Shaddick v JDV Ltd
[2012] WASC 120 (S)
•5 APRIL 2012
SHADDICK -v- JDV LTD [2012] WASC 120 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 120 (S) | |
| Case No: | CIV:1966/2004 | 29 NOVEMBER - 2 DECEMBER 2010, 18-21, 27-29 APRIL 2011, 6 MAY 2011, 27 APRIL 2012 | |
| Coram: | ALLANSON J | 5/04/12 | |
| 10/05/12 | |||
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Defendants to pay the costs of the third party in the third party proceedings Plaintiff and third party to pay the defendants' costs of the primary proceedings | ||
| B | |||
| PDF Version |
| Parties: | JANET SHADDICK JDV LTD LUKE MATTHEWS BRIAN JOHN SHADDICK |
Catchwords: | Costs Third party proceedings Award of costs against a nonparty Calderbank offer Whether rejection of Calderbank offer was reasonable Turns on own facts |
Legislation: | Legal Profession Act 2008 (WA), s 301 Rules of the Supreme Court 1971 (WA), O 66 r 1, O 19 r 1, O 19 r 12 Supreme Court Act 1935 (WA), s 37 |
Case References: | Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 Burke v LFOT Pty Limited [2002] HCA 17; (2002) 209 CLR 282 Donald Campbell & Co v Pollak [1927] AC 732 Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 Furber v Stacey [2005] NSWCA 242 Grbavac v Hart [1997] 1 VR 154 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 Henry v Australian Guarantee Corporation Ltd [1985] WAR 137 Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355 Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Lombard Insurance Co (Australia) Ltd v Pastro [1994] SASC 4481; (1994) 175 LSJS 448 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 10 MAY 2012 FILE NO/S : CIV 1966 of 2004 BETWEEN : JANET SHADDICK
- Plaintiff
AND
JDV LTD
First Defendant
LUKE MATTHEWS
Second Defendant
BRIAN JOHN SHADDICK
Third Party
Catchwords:
Costs - Third party proceedings - Award of costs against a nonparty - Calderbank offer - Whether rejection of Calderbank offer was reasonable - Turns on own facts
(Page 2)
Legislation:
Legal Profession Act 2008 (WA), s 301
Rules of the Supreme Court 1971 (WA), O 66 r 1, O 19 r 1, O 19 r 12
Supreme Court Act 1935 (WA), s 37
Result:
Defendants to pay the costs of the third party in the third party proceedings
Plaintiff and third party to pay the defendants' costs of the primary proceedings
Category: B
Representation:
Counsel:
Plaintiff : Mr S G Leslie
First Defendant : Mr J C Yeldon
Second Defendant : Mr J C Yeldon
Third Party : Mr S G Leslie
Solicitors:
Plaintiff : Metaxas & Hager
First Defendant : David Huggins
Second Defendant : David Huggins
Third Party : Metaxas & Hager
Case(s) referred to in judgment(s):
Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69
Burke v LFOT Pty Limited [2002] HCA 17; (2002) 209 CLR 282
Donald Campbell & Co v Pollak [1927] AC 732
Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1
Furber v Stacey [2005] NSWCA 242
(Page 3)
Grbavac v Hart [1997] 1 VR 154
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435
Henry v Australian Guarantee Corporation Ltd [1985] WAR 137
Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355
Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
Lombard Insurance Co (Australia) Ltd v Pastro [1994] SASC 4481; (1994) 175 LSJS 448
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128
(Page 4)
1 ALLANSON J: On 5 April 2012, I gave judgment dismissing the plaintiff's claim for damages against the defendants, and also dismissing the defendants' third party claim against Mr Shaddick. Mr Shaddick and the defendants have applied for costs orders.
