Carey v Balfour (No 2) - [2021] SASC 111

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeal: Civil)
CAREY v BALFOUR (No 2)
[2021] SASC 111
Judgment of the Honourable Justice Hughes
17 September 2021
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - POWERS OF COURT - COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
The Court delivered judgment in Carey v Balfour [2021] SASC 79 and allowed the appeal, set aside the order granting summary judgment, dismissed the application for summary judgment, and remitted the matter to the Magistrates Court. The appellant sought costs of the application for summary judgment before the Magistrate and the costs of the appeal.
Held:
1. The costs order made on 10 September 2020 in proceedings AMCCI-18-2750 is set aside.
2. The respondent is to pay the appellant’s costs of the application for summary judgment in proceedings AMCCI-18-2750 to be agreed or taxed on a party/party basis;
3. The respondent is to pay 70 per cent of the appellant’s costs of the appeal to be agreed or taxed on a party/party basis; and
4. The appellant is to pay 30 per cent of the respondent’s costs of the appeal to be agreed or taxed on a party/party basis.
Supreme Court Act 1935 (SA) s 40, referred to.
Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2) [2021] SASC 55, applied.

CAREY v BALFOUR (No 2)
[2021] SASC 111
Civil

On 30 June 2021 I delivered judgment in proceedings CIV-20-002399 in an appeal against the decision of a magistrate granting summary judgment in favour of the respondent, Mr Balfour. The substantive proceedings concern a claim by Mr Balfour against Mr Carey for the amount of $100,000 pursuant to business dealings involving the parties some years earlier.
In the primary decision, I found in favour of the appellant and set aside the summary judgment and remitted the dispute for determination before a magistrate.
The parties have made submissions as to how the question of costs should be resolved.
The successful appellant submits that he should have his costs of the proceedings before the Magistrate on the application for summary judgment, and of the appeal. In short, he considers the matter to be a straight-forward application of the principle of costs following the event. The appellant argues that as the decision of this court found that the respondent had acted prematurely in bringing the application for summary judgment, it is appropriate for the appellant to have the costs of that failed application. Further, as the court found that the Magistrate had erred in his statement of and application of the law in relation to the respondent’s claim in contract, the appellant should also have his costs of the appeal.
The respondent submits that the costs of the application in the Magistrates Court should be costs in the cause, and that the costs of the appeal should follow the event of the action in the Magistrates Court. As the respondent put it, the effect of the submissions is to grant the appellant the costs of the application and the appeal if he is ultimately successful in the Magistrates Court proceedings, but not otherwise.
In respect of the application before the Magistrate, the respondent argues that the appellant has, after some considerable period and opportunity, failed to establish the evidence upon which he would seek to rely to make out his defence that the circumstances of the dealings between the parties do not support the imposition of a right of indemnity. By implication, the respondent argues that the appellant has only a theoretical defence and as no evidence has been advanced to support it, the respondent’s application for summary judgment should be viewed sympathetically and will be borne out when the proceedings are substantively resolved.
In relation to the appeal, the respondent complains that the appellant’s grounds were excessive and that the appeal covered an unnecessarily expansive set of legal and factual grounds, and that the appellant was successful on a relatively small subset of the grounds which might have been disposed of in a shorter hearing.
Consideration
The principles underlying an award of costs following an appeal were comprehensively discussed by Blue J in Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2).[1] In that case, his Honour was considering an application for costs following the dismissal of an appeal against a Master’s decision to dismiss an application for summary judgment. At [5] – [15] of the judgment, Blue J states:[2]
[1] [2021] SASC 55.
[2] Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2) [2021] SASC 55 at [5] – [15].
Costs are in the discretion of the Court under section 40 of the Supreme Court Act 1935 (SA). The discretion is unfettered but must be exercised judicially.
Without fettering the discretion, several general principles have been formulated in relation to the exercise of the discretion, which principles are best regarded as rules of thumb. There is a unifying factor underlying many of these general principles that the Court is endeavouring to ascertain which party caused or contributed to the incurring of the costs in question.
