Londsdale Investments Pty Ltd v OM (Manganese) Ltd [No 3]
[2012] WASC 185 (S2)
•29 JANUARY 2013
LONDSDALE INVESTMENTS PTY LTD -v- OM (MANGANESE) LTD [No 3] [2012] WASC 185 (S2)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 185 (S2) | |
| Case No: | CIV:1830/2006 | 9 NOVEMBER 2012 | |
| Coram: | CORBOY J | 29/01/13 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Special costs order made. First defendant by counterclaim and the second defendant by counterclaim shall be jointly and severally liable for 20% of the total costs awarded to the plaintiff by counterclaim; the first defendant by counterclaim shall be liable for 80% of the total costs awarded to the plaintiff by counterclaim | ||
| B | |||
| PDF Version |
| Parties: | LONDSDALE INVESTMENTS PTY LTD PROMET ENGINEERS PTY LTD OM (MANGANESE) LTD JAMES DINSDALE CRIBBES DEREK MACAULEY |
Catchwords: | Practice and procedure Costs Special costs order Apportionment of liability for costs between different losing parties No new principles Turns on its own facts |
Legislation: | Legal Profession Act 2008 (WA), s 280(2) Rules of the Supreme Court 1971 (WA), O 66 r 2 |
Case References: | Australand Corporation (Qld) Pty Ltd v Johnson & Ors [2007] QSC 128 Currabubula Holidays Pty Ltd v State Bank of New South Wales [2000] NSWSC 232 Fagan v Morien [2008] WASC 54(S) Heartlink v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254(S) Londsdale Investments Pty Ltd v OM (Manganese) Ltd [No 3] [2012] WASC 185(S) O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36(S) Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Consolidated by Order dated 1 May 2007
- First Plaintiff
PROMET ENGINEERS PTY LTD
Second Plaintiff
AND
OM (MANGANESE) LTD
Defendant
(BY ORIGINAL ACTION)
OM (MANGANESE) LTD
Plaintiff by Counterclaim
AND
LONDSDALE INVESTMENTS PTY LTD
First Defendant by Counterclaim
PROMET ENGINEERS PTY LTD
Second Defendant by Counterclaim
JAMES DINSDALE CRIBBES
Third Defendant by Counterclaim
(BY COUNTERCLAIM)
- Plaintiff
AND
LONDSDALE INVESTMENTS PTY LTD
First Defendant
JAMES DINSDALE CRIBBES
Second Defendant
DEREK MACAULEY
Third Defendant
- Plaintiff
AND
OM (MANGANESE) LTD
Defendant
Catchwords:
Practice and procedure - Costs - Special costs order - Apportionment of liability for costs between different losing parties - No new principles - Turns on its own facts
Legislation:
Legal Profession Act 2008 (WA), s 280(2)
Rules of the Supreme Court 1971 (WA), O 66 r 2
(Page 3)
Result:
Special costs order made. First defendant by counterclaim and the second defendant by counterclaim shall be jointly and severally liable for 20% of the total costs awarded to the plaintiff by counterclaim; the first defendant by counterclaim shall be liable for 80% of the total costs awarded to the plaintiff by counterclaim
Category: B
Representation:
CIV 1830 of 2006
Consolidated by Order dated 1 May 2007
Original Action
Counsel:
First Plaintiff : Mr G R Hancy
Second Plaintiff : Mr G R Hancy
Defendant : Mr J M Healy
Solicitors:
First Plaintiff : Sparke Helmore
Second Plaintiff : Sparke Helmore
Defendant : K & L Gates
Counterclaim
Counsel:
Plaintiff by Counterclaim : Mr J M Healy
First Defendant by Counterclaim : Mr G R Hancy
Second Defendant by Counterclaim : Mr G R Hancy
Third Defendant by Counterclaim : Mr G R Hancy
Solicitors:
Plaintiff by Counterclaim : K & L Gates
First Defendant by Counterclaim : Sparke Helmore
- Second Defendant by Counterclaim : Sparke Helmore
Third Defendant by Counterclaim : Sparke Helmore
CIV 2283 of 2006
Counsel:
Plaintiff : Mr J M Healy
First Defendant : Mr G R Hancy
Second Defendant : Mr G R Hancy
Third Defendant : Mr G R Hancy
Solicitors:
Plaintiff : K & L Gates
First Defendant : Sparke Helmore
Second Defendant : Sparke Helmore
