ROYEL Fitness Equipment Pty Ltd v Sheppard West Pty Ltd
[2002] WASC 212
ROYEL FITNESS EQUIPMENT PTY LTD & ORS -v- SHEPPARD WEST PTY LTD [2002] WASC 212
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 212 | |
| Case No: | CIV:2476/2000 | 12 AUGUST 2002 | |
| Coram: | MASTER SANDERSON | 9/09/02 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed Costs order set aside | ||
| B | |||
| PDF Version |
| Parties: | ROYEL FITNESS EQUIPMENT PTY LTD (ACN 079 975 143) ROYEL FITNESS WHOLESALE PTY LTD (ACN 080 070 944) ALABAMA PTY LTD (ACN 009 416 862) as Trustee for the ALABAMA FAMILY TRUST SEALCREST PTY LTD as Trustee for the OCCUPATIONAL HEALTH TRUST ALABAMA PTY LTD in its own right and as Trustee for the ALABAMA FAMILY TRUST JAMES EARL CRAWFORD LISA KAREN CRAWFORD SEALCREST PTY LTD (ACN 053 117 472) in its own right and as Trustee for the OCCUPATIONAL HEALTH SERVICES TRUST GARY DESMOND GARSIDE SHEPPARD WEST PTY LTD |
Catchwords: | Practice and procedure Costs order made after aborted mediation Turns on own facts |
Legislation: | Nil |
Case References: | Nil Solomon Bros v Ginbey & Ors, unreported; SCt of WA; Library No 980526; 11 September 1998 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- ROYEL FITNESS WHOLESALE PTY LTD (ACN 080 070 944)
First Plaintiffs
ALABAMA PTY LTD (ACN 009 416 862) as Trustee for the ALABAMA FAMILY TRUST
SEALCREST PTY LTD as Trustee for the OCCUPATIONAL HEALTH TRUST
Second Plaintiffs
ALABAMA PTY LTD in its own right and as Trustee for the ALABAMA FAMILY TRUST
JAMES EARL CRAWFORD
LISA KAREN CRAWFORD
SEALCREST PTY LTD (ACN 053 117 472) in its own right and as Trustee for the OCCUPATIONAL HEALTH SERVICES TRUST
GARY DESMOND GARSIDE
Third Plaintiffs
AND
SHEPPARD WEST PTY LTD
Defendant
(Page 2)
Catchwords:
Practice and procedure - Costs order made after aborted mediation - Turns on own facts
Legislation:
Nil
Result:
Appeal allowed
Costs order set aside
Category: B
Representation:
Counsel:
First Plaintiffs : Mr K E Yin
Second Plaintiffs : Mr K E Yin
Third Plaintiffs : Mr K E Yin
Defendant : Mr T E Elisara
Solicitors:
First Plaintiffs : Murcia Pestell Hillard
Second Plaintiffs : Murcia Pestell Hillard
Third Plaintiffs : Murcia Pestell Hillard
Defendant : Allens Arthur Robinson
Case(s) referred to in judgment(s):
Nil
(Page 3)
Case(s) also cited:
Solomon Bros v Ginbey & Ors, unreported; SCt of WA; Library No 980526; 11 September 1998
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190
(Page 4)
1 MASTER SANDERSON: It is difficult to over-state the importance played by mediation in the disposition of the business of the Supreme Court. Without the settlements achieved by negotiation conducted under the auspices of Mediation Registrars, the list of cases awaiting trial already under pressure would become unmanageable. Given the number of cases which go to mediation and the lack of any guide provided by the Rules, it is remarkable that few problems arise. No doubt that is a tribute to the earnest attention paid to the mediation process by solicitors and their clients and to the skill of the Mediation Registrars. Unhappily, occasionally problems do arise and this is one of those cases.
2 This is an appeal from orders made by Registrar C Boyle at a status conference on 22 April 2002. By amended application the defendant had sought the following orders:
"1. Pursuant to Order 29 Rule 3(1)(ba), Order 29A Rule 11(2), Order 66 Rule 10(1) and Order 66 rule 5(1)(c) Rules of the Supreme Court 1971, the Plaintiffs' solicitors pay the Defendant's costs thrown away in respect of preparation for, and attendance at, the Mediation Conference before Registrar S Boyle on 31 October 2001 forthwith, fixed in the amount of $27,757.54, being for:
Preparation for Mediation Conference on Tuesday 30 October 2001:
Legal Costs $5,921.00
Expert Costs $6,352.50
Client Attendance
- Insurer $1,480.00
- Sheppard West $1,900.00 $3,380.00
Attendance at Mediation Conference on Wednesday 31 October 2001:
Legal Costs $2,655.00
Expert Costs $3,176.25
Client Costs
(Page 5)
- Attendance
- Insurer $ 740.00
- Sheppard West $2,700.00 $3,440.00
Airfare $ 935.09
Accommodation $ 351.00
Cab Charges $ 66.70
Travel time $1,480.00
- 2. Pursuant to Order 66 rule 5(1)(c) Rules of the Supreme Court 1971, the Plaintiffs' solicitors do pay the Defendant's costs of this application forthwith.