Examples of general principles based on this underlying factor include:
·the principle that costs generally follow the event, reflecting the fact that generally an unsuccessful applicant caused the incurring of the costs by prosecuting the action and generally an unsuccessful respondent caused the incurring of the costs by defending the action;
·the principle that a party may be ordered to pay the costs of their opponent (or at least not recover their own costs) on a relatively discrete and substantial issue on which the opponent succeeded notwithstanding that the first party succeeds overall in the action;
·the principle that a party may be ordered to pay the costs of their opponent incurred after that party rejected an offer by their opponent that would have produced a better result to the party than the ultimate result of the action; and
·the principle that a party may be ordered to pay the costs of their opponent caused by misconduct or other conduct by that party in, relating to or leading up to the action.
When making an order in relation to the costs of an interlocutory application, it may be appropriate to order:
·that the unsuccessful party on that application pay the costs of the application of the successful party regardless of the ultimate event of the action;
·that the costs of the application be costs in the cause;
·that there be no order as to the costs (each party bears its own costs); or
·that the costs of the application be reserved to be determined when the ultimate event of the action is known.
Determining the appropriate order in relation to the costs of an interlocutory application will principally be informed by an analysis as to the proximate cause of the incurring of those costs. In some cases:
·it can be confidently determined when the interlocutory application is decided that the cause of the incurring of those costs was the making of the application by the unsuccessful party or resistance of the application by the unsuccessful party; in these cases the costs of the interlocutory application will generally be ordered to follow the event of the interlocutory application;
·it can be confidently determined at that stage that the costs of the application are merely part of the overall costs of the action; in these cases the costs of the interlocutory application will generally be ordered to be costs in the cause (and hence will generally follow the event of the action);
·it can be confidently determined at that stage that neither party should recover the costs of the interlocutory application (for example, this may be the case when there is a mixed result on the interlocutory application); in these cases no order in relation to the costs of the interlocutory application will generally be made;
·the analysis of causation will be unclear at that stage or may depend on contingencies in the proceeding yet to occur; in these cases the costs of the interlocutory application will generally be reserved to the trial judge.
The most common interlocutory applications relate to pleadings (strike out applications or applications for further and better particulars) and discovery (applications for further and better discovery). Often these applications have mixed results (the applicant succeeding in respect of some paragraphs of the pleading or categories of discovery but failing in respect of others) and an order is made that the costs of the application be costs in the cause or no order is made as to the costs of the application. However, where the applicant for the interlocutory order is wholly successful or wholly unsuccessful, generally it may be expected that the costs of the interlocutory application will follow the event of the interlocutory application because respectively the making of, or resistance to, the interlocutory application is seen as the proximate cause of the incurring of the costs of the interlocutory application.
The analysis in relation to an interlocutory application for an interlocutory injunction is more complex. If the applicant for the interlocutory injunction fails to establish a prima facie case (or a reasonable case to be tried) and the application is consequentially dismissed, it may be that it is an appropriate exercise of the discretion to order that the applicant pay the costs of the interlocutory application. However, most applications for interlocutory injunctions are decided on the “balance of convenience”. The principal purpose of an interlocutory application is to regulate the interim rights and liabilities of the parties on a basis that is most fair and equitable pending the ultimate determination of the ultimate rights and liabilities of the parties (assuming that the applicant establishes a prima facie case). The balancing exercise may be finely tuned and in any event involves the exercise of a discretion. As a result, it will often be the case that the Court is not at that stage in a position to analyse confidently which party caused the incurring of the costs of the interlocutory application and often an order will be made that the costs be costs in the cause.
When the applicant in an action applies for summary judgment, the issue is not whether the applicant will ultimately succeed in the action but rather whether there is no reasonable basis for defending the applicant's claim. Similarly, when the respondent in an action applies for summary judgment, the issue is not whether the applicant will ultimately fail in the action but rather whether there is no reasonable basis for the applicant's claim. If the application is successful, it may be expected that generally the party who is successful on the interlocutory application will receive an order that the unsuccessful party pay their costs of the application, even if the application does not dispose of the action but only part of it. Conversely, if the application is unsuccessful, as a matter of principle, although much will depend on the nature of the issues on the summary judgment application (including whether they are as to the facts or the law or both) and the conduct of the parties (including the timing and content of any evidence adduced on the application), the proximate cause of the incurring of the costs of the application should often be seen as the making of the unsuccessful application for summary judgment rather than the prosecution or defence of the action (the event of which can only be determined at the conclusion of the action). The position will often be more analogous to the pleadings and discovery applications referred to above than the interlocutory injunction applications referred to above.
