Rasch Nominees Pty Ltd v Bartholomaeus (No 2)
[2012] SASC 168
•21 September 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RASCH NOMINEES PTY LTD v BARTHOLOMAEUS & ORS (No 2)
[2012] SASC 168
Judgment of The Honourable Chief Justice Kourakis
21 September 2012
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - CO-DEFENDANTS
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - THIRD PARTIES
Judgment delivered that plaintiff not entitled to orders sought registering it as proprietor of land it had contracted to purchase from the first and second defendants and dismissing plaintiff’s claim against the third, fourth and fifth defendants.
COSTS – (1) Plaintiff seeks declaration that first and second defendants breached the contract – (2) Plaintiff seeks order that the first and second defendant pay nominal damages in the amount of $1.00 for breach of contract – (3) Second plaintiff consents to order for party/party costs for specified period but disputes application for indemnity costs – (4) First and second defendants seek an order that the plaintiffs pay its costs on an indemnity basis – plaintiff contends no order as to costs should be made – (5) Third to fifth defendants seek order that first plaintiff pay its costs on an indemnity basis – (6) First and second defendant seek contribution from third defendant – (7) First and second defendants seek costs on their cross-action against the sixth defendant – (8) Third to fifth defendants seek costs on the cross-action against them by the sixth defendant.
Held: (1) No utility in making the declaration sought by the plaintiff - (2) First and second defendants pay the plaintiff nominal damages in the amount of $1.00 – Plaintiff’s claims against the first to fifth defendants are dismissed – (3) Second plaintiff is to pay the costs of the first to fifth defendants on an indemnity basis – (4) First plaintiff is to pay the first and second defendants’ costs on the issue of the quantum of damages on an indemnity basis until date it abandoned its claim for damages – first plaintiff to pay 25 per cent of all of the other costs of the first and defendants thereafter – (5) First plaintiff to pay the third to fifth defendants costs on a party and party basis - costs to be assessed on a lump sum basis subject to a contrary opinion to be provided by the plaintiff - (6) First and second defendants to pay costs of third to fifth defendants on contribution notice in District Court – no order for costs of cross-action in this Court – (7) Question of costs of the cross-claim brought by the first and second defendant against the sixth defendant reserved - (8) Sixth defendant to pay the costs of the third to fifth defendants on a party and party basis.
Supreme Court Act 1935 (SA) s 30; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) s 6; Trade Practices Act 1974 (Cth); Fair Trading Act 1987 (SA); Supreme Court Civil Rules 2006 (SA) r 146(2), referred to.
Nominal Defendant v Dighton [2012] SASCFC 97; Hazeldene’s Chicken Farm v VWA (No 2) (2005) 13 VR 435, discussed.
Jones v Howell & Associates [2002] SASC 152; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Denny v Ashton (1994) 173 LSJS 110; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873; Totalise PCL v Motley Fool Ltd [2003] 2 All ER 872; Cappuccio v ANZ Banking Group Ltd [1999] FCA 1188; Howe v South Australia (1990) 197 LSJS 98; Pyramis v Farrow (1995) 1 VR 464, considered.
RASCH NOMINEES PTY LTD v BARTHOLOMAEUS & ORS (No 2)
[2012] SASC 168
Civil
KOURAKIS CJ: On 30 April 2012 I delivered reasons for judgment in this matter. In summary, I found that the plaintiff (Rasch) was not entitled to orders which would have resulted in its registration as the proprietor of three allotments of land in Mount Barker (the Land) which it had contracted to purchase from the first and second defendants (Mr and Mrs Bartholomaeus). I refer to the contract for sale as the Rasch contract. In breach of their contractual obligation to transfer the land to Rasch, Mr and Mrs Bartholomaeus sold the Land to the tenant of two of the allotments, the third defendant (MBP) in the purported exercise of a pre‑emption right granted as a term of the lease of those allotments (the Lease and the Leased Premises). I found that Rasch had not established that the fifth defendant, the principal of MBP, Mr Hone, had acted fraudulently in procuring that transfer nor in transferring title to the fourth defendant, Jondam, which was another corporation controlled by Mr Hone. I refer to the third to fifth defendants as the Hone Parties. Mr and Mrs Bartholomaeus succeeded in their action against the sixth defendant (MRS), a firm of solicitors who had advised them in relation to the transfer.
