| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : ZURICH BAY HOLDINGS PTY LTD -v- ATM ENTERPRISES PTY LTD [No 2] [2011] WADC 48 (S) CORAM : SCOTT DCJ HEARD : 17-19 AUGUST, 13 DECEMBER 2010 & 26 MAY 2011 DELIVERED : 31 MARCH 2011 SUPPLEMENTARY
DECISION : 24 JUNE 2011 FILE NO/S : CIV 1899 of 2006 BETWEEN : ZURICH BAY HOLDINGS PTY LTD Plaintiff
AND
ATM ENTERPRISES PTY LTD
First Defendant
MURRAY PADDISON
Second Defendant
Catchwords: Costs Applicability of O 66 r 17 of the Rules of the Supreme Court Whether costs ought to be awarded on Magistrates Court scale Calderbank offer - Effect on costs with respect to issues upon which plaintiff unsuccessful
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Legislation: District Court of Western Australia Act 1969, s 74(1), s 87(1)
District Court Rules 2005, r 5(1), r 6
Fair Trading Act 1997 (WA), s 10, s 77,s 79
Rules of the Supreme Court 1971, O 66 r 17(1)
Trade Practices Act 1974 (Cth), s 52, s 82, s 87 Result: Plaintiffs costs to be taxed on Supreme Court scale
Plaintiff to have 85% of costs Representation: Counsel:
Plaintiff : Mr A D Bereyne
First Defendant : Mr M T S Rennie
Second Defendant : Mr M T S Rennie
Solicitors:
Plaintiff : Jackson McDonald
First Defendant : HFM Legal
Second Defendant : HFM Legal
Case(s) referred to in judgment(s):
Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133(S)
Darling Range Brewing Co Pty Ltd v Luciana Holdings Pty Ltd (2007) 56 SR (WA) 176
Evans Shire Council v Richardson (No 2) [2006] NSWCA 61
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748
Jamal v Secretary, Department of Health (1988) 14 NSWLR 252, 271
Jerinic v Metropolitan Passenger Transport Trust [1969] WAR 132
Lampropoulos v Kolnik [2010] 193(S)
Mercer v Western Australian Planning Commission [2008] WASC 124(S)
Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASC, Library No 980302, 25 March 1998)
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R J Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2009] 206(S)
Vella v Ivanovski [1984] WAR 8
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1 SCOTT DCJ: On 31 March 2011 I gave judgment in this action. In that judgment:
2 On 26 May 2011 I heard the parties on the issue of costs. The parties by then had each filed and served a written outline of submissions and thereafter filed and served supplementary submissions. 3 The issues as to costs are as follows: (a) the effect of a Calderbank offer; (b) whether costs ought to be taxed on Magistrates Court scale; (c) the effect on costs by reason that the plaintiff was unsuccessful on some issues pursued by it and against the second defendant; (d) the cost of the transcript – by reason that the plaintiff refused the request of the defendants to share equally, that cost.
Return of cabin 4 Before I deal with these issues as to costs, counsel for the defendants sought an order in favour of the first defendant for the return of the original cabin fitted by the first defendant to the bulldozer. 5 The submission made was that because the plaintiff was awarded damages calculated by reference to the replacement cost of the cabin as at August 2006, it ought not be entitled to damages in that sum and to retain the cabin which was installed by the first defendant. 6 The difficulty with that submission is that property in the cabin passed to the plaintiff upon installation by the first defendant. There was no claim made in the pleadings or at trial by the first defendant for an order that the cabin be transferred to it. 7 Even if there had been such a claim, it is difficult to see how it could succeed. (Page 5)
8 The plaintiff's claim is in damages. It is not incumbent upon the plaintiff to expend the fruits of its judgment on replacing the cabin. The claim which the first defendant could, it seems to me, have made is to have asserted at trial that the cabin had a salvage value and that any damages awarded to the plaintiff ought to take into account that value. 9 I handed down my reasons for decision on 31 March 2011 and it is now too late for that issue to be raised. 10 It is not relief in the form of a consequential order flowing from the findings which I have made but is in the nature of a claim which could have been raised and agitated at trial. 11 The relief sought by the first defendant is not made out.
