Case noteCameron Ford*

SPIRIT OF CIVIL PROCEDURE REFORMS BITES

The spirit as well as the letter of Northern Territory Practice Direction 6 (PD6)1

has been given teeth by the first published decision in which it was expresslyapplied, Spadaccini v Grice (2012) 32 NTLR 1. Barr J deprived both parties ofcosts for their failure to comply with its letter and its spirit. Notably, the spirit ofPD6 was applied to pre-commencement conduct even though it did not apply tothe proceeding until six weeks after it had been commenced, when an order wasmade that, having been commenced by Originating Motion, it continue as ifcommenced by Writ, thus attracting PD6. The defendant’s unreasonable rejectionof sensible pre-commencement settlement offers operated to reduce her costsentitlement until the time the plaintiffs’ serious failure to comply with PD6overwhelmed the effects of the defendant’s failure. Settlement was reached on thesecond day of trial for $110,000, with combined costs exceeding $900,000 whichthe court was asked to allocate.

BRIEF FACTS

The plaintiffs commenced proceedings after negotiations – including anin-principle agreement – failed; consent orders were made six weeks later fordamages to be assessed, the defendant paid $52,500 into court and offeredindemnity costs seven months later, and two months later the parties settled aftertwo days of trial for $110,000, leaving the plaintiffs worse off than had theyaccepted the $52,500 and indemnity costs. Under the settlement agreement, costswere to be determined by the court.

SUMMARY OF MESSAGES FROM THE DECISION

The key messages from the decision of ways to reduce the incurrence of orliability for costs are dealt with in greater depth at the end of this note. Asummary of the messages is:

1. the spirit of PD6 can be applied to proceedings where its letter does notapply;

2. use appropriate, non-inflammatory precedents and terms for settlementagreements;

3. make and accept reasonable and genuine offers of alternative disputeresolution (ADR) early;

4. do not impose irrelevant conditions on mediation;

* LLB (Qld), LLM (Melb), GradCertIntArb (NUS), FCIArb, FSIArb; Barrister; Editor, Northern

Territory Law Reports; Executive Editor, Northern Territory Law Journal.

1 PD6 contains civil procedure reforms requiring pre-commencement and pre-trial disclosure,mediation and other time and cost-saving initiatives. A copy is annexed to the judgment in theNorthern Territory Law Reports.

(2012) 2 NTLJ 277 277

5. explain a change in attitude from earlier refusing, to later agreeing tomediation;

6. courts should force mediation;

7. make and accept reasonable offers of settlement;

8. respond promptly to offers closer to trial;

9. indemnity costs will not always be awarded where offers are not bettered;

10. avoid grossly exaggerated damages claims;

11. quantify and document damages claims;

12. temper public comments about opponents. Use conciliatory language in courtand in person;

13. do not plead unsustainable or inconsistent defences;

14. plead matters which must be pleaded. Do not ambush;

15. avoid trench warfare in court; and

16. agree costs in a settlement if at all possible.

SETTLEMENT NO BAR TO COSTS DETERMINATION

Courts will often refuse to determine costs where the parties have settled and it isdifficult to determine success, usually the most significant determinant of costs.2

This approach3 was not mentioned in the decision, with emphasis being placedinstead on the conduct of the parties and on offers made and rejected. Perhapsone reason for this is that there had been a consent judgment for the plaintiffs andit only remained for damages to be quantified. There were no academic issues totry solely to decide costs; the plaintiffs had been successful in one sense and theirprima facie entitlement to costs was affected by conduct, offers and their degreeof success.4

2 For example, Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194;NT Pubco Pty Ltd v DNPW Pty Ltd [2011] NTSC 51; R v Dunkerton [2011] NTSC 25; Renehan v

Leeuwin Ocean Adventure Foundation Ltd (No 4) (2006) 17 NTLR 124; Parkmore Investments Pty

Ltd v Acer Forester (Darwin) Pty Ltd [2005] NTSC 9; South East Queensland Electricity Board v

Australian Telecommunications Commission (unreported, Fed Ct, Pincus J, No G168 of 1987,10 February 1989); Parap Hotel Pty Ltd v Northern Territory Planning Authority (1993) 112 FLR336; JT Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547; Re Minister for Immigration and

Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; Domino Hire v Pioneer Park [2003] NSWSC496; Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR230; Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544;Re St George Builders Hardware Pty Ltd (1995) 18 ACSR 451; United Super Pty Ltd v Randazzo

Investments Pty Ltd [2010] NTSC 31; One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548.

