JUDGMENT No. dt UE CATCHWORDS PRACTICE AND PROCEDURE - costs - payment into court - acceptance within time fixed - late amendment to statement of claim - whether change in risk - whether Court should "otherwise order" as to costs prior to amendment. Federal Court Rules, O 23 rr 4(1), 5(3)(7), 11(1)(2) Trade Practices Act 1974 (Cth), ss52, 53(a), 53(c), 71(1)(2), 73(2), 74H Minchillo v Lanes Ford Trucks Pty Ltd (1992) ASC 956-156, (1994) ATPR (Digest) 46-119. D&S Estates Limited v Church Commissioners for England [1989] 1 ac 177 Gaskins v British Aluminium Co Limited [1976] QB 524 Proetta v Times Newspapers Limited [1991] 1 WLR 337 Wills & Anor v Bigmac Pty Ltd and Ford Motor Company of Australia Limited VG No 59 of 1992 at By Judge: Heerey J Place: Melbourne RECEIVED Date: 9 December 1994 -9 DEC 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTRY IN_THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG No. 59 of 1992 ) ENERAL DIVISIO ) BETWEEN: DONALD JOHN WILLS and HEATHER RENEY WILLS Applicants ~ and ~ BIGMAC PTY LTD and FORD MOTOR COMPANY OF AUSTRALIA LIMITED Respondents - and - BIGMAC PTY LTD Cross-Claimant - and - FORD MOTOR COMPANY OF AUSTRALIA LIMITED Cross-Respondent JUDGE: Heerey J DATE: 9 December 1994 PLACE: Melbourne MINUTE OF ORDERS THE COURT ORDERS: 1. The respondents' motion by notice dated 23 November 1994 is dismissed with costs, including reserved costs. IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) VG No. 59 of 1992 GENERAL DIVISION ) BETWEEN: DONALD JOHN WILLS and HEATHER RENEY WILLS Applicants - and - BIGMAC PTY LTD and FORD MOTOR COMPANY OF AUSTRALIA LIMITED Respondents - and - BIGMAC PTY LED Cross-Claimant - and - FORD MOTOR, COMPANY OF AUSTRALIA LIMITED Cross-Respondent JUDGE: Heerey J DATE: 9 December 1994 PLACE: Melbourne REASONS FOR JUDGMENT During the course of the trial the applicants accepted the respondents' offer of compromise. Under 0.23 r.11(1)(a) of the Federal Court Rules the applicants will be entitled to tax their 2. costs on a party and party basis up to and including the day the offer was accepted, "unless the Court otherwise orders". The respondents have moved the Court for an order to the effect that for the period between 17 December 1992 and 27 October 1994 the applicants recover no costs and pay the respondents' costs. The significance of those dates and the argument put forward in support of the respondents' application require an examination of the history of this litigation. Acquisition of Vehicle In the middle of 1989 the applicants acquired from the first respondent, a Ford dealer then called Denmac Ford Pty Ltd (the dealer), a Ford Louisville LTL 9000 prime mover. Financing was arranged by the Commonwealth Bank of Australia which purchased the vehicle from the dealer and leased it to the applicants' company Hea-Don Pty Ltd. The vehicle was manufactured by the second respondent Ford Motor Company of Australia Limited ("Ford"). Commencement of Proceedings On 26 February 1992 the applicants commenced the present proceeding number No. VG 59 of 1992 against the dealer and Ford. The statement of claim alleged that representations by the dealer and Ford were made as to the reliability, economy and other desirable characteristics of the vehicle. Particulars of the representations referred to conversations between the first 3. applicant and a named employee of the dealer, and also the supply of a brochure. It was further alleged that the representations were false and untrue and that the dealer and Ford had contravened ss.52, 53(a) and 53(c) of the frade Practices Act 1974 (Cth) (the Act). It was further alleged that the representations constituted negligent misstatements on the part of the dealer and Ford. In the further alternative, allegations of negligence were made against both respondents. The dealer was said to have been negligent in supplying a defective vehicle, failing to effect repairs in a proper and workmanlike manner, failing to properly examine the vehicle prior to supply and failing to take any proper care to safeguard the applicants' interests "in the circumstances where it owed the applicants a duty to provide them with a vehicle capable of being used in the course of a cartage business". Ford was alleged to have been negligent in designing and manufacturing a defective vehicle for use by a cartage contractor, failing to conduct any proper inspections or examinations, permitting the vehicle to be supplied to the dealer for supply to the applicants and failing to take any proper care to safeguard the applicants' interests. The First Payment In On 17 December 1992 Ford paid into court $20,000 "in answer to all the causes of action on which the applicants claim". On 19 January 1993 the applicants' solicitors rejected that payment in. 4. Amendment to Statement of Claim On 20 October 1994 the applicants' solicitors advised the respondents of an application for amendment to the statement of claim. The trial had already been fixed to commence on Monday 31 October. The application came on for hearing before me on 27 October. The proposed amendment raised a case against the dealer under s.73(2) of the Act of the implied conditions of merchantable quality and fitness for the purpose of interstate cartage implied by s.71(1) and (2). The application was conducted on the basis that if the amendment were granted the dealer would also be entitled to claim indemnity against Ford under s.74H of the Act and amend its cross-claim for that purpose. In support of the amendment counsel for the applicants said that no new facts were alleged and that the amendment raised an alternative cause of action on facts already pleaded and particularised. Ford did not oppose the amendment, and did not dispute the applicants' contention that the amendment raised no new factual contentions. However, its counsel sought the adjournment of the trial by one day to Wednesday 2 November (the Tuesday being the Melbourne Cup Day holiday) "to consider the ramifications of the amendments and, in particular, whether it was appropriate for (Ford) to make a payment into court". I granted leave to amend and refused the adjournment of the trial, which commenced on the Monday. In particulars of damage 5. filed on 28 October the applicants particularised the quantum of their claim in a total of $618,894.86. At about 5.30 pm on Thursday 3 November senior counsel for Ford offered counsel for the applicants $40,000 plus costs to the date of the payment in (17 December 1992) together with the purchase of the vehicle by Ford for its then market value. No value was specified. The offer was rejected by the applicants. The Second Payment In At 6.01 pm on Wednesday 9 November the applicants' solicitors received by fax a notice of further deposit signed on behalf of both respondents. The notice advised that both respondents had paid into court a further $80,000 in addition to the $20,000 already paid by Ford on 17 December 1992. The sum was said to have been paid under 0.23 and to be "in answer to all the causes of action on which the applicants claim". By this stage both applicants had completed their evidence, as had their accountant and a mechanical engineer called on their behalf. The applicants' counsel had completed slightly more than one day's examination in chief of their principal expert witness Mr Andrew Enkelman, another mechanical engineer. The trial proceeded until Friday 11 November. It was adjourned 6. to resume on Monday 28 November when in accordance with the previous listing arrangement it was to continue for another two weeks. Acceptance of Second Payment In On Monday 14 November the applicants' solicitor, Mr Anthony Watson, received instructions from the applicants that they wished to accept the $100,000. Mr Watson had previously advised the applicants that if they accepted the payment into court then the respondents would be obliged to pay their costs on a party/party basis, save for any costs that had already been the subject of a specific order. Late in the afternoon of that day Mr Watson gave instructions to his staff to prepare faxes to the court and to the respondents' solicitors advising of acceptance. Shortly before the faxes were sent, Ford's solicitor, Ms Louise Jenkins, during the course of a telephone conversation with Mr Watson, said that should the payment into court be accepted Ford would be seeking to have the applicants' costs reduced on the basis of the late amendment to the statement of claim. Respondents' arquments In an affidavit sworn in support of the present application Ms Jenkins deposed that had the statement of claim included the cause of action under ss.71 and 73 of the Act at the time of the first payment into court she would have advised her client to have made a payment of "a significantly larger amount". She 7. deposed "furthermore, had the applicants' statement of claim been amended at any time between (Ford's) first payment into court on 17 December 1992 and 27 October 1994, I would have advised my client to make a further payment into court to meet the increased risk of the litigation. I have been informed by my client and verily believe that in all probability and in reliance upon my advice, a further payment into court would have been made at such time in response to (such) amendments". She further deposed that because of the late amendment "... my client has been denied a proper opportunity to have considered both its position with respect to its future conduct in relation to the action and the desirability of seeking settlement of the action". On the hearing of the application senior counsel for Ford argued that it was not fair that costs should be awarded as if the new cause of action had been in the case from the beginning. He said that there had been a change in the risk his client ran after the first payment into court. The Minchillo Case At this stage mention should be made of other litigation against Ford over another Louisville LTL 9000 prime mover. On 21 November 1991, that is before the present proceeding commenced, McGarvie J delivered judgment in the Supreme Court of Victoria in Minchillo v Lanes Ford Trucks Pty Ltd (1992) ASC 456-156. 