Calderbank offer 12 By a letter dated 22 December 2007, the solicitors for the defendants made a Calderbank offer which was marked 'without prejudice except as to costs'. 13 The offer was in the following terms: (1) ATM will, at its own cost, collect the dozer from any location in the Perth metropolitan area. (2) Your client engage Mr Rossi to stipulate what work is required to repair the cab. (3) ATM, at its own cost, will (within reason) undertake those repairs. (4) Your client shall have Mr Rossi inspect those repairs and confirm that they have been undertaken in accordance with his instructions. (5) ATM will, at its own cost, return the machine to any location in the Perth metropolitan area. (6) Once those repairs are completed and the dozer returned, your client will have no further claim against my client. In otherwise, this settlement will be in full and final satisfaction of all claims in relation to the subject matter of this action. (7) ATM will contribute $5,000 towards your client's costs, this sum being payable when the dozer is returned to your client. (Page 6)
14 The critical question in deciding whether to award indemnity costs against a party who has rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances: Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. 15 The party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 [26]. In deciding whether the rejection of a Calderbank offer was unreasonable regard should ordinarily be had to at least the following: (a) the stage of the proceedings at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offerees' prospects of success assessed at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offerees rejecting it. Ford Motor Company of Australia Ltd . 16 The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted does not mean that its rejection was unreasonable. The assessment of the unreasonableness of the rejection of a Calderbank offer must be made without the benefit of hindsight: Ford Motor Company of Australia Ltd.17 In my view it was not unreasonable for the plaintiff not to accept the defendants' offer. There was in my view a lack of precision in the offer which left open the prospect of ongoing dispute. To that end item 3 of the offer by which ATM offered, at its own cost to undertake the repairs (Page 7)
stipulated by Mr Rossi but within reason leaves open further dispute the manner of resolution of which is not particularised in the offer. 18 Further, item 7 offers to contribute $5,000 towards the plaintiff's costs. By this stage the action had been on foot for approximately 15 months and it is likely that the recoverable costs which would have been incurred by the plaintiff to that date would have exceeded that sum. 19 In these circumstances I am not persuaded that by failing to accept the offer the plaintiff has acted unreasonably. 20 As a result no cost consequences flow from the offer not being accepted.
Costs on the Magistrates Court scale 21 Section 74 of the District Court of Western Australia Act1969 (DCA)provides as follows: 74. Court may transfer case to Magistrates Court (1) If an action or matter in the Court (a) is within the Magistrates Court's jurisdiction; (b) becomes within the Magistrates Court's jurisdiction because the claim in the action or matter is reduced by a payment into court, an admitted setoff, a judgment on part of the claim, or otherwise; or (c) becomes within the Magistrates Court’s jurisdiction because its jurisdiction is increased, the Court may order that the action or matter be transferred to the Magistrates Court. (2) An order under subsection (1) may be made on the application of a party to the action or matter or by the Court on its own initiative. … 22 This section was operational as and from 1 May 2005. Before that date, s 74 of the DCA was in significantly different terms. That section provided: 74(1) When an action is brought in the Court that might have been brought in a Local Court without the consent of the defendant – (Page 8)
(2) Notwithstanding section 78(c) so far as it relates to costs, when an action is brought in the Court that might have been brought in a Local Court without the consent of the defendant, the plaintiff is not entitled to recover a greater sum by way of costs than he could have recovered had the action been brought in a Local Court, unless the District Court Judge hearing the action certifies – (a) in the case of an action founded in tort, that in his opinion it was proper to bring the action in the Court instead of the Local Court; and (b) in any other case, that by reason of some important principle of law being involved, or of the complexity of the issues, or of the facts, the action was, in his opinion, properly brought in the Court. 23 That section included provision for the cost consequences of litigating a matter in this court which might have been brought in a (then) Local Court without the consent of the defendant. 24 The section now in force and in force when these proceedings were instituted makes no reference to those cost consequences. 25 The question then arises as to whether upon the proper construction of s 87(1) of the DCA the provisions of O 66 r 17 of the Rules of the Supreme Court1971 (RSC) are applicable. 26 To that end the relevant legislative provisions are as follows. 27 Section 87(1) of the District Court Act provides: (1) Subject to this Act, the practice and procedure of the Court shall be governed by the rules of court, and until provision is made by rules of court or where no special provision is contained in the rules of court, the rules of court of the Supreme Court for the time being in force, so far as applicable, apply to the Court. 28 Rule 6 of the District Court Rules 2005 (DCR) provides: (Page 9)
