Trade Practices Act 1974 (Cth) s.86A

Federal Court Rules 0.23 rr.2(2), 7, 15; 0.62 rr.27(2), 36A(1) and (2)

Calderbank v. Calderbank (1976) Fam 93

Smallacombe v. Lockyer Investment Co Pty Ltd [1993] FCA 169; (1993) 42 FCR 97

Messiter v. Hutchinson (1987) 10 NSWLR 525

Vella v. Ivanovski (1984) WAR 8

Galvin v. Forests Commission of Victoria [1939] VicLawRp 42; (1939) VLR 284

Jackman v. Dandenong Sewerage Authority (No. 2) (1967) 20 LGRA 413

Cretazzo v. Lombardi (1975) 13 SASR 4

Trade Practices Commission v. Nicholas Enterprises Pty Ltd (1979) 28 ALR 201

Dobb v. Hacket (unreported, Supreme Court of Western Australia, Murray J 18/8/93, Library No. 930448)

Counsel for the Applicant: Mr R.H. Pringle QC, with him Mr J.C. Hammond

Solicitors for the Applicant: Messrs Hammond Worthington Prevost

Solicitors for the Respondent: Messrs Parker and Parker

1. Judgment be entered against the first respondent and the fourth respondent for interest in the sum of $37,029.52.

2. The applicant pay the respondents' costs to be taxed in respect of the following:

(a) the claim for damages in respect of the acquisition of the

Shopping Centre (being the claim described in paragraphs

28-40, inclusive of both paragraphs, of the statement of claim in

its form as at the commencement of the trial); and

(b) the claim relating to the number of parking bays (being the

claim described in paragraphs 41-53, inclusive of both

paragraphs, of the statement of claim in its form as at the

commencement of the trial).

3. The first respondent and the fourth respondent pay the applicant's costs

to be taxed in respect of its claim for damages in respect of the Council Rates (being the claim described in paragraphs 13-27, inclusive of both paragraphs, of the statement of claim in its form as at the commencement of the trial) up to and including 2 February 1994 and that such costs not be reduced by one-third under Order 62 Rule 36A(1).

4. There be no order as to costs in respect of the Council Rates claim (being the claim described in paragraphs 13-27, inclusive of both paragraphs, of the statement of claim in its form as at the commencement of the trial) after 2 February 1994.

5. All parties have liberty to apply in respect of any moneys paid into Court by way of security for costs.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

CARR J These are reasons for judgment in respect of claims for interest and costs.

2. The trial of this application occupied ten hearing days commencing on 14 February 1994. On 4 May 1994 I gave judgment for the applicant against the first respondent, Richard Ellis (Western Australia) Pty Ltd and the fourth respondent, Paul Winton, in the sum of $52,290.29 plus interest thereon in an amount to be determined in accordance with the reasons for judgment which I published on that date. I reserved the matter of quantum of interest and the question of costs for submissions which were made by the parties on 11 May 1994.

3. Although I included in the reasons for judgment the respective rates of interest which were to be applicable, it was not possible for me to quantify the amount of interest on the abovementioned judgment because there was no evidence as to the actual date or dates of payment of certain municipal rates ("the Council Rates") which comprised the amount of that judgment. I indicated that I proposed to apply the same rate of interest as applied to judgments of this Court during the relevant periods. Evidence has now been filed and agreement reached on the quantum of interest namely $37,029.52 and accordingly there will be judgment for the applicant against the first respondent and the fourth respondent for interest in the sum of $37,029.52.

4. When the principal application came on for hearing on 14 February 1994 the applicant's claims fell into three separate categories. The first was a claim for damages being the difference between the price paid for the Kelmscott Village Shopping Centre ("the Shopping Centre") at Kelmscott, a suburb of Perth, and the value of the Shopping Centre at the time of purchase. That claim was based on what was said to be a contravention of s.52 of the Trade Practices Act ("the Act") and other grounds, in the alternative, but was dismissed.

