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[2009] TASSC 11
Supreme Court of Tasmania
2009-03-03
Crawford CJ, Blow JJ, Slicer J
Original judgment source is linked above.
CITATION: Edwards v Stocks [2009] TASSC 11
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
Procedure - Costs - Departing from the general rule - Conduct of parties - Conduct tending to litigation - Third party proceedings - Real fight between plaintiffs and third parties - Plaintiff sued defendant for damages for negligent misrepresentations made without authority by the third parties as its agent - Action failed because of limitation defence - Whether plaintiffs and not the defendant should be ordered to pay the costs of the third parties.
Johnson v Ribbins [1977] 1 WLR 1458; Edginton v Clark [1964] 1 QB 367; Thomas v Times Book Company Ltd [1966] 1 WLR 911; Gladstone Park Shopping Centre Pty Ltd v Wills [1984] FCA 166; (1984) 6 FCR 496; Harnett v Vise (1880) 5 Ex D 307; Bostock v Ramsey Urban District Council [1900] 2 QB 616, referred to.
Procedure - Costs - Departing from the general rule - Other cases - Relevance of impecuniosity of a party.
Yilan v Minister for Immigration and Multicultural Affairs [1999] FCA 1212; Hollier v Australian Maritime Safety Authority (No 2) [1998] FCA 975; Scott v Secretary, Department of Social Security [2000] FCA 1450; Board of Examiners v XY [2006] VSCA 190; Mayer v Harte [1960] 2 All ER 840; Vucadinovic v Lombardi [1967] VicRp 10; [1967] VR 81; Barradine Pty Ltd v Westworld Holdings Pty Ltd [1988] 1 Qd R 498; Johnson v Ribbins [1977] 1 WLR 1458, referred to.
Judgment Number: [2009] TASSC 11
1 That orders 1, 2, 3 and 5 made in action 1051/1992 on 28 May 2007 be set aside, and the following orders substituted:
(i) That the action is dismissed.
(ii) That the defendant's claim against the first and second third parties is dismissed.
(iii) That the first and second third parties pay the defendant's costs of and incidental to the action and the third party proceedings against them, but excluding any costs occasioned by the joinder of the third third party.
(iv) That the plaintiffs pay the first and second third parties' costs of and incidental to the action and the third party proceedings.
(v) That the plaintiffs indemnify the first and second third parties in respect of the defendant's costs.
2 That the appellants pay the third respondent's costs of and incidental to the costs applications made on 19 November 2008.
3 That the first and second respondents pay the appellants' costs of and incidental to the appeal.
4 That the first and second respondents indemnify the appellants in respect of the third respondent's costs of the said costs applications.
5 That the first and second respondents be granted an indemnity certificate in respect of the appeal under section 8(1) of the Appeal Costs Fund Act 1968.
1 I agree with the reasons for judgment of Blow J and the orders he proposes.
2 I have had the advantage of reading the draft reasons for judgment of Blow J. I agree with both his reasons and conclusion. I would concur in the making of the orders stated in his reasons.
3 The successful parties to this appeal (the appellants and the third respondent) are seeking orders against each other for the payment of their costs. The background to this unusual situation is as follows:
• In 1986 the first and second respondents, Mr and Mrs Stocks ("the tenants") leased a shop from the third respondent, the Retirement Benefits Fund Board ("the landlord").
• The tenants were induced to lease that shop by a number of false representations made to them by the appellants, Mr Edwards and Mr Elwood, who were the landlord's agents ("the agents").
• As a result of leasing the shop, the tenants suffered financial losses.
• In 1992 they brought an action against the landlord for damages in respect of those losses. The landlord instituted third party proceedings against the agents and a Mr Fitzgerald, seeking an indemnity from them.
• In 1995 the agents and Mr Fitzgerald, as the third parties in the proceedings, sought and obtained an order pursuant to the Rules of the Supreme Court 1965, O18, r63, giving them liberty to defend the action jointly with the defendants/landlord.
• In 2007, following a trial of the action and the third party proceedings, a judge gave judgment for the tenants against the landlord for damages, ordered the agents (but not Mr Fitzgerald) to indemnify the landlord, and made orders for costs. The agents and the landlord had contended that the action was brought out of time, but the learned trial judge held otherwise: Stocks v Retirement Benefits Fund Board [2007] TASSC 8.
