Walhane & Ors v Wendys Supa Sundaes & Ors (No 2) No. DCCIV-96-1580

Mark Joseph Walhane, Sarah Jane Walhane & Arumah Pty Ltd (No.2) (Plaintiffs)
Wendy’s Supa Sundaes Pty Ltd, Daroko Pty Ltd, Davrog Pty Ltd, Trevor Herriot & Kerry Stirling Hanel
(Defendants)
Christine Alice Hanel
(Third Party)
[2000] SADC D62

Judge C R Lee
Civil

These reasons are supplementary to those which I delivered on 30 March 2000, and are for the purpose of making final orders in the proceedings. The orders that I make with respect to costs are not intended to derogate from existing orders with respect to costs.
Arumah is entitled, as against Daroko, to judgment on the claim in the sum of $45,224, being $42,500 with respect to the assignment issue and $2724 with respect to the conversion. Arumah is also entitled to interest between 9 December 1996 and today’s date, calculated to the nearest dollar as follows:-
12.2% on $23,782.81 (balance of bank loan) $10,024
5.4% on $21,441.19 ($42,500 less $23,782.81 plus $2724) $ 4,000 $14,024 ======
The counterclaim must be dismissed, because it relates to charges which would not have been incurred by Arumah if Daroko had allowed settlement on the sale to proceed on 9 December 1996. The plaintiffs are entitled to recover from Daroko any costs that they expended in defence of the counterclaim.
With respect to Arumah’s occupation of the store between 9 and 30 December 1996, there is no evidence that Arumah received a net offsetting benefit in that period. So, whether in relation to the counterclaim or in relation to mitigation of the claim, Daroko is not entitled to any allowance in that regard.
By contribution and third party notices, Wendys sought, amongst other claims, to be indemnified by Daroko and Mr Hanel (in the case of the contribution notice), and by Mrs Hanel (in the case of the third party notice), “in respect of any .... costs and expenses incurred” by Wendys in the principal action. Although the relief sought by Wendys in each of the notices is based upon contractual rights of indemnity, the contribution notice is expressed to be contingent upon Wendys being found liable to the plaintiffs in the principal action. I consider that the issue raised in both notices should be left for determination, if need be, in separate proceedings at a later time.
Wendys, Davrog, Mr Herriot and Mr Hanel, as the successful defendants, are entitled to an order for costs against the plaintiffs. I observe for the information of the taxing officer that Davrog, Mr Herriot and Mr Hanel may not have separately incurred any costs in their own right. Davrog’s involvement in the proceedings was relatively minor, it is owned in or controlled by the same interests as Wendys, and it was not separately represented. The involvement of Mr Herriot and Mr Hanel in the proceedings was as employee and director respectively of Daroko, and they were not separately represented.
Arumah is entitled to an order for costs against Daroko, but I need to consider whether the order should reflect the fact that Arumah was only partly successful in the claim. Arumah succeeded on the assignment and conversion issues, but failed on the misrepresentation issue. By “misrepresentation issue”, I mean to include all the causes of action which were pleaded by the plaintiffs with respect to the sale of the store in June 1994.
Whilst I acknowledge the observations of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 that “The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues however doubtful which might be material to the decision of the case”, I consider that, given the prominence attached to the misrepresentation issue by the plaintiffs at the trial, Arumah’s overall costs of the claim should be reduced to reflect its failure on that issue.
As for the extent of the reduction, it is true that some at least of the evidence called by the plaintiffs with respect to the misrepresentation issue would have been necessary in any event to provide a context for the assignment and conversion issues. I consider that a reduction of one third would fairly reflect the extra time and effort that was devoted to the misrepresentation issue in the pleadings and at the trial.
With respect to the costs that Wendys is entitled to recover from them, the plaintiffs seek a Bullock or Sanderson order against Daroko under rule 101.01(d) of the Rules.
In relation to the misrepresentation issue, the plaintiffs did not succeed against any of the defendants, and I see no warrant for an order that Daroko, as a successful defendant, should pay the costs of Wendys or any of the other successful defendants. If any of Wendys’ costs are to be paid by Daroko pursuant to a Bullock or Sanderson order, it should only be those costs which relate to Wendys’ successful defence of the assignment issue.
This is not a case of two defendants blaming each other and the plaintiff, being uncertain where liability lies, suing both: see the discussion of Wells J in Post v Colbert (1978) 20 SASR 62. The question of a Bullock or Sanderson order in relation to Wendys’ costs of the assignment issue will turn, in my opinion, on the conduct of Daroko as the unsuccessful defendant.
In Fennell v S & E Services Holdings (1988) 47 SASR 6, the Full Court discussed the relevance to a Bullock order of the conduct of the unsuccessful defendant, and referred to different approaches to that question in the High Court in Gould v Vaggelas (1984) 157 CLR 215. At page 19, von Doussa J concluded:-