5. The second category of claims was based on similar grounds and related to alleged misrepresentations concerning the number of parking bays at the Shopping Centre. That claim was abandoned on the morning of the third day of the hearing. The applicant requested leave to discontinue that part of its application and, there being no objection from the respondents to that course being taken, I gave leave for that part of the application to be discontinued.

6. The third category of the applicant's claims was a claim for damages quantified in the sum of $52,290.29 being the amount of the Council Rates paid by the applicant which included a penalty for late payment. Again that claim was based on a contravention of s.52 of the Act and other grounds in the alternative. I found for the applicant against the first and fourth respondents in relation to this third claim.

Whether costs recovered by the applicant should be reduced by one-third? 7. I propose to order the first and fourth respondents to pay the applicant's costs in respect of the Council Rates claim up to and including 2 February 1994. With interest, the total amount recovered by the applicant is $89,319.81. It thus becomes necessary to consider Order 62 rule 36A(1) of the Federal Court Rules which provides:

"36A.(1) (Reduction where judgment less than

$100,000)

Where a party is awarded judgment for less than

$100,000 on a claim (not including a cross-claim) for

a money sum or damages any costs ordered to be paid,

including disbursements, will be reduced by one-third

of the amount otherwise allowable under this Order

unless the Court or a Judge otherwise orders."

8. Mr Pringle QC, for the applicant, referred to the fact that when his client commenced these proceedings (which was on 29 November 1991) the amount referred to in sub-rule 36A(1) was $50,000 and that the amendment of that amount to a figure of $100,000 did not take effect until 1 January 1993. Mr Pringle referred to a passage in para. 20-025 of Volume 2 of the CCH Australia Ltd "Australian High Court and Federal Court Practice" which describes this sub-rule as an incentive to commence proceedings in a Court other than the Federal Court where jurisdiction to hear the applicant's claims is vested in that other Court. The applicant's claim in this particular matter, so it was put, was that it was either going to succeed to the extent of $52,290.29 plus interest or receive nothing and that at the relevant time the rule stipulated a figure of $50,000 which was below the amount claimed. Reference was made to a decision of the Full Court of the Supreme Court of Western Australia in Vella v. Ivanovski (1984) WAR 8. That case was concerned with s.74(2)(a) of the District Court Act 1969 (WA) which provided that when an action founded in tort was brought in the District Court which might have been brought in a Local Court without the consent of the defendant, the plaintiff was not entitled to recover a greater sum by way of costs than he could have recovered in the Local Court unless the District Court Judge hearing the action certified that in his opinion it was proper to bring the action in the District Court. The Full Court held unanimously that the sole question was whether it was proper to bring the action in the District Court and the test was whether, when issuing the proceedings, the plaintiff might reasonably have been expected to recover an amount in excess of the maximum of the jurisdiction of the Local Court.

9. Mr K Martin, for the respondents, submitted that the principle applied in Vella v. Ivanovski was more appropriate to a provision such as sub-rule 36A(2) which also provides for a one-third reduction of costs if the Court is of the opinion that a proceeding brought in the Federal Court could more suitably have been brought in another Court or in a Tribunal. Mr Martin argued that the policy considerations in sub-rule 36A(1) were different to those advanced by sub-rule 36A(2).

10. In my opinion, the same policy is reflected in both rules, namely the suitability or otherwise of bringing the proceedings in the Federal Court. Where the judgment recovered is less than $100,000 sub-rule 36A(1) operates automatically to effect a one-third reduction unless the Court otherwise orders whereas under sub-rule 36A(2) there is no such automatic reduction of one-third in costs but the Court may make such a declaration regardless of the amount recovered. It is significant that the rule considered in Vella v. Ivanovski was expressed in terms of a monetary amount but also used language which to some extent is reflected in sub-rule 36A(2).

