CMF Projects Pty Ltd v Riggall & Anor [2014] QDC 101

DISTRICT COURT OF QUEENSLAND CITATION: CMF Projects P/L v Riggall & Anor [2014] QDC 101 PARTIES: CMF PROJECTS PTY LTD (ACN 114 539 212) Respondent/plaintiff v BRIAN NOEL MANSON RIGGALL applicant/first defendant and JANE REIMAN RIGGALL applicant/second defendant FILE NO/S: BD4085 of 2013 DIVISION: Civil Applications PROCEEDING: Application for costs ORIGINATING COURT: Brisbane DELIVERED ON: 8 May 2014 DELIVERED AT: Brisbane HEARING DATE: Written submissions to 6 May 2014 JUDGE: Andrews SC DCJ ORDER: Order that the plaintiff pay on the indemnity basis the defendants’ costs of the applications filed on 1 and 15 April 2014 CATCHWORDS: COSTS – whether indemnity costs appropriate – where one cause of action was reasonably included in pleading but a second cause of action was unreasonably maintained – where both struck out as unenforceable UCPR 171 Mio Art Pty Ltd v Macequest Pty Ltd & Ors [2013] QSC 211 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225 at 233; 118 ALR 248 Di Carlo v Dubois & Ors [2002] QCA 225 Gideona v Suncorp Metway Insurance Ltd [2005] QSC 309 -- 1 of 4 -- COUNSEL: G I Thomson for the applicant/defendants G Coveney for the respondent plaintiff SOLICITORS: H W L Ebbsworth for the applicant/defendants Arrow Law for the respondent/plaintiff [1] The issue is whether indemnity costs are appropriate. On 24 April 2014 in this proceeding I made orders and published reasons.1 On the amended application of the defendants (“home owners”) I ordered that the plaintiff’s (“builder’s”) amended statement of claim be struck out. Because the builder may not maintain its estoppel argument paragraphs 4(d), 10 and 11 of the builder’s reply were ordered to be struck out together with paragraphs 1, 3(b) and 4 of the answer to the amended counter-claim. The parties had not made submissions as to costs. By my reasons I observed: The general rule is that where the court strikes out all or part of a pleading there will be an order that the costs of the application be paid by the unsuccessful party on the indemnity basis. I am reluctant to impose that order without first giving the unsuccessful builder liberty to make submissions to the contrary. However, in an effort to spare the parties from wasted expense it seems sensible to order that the plaintiff pay the defendants’ costs of the application calculated on the indemnity basis and to give the plaintiff liberty for 7 days to apply to set aside that order for costs. [2] The builder has since opposed the indemnity basis for the costs. The home owners submit that indemnity costs are appropriate. [3] The builder’s counsel’s submission helpfully drew my attention to Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271. With the benefit of that decision I accept that there is no general rule that where the court strikes out all or part of a pleading there will be an order that the costs of the application be paid by the unsuccessful party on the indemnity basis. In that case Jackson J determined that there should not be a greater predisposition towards making an order for indemnity costs in favour of a successful applicant on an application to strike out than there is on any other interlocutory application.2 I respectfully reconsider the issue of indemnity costs and accept that his Honour’s determination is correct. [4] I note that his Honour went on to order indemnity costs in favour of the successful applicants. The applicants in Mio Art had successfully obtained orders to strike out the statement of claim, though the applicants were not successful in that part of their application which was for an order to summarily dismiss the proceedings against them.3 [5] The first basis upon which his Honour relied for making an exceptional order for indemnity costs was that the pleading did not identify the nature of the 1 CMF Projects P/L v Riggall & Anor [2014] QDC 090 2 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [37] to [38] 3 Mio Art Pty Ltd v Macequest Pty Ltd & Ors [2013] QSC 211 at [278] and [279] -- 2 of 4 -- case.4 That was said to be a “serious problem…no mere technicality… - it goes to the very heart of the adjudicative process.”5 [6] I infer that when considering whether a litigant’s conduct warrants an order for indemnity costs a court may take into account as a matter of particular relevance that a statement of claim which fails to identify with any precision the case which defendants would have to meet creates a serious problem as it impeaches the fairness of the proceeding. [7] His Honour’s second basis was that there was another inadequate pleading of a fraudulent scheme.6 [8] His Honour’s third basis was that the pleader was given ample notice of the defects and persisted in maintaining causes of action which were not viable or not viably pleaded.7 [9] No other blameworthy conduct was relied upon by his Honour. [10] There are some parallels between the merits and demerits of the plaintiff in Mio Art and the builder before me. The plaintiff in Mio Art had one merit. It demonstrated that its pleading contained a viable cause of action for oppression which it was at liberty to replead.8 Thus the plaintiff in Mio Art was not entirely unsuccessful and was not entirely without