Bale v Kimberley Developments Pty Ltd (No 2)

Case •

[2022] NSWSC 1009

•

27 July 2022

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009
Hearing dates: On the papers
Date of orders: 27 July 2022
Decision date: 27 July 2022
Jurisdiction:Equity
Before: Ward CJ in Eq
Decision:

1.   Subject to order 2, order that the first, second, fourth, fifth and sixth defendants be severally liable to pay the plaintiff’s costs of the proceeding on the ordinary basis.

2.   Order that each of the parties pays her, his or its own costs of the amended notice of motion dated 20 August 2021.

Catchwords:

COSTS — Indemnity costs – Party/party costs

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Competition and Consumer Act 2010 (Cth), Schedule 2

Contracts Review Act 1980 (NSW), s 7

Limitation Act 1969 (NSW), s 52

Uniform Civil Procedure Rules 2005 (NSW), rr 6.24, 42.1

Cases Cited:

Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33

Avopiling Pty Ltd v Bosevski (2018) 98 NSWLR 171; [2018] NSWCA 146

Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820

Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107

Bullock v London General Omnibus Co [1907] 1 KB 264

Calderbank v Calderbank [1975] 3 All ER 333

Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801

Commonwealth of Australia v Gretton [2008] NSWCA 117

Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423

Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176

Cretazzo v Lombardi (1975) 13 SASR 4

Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261

Drummond v Drummond [1999] NSWSC 923

Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491; [2007] NSWCA 266

Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202

Golding v Vella (No 2) [2001] NSWSC 731

Hodge v TCN Channel 9 (No 2) [2006] NSWSC 1272

Hooker v Gilling (No 2) [2007] NSWCA 214

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748; [1986] FCA 511

James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296

Johnson’s Tyne Foundry Pty Ltd v Maffra Corp (1948) 77 CLR 544; [1948] HCA 46

King v Hudson [2009] NSWSC 1500

Lackersteen v Jones (No 2) (1988) 93 FLR 442

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775

Leallee v The Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518

Leichhardt Municipal Council v Green [2004] NSWCA 341

Lenning v Alexander Proudfoot Co World Headquarters (Court of Appeal (NSW), Kirby P, Priestley and Clarke JJA, 22 April 1991, unrep)

LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72

Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13

Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25

NRMA Ltd v Morgan (No 3) [1999] NSWSC 768

Ohn v Walton (1995) 36 NSWLR 77

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Owners Strata Plan No 64970 v Austruc Constructions Ltd (in liq) (No 5) [2010] NSWSC 568

Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724

Permanent Trustee Co Ltd v Keogh [1999] NSWSC 883

Qantas Airways Ltd v AF Liddle Pty Ltd [1981] 2 NSWLR 34

Re Jones; Christmas v Jones [1897] 2 Ch 190

Roache v News Group Newspapers Ltd [1992] TLR 551

Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306

Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403

Sanderson v Blyth Theatre Co [1903] 2 KB 533

Short v Crawley (No 40) [2008] NSWSC 1302

Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 496; [2005] NSWSC 493

Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141

Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179

Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842

Sydney City Council v Geftlick [2006] NSWCA 280

Sze Tu v Lowe (No 2) [2015] NSWCA 91

Timms v Clift [1998] 2 Qd R 100

Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201

Uniline Australia Ltd v SBriggs Pty Ltd (No 2) (2009) 232 FCR 136; [2009] FCA 920

Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115

Waterman v Gerling Australia Insurance Company Pty Ltd (No 2) [2005] NSWSC 1111

Waters v PC Henderson (Australia) Pty Ltd (Court of Appeal (NSW), Kirby P, Mahoney and Priestley JJA, 6 July 1994, unrep)

White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303

Windsurfing International Inc v Petit [1987] 2 NSWLR 196; [1987] AIPC 90-441

Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276

Zhang v Ng [2021] NSWSC 1369

Category:Costs
Parties: Françoise Bale (Plaintiff)
Kimberley Developments Pty Ltd (First Defendant)
Albert Darwiche (Second Defendant)
Martin Churchill (Third Defendant)
Chyna Schein (Fourth Defendant)
Theofanis Trigas (Fifth Defendant)
Super Start Batteries Pty Ltd (Sixth Defendant)
Representation:

Counsel:
DP O’Connor with J McEnaney (Plaintiff)
R Perla (1st, 2nd, 5th, 6th Defendants)

Solicitors:
SCB Legal (Plaintiff)
Weinberger Lawyers (1st, 2nd, 5th, 6th Defendants)
K & L Gates (3rd Defendant)
File Number(s): 2018/00237019
Publication restriction: Nil

Judgment

  1. HER HONOUR: On 23 June 2022, I published my reasons for judgment (Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820) in a dispute arising out of the transfer on 21 February 2011 by the late Michel Schein (the deceased) of a commercial property at Forest Lodge, New South Wales (the Forest Lodge Property) to the first defendant, Kimberley Developments Pty Ltd (Kimberley Developments). For convenience, I adopt the same abbreviations as used in the principal judgment.

  2. For the reasons set out in the principal judgment, I concluded (see as summarised at [670]) that the claim made by the plaintiff, Ms Françoise Bale, (as executor of the deceased’s estate) against Kimberley Developments and Mr Albert Darwiche (the second defendant) (that the underlying transaction effected by the 21 February Agreement was unconscionable) had been made good and that, from the time of the sale transaction in respect of the Forest Lodge Property, that property was held on constructive trust for the deceased (and since his death, the deceased’s estate). I concluded that Kimberley Developments had breached that trust by encumbering the Forest Lodge Property and then transferring the funds so borrowed to Super Start Batteries Pty Ltd (the sixth defendant) (not for any purpose associated with the trust property); and that Mr Theofinas (Theo) Trigas (the fifth defendant and the director of both Kimberley Developments and Super Start at the relevant times) had constructive notice of the matters giving rise to the trust and breach of trust; and hence that he, and Super Start, were liable for being knowingly concerned in the breach of that trust, and for knowing receipt of property transferred in breach of trust.

  3. In light of the relief I granted in respect of those claims, I did not consider it necessary to consider the claims of unconscionable conduct that had been made (insofar as they arose from the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth) though I noted that those claims would be statute-barred subject to a finding of a relevant disability pursuant to s 52 of the Limitation Act 1969 (NSW) (Limitation Act)). Nevertheless, it should be noted (as it is relevant to the costs issues now in dispute) that I found that Mr Darwiche (and Kimberley Developments) had engaged in unconscionable conduct in relation to the relevant transaction and that the transaction was liable to be set aside (see at [592]).

