Valeondis v Permanent Trustee Aust Ltd (No 2) - [2009] SADC 24

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
VALEONDIS v PERMANENT TRUSTEE AUST LTD & ORS (No 2)
[2009] SADC 24
Judgment of His Honour Judge Lovell
16 March 2009
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE
Plaintiff claims costs against the first to fourth defendants on solicitor/client basis - seeks Bullock order in relation to the costs of the fifth defendant - question of late discovery - fifth defendant seeks solicitor/client costs against the first to fourth defendants pursuant to a "Calderbank" offer.
Held: First to fourth defendants to pay plaintiff's costs on solicitor/client basis subject to plaintiff not recovering costs for 1 day and instead first to fourth defendants having party/party costs for that day - Bullock order granted - fifth defendant's application for solicitor/client costs dismissed.
District Court Civil Rules 1987 Rules 41 & 41.04; District Court Civil Rules 2006 Rules 8, 187, 188, 263, 263(1), 263(3), referred to.
Cretazzo v Lombardi (1975) 13 SASR 4; Bullock v The London General Omnibus Company and Others [1907] 1 KB 264; Cornwall & Ors v Rowan (No 2) [2005] SASC 122; Gould & Anor v Vaggelas & Anor (1984) 157 CLR 215; Fennell v Supervision and Engineering Services Holdings Pty Ltd and Santos Ltd (1988) 47 SASR 6; Glenmont Investments Pty Ltd v O'Loughlin and Others (No 3) (2001) 79 SASR 288; Roads and Traffic Authority of New South Wales v Dederer and Another (2007) 233 ALR 761; Calderbank v Calderbank (1975) 3 All ER 333; Re Wilcox: Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Hartford Holdings v CP (Adelaide) Pty Ltd [2004] SASC 161; Pirrotta v Citibank and Others (1998) 72 SASR 259; Commonwealth of Australia v Gretton [2008] NSWCA 117, discussed.

VALEONDIS v PERMANENT TRUSTEE AUST LTD & ORS (No 2)
[2009] SADC 24
Background

On the 31 October 2008 I entered judgment for the plaintiff against the first to fourth defendants in the sum of $437,233.50 inclusive of interest. I dismissed the plaintiff’s claim against the fifth defendant.
The plaintiff claims costs on a solicitor/client basis against the first to fourth defendants. He also seeks a “Bullock” order in relation to the costs of the successful fifth defendant.
The first to fourth defendants do not oppose an order for party/party costs. However they seek costs for three days of the trial they allege were wasted due to the failure of the plaintiff to provide proper discovery. They also oppose an order for solicitor/client costs.
The first to fourth defendants oppose the making of a “Bullock” order. The fifth defendant seeks solicitor/client costs against the first to fourth defendants either by way of a Sanderson order or an order on the Contribution Notices.
Plaintiff’s Costs
This action was governed by the 1987 Rules. However under the District Court Civil Rules 2006, the rules relating to costs (with some exceptions) apply to actions including actions commenced under the 1987 Rules.[1]
[1] 6DCR 8.
The Court’s discretion as to costs is found in 6DCR 263. The starting point is that as a general rule costs follow the event.[2]
[2] 6DCR 263 (1).
In exercising the discretion the Court may have regard to any offer to consent to judgment or other attempt to settle the action or an issue involved in the action[3]. 6R 187 deals with the filing of offers and 6R 188 deals with the various consequences of the offers. The wording of the new Rules is slightly different although the penal nature of the Rules remains the same. Under the 2006 Rules the Court retains the discretion to relieve a party from the strict operation of the Rules relating to filed offers.
[3] 6DCR 263 (3).
The plaintiff on the 23 March 2006 lodged an offer to consent to judgment in the sum of $260,000 plus costs. The judgment awarded to the plaintiff significantly exceeded that offer.
The offer to consent to judgment was lodged pursuant to r 41 of the 1987 Rules. Rule 41.04 states that where in a case such as this that the plaintiff has bettered the lodged offer (and the defendant has not accepted it) the Court “unless it thinks proper to order otherwise, shall order the defendants pay the whole of the plaintiff’s action to be taxed as between solicitor and client”. Thus the Court always had a discretion to relieve the defendant of the provision of the Rule where it thought “proper to order otherwise”.
Mr Frayne, for the unsuccessful defendants, accepted that the plaintiff received an award significantly in excess of the lodged offer. He accepted that the plaintiff should have his costs on a party/party basis. However, he argued against the plaintiff’s application for solicitor/client costs for the whole of the action on the basis that the plaintiff had argued two grounds of negligence only one of which was successful. The plaintiff had alleged a deficiency in the design of the lift and had been wholly unsuccessful in making out that allegation.
