Calvo v Ellimark Pty Ltd (No 2)

[2016] NSWCA 197

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Calvo v Ellimark Pty Ltd (No 2) [2016] NSWCA 197
Hearing dates:	On the papers
Decision date:	11 August 2016
Before:	Ward JA; Gleeson JA; Leeming JA
Decision:	See [21] of judgment.
Catchwords:	COSTS – partial success on appeal – whether costs at first instance and on appeal should follow the event, or whether fractional costs order should be made
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 101 Contracts Review Act 1980 (NSW)
Cases Cited:	Calvo v Ellimark Pty Ltd [2016] NSWCA 136 Commonwealth of Australia v Gretton [2008] NSWCA 117
Category:	Costs
Parties:	Athalie Calvo as executrix of the estate of the late Peter Calvo (First Appellant) Athalie Calvo (Second Appellant) Ellimark Pty Ltd (First Respondent) Leigh Diane Johnson (Second Respondent)
Representation:	Counsel: P Newton (Appellants) GKJ Rich SC, SA Lawrance (First Respondent) D Allen (Second Respondent)   Solicitors: Stephen Wawn & Associates (Appellants) Arnold Bloch Leibler (First Respondent) McWilliams Lawyers (Second Respondent)
File Number(s):	2015/281258
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2015] NSWSC 1240 Date of Decision: 31 August 2015 Before: Bergin CJ in Eq File Number(s): 2013/353242

Judgment

1. THE COURT: On 17 June 2016, this Court allowed the appeal, setting aside certain of the orders made by the primary judge, and directed the parties to file and serve submissions as to the further orders appropriate, including as to costs, and whether those orders should be determined on the papers: Calvo v Ellimark Pty Ltd [2016] NSWCA 136. The parties have complied with that regime, constructively, and the result is that the remaining issues between them are of relatively narrow compass – a small point as to the form of the orders, and questions of costs. It is agreed that those issues be determined on the papers.

Orders for the transfer of shares in AIM

2. Ellimark Pty Ltd proposed two minor amendments to the mechanical orders pursuant to which Mrs Calvo would obtain legal title to the 1,250 shares in Australian Institute of Music Ltd (AIM), to one of which Mrs Calvo agreed. There is an outstanding issue whether this Court should impose an obligation not merely upon Ellimark to take all steps required to permit the transfer to be registered, but also, as Mrs Calvo seeks, to ensure that a director nominated by it takes all those steps. It is not appropriate for those additional obligations to be imposed. For one thing, Mrs Calvo’s proposed formulation imposes an obligation, enforceable by contempt, to ensure a nominated director takes steps. It is difficult to see how Ellimark, the company, could ensure its director (the natural person) to do something; the company, after all, can only act through its agents. For another, it is not entirely clear that it is necessary for Ellimark to nominate a director in order for the transfer to be registered.

3. The final orders will require Ellimark to take all steps required to permit the transfer to be registered, but not include the additional words for which Mrs Calvo contends.

Costs at first instance between Mrs Calvo and Ellimark

4. In what follows, reference will be made to Mrs Calvo, although the costs in question relate to costs incurred by Mrs Calvo in her own capacity, and as personal representative of her late husband, and (in relation to some of the costs at first instance) to costs incurred by her late husband.

5. Mrs Calvo seeks an order that Ellimark pay her costs at first instance in relation to the relief claimed in the Amended Statement of Claim and Amended First Cross Claim. Ellimark submits that it should pay 25 per cent of those costs, and Mrs Calvo should pay 75 per cent of its costs at first instance.

6. Mrs Calvo submits that Ellimark was wholly unsuccessful in its claim for specific performance, and that the various defences she advanced were reasonably arguable. She relies upon the fact that “the position taken by the Calvos at first instance was wholly defensive to the claim for specific performance and Ellimark has been wholly unsuccessful”.

7. Ellimark identifies what it says were five “issues of substance” at the commencement of the trial: (a) whether the deed was void on the ground of non est factum; (b) whether the deed was liable to be set aside for unconscionability; (c) whether the deed was liable to be set aside under the Contracts Review Act 1980 (NSW); (d) whether the orders made by White J in the Sweeney proceedings triggered the requirement that Dr Calvo had been “successful in obtaining the return of Bill’s shares to him” for the purposes of the deed; and (e) whether Ellimark’s rights under the deed had lapsed. Ellimark maintains that the bulk of the evidence and submissions at trial addressed the first three of those issues, the fourth issue was abandoned no later than the end of the third day of the trial, and that had the Calvos raised the only issue upon which they succeeded, the issues between them and Ellimark could have been tried within a day, without the necessity to cross-examine a single witness. Ellimark maintains that it was fair that Mrs Calvo bear her own costs, as well as paying Ellimark’s costs, in respect of the non est factum, unconscionability and Contracts Review Act issues saying:

“They were quite separate and dimensionally different from the lapsing issue that succeeded on appeal. In particular, they were fact-intensive, necessitated cross-examination as well as consideration of a substantial number of documents, and they undoubtedly occupied the bulk of the parties’ and the Court’s time prior to and during the hearing.”