• The agents appealed, joining the tenants and the landlord as respondents to the appeal. The findings of the learned trial judge that the agents made the misrepresentations relied on by the tenants were not challenged by the agents in the grounds of appeal.
• The landlord did not take any active part in the appeal. Its counsel appeared at the commencement of the hearing of the appeal, sought and obtained leave to withdraw, withdrew, and did not return during the hearing.
• The appeal was successful: Edwards v Stocks [2008] TASSC 12. This Court held, by majority, that the tenants were not entitled to recover any damages because the action was brought out of time. We also held that damages had been assessed at too high a figure as a result of an error in relation to interest. Two grounds of appeal succeeded, but six grounds of appeal failed. On the grounds of appeal that succeeded, the interests of the landlord coincided with the interests of the agents. It is for that reason that I regard not only the agents, but also the landlord, as the successful parties to this appeal.
• The agents and the landlord believe the tenants to be impecunious.
4 Except in relation to costs, there is no dispute as to what orders this Court should make to dispose of the proceedings, though such orders have yet to be made. In their action, the tenants pursued an alternative claim for equitable compensation in respect of unjust enrichment. The learned trial judge made no determination in respect of that claim. On 19 November 2008 Mr Stocks appeared before us without legal representation, and told us that he and his wife did not wish to pursue that claim. His wife was not present. Not being a legal practitioner, he did not have a right to speak on her behalf: Co-Operative Property Developments of Australia Ltd v Mount [1980] Tas R 7. But as Mr Stocks wants to abandon that claim, and Mrs Stocks has not asked us either to determine it or to remit it to a single judge for determination, it is appropriate for us to treat her as having abandoned it also. Orders were made by the learned trial judge dismissing the third party claim by the landlord against Mr Fitzgerald and ordering the landlord to pay his costs. Those orders should not be disturbed, but the other orders of the learned trial judge must be set aside.
5 The agents contend that, both in relation to the appeal and in relation to the proceedings at first instance, there should be orders that (a) the tenants pay the landlord's costs; (b) the landlord pay the agents' costs; and (c) the tenants indemnify the landlord in respect of the agents' costs.
6 The agents' contentions as to why such orders should be made can be summarised as follows:
• The tenants made no claim against them.
• The only claim against them was a claim for an indemnity made by the landlord.
• The result of this litigation is that there will be no order for such an indemnity. Therefore the landlord should be regarded as unsuccessful as against the agents, and ordered to pay their costs, including the costs of the appeal.
• The "real fight" in this litigation was between the tenants and the landlord.
• There was nothing in the conduct of the agents in relation to the litigation that would justify departure from the ordinary principle that costs follow the event.
• It was the agents' solicitors who first alerted the landlord's solicitors to the existence of a limitation defence that was ultimately successful.
• The landlord did not ever ask the agents to admit having made their false representations and agree to indemnify it, so that it could take no part in the trial. Instead it chose to take part in the trial.
• The landlord made a concession that two of the representations alleged by the tenants to have been made by the agents, if made after a particular point in time, were made within the scope of the agents' authority.
7 The landlord contends that, in relation to the action, the third party proceedings, and the appeal, there should be orders that (a) the agents pay the landlord's costs; (b) the tenants pay the agents' costs; and (c) the tenants indemnify the agents in respect of the landlord's costs.
8 Such orders involve a departure from the general rule that costs should follow the event. The landlord's contentions as to why such orders should be made can be summarised as follows:
• This litigation took place as a result of the agents making false representations. The findings of the learned trial judge as to them having made false representations have not been challenged or disturbed on appeal.
• The limitation defence which succeeded involved difficult questions of fact and law. As it was far from clear that that defence would ultimately succeed, it was reasonable for the landlord to seek an indemnity from the agents.
• The "real fight", both at first instance and on appeal, was between the tenants and the agents.
• It was open to the agents, in the proceedings at first instance, to agree to indemnify the landlord, so that there would have been no need for the duplication of costs, but no such indemnity was offered.