2 The costs of and incidental to all proceedings in the Supreme Court are in the discretion of the court or judge, and the court or judge shall have full power to determine by whom, and to what extent, such costs are to be paid: Supreme Court Act 1935 (WA) s 37(1). The discretion regarding costs has been described as absolute, unconfined or unfettered, although a discretion that must be exercised judicially, not arbitrarily or capriciously, or on grounds unconnected with the litigation: Oshlackv Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [21] - [22], [134]; Latoudis v Casey[1990] HCA 59; (1990) 170 CLR 534, 540, 558, 562, 568; Donald Campbell & Co v Pollak [1927] AC 732, 811. The courts have developed principles for the guidance of judges in exercising the discretion. The guiding principle, set out in O 66 r 1 of the Rules of the Supreme Court 1971 (WA), is that the court will generally order that the successful party to any action or matter recovers its costs.
3 For third party proceedings, O 19 r 12 provides that the court may decide all questions of costs as between a third party and other parties to the action, and may order any one or more of them to pay the costs of any other, or others, or give such directions as to costs as the justice of the case may require.
4 The present applications require the court to apply those principles in resolving the following issues:
1. Should the defendants pay Mr Shaddick's costs of the third party action;
2. Should the defendants pay the costs thrown away by the amendment of the third party statement of claim on 1 December 2010;
3. Should the defendants pay the costs thrown away by reason of the adjournment of the proceedings on 2 December 2010;
4. Should Mr Shaddick rather than the plaintiff pay the defendants' costs of the action, or should he be liable for them jointly with the plaintiff;
(Page 5)
- 5. Should Mr Shaddick, or the plaintiff, or both of them pay the defendants' costs on an indemnity basis from the date they had to respond to a Calderbankoffer, that is, from October 2010.
5 The defendants have also asked the court to grant a certificate for second counsel, and a certificate for transcript.
Background
6 First, it is necessary to consider Mr Shaddick's involvement in the proceedings, and the basis on which he was joined as a party. There are two separate issues: Mr Shaddick's involvement in the transactions which led to this claim, and his conduct in the litigation.
7 The plaintiff's claim, very broadly stated, was that Mr Shaddick represented her in her dealings with the defendants. She claimed that she suffered loss because of the defendants' misleading or deceptive conduct, further or alternatively because of the defendants' breach of duty or breach of contract. The representations that founded the plaintiff's Trade Practices Act 1974 (Cth)claim also lay at the heart of the other causes of action pleaded. The plaintiff's primary case was that she suffered loss because Mr Shaddick was misled.
8 The share dealings that were the subject matter of the plaintiff's claim were carried on in the plaintiff's name, primarily because Mr Shaddick believed there was a prospect that the Australian Taxation Office would seek to recover debts of a failed company from him, leading to his bankruptcy. Mr Shaddick and his wife intended to accumulate assets that were in reality joint assets. Her name was used to enable Mr Shaddick to trade without exposing any profits to his creditors in the anticipated bankruptcy. But there is no doubt that Mr Shaddick gave all of the instructions to the defendants in relation to the share transactions, and made all of the decisions, to the extent of signing documents in his wife's name. He was the one who attempted to deal with Mr Kott, and who ultimately abandoned that course.
9 There is, as submitted by counsel for Mr Shaddick, a difference between Mr Shaddick having the carriage of the investment and matters relating to it, and his being, in effect, the plaintiff in the litigation. But the extent of his involvement in the conduct of the litigation was far beyond that of the principal witness. The plaintiff and the third party were represented by the same solicitors and counsel. He was the one who provided instructions to the solicitors, not only about his own case but the case brought by his wife. In evidence, Mr Shaddick agreed that he was
(Page 6)
- primarily involved in instructing the solicitors for the plaintiff, and he was the person making decisions in the interests of both himself and his wife. I understood this to apply to both the investment and the litigation. Specifically, he was taken to various changes in the plaintiff's pleaded case over the years and agreed that he was the one who gave instructions on those changes (ts 325 - 327, also at 337, 341, 359).
10 The third party claim against Mr Shaddick sought an indemnity against, alternatively a contribution to, any liability on the part of the defendants to the plaintiff. The defendants pleaded that Mr Shaddick represented the plaintiff and acted on her behalf, and owed her a duty of care to act with reasonable care, skill and diligence. The defendants said that the sole cause of the plaintiff's loss was Mr Shaddick's negligence and breach of duty.
