Amended Charter Pacific Corporation Ltd v Belrida Enterprises Pty Ltd & Ors [2002] QSC 319

Supreme Court of Queensland|2002-10-17|Before: Fryberg, J

[1] Reasons for Judgment have been delivered in this action and the following orders foreshadowed:

1. Judgment for the plaintiff against the third, fourth and fifth defendants for $604,634.30 plus interest to date, calculated from 1 June 1994 at the rate which is one per cent higher than the benchmark rate of the National Australia Bank from time to time.

2. Judgment for the first cross-claimants against the plaintiff for $397,600 plus interest to date, calculated on $360,000 from 1 June 1994 and on $37,600 from 29 July 1994, at the rate which is one percent higher than the benchmark rate of the National Australia Bank from time to time.

3. Judgment for the second cross-claimants against the plaintiff for $397,600 plus interest to date, calculated on $360,000 from 1 June 1994 and on $37,600 from 29 July 1994, at the rate which is one percent higher than the benchmark rate of the National Australia Bank from time to time.

4. Judgment for the second and third defendants by cross-claim (K J Dart and B G Dart) against the cross-claimants.

The references to cross claimants and to a cross-claim were anachronistic and should have been to counterclaimants and a counterclaim. The questions now before the Court are what orders should be made in regard to costs and whether there should be any stay of execution to enable set-off of amounts due under such orders against amounts due under the judgment. At the hearing of the argument on these questions the defendants were represented by solicitors and senior counsel.

[2] For convenience I shall identify the parties and their relationships to the respective claims, omitting the first and second defendants who compromised with the plaintiff at an early stage and who are not material for present purposes:

Third defendants Michael John and Lynette Helen Coventry

First counterclaimants Michael John and Lynette Helen Coventry

Second counterclaimants Barry Tabe and Andrew Coventry

First defendant by counterclaim Charter Pacific Corporation Limited

Although it might have been possible for the first and second counterclaimants to bring separate counterclaims, they did not do so. They joined in the one counterclaim.

[3] The claim alleged several causes of action against the defendants and against them in different capacities. It was amended from time to time, but the major allegations were:

Misleading or deceptive conduct: against Andrew Coventry personally and the other defendants on the basis that Andrew Coventry was their agent. (This was based on both the Corporations Law and Trade Practices Act 1974).

Breach of warranty (First Deed): against Michael and Lynette Coventry and Barry Tabe.

Breach of warranty (Second Deed): against Michael and Lynette Coventry and Barry Tabe.

[4] The counterclaim also alleged several causes of action on different bases:

Misleading or deceptive conduct: against Charter Pacific Corporation Limited on the basis of conduct by the Darts and against the Darts personally (based on the Trade Practices Act 1974).

Deceit: against the Darts personally and Charter Pacific Corporation Limited vicariously.

Negligence: against the Darts personally and Charter Pacific Corporation Limited vicariously.

Debt: against Charter Pacific Corporation Limited (based on the Second Deed).

Undertaking as to damages: against Charter Pacific Corporation Limited.

Interest: against Charter Pacific Corporation Limited and the Darts personally.

[5] Costs are now the major issue between the parties. I venture to repeat part of what I wrote in my reasons for judgment:

"In their final form the pleadings spread over 87 pages ... The trial lasted 157 sitting days spread over a period of about 18 months. There was an interlocutory appeal to the Court of Appeal. Thirty witnesses were called at trial, the transcript occupied over 11,000 pages, and 342 exhibits were tendered, including one which was a CD ROM on which a large number of documents were imaged ... I cannot know what all of this has cost the parties and the taxpayers, but the amount must be horrendous."

Notices under ch 9 pt 5 of the Uniform Civil Procedure Rules

[6] The trial began in January 2000 and continued for nearly six weeks until it was adjourned in accordance with the court calendar. It resumed on 28 August, which was the 29th day of the hearing. The Court did not sit on 30 August 2000 at the request of the parties. On that day the defendants and counterclaimants delivered an offer to settle pursuant to ch 9 pt 5 of the Uniform Civil Procedure Rules:

TAKE NOTICE THAT the defendants & counterclaimants offer to settle this action upon the following terms: -

1. The plaintiff will pay to the defendants & counterclaimants the sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), such payment to be made within 28 days of acceptance of this offer.

2. The plaintiff will pay the costs of the defendants & counterclaimants, up to the date of service of this offer on the standard basis, incidental to the claim & counterclaim, such costs to be assessed if not agreed.

