GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3)
[2008] VSC 296
•12 August 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2110 of 2005
| GT CORPORATION PTY LTD (ACN 073 939 474) | Plaintiff |
| v | |
| AMARE SAFETY PTY LTD (ACN 006 945 811) | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 June 2008 | |
DATE OF JUDGMENT: | 12 August 2008 | |
CASE MAY BE CITED AS: | GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 296 | |
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COSTS – Indemnity costs – Defence amended at trial to abandon serious allegations including allegation of misconduct – Whether abandoned allegations were unreasonably or improperly raised – Whether special circumstances had been established to justify departure from the usual party/party basis of costs – Indemnity costs denied – Rule 63.28 Supreme Court (General Civil Procedure) Rules 2005 Chapter 1.
COSTS – Proportion of costs - Whether successful plaintiff’s costs should be reduced on issues it failed on – Whether issue by issue approach to awarding costs should be adopted – Lord Woolf’s Access to Justice interim report June 1995 – Rule 63.04 Supreme Court (General Civil Procedure) Rules 2005 Chapter 1.
COSTS - Notice to admit facts – Whether an order should be made excusing the plaintiff from paying the costs of the defendant proving facts not admitted by the plaintiff – Rules 35.06 and 63.18 Supreme Court (General Civil Procedure) Rules 2005 Chapter 1.
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Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383
Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107
Byrns v Davie [1991] 2 VR 568
Colgate-Palmolive v Cussons (1993) 46 FCR 225
Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425
Cretazzo v Lombardi (1975) 13 SASR 4
Cummings v Lewis (1993) 41 FCR 559
Dodds Family v Lane Industries (1993) 26 IPR 261
Donald Campbell & Co v Pollak [1927] AC 732
Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602
Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282
FAI General Insurance Co Ltd v McSweeney (Unreported, Federal Court, Lindgren J, 15 September 1998)
GT Corporation Pty Ltd v Amare Safety Pty Ltd (No.2) [2008] VSC 223
GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 143
Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1699
Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40 – 748
James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296
Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWC 568
Lollis v Loulatzis (No 2) [2008] VSC 35
Martech International Pty Ltd v Energy World Corporation Ltd (No 4) [2006] FCA 1779
McFadzean v CFMBEU [2007] VSCA 289
Mickelberg v Western Australia [2007] WASC 140 (S)
Mok v Minister for Immigration (No 2) (1993) 47 FCR 81
Nolan v Nolan [2004] VSCA 134
NRMA Ltd v Morgan (No 3) [1999] NSWSC 768
Oshlack v Richmond River Council (1998) 193 CLR 72
Pricom Pty Ltd v Sgarioto (Unreported, Supreme Court of Victoria, Eames J, 24 April 1995)
Queensland Wire Industries Pty Ltd v BHP Co Ltd (1987) 17 FCR 211
R v Secretary of State for Transport (1998) EWCA 2999
Ragata Developments Pty Ltd v Westpac Banking Corporation (Unreported, Federal Court, Davies J, 5 February 1993)
Re Elgindata Ltd (No 2) [1992] 1 WLR 1207
Ritter v Godfrey [1920] 2 KB 47
Rosniak v GIO (1997) 41 NSWLR 608
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229
Spencer v Dowling [1997] 2 VR 127
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213
Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189
Victoria v Master Builders Association of Victoria (Unreported, CA SCV, Tadgell, Ormiston and Eames JJ, 15 December 1994)
Waters v PC Henderson (Australia) Pty Ltd (Unreported, CA NSW, Kirby P, Mahoney, Priestley JJA, 6 July 1994)
Westgold Resources NL v St George Bank Ltd (Unreported, SCWA, Anderson J, 9 December 1998)
Woolf v Burman (1939) 13 ALJR 431
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M G Rinaldi | Heydon & O’Loghlen |
| For the Defendant | Mr J Delany SC with Ms L de Ferrari | Russell Kennedy |
TABLE OF CONTENTS
INTRODUCTION.............................................................................................................................. 2
RELEVANT RULES AND ACT...................................................................................................... 3
LEGAL PRINCIPLES ON INDEMNITY COSTS........................................................................ 5
THE CLAIM FOR INDEMNITY COSTS...................................................................................... 9