29 Order 66 rule 17 of RSC provides: (1) If an action is brought in the Supreme Court which could have been brought in the Magistrates Court without the special consent of the defendant, the plaintiff shall recover no greater sum by way of costs than he could have recovered had the action been brought in the Magistrates Court, unless the Court certifies that by reason of some important principle of law being involved, or of the complexity of the issues or of the facts, the action was properly brought in the Supreme Court. 30 I have not been referred to nor am aware of, any Court of Appeal decision with respect to that question. 31 In Darling Range Brewing Co Pty Ltd v Luciana Holdings Pty Ltd (2007) 56 SR (WA) 176, Stevenson DCJ observed, albeit obiter, that although the former s 74 specifically dealt with cost consequences and it was likely that the provisions of O 66 r 17 of the RSC would have no application in this court, the absence of those cost consequences in the current section did render the position far less clear. 32 In my view there is no provision in the DCR with respect to the cost consequences of proceedings being instituted in this court which could or might have been instituted in the Magistrates Court. There is, therefore, no 'special provision' within the proper construction of s 87(1) of the DCA. 33 The consequence, in my view, is that the provisions of O 66 r 17 of RSC are incorporated in the rules of this court. (Page 10)
34 There are a number of authorities in which the provisions of the former s 74 of the DCA were considered. There is some difference in the relevant terminology between that section and O 66 r 17 RSC. In the former s 74, the words '… when an action is brought in the court that might have been brought in a local court without the consent of the defendant' appear, whereas in O 66 r 17 the relevant words are '… which could have been brought in the Magistrates Court without the special consent of the defendant'. 35 In my view in their context the words 'might' and 'could' have the same meaning. 36 The judgment of Wickham SPJ in Vella v Ivanovski [1984] WAR 8 was followed in Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASC, Library No 980302, 25 March 1998) in which Kennedy J said that the central test was whether the plaintiff when instituting proceedings might reasonably have been expected to recover an amount in excess of the maximum of the jurisdiction of the (Local Court). 37 That was also the question posed by Negus J in Jerinic v Metropolitan Passenger Transport Trust [1969] WAR 132. 38 The question then is whether the plaintiff in this case when issuing proceedings in this court might reasonably have been expected to recover an amount in excess of the jurisdiction of the Magistrates Court. 39 It was common ground that the jurisdictional limit of the Magistrates Court at the date upon which these proceedings were instituted was $50,000. 40 The plaintiff says that when it instituted proceedings, it did reasonably expect to recover an amount in excess of $50,000. 41 To that end, there was a generally indorsed claim on the writ in which the plaintiff sought damages against the first defendant: (a) for breach of contract with respect to the contractual obligation of the first defendant in undertaking to design, manufacture and install the cabin to the bulldozer; (b) for breach of a duty of care owed by the first defendant with respect to the design, manufacture and installation of the cabin and the manufacture, installation and supply of a fork jib, mounting (Page 11)
ears and tyre handing attachment to a CAT ID38G tyre handler which was sold and supplied to the plaintiff by Caudo Pty Ltd; (c) pursuant to s 82 and s 87 of the (then) Trade Practices Act 1974 (Cth) (TPA) and s 77 and s 79 of the Fair Trading Act 1997 (WA) (FTA) for misleading and deceptive conduct in contravention of s 52 of the TPA and s 10 of the FTA with respect to the design, manufacture and installation of the cabin; 42 Damages were claimed against the second defendant by reason of his alleged accessorial liability under the TPA and FTA and for breach of his duty of care. 43 Counsel for the plaintiff relied upon the schedule of damages dated 28 June 2007 which he said particularised the plaintiff's claim as at the date of the institution of the proceedings. The damages claimed were: (a) $18,474.34 for a replacement cabin; (b) the value of the loss of opportunity to earn income from the date that the cabin failed until the installation of a new cabin at the rate of $1,250 per week; (c) $18,782.16 for replacement forks and materials handling arm for the IT38G tool carrier; alternatively, $4,855.50 for modification costs and the value of the loss of opportunity to earn income during the period of repair and rectification of $780 per day; (d) $4,400 for the cost of freighting the IT38G tool carrier from Port Hedland to Perth. (paragraphs (c) and (d) are referred to as the Caudo Claim) 44 Counsel for the plaintiff said that proceedings were also instituted against Caudo Pty Ltd with respect to the sum sought in the Caudo claim and that those proceedings were subsequently settled. 