Ziegler v Piva (No 3)

[2005] VSC 331

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 6335 of 2003

ANDREA PATRICIA ZIEGLER	Plaintiff
v
SANDRA PIVA and ORS	Defendants
And
MICHAEL DAVID GIBSON	Third Party

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JUDGE:	BYRNE J
WHERE HELD:	Melbourne
DATE OF HEARING:	15 August 2005
DATE OF JUDGMENT:	19 August 2005
CASE MAY BE CITED AS:	Ziegler v Piva (No. 3)
MEDIUM NEUTRAL CITATION:	[2005] VSC 331

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Practice and Procedure – costs – certain parties to proceeding achieve settlement – settling parties obtain dismissal of their claims against non-settling parties – whether non-settling parties entitled to costs of dismissed claims.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Philip D. Crutchfield	Clayton Utz
For the first and secondnamed Defendants	Mr George A. Beaumont QC with Mr I.S. Williams	Piper Alderman
For the thirdnamed Defendant and Third Party	Mr P.J. Riordan SC	Phillips Fox

HIS HONOUR:

1. This litigation concerns a contract of sale allegedly entered into on 3 April 2003 between the plaintiff, Andrea Patricia Ziegler as vendor, and the first defendant, Sandra Piva as purchaser, of the land situate at and known as 743 Orrong Road, Toorak for the price of $7.1M.  The selling agent was Kay & Burton Pty Ltd, the thirdnamed defendant.  On 3 April 2003 a cheque dated 26 February 2003 for $710,000, the amount of the deposit, drawn by Shandford Investments Pty Ltd in favour of Kay & Burton Trust Account was handed to the third party, Michael David Gibson, an employee of Kay & Burton.  On or about 7 April 2003 the cheque was dishonoured upon presentation.

1. Two proceedings were commenced as a consequence of these events, which were not in dispute.

·Proceeding 5363 of 2003 was commenced by writ filed on 14 April 2003.  The plaintiff, Kay & Burton, sued Shandford on the cheque.  The substantial defence of Shandford was that the cheque was delivered on the express condition that it was not to be presented for payment unless or until Shandford informed Kay & Burton that there were sufficient funds to meet it.  This condition was agreed to in a conversation between Mr Gibson and Vincent Di Francesco who was acting as agent for Ms Piva.  This condition was put in issue in the reply.  In this proceeding Kay & Burton was represented by Herbert Geer & Rundle until October 2003, and, thereafter, by Nathan Kuperholz. 

·This proceeding No. 6335 of 2003 was commenced by writ filed on 19 June 2003.  Mrs Ziegler sued three defendants: Ms Piva, Mr Di Francesco and Wallace Stuart Cameron, alleging that the contract of sale had been terminated.  Against Ms Piva she sought payment of the deposit and damages.  Against Mr Di Francesco she sought damages for breach of a warranty that he was authorised to conclude the contract of sale.  Against Mr Cameron, who was a director of Shandford and the signatory of the cheque, she sought damages for misleading and deceptive conduct and for a breach of his warranties that Mr Di Francesco was authorised to act as his agent and as agent for Ms Piva and that the deposit would be paid and a contract of sale entered into.

1. The current statement of claim is a little different.  The claim against Mr Di Francesco is not pursued and he is no longer a party to the proceeding.  Mr Cameron has, therefore, been promoted to the position of second defendant, Kay & Burton Pty Ltd (“Kay & Burton”) has been added as third defendant.  Ms Piva and Mr Cameron assert inter alia in their defence that the arrangements for the purchase were subject to the same condition as to the presentation of the deposit cheque.  Mrs Ziegler’s claim against the added defendant is that, if the contract of sale was executed and the deposit cheque was delivered on a conditional basis, as Ms Piva contends, then Kay & Burton was in breach of duties owed to her as its principal in failing to inform her of the agreement which had been reached with respect to the condition.  Mrs Ziegler seeks damages from Kay & Burton being the conveyancing costs thrown away and the legal costs of the proceeding which she may have to pay to Ms Piva and Mr Cameron. 

1. In December 2004 Ms Piva and Mr Cameron, by leave,[1] filed a third party statement of claim against Mr Gibson.  In essence, their contention against him is that he warranted and represented to them that he would tell Mrs Ziegler that the contract of sale had been signed and the deposit paid on a conditional basis and that he would obtain from her, as his principal, her agreement to this and that he would not cause the cheque to be presented for payment otherwise than in accordance with this condition.  He breached the warranty and his representation constituted misleading and deceptive conduct.  Their claim against him is for damages. 

