Parabanks Shopping Centre Pty Ltd v Brine (No 2)

[2014] SADC 146

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

PARABANKS SHOPPING CENTRE PTY LTD v BRINE (No 2)

[2014] SADC 146

Judgment of His Honour Judge Tilmouth

22 August 2014

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE

Consideration of the circumstances appropriate to depart from the general rule that costs follow the event on a party and party basis, when the plaintiff applies to amend a Statement of Claim moments before the commencement of the trial and when a previous trial was vacated on a similar basis.  Indemnity costs awarded to defendant for the costs consequently thrown away and some costs in relation to a failed issue awarded on a similar basis. 

District Court Civil Rules 2006 (SA) DCR263(1), DCR263(3), DCR 6 264(5)(a) & (b); Distrct Court Act 1991 (SA) s 42(1); Parabanks Shopping Centre Pty Ltd v Brine [2014] SADC 123; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Cambelltown) Pty Ltd (2008) 234 CLR 237; Copping & Ors v ANZ McCaughan Ltd & Anor (1995) 63 SASR 523; Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97; BHP Billiton Ltd v Parker (2012) 113 SASR 206; Rapuano v Karydis-Frisan [2013] SASCFC 8; Forlyle Pty Ltd v Tiver (2007) 252 LSJS 387; Colgate Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225; Latoudis v Casey (1990) 170 CLR 534; Cretazzo v Lombardi (1975) 13 SASR 4; Stewart v Atco Controls Pty Ltd, (In Liq) (No 2) [2014] HCA 31; Morris v McEwer (2005) 92 SASR 281; Yap v Flinders Reproductive Medicine Pty Ltd [2014] SADC 82; Rosniak v GIO (1997) 41 NSWLR 608; Wilcox, Re; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151; Skorpos v United Petroleum Pty Ltd [2014] SASCFC 21, referred to.

PARABANKS SHOPPING CENTRE PTY LTD v BRINE (No 2)
[2014] SADC 146

The issue

1. There is before the court an application by the defendant for an order for costs in his favour, following his successful defence of a claim for the enforcement of a personal guarantee and indemnity entered into with the plaintiff.  He seeks costs on an indemnity and if not a solicitor/client basis, in view of certain offers to settle made by him before and during these proceedings and on account of certain conduct of the plaintiff during the course of the trial.

   The primary judgment – a brief summary

2. The plaintiff failed in its cause of action to enforce the guarantee and indemnity, for which damages of nearly $150,000 was claimed.[1]  The hearing occupied eight sitting days.  Evidence was taken between mid and late February 2014, there was two days of closing submissions on 20 and 21 March 2014, and further short oral argument was heard on 30 May 2014.

   [1]    Parabanks Shopping Centre Pty Ltd v Brine [2014] SADC 123.

3. Three principal contentious issues emerged during the course of the trial.  The first related to the proper construction of the clause of guarantee and indemnity in a shop lease between Parabanks Shopping Centre (Parabanks) and a tenant of the Centre, a company associated with the defendant Mr Brine, the menswear retailer Ed Harry Pty Ltd.  Whilst by no means a straightforward issue, the construction question was resolved in favour of Mr Brine.  This issue occupied considerable time in the course of submissions, but very little in terms of evidence.

4. A second issue was whether or not Parabanks had mitigated its loss.  That too was resolved against Parabanks, on multiple grounds.[2]  This issue occupied a significant proportion of the time taken in the trial, in both evidentiary and submission stages.  The third issue which consumed an equally significant portion of time, was the appropriate valuation of the subject shop at the time of breach.  This involved close analysis of the extensive evidence of two valuation experts, and the proof of underlying facts upon which this evidence was based.  This issue was also resolved in favour of Mr Brine.

   [2] Ibid [55-70].

