Permanent Trustee v Keogh

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

15225/92 - PERMANENT TRUSTEE COMPANY LIMITED & ANOR v KEOGH & ORS

JUDGMENT 1 HIS HONOUR: In this application, the plaintiffs, Permanent Trustee Company Limited and Morlend Finance Corporation (VIC) Pty Limited, financiers, seek an order for costs against the fourth to seventh defendants, who are valuers. I entered judgment for the plaintiffs against the valuers on 22 July 1999 but reserved the question of costs. It is not in dispute that the valuers should pay the plaintiffs' costs of the proceedings, including the costs of a reference which proceeded before Mr W H Nicholas QC. The issue is whether the plaintiffs may recover from the valuers, under what is known as a Bullock order, costs which the plaintiffs became liable to pay to the first and second defendants, solicitors, who were dismissed from the proceedings by Simpson J, following receipt of the report of the Referee. 2 By way of background, I should mention that the valuers and the solicitors were each sued on a like cause of action. Both were given clearly worded instructions. In the valuers' case, the letter of instructions included the following: "Please provide the following information in your report: … 6. Any details as per the planning approvals or outstanding orders on the property. … 9. We further require you to be satisfied and sight all Planning Certificates and to advise if anything of a detrimental nature including the state of the property which could or would inhibit its sale."

Notwithstanding this instruction, the valuers did not make inquiries of the Penrith City Council, the relevant municipal council, and therefore did not ascertain the existence of an order issued by the Council under s 310 of the Local Government Act 1919 which specified breaches of both building and planning approvals and directed that works be carried out on the property, which was to be security for a proposed loan to be given by the plaintiffs. 3 The letter of instructions given by the plaintiffs to the solicitors included the following: "61. Please obtain all relevant Certificates from all relevant authorities and be satisfied that such Certificates do not prejudice the Company's position ."

Two relevant certificates would have been a s 317AE Certificate and a s 160 Certificate. Apparently, the solicitors were later informed that the s 317AE Certificate was not required. The Referee found that the solicitors remained under an obligation to obtain a s 160 Certificate and that, had an up-to-date certificate been obtained, it would have disclosed the existence of the s 310 Order. The solicitors did not obtain any certificates from the Penrith City Council but relied upon a s 160 Certificate obtained from the prospective borrowers' solicitors which had been issued several months previously and which, as a consequence, did not disclose the s 310 Order. 4 The Referee found that neither the valuers nor the solicitors were liable, notwithstanding that the plaintiffs had expressly instructed the valuers to obtain all outstanding orders and the solicitors to obtain all relevant certificates. If either or both had done so, the existence of the s 310 Notice would have been disclosed. As it was, neither the valuers nor the solicitors made inquiries of Penrith City Council. Simpson J accepted the Referee's report insofar as it dealt with the solicitors but sent the case against the valuers to trial. 5 This depiction of the basic facts is unduly simplistic. I have avoided stating many subtleties and complexities which, if the facts were to be fairly described, would need to be stated. Nevertheless, the description I have given is a sufficient background upon which I can express my view that the joining of both the valuers and the solicitors in the proceedings was not only a reasonable course, but an inevitable consequence of the plaintiffs' need to recover their loss. An analysis of the respective responsibilities of the solicitors and the valuers was an intrinsic element of proof of liability on the part of one or both groups of defendants. Such an assessment was also necessary for the purpose of establishing liability for damages. Indeed, it would have been unfair if the plaintiffs had sued either the valuers or the solicitors without suing the other. If only one of the two groups had been sued, that group would have felt a sense of injustice that it had been selected out, when the written instructions to each were similar in substance. 6 The principle to be applied is that stated by Romer LJ in Sanderson v Blyth Theatre Company (1903) 2 KB 533 at 539 where his Lordship said: "The costs so recovered over by the plaintiff are in no true sense damages, but are ordered to be paid by the unsuccessful defendant, on the ground that in such an action as I am considering those costs have been reasonably and properly incurred by the plaintiff as between him and the last-named defendant."

