Rollings v Portrange Pty Ltd
[2014] WADC 56 (S)
•24 APRIL 2014
ROLLINGS -v- PORTRANGE PTY LTD [2014] WADC 56 (S)
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WADC 56 (S) | |
| Case No: | CIV:258/2010 | 15-17 JANUARY 2014 | |
| Coram: | SCOTT DCJ | 24/04/14 | |
| PERTH | 26/08/14 | ||
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Second defendant entitled to costs to be taxed on a solicitor and client basis | ||
| PDF Version |
| Parties: | BRADLEY NOEL ROLLINGS PORTRANGE PTY LTD XSTRATA NICKEL AUSTRALASIA OPERATIONS PTY LTD |
Catchwords: | Costs Construction of indemnity clause in contract Whether costs of proceedings ought to be awarded on a party and party or solicitor and client basis |
Legislation: | District Court of Western Australia Act 1969 s 64(3) Supreme Court Act 1935 s 37 |
Case References: | Abi Group Ltd v Sandtara Pty Ltd [2002] NSWCA 45 Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28 Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141 Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority(No. 2) [2005] VSCA 298 Irani v St George Bank Ltd (No 3) [2005] VSC 456 Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 Perpetual Trustees Australia Ltd v Barker [2004] SASC 58 Rumball v Mortimore [2000] WASC 126 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 26 AUGUST 2014 FILE NO/S : CIV 258 of 2010 BETWEEN : BRADLEY NOEL ROLLINGS
- Plaintiff
AND
PORTRANGE PTY LTD
First Defendant
XSTRATA NICKEL AUSTRALASIA OPERATIONS PTY LTD
Second Defendant
Catchwords:
Costs - Construction of indemnity clause in contract - Whether costs of proceedings ought to be awarded on a party and party or solicitor and client basis
Legislation:
District Court of Western Australia Act 1969 s 64(3)
Supreme Court Act 1935 s 37
Result:
Second defendant entitled to costs to be taxed on a solicitor and client basis
Representation:
Counsel:
Plaintiff : No appearance
First Defendant : Ms B A Mangan
Second Defendant : Mr D R Clyne
Solicitors:
Plaintiff : Not applicable
First Defendant : Jarman McKenna
Second Defendant : HBA Legal
Case(s) referred to in judgment(s):
Abi Group Ltd v Sandtara Pty Ltd [2002] NSWCA 45
Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28
Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141
Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298
Irani v St George Bank Ltd (No 3) [2005] VSC 456
Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139
Perpetual Trustees Australia Ltd v Barker [2004] SASC 58
Rumball v Mortimore [2000] WASC 126
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52
1 SCOTT DCJ: On 24 April 2014 I published reasons in which I found that the second defendant was entitled to be indemnified against its liability to the plaintiff, alternatively to damages. The second defendant has elected relief by way of the indemnity.
2 The matter outstanding relates to the nature of the appropriate costs order. To that end, the proper construction of the indemnity clause in the Terms (cl 11) is in issue.
3 Clause 11 of the Terms provides:
11.1 In this clause 11 …:
'Claim' means any claim, action, proceeding, demand, costs, damage, loss, expense, liability or other outgoing howsoever incurred or suffered by, or brought or made or recovered howsoever arising …
11.2 Unless due solely to the negligence of the Company (second defendant), the Vendor (first defendant) shall be liable for and must indemnify the Company … against any and all Claims arising whether at common law or under statute, and caused or contributed to, whether wholly or in part and whether directly or indirectly, by:
(c) reason of any act, negligent or default by the Company …
(d) the presence of any Vendor personnel on or about the Company's premises in respect of:
(i) injury to or death of any person …
5 The first defendant submits that those costs ought to be taxed on a party and party basis.
6 The second defendant submits that:
(a) The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52.
(b) Where there is a contract of indemnity and there is doubt on the construction then the construction must necessarily be resolved in favour of the indemnifier: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28.
(c) There is no uncertainty or ambiguity in the construction of cl 11. That clause is part of an arm's length transaction between two parties engaging in commercial dealings. The plain meaning of the clause is that the second defendant is entitled to be indemnified in respect of any Claim, as that term is defined, which includes on its proper construction the legal costs paid by the second defendant in defending the plaintiff's claim and in respect to the contribution proceedings.
(d) Where costs are taxed on a solicitor and client basis, the party in whose favour the order is made is able to recover all costs reasonably incurred and of a reasonable amount: Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298.
(e) Once costs are taxed on a solicitor and client basis the quantification of costs then determined will form part of the indebtedness of the other party: Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 5) [2009] WASC 141 [15]. Interest will then accrue on the total sum including costs.
