Miller v Evans
[2010] WASC 127 (S)
•9 JUNE 2010
MILLER -v- EVANS [2010] WASC 127 (S)
Pending Appeal
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2010] WASC 127 (S) | |
| Case No: | CIV:2093/2007 | 14-18 DECEMBER 2009, 12 FEBRUARY 2010, ON THE PAPERS | |
| Coram: | HALL J | 9/06/10 | |
| 12/08/10 | |||
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Indemnity costs payable | ||
| B | |||
| PDF Version |
| Parties: | COLLEEN MARGARET MILLER ANTHONY RHYS EVANS BERYL EVANS |
Catchwords: | Costs Indemnity costs Whether defendants' case hopeless Calderbank offer Offer rejected Whether rejection unreasonable |
Legislation: | Legal Practice Act 2003 (WA), s 215 Legal Profession Act 2008 (WA), s 616(1) Rules of the Supreme Court 1971 (WA), O 66 r 1 |
Case References: | Black v Lipovac [1998] FCA 699 Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] 28 WAR 95 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Hazeldene's Chicken Farm v Victoria Workcover Authority (No 2) [2005] VSCA 298 Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) (1993) 46 IR 301 Miller v Evans [2010] WASC 127 Mutual Community Ltd v Lorden Holdings Pty Ltd (Unreported, VSC, (Byrne J), Library No 10561, 28 April 1993) NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77 Quancorp Pty Ltd v MacDonald [1999] WASCA 101 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 12 AUGUST 2010 FILE NO/S : CIV 2093 of 2007 BETWEEN : COLLEEN MARGARET MILLER
- Plaintiff
AND
ANTHONY RHYS EVANS
BERYL EVANS
Defendants
Catchwords:
Costs - Indemnity costs - Whether defendants' case hopeless - Calderbank offer - Offer rejected - Whether rejection unreasonable
Legislation:
Legal Practice Act 2003 (WA), s 215
Legal Profession Act 2008 (WA), s 616(1)
Rules of the Supreme Court 1971 (WA), O 66 r 1
(Page 2)
Result:
Indemnity costs payable
Category: B
Representation:
Counsel:
Plaintiff : Mr S J Davis
Defendants : Mr G A Rabe
Solicitors:
Plaintiff : Curwood & Co Pty Ltd
Defendants : Stables Scott
Case(s) referred to in judgment(s):
Black v Lipovac [1998] FCA 699
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] 28 WAR 95
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Hazeldene's Chicken Farm v Victoria Workcover Authority (No 2) [2005] VSCA 298
Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) (1993) 46 IR 301
Miller v Evans [2010] WASC 127
Mutual Community Ltd v Lorden Holdings Pty Ltd (Unreported, VSC, (Byrne J), Library No 10561, 28 April 1993)
NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77
Quancorp Pty Ltd v MacDonald [1999] WASCA 101
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49
(Page 3)
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190
(Page 4)
1 HALL J: On 9 June 2010 judgment in this matter was given for the plaintiff: Miller v Evans [2010] WASC 127. At delivery of the judgment counsel for the plaintiff indicated that a special order as to costs would be sought. Written submissions by the parties have been submitted in that regard.
2 The plaintiff has three alternative positions on costs:
A. That the defendants pay the plaintiff's costs on an indemnity basis throughout; alternatively
B. That the defendants pay the plaintiff's costs on an indemnity basis from 21 July 2008, being the date on which the plaintiff made the defendants an offer to settle the litigation on a less favourable basis to the plaintiff than the judgment that the plaintiff ultimately obtained; alternatively
C. That a special costs order be made pursuant to s 215 of the Legal Practice Act 2003 (WA) because the amounts otherwise allowable, in nominated respects, would be inadequate.
3 Having succeeded at trial, the plaintiff is entitled to an order for costs: Rules of the Supreme Court 1971 (WA) O 66 r 1(1). However, such costs are limited to those allowed by the Supreme Court scale unless some special order is made. The usual order is one for party/party costs. An order for indemnity costs is only made if there is some special or unusual feature in the case to justify departure from the ordinary practice: Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190, 191.