There are two elements to be considered. The first is that the costs in question have been reasonably and properly incurred. There is no issue about that in the present case. The second is that the costs must have been incurred in such circumstances such that, as between the plaintiff and the defendant against whom the costs order is sought, it is proper to order that they be paid by that defendant. 7 In respect of the second element, there are cases which point to conduct on the part of the unsuccessful defendant which has been such as to make it fair to impose a liability on it for the costs of the successful defendant. In Gould & Anor v Vaggelas & Ors (1983-1985) 157 CLR 215, Gibbs CJ expressed such a view at pp 229-231. His Honour referred to comments by Blackburn CJ in Steppke v National Capital Development Commission (1978) 39 LGRA 94 at 100. In Steppke , Blackburn CJ emphasised the importance of the attitude taken by the unsuccessful defendant, whether something said or done by it prior to the commencement of the proceedings or raised by it in the defence of the proceedings had led to the joinder of the successful defendant. Another example is Besterman v British Motor Cab Company Limited (1914) 3 KB 181 where, before the issue of the writ, the unsuccessful defendant had endeavoured to throw the blame on others and, as a matter of fact, the defendant who was ultimately unsuccessful had accused the other defendant of being partly to blame and that attitude had been persisted in right through the trial. 8 However, it is not necessary that there be attitude taken on the part of the unsuccessful defendant which has led to the joinder of a defendant or defendants who were successful in the action. Sanderson itself was a case in which defendants were sued in the alternative. It was held that the unsuccessful defendant should pay the costs of the other. That was because the circumstances of the case were such that both defendants ought to have been joined. Romer LJ and Stirling LJ both referred to Order XVI rule 7 and as to the prior rule of Chancery that all persons materially interested in the subject-matter of the suit ought in general to be made parties as plaintiffs or defendants, so that the Court might be enabled to do complete justice by deciding upon and settling the rights of all persons interested. Stirling LJ referred in this respect to Mitford on Pleading , p 164. Bullock v The London General Omnibus Company & Ors (1907) 1 KB 264, from which the term "Bullock order" derives, was a case where an order was made in the circumstance that there was an averment of a joint tort by both sets of defendants, with a separate charge of tort against each. In the reasons for judgment, no particular mention was made of any express conduct on the part of the unsuccessful defendant which brought about the joinder of the successful defendant. 9 In Altamura v Victorian Railways Commissioners (1974) VR 33, Kaye J examined the cases. At p 37, his Honour held that a Bullock order may be made even though the cause of action alleged against the successful defendant was different from that alleged and made out against the unsuccessful defendant, so long as the nature of the duty owed to the plaintiff by all the defendants was the same and arose out of the same factual circumstances. He rejected the contention put for the unsuccessful defendant that the costs of a successful defendant were not recoverable from the other defendant or defendants unless the causes of action were the same and the unsuccessful defendant had blamed the other party. Likewise, in Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 58 ALJR 521, Gibbs CJ, Mason, Wilson and Dawson JJ declined to make a Bullock order on the ground that, "It was a straightforward action which was not interdependent with or in any real sense alternative to the claim against the Co-operative." 10 In my opinion, the approach taken by Kaye J in Altamura should be followed. I note that in Gould v Vaggelas , Murphy J, Wilson J and Brennan J all took this wider approach. 11 In the present case, both the valuers and the solicitors had been given written instructions which, had they been complied with, would have led to the discovery of the s 310 Order, the failure to ascertain and disclose which has led to the judgment against the valuers. In my opinion, it was both inevitable and just that both the solicitors and the valuers were joined in the proceedings. The claims were interdependent and alternative. Although in the end there was no conduct on behalf of the valuers in which blame was laid upon the solicitors, other than that the solicitors and the valuers each had a cross-claim against the other, yet, it was a necessary part of the litigation against the valuers that the solicitors be joined. In this circumstance, I am of the view that a Bullock order should be made. 12 Accordingly, I shall order that the fourth to seventh defendants pay the plaintiffs' costs of the proceedings, including the costs payable by the plaintiffs to the first and second defendants. The costs ordered to be paid include the costs of the reference to Mr W H Nicholas QC. **********

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