7 The second defendant submits that:
(a) Costs are awarded at the discretion of the court (s 64(3) District Court of Western Australia Act 1969 (DCA); s 37 Supreme Court Act 1935 (SCA)).
(b) Where there is a contractual right to costs, the discretion should ordinarily be exercised so as to reflect any contractual right: Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171 [174].
(c) Although costs are always a matter in the court's discretion those costs are usually party and party costs in the absence of conduct warranting the making of a more onerous order or a contractual basis for enlarging the costs entitlement: Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 [7].
(d) An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis unless it is plain from its terms that costs are to be paid on a 'special basis'. Where the terms plainly and ambiguously provide for costs to be assessed on some special basis, the court will take such provision into account but is not bound to give effect to an extra-curial contract as to costs: Chen [8].
(e) The Terms do not refer to any basis upon which an award of costs ought to be taxed and in the absence of unequivocally plain language that the costs were to be awarded on a solicitor and client or indemnity basis, the costs ought to be awarded on a party and party basis.
Whether costs part of contractual claim
8 On one view the second defendant's claim for costs falls to be determined as part of the substantive claim in the contribution proceedings. This is because the claim for costs forms part of the claim for indemnity pursuant to cl 11: see Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141.
9 In this case however, in the prayer for relief in the contribution proceedings the second defendant has claimed against the first defendant:
(a) An indemnity for all amounts that it paid or may be required to pay to the plaintiff in respect of the plaintiff's action including interest and costs;
(b) Damages arising from the first defendant's breach of contract, including all costs of this action;
(c) Costs.
10 There was no substantive claim pursuant to cl 11 for costs on an indemnity basis or on a solicitor and client basis in the contribution proceedings.
11 In my view it is appropriate that the issue of costs be dealt with as a discretionary matter in respect to which the question to be determined is the extent to which cl 11, as a contractual term, ought to be construed and given effect. From a practical standpoint the result is likely to be the same in any event.
Statutory provisions
12 By s 64(3) of the DCA a judge of this court has the same power in relation to the payment of costs by any party as a judge of the Supreme Court has.
13 By s 37 of the SCA the costs of and incidental to all proceedings in the Supreme Court are to be in the discretion of the court which has full power to determine the extent to which such costs are to be paid.
14 Generally speaking there are at least three different ways that costs can be assessed:
(a) On a party and party basis which is the usual basis upon which costs are taxed;
(b) On a solicitor and client basis with the result that the costs are taxed on a more generous basis than party and party costs; and
(c) Indemnity costs by which a party will pay all the costs incurred by his opponent except insofar as they are of an unreasonable amount or have been unreasonably incurred:
Rumball v Mortimore [2000] WASC 126 [13].
15 In Rumball, Owen J observed that where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a certain basis, the court should ordinarily exercise its discretion in a manner consistent with the contractual provisions.
16 Nonetheless it must be kept in mind that a court is not bound to give effect to any extra curial contract as to costs when exercising its discretion to award costs, and the order for costs continues to be at the discretion of the court: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 [22]; Chen [8].
17 In Chen at [8] the court observed:
An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a 'special basis'. Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give the effect to any extra-curial contact as to costs. An agreement to pay costs on a 'special' basis is only a factor in forming the exercise of the court's discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order.
Construction of cl 11 as it relates to legal costs
18 It is common ground that any ambiguity in the interpretation of the indemnity provision is to be construed in favour of the first defendant as the indemnifying party. See Andar Transport.
19 There is also no dispute between the parties as to the manner in which a written contract falls to be construed. Consideration should ordinarily be given not only to the language of the document but also to the surrounding circumstances known to the parties and the apparent purpose and object of the transaction.
20 The Terms regulated the agreement between two commercial parties trading at arm's length. The second defendant was the owner and operator of a mine site. The first defendant carried on business as an electrical contractor and contracted to supply goods and labour to the second defendant.
21 By cl 11.2 of the Terms the first defendant agreed to indemnify the second defendant against any 'Claims' (as that term was defined) arising at common law or under statute in circumstances which included the second defendant being partly (but not wholly) negligent. Even if, as is this case, the second defendant was primarily to blame for the plaintiff suffering injury.
22 The term 'Claim' defined in cl 11.1 is cast widely. It includes any 'cost … expense … liability or other outgoing howsoever incurred or suffered by … howsoever arising.'
23 Legal costs which are incurred by the second defendant in any litigation to which cl 11.2 applies would in my view fall within a 'Claim' as that term is defined in cl 11.1.
