Citimax Henderson Pty Ltd v Cobblestone Constructions Pty Ltd & Anor (No.2) [2018] QDC 186

DISTRICT COURT OF QUEENSLAND CITATION: Citimax Henderson Pty Ltd v Cobblestone Constructions Pty Ltd & Anor (No.2) [2018] QDC 186 PARTIES: CITIMAX HENDERSON PTY LTD (ACN 616 130 806) (Plaintiff) v COBBLESTONE CONSTRUCTIONS PTY LTD (ACN 611 123 016) (First defendant) And ADAM WILLIAM SCOTT ALLEN (Second defendant) FILE NO/S: 1276/18 DIVISION: Civil PROCEEDING: Application in a proceeding ORIGINATING COURT: Brisbane DELIVERED ON: 13 September 2018 DELIVERED AT: Brisbane HEARING DATE: Written submissions received 16 August 2018 JUDGE: Williamson QC DCJ ORDER: 1. The Defendants pay the Plaintiff’s costs of the Amended Application filed 30 July 2018 and the Defendants’ application filed 24 July 2018, save for those costs which are already the subject of a specific order for costs made on 30 July 2018. CATCHWORDS: COURT PRACTICE AND PROCEDURE – COSTS – where application to withdraw admissions – where application allowed - whether defendants pay plaintiff’s costs – whether costs to be assessed on indemnity basis COUNSEL: Ms Hoiberg for the Plaintiff/Respondent Mr Kipps for the Defendants/Applicants SOLICITORS: Allens for the Plaintiff/Respondent Irish Bentley Lawyers for the Defendants/Applicants -- 1 of 5 -- 2 Introduction [1] On 10 August 2018, I gave judgment in respect of two applications in this proceeding. The applications related to the need for the Defendants to obtain leave to withdraw admissions under r.188 of the Uniform Civil Procedure Rules 19991 (“UCPR”). Leave was granted in part. The parties were given liberty to apply with respect to costs. The parties have filed and served written submissions with respect to costs. The submissions disclose the parties disagree as to the order, if any, to be made about costs. [2] Citimax submits that the Defendants should pay its costs of the both applications. It is further submitted the costs should be assessed on the standard basis up to 10:00am on 27 July 2018, and on the indemnity basis thereafter. The application for indemnity costs is founded upon the contention the Defendants unreasonably rejected an offer to settle the applications prior to the hearing. [3] The Defendants submit the costs of both applications should be costs in the cause or, alternatively, there should be no order as to costs. Background [4] The proceeding was commenced by way of Claim and Statement of Claim filed on 6 April 2018. A Notice of Intention to Defend, Defence and Counterclaim were filed on behalf of both Defendants on 11 May 2018. As I observed in my reasons for judgment published on 10 August 20182, the Defence was characterised by Mr Kipps as a holding defence. [5] On 31 May 2018, the Defendants filed an Amended Defence and Counterclaim. At the hearing of the applications, it was accepted by the Defendants that the Amended Defence sought to withdraw admissions made in the holding defence for which leave was required under r.188 of the UCPR. Two separate applications in this proceeding were then made. The first in time was an application by Citimax to strike out those aspects of the Amended Defence and Counterclaim for which leave to withdraw was required, but not sought. The second application in time was brought by the Defendants for leave to withdraw admissions under r.188 of the UCPR. [6] On 4 June 2018, some six weeks prior to the filing of the first of the two competing applications, Citimax’s solicitor wrote to the Defendants’ solicitor pointing out the Amended Defence and Counterclaim sought to withdraw admissions for which leave had not been granted. The Defendants were invited to file a further amended pleading reverting back to the admissions as originally made. Citimax put the Defendants on notice that it would apply to the Court for orders that those parts of the Amended Defence and Counterclaim seeking to withdraw earlier admissions be struck out, with costs assessed on the indemnity basis. [7] By correspondence dated 8 June 2018, the solicitor for the Defendants responded to the letter of 4 June 2018. In that correspondence, it was asserted that no further amended pleading was to be delivered. Further, Citimax was invited to agree to a particular course of conduct to advance the proceeding. 1 Citimax Henderson Pty Ltd v Cobblestone Constructions Pty Ltd & Anor [2018] QDC 154. 