3 In Brawley v Marczynski [2002] 4 All ER 1060 at 1065, the Court of Appeal said that there was “notradition” of there being no order as to costs merely because a case had been settled except as to costs.In such a case, the overriding objective was to do justice between the parties without incurringunnecessary court time and consequently additional cost. At each end of the spectrum there would becases where it was obvious which side would have won if the substantive issues had been fought to aconclusion. In between, the position would, in differing degrees, be less clear. How far the courtwould look into previously unresolved substantive issues would depend on the circumstances of thecase, not least the amount of costs at stake and the conduct of the parties. In the absence of a goodreason to make any other order, the fallback was to make no order as to costs.

4 Referable to the amount claimed compared to the amount recovered, and betterment of thedefendant’s offers.

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(2012) 2 NTLJ 277278

FIVE PERIODS FOR COSTS

Costs were awarded for five separate periods:1. from commencement to consent orders – six weeks;2. from consent orders to the time for acceptance of a payment into court –

seven months;3. from payment into court to the time for acceptance of a Calderbank offer –

two months;4. from the time for acceptance to trial – six days;5. for trial and submissions on costs – two days plus written submissions.

The award for each of those periods and the reasons may be summarised as:

Period Award Reasons

Commencement toconsent orders(6 weeks).

Defendant payplaintiffs’ costs.

Plaintiffs entitled to bring proceedings andvindicated. Defendant unreasonably rejectedpre-commencement offers (at [51]).

Consent orders topayment in(7 months).

Defendant pay 70%of plaintiffs’ costs.

Plaintiffs seriously defaulted under PD6 buteffects not yet fully felt. Plaintiffs entitled tobring proceeding. Defendant unreasonablyrejected pre-commencement offers.Defendant’s unsustainable and inconsistentdefences (at [88], [90], [92]).

Time for acceptanceof payment in to timefor acceptance ofCalderbank offer(2 months).

Plaintiffs pay 50% ofdefendant’s costs.

Plaintiffs better off to accept payment in.Plaintiffs’ default under PD6 overwhelmeddefendant’s pre-commencement unreason-ableness (at [83], [88], [94]).

Time for acceptanceof Calderbank offer totrial (c 6 days).

Plaintiffs paydefendant’s costs.

Plaintiffs should have accepted one dayafter offer made. Settled for same amounton second day of trial (at [96]-[97]).

Trial and costssubmissions (2 daysplus writtensubmissions).

Each party bear owncosts.

Trial was trench warfare, partly organisedand disciplined but with confusion,obfuscation, thick mud and murky fog;caused partly by defendant’s arguments andambush of plaintiffs.

The costs incurred by the parties are analysed using this table and certainstated assumptions at the end of this note to suggest the parties were not in agreatly different position under the decision than if they had agreed to bear theirown costs in the settlement.

DECISION IN DETAIL

Defendant’s wall encroaches on plaintiffs’ land

The parties were neighbours on East Point Road, Fannie Bay, overlooking theocean, and a wall of the defendant’s encroached onto the plaintiffs’ land. Theplaintiffs wanted to demolish the wall so they could build their dream home, andafter initial reluctance, the defendant orally agreed to the demolition of the wall

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(2012) 2 NTLJ 277 279

and for a fence to be erected on the plaintiffs’ side of the boundary at theplaintiffs’ expense. The defendant insisted on the agreement being formallydocumented which Barr J said was unnecessary and, together with theinappropriate terms of the deed drafted by her solicitors, suggested arrogance andcaused or contributed to the breakdown in relations (at [21]-[25]).

