Practice and procedure - Costs - Indemnity costs on special costs order

Practice and procedure - Responsive witness statements - Best practice

Plaintiff pay the defendant's costs of interlocutory applications

Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225

FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268

FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33

Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95

Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534,

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

Re Malley SM; Ex Parte Gardner [2001] WASCA 83

Rodwell v Hutchinson [2010] WASCA 197

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Sydney South West Area Health Service v Stamoulis [2009] NSWCA 153

1 ALLANSON J: In 2008 the plaintiff, Unified Pty Ltd (Unified), contracted with the Cancer Council Western Australia Inc (Cancer Council) to provide software development services. In June 2009, Unified ceased work under the contract. Unified now claims damages and other relief from the Cancer Council under various causes of action. It is not necessary for present purposes to give greater detail of the claim.

2 Proceedings began in 2009. The matter first came before me on 3 September 2010, for directions. At that time it had been tentatively listed for a trial beginning on 11 October 2010. Earlier, it had been tentatively listed for trial commencing 16 September 2010. The trial has been estimated to last between 12 and 20 days. When the matter came before me on 3 September, preparation for trial was not then complete: witness statements had not been exchanged; and there were outstanding procedures in relation to the production of expert evidence. Further, both parties agreed that the pleadings were inadequate, and the issues for trial needed to be clarified, although this might be done in some other way than by a further amendment to the pleadings. Despite these matters, Unified up to at least September 2010, maintained that a trial in 2010 was achievable.

3 The matter did not go to trial in 2010, and is still not ready to go to trial. Witness statements of lay witnesses have now been exchanged, but the process for resolving objections to those statements is not complete.

4 In the course of dealing with witness statements, several matters arose which were dealt with at a special appointment on 12 January 2011. The Cancer Council applied for specific costs orders for one of the directions hearings. Both parties sought orders in relation to the practice to be followed by Unified in preparing its responsive witness statements. These reasons deal with the matters argued at that appointment.

Background to the exchange of witness statements

5 I am told that the preparation of witness statements has been a very demanding process for the Cancer Council. In particular, one of its principal witnesses, Ms Christene Offenburg, is not an employee of the Cancer Council and access to her and her time have both been limited. Both parties now also agree that they may have initially underestimated the size and the complexity of the task of preparing statements.

6 On 3 September 2010 there had already been several extensions of time for the production and exchange of witness statements, and the Cancer Council was seeking a further extension. I made orders extending time to 4 October 2010, based on the best estimate of counsel for the defendant. On 29 September 2010 the Cancer Council advised Unified that it would be able to file statements from all of its witnesses except Ms Offenburg by that deadline. Unified and the Cancer Council agreed to a further extension of two weeks, although the Cancer Council was then aware (and advised the solicitors for Unified) that there may not be enough time to obtain the statement from Ms Offenburg. On 11 October 2010 the Cancer Council again sought an extension of time. Unified gave no indication on any of these occasions that it would not be ready to exchange statements. On 4 October, 13 October, and 20 October 2010, orders were made by consent further extending the date for exchange of witness statements. The last of these extended the date to 22 October 2010. Each of these extensions was at the request of the Cancer Council.

7 The Cancer Council has worked very intensively to produce its statements. One of the complaints it makes is that Unified has been kept aware of the efforts it was making to try to comply with the successive dates for the exchange of statements. During this period, however, Unified gave no intimation that it would not be in a position to file and provide its own witness statements. While Unified generally agreed extensions, they were short. Even though most extensions were agreed without the need for attendance, both time and costs were involved.

8 On 18 October 2010, the defendant advised the plaintiff that it would not be able to provide a statement from Ms Offenburg by the due date of 20 October. The defendant proposed either exchange on 20 October with liberty to apply to file a statement from Ms Offenburg if one was obtained, or for Ms Offenburg's statement to be provided on 3 November 2010. The plaintiff pressed for an order that statements be exchanged by 4.00 pm on 3 November 2010 and if not, the Cancer Council would not be permitted to subsequently file and serve any statement of Ms Offenburg or call evidence from her at trial. This was not first time that such an order had been proposed by Unified. I had earlier declined to make such an order without the qualification that it be subject to the discretion of the trial judge.

