Olivero v Ailakis
[2012] WADC 174 (S)
•14 DECEMBER 2012
| JURISDICTION | : | DISTRICT COURT OF WESTERN AUSTRALIA IN CIVIL |
| LOCATION | : PERTH | ||
| CITATION |
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| CORAM | : SCHOOMBEE DCJ | ||
| HEARD |
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| DELIVERED |
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| SUPPLEMENTARY | |||
| DECISION |
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| FILE NO/S |
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| BETWEEN | : JUAN CARLOS OLIVERO |
Plaintiff
AND
ANTHONY AILAKIS
First Defendant
RODNEY AILAKIS
Second Defendant
Catchwords:
Costs - Indemnity costs - Whether defendants unreasonably rejected Calderbank offer - Whether misconduct by defendants - Special costs - Whether matter unusually difficult, complex or important
Whether r 41(2) of the District Court Rules 2005 allows offers made during a pre-trial conference to be disclosed at a hearing regarding trial costs
[2012] WADC 174 (S)
Legislation:
District Court Rules 2005 r 41(2)
Result:
Application for indemnity costs dismissed
Application for special costs order granted in part
Representation:
Counsel:
| Plaintiff | : | Mr T R Thies |
| First Defendant | : | Mr S Penglis |
| Second Defendant | : | Mr S Penglis |
Solicitors:
| Plaintiff | : | Timothy R Thies |
| First Defendant | : | Freehills |
| Second Defendant | : | Freehills |
Case(s) referred to in judgment(s):
Chen v Karandonis [2002] NSWCA 412
Colgate-Palmolive Co v Cussons (1993) 46 FCR 225
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
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)
(2005) 13 VR 435
Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007]
WASC 254
Miller v Evans [2010] WASC 127 (S)
NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77
Rodwell v Hutchinson [2010] WASCA 197
Unioil International Pty Ltd v Deloitte Touche Tohmatsu [No 2] (1997)
18 WAR 190
William Buck (WA) Pty Ltd v Faulkner [No 2] [2012] WASC 257
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
SCHOOMBEE DCJ: This is an application by Mr Olivero, the plaintiff, for indemnity costs, alternatively a special costs order under s 230 of the Legal Practice Act 2003 (WA). Mr Olivero was successful at trial and was awarded $750,000 in damages in respect of a claim brought against Mr Anthony Ailakis and Mr Rodney Ailakis, the defendants. The damages payable to Mr Olivero amounted to a larger sum, but were capped by the jurisdiction of the District Court.
2 The claim concerned an agreement pursuant to which the Ailakis
brothers agreed to transfer 1 million shares in Redstone Resources Pty Ltd to Mr Olivero in consideration of him undertaking certain work to allow Redstone Resources to regain control over a mining tenement. The tenement had been inadvertently lost because Mr Anthony Ailakis had failed to reapply for it in time.
The main issues canvassed at the trial were the following:
(a)
whether the oral agreement entered into between Mr Olivero and the Ailakis brothers was constituted by a proper offer and acceptance and whether the parties had an intention to create a legally binding contract;
(b)
whether there was proper consideration for the undertaking to transfer the 1 million shares or whether Mr Olivero already owed a duty as non-executive director of Redstone Resources to perform the work to regain the tenement;
(c)
whether Mr Olivero lost the right to terminate the agreement and claim loss of bargain damages because he had initially claimed specific performance;
(d)
the assessment of loss of bargain damages and whether the intention of Mr Olivero as to when he would have sold the shares should be taken into account;
(e)
whether loss of bargain damages should be assessed at the date of the breach or at a later date;
(f) the credibility of Mr Olivero.
Indemnity costs
4 Mr Olivero applied for indemnity costs on two grounds. Firstly he
submitted that the defendants acted unreasonably when they did not accept a Calderbank offer that the defendants pay the plaintiff $270,000 in
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
full and final settlement of all claims and with no order as to costs. Secondly, Mr Olivero alleged that there was improper or unreasonable conduct by the Ailakis brothers or their legal advisors.
5 The usual costs order is one for party and party costs. An order for
indemnity costs will only be made if there is some special or unusual feature of the case which justifies a departure from the ordinary practice: Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 [8]. It is well-established that an indemnity costs order will only be made in exceptional circumstances: Rodwell v Hutchinson [2010] WASCA 197 [29]. An order for indemnity costs is a mark of disapproval on the part of the court about the improper or unreasonable conduct of litigation: Flotilla Nominees [25].
