Queanbeyan Leagues Club Ltd v Poldune Pty Ltd & Ors [2000] NSWSC 1100 | Case summary

Queanbeyan Leagues Club Ltd v Poldune Pty Ltd & Ors [2000] NSWSC 1100 | Case summary | Zoe

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G C Lindsay SC and A Ridley (P) S P Gullotta (D1) G Colman (D2 & 15) COUNSEL : No appearance (D3-13) J Timbs QC and I Bailey (D14) M L D Einfeld QC and J E Thomson (D16) M T McCulloch (XD1) D Hammerschlag (XD to 2nd XC) Bernard Collaery & Associates (P) Kemp Strang (D1) Barker Gosling (D2 & 15) SOLICITORS : Mallesons Stephen Jaques (D3-13) Tress Cocks & Maddox (D14) Norton Smith & Co (D16) Phillips Fox (XD1) Minter Ellison (XD to 2nd XC) CATCHWORDS : DAMAGES [10] - General principles - Recovery of costs - Difference between costs incurred and costs recovered - PROCEDURE [574] - Costs - Departing from general rule - Order for indemnity costs - Factors relevant to exercise of court's discretion - Hopelessness of proceedings - Offer of compromise. LEGISLATION CITED : Supreme Court Act 1970 ss 63, 78, 124(1)(j) Supreme Court Rules 1970 Pt 52A r 8 Anderson v Bowles (1951) 84 CLR 310 Attorney General v The Mayor of Sheffield (1912) 106 LT 367 Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 Avenhouse v Hornsby SC (1998) 44 NSWLR 1 AWA Ltd v Daniels t/as Deloitte Haskins and Sells SCNSW Rogers CJ CommD 8 October 1992 unreported Berry v British Transport Commission [1962] 1 QB 306 Blue Circle Industries PLC v Ministry of Defence [1999] Ch 289 Britannia Hygienic Laundry Co v Thornycroft (John I) & Co (1925) 94 LJKB 858; 95 LJKB 237 British Racing Drivers' Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667 Cockburn v Edwards (1881) 18 ChD 449 Coles Myer Ltd v Bowman [1996] 1 VR 457 Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 Degmam Pty Ltd (in Liq) v Wright (No 2) [1983] 2 NSWLR 354 Dein v Wentworth Gold Field Proprietary Co (1899) 15 WN (NSW) 280 Doe v Filliter (1844) 13 M & W 47; 153 ER 20 Dorofee v Pennsauken Township Planning Board 453 A 2d 1341 (1982) Energy & Resource Conservation Co Pty Ltd (in liquidation) v Abigroup Contractors Pty Ltd NSWSC Rolfe J 18 March 1998 unreported Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 397 Hadid v Australis Media Ltd [1999] NSWSC 32 CASES CITED : Hammond & Co v Bussey (1887) 20 QBD 79 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Huntsman Chemical Company Australia Pty Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489 Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 Multicon Engineering Pty Limited v Federal Airports Corporation (1996) 138 ALR 425 Penn v Bristol & West Building Society [1997] 1 WLR 1356 Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 216 Ritchie v British Insulated Callender's Cables (Aust) Pty Limited (1959) 77 WN(NSW) 299 Ross v Caunters [1980] Ch 297 St George Commercial Credit Corporation Ltd v Collins Wallis Properties Pty Ltd NSWSC Rolfe J 21 August 1998 unreported Seavision Investments SA v Evennett (The "Tiburon") [1992] 2 Lloyd's Rep 26 Segenhoe Limited v Akins (1992) 29 NSWLR 569 Skinner & Edwards (Builders) Pty Limited v Australian Telecommunications Corp (1992) 27 NSWLR 567 Underwriters at Lloyds v Ellis NSWCA 25 February 1998 unreported Wickstead v Browne (1992) 30 NSWLR 1 Wiffen v Bailey and Romford UDC [1915] 1 KB 600 22 Am Jur 2d tit Damages s 622 12(1) Halsbury's Laws of England (4th Ed Reissue, 1998) tit Damages [826] - [832] McGregor on Damages (16th Ed, 1997) Ch 16 and First Supplement (2000) DECISION : Poldune's claim for indemnity costs against the plaintiff refused; the ANZ Bank's claim for indemnity costs against the plaintiff refused up to but granted after 10 June 1997; Mr Landerer granted indemnity costs against the GIO; ruling that as a matter of law neither the plaintiff nor any cross claimant can recover as damages against any defendant or cross defendant any costs of the proceedings.

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HIS HONOUR: Factual Framework 1 As I have previously said, these complex proceedings arise from the simple act of the accidental removal from a certificate of title of a caveat which had been lodged by the plaintiff ("the Club"). I delivered a substantive judgment in the matter on 17 December 1998 ("my judgment"). Orders were made on 24 December 1998. The factual framework is set out in paragraphs [1] to [14] of my judgment. Terms defined in my judgment are used in the same sense in these reasons. 2 A short summary of the factual framework for the purposes of this judgment is as follows. The Club owned hotel premises ("the hotel site") on the opposite side of Monaro Street, Queanbeyan, from its club premises. The hotel site consisted in part of land under the provisions of the Real Property Act 1900 ("the RPA") and in part under old system title. It was decided to sell the hotel site for consolidation with other sites for a plaza development. As a result of various contractual arrangements, on 28 August 1986 the Club transferred and conveyed the hotel site to the GIO. The term "the GIO" encompasses the second defendant and the 15th defendant, between which it is not necessary to differentiate for the purposes of this judgment. At the time of the conveyance and transfer of the hotel site, the GIO executed a Deed of Future Arrangements ("the deed") which purported to reserve to the Club the use of parking spaces in the plaza development when built. The deed evinced an intention that there should be registered on the title to the plaza development land an instrument under s 88 or s 88B of the Conveyancing Act 1919 ("the CA") creating a restrictive covenant to give effect to the reservation of parking places. At the time of the conveyance and transfer the hotel site continued to be partly under Torrens title and partly under old system title. The deed was registered in the general register of deeds and a caveat was lodged on the land under Torrens title. The plaza development was duly built. In 1988 the old system land was brought under the RPA and, by registration of a plan of subdivision, the plaza development land was subdivided into two only lots. The caveat was recorded on each of the two new certificates of title. Lot 1, which was a small lot, was not in any way the subject of the Club's rights and it was not appropriate that the caveat should remain registered upon that lot. In 1991 the GIO was proceeding with a transfer of Lot 1 and asked that the caveat be removed from it. The third to 13th defendants ("Gadens") were involved as solicitors and Mr Armstrong, the 14th defendant, as law stationer in that operation. In the course of that operation the caveat was accidentally removed from Lot 2 as well as from Lot 1. The GIO subsequently sold Lot 2 to the first defendant ("Poldune"). The 16th defendant ("the ANZ Bank") financed Poldune's purchase of the plaza development and took a mortgage over (relevantly) Lot 2. Marshall Marks Kennedy ("MMK") acted as solicitors for the GIO on the sale by the GIO to Poldune and Mr Landerer acted as solicitor for Poldune. On the sale of the plaza development the GIO was obliged by the deed to have any purchaser from it enter into a similar deed. Upon the sale to Poldune, as I found in my judgment, it did not do so. Probably this was because the matter was simply forgotten. In any event, it was not done: see my judgment [32]. The Claims 3 The Club as plaintiff made the following claims against Poldune, the ANZ Bank, the GIO, Gadens and Mr Armstrong:

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(4) The costs as damages question as outlined in [8] above. Indemnity Costs: The Law 10 There is really no controversy about the legal principles to be applied in this area in the circumstances of this case. The Court's jurisdiction to award costs on the indemnity basis is undoubted: Degmam Pty Ltd (in Liq) v Wright (No 2) [1983] 2 NSWLR 354. Two of the bases on which such orders are made are that the proceedings brought were totally hopeless: Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 397; Huntsman Chemical Company Australia Pty Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242; and that during the course of the proceedings an offer of compromise was made which was no worse than the result ultimately achieved by the party against whom the indemnity order is sought: Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721; Multicon Engineering Pty Limited v Federal Airports Corporation (1996) 138 ALR 425; Hadid v Australis Media Ltd [1999] NSWSC 32. And see generally AWA Ltd v Daniels t/as Deloitte Haskins and Sells 8 October 1992 SCNSW Rogers CJ CommD unreported; Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225. Poldune's Claim for Indemnity Costs 11 Poldune submits that it certainly ought be entitled to costs on the ordinary basis against the Club and this, as I have said, is not contested. In addition, it says that the costs ought not be framed as costs on the Club's claim against it, but costs of the proceedings, as it has been obliged by its joinder to be present at the trial of the whole of the proceedings, including the plaintiff's claims against numerous other defendants and cross claims: see s 78 of the Supreme Court Act 1970 ("the SCA") set out in [32] below. The order will certainly be made in terms of Poldune's costs of the proceedings and I do not understand this to be the subject of contest. However, The Club resists Poldune's claim that the costs be ordered on the indemnity basis. 12 In relation to indemnity costs, Poldune's submissions are as follows:

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In such a case the Club ought not be visited with an indemnity costs order. 14 With respect to Poldune's claim for indemnity costs against the Club, I have set the parties' submissions out at length. I have in the course of coming to my decision adverted to them all. However, the claim for indemnity costs can in my view be determined in small compass. The heart of this claim is that the Club's claim against Poldune was always hopeless. Whilst it was conceded that there was in the affidavits some evidence upon which the RPA fraud claim was based, it was said that the fact that this evidence collapsed at trial indicated that, had proper questions been directed to the witnesses, and particularly Mr Beck, it would have been apparent at an early time that there was no case in fraud. The other claims were said always to have been as hopeless as the fraud claim was after the collapse of Mr Beck's evidence. I do not accept these submissions. The retraction of evidence is always a possibility in litigation and in this case, under skilful cross examination, it occurred. Thereafter the relevant claims were properly abandoned by the Club. As to the other claims, particularly the proprietary claim, the situation is not so clear as represented. In my judgment I indicated that the question of the construction of the relevant document in the context of the entire matter was not an easy question. My conclusion from the document that it was not intended immediately to create a proprietary interest terminated the matter, but had that difficult question been decided the opposite way, the further issues that would have arisen would equally have been difficult issues. Poldune's submission that the case could have been determined by the short trial of a separate question is, in my view, unrealistic. In these circumstances, it seems to me that Poldune's application for a costs order against the Club should result in an order for costs of the proceedings in Poldune's favour on the ordinary basis. The ANZ Bank's Claim for Indemnity Costs 15 In relation to this claim it is necessary to set out certain additional matters of fact. After the commencement of the proceedings, but at an early stage and before a statement of claim had been filed, the Club's solicitors wrote to the ANZ Bank on 16 October 1996 referring to the Bank's mortgage over Lot 2, stating that the Bank might "wish to submit to or be joined in the proceedings" and inviting "your Bank's views on this aspect". On 22 October 1996 the Club's solicitors forwarded to the ANZ Bank the notice of motion seeking an interim extension of the caveat and enquired what action the Bank proposed to take with respect to the matter. On 26 November 1996 Margaret Harrison, senior corporate solicitor, replied on behalf of the ANZ Bank that it did not propose to make application to be joined as a defendant and stated the following: "I am instructed to advise the Bank takes the view your client cannot properly obtain an order which affects the Bank's rights or title without joining the Bank as a defendant to this proceeding. If your client obtains any order which affects the Bank's rights or title, the Bank expressly reserves its right to make application to the Court to have any such order set aside insofar as it affects the Bank's interest in the property." 16 On 20 December 1996 the ANZ Bank was joined as 16th defendant by an order procured by the Club. The statement of claim filed on the same day contained allegations against the ANZ Bank, including allegations that the Bank was guilty of such fraud or other conduct that its registered interest ought not prevail over the proprietary interest alleged by the Club in relation to Lot 2 and making the claims for damages. Thereafter the ANZ Bank filed a defence and continued to participate in the proceedings. The next event significant for present purposes is that on 10 June 1997 the Bank's solicitors wrote to the Club's solicitors "without prejudice save as to costs" offering a settlement of the proceedings as between the Club and the Bank as follows: "1 an agreement (to be noted by the Court) that the Bank's registered mortgage remain on title to the property until discharged, regardless of the outcome of the claims by the Club against Poldune Pty Ltd; 2 the Club withdraws its allegations of fraud against the Bank and amends its Statement of Claim, deleting all such allegations and substituting some appropriate notation referring to this agreement; 3 once that has been done, the Bank will withdraw its defence and enter a submitting appearance and seek leave to be excused from further participation in the proceedings. This agreement is subject to the Bank being so excused and the Bank reserving its rights to address the Court and be heard on the question of damages and compensation; and 4 the Club is to agree to pay the Bank's costs of and incidental to the proceedings up to and including the time it is excused from further participation, with leave to proceed to assessment immediately of those costs."