  4. I dismissed the alternative claims for breach of contract and claims arising out of the Contracts Review Act 1980 (NSW) (Contracts Review Act), on the basis that I did not consider the 21 February 2011 Agreement to be a binding contract (and in any case I accepted the defendants’ submissions that those claims were statute-barred subject to the application of s 52 of the Limitation Act).

  5. I declined to make a declaration that the deceased was under a disability at the time of entering into the transaction in 2011 (on the basis that it was conceded that the evidence did not go so far as to establish incapacity and no expert evidence was tendered on this issue). However, I did note that, had the issue arisen, I would have found that the deceased was under a relevant disability from January 2016 onwards for the purposes of the Limitation Act, which would have had the effect of bringing the contract and statutory unconscionable conduct claims within the limitation period.

  6. I upheld Ms Bale’s claim for breach of fiduciary duty against the deceased’s second wife, Ms Chyna Schein (the fourth defendant).

  7. In light of those conclusions, it was not necessary to address other relief that had been sought in the proceeding. That is also relevant when it comes to consider the issues that have been raised as to costs, as I explain in due course.

  8. As to costs, I noted in the principal judgment that these would ordinarily follow the event but that costs had been reserved in relation to an application for security for costs that had been brought by the first, second, fifth and sixth defendants (and which I had dismissed). I therefore made directions in order to give the parties the opportunity to make any submissions as to costs (to be dealt with on the papers).

  9. Submissions were filed by Ms Bale and the active defendants in accordance with those directions but Ms Bale sought (and I granted) leave to file further brief submissions in reply to those of the defendants. Those submissions have now been filed and are considered below.

The parties’ respective positions as to costs

  1. In summary, the parties’ respective positions as to costs (there being no submissions filed by the fourth defendant, who took no part in the proceeding), are as follows.

  2. Ms Bale seeks an order for costs on the ordinary basis that costs follow the event as against the first, second, fourth, fifth and sixth defendants (having already settled with the third defendant), including the reserved costs of the security for costs motion (though Ms Bale did not initially in terms address the position in relation to the reserved costs of the security for costs motion).

  3. The defendants (i.e., the first, second, fifth and sixth defendants) seek the following orders as to costs:

  1. an order that Ms Bale pay the second defendant (Mr Darwiche)’s costs of the proceeding on an indemnity basis as agreed or assessed (the Darwiche Cost Order) (or, in the alternative on the ordinary basis);

  2. an order that there be no costs of the proceeding as between Ms Bale and the first, fifth and sixth defendants with the intention that Ms Bale and the first, fifth and sixth defendants respectively bear her, his or its own costs of the proceeding (the Proceedings Cost Order); and

  3. an order that Ms Bale pay the defendants’ costs of the amended notice of motion filed 20 August 2021 (i.e., the reserved costs of the security for costs application) on an indemnity basis as agreed or assessed (the Security for Costs Order) or alternatively on the ordinary basis.

  1. In support of their submissions, the defendants rely on the following affidavit evidence that was read in the proceeding: affidavits sworn by the defendants’ solicitor, Nathan Weinberger on 10 August 2021 and 18 August 2021 and an affidavit affirmed by Mr Weinberger on 8 July 2022 (the first two relied upon in support of the security for costs motion); and an affidavit sworn by the plaintiff, Ms Bale, on 18 August 2021.

  2. In Ms Bale’s submissions in reply, Ms Bale resists the costs orders sought by the defendants and maintains her position that she (Ms Bale) should be awarded her costs of the proceeding (including the security for costs motion) as against the defendants on the ordinary basis.

  3. Given that Ms Bale’s submissions rest largely on the (uncontroversial) proposition that costs generally follow the event (see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [67] per McHugh J, [134] per Kirby J; Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 (Sangare) at [25] per the Court), it is convenient to address the costs issues that have been raised by reference to the particular orders sought by the defendants.

The Darwiche Cost Order

Defendants’ submissions as to the Darwiche Cost Order

  1. The defendants note that there were numerous causes of action pleaded against Mr Darwiche, not all of which were ultimately pressed by Ms Bale (see below), the defendants identifying those claims as including: a claim pursuant to s 7 of the Contracts Review Act; a claim of unconscionable conduct within the meaning of the Australian Consumer Law and the general law by reason of Mr Darwiche’s knowledge of the deceased’s cognitive degeneracy and or dementia (see at [35]-[46A] of the further amended statement of claim – although I note that counsel for Ms Bale pressed this claim at the conclusion of the hearing, see at T 325.44-49); a claim that Mr Darwiche engaged in misleading or deceptive conduct by representing to the deceased that if the deceased transferred the Forest Lodge Property to Kimberley Developments, Kimberley Developments would do certain things (see at [47](I)-[47](VII) of the further amended statement of claim); and a claim for breach of the 21 February 2011 Agreement (see at [62]-[68] of the further amended statement of claim – however, I note that counsel for Ms Bale pressed the claim for breach of contract on the final day of the hearing, see at T 326.30-31).

  2. In particular, the defendants say that Ms Bale ultimately did not press the claims in relation to capacity (see at [6] of the prayers for relief); the Australian Consumer Law relief (see at [9], [10], and [14] of the prayers for relief); the claims at [33] and [34] of the further amended statement of claim (being claims of undue influence); and the misleading or deceptive conduct allegations at [46]-[49] of the further amended statement of claim (referring to the principal judgment at [211], which I extract in due course below).

  3. The defendants contend for the Darwiche Cost Order for any one or more of the following reasons.

  4. First, the defendants say that it was not necessary for Mr Darwiche to be a defendant in the proceedings, noting that the declaratory relief sought by Ms Bale was not sought against Mr Darwiche and that he had not been the director of Kimberley Developments since February 2012 (some six years before the proceeding was commenced). The defendants say that, while prayer 5 of the prayers for relief named Mr Darwiche, it was not necessary for him to be a defendant in order for Ms Bale to obtain the relief which she ultimately obtained against Kimberley Developments. Further, it is noted that the relief sought in prayers 10 (being a claim for a declaration that the first and second defendants obtained the deceased’s consent to the agreement by misleading and deceptive conduct, contrary to the Australian Consumer Law) and 14 (being a claim for damages as against the first and second defendants for unconscionable conduct and misleading and deceptive conduct pursuant to s 236 of the Australian Consumer Law) was not pressed by Ms Bale at the hearing. The defendants say that Ms Bale chose to keep Mr Darwiche in the proceeding as a defendant; and did not abandon any of the claims against him until the closing oral submissions that were heard on 6 December 2021.