• The claim for an indemnity arose out of the agents' conduct towards the tenants, and not out of private dealings between the agents and the landlord.
• The landlord was in substance a "nominal party", taking little part in the proceedings.
The discretion as to costs - general principles
9 The power to make orders for the payment of costs is conferred by the Supreme Court Civil Procedure Act 1932, s12(1). That Act confers a discretion which is not fettered by any legislative provision. There is a general rule that costs follow the event, ie that the unsuccessful party will be ordered to pay the successful party's costs. See, for example, Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. However, because the power to order costs is discretionary, the general rule may be departed from in appropriate cases.
10 When a plaintiff has failed against a defendant, the defendant has joined a third party seeking an indemnity, and no indemnity is ordered because the plaintiff has failed, generally the third party is regarded as having succeeded against the defendant, and the defendant is regarded as having succeeded as against the plaintiff. On that basis, the usual orders are that the plaintiff pay the successful defendant's costs, that the defendant pay the successful third party's costs, and that the unsuccessful plaintiff indemnify the defendant in respect of the third party's costs: Johnson v Ribbins [1977] 1 WLR 1458; Burke v Gillett [1996] VicRp 11; [1996] 1 VR 196; Mifsud v ICT Pty Ltd [1997] TASSC 115; (1997) 7 Tas R 148. The agents, as successful third parties, now contend that such orders should be made in respect of the proceedings, not only at first instance but also on appeal.
11 In multi-party litigation, it can be appropriate to depart from the general rule by making an order for costs that reflects the fact that the "real fight" was between two particular parties. For example, in Edginton v Clark [1964] 1 QB 367 at 384, the English Court of Appeal indicated that it would have been prepared to order that the plaintiff pay the third parties' costs directly because the "real and only fight" was between them. In Thomas v Times Book Company Ltd [1966] 1 WLR 911 at 919 - 920, in which the plaintiff was the administratrix of the estate of Dylan Thomas, Plowman J ordered her to pay the costs of the third and fourth parties directly after observing that the "real issue in the action" was whether Dylan Thomas had made a gift of a manuscript to the fourth party. In Gladstone Park Shopping Centre Pty Ltd v Wills [1984] FCA 166; (1984) 6 FCR 496 at 510, Beaumont J, with whom Northrop J agreed, treated the identities of the participants in the "real fight" as a relevant factor in an appeal concerning costs. On the facts of the present case, there was never a significant chance that the tenants would succeed against the landlords without the landlords recovering an indemnity from the agents. Assuming the continuing solvency of at least one of the agents, I think it fair to say that the real fight was between the tenants and them, with the landlord standing in the middle and never facing a significant risk of having to pay damages that it could not recoup from the agents.
12 There is a well established principle that, at least when the legislation is silent as to relevant considerations, the impecuniosity of a party seeking or opposing a costs order is not a relevant consideration. Although that rule is well established, reported cases establishing or acknowledging the rule are not easy to find. Examples of the application of that rule include three decisions of the Full Court of the Federal Court: Yilan v Minister for Immigration and Multicultural Affairs [1999] FCA 1212; Hollier v Australian Maritime Safety Authority (No 2) [1998] FCA 975; Scott v Secretary, Department of Social Security [2000] FCA 1450. The Victorian Court of Appeal held in Board of Examiners v XY [2006] VSCA 190 that the impecuniosity of a party seeking a costs order was an irrelevant consideration.
13 However, the question that arises in this case is whether, in the context of costs applications by the agents against the landlord and vice versa, the impecuniosity of the tenants is a relevant consideration. I see no reason for an inflexible rule that every party's financial position is always irrelevant.
14 There are a number of reported cases involving multiple parties in which the financial position of a party has been regarded as a relevant consideration.
