Shepherd v Baster
[2006] WASC 176 (S)
•16 AUGUST 2006
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA DETERMINATION ON THE PAPERS |
| CITATION | : | SHEPHERD & ANOR -v- BASTER [2006] WASC 176 (S) |
| CORAM | : TEMPLEMAN J | ||
| DELIVERED | : 16 AUGUST 2006 | ||
| SUPPLEMENTARY | |||
| DECISION | : 25 JANUARY 2007 | ||
| FILE NO/S |
| ||
BETWEEN | : JUSTIN LESLIE SHEPHERD ERIN JENNIFER SHEPHERD Plaintiffs |
AND
KAREN LESLEY BASTER
Defendant
Catchwords:
Costs - Plaintiffs awarded specific performance but not damages - Whether offsetting appropriate - Calderbank offers by plaintiffs before amending statement of claim - Plaintiffs' case set out in correspondence - Plaintiffs claim unreasonable conduct by defendant during proceedings - Whether plaintiffs entitled to indemnity costs - Counterclaim at instigation of defendant's brother - Counterclaim abandoned - Defendant suffering chronic medical condition - Defendant's proceedings conducted generally by agency of her brother - Whether non-party costs order against defendant's brother
Legislation:
Nil
[2006] WASC 176 (S)
Result:
Defendant pay plaintiffs' costs of the action (except expert evidence) to be taxed
if not agreed
Plaintiffs pay defendant's costs of this application to be taxed if not agreed
Category: B
Representation:
Solicitors:
| Plaintiffs | : | Lavan Legal |
| Defendant | : | MacKinlays |
Case(s) referred to in judgment(s):
Castro v Hillery & Ors [2003] 1 Qd R 651
Den Hoedt & Anor v Barwick [2006] WASCA 196
Dobb v Hacket (1993) 10 WAR 532
HPM Pty Ltd v Fear [2002] WASCA 249
Koh v Tay [1999] WASC 228
NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569
Shepherd & Anor v Baster [2005] WASC 23
Shepherd & Anor v Baster [2006] WASC 176
Symphony Group Plc v Hodgson [1994] QB 179
Westgold Resources NL v St George Bank Ltd & Ors, unreported; SCt of WA;
Library No 980717; 9 December 1998
Willoughby v Barrett-Lennard [1979] WAR 167
[2006] WASC 176 (S)
TEMPLEMAN J
TEMPLEMAN J: In these reasons, I deal with the costs of the action Shepherd & Anor v Baster [2006] WASC 176.
2 In those reasons, I referred to the parties by their names. However,
because the question of costs may be of more general interest, I shall now
refer to the parties as "the plaintiffs" and "the defendant" respectively.3 The parties have filed written submissions and supporting documents
in relation to costs and have requested that I decide the matter on the basis
of those papers, without further oral argument.
I have therefore had regard to the following materials:
(1)
the plaintiffs' submissions dated 14 November 2006 entitled "Submissions in support of the plaintiffs' application for indemnity costs and an order against Paul Robert Baster";
(2)
an affidavit of Stuart Kenneth Shepherd in support of costs orders in favour of the plaintiffs and annexures SKS1 to SKS10 sworn on 14 November 2006;
(3)
the defendant's response to the above materials dated 24 November 2006 and entitled "Defendant's submissions as to costs", annexing the amended statement of claim dated 22 March 2005 and the defendant's submissions for trial dated 3 August 2006;
(4)
an affidavit of Louise Horwood filed on behalf of the defendant and sworn 24 November 2006 together with exhibit LH1;
(5) a document entitled "Plaintiffs' submissions in reply" dated
14 December 2006;(6)
a copy of an offer of compromise made by the plaintiffs on 11 November 2004, pursuant to O 24A of the Rules of the Supreme Court 1971 (WA) ("the Rules"). This document was supplied in response to my request to the plaintiffs' solicitors.
Background
The plaintiffs initiated the action by writ issued on 23 August 2004. The writ was indorsed with a claim for specific performance of a written contract for the sale of a residential property at 18 Tain Street, Applecross, made between the plaintiffs as purchaser and the defendant as
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TEMPLEMAN J
vendor, at a price of $756,500. Further, or alternatively, the plaintiffs
claimed damages for breach of the contract.6 The plaintiffs' statement of claim was defective, as they
acknowledged. They therefore sought leave to amend. However, the defendant contended that the proposed amendment was embarrassing because it alleged an oral agreement between the parties and a subsequent written agreement.
