Laurelmont Pty Ltd v Stockdale & Leggo (Qld) Pty Ltd

[2000] QDC 166

Issued subject to correction upon revision

DISTRICT COURT

CIVIL JURISDICTION

DODDS DCJ

No 69 of 1994

LAURELMONT PROPRIETARY LIMITED   Plaintiff

and

STOCKDALE & LEGGO (QUEENSLAND) PTY LTD          1st Defendant

and

STOCKDALE & LEGGO PTY LTD  2nd Defendant

and

WILLIAM ROBERT DARBY  3rd Defendant

and

MARK ANTHONY HALL  4th Defendant

and

STOCKDALE & LEGGO (SUNSHINE COAST)

PROJECT MARKETING PTY LTD  5th Defendant

MAROOCHYDORE

..DATE 24/05/2000

JUDGMENT

1

HIS HONOUR:  In this matter I gave judgment on 2 May 2000.  Counsel for the plaintiff has, since judgment was given, handed to my Associate lengthy written submissions and a number of authorities. 

I do not intend to respond to the matters therein except for two matters.  In the judgment, I did not specifically mention the express terms of the Maroochydore franchise agreement set out at paragraph 5 of the second amended plaint.  By paragraphs 30 and 31 of the second amended plaint, those express terms were alleged to have been breached by the first defendant along with the implied terms which were pleaded.

In my opinion, the first defendant did not fail in its obligation pursuant to clause 13.3(a) or (b) of exhibit 9.  Clause 13.3(a) dealt with information, advice and instruction as to business and techniques relevant to the operation of the franchise business, as may be determined necessary by the franchisor, and as provided to other associated franchisees.

Clause 13.3(b) dealt with professional service, advice and assistance as the franchisor may reasonably be in a position to give, additional to the services and assistance rendered by the franchisor as part of the franchise agreement, or to associated franchisees, to be provided at a reasonable fee.

Neither clause by its terms required the first defendant to inform the plaintiff it was proposing to assist the third defendant to purchase one of its franchised real estate

offices which was for sale and would operate in the same general area as the plaintiff operated.

The second matter relates to the claim for interest. When I gave judgment on 2 May 2000, I overlooked the claim for interest. Interest should have been awarded. I will correct the error. It was an error of omission on my part. Had I adverted to the fact that I had overlooked it when giving judgment, I would have immediately attended to it. L Shaddock and Associates Pty Ltd v Parramatta City Council (No. 2) (1982) 151 CLR 590, 594-5.

The original plaint was filed on 26 June 1994.  I will assess interest at 9 per cent from the date of filing of the plaint to judgment.  I assess interest in the sum of $13,266.  I have already given judgment for the plaintiff against the third and fourth defendants for $25,200 for damages.  In addition, I give judgment for the plaintiff against the third and fourth defendants for $13,266 for interest on damages.

Regarding costs.  On 2 May, judgment was given in the proceeding:  for the plaintiff against the third and fourth defendants, for $25,200;  for the first, second and fifth defendants against the plaintiff.

The action was commenced by issue of a plaint on 26 June 1994.  An initial entry of appearance and defence was filed by all defendants in 1994.  Thereafter, various interlocutory activity occurred and various interlocutory orders were made.

On 28 January 1997, an order was made against the third, fourth and fifth defendants for further discovery.  An amended plaint was filed on 11 November 1997, and a second amended plaint filed on 1 April 1998.

On 12 December 1997, the plaintiff brought an application to have the matter set down for trial.  On the return of that application on 23 December 1997, a consent order was made giving directions for further conduct of interlocutory stages of the action.

Further orders were made in February and March 1998, giving directions.  On 1 April 1998, there was a further application by the plaintiff against the defendants for further discovery.  On the return of that application on 20 April 1998, further discovery by the defendants was ordered.

Orders were also made setting a time limit for delivery and answering of interrogatories by any party.  Costs of the application were reserved for the trial Judge.

On 31 May 1999, a further application was made by the plaintiff seeking orders that the defence of the first and second defendants be struck out for non-compliance with earlier orders of the Court, and that any further extension for time for delivering and filing answers to interrogatories be attended by a guillotine order for judgment if not complied with.

The order of 20 April 1998 had the consequence that the first and second defendants were required to file their answers to interrogatories within 14 days from the date of service of the interrogatories.  Interrogatories had been served on them on 25 January 1999.

On 15 June, on the return of the application, it was ordered that the first and second defendants deliver answers to interrogatories before 4.00 p.m. on 29 June 1999;  in default of compliance with the order, the entry of appearance and defence of the first and second defendants be struck out and the plaintiff be at liberty to enter judgment.  It was ordered that the first and second defendants pay the plaintiff’s costs of the application.