Third Defendant : Sparke Helmore
CIV 1227 of 2010
Counsel:
Plaintiff : Mr G R Hancy
Defendant : Mr J M Healy
Solicitors:
Plaintiff : Sparke Helmore
Defendant : K & L Gates
Case(s) referred to in judgment(s):
Australand Corporation (Qld) Pty Ltd v Johnson & Ors [2007] QSC 128
Currabubula Holidays Pty Ltd v State Bank of New South Wales [2000] NSWSC 232
Fagan v Morien [2008] WASC 54(S)
Heartlink v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254(S)
Londsdale Investments Pty Ltd v OM (Manganese) Ltd [No 3] [2012] WASC 185(S)
O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36(S)
(Page 5)
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213
(Page 6)
- CORBOY J:
Introduction
1 The plaintiffs in CIV 1830 of 2006 and CIV 1227 of 2010 (who were referred to in the trial and the primary reasons as the ProMet parties and separately, as Promet 1 (Londsdale Investments) and ProMet 2 (ProMet Engineers)) sought to recover from the defendant (OMM) the cost of work done in designing a plant to process manganese ore. OMM claimed in CIV 2283 of 2006 for loss and damage allegedly caused by:
(a) the negligence of the ProMet parties in designing aspects of the plant;
(b) further or alternatively, the plant failing to achieve certain design criteria in breach of warranties that had been given by ProMet 1;
(c) further or alternatively, by ProMet 1 engaging in conduct that was misleading or deceptive by making representations about the state of the design work at particular times and about the skill and competence that it would exercise to ensure that the plant, as designed and constructed, would achieve certain design specifications and criteria.
2 OMM also claimed that Mr Cribbes and Mr Macauley were knowingly involved in the conduct of ProMet 1 that was alleged to have been misleading or deceptive.
3 The actions were consolidated. The findings made at the trial of the consolidated proceedings were summarised in Londsdale Investments Pty Ltd v OM (Manganese) Ltd [No 3] [2012] WASC 185(S) (the supplementary decision) at [3]. That decision determined some but not all of the issues between the parties concerning the costs of the consolidated proceedings.
4 OMM had sought separate costs orders for what was referred to at the trial and in the primary reasons as the ProMet Action (CIV 1830 of 2006, consolidated with CIV 1227 of 2010) and the OMM Action (CIV 2283 of 2006). The costs orders for which it contended would have required ProMet 1 to pay a percentage of OMM's costs in the OMM Action and the ProMet parties to be jointly and severally liable for its costs of the ProMet Action. The ProMet parties, on the other hand, contended that separate costs orders should be made for each cause of
(Page 7)
- action alleged by the parties in the various actions that had been consolidated.
5 Neither approach was adopted in the supplementary decision. Rather, it was held that OMM was entitled to recover 75% of the costs of the consolidated proceedings, subject to it paying certain costs [43]. The costs to be paid by OMM included the costs of its actions against Mr Macauley and Mr Cribbes (see the order made on 3 May 2010 in relation to the action against Mr Macauley). No decision was made regarding the allocation of liability, if any, between the ProMet parties for OMM's costs as the parties' submissions on that matter did not reflect the determination that had been made in the supplementary decision. The parties were directed to confer about that matter.
6 OMM had also foreshadowed applying for special costs orders under s 215(2) of the Legal Practice Act 2003 (WA) (LPA 2003) and s 280(2) of the Legal Profession Act 2008 (WA) (LPA 2008). The parties were left to also confer about that matter.
