Stone v Chappel (No 2) - [2017] SASCFC 118

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
STONE v CHAPPEL (NO 2)
[2017] SASCFC 118
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Doyle and The Honourable Justice Hinton)
11 September 2017
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - COSTS OF WHOLE ACTION
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS
Application for costs of the appeal and cross appeal, and consideration of the costs of the action generally.
The appellants (plaintiffs) contracted with the respondents (defendants) to construct the shell and framework of an apartment in a retirement village in Leabrook. The plaintiffs alleged that the defendants breached the contract by not constructing the apartment in accordance with plans forming part of the contract, and that they had engaged in misleading conduct in respect of the ceiling height.
The trial judge found that the defendants were in breach and awarded damages to the plaintiffs in the sum of $81,046.68. The trial judge did not find that the defendants had engaged in misleading conduct
The plaintiffs appealed seeking further damages and a finding of misleading conduct. The defendants cross-appealed, challenging particular heads within the trial judge’s award for damages.
The Court dismissed the appeal and upheld the cross appeal, resulting the plaintiff’s damages being reduced to $11,347.54. The defendants seek costs of the appeal and cross appeal.
Held per Doyle J (with Kourakis CJ and Hinton J agreeing):
1.       The plaintiffs to pay the defendants’ cost of the appeal and cross-appeal on a party and party basis.
2.       The trial judge’s costs orders are set aside.
3.       The defendants are to pay the plaintiffs 25 percent of their costs of the action on a party and party basis, save and except for the costs of the expert determination and the costs order of the Master made on 21 September 2011.
Supreme Court Rules 2006 (SA) s 263, referred to.
Stone v Chappel [2016] SASC 32; Stone v Chappel (No 2) [2016] SASC 88; Stone v Chappel [2017] SASCFC 72, considered.

STONE v CHAPPEL (NO 2)
[2017] SASCFC 118
Full Court: Kourakis CJ, Doyle and Hinton JJ

