PHR P/L v Bradford Insulation (SA) P/L (No 3) - [2018] SADC 41

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PHR P/L v BRADFORD INSULATION (SA) P/L (No 3)
[2018] SADC 41
Judgment of His Honour Judge Gilchrist
4 May 2018
INTEREST
The defendant issued third party proceedings as against Bradford Insulation Contracting Pty Ltd and discontinued that action once it learnt that the actual contracting party was Bradford Insulation (SA) Pty Ltd - The third party action was in contract and in tort - The defendant failed in the contract action but succeeded in the action in tort - The trial was delayed because of a potential deficiency in discovery by the defendant - Whether the defendant is entitled to all of its costs or whether the costs should be reduced because of the failed action in contract and the adjournment - Whether the amount of interest to be awarded should be reduced because of the delay occasioned by the adjournment - Whether there should be a Sanderson order or a Bullock order in connection with the costs of the discontinued action - Held that it was not unreasonable to pursue a claim in contract - the circumstances necessitating the adjournment did not reflect adversely on the defendant such that it is entitled to full party/party costs and interest - Principles governing the making of Sanderson and Bullock orders considered - Held that the Bradford companies had no obligation to assist the defendant and that in the circumstances the defendant should pay the costs of the discontinued action.
Sanderson v Blyth Theatre Co [1903] 2 KB 533; Bullock v London General Omnibus Co [1907] 1 KB 264; GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296; Lackersteen v Jones (No 2) (1988) 93 FLR 442; D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, considered.

