JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : ORCHARD HOLDINGS PTY LTD -v- PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE [2012] WASC 271 (S) CORAM : ALLANSON J HEARD : 20 AUGUST, 14 SEPTEMBER 2012 DELIVERED : 14 SEPTEMBER 2012 PUBLISHED : 17 SEPTEMBER 2012 FILE NO/S : CIV 1762 of 2010 BETWEEN : ORCHARD HOLDINGS PTY LTD First Plaintiff
KEITH ROBERT ANDERSON
Second Plaintiff
SUE-ANN ELIZABETH ANDERSON
Third Plaintiff
AND
PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE
First Defendant
PRO PROPERTY PTY LTD AS TRUSTEE FOR ACEHIGH ADELAIDE TRUST TRADING AS COLDWELL BANKER PRO PROPERTY
Second Defendant
RICHARD MASSON MOODY
Third Defendant
(Page 2)Catchwords:
Practice and procedure - Costs - Offers of settlement - Multiple causes of action - Turns on own facts
Legislation:
Nil
Result:
Orders made as to costs
Category: B
Representation:
Counsel:
First Plaintiff : Mr S C England
Second Plaintiff : Mr S C England
Third Plaintiff : Mr S C England
First Defendant : Mr M S White
Second Defendant : Dr J T Schoombee
Third Defendant : In person
Solicitors:
First Plaintiff : Lawton Gillon
Second Plaintiff : Lawton Gillon
Third Plaintiff : Lawton Gillon
First Defendant : Clavey Legal
Second Defendant : Downings Legal
Third Defendant : In person
(Page 3)Case(s) referred to in judgment(s):
Dobb v Hacket (1993) 10 WAR 532
Donald Campbell & Co v Pollak [1927] AC 732
Glew v Frank Jasper Pty Ltd [2008] WASCA 186
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435
Hughes v St Barbara Ltd [2011] WASCA 234 (S)
Keet v Ward [2011] WASCA 139
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S)
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569
(Page 4)
1 ALLANSON J: Orchard Holdings Pty Ltd suffered damage because Mr Moody deceived it. The first and second defendants, Property People and Coldwell Banker, employed Mr Moody and are liable with him for that damage. Orchard Holdings obtained judgment against Mr Moody and his employers. The total damages awarded were $450,000.
2 Mr and Mrs Anderson had also brought claims, but those claims failed.
3 The court must now decide who is to pay costs. No one disputes that Mr and Mrs Anderson should pay the defendants' costs of their action. The plaintiffs have calculated the proportion of the time at the hearing that was devoted to Andersons' claims, but that may not lead to an accurate assessment. The taxing officer should decide what proportion of the costs of the action relates to those claims.
4 Orchard Holdings asks for its costs against the defendants. The defendants say the court should award part of the costs of the action, including the costs of the hearing, against Orchard Holdings.
The factors bearing on costs
5 The costs are in the discretion of the court: Supreme Court Act 1935 (WA) s 37(1). The discretion must be exercised judicially, but is otherwise unconfined: Oshlackv Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [21] - [22], [134]; Latoudis v Casey[1990] HCA 59; (1990) 170 CLR 534, 540, 558, 562, 568; Donald Campbell & Co v Pollak [1927] AC 732, 811.
6 There are several significant matters affecting the question of costs. First, Mr and Mrs Anderson did not succeed. I do not need to deal further with that. Second, in the weeks leading up to trial each defendant separately, and then the defendants jointly, offered to settle the matter for amounts which exceeded the damages ultimately awarded. Third, Orchard Holdings did not succeed on all of its causes of action.
7 The courts have developed principles to guide judges in exercising the discretion under s 37. Orchard Holdings is the successful party. The general rule is that it should recover its costs: Rules of the Supreme Court 1971 (WA) O 66 r 1. But there are competing principles which give rise to the questions that must be decided in this case.
(Page 5)
8 First, each defendant offered to compromise the proceedings. Should Orchard Holdings pay the costs incurred after those offers were made?
9 Second, Orchard Holdings failed in its claims in contract, tort, breach of fiduciary duty, and (against Mr Moody only) breach of the Fair Trading Act 1987 (WA). Should Orchard Holdings pay the costs of those causes of action on which it failed?
Costs after the offers of settlement
10 On 6 July 2011, the court listed the matter for trial for eight days, commencing on 17 October 2011, and set a timetable for interlocutory steps that were then incomplete. Changes were made to that timetable, but the proposed 17 October starting date remained fixed.
11 The defendants tried to settle the claim.
12 On 27 September 2001, Property People offered to pay $325,000, in full and final settlement of the plaintiffs' claims against it, and also to pay the plaintiffs' costs of the action. The offer was to be open until close of business on 11 October 2011, approximately two weeks.
