Bird v Bird

Judgment 1I gave judgment in these proceedings on 5 June 2012 and published my reasons on that date. I shall use the same definitions as were used in the principal judgment. These reasons deal with costs issues in the proceedings. I have received extensive written submissions on costs and this judgment deals with all costs issues other than an issue relating to preliminary discovery proceedings 5751 of 2005. 2Warrick and Rodney seek orders that: (1)Deborah pay their costs on her claim; (2)the costs which Deborah is to pay be assessed from 9 December 2011 on the indemnity basis; (3)Deborah pay the costs of the cross claims between the defendants; and (4)in the alternative to (3), the cross claimants pay the costs of the cross defendants on a party-party basis. 3Mr Cannington seeks orders that: (1)Deborah pay his costs on her claim; (2)the costs be assessed from 14 March 2008 on the indemnity basis; (3)Deborah pay the costs he incurred in seeking contribution from Warrick and Rodney; and (4)Warrick and Rodney pay his costs of defending the cross claims against him in respect of his role as solicitor on an indemnity basis and in respect of their other cross claims against him on a party-party basis. 4Deborah resists the orders against her and seeks the following: (1)the plaintiff and defendants each pay their own costs of these proceedings; (2)in the alternative to (1), orders that: (a)the plaintiff pay the costs of the defendants limited to one third of the defendants' costs on a party-party basis; and (b)the first and second defendants pay the plaintiff's costs of the first cross claim on a party-party basis; (3)that Mr Cannington, the first defendant in Supreme Court proceedings 5751/2005, pay the plaintiff's costs of those proceedings. This is the issue which will be dealt with by a separate hearing because it involves further evidence. 5Deborah also sought an order that a costs order of 21 April 2010 made by McLaughlin AsJ be set aside, but Mr Drummond could not point to any power in the Court (other than on an appeal) to do so and this was not pressed. 6The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party unless for some reason connected with the case a different order is specially warranted - see Donald Campbell & Co Ltd v Pollak [1972] AC 732 at pp 811 - 811: "A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not to award them. This discretion, like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case." applied in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. The Uniform Civil Procedure Rules 2005 ("the Rules"), Pt 42, r 42.1 reflects this. The Court does have power to make orders departing from the general rule where the circumstances warrant it: see State of New South Wales v Stanley [2007] NSWCA 330 and Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. The maintenance of points without merit may be a relevant consideration in ordering a successful party to be deprived of his costs: see Oshlack v Richmond River Council at p 122 per Kirby J. 7By the submissions on her behalf, Deborah contended that there are circumstances which should lead to a different result here. Those reasons are that the defendants failed on a number of issues and prolonged the case by their ventilation of them: see T29.25 - 34 and pars 24 to 31 and 39 to 42 of the plaintiff's amended submissions. The "issues" to which Deborah is referring are: (1)the defendants' claim that Mona did have authority to receive the proceeds of sale; (2)the brothers' claim that they did not know that the properties were owned by Percy; (3)the defendants' claim that Percy was capable of ratifying and had ratified the receipt of proceeds; (4)the defendants' claim that there had been no breach of their duties as executors; (5)Mr Cannington's assertion that he had resigned as an executor in 2004; (6)the defendants' contention that Deborah had no right to bring the proceedings; and (7)the defendants' assertion that Mona could have brought a claim under the Family Provision Act 1982. 8The problem with (1), (2) and (3) is that although the defendants failed on their factual assertions, they were successful on the issue in respect of which the facts were asserted. Issues (5) and (6) were legal in nature and, although incorrect, were not the subject of much argument at all at the hearing. 9So far as (4) is concerned, most of the breaches were not breaches directly relevant to the subject of complaint ventilated in the proceedings and the one that was connected, namely the failure to examine what had happened to the sale proceeds and consider what steps should be taken, I have found was not causative of loss. 10So far as (7) is concerned, the issue of whether a Family Provision Act claim by Mona would have succeeded did not need to be determined because of the view that I came to about the maximum amount that the estate could recover from Mona, so I do not see that as assisting Deborah. 