3. Alternatively, the Plaintiffs and the Plaintiffs' solicitors each pay half the costs set out in Orders 1 and 2 above forthwith pursuant to Order 29 rule 3(1)(ba), Order 29A rule 11(2), Order 66 rule 10(1) and Order 66 rule 5(1)(c) Rules of the Supreme Court 1971.
4. Alternatively, the Plaintiffs do pay the costs set out in Orders 1 and 2 above forthwith pursuant to Order 29 Rule 3(1)(ba), Order 29A Rule 11(2) and Order 66 Rule 10(1) Rules of the Supreme Court 1971."
3 There were a number of affidavits filed in support of and in opposition to the application. After hearing argument the learned Registrar made the following order:
"The plaintiffs' solicitor, Mr G Pestell, pay the defendant's:
(a) costs of the mediation conference on 31 October 2001,
(b) the costs thrown away by reason of the early termination of that conference and
(c) costs of this application,
including, in relation to (a), (b) and (c) the costs of expert witnesses engaged for the occasion, to be taxed forthwith if not agreed on a solicitor and client basis."
(Page 6)
4 By the notice of appeal the plaintiffs seek to set aside the orders made by the learned Registrar and in lieu thereof seek an order that the costs of the mediation be costs in the cause. The grounds of appeal are set out in four paragraphs, each of which contains numerous subparagraphs. It is doubtful whether the notice of appeal complies with O 60A r 5(2)(b). In any event, as an appeal from a Registrar is by way of rehearing (see O 60A r 6(1)), it is a fair summary of the appellant's position to say that it was submitted that on the facts of the case, the learned Registrar's costs orders against the solicitor personally were not justified.
5 The position as it emerges from the numerous affidavits filed for the hearing before the Registrar on 22 April and on the hearing of this appeal is relatively straightforward.
6 By letter dated 14 September 2001 the Court advised the parties that a mediation conference would be held on 31 October 2001. As is invariably the case, the letter advised as to the time and the place at which the mediation was to be held. The letter did not specify a time period for the mediation. Unless the mediation is expected to extend over a number of days, it is the practice of the Court to simply specify a commencement time for the conference and leave it to the Mediation Registrar and the parties to determine when the conference should come to an end. At no time prior to the conference did any of the parties indicate there was a limit to the amount of time that they could be present at a conference.
7 This was the third mediation conference between these parties. Each of the two previous conferences had been adjourned without any resolution being achieved. All parties agreed that it was appropriate that the conferences be adjourned and no negative inference could be drawn against either party by reason of the adjournments. However, it is worth noting that the stage had well and truly been reached where if this matter was to settle at mediation, it was likely to settle at this third mediation conference.
8 On 27 September 2001 Titiimaea Eugene Elisara ("Mr Elisara"), a solicitor acting for the defendant, attended at the offices of the plaintiffs' solicitors to inspect certain discovered documents. During the course of that inspection Mr Elisara had a conversation with Grant Anthony Pestell (Mr Pestell), the solicitor representing the plaintiffs. Mr Elisara advised Mr Pestell that a representative of the defendant's insurer in Sydney would be travelling to Perth to attend the mediation conference. Mr Pestell could have been left in no doubt that the defendants were taking the conference seriously and would be thoroughly prepared.
(Page 7)
9 On 25 October 2001 the defendants received an expert report. The report was passed on to the plaintiffs' solicitors on 26 October 2001. The report itself is 22 pages long and includes eight appendices. The report is of some significance because it addresses the question of damages, a central element in the dispute between the parties and a matter which inevitably would have occupied a good deal of time at the mediation conference. On behalf of the plaintiffs, counsel pointed out that the defendant's expert report was provided just three days prior to the conference. This, it was said by counsel, provided the plaintiffs with little time to consider the report and inevitably compromised the effectiveness of the conference. Counsel placed great emphasis on this point and I will return to it later in these reasons.
