HIS HONOUR: On 3 August 2015, I made orders disallowing amendments contained in a further amended statement of claim filed on 16 July 2015 (which sought to re-articulate the case pleaded against the third and fourth defendants) and dismissed the proceedings as against the third and fourth defendants. I then made an order that the plaintiffs pay the third and fourth defendants' costs of the proceedings, including all reserved costs.
The proceedings as against the first and second defendants went to trial commencing on 18 August 2015, and were determined by a judgment given on 21 August 2015. Needless to say, the third and fourth defendants were not engaged in that trial.
It now transpires - although nothing was said about it when the orders were made on 3 August - that on 3 December 2014, the solicitors for the third and fourth defendants communicated to the solicitors for the plaintiffs an offer of compromise pursuant to (NSW) Uniform Civil Procedure Rules 2005, r 20.26, containing terms that the claim against the third and fourth defendants be dismissed, with each party to bear their own costs to date. The offer was expressed to be made in accordance with UCPR, Pt 20.r 26, and to be open for acceptance for 28 days from the date it bore. It has not been suggested that it was not a valid offer of compromise under r 20.26. Alternatively, it was said to be made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333.
Moustach Pty Ltd v Eddie Takchi [2015] NSWSC 2080 | Case summary | Zoe
It cannot be said that the third and fourth defendants did not better that offer since, ultimately, they obtained an order that the proceedings against them be dismissed with costs. Moreover, the plaintiffs were never able to articulate a viable cause of action against the third and fourth defendants. This was the subject of comment in a number of interlocutory judgments, both of mine and of Black J, on applications for striking out of the pleadings against those parties. It can fairly be said that the third and fourth defendants were put to substantial trouble and cost in defending the proceedings, and preparing for a trial which was imminent when the proceedings against them were ultimately dismissed, in circumstances where, whether for want of other parties or want of pleading of material facts, no viable claim against them was ever identified.
I take the view that indemnity costs are reserved for a case in which it can be said that the party in whose favour the costs order has been made has been caused to incur costs, not reasonably, but wantonly or recklessly. Such wantonness or recklessness is presumed, by force of the rules of court, where a valid offer of compromise is not accepted but bettered at trial. In this case, that result is reinforced by the plaintiffs' inability ever to articulate a viable case against the third and fourth defendants. Prima facie, the case is one for an indemnity order.
However, as I have said, when the costs order was made in favour of the third and fourth defendants on 3 August 2015, no application was then made for an indemnity costs order. Nor was the Court informed that there might be an application for a special costs order, in which case directions would have been made to require it to be prosecuted expeditiously. Nor even was liberty to apply generally sought or reserved.
On 4 September 2015, the defendants' solicitors wrote to the plaintiffs' solicitors, requesting the latter's consent to an order to the effect that the costs to which the third and fourth defendants were entitled be assessed on the ordinary basis up to and including 3 December 2014, and thereafter on the indemnity basis. The plaintiffs' solicitors replied on 22 September, to the effect that costs orders had already been made, no application was then made for costs other than on a party/party basis, and any attempt to re-list the matter would be opposed. The plaintiffs' solicitors also noted "we are also in the process of preparing a further application against your clients pursuant to section 37A of the Conveyancing Act".
The defendants' solicitors responded on 22 September 2015, asserting that it was not unusual for an indemnity costs application to be made in the way they contemplated, and that should the re-listing not be consented to, they would seek costs of the application to do so, also on an indemnity basis. Meanwhile, on 18 September, the defendants' solicitors communicated to my chambers a request that the matter be re-listed as soon as possible for a short hearing on the issue of costs, as their client "seeks proper orders as to costs in this matter". This elicited an inquiry from my chambers, as to what were "the proper orders" that were to be sought. On 21 September, the defendants' solicitors replied that they sought an indemnity order. My chambers responded on 15 October to the effect that it might be possible to hear the motion on 5 November, but that should not be taken as an indication that such an application would be competent.
On 2 November, the defendants' solicitors inquired when I might be available to hear such a notice of motion. They repeated that request on 5 November when they were informed that the matter could be made returnable today, 24 November, at 10am. On 12 November 2015, the defendants filed the present motion, in which they seek an order that the costs be assessed on the ordinary basis up to 3 December 2014, and thereafter on the indemnity basis.
