R T & Y E FALLS INVESTMENTS PTY LTD v STATE OF NEW SOUTH WALES

DECISION: (a) The State pay the costs of the second trial and the second appeal.; (b) No order be made as to the costs of the proceedings up to the conclusion of the first trial.; (c) The State pay interest of $185,687.14 to 31 March 2007 and interest thereafter at the rate of $47.95 per day.

PARTIES: R T & Y E FALLS INVESTMENTS PTY LTD (Appellant) STATE OF NEW SOUTH WALES (Respondent)

COUNSEL: B Walker SC/ P T Taylor SC (Appellant) P W Taylor SC/G Laughton SC (Respondent)

SOLICITORS: Taylor & Whitty (Appellant) I V Knight, Crown Solicitor (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT MEDIUM NEUTRAL CITATION: R T & Y E FALLS INVESTMENTS PTY LTD v STATE OF NEW SOUTH WALES [No 2] [2005] NSWSC 335

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40369/05

BEAZLEY JA HODGSON JA IPP JA

16 April 2007 R T & Y E FALLS INVESTMENTS PTY. LTD v STATE OF NEW SOUTH WALES (No. 2) Judgment 1 BEAZLEY JA: I agree with Ipp JA. 2 HODGSON JA: I agree with Ipp JA. 3 IPP JA: These reasons concern the orders that should be made for interest and costs following this Court's judgment in [2007] NSWCA 18 delivered on 23 February 2007. By that judgment, the appeal of Falls Investments against the State of New South Wales was upheld, the orders made by Palmer J were set aside, and judgment for Falls Investments in the sum of $175,000.00 was ordered. No order was then made in respect of interest and costs as these issues had not been argued. 4 As regards interest, the parties have since agreed that the total interest to 31 March 2007 on the judgment sum is $185,687.14 and increases thereafter by $47.95 per day until payment is made. 5 In [188] of my judgment (with which Beazley and Hodgson JJA agreed), I expressed the provisional view that the State should pay the costs of both trials and the costs of the appeal. Orders were made inviting the State to file written submissions if it wished to contend otherwise and for Falls Investments to file written submissions in reply. The State did file written submissions and Falls Investments replied. 6 Falls Investments' successful appeal was the fourth round of litigation between it and the State of New South Wales (the respondent). Full details of the litigation are given in the reasons delivered in [2007] NSWCA 18. In the first trial, Palmer J gave judgment for Falls Investments in the sum of $607,981.00. In so doing, his Honour dismissed Falls Investments' claims based on contract, estoppel and negligence but upheld its claim under the Fair Trading Act 1987 (NSW). On 25 March 2003, this Court upheld the State's appeal (see State of New South Wales v R T & Y E Falls Investments Pty Ltd (2003) 57 NSWLR 1) on the basis that there had been no contravention of the Fair Trading Act. Falls Investments' appeal in relation to the contract and estoppel causes of action, and also in regard to damages, was dismissed. In the first appeal, this Court upheld Falls Investments' argument in regard to its negligence cause of action on the ground that his Honour had not dealt adequately with the negligence case. The Court remitted Falls Investments' claim in negligence and all questions of costs of the first trial to Palmer J. At the remitted trial, Palmer J dismissed Falls Investments' claim. The judgment in [2007] NSWCA 18 was in respect of the second appeal. 7 As is explained in [85] of [2007] NSWCA 18, the first way in which Falls Investments put its argument in the second appeal was that the State had caused Falls Investments to transfer its agisted cattle to Malton and that the State should have foreseen that that transfer might cause Falls Investments to suffer loss. The second, alternative, way in which Falls Investments put its case was that the State, by its representations, induced Falls Investments to leave infected cattle (the "reactors") with the Malton herd and thereby cause Falls Investments to suffer loss. This case was referred to as "the reactor case". In the second appeal, this Court rejected Falls Investments' case based on the transfer of the agisted cattle but upheld the reactor case. 8 In dealing with the costs issues, the State made three primary submissions, namely, that Falls Investments:

(a) "failed on all pleaded issues apart from one aspect of its causes of action in negligence";

(b) "succeeded only on a point which it raised in reply in the second appeal"; and

(c) "succeeded on an issue that was not merely different from but substantially contradictory to the basis for the claim [Falls Investments] had previously presented". 9 I would, at the outset, reject the third contention advanced by the State. While the reactor case was different from the case based on the transfer of the agisted cattle, it was an alternative argument in the true sense of the term. The reactor case was propounded on the assumption that the case based on the transfer of the agisted cattle failed. There is force, however, in the other two propositions advanced by the State. 10 It is correct that, at the first trial as affected by the appeal from that trial, Falls Investments failed on all pleaded issues apart from negligence. Moreover, at the first trial, Falls Investments, as plaintiff, did not focus on the issue of negligence. The consequences of this were explained by Spigelman CJ in (2003) 57 NSWLR 1 at 7 [38] where his Honour said: "The difficulties that arise on the appeal …, and which justify a new trial, arise primarily from the limited attention which the separate case of negligence received from the parties at trial. As Palmer J noted: '[130] It is fair to say that both parties paid very little attention to this part of the case [namely, negligence]. They were focussed upon the plaintiff's claim in contract and the claim under [the] Fair Trading Act . The plaintiff's submissions on its case in negligence were perfunctory and the defendant's submissions in response were even more so. This, I suppose was understandable: if the plaintiff succeeded in its Fair Trading Act claim it did not need to succeed on its claim in negligence …'"