6 It is impossible to set out exhaustively the circumstances in which a
court could make an indemnity costs order, because the appropriateness of such an order depends on the particular circumstances of the case. Although it is within the court's discretion whether to award indemnity costs or not, indemnity costs are usually only granted where there has been some element of improper, or at least unreasonable, conduct by a party or its legal advisors. The following examples of such conduct were listed by Sheppard J in Colgate-Palmolive Co v Cussons (1993) 46 FCR 225, 233 and were adopted in Rodwell v Hutchinson [29]:
(a) the making of allegations of fraud knowing them to be false; (b) the commencement of proceedings for some ulterior motive; (c) wilful disregard of known facts or the established law; (d) making of allegations which ought never to have been made; (e) undue prolongation of a case on groundless contentions; (f) the unreasonable refusal to accept an offer of compromise; (g) where a contempt of court has been committed.
7 The ground most often relied upon is that a party was unreasonable
in refusing a Calderbank offer. In deciding whether a party's rejection of a Calderbank offer was unreasonable all relevant facts and circumstances must be considered. The mere fact that the offeree is ultimately worse off than he or she would have been had the offer been accepted, does not necessarily mean that the rejection was unreasonable. Whether conduct was 'reasonable' or 'unreasonable' involves matters of judgment and
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
impression: Ford Motor Company of Australia Ltd v Lo Presti [2009]
WASCA 115 [17] – [18].8 In Lo Presti Buss JA, with whom Wheeler JA agreed, referred at [19] to Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 [25] and repeated the following factors which should be taken into account by a court in exercising its discretion:
(a) the stage of the proceeding at which the offer was received, (b) the time allowed to the offeree to consider the offer, (c) the extent of the compromise offered, (d) the offeree's prospects of success, assessed as at the date of the offer, (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.
9 In NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77, 98, Lindgren J identified another factor to be taken into consideration, namely whether the offeror had put with sufficient particularity the reasons why the offeree's case would fail. In Miller v Evans [2010] WASC 127 (S) [18] Hall J accepted that this might be a factor relevant to the exercise of the discretion, but noted that the absence of such an explanation by the offeror did not preclude an award of indemnity costs.
10 The party who made the Calderbank offer carries the burden of
satisfying the court that it should make an award of indemnity costs in his or her favour: Lo Presti [21]. In Lo Presti Buss JA came to the conclusion at [28] that the offeror only had to satisfy the court that it had been unreasonable for the offeree to reject the offer; it was not necessary to qualify the concept 'unreasonable' by words such as 'manifestly' or 'plainly'.
11 Buss JA explained at [49] that in deciding whether the rejection of
the Calderbank offer was unreasonable, a court should assess the relative strength of the offeree's case at the time that the offer was made. This required a consideration of the evidence adduced at the trial and the certainty, or otherwise, at the time that the offer was made, of the outcome of the trial. Buss JA noted at [89] that the assessment of whether the
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rejection of the Calderbank offer was unreasonable should not be made with the benefit of hindsight. The court should also not take the ultimate judgment sum as a yardstick to measure the reasonableness or unreasonableness of the rejection of the offer.
Offer made by Mr Olivero
12 Mr Olivero made a settlement offer to the Ailakis brothers in the
course of the pre-trial conference on 7 October 2011. Counsel for the defendants objected to the court having regard to the settlement offer as it was a part of 'without prejudice' negotiations during a pre-trial conference.
13 Counsel for Mr Olivero relied on r 41(2) of the District Court Rules 2005. Rule 41(1) and r 41(2) provide as follows:
(1) Evidence of anything said or any admission made in the course of a
pre-trial conference is not admissible at the trial of the case.
(2) Subrule (1) does not apply — (a) to the hearing of an application for costs arising out of a pre-trial conference; or (b) to anything said or any admission made that all parties at the conference, in an agreement recorded in writing by the presiding officer, agree is admissible at the trial.