3. Payment of the said settlement sum & costs will operate as a release & discharge of all actions, suits & claims between the plaintiffs & cross defendants and their legal advisers (on the one hand) and the defendants & counterclaimants and their legal advisers (on the other hand), severally & jointly.

4. The defendants & counterclaimants, within 14 days of this offer being accepted, are to apply to the Australian Taxation Office for a private ruling regarding their liability to pay GST on the settlement monies under cl 1 hereof. If that private ruling indicates that a GST liability exists, the plaintiff is to pay same promptly.

5. This Offer to Settle is made pursuant to ch 9 pt 5 of the Uniform Civil Procedure Rules and remains open for acceptance for a period of 14 days from date of service."

[7] 6 October 2000 was the 56th day of the trial. On that day the plaintiff and the Darts delivered three notices, one to the third defendants, one to the fourth defendant and one to the fifth defendant. The first of these notices provided:

TAKE NOTICE that the Plaintiff and the Defendants by Counterclaim hereby offer to settle this action (comprising the Claim, the Counterclaim and the Claim in respect of the Plaintiff's undertaking as to damages), as between themselves and the Third Defendant and the First Plaintiff by Counterclaim, on the following terms:

1. The Plaintiff will pay to the Third Defendant and First Plaintiff by Counterclaim the sum of ONE HUNDRED AND TWENTY FIVE THOUSAND DOLLARS ($125,000).

2. The Plaintiff will pay the Third Defendant's and the First Plaintiff by Counterclaim's costs up to the date of service of this offer, on the standard basis, of and incidental to the Claim and Counterclaim, such costs to be assessed if not agreed.

3. This Offer to Settle will remain open for acceptance for a period of 14 days from the date of service of this Offer upon the Third Defendant and First Plaintiff by Counterclaim.

4. This Offer to Settle is made pursuant to ch 9 pt 5 of the Uniform Civil Procedure Rules.

5. The Plaintiff and the Defendants by Counterclaim are jointly and severally liable to pay the Third Defendant and First Plaintiff by Counterclaim the whole of the amount of this offer."

[8] The second notice of 6 October was in identical terms save that references to the third defendant and the first plaintiff by counterclaim were replaced by references to the fourth defendant and the second plaintiff by counterclaim respectively.

[9] The third notice of that date was as follows:

TAKE NOTICE that the Plaintiff hereby offers to settle this action against the Fifth Defendant on the following terms:

1. The Plaintiff will discontinue the action herein against the Fifth Defendant.

2. The Plaintiff and Fifth Defendant agree to bear their own costs of and incidental to this action.

3. The offer is subject to, and conditional upon, acceptance of both of the offers annexed hereto and marked `A' (in relation to the Third Defendant), and `B' (in relation to the Fourth Defendant).

4. This Offer to Settle will remain open for acceptance for a period of 14 days from the date of service of this Offer upon the Fifth Defendant.

5. This Offer to Settle is made pursuant to ch 9 pt 5 of the Uniform Civil Procedure Rules."

[10] On 13 October, day 59 of the trial, the plaintiff delivered the following notice to the defendants:

TAKE NOTICE that the Plaintiff hereby offers to settle this action against the Third, Fourth and Fifth Defendants on the following terms:

1. The Third, Fourth and Fifth Defendants will pay to the Plaintiff the sum of THREE HUNDRED AND FIFTY THOUSAND DOLLARS ($350,000) for its claims in the action.

2. The Third, Fourth and Fifth Defendants will pay the Plaintiff's costs of the action against the Third, Fourth and Fifth Defendants up to the date of service of this offer, on the standard basis, of and incidental to the action, such costs to be assessed if not agreed.

3. This Offer to Settle will remain open for acceptance for a period of 14 days from the date of service of this Offer upon the Third, Fourth and Fifth Defendants.

4. This Offer to Settle is made pursuant to ch 9 pt 5 of the Uniform Civil Procedure Rules."

[11] Part 5 of ch 9 is entitled "Offer to Settle". It is the successor to O 26 of the previous Rules of the Supreme Court, which replaced the earlier provisions relating to payment into court in 1988. It has analogues in New South Wales[1], Victoria[2], Western Australia[3], Tasmania[4] and the Northern Territory[5], and in the Federal Court Rules[6], but none is identical to it. All have been said to derive from a similar provision in Canada[7]. The Court of Appeal has said that the primary purpose of the Queensland Rules "is to encourage litigants through favourable costs orders to make realistic offers in order to achieve a just compromise and to avoid where possible the expense, time and effort of the trial."[8] The objects of the equivalent New South Wales provisions have been said to include:

"1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the Plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court;

2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and

3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant who has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation."[9]

[12] The core provision of pt 5 of ch 9 is r 353:

"353 (1) A party to a proceeding may serve on another party to the proceeding an offer to settle 1 or more of the claims in the proceeding on the conditions specified in the offer to settle.

