Ironwill v Allbut - [2021] SADC 24

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
IRONWILL v ALLBUT & ANOR (No 2)
[2021] SADC 24
Judgment of his Honour Judge Burnett
16 March 2021
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - EVENT: WHAT CONSTITUTES
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - DEPRIVING SUCCESSFUL PARTY OF COSTS - CONDUCT OF PARTY OR PROCEEDING - INFLATED CLAIMS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - INFORMAL OFFERS AND CALDERBANK LETTERS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - INTEREST ON JUDGMENTS - TIME FROM WHICH INTEREST RUNS
At trial, the Court ordered that the applicant was entitled to damages for loss of profits in the sum of $50,000 and that the counter-claim made by the respondents was liable to be dismissed. The claim of the applicant was for damages for repudiation of a contract for the hire of a Caterpillar D7H Bulldozer that the applicant had entered into with the respondents. The applicant’s loss arose because it was unable to complete as much land clearing work under a contract it held with a third party to clear certain properties in New South Wales.
The applicant sought interest from a mid-way point of the relevant period of the land clearing contract. The respondents submitted that interest should be calculated from the date of the issue of the proceedings.
The applicant sought indemnity costs on the basis of an informal or Calderbank offers that had been made by it prior to the institution of the proceedings. Alternatively, the applicant sought party party costs on the standard basis. The respondents submitted that there be no order as to costs or alternatively, the respondents pay the applicant 5% of its costs, but not including costs associated with the obtaining of expert reports.
In its statement of claim the applicant sought damages in the sum of $966,745. In its closing address, it sought damages in the sum of $544,089. Ultimately, following receipt of a fourth expert report, the applicant reduced its claim for damages to between $77,858 and $102,604. Ultimately, it received $50,000 in damages.
In these circumstances, the respondents submitted that the applicant had not been successful in the proceedings or had only been nominally successful. The respondents further submitted that the applicant’s claim, in the circumstances described above, had been exaggerated. The respondents also submitted that there had been wasted costs associated with the obtaining of the further expert reports.
Held:
1.     The applicant is entitled to interest from the mid-way point of the land clearing contracts.
2. Pre-judgment interest is included in the judgment and is to be considered part of the award for the purposes of considering whether the applicant obtained more than $60,000; Conroy’s Smallgoods Pty Ltd v Channel Seven Adelaide Pty Ltd [2007] SASC 76 applied.
3.     The applicant is not entitled to indemnity costs because of the informal or Calderbank offers. Although it bettered those offers, they were made prior to the institution of proceedings, did not articulate the basis upon which the various components of the offers were calculated and were made during the continuance of the land clearing contract. Ultimately, the basis of the claim made by the applicant in the proceedings was different from the basis of the claim at the time that the offers were made.
4.     The applicant could not be considered to have been only nominally successful. It obtained damages in the sum of $50,000 and the counterclaim of the respondents in a similar amount was dismissed.
5.     There were some wasted costs incurred in relation to the further expert reports obtained by the applicant. The respondents are entitled to a deduction in the costs which would otherwise be payable to the applicant for those wasted costs.
6.     The claim, in its initial form, was exaggerated. This caused the respondents to incur some additional costs in relation to the further expert reports. The respondents also lost the opportunity of negotiating a settlement, although it is not possible to quantify the loss of that chance.
7.     Taking all these matters into consideration, the applicant is entitled to 60% of its costs on the standard basis.
District Court Act 1991 (SA) s 39, 42(2); Uniform Civil Rules 2020 (SA) r 194.3, 194.5, 194.6; District Court Civil Rules 2006 (SA) s 263(2)(g), referred to.
