Metcalf, E.W. v The R. & I. Bank of Western Australia

[1993] FCA 989

JUDGMENT No. ..... ...... .,., .. . r 9 3

C A T C H W O R D S

COSTS - successful party failed on a substantial part of the claim - lssue affecting

damages not disclosed by successful party prior to trial - necessity for respondent to

plead and raise issue - pre-trial offer of settlement - apportlonrnent of costs -

discretionary judgment.

Federal Court of Australia Act 1976 s.43(2)

Hughes v. Western Australian Cricket Association (Incl (1986) 8 ATPR 40-748

Oueensland Wire Industries Ptv Ltd v. BHP Co. Limlted (1987) 17 FCR 211

Cumminos v. h (1993) 113 ALR 285

Dodds Familv Investments Ptv Ltd v. Lane Industries Ptv Limited and Others (unrep.

Full Federal Court 2 June 1993)

ERIC WILLIAM METCALF and LETILA PTY LTD v. THE R. & I. BANK OF
WESTERN AUSTRALIA LIMITED
THE R. & I. BANK OF WESTERN AUSTRALIA LIMITED v. ERIC WILLIAM
METCALF and LETILA PTY LTD

NO. WAG 49 OF 1992

REGISTRY

FRENCH J.

PERTH

23 DECEMBER 1993	AUSTRALIA
PRINCIPAL

IN THE FEDERAL COURT )

I	OF AUSTRALIA
!	WESTERN AUSTRALLA )
i	DISTRICT REGISTRY
!	1

GENERAL DIVISION No. WAG 49 of 1992

i 1

B E T W E E N :  ERIC WILLIAM METCALF and

i	I	LETILA PTY LTD
I
and
THE R. & I. BANK OF WESTERN AUSTRALIA

Respondent

AND

THE R. & I. BANK OF WESTERN

AUSTRALIA LIMITED

Cross-Claimant

and

ERIC WILLIAM METCALF and

LETILA PTY LTD

Cross-Respondents

MINUTE OF ORDER

JUDGE MAKING ORDER:  FRENCH J.

DATE OF ORDER:	23 DECEMBER 1993
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.                 The respondent pay the applicants pre-judgment Interest of $8,730.

2.                  The respondent pay half of the applicants' costs of the action.

3.                  There be no order as to the costs of the cross-claim.

NOTE: Settlement and entry of Orders is dealt \nth in Order 36 of the

Federal Court Rules.

IN THE FEDERAL COURT )

OF AUS'I'KALIA	1
WESTERN AUSTRALIA	)
DISTRICT REGISTRY	)
GENERAL DIVISION	1 No. WAG 49 of 1992
B E T W E E N :	ERIC WlLLIAM METCALF and LETILA PTY LTD

Applicants

and

THE R. & I. BANK OF WESTERN

AUSTRALIA LIMITED

Respondent

AND

THE R. & I. BANK OF WESTERN

AUSTRALIA LIMITED

Cross-Claimant

and

ERIC WILLIAM METCALF and

LETILA PTY LTD

Cross-Respondents

CORAM:	FRENCH J. 23 December 1993
REASONS FOR JUDGMENT ON COSTS AND INTEREST

These proceedings arise out of deallngs between Eric Metcalf and

Callison Holdings Pty Ltd (Callison), the operator of a second hand luxury motor

vehicle business, trad~ng under the name Motorsport of Sublaco. They involve a dispute between Mr Metcalf and the company's banker, the Rural and Industries

Bank of Western Australia. When Calllson encountered serious financ~al d~fficulties

in 1990, Metcalf was persuaded to place $50,000 on term deposlt with the Bank,

subject to a security by way of a Letter of Lien which would allow the Bank to resort
to the money so deposlted in the event of any default on the part of Callison.
Ultimately, acting under its security, the Bank appropriated the $50,000 deposit. It
also claimed a number of vehicles pursuant to a debenture over the stock of the
dealership. Metcalf maintained that certain of the cars claimed by the Bank under

the debenture were his property, purchased by him for sale on consignment through Motorsport. Further, he contended that he was induced to lodge the $50,000 term

deposit by misleading or deceptive statements as to the financial soundness of the

business on the part of an officer of the Bank. H e and his associated company, Letila

Pty Ltd, claimed declaratory relief in relatlon to the motor vehicles and damages for

misleading or deceptive conduct, fraud andfor negligence. The Bank cross-claimed for

damages for conversion of motor vehicles claimed by Metcalf.

In the event, on 9 December 1993, I made a declaration that Metcalf

was the owner of two of the vehicles in contention and made a finding that he had been the owner of a third vehicle which was in contention but had been sold by

agreement between the parties. I awarded him and Letila damages of $17,590, being

the sum of $50,000 deposlted with the Bank on 1 August 1990, less a benefit received	in consideration of that deposit by way of a half interest m a property at 14 Rio
Street, Bayswater. That benefit was assessed at $32,410. The Bank's cross-claim was dismissed.

