Scott v Williams & Ors (No. 2) No. Scciv-98-1663

SCOTT V WILLIAMS & ORS (NO. 2)
[2003] SASC 32
Civil

LANDER J. Originally proceedings were brought in this matter against five defendants. The plaintiff compromised his action against all defendants except the fourth defendant. I heard the trial of the action between the plaintiff and the fourth defendant and on 20 December 2002 I delivered my reasons for judgment[1] in which I found for the plaintiff.
[1] Scott v Williams & Ors [2002] SASC 424
On 15 January 2003 I entered judgment for the plaintiff against the fourth defendant in the sum of $500,000.
At the same time I heard applications by both the plaintiff and the defendant for various orders for costs.
I dismissed the plaintiff’s application that the fourth defendant pay the plaintiff’s costs in relation to the issues of insolvency and incurring debts on an indemnity basis. I also dismissed the fourth defendant’s application that the plaintiff pay the fourth defendant’s costs in relation to the issue of incurring debts on an indemnity basis.
I ordered the plaintiff to pay the fourth defendant’s costs in relation to the plaintiff’s amendments to the summons, the statement of claim, the more explicit statement of claim and the second more explicit statement of claim on a party and party basis.
I reserved for decision some further applications. The plaintiff sought an order that the fourth defendant pay the plaintiff’s costs of action. The fourth defendant, on the other hand, applied for an order that the plaintiff pay the fourth defendant’s costs of action from 26 June 2001.
I also reserved, for decision, the fourth defendant’s application that the plaintiff pay the fourth defendant’s costs in relation to the Ka Me Wa Australia Pty Ltd debt on an indemnity basis. Lastly, I reserved for decision the fourth defendant’s application that the plaintiff pay the fourth defendant’s costs in relation to a notice to admit delivered by the plaintiff to the defendants on 28 April 2000.
I shall deal with the last two matters first. The plaintiff originally included, as part of his claim, a debt owed by the Company of which the plaintiff is liquidator, South Australian Ships Pty Ltd (the Company), to Ka Me Wa Pty Ltd. Eventually, at trial, the plaintiff abandoned that aspect of his claim.
As I have already indicated the plaintiff also sought the costs of issues on an indemnity basis and I refused those applications.
It seems to me that, consistent with that approach, I should refuse the fourth defendant’s application for costs on an indemnity basis in relation to the Ka Me Wa debt.
It is true, as the fourth defendant claims, the plaintiff maintained this debt was an unsecured debt owing by the company to Ka Me Wa Pty Ltd until abandoned at trial. However the abandonment of the claim itself does not mean that the plaintiff should suffer an order for indemnity costs in relation to the issue of that debt.
I am not persuaded that this issue should be treated differently to other issues in the trial which have been won and lost. In the end result the plaintiff recognised that the debt could not form part of the claim for damages and abandoned the claim. In my opinion, it would not be an appropriate exercise of my discretion to call upon the plaintiff to pay costs on an indemnity basis in relation to that issue.
The fourth defendant has also sought costs pursuant to r 54.07 occasioned by the plaintiff’s unreasonable request for admissions in a notice to admit delivered by the plaintiff to the fourth defendant on 28 April 2000.
The plaintiff delivered two notices to admit pursuant to the procedure provided for in r 54 to the defendants. I say, from the outset, that this was an appropriate case for the r 54 procedure. Indeed it would have been inappropriate not to use the procedure.
There are two matters which it was in the parties’ interests to agree. The first was the solvency/insolvency of the company over the relevant period. The second was the debts incurred by the company over the relevant period which remained unsecured and unpaid.
The plaintiff attempted to address those matters in the notices to admit. He did so, no doubt, in an endeavour to narrow the issues. However, I think also it is clear from a judgment of the Master, Judge Burley, given on 11 May 2001[2], that the plaintiff availed himself of this procedure because he believed that the defendants were delaying the prosecution of these proceedings.
[2] Scott v Williams [2001] SASC 148
The relevant notice to admit was responded to by the fourth defendant within the appropriate time but not by the first, second, third and fifth defendants. Those other defendants applied for an order that the deemed admissions which would otherwise arise pursuant to r 54.02(1) not occur. That application came before Judge Burley and during the course of the hearing of that application His Honour was called upon to consider the adequacy of the fourth defendant’s response and the other defendants’ response in relation to that part of the notice to admit that was directed to the company’s debts.