8. Where a plaintiff is ultimately unsuccessful, but a defendant is unsuccessful on some – perhaps the majority – of matters raised by way of defence, there is recurringly a question whether costs should follow the event, or whether there should be a special costs order reflective of the plaintiff’s success on individual issues. In each case, it is very much a matter of impression, based upon matters such as the severability of the issues, the reasonableness of reliance upon the issues, and the extent to which the issues incurred expending additional costs and time.

9. Contrary to Mrs Calvo’s submissions, the mere fact that a defence was reasonably arguable does not preclude a court from making a special costs order departing from the starting point of costs following the event. Ultimately, as Hodgson JA explained in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]:

“underlying the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.”

10. In making that assessment of fairness, regard may be had to the extent to which an issue contributed to the cost of the trial, and the extent to which is was arguable. However, the discretion as to costs is not circumscribed by the binary question whether or not an unsuccessful defence was reasonably arguable. The ultimate question – what is the appropriate order to achieve fairness – may in an appropriate case require a more nuanced analysis.

11. That said, and contrary to Ellimark’s submissions, there is no occasion to make orders whereby each party pays a percentage of the other party’s costs; such a regime requires the determination of both parties’ solicitor-client costs, and effectively doubles the possibility for further dispute. In an area where, if one thing is clear, it is that a broad-brush approach is to be applied, the same substantive result can and in most cases should, be attained by an order that only part of a party’s costs be paid by the other party.

12. In the present case, it is plain that the point on which Mrs Calvo ultimately succeeded against Ellimark was a pure question of construction, while she failed on matters involving contested evidence including cross-examination. Moreover, one of those issues (non est factum) was abandoned during the trial, while the defence based on unconscionability was not pursued on appeal.

13. Bearing in mind the foregoing, the appropriate order is that Ellimark pay 50 per cent of Mrs Calvo’s costs at first instance in relation to the relief claimed in the Amended Statement of Claim and the Amended First Cross Claim as agreed or assessed.

Costs on appeal between Mrs Calvo and Ellimark

14. Mrs Calvo contends that Ellimark should pay 50 per cent of her costs of the appeal, while Ellimark proposes that Mrs Calvo pay 25 per cent of its costs, and it pay 25 per cent of Mrs Calvo’s costs of the appeal.

15. It is common ground between Mrs Calvo and Ellimark that 50 per cent of Mrs Calvo’s costs of the appeal are attributable to the case against Ellimark, and 50 per cent to the case against Ms Johnson.

16. Ellimark submits that Mrs Calvo raised two issues on appeal. She succeeded on the lapsing issue and failed on the Contracts Review Act issue. Against this Mrs Calvo submits that the Contracts Review Act claim was not without merit, nor did it unreasonably prolong the appeal, and it was caused by Ellimark pursuing a claim for specific performance to which it was not entitled.

17. This is a case where, in contrast to the position at first instance, there is no reason to depart from the default position that costs follow the event for the reasons advanced by Mrs Calvo. Ellimark should pay 50 per cent of Mrs Calvo’s costs of the appeal as agreed or assessed.

Costs orders between Mrs Calvo and Ms Johnson

18. Ms Johnson seeks orders that she pay 20 per cent of Mrs Calvo’s costs of the proceedings at first instance and 20 per cent of Mrs Calvo’s costs of the appeal. Mrs Calvo seeks orders that Ms Johnson pay her costs of the proceedings at first instance in relation to the pleadings directed to Ms Johnson, and 50 per cent of her costs of the appeal.

19. The main source of the difference between the competing submissions is that Ms Johnson’s submissions appear to proceed on the basis that a small percentage (20 per cent) of the entire costs of Mrs Calvo be the subject of a costs order, whereas Mrs Calvo’s submissions proceed on the basis that the costs which Ms Johnson should be directed to pay should be limited to costs directed to the issues between her and Ms Johnson. The latter course is appropriate, especially given that most of Mrs Calvo’s costs arising in relation to Ms Johnson will have been incurred relatively late in the proceedings; there will be many items of costs incurred early on which should not form part of the costs Ms Johnson is ordered to pay.

