Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors [1988] FCA 202; (1988) 81 ALR 397

Inn Leisure Industries Pty Ltd v McCloy Pty Ltd and McCloy (1991) 28 FCR 172

1 PARKER J: After trial in this action I made certain orders on 29 September 1999. The question of costs was reserved into Chambers. Orders as to costs were sought on 13 June 2000. This decision deals with the matter of costs.

2 There had been some submissions as to costs on 29 September 1999 but, in the end, no orders were made and all questions as to costs were reserved.

3 The first contentious issue is whether the plaintiff should have their costs taxed on an indemnity basis from 26 February 1999.

4 On 26 February 1999, which was shortly before the commencement of the trial, the plaintiff's solicitors made a firm offer of settlement in writing to the defendants' solicitors the terms of which are properly viewed as clearly more favourable to the defendants than the decision given at trial. This offer was not accepted. The trial commenced on 3 March 1999. On 4 March 1999 the plaintiff's solicitors made a further firm offer of settlement in writing to the defendants' solicitors the terms of which were even more favourable to the defendants than the earlier offer. This too was not accepted. The trial took its full course.

5 It was a term of each offer that each party should bear its own costs, so that not only were the other terms proposed more favourable to the defendants than the decision on trial, but the defendants would not have borne the plaintiff's costs had either offer been accepted.

6 There was also a significant failure on the part of the defence with respect to its discovery. The reasons for the decision in the action set out the circumstances and I will not repeat them fully here. It is sufficient to say that material documents that should have been discovered, and which tended against the defendants' case, were not discovered by the defendants. The trial was prepared and commenced by the plaintiffs without access to those documents. It was fortunate that astuteness and thoroughness in preparation had led the plaintiff's solicitors to gain some knowledge of some of these documents and of some of the conduct of the defendants to which they related. By this means the plaintiff was able, in the course of the trial process, to expose the failure to discover. This led to the documents eventually being discovered during the trial and the true position was able to be considered but only with much unnecessary difficulty and work by the plaintiff's legal advisers and at additional expense to the plaintiff. It is the unfortunate fact that, for the most part, the existence of these documents had been made known to the defendants' solicitors before trial but, by a combination of error of judgement by the solicitors and a misleading explanation to the solicitors of the documents by the first defendant, they were not discovered as they should have been.

7 Relying on these two matters, indemnity costs are sought from the date of the first offer.

8 While the jurisdiction to grant such an order is clear, it remains the case that the usual cost order is one for costs to be taxed on a party and party basis. A departure from that ordinary practice to order indemnity costs will only be justified where there is some special or unusual feature, Unioil v Deloitte Touche Tohmatsu (1997) 18 WAR 190 at 191, and see Colgate-Palmolive Co v Cussons [1993] FCA 536; (1993) 46 FCR 225 at 223. The category of circumstances in which indemnity costs might be justified is not closed. Relevant considerations include failure to accept an offer of settlement which ought reasonably to be accepted, especially where the offer provides a real incentive to settle, Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721, or the conduct of one of the parties in the action, Spencer v Dowling [1996] VSC 51; [1997] 2 VR 127 at 147, 163. It remains, though, a matter of discretion.

9 The question is raised whether it is open to the plaintiff to rely on his two offers for this purpose as there was no payment into Court and no attempt was made to comply with the procedure in O 24A. Had O 24A been complied with the effect is that the plaintiff would have been entitled by force of the rule, in the absence of an order to the contrary, to costs on an indemnity basis.

10 The effect of O 24A was considered by Scott J in Koh v Tay [1999] WASC 228. There at [7] his Honour referred to the commentary in Seaman: Supreme Court Practice where it is said:

"It should not be assumed that the mere writing of a calderbank letter by a plaintiff making an offer to the defendant which is not less favourable than the judgment recovered generates the same presumptive entitlement to an order for indemnity costs. The circumstances would have to take the case out of the ordinary or usual category: MGICA (1992) Ltd v Kenny and Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240; 140 ALR 707 at 711."

"In my opinion, there was nothing in the plaintiff's submission to make it inordinate or unusual. If the plaintiff wanted to protect his position in relation to costs, the appropriate method would have been to serve a notice under O 24A of the Rules of the Supreme Court."

It is submitted that it may be the effect of his Honour's decision that, in a case which is not out of the ordinary or usual category, a failure to follow the O 24A procedure would preclude an indemnity order. In this connection, against such a reading of O 24A, I was also referred to Messiter v Hutchinson (1987) 10 NSWLR 525, Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd [1996] 931 FCA 1 and Russell Fraser Henderson and Ors v Amadio Pty Ltd and Ors, unreported; Fed C of A (Heerey J); No VG260 of 1993; 28 March 1996.

11 It is further submitted by the plaintiff that, because of the discovery issue, this is a case which is out of the ordinary or usual category as recognised by Scott J.

12 Fortunately, for reasons which follow, it is unnecessary for me to attempt to resolve these issues in this case. Even were I to assume that O 24A presented no barrier to the granting of an order for costs to be taxed on an indemnity basis, I would not be persuaded, as a matter of discretion, to make such an order.

13 While the offers of settlement made were more favourable to the defendants than the merits proved to justify, the nature of the legal and factual issues in this case were both complex and uncertain and it cannot be said that the refusals to accept the offers were perverse in any sense or led to an entirely unwarranted wasting of court time and resources or put the plaintiff to entirely unjustified effort and expense. The matter of discovery weighs, in my view, more significantly in favour of indemnity costs. To a degree it was a consequence of a failure of the first defendant to fully and frankly disclose material facts, embarrassing to the defendants' case, to his solicitor. This did lead to some limited prolonging of the hearing and a good deal of additional work during the trial by those acting for the plaintiff. It is the case, however, that to a significant degree the responsibility for this lies with the solicitors acting for the defendants. Further, the consequences of the failure to make proper discovery were overcome by the plaintiff in the action and the costs of this additional work may be reasonably compensated by special orders.

