Paolo Bataglia and Anor v Samuel Edward Stratti and Ors

DETAIL ROCK TOOLS PTY LTD (ACN 076 292 987)

STRATTI OCEAN & EARTH WORKS PTY LTD (ACN 067 274 220) Fourth Respondent FILE NUMBER: IRC 5709 of 2001 CORAM: Schmidt J CATCHWORDS : Costs - section 106 application - claim for indemnity costs order by respondents - Calderbank offer rejected - unmeritorious claim - applicants ordered to bear respondents' costs on an indemnity basis LEGISLATION CITED : Industrial Relations Act 1996 Anderson v Boner (1993) 52 IR 114 AMP & Anor v Avis & Anor, Avis & Anor v AMP & Anor (1997) 111 IR 1 Boner v Anderson (No 2) (1993) 50 IR 406 Hairman v FileNET Corporation Pty Limited [2002] NSWIRComm 76 CASES CITED : Lolomania v Roads & Traffic Authority [2002] NSWSC 780 Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Paolo Bataglia and Anor v Samuel Edward Stratti & Ors [2003] NSWIRComm 141 Ragata Developments Pty Limited v Westpac Banking Corporation (unreported, 5 February 1993, Davies J, BC9304555), Tuholi Pty Ltd v Caltex Australia Petroleum Pty Ltd [2001] NSWIRComm 7 HEARING DATES: 07/10/2003 DATE OF JUDGMENT: 07/16/2003

APPLICANTS: Mr R Dunbier SOLICITORS: RA Dunbier & Associates LEGAL REPRESENTATIVES: RESPONDENTS: Ms N Obrart of counsel SOLICITORS: Normanwaterhouse

JUDGMENT: - 7 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J

PAOLO BATAGLIA AND ANOTHER v SAMUEL EDWARD STRATTI AND OTHERS Application under section 106 of the Industrial Relations Act 1996

1 Judgment in this matter was given on 8 May 2003 (Paolo Bataglia and Anor v Samuel Edward Stratti & Ors [2003] NSWIRComm 141). The application was dismissed and the parties were given liberty to approach in relation to the question of costs, if agreement could not be reached. This judgment deals with that question.

2 The respondents sought an order for indemnity costs. Ms Obrart of counsel argued that the applicants' case was founded upon groundless contentions, which ought never to have been made, which were obstinately persisted with over six days of hearing and which unduly prolonged an unnecessarily complex case. The claim was also submitted to be based upon fraud and fabrication. It was argued that Mr Bataglia's obligation to give truthful evidence was treated by him in a reckless manner and his conduct before and during the hearing was improper. The case was unusually unmeritorious and it followed that an indemnity costs order would be made in favour of the respondents. (See Ragata Developments Pty Limited v Westpac Banking Corporation (unreported, 5 February 1993, Davies J, BC9304555); Boner v Anderson (No 2) (1993) 50 IR 406 at 475; Tuholi Pty Ltd v Caltex Australia Petroleum Pty Ltd [2001] NSWIRComm 7 at [40]).)

3 The respondents also relied upon a Calderbank letter of 13 May 2002, sent to the applicants after the discovery of the rock saw in issue in the proceedings, abandoned in the bush. The offer was put on the basis that 'the application be dismissed with an order that the Applicants pay the Respondents' costs as agreed or assessed.' The applicants were warned that an order for indemnity costs would be sought, if the offer were rejected. The applicants did not accept the offer.

4 The applicants took different positions in relation to the costs orders sought. Mrs Bataglia made no submissions in relation to the orders sought, but submitted to the order of the Court. Mr Bataglia's written instructions to Mr Dunbier, solicitor, who appeared for both he and Mrs Bataglia were: 'Dear Ron I' hope that you and tony are wel. Tank you for wat you have done I' would apreciate if you could pass this lettera on to the Jarg (Her Oner) and hope that the law wil revile as I' have not liyed neder to you or the law, as it has appeare in cort by been manipulated by the clever Mr Manzies and Mr Lola of wich I' told them that they were difending a croks.

