Hughes v St Barbara Ltd
[2011] WASCA 234 (S)
•1 NOVEMBER 2011
HUGHES -v- ST BARBARA LTD [2011] WASCA 234 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASCA 234 (S) | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:79/2010 | 17 & 18 AUGUST 2011 & 9 MARCH 2012 | |
| Coram: | MARTIN CJ PULLIN JA MURPHY JA | 1/11/11 | |
| 24/04/12 | |||
| 12 | Judgment Part: | 1 of 1 | |
| Result: | The first respondent pay the appellant's costs of the trial up until and including 10 November 2008 The appellant pay the first respondent's costs of the trial after 10 November 2008 on an indemnity basis No order as to costs of the appeal as between the appellant and the first respondent The second respondent to have its costs of the trial and the appeal over and above the costs incurred by the first respondent The $1.5 million previously paid by the appellant to be deducted from the respondents' entitlement to costs There be a set off between the appellant and the respondents with the balance to be paid | ||
| B | |||
| PDF Version |
| Parties: | BRYAN KEVIN HUGHES as Trustee for the Kingstream Steel Creditors' Trust ST BARBARA LTD ZYGOT LTD |
Catchwords: | Costs Appeal against liability and provisional assessment of damages Appeal on liability succeeded Appeal against provisional assessment of damages failed existence of two pretrial Calderbank letters No offers during the appeal proceedings Appropriate orders for costs of the trial and the appeal |
Legislation: | Nil |
Case References: | Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 Calderbank v Calderbank [1976] Fam 93 Donnelly v Edelsten (1994) 49 FCR 384 Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 (S) Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; (1999) 46 NSWLR 194 Hendrie v Rusli [2000] WASCA 420 Hughes v St Barbara Ltd [2011] WASCA 234 Koh v Tay [1999] WASC 228 Milne v Attorney-General (Tas) [1956] HCA 48; (1956) 95 CLR 460 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : HUGHES -v- ST BARBARA LTD [2011] WASCA 234 (S) CORAM : MARTIN CJ
- PULLIN JA
MURPHY JA
DECISION : 24 APRIL 2012 FILE NO/S : CACV 79 of 2010 BETWEEN : BRYAN KEVIN HUGHES as Trustee for the Kingstream Steel Creditors' Trust
- Appellant
AND
ST BARBARA LTD
First Respondent
ZYGOT LTD
Second Respondent
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ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : KENNETH MARTIN J
Citation : HUGHES -v- ST BARBARA MINES LTD [No 4] [2010] WASC 160
File No : CIV 1913 of 2002
Catchwords:
Costs - Appeal against liability and provisional assessment of damages - Appeal on liability succeeded - Appeal against provisional assessment of damages failed - existence of two pretrial Calderbank letters - No offers during the appeal proceedings - Appropriate orders for costs of the trial and the appeal
Legislation:
Nil
Result:
The first respondent pay the appellant's costs of the trial up until and including 10 November 2008
The appellant pay the first respondent's costs of the trial after 10 November 2008 on an indemnity basis
No order as to costs of the appeal as between the appellant and the first respondent
The second respondent to have its costs of the trial and the appeal over and above the costs incurred by the first respondent
The $1.5 million previously paid by the appellant to be deducted from the respondents' entitlement to costs
There be a set off between the appellant and the respondents with the balance to be paid
Category: B
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Representation:
Counsel:
Appellant : Mr R M Smith SC & Mr T O Coyle
First Respondent : Mr C R C Newlinds SC & Mr I R Pike
Second Respondent : Mr C R C Newlinds SC & Mr I R Pike
Solicitors:
Appellant : Lavan Legal
First Respondent : Tottle Partners
Second Respondent : Tottle Partners
Case(s) referred to in judgment(s):
Amaca Pty Ltd v Hannell [2007] WASCA 158 (S)
Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160
Calderbank v Calderbank [1976] Fam 93
Donnelly v Edelsten (1994) 49 FCR 384
Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 (S)
Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; (1999) 46 NSWLR 194
Hendrie v Rusli [2000] WASCA 420
Hughes v St Barbara Ltd [2011] WASCA 234
Koh v Tay [1999] WASC 228
Milne v Attorney-General (Tas) [1956] HCA 48; (1956) 95 CLR 460
Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
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1 REASONS OF THE COURT: This court delivered its reasons for decision in this appeal on 1 November 2011 (Hughes v St Barbara Ltd [2011] WASCA 234). The matter was adjourned to enable the parties to make written submissions as to the orders to be made in relation to costs of the trial and the appeal, such submissions to be considered at a further hearing. That hearing was conducted on 9 March 2012.