merit. In the proceeding before me the builder included an arguable claim in quantum meruit. The issue about that claim was a legal one, namely whether that quantum meruit claim could be brought in this court. Though the builder lost on that issue, it was not misconduct to include that claim. The prospects of success on a claim for quantum meruit in this court, though problematic, justified including that claim. Its inclusion would have been more justifiable if it had been combined with any other viable cause of action arising from the amended statement of claim or the reply. There was no other viable cause of action arising from the amended statement of claim or reply. [11] A second parallel with Mio Art is that, like the plaintiff in Mio Art, the builder persisted in maintaining an untenable cause of action. That was the builder’s cause of action for breach of contract. It maintained that cause of action in spite of correspondence from the home owners’ solicitors asserting the uncontroversial and correct law on that issue. After an application to strike out was filed, the builder amended its statement of claim to add its arguable but unsustainable cause of action based on quantum meruit. But the builder also maintained the untenable cause of action for breach of contract in its amended statement of claim. After an amended application to strike the amended statement of claim was filed the builder did not abandon reliance on the untenable breach of contract claim. The builder’s counsel sensibly abandoned the breach of contract claim at the hearing. He had added the nice bolster to the builder’s pleading by amending the statement of claim after the application to 4 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [41] 5 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [41] 6 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [42] 7 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [43, [44] and [46] 8 Mio Art Pty Ltd v Macequest Pty Ltd (No 2) [2013] QSC 271 at [270] -- 3 of 4 -- strike out was filed so as to include a plea of quantum meruit. It was a plea and argument which was in the face of obiter from a single judge of the Supreme Court to the effect that it should fail. It did fail. He also bolstered the pleading with a further amendment which included weak allegations to support a plea of estoppel against the statutory prohibition against bringing a quantum meruit claim outside the tribunal. The weakness of the allegations remained untested because, as a matter of law, it was held that there could be no estoppel against the relevant statute in this instance. [12] The builder’s statement of claim was doomed to be struck out for as long as it was based solely on the breach of contract claim. Whatever bolsters were successfully added, that breach of contract claim was doomed. The builder’s counsel’s efforts to bolster it failed: by adding a quantum meruit claim; by raising an estoppel against a statute; by arguing that what appeared to be a claim for breach of contract was not but was really a claim on a fully executed contract. The proceeding was unduly based, until the hearing began, on a groundless contention, namely that the builder may proceed on a breach of contract claim. [13] The builder’s counsel relied upon Gideona v Suncorp Metway Insurance Ltd [2005] QSC 309 where indemnity costs were refused despite the striking out of a part of the defence which raised a novel proposition of law. That case’s circumstances are distinguishable. There was no prolongation of the case nor unreasonable conduct. Sometimes, a reasonable way to test a novel proposition is to plead it and defend it on an application to strike out the passages of the pleading containing it. For example, if the builder had pleaded its quantum meruit claim with a viable cause of action in its statement of claim, I would not have regarded the striking out of the quantum meruit claim as an occasion to order indemnity costs, particularly with the benefit of the decision in Mio Art. I contrast the present case where the amended statement of claim retained an unarguable, unenforceable claim for breach of contract and attached a new, arguable quantum meruit claim which was also struck out. [14] A list of discretionary factors as to indemnity costs set out in the judgment of Sheppard J in Colgate Palmolive Co & Anor v Cussons Pty Ltd9 was cited with approval by White J (with whom Williams JA and Wilson J agreed) in Di Carlo v Dubois & Ors.10 The list of factors mentioned there includes “the undue prolongation of a case by groundless contentions”. The homeowners gave the builder adequate notice of the groundless contention. Thereafter, from November 2013 the builder prolonged the case with its unenforceable claim for breach of contract arguing that that the home owners were being vexatious. The builder then added its obviously problematic claim for quantum meruit. [15] The discretion to award indemnity costs is “not confined to the situation of…the ethically or morally delinquent party” and “…the Court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation”. 11 Indemnity costs are appropriate here. 9 (1993) 46 FCR 225 at 233; 118 ALR 248 at 256-7. 10 [2002] QCA 225 at [37]. 11 Di Carlo v Dubois at [38]. -- 4 of 4 --