Plaintiff v Defendant

3 The question of the costs to be paid by one or other of the parties is not so simple. Two matters require determination, firstly, what is the appropriate party/party order to be made as between the parties; secondly, is the defendant entitled to costs on any basis over and above that of the party/party allowance.

4 Section 24 of the Supreme Court Act provides as follows:

"Unless otherwise expressly provided by this or any other Act or by the rules, the costs of and incidental to all the matters in the court is in the discretion of the court and the court has full power to determine by whom and to what extent the costs are to be paid".

That general principle is elaborated upon in Order 63 of the Rules in which Rule 63.02 provides the general power of the court to exercise the discretion consistent with s.24.

5 I should also mention one other provision of the Rules which is relied upon by Ms Sparke, who appeared on behalf of the defendant, and that is Rule 63.04 which reads as follows:

"(1) The court may make an order for costs in relation to a particular question in or a particular part of the proceeding.

(2) Where the court makes an order under Paragraph 1 the court shall by order fix a proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding."

6 Both Ms Sparke and Mr Evans, who appeared on behalf of the plaintiff, advanced different propositions in relation to the way in which I should deal with the party/party costs. Ms Sparke contended that I should make an order in favour of the defendant on an issues basis as provided for by Rule 63.04: Nolan v. Nolan (No.2).[2] Mr Evans, on the other hand, submitted that given that the plaintiff had been successful and that an order would necessarily be made in his favour and that the counterclaim had been dismissed, then the appropriate order should be solely in the plaintiff's favour. Mr Evans contended this was consistent with authority.

7 I reject the application of Mr Evans in relation to the order that the defendant pay the plaintiff's costs. It would, in my view, be a travesty of justice to make the order sought by Mr Evans. The plain fact is that the plaintiff was only partially successful and a significant number, if not the vast majority, of issues were decided against him. It is this very situation that is catered for by Rule 63.04. I am persuaded that fairness dictates that an order for costs be made on an issues basis [see the general principles espoused by Redlich J (as he then was) in Aljade v. OCBC[3]].

8 This was a complex and difficult trial in which claim and counterclaim were inextricably interwoven. It would not, in my view, be appropriate to make separate orders, rather the various issues raised and resolved need to be identified and the appropriate order made.

9 In my reasons for judgment I identified the issues which had to be resolved. By reference to those issues I think the following analysis can be made. The plaintiff succeeded on the following issues which were in dispute, firstly, the existence of a partnership between the plaintiff and his brother Remo, secondly, the payment out of funds held by the solicitors, Messrs Cain & Lamers of one half of the proceeds of the sale of the Tooborac property. Otherwise the plaintiff's claims failed. The defendant succeeded on the following issues which were in dispute, firstly, the nature of the partnership and the business, secondly, the use of the joint account, thirdly, adjustment of the ownership of the Kilmore property, fourthly, adjustment of the ownership of the Alexandra property, fifthly, claims for moneys outstanding as a result of the purchase of the Elmore service station by Steven Rosselli, sixthly, payment of moneys to the plaintiff in respect of mortgage payments and repairs related to the Kilmore property. In addition to those matters, there is also the defendant's entitlement to costs relevant to claims abandoned either immediately prior to the commencement of the trial, such claims being in respect of the Hammond Street property, the property at Inverloch and a Mercedes motor vehicle, and also the claim abandoned at the conclusion of the trial, namely, the Elmore service station claim, which I have already adverted to.

10 I accept that there is no "meter" or hard and fast rule by which to determine this issue. It is necessarily impressionistic, judgmental and, to an extent, intuitive; however, I had the opportunity to identify and consider the issues raised during nine days of hearing and believe that I have a grasp as to where the issues raised led to and, in particular, the time occupied by the parties in debating and resolving those issues. I conclude that it is clear that the defendant, rather than the plaintiff, should obtain the benefit of a cost order, however I necessarily take into account the fact that the plaintiff did succeed on some issues.

11 In my view, the appropriate order to costs on a party/party basis is that the plaintiff pay 75 per cent of the defendant's costs.

13 As a general rule costs are to be paid on a party/party basis. Ms Sparke, however, submits that the defendant should be awarded costs on an indemnity basis. She relies upon two discrete matters in this application. The first, that there is an entitlement to costs thrown away on a solicitor/client basis by reason of the plaintiff's conduct of the proceeding, second, that a Calderbank offer made by the defendant on 21 August 2007 should result in an order for solicitor/client costs from that day.

14 Mr Evans opposes any such order. He asserts, firstly, that any order based upon conduct would necessarily be tainted with hindsight and the known facts that were ascertained as a consequence of the judgment, second, that the circumstances involving the Calderbank offer and the eventual result should not result in a solicitor/client order.

