AA Technical Services Pty Ltd v Diedler [No 3] - [2024] WASC 287 (S)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   AA TECHNICAL SERVICES PTY LTD -v- DIEDLER [No 3] [2024] WASC 287 (S)
CORAM:   STRK J
HEARD:   ON THE PAPERS
DELIVERED          :   29 AUGUST 2024
FILE NO/S:   CIV 1653 of 2016
BETWEEN:   AA TECHNICAL SERVICES PTY LTD
Plaintiff

AND

JOACHIM GOTTFRIED DIEDLER
First Defendant

PAUL GREGORY MCKENZIE
Second Defendant

Catchwords:

Unconscionable conduct - Statutory unconscionable conduct - Australian Consumer Law - Costs

Legislation:

Competition and Consumer Act 2010 (Cth) sch 2 s 21, s 236
Rules of the Supreme Court 1971 (WA) O 66
Supreme Court Act 1935 (WA) s 37

Result:

First and second defendant to jointly and severally pay the plaintiff's costs, including all reserved costs, to be taxed if not agreed

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance

Solicitors:

Plaintiff	:	Roe Legal Services
First Defendant	:	Forbes Kirby
Second Defendant	:	In person

Cases referred to in decision:

AA Technical Services Pty Ltd v Diedler [No 2] [2024] WASC 11
AA Technical Services Pty Ltd v Diedler [No 3] [2024] WASC 287
Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S)
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)
Brazendale v Kenna [1961] Tas SR 199
Frigger v Lean [2012] WASCA 66
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
May v Thomas [2014] WASCA 176 (S)
Metalicity Ltd v Allen [No 2] [2022] WASC 420 (S)
Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516
Nikolaou v Papasavas, Phillips and Co (1989) 166 CLR 394
Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164
Shire of Manjimup v Cheetham [2010] WASCA 225 (S)
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Wentworth v Attorney‑General (NSW) [1984] HCA 70; (1984) 154 CLR 518

STRK J:

(These reasons were delivered extemporaneously on 29 August 2024, and were edited from transcript so as to include complete references and citations.)

By a proceeding commenced by writ of summons, AA Technical Services Pty Ltd as trustee for the Alan Dodd Family Trust claimed damages as against Joachim Gottfried Diedler and Paul Gregory McKenzie pursuant to the Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth)) s 236, together with interest on all sums awarded to AA Technical Services pursuant to the Supreme Court Act 1935 (WA) and costs. The damages claimed were said to arise from Mr Diedler and Mr McKenzie having been knowingly concerned in the statutory unconscionable conduct of AWD Diversified Pty Ltd, a now deregistered company, in relation to a lease of premises located at 100 Murray Street, Perth, that was entered into as between AWD Diversified as landlord and AA Technical Services as tenant. At all material times, Mr Diedler and Mr McKenzie were the directors of AWD Diversified.
AA Technical Services' case with respect to certain conduct of AWD Diversified was established. The established unconscionable conduct of AWD Diversified was found to have been carried out by one or both of Mr Diedler and Mr McKenzie, and occasionally at their direction and with their implicit or express agreement. Mr Diedler and Mr McKenzie were each found to have been persons involved in contravention of s 21 of the Australian Consumer Law. AA Technical Services was found to be entitled to an order for judgment in its favour and damages recoverable against Mr Diedler and Mr McKenzie: AA Technical Services Pty Ltd v Diedler[No 2] [2024] WASC 11.
Damages were assessed and it was ordered that Mr Diedler and Mr McKenzie pay to AA Technical Services damages in the amount of $416,867.21 (an amount inclusive of pre‑judgment interest), together with interest on that sum from 15 August 2024 until payment: AA Technical Services Pty Ltd v Diedler[No 3] [2024] WASC 287.
These reasons concern the costs of the proceeding. They should be understood as if they incorporate the reasons contained in AA Technical Services Pty Ltd v Diedler[No 2] and AA Technical Services Pty Ltd v Diedler[No 3].