Defendant “kicks gift horse in teeth” with inappropriate,offensive settlement deed

The draft deed was based on an inappropriate precedent, contained inapplicableand inflammatory terms such as referring to the defendant as “the Landlord”,requiring the plaintiffs to submit plans of the new wall to the defendant asLandlord for approval, to rectify any defect in the new wall of which thedefendant notified the plaintiffs, that the wall be built in a proper andworkmanlike manner by properly qualified and experienced contractors, and thatthe plaintiffs achieve completion of the new wall within 60 days fromcommencement.

His Honour said that in insisting on the agreement and its insulting terms,“[n]ot only was the defendant ‘looking the gift horse in the mouth’; she wasreserving the right to kick it in the teeth” (at [23]). He said the precedent used forthe deed was not a conciliatory precedent which parties who have caused a legalwrong would use in recording their agreement with an injured party who was stillmotivated to be reasonable, it would almost inevitably annoy, irritate and evenoffend the plaintiffs, it showed a lack of commonsense and was without apparentappreciation for the need to maintain and not jeopardise the very favourableoutcome for the defendant as a result of the plaintiffs’ willingness to sensiblycompromise (at [21]-[25]).

Suffer costs for rejecting reasonable proposalspre-commencement

This conduct by the defendant, combined with her later rejections of reasonableproposals from the plaintiffs before they commenced proceedings, resounded incosts against her even though PD6 did not apply to the proceedings until theywere ordered to continue as if commenced by Writ six weeks after commence-ment. His Honour said that “[a] just costs order must reflect the defendant’sunreasonable refusal to accept the plaintiffs’ pre-commencement settlementproposals” (at [88]).

It also had the incidental effect of depriving the defendant of indemnity costsfor the period after the plaintiffs should have accepted her Calderbank offer, abouta week before trial. Because the judge did not award indemnity costs against thedefendant for her pre-commencement rejections of reasonable offers, to beconsistent, he did not award indemnity costs against the plaintiffs for their initialrejection of this offer (at [97]).5 Had there been no unreasonable rejections by thedefendant,6 there would have been no reason to deny her indemnity costs for theplaintiffs’ rejection of her offer.

5 It could be argued that this is an unequal comparison and that a potential defendant’s rejection of aninformal pre-commencement offer is not in the same class of delinquency as a plaintiff’s rejection ofa Calderbank offer one week from trial, and seven months after rejecting a substantively identical

Case note

(2012) 2 NTLJ 277280

Unexplained offer to mediate is costs-neutral

After rejecting a number of further reasonable proposals from the plaintiffs, thedefendant offered to mediate but did not explain how or why she hadreconsidered her position. His Honour said that without more, this bald offer tomediate and the plaintiffs’ rejection of it had no significant effect on costs(at [36]).

Plaintiffs justified in commencing proceedings

On that background, his Honour held that the plaintiffs were entitled to bring theproceedings for declaratory relief and consequential orders. Their purpose wasrapidly achieved, practically, by the making of consent orders on 20 April 2011,six weeks after commencement, requiring the defendant at her own expense toremove the wall and footings and that the proceedings continue as if commencedby Writ. PD6 applied from this point. General damages were reserved for trial.

His Honour said that on general principles the defendant should pay theplaintiffs’ costs incurred to that point because the plaintiffs had succeeded inobtaining the relief to which they were entitled, PD6 did not apply and, in anycase, there was no aspect of the plaintiffs’ pre-commencement dealings with thedefendant which disentitled them to costs. Further, the defendant unreasonablyrejected sensible offers from the plaintiffs (at [51]).

Plaintiffs grossly exaggerate damages

After consent orders were made, the plaintiffs variously claimed that theirdamages were between $1 million and $1.6 million. His Honour reasoned thattheir true entitlement at that time was around $100,000 because of the settlementsum of $110,000, which included interest (at [53]). The plaintiffs did not explainthe exaggerated quantifications.

