| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : BROOME CITATION :MARTIN -v- CADENG PTY LTD [2011] WADC 73 (S) CORAM : DAVIS DCJ HEARD : 1315 DECEMBER 2010, 14 JUNE 2011 DELIVERED : 11 MAY 2011 SUPPLEMENTARY
DECISION : 15 JULY 2011 FILE NO/S : BRO CIV 1 of 2009 BETWEEN : DENNIS MARTIN Plaintiff
AND
CADENG PTY LTD
First Defendant
BROOME MINING SERVICES PTY LTD
Second Defendant
Catchwords: Costs - Claim for indemnity costs - Calderbank offer - Sanderson order - Costs of a successful defendant - Costs apportionment where plaintiff fails on a cause of action - Turns on own facts
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Legislation: Rules of the Supreme Court 1971,O 66 r 1(1) and r 2(a) Result: Plaintiff entitled to recover only 50% of his costs from first defendant
Plaintiff to pay costs of the successful second defendant Representation: Counsel:
Plaintiff : Mr G T Stubbs
First Defendant : Ms C E Kierath
Second Defendant : Ms C E Kierath
Solicitors:
Plaintiff : Julia Barber & Co (Legal) Pty Ltd
First Defendant : Norton Rose Australia
Second Defendant : Norton Rose Australia
Case(s) referred to in judgment(s):
Coastal Hire Pty Ltd v Ewers [2009] WASCA 36
Cretazzo v Lombardi (1975) 13 SASR 4
Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261; [1993] FCA 259
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298
JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39(S)
Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134
Martin v Cadeng Pty Ltd [2011] WADC 73
Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516
Permanent Building Society v Wheeler [No 2] (1993) 10 WAR 569
Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85
Sanderson v Blyth Theatre Company [1903] 2 KB 533
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd (No 3) [2009] WASC 352(S)
Wilden Pty Ltd v Green [2009] WASCA 38; (2009) 38 WAR 429
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1 DAVIS DCJ: This supplementary decision relates to the issue of costs, following my decision delivered on 11 May 2011, Martin v Cadeng Pty Ltd[2011] WADC 73(Reasons).
2 The plaintiff in this action, Mr Martin, had claimed that: 3 I found that Cadeng, but not Broome Mining, was Mr Martin's sole employer from and after 1 July 2009 and at the relevant time of the termination. I found that Cadeng had terminated the employment contract when it was not entitled to do so and without notice or payment in lieu of notice. I found that Mr Martin had failed to prove the agreement for the bonus payment of $150,000. 4 On 27 May 2011 I made orders giving judgment for Mr Martin against Cadeng for damages for the wrongful termination of the employment contract. These damages represented Mr Martin's salary for the 12 month notice period provided in the employment contract, less payments he had received which were referrable to that salary, plus interest: Reasons [119] to [124]. I dismissed the action against Broome Mining and adjourned the question of costs to a hearing on 14 June 2011, with the parties to file written submissions. 5 The general rule is that costs follow the event and, in the absence of special circumstances justifying some other order, a successful party is entitled to a costs order: Rules of the Supreme Court1971, O 66 r 1(1). This general rule is subject to a number of qualifications. One of those qualifications is that, in the absence of any specific order, where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought: Rules of the Supreme Court O 66 r 2(a). Costs are, however, at the discretion of the Court, which is very wide. The discretion as to costs is to be exercised judicially: Naidoo v Williamson[2008] WASCA 179; (2008) 37 WAR 516 [39]. (Page 4)
6 In this case Mr Martin succeeded only on one of his claims, the wrongful termination claim, against one of the defendants, and failed in the claim for the bonus payment. Each of the parties has raised a number of matters which they have submitted are special circumstances which justify a departure from the general rule as to costs set out in O 66 r 1 and the rule where a plaintiff does not succeed in all his causes of action, as set out in O 66 r (2)(a).