15 In a case where one defendant is successful and another defendant is unsuccessful, a choice will often need to be made between an order that the unsuccessful defendant pay the successful defendant's costs (a Sanderson order: Sanderson v Blyth Theatre Co [1903] 2 KB 533) and orders that the plaintiff pay the costs of the successful defendant, and that the unsuccessful defendant indemnify the plaintiff as to those costs (a Bullock order: Bullock v London General Omnibus Company [1907] 1 KB 264). If the unsuccessful defendant is insolvent, a Sanderson order would result in the successful defendant being unable to recover any costs. There are reported cases in which the insolvency of an unsuccessful defendant has been taken into account in such circumstances and regarded as justifying a Bullock order: Mayer v Harte [1960] 2 All ER 840; Vucadinovic v Lombardi [1967] VicRp 10; [1967] VR 81; Barradine Pty Ltd v Westworld Holdings Pty Ltd [1988] 1 Qd R 498.
16 On the other hand, in Johnson v Ribbins (supra) at 1464, the English Court of Appeal took the view that the impecuniosity of a plaintiff was not a reason to make an order akin to a Sanderson order in favour of a successful third party. Their Honours said:
"... we can see nothing which the defendant can call in aid except the impecuniosity of the plaintiff, but it cannot be right to deprive a third party of an order for costs to which he is otherwise entitled against the defendant, because the defendant when looking to the plaintiff for reimbursement, finds a person not worth powder and shot."
Agents' costs of the proceedings at first instance
17 In my view it is very significant that the learned trial judge made findings, which were not challenged in the appeal, that the agents made false representations to the tenants, and thereby breached the duty that they owed to the landlord, and acted in excess of their authority. This Court has decided that, only because the tenants' action was brought out of time, the agents should have been successful in the third party proceedings. However the issues between the landlord and the agents in the third party proceedings were fully litigated, and were all determined in the landlord's favour.
18 When a successful party has engaged in conduct that has given rise to litigation, that factor can be a sufficient reason to depart from the general rule and refuse an order for costs: Harnett v Vise (1880) 5 Ex D 307; Bostock v Ramsey Urban District Council [1900] 2 QB 616.
19 When a third party would have been liable to indemnify a defendant if the plaintiff had succeeded against the defendant, that fact is relevant to the exercise of the costs discretion. Thus in Gold Coast Bakeries (Qld) Pty Ltd v Heat & Control Pty Ltd [1992] 1 Qd R 162, the Full Court of the Supreme Court of Queensland refused to make any order as to the costs of an insurer, joined as a third party, which would have been liable to indemnify its insured if the insured had been held liable in the action.
20 Johnson v Ribbins (supra) concerned a different sort of situation. That case arose out of a mortgagee's sale of a hotel. The plaintiff was a mortgagor, who sued the mortgagee alleging a sale at a gross undervalue. The mortgagee prudently joined its agents as third parties. The plaintiff failed. In fact the trial judge found that the hotel had been sold for more than it was worth. That case can be distinguished on the basis that no determination adverse to the third parties was made in relation to any issue.
21 Because this litigation arose from tortious conduct on the part of the agents, who thereby breached their duty to the landlord and acted in excess of their authority, I think it is open to this Court to depart from the general rule that costs follow the event, and not to apply that rule in the manner that it was applied in Johnson v Ribbins. There are still factors that weigh in favour of the agents in relation to the exercise of the costs discretion. They were seeking to benefit the landlord when they made the misrepresentations. They brought about a tenancy, and the tenants paid $10,759.72 in rent. However I do not consider it significant that it was the agents' solicitors who first thought of the limitation defence, nor that the landlord did not ever ask the agents to agree to indemnify them if it was ordered to pay damages to the tenants, nor that it made a concession as to the scope of the agents' authority as at a particular time. That concession was insignificant because the learned trial judge found that the representations had been made at an earlier time.
22 In my view the factors weighing in favour of the landlord, particularly the fact that the litigation was brought about by the agents making misrepresentations that were made in breach of their duty to the landlord, negligent, and outside the scope of their authority, outweigh the factors weighing in favour of the agents. On that basis, I think that the general rule should be departed from, and that the landlord should not be ordered to pay the agents' costs of the third party proceedings. Because the plaintiffs failed in the action, I think they should be ordered to pay those costs.
Landlord's costs of proceedings at first instance
23 The landlord's primary submission was that this Court should order the agents to pay its costs of the action and the third party proceedings.
