Quality Roofing Services P/L v McIntyre
[2017] SADC 118
•26 October 2017
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
QUALITY ROOFING SERVICES P/L v MCINTYRE & ANOR
[2017] SADC 118
Judgment of Her Honour Judge Tracey
26 October 2017
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES - FAILURE IN PORTION OF A CASE
Plaintiffs seek an elevated costs order based on informal and formal offers which were not bettered by the Defendants, interest and costs of Magistrates Court proceedings pursuant to ‘complex action’ scale.
Whether imprudently refused offers and/or whether misconduct or improper motive justifying elevated costs.
Held:
1. No basis to award elevated costs.
2. Defendants are to indemnify Plaintiff for costs paid to the City of Charles Sturt in ERD Court Action 322 of 2013 in the sum of $31,500.00.
3. Defendants are to pay pre-judgement interest in the sum of $8,885.77.
4. Defendants to pay pre-judgement interest in the sum of $3,647.31.
5. Defendants to pay interest on the total judgement sum of $71,936.08 from the date of judgement in accordance with s 40 of the District Court Act 1991 and District Court Supplementary Rule 217.
6. Defendants to pay Plaintiffs’ costs of the ERD Court Action 322 of 2013 on a party and party basis.
7. Plaintiffs’ costs from the date Magistrate Court action 4120 of 2012 to be paid pursuant to the “complex action” scale (90% of the Supreme Court scale).
8. Defendants are to pay 65 per cent of QRS’ costs of this action on a party and party basis.
BHP Billiton v Parker (2012) 113 SASR 206; District Court Act 1991 (SA) s 42(1); District Court Civil Rules 2006 R 187, R 188, R 188A, R 263, R 263(3), R 264(1); Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; Rapuano (trading as RAPS Electrical) v Karydis Frisan & Anor [2013] SASFC 93; Morris v McEwen [2005] SASC 284; Isotomic Pty Ltd & Anor v Adelaide International Raceway Pty Ltd (No 2) [2007] SASC 230; A,DC v Prince Alfred College Inc (No 2) [2016] SASFC 27; Carter v Brine (No 2) [2016] SASC 36; Parabanks Shopping Centre Pty Ltd v City of Salisbury & Anor (No 2) [2013] SASC 204; Batchelor v Burke (1981) 148 CLR 448; Osborne v Kelly (1993) 61 SASR 308, referred to.
QUALITY ROOFING SERVICES P/L v MCINTYRE & ANOR
[2017] SADC 118
The plaintiff, Quality Roofing Services Pty Ltd (‘QRS’) issued proceedings against Leonard and Julie McIntyre (‘the Defendants’), seeking payment in the sum of $37,360 plus interest, in relation to a progress claim concerning the construction of verandahs to the Defendants’ property in West Lakes.
The Defendants denied liability and cross claimed alleging QRS breached the contract entered into by the parties.
On 22 June 2017, I found that QRS were entitled to a quantum meruit claim in the sum of $27,903 plus interest.[1] I dismissed the Defendants’ cross action. I also held that the Defendants were liable to indemnify QRS for its costs incurred in ERD Court action 322 of 2013, and to indemnify QRS for the costs it paid to the City of Charles Sturt (‘the Council’) in those proceedings.[2]
[1] The Defendants were entitled to deduct from the progress claim, the cost of carrying out the rectification works recommended by Mr John as agreed by the expert quantity surveyors to be in the sum of $9,457.
[2] On 9 July 2015, QRS had paid the sum of $31,500 to the City of Charles Sturt in accordance with the costs order of Judge Costello made on 10 December 2014.
While the fundamental dispute between the parties concerned whether the structure QRS built was in accordance with the contract, other disputes included:
·Whether Mr McIntyre had told QRS he would arrange for the installation of a footing across the southern elevation and for the improvement of the current footing on the western side.
·Whether the design of enclosure of the verandahs had been finalized.
·Whether the verandahs as constructed was structurally adequate and compliant with the relevant building code and Council permission.
·Whether any structural inadequacy could be rectified without demolition of the verandahs.
·Whether QRS and its sub-contractors were appropriately licensed to carry out and supervise the work.