There are circumstances where a court may deprive a successful plaintiff of some of his costs on such a basis.[4] In my view this is not such a case.
[4] Cretazzo v Lombardi (1975) 13 SASR 4.
Whilst the credit of the plaintiff caused me some concern in parts, I did not find that he was exaggerating his injuries or that in some way he tried to mislead me about the claim. Further, the evidence of the design of the lift and the evidence relating to how the ceiling came to fall overlapped to a considerable extent. It could not be said that the two issues were totally distinct. It could not be said that the issue of the design of the lift was frivolous. From the plaintiff’s perspective there was an arguable case on the issue albeit one that was ultimately unsuccessful.
As Mr Harms pointed out the offer lodged by the plaintiff was a “risks” offer. It was meant to encompass the risk of failure in relation to any number of issues. The defendants had the opportunity to accept the offer prior to trial but did not do so. The rules relating to such offers are penal. They are designed to encourage parties to assess their risk and consider settlement.
Pursuant to 6DCR 263(3) in exercising my discretion, I may have regard to the offer lodged by the plaintiff. The unsuccessful defendants prior to trial made no attempt to settle the case.
Taking all those matters into account I see no reason why the plaintiff should not have the benefit arising from their lodged offer and I order that the first to fourth defendants pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client.
That order is subject to an exception. Mr Frayne argued that the trial was delayed on occasions by the failure of the plaintiff to provide adequate and timely discovery of documents relating to his entities involved in property development. I accept that, as argued by Mr Harms for the plaintiff, some of the documents were not the plaintiff’s but held by entities in which he had an interest. They were company documents. However the plaintiff knew prior to trial, that he had to show that he had not earned income for the relevant periods and steps should have been taken before trial to ensure such documentation was made available to the defendants.
The trial was delayed to some extent by the late discovery of such documentation. It is very difficult to assess how much time was lost by the delay in the provision of such documentation. Mr Frayne suggested three days were lost. I think that is an overestimation. It is not possible to be precise. The case was adjourned for a period of time and some discovery was made during the intervening period. I accept however there was some delay caused by the late discovery by the plaintiff. Whilst I have little doubt that the defendants spent some considerable time examining the documents produced that was time that would have been spent no matter when the documents were produced.
Taking all the matters into account I order that the plaintiff not receive costs for one day of the trial and the first to fourth defendants are to have their costs on a party/party basis for that one day. The plaintiff is to pay the fifth defendant’s costs for that one day.
Bullock order
In certain circumstances a court will order an unsuccessful defendant to pay not only the plaintiff’s costs but also the plaintiff’s liability for costs to a successful defendant (Bullock v The London General Omnibus Company and Others [1907] 1 KB 264: Bullock order).
The circumstances giving rise to the consideration of a “Bullock” order were discussed recently in Cornwall & Ors v Rowan (No 2).[5] The Court, having discussed the various tests espoused in Gould & Anor v Vaggelas & Anor[6] accepted the analysis of that decision by Von Doussa J in Fennell v Supervision and Engineering Services Holdings Pty Ltd and Santos Ltd.[7] Von Doussa J considered that a Bullock order may be made where the costs in question have been reasonably and properly incurred by the plaintiff as between him and the unsuccessful defendant: as between them those costs will be so incurred where the conduct of the unsuccessful defendant in relation to the plaintiff’s claim shows that the joinder of the successful defendant was reasonable and proper to ensure recovery.[8]
[5] [2005] SASC 122.
[6] (1984) 157 CLR 215.
[7] (1988) 47 SASR 6.
[8] Supra at p 19.
As was emphasized in Glenmont Investments Pty Ltd v O’Loughlin and Others (No 3)[9] a court should always bear in mind it is dealing with a discretion to be exercised on principle. There is no precise rule.
[9] (2001) 79 SASR 288.
I do not think the decision in Roads and Traffic Authority of New South Wales v Dederer and Another[10] affects those principles.
[10] (2007) 238 ALR 761.
Mr Harms submitted the Court in the exercise of its discretion should make a “Bullock order” such that the unsuccessful defendants pay the costs of the successful defendant. The first to fourth defendants opposed such an order.
Was it reasonable for the plaintiff to sue the fifth defendant?
