Practice and procedure - Costs - Appropriate orders in complex litigation - Special allowances

Fair Trading Act 1987 (WA)

1 ANDERSON J: In my reasons for judgment handed down on 2 December last I said that these were three actions which were ordered to be tried together. It seems I was wrong about that. An order for consolidation was made on 3 June 1999. The confusion arises because, although the actions were ordered to be consolidated they were not, in fact, consolidated. The matter proceeded with three separate sets of pleadings and the trial was conducted in the same manner as if an order had been made that they be tried together. I doubt that anything turns on this.

2 The plaintiffs claimed very substantial damages on various causes of action against the several defendants. The plaintiff, Murcia Holdings, sued the City of Nedlands, nine of the 12 councillors and, separately, the mayor, for damages in the order of $742,750 plus exemplary damages and interest. The Hwangs sued the same three sets of defendants for approximately $18,000 and exemplary damages and interest. The plaintiff Mr Howe originally sued the same three defendants for approximately $386,000 in damages plus interest and costs, although on 6 August 1998 he discontinued his action against the councillors and the mayor. However, he added a claim for exemplary damages against the City.

3 In brief summary, the plaintiffs were landowners in the City of Nedlands who sought to have the applicable town planning scheme amended to allow for the construction of two dwelling units on their lots. As it stood, the town planning scheme permitted a single dwelling on each lot. The City started the process of amendment, but after advertisement of the proposed amendments and receipt of objections, decided not to proceed with the amendments. It was the plaintiffs' case that the City was obliged by the Town Planning and Development Act and Town Planning Regulations to continue with the process of amendment to the point of submission of the amendments to the Minister for Planning for his approval and, upon receipt of his approval, to take the requisite steps to effect the approved amendments. Ultimately, the City accepted that this was its obligation and the amendments were made. The plaintiffs' case was that, in its handling of the amendment and in its dealings with the plaintiffs, the City was negligent and in breach of its statutory duties and in violation of the Fair Trading Act and abused its office; and the councillors and the mayor abused their office by voting in a manner which caused the City not to comply with its statutory duties.

4 In rejecting the claims of all plaintiffs, I held, in effect, that insofar as the claim in negligence and under the Fair Trading Act was based upon negligent misrepresentations made by City planners, those representations had not been made; insofar as the claim of negligence against the City was based upon a common law duty of care, there was no such duty; insofar as the claim was based upon misfeasance in office, that cause of action had not been made out.

5 I am now required to consider what costs orders should be made in favour of the defendants. A detailed minute has been provide and I have heard comprehensive argument on both sides and received written submissions and these are the orders I would make.

1. The Plaintiff in action CIV 1975 of 1996 pay the costs of the First, Second and Third Defendants in respect of that action including reserved costs to be taxed on the following basis:

(i) for the period up to and including 22 February 1999, there be a separate bill of costs for each of:

(ii) For the period from 23 February 1999 up to and including 3 June 1999, there be a single bill of costs for all defendants.

2. The Plaintiffs in action CIV 2146 of 1996 pay the costs of the First, Second and Third Defendants in respect of that action including reserved costs to be taxed on the following basis:

(i) for the period up to and including 22 February 1999, there be a separate bill of costs for each of:

(ii) For the period from 23 February 1999 up to and including 3 June 1999, there be a single bill of costs for all defendants.

3. The Plaintiffs in action CIV 1348 of 1998 pay the costs of the First Defendant for the period up to and including 3 June 1999 in respect of that action including reserved costs to be taxed.

4. The Plaintiffs pay the costs of the Defendants from 4 June 1999 including reserved costs to be taxed on the basis that there be one bill of costs for the consolidated action.

6 The reason why it is desirable to make orders with reference to certain periods is as follows. For most of the time until 22 February 1999, the City on the one hand and the councillors and the mayor on the other used different solicitors. From 23 February 1999, all defendants were represented by the same firm of solicitors, but the defences were separately conducted. On 3 June 1999, there was the order for consolidation.