7 The parties were unable to reach a complete agreement on the outstanding costs issues following conferral and a further hearing on the question of the costs of the consolidated actions was held. I have concluded that special costs orders should be made in respect of the costs awarded to OMM, Mr Macauley and Mr Cribbes and that the ProMet parties should be jointly and severally liable for 20% of the total costs awarded to OMM and ProMet 1 should be liable for 80% of those costs (in the terms in which OMM expressed its proposal, the ProMet parties should be jointly and severally liable for 15% of OMM's costs and ProMet 1 should be liable for 60%).
Special costs orders
The parties' position
8 All parties sought special costs orders under s 215(2) of LPA 2003 and s 280(2) of LPA 2008 in respect of those costs to which they were entitled. No party submitted that another party was not entitled to a special costs order (see at ts 2171 in relation to the ProMet parties' position).
The principles relevant to an application under s 215(2)/s 280(2)
9 A special costs order may be made under s 215(2) LPA 2003 and s 280(2) LPA 2008 where the court is of the opinion that 'the amount of costs allowable in respect of a matter under a costs determination is
(Page 8)
- inadequate because of the unusual difficulty, complexity or importance of the matter'. The court is required to form an opinion about those matters; the power to make an order is is not engaged merely by the party to be charged with the liability to pay costs consenting to an application. Further, the matters about which the court is required to form an opinion are inter-related; in effect, the court must form a composite opinion.
10 The principles relevant to an application under s 215(2)/ s 280(2) of the LPA Acts were summarised by the Chief Justice in Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254(S):
(a) the policy considerations that should guide a court when addressing an application under s 280(2)/s 215(2) are first, that the court should not usurp the role of a taxing officer and second, that at least where party and party costs are concerned, the court should make an order that will give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party [13];
(b) the word 'unusual' when used in s 280(2)/s 215(2) only qualifies the word 'difficulty'; it does not qualify the words 'complexity' or 'importance' [17];
(c) the inclusion of the word 'importance' allows the court to consider whether the work done was appropriate to the significance of the issues that arose in the litigation [19];
(d) whether an order should be made under s 280(2)/s 215(2) was a matter of 'impression rather than … a matter of detailed evaluation as the determination was ordinarily made before a taxation had been undertaken' [20].
11 It is also relevant to note the observation of Templeman J in Fagan v Morien [2008] WASC 54(S) that the expression 'unusual difficulty' suggests that the matter was more difficult than would ordinarily be expected in an application of the kind under consideration. In O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36(S), the Chief Justice stated that:
… it seems to me that the word 'unusual' means unusual having regard to what one might describe as the usual run of civil cases. The question is not, for example, in this case, whether this was an unusually difficult, complex or important case for specific performance for a contract for the sale of land which at the time the contract was entered into was not
(Page 9)
- subdivided. Rather, the question is whether this was an unusually difficult, complex or important case, having regard to the usual run of civil cases determined in the Supreme Court and generally in the District Court …
It also seems to me that the assessment of the question of whether or not there is 'unusual difficulty, complexity or importance' is essentially a value judgment to be made by the court. [23] - [24]
Conclusion
12 The relevant feature of this matter for costs was its factual density. The issues raised required lengthy and detailed expert evidence and an analysis of a substantial body of factual material. The magnitude of the case was apparent from the evidence of the witnesses who were called or whose statements were tendered by consent, the number of exhibits, the detail in the expert evidence, the parties' closing submissions and the reasons for decision. The consolidated proceedings were unusually difficult for that reason when compared to the 'usual' cases prosecuted in this court and the District Court. They were also factually complex.
13 I accept that the amount of costs that would be allowed by certain items in the applicable legal costs determinations would be inadequate for those reasons. I have formed that opinion in relation to the cost orders made in favour of OMM having regard to the nature and variety of the factual questions raised in the consolidated proceedings and the magnitude of material relevant to litigating those questions.