The lift ceiling fell on the plaintiff whilst he was picking up a parcel from a client. The ceiling had recently been reinstalled on two occasions by the fifth defendant at the request of the fourth defendant. The most recent reinstallation was five days before the incident.
By letter of 17 January 2005 the solicitors for the fourth defendant provided the plaintiff’s solicitors with documents relating to the fifth defendant’s work on the lift ceiling. The author stated:
The fact that the ceiling apparently collapsed on 22 August 2000 causing your client’s injury, may also suggest that the work was not properly carried out by Kennedy Property Services on 17 August 2000.
Based on the documentation that we have now received it seems that Kennedy ought to be joined as a party to these proceedings. Please let us know whether your client wishes to take this step.
Given the information in the fourth defendants’ position the comments were sensible and appropriate. It was clearly reasonable for the plaintiff to join the fifth defendant to the proceedings. Mr Frayne did not argue against that position.
Conduct by the first to fourth defendants
Mr Frayne submitted that the first to fourth defendants did nothing during the trial which would amount to “conduct” such as to “make it fair to impose some liability” on it for the costs of the successful defendant.
Mr Frayne accepted that the first to fourth defendants had filed Contribution Notices against the fifth defendant. However he submitted that the Contribution Notices were only “defensive” Contribution Notices. He submitted that no positive case was put against the fifth defendant by the first to fourth defendants and the Contribution Notices amounted to no more than a position of “if you have done something wrong we want you to contribute”.
Whilst I accept the submission by Mr Frayne that no positive case was put by him to the fifth defendant’s witnesses I do not accept that “conduct” as mentioned should be construed so narrowly.
Having suggested to the plaintiff that he should consider joining the fifth defendant as a party, the first to fourth defendants then issued Contribution Notices against the fifth defendant. They assert a positive case against the fifth defendant. Whilst tactically the first to fourth defendants may have decided, during the course of the fifth defendant’s evidence, not to put a positive case, the effect of the Contribution Notices were to hold the fifth defendant in the action even if the plaintiff had decided he had no case against the fifth defendant.
Further, it was accepted that the first to fourth defendants had in its possession an opinion from an expert witness implicating the fifth defendant. As it transpired the first to fourth defendants did not call the witness. In accordance with the Court rules the report had been disclosed to the plaintiff and the fifth defendant. Whilst there was some interposition of witnesses the first to fourth defendants’ position of not putting a positive case did not become clear until the plaintiff’s case and the first to fourth defendants’ case closed. It was perfectly reasonable for the plaintiff to proceed on the basis that the first to fourth defendants and the fifth defendant were making allegations of negligence against each other and would call evidence to substantiate those allegations.
In assessing the “conduct” of the first to fourth defendants in my view the Court should look at their conduct during the entirety of the legal proceedings.
Given all of the circumstances of this case I am satisfied that the conduct of the first to fourth defendants was such that the joinder of the successful defendant was reasonable and proper to ensure recovery. In my view it is fair to impose liability on the first to fourth defendants for the costs of the successful defendant.
I order that the fifth defendant is entitled to its party and party costs as against the plaintiff and I order that those costs be paid by the first to fourth defendants pursuant to a “Bullock order”.
The fifth defendant’s claim for indemnity costs
The fifth defendant claims costs on an indemnity basis against the first to fourth defendants. No such claim was made, nor could it be made, against the plaintiff.
The basis of the claim for indemnity costs lay in offers made by the fifth defendant to the unsuccessful defendants to settle the matter. These offers were not accepted.
On the 9 February 2007 the solicitors for the fifth defendant wrote to the solicitors for the first to fourth defendants. The letter set out what in essence was the defence of the fifth defendant. Further an offer was made to settle the matter. The fifth defendant offered to contribute 30% of the plaintiff’s claim plus costs. The offer was expressed to be made in accordance with the principles applied in Calderbank v Calderbank (1975) 3 All ER 333. Further it was stated in effect that an order would be sought for indemnity costs if the first to fourth defendants did not better the offer. The letter was faxed to Minter Ellison on 9 February 2007. There was no response from the first to fourth solicitors.
The trial was listed to commence on the 5 March 2007.
On the 26 February 2007 counsel for the fifth defendant wrote to counsel for the first to fourth defendants. The letter referred to “discussions of the 23^rd instant”. I was not given any details of those discussions.
The letter contained an offer. The offer was as follows:
1. That our client will pay to your client(s) the sum of $50,000.00 all inclusive.
2.That your client(s) will take over conduct of the proceedings on behalf of Kennedy Property Services.
