Westpoint Constructions Pty Ltd v Haden Engineering Pty Ltd
[2006] WADC 2
•19 JANUARY 2006
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: WESTPOINT CONSTRUCTIONS PTY LTD -v- HADEN ENGINEERING PTY LTD [2006] WADC 2
CORAM: COMMISSIONER KEEN
HEARD: 8 DECEMBER 2005
DELIVERED : 19 JANUARY 2006
FILE NO/S: CIV 1755 of 2001
BETWEEN: WESTPOINT CONSTRUCTIONS PTY LTD (ACN 009 399 740)
Plaintiff
AND
HADEN ENGINEERING PTY LTD (ACN 000 694 173)
Defendant
Catchwords:
Costs - Following dismissal of claim and part of counterclaim
Legislation:
Legal Practice Act 2003, s 125(2)
Rules of the Supreme Court 1971, O 24A, O 24A r 10(4), O 66 r 12
Trade Practices Act1974, s 51AC
Result:
Costs to follow event
Representation:
Counsel:
Plaintiff: Mr N D C Dillon
Defendant: Mr P B O'Neal
Solicitors:
Plaintiff: Nash Clavey
Defendant: Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Alpine Holdings Pty Ltd & Ors v Warrick Entertainment Centre Pty Ltd & Ors [2003] WASC 53
Calderbank v Calderbank [1976] FAM 93
Dobb v Hacket (1993) 10 WAR 523
Smith v Madden (1946) 73 CLR 129
Stambulich v Ekamper [2001] WASCA 283
Wayella Nominees Pty Ltd as trustee for the D J Gordon Family Trust v Cowden Ltd [2003] WASC 210
Case(s) also cited:
Flotilla Nominees Pty Ltd v Western Australia Land Authority & Anor [2003] WASC 122 (S)
Henrie v Rusli [2002] WASCA 420
Latoudis v Casey (1990) 170 CLR 534
Oshlack v Richmond River Council (1998) 193 CLR 72
Palm Bridge Pty Ltd v Miles & Anor [2001] WASCA 334
Scherer v Counting Instruments Ltd (1986) 1 WLR 615
Schmidt v Glimour [1988] WAR 219
Smallacombe & Ors v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568
COMMISSIONER KEEN: The trial of this action was heard before me between 11 April and 15 April and on 23 June 2005. On 1 September 2005 I delivered my reasons in which I dismissed the plaintiff's claim and allowed the defendant's counterclaim but only to the extent of those parts which had been conceded by the plaintiff at trial. On 1 September 2005 I pronounced judgment in favour of the defendant on that part of its counterclaim in the sum of $32,707.05. On 8 December 2005 I made orders formally dismissing the plaintiff's claim.
On 8 December 2005 the matter came before me again for the hearing of submissions as to costs.
To recap, the claim and counterclaim arose out of a sub-contract for the provision of mechanical services for the Paragon Stage 2 Apartments in Hay Street Perth. The plaintiff was the main contractor and the defendant was the sub-contractor carrying out those mechanical services which included the design supply installation testing and commissioning of the stair pressurisation system.
The plaintiff claimed against the defendant for liquidated damages under the contract and other damages. The defendant counterclaimed for extensions of time, variations to the sub-contract and other matters which were all set out in the pleadings.
Ultimately, at trial the plaintiff's claim came down to one of delay and liquidated damages under the sub-contract and the head contract. I found that such delay had been caused by deficiencies in the building of the apartments carried out by the plaintiff. I found that by reason of those deficiencies the system, being a purge system that had be designed and built by the defendant, would not and could not be made to work. To over come that the defendant effected a change from a purge system to a zone system.
In the reasons that I delivered the defendant succeeded on its defence of the plaintiff's claim.
The defendant made a number of counterclaims, one of which was for extension of time costs as set out in pars 22-32 of its counterclaim. These claims were not proceeded with and were abandoned at trial. Other claims made by the defendant for progress claims were admitted at trial by the plaintiff and formed the basis for the judgment which I pronounced in favour of the defendant. What was left in the defendant's counterclaim was the claim for the costs of the variation from the purge system to the zone system or in the alternative for a quantum merit on the basis that such works were outside the scope of works in the contract. In addition the defendant made a claim in respect to certain air conditioner supplied to the works. That claims was made under s 51 AC Trade Practices Act 1974 and which failed at trial.