11 The present proceedings were brought before the amendments to the Trade Practices Act and the introduction of the Civil Liability Act 2002 (WA)provisions which permit apportionment of liability.
The application by the third party
12 Save for Henry v Australian Guarantee Corporation Ltd [1985] WAR 137, which was concerned with the 'normal rule' where damages are claimed for breach of one of a string of contracts, and the seller brings in its immediate seller as a third party, I am not aware of any decision of the Court of Appeal offering guidance on the award of costs in third party proceedings. Counsel referred me to none. There are appeal court decisions in other Australian jurisdictions to the effect that the usual rule that a successful party will generally recover its costs is applicable to third party proceedings, subject to the overriding power of the court to do justice between the parties: Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355; Furber v Stacey [2005] NSWCA 242; Lombard Insurance Co (Australia) Ltd v Pastro[1994] SASC 4481; (1994) 175 LSJS 448.
13 In Kheirs Financial Services [28], the court set out the following principles derived from the authorities:
(1) The usual rule as to costs applies to proceedings as between defendant and third party, the 'event' being the success or failure of the defendant's claim against the third party.
(2) Where the third party claim is dismissed because the plaintiff's claim against the defendant fails, the defendant will ordinarily be liable for the third party's costs of the third party proceeding.
(Page 7)
- (3) The award of costs remains a matter of discretion, however, and there may be circumstances of the case which justify a departure from the usual rule.
(4) In deciding (in a case of the kind referred to in (2)) whether any departure from the usual rule is warranted, the Court will ordinarily need to consider at least the following matters:
• the reasonableness of the defendant's decision to join the third party;
• whether the joinder of the third party was reasonably foreseeable by the plaintiff, such that the plaintiff might be viewed as having some responsibility for the costs of the third party proceeding;
• the responsibility of plaintiff, defendant and third party, respectively, for the time taken up in the hearing of the third party proceeding.
15 I doubt that the joining of the third party contributed significantly to the time taken up in the hearing, as the same issues arose in the main proceedings. But the third party was required to plead, and there may be other matters which he can properly establish in taxation. That is for the taxing officer.
16 In the circumstances, there is no basis to depart from the usual rule. The defendants should pay the third party's costs of the third party proceedings.
17 Two particular issues then arise. This matter was originally listed for trial for six days, commencing on 29 November 2010. On the first day the plaintiff applied to amend the statement of claim. The defendants objected to that amendment, but I allowed it to be made. The defendants then amended their defence, with a corresponding amendment in the third party statement of claim. The defendants' amendments were not confined to a response to the changes made by the plaintiff. The defendants'
(Page 8)
- amendments, in turn, required the plaintiff to amend (in her reply), and the third party to amend his defence to the third party statement of claim. I anticipated that further amendments would follow.
18 The first issue is whether the defendants should pay the costs thrown away by reason of the amendment to the third party statement of claim. No reason has been put forward why they should not, other than the general opposition to the third party having its costs. The amendment to the third party statement of claim was not simply responsive, but introduced a significant additional matter. In my view, the third party should have the costs thrown away by reason of the amendment.
19 Mr Shaddick also seeks the costs thrown away by reason of the adjournment of the trial on 2 December 2010. The trial began on 29 November, and the plaintiff's counsel commenced the opening address, taking the court in some detail through the documents on which the plaintiff relied. The amendments to each party's pleadings were also dealt with, although it was apparent that further consequential amendments were likely to be made, and the parties may need to consider the leading of further evidence in light of the amendments. By the middle of day three, the testimony of witnesses had not begun, and there were many objections to witness statements still to be heard and resolved. By then, it was clear that the matter would not be completed in the time set aside for trial. Indeed, it was likely that the evidence of the principal witness for the plaintiff would not have been completed. The decision to adjourn was made on the third day (1 December 2010), although part of the next day was used to deal with objections and the trial was only formally adjourned then. When the trial resumed, it took another eight days.
20 While the defendants' amendment of the defence and third party statement of claim was one catalyst for the adjournment, it was just one of several. It would, in my opinion, be artificial to identify the defendants' conduct of the action as the cause of the adjournment. The fair apportionment of costs does not call for such an artificial exercise. I would not allow the third party (or the defendants) the costs thrown away by reason of the adjournment.