15 The principles relevant to an award of costs over and above party/party costs based on the conduct of a party in a proceeding are set out in detail in Aljade.[4] The principles relevant to Calderbank offers have been set out by the Court of Appeal in Hazeldene's Chicken Farm v. The Victorian WorkCover Authority (No.2).[5] There are also a number of decisions of judges in the trial division of this court. M.T. Associates Pty Ltd v. Aqua-Max Pty Ltd & Anor (No.3),[6] Clarke v. ABC,[7] Pearson v. Williams,[8] Nolan v. Nolan (No.2).[9]

16 Turning to the first ground, I think that a court should be wary of making indemnity or solicitor/client orders on the basis of the conduct of a party, either prior to a trial or in the course of the trial. For such a special costs order to be made a party must be shown to have acted unreasonably and hindsight must be eschewed. In this case it is suggested by the defendant that the plaintiff engaged in the pursuit of futile claims. I do not think that the plaintiff's claims could necessarily be described as futile, although I regard them at best, in the main, as ambit with the exception of the Tooborac claim. With some hesitation, I take the view that it is not appropriate in this case to make an order on this basis. I am not persuaded that such an order ought to be made.

17 I turn to the second ground raised by the defendant, namely, the Calderbank letter of 21 August 2007 from the defendant's solicitors to the plaintiff's solicitors and headed without prejudice, save as to costs, which reads as follows:

"We are instructed to advise of our client's proposal to settle the proceedings on the following basis:-

1. 1. The proceeds of sale of the Tooborac property, the scrap metal, the livestock and the Dodge motor vehicle and all other moneys including accrued interest held by Cain and Lamers on trust for the parties, be divided equally between the parties.
2. 2. Within thirty (30) days of the date hereof, the Kilmore property be offered for sale in such manner as agreed between the parties and failing agreement by an agent to be appointed by the President of the Real Estate Institute of Victoria and in such manner as such appointed agent determines.
3. 3. The proceeds of sale of the Kilmore property be disbursed as follows:-

(a) to pay all agents commission and expenses and legal costs of the sale

(b) to discharge the mortgage encumbering the property

(c) to pay any outstanding rates and insurance on the Kilmore property

(d) to pay to your client, an amount equal to all mortgage repayments, rates, insurance paid by him from 9th December 2002 to the date of settlement of the sale of the Kilmore property

(e) the balance thereof to be divided equally between our respective clients.

1. 4. Within thirty (30) days of the date hereof, all remaining stock, tractors, equipment, and machinery be sold and the nett proceeds thereof be divided equally between our respective clients.
2. 5. Each party file a Notice of Discontinuance of the proceedings and bear their own costs of and incidental to the proceedings.

We advise that the above offer is open for acceptance until 4.00pm on 28th August 2007."

18 Two issues arise as a result of this letter, firstly, whether the defendant has bettered the offer in the sense that the offer was more favourable than the result, secondly, assuming that the first condition is made out, was it unreasonable and/or imprudent for the plaintiff to refuse the offer made by the defendant.

19 In my view, the offer of 21 August 2007 by the defendant bettered the result. The offer effectively replicated the manner in which the claim was disposed of, save that the defendant was successful in resisting the claim for the reimbursement of mortgage payments, insurance and rates related to the Kilmore property. It is clear, therefore, that in a practical sense the offer bettered the result: nine days of hearings would have been avoided if the plaintiff had accepted the offer.

20 Mr Evans contends that the offer to bear its own costs carried with it an element of uncertainty. I think, however, given my order that the plaintiff pay 75 per cent of the defendant's costs that it is clear that the offer, (which was that each party bear its own costs), is better than the result. I conclude, therefore, that the defendant has in the sense explained in Hazeldene Chicken Farm v. VWA (No. 2) bettered the result.

21 The second issue to be resolved is the question of the refusal by the plaintiff to accept the offer. I am bound to follow the principles set out in Hazeldene's Chicken Farm v. VWA (No. 2), the test is one of reasonableness and no more:

"In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as 'manifestly' or 'plainly' unreasonable."[10]

22 The court noted that in dealing with such an application it is a question of judgment and impression as to whether a party has or has not acted reasonably or unreasonably in rejecting an offer made by another party.[11]

23 Before I turn to Hazeldene there are, in my view, salient remarks in this regard made by Gillard J in M.T. Associates v. Aqua-Max Pty Ltd. Although the Court of Appeal adopted a different approach to the presumption a court ought to adopt in an application such as this, it seems to me that several of His Honour's statements are relevant to the disposition of this application, particularly as they have subsequently been endorsed by Ashley J (as he then was) in Clarke v. ABC. I refer in particular to the observations of Gillard J in M.T. Associates that:

"Any form of offer assuming it can be adduced into evidence should be considered by the Court on the question of costs and overly technical reasons given by the other party for not seriously considering an offer should be rejected. ... In days of old, points were taken justifying the refusal of an offer because of some point. In this day and age where costs in heavy litigation are high, litigants and their lawyers must consider all offers of settlement bona fide and reasonably."[12]

24 I am aware that in Hazeldene's Chicken Farm v. VWA (No. 2) the court pointed, as Redlich J (as he then was) had in Aljade, to the proposition that potential litigants should not be discouraged from bringing their disputes to the courts and, as such, that consideration is one which underpins the general rule that an order for special costs should only be made in special circumstances.