The relief obtalned by Metcalf and Letila was substantially less than that

claimed by them. They had asserted loss and damage including:

Thc sum of $66,562 s a ~ d	to be owing to Metcalf andlor Lctila by Call~son
Holdmgs Ply Ltd.
The loss of moneys lent to Sub~aco	Car Rentals Pty Ltd by Metcalf or Letila.

Depreciation in the valuc of thc Porsche of S40.000.

A diminut~on in the value of an Alfa GTV of about S2,000

The loss of S38.000 reallsed by Calllson from the sale of a Cobra rcpllca vehicle whlch Callison had falled to pay to Metcalf or Letila

The loss of about S20.000 realised by Callison on the sale of a BMW, which

Calllson had failed to pay to Metcalf or Lctila.

The loss of the sum of S5.200 lent to Call~son by Mctcalf or Letila.

Thc loss of $4,800 expended on repairs to the Porsche by Metcalf or Letila.

A dim~nution in the value of a Rovcr vehicle of about S4.000.

In argument on the question of costs on 21 December 1993, the Bank

contended that Metcalf and LetiIa had been successful only to a llmited extent. They had obtained declaratory relief relatlng to the Porsche and the Alfa and an award of

$17,590, compared w t h a total damages claim and interest in excess of $300,000.

Reference was made to the various transactions pleaded In the statement of claim in

respect of which Metcalf and Letlla were not successful. And it was submitted that a significant part of the trial was taken up in deallng with those issues. Further, it was

relation to alleged depreciation in the values of the Porsche and the Alfa. Although pointed out that Metcalf and Letila were unsuccessful in their claim for damages in they recovered damages of $17,590 arising out of the creation of the term deposit,
those damages were substantially less than the amount cla~med.

Two particular matters were ralsed by the Bank on the question of

costs. The reduction of the damages claimed by the value of a one half interest in the Rio Street, Bayswater property arose only because of the Bank's discovery of that

transaction prlor to trial. It was said that in the statement of claim neither Metcalf nor Letila had disclosed the transaction or reduced the damages claimed by the value of the one half ~nterest in the property. Nor had they given any discovery relating to the property until after the Bank had fortuitously discovered the existence of the transaction. The circumstances of that discovery were set out in an affidavit of Brendan Taylor, a solicltor employed by the solicitors for the Bank. The enstence of

thls transaction was discovered on 2 November 1992 when Taylor interviewed Lorraine Sullivan who said that Metcalf had advised her of the agreement and the

transfer of the property.

In the submissions made on behalf of the Bank, it was said that it was

necessary for the Bank to plead and prove the Rio Street transaction and obtain evidence for the value of a one half interest in the property. Evidence relating to Rio Street had been given by the Bank's witnesses, Williams and Sullivan. Admissions in

relation to it had been obtained in cross-examination of Metcalf and Lings, and a report from the Bank's expert waness, Carey, as to the value had been agreed by

Metcalf a few days prior to trial.

The essential allegations in relation to the Rio Street property are not

disputed. However, counsel for the Bank was unable to point to any substantial

additional expense incurred by the Bank as a result of the late discovery of that transaction. In the event, the Bank received credit for it in the reduced damages which were awarded. Counsel, however, submitted that the Court ought to mark its displeasure at the lack of candour on the part of the applicant in failing to dlsclose

the transaction earlier by an appropriate reduction in the costs recoverable. This
suggests a purely punitlve reduction.

As to that, I an1 not satisfied that the evidence would enable me to unambiguously attribute fault to the applicants or their advisers in this respect. And even if I were able to do so, it is not at all clear to me that a punitive reduction of the costs awarded to the applicants 1s an appropriate response. The fact that the Bank had to plead the matter and bring evidence in relation to the transaction is, however,

I think, a factor that I can take into account on the general issue of apportionment of

costs in the case without the necessity to resort to punitive considerations.

The other matter raised by the Bank related to a settlement offer made

prior to the heanng. A letter dated 23 December 1992 was sent by the Bank's

solicitors to the solicitors for Metcalf and Letila recording an offer made on 19

November 1992 to the following effect:

"1. That Mr Metcalf or Letila IS agreed by all partles to be the owner of the Porsche, the Alfa and the Gcm~ni.

2             That the Bank pays Mr Metcalfs taxed cosu; of the action "

The letter recorded that the offer had been refused by Metcalf and that the Bank's

solicitors were notified of such refusal on 20 November 1992. I t also went on to give notlce of the Bank's Intention to make a copy of the letter available to the Court after

judgment in the action to the ex3ent that the contents might be relevant to an

argument in relation to costs. I do not consider that the letter ought to be taken into account in the apportionment of costs. Although the settlement related to certaln of the veh~cles in contest, it made no concession on the question of the Bank's conduct and the deposit in respect of which Metcalf was successful. In my opinion, there was a suffic~ent difference between the offer and the result that I should not have regard to the offer in determining the question of costs.