9 The matter came to a directions hearing in the CMC list on 22 October 2010. I declined to make the order sought because, in my opinion, it was not appropriate to take away the discretion of the trial judge. The deadline for the exchange of witness statements was extended to 3 November 2010. Costs were reserved. At the hearing on 22 October 2010, Unified gave no indication that it would not be in a position to file its own witness statements.

10 On 3 November 2010 the Cancer Council advised Unified that it anticipated it would have a comprehensive statement from Ms Offenburg that could be filed that day or the next, but it contained some arguably inadmissible material. The parties agreed to extend the deadline for exchange of statements to 15 November 2010. On 9 November 2010, Unified sought the Cancer Council's consent to orders extending the deadline. This was the first indication during the time I have been managing this matter that Unified was not ready to exchange statements. Consent orders were made. On 17 November 2010 Unified sought the Cancer Council's consent to a further extension to 22 November 2010. Consent orders were made.

11 The Cancer Council filed its witness statements shortly before 4.00 pm on 22 November 2010. Late on that day, Unified advised the Cancer Council that its witness statements were still not ready and asked to postpone the exchange. The following day Unified requested a further extension of one day. On 24 November 2010, Unified advised that it was still not ready and said that it would file its statements by 26 November 2010.

12 It is in this context that the Cancer Council seeks special costs orders, alternatively indemnity costs, in relation to the hearing of 22 October 2010 at which Unified sought the making of the guillotine order. The Cancer Council seeks those orders on the following bases:

(a) the order sought by Unified was inappropriate and doomed to fail;

(b) the application was made at the time when Unified's witness statements were far from their final state.

13 With regard to the first of those grounds, the Cancer Council argues that the appropriate time to consider whether a party ought to be permitted to adduce evidence from a witness in respect of whom a witness statement was not filed by the required time is when a statement has been obtained, and an application for leave made. It is only at that stage, that the content of the statement and the length of the delay are known, and full reasons for the delay can be put before the court. The court can then properly evaluate the probative value of the statement and the prejudice that may have been caused to the other party by the delay.

14 In my opinion, this submission overstates the position. I agree that a guillotine order was unlikely in the present matter, where the Cancer Council had on each occasion sought an extension of time before it was in default, and had given proper and candid explanation for the delay. But, in my opinion, such an order may be made in circumstances of repeated failure to meet deadlines. It would, however, be subject to the discretion of the court to extend the time fixed by the order, even on an application made after the time has expired: see Rules of the Supreme Court 1971 (WA) O 3 r 5 and FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268, 283 - 284.

15 More significant, in my view, is that Unified pressed for the order when, as events have shown, it was not in a position to comply with its reciprocal obligation to exchange. I accept that Unified may have believed that it was able to comply, but if that is so, its belief was wrong. Further, the extent to which Unified was not ready is revealed in an affidavit of Mr Coyne, dated 10 December 2010. He says that at 22 October 2010 he was not aware of any matters requiring substantial further work to be carried out on his statement, and believed all that was required was a final review. In early November, after further reflection, he decided to add some further material to his statement. Ultimately he worked on the statement for about 14 hours a day from early November 2010 to 26 November 2010. The witness statement has apparently doubled in length as a result.

16 Section 37(1) of the Supreme Court Act 1935 (WA) provides:

Subject to the provisions of this Act and to the rules of court and to the express provisions of the Magistrates Court (Civil Proceedings) Act 2004, or any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or judge, and the Court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid.

17 In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [21] - [22], Gaudron and Gummow JJ said of the similar discretion in s 69(2) of the Land and Environment Court Act 1979 (NSW):

The provisions of s 69 of the Court Act which confer upon the Court the discretion exercised by the primary judge attract the application of the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used. The necessity for the exercise of the jurisdiction or power by a court favours a liberal construction. Considerations which might limit the construction of such a grant to some different body do not apply.

The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view'.