13 On 30 September 2011, the solicitors for Coldwell Banker and Mr Moody also offered to settle. They offered $500,000 plus 50% of the plaintiffs' costs to be taxed or agreed. Significantly, the offer was qualified in this way:
3. Our clients naturally have a concern that if your clients settle with them, there may be moves by the first defendant to join them in contribution proceedings. This issue can be resolved in one of three ways: 3.1 Your clients indemnify our clients against such consequences, both as to costs and otherwise. This offer is made on this basis. Two alternatives are raised below for your consideration. 3.2 If the case against the second and third defendants is dismissed by court order, it may be difficult or not possible to join them back in at the behest of the first defendant. But the first defendant may object to such process.
3.3 It would of course be best if all defendants can settle with all the plaintiffs at the same time. We trust that this can be
(Page 6) achieved by obtaining an appropriate settlement offer from the first defendant.
14 I am not sure why the qualification was added. Apportionment legislation allows apportionment between concurrent wrongdoers even when they are not all parties to the proceedings. There can have been only a slight risk that Property People would seek to join the other defendants in contribution proceedings. 15 The offer was to remain open until 7 October 2011.
16 In the letter of offer, the lawyers for Coldwell Banker said that they did not wish to argue the merits of the case. But they set out, in brief, their contentions that the claim against Coldwell Banker must fail because the plaintiffs could not prove that Mr Moody was acting with Coldwell Banker's authority. They also pressed the merits of a limitation point pleaded on behalf of Mr Moody. These potential defects in the claim were later remedied.
17 Each of the defendants made its offer without admission of liability and as a commercial settlement. Each left it for the three plaintiffs to determine how the settlement sum should be apportioned between them. Each reserved the right to rely on the offer on the issue of costs.
18 On 14 October 2011 (the Friday before the trial was to begin) the three defendants jointly offered to settle. Again the offer was expressed to be for commercial reasons, without prejudice save as to costs, and without admission of liability. The defendants offered $1 million in full and final settlement plus costs to be taxed or agreed, with Property People to pay half, and the other defendants to pay half.
19 The offer was open for acceptance in writing until 1.00 pm on 17 October 2011. Again the defendants referred to the use which might be made of the letter if the plaintiffs obtained an award no more favourable than the offer.
20 There is a policy of encouraging reasonable settlement of an action: see for example McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S) [93] - [94]. There may be costs consequences for a party rejecting a reasonable offer of settlement, particularly where the rejection is unreasonable: Dobb v Hacket (1993) 10 WAR 532, 540; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 [7] - [8].
(Page 7)
21 In Hughes v St Barbara Ltd [2011] WASCA 234 (S) [12], the court said that the existence of an offer of compromise made in aCalderbank letter, which it would not have been unreasonable for the other party to accept, will be a powerful factor in the exercise of the court's discretion. The court continued:
In most cases where the offeree ends up worse off than if the offer had been accepted, the court will make an order in favour of the party making the offer as from the date of the offer and allowing the offeree costs only up until the date of the offer.
22 The relevant question is different from that when a party seeks indemnity costs. The double negative, whether it is 'not unreasonable' to accept, has a degree of imprecision. But it is not necessary to find that the plaintiffs acted unreasonably: compare Glew v Frank Jasper Pty Ltd [2008] WASCA 186 [15]. 23 Allowing for that difference, and the protean nature of the concept of reasonableness, guidance as to relevant considerations can still be found in the cases on indemnity costs: see, for example, Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 [25]. The matters relevant to whether the rejection of an offer is unreasonable include:
(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 costs in the event of the offeree's rejecting it.
24 The assessment I must make relates to the time the offers were made, not with the advantage of the findings that were ultimately made. 25 The parties were proceeding on an expedited timetable. The trial was expected to take at least eight days, with three defendants and it was going to be expensive. The defendants offered to pay the plaintiffs' costs. There is no reason to doubt that all of the offers were genuine attempts to compromise the actions.
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26 Although each offer was in a global sum to the three plaintiffs, the plaintiffs are so closely related that it was reasonable to allow them to decide how to share it.
27 The combined effect of the individual offers, and the effect of the later joint offer, is far more favourable than the result achieved by the plaintiffs' collectively.
28 Looking at the factors referred to in Hazeldene's Chicken Farm, they generally favour the defendants. That is so, even though the last joint offer was on the Friday before the trial began and was only open to 1.00 pm on the following Monday. The time to consider the offer was short. But at that time the witness statements had all been filed, and the relevant documents compiled. The plaintiffs and their lawyers should have been sufficiently across their case to assess the reasonableness of a significant offer. The plaintiffs were seeking considerably more than what was offered, but, in my view, their expectations were inflated.
29 There are, however, two matters which weigh heavily in favour of Orchard Holdings.
30 First, the plaintiffs were seeking to amend their case on the first day of trial. Two of the amendments that were allowed were critical to their case: the plea that Property People and Coldwell Banker were liable under s 84(2) of the Trade Practices Act 1974 (Cth); and the plea that Mr Moody was liable under s 75B of that Act. The amendments overcame the limitation point on which Mr Moody had relied in his defence, and which had been argued by Coldwell Banker and Mr Moody when they made their first offer.
