Thiess Pty Ltd and Laing O'Rourke (BMC) Pty Ltd v Hydro International Pty Ltd - [2021] NTSC 21

CITATION:Thiess Pty Ltd & Laing O’Rourke (BMC) Pty Ltd v Hydro International Pty Ltd [2021] NTSC 21
PARTIES:THIESS PTY LTD

and
LAING O’ROURKE (BMC) PTY LTD
v
HYDRO INTERNATIONAL PTY LTD

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT exercising Territory jurisdiction
FILE NO:115 of 2019 (21937389)
DELIVERED:  25 February 2021
HEARING DATE:  3 December 2020 and Written Submissions concluding 12 February 2021
JUDGMENT OF:  Luppino AsJ
CATCHWORDS:
Practice & Procedure – Costs – Costs are in the discretion of the Court –Court’s discretion is unfettered – General rule is that a party discontinuing proceedings is to pay the other party’s costs – Circumstances where it is appropriate to depart from that general rule –– Requirements of pre-commencement procedures in Practice Direction 6 of 2009 - Trial Civil Procedure Reforms – Requirements are limited to the substantive matters relating to the claim – Obligation to consider alternative dispute resolution – Obligation to provide essential documents – Cost sanctions for non-compliance – Pre-conditions for costs sanctions in paragraph 13 of PD6 – A costs order pursuant to paragraph 13 of PD6 remains discretionary once the pre-conditions are satisfied – Whether parties failure enlivened cost sanctions in PD6
Supreme Court Rules 1987 rr 1.09(1), 25.02, 48.04, 48.12, 63.03(1), 63.11(6), 63.11(7), 63.11(9).
Limitation Act 1981 s 12.
Building Act 1993 s 159 and 160.
Practice Direction 6 of 2009 - Trial Civil Procedure Reforms, paragraphs 4, 5, 6, 7, 8, 9, 10, 11 and 13.
Want & Anor v Blackbear (NT) Pty Ltd [2014] NTCA 3.
Spadaccini v Grice [2012] 32 NTLR 1.
Matzat v Gove Flying Club Inc (1998) NTSC 36.
Oshlack v Richmond River Council (1998) 193 CLR 72.
Ceccon Transport Pty Ltd & Ors v Tomazos Group Pty Ltd (No 2) [2017] NTSC 55.
NT Pubco Pty Ltd & Anor v DNPW Pty Ltd (Subject to a Deed of Company Arrangement) & Ors [2011] NTSC 51.
Parap Hotel Pty Ltd & Ors v Northern Territory Planning Authority & Ors (1993) 112 FLR 336.
Jones v Dunkel (1959) 101 CLR 298.
Re TAI-AO Aluminium (Australia) Pty Ltd v Cordukes & Anor [2004] FCA 1488.
Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129.
REPRESENTATION:
Counsel:
Plaintiffs:J W Roper
Defendant:D Baldry
Solicitors:
Plaintiffs:Hunt & Hunt Lawyers
Defendant:O’Loughlins Lawyers
Judgment category classification:    B
Judgment ID Number:  Lup2101

Number of pages: 33

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Thiess Pty Ltd & Laing O’Rourke (BMC) Pty Ltd v Hydro International Pty Ltd [2021] NTSC 21
No. 115 of 2019 (21937389)

BETWEEN:
THIESS PTY LTD
and
LAING O’ROURKE (BMC) PTY LTD

Plaintiffs
AND:
HYDRO INTERNATIONAL PTY LTD
Defendants

CORAM: Luppino AsJ
REASONS

(Delivered 25 February 2021)