Rodda & Anor v Ian Rodda Pty Ltd & Anor (No 2) [2015] SASC 128; Trevorrow v State of South Australia (No 6) [2008] SASC 4; Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382; Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 ; BHP Billiton Limited v Parker [2012] SASCFC 73; Morris v McEwen [2005] SASC 284; (2005) 92 SASR 281; Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 119 CLR 118; Pirrotta v Citibank [1998] 72 SASR 259; Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2016] FCA 447; Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163; SPI PowerNet Pty Ltd v Commissioner of Taxation (No 2.) [2014] FCA 356; Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816; Conroy’s Smallgoods Pty Ltd v Channel Seven Adelaide Pty Ltd [2007] SASC 76; (2007) 97 SASR 14; Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER 685; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWSC 171; Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39; The Australian Institute for Progress Ltd v The Electoral Commission of Queensland & Ors [2020] QSC 174; Berrico Estate Pty Ltd v Anderson [2003] NSWCA 23; Tramountana Armadora SA v Atlantic Shipping Co SA [1978] 2 All ER 870; Basetec Services Pty Ltd v Leighton Contractors Pty Ltd (No 8) [2017] FCA 258, considered.

IRONWILL v ALLBUT & ANOR (No 2)
[2021] SADC 24

Civil

On 14 December 2020, the Court published its reasons for finding that the applicant, Ironwill Earthmoving Pty Ltd, was entitled to judgment in its favour in the sum of $50,000 before pre-judgment interest and exclusive of GST. The Court also found that the counterclaim of the respondents was liable to be dismissed. The Court indicated that it would hear the parties on the question of GST, interest and costs.
I will now deal with those issues.
Background to dispute about costs and interest
The applicant and the respondents entered into a contract for the hire of a Caterpillar D7H bulldozer (the Allbut D7). The applicant intended to use that bulldozer, along with other bulldozers, in a land clearing contract it had with a third party (the land clearing contract). The applicant claimed damages arising out of the repudiation of the hire contract by the respondent. The applicant sought damages based on the loss of the opportunity to undertake further raking and chaining pursuant to the land clearing contract had the Allbut D7 been available throughout the period from 23 May 2016 to 31 January 2017 (when the land clearing contract was terminated for other reasons).
I found that the applicant was entitled to damages in the sum of $50,000 on the basis of the repudiation of the hire contract by the respondents.
I found that the counterclaim of the respondents, in which they sought damages in the sum of $49,754.10, being the loss of income that they would have derived had the contract of hire been performed, was liable to be dismissed.
The applicant, in its statement of claim, sought damages in the sum of $966,745. This amount was based on an assumed rate of chaining during the course of the performance of the land clearing contract of 35 hectares per day by using two machines and assumed rate of raking of 8 hectares per day per machine on flat country and 6 hectares per day in steep country.
In support of its claim, the applicant obtained four reports from its expert forensic accountant, Mr Opie. The first report of Mr Opie was based on the assumed rates of raking and chaining referred to above. The evidence adduced by the applicant did not support that rate of raking.
Prior to the completion of evidence, the applicant obtained two further reports from Mr Opie. The second Opie report calculated the profit that was derived by each machine during the course of the land clearing contract and then determined the loss of profit from not having the use of the Allbut D7 (only). The applicant submitted in its closing address that this calculation could not be used to determine the amount of damage suffered and that I should use the third Opie report.
The third Opie report made a series of calculations based on assumed chaining rates of 25, 30 or 35 hectares per day and assumed raking rates of 3.611, 4 or 5 hectares per day per machine. Based on the most favourable of those alternatives, a chaining rate of 35 hectares per day and a raking rate of 5 hectares per day, the applicant sought damages in the sum of $544,098 in its closing address.
There were however three difficulties with the third Opie report. The Report assumed a start date of land clearing work at the Urbenville properties of 1 June 2016 when the evidence was to the effect that work did not start there until 1 July 2016. Secondly, the Report did not take into account the profit that was actually derived from the land clearing contract and thirdly, the raking rate was not consistent with the raking rate achieved at the Urbenville properties.
