Walker and Anor v Corporation of the City of Adelaide and Ors (No 2) No. Scciv-01-1272

WALKER and ANOR v CORPORATION OF THE
CITY OF ADELAIDE and ORS (No 2)
[2004] SASC 139
Civil

PERRY J. On 16 April 2004, I delivered judgment in this matter. In accordance with the reasons published by me on that day,[i] I dismissed the plaintiffs’ claim against all defendants except Adelaide Civil Pty Ltd (“ADCIV”).
I gave judgment in favour of the plaintiffs against ADCIV in the sum of $700,000 inclusive of interest to the date of judgment.
I dismissed the third party proceedings brought by ADCIV against David Smith and Owen Goldie trading as Core Engineering (“Core Engineering”).
I made no orders on various contribution notices which had been exchanged between the defendants.
I reserved the question of costs for further argument.
I received written submissions and heard counsel for all parties on the issue of costs at a further hearing on 28 April 2004.
I reserved my decision on the issue of costs.
These reasons explain the costs order which I propose to make.
Given the outcome of the case, the plaintiffs are entitled to their costs of action as against ADCIV.
The plaintiffs are liable to pay the costs of the defendants against whom they have been unsuccessful.
ADCIV is liable to pay the costs of Core Engineering with respect to its unsuccessful third party claim against Core Engineering.
The further questions which arise are whether I should make either a Bullock order or a Sanderson order with respect to the costs payable by the plaintiffs, and whether, as was contended by some parties, the order for costs should be on an indemnity basis, or as between solicitor and client, rather than as between party and party.
I will deal first with the question whether costs should be payable on a party and party basis or on some other footing.
Party and Party or Other Order?
(a) Claim by the first defendant, the Corporation of the City of Adelaide for indemnity costs.
Mr Greenwell of counsel for the Corporation of the City of Adelaide (“the Corporation”) sought an order in favour of his client for indemnity costs, at least from 30 August 2002.
He based his argument on two grounds.
The first ground had its foundation in a letter dated 30 August 2002 from his instructing solicitors, Wallmans, to the solicitors for the plaintiffs, Cowell Clarke, in which the various bases upon which the plaintiffs’ claim against the Corporation were advanced, were negatived and the Corporation’s grounds of defence were explained.
In the letter, Wallmans denied that their client was under any “real exposure” and threatened that if the matter did not resolve shortly (apparently negotiations were in train) the Corporation would “defend the matter throughout trial”.
They further state that:
“... given that our position in this matter has been made abundantly clear from the start, we believe there is the possibility of obtaining costs on an indemnity basis.”
Although that letter was written “without prejudice”, with no reservation as to its use on the question of costs, there was no objection to its tender before me in the context of the costs hearing.
The second ground advanced by Mr Greenwell was based upon the plaintiffs’ refusal to accept an offer conveyed by another letter, namely, a letter dated 15 July 2003 from Wallmans to the solicitors for all other parties.
In that letter Wallmans put an offer on behalf of the Corporation and ADCIV in the following terms:
“The First Defendant and the Fifth Defendant are prepared now to offer the following amounts to the Plaintiff in full and final settlement of all claims against those Defendants:
First Defendant: $130,000.00 (with a denial of liability) exclusive of a contribution towards the plaintiff’s costs of action (from 8 February 2002) to be taxed or agreed. This is in addition to the First Defendant agreeing to waive statutory rights of recovery to costs incurred in performance of temporary rectification works at the site ($40,000.00). The total of the offer is therefore $170,000.00 exclusive of costs.
Fifth Defendant: $300,00 exclusive of a contribution towards the plaintiff’s costs of action to be taxed or agreed.
Such offer is conditional upon final resolution of all claims, third party claims and counterclaims in the above action, with each party to bear their own costs of action.
As quantum has been agreed between the parties, the First Defendant makes clear that the level of its offer represents an amount in excess of 20% of the agreed damages.
This letter is provided to all parties to the proceedings firstly with hope that the Second, Third and Fourth Defendants and Third Party will contribute such further amount in full satisfaction of the plaintiff’s claim and secondly with notice that it will be drawn to the attention of the court on the question of costs at an appropriate time.