  5. Second, the defendants note that no orders have been made against Mr Darwiche. It is submitted that, in that sense, he is the “successful party” (for the purpose of the ordinary rule that costs should follow the event), reference being made in this context to what was said in Avopiling Pty Ltd v Bosevski (2018) 98 NSWLR 171; [2018] NSWCA 146 (Avopiling) at [172] where Payne JA said the following:

Section 98 of the Civil Procedure Act 2005 (NSW) confers on the court a wide discretion with respect to costs. Under r 42.1 of the Uniform Civil Procedure Rules the general rule is that the court is to order that costs follow the event. The “event” may be characterised in more than one way. Generally the “event” refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd(No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd [No 2] [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22.

Although I interpose to note that this is not of much assistance to the defendants in demonstrating that Mr Dawiche was, in the requisite sense, the successful party in the litigation.

  1. Further, the defendants say that, even if there has not been an “event” (on which Mr Darwiche succeeded) within the meaning of r 42.1 of the UCPR, the discretion as to costs should be exercised in favour of making the Darwiche Cost Order. It is said that Mr Darwiche was a named defendant and incurred significant legal costs in defending the proceeding; and that, as it was not necessary for Ms Bale to join him as a defendant, he should have his legal costs met by Ms Bale.

  2. The defendants note that the purpose of a costs order is to compensate the person in whose favour it is made, not to punish the person against whom the order is made (citing Sangare [17]; Ohn v Walton (1995) 36 NSWLR 77 (Ohn) at 79 per Gleeson CJ; Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33 at [33] per Tobias JA, with whom Santow JA agreed). Reference is also made to Zhang v Ng [2021] NSWSC 1369 for the proposition noted at [56] that “the central and overriding principle is, of course, to do justice between the parties in each particular case”. The defendants maintain that, in the circumstances, justice as between Ms Bale and Mr Darwiche can be achieved by the making of the Darwiche Cost Order.

  3. Further, Mr Darwiche seeks that his costs be paid on an indemnity basis. It is submitted that Ms Bale’s conduct of the proceeding (namely, joining and maintaining the proceeding as against Mr Darwiche in the circumstances outlined above) is sufficiently special or unusual to justify an order for costs on an indemnity basis (the defendants here citing Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 (Colgate) at 233 per Sheppard J). Alternatively, Mr Darwiche seeks that his costs be paid by Ms Bale on the ordinary basis.

Ms Bale’s reply submissions as to the Darwiche Cost Order

  1. As to the bases on which the defendants seek the Darwiche Cost Order (that Mr Darwiche was not a necessary party in order for Ms Bale to obtain the relief ultimately sought; that no order was made against him; and that Ms Bale did not press all the relief sought as against him in the pleading), Ms Bale says as follows.

  2. First, Ms Bale notes that Mr Darwiche was the controlling mind of Kimberley Developments when the transfer occurred and was, by his own admission, intimately involved in the transaction. Reliance is placed on the principle that, in considering who should pay the costs of the proceedings, regard will be had to which party was predominantly responsible for incurring the costs of the litigation (reference here being made to Commonwealth of Australia v Gretton [2008] NSWCA 117 (Gretton) at [121] per Hodgson JA).

  1. Ms Bale notes that it was alleged in the further amended statement of claim that Mr Darwiche, as the controlling mind of Kimberley Developments, obtained the transfer of the Forest Lodge Property through (amongst other things) unconscionable conduct (pointing to [46A] of the further amended statement of claim that specifically sought a finding that the transfer had been obtained by unconscionable conduct). Ms Bale says that this claim was vindicated by the finding at [670] of the principal judgment; and that this finding underpinned the final relief ultimately obtained by Ms Bale in the proceeding. Ms Bale maintains that it was Mr Darwiche’s conduct that caused the parties to incur the costs of these proceeding by engaging in the impugned conduct.

  2. It is noted that Mr Darwiche denied from the outset the allegation of unconscionable conduct and gave evidence at the hearing denying that he had engaged in the conduct of which complaint was made. Ms Bale points out that it was open to Mr Darwiche at all times to admit the allegation or simply to file a submitting appearance; and says that Mr Darwiche chose (instead) to take an active role in the proceeding.

  3. Ms Bale submits that the general test is that a person is a necessary party to a litigation if the joinder is necessary to the determination of all matters in dispute (referring to r 6.24 of the UCPR and noting that matters in dispute in the proceedings include ancillary or preliminary matters – see Qantas Airways Ltd v AF Liddle Pty Ltd [1981] 2 NSWLR 34 at 38 per Glass JA). Relevantly, Ms Bale points out that the allegation that Mr Darwiche engaged in unconscionable conduct is a serious allegation and Ms Bale thus says that this then became an issue “in dispute” for the purposes of r 6.24 of the UCPR. Ms Bale argues that Mr Darwiche would have been denied procedural fairness had he not had the opportunity to reply to those allegations in Court (and, as adverted to above, says that in the event Mr Darwiche: chose to avail himself of that opportunity; sought to be heard against the allegations; and lost).

  4. Thus, it is submitted by Ms Bale that costs should be ordered against Mr Darwiche in favour of Ms Bale because it was necessary to join him as a party to the proceedings and he chose to fight the allegations.

  5. Second, Ms Bale says that the fact that no orders were made as against Mr Darwiche is immaterial to the question of costs; and that the correct principle is that costs follow the “event”, not that costs follow the “orders”. Ms Bale says that the “event” in this case is the finding that Mr Darwiche engaged in unconscionable conduct.

  6. Third, as to the fact that Ms Bale did not press at the hearing all the grounds of relief, and that other claims for relief that Ms Bale did in fact press failed, Ms Bale says that the correct principle to be applied is that a successful party should have the whole costs of the proceeding, including the costs of an issue on which it has failed, unless in respect of that issue the successful party has “unfairly, improperly, or unnecessarily increased the costs” of the hearing (citing Windsurfing International Inc v Petit [1987] 2 NSWLR 196; [1987] AIPC 90-441 (Windsurfing International) at 37,861-37,862 per Waddell J, as his Honour then was).

  7. Ms Bale says that the evidence relied upon was the same for all of the grounds of relief sought such that it cannot be argued that Mr Darwiche was put to some kind of “unnecessary” or unfairly incurred cost that would not have otherwise been incurred in confronting Ms Bale’s case. In this regard, Ms Bale points out that Mr Darwiche does not articulate how Ms Bale’s claim for statutory unconscionability, relief under the Contracts Review Act, misleading and deceptive conduct, or breach of contract, could be said unfairly to have increased his costs; and Ms Bale maintains that it did not (because the different forms of relief all relied on the same evidence about the same transaction).

