Frisbo Holdings Pty Ltd v Austin Australia Pty Ltd (No 2)

[2010] NSWSC 298

CITATION:	Frisbo Holdings Pty Ltd v Austin Australia Pty Ltd (No 2) [2010] NSWSC 298
HEARING DATE(S):	On written submissions
JUDGMENT DATE :	20 April 2010
JURISDICTION:	Common Law Division
JUDGMENT OF:	Hislop J
DECISION:	I vary the judgment dated 11 March 2010 by adding to para [52](3) the following: "Such costs to be assessed on the ordinary basis in respect of the first defendant and, as regards the second defendant, on the ordinary basis up to and including 11.00am on 6 June 2007, and thereafter on an indemnity basis.
CATCHWORDS:	Costs.
LEGISLATION CITED:	UCPR
CASES CITED:	Morgan v Johnson (1998) 44 NSWLR 578 Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109
PARTIES:	Frisbo Holdings Pty Limited (1st Plaintiff) Aymoy Pty Limited (2nd Plaintiff) Arvant Holdings Pty Limited (3rd Plaintiff) Austin Australia Pty Limited (1st Defendant) Premier Pools Pty Limited (2nd Defendant)
FILE NUMBER(S):	SC 2006/262442
COUNSEL:	S. Torrington (Plaintiffs) D. Priestley (1st Defendant) A.D.M. Hewitt SC/S. Maybury (2nd Defendant)
SOLICITORS:	Sparke Helmore (Plaintiffs) HWL Ebsworth Lawyers (1st Defendant) Curwoods Lawyers (2nd Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HISLOP J

Tuesday 20 April 2010

2006/262442 FRISBO HOLDINGS PTY LIMITED & ORS v AUSTIN AUSTRALIA PTY LIMITED & ANOR (No. 2)

JUDGMENT
(Re: costs)

Introduction

1 In this matter there was verdict and judgment for the defendants. The plaintiffs were ordered to pay the defendants’ costs. Such costs, prima facie, are payable on the ordinary basis: see UCPR 42.2. The second defendant obtained a verdict and judgment on the first defendant’s cross claim against it with costs.

2 The defendants have sought indemnity costs orders against the plaintiffs.

The first defendant

3 The first defendant’s application was made on two bases. The first basis was that the plaintiffs’ prospects in the case were such that they “properly advised, should have known [they] had no chance of success” and that in these circumstances the Court should exercise its discretion under s 98 CPA to order the plaintiffs to pay the whole of the first defendant’s costs on an indemnity basis.

4 The court may order costs be awarded on an indemnity basis – s 98(1)(c) CPA. The award of indemnity costs presupposes relevant unreasonable action by a party, an example of which is where a party maintains proceedings which, properly advised, it should have known had no chance of success.

5 However, the settled practice of the court is to order costs on the ordinary basis. A mechanism is provided by the notice of offer of compromise procedure to put the opposite party at risk of indemnity costs. Litigation is inescapably chancy: Mason P – Morgan v Johnson (1998) 44 NSWLR 578 at [34]. It would only be in a rare case that it could be said a party “had no chance of success”.

6 The present is not such a case. In my opinion it could not be said the plaintiffs’ prospects were non-existent. Furthermore, there remained up to the hearing the possibility that the evidence of the recollection of Mr Ryan or other eye-witnesses may change with a significant impact upon the plaintiffs’ prospects. Accordingly, I decline to exercise my discretion in favour of making an order that the whole of the first defendant’s costs be paid on an indemnity basis.

7 The second basis advanced by the first defendant was to rely upon a notice of offer of compromise served on the plaintiffs’ solicitors on 6 August 2009 which offered

“1. Verdict and judgment for the first defendant against the plaintiffs.
2. The plaintiffs to pay fifty percent of the first defendant’s costs, to be agreed or assessed.”

This offer was not accepted by the plaintiffs.

8 UCPR 20.26(2) states in respect of notices of offers of compromise:

“An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs.”

9 The first defendant’s “offer” was not exclusive of costs nor did it state that it was a verdict for the defendant and that the parties were to bear their own costs. The first defendant’s notice of offer of compromise in my opinion was not an offer within the terms of UCPR 20.26 and therefore not such as to attract the operation of the costs consequences in UCPR 42.15A.

10 The first defendant’s offer of compromise, though not an offer within UCPR 20.26, may be treated as a Calderbank letter for settlement purposes. A Calderbank letter will not justify an indemnity costs order unless the rejection of the offer was unreasonable. In my opinion it was not unreasonable for the plaintiffs to reject the first defendant’s offer. The plaintiffs’ claim was in the order of $2 million + and it could not be said the plaintiffs’ prospects were nonexistent.

11 For the above reasons, I reject the first defendant’s claim for indemnity costs against the plaintiff.

The second defendant

12 The second defendant relied upon a notice of offer of compromise served on the solicitors for the plaintiffs on 5 June 2007. The notice offered to compromise:

“By agreeing to consent to a verdict in favour of the second defendant on the basis that the second defendant agrees to pay its own costs to date.”

13 The notice of offer of compromise was an offer within the terms of UCPR 20.26(2). Unless the Court orders otherwise, the second defendant is entitled to part of its costs on an indemnity basis pursuant to UCPR 42.15A. The onus is on the plaintiffs to demonstrate why the Court should not order them to pay the second defendant’s costs on an indemnity basis. Generally, exceptional circumstances are required to justify an order denying the offeror’s entitlement – Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109 at [35].

14 The plaintiffs submitted the Court should “order otherwise”. However, in my opinion, the circumstances referred to in the plaintiffs’ submissions are not of such an exceptional nature as to cause me to “order otherwise”.

15 In my opinion, the second defendant is entitled to an order for indemnity costs from 11.00 am on 6 June 2007.

The cross claim

16 The first defendant also seeks an order in the nature of, but not identical to, a Bullock or Sanderson order, to the effect that the first defendant’s costs are to include both defendants’ costs of the cross claim.

17 It submitted such an order can be made where it was reasonable for a defendant to have joined, (or cross claimed against), another successful defending party, in the face of the plaintiffs’ claim, or where the primary claim in its terms was the effective cause of the cross claim. Given the plaintiffs’ allegations against the first defendant were invariably in respect of negligent design and construction of the spa and pool, and such works had been contracted to the second defendant, it would have indeed been unconventional, if not remiss, of the first defendant not to have claimed contribution or indemnity from the second defendant.

18 I decline to make the order sought in the exercise of my discretion. The costs involved are minimal. The cause of action in contract in the cross claim is statute barred. It is arguable the cross claim was unnecessary in tort because each individual defendant’s responsibility is separately assessed in actions of this kind. It is arguable the indemnity clause in the contract was inapplicable.

Orders

19 I vary the judgment dated 11 March 2010 by adding to para [52](3) the following:

“Such costs to be assessed on the ordinary basis in respect of the first defendant and, as regards the second defendant, on the ordinary basis up to and including 11.00 am on 6 June 2007, and thereafter on an indemnity basis.”
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