4 An order for indemnity costs permits the taxing officer to allow the successful parties actual costs other than where they are for an unreasonable amount or have been unreasonably incurred. An order for costs on this basis is intended to provide the successful party with a complete indemnity.
Indemnity costs throughout
5 The first alternative sought by the plaintiff is that of an order for indemnity costs for the whole of the proceedings. Both parties submit that the test to be applied in that regard is whether the action has been commenced or continued in circumstances where the party in question, properly advised, should have known that he had no chance of success: Fountain Selected Meats (Sales) Pty Ltd v International Produce
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- Merchants Pty Ltd (1988) 81 ALR 397. In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) (1993) 46 IR 301, French J said:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reasons, the party persists in what should on proper consideration be seen to be a hopeless case (303).
There appear to me to be two competing principles. On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as 'hopeless' so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as 'hopeless' is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full. .
7 In the present case, the plaintiff submits that the defendants continued to defend an action in circumstances where, properly advised, they should have known that they had no chance of success. In this regard the plaintiff relies upon the following findings made in the judgment:
1. That there was a restrictive covenant the purpose of which was to maintain views and amenity to neighbouring properties [35];
2. That the defendants were aware that the covenant needed to be complied with [35];
3. That the defendants knew that the building of the structures would breach the covenant [36];
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- 4. That the structures could impact adversely on the view from the plaintiff's property [39];
5. That any mistake as to the relevant level from which structures were to be measured or that the covenant could be breached if thought to be inconsistent with safety requirements, were not reasonable [45].
8 The plaintiff notes that the defendants' argument that the structures did not fall within the scope of the restrictive covenant were rejected. The plaintiff also points out that all arguments raised by the defendants against the court exercising a discretion to order a mandatory injunction were rejected. The issues raised in this last regard included delay, harsh and oppressive conduct and unclean hands.
9 An assessment of the defences required not only the application of settled legal principles to the objective facts but the determination of disputed facts. For example, one of the principal issues at trial was whether the damage suffered by the plaintiff was trivial as compared to the damage that would be suffered by the defendants if a mandatory injunction was ordered. This required an assessment of the evidence given by the plaintiff and her husband as to the effect of the structures on their views. To some extent, findings in this regard relied upon the credibility of the plaintiff's witnesses.
10 Where the issues to be resolved in a case require the resolution of disputed facts and the application of discretionary principles, the outcome may not be predictable. Even if a prediction could be made, it would have to be one with some very clear level of certainty to justify a conclusion that a case was hopeless. The fact that all of the contentions raised by a defendant have failed does not mean that they were clearly destined to fail; far less does it mean that such failure should have been foreseen. A weak case is not necessarily a hopeless one. In the circumstances I am unable to conclude that the defendants unreasonably persisted in what they should have known was a hopeless case.
Indemnity costs from 21 July 2008
11 The second alternative basis for indemnity cost relies upon a Calderbank offer made by the plaintiff on 21 July 2008. That offer was made by letter from the plaintiff's solicitors to the defendants' solicitors. The letter appears as Annexure B to the affidavit of the plaintiff's solicitor filed in respect of the costs application. The letter sets out a proposal for modifying the structures. The modifications were detailed in the letter
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- and in an attached diagram. It is unnecessary for present purposes to set out the offer in detail other than to say it involves some parts of the structures being reduced in height to conform with the covenant but it permitted the spa to remain in its location. The preservation of the spa in its location was to be achieved by an agreement that clear glass fences could be erected on a dividing wall up to the minimum safety requirement.