The participation of Mr McKenzie

All parties were given early notice that reasons for decision concerning the assessment of damages would be delivered on 14 August 2024; were provided with an advance copy of the reasons for decision; were provided with the court's proposed form of orders concerning judgment; and were informed that should any party wish to be heard as to the form of orders, they would be heard on 14 August 2024. Mr McKenzie was also given notice that orders may be made in his absence should he fail to attend.
Despite such notice, there was no appearance by Mr McKenzie on 14 August 2024 and judgment was entered in favour of AA Technical Services against Mr Diedler and Mr McKenzie in Mr McKenzie's absence.
After hearing from counsel for AA Technical Services and Mr Diedler on 14 August 2024, the court did not accede to AA Technical Services' request that the court proceed to immediately hear counsel as to the appropriate costs orders. Rather, programming orders were made with respect to costs, intended in particular to afford Mr McKenzie the opportunity to be heard with respect to costs despite his non‑appearance on 14 August 2024. The costs of the action were reserved, including the costs of attendance before the court on 14 August 2024, to be determined on the papers.
As an outline of submissions had been filed on 14 August 2024 on behalf of AA Technical Services as to what it submitted was the appropriate costs outcome, on 14 August 2024 it was ordered that:
(a)Mr Diedler and Mr McKenzie were to file and serve an outline of submissions (limited to 10 pages) and any affidavit with respect to costs by 4.00 pm on 22 August 2024;
(b)AA Technical Services may file and serve any responsive outline of submissions (limited to 10 pages) and any affidavit in reply with respect to costs by 4.00 pm on 26 August 2024; and
(c)the matter is adjourned to 2.15 pm on 29 August 2024, for delivery of reasons as to costs, with liberty to apply.
At the conclusion of the hearing on 14 August 2024, the court sent Mr McKenzie a copy of the delivered reasons for decision and the orders made on 14 August 2024 (which dealt with judgment being entered and programming orders with respect to costs). No outline of submissions was filed by or on behalf of Mr McKenzie in accordance with the programming orders, or at all.

The position of AA Technical Services and Mr Diedler with respect to costs

By the outline of submissions filed on 14 August 2024, the court understood that AA Technical Services did not seek any special costs orders. For the reasons set out in the outline of submissions, AA Technical Services maintained that it was entitled to an order that Mr Diedler and Mr McKenzie jointly and severally pay its costs of the proceeding on an ordinary party-party basis.
As to the position of Mr Diedler, he also did not cause an outline of submissions to be filed on his behalf in accordance with the programming orders. Instead, by an email communication received on 23 August 2024 from AA Technical Services' representatives, the court was informed that a memorandum of proposed consent orders had been signed on behalf of AA Technical Services and Mr Diedler in relation to costs.
In the memorandum of proposed consent orders filed on 23 August 2024, AA Technical Servicers and Mr Diedler recorded their consent pursuant to the Rules of the Supreme Court 1971 (WA) O 43 r 16, to an order in the following terms:
The first and second defendants jointly and severally pay the plaintiff's costs, including all reserved costs, to be taxed if not agreed.
By the email communication of 23 August 2024, the court was also informed that Mr McKenzie had been copied into all communications as between AA Technical Services and Mr Diedler in regard to the memorandum, and in circumstances where no outline of submissions as to costs had been filed by Mr McKenzie, AA Technical Services' representatives asked whether the court could proceed to make a final order with respect to costs on the papers.

Applicable principles

I adopted and applied the following principles in determining the question of costs.
Where costs should fall is at the discretion of the court.[1] The discretion to order costs under the Supreme Court Act s 37 and the Rules of the Supreme Court O 66 r 1 is very wide.[2] The only restrictions are those provided elsewhere in the Supreme Court Act and the Rules of the Supreme Court, or in any other act; and the fact that the discretion must be exercised judicially, in accordance with established principles and factors directly connected with the litigation.[3] The discretion must be exercised so as to achieve what is fair and just between the parties according to the circumstances of the particular case.[4]
[1] Supreme Court Act s 37.
[2] LexisNexis, Civil Procedure Western Australia, vol 1 (198‑03‑23) [66.1.2], citing Wentworth v Attorney‑General (NSW) [1984] HCA 70; (1984) 154 CLR 518, 528; Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516 [39].
[3] LexisNexis, Civil Procedure Western Australia, vol 1 (198‑03‑23) [66.1.2], citing Naidoo v Williamson [39], [42]; Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [48] ‑ [50]. See also Frigger v Lean [2012] WASCA 66 [53]; and Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 540, 558, 568.
[4] LexisNexis, Civil Procedure Western Australia, vol 1 (198‑03‑23) [66.1.2], citing Latoudis v Casey (558).
An order for the payment of costs by one party is compensatory in nature; it is not for the purpose of punishment. Costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action or application.[5]
[5] Rules of the Supreme Court O 66 r 1(1); LexisNexis, Civil Procedure Western Australia, vol 1 (198‑03‑23) [66.1.2], citing Latoudis v Casey (567); Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 [30] - [31]. See also Strzelecki Holdings Pty Ltd v Jorgensen [49].
It is incumbent on the unsuccessful party to satisfy the court that there were good reasons why it should not pay the successful party's costs.[6]
[6] Strzelecki Holdings Pty Ltd v Jorgensen [49], citing Nikolaou v Papasavas, Phillips and Co (1989) 166 CLR 394, 407; Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S) [5].
Where a party though generally successful has, by the introduction of some issue or issues on which that party has failed, increased the costs the court may order such party to pay the costs of such issue or issues.[7] However, the power to apportion costs on an issue by issue basis should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way.[8] Further, where the court decides, in the exercise of its discretion, to modify the usual costs orders to reflect the limited success of the successful party, that power will be exercised broadly, as a matter of impression, and without any attempt at mathematical precision (which is likely to prove illusory in any event).[9] That approach reflects the fact that it may be difficult to separate the factual and evidentiary substratum of different issues,[10] the fact that some issues are more important than others, and the fact that some issues are subsidiary to others.[11]
[7] Rules of the Supreme Court O 66 r 1(3).
[8] LexisNexis, Civil Procedure Western Australia, vol 1 (198-03‑23) [66.1.10], citing Strzelecki Holdings Pty Ltd v Jorgensen [51]; Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S) [7]; Brazendale v Kenna [1961] Tas SR 199, 208.
[9] Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [6]; Shire of Manjimup v Cheetham [2010] WASCA 225 (S) [7]; Strzelecki Holdings Pty Ltd v Jorgensen [52]; May v Thomas [2014] WASCA 176 (S) [5]; Metalicity Ltd v Allen [No 2] [2022] WASC 420 (S) [7].
[10] Strzelecki Holdings Pty Ltd v Jorgensen [52].
[11] Strzelecki Holdings Pty Ltd v Jorgensen [52].

