Kilpatrick Green P/L v Kockums Industries P/L No. Scgrg-91-1465 Judgment No. S6611

[1998] SASC 6611

KILPATRICK GREEN V KOCKUMS INDUSTRIES

Civil

Lander J

On 23 July 1997 the plaintiff applied for:

1.     General directions.

2.Directions as to the costs payable upon the discontinuance of the proceedings by the plaintiff.

The matter was called on on the same day when the plaintiff sought leave to discontinue its proceedings against the first defendant, Kockums Industries (Australia) Pty Ltd.

The plaintiff’s first position was that it did not need leave to discontinue the proceedings but sought leave in the alternative.  The first defendant claimed that the plaintiff was not entitled to discontinue the proceedings without leave.

The first defendant also sought the costs of action upon the plaintiff either discontinuing as of right or alternatively discontinuing by leave.  In respect of that application the first defendant claimed to be entitled to costs on an indemnity basis from the date of commencement of the action or alternatively on a party and party basis until September 1995 and thereafter indemnity costs for reasons which I will mention.

Rule 52 of the Supreme Court Rules provides:

“52.01...... A plaintiff may at any time before the making of the order that the action proceed to trial, discontinue his (sic) claim, either wholly or in part, against a defendant.  After that time a plaintiff may discontinue only with the leave of the Court, or with the written consent of all parties filed in the Court.”

The purpose of r52.01 is to protect defendants so as to ensure in so far as possible that a discontinuance does not act to the disadvantage of a defendant.

A discontinuance does not operate as a bar to subsequent proceedings by the plaintiff against the same parties in respect of the same subject matter provided the plaintiff has paid the costs of those parties.

Rule 52.05 provides:

“The discontinuance of an action before trial shall not be a defence to any subsequent action for the same, or substantially the same, cause of action, provided that the costs of the previous action have been paid.  If the costs have not been paid, the subsequent action may be stayed until payment.  If an action is discontinued at trial the Court may direct that the discontinuance have the effect of a final judgment against the party discontinuing.”

The discontinuance of proceedings raises an obligation upon the plaintiff to pay the costs up until the date of delivery of the notice to the parties against whom the claim has been discontinued.

It was said in this case that the plaintiff was obliged to obtain leave because an order had been made that the action proceed to trial and therefore the plaintiff was obliged to seek leave under r52.01.

On 29 April 1997, I dismissed an application on the part of the first defendant for judgment under r25.04 of the Supreme Court Rules.  That application had been made by the first defendant on 7 September 1995 and on 19 September 1996.

I indicated at that time to the parties that whilst I was not prepared to enter summary judgment in favour of the first defendant, I believed that there ought to be trials of the issues raised in the applications of 7 September 1995 and 19 September 1996 prior to the trial of any other issues in the action.

On 5 May 1997, I made orders accordingly that there be trials of the issues identified in those applications in October.

In my opinion that order operated as an order that the action proceed to trial and in those circumstances the plaintiff is obliged to seek leave to discontinue in conformity with r52.01.

The defendant opposed leave being given to discontinue unless it was made a term of the leave that the discontinuance have the effect of a judgment.

In response to that submission, the plaintiff’s solicitor filed an affidavit exhibiting an undertaking from its solicitors in Sydney in which those solicitors instructed solicitors in Adelaide to give an undertaking to the Court that the plaintiff would not issue fresh proceedings at any stage in the future in relation to this particular matter.

I accept the plaintiff’s undertaking in those terms and upon that undertaking I would give leave to the plaintiff to discontinue its proceedings against the first defendant.

As I have already indicated, the effect of that discontinuance will be to oblige the plaintiff to pay the first defendant’s costs (r52.03).  In my opinion, that rule supposes that the defendant would only be entitled to have its costs on a party and party basis.

The defendant, however, seeks an order for costs that the plaintiff pay the defendant’s costs on an indemnity basis.

This action has had a very long history.

Originally the proceedings were brought by the plaintiff against the “State Supply Board.  The first defendant was later joined and the second defendant joined later still.

The proceedings were discontinued against that organisation and continued only against the first and second defendants.

In September 1995, the first defendant sought summary judgment.  The application was for summary judgment only in respect of the cause of action for breach of contract.  In the alternative, the defendant sought that those issues be heard prior to the trial of any other issues in the action.