These proceedings were commenced by Writ and Statement of Claim filed 8 October 2019. Since then amended pleadings have been filed and a settlement conference has been held. A case management conference was held on 14 August 2020 when orders were made timetabling the matter up to a contemplated trial date in March 2021.
The proceedings relate to construction works at the East Arm wharf. The Plaintiffs were the head contractors. Part of the works related to the installation of concrete drains. In 2011 the Plaintiffs contracted with the Defendant for the supply only of prefabricated drains. The drains were then installed by a subcontract plumber engaged by the Plaintiffs. The Plaintiffs’ pleaded claim alleges that the Defendant breached the contract as the drains supplied did not meet the specifications and secondly, were not fit for purpose nor of merchantable quality. The damages claimed represent the cost of removal of the initial drains and their replacement in an amount just under $900,000.
The current application by the Plaintiffs is by summons filed 27 November 2020 seeking leave to discontinue the proceedings and an order that the Defendant pays the Plaintiffs’ costs of the proceedings. The application is made pursuant to rule 25.02 of the Supreme Court Rules (SCR). Leave is required because pleadings have closed and the Defendant does not consent to the discontinuance. However, the issue is not so much whether the Plaintiffs should be permitted to discontinue the proceedings. The Defendant only refused to consent to the discontinuance because it opposed the costs order sought by the Plaintiffs. In lieu, the Defendant seeks an order that the Plaintiffs pay the Defendant's costs, which is the usual rule as provided in rule 63.11(6) of the SCR.
The Plaintiffs’ claim for costs is mostly based on the Defendant’s alleged non-compliance with the requirements of Practice Direction 6 of 2009 - Trial Civil Procedure Reforms (PD6). The Plaintiffs allege that the Defendant did not provide a PD6 response letter before proceedings were issued and secondly, that the Defendant’s belated PD6 letter did not comply with the requirements of PD6 in any case. The Plaintiffs say that had the Defendant duly complied, the proceedings might not have been commenced, or that some costs may have been avoided, which are broadly the factors which enliven the costs discretion pursuant to paragraph 13 of PD6.
In lieu of setting out extracts of the objectives and requirements from PD6, I rely on the statements in that respect in two cases. Firstly, in Want & Anor v Blackbear (NT) Pty Ltd[1] where the Court of Appeal said:-
Practice Direction 6 was introduced in 2009 and was designed to maximise the prospects of civil proceedings settling without incurring the costs of court proceedings. The objectives of the Practice Direction included encouraging the exchange of early and full information between the parties, enabling parties to avoid litigation by agreeing to a settlement of the claim, and supporting the efficient management of proceedings where litigation could not be avoided. In the event that resort to court proceedings becomes necessary, the Practice Direction endeavoured to ensure that each party had a sufficient understanding of its case, and the case against it to accurately assess its prospects of success. It was noted that the court is expressly empowered to take into account a party's compliance with the reforms in the conduct of litigation when awarding costs and interest. The Practice Direction placed the parties to the proceedings under a general obligation to disclose the nature of their respective cases and to attempt to settle the dispute prior to the commencement of litigation (emphasis added).[2]
Secondly, and in respect of the required pre-action conduct of the parties, in Spadaccini v Grice[3] where Barr J said:-
Consistent with the stated purpose of the reforms, PD6 requires that parties to a dispute "should follow a reasonable procedure, suitable to their particular circumstances, which is intended to avoid litigation." PD6 provides substantial details as to the required pre-commencement procedure, but I briefly summarise the first two steps in the procedure as follows: (1) the plaintiff should send a letter to the defendant with details of the claim, supported by copies of the essential documents on which the plaintiff relies and any documents (except privileged documents) which might significantly impair the plaintiffs’ case; (2) the defendant should acknowledge the plaintiffs’ claim letter promptly, and then provide a full written response, as appropriate, accepting the claim in whole or in part and making proposals for settlement; or stating that the claim is not accepted. The defendant must be precise about what parts, if any, are accepted and what parts are rejected and provide detailed reasons (including supporting documents) for non-acceptance. PD6 requires pre-commencement discovery of documents by both sides.[4]
The costs sanctions for non-compliance with the requirements of PD6 are set out in paragraph 13. The parts of that paragraph relevant to the current case are as follows:
13.If, in the opinion of the Court, non-compliance with this Part has led to the commencement of proceedings which might otherwise not have needed to be commenced, or has led to delay or costs being incurred in the proceedings that might otherwise not have been incurred, the orders the Court may make include:
13.1an order that the party at fault pay the costs of the proceedings, or part of those costs, of the other party or parties;
13.2an order that the party at fault pay those costs on an indemnity basis;
13.3 Omitted.
13.4 Omitted.
The starting point in the consideration of any costs order is rule 63.03(1) of the SCR. That sets out the general rule namely, that the costs of a proceeding are in the discretion of the Court. That restates the common law position. That discretion is a complete and unfettered discretion.[5] Rule 63.11(6) is the specific costs provision where proceedings are discontinued. That provides that a party who discontinues an action is to pay the other party’s costs. That however is subject to the Court’s unfettered and overriding discretion referred to above. That is clearly the case given rule 63.11(9) which specifically makes rule 63.11 subject to any other order that the Court may make. Similarly, the use of the word “may” in paragraph 13 of PD6 demonstrates that costs are discretionary even if the enlivening factors are satisfied.
There are few examples of costs orders made due to non-compliance with PD6. Two authorities have been referred to above. Another is Ceccon Transport Pty Ltd & Ors v Tomazos Group Pty Ltd (No 2).[6] Those cases set out the principles that apply. Each of those cases was of course decided based on the application of the principles to the facts of those cases. A cost order being discretionary, it must be made judicially and all relevant factors must be taken into account. Therefore, although other cases can provide guidance, any costs order must have regard to all relevant circumstances. In any case, there is no dispute between the parties in respect of the applicable principles. A costs order in the current case turns more on the facts and circumstances.
Dealing first with the Plaintiffs’ complaint relating to the adequacy of the Defendant’s PD6 response letter. The Plaintiffs’ evidence on the application consisted of the affidavit of Kate Elizabeth Frost made 27 November 2020 (Frost Affidavit) and the affidavit of Chris Osborne made 3 December 2020 (Osborne Affidavit). Both deponents are lawyers in the firm engaged by the Plaintiffs.
The evidence is to the effect that the pre-action letter required by paragraph 6 of PD6 was dispatched by the Plaintiffs’ solicitors to the Defendant bearing date 4 February 2019. No response being received from the Defendant, a reminder letter was sent on 5 March 2019. The Frost Affidavit deposes that absent "any formal response" the proceedings were commenced on 8 October 2019. The qualification as to the absence of a “formal response” likely refers to a telephone conversation in early March 2019 between the Defendant's director, Mr Turner, and Ms Osborne. The Defendant’s evidence is that during that telephone conversation Ms Osborne told Mr Turner that he did not need to do anything further in relation to the Plaintiffs’ PD6 letter. Ms Osborne denies that.
A formal PD6 response by the Defendant was first made by letter dated 12 December 2019. That was ten months after the date of the Plaintiffs’ PD6 letter and also well after proceedings had been commenced.[7] That letter repeats, in summary form, the Defendant’s version of the telephone discussions between Mr Turner and Ms Osborne referred to above. It also sets out a denial of the Plaintiffs’ claims on a number of bases.
