Nominal Damages Do Not Constitute Victory for Claimant in Costs Determination

The court considered a case where the claimant obtained judgment for nominal damages only. The court determined that this did not constitute a victory for the claimant for the purposes of determining costs. Applications for indemnity costs were refused.

New South Wales Supreme Court

CITATION : [NAME] v [NAME] [2005] NSWSC 385

HEARING DATE(S) : 21 April 2005

JUDGMENT DATE : 21 April 2005

JURISDICTION : Equity

JUDGMENT OF : Hamilton J

DECISION : Where claimant obtained judgment for nominal damages only the event was against him for purposes of determining costs. Applications for indemnity costs refused.

CATCHWORDS : PROCEDURE [572], [574] - Costs - General rule: costs follow the event - What is the event when plaintiff obtains judgment for nominal damages only - Order for indemnity costs - Factors relevant to exercise of Court's discretion.

[NAME] v [NAME] (No 2) [2003] NSWCA 258 Leichhardt Municipal Council v Green [2004] NSWCA 341 [COMPANY] (1992) v [COMPANY] (No 2) (1996) 70 FCR 236 [COMPANY] v [NAME] (1996) 138 ALR 425 CASES CITED : [NAME] v Brutus Constructions Pty Ltd FCAFC 10 September 1997 unreported [NAME] v [NAME] [2005] NSWSC 270 [NAME] v [NAME] of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 [NAME] (1980) 193 CLR 72 SMEC Testing Services Pty Ltd Limited v Campbelltown City Council [2000] NSWCA 323

[NAME] (P1 & XD1) [NAME] (P2 & XD2) PARTIES : [NAME] (P3 & XD3) [NAME] ([NAME]) [NAME] t/as [NAME] Solicitor and Conveyancer (XD4)

FILE NUMBER(S) : SC 2607/02

[NAME] (Ps & XDs) [NAME] ([NAME]) COUNSEL : [redacted]

[NAME] (Ps & XDs) [NAME] ([NAME]) SOLICITORS : [redacted]

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

THURSDAY, 21 APRIL 2005

2607/02 [NAME] & 2 ORS v [NAME]

JUDGMENT - Costs 1 HIS HONOUR: These were proceedings by the plaintiffs against the defendant for specific performance of a contract for the sale of land, with a consequential [NAME] claim against the plaintiffs and a [NAME] claim for damages against the [NAME] ("the [NAME] defendant"), who was the defendant's solicitor. The proceedings were tried over nine days in 2004. The first three days were 24 to 26 May and the second three days were 17 to 19 August. 2 On 31 March 2005, I delivered judgment: [NAME] v [NAME] [2005] NSWSC 270. I ordered specific performance against the defendant and dismissed the [NAME] claim against the plaintiffs. On the [NAME] claim against the [NAME] defendant, I found there had been breaches of contract but no damages established and gave judgment against the [NAME] defendant for nominal damages of $10. On the negligence claims in tort, in some instances I found a breach of duty, but in no instance did I find damage flowing from the breach. There was therefore judgment for the [NAME] defendant on the tortious claims. 3 I have now heard argument on costs. The claims were as follows:

1 The plaintiffs ask for costs against the defendant including indemnity costs from 28 May 2004. 2 The defendant asks for costs of a motion for pleadings. 3 The defendant asks that the [NAME] defendant be ordered to pay him any costs paid by him to the plaintiffs pursuant to the order of the Court. 4 The [NAME] defendant asks for costs against the defendant including indemnity costs from 1 May 2004. 1 Plaintiffs' Costs against Defendant 4 The defendant does not contest the making of an order for costs. There are only two qualifications. The first is the costs of the motion which I deal with under the second heading. Secondly, he contests the indemnity element asked for. I deal with indemnity costs under the fifth heading below. 2 Costs of Motion for Pleadings 5 Early in the proceedings, the defendant asked that there be pleadings but the plaintiffs resisted. The defendant took out a motion on 25 September 2002, whereupon the plaintiffs consented. The plaintiffs say that they should have the costs of this motion as part of the general costs. They say that specific performance proceedings are generally by summons and that the ordering of pleadings was an unusual course. In my experience that is not a correct statement as to the general practice in this Division. In any event, the plaintiffs conceded the justice of the defendant's request by consenting to an order. The plaintiffs should pay the defendant's costs of this motion. 3 Defendant's Application for "Bullock type" Order 6 The defendant submitted that it was the [NAME] defendant's conduct that resulted in the onset of the proceedings, in which the plaintiffs ultimately succeeded against the defendant. For this reason, by analogy with Bullock orders, the [NAME] defendant should be ordered to pay to the defendant the costs he is ordered to pay to the plaintiffs. I find this submission quite without substance and, indeed, almost incomprehensible. My findings as to the advice given by the [NAME] defendant to the defendant militate strongly against it: see my judgment [60]. [NAME], of counsel for the [NAME] defendant, reminded me of the [NAME] defendant's letter to the defendant of 21 November 2001 tendered at the trial which was as follows: "I refer to our numerous telephone conversations concerning the above matter. I confirm in writing to you that your purchaser has agreed to settle the matter by paying an additional $5,000 on top of the contract price.