7 The issue was resolved in favour of the defendant by Master
Sanderson who delivered a judgment on 8 March 2005: Shepherd &
Anor v Baster [2005] WASC 23.8 The Master permitted the plaintiffs to re-plead: and later in
March 2005, they filed an amended statement of claim. I note from the Papers for the Judge that the amended statement of claim is said to have been filed on 9 March. This is incorrect. As appears from the date of the document annexed to the defendant's submission as to costs, the amended statement of claim was filed on 22 March.
9 In the amended statement of claim, the plaintiffs relied on a written
agreement. In par 9, they alleged that if the defendant did not perform her part of the agreement, they would suffer loss and damage. They gave the following particulars:
"The plaintiffs' loss and damage includes the costs incurred in making arrangements to offer the plaintiffs' property for sale, rental of an alternative property and loss of opportunity to develop the property, full particulars of which will be provided after expert evidence and prior to trial."
10 No further particulars were given of par 9. However, at the trial, the
plaintiffs obtained leave to add an additional paragraph in the following
terms:"As a result of the Defendant's delay in performing the Agreement, the Plaintiffs have suffered loss and damage and are entitled to equitable damages arising from the delay.
Particulars of Loss
(a)
The costs of alternative rental accommodation for the period from 8 March 2005 to 5 March 2006 at the rate of $480.00 per week ($24,960).
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(b) The cost of alternative rental accommodation for the period from 4 March 2006 to 3 September 2006 at the rate of $505.00 per week ($13,130). (c) Such further rental costs as might be incurred from 3 September 2006 to the date of judgment. (d) The additional cost of constructing a house in August 2006 as compared to doing so in August 2004 being 45% of an estimated cost of $450,000 ($202,500). (e) The loss of opportunity to subdivide being the difference between the value of the subdivided blocks and the single block ($200,000)."
11 The defendant denied the existence of any agreement between the
plaintiffs and herself. However, she contended that if there was an agreement, it was conditional upon the plaintiffs obtaining finance. The defendant then contended that the plaintiffs had failed to obtain finance and that she had terminated the agreement.
12 The defendant counterclaimed for damages for the allegedly
wrongful action of the plaintiffs in lodging a caveat over the title to the
property.13 In answer to a request for further and better particulars of the loss
and damage said to have been suffered by the defendant, the defendant alleged that in anticipation of the sale of the property, she had taken out a bridging loan for $500,000, which loan was to be discharged on the sale of the property. The defendant alleged also that she had incurred interest on a loan of $35,000 secured by a mortgage over the property and that in order to discharge the mortgage she had borrowed money from her brother on the basis that she would indemnify him for any loss suffered.
14 The defendant alleged that in order to provide the finance, her
brother had sold a property in North Perth. The defendant alleged that because she had agreed to indemnify her brother, she was required to pay him:
•
interest on the balance outstanding at 6.7 per cent per annum;
• agent's fees of $11,650.00; • conveyancing fees in the sum of $700.00;
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• capital gains tax in the sum of $88,320.00; •
the loss of the capital gain which her brother's property would have achieved had it not been sold.
The trial
The trial took place over two days and was conducted efficiently by
both counsel.
16 On the opening day, I was informed by counsel for the plaintiffs that
the counterclaim had been abandoned and could be struck out (TS 115). The defendant's position was simply that if she was successful, the caveat should be removed. That was clearly an unassailable proposition.
17 The bulk of the evidence given at trial was directed to the
circumstances in which the written agreement between the parties came into existence. Very little time was taken up with the plaintiffs' claim for damages. Expert valuation evidence, and other evidence relied on by the plaintiffs in support of their claim for damages was tendered by consent (exhibits 2 and 3 and documents included in the trial bundle, exhibit 1).
The outcome of the trial
18 It is sufficient for present purposes to note that I held the plaintiffs to
be entitled to an order for specific performance of the agreement. However, I concluded that it would be inappropriate to award them damages.
The plaintiffs' entitlement to costs
19 Section 37 of the Supreme Court Act 1935 (WA) confers a general discretion on the Court in relation to the costs of proceedings. However, O 66 r 1(1) of the Rules provides that the Court will generally order that the successful party to any action will recover his costs from the unsuccessful party.
