Novamaze Pty Ltd v Cut Price Deli Pty Ltd
[1998] FCA 1421
•30 OCTOBER 1998
FEDERAL COURT OF AUSTRALIA
COSTS – interpretation of settlement – ‘costs of … the action’ – where proceedings settled as between applicant and fourth and fifth respondents only – whether respondents agreed to pay all of applicants’ costs, or only those incurred by the applicants in connection with proceedings against fourth and fifth respondents.
Federal Court of Australia Act 1976 (Cth), s 4 and s 43
Judicature Act 1876 (Qld), s 1
Supreme Court Act 1981 (UK)
Supreme Court Rules (Qld), O 2 r 1
Willis v Wilson and Mackinnon [1922] VLR 453 Refd
Johnson v Refuge Assurance Company Limited [1913] 1 KB 259 Refd
Bradlaugh v Clarke (1883) 8 AC 354 Refd
Stumm v Dixon (1889) 22 QBD 529 Refd
Dansk Rekylriffel Syndikat Aktieselskab v Snell [1908] 2 Ch 127 Refd
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-82) 149 CLR 337 Refd
Novamaze Pty Ltd & Anor v Cut Price Deli Pty Limited & Ors
QG 149 of 1994
Dowsett J
Brisbane
30 October 1998
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 149 of 1994
BETWEEN:
NOVAMAZE PTY LTD
FIRST APPLICANTDARRYL PAUL WEEDMAN AND ELAINE MARGARET WEEDMAN
SECOND APPLICANTSAND:
CUT PRICE DELI PTY LIMITED
FIRST RESPONDENTENZO SGAMBELLONE
SECOND RESPONDENTLUZETTE McKENZIE
THIRD RESPONDENTBERNE NO 7 PTY LTD
FOURTH RESPONDENTRUSSELL GORDON DONALD AND VIVIAN ANNE DONALD
FIFTH RESPONDENTSJUDGE:
DOWSETT J
DATE OF ORDER:
30 OCTOBER 1998
WHERE MADE:
BRISBANE
A. THE COURT ORDERS BY CONSENT THAT:
The application, as against the fourth and fifth respondents be dismissed;
The fourth and fifth respondents pay the first and second applicants’ costs of and incidental to the action, including all reserved costs, to be taxed.
B.THE COURT DECLARES THAT the second order means and should be construed as meaning that the fourth and fifth respondents are to pay the taxed costs incurred by the applicants in connection with the proceedings against them not including costs incurred by the applicants solely in connection with the conduct of the proceedings against the other respondents.
C.THE COURT FURTHER ORDERS THAT:
The costs to be recovered by the applicants are to be limited to costs incurred up to and including Monday 19 October 1998;
The applicants pay the fourth and fifth respondents’ costs of Wednesday 21 October 1998.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 149 of 1994
BETWEEN:
NOVAMAZE PTY LTD
FIRST APPLICANTDARRYL PAUL WEEDMAN AND ELAINE MARGARET WEEDMAN
SECOND APPLICANTSAND:
CUT PRICE DELI PTY LIMITED
FIRST RESPONDENTENZO SGAMBELLONE
SECOND RESPONDENTLUZETTE McKENZIE
THIRD RESPONDENTBERNE NO 7 PTY LTD
FOURTH RESPONDENTRUSSELL GORDON DONALD AND VIVIAN ANNE DONALD
FIFTH RESPONDENTS
JUDGE:
DOWSETT J
DATE:
30 OCTOBER 1998
PLACE:
BRISBANE
REASONS FOR JUDGMENT
The application and statement of claim in these proceedings were filed on 27 October 1994. The claim arose out of an agreement between the first applicant and the fourth respondent for the acquisition by the former of a delicatessen business conducted by the latter. The second applicants were directors of the first applicant, and the fifth respondents were directors of the fourth respondent. The business was conducted pursuant to a franchise agreement between the first and fourth respondents. The second and third respondents were associated with the first respondent. The applicants alleged that the acquisition was induced by various misleading and deceptive statements made by or on behalf of various respondents. There were associated allegations of fraud and, possibly, negligent mis-statement. The relevant operative representations alleged against the first, second and third respondents were different from those alleged against the fourth and fifth respondents. There was also a claim against the fourth respondent for breach of a warranty in the agreement. The fifth respondents had guaranteed performance of the agreement by the fourth respondent, and there was also a claim under the guarantee. It is common ground that the first, second and third respondents are now insolvent. The first respondent is in liquidation. The second and third respondents are bankrupt.
