FAL Healthy Beverages Pty Limited v Manly Warringah Sea Eagles Limited (No 2)

[2016] NSWSC 1092

Supreme Court

New South Wales

Medium Neutral Citation:	FAL Healthy Beverages Pty Limited v Manly Warringah Sea Eagles Limited (No 2) [2016] NSWSC 1092
Hearing dates:	On the papers
Decision date:	10 August 2016
Jurisdiction:	Equity
Before:	Barrett AJA
Decision:	Costs order already made will not be varied.
Catchwords:	PROCEDURE – costs – whether order that unsuccessful defendant pay costs should be varied to take account of success and failure on particular issues – no matter of principle.
Legislation Cited:	Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 388; 254 ALR 328
Category:	Costs
Parties:	FAL Healthy Beverages Pty Limited (P) Manly Warringah Sea Eagles Limited (D)
Representation:	Counsel: Mr MLD Einfeld QC & Mr T Buterin (P) Mr DAC Robertson (D)   Solicitors: Colin W Love & Company Lawyers (P) Unsworth Legal Pty Limited (D)
File Number(s):	2016/121400
Publication restriction:	Nil

Judgment

1. BARRETT AJA: On 3 August 2016, the Court ordered pursuant to s 459H(3) of the Corporations Act 2001 (Cth) that a statutory demand dated 30 March 2016 served on the plaintiff by the defendant be set aside and that the defendant pay the plaintiff’s costs of the proceedings.

2. The defendant later lodged written submissions in support of the proposition that the Court “should, of its own motion, vary the costs order made on 3 August 2016 pursuant to UCPR 36.16(3B)”.

3. It seems contradictory that a party should seek action by the court “of its own motion”. If the court acts in response to an application or request, it does not act of its own motion.

4. The defendant has not filed a notice of motion as envisaged by r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) seeking variation of the costs order. To that extent, a basis for varying the order is lacking. However, as the plaintiff has not taken this point and has filed written submissions engaging with those of the defendant, I proceed to address the merits.

5. The defendant contends that the plaintiff’s genuine dispute case under s 459H(1)(a) was argued on two bases (one involving the assumptions made available by ss 128 and 129 of the Corporations Act and the other concerned with a dispute resolution clause in the parties’ contract) and that the entirety of the defendant’s evidence and almost all of the plaintiff’s evidence related to the second basis – yet the plaintiff abandoned that second basis in the course of the hearing.

6. The defendant further says that much of the argument before the court concerned the scope of relevant “dealings”, for the purposes of the assumptions under ss 128 and 129, and that the Court rejected the plaintiff’s contentions on that matter.

7. These two factors, the defendant argues, should lead to the result that the plaintiff pays the defendant’s costs in respect of matters on which the plaintiff failed or which it abandoned and the defendant pays the plaintiff’s costs of only the one issue on which the plaintiff succeeded. The defendant also says that, to save expense, the position just outlined could appropriately be reflected in an outcome that sees each party bear its own costs.

8. The plaintiff disputes the defendant’s identification and assessment of the issues to which particular evidence was relevant. It says that “virtually none” of the evidence went to the abandoned ground concerning the dispute resolution clause which, as the plaintiff views matters, involved only “a short legal question”.

9. By written submissions in reply, the defendant in turn takes issue with the plaintiff’s view about the matters to which various aspects of the affidavit evidence were relevant.

10. The starting point in considering the question raised is the principle in r 42.1 of the Uniform Civil Procedure Rules that costs follow the event unless it can be seen clearly that that is not a fair and just exercise of the discretion with respect to costs.

11. It cannot be doubted that, in an appropriate case, the discretion extends to allow departure from the general rule and apportionment on the basis of issues won and issues lost, arguments pressed and arguments abandoned and other aspects of the overall litigation process as it unfolded in the particular case. But the matter cannot be approached in any mechanical or mathematical way.

12. The following passage in the judgment of Campbell JA in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 at [83]–[84] is instructive:

“The Sayer Interests submit that there are several matters that call for the costs order concerning the Equity Proceedings to depart markedly from the starting point that UCPR 42.1 provides. One is that the Tomanovic Interests ‘either abandoned or failed in respect of 90% of the myriad of particular allegations of oppression pressed against Mr Sayer in the Equity Proceedings’. This figure of 90% is derived from a detailed analysis that counsel for the Sayer Interests put forward of the evidence, closing submissions, cross-examination and judgment in the court below. That analysis identifies some 22 factual topics, breaks them into categories of ‘claims of oppression pressed in evidence, but abandoned at commencement of the hearing’, ‘claims of oppression particularised and lost at trial, and not pressed by appellant on appeal’, ‘claims of oppression particularised – pressed and lost at both trial and on appeal’, ‘respondent's claim in Common Law Proceedings debt recovery claim (excluding cross-claim)’ and ‘claims of oppression upheld on appeal’. It then counts the number of paragraphs dealing with affidavit evidence in each category, the number of paragraphs dealing with each such topic in closing submissions, and the number of pages devoted to each such topic in cross-examination, and the number of paragraphs of the trial judgment devoted to each such topic.

This is a highly artificial way of proceeding and gives a false air of mathematical precision. As has been repeatedly stated, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful has succeeded, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272; Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [19]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22]… .”

13. Also relevant is the observation of Mahoney JA in Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 388; 254 ALR 328 at 331 that it is contrary to the trend of decisions in relation to the exercise of discretion as to costs for a trial judge to attempt to determine which issues were won by particular parties, to what extent they were won and what was the amount of time spent on each of the issues so as to apportion the costs.

14. The defendant seeks to inject an air of precise calculation as a foundation for a submission that each party should be left to bear its own costs. It does so, moreover, in a context where the hearing occupied very slightly more than half a day and affidavits read by the plaintiff consisted of some 34 pages of narrative and about 320 pages of annexures or exhibits (including some 40 pages of company search and company constitution) while those read by the defendant contained 8 pages of narrative and slightly fewer than 100 pages of annexures and exhibits.

15. In a context of that magnitude, the impressionistic and discretionary evaluation that must be made regarding the possibility of displacement of the general rule in favour of some apportionment having regard to different issues and the time and effort expended on each leads firmly to the conclusion that no sound basis for apportionment is shown and that the general rule should be left to operate according to its terms.

16. The costs order already made will not be varied.

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Decision last updated: 10 August 2016