3.That your client(s) will discontinue its claim for contribution against Kennedy Property Services.
4.That your client(s) will provide a full and complete indemnity with respect to this action.
5.That Kennedy Property Services will bear its own costs to date.
The offer was expressed to only be open until 5 pm on Tuesday 27 February 2007. There was no mention as to whether the offer contained in the letter of the 9 February 2000 remained open or was withdrawn. The offer of the 9 February 2000 had been expressed to be open for 21 days. That period had not expired by the time of the letter of the 26 February 2000.
In my view the offer contained in the letter of the 26 February 2000 must have had the effect of withdrawing the offer contained in the letter of the 9 February 2000. First, there was no mention of keeping the first offer open as an alternative in the letter of the 26 February 2000. Secondly, the offer contained in the letter of the 26 February 2000 was, when viewed in the context of the case, a substantially less attractive offer of settlement. It was expressed to be open to acceptance for less than 48 hours.
Generally a court will only order costs on a solicitor and client or indemnity basis where the justice of the case warrants such an order, or whether there is some “special or unusual features” which justifies a departure from the usual party and party costs order. The question must be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.[11] Factors which have been considered relevant (amongst others) include the making of irrelevant allegations of fraud, proceedings being issued for an ulterior motive, an imprudent refusal of an offer to compromise and a wilful disregard of known facts.[12]
[11] Re Wilcox: Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151.
[12] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Hartford Holdings Pty Ltd v CP (Adelaide) Pty Ltd [2004] SASC 161.
The exercise of the discretion involved in a case such as this where the Rules of Court do not provide a specific mechanism for the filing of an offer was discussed in Pirrotta v Citibank Ltd and Others.[13]
[13] (1998) 72 SASR 259.
The onus is on the party making a Calderbank offer to satisfy the Court that it should exercise the discretion in its favour. There are public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made.[14]
[14] Commonwealth of Australia v Gretton [2008] NSWCA 117.
In this matter the first to fourth defendants were not present at the time the lift ceiling fell. They could only rely on the plaintiff’s original letter of claim and later “Particulars of Claim” to investigate the incident. The fifth defendant had been engaged to reinstall the ceiling a few days before the incident. Whilst it is correct that the fifth defendant wrote to the first to fourth defendants on the 9 February 2007 setting out its defence, in reality it consisted largely of blanket denials and an assertion of good workmanship. However the first to fourth defendants had not, at the time shortly prior to the incident, complained of any poor workmanship.
The “Calderbank” offer made on 9 February 2007 was to pay 30% of the plaintiff’s claim plus 30% of the plaintiff’s costs and disbursements. It was expressed to be open for a period of 21 days. However, as discussed earlier, a subsequent offer of an “all inclusive” figure of $50,000 was made before the expiration of the 21 days. This was only open for approximately 48 hours. It was a substantially less generous offer. It was expressed to be open for such a short time “in the interest of avoiding trial costs, including preparation for trial”. The offer was to expire at 5 pm on 27 February 2007. As I have mentioned it revoked the earlier offer.
As it was stated in Pirrotta v Citibank Ltd and Others[15] when the Rules do not provide a framework for a formal offer, the informal offer should be couched in terms which as far as reasonably practicable, conform to the formal rules.[16] It could not be said that the second offer conformed to the formal rules in a practical sense.
[15] Supra.
[16] Supra at p 267.

Whilst the fifth defendant should not be criticised for making multiple offers, its final offer was pay $50,000 for the first to fourth defendants to assume full responsibility for the actions of the fifth defendant. Whilst I accept that this offer had to be viewed against the background of the earlier offer I am not persuaded that the fifth defendant has established that it was imprudent for the first to fourth defendants to reject one or either of the offers.
The first to fourth defendants did not wilfully ignore “known” facts. Consideration of whether there was an imprudent refusal of an offer is only one of a number of factors to consider in relation to the discretion.
Taking all the matters into account I am not persuaded to exercise my discretion to order indemnity costs as between the fifth defendant and the first to fourth defendants.
I make the following orders:
1.The plaintiff is to have his costs on a solicitor and client basis against the first to fourth defendants for the whole of the action subject to the following orders.
2.The first to fourth defendants is to have its costs on a party and party basis for 1 day of the trial and the plaintiff is to receive no costs for that 1 day.
3.The fifth defendant is entitled to its costs on a party and party basis and I make a “Bullock” order against the first to fourth defendants in that respect.
4.The fifth defendant’s application for indemnity costs against the first to fourth defendants is dismissed.