24 The matter which falls for determination is whether cl 11 provides 'in plain and unambiguous language' that the second defendant's legal costs be assessed on a basis other than a party and party basis.
25 In a number of cases the contractual clause under consideration made specific reference to costs being assessed on a solicitor and client (or own client) basis: See Rumball; Macquarie International Health Clinic;Perpetual Trustees Australia Ltd v Barker [2004] SASC 58.
26 Costs were there awarded on a solicitor and client (or own client) basis.
27 In those cases the court exercised its discretion as to costs so as to reflect the contractual provision holding that the relevant terms were plain and unambiguous.
28 The position is perhaps less certain in cases where the provision under consideration does not specify the specific basis upon which the costs ought to be assessed.
29 The first defendant cited Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355 in support of its submission that the second defendant's costs ought to be awarded on a party and party basis.
30 In Kheirs the relevant provision was in terms that Kheirs would indemnify Aussie Home Loans against 'all or any loss, damages, claims, costs and expenses' that Aussie incurred as a result of Kheirs failing to observe any of the provisions of the relevant contract.
31 The court interpreted the indemnity clause to cast upon Kheirs an obligation to pay legal costs on a party and party basis, in the absence of unequivocally plain language that the costs were to be on a solicitor and client or indemnity costs basis.
32 However in that case the court said [at [199]] that it did not consider that the award of indemnity costs by the trial judge could be justified as a means of enforcing the contractual obligation given that the ultimate award (in favour of Aussie Home Loans) was only 70% when a breach of a contract would give rise to an entitlement to 100%.
33 As a consequence the court considered that the discretion ought not to have been informed by the contractual obligation in the manner it was in the absence of plain language.
34 In Irani v St George Bank Ltd (No 3) [2005] VSC 456 the guarantees provided that each of the guarantors indemnified the lender against all costs it incurred in exercising, or attempting to exercise, any power or right in relation to the recovery of 'guaranteed money'. Whelan J ordered only party and party costs as the terms did not refer to legal costs and were not considered sufficiently clear and unequivocal. Further, the successful party had not pleaded or otherwise appropriately alerted the other party to such a costs order.
35 In Chen the court considered the provision in a building contract by which the owner undertook to pay to the contractor any costs and fees incurred by the contractor in enforcing or further securing its rights under the agreement. The court said that the clause did not specify that the owner would 'indemnify' the builder and did not refer to 'indemnity costs, solicitor/client costs' and 'special costs'. The court said that the provision contained no language which might signify that the costs contemplated were solicitor and client or indemnity costs.
36 On the other hand, in Abi Group Ltd v Sandtara Pty Ltd [2002] NSWCA 45 the court dealt with a clause requiring the guarantor to 'unconditionally indemnify' the landlord from (inter alia):
… damages, costs and expenses which the landlord may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the tenant of any terms in the lease.
37 The court there said that the term 'indemnify', in particular its reference to 'or costs and expenses', reflected an intention that costs were to be on a solicitor and client basis. The court did not accept that a non-specific provision for 'all costs and expenses' indicated payment on the basis of party and party costs or that a specific reference to some other basis for assessment was necessary.
38 In Chen at [13] the court observed that the approach in Abi Group accorded with the statement in Halsbury's Laws of England, 5th ed, vol 49 and the authorities there cited that ordinarily an indemnifier would be liable for the full costs as between solicitor and client.
39 In my view the provisions of cl 11.1 and cl 11.2 of the Terms are to be construed as casting upon the first defendant the obligation to indemnify the second defendant against the legal costs and expenses incurred by it in defending the plaintiff's claim and in these contribution proceedings on at least a solicitor and client basis. It may also extend to legal costs and expenses on an indemnity basis, however that is not what is claimed by the second defendant.
40 The use of the word 'indemnify' is, in my view, compelling. In this context it means 'to keep free from' (see Shorter Oxford Dictionary). I consider that the meaning of the words in cl 11.1 and cl 11.2 are unambiguous and plain.
41 It is appropriate for my discretion as to costs to be exercised in a manner consistent with the contractual provisions. There is no other discretionary consideration which in my view militates against the making of such orders.
42 The orders to be made are:
1. The first defendant do indemnify and pay to the second defendant:
(a) damages paid by the second defendant in the sum of $325,000;
(b) costs paid by the second defendant to the plaintiff in the sum of $30,000.
2. The first defendant pay:
(a) the second defendant's costs of defending the plaintiff's claim; and
(b) the second defendant's costs of the contribution proceedings
to be taxed on a solicitor and client basis.
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