Nalborczyq v Gross
[2012] QMC 12
•1 February 2012
MAGISTRATES COURTS OF QUEENSLAND
CITATION:
Nalborczyq v Gross & Ors [2012] QMC 12
PARTIES:
DANIEL EDWARD NALBORCZYQ
(plaintiff)
v
SHANE NORMAN GROSS
(first defendant)
JESTLEY PTY LTD TRADING AS BROSNAN ELECTRONICS
(second defendant)
ROBERT EDWARD BROSNAN
(third defendant)
FILE NO/S:
M28/10
DIVISION:
Magistrates Courts
PROCEEDING:
Claim – Application for assessment of costs
ORIGINATING COURT:
Magistrates Court at Tully
DELIVERED ON:
1 February 2012
DELIVERED AT:
Tully
HEARING DATE:
On the papers
MAGISTRATE:
Brassington JM
ORDER:
(1) The Plaintiff is to pay the second and third Defendants costs on the standard basis to be agreed.
(2) Failing agreement the second and third Defendants file material for the Court to fix costs.
CATCHWORDS:
CIVIL LITIGATION – COSTS – assessment of costs for defendant after claim dismissed - indemnity costs
Uniform Civil Procedure Rules 1999, r 361, r 683(3), r 703
COUNSEL:
B Gillan for plaintiff
SOLICITORS:
Rodgers Barnes & Green Lawyers for second and third defendants
INTRODUCTION
On 22 September 2010 Daniel Nalborczyk (the Plaintiff) filed a claim in the Tully Magistrates Court claiming $5,963.68 in damages for negligence. The first Defendant, Shane Norman Gross, was the driver of a motor vehicle that collided with the Plaintiff’s motor vehicle causing the Plaintiff’s motor vehicle to be essentially ‘written off’. The First Defendant’s motor vehicle was alleged to be on the wrong side of the road when it collided with the Plaintiff’s vehicle. Particulars of negligence alleged included that the First Defendant drove with a blood alcohol level of 0.154. The Statement of Claim alleged the First Defendant was the employee of Jestley Pty Ltd trading as Brosnan Electronics (the second Defendant) and was driving with the authority of the second Defendant. The motor vehicle was registered as owned by Robert Brosnan (the third Defendant) and the Statement of Claim also alleged that the First Defendant drove the motor vehicle with “the authority and under the agency and on behalf of the Third Defendant”.
On 31 August 2001 I made a consent order dismissing the Plaintiff’s claim and further ordering “the Plaintiff pay the second and third Defendants cost of the proceeding to be agreed, or failing agreement, either party be at liberty to apply to the Court for an order relating to costs.”
Agreement could not be reached and on 24 October 2011 an application for assessment of costs was made. By agreement and in accordance with the philosophy of the Uniform Civil Procedure Rules (the UCPR) the matter was heard on the papers with both the Plaintiff and the second and third Defendants’ (the applicant) providing written submissions. For convenience I will continue to refer to the applicant as the second and third Defendant.
THE SUBMISSIONS
The second and third Defendants’ submit that a costs order should be made on an indemnity basis as:
(1) the proceedings against the second and third Defendant were continued in “wilful disregard of the known facts”
(2) there was unreasonable conduct on the part of the applicant
(3) the Plaintiff obtained a Judgment that was not more favourable than any of the three offers made by the second and third Defendants and should be ordered under r 361 of the UCPR to pay costs on an indemnity basis
The Plaintiff concedes that it must pay some costs of the second and third Defendants but any order should not be on an indemnity basis as the Plaintiff’s case was not continued as an abuse of process and much of the delay in resolution was because certain documents, fundamental to the employment status of the First Defendant, were not disclosed until March 2011 or not actually provided. The Plaintiff also argues that under the UCPR there is now no difference between assessment on the standard and indemnity basis. Finally, the Plaintiff submits that r 361 has no application as the Plaintiff wholly failed and the term “obtain a judgment” means succeeds to some extent.