While I found that the work carried out by QRS was in accordance with design agreed between the parties, I found in the Defendants’ favour in relation to the following issues:
·The Defendants were not responsible for the installation of footings.
·The verandahs were not constructed in compliance with council permission.
·The verandahs were not structurally adequate.
·QRS were not appropriately licensed to carry out the work.
·QRS could not avail itself of the “inadvertence defence” but was entitled to payment on a quantum meruit basis for the work done.
QRS has sought the following orders:
1An award of pre-judgment interest on the sum of $27,903 in accordance with s 39 of the District Court Act 1991 and rule 208 of the District Court Supplementary Rules 2014 (SA).
2An award of pre-judgment interest on the sum of $31,500 in accordance with s 39 of the District Court Act 1991 and rule 208 of the District Court Supplementary Rules 2014 (SA).
3An order that interest to be payable on the judgment sum of $73365.25 in accordance with s 40 of the District Court Act 1991, and rule 217 of the District Court Supplementary Rules 2014 (SA).
4The Defendants pay QRS’ costs of the ERD Court action on an indemnity basis or alternatively, on a solicitor/client basis.
5The Defendants pay QRS’ costs of the District Court claim and its costs incurred in defending the defendants counter-claim on an indemnity basis or alternatively, on a solicitor/client basis.
I have received affidavits from the Director of QRS, Mr Vincent Barry, QRS’ solicitor, Mr Thomas Walker (Clelands Lawyers), and the Defendants’ solicitor, Mr Rino Marrone (Grope Hamilton lawyers), setting out the various negotiations that occurred between the parties. Both parties filed detailed outlines in support of their respective positions and made submissions.
COSTS
The principles relevant to the determination of the costs issues are set out in BHP Billiton v Parker:[3]
·I have an unfettered discretion as to costs, subject to the District Court Civil Rules 2006.[4]
·It will generally be the case that costs follow the event.[5]
·I may have regard to any offer to consent to judgment or other attempt to settle the action.[6]
·I can award costs on any basis I think appropriate.[7]
·The ‘usual’ practice is for costs to be awarded on a party and party basis but this is no more than a usual practice.
·The Rules provide for a party to file a ‘formal offer of settlement’.[8]
[3] (2012) 113 SASR 206 at [261].
[4] Section 42(1) District Court Act 1991 (SA).
[5] Rule 263 District Court Civil Rules 2006.
[6] Rule 263 (3) District Court Civil Rules 2006.
[7] Rule 264(1) District Court Civil Rules 2006.
[8] Rules 187 and 188 District Court Civil Rules 2006.
Filed offers made before 1 December 2015 are subject to 6R 187 and 6R 188 and provide as follows:
187—Offers of settlement
(1) A party may, before the relevant date, file an offer of settlement in the Court (a formal offer of settlement).
(2) The relevant date is—
(a) the date falling 21 days before the first, or any subsequent, date fixed for the trial to commence; or
(b) if the offer relates only to costs and is made in proceedings relating only to the adjudication upon costs, the date falling four days before the date appointed for the adjudication.
(3) The offer must—
(a) be in an approved form; and
(b) if the offer relates to some, but not all, of the claims involved in the proceedings—state to which claims it relates; and
(c) state whether the offer relates to costs and, if so, the amount of the offer so far as it relates to costs; and
(d) if the offer relates both to principal relief and costs—state whether the party to whom the offer is made may accept the offer of principal without also accepting the offer as to costs,
and a copy of the offer must be served on all other parties to the action.
(4) A formal offer of settlement must be filed in a suppressed file and must not be disclosed to the trial judge (or the adjudicating officer) unless—
(a) all questions to which the offer is relevant have been determined; or
(b) a defence of tender before action is raised; or
(c) the defendant relies on the offer (together with an apology or apologies) as a defence to an action for defamation and the plaintiff, by pleading, denies the defence; or
(d) a declaratory judgment determining liability has been made and the Court permits the disclosure of the offer.
(5) If a defendant makes an offer of settlement for a specified amount, the offer may be accompanied by a payment into Court of the relevant amount.