In Cooney v Doepel Mann J said:
There seems to be an impression that when a summons of this kind is dismissed, costs should be costs in the cause, and by consent such orders are often made, but there is no rule to that effect, and, speaking for myself, I can see no foundation for such a practice. The summary procedure under Order XIV is a very special one, and if a plaintiff, having taken out his summons for final judgment, fails on that summons, I see no reason why the usual consequences as to costs should not follow.
On the other hand, in Whitehall Holdings Pty Ltd v Custom Credit Corporation Limited Ipp J (with whom Pidgeon J and Owen J agreed) said that “[t]he usual order where an application for summary judgment is dismissed is that the costs of the application be in the cause so that the party successful at the trial recovers them.” It appears from the Court’s reasons for judgment that this was common ground but, in any event, this was said when the regime for summary judgment was quite different and a defendant required leave to defend.
Regardless of the appropriate costs order on an interlocutory application at first instance, it is settled that there is a general principle that the costs of an appeal against an interlocutory order should generally follow the event of the appeal rather than being reserved to the trial judge or being costs in the cause of the underlying action. The appeal is a separate proceeding to the underlying action. As a matter of principle, generally, the proximate cause of incurring the costs of the appeal should be seen, when the appeal is dismissed, as the prosecution of the appeal by the appellant and, when the appeal is allowed, as the resistance of the appeal by the respondent to the appeal.
(footnotes omitted)
In summary, an award of costs is made in the discretion of the court, subject to various principles including a general rule that a successful party is entitled to an award of costs, with the Court undertaking an assessment of which party caused or contributed to costs being incurred in the appeal or application considered.
In the exercise of that discretion, I am not satisfied that the respondent has established that the appellant should not be awarded costs in respect of the application before the Magistrate. The proceedings were brought long after the events in question. The arrangements upon which the respondent relies to establish the agreement between the parties, and the documents surrounding those arrangements from which he asserts that an indemnity arises, occur between 2004 and 2011. It will be immediately apparent that the time that has passed since the last of the relevant events exceeds that which the parties were required to maintain documentary records for compliance with taxation and other laws. On the respondent’s account, his rights arose in or around 2012 and he filed his claim in the Magistrates Court on 23 August 2018. It is true to say that the defence is scant on detail.[3] However, the defendant was able to assert, with the effect of the respondent amending his claim, that the respondent was wrong by a period of three years as to when the relevant dealings between the parties commenced.[4] This highlights the difficulties both parties appear to face in respect of both the prosecution and defence of this claim. Both parties, and a third person involved in the negotiations, now have inadequate documentary records and poor memories of business dealings that appear to have been made partially formally and partially informally. In those circumstances, it was an inevitable risk taken by the respondent to bring the substantive proceedings so long after the key events. It follows that the appellant’s inability to document his defence and to seek further time for discovery is unsurprising. The judgment identifies that the state of the evidence was insufficient to enable summary judgment to be granted. To that extent, the error laid at the feet of the respondent, and it is appropriate for the appellant to have his costs of that application. I set aside the costs order made on 10 September 2020 by the Magistrate in proceedings AMCCI-18-2750 and I grant the appellant his costs in respect of the application for summary judgment before the Magistrate.
[3] Defence (Revision 1) filed 2 June 2020.
[4] See, Claim filed on 23 August 2018 at [3], Defence filed on 22 August 2019 at [3] and the amended Claim filed on 1 May 2020 at [3].
I am sympathetic to the respondent’s complaint that the appeal might properly have been confined to a narrower set of issues. There were 23 grounds of appeal and these contained significant overlap. Insufficient focus was kept to the ultimately successful ground of appeal concerning the insufficiency of the evidence to found a grant of summary judgment. A significant amount of time was spent in the effort to establish uncertainty in the state of the law that did not exist. The hearing was not able to be completed in one sitting because the appellant’s case consumed the allocated usual half day. In the exercise of the court’s discretion, I grant the appellant his costs in the appeal in the proportion of 70% in favour of the appellant and 30% in favour of the respondent.
Orders
1.The costs order made on 10 September 2020 in proceedings AMCCI-18-2750 is set aside.
2.The respondent is to pay the appellant’s costs of the application for summary judgment in proceedings AMCCI-18-2750 to be agreed or taxed on a party/party basis;
3.The respondent is to pay 70 per cent of the appellant’s costs of the appeal to be agreed or taxed on a party/party basis; and
4.The appellant is to pay 30 per cent of the respondent’s costs of the appeal to be agreed or taxed on a party/party basis.