(2) A party may serve more than one offer to settle.

(3) An offer to settle must be in writing and must contain a statement that it is made under this Part."

Rule 352 defines "offer to settle" as "an offer to settle made under this Part".

[13] Two features of r 353 should be noted at this stage. First, the rule empowers a "party". In other words, this is the rule which founds offers by plaintiffs, defendants or any other party to proceedings. Both r 360 and r 361 proceed on the basis that the plaintiff or the defendant as the case may be has made an offer under r 353. Second, an offer under the rule must be to settle one or more of the "claims" in the proceeding.

[14] "Claim" is not used in the Uniform Civil Procedure Rules to refer to a demand, a cause of action, a bundle of rights against a particular person, a paragraph or element in a prayer for relief or any other abstraction. By sch 4 to the Rules, it is a document under ch 2 pt 3 starting a proceeding.[10] (In this respect the Uniform Civil Procedure Rules differ from both their predecessor and their analogues.) Prima facie that must be its meaning in pt 5 of ch 9, although I am prepared to assume that on ordinary principles of statutory interpretation[11] that meaning will give way if the context otherwise indicates or requires.[12] The prima facie meaning does not preclude the application of the Part to counterclaims or claims against third or subsequent parties.[13] In each case the reference would be to the document corresponding to the relevant description.

[15] It is arguable that the context does otherwise indicate or require. If the definition is applicable, an offer under r 353 must be an offer to settle every dispute or matter in the document constituting the claim. It must encompass at least one document (whether a claim, counterclaim or third party notice); it must offer to settle everything in that document. It may offer to settle everything in several such documents. It may not offer to settle a particular cause of action among several in the claim, nor one of several elements in the relief claimed. This may be thought inconsistent with the objects of the Part. It also has the potential to lead to different outcomes in Queensland from those in other jurisdictions. That might be thought undesirable. There is also a degree of incongruity in the notion of offering to "settle" a claim in this sense.

[16] I have come to the conclusion that this argument is not correct. The objects of the Part are not defeated by the use of the schedule definition. "Claim" in the previous O 26 and some of the Australian analogues is ambiguous and whatever meaning is adopted it is possible to imagine problematical outcomes or outcomes which also conflict with the objects of the rules. Generally speaking courts have adopted a fairly strict approach in determining whether a particular offer is an offer to settle within the relevant rules. The issue has been resolved in each jurisdiction by the construction of the relevant rules rather than by reference to outcomes in other jurisdictions using different wording.[14] Finally, the incongruity referred to above can be resolved if one understands the concept as the settlement of all matters in a claim.

[17] There were two claims in the present proceedings: the original claim and the counterclaim. The offers of 30 August and 6 October were to settle "the action". That plainly referred to the whole proceedings, i.e. the two claims. Rule 353 expressly refers to an offer to settle one or more claims. The fact that the offers were to settle the action did not take them outside the scope of the rule. They are to be regarded as offers to settle the two claims.

The notices of the plaintiff/defendants by counterclaim of 6 October

[18] The notices of 6 October appear on their face to be separate offers to the third, fourth and fifth defendants. By itself, r 353 authorises only an offer to settle one or more claims. It does not authorise the settlement of only part of a claim. Where there are multiple parties to a claim an offer to settle it would comply with r 353 only if made to every other party by or against whom the claim was brought. Ex hypothesi, it is impossible to settle a claim in the sense already discussed unless all parties to the claim are involved in the settlement. (There is, however, no requirement in r 353 for identical terms to be offered to each party.) It follows that by itself, r 353 does not authorise separate offers to different parties. But do the three notices have to be regarded as separate offers? In other words, did the notices of 6 October in substance constitute one offer?