  8. Thus, Ms Bale maintains that she should be awarded her costs of the proceeding as against Mr Darwiche. In the alternative, if that is not accepted, then Ms Bale seeks a Sanderson order (see below) as against Kimberley Developments in favour of Mr Darwiche (see generally Sanderson v Blyth Theatre Co [1903] 2 KB 533). Ms Bale notes that Kimberley Developments has been ordered to return the property, having denied in the pleadings and at the hearing that it engaged in the conduct complained of via the actions of Mr Darwiche. Ms Bale says that if Kimberley Developments had simply admitted the allegation at [46A] of the further amended statement of claim, then it would not have been necessary to join the second defendant because the issue would not have been in dispute.

Determination as to the Darwiche Cost Order

  1. As to the question whether Mr Darwiche was a necessary party to be joined as a defendant, it must be noted that Mr Darwiche was the sole director of Kimberley Developments at the time that the impugned transaction took place, even though by the time of the proceeding he had not been a director for some years. I accept that where a claim is made against a company (here, Kimberley Developments) for claims, including claims of unconscionable conduct, referable to conduct or representations of its sole director (here, Mr Darwiche), it may not be considered necessary for the director to be joined in his or her own right to the proceeding; and I do not accept that if the decision were made (say, for the laudable reason of minimising or avoiding unnecessary costs) simply to sue the company there would necessarily be a denial of procedural fairness to the director simply because his or her conduct was being put in issue. (That said, where serious findings of dishonesty or fraud are sought against an individual, I accept that such an individual might well have a basis for complaint if he or she did not have an opportunity to be heard on those issues.)

  2. However, it is a matter for Ms Bale to determine whether to sue only the company or also the director by reference to whose actions the company is said to be liable (at least if there is a proper basis on which to bring a claim alleging personal liability on the part of the director).

  3. Here, not only was the claim of unconscionable conduct brought against both the company and its director, but the claim succeeded against both. Insofar as the defendants argue that a claim of unconscionable conduct was not pressed against Mr Darwiche, it is relevant to note that what was not pressed was a claim of that kind based on knowledge by Mr Darwiche of a lack of capacity on the deceased’s part (as Ms Bale conceded that the medical evidence was not sufficiently precise to establish lack of capacity at the relevant time). At [211], what I recorded was that:

211.   Insofar as the defendants in their submissions suggested that Ms Bale was abandoning the pleaded claims pursuant to the Contracts Review Act or the Australian Consumer Law, Ms Bale in reply submissions affirmed that the case as to relief under the Contracts Review Act is pressed. (What is not pressed (see T 324) is: the relief claimed in relation to capacity ([6]); the Australian Consumer Law relief (see [9], [10], [14]); the claims at [33] and [34] and the misleading or deceptive conduct allegations at [46]-[49].)

  1. Moreover, insofar as the defendants say that it was not necessary for Mr Darwiche to be joined as a defendant in order for Ms Bale to obtain the relief that she sought (and, I might add, obtained) against Kimberley Developments, it is trite to observe that Ms Bale, when making the decision against whom to proceed, could not have known precisely how the relief would ultimately be framed in respect of the impugned transaction. Therefore, I do not accept that there was not a legitimate basis on which to have joined Mr Darwiche as a party to the proceeding (and I note the force of Ms Bale’s response to the effect that it was open to Mr Darwiche to have chosen not actively to defend the proceeding but that, instead, he took an active role in the proceeding of his own initiative).

  2. As to the proposition that Mr Darwiche has been the “successful party” such that, for the purpose of the general rule that costs follow the event, the fact that no order was made against him should be treated as the relevant “event”, this seems to me (with all due respect) to be an extraordinary (or perhaps simply unduly optimistic) submission in circumstances where there was a clear finding of unconscionable conduct against Mr Darwiche (and his involvement in the impugned transaction was the subject of adverse findings against him). As noted in the principal judgment at [208], the principal claim against (inter alios) Mr Darwiche was for unconscionable conduct in relation to the 21 February Agreement. That claim was made good. It cannot, therefore, be said that Mr Darwiche ought to be treated as the “successful party” simply because as no order was made against him, and that therefore, there was no “event” in the relevant sense.

  3. The statement of general principle (that costs ordinarily follow the event) necessarily requires one to identify “the event” for the purposes of the costs orders; and it has been recognised that where there are a number of issues in the proceeding (on which there have been varying degrees of success) it will not always be easy to determine the relevant event (see Owners Strata Plan No 64970 v Austruc Constructions Ltd (in liq) (No 5) [2010] NSWSC 568 at [22] per Bergin CJ in Eq (her Honour there referring to Lenning v Alexander Proudfoot Co World Headquarters (Court of Appeal (NSW), Kirby P, Priestley and Clarke JJA, 22 April 1991, unrep) (Lenning); Hooker v Gilling (No 2) [2007] NSWCA 214 at [3] and [25]-[26] per McColl JA with whom Ipp and Basten JJA agreed); and, in any particular case, there may be a number of “events”.

  4. In this regard, one quite helpful approach to the question as to who is to be seen as the successful party “in the event” (as suggested by the English Court of Appeal in Roache v News Group Newspapers Ltd [1992] TLR 551, see also Timms v Clift [1998] 2 Qd R 100) is to ask “[w]ho, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?”.

  5. In the present case, Ms Bale squarely accused Mr Darwiche of having engaged in unconscionable conduct and sought relief in relation thereto; Mr Darwiche denied having engaged in such conduct and denied Ms Bale’s entitlement to such relief; and Ms Bale succeeded in obtaining a finding against Mr Darwiche of such unconscionable conduct. True it is that, ultimately, the relief granted was to set aside the transaction as against Kimberley Developments. However, the fact that Mr Darwiche avoided having adverse orders made against him personally for the unconscionable conduct in which he engaged does not in my opinion render him the successful party. Indeed, it would make a mockery of the finding of unconscionable conduct for Ms Bale to be required to pay for Mr Darwiche’s costs of unsuccessfully defending that allegation simply because the more appropriate relief at the end of the day was determined to be an order that the transfer of the Forest Lodge Property be effectively undone.

  6. Thus, I do not consider that justice would be achieved as between the relevant parties by the making of the Darwiche Cost Order.

  7. It is therefore not necessary to consider whether any such costs order should be made on an indemnity basis. However, for completeness, I address that contention briefly as follows.

