Chapman v Wickman Ryan Pty Ltd

Background 1 On 29 March 2000, at the end of a lengthy judgment on this matter, I ordered that the application be dismissed and that the applicants pay the costs of the respondents and the cross-respondent. The respondents now seek an order that part of those costs be paid on an indemnity basis. 2 The matter has a long and complex background, which I shall describe as succinctly as possible. The applicants in the present proceedings ("the Chapmans") were also represented parties in parallel proceedings ("the representative proceedings") commenced by David Louis Schneider against Hoechst Schering Agrevo Pty Limited ("Hoechst"). The representative proceedings were brought on behalf of all wheatgrowers in the north-west of New South Wales who claimed losses arising out of the application of a particular herbicide, Puma S, onto their wheat crops in 1996. There were ten identified members of this class, including the Chapmans. The proceedings sought damages from Hoechst, as the manufacturer of Puma S, for negligence and for engaging in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act"). 3 At much the same time six of the represented parties, including the Chapmans, commenced separate proceedings against the companies or organisations from which they had purchased Puma S ("the distributors"), seeking damages for losses arising from the application of Puma S onto their 1996 wheat crops. In the case of the Chapmans the respondents were Wickman Ryan Pty Limited and Wesfarmers Dalgety Pty Limited (jointly known as "Wesfarmers"). The proceedings were based on breach of contract, negligence, breach of implied conditions under ss 70 and 71 of the Trade Practices Act and ss 18 and 19 of the Sale of Goods Act 1924 (NSW) ("the Sale of Goods Act"), and engaging in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act and s 42 of the Fair Trading Act 1987 (NSW) ("the Fair Trading Act"). Wesfarmers cross-claimed against Hoechst, claiming that Hoechst had made negligent misrepresentations as to the suitability of Puma S for its declared use and that it had contravened s 52 of the Trade Practices Act. Hoechst in turn cross-claimed against Wesfarmers claiming that it was in breach of an implied term of the agreement between them whereby it was to provide agronomic advice to the Chapmans. 4 By order of the Court (and by consent) the representative proceedings were heard together with the six separate proceedings against the distributors. The applicants in all cases had the same legal representation at the hearing. In other words, the Chapmans were represented by the lawyers who represented Mr Schneider and the other five individual applicants. Before the matter came to hearing, the cross-claims between the distributors and Hoechst were settled in two of the six individual proceedings. In each of these cases, the distributors were represented at the hearing by the solicitors and counsel who appeared for Hoechst. Three of the remaining cases involved the same distributor ("AG-N-Vet") which was separately represented at the hearing. Only in the Chapmans' case against Wesfarmers was the respondent singly represented, in this case by Mr Ryan of senior counsel. 5 The hearing of the combined actions lasted for three weeks, at the end of which I reserved judgment in all cases. Each of the seven applicants, including Mr Chapman, gave evidence at the hearing. Apart from Mr Schneider (whose evidence was relevant only in the representative proceeding) the evidence of each of these witnesses was relevant both to the representative action against Hoechst and also to the witness's own action against his or her distributor. In Mr Chapman's case he was cross-examined by counsel for both Hoechst and Wesfarmers. 6 Between the end of the hearing and the delivery of judgment, the three actions against AG-N-Vet were settled. This left outstanding, as separate proceedings, only the Chapmans' case against Wesfarmers and the two cases in which the distributors had settled their cross-claims with Hoechst and were represented by Hoechst's legal advisers. This meant that the action commenced by the Chapmans was the only remaining action in which the respondent was separately represented. 7 On 29 March 2000 I delivered judgment in all cases and dismissed all applications. The representative proceeding against Hoechst was the primary matter discussed in the judgment. In that case I found that the applicants had failed to establish that Puma S was the relevant "cause" of damage to the growers' wheat crops. I also found that they had failed to establish, against Hoechst, that it should have foreseen the possibility that Puma S might be damaging to wheat crops. 8 My findings on causation meant that the claims of the individual growers, including the Chapmans, against the distributors from whom they had purchased Puma S, could not succeed. As Puma S was not a relevant "cause" of the damage to their crops, no breaches had been established under the Trade Practices Act, the Sale of Goods Act, or pursuant to any of the other counts relied upon in those proceedings. It was on this basis that I dismissed all applications. In the circumstances, it was unnecessary to consider the merits of the individual counts in those actions. 9 As to the issue of costs, no party had intimated, during the course of the proceedings, that any special costs order would be sought. Accordingly I made standard orders indicating that costs should follow the event. In the Chapmans' action against Wesfarmers, the order I made was that the applicants pay the respondents' and cross-respondents' costs of the proceedings. In accordance with normal principles, these costs are to be paid on a party - party basis. 10 On 3 April 2000 the respondents filed a notice of motion seeking the following primary orders: 1. That the costs order in the primary proceeding be set aside; 2. That the applicants pay the respondents' costs: (a) up to and including 17 March 1998 on a party - party basis; and (b) from 18 March 1998 on an indemnity basis; Or, in the alternative: 3. That the applicants pay the respondents' costs: (a) up to and including 1 March 1999 on a party - party basis; and (b) from 2 March 1999 on an indemnity basis. 11 In an affidavit in support of the notice of motion, Wesfarmers' solicitor, Ms Kim O'Connell, annexed two letters from Wesfarmers' solicitors to the Chapmans' solicitors, dated respectively 17 March 1998 and 1 March 1999. The first letter pointed out a number of respects in which it was suggested that the statement of claim was defective. It asserted that the separate proceedings would not give the Chapmans any relief in addition to that which they claimed in the representative proceedings, and pointed out that in maintaining the separate proceedings they were increasing their exposure to costs in the event that they were unsuccessful. The letter, which was a lengthy one, discussed each of the causes of action relied upon by the Chapmans and argued that they were, in the circumstances, unsustainable. The letter concluded in the following terms: "For the reasons outlined at the commencement of this letter our clients invite you to withdraw the proceedings against them. Our clients will not seek any payment of their costs if your clients withdraw the claim prior to the Directions Heading [sic] scheduled in this matter for 7 April 1998. If your clients do not withdraw then our clients will seek to bring application to have the matter dismissed or alternatively the statement of claim struck out." 12 The second letter, dated 1 March 1999, raised similar issues. The letter enclosed a copy of the previous letter of 17 March 1998 and concluded in the following terms: "We are instructed by our clients to repeat their offer to pay their own costs if the Applicants agree to discontinue the action. In the event that this offer is not accepted and the matter proceeds to hearing and your clients fail to recover a judgement against our clients which is substantially better than this offer, we put you on notice that this letter and the letter of 17 March 1998 will be tendered and costs sought on an indemnity basis." 13 There is no evidence of any reply to either of these letters. Certainly the suggestion that the Chapmans should discontinue the proceedings was not taken up. Wesfarmers now claim that, at least since receipt of the second letter, the Chapmans should pay the respondents' costs on an indemnity basis.