12 One of the principal issues at trial was whether there was a disproportion between the damage suffered by the plaintiff and the damage that would be suffered by the defendants if they were required to move, or remove entirely, their spa. The defendants submitted that the cost of moving the spa to another location on their property would be very high and led evidence from an expert builder in support of that contention. Whilst I ultimately determined the matter on the basis that the cost of moving the spa may prove so prohibitive as to mean that any mandatory injunction would result in the spa being removed entirely, this serves to show that retention of the spa was a matter of considerable significance to the defendants. For this reason, it is clear that the offer made on 21 July 2008 was more favourable to the defendants in its terms than the final judgment.
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. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The mere fact that the recipient of an 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: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, [37].
14 The discretion to award indemnity costs as a consequence of an unreasonable failure to accept a Calderbank offer does not only arise where the offeree's case is hopeless. If it was so limited, the making of such an offer would add nothing to the existing discretion of the court considered under the previous heading. The significance of such an offer is that it requires the offeree to make a reasonable assessment of the advantages of the offer weighed against the possible disadvantages of proceeding. A case may not be hopeless, but the rejection of an offer may be unreasonable bearing in mind the value of the offer and the prospects of success if the case goes to trial.
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15 All of the relevant circumstances and facts have to be taken into account, however, ordinary regard should be had to at least the following:
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 assessed 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 the event of the offeree rejecting it: Hazeldene's Chicken Farm v Victoria Workcover Authority (No 2) [2005] VSCA 298.
16 Having regard to those factors, it should be noted that the offer of 21 July 2008 was some nine months after commencement of the action and 17 months before trial. The offer was stated to remain open for 14 days. The extent of the compromise offered was significant bearing in mind it would have enabled the defendants to keep their spa in its existing location. The defendants' prospect of success at the time the offer was made must have been attended with significant risk bearing in mind that they had built the structures knowingly in breach of the covenant, albeit that they were mistaken as to the extent of that breach. The offer was in clear terms setting out measurements and a diagram which illustrated what was proposed. The plaintiff also argues that the use of the expression 'without prejudice save as to costs' in the context of this letter was sufficiently clear that if the offer was rejected and a judgment was eventually obtained that was no less favourable to the plaintiff than the offer, the costs consequences would be party/party costs up to the date of the offer and indemnity costs thereafter.
17 On behalf of the defendant it is submitted that the rejection of the offer was not unreasonable. The defendants say that the letter of offer failed to particularise the reasons why the defendants' defences were unlikely to succeed at trial. In support of this submission the defendant quotes NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77, 98 in which Lindgren J said:
No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail yet the latter does not recognise the inevitable this will be a factor pointing to an award of indemnity costs.
(Page 9)
- The requirements of sufficient particularity and inevitability of failure are important. In their absence it will be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope if it ultimately finds favour with the court an award of indemnity costs will follow. If this were correct one might ask rhetorically why write a letter as distinct from relying on the pleadings?
18 It is true that the letter of offer of 21 July 2008 does not attempt to argue against the defences raised by the defendants in the pleadings. However, I do not understand Lindgren J to be suggesting that the absence of any such assertion precludes the party making the offer from later seeking indemnity costs. It may, as his Honour states, be a factor relevant in the exercise of a discretion to award indemnity costs. But that discretion is a wide one and the court has jurisdiction to make an indemnity costs order whenever justice requires it: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] 28 WAR 95. Whether the rejection of the offer is unreasonable may well depend upon the content of the offer, but the content will be dictated by the circumstances of the particular case.
19 In my view what was required in this case was that the offer particularised the modifications to the structures that were proposed in sufficient detail for the defendants to be able to compare the advantages of that offer against the risks of being unsuccessful in the litigation. The defendants must have appreciated that there was a significant risk that the structures would be found to be in breach of the covenant. The only issues that would then remain would be whether any of the defences raised would justify the court not exercising its discretion to grant the injunction sought by the plaintiff. In the circumstances it is difficult to see what any assertions by the plaintiff's solicitors that the defences would not succeed would have added to the offer. The legal principles applicable to those defences were well settled and never apparently disputed. For these reasons I do not accept that the letter of offer of 21 July 2008 lacked any necessary degree of particularity.