I found that MRS had negligently advised Mr and Mrs Bartholomaeus on the best way to resolve the dilemma in which they found themselves after contracting to sell the land to Rasch without appreciating that they were vulnerable to a claim by MBP that it was entitled to call for a conveyance of the Leased Premises pursuant to its right of pre-emption.
On 13 June 2012, I made limited orders to give effect to my reasons as follows:
1.The First Plaintiff’s claim against the Third, Fourth and Fifth defendants (by FDN 195) be dismissed.
2.The First Plaintiff forthwith withdraw, and execute all documents and do all things necessary to effect the withdrawal of, caveat numbered 10389420 from the title of the whole of the land comprised in Certificate of Title Register Book Volume 5626 Folio 627, with the First and Second Defendants reserving their rights to claim compensation from the First Plaintiff in relation to the said Caveat pursuant to section 191(j) of the Real Property Act 1886.
3.The execution of order 2 above stayed until the expiry of the period in which the First Plaintiff may appeal against order 1, which stay shall:
3.1 lapse immediately upon the expiry of the said period should the First Plaintiff not file a notice of appeal within such period; or
3.2 continue until:
3.2.1.any appeal instituted by the First Plaintiff against order 1 above within the said period is withdrawn, discontinued, stayed, dismissed or refused; or
3.2.2.any further or other order of the Court.
4.Adjourned to Friday 20 July 2012 at 9.00 am.
On 31 July, 7 August and 8 August 2012 the parties made submissions on the appropriate consequential orders and on the question of costs.
Rasch awarded nominal damages – declaration not necessary
The plaintiffs ask for a declaration that Mr and Mrs Bartholomaeus breached the Rasch contract. The various findings I made in the course of my reasons necessarily entail the conclusion that Mr and Mrs Bartholomaeus did transfer the land to the Hone Parties in breach of their contractual obligations. That conclusion is reasonably apparent from paragraphs [135] to [143] in which I rejected Mr and Mrs Bartholomaeus’ construction of the terms of the contract on which they relied to justify their failure to convey the Land in accordance with the terms of the Rasch contract. It is also apparent from [230] which proceeds implicitly on the basis that Mr Hone induced the breach of contract. The conclusion was not further developed in my reasons because Rasch had abandoned its claim for common law damages for any substantive loss arising out of the breach. Instead, Rasch sought orders that the Hone Parties convey the land to Mr and Mrs Bartholomaeus so that an order for specific performance of the Rasch contract might be made against them. Rasch sought compensation pursuant to s 30 of the Supreme Court Act 1935 (SA) only in the event that the order for specific performance was refused on discretionary grounds.
In addition to seeking the decretal order, Rasch seeks an order that the first and second defendant pay the first plaintiff nominal damages in the amount of $1.00 for breach of the Rasch contract. It is convenient to deal with that order first.
It is well established that a plaintiff is entitled to nominal damages for breach of contract even when no other damage is established.[1] The right to nominal damages follows “as a matter of course” on the breach.[2]
[1] Jones v Howell & Associates [2002] SASC 152 at [32]; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 300; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 412; Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 359; Denny v Ashton (1994) 173 LSJS 110 at 112 per Debelle J; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874.
[2] Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 300 per Latham CJ.
Despite that principle, Mr and Mrs Bartholomaeus oppose the award. They contend that that proposition reflects only a rebuttable presumption that actual damage results from every contractual breach. Mr and Mrs Bartholomaeus submit that the evidence in this case conclusively proves that there was no loss because the historically low rents paid pursuant to the Lease, to which the Rasch contract was subject, would, after deduction of the costs of borrowing to finance the purchase, have resulted in a net loss.
The major premise of Mr and Mrs Bartholomaeus’ contention should be rejected. The right to nominal damages for breach is not based on a rebuttable presumption of actual loss. In the text McGregor on Damages,[3] the authors reject the explanation for awards of nominal damages based on a presumption and describe it as confusing for these reasons:
In the first place it explains nothing because it is a fiction, as those cases where there is clear evidence of no loss show. … The proper approach is to regard an injuria or wrong as entitling the plaintiff to a judgment for damages in his favour even without loss or damage, but where there is no loss or damage such judgment would be for nominal damages only.
[3] McGregor, H, McGregor on Damages (Sweet & Maxwell, 14th ed, 1980) at [303].