[19] Despite an initial inclination to the contrary, I have come to the conclusion that they did not constitute one offer. I have reached that conclusion not only because their form indicates an intention to make three separate offers, but also because there are significant differences among them. First, in para 2, the offerors proposed paying the third and fourth defendants' costs. No such offer was made in the notice to the fifth defendant. Second, his offer was conditional upon acceptance of their offers by the third and fourth defendants, whereas there is no condition in their notices requiring acceptance by the other defendants of their offers. Third, the scope of each offer was expressly limited. The one to the third defendants was to settle "as between [the plaintiff and the defendants by counterclaim] and the third defendant and the first plaintiff by counterclaim". That to the fourth defendant was correspondingly worded. The one to the fifth defendant was simply to settle "against the fifth defendant". Acceptance of either or both of the first two would not have brought about the settlement of the whole of the claim. In my judgment the notices constituted separate offers. They were valid offers to settle under the rules only if authorised by r 363.

"363 (1) If there are 2 or more defendants, the plaintiff may make an offer to settle with any defendant, and any defendant may offer to settle with the plaintiff.

(2) However, if defendants are alleged to be jointly or jointly and severally liable to the plaintiff and rights of contribution or indemnity may exist between the defendants, this rule applies to the offer to settle only if -

(a) for an offer made by the plaintiff - the offer is made to all of the defendants and is an offer to settle the claim against all the defendants; or

(i) the offer is an offer to settle the plaintiff's claim against all the defendants; and

(ii) if the offer is made by 2 or more defendants, by the conditions of the offer the defendants who make the offer are jointly or jointly and severally liable to the plaintiff for the whole of the amount of the offer."

"Plaintiff" is defined in sch 4 to the rules to include a party who files a counterclaim, a third or subsequent party notice or a notice claiming contribution or indemnity. "Defendant" is given a cognate definition.

[21] It is worth noting that the rule does not impose a limitation on r 353. An offer which complies with the latter does not have to satisfy the former. In other words, an offer by a sole plaintiff to all defendants does not have to comply with r 363(2). The requirements of that sub-rule must be complied with only to enable r 363 to apply, i.e. to authorise a plaintiff to make an offer to fewer than all the defendants or one of a number of defendants to offer to settle with the plaintiff.

[22] In the present case both the claim and the counterclaim had multiple defendants. The offers of 6 October to the third and fourth defendants were to settle both the claim and the counterclaim; that to the fifth defendant was to settle the claim. It follows that in respect of the offers to the third and fourth defendants it is necessary to apply r 363 in relation to both the claim and the counterclaim and in respect of that to the fifth defendant to apply it in relation to the claim. The position is complicated by the fact that the fifth defendant, Andrew Coventry, was one of the second counterclaimants by reason of his having become a co-trustee with Mr Tabe subsequent to the commencement of the action. No party relied upon this complication and I shall therefore ignore it.

[23] The condition for the application of r 363(2) is that "defendants are alleged to be jointly or jointly and severally liable to the plaintiff and rights of contribution or indemnity may exist between the defendants". On the claim the respective liabilities of the third and fourth defendants were based on the agency of the fifth defendant. The liabilities of a principal and agent are joint.[15] Consequently, some of the liabilities of the defendants were joint. That satisfies the first limb of the condition. It is true that the statement of claim did not in terms allege that the liabilities were joint. To satisfy the condition it did not have to do so. It is enough that it alleged a liability which was in law a joint liability. It is also true that not all of the causes of action alleged against the defendants may have given rise to joint or joint and several liability, and that no one of them may have given rise to a joint (or joint and several) liability in all of the defendants. That does not matter. The word "defendants" where first appearing in sub-r (2) is unqualified by an article. Grammatically that indicates that it refers to some defendants, not all defendants. There is nothing in the context to displace the grammatical meaning.

[24] As to the second limb of the condition, there were no claims for indemnity or contribution made by the third or fourth defendants against the fifth defendant and there has been no determination of the question whether they had any such rights. However the rule does not require claims to be made or rights determined. It requires only that such rights "may" exist between the defendants. Andrew Coventry was a non-contractual agent of the third and fourth defendants. As such he was liable to his principals if in exercising his delegated authority he failed to exercise the degree of care which would reasonably be expected of him in all the circumstances.[16] Prima facie his misrepresentations would constitute such a failure. That is sufficient to satisfy the second limb of the condition. Consequently, in relation to the claim, r 363(1) authorised any one of the offers of 6 October only if it satisfied r 363(2)(a).

[25] That paragraph required an offer to be made to all of the defendants and to be an offer to settle the claim against all the defendants. None of the offers of 6 October was made to all of the defendants and only one (that to the fifth defendant) was even arguably an offer to settle the claim against all defendants. The requirements of the paragraph were not met. It follows that insofar as the notices constituted offers to settle the claim, they were not authorised by r 363. They were therefore not offers to settle made under pt 5 of ch 9 of the Uniform Civil Procedure Rules.