20 The defendants also contend that the rejection of the offer was not unreasonable because the offer contained no element of compromise on the part of the plaintiff. It is suggested that what is demanded in the offer is no less than what was demanded by the plaintiff in her pleadings. I cannot accept that this is correct. The remedy sought by the plaintiff was that an injunction be granted to remove all parts of the structure that were in breach of the covenant. This included those parts of the spa and the safety fencing around it that exceeded the height limitation. It is clear that the offer did contain a compromise on behalf of the plaintiff in so far as
(Page 10)
- she was willing to accept that the spa would remain with clear glass fencing around it, notwithstanding that this would necessarily involve some infringement of the covenant.
21 The defendants also contend that the offer could not be accepted because it would require the defendants to do something that they could not do safely. It is suggested that reduction of parts of the structure would result in breaches of relevant safety regulations. It is not apparent why this assertion is made. The offer specifically allows for new fences to be constructed around the spa in accordance with council height requirements. There is no evidence available to suggest that the offer was impossible of compliance or that the defendants rejected it because they believed it was impossible of compliance. I should note in this regard that the defendants have not sought to file any affidavits in response on the question of costs.
22 Litigating parties are encouraged by the court to undertake genuine settlement negotiations and for that purpose to engage with serious offers of settlement. In assessing whether a party has unreasonably rejected an offer it is not helpful for the party to advance reasons why the offer was rejected, or could have been rejected, that were not advanced at the relevant time. In Mutual Community Ltd v Lorden Holdings Pty Ltd (Unreported, VSC, (Byrne J), Library No 10561, 28 April 1993) quoted in Black v Lipovac [1998] FCA 699, Byrne J said:
The policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to serious offers of settlement. The response of a litigant in receipt of an offer of settlement will always be affected by the prospect that the sum which the court might order including party and party costs might be less advantageous than the terms of the offer. Experience, however, shows that this prospect alone is not always sufficient to compel a litigant to face up to the offer. The further prospect of a super added costs penalty if a reasonable offer be not accepted is a salutary inducement to an offeree to undertake this often painful task.
23 In Ford Motor Company v Lo Presti, Buss JA noted that in some earlier authorities the level of unreasonableness required to justify an award of indemnity costs had been qualified by the use of such words as 'manifestly' or 'plainly'. This might have been taken to suggest that it was only in cases where it was readily apparent that the only reasonable course was to take advantage of the offer that an award for indemnity costs would be made. However, Buss JA concluded that he was satisfied that the test for unreasonableness should not be qualified.
(Page 11)
24 In my view, the rejection of the offer of 21 July 2008 was unreasonable. I have come to that conclusion taking into account the following factors:
1. The offer was made at an early stage of the proceedings, but at a time when all of the relevant events had occurred and the relative strengths of the parties' cases were capable of being assessed;
2. The time allowed for consideration of the offer was reasonable;
3. The compromise offered was significant. This is particularly so because it was an offer to allow the defendants to maintain their spa in its present location, which the defendants have always maintained was of great significance to them;
4. The defendants' prospects of success, whilst not entirely nonexistent (for the reasons I have earlier referred to), must always have been attended with significant uncertainty given that they were seeking to rely upon discretionary considerations;
5. In the context of these proceedings the offer was clear in its terms; and
6. An offer made in these circumstances contains the necessary implication that if rejected it would be relied upon in making an application for indemnity costs.
25 In those circumstances the clearly reasonable course was to accept the offer. This is apparent when bearing in mind that the alternative was to proceed to a contested trial which was likely to take several days and, in the event, took over a week.
26 For these reasons I am satisfied that the plaintiff's application for indemnity costs from 21 July 2008 should be allowed.