PHR P/L v BRADFORD INSULATION (SA) P/L (No 3)
[2018] SADC 41

This is an application for costs and interest following judgment for the defendant PHR P/L against the third party Bradford Insulation (SA) Pty Ltd.[1] The effect of that judgment was that PHR is entitled to recover from BISA the sum of $120,000 plus interest.
[1] PHR Pty Ltd v Bradford Insulation (SA) Pty Ltd [2017] SADC 80 (28 July 2017).
BISA contend that PHR should not be entitled to all of its costs. It also contends that PHR should not be entitled to interest for the whole period claimed. There is also an issue about costs of a discontinued action.
PHR settled the primary action by consent orders made on 18 June 2014. Bradford Insulation Contracting Pty Ltd (BIC) was a party to those proceedings. PHR issued a contribution notice as against it on the ground that it had supplied asbestos to PHR. BIC denied that allegation. Third party proceedings were issued against BISA on 22 May 2015. They also alleged that BISA had supplied PHR with asbestos. In its defence BISA denied that allegation. It did not yield from that position until sometime later at which time it admitted supplying PHR with asbestos. Following that admission, on 25 July 2016 PHR consented to an order dismissing the claim for contribution as against BIC at which time costs were reserved.
On 23 November 2016 the action between PHR and BISA proceeded to trial. During the course of the cross examination of PHR’s principle witness, Mr Harris, it appeared that Mr Harris may have been in possession of documents that had not been disclosed to BISA that would have been discoverable by PHR. The case was adjourned so that this could be explored. It did not proceed again until 27 March 2017. As it was Mr Harris was not in possession of any further relevant documents.
The action that PHR took as against BISA was framed in contract and tort. The action in contract was based on the assertion that BISA supplied PHR with asbestos millboard that was not of merchantable quality for the purposes of the Sale of Goods Act. The Court held that the claim for breach of contract had not been made out.
BISA contends that PHR should pay BIC’s costs. It contends that PHR should pay for the costs of the adjournment. It contends that PHR’s entitlement to costs needs to be modified to reflect its failed contract action. And it contends that PHR should not recover interest during the period of the adjournment. It also submits that there was inexcusable delay in bringing the third party action and that this should be taken into account in determining interest.
PHR submits that its failure on one part of its claim was no reason why it should not recover all of its costs. It submits that its pursuit of the claim in contract did not require the calling of any additional evidence and that it did not occupy an inordinate amount of time at trial.
As to BIC’s costs, PHR submits that if the Court is disposed to award costs to it, either through a Sanderson order[2] or a Bullock order,[3] BISA should pay those costs. PHR contends that because of uncertainty as to which Bradford Insulation company supplied asbestos to it, it was reasonable for it to have sued BIC. It submitted that BIC acted unreasonably in failing to promptly inform it that BISA was the relevant Bradford entity that supplied PHR with asbestos.
[2] Sanderson v Blyth Theatre Co [1903] 2 KB 533.
[3] Bullock v London General Omnibus Co [1907] 1 KB 264.
As to the adjournment PHR contends that there is no suggestion that it failed in its obligations to make disclosure and that the need to adjourn was simply an unforeseen event for which it was not responsible. Finally it submitted that there was no significant delay in the prosecution of the third party action.
Consideration
Costs
In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3), Robson J canvassed a number of authorities dealing with costs and summarised them as follows:
1.     The award of costs is in the discretion of the Court or Judge:
2.     The discretion must be exercised judicially.
3. The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation or the circumstances leading up to the litigation.
4. Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party.
5. As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim.
6. Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding.
7. The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim.
8. It is not necessary that the issue concerned was raised unreasonably by the party. Although, a relevant consideration may include whether the issue was raised unreasonably.
9. The court may, in its discretion, make an order that is a single order, fixing what proportion of a party’s costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs.
10. The caveat referred to by Jacobs J in Cretazzo v Lombardi may have less weight today than when it was decided.[4]
11.Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.[5]
[4]    This was on the basis that in contemporary times principles of caseflow management are more important that in times past.
[5] [2008] VSC 296 at [59] (footnotes omitted).
I regard this as a correct statement of the law.
In this case, although PHR failed in its claim for contract, I do not think it acted unreasonably in pursuing it. The point was not without merit and in the overall scheme of things it occupied relatively little time. The fact that PHR lost the point does not, in my view, warrant departing from the general rule that costs follow the event.
I now turn to consider the impact of the adjournment.
In an ideal world trials would run like clockwork. But this is not the reality. Counsel’s estimates of time in connection with witnesses’ testimony and argument are often wrong. Witnesses give unexpected evidence that can result in lines of enquiry being abandoned or new ones pursued. If the trial does not run smooth and new dates become necessary, finding mutually convenient times for the Court, counsel and witnesses can be challenging.
In my view PHR cannot be criticised for not anticipating Mr Harris’ evidence. There is no suggestion that it did not meet its obligations regarding disclosure. I would regard the need for the adjournment in connection with his evidence as no more than an unfortunate unexpected occurrence that simply reflects the reality that legal trials do not always go according to plan. Costs associated with the adjournment should be treated as costs in the cause. Given PHR’s success at trial it follows that it is entitled to the costs associated with that adjournment.
Interest
As I explained in David Jones v BI,[6] in determining the amount of interest payable on an award a party’s gross delay can be taken into account. But as I also explained in that case, in determining whether delay is gross, a realistic approach is called for. In my view the prosecution of the Third Party action was not attenuated from gross delay. As for the period of the adjournment, in light of my conclusion that PHR was not at fault, it does not reflect adversely on it.
[6] [2018] SADC 40
PHR is entitled to interest at the appropriate rate until the date of the judgment.
BIC’s Costs
BIC is entitled to an award of costs in its favour. The issue is who should ultimately pay.
In a case where there are multiple defendants and a plaintiff does not succeed against all of them, fairness might dictate that the defendant that has been found liable should be responsible for the costs of the defendant or defendants who were exonerated. Sanderson orders and Bullock orders achieve this. They allow a successful defendant to claim its costs from the unsuccessful defendant, as opposed to obtaining costs from the plaintiff.
In the case of a Bullock order, the plaintiff is ordered to pay the successful defendant’s costs and the unsuccessful defendant is ordered to reimburse the plaintiff for those costs.
In the case of a Sanderson order the unsuccessful defendant is ordered to pay the successful defendant directly.
The principles that guide the making of such orders are helpfully set out in the judgment of Asche CJ in Lackersteen v Jones (No 2) as follows:
1.It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.
2.The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.
3.While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.
4.Finally, in considering whether to make such an order, the court should, in the exercise of its discretion, balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.[7]
[7] (1988) 93 FLR 442 at 449.
On the basis of Mr Harris’s evidence, it is reasonable to presume that PHR’s instructions were simply that “Bradfords” had supplied it with asbestos. It is therefore understandable why PHR elected to pursue an action for contribution from BIC. The complaint made now by PHR is that BIC was in a position to know that BISA was the correct entity to pursue and that BISA’s admission that it supplied PHR with asbestos was made late. I accept that to be so. However in adversarial proceedings a party is not obliged to assist an adversary. In D’Orta- Ekenaike v Victoria Legal Aid, McHugh J stated the principles applicable to counsel in connection with such matters. He said:
No doubt care needs to be taken when using expressions such as “exercising a unique but indispensable function in the administration of justice”. That expression is not synonymous with assisting the court in every possible way to arrive at the best legal decision possible on the facts of the case. This is a consequence of the adversarial system of justice, a consequence that is reinforced by the doctrine of legal professional privilege which exists for the benefit of the client and not for the benefit of his or her legal adviser and prevents the barrister from disclosing legally privileged information.
Under the adversarial system of justice, a barrister has no obligation to the court to assist an opponent to prove a cause of action or defence. A barrister is under no obligation to tell an opponent or a witness anything that may assist the opponent’s cause. Nor does a barrister owe a duty to the court to assist the opponent to plead the facts in a way best calculated to obtain a just result according to law.[8]
[8] (2005) 223 CLR 1 at [110] - [113].
The same principles apply to parties and their obligations in relation to pleadings. Accordingly BIC was under no duty to inform PHR that BISA was the contracting entity. In all the circumstances I do not think that BISA should bear any responsibility for BIC’s costs. BIC is entitled to an order for costs as against PHR.
PHR is to draw up minutes of order to reflect these reasons.