KOURAKIS CJ: I would join in the cost orders proposed by Doyle J for the reasons he gives.
DOYLE J:             In these proceedings, the trial judge awarded the plaintiffs damages in the amount of $81,046.98.[1] The plaintiffs appealed, and the defendants cross-appealed. The appeal failed, and the cross-appeal succeeded, resulting in the plaintiffs’ damages being reduced to $11,347.54.[2]
[1]    Stone v Chappel [2016] SASC 32.
[2]    Stone v Chappel [2017] SASCFC 72.
It remains only to deal with the issue of costs.
Overview of the proceedings
The nature of the proceedings, and outcome at trial, are set out in this Court’s reasons on the appeal.[3] It is unnecessary to repeat that detail.
[3] Stone v Chappel [2017] SASCFC 72 at [97]-[107].
It is sufficient for present purposes to note that the plaintiffs’ claim at trial focused upon their claims for breach of contract and misleading conduct in respect of a deficiency in the ceiling height of the apartment that they contracted the defendants to construct for them. The plaintiffs’ claim for breach of contract succeeded, but their claim for substantial rectification damages on account of that breach failed. They were confined to an award of $30,000 by way of damages for loss of amenity. The claim for misleading conduct failed on the basis that the defendants made no representation as to the ceiling height of the apartment.
The plaintiffs also succeeded in recovering an award of damages ($36,212.24) for loss of use of monies by reason of them having paid two instalments of the purchase price before they were required to be paid under the contract, given the deficiency in the ceiling height.
Finally, the plaintiffs also succeeded in recovering awards for the cost of rectifying some door frames ($19,942.45), the cost of some window seals ($445.50) and a fire inspection fee ($539.00), which together, but net of the $6,092.51 cost of some variations to which the defendants were entitled, gave a total for these items of $14,834.44.
On appeal, the plaintiffs challenged the trial judge’s refusal to award them rectification damages in relation to the breach of contract relating to the deficient ceiling height, and the trial judge’s rejection of their claim for misleading conduct in respect of the ceiling height.
In their cross-appeal, the defendants challenged the trial judge’s awards of damages for loss of use of the instalments of the purchase price paid prematurely (contending in addition that in fact the payments were made late, and so there should have been an award of interest in the defendants’ favour), for loss of amenity in respect to the deficient ceiling height, and for the defective door frames.
Costs of the appeal and cross-appeal
The plaintiffs’ appeal failed. While the plaintiffs succeeded in establishing that the trial judge erred in failing to find that the defendants made a representation as to ceiling height,[4] their claim for misleading and deceptive conduct failed for other reasons. The plaintiffs’ challenge to the trial judge’s refusal to award rectification damages also failed.
[4] By majority; Kourakis CJ did not express a conclusion on this issue.
The defendants’ cross-appeal was partially successful. They succeeded in setting aside the trial judge’s award of damages for loss of use of monies, and in obtaining an award of interest in their favour. They did not, however, succeed in having the awards of damages for loss of amenity or for the defective door frames set aside. The effect of the defendants’ partial success on the cross-appeal was to result in the judgment sum in the plaintiffs’ favour being reduced from $81,046.98 to $11,347.54.
In my view, for the purposes of the application of the general rule that costs follow the event, the defendants were the successful party in respect of both the appeal and cross-appeal. I do not regard the plaintiffs’ success on some limited issues as being sufficient to warrant a departure from the general rule, or to otherwise warrant dissecting the issues on the appeal or cross-appeal so as to arrive at some percentage or issues-based reduction in the defendants’ cost entitlement.
I would order that the plaintiffs pay the defendants’ cost of the appeal and cross-appeal on a party and party basis.
Costs of the action
Given the defendants’ success on the cross-appeal and consequential reduction in the judgment sum, I consider it appropriate to revisit the issue of the parties’ cost of the action more generally.
The trial judge ordered that the defendants pay one third of the plaintiffs’ costs of the action, subject to two qualifications (to which I shall return). His Honour gave relatively detailed reasons for depriving the plaintiffs of a significant proportion of their costs despite their success in achieving a judgment of $81,046.98 in their favour.[5] His Honour noted that the award of $81,046.98 exceeded the prescribed threshold of $75,000[6] for the application of the general rule that cost follow the event. However, his Honour also noted that the parties had agreed to resolve a component of the plaintiffs’ claim (in relation to the base price deduction) shortly prior to trial on terms that involved a payment to the plaintiffs of $160,892.
[5] Stone v Chappel (No 2) [2016] SASC 88.
[6] This was the figure applicable under rule 263(g) of the Supreme Court Rules 2006 (SA) at the time the proceedings were commenced; it was subsequently increased to $120,000.
The trial judge also held that the plaintiffs were not to be deprived of costs by reason of the defendants’ Calderbank offers. His Honour observed that an offer had been made on 29 October 2014 in the sum of $200,000 (inclusive of costs). However, his Honour reasoned that, when properly analysed, this represented an offer of $25,000 for the deficiency in the ceiling height, which was less than the award ultimately obtained by the plaintiffs under that head of damages.
The trial judge then undertook an analysis of the various issues at the trial, and the time taken and parties’ success on each of those issues.[7] It is not necessary to repeat what his Honour said. It is sufficient to set out his Honour’s conclusion:[8]
All in all, my impression is that the time and resources occupied by the issues on which the plaintiffs succeeded broadly equates to the time and resources occupied by the issues on which the defendants succeeded. Further, in my view, the misleading and deceptive conduct claim in relation to the base price was misconceived and the claim for damages based on the costs of rectification had no reasonable prospect of success. Nonetheless, the plaintiffs were successful on the action. Ultimately, they would not have had to undertake the proceedings if the defendants had not denied liability in relation to the ceiling height claim. On the other hand, they pursued an unrealistic award of damages. Balancing these considerations, I consider justice will be done by awarding the plaintiffs one-third of their costs of the action on a party/party basis.
[7] Stone v Chappel (No 2) [2016] SASC 88 at [19]-[21].
[8] Stone v Chappel (No 2) [2016] SASC 88 at [21].
I consider that his Honour appropriately exercised his discretion in the circumstances as they existed at the end of the trial. While the outcome of the appeal and cross-appeal has altered the analysis to some extent, it has not resulted in a significant alteration so far as the exercise of the discretion in relation to costs is concerned. The defendants have now been successful on the additional issues of the plaintiffs’ claim for damages for loss of use of monies, and their own associated claim for interest. While this success materially reduced the judgment sum, these were not issues that added significantly to the time taken at trial, or to the overall costs of the action more generally. The outcomes on the other issues remain as they were at trial.
The judgment sum recovered by the plaintiffs has now fallen below the threshold of $75,000 applicable at the time of the issue of the proceedings. But in my view, the settlement of the base price reduction claim immediately prior to the trial means that it was appropriate to issue these proceedings in this Court. While the modest level of damages recovered, relative to the amount claimed, remains relevant in a general way, I do not consider that this consideration weighs heavily in this case.
The trial judge’s conclusion that the defendants’ Calderbank offers do not provide a basis for depriving the plaintiffs’ of their costs also remains valid. The plaintiffs’ recovery includes a component of $30,000 for loss of amenity in relation to the ceiling height deficiency, which is more than the $25,000 component for this head in the defendants’ offer. While the plaintiffs’ total recovery (even including the $160,892 for the base price deduction) has fallen short of the $200,000 the plaintiffs offered on 29 October 2014, it is significant that the offer included a figure of $65,000 for the plaintiffs’ costs. It is not clear to me that the defendants ‘beat’ the offer they made. Further, the offer was not made under the mechanism provided for in the rules. Despite the plaintiffs’ view of the value of their claim having proven to be significantly exaggerated, I do not consider that their rejection of the offers made was imprudent or unreasonable in the sense required to warrant depriving them of an award of costs in their favour. In my view, the modest nature of the plaintiffs’ success is best reflected by confining them to recovery of a proportion of their costs.
I consider it appropriate to make merely a modest adjustment to the orders made by the trial judge to reflect the outcome of the appeal and cross-appeal. I would order that the defendants pay the plaintiffs 25 per cent of their costs.
The trial judge made two qualifications to his general costs order, namely in relation to the costs of the expert determination (which were to be determined by the expert, Mr Walsh QC), and the costs order of Master Norman made on 21 September 2011. In my view, his Honour’s reasons for making these two qualifications to the general costs order remain sound.
I do not consider it appropriate to entertain the plaintiffs’ late attempt in their costs submissions to pursue a claim for pre-judgment interest, and thus will not do so.
Orders
For the reasons set out, I would order:
1.   The plaintiffs pay the defendants’ costs of the appeal and cross-appeal on a party and party basis.
2.   Set aside the trial judge’s costs orders made on 23 June 2016.
3.   In lieu thereof, order that the defendants pay the plaintiffs 25 per cent of their costs of the action on party and party basis, save and except for the costs of the expert determination (which are to be decided by Mr Walsh QC), and the costs order of Master Norman made on 21 September 2011.
HINTON J:
I agree with the orders proposed by Doyle J for the reasons he gives.