These are firstly, that the Plaintiffs’ claims were statute barred. Secondly, that the Defendant was only the supplier of the drains and did not install those drains. Thirdly, that the Plaintiffs, and not the Defendant, were responsible for any loss resulting from the installation of the drains. Fourthly, that the Plaintiffs failed to install the drains in accordance with the "relevant" specifications.
The only specification cited for the purposes of the fourth basis was that the drains were required to be installed within a 250 mm concrete channel. The Defendant alleged that only a 200 mm concrete channel was provided. The Defendant’s case is that the drains failed as a result of the failure to comply with the specifications, because they could not deal with the ground movement caused by heavy vehicle loads. Implicitly, the Defendant’s case is that the failure would not have occurred had the specified concrete channel been provided, but that was not expressly stated.
Mr Roper, counsel for the Plaintiffs, challenged the sufficiency of the Defendant’s belated PD6 response on a number of bases. Firstly, as to the claimed time bar, that the Defendant did not articulate precisely why it was alleged that the Plaintiffs’ claim was statute barred. Looked at in isolation that seems to be a minor and simple matter but that needs to be assessed having regard to whether the applicable limitation period is the three year limitation period in section 12 of the Limitation Act, which is the Defendant’s position, or whether the 10 year time limit provided for in sections 159 and 160 of the Building Act applied to the Plaintiffs’ claim.
That dispute would have been an issue at trial. That cannot now be ventilated based on the principle that Courts will not try proceedings, or predict the outcome of proceedings, simply for the purposes of determining costs.[8] That therefore puts an end to that basis as the admittedly brief statement by the Defendant that the action was statute barred must, divorced of legal argument, suffice. As the Plaintiffs’ case could only be statute barred if the Limitation Act applied, the Plaintiffs must have known precisely why the Defendant alleged that the Plaintiffs’ claim was statute barred. Whether the Plaintiffs had a contrary view about that is not the point and does not adversely reflect on the adequacy of the Defendant’s PD6 response.
Secondly, Mr Roper was critical of the one line statements utilised to support the Defendant’s denial of liability. These were to the effect that the Defendant was only the supplier of the drains and did not install them. The specific criticism is that this apparently tells the Plaintiffs no more than they already knew, something that is confirmed by the Plaintiffs’ pleadings. In my view, that is not the test for sufficiency of compliance. As that was, even as briefly put, the basis of the Defendant’s case having regard to what the Plaintiffs set out in their PD6 letter, that was sufficient. It is difficult to imagine what further meaningful detail the Defendant could have provided in light of that.
Likewise in respect of the statement in the Defendant’s PD6 letter to the effect that the Plaintiffs were responsible for the installation of the drains which in any case necessarily follows from the statement that the contract was supply only.
Similar complaints were made in respect of the more detailed allegation of the Defendant that the Plaintiffs failed to install the drains in accordance with the specifications, i.e., that the drains were not encased in a 250 mm concrete channel. In this respect I think the Plaintiffs’ complaint has some justification, more so because the Defendant was later to allege non-compliance by the Plaintiffs with an additional specification. That additional specification was that the grate of the drains was to be installed three millimetres below surface level but the Plaintiffs’ contractors instead installed them flush with the surface. How that caused the failure of the drains was not stated.
The Defendant claims that it only learnt of this breach through later discovery of correspondence from the Plaintiffs’ sub-contract plumber to a representative of the Plaintiffs and to which the Defendant was not a party. That is at least consistent with the Defendant’s initial Defence filed on 23 January 2020.[9] However, I cannot accept that is the case given the evidence that, in the letter from the Defendant’s solicitors dated 22 April 2020,[10] Mr Turner raised the installation issues “shortly after the installation” and both in respect of the required concrete casing and the requirement that the drains be installed a minimum of 3 mm below the surface. Accordingly, the Defendant’s PD6 response is deficient to that extent at least.
I also consider that the Defendant’s PD6 response is insufficient for a number of other reasons. Firstly, it did not state how the relevant specifications formed part of a supply only contract. On the Amended Defence, the Defendant’s case is that installation instructions were supplied with the drains. That should have been set out in the Defendant’s PD6 response because, if that is so, it is not clear that the installation instructions were terms when the supply only contract was formed. If they issued after the contract was made they would not be terms of the contract. The Defendant therefore should have set out how the Defendant said that the installation instructions were terms of the contract.
Secondly, the allegation that the failure to comply with the installation specifications resulted in the failure of the drains is devoid of detail to demonstrate causation. Some detail should have been provided as the bare statement is insufficient to enable proper assessment of that case by the Plaintiffs.
Thirdly, the Plaintiffs’ PD6 letter alleged that the drains supplied were not fit for purpose and were not of merchantable quality. The Defendant did not address that at all and ought to have as any defence available to the Defendant on the basis that it was only the supplier of the drains would not apply to a claim that the drains were not fit for purpose and were not of merchantable quality.
The foregoing raises the question of how much detail is required for satisfactory compliance with the pre-action requirements of PD6. Although setting out informally everything that would be pleaded would clearly suffice, I think it is inappropriate to set that requirement by reference to what would be required to be pleaded. Also, brevity alone should not be a basis of a finding of non-compliance. In my view, consistent with Want & Anor v Blackbear (NT) Pty Ltd,[11] what is required in general terms is sufficient information in respect of the party’s case to enable the other party to properly assess the prospects of that case and, in the case of a defendant, to make an informed response. In the current case, that is as set out in paragraphs 17-23 above. The Defendant’s PD6 response is deficient to that extent.
A second aspect of the Plaintiffs’ complaint of the inadequacy of the Defendant’s PD6 response is that no essential documents were provided. That self-evidently is the case as a perusal of that letter demonstrates. That was also confirmed in the affidavit of the Defendant’s solicitor, Kym David Ryder made 2 December 2020 (Ryder Affidavit No 1) with the explanation that the documents had only been located by the Defendant when reviewing old emails as part of ongoing discovery obligations.[12] However, in that affidavit, when explaining the delay in the provision of the Defendant’s PD6 response, Mr Ryder partly relied on the time taken to receive necessary documents from the Defendant.[13] If that was the case therefore it is likely that they were essential documents. If that was the reason for the delay, presumably Mr Ryder received those documents before dispatching the Defendant’s PD6 response. Therefore he must have had them at that time and therefore the documents should have been provided with the PD6 response.
Further evidence relevant to disclosure of documents is contained in the Frost Affidavit in the form of a letter from the Plaintiffs’ solicitors to the Defendant’s solicitors.[14] There the Plaintiffs complain that the Defendant’s Amended Defence referred to documents which, it was alleged, ought to have been provided as part of the PD6 response. Although not entirely clear, it appears that this relates mostly to the new defences pleaded in the Amended Defence namely, accord and satisfaction and estoppel.