The orders contended for by the parties
2 The appellant contends that there should be orders that:
(a) the respondents pay the appellant's costs of the appeal on a party and party basis;
(b) the respondents pay the appellant's costs of the trial on a party and party basis;
(c) the respondents repay to the appellant the amount of $1.5 million with interest paid by the appellant in settlement of the entitlement of the respondents to their costs of the proceedings at first instance.
3 The respondents contend that this court should:
(a) order that the appellant pay the respondents' costs of the appeal on an indemnity basis; and
(b) not make any orders as to the costs of the trial to the intent that the agreement reached between the appellant and the respondent as to the costs of the proceedings before Kenneth Martin J remain in effect.
Relevant facts
4 The facts bearing on the proper order for costs are as follows:
(a) The appellant (or rather his predecessor in title) commenced proceedings in 2002 claiming damages for breach of contract relating to some mining tenements. There were many other associated causes of action. The appellant at trial claimed damages of $350 million. However, one of the two expert witnesses called by the appellant to give valuation evidence, valued the tenements at the date of breach at $500,000.
(b) On 10 November 2008 there was a mediation conference attended by senior counsel for both parties. This conference was held with
- the trial pending and due to begin on 1 December 2008. The mediation conference failed to resolve the dispute. On the same day, and after the mediation conference, the respondents made a Calderbank offer to pay $1.25 million plus costs. There was no response to that offer.
- (c) The trial for some reason did not commence on 1 December 2008 and was rescheduled to begin on 2 June 2009.
(d) On 14 May 2009 the respondents made another Calderbank offer, this time in the sum of $1.7 million plus interest and costs. This offer was rejected.
(e) The appellant countered with an offer to settle if the respondents paid $20 million inclusive of interest and costs.
(f) The matter went to trial commencing on 2 June 2009 and concluding on 19 June 2009. After reserving his decision the trial judge, Kenneth Martin J, dismissed the appellant's claim but provisionally assessed damages at $500,000.
(g) The parties negotiated and the appellant agreed to pay the respondents $1.5 million for the costs of the trial. As a result, no formal costs order was necessary. The appellant paid the $1.5 million.
(h) The appellant appealed. Some grounds of appeal challenged the decision on liability and one ground challenged the provisional assessment of damages.
(i) The respondents did not renew either of the offers that they had made. The appellant did not renew its offer.
(j) The appeal was heard on 17 and 18 August 2011 and this court reserved its decision.
(k) On 20 October 2011 the appellant made an offer to the respondents that he would settle if the respondents paid to the appellant $4 million. The offer was not accepted.
(l) On 1 November 2011 this court published its reasons for decision. The court concluded that the appeal should be upheld in part. The appellant succeeded on the issue of liability, but on a ground identified by the court and then adopted by the appellant in the appeal. The appellant amended its grounds to formalise the
- adoption. This ground succeeded. The ground of appeal challenging the provisional assessment of damages was unsuccessful. The appellant contended during the appeal that damages should be awarded in the amount of $13.79 million rather than the $500,000 provisionally assessed by the trial judge.
- (m) The result was that the trial judge's judgment was set aside and in lieu, judgment was entered for the appellant in the sum of $500,000.
Disposition of the issues concerning costs
5 Costs of proceedings are in the discretion of the court both at trial and on an appeal: see s 37 of the Supreme Court Act 1935 (WA). The discretion is unconfined because s 37 contains no positive indication of the considerations upon which the court is to determine by whom and to what extent costs are to be paid. However, the power conferred is to be exercised judicially; that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [22] (Gaudron & Gummow JJ). Nevertheless, practices or guidelines have developed, one of which is that, generally speaking, a wholly successful party should receive his or her costs unless good reason is shown to the contrary: Milne v Attorney-General (Tas) [1956] HCA 48; (1956) 95 CLR 460, 477; Oshlack [35].
6 To guard against a plaintiff with a strong case on liability, but with an unreasonable expectation as to the quantum of relief likely to be granted, the Supreme Court had a rule (at first O 22 and then after 1971, O 24) whereby a defendant could make a payment into court. If the payment in was not accepted and the plaintiff went to trial and recovered less than the payment in, then typically the plaintiff would be ordered to pay the defendant's costs after the payment into court but recover costs up to the date of such payment. This process did not protect a plaintiff who considered that the defendant was being unreasonable in its defence of an action and could not be used in relation to claims for relief not involving the payment of money.