20 The effect of O 66 r 1(2) and (3) is that a generally successful party
may be deprived of all or some of his costs if he has caused costs to be incurred unreasonably, either by his conduct before or after the commencement of the litigation, or by introducing issues on which he has failed.
21 There is no doubt that in the present case, the plaintiffs were
generally successful. However, the defendant contends that the plaintiffs'
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claim for damages accounted for "40% of the time taken and costs
incurred".
The plaintiffs responded that "a suggestion that 40% of the hearing related solely to the damages claim is no more than fanciful".
23 It is not clear whether the defendant's contention relates to the
hearing, or to the litigation generally. However, there is no material before me on which I can make any assessment other than in relation to the trial itself. As to that, I respectfully adopt the observation of Anderson J in Westgold Resources NL v St George Bank Ltd & Ors, unreported; SCt of WA; Library No 980717; 9 December 1998 that:
"The court should not get involved in an excessively detailed analysis of the various issues in an attempt to make intricate dollar-perfect costs orders. To adopt that practice would be to add an extra dimension to litigation which, by and large, is already these days complicated and expensive enough."
His Honour referred to various authorities including his own decision in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 at 574:
"Thus it may be that although it is strictly correct to say that different causes of action are involved, there may have been only one contest in substance. This will often be so when all causes of action arise out of the one course of dealings, the one transaction or the same fact. Where that is the situation, there will usually be one order for the general costs of the action, moulded as necessary to ensure that, however rough and ready it may be, substantial justice is done."
24 In the present case, the causes of action for specific performance and
damages may be said to have arisen out of the one transaction or the same fact. However, they gave rise to different considerations and different evidence.
25 That being so, I would be inclined to deprive the plaintiffs of costs
relating to their unsuccessful claim for damages, were it not for the fact that the defendant brought a counterclaim which she abandoned at the trial.
26 In these circumstances, rather than requir ing the parties to identify
the costs incurred in relation to the competing monetary claims, and attempting some kind of offsetting exercise, I consider that the appropriate
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course would be to order the defendant to pay the plaintiffs' costs of the
action but to disallow the plaintiffs' costs of obtaining expert evidence.
Should the plaintiffs be entitled to costs on an indemnity basis?
27 The plaintiffs contend that their costs should be taxed on an
indemnity basis because the defendant did not accept an offer they made pursuant to O 24A of the Rules or offers in the form of Calderbank letters when, it is said, she should have done so.
I deal with each offer in turn.
The first offer
The plaintiffs' first offer was set out in a letter dated 24 August 2004 from their solicitors to the defendant's solicitors.
The letter was in the following terms:
"Without prejudice to any of their rights under the contract of
sale, our clients make the following offer:
1.
Your client agrees to proceed with the sale of the property on the terms set out in the contract save that:
(a) the purchase price be increased to $760,000; (b) the deposit of $50,000 payable 7 days after acceptance of this offer; (c) the latest time for notice of Finance Approval to be given to your client be 24 hours after acceptance of this offer; and (d) the date 14 September 2004 in Annexure 'A' be extended to 5 October 2004. 2. Our clients discontinue matter CIV 2083 of 2004 on the basis that there be no order as to costs."
31 I assume that the letter was written after the writ indorsed with the
statement of claim, which had been issued on the previous day, had been
served on the defendant or her solicitors.32 The defendant submits that the plaintiffs should not be permitted to
rely on an offer in the Calderbank form, such as this, when provision is
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made in O 24A of the Rules for offers to be made when the consequences prescribed by the rule is open and available. The defendant relies on the decision of Scott J in Koh v Tay [1999] WASC 228 at [8].
Scott J referred to a passage in Seaman on Civil Procedure at [24A.10.2] where it is said:
"It should not be assumed that the mere writing of a Calderbank letter by a plaintiff making an offer to the defendant which is not less favourable than the judgment recovered generates the same presumptive entitlement to an order for indemnity costs. The circumstances would have to take the case out of the ordinary or usual category: MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240; 140 ALR 707 at 711."