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The letter asked that instructions be obtained and the offer responded to within seven days. On the evidence, there was no response. 17 The trial of the proceedings commenced on 8 September 1997 before me. The ANZ Bank at once indicated that it wished to move for summary dismissal from the proceedings and I heard such an application by it on 18 September 1997 and delivered judgment on that day. At that stage the evidence had not proceeded very far. The considerations by reference to which I dismissed its application for summary dismissal were that I did not think it was established at that stage that "the claim which is attacked is so clearly untenable that it cannot possibly succeed" (per Charles JA in Coles Myer Ltd v Bowman [1996] 1 VR 457 at 459), particularly in view of the early stage of the evidence and the multiplicity of defendants and cross defendants in the proceedings: see Wickstead v Browne (1992) 30 NSWLR 1 at 11-12. I did on the ANZ Bank's motion strike out portion of the Club's statement of claim against it with leave for that portion to be repleaded. At that stage there was on file evidence by Mr Beck suggesting that he had sent the deed to the GIO before the contract of sale to Poldune was entered into; his evidence had not yet fallen over, although at no stage did it suggest that he had sent the deed to the ANZ Bank or anyone associated with it. After Mr Beck in cross examination withdrew his evidence that he had sent the deed to Poldune before contract, Mr Lindsay, of Senior Counsel for the Club, announced on the 18th day of the trial that the claims relating to the Torrens title land of fraud and estoppel were withdrawn, and that those claims were at an end as against Poldune and as against the ANZ Bank. However, the claims in damages against the Bank were persisted with to the end. 18 The only evidence of any negotiation between the Club and the ANZ Bank after the letter set out in [16] is constituted by short minutes of order which the evidence shows were handed by Mr Lindsay to Mr Einfeld, of Queen's Counsel for the ANZ Bank, on 9 September 1997. That document is headed in Mr Lindsay's handwriting "DRAFT, subject to instructions 9/9/97". The body of that document was as follows: "1 NOTE that (in the event that the Court holds that Poldune is bound by, or the estate or interest held by Poldune in Lot 2 Deposited Plan 773522 is subject to, an easement or other rights for the Club, its members and guests to use Lot 2 or any part of Lot 2 for car parking) the ANZ Bank, as mortgagee of Poldune, will submit to an order binding it and its estate or interest in Lot 2 to the same extent as Poldune. 2 NOTE that, subject to: (a) the notation referred to in paragraph 1 hereof and such orders as may be sought or made to give effect to that notation; and (b) such orders as may be sought or made for costs. the Club does not propose to press any other claim for relief against the ANZ Bank. 3 RESERVE: (a) all questions of costs; and (b) liberty to apply. 4 ORDER (subject to paragraph 3 hereof) that the ANZ Bank be excused from further attendance at the hearing of these proceedings."

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At the foot there appeared, again in Mr Lindsay's handwriting, the following: "9/9/97 9.18am. Delivered to Martin Einfeld QC. He to get instructions but is inclined to view he will not get instructions to agree; Bank likely to submit only to a s 88K order, if made. GL" 19 The tender of this document was objected to on the ground that it contained no firm offer and there was no further evidence to the effect that that offer had been made firm, much less that it had been accepted or rejected. I admitted the document as part of the chain of dealings between the parties which might have some relevance to the indemnity costs application. 20 However, it seems to me that the real significance of the dealings is not whether any offer that was made was clear or reasonable but only whether the offer which was made as an open offer was better or worse than the result finally achieved. The real point concerning the letter of 10 June 1997 is that, even construed in the manner least favourable to the Club, it was at least as good as the result which the Club ultimately achieved as against the ANZ Bank. 21 In determining the damages claims against the ANZ Bank in its favour, I said in my judgment: "[36] The ANZ Bank, which lent Poldune the funds to purchase the plaza development, was also the Club's banker. In this guise, it held security over the Club's premises in Monaro Street, Queanbeyan and hence, it is said, over its rights under the Deed. It is contended that, by reason of these facts, it is under a duty not to derogate from the Club's proprietary rights in relation to its premises, which duty is breached by its denial of the Club's proprietary claims over the plaza development, over which the ANZ Bank also holds security from Poldune. The duty is said to arise in negligence, or from an implied term of the contract between the ANZ Bank and the Club as banker and customer. No authority is cited in which a duty of care or an implied contractual term has been held to exist in such circumstances. The implied term does not seem to me to meet the test for the existence of such terms laid down in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. Furthermore, any damage to the Club, it seems to me flows from the indefeasibility of Poldune's title as registered proprietor of the fee simple rather than the ANZ Bank's interest as mortgagee. In my view, the ANZ Bank was not guilty of the alleged negligence or breach of contract. There will be judgment for the ANZ Bank on these claims." 22 The ANZ Bank's submissions in support of its application for indemnity costs were as follows:

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(5) In any event, the ANZ Bank had very early indicated its preparedness to abide the orders of the Court with respect to this relief. 23 To the claim by the ANZ Bank for indemnity costs the Club's submissions in answer were as follows. This is not an appropriate case for such an order. The ANZ Bank was a necessary party to the proceedings. It held a registered mortgage over the plaza development, and the Club was claiming a continuing interest in the land. The Court refused the ANZ Bank's application for summary dismissal of the proceedings so far as they involved the ANZ Bank (see my reasons for judgment of 18 September 1997). That decision is inconsistent with any suggestion that the Club's claim against the ANZ Bank was an abuse of process, or had no real prospect of success. In any event, despite the Club's invitation to all parties to indicate during the trial what their attitudes were, none of the defendants against whom any damages were sought (being the GIO, Gadens and Mr Armstrong) conceded or suggested that the Club could properly abandon a claim of entitlement to a continuing interest in the land. Had the Club abandoned its claim of a continuing interest in the land, the defendants against whom only damages were sought, had reserved to themselves an opportunity, if not an entitlement, to contend that the Club had lost its interest in the land by reason of its own conduct. The ANZ Bank chose to play an active role in the proceedings insofar as it insisted on becoming a party rather than submitting to orders; it declined to submit to an order referable to Poldune's success or failure on the "interest in land" question; it made an unsuccessful application for summary judgment; it actively pursued not only the "town planning" defence but also cross claimed against other parties. In light of the fact that the Club was bound to maintain its claim to an interest in land; because of the attitude of the parties against whom only damages were sought; and because it was found on the ANZ Bank's summary judgment application that there was an arguable case against the ANZ Bank, the Club had no alternative but to make and maintain its claim against the Bank. 24 It is not contested that the ANZ Bank should have its costs of the proceedings generally against the Club on the ordinary basis. The ANZ Bank asks for those costs on the indemnity basis from the commencement of the proceedings or, alternatively, from 11 June 1997 onwards. 25 Initially I was attracted to the view that the ANZ Bank was entitled to its costs on the indemnity basis from the time of the commencement of the proceedings against it in view of the fact that the Club's claims against it all ultimately came to appear hopeless. So much was conceded by the Club in relation to certain of the claims on the 18th day of the trial and the evidence, the failure of which caused it to take that stance as against Poldune on that day, had never really reached as far as the ANZ Bank. 26 The Club has contended that I cannot or should not order indemnity costs in favour of the ANZ Bank in view of its failure in its application for summary dismissal from the proceedings. I do not think that this is necessarily so. As pointed out in [17] above, the application was refused because the Court was unable to characterise the Club's claims as completely untenable on the material then available to it. When all the material was available, those claims did appear to be completely untenable. The chance that evidence sheeting fraud home to the ANZ Bank or founding relief against it based on estoppel simply did not eventuate. If the Club chose to keep the ANZ Bank in the proceedings against the chance of some such evidence appearing in the course of the multi defendant proceedings, it did so in my view at the risk that, if that course proved always to have been hopeless, that might visit consequences in costs upon the Club. I have decided, however, that in the circumstances which prevailed in December 1996 the Club did not act unreasonably in joining the ANZ Bank as a defendant. The ANZ Bank as mortgagee was a necessary party in view of the claim of a proprietary interest, which I have found it was not unreasonable of the Club to pursue: see [14] above. The ANZ Bank when the situation was raised with it did in effect challenge the Club to join it. It did not make at that time any such offer as it made on 10 June 1997 and persisted in thereafter. The situation was in my view radically changed by the letter of 10 June 1997. The settlement offered by the ANZ Bank at that time (as set out in [16] above) is not entirely clear in its terms. However, I think that, fairly read, it is an offer that, provided the ANZ Bank was allowed to retain its mortgage upon the title, it would not further defend the proceedings and would submit to the order of the Court. That might well include an order, if appropriate facts were found, that the Bank's rights under the mortgage might yield priority to the Club's proprietary rights, if they were vindicated by the Court. That is, the ANZ Bank would retain its registered mortgage and be entitled, if occasion arose, to sell, but what it might sell would be the land subject to the rights of the Club. The Club's complaint that it did not understand the terms of the offer, or it was not clear that they went so far, rings hollow against its response to the letter. On the evidence, the letter was not even given the courtesy of a reply, much less an enquiry as to whether it did or did not bear the meaning which the ANZ Bank contends for, and which in my view is certainly open on the face of the letter. On that basis the offer that was then made is no worse than what has been achieved by the Club as against the ANZ Bank in the proceedings. 27 In my view the existence of that offer, combined with what proved to be the hopelessness of the Club's case against the ANZ Bank, and its insistence in pursuing the damages claims against the ANZ Bank until the end, leads me to the view that the appropriate result is that the Club ought be ordered to pay the ANZ Bank's costs of the proceedings up to and including 10 June 1997 and to pay the ANZ Bank's costs of the proceedings from and including 11 June 1997 on the indemnity basis. Claim for Indemnity Costs by Mr Landerer 28 Mr Landerer submits as follows:

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(8) The GIO submits there is no basis for indemnity costs at all. 30 Although I have again set out the submissions at length, the claim by Mr Landerer for indemnity costs against the GIO can be shortly disposed of. It is apparent from paragraphs [58] - [62] of my judgment relating to this claim that there was not at any time any evidentiary basis for the claim made by the GIO against Mr Landerer. In these circumstances it was in my view unreasonable for Mr Landerer to be joined in the proceedings. Equally, it is not to the point that the optional course was not taken of stating in the defence points of law concerning the cause of action. The primary responsibility was on the GIO as cross claimant to formulate its cause of action and bring proofs to establish it. It did not do so and, by the end, it was clear that there was never any basis on which it could have done or have hoped to do so. It should be ordered that the GIO pay Mr Landerer's costs of the proceedings on the indemnity basis. Costs as Damages 31 This matter arises in two ways. First, the Club and the unsuccessful defendants desire to have determined whether the plaintiff, assuming it does not recover its costs of the proceedings on the indemnity basis against them, may recover against them the difference between the costs of the proceedings which it has paid and the costs ordered in its favour as damages in these proceedings. The defendants concerned are the GIO, against which it has established breach of contract, and Mr Armstrong, who is potentially liable to it in negligence (subject to proof of damage). Secondly, Poldune desires to have determined whether it may, on its cross claim against the GIO, recover its costs of the proceedings, insofar as they exceed the amount recovered by it from the Club, which I have decided I shall order on the ordinary basis. Thirdly, other cross claimants, if successful, may wish to make such a claim against unsuccessful cross defendants. All parties in the proceedings have been invited to make submissions on these questions, to the intent that they should all be bound by my rulings of law on these questions for the purposes of these proceedings. I shall make an order for the separate determination of the following question: Whether as a matter of law (and without deciding the merits of any such claim) the plaintiff or any cross claimant in these proceedings can recover as damages from any defendant or cross defendant any costs of the proceedings. 32 The Club, by its notice of motion sought also to have separately determined questions relating to the recoverability of costs other than costs of these proceedings (as to which see Blue Circle Industries PLC v Ministry of Defence [1999] Ch 289 per Aldous LJ at 310 - 312), eg, costs expended by the Club towards the procuring and perfection of the deed, but I do not think it appropriate that the claims to such items of damage should be determined in this way, rather than upon a consideration of the facts proved at the damages trial. 33 In considering the situation in this Court, the following provisions need to be borne in mind. There is not in the SCA or the Supreme Court Rules 1970 ("the SCR") any relevant definition of "proceedings". However, the SCA by s 63 provides: "The Court shall grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided."