   [1][2004] VSC 453

1. In this proceeding Kay & Burton and Mr Gibson were represented by Mr Kuperholz until March 2004 and, thereafter, by Phillips Fox. 

1. By order made on 28 November 2003 the two proceedings were ordered to be heard together and, in due course, a trial date of 15 August 2005 was appointed.

1. For some time the parties have been attempting to negotiate a settlement and these efforts have, to some extent at least, been crowned with success.

1. The disputes the subject of proceeding no. 5363 of 2003, Kay & Burton v Shandford, have been settled and a Notice of Discontinuance has been filed by the plaintiff with the consent of Shandford on 10 August 2005.

1. The disputes between Mrs Ziegler and Ms Piva and Mr Cameron, the subject of proceeding no. 6335 of 2003 have also been settled.  Counsel for Mrs Ziegler sought an order by consent that this claim be dismissed with no order as to costs.  I made these orders by consent of the affected parties.

1. There remained only the claims involving Kay & Burton and Mr Gibson.  Counsel on behalf of Mrs Ziegler announced that he sought an order that his client’s claim against Kay & Burton be also dismissed and, with no resistance on the part of that defendant, that order was made.  It was apparently the wish of Ms Piva and Mr Cameron, although no order was sought, that the third party claim brought by them against Mr Gibson should meet the same fate.

1. The issue before me, therefore, concerned the costs of the claims involving Kay & Burton and Mr Gibson.  Mrs Zielger asks that there be no order as to the costs of Kay & Burton in respect of her claim against it but, rather, that it should pay her costs incurred on or after 10 August 2005.  Ms Piva and Mr Cameron seek similar orders.  Counsel for Kay & Burton and Mr Gibson seek its or his costs of the abandoned claims.

1. The terms of the settlements achieved were not disclosed to me, although it does appear from the Clayton Utz letter of 10 August 2005 that Mrs Ziegler “compromised her claims by a substantial amount” and agreed to bear her own costs. 

1. The evidence before me comprised an affidavit of Cain Jamieson Jackson, a solicitor with Phillips Fox the solicitors acting for Kay & Burton and Mr Gibson, sworn 15 August 2005 and a bundle of correspondence passing between the solicitors.  Subsequent to the hearing I have received further affidavits; that of Mr Kuperholz sworn 16 August 2005, a second affidavit of Mr Jackson sworn 17 August 2005 and that of Scott Edward Ralston, a solicitor employed by Clayton Utz acting for Mrs Zeigler sworn 17 August2005.

1. It appears from this that, on Friday 5 August 2005, Phillips Fox, on behalf of  Kay & Burton and Mr Gibson, responded to a draft deed of settlement which they had received from the other parties.  They made two points:

·The draft did not make provision for the payment of $71,000 for Kay & Burton’s commission on the sale.  I note as to this that such a claim is not made by Kay & Burton in the proceeding.

·The draft did not provide for payment of their clients’ costs by Ms Piva and Mr Cameron.

1. The next letter is from the same solicitors dated Tuesday 9 August dealing with the matters required for the trial which was due to commence on the following Monday.  This attracted a response from Clayton Utz, solicitors for Mrs Ziegler, stating that her claims against Ms Piva and Mr Cameron had been resolved and the proceeding against them would be discontinued.  They said, too, that they would also discontinue against Kay & Burton on the basis that each party bears its own costs.  They enclosed a notice of discontinuance for Phillips Fox to execute on behalf of their clients as consenting parties.

1. And this is how things stood and still stand between the parties.  On Wednesday 10 August Clayton Utz wrote offering reasons to persuade Phillips Fox to relent and concluded by warning them that if, notwithstanding these arguments, Kay & Burton’s attitude required an attendance on 15 August, Mrs Ziegler would seek an order for it to pay her costs as from that date.  This was the basis for her application for costs.

1. On the same day, Piper Alderman, the solicitors for Ms Piva and Mr Cameron also wrote to Philips Fox informing them that their clients would not pursue their claims against Mr Gibson by reason of the settlement with Mrs Ziegler.  They reserved their rights to give notice that they would argue about costs on 15 August including the costs of attendance on that date.

1. On Thursday 11 August and Friday 12 August the parties maintained these positions and, I was told, the practitioners for Kay & Burton and Mr Gibson stopped preparation in the expectation that, whatever happened on 15 August, the trial would not proceed.