8. The applicants in Minchillo had acquired their vehicle in May 1989. They claimed it was never of merchantable quality because it was prone to excessive vibration and difficulty in steering, the same complaints as the applicants made in the present case. Prior to the trial the dealer went into liquidation. It did not appear at the trial, which proceeded against Ford alone. McGarvie J accepted the applicants' evidence as to experience of the vehicle on the road. His Honour found (at 57,546): " I am satisfied that from the time 1t was supplied the prime mover was never of merchantable quality because it was prone to excessive vibration and difficulty in steering. It was not safe to use." His Honour found that the applicants were entitled to recover any loss and damage suffered against the dealer (the trial had proceeded on the issue of liability only). However because of the disappearance of the dealer from the case, there was no cross-claim for indemnity against Ford under s.74H and accordingly no practical benefit for the applicants on this cause of action. The direct causes of action against Ford failed. McGarvie J held that there was no liability in negligence for defective manufacture which causes no injury other than injury to the defective article itself and consequent economic loss: D & S$ Estates Limited v Church Commissioners for England [1989} 1 AC 177 at 206, 211. Nor was there any claim under s.53(a) of the Act since a manufacturer did not impliedly represent that goods were of merchantable quality or fit for a particular purpose simply by supplying them to a retailer. The claim under a 9. contractual warranty failed because it was not established that the defect was not due to a design fault as distinct from defective materials or workmanship. An appeal to the Appeal Division of the Supreme Court was dismissed on 10 February 1994: (1994) ATPR (Digest) 946-119. Conclusion In my opinion, there has been no sufficient cause shown for departing from the usual consequence prescribed by 0.23 x.11(1)(a). First, the history of this proceeding belies the contention that, had the amendments formed part of the original statement of claim, the respondents would have made a payment into court on 17 December 1992 of $100,000 or anything like it. When the amendments were made on 27 October 1994, at a time when the respondents presumably knew much more about the case than they did in December 1992, they were prepared to run the trial for almost two weeks before making the second payment in. In the meantime, on 3 November, Ford offered a substantially lesser amount. Secondly, while I am prepared to accept that 0.23 r.11(2) made it impossible for the respondents to frame a notice of offer containing the costs consequence now sought to be imposed (although presumably this could have been done by a sum including a specified amount of costs: see 0.23 r.4(1)) nevertheless the respondents made no informal offer expressed in such terms. Ms Jenkins did raise with Mr Watson the contention now advanced, 10. but that was after the second payment in was made. Thirdly, it is somewhat unrealistic to argue that Ford was never at risk of attack under ss.73 and 74H until the amendment. Ford was represented by the same solicitors in the Minchillo case as in the present one. The gap in the present applicants' case as originally pleaded must have been only too obvious to Ford and its legal advisers. Since the dealer in the present case remained in business, and in the case, it was only a matter of time before the penny dropped for someone in the applicants' camp as to the need to introduce a s.73(2) claim. (As it happened, the application for amendment was made shortly after the applicants' present counsel was briefed for the trial.) Fourthly, the authorities relied on by the respondents in my opinion weigh against their application. In Gaskins v British Aluminium Co Limited [1976] QB 524 the court had to consider the Rules of the Supreme Court (UK). Those rules provided that if a defendant made a payment into court more than 21 days before the trial, the plaintiff had a right to accept it within that period and get his costs. If the payment was made less than 21 days before the trial, the plaintiff had a right to accept it so long as he did so before the trial started. If the plaintiff let those times pass he no longer had a right to accept the payment but the court had a discretion to allow payment out at any time before, at, or after the trial. A payment in was made, but not accepted before the trial il. commenced. At the end of the first day the plaintiff's case was going badly and his counsel asked for an order for payment out of the money in court. The trial judge refused leave and an appeal to the Court of Appeal was dismissed. The Court of Appeal differed as to whether the application should have been made to the trial judge at all in the face of opposition by the defendant. Lord Denning MR and Orr LJ held that it should not have been; Browne LJ differed. However all members of the court agreed that the trial judge was correct in refusing an order because there had been a change in the risk and the plaintiff's prospects had diminished: see [1976] QB at 531, 532, 534 and 539. In Proetta v Times Newspapers Limited [1991] 1 WLR 337 a plaintiff in a libel action was on 27 June 1990 granted leave to accept a payment into court made on 1 August 1989. In the meantime the defendants had been given leave to amend their defence to plead justification and also leave to deliver certain witness statements. An appeal by the defendants to the Court of Appeal succeeded, the court