20. When that matter is borne in mind, there is no reason not to make the orders sought by Mrs Calvo. The costs in issue at trial were wholly attributable to Ms Johnson’s execution of the deed, and her belated rendering of a very large bill of costs upon Mrs Calvo. Ms Johnson was unsuccessful in enforcing the deed at trial, and she did not appeal from that finding. On appeal, Mrs Calvo was successful in restraining Ms Johnson from taking any steps to recover costs or disbursements. In short, Ms Johnson has been wholly unsuccessful at both trial and on appeal, and, as Mrs Calvo submits, “[i]f Ms Johnson had acted reasonably, the Calvos would not have been exposed to the claims made by Ms Johnson and the costs incurred by them in defending those claims”. There is no basis for departing from the usual orders as to costs as between Mrs Calvo and Ms Johnson in respect of the costs between those parties at trial and on appeal.

21. The final orders made reflect the form of orders provided by the parties, subject only to amendments to orders 3, 4 and 9 in accordance with the foregoing reasons and what seems to have been a typographical error in orders 5 and 10 (“Plaintiff” in the definitions of X and Y in the form provided by the parties has been replaced by “Appellants”):

1. Appeal against the First Respondent allowed.

2. Set aside the orders made in paragraphs 1D, the second paragraph 2, 9 and 10 of the Judgment/Order made at first instance in case number 2013/353242 on 22 October 2015.

3. Order that within three business days of the Appellants delivering to the First Respondent, or its solicitors Arnold Block Leibler, a bank cheque payable to Ellimark Pty Ltd in the amount of $417,000, the First Respondent is to:

1. execute and deliver to the Second Appellant a transfer in respect of 1,250 shares in the capital of Australian Institute of Music Limited (the Shares);

2. deliver to the Second Appellant any share certificate held by it in respect of the Shares; and

3. take all steps required to permit the transfer referred to in 3(a) to be registered.

4. Order that the First Respondent pay to the Appellants:

1. 50 per cent of the Appellants’ costs of the proceedings at first instance in relation to the relief claimed in the Amended Statement of Claim and the Amended First Cross Claim as agreed or assessed;

2. 50 per cent of the Appellants’ costs of the appeal as agreed or assessed.

5. Order pursuant to section 101(4) of the Civil Procedure Act 2005 (NSW), that the First Respondent pay interest on the costs payable under order 4 above, calculated at the rates set out in Practice Note SC Gen 16, on the Allowed Percentage of each amount of costs and disbursements actually paid by the Appellants, from the date of payment by the Appellants of each such amount of costs and disbursements until such time as those costs are paid to the Appellants.

In this order:

X – equals the total amount of costs and disbursements which the Appellants have paid or are liable to pay in connection with these proceedings.

Y – equals the total amount of costs and disbursements allowed on assessment to the Appellants in connection with these proceedings.

The Allowed Percentage – equals ((Y/X) x 100) %

6. Appeal against the Second Respondent allowed.

7. Order that the Second Respondent is permanently restrained from taking any step to recover any costs or disbursements from the First and Second Appellants.

8. Set aside paragraphs 11 and 12 of the Judgment/Order made at first instance in case number 2013/353242 on 22 October 2015.

9. Order that the Second Respondent pay to the Appellants:

1. the Appellants’ costs of the proceedings at first instance in relation to the relief claimed in the Amended Second Cross Claim and Third Cross Claim as agreed or assessed;

2. 50 per cent of the Appellants’ costs of the appeal as agreed or assessed.

10. Order pursuant to section 101(4) of the Civil Procedure Act 2005 (NSW), that the Second Respondent pay interest on the costs payable under order 9 above, calculated at the rates set out in Practice Note SC Gen 16, on the Allowed Percentage of each amount of costs and disbursements actually paid by the Appellants, from the date of payment by the Appellants of each such amount of costs and disbursement until such time as those costs are paid to the Appellants.

In this order:

X – equals the total amount of costs and disbursements which the Appellants have paid or are liable to pay in connection with these proceedings.

Y – equals the total amount of costs and disbursements allowed on assessment to the Appellants in connection with these proceedings.

The Allowed Percentage – equals ((Y/X) x 100) %

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Decision last updated: 22 March 2018