7 It was submitted, on behalf of the plaintiffs, that the second and third defendants (the councillors and the mayor) are not entitled to a costs order because, on 8 October 1996, the Council had resolved to "provide full financial support for their defence costs". Mr Kyle, on behalf of the plaintiffs, submitted that, as the second and third defendants were throughout indemnified by the City for their costs, they had never been at risk as to costs and ought not now have the benefit of a costs order. I do not accept this submission. The fact that a successful party to proceedings is indemnified in respect of his costs by another person, whether a party to the proceedings or not, is not an answer to that party's claim for costs against the unsuccessful party. New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co Ltd (1902) 2 SR NSW 50 at 54, 57; R v Miller [1983] 1 WLR 1056; Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152; Environmental Protection Authority v Taylor Woodrow (Australia) Pty Ltd (No 2) (1997) 97 LGERA 368.

8 The defendants seek an order for costs on an indemnity basis as from 12 August 1999 in action 1975 of 1996 and as from 30 July 1999 in the other two actions. This claim is sought to be justified on the basis that, on 12 August 1999, the City made an O 24A offer to compromise Murcia Holdings' claim against all defendants by way of an offer to consent to judgment in the sum of $60,000 in full and final satisfaction, which offer was rejected by that plaintiff; and, on 30 July 1999, the City made letter offers to settle each of the Hwangs' claim and Howe's claim in the sum of $20,000 inclusive of costs, which offers were also rejected. It was submitted on behalf of the defendants that, where an offer of settlement is made by a defendant to a plaintiff and the plaintiff obtains a judgment no less favourable than the terms of the offer, an order for indemnity costs from the date of the offer should be made. Counsel relied on Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425; Coshott v Learoyd [1999] FCA 276 (unreported).

9 In this case, the aggregate damages claimed by the plaintiffs exceed $1,000,000. There was also a claim for exemplary damages in each case. Because only the issue of liability was tried before me, I am not in a position to reach any definite conclusion as to whether, had the plaintiffs been successful on the issue of liability, damages in that amount might have been awarded to them. The impression I have from the evidence which I have heard as to damages is that it is most unlikely that anything approaching the amounts claimed by Murcia Holdings and Mr Howe would have been awarded to those plaintiffs. In the case of Murcia Holdings and Mr Howe, the damages were quantified by reference to an alleged lost opportunity to purchase other properties on which they would have made a profit by development and resale. That is, at best, a dubious claim. In the case of the Hwangs, damages are quantified by reference mainly to holding costs. I certainly do not intend to embark on a detailed analysis of the damages claims. It is sufficient to say that I believe the claims by Murcia Holdings and Mr Howe were extravagant. Further, there was little or no prospect that any of the plaintiffs would have obtained an award of exemplary damages. There is no evidence that any of the plaintiffs acted in contumelious disregard of the plaintiffs' interests. Whatever view one might take of their statutory duties in regard to the formal processing of the scheme amendments it is clear that all of the defendants were acting in what they considered to be the best interests of the City of Nedlands and the ratepayers as a whole.

10 On the other hand, I accept that each of the plaintiffs genuinely believed they had an entitlement to substantial damages, well in excess of the amounts offered by way of settlement. It is to be remembered that the offers made to Mr Howe and the Hwangs ($20,000 in each case) were inclusive of costs and the offers were made quite late and at a time when heavy costs must already have been incurred. It is not a case in which O 24A r 10(4) applies. That is the rule which provides that a plaintiff who obtains a judgment no less favourable than an offer which he has made is entitled to indemnity costs from the date of his offer "unless the court otherwise orders". Order 24A does not provide for the case where the defendant makes an offer and the plaintiff wholly fails. In the end, I have a discretion to exercise and I must exercise it having regard to all the circumstances and with policy considerations in view. There are two matters of policy, I think. In the first place, settlements are to be encouraged. Parties should know that if they act obdurately in the face of realistic compromise offers, they may have to pay indemnity costs. On the other hand, parties should not be placed in terrorem by compromise offers. I respectfully adopt the reasoning of Lehane J in Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1998) 83 FCR 411 where he said that the promotion of the policy of encouraging settlements "does not ... require that an applicant who receives any offer and rejects it be at risk of an order for payment of indemnity costs should the applicant ultimately fail to obtain any relief because it fails to make good the cause of action on which it relies. There is, after all, a policy against deterring parties from pursuing claims to which they reasonably believe themselves entitled".