14 Counsel for Mr Olivero submitted that r 41(2) allows for any matter
discussed during a pre-trial conference to be disclosed during an application for trial costs, if this is relevant to costs. Counsel for Mr Olivero argued that public policy required that discussions between parties during a pre-trial conference be automatically regarded as having been 'without prejudice save as to costs'. According to counsel this was necessary to ensure that parties made a proper effort to settle a matter at a pre-trial conference and could be held accountable for any unreasonable conduct in rejecting a fair offer.
15 However, this is not what r 41 provides. Rule 41(1) makes is clear
that evidence of anything said or any admission made in the course of a pre-trial conference is not admissible at the trial of the case. A ruling on costs is part of the trial of the case. Rule 41(2) also does not assist Mr Olivero as it only applies to the hearing of an application for costs where the hearing arises out of a pre-trial conference.
16 In Gourdis v Barry Crommelin Nominees Pty Ltd (Unreported, WADC, Library No D970414, 29 October 1997) 4 – 5, Macknay DCJ
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
held in respect of the predecessor to this subrule that the subrule was only intended to permit a registrar hearing an application for costs in respect of a pre-trial conference to consider what was said between the parties at the conference. The rule was not intended to allow a party to 'parade all of the pre-compromise negotiations' before a court on an application for costs in respect of the trial.
17 Counsel for Mr Olivero also submitted that in the course of the
pre-trial conference the registrar had written on the whiteboard the words 'without prejudice save as to costs'. However there was no evidence that the defendants had seen this whiteboard or that the message that the negotiations were being conducted on that basis had been communicated to the defendants.
Accordingly, I rule that the offer made during the pre-trial conference is privileged.
19 In any event Mr Olivero repeated the offer in an email to the
defendants on the Monday after the Friday's pre-trial conference. The offer was stated to be a Calderbank offer and indicated that the plaintiff would accept payment of $270,000 with each party to pay its own costs.
20 Counsel for Mr Olivero submitted that Mr Olivero should be entitled
to indemnity costs because the offer was stated to be a Calderbank offer and the factors listed in Lo Presti as being relevant to the court's discretion all pointed to the fact that the defendants had acted unreasonably in refusing the offer. Counsel for Mr Olivero pointed out that the offer was made approximately seven months prior to the trial, that it only requested a response after seven days and was an offer in clear terms. Moreover, counsel submitted, the offer was very reasonable.
21 At the date of the pre-trial conference Mr Olivero had claimed
specific performance of the agreement as well as damages. At that time the market value of 1 million shares in Redstone Resources Pty Ltd was $270,000. However, Mr Olivero had also made a claim for damages in the amount of $712,215 on the basis that if the 1 million shares had been delivered to him at the time of the agreement on or about 8 June 2007 he would have sold them in two tranches over a specified period of time and would have obtained $712,215 for them. Counsel for Mr Olivero submitted that in making the offer of $270,000 Mr Olivero forwent damages in the amount of about $442,215 in that he was prepared to settle
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
for the then current value of the shares. This was a 62% reduction in the
amount of damages that Mr Olivero would have been entitled to.22 Counsel for the Ailakis brothers conceded that the amount of the
offer was reasonable and not paltry. However, counsel for the Ailakis brothers argued that in spite of this it was not unreasonable for the defendants to reject the offer, because they were relying on defences which, if upheld, would have meant that they did not have to pay any damages or deliver any shares.
23 Counsel for Mr Olivero pointed out that at the time of the offer the
defendants had only pleaded a general denial of the oral agreement regarding the 1 million shares and had not indicated specifically that a lack of intention by the parties to enter into a legally binding contract would be relied upon. Furthermore, Mr Olivero had been ultimately successful in proving that a legally binding agreement had been entered into. Counsel for Mr Olivero submitted that it should have been obvious to the Ailakis brothers that their prospects of defending the claim were very slim.
24 I do not agree that this was necessarily the case. A very large
proportion of the trial was devoted to the issue whether there had been good consideration for the agreement by the Ailakis brothers to transfer 1 million shares to Mr Olivero. A number of issues regarding the lack of consideration were raised at the trial, but the main issue was whether Mr Olivero had an existing duty as non-executive director of Redstone Resources to do everything within his power to regain the lost rights to the mining tenement. Although the defendants were ultimately unsuccessful in relying on this point, it was an issue on which little case law was available and which was fairly arguable by the defendants.
