Benson v Rational Entertainment Enterprises Ltd (No 2)

[2018] NSWCA 148

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Benson v Rational Entertainment Enterprises Ltd (No 2) [2018] NSWCA 148
Hearing dates:	On the papers
Decision date:	11 July 2018
Before:	Beazley P, Leeming JA, Emmett AJA
Decision:	BY CONSENT, THE COURT ORDERS: 1. Judgment for the Appellant against the Fourth Respondent, Rational FT Enterprises Limited, in the sum of US$382,216.23. 2. The name of the Second Respondent upon all documents filed in these proceedings shall be taken to have been amended to the name “Amaya Group Limited.”  THE COURT ORDERS: 3. Vary order 4 made on 25 May 2018 so that it reads “The fourth respondent to pay the appellant’s costs of the appeal, exclusive of the costs of submissions on the form of the judgment, parties and costs.” 4. No order as to the costs of submissions on the form of the judgment, parties and costs, with the intent that the parties bear their own costs of those submissions. 5. The fourth defendant to pay the plaintiff’s costs at first instance.
Catchwords:	COSTS – plaintiff obtained judgment for US$285,000 plus interest against one of four defendants – all defendants located in Isle of Man – proceedings were appropriately commenced in Supreme Court – whether proceedings warranted continuation in Supreme Court after jurisdiction was confirmed – whether settlement offer to all defendants affected discretion as to costs
Legislation Cited:	Uniform Civil Procedure Rules 2005, r 42.34
Cases Cited:	Benson v Rational Entertainment Enterprises Ltd [2018] NSWCA 111 Flo Rida v Mothership Music Pty Ltd [2013] NSWCA 268 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Sahade v Bischoff (No 2) [2016] NSWCA 45
Category:	Costs
Parties:	Gary Benson (Appellant) Rational Entertainment Enterprises Ltd (First Respondent) Rational Group Ltd (Second Respondent) Oldford Group Ltd (Third Respondent) Rational FT Enterprises Ltd (Fourth Respondent)
Representation:	Counsel: M W Young SC (Appellant) A R Zahra (Respondents)   Solicitors: H A Miedzinski Lawyers (Appellant) Addisons Lawyers (Respondents)
File Number(s):	2017/242547
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2017] NSWSC 922 Date of Decision: 13 July 2007 Before: Hallen J File Number(s): 2014/336109

Judgment

1. THE COURT: By a judgment delivered on 25 May 2018, this Court allowed Mr Benson’s appeal in part and made provision for submissions on four ancillary matters arising out of its reasons: Benson v Rational Entertainment Enterprises Ltd [2018] NSWCA 111. The parties have exchanged written submissions on those matters. Two matters are not in issue, and orders 1 and 2 below reflect the agreed position as to the judgment to be entered in favour of Mr Benson and against the fourth respondent, Rational FT Enterprises Ltd, including interest, and the correct name of the second respondent.

2. The outstanding issues are as to the costs at first instance and on appeal. This Court made no order as to the costs at first instance, in part because it appeared that there may have been an offer of compromise or Calderbank correspondence of which it was unaware, and also because of the potential effect of UCPR r 42.34, which provides that a plaintiff who obtains a Supreme Court judgment for less than $500,000 will ordinarily not receive a favourable costs order unless the Court is satisfied that “the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted”. This Court also made an order that the respondents pay the appellant’s costs of the appeal, but granted liberty to the parties to make submissions, if they so wished, for a different order as to the costs of the appeal.

3. The parties have made written submissions in support of the orders for which they contend in relation to costs at first instance and on appeal.

Mr Benson’s submissions

4. Mr Benson seeks to vary the order as to the costs of the appeal such that they be paid on an indemnity basis after 21 February 2018, reflecting a Calderbank letter of that date which contained an offer that “the First to Fourth Respondents pay to the appellant half the sum paid, namely, US$142,500.00 within 28 days of entering into agreement”. Each party was to bear their own costs of the appeal and first instance. The respondents rejected that offer.

5. In respect of the costs at first instance, Mr Benson seeks an order that the fourth respondents pay his costs at first instance on an ordinary basis until 23 March 2017 and on an indemnity basis thereafter, again reflecting an offer of compromise of that date which required “the First to Fourth Defendants pay to the plaintiff the sum of US$270,000”, which the respondents rejected.