(6) An amount paid into Court may be increased but cannot be withdrawn in whole or part unless—
(a) the plaintiff consents; or
(b) the Court permits its withdrawal.
(7) A formal offer of settlement may be withdrawn at any time before it has been accepted by the filing and service on each party to the proceeding of a notice of withdrawal and in such cases, subject to any Court order to the contrary, the offer will be treated as if it had never been made.
188—Consequences of filing offer of settlement in Court
(1) A party to whom a formal offer of settlement is made may, before the relevant date—
(a) accept the offer; or
(b) if the offer relates to both the principal relief and costs and the offeror has not indicated that the offer may only be accepted in its entirety—accept the offer so far as it relates to principal relief.
(2) In sub-rule (1), the relevant date is—
(a) the date falling 7 days before the first, or any subsequent, date fixed for the trial to commence; or
(b) if the offer relates only to costs and is made in proceedings relating only to the adjudication upon costs—the date falling two days before the date appointed for the adjudication.
(3) The acceptance of a formal offer of settlement—
(a) must be in an approved form; and
(b) takes effect on the filing of the acceptance in the Court.
(4) A copy of the acceptance of a formal offer of settlement must be served on all other parties to the proceedings as soon as practicable after it is filed in the Court.
(5) If a formal offer of settlement is accepted, judgment may be entered, by consent, determining the relevant action or claim on a basis reflecting the terms of the offer.
(6) If a formal offer of settlement so far as it relates to principal relief is not accepted by the party to whom the offer is made and the Court determines the relevant action or claim on terms (as to principal relief) that are no more favourable to the party than the terms of the offer, then, subject to the Court's order to the contrary—
(a) the party to whom the offer was made is not to be entitled to costs referable to the period falling after the relevant date; and
(b) the party that made the offer—
(i) if a defendant—is entitled to costs referable to the period falling after the relevant date; and
(ii) if a plaintiff—is entitled to the whole of the party's costs of action on a solicitor/client basis and the defendant is not entitled to any costs not otherwise ordered.
(6A) If, after the relevant date, a plaintiff accepts a formal offer of settlement insofar as it relates to principal relief, the Court may, on the application of any other party, order that the plaintiff pay the costs of action incurred by that other party during some or all of the period after the relevant date.
(7) In subrules (6) and (6A), the relevant date is the date falling 14 days after the date of service of the offer.
(8) If a formal offer of settlement in proceedings relating only to the adjudication upon costs is not accepted by the party to whom the offer is made and the Court determines the proceedings on terms that are no more favourable to that party than the terms of the offer, then, subject to the Court's order to the contrary, the costs of the adjudication upon costs are to be borne on a solicitor/client basis by that party.
Relevantly, the rules provide in relation to a discontinuance of proceedings as follows:
108—Discontinuance not generally bar to future action
Subject to the following exceptions, a party who discontinues an action or a claim is not prevented from bringing a further action based on the same or substantially the same claim.
Exceptions—
1 If a party to the later action is entitled to costs in relation to the earlier action, the Court may, on the application of that party, stay an action based on the same or substantially the same claim until the costs have been paid.
2 The Court may order that the discontinuance of an action or a claim is to have the same effect as a final judgment against the party discontinuing.
OFFERS TO SETTLE
QRS made a number of informal offers to settle the dispute and a formal offer was filed on 31 August 2015. All offers would have resulted in a more favourable outcome to the Defendants than the eventual outcome. I summarise the details of the various offers as follows:
1Letter from Clelands Lawyers to Grope Hamilton Lawyers dated 25 May 2015. QRS offered to resolve both District and ERD Court actions without admission of liability on the basis that each party “walks away” bearing their own costs with a Notice of Discontinuance to be filed and a Settlement Deed executed including the ‘usual mutual release clauses’. The offer was said to be open to be accepted until 3 September 2015.[9]
2Letter from Clelands Lawyers to Grope Hamilton Lawyers dated 31 August 2015 offering to settle all issues in dispute (including ERD costs orders) by payment to the Defendants of the sum of $20,000 with discontinuance by both parties and with each party bearing their own costs. The offer was said to be open to be accepted until 5 pm on 14 September 2015.[10]
3On 31 August 2015 QRS filed an offer of settlement in the District Court pursuant to rule 187(3) in the following terms:
(1)QRS’claim be discontinued with no order as to costs, and with each party to bear their own costs. The Defendants counter-claim be discontinued with no order as to costs, and with each party to bear their own costs.
