Hamilton v Simeon Wines Ltd (No 3) - [2012] SADC 58

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
HAMILTON & ANOR v SIMEON WINES LTD & ORS (No 3)
[2012] SADC 58
Judgment of His Honour Judge Lovell
1 May 2012
PROCEDURE - COSTS
Form of order where one partner sues for a partnership loss and other partners are joined as defendants. Effect of failure to offer other partners an indemnity on costs. Whether the ordinary rule as to costs following the event should not be followed.
Held: Judgment for the plaintiffs and the second, third and fourth defendants against the first defendant in the sum of $163,850.
District Court Civil Rules 2006 r 72(3), r 73, r 188(6), referred to.
Coulls v Bagots Executor & Trustee Co Ltd (1967) 119 CLR 460; Cretazzo v Lombardi (1975) 13 SASR 4; Cullen v Knowles & Birks [1898] 2 QB 380, considered.

HAMILTON & ANOR v SIMEON WINES LTD & ORS (No 3)
[2012] SADC 58
Form of Judgment

I have already found that judgment should be entered for the full amount of the partnership loss as assessed plus interest. I accept the submissions of Mr Frayne SC that judgment should be entered in favour of the plaintiffs and the second, third and fourth defendants against the first defendant. This is appropriate where there is a claim vested in the partners jointly and the plaintiffs have joined other partners as defendants.[1]
[1] Cullen v Knowles & Birks [1898] 2 QB 380; Coulls v Bagots Executor & Trustee Co Ltd (1967) 119 CLR 460.
Costs
The question of costs raises three issues:
1.     Question of costs as between the plaintiffs and the first defendant;
2.     Question of costs as between the plaintiffs and the second, third and fourth defendants;
3.     Depending upon the determination of 2 above, should the plaintiffs be entitled to an order as against the first defendant for the costs of the second, third and fourth defendants?
First Issue
The plaintiffs were successful in their action against the first defendant. In the ordinary course, an order for party/party costs would follow the event.
The first defendant argued, on two main grounds, that I should exercise my discretion and not award the plaintiffs party/party costs in full.
First, the first defendant filed an offer to settle the plaintiffs’ claim in the sum of $90,000 plus costs in the sum of $30,000. The offer was filed approximately one month before the trial commenced. Mr Doyle conceded that the amount offered for costs was “modest”. The offer could only be accepted in its entirety. I note the $90,000 offered would have been inclusive of interest to the date of the filing of the offer.
Mr Dal Cin submitted that the offer could not be taken into account, indeed should not be disclosed to the Court even on a costs argument. He argued that as the “offer” made was less than the judgment finally obtained, the offer should remain “suppressed”. Mr Dal Cin relied upon rule 188(6) of the District Court Civil Rules 2006 (hereafter referred to as DCR).
I reject that argument. A court must exercise a discretion on the question of costs. The Rule itself is expressed as the Court determining the relevant action “on terms (as to principal relief) that are no more favourable than the terms of the offer” rather than whether the offer was greater than the judgment. A court can award costs to a defendant where it assesses that the offer was adequate even though it was less than the judgment sum.[2]
[2] Cretazzo v Lombardi (1975) 13 SASR 4.
In any event, DCR 187 contemplates the offer to be kept in a “suppressed” file and not disclosed to a trial judge “unless all questions to which the offer is relevant have been determined.” Once all such questions have been determined the Rules contemplate the “offer” being disclosed.
The amount of the offer and when the offer was filed are relevant matters to the exercise of the discretion.
I have found that the plaintiffs are entitled to a judgment exceeding the amount offered. Once interest is taken into account (up to the time of the filing of the offer) the amount awarded significantly exceeded the offer. While the defendant’s offer is a factor to be taken into account generally on costs, I further note that $30,000 was offered for costs. The plaintiffs were not entitled to take the $90,000 and then argue about the question of costs. They could only accept the offer in its entirety. I think it likely that the offer for costs was significantly less than modest.
Secondly, it was submitted that there should be a significant reduction in the plaintiffs’ entitlement to costs as the plaintiffs only succeeded on one of their causes of action. It was submitted that the issues on which they lost took a substantial amount of the trial time. Again, I accept that this is a matter I may take into account although in my view it has limited relevance on the facts of this case.
I have taken into account all of the matters raised by the first defendant. None of those matters either individually or taken together have persuaded me that I should depart from the usual rule.
I therefore order that the plaintiffs have their costs of action as against the first defendant on a party/party basis to be agreed or taxed.
Second Issue
The second, third and fourth defendants seek costs of the action against the plaintiffs in addition to the costs of the interlocutory application of 5 February 2010.
The plaintiffs alleged two separate causes of action against the first defendant. First, a partnership claim that vested in the partners jointly. Secondly, a claim for the reduction of the capital value of the partnership upon sale of the plaintiffs’ interest in it. This was a personal claim in which the second, third and fourth defendants never had an interest. The plaintiffs were ultimately unsuccessful in relation to the personal claim.
It was common ground that the plaintiffs, when issuing the summons, did not seek the authority of the second, third and fourth defendants when doing so. They were made defendants in the action in order that all relevant parties were before the Court; this was done without consultation. No indemnity for costs was offered before the issue of the proceedings.
