MAK INDUSTRIAL WATER SOLUTIONS PTY LTD -v- DOHERTY [No 3] [2023] WASC 313 (17 August 2023)

(a) an order for indemnity costs would be an appropriate sanction to mark the improper or unreasonable conduct by MAK Water in persisting with its defences to the counterclaims;
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> (b) MAK Water's defences to the claims were 'hopeless'; and
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> (c) MAK Water unreasonably rejected Calderbank offers on behalf of Mr Hartnett and Mr Matthews dated 18 May 2023.

(a) denied that it had engaged in improper or unreasonable conduct in defending the counterclaims;
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> (b) denied that its defences were 'hopeless';
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> (c) submitted that I should reduce the costs payable on a party‑party basis by 70% to take account of the failure of Mr Hartnett and Mr Matthews on specific issues; and
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> (d) relied upon its own correspondence in which it made offers to resolve the summary judgment applications or indicated a willingness to pay money into court.

10. I will deal first with MAK Water's submission that I should reduce the costs of Mr Hartnett and Mr Matthews. That submission relies upon:

(a) MAK Water having made offers dated 10 May 2023 to pay money into a controlled trust account until the conclusion of the proceedings, the balance of which (if any) would be paid to Mr Hartnett and Mr Matthews after setting off MAK Water's loss and damage with respect to its own claims. The amounts offered in respect of Mr Hartnett and Mr Matthews respectively, were $310,162.12 and $115,000. MAK Water also indicated a willingness to pay similar amounts into court;
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> (b) MAK Water having been 'successful on the stay of enforcement of judgment issue';
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> (c) my reference in the reasons to MAK Water having had a 'legitimate suspicion'; and
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> (d) the fact it was necessary for Mr Hartnett and Mr Matthews to amend their counterclaim as to the quantum of the claims for the redemption of their Plan Shares.

11. There is no basis for an order reducing the costs payable by reference to discrete issues in this case. As is well established, such an order should not be made as a matter of course, because to embark, in each case, upon an analysis of which party was successful on each issue, would add uncertainty and complexity to the outcome of litigation and to the time and cost of costs arguments,[2] as it did here.
12. Dealing briefly with the matters relied upon by MAK Water.
13. First, subject to the stay of execution (to which I will return), the result of the summary judgment applications for Mr Hartnett and Mr Matthews were an unqualified success. The outcome places them in a significantly better position than if they had accepted MAK Water's offers dated 10 May 2023. In particular:

(a) Mr Hartnett and Mr Matthews have judgments in their favour in the sum of $385,377.38 (plus interest) and $159,853.21 (plus interest), respectively. MAK Water's offers by contrast were 'without admissions' and subject to set-off;
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> (b) Mr Hartnett and Mr Matthews have partial security for the judgment sums of $385,377.38 and $159,853.21 respectively, which is greater than the 'security' offered by MAK Water;
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> (c) the stay of execution is not necessarily until the conclusion of the proceedings. It was made subject to further order, in relation to which I envisaged that if the proceedings are not progressed quickly or if interlocutory processes of the court do not produce some more substantial basis for the claims made by MAK Water, the stay of execution will be lifted and the security released.[3]

14. Secondly, my reference to MAK Water having had a 'legitimate suspicion' must be seen in context. What I said was that:[4]

At most, thus far, the evidence does not rise above legitimate suspicions on the part of MAK Water that something may be awry. ... Those suspicions have been expressly denied on oath. On the current state of the material in my assessment MAK Water's claims, at least against Mr Hartnett and Mr Matthews, are best described as weak.

1. This does not represent partial success by MAK Water on the applications.
2. Finally, the fact that it was necessary for Mr Hartnett and Mr Matthews to amend their Counterclaims is of little moment. Those amendments simply amended the sum claimed so as to accord with the calculation of the appropriate Prevailing Price reflected in the summary judgment applications. They do not affect Mr Hartnett and Mr Matthews' entitlement to their costs.
3. Turning then to the orders sought by Mr Hartnett and Mr Matthews. In relation to the costs of the counterclaims themselves, the costs should follow the event. Accordingly, there should be orders that:

(a) MAK Water do pay Mr Hartnett's costs of his counterclaim, to be assessed if not agreed, and to be paid forthwith; and
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> (b) MAK Water do pay Mr Matthews' costs of his counterclaim, save for his claim for payment of accrued long service leave, to be assessed if not agreed, and to be paid forthwith.