24 It is one thing to depart from the general rule to the extent of denying the successful third parties the usual order for costs against the defendant, and instead to order the impecunious unsuccessful plaintiffs to pay their costs. It involves a greater departure from the general rule to order the unsuccessful third parties to pay the costs of the defendant that proceeded against them. However, given the wide nature of the costs discretion, there is no reason why that course should not be taken in an appropriate case. Having regard to the factors discussed above, I consider that, to the extent that the landlord is unable to recover its costs from the tenants, it would be just for it to be able to recover those costs from the agents, and that such a departure from the general rule is justified. However, because the tenants were wholly unsuccessful in their action, they should be required to bear the landlord's costs, to the extent that an order against them can be enforced.
25 It is not practical to make orders whereby the landlord would have to try to enforce a costs order against the tenants and, to the extent that it was unsuccessful after making reasonable efforts, could then recover costs from the agents. To do justice in this situation, I think the most practical course is to make an order akin to a Bullock order - an order that the agents pay the landlord's costs, and that the tenants indemnify the agents in respect of those costs. The burden of the landlord's costs would then ultimately fall upon the tenants, to the extent that they can be made to pay them.
26 As I have already said, I think the landlord should be regarded as successful in this appeal because, in relation to the grounds of appeal that succeeded, its interests coincided with those of the successful appellants, and not with those of the other respondents, ie the tenants. At least some of the unsuccessful grounds of appeal were also grounds which, if established, would have resulted in a conclusion that the landlord had no liability to the tenants. The agents unsuccessfully attacked the findings as to the tenants' reliance on the misrepresentations (ground 4), as to a particular misrepresentation being negligent (ground 5), and as to the materiality of the misrepresentations (grounds 6 and 7). Grounds 2 and 3 attacked a finding of the learned trial judge that the agents' misrepresentations were made in January 1986. It was in the interests of both the agents and the landlord to try to establish that the misrepresentations were not made until after the tenants had decided to lease the shop. However the situation is complicated by the fact that it was in the interests of the agents alone, and not the landlord, to establish that the misrepresentations were made at a later time when some of the misrepresentations would have been within the scope of the agents' authority. Subject only to that point, the interests of the landlord in relation to the matters argued on appeal coincided with the interests of the agents.
27 In my view, the real fight in the appeal proceedings was between the agents and the tenants. The landlord, although a respondent, was on the appellants' side. In those circumstances, it is appropriate that only the tenants, and not the landlord, should be ordered to pay the agents' costs. As the appeal succeeded because of errors on the part of the learned trial judge, the tenants should have an indemnity certificate under the Appeal Costs Fund Act 1968, s8(1)(b).
28 Except in relation to the costs applications, the landlord has taken no active part in the appeal. It did not appeal and win. It did not lose either. Some costs would have been incurred, at least in deciding whether or not to take an active part in the appeal, and in counsel appearing for the limited purpose of seeking leave to withdraw. In the circumstances, I think the landlord should not recover any costs of the appeal, except in relation to the costs application. It has been substantially successful in the costs proceedings, and the agents have been substantially unsuccessful in them. The agents should therefore be ordered to pay the landlord's costs of the costs applications determined today.
29 For the above reasons, I would make the following orders:
1 That orders 1, 2, 3 and 5 made in action 1051/1992 on 28 May 2007 be set aside, and the following orders substituted:
(i) That the action be dismissed.
(ii) That the defendant's claim against the first and second third parties be dismissed.
(iii) That the first and second third parties pay the defendant's costs of and incidental to the action and the third party proceedings against them, but excluding any costs occasioned by the joinder of the third third party.
(iv) That the plaintiffs pay the first and second third parties' costs of and incidental to the action and the third party proceedings.
(v) That the plaintiffs indemnify the first and second third parties in respect of the defendant's costs.
2 That the appellants pay the third respondent's costs of and incidental to the costs applications made on 19 November 2008.
3 That the first and second respondents pay the appellants' costs of and incidental to the appeal.
4 That the first and second respondents indemnify the appellants in respect of the third respondent's costs of the said costs applications.
5 That the first and second respondents be granted an indemnity certificate in respect of the appeal.
# Edwards
Stocks \[2009\] TASSC 11
(1984) 6 FCR 496
(1990) 170 CLR 534
(1998) 193 CLR 72
(1997) 7 Tas R 148