By consent, after closing addresses, a fourth Opie report was prepared and received into evidence, the applicant re-opening its case to tender that report. The fourth Opie report corrected the above matters and made a series of calculations based on chaining rates of 25, 30 or 35 hectares per day and raking rates of 2.75, 3, 3.611, 4 or 5 hectares per day per machine. After receipt of this report, the applicant accepted that its loss should be based on a chaining rate of 30 or 35 hectares per day and a raking rate of 3.611 hectares per day per machine. This produced a loss of profit of between $77,858 (if a chaining rate of 30 hectares per day was used) and $102,604, if a chaining rate of 35 hectares per day was used. The applicant accepted that I should award damages between $77,858 and $102,604.
Ultimately, I decided that the best evidence of loss was obtained from the determination of the gross profit per machine, but that the loss calculated by reference to chaining rates and raking rates provided support to the figure derived by determination of the gross profit per machine.
GST
Both parties accepted that no GST would be payable on any judgment sum awarded for loss of profits.
I therefore decline to award any further amount in the judgment sum in respect of GST.
The Deposit
The applicant initially submitted that it was entitled to the return of its deposit. After argument, the applicant appeared to concede that it could not obtain an order for the return of the deposit (or increase the judgment sum by that amount), as the payment of the deposit was part of the costs that would have been incurred had the lost profit been obtained. That concession is clearly correct. The payment of the deposit was taken into account by the expert in calculating the loss of profits.
Pre-Judgment Interest
Pursuant to s 39 of the District Court Act 1991 (SA):
(1)Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with this section;
(2)     The interest-
(a)     will be calculated at a rate fixed by the Court; and
(b)     will be calculated in respect of the period fixed by the Court (which must, however, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell due to the date of judgment unless the Court otherwise determines); and
(c)     is, in accordance with the Court’s determination, payable in respect of the whole or part of the amount for which judgment is given.
Section 39 gives the Court a discretion to award interest in respect of any period after the cause of action arises.[1] The applicant submitted that interest should be calculated at the rate of 5% per annum (simple interest) from 1 October 2016 (this date being an approximate mid-point of the period in which the Allbut D7 would have been used in the land clearing contract). Alternatively, the applicant submitted that interest should run from 1 January 2017 (by which time most of the loss in not having the Allbut D7 would have occurred), or in the further alternative, 31 January 2017 (being the date of the repudiation of the contract).
[1] Rodda & Anor v Ian Rodda Pty Ltd & Anor (No 2) [2015] SASC 128 at [26].
The respondents submitted that the interest should run from 13 April 2017, being the date when proceedings were issued.
In the circumstances of this case, the difference between the alternate dates is minimal.
The respondents do not complain about the rate of interest sought by the applicant or the calculations of interest using that rate.
In determining the commencement date for the award of interest, I must take into account the function of an award of interest. As held by Gray J in Trevorrow v State of South Australia (No 6),[2] the general function of award of interest is to compensate the plaintiffs/applicants from being kept out of money of which they would otherwise have had the use and benefit. Gray J quoted from the Full Court of the Supreme Court of Victoria in Clarke v Foodland Stores Pty Ltd,[3] where the Court held:
It may be accepted that the purpose of the statutory power to allow interest is to compensate the plaintiff for being kept out of his money, although not because he has on that account lost the opportunity to invest it, but because he has thereby been deprived of its use. This has been laid down now by a unanimous High Court in relation to interest on damages for personal injuries: M.B.P. (SA) P/L v Gogic (1991) 171 CLR 657 at pp 663, 666, approving what was said in this respect by Gibbs CJ in Batchelor v Burke (1981) 148 CLR 448 at p 455.
[2] [2008] SASC 4 at [5].
[3] [1993] 2 VR 382 at 396.
Gray J also referred to the decision of the High Court in Grincelis v House,[4] where the court held the function of award of interest is to compensate a plaintiff from the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period. Gray J held this function of an award of interest was an important purpose of statutory provisions providing for the award of interest on the amount of the debt or damages in respect of the period between the cause of action accruing and the date of judgment.