5 No other submissions were advanced for the applicants.

6 As noted in the earlier judgment, the usual order as to costs would be that the applicants bear the respondents' costs, as agreed or assessed. The respondents seek a departure from that approach, having in mind the basis upon which the applicant's claims failed and the applicants rejection of their Calderbank letter. In considering that claim I have had regard to what was put for the applicants.

7 The authorities relevant to the determination of the issues now lying between the parties show, however, that the respondents are entitled to seek an indemnity costs order, following upon the rejection of their Calderbank offer. In Hairman v FileNET Corporation Pty Limited [2002] NSWIRComm 76, I discussed at [13] to [17] the onus which falls upon a party seeking to rely upon a Calderbank letter, following the approach of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 451.

8 In this case the applicants did not do better than the offer. The Calderbank letter warned the applicants as to the difficulties of their claim that they had never been provided with a rock saw, that saw having then been discovered by the respondents, abandoned in the bush. Other problems with the case advanced were also drawn to their attention. Eventually, it came to pass that the applicants abandoned the central element of their claim, the failure to provide the rock saw, but not until their final submissions. That was an inescapable result, given the evidence which had been led at the hearing, both by the respondents and also by the applicants. The applicants also did not make out the other parts of their claim on the evidence, including that they had entered a written agreement with the respondents, in terms which the respondents had always denied.

9 These circumstances must inevitably lead to the conclusion that the applicants should have accepted the respondents' offer, as a reasonable one in all the circumstances. That conclusion is confirmed when regard is had to various of the findings made in the judgment. An indemnity costs order for the costs of all of the proceedings is, however, pressed and must be considered.

10 The Court undoubtedly has the power to make such an indemnity costs order. In Anderson v Boner (1993) 52 IR 114 at 118 and AMP & Anor v Avis & Anor, Avis & Anor v AMP & Anor (Unreported, Bauer, Peterson and Marks JJ, 18 December 1997), reference was made by the Full Court to what Hill J had observed at first instance in Boner: 'There is little doubt that orders for costs on an indemnity basis still constitute exceptions to the general rule. While costs are, under the Act and the rules, within the absolute discretion of the Court, nevertheless the Court must exercise its discretion judicially. Many of the criteria upon which such discretion is exercised in cases involving indemnity costs are to be found in the cases to which Mr Shaw referred and in a number of other cases dealing with the matter. It is fair to say that generally speaking an order for costs on an indemnity basis is justified in a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings. It is unnecessary to traverse the cases in any detail; they demonstrate in one form or another special or usual circumstances which manifest themselves in improper or unmeritorious conduct by the unsuccessful party, as for example, in cases involving the maintenance of a vexatious claim or defence, the institution and/or maintenance of an action or defence which while not vexatious or involving an ulterior or collateral purpose, may, on a rational basis, be described as untenable or doomed to failure and cases where a party has conducted its case in wilful disregard of known facts or clearly established law. However, even where there are special or unusual circumstances attaching to a particular case it does not follow as of course that indemnity costs will be awarded. But it may be observed, and the authorities demonstrate, that the categories of special or unusual circumstances justifying indemnity costs are not closed; a too rigid or narrow approach can lead to error in the exercise of the discretion. (See generally on indemnity costs Singleton v Macquarie Broadcasting Holdings Ltd and Qantas Airways Ltd v Dillington (unreported, Supreme Court, 14 May 1987) and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 33-35, per Kirby P, Gleeson CJ concurring).' 11 In AMP the Full Court went on to observe at pp71-72: 'In the course of determining an application for the awarding of indemnity costs Morling J in the Federal Court of Australia in Australian Federation of Consumer Organisations Inc. v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 said (at 570): "I was referred to a number of cases in which orders for costs have been made on a solicitor and client or indemnity basis. Those orders have usually been made in circumstances where the conduct of the parties against whom the orders have been made has been deserving of criticism: see, for example, Degman Pty Ltd (in liq) v Wright No 2) (1983) NSWLR 354 (sic); Packer v Meagher (1984) 3 NSWLR 486; and Australian Guarantee Corporation Ltd v De Jager (1984) VR 483. The respondent fought these proceedings fiercely and left no stone unturned in resisting the application. But I do not think the conduct of its case is deserving of criticism of the kind referred to in the authorities relied upon by the applicant. Accordingly, the cases in which orders for costs have been made on a solicitor and client or indemnity basis by reason of the undeserving conduct of a litigant are distinguishable from the present case."