The Plaintiff and each other party are hereby put on notice that both the First and Fifth Defendants will apply for their costs of trial from hereon in the event that the Plaintiff does not better the above offers at judgment.”
The argument based on the letter of 15 July 2003 may be disposed of shortly.
Insofar as it was conditional upon “final resolution of all claims etc”, there was no such final resolution, so that the offer was never operative.
I should say that a further letter dated 18 July 2003 in which the Corporation, through its solicitors, repeated the offer and indicated that it would reduce the offer by $5,000 for each sitting day of the trial after Monday 21 July 2003, did not take the matter any further, given that the offer never became effective.
So far as the letter dated 30 August 2002 is concerned, this simply put the arguments raised by way of defence to the plaintiffs’ claim, which had already found expression in the Corporation’s pleading. It was a letter which in one sense was written in terrorem. It did not refer to any factor beyond its denial of the claim against it by the plaintiffs which could have a bearing upon the question of the quantum of the costs to which it is now entitled.
The mere denial of liability, however emphatic, coupled with a repetition of the grounds advanced by a defendant by way of defence, cannot have any effect upon the exercise of the discretion as to costs.
At all times the plaintiffs had an arguable claim against the Corporation, and they were justified in pursuing it to trial.
I am unable to identify any circumstances which would justify the award of costs in favour of the Corporation on any basis other than as between party and party.
I reject the claim for indemnity costs made by the Corporation.
(b) Claim for Costs by the Second Defendant, Estoril Developments Pty Ltd
Estoril Developments Pty Ltd (“Estoril”) did not appear at the trial, although it had filed a defence to the plaintiffs’ claim.
Mr Ryder of counsel appeared for Estoril on the hearing of the costs argument and sought indemnity costs in favour of Estoril, at least from the date of what he described as a “Calderbank” letter written by Minter Ellison, solicitors for Estoril and for the third defendant, Performa Real Estate Pty Ltd (“Performa”). The letter was dated 31 May 2002, and is to be read in conjunction with an earlier letter dated 12 January 2001.
Neither the letters nor Mr Ryder’s submissions identify any basis upon which it would be proper to award costs in favour of Estoril, other than party and party costs.
In the case of Estoril, those costs will not include costs of the trial as it did not participate in the trial.
(c) Claim for Costs by the Third Defendant, Performa
Mr Strawbridge on behalf of Performa sought indemnity costs.
At the end of the day, I held that Estoril, rather than Performa, was the contracting party which engaged ADCIV to perform the work in question. Accordingly, the plaintiffs had no cause of action to pursue against Performa.
At an earlier stage when the proceedings were instituted, and indeed, until evidence was led at the trial which made the position clear, there was a good deal of confusion as to the status of Performa vis-à-vis Estoril. This confusion was evident in the manner in which the consulting engineers, Allan Gilbert & Associates Pty Ltd (“ABG”) corresponded and rendered their accounts. I refer to this in my trial judgment reasons.
A further factor is, that having regard to the terms of s 72 of the Planning and Development Act 1993, to which I refer in the trial judgment reasons, the plaintiffs were justified in joining and maintaining the action against all parties who could conceivably be liable.[ii]
In all the circumstances, I do not see any reason to award costs to Performa other than on a party and party basis.
(d) Claim for Costs by the Fourth Defendant, ABG
ABG sought costs on a party and basis only. They are clearly entitled to that.
(e) Claim for Costs by Core Engineering
Mr Swan for Core Engineering sought costs in favour of his client against ADCIV on a party and party basis.
There can be no argument as to its entitlement for an order in those terms.
Bullock or Sanderson Order
The difference between the two forms of order is conveniently explained by McGarvie J in the following passage in his judgment in Thorne v Doug Wade Consultants Pty Ltd:[iii]
“The essential difference between the two forms of order is that although in both an unsuccessful defendant is ordered to pay the costs of the successful defendant, in a Sanderson order the unsuccessful defendant is ordered to pay those costs direct to the successful defendant, whereas by a Bullock order the plaintiff will recover from the unsuccessful defendant the costs of the successful defendant which he has been ordered to pay.”