[26] Each of the two notices of 6 October relevant to the counterclaim was given by all of the defendants to the counterclaim. However each was given only to one set of counterclaimants, not to all of the counterclaimants. For the reasons advanced above, the notices cannot be regarded as constituting one offer. Consequently, neither is an offer to settle the counterclaim under r 353 because neither settles the whole of the counterclaim.

[27] In my judgment r 363 cannot overcome this difficulty. It is not designed to deal with the problem which arises when a defendant wishes to make an offer to multiple plaintiffs. In terms sub-r (1) permits "any defendant" to offer to settle with "the plaintiff". To read the singular "plaintiff" as encompassing the plural and "any defendant" as including all defendants does violence to both the language and the context.

[28] It follows that in my judgment nothing in the notices of 6 October constituted an offer to settle within the meaning of ch 9 pt 5.

The notice of the defendants/counterclaimants of 30 August 2000

[29] The defendants conceded that the outcome of the action (i.e. the claim and the counterclaim) could on no view be regarded as more favourable to them than their offer. It is therefore unnecessary to analyse whether their offer constitutes an offer to settle within the meaning of ch 9 pt 5.

[30] The offer contained in the notice of 13 October 2000 complied with r 353. It was not accepted and lapsed after 14 days, the period for which it was specified to remain open. By the notice the plaintiff offered to accept $350,000, which prima facie was much less than it in fact recovered against the defendants.

[31] Rule 360 of the Uniform Civil Procedure Rules provides:

(a) the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle; and

(b) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;

the court must order the defendant to pay the plaintiff's costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

(2) If the plaintiff makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule."

[32] The defendants argued that r 360 did not apply to the offer of 13 October because the judgment which the plaintiff obtained was not "no less favourable" than the offer to settle; the offer was not the plaintiff's first offer; and "another order for costs" was appropriate in the circumstances.

[33] The foundation for the first of these arguments was a submission that a compromise of the plaintiff's claim against the defendants would have destroyed the basis for any claim by the defendants pursuant to the undertaking as to damages. It followed from this submission that on its proper construction, the offer gave the plaintiff an advantage relative to the defendants worth $1.07 million. This, it was submitted, was more than the plaintiff in fact recovered, even taking into account interest to 13 October of approximately $411,000. Although counsel drew my attention to the use of "action" in the opening words of the offer, it was not submitted that the offer should be interpreted as intended to settle both the claim and the counterclaim. It was submitted that because the interlocutory injunction had been granted and the undertaking as to damages given in the course of the plaintiff's claim, any compromise of that claim necessarily involved, as a matter of construction, compromise of the right to claim on the undertaking as to damages.

[34] No authority was cited in support of this submission. However, I am prepared to accept that the question is one of construction of the notice. The task of construing the notice must be undertaken bearing in mind one unusual feature of this case: the proceeding for damages pursuant to the undertaking was embodied in the counterclaim. Traditionally an undertaking as to damages was enforced by a notice of motion filed by the defendant in the action, usually after obtaining judgment in his or her favour. In such a case I can understand how it might be thought that a compromise of the action should be construed as intended to compromise any claim based on the undertaking as to damages. (Even in that case, I see no reason why a right to claim pursuant to the undertaking should not be expressly reserved.)[17] In the present case termination of the claim would not have disposed of the counterclaim. The plaintiff made no offer in respect of the counterclaim on 13 October. It intended that the counterclaim should continue to be litigated. In these circumstances the construction advanced on behalf of the defendants cannot be sustained.

[35] I am satisfied that the offer of 13 October was more favourable (and therefore "no less favourable") to the defendants than the judgment ultimately obtained.

[36] The defendants' second submission was that the offer of 13 October should be disregarded under r 360(2) because it was not the first offer made by the plaintiff satisfying sub-r (1). The first offer was, submitted Mr Savage SC, contained in the notices of 6 October. I have already held that those notices did not constitute a valid offer to settle under ch 9 pt 5 of the Uniform Civil Procedure Rules. Mr Savage anticipated such an outcome with his submission that r 360 contemplated invalid as well as valid offers. I reject that submission. The first condition for the application of r 360 is that the plaintiff makes an "offer to settle". There is no reason not to apply the definition of that term contained in r 352. The definition is included for the purposes of pt 5 and should be applied. The notices of 6 October did not contain an offer to settle. That of 13 October contained the first offer to settle made by the plaintiff under the rules.

