Mohamed v Adrija Pty Ltd (No 3)

[2022] ACTSC 256

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Mohamed v Adrija Pty Ltd (No 3)

Citation:

[2022] ACTSC 256

Hearing Dates:

26 August 2022

DecisionDate:

20 September 2022

Before:

McWilliam AsJ

Decision:

1.     The respondent is to pay the appellants’ costs of the appeal.

2.     The appellants are to pay 10% of the respondent’s costs of the proceeding in the court below.

Catchwords:

COSTS – APPLICATION FOR COSTS – whether a special costs order should be made – where appellants were successful on appeal – where a Calderbank offer was made in relation to the proceeding in the court below – where respondent awarded damages on appeal – where quantum of damages awarded exceeded the earlier offer of settlement – whether it was unreasonable for the appellants to reject the settlement offer – whether respondent ought be deprived of its costs where the only claim on which the respondent succeeded occupied a minor part of the proceeding in the court below

Legislation Cited:

Court Procedures Rules 2006 (ACT) r 1721

Cases Cited:

Calderbank v Calderbank[1975] 3 All ER 333

Cooper v Singh [2017] ACTCA 21
Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219
Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1
Hazeldene’s ChickenFarm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] NSCA 298; 13 VR 435
Hulanicki v Walton (No 2) [2015] ACTCA 45
Mohamed v Adrija Pty Ltd (No 2) [2022] ACTSC 89
Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72
Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43
Rural & General Insurance Broking Pty Limited v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199

Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; 254 ALR 328

Parties:

Abdiwahaab Barkhadle Mohamed (First Appellant)

Sagal Ahmed (Second Appellant)

Adrija Pty Ltd (ACN 119 998 720) (Respondent)

Representation:

Counsel

A Bartzis (Appellants)

S Onitiri (Respondent)

Solicitors

Starnet Legal Pty Ltd (Appellants)

WMG Legal (Respondent)

File Number:

SCA 2 of 2020

McWilliam AsJ:

1. The application before the Court concerns the costs orders to be made following the judgment delivered in respect of an appeal from the Magistrates Court: see Mohammed v Adrija (No 2) [2022] ACTSC 89. The underlying dispute between the parties was a residential building dispute. The builder (the respondent) claimed moneys following the contract coming to an end, and the owners (the appellants) counter-claimed against the builder in relation to the work that was carried out.

1. The appeal was successful.  The judgment in the court below (in the sum of $244,703.56) was set aside.  Judgment was instead entered for $88,058.00, plus interest payable in the sum of $55,623.83.  The details and issues that were in dispute and how they were resolved will not be repeated here. 

1. Following that result, the respondent has sought that the parties each pay their own costs of the appeal and that the appellants pay its costs of the proceedings in the court below.  

1. The appellants submitted that the provisional decision made in relation to costs on 28 April 2022 should be left undisturbed.  That is, they are entitled to their costs on appeal and that each party should pay their own costs of the proceeding in the court below.

Applicable principles

1. The Court’s discretion with regard to awarding costs (see r 1721 of the Court Procedures Rules 2006 (ACT)) is unfettered, save that it is to be exercised judicially: Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 at [41]-[42]. The purpose of a costs order is to reach a fair and just result: Cooper v Singh [2017] ACTCA 21 at [14]-[16]. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 at [2].

1. The ordinary consequence is that costs follow the event: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67], [134]. Further, a court should ordinarily award the costs of the proceedings to a successful party without attempting to differentiate between the issues on which the party succeeded and any issues on which the party failed unless the issues on which the party did not succeed occupied the bulk of the time of the proceedings: Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; 254 ALR 328 at 330-331, cited in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [17]-[18].

1. The making of an offer of settlement may justify a departure from the usual approach that costs follow the event.  One of the circumstances giving rise to justification for such a departure is when the resolution that was offered by a party is more favourable to the recipient than the ultimate outcome of the matter: Rural & General Insurance Broking Pty Limited v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199 at [137]. An unreasonable rejection of an offer of settlement may disentitle a party to some or all of that party’s costs, or even require that party to pay the costs of the other party: Calderbank v Calderbank[1975] 3 All ER 333.

1. An approach frequently adopted is to ask whether there was a genuine offer of compromise; and if so, whether it was unreasonable for the offeree not to accept it, having regard to the circumstances of the case: Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki)at [14].