[4] [2000] HCA 42; (2000) 201 CLR 321 at [6].
The decisions clearly inform how I should exercise my discretion. I consider that it is appropriate to award interest from the mid-point of the period of the contract when the applicant would have had the use of the Allbut D7, that is 1 October 2016. I adopt this date for a number of reasons. First, taking into account that the purpose of the award of interest is to compensate the applicant for its loss of use of the money, that date best compensates the applicant for that loss. Secondly, there is no statutory bar to awarding interest from the date the cause of action accrued. Thirdly, the applicant’s loss of profit was incurred continuously from the time that it should have had the use of the Allbut D7. The applicant would have, but for the repudiation of the contract by the respondents, received the further income during the course of performing the contract with the third party.
It appears to me that selecting 1 October 2016 as the start date for the calculation of interest will best compensate the applicant for its loss of profit. It is not appropriate to calculate interest from the date of the issue of proceedings, 13 April 2017 as the applicant had already incurred the entirety of its loss well prior to that date. A commencement date of 1 January 2017 (when the contract had largely been performed) or 31 January 2017, being the date of the termination of the land-clearing contract, also does not fully compensate the applicant for its loss of interest, as it would have earnt the majority of the $50,000 prior to those dates.
In these circumstances, I select 1 October 2016 as the period from which interest should be calculated.
The parties have agreed the interest rate of 5% per annum and in accordance with the schedule submitted by the applicant, interest to 17 February 2021 has been calculated in the sum of $10,958.40. I will allow a further 26 days interest at the rate of $6.849 per day or a further $178.07. I will therefore enter judgment in the sum of $61,136.47, inclusive of pre-judgment interest in favour of the applicant.
Costs
The applicant has sought indemnity costs or alternatively, party/party costs, on the basis that it was successful in the proceedings. The applicant seeks indemnity costs as a result of informal or Calderbank offers that were made prior to the institution of the proceedings.
The respondents have denied that they are liable for indemnity or party/party costs and submit that the appropriate costs order in the circumstances of the case is that either there be no order as to costs or alternatively, the respondents pay the applicant 5% of its costs, but not including the costs associated with the expert reports of Mr Opie.
There are three issues to be determined in relation to costs:
1.Is the applicant entitled to indemnity costs as a result of the informal or Calderbank offers that were sent to the respondents?
2.What was the event and should the applicant or the respondents be regarded as having been successful?
3.Should there be a deduction, in whole or in part, because the applicant initially claimed the sum of $966,745 in its statement of claim, then revised that claim in its closing address to the sum of $544,098 and upon receipt of the fourth report of Mr Opie further revised its claim to between $77,858 and $102,604 and ultimately received damages from the Court in the sum of $50,000 (prior to pre-judgment interest)?
The respondents submitted that the applicant should in these circumstances not be regarded as successful or should be regarded as having been nominally successful. Alternatively, the respondents submitted that the applicant’s claim was very much exaggerated and a deduction should be made in respect of its costs. The respondents further submitted that they wasted costs as a result of the applicant revising its claim and obtaining four reports from Mr Opie.
Indemnity Costs
In support of its claim for indemnity costs, the applicant relies on the following communications:
1.A letter dated 30 September 2016 from the applicant’s solicitors (prior to the institution of proceedings) when the applicant offered to accept the sum of $20,000 in full and final satisfaction of the matter. The offer was expressed to remain open for 7 days. It is not clear from the letter how the loss of profit component of $10,000 and the loss of use of funds of $3000 was calculated.
2.An offer made by letter dated 20 October 2016 from the applicant’s solicitors (prior to the institution of proceedings), where the applicant restated its position that it would accept the sum of $20,000 in full and final satisfaction of this matter within 21 days.
3.     A letter dated 8 November 2016, in which the applicant’s solicitors reiterated      the applicant’s willingness to negotiate and requested that the respondents         provide a counter-offer for their consideration.