Paragraph 11 of the Amended Defence pleads an accord and satisfaction defence based on an alleged settlement in 2014, of the same dispute as in the current proceedings. References are there made to some emails passing between the parties, some correspondence from the Defendant’s solicitors in 2014 (being the same solicitors as the Defendant has engaged in the current proceedings), some on-site meetings and other discussions. The Defendant alleges that the Plaintiffs were given a reduced price for replacement drains as part of the settlement of the dispute. The letter from the Defendant’s solicitors in 2014 referred to above was sent shortly before the alleged settlement was arrived at. It set out a denial of liability, consistent with the Defendant’s initial PD6 response.
Paragraph 12 of the Amended Defence also pleaded an estoppel on the basis of the Plaintiffs’ payment of the Defendant’s invoices for the replacement drains at that time and that no further demands were made by the Plaintiffs, at least until the date of the Plaintiff’s PD6 letter. The Plaintiffs complain that these details ought to have been included in the Defendant’s PD6 response.
In written submissions, Mr Baldry, counsel for the Defendant, attempted to explain the failure by submitting that it was probable that Mr Turner started searching for the documents after receipt of the Plaintiffs’ PD6 letter, which was on or about 8 March 2019 on the Defendant’s evidence. I think it is also probable that the Defendant had provided the documents to its solicitors at the time of the 2014 dispute. In any case, the Defendant submits that this made it likely that Mr Turner had not been able to locate documents by the time of the PD6 letter, accounting for the failure to provide the documents. There is however no evidence to support that. Evidence could have been provided. Something as critical as I think this is should not be left to implication particularly as it fails to address the question of the Defendant’s solicitors having had those documents for the purposes of the 2014 dispute.
In any case, I do not accept the Defendant’s submission. If the documents had not been provided to the Defendant’s solicitors at the time of the 2014 dispute, it is likely on the evidence that Mr Turner would have done nothing following his telephone discussions with Ms Osbourne, at least if his version of the discussions was true. Leaving aside whose version of those discussions is to be accepted for the present, Mr Turner claimed that Ms Osborne told him that he did not need to do anything further and the Defendant’s case for excusing the non-compliance with PD6 is made largely on that basis. Hence Mr Turner had, on the Defendant’s version, no motive to search for documents. Nothing to the contrary was put in evidence by the Defendant.
Mr Ryder, in Ryder Affidavit No 1, concedes that he did not serve documents in respect of the accord and satisfaction defence when he served the Amended Defence because the documents only comprised documents common to the parties[15] but that is not the appropriate test, either for PD6 disclosure or for discovery.
Mr Baldry also pointed that, notwithstanding the unavailability of documents in respect of the accord and satisfaction defence at the relevant time, Mr Turner was able to give instructions in respect of the installation defence. If he could recall details of the installation defence, then I would have expected that he would also have recalled the circumstances of the accord and satisfaction just as readily.
Further, the Defendant’s written submissions note that Mr Ryder deposed to his lack of knowledge concerning the accord and satisfaction defence at the time of the Defendant’s PD6 response.[16] However that does not sit well with firstly, the reference in the Defendant’s PD6 letter that the replacement parts for the drains were provided by the Defendant to “resolve issues”,[17] a clear suggestion of a settlement. Secondly, his firm’s involvement in the dispute at the time of the alleged settlement. His firm must have been provided, at that time, with the emails and other documents which preceded the letter from his firm referred to in that pleading.
Therefore Mr Ryder’s firm at least must have had those documents contemporaneously with the despatch of the letter in 2014. More recently his firm, and he specifically, had the documents at least in the lead up to the preparation of the Amended Defence in April 2020. There is no evidence from the Defendant as to when, post the Plaintiffs’ PD6 letter, the Defendant’s solicitors were first provided with those documents, or if those same documents had been provided for the purposes of the 2014 correspondence and, if yes to the latter, whether they were still in the possession of the Defendant’s solicitors when they were instructed for the current proceedings.
The absence of evidence from the Defendant concerning that is telling. That unexplained failure leads to an inference that the evidence would not have supported the Defendant’s case.[18] I am therefore of the view that at least some details of the accord and satisfaction defence should have been included in the Defendant’s PD6 response and relevant documents should have been provided at the same time.
Another basis relied on by the Plaintiffs was the Defendant’s refusal to enter into alternative dispute resolution. Paragraphs 4.4, 6.6 and 10.5 of PD6 set out that requirement. The Plaintiffs’ PD6 letter indicated that the Plaintiffs were prepared to enter into alternative dispute resolution. The Defendant’s PD6 response briefly stated that the Defendant was not prepared to mediate because of the denial of liability set out in that letter. That is unacceptable. Mr Baldry submitted that PD6 only requires a party to consider mediation, without obliging them to do so, in the context of a strong case.
I do not accept that. Many things can occur at a mediation short of achieving a settlement. It could be demonstrated to a party that its case is not as strong as it believes. Alternatively, a party may better understand the opposing party’s case following mediation. If a party has a strong case, they might be able dissuade the other party from proceeding further. Given the objective of PD6 to avoid unnecessary litigation, a refusal to mediate because of a belief by a party of the strength of its own case is inappropriate.