34 That passage does not suggest that an offer in the Calderbank form cannot be made when procedures under rules such as O 24A are available. This is made clear by Murray J in Dobb v Hacket (1993) 10 WAR 532 at 539 - 540. His Honour there adopted the view expressed in earlier authority that the making of a Calderbank offer instead of an offer pursuant to some formal procedure provided by the Rules of Court, would be a factor to be taken into account in the exercise of the costs discretion. The approach taken by Murray J was approved by the Court of Appeal in Den Hoedt & Anor v Barwick [2006] WASCA 196 at [112].
35 Ultimately, in my view, the question is whether a defendant to whom
a Calderbank offer has been made, thereafter acts unreasonably in the proceedings: NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77 at 98.
36 In the present case, I do not consider that the defendant acted
unreasonably in refusing the offer contained in the letter dated 24 August 2004 from the plaintiffs' solicitors. That is because the plaintiffs' case was based on a defective statement of claim. In other words, the action as then constituted was doomed to failure.
37 The plaintiffs contend that the deficiencies in their statement of claim
were irrelevant because their case was set out clearly in their solicitor's letter before action dated 19 August 2004. That letter did identify the point on which the plaintiffs succeeded. However, litigation is based on pleadings: not on correspondence between the parties or their solicitors. As Burt CJ said in Willoughby v Barrett-Lennard [1979] WAR 167 at 170:
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"It is the function of pleadings to isolate and lay bare the issues of fact which are in dispute. That is not something which is to be worked out by correspondence."
38 Further, the issue whether an offeree has acted unreasonably, "must
be decided on material disclosed in the proceedings": Castro v Hillery & Ors [2003] 1 Qd R 651 at [72], per Williams JA, with whom Wilson J agreed.
The second offer
39 On 11 November 2004, the plaintiffs, by their solicitors, served a
notice pursuant to O 24A of the Rules. The notice was in the following
terms:"TAKE NOTICE that the plaintiffs make an offer to compromise in the sum of $100,000 to be paid by the defendant to the plaintiffs.
The said $100,000 is in satisfaction of all causes of action in respect of which the plaintiffs claim specific performance and damages.
The said offer remains open for acceptance for a period of
28 days.
This offer is made without prejudice."
The significance of an offer made pursuant to O 24A of the Rules, lies in r 10(4). It provides that:
"Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, taxed on an indemnity basis in addition to his costs incurred before that date, taxed on a party and party basis." (emphasis supplied)
41 The plaintiffs contend that the judgment for specific performance
they obtained was more favourable to them than the terms of the offer and
that r 10(4) should therefore apply.
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42 I do not accept the plaintiffs' submission for two reasons. First,
although I accept that as at the date of judgment, the property the subject of the contract had increased in value by more than $100,000 (so that the judgment was more favourable to them than the offer) there is no evidence that was the position as at 11 November 2004, when the offer was made.
Secondly, is the fact that the offer was also made when the plaintiffs' case rested on a defective statement of claim.
As the author of Seaman on Civil Procedure in Western Australia says at [24A.10.2]:
"It is the obvious intention of rule 10(4) to oblige a defendant who receives an offer of compromise to give serious thought to the risk of losing the proceedings and then being ordered to pay costs subsequent to the offer on an indemnity basis."
It follows, that in order to give an offer the required consideration, the defendant must be in a position to understand the case he or she has to meet. As was held in Castro v Hillery (supra), at 663 - 665, if that is not so, there is good reason to refuse an order for indemnity costs.
45 In my view, that was not so in the present case. I repeat that having
regard to the deficiencies in the statement of claim, the defendant was entitled to assume, as at 11 November 2004 (and for the period of 28 days thereafter), that the action against her was doomed to failure. In those circumstances, in my view, she did not act unreasonably in declining to accept the plaintiffs' offer.
The third offer
46 The plaintiffs' third offer was set out in a letter dated 11 February
2005 from their solicitors to the defendant's solicitors. The letter, which was marked "without prejudice", was written when the parties were awaiting the decision of Master Sanderson on the defendant's application to strike out parts of the statement of claim. The plaintiffs' solicitors referred to the fact that the owner of a property which abutted the rear of the subject property was considering the sale of his own property. This was significant because the plaintiffs had previously received an offer from the owner of the adjoining property, to sell a small parcel of his land to the plaintiffs. This addition to the subject property would have made it subdivisible: see [25] - [28] of my earlier reasons.
