Doolan v Clarke and Kann (a firm) (No. 3) [2008] QDC 68

DISTRICT COURT OF QUEENSLAND CITATION: Doolan v Clarke and Kann (a firm) (No. 3) [2008] QDC 68 PARTIES: Doolan (Plaintiff) v Clarke and Kann (a firm) (Defendant) FILE NO/S: Claim 2215/ 06 DIVISION: Civil Jurisdiction PROCEEDING: Costs Order ORIGINATING COURT: Brisbane District Court DELIVERED ON: 28 March 2008 DELIVERED AT: Brisbane HEARING DATE: Written submissions received 5 and 25 March 2008 for the plaintiff, 10 March 2008 for the defendant JUDGE: Forde DCJ ORDER: 1. Order that the defendant do pay to the plaintiff his costs of and incidental to the action including reserved costs, if any, to be agreed or assessed on a standard basis. 2. That the assessment of the plaintiff’s costs be made on the basis that, except so far as they are of an unreasonable amount, the fees of senior and junior counsel should be regarded as costs necessary and proper. CATCHWORDS: Costs – indemnity costs – whether costs on separate issues justified – exercise of discretion – breach of trust – no moral turpitude – certification for senior and junior counsel Thiess v Channel Nine Pty Limited (No. 5) [1994] 1 Qd R 156; referred to Cretazzo v Lombardi [1975] 13 SASR 4; referred to RC and MB Steninhardt Pty Ltd v Cunningham, unreported, Supreme Court of Queensland, 29 January 1997; referred to Smith v Madden (1946) 73 CLR 129; applied Medway Oil & Storage Co Ltd v Continental Contractors Ltd -- 1 of 8 -- 2 [1929] AC 88; referred to Hagan v Waterhouse (No. 2) (1992) 34 NSWLR 400; distinguished Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; applied Hobbs & Anor v Oildrive (No. 2) [2008] QSC 52; applied Uniform Civil Procedure Rules 1999, r 687 COUNSEL: A. J. H. Morris QC, and P. D. Tucker for the plaintiff D. Clothier for the defendant SOLICITORS: Hollingworth and Spencer Lawyers for the plaintiff ClarkeKann for the defendant Introduction [1] Judgment was given in this matter on 29 February 2008. The issue of costs was left to be determined after receiving written submissions. These were received on 5 and 25 March 2008 from the plaintiff and 10 March from the defendant. Judgment was given in favour of the plaintiff in the sum of $40,166.25. He had sought the sum of $122,612.87. It was held that the defendant as the solicitor for Doolan Properties had the necessary authority to transfer the sum of $82,456.62 from the trust account to its general account pursuant to a written authority but that it had no authority to transfer the sum of $40,166.25. [2] The main issues dealt with in the judgment were the question of the authority in relation to the resumption issues ($82,456.62), the authority in relation to the non- resumption issues ($40,166.25) and the honesty of the solicitors. The plaintiff succeeded on the lack of authority of the non-resumption issues. The resumption related to land adjacent to a proposed shopping centre development. The non- resumption work related to leases on shops in the shopping centre. The defendant failed in relation to the Limitation of Actions issue and the defence of laches. Issues [3] The plaintiff submits that he is entitled to its costs on an indemnity basis. The defendant submits that there should be no order as to costs or alternatively that the court should order that each party to pay the other 50% of the other’s costs. -- 2 of 8 -- 3 Plaintiff’s submissions [4] It is common ground that there were no formal offers by either side. It is submitted that although the defendant has resisted the larger portion of the claim, the entirety of the plaintiff’s claim fell under the “overarching issue” whether the solicitors had acted in breach of trust by removing monies from their trust account. The plaintiff failed to proved any moral turpitude on the part of Mr Kann who was the solicitor acting at the time the monies were transferred. The plaintiff persisted with the allegation of dishonesty on the part of the defendant. [5] In support of this point of an overarching issue, it is submitted that consideration ought to be given to: 1 (a) the history of Doolan Properties’ relationship with Clarke & Kann, including the Terms of Engagement Letter and the work covered under it; (b) the events surrounding the removal of the monies from trust; (c) the subsequent inquiries from the liquidator of Doolan Properties in respect of Clark & Kann’s removal of monies from trust; and (d) Clark & Kann’s retention of its records. [6] There is some merit in those submissions. The problem for the defendant is that those issues had to be explored in order to make sense out of the authority relative to the resumption issue and its relevance to the non-resumption issue. It is further submitted that unless issues are separate and distinct and that the evidence could be confined to say the non-resumption issue, then the court should not make an order for costs on specific issues.2 [7] If one accepts the general thrust of the plaintiff’s argument that there were “overarching questions” to be determined, then costs should follow the event notwithstanding that the plaintiff did not succeed in recovering more than one third of its claim. If the issues were so clearly defined as suggested by the defendant now, it was open to the defendant to make a formal offer and that is then taken into account in assessing costs. It is submitted that it has not been shown that costs could have been less by not calling certain witnesses or by limiting other disclosure 1 Written submissions para. [11]. 