Judgment was subsequently entered and damages assessed on
26 July 1999.  On 27 July 1999, the first and second defendants were ordered to pay the plaintiff’s costs assessed on a solicitor and client basis.

On 11 August 1999, the first and second defendants applied for orders setting aside the judgment.  On 23 August 1999, the judgment was ordered to be set aside.  The first and second defendants were ordered to pay the plaintiff’s costs of entering judgment and the assessment of damages and of the application to set aside judgment.

Until 1 July 1999, rules 363 and 363A of the District Court Rules dealt with the question of costs. Rule 363 provided: “Except where herein otherwise provided the costs of any action or proceeding shall be paid by or apportioned between the parties in such manner as the Judge directs and in default of a special direction shall abide the event ---”.

Rule 363A, which was inserted in 1993, provided, inter alia:  “(3) If the plaintiff in an action to recover a debt or damages recovers an amount of $5,000 or more but not more than $20,000, and the plaintiff could have sued for and recovered the amount in a Magistrates Court, a Judge may when awarding costs order that the plaintiff is not entitled to a greater amount for costs than the plaintiff would have recovered if the plaintiff had brought the action in a Magistrates Court”.

Since 1 July 1999 the Uniform Civil Procedure Rules 1999 apply. Rule 689 provides:

“(1)Costs of a proceeding are in the discretion of the Court but follow the event unless the Court considers another order is more appropriate.

(2)Subrule (1) applies unless these rules otherwise provide.”

Rule 698(2) of the UCPR provides: “If the relief obtained by a plaintiff in a proceeding in the -- District Court is a judgment that when the proceeding began could have been given in a Magistrates Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the Magistrates Court.”

Rule 698(1) provides:  “Subrules (2)and (3) apply unless the Court otherwise orders.”

The trial proceeded upon the second amended plaint. 
It occupied six days in October and December 1999. 

The settled practice of the Court is reflected in the rules.

“In the absence of special circumstances a successful litigant should receive his costs -- It is necessary to show some ground for exercising a discretion by refusing an order which would give them to him. The discretion must be judicially exercised and therefore there must be some grounds for its exercise, for a discretion exercised on no grounds cannot be judicial.” Ritter v. Godfrey (1920) 2KB 47 at 52-3.

In Hughes v. Western Australian Cricket Association (Inc.) (1986) 80 ATPR 40-748 at 48136 Toohey J, setting out the effect of decisions of Australian and English Courts on the judicial exercise of the discretion in awarding costs, said:

“(1)Ordinarily costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

Ritter v. Godfrey (1920) 2KB 47.

(2)Where a litigant has succeeded only upon a portion of his claim the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1QB 564.

(3)A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense ‘issue’ does not mean a precise issue in the technical pleading sense, but any disputed question of fact or of law.”

Cretazzo v. Lombardi (1975) 13SASR 4 at 12.

There is no difficulty in stating the principles.  Their application to the facts of a particular case is not always easy.  Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v. Lombardi at 16.  His Honour sounded what he described as, “A note of cautious disapproval.” of  applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial.  His Honour commented:

“But trials occur daily in which the party who in the end is wholly or substantially successful nevertheless fails along the way on particular issues of fact or law. 
The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from the canvassing of all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors effecting the exercise of the discretion as to costs in each case including in particular, the severability of the issues and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom a judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded based merely on his success in those particular issues.”

In Mok v. The Minister For Immigration and Local Government and Ethnic Affairs (No. 2) (1993) 47 FCR 81 at 84, Keely J commented:

“The Court’s power to order a successful applicant to pay the costs in respect of an issue raised by the applicant on which the applicant has failed, ought to be exercised only where the Court, on a consideration of all the circumstances, has concluded that the raising of the issue by the applicant was so unreasonable that it is fair and just to make the order.  In expressing that opinion I am, of course, not attempting to fetter in any way the judicial discretion of the Court.”

The third, fourth and fifth defendants sought that the fifth defendant have its costs, that as regards the third and fourth defendants, costs be distributed according to who succeeded on particular issues raised by the plaintiff’s pleading and that costs ordered against them be on the Magistrates Court scale.

The fifth defendant is a company.  The third defendant was
at all material times a director of the fifth defendant. 

The claim against it in the pleadings was that it knowingly profited from the misuse of confidential information within the knowledge of the third and fourth defendants and that it account for commission received on resale of some of the “Mariner on the Pacific” units.  The claim failed.  The information within the knowledge of the third and fourth defendants was not confidential information in the sense that it attracted equitable protection.  The commission claimed was on the resale of units after the third and fourth defendants had left the employ of the plaintiff and were in the employment of the fifth defendant.  It was not shown the plaintiff had any claim to this commission.

