Mendrecki v Doan & Pham (No 3) - [2007] SADC 18

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MENDRECKI v DOAN & PHAM & ORS (No 3)
[2007] SADC 18
Judgment of His Honour Judge Rice
1 March 2007
PROCEDURE - COSTS
Part of these proceedings related to a claim for breach of contract by the third defendant against the first and second defendants - third defendant succeeded in proving breach of contract but no entitlement to an indemnity and was awarded only nominal damages - claim by the first and second defendants for their costs in those circumstances.
Held: On the contract claim each party had mixed success and therefore, bearing in mind the discretion on costs, each party should bear its own costs.
First and second defendants were granted leave to amend their pleadings part the way through the trial - third defendant and fifth defendant properly entitled to seek expert advice before the trial continued - trial adjourned for a week - third defendant, fourth defendant and fifth defendant sought costs thrown away when trial meant to be proceeding.
Held: First and second defendants to pay costs thrown away of other defendants for the lost week.
Costs as between defendants - it was submitted on behalf of two defendants that an offer by those defendants to resolve the matter with the other defendants should have been accepted but was not - those defendants endeavouring to resolve the matter did better than their offer (that is, the other defendants are now worse off) and sought their costs and an indemnity for the plaintiff's costs.
Held: Subject to other orders, as between defendants, each defendant to bear its own costs.
District Court Civil Rules 2006 rule 263(1) and (3), referred to.
Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER 685, distinguished.
Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873; Oshlack v Richmond River Council (1998) 193 CLR 72; Pirrotta v Citibank Ltd and Others (1998) 72 SASR 259; Morris v McEwen and Another (2005) 92 SASR 281, considered.

MENDRECKI v DOAN & PHAM & ORS (No 3)
[2007] SADC 18
Introduction

This judgment is the third arising from the trial of an action: Mendrecki v Doan & Pham & Ors [2006] SADC 140. The primary judgment dealt with liability and quantum. All defendants, on a joint and several basis, were found liable to the plaintiff.
The second judgment, after dealing with an issue relating to insurance between the first and second defendants on the one hand, and the third defendant on the other, then dealt with costs orders between the plaintiff and all defendants and the plaintiff and particular defendants: Mendrecki v Doan & Pham & Ors (No 2) [2007] SADC 9.
This judgment relates to the question of costs as between the defendants and orders on the Contribution Notices.
I have directed that the plaintiff prepare Minutes of Order detailing all the orders made in these judgments.
Costs on the claim as between the third defendant and the first and second defendants
I found in the second judgment that the first and second defendants were liable in contract to the third defendant arising from a breach of their contract. I also found that the third defendant had failed to prove loss and was therefore only entitled to nominal damages, which I fixed at $10.00.
The first and second defendants apply for costs against the third defendant on this part of the third defendant’s claim because they have succeeded in avoiding having substantial damages awarded against them. In essence, it was submitted that, although the third defendant succeeded in litigating the breach of contract, an award of nominal damages meant that he effectively failed.
The third defendant made written submissions, which included a number of different approaches to the question of costs. The third defendant claims costs against the first and second defendants on the contractual claim because he says he succeeded in that respect. In this regard, the third defendant submits that his claim was not for damages but for an indemnity from the first and second defendants. The third defendant submits he was the successful party in that the contract and its breach were proved, although acknowledging, in the result, he was not entitled to an indemnity.
In the alternative, the third defendant submits that no order as to costs should be made between the first and second defendants and the third defendant on the contract issue.
I observe that some trial time was taken up with evidence and submissions as to the terms of the contract and its alleged breach. No Court time was taken trying to prove quantum.
Some of the new Rules in relation to costs were referred to in Mendrecki (No 2). For present purposes, it is sufficient to refer again to Rule 263(1) where, as a general rule, costs follow the event. There are certain stated specific rules and exceptions, but the Court still has the power to depart from those rules and exceptions.
Where a plaintiff succeeds only in obtaining an award of nominal damages, that does not necessarily mean that he would be entitled to costs: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, per Devlin J at 874-876; Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER 685; Oshlack v Richmond River Council (1998) 193 CLR 72, per McHugh J at 97-98. Alltrans is readily distinguishable because the defendants admitted the breach of contract and the contest was as to the manner of calculation of any loss.
As Mr Dart, counsel for the first and second defendants emphasised, one of the questions becomes, what is “the event” or perhaps “events” for the purposes of the general rule. Depending upon how you approach an examination of the respective claims, there are really two key “events”, one is proof of breach of contract, the other is proof of an entitlement to an indemnity or perhaps damages.
Where a plaintiff succeeds only to the extent of receiving an award of nominal damages or trivial damages, the authorities do not support that such plaintiff is the successful party. For the purposes of the third defendant’s contract claim, “the event” sought was an indemnity. Such did not happen here.