ISSUE BY ISSUE COSTS............................................................................................................... 12
RELEVANT AUTHORITIES......................................................................................................... 12
UNREASONABLY RAISING ISSUES........................................................................................ 24
THE ENGLISH APPROACH......................................................................................................... 25
CONCLUSION ON ISSUES.......................................................................................................... 30
NOTICE TO ADMIT....................................................................................................................... 31
CONCLUSION................................................................................................................................. 31
HIS HONOUR:
INTRODUCTION
In GT Corporation Pty Ltd v Amare Safety Pty Ltd[1] and GT Corporation Pty Ltd v Amare Safety Pty Ltd (No.2),[2] I decided issues of liability and damages. On 24 June 2008, I ordered that there be judgment for the plaintiff in the sum of $369,852.42, ordered the release of $95,000 plus interest paid into court by the plaintiff, extended the time for appeal until 30 July 2008 and, after hearing argument, reserved the question of costs. I now deliver my reserved reasons and make orders on costs.
[1][2008] VSC 143
[2][2008] VSC 223
In substance, GT seeks the following orders for costs:
(a)Amare pay GT’s costs of and incidental to the proceedings, including all reserved costs, save where costs otherwise have been ordered.
(b)These costs are to include GT’s costs thrown away by reason of the amendment of Amare’s amended further defence of July 2006 amended by leave granted on 11 February 2008 and, in particular:
(i) the deletion of paragraph 7(a);
(ii) the amendment of paragraph 7(b) and the particulars thereto; and
(iii) the deletion of particulars (A) and (C) of paragraph 7(c).
(c)The costs thrown away be taxed on an indemnity basis, if not otherwise agreed, and when taxed be paid by Amare.
(d)Otherwise, GT’s costs are to be taxed on a party/party basis, if not agreed, and when taxed be paid by Amare.
Amare seeks an order that the costs in favour of GT be paid only in part as GT was only successful on some of its claims. In particular, Amare submits that GT has only succeeded on two of the four breaches of contract claimed and only succeeded in a small proportion of the quantum claimed under the purported termination claim. It submits GT should only receive 40 per cent of its costs.
Further, Amare claims the costs of proving the facts that were disputed on its notice to admit.
For the following reasons, I have decided as follows. The usual basis for the taxation of costs is on a party/party basis. Indemnity costs will only be awarded in special circumstances that justify departure from the usual course. I find that the circumstances relied on by GT do not justify the awarding of costs on an indemnity basis.
The general rule is that costs follow the event. The general rule may give way where GT raised allegations on which it failed. After considering the issues raised by GT on which it lost, I will order the defendant pay the plaintiff 85 per cent of its costs, other than those thrown away by reason of the abandonment of the allegations in the defence where it will receive all its costs.
On the notice to admit, I am not persuaded to make an order that Rule 63.18 not apply and accordingly on taxation Amare will be able to rely on the notice to admit under Rule 63.18.
RELEVANT RULES AND ACT
Section 24(1) of the Supreme Court Act 1986 provides –
Costs to be in the discretion of Court
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Rule 63.02 provides[3] -
[3]Rule 63.02 has the force of statute, being contained in the General Rules of Procedure in Civil Proceedings 1986, Ch 1 of the Rules of the Supreme Court as ratified, validated and approved by s 4(1) of the Supreme Court (Rules of Procedure) Act 1986.
General powers of Court
The power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to or in accordance with this Order.
Rule 63.04 provides –
Costs of question or part of proceeding
(1) The Court may make an order for costs in relation to a particular question in or a particular part of a proceeding.
(2) Where the Court makes an order under paragraph (1), the Court shall by order fix the proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding.