In this context, it was argued that the Defendant subsequently indicating that it agreed to participate in alternative dispute resolution in January 2020, and subsequently participating in a settlement conference,[19] alleviated the effect of the refusal in the PD6 letter. I disagree. Participation in a settlement conference cannot alleviate that as a settlement conference pursuant to rule 48.12 of the SCR occurs well after proceedings have commenced and is routinely ordered. A settlement conference would have been ordered even absent the Defendant’s agreement.[20] In any case, the Defendant’s agreement to participate in a settlement conference came too late to satisfy the objectives of PD6. The Defendant’s non-compliance in general with the PD6 process resulted in alternative dispute resolution not occurring before the issue of proceedings. The refusal to mediate expressed in the Defendant’s PD6 letter in December 2019 only exacerbated that.
Having said that, I believe it is relevant that had any alternative dispute resolution process occurred before proceedings were commenced, that was not likely to have resulted in a settlement of the claim having regard to the failure to resolve the proceedings at the later settlement conference. That settlement conference was held on 22 July 2020 and by then each party knew much more about the case of the other than was known before the issue of proceedings. I regard that as a good guide as to what might have occurred at any pre-action mediation.
The Plaintiffs also argued that the Defendant’s PD6 response was inadequate because of the lack of disclosure of details of the financial position of the Defendant. A letter dated 22 April 2020 from the Defendant’s solicitor advised that there was no prospect of the Plaintiffs being able to enforce any judgment against the Defendant because of the financial position of the Defendant, which it was said was due in part to the effects of the Covid 19 pandemic. The Plaintiffs argued that this should have been set out in the Defendant’s PD6 response and that the Plaintiffs might then have decided not to proceed against the Defendant. That could not be the case to the extent that it was due to the pandemic as that had not occurred at the time of the Defendant’s PD6 response.
In any case, this raises the question as to whether a PD6 letter needs to go beyond the merits of the claim and whether it needs to deal with peripheral matters such as insolvency and the like. Mr Roper argued, based on the objectives of PD6, that PD6 required disclosure of anything to do with the prospects of the case or the settlement of the case. I accept that a peripheral matter, such as insolvency, can relate to the latter if that was viewed as an isolated requirement. However, I do not consider that it is appropriate to view the requirements separately. Looking at PD6 as a whole and relying on various references in PD6, I have come to the conclusion that a party needs only to deal with the substance or merits of a claim in its PD6 letter.
The references I refer to are firstly, in the objective in paragraph 3.1 of PD6, the reference to an exchange of information about “a prospective legal claim”. Although that is stated in broad terms, I do not see any scope for reading that as going beyond the substance of the claim itself.
Secondly, paragraph 4.1 of PD6, which summarises the pre-action requirements, refers to the giving of “details of the claim”. Likewise this should not be read as going beyond the substance of the claim.
The references to a “claim” or the “plaintiff’s case” in paragraphs 6.1 and 6.2 of PD6 can only relate to the substance of the claim. Nothing else in any of the sub-paragraphs of paragraph 6 supports the extended meaning argued for by the Plaintiffs.
Paragraph 10.1 of PD6 can only refer to the substance of the claim as it refers to a defendant’s response to the plaintiff’s contentions. It is unlikely that a plaintiff would raise, even assuming that a plaintiff had the requisite knowledge, anything other than the substantive issues in a pre-action letter.
Paragraph 11 of PD6, which relates to alternative dispute resolution, requires parties to assess whether alternative dispute resolution would be more suitable than litigation. I read the references to “litigation” in that paragraph as being in the context of substantive issues. As peripheral matters can never be a “question”[21] in the proceedings, therefore such matters could not be the subject of the litigation.
I accept that paragraph 4.4 of PD6, which requires the parties to conduct negotiations with a view to arriving at a settlement, might be read as applying also to peripheral matters, particularly insolvency issues, as these might be taken into account when considering the settlement of a claim at the pre-commencement stage. However, that view of that paragraph is not apt when read in the context of the foregoing.
Likewise in respect of the chapeau to paragraph 13 of PD6, which sets out the cost sanctions. Although that is broad enough to support the extended meaning when viewed in isolation, it is not apt when PD6 is read as a whole.
Lastly, I note that the extended meaning put by the Plaintiffs is inconsistent with what was said in Want & Anor v Blackbear (NT) Pty Ltd,[22] cited in paragraph 5 above, particularly those parts were I have added emphasis.
I conclude therefore that the Defendant was not required to inform the Plaintiffs of its insolvency issues as part of its PD6 response.
This aspect however remains relevant for general discretionary considerations. Mr Roper referred me to the cases of Re TAI-AO Aluminium (Australia) Pty Ltd v Cordukes & Anor[23] (Re TAI-AO) and Verna Trading Pty Ltd v New India Assurance Co Ltd[24] which held that, in exceptional circumstances, the general costs discretion extends to empowering the Court to order a successful defendant to pay the costs of an unsuccessful plaintiff. In my view, that principle can equally apply to a case such as the present where the cost question arises as a result of the discontinuance of proceedings and where the matter has not been determined after trial.
Examples given in Re TAI-AO included:-
… rare cases where the defendant’s conduct has “brought about the proceeding” or “caused its continuance” or where the defendant “escapes the normal consequence of his blameworthy conduct by reason of some unexpected matter which he knew but which the plaintiff could not know”.[25]
In Re TAI-AO, the principle was applied in respect of the conduct of a defendant which denied the plaintiff inspection of documents which the plaintiff was otherwise entitled to.