following Gaskins. The argument which the court accepted was that 2+.payment into court is a procedure whereby the defendants can provide an opportunity to the plaintiff to dispose of the action by acceptance of the sum paid in but the sum is paid in in the light of the defendant's perception of the case at the time of payment in. Accordingly the Court should not extend the time laid down in the Rules for acceptance if the risks of the case change adversely to the plaintiff." Neill LJ, with whom the other members of the court agreed, held that there had been a substantial alteration of the risks in the case once a plea of justification was allowed and the risks were 12. again substantially altered when the Evidence Act notices were allowed out of time. His Lordship concluded (at 340) that "once there is a substantial alteration in the risks, the time for acceptance should not be extended". Under Order 23 of the Federal Court Rules the commencement of trial has no particular significance. The offer can be accepted within the time expressed, which however must not be less than 14 days: r.5(3). Subject to that, the offer can be accepted in non-jury cases at any time before the Court pronounces the decision or begins to give reasons for the decision: r.5(7). The English cases both concerned a plaintiff seeking an indulgence by being allowed to accept a payment into court after the time for acceptance as of right had expired. In the present case, the applicants have exercised their right to accept the payment in within the prescribed period and it is the respondents who are seeking an indulgence in the form of a variation to the usual costs consequences provided for by the rules. An essential element of any payment into court machinery is the provision of a fixed period during which the plaintiff can accept. The reasons are obvious enough. To be fair, such a machinery has to allow the plaintiff adequate time to obtain advice and give proper consideration to what will usually be a critically important decision. Since the Federal Court Rules have the effect that the period for acceptance may, as occurred in the present case, run during the course of a trial, the rule- 13. makers must have contemplated that the offer is to remain open for the stipulated period notwithstanding the possibility of the fluctuations of fortune which are an inescapable part of the trial process. Moreover, an important element in facilitating proper consideration of a payment in is certainty as to the costs consequences. It would in my opinion require compelling and exceptional circumstances before a court "otherwise orders". Were this not so, applicants might be inhabited in accepting otherwise reasonable offers because of uncertainty as to the costs consequences. The effectiveness of Order 23 in promoting settlement of litigation would be diminished. In any case, the respondents do not seek to advance a case that the prospects of the applicants declined after the payment into court on 9 November. Mention was made in the course of argument on the present application of the fact that during the course of the hearing the applicants produced prescribed payment vouchers showing payments received from carriers for whom they sub- contracted work (virtually all the applicants' work was sub- contracting). These vouchers, which had not been discovered, in some ways detracted substantially from the applicants' case on damages. For example they showed that less work was available from the applicants' principal customer Brambles Limited than was asserted in their damages calculation. The short answer to these arguments however is that the second 14. payment 2n was made after the applicants and their accountant had completed evidence. The inference is equally open that the amount of that payment in was less than it would otherwise have been because of headway the respondents had made in the course of the trial on the issue of damages. The respondents' motion by notice dated 23 November 1994 will be dismissed with costs including reserved costs. No other order is required as 0.23 r.11(1)(a) will operate in its terms. I certify that this and the preceding thirteen (13) pages are a true copy of the reasons for judgment of his Honour Justice Heerey. Dated: 9 December 1994 a) aa Associate Appearances Counsel for the applicants: P J Riordan Solicitor for the applicants: Coltmans Counsel for the first respondent: P Williams Solicitor for the first respondent: Purves Clarke Richards Counsel for the second respondent: P Buchanan QC with P D Santamaria Solicitor for the second respondent: Arthur Robinson & Hedderwicks Date of hearing: 1 December 1994 * JUDGES CHAMBERS FEDERAL COURT OF AUSRALIA 450 LITTLE BOURKE STREET ay AUBTRALIA MELBOURNE, 3000 9 December 1994 Sonia Cornaie Federal Court of Australia Principal Registry Law Courts Building Queens Square SYDNEY NSW 2000 Dear Sonia Re: Willis Anor _v Bigmac Pt td_ and Ford Motor Company o Australia No. VG 59 of 1992 I enclose a copy of the judgment delivered by his Honour Justice Heerey in the above matter today (9 December 1994). A diskette record of the catchwords, minutes and reasons for judgment is also enclosed. This judgment is for general distribution. , David Brennan Associate to Heerey J enc.