4.     A letter from the respondents’ solicitors dated 10 November 2016, in which the respondents said that they considered that the applicant had         demanded $20,000 in satisfaction of its claim, which they said, represented no less than 100% of what they were claiming. The respondents’ solicitors also advised of their clients’ loss of $57,200 plus GST.
5.     A letter from the applicant’s solicitors dated 24 November 2016, in which    the applicant refuted the claims by the respondents and required the         respondents to make a counter-offer by 30 November 2016.
6.     A letter from the respondents’ solicitors to the applicant’s solicitors dated    30 November 2016, in which the respondents offered to pay the applicant the    sum of $8,000, inclusive of costs and interest, within 28 days.
7.     A letter from the applicant’s solicitors dated 9 December 2016 in which the applicant offered to accept the sum of $18,000 to be paid within 30 days of         acceptance of this offer, which offer was to remain open for 7 days. The $18,000 represented $5,000 for loss of the deposit, $3,000.00 for costs,       $1,000.00 for loss of use of funds and $9,000.00 for loss of income.
8.     By letter dated 21 December 2016, the respondents rejected that offer and    made a counter-offer that the respondents would pay the applicant $10,000.00 within 30 days of acceptance of the offer.
9.     A further letter from the respondents’ solicitors dated 6 January 2017 in       which the respondents, in responding to an anticipated offer of $15,000.00 from the applicant, said they would reject such an offer if it were made.

Pursuant to s 42(1) of the District Court Act, a judge has a broad discretion as to costs, subject to the provisions of that section (none of which are relevant in the present case) and subject to the rules.[5]
[5] BHP Billiton Limited v Parker [2012] SASCFC 73 at [261].
Both parties accepted that the Uniform Civil Rules 2020 (UCR) applied to the determination of the issue of costs, although in the circumstances of this case, the rules are substantially to the same effect as the 2006 Rules.
UCR 194.3 provides that costs may be awarded on the standard costs basis, solicitor/client basis, indemnity basis or any other basis specified by the Court.
UCR 194.5 sets out the general principles as to costs. UCR 194.5 relevantly provides:
(1)     Each of the following principles are subject to-
(a)     the presumptive costs rule in rule 194.4 (to the extent that the Court does not otherwise order);
(b)     other applicable rules;
(c)     other applicable principles; and
(d)     the overriding discretion of the Court as to costs.
(2)     Costs follow the event.
………..
(11) In any monetary claim [in the District Court], costs of the claim are not payable to a successful applicant if the amount awarded is less than $60,000.
UCR 194.6 sets out discretionary factors relevant to the exercise of the discretion as to costs. It provides:
(1)     In exercising its discretion as to costs, the Court may have regard to any factors it considers             relevant.
(2)     For example, the Court may have regard to the following factors-
(a)     any misconduct or unreasonable conduct of a party in connection with a proceeding;
(b)     any breach of overriding obligations, these Rules or an order of the Court;
(c)     any breach by a party of the pre-action obligations imposed by Chapter 7, Part 1;
(d)     the making or not making of an offer by a party to resolve the proceeding;
(e)     the non-acceptance by a party of an offer made by another party to resolve the   proceeding;
(f)     the value and importance of the relief sought or any relief obtained;
(g)     any public interest in the subject matter of the proceeding or public benefit from the   prosecution or defence of the proceeding; or
(h)     whether costs awarded are to be met by a person or out of a fund.
In BHP Limited v Parker,[6] Doyle CJ and White J followed the decision in Morris v McEwen[7] to the effect that the Court when exercising the discretion as to costs, can have regard to a Calderbank letter, even though the party making the offer could have filed, but did not file, a formal offer of settlement. That reasoning is clearly applicable to the discretion under the UCR where rules 194.6(2)(d) and (e) make it explicit that informal offers of settlement can be taken into account.
[6] Ibid at [263].
[7] [2005] SASC 284; (2005) 92 SASR 281.