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47 In those circumstances, the plaintiffs proposed that the matter be
settled on the basis that the defendant pay the plaintiffs the sum of $75,000 (inclusive of legal costs) either upon the settlement of the subject property or of either of the properties created by a subdivision of that property, or on 1 May 2005, whichever was the sooner.
The offer was to remain open until 5 pm on 25 February 2005.
49 In my view, although this was an informal offer, there was no change
in the circumstances which existed at the time of the first and second offers. I therefore consider that the defendant did not act unreasonably in refusing to accept the third offer.
Did the defendant act unreasonably in the proceedings?
The plaintiffs submit that the defendant (and her brother) acted unreasonably in the proceedings by:
• refusing to convey the subject property to the plaintiffs; • failing on numerous occasions to attend properly to discovery obligations and delaying in the service of witness statements; • failing to prosecute the counterclaim.
51 In my view, these are not matters which justify an order of indemnity
costs. The consequences of the first and third of the matters referred to above are simply that costs follow the event. The consequence of the second matter (if the relevant failures resulted in applications being made by the plaintiffs) will have been the making of appropriate costs orders against the defendant in those applications. If the conduct complained of was not the subject of any application by the plaintiffs it may be assumed that they did not incur any additional costs as a result of that conduct.
Should a special costs order be made against the defendant's brother?
52 The plaintiffs contend that the jurisdiction which undoubtedly exists
to make a costs order against a person who is not a party to the proceedings, should be exercised in the present case so as to make a costs order against the defendant's brother, Paul Baster.
53 The plaintiffs' contention is based on the fact that Mr Baster was
closely involved, on behalf of the defendant, at every stage of the transaction and the subsequent litigation. It was Mr Baster who
[2006] WASC 176 (S)
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negotiated the agreement for the sale of the subject property on behalf of the defendant and who dealt with all matters subsequently, albeit acting on the advice of her solicitors.
54 The circumstances in which the Court will award costs against a
non-party were considered by the Full Court in HPM Pty Ltd v Fear [2002] WASCA 249. There, the Court adopted an analysis of the English authorities compiled by Balcombe LJ in Symphony Group Plc v Hodgson [1994] QB 179 at 191 - 192. The analysis showed that the decisions might conveniently be classified under six heads, three of which involve considerations which might be thought relevant to the present case. They are:
(1) where the non-party has the management of the action; (2) where the non-party has maintained or financed the action; (3) where the non-party has caused the action.
55 As to (1) above, the example given in the analysis is of a director of
an insolvent company who causes the company improperly to prosecute or defend proceedings. In such a case, the director stands to derive some benefit from the litigation but without being exposed to the risk of an order for costs.
56 By contrast, in the present case Mr Baster's involvement was as a
brother concerned to safeguard the interests of his sister (the defendant)
who suffered from a chronic debilitating medical condition.57 The plaintiffs contend that the counterclaim "appears to have been
the creation of Paul Baster who, through it, was endeavouring to obtain a
personal benefit".58 I have referred above to the counterclaim. I do not see it as an
attempt by Mr Baster to obtain a personal benefit: rather, as an attempt to ensure that he did not suffer any loss as a result of the financial assistance he gave to the defendant so as to enable her to discharge a mortgage over the subject property.
In any event, the counterclaim was abandoned.
60 The typical case in which an order for costs will be made against a
non-party under head (2) above, is one in which the non-party has been maintaining or funding an action in which he has no involvement, with a view to profiting by it. For the reasons given above, I am satisfied that Mr Baster's involvement was not of that kind.
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61 Nor do I consider that head (3) above is applicable in the present
case. I do not think it could be said that Mr Baster caused the litigation. Although the defendant undoubtedly relied on Mr Baster, who acted, in substance, as her agent, the defendant nevertheless proceeded in accordance with the legal advice she had received.
In all the circumstances, I am not persuaded that it would be appropriate to make an order for costs against Mr Baster.
Conclusion
63 For the reasons given above, I consider that the appropriate order
should be that the defendant pay the plaintiffs' costs of the action (other than the costs of obtaining expert evidence), such costs to be taxed if not agreed.
64 Having regard to these conclusions, I consider that the plaintiffs
should pay the defendant's costs of this application, to be taxed if not
agreed.
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