Thiess Pty Ltd v FLSMIDTH Minerals Pty Ltd (No. 2)

**[1] The plaintiff has obtained a judgment for the rectification of a deed between the parties.[1] I have ordered that the deed be rectified in precisely the manner which the plaintiff had claimed in its pleading. This judgment concerns the costs of the proceedings.

[2] In October 2008, there was an adjournment of the trial which I held to be the result of some fault on each side. I ruled that there be no order for the costs thrown away by that adjournment. The parties now agree there should be an order in the plaintiff's favour for all other costs of the proceedings. The issue is whether they should be awarded upon the indemnity basis.

[3] There was no offer to settle made under Part 5 of Chapter 9 of the Uniform Civil Procedure Rules. But the plaintiff argues that it offered to resolve the dispute which was the subject of these proceedings, albeit prior to their commencement, and that the defendant unreasonably declined that proposal. Moreover, it is said to be significant that the defendant sought to gain a bargaining advantage, by the use of the (unrectified) deed, in respect of other litigation between the parties to which I referred in my judgment as the Proceedings.

[4] In Di Carlo v Dubois[2], White J (with whom Williams JA and Wilson J agreed) cited Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd[3]; Colgate-Palmolive Company v Cussons Pty Limited[4] and Rosniak v Government Insurance Office[5] as indicating the circumstances in which an order for indemnity costs would be justified under the UCPR. In Rosniak, Mason P[6] said that the discretion to depart from the usual basis for costs is not confined to the situation of what Gummow J in Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, The Environment, Tourism and Territories[7] had described as the "ethically or morally delinquent party", but he held that "[n]evertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation".[8] Chesterman J has preferred a criterion of "something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis".[9] Whether the criterion is that of unreasonableness or irresponsibility, the parties here agreed that, as I said in Anderson v AON Risk Services Australia Ltd[10], there must be something about the facts and circumstances beyond the demerit of a party's case, as reflected in the outcome, before such an order is warranted.

[5] I go then to the correspondence before these proceedings were commenced upon which the plaintiff relies. On 10 July 2007 the plaintiff's solicitors wrote to DLA Phillips Fox who were then acting for the defendant. Under the heading "The way forward", they wrote that "[t]he appropriate course to take is for Thiess and FFE to rectify the Side Deed so that it records their common intention" and they proposed "an amended form of clause 8 of the Side Deed" in certain terms. It is unnecessary to set out in full that proposed clause. But it proposed an amendment to cl 8.2 as follows:**

"8.2 The Contractor shall not enforce against the Consultant any judgment, settlement or order made in connection with the Proceedings, except to the extent that the Consultant is indemnified by QBE pursuant to the Project Specific PI Policy and/or Liberty pursuant to the Liberty Policy in respect of that judgment, settlement or order."

**[6] The proposed amendment was in terms different from the rectification which was ultimately pleaded and granted. The rectified cl 8.2 limited the plaintiff's right to enforce a judgment, settlement or order made in connection with the Proceedings to the extent that the defendant was indemnified pursuant to the Project Specific PI Policy, according to whatever was the meaning of that term in the 2001 agreements. As to what was that meaning, the plaintiff argued at the trial that it meant the combined effect of the QBE Policy and the Liberty Policy, which the defendant neither conceded nor disputed by any submission. I held that it was unnecessary to decide what was meant by the Project Specific PI Policy in the 2001 agreements. The order for rectification which was made was therefore in terms which did not specify which policy or policies constituted the Project Specific PI Policy in the 2001 agreements: rather it rectified the deed so that the term Project Specific PI Policy in the deed would take whatever was its meaning in the 2001 agreements. Similarly, the insurer was to be defined in the deed as rectified not as QBE and Liberty, but as "either or both of QBE and Liberty". Strictly speaking then, the plaintiff has not achieved an outcome by these proceedings as favourable as that proposed within the letter of 10 July 2007, because the proposal would not have left that question open.

[7] On 19 October 2007 the plaintiff's solicitors wrote again to DLA Phillips Fox, asking whether there was a real dispute as to what was intended to be recorded by the Side Deed. And they asked several specific questions, the first of which is whether the defendant asserted that the Side Deed, in the form executed by the parties, reflected the agreement which the defendant intended to make with the plaintiff so far as cl 8 is concerned. They also there wrote that the letter had two purposes: to ascertain whether it was necessary for proceedings to be brought and to ground an application for an order for indemnity costs in the event that proceedings were brought and the plaintiff succeeded.

[8] On 13 November 2007 DLA Phillips Fox replied that the answer to that particular question was yes, making it unnecessary to provide a response to the others. On 30 January 2008, they again wrote to the plaintiff's solicitors, saying that the defendant maintained that the Side Deed, in the form executed by the parties, reflected the agreement which the parties intended to reach.

[9] The assertion for the defendant that it was its intention to contract in terms of the Side Deed as executed is, of course, inconsistent with my findings. It is said then that the defendant well knew that the deed was executed with the common intention as I found.

[10] The defendant must be taken to have known throughout these proceedings that it intended the Side Deed to have the effect according to the plaintiff's case. But that is not to say that it knew that it had no prospects of successfully defending the case. It was entitled to test that case and there was no impropriety in the fact or manner of its doing so. And the fact that it resisted this case in order to secure an advantage negotiating a settlement of the Proceedings is not critical, absent a finding that it deliberately delayed this litigation in order to promote that advantage. I am not asked to make that finding.

[11] Ultimately the plaintiff's argument is one which could be applied to any case in which a plaintiff succeeds in obtaining an order for rectification of a contract upon the basis of a mutual mistake. Yet no authority was cited which indicates that such a category of litigation ordinarily warrants an award of indemnity costs. Overall I am not persuaded to make such an order in this case.

[12] It will be ordered that the defendant pay the plaintiff its costs of and incidental to the proceeding (including reserved costs, if any) to be assessed on the standard basis but excluding the costs thrown away by the adjournment on 21 October 2008.**

[1] [2010] QSC 006.

[2] [2002] QCA 225.

[3] [1988] FCA 202; (1998) 81 ALR 397.

[4] [1993] FCA 536; (1993) 46 FCR 225.

[5] (1997) 41 NSWLR 608.

[6] (1997) 41 NSWLR 608 at 616.

[7] (1992) 34 FCR 412 at 415.

[8] (1997) 41 NSWLR 608 at 616.

[9] Todrell Pty Ltd v Finch (No. 2) [2007] QSC 386; [2008] 2 Qd R 95 at [4].

[10] [2004] QSC 180 at [2].