I accept as a correct statement of the principles which should be applied in considering either form of order, the following passage from the joint judgment of Olsson, Debelle and Wicks JJ in Micarone and Ors v Perpetual Trustees Aust Pty Ltd and Ors (No 2):[iv]
“48While it was appropriate to join the causes of action against the separate defendants, it does not necessarily follow that it is appropriate to make either a Bullock or a Sanderson order. A Bullock order will be made only if the conduct of the unsuccessful defendant in relation to the plaintiff’s claim against him show that the joinder of the successful defendant was reasonable and proper to ensure recovery of the damages sought: Gould v Vaggelas (supra) per Brennan J at 260. [v] See also Gibbs CJ at 229-230; Reid v Campbell Wallis Moule[vi] and Post v Colbert.[vii] A Sanderson order will only be made if the causes of action are substantially connected or dependent the one on the other: Lackersteen v Jones (No 2).”[viii]
In my view, this is unquestionably a case where it is appropriate for a Bullock order to be made.
Again, the terms of s 72 of the Development Act 1972, to which I have already made reference and to which I refer in my trial judgement reasons, has a bearing on the exercise of the discretion. It seems to me that in cases where s 72 is of potential application, a plaintiff simply cannot afford not to join all parties who may potentially be liable. If the plaintiff fails to do that, there is a risk that the plaintiff will not recover 100 per cent of whatever damages the plaintiff may otherwise prove to be entitled to.
As for the question of the choice between a Bullock or a Sanderson order, I adopt the following passage from the Law of Costs, Dal Pont and Walker:[ix]
“[11.10] In most circumstances, whether an indirect (Bullock) or a direct (Sanderson) order is made will not, so far as the ultimate outcome is concerned, make any difference.[x] Yet as a Sanderson order is direct and therefore ‘less circuitous’,[xi] it has been described as ‘the modern form of order’,[xii] and to represent a practice which should be adhered to wherever practicable to do so.[xiii]”
One of the arguments advanced against the making of a Sanderson order in this case was that because of some remarks attributed to Mr Riggall of counsel for ADCIV, being remarks which apparently were made during the course of pre-trial negotiations, the remaining parties were given to understand that there might be some uncertainty attaching to the ability of ADCIV to pay both the judgment and costs.
While it has commonly been held that it is inappropriate to make a Sanderson order where the making of the order would “cast upon the successful defendant the burden of the unsuccessful defendant’s insolvency”,[xiv] such a result can be avoided if the order is expressed in terms which would enable recourse to be made to the plaintiff by the successful defendants in the event of a failure by the successful defendants or any of them to recover costs from the unsuccessful defendant.
In my view, the appropriate order in this case is a Sanderson order conditioned in that way.
Conclusion
The order as to costs will be that:
1.the plaintiffs recover from ADCIV their costs of action to be taxed.
2.subject to paragraph 3 of this order, the plaintiffs pay the costs of action to be taxed of the first defendant (the Corporation), the second defendant (Estoril), the third defendant (Performa) and the fourth defendant (ABG).
3.the defendants other than the fifth defendant (ADCIV) shall in the first instance recover from ADCIV the costs payable to them by the plaintiffs, provided that if they or any of them, after making reasonable efforts to do so, are unable to make a full recovery of such costs from ADCIV, the costs or such part of the costs as may not have been recovered from ADCIV, shall be payable by the plaintiffs.
4.ADCIV pay the costs of action of Core Engineering, to be taxed.
5.the parties and any of them are at liberty to apply for such further or other order in the premises as they may be advised, as to the working out and application of this order.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1. Judgment No [2004] SASC 98.
2.    See the interesting and perceptive article From Contribution to Apportioned Contribution to Proportionate Liability by James Watson (2004) 78 ALJ 114.
3. [1985] VR 433 at 500.
4. (Unreported) 19 January 2000, judgment No [1999] SASC 533.
5. (1985) 157 CLR 215.
6. [1990] VR 859 at 876-879.
7. (1978) 20 SASR 62.
8. (1988) 93 FLR 442 at 449.