This unexplained, gross overestimation of damages, combined with a failureto provide concise details of their claim and copies of the documents essential toenable the defendant to understand and investigate it, and a failure to follow areasonable procedure to avoid litigation, was a failure to comply with the spirit ofPD6 (at [56]).

Inappropriate condition on mediation

Mediation was then suggested by the defendant but, after initially agreeing, theplaintiffs said they would not mediate before the costs of a summons were dealtwith. Barr J said that the imposition of that condition on their preparedness tomediate should be seen as a failure by the plaintiffs to comply with the spirit ofPD6. Those costs were irrelevant to the utility or futility of mediation. If theywere relevant, they should have been included in the issues for mediation(at [57]).

formal offer. But considerations of costs involve an imprecise synthesis of inherently unequal factors,with the court’s sense of fairness in all the circumstances taken together, and it is difficult to accuratelydescribe how the various factors work to produce the result. It is unfair to the court and misleading tothe practitioner to criticise the treatment of one factor in isolation. See, for example, comments ofKaye J (McGarvie J agreeing) on the appeal from Beach J’s ruling for costs in Verna Trading Pty Ltd

v New India Assurance Co Ltd [1991] 1 VR 129 at 155.

6 Naturally the proceeding would not have commenced, but this proposition assumes no reasonableoffers rejected by the defendant for the sake of illustration.

Case note

(2012) 2 NTLJ 277 281

Unreasonable refusal to mediate until damages quantified

The plaintiffs then refused to mediate for two other reasons. First, Mrs Spaddaccinisaid she was approached by counsel for the defendant in an aggressive mannerafter an interlocutory hearing and thereafter she did not want to participate inanything he suggested. She said that, after extending his hand to greet her, whichshe refused, counsel said to her:

This is crazy, you are going to be neighbours. We should sit down and settle thismatter as the lawyers are the only persons making money out of this case.

His Honour said that while the contact and words may have beenintemperate, they were correct and the plaintiffs’ lawyers would or should havebeen giving the same advice (at [64]). Since the concern was not mentioned byMr Spaddaccini or their lawyers, his Honour did not accept that this caused thealleged reluctance to mediate. It would seem from his Honour’s treatment of thisallegation that he might have accepted it as a legitimate reason not to mediate ifhe had believed the concern was genuinely held and (perhaps) shared by bothplaintiffs.

Secondly, the plaintiffs insisted they could not mediate until they haddefinitive evidence of the quantum of their damages (at [65]). His Honour saidthis insistence was unmeritorious, was a cavalier approach to compliance with anorder for mediation, and showed either no awareness of PD6 or an obstructiveapproach to compliance. Mediation could have proceeded without definitiveevidence of quantum (at [60], [88]). He said the probable effect of the plaintiffs’failure to provide a timely quantification and breakdown of their damages claim,and the consequent postponement of the mediation, was that the parties continuedto incur the substantial costs of the ongoing litigation (at [69]).

Counsel’s court comments create concern

In an interlocutory hearing, counsel for the defendant said:

Your Honour, there is only one reason why these proceedings are continuing and thatis because of a (inaudible) exaggerated claim for damages which is completely, onany examination of facts, unsustainable. It has been run for one reason only and thatis out of spite by the plaintiffs to harass this old widow. That is what we will besaying at trial.

This is a classic case where mediation should be undertaken. Not just because of thenature of this exaggerated claim, but also because of the fact these people areneighbours. They are living beside each other. It is just ridiculous that this litigation iscontinuing. We offer now – we have offered for months to mediate, unconditionally,this dispute.

Barr J said that those words were not likely to encourage the plaintiffs toengage in mediation, were not words calculated to create or induce a spirit ofreconciliation, and would normally be expected to create or aggravate hostility(at [73]). Since the plaintiffs did not complain of any adverse reaction to thecomments, his Honour did not expressly take them into account on costs, but itseems he would have done had there been such evidence of a reaction.