14 In the circumstances I have not been persuaded that there is sufficient to take this case out of the normal category so as to justify an order for indemnity costs rather than party and party costs.

15 Special orders are sought in a number of respects on the basis of unusual complexity of both fact and law and because the amount of work reasonably done would not be adequately remunerated within the scale limits so constituting "other good or sufficient reason" within O 66 r 12(1). In the second respect reliance is placed on Schmidt v Gilmour [1988] WAR 219, Collins v Westralian Sands Ltd (1993) 9 WAR 56 and Lewandowski v Lovell, unreported; FCt SCt of WA; Library No 960310; 14 June 1996.

16 My appreciation of both the factual and the legal issues in the trial is that they were unusually complex, sufficiently so to satisfy O 66 r 12(1). The plaintiff has also well documented and supported his claim insofar as he relies on the value of work reasonably and properly undertaken. This work is shown to be both greater than usual for this type of litigation, see Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400, and to be such that it would not be adequately remunerated in a number of respects by allowances within the scale limits. In reaching these views I have given full consideration to the carefully detailed submissions to the contrary of the defendants, but for the most part I have not been persuaded by them.

17 The considerations are too complex and varied for me, on an application such as this, reliably to estimate the degree to which the limits ought properly to be raised. Instead, in the circumstances, it is preferable that I identify those items clearly shown, in my view, to require a lifting of the scale limits and to leave it to the detailed review and assessment of the taxing officer to determine what amounts ought properly to be allowed to the plaintiff on taxation in respect of those items.

18 In my view the plaintiff's costs should be taxed without regard to scale limits for Items 6(d), 13, 14(a), (c), (e), (g) (with respect to the attendance on 29 September 1999), 15(b) and 24 (with respect to the Directions hearing on 12 February 1999).

19 For the further assistance of the taxing officer with respect to some of these items I would make the following observations.

20 Included in my appreciation of the justification for lifting the limits with respect to items 14(c) and (e) was the unusual need for time to be spent by counsel and instructing solicitor, outside normal court sitting hours and on days when the court did not sit during the trial, in dealing with the late discovered documents and their implications for the trial. This work included, but was not limited to, the identification, locating, proofing and securing the attendance of additional witnesses and related legal research and factual enquiries. Reasonable additional allowance might properly be made for this work.

21 With respect to items 14(a) and (c), apart from additional time, the draft Bill before me also seeks allowances at rates above the normal scale provision. I make no observation as to whether that is reasonable save, if it be considered relevant, for what has been said earlier about the complexity of fact and law presented by this case, and except to observe that, in relation to a submission of the defendants that such an application was rejected when orders were originally sought, while there were some submissions as to costs at that time no orders were made so that there was no decision or rejection in respect of that application.

22 After the trial proper had concluded on 17 March 1999 the High Court delivered its decision in Giumelli v Giumelli [1999] HCA 10. Further submissions were made on this on 11 May 1999. At the same time other issues dealt with during the trial were revisited by counsel. Reasonable additional allowance might properly be made under items 14(c) and (e) in respect of this appearance and attendance.

23 There is no question and no dispute that the plaintiff should have an order for reserved costs and for interrogatories.

24 It is accepted by the defendants that in the circumstances of this case the plaintiff should have a reasonable allowance for his own travel costs from Melbourne, accommodation during the main trial and vehicle hire expenses for one day to visit the properties in dispute. I would not otherwise give any direction with respect to vehicle hire expenses of the plaintiff and I would not give any direction with respect to his wife's expenses which are properly considered on the ordinary basis applicable to a witness.

25 The plaintiff sought directions for the reasonable costs of photocopying to be allowed. This was sought because between 1 February 1997 and 30 June 1999 there was no provision in the scale for these costs to be recovered. Consideration was given to this issue in Stobbart v Mocnaj [1999] WASC 252 at [34]. It was pointed out, however, that within a few days of that decision, such an order was made in Murcia Holdings Pty Ltd and Ors v City of Nedlands and Ors [1999] WASC 270, although Stobbart v Mocnaj does not appear to have come under notice in that case. For the reasons given in Stobbart v Mocnaj I would not give such a direction in this case.

26 There is no need for me to consider the question of transcript as that is able to be dealt with by the taxing officer.

27 A "declaration" was sought for the defendants to pay interest on the plaintiff's costs, as allowed on taxation pursuant to this decision, from and including 28 September 1999 which is the date on which the main orders in the action were made and costs were reserved. It is not explained formally, or in any detail, why it has taken from 28 September 1999 until now to bring the matter of costs back before me, except that it is said in submission that there had been discussions about costs between the parties and for this purpose a draft bill was prepared and this took some time. While I accept it was clear, as at 28 September 1999, that the plaintiff should have an order for costs, none was made on that day and none has been sought until this application. I am not persuaded any such declaration should be made, even if it were open to make such an order which is a question I have not considered.

28 The plaintiff should have the costs of this application.

1. The defendants should pay the plaintiff's costs of this action, including reserved costs, to be taxed if not agreed.

2. The plaintiff's costs should be taxed without regard to the scale limits for items 6(d), 13, 14(a), (c), (e), (g) (with respect to the attendance on 29 September 1999), 15(b) and 24(with respect to the Directions hearing on 12 February 1999).

4. Reasonable allowance should be made on taxation for the cost of the plaintiff's travel, accommodation during the main trial, and vehicle hire expenses for one day.

5. The defendant should pay the plaintiff's costs of this application to be taxed if not agreed.