DSHE Holdings Ltd (Receivers and Managers) (in liq) v Potts (No 2)

In DSHE Holdings Ltd (Receivers and Managers) (in liq) v Potts (No 2), the New South Wales Court of Appeal, comprising Leeming and Kirk JJA and Basten AJA, considered the appropriate approach to awarding costs following a partially successful appeal. The dispute involved the costs of proceedings at first instance and the costs of the appeal itself, with a particular focus on the application of the "Issues Approach" versus the "Proportion Approach" to cost allocation.

The primary legal issues before the Court of Appeal were whether to adopt the Issues Approach or the Proportion Approach in determining the costs of the proceedings at first instance, given the partial success of the appeal and the inevitable overlap in the issues litigated. The Court was also required to determine the extent of liability for costs incurred by non-parties and to make orders regarding interest, set-off, and the stay of execution.

The Court determined that the Proportion Approach was the more appropriate method for allocating costs in this instance, acknowledging the significant overlap in the issues that were disputed at first instance. This approach was favoured over the Issues Approach, which the Court found would be impractical and potentially unfair given the interconnectedness of the matters. The Court also made specific orders regarding the payment of costs by non-parties, the application of interest, and the set-off of liabilities between the parties.

The Court ordered a variation to a previous judgment, specifying the amount of $15,541,835.16 against each of Mr Potts and Mr Abboud, to take effect from 7 October 2021, with joint and several liability. Further orders stipulated that the plaintiff, National Australia Bank Ltd, and HSBC Bank Ltd were to pay 50% of the costs of the first and second defendants at first instance, jointly and severally. The Court also ordered that liabilities arising from the varied judgment were to be set off against costs liabilities, and execution of the judgment was stayed until costs were assessed or agreed.