Mohamed v Farah [2004] NSWSC 598

New South Wales Supreme Court

CITATION : Mohamed v Farah [2004] NSWSC 598 HEARING DATE(S) : Written submissions: 18/06/04, 30/06/04 JUDGMENT DATE : 6 July 2004 JURISDICTION: Equity Division JUDGMENT OF : Barrett J DECISION : Successful plaintiff to pay defendant's costs of motion

CATCHWORDS : PROCEDURE - costs - successful application by plaintiff to withdraw accepted offer of compromise - offer and confirmation of it affected by mistake by plaintiff's solicitors - defendant properly putting plaintiff to proof of mistake - analogy with grant of indulgence LEGISLATION CITED : Supreme Court Rules, Part 52A rule 16 Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 Mertelmeyer v Mertelmeyer (No 2) (1904) 21 WN (NSW) 76 CASES CITED : Mohamed v Farah [2004] NSWSC 482 Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411 Young v Combe (unreported, NSWSC, Hodgson J, 29 July 1993) Makram Mohamed - Plaintiff PARTIES : Lorraine Marion Farah - Defendant

FILE NUMBER(S) : SC 3535/03 COUNSEL : Mr C Dick - Plaintiff Mr C M Simpson - Defendant SOLICITORS : Back Schwartz Vaughan - Plaintiff L Rundle & Co - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

