Pihir v Galvin (No 2) - [2007] SADC 42

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PIHIR & ANOR v GALVIN (No 2)
[2007] SADC 42
Reasons of His Honour Judge Burley
24 April 2007
PROCEDURE - COSTS
Application for costs of action by plaintiff - judgment for plaintiff amounting to less than half Magistrates Court jurisdictional limit - whether costs to be awarded on Magistrates Court scale.
Application for costs of action by defendant - building case - Scott Schedule prepared - defendant made admissions in Scott Schedule relating to quantum of rectification work - total more than judgment sum - whether defendant entitled to costs from date of Scott Schedule.
Whether pre-trial negotiations affect discretion as to costs.

PIHIR & ANOR v GALVIN (No 2)
[2007] SADC 42

On 4 March 2007 I gave judgment in this matter and published reasons for my decision: Pihir & Anor v Galvin [2007] SADC 13. On that occasion counsel requested that the question of the costs of the proceedings be adjourned to a later date to enable affidavits to be filed and submissions to be put. I adjourned the matter to 17 April 2007 and on that day I received affidavit evidence from both parties on the question of costs and heard counsels’ submissions. Mr Dal Cin appeared for the plaintiffs and Mr Black for the defendant. The further affidavits admitted were the affidavit of Mr Hutton, sworn on 16 March 2007, and the affidavit of Mr Black, sworn 10 April 2007 with the exception of exhibits 1, 3 6 and 7 to that affidavit.
Mr Dal Cin sought an order that the costs of the action be the plaintiffs’ costs. Mr Black submitted that if costs were to be awarded to the plaintiffs, they should be on the scale applicable to the Magistrates Court because the plaintiff recovered less than half of the jurisdictional limit of the Magistrates Court, namely $40,000. The amount of the judgment entered in favour of the plaintiff on 1 March was $17,000 plus an amount in lieu of interest of $2,500.
I mention briefly at the outset that reference was made to s42(2) of the District Court Act which is as follows:
(2)If –
(a)an action for the recovery of damages or any other monetary sum is brought in the Court;
(b)the action might have been brought in the Magistrates Court;
(c)the plaintiff recovers less than an amount fixed by the Rules for the purposes of this paragraph,
no order for costs will be made in favour of the plaintiff unless the Court is of the opinion that it is just in the circumstances of the case that the plaintiff should recover the whole or part of the costs of action.
It was agreed that the relevant amount fixed by the Rules referred to in subpara (c) was $15,000. Consequently it was common ground that s42(2) of the District Court Act had no bearing upon the question of what (if any) order for costs should be made in these proceedings.
In addition to contending that the plaintiffs’ costs should be restricted to those on the applicable Magistrates Court scale, the defendant also contended that he should have the costs of action from a specified time because of “offers” made by him in a Scott schedule which was exchanged by the parties.
The relevant Scott schedule is exhibit “DAB 8” to Mr Black’s affidavit and it disclosed that the defendant’s estimate of costs of rectification work set out in the 28 items contained in the Scott schedule amounted to nearly $18,000. It was submitted by Mr Black that the concessions made by the defendant in the Scott schedule should be treated, for the purposes of determining the costs of action, as if there had been an open offer for payment of a specific sum. If the Scott schedule was so treated and given that the plaintiff recovered less than $18,000, he submitted that the costs of action from June 2005 (the time when the Scott schedule was circulated) they should be awarded to the defendant.
The defendant also submitted that because of the detailed negotiations between the parties subsequent to the dispute arising and subsequent to the commencement of proceedings, an additional reason arose for the awarding of costs to the defendant at least since June 2005. It was not clear from Mr Black’s submissions, both written and oral, whether his contention extends to depriving the plaintiffs of costs prior to June 2005. However, even if his submission did go that far, for reasons which will appear, I do not think that such a submission can be upheld. In other words I have formed the view that the plaintiff is entitled to costs of action at least up to June 2005.
I propose first of all to deal with the question of whether or not the plaintiffs’ costs should be awarded by reference to the scale applicable to District Court proceedings or Magistrates Court proceedings. Mr Black submitted that even though s42(2) of the District Court Act didn’t apply, it was still open to a party to submit that the proceedings should have been maintained in the Magistrates Court given the monetary result that was ultimately obtained by the plaintiff. I think there is some force in this submission. But the resolution of this aspect of the dispute between the parties as to the costs of action needs also to take into account other factors. For example, it could be said that in a building case of the type determined by me in my Judgment of 1 March 2007, it is notoriously difficult to predict how the question of damages will be dealt with. In other words, there is a range of damages that might be recoverable which would justify the bringing of the proceedings in the District Court rather than the Magistrates Court. The uncertainty as to the amount of damages ultimately to be awarded depends on the extent to which the plaintiff succeeds on questions of liability and the extent to which damages are awarded for rectification work. In my opinion, some leeway should be afforded to an intending plaintiff so that the plaintiff does not miss out on recovering his or her full entitlement as to damages because of having sued in the wrong Court.