10 There can be no doubt that the defendant's solicitors took great pains to prepare for the mediation conference. On 30 October 2001 Mr Elisara and his supervising partner, two representatives of the accountants who had prepared the expert report, a representative of the defendant's insurer and two directors of the defendant spent almost the whole day in preparation.
11 The plaintiffs were in a somewhat different position. In an affidavit sworn 21 March 2002 Mr Pestell sets out the history of the matter. He points to the fact that over a number of months prior to the mediation he had discussions with the defendant's solicitors in an attempt to resolve outstanding issues. In particular, he says he had corresponded with the defendant's solicitors regarding "specific issues" as to damages: see par 10 of Mr Pestell's affidavit. According to Mr Pestell, the defendant's solicitors had not responded, or responded satisfactorily, so that by the time the mediation came on, there were issues outstanding which could have been but had not been resolved with the almost inevitable consequence the mediation would be compromised. I think it is a fair assessment of the tenor of Mr Pestell's affidavit to say that he and his client approached the mediation with a degree of scepticism, occasioned mainly by the late delivery of the expert's report, but contributed to by the lack of cooperation from the defendant's solicitors in the months prior to the mediation.
12 As to the conduct of the mediation itself, both parties agreed that between 10am and 12.50pm the issues were discussed. As from 12pm, initial discussions having taken place, the parties were located in separate meeting rooms. Mr Elisara, in his affidavit of 29 November 2001, says that the mediation came to an end in the following way (at par 13):
(Page 8)
- "13. At approximately 12.50pm, Registrar S Boyle, who was conducting the mediation, advised the parties representing the defendant that Mr Pestell, the solicitor representing the plaintiffs at the mediation, had advised the Registrar he would have to leave the mediation as he had a 1.00pm meeting. The Registrar also advised that she had been told that Dr Garside was leaving to catch a plane. From the words used by the Registrar and her demeanour, I understood that she had not been previously advised of the intention of either Mr Pestell or Dr Garside to leave the mediation at or near 1.00pm."
13 As Mr Elisara points out, without either Dr Garside or Mr Pestell, the mediation could not proceed and accordingly he, his clients and the expert witnesses had no choice but to abandon the mediation process. A reading of the various affidavits filed by the defendant makes it plain that all concerned were incensed by the way in which the mediation was terminated. It is not hard to understand why.
14 The plaintiffs' position regarding the termination of the mediation was set out by Mr Pestell in his affidavit of 21 March 2001. He says (at par 14 and 15):
"14. At the mediation on 31 October 2001 it was also apparent that the defendant's experts had failed to consider financials beyond 31 March 2000. Neither did they address the issue of whether or not a foreign currency sensitivity analysis should have been covered in a due diligence by the defendants. Further I again had to provide our clients' schedule of damages to the defendant's solicitors as a result of which, and for the first time in 8 months, the defendant took issue with various items claimed, which issues were pertinent and obviously required our clients to investigate as such matters were clearly incapable of being addressed at the mediation. In effect the plaintiffs and myself spent 3 hours at the mediation the subject of the proceedings covering exactly the same ground as previously, with the exception of the report by PriceWaterhouseCoopers and issues raised by the defendants solicitors regarding damages (raised for the first time at the mediation) which could not realistically be addressed by the plaintiff at the mediation. Furthermore, the defendant still had not made any
(Page 9)
- proposal for settlement of the matter, provided a report in response to PKF's report or dealt with any of the issues the subject of our previous requests.
- 15. Mr Garside on behalf of our client was scheduled to fly out at 1:30pm on the day of the mediation. Mr Garside is the primary funder of this litigation the fact of which the defendants were made aware at the first mediation and no decision can be reached without him. I had a subsequent appointment at 1:00pm which could have been postponed and the mediation continued if there was in the plaintiffs' opinion anything to be achieved from such. Given that no offer was forthcoming from the defendant to settle the action after 3 hours of mediation or any indication of an offer being made and it was obvious that we would require to respond to the belated PriceWaterhouse Report and that the defendants solicitors still had not prior to the mediation raised with us its concerns with either pleadings or heads of damage (despite numerous requests and having had ample opportunity to do so as set out above) and that Mr Garside would be unavailable, I left for my subsequent engagement at 1:00pm. Mr Garside left to take his flight at around the same time. I was unaware in any event of Mr Garside's flight until the previous night."
