WCW Pty Ltd v Charthill Ltd

[1992] FCA 481

Re: WCW PTY. LTD.
And: CHARTHILL LIMITED; CHARTHILL BUSINESS BROKERS (QLD) PTY LTD; HENRI VAN
RYN; ELZA VERONICA BRAIN and BOLSTER AND CO. (a firm)
No. Q G5 of 1992
FED No. 481
Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Olney J.(1)

CATCHWORDS

Costs - claim for damages made against vendor of business by purchaser - further claim for damages by purchaser against his solicitor - all claims dismissed - adverse findings made concerning credibility of principal witness for applicant - request by respondents that costs be paid on an indemnity or solicitor and client basis - principles applicable to exercise of discretion.

Federal Court Act 1976, s.43

Packer v. Meagher (1984) 3 NSWLR 486

Australian Guarantee Corporation Ltd v. de Jager (1984) VR 483

Messiter v. Hutchinson (1987) 10 NSWLR 525

Thors v. Weekes (1989) 92 ALR 131 at 152

Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Pty Ltd (1988) 81 ALR 397

Australian Transport Insurance Pty Ltd v. Graeme Phillips Road Transport Insurance Pty Ltd (1986) 71 ALR 287 at 288

HEARING

BRISBANE

#DATE 7:7:1992

Counsel for the applicant: Mr P. Baston

Solicitors for the applicant: Thynne and Macartney, Brisbane

agents for Primrose Couper Cronin Rudkin, Southport.

Solicitors for the first
respondent: Sly and Weigall Cannan and Peterson

Counsel for the third and fourth
respondents: Mr P. Applegarth

Solicitors for the third and
fourth respondents: Callaghan and Reidy, Brisbane,

agents for Price and Roobottom, Southport.

Counsel for the fifth respondent: Mr G.A. Thompson

Solicitors for the fifth
respondent: Mallesons Stephen Jaques

ORDER

THE COURT ORDERS THAT:

1. The costs of the third and fourth respondents including any reserved costs be taxed and paid by the applicant;

2. The costs of the fifth respondent including any reserved costs be taxed and paid by the applicant;

3. In the event that the costs ordered to be paid by the applicant are not paid within 28 days of the same being taxed, the third and fourth respondents and/or the fifth respondent (as the case may be) shall have liberty to apply to enforce the orders for security for costs made during the course of the proceedings.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

At the time judgment was handed down in this matter the question of costs was reserved and liberty given for the parties to make written submissions. I have since received separate submissions from the third and fourth respondents and from the fifth respondent seeking orders in their favour. A written reply on behalf of the applicant has also been received in which no opposition is raised to the general proposition that the costs should follow the event, but issue is taken as to the type of order sought by the respondents.

Third and Fourth Respondents

1. The first submission made on behalf of the third and fourth respondents is that the conduct of the applicant in pursuing them was at best "a high-handed presumption" such that the Court ought to do what it can to ensure that they are not out of pocket over their justified defence of the action.

2. Particular reference is made to the adverse findings of credit made against Mr Wakefield, the Managing Director of the applicant. It is said that Wakefield's conduct in continuing with the action in circumstances where he must have known that the allegations of fraud against the third and fourth respondents were false was entirely reprehensible. In these circumstances I am urged to make an order that the applicant pay the costs of the third and fourth respondent on an indemnity basis.

3. A second alternative submission is made that the costs of the third and fourth respondents after 12 December 1991 should be paid either on an indemnity basis or taxed as between solicitor and client. In support of this submission affidavit evidence has been adduced to show that on 9 December 1991 the solicitors acting for the third and fourth respondents made an offer to the applicant's solicitors, without admission of liability, to settle the claim by the payment of $30,000. By letter dated 12 December 1992 the offer was rejected. It is said that in rejecting the offer, the applicant put the third and fourth respondents to the expense and distress of a lengthy trial and occupied the time of the Court in the lengthy hearing of a mischievous and unmeritorious claim.