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(4) Subject to the rules, a person against whom relief is claimed under this section: (a) shall, if not a party to the first proceedings, become a party to the first proceedings, and (b) shall have the same rights in respect of the person's defence against the claim as if the person were a defendant in separate proceedings commenced by the defendant for the purpose of that claim." Section 76 confers on the Court a general discretion as to costs. By s 124(1)(j) there is power to make rules "regulating any matters relating to the costs of proceedings in the Court". Part 52A r 8 of the SCR provides: "Subject to this Part, a party to the proceedings in the Court shall not be entitled to recover any costs of or incidental to the proceedings from any other party to the proceedings except under an order of the Court." 34 Central to the law on this subject in Australia is the decision of the High Court in Anderson v Bowles (1951) 84 CLR 310. That was a case where a landlord failed to gain possession of premises under a warrant obtained in a Queensland Magistrates' Court because the tenant had without the landlord's knowledge let a subtenant into possession. Protracted further proceedings had to be taken in the Magistrates' Court before possession could be obtained. At the time, no order for costs could be obtained in the Magistrates' Court proceedings by reason of the National Security (Landlord and Tenant) Regulations. The landlord subsequently sued the tenant in the Supreme Court of Queensland for mesne profits or damages for breach of the covenant to yield up possession. She claimed in those proceedings to recover the costs of the Magistrates' Court proceedings. In a joint judgment Dixon, Williams, Fullagar and Kitto JJ said at 322 - 324: "A question then arises as to the measure of the damages. In an action to recover mesne profits, and presumably in an action for breach of the implied condition that a lessee shall deliver up the demised premises at the termination of his tenancy, the lessor is entitled to include in the damages the costs, charges and expenses which are incurred in recovering possession. In the days when the power of the courts to award costs did not cover all proceedings the expenses of necessary proceedings in which such costs could not be awarded might be included in the assessment of the damages. At common law a court of error had no power to award costs upon any writ of error. By 8 & 9 Wm 3, c 11, s 2, a partial alteration in the law was made, by which if the writ of error failed the defendant in error might recover his costs against the plaintiff in error. No provision, however, was made for costs where a judgment was reversed on error: see Wyvil v Stapleton (1724) 1 Strange 615 [93 ER 735], where the court remarked that the statute extended only to the case of affirmance of a judgment and that very reasonably; for why should any man in the case of reversal pay costs for the error in the court below? see further Bell v Potts (1804) 5 East 49 [102 ER 987]. In Nowell v Roake (1827) 7 B & C 404 [108 ER 774]; sc 1 Man & Ry 170; 6 LJ KB OS 26 it was decided that the landlord who had incurred the costs of the reversal in error of a judgment against him below, in the course of securing the ejectment of the tenant, could include the costs of the writ of error in the damages claimed. 'These costs', said Lord Tenterden CJ, 'are the consequence of keeping the plaintiff wrongfully out of possession. I see no objection to the plaintiff's recovering them as between attorney and client.' In the present case the plaintiff seeks to apply the foregoing rule to the costs of the proceedings under the Landlord and Tenant Regulations which ended in the ejectment of James. Regulation 75, corresponding with s 62 of the Act, provides, however, that no costs shall be allowed in any proceedings in relation to which the Part applies not being proceedings in respect of an offence. This is a legislative declaration that the parties to proceedings for the recovery of possession or proceedings arising thereout shall not be liable to one another for the costs of those proceedings. In the face of this legislative declaration can costs be properly included in the damages or mesne profits? It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred: Barnett v Eccles Corporation (1900) 2 QB 423 at p 428. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld: Loton v Devereux (1832) 3 B & Ad 343 [110 ER 129], where Lord Tenterden CJ said: 'In such a case the Court have jurisdiction to say definitely whether there shall or shall not be costs'. In Malden v Fyson (1847) 11 QB 292 at p 301 [116 ER 486 at p 489] Lord Denman CJ said: 'And this principle was admitted, in general, to apply; so that, if any costs were awarded, nothing beyond the sum taxed according to the rules of the Court could be recovered as damages; or, if costs were expressly withheld by an adjudication in the particular case, none would be recoverable by suit in any other Courts.' See, further, Pritchet v Boevey (1833) 1 C & M 775 [149 ER 612]. The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind. The case is not like Nowell v Roake (1827) 7 B & C 404 [108 ER 774] depending upon a rule of the common law which simply ignored costs of legal proceedings of the character in question. It is one where the legislature, having considered whether in such proceedings costs should or should not be awarded, has expressed its conclusion in a definite provision. This should stand on the same footing as a judicial pronouncement upon the same question and as the rule that the difference between party and party costs judicially awarded and costs as between solicitor and client are not recoverable. For these reasons the costs of the proceedings should be excluded from the calculation of the damages." 35 One of the most ample textbook discussions of the relevant principles is to be found in McGregor on Damages (16th Ed, 1997) Ch 16 and First Supplement (2000); this and earlier editions have been widely cited in reported authorities on this subject matter. There is another extensive discussion in 12(1) Halsbury's Laws of England (4th Ed Reissue, 1998) tit Damages [826] - [832]. In both cases the learned authors approach the subject on the basis of dividing the discussion between cases where the costs sought were incurred in proceedings between the same parties and cases where the costs sought were incurred in proceedings between the now plaintiff and third parties. Cases in the second category may themselves usefully be considered in two classes: cases of successful parties in the earlier proceedings, who have or have had the opportunity to have a costs order in their favour; and cases of parties who in the earlier proceedings had the costs ordered against them. These divisions assist in the analysis of the material and are relevant to the questions to be decided in this case. 36 Where the previous proceedings were civil proceedings between the same parties, McGregor states the position thus at [739]: "In a civil action the successful party will generally recover costs against the other party: these will be taxed costs. Occasionally the successful party may be denied costs, for costs are in the court's discretion. Clearly it would make nonsense of the rules of the court as to the award of costs and the taxation of costs if the successful party could recover as damages either the costs withheld by the court or any further costs he has incurred to his solicitor beyond the taxed costs, whether in the same action or in a further action brought solely for this purpose."

[83]