The plaintiff's submissions as to costs 7 Mr Martin has applied for orders that: 8 In written submissions alternative orders for costs are suggested if Mr Martin does not succeed on the application for indemnity costs or a Sanderson order. These are: 1. There be no order as to costs of the second defendant (Broome Mining); 2. The first defendant (Cadeng) should pay the plaintiff's (Mr Martin's) costs on a party/party basis; or 3. Alternatively to 2, the first defendant should pay a portion of the plaintiff's costs on a party/party basis; or 4. Alternatively to all of the above, there should be no order as to costs as between the plaintiff and the defendants.
The defendants' submissions as to costs 9 Cadeng and Broome Mining have submitted that: 1. Broome Mining should be entitled to its costs, the claim against it having been dismissed; (Page 5)
10 In response to Mr Martin's claim for costs on an indemnity basis based on the offers made between 24 and 30 July 2009 it is contended that in the terms of the offers made there was no real compromise and it was not unreasonable for the offers to be refused by Cadeng. 11 Cadeng and Broome Mining submit that a Sanderson order is not appropriate. It was neither reasonable nor proper for Mr Martin to have brought proceedings against Broome Mining. It was further submitted that Mr Martin has failed to demonstrate that anything said or done by Cadeng led him to sue Broome Mining and, in fact, he misconceived the claim for wrongful termination against Broome Mining. 12 The particular costs orders sought by the defendants are: Should an indemnity costs order be made? 13 The principles applicable to an award of indemnity costs following the rejection of a Calderbank offer were set out by the Court of Appeal in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16] - [32]. The test which must be applied in Western Australia in deciding whether to award indemnity costs against a party who has a rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances. 14 The significance of a Calderbank offer is that it requires the recipient of the offer to make a reasonable assessment of the advantages of the offer, weighed against the possible disadvantages of proceeding. The mere fact, however, that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable: Ford Company of Australia Limited v Lo Presti [18]. (Page 6)
15 The following circumstances and facts should be taken into account when determining whether it was unreasonable for the other party not to accept or to reject a Calderbank offer: 1. The stage of the proceedings at which the offer was received; 2. The time allowed to the offeree to consider the offer; 3. The extent of the compromise offered; 4. The offeree's prospects of success as at the date of the offer; 5. The clarity with which the terms of the offer were expressed; and 6. Whether the offer foreshadowed an application for indemnity costs in event of the offeree rejecting it. see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; Ford Company of Australia Limited v Lo Presti [19]. 16 It is for the person seeking indemnity costs to persuade the court that such an order should be made: Ford Company of Australia Limited v Lo Presti [21]. 17 Further when an application is based upon the suggested unreasonable refusal of a Calderbank offer of compromise, the determination is not to be made with the benefit of hindsight gained as a result of the outcome of the trial, but upon the basis of the circumstances as they were presented at the time when the offer was made: see Ford Company of Australia Limited v Lo Presti [89]; Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd (No 3) [2009] WASC 352(S) [20]. 18 By correspondence written by Mr Martin's solicitor between 24 July 2009 and 30 July 2009, Mr Martin offered to settle with the first defendant, Cadeng. The without prejudice correspondence made on Mr Martin's behalf did not, however, address the claim for the $150,000 bonus payment. All correspondence addressed only the claim for wrongful termination. 19 The initial offer made by letter dated 24 July 2009 was headed 'without prejudice save as to costs' on the front page. In the letter it was claimed that the termination of Mr Martin's employment had breached the contract of employment, various provisions of the Fair Work Act 2009 and/or its predecessor Act, the Fair Trading Act 1987 and the Equal (Page 7)