The Court in BHP Billiton Limited v Parker[8] held that the relevant question is not simply whether, having regard to a Calderbank letter, a court should order a defendant to pay costs on the basis other than between party and party. The court is exercising a broad discretion and the making of an informal offer of settlement is merely one of the matters relevant to the exercise of that discretion.[9]
[8] Ibid.
[9] Ibid at [265] citing Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 118 ALR 248 at 257.
In Pirrotta v Citibank,[10] Debelle J said that imprudent refusal of an offer to settlement is often raised on an application for an order for costs on a basis other than party and party costs, but it had to be borne in mind that while imprudent refusal of an offer conveniently encapsulates an approach to the exercise of discretion, in the end, the issue is whether the discretion should be exercised to depart from the usual basis of an order for costs.
[10] [1998] 72 SASR 259 at 263.
In Australian Competition and Consumer Commission v Australian Egg Corporation Ltd,[11] White J approved the above statement and held that the authorities indicated that the matters bearing upon whether the rejection of an informal offer of settlement may warrant a later order of indemnity costs include:[12]
(i)     the stage the proceedings had reached when the offer was made;
(ii)    the time allowed to the offeree to consider the offer;
(iii)   the extent of the compromise offered;
(iv) the offeree’s prospects of success, assessed as at the date of the offer;
(v)    whether the offeree should have appreciated that its claim would fail;
(vi) whether the offeror explained why it considered the offeree will fail or, at   least, not better the offer;
(vii) the clarity with which the terms of the offer are expressed; and
(viii) whether the offeror foreshadowed an application for indemnity costs in the                    event of the rejection of its offer.
[11] [2016] FCA 447 at [48].
[12] Ibid at [50].
White J also cited,[13] with approval, similar observations made by Sackville J in Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd[14] and Pagone J in SPI PowerNet Pty Ltd v Commissioner of Taxation (No 2).[15]
[13] Ibid at [49] and [51].
[14] [2000] FCA 163 at [9].
[15] [2014] FCA 356 at [3].
In the present case, the applicant bettered the offer. The applicant received $50,000 in damages while the offers of settlement were $20,000 and later $18,000.
The offers of settlement made by the applicant were made prior to the institution of proceedings. The offers were made at a time when I consider that it was difficult for the respondents to make an informed assessment of the strengths and weaknesses of its case and the strengths or weakness of the claim of the applicant. The letters of offer did not provide any substantiation of the amounts claimed by the applicant. Importantly, the offers were made at a time when it was not clear that the applicant had suffered any loss of profit. The offers were made at a time when the land clearing contract was still on foot. There was no suggestion at that time that the land clearing contract would be terminated and that a consequence of the repudiation of the hire contract by the respondents was that the applicant would complete less chaining and raking. At that time, the applicant’s claim was likely to be in damages for the additional time that it would take to complete the land clearing contract without the Allbut D7.
In Nu Line Construction Group Pty Ltd v Fowler,[16] it was held that in relation to an offer that was made two years before the commencement of litigation and at a time when the basis of the claim was very different from that ultimately pressed, it was not unreasonable for the offeree to refuse the offer, especially as it was not later reinstated.[17]
[16] [2012] NSWSC 816.
[17] Ibid at [51] and [68].
I do not consider that the offers made by the applicant clearly explains the strength of the offer of their claim nor how the amount claimed has been determined. I also consider that the offer was made on a quite different basis from the basis ultimately pursued. Further offers were not made during the course of the proceedings.
I do not consider that it could be said to be imprudent for the respondents to have rejected or not accepted the offers of the applicant at the time that they were made.
Taking the above matters into account and all the circumstances of the case, I do not consider that there is any basis for an award of indemnity costs in favour of the applicant.
What is the “event”?
UCR 194.5(2) make it clear that costs will follow the event (subject to the overriding discretion as to costs and the other matters set out in UCR 194.5(1).
The parties differ in the present case as to characterising who was successful in the proceedings.