And it had earlier been succinctly said by Pollock CB in Doe v Filliter (1844) 13 M & W 47 at 51; 153 ER 20 at 21: "The taxed costs are a fair indemnity; and if they are not so, the rules which govern taxation ought to be altered." 37 However, over the years, doubts have been expressed as to the proposition that the costs which could be recovered in such cases were restricted to party and party costs or would not extend to solicitor and client costs. For many decades this was a matter of considerable importance, because of the very considerable gap between the "necessary" costs allowed on a party and party basis and the "reaonably incurred costs" allowed on a solicitor and client basis. This is attested to in various English authorities, particularly Berry v British Transport Commission [1962] 1 QB 306. A large difference also prevailed in New South Wales so long as the traditional pattern of costs orders was adhered to. In Berry the Lords Justices were troubled by the difference remaining unrecoverable. Devlin LJ (as his Lordship then was) said at 322 "I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong." However, their Lordships felt themselves bound by long standing authority to adhere to the existing situation in civil cases; they declined to extend it to the situation where the earlier costs were incurred in criminal proceedings between the same parties. The position stated in Cockburn v Edwards was reaffirmed by Sir Robert Megarry VC in Ross v Caunters [1980] Ch 297 at 324. The pressure imposed by the radical difference between costs on the two traditional bases has been reduced by the introduction in England in 1986 and in New South Wales shortly thereafter of new costs regimes under which the difference has in both cases been very greatly reduced. The law as stated in Berry was reaffirmed by the Court of Appeal in Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489. There it was said that, although costs in the earlier action had not yet been dealt with, the plaintiff would not be able to recover more than the costs ordered in that action by the Court in its discretion: per Stuart- Smith LJ at 1505 - 1506; Evans LJ at 1510 - 1511. And see generally McGregor at pars [748 - 753]. 38 It is against the background of and by reference to such English authority that the High Court expounded the law in Anderson v Bowles as set out in [33] above. In this Court Manning J, in Ritchie v British Insulated Callender's Cables (Aust) Pty Limited (1959) 77 WN(NSW) 299 at 300, adopted the rule, stated in the words of Buckley LJ in Wiffen v Bailey and Romford UDC [1915] 1 KB 600 at 607, that "the difference between solicitor and client costs and party and party costs is not legal damage." More recently, Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 was a case where the plaintiff sought to recover as damages against the defendant the shortfall between its costs incurred and costs recovered under a costs order in the same proceedings. Giles J at 365 - 366 cited the paragraph in the 15th edition of McGregor corresponding with the [739] from which I have quoted in [36] above and also Cockburn v Edwards supra. His Honour concluded that there was a well established principle which precluded the recovery of the difference as damages in the same proceedings; although the case lacked merit, it did not warrant an indemnity costs order (at 369). The same conclusion as to the recovery of any costs as damages against the defendant in the same proceedings was reached by Rolfe J in Energy & Resource Conservation Co Pty Ltd (in liquidation) v Abigroup Contractors Pty Ltd NSWSC 18 March 1998 unreported (although his Honour in that case made an order for indemnity costs); see also St George Commercial Credit Corporation Ltd v Collins Wallis Properties Pty Ltd NSWSC Rolfe J 21 August 1998 unreported. 39 Furthermore, the Court of Appeal in Avenhouse v Hornsby SC (1998) 44 NSWLR 1 reapproached the question where it arose between the same parties, but the claim was made in a second set of proceedings. In that case the earlier proceedings had been in the Land and Environment Court which, unlike the Queensland Magistrates' Court in Anderson v Bowles supra, had power to make costs orders in the proceedings before it. The proceedings been settled upon terms under which that Court made an order that there be no order as to costs. In subsequent proceedings in this Court the plaintiff (in each set of proceedings) claimed its costs of the proceedings in the Land and Environment Court as damages. The Court of Appeal held that those costs could not be recovered as damages in the second proceedings because both actions were between the same parties. Sheller JA (with whom Mason P and Priestley JA agreed on this subject) discussed the present state of the law at 34 - 37. His Honour said at 36 - 37: "Had Mr and Mrs Avenhouse obtained an order for costs in the Land and Environment Court, principle would suggest that they could not recover in the present proceedings the difference between the costs assessed and the actual costs or expenses they incurred. Principle would also suggest that if the Land and Environment Court had ordered them to pay the Council's costs, they should not be able to recover their costs as damages in the present proceedings. That would make a mockery of the Land and Environment Court costs order. I see no reason why in the Land and Environment Court it was not open to them to argue in any contest about costs, that the proceedings were necessitated as a result of the Council's conduct, such as is here complained of: s 69 of the Land and Environment Court Act 1979. Ordinarily, costs would have followed the event if Mr and Mrs Avenhouse had succeeded, but such material may have been relevant in support of a claim for costs on an indemnity basis. I do not see how reliance upon such material is inhibited by the considerations discussed in National Parks and Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 573. In that case it was held that the Land and Environment Court, though a superior court of record, was a court of limited jurisdiction and had no jurisdiction to deal with a claim in tort for general damages. If the court determined that there should be no order as to costs, the same result would follow: see generally, per Devlin LJ in Berry v British Transport Commission (at 320-321). His Lordship there remarked that if a party has failed to apply for costs which he would have got if he had asked for them a subsequent claim for damages may be defeated. Mr and Mrs Avenhouse having agreed that there should be no order for costs, they cannot, in my opinion, now seek to go behind that agreement by claiming the costs as damages in the present proceedings. In my opinion, Spender A-J correctly held that the costs incurred in the Land and Environment Court proceedings were not recoverable." 40 In my judgment at [44] I adverted to US authority in the area: 22 Am Jur 2d tit Damages s 622; Dorofee v Pennsauken Township Planning Board 453 A 2d 1341 (1982). I have since come to the view that the established body of Anglo-Australian authority on the subject together with the totally different costs structures in the US courts means that reference to that authority is not useful. 41 Turning to the recovery of costs as damages in a second action against a third party, it is said that the principle that costs are recoverable in such circumstances was established in England after some doubt by the decision of the Court of Appeal in Hammond & Co v Bussey (1887) 20 QBD 79. There the plaintiff by description bought coal from the defendant and resold it to sub vendees. The coal did not answer the description, but this was not apparent till it was burnt by the sub vendees. The defendant denied that the coal did not answer the description. The sub vendees sued the plaintiff. The jury found that the coal did not answer the description and judgment for damages and costs went against the plaintiff. It now sued the defendant and claimed the amount of the damages and costs as damages. The trial judge held that the plaintiff had acted reasonably in defending the sub vendees' action and awarded it the costs as damages. The Court of Appeal held that he was right. This principle was shortly thereafter adopted by the Full Court of this Court in Dein v Wentworth Gold Field Proprietary Co (1899) 15 WN (NSW) 280. That that rule still exists in New South Wales was confirmed by Powell JA in Underwriters at Lloyds v Ellis NSWCA 25 February 1998 unreported. In England, in Britannia Hygienic Laundry Co v Thornycroft (John I) & Co (1925) 94 LJKB 858 McCardie J held that costs could be recovered as damages in the second action where, although ordered in the first, they had proved irrecoverable against that defendant. (That decision was reversed by the Court of Appeal, but on other grounds: (1925) 95 LJKB 237.) Whether that case would be decided in the same way today remains unclear. 42 I have already said in my judgment at [44] that there has been comparatively little authority as to how these principles are to be extrapolated into litigation conducted under modern rules with multiple defendants and multifarious cross claims encompassed in the same proceedings. The problem of multiple defendants in the same proceedings was faced in England by the Court of Appeal in Seavision Investments SA v Evennett (The "Tiburon") [1992] 2 Lloyd's Rep 26. However, the course of that case was not entirely straight or clear. There the owners of a ship hit by an Exocet missile in the Persian Gulf sued their insurance underwriter, who denied liability under the policy, and alternatively the broker who had procured the policy. At trial in the Commercial Court before Steyn J (see [1990] 2 Lloyd's Rep 418) they failed against the underwriter but succeeded against the broker. The trial Judge ordered the broker to pay the plaintiff's costs of its failed claim against the underwriter, but refused an order on the indemnity basis: [1992] 2 Lloyd's Rep at 28. The rule in England being that there is no appeal from a discretionary costs order made in the High Court without the leave of the High Court (cf SCA s 101(2)(q)) the plaintiff was refused leave to appeal by the trial Judge. In the Court of Appeal, the plaintiff argued that its excess costs were at law a recoverable head of damage; that the appeal was an appeal as of right on a question of damages; and that the Court had no discretion to award the costs otherwise than on the indemnity basis. Parker LJ said at 28: "Mr Clarke's submission is that if there had been a separate action against the underwriters in which the plaintiffs had been ordered to pay the costs of the underwriters, and a subsequent action against the brokers, he would have been entitled to claim as damages, first, the costs which he had been ordered to pay to the successful underwriters and, secondly, the costs that he had himself incurred in pursuing them unsuccessfully. I do not contest that that is so. But that would be a case which was not within O 62, r 3(2). Mr Clarke submits that the rules cannot deprive him of his right to damages under those two heads. In my judgment there is no question of him being deprived of his right to damages under those two heads. The first is incontestable and raises no question on this appeal. As to the second, it appears to me that the discretion which the Judge undoubtedly had over all the costs of the proceedings should be so exercised as to produce the same result as would be achieved if there had been a separate action."