11. I acknowledge that the applicant had some thirteen months before the hearing started in which to apply to transfer the proceedings to another Court but it was not the only party entitled to do so: see s.86A of the Trade Practices Act 1974 (Cth).

12. Mr Martin submitted that sub-rule 36A(1) was a procedural provision which might have retrospective operation. He referred to Galvin v. Forests Commission of Victoria [1939] VicLawRp 42; (1939) VLR 284 and Jackman v. Dandenong Sewerage Authority (No. 2) (1967) 20 LGRA 413. There is no need, in my view, to give sub-rule 36A(1) any kind of "retrospective" effect as it operates quite satisfactorily at the point of time as each judgment is given. Nevertheless if it were necessary to do so, I would adopt and apply the principle reflected in those cases that amendments to costs provisions may apply to proceedings already part heard. This was implicitly recognised as being so in the majority decision of the Full Court of this Court in O'Kelly Holdings Pty Ltd v. Dalrymple Holdings Pty Ltd (unrep. Judgment No. 658/93, 21/9/93), a case where the amount specified in sub-rule 36A(1) was increased to $100,000 after trial but before judgment.

13. However, bearing in mind the following circumstances:

. that when the applicant started these proceedings the threshold

limit in sub-rule 36A(1) was $50,000;

. the monetary total of all the claims made by the applicant in

these proceedings approached $1 million and the applicant is

going to have to pay the respondents' costs in respect of the

bulk of those claims on the full Federal Court scale; and

. there were some, although not many, complex matters of evidence

and argument, including the construction of s.65 of the Real

Estate and Business Agents Act 1978 (WA) which arose in relation

to the Council Rates claim though in the end not all of them had

to be decided;

I do not think sub-rule 36A(1) should apply in this matter and accordingly I order that such costs as the applicant is to recover will not be reduced by one-third.

Applicant's claim for costs on "the insolvency issue"

14. The applicant submitted that it was successful on an issue relating to the solvency of Caland Pty Ltd ("the insolvency issue") which formed part of its claim relating to the purchase of the Shopping Centre and that the respondents had put the applicant to proof by not admitting the allegation. The applicant submitted that the respondents should pay its costs in respect of the insolvency issue. It was said, and I agree, that a considerable volume of evidence, including expert evidence was adduced in relation to the insolvency issue. Reliance was placed on a decision of the Full Court of the Supreme Court of South Australia; Cretazzo v. Lombardi (1975) 13 SASR 4 at p 11 cited with approval in this Court by Fisher J in Trade Practices Commission v. Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at pp 207-209.

15. I have given consideration to that submission but I do not feel that there is sufficient about the insolvency issue to remove it from the context of the particular claim of which it was part and in respect of which the applicant was unsuccessful. Furthermore, I have held that at the relevant time the first respondent did not suspect what was the true financial situation concerning Caland, but that is not to ignore the fact that events which subsequently unfolded a long time before trial indicated that it was inaccurate to describe Caland as a sound tenant as at 15 September 1988. Nevertheless I do not consider it was unreasonable for the respondents to contest the insolvency issue and I note that the applicant was given leave to make amendments to its statement of claim and further and better particulars in respect of the insolvency issue shortly prior to the hearing and during the hearing. I do not think that this is a case in which it would be appropriate to make a special order either depriving the respondents in respect of their costs of the insolvency issue or awarding costs against them in respect of the insolvency issue.

Whether the applicant should be deprived of part of its costs in respect of the Council Rates claim and whether it should pay part of the respondents' costs in respect of that claim

16. On Friday 24 December 1993 the respondents' solicitors wrote to the applicant's solicitors a "without prejudice" letter offering, on behalf of their clients, to pay the applicant the sum of $90,000 plus costs to be taxed up to that date, in full and final settlement of the applicant's claims. That offer was conditional upon the applicant withdrawing certain complaints made against the first respondent and others before the Real Estate and Business Agents Supervisory Board of Western Australia which arose out of the same factual matrix as the Council Rates claim. The offer was also conditional upon the execution of a deed of release and a confidentiality requirement. The offer was open until 5.00 pm on Thursday 30 December 1993 and the respondents expressly reserved the right to show that letter to this Court at the conclusion of any trial, in relation to the question of costs. The offer was rejected by the applicant. It will be noted that the amount of the judgment (including interest) is just under the amount of $90,000 offered by the respondents.

