Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2)

In *Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2)*, the New South Wales Court of Appeal considered the appropriate orders for costs following an appeal and cross-appeal where the original trial judgment in favour of the plaintiffs, Cawarrah Holdings Pty Ltd and Crusader Pty Ltd, had been significantly reduced. The appeal by Cellarit Pty Ltd was allowed in part, and the cross-appeal by the plaintiffs was also allowed in part, resulting in a substantial reduction of the damages payable by Cellarit.

The primary legal issues before the Court of Appeal concerned the application of the general rule that costs follow the event, particularly in circumstances where multiple issues were contested at trial and on appeal. The court had to determine whether the "late amendment" principle applied to the trial costs, whether Cellarit Pty Ltd had succeeded on the dominant issue on appeal, and whether the plaintiffs had engaged in disentitling conduct. Further, the court considered the costs of the appeal and cross-appeal, including the impact of the plaintiffs being granted leave to file a cross-appeal late in the proceedings and the substantial post-hearing submissions made. The court also addressed a motion by the plaintiffs concerning the payout of moneys paid into court as security for costs.

The Court of Appeal reasoned that while the general rule is that costs follow the event, this principle must be applied flexibly, especially where an appeal significantly alters the outcome of the trial. The court found that Cellarit Pty Ltd had succeeded on the main issue argued on appeal, leading to a substantial reduction in the damages awarded to the plaintiffs. Consequently, the court ordered that Cellarit Pty Ltd should recover 80% of its costs of the appeal and cross-appeal. Regarding the trial costs, despite the plaintiffs' reduced success on appeal, the court determined that they were still the overall winners at trial and ordered Cellarit Pty Ltd to pay their costs of the trial. The court also ordered that the sum paid into court as security for costs be paid out to Cellarit Pty Ltd.