6. Mr Benson also submits that r 42.34 does not apply because the bringing of his claim in the Supreme Court was “warranted”. His submissions identify three reasons: (a) the restitution claim was of “a novel type that required consideration by a superior court”, (b) there were many complexities in determining the matter, including identification of parties, and determining the existence of the contract in complex factual circumstances, such that, so it was said “[i]t is not the sort of case a reasonable litigant could readily have entrusted to the District Court”, and (c) the issue of forum non conveniens was readily foreseeable and difficult and required a lengthy judgment at first instance.

Respondents’ submissions

7. The respondents submitted that the costs of the appeal should be borne solely by the fourth respondent, on the basis that the claims against the first to third respondents had been dismissed. The respondents referred to paragraph 130 of the principal judgment, which had noted that “although three of the respondents have been successful, they made common cause throughout the litigation, filing a single defence and being represented by the same solicitor and counsel”. They acknowledged that there was no issue about that, and made no application, on behalf of the first, second and third respondents, for a costs order in their favour, consistent with their success. However, they maintained that there was no basis for the successful first to third respondents to pay the appellant’s costs of the appeal.

8. They submitted, in relation to costs at first instance, that r 42.34 applied. They noted that the principal judgment amount to which Mr Benson was entitled was US$285,000, which was substantially less than (AUD) $500,000. They submitted that the $500,000 threshold was a reference to principal, exclusive of interest, but noted that even if it were relevant to have regard to interest at pre-judgment rates, the inclusive of interest amount was still less (although only slightly less) than $500,000. They also acknowledged that District Court proceedings could not be served outside Australia, in accordance with Flo Rida v Mothership Music Pty Ltd [2013] NSWCA 268 at [20]-[23], and that if proceedings had been commenced in the District Court, it would have been necessary for their transfer to the Supreme Court in order to effect service on the respondents. However, they submitted that once service was effected and the challenge to jurisdiction determined, there was “no justification for the proceedings to continue in the Supreme Court, and the continuation of the proceedings there was not warranted”. They said that the claims for breach of contract and unjust enrichment were not particularly complex, and were able to be heard and determined by the District Court, and the amount claimed was well within that court’s jurisdictional limit.

9. Alternatively, if contrary to their primary submission, the Court was minded to make an order in favour of Mr Benson for the first instance proceeding, then that order should only be made in favour of the fourth respondent, which was the fourth defendant at first instance.

10. The respondents also submitted that the settlement offers, both at first instance and on an appeal, would not alter the exercise of discretion, because both offers were made collectively to all four defendants/respondents, and required all to make a substantial payment whilst Mr Benson has never had any entitlement to judgment against or to recover any money from the first, second or third respondents/defendants. For those reasons, it was reasonable and appropriate that those offers not be accepted: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].

Mr Benson’s submissions in reply

11. Mr Benson maintained that he should obtain costs judgments against all respondents, at first instance and on appeal. He said that the first, second and third respondents were successful “only if one focusses exclusively on the lack of a judgment against them”, and that they had failed on whether Mr Benson had suffered any loss, and whether the EULA was a binding contract. He also said that the fact that the settlement offer was addressed to all four respondent was no good reason to decline to order indemnity costs, because the three respondents which were ultimately found not to be liable could have agreed amongst themselves that the fourth respondent would pay. He also pointed to an offer of compromise which had been made by all four respondents as indicating that “clearly the First to Third Respondents were not averse to having a judgment entered against them”.

Resolution

12. First, neither the offer of compromise nor the Calderbank letter impacts upon the exercise of the discretion as to costs. In both cases, as the respondents point out, the offers were capable of acceptance only by all of the first, second, third and fourth respondents. On one view, which would accord with what was said in Sahade v Bischoff (No 2) [2016] NSWCA 45 at [22]-[23], that is an end to the inquiries in relation to the operation of the rules and the principles applicable to Calderbank letters, although the position is perhaps less than perfectly clear because the respondents are related companies and were not treated as having separate causes of action, with Mr Benson’s pleading referring consistently to “the Rational Group of Companies or any one of them”. But as this was not put forward by the respondents, it need not be considered in detail.

