Jarrad v Santamaria (No 2) - [2007] SADC 31

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
JARRAD v SANTAMARIA (NO 2)
[2007] SADC 31
Judgment of His Honour Judge Nicholson
28 March 2007
PROCEDURE - COSTS
Depriving a successful party of part of his costs - ordering a successful party to pay part of the opponent's costs.
District Court Act 1991, s42 and DCR 101, referred to.
Cretazzo v Lombardi (1975) 13 SASR 4 at 11-12; ACCC v Universal Music (No 2) (2002) 201 ALR 618 at 631-2; Hypec Electronics Pty Ltd (in Liq) v Mead (2004) 61 NSWLR 169 at 178-181, considered.

JARRAD v SANTAMARIA (NO 2)
[2007] SADC 31

In my judgment and reasons delivered on 15 March 2007 I dismissed the plaintiff’s claim and allowed the defendant’s counterclaim in part. In allowing the defendant’s counterclaim I found three allegations of slander proved and dismissed one allegation of libel.
The defendant has sought orders that his costs of both the claim and the counterclaim be paid by the plaintiff on a solicitor and client basis. This is opposed by the plaintiff who has sought orders to the effect, inter alia, that the defendant should be deprived of part or all of his costs and should pay part of the plaintiff’s costs. I heard submissions from the parties on Friday, 23 March 2007.
In support of his claim for solicitor and client costs the defendant relies on a letter dated 17 July 2006 sent on his behalf by Law Barossa to the plaintiff’s solicitors. It was in the following terms, omitting formal parts,
We refer to our discussions in Murray Street Tanunda a week or so ago, when you advised you were going to obtain your client’s instructions on our client’s offer to your client to settle these matters once and for all as put to you by our counsel … .
We confirm the basis of this offer was that our client was to pay your client the sum of $2,685.15. The basis for this being that our client pay the difference between the costs awarded to your client on the appeal, namely $5,621 and the costs awarded to our client of the Magistrates Court, namely $2,935.85.
Could you please take your client’s urgent instructions on this offer and advise us today or at the hearing tomorrow on 18 July 2006.
We advise this offer is made on a without prejudice basis except as to costs.
The effect of the offer contained in the letter was that the defendant was prepared to pay the nett amount outstanding and owing by him to the plaintiff pursuant to costs orders made with respect to the earlier Magistrates Court litigation and that each party would walk away, with no order as to costs, from their respective claims in the present litigation. The terms of its penultimate paragraph at the least suggest a strong intimation but probably comprise a condition, that the offer was only available for acceptance on or before the very next day.
The defendant’s counsel submitted that the letter constituted an offer to settle falling within the terms of Calderbank v Calderbank [1975] 3 All ER 333 as that decision has been interpreted and applied by the Full Court in this State in Pirrotta v Citibank Ltd & Ors (1998) 72 SASR 259 and Morris v McEwen [2005] SASC 284.
I am not prepared to place any weight on this letter in support of the defendant’s application for solicitor and client costs. There are a number of reasons for this but I need only mention three.
(i)It does not satisfy the requirements of a “Calderbank” offer having regard to the authorities referred to above. It is not framed in terms consistent with the spirit and intent of DCR 40 or 41 for the reason, inter alia, that it does not, on its face, make plain that the plaintiff had at least fourteen days within which to consider and accept the offer of compromise. In this respect, the opportunity afforded to the plaintiff was clearly inferior to that envisaged by a formal rules offer.
(ii)Further, the letter was not in my view a genuine offer of compromise of this litigation. Part of the “offer” was for the parties merely to observe their already existing obligations with respect to costs orders made in earlier and different litigation. As far as the present litigation is concerned, it was at best an offer in relation to costs only and not a genuine offer to compromise the plaintiff’s claim, cf; ACCC v Universal Music (No 2) (2002) 201 ALR 618 at 631-2.
(iii)In addition, and insofar as it was an offer by the defendant to abandon the counterclaim, it required the plaintiff to abandon his claim. However, at the time the defendant made the offer, the plaintiff was suffering under the delusion, caused by the defendant’s wrongful conduct, that the defendant was the author of the P4 diary entries (see further below). It was only as at the commencement of trial that the plaintiff had an appreciation of the defendant’s actual case and of the strength of the defendant’s case in this respect so as to be in a position to properly evaluate such an “offer”. By this time, any such offer had lapsed. In my view, it was not at all unreasonable for the plaintiff to have rejected this “offer” at the time it was made, see ACCC v Universal Music (No 2) at paragraph [62].
I reject the defendant’s application that such costs as might be awarded in his favour should be awarded on a solicitor and client basis.
The plaintiff raised a number of matters in submissions not all of which are referred to in these reasons but to all of which I have had regard. It was put that it was the defendant’s amendment to his counterclaim which caused the transfer of these proceedings from the Magistrates Court into this court. The amendment raised the Phillip Consalvo conversation and pleaded and particularised special damages said to have followed from the defendant’s loss of opportunity to sell his business.
Whilst the defendant succeeded on liability with respect to this issue, he did not succeed in demonstrating that any special damage had been caused. In my view the claim for special damage was fatally flawed from the outset and but for this claim for special damage, which took the matter outside of the Magistrates Court jurisdiction, the claim and the counterclaim in all likelihood would have remained in that court.
The defendant also, as I have indicated above, failed on an aspect of his counterclaim going to liability.