His Honour ordered that all five defendants provide a further and better response than had, at that stage, been provided in relation to that aspect to the notice to admit.
In his reasons Judge Burley said at paragraph [21]:
“ 21. I mention that there are some 600 debts referred to in the schedule to the Statement of Claim and I accept that considerable work needs to be done by the defendants and the fourth defendant in responding in detail to the request. I do not think that the request is improper merely because a considerable amount of time and expense is required to answer the request. The test, as accepted by Debelle J in Southern Equities Corporation Ltd (In Liquidation) & Ors v Bond & Ors (No. 2) (supra), is whether or not the cost and time involved in answering the request is out of all proportion to the benefits to be gained at the trial as a result of the appropriate admissions being made. In my view, the defendants and fourth defendant must at some stage prior to trial address this point and for that reason I do not see that any relevant disproportion arises.”
He also required the defendants to admit whether the debts were unsecured.
The notice to admit also sought an admission that the company was either insolvent at the time that debts were incurred or became insolvent by incurring the debts.
All defendants asserted that the request for those admissions was improper because it required an admission as to a matter of law. The Master upheld that objection. He also ruled that other requests were for admissions as to conclusions and not facts, and that a further request was for admissions as to conclusions of law. He refused to order better answers where a request sought an admission as to the meaning of documents.
The Master dealt with a number of other matters most of which he decided in favour of the defendants upon the basis that the requests were improper. He said at paragraph [43]:
“ 43. 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.”
In the end result the Master was quite critical of the plaintiff’s notice to admit and of the plaintiff’s attitude in relation to the defendant’s response. The Master was also critical of the plaintiff’s legal advisers.
The defendants sought the costs of the application. The Master heard argument on the question of costs on 20 July 2001.
On 31 July 2001, the Master ordered the plaintiff to pay 90 per cent of the defendants’ costs of the application to strike out the defendants’ responses to the notices to admit.
In doing so he noticed that during the application for costs the defendants sought to pursue costs pursuant to r 54.07. He said:
“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 the application in conjunction with the costs of the application to strike out responses”. [3]
[3] Scott v Williams (No. 2) [2001] SASC 252 at [21]-[24]
The application which Judge Burley declined to hear has now been made to me.
In my opinion, it would have been preferable to pursue this application with Judge Burley immediately after his decision in July 2001.
His Honour would then have been in a position, because of his intimate knowledge of the matter, to determine whether the plaintiff had unreasonably requested admissions and whether, in those circumstances, the plaintiff should pay the further costs occasioned thereby.
It would seem, from Judge Burley’s reasons given on 11 May 2001, that there might be an argument to suggest that some of the requests were unreasonable. As I have mentioned His Honour referred to a number of the requests as being fundamentally flawed.
Unfortunately it is not possible for me, without hearing argument on the notice to admit itself, which would in effect be a duplication of the argument put to Judge Burley, to conclude as to which and how many of the admissions sought in the notice to admit, if any, were unreasonable.
I decline to hear the application under r 54.07 and I direct the fourth defendant, if application is to be made, to make it to Judge Burley for his consideration.
That leaves the question of the costs of action. On the face of it the plaintiff succeeded and the plaintiff would ordinarily be entitled to costs: r 101.02(1). However, like a number of other aspects of this matter, the issue is not so simple.
On 15 June 1999 the defendants, who were then represented by the same solicitor, filed an offer pursuant to r 40.01 to consent to judgment in satisfaction of the plaintiff’s claim in the sum of $250,000.
On 12 January 2001 the defendant filed an offer which was entitled:
“Joint offer by defendants to consent to judgment.”
The offer was in the following terms:
“ The defendants HEREBY OFFER pursuant to Rule 40.01 to consent to judgment in satisfaction of the plaintiff’s claim the sum of $700,000.00”
The offer was signed by the solicitors for the first, second, third and fifth defendants and the solicitors for the fourth defendant.
The fourth defendant submitted that the plaintiff has not recovered a sum greater than that offered by the defendants and that, as a result, the plaintiff must suffer the consequences provided in r 40.05.
Rule 40.05 provides:
“Where a plaintiff has not accepted a payment into Court or an offer to consent to judgment and:
(a) the sum recovered, or as the case may be, the proportion of the debt, the damages or the relief recovered by the plaintiff, is no greater than that offered or paid into Court; or
(b) the Court is of the opinion that the amount, percentage or relief offered was adequate the Court, unless it thinks proper to order otherwise shall order:
(i)that the plaintiff recover against the defendant his costs incurred until 14 days after the service of the offer or the notice of the payment into Court.
