Supreme Court New South Wales Medium Neutral Citation: Metals Trading Pty Ltd v Doctor Scrap Pty Ltd (No 2) [2012] NSWSC 642 Decision date: 01 June 2012 Jurisdiction: Equity Division Before: Rein J Decision: 1. Plaintiff to have order for costs in its favour on its claim. 2. Cross claimant to have an order for costs in its favour on its cross claim. Catchwords: PROCEDURE - costs - departing from the general rule - order for costs on indemnity basis - conduct of parties - misconduct, etc - in proceedings - conduct of case - where party has pleaded a defence which it then abandons at trial - abandonment of a defence does not itself support order for indemnity costs PROCEDURE - costs - departing from the general rule - Supreme Court procedure - New South Wales - UCPR r 42.34(1) costs order not to be made unless Court satisfied proceedings in appropriate court - where proceedings transferred to Supreme Court to avoid claim being restricted by jurisdictional limit of District Court on quantum - bringing of proceedings in Supreme Court was warranted - exception in UCPR r 42.34(2) applies Legislation Cited: Civil Procedure Act 2005 District Court Act 1973 Uniform Civil Procedure Rules 2005 Cases Cited: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 FAI General Insurance Co Ltd v Burns [1996] NSWCA 177 Lahoud v Lahoud [2006] NSWSC 126 Category: Consequential orders Parties: Metals Trading Pty Ltd (Plaintiff) Doctor Scrap Pty Ltd (Defendant) Representation: Counsel: J Hynes (Plaintiff) J Baxter (Defendant) Solicitors: Minter Ellison (Plaintiff) Anderson Lawyers (Defendant) File Number(s): SC 2010/106818 Judgment 1I gave judgment in this matter on 5 April 2012 in favour of the plaintiff and cross defendant, Metals Trading Pty Ltd ("Metals"), on its claim for $332,677.64 plus interest of $60,754.43 and in favour of the defendant and cross claimant, Doctor Scrap Pty Ltd ("Doctor Scrap"), on its cross claim for $435,000 and indicated that I would hear the parties on the issues of costs and the form of orders: see [68] and [69] of Metals Trading Pty Ltd v Doctor Scrap Pty Ltd [2012] NSWSC 366. The form of orders was agreed, including a timetable for written submissions in the event that consent orders on costs could not be agreed upon between the parties. 2I have received lengthy written submissions and submissions in reply on costs by both Metals and Doctor Scrap. Doctor Scrap contends that the orders made should, as is usual, follow the event, namely that Metals should have an order for costs in its favour on its claim and Doctor Scrap should have an order for costs on its cross claim. Metals' Claim for Costs 3Metals agrees of course that it should have an order for costs in its favour on its claim but submits that that order should be made on the indemnity basis rather than on the normal basis. This result, it is said in par 35 of Metals' written submissions on costs, should follow because: "(1)Doctor Scrap maintained, until the first day of the trial, its defence of the [claim for unpaid hire charges and damages in respect of a scrap metal baler machine] as articulated in its cross claim, notwithstanding, that it had served no evidence in support of the defence. (2)In relation to the defence of the [claim for reimbursement of amounts spent on development works undertaken on the property owned by Doctor Scrap at Hereford Street, Wagga Wagga], the obvious difficulties that Doctor Scrap faced with the defence were candidly expressed to the Court on the first day of the hearing (T8.43). On the final day of the hearing the defence of this claim was also abandoned (T47.7). (3)...[C]onsiderable time and effort (and associated cost including the cost of expert evidence) was spent by Metals in proving its claim and addressing these aspects of the proceedings. There was no expert evidence adduced in response to Mr Menzies' report, and he was not required for cross examination. (4)It is plain that the stance taken by Doctor Scrap in relation to Metals' claim was unjustified and entirely inconsistent with the just, quick and cheap disposition of the litigation. (5)No explanation was provided by Doctor Scrap in relation to why it chose to conduct the litigation in the manner that it did. Properly advised, and in keeping with a party's obligation to avoid wasting costs and time, Doctor Scrap should have conceded the claims either from the outset, or at least at a much earlier stage in the litigation. (6)Had Doctor Scrap approached the litigation differently, it is without question that considerable cost and time would have been saved in bringing the entire matter to finality." 