17. On 7 January 1994 the respondents filed a security in the sum of $90,000 in accordance with Order 23 and in particular Order 23 rules 2(2) and 15 of the Rules.

18. On 7 January 1994 a copy of the security to pay into Court was served on the applicant's solicitors. The applicant's solicitors took issue with the form of the notice given in relation to the security to pay into Court on the basis that the respondents had not allotted the money amongst the various causes of action.

19. On 11 January 1994 the respondents' solicitors wrote to the applicant's solicitors and served a notice of deposit advising that the sum of $90,000 was in answer to all causes of action on which the applicant claimed. When the respondents refused a further request from the applicant's solicitors specifically to allot the moneys brought into Court, the applicant applied on motion for orders that the respondents specifically allot the $90,000 amongst the various causes of action in the matter.

20. The motion was opposed by the respondents on the basis that the offer of payment was made so that if it were accepted the whole of the litigation and thus all causes of action would be brought to an end without admission of any liability. It was said that it was not the respondents' object to enable the applicant to accept part or the whole of the sum of $90,000 in settlement of one or more causes of action but then proceed to trial of an action which at that stage was set down for 15 hearing days. The respondents say that they were seeking to protect themselves against the risks associated with all the litigation as well as the costs involved. It seems reasonably clear from the affidavit filed by the applicant in support of that notice of motion, that had the respondents allotted the sum of $90,000 to the causes of action relating to the Council Rates then the applicant would probably have accepted that amount and proceeded to trial in respect of one or both of the other claims.

21. French J heard argument in respect of the motion and ordered that the respondents specifically allot the money brought into Court amongst the various causes of action but gave the respondents the right, if an allotment were not made, to withdraw the security deposit in the event that an amended Notice of Deposit was not filed on or before 31 January 1994. The respondent exercised its right to withdraw the security deposit.

22. On 31 January 1994 the solicitors for the respondents wrote a further letter to the applicant's solicitors offering to settle the application by payment of the sum of $90,000 plus costs to be taxed up to the date of the Notice of Deposit being 11 January 1994 in full and final settlement of all of the applicant's causes of action against the respondent. Conditions similar to those in the letter of 24 December 1993 (relating to the complaint before the Real Estate and Business Agents Supervisory Board of Western Australia and execution of a deed of release and confidentiality) were set out in that letter together with a time limit of 5.00 pm on Wednesday 2 February 1994 for acceptance of the offer. The letter gave notice that the respondents reserved the right to show it to the Court at the conclusion of the trial in relation to the question of costs. That letter was apparently sent at 2.45 pm on Monday 31 January 1994 and accordingly the applicant had just over two days in which to decide whether to accept that offer although it was an offer in virtually identical terms to the offer made on 24 December 1993 which itself (bearing in mind the holidays associated with Christmas and Boxing Day) was a fairly short-term offer.

23. The respondents rely on the letter of compromise dated 31 January 1994 as being a Calderbank letter, a reference to the letter considered in Calderbank v. Calderbank (1976) Fam 93 a decision referred to by Spender J in Smallacombe v. Lockyer Investment Co Pty Ltd [1993] FCA 169; (1993) 42 FCR 97 where his Honour rejected a submission that a letter relied upon by the unsuccessful respondent was a Calderbank letter.