Another way of approaching the question is to ask whether the third defendant really has been the successful party. The reality is that the third defendant on the one hand, and the first and second defendants on the other, have had mixed success. The third defendant has proved a breach of contract, but no entitlement to an indemnity, and was awarded nominal damages. In those circumstances, and bearing in mind the discretion, each party should bear their own costs on the contract claim.
Applications for costs for week commencing 28 November, 2005
This matter has, in part, been dealt with in Mendrecki (No 2). In that judgment I ordered that the first and second defendants pay the plaintiff’s costs for that lost week. The other defendants now also seek an order as to costs for that week against the first and second defendants. The view which I reached originally, and see no reason to depart from, is that the amendments sought and obtained by the first and second defendants against all other defendants justified the third defendant and the fifth defendant obtaining expert advice before the matter proceeded. For that reason I granted an adjournment of the trial for that week.
Bearing in mind the discretion on costs, I see no sufficient reason to deprive the other defendants their costs for that week. I order that the first and second defendants pay the costs thrown away of the third defendant, the fourth defendant and the fifth defendant for the five days commencing 28 November, 2005. Again I will leave it to the Taxing Master to ascertain costs actually thrown away. Such costs will be on a party and party basis.
Costs as between the defendants and orders on the Contribution Notices
In paragraph 178 of the primary judgment, I apportioned liability to the plaintiff as between all defendants. I said:
...I indicate that I would apportion responsibility for the injury at 50 per cent against the fifth defendant, 30 per cent against the fourth defendant, 10 per cent against the third defendant and 10 per cent against the first and second defendants.
Later in this judgment I deal with the form of the orders on the Contribution Notices by each defendant against the others. Again, for these purposes, the first and second defendants have been considered together.
It should be said that each defendant has succeeded and each defendant has failed on the Contribution Notices. Each has succeeded because some percentage of the responsibility for the plaintiff’s injury and damages has been sheeted home to other defendants. Each has failed because some measure of responsibility for the plaintiff’s injury still attaches to each. If there was nothing more to it, it may have been an appropriate approach to order that each defendant pay its own costs.
However, a submission has been made by Mr Stratford, on behalf of the first and second defendants, that they should be indemnified with respect to the plaintiff’s costs from 7 January, 2005, from all other defendants, either on a party and party basis or a solicitor and client basis. Further, it is submitted that the first and second defendants should recover their costs from that date from some or all of the other defendants.
Consideration of this submission involves looking again at the attempt by the first and second defendants to settle or resolve their liability with the plaintiff and the other defendants. The relevance of some of the correspondence is dealt with in Mendrecki (No 2) in the context of costs as between the plaintiff and the first and second defendants. It is necessary to restate some of the background.
After the first block of the trial in December, 2004, efforts were made to resolve the matter as between the plaintiff and all defendants, and as between the defendants.
There was a letter of 23 December, 2004 from the solicitors for the first and second defendants to the solicitors for the plaintiff offering to pay $100,000 towards an assessment of the plaintiff’s damages or 25 per cent of those damages to be assessed. In addition, the offer was to pay an appropriate proportion of the plaintiff’s costs on a party and party basis.
By a letter of the same date, the solicitors for the other defendants were sent a copy of the letter of offer to the plaintiff. The relevant portions of this letter were quoted in Mendrecki (No 2).
I have no trouble in accepting that the letters from the first and second defendants to the plaintiff and other defendants were attempts to settle the action within the meaning of Rule 263(3). Even under the former Rules it would have been proper to have regard to such a letter on the question of costs (Pirrotta v Citibank Ltd and Others (1998) 72 SASR 259; Morris v McEwen and Another (2005) 92 SASR 281), but the matter is now put beyond doubt by sub-rule (3).
Essentially, the submission on behalf of the first and second defendants is that they should have some of their costs and some of their portion of the plaintiff’s costs against the other defendants because they bettered their offer to the other defendants. The effect of their argument is to say that they remained in the case and remained liable for the plaintiff’s (ongoing) costs because the other defendants failed to accept an offer that is greater than that for which they are now liable after apportioning liability pursuant to the Contribution Notices. Put another way, having regard to the result, they should not have been in the trial after early 2005 and should not be responsible for the plaintiff’s costs after whatever date is fixed upon. To use the language often employed in this situation, they did better than their offer as between the defendants. It is submitted that the other defendants are now worse off for not having accepted the offer. It must be acknowledged that this is a relevant matter but it is not the sole criterion to take into account in the weighing and discretionary process.
It is necessary to say something about the offer by the first and second defendants reduced to monetary terms having regard to the judgment and apportionment between defendants.
There has been judgment for the plaintiff against all defendants for $797,897.22. In Mendrecki (No 2), I decided that the offer by the first and second defendants to the plaintiff had not been bettered because the judgment amount was ordered to be paid by the defendants jointly and severally. However, the offer, as between the defendants, needs to be considered on a different footing.