15 It is not apparent from the affidavits filed in opposition to and support of this application whether by 12.50pm any party expected the dispute to be resolved. It is also not clear, understandably, what course the negotiations took. In other words, it is not clear how far the discussions had progressed and whether an independent observer could reasonably have anticipated the action would settle. A confidential report has been prepared by the Mediation Registrar with a direction that it only be opened by the trial Judge. It is clearly inappropriate for any party to go into detail in affidavit material as to what took place in confidential discussions. But two points can be made. First, as at 12.50pm on 31 October 2001, no offer had been made by the defendant to settle the action and there is no indication that an offer would have been made. Secondly, the plaintiffs were of the view that there was little to be gained from further discussion. They had not had an opportunity to consider in detail the defendant's experts report and matters had been raised during the course of the mediation which, in the plaintiffs' view, required further consideration. In other words, the plaintiffs took the view that by 1pm the
(Page 10)
- mediation conference had achieved as much as could be achieved and that the further attendance of the plaintiffs' representatives would achieve no purpose.
16 As I have said, during the course of his submissions both on the hearing of the appeal and before the learned Registrar, counsel for the plaintiffs placed great emphasis on the fact that the defendant's expert report had been received only three days prior to the mediation conference. Counsel made the point that this was a complex case which was largely dependent on expert evidence. A reading of the pleadings supports counsel's submission. The case itself concerns a claim by the plaintiffs that the defendants inadequately prepared a report on a business purchased by the plaintiffs. The plaintiffs say as a consequence they have suffered loss and damage. The statement of claim pleads that in large measure, the goods sold by the business were purchased from overseas and paid for in US dollars. Accordingly, it is said, it should have been known to the defendant that the profitability of the business would fluctuate in accordance with the variation of the strength of the Australian dollar. It is said that no warning was contained in the defendant's report as to the adverse impact on the profitability of the business if the Australian dollar depreciated against the US dollar. As I understand the plaintiffs' claim, that is at the heart of the plaintiffs' cause of action. It is said that this failure to warn as to the effect of exchange rate fluctuations caused the plaintiffs to borrow to purchase the business and has resulted in loss and damage.
17 Even from this brief outline of the plaintiffs' cause of action it is clear that expert evidence was likely to be crucial in the outcome of the action. Furthermore, the expert evidence seems to be of a particularly technical nature. Among other questions there is in issue whether or not some advice should have been provided by the defendant to the plaintiffs as to the effect of exchange rate fluctuations and tied to that issue the question of what knowledge the defendants could have been expected to have in relation to these fluctuations. In these circumstances it is not difficult to accept, as is said by the plaintiffs, that as they had limited opportunity to consider the defendant's expert evidence, there was no real prospect of settlement being affected at the mediation conference on 31 October.
18 During the course of his submissions, counsel for the plaintiffs suggested that at issue in this appeal is the protocol to be observed by solicitors and their clients at mediation hearings. With respect, that seems to me to be a very apt way to describe what is at issue. It is not open on
(Page 11)
- the evidence to conclude that the actions of the plaintiffs' representatives and their solicitor resulted in a mediation which might otherwise have been successful, being aborted. That assessment can only be made after reading the report of the Mediation Registrar. The question then is whether the actions of the plaintiffs' solicitor in terminating the mediation as he did, warrant the making of what must be seen as a draconian costs order.
19 On balance I am satisfied that they did not. There is no doubt that the attitude of the plaintiffs' representative and the plaintiffs' solicitor was unhelpful. It would have been far better had they both remained at the mediation conference until they had satisfied the Registrar that nothing further was to be gained and the Mediation Registrar determined that the mediation should come to an end. But in the circumstances, I think that determination of who should pay the costs of the aborted mediation would be better left to the trial Judge. Not only would the trial Judge have had the opportunity to hear all of the evidence and rule upon the plaintiffs' claim, he or she will also have the advantage of reading the mediation report. A costs order can then be made in relation to mediation. That, I think, is the fairest way to deal with the matter.
20 In allowing this appeal I would not like it to be thought that the decision offers succour to those who approach mediation with anything other than the utmost goodwill and honest intentions. Moreover, the process of mediation is controlled by a Mediation Registrar and if the mediation is to terminate, then it should be after the Mediation Registrar has satisfied him or herself that nothing further is to be gained by negotiation. A unilateral decision to terminate a mediation taken by one party without consultation either with the Registrar or the other party is entirely inappropriate.
21 I would set aside the orders made by Registrar C Boyle on 22 April 2002 and instead order that the costs of the mediation conference on 31 October 2001 and all costs incidental thereto be reserved to the trial Judge. The costs of this appeal should also be reserved to the trial Judge.
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