24. On reading Calderbank it is interesting, and possibly useful, to note that the Court of Appeal unanimously rejected the "without prejudice" letter proffered by the appellant. The Court put aside that letter altogether and relied on an offer contained in an affidavit sworn by the appellant before the hearing in the Court below. It was the husband's refusal to accept that offer (worth more than he was awarded by the trial judge) which was the basis for the Court of Appeal ordering the husband to pay his wife costs from a date shortly after the service of that affidavit. Nevertheless, Cairns LJ, in his reasons for judgment, suggested that in future a letter offering a particular amount could be used to protect a party in relation to costs. It seems that the letter contemplated was one which simply stated the offer of an amount and which if not accepted, could be produced after trial when the question of costs was considered.

25. In Smallacombe the relevant letter made an offer which was in full and final settlement including any claim for costs which was in excess of the amount of the judgment excluding costs. Spender J's judgment in Smallacombe reviews the English authorities and a decision of Rogers J in Messiter v. Hutchinson (1987) 10 NSWLR 525. In Messiter his Honour held that where a party has offered as much or more as the other party recovers then the Court, following the hearing, should take that into account in deciding whether to make a special costs order instead of the usual order that costs follow the event.

26. The English authorities referred to by Spender J in Smallacombe indicated that it was important, where there was provision in the Rules of Court for payment into Court and the like, that the discretion should be exercised in accordance with those rules following adoption of that procedure by the party concerned. As was pointed out in Messiter (and by reference in Smallacombe) the plaintiff should not be left to look for the actual payment of the amount from a possibly impecunious defendant. Nevertheless, Rogers J held that a Court could have regard to a Calderbank letter even in circumstances where a payment into Court can be effected under the rules.

27. Spender J, whilst agreeing with Rogers J's opinion (an opinion which I respectfully adopt), held that the letter in Smallacombe was not a Calderbank letter and nor was it a letter of the kind considered in Messiter. His Honour therefore refused to use it as the basis for the costs order sought by the respondent in that case.

28. In my view, in deciding this matter, the question whether the letter dated 31 January 1994 is a true Calderbank letter or is analogous to it by being expressed as being "without prejudice" as in Messiter, is not a crucial matter. In my opinion, I should have regard to the terms of the letter in the context of all relevant circumstances, in order to decide whether that letter serves the public interest of promoting settlement of disputes and finality of litigation to the extent that the rejection of the offer made in it justifies the shifting of some or all of the burden of costs onto the applicant as the person rejecting the offer.

29. Where there is a procedure provided by the Rules for payment into Court as in Order 23 and as was the case in New South Wales when Messiter was decided and even where there is provision for formal offers of compromise there may still be room for offers of a Calderbank type to give effect to the public interest principles referred to above: see Dobb v. Hacket (unreported, Supreme Court of Western Australia, Murray J, Library No. 930448, 18 August 1993 at pp 30-34). As pointed out by Rogers J in Messiter, the consequences of not using the procedure of payment in (or, in my view, other similar procedures where they are provided) is that the consequences (if any) of payment prescribed by the rules will not automatically be available.

30. In this matter the respondents have sought to adopt the procedures relating to payment into Court, but for reasons which I accept as being appropriate in the circumstances and pursuant to an order granting leave, they withdrew the security moneys and renewed their offer to settle.

31. I acknowledge that the offer to settle contained a condition which required the applicant to withdraw its complaints to the Real Estate and Business Agents Supervisory Board and to execute a deed of release and keep the settlement confidential. There was no evidence that at any relevant time the applicant objected to these conditions as being unreasonable. It is clear that if the payment into Court had been allotted to the claim relating to the Council Rates then it would have been accepted and the applicant would have proceeded with its other claims only. Similarly, I am satisfied that if the respondent's offer letter of 31 January 1994 had been confined to being in settlement of that claim then the same would have happened. The fact is that it was not so confined but was a global offer to settle also the other claims in respect of which other claims the applicant was unsuccessful.