The application was supported by affidavits which were sworn in November 1995.

The matter was first listed before me on 31 May 1996 at which time there were no answering affidavits on the part of the plaintiff.

After some argument at that hearing the plaintiff indicated that it would wish to bring in affidavits in opposition to the application made in September 1995.  The matter was adjourned until 16 July 1996.  During the period of the adjournment the plaintiff filed an affidavit upon which it sought to rely at the further hearing.  On the occasion of that further hearing the plaintiff indicated that it wished to amend its statement of claim to allege a further cause of action in tort in addition to the tortious cause of action already pleaded in the statement of claim.  The argument was that, notwithstanding this application only dealt with the contractual aspects of the statement of claim, it would be inappropriate to give the defendant relief by way of summary judgment on that application because the tortious causes of actions had to be considered in any event and that the same evidence would be directed to those other causes of action.

Mr Lunn, who then appeared for the plaintiff, recognised that the cause of action then pleaded was perhaps not wide enough to support the submission being advanced.

The matter was adjourned to 20 August 1966.  Shortly before that time the plaintiff filed an application seeking leave to amend the further more explicit statement of claim.  That application was considered on 20 August 1996 but after argument the application was adjourned to enable the plaintiff to give further particulars of the amendments.

In my reasons for judgment dismissing the first defendant’s claim for summary judgment, I recorded the position at that time:

“An adjournment posed some difficulties.  First, of course, the plaintiff had by then delayed [Kockum Industries (Australia) Pty Ltd] application for summary judgment for two reasons.  It had previously obtained an adjournment to file an affidavit in answer to the application.  It had obtained a second adjournment for the purpose of seeking to amend its statement of claim so as to allow it to argue that the application for summary judgment ought to fail.  In those circumstances it had delayed by more than one year the application for summary judgment.  Secondly, but in the circumstances of this case more importantly, it was asserted by the defendant that any cause of action against the defendant would expire on 24 September 1996.  The defendant therefore argued that to allow an adjournment to a date close to 24 September 1996 might give the plaintiff the tactical advantage of having the amendment allowed, because not to allow the amendment would lead to the cause of action being defeated by operation of the Limitations of Actions Act.  The matter was adjourned until 10 September 1996.”

On 3 September 1996, a further affidavit was filed by the plaintiff exhibiting the new proposed amendment to the further, more explicit, statement of claim.

The first defendant opposed the amendments and tendered affidavits in opposition to the application.

On the hearing, on 10 September 1996, the defendant pointed to further inadequacies in the plaintiff’s proposed amendment and the application for leave to amend was further adjourned to 17 September 1996.

On 17 September 1996, I gave the plaintiff leave to amend the further more explicit statement of claim.  I ordered that the plaintiff pay the first defendant’s costs of its application under r25.04 thrown away.  I further ordered that the plaintiff pay Kockums Industries (Australia) Pty Ltd’s costs of the application by the plaintiff to amend its statement of claim.

The amendments which were introduced by the plaintiff after May 1996 were, in my opinion, introduced principally for the purpose of defeating the first defendant’s application for summary judgment.

On the first hearing of the application for summary judgment during argument, it appeared to me that the first defendant might well establish all the criteria necessary for summary judgment in respect of that part of the claim for which it sought summary judgment.  No doubt the plaintiff was of the same mind because the plaintiff argued that the first defendant should not have summary judgment because other tortious matters needed to be examined in any event, and those other matters would include the same facts which formed the basis of the application for summary judgment.  The plaintiff then, over the next few months, set about amending the statement of claim so as to raise tortious causes of action to frustrate the claim for summary judgment.

On 19 September 1996 the first defendant sought summary judgment in respect of the causes of action in tort which had been allowed to be raised by the amendments.

In due course the plaintiff succeeded.  I denied the first defendant summary judgment for the reasons that the amendments, which I had previously allowed, necessarily required an investigation of the same facts which formed the basis of the application for summary judgment. I believed, in those circumstances, that it was inappropriate to grant the first defendant’s application.

In my reasons for judgment I concluded:

“Whilst having every sympathy with [Kockums Industries (Australia) Pty Ltd] in its endeavours to bring this matter to a conclusion as soon as possible, and to have those matters determined which are not really in dispute, it seems to me that the plaintiff has been able to point to the necessity for an inquiry in relation to all of the facts and circumstances in any event.”

