Shaw v Niru Construction Pty Ltd and Anor (No.3)

[2021] NSWDC 624

District Court

New South Wales

Medium Neutral Citation:

Shaw v Niru Construction Pty Ltd & Anor (No.3) [2021] NSWDC 624

Hearing dates:

On the papers

Date of orders:

18 November 2021

Decision date:

18 November 2021

Jurisdiction:

Civil

Before:

Abadee DCJ

Decision:

See paragraph 27

Catchwords:

COSTS – multiple defendants – plaintiff successful against company first defendant only – whether plaintiff should pay costs of director second defendant where same legal representatives were retained – application for Sanderson order – application for exemption from statutory cap for costs

Legislation Cited:

Legal Profession Uniform Law Application Act 2014 (NSW) s 2, Sch 1 cl 6

Cases Cited:

Currabubula Holdings Pty Ltd v State Bank of NSW [2000] NSWSC 232

King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No.2) [2009] NSWCA 204

Korner v H Korner & Co Ltd [1951] Ch 10

McCausland v Surfing Hardware International Holdings Pty Ltd (No.3) [2014] NSWSC 590

Shaw v Niru Construction Pty Ltd & Anor [2021] NSWDC 589

Shaw v Niru Construction Pty Ltd & Anor (No.2) [2021] NSWDC 600

Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 388

Texts Cited:

Nil

Category:

Costs

Parties:

Robin Shaw (plaintiff)
Niru Construction Pty Ltd (first defendant)
Arasaratnam Mahendran (second defendant)

Representation:

Counsel:
Ms E Welsh for the plaintiff
Mr A Renshaw for the first and second defendants

Solicitors:
Brydens Lawyers for the plaintiff
McMahons Lawyers first and second defendants

File Number(s):

2020/00032476

Publication restriction:

Nil

Judgment

Background

1. On 5 November 2021, I ordered judgment in favour of the plaintiff against the first defendant for the sum of $54,540.32 but also ordered judgment for the second defendant against the plaintiff^[1] . This followed a 4-day trial during which the defendants unsuccessfully applied for an adjournment of the hearing on the penultimate day^[2] . After expressing commentary on the subject of costs, I reserved the question of costs to enable the parties to make submissions. Both parties supplied written submissions, although the plaintiff forewent the opportunity of supplying written submissions in reply to the defendants’ written submissions.

   1. Shaw v Niru Constructions Pty Ltd & Anor (No.2) [2021] NSWDC 600 (the ‘Liability judgment’)

   2. Shaw v Niru Constructions Pty Ltd & Anor [2021] NSWDC 589 (the ‘Adjournment Judgment’)

2. The plaintiff applied for the following orders on costs:

1. Subject to order 3, the first defendant should pay the plaintiff’s costs on the ordinary basis (as agreed or assessed);

2. A Sanderson order, whereby the first defendant pay the second defendant’s costs;

3. The plaintiff’s costs of the hearing on 29 October 2021 should be excluded from the operation of Schedule 1 of the Legal Profession Uniform Law Application Act 2014 (NSW) (the LPULA Act).

3. The defendants (jointly) submit that the appropriate costs orders are:

1. The first defendant pay the plaintiff’s costs on the ordinary basis; and

2. The plaintiff pay the second defendant’s costs on the ordinary basis.

4. In its opposition to the Sanderson order, the defendants raised an anterior question concerning what costs the second defendant should recover in light of the fact that he was represented by the same legal team which represented the unsuccessful (first) defendant.

What costs should the second defendant recover?

5. The defendants cited a decision of Einstein J in Currabubula Holdings Pty Ltd v State Bank of NSW [2000] NSWSC 232 (“Currabubula”) (at [90]-[104]) for the proposition that where two defendants are jointly represented by common lawyers, the ‘rule of thumb’ is that the successful defendant should be able to recover from the plaintiff a proportionate share of ‘common costs’ being those referable to the claim pressed (jointly) against both defendants, plus any costs solely referable to the plaintiff’s claim against the successful defendant. As Einstein J said (at [95]) this ‘rule of thumb’ would require that a plaintiff cannot look to the unsuccessful (first) defendant for more than an equal proportionate share of the costs which are not solely referable to the plaintiff’s costs against one or other of the defendants individually, in addition to the costs so referable. The purpose of the rule of thumb, his Honour identified, was to prevent the plaintiff, only partly successful, from being unjustly enriched and prevent the unsuccessful defendant from being unfairly burdened by the thrusting upon it all of the plaintiff’s costs which are not referable to the action against one or both of them. It is pertinent, perhaps, to observe that the rule of thumb was not applied on the facts in that case; which was, in any event dealing with the factual position of multiple plaintiffs. As his Honour recognised, and as other cases hold, ultimately, the Court must follow the dictates of justice rather than mechanistically applying a rule of thumb: McCausland v Surfing Hardware International Holdings Pty Ltd (No.3) [2014] NSWSC 590 at [45].