(2)QRS and the Defendants each bear their own costs of the ERD Court action 322 of 2013, and the costs paid to the City of Charles Sturt under the costs order dated 10 December 2014.
(3)QRS to pay the Defendants the sum of $12000 within 14 days of acceptance of the offer.
(4)This offer is indivisible and can only be accepted in its entirety and not in parts.[11]
4. Letter from Clelands Lawyers to Grope Hamilton Lawyers dated 30 October 2015 offering to settle by way of payment to the Defendants in the sum of $50,000 on condition that the District Court action be discontinued by both parties with no order as to costs and with each party bearing their own costs of the ERD Court action. The offer was open for acceptance until 10 am on Tuesday 3 November 2015, which was the date the trial recommenced.[12]
5.Letter Clelands Lawyers to Grope Hamilton Lawyers dated 8 November 2015 increasing the offer previously made to the sum of $60000 in otherwise identical terms. The offer was open for acceptance until 10 am on Monday 9 November 2015, the date the trial was to continue. [13]
[9] Exhibit TAW4 to the 7th Affidavit of Thomas Alexander Walker.
[10] Exhibit TAW5 to the 7th Affidavit of Thomas Alexander Walker.
[11] Exhibit TAW6 to the 7th Affidavit of Thomas Alexander Walker.
[12] Exhibit TAW7 to the 7th Affidavit of Thomas Alexander Walker.
[13] Exhibit TAW8 to the 7th Affidavit of Thomas Alexander Walker.
QRS says that the Defendants’ imprudent refusal of any of the offers and their improper motives and misconduct, enlivens the court discretion to order either indemnity costs or costs on a solicitor/client basis.
The relevant principles to be considered when determining whether circumstances warrant a departure from the usual costs orders on a party and party basis have been set out in Colgate-Palmolive Company v Cussons Pty Ltd[14] by Sheppard J as follows:
… it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the Court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive or in willful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; an imprudent refusal of an offer to compromise and an award of costs on an indemnity basis against a contemnor. Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
(authorities and citations omitted)
[14] (1993) 46 FCR 225 at [233]-[234].
The Defendants argued that the offers made by QRS were merely invitations to agree to mutual discontinuance and that an offer to settle means an offer which if accepted, would bring into play either a judgment of the court if R187 or R188 were properly invoked or, if not a judgment, at least a binding contract between the parties which would afford finality and bring the proceedings to a conclusion.
In Rapuano (trading as RAPS Electrical) v Karydis Frisan & Anor,[15] Peek J, with whom the other members of the court agreed, set out the terms of the offer the subject of the matter before the Court. The offer referred expressly to R187, provided inter alia for a payment by the defendant to the plaintiff, and for discontinuance of the District Court proceedings in certain circumstances. Peek J said:[16]
Rule 188(5) specifically envisages the entry of a consent judgment upon the acceptance of an offer as an essential part of a stand-alone regime which is not dependent upon the formation of a contract between the parties.
[15] [2013] SASFC 93.
[16] Ibid at [21].
And later:[17]
The finality resulting from a consent judgment does not flow from the mere filing of a Notice of Discontinuance which is not generally a bar to the plaintiff bringing future action in relation to the same matter in the future. Quite apart from the plaintiff starting again (if he can), it is also to be noted that in some circumstances the original action can be revived by the withdrawal of the Notice of Discontinuance under r 117(2)(d) with the permission of the Court. (footnotes omitted)
[17] Ibid at [36].
I accept that the offer filed on 31 August 2015 cannot properly be said to resolve the matters between the parties by way of either a judgment or a binding conclusion. I do not accept that any consideration of the new Court Rules requiring a party to respond as regards any objection to the form in which an offer is made, is relevant to the matters before me.[18]
[18] See R 188A.
As set out above, R 263(3) provides for the court to have regard to other attempts to settle that do not fall strictly within R187.