I strongly recommend that you accept this offer. The position is, as I have explained to you on a number of occasions, I cannot guarantee that you will be successful in defending an action for specific performance of the contract. If this matter is taken to court there will be significant barrister's fees and legal costs amounting to possibly $3,000 per day for every day together with preparation costs.

I cannot, nor can any lawyer, give you a guarantee that a court would not find against you and hold that the termination was not fair and reasonable in all the circumstances. I have explained this to you at length. Last week you indicated that you would discuss the matter with you [sic] wife and come back to me. To date, I have heard nothing. I implore you to sit down and think long and hard about this offer and I strongly recommend that you accept it. It could literally cost you thousands and thousands of dollars if this matter proceeds to court and you lose.

Could you urgently give me any instructions in this matter."

The application for this order is refused. 4 [NAME] Defendant's Costs against the Defendant. 7 The [NAME] defendant says these should follow the event. The event was in the [NAME] defendant's favour. This is not derogated from by the judgment for the defendant of nominal damages for $10; the substance of the claim for compensatory damages was lost. 8 Reference was made to what McHugh J said in Oshlack v Richmond River Council (1980) 193 CLR 72 at [70]. There was more extensive discussion of the principles in the [ADDRESS] of the Federal Court in [NAME] v Brutus Constructions Pty Ltd FCAFC 10 September 1997 unreported. In general terms the event will be regarded as going against a party who recovers nominal damages only, unless some other right is vindicated by the judgment, eg, the establishment of a legal right irrespective of whether any substantial remedy is obtained. 9 This [NAME] claim was a claim for damages only. The claim for damages substantially failed. The event was in favour of the [NAME] defendant. In argument, counsel for the defendant put the proposition that the order for $10 damages should have included the causes of action for tortious claims based on negligence as well as those for breach of contract. This submission appeared to proceed from the misapprehension that the $10 was an estimate by the Court of the defendant's loss. In fact the Court specifically found there was no loss established as flowing from the breaches. The judgment for $10 was a modern extrapolation of the traditional common law verdict for 40 shillings where breach of contract was established, but no damage. 10 Furthermore, there was a submission that in my judgment I found that tortious causes of action in negligence were established. Wherever in my judgment I made a finding of negligence, it is quite clear from the context that it was a finding of negligence in the sense of a finding of a breach of a duty of care only; in every case, I clearly found there was no damage established as arising from the breach. The causes of action in negligence were clearly encompassed in my order giving judgment for the [NAME] defendant otherwise than in respect of the breaches of the contract. 11 There is no reason why these costs should not follow the event and the event was in favour of the [NAME] defendant. 5 Indemnity Costs 12 This leaves questions of indemnity costs. Both the plaintiffs and the [NAME] defendant claim indemnity costs based on Calderbank letters. Both letters make offers better than the result obtained by the defendant. The [NAME] defendant's letter of 30 April 2004 is technically flawless, whereas the plaintiffs letter of 27 May 2004 does not state that it is a Calderbank letter or warn of the consequences. 13 It is well established that the making of an offer better than the result ultimately obtained does not automatically translate into an indemnity costs order. At one stage there was a suggestion that such a letter raised a prima facie presumption: see [COMPANY] v [NAME] (1996) 138 ALR 425 at 451. However, the rule now applied was stated by Giles JA in SMEC Testing Services Pty Ltd Limited v Campbelltown City Council [2000] NSWCA 323 at [37]. This formulation was confirmed by the Court of Appeal in [NAME] v [NAME] (No 2) [2003] NSWCA 258 at [8]. Multicon was explicitly disapproved at [9]. And Santow JA in Leichhardt Municipal Council v Green [2004] NSWCA 341 has counselled caution in departing from making costs orders on the usual basis. 14 In all the circumstances, I decline to make an indemnity costs order in favour of the plaintiffs. After the first three days of the trial, the defendant was given only seven days to decide on the offer. Although the case was not huge, the issues were of some complexity: see [COMPANY] (1992) v [COMPANY] (No 2) (1996) 70 FCR 236. Acceptance of the plaintiffs' offer would have left the defendant in an undefined situation of some uncertainty vis a vis the continued conduct of its case against the [NAME] defendant. I do not find it unreasonable for the defendant not to have accepted the offer. As to the form of the letter, I do not think that that alone would have precluded the making of an indemnity costs order were that course otherwise justified: see [NAME] v [NAME] of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133; [NAME] supra. But I have not in any event taken the form of the letter into account in refusing indemnity costs. 15 As to the [NAME] defendant's application for indemnity costs, it does not have the problem of creating difficulty with another party if accepted. And the time given for acceptance (19 days) was longer. However, bearing in mind all the circumstances, including the terms of the offer and the complexity of the case, I am not prepared to find in this case either the non acceptance of the offer conduct sufficiently unreasonable to justify an indemnity costs order. 16 The orders of the Court will be: 1 Order that the plaintiffs pay the defendant's costs of the notice of motion of 25 September 2002. 2 Otherwise order that the defendant pay the plaintiff's costs of the proceedings. 3 Order that the defendant pay the [NAME]'s costs of the proceedings. 4 Direct that the exhibits be returned unless an appeal is instituted within 28 days from today.

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