Scott v WILLIAMS and Ors and Sims and Ors (No 2) No. Scciv-98-1663

SCOTT V WILLIAMS AND ORS AND SIMS AND ORS (NO 2)
[2001] SASC 252

JUDGE BURLEY. On 11 May 2001 I announced my decision on the plaintiff’s application to strike out the respective responses of the defendants to notices to admit administered by the plaintiff. The defendants have sought the costs of that application. The plaintiff contends that there should be no order as to costs on the application or, alternatively, that the costs order should be costs in the cause. I heard argument on the question of costs on 20 July 2001.
In my reasons delivered on 11 May 2001 I summarised the background to the application as follows:
“These proceedings are brought by the plaintiff pursuant to Section 588G of the Corporations Law. It is alleged that debts totalling in excess of $3.5 million dollars were incurred by the director defendants whilst the company was insolvent. It is therefore necessary for the plaintiff to prove at trial that those debts (some 600 of them) were incurred by the company at a time when the company was insolvent. The plaintiff’s Notice to Admit is directed mainly to those two aspects of the plaintiff’s claim.”
At the hearing of the costs application, Mr Ross-Smith, counsel for the plaintiff, contended that the result of the application to strike out the defendants’ respective responses to the notices to admit was a tie and as such no order for costs ought to be made or, alternatively, costs should be in the cause. Ms Sofroniou, counsel for the defendants, contended that the defendants were substantially successful on the strike out application and that costs should follow that event.
Both parties agreed that the principles set out in Cretazzo v Lombardi (1975) 13 SASR 4 applied. In that case Bray CJ said (at 11):
“Order 65, rule 1 provides generally that all costs shall be in the discretion of the court or judge, subject to a proviso irrelevant for the present purpose. Time and again attempts have been made to fetter that general discretion by the imposition of judge-made rules. Time and again those fetters have been released by appellate courts. I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co v Pollak [1927] AC 732, that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation.”
Jacobs J said (at 16):
“… I would wish to sound a note of cautious disapproval of applications, which are being made with increasing frequency, to apportion costs according only to the success or failure of one party or the other on the various issues of fact or law, which arise in the course of a trial. … But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.”
In broad terms, the plaintiff was successful to the extent that the respective responses of the defendants to the request to admit the relevant debts were defective and that further responses should be provided. The plaintiff was largely unsuccessful on the question of obtaining admissions in relation to insolvency. The notices to admit were concerned, for the most part, with the question of insolvency. Consequently, the defendants have been substantially successful in relation to the application. I reject the plaintiff’s contention that because there were 600 debts involved, each of which was set out in the schedules to the notices to admit, the fact that they were successful in relation to the debts brought about a tie. At page 14 of my reasons of 11 May 2001 I said:
“So far I have dealt with the first four pages of the schedule handed up by the plaintiff’s counsel in relation to an admission of facts. The schedule continues until page 24. The plaintiff seeks to debate numerous requests to admit facts and the responses given by all of the defendants to those requests. By and large the requests come within the categories already dealt with by me in these reasons.
The balance of the paragraphs relating to requests to admit fact in the schedule are for the most part fundamentally flawed. Many of the requests seem to be a requirement to admit matters of opinion contained in an expert report relied upon by the plaintiff. Many paragraphs request an admission as to the definition of phrases or the meaning of the contents of documents and many have requested admissions as to conclusions to be drawn from a complex series of facts. A number of requests required the defendants to make conclusions of law. The defendants have been requested to agree to matters of expert accounting opinion. Many of the requests involve a combination of the above faults. There are interspersed in these paragraphs some requests which might be legitimately pursued, the clearest examples of which are where the fourth defendant has made partial admissions.
