Carlyon v Town & Country Pubs No. 2 Pty Ltd T/A Queens Hotel Gladstone

[1] The trial of this action was conducted in Rockhampton over three days from 11 to 13 November 2014. On 3 February 2015 I delivered Reasons for Judgment and ordered Judgment for the defendant. Counsel for the defendant was given leave to file written submissions within seven days, and Counsel for the plaintiff was given leave to file reply written submissions within five days. Submissions from the defendant were received on 6 February 2015, and submissions for the plaintiff were received on 10 February 2015. Counsel for the defendant provided submissions in reply on 11 February 2015.

[2] Those submissions indicate that on 15 July 2013 the defendant served the plaintiff with an Offer to Settle offering to settle for $30,000 for damages and $45,000 for costs in accordance with Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR"). That Offer to Settle was rejected by the plaintiff.

[3] Counsel for the defendant submitted that rule 361 UCPR does not apply, and that the costs after 15 July 2013 should be paid on an indemnity basis as the plaintiff's refusal of the Offer to Settle was "imprudent".[1] Counsel argued that at the very least, the plaintiff should pay the defendant's costs of and incidental to the proceeding on the standard basis.[2]

[4] Counsel for the plaintiff submitted that the defendant's application for indemnity costs is "unwarranted, oppressive and seeks to introduce into the UCPR, a rule in favour of the Defendant, similar to UCPR 360."[3] The plaintiff further submitted that rule 361 UCPR applies,[4] and that costs should be awarded on a standard basis.[5]

Rules 360 and 361 UCPR

[5] It is useful to discuss the difference between rules 360 and 361 UCPR.

[6] Rule 360 UCPR provides that:

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

[7] By contrast, rule 361 UCPR provides that:

(a) the defendant makes an offer that is not accepted by the plaintiff and the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer; and

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

(2) Unless a party shows another order for costs is appropriate in the circumstances, the court must -

(a) order the defendant to pay the plaintiff's costs, calculated on the standard basis, up to and including the day of service of the offer; and

(b) order the plaintiff to pay the defendant's costs, calculated on the standard basis, after the day of service of the offer.

(3) However, if the defendant's offer is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders -

(a) the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and

(b) the defendant is entitled to the defendant's costs incurred after the opening of the court on that day on the indemnity basis.

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

[8] In relation to rule 360 UCPR, if the elements set out subrule(1) are satisfied, the court must order that the defendant pay the plaintiff's costs calculated on an indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

[9] Under rule 361 UCPR, if the elements set out in subrule (1) are satisfied, the court must make the prima facie order under subrule (2), unless a party shows that another order is appropriate in the circumstances. As the offer was made prior to the commencement of the trial, subrule (3) is irrelevant.

[10] As indicated in the defendant's submissions, there is ample authority which supports the proposition that rule 361 UCPR does not apply if the plaintiff does not obtain a judgment.[6] In the present case, the defendant was wholly successful in defending his claim, and therefore, I am satisfied that rule 361(1)(a) UCPR does not apply. I will now consider the issue of awarding indemnity costs.

[11] Although rule 361 UCPR does not apply, the costs issue is to be determined in the exercise of the Court's general discretion as to costs.[7]

[12] It must be noted that in awarding indemnity costs, "there needs to be some special or unusual feature in the case to justify a court departing from the ordinary practice".[8] As McMurdo P stated in Grice v Queensland[9] (McPherson and Williams JJA concurring) "Before ordering costs on an indemnity basis, a court requires some evidence of unusual circumstances or unreasonable conduct".[10]

[13] Chesterman J in Emanuel Management v Fosters Brewing Group Limited[11] ("Emanuel Management") noted the following:

[36] The rule is not applicable because the plaintiffs did not obtain a judgment. This may be an oversight in the Rules but r 361 does not give rise to a prima facie right in the defendants to have their costs on the indemnity basis from the commencement of the trial subject only to the court 'otherwise' ordering".

[37] Nevertheless it is clear that r 361 does not by implication prevent an order for indemnity costs being made in favour of a defendant save in the particular circumstances covered by the rule. A defendant who has been completely successful and has made an offer to settle better than the result for the plaintiff should not be in a worse position than a partly unsuccessful defendant who made such an offer.

[38] I was referred to a debate in the authorities as to what response is appropriate where a successful defendant had offered to compromise on terms which gave the plaintiff something and the offer was rejected. There are slightly conflicting views: on the one hand there is said to be a 'presumption' that the defendant should have its costs on the indemnity basis and the plaintiff must show some good reason why another order should be made. The second view is that the defendant must show that the offer was rejected unreasonably, judged in the circumstances known at the time it was made.