It was also submitted for the Bank that I should act under 0.62

r.3GA(2) to reduce the costs recoverable by Metcalf and Letila on the basis that this case was one which could have been and ought to have been litigated in the District Court of Western Australia. Whilst that proposlhon is arguable, having regard to the

factual complexity of the case, which extended over some eight days, and the number

of transactions and the quantum m issue, I am not prepared to find that it 1s caught by that rule. That leaves me with the questlon of the proper exercise of the discretion

to apportion costs in t h ~ s case. The discretion to award costs is conferred by s.43(2) of the Federal Court of Australia Act 1976. Principles relevant to that discretion were set out by Toohey J. in Huehes v. Western Australian Cr~cket Assoclatlon (Inc.) (1986) 8 ATPR 40-748 at p.48,136:

Costs ordlnarlly follow the event with a successful litigant

belng entitled to its costs in the absence of special

circumstances justifying some other order.
Where a litigant succeeds only upon a portion of its clalm,

circumstances may make it reasonable that it bear the expense of

l~tigatlng that portlon upon which it has failed.

A successful party which has failed on certaln issues may not only be

deprlved of the costs of those issues, but may be ordered as well to pay

the other party's costs of them.

These principles were described by the Full Court in Oueensland Wire Industr~es Ptv

-Ltd v. BHP Co. Limlted (1987) 17 FCR 211 at 222 as "the well-known guidelines within which the discretion as to costs 1s exerc~sed". See also Cummines v. M (1993) 113 ALR 285 at 327, where a was held to be within the discretion of a trial

judge to award only a proportion of a successful party's costs if the conduct of that

party in the trial was such as to unreasonably prolong the proceedings.

In a recent unreported decision of the Full Court in Dodds Familv

Investments Ptv Ltd v. Lane Industries Pty Limited and Others (unrep. Full Federal

Court 2 June 1993), the Court referred to the principles enunciated by Toohey J and

said, at 19: 

"The proposit~ons enunc~ated in that case are subject to the further consideration that justice may not be scrved I€ parties are dissuaded by the r ~ s k of costs from canvassing all issues which might be materlal

to the decision in the u s e - Crela7~o v. Lombardl (1975) 13 SASR 4

at 12. In Trade Pra~ t~ces Commisclon v Nlcholas Entcr~rlses Ptv Ltd

(1979) 42 FLR 213, Flsher J regarded the discret~on to apportion

costs as one to be exercised only in the most exceptlonal
circumstances. Nevertheless he accepted that where a cons~derable
part of the trial 1s taken up in determining issues upon which a party
rails, it IS a proper exerclse of the discret~on to reduce the costs
allowed to that party. Generally speaking, and notwithstanding the
considerations referred to by Toohey J and the other authontics
mentioned above, the demands of the community for greater economy
and efficiency in the conduct of litigation may properly be reflected in
a qualification of the presumption that a succcsslul parly is entitled to

all its costs. In Cnmmir~ioiier of Australian Federal Police v

(1991) 101 ALR 425 at 430, Wilcox J, alter referring to the

Importance of the general princ~ple enunciated by Toohey J, said.

"But 1 do not think that courts should be reluctant to recognise the existence of exceptional cases In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carclully what matters they will put in lssue in their litigation. If the paraes come to realise that they will not necessarily recover the whole of the~r costs, cven though they have unsuccessfully raised a discrete issue, they are likely better ro consider whether the raislng of that issue is

a just~fiable course to take."

Where there is a mixed outcome m proceedings, the question of apportionment a very much a matter of discretion for the trial judge Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation."

In my opinion, I should recognise in the costs order to be made that a

significant proportion of the trial, although not the majorlty of a, was taken up wlth

the issues and transactions on which the applicants failed. On the other hand,

there was a significant factual substratum whlch had to be covered in relatlon to the issues on which the applicants succeeded, both as to the ownership of the motor

vehicles and as to the misleading or deceptive conduct of the Bank and the	entitlement to recover the $50,000. I do take into account, in favour of the Bank, that
~t was necessary for it to raise and deal wlth the issue of the acquisition of a half interest in the Rio Street property at Bayswater. In so doing, I recognise also that the
Bank advanced an argument, on which it failed, that the $50,000 deposit should be completely set off by the Rio Street property interest because that was an Interest said to have been received by Letila m consideration of the deposit. The matter 1s largely
one of impression and evaluation and in th~s case, in my opinion, Metcalf and Letila ought to recover half of their costs against the Bank. This order is made in lieu of a higher proportion of recovery with an offsetting costs order in favour of the Bank.
There should be no separate costs order on the cross-claim which, in substance, joined
issue with Metcalf on the ownersh~p of the motor vehicles.

As to pre-judgment interest, the parties are ad idem that the relevant

rates to be applied should be the judgment Interest rates applicable under the Rules to the sum of $17,590 from 1 August 1990. Interest calculated on that basis to the date of judgment is $8,730. It will therefore be ordered that the respondent pay to the applicants pre-judgment interest of $8,730 and half of the applicants' costs of the action.

I certify that this and the preceding

eight (8) pages are a true copy of the Reasons for Judgment of his Honour Justice French.

Associate: L c*vV

Date:  a 3 lq73

Counsel for the Applicants: Mr I.L.K. Marshall

Solicitors for the Applicants: Taylor Smart

Counsel for the Respondent: Mr M.J. Buss
Solicitors for the Respondent: Parker & Parker

Date of Hearing: 21 December 1993 Date of Judgment: 23 December 1993