2 Thiess v Channel Nine Pty Limited (No. 5) [1994] 1 Qd R 156 at 208; Cretazzo v Lombardi [1975] 13 SASR 4 at 16 per Jacobs J; RC and MB Steninhardt Pty Ltd v Cunningham, unreported, Supreme Court of Queensland, 29 January 1997 per Fryberg J at p 6. Reference is made to Thiess’ case. -- 3 of 8 -- 4 issues. The plaintiff relied upon the proposition that even if a plaintiff has failed on some issues it is entitled to all of the costs necessarily incurred to achieve such success and the defendant is entitled to the costs of an issue on which the defendant succeeded “only [to the extent of] the amount by which the costs of the proceedings have been increased by it”.3 The High Court in Smith v Madden was referring to the House of Lords decision Medway Oil & Storage Co Ltd v Continental Contractors Ltd:4 “That the claim should be treated as if it stood alone and the counterclaim should bear only the amount which the costs of the proceedings have been increased by it.” [8] As explained by Dixon J in Smith v Madden5 a charge for work may be able to be calculated if it is severable from other work which may relate in some cases to a counter claim. In the present case, there is no counter claim but there are defences raised which did not succeed. Defendant’s submissions [9] It is the defendant’s submission that as the plaintiff has failed in relation to the majority of its claim that there should be no order as to costs or that the plaintiff should receive limited costs. The defendant has taken a somewhat limited view of the evidence and has attempted to separate the issues of costs relating to the resumption work and that relating to the non-resumption work. Once the documents were looked at carefully, and the oral evidence dealt with, the issues did crystallise. However, it was necessary to go through the evidence on all issues to allow that crystallisation to occur. It was the defendant’s position that the written authority related to both. An examination of the nature of the relationship between the parties, their oral and written communications and a construing of the documents allowed a finding to be made. The issues could not at the outset have been regarded as separate or discrete. Had it been obvious to the defendant, a prudent formal offer to settle should have been made. [10] It is submitted that the first day was lost because of the plaintiff’s claim about the resumption work. It related to what may have been a trigger to invoke the authority 3 Written submissions para. 26 referring to Smith v Madden (1946) 73 CLR 129 at 136. 4 [1929] AC 88. 5 Op cit 136. -- 4 of 8 -- 5 to transfer the money. There were however some disclosure issues which involved a failure by the defendant to discover some documents. Any delay was not solely caused by the conduct of the plaintiff’s case. Limitation of Actions [11] Although this did not take much trial time, it was an issue raised by the defendant under s 27 of the Limitation of Actions Act. It was submitted that an assignee was not a beneficiary for the purposes of avoiding the six year limitation period. No authority was cited. It required a close analysis of the law to determine this issue. The defendant failed on that issue. Laches [12] This issue raised the question of what prejudice the defendant suffered because of the delay in bring the proceedings and also the paper trail to determine what files were still in existence. This took a considerable amount of time in so far as the evidence was concerned. The problems with Doolan Properties in liquidation, the previous bankruptcy of the plaintiff, the issue of prejudice and lost documents were all part of the inquiry on this issue. The defendant failed on that issue. In reality, the case took two full days although it was set for hearing for three days. Separating issues is made more difficult in that situation. In any event, it would be difficult to say that the trial could have been significantly reduced by leaving out certain issues. Both sides ran an efficient and yet probative case. It would not warrant exercising a discretion to separate certain issues to minimise the costs. Costs should follow the event. It cannot be said in this case that it would be reasonable for the plaintiff to bear the expense of part of the litigation because it did not succeed completely. In view