   The application for costs

5. It was not disputed by Mr Duggan SC for Parabanks, that it was other than liable for the usual dual order that costs follow the event on a party/party basis, in keeping with the ordinary ‘default’ position under DCR 263 (1) and 6DCR 264(1) of the District Court Civil Rules 2006 (SA). Nor was it in dispute that orders for costs are in the unfettered discretion of the court: s 42(1) of the District Court Act 1991 (SA), Copping & Ors v ANZ McCaughan Ltd & Anor,[3] Luxmore Pty Ltd v Hydedale Pty Ltd.[4]

   [3] (1995) 63 SASR 523, 527-528.

   [4] (2008) 20 VR 481, [11]-[12].

6. Quite apart from the general rule that costs follow the event, a successful party generally has a reasonable expectation of obtaining an order for costs, unless for some reason connected with the case, a different order is warranted: Latoudis v Casey.[5]  The purpose of making costs orders is compensatory, by way of restorative justice rather than punitive:  Latoudis v Casey.[6]  Nor is there any fixed principle against dividing costs as between issues: Cretazzo v Lombardi,[7] and 6DCR 264(6).

   [5] (1990) 170 CLR 534, 557, 569, 577.

   [6] Ibid, 567.

   [7] (1975) 13 SASR 4, 12.

7. The spectre of costs orders on other than a party/party basis tend to raise different considerations.  The capacity to order them on either a solicitor/client or on an indemnity basis, is furnished by 6 DCR 264(5) in the following terms:

   [6R 264] Basis for awarding costs

   …

   (5)In exercising its general discretion as to costs, the Court may—

   (a)     award costs as between solicitor and client (that is, on the basis that the party will be fully reimbursed for costs reasonably incurred by the party in the conduct of the litigation); or

   (b)     award costs on the basis of an indemnity (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred); or

8. The difference between the two lies essentially in the requirement that the party having the benefit of a solicitor/client costs order must demonstrate such costs were necessarily incurred, whereas the party against whom an indemnity costs order is made, must demonstrate that such costs were unreasonably incurred.  The discretion to order costs on either basis provided for by 6R 264(5) usually arises from some identifiable misconduct of a party during the course of the litigation: Rosniak v GIO,[8] Wilcox, Re; Ex parte Venture Industries Pty Ltd (No 2).[9]

   [8] (1997) 41 NSWLR 608, 616C-D, 627G.

   [9] (1996) 72 FCR 151, 153F, 159B.

   Orders for costs - analysis

9. There is no doubt the defendant was anxious to settle.  He made several offers, but these were available for acceptance over a relatively short duration and occasionally on an all inclusive basis.  In some instances they contained the contingency of discontinuance.  The Full Court pointed out in Rapuano v Karydis-Frisan,[10] that discontinuance does not put the proceedings finally to rest, for it remains open to commence fresh proceedings.  There are in addition difficulties with offers to settle ‘inclusive of costs’, because it may be difficult to disentangle the components of such offers: Smallacombe v Lockyer Investment Co Pty Ltd.[11]

   [10] [2013] SASCFC 8, [30].

   [11] (1993) 42 FCR 97, 101.

10. No doubt the court may have regard to any offer to consent to judgment or other attempt to settle an action, pursuant to 6 DCR 263 (3), even though such offers might have been filed under the Rules of Court: Stewart v Atco Controls Pty Ltd, (In Liq) (No 2),[12] Morris v McEwer.[13]  It was stated in BHP Billiton Ltd v Parker,[14] that when a court considers a departure from the usual practice of awarding costs as between party/party, the question was whether the party against whom the order is made, acted imprudently in rejecting offers to settle.

    [12] [2014] HCA 31, [4].

    [13] (2005) 92 SASR 281, [62].

    [14] (2012) 113 SASR 206, [259], [263] & [272].

11. Applying these principles to the case at bar, it may well be the situation that the plaintiff was at first unwilling to discount its claim ‘to reflect present value of future income stream’ at a settlement conference in May 2012,[15] however that means of proof is unavailable to the defendant as it was a privileged occasion, protected as such by 6R DCR 128(1).  In any case offers by the plaintiff going as high as $120,000, do not bear that out.

    [15]   Affidavit of Ms Carne, 23/7/14, para 5.