45 The plaintiff increased the claim for replacement costs of the cabin on a number of occasions such that by trial the sum claimed was $65,058.38. Relevantly, however, as at the date of institution of these proceedings the sum which the plaintiff claimed under this head was $18,474.34. 46 The claim for the value of loss of opportunity to earn income at the rate of $1,250 per week was not particularised in the schedule of damages (Page 12)
dated 28 June 2007 and was not the subject of any calculation until 16 July 2010 when amended particulars were filed in which that value was claimed to be $1,250 per week from August 2006 to about May 2007 and during periods of repair being 21 June 2005 to 8 June 2005 and 7 November 2005 to 30 November 2005. 47 The plaintiff says that the period August 2006 to May 2007 was the period during which it contended that the bulldozer was out of work because of the need for the cabin to be replaced. At $1,250 per week the sum under this head would exceed $45,000 48 Counsel for the plaintiff submits that even leaving aside the Caudo claim at the date the action was commenced, the plaintiff reasonably expected that the claim would exceed the sum of $50,000. 49 Counsel for the defendants submitted that by the date upon which the proceedings were instituted the plaintiff was well aware of the prospects of successfully recovering loss of income referable to the alleged defective cabin and that for the reasons to which I referred in my judgment there was, as the plaintiff must have well known, not to have been any reasonable prospect of the claim both for past loss and future loss being made out. 50 To that end, putting aside the Caudo claim, defence counsel submits that the claim which the plaintiff could reasonably have considered might be successful would not have exceeded the jurisdictional limit of the Magistrates Court. 51 In the reasons published by me I found that the plaintiff did not prove any loss of income prior to August 2006 and that it had failed to mitigate its loss by failing to replace the cabin in or about August 2006. To that end I found that the cabin could have been replaced by 30 September 2006. 52 As a consequence the only recoverable income losses after August 2006 would have been for the period expiring 30 September 2006. 53 The plaintiff pursued its claim at trial for the value of a lost opportunity to earn income between August 2006 and May 2007. Even though I found that the plaintiff had failed to mitigate its loss and I found that I was not satisfied that the plaintiff had made out its claim for loss of income I do not consider that the plaintiff might not reasonably have expected to recover that sum or a significant part of that sum at trial. (Page 13)
54 The fact that it was not successful in doing so is not to the point. The question falls to be determined at the date upon which the proceedings were instituted. 55 Even without the Caudo claim the sum sought by the plaintiff was substantially in excess of the jurisdictional limit of the Magistrates Court. 56 Insofar as the Caudo claim is concerned I cannot make any firm determination as to the plaintiff's reasonable expectation. 57 It was not a claim which was dealt with at trial. However I have sighted the statement of claim in which the Caudo claim is pleaded. Counsel said that that claim was being pursued but was the subject of a settlement direct by Caudo Pty Ltd. 58 In all I am satisfied that when the proceedings were instituted in this court the plaintiff might reasonably have been expected to recover an amount in excess of $50,000. 59 Further it was always open to the defendants if they took the view at any stage during the course of these proceedings that the sum to which the plaintiff might at best be entitled would not exceed the jurisdiction of the Magistrates Court, to make an application for an order that this action be remitted to the Magistrates Court. 60 Of course, before making such an application a defendant may need to be fully appraised of the ambit of the plaintiff's case and have considered all the relevant documentation and other relevant materials relating to it. 61 Nonetheless it is a course which is open to a defendant. 62 In the premises it is appropriate that any costs awarded to the plaintiff be taxed on the Supreme Court scale.