As between the defendants, the first and second defendants offered $100,000 or 25 per cent of damages to be assessed. Using either method, the offer is equivalent to $100,000 or 25 per cent of the judgment sum, which is an amount of $199,474.31. As a result of the judgment, the first and second defendants are liable for only about $80,000. On either basis, the first and second defendants bettered the offer made to the other defendants.
The arguments put on behalf of the remaining defendants attack the efficacy of the offer by the first and second defendants.
First, it is said that at no place in the letter of offer do the first and second defendants accept any liability to the plaintiff. On the contrary, it advances the argument that s 72 of the Development Act applies so as to establish a proportionate liability approach. It was submitted that the letter of offer did not agree to judgment for the plaintiff being against the first and second defendants also, but rather they were prepared to put money in, or a percentage of damages, to settle the matter. Although it is a regular occurrence that offers to resolve are made without any admission of liability, the letter of offer left the topic unclear. In my view, that argument cannot have any bearing on my decision on this point. The offer was genuine and able to be accepted even with a denial of liability.
Secondly, it was submitted that, in the situation that now exists, the plaintiff can seek to enforce the judgment against all or some of the defendants. If the offer by the first and second defendants had been accepted by one or some of the other defendants, there would be a reduced number of defendants against whom judgment could be enforced. Therefore, it was said, they would have been worse off because the full amount, or a large proportion of it, could not be enforced against the first and second defendants.
As to this second point, I do not consider that I can properly take into account the ability of some defendants to meet the judgment sum and the inability of others to do so, as part of my decision on costs. Not only is the material that I have too imprecise, it may lead to a separate, prolonged inquiry which should be resisted as a matter of policy.
Finally, it was put that, in reality, this was an offer that had to be accepted by all defendants and that, for differing reasons, the defendants were not prepared to accept it.
It must be said that this was complex litigation both as to liability and quantum. Each defendant was saying that there was no liability in negligence by he, she or it. Further, if there was liability and the Development Act applied, liability was proportionate. Any potential liability between the defendants was sought to be deflected onto another defendant as well as the plaintiff.
On the question of quantum, the extent of injury and incapacity was very much in dispute. The factual allegations by the respective parties were quite diverse and it was unsurprising that the defendants were unable to agree with the offer by the first and second defendants.
In evaluating this final argument, it is necessary to say something more about the offer. The defendants submit that it lacks clarity, certainty and was properly rejected.
First, the offer of $100,000 towards an assessment of the plaintiff’s damages, or 25 per cent of the plaintiff’s damages to be assessed, does not make it plain whether the defendants had a choice of those options or whether the contribution would be the lesser or greater amount of those two after judgment was entered.
Secondly, the nature of the offer to the third defendant appeared to shift to an offer to pay $100,000 (as distinct from a choice as referred to earlier); see Exhibit “CAL 4” to Mr Lind’s affidavit.
Thirdly, no amount or scale was referred to concerning that part of the offer relating to the plaintiff’s costs. There was no indication of the “proportion” which the first and second defendants had in mind and it was left to future agreement. This was no small consideration for any defendant because the trial had already proceeded for a block of two weeks in December, 2004.
Fourthly, not all defendants approached the offer on the same footing. The third defendant, if he accepted the offer, was required to abandon all proceedings against the first and second defendants, including the contract claim (upon which he was ultimately successful). The other defendants were not in that situation.
Fifthly, as was touched on earlier, as between the remaining defendants, it was unknown whether one or some may accept and others not. It was not surprising, given the complexity of the litigation, that the other defendants, or any of them, were unable to agree with the offer by the first and second defendants.
In addition to those various matters, it should not be overlooked that this is not a Rules offer. It is appropriate to take the offer into account as one of a number of relevant factors.
At the end of the day, I have reached the view that each defendant is to bear its own costs. It follows that I reject the submission that the defendants, other than the first and second defendants, should indemnify the first and second defendants for their liability to the plaintiff for costs after 14 days from the date of the offer.
Annexed to this judgment is a Schedule of Orders, including orders on the Contribution Notices.
ANNEXURE
SCHEDULE OF ORDERS MADE ON 1 MARCH, 2007
1.As between the first and second defendants on the one hand, and the third defendant on the other, relating to the contract claim, each party to bear its own costs.
2.The first and second defendants to pay the costs thrown away of the third defendant, the fourth defendant and the fifth defendant for the five days commencing 28 November, 2005, such costs to be on a party and party basis.
3.Subject to earlier orders, as between defendants, each defendant to bear its own costs.
4.The amount of contribution as between the defendants in respect of their liability to the plaintiff under this judgment and for costs shall be as to the first and second defendants 10 per cent, as to the third defendant 10 per cent, as to the fourth defendant 30 per cent and as to the fifth defendant 50 per cent.
5.If the plaintiff recovers from any defendant a proportion of the damages and costs in excess of the contribution for which such defendant has been found liable, then the defendant from whom such excess shall have been recovered may enter judgment for such excess against the other defendants to the extent of such excess, together with the costs of entering such judgment.