It serves no useful purpose to go through the balance of these paragraphs item by item. By and large they require the same consideration as has been given for the first four pages of the schedule. … Almost all of the balance of the requests to admit facts are flawed by the presence of one or more of the defects that I have just referred to. I do not propose in those circumstances to attempt to isolate those few requests that may be legitimate. It is sufficient to say that there is no basis for suggesting that the responses of all of the defendants to the remainder of the requests in dispute should either be struck out or the subject of a direction that further and better answers be provided.”
In my view, the conclusions and findings set out in the passage cited above lead inevitably to the conclusion that the defendants were substantially successful on the application pursued by the plaintiff to strike out the responses to the notices to admit.
The notices to admit were found to be fundamentally flawed except for those few questions which dealt with the debts which were allegedly incurred when the company was insolvent.
During the course of submissions at the hearing on 20 July 2001, the defendants sought to tender the affidavit of Mr BK Hearnden sworn on 18 July 2001. By this affidavit the defendants sought to rebut the plaintiff’s contention that they achieved a substantial degree of success on the application because they were successful in relation to the alleged debts. The affidavit was admitted conditionally because the plaintiff objected to its relevance. It was said, and I accepted, that I would not be able to determine whether or not the affidavit was relevant until after I had heard the submissions of the defendants in relation to the question of the costs of the application.
The affidavit has exhibited to it correspondence between the parties after 11 May 2001 in relation to proposed amendments to the amended statement of claim relating to the alleged debts to be relied upon. It has been argued that the proposed amendments are so extensive that the extent of any victory obtained by the plaintiff on its application to strike out responses is diminished to the extent that the plaintiff now wishes to change the pleading in relation to the alleged debts.
Mr Ross-Smith said that he was taken by surprise by the affidavit. Because of its late introduction, it is clear that he did not have the opportunity to take instructions and formulate a detailed response to the defendants’ argument based on the additional affidavit material. Mr Ross-Smith sought an adjournment to enable him to take such instructions. That was opposed by the defendants’ counsel.
If the matters raised in the affidavit are material, I think the plaintiff is entitled to an adjournment with costs because, although I accept that the plaintiff should have anticipated the defendants’ argument that dealings between the parties after my decision of 11 May this year qualified the plaintiff’s contention that they were successful in relation to the alleged debts, the plaintiff’s response to such an argument would have been prepared on the basis that the defendants had not filed affidavit material to support the argument. However, if the contents of the affidavit are not material to the costs application, its conditional admission will be rescinded and there will be no need for an adjournment. In that event I may proceed to decide the question of costs because I invited the parties to complete their submissions on that question in case I decided that an adjournment would not be granted.
I do not consider that the affidavit raises relevant matters. The dealings between the parties relating to the pleading of the alleged debts after my decision of 11 May 2001 do not alter the fact that, on the application, the defendants’ respective answers were held to be deficient insofar as the alleged debts were concerned. To that extent the defendants were unsuccessful. If any costs consequences arise from that, the defendants must suffer them. If it later turns out that the plaintiff seeks to amend the statement of claim regarding the alleged debts, any costs thrown away incurred by the defendants will be dealt with by reference to the application for leave to amend.
Because I do not consider that Mr Hearnden’s affidavit raises admissible matters, I rescind the conditional admission of that affidavit. As a result there is no need to adjourn the matter on account of the late tendering of an affidavit.
I turn to a consideration of the arguments advanced by the parties in respect of the costs of the application to strike out the defendants’ respective responses to the notices to admit. As indicated above, the primary submission of the plaintiff was that he had been as equally successful as the defendants in respect of the application and that costs should be determined accordingly. Because I am of the view, for the reasons given above, that the plaintiff has only been partially successful on the application and that, more particularly, the defendants have been substantially successful on the application, I reject the submission that the costs order ought to be either no order as to costs or costs in the cause. In my view, the only choice to be made is whether or not the defendants recover the whole of their costs or most of them.