RESOLUTION
The Law
Rule 680 of the UCPR allows recovery of the costs of a proceeding to be recovered only under the UCPR or an order of the Court. Rule 681 sets out the general rule that costs of a proceeding follow the event unless the Court orders otherwise. As already noted by consent order the Plaintiff has been ordered to pay the second and third Defendant’s costs. The only issue is the quantum of those costs and the basis of assessment. In the Magistrate Courts costs are generally fixed by the Magistrate unless I consider it appropriate because of the nature and complexity of the proceeding to order costs to be assessed by a costs assessor.[1]
[1]Rule 683
Rule 702 of the UCPR provides that unless otherwise ordered a costs assessor must assess costs on a standard basis. Rule 703 then provides for the assessment of costs on an indemnity basis. That rule provides:
(1) The court may order costs to be assessed on the indemnity basis.
(2) Without limiting subrule (1), the court may order that costs be assessed on the indemnity basis if the court orders the payment of costs—
(a) out of a fund; or
(b) to a party who sues or is sued as a trustee; or
(c) of an application in a proceeding brought for noncompliance with an order of the court.
(3) When assessing costs on the indemnity basis, a costs assessor must allow all costs reasonably incurred and of a reasonable amount, having regard to—
(a) the scale of fees prescribed for the court; and
(b) any costs agreement between the party to whom the costs are payable and the party’s solicitor; and
(c) charges ordinarily payable by a client to a solicitor for the work.
It is convenient to deal at this time with the plaintiff’s submission that given the structure of the Rules there is now no difference between costs assessed on the standard basis and on the indemnity basis. The submission is as follows:
8. Rule 691 provides relevantly in (4) for an assessment for Magistrates Courts on the indemnity basis the scale in schedule 3 appropriate for the amount the Plaintiff claims applies (sic). That must meant that for either the Magistrate or the assessor that is the appropriate scale for an Australian lawyer’s costs as that is what the section deals with.
9. The Plaintiff’s submission then is that by the Rules the professional costs to be assessed by a magistrate or by an assessor must be in accordance with schedule 3. The legislation is quite precise. ……
10. The Plaintiff would submit firstly that there would be little difficulty in the Court fixing the professional costs items in favour of the second and third Defendants costs on either the standard basis or indemnity basis as they would be the same amount. The only argument that otherwise might remain would be in respect of outlays that may be claimed on an indemnity basis but not on the standard basis and at this stage we do not have those provided by the Applicant.
I do not accept this submission. Rule 703 provides for the assessment of indemnity costs and these are plainly “all costs reasonably incurred and of a reasonable amount”. When determining that issue the assessor must then consider those matters in r 703(3) including (a) the scale of fees prescribed for the court, (b) any cost agreement between the party and their solicitor and (c) charges ordinarily payable by a client to a solicitor for the work. It is I consider fairly notorious that those charges in (c) generally far exceed the scale of fees in (a). I make that observation without criticism of those ordinary charges. Often the work for a simple application will require billing in excess of the generally modest sums allowed under the scale.
Rule 691 sets out the scale of costs for assessment to be applied in assessing costs. Rule 691(1) provides for assessing costs on the standard basis an Australian lawyer is entitled to charge and be allowed the costs under the scale of costs for work done for or in a proceeding in court. Rule 691(2) provides the scale of costs for the Magistrates Court is in schedule 3. The effect of r 691(1) and (2) is then that a costs assessment on a standard basis can only allow costs to the extent of the scale. Rule 691(4) then provides that for an assessment for Magistrates Courts on the indemnity basis the scale in schedule 3 appropriate for the amount applies. Rule 691(4) must be read with r 703 where the scale of fees is simply one consideration that the assessor must take into account when determining what costs are reasonably incurred and of a reasonable amount. Rule 691(4) then identifies for the purpose of r 703(3)(a) the scale of fees applicable and does not restrict the assessment required in rule 703(3) to the scale in schedule 3. There may well be then a significant difference between the quantum of costs awarded under r 691 and 702 (costs assessed on a standard basis) and costs assessed under r 703 (costs assessed on an indemnity basis).