11I accept that it is open to the Court to exclude from the successful parties' costs order costs relating to a specific issue but it has been said that a Court should not too readily take that course (see Cretazzo v Lombardi (1975) 13 SASR 4 at p 12 per Bray CJ and p 16 per Jacobs J and James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]) and generally apportionment will not be appropriate unless at least there is a clearly dominant or separable issue or group of issues on which the successful party failed (see Elite Protective Personnel Pty Ltd v Salmon (No 2) at [6]). 12The plaintiff submits that since a considerable amount of time was spent in cross examining the defendants to establish matters which should have been admitted, it would be unfair to require the plaintiff to pay the entire cost of the trial notwithstanding her loss of the case. 13I do not think the plaintiff can be said to have succeeded on a clearly dominant or separable issue - what she succeeded in doing was establishing that some of the essential building blocks of her case were made out. I think that the thrust of her argument is really that the defendants should be deprived of a costs order in their favour because of their conduct. Mr Drummond went so far as to speak of "false issues". A successful party can be deprived of costs by reason of his or her conduct of the case but I do not think that the fact that I did not believe the brothers when they said "x" or "y" constitutes "misconduct" which would warrant them being deprived of an order for costs. The fact that a party admits in cross examination that he should have taken steps which he did not take (here Mr Cannington) does not as a general rule mean that his failure to admit a duty of care or a breach of a duty of care on the pleadings means that he ought to pay indemnity costs. The cases referred to in [11] above support the notion that a defendant is entitled to costs even for quite discrete defences advanced which have failed if that party has succeeded on another defence. Here the extensive cross examination on credit was closely linked, at least potentially, to all of the factual and legal issues before the Court. The fact that Mr Cannington said in 2004 that no power of attorney had been utilised in the sale of Percy's property, although erroneous, did not mislead Deborah because by then her solicitor knew that a power of attorney had been utilised. 14In my view, this is not a case in which it is appropriate to apportion costs and the defendants are entitled to all of the costs of defending the proceedings on the usual basis. The Cross Claims 15There is no dispute that the plaintiff is entitled to a costs order against Warrick and Rodney on their cross claim against her. So far as their cross claim against Mr Cannington is concerned, to the extent that it made a claim for contribution, as did Mr Cannington's cross claim against them, it was accepted in the course of argument that there are no additional costs for which they will not be compensated by the plaintiff paying their costs of the main proceedings. To the extent that Warrick and Rodney claimed against Mr Cannington in his role as solicitor, a claim which was in effect abandoned by them at the hearing, Mr Cannington should be paid those costs on the ordinary basis by Warrick and Rodney and there is no basis for the plaintiff to have to pay those costs. Indemnity costs: The Offer of Compromise 16The first and second defendants made an offer of compromise on 8 December 2011, purportedly in accordance with r 20.26 of the Rules, by which they offered to pay the plaintiff $72,500 - but the offer dealt with the issue of costs by stating in par 3: "The First and Second Defendant pay the Plaintiff's costs as agreed or assessed reserving liberty to the First and Second Defendant to seek an Order under Uniform Civil Procedure Rule 42.4 as to the maximum costs that the First and Second Defendant may be liable to pay to the Plaintiff." 17Save for par 3, the offer meets the requirements of an offer of compromise in accordance with Pt 20 of the Rules. I accept that par 3 does not infringe r 42.14 or r 42.15 but in my view the inclusion of par 3 does render the offer one not made in accordance with the Rules. 18In Frisbo Holdings Pty Ltd v Austin Australia Pty Ltd (No 2) [2010] NSWSC 298 per Hislop J, it was held that the inclusion of a term that the plaintiffs pay 50 per cent of the first defendant's costs was not an offer within the terms of r 20.26. The present case is not as clear because the offer does not propose a specific limitation on costs, but in Old v McInnes and Hodgkinson [2011] NSWCA 410, the Court of Appeal per Meagher JA, with whom Beazley and Giles JJA concurred, at [101] to [105] held that the inclusion of the words "[f]irst defendant to pay the plaintiff's costs as agreed or assessed" meant that the offer did deal with costs and that the offer did not meet the requirements of the rules. 