2 At paragraph [1]. -- 2 of 5 -- 3 [8] The course of conduct Citimax was invited to adopt involved leave being sought by the Defendants to withdraw admissions, by consent, at the next occasion the proceeding was before the Court. No date was identified for this next appearance before the Court. This was said to be consistent with the underlying philosophy of the UCPR, namely r.5. This invitation was not taken up by Citimax. [9] Further correspondence was exchanged between the parties. That exchange of correspondence did not prove productive and led to the first application in time being filed on 18 July 2018. [10] On 25 July 2018, the Defendants offered to settle the applications on the basis that they be granted leave to withdraw admissions, Citimax’s application be dismissed and there be no orders as to costs. On 26 July 2018, Citmax rejected the Defendants’ offer to settle. It made an offer that the Defendants have leave to withdraw admissions, both applications otherwise be dismissed, subject to paying Citimax’s costs on the standard basis. The offer expired at 10:00am on 27 July 2018. [11] The Defendants’ solicitor, in response to Citimax’s offer, enquired as to the quantum of costs incurred. Citimax’s solicitor responded to the effect that $10,000 (excluding GST) had been incurred in legal costs and Citimax was prepared to settle on the basis that costs be fixed at $7,500. The correspondence reiterated that the offer made on 26 July 2018 would remain open for acceptance until 10:00am on 27 July 2018. The Defendants did not respond to the offer. The offer expired. [12] The matter first came on for hearing before the Court on 30 July 2018. The hearing did not proceed smoothly. During the course of argument, it became clear that the affidavit material relied upon by the Defendants was inadequate to discharge their onus. As a consequence, the hearing of both applications was adjourned, by consent, to enable the Defendants to file further affidavit material. The adjournment was granted. An order was made requiring the Defendants to pay Citimax’s costs of the adjournment on the standard basis. [13] The hearing was resumed on 3 August 2018. As I noted in the reasons for judgment published on 10 August 2018, the Defendants did not press their application with respect to paragraph 24 of the Amended Defence and Counterclaim, thereby leaving only five admissions to consider for the purposes of r.188 of the UCPR. Citimax opposed leave with respect to two of the admissions for which leave was sought. The Defendants’ application was successful. To give effect to my reasons for judgment, I ordered the Defendants file and serve a further amended defence consistent with the reasons for judgment. The amended document was filed on 3 September 2018. Should an order for costs be made against the Defendants? [14] Given the background I have set out above, I am satisfied that it is appropriate for the Defendants to pay Citimax’s costs of both applications. The order made is intended to exclude those costs which are already the subject of the specific order for costs made on 30 July 2018. [15] There are three reasons why the Defendants should pay Citimax’s costs of both applications. -- 3 of 5 -- 4 [16] First, as a general rule, a party seeking an indulgence from the Court to overcome errors on its side pays the costs of obtaining that indulgence3. As a general statement of principle, this is unsurprising given the circumstances to which it has application. The circumstances will normally involve a party to a proceeding who incurs costs dealing with, and responding to an error for which it is in no way responsible. The cost of correcting the error in such circumstances should ordinarily be borne by the party responsible for it. [17] The nature of the Defendants’ application involved them seeking an indulgence from the Court to, inter alia, overcome three errors on its side. It was accepted by the Defendants that their Defence and Counterclaim filed on 11 May 2018 failed to plead to three paragraphs in the Statement of Claim. The failure to properly plead to the Statement of Claim in this respect resulted in deemed admissions. The Defendants sought leave to withdraw these deemed admissions. The reason offered for the failure to plead was inadvertence on the part of the Defendants’ legal team. An indulgence was granted by the Court to correct these errors. Citimax incurred costs in responding to these errors. The cost of overcoming the errors should be borne by the Defendants. [18] Second, against the background that I have set out above, it is my view that both applications were necessitated by the Defendants’ conduct in filing a holding defence and then filing an