In most torts, of which negligence is the most obvious example, conduct is only actionable insofar as it causes loss. On the other hand, the law proscribes breaches of contract and, those special torts which are actionable per se, irrespective of their consequences. The causation of loss is not an element of those causes of action. The remedy provided by the common law for those wrongs is damages irrespective of the causation of loss. Only the quantum varies, from nominal to substantial damages, according to the extent of loss.
The failure to expressly seek relief by way of nominal damages can not possibly have prejudiced Mr and Mrs Bartholomaeus. I therefore order that the first and second defendants pay the first plaintiff nominal damages assessed in the amount of $1.00. Having made the order for the payment of the nominal damages, there is no further utility in making the declaration sought by the plaintiff.
The plaintiff submits to an order that its claims against the first to fifth defendants otherwise be dismissed and I will so order.
Costs – SAPC
The second plaintiff, SAPC, is a corporation related to Rasch and conducts potato packing operations on premises adjacent to the subject land. SAPC discontinued its claim on 28 March 2011. SAPC had claimed that Mr and Mrs Bartholomaeus and the Hone Parties were liable to it for substantial damages for operating losses it would incur by reason of Rasch’s failure to procure the Land. It had claimed that purchase of the Land would have allowed it to reconfigure its packing operations over both parcels of land so that they would operate more efficiently. SAPC consents to an order that it pay to Mr and Mrs Bartholomaeus and the Hone Parties their party/party costs of its claim in the action from the date of its joinder on 15 July 2008. However, it disputes their application for indemnity costs orders.
Having considered the expert reports and the outlines of witness statements, it is apparent that the claim was fraught from the outset. On the face of things, SAPC’s abandonment of its claim is a confession that it was doomed.
However, SAPC contends that a different view of the discontinuance should be taken in light of the settlement of the professional negligence claim it had brought against its solicitor. SAPC abandoned its claim against the defendants after it had settled that claim. The terms of that settlement remain confidential and it has not been placed before me.
I take the view that the settlement between SAPC and its solicitor is very likely to have been discounted for risks on liability. It is not common in South Australia for conveyancers acting for a purchaser to caveat the title of the subject land. Moreover, the communications made to Mr Iuliano and Rasch’s solicitor on the delay in settlement gave no reason to suspect that Mr and Mrs Bartholomaeus would convey the Land to the Hone Parties. For those reasons I doubt that the settlement would have fully compensated SAPC. I am therefore not persuaded that the settlement between SAPC and its solicitor is reason enough not to draw the inference that would ordinarily be drawn from the abandonment of its claim.
There are further reasons which support the making of an order on an indemnity basis. First, Mr and Mrs Bartholomaeus continued to offer part of the Land, Lot 25, to Rasch, even after the transfer of Lots 23 and 24 to the Hone Parties but that offer was not accepted. I refer to that letter in great detail in [30] below. The expert reports show that the efficiencies that SAPC hoped to achieve, by and large, could have been achieved by the purchase of Lot 25 alone. If there were substantial savings to be made by restructuring operations by taking advantage of the space on Lot 25, the failure to accept the offer is surprising. Secondly, Mr and Mrs Bartholomaeus obtained and provided to SAPC an expert report from Mr Morris which concluded that no loss was suffered. Mr Morris maintained that position after a conference with SAPC’s forensic accountant. Mr Morris’ conclusion was based on both the insufficiency of the supporting material to show that the efficiency savings could be achieved and on the offsetting affect of the cost of restructuring the operations even if the savings were achieved.
Having reviewed the material I am satisfied that there never was a reasonably worked out basis for the claim.
SAPC also submits that no costs order should be made against it directly because Rasch has given an undertaking to pay costs to which the defendants are entitled by reason of SAPC’s discontinuance. The undertaking was given in the course of negotiations over SAPC’s proposed discontinuance. The reasons for requesting the undertaking are obvious enough. It provided a form of security. However, it was no part of the agreement that SAPC itself would escape the ordinary cost consequence of its discontinuance. Indeed, the reference in the correspondence to the joint and several liability of Rasch and SAPC for the costs to which the defendants may be entitled, implies that SAPC remained liable to a costs order and that Rasch accepted a joint and several liability to satisfy that order.
For the above reasons, I order that SAPC pay the costs of Mr and Mrs Bartholomaeus and the Hone Parties on an indemnity basis.