[37] When r 360 applies the court must order the defendant to pay the plaintiff's costs calculated on the indemnity basis unless the defendant shows that another order for costs is appropriate in the circumstances. The defendants pointed to a number of circumstances which they submitted made another order appropriate. They were:

(a) the offer proposed payment of $350,000 plus costs by two people who were for the majority of the proceedings bankrupt and representing themselves;

(b) the offer effectively sought to make the third and fourth defendants give up their cross-claims;

They also submitted, relying on Theiss v TCN Channel Nine Pty Ltd (No 5)[18] that one overall order for costs should be made to avoid the expense and difficulty of an assessment of costs based on issues.

[38] The first two of these points were connected. Andrew Coventry was bankrupt from 9 March 1994 until 21 April 1997. Michael Coventry was bankrupt from 22 August 1994 until 22 September 1997. It was argued on the defendants' behalf that these facts must have been known to the plaintiff when it made its offer of 13 October 2000; and that the plaintiff could therefore have had no expectation that the defendants were capable of accepting the offer. Because the offer did not include a stay on execution or delay time for payment until the determination of the counterclaim, its acceptance would inevitably have meant the end of a bona fide counterclaim, since the plaintiff would never have allowed that to proceed with the amount of the claim unpaid.

[39] These arguments are flawed. First, there was no evidence (or if there was, I was not referred to it) that in October 2000 Andrew and Michael Coventry were impecunious. One would not infer it from the fact that they had been discharged from bankruptcy three years earlier, nor from the fact that they were conducting the trial without legal representation, when evidence of their financial position could easily have been led. Andrew Coventry gave evidence at the trial that he had been a millionaire on several occasions: "I have been a millionaire, I have lost it, I built it, I lost it." Second, it was not the Coventrys' personal position which was crucial, but the position of their family trusts. There is no evidence that these were insolvent or impecunious at the time of the offer. Third, there was nothing to prevent the defendants from making a counter offer embodying the terms of the plaintiff's offer but delaying the date for payment and perhaps offering to settle the counterclaim on realistic terms, whether under the rules or not. That was not done. No doubt the plaintiff's offer was designed to put pressure on the defendants. The rules intend such offers "to instil a heightened sense of realism in the negotiation between parties ... They introduce an added element of risk".[19] The offer was genuine; it was not oppressive.

[40] The plaintiff failed on a number of issues. Mr Savage SC drew attention particularly to the plaintiff's ultimate failure to obtain an injunction; to the fact that it succeeded in relation to only 10 of about 25 alleged misrepresentations; to the criticisms in the judgment of the plaintiff's expert witnesses; and to the wasted costs of the appeal to the Court of Appeal[20]. The last point has no substance. Although the defendants lost the appeal and were ordered to pay the plaintiff's costs, they were granted an indemnity certificate under the Appeal Costs Fund Act 1973 and, as Mr Savage SC ultimately conceded, will not be out of pocket in respect of those costs. The time taken during the trial in respect of this issue was insignificant in the total picture.

[41] I turn to the submissions that the plaintiff failed on a number of issues and some witnesses took longer than they should have over a number of others. The plaintiff submitted that under the rules the issue of costs stands or falls with the rest of the action and that success or failure on some issues was not a sufficient reason to otherwise order under r 360. For this proposition it relied on a passage in the judgment of Giles J at first instance in Bond Brewing New South Wales Ltd v Whitehouse Properties Pty Ltd[21]: "Generally, the point is not who won or lost on the issues, but there should not have been litigation of the issues at all." It relied on a similar passage in the judgment of Smith J in Freemantle's Pastoral Pty Ltd v Hyatt[22]. Those cases demonstrate that the mere fact that the party making an offer under the rules has failed on some issues does not ordinarily suffice as a ground to refrain from applying the costs rule. However they do not absolve the court from the duty of considering whether that party has been guilty of wasting time. If it has, the circumstances may disclose a sufficient basis for a different costs order. As Smith J said, "The policies that lie behind the offer of compromise rule would require that a court exercising the discretion ensure that the party who made the offer does not recover costs shown to be unnecessarily incurred or abnormal."