“In my opinion the principle to be discerned from Gould v Vaggelas is 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.”
More recently, Tadgell J in Reid v Campbell Wallis Moule (1990) VR 859 said at page 877:-
“The order may be justified in circumstances where the plaintiff has reasonably and properly incurred the cost of joining the successful defendant in order to establish his claim and where it is just that the unsuccessful defendant should bear the cost of the joinder. Circumstances of that kind may be found when each of two potential defendants blames the other for the plaintiff’s loss; or where the conduct of one is otherwise such as to induce the plaintiff to join the other, whether or not each seeks to blame the other.”
In relation to the assignment issue, I have held that clause 8.1 of the franchise agreement imposed an obligation upon Daroko, as the master franchisee, not to unreasonably withhold its approval to assign the franchise, and that Daroko’s breach of that obligation entitled Arumah, as the franchisee, to damages. Clause 8.1 did not impose a similar obligation upon Wendys as the national franchisor, and in their statement of claim the plaintiffs made no allegation to that effect. Instead, as I say in my primary reasons, the plaintiffs alleged by paragraphs 29 and 30 that Wendys owed a fiduciary duty to the plaintiffs to intervene or otherwise direct Daroko to approve Arumah’s assignment of the franchise to Lowrie Investments. And, as I also say in my primary reasons, the point was not, in the end, pressed by the plaintiffs.
I have said that the plaintiffs could not have been in any uncertainty about which of Wendys and Daroko to sue in relation to the assignment issue. Nor, as I now find, did Daroko by words or conduct induce the plaintiffs to join Wendys or any of the other defendants.
I do not overlook the point that the form of release submitted by Daroko to the plaintiffs purported to release Wendys as well as Daroko from liability to the plaintiffs. The plaintiffs were not thereby induced to allege in their pleadings or at the trial that Wendys joined with Daroko in insisting upon the release in its all-embracing form, and there was certainly no evidence to that effect. Nor do I overlook the allegation by Daroko in its contribution notice that any conduct making Daroko liable to the plaintiffs was as a result of Wendys “negligence or wilful act or omission”. It should be noted that Daroko’s contribution notice was filed on 17 January 2000 following the filing of Wendys’ contribution notice on 14 January 2000.
I decline to make a Bullock or Sanderson order against Daroko.
I consider that the third party claim and the two contribution notices should be dismissed, with no order as to costs.
I have said that Mr Herriot and Mr Hanel may not have separately incurred any costs in their own right. But if the taxing officer finds that they did, I do not consider that those costs should be assessed on an indemnity basis. I take the relevant principles from Colgate Parmolive v Cussons (1993) 46 FCR 225 at 232 to 234. Notwithstanding the allegations in the statement of claim, no suggestion was made at the trial that either was guilty of dishonesty or fraud.
On 18 March 1999 on the application of the defendants, Master Berry ordered the plaintiffs to pay the sum of $4000 into court by way of security for costs. Wendys and Davrog now apply for an order that Daroko pay into court from the judgment and interest moneys otherwise payable by it to the plaintiffs a sum to provide security for the costs payable by the plaintiffs to Wendys and Davrog, such sum to be dispersed by order of the court after the costs have been agreed or taxed. An affidavit filed by Wendys’ solicitors discloses that Wendys’ costs are likely to exceed $35,000. I consider that the application should be granted, and that Daroko should pay into court the sum of $31,000 to the intent that the total sum of $35,000 be held as security for the costs of Wendys and Davrog pending further order by the court.
In the result, the orders of the court are as follows:-
1...... that there be judgment on the claim for Arumah against Daroko in the sum of $45,224
2.that interest on the judgment sum to the date of judgment be fixed at $14,024
3...... that the plaintiffs’ claim against Wendys, Davrog, Mr Herriot and Mr Hanel be dismissed
4.that the counterclaim be dismissed, with Daroko to pay the plaintiffs’ costs to be taxed
5...... that the third party notice and contribution notices be dismissed, with no orders as to costs
6.that Arumah recover from Daroko two-thirds of its overall costs of the claim to be taxed
7...... that Wendys, Davrog, Mr Herriot and Mr Hanel recover from the plaintiffs their costs of the claim to be taxed
8.that Daroko pay into court from the judgment sum and interest awarded against it the sum of $31,000, to be held with the sum of $4000 already in court, together with interest accrued and accruing on both sums, as security for the costs that the plaintiffs are liable to pay to Wendys and Davrog
9...... that the said sums of $4000 and $31,000, with interest thereon, be applied by order of the court after the costs have been agreed or taxed
10.that Wendys and Davrog be at liberty to apply with respect to payment out of monies in court.

[2000] SADC 62

23 May 2000