FEDERAL COURT OF AUSTRALIA

Bollen v Condor of Bermuda (No 2) [2000] FCA 143

PATRICK JOSEPH BOLLEN v THE SHIP CONDOR OF BERMUDA

NG 300 OF 1998

LINDGREN J

10 FEBRUARY 2000

SYDNEY

THE COURT ORDERS THAT:

Order No 2 of 23 December 1999 be varied by the addition of the words “on an indemnity basis”.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT (No 2)

(ex tempore)

1                     On 23 December, 1999 I made orders dismissing this admiralty proceeding and requiring the plaintiff to pay the defendant’s costs.  I delivered reasons on that day.  Those orders have not yet been entered.

2                     The defendant now asks that the costs should be taxed on an indemnity basis. 

3                     It is not suggested for Mr Bollen that the Court lacks power to vary the costs order of 23 December 1999 and plainly the Court does have that power: see O 35 r 7(1).

4                     I will not attempt to summarise my reasons of 23 December last and will take them as read.  They constitute part of my reasons on the present application.  I will use the abbreviated forms of reference I used in those reasons.

5                     On the hearing today, an affidavit of the defendant’s solicitor, Mr Carter, has been read on behalf of the defendant.  This gives the following account of events relevant to the application for indemnity costs.

6                     On 8 April 1998, the Admiralty Marshal arrested the yacht. 

7                     On 28 April 1998, a notice of appearance was entered for the defendant. 

8                     On 20 May 1998, Mr Bollen offered to release the vessel in return for a bank guarantee providing a security in an amount of $750,000. 

9                     On 2 July 1998, Mr Bollen’s solicitors wrote to the defendant’s solicitors, giving particulars of the claim.  The particulars, including particulars of legal costs and costs associated with the arrest, were of a claim totalling $335,475.02.  This figure included a figure of $160,000 for diminution of earning capacity.  Mr Bollen’s solicitors estimated that his pre-accident income was likely to fall by 75 per cent and they quantified his future loss at $250 per week over fifteen years. The solicitors advised that Mr Bollen would agree to cash security in a sum of $350,000 for release of the vessel from arrest.

10                  On 22 July 1998, the defendant’s solicitors offered to settle by paying $25,000 plus costs as agreed or assessed.  They stated that their client took the view that Mr Bollen’s loss of income attributable to the accident, which had happened on 27 November 1998, was less than claimed and they referred to Mr Bollen’s “apparent activity on the waterfront” in the then recent past. 

11                  The letter offering to settle did not fix a time for acceptance of the offer but Mr Bollen rejected it on 5 August 1998.

12                  By 24 August 1998, the Marshal’s fees and expenses that had been incurred amounted to $9552.83.

13                  On 27 August 1998, Mr Bollen filed his statement of claim.  Until this time, apart from the correspondence between the respective solicitors, the only intimation of the nature of the claim was to be found in the writ which had been filed on 8 April 1998 and of course that document conveyed no significant information to the defendant.  The statement of claim stated as particulars of out of pocket expenses, loss of income and other financial losses the following:

“Particulars

(a)       The plaintiff was taken to St Vincent’s Hospital and underwent surgery.  The plaintiff has undergone and will continue to require physiotherapy in relation to the injury to his knee.  Further particulars of out of pocket medical expenses will be supplied.

(b)               The plaintiff will suffer loss of his earning capacity in that he will not be able to continue to act as a crew member of sailing vessels such that he will not receive the same amount of work for the maintenance or restoration of sailing vessels.  The plaintiff estimates that his income from this work is likely to fall by 75 per cent and this loss will continue indefinitely.”

14                  By application filed on 4 September 1998 Mr Bollen applied for an order for the valuation and sale of the yacht.  Apparently it was on this date that the statement of claim filed on 27 August 1998 was served.  As will be clear from what I have already said, the statement of claim did not descend to detail in the particularisation of Mr Bollen’s claim, although it is true that a little more detail had been provided in the correspondence between the parties’ solicitors.

15                  The defendant opposed the application for valuation on sale.  On 28 October 1998 I declined to make the orders sought but ordered that the final hearing be expedited and the proceeding was set down for hearing on 21, 22 and 23 December 1998, outside Term time.

16                  On 10 December 1998 Mr Bollen’s solicitors wrote to the defendant’s solicitors offering to accept $239,000 including costs.  The letter gave particulars of this figure.  It included $101,632 for future economic loss.  The defendant did not accept that offer.

17                  On 21 December 1998 the main hearing commenced and it continued on 23 December 1998, on the afternoon of which day Mr Bollen agreed to release the vessel in return for cash security of $100,000 being deposited into an account in the names of the solicitors for the respective parties.  Early in January 1998 Mr Bell Snr, the beneficial owner of the vessel, deposited that sum into such an account and on 5 January 1999 the vessel was released by the Admiralty Marshall to Mr Bell Snr.

18                  As noted in my earlier reasons for judgment, the release of the vessel had taken away the justification for giving this case an expedited hearing and priority over other cases.  Accordingly, the hearing resumed on 27 July 1999 and continued on 29 July, 30 July and 6 August.  On 29 July, before the matter was called, the defendant made a further written offer of settlement of $40,000 including interest and costs.  On this occasion the letter expressly indicated that the offer was made in accordance with the principles of Calderbank’s case (Calderbank v Calderbank [1976] Fam 93) and the defendant reserved the right to bring the letter to the attention of the Court on any issue as to costs.

19                  I heard final submissions on 12 August 1999 and reserved judgment.  As indicated above, reasons for judgment were delivered and orders made on 23 December last.