Indeed, at no stage of the proceedings was such an indemnity offered. Discussions concerning resolution of the costs question between the partners are set out in the affidavit of Mr Hamilton of 5 February 2010. I have taken into account those matters. At some stage it appears that the second, third and fourth defendants were contemplating bringing their own action against the first defendant. That action did not eventuate. While that complicated the discussion on costs, the final position was that no indemnity was offered by the plaintiffs to the second, third and fourth defendants.
Further, the plaintiffs failed to comply with the mandatory requirements of DCR 72(3). That issue was dealt with by me during the trial. Until it was raised by Mr Frayne SC during the trial, it appears that no party had considered it.
The second, third and fourth defendants neither consented nor opposed the plaintiffs bringing the proceedings. The plaintiffs ought to have offered an indemnity on costs to the second, third and fourth defendants before the issue of proceedings. They then had the opportunity to do so later in the proceedings but did not do so.
Given the way the case proceeded and the issues at the trial, it may well be that the partners would have required separate legal advice and representation in any event.
Both the plaintiffs and the first defendant submitted that representation for the whole of the trial for the second, third and fourth defendants was unnecessary given that they were not interested in all of the causes of action being litigated. As Mr Frayne SC submitted, it would not have been easy for the second, third and fourth defendants to know when to attend, as it was not clear when various issues would be raised.
However, there was a period of trial time spent on the plaintiffs’ personal action against the first defendant. The other defendants had no interest in that matter. Mr Frayne made submissions on the matters directly affecting the relevant issues. He then excused himself and Mr Andrew, who was also the second, third and fourth defendants’ solicitor, appeared as counsel.
I considered leaving that matter to a taxing Master. However, I considered in the end that I was in a better position to determine such an issue. Clearly, whether Mr Andrew was there or not, some legal work would have been required to monitor the progress of the trial and the issues then being ventilated.
I cannot be precise. However, in all of the circumstances, I am only prepared to award 50 per cent of the attendance costs of Mr Andrew as counsel when Mr Frayne SC was not present.
The plaintiffs should therefore pay the costs on a party/party basis of the second, third and fourth defendants. That includes the costs of Mr Frayne. As mentioned, the only variation to that is to allow only 50 per cent of the cost of Mr Andrew attending as counsel when Mr Frayne was absent.
Third Issue
The first defendant, as it was entitled to do, denied that the plaintiffs had standing to bring the claim.[3] It admitted only that it entered into a contract with the second defendant. It denied paragraphs 4 and 6A of the statement of claim, namely that the second defendant entered into the relevant contract as undisclosed agent of the partnership.
[3] Paragraph 1B of the amended defence.
The first defendant alleged that the plaintiffs were not entitled to sue for a partnership loss unless all partners agreed and further, that joining the “reluctant” partners as defendants did not “cure” the problem. Further, the first defendant argued that as the plaintiffs sold their interest in the partnership they were not entitled to claim the loss of income sought.
I found against the first defendant on all of those issues.
The first defendant submitted that it should not be liable to a second set of costs when those costs came about because the partners “couldn’t agree amongst themselves”. If the partners had come to an arrangement (indemnity) on costs there would have been no need for the second, third and fourth defendants to have been represented at trial.
Mr Doyle did not argue (given my earlier findings) that the second, third and fourth defendants were not properly before the Court. He submitted that it was the “partnership’s” fault that two sets of lawyers were required; it was not the fault of the first defendant.
As mentioned, given the nature of the plaintiffs’ case and the way the first defendant ran its case, it is possible that there was always going to be a need, for some of the trial at least, for independent advice and/or representation of the second, third and fourth defendants.
The plaintiffs should have complied with DCR 73 earlier than they did. The first defendant did not insist on compliance. It is likely that the issue of the joinder of the other partners as defendants may have been argued and finalised at an earlier time. What effect that may have had on the course of proceedings is not clear.
Taking into account all of the matters argued, I find that the plaintiffs are entitled to recover, from the first defendant 75 per cent of the second, third and fourth defendant’s costs on a party/party basis.
Final Orders
There will be judgment for the plaintiffs and the second, third and fourth defendants against the first defendant in the sum of $163,850.
The first defendant is to pay the plaintiffs’ costs of action as between them on a party/party basis to be agreed or taxed.
The plaintiffs are to pay the second, third and fourth parties’ costs of action on a party/party basis to be agreed or taxed. In relation to that order, the plaintiffs are to pay only 50 per cent of Mr Andrew’s costs relating to his attendance as counsel in the absence of Mr Frayne.
The first defendant is to pay to the plaintiffs 75 per cent of the agreed or taxed costs of the second, third and fourth defendants.