The New South Wales Court of Appeal considered the appropriateness of making an order for the payment of indemnity costs on appeal in Huntsman Chemical Co (Australia) Ltd v International Pools (Australia) Ltd (1995) 36 NSWLR 242. The judgments of Kirby P and Mahoney JA (as they then were) suggest that a cautious approach should be adopted to the awarding of indemnity costs, especially on appeal. This is consistent with the approach taken by Kirby P in Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 (at 32-4).

Despite certain decisions (referred to by Hill J in Boner v Anderson (No. 2)) to the effect that there should be an increase tendency towards the awarding of indemnity costs, we consider that there is still in existence and operation a general approach to the effect that costs will be normally awarded on a party-party basis with the indemnity costs to be awarded in the more exceptional case where conduct of a party justifies it. Hill J referred to those matters this way: ". . . . a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings." The view of Morling J in the Tobacco Industry Cas e, consistently with our thinking, was that fierce opposition to the claim was insufficient to ground indemnity costs; something more is needed.'

12 The proper approach to such an application thus requires consideration of whether the applicants' case had special or unusual features of an unmeritorious or improper nature, which make it unreasonable and unfair that the respondents should be out of pocket as the result of the proceedings. That question must be approached on a cautious basis. Fierce pursuit of a claim is not a proper basis for such an order.

13 In this case, I cannot but come to the conclusion that an indemnity costs order must be made. I do not here repeat the various conclusions reached in the judgment. I accept however, as the respondents submitted, that the conclusions reached in relation to matters such as the rock saw, at [149] and [153]; those in relation to the written agreement relied upon by the applicants at [157], [158] and [159]; the alleged oral promises of work, at [155] and Mr Bataglia's evidence as to his intention to himself sell rock saws, at [173], were such that it must be concluded that the claims were unusually unmeritorious and improperly brought. This was a case where the applicants not only fiercely pursued their claims, they were claims which were plainly pursued in wilful disregard of known facts; the case was unduly prolonged by the pursuit of groundless contentions and having regard to the evidence, it might well be thought that the applicants had some ulterior motives. (See the discussion of Wright J, President in Tuholi at [29] and [30].)

14 I am satisfied that the circumstances of this case were such that justice could not be achieved, were the respondents to be out of pocket as a result of the bringing of these claims. It cannot but be concluded that the 'real cause and occasion of the litigation' was the attitude adopted by the applicants. (See Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721.)

15 I also note that while not pressed for the applicants, I did give some consideration as to whether justice required that a different conclusion be reached, as between the two applicants. I have concluded that this was not possible. Costs orders are not concerned with punishing the unsuccessful party, but rather with doing justice as between the parties. While great reliance was placed by the respondents upon the evidence given by Mr Bataglia, it was submitted that the case advanced for the applicants could not lead to any relevant distinction being drawn between the applicants, on the question of costs.

16 After careful consideration I have accepted that submission. There were obvious discrepancies in the evidence of Mr and Mrs Bataglia, yet they both advanced the same claims against the respondents, in relation to the business which they ran in partnership with each other. They both rejected the respondents' Calderbank offer, in which the discovery of the rock saw and other difficulties with the case being pressed were drawn to their attention. I also had regard to the fact that the applicants did not seek that any distinction be drawn as between them, in relation to the costs order. That was an additional reason for rejecting such an approach as being an available one.

17 I finally note that I was confirmed in this conclusion by the observations of Greg James J in Lolomania v Roads & Traffic Authority [2002] NSWSC 780 at [27]: 'It must be noted that indemnity costs are limited to those costs which are reasonably incurred in prosecuting the proceedings to a successful conclusion.'

18 For all of the reasons given, I order that the applicants bear the respondents' costs, on an indemnity basis. ------------------------

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