Rule 63.28 provides –
Bases of taxation
Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on –
(a) a party and party basis;
(b) a solicitor and client basis;
(c) an indemnity basis; or
(d) such other basis as the Court may direct.
Rule 63.29 provides –
Party and party costs
On a taxation on a party and party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed shall be allowed.
Rule 63.30 provides –
Solicitor and client costs
On a taxation on a solicitor and client basis all costs reasonably incurred and of reasonable amount shall be allowed.
Rule 63.30.1 provides –
Indemnity basis
(1) Subject to paragraph (2), on a taxation on an indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.
(2) Any doubt which the Taxing Master may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.
Rule 63.31 provides –
General basis
Except as provided by these Rules or any order of the Court costs shall be taxed on a party and party basis.
Rule 35.06 provides –
Cost of non-admission of fact or document
Where a party serves a notice under Rule 35.03(2) or 35.05(2) disputing a fact or the authenticity of a document, and afterwards that fact or document is proved in the proceeding, liability for costs shall be determined in accordance with Rule 63.18.
Rule 63.18 provides –
Non-admission of fact or document
Where a party serves a notice –
(a) under Rule 35.03(2) disputing a fact, and afterwards that facts is proved in the proceeding;
(b) under Rule 35.05(2) disputing the authenticity of a document, and afterwards the authenticity of that document is proved in the proceeding –
that party shall pay the costs of proof, unless the Court otherwise orders.
LEGAL PRINCIPLES ON INDEMNITY COSTS
In Colgate Palmolive v Cussons,[4] Sheppard J of the Federal Court of Australia examined the relevant authorities dealing with indemnity costs. From those authorities he drew certain propositions as follows.
[4](1993) 46 FCR 225
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1.The problem arises in adversary litigation, ie litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2.The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of O 62, rr 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission[5] and Handley JA in Cachia v Hanes[6] on the one hand and by Rogers J in Qantas[7] on the other. The relevant passages form the respective judgments have been earlier referred to.
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes[8] said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats[9] appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston;[10] namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said in Tetijo,[11] “The categories in which the discretion may be exercised are not closed”. Davies J expressed similar views in Ragata.[12]
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain[13] and also by Gummow J in Thors v Weekes;[14] evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo);[15] the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata)[16] or in wilful disregard of known facts or clearly established law (Woodward J in Fountain[17] and French J in J-Corp;[18] the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata);[19] an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson;[20] Maitland Hospital v Fisher (No 2)[21] (Court of Appeal); Crisp v Keng[22] and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records[23]). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6.It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice. (Citations added.)
[5][1962] 1 QB 306 at 323
[6](1991) 23 NSWLR 304 at 319
[7]Qantas Airways Ltd v Dillingham Corporation (Unreported SC NSW, 14 May 1987)
[8](1937) 39 ChD 133 at 141
[9]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
[10][1981] 3 WLR 619 at 637
[11](Unreported, FCA, French J, 3 May 1991 at 8)
[12]Ragata Developments Pty Ltd v Westpac Banking Corporation (Unreported, FCA, Davies J, 5 February 1993 at 6)
[13](1998) 81 ALR 397
[14](1989) 92 ALR 131 at 152
[15](Unreported, FCA, French J, 8 May 1991)
[16](Unreported, FCA, Davies J, 5 February 1993)
[17](1988) 81 ALR 397
[18]J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (10th Branch) (No 2) (1993) 46 IR 301
[19](Unreported, FCA, Davies J, 5 February 1993)
[20](1987) 10 NSWLR 525
[21](1992) 27 NSWLR 721 at 724
[22](unreported, CA NSW, Kirby P, Priestley JA, Cripps JA, 27 September 1993, No 40744/1992,)
[23][1983] Ch 59 at 63-65
In Ugly Tribe Co Pty Ltd v Sikola,[24] Harper J said:
[24][2001] VSC 189
