Solicitors:
Pikes & Verekers Lawyers (Appellant)
Somerville Laundry Lomax (First and Second Respondents)
File Number(s): 2015/14881
Decision under appeal Court or tribunal: District Court of New South Wales
Jurisdiction: Civil
Citation: [2014] NSWDC 251
Date of Decision: 22 December 2014
Before: Neilson DCJ
File Number(s): 2011/101316
[2]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[3]
Judgment
MACFARLAN JA: I agree with Emmett AJA.
GLEESON JA: I agree with Emmett AJA.
EMMETT AJA: On 10 November 2015, for reasons published on that day, the Court made orders in an appeal brought by The White Ant Co Pty Limited (White Ant). The respondents to the appeal were Michael and Judith Robson (the Owners). The appeal was concerned with the meaning of a deed of agreement made between White Ant and the Owners (the Deed). The Owners claimed that, under the Deed, White Ant was liable to pay for the reasonable costs of the rectification of damage done by termites to a house owned by them.
The Owners commenced proceedings against White Ant in the District Court and White Ant filed a cross-claim. The Owners obtained judgment in the District Court against White Ant in the sum of $56,492.00 and White Ant was ordered to pay their costs. The cross claim was dismissed with costs.
White Ant applied for leave to appeal on 12 grounds. Leave was granted, but the Court restricted White Ant to only two of those grounds, neither concerning the cross-claim. One ground was that the primary judge erred in drawing an inference that there was actual damage caused by the ingress of termites. The other ground was that the primary judge erred in finding that White Ant had a liability to the Owners under the Deed.
On 10 November 2015, the Court allowed the appeal on the ground concerning the construction of the Deed and ordered that the District Court's orders be set aside. The Court ordered that, in lieu of the orders made by the District Court, the following orders be made:
The proceedings brought by the Owners against White Ant be dismissed with costs.
The cross-claim brought by White Ant be dismissed and there be no order as to the costs of the cross-claim.
However, the Court revoked leave to appeal in so far as it related to the damage ground. Thus, of the original 12 grounds, White Ant succeeded on only one ground.
By amended notice of motion dated 23 December 2015, White Ant now seeks orders pursuant to Uniform Civil Procedure Rules ('UCPR'), r 36.16 that the orders of 10 November 2015 be varied to provide as follows:
The Owners pay White Ant's costs of the appeal.
In lieu of the orders made by the District Court on 22 December 2014, orders be made to the effect of the following:
1. The proceedings brought by the Owners against White Ant be dismissed;
2. Subject to the costs order of the District Court made on 22 October 2012, the Owners pay White Ant's costs of and incidental to the proceeding on the ordinary basis up to and including 2 September 2012.
3. The Owners pay White Ant's costs of and incidental to the proceedings on the indemnity basis on and from 3 September 2012.
In the alternative, White Ant seeks orders for the payment of indemnity costs from such dates as this Court determines. White Ant did not seek to vary the order made by this Court regarding the cross-claim.
In support of its application for the costs of the appeal, White Ant Co relies on UCPR, r 42.1, which embodies the general principle that costs follow the event, unless it appears to the Court that some other order should be made as to the whole or part of the costs. White Ant contends that the substantive ground upon which the appeal was brought was upheld and that the withdrawal of the grant of leave had no effect on the ultimate determination of the Court. It says that there was nothing unusual about the appeal that would warrant a departure from the general entitlement of a successful appellant to have its costs.
The Owners accept that costs of the appeal are at the discretion of the Court and that the general rule is that costs should follow the event. However, they contend that, in circumstances where White Ant was unsuccessful on all but one of the grounds upon which it sought to rely, it is appropriate to award it only part of the costs of the appeal. They say that, in the circumstances, the case is an appropriate one for apportionment of the costs. They contend that the appropriate course would be to make no order as to costs or, alternatively, that White Ant be allowed one-half of its costs.
White Ant points out that, whatever may have been stated in the Draft Notice of Appeal filed in connection with the application for leave to appeal, only two grounds were relied on in the Notice of Appeal and the Owners do not suggest that its conduct of the appeal was unconventional or inappropriate. It denies that its conduct resulting in increased costs. It points out that the appeal took half a day and says that the fact that leave to appeal on the damage question was withdrawn was of no consequence since it had no impact on the result.
In the course of hearing the appeal, this Court concluded that no injustice would flow from the manner by which the primary judge assessed the quantum of damages. Accordingly, the Court revoked the grant of leave in relation to that question. Further, in the result, White Ant was refused leave on 11 of 12 grounds. Accordingly, White Ant should not have its costs of the application for leave in relation to any of those grounds, all of which would have involved considerable time and expense in preparation. The question upon which White Ant succeeded in the appeal was a simple matter of the proper construction of the Deed. It is highly likely that the costs of preparing the question of damage would have exceeded significantly the costs of preparing the question of construction.