Mr Roper relied on that principle, in conjunction with what he described as the deliberate actions of the Defendant in divesting funds via dividend payments. The evidence concerning that is in the financial statements of the Defendant for the year ending 30 June 2019, i.e., three months after the Defendant first received the Plaintiff’s PD6 letter and the telephone discussion with Ms Osbourne. That evidence[26] shows that a dividend of approximately $1.1 million was paid by the Defendant to a trust known as the Turner Investments Aust Family Trust in that financial year despite that the profit for the financial year was only $270,000. That, and the fact that retained earnings at the start of the 2019 financial year were recorded as $1.162 million, indicates that the dividends were paid out of reserves. It was argued that this was a deliberate ploy to avoid the Plaintiffs recovering a judgment against the Defendant. There was no evidence from the Defendant to contradict that, but other than the Plaintiffs’ argument, there was also no direct evidence to support that either.
Relevant to this consideration is what the Plaintiffs would have done had the financial position of the Defendant been disclosed earlier. Mr Roper attempted to negate the suggestion that the Plaintiffs would have proceeded to trial in any event in the hope of a possible clawback through liquidation. He noted, correctly I think, that that would be uncertain and costly. However, I am not entirely convinced that the Plaintiffs would not have proceeded. Indictors of this are firstly, that the Plaintiffs continued with the proceedings even after the possible settlement in 2014 and the resultant estoppel were raised in the Amended Defence. Also, this was a very sizable claim with damages being sought in the order of $900,000, and the Plaintiffs might have considered that the possibility of recovering such a large amount justified those risks.
Also relevant is that the Plaintiffs sought leave to end the proceedings approximately four months after the time when the Defendant’s financial position had been disclosed and further information requested by the Plaintiffs’ had been provided. The Defendant’s financial position was disclosed to the Plaintiffs by letter from the Defendant’s solicitors dated 23 April 2020. Then, by letter dated 18 May 2020, the Plaintiffs’ solicitors requested more information. That further information was provided by letters dated 4 and 5 June 2020. More information was then requested by the Plaintiffs by letter dated 22 June 2020 and was provided by the Defendant’s solicitors by letter of 25 June 2020. The settlement conference was held in the intervening period, specifically on 22 July 2020. After that time the evidence shows that the matter proceeded rather routinely until the Plaintiffs wrote to the Defendant’s solicitors by letter dated 9 November 2020 proposing a discontinuance of the proceedings on the basis that each party bore their own costs.[27] That offer not having been accepted by the Defendant, the extant summons was then filed. As a period of four to six months is longer than I think was required for the Plaintiffs’ to assess the Defendant’s financial position, that casts a doubt on the Plaintiffs’ claim that the Defendant’s financial position was motivation for seeking to discontinue the proceedings, or at least as the sole motivation.
Turning now to deal with the Plaintiffs’ complaint based on the failure of the Defendant to provide a PD6 response prior to the commencement of proceedings. That the Defendant failed to do so is patently obvious. There was no correspondence at all from the Defendant in response to the Plaintiffs’ PD6 letter before the issue of proceedings. The Defendant did not provide a response to the Plaintiffs’ PD6 letter in the succeeding eight months until the issue of proceedings and despite some follow up communications from the Plaintiff’s solicitors. The only question is whether the Defendant’s non-compliance is justified and should be excused as part of the exercise of the Court’s discretion. The only possible basis argued for that was the telephone discussions occurring between Mr Turner and Ms Osborne in March 2019.
Mr Turner claims that, in that telephone discussion, Ms Osborne told him that he did not need to do anything further. If I were to accept the Defendant’s version, that could be a basis for excusing the default by the Defendant in complying with its PD6 obligations on discretionary grounds. However, for the reasons that follow, I accept Ms Osborne’s version.
I deal first with a preliminary point. The Defendant’s written submissions contain references to discussions between Mr Turner and Ms Osborne which are not supported by the evidence. Those submissions, when compared with the Defendant’s affidavit evidence, add that there were discussions concerning a change to the shareholding of the Defendant which had resulted in changes to the Defendant’s computer systems and which in turn had resulted in documents being unavailable. Although I cannot see the relevance of that, in any case I disregard the Defendant’s written submissions to the extent that those submissions are not supported by the evidence.
Given the extent of the telephone discussion as set out in Ryder Affidavit No 1 and the further affidavit of Mr Ryder made 3 December 2020 (Ryder Affidavit No 2), it would appear very unlikely that the comment that is now attributed to Ms Osborne would have been made. That is because both affidavits by Mr Ryder say that, up to the time of the disputed statement, all that Mr Turner had said to Ms Osbourne was that he had just received the Plaintiffs’ PD6 letter, that he (presumably meaning the Defendant) was not liable and that he asked Ms Osbourne what the claim was about.
Ryder Affidavit No 2 adds details of discussions regarding an intervening change of shareholders of the Defendant and the question of whether therefore there could be some come back against the former shareholders. Ms Osborne is said to have told Mr Turner that, correctly it seems from basic corporations law principles, the current proceedings only related to the Defendant and not the Defendant’s shareholders. That goes beyond what was said in the Defendant’s PD6 letter concerning that telephone discussion, but I do not think that anything turns on that for current purposes. It also goes beyond what was contained in Ryder Affidavit No 1, which was sworn only the day before. What is unknown is where this discussion fits in to the sequence of the discussion but again, I do not consider that anything turns on that for current purposes.
If that is the extent of the discussions to the point where Ms Osborne supposedly made the subject comment, it does not logically follow that Ms Osborne would have responded as is claimed. I cannot see why she would accept Mr Turner’s assertion that the Defendant was not liable, especially in light of him asking what the claim was about, given her own instructions to the contrary from her clients. Even on a standalone basis, it is also very unlikely that a legal practitioner would have made such a clearly incorrect statement to an opposing party in respect of such a sizeable claim as in the current case. I accept Ms Osborne's version in relation to the disputed statement.

