Palazzo Homes Pty Ltd v Palumbo
[2016] WADC 31 (S)
•22 MARCH 2016
PALAZZO HOMES PTY LTD -v- PALUMBO [2016] WADC 31 (S)
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WADC 31 (S) | |
| Case No: | CIV:660/2014 | 22 MARCH 2016 & 9 NOVEMBER 2017 | |
| Coram: | STAUDE DCJ | 22/03/16 | |
| PERTH | 9/11/17 | ||
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's motion for indemnity costs refused Third party's motion for indemnity costs allowed in part | ||
| PDF Version |
| Parties: | PALAZZO HOMES PTY LTD ALESSANDRO PALUMBO GAVIN YOUNG |
Catchwords: | Costs Special orders for costs Conduct of defence Whether defence was a sham Whether indemnity costs orders should be made Effect of third party's offer to consent to dismissal of third party proceedings with no order for costs Turns on own facts |
Legislation: | Nil |
Case References: | Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122; (2003) 28 WAR 95 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 9 NOVEMBER 2017 FILE NO/S : CIV 660 of 2014 BETWEEN : PALAZZO HOMES PTY LTD
- Plaintiff
AND
ALESSANDRO PALUMBO
Defendant
GAVIN YOUNG
Third party
Catchwords:
Costs - Special orders for costs - Conduct of defence - Whether defence was a sham - Whether indemnity costs orders should be made - Effect of third party's offer to consent to dismissal of third party proceedings with no order for costs - Turns on own facts
Legislation:
Nil
Result:
Plaintiff's motion for indemnity costs refused
Third party's motion for indemnity costs allowed in part
Representation:
Counsel:
Plaintiff : Mr C S Gough
Defendant : No appearance
Third party : Mr D G Price
Solicitors:
Plaintiff : Mills Oakley
Defendant : Not applicable
Third party : D G Price & Co
Case(s) referred to in judgment(s):
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122; (2003) 28 WAR 95
1 STAUDE DCJ: The trial of this action was heard on 8 March 2016. On 22 March 2016 I gave reasons for decision in which I concluded that the plaintiff's claim should be allowed in the sum of $113,328 plus interest of $34,259. I also held that the third party claim should be dismissed.
2 As the plaintiff had undertaken to stamp three documents received in evidence, but had not done so, final orders were not made. The plaintiff and the third party indicated that each would make an indemnity costs order application against the defendant. I indicated that the defendant, who had not appeared at trial, would need to be given notice of any application for indemnity costs and I would deal with any such application on the papers unless there was a need to hear from counsel.
3 The documents in question were uplifted for stamping and subsequently returned. On 24 August 2016 the plaintiff's solicitors wrote to the registry lodging submissions in support of an indemnity costs order, but no motion. Annexed to the submissions of the plaintiff's solicitors was a copy of a letter to the defendant giving notice of the terms of the order sought by the plaintiff and the grounds for the order.
4 On 26 August 2016 the third party's solicitor wrote to the registry enclosing an affidavit of Mr D G Price sworn 21 March 2016 and the third party's submissions in favour of an indemnity costs order, but again no motion.
5 On 11 August 2016 an affidavit of the third party was filed deposing to and annexing screen captures of text messages from the defendant to the third party which are submitted to be intimidatory.
6 For some reason, the documents and correspondence to which I have referred were not drawn to my attention until recently after the plaintiff's solicitors made an inquiry.
7 By letter of 4 October 2016 Mr Philip Lafferty, who had previously acted for the defendant, though not at the trial, informed the court that he had been instructed to prepare and file responsive submissions in respect of the indemnity costs order applications and foreshadowed doing so within 21 days. No such submissions have been received. On 6 November 2017 Mr Lafferty informed my associate that he was without instructions.