[42] There is some force in the points made on behalf of the defendants. However, it is dissipated when one considers the amount of time wasted by the defendants. I am also conscious of how easy it is to be over-critical of the conduct of the case from the calm heights of the bench. Subject to what follows, I do not think these matters on balance warrant "another order for costs" under r 360. If the result is to impose a penalty of some sort on the defendants, it is a result contemplated by the rule.[23] It is therefore unnecessary for me to consider the defendants' submission based upon the decision in Theiss v TCN Channel Nine Pty Ltd (No 5).

[43] The plaintiff was ultimately unsuccessful in obtaining an injunction or any other relief capable of protection by the interlocutory injunction. The defendants have been successful on the claim pursuant to the undertaking as to damages. The costs of the applications for interim and interlocutory injunctions were reserved. They form a distinct set of costs. It has now been shown that they were wrongly incurred in that the injunctions should not have been sought. By itself, that fact might not be enough to warrant departure from the usual consequences provided by r 360. However, I found in my reasons for judgment that "some aspects of the plaintiff's conduct leading up to the application for the injunction reflect poorly upon it". In particular I referred to the fact that the plaintiff knew of the defendants' misrepresentations in August 1993, made no application to the court until June 1994 and did not explain the delay. I also found that the application for the interlocutory injunctions had been in preparation for some time and that there was no explanation offered by the plaintiff of why it did not bring the application on notice.[24] I observed that the plaintiff did not even send a letter before action and found that the circumstances suggested an attempted ambush.

[44] The plaintiff submitted that these costs also should be dealt with in accordance with r 360. I have reached a different conclusion. The factors referred to in the preceding paragraph in my judgment constitute sufficient reason to make another order for costs. Applications for injunctions should be brought in a timely way and on notice wherever possible. The court discourages parties from seeking forensic advantage by surprise applications. In a complex matter, that is particularly important. The plaintiff should pay the defendants' costs of and incidental to the applications made on 1 June 1994, 3 June 1994, 9 June 1994 and 16 June 1994 to be assessed.

[45] With that exception, the defendant has failed to show that another order for costs than that required by r 360 is appropriate in the circumstances. Consequently, subject to that order and to any other orders which may already have been made, the defendants must pay the plaintiff's costs of the claim calculated on the indemnity basis.

[46] For the plaintiff Mr O'Donnell QC submitted that the plaintiff's costs of the counterclaim should follow the event of success in relation to the four categories into which the counterclaim was divided.[25] He argued that it should recover its costs from the counterclaimants in relation to the alleged misrepresentations. Apart from the fact that the counterclaimants were unsuccessful on some of their arguments there is little to commend this submission.[26] Little additional time was taken in relation to the two categories involving misrepresentations by comparison with the time taken for the trial as a whole, and to the extent that the evidence was concerned with the making of the alleged misrepresentations it would have been given in any event as part of the narrative. In addition, I found that two statements made by the Darts on behalf of the plaintiff were misleading and deceptive. These factors persuade me not only that no order should be made in the plaintiff's favour but also that this is not a case for splitting the costs of the counterclaim by issues. Indeed to do so would probably condemn the parties to further adversarial proceedings of the most tedious and expensive kind. The costs of the counterclaim as against the plaintiff should follow the event.

[47] On behalf of the Darts Mr O'Donnell submitted that having succeeded, they should have their costs against the counterclaimants and it should be left to the assessing officer to determine the amount of those costs. Such an order would evade the difficult question of whether having regard to their relationship with the plaintiff the Darts should receive full costs or only incremental costs. The defendants submitted that the Darts personally were not separately represented and must have incurred no significant costs over and above those incurred by the plaintiff. The plaintiff specifically rejected an opportunity to place evidence before me to show that the Darts actually had a personal liability for costs. Whether or not they had such a liability, I have no doubt that they were fully indemnified by the plaintiff. To the extent that the costs of the defendants to the counterclaim were greater than they would have been had the Darts not been joined, but only to that extent, the counterclaimants should pay them. They must be assessed on the standard basis as the Darts made no offer to settle within the meaning of ch 9 pt 5 of the Uniform Civil Procedure Rules.[27]

[48] In the light of these findings it seems inevitable that the costs payable to the plaintiff will far exceed those payable by it. To cover that eventuality the plaintiff sought an order staying execution on the principal judgment to enable set-off of that excess. The defendants made no submissions against this. Presumably the plaintiff will be unable to effect such a set-off until costs are assessed and become liquidated amounts.[28] Fairness requires that the plaintiff be given the opportunity to do this, particularly if there is a risk that the defendants are as impecunious as they sought to argue they were.