  8. The well-known authorities in relation to the power to award indemnity costs include Colgate (to which the defendants have referred) and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202 (Fountain Selected Meats) per Woodward J at 401. However, what is required for such a special costs order (leaving aside cases where the special costs procedure for offers of compromise is validly invoked or the Calderbank principles (see Calderbank v Calderbank [1975] 3 All ER 333) apply) is that the conduct of the case by the party against whom costs are sought is plainly unreasonable or amounts to “relevant delinquency” by the party as a litigant (see Fountain at 401; Sydney City Council v Geftlick [2006] NSWCA 280 at [90] per Tobias JA, Mason P and Hodgson JA agreeing; Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491; [2007] NSWCA 266 at [44] per McColl JA, Beazley JA, as Her Excellency then was, and Ipp JA agreeing; Leichhardt Municipal Council v Green [2004] NSWCA 341 (Leichhardt v Green) at [57] per Santow JA, Bryson JA and Stein AJA agreeing; Oshlack at [44] per Gaudron and Gummow JJ).

  9. In that context, “relevant delinquency” does not mean moral delinquency or some ethical shortcoming but delinquency bearing a relevant relation to the conduct of the case (see, for example, White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 at [11] per McDougall J). Circumstances in which indemnity costs may be awarded include: where a party has made allegations that ought never to have been made; where an action has been commenced or continued where the plaintiff, properly advised, should have known the applicant had no chance of success; and where proceedings have been commenced in wilful disregard of known facts or clearly established law. An award of indemnity costs serves the purpose of compensating a party fully for costs incurred when the Court takes the view that it was unreasonable for the party against whom the order was made to have subjected the innocent party to the expenditure of the case.

  10. The present case exhibits no such features. The finding of unconscionable conduct against Mr Darwiche makes that abundantly clear; and the fact that Mr Darwiche was not made personally liable for damages for such conduct is fortuitous (and hardly a matter of which he should now be heard to complain). Moreover, it seems to me that there is much force in the submission for Ms Bale that Mr Darwiche bears much of the responsibility for the costs being incurred in the first place and has not established that costs were unnecessarily or unfairly incurred above those that would have been incurred in any event in the defence by Kimberley Developments of the claim.

  11. For completeness, I also make the following comments as to the invocation by Ms Bale (in her submissions in reply to which the defendants have not had a chance to respond) of a Sanderson order.

  12. In Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [16], Beazley JA (as Her Excellency then was), together with Hodgson and McColl JJA, when considering whether a Sanderson order, requiring an unsuccessful defendant to pay the costs of other successful defendants should be made, referred to the relevant considerations articulated in Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179 at [128] per Mason P (Stein JA and Heydon JA, as his Honour then was, agreeing) as adopted from those stated by Asche CJ in Lackersteen v Jones(No 2) (1988) 93 FLR 442 at 449, namely:

1.   It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.

2.   The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.

3.   While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.

4.   Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.

  1. The overriding consideration for the exercise of the discretion to make an order of this kind (or the not dissimilar Bullock order – see Bullock v London General Omnibus Co [1907] 1 KB 264) must be whether, as between the contending parties, it is proper or fair to order the relevant party to pay the costs involved (see Johnson’s Tyne Foundry Pty Ltd v Maffra Corp (1948) 77 CLR 544; [1948] HCA 46 at 572 per Williams J; Permanent Trustee Co Ltd v Keogh [1999] NSWSC 883 at [11] per Davies AJ; and Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842 at 56-605 per Giles J (Sved)).

  2. In the present case, it is not necessary to address those matters (as the Darwiche Cost Order is not to be made). Had I been inclined to make such an order then, as a matter of procedural fairness, I would have given the defendants the opportunity to respond to Ms Bale’s submissions on this issue.

  3. Thus, I do not make the Darwiche Cost Order as sought by the defendants (and even had I done so I would not have made the order on an indemnity basis).

The Proceedings Cost Order

Defendants’ submissions as to the Proceedings Cost Order

  1. The defendants emphasise that (as recorded at [16] of the principal judgment) various of the causes of action and claims for relief were not pressed by Ms Bale (including claims for lack of capacity, undue influence and misleading or deceptive conduct).

  2. It is noted that, as against Kimberley Developments, Mr Theo Trigas and Super Start, Ms Bale pleaded: that based on the deceased’s cognitive decline, the alleged contract is void (see at [14] of the further amended statement of claim); that the deceased was under a relevant disability for the purposes of s 52 of the Limitation Act (see at [15] of the further amended statement of claim); a claim pursuant to s 7 of the Contracts Review Act (see at [26] of the further amended statement of claim); that the deceased’s execution of the contract and the transfer of the same date and the deceased’s consent to register the transfer were acquired by undue influence (see at [33] of the further amended statement of claim); that Kimberley Developments acted unconscionably within the meaning of the Australian Consumer Law (see at [35] of the further amended statement of claim) and the general law (see at [46A] of the further amended statement of claim) by reason of its knowledge of the deceased’s cognitive degeneracy and or dementia; that Kimberley Developments engaged in misleading and deceptive conduct by representing to the deceased that if the deceased transferred the property Kimberley Developments would do the things pleaded at [47](I)-[47](VII) (see at [47] of the further amended statement of claim); that Kimberley Developments breached the 21 February 2011 contract (see at [65A] and [68] of the further amended statement of claim); that in breach of trust Kimberley Developments and Mr Theo Trigas encumbered the trust property (see at [70] of the further amended statement of claim); and that Super Start was aware that the transfer of funds to it was a breach of trust (see at [73] of the further amended statement of claim).

  3. The defendants point out that, in closing oral submissions, Ms Bale did not press various of those matters (as noted above) and that Ms Bale failed to establish that the contract was binding, failed to establish the claim pursuant to the Contracts Review Act and failed to obtain a declaration that the deceased was under a disability at the time of entering into the transaction.

  1. The defendants accept (at least for present purposes) that Ms Bale was successful in establishing that: the underlying transaction effected by the 21 February Agreement was unconscionable and that the property was held on constructive trust for the deceased (and since his death, the deceased’s estate); and that Kimberley Developments breached that trust by encumbering the property and then transferring the funds so borrowed to Super Start (not for any purpose associated with the trust property) and Mr Theo Trigas had constructive notice of the matters giving rise to the trust and breach of trust; and that he and Super Start were liable for knowing receipt of property transferred in breach of trust. As noted earlier, in light of those findings, the claims of unconscionable conduct insofar as they arose from the Australian Consumer Law were not determined.

  2. The defendants invoke the principles for the determination of costs on an issue-by-issue basis as stated in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38] per the Court (Beazley JA, as Her Excellency then was, Ipp and Basten JJA) (see below).