Opportunity Act 1984. No details of how each of these had been breached were set out in the letter. The offer made was essentially to accept the full amount of Mr Martin's claim in this action, that is 12 months salary, plus superannuation and accrued leave entitlements. There were some other terms of the offer including that Mr Martin should retain his laptop (with Mr Martin contending the laptop was given to him and was his property), that 'payments are to be characterised/made in a manner to be directed' and that the parties bear their own costs and enter into a deed to record the settlement. The offer was stated to be open only for seven days from the date of the letter. 20 In an email response from Cadeng's solicitors on 27 July 2009, the offer was rejected, although the question of settlement appears to have been left open. For example, in this email Mr Martin's solicitor was requested to clarify the basis of the claim for 12 months salary and other entitlements. Questions were asked about the basis upon which leave loading was payable and the manner in which the monies were proposed to be paid. It was suggested that in the event of an agreement being reached, the parties should enter a deed and Mr Martin's solicitor was requested to send a copy of the proposed document. 21 There followed an email exchange, dealing mainly with issues relating to Mr Martin's return of company property, but in which Cadeng's solicitors stated that if Mr Martin wished the settlement proposal to be considered further, 'please provide the requested particulars'. 22 The next correspondence addressing the settlement proposal was a letter from Mr Martin's solicitor dated 30 July 2009, with a draft deed of release enclosed, which it appears was sent to Cadeng's lawyers by facsimile. The basis of the claim was stated to be 'paragraph 16 of the employment contract dated 28 December 2005, the Fair Work Act 2009 and/or its predecessor Act, the Fair Trading Act 1987 and the Equal Opportunity Act 1984'. The sections of these Acts which Cadeng was said to have breached were not identified. There was an explanation as to leave loading. The manner of payment was said to be 'as set out in the enclosed draft deed'. After addressing some other issues, the letter concluded by confirming that the offer remained open until 31 July 2009. 23 The deed which accompanied the letter of 30 July 2009 named the Employer as Cadeng only. The deed contained no background recital, but cl 1 recited that the payment by the Employer (the amount of payment in the draft was not yet specified) was made 'in full and final settlement of all matters arising in relation to the Employee's employment without (Page 8)
admission of liability on the part of the Employer'. The deed also provided that the Employer must accept an undated letter of resignation from the Employee (Mr Martin) with effect from 14 July 2009. 24 There is no evidence of any reply to this letter of 30 July 2009. In my view that is understandable, as effectively there was only 24 hours given to Cadeng's solicitors to consider, obtain instructions and respond to this letter and the terms of the draft deed. 25 In the circumstances at the time when the offer was made, I do not consider that Cadeng acted unreasonably in not accepting this offer, for the following reasons. 26 This was an offer made before the commencement of proceedings. There was, however, very little time allowed to Cadeng to consider the explanations provided in the letter of 30 July 2009 or the terms of the draft deed. In my view Cadeng could not have made a reasonable assessment of the advantages of the settlement proposal and deed, weighed against the possible disadvantages of proceeding, in the time provided. 27 There was little, if any, element of compromise in the offer, as essentially what was being offered was that Cadeng pay the full amount of Mr Martin's claim pursuant to the terms of the employment contract, plus other entitlements. What was being offered in this without prejudice offer was also substantially the same as what I construed to have been an offer in the earlier correspondence from Mr Martin's lawyer dated 9 July 2009: Reasons [66] and p 28, par 9 of the letter. 28 Based on my findings following trial, it might be said that Cadeng's prospects of success as at the date of the offer were not good, however, this matter cannot be considered with the benefit of hindsight. In my view, having regard to the previous correspondence in the letters of 7 and 14 July 2009, it could not be said that Cadeng had no prospect of success and ultimately the determination of the wrongful termination issue depended on an assessment of a number of facts. 29 While the terms of the initial offer as expressed were reasonably clear, and the basis for the contractual claim was clarified in the subsequent letter of 30 July 2009, the other claims for alleged breaches of the Fair Work Act 2009 and/or its predecessor Act, the Fair Trading Act 1987 and the Equal Opportunity Act 1984 were not explained at all. (Page 9)
30 Finally, neither of the two letters of 24 and 30 July 2009 foreshadowed an application for indemnity costs in the event of Cadeng rejecting the offer. 31 Mr Martin has failed to satisfy me that I should exercise my discretion to make an award of indemnity costs in his favour. I am not prepared to award indemnity costs in favour of Mr Martin against Cadeng.