Case note

(2012) 2 NTLJ 277282

Court does not force mediation

At that hearing and at the urging of both parties (contrary to the words quotedabove), the court did not force them to mediate (at [77]). Of course, at that timethe court did not know the history of offers, agreement, rejections and mediationproposals, but if it had it might have ordered mediation over objection. Withknowledge of this history at the conclusion of the proceeding, Barr J said thatneither of the parties was so unreasonable that an experienced mediator could nothave brought them to a satisfactory agreement much earlier (at [86]). His Honourhad difficulty in assessing the impact this had on costs, since the partiesconsented to the mediation not being held (at [87]).

In hindsight, knowing both the history of the dispute and its ultimatesettlement, a mediation ordered at or around that time may have resulted insettlement or laid the foundation for a settlement earlier than occurred. At thatstage of proceedings there can only be one of two positions – either there will orwill not have been settlement offers. If offers have been made, even a forcedmediation may well rejuvenate stagnant discussions. If offers have not been madeby then, a forced mediation might start the settlement ball rolling. Mediation isnot considered a failure merely because it does not produce agreement on the day.It might just be the first but essential step in breaking down barriers between theparties and their advisers. The Hon JJ Spigelman AC QC, when Chief Justice ofNew South Wales, said extrajudicially:7

At first there was some scepticism as to whether or not forcing someone to negotiatea settlement by court order would work. However, it has proven very effective. Aformal court order has frequently overcome the negotiating posture of a party whopretends, and may believe, that his or her case cannot fail. The experience of thecourts is that reluctant starters have often become active participants in negotiations,leading to significant success rates for mediation in civil disputes.

Reading the excerpts of transcript in this case, “reluctant starters” seems anappropriate description of the parties at the time rather than, say, “vehementopposers” of mediation.

Payment into court is significant costs factor

Seven months after the consent orders were made for removal of the wall(April 2011), the defendant paid $52,500 into court combined with a Calderbankoffer to pay indemnity costs. To this point, his Honour awarded the plaintiffs 70%of their costs on the standard basis. This was because the plaintiffs committedserious defaults under PD6 after the payment in, but the effects were not manifestfor some time. A deduction of 30% was made to reflect some effect of theirnon-compliance which led to costs being incurred unnecessarily (at [90]).

7 Spigelman JJ, “Judicial Mediation in Australia” (Speech delivered at the National Judicial College,Beijing, 25-28 April 2011) pp 13-14, http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/vwFiles/spigelman280411.pdf/$file/spigelman280411.pdf viewed 27 June 2012.

Case note

(2012) 2 NTLJ 277 283

Unsustainable defences add to litigation and adversarialnature

Barr J said he considered denying the plaintiffs all of their costs in the periodbetween consent orders and when they should have accepted the payment intocourt, but did not because (1) the plaintiffs were entitled to $100,000 throughout,(2) proceedings would not have been necessary had the defendant accepted theplaintiffs’ reasonable pre-commencement offers, and (3) the defendant contrib-uted to the ongoing litigation and its adversarial nature by maintaining variousdefences, one in particular which was inconsistent with reliable and objectivedocumentary evidence and with an admission by the defendant (at [88], [92]).

“Giving effect to PD6” by depriving plaintiffs of costs

After the time for acceptance of the payment into court (24 November 2011), hisHonour gave effect to PD6 by depriving the plaintiffs of all their costs to trial andawarded the defendant 50% of her costs. He said the plaintiffs would have beenbetter off had they accepted this offer than the eventual settlement of $110,000two months later (at [83], [94]).

Plaintiffs’ PD6 default overwhelms defendant’sunreasonableness

His Honour said at this point – the rejection of the payment into court – theplaintiffs’ default under PD6 and its effects overwhelmed the effect of anypre-commencement unreasonableness by the defendant (at [88]). There was noappropriate settlement-motivated response from the plaintiffs for several months,which was a significant factor in the consideration of costs (at [83]).