(ii)that the defendant making such offer, recover against the plaintiff his costs incurred 14 days after the service of the offer, or the notice of the payment into Court.”
The plaintiff claimed that the offer was ineffective for two reasons.
There is a summary procedure provided for in r 40.06 to determine the effectiveness of an offer to consent but that summary procedure is confined to a determination as to whether or not an offer is ineffective because it is out of time under the rule. The rule does not provide for a summary procedure for the determination of the effectiveness of an offer except in those circumstances.
Rule 40.01 allows a defendant at any time more than 21 days prior to trial to lodge with the Registrar and serve on the parties a notice offering to consent to judgment either in satisfaction or part satisfaction of the plaintiff’s claim. The offer may be for a nominated sum of money, a proportion of the plaintiff’s claim expressed as a percentage, or for costs on any particular scale.
Such an offer may be made by a defendant or by several defendants jointly: r 40.01(2).
A plaintiff may file and serve a notice of acceptance in response to an offer to consent to judgment at any time up to seven days prior to trial: r 40.02.
Where the offer is accepted the plaintiff may sign judgment for the amount offered and tax his or her costs against the consenting defendant incurred up to 14 days after the service of the notice on the plaintiff, together with the costs of filing and serving the notice of acceptance and signing judgment: r 40.03(a)(i) and (ii).
The costs are to be taxed on any scale stated in the offer but if no scale is contained in the offer, then upon the scale which would apply under the Rules to a judgment for that amount in the Court: r 40.03(d).
If the plaintiff accepts any offer to consent to judgment later than 14 days after service the Court may, on the application of any other party, if it is just to do so, order the plaintiff to pay to that other party costs of action incurred after the expiration of 14 days or such other period as the Court may fix from service of the offer: r 40.03(c).
It was submitted by the plaintiff as the first ground of objection that this offer was ineffective because the offer did not expressly state whether the sum of $700,000 included costs or whether costs were to be in addition to that sum.
In my opinion, an offer for a nominated sum does not have to include a reference to costs. Certainly an offer may refer to the question of costs: r 40.01(d), but it does not need to. If an offer is filed for a nominated sum, without any reference to costs, r 40.03 operates in its terms and the plaintiff may tax his or her costs in accordance with that rule.
In my opinion, this offer was clearly, in its terms, an offer to consent to judgment on the plaintiff’s claim for $700,000 which would have meant that the plaintiff, if the offer had been accepted, could have taxed his costs in accordance with the provisions of r 40.03.
I reject the plaintiff’s submission that the offer was ineffective for that reason.
As a second or alternative ground the plaintiff submitted that because it was a joint offer and because settlement had been reached with the other defendants, the offer ceased to be effective and, therefore, the provisions in r 40.03 and in particular the consequences of not bettering an offer provided for in r 40.05 do not apply.
If the offer is effective then this Court, unless it thinks proper to order otherwise, should make an order in favour of the plaintiff for the plaintiff’s costs of action until 14 days after service of the offer and should make an order in favour of the fourth defendant for his costs of action against the plaintiff incurred 14 days after service of the offer.
The plaintiff contended that this offer was ineffective because he settled with the defendants apart from the fourth defendant and, because the offer was a joint one, it was thereby rendered ineffective.
In my reasons for decision[4] I referred to the settlement with the defendants apart from the fourth defendant (paras 8-21).
[4] Scott v Williams &Ors [2002] SASC 424
However, there are other provisions of the Deeds of Settlement apart from those referred to in those reasons which are relevant in determining the issues raised on this application.
The settlement between the liquidator and Dr Williams’ executrix, Mrs Williams, provided for payment of $300,000 by way of interim settlement sum. The deed also provided for payment in the circumstances provided for in the deed.
More importantly, at least for this application, the deed contained the following acknowledgment:
“17.1The Liquidator acknowledges that the joint offer filed in the Proceeding pursuant to Supreme Court Rule 40.01 of the Supreme Court Rules on 12 January 2001 by Donald Gatherer Williams, Verboon Senior, Verboon Junior, Thomas and Hercus for $700,000.00 (“the Offer”) shall remain valid and effective for the purposes of Supreme Court Rules 40.03 and 40.05 notwithstanding this Deed and the parties acknowledge that notwithstanding the terms of the settlement set out herein, the Offer shall continue in its force and effect in the name of Hercus alone and Hercus is to be dealt with by the Liquidator and the offer is to operate as if he was the sole offerer for as long as the Offer remains filed.