See also the remarks of Hodgson JA at 37 to 38 [147] to [149]. 11 Moreover, as is noted in [89] of [2007] NSWCA 18: "At [the second] trial, Falls Investments did not focus on a case articulated in these terms [that is, the reactor case] and, no doubt for that reason Palmer J did not expressly address all the elements of a case so defined. Indeed, on appeal, a case in these terms only emerged with clarity in reply. Mr P W Taylor did not object, however, to such a case being argued and, as I have observed, that case was open on the pleadings". 12 In my opinion, a major cause of the need to have two trials and two appeals was Falls Investments' failure, at an early stage, to articulate the reactor case properly and to focus upon it. Moreover, as appears from Palmer J's remarks referred to in [38] of the judgment of Spigelman CJ, the issue of negligence played only a very small part in the issues raised at the first trial. Regard must also be had to the fact that, ultimately, Falls Investments was unsuccessful in regard to those issues on which the parties did focus at the first trial. 13 Falls Investments sought to derive support for its argument that the State should pay the costs of the appeal and the first two trials from an offer of compromise Falls Investments made on 3 August 2001. It went so far as to contend that this offer justified orders for indemnity costs. In that offer, Falls Investments offered to compromise the claim on the basis that the State pay it $100,000.00 plus costs. The offer stated that it was open to be accepted within 28 days of the date it was made. 14 The offer of compromise was expressed as having been made "in accordance with Div 1 of Pt 22 of the Supreme Court Rules". Part 52A r 22 of the Supreme Court Rules provided: "Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall … be entitled to an order against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party and party basis". 15 Part 52A r 22(4) has been repealed. Its replacement in the Uniform Civil Procedure Rules is Pt 42 r 42.14. In substance there is no presently relevant difference between Pt 52A r 22(4) of the Supreme Court Rules and Pt 42 r 42.14 of the Uniform Civil Procedure Rules. 16 Generally, under Pt 52A r 22(4) (and Pt 42 r 42.14) where a plaintiff obtains judgment in terms no less favourable to it than the terms of an offer of compromise, the plaintiff will be awarded the costs of the trial on an indemnity basis in accordance with the relevant rule, unless the court exercises its discretion to order otherwise: see, for example, Baresic v Slingshot Holdings (No 2) [2005] NSWCA 160 at [10] per Beazley JA. 17 Where no fresh offer of compromise is made between the date of the judgment given at trial and the appeal, the award of the costs of the appeal is in the exercise of the court's discretion: Coombes v Roads and Traffic Authority & Ors (No 2) [2007] NSWCA 70 at [80] per Beazley JA. 18 The mere fact that an offer was made before a trial and the proceedings thereafter encompassed an appeal and a retrial does not affect the potential consequences of offer as regards the costs of the two trials and the appeal: Ettingshausen v Australian Consolidated Press Limited (1995) 38 NSWLR 404. 19 As regards the first trial, due regard must be had to the way in which Falls Investments presented its case. I have noted that Falls Investments paid little attention to the question of negligence at that trial and this contributed materially to the lack of attention given to the negligence issue by the trial judge. Falls Investments' conduct of the first trial was a material cause of its failure in those proceedings. In reality, after this Court's decision in the first appeal, all Falls Investments then had was the opportunity of succeeding in the remitted trial. In the first appeal this Court did not (and could not) find that Falls Investments should have succeeded in the first trial. 20 In these circumstances, I consider that it would not be just to attribute any weight to the offer of compromise when determining the costs of the first trial. One may ask rhetorically: why should the State pay Falls Investments the costs (indemnity or otherwise) of the first trial when Falls Investments conducted that trial in such a way that this Court was not prepared to find that it should have succeeded? 21 As regards the remitted trial, I have noted that Falls Investments' failure to articulate the reactor case with clarity during that trial contributed materially to the trial judge's omission to address, expressly, all of the elements of that case and, to that extent, bore on the conclusion to which his Honour arrived. Some allowance must be made for Falls Investments' conduct in this respect (and the wasted costs it caused). 22 As regards the second appeal, allowance must be made for the wasted costs incurred by the same failure on the part of Falls Investments. 23 Taking all of the matters which I have mentioned into account, and according due weight to the fact that Falls Investments has been held, ultimately, to have succeeded in its action, I have come to the conclusion that it would be appropriate to order the State to pay the costs of the second trial and the second appeal and to make no order as to the costs of the first trial. 24 In summary, the orders I propose are:

(a) The State pay the costs of the second trial and the second appeal.

(b) No order be made as to the costs of the proceedings up to the conclusion of the first trial.

(c) The State pay interest of $185,687.14 to 31 March 2007 and interest thereafter at the rate of $47.95 per day.

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