19What the offer under consideration here does is to indicate that the offeror does not accept the consequences of acceptance that are laid down by r 42.13A (in Pt 42, Div 3 which deals with costs). That rule provides that the party accepting the offer will receive costs on the ordinary basis. The offer made by Warrick and Rodney seeks to reserve to Warrick and Rodney the right to obtain a different cost result, namely an order capping costs - this is inimical to the scheme for offers of compromise established in the Rules. The offer deals with costs and is not "exclusive of costs" as required by r 20.26(2) because it proposes a regime for costs, namely liberty to the defendants to apply for a maximum costs order for which r 42.13A does not allow. 20It follows that the offer was not an offer of compromise within the terms of r 20.26 and that r 42.4 has no application. The Other Offers 21Warrick and Rodney made two offers of compromise. The first was the failed offer of compromise on 8 December 2011 (to which I have already referred and which I shall refer to as the Brothers' 2011 Offer). An open offer was made in Court on 7 March 2012 by Warrick and Rodney to the effect that they would accept dismissal of the claims against them and an order that each party pay his or her own costs with the vacation of all prior costs orders: see T169.5 - 44. Reference was made to a document which was marked "MFI 2" but it was not put into evidence on this costs application. I shall refer to this as the Brothers' 2012 Offer. Calderbank offers were also made by Mr Cannington. The first such offer was made by letter dated 14 March 2008 ("Cannington's 2008 Offer"). The second was made by letter of 8 December 2011 (pp 6 - 9 of Mr Toby Blyth's affidavit of 15 June 2012) ("Cannington's 2011 Offer") and Cannington's 2012 Offer was made by letter of 16 March 2012: see Mr Blyth's affidavit at pp 22 - 24. 22I shall commence with consideration of the Brothers' 2011 Offer. 23The first and second defendants maintain that the Brothers' 2011 Offer is nevertheless effective as a Calderbank offer (after Calderbank v Calderbank [1975] 3 All ER 333) even though it was contained in the offer of compromise. That an offer of compromise which does not meet the requirements of the Rules can be effective as a Calderbank offer (if so specified) has been accepted (see Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker & Anor (No 2) [2007] NSWCA 194 at [27] - [28]) and it was not contested here. 24The Court of Appeal has made it clear that the approach to unaccepted offers of compromise and unaccepted Calderbank offers is different. In the former case, the consequence is normally that indemnity costs will be ordered unless the offeree establishes on some special basis that this should not apply, but in the case of Calderbank offers the offeror must establish not only that the offer was genuine but also that the offeree acted unreasonably in not accepting the offer: see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19], [21] and [46] and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] per Basten JA. 25The size and attractiveness of the offer is relevant in considering the failure to accept it but the fact that the offer was not accepted does not lead to any presumption that indemnity costs should be awarded. 26I think that the offer of $72,500 was, taken on its own, a very reasonable one and a credible case could be made out for the contention that Deborah's failure to accept the offer was unreasonable, but the offer was much diminished by the prospect of an application by the brothers to reduce the normal incidence of costs to an unspecified degree, thus preventing Deborah from assessing with certainty the true value of the offer. 27I think that the plaintiff was entitled to consider that although the offer of $72,500 was a very reasonable offer, the unwillingness of the defendants to pay her costs (on the ordinary basis) or at least indicate the extent of capping they would seek was, in the light of their willingness to pay the $72,500, unsatisfactory. She was given no idea of what contentions would be advanced by Warrick and Rodney or the amount to which the costs should be capped and a significant capping, if sought and obtained, could have rendered the advantage of the $72,500 nugatory. Mr Drummond also argued that the fact that, at the time of the Brothers' 2011 Offer, Warrick and Rodney had indicated that they would cross claim against Mr Cannington and Mr Cannington had indicated that he would cross claim against Warrick and Rodney and that their evidence was not yet complete meant there was nothing unreasonable in the plaintiff not accepting the Brothers' 2011 Offer due to the unfinalised nature of the evidence and prospects of material helpful to Deborah's case emerging. Whilst I accept that a change in the case ultimately advanced or the evidence relied on to support it can be relevant (see Jones v Bradley (No 2) [2003] NSWCA 258), I am not persuaded that a foundation for these