TUESDAY, 6 JULY 2004

3535/03 – MAKRAM MOHAMED v LORRAINE MARION FARAH JUDGMENT 1 For reasons published on 4 June 2004 (see Mohamed v Farah [2004] NSWSC 482), I (a) granted leave to the plaintiff to withdraw an offer of compromise dated 23 March 2004; and (b) directed that judgment not be entered in terms of that offer of compromise. 2 I did so because I had formed the opinion that the offer of compromise was affected by unilateral mistake (being mistake on the part of the plaintiff's solicitor) and that it would be unjust to enforce the apparent compromise rather than allowing the parties' controversy to proceed towards trial as if the offer had not been made and accepted. 3 It remains to deal with costs of the plaintiff's successful application. Submissions on costs have been filed by the parties (defendant's submissions dated 18 June 2004; plaintiff's submissions dated 30 June 2004). 4 The application on which I gave judgment on 4 June must be put into context. The proceedings were commenced by summons filed on 30 June 2003. On 12 November 2003, Registrar Berecry set the proceedings down for hearing before me on 25 and 26 May 2004 and appointed 29 April 2004 for a pre-trial directions hearing. When the matter came before me on 29 April 2004, the plaintiff's intention of seeking to be released from an apparent compromise was raised. It was recognised by both parties that that issue should be determined without delay. Without opposition from the defendant, I vacated the hearing dates of 25 and 26 May 2004, directed that any notice of motion by the plaintiff in respect of the alleged compromise be filed and served by 4 May 2004 and that it be returnable before me on 21 May 2004 and noted that further conduct of the proceedings would be addressed after the notice of motion had been determined. Argument on the plaintiff's application was heard on 21 May 2004 and judgment was delivered on 4 June 2004. 5 In relation to costs of the notice of motion, the defendant says that the necessity for the motion arose solely as a consequence of the plaintiff's solicitor's mistake which was not occasioned in any way by action on behalf of the defendant; also that the plaintiff sought, by the motion, not the vindication of a right but the grant of an indulgence. In those circumstances, the defendant says, the ordinary rule that costs follow the event does not apply and it should be ordered that the plaintiff, although successful, pay the defendant's costs of the motion. 6 The plaintiff views matters differently. In his submission, the indulgence sought was not akin to an amendment or adjournment which involved some form of procedural misconduct or oversight resulting in delay in the matter proceeding to trial. The plaintiff also says that it was obvious that the plaintiff's solicitor had made a mistake which could not be allowed to stand; and that the defendant nevertheless allowed the motion to go to a contested hearing. On that basis, the plaintiff says, the costs of the motion should be costs in the cause. 7 I approach the question of costs on the basis that the offer of compromise would never have been made by the plaintiff unless the plaintiff's solicitor had been under the mistake or misapprehension referred to at paragraph 28 of my earlier judgment; that the solicitors for the defendant were concerned to be certain that the offer of compromise meant what it appeared to say and, to that end, took steps to clarify matters with the solicitors for the plaintiff (paragraph 29 of my earlier judgment); and that, having received a reply from the plaintiff's solicitors (being a reply affected by the same mistake or misapprehension), the defendant's solicitors did not know (and had no reason to know) that the offer of compromise was affected by mistake (paragraphs 30 and 31 of the earlier judgment). 8 In these circumstances, it is understandable that the defendant did not consent to the plaintiff's application for orders negating the effectiveness of the compromise (or to its withdrawal without the intervention of the court) and saw fit to put the plaintiff to proof of its case on the application. The plaintiff's solicitors had laboured under the mistake (to which the defendant did nothing to contribute) both when the offer of compromise was made and when a response was given to the inquiry of the defendant's solicitors obviously prompted by a suspicion that there may have been some mistake or misunderstanding. The defendant was therefore entitled to hold a suspicion that the eventual assertion that the offer of compromise was affected by mistake was the product of some subsequent invention. 9 There is, to my mind, a strong analogy between the position of the plaintiff upon the application directed towards his release from the compromise and the position of a party who seeks leave to amend or an adjournment for purposes or reasons in no way related to conduct of the opposing party. Here, the conduct of the plaintiff in making the offer of compromise affected by mistake and subsequently confirming the offer under the same mistake, being conduct to which the defendant in no way contributed, necessitated the plaintiff's application which, as I have said, was properly opposed by the defendant. The plaintiff has, in the words of A H Simpson CJ in Eq in Mertelmeyer v Mertelmeyer (No 2) (1904) 21 WN (NSW) 76, "taken up a wrong position" and thereby exposed the defendant to the necessity to meet and deal with the plaintiff's application. 10 An order (as the plaintiff seeks) that the costs of the plaintiff's notice of motion be costs in the cause would leave those costs to be included in the final award of costs in the proceedings. Such an order would thus connote that the application and the parties' expenses in relation to it were, as it were, part and parcel of the ordinary and ongoing progress towards a final adjudication, this being the assumption underlying Part 52A rule 16 of the Supreme Court Rules. Such an order would, in my opinion, fail to recognise that it was conduct of the plaintiff (or, more precisely, the plaintiff's solicitors) which necessitated not only the plaintiff's application but also the defendant's putting the plaintiff to proof and the eventual determination of the application. 11 Because of the strong analogy I have mentioned with amendment and adjournment cases where a party seeks an indulgence and there is, for that reason, a departure from the general rule that costs follow the event, I consider that there should be an order for costs against the plaintiff. 12 I should add that the circumstances of the present case seem to me to be, in relevant respects, distinguishable from those in Young v Combe (unreported, NSWSC, Hodgson J, 29 July 1993) and Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411. In each of those cases, a party was permitted to withdraw an offer of compromise. In the first case, costs of the application were reserved. In the second the defendants opposing the plaintiff's successful application to withdraw were ordered to pay the plaintiff's costs. In each case, however, the reasons for allowing the withdrawal lay in changed circumstances which could not be laid at the feet of a party in the same way as the original mistake and the confirmation of it can be laid at the feet of the plaintiff's solicitors in this case. The report of the case mentioned in my earlier judgment that is most similar to this one (i.e., Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528) does not disclose the outcome on costs. 13 There is reference in the defendant's submissions to costs thrown away and, as I read the submissions, the defendant says that there are unlikely to be any costs thrown away because the decision to seek vacation of the hearing dates was taken in a timely manner and preparation to that point may be expected to be useful for the purposes of the deferred final hearing. Nevertheless the defendant says (and I agree) that the position should be confirmed by order. 14 The orders with respect to costs are accordingly that (a) the costs of the defendant of and incidental to the plaintiff's application heard by me on 21 May 2004 and determined by me on 4 June 2004 be paid by the plaintiff; and (b) such costs of the defendant, if any, as were thrown away by reason of the order made by me on 29 April 2004 vacating the hearing dates 25 and 26 May 2004 be paid by the plaintiff. **********