On the counterclaim the defendant succeeded in showing that the change from a purge system to a zone system was indeed a variation alternatively outside the scope of works for which a quantum merit would have been allowed. However, the defendant failed to prove the amount of the claim and accordingly the claim was dismissed.
The plaintiff argues that it was the defendant who was effectively the plaintiff at trial in respect of the counterclaim. The plaintiff further argues that, by reason of my findings at pars 157-160 of my reasons, the defendant succeeded because the plaintiff's works had not been carried to the stage where the defendant's works could be tested and completed. The argument is that that was of itself a sufficient defence to the plaintiff's claim for liquidated damages and that much of the trial was taken with matters relating solely to the counterclaim. In the result, the plaintiff submits that the benefit of costs should fall in favour of the plaintiff rather than the defendant.
The defendant's argument is that much of the time spent at trial, including the detailed evidence of experts, was necessary in order to deal with the claim made by the plaintiff for delay. Mr O'Neal for the defendant has pointed to the defendant's defence and counterclaim. At par 12 of the defence, in answer to the plaintiff's claim, the defendant says that any failure on its part to complete the works by the date of completion was caused by the conduct of the plaintiff pleaded in par 17. Paragraph 17 is to be found in the counterclaim and sets out, under a general heading, that the delay was caused entirely by the acts of the plaintiff or its agents or sub-contractors not by any act or default of the defendant. A series of particulars are there set out going to the state of the plaintiff's works which impacted upon the defendant's ability to test the system. Those particulars also set out that the system did not and could not be made to work.
The defendant argues that the defendant has succeeded in its defence of the plaintiff's claim and it should have the benefit of an order for costs against the plaintiff.
The course of the trial
It has to be accepted that most of the time in trial was spent in analysing what went wrong with the purge system designed and installed by the defendant and time spent in considering what was required to provide a working alternative.
The question that arises is whether or not that evidence was required to defeat the plaintiff's claim. The plaintiff suggests that it was not and relies upon pars 157-160 and par 186 of my reasons. In my view the evidence of the experts was necessary and was required to defeat the plaintiff's claim. Unless the defendant could show that the delays had been caused by the plaintiff's work requiring the defendant to modify its works it may have well be liable for some, if not all, of the liquidated damages claimed. The argument that was put by the defendant at trial was that the building was not ready for the stair pressurisation system to be properly tested and commissioned. The plaintiff argued, throughout the trial, that, whilst there were defects in the building which were being rectified, the building was ready and the defendant had an overriding obligation to design and construct a system that worked. Faced with that argument it was necessary for the defendant to show that there were a number of defects in the building which caused its system that it had designed not to work. It seemed to me that to get to that point the defendant had to show that the system that it had designed (the purge system) was a system that would have worked on a properly constructed building. In the end that was my finding.
Accordingly, I am satisfied that it was necessary for the defendant to call the evidence that it did going to the course of the works and the expert evidence as to the nature and efficacy of the works in order to properly deal with the claim that it faced. Put another way, if there had been no counterclaim would the defendant have been obliged to call this evidence in any event? In my opinion it would or it would have been prudent for it to do so and it could certainly not be criticised for so doing. The fact that some of the same evidence may have been required to establish the counterclaim or the basis for it is not to detract from its efficacy in defeating the claim.
This analysis of the claim is adequately encapsulated in the argument of defendant's counsel that my reasons for judgment are occupied with the struggle between the competing theories as to why the system wouldn't work. That, with respect, is a fair assessment of a large part of my reasoning.
Costs
It is trite that costs will normally follow the event. Where there is a claim and counterclaim the usual rule is that the party receiving the costs of claim should recover the general costs and whatever was reasonably incurred in bringing it as if there had been no counterclaim and the party receiving the costs of the counterclaim should recover the further or increased costs reasonably incurred in bring the counterclaim Smith v Madden (1946) 73 CLR 129. It is noted in Civil Procedure in Western Australia by the Honourable Paul Seaman QC at [66.2.1A] that where the plaintiff succeeds on a claim and the defendant succeeds on the counterclaim the plaintiff should have the costs of the claim and the defendant the costs of the counterclaim unless, because the issues are very much interlocked, a special order is appropriate.