Special order - section 215 Legal Practice Act 2003
27 In the circumstances, it is unnecessary to consider the third alternative basis for seeking a special costs order. However, if my conclusions in regards to indemnity costs were wrong, I would, in any event, make a special costs order in relation to some of the items sought by the plaintiff. The items in respect of which the plaintiff seeks an order are, the getting up of the case for trial (item 16), counsel fees for fee on brief and first day of trial (item 19(a)), counsel fees for subsequent days of the trial (item 19(c)) and attendance at a mediation conference (item 23).
(Page 12)
28 The plaintiff instructed her lawyers on 17 August 2007 prior to the Legal Profession Act 2008 (WA) commencing. The writ was issued on 25 October 2007. Section 616(1) of the Legal Profession Act 2008 states as follows:
Subject to subsection 2 Part 13 of the 2003 Act continues to apply to a matter if the client first instructed the law practice in the matter before the commencement day.
29 The reference to the 2003 Act is the Legal Practice Act 2003 (WA) (2003 Act). Accordingly, s 215 of the 2003 Act applies in this matter. Section 215(2) of the 2003 Act relevantly provides as follows:
Despite subsection 1 if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter are under legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter the court officer may do all or any of the following -
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination; or
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.
30 As is evident, in order for the court to make a special costs order under s 215(2) the court must form an opinion that the costs otherwise allowable would be inadequate and that such inadequacy arises because of the unusual difficulty, complexity or importance of the matter: Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) (Martin CJ) [11].
31 In Heartlink,Martin CJ noted that the question for a judge under s 215(2) will almost always arise before taxation has occurred. The requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination.
32 In regard to unusual difficulty, complexity or importance, his Honour said that the court can have regard to whether the work done was appropriate to the significance of the issues that arose in the litigation. That can mean either significance of the issues to the parties or because of the significance of the issues to other prospective parties or the public or
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- community generally. Because the determination would ordinarily be made in advance of taxation it is a matter of impression rather than of detailed evaluation.
33 Having regard to the contents of the affidavit of the plaintiff's solicitor filed in respect of this application and in particular to [9] - [14] thereof, my view is that there is a significant likelihood that the bill to be presented to the taxing officer would be greater than the limit that would be imposed by the applicable costs determination.
34 One of the items of the special costs order sought is for counsel's attendance at a mediation conference. No allowance is currently made under the determination for counsel to attend mediations: Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49. It can however, be highly desirable for counsel to attend mediation conferences, particularly where the parties may have become entrenched in their positions over time. I accept that it was desirable in this case.
35 An order is also sought in respect of the costs incurred in preparation of closing submissions. The trial in this matter proceeded over the five days that were listed and was then adjourned for closing submissions. The parties were ordered to prepare and file written submissions with a view both to assisting the court and ensuring that oral submissions would be reasonably limited. In the circumstances, the making of an order that would allow for the costs of the preparation of closing submissions would be appropriate.
36 In regards to the importance of the matter, it would be too easy to dismiss the matters at issue in this case as being a neighbourhood dispute. The matter was considered to be of great importance to the parties and, as I have noted, proceeded over six days. It could also be fairly argued that the issues are of significance to prospective parties given that the restrictive covenant at issue in this case is one that burdens other properties in the area. One of the matters at issue at the trial was the interpretation of the covenant and the nature of structures which are covered by it. I accept that that is a matter of significance to others beyond the parties to this action.
37 However, those factors alone do not convince me that the matter was of unusual difficulty, complexity or importance. The usual order of party/party costs might be too readily departed from if cases such as this were thought to justify the exercise of the power under s 215(2). No doubt an argument could be made for almost every case that is difficult,
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- complex or important in some respect or other. Certainly the parties might often see it that way. In my view the issues in this case would not in themselves justify an order in broad terms. However, I do accept that (had it been necessary to do so) an order that would have permitted costs for counsel's attendance at mediation and preparation of the closing submissions would have been appropriate.
38 Accordingly, the orders will be as follows:
1. The defendants to pay the plaintiff's costs of the action to be taxed.
2. The plaintiff's costs to be taxed on a party/party basis to the 21 July 2008 and thereafter on an indemnity basis.
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