In Morris v McEwen[19] the Court held that in exercising the discretion as to costs, a court can have regard to a Calderbank letter, even though no formal offer was filed.
[19] [2005] SASC 284.
In BHP Billiton Limited v Parker[20] Doyle CJ and White J said:
It is also important to bear in mind that the question is not simply whether, having regard to a Calderbank letter, a court should order the defendant to pay costs on a basis other than as between party and party. The court will be exercising a broad discretion, and the making of an informal offer of settlement is merely one of a number of matters relevant to the exercise of that discretion: Colgate-Palmolive Co v Cussons Pty Ltd. And a Calderbank letter is but one instance of how a party might make an offer which has been “imprudently refused”: Pirrotta at 263 Debelle J. Imprudent refusal of an offer of settlement is often raised as the basis for an application for an order for costs on a basis other than as between party and party, but once again it has to be borne in mind that while “imprudent refusal” conveniently encapsulates an approach to the exercise of the discretion, in the end the issue is whether the discretion should be exercised to depart from the usual basis of an order for costs.
(my emphasis)
[20] Ibid at [265].
I have concluded that the difficulties associated with the filed offer are also a feature of the informal offers. None of the informal offers provide for a resolution of the matter with any certainty. Without such certainty, the Defendants’ solicitors could not have advised the Defendants to accept the offers in the terms they were made.
Was there improper motive and/or misconduct justifying an indemnity costs order?
In my reasons for judgment, I found that the ERD Court proceedings were as a result of the refusal by the Defendants to allow QRS to bring the verandahs into compliance with what Council had approved and that this was designed to achieve the demolition and removal of the verandahs, such that it was appropriate to order the Defendants pay QRS’ costs of the ERD Court action and to indemnify QRS for the costs it paid to Council. The ‘veiled threats’ I found Ms McIntyre made cannot however be characterised as ‘misconduct’. In my view the decisions the Defendants made and the tactics they employed, both with respect to the ERD Court proceedings and the involvement of the media, do not warrant the court marking ‘its disapproval of inappropriate conduct’[21] such that an indemnity order should be made.
[21] Isotomic Pty Ltd & Anor v Adelaide International Raceway Pty Ltd (No 2) [2007]SASC 230 at [26].
SHOULD COSTS BE AWARDED ON AN ISSUE BY ISSUE BASIS?
The Defendants submit that costs should be dealt with on an issue by issue basis as it would be unfair if QRS were to recover costs without a corresponding order that the Defendants recover costs on the ‘plethora’ of issues that QRS put in issue and obliged the Defendants to prove.
It is acknowledged by QRS that there has been a trend towards courts adopting an issue by issue approach to costs. In A,DC v Prince Alfred College Inc (No 2)[22] in discussing the respondent’s application to take into account the appellant’s loss on the issue of the respondent’s primary liability, the Full Court said:
In more recent times, courts more readily modify the general rule recognising that the interests of justice sometimes require a reduction in the costs that would otherwise have been awarded to a successful party when that party has failed on particular disputed questions of fact or law.
[22] [2016] SASFC 27 at [5].
QRS argued that the issues upon which they were unsuccessful were all matters raised by the Defendants.
I note in Carter v Brine (No 2),[23] Blue J said:
The discretion is less likely to be exercised to order that the successful party pay the costs of the unsuccessful party in respect of the unsuccessful issue. However, that discretion is more likely to be exercised if the successful party unreasonably pursued or defended the unsuccessful issue or conducted its case unreasonably in respect of that issue.
(footnotes omitted)
[23] [2016] SASC 36 at [11].
While in making the concession that it would undertake the remedial work, QRS had agreed to attend to the inadequate footings that the experts had identified, the issue of the footings was nonetheless agitated at trial in some detail as was the licensing issue and thereby the issue of whether or not QRS could avail itself of the ‘inadvertence’ defence. In my view, appropriate concessions on the part of QRS on both these issues would have been appropriate, would not have compromised its position with respect to its claim or defence of the counterclaim and would have shortened the trial. In the circumstances, I am satisfied that in regards to these two issues alone, it is appropriate to award costs in the Defendants’ favour. The same cannot be said in my view, in relation to the issue of the enclosure of the verandahs, given my findings that QRS could ultimately have remedied the situation and built an enclosure in accordance with an agreed design and Council approval.