Here, essentially, both the plaintiff and the defendant lost on the claims and counterclaims respectively. Had there been no counterclaim, it is my view, that the defendant would undoubtedly have been entitled to the costs of defending the action. I have already noted above that in the course of the trial the evidence that was led was to a large extent, required for that purpose.
Counsel for the plaintiff has cited a number of authorities dealing with some of the principles involved in the awarding of costs. In particular the plaintiff says that I should look at the question of costs from the perspective of the defendant by which I understand him to mean the defendant to the counterclaim. I do not accept that that is necessarily so in relation to the present claim. I am required to exercise my discretion in relation to the costs of the claim and counterclaim by examining the realties of the case in hand and to frame orders so justice as to costs should be done. In doing so I should not lose sight of the general principles reference to which I have made above.
The plaintiff argues for a number of different scenarios ranging from that the defendant should pay two thirds of the plaintiff's costs to there being no order as to costs with varying orders between those two extremes. The defendant argues for its costs on the basis that the bulk of the work was necessary for the purposes of defeating the claim and the balance of the work done and time spent at trial, were in reality, de minimis.
Counsel for the plaintiff argues that I ought to attempt to make an assessment of a percentage of costs to be paid and this is an attractive proposition in that it would no doubt assist the taxing officer in circumstances where, as trial judge, I am able to use my own knowledge of the proceedings and the course of the trial.
Counsel for the plaintiff, in supporting his argument for two thirds costs was unable to provide any real basis for the same but did make reference to a Calderbank offer made just before trial which I will come to later. In addition counsel for the plaintiff also relied upon the fact that the defendant abandoned approximately $150,000 worth of its claims.
I have found that much of the trial time was taken in evidence which went directly to the defence of the plaintiff's claim. If further support for that position is needed it can be found in the plaintiff's claim that this was a design and construct contract and the defendant had the obligation to produce something that worked. That is all very well but in ascertaining whether or not the system would have worked, the detail and intricacies of the system needed to be explored before the defendant could show that it was the plaintiff that put it beyond the defendant's power to make it work and therefore all the delays were the plaintiff's fault.
Whilst I may be able to judge from my experience at the trial as to how much time was taken in defence of the claim I am not able to judge how much time was spent in preparation for trial and which relates solely to the counterclaim upon which the defendant failed. Accordingly, whilst it is an attractive proposition that I should attempt to formulate some percentage costs to be awarded to do so would be entirely arbitrary and I am not prepared to take that step. No doubt the appropriate representations can be made to the taxing officer in due course.
Before I come to the final outcome on costs there are other matters which I need to dispose of.
Settlement offers
In this matter a Calderbank (Calderbank v Calderbank [1976] FAM 93) offer was made. According to the affidavit of Mr Norman Phillip Carey sworn on 6 December 2005 this was made on 11 April 2005, the opening day of the trial. The offer was expressed in the following terms:
"For commercial reasons my client offers to settle the above action on the following terms:
1. My client will pay to your client the sum of $34,000 together with interest on that amount from 1 January 2001 at the rates prescribed for that period by s 32 of the Supreme Court Act 1932;
2. The above proceedings be dismissed by consent with no order as to costs.
The offer is open for acceptance until 1.00pm 13 April 2005."
It can readily be seen that the sum offered to the defendant was greater than the sum ultimately recovered on judgment including interest namely $32,707.05.
Whilst a regime exists under the rules of court for the making of offers (O 24A) that does not prevent a Calderbank offer being made in appropriate circumstances and it is well known that the court encourages reasonable and timely settlements: Dobb v Hacket (1993) 10 WAR 523, 540.