When the action was called on for trial on Monday, 19 October 1998, only the applicants and the fourth and fifth respondents appeared. I was informed by counsel for the fourth and fifth respondents that the applicants had submitted a written offer to settle which the fourth and fifth respondents had accepted. The offer and acceptance are contained in exhibit 1 which reads as follows:-
“OFFER TO
SETTLE APPLICATION
NO G 149 OF 1994From: DARRYL PAUL WEEDMAN
ELAINE MARGARET WEEDMAN
NOVAMAZE PTY LTDTo: BERNE NO. 7 PTY LTD
RUSSELL GORDON DONALD
VIVIAN ANNE DONALDRe: APPLICATION NO. G 149 of 1994
DARRYL PAUL WEEDMAN, ELAINE MARGARET WEEDMAN and NOVAMZAE PTY LTD hereby offer to compromise proceedings in the Federal Court of Australia bearing Application No G 149 of 1994 on the following basis:-
1.BERNE NO. 7 PTY LTD and RUSSELL GORDON DONALD and VIVIAN ANNE DONALD must pay DARRYL PAUL WEEDMAN, ELAINE MARGARET WEEDMAN and NOVAMAZE PTY LTD the sum of forty-five thousand dollars ($45,000) by way of cash or bank cheque within thirty days of the date hereof.
2.BERNE NO. 7 PTY LTD, RUSSELL GORDON DONALD and VIVIAN ANNE DONALD will consent to the following orders being made by Dowsett J on 19 October 2998 in Application No G 149 of 1994:-
1. Application dismissed.
2.The Fourth and Fifth Respondents pay the First and Second Applicants’ costs of and incidental of the action, including all reserved costs, to be taxed.
Dated: 16 October 1998
(signed)
DARRYL PAUL WEEDMAN
(signed)
ELAINE MARGARET WEEDMAN
(signed)
NOVAMAZE PTY LTD
by DARRYL PAUL WEEDMAN
and ELAINE MARGARET WEEDMAN
(signed)
RUSSELL GORDON DONALD
(signed)
VIVIAN ANNE DONALD
(signed)
BERNE NO. 7 PTY LTD
by VIVIAN ANNE DONALD
and RUSSELL GORDON DONALD”
I was also informed that the parties had now discovered that they disagreed as to the meaning of the second proposed order. Counsel for the applicants initially indicated that they stood by the terms of the settlement agreement and submitted that the matter should go to taxation, leaving it to the taxing officer to determine its meaning. I did not consider that to be an appropriate course. It seemed inappropriate to make an order, even by consent, knowing that the taxing officer would then be asked to resolve a question of construction. In those circumstances, the matter was stood over until Wednesday, 21 October 1998 for the parties to consider their positions and to make such applications as they should be advised. On that date, counsel for the fourth and fifth respondents moved for a declaration as to the proper construction of the second proposed order, and that question was argued.
In effect, the fourth and fifth respondents submit that the costs to be paid pursuant to the second proposed order are the taxed costs of the proceedings between the applicants and the fourth and fifth respondents. The applicants assert that the agreement obliges the fourth and fifth respondents to pay all costs incurred by the applicants in the proceedings against all respondents, subject to taxation. It was not submitted that either interpretation would be beyond the jurisdiction of the court conferred by s 43 of the Federal Court of Australia Act 1976. It is common ground that the parties entered into the settlement agreement with the benefit of legal advice.
The applicants effectively submit that the phrase “costs of … the action” should receive a broad meaning to include the costs of all steps taken pursuant to the application against all respondents. They point to numerous authorities said to justify this approach. Perhaps the most typical reflection of the applicants’ submission is to be found in an extract from Gray on Costs (1853), approved by Cussen J in Willis v Wilson and Mackinnon [1922] VLR 453 at p 462. The passage is as follows:-
“The general costs of the cause, then, are all the costs necessarily incurred by the successful party to enable him to achieve that success …”.
That proposition does not really meet the present situation because, after all, the costs incurred in prosecuting the proceedings against the first, second and third respondents did not, prima facie, contribute to the applicants’ success against the fourth and fifth respondents.
The real thrust of the applicants’ argument is that the word “action” is only appropriate to describe the whole of the proceedings conducted pursuant to application no. G 149 of 1994. I am not sure that the word has such a precise or narrow meaning. The New Shorter Oxford Dictionary relevantly defines “action” as:-
“The taking of legal steps to establish a claim or obtain remedy; the right to institute a legal process … A legal process or suit.”
In some jurisdictions, the word has been given a more limited meaning. Pursuant to s 1 of the Judicature Act 1876 (Qld) the term is defined to mean “a civil proceeding commenced by writ or in such other manner as may be prescribed by rules of court”. There is a similar provision in the Supreme Court Act 1981 (UK). The Rules of the Supreme Court of Queensland provide that “Causes commenced by writ of summons are called actions” (O 2 r 1). In the Federal Court, proceedings are not commenced by writ, but by application. As far as I am aware, the word “action” finds little formal usage in connection with proceedings in this court, although s 4 of the Federal Court of Australia Act 1976 defines “suit” to include “any action or original proceeding between parties”. Also relevant is the term “proceeding” which is defined to mean “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with a proceeding, and also includes an appeal …” Although an action will be a proceeding, not all proceedings will be actions.