Trial preparation, mediation final offer

A mediation was held two months later and eight days before trial. The defendantmade a Calderbank offer of $110,000 a few days after the mediation which wasopen until 10 am on the day of trial, due to commence in five days (at [85]). Theplaintiffs initially rejected the offer but then agreed to that sum on the second dayof trial. His Honour said the plaintiffs should have been in a position to dealpromptly with the offer and should have accepted it the day after it was made.Costs were awarded against the plaintiffs from that day on the standard basis, tobe consistent with not awarding indemnity costs against the defendant for herpre-commencement unreasonableness (at [96]-[97]).

Costs of trench warfare trial born equally

His Honour ordered each party to bear its own costs of the two days of trial andof written submissions on costs, principally because the defendant’s raising of amatter not pleaded as required by r 13.07(1) of the Supreme Court Rules (NT)had “all the hallmarks of an ambush” (at [98]), but also because:

what happened could be compared with some aspects of trench warfare: organisedand disciplined to a degree, but with considerable confusion and obfuscation: theparties trudging and stumbling through thick mud, enveloped by murky fog – muchof it created by the defendant’s pleadings and legal arguments. (at [100])

Case note

(2012) 2 NTLJ 277284

MESSAGES FROM THE DECISION

1. The spirit of PD6 can be applied to proceedings where its letter does notapply. The defendant was denied costs and was criticised for pre-commencement conduct contrary to the spirit of PD6 even though it did notapply to the proceeding until six weeks after commencement. Thedefendant’s rejection of informal pre-commencement offers was treatedsimilarly for costs purposes to the plaintiffs’ rejection of the defendant’sformal Calderbank offer. This application of the spirit of PD6 to proceedingsto which its letter does not apply can be supported as the application of anew approach of the court as expressed in PD6, encouraging settlement andreducing costs, in the spirit of the High Court’s decision in Aon Risk ServicesAustralia Ltd v Australian National University (2009) 239 CLR 175.

2. Use appropriate, non-inflammatory precedents for settlement agree-ments. The defendant was deprived of part of her costs because of herunreasonable pre-commencement conduct, which included and arguablystemmed from the inappropriate and offensive draft settlement deed herlawyers submitted (at [21]-[25], [88]). It is conceivable that lawyers draftingsettlement agreements before proceedings have commenced could bepersonally liable for costs if their drafting causes or contributes to abreakdown in the agreement and to litigation. Rule 63.21(1) is broad enoughto encompass pre-commencement actions by lawyers since it applies“[w]here a solicitor for a party, whether personally or through a servant oragent, has caused costs to be incurred improperly or without reasonablecause or to be wasted by undue delay or negligence or by other misconductor default”.

3. Make and accept reasonable and genuine offers of ADR early. Theplaintiffs were denied costs because of their unreasonable refusal of offers ofmediation (at [57], [60], [88]).

4. Do not impose irrelevant conditions on mediation. The plaintiffs lost someof their costs because they refused to mediate until a separate costs issue wasresolved and until they had definitive evidence of quantum (at [57], [60],[88]).

5. Explain a change in attitude to mediation. The defendant’s pre-commencement offer of mediation, rejected by the plaintiffs, had no effect oncosts because she did not explain her change in attitude from rejectingprevious reasonable offers (at [36]).

6. Courts should force mediation. Whether there have or have not beensettlement discussions, even where parties are reluctant starters and need tobe ordered, most proceedings will benefit from a mediation, if only to startnegotiations and to bring cost consequences home to the parties.

7. Make and accept reasonable offers of settlement early. Both parties weredenied costs because they rejected reasonable settlement offers (at [88],[94]), with a formal offer being significant in consideration of costs (at [84]).Barr J said “PD6 encourages an enhanced role for offers made ‘withoutprejudice save as to costs’” (at [40], [96]).

