New South Wales Supreme Court CITATION : Hetherington v Mirvac Pty Ltd & 3 Ors [1999] NSWSC 515 CURRENT JURISDICTION : Civil FILE NUMBER(S) : 20982/86 HEARING DATE(S) : JUDGMENT DATE : 31 May 1999 Garry Colin Hetherington Mirvac Pty Ltd PARTIES : Taylor & Scott Boral Roof Tiles Ltd Keddies JUDGMENT OF : Wood CJatCL LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : LOWER COURT JUDICIAL OFFICER : R.P. McLoughlin SC with P.A. Regattieri (P) C.Simpson (1d) COUNSEL : M.L. Williams (2d) G. Curtin (3d) N. Perram (4d) Hunt & Hunt (P) Minter Ellison (1d) SOLICITORS : Colin Biggers & Paisley (2d) Phillips Fox (3d) Mallesons (4d) CATCHWORDS : DECISION : Order - Plaintiff to pay costs of Mirvac on party-party basis up to 18 November 1998 and upon indemnity basis therafter; Order - Plaintiff to pay costs of Boral on party-party basis up to 22 August 1995 and upon an indemnity basis thereafter; Order - Plaintiff to pay costs of Taylor & Scott and of Keddies, confined to the claims brought against them for negligence, on a party-party basis; Stay granted in relation to costs orders for 28 days THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION WOOD CJ AT CL MONDAY 31 MAY 1999 20982/86 - GARRY COLIN HETHERINGTON V MIRVAC PTY LIMITED & ORS JUDGMENT - On costs 1 HIS HONOUR: This matter has been relisted in order to determine the outstanding issues as to costs of the proceedings. Boral 2 It has now been shown, in relation to the proceedings concerning this party, that: (a) On 6 April 1993 Boral, through its solicitors, made an offer to Taylor & Scott to bear its own costs of the proceedings if they were discontinued against it, and outlined the basis on which it contended that the proceedings against it should fail. (b) This offer was repeated in a Calderbank letter from Boral's solicitors to Keddies dated 9 February 1995, in which Boral advised that it intended to seek costs upon an indemnity basis from that date, if this offer was not accepted. (c) On 22 August 1995 Boral's solicitors wrote to Hunt & Hunt, drawing attention to the fact that special leave to appeal from the decision in O'Brien v Boral Roof Tiles had been refused by the High Court, and repeated the offer contained in the letter of 9 February 1995. (d) On 12 December 1995 a letter was sent advising that the earlier offer remained open and again giving notice of Boral's intention to seek indemnity costs. (e) Mediation was attempted, unsuccessfully, on 29 May 1998. (f) On 18 November 1998 a further letter was sent to the plaintiff's current solicitors, drawing attention to the very same matters which led to the proceedings ultimately being decided by me in favour of Mirvac and Boral, and making a joint offer on behalf of each of those parties to pay the plaintiff's costs in the sum of $30,000 in return for a judgment in their favour accompanied by a deed of release and indemnity. Express reference was made in this letter to the decision in Calderbank. (g) On 4 February 1999 a further joint offer was made, this time by Mirvac's solicitors, as set out below. 3 In the light of those circumstances, Boral seeks an order for costs on a party and party basis up to 6 April 1993, and upon an indemnity basis from that date, or at the latest from 18 November 1998. Mirvac 4 In relation to the proceedings against Mirvac, it was established that: (a) On 25 November 1993, that is the day after Keddies took over conduct of the proceedings from Taylor & Scott, a without prejudice offer was sent to the former firm to settle the matter for $50,000, inclusive of costs. (b) On 1 July 1998 a statement from Gordon Collis was served upon the plaintiff's current solicitors, which underlined the problems that the plaintiff ultimately faced in establishing a claim against Mirvac and, I would add, against the carpenters. (c) As previously mentioned, on 18 November 1998 a joint offer of settlement was made on behalf of both Mirvac and Boral. (d) On 4 February 1999, that is on the third day of the trial, a letter was sent to the plaintiff's solicitors by Mirvac's solicitors, in which a joint offer was made on behalf of Mirvac and Boral to pay their own costs in return for a verdict in their favour and entry into a deed of release and indemnity. 5 Mirvac seeks, in those circumstances, an order for costs upon a party and party basis up to 25 November 1993 and upon an indemnity basis from that date or, alternatively, from 18 November 1998. 