17 Even more extraordinary circumstances must be found to exist before a successful defendant would be ordered to pay the plaintiff's costs, but such circumstances are not unknown and Beach J's decision at first instance in Verna Trading is an example of such an order. Beach J indeed went so far as to order costs against a successful defendant on a solicitor/own client basis. The misgivings that Ormiston J expressed in the appeal in that matter may well be related to this aspect of Beach J's approach.
18 Kaye J's analysis in Verna Trading has since been relied upon as setting out the appropriate principles to be applied.[9] I proceed on the basis that his analysis is the correct one.
19 In the circumstances here it seems to me that there is not a proper basis for ordering the second and third defendants, who have succeeded, to pay any part of the plaintiffs' costs. However, I consider that the circumstances here do require that the successful defendants be deprived of an order for costs in their favour.
20 The factors that lead me to conclude that this is the appropriate course are the following.
21 First, in my view, the defendants did induce in the plaintiffs a belief that they had a good claim. The plaintiffs' claim was at least in part prompted, in my view, by untrue allegations made by Mr Ceravolo in the related proceeding between him and the Commonwealth. If the allegations that Mr Ceravolo made against the Commonwealth had been true, and had been established in this proceeding, the plaintiffs would have succeeded on the substantial factual issues raised by this case.
22 The defence and counterclaim of Mr Ceravolo in the Commonwealth proceeding alleged that he had reached an agreement with the Commonwealth whereby settlement of the sale would be postponed until the Commonwealth had provided Mr Ceravolo with proof of non-contamination of the land. It was also alleged that misrepresentations had been made to Mr Ceravolo by officers of the Commonwealth or their agents prior to entry into the contract. It was not until Mr Ceravolo's oral evidence and cross-examination, occupying days 8-10 of this proceeding, that it was revealed that many, if not all, of these claims were without factual foundation.
23 Mr Tomassi, one of the plaintiffs, said in his evidence that after reading the applicable paragraph of the defence and counterclaim in the Commonwealth proceeding, he discovered that it was "not true what he [Mr Ceravolo] was saying to us all along." Similarly, Mr Wilson said that after reading the defence and counterclaim he found that the Commonwealth had not been pressing for settlement or payment of penalties. Dr Loizou also gave evidence that he had read the defence and counterclaim, although he was unsure when he did so.
24 It is particularly significant that the original statement of claim filed on 15 June 1998 relied upon the allegations made against the Commonwealth by Mr Ceravolo as being the basis for the allegation that the representations Mr Ceravolo had made to his partners were untrue.
25 This is the most important factor which leads me to conclude that an unusual course should be taken in this case. If the dealings between Mr Ceravolo and the Commonwealth had been clear to the plaintiffs, a different course might have been taken by them.
26 A second factor which bears on the matter and creates an unusual position is the evidence that Mr Ceravolo gave in this proceeding, which, in certain respects, was most unsatisfactory in my view. It is necessary to say that I formed the view that Mr Ceravolo was not prepared to reveal the truth of some matters, and, accordingly, was not assisting the Court as much as he could have in determining these difficult disputes.
27 It transpired that the matters with which I am concerned were not critical to the outcome of the case, but in my view they do bear upon the question of costs. The matters which particularly concerned me in that regard are those to which I alerted the parties and to which I have referred earlier. Additional unsatisfactory aspects of Mr Ceravolo's evidence are set out in my judgment delivered on 21 May 2004.
28 In this respect I was also concerned at the approach taken by the successful defendants and their advisers in the interlocutory stages of the proceeding. It seemed to me that there had been a failure to admit a number of matters which subsequently became part of their own case. In particular, I refer, by reference to the second amended defence, to the admissions eventually made in paragraphs 12, 13, 16, 23(b) and 23(c).
29 The final factor which leads me to conclude that an unusual course should be taken here is the fact that I have found there was some wrongdoing by Mr Ceravolo in relation to the relevant transactions. In this respect I refer to my finding as to the misrepresentation regarding the Popovic land made by Mr Ceravolo on 10 September 1991.
30 It is said on behalf of the defendants that the plaintiffs would have failed in any event because of the successful laches defence. There would be merit in that submission were it not for the fact that that defence was introduced into the proceeding and pleaded for the first time on day nine of the trial. In the circumstances, the late introduction of the laches defence is a factor also militating towards a refusal of an order for costs in the defendants' favour, notwithstanding their success.
31 The allegation of fraud is one which, if it is not made out, would ordinarily have costs consequences for the person making the allegation. The circumstances here are, again, in my view, unusual. If the allegations that Mr Ceravolo made against the Commonwealth had been true, as particularised in this proceeding in paragraph 26 of the original statement of claim, then Mr Ceravolo would have made representations to his partners which he must have known to be untrue. Thus, it seems to me that the allegation of fraud was also induced by the false allegations which Mr Ceravolo made against the Commonwealth in his pleading in the Commonwealth proceeding.
32 Finally, Mr Tsalinidis relied upon the Calderbank offer made on Friday 26 March 2004. Ordinarily there ought to be costs consequences for failing to accept such an offer, but the circumstances here are unusual. As at Friday 26 March 2004, the plaintiffs still did not know what Mr Ceravolo's evidence would be, or what his case would be, about the arrangements between him and the Commonwealth. This did not become clear until days 8-10 of the trial when it became apparent that Mr Ceravolo could not provide any factual basis for the relevant allegations he had made against the Commonwealth concerning agreement to delay settlement, and in fact disavowed any such agreement as alleged.
33 If, on 29 March 2004 when the offer expired, the position as it was subsequently revealed to be had been known, it is not at all clear what the costs consequences would have been if the plaintiffs had decided to discontinue. They might well have successfully argued that the defendants ought to pay the costs, as the defendants had never made it clear that Mr Ceravolo's pleading against the Commonwealth was untrue.
34 If, instead of sending a Calderbank offer, the defendants had made an offer under Order 26 that the plaintiffs withdraw, which had been accepted, the Court might have been called on to decide what ought to be done about the issue of costs.[10] If the facts, as subsequently found, had been revealed then, it seems to me to be unlikely that the Court would have been persuaded to "otherwise order" under Rule 26.03(7). If so, the defendants would have had to pay the plaintiffs' costs.
35 The sorts of concerns which led courts at one time to be dubious about imposing costs consequences where there had been "all in" offers are particularly apparent here. I accept what Gillard J said in Aqua-Max that sometimes it is very easy to tell whether an "all in" offer ought to have been accepted or not. That is not the case here. It is not easy to tell whether the plaintiffs reasonably ought to have accepted the offer made to them on 26 March 2004, and, in the circumstances, I do not intend to depart from the course I would otherwise have taken because that offer was made.
36 It could be said that it was not until day 10 of the trial that the plaintiffs were really in a position to assess whether they ought to have accepted the offer made on 26 March 2004 or not. The material before me indicates that the offer remained open until 10.30 am on Monday 29 March 2004. By day 10 of the trial, the offer was not open to them.
37 It is an unusual course to deprive successful defendants of their costs but in the very unusual circumstances of this proceeding that is the course which I intend to take. The orders will be that the plaintiffs' claim is dismissed and that there be no order as to costs.
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