7 In 1991 the relevant provisions of O 24 of the Rules of the Supreme Court1971 (WA) were repealed and O 24A was inserted. This allows either party to make an offer of compromise. There are certain formalities to be complied with and there are restrictions on the time when the offer can be made. Further, under O 24A, if an offer is made and accepted, then any party to the compromise is permitted to apply to the court for
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- such judgment or order as they may be entitled to. Order 24A r 10 states the consequences which are to apply in relation to costs if an offer of compromise under O 24A is accepted or not accepted. In particular, if an offer is made by a defendant and not accepted by a plaintiff and the plaintiff obtains judgment on the claim to which the offer related not more favourable to that person than the terms of the offer, then 'unless the court otherwise orders' the plaintiff is entitled to an order against the defendant for costs in respect of the claim up to and including the day the offer was made, taxed on a party and party basis and the defendant is entitled to an order against the plaintiff for its costs in respect of the claim thereafter taxed on a party and party basis.
8 When O 24A was first introduced it provided, at least in the case of an offer made by a plaintiff and not accepted by the defendant, that if judgment was obtained from the claim in terms no less favourable to the plaintiff than the terms of the offer, then costs incurred after the date on which the offer was made should be taxed on an indemnity basis: see O 24 r 10(4) recited in Koh v Tay [1999] WASC 228. This was subsequently amended in 2007 to remove the provision for indemnity costs and to provide for costs to be taxed on a party and party basis.
9 When it comes to an appeal, r 49 of the Supreme Court (Court of Appeal) Rules 2005 (WA) expressly applies O 24A with appropriate modifications.
10 A separate method of making an offer of settlement which will be relevant in relation to costs orders is via a letter containing a Calderbank offer. This is the name given to an offer of the type used in Calderbank v Calderbank [1976] Fam 93. This will be one which is marked 'without prejudice', makes an offer of settlement and warns that the letter containing the offer will be relied upon on the question of costs if and when the issue arises. This method is more flexible than an O 24A offer. For example, it may offer to settle by a payment without a judgment being entered. If the offeree does not accept the Calderbank offer, but ends up worse off than if the offer had been accepted, then the existence of the Calderbank offer becomes a factor to be taken into account in the exercise of the court's discretion when dealing with costs. The question will be whether the offeree's failure to accept the offer warrants departure from the practice suggesting the costs order which would usually be made in the absence of such an offer: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 [37] (Giles JA).
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11 There are a number of factors to be considered when examining the significance of the Calderbank offer in relation to the appropriate costs order. For example, an appropriate opportunity to consider and deal with the offer must have been given: Donnelly v Edelsten (1994) 49 FCR 384, 396 and a Calderbank offer expressed to be 'inclusive of costs' will often reduce the weight to be given to the existence of the offer if the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the amount to be attributed to costs: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97, 101.
12 However, if there is an offer of compromise made in a Calderbank letter which it would not have been unreasonable for the other party to accept, then the existence of the Calderbank offer will be a powerful factor in the exercise of the court's discretion. In most cases where the offeree ends up worse off than if the offer had been accepted, the court will make an order in favour of the party making the offer as from the date of the offer and allowing the offeree costs only up until the date of the offer.
13 In addition, if the rejection of the offer is unreasonable then an indemnity costs order may be made against the offeree: Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16] (Buss JA, Wheeler JA agreeing). Determining whether the conduct was reasonable or unreasonable involves matters of judgment and impression, but factors often taken into account in making that assessment are set out in Buss JA's reasons. Usually the stage of the proceedings at which the offer was received, the time allowed to consider the offer, the extent of the compromise and the clarity with which the terms of the offer were expressed will be relevant.
14 There is no reason why a Calderbank offer might not also be made during the course of an appeal: Hendrie v Rusli [2000] WASCA 420 [9]. The existence of a Calderbank offer made during the course of the appeal proceedings will often be an important relevant and determinative factor in the exercise of discretion in relation to appeal costs. A litigant making a reasonable Calderbank offer during an appeal which is not unreasonable for the other party to accept will usually gain a costs order in its favour in relation to costs after the offer if the other party rejects the offer, persists and ends up worse off in the appeal judgment.
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The costs of the trial
15 The appellant contended that in relation to the trial, the respondents should pay the costs because the Calderbank offers which had been made during the trial had not been renewed during the appeal. There is no merit in that submission. The making of or failure to make offers during the appeal cannot bear on the costs order appropriate in relation to the trial.
16 This court has substituted for the trial judge's judgment, a judgment which is for a sum considerably less than the offers made by the respondents in their two Calderbank letters. The appellant is much worse off than if he had accepted the offers made by the respondents.
17 In the exercise of the court's discretion in relation to the costs of the trial, it is necessary to take into account the fact that the court would normally order that costs follow the event if there were no other relevant factors. However, that was not the only relevant factor.
18 The court must also take into account the existence of the two Calderbank offers made by the respondents. The first of these offers was made on the day of and immediately after the mediation conference which had been attended by senior counsel for both parties and where it may be assumed both parties had then had the opportunity to fully assess the issues in the case. The offers were for an amount well above the damages ultimately awarded. The existence of the Calderbank letters significantly outweighs the normal inclination of the court to award costs to the successful party. Instead, an order should be made that the respondent pay the appellant's costs of the trial up until and including the date of the first Calderbank offer and the appellant pay the respondents' costs of the trial after that date.