6 By consent Mirvac and Boral do not seek any order for costs in relation to the cross-claims between them. Taylor & Scott 7 In relation to Taylor & Scott, it was established that: (a) On 13 April 1995 a formal offer of compromise was forwarded to Keddies upon the basis that they bear their own costs and that a consent verdict be entered in their favour. This was accompanied by a letter detailing the basis on which it was suggested that the claim against Taylor & Scott must fail, advising that the offer was open for twenty-eight days, and asking that it be treated in accordance with the Calderbank principle. (b) On 26 May 1995 this offer was, in substance, repeated in a letter to Hunt & Hunt, in which notice was given that if the proceedings were pursued unsuccessfully against Taylor & Scott, then costs incurred henceforth would be sought on an indemnity or a solicitor and client basis. (c) This offer was rejected by Hunt & Hunt on 11 August 1995. (d) On 24 April 1996 the solicitors for Taylor & Scott again wrote to Hunt & Hunt, outlining in detail their case and advising that they were still prepared to settle on the basis of the offer of compromise, provided that settlement was achieved within twenty-eight days. Again, notice was flagged of an intention to seek costs on a solicitor and client or indemnity basis. 8 In those circumstances Taylor & Scott seek costs on a party and party basis up to 13 April 1995 and upon an indemnity basis from that time. Keddies 9 In relation to Keddies, it was established that: (a) On 28 February 1996 the solicitors for that firm wrote to Hunt & Hunt, making a without prejudice offer of $30,000, inclusive of costs, in full and final settlement of the matter, and setting out, in some detail, the problems that they saw in the way of the plaintiff's claim against them. (b) This offer was effectively renewed by a reminder sent on 20 May 1996. (c) A counter offer was made on 15 July 1997 by the plaintiff's solicitors to settle the proceedings for $280,000, inclusive of costs. (d) On 7 August 1997 Keddies' Solicitors, withdrew their earlier offer and on 27 August 1997 they rejected the plaintiff's counter offer. They seek an order for costs on a party and party basis only. 10 Section 76 (1) of the Supreme Court Act 1970 (NSW) provides as follows: "Subject to this Act and the rules and subject to any other Act - (a) costs shall be in the discretion of the Court; (b) the Court shall have full power to determine by whom and to what extent costs are to be paid; and (c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis." 11 The proceedings were commenced at a time when Supreme Court Rules Pt 52 were in force. Those rules were superseded effective from 1 July 1994 by Supreme Court Rules Pt 52A. 12 It is not necessary to enter into any inquiry whether this requires any difference of approach as to the costs of these proceedings or any part of them, since both sets of rules recognise the power of the Court to order costs on an indemnity basis (Pt 52 r 28A and Pt 52A r 37), and contain similar provisions in relation to offers of compromise (Pt 52 r 17 (4) and (5) and Pt 52A r 22 (4) and (6)). They provide, relevantly, that: "Where a defendant has made an offer of compromise that is not accepted by the plaintiff, and the plaintiff has obtained an order or judgment that is not more favourable to the plaintiff than the terms of the offer, then the plaintiff, unless otherwise ordered, is to be entitled to party and party costs up until the day of the offer and the defendant is to be entitled to costs upon a party and party basis thereafter." 13 As Rolfe J observed in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, these rules do not expressly accommodate the situation where a defendant has made an offer and the plaintiff has failed entirely. Notwithstanding, his Honour held that there was a prime face presumption that an order for indemnity costs should be made, if an offer of settlement was made, rejected and not bettered in litigation, unless the party rejecting the offer establishes that it was reasonable for it not to accept the offer. Prime face, his Honour held unreasonableness would depend upon the failure of the offeree to accept the offer. The discretion to order indemnity costs, his Honour considered, should not be limited to those cases where there was no prospect of success, or where the rejection of the offer was plainly unreasonable, or where there was an element of misconduct on the part of the offeree. 14 With respect, I agree with the conclusion which his Honour reached and with the analysis which led to that result. 15 The present case may be approached upon the basis that a Calderbank letter is the equivalent of an offer of compromise and that its existence may properly enliven the discretion to order indemnity costs. The present case is also one in which, so far as Mirvac and Boral are concerned, the principles described by Cole J, as he then was, in State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (Supreme Court of New South Wales, 8 February 1991) and by Rogers CJ Comm D in AWA Ltd v Daniels (Supreme Court of New South Wales, 8 October 1992) have particular application. 16 The plaintiff's claim against the primary parties (Mirvac and Boral) was always very weak and that weakness was only confirmed once the decision of the Court of Appeal in O'Brien was handed down, and once it became known what evidence Mr Collis would give if called as a witness. Each of Mirvac and Boral pointed out, in clear terms, the pitfalls in the way of the plaintiff, and each took sensible and commercial endeavours to be released from the litigation. I cannot see any reason why they should be burdened with the recovery of costs only up-on a party and party basis, once they had brought these matters to attention and had delivered a Calderbank offer. 