Plaintiff unsuccessful on issues – claim against second defendant dismissed 63 During the course of oral submissions on 26 May 2011, counsel for the parties agreed that rather than the orders encompass an order for costs: (Page 14)
there ought to be a percentage order for recovery in favour of the plaintiff which would deal with all of these issues given that the second defendant was the managing director of the first defendant. 64 That is a course which is a practical one. It is a course which has been referred to with approval in cases such as Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133(S); R J Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd[2009]206(S) and Lampropoulos v Kolnik [2010] 193(S).
Issues not proved by plaintiff 65 The defendants say that the plaintiff was unsuccessful in its claim against the first defendant with respect to two issues being: 66 The first defendant in its supplementary submissions says that insofar as the loss of opportunity claim is concerned the evidence was given by James Lim (total time of his evidence being 43 minutes) and to a much lesser extent, Matthew Caruso (total time of his evidence being 30 minutes). 67 With respect to the replacement cost of a new cabin, counsel for the first defendant said that the evidence of Mr Major and Mr Jones (for Westrac) totalled 67 minutes. 68 The first defendant submits that the evidence and submissions approximated 2.5 hours out of a total time for trial of approximately 20 hours or 12.5% of the trial time. 69 Insofar as preparation time is concerned with respect to these issues of quantum, counsel for the first defendant estimated (conservatively), five hours. 70 The plaintiff on the other hand submitted that the plaintiff should not be deprived of its costs in respect of a particular issue simply because it failed in respect of that issue. 71 In Mercer v Western Australian Planning Commission [2008] WASC 124(S) [45] Jenkins J said: (Page 15)
Having found that the plaintiffs should generally have their costs, I would not deprive them of costs in respect to a particular issue simply because they failed in respect to it. It is to be expected that even a successful party will fail in respect to some issues which it raised during the course of proceedings: Cretazzo v Lombardi (1975) 13 SASR 4, 12. 72 In that case her Honour was critical of a valuation methodology upon which the plaintiffs relied and noted that the combined evidence referable to that valuation took approximately four and a half days out of a total of five and a half days of evidence in the plaintiff's case. 73 As a consequence her Honour significantly discounted the costs to which the plaintiff was entitled. 74 In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748, 136-48137 Toohey J held that where a litigant had succeeded only upon a portion of his claim, the circumstances might make it reasonable that he bear the expense of litigating the portion upon which he failed. His Honour referred to the decision of Jacobs J in Cretazzo [16] to the effect that such an order should be made with caution as the ultimate ends of justice might not be served if a party was dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. 75 In Jamal v Secretary, Department of Health (1988) 14 NSWLR 252, 271 Kirby P said that the ordinary rule that costs follow the event should only be departed from if the increase in costs relating to the issue on which the successful party was unsuccessful was of 'sufficient significance to warrant a special order'. 76 In this case I am of the view that there should be no reduction in the costs awarded to the plaintiff by reason of its failure to recover the sum sought by it at trial for the replacement cost of the cabin, calculated as at 4 June 2010. 77 The plaintiff was successful in recovering damages for the cost of replacing the cabin but I awarded damages calculated as at August 2006. 78 The evidence referable to the cost of replacement of the cabin be it August 2006 or June 2010 comprised, principally, evidence by quotations from Westrac which were exhibited by consent. 79 The claim for loss of profit is, in my view of a different category. It was a discrete issue and one which required a close examination of a (Page 16)
number of relevant documents and cross-examination of both Mr Lim and Mr Caruso. 80 In my view a percentage reduction ought to be afforded to the first defendant to take into account the costs incurred by it and the costs incurred by the plaintiff which it ought not recover.