[39] An order of costs being a matter always for the discretion of the court I do not know that it is sensible to adopt either position as a 'rule'. The making of an offer in the circumstances in question is a very relevant circumstance to be taken into account when exercising the discretion. If there are no countervailing circumstances the order for indemnity costs is likely to be made.

[40] In this case I can see no countervailing circumstances. Indeed as I have explained the plaintiffs should have appreciated that their case had no worthwhile prospect of success. It was, therefore, unreasonable not to accept the offer.

[41] If I had not been satisfied that the first basis discussed entitled the first defendants to an order for indemnity costs for the whole of the action I would have ordered indemnity costs from the first day of the trial and costs on the standard basis to that date.

[14] In Emanuel Management, Chesterman J referred to the general principles relating to the circumstances in which indemnity costs ought to be awarded as set out by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited:[12] Those circumstances include the following;

(i) the making of allegations of fraud knowing them to be false or making irrelevant allegations of fraud;

(ii) misconduct that causes loss of time to the court and the other parties;

(iii) commencing or continuing proceedings or some ulterior motive or in wilful disregard of known facts or clear law;

(iv) the making of allegations which ought never to have been made;

(v) the undue prolongation of a case by groundless contentions;

(vi) the imprudent refusal of an offer to compromise; and

[15] Ultimately Chesterman J awarded indemnity costs in circumstances where he considered that there was irresponsibility in the plaintiff's claim against the first defendants as follows:

"[31] I have said enough to indicate that in my opinion there was a degree of irresponsibility in the plaintiff's bringing and prosecuting their action against the first defendants. It is significant that extravagant claims of dishonesty, corruption and gross impropriety were made in support of which not the slightest evidence was called. It is a case in which it is right to regard to the defendants as having been vexed. It is therefore an appropriate case in which to order and order of indemnity costs."[13]

[16] The only circumstance which is relied on in the present case is whether there was an "imprudent refusal of an offer to compromise" on the part of the plaintiff as discussed by White J (Williams JA and Wilson J agreeing) in Di Carlo v Dubois & Ors.[14]

[17] I am not satisfied that the plaintiff's refusal of the defendant's Offer to Settle in the circumstances of this case was imprudent. I accept the plaintiff's submission that "the case was not brought for any ulterior motives or purpose but rather simply to obtain compensation for the grave injuries sustained by the Plaintiff to protect his family against the foreseeable deterioration of his economic capacity as he ages."[15] This was not a case where there were no reasonable prospects of success.

[18] As Fraser JA (Holmes JA and Fryberg J agreeing) stated in Mizikovsky v Queensland Television Ltd[16] "it does not follow that the appellant's mere failure to accept the offer afforded a ground for the costs awarded in favour of the respondents to be assessed on an indemnity basis". Neither am I satisfied that this case contains any special or unusual features such as to justify such an order. In my view there must be some circumstances of the type referred to in Colgate before such an order can be entertained.

[19] I consider that the plaintiff should pay the defendants costs of and incidental to the proceeding to be assessed on the standard basis.

[20] The plaintiff is to pay the defendant's costs of and incidental to the proceeding to be assessed on a standard basis.

[1] Defendant's Submissions as to Costs dated 6 February 2015, pages 1 and 3.

[2] Defendant's Submissions as to Costs dated 6 February 2015, page 1.

[3] Plaintiff's Submissions as to Costs dated 10 February 2015, page 2.

[4] Plaintiff's Submissions as to Costs dated 10 February 2015, pages 1-2.

[5] Plaintiff's Submissions as to Costs dated 10 February 2015, page 5.

[6] Emanuel Management v Fosters Brewing Group Limited [2003] QSC 299 at [36]; Rathie v ING Life Ltd [2004] QSC 146 at [52]- [53]; Jones v Jones [2012] QSC 342 at [41]; Astway Pty Ltd v Council of the City of the Gold Coast [2007] QSC 224 at [15].

[7] Rathie v ING Life Ltd [2004] QSC 146, [49]-[57] (Wilson J); Anderson v Aon Risk Services [2004] QSC 180 at [10] (McMurdo J).

[8]Di Carlo v Dubois & Ors [2002] QCA 225 at [37]; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397.

[9] [2005] QCA 298.

[10] [2005] QCA 298 at [6].

[11] [2003] QSC 299.

[12] [1993] FCA 536; (1993) 46 FCR 225 at 232-234. Note also the other commonly cited authority of Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397.

[13] Emanuel Management v Fosters Brewing Group Limited [2003] QSC 299 at [31].

[14] [2002] QCA 225 at [37].

[15] Plaintiff's Submissions as to Costs dated 10 February 2015, pages 2-3.

[16] [2013] QCA 68 at [54]- [55].