17.2The Liquidator acknowledges that in the event that he accepts the Offer or there is a determination by the Supreme Court of the Liquidator’s claim, the Liquidator shall be obliged to give credit to Hercus for the payment of the amount of $300,000.00 paid by the Executor pursuant to the terms of this Deed against firstly, any liability of Hercus for party and party costs in favour of the Liquidator in the Proceeding and then as to a credit against any judgment against Hercus by acceptance of the Offer or judgment by determination of the Court. The acknowledgment by the Liquidator that the Offer has ongoing validity and effect in no way reserves to the Executor any future right, entitlement or benefit arising in the Proceeding.
17.3So as to avoid any doubt the Executor acknowledges that the release given by the Liquidator in paragraph 5 above does not in any way whatsoever provide an indemnity to the Executor for any liability which it might have to any other defendants in the Proceeding whether under a claim for contribution or otherwise and such an indemnity is expressly hereby excluded and the Executor further acknowledges that any such claim by any other defendant in the Proceeding against the Executor is not material to the Liquidator and is not material to the settlement contained in this Deed.”

The liquidator acknowledged in Clause 17.1 that the offer to which I have referred would continue in its force and effect in the name of the fourth defendant alone. The liquidator further acknowledged that if he accepted the offer he would be obliged to give credit to the fourth defendant for the payment of the amount of $300,000 against first, any liability of the fourth defendant for party and party costs, and then as to a credit against any judgment against the fourth defendant either as a consequence of accepting the offer or by a determination of the Court.
Of course, the fourth defendant was not a party to that deed and did not acknowledge for himself that the offer was still effective in the sum of $700,000. The plaintiff’s agreement with Dr Williams’ executrix did not bind the fourth defendant in any way.
It might be said, however, that it bound the plaintiff to recognise that the sum paid by Dr Williams’ estate had to be set off against any costs and judgment entered against the fourth defendant.
The plaintiff also reached a settlement with Mr Dirk Verboon, Mr Hendrikus Verboon and Mr Michael Thomas.
The settlement with those gentlemen provided that Mr Dirk Verboon pay $150,000, Mr Hendrikus Verboon, $1.00 and Mr Thomas, $1.00 towards the liquidator’s costs in the proceedings.
That deed also contained an acknowledgment in relation to the offer in the following terms:
“12.12.1 The Liquidator acknowledges that the joint offer filed in the Proceeding pursuant to Supreme Court Rule 40.01 on 12 January 2001 by Donald Gatherer Williams, Verboon Senior, Verboon Junior, Thomas and Phillip Christian Hercus for $700,000.00 (“the Offer”) shall remain valid and effective for the purposes of the Supreme Court Rules 40.03 and 40.05 notwithstanding this Deed. The parties to this Deed acknowledge that notwithstanding the terms of the settlement set out herein, the said offer shall continue in the joint names of Phillip Christian Hercus (“Hercus”) and the estate of the late Donald Gatherer Williams (“the Estate”) (as a party in lieu of Donald Gatherer Williams) and those two parties are to be dealt with by the Liquidator as if they were the joint offerers from 12 January 2001 for as long as that offer remains filed.
12.2The Liquidator acknowledges that in the event that he accepts the Offer or there is a determination by the Supreme Court of the Liquidator’s claim, the Liquidator shall be obliged to give credit to Hercus and the Estate for the payment of the amount of $150,002.00 payable by Verboon Senior, Verboon Junior and Thomas pursuant to the terms of this Deed against any liability for party and party costs in favour of the Liquidator as a consequence of the acceptance of that offer or by determination of the Supreme Court. The acknowledgment by the Liquidator that the said offer has ongoing validity and effect in no way reserves to Verboon Senior, Verboon Junior or Thomas any future right, entitlement or benefit arising in the Proceeding.
12.3So as to avoid any doubt the Defendants acknowledge that the indemnity given by the Liquidator in paragraph 5 above does not in any way whatsoever provide an indemnity to the Defendants for any liability which they might have to any other defendants in the Proceedings whether under a claim for contribution or otherwise and such an indemnity is expressly hereby excluded and the defendants further acknowledge that any such claim by any other defendant in the Proceeding against the Defendants is not material to the Liquidator and is not material to the settlement contained in this Deed.”