8. Respond promptly to offers closer to trial. The plaintiffs had costs awardedagainst them from one day after an offer was made a week before trial, eventhough the offer was open until trial (at [96]).

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(2012) 2 NTLJ 277 285

9. Indemnity costs not always awarded where offers not bettered. Thedefendant received only standard costs for the period after the plaintiffshould have accepted her offer, despite PD6 saying indemnity costs would beawarded in the ordinary case. The case was not ordinary, and the defendantwas denied indemnity costs to be consistent with the plaintiffs’ not beingawarded indemnity costs for the defendant’s failure to accept theirreasonable pre-commencement offers (at [97]).8

10. Avoid grossly exaggerated damages claims. The plaintiffs were deprivedsome of their costs because they persisted in an unjustified damages claim10 to 16 times greater than their true entitlement, which they never explainedand which contributed to the continuing costs of the litigation (at [56], [69],[88]).

11. Quantify and document damages claims. The plaintiffs’ failure to providea timely quantification and breakdown of their damages claim partly causedthe incurrence of the substantial costs of the ongoing litigation, was a failureto comply with PD6 and was a factor in awarding costs against them (at [56],[69], [88]).

12. Temper public comments about opponents. While neither party directlysuffered in costs as a result, counsel’s non-conciliatory and potentiallyinflammatory comments in and (allegedly) out of court about and to theplaintiffs were noted and might have resounded in costs had they caused theincurrence of costs or a genuine reluctance to mediate (at [64], [73]).

13. Do not plead unsustainable or inconsistent defences. The defendant waspenalised in costs for pleading defences which were unsustainable or wereinconsistent with other defences or with objective documents (at [92]).

14. Plead matters which must be pleaded. Do not ambush. A factor indepriving the defendant of some costs was her failure to plead a matter incompliance with r 13.07(1), which “had all the hallmarks of an ambush”(at [98]).

15. Avoid trench warfare in court. The parties had to pay their own costs oftwo days in court partly because it was like trench warfare (at [98]).

16. Agree costs in a settlement. An overriding message is to agree costs in asettlement if at all possible. Neither party emerges from this decisionparticularly victorious or laudable. They would probably have been as welloff had they agreed to bear their own costs in the settlement as explainedbelow.

WERE THE PARTIES BETTER OFF WITH A RULING?

Would the parties have been just as well off to agree to bear their own costs underthe settlement? This may be explored with some assumptions which, even if notprecise, can give an indicative answer. Assumptions for the sake of argument are:

• solicitor-client costs for each side were around $500,000 (Barr J noted totalcosts exceeded $900,000, and for ease let it be assumed costs were equal);

• costs were incurred by each side at roughly the same rate and stage; and

8 See n 6.

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(2012) 2 NTLJ 277286

• party-party costs were 70% of solicitor-client costs.

Period AwardSolicitor-clientcosts (for eachparty) ($)

Plaintiffs’recovered costs($)

Defendant’srecovered costs($)

Commencementto consentorders(6 weeks).

Defendant payplaintiffs’ costs.

100,000 70,000* Nil

Consent ordersto payment in(7 months).

Defendant pay70% ofplaintiffs’ costs.

150,000 73,500† Nil

Payment in totime foracceptance oflater offer(2 months).

Plaintiffs pay50% ofdefendant’scosts.

100,000 Nil 35,000^

Time foracceptance totrial (c 6 days).

Plaintiffs paydefendant’scosts.

100,000 Nil 70,000*

Trial and costssubmissions(2 days pluswritten subs).

Each party bearown costs.

50,000 Nil Nil

Total 500,000 143,500 105,000

Notes:* Full party-party costs at 70%.† 70% of 70%.^ 50% of 70%.