18 While the discretion to award costs cannot be shackled, and considerations which might guide the exercise of the discretion cannot be rigidly applied, the authorities offer guidance on the proper exercise of the discretion. In particular, it is well-established that an indemnity costs order will only be made in exceptional circumstances: see Rodwell v Hutchinson [2010] WASCA 197 [29]; Re Malley SM; Ex Parte Gardner [2001] WASCA 83. The circumstances in which a court will make such an order are not closed, and cannot be exhaustively stated. They include where there has been improper or unreasonable conduct on the part of a party or that party's legal advisors, and in those circumstances mark the court's disapproval of the conduct: Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10]; Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233; Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [9].

19 In the circumstances outlined above, the application by Unified for the guillotine order was unreasonable. But that is not the only consideration. The additional costs incurred in meeting the application, in the context of the case overall, are small. The matter was dealt with as part of the directions in a CMC list. The guillotine order was only one of the matters dealt with, and the whole hearing occupied 15 minutes. I am not satisfied that an order that requires the taxation of costs on an indemnity basis is required when that process is disproportionate to the value of what is now in dispute.

20 As an alternative, the Cancer Council seeks a special costs order reflecting the actual rates charged by the practitioners acting for the Cancer Council (including senior counsel), and again requiring taxation. For the same reasons, I do not regard such an order as appropriate. The matter should be the subject of an order fixing costs. The application was heard in the CMC list. Each party filed short written submissions but the issue was not complex. Unified should pay the Cancer Council's costs of the hearing of 22 October 2010. I fix them in the amount of $405 in accordance with the then current Schedule of Standard Costs Orders for Interlocutory Applications in the Consolidated Practice Directions. The costs should be paid forthwith.

21 The second issue relates to matters which arise after the exchange of witness statements. The Consolidated Practice Directions provide the usual orders to be made in case management. They include orders setting out the formal requirements of witness statements. Paragraph 44(g) of those orders now include the requirement that such a witness statement 'shall be prepared in accordance with Best Practice Guide 01/2009 issued by the Western Australian Bar Association entitled "Preparing Witness Statements for Use in Civil Cases" and shall contain a certificate to that effect signed by the practitioner most responsible for its preparation'.

22 The Best Practice Guide deals with responsive statements in pars 24.1 to 24.6. In particular, par 24.1 states:

A witness statement is not a pleading. It should never adopt the form of responding to particular paragraphs in other statements. The witness should not be told what is in other witness statements. It is the responsibility of the lawyer to identify topics relevant to the issues in the case that have been addressed in other witness statements and to elicit the testimony of the witness to those topics and record the testimony in the statement. As explained elsewhere in this Guide, the testimony should be elicited by open questions that do not direct a witness to give a particular version of events.

23 The guide expresses the view that it is 'fundamentally inconsistent with the role of the witness for evidence to take the form of a response to the evidence of others'. Further, the guide stresses the need to record evidence in a way which is preserved so far as is possible from any process that will take the independence of that testimony.

24 Unified proposes to show the Cancer Council's witness statements to Mr Coyne for the purpose of the preparation of his responsive witness statement. When the case was before the court for directions on 26 November 2010, as part of a CMC list, Unified put forward a minute of proposed orders, including orders:

1. In their preparation of responding witness statements, the parties are not required to follow the procedure set out in paragraph 44(g) of the standard CMC List directions.
2. Responding witness statements may be prepared on the basis that the responding witness first reads the statements of the witnesses, which are being responded to.

The parties do not show any of their witnesses the statement of any other witness.

26 Unified submits, correctly, that the requirement in 44(g) was not in force at the time when orders for the exchange of witness statements were made, and there is currently no order requiring the parties to prepare their statements in accordance with the Best Practice Guide and to certify that their statements do comply. It says the practice it wishes to follow has often been followed in civil matters. It further submits that the result of following the practice set out in the Guide is that the witness's recollection may not be fully refreshed. It also says that having the witnesses read the statements to which they are responding may substantially reduce time and costs.

27 Finally, Unified submits that Mr Coyne should be shown the evidence of the defendant's witnesses because it proposes to lead evidence from him as an expert. The interest of Mr Coyne in the outcome of the case would not disqualify him or make his evidence inadmissible: see FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33; Sydney South West Area Health Service v Stamoulis [2009] NSWCA 153 [213] - [219]. Mr Coyne's interest may properly bear on the weight given to his opinions. It may also affect the way in which the court must approach the taking of expert evidence - for example, whether it is practical to receive expert evidence concurrently.