In Halsbury (4th ed, vol 37, at par 17) it is said that:-
“In its natural meaning ‘action’ refers to any proceeding in the nature of litigation between a plaintiff and a defendant. It includes any civil proceedings in which there is a plaintiff who sues, and a defendant who is sued, in respect of some cause of action, contrasted with proceedings such as statutory proceedings which are embraced in the word ‘matter’.”
The author relies primarily upon the decision of Kennedy L.J. in Johnson v Refuge Assurance Company Limited [1913] 1 KB 259 at p 264. His Lordship there said, concerning an English rule:-
“Prima facie, I should say that the word “action” in the phrase “not being an action” in Order 58 rule 15 would seem to be used in its natural meaning, as referring to any proceeding in the nature of a litigation between a plaintiff and a defendant.”
Later on that page, his Lordship said:-
“In this case there was a civil proceeding in the county court which was, according to the ordinary understanding of language, not merely a matter, but a litigation between a plaintiff and a defendant in the nature of an action.”
The other member of the Court of Appeal, Buckley L.J., at p 263, said of the use of the word “action” in the Judicature Act 1873:-
“In my opinion it was intended to include in the term “action” any civil proceeding in which there is a plaintiff, who sues, and a defendant, who is sued, in respect of some cause of action, …”.
Halsbury also cites Coke as follows:-
“Action is the form of a suit given by law for the recovery of that which is one’s due, or it is the demand of a man’s right.”
Halsbury cites Bracton to the effect that an action is:-
“… nothing other than the right of pursuing in a judicial proceeding what is due to one.”
Both propositions appear to have been approved in the judgment of the Earl of Selbourne L.C. in Bradlaugh v Clarke (1883) 8 AC 354 at p 361. The common thread is that apart from any statutory provision, an action is the process for enforcing a right claimed by one party against another. Presumably, this is the meaning to be attributed to the word in s 4 of the Federal Court of Australia Act (cited above). If, in any proceedings, an applicant seeks to enforce rights against two or more respondents, the whole of those proceedings might, pursuant to those authorities, be described as an action, but so might the proceedings as against each respondent. This is consistent with common practice. It is common to speak of commencing action or taking action against a party where that party is one of two or more defendants. Such a defendant would surely say that there was an action against him. One also speaks of discontinuing an action against one or other of several defendants. In the end, I reject the submission that the word “action” necessarily implies the whole of the proceedings conducted pursuant to application no. G 149 of 1994. I find myself unable to resolve the dispute between the parties upon that basis.
The intention of the parties must be found in the terms of the settlement agreement, having regard to the context in which it was made. The introductory words recite an offer “to compromise proceedings in the Federal Court … bearing Application No. G 149 of 1994”. In isolation, this may suggest an intention to compromise all issues arising in those proceedings but of course, that was not possible. The claims as between the applicants and the first, second and third respondents could not have been so compromised simply because those respondents were not to be parties to the compromise. The intention must have been to resolve the matters in dispute between the parties to the proposed compromise, namely the applicants and the fourth and fifth respondents. Those matters were the claims for relief made against the fourth and fifth respondents. There was also a general claim for costs, without particulars of the actual orders sought. However, given the nature of the substantive claims, it is possible to predict the likely orders as to costs against the fourth and fifth respondents had the applicants been successful at trial.
Quite distinct claims were made as against the first, second and third respondents on the one hand, and the fourth and fifth respondents on the other. There were, inevitably, separate defences by the two groups of respondents simply because there were separate and distinct claims against them, although there were some common elements. In Stumm v Dixon (1889) 22 QBD 529, after a trial by jury, judgment was given against two defendants, and they were ordered to pay the plaintiff’s costs. At taxation, a question arose as to whether each was liable for all of the costs, given that they had conducted separate defences. A Divisional Court held that they were not. On appeal to the Court of Appeal, at pp 532-3 Lord Esher M.R. said:-
“But the common form of ‘judgment for plaintiff with costs’ does not in the case of a single defendant mean that the defendant is to pay all the costs incurred by the plaintiff, or all the costs reasonably incurred by him. It means that the defendant is to pay all the costs caused to the plaintiff by the act of the defendant. It may be reasonable for the plaintiff to have five or six consultations with counsel, but he does not get the costs of them all from the defendant. That is the difference between costs as between party and party and costs as between solicitor and client. The meaning of the common form is, that the plaintiff is to recover the costs caused to him by the defendant …
Before the Judicature Acts the judgment in a common law action could not have been moulded to meet the facts of a particular case, and we must, therefore, ascertain what was the meaning of the common form of judgment. The judgment at the trial is only the nisi prius judgment; it is not the final judgment. When the costs have been taxed the amount of the taxed costs is inserted in the postea, and that is the final judgment. It would be contrary to principle and to natural justice that one man should be mulct for that which another man has done – eg if one defendant took out a commission to examine witnesses from which the other defendant could derive no advantage. I agree with the Divisional Court … that the costs ought to be distinguished so that this frightful injustice need not be done, and I think there is an easy mode of distinguishing them, as the master has done. In my opinion, the true rule is this: When an action is tried against two or more defendants and any defendant separates in his defence, and the judgment is against all, the law is that each of them is liable for the damages awarded by the judgment, and each of them is liable to the plaintiff for all costs taxed on his behalf as properly incurred by him in the maintenance of his action, except as to costs caused to him by so much of the separate defence of any defendant as is, and can only be, a defence for that defendant as distinguished from the other defendants.”