Amended Defence and Counterclaim without first seeking leave to withdraw the admissions contained in the Defence and Counterclaim filed on 11 May 2018 . The position was exacerbated by the Defendants’ initial reluctance to seek leave to withdraw admissions in the orthodox way. It left Citimax in a position where it was unclear as to if, and when, the matter would be before the Court to resolve the question of leave. This was a matter of some importance to Citimax. It had a legitimate issue to consider: was it obliged to prepare and file a reply to a non- compliant defence? The failure to proceed with the matter in an orthodox way has put both parties to unnecessary expense to secure an indulgence from the Court that the Defendants have always accepted was required. [19] Third, Citimax has not engaged in conduct described as “disentitling conduct”. There are a number aspects of Citimax’s conduct before, and during the hearing of the applications that are evidence of its preparedness to conduct itself consistent with the tenor of r.5 of the UCPR. In particular: (a) prior to the hearing of 30 July 2018, Citimax made a sensible offer to resolve both applications to which the Defendant provided no response; (b) Citimax opposed the Defendants’ application at the hearing on 30 July 2018 on an entirely proper basis. It opposed the application on the basis that the affidavit material filed in support of it was manifestly inadequate. The force of the submissions made on behalf of Citimax were compelling and resulted in an instantor application on behalf of the Defendants to adjourn the hearing to file further affidavit material. Sensibly, the application to adjourn was not opposed by Citimax; and 3 Pollock v Thiess Pty Ltd & Ors [2014] QSC 22, [61]. -- 4 of 5 -- 5 (c) after considering the further affidavit material filed on behalf of the Defendants, Citimax recalibrated its opposition to the application for leave to withdraw admissions. Submissions were made at the resumed hearing opposing only two of the five admissions the subject of the application for leave to withdraw. Citimax was successful in opposing leave with respect to one of the admissions sought to be withdrawn by the Defendants. Should costs be assessed on an indemnity basis? [20] Citimax submits the costs of both applications should be assessed on the standard basis up to 10:00am on 27 July 2018 and on the indemnity basis thereafter. The submission is advanced on the footing that: (a) Citimax made an offer to settle both applications on a without prejudice basis, save as to costs; (b) the Defendants have fared no better than the offer; and (c) the rejection of Citimax’s offer was unreasonable in the circumstances. [21] I accept Citimax made an offer to settle both applications that was reasonable in all the circumstances. The offer was a simple one: the Defendants’ application for leave to withdraw admissions succeeded, provided they paid Citimax’s costs. Citimax’s solicitor clarified in subsequent correspondence that costs could be fixed in the amount of $7,500. No explanation was given in any affidavit material as to why the Defendants did not accept this offer. This is in circumstances where the Defendants have fared no better than the offer. It does not, however, follow that costs should be assessed, in part, on the indemnity basis. [22] As was submitted on behalf of Citimax, the critical question in this respect is whether the rejection of Citimax’s offer was unreasonable. The rejection of Citimax’s offer is not one that can be fairly described as “unreasonable” or “imprudent”. It was always open to the Defendants to argue the costs of both applications should be costs in the cause. An order as to costs was by no means certain. Costs were always in the Court’s discretion. Reserving the right to argue costs was open and not an unreasonable position for the Defendants to adopt where Citimax readily accepted it would not be prejudiced if leave was granted to withdraw admissions. [23] Accordingly, I am not persuaded that the Plaintiff’s costs of both applications should be assessed, in part, on the indemnity basis. Costs are to be assessed on the standard basis only. Conclusion [24] For the above reasons, it is ordered that the Defendants pay Citimax’s costs of the Amended Application filed 30 July 2018 and the Defendants’ Application filed 24 July 2018, save for those costs which are already the subject of a specific order for costs made on 30 July 2018. [25] The costs are to be assessed on the standard basis. -- 5 of 5 --