Ewen's evidence because the form of the evidence did not sufficiently disclose Mr Ewen's reasoning. The proposed evidence of Mr Machell and Mr Ewen would have been relevant to the Yarmohammads' damages case, which is not a hopeless case. Therefore, I do not consider the application to adduce further evidence would attract an indemnity costs order, even if the question of costs should now be revisited. A further factor which I consider would operate against the making of an indemnity costs order is that for the reasons expressed below, I cannot be satisfied such an order is necessary to enable Mr Popal to recover costs that would not be recoverable under the applicable costs determination.

The Yarmohammads' chamber summons for orders as to separate trial of issues

As explained above, while this application was filed, it was not pursued. The question as to whether or not the questions of liability and damage should be heard separately was a matter I raised with the Yarmohammads' counsel in the context of the late evidence directed to damages. It was a possible mechanism to proceed with a hearing during the allocated trial dates in the absence of that evidence. Whether or not such an approach was appropriate has not been determined. In these circumstances, I do not consider the making of the application warrants the imposition of an order for indemnity costs and I decline to make such an order in respect of it.

Costs thrown away

In support of the application that the costs identified at par 1(c) of the Costs Order be paid on an indemnity basis, Mr Popal relies upon a number of grounds:
1.Mr Popal warned the Yarmohammads that their application to adduce expert evidence would be opposed and special costs orders sought if there was an adjournment;
2.the delay and prolonging of the litigation;
3.non-compliance by the Yarmohammads with court orders;
4.the Yarmohammads ought to have known their conduct would cause prejudice;
5.the Yarmohammads' conduct is worthy of admonition; and
6.the overall justice of the case.
In my view, the conduct of the Yarmohammads' former solicitors in not obtaining expert evidence directed to damages until shortly prior to the trial was plainly unreasonable. The need for such evidence was obvious. Yet, in the six months prior to trial, the issue of expert evidence was not raised at any of the listing conferences held to address the readiness of the matter for trial. On 6 September 2018, the Yarmohammads' trial counsel in effect certified that the matter was ready for trial. There was no plausible explanation for the delay in providing expert evidence as to damages, apart from oversight. The delay has prejudiced the conduct of the proceedings and caused wasted costs for Mr Popal.
I am not satisfied that Mrs Yarmohammad personally acted in an unreasonable manner. It was clear from the conduct of the trial that she was very much dependant on her former solicitors as to what was required.
In my view, the conduct of the Yarmohammads' former solicitors is conduct worthy of sanction. However, in my view such a finding does not by itself require the discretion to award indemnity costs to be exercised in Mr Popal's favour. It still remains a discretion which must be exercised in all of the applicable circumstances.
There are two additional features of this case which need to be considered.
The first is that the adjournment of the trial was necessitated by the Yarmohammads' former solicitors ceasing to act for them. This occurred as a result of the breakdown of the solicitor and client relationship. I consider the manner in which the Yarmohammads' former solicitors had prepared for and conducted the trial, contributed to the breakdown of the relationship. However, from the exchanges between the court, Mrs Yarmohammad and her counsel which appear at ts 92 - ts 96, it seems to me that the conduct of the settlement negotiations was also a factor in that breakdown. In the circumstances I have outlined, the breakdown of the relationship was not contrived to obtain a tactical advantage.