The applicant submitted that it was successful as it was awarded damages in the sum of $50,000 (before pre-judgment interest) and the counter claim of the respondents was dismissed. The respondents submitted that they should be viewed as the successful party as the claim of the applicant had been reduced from $966,745 (which was the sum claimed in the statement of claim) to between $77,858 and $102,604 (being the final amount, after the delivery of the fourth Opie report). The respondents submitted that given the length of the trial, the cost and duration of the proceedings, an award of $50,000 in favour of the applicant could not be considered a success.
UCR 194.5(11) has no application (i.e. costs of the claim are not payable if a monetary sum of less than $60,000 is awarded to the applicant). In Conroy’s Smallgoods Pty Ltd v Channel Seven Adelaide Pty Ltd,[18] it was held that by reason of s 39 of the District Court Act, pre-judgment interest was included in the judgment. Therefore, for the purposes of the 2006 DCR 263(2)(g) and now UCR 194.5(11), the amount awarded to the applicant includes both damages and pre-judgment interest and in this case, exceeds $60,000.
[18] [2007] SASC 76; (2007) 97 SASR 14 at [271]-[273].
In any event, the applicant was also successful in having the counter claim of the respondents dismissed. That success would, coupled with the award of damages that was made in its favour, would lead me not to apply the principle set out in UCR194.5(11).
The respondents submitted, as I have said, that given the size of award and the time and expense of the proceedings, the applicant could not be considered to have been successful (in the context of the amount claimed in the statement of claim and in the closing address). That proposition is true if nominal or trivial damages are only awarded. In Alltrans Express Ltd v CVA Holdings Ltd,[19] Stephenson LJ quoted from Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd[20] where His Honour held:
No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a successful plaintiff.
[19] [1984] 1 All ER 685 at 691.
[20] [1951] 1 All ER 873 at 874.
This principle has been applied in Australia in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)[21] and Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd; Carelli v FS Architects Pty Ltd[22] and more recently in The Australian Institute for Progress Ltd v The Electoral Commission of Queensland & Ors.[23]
[21] [2011] NSWCA 171 at [14].
[22] [2008] NSWCA 39 at [100] and the cases cited therein.
[23] [2020] QSC 174 at [13].
The same principle applies if the damages awarded are trivial.[24]
[24] Alltrans Express Pty Ltd v CVA Holdings Ltd [1984] 1 All ER 685 at 691.
The plaintiff or applicant could also not be regarded as successful where the judgment was for an undisputed amount which the respondent had acknowledged that it was liable to pay, but the applicant was otherwise unsuccessful in recovering the further damages sought.[25]
[25] Berrico Estate Pty Ltd v Anderson [2003] NSWCA 23 at [39].
I do not consider that any of these principles apply in the present case. The sum of $61,136.52 (inclusive of pre-judgment interest) cannot be regarded as nominal or trifling. It is a significant sum of money, although clearly much reduced from the amount initially claimed. The applicant was also wholly successful on the counterclaim.
The respondents further submitted that the applicant should be denied costs (or receive reduced costs) because it had exaggerated its claim. In Tramountana Armadora SA v Atlantic Shipping Co SA,[26] Donaldson J held (in the contest of an arbitration) that the relevant question was whether the claim was so inflated as to deter the other party from seeking a settlement or in some way increase the costs of the arbitration. Donaldson J said:
If the sum recovered was trifling and did not justify the proceedings, it may well be right not only to deprive the claimant of his costs, but to order him pay the respondent’s costs: See Harris v Petherick. But this would be a wholly exceptional case and it certainly is not this case. If the claim was reasonably brought, but the inflated amount claimed may have unnecessarily prolonged the proceedings by, for example, deterring the respondent from making an offer of settlement, an order depriving the claiming of part or even all of his costs might be justified. But I doubt whether such a consideration would ever justify an order requiring him to pay all the respondent’s costs.
[26] [1978] 2 All ER 870 at 878.