25 Another issue that occupied considerable time at the trial was the
question whether in assessing the damages for loss of bargain the court should have regard to when Mr Olivero had intended to sell the shares. At the time of the pre-trial conference Mr Olivero had not formulated his damages claim on the basis of a repudiation of the agreement and damages for loss of bargain. This only occurred at the start of the trial. Counsel for the Ailakis brothers submitted that similar issues would have arisen in respect of Mr Olivero's damages claim as formulated at the time of the offer and that the defendants did not act unreasonably in wishing to have those issues determined by a court. However, as Mr Olivero was content to limit his claim in his Calderbank offer to the then current value of the shares the defendants did not have to be concerned at that time how
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the damages claim might be calculated. Accordingly, the uncertainty of how any damages claim should be calculated was not a good reason to reject the offer.
26 Counsel for the Ailakis brothers further submitted that the court
should assume that the question of whether the parties intended to create legal relations was already in issue at the time of the offer, because the defendants' general denial of the oral agreement included a denial of the legal validity of the agreement. Counsel stated that the reliance on a lack of intention to create legal relations was only spelled out in clear terms in a later amended defence to prevent a 'trial by ambush'. The Ailakis brothers did not provide any affidavit evidence to this effect or generally with regard to their reasons for refusing the offer. Counsel for the Ailakis brothers submitted that they did not have to do so, because the burden is on the offeror to prove an entitlement to indemnity costs. This may be so, but the defendants also have a burden to place evidence before the court which they wish the court to take into account. In the absence of affidavit evidence to this effect, I am not prepared to assume that a general denial was meant to encompass a denial of an intention to create legal relations. Accordingly, this issue which also took considerable time at the trial, is not a matter that should be taken into account as providing a potential defence at the time of the offer.
27 However, the issue of a lack of consideration had already been
pleaded at the time of the offer. This was a major issue at the trial and would have, if successful, provided the Ailakis brothers with a total defence. This was not a case where it was clear from the start that the prospects of the defendants being successful were very limited.
28 As indicated by the case law referred to earlier, the assessment as to
whether the rejection of an offer was unreasonable should not be made with hindsight and is not to be determined by what the court ultimately decided. The proper question is whether at the time of the offer the defendants had a valid defence and whether it was reasonable for them to decide that they wanted this defence adjudicated by a court.
29 Counsel for the Ailakis brothers pointed out that the offer did not
specifically say that indemnity costs would be sought if it was rejected. I would regard this as a reasonably minor factor in considering the reasonableness of rejecting the offer as the email by Mr Olivero's legal representative was headed 'without prejudice save as to costs' and referred to a Calderbank offer. Any practising lawyer in Western Australia knows
| SCHOOMBEE DCJ | [2012] WADC 174 (S) |
that this foreshadows a potential claim for indemnity costs if the offer is
rejected.30 Counsel for Mr Olivero submitted that it had been unreasonable for
the Ailakis brothers to have rejected the offer by return email sent two minutes after the email containing the offer was received. However, this has to be seen in the context of the parties having discussed a settlement at a pre-trial conference the previous Friday. The return email specifically referred to the discussions on the Friday.
31 Accordingly, even though the amount for which Mr Olivero was
prepared to settle was very reasonable, it cannot be said in my view that the defendants did not have any fair prospects of success at that stage and were unreasonable in rejecting the offer. No indemnity costs are therefore to be awarded on the basis of an unreasonable rejection of the Calderbank offer.
Improper or unreasonable conduct
32 Counsel for Mr Olivero submitted that Mr Olivero should also be
entitled to indemnity costs by reason of the improper and unreasonable conduct by the defendants and their legal advisers. Counsel for Mr Olivero seemed to rely mainly on the fact that the defendants denied certain matters in their defence which were either admitted at trial or in respect of which no evidence was led.
33 Counsel for Mr Olivero firstly relied on the fact that the defendants
originally simply pleaded a general denial of the agreement to transfer the 1 million shares. The defence was amended approximately one month prior to the trial to specify that the agreement was denied, and that in particular, it was denied that there had been any offer made by one party to another, that there had been any acceptance of such an offer and that there had been any intention to create legal relations.