13. The respondents simply submitted that their acceptance would have left all four respondents severally liable for a judgment amount, whereas the true position in law, based on the way the litigation has been conducted, is that the first, second and third defendants are entitled to judgments against Mr Benson.

14. Contrary to Mr Benson’s submissions in reply, it is not to the point that the first, second and third respondents might have agreed amongst themselves that the fourth respondent bear the whole of the judgment against all of them. The offer made by Mr Benson gave him the right, if it were accepted, to execute that judgment upon any of the respondents. The result determined by this Court is that Mr Benson had no right to any judgment against the first, second or third respondents.

15. Further, the fact that the first, second and third respondents failed on some issues is also not to the point. This is not a case where it is appropriate to exercise the discretion as to costs by reference to issues within the litigation.

16. Nor is it to the point that all four respondents agreed in making an offer of compromise to Mr Benson. No inference as to the unreasonableness of their not accepting Mr Benson’s offer is to be drawn, in the circumstances of this case, from the form of their own offer. It may readily be seen that if the respondents’ offer were in any other form, then there would be apt to be difficulties in relying on the presumption in the rules had a lesser judgment been obtained by Mr Benson against any of them, given the lack of precision in which Mr Benson’s case was formulated.

17. Secondly, all four respondents were incorporated in the Isle of Man, and it is not shown that they have any physical presence in Australia. The respondents rightly point to the fact that, putting to one side the special case of New Zealand, an originating process in the District Court cannot be served outside Australia, on the basis of which they concede that it was correct for Mr Benson to commence against all of them in the Supreme Court. It is true that Mr Benson had been sued in the District Court by iBus Media, another Isle of Man company (see principal judgment at [32]-[34]), but jurisdiction in a case such as this turns upon the amenability of the defendant to the authority of the court, so that takes the matter no further.

18. Having been obliged to commence in the Supreme Court, was the continuation of proceedings in that Court warranted? The respondents submit that the common law causes of action were not “particularly complex”. Minds may differ as to what is “particularly complex”, and further a cause of action may be straightforward whilst having factual complexity. Mr Benson’s proceedings were neither legally nor factually straightforward. They involved, in part, the construction of the “USA Settlement Deed”, made in the United States and governed by United States law, but having the form of an order certified by a United States federal judge. The unjust enrichment claim was novel. And the amount at stake was US$285,00 plus interest, which is not insubstantial.

19. The litigation having properly been commenced in the Supreme Court, and service having been confirmed by judgment of that Court, we are satisfied that this is a case where the continuation of proceedings in the Supreme Court was warranted. UCPR r 42.34 does not apply to the costs at first instance.

20. Thirdly, although there were four defendants, there is nothing to displace the inference that there was a single set of defendants’ costs. Consistently with this, the successful defendants/respondents make no application to be paid their costs, a stance which is warranted. There is force, however, in their submission that the appropriate exercise of the discretion as to costs is that the unsuccessful fourth defendant/respondent, Rational FT Enterprises Ltd and that company alone pay Mr Benson’s costs at first instance and on appeal. There is no warrant for Mr Benson, having chosen to sue a number of related companies only one of which is liable, to be advantaged by favourable costs orders against defendants other than the single defendant which is liable to him.

21. Both sides have enjoyed a measure of success in relation to the submissions as to costs. There should be no order as to the costs of those submissions, with the intent that the parties bear their own costs of those submissions.

22. The orders which reflect the parties’ agreement, and the resolution of the matters in issue, are as follows:

BY CONSENT, THE COURT ORDERS:

1. Judgment for the Appellant against the Fourth Respondent, Rational FT Enterprises Limited, in the sum of US$382,216.23.

2. The name of the Second Respondent upon all documents filed in these proceedings shall be taken to have been amended to the name “Amaya Group Limited.”

THE COURT ORDERS:

3. Vary order 4 made on 25 May 2018 so that it reads “The fourth respondent to pay the appellant’s costs of the appeal, exclusive of the costs of submissions on the form of the judgment, parties and costs.”

4. No order as to the costs of submissions on the form of the judgment, parties and costs, with the intent that the parties bear their own costs of those submissions.

5. The fourth defendant to pay the plaintiff’s costs at first instance.

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Decision last updated: 11 July 2018