The application by the defendants
21 Under O 19 r 12, the court may decide all questions of costs as between a third party and other parties to the action, and may order any one or more of them to pay the costs of any other, or others.
(Page 9)
22 The defendants seek an order that Mr Shaddick, who was the third party in the proceedings, pay the costs of the claim between the plaintiff and the defendants. Although, having regard to O 19, Mr Shaddick is a party, I have found the principles regarding the award of costs against a non-party to be a useful guide.
23 In Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178, Mason CJ and Deane J (Gaudron J agreeing) recognised a general category of case in which an order for costs should be made against a non-party: where the party to the litigation is insolvent or man of straw, where the non-party has played an active part in the conduct of the litigation, and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. In that category of cases, an order for costs should be made against the non-party if the interests of justice require that it be made (192 - 193). Dawson J held there was jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings 'where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the court' (202).
24 In a recent review of the authorities, the Full Court of the Federal Court accepted that the category of cases in which an order may properly be made is not closed, and that it is not a precondition to the exercise of power to award costs against a non-party that the unsuccessful party is impecunious: Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50 [71] - [93]. The court accepted that it had power to make an order for costs against a non-party
where the non-party is connected with the unsuccessful party to the proceeding, and has caused that party to start, continue or prosecute the proceeding in circumstances where the non-party's conduct makes it just and equitable that the non-party be visited with an order for costs in favour of the successful party either in addition to such an order against the unsuccessful party or in substitution for such an order [88].
25 On the view I formed of the way in which the proceedings were conducted, Mr Shaddick was the effective litigant. This was not an abuse of process or contempt - it is simply the fact. The proceedings had to be commenced in the plaintiff's name because Mr Shaddick had traded in her name, and she had owned the shares.
(Page 10)
26 There is no evidence before me that the plaintiff is impecunious, and would be unable to meet an order for costs. And there is no evidence that Mr Shaddick funded the litigation. But none of those factors is essential to making a costs order against him. Had he not been joined as a third party, I would have considered it just and equitable that he be responsible, together with his wife, for the costs of the successful defendants because of his connection with the plaintiff, his interest in the claim, and his effective control of the action. Where, by reason of O 19, he is a party to the proceedings, the same result should follow.
The Calderbank offer
27 On 17 September 2010, the solicitors for the defendants delivered to the solicitors for the plaintiff and third party a letter marked 'without prejudice except as to costs'. It set out an offer to settle 'the Proceedings' on the basis that the defendants would, within 30 days of entering a deed of release with the plaintiff and the third party, pay the plaintiff the sum of $1 million, the plaintiff would discontinue her claims against the defendants with no order as to costs, and the defendants would discontinue their claims against the third party with no order as to costs. The offer was open to 5.00 pm on 15 October 2010. It contained a statement that the defendants would produce the letter to the court on the question of costs and seek an order that the plaintiff and the third party pay the defendants' costs on an indemnity basis.
28 The letter proceeded to set out several grounds on which it said the offer should be accepted, including that the plaintiff's claim (and by extension the third party's defence) was devoid of merit.
29 The plaintiff and third party did not accept the offer.
30 Where a party does not accept a Calderbank offer the court will not depart from the ordinary rules as to costs unless, in the circumstances, the offeree's failure to accept the offer was unreasonable: RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128; Ford Motor Company of Australia Ltd v Lo Presti[2009] WASCA 115; (2009) 41 WAR 1; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 [23]; Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 [16].
31 The party who made the offer bears the onus of establishing that its rejection was unreasonable. An offeree will not be found to have acted unreasonably in rejecting an offer except on clear grounds: Ford Motor Company of Australia Ltd v Lo Presti [19], [21]. Whether a refusal was
(Page 11)
- unreasonable will depend upon all the circumstances and will always involve matters of judgment and impression: Hazeldene's Chicken Farm [24]. Generally, it will not be unreasonable for an offeree to reject an offer that leaves the offeree in any reasonable doubt as to what is being offered: Grbavac v Hart [1997] 1 VR 154, 155.
