De Pasquale & Ors v Deppeler & Anor (No. 2) [2011] QDC 136

DISTRICT COURT OF QUEENSLAND CITATION: De Pasquale & Ors v Deppeler & Anor (No. 2) [2011] QDC 136 PARTIES: RALPH PETER DE PASQUALE, FRANCESCO ANTONIO DE PASQUALE, ANTONIO RAFFAELE DE PASQUALE AND ALESSANDRO SIMONE DE PASQUALE (Plaintiffs) V RAYMOND MAXWELL DEPPELER (First Defendant) AND MICHAEL SLOBE (Second Defendant) FILE NO/S: D1558/2010 PROCEEDING: Civil – Application for cost on an indemnity basis ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 22 July 2011 DELIVERED AT: Brisbane HEARING DATE: 23 June 2011 JUDGE: Jones DCJ ORDER: The plaintiff pay the first defendant’s costs of and incidental to the proceeding on the standard basis CATCHWORDS: COSTS – COSTS ON AN INDEMNITY BASIS – Where defendants entirely successful in defending the plaintiff‘s claims against them –whether an Order for costs on indemnity basis ought be made in favour of the first defendant in circumstances where (i) he was entirely successful in defending the action (ii) that offers to settle were made on his behalf – whether other circumstances justifying costs on an indemnity basis exist Rule 361 Uniform Civil Procedure Rules De Pasquale & Ors v Deppeler & Anor [2011] QDC 117 Emanuel Management Pty Ltd (in liquidation) & Ors v Foster Brewing Group Ltd & Ors [2003] QSC 299 Turrisi Properties Pty Ltd v LJ and BJ Investments Pty Ltd; Turrisi Properties Pty Ltd v B McVicar; Turrisi Properties Pty -- 1 of 6 -- 2 Ltd v Mulcahy [2010] QSC 349 Rathie v ING Life [2004] QSC 146 COUNSEL: Mr M Wilson on behalf of the plaintiffs Mr D Bowles, solicitor for the first defendant No appearance by the second defendant SOLICITORS: Porta Lawyers on behalf of the plaintiffs The Law Place Solicitors on behalf of the first defendant No appearance by the second defendant [1] This proceeding is concerned with an application made on behalf of the first defendant for a costs order against the plaintiffs on an indemnity basis. For the reasons set out below, that application is refused and the order of the court will be that the plaintiffs pay the first defendant‘s cost of and incidental to the proceeding on the standard basis. [2] At all material times the second defendant acted on his own behalf. He did not appear on 23 June 2011 when the substantive decision in this matter was handed down. Consequently no application for costs was made on his behalf. No cost orders will be made against the plaintiffs in respect of the second defendant. Background [3] The plaintiffs sued the first and second defendants seeking financial relief which the plaintiffs alleged was due and owing to them under certain guarantees. On 2 June 2011 I dismissed the plaintiff‘s claim against both defendants.1 In essence, the defendants avoided liability on the basis that their liability under guarantees did not extend to include any breaches by the tenant under the subject lease in circumstances where the tenant and the plaintiffs had entered into a new and discreet lease.2 [4] The first defendant seeks costs against the plaintiff on an indemnity basis primarily based on an offer to settle made on his behalf on 5 July 2010. Mr Wilson, counsel for the plaintiffs, concedes that his clients could not oppose a costs order on a standard basis but opposes any such order on an indemnity basis. The Offers [5] On 5 July 2010 the first defendant‘s solicitors wrote to the plaintiff‘s solicitors making an offer in the following terms: 1 De Pasquale & Ors v Deppeler & Anor [2011] QDC 117 2 De Pasquale at paras 17-27 -- 2 of 6 -- 3 ―This offer is made pursuant to Ch 9 Part V of the UCPR The offer is that the First Defendant within 7 (seven) days of acceptance pay to the plaintiff $5,000.00 (five thousand dollars) in full and final settlement of the plaintiff‘s claim inclusive of costs. This offer remains open for 14 days from the date upon which it is given.‖ The offer was expressly made on or without prejudice basis save as to costs. [6] That offer was rejected. [7] On 23 September 2010 the first defendant‘s solicitors put another without prejudice offer save as to costs in the following terms: ―It would appear that each party maintains their original position concerning liability. They are also realistic concerning costs. Our client makes the following offer: 1. The Defendant will pay the Plaintiff the sum of $25,000 plus GST; 2. Prior to such payment the Plaintiffs must render a Tax Invoice; 3. Payment shall be made by way of 12 (twelve) equal monthly instalments. 4. This payment shall be in full satisfaction of the Plaintiff‘s claim with each party to bear their own costs; 5. Prior to the first payment a Settlement Deed conditional upon due payment shall be entered into. The Deed shall be on standard terms satisfactory to both parties; 6. Immediately following the last payment the claim shall be discontinued as against our Client; and 7. No judgment shall be entered unless the payment agreement is breached, in which case judgment for such payment may be entered as a liquidated sum.‖ [8] Given the terms and conditions of the second offer, which was also rejected, Mr Bowles, solicitor for the first defendant, agreed that it was of little relevance apart from being indicative of a ―strong attempt on the part of the defendant to bring this matter to a successful conclusion…‖.3 The Uniform Civil Procedure Rules and the arguments [9] Rule 361 of the Uniform Civil Procedure Rules 1999 (UCPR) provides: 3 Transcript of costs proceedings T 1-11, L15 to 35 -- 3 of 6 -- 4 ―Costs if offer to settle by defendant (1) This rule applies if— (a) the defendant makes an offer to settle that is not accepted by the plaintiff and the plaintiff obtains a judgment that is not more favourable to the plaintiff than the offer to settle; and (b) the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer. (2) Unless a party shows another order for costs is appropriate in the circumstances, the court must— (a) order the defendant to pay the plaintiff‘s costs, calculated on the standard basis, up to and including the day of service of the offer to settle; and (b) order the plaintiff to pay the defendant‘s costs, calculated on the standard basis, after the day of service of the offer to settle. (3) However, if the defendant‘s offer to settle is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders— (a) the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and (b) the defendant is entitled to the defendant‘s costs incurred after the opening of the court on that day on the indemnity basis. (4) If the defendant makes more than 1 offer satisfying sub-rule (1) the first of those offers is taken to be the only offer for this rule.