1. I have mentioned that the Kay & Burton cheque proceeding was settled and discontinued on 10 August.  It will be recalled that in that proceeding Kay & Burton was then represented, not by Phillips Fox, but by Mr Kuperholz.  The evidence shows that by agreement between him and Clayton Utz, Kay & Burton was pursuing this proceeding for the benefit of Mrs Zeigler who was, after all, the person entitled to have received the proceeds of the cheque. Ms Piva and Mr Cameron were not, it seems, privy to this arrangement but, nonetheless, its existence was in issue.  Mr Kuperholz obtained the execution by Kay & Burton to the terms of settlement on 9 August as agent for Mrs Zeigler and reserving the rights of parties with respect to commission on the sale and those with respect to the claims brought against Kay & Burton and Mr Gibson in the present proceeding.  Mr Kuperholz brought this to the attention of Clayton Utz and this was apparently acceptable to their client, Mrs Ziegler.  The other parties were aware only that her claims against Kay & Burton and their own against Mr Gibson were resolved by the settlement.

1. In the normal course of things, a discontinuing party must pay the costs of the other party of the discontinued proceeding[2].  On behalf of Kay & Burton and Mr Gibson, it was contended that the formal submission to judgment in their favour by each of the claimants against them should have the same consequence.  How might it be, counsel asked, that a claimant who has brought claims based on breach of professional duty against estate agents can simply abandon those claims without payment of the costs incurred by the estate agents in defending them?

   [2]Rule 25.05, Rule 63.15.

1. The argument to the contrary depended upon a line of authority of which Re the Minister for Immigration & Ethnic Affairs of the Commonwealth of Australia;  Ex parte Lai Qin[3] is the most authoritative.  It was put that, where neither party to litigation wishes to pursue it, and each party has acted reasonably in commencing and defending the proceeding and continued so to act until settlement or until the further prosecution of the litigation has become futile, the proper exercise of the Court’s discretion as to costs will usually lead to an order that no order as to costs be made[4].  The reason for this is the practical difficulty of the Court being required to undertake a hypothetical trial to determine whether one or other party would eventually succeed on the settled issues and thereafter have an entitlement to costs following that hypothetical event.  A further reason is that the Court acknowledges that it is in the public interest that parties compromise their disputes and the law should not create difficulties in the way of this. 

   [3](1997) 186 CLR 622.

   [4](1997) 186 CLR 622 at 625, per McHugh J.

1. In the Lai Qin case, the prosecutrix sought prerogative relief against the Minister who had refused to grant her a protection visa as a refugee.  One week after the proceeding was commenced the Minister granted her a visa so that the reason for the proceeding disappeared.  McHugh J in these circumstances, considered “the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means”.  For the reasons set out above his Honour concluded that the prosecutrix’s application for costs should fail.

1. The principles have been helpfully summarised by Hill J in Australian Securities Commission v Aust-Home Investments Ltd[5] and I venture to set out those relevant to this case:[6]

(1)Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order[7].

(2)It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial[8].  This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3)In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them[9].

[5](1993) 44 FCR 194 at 201.

[6]References have been taken to footnote.

[7]J T Stratford & Son Ltd v Lindley (No.2) [1969] 1 WLR 1547; [1969] 3 All ER 1122; South East Queensland Electricity Board v Australian Telecommunications Commission (unreported, Federal Court, 10 February 1989).

[8]J T Stratford & Son Ltd v Lindley (No. 2) [1969] 1 WLR 1547; [1969] 3 All ER 1122.

[9]South East Queensland Electricity Board v Australian Telecommunications Commission (unreported, Federal Court, 10 February 1989).

1. Hyder Consulting (Vic) Pty Ltd v CGU Insurance Ltd[10] was a claim for costs which arose following the settlement of the Burnley Tunnel cases in 2003.  In one of these cases, Hyder, the design engineer, sued CGU, QBE and Heath seeking indemnity against its liability to the proprietors for the deficiencies in the tunnel.  Its claim was brought against them under its professional indemnity policy and other policies.  An alternative claim against Heath was for misleading and deceptive conduct.  Heath defended these claims and itself brought a counterclaim against CGU and QBE and others.

   [10][2003] VSC 223.