34 Counsel for Mr Olivero submitted that it only became apparent at the
trial that the defendants did not deny the actual content of the conversation constituting the agreement and that Mr Olivero had incurred unnecessary costs and also stress in having to prove this conversation.
35 Counsel for the Ailakis brothers submitted that it must have been
apparent to Mr Olivero's counsel well before the start of the trial that the conversation would not be placed in dispute because the defendants did not file any witness statements dealing with that conversation. Counsel for the defendants also pointed out that it would have been necessary for
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Mr Olivero to have dealt with this conversation in his witness statement in any event as it was also relevant to the intention to create legal relations.
36 Counsel for Mr Olivero further submitted that it had been
unreasonable for the defendants not to admit in their defence certain matters which were not challenged at trial, for example, that Mr Olivero had obtained a signed withdrawal form from Traka Resources Pty Ltd, the company which had in the meantime gained control over the lost mining tenement, and that he had handed this form to one of the defendants. Counsel for Mr Olivero further relied on the fact that Mr Olivero's evidence at the trial regarding his meetings with the Aboriginal elders to obtain their cooperation in relation to Traka Resources' mining ventures in the same area were not disputed at trial.
37 Counsel for Mr Olivero referred the court to case law to the effect
that persisting in a defence which a party knows or ought to have known with competent legal advice, to be hopeless and which conduct causes unnecessary expense and cost to the plaintiff may attract an indemnity costs order. However, this was not a case of the defendants relying on a hopeless defence. This was merely a case of the defendants not having made all of the admissions that could possibly have been made if their final conduct at the trial was taken into account.
38 In so-called 'submissions in reply', in respect of which I will say
something later, counsel for Mr Olivero relied on Unioil International Pty Ltd v Deloitte Touche Tohmatsu [No 2] (1997) 18 WAR 190, 193, where Ipp J held that the practice of putting the opponent to proof of or denying allegations for tactical reasons should no longer be tolerated and that there might be indemnity cost consequences for a party putting the other to proof or denying facts where this is inconsistent with the party's instructions.
39 In this case the denial of the agreement and the non-admission of
facts regarding Mr Olivero's endeavours to regain the lost mining tenement for Redstone Resources were not matters which would have caused Mr Olivero a substantial amount of additional cost. These were all matters in respect of which Mr Olivero would have wanted to give evidence in any event because they were relevant to the intention to create legal relations and to whether the work performed by him went beyond the scope of his duties as a non-executive director.
40 A court does not grant indemnity costs in respect of the whole
proceedings every time that a defendant could have, and perhaps should
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have, admitted matters that were denied or in respect of which the other party was put to the proof. Counsel for the Ailakis brothers rightly pointed out that Mr Olivero had never served a notice to admit facts.
41 Counsel for Mr Olivero submitted that there could not have been any
credible instructions for such denials or non-admissions and that the defendants 'created false issues for tactical reasons'. There is no evidence that this was the case and there were no 'false issues' raised.
42 Counsel for Mr Olivero further argued that indemnity costs should be
ordered because the defendants were financially stronger and had obtained funding for their defence from Redstone Resources without disclosing this to Mr Olivero. Counsel for Mr Olivero relied on Chen v Karandonis [2002] NSWCA 412 [110] where the New South Wales Court of Appeal held that indemnity costs might be appropriate where 'a financially stronger party had patently and deliberately protracted proceedings for the purpose of multiplying costs and wearing down the other side in the hope of forcing an out-of-Court capitulation'. However, there was absolutely no evidence that this had occurred in this case. There were no unnecessary or repetitive interlocutory applications or similar conduct that Mr Olivero could rely upon. The sole basis in support of this argument was that the defendants had obtained funding from Redstone Resources.
43 Counsel for Mr Olivero relied on O 9A of the Rules of the Supreme Court pursuant to which a party to a case must notify the other party and the registrar if the party is obtaining financial assistance from an interested non-party for the purpose of conducting the case. However, this rule only applies if the interested non-party not only provides funding or financial assistance to the party engaged in the proceedings, but also exercises direct or indirect control or influence over the way in which the party conducts the case. There was no evidence that Redstone Resources had exercised any direct or indirect control over the manner in which the defendants had conducted their defence.