20                  The principles which govern an application for indemnity costs have been discussed in many cases.  Counsel for the defendant has today referred to my summary of them in MGICA (1992) Pty  Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236.  The circumstances which warrant an exercise of discretion to make an order for indemnity costs have been described in different terms in the cases.  For example, in Fountain Selected Meats (Sales) Pty Ltd v International Product Merchants Pty Ltd (1988) 81 ALR 397, Woodward J said (at 401) that it was:

“appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action had been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.”

His Honour said that in cases of that kind it must be presumed that the action was commenced or continued for some ulterior motive or because of some:

“ … wilful disregard of the known facts or the clearly established law.”

21                  There are also references in the authorities to “abuse of the process of the court” as a sufficient ground for the making of an order for indemnity costs.  Counsel for the defendant today relies on both of those notions in support of the present application. 

22                  It seems to me that there are three major issues to be considered.  The first is the course of correspondence and in particular the making of offers and counter-offers.  On the basis of my findings made on 23 December last, the defendant made realistic settlement offers and Mr Bollen made quite unrealistic ones.

23                  Acceptance of either of the defendant’s offers would clearly have resulted in a better position for Mr Bollen than the dismissal of his proceeding together with an order that he pay the defendant’s costs.  Indeed, I stated in my earlier reasons for judgment that even if I had found against the defendant on liability, I would have awarded Mr Bollen only $30,000 for pain and suffering and loss of enjoyment of life and even if I was wrong as to loss of earning capacity I would have awarded him only $10,000 on that account.  There would have been a reduction of 50 per cent on account of Mr Bollen’s contributory negligence, that is, down to $15,000 or $20,000 as the case may be.

24                  Most significant was Mr Bollen’s claim for future economic loss which had clearly not been tested against the evidence.   This is not necessarily a criticism of Mr Bollen’s solicitors: it may be that Mr Bollen simply instructed them as to what his pre-accident and post-accident levels of income had been and they composed the letters of offer on the basis of those figures.

25                  But the fact remains that the figures for future economic loss which were put bore no resemblance to anything which could have been supported by Mr Bollen’s evidence and Mr Bollen, at least, should have known that fact.

26                  The second and related matter is that, on the hearing, Mr Bollen’s evidence of economic loss was of no substance whatever.  There were quite glaring problems with his evidence, such as the fact that he provided a witness statement dated 15 December 1998 purporting to give an exhaustive list of jobs he had undertaken, yet documentary evidence showed that he worked on board various vessels over the days and weeks preceding and following that date.  Similarly, there was his testimony of being bedridden for three months and “able to do absolutely nothing” for seven months which was clearly falsified by other evidence.  In a word, the plaintiff’s case of loss of earnings and ongoing loss of earning capacity was a gross exaggeration and a reasonable assessment of it would have demonstrated that it was doomed to fail.  If Mr Bollen had reflected on the words in his statements, he must have appreciated that they were not correct.

27                  I appreciate that this is only part of Mr Bollen’s claim but in terms of money the claim for economic loss was the largest part.

28                  The third area which has been relied upon by counsel for the defendant today is Mr Bollen’s testimony that at the time of the accident he was standing between the genoa sheet and the cabin rather than astride the genoa sheet.  There was a considerable body of evidence tending to show that this testimony was not in accord with the facts and I rejected Mr Bollen’s testimony on the point.  Moreover, I accepted the testimony of others that Mr Bollen himself had admitted, while in hospital shortly after the accident, that he had been standing astride the genoa sheet.  However, I do not think that these findings against Mr Bollen demonstrate that when he said in his statement made on 18 November 1998, nearly twelve months after the accident, that he was standing “between the genoa sheet and the cabin side in a position of safety”, he knew that he was making a false statement. 

29                  Other explanations are available, in particular, innocent reconstruction.  Counsel for the defendant submits that Mr Bollen must have known the true facts yet testified as to where he was standing, in “wilful disregard of the known facts”.  I am not persuaded that this is the case in relation to the position where Mr Bollen was standing, but I think that it is the case in relation to his claim of economic loss.  “Wilful disregard” does not necessarily mean that it was actually present to Mr Bollen’s mind what the true position was, that is to say, that he knew that he was making a false statement.  What it does signify is that, whatever the explanation, Mr Bollen suppressed his knowledge of the true facts.

30                  Before expressing my conclusion on the application there is one further matter to which I should refer. Mr Bollen had the unusual advantage of being able to have Mr Bell Snr’s yacht arrested.  The capacity to achieve this is a considerable benefit to a plaintiff in admiralty proceedings: no doubt the fact that a vessel is under arrest enters into consideration in negotiations between plaintiffs and defendants in such proceedings.  Mr Bell Snr was faced with the arrest of the vessel, received no particulars of Mr Bollen’s claim for quite some time and faced the prospect that the hearing and resolution of the proceeding might be quite some time off.  This must have subjected him to considerable pressure to capitulate.  As it has turned out, it was quite unfair that he should have been subjected to that pressure.  I think it appropriate to take into account the fact of arrest when assessing Mr Bollen’s stance in the course of the “settlement negotiation” that took place.

31                  Having regard to the fact that, as revealed by my reasons for judgment of 23 December last, Mr Bollen’s claim was only ever a quite small claim, the quite unrealistic and irresponsible approach taken by Mr Bollen to the process of negotiation against the reasonable approach to it taken on behalf of the defendant, and Mr Bollen’s grossly exaggerated and unsupportable claim for economic loss, the case is, in my view, an appropriate one for an order for costs to be paid on an indemnity basis. 

32                  Accordingly, the Court orders that order number 2 of 23 December 1999 be varied by the addition of the words, “on an indemnity basis”.

Associate:

Dated:              18 February 2000