8 The plaintiff having succeeded in its claim, and the third party claim having been dismissed, the usual orders would be that the defendant do pay the plaintiff's costs of the action to be assessed and that the defendant do pay the third party's costs of the third party proceedings to be assessed. Pursuant to such orders, the costs awarded would be assessed on a party and party basis according to the applicable Legal Practitioners (Supreme Court) (Contentious Business) Determination. An indemnity costs order of the type sought is an order that usually has the effect of allowing the successful party all costs incurred except insofar as they are of an unreasonable amount or have been unreasonably incurred. Obviously, each such order, if allowed, would result in a higher costs assessment.
9 The circumstances which may justify an indemnity costs order are many and varied, but generally involve unreasonable or inappropriate conduct on the party ordered to pay costs: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122; (2003) 28 WAR 95. The applicable principles are discussed in Kendall & Curthoys, Civil Procedure Western Australia (LexisNexis, [66.1.16]).
Plaintiff's submissions
10 The defendant was put on notice of the plaintiff's intention to claim indemnity costs by letter dated 30 March 2016 following the delivery of my reasons for decision, but there is no evidence that any such notice was given at any time prior to judgment.
11 The grounds of the plaintiff’s application may be summarised as follows:
1. The defence had no chance of success, as the defendant should have known.
2. The defendant by his conduct of the defence abused the process of the court.
3. The defendant's conduct was delinquent and plainly unreasonable.
12 With respect to the first ground, the plaintiff submits that the defendant admitted signing the loan agreements upon which the plaintiff's action was based, but argued that he was an employee and that the agreements did not have the effect for which the plaintiff contended. It is submitted that the defendant's position at trial was untruthful.
13 Although the defendant did not appear at the trial, I outlined his defence in my reasons at [15] – [19]. There were three limbs to the defence. First, there was a contention that the defendant entered into a further oral employment agreement with Mr Young, the plaintiff's managing director (and the third party), which was varied when he was requested to perform additional duties. I construed the defence as pleading in the alternative a set-off in the form of a quantum meruit for the value of additional work done by the defendant. The second contention was that prior to the termination of the alleged employment contract, Mr Young orally agreed to release and discharge the defendant from any obligation pursuant to the agreements and that the plaintiff was thereby estopped from claiming the repayment of the monies loaned on the basis that, in reliance on Mr Young's alleged release, the defendant continued to provide additional services to the plaintiff and thereby suffered a detriment. The third limb of the defence is that the defendant agreed with Mr Jujnovich, a director of the plaintiff, that in consideration of him introducing new customers he would be released from his obligation to repay the loan amounts, and that he did in fact introduce two potential customers and was thereby released. There was no application to strike out the defence.
14 At the trial the plaintiff's claim was proved. There was no evidence to support the pleaded defences. While the defences were not made out, I am not satisfied that they were without all merit and unarguable.
15 As to the second ground of the application, the plaintiff contends that the defendant
abused the process of the court, wasted the court's time, wasted the litigants' money because he:
(i) stated he would conduct himself in a way that would prevent judgment being enforced against him;
(ii) made interlocutory applications which were doomed to fail;
(iii) swore an affidavit to the effect that he was not a flight risk when in fact he was;
(iv) failed to appear at trial to defend the plaintiff's claim and prosecute his own third party claim;
(v) commenced third party proceedings which were doomed to fail; and
(vi) conducted a sham defence.
16 That the defendant said he would conduct himself in a way that would prevent judgment from being enforced against him is not exceptional, in my view. That the defendant's sworn affidavit to the effect that he was not a flight risk in the context of interlocutory proceedings bears only on the costs order in the application in which the affidavit was filed, assuming that the contention is capable of being made out. That the defendant failed to appear at trial does not amount to conduct which would justify a special costs order. Rather, it made the plaintiff's task of proving the claim easier. That the defendant made interlocutory applications which were doomed to fail is not a ground for a special costs order either. Costs orders would have been made upon the disposition of those applications. Finally, I do not consider that the defence was a sham for the reasons given above.