1. When evaluating the reasonableness or otherwise of rejecting an offer, it is also important to remember that the Court assesses the offeree’s prospects of success not from the position of hindsight, but as at the date the offer was made: see Hazeldene’s ChickenFarm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] NSCA 298; 13 VR 435 at [30]. A plaintiff or defendant’s view may not have been unreasonable about a particular claim at the time the offer was made.

Costs of the proceeding in the court below

1. The respondent argued that although it did not achieve the full sum it had claimed, it has been ultimately successful in obtaining judgment in its favour and it is entitled to the usual order that costs follow the event. 

1. The respondent also relied upon an offer it made to the appellants dated 10 August 2015, which was in the following terms:

1.You pay to our client the sum of $50,000.00, to be paid within 30 days of acceptance of this offer;

2.You pay our client’s costs as taxed or agreed; and

3.The parties enter into a deed of release to be prepared by our office.

1. The offer was expressed as a Calderbank offer, and explained that if not accepted, the respondent would be seeking an order for indemnity costs from the date the offer expired.  The offer was open for a period of 30 days.  The letter setting out the offer contained no discussion of the respondent’s case.  The respondent argued that the final judgment sum it obtained is considerably greater than the terms of the offer it made in August 2015.

1. The respondent’s submissions overlook two matters that I consider to be material to the appropriate costs order for the proceedings below.  The first is that the respondent has ultimately succeeded only on a case that occupied a minor part of the proceeding in the court below.  The claim based on quantum meruit was pleaded as an alternative and the evidence and submissions in the court below were directed almost entirely to the contractual dispute.  It appears to have occupied no time at trial.  On the issues that clearly dominated the trial in the court below, it was the appellants who succeeded.

1. Secondly, the appellants succeeded on their counter claim in the court below.  Any costs orders made in the court below should reflect that the appellants not only succeeded in defending the respondent’s primary claim in contract, but also succeeded on their cross claim.

1. Dealing with the offer that was made in August 2015, its form and contents comply with the requirements for a settlement offer to be operable in relation to costs.  By that I mean that the offer was open for a reasonable period of time, the terms of the offer were clear, and the offer explained the potential costs consequences.  

1. However, the material that was put before the court on the costs application did not persuade me that the evidence and argument presented on the quantum meruit aspect of the claim, at the time the offer was made, was sufficient to make it unreasonable for the appellants to reject the offer.  The respondent’s submission that “presumably” the appellants “had assembled their evidence and carefully considered their prospects” does not grapple with real question, which is whether the respondent had assembled and presented its evidence and argument on the quantum meruit aspect of the claim sufficiently for the appellants to consider the prospects of that claim succeeding. 

1. In light of the above circumstances and balancing the respective successes that each party had at trial, the just outcome is for the appellants to pay 10% of the respondent’s costs of the trial below.  That apportionment recognises the ‘event’ as being ultimately that the builder was entitled to recovery of certain moneys and that part of the material that was led in pursuing the contractual dispute was able to be used in assessing the quantum meruit claim.

Appeal Costs

1. The basis for the respondent seeking that each party pay their own costs on appeal is that although the appellant succeeded on a number of grounds of appeal, the respondent ultimately secured a judgment in its favour.

1. The respondent argued that it “was not provided with a way out” and had to continue with a lengthy court proceeding in order to secure money to which it was found to be entitled, although not to the extent of the amount sought.

1. The respondent’s argument overlooks the fundamental starting proposition that costs are compensatory.  The appellants were successful on appeal.  They pursued the appeal proceedings in order to obtain the result that should have been given in the Magistrates Court.  They are entitled to their costs of doing so.

1. The respondent did ultimately obtain a judgment in its favour, due to this Court on appeal determining the outcome, rather than remitting the decision for further consideration.  That outcome has already been taken into account when considering the costs of the proceeding in the court below.

1. No other material in the affidavit evidence before the Court suggests that there should be a departure from the ordinary consequence when a party succeeds in a proceeding.  Accordingly, the respondent should pay the appellants’ costs on appeal.

Conclusion

1. For the above reasons, the orders of the Court are as follows:

1.       The respondent is to pay the appellants’ costs of the appeal.

2.       The appellants are to pay 10% of the respondent’s costs of the proceeding in the court below.

I certify that the preceding twenty-three [23] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour, Associate Justice McWilliam

Associate: Aislinn Grimley

Date: 20 September 2022