Disposition

First, in the absence of any submissions made by or on behalf of Mr McKenzie, and satisfied that Mr McKenzie had been provided with notice of the reasons published and the programming orders made on 14 August 2024 via the email address provided in his memorandum of appearance, I was satisfied that it was appropriate to exercise discretion to proceed to determine costs in his absence (as had occurred with respect to the hearing of the later part of the trial of this action pursuant to the Rules of the Supreme Court O 34 r 2).[12]
[12] AA Technical Services Pty Ltd v Diedler [No 3] [5] - [12].
Secondly, while Mr McKenzie was not heard in relation to costs, and had not through submissions or any evidence sought to satisfy the court that there were good reasons why he should not pay the successful party's costs, I did not proceed on the basis that Mr McKenzie's lack of engagement was determinative of the matter. Instead, I proceeded cognisant that the discretion to determine where costs should fall was required to be exercised judicially, in accordance with established principles and factors directly connected with this litigation, and that discretion was required to be exercised so as to achieve what was fair and just between the parties according to the circumstances of this particular case.
In the absence of Mr McKenzie, and absent any indication of his position with respect to costs, among other things, I considered carefully whether the costs order pressed by AA Technical Services as against Mr McKenzie (in the form consented to by Mr Diedler) would achieve what was fair and just between the parties according to the circumstances of this particular case.
Thirdly, I took some comfort that there was a contradictor in Mr Diedler, and that the interests of Mr Diedler and Mr McKenzie were aligned in seeking to limit the costs awarded in favour of AA Technical Services against them. However, while I was cognisant that Mr Diedler had consented to an order by which costs followed the event, I did not proceed on the basis that Mr Diedler's consent was determinative of the appropriate cost outcome for Mr McKenzie.
Fourthly, when regard was had to the particular circumstances of this case, I was satisfied that the exercise of discretion to make the usual costs order (that is, an order that costs follow the event), would achieve a fair and just result as between the parties.
In so concluding, I did not overlook that AA Technical Services did not recover all of the damages it had pursued at trial. However, on balance, I considered AA Technical Services to have been generally successful in the prosecution of the proceeding against Mr Diedler and Mr McKenzie.
In summary, it was AA Technical Services' case that AWD Diversified, by the conduct of Mr Diedler and Mr McKenzie, had displayed a complete disregard for AA Technical Services' rights; and that conduct resulted in the unlawful termination of AA Technical Services' lease, AA Technical Services being impermissibly locked-out of the leased premises and thereby prevented from trading, the subsequent removal of and damage to AA Technical Services' plant and equipment and, ultimately, the destruction of the business operated by AA Technical Services at the leased premises, a fitness centre known as CBD Health Spa.
After a lengthy trial, certain conduct of AWD Diversified that AA Technical Services complained of was found to have been unconscionable and to have contravened s 21 of the Australian Consumer Law. However, not all of the conduct complained of was established, and not all of the conduct complained of that was established, taken individually or as a whole, in the circumstances was found to be unconscionable.
That said, Mr Diedler and Mr McKenzie were found to have been involved in the unconscionable conduct that was established, and were each involved in a contravention of the Australian Consumer Law. Further, it was found that as a result of the established unconscionable conduct of AWD Diversified, and Mr Diedler and Mr McKenzie's conduct or involvement in a contravention of the Australian Consumer Law, AA Technical Services suffered loss and damage; and AA Technical Services was entitled to damages against Mr Diedler and Mr McKenzie pursuant to the Australian Consumer Law s 236, together with interest.