I am of the view that it was not unreasonable for the defendant not to have accepted the offer that was made. The offer had been clarified on the morning of the 11 April 2005 and confirmed in a facsimile transmission of 14 April 2005 (Annexure NPC3 to the affidavit of Mr Cleary). The clarification was that the offer was calculated having regard to the claim for unpaid progress payments, the claim for unpaid variations and the claim for the replaced air conditioners. None the less that offer made no provision for costs. The offer is one that covered parts of the claim upon which the defendant was ultimately successful. The offer made no reference to costs whatsoever whether in relation to that part of the claim upon which the defendant was ultimately successful or in relation to the plaintiff's claim, upon which the plaintiff failed, other than to suggest that the proceedings be dismissed by consent with no order as to costs. Having regard to the final outcome of costs which I will deal with later, it seems to me that a Calderbank offer which makes no provision for payment of costs on those parts of the claim upon which the plaintiff is ultimately unsuccessful and the defendant is successful is not one which will or should afford the plaintiff any real protection. The offer is made "for commercial reasons". Commercial reasons may not always correspond with the eventual outcome. For these reasons I pay no regard to the Calderbank offer in the final wash up on costs.
Similarly the defendant made a number of offers under O 24A of the Rules of the Supreme Court 1971. Details of those offers can be found as Annexures CAR5, CAR8 and CAR9 to the affidavit of Mr Christopher Allen De Courcy Ryder sworn 6 December 2005. The first offer was made on 14 December 2001 and was an offer to compromise the claim and counterclaim by the plaintiff paying the defendant the sum of $185,000 and GST on that sum. The second offer was made on 10 March 2003 and was an offer to comprise the claim and counterclaim by way of orders that the plaintiff's claim be dismissed, the plaintiff pay the defendant the sum of $80,000 and GST on that amount. The final offer was dated 14 March 2005 and offered to compromise the claim and counterclaim by orders that the plaintiff pay the defendant the sum $103,000 including interest up to the date of the offer and GST on that amount.
The defendant has not obtained judgment, "no less favourable to him than the terms of the offer" (O 24A r 10(4)), I am required to look at the effect of the judgment overall to determine whether that criteria has been satisfied: Stambulich v Ekamper [2001] WASCA 283. The only offer by the defendant that expressly referred to the dismissal of the plaintiff's claim was the offer of the 10 March 2003. However, all offers were offers to compromise the claim and counterclaim and so that position can be inferred in the other two offers. Nevertheless the offers are principally directed to the counterclaim, those offers being for payment by the plaintiff to the defendant of various sums of money plus GST. It can be seen in that respect that the judgment on the claim and on the counterclaim is less favourable than the terms of the offers made and the circumstances I pay no regard to the offers under O 24A when dealing with the final outcome on costs.
Special order as to cost
The defendant seeks a special order for costs in relation to the discovery process in this matter pursuant to O 66 r 12. The affidavit of Mr Ryder reveals that discovery occupied approximately 100 hours work and resulted in affidavits totalling some 137 pages. I was advised by counsel for the defendant that the plaintiff's own affidavits of discovery comprised of approximately of 88 pages.
Section 125(2) Legal Practice Act 2003 provides that if a court or judicial officer is of the opinion that the amount of costs allowed in respect of the matter under a Legal Cost Determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following:
a.order the payment of costs above those fixed by the determination;
b.fixed higher limits of costs than those fixed in the determination;
c.remove limits on costs fixed in the determination;
d.make an order or give any direction for the purpose of enabling costs above those in the determination to be ordered or taxed.
Order 66 r 12 of the Rules of the Supreme Court provides:
1.Where the Court is of opinion that a special Order as to costs should be made by reason of the unusual complexity or importance of the case or for any other good or sufficient reason the Court may order that any particular allowance in any relevant scale be raised or a limit removed and in giving any such direction the Court may fix a limit within which the Taxing Officer may allow such costs.
It was noted in Alpine Holdings Pty Ltd & Ors v Warrick Entertainment Centre Pty Ltd & Ors [2003] WASC 53 (S 2) that s 215 is in its terms more narrow in its effect than O 66 r 12 (1). However, Robert-Smith J at [45] noted:
"The order, on the other hand recognises unusually complex or unusually important matters, but the words 'any other good or sufficient reason' are susceptible of encompassing not only unusual difficulty but any other relevant circumstance. That includes, in my view the amount of work involved in preparation itself constituting a good and sufficient reason to increase the allowance provided under the scale: see Schmidt v Gilmore [1988] WAR 219."