  3. The defendants say that a significant part of the trial was taken up with the matters upon which Ms Bale was unsuccessful both by way of evidence and argument. By way of example, the defendants refer to the space occupied by Ms Bale’s opening submissions: those relating to mental decline at [24] to (at least) [45]; those relating to incapacity from [69] to [91]; and those relating to unconscionability from [92] to [114].

  4. The defendants contend that, applying the “appropriate broad brush approach based on matters of impression and evaluation” (using the language in Avopiling at [176]), the Proceedings Cost Order should be made.

  5. At the least, the defendants contend that there should be a proportionate costs order; i.e., that Kimberley Developments, Mr Theo Trigas and Super Start should only be ordered to pay a proportion of Ms Bale’s costs. The defendants say that (on the basis that Ms Bale was successful on two issues out of ten) the appropriate order in that event would be for Kimberley Developments, Mr Theo Trigas and Super Start to pay one-fifth of Ms Bale’s costs as agreed or assessed. (I interpose to note that I have assumed that on the rejection of the Darwiche Cost Order, the defendants would here include Mr Darwiche in the proposed Proceedings Cost Order and I proceed on that basis.)

Ms Bale’s submissions in reply as to the Proceedings Cost Order

  1. In response to the defendants’ contention that the first, fifth and sixth defendants (and presumably the second defendant, Mr Darwiche) should not pay Ms Bale’s costs of the proceeding and that the order should be that each party pay its, his or her own costs (because Ms Bale either did not press or was unsuccessful in some of the relief sought), Ms Bale again argues that the various forms of relief sought all revolved around the same evidence. Thus, it is said that the defendants were never put to the added expense of preparing to meet a case on an additional set of facts that they were successful in resisting.

  2. Ms Bale invokes the principle that, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed (citing Bostik at [38]).

  3. Ms Bale argues that the defendants point to no particular issue or group of issues that was clearly dominant or separable; and that they point to no evidence that they unnecessarily wasted expense answering any such issue or issues. It is submitted that all the evidence was focussed on the impugned transaction and the increasing frailty of the deceased. Ms Bale says that this evidence was equally as relevant to unconscionable conduct as it was to capacity, or relief under the Australian Consumer Law or the Contracts Review Act.

  4. Ms Bale’s response to the defendants’ recitation of the number of paragraphs of Ms Bale’s outline of opening submissions that are said to have been devoted to relief on which Ms Bale was either not successful (other relief being granted) or which were not pressed, is to note that the defendants’ opening submissions consisted only of a handful of pages. Thus, Ms Bale says that it is difficult to understand to what extra cost the defendants were here put. (Pausing here, I do not accept that the issue can be helpfully resolved by a comparison of the verbiage of the respective opening written submissions, particularly when the course of submissions was expanded to meet Ms Bale’s request for additional time – which of itself introduced further delay and no doubt cost.)

  5. In any event, the nub of Ms Bale’s complaint in this context is that the defendants have not identified with any precision an aspect of the case on which Ms Bale failed which was dominant and separable such as to ground an issue-by-issue style of costs order.

Determination as to the Proceedings Cost Order

  1. The order here sought by the defendants raises issues as to when it is appropriate to award costs on an issue-by-issue basis.

  2. In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, Young J (as his Honour then was), having accepted that where there are multiple issues it may be appropriate for the court to assess the costs on each issue or to make a reduction in the costs which the successful party obtains because of that party’s losses on separate issues, said (at 22), in an approach later cited by Barrett J (as his Honour then was) in Golding v Vella (No 2) [2001] NSWSC 731 at [8]:

The cases, however, show that it is unwise to be too technical about what is meant by “event” or “issue” in this context. The judgment of Thomas J in Colburt v Beard (1992) 2 Qd R 67 gives abundant examples which establish this point. In particular one does not look at issues as if they were pleaders’ issues but approaches the matter with a broad brush.

  1. There is, in the authorities, a tension between the accepted general principle that a successful party should have the whole costs of the proceeding (including the costs of an issue on which it has failed) (as noted in Windsurfing International to which reference has been made above) and the recognition that in an appropriate case a costs order may be formulated to reflect the degree of success on distinct issues (see, for example, Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775 per Rolfe J; Uniline Australia Ltdv SBriggs Pty Ltd(No 2) (2009) 232 FCR 136; [2009] FCA 920 per Greenwood J; Leallee v The Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518 per Price J; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 at [36]-[37] per Slattery J).

  2. The rationale underlying the general principle is reflected in the observation made by Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 (at 16) that:

… trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

  1. By contrast, the rationale underlying a departure from the ordinary costs rule appears to be that where there are multiple issues, the application of the general rule may involve hardship where a party succeeds on some issues but not others (James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (James v Surf Road) at [32] per the Court (Beazley JA (as Her Excellency then was), Tobias and McColl JJA)).

  2. It has been said on more than one occasion that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (see Trade Practices Commission v Nicholas Enterprises Pty Ltd(No 3) (1979) 28 ALR 201 at 208 per Fisher J; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12] per Tamberlin J).

  3. The circumstances in which apportionment of costs as between different issues may be appropriate are: where, in respect of one or more issues, the successful party has “unfairly, improperly, or unnecessarily increased the costs” (Waddell J, as his Honour then was, in Windsurfing International); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (Mahoney JA in Waters v PC Henderson (Australia) Pty Ltd (Court of Appeal (NSW), Kirby P, Mahoney and Priestley JJA, 6 July 1994, unrep); Toohey J (as his Honour then was) in Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748; [1986] FCA 511 (Hughes)); and where a particular issue or group of issues is clearly dominant or separable (Mahoney JA in Waters; McColl JA in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373).

  4. In Hughes, Toohey J (as his Honour then was) commented that a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may also be ordered to pay the other party’s costs of those issues. His Honour nevertheless also said that:

It seems to me that the only basis on which it would be appropriate to depart from the general rule that costs follow the event, by reason of the circumstance that the appellant lost what might be regarded as the dominant issue, is that the judgment is made that, had that issue been excluded then, although the dominant issue was not clearly separable, the costs incurred on the appeal would be likely to have been substantially less, perhaps because there was less at stake.