4. In Packer v. Meagher (1984) 3 NSWLR 486, in quite extraordinary facts, the judge had no difficulty in concluding that the proceedings had been an abuse of the process of the Court, having been brought for a purpose ulterior, or collateral, to that for which proceedings are properly designed and exist. In those circumstances costs were ordered to be taxed on a solicitor and client basis. A similar result was achieved in Australian Guarantee Corporation Ltd v. de Jager (1984) VR 483 in which the judge concluded that the unsuccessful plaintiff's pursuit of the action had been "high-handed and presumptuous". But in these proceedings the issue is far less clearly defined. In a number of respects it was not possible to form a full understanding of the facts of the case without hearing the evidence. In particular the evidence of the various government and council employees could not be properly tested except in the course of the trial and indeed, it was not possible to reach any firm view of the state of knowledge of the third and fourth respondents as to the purpose for which the premises could lawfully be used until all the evidence was given. Whilst it is true that in a number of respects Wakefield gave evidence which was clearly false, and thereby did the applicant's case serious harm the case did not depend entirely on his evidence. I do not regard the bringing of the proceedings against the third and fourth respondents as having been motivated by any ulterior purpose nor was the applicant's conduct high- handed and presumptuous. The allegations of fraud made against the third and fourth respondents were not established but this was not a case in which it can fairly be said that the applicant made those allegations knowing them to be false nor that they were not relevant to the issues between the parties.

5. The alternative submission appears to be based upon a misunderstanding of the decision in Messiter v. Hutchinson (1987) 10 NSWLR 525 and other similar cases. A "Calderbank" letter may in an appropriate case give rise to the same consequences as a payment into Court, and so justify the Court in making a special costs order in favour of a party who would otherwise not have been entitled to costs, but I have not been directed to any authority that supports the proposition that the mere writing of such a letter will justify an order for costs in favour of a successful party being taxed on a solicitor and client, or an indemnity, basis.
   The fifth respondent

6. On behalf of the fifth respondent, it is urged that this is an appropriate case to make an order for the payment of the fifth respondent's costs by the applicant on a solicitor and client basis. It is said that the facts fit comfortably within the principles referred to by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152. Reference is also made to the decision of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Pty Ltd (1988) 81 ALR 397.

7. The only basis upon which the fifth respondent supports the assertions made is that Wakefield, the principal of the applicant, was demonstrated at the trial to have given a knowingly false account of conversations with Mr Bolster, the principal of the fifth respondent.

8. In Fountain Selected Meats, after referring to Tadgell J's description "a high-handed presumption" in de Jager, Woodward J said at p 401:
   

No doubt the expression "high-handed presumption" was appropriate in the case Tadgell J had to decide, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, 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 establish law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.

1. Whilst it is true that some aspects of Wakefield's evidence concerning his dealings with Bolster was shown to be quite untrue, the nub of the case against the fifth respondent turned on a very narrow issue, namely the extent to which Wakefield had indicated to Bolster that he would make his own inquiries and had relieved Bolster from further responsibility in those respects. The evidence on this issue would have been fairly evenly balanced had it not been for the generally poor opinion I had formed of Wakefield's credibility, but I do not think that it could ever be said that the applicant, properly advised, should have known that it had no chance of success.
   Conclusion

2. There is always a measure of injustice when a successful litigant is put to expense, but that is the nature of the system under which the Court operates. The discretion conferred by section 43 of the Federal Court Act is not limited. As Woodward J said in Australian Transport Insurance Pty Ltd v. Graeme Phillips Road Transport Insurance Pty Ltd (1986) 71 ALR 287 at 288:
   

That discretion is "absolute and unfettered", but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way" (Preston v Preston (1982) 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion - for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 6 LR Ch App 133; Forester v Read (1870) 6 LR Ch App 40; Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) (1983) 2 NSWLR 354.

1. In my opinion, the facts and circumstances of this case are not of such a special nature as to warrant the making of an order for costs other than on a party and party basis.

2. As the applicant was wholly unsuccessful as against the third and fourth respondent and the fifth respondent there will be an order that the costs of those parties be paid by the applicant. I will reserve liberty to apply in respect of the security for costs ordered during the course of the proceedings in the event that the costs of either party are not paid within 28 days after taxation.