9.    LexisNexis Butterworths 2003 at 334.
10.   Citing Bankamerica Finance Ltd v Nock [1988] AC 1002 at 1007, 1001 per Lord Brandon.
11.   Citing Babcock v Carr (1981) 127 DLR (3d) 77 at 87 per Rutherford J (HCJ(Ont)).
12.   Citing Johnsons Tyne Foundry Pty Ltd v Maffra Corporation (1948) 77 CLR 544 at 572 per Williams J. See also Rudow v Great Britain Mutual Life Assurance Society (1881) 17 Ch D 600 at 608 per Jessel MR; Sanderson v Blyth Theatre Co [1903] 2 KB 533 at 539 per Romer LJ. Historically the court of Chancery, pursuant to its jurisdiction to deal with the costs of litigants and to decide by whom they should be borne (see [6,2]), adopted the practice, where it was of the opinion that the costs ought to be borne by a co-defendant, ‘to direct the plaintiff to pay them in the first instance, and then to add them to his own, and to have them over against the defendant who was to bear them’: Sanderson v Blyth Theatre Co at 542 per Stirling LJ (citing as an example Blenkinsopp v Blenkinsopp (1850) 12 Beav 568 at 588; 50 ER 1177 at 1185 per Lord Langdale MR). After the Judicature Acts this practice was altered in Rudow, such that the proper form of order was to direct the unsuccessful defendant liable to costs to pay them direct to the successful co-defendant.
13.   Citing Sanderson v Blyth Theatre Co [1903] 2 KB 533 at 543 per Stirling LJ; Vance v Cheynes Beach Whaling Co [1966] WAR 16 at 24 per D”Arcy J.
14.    Law of Costs, Dal Pont and Walker (supra) at 334.

[i] Judgment No [2004] SASC 98.
[ii]    See the interesting and perceptive article From Contribution to Apportioned Contribution to Proportionate Liability by James Watson (2004) 78 ALJ 114.
[iii] [1985] VR 433 at 500.
[iv] (Unreported) 19 January 2000, judgment No [1999] SASC 533.
[v] (1985) 157 CLR 215.
[vi] [1990] VR 859 at 876-879.
[vii] (1978) 20 SASR 62.
[viii] (1988) 93 FLR 442 at 449.
[ix]    LexisNexis Butterworths 2003 at 334.
[x]   Citing Bankamerica Finance Ltd v Nock [1988] AC 1002 at 1007, 1001 per Lord Brandon.
[xi]   Citing Babcock v Carr (1981) 127 DLR (3d) 77 at 87 per Rutherford J (HCJ(Ont)).
[xii]   Citing Johnsons Tyne Foundry Pty Ltd v Maffra Corporation (1948) 77 CLR 544 at 572 per Williams J. See also Rudow v Great Britain Mutual Life Assurance Society (1881) 17 Ch D 600 at 608 per Jessel MR; Sanderson v Blyth Theatre Co [1903] 2 KB 533 at 539 per Romer LJ. Historically the court of Chancery, pursuant to its jurisdiction to deal with the costs of litigants and to decide by whom they should be borne (see [6,2]), adopted the practice, where it was of the opinion that the costs ought to be borne by a co-defendant, ‘to direct the plaintiff to pay them in the first instance, and then to add them to his own, and to have them over against the defendant who was to bear them’: Sanderson v Blyth Theatre Co at 542 per Stirling LJ (citing as an example Blenkinsopp v Blenkinsopp (1850) 12 Beav 568 at 588; 50 ER 1177 at 1185 per Lord Langdale MR). After the Judicature Acts this practice was altered in Rudow, such that the proper form of order was to direct the unsuccessful defendant liable to costs to pay them direct to the successful co-defendant.
[xiii]   Citing Sanderson v Blyth Theatre Co [1903] 2 KB 533 at 543 per Stirling LJ; Vance v Cheynes Beach Whaling Co [1966] WAR 16 at 24 per D”Arcy J.
[xiv]    Law of Costs, Dal Pont and Walker (supra) at 334.

[2004] SASC 139

27 May 2004