In Alpine his Honour referred to Wayella Nominees Pty Ltd as trustee for theD J Gordon Family Trust v Cowden Ltd [2003] WASC 210 and in which he noted that in relation to an application of this nature the judge is not engaging in a taxation. What was necessary was for the trial judge drawing on his or her knowledge of the trial to make a preliminary and provisional judgment whether on the face of it the amount of work done appears to have been reasonably done so as to constitute good and sufficient reason for making the order. He further noted that it is not sufficient for the applicant to show merely that the work was done but must also show why it was done or the necessity for it or it must otherwise be apparent to the trial judge from his or her knowledge of the proceedings so as to enable the judge to make that preliminary and provisional determination whether the work was reasonable or necessary. His Honour also noted that there maybe work done of which the judge is not aware and specifically referred to unusually voluminous discovery which is not reflected in the actual number of documents tendered at trial. In that case his Honour was of the view that it was necessary for affidavit material to be placed before the judge explaining in general terms what was done and why it was done and give some indication of the time occupied by the work.
In the present matter all that I have is the affidavit of Mr Ryder to which is annexed some 73 pages of what is described as a transaction matter report from which Mr Ryder draws his conclusion that discovery took approximately 100 hours. That does not provide me with the sort of information referred to in Wayella Nominees Pty Ltd. At trial I was presented with two lever arch files of documents as being the trial bundle. It may be the case that there was a great deal of work done by way of discovery of which I am not aware. The only other assistance that I gain in this matter is from the fact that the plaintiff's own discovery was of some 88 pages.
In the end I am not satisfied that I ought to exercise my discretion either under s 125 of the Legal Practice Act or O 66 r 12. The Legal Practitioners (Supreme Court) (Contentious Business) Determination 2004 provides by item 7b for the giving of discovery and allows 10 hours for this exercise. In its determination the Legal Costs Committee has regard to enquires and submissions referred to in par 3 of that determination to set the maximum hours and daily rates set out in the determination.
In the circumstance I do not exercise my discretion in favour of an alteration in this scale in this regard.
The defendant also sought an order that there should be a certificate for transcript. That is entirely appropriate pursuant to O 69 r 3.
The defendant also sought an order for the attendance of its expert witness Mr Fok during the course of the trial. It was said that his attendance was necessary to assist counsel.
Whilst under the old Fourth Schedule item 13(5) provision was made for a special order for the attendance in court of an expert to assist or advise counsel, that item no longer appears in the 2004 Determination. That provides at item 33 for disbursements as between party and party as have been necessarily or reasonably incurred.
I am not satisfied that such attendance was necessary or reasonable. This was a case that relied to a large extent on expert evidence of a technical nature which would have had to be obtained and analysed prior to trial. In the circumstance I decline to make an allowance in this regard.
Conclusion
I am of the view that had there been no counterclaim in this matter the defendant would have been entitled to the costs on dismissal of the plaintiff's claim. The additional work in respect to the counterclaim was largely in respect of the quantum thereof and matters of a technical nature were necessary for the purposes of defeating the claim. It is not possible for me to try to assess how much work was involved in relation to the quantum of the counterclaim, upon which the defendant failed. The plaintiff did not cross-examine Mr Salter called by the defendant in this regard. This may have been for strategic reasons and there may well have been a good deal of work carried out in preparation for trial on this aspect alone.
The proper order in the circumstances should be:
1.The plaintiff do pay the defendant's costs of the claim.
2.The plaintiff do pay the defendant's cost of the counterclaim limited to that part of the claim admitted at trial and for which judgment in favour of the defendant has been given.
3.The costs in pars 1 and 2 be taxed as one set with a certificate of transcript.
4.The defendant do pay the plaintiff's costs of the counterclaim to be taxed and limited to the cost relating to;
(a)the quantum of the defendant's cost for variations from the purge to the zone system;
(b)the claims abandoned at trial and comprised in pars 22 to 33 of the defence and counterclaim;
(c)the claim under s 51AC Trade Practices Act.
There should be orders accordingly.
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