Vivian Fraser & Associates Pty Ltd v Shipton

[1999] FCA 228

Vivian Fraser & Associates Pty Limited and Vivian Fraser v William John Shipton, Jose De La Vegva and Wedderlight-Delmo Pty Limited
[1999] FCA 228
No. NG 680 of 1994
Number of pages - 3
Practice and Procedure

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

LINDGREN J

Practice and Procedure - costs - indemnity costs sought on basis that claim made in wilful disregard of known facts - submission based on individual applicant's concession in cross-examination - whether concession satisfactory basis for indemnity costs order - whether matter conceded fatal to all causes of action pleaded.

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397 cited

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 cited

J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 cited

Re Wilcox; Ex parte Venture Industries Pty Ltd (No. 2) (1996) 72 FCR 151 cited

Rosniak v Government Insurance Office (1997) 41 NSWLR 608 cited

SYDNEY, 25 February 1999 (hearing), 1 March 1999 (decision)

#DATE 1:3:1999

Appearances

Counsel for the Applicant: Ms C A Needham

Counsel for the Respondent: Mr I M Jackman

Solicitors for the Respondents: Dobes and Andrews

THE COURT ORDERS THAT:

(1) The application be dismissed.

(2) The applicants pay the respondents' costs of the proceeding.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LINDGREN J

1. In this matter I published reasons for judgment on 5 February 1999. The only order then made was that the application stand over to 12 February for mention. On that day, Mr Fraser, whose former solicitors had filed a notice of removal of solicitor, indicated that he did not wish to apply for leave to amend his pleading to pursue a matter which I had raised in the reasons for judgment. Also on that day, Mr Jackman, counsel for the respondents, indicated that his clients wished to apply for an order for costs on an indemnity basis. Since that time, written submissions have been made on behalf of the respondents, and Ms Needham of counsel, who had appeared for the applicants on the substantive hearing, has made submissions on their behalf in relation to the indemnity costs issue.

2. The respondents put the case for indemnity costs on the specific basis that Mr Fraser conceded in cross-examination that he had not been engaged as project architect for the entire project. The respondents refer to various passages in the reasons for judgment in support. It follows, they submit, that the applicants brought their claims in wilful disregard of known facts.

3. The power to award costs is given by s 43 of the Federal Court of Australia Act 1976 (Cth). The discretion is a general one but must be exercised judicially. The classes of case in which indemnity costs have been awarded are instructive but they are not binding: all the circumstances of each case must be taken into account and there are always differences between cases.

4. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397 (FCA), Woodward J described the relevant class of case supporting an award of indemnity costs in these terms:

"... whenever it appears that an action has been commenced or continued in circumstances where the applicant properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases, are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion." (at 401 - emphasis supplied).

5. In Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J referred to the relevant class of case as one in which proceedings are commenced:

" ... in wilful disregard of known facts or clearly established law." (at 233)

6. In J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) (1993) 46 IR 301, French J noted that it is not a necessary condition of the power to award indemnity costs in a case of this class that a collateral purpose or some species of fraud be established. His Honour said:

"... It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case." (at 303 - emphasis supplied)

7. In Re Wilcox: Ex parte Venture Industries Pty Ltd (No. 2) (1996) 72 FCR 151, a Full Court accepted that ordinarily party and party costs are awarded and that a departure from this practice requires the existence of special circumstances. The same point was made by Mason P of the New South Wales Court of Appeal in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 where his Honour said:

" ... the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker: ... "

8. Notwithstanding Mr Jackman's persuasive submissions, I am not convinced that the present case is one in which an order for indemnity costs should be made.

9. The gist of the concession in cross-examination was that in the absence of agreement on Mr Fraser's fee, he had not been engaged as the architect for the entire project, that is, that a fundamental aspect of his engagement for the entire project remained outstanding and that until that aspect was agreed he was not the project architect. The respondents' case for indemnity costs is that Mr Fraser's concession necessarily spelt failure for the entirety of the applicants' case.

10. I do not accept the submission for two overlapping reasons. First, I have difficulty with the proposition that a concession of this kind made in cross-examination here necessarily indicates that the case should have been perceived from the start to be hopeless. The argument seems to be that an applicant should, if an order for indemnity costs is to be avoided, reveal to his legal advisers, and that they should advise him on, any factual aspect of the case already known to him which, it later transpires, is determinative of the result. In my view, such a broad proposition is not suggested by the passages from the cases set out above.

11. This is not to say that a concession in cross-examination might never provide the basis for an indemnity costs order. But the concession, unlike the one here, would have to establish that the applicant had proceeded in wilful disregard of known facts. Even though a concession goes to a matter which proves to be decisive of a case, it would take the "wilful disregard" or "hopelessness" notion too far to say that in all such cases indemnity costs should be ordered. In the present case, it has always been common ground that the amount of the architect's fee had not been agreed upon. What the applicants did was to plead by reference to various legal categories, forms of obligation consistent with the absence of agreement on the amount of the fee.

12. Taking a broad view of matters and not detracting from anything said in the earlier reasons for judgment, I think that the applicants believed that they had suffered unjust treatment at the hands of the respondents. No doubt they still believe this. It would be surprising that Mr Fraser's concession, having regard to the sophisticated way in which the applicants' case was pleaded, should have the extreme consequence for which the respondents now contend.

13. The second broad ground on which I think the case for indemnity costs is not made out is that the pleading did put other constructions on the facts and that these constructions were consistent with, even if made difficult by, Mr Fraser's concession. I need not discuss the pleading in detail but it suffices to say that in the contractual claim, paras 9, 17, 18, 24 and 25 suggest a case which recognises that neither applicant had in fact been formally engaged as project architect, that is, that something remained to be agreed. Perhaps the position is expressed most clearly in para 18 in which it is pleaded that it was a term of the contractual arrangement that in consideration of the performance of work for a reduced fee, the respondents would agree to the "full fee (reasonably demanded)". Similarly, para 24 refers to the respondents' refusal in bad faith to negotiate for, or to accept, the fee proposed by the applicants.

14. While I have been against the applicants on this aspect of their case also, the present point is simply that Mr Fraser's concession that neither applicant had to its or his knowledge been engaged as project architect for the entire project, is open to a construction consistent with success on the case as pleaded.

15. Similar observations apply to the case of misleading and deceptive conduct; see paras 28 and 29 of the third further amended statement of claim.

16. In the result, I do not think that the case falls within the category of case recognised in the authorities as one in which an order for indemnity costs is called for.

17. The Court orders that:

(1) The application be dismissed.

(2) The applicants pay the respondents' costs of the proceeding.