Should a Sanderson order be made? 32 Where a plaintiff succeeds against one defendant but fails against another defendant in an action against them for substantially the same relief, the court may make an order that the costs of the successful defendant be paid directly or indirectly by the unsuccessful defendant. 33 The circumstances in which it is appropriate to order that the successful defendant's costs of the action should be borne by the unsuccessful defendant were discussed by the Court of Appeal in Coastal Hire Pty Ltd v Ewers [2009] WASCA 36 [26] - [34]. Normally a Sanderson order will be made only where: 1. The plaintiff's claim against two or more defendants are substantially connected or inter-dependent; 2. The plaintiff acted reasonably in suing the successful defendant; and 3. There is something in the conduct of the unsuccessful defendant which makes it just to move the burden of the successful defendant's costs from the plaintiff to the unsuccessful defendant. 34 Mr Martin's claims against both Cadeng and Broome Mining in relation to the issue of the wrongful termination of his employment were substantially connected if, at the time of the termination, both of them had employed Mr Martin. It is true that Mr Martin was employed by both defendants for a substantial period, but from 1 July 2009 there was a change in his employment from a joint employment by Cadeng and Broome Mining to employment only by Cadeng. It was contended on Mr Martin's behalf that there was 'no clear and unequivocal cessation or termination' of his employment by, for example, written notice from Broome Mining. I am unable to accept this contention. The change from being employed jointly by Cadeng and Broome Mining to Cadeng alone was, in fact, initiated and intended by Mr Martin: see Reasons [24] - [27]. Mr Martin later completed a PAYG record to reflect this change: Reasons (Page 10)
[28]. Mr Martin knew that as from 1 July 2009 Broome Mining had ceased all activity: Reasons [27]. The letter of 9 July 2009 written by Mr Martin's lawyer on his instructions concerning the termination of employment was addressed to Mr Bray, the director of Cadeng, and stated 'I have been consulted by Mr Dennis Martin regarding his employment with Cadeng…': Reasons [29]. The without prejudice correspondence and the draft proposed settlement deed drafted by Mr Martin's solicitor referred only to Cadeng as the employer. None of the pre-action correspondence raised any claim against Broome Mining. All of this establishes to my satisfaction that Mr Martin knew that his employer was Cadeng and not Broome Mining. 35 Based on all of these circumstances, I do not consider that Mr Martin acted reasonably in suing the successful defendant, Broome Mining. Furthermore I do not consider there is anything in the conduct of Cadeng which makes it just to move the burden of the costs of the successful defendant, Broome Mining, from Mr Martin to Cadeng. 36 In the particular circumstances of this case I do not consider it just to make the Sanderson order sought, and I decline to make that order.
Should there be no order as to Broome Mining's costs? 37 It was submitted on behalf of Mr Martin that if no Sandersonorderwas made, there should be no order as to costs of the second defendant (Broome Mining), bearing in mind the relationship between the defendants and the nature of the claim against Broome Mining. 38 It is true that there was and is a close relationship between the two defendants with Cadeng's director, Mr Bray, representing Broome Mining at all relevant times, even though he was not a director of Broome Mining. Broome Mining was represented by the same solicitor and had the same counsel and it was submitted there should be few, if any, additional costs which would have been incurred by Broome Mining over and above those incurred by Cadeng. While these matters affect the quantum of Broome Mining's costs and are a relevant consideration for the taxing officer, in my view they ought not disentitle Broome Mining to an order for its costs. 39 I have found that Mr Martin did not act reasonably in joining Broome Mining as a party to the proceedings and I consider there was little merit to his claim against that company. I find that Broome Mining is entitled to an order for costs to be paid by Mr Martin and there is nothing which would justify a departure from the general rule that as a successful party, Broome Mining is entitled to its costs. (Page 11)