(NSW) Civil Procedure Act 2005, s 98(1)(c), provides that the Court may order that costs are to be awarded on the ordinary basis or on the indemnity basis. UCPR, r 42.2, provides that unless the Court orders otherwise or the rules otherwise provide, costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis. Thus, in the absence of an order otherwise, the costs payable under the costs order of 3 August are payable on the ordinary basis.
Civil Procedure Act, s 98(3), provides that an order as to costs may be made by the Court at any stage of the proceedings or after the conclusion of the proceedings. Section 98(4) then provides:
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount.
When subsection (3) is read in the light of the particular, but not exclusive, list of its applications set out in subsection (4), it seems clear that the section was intended to have the consequence that an order as to costs may be made up to the time that "costs are referred for assessment", which in the absence of an order referring costs for assessment, presumably means when an application is made for assessment.
In Roads and Traffic Authority of New South Wales, Council of the Shire of Evans & Pioneer Road Services Pty Ltd v Palmer (No 2) [2005] NSWCA 140, the Court of Appeal considered former (NSW) Supreme Court Rules 1970, Pt 52A r 5, which provided that the Court may, in any proceedings, exercise its powers and discretions as to costs of any stage in the proceedings or after the conclusion of the proceedings. Giles JA, with whom Spigelman CJ and Handley JA agreed, said (at [17]) that the rule is relevantly concerned with costs orders after the substantive decision has been given, and must be subject to finality from entry of costs orders already made. His Honour then continued to the effect that a judge was not functus officio after making costs orders if, although unknown to the judge, a costs argument remained to be heard.
But, in the case to which his Honour referred (being New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8), there had been no question of entry of judgment.
In Grace v Grace (No 9) [2014] NSWSC 1239, I followed the view expressed by Giles JA, to the effect that Civil Procedure Act, s 98(3), was concerned with costs orders, and that the substantive decision had been given and must be subject to finality for entry of costs orders already made, so that it would not authorise reopening of a final costs order that had already been made.
In Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, I sought to recognise a distinction between orders that fixed liability for costs, and orders that dealt with the basis of assessment of such liability. It is, I think, instructive that Civil Procedure Act, s 98(4)(c) contemplates that after a final costs order has been made, the Court might subsequently fix a gross sum as the costs liability instead of providing for the assessment of those costs. The section plainly contemplates that an order can be made at any time before the costs are referred for assessment. But consistent with the judgment of the Court of Appeal to which I have referred, I do not think it should be read as permitting the variation of a final costs order that has already been made.
The question, however, is whether an "otherwise order" for the purposes of UCPR, r 42.2, varies an order that has already been made or, as I sought to suggest in Hancock v Rinehart (Lump sum costs), it merely establishes the basis of assessment without affecting the liability fixed under the order already made. In the light of s 98(4), the better view of s 98(3) is that it was intended to empower the Court to make or reconsider questions of costs at any time before the matter is referred for assessment. That means that an application can be made in respect of indemnity costs up to the time that the reference to assessment takes place, even if an order has been made on the ordinary basis previously.
That said, courts will not entertain repeated applications on the same topic or applications to reopen previous orders which have previously been the subject of contest and consideration, on essentially the same principles as it will not reopen interlocutory orders in the absence of a change of circumstances. But in this case, the question of the basis of assessment has not previously been the subject of consideration or determination, and there is no element of vexation or abuse of process in that sense in the present application, save its belatedness.
While the orders of 3 August brought the proceedings to an end as against the third and the fourth defendants, they did not bring to an end the plaintiff's involvement in the proceedings, which continued thereafter. This, therefore, unlike Lucantonio v Kleinert & Ors (Costs) [2011] NSWSC 1642, is not a case in which the plaintiffs would reasonably have thought that the orders made on 3 August brought their involvement in the proceedings to an end.
All that said, the policy of the Court is against belated costs applications, but to encourage such applications to be made or at least foreshadowed when judgment is given. It was the non-adherence to that policy which has necessitated the present application, which would have been more straightforward had it been made in a timely manner. I do not think that the oversight in making it when it might have been made should deprive the defendants of what I consider is their substantive entitlement to an indemnity order; but I do not think they should have their costs of having to make an extra application to enforce that entitlement.
Accordingly, the Court orders that:
1. The costs payable by the plaintiffs to the third and fourth defendants under the costs order made on 3 August 2015 be assessed on the ordinary basis up to and including 3 December 2014, and on the indemnity basis thereafter.
2. There be no order as to the costs of and incidental to the notice of motion filed on 12 November 2015, to the intent that each party bear its own costs thereof.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 13 April 2016