Although there were a number of contested issues at trial, the central issue in the case was whether or not there had been compliance with the agreement between the parties as to the design of the verandahs, I have not been persuaded that this was a case where there was success and failure by both parties to a substantial degree such that neither party should be ordered to pay the other party’s costs. This was not a case where the time spent on the separate events won and lost by QRS was ‘broadly equal’,[24] such that each party should bear their own costs.
[24] Parabanks Shopping Centre Pty Ltd v City of Salisbury & Anor (No 2) [2013] SASC 204 at [21].
MAGISTRATE’S COURT COSTS
In relation to the costs of the Magistrates Court action 4120 of 2012, I am satisfied that pursuant to MCR 1992 106 (7), the appropriate notice certifying the action was certified as ‘complex’ was served and QRS did not object to the certification. QRS’ costs from the date those proceedings were commenced on 2 April 2012, to the date of transfer of the Court action to the District Court on 17 May 2013 are to be paid pursuant to the “complex action” scale (90% of the Supreme Court scale).
INTEREST
QRS claims pre-judgment interest on the judgment sum of $27,903 and on the costs it paid to the Council of $31,500.
The primary purpose of pre-judgment interest is to compensate a successful plaintiff for having been kept out of its money during the pre-judgment period: Batchelor v Burke,[25] Osborne v Kelly.[26]
[25] (1981) 148 CLR 448, 455.
[26] (1993) 61 SASR 308, 311.
The judgment sum was awarded on the basis that while QRS could not avail itself of the “inadvertence defence” it was entitled to payment on a quantum meruit basis. Given that the verandahs as constructed by QRS did not comply with Council approval, was not structurally adequate, and required at least partial demolition, it is not appropriate for an award of pre-judgment interest to be applied from the date the verandahs was completed as QRS has submitted. I allow pre-judgment issue on the judgment sum from 1 July 2012 to 21 June 2017, that is, in the sum of $8,885.77. I allow pre-judgment interest in the sum of $3,647.31 in relation to the costs paid by QRS to the Council.
INTEREST ON JUDGMENT DEBT
The Defendants are to pay interest on the total judgment sum of $71,936.08 from the date of judgment in accordance with s 40 of the District Court Act 1991 and District Court Supplementary Rule 217.
CONCLUSION
In the interests of enabling a less complicated result on the issue of costs, I consider it appropriate to award costs in relation to the District Court action on a percentage basis. A number of the witnesses called at trial in relation to these issues also gave evidence on a number of other significant issues. The only witness who would not have been required was Mr Heidenreich. At trial, the issues of footings and licensing accounted for almost four days of an eleven day trial. Arriving at a percentage is difficult given that no submissions have been made on the appropriate allocation of time and resources spent overall on these issues. Doing the best I can, I find that QRS is entitled to 65% of its costs of the District Court action.
Accordingly, I make the following orders:
1. Judgment for QRS in the sum of $27,903.00.
2. The Defendants’ cross action is dismissed.
3. The Defendants are to indemnify QRS for the costs it paid to the City of Charles Sturt in ERD Court Action 322 of 2013 in the sum of $31,500.00.
4. The Defendants are to pay pre-judgment interest to QRS in the sum of $8,885.77.
5. The Defendants are to pay pre-judgment interest on the sum of $31,500.00 from 10 July 2015 to the date of judgment in the sum of $3,647.31.
6. The Defendants are to pay interest on the total judgment sum of $71,936.08 from the date of judgment in accordance with s 40 of the District Court Act 1991 and District Court Supplementary Rule 217.
7. The Defendants are to pay QRS’ costs of the ERD Court Action 322 of 2013 on a party and party basis.
8. QRS’ costs from the date Magistrate Court action 4120 of 2012 commenced on 2 April 2012, to the date of transfer of the Court action to the District Court on 17 May 2013 are to be paid pursuant to the “complex action” scale (90% of the Supreme Court scale).
9. The Defendants are to pay 65% of QRS’ costs of this action on a party and party basis.
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