BB Australia v Danset (No 3)
[2018] NSWSC 1823
•29 November 2018
Supreme Court
New South Wales
Medium Neutral Citation: BB Australia v Danset (No 3) [2018] NSWSC 1823 Hearing dates: On the papers Date of orders: 29 November 2018 Decision date: 29 November 2018 Jurisdiction: Equity - Commercial List Before: McDougall J Decision: Plaintiff’s Notice of Motion filed 9 October 2017 dismissed with costs.
Catchwords: COSTS – application to vary costs order – whether alleged “misconduct” of the fourth and fifth defendants should disentitle those parties to a costs order – where misconduct was part of the plaintiff’s case against those parties which failed – no reason to depart from the usual order as to costs. Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: BB Australia Pty Ltd v Danset Pty Ltd [2017] NSWSC 1307
BB Australia Pty Ltd v Danset Pty Ltd [2018] NSWCA 101
BB Australia v Danset (No 2) [2018] NSWSC 1745
Emerald Construction Co v Lowthian [1966] 1 WLR 691
Short v City Bank (1912) 12 SR (NSW) 186Category: Costs Parties: BB Australia Pty Ltd (Plaintiff)
Danset Pty Ltd (First Defendant)
Jorge Manuel Simoes Miraldo (Second Defendant)
Maria Graca Samagaio Miraldo (Third Defendant)
Tresblue Pty Ltd (Fourth Defendant)
John Kevin Price (Fifth Defendant)Representation: Counsel:
Solicitors:
P Herzfield (Plaintiff)
J A Darvall (Fourth and Fifth Defendants)
Macpherson Kelley Lawyers (Plaintiff)
Paul Mattick & Associates (Fourth and Fifth Defendants)
File Number(s): 2016/94570
Judgment
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HIS HONOUR: The plaintiff (BBA) sued:
the first defendant (Danset) for breach of a franchise agreement made between them;
the second and third defendants, Danset’s principals, pursuant to their guarantee of Danset’s obligations under the franchise agreement; and
the fourth and fifth defendants (the Tresblue parties) for allegedly inducing Danset’s breach of contract, and as accessories to Danset’s alleged breach of trust or fiduciary duty.
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In reasons given on 28 September 2017[1] , I concluded, with a presently irrelevant exception, that the claims for relief against Danset and its principals (the Danset parties) failed[2] . I ordered, as between BBA and the Tresblue parties, that the proceedings be dismissed with costs.
1. BB Australia Pty Ltd v Danset Pty Ltd [2017] NSWSC 1307.
2. The presently irrelevant exception was dealt with in reasons that I gave on 14 November 2018: BB Australia v Danset (No 2) [2018] NSWSC 1745.
The notice of motion
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By notice of motion filed on 9 October 2017, BBA sought to vary that costs order by substituting, for the order that it pay the Tresblue parties’ costs, an order that, as between it and those parties, there be no order as to costs. These reasons deal with that notice of motion.
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The significant delay in dealing with the notice of motion has arisen because, relatively soon after it was filed, BBA appealed (more accurately, sought leave to appeal) from my orders dismissing, with the irrelevant exception to which I have referred, its claim against the Danset parties. That appeal failed[3] . Thereafter, the “irrelevant issues” were revived. They were the subject of written submissions. I dealt with them in my reasons of 2018.
3. BB Australia Pty Ltd v Danset Pty Ltd [2018] NSWCA 101.
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Following publication of those reasons, BBA and the Tresblue parties asked me to deal with BBA’s notice of motion filed on 9 October 2017. They provided written submissions, and agreed that I should deal with the application on the basis of those submissions.
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I do not propose to go into any of the factual background. In the unlikely event that any reader of these reasons wishes to know the details of the dispute between BBA and the Tresblue parties, they should refer to my 2017 reasons or to the Court of Appeal’s reasons.
The parties’ submissions
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BBA submits that at the factual level, it succeeded in establishing that the Tresblue parties had involved themselves, dishonestly, in Danset’s breach of the franchise agreement: that they had, in effect, induced it. In those circumstances, BBA submitted, the Tresblue parties had engaged in misconduct which was sufficient to disentitle them to costs.
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The submissions for the Tresblue parties emphasised that the proceedings against them had failed for two reasons. As to the case based on inducing breach of contract, they submitted that damages were an essential element – of the gist of the action – and that BBA had failed (as I held, and the Court of Appeal agreed) to prove any loss. As to accessorial liability for the suggested breach of trust or fiduciary duty, the Tresblue parties submitted (again as I had held, and as the Court of Appeal agreed) that there was no trust.
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In those circumstances, the Tresblue parties submitted, there was no basis for the depriving them of their costs.
Decision
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In my view, the position for which the Tresblue parties contend is correct.
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I found that the Tresblue parties agreed that Tresblue would contract with Danset knowing that by doing so, Danset would breach its contract with BBA, and would deprive BBA of its rights under that contract[4] . However, I did not find that BBA had suffered loss thereby. And loss is of the gist of the action: see (if authority be necessary) Street J in Short v City Bank [5] at 202; see also Diplock LJ in Emerald Construction Co v Lowthian [6] at 703.
4. See my 2017 reasons at [101].
5. (1912) 12 SR (NSW) 186.
6. [1966] 1 WLR 691.
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Thus, the relevant event, for the purposes of UCPR r 42.1, was that BBA’s claim against the Tresblue parties failed. The position is clear enough in relation to the claim based on inducing breach of contract. It is even clearer for the case based on accessorial liability for breach of trust or fiduciary duty, because BBA failed to show that it was owed any relevant fiduciary duty (or, if it matters, that there was any property held on trust for it).
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The simple fact is that BBA brought the Tresblue parties to court, and claimed substantial damages from them. It failed; or to put it conversely, they defeated its claim. In my view, the fact that BBA succeeded in proving some but not all of the factual ingredients of its claim does not, in the circumstances of this case, justify a departure from the operation of r 42.1. This dispute is no more than a quotidian example of a plaintiff who, having failed to prove every unadmitted element of its cause of action, loses and suffers the consequences in costs.
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Nor do I perceive the Tresblue’s parties’ actions as amounting to misconduct of a kind that should disentitle them to a costs order. This is not a case where they conducted themselves in such a way as in effect to leave BBA in a position where it should either sue them or allow its rights to lapse for want of prosecution. BBA could have left them out of the proceedings. It chose not to do so.
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In effect, BBA’s “misconduct” submissions invite the court to punish the Tresblue parties for conduct which could well be stigmatised as commercially dishonest. But the costs jurisdiction is compensatory, not punitive.
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I accept that where there is some link between the misconduct complained of and the incurring of costs that otherwise would not have been incurred, it may be appropriate to deprive a successful party of part or all of its costs. That approach does not seem to me to be applicable where the misconduct complained of is the very conduct said to ground the cause of action, in a case where the plaintiff fails to establish all elements of its cause of action.
Order
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I order, as between the plaintiff and the fourth and fifth defendants, that the plaintiff’s notice of motion filed on 9 October 2017 be dismissed with costs.
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Endnotes
Decision last updated: 29 November 2018
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