[84]

The rule cited by his Lordship is identical with Part 52A r 8 of the SCR (see [32] above). His Lordship set out what the trial Judge had said about the basis on which the quantum of costs should be determined. He concluded that Steyn J "was indeed trying to produce the same result as would have been produced by an assessment of damages"; he had "considerable doubts as to whether the Judge was right"; but the appeal was as to costs and could not be heard without leave (at 29). Scott LJ and Sir Roger Ormrod agreed. Because the appellant had not come prepared to argue the competency question, on application made before the entry of the order of dismissal, there was reconsideration by the Court of the appeal after further argument (see 30). Judgment was delivered by Parker and Scott LJJ, Sir Roger Ormrod having died. Parker LJ said at 33 - 34: "The provisions of ss 51 and 18(1)(f) of the Act and of the Rules of Court which I have quoted appear to me to be perfectly clear, but it is sought to argue that because the costs of the failed claim against the underwriter are a recoverable head of damage against the brokers, such costs are not by law left to the discretion of the Court and thus the prohibition in s 18(1)(f) of the 1981 Act has no application. It is further submitted that, as damages, such costs must be assessed on an indemnity basis. If this submission is correct it would in my judgment involve engrafting on to s 51(1) of the Act words of exception for costs which also formed a recoverable head of damage or making amendments to the rules to which s 51 is expressly subject. I can see no justification for so doing. The costs of the failed claim against the underwriter are in my judgment in like case to the costs of the successful claim against the brokers which have been incurred but which are not recoverable on taxation, as to which see the judgment of Lord Justice Devlin in Berry v British Transport Commission [1962] 1 QB 306, at p 313 et seq. At that time party and party costs only permitted the recovery of costs necessarily incurred and there was a wide margin between such costs and costs reasonably incurred. This difference has now been alleviated and enables the successful party who is awarded costs on a standard basis to recover a reasonable amount in respect of all costs reasonably incurred. The only difference between that and the indemnity basis being that on the standard basis the burden of proof is upon the receiving party, whereas on the indemnity basis the burden is upon the paying party. The standard basis is moreover, in effect, the same as its predecessor, the common fund basis, which in turn was intended to replace the old solicitor and client basis, see EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 at p 63, and it was on that basis that the cost of a previously failed action against the underwriter would, according to the old cases, have been recovered in a subsequent action against the brokers. It was these changes which the learned Judge referred to as the 'new dispensation'. Such dispensation, in my view, destroys any argument that justice requires any gloss to be placed on the plain words of the statutory provisions and the rules. It must in my view be remembered that cases of this sort have much in common with the large number of cases in which each of two defendants blames the other and which end up with either a Bullock order or a Sanderson order and where there is no question but that the costs are wholly in the discretion of the Judge. It is in my judgment right that they should be. The Judge has all three parties before the Court and he can determine whether as between them certain orders for costs should be made. It does not as it seems to me make sense that as to one element of the costs he should be deprived of discretion. I am therefore of the clear opinion that the Act and the Rules mean what they say and that there is no warrant for making an exception in cases such as the present. Prima facie, no doubt, the Judge will proceed on the basis that the party who has failed against one defendant and whose own costs are a legitimate head of damage against the other, should have such costs against the other on the same basis as would have prevailed had he claimed them as damages against the other defendant in a separate action. But depending on the way the whole action has been conducted by all the various parties I see no reason why he should not depart from that basis to reflect his view of their respective conduct. In addition it must not be forgotten that if A sues B and fails he will prima facie be obliged to pay B's costs on the standard basis and bear his own costs. If he then sues C successfully he may be entitled to recover the costs he has had to pay to B and his own costs, but he will or may by then have had to pay B, and C may be unable to pay. If however B and C are sued together it can be ordered that B's costs shall be paid not by A but directly by C. In certain circumstances this can be an advantage to A. Finally I should add that, whereas in my previous judgment I expressed doubts on the question whether the Judge had been right to consider the standard basis as that appropriate to the assessment of costs in the guise of damages, further argument has convinced me that these doubts were misplaced." 43 The general area was revisited by Carnwarth J in the Chancery Division in British Racing Drivers' Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667. There the plaintiffs sued their solicitors who had failed to warn them a certain course could be taken by the companies only with the prior approval of the shareholders. Retrospective approval by the shareholders was refused. Among the damages claimed were costs paid by the company in relation to an action brought by strangers to this litigation, which action was settled on the basis that there was no order as to costs. His Lordship extensively reviewed the authorities (including the tortuous course of The Tiburon) and concluded at 691 - 692: "The expenditure on the professional fees of solicitors and accountants was, as I have held, expenditure incurred by the plaintiffs in reasonably mitigating their loss. Prima facie therefore, it is claimable under the ordinary rules relating to mitigation. However, litigation costs have traditionally been subject to special rules for policy reasons. Prior to the change in the taxation rules there was an established distinction between such costs incurred in proceedings between the same parties, and those incurred in proceedings against third parties. This was anomalous, given that similar policy considerations applied in each case. The most recent cases show that the position must be reconsidered in the light of the changes to the taxation rules. This enables the anomaly to be resolved. Under the new dispensation, taxation on the standard basis is to be regarded as equivalent to the solicitor and client basis referred to by McGregor. Accordingly, where costs on the standard basis have been recovered from the defendant in other proceedings, there is no basis for an additional claim by way of damages. In principle the same reasoning must in my view apply where, as in this case, the other proceedings have been settled on terms that each side pays his own costs. The present defendant should not be worse off, in respect of the basis of taxation, because no order for costs was made in the other proceedings. If anything this should justify a more rigorous test. In this case a very substantial claim is made in respect of BRDC's own costs in the Walkinshaw action. If there had been an order for those costs to be paid by the defendants in those proceedings, or if the present defendants had been held liable as contributories, they would have been entitled to have them taxed on the standard basis. In my view, the same principle should apply in this case, and there should be an inquiry to establish the appropriate amount." 44 In Penn v Bristol & West Building Society [1997] 1 WLR 1356, the Court of Appeal squarely faced the problem of recoverability of costs where the second proceeding was not brought separately, but by cross claim in the first proceeding. There solicitors were led to believe that they were acting jointly for husband and wife in the sale of their home. The husband had fraudulently signed documents for his wife. The wife successfully sued the building society which "financed" the fraudulent transaction and took a charge over the property. The building society cross claimed against the solicitors. The trial judge ordered the solicitors to pay the Building Society's costs of defending the wife's action on the indemnity basis. On appeal it was argued that the indemnity costs were justified because the building society could have claimed and recovered against the solicitors as damages in separate proceedings the costs of the previous proceedings. The Court of Appeal overruled the indemnity costs order. It held that the indemnity costs order was not justified merely because the costs of defending the action would have been recoverable as damages had separate proceedings been brought. In the absence of other factors indemnity costs were not justifiable. Waller LJ said at 1365 - 1366: "I have not found it easy to establish what is the correct approach to the problem which faced the judge in this case and am surprised to find that there is apparently no authority to guide the court in what must be a not unfamiliar situation. Furthermore, for sound commercial reasons, because the difference in costs on a standard basis and on an indemnity basis are not so great as to justify expenditure on detailed argument, we have had the benefit of only very brief submissions. The problem as it seems to me is that there are competing considerations which do not necessarily lie easily together. The first consideration is that a wrongdoer should indemnify in damages for the wrong done. The second is that when it comes to costs a wrongdoer is only liable to pay on a standard basis unless 'it appears to the court to be appropriate to order costs to be taxed on the indemnity basis:' see RSC Ord 62 r 3(4). In other words, a wrongdoer is normally thought to be compensating the person wronged so far as costs are concerned by paying costs on a standard basis, and it takes something out of the norm for there to be an order for indemnity costs. It is in my view important that it is expressly provided by Ord 62 r 3(2) that 'No party to any proceedings shall be entitled to recover any of the costs of those proceedings from any other party to those proceedings except under an order of the court.' Thus a defendant cannot claim as part of his damages against a third party the costs of fighting the plaintiff, and it also follows that even if the third party is bound to indemnify the defendant under an express contract of indemnity, the note in The Supreme Court Practice 1997 p 1157 para 62/B/144 is correct in saying that an order for costs awarded on an indemnity basis would have to be obtained if an indemnity is to be achieved. I am, however, concerned as to the accuracy of the note in so far as it might encourage the thought that in any situations in which costs might have been recoverable as damages if separate proceedings had been brought, it would be appropriate on that basis alone to order taxation on an indemnity basis. As I see it, the philosophy that lies behind Ord 62 r 3(2) is to prevent costs being included in an award of damages in third party and other proceedings in the same action, in order that costs will be assessed normally on a standard basis. It seems to go contrary to that philosophy for the court to order costs to be assessed on an indemnity basis where, but for Ord 62 r 3(2), they would have been recoverable as damages. The other side of the coin, I accept, is that it could be said that if the court does not order indemnity costs where such costs would have been recoverable as damages if a separate action had been brought, that will discourage the bringing of third party and other claims in the one action. That, however, I do not think is a serious risk having regard to the many other benefits of proceeding in one action and having all issues tried at the same time. In any event the philosophy which lies behind Ord 62 r 3(2) would seem to me to be clear. If it is followed, it should not by itself be a ground for awarding indemnity costs that the costs of defending or fighting another party would have been recoverable as damages if separate proceedings had been brought. I have accordingly concluded that for an order for indemnity costs to be appropriate there should be some additional factor of the nature which normally gives rise to such an order. I am not going to attempt further definition of the ingredients of that additional factor, because as I understand it, no factor other than that the costs would have formed part of the claim to damages in a separate action was relied on in this case." 45 I derive the following propositions from the foregoing authorities:

[89]

(5) If the plaintiff was a successful party in the earlier proceedings, then in the later proceedings it is precluded from recovering more than it recovered as costs in those proceedings: Avenhouse v Hornsby SC , unless there was no provision for recovery of costs in those proceedings (though it remains precluded if there is a statutory prohibition against the recovery of those costs: Anderson v Bowles ) . The costs may also be able to be recovered in the later proceedings where a party ordered to pay the earlier costs has proved unable to do so: Britannia Hygienic Laundry supra. 46 Of the foregoing propositions, propositions (4) and (5) are irrelevant to the decision of the present question since, in these proceedings, what is under consideration is the costs of the very proceedings in which the question is to be answered. Proposition (1) is well settled by authority. I have had greater doubt about propositions (2) and (3). There is a lack of Australian authority for these propositions, but they are supported by the English authority cited in [45] (2) and (3). One way in which proposition (2) can be derived is as a result of Part 52A r 8. It is clear from the provisions of the SCA s 78 set out in [33] above that persons joined in the proceedings by cross claim are parties to the proceedings for all purposes. I had at one stage thought that it could be suggested that Part 52A r 8 may be beyond power in purporting to take away a common law right of damages, as was suggested in argument in The Tiburon. However, on consideration, in light of the terms of s 124(1)(j) of the SCA, I have come to the conclusion that the decision of the English Court of Appeal in The Tiburon was correct and that, since what is being dealt with is costs incurred in the very proceedings in which the question is being determined, a rule in terms of Part 52A r 8 is within the ambit of the rule making power. An alternative way of reaching the same conclusion without reliance on the rule is through the proposition that, where the Court has power to award costs in the proceedings, no more would in any event be recoverable as damages than the amount of costs which the Court is prepared to allow: that amount quantifies the appropriate indemnity to which the relevant party is entitled or, as Manning J put it in the Callender's Cables case supra, "the difference between solicitor and client costs and party and party costs is not legal damage." If the party has expended costs but is refused an order for their recovery, then that circumstance will also preclude their recovery as damages. To my mind, it further follows that proposition (3) is correct. Cole J appeared to assume the opposite in Skinner & Edwards supra at 578, but the proposition was not necessary to his Honour's decision, nor does it appear that the question was argued before him. While noting the anomaly adverted to by Waller LJ in Penn v Bristol & West Building Society supra, I respectfully agree with his Lordship that the best conclusion is that the rule should be that all costs of all parties in multi party proceedings should be dealt with by costs orders made in exercise of the Court's discretionary power to make such orders. Despite what I have said about the lack of Australian authority, Rolfe J does appear to support this proposition obiter in St George Commercial Credit Corporation supra. 47 My conclusion is that none of the costs under consideration are as a matter of law recoverable as damages in these proceedings, and the question to be determined separately (see [31]) must accordingly be answered, No. 48 Short minutes should be brought in to give effect to my decisions. …oOo…

Queanbeyan Leagues Club Ltd v Poldune Pty Ltd & Ors

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