As I have already said, I then set the matter down for the trial of those issues which had been agitated in the application for summary judgment.

In my opinion, after May 1996 the plaintiff made every effort to frustrate the first defendant’s claim for summary judgment which on the face of it appeared to be a strong claim.  It did so by pleading causes of action not previously mentioned for the purpose of putting the argument to which I have referred.

Mr Wilkinson, who appeared for the first defendant relied on the history of the matter, and on those circumstances in particular, to support his claim that this action by the plaintiff against the first defendant was always doomed to failure and ought to have been recognised by the plaintiff as such.  He said, in his argument, that all of that supported an application for indemnity costs.

However, Mr Lunn argued that I could not use that history for the purpose of my consideration on the application for costs unless I was prepared to make a decision that all of the arguments on the matters of law and equity as to novation, assignment and abandonment, which had been raised on that application for summary judgment, were completely untenable.  In other words he said that I was obliged to reach a decision on the application for summary judgment before determining whether or not it would be appropriate to make an order that the plaintiff pay the first defendant’s costs on an indemnity basis.

I reject that submission.  I think it would be quite inappropriate that I now determine the issues between the parties in circumstances where the plaintiff itself does not wish to proceed with the matter.  I not only think it would be inappropriate but I think, with respect, it is an extraordinary submission to ask this Court to set aside time for the purpose of consideration of applications made in September 1995 and 1996, and the evidence and arguments in support, for the purpose of determining whether the plaintiff had, in fact, any claim against the first defendant at all.  It would be extraordinary because the plaintiff has acknowledged by seeking leave to discontinue, that its claim was so weak that it could not to be maintained.

The plaintiff claimed in its application for general directions that the basis of the discontinuance was the cost and inconvenience of the further conduct of this matter by the plaintiff.  Whilst it is not prepared to put itself to the cost and inconvenience of further conduct of the matter, it claims that the Court ought to do so for the purpose of resisting the first defendant’s application for indemnity costs.  I am not prepared to undertake that task. 

The question of costs is, of course, in the discretion of the Court: s40, Supreme Court Act.  So also is the amount thereof: 101.01, Supreme Court Rules.

There is no doubt, in my opinion, that I have jurisdiction to order indemnity costs but I would only do so where the party seeking costs had put forward some facts and circumstances which would justify the Court in departing from the usual order for costs, i.e. on a party and party basis: Colgate Palmolive v Cussons (1993) 118 ALR 248 at 257.

Whether or not I ought to make an order for costs as sought will depend upon the circumstances of the case and whether those circumstances warrant the making of such an order.

I believe that the circumstances prior to the application for summary judgment do not warrant the making of an order for costs other than on a party and party basis.  I am not convinced that it could be said that the plaintiff initiated proceedings and maintained those proceedings in circumstances where an order for indemnity costs would follow.

The situation is different, in my opinion, after the making of the application for summary judgment.  In my opinion the plaintiff then conducted the litigation so as to avoid the real possibility that summary judgment would be entered against it in relation to its claim in contract.  It therefore made various applications to amend its statement of claim so as to prevent the first defendant narrowing the issues between it and the plaintiff.

In my opinion, the plaintiff should have realised, after the application for summary judgment was made in September 1995, and in particular after the receipt of affidavits filed in support of that application, that its claim against the first defendant was at the very best tenuous.  Notwithstanding that the plaintiff should be given some time in which to consider the application, in my opinion it ought to have realised well before the first hearing in May 1996 that it would be imprudent to continue with the proceedings.  I believe that it ought to have reached a decision by 31 March 1996.

I believe that the plaintiff, in continuing with the proceedings after that time, did so without regard to a proper assessment of the strength of the case against it and in those circumstances the plaintiff ought to pay the defendant’s costs on an indemnity basis since that time.

I have already made orders for costs in relation to some of those interlocutory matters.  The order which I now make ought to be understood as including, by way of quantum, those other orders for costs.

I therefore order that the plaintiff pay the defendants costs of action on a party and party basis to 31 March 1996.  Thereafter I order that the plaintiff pay the first defendant’s costs on an indemnity basis.  By indemnity costs I mean all costs except in so far as they are of an unreasonable amount or have been unreasonably incurred so that subject to those exceptions the first defendant will be completely indemnified by the plaintiff for its costs and any doubts which the taxing Master may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the first defendant.