Lester v Queen Victoria Apartments (No 2) No. DCCIV-01-754

[2003] SADC 104

DAMIAN LESTER v QUEEN VICTORIA APARTMENTS (NO 2)
[2003] SADC 104

Judge Lunn
Civil

REASONS ON THE PLAINTIFF’S APPLICATION FOR COSTS OF THE ACTION AS BETWEEN SOLICITOR AND CLIENT.

1. On 15 May 2003 I delivered judgment number [2003] SADC 63 in which I found the plaintiff was entitled to a declaration that the contract of 16 October 1999, by which he had agreed to purchase apartment 709 in the Queen Victoria Apartments from the defendant, was not binding upon him and to $3,670 damages and interest. (These reasons need to be read in conjunction with the earlier one.) The defendant concedes that it should pay the plaintiff’s costs of the action as between party and party, but disputes the plaintiff’s application for those costs on a solicitor and client scale. The plaintiff’s application that I should certify the trial fit for Queen’s Counsel was not pursued.

2. The plaintiff first contended that I should exercise my discretion to allow costs as between solicitor and client because the defendant, if properly advised, should have known that it had little or no chance of success in the action: Duke Group Ltd v Pilmer (No 8), Mullighan J, 1 June 1998, Jud No S6699, unreported, particularly at page 11.  Although many issues and alternative causes of action were canvassed at the trial, my decision turned on one narrow point concerning the obliteration of a material term in the written contract by someone on behalf of the defendant after it had been signed by the plaintiff.  The contract was largely negotiated and prepared by Georgie Taarnby, a land agent retained by the defendant.  Paragraph 8.13 of the defence pleaded that Taarnby had told the plaintiff before he signed the contract that the storage area which was the subject of the obliteration was excluded from the contract.  If that allegation could have been established, it may well have provided an answer to the plaintiff’s claim based on breach of contract.  However, Taarnby in her evidence-in-chief did not say this.  Counsel for the plaintiff was content to accept Taarnby’s evidence-in-chief and did not explore in cross examination this, and a number of other instances, where her evidence did not match up to what had been pleaded in some detail in the defence.  In his final address he did not challenge her credit.  I accept that paragraph 8.13 was pleaded by the defendant’s solicitors in accordance with the instructions which they then had which must have been based substantially on what Taarnby had told them.  I do not know whether the defendant knew before Taarnby gave her evidence that she would not come up to proof on this allegation in paragraph 8.13.  The onus is on the plaintiff to show that the defendant should have known that its case lacked sufficient merit before the trial commenced.  He has not discharged this onus.  There is no special feature shown here to justify an order other than the usual one for party and party costs.  With the value of hindsight the Court must be careful not to unduly criticise the way in which the defence case was pursued at trial.  Solicitor and client costs are not to be awarded merely because the defendant’s case lacked merit: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; Yates Property Pty Ltd v Boland (No 2) (1997) 147 ALR 685.

3. The plaintiff also relied in the application for solicitor and client costs on Rule 6A, the relevant parts of which provide:

   “6A.01 …….

   (2)    Rule 6A does not apply to actions:

   (a)if the claims made do not include any liquidated or unliquidated monetary sum other than costs; or

   (b)if urgent relief is sought;

   …….

   6A.02(1)   At least 90 days before commencing an action the plaintiff is to post or send to the defendants at their last known address a notice of the proposed claim with sufficient detail so that the defendants have a reasonable opportunity to make an offer to settle the claim before it is commenced.

   (2)    Where the claim is for an unliquidated amount the notice is to state the sum which the plaintiff will accept in satisfaction of such unliquidated claim or why, with brief reasons, such sum cannot be stated.

   ………

   6A.06(1)   Within 60 days of receipt of any notice under Rule 6A.02 the defendants or their insurers are to post or send to its sender a response to it and copies of any relevant reports from any expert on which they intend to rely unless such reports have already been supplied.

   (2)    The response under (1) is to include whether liability for the claim is denied, and, if so, briefly state the grounds of such denial.

   6A.07        In any order for the costs of the action the Court is to have regard to any failure of a defendant or insurer to make any, or a reasonable, response under Rule 6A.06 and it may as a result of it order costs as between solicitor and client to the plaintiff for the whole or part of the action.

   ……….”

4. On 16 March 2001 the plaintiff’s solicitor sent the following letter to the defendant:

   “I have to hand a copy of the Agreement entered into between your Company and my client for the sale and purchase of Apartment 709 and areas ancillary to it.

   I am instructed that after the Agreement was signed the description of ‘the Land’ was altered by deleting the storage area adjacent to the Apartment.  That alteration was made by your Company without my client’s knowledge or consent.

   Moreover, the storage area was shown on plans provided to my client prior to signing the Agreement and was material to his decision to proceed with the purchase.  At that time he was well aware that the floor area of the Apartment was smaller than other apartments on the sale level due to the configuration of the common areas.  As such, it was important that there be additional storage facilities.

   In these circumstances my client considers that the Agreement is not binding and may be completed at his option.  However, to avoid unnecessary litigation he is willing to authorise your Company to list the Apartment with an agent for re-sale on the conditions that:-

   (a)your Company and my client release each other from all claims, demands, actions and legal proceedings whatsoever in relation to the Agreement and the subject matter thereof; and

   (b)your Company return to my client the bank guarantee for $30,000 within fourteen (14) days from the date hereof.