32 In Hazeldene's Chicken Farm [25], the court said regard should be had to, at least, the following:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree's prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; [and]
(f) whether the offer foreshadowed an application for indemnitycosts in the event of the offeree's rejecting it.
33 The Calderbank offer from the defendants was about 10 weeks before trial. It allowed four weeks for the plaintiff and third party to consider the offer and take advice on it, which was a reasonable period in the circumstances.
34 The offer clearly foreshadowed the application for indemnity costs against the plaintiff and the third defendant, although it is not clear whether the defendants were warning of their intention to claim the costs of the plaintiff's action from the third party. They asserted also that the third party defence was devoid of merit.
35 The amount offered was substantial.
36 On the other hand, the provisional assessment of damages was for $4.6 million or $5.7 million, depending on which basis the damages were assessed, with interest from April 2000. The offer made did not include interest or costs. Interest alone on the plaintiff's loss (as provisionally assessed) far exceeded the amount of the offer. Even if the plaintiff had recovered part only of the claimed loss, she would have been entitled to interest over about 10 years. Further, the matter had been proceeding for about six years, so costs may have been substantial.
(Page 12)
37 The offer also included the condition that the third party proceedings would be discontinued with no order as to costs. The third party action was, in my opinion, unlikely to succeed. It has been dismissed with costs.
38 In these circumstances I am not satisfied that the plaintiff and the third party acted unreasonably in rejecting the offer. There will not be an order for indemnity costs.
39 Finally, the defendants ask for a certificate for transcript and a certificate for two counsel. I am not aware of any current basis in the Rules or subordinate legislation for the court to grant a certificate for transcript. The practice of certifying for second counsel has not been required by the determinations made under the Legal Profession Act 2008 (WA) or its predecessors, since 2006. In the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2008, cl 5 of the schedule provided:
The practice of certification for second counsel or for Senior Counsel is no longer required by the Scale, which brings the practice in this State into line with other Australian jurisdictions. However, where fees are claimed for second counsel or for Senior Counsel, it is anticipated that the Taxing Officer shall consider whether the briefing of second counsel, or Senior Counsel, was reasonably necessary in the circumstances.
- This clause was not repeated in the 2010 determination, but the practice of certifying for second counsel has gone.
40 Under pt 10, div 8 of the Legal Profession Act, the taxing officer of the court is to assess costs. Section 301 specifies the criteria for assessment. The schedule to the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 provides, in item 34 of the table to cl 11:
As between party and party, a party may be allowed disbursements incurred by that party except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions, that party is fully reimbursed for its disbursements.
41 This is consistent with O 66 r 19, which sets out disbursements, expenses, payments, or charges that are allowable on taxation, including items of costs allowable under any relevant scale and such counsel fees as may be allowed, and other necessary disbursements or payments made or incurred in the conduct of the litigation.
42 Section 301(1) of the Legal Profession Act provides:
(Page 13)
- (1) In conducting an assessment of legal costs, a taxing officer must consider -
(a) whether or not it was reasonable to carry out the work to which the legal costs relate; and
(b) whether or not the work was carried out in a reasonable manner; and
(c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that section 302 or 303 applies to any disputed costs.
44 It may still be appropriate, in particular cases, for the judge who has immediate knowledge of the facts and complexity of the case to give directions regarding what the taxing officer should or should not allow: see, for example, Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 (S) [3], [20]. Otherwise, the current legislative scheme leaves assessment to the taxing officer by reference to specified criteria. In the present case, I see no reason to direct the taxing officer in how he or she will carry out that task.
Conclusion
45 The orders will be:
(1) the defendants are to pay the costs of the third party in the third party proceedings, including costs thrown away by reason of the amendment to the third party statement of claim on 1 December 2010, to be assessed if not agreed;
(2) the plaintiff and the third party are to pay the costs of the defendants of the action between the plaintiff and the defendants, to be assessed if not agreed;
(3) there is no order as to the costs of the adjournment on 2 December 2010.
Each party has been successful in part only on the costs applications. The appropriate order, in my opinion, is that each bear their own costs of the applications.
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