Neilson Investments (Qld) P/L & Ors v Spud Mulligan's P/L & Ors [2002] QSC 295

Murrays Lawyers for the second and third defendants

[1] AMBROSE J: On 29 August 2002 I gave judgment for the plaintiffs against the defendants in the sum of $327,877.82.

[2] Upon the application of the defendants I reserved the question of costs and invited the parties to make written submissions with respect to the appropriate cost order.

[3] The judgment pronounced was for damages assessed at $198,791 and interest thereon in the sum of $129,086.82.

[4] It appears that on 25 May 1999 the plaintiffs made an offer to settle their action against the defendants for payment of the sum of $150,000 (inclusive of costs). This offer was made pursuant to RSC 026 r 2. Under RSC 026 r 9 the plaintiffs would have been entitled to indemnity costs in the circumstances of this case.

[5] The action had been commenced on 10 December 1997 and by the date when the offer was made on 25 May 1999 significant costs must have been incurred in preparation for trial.

[7] The new Uniform Civil Procedure Rules 1999 came into force on 1 July 1999.

[8] Upon amendment to s 68(2) of the District Court Act 1967 effected by the Courts Reform Amendment Act 1997 the operation of which commenced in August 1997 the monetary limit under s 68 was lifted from $200,000 to $250,000.

[9] When the action was commenced therefore the District Court had jurisdiction to give judgment for the amount of damages ultimately assessed.

[10] Under s 68(3) of the District Court Act it is provided -

"(c) in any case where it is necessary to determine whether the monetary limit is exceeded--no account shall be taken of any amount awarded or liable to be awarded in the action by way of interest on any amount."

This section reflects the approach adopted in RSC 026 r 9(4) and District Court Rule 118(4) in force both when proceedings were instituted and the offer to settle made, and in UCPR 362(2) in operation when judgment was given except that under all those rules only interest relating to a period after the date upon which an offer to settle is made, is to be disregarded when assessing indemnity costs on the damages recovered. However s 68(3)(c) relates to monetary jurisdiction and not to the date to which interest will be considered as part of the damages recovered for the purpose of assessing indemnity costs.

[11] In this case interest in the sum of $32,320.20 was awarded in respect of a period preceding the making of the rejected offer to settle. It is clear that this interest would not be disregarded under any of those three rules in the assessment of indemnity costs under UCPR 704(3). Under UCPR 362(2) a Court would have regard to the sum of at least $231,111 when awarding indemnity costs. This sum would still be within monetary jurisdiction in any event.

[12] As I understand the contention of the defendants when the action was commenced, the District Court had jurisdiction to entertain the plaintiffs' claim for the damages awarded - those damages being $51,209 less than the maximum monetary limitation in the District Court at that time.

[13] Under UCPR 698(1) the court has a discretion to depart from rule 698(3) which provides -

"(3) If the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that, when the proceeding began, could have been given by the District Court ... the costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court."

[14] In this case the obligation is on the plaintiff to demonstrate that an order other than the one contemplated as the general rule under UCPR 698(3) is "appropriate". In this respect I refer to what was said in Walz Constructions Company Pty Ltd v ASP Ship Management & Ors [2002] QCA 155 at para 9. That was a case where the judgment obtained in an action in the Supreme Court was for "an amount barely within the lower limit of the District Court's monetary jurisdiction".

[15] In this case the judgment recovered failed by $51,209 to reach the upper monetary limit of the District Court jurisdiction of $250,000 at the time when the action was instituted.

[16] In Beardmore v Franklins Management Services Pty Ltd [2002] QCA 60 two of the members of the court considered the exercise of discretion by a District Court judge to award costs on the lower District Court scale although the judgment recovered was in fact within the jurisdiction of the Magistrates Court. That was a case where the plaintiff had offered to settle her action for approximately half the damages she recovered in the District Court. The defendant had rejected that offer and the problem faced in the District Court was that the Magistrates Court scale of costs does not provide for the assessment of indemnity costs. The President at para 24 of that judgment observed -

"Apparently in the spirit of encouraging acceptance of offers to settle under Part 5 UCPR, the judge awarded costs on the lowest District Court Scale to be assessed. This was a proper exercise of the discretion given under UCPR 698(1) in circumstances where the amount recovered was less than 20 per cent below the upper jurisdictional limit of the Magistrates Court."