  1. In Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423, Hammerschlag J, as his Honour then was, (referring to the relevant authorities collated by White J, as his Honour then was, in Short v Crawley (No 40) [2008] NSWSC 1302 at [25]–[32]) said the following (at [31]) summarised the principles applicable as to the question when the general rule may be displaced:

(a)   a costs order in favour of a successful party can be modified to reflect its failure on particular issues even if the successful party did not act unreasonably in raising those issues: Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd; (Supreme Court of New South Wales, Hodgson CJ in Eq, 3 June 1998 unreported, BC9802305 at 10–11);

(b)   if a party unreasonably pursues or persists with points which have no merit, such conduct will constitute a consideration relevant to the ordering of costs even in circumstances where that party is generally successful: Oshlack v Richmond River Council (1998) 193 CLR 72 at 122;

(c)   conduct in relation to the matter may be discreditable to an extent warranting a party being deprived of costs: Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271;

(d)   where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed: Hughes v Western Australian Cricket Assn (Inc) (1986) 8 ATPR 40-748 at 48,136;

(e)   where the proceedings involve multiple issues departure from the general rule may be warranted particularly where the losing party has succeeded on issues which occupied significant time. Nevertheless the application of the general rule may involve hardship where a party succeeds on some issues but fails on others particularly where the losing party succeeds on some issues. However unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Ritchie’s Uniform Civil Procedure NSW at [42.1.15]; Waters v PC Henderson (Aust) Pty Ltd (New South Wales Court of Appeal, 6 July 1994, unreported, BC9404952 at 5); Short v Crawley (No 40) at [27]–[28];

(f)   a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them: Hughes v Western Australian Cricket Assn (Inc) at 48,136.

  1. Ultimately, as Finkelstein and Gordon JJ (her Honour then sitting on the Federal Court) observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (at [5]):

Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied.

(See further Hodge v TCN Channel 9 (No 2) [2006] NSWSC 1272 at [73]-[74] per Smart AJ, and Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 496; [2005] NSWSC 493 at [22] per Barrett J), as his Honour then was.

  1. In the present case, I am not persuaded that there was a clearly dominant and separable issue or group of issues that would warrant departure from the general rule, in circumstances where the issue of capacity (while a lack of capacity was not established) raised questions as to the special vulnerability or disadvantage to which the deceased was held to be subject. It is not as if, for example, the defendants had expended a considerable amount of time and cost in obtaining expert medical opinion on the issue of medical capacity that might be said unnecessarily to have been incurred in the end result.

  2. Had I been persuaded otherwise, then I would have adopted a broad brush impressionistic approach.

  3. In Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 (cited by the Court of Appeal in James v Surf Road at [36]) and again in Bostik), Gummow, French (their Honours then sitting on the Federal Court) and Hill JJ said (at [272]):

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation. …

  1. In NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 (NRMA), Giles J (as his Honour then was) stated (at [25]):

If an order reflecting success or failure on issues is made, it is appropriate to have regard to the time referable to the issues, although necessarily without mathematical precision (Lenning v Alexander Proudfood [sic] Co World Headquarters (NSWCA, 22 April 1991, unreported)). It is not necessary that the issue or issues on which the party failed was or were raised by him unreasonably (Rosniak v Government Insurance Office (1997) 41 NSWLR 608, at 615).

  1. In NRMA, his Honour acknowledged (at [28]) that precision was impossible and framed the costs orders by reference to his view as to what would give appropriate recognition to the fact that the NRMA was not wholly successful in the proceedings “bearing in mind the ebb and flow of litigation”. In Lenning, the court (Kirby P (as his Honour then was), Priestley and Clarke JJA) stated:

In our view the costs orders should be made bearing in mind the court’s observations of what took place in court, but principally by reference to what the moving parties were claiming and what was the effect of the orders that were made.

  1. Making an assessment of the time occupied by various discrete issues requires an assessment of what evidence was required for each and the overlap, if any, between the evidence on particular issues (see eg LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72 at [31] and [41] per Barrett J). There, Barrett J, as his Honour then was, considered (at [46]) that the two claims before him were “so separate and dissociated” (even though they involved common witnesses) that they should be treated for costs purposes as if they had been the subject of separate trials (and made costs orders accordingly).

  2. I note that in James v Surf Road (at [35]), their Honours were of the opinion that it was preferable not to speak in terms of “rules” in this context but noted that an available approach to the exercise of the court’s discretion in particular cases could be to estimate the time taken on discrete issues at the hearing and to make orders accordingly. This points to the significance of the time taken up in the lead up to and during the hearing on particular issues. In Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724, Brereton J, as his Honour then was, (at [10]), cited Waterman v Gerling Australia Insurance Company Pty Ltd (No 2) [2005] NSWSC 1111 in which it was held (again by Brereton J, at [10]) that it might be appropriate to award costs of a separate issue where a clearly defined and separate issue (on which the otherwise successful party failed) had occupied a significant part of the trial. Similarly, in Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306, at [24], said the Court (Beazley JA (as her Excellency then was) Ipp and Tobias JJA) held that it may be appropriate to deprive a successful party of costs or a portion of costs if the matters upon which that party was unsuccessful took up a significant part of the trial either by way of evidence or argument.

  3. Therefore, had I been persuaded to adopt an issue-by-issue approach to costs, I would have made a proportionate costs order (but not one based on paragraph numbers in the opening submissions). Rather, I would have made an assessment of the time occupied in the hearing on particular issues and dealt with the costs on that basis. As it is, such an approach is not necessary.

The Security for Costs Order

The defendants’ submissions as to the Security for Costs Order

  1. Finally, as to the reserved costs of the security for costs application (being the amended notice of motion dated 20 August 2021), it is noted that in the submissions provided in 2021 in support of the amended notice of motion, the defendants submitted that an order for security for costs should be made in circumstances where: Ms Bale received the settlement sum of $350,000 in these proceedings in late 2020 (the Settlement Sum); Ms Bale deposed that she has “limited means” and sets out the extent of her property ownership, savings and income; Ms Bale asserted that her late father was indigent at the commencement of the proceeding; and Ms Bale adduced no evidence of how or why the Settlement Sum was “dispersed” (presumably meaning disbursed), other than deposing that it was disbursed “to the lawyers for the Deceased’s estate”.

  2. On that occasion, I directed Ms Bale to provide copies of receipts recording the expenditure for legal fees. Copies of those documents were produced to the defendants’ solicitor on 20 August 2021.

  3. The defendants say that those documents establish the following. First, that, on 23 November 2020, Mr O’Connor of Counsel issued an invoice noting that his fee agreement dated 22 March 2018 provided for payment upon receipt of the settlement moneys for work done up until that date and that his fees for the work performed between 22 March 2018 and 23 November 2020 were $231,337.50 plus GST and were increased by a 25% uplift (totalling $289,171.87 plus GST). Second, that on 17 December 2020, Ms Bale’s solicitors issued an invoice for the work done between 14 March 2017 and 17 December 2020 in the sum of $290,217.55 plus GST. Third, that on 23 August 2021, Mr O’Connor of Counsel confirmed receipt of the sum of $300,000 in part payment of his invoice. Fourth, that Ms Bale’s solicitors applied $50,000 to their invoice.