25 The appropriate analysis in this case, in my view, is by reference to the individual considerations contained in Hazeldene's Chicken Farm v VWA (No. 2) bearing in mind that that list, which is to be found at Paragraph 25, is neither definitive or exhaustive; nevertheless, it provides a ready starting point for the consideration of this application. I turn to each of the issues.

26 First, the time of the offer. The offer was made over two weeks prior to the trial. In my view, this is not a reason to disentitle the defendant to an order for solicitor/client costs.

27 Second, the time allowed. Seven days was allowed. True it is that this is less than the prescribed time under the offer of compromise rules, however, I think it relevant to bear in mind the following three matters.

(a) The plaintiff was represented by an experienced firm of solicitors who presumably were in a position to give advice to the plaintiff. Presumably the plaintiff was in the position to give instructions in relation to the offer.

(b) The plaintiff did not seek through his solicitors any extension of time for the offer. It simply expired without any further deliberation, it would appear.

(c) No evidence was led to suggest that a seven day time limit influenced or prejudiced the plaintiff in terms of his consideration of the offer.

In other words, I do not regard this as disentitling the defendant from a solicitor/client order for costs.

28 Third, the extent of the compromise. I think that this is significant. Acceptance would have resolved the litigation in its entirety and avoided a nine day hearing.

29 Fourth, the offer and its prospects of success. I accept Mr Evans's submission that this is not to be viewed with hindsight but reasonably requires one to look at the plaintiff's position at the time of the offer. I have thought long and hard about this given the submissions that were made by Mr Evans this morning, however, I am forced to come to the conclusion that the plaintiff could only reasonably have expected to succeed on the Tooborac claim. I do not accept that the plaintiff could not reasonably have anticipated what would happen with Elmore. Elmore was, in my view, part and parcel of an ambit claim made by the plaintiff, parts of which were shed or abandoned by him from time to time. Nor do I accept that the asserted exponential increase in the breadth of this claim during the course of the evidence is a relevant consideration, as submitted by Mr Evans. This was all of the plaintiff's making. It could hardly be said that, the plaintiff having created the scenario in which the case ran for nine days, as a consequence the defendant should be deprived of a special order for costs. The one person in this case who was aware of the issues and aware of the matters that arose as between himself and his late brother was the plaintiff. He chose the battleground upon which to conduct his claim which ultimately resulted in a further amendment to his statement of claim at the end of the hearing. I conclude, therefore, that the plaintiff should, two weeks out from the trial, have been alive to the issues in respect of length of the trial and the reasonableness of the offer of the settlement.

30 Fifth, the clarity of the offer. The terms were clear and unequivocal. No issue arises here.

31 Sixth, foreshadowing the seeking of solicitor/client costs. This was patently adverted to. The plaintiff proceeded at his peril.

32 Seventh, the question of the plaintiff's view as to an order for costs. Mr Evans contended it was unreasonable to expect the plaintiff to envisage the costs consequence given that he was ultimately successful in the claim in respect of Tooborac. In my view this is unrealistic. Given that the plaintiff chose to litigate a number of claims it must have been apparent to him that a minor success could lead to an adverse costs order. He had experienced solicitors advising him; the defendant's letter to him left him or ought to have left him in no doubt that the issues could be dealt with selectively and that they may well have consequent cost implications. If the plaintiff was in any doubt as to his own costs position this could easily have been resolved by reference to his solicitors.

33 In my view, the offer made by the defendant, including the disposition of costs, was reasonable and should have been regarded as such.

34 I conclude that the plaintiff acted unreasonably in rejecting the offer and it is appropriate to make an order for solicitor/client costs after 21 August 2007.

35 I propose to make the following orders as to costs.

36 First, that the plaintiff pay 75 per cent of the defendant's costs on a party/party basis up to and including 21 August 2007, thereafter the plaintiff pay the defendant's costs, without any percentage reduction, on a solicitor/client basis.

37 Secondly, pursuant to Rule 63.17, the plaintiff pay the defendant's costs of and occasioned to by the amendments to the statement of claim of February 2006.

[2] [2003] VSC 136.

[3] [2004] VSC 351.

[4] [2004] VSC 351 paragraphs 12-40.

[5] [2005] VSCA 298.

[6] [2001] VSC 274.

[7] [2002] VSC 30.

[8] [2003] VSC 136.

[9] [2000] VSC 163.