That however does not end the matter. Mr Roper submitted that all the Plaintiffs had to demonstrate to secure a costs order pursuant to paragraph 13 of PD6 was that the Defendant did not comply with PD6 and that, had the Defendant complied, there is a likelihood, or a potential that either the proceedings may not have been commenced, or that the proceedings were commenced in circumstances which involved additional costs. I think that is largely correct but, more precisely, on the wording of paragraph 13 of PD6, the Court is empowered to order costs if it is of the opinion that the non-compliance had the specified effects. Importantly, even if those specified effects are satisfied, an award of costs is still discretionary.
What might have occurred if a proper PD6 process had been conducted is therefore relevant. I am not satisfied that the Plaintiffs would have done anything differently had there been proper compliance, either at the time that the Defendant’s PD6 letter actually issued, or when it ought to have issued. In my view what occurred in the context of the Plaintiffs’ initial claim against the Defendant in 2014 is indicative of what might have occurred in that event. That is discussed commencing at paragraph 27. That satisfies me that both parties considered that they had a strong case. Also, the correspondence from the Defendant’s solicitors in 2014, which was consistent with the Defendant’s PD6 response in December 2019, did not dissuade the Plaintiffs from claiming again in 2019.
Further, the subsequent extensive pleading in the Reply to the Amended Defence satisfies me that both the accord and satisfaction and estoppel defences were strongly disputed and I conclude that prior knowledge of those defences in a PD6 letter by the Defendant would not have made any difference to the Plaintiffs. There may be some basis to suggest that additional costs were incurred as a result of the non-compliance by the Defendant with PD6 in respect of the accord and satisfaction and the estoppel defences as that necessitated amended pleadings. However, any such additional costs were more a consequence of the amendment of the Defence and not of any non-compliance by the Defendant with PD6 and costs in relation to that is specifically provided for in rule 63.11(7) of the SCR.
I think all of that is very telling and I conclude that the Plaintiffs would nonetheless have continued with the claim and issued the current proceedings had a proper PD6 response been provided in a timely fashion.
Although I have determined that that PD6 did not require the Defendant to disclose the insolvency issues, I agree that this remains relevant in respect of the exercise of the general discretion for the reasons set out in paragraphs 51-56 above.
In that respect exceptional circumstances are required for the Court to order costs against a successful defendant in the course of the exercise of the Court’s overall discretion as to costs. Before I would be prepared to find exceptional circumstances in the context of the dividend payment discussed above, I would want to be satisfied that the dividend was solely paid to thwart the possibility of the Plaintiffs recovering a judgment against the Defendant. Understandably, the Plaintiffs have no direct evidence to establish that but there is also no clear or strong evidence to support the drawing of an inference to that effect. The Plaintiffs conceded that it could not demonstrated that the dividend payment was deliberately done for the sole purpose of depleting the Defendant’s reserves.[28] That was an appropriate concession having regard to the available evidence.
I am not prepared to draw an inference to that effect because, on the available evidence, the dividend may have been paid for legitimate purposes other than to deplete the Defendant’s financial reserves. Relevant to that conclusion is that the dividend payment occurred sometime in the 2019 financial year, although precisely when is not clear. It may have occurred prior to Mr Turner receiving the Plaintiffs’ PD6 letter. An inference favourable to the Plaintiffs in this respect could only be drawn if the dividend payment occurred after, but proximate to, the telephone discussions between Mr Turner and Ms Osborne.
Further, the disclosure of the Defendant’s financial circumstances occurred almost 10 months after the end of the 2019 financial year, a considerable period of time after the latest time that the dividend could have been paid, which is 30 June 2019. A more proximate time to the end of the relevant financial year might have strengthened the case for the required inference. Instead, that 10 month period is consistent with normally occurring events and importantly, by that time the economic impacts from the Covid 19 pandemic had commenced and I note that was one of the matters put by the Defendant to the Plaintiffs to explain the then current financial plight of the Defendant. The claim of the Defendant concerning the adverse effects from the pandemic were at least temporally consistent.
Likewise if I was convinced that contemplation of depleting the Defendant’s financial reserves was the motive for Mr Turner asking Ms Osborne about possible comebacks against shareholders, the inference required by the Plaintiffs might have been able to be drawn. However, countering that is that Mr Turner asked the question in a different context, specifically about the liability of former shareholders. The timing of the question is also relevant. It came shortly after Mr Turner had received the Plaintiffs’ PD6 letter. It is very unlikely that Mr Turner had plans to thwart the Plaintiffs’ claim at that point, and especially in light of the 2014 dispute as that liability was denied at the time of the 2014 dispute as well as in the course of the telephone discussion with Ms Osborne. It was also denied after the issue of proceedings as the Defendant has maintained the ongoing denial of liability. Lastly, the only evidence of this aspect of the telephone discussion comes from the Defendant. The Defendant’s evidence in this respect is unchallenged.
A considerable period of time elapsed between the Plaintiffs’ initial PD6 letter on 4 February 2019 and the issue of proceedings on 8 October 2019. The Defendant’s non-compliance with its PD6 obligations is manifest. The extent of the Defendant’s unjustified failure to comply with PD6 and the need to ensure that parties properly engage in the PD6 process leads me to conclude that the Defendant’s failure needs to be addressed in a costs order in the exercise of my discretion notwithstanding that the Plaintiffs may have not done anything differently had the Defendant provided a proper PD6 letter. PD6 is an important initiative designed to ensure the most efficient utilisation of the Court’s resources and the proper management of civil cases. Considerations in respect of the conduct of a party that amounts to non-compliance with PD6 are not limited to the cost sanctions in paragraph 13 of PD6. That conduct can also be taken into account for the purposes of the general discretion of the Court to order costs. The order I intend to make is intended to encourage proper compliance with the requirements of PD6.
Having regard to the need to ensure that parties to litigation fully and properly comply with the requirements of PD6, noting the extent of the Defendant’s failure to comply with PD6, including the inadequacy of the Defendant’s belated PD6 response and the refusal to mediate, and having regard to my view that the Plaintiffs would have issued proceedings in any case, I think that the appropriate order is that the Defendant pay the Plaintiffs’ costs, on the standard basis, from 12 April 2019, by which time the Defendant ought to have provided its PD6 response, and until the date of the Defendant’s PD6 letter i.e., 12 December 2019, save and except for any costs of and incidental to the issue of proceedings and all attendances normally required in respect of the conduct of the proceedings. Otherwise each party is to bear their own costs.
In addition there will be an order that the Plaintiffs have leave to discontinue the proceedings.
I will hear the parties as to any other matters or consequential orders.