7. In seeking costs on an indemnity basis, the first defendant is asking the Court to depart from its usual course: Spencer v Dowling.[25] Special circumstances must be present to justify such a departure: Australian Electoral Commission v Towney (No. 2).[26] These include:
[25][1996] VSC 51; [1997] 2 VR 127 per Winneke P at 147 and per Callaway JA at 163
[26](1994) 54 FCR 383 per Foster J at 388
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd.[27]
[27](1988) 81 ALR 397 (Woodward J)
(ii) The making of an irrelevant allegation of fraud: Thors v Weekes.[28]
[28](1989) 92 ALR 131 (Gummow J)
(iii) Conduct which causes loss of time to the Court and to other parties: Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd.[29]
[29](Unreported, FCA, French, J, 3 May 1991)
(iv) The commencement or continuation of proceedings for an ulterior motive: Ragata Developments Pty Ltd v Westpac Banking Corporation.[30]
[30](Unreported, FCA, Davies J, 5 February 1993)
(v) Conduct which amounts to a contempt of court: EMI Records Ltd v Ian Cameron Wallace Ltd.[31]
[31][1983] Ch 59
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law: J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA) Branch (No. 2).[32]
[32](1993) 46 IR 301
(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the time of discovery of which would have considerably shortened, and very possibly avoided, the trial: National Australia Bank v Petit-Breuilh (No. 2).[33]
[33][1990] VSC 395
8. The categories of special circumstances are not closed: Tetijo Holdings.[34] The cases must not, therefore, be read “in an endeavour to establish a set of inflexible guidelines which should thereafter be determinative of the manner in which the Court’s discretion is to be exercised [for this] would be to fetter the Court’s discretion”: National Australia Bank v Petit-Breuilh, supra.
[34](Unreported, FCA, French, J, 3 May 1991)
9. At the same time, the courts should, I think, be astute to avoid a wilderness of single instances. Even worse would be the creation of different regimes in different courts, especially as between the Federal Court and a State Supreme Court. This would encourage the undesirable practice of forum shopping, as well as the almost equally undesirable spectre of frequent post-trial applications for costs to be awarded on some special basis (i.e. on the other than the usual party and party basis).
10. According to Winneke P in Spencer’s case:[35]
“It is well recognised that there is occurring an ever increasing gap between party/party costs and those actually incurred … This … has continued … notwithstanding expressions of view by individual Judges that it is capable, in today’s circumstances, of working injustice: see, for example, per Rogers, J (as he then was) in Qantas Airways Ltd v Billingham Corp.[36] The practice is designed to reflect a compromise between the interests of successful and unsuccessful litigants. As Handley, JA observed in Cachia v Hanes[37] the practice is also adopted to provide an ‘important spur to settlement’. Sheppard, J in Colgate-Palmolive Co v Cussons Pty Ltd[38] restated the practice and pointed out: ‘This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation … or a decision of an intermediate court of appeal or of the High Court would be required to alter it’.
11. The compromise about which Winneke, P spoke is perhaps justifiable on the basis that potential litigants must not be unnecessarily discouraged from bringing their disputes to the courts. After all success can seldom be guaranteed, if only because – where the facts are in dispute, as they generally are – it is seldom possible to predict with certainty what findings of fact will be made. In these circumstances, an honest plaintiff or defendant might be discouraged from bringing or defending a claim were an adverse result to be followed by an order that the losing party indemnify, or go close to providing an indemnity to, the successful party against the latter’s costs.
12. The position changes where a litigant acts dishonestly in the litigation, or where the rights and privileges of a litigant are flouted or abused. Then, the rationale for refusing to order that the losing party indemnify an opposite party against that party’s costs is less compelling. Indeed, costs are more frequently if not invariably awarded on an indemnity or like basis (such as that of solicitor/client) where findings of dishonesty or serious misconduct have been made against the party ordered to pay.
[35]at 147
[36](Unreported, SC NSW , 14 May 1987)
[37][1994] HCA 14; (1991) 23 NSWLR 304 at 318
[38](1993) 46 FCR 225 at 233
Bearing these principles in mind, I turn to the claim for indemnity costs.