28 The Cancer Council submits that the issue is essentially one of the integrity of the process for adducing evidence, and thus the integrity of the evidence. Efficiency and the saving of time and cost are important considerations, but do not justify ignoring those processes. The Cancer Council submits that the question is to do with responsive 'lay' witness statements, and the intention of Unified to seek to lead Mr Coyne's opinions on matters within his expertise is not relevant.

29 I agree with the basic position put forward by the Cancer Council. A responsive witness statement, although it is responsive, remains a statement of the evidence of the witness. It is not intended to plead the case of the party calling that witness. It is the responsibility of the practitioner who prepares the statement to elicit the evidence of the witness on the topics which that party's case requires the witness to address. It should not be necessary for Mr Coyne to see the statements of the defendant's witnesses for him to give responsive evidence.

30 I am not, however, prepared to make an order - either in terms of the orders sought by Unified on 26 November 2010, or the order sought by the Cancer Council on 12 January 2011. The witness statements already filed were not subject to the requirements now set out in par 44(g), and have not been certified as complying with the Best Practice Guide. If Unified chooses to show the statements of the defendant's witnesses to Mr Coyne for the purposes of his responsive statement, the effect of that will have to be considered at the trial. The way in which the statement has been produced may be the subject of cross-examination, and must be considered in assessing the weight to be given to his testimony: see Day v Perisher Blue Pty Ltd [2005] NSWCA 110; (2005) 62 NSWLR 731 [30] - [34]. It would not, however, affect the admissibility of the testimony.

31 The final two matters are the costs of the directions hearing of 26 November 2010, and the costs of the hearing on 12 January 2011.

32 There were several matters raised in the hearing on 26 November 2010. The hearing was part of the CMC list of that day. As well as Unified's application regarding its witness statements, there were applications by the Cancer Council for Unified to pay the Cancer Council's costs of 22 October 2010 on an indemnity basis or under a special costs order; for orders that Unified file and serve an affidavit as to why it needed more time for the filing and exchange of its witness statements; and for Unified to file its witness statements by 4.00 pm on that day.

33 In my opinion, it was necessary for the parties to attend at that directions hearing primarily because of Unified's application and its failure to be ready to exchange witness statements. The hearing was longer than an ordinary directions hearing, but that was caused, at least in part, by the number of separate matters that were considered. It is appropriate for Unified to pay the Cancer Council's costs of that directions hearing on the basis of an appearance before a judge in the CMC list lasting 43 minutes.

34 The last matter to consider is the costs of these applications as they were argued on 12 January 2011. The Cancer Council has not been successful in its application for an indemnity costs order or for a special costs order, although it has been successful in being awarded the reserved costs of 22 October 2010 and 26 November 2010. No orders have been made on the application by either party regarding the plaintiff's responsive witness statements. The effect of Unified not following the Best Practice Guide in relation of the preparation of those statements, if that is what it chooses to do, will be resolved at trial.

35 The ordinary principle reflected in Rules of the Supreme Court O 66 r 1, is that the court will generally order that the successful party recovers its costs: Oshlack [66] (McHugh J), [134] (Kirby J). See also Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 562 - 563, 566 - 567. There is, however, no automatic rule that costs always follow the event: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 [26] - [27], [34]; Oshlack [40]. Neither party has been wholly successful in the application before me. That is not the sole criterion by which the discretion as to costs is to be exercised. But having regard to the nature of the issues argued, and the decision that I have made on each of them, in my opinion the costs the hearing of 12 January 2011 should be in the cause.

36 The plaintiff should pay the defendant's costs of the hearing of 22 October 2010, fixed in the amount of $405, forthwith.

37 The plaintiff should pay the defendant's costs of attendance at the CMC directions of 26 November 2010, fixed in the amount of $440, forthwith.

38 The applications are otherwise dismissed. The costs of the hearing of 12 January 2011 are costs in the cause.