  1. Thus, it is said that when the matter came before the Court on 20 August 2021, Ms Bale (and her solicitors, who it is said presumably assisted in drafting her affidavit sworn 18 August 2021) had been aware since November to December 2020 that her solicitors and counsel briefed in the matter were going to receive the sum of $350,000 from the Settlement Sum in part payment of their respective invoices. The defendants say that the Settlement Sum had not been “disbursed to the lawyers for the Deceased’s estate”; rather, it had been disbursed to Ms Bale’s lawyers (the very people acting for her in the proceeding and who presumably assisted her in drafting the affidavit).

  2. The defendants say that the evidence adduced on the security for costs motion established that: prior to the filing of the defendant’s motion for security for costs, Ms Bale’s solicitors were asked, by letter dated 15 June 2021, whether Ms Bale held the Settlement Sum and they did not respond to that letter; on 18 August 2021, Ms Bale’s solicitors were again asked as to the status of the Settlement Sum; and it was not until service of Ms Bale’s affidavit sworn 18 August 2021 that any information was provided (that being the affidavit in which Ms Bale deposed that the Settlement Sum was “disbursed to the lawyers for the Deceased’s estate”).

  3. The complaint by the defendants is that there was a considerable length of time where the defendants’ solicitor was not provided with any information or evidence about how the Settlement Sum had been disbursed. It is said that if Ms Bale’s solicitors had advised that the Settlement Sum had been disbursed to meet their client’s legal fees including counsel’s fees, the motion seeking security for costs would have been avoided (it being said that this is why the letter dated 15 June 2021 was sent in the first place).

  4. Having regard to the above, it is said that the Security for Costs Order should be made. The defendants say that not only did Ms Bale’s solicitors know that the Settlement Sum had been disbursed to meet their client’s legal fees, including counsel’s fees, but also that Ms Bale’s affidavit evidence (that the Settlement Sum was “disbursed to the lawyers for the Deceased’s estate”) was obfuscating.

  5. It is submitted that if those costs are not ordered to be paid on an indemnity basis, they should be awarded on the ordinary basis.

Ms Bale’s submissions in reply as to the Security for Costs Order

  1. Ms Bale points out that not only was she successful in resisting the defendants’ application for security for costs but also that she has been vindicated by the making good of the unconscionable conduct claims.

  2. Ms Bale asserts that the usual order in security for costs applications is that the cost be reserved until the completion of the hearing; and that if the applicant for security be vindicated by resisting the substantive claim, costs normally follow but that, in the present case, not only did the defendants not succeed in the actual proceedings but they also lost the application. Further, Ms Bale points out that the application was brought late (the week before the hearing was to commence, some three years after the statement of claim was filed).

  3. As to the defendants’ submission (at [30]) that, had they been advised that the Settlement Sum had been disbursed to meet Ms Bale’s legal fees, the motion seeking security for costs would have been avoided, Ms Bale says that this statement should be approached with some caution given the following matters. First, that, notwithstanding the fact the defendants did not have the information that they now claim told decisively one way or another, they filed the motion anyway. Second, that the motion sought a “cornucopia of relief”, aside from security for costs, including that the whole proceeding be struck out. Third, that Ms Bale freely admitted that she had other assets aside from the Settlement Sum including the home in which she lived in and an investment property. Fourth, Ms Bale says that the application for security was always weak because the defendants’ defence on the merits in the substantive matter relied upon a significant, undocumented, cash transaction and the word of a convicted criminal (this clearly being a reference to Mr Darwiche – see the submissions made at the hearing as referred to in the principal judgment as to his credit – for example, at [280]).

  4. Thus, Ms Bale maintains that she should be awarded her costs of the proceeding, including the security costs motion, as against the defendants on the ordinary basis.

Determination as to the Security for Costs Order

  1. The issue as to the reserved costs of the security for costs motion is more problematic. But for the issue raised as to the information provided by Ms Bale at the time of the making of the application, I would have had little hesitation in concluding that the costs should simply fall to be dealt with as part of the overall costs of the proceeding. That is because the application (having been belatedly made) was unsuccessful, as was the defendants’ defence of the proceeding overall.

  2. However, I am concerned that, on the face of the material now before me, the affidavit evidence relied upon by Ms Bale in resisting the application for security for costs presented (to put it charitably) a less than complete version of events. I am concerned that to say that the costs were disbursed to the solicitors for the estate does not tell the whole story and, while (as urged by Mr Bale) I treat with caution the proposition that, had the position been made clear at the time, the motion would not have been made or would not have been necessary, I have considerable disquiet as to the manner in which the evidence was put before the Court.

  3. In all the circumstances I consider that the appropriate order is that each party bear his, her or its own costs of the amended motion seeking security for costs.

Conclusion

  1. The applicable principles were not in dispute. The power to award costs (contained in s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act)) is a broad discretion, although it must be exercised judicially (see Oshlack; and more recently, Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 at [136] per McColl JA (with whom Sackville AJA and Adamson J agreed)) and with regard to the overriding statutory mandate under the Civil Procedure Act (see s 56).

  2. The usual order is that costs follow the event (r 42.1 of the UCPR); unless it is considered that some other order ought to be made (see Gretton at [38] per Beazley JA, as her Excellency then was (with whom Mason P agreed)). Further, it is not disputed that costs orders in civil litigation are well recognised as being compensatory, not punitive, in nature (see Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, in turn citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ; see further Ohn at 84 per Cole JA).

  3. Ordinarily an executor or trustee representing the estate will be entitled to costs out of the estate (see, for example, Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13 at 578 per Latham CJ; Drummond v Drummond [1999] NSWSC 923 (Drummond) at [41]-[51], especially [43] per Austin J) (subject, of course, to exceptions – including where the executor is effectively protecting his or her own interests – see Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115 at [72]; Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197 per Kekewich J; King v Hudson [2009] NSWSC 1500; Drummond at [43]-[45] and [49]). In the present case, Ms Bale did not invoke this principle, no doubt because the claim was in effect for her ultimate benefit.

  4. For the reasons set out in addressing the costs issues raised in the present case, I make the following orders:

  1. Subject to order 2, order that the first, second, fourth, fifth and sixth defendants be severally liable to pay the plaintiff’s costs of the proceeding on the ordinary basis.

  2. Order that each of the parties pays her, his or its own costs of the amended notice of motion dated 20 August 2021.

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Decision last updated: 27 July 2022

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