Nevertheless, I am not persuaded that the time spent on the Consalvo special damages issue or the libel claim, both of which failed at the trial, was particularly significant in the overall scheme of things. Further, whilst I accept that one effect of the proceedings being heard in this court is that costs will be taxed on a different and, generally, higher scale, the defendant was always at liberty to have brought his proceedings (being, ultimately, the only proceedings which succeeded) in this court. The damages award obtained by the defendant exceeded the amount below which he might otherwise have been deprived of costs in accordance with DCR 101.02A.
In these circumstances I do not agree that the defendant should be penalised in costs merely because the counterclaim failed on some issues and proceeded in this court rather than the Magistrates Court.
Pursuant to s42 of the District Court Act 1991 and DCR 101.01, costs are in the discretion of the trial judge. Whilst ordinarily costs would follow the event, I am entitled to take a different approach if the circumstances warrant. My discretion has to be exercised judicially and based on grounds relating to the litigation. Any relevant misconduct relied upon must be connected with or leading up to the litigation.
If appropriate circumstances are established it would be within my discretion to deprive the successful defendant in this case of part or all of his costs or to order him to pay part or all of the unsuccessful plaintiff’s costs, see generally Cretazzo v Lombardi (1975) 13 SASR 4 at 11-12, although, it has been said that a successful defendant should only be ordered to pay the whole of a plaintiff’s costs in rare and exceptional cases.
There are a number of types of situations where a successful defendant has been deprived of costs, including, where they succeeded only on a point raised by amendment made late in the proceedings, for example, Monier Ltd v Metal Work Tiling (No 2) (1987) 43 SASR 588 and where they have misled the plaintiff into believing that he had a cause of action, for example, Bustock v Ramsey [1900] 2 QB 616.
In this matter the following chronology is significant.
(i)In late 2003 the defendant when giving evidence in the Magistrates Court told the court that the diary entries in exhibit P4 had been written by him.
(ii)As a consequence, and in reliance on this, the plaintiff obtained a report from a handwriting expert (Mr Gangell) in December 2003 which strongly supported the claim that the person who wrote the diary entries in P4 (the defendant, according to the Magistrates Court evidence) also wrote the graffiti which defamed the plaintiff.
(iii)The plaintiff commenced these proceedings on 24 February 2004.
(iv)During 2004, the plaintiff obtained further expert reports from Mr Gangell and one from Mr Smith, all of which provided strong support for the plaintiff’s claim. The defendant was in possession of copies of the plaintiff’s expert reports well before trial and must be taken to have understood how the plaintiff intended to prove his case.
(v)On the Friday before the trial which commenced on Monday, 20 November 2006, the plaintiff was advised by the defendant, for the first time, that the defendant’s son would give evidence to the effect that he was the author of the diary entries in P4 and of some of the graffiti and that, contrary to his evidence given in the Magistrates Court proceedings, the defendant would be denying that he had written the P4 diary entries.
(vi)On the first day of trial the defendant sought and obtained leave to amend his counterclaim to plead this positive case.
It was only on the eve of trial that the plaintiff was put on notice that the defendant was proposing to prove a positive case and, more importantly, that the defendant would now deny the very foundation of the plaintiff’s expert evidence, which foundation had been provided by the defendant under oath in the earlier Magistrates Court proceedings.
It is true that the plaintiff lodged in the Tanunda Magistrates Court a minor civil claim against the defendant as early as 19 August 2003 (exhibit D22) which raised many of the neighbourhood dispute allegations together with one of the allegations of defamation which became the subject of proceedings in this court.
Nevertheless, but for the untruthful and misleading evidence of the defendant in the Magistrates Court proceedings, it is quite unlikely that the plaintiff, properly advised, would have continued with that allegation much less brought these proceedings. As I have reasoned in the judgment delivered in this matter, unless the plaintiff could prove that the defendant was, in fact, the author of the P4 diary entries, the claim was doomed to fail. It goes without saying that I find the defendant’s conduct in this respect to have been quite extraordinary and totally unacceptable.
As of late 2003 the plaintiff was misled in a significantly material respect, that is, into believing that he had a viable cause of action against the plaintiff. Even as at the first day of trial, the plaintiff was faced with a very difficult dilemma – it was not surprising nor unreasonable, in the circumstances, that he elected to press on and attempt (ultimately unsuccessfully) to show that the defendant was telling the truth in the Magistrates Court proceedings as to his authorship of the diary entries in P4.
In my view, the circumstances of this litigation, in this respect, are exceptional and justify the making of a costs order in favour of the plaintiff with respect to the period prior to the actual trial of the plaintiff’s claim. I have considered whether this order should be on a solicitor and client basis. However, having regard to the relevant principles (see the helpful discussion in Hypec Electronics Pty Ltd (in Liq) v Mead (2004) 61 NSWLR 169 at 178-181) I do not think such an order is warranted in this case.
Having regard to the foregoing and the written and oral submissions put by counsel for the parties, I make the following orders as to costs.
1.The defendant is to pay the plaintiff’s costs of the claim for the period up to but not including the first day of trial on a party and party basis.
2.The plaintiff is to pay the defendant’s costs of the claim from and including the first day of trial on a party and party basis.
3.The plaintiff is to pay the defendant’s costs of the counterclaim on a party and party basis.