14 The claims made against Mr Macauley and Mr Cribbes were confined to allegations that they were knowingly involved in conduct by ProMet 1 that was alleged to have been misleading or deceptive. However, ProMet 1's conduct was said to have included misrepresentations about the skill and competence that it would exercise to achieve design specifications and criteria for the plant (par 19(e) of the re-amended defence and counterclaim in the consolidated proceedings; in relation to Mr Macauley, see par 19(e) of the re-amended defence and counterclaim dated 9 December 2009 [CRT.0050.0001]). That allegation raised similar issues to OMM's claim that the ProMet parties were negligent in designing the process plant (see par 25(e) of the re-amended defence and counterclaim in the consolidated proceedings and the reference to pt A of sch 1 in the particulars to that paragraph and the equivalent paragraphs in [CRT.0050.0001]). Consequently, Mr Macauley and Mr Cribbes were confronted with the same body of factual material as the ProMet parties in defending the claims made against them. In my opinion they are entitled to orders under s 215(2) LPA 2003/s 280(2) LPA
(Page 10)
- 2008 having regard to the unusual difficulty and complexity of the factual questions that were raised by the claims made against them.
15 The orders to be made are that the costs of OMM, Mr Cribbes and Mr Macauley are to be taxed without regard to the limits imposed by the items in the applicable Legal Practitioners (Supreme Court)(Contentious Business) Determinations for pleadings, including the giving of particulars; giving discovery; inspection; getting up; counsel fees for trial and instructing solicitor attending trial; drawing up bills of costs and taxation of costs. The parties are to submit minutes of the orders that give effect to these reasons, recognising, for example, that not all of the items of the costs determinations to which reference has been made will apply to Mr Macauley's entitlement to costs.
16 The effect of the orders will be to permit the parties to argue in a taxation that the amount that ought to be allowed for any of those items should exceed the scale. It will be for the taxing officer to determine what is reasonable for each item, including whether the maximum amount allowed should be exceeded. The fact that Mr Cribbes, Mr Macauley and the ProMet parties were represented by the same solicitors and Mr Cribbes and the ProMet parties by the same counsel will obviously be relevant to that determination.
The ProMet's parties liability for OMM's costs
The parties' submissions
17 As has been noted, OMM is entitled to recover 75% of its costs in the consolidated proceedings. OMM submitted that each of the ProMet parties should be jointly and severally liable for 25% of the costs and that ProMet 1 should be solely liable for 50% of the costs (that is, one third joint and several liability for the total costs awarded to OMM by agreement or on a taxation; ProMet 1 to be liable for two-thirds of the costs). That allocation was said to reflect four matters: OMM's success in establishing that the ProMet parties had been negligent in the design of the process plant; the failure of the ProMet parties to establish that they were entitled to the cost of performing variation work; the fact that the ProMet parties did not advise OMM that, at a point in the design process, ProMet 1 had ceased to undertake the design work and ProMet 2 had commenced to perform the work; and the fact that OMM was unable to determine what work had been performed by each of the ProMet parties from the way in which they had pleaded their defence to OMM's claims.
(Page 11)
18 The ProMet parties contended that they should be jointly and severally liable to pay 5% of the costs awarded to OMM and that ProMet 1 should be solely liable for the balance of those costs. That was said to reflect the following matters: the fact that the ProMet Action formed a 'comparatively minor' part of the consolidated proceedings; that ProMet 1 was ordered to pay 96.43% of the total amount awarded to OMM in damages and that ProMet 2 was largely successful in defending the claims made against it but it has not been awarded any costs for that success.
Order 66 r 2, special orders and the relevant principles
19 Order 66 r 2 of the Rules of the Supreme Court 1971 makes provision for costs where there are several causes of action or defendants 'in the absence of any special order'. Rule 2(e) provides that, 'if there are several defendants and the plaintiff has a verdict against each of them, each of them shall be liable to the plaintiff for the entire costs although they defend separately: Provided that the Court may from time to time make an order or orders as between several defendants apportioning the liability as between themselves and the recovery of contribution'.