It can be seen that the liquidator acknowledged that the offer would continue as against the fourth defendant and Dr Williams’ estate. At the time of the settlement between the plaintiff and Mr Dirk Verboon, Mr Henrikus Verboon and Mr Michael Thomas, the plaintiff had not settled with Dr Williams’ executrix.
Clearly enough in both deeds the liquidator acknowledged the effectiveness of the offer filed by the joint defendants and acknowledged that the offer, in its terms, was still available to him as an offer made by the fourth defendant alone. There is no doubt that that is the agreement which he had reached with all four defendants.
On this application, however, the liquidator has maintained that the offer was ineffective. It might be thought surprising that the liquidator, who is an officer of the court, would take an inconsistent stand in the settlements which he has reached with the other defendants and in the trial against the fourth defendant. By reason of the acknowledgments in the Deed, the plaintiff represented to the other defendants that the joint offer made by them and the fourth defendant “remained valid and effective for the purposes of the Supreme Court Rules 40.03 and 40.05 notwithstanding this Deed”. It was not a representation to the fourth defendant because he was not a party to the Deeds. In fact the fourth defendant was not privy to the terms of the Deeds. The plaintiff does not deny that he is still bound, in the terms of the two Deeds with the other defendants, to give credit to the fourth defendant for the amounts for which he has settled with the remaining defendants. In those circumstances he says he is entitled to argue that he could never have accepted the offer after he settled with the other defendants.
Unless the plaintiff is prevented in some way from arguing that the offer is ineffective, whatever one may think of the plaintiff’s conduct, the question remains whether or not the offer was effective. The fourth defendant has not argued that the plaintiff could not contend that the offer was ineffective.
In my opinion, the offer was rendered ineffective when the plaintiffs settled first with the second, third and fifth defendants, and secondly with the first defendant. The offer was a joint offer made on behalf of all defendants. When any one of those defendants withdrew the offer, which was the effect of the other defendants settling with the plaintiff, the offer was withdrawn by all defendants.
The defendants were not severally liable when the joint offer was filed. It was for one sum for all defendants. The plaintiff could not sign judgment against the defendants for several amounts of $700,000. The fourth defendant could not become severally liable by the plaintiff settling with the other defendants.
In my opinion if the plaintiff had purported to accept the offer made after settling with any of the other defendants the fourth defendant could have properly objected to any purported notice of acceptance.
Once the plaintiff had settled with any of the other defendants it was incumbent upon the fourth defendant to renew the offer for himself if that was what he wished.
In my opinion the acknowledgements in the two deeds to which I have referred do not affect the effectiveness of the joint offer. They are an acknowledgement between the parties to the deeds that the plaintiff will in each case give credit to the fourth defendant in the circumstances referred to in the deed.
Those acknowledgements do not make effective a notice which had become ineffective by the settlements.
In those circumstances, after settling with the other defendants the offer became ineffective and there was no offer capable of acceptance by the plaintiff.
In my opinion the fourth defendant cannot argue that after the offer was filed and during the period until the plaintiff settled with the four defendants, the plaintiff should bear the consequences under r 40.05. The sum awarded by this Court, together with the amounts of the settlement to which regard has to be had for the purpose of that argument, exceed the amount of the offer.
In all the circumstances I should address the question of the costs of trial as if the offer was made, not accepted and then became ineffective.
In those circumstances the ordinary consequences ought to follow and the fourth defendant should be ordered to pay the plaintiff’s costs of trial and I exercise my discretion accordingly.
My reasons make it unnecessary for me to consider the fourth defendant’s oral application that any costs order in his favour should be set off against the judgment sum ordered against him.
I make the following orders and direction:
1The fourth defendant’s application that the plaintiff pay the fourth defendant’s costs in relation to the Ka Me Wa Pty Ltd debt is dismissed.
2Decline to consider the fourth defendant’s application that the plaintiff pay the fourth defendant’s costs in relation to the notice to admit delivered by the plaintiff to the defendants on 28 April 2000.
3Direct that the fourth defendant make the application referred to in paragraph 2 hereof to Judge Burley if so advised.
4Order that the fourth defendant pay the plaintiff’s costs of the action on a party and party basis.

[2003] SASC 32

19 February 2003