11 Whilst I think the cause of action in negligence and for breach of the Fair Trading Act based upon the representations alleged to have been made by the City planners, Mrs Holdaway and Mr Algeri, never had any prospect of success, the other heads of claim were by no means hopeless. As I said in my judgment, at p 46, "the law relating to the common law liability of municipalities is unsettled and is still evolving". The law relating to misfeasance in office is also a little unclear. In saying that, I am not to be taken as saying that a party involved in complex litigation in an unsettled area of the law can reject offers of compromise with impunity. There are two sides to it. In such cases, it might be even more imperative than usual to give very careful consideration to any compromise offer, even one that might at first sight appear to be merely a token offer.

12 As I have said, in the end, it is an exercise of discretion and I have decided that, in this case, there should not be an order for indemnity costs. Essentially, this is because I am satisfied the plaintiffs at all times held a bona fide belief that they could make good their causes of action and, as to the main causes of action, that belief was not unreasonable; and that, at all times, the plaintiffs held a bona fide belief that should they succeed, they would recover damages, if not of the proportion claimed, in excess of the amounts offered and I am not able to say that belief was unreasonable. To this I would add that there is no other basis upon which an order for indemnity costs should be considered.

13 The defendants also seek an order lifting the scale limits in respect to certain specific items. This is resisted by the plaintiffs, essentially on the ground that the case did not warrant any special order in respect to these items. I am satisfied that the case was of unusual complexity and it is to be remembered that each of the nine individual councillors and the mayor were separately sued on allegations of malice and misfeasance in office. This required the state of mind of each councillor to be dealt with and this added an extra dimension to an already complex piece of litigation. However, this can be compensated by lifting the scale limits for getting up and fee on brief. I will, therefore, make an order that the scale limits be lifted with respect to those items.

14 I am not persuaded there is a proper basis to lift the scale limits on any of the other items.

15 I should say that the defendants also sought an order that the relevant scale limits be lifted in respect to item 21 in the scale, which relates to originating summonses. Mr Howe took out an originating summons for leave to commence the action against the City out of time. I can see no basis whatever for making any special order in respect of the costs of that originating summons and I decline to make any special order in relation to it.

16 The defendants seek a certificate for second counsel for trial. The defendants were represented at trial by Mr C B Edmonds and Mr R E Sandover. Mr Edmonds is not Queen's Counsel, but, in my opinion, it was reasonable for Mr Edmonds to have the assistance of second counsel, Mr Sandover, having regard for the overall size and complexity of the litigation and I am prepared to grant a certificate for second counsel.

17 The defendants seek an allowance for the instructing solicitor attending trial and examination of witnesses before trial. Because of the overall size and complexity of the case, it was reasonable for the defendants to have an instructing solicitor attending at trial and I am prepared to order that there be an allowance. However, I do not consider that it was necessary for the instructing solicitor to attend on the examination of witnesses before trial. The defendants were represented at those examinations by Mr Edmonds. The evidence of the witnesses was not such as to present any unusual difficulties. It was something which Mr Edmonds was more than competent to handle alone, without the need for an instructing solicitor to be present. I decline to make an allowance for the attendance of an instructing solicitor at the examination of witnesses before trial.

18 The defendants seek an order that there be an allowance for a clerk attending trial. Whilst it was reasonable for an instructing solicitor to attend throughout the trial, it is not reasonable to require the plaintiffs to pay for the attendance of a clerk also. I decline to make an order that there be an allowance for the attendance of a clerk as well as an instructing solicitor.

19 I am prepared to make an allowance for all reasonable and necessary photocopying undertaken in the course of the actions.