44 Counsel for Mr Olivero also raised a number of issues to the effect
that Mr Anthony Ailakis, as a director of Redstone Resources, was not entitled to be indemnified by that company for the costs of conducting the defence. Those matters only concern the inter-relationship between the defendants and Redstone Resources and have nothing to do with the question whether indemnity costs should be granted in this case.
45 Lastly, Mr Olivero's counsel submitted that there had been an
inappropriate attack on Mr Olivero's credibility in the course of the
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proceedings. Counsel for the Ailakis brothers cross-examined Mr Olivero on a number of issues and submissions were filed arguing that Mr Olivero had not been a credible witness. There is nothing wrong with a party taking these steps during a trial and there was nothing in the manner in which counsel for the defendants cross-examined Mr Olivero or in the allegations made in the submissions which overstepped the mark of a normal contest between litigants.
46 On the morning of the hearing of the application for indemnity cost
counsel for Mr Olivero filed and served a 24-page document called 'submissions in reply' as well as a nine page affidavit containing a further 58 pages of annexures. The application had to be adjourned to another date so that counsel for the Ailakis brothers could have the opportunity of perusing the additional material and deciding whether a response needed to be filed. Initially orders were made for the parties to identify the matters which were truly in reply or responsive to matters raised in the defendants' submissions on costs and I contemplated disallowing Mr Olivero to rely on any new matters raised in the 'submissions in reply' and supporting affidavit. However, having perused the new or additional matters raised by Mr Olivero in these documents, they are not of much substance and may as well be dealt with.
47 This does not mean that an appropriate costs order should not be
made against Mr Olivero and I will hear the parties on that issue. It should also be noted that the filing of substantial new or additional submissions and affidavit evidence on the morning of the hearing was in flagrant disregard of case management rules and the court's clear earlier orders regarding the filing of submissions and affidavits. The affidavit filed by Mr Olivero's counsel on request by the court to explain the late filing of the additional submissions and affidavit evidence did not provide any reasonable excuse. Filing substantial additional material at the last minute means that a court's allocated resources for that day, including the judge, the staff and the use of the courtroom, are wasted. In addition the opponent is at least inconvenienced and may also incur lost time and resources which are difficult to recover as part of a costs order. Although I agreed to deal with the additional matters, an order refusing to hear any new matters would be entirely appropriate on another occasion.
48 The one issue raised in the 'submissions in reply' which appeared to
have relevance to an order for indemnity costs was the allegation that counsel for the Ailakis brothers had misled the deputy-registrar of this court during the hearing of an application to amend the defendants' defence when he told the court that he had not previously signed a
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certificate by counsel to the effect that he had reviewed the pleadings. However, counsel for the Ailakis brothers dealt with this allegation in a further affidavit and supplied the court with the transcript of the hearing before the deputy registrar.
49 At the hearing before the deputy-registrar reference was made to an
affidavit sworn to earlier by counsel for the Ailakis brothers in which he had stated that the matter had been entered for trial without him having tendered a certificate under r 43(3)(a) of the District Court Rules, but that he would nevertheless explain the reasons for the proposed amendment, as if he had filed such a certificate. Counsel for Mr Olivero pointed out to the deputy-registrar that counsel for the Ailakis brothers had in fact filed a certificate under r 43(3)(a). Counsel for the Ailakis brothers was happy to concede that this could have occurred. The learned registrar then located a copy of the certificate and that was the end of the matter.
50 It was inappropriate for Mr Olivero's counsel to allege misconduct by
counsel for the Ailakis brothers where it was obvious from the proceedings before the deputy-registrar that the alleged 'false testimony' was clearly an oversight, did not go anywhere, and was corrected before any reliance was placed on it.
51 Counsel for Mr Olivero raised another matter in the 'submissions in
reply' which he argued should not have been denied by the defendants in their defence. This matter concerned the issue to which extent the defendants had control over shares in Redstone Resources as some of these shares were held in trusts or by their family members. Counsel for Mr Olivero complained that the defendants had only admitted shortly prior to trial that one of them was a primary beneficiary of one of the trusts and that it had never become clear whether the other defendant was a beneficiary or not. The issue of whether the defendants had direct control over the shares in Redstone Resources was not a major issue at trial. The only relevance was that if the defendants were major shareholders in Redstone Resources, directly or indirectly, they had a lot to lose if the company did not manage to regain the rights to the mining tenement which one of the defendants had inadvertently lost.