Claim against second defendant dismissed 81 In the first defendant's submissions on costs the first defendant does not make any claim with respect to the failure by the plaintiff to prove its claim for damages against the first defendant based upon the alleged breaches of the Competition and Consumer Act 2010 (Cth) (CCA) and the Fair Trading Act 1987 (FTA). 82 Counsel does submit however that with respect to the second defendant the costs incurred in dealing with the accessorial claim against the second defendant would amount to no more than three hours' work. 83 The practical approach, as I said earlier, is to award the plaintiff a percentage of its costs rather than make discrete orders in favour of the first and second defendants. 84 To that end having regard to the time spent at trial and a reasonable estimate of time in preparation and the costs incurred by the plaintiff which it ought not recover the appropriate course is to allow the plaintiff 85% of its costs to take into account the loss of opportunity issue in which it failed and its failure to prove its claim against the second defendant. 85 Consequently the plaintiff should be entitled to 85% of its costs and disbursements allowable on taxation with there being no order for costs in favour of the second defendant.
Cost of transcript 86 The defendants do not say that a transcript was not reasonably necessary during the course of this trial. That is a proper concession to make given the fact that the trial was adjourned part heard and was heard over a number of days. 87 The defendants say however, that they made a proposition to the plaintiff in December 2010 that they would share the costs of the transcript ordered by the plaintiff on a 50/50 basis but that offer was refused resulting in the defendants having to pay the cost of a transcript direct. (Page 17)
88 The defendants' counsel said that it was a practice for parties to share costs in the manner the subject of their counsel's proposal and that the refusal on the part of the plaintiff was, in all the circumstances, unreasonable. 89 I can sympathise with the submissions made by counsel for the defendants. I cannot see any reasonable basis for the plaintiff to take that position. Parties to litigation should be encouraged to take reasonable steps to reduce costs. 90 During the course of oral submissions reference was made to copyright issues which may arise in the event that the transcript obtained by the plaintiff was then copied. 91 The heading on the transcript is in the following terms: Copyright in this document is reserved to the State of Western Australia. Reproduction of this document (or any part thereof, in any format) except with the prior written consent of the Attorney General is prohibited. Please not that under s 43 of the Copyright Act 1968 copyright is not infringed by anything reproduced for the purposes of a judicial proceeding or of a report of a judicial proceeding. 92 The matter was canvassed in Computer Accounting and Tax Pty Ltd (S) where Simmonds J said: I agree that it is desirable parties confer with a view to sharing costs where such cost sharing is reasonably possible. … [54]. 93 At [57] his Honour made reference to the provisions of s 43 of the Copyright Act 1968 (Cth) and said: However, the copyright warning carried on transcript that is made available to a party on payment of the relevant fee would in my view make it reasonable for a party not to consider sharing the transcript with the other party by copying it, at least in the absence of an approach by the other party. It was common ground there had been no such approach here. 94 In my view there was not likely to be a breach of copyright by the costs of the transcript being shared in the manner proposed by counsel for the defendants. In exercising my discretion I am of the view that the approach taken by the plaintiff was an unreasonable one. 95 In the circumstances the disbursement item for transcript will be limited to 50% of the cost, to the plaintiff. (Page 18)
Summary 96 The costs orders which are to be made are that the first defendant pay 85% of the plaintiff's costs and disbursements to be taxed. There be no costs order in favour of the second defendant. 97 The parties ought to submit a minute of the formal costs orders reflecting this determination.
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