17 The third ground of the application is that the defendant's conduct was delinquent and plainly unreasonable. This ground is repetitive. It is alleged that the defendant persisted with the defence perversely and that he persisted with a number of hopeless interlocutory applications. I am not concerned with the costs of the failed interlocutory applications. Furthermore, I am unable to find that the defence was a sham. It is alleged further that the defendant 'grossly prolonged litigation'. The writ was issued on 6 March 2014 and the matter came to trial two years later. The plaintiff is compensated for the delay by the favourable award of interest at the rate prescribed by the Supreme Court Act. As to any interlocutory proceedings, I assume that costs orders would have been made in favour of the plaintiff where it was successful. The court's rules and procedures otherwise allow a plaintiff to progress a matter towards trial in a timely manner.
18 In a letter to the defendant dated 30 March 2016 the plaintiff's solicitors set out the grounds for the costs order now sought. One of the allegations made against the defendant is that he made threats to the third party who was the plaintiff's primary witness. An affidavit of Mr Young has been lodged which annexes mobile phone screen captures of messages exchanged between him and the defendant on 10 July 2014, some months after this action had been commenced. The so-called threat was made in the context of a request in the following terms:
Please just do the right thing. 'I'll always tell you the truth' you said. Please do the right thing. The Gavin I knew would never let this happen.
19 A subsequent message reads:
See you at all your home opens this weekend on. EVERY SINGLE HOME YOU OPEN I WILL BE THERE WITH SOME QUALITY FRIENDS to make it a very pleasant experience for all that attend. See you on the weekend.
20 The second message suggests that the defendant was prepared to embarrass and cause inconvenience to the plaintiff. While it may be construed as a threat to do harm to the plaintiff of a commercial nature, there is no evidence that anything came of it. It reflects badly on the defendant, but I do not consider that in all the circumstances of this case, a special costs order should be used to penalise the behaviour.
21 All in all, I am not satisfied that proper grounds have been shown for the exercise of the court's discretion to order other than the usual costs order in this case, at least as far as the plaintiff's claim is concerned.
Third party's submissions
22 It is submitted that the third party claim lacked merit altogether because the third party notice was directed to Mr Young, who was the managing director of the plaintiff company.
23 The pleadings do not show that Mr Young acted in any other capacity. Accordingly, the third party claim was really no more than an iteration of the defence. It ought to have been struck out. In any event, the third party's solicitors did propose by letter to the defendant's solicitors dated 21 January 2016 that the third party proceedings be dismissed by consent with no order as to costs. The proposal was in the form of a Calderbankletter. It notified the defendant of the possible costs consequences of refusal.
24 I am satisfied that offer was unreasonably refused by the defendant for the reasons that the lack of merit of the third party claim was conspicuous, the offer involved an element of compromise in that the third party was prepared to forego costs at that stage, and the defendant used to be a practising lawyer and was at the time of the offer represented. There was no way that the third party claim could have succeeded to any greater extent than the defence. In the case of the third party proceedings, I am satisfied that proper notice was given to the defendant of the third party's intention to claim indemnity costs in the event that its offer to agree to the discontinuance with no order as to costs was not accepted.
25 Costs after the date of the third party's offer should be assessed on an indemnity basis.
26 As judgment has not yet been pronounced, the calculation of interest in my reasons for decision should be amended to reflect the passage of time. Interest should be allowed at 6% per annum pursuant to s 32 of the Supreme Court Act on the debt of $113,328 from 3 March 2011 to date, a period of approximately six years and eight months, being $45,331.
27 The orders are:
1. Judgment be entered for the plaintiff against the defendant in the sum of $158,659, inclusive of interest.
2. The defendant do pay the plaintiff's costs of the action, including any reserved costs, but excluding the costs of the special costs order application, to be assessed.
3. The third party proceedings be dismissed.
4. The defendant do pay the third party's costs of the third party proceedings, including any reserved costs, on a party and party basis to 21 January 2016, and thereafter all costs incurred by the third party except insofar as they are of an unreasonable amount or have been unreasonably incurred, such costs to be assessed.
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