It is convenient to mention here that, for the purposes of the costs argument, the Hone Parties sought an order for the production of the settlement deed from Rasch. The application for that order was, quite properly, also served on Rasch’s former solicitor. The Hone Parties’ application was later abandoned. The solicitor sought his costs on that application. The Hone Parties opposed that application. In my view, the solicitor acted reasonably in engaging representation after he was served to make submissions to protect his interest in the confidentiality of the settlement deed on that application even though he was not a party to it. For those reasons I awarded the solicitor costs against the Hone Parties when his application was called on in the course of the costs hearing.
Costs – Rasch v Bartholomaeus
I next turn to the question of costs as between Rasch and Mr and Mrs Bartholomaeus. Rasch contends that there should be no order as to costs as between it and Mr and Mrs Bartholomaeus. Rasch relies on the findings I made in its favour on several questions of the construction of the Rasch contract and of the Lease. Rasch relies also on the award made, albeit for nominal damages, in its action against Mr and Mrs Bartholomaeus.
For their part, Mr and Mrs Bartholomaeus seek an order that Rasch pay them their costs on an indemnity basis.
Mr and Mrs Bartholomaeus contend that Rasch’s claim for specific performance was doomed to fail because of the indefeasible title held by the Hone Parties.
I reject Rasch’s contention that no order for costs should be made against it. The judgment it has obtained for nominal damages is not, in any real sense, a successful result. Rasch brought the action against Mr and Mrs Bartholomaeus to recover substantial common law damages but then abandoned that claim. I infer that it did so largely because it could not demonstrate that it had suffered any financial loss when the costs it would have incurred, had it settled on the Land, were taken into account. It also sought damages against Mr and Mrs Bartholomaeus for tortious and statutory wrongs but failed in those claims. The predominant purpose of the contractual claim against Mr and Mrs Bartholomaeus was to enable a conveyance of the land to Rasch to be made in the event that the conveyances to the Hone Parties were set aside. Rasch failed in the claim against the Hone Parties because it could not prove fraud on the part of Mr Hone.
On the other hand, after Rasch abandoned its claim for damages, for breach of contract and false or misleading conduct, against Mr and Mrs Bartholomaeus, the Bartholomaeus’ continued defence of the Rasch claims had one substantial purpose. That purpose was to provide a first line of defence against Rasch’s claim for a conveyance of the Land to it.
The construction of the Rasch contract advanced by Mr and Mrs Bartholomaeus, and the patent concern of Mr Bartholomaeus to play down the breaches of the lease when he gave evidence on that subject matter, suggests that, after the abandonment of the claim for damages by Rasch, their primary concern was to avoid a potentially greater damages claim for breach of the sale contract to the Hone Parties if Rasch had succeeded in setting aside the conveyances. Rasch succeeded on the issues joined by Mr and Mrs Bartholomaeus for that purpose.
I acknowledge that if Mr and Mrs Bartholomaeus had simply submitted to a judgment for nominal damages for breach, Mr Bartholomaeus was still likely to have given evidence on those issues. He was likely to have been called by the Hone Parties. However, the question here is whether Mr and Mrs Bartholomaeus should be entitled to all of their party/party costs as against Rasch when they failed in the litigation of the substantial remaining live issue between them. The question of s 30 damages was always very unlikely to arise and could have been reserved, as against Mr and Mrs Bartholomaeus, until the determination of the issues between Rasch and the Hone Parties.
I also accept that a concession by Mr and Mrs Bartholomaeus that they had breached the Rasch contract left hanging the allegations of fraudulent and misleading conduct made against them. I accept that their concern to actively participate in the proceeding to deny those allegations is of some weight. However, litigation, and the exercise of the cost discretion in particular, requires substantial weight to be given to practical considerations.
Mr and Mrs Bartholomaeus also rely on two Calderbank letters of offer made by them. On 25 February 2008, the solicitors for Mr and Mrs Bartholomaeus offered to transfer Lot 25 to Rasch for the sum of $360,000. The offer of $360,000 was $40,000 less than the notional value of Lot 25, having regard to the Rasch contract purchase price and the sale of Lots 23 and 24 to MBP for $850,000. They also offered to realign the boundaries so as to deal with the encroachments. The offer was made without prejudice to any further claim for damages which might be made. Plainly enough, the offer did not address any real compensation for the loss of the property right in Lots 23 and 24. Mr and Mrs Bartholomaeus had also offered to pay $100,000 to Rasch for damages. The offer was withdrawn on 4 February 2010.
