Down to Earth Spring Water Pty Limited & Ors v Nikolaidis [2005] NSWSC 609 | Case summary

JUDGMENT ON COSTS 1 His Honour: On 29 April 2005, I delivered reasons for the matters determined following the lengthy hearing that had earlier taken place during March 2005. 2 On 23 June 2005, the matter was re-listed before me for the determination of the outstanding questions of nominal damages and costs. 3 The matter of nominal damages was resolved without argument. However, I heard detailed argument on the question of costs. 4 The plaintiffs have argued that the following orders should be made: 2. Order that the Defendants pay the Plaintiffs' costs of the proceedings from 26 June 2002 up to and including 8 November 2004 on the party/party basis. 3. Order that the Plaintiffs pay the Defendants' costs of the proceedings from 9 November 2004 on the party/party basis. 5 The defendants have argued that the plaintiffs should pay their costs since 26 June 2002. Further, they have argued that the orders should take the form of one of the two following alternatives:- 1. The plaintiffs pay the defendants' costs of the proceedings, except the costs of the determination of the separate questions before her Honour Justice Bell, and the costs payable be assessed on the indemnity basis from 13 July 2000. IN THE ALTERNATIVE 1. The plaintiffs pay the defendants' costs of and incidental to all issues in the proceedings other than those issues the subject of the determination of the separate questions before her Honour Justice Bell, such costs to be assessed on the indemnity basis from 7 December 2004. 6 Before addressing these competing approaches, it is first necessary to refer both to certain relevant matters and the relevant provisions of the Supreme Court Act 1970 (the Act ) and the Supreme Court Rules 1970 (the Rules). 7 On 22 October 1999, an order was made for the determination of certain issues in an early separate trial. On 3 May 2002, Bell J determined those issues. On 19 June 2002, her Honour heard argument on costs. 8 Prior thereto, the defendant had made an offer, dated 7 July 2000. The offer was in the following terms:- WITHOUT PREJUDICE EXCEPT AS TO COSTS We are instructed that the defendants offer to settle the above proceedings on the basis that the claim be dismissed and each party pay its or their own costs. This offer is open for acceptance until 4.00pm, 13 July 2000. 9 Evidence as to this offer was not before Bell J. 10 Her Honour did have evidence of an offer made on behalf of the plaintiffs. It was contained in a letter dated 16 November 2001. The terms of the offer may be found in the judgment delivered by her Honour on 26 June 2002. 11 In that judgment, she made the following order as to costs:- The defendant is to pay the plaintiffs' costs of the proceedings to date, such costs to be paid on an indemnity basis from 16 November 2001, with leave to have these costs assessed and paid forthwith. 12 The costs have been assessed and paid by the defendants. 13 The defendants served an offer of compromise, purportedly pursuant to "Part 22 Division 1" of the Rules. It was dated 5 November 2004. The notice of offer of compromise contained the following:- 1. The defendants offer to compromise the proceedings by payment of the sum of $450,000, plus costs, as agreed or assessed, to the plaintiffs. 2. This offer is made in accordance with Part 22 Division 1 of the Supreme Court Rules. 14 The powers of the Court in respect of costs are conferred by s76 of the Act. The relevant rules may be found in Part 52A of the Rules. 15 Part 52A contains the following:- 11 Following the event If the Court makes any order as to costs, the Court shall, subject to this Part, order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs. 16 In the circumstances of this case, I consider that the plaintiffs should pay the costs of the proceedings since 26 June 2002. 17 Part 52A rule 22 contains the following:- 22 Offer of compromise (6) Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on a party and party basis. (7) For the purpose of subrule (6), where the offer was made on the first or a later day of the trial of the proceedings, then, unless the Court otherwise orders, the plaintiff shall be entitled to his costs in respect of the claim up to 11 a.m. on the day following the day on which the offer was made, assessed on a party and party basis, and the defendant shall be entitled to his costs in respect of the claim thereafter, assessed on a party and party basis. 18 Rule 22 provides procedures which, if they are followed and found to be applicable in the circumstances of the particular case, have the cost consequences specified therein (subject to the Court making an "otherwise" order). 19 In this case, whilst the defendants look to the notice as being an offer of compromise, they do not seek to rely on the provisions of the rule. However, the plaintiffs seek to take advantage of the defendants' purported use of the procedures and contend that the rule has application. 20 The offer of compromise made by the defendants on 8 November 2004 was not accepted by the plaintiffs. The plaintiffs only obtained judgment in respect of that part of the claim that was founded on contract. The judgment was restricted to an award of nominal damages only. What was recovered was not more favourable to the plaintiffs than the terms of the offer. 21 As has been pointed out in many of the decided cases, subrule (6) does not have application in those cases where the plaintiff has been entirely unsuccessful. In this case, the plaintiffs have had an entitlement to nominal damages on the contract claim since 3 May 2002. Thereafter, they pursued a claim for actual damages allegedly occasioned by the breaches found by Bell J. In that part of the proceedings, the plaintiffs were entirely unsuccessful. 22 The powers had by the Court in respect of questions of costs are, subject to the Act, the Rules and any other Act, discretionary. The powers enable it to award indemnity costs. The power may be exercised in cases where a party has used the procedure of sending a Calderbank letter. The authorities demonstrate that in cases where the rule has no application to the purported notice, the notice can still operate as an offer of compromise. In this case, it was unreasonable for the plaintiffs to reject the offer made in such notice. 23 The power is often exercised also in other cases where neither the rule 22 nor the Calderbank procedures have been used. A review of the authorities demonstrates that in the past, indemnity costs have been awarded in various categories of cases (inter alia, where the case has no chance of success or is hopeless and/or where the justice of the case warrants such an order). 24 In my view, this case falls within those categories. The claim for actual damages was hopeless for a host of reasons. The Court could be pardoned for concluding that there has been failure to subject the actual damages claim to close scrutiny. What should have been obvious at least since 26 June 2002, became progressively more clearly exposed as the long trial proceeded. Despite this, the claim for actual damage was prosecuted up to the bitter end. 25 I am more than satisfied, that the justice of the case warrants the making of the alternative order sought by the defendants. It is common ground that any order that costs be assessed on an indemnity basis should operate from 7 December 2004. 26 The defendants have argued that the costs order made by Bell J on 26 June 2002 should be disturbed. In support of that application, the Court has been referred to the judgment of Bryson J in Weldon & Co Services Pty Limited v Harbinson [2000] NSWSC 389. 27 In that case, Bryson J (as he then was) vacated an earlier costs order made in respect of an interlocutory application. The earlier order was reconsidered and vacated, inter alia, because of misconduct that had been retrospectively revealed. It was also done in circumstances where the order for costs had neither been entered nor enforced. 28 The question of the power to revisit costs orders made earlier in a proceeding was but briefly argued. His Honour's reasons did not disclose the nature of the power had in mind. Perhaps, it was that conferred by Part 40 rule 9. 29 Fortunately, it does not need to be further considered in this case. The Court is now dealing with a state of affairs that is distinguishable from what was before Bryson J. 30 In this case, the costs order made by Bell J had application to a separate and distinct part of the proceedings and finally disposed of that part of the proceedings in the plaintiffs' favour. The costs have been paid. 31 Even if it be assumed that the order made by Bell J can be vacated or set aside (otherwise than by way of appeal), I am not satisfied that such a course should be taken in the circumstances of this case. 32 The costs order that I consider should be made in this case is as follows:-

Down to Earth Spring Water Pty Limited & Ors v Nikolaidis

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