In this case, it was apparent from the pre-trial dealings between the parties that the plaintiffs sought to recover sums of money considerably in excess of the jurisdictional limit of the Magistrates Court. However, by the time the parties had agreed liability, on the second day of trial, the quantum of the plaintiffs’ claim had been reduced to just in excess of the jurisdictional limit of the Magistrates Court. As was pointed out by the defendant’s counsel, the plaintiffs ultimately obtained a judgment for less than half of the jurisdictional limit of the Magistrates Court. In those circumstances, it seems to me that the plaintiffs were so far off the mark in their estimate as to the quantum of their claim that it would be unfair to saddle the defendant with costs applicable to District Court proceedings rather then Magistrates Court proceedings. Consequently, those costs which I intend to award to the plaintiffs will be costs to be agreed or taxed in accordance with the appropriate Magistrates Court scale.
I next turn to the general submission of the defendant that because in pre-trial negotiations the defendant made a number of offers to carry out rectification work in accordance with the report of a Mr Coombe, that readiness of the defendant to co-operate with the plaintiffs should be reflected in favour in costs orders favourable to the defendant. In order to make an assessment of this submission, it would be necessary to compare the evidence adduced by the plaintiffs with that adduced by the defendant in relation to pre trial negotiations. A cursory look at the content of the two affidavits admitted by me shows that the parties had quite different views as to what was necessary to obtain a settlement of the proceedings prior to trial. It would not be possible to resolve those differences without the parties themselves giving evidence and being subject to cross-examination. I indicated to counsel during the course of argument that it was not appropriate to attempt to deal with disputed issues between the parties which were not dealt with at the trial. If I were to accede to the defendant’s request, there would need to be a trial on the question of costs. It is similar to but not the same as the difficulty faced by the Court in Tobin v Tobin (1977) 75 LSJS 9. For these reasons, I do not consider that the pre-trial negotiations between the parties, and in particular the alleged willingness of the defendant to carry remedial work, as referred to in the correspondence, constitute a factor to be taken into account in the defendant’s favour when deciding the question of costs. Additionally, even if such matters could be taken into account, I do not see that in the circumstances of this case the defendant has made out such a case. Whatever willingness he had was a willingness to carry out work in the report prepared by Mr Coombe.
The reality is that, at trial, the scope of the remedial work to be carried out was the subject of agreement between the parties at the commencement of the trial and was defined by reference to the report of a Mr Goldfinch, an engineer who was employed by both of the parties to look into the question of what the scope of the required remedial work was. There was a fundamental difference between the works suggested by Mr Coombe and the work suggested by Mr Goldfinch. The latter said that the scope of works included the application of a waterproof membrane to the inside of certain walls which in turn required extensive excavation and subsequent backfilling. It could not, in my view, be said that the willingness to do the work specified by Mr Coombe was a factor in favour of the defendant on the question of costs when at trial the defendant agreed liability based on Mr Goldfinch’s quite different report.
The final question to be determined is whether or not the concessions made in the Scott schedule should be treated as the same as an open offer to pay the monetary amount of those concessions, namely just under $18,000, and that as a consequence the defendant should have the costs of the proceedings from about mid 2005.
In some respects, there is some substance to the defendant’s contention. Like a formal offer of offer or a filed offer, the concession made by the defendant in the Scott schedule, if it had been accepted by the plaintiffs, constituted a resolution of those aspects of the plaintiffs’ claim. But, in my opinion, the similarity ends there. There is no specific offer on the part of a party to pay, in the case of a Scott schedule, a sum of money. Rather, the function of the Scott schedule is to define both to the Court and as between the parties what issues will need to be litigated at the trial and what issues are the subject of agreement. By such a process, the plaintiffs are not put on notice that, should the plaintiffs fail to agree the quantum of a particular aspect of plaintiffs’ claim as conceded by the defendant in the Scott schedule, costs orders would be sought in favour of the defendant. To that extent there is only a superficial similarity between the Scott schedule and the formal open offer, whether it be by letter or by filed offer. The latter have as their specific purpose consequences in costs if the offers are not accepted and if the party to whom the offer is made fares less well by way of judgment. That is quite a different purpose from that behind the preparation of a Scott schedule. Consequently, I do not consider that the concessions made by the defendant in the Scott schedule in about mid 2005 constitute a basis for saying that the defendant should have the costs of action subsequent to that time.
In addition, I am of the view that, even if the concessions made in the Scott schedule were capable of having the effect contended for by the defendant, such a submission would in any event fail because the concessions made in the Scott schedule by the defendant are in relation to matters, when taken into combination, are substantially different from the matters actually litigated at trial. I reject Mr Black’s submissions that it does not matter if there is such a difference because the monetary amount is the governing factor. He said that, if the Scott schedule were to be taken to be an offer to pay nearly $18,000 to the plaintiffs, it mattered not that the $18,000 related to matters which were not subsequently pursued at the trial. I disagree.
For the above reasons, I refuse the defendant’s application for costs and I order that the defendant pay the plaintiffs’ costs of action to be taxed or agreed on the appropriate Magistrates Court scale.