The third, fourth and fifth defendants were represented by the same solicitors and counsel.  The matters claimed against the fifth defendant, in reality, raised nothing additional over and above that which was raised against the third and fourth defendants.

The claim against the third and fourth defendants included a contractual claim for breach of implied terms in their respective employment contracts, the misuse of confidential information; a claim for a contravention of section 232(6) of the Corporations Law; an allegation of a conspiracy with the first and second defendants to damage the plaintiff’s business and an allegation that the third defendant induced other employees of the plaintiff’s business to breach their contracts of employment.

The plaintiff succeeded against the third and fourth defendants for a breach by each of them of the implied term of good faith and fidelity in their contracts of employment. 
The claim under the Corporations Law and the conspiracy claim were not established. As to inducement of breach of contract of employment, no breach of any employee other than the fourth defendant was established.

The claims which were not established were advanced as issues of fact or law supporting a claim by the plaintiff to damages from the third and fourth defendant.  They added little or nothing to the costs of the proceeding between the plaintiff and the third and fourth defendants, additional to the costs of establishing the liability of the third and fourth defendants for breach of the their contract of employment.

I am not persuaded I should distribute the costs of the plaintiff’s claim against the third, fourth and fifth defendants according to what issues the plaintiff succeeded on and what issues it did not succeed on. The third and fourth defendants were involved in a flagrant breach of the implied condition of their employment contract that they act towards the plaintiff with good faith and fidelity. The evidence necessary to prove that breach by and large included the evidence led in the attempt to prove the other matters upon which the plaintiff failed against the third and fourth defendants; likewise the evidence led by the third and fourth defendants. The claim for a breach of the Corporations Law was capable of being dealt with by a brief submission. The claim of conspiracy was bound up with the claim against the first and second defendants. It required little or no additional preparation by the third and fourth defendants.

The claims against the third and fourth defendants were part of a proceeding that included claims against the first and second defendants in respect of which the plaintiff was unsuccessful.  The judgment obtained by the plaintiff against the third and fourth defendants was one that could have been obtained in the Magistrates Court when the proceeding began,  Act number 39 of 1993 section 4. 

Under the old Rules which were applicable until 1 July 1999 the trial Judge had a discretion to order a plaintiff not recover a greater amount for costs than would have been recoverable if the action had proceeded in the Magistrates Court. Under the UCPR the trial Judge has a discretion to order the costs be assessed on a basis other than applicable if the action had been started in the Magistrates Court.

If the plaintiff had sued the third and fourth defendants, or the third and fourth and fifth defendants, and not sued the first and second defendants in the one action it may have been appropriate to sue in the Magistrates Court.  However, even in that event I do not think it could have been said to be unreasonable to have proceeded in the District Court.  The assessment of damages arising from the third and fourth defendants’ breach was not necessarily straightforward.  Once the proceeding included action against the first and second defendants the matter, beyond doubt, was not within the Magistrates Court jurisdiction.

The actions against the first and second defendants were not successful and I can see no sufficient reason why the first and second defendants should not have an order for their costs.  I am aware that the claim against them was for an amount greater than $50,000.  Ordinarily that would mean the costs would be assessed on a higher scale than if the amount claimed was less than $50,000.  There are, however, two reasons why I intend to order the costs be assessed on the District Court Scale of Costs where the amount recovered does not exceed $50,000.

The conduct of the first and second defendants towards the plaintiff, whilst not providing a legal basis for damages to be awarded against either of them, paid scant regard to the plaintiff’s interests.  It was recognised the effect of what was to occur would probably be very serious for the plaintiff, the more so if it were taken unawares.  It was a franchisee of the first defendant. 

Secondly, the first and second defendants’ conduct of the litigation during the interlocutory stages was marked by delays.

I have already described the third and fourth defendants actions as a flagrant breach of their employment contract. In all the circumstances, I will not order that costs recoverable from the third and fourth defendants up until 1 July 1999 be assessed on the Magistrates Court Scales. I will order, pursuant to the UCPR, that these costs be assessed according to the District Court Scale of Costs where the amount recovered does not exceed $50,000.

I order the plaintiff pay the first and second defendants’ costs of and incidental to the action against each of those defendants to be assessed on the standard basis where the amount claimed does not exceed $50,000.

There will be no order regarding costs of the action against the fifth defendant.

I order the third and fourth defendants pay the plaintiff’s costs, including reserved costs, of and incidental to the action against each of those defendants to be assessed on the standard basis where the amount recovered does not exceed $50,000.

-----