[17] I observe merely that in this case the judgment was 20.48% below the upper jurisdictional limit of the District Court which of course does have power to order assessment of costs on an indemnity basis.

[18] In Campbell v Jones & Anor [2002] QCA 332 the President observed in paras 30-36 that the plaintiff had made an offer to settle her action commenced in the Supreme Court for $40,000 plus costs on the Magistrates Court scale. Ultimately the plaintiff recovered $62,557 in this Court.

[19] The trial judge had ordered that the plaintiff recover costs on an indemnity basis observing that -

"the action is one which plainly ought to have been brought in the District Court and I leave to the officer assessing costs to give whatever weight or effect he thinks possible and appropriate to this view when assessing costs on an indemnity basis."

[20] The President characterised the order under appeal as having the effect that the plaintiff then could only recover costs assessed as if the proceedings had been started in the District Court and referred to the discretion given to the court under UCPR rule 698(1). In para 36 she observed -

"The appellant has not satisfied me that the primary judge erred in the exercise of his discretion in declining to be persuaded that an order for costs other than indemnity costs was appropriate in the circumstances; those costs will, as required by the rules, be assessed on the District Court scale."

[21] In the joint judgment of Fryberg and Mullins JJ it was observed that unless the defendant could show that another order for costs was appropriate in the circumstances the court was obliged to order that it pay her costs calculated on an indemnity basis. However at para 72 it is observed -

"On the face of the statement of loss and damage there was no possibility of the respondent's recovering an award in excess of the jurisdiction of the District Court. There was every chance that the award would not exceed the jurisdiction of the Magistrates Court, as the offer to settle showed."

[22] That was not a case where it emerged only after action was commenced that it could have been brought in the District Court. At para 73 however their Honours concluded that the appropriate order for costs was that the defendant should pay the plaintiff's costs of the action to be assessed on a standard basis and that by operation of the rules they would be assessed as if the proceeding had been started in the District Court (UCPR 698(3)).

[23] That was a case which on the facts bears no similarity to the present one. In that case there was never any prospect of the plaintiff recovering an award of damages anywhere near the upper limit of the monetary jurisdiction of the District Court. Indeed the very offer which she advanced in support of a claim for indemnity costs was to accept a figure well within the jurisdiction of the Magistrates Court together with costs assessed according to the Magistrates Court scale of costs.

[24] In this case the sum assessed for damages was 20.48% below the upper monetary limit of the District Court jurisdiction of $250,000 at the time the action was commenced. The only real prospect that the plaintiffs had of recovering an award of damages in excess of $250,000 when the action was commenced was if they succeeded in recovering an award for the loss of income they may have earned if employed elsewhere instead of running the business. They failed on this issue.

[25] I have had regard to the work involved in and the complexity of this case, and to the very generous offer made by the plaintiffs to settle the action which was rejected by the defendants, and to the fact that the judgment recovered was 20.48% below the upper monetary limit of jurisdiction of the District Court at the time proceedings were commenced; I am unpersuaded however that in the circumstances I should exercise my discretion under UCPR 698(1) and depart from the general rule to be found in UCPR 698(3) and order that the defendants pay to the plaintiffs their costs to be assessed on an indemnity basis under the scale of costs prescribed in UCPR 690(2)(a) - Schedule 1.

[26] In the assessment of costs upon an indemnity basis the registrar has a wide discretion to exercise having regard to the difficulty and complexity of the case and the vigour with which the second, third, fourth and fifth defendants conducted their defence.

[27] I order therefore that the defendants pay to the plaintiffs their costs of and incidental to the proceedings including reserved costs, if any, to be assessed on an indemnity basis under the scale of costs prescribed in UCPR 690(2)(b) - Schedule 2.