I turn then to the determination of whether an indemnity costs order should be made. I accept the Plaintiff’s submission that the relevant law to be applied in this determination is conveniently set out by Justice McMurdo in the case of Theiss Pty Ltd v FLSMIDTH Minerals Pty Ltd (No 2) [2010] QSC 120:
In Di Carlo v Dubois, White J (with whom Williams JA and Wilson J agreed) cited Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd; Colgate-Palmolive Company v Cussons Pty Limited and Rosniak v Government Insurance Office as indicating the circumstances in which an order for indemnity costs would be justified under the UCPR. In Rosniak, Mason P said that the discretion to depart from the usual basis for costs is not confined to the situation of what Gummow J in Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, The Environment, Tourism and Territories had described as the “ethically or morally delinquent party”, but he held that “[n]evertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation”. Chesterman J has preferred a criterion of “something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis”
Whether the criterion is that of unreasonableness or irresponsibility, the parties here agreed that, as I said in Anderson v AON Risk Services Australia Ltd, there must be something about the facts and circumstances beyond the demerit of a party’s case, as reflected in the outcome, before such an order is warranted.
I also accept that the indemnity costs may be appropriate in circumstances where the applicant properly advised should have known that he had no chance of success and that the action can be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.[2]
[2]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at page 401 and Colgate Palmolive Co. v Cussons Pty Ltd [1993] FCA 536
To properly understand the submission of the Plaintiff and the second and third Defendants it is necessary to traverse the progress of the case until conclusion.
The Progress of the Claim
On 20 October 2010 the second and third Defendants filed a defence including the following pleading:
(1) the second Defendant denied being the owner of the relevant motor vehicle
(2) the third Defendant admitted being the owner of the motor vehicle;
(3) a denial the first defendant was an employee of the second Defendant
(4) an assertion the first defendant was an employee of Build N Invest Pty Ltd
(5) that the first Defendant was not driving the Toyota for an purpose or benefit of the second and third Defendant
(6) an admission that the collision occurred.
Also on 20 October 2010 the second and third Defendants filed a notice claiming a contribution from the first Defendant.
On 28 January 2011 an amended Defence was filed by the second and third Defendants simply noting that the second Defendant formally admitted the owner of the motor vehicle was the third Defendant (see paragraph (2)(a)). The denial of ownership was again pleaded.
On 29 March 2011 a further amended Defence was filed by the second and third Defendant again amending ownership details. The second Defendant now admitted it was the legal owner of the motor vehicle involved in the collision while the third Defendant was the registered owner.
On 7 June 2011 a Request for Trial Date signed by both parties was filed in the Court.
On 20 September 2011 the consent orders dismissing the claim were filed in Court.
The affidavit of Andrew John Mackintosh (filed 24 October 2011) sets out comprehensively the contact between the Plaintiff’s solicitor and the second and third Defendant’s solicitor. I am satisfied on this material that the second and third Defendants did notify the Plaintiff’s solicitor on a number of occasions that the second and third Defendants were not vicariously liable for the first Defendant’s negligence because:
· at the time of the accident the First Defendant was driving the Toyota for his personal use and not in the course of his employment with the second and third Defendants;
· the First Defendants journey did not involve travelling to and from work his use of the vehicle at the time of the collision was not authorised by the second and third Defendants.[3]
[3]See exhibit AJM5 sent 12 November 2010
The amendments to the second and third Defendant’s defences discussed previously were notified to the Plaintiff on 2 March 2011. The Plaintiff did require the Defendant to amend the defence as asserted in the submission. In correspondence dated 16 March 2011[4] the Plaintiff’s solicitor notes this is to ensure a reply can be lodged that can be relied upon as an admission at trial.
[4]AJM9
The affidavit also establishes as of 16 March 2011 no disclosure by the second and third Defendants had been made with respect to employment records including tax declarations and Workcover declarations. On the 25 March 2011 a ‘Time and Wages’ recording of Build N Invest Pty Ltd was disclosed. This record is not in evidence but the second and third Defendant’s solicitor assert in correspondence[5] “the time and wages record clearly supports our clients position.”
[5]AJM10
Formal offers to settle the claim were made by the second and third Defendant on:
· 12 November 2010 on the basis the Plaintiff pay $1500 which was approximately 75% of the costs of the second and third Defendants’ to date
· 11 March 2011 on the basis the Plaintiff pay $2753.75 for costs to date on Scale E of the Magistrates Court scale
On 22 August 2011, seven days before the trial was listed, the Plaintiff offered to discontinue the action. The second and third Defendants replied consenting to discontinuance on the basis the Plaintiff paid 80% of the legal costs ($8500).
On 26 August 2011 the Plaintiff offered $4000 in full and final settlement of the second and third Defendant’s costs. On the same day the second and third Defendant’s consented to withdrawal on the basis of the Court’s final order.
Was the Plaintiff’s Conduct in Wilful Disregard of the Known Facts or Unreasonable?
It is the second and third Defendant’s submission that the conduct of the Plaintiff was in wilful disregard of the known facts and clearly established law regarding vicarious liability in that the Plaintiff commenced and continued his Claim despite repeatedly been offered the opportunity to discontinue.
With respect to the law to be applied in this type of case I refer to the convenient summary in Klesteel Pty Ltd v Mantzouranis [2008] NSWSC 194 per McCallum J:
The overriding principle is that an employer is vicariously liable for a tort committed by an employee in the course of his or her employment. As noted by Spigelman CJ in Nationwide News Pty Ltd v Naidu [2007] NSWCA 337 at [88], a number of different formulations appear in the judgments of the High Court in Lepore in elaboration of the traditional formulation of the “course of employment” from Salmond referred to by Gleeson CJ. In Naidu , Spigelman CJ considered the conduct complained of against the following formulations from Lepore :
(a) whether the conduct was so closely connected with the employee’s responsibilities as to be in the course of his employment ([85] per Gleeson CJ).
(b) whether the conduct was the “doing of an authorised act in an unauthorised way” and vicarious liability can be justified “on the basis of ostensible authority”, a species of estoppel (at [108] per Gaudron J and see at [130]).
(c) whether there is “a close connection between what was done and what that person was engaged to do” (at [131] per Gaudron J).
(d) whether “the identification of what the employee was actually employed to do and held out as being employed to do” encompassed the conduct complained of (at [232] per Gummow and Hayne JJ).
(e) whether the conduct complained of was done in the ostensible pursuit of the employer’s business or the apparent execution of the authority which the employer held out the employee as having (at [239] per Gummow and Hayne JJ). Although not necessary to be considered in Naidu , that passage in the judgment of Gummow and Hayne JJ also refers to the need to consider whether the conduct complained of was done in the intended pursuit of the employer’s interests or in the intended performance of the contract of employment.
(f) whether there was a sufficiently close connection between the conduct which was not authorised and the acts which were authorised (at [315] per Kirby J).
29 Those formulations assume as a first step the identification of what the employee was actually employed to do or is held out as being employed to do. That is central to the inquiry: Lepore at [232] per Gummow and Hayne JJ. The focus of the inquiry, however formulated, is on the connection between the duties so identified and the conduct complained of.
What effectively had to be established by the Plaintiff was that the driving of the first Defendant was within the scope of what the first Defendant was authorised to do by the second and/or third defendant as an employee of the second and/or the third defendant. On the (albeit limited) material I have I am not persuaded by the second and third Defendant that the Plaintiff’s case was hopeless from the outset. The first Defendant was driving a motor vehicle registered as owned by the third Defendant while the second Defendant was the admitted legal owner of the vehicle when it collided with the Plaintiff’s vehicle. The first Defendant was employed by an entity that was closely associated with the Third Defendant. No actual employment records or time sheets were disclosed until 13 March 2011. I am unable to accept that because the Plaintiff did not accept asserted facts by the solicitors for the second and third Defendant, unsupported initially by any other documentation or sworn testimony, that can amount to proceeding in wilful disregard of the facts especially when it may be that the Plaintiff had good reason to initially doubt the veracity of the third Defendant’s position.[6] The commencement and pursuit of the action lacks that moral delinquency or even unreasonableness not amounting to vexatious conduct justifying the order of indemnity costs in other cases.
[6]See Plaintiff’s submissions paragraph 21
Nor am I satisfied that these matters proceeded in a way that amounted to unreasonable conduct. The essence of this complaint is in paragraph 28 of the submissions:
(a) Made and maintained allegations that the Second and Third Defendants were vicariously liable for the negligent acts and omissions of the First Defendant after repeatedly being advised of the relevant facts, supported by documents, to the contrary.
(b) Prolonged the proceedings by the use of repeated requests that the Second and Third Defendants make minor and inconsequential amendments to their Defence and provide irrelevant and unnecessary documentation and information.
(c) Caused this Court and the second and third Defendants to expend time and expenses unreasonably by conducting his proceedings in an aggressive and vexatious manner.
I have dealt with the first allegation and do not find it proved.
The second allegation refers to the request for amendment of the defence to reflect the true position of ownership of the motor vehicle. Initially the pleadings of the second and third Defendant were that the second Defendant denied ownership of the vehicle and the third Defendant admitted being the registered owner.[7] This was amended on 28 January 2011 when an amended Defence was filed by the second and third Defendants simply noting that the second Defendant formally admitted the owner of the motor vehicle was the third Defendant (see paragraph (2)(a)) but reiterated the denial that the second Defendant was the owner of the motor vehicle.[8]
[7]See Defence filed 20 October 2010 paragraphs 2(a) and (b)
[8]See Defence filed 28 January 2011 paragraph 2(a)
On 29 March 2011 a further amended Defence was filed by the second and third Defendant again amending ownership details where the second Defendant admitted it was the legal owner of the motor vehicle involved in the collision while the third Defendant was the registered owner. As is apparent by the third amendment the second and third Defendant essentially admitted that the first pleading, with a denial that the second Defendant owned the motor vehicle, was completely wrong. It is difficult to see how such an amendment can be categorised as ‘minor and inconsequential’ nor that the Plaintiff’s conduct in insisting on the amendment (so it could be relied on as an admission) prolonged proceedings. Proceedings may well have been substantially shortened if accurate pleadings had been initially filed. It may have saved time and money to accept the second and third Defendants offer to amend at trial but the Plaintiff is entitled to expect compliance with the Rules and seeking accuracy in pleadings in these circumstances cannot justify a finding of unreasonable conduct.
Finally the second and third Defendant submit that extra time and expense were caused by conducting proceedings in an aggressive and vexatious manner. Again I do not find this allegation proved. The original claim was filed on 22 September 2010. The claim moved fairly expeditiously to a directions hearing and then the setting of a hearing date by consent. No contested application was heard in Court. None of the material sought by letter by the Plaintiff from the second and third Defendants appears particularly irrelevant to the issues or required much effort from the second and third Defendants to produce. Again, the allegation that the Plaintiff conducted its case is a vexatious or aggressive manner is not made out.
Rejection of Offers to Compromise
The final basis for the assessment of indemnity costs is the refusal of offers.
While the submissions of the second and third Defendant refer in passing to r 361 of the Rules that rule is not relevant because the Plaintiff has not obtained any judgment.[9] The authorities indicate in this situation a formal offer may still be treated as a “Calderbank” offer. However, the offers of the second and third Defendants were not compromises. Rather they might be categorised as seeking capitulation rather then compromise[10] as they sought to settle the claim by having the Plaintiff pay the second and third Defendant’s costs.
[9]See Astway P/L v Council of the City of the Gold Coast [2007] QSC 224 and the cases cited therein.
[10]See Jones v Millward [2005]1 Qd R 498
The first offer was said to constitute 80% of the costs to date while the second offer was less $515 (disclosure) and $27 (registration searches). A third informal offer of settlement was made that Plaintiff discontinue the claim and pay costs to date on the appropriate scale. The purpose of the rules with respect to offers is to encourage compromise with the knowledge that an unreasonable refusal carries with it the risk of a costs order being made on an indemnity basis. The offers made by the second and third Defendants were not proper offers.
Accordingly being satisfied that the general rule with respect to costs applies and not being satisfied that another order is appropriate I order costs to be assessed on the standard basis.
The second and third Defendant also seek that I make an order that costs be assessed by a costs assessor under r 683(3). However, that rule requires me to make that referral if I am satisfied having regard to the nature and complexity of the proceedings it is appropriate. Having considered all the material I am satisfied that the matter is not particularly complex if I had the material to assess the costs it would be a straightforward matter. A failure to provide this material cannot amount to then converting the proceeding to a complex matter justifying referral to a costs assessor and causing further costs to accumulate in what is a very modest claim. Having regard to r 5 it would be more appropriate for me to assess the costs.
Given my findings in the second and third Defendant’s application I make no order as to costs for this application.
Accordingly I make the following orders:
(1) The Plaintiff is to pay the second and third Defendant costs on the standard basis to be agreed.
(2) Failing agreement the second and third Defendants file material for the Court to fix costs.
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5
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