Having re-read my reasons for decision of 11 May 2001, it seems to me that the extent of the plaintiff’s success on the application was significant enough to deprive the defendants of an order for costs whereby they recover 100 per cent of their costs. At the end of the day it is a matter of judgment, without endeavouring to be precise in respect of matters which defy precision. I do not think that the extent of the plaintiff’s victory is such that the plaintiff should recover part of his costs of the application. I think the justice of the case requires that some small diminution of the costs recoverable by the defendants be effected to reflect the extent of the success that the plaintiff achieved on the application. In all the circumstances I think it appropriate to award the defendants 90 per cent of their costs.
In arriving at that conclusion I have taken into account the plaintiff’s submission that the extent of the defendants’ success on the application must be markedly qualified because, even though it has been found that proper objections were taken to the requests to admit facts relating to insolvency, a short time after the decision the defendants ended up admitting insolvency.
As to proof of insolvency the plaintiff relied upon the expert report of Mr Scott. That report was disclosed to the defendants. A few days after I gave my decision on the plaintiff’s application, the defendants admitted insolvency, although not on the basis of the plaintiff’s expert’s report.
The plaintiff has argued that if the admission of insolvency had been made at an earlier time, it would not have been necessary to include the notice to admit matters relating to proof of insolvency.
I do not think there is any substance in such an argument. The plaintiff chose to deliver a notice to admit as to matters of insolvency before they received the defendants’ answering expert report. The fact that the defendants’ report was disclosed a considerable time after the plaintiff had disclosed the final version of their expert report on insolvency does not add cogency to the submission. It was always open to the plaintiff to await the defendants’ expert report. Instead, they chose to deliver a notice to admit on matters of insolvency which was ineptly drawn. The plaintiff must suffer the cost consequences arising from a defective notice to admit.
I should also mention the application which the defendants sought to pursue under SCR 54.07. That rule provides that where “any party unreasonably requests admissions, he shall pay the costs occasioned thereby”. The defendants sought to raise an application based on that rule as part of their argument on the costs of the application to strike out their responses to the notices to admit. Notice was given of their intention to do so in correspondence which followed my decision of 11 May 2001. The notice so given was ambiguous and I think that the plaintiff’s counsel could be forgiven for not realising that the defendants proposed to raise the application under SCR 54.07 at the hearing on 20 July 2001.
Two points need to be made: first, when the hearing time of 20 July 2001 was appointed, it was only to enable submissions to be put in relation to the costs of the application to strike out the defendants’ answers; and, second, if the defendants wanted to pursue an application under SCR 54.07, they should have, at the earliest possible stage, filed a formal application supported by the appropriate affidavit so that the plaintiff and the Court were put on notice that the defendants wished to have not only a ruling as to the costs of the application but also a ruling pursuant to SCR 54.07.
In my view, an application under SCR 54.07 would not necessarily form part of the submissions a successful respondent to a notice to admit may put on the costs aspect of the application to strike out that party’s responses. In particular, on this costs application, it is not necessary to determine what costs have been incurred by the respondent to the notice to admit in answering defective requests. Thus, if an application under SCR 54.07 is to be pursued at the same time as the argument on the costs of the application to strike out the defendants’ responses, additional submissions will need to be put specifically by reference to the requirements of SCR 54.07.
I think that if a respondent to a notice to admit, who is successful on an application to strike out that party’s responses to the notice to admit, wishes to cover the costs occasioned by answering the defective notice to admit, it would in most cases be convenient to deal with such an application in conjunction with the costs of the application to strike out. However, if this is to be done, clear notice of intention to do so must be given and the best way to give such notice is to file the appropriate application and obtain the Court’s permission to have the two matters heard together. That has not been done in this case. As a result there has not been sufficient time allocated to the matter on 20 July 2001 to hear full submissions from both parties on matters relating to SCR 54.07. For that reason I decline to deal with that application in conjunction with the costs of the application to strike out responses.
For the above reasons, there will be an order that the plaintiff pay 90 per cent of the defendants’ costs of the application to strike out the respective defendants’ responses to the notices to admit.

[2001] SASC 252

31 July 2001