On 23 December 2010, Mr and Mrs Bartholomaeus made a second offer. They offered to settle Rasch’s claims on the basis that Rasch discontinue and pay Mr and Mrs Bartholomaeus 80 per cent of their party/party costs. That offer remained open until 17 February 2011. As will shortly be seen, that offer was possibly for a greater proportion of the costs than the order I am about to make. I further observe that the offer was also one as to costs only and for that reason has little weight on the issue of indemnity costs.
In Nominal Defendant v Dighton,[4] the Full Court accepted that the five matters identified in Hazeldene’s Chicken Farm v VWA (No 2)[5] were a useful guide to the exercise of the costs discretion where a Calderbank offer had been made. The five matters were:[6]
First, what stage the proceedings were at when the offer was received. Secondly, the time allowed to consider the offer. Thirdly, the extent of the compromise offer. Fourthly, the prospects of success from the date of the offer. Fifthly, the clarity in which the terms were expressed and finally, whether the offer foreshadowed indemnity costs in the event the offeree rejected it.
[4] [2012] SASCFC 97.
[5] (2005) 13 VR 435.
[6] [2012] SASCFC 97 at [8].
The most appropriate way to balance the competing considerations to which I have referred, is for an order that the first plaintiff pay the first and second defendants’ costs on the issue of the quantum of its damages, including all reserved costs until 11 March 2011 on which day it indicated that it abandoned its claim for damages. I order that those costs be taxed on an indemnity basis for two reasons. First, it was unlikely that anything more than nominal damages would be awarded because of Rasch’s borrowing costs. Secondly, the letter of 25 February 2008 made a generous offer in settlement of the damages claim.
I order that Rasch pay 25 per cent of all of the other costs of Mr and Mrs Bartholomaeus on a party and party basis. Despite its overall success on the issues against Mr and Mrs Bartholomaeus, it failed ultimately in the substantial relief it claimed. Much time was also spent cross-examining Mr Bartholomaeus and Mr Hone in an effort to show that MBP had been offered the Land pursuant to the right of pre-emption but had refused it. Rasch lost on that issue. Moreover, Mr and Mrs Bartholomaeus remained at risk on the claim for s 30 damages. On the other hand, Mr and Mrs Bartholomaeus’ costs would have been much less if they had submitted to an order that they had breached the Rasch contract.
The Calderbank letters are not sufficient reason to assess those costs on an indemnity basis. The letters did not acknowledge the contractual breach of Mr and Mrs Bartholomaeus. It was essential to Rasch’s claim against the Hone Parties that it establish its contractual right as against Mr and Mrs Bartholomaeus if it were to recover the land. For the reasons given in the next part of these reasons, Rasch had a properly arguable case against the Hone Parties even though it ultimately failed.
Costs – Rasch v Hone Parties
I have ordered that SAPC pay the costs of the Hone Parties of the defending its action on an indemnity basis at [20] above.
The Hone Parties also seek an order that Rasch pay its costs on an indemnity basis. Rasch, on the other hand, contends that no order as to costs should be made.
Rasch failed ultimately in its claim against the Hone Parties. There is no sufficient reason to depart from the ordinary rule as to costs so as to excuse it from any liability to pay costs. The question remains on what basis those costs should be taxed.
The Hone Parties contend that Rasch’s case was based on allegations of fraud that had no evidential basis and was, for that reason, bound to fail. Furthermore, the Hone Parties contend that the claim made was a complex one that was litigated by means which were particularly expensive and caused substantial financial hardship.
I reject the contentions of the Hone Parties. In my view, there was an adequate evidential basis for the claim brought by Rasch. Mr Hone, and later Mr Mead, spoke to Mr Iuliano shortly after Rasch had entered into the contract with Mr and Mrs Bartholomaeus. On the basis of those conversations, Rasch had no reason to suspect that its contract would be dishonoured. Rasch had no reason to suspect that Mr and Mrs Bartholomaeus would, in breach of their contractual and equitable obligations, transfer the land to the Hone Parties. Having regard to the content of the conversations with Mr Iuliano to which I have referred, and the speed with which settlement on the sale of the land to the Hone Parties was effected, it was reasonable for Rasch to infer that Mr Hone was knowingly involved in a plan to deceive Rasch into inaction. Ultimately, having heard the evidence, including the testimony of Mr Bartholomaeus, I found that there was no such plan and that Mr Hone was not knowingly involved in any such deceit. However, my finding on all of the evidence does not mean that there was no evidential foundation for the claim brought by Rasch. A no case submission was not made. Indeed, but for the testimony of Mr Bartholomaeus and Mr Mead such an inference could properly have been drawn.