2. Judgment for the first counter-claimants against the plaintiff for $397,600 plus interest to date, calculated on $360,000 from 1 June 1994 and on $37,600 from 29 July 1994, at the rate which is one percent higher than the benchmark rate of the National Australia Bank from time to time.

3. Judgment for the second counter-claimants against the plaintiff for $397,600 plus interest to date, calculated on $360,000 from 1 June 1994 and on $37,600 from 29 June 1994, at the rate which is one percent higher than the benchmark rate of the National Australia Bank from time to time.

4. Judgment for the second and third defendants by counter-claim (K J Dart and B G Dart) against the counter-claimants.

5. Order that the plaintiff pay the defendants' costs of and incidental to the applications made on 1 June 1994, 3 June 1994, 9 June 1994 and 16 June 1994 to be assessed on the standard basis.

6. Subject to order 5 and to any other orders previously made, order that the third, fourth and fifth defendants pay the plaintiff's costs of the claim to be assessed on the indemnity basis.

7. Order that the plaintiff (first defendant by counterclaim) pay the counterclaimants' costs of and incidental to the counterclaim to be assessed on the standard basis.

8. Order that the counterclaimants pay the defendants by counterclaim the amount if any by which those defendants' costs were increased by reason of the joinder of the second and third defendants by counterclaim, assessed on the standard basis.

9. Order that enforcement of the orders for payment of money made in paras (1) to (3) be stayed until further order.

10. Liberty to any party to apply generally on five days notice to all other parties.

[2] O 26, Supreme Court (General Civil Procedure) Rules 1996.

[3] O 24, Rules of the Supreme Court 1971.

[7] Cairns: Australian Civil Procedure, 5th ed (2002), p 339. Similar rules were introduced in British Columbia in 1980 and Ontario in 1985.

[8] Cameron v Nominal Defendant [2000] QCA 137; [2001] 1 Qd R 476 at pp 478-9.

[9] Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at p 724.

[10] Uniform Civil Procedure Rules, r 4.

[11] Sections 32A and 32AA of the Acts Interpretation Act 1954 do not seem to apply to subordinate legislation: see ss 6 and 7.

[12] K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48; (1985) 157 CLR 309 at 315 per Mason J; Metropolitan Gas Company v Federated Gas Employees' Union [1925] HCA 5; (1925) 35 CLR 449 at 455; Commissioner for Railways v Agalianos [1955] HCA 27; (1955) 92 CLR 390 at 397.

[13] As to counterclaims see rr 178 and 181; as to third and subsequent party notices and counterclaims thereon see rr 196, 207 and 200.

[14] Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17 at 21; John Goss Projects Pty Ltd v Thiess Watkins White Constructions Ltd (in liq) [1995] 2 Qd R 591 at 595-6; Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 at 159.

[15] Compare Jones v Manchester Corporation [1952] 2 QB 852. It is unnecessary to examine whether the breach of warranty claims were joint, joint and several or several. Rule 363(2) applies if there is any allegation of joint or joint and several liability.

[16] Bowstead on Agency, 17th ed (2001), art 44.

[17] This would be so only as a matter of construction. In equity, the undertaking remained in force despite the dismissal or discontinuance of the action: Newby v Harrison [1861] EngR 850; (1861) 3 De G F & J 287, 45 ER 889; Newcomen v Coulson (1878) 7 Ch D 764.

[19] Hillier v Sheather (1995) 36 NSWLR 414 at p 421 per Kirby P.

[20] See par [712] to par [714] of the reasons for judgment.

[21] Unreported, SC (NSW), 16 March 1990. The decision was reversed on appeal on a ground not argued at first instance: (1992) 28 NSWLR 17.

[23] Compare Shaw v Jarldorn (1999) 76 SASR 28 at p 29.

[26] I note that the Uniform Civil Procedure Rules contain no equivalent of the former O 91 r 3.

[27] Even had they done so they could not have had the benefit of r 361. That rule cannot apply where the party in the position of defendant is completely successful because in that event, the condition that "the plaintiff obtains a judgment" is not satisfied. On this point I agree with what was said by Shepherdson J about the previous O 26 r 9 in Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1998] QSC 18; [1999] 1 Qd R 518 at pp 523, 524.

[28] The power of the Registrar to set off costs under r 734 is limited to setting off costs against costs.

Interpretation Act 1954

At a glance

Court

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Catchwords

Judgment (148 paragraphs)

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Legislation Cited (1)

Cases Cited (7)