52 It is not unusual for matters regarding the exact entitlement of parties
as beneficiaries of trusts to be only clarified closer to trial and this is not a matter which would have occasioned Mr Olivero to expend considerable costs in trying to prove this. The complaint by counsel for Mr Olivero is essentially that some of these matters were apparent on the documents and that there was no reason for the defendants to have denied these matters.
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However, even if this is correct, these issues played such a minor role that there would certainly be no reason to grant indemnity costs for the whole of the proceedings.
53 Counsel for Mr Olivero further submitted that indemnity costs
should be granted because it was inappropriate and unreasonable for the defendants to have made an application to amend their defence approximately a month prior to the trial and that the inappropriateness of this conduct was evident from the fact that the defendants lost the application. Counsel for Mr Olivero essentially submitted that the application had so little prospect of succeeding that this amounted to oppressive conduct by the defendants which should be met by granting indemnity costs for the trial.
54 The reasons given by the deputy registrar for refusing the application
were that he was not persuaded that the defendants' proposed plea that the agreement to transfer shares was illegal had any proper basis and he raised the concern that the amendment to the defence was only made one month prior to the trial.
55 There is nothing on the transcript which indicates that the deputy
registrar was of the opinion that the defendants had brought a hopeless application or that it was only brought to distract the plaintiff shortly prior to the trial. No application for indemnity costs in respect of the costs of that application was made by Mr Olivero. The fact that the defendants lost the application to amend their defence is no ground for allowing indemnity costs in respect of the trial.
56 Counsel for Mr Olivero also submitted that the defendants had acted
inappropriately in not agreeing to an adjournment of the trial which was sought because of Mr Olivero's illness at the time and was ultimately granted by a registrar of the court. Counsel further submitted that the defendants had at first insisted on witness statements, then abandoned that demand, and ultimately reinstated the requirement, all apparently as part of a tactic to put pressure on Mr Olivero to abandon his claim. Counsel for Mr Olivero also relied on a settlement offer made by the defendants at a second pre-trial conference approximately one month before the trial when they offered to settle the matter on the basis that each party simply pay its own costs.
57 The order that witness statements should be filed in this case was
made by consent. The fact that the defendants did not agree to vacate the trial and caused Mr Olivero to have to make an application in this regard
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does not amount to inappropriate conduct. Counsel for the defendants indicated that the application was not opposed upon being heard. There is nothing wrong in making an offer that each party simply pay their own costs.
58 Having considered the original allegations of misconduct and the
additional matters raised in the 'submissions in reply' there is nothing which justifies the grant of an indemnity costs order in respect of the trial.
59 Even less is there any basis for an order to be made that Mr Olivero
have leave to seek an indemnity from the defendants' solicitors and counsel in respect of any costs that remain unsatisfied by the defendants. Such a suggestion first reared its head in a minute of proposed orders filed by Mr Olivero's counsel on the adjourned hearing of the application for costs. In Mr Olivero's original submissions on costs mention was made in passing that the indemnity costs order should be made payable by the defendants' solicitors. However, this issue was not properly addressed in the written or oral submissions and there is no basis for making such an order.
Special costs order
60 Mr Olivero applied, in the alternative to the indemnity costs order,
for a special costs order pursuant to s 280(2) of the Legal Profession Act
2008.61 In Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254, Martin CJ held in relation to the predecessor section to s 280(2), which was in exactly the same terms, that before the court could make an order for special costs the court had to form an opinion with regard to two components. The first one was that the amount of costs allowable in respect of the matter under a legal costs determination was inadequate and the second that the inadequacy arose because of the 'unusual difficulty, complexity or importance of the matter'.
62 Martin CJ explained that there were two alternative ways in which
the first issue could be proven by an applicant for a special costs order. The applicant could satisfy the court that it was likely that the bill to be taxed would be greater in respect of any particular item in the costs determination than the limit allowed for that item. Alternatively, the applicant could satisfy the court that there was a fairly arguable case to be put before a taxing officer that the total bill would tax out at more than the limit imposed by the costs determination.
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63 Martin CJ came to the conclusion at [20] that it was not necessary for
an applicant to demonstrate that a limit was inadequate by providing a detailed evaluation of a draft bill for taxation. This would lead to 'satellite' or 'parasitic' litigation. Rather, the court should make a determination as a matter of impression and not as a matter of detailed evaluation.