17 Accordingly, I order that the plaintiff pay the costs of Mirvac on a party and party basis up to 18 November 1998, and upon an indemnity basis thereafter. 18 I order that the plaintiff pay the costs of Boral on a party and party basis up to 22 August 1995, and upon an indemnity basis thereafter. 19 The position in relation to Taylor & Scott and Keddies is somewhat more complicated, in that each firm, to some extent at least, encouraged the plaintiff to pursue litigation which, upon my assessment, was bound to fail. In the case of Taylor & Scott, they encouraged action against Mirvac and Boral, and also against the carpenters. In the case of Keddies, they encouraged continuance of the proceedings against Mirvac and Boral, and also advised action against Taylor & Scott for not joining the carpenters in time. 20 Even looked at in the most favourable light possible, the discharge by each firm of its retainer can only be described as dilatory and as unsatisfactory from a professional point of view. However, at least three problems stand in the way of the plaintiff in seeking the orders that he seeks: namely, that they be required to pay the costs that he now has to pay to Mirvac and Boral and, additionally, or alternatively, that they be deprived of their costs of defending the proceedings he has brought against them. 21 The problems are as follows: (a) The proceedings were continued against Mirvac and Boral, and against Taylor & Scott and against Keddies, by two other firms of solicitors, once they had ceased to act for the plaintiff. (b) There is no evidence before me as to what advice they gave to the plaintiff in relation to pursuing any aspect of the proceedings or in relation to their possible settlement, and (c) In each instance they had consulted counsel from time to time concerning the proceedings and may be assumed in the absence of evidence to the contrary to have acted in accordance with their advice. 22 There is a power to order costs against successful parties but the Court must be satisfied that, in the particular circumstances, it is appropriate to do so. For example, such an order may be made where they have misconducted themselves in relation to the events the subject of the proceedings, or in the institution or conduct of the proceedings, or in encouraging the other party to believe in the strength of the case that was brought against them. These principles are discussed in Ritter v Godfrey (1920) 2 KB 47 and Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271-272. 23 The argument on costs cannot be converted into an inquiry whether Taylor & Scott or Keddies were negligent in advising the plaintiff to begin, or to continue, the proceedings against Mirvac or Boral, or whether Keddies was negligent in encouraging the plaintiff to commence proceedings against Taylor & Scott. 24 On the state of the evidence before me, I am unable to find that there was that degree of misconduct or encouragement as would justify an order that either party pay the costs of the plaintiff, either by way of a reimbursement of the costs that he must now pay to Mirvac and to Boral, or those which he has incurred in bringing the proceedings against them. 25 Each did flag, for the plaintiff, the problems he was likely to face in the proceedings so far as they related to them. However, neither, while acting for the plaintiff, seems to have adequately assessed the aspect that became critical if negligence was to be established against Taylor & Scott: namely, whether there was any reasonable prospect of maintaining an action against the carpenters, or of gaining access to the insurance policy. It was that aspect that halted progress for an extended period, to the considerable disadvantage of the plaintiff, both while Taylor & Scott had the conduct of the proceedings and when attempts were made later by Keddies to institute proceedings against them. 26 Absent the offers, and the waiver of their own fees in respect of the periods during which they acted respectively for the plaintiff, I would, in the exercise of my discretion, have declined to make any order for costs in the proceedings so far as they concern the claims brought against each firm. However, once sued, they did endeavour to resolve the proceedings and to point out the problems in the way of the plaintiff. It was his election to proceed with the claims and it is, in my view, appropriate that the costs should follow the event but only on a party and party basis. 27 Accordingly, I order that the plaintiff pay the costs of Taylor & Scott and of Keddies, confined to the claims brought against them for negligence, on a party and party basis. 28 I grant a stay in relation to the costs orders for twenty-eight days. ********** Last Modified: 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.