‖ [10] Rule 681 of the UCPR deals with the general rule about costs and provides: ―(1) Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise. (2) Subrule (1) applies unless these rules provide otherwise.‖ [11] Mr Bowles in his oral submissions accepted that r 361 had no application in this case as it was not one where ―the plaintiff obtains a judgment‖, but argued that his client would be entitled to indemnity costs irrespective of that rule.4 4 T1-9, L22-60 -- 4 of 6 -- 5 [12] Mr Bowles essentially relied on two features of the case to ground his argument for costs on an indemnity basis. First, the plaintiffs had unreasonably refused the first offer to settle.5 Second, at the end of the day, the case essentially boiled down to one of construction of various documents where the plaintiffs should have known that the prospect of success was unlikely.6 [13] In Emanuel Management Pty Ltd (in liquidation) & Ors v Foster Brewing Group Ltd & Ors7, Chesterman J (as he then was) said: ―(Rule 361) is not applicable because the plaintiffs did not obtain any judgment. This may be an oversight in the rules but r 361 does not give rise to a prima facie right in the defendants to have their costs on the indemnity basis from the commencement of the trial subject only to the court ‗otherwise‘ ordering. Nevertheless it is clear that r 361 does not by implication prevent an order for indemnity costs being made in favour of a defendant save in the particular circumstances covered by the rule. A defendant who has been completely successful and has made an offer to settle better than the result for the plaintiff should not be in a worse position than a partly unsuccessful defendant who made such an offer.‖ His Honour went on to say8: ―An order of costs being a matter always for the discretion of the court I do not know that it is sensible to adopt either position as a ‗rule‘. The making of an offer in the circumstances in question is a very relevant circumstance to be taken into account when exercising the discretion. If there are no countervailing circumstances the order for indemnity costs is likely to be made. In this case I can see no countervailing circumstances. Indeed as I have explained, the plaintiff should have appreciated that their case had no worthwhile prospect of success. It was, therefore, unreasonable not to accept the offer.‖ [14] It is quite clear that the lack of any worthwhile prospect of success was a significant factor in Chesterman J deciding to award indemnity costs in the relevant circumstances.9 In paragraph 31 His Honour relevantly said: ―I have said enough to indicate that in my opinion there was a degree of irresponsibility in the plaintiffs bringing and prosecuting their action against the first defendant. It is significant that extravagant claims of dishonesty, corruption and gross impropriety were made in 5 T1-9, L58 6 T1-12, L1-30 7 [2003] QSC 299 at paras 36 and 37 8 At paras 39 and 40 9 At paras 31 and 40 -- 5 of 6 -- 6 support of which not the slightest evidence was called. It is a case in which it is right to regard to the defendants as having been vexed. It is therefore an appropriate case in which to order an order of indemnity costs.‖ [15] In Turrisi Properties Pty Ltd v LJ and BJ Investments Pty Ltd; Turrisi Properties Pty Ltd v B McVicar; Turrisi Properties Pty Ltd v Mulcahy (No 2)10 Justice Margaret Wilson said: ―The usual order is for costs on the standard basis, and some special feature warranting a more generous award needs to be established before the court will award indemnity costs. Although that special feature is often some delinquency on the part of the party being ordered to pay costs, it is not necessarily so. It is anomalous that a defendant who has offered to compromise a plaintiff‘s claim which ultimately it defeats completely should not be able to recover indemnity costs pursuant to r 361, while a defendant who has offered to compromise a claim and against whom some judgment (albeit no more than that offered) is entered may do so. That an offer took the form of a Calderbank offer is another relevant factor in exercise of the discretion to depart from the usual order as to costs.‖ (footnotes deleted) [16] In my view, the claims brought by the plaintiffs could not be described as being unmeritorious. Put another way, it was not a case where they should have known that their action would fail.11 In my view, the plaintiff had an arguable case, a factor considered relevant by Wilson J in Turrisi Properties Pty Ltd12. The plaintiffs otherwise conducted their case on a fair and reasonable manner. It is also not an irrelevant consideration that the offer relied on could only be described as an extremely modest one. An offer of $5,000 in the face of a much more significant claim in circumstances where the plaintiffs would also be required to meet their existing legal fees was not an offer, in my view, likely to elicit acceptance. It, in essence, amounted to little more than an offer that each party walk away bearing their own costs. To an extent, this point is supported by the later and arguably more generous offer on 23 September 2010. [17] For the reasons given, I do not consider it appropriate to depart from the usual orders. To adopt the terminology used by Wilson J in Rathie v ING Life,13 there is nothing in the conduct of the litigation by the plaintiffs calling for sanction by way of indemnity costs. Accordingly, the order of the court will be that the plaintiffs pay the first defendant‘s cost of an incidental to the proceeding on the standard basis. 10 [2010] QSC 349 at para [11] 11 E.g. Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] 81 ALR 397 at 401 and Emanuel Management Pty Ltd (in liquidation) & Ors v Foster Brewing Group Ltd & Ors[2010] QSC 349 12 At para 6 13 [2004] QSC 146 at [56]. -- 6 of 6 --