One course would be to order the Owners to pay White Ant's costs of the appeal, except the costs relating to preparation of the question on which leave was revoked. That would involve additional costs in the event that apportionment was disputed. In the circumstances, I consider the appropriate order is that the Owners pay 40 per cent of White Ant's costs of the appeal and the application for leave to appeal.
White Ant relies on a series of offers that they had made to settle the proceedings as justification for making special orders as to the costs of the proceedings brought by the Owners in the District Court. It acknowledges that there is no presumption that a party who does not accept an informal offer and does not obtain a judgment more favourable than the offer will necessarily pay indemnity costs from the date of the offer. However, White Ant contends that each of the offers made was a genuine offer of compromise, in the sense that it involved giving up its entitlement to a favourable costs order as well agreeing to pay a sum to the Owners in full and final settlement of their claims.
[4]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 07 September 2016
On 29 August 2012, White Ant offered to pay $20,000 in full and final settlement. The offer expired on 3 September 2012. On 22 February 2013, White Ant offered to pay $10,000 in full and final settlement. That offer expired on 28 February 2013. On 5 March 2013, the offer of 22 February 2013 was renewed to 6 March 2013. On 12 April 2013, White Ant again offered to pay $10,000 in full and final settlement. The offer expired on 26 April 2013. None of the offers was accepted.
As at 29 August 2012, the claim pleaded against White Ant was that it had performed certain works on 27 March 2008 in a negligent, unprofessional or unworkmanlike manner and that the Owners had suffered loss or damage in the cost of performing rectification works and in the diminution in the value of their house. That pleading was abandoned and an entirely new pleading was filed on 26 November 2012. After 26 November 2012, the Owners did not make any allegation that White Ant had acted negligently, unprofessionally or in an unworkmanlike manner in respect of work undertaken on their house.
White Ant says that, in circumstances where the claim pleaded as at 29 August 2012 was abandoned, two days was a reasonable time within which to consider the offer of that date and that, therefore, the rejection of the offer was unreasonable. Accordingly, it says, it should have its costs on the indemnity basis from 4 September 2012.
The second and third offers were made after the third iteration of the Owners' claim had been filed. White Ant says that the second and third offers were made within sufficient time for the Owners to consider them and the rejection of the offers was unreasonable. The fourth offer was made prior to the final two versions of the pleadings. However, it was made at a time when the case that the Owners ultimately ran at trial was pleaded, except for specific allegations as to the source of termite ingress.
White Ant contends that, given the repeated abandonment and recasting of claims, each of the second, third and fourth offers was made at a time when the pleaded case as to liability, which this Court determined should fail, was finalised. In particular, the fourth offer, made shortly prior to commencement of the trial on 20 May 2013, was made at a time when all of the evidence was prepared and after the pleadings were finalised. In those circumstances, it says, the Owners acted unreasonably in refusing each of the offers. It therefore contends that they should be ordered to pay its costs on the indemnity basis from 4 September 2012 or such other date as the Court determines.
The Owners respond that the offers made by White Ant focused on questions of causation and damage, which were ultimately found in their favour. Each of the offers was made on the basis that they would have to bear their own costs to the date of the offer. The first offer was made 17 months after the proceedings had commenced and the costs incurred by the Owners by the time the offers were made were therefore likely to be significant. They say that the offers were only open for very short periods, in circumstances where the case was a complex one involving many disputed issues of law and fact. They contend that they had incurred significant costs by the time the first offer was made and each offer involved their bearing their own costs. The offers were significantly less than the amount that was awarded by the District Court for damages. That figure was not disturbed on appeal, although this Court determined that there was no liability for the damage.
More significantly, the Owners contend that their failure to accept any of the offers was not unreasonable in circumstances where, when making the offers, the reasons given on behalf of White Ant as to why the Owners should accept them were reasons ultimately rejected by the District Court. The reasons advanced by White Ant were based, not on the meaning of the Deed, but on questions of causation and damage, on which White Ant was not successful. That is to say, the reasons advanced by White Ant as to why the Owners would not succeed were not the reasons upon which the Owners were ultimately unsuccessful in the proceedings.
The overwhelming majority of the costs incurred and time spent in preparation and in the hearing related to issues of causation of damages, matters that White Ant disputed in its case on which it was substantially unsuccessful. Significant and unnecessary costs were therefore imposed on both sides. Nevertheless, the Owners conceded in their written submissions that the appropriate order for costs was that they pay the costs of the proceedings brought by them on the ordinary basis.
It is clear enough that the effect of the appeal being allowed is that White Ant has been successful in the District Court in resisting the Owners' claim for damages. However, it put in issue detailed factual matters in respect of which there has been no determination in its favour and, indeed, adverse determinations. Further, the reasons advanced on its behalf as to why the Owners would fail in the proceedings, and should therefore accept the offers of compromise, were not based on the reasons of this Court for allowing the appeal.
In all of the circumstances, I do not consider that the Owners acted unreasonably in rejecting the offers made by White Ant.
For these reasons the orders that this Court made on 10 November 2015 should stand, with a further order being made that the respondents pay 40 per cent of the appellant's costs of the appeal and the application for leave to appeal.