contentions is made out here and I do not base my conclusion on this. 28There is, however, another dimension to this, which is I think it would not have been unreasonable for the plaintiff to consider that the considerable expense she had incurred in the case even to that date was brought about by reason of the conduct of the defendants in their lack of openness with her about what had in fact occurred and in their refusal to admit any duty of care in relation to the failure to investigate what had happened to the sale proceeds. These are linked to the matters which Mr Drummond submitted as reasons why I should apportion costs. Whilst I am not persuaded that the conduct of the defendants should lead to a reduction in the costs to which they are entitled, I do think that those matters would be relevant in considering whether any order for indemnity costs should be made against the plaintiff because she did not accept any of the Calderbank offers made, even if such an order might otherwise be appropriate. 29The Brothers' 2012 Offer offered the plaintiff nothing other than relief from any costs order. It was open only on the day it was made. The written submissions on behalf of Warrick and Rodney did not refer to this offer but the oral submissions appeared to go further and against the possibility that the first and second defendants do rely on this offer, I will deal with it. I will also assume for present purposes that an open offer in Court could found an order for indemnity costs if not accepted. I do not think it can now be said (as has been said in some cases in the past: see Bishop v New South Wales (Supreme Court of New South Wales, Dunford J, 17 November 2000, unreported) and McKerlie v New South Wales (No 2) [2000] NSWSC 1159) that an offer for each party to pay their own costs can never warrant an order for indemnity costs, as it is clear from Leichhardt Municipal Council v Green at [33] and Alexander v Australian Community Pharmacy Authority (No 3) [2010] FCA 506 at [29] to [31] that it can do so, but having regard to the fact that the brothers had already offered $72,500 plus costs (albeit on conditions), and the Brothers' 2012 Offer would provide no money to the plaintiff, and that the case had some unusual aspects, I am not persuaded that the plaintiff's conduct in not accepting the Brothers' 2012 Offer during the hearing was unreasonable so as to warrant an indemnity costs order and I am not persuaded that I should make such an order. Another problem with the Brothers' 2012 Offer is that it was not expressed in terms that non-acceptance would lead to an application for indemnity costs. 30Cannington's 2008 Offer was made in a letter which made a number of assertions that were incorrect. It offered no payment to the plaintiff and, if accepted, would have amounted to a capitulation by the plaintiff. Cannington's 2011 Offer offered no money. It was made at the time of the Brothers' 2011 Offer but it did not state (as was the fact - see Exhibit 3D1) that Warrick and Rodney had agreed with Mr Cannington that acceptance of the brothers' offer by Deborah would resolve the proceedings as between themselves and it did not refer to the Brothers' 2011 Offer. I think this fact should have been made clear to Deborah, but even accepting that Cannington's 2011 Offer should have been seen as linked to the Brothers' 2011 Offer, its fate must rest with the conclusion that the Brothers' 2011 Offer was not unreasonably refused. Another problem with this offer was that the letter by which it was made continued to make, by reliance on earlier correspondence, a number of assertions that were incorrect. 31Cannington's 2012 Offer indicated a need to be paid $45,000 but it did not specify by whom those monies should be paid and required releases not only from Deborah but also from Warrick and Rodney, which introduced a complication because it was not an offer that Deborah could accept to bind her brothers to release Mr Cannington for any claim they might wish to pursue against him. What I have said about the Brothers' 2012 Offer applies here as well and it is also relevant that it was made very late, that is, on the ninth day of the hearing. I am not persuaded therefore that Deborah's failure to accept Cannington's 2012 Offer was unreasonable. Conclusion 32For these reasons, the costs orders which I propose to make are: (1)the plaintiff pay the defendants' costs of the proceedings on a party-party basis; (2)the first and second defendants pay the plaintiff's costs of the first cross claim on a party-party basis, such costs to be offset against the costs payable by the plaintiff under order (1); (3)the first and second defendants pay on a party-party basis the third defendant costs of the third cross claim in relation to the third defendant's role as solicitor; and (4)save as set out in orders (2) and (3), there be no order as to the costs of the cross claims.

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Cases Cited (16)