64 As regards the second requirement of 'unusual difficulty, complexity
or importance of the matter' Martin CJ held that the word 'unusual' only qualified the expression 'difficulty'. His Honour also came to the conclusion at [17] – [19] that the requirement of 'importance' of the matter did not call for proof of public importance. The requirement would be satisfied if the matter was important to the parties, the public, the community or other people who had an interest in the outcome of the litigation.
65 Counsel for Mr Olivero submitted that all scale limits should be
removed. Counsel argued that unusual difficulty was created by the maintenance of the denials and non-admissions by the defendants, their non-cooperation regarding Mr Olivero's illness and the issues concerning the quantification of damages. Counsel for Mr Olivero further submitted that the matter was complex by reason of the defendants' arguments regarding the absence of an intention to create legal relations and the lack of consideration.
66 In order to support their defence of a lack of intention to create legal
relations the defendants relied on the parties' post-agreement conduct and the non-disclosure of the alleged agreement in Redstone Resources' documentation. The issue also caused Mr Olivero to lead evidence with regard to similar undertakings made by the Ailakis brothers to other people in order to show that such undertakings had been honoured. These matters raised unusual legal issues such as whether similar fact evidence was admissible.
67 The question whether there was no proper consideration because
Mr Olivero was already under a duty to perform the work to regain the tenement also raised some unusually difficult matters of fact and law. It is fair to say that the defences raised made the trial to some extent unusually difficult and complex.
68 Counsel for Mr Olivero submitted that the total quantum for getting
up the case had exceeded the total allowed by the scale by $51,518 after the Calderbank offer had been made. Counsel also submitted that the
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quantum for the item of discovery had been exceeded by $2,637 after the Calderbank offer had been made. The date of the offer does not seem to have any relevance with regard to whether the costs that will be able to be taxed are prima facie inadequate in comparison to the limit allowed under the scale.
69 Counsel for Mr Olivero further submitted that the defendants had
requested unnecessary documents to be included in the trial bundle, such as the annual reports of Redstone Resources, which were not referred to at trial.
70 Although the information provided by Mr Olivero is reasonably
scant in order to show why the scale limits were exceeded, I accept that there is a prima facie case that the scale limits for getting-up and discovery may have been exceeded. There is no evidence or indication that any other scale limits may have been exceeded. Accordingly I make an order lifting the scale limits that apply to getting up the case for trial and to discovery. It will then be for Mr Olivero to satisfy the taxing officer that the bill to be taxed should amount to more than the scale limits in respect of these two items.
71 Counsel for Mr Olivero lastly submitted that the scale limits for
photocopying should be lifted because he had agreed to a higher rate with Mr Olivero in his solicitor's retainer and had also agreed on a higher rate with the defendants' solicitors when they asked him to provide copies of discovered documents. He had also paid a higher rate to the defendants' solicitors for copies provided by them.
72 However, the fact that a higher rate was agreed in the retainer
between solicitors and their client or the fact that the parties were prepared to pay higher costs per copy for discovered documents is no good reason to lift the scale limit for photocopying.
73 Counsel for Mr Olivero referred the court to the decision in William Buck (WA) Pty Ltd v Faulkner [No 2] [2012] WASC 257 in which Kenneth Martin J held that, unless otherwise agreed, a party asked to provide copies of discovered documents could only charge the scale costs of 11 cents per copy. Martin J referred to the fact that the photocopying costs had been substantially reduced to 11 cents per page in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 in comparison to earlier determinations in 2006 and 2008 where $1 per page was allowed. His Honour came to the conclusion at [25] that this reduction was obviously a measure which endeavoured to make a
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contribution towards reducing the seemingly ever-increasing costs of litigation, particularly where the commercial rate for copying documents was more in line with 11 cents per page.
74 There is no reason to lift the scale limit for photocopying merely
because the parties had agreed between themselves to provide each other with copies of discovered documents at a higher rate per page. Mr Olivero could have insisted to be provided with photocopies at 11 cents per page or could have made his own arrangement for the copying of the discovered documents.
Accordingly, the scale limit for photocopying should not be lifted. However, the application for a special costs order is allowed in part.
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