19 The respondents' submission that the compromise on the costs of the trial should not be disturbed and that no order should be made for the costs of the trial has no merit. The compromise was reached on the premise that the appellant's claims had been properly dismissed and that the respondents were entitled to an order for costs. That premise was false. The payment of $1.5 million by the appellant must be brought to account in the process of determining what amount has to be paid by which party after the costs have been taxed.
The costs of the trial - party and party costs or indemnity costs?
20 There is a further issue and that is whether costs to be awarded to the respondents should be on a party and party basis or on an indemnity basis.
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21 In this case, the first offer was made at an appropriate time, namely immediately after the failure of the mediation conference. The extent of the compromise was a sum well in excess of the amount eventually recovered in the judgment. The second offer was made 19 days before trial. The offers were clear in their terms and the time allowed to the offeree to consider the offers was reasonable. Even though the letters did not foreshadow an application for indemnity costs, that aspect does not outweigh the other factors and to those must be added the unreasonableness of the appellant's expectations. It had sought $350 million in the proceedings. This was revealed (to the respondents but not to the trial judge) as an ambit claim because the appellant offered to settle for $20 million which was itself excessive when measured against the opinion of one of its own expert witnesses. At trial the appellant still contended for damages in the sum of $350 million.
22 This is a case where the appellant's rejection of the Calderbank offers was unreasonable and as a result the costs of the trial from the day after the date of the first Calderbank letter should be paid by the appellant to the respondents to be taxed on an indemnity basis. The appellant and the respondents will both be ordered to tax their costs. The party entitled to the lesser of the amounts of costs taxed or agreed is entitled to set off that amount against the higher amount with the balance then payable to the other party. The $1.5 million paid by the appellant must be deducted from the respondents' entitlement to costs.
The costs of the appeal
23 The normal practice would suggest that costs should follow the event. That would mean that the appellant should be awarded costs. However, the respondents advanced several reasons why the normal practice should not be followed. First, they pointed out that the appellant succeeded on liability on a ground which was suggested by the court and adopted by the appellant during the course of the proceedings. Secondly, they referred to the fact that the appellant's unreasonable approach to quantum persisted at the appeal. Although its claim for $350 million had been abandoned, the appellant still contended on appeal for judgment in an excessive amount, namely $13.79 million. Thirdly, the respondent submits that if the Calderbank offers made during the trial had been accepted, there would have been no trial and no appeal.
24 The latter reason may be true in point of fact, but it ignores the circumstance that proceedings by way of appeal were necessary to remedy the erroneous dismissal of the appellant's claim. This is not to say that
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- pre-trial offers are irrelevant when it comes to the appeal: Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160; Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 (S) [6]; Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 [71]; Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; (1999) 46 NSWLR 194 [33].
25 However, the existence of a pre-trial offer should be given less weight than an offer made during the appeal. The appellant accepted that the existence of the pre-trial offer was relevant to the question of the appropriate order for costs on the appeal.
26 Just as the existence of a pre-trial offer is relevant in relation to the costs of the appeal, so the lack of any O 24A offer or any Calderbank offer during the appeal proceedings is also a relevant factor: Monie v Commonwealth (No 2) [71].
27 It is also relevant in this case that the appellant persisted in the appeal and failed in its attempt to recover more than $500,000 which had been provisionally assessed by the trial judge. As a general practice, an appeal court will not embark on an analysis of success on particular issues: Oshlack [67] - [68]. However, where there are discrete and severable issues which have added to the cost of the proceedings in a significant and readily discernible way, then the court may exercise its discretion to adjust an order for costs: Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) [7]. In this case, the appeal ground concerning damages was separate from the grounds concerning liability and took up a significant amount of the court's time.
28 In summary the factors to be weighed are as follows. The appellant advanced a ground of appeal dealing with the issue of damages on which it failed completely and which took up a significant amount of time. The appeal succeeded on the liability aspect on a ground not originally advanced by the appellant. Finally, the appellant had unreasonably rejected offers of settlement before trial. These factors militate against the application of the practice that costs follow the event. On the other hand, the appellant had to conduct the appeal to gain a judgment in his favour. No Calderbank offer was made by the respondents during the appeal. Those factors favour the appellant. The factors are so evenly balanced that the appropriate disposition in relation to the costs of the appeal is to make no order as to costs, thereby leaving the appellant and first respondent each to bear their own costs of the appeal.
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29 The second respondent, Zygot, was successful both at trial and on the appeal. Insofar as it incurred costs over and above the costs of the first respondent, it should recover costs both of the whole of the trial and of the appeal.
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