4Metals' submissions refer to Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-4, in which Sheppard J set out (and not exhaustively) the categories of cases in which indemnity costs are ordered. An order for indemnity costs can be made in circumstances where there has been particular misconduct of a case which has caused loss of time to the Court by wilful disregard for the known facts or clearly established law or the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions and an abuse of process: see also Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362. FAI General Insurance Co Ltd v Burns [1996] NSWCA 177 is also cited in Metals' submissions. It is a case in which comments were made on the need for parties, particularly in a commercial cause, to maintain appropriate standards, conduct litigation in a bona fide way and help ensure that issues are determined effectively, efficiently, timeously and justly. This scope of this approach has been expanded and is now explicitly incorporated into the Civil Procedure Act 2005 in Pt VI, Div 1, ss 56 - 60. 5The cases cited in Metals' submissions are far removed from the present case and Metals' argument seems to promote a contention that if a party has pleaded a defence which it chooses to abandon at trial, that party is in breach of his/her/its obligations to conduct litigation in a bona fide way and that the outcome should be an order for indemnity costs. I am unable to accept that proposition. In my view, Metals has not established that Doctor Scrap's conduct involved misconduct or behaviour of a character that would justify an order for indemnity costs. The defendant was entitled (albeit putting itself at risk for an order for costs) to put the plaintiff to proof of its claim; that is effectively what it did and, after having had an opportunity to cross examine witnesses called by Metals, it chose to abandon its defence. I agree with Doctor Scrap's submission that abandonment of a defence does not of itself support an order for indemnity costs: see Lahoud v Lahoud [2006] NSWSC 126 per Campbell J. I also accept the contention that regard should not be had to the affidavit of Mr Gary Stephen Ulman on 11 April 2011, which affidavit was not read on the application for costs. Doctor Scrap's claim for costs 6Metals' argument here has the following elements: (1)that Doctor Scrap claimed $3.8 M but recovered only $435,000; (2)the $435,000 was within the jurisdiction of the District Court; (3)Rule 42.34 of the Uniform Civil Procedure Rules 2005 provides: "Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court (1)This rule applies if: (a)in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2)An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted." (4)Doctor Scrap applied for removal of the proceedings to the Supreme Court on the basis of the quantum of the cross claim and on the basis that there were Trade Practice Act (Cth) 1975 issues arising on the cross claim. 7Metals' written submissions on costs included the following at par 46: "In relation to the claim for remediation costs, the claim must be regarded as overly ambitious by comparison to the quantum of the ultimate award. Notwithstanding the significant historical evidence of prior use, at no stage did Doctor Scrap serve realistic and useful expert evidence, such as that which reflected a partial degree of responsibility in relation to the contamination. Doctor Scrap's "all or nothing" approach to the cross claim left Metals with no option other than to defend the claim on an equivalent basis." 8The first report of the expert retained by Metals on quantum referred to two figures: $295,000 on one basis and $575,000 on the other, and in his second report in response to Dr Itakura's qualification of the costs of remediation at $3.8 M, Metals' expert proposed a capping of the whole site at a cost of $995,000 plus GST. Given that Metals' own expert put forward a remediation cost of an amount higher than the District Court jurisdiction of $750,000 and Metals' expert did not venture into any explanation of how the different quantities of soil requiring removal had been arrived at for the earlier report, Metals' submission cannot be accepted. I do not accept Metals' contention that it was forced to adopt an "all or nothing" approach - it could have accepted responsibility for surface contamination at or near its stockpiles but, as Doctor Scrap's submissions point out, it did not do so. 9It would have been open to Metals to consent to the removal of the jurisdictional limit (see s 51 of the District Court Act 1973) but there is no evidence that it was sought by Doctor Scrap or offered by Metals and nothing was said about this in submissions. I do not accept the submission of Doctor Scrap that for reasons other than the quantum of the claim the matter was one which was not suitable for determination by the District Court. I think that Doctor Scrap was warranted in seeking to have the proceedings continue in the Supreme Court to avoid its claim being restricted by the jurisdictional limit of the District Court. Rule 42.34 of the Uniform Civil Procedure Rules is of recent origin and is an important restriction on costs where there is no justification for commencing, continuing or transferring a matter to the Supreme Court, but the qualification found in r 42.34(2) applies here. Conclusion 10It follows that the usual order for costs referred to in [2] above should be made and that Doctor Scrap's costs should include the costs of this application. ********** 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: 12 June 2012