6. The second defendant submitted that there were certain costs referable solely to the claim against him, because it involved allegations of personal obligations owed by him that were different to the obligations of the first defendant. This resulted in a need to separately consider his personal position, discrimination in the drafting of pleadings and particulars; the issue of court process (a subpoena to the Department of Communities and Justice relating to the easement) and a need to generally obtain instructions from him as to the case against him. It was pointed out that the second defendant was cross-examined, partly, about his personal obligations. The second defendant further submitted that it would be appropriate for a costs assessor to sort out what share of ‘common costs’ should be apportioned to him and also what costs were referable specifically to him.

Consideration

7. It may be accepted that the ‘rule of thumb’ identified in Currabubula has been acknowledged, at least in relation to the position concerning multiple defendants represented by common lawyers. Some of the authorities approving of the proposition were cited by Slattery J in McCausland at [43]. But in Korner v H Korner & Co Ltd [1951] Ch 10, the English Court of Appeal said (at 17) that:

“This rule, a rule of thumb is no doubt convenient in an ordinary case; but I do not think that it can be said that it must be applied in every case. Regard must be had to the nature of the case and to the nature of the defences raised to the same claim”.

8. That passage was apparently approved by the Court of Appeal in King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No.2) [2009] NSWCA 204 (per Young JA, Hodgson JA and Campbell JA agreeing) at [27].

9. In my opinion, and as intimated at [60]-[64] and [196] of the Liability Judgment, the issues upon which the second defendant succeeded – whether he owed and breached a personal duty of care – were discrete and severable from all the other issues in which the second defendant’s position was identical to the unsuccessful first defendant. Save for those issues, the defendants presented an entirely united front: the second defendant ran the same statutory defences, denials of breach of duty and disputes about the circumstances of the incident, the injuries and on-going disabilities sustained by the plaintiff and quantum of loss as the first defendant had run. In such circumstances, it would be unfair to the plaintiff if it was only able to obtain a proportion of ‘common’ costs against the first defendant whilst remain liable to pay a proportion of ‘common’ costs to the second defendant. This is a case, in other words, where it would be inappropriate to apply the ‘rule of thumb’. In my view, the appropriate result is that the second defendant’s costs should be limited to those that were incurred in defence of the issue of whether he owed a personal duty of care to the plaintiff and whether that personal duty was breached.

10. In my view, the proper exercise of the discretion on costs should sound in an order which generally renders both defendants jointly responsible for the plaintiff’s costs. The exceptions, however, concern the issues on whether the second defendant owed the plaintiff and breached a personal duty of care.

Whether a Sanderson order should be made

11. The plaintiff referred to the circumstance that the defences of both defendants were materially identical, in their general denial of liability. The plaintiff also pointed to evidence of the (successful) second defendant in which the latter accepted his awareness of star pickets of a similar (if not necessarily identical) size to the one that the plaintiff stumbled over was on the subject property throughout 2017.

12. The plaintiff also appeared to tie matters which, on one view, were relevant to his other application (considered below). He argued that he was put to additional expense and delay of another day’s hearing when, but for the making and consideration of the defendants’ adjournment application, it would have concluded on the third day. Having regard also to the size of the monetary judgment and the prima facie limitation upon the recovery of costs, it would be unfair to then penalise the plaintiff by subjecting him to a costs liability to the second defendant.

13. As to the application for a Sanderson order, the defendants submitted that it was unclear on what basis this order was sought. They disputed the plaintiff’s contention that the second defendant was taken to have admitted his awareness of the use of star pickets.

Consideration

14. The usual rule that costs follow the event may give rise to difficulties when a plaintiff brings actions against multiple defendants, since there are multiple ‘events’. It is said, and indeed, as I noted briefly in my reasons for judgment, the usual rule would see the plaintiff pay the successful defendant’s costs and receive costs from the unsuccessful defendant – what Campbell JA once described as a ‘per-defendant order’ (Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 388 at [46]). I am not persuaded that a Sanderson order should be made here. Whether or not it was reasonable for the plaintiff to join the second defendant, it has not been shown that its decision to join it was affected by conduct of the unsuccessful (first) defendant. A Sanderson or Bullock order should not be blithely made in circumstances where a plaintiff has taken a forensic risk to join multiple defendants and is seeking to make the unsuccessful defendant an insurer against that risk.

15. The plaintiff should pay the second defendant’s costs.

Application for exemption from the operation of the LPULA Act

16. The plaintiff acknowledged that the size of the verdict the plaintiff is confined to costs in accordance with Schedule 1 of the LPULA Act. That confines the plaintiff in this case to the recovery of $10,000 for all legal services provided by a solicitor or a barrister. Section 2(4)(b) precludes a court or tribunal from making otherwise a costs order, unless, relevantly, clause 6 of Schedule 1 applies.