4. In relation to the summary judgment applications, while I am satisfied that Mr Hartnett and Mr Matthews should receive the costs in connection with the applications for summary judgment including the costs of conferral and the costs of the application of special costs orders, I am not satisfied that there ought to be an order for indemnity costs. While I did conclude that there was no triable defence to the claims, I would not go so far as to say that MAK Water's position was so 'hopeless' or its approach to the applications so unreasonable as to require the sanction of the Court. Indeed, in a number of respects MAK Water made appropriate concessions at the hearing of the applications.
5. For example, it proffered an amount of long service leave that it accepted was owing to Mr Hartnett, which meant that the focus on that part of Mr Hartnett's claim could be on his substantive entitlement.[5] In addition, in relation to the quantification of Mr Hartnett and Mr Matthews' claims for redemption of their Plan Shares, MAK Water accepted that the only dispute as to the issue was as to the financial years applicable to the calculation of the Prevailing Price for those shares and that the dispute was limited to a matter of contractual construction.[6] MAK Water's approach to the application in this regard facilitated its efficient determination.
6. Nor, on balance, am I satisfied that MAK Water's failure to accept Mr Hartnett and Mr Matthews' Calderbank offers justifies an order for indemnity costs. The effect of those offers was, in essence, that each of Mr Hartnett and Mr Matthews be paid their full entitlement for the redemption of their Plan Shares (which was the largest component of their claims), plus interest and costs, leaving the other claims (with respect to commissions and long service leave) to another day. While this did involve something of a compromise, inasmuch as the timing of payment of their other claims is concerned, the extent of any compromise was limited. In addition the offers came at a time at which MAK Water's analysis of the USB devices belonging to Mr Hartnett and Mr Matthews was incomplete, which would have been relevant to MAK Water's consideration of the offer. In all of the circumstances, in my view, it was not unreasonable for MAK Water to fail to accept the offer at that time. I also take into account that properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.[7]
7. In that regard, I heard the parties today as to whether I should lift the limits on the items in the relevant costs determinations in relation to the summary judgment applications pursuant to s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA) (the power formerly known as s 280(2) of the Legal Profession Act 2008 (WA)).[8] In that respect the relevant determination items of the proceedings in chambers are counsel fees of $14,190 (GST incl) (item 10) and other work performed by counsel and a junior practitioner at the rates of $473 (GST inc) and $374 (GST incl), respectively (item 35).
8. I am readily satisfied that $14,190 (GST incl) for counsel fees would be inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination. I am also satisfied that that inadequacy would be due to the complexity of the matter. There were a number of factual and legal issues of some complexity that needed to be addressed as part of the summary judgment applications.
9. I note, of course, that Mr Hartnett and Mr Matthews were jointly represented and that the large bulk of the issues in the applications were common to them both. If they were each entitled to the maximum of the item on an assessment, I could not be so readily satisfied that $28,380, would be inadequate in the relevant sense (although it might be). It is important, however, that there be clarity in the costs orders for the purposes of any costs assessments. Accordingly, so as to avoid any debate as to applicable maximum, I am prepared to remove the limits on that item in the determination and leave it to the taxing officer to determine in light of these reasons.
10. Consistent with that conclusion, I would also lift the maximum hourly rates for counsel and junior practitioner to $528 (GST incl) and $386 (GST incl).
11. For these reasons, I would make costs orders in the following terms.
12. On Mr Hartnett's application:
    1. The plaintiff do pay the third defendant's costs of his counterclaim to be assessed if not agreed and paid forthwith.
    2. The plaintiff do pay all of the costs incurred by the third defendant in connection with his application for summary judgment, including the costs of conferral with the plaintiff and the costs of the application for special costs orders, to be assessed if not agreed and paid forthwith.
    3. The costs in order 2 are to be assessed without regard to the:

(a) limits set out in item 10 of Table B of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2022 (the Determination);
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> (b) hourly rates for counsel provided for in Table A of the Determination, which are to be increased to $528 (GST incl); and
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> (c) hourly rates for junior practitioner provided for in Table A of the Determination, which are to be increased to $386 (GST incl).

13. On Mr Matthews' application:
    1. The plaintiff do pay the fourth defendant's costs of his counterclaim, save for his claim for payment of accrued long service leave, to be assessed if not agreed and paid forthwith.
    2. The plaintiff do pay all of the costs incurred by the fourth defendant in connection with his application for summary judgment, including the costs of conferral with the plaintiff and the costs of the application for special costs orders, to be assessed if not agreed and paid forthwith.
    3. The costs in order 2 are to be assessed without regard to the:

(a) limits set out in item 10 of Table B of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2022 (the Determination);
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> (b) hourly rates for counsel provided for in Table A of the Determination, which are to be increased to $528 (GST incl); and
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> (c) hourly rates for junior practitioner provided for in Table A of the Determination, which are to be increased to $386 (GST incl).

I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.

[1] MAK Industrial Water Solutions Pty Ltd v Doherty [No 2] [2023] WASC 279 (reasons). These reasons should be read with those previous reasons.

[2] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [51] (Murphy, Mitchell & Pritchard JJA).

[7] Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [9] (Pullin J).

[8] As to which the relevant test is set out in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] - [16] (Buss P, Murphy & Beech JJA).