In Basetec Services Pty Ltd v Leighton Contractors Pty Ltd (No 8), (Basetec)[27] Besanko J considered a submission that he should take into account the fact that the successful party maintained an inflated or exaggerated claim. Besanko J held:
[71] It is correct to say that in exercising the discretion as to costs, a court may take into account the fact that an applicant “has made an exaggerated claim which has occupied a significant proportion of the proceedings and has succeeded only on a minor aspect of its original claim” or has conducted the trial in a manner which “unreasonably prolong[s] the proceeding” (Ruddock v Vadarlis supra at [15]). I think that Basetec’s inflated or exaggerated claim did unreasonably prolong the proceeding in this case. One only has to consider the concessions as to quantum made by Basetec after Mr Paul Figallo’s lengthy cross-examination to appreciate that point. This is a matter I will consider when addressing the costs for the period after the Rules of Court offer.
[72] It is a different matter as to whether Basetec’s inflated or exaggerated claim led to Leighton incurring not insubstantial additional costs in the period now under consideration. I am not satisfied that it did.
[73] There is another way in which Basetec’s inflated or exaggerated claim might have led to costs being incurred and that is that it might have meant that the proceeding could not have been resolved by a negotiated settlement. I will consider this matter in the context of the last of the five matters I have identified.
[27] [2017] FCA 258 at [71]-[73].
In accordance with the reasoning of Besanko J in Basetec,[28] I consider that the claim was exaggerated, but that this characterisation does not affect the event, but does affect the deductions that ought to be made.
[28] Ibid
Deductions
In the present case, I consider that the reformulation of the applicant’s claim did unreasonably prolong the proceeding to some extent. The reformulation required the second, third and fourth Opie Reports to be prepared and some additional court time dealing with those issues. Although the claim in the statement of claim might be described as being optimistic, it was never going to succeed as to that quantum and was unrealistic. That quantum required the assumptions as to raking to be established and Mr Cole frankly admitted in cross-examination that the applicant did not ever achieve anything like those rates when undertaking the raking as part of the land clearing contracts.
I consider however that the methodology employed by the applicant to determine its loss was reasonable and the same exercise would still have to have been undertaken (although without the duplication), had the claim been reformulated at the lower sum, to properly determine its loss. This is in fact what occurred. This is not a case where the exaggerated claim led to a lot of evidence on an issue that proved to be irrelevant.
I also do not consider that apart from considering the further reports of Mr Opie and the additional court time considering those reports and cross-examining Mr Opie on those reports, that the respondents incurred further substantial costs as a result of the exaggerated claim. The respondents did not, at any stage, obtain its own expert report on loss or adduce any additional evidence on that topic itself.
The exaggerated claim might have prevented, as Besanko J observed in Basetec[29], the proceeding being resolved by a negotiated settlement. No evidence was adduced at the costs hearing by the respondents as to how the exaggerated claim thwarted a negotiated settlement. It does appear to me that the exaggerated claim may have, to some extent, deterred settlement negotiations, although given this was a hypothetical scenario, it is not possible to quantify this loss of the chance of settlement. A claim of $966,745 is very different from a claim of between $50,000 and $102,000. Costs considerations are likely to have increased the possibility of settlement if there had been a reduced claim.
[29] Ibid.
I consider that the applicant was successful both in the claim and counter claim. However, I consider that there should be a discount of the percentage of its costs to which it is entitled. These deductions are to be made because of the extra costs incurred in relation to the additional reports of Mr Opie and because of the loss of the possibility of the parties negotiating a settlement, because of the exaggerated claim.
Taking all of these matters into account, I determine that the applicant is entitled to 60% of its costs to be agreed or taxed on the standard costs basis.
Judgment
I make the following orders:
1.     There be judgment in favour of the applicant against the respondents in the                    sum of $61,136.47 (inclusive of pre-judgment interest).
2.     The counterclaim of the respondents is dismissed.
3.     The respondents pay 60% of the costs of the applicant, to be agreed or taxed,                 on the standard costs basis.