17. The plaintiff therefore applies for an exemption from the operation of Schedule 1 of the LPULA Act.

18. Clause 6 of Schedule 1 provides:

"6. Court may order certain legal services to be excluded from maximum costs limitation

A court hearing a claim for personal injury damages may by order exclude from the operation of this Schedule legal services provided to a party to the claim if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party's case or intended or reasonably likely to unnecessarily delay or complicate determination of the claim".

19. The plaintiff generally submitted that he required legal services on the last day which were provided in response to the application for adjournment, being an additional day’s costs, which caused unnecessary delay.

20. The defendants disputed that the adjournment caused on 28 October 2021 was occasioned by any fault on their part. They relied, on the application for costs, on an affidavit of Andrew Clarke (sworn 12 November 2021), their solicitor. Mr Clarke deposed to correspondence with Mr Buddy John Chalhoub, a person not ultimately called by the defendants, but who had been the recipient of a subpoena to give evidence. The correspondence, commencing about a week before the trial, concerned the circumstances in which he might give evidence at trial in August 2021 (when civil hearings were being conducted remotely). After the hearing was adjourned in August 2021 to October 2021, Mr Clarke deposed to his renewal of communications with Mr Chalhoub. In particular, on 27 October 2021 (the morning when the hearing resumed), Mr Clarke told Mr Chalhoub that he should attend the chambers of Counsel for the defendants at 11:00am on 28 October 2021. However, early in the morning of 28 October 2021, Mr Chalhoub indicated (by a text to Mr Clarke) that he was unwell and would be unable to attend chambers. For the rest of the day until after the luncheon adjournment, further attempts were made to ascertain Mr Chalhoulb’s availability, that afternoon and the next day (29 October 2021).

21. The defendants submitted that it not appropriate that the costs of the last day of the hearing be excised from the maximum costs limitation. They also submitted that the second defendant’s costs should be subject to the same costs limitation.

Consideration

22. It may be accepted that the adjournment application delayed the determination of the claim. As is apparent in the Adjournment Judgment, the application was made, after lunch, on day 3, at a time when, apparently, the case for the defendants had closed. As the plaintiff pointed out in his submissions, the Court reserved its decision on the adjournment application overnight. Following the rejection of the application the next morning, closing submissions proceeded. It is probable that, but for the making of the adjournment application, the hearing would have concluded on day 3 (28 October 2021). On the last day, Counsel relied solely upon oral submissions which were capable of having been delivered the previous afternoon.

23. However, for the exemption in cl 6 of Schedule 1 to apply, the plaintiff must not only demonstrate that legal services were provided in response to an adjournment application likely to cause delay to the determination of the case, but the additional factor that the making of the adjournment application was “intended to or reasonably likely to unnecessarily” delay determination of the claim (emphasis supplied).

24. The adjournment application was, ostensibly, the result of an inability on the part of the defendants to call Mr Chalhoub as a witness, as they had anticipated both in the hearing, when it was heard in August and when it resumed in October. But although the defendants had anticipated that they might call him, ultimately they would only do so if their Counsel made a forensic judgment that he should be called. In my view, the fair construction of events on 28 October 2021 was that, although the defendants knew that there may be a problem with calling Mr Chalhoub because of the indications of his ill-health that morning, they wanted to keep their options open. That remained their position until lunch, even when the last of the witnesses for the defendants (the second defendant himself) had given evidence which might have implicated Mr Chalhoub in a way adverse to the defendants’ interests. With time to reflect over the luncheon adjournment, I accept that Counsel for the defendants sought his clients’ instructions to call Mr Chalhoub but, knowing that this was at least highly impracticable for the rest of that day (and uncertain for the next day), applied for the adjournment.

25. That the application for adjournment failed does not mean that it was brought only for the (defendants’) purpose (ie an “intention”) of delaying the determination of the plaintiff’s claims or that the bringing of the adjournment application unnecessarily delayed it. The plaintiff did not suggest that Mr Chalhoub may not have relevant evidence to give. To the contrary, Counsel for the plaintiff, on the adjournment application, signalled that she might raise a Jones v Dunkel submission if Mr Chalhoub was not called (although no such submission was eventually put).

26. I am not persuaded that the circumstances which enliven the exclusion in clause 6 of the Schedule apply. I reject the plaintiff’s application for the exemption.

ORDERS

27. In the result,

1. Subject to order 2, the defendants pay the plaintiff’s costs as agreed or assessed.

2. The plaintiff is to pay the second defendant’s costs on the issue of whether the second defendant owed the plaintiff a personal duty of care and whether such personal duty was breached, as agreed or assessed.

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Endnotes

Decision last updated: 18 November 2021