32. I can see some merit in the applicant's submission that it was successful before French J in requiring the respondent either to allot its payment into Court or to withdraw it. The respondent's proposed use of its letter of 31 January 1994 can be seen as a means of retrieving the situation which existed prior to the making of French J's order. I am conscious also that the applicant will bear the costs consequences in respect of the other two claims being discontinued and dismissed respectively, in any event. Furthermore, there were some problems, referred to by Mr Pringle, in relation to the offer conditions. One was the possibility that the Real Estate and Business Agents Supervisory Board might not have accepted the withdrawal of the complaint, although I would not regard that as being very likely. There is also the factor that, technically, the car parking bays claim is still undecided, although the subject of a discontinuance. Again I do not regard that as a particularly significant factor.

33. On the other hand, the respondents wished to negotiate a global settlement - one as matters turned out, which would have been more favourable to the applicant than the result which it achieved after a ten day trial.

34. On the principles discussed in Messiter and Smallacombe I consider that I am permitted to take the applicant's letter of 31 January 1994 into account and in considering what weight should be given to the offer and that I should have regard to all relevant circumstances including the attempt to secure the payment. This case is different from Smallacombe in that respect and also in another important respect in that in addition to the sum of $90,000 there was an offer of costs to be taxed to 11 January 1994.

35. In all the circumstances, I consider that the offer had the very relevant and important purpose of promoting the finality of litigation. I have had regard to the brief period of time in respect of which the offer was open for settlement but I have discounted that factor by reason of the previous offer (which it must be conceded was also very short) and the filing of a security for payment. In my view the applicant had sufficient time in which to consider its position.

36. If the applicant had accepted the respondent's second letter then it would have received the amount of $90,000 plus its taxed costs and what turned out to be ten days of hearing and the final preparation for that hearing would have been saved.

37. Nevertheless, on balance, whilst I do not consider that the applicant acted completely reasonably in relation to the offer of 31 January 1994 nor, in my view, could it be said to have acted completely unreasonably. One further relevant circumstances was that the applicant was being asked to give up approximately ninety per cent of the amount which it was then claiming.

38. After taking into account all of the above factors I consider that the applicant should have its costs in respect of the claim concerning the Council Rates until 2 February 1994 and that there should be no order as to costs in respect of that claim after that date.

39. The respondents point to the fact that the total of the applicant's three claims was $1,015,290.29 and the amount of damages awarded was approximately 5.15% of that sum. It was common ground between the parties that about one-third of the time taken at trial was in respect of the Council Rates claim and two-thirds in respect of the claims in which the applicant was unsuccessful.

40. In view of the long and somewhat convoluted history of this application, I do not think it is appropriate for me to make the assessment of what is an appropriate proportion in respect of each of the three categories of claim. I propose to make orders governing the principles to be applied so that the taxing officer can apply his or her expertise to achieve as just a result as is possible in the circumstances.

41. I propose to make orders along the following lines:-

1. Judgment be entered against the first respondent and the

fourth respondent for interest in the sum of $37,029.52.

2. The applicant pay the respondents' costs to be taxed in

respect of the following:

(a) the claim for damages in respect of the acquisition of the

Shopping Centre (being the claim described in paragraphs

28-40, inclusive of both paragraphs, of the statement of claim in

its form as at the commencement of the trial); and

(b) the claim relating to the number of parking bays (being the

claim described in paragraphs 41-53, inclusive of both

paragraphs, of the statement of claim in its form as at the

commencement of the trial).

3. The first respondent and the fourth respondent pay the

applicant's costs to be taxed in respect of its claim for

damages in respect of the Council Rates (being the claim

described in paragraphs 13-27, inclusive of both paragraphs,

of the statement of claim in its form as at the commencement

of the trial) up to and including 2 February 1994 and that

such costs not be reduced by one-third under Order 62 Rule

36A(1).

4. There be no order as to costs in respect of the Council Rates

claim (being the claim described in paragraphs 13-27,

inclusive of both paragraphs, of the statement of claim in

its form as at the commencement of the trial) after 2

February 1994.

5. All parties have liberty to apply in respect of any moneys

paid into Court by way of security for costs.