I have received evidence on this application of the financial hardship wreaked by this litigation on Mr Hone and the corporations he controls. They have incurred substantial costs and have borrowed to pay the large part of them. The drain on the companies’ financial resources has adversely affected their businesses. The strain of the litigation has impacted on Mr Hone’s health. I am not persuaded Rasch conducted the litigation in a way which warrants an indemnity costs order. I accept that Rasch’s pleadings could have been simpler. However, Rasch was denied its contractual and equitable rights as a result of the conduct of a number of persons and entities in complex circumstances. The Hone Parties did not identify any particular step or steps in the proceedings which were unreasonably taken. There is an insufficient basis to attribute sole responsibility to Rasch for the expensive and protracted course of the proceedings.
The consequences to the Hone Parties highlight the importance of taking a practical and cost efficient approach to litigation. However, I am not persuaded that either alone, or together with the other matters relied on by the Hone Parties, that there is sufficient reason to make an indemnity costs order.
There is a further reason to deny the Hone Parties an indemnity costs order. On 12 March 2010, Rasch made an offer by letter to the Hone Parties. The letter contained two alternative offers. The primary offer was to purchase Lots 23 and 24 from the Hone Parties for $2.2 million. Having regard to the purchase price paid by the Hone Parties of $850,000, that amount represented a substantial profit to them. Their costs at that stage were unlikely to have been more than several hundred thousand dollars. The offer included mutual releases and a term that each party bear their own costs. The alternative offer was premised on Rasch purchasing Lot 25 from Mr and Mrs Bartholomaeus and selling to MBP that part of Lot 25 on which there was an encroachment from Lot 24. Rasch’s offer appeared to contemplate a settlement in its favour against Mr and Mrs Bartholomaeus for their breach of contract. The alternative offer included mutual releases with the parties to bear their own costs.
I acknowledge that the Hone Parties were in a sense entitled to reject the primary offer because it required them to forsake what I have found to be their proprietary interest in Lots 24 and 25. However, their rejection of the offer of very generous compensation is relevant to the exercise of the discretion to award indemnity costs.
I order that Rasch pay the costs of the Hone Parties on a party and party basis. I am inclined to order that those costs be assessed on a lump sum basis. The quantification of costs by reference to the expert opinion of an experienced assessor is the most cost efficient way to proceed in a matter such as this. After the hearing of the costs applications, I received one report advising that the Hone Parties’ files have been adequately kept and are suitable for such an assessment. Subject to any contrary opinion which Rasch may provide, I will order the assessment of costs on a lump sum basis.
Bartholomaeus cross-action against the Hone Parties
Mr and Mrs Bartholomaeus sought contribution against MBP pursuant to s 6 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) with respect to any judgment or order made against them in the Rasch action for tortious conduct or conduct in breach of statutory duties on the grounds that similar conduct of MBP caused or contributed to the loss suffered by Rasch.
Mr and Mrs Bartholomaeus also sought an order for the delivery of vacant possession of the land.
Mr and Mrs Bartholomaeus also sought orders for damages against MBP for alleged misrepresentations made by MBP and its solicitor on two matters. The first was an assertion made in the course of negotiations between them after the Rasch contract was executed, that parties associated with MBP had made an offer to buy the land for $1,265,000. The second matter was an assertion by MBP and its solicitors that they were entitled to a conveyance of the land pursuant to the right of pre-emption in the Lease. Similar cross-actions were brought by Mr and Mrs Bartholomaeus against the fourth and fifth defendants.
I did not expressly deal with the cross-actions in my earlier reasons. However, I did find that an offer of $1,265,000 had been made for the land by the Hone Parties in association with others.
It is appropriate that I now finally deal with the cross-action. The first representation was, as I just mentioned, not false and Mr and Mrs Bartholomaeus must fail on that part of their claim. The representation that MBP was entitled to a conveyance pursuant to the right of pre-emption, in so far as it included a representation that it was not in breach of the Lease was not true. However, both representations were about matters of which Mr and Mrs Bartholomaeus had knowledge. I find that the representations did not induce them to breach the Rasch contract. Mr Bartholomaeus would not have, and did not change his view of, MBP’s breaches of the Lease on the strength of the representations of the Hone Parties. Mr and Mrs Bartholomaeus simply acted on the advice of Mr Mead which was primarily based on an assessment of which the claimants over the land had the weakest damages claim.