1. The tunnel cases duly settled.  The claims of the proprietors against Hyder were settled as was Hyder’s claim against CGU, QBE and Heath.  Heath did not proceed with its counterclaim against Hyder and, accordingly, Hyder sought its costs of that counterclaim.  In refusing a costs order, Mandie J referred to and applied the Lai Qin case.  His Honour concluded his judgment with the following comments:

“[15]In this case the counterclaim has been rendered futile not by settlement of the counterclaim itself between the particular parties now before the Court, but has rather been rendered futile by other events namely, the settlement of the tunnel cases and of the claim by Hyder against Heath in this proceeding.  It was no doubt appropriate for those representing the defendants to counterclaim to point out that Heath had procured a settlement with Hyder without regard to the risk of costs in its counterclaim.  On the other hand, I have noted that CGU and QBE were also parties to a settlement with Hyder.  It may be that in some cases where a principal claim is settled thereby rendering a counterclaim or third party proceeding redundant or futile, it would be appropriate to make an order for costs in favour of defendants to the counterclaim or third party proceeding.  However, I think that those circumstances would probably be rare.  I am assuming in making these comments that the parties will have acted reasonably in conducting and defending the counterclaim or third party proceeding.  In the present case, where the merits of the counterclaim cannot be determined, there is a strong argument, as the authorities suggest, in favour of the Court exercising its discretion to make no order as to costs.  I think that is particularly so in the present case where very heavy, complex and expensive proceedings have been settled.  It would not be in the public interest to discourage or penalise parties who have settled proceedings of this nature by making orders for costs against them in any parts of such proceedings which were not settled but rendered futile.  I think in all the circumstances that the just and reasonable exercise of the Court’s discretion is to make no order as to costs.”

1. There are two aspects of the present case which cause difficulty.  First is the fact that Kay & Burton was a party to the settlement of the Ziegler claim against Ms Piva and Mr Cameron.  Counsel for Mrs Ziegler and for Ms Piva and Mr Cameron said that this shows that Kay & Burton approved the settlement and that its present resistance was simply part of a strategy to recover its commission.  I mention in passing that this cannot affect the rights of Mr Gibson who was not a signatory to the deed of settlement.  In any event, counsel for Kay & Burton disputed this and said that his client had brought the claim on the cheque for the benefit of its principal, Mrs Ziegler and it settled this claim at her direction.  Its conduct in resisting the breach of duty claims was in pursuit of its own interests.  The evidence clearly demonstrates the correctness of the analysis offered on behalf of Kay & Burton.

1. The second is that it seems on the material a fair inference that the settling parties were aware that Kay & Burton and Mr Gibson were not agreeable to its terms and that the claims made against them remained on foot. They executed them nonetheless.  Where a number of parties to litigation wish to compromise their own claims, they ignore the interests of other parties at their own peril.

1. In One-Tel Ltd v Commissioner of Taxation[11], Burchett J drew a distinction between “cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs”.[12]

   [11](2000) 101 FCR 548.

   [12]101 FCR 548 at 553.

1. I make no finding as to the prospects of success of the abandoned claims.

1. I make no finding that any party acted unreasonably in bringing, pursuing or defending the various claims, including those which have been abandoned.  Insofar as it should be presumed, unless shown otherwise, that the parties acted reasonably[13], I so find.

   [13]As appears to be assumed in Hyder Consulting (Vic) Pty Ltd v CGU Insurance Ltd.

1. I conclude from all of this that there should be orders for costs in favour of Kay & Burton and Mr Gibson.  The following factors lead me to this conclusion:

(1)Ms Piva and Mr Cameron made some payment to Mrs Ziegler under the terms of settlement.  This payment represents part of the loss and damage claimed against both Kay & Burton and Mr Gibson.

(2)The settlement did not, as a matter of law, destroy the claims against Kay & Burton and Mr Gibson which might therefore have proceeded.

(3)Mrs Ziegler, as well as Ms Piva and Mr Cameron, each have unconditionally abandoned before me the claims against Kay & Burton and Mr Gibson.  In this sense, it is akin to a surrender.

(4)It cannot be said that all parties before me were not wishing to proceed with the litigation.  Kay & Burton and Mr Gibson were prepared to continue defending the claims made against them but, naturally enough, they had no resistance to the abandonment of those claims.

(5)The settling parties appear to have made a deliberate decision to override or bypass the interests of Kay & Burton and Mr Gibson.  It is right that they should abide the consequences of this decision.

1. I therefore propose the following orders.

(1)       The plaintiff pay the costs of the third defendant of the proceeding.

(2)That the first and second defendants pay the third party’s costs of the third party proceeding.

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