THE CLAIM FOR INDEMNITY COSTS
On the first day of the trial, Amare obtained leave to amend its defence by deleting paragraph 7(a), which alleged that in breach of the agreement, GT did not at all times work diligently to protect and promote the interests of Amare. It deleted certain allegations in paragraph 7(b) and the particulars thereto which alleged that GT did not at all times work diligently to promote and procure sales of the goods of Amare. It sought to abandon claims in particulars (A) and (B) to paragraph 7(c) that in breach of clause 4.4 of the agency agreement and in breach of the terms pleaded in paragraphs 6(s) and 6(t) of the defence, GT did not in all matters act loyally and faithfully and in good faith towards Amare and did not make full disclosure as it was obliged to do.
Particular (A) referred to and repeated the particulars subjoined to paragraph 7(a) and 7(b). Particular (C) alleged as follows:
In or about 2001 Mr Tuckett induced Ron Williams, then General Manager of Amare, to enter into the Agreement by offering him a 20 per cent share of Mr Tuckett and/or his partner Miss O’Dowd’s venture in the Bridge Hotel at Echuca without disclosing these matters to Amare. In or about June or July 2004, Mr Tuckett met with Mr Pizzey of Amare. Mr Tuckett broke down, cried and advised Mr Pizzey that he had invested in the Bridge Hotel at Echuca and had induced Mr Williams to leave Amare for the hotel.
Although the defence that GT did not at all times work diligently to protect and promote the interests of Amare, was dropped, evidence dealing with the communications between the parties was tendered. There was no suggestion at any stage in those communications that GT was other than a hardworking and loyal agent for Amare. So far as the evidence disclosed, no allegation about Mr Tuckett failing to work diligently had been made prior to the dispute over whether the contract had been properly terminated or not. Although the purported termination on 15 April 2005 was based on sales falling below budget.
The allegation that GT breached its fiduciary duty by inducing Mr Williams to enter into the agency agreement by offering a 20 per cent share in the hotel venture was a serious allegation. The allegation was first made, as far as the evidence disclosed, on 20 October 2005 in the letter from Russell Kennedy to Norton White referred to in my judgment on damages. It is not an allegation of fraud, but in my view does allege improper behaviour on the part of Mr Tuckett. As it was, Amare withdrew the allegation.
Mr Delany SC submitted that the effect of the withdrawal of these defences narrowed the issues and reduced the trial time. Significant parts of Mr Tuckett’s and other witness statements were deleted as a consequence of the withdrawal of these defences.
In Ragata Developments Pty Ltd v Westpac Banking Corporation,[39] Davies J observed that circumstances that may warrant an order for indemnity costs include the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
[39](Unreported, FCA, Davies J, 5 February 1993, BC 9304555)
In that case, allegations initially made by the plaintiff were not pursued. It was contended that allegations were made which ought never to have been made and which greatly increased the costs of the litigation. Davies J concluded, however:
I cannot draw from the slimming down of the case as it proceeded, any inference that there were allegations which ought never to have been made, or that the case was unduly prolonged by groundless contentions. It seems to me that the very opposite occurred. It is the task of lawyers to define for their clients the matters which ought to be put to a court and the matters which ought not to be put. It is the duty and function of lawyers to advise their clients on these aspects. Such advice must be given as the case progresses, as more becomes known of the facts and as the lawyers come to understand the ensuing ramifications. It is not a task that can be undertaken once and for all before the proceedings are instituted, before discovery of documents has been had, or before the affidavits of the opposing parties have been received and studied. So, in the present case, the applicants’ case, under the guidance of senior and junior counsel and solicitor, was refined.
I see no aspect of this process whereby the case was unduly prolonged. Indeed, the hearing was quick, requiring less than the time allocated for it. The case, as put by counsel for Ragata, was put efficiently with a considerable saving of costs for all concerned. It was better that counsel for the applicant should abandon certain issues