   Upon written confirmation of your Company’s acceptance of this proposal my client will provide a written authority to enable the Apartment to be placed in the hands of an agent for re-sale.

   This letter is written without prejudice.”

   The defendant’s solicitors responded by a letter of 26 March denying the allegations.  There was then an exchange of correspondence about various aspects of the matter.  The defendant did not accept that the plaintiff was not bound by the contract and went through various procedures to rescind the contract based on his failure to settle.  In a letter of 5 April the plaintiff’s solicitor referred to the plaintiff’s apparent prior rescission of the contract, but there was no evidence that he had purported to rescind it.

5. By a letter of 8 May the defendant’s solicitors indicated that if the plaintiff did not settle they would pursue remedies under the contract including forfeiting the deposit and calling up the bank guarantee which the plaintiff had given in lieu of paying a deposit.

6. On 30 May 2001, without apparently giving any prior notice of his intention to do so, the plaintiff instituted this action in which he sought the following relief:

   “44.   The plaintiff claims:

   44.1.1       An order in the nature of a declaration that:

   44.1.1the purported Contract is not enforceable against the plaintiff;

   44.1.2the defendant breached and repudiated the Contract and the plaintiff has lawfully terminated it;

   44.1.3in the alternative there was no binding or enforceable Contract;

   44.1.4in the further alternative the plaintiff was legally entitled to and has rescinded the Contract for misrepresentation, misleading conduct or mistake;

   44.2          Alternatively, an order rescinding or setting aside the Contract;

   44.3An order that the defendant return to the plaintiff the bankers guarantee dated 29 October 1999;

   44.4Damages;

   44.5Such further or other ancillary relief as the Court thinks fit;

   44.6Costs.”

   There was no pleading of the quantum of the damages sought in paragraph 44.4.

7. The plaintiff’s contention under Rule 6A.07 was that the defendant had not made any reasonable response under Rule 6A.06.  The argument before me centred on this issue, but it is not necessary to deal with the point as I am satisfied that Rule 6A can not be invoked by the plaintiff for the following reasons:

   ·The plaintiff had not complied with Rule 6A.02(1) in that his notice was not sent at least 90 days before the commencement of the action.  The letter of 16 March, upon which the plaintiff relied, was only sent about 74 days before the action was commenced.  The plaintiff did not need to comply with Rule 6A.02 as he came within Rule 6A.01(2)(b), but if he was proceeding under that subrule Rule 6A.01 did not apply to the defendant.  The plaintiff was seeking urgent interlocutory relief to prevent the defendant from calling up the bank guarantee of the deposit.  It was only after the summons had been served that the defendant gave an undertaking not to call up the guarantee.  It may be that this failure to give the requisite length of notice would not in itself stop the Court acting under Rule 6A.07, but it is a factor against the Court exercising its discretion under that Rule.

   ·Rule 6A.02(1) required that the plaintiff send “a notice of the proposed claim”.  In broad terms this is what used to be called a letter before action.  The letter of 16 March 2001 does not amount to “a notice of a proposed claim” within subrule (1).  It is merely an allegation that the agreement was not binding and a without prejudice offer to resolve outstanding liabilities.  It does not state that the plaintiff intended to institute Court proceedings if the offer was not accepted.  The reference in it to “litigation” was equally consistent with the defendant bringing proceedings against the plaintiff.

   ·Rule 6A.02(1) required that the notice have sufficient detail so that the defendant would have a reasonable opportunity to make an offer to settle, and (2) states that where the claim is for any unliquidated amount, the notice is to state the sum which the plaintiff will accept or reasons why it cannot be stated.  The letter of 16 March does not seek to quantify the plaintiff’s monetary claim and does not give details of the damages which were subsequently claimed in the action.  At the time there were amounts claimed by the defendant from the plaintiff for extras and variations to the Apartment which the letter of 16 March required be waived, but it gave no details of them.  Rule 6A.02 does not require a plaintiff to make any proposal for settlement, but merely to give the defendant a proper opportunity to do so.  The mere fact that the plaintiff has made an offer of settlement himself in the letter of 16 March does not mean that he has complied with Rule 6A.02.

   As the plaintiff did not comply with Rule 6A.02 in these ways the defendant is not to be penalised under Rule 6A.07.

8. Although it was not referred to in argument, I also have considered whether the plaintiff should have solicitor and client costs on the basis that his letter of 16 March 2001 could be a “Calderbank” offer.  I do not categorise that letter as such an offer.  It was written before the issues had crystallised and before the defendant knew whether there would be any loss on a re-sale of the apartment.  If the plaintiff had wished to pursue solicitor and client costs on the failure of the defendant to accept his offer of settlement, he should have utilised the procedures in Rule 41, but he did not.  In any event even if the letter was a Calderbank letter that in itself does not give an automatic entitlement to solicitor and client costs: CP (Adelaide) Pty Ltd v Hartford (Holdings) Pty Ltd (No 10), (2002) 221 LSJS 124 at 137-8.

9. There will be an order that the defendant pay to the plaintiff his costs of the action, as agreed or taxed, as between party and party.  I refuse the plaintiff’s application for these costs to be as between solicitor and client.  The costs of this application for solicitor and client costs are to be paid by the plaintiff to the defendant and set off against the costs of the action.