As a result of the Yarmohammads' former solicitors ceasing to act, it was inevitable the trial needed to be adjourned, having regard to the requirement set out in O 70 r 2(3) of the Rules of the Supreme Court 1971 (WA) that a next friend must act by a solicitor.
Accordingly, while I consider the former solicitors' preparation for and conduct of the trial was a factor contributing to the adjournment of the trial, it was not the sole contributing factor.
The second feature is directed to Mr Popal's actual costs.
At par 14 of Mr Preece's affidavit, he says:
Mr Popal paid Hale Legal the sum of $44,000 on a fixed fee basis for our professional fees in preparing for and attending at the trial of CIV 635 of 2016. These costs were wasted by the plaintiffs' unsuccessful applications which resulted in the abortion of the trial.
In respect of the last sentence of par 14 of Mr Preece's affidavit, if that is intended to convey that all of Mr Popal's costs were thrown away, while that is ultimately a matter for the registrar conducting the assessment to determine, I must say from my impression of the matter I expect such a result is unlikely.
At par 15 of Mr Preece's affidavit, he annexes marked TWP-2 a draft bill of costs in respect of the services rendered by Mr Popal's solicitors in connection with the trial and the various applications addressed during the trial. The draft bill states it is prepared under the Legal Profession (Supreme and District Courts) (Contentious Business) Report 2018.[8] Mr Preece says at par 20 of his affidavit that he believes the amounts in the draft bill of costs annexed at TWP-2: 'to be fair and reasonable taking into account the time spent on the matter and the Legal Profession (Supreme and District Courts) (Contentious Business) Report 2018.'
There is no suggestion in the draft bill that any of the separate items claimed exceed the allowable limit. The total of the costs claimed in the draft bill is $45,701.10, representing $45,397 in professional costs and $304.10 in disbursements.[9] The amount claimed is higher than the sum of $44,000 which Mr Popal has paid.
[8] Page 8 of Mr Preece’s affidavit, above the table.
[9] Page 10 of Mr Preece’s affidavit.
Further, if as I expect will be the case, not all of the work undertaken in connection with the trial is thrown away, then there does not seem to be a mechanism by which the actual costs paid by Mr Popal for the work thrown away is capable of calculation. On the material before me, the $44,000 fixed fee was referrable to the entirety of the trial, not to particular components of it. The bill of costs claims for the work of two practitioners during the trial, being a senior and junior practitioner. It is not clear to me how the registrar could ascertain Mr Popal's actual costs for the work thrown away, as the assessment of the actual cost depends upon whether the cost attributable to the hours worked is a blended rate (that is an averaged out rate applicable to both practitioners), or a separate rate for each practitioner. If the latter, it is not clear to me how the registrar is to determine those rates.
In any event, even if it were possible for Mr Popal to put on further material before the registrar to enable calculation of the actual cost of the work thrown away, the position remains that the draft bill of costs put forward by Mr Popal's solicitors as being fair and reasonable reflects an amount higher than that which Mr Popal has paid. It also needs to be kept in mind that an indemnity costs order does not usually authorise the recovery of costs of an unreasonable amount, or which have been unreasonably incurred. Thus, if the amount claimed in the draft bill is reduced because the registrar considers the hours claimed are unreasonable, then this reduction would in all likelihood also apply if an indemnity costs order was made.
Having regard to these matters, I cannot be satisfied on the material before me that an order for indemnity costs is necessary to enable Mr Popal to recover costs that would not be recoverable under the applicable costs determination.[10]
[10] See Tey v Optima Financial Group [23], and the additional authorities referred to in footnote 4.
In respect of the fixed fee arrangement referred to at par 14 of Mr Preece's affidavit, Mr Popal relies on the decision of Anderson J in Hancock Family Memorial Foundation Ltd v Porteous [2000] WASC 61, where special costs orders were made. In particular, Mr Popal relies on what his Honour said at [5][11] that:
As I understand the cases, they go no further than to say that a solicitor ought not to actually recover costs in excess of those which he is entitled to charge his client pursuant to any agreement he may have with his client; and that to do so may amount to unprofessional conduct. In other words, the question whether there is a costs agreement, and, if so, what is its effect, are questions which become relevant after the bill has been taxed.
[11] The decision in Hancock Family Memorial Foundation Ltd was referrable to s 59(3) of the Legal Practitioners Act 1893. To what extent a similar approach is mandated by the Legal Profession Act 2008 was not argued before me and I do not consider I need to determine that issue in addressing the application before me.
In reliance on this passage, Mr Popal submits that the exercise of the discretion to make an indemnity costs order should not be informed by the fixed fee arrangement in place. The decision in Hancock Family Memorial Foundation Ltd v Porteous is not directed to an indemnity costs order. The costs orders sought in that case were special costs orders having regard to matters such as complexity, importance and time spent. The authorities I have referred to at [11] and [12] above establish that a comparison of the parties' incurred costs and recoverable costs on a party/party basis is a relevant consideration in deciding whether to exercise the discretion. Accordingly, Mr Popal's actual costs are a relevant consideration.
I do not consider the warning set out in Mr Popal's solicitors' letter of 20 March 2019 that a special costs order would be sought is of any particular significance in this case. Ordinarily, such warnings are preferable in situations where the warning puts the other side on notice that their case is hopeless and should be discontinued[12], or where the warning requires a party to promptly remedy a default in compliance with orders. Here, the position is more nuanced. The complaint arose because, in effect, the Yarmohammads' former solicitors had not properly prepared the matter for trial. There is no suggestion in the letter that the Yarmohammads' case is hopeless, or that Mr Popal wanted the Yarmohammads to promptly remedy their default in putting on expert evidence as to damages. Rather, Mr Popal wanted to resist the Yarmohammads putting on any such evidence. Furthermore, the specifics of the special costs order identified in the letter - costs thrown away, payable forthwith - has been agreed to by the Yarmohammads. This allows Mr Popal to seek recovery of his costs thrown away prior to the ultimate trial.
[12] Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 250.
In these overall circumstances, in my view while the conduct of the Yarmohammads' former solicitors warrants sanction, I am not satisfied that the discretion to order indemnity costs should be exercised in Mr Popal's favour.
Accordingly, I decline to make an order for indemnity costs in respect of Mr Popal's costs thrown away by reason of the adjournment of the trial.

Conclusion

I decline to make an order for indemnity costs in respect of the categories of costs identified at 1(a), 1(b) and 1(c) of the Costs Order.
I will hear from the parties as to what costs order should be made on Mr Popal's Costs Application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
CM
Orderly
9 JANUARY 2020