When the costs applications were brought on for hearing, the only costs claim made by the Hone Parties in their written submissions was with respect to a third party notice served by Mr and Mrs Bartholomaeus before the Hone Parties had been joined as defendants and whilst the matter was being litigated in the District Court. Mr and Mrs Bartholomaeus having ultimately failed must pay the costs of those notices. I order that costs be assessed on a party and party basis.
After hearing argument on costs, the Hone Parties sought to withdraw their consent to an order that there be no order as to costs on the cross-action. I refuse permission to withdraw that consent. The cost of bringing the matter back on for full argument made it inconvenient and unjust to do so. In any event much of the work in defending the cross-action, other than filing pleadings, was necessary to defend the claims brought by Rasch against the Hone Parties. I did not determine at trial the separate issue on that cross-action concerning the alleged breach by MBP of the Lease by subletting to the eighth defendant, Dutton Motors. The issue did not arise given my primary findings. It is appropriate that the parties bear their own costs.
Rasch should not be ordered to indemnify Mr and Mrs Bartholomaeus for those costs. The claim of Mr and Mrs Bartholomaeus against the Hone Parties did not fail by reason only of the failure of Rasch’s claim against them. In fact, Rasch largely succeeded against Mr and Mrs Bartholomaeus.
Cross-action against the sixth defendant
Mr and Mrs Bartholomaeus claimed damages in negligence against the sixth defendant, their solicitors who advised them on how they should resolve the competing legal claims against them, MRS, for negligence.
They have succeeded on that claim but the question of damages has been reserved to be resolved by the parties or to be determined failing any such agreement. The question of costs on that cross-claim will also be reserved.
The sixth defendant consents to the dismissal of his cross-action against the first and second defendants. That order will be made. The costs of that cross-action will also be reserved.
Cross-actions by sixth defendants
The sixth defendant, MRS, also brought cross-actions against the Hone Parties for any liability it was found to have to Rasch for the fraudulent and misleading conduct Rasch had alleged against all of the defendants. The sixth defendant consents to judgment against it dismissing that cross-action. The Hone Parties seek their costs on the cross-action against them. MRS does not oppose that application. I order that MRS pay the costs of the Hone Parties on a party and party basis.
There will be no order for costs of any other cross-action brought by MRS.
In my view all of the defendants should be left to bear their own costs on that question.
Application for costs by Adrian and Florence Hone
In the course of the proceedings Rasch made applications for non-party discovery orders against Adrian and Florence Hone. The costs of the application were reserved. Adrian and Florence Hone now seek their costs of that application.
The applications were directed towards the discovery of documents in their possession which might have supported Rasch’s claim of fraudulent or misleading conduct on the part of the Hone Parties and potentially by the non-parties with a view to joining them if the discovered material supported such a claim. The documents were first sought by letters from Rasch’s solicitors which asked for voluntary disclosure. The information was not produced. Rasch brought an application on 8 August 2008 for documents and for an order that Adrian Hone and Florence Hone attend for examination. No relief was obtained on Rasch’s application. Documents falling within the request for discovery from the non-parties were later produced by other parties to the action.
In the ordinary course, costs should be awarded in favour of the non‑party.[7] The non-parties sought an order for costs on an indemnity basis. That claim, however, was premised on a proper foundation being shown for an indemnity costs order against the Hone Parties.
[7] Totalise PCL v Motley Fool Ltd [2003] 2 All ER 872; Supreme Court Civil Rules 2006 (SA) r 146(2); Cappuccio v ANZ Banking Group Ltd [1999] FCA 1188.
There is no such basis and for that reason I decline to make an indemnity costs order in favour of the non-parties.
I am satisfied there is no sufficient basis to stay the costs order in favour of the non-parties.
To avoid doubt I expressly include within the costs order the costs of responding to the correspondence which preceded the application.
Retain of Deposit
Rasch seeks an order that the real estate agents who acted for Mr and Mrs Bartholomaeus on the sale of the Land to Rasch retain the deposit it paid. I see no utility in making that order, and decline to do so.
Cross-Action brought by Seventh Defendant
The cross-actions (contribution notices) brought by the seventh defendant against the Hone Parties are dismissed. The Hone Parties seek the costs of those applications. The seventh defendant was not heard on that application. The costs are likely to be minor and overlap with the costs of the other actions and cross-actions. I decline to make that order.
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