of the length of the trial and the “overarching issues”, it does not follow that the plaintiff pay the defendant’s costs on any issue. In reaching that decision, recognition has to be given to the defendant’s failure to establish its defences. Indemnity costs [13] The plaintiff submits that it is entitled to indemnity costs based upon the following: (a) being a trustee of the monies converted; -- 5 of 8 -- 6 (b) raising plainly unsustainable defences; and (c) manner of conducting the litigation generally. At the outset it should be noted that the plaintiff failed to establish any moral turpitude on the part of the defendant. The defences raised were substantial and required close scrutiny of the law and facts before a finding adverse to the defendant was made. Its conduct in relation to the liquidator of Doolan Properties was not unusual. The defendant asserted that it has the requisite authority which, on examination, it did not have in relation to the non-resumption work. Given the relationship with the plaintiff and his company, it assumed (wrongly as it turned out) that it was entitled to the fees based on the original authority. The failure of the defendant to make proper discovery was remedied on the first day by adjourning the trial to allow the plaintiff to consider the material. The trial then continued. The plaintiff will get its costs of the first day notwithstanding there were some amendments to the pleadings on his part. [14] It has been suggested6 that where there is a conversion of trust monies, that such conduct justifies an award of costs on an indemnity basis. Hagan’s case was complicated by the existence of some offers by the defendants. However, the breaches of trust in that case were numerous and made the conduct of the litigation somewhat difficult. In the present case, the conduct of the defendant’s solicitors in relying on the original authority was wrong, but it is not so culpable so as to justify an indemnity costs order. The relationship of the parties and the nature of the authority held by the defendant make it less culpable. [15] The defendant resists the order for costs on an indemnity basis. In the submissions 7 the following principles from Colgate Palmolive Co v Cussons Pty Ltd8 are referred to: (a) the ordinary rule is that costs are payable on a standard basis; (b) the Court ought not usually make an order for the payment of costs on some basis other than the standard basis unless the circumstances of the case warrant the Court in departing from the usual course. 6 Plaintiff’s written submissions para. 37 referring to Hagan v Waterhouse (No. 2) (1992) 34 NSWLR 400 at 405. 7 Defendant’s written submissions para. 20. 8 (1993) 46 FCR 225. -- 6 of 8 -- 7 The submissions by the defendant rely on the following:9 (a) It is common ground that the plaintiff did not make a relevant offer. It was always open to him to do so if he wanted to be protected as to costs. (b) The defendant’s defence of the claims was not frivolous or vexatious. Its defence was successful in respect of the majority of the plaintiff’s claim. In respect of the balance of the plaintiff’s claim it had reasonably arguable defences, such as the laches defence. The fact that its defences failed upon close analysis does not mean they were entirely lacking in merit; (c) Contrary to the plaintiff’s submission there was no misconduct in the conduct of the defendant’s defence. The late disclosure of part of the Resumption Work file, whilst unfortunate, was explained and did not involve any misconduct. The general import of those submissions are accepted. This is not a case where the circumstances warrant a departure from the usual rule as to costs. The plaintiff failed in its allegation of dishonesty by the defendant. Two counsel [16] Finally, the plaintiff seeks an order as to senior and junior counsel being justified in the case. The defendant says that it is a matter which is usually left to the person assessing costs. In answer to that submission the plaintiff relies on the decision of Hobbs & Anor v Oildrive (No. 2). 10 The present matter did have some complexity, particularly the Limitation of Actions point. It is appropriate to order in terms of the order made by Daubney J vis that in assessing the plaintiff’s costs he made on the basis that, except so far as they are of an unreasonable amount, the fees of senior and junior counsel should be regarded as costs necessary and proper. Orders (1) The defendant is ordered to pay the plaintiff’s costs of and incidental to the action including reserved costs, if any, to be agreed or assessed on the standard basis. 9 Op cit para. 23. 10 [2008] QSC 52 per Daubney J. -- 7 of 8 -- 8 (2) That the assessment of the plaintiff’s costs be made on the basis that, except so far as they are of an unreasonable amount, the fees of senior and junior counsel should be regarded as costs necessary and proper. -- 8 of 8 --