[1][2014] NTCA 3.

[2][2014] NTCA 3 at para 43.

[3][2012] 32 NTLR 1.

[4][2012] 32 NTLR 1 at para 44.

[5]Matzat v Gove Flying Club Inc (1998) NTSC 36; Oshlack v Richmond River Council (1998) 193 CLR 72; Want & Anor v Blackbear (NT) Pty Ltd [2014] NTCA 3.

[6][2017] NTSC 55.

[7]It was after the initial directions hearing held on 6 November 2019 pursuant to rule 48.04 of the SCR at which time the Defendant was directed to provide a PD6 response by 4 December 2019.

[8]NT Pubco Pty Ltd & Anor v DNPW Pty Ltd (Subject to a Deed of Company Arrangement) & Ors [2011] NTSC 51; Parap Hotel Pty Ltd & Ors v Northern Territory Planning Authority & Ors (1993) 112 FLR 336.

[9]Paragraphs 8.4 and 8.5 of the Defence filed 23 January 2020.

[10]Frost Affidavit at para 10 and annexure KEF5.

[11][2014] NTCA 3.

[12]Ryder Affidavit No 1 at para 67.

[13]Ryder Affidavit No 1 at para 20.

[14]Frost Affidavit, at para 9 and annexure KEF4.

[15]Ryder Affidavit No 1 at para 43.

[16]Defendant’s written submissions filed 22 December 2020, at para 49.

[17]Frost Affidavit at para 21.2(c) and annexure KEF4.

[18]Jones v Dunkel (1959) 101 CLR 298.

[19]Pursuant to rule 48.12 of the SCR.

[20]The test for deciding whether or not to order a settlement conference pursuant to rule 48.12(1) is undemanding namely, if the Court is of the opinion that a proceeding is capable of settlement, or ought to be settled.

[21]See the definition of that term in rule 1.09(1) of the SCR.

[22][2014] NTCA 3.

[23][2004] FCA 1488.

[24][1991] 1 VR 129.

[25][2004] FCA 1488 at para 10.

[26]Annexure CO1 to the Osbourne Affidavit.

[27]See generally Frost Affidavit annexure KEF5 and Ryder Affidavit No 1, annexures KDR14, KDR16, KDR19, KDR20 and KDR21 and Osbourne Affidavit, para 6 and annexure CO2.

[28]Transcript at p 20.6.