12. The issue of construction was always a difficult and uncertain one.  If the plaintiff’s proposed construction was correct, it was entitled to recover some damages.  It was not therefore imprudent in the requisite sense to accept offers to settle, on that account.  The same may be said about the disputed valuation evidence.  Although resolved against the plaintiff, it had an expert report of a reputable valuer, supporting its position.

13. On the other hand the plaintiff always faced a significant hurdle over its failure to mitigate loss, and to have proceeded other than in accordance with the decision of the High Court in GumlandProperty Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd,[16] and Parabanks v Brine,[17] as to which it really had no answer.  That issue was one demanding considerable evidence, although a good deal of that evidence was in common with the valuation issue, so much of it – but not all – would have been led anyway.

    [16] (2008) 234 CLR 237.

    [17] Ibid [58]-[59].

14. In the combined circumstances there is no sufficient reason to depart from the usual order that costs of the trial should follow the event on a party/party basis, except as to the mitigation issue.  Doing the best one can in imprecise circumstances, it is appropriate to allow costs in favour of the defendant on account of that issue on an indemnity basis, for one day.

    Costs of amendments to the Statement of Claim

15. Some minutes before the trial commenced on Monday 17 February 2014, the plaintiff served on the defence a proposed third Statement of Claim.  The circumstances are set out in detail in the principal judgment.[18]  No explanation was given why the application was not notified sooner, or why they were served so late.  These amendments involved a substantial shift in focus.  Leave was eventually granted to make the amendments on 21 February 2014, that is on the fifth day of the trial.[19]

    [18]   Above [27]-[29].

    [19]   T252.5-.11.

16. Oral argument as to the merits of the application for leave to amend ran until well after lunch on the first day.[20]  Thereafter the plaintiff proceeded to open its case, pending further consideration of the matter by the defendant.  The opening continued on the second day of the trial for a short time, a little further argument developed over the amendments, before the plaintiff’s first witness was called.[21]  By the close of evidence on the third day, the defendant had not resolved his attitude to the amendments.  Further evidence was taken on the fourth day, and by the commencement of the fifth, the amendments were conceded.

    [20]   T1-48.

    [21]   T79-90.

17. The extremely late application to amend without explanation, the radical change of position involved, the distraction it caused to the defendant in the meantime, and as a means of expressing curial disapproval particularly given the adjournment vacating the trial in March 2013 to facilitate a second amendment to the Statement of Claim,[22] an order for costs thrown away on an indemnity basis is entirely appropriate in relation to the amendments: Forlyle Pty Ltd v Tiver,[23] Colgate Palmolive Co Pty Ltd v Cussons Pty Ltd,[24] Skorpos v United Petroleum Pty Ltd,[25] Yap v Flinders Reproductive Medicine Pty Ltd.[26]

    [22]   Affidavit of Ms Carne, 22/7/14, para 9.

    [23] (2007) 252 LSJS 387, [29].

    [24] (1993) 46 FCR 225.

    [25] [2014] SASCFC 21, [43].

    [26] [2014] SADC 82, [46]-[52].

18. Given the above history of the proceedings it is appropriate therefore to allow costs of the third amendment on an indemnity basis for one day, including all conferences and attendances necessary or incidental thereto.

    Conclusion and orders

19. In the result there will be an order that the defendant have the whole costs of the action on a party/party basis to be agreed or taxed, except that he is entitled to costs thrown away as a consequence of the application to amend the Statement of Claim on an indemnity basis, fixed at one day for both solicitor and counsel, together with all attendances and conferences necessary or incidental thereto, and that he is entitled to costs pertaining to the mitigation issue for both solicitor and counsel, based on one further day, on an indemnity basis.  I certify fit for counsel.  The order for costs made on 12 March 2013, stands.

20. Otherwise there will be, for reasons explained in the primary judgment, an order in favour of the plaintiff for legal fees incurred for which the defendant is responsible under the subject leaser, in the sum of $2,065.10, inclusive of $400 interest agreed between the parties: Parabanks Shopping Centre v Brine.[27]

    [27] Above [112].