20 On 23 November 1998, on the application of the plaintiffs, Master Bredmeyer made orders for expert evidence in the usual form. The experts were concerned only with the damages claims. The nature of those claims made it reasonable for the defendants to engage experts to evaluate and report upon the validity of the claims, in particular the claims based upon allegations of lost opportunity. The defendants retained Mr Philip Litton to provide expert evidence and assistance in relation to the accounting aspects of the damages claim and retained Mr Philip Logan to provide expert evidence and assistance in relation to the valuation aspects of the damages claim. Each of these experts had to be briefed and prepared expert reports and gave assistance in respect to interlocutory applications (discovery, further and better particulars in relation to damages and so on). The defendants seek an order that there be an allowance for the costs reasonably incurred in the engagement of, proofing, briefing, conferences with and obtaining reports and affidavit evidence, from these two experts. I am prepared to make an allowance in terms of item 11 of the defendants' minute. I do so on the basis that it was reasonable and proper to engage experts to assist with the matters mentioned.

21 The defendants seek an order that there be an allowance for reasonable witness fees for Mrs Holdaway, Mr Kotsoglo and the solicitor, Mr McLeod. Mrs Holdaway and Mr Kotsoglo are now in private practice as town planners and Mr McLeod is, of course, in private legal practice. It is appropriate that the reasonable costs of bringing these people to court to give evidence be recovered. I am not at all sure that there is any need for any special order to be made. They were not called as expert witnesses, but as fact witnesses due to their involvement in the matters in dispute. I would not have thought that any of them would be entitled to charge professional fees for their attendance at court, having regard for the capacity in which they attended. So far as the court is concerned, they were simply witnesses to the facts which the defendants wished to prove in defence of the plaintiffs' claim. What allowances should be made for the costs involved in bringing them to court is entirely for the taxing officer. I am not persuaded there is a need to make any special order and I decline to make an order in the terms of item 12 of the minute.

22 The defendants seek an order that there be an allowance for "conferences and consultations between solicitors and counsel; solicitors, counsel and experts; and solicitor for the First Defendant on one hand and solicitors for the Second and Third Defendants on the other hand for the period during which those defendants were separately represented". I am not persuaded there should be any special allowance for conferences and consultations between solicitors, counsel or experts. I think costs incurred in this area should be included in the composite item of getting up case for trial.

23 The defendants seek a certificate for the cost of the transcript of the trial and the transcript of examination of witnesses before trial and I am prepared to give a certificate for these costs in terms of item 14 of the minute.

24 The defendants seek an allowance for counsel's advice "on the causes of action and in relation to settlement". I am not prepared to order that any special allowance be made for counsel's advice. So far as I am aware, the only counsel involved was Mr Edmonds and he is a partner in the firm of solicitors acting for the defendants. I am not persuaded that advices given by him should attract an additional allowance. Anyway, the general rule is that the opinion of counsel is a fee for the client alone to bear and not the opposing party and I see no reason why that general rule should not be applied in this case. Collins v Westralian Sands Ltd (1993) 9 WAR 56 at 64, 68.

25 The defendants seek an allowance "for the costs of transcribing tape recordings of council meetings". I am not persuaded there is any need for a special allowance. This item of work would seem to me to be simply part of the composite item getting up case for trial.

26 The defendants seek an allowance "for the costs of conducting all necessary and reasonable land title and company searches". Once again, I am not persuaded there is any reason to make a special order in respect to this work. I do not see why it is not simply part of the composite item getting up case for trial.

27 The defendants seek a certificate for interrogatories. I think it was reasonable to administer interrogatories and I am prepared to grant a certificate in the terms of item 18 of the defendants' minute.

28 The plaintiffs seek their costs thrown away as a result of the amendments to the defence for which leave was granted during the trial on 14 September 1999 including for counsel fees for one day of the trial and for the replies filed in response to the amended defences. I thought I had made an order that the plaintiffs should have their costs thrown away, but, in case I omitted to do so, I would make the order now. The transcript will show how much of the day was lost, but I do recall that it was most of the day, if not the whole day. It will be for the taxing officer to assess what costs were actually thrown away, but I would have thought that, prima facie, these costs would include counsel fees for the wasted day and any amendments to pleading consequential upon the amendment of the defences.