On those figures and assumptions, the parties are only some $40,000 apart asa result of the decision on costs out of total costs each of around $500,000. Itwould take very little tweaking of the figures to make them equal, such asassuming more costs were incurred in the second half of the proceeding when thedefendant received costs awards. Of course, it may be that the plaintiffs incurredmore costs than the defendant in having to prove their claim and that thependulum would swing towards them, but there might be an argument on taxationas to whether the costs were reasonable for a “true entitlement” of only $100,000as opposed to the $1.6 million the plaintiffs were pursuing.

DID PD6 MAKE A DIFFERENCE?

The final question is whether PD6 made a difference to this proceeding, either tothe incurrence of costs or their apportionment between the parties. As to theincurrence of costs and the behaviour of the parties, it is difficult to see how PD6made a difference since the parties – particularly the plaintiffs – appear to haveignored it considerably. Perhaps the defendant was encouraged to make the offersin the spirit of PD6 but it would seem likely those offers would have been madein any case.

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(2012) 2 NTLJ 277 287

As to whether PD6 made a difference to the apportionment of costs, all of thefactors taken into account in making the order could have been considered inpractically the same manner under the pre-PD6 approach. In short, any “relevantdelinquency” of a party could be considered9 without PD6: the conduct of theparties10 – including pre-commencement conduct;11 compliance with court rulesand orders; pleading unsustainable or excessive claims and defences;12 and offerswere highly relevant and often determinative.13

The same orders might well have been made in the absence of PD6, althoughunder the former practice, greater delinquency may have been required todisplace the usual costs orders. PD6 might embolden parties to rely in court onconduct that formerly was merely complained about in private, and courts mayfeel at greater liberty to sanction that conduct with costs orders if it amounts tonon-compliance with the letter or spirit of PD6. Of course, the hope is that PD6will ultimately result not in more costs arguments and orders but in less, shorterand cheaper litigation and better pre-commencement and post-commencementconduct.

9 Oshlack v Richmond River Council (1998) 193 CLR 72 at [44] (Gaudron and Gummow JJ).

10 MS Stock Contracting v AUX Venture (No 2) [2011] NTSC 76 at [13] (Barr J); Keddie v Foxall

[1955] VLR 320; Lollis v Loulatzis (No 2) [2008] VSC 35; Forbes v Samuel [1913] 3 KB 706;Parkinson v College of Ambulance Ltd [1925] 2 KB 1; Gold v Patman & Fotheringham Ltd [1958] 2All ER 497; Capolingua v Phylum Pty Ltd (1991) 5 WAR 137; Verna Trading Pty Ltd v New India

Assurance Co Ltd [1991] 1 VR 129; Fountain Selected Meats (Sales) Pty Ltd v International Produce

Merchants Pty Ltd (1988) 81 ALR 397; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

11 MS Stock Contracting v AUX Venture (No 2) [2011] NTSC 76 at [13] (Barr J); Bostok v Ramsey

Urban District Council [1900] 2 QB 616; Parkinson v College of Ambulance Ltd [1925] 2 KB 1;Donald Campbell & Co Ltd v Pollak [1927] AC 732; Re Lucas (1895) 1 ALR 61; Moore v Gannon

(1915) 32 WN (NSW) 60; Belcher v Belcher (1884) 10 VLR (IP & M) 52; Re Spinks (1884) 6 ALT36; Sutcliffe v Smith (1886) 2 TLR 881; Davey v Bullock (1891) 17 VLR 3; Merrett v Schuster [1920]2 Ch 240; Scottish Gympie Gold Mines Ltd v Carroll [1902] St R Qd 311; Cromer v Harry Rickards’

Tivoli Theatres Ltd [1921] SASR 325; Bryant Bros v Thiele [1923] SASR 393.

12 Re Elgindata Ltd (No 2) [1993] 1 All ER 232; Huxley v West London Extension Railway Co (1889)14 App Cas 26; Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129; Fountain

Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397;Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

13 Cutts v Head [1984] Ch 290; AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1988) 13NSWLR 486; Johns Perry Industries Pty Ltd v International Rigging (Aust) Pty Ltd [1988] 2 Qd R556; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

Case note

(2012) 2 NTLJ 277288