The unconscionable conduct that was established did not cause the whole of AA Technical Services' loss.[13] While the aggregate of AA Technical Services' claim for damages at trial was $1,790,699.60, it was ordered that Mr Diedler and Mr McKenzie pay to AA Technical Services damages in the amount of $416,867.21 (an amount inclusive of pre‑judgment interest), together with interest on that sum from 15 August 2024 until payment.[14] That is, in all of the circumstances, it was found that AA Technical Services was generally successful in that statutory unconscionable conduct was found and AA Technical Services was found to be entitled to recover $416,867.21 from Mr Diedler and Mr McKenzie, as persons involved in the contravention that caused AA Technical Services to suffer loss and damage.
[13] AA Technical Services Pty Ltd v Diedler[No 2] [999].
[14] AA Technical Services Pty Ltd v Diedler[No 2] [97], [992]; and AA Technical Services Pty Ltd v Diedler[No 3] [254].
I also considered there to be no discrete or severable issue with respect to which AA Technical Services' claim failed and which added to the cost of the proceedings in a significant and readily discernible way. This was a case where, given the matters in issue at trial, it would be very difficult (if not impossible) to separate the factual and evidentiary substratum of the different issues (by reference to the pleaded conduct of AWD Diversified, through Messrs Diedler and McKenzie, or otherwise). I proceeded cognisant that the findings of unconscionable conduct required consideration of 'all of the circumstances',[15] and findings were made with regard to the entire factual matrix and all relevant factors. I was positively satisfied that this was not a case which would properly attract the use of discretion to undertake an assessment of costs conducted by reference to issues at trial.
[15] Australian Consumer Law s 21.
Fifthly, the Rules of the Supreme Court O 66 r 2(e) provides that in the absence of a special order, if there are several defendants and the plaintiff has judgment against them, each of them shall be liable to the plaintiff for the entire costs, although they defended separately. In this case, no party moved for a special order and the costs order consented to by AA Technical Services and Mr Diedler was consistent with the general rule in that it provided for costs to follow the event and recorded the intention that the defendants be jointly and severally liable for the plaintiff's costs.
Sixthly, while the Rules of the Supreme Court O 66 r 2(e) also provides that the court may from time to time make an order or orders as between several defendants apportioning the liability as between themselves and the recovery of contribution, in this case, no party moved for such order. Further, none of the findings made suggested that fairness between the parties required Mr Diedler and Mr McKenzie to be treated differently. Both had been found to have been persons involved in the contravention that caused AA Technical Services to suffer loss and damage.[16]
[16] See by way of example the findings in AA Technical Services Pty Ltd v Diedler [No 2][910] ‑ [911], [988] (unilateral alteration of terms), [924], [988] (draw down of bank guarantee), [959], [988], [1001] (conduct with respect to the removal of AA Technical Services' property from the Leased Premises post-lockout), [972], [988] (property seizure), [1001] - [1002] (loss, damage and destruction of property); and in AA Technical Services Pty Ltd v Diedler [No 3] [38] ‑ [39], [44], [51] - [53], [58], [71] - [72], [76], [105], [110] (legal fees), [138] - [139], [145] - [147], [151], [164], [176] - [180], [184], [188], [194] - [196] (removal and storage fees), [210] - [212], [216] - [219] (Seizure Costs).

In the end, I found AA Technical Services to have been generally successful in the prosecution of the proceeding against Mr Diedler and Mr McKenzie, and in all of the circumstances, I did not consider that the conduct of AA Technical Services in this proceeding warranted a departure from the usual order. Discretion would properly be exercised in the making of a costs order in the form consented to by AA Technical Services and Mr Diedler.

Conclusion

For these reasons, the costs order which should be made on the action is an order that Mr Diedler and Mr McKenzie jointly and severally pay AA Technical Services' costs, including all reserved costs, to be taxed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SE
Associate to the Judge
29 AUGUST 2024