20 Order 66 r 2(e) reflects a general rule that the liability for costs should be joint and several where the court makes an order for the payment of costs by multiple parties. The rule gives effect to the fundamental principle that the plaintiff is entitled to be indemnified for its costs of an action in which it has succeeded. So, for example, Fisher J observed in Trade Practices Commission v Nicholas Enterprises Pty Ltd(No 3) (1979) 42 FLR 213, 224 that, 'the plaintiff as the successful party is prima facie entitled by way of indemnity to its costs of the action, and if one of the unsuccessful defendants is unable or unwilling to meet its share of the obligation, the misfortune should be that of its "partner in crime" and not of the plaintiff'. See also R Quick, Quick on Costs (loose leaf) at [4.3390].
21 It is, however, necessary to note several points about the application of the principal embodied in O 66 r 2(e) to the circumstances of this matter.
22 First, the question now under consideration concerns the respective liability of the ProMet parties for payment of the costs that have been ordered and not what order should be made for costs having regard to the relative success or failure of each party in the consolidated proceedings. The costs orders that have already been made reflect the outcome of various claims and counterclaims that were determined in the consolidated
(Page 12)
- proceedings. However, as will become apparent, that statement is subject to a qualification that reflects the unusual circumstances of this matter.
23 Second, as the reference in TPC v Nicholas Enterprises to 'partner in crime' suggests, the notion that two or more unsuccessful defendants will ordinarily be jointly and severally liable for the costs awarded to the successful plaintiff reflects an assumption about the basis on which the defendants were found liable for the relief granted. Most obviously, multiple tortfeasors who have been held to be jointly and severally liable to the plaintiff for damages should, likewise, be jointly and severally liable for the costs of the action establishing their liability. Similarly, defendants who were co-obligors should ordinarily be jointly and severally liable for the costs of proceedings even if their liability in respect of the obligation was not joint. Joint and several liability for costs in those instances ensures that effect is given to the basic principle that the successful party should be indemnified for its costs. That principle will usually require that the liability for costs between multiple defendants should be joint and several whenever the plaintiff has succeeded against them on some common basis.
24 Third, ProMet 1 and ProMet 2 were not joint tortfeasors or joint contractors. ProMet 1 was a party to contracts with OMM pursuant to which it owed duties of skill and care. It performed design work on the proposed plant up to a particular date. ProMet 2 was not in a contractual relationship with OMM but it performed design work for the proposed plant after that date. ProMet 1 and ProMet 2 were found to have been negligent in designing different aspects of the process plant. The primary finding of negligence against ProMet 1 concerned the failure to take into account the likely characteristics of the ore to be mined and processed in designing the materials handling components of the process plant. ProMet 2 was found to have been negligent in designing the location of a rock breaker. Its breach of duty did not involve any question concerning the likely characteristics of the feed ore. None of the evidence relevant to establishing the duty of care over ProMet 1 and its breach was relevant to the finding made against ProMet 2. They were each found to have been negligent for very different reasons. Consequently, the loss and damage sustained by OMM as a result of the negligence of each of the ProMet parties was different. Damages were necessarily assessed and awarded separately. There was a very substantial difference in the amount of damages awarded against each of the ProMet parties.
25 Fourth, neither OMM nor the ProMet parties pleaded and presented their cases at trial in a way that reflected the findings that were made
(Page 13)
- regarding the respective liabilities of each of the ProMet parties for the loss and damage claimed by OMM. In particular, OMM simply pleaded its negligence claims against each of the ProMet parties in the alternative. The allegations of negligence made against the ProMet parties were particularised by the matters pleaded in pt A of sch 1 to the statement of claim. Those matters made no distinction between ProMet 1 and ProMet 2.
26 Fifth, OMM did not admit that ProMet 2 had undertaken any of the design work for the process plant. It pleaded its allegations of negligence on the hypothetical basis that a finding was made ProMet 2 did, in fact, perform some of the design work. The pleading was said to reflect the fact that OMM did not know at the time that ProMet 1 had ceased to perform design work as a result of a restructuring of its business. It was admitted that OMM was not told of the restructure at the time that it occurred and while the design work was being undertaken.
27 Sixth, the cause of action alleged against ProMet 2 was in negligence. Multiple other causes of action were alleged in the alternative against ProMet 1.
28 Seventh, OMM submitted that it was unable to determine what work had been performed by each of the ProMet parties from the way in which the case had been pleaded. Reference was made to the answers given by the ProMet parties to a request for further particulars of their amended statement of claim in the ProMet Action [CRT.0069.0001].
29 The ProMet parties first pleaded that ProMet 2 had performed design work in an amended statement of claim in the ProMet Action dated 3 April 2007 [CRT.0060.0001]. The ProMet parties alleged that ProMet 2 commenced performing the design work as the agent for ProMet 1 from 26 August 2005. Which variations claimed in the ProMet Action had been performed by which ProMet party was identified in the answers to the request for further particulars. I was unable to ascertain how the answers to the request obscured which ProMet party performed the items of work that were the subject of the ProMet Action. Further, the ProMet Action formed a comparatively small part of the consolidated proceedings. The issue is the extent to which each of the ProMet parties should be held jointly and severally liable for OMM's costs given the conduct and outcome of the whole of the consolidated proceedings.
30 Lastly, it appeared that OMM knew from at least the pleading of the amended statement of claim in the ProMet Action in April 2007 that the
(Page 14)
- ProMet parties alleged that ProMet 2 commenced performing design work from late August 2005. OMM was required by its misleading and deceptive claim to analyse the state of the design work at various times in the project up to May 2005. It ought not to have been too difficult for OMM to analyse which of the ProMet parties performed which items of work for the purpose of the negligence claims made against those parties in the OMM Action.
31 Underpinning the submissions made by the ProMet parties was the proposition that OMM had been substantially unsuccessful in the claims that it made against ProMet 2 and liability for costs should reflect that lack of relative success. The submission echoed, perhaps, what is sometimes referred to as the 'rule of thumb' in cases involving multiple parties where a plaintiff has succeeded against one or more of the defendants but has failed against other defendants: see, for example, Currabubula Holidays Pty Ltd v State Bank of New South Wales [2000] NSWSC 232 (the parties did not refer to the rule in their submissions). That is obviously a different situation to a case where the plaintiff has succeeded against all defendants: and see Australand Corporation (Qld) Pty Ltd v Johnson & Ors [2007] QSC 128. Nevertheless, the rule of thumb indicates that it may be necessary to mould cost orders so that a successful party is not overly compensated and an unsuccessful defendant unfairly burdened.
32 In this instance, much of the consolidated proceedings were devoted to the claims made by OMM against ProMet 1 in the OMM Action. ProMet 2 substantially succeeded on the allegations that it was negligent. The pleading of the negligence claims against the ProMet parties in the alternative could not be entirely explained by the failure to inform OMM of the change in business of ProMet 1 during the project (although, I accept that it was reasonable for OMM to make no admission about which party did what work given what had occurred).
33 The order that has been made that OMM recover only 75% costs of the consolidated proceedings did not fully reflect the separate position of each of the ProMet parties in the proceedings. That was apparently recognised by OMM in its proposal for the apportionment of liability. However, the proposed apportionment of one-third/two-thirds does not, in my view, strike the appropriate balance having regard to the various matters referred to above. I consider that the ProMet parties should be jointly and severally liable for 20% of the total costs awarded to OMM and ProMet 1 should be liable for 80% of the costs (in the terms in which OMM expressed its proposal, the ProMet parties should be jointly and
(Page 15)
- severally liable for 15% and ProMet 1 should be liable for 60%) having regard to those matters.
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