What are the appropriate orders as to costs between Mr Martin and Cadeng? 40 I have determined that I will not award indemnity costs in favour of Mr Martin against Cadeng, and that a Sanderson order should not be made against Cadeng. I have also determined that Broome Mining is entitled to its costs of the action. I turn now to consider the costs orders which should be made in the situation where Mr Martin has brought two causes of action against Cadeng, and has succeeded in only one. 41 There is a suggestion made on behalf of Mr Martin that Cadeng pay a proportion of his costs, although there is no proportion suggested. Suggestions have also been made by both parties that an order I could make is that there be no order as to costs; in other words, the parties each bear their own costs. 42 The effect of O 66 r 2(a) of the Rules of the Supreme Court is that a defendant is prima facie entitled to its costs on a cause or causes of action on which the plaintiff fails. However, an order of that kind does not have to be made as a matter of course. If the court does not wish to make orders in accordance with O 66 r 2(a), it may decline to do so. It retains a discretion: Permanent Building Society v Wheeler [No 2] (1993) 10 WAR 569,574 – 575 (Anderson J); Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134 [12] - [16] (Pullin JA); Wilden Pty Ltd v Green [2009] WASCA 38; (2009) 38 WAR 429 [171] – [173] (McLure JA). 43 What I must do is look at the realities of the case and attempt to do justice. That may involve one order for the general costs of the action moulded as necessary to ensure that substantial justice is done: Permanent Building Society v Wheeler [No 2]. There are practical and pragmatic reasons to deal with costs in this way, rather than attempt to award the costs of one issue to one party and the costs of another issue to the other party: Phillips Fox(a firm) v Westgold Resources NL [2000] WASCA 85 [28] (Owen J);JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39(S) [3] (Pullin JA). 44 On behalf of Mr Martin it is contended that the bonus payment issue was a relatively simple factual issue. This issue required, however, evidence to be given by each of Mr Martin and Cadeng's director, Mr Bray, dealing only with that issue. Significantly for Cadeng, this issue also required the calling of additional evidence from the accountant Mr Mathew Salmon and another witness, Ms Cassandra Russell (although ultimately nothing turned on the evidence which she gave). Neither of (Page 12)
those witnesses was necessary for the wrongful termination claim. In my view the bonus payment was a significant issue taking a roughly equal amount of the time taken in the trial, not only in relation to the evidence but also argument. 45 Taking a broad and overall view of the mixed outcome in this case, however, I do not consider the result in respect of costs should be that there is no order as to costs. This is a situation where the ultimate ends of justice would not be served by making such an order. Cadeng resisted all claims for relief and put all matters of fact into issue. Mr Martin was successful in part and has obtained a judgment against Cadeng on a matter which was both of importance and some value. I would not want to lend encouragement to any suggestion that a defendant against whom judgment is entered in favour of the plaintiff ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs merely because of the defendant's success on a particular issue or issues: Cretazzo v Lombardi(1975) 13 SASR 4, 16 (Jacobs J);Permanent Building Society v Wheeler [No 2] (574). The fact that Mr Martin did not succeed on all of his causes of action should not deprive him of all of his costs. 46 In the circumstances of this case I consider that the fairest outcome would be to order that the unsuccessful defendant, Cadeng, pay a proportion of Mr Martin's costs. 47 As to what proportion of Mr Martin's costs Cadeng should pay, the question of apportionment is not a matter of mathematical precision. It is very much a matter of discretion for the trial judge and often depends on matters of impression and evaluation: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261; [1993] FCA 259 [45], [46]; JWH Group Pty Ltd v Kimpura Pty Ltd [5]. 48 An assessment of the matter is bound to be arbitrary but I consider that Mr Martin should recover only 50% of his costs of the action against Cadeng. This reflects my overall assessment that the bonus payment issue, on which he failed, occupied roughly one half of the time taken at trial.
Orders 49 The costs orders I will make are that: 1. The first defendant pay 50% of the plaintiff's costs of the action to be taxed, if not agreed, including any reserved costs; (Page 13)
2. The plaintiff pay the second defendant's costs of the action to be taxed, if not agreed.
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