31 Second, the plaintiffs had applied for leave to rely on additional expert evidence in support of a claim for damages for lost value in the 'unsold apartments' - apartments which they had not actively marketed between June 2007 and December 2009. The application was refused, but it was only decided after the last time for accepting the defendants' offers had expired
32 The uncertainty about whether they would be permitted to rely on the additional expert evidence is important in assessing whether the plaintiffs should, reasonably, have accepted the offers. That uncertainty affected claims for more than $1 million. On the findings made at trial, those claims may not have succeeded. But it is not helpful to speculate about what findings would have been made if the evidence had been different.
(Page 9) This is particularly so where the question is whether it would have been 'not unreasonable' to accept the offer at the earlier time when it was made.
33 In my view, the general rule that the successful party should recover its costs should apply. The defendants should pay Orchard Holdings costs of the trial, subject to specific matters which I will deal with below.Costs of the causes of action which failed
34 In the absence of a special order, where the statement of claim contains more than one cause of action, and the plaintiff does not succeed on all of them, costs shall be in the same manner as if separate actions had been brought. Even where the plaintiff succeeds, costs may be allowed to a defendant on those causes of action on which the defendant succeeded: O 66 r 2(a).
35 In Keet v Ward [2011] WASCA 139 [24], the Court of Appeal set out several propositions from the cases discussing this rule. Two are particularly relevant. The rule is not inflexible, and the court will always attempt to do substantial justice in the circumstances: Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, 574 - 575. And it may not be appropriate to make a costs order under O 66 r 2(a) where there is in substance one contest, that is, where the causes of action arise from the one course of dealings, the one transaction, or the same facts.
36 The second of these propositions describes the circumstances of this trial. Mr Moody deceived Orchard Holdings by presenting it with false offers for the apartments it was trying to sell. This was misleading and deceptive conduct within the Trade Practices Act. The plaintiffs also put forward claims in contract, tort and fiduciary obligation. In each case the particular of the breach was the same: the conduct of Mr Moody in presenting offers that were not genuine.
37 The defendants pleaded to these allegations by denying them. The plaintiffs did not even make submissions on them. It almost overstates their significance to the course of the trial to describe these causes of action as peripheral.
38 The claim for breach of the Fair Trading Act was relevant up to trial, due to Mr Moody's limitation defence. After the plaintiffs amended to plead that Mr Moody was knowingly concerned in breaches of the Trade Practices Act by his employers, the importance of his limitation defence fell away.
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39 I will make a specific order regarding the application to amend. Otherwise, those failed causes of action should not affect the order for costs.
The amendments at the beginning of the trial
40 The costs of 18 October 2011, the second day of the trial, were reserved. On 17 October, plaintiffs' counsel foreshadowed amendments to each of the causes of action on which the first plaintiff relied. Other matters were dealt with, including some inadequacy in the trial bundle. The trial was adjourned to the following day, and I ordered that the plaintiffs pay the defendants' costs thrown away by reason of the adjournment.
41 On 18 October, I heard argument on the plaintiffs' application to amend the statement of claim, including an application (previously not pressed) to rely on s 75B of the Trade Practices Act in their claim against Mr Moody. The trial had been adjourned the previous day to allow the application to amend to be considered with as much notice as possible to all parties.
42 The defendants opposed the proposed amendments, in part because of when they were made, and in part by arguing that they would be liable to be struck out. Most of the amendments proposed by the plaintiffs were allowed.
43 The plaintiffs say that the order that the defendants have the costs thrown away by reason of the adjournment on 17 October sufficiently compensates the defendants for the costs thrown away by reason of the late amendments to the statement of claim. I do not see how that can be so. The plaintiffs moved amendments to the statement of claim only when the trial was due to start. Those amendments had to be dealt with before the trial could get underway. Both 17 and 18 October were needed to deal with the plaintiffs' applications.
The application and the special appointment in January 2012
44 The plaintiffs accept that the defendants should have the costs of the application dated 10 January 2012 and the special appointment on 25 January 2012.
Conclusion
45 The costs orders, accordingly, are these:
(Page 11) 1. The second and third plaintiffs to pay the defendants costs of the action on the claims by the second and third plaintiffs. 2. The defendants to pay the costs of the first plaintiff. The defendants to be liable for those costs as follows:
3. The plaintiffs to pay the defendants' costs thrown away by reason of the application to amend the statement of claim, heard on 17 and 18 October 2011 and determined on 19 October 2011, which include the costs of 18 October 2011. The plaintiffs are jointly and severally liable for those costs. 4. The plaintiffs to pay the defendants' costs of the application dated 10 January 2012 and the special appointment on 25 January 2012.
46 The matters which were argued in relation to set off and stay of execution do not arise on the orders I propose.