Although Fry L.J., the other member of the court, took a contrary view, Lord Esher’s view, and that below, prevailed.
Curiously, the question arose again at first instance in Dansk Rekylriffel Syndikat Aktieselskab v Snell [1908] 2 Ch 127. Neville J said, at p 138:-
“I have consulted the senior taxing Master, and it appears that, according to the practice in the Chancery Division up to date, where some of the defendants do not appear or do not defend, and other defendants carry the action to trial and fail, the costs being given in the usual way in favour of the plaintiffs against the defendants, the whole of the costs are taxed against both defendants jointly, so that the defendant who has either not appeared to the writ or not put in a defence may be rendered liable by the action of his co-defendant, which he is powerless to prevent, to costs, which, of course, may amount to very considerable sums. It appears to me that this is an injustice, and that some alteration in the form of the order which is made in cases of that kind ought to be adopted, and the order that I propose to make is this: “The Court doth order that the plaintiffs recover their costs of action down to date of judgment and that it be referred to the taxing Master to tax such costs and to certify how much thereof is properly attributable to the defendants jointly, and to each defendant separately, and that the respective defendants do pay to the plaintiffs the amounts to be so certified.”
The decision is curious because of the apparent inconsistency between the master’s view of the practice in Chancery prior to that decision and the earlier decision in Stumm v Dixon (supra). This inconsistency may be attributable to the fact that Stumm v Dixon was an appeal from the Queen’s Bench Division. Lord Esher noted at p 532 that a judge in the Chancery Division was able to mould a judgment as to costs to meet the circumstances of each case. His Lordship considered the position in the Queen’s Bench Division to be different, perhaps because of the involvement of a jury. It may be that the position reported to Neville J in Dansk Rekylriffel was that in Chancery, where the judge made no order distinguishing between the defendants as to liability for costs, each was considered liable for all of the plaintiff’s costs. Both cases involved orders such as that proposed in this case. In both cases, it was considered that such an order should be construed so as to limit each dependant’s liability to those costs which were incurred in prosecuting the case against that defendant.
Of course, as was urged in argument on behalf of the applicants, it was open to the present parties to reach an agreement as to costs which differed from that practice. However the only evidence of such an agreement is the use of the expression “costs of … the action”, which is, to me, ambiguous. It may be arguable that as the parties each acted on legal advice, common knowledge of the effect of decisions such as Stumm v Dixon and Dansk Rekylriffel should be imputed to them for the purpose of construing the meaning of the term in question. See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-82) 149 CLR 337 at p 348 et seq (per Mason J). Such an approach would favour the fourth and fifth respondents, but I do not find it necessary to resort to it. I consider that the settlement agreement itself discloses the true intentions of the parties.
The fourth and fifth respondents agreed to submit to two orders. The first proposed order was “Application dismissed”. This obviously meant that the application as between the applicants and the fourth and fifth respondents was to be dismissed. As the other respondents were not parties to the compromise, it cannot have been intended that proceedings against them be dismissed. In other words, the first proposed order was implicitly limited in its operation to proceedings as between the applicants and the fourth and fifth respondents. Counsel for the applicants conceded as much in the course of argument. If the first proposed order was to be so limited in operation, then it is probable that the second proposed order was to be similarly limited.
In the circumstances, I conclude that the second proposed order should be construed as obliging the fourth and fifth respondents to pay the taxed costs incurred by the applicants in connection with proceedings against them and as not including costs incurred by the applicants solely in connection with the conduct of proceedings against the other respondents. I will hear further argument as to the appropriate form of declaration and as to costs.
I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.
Associate:
Dated: 29 October 1998
Counsel for the First and Second Applicants: Mr Kronberg Solicitor for the First and Second Applicants: Lynch & Company Counsel for the Fourth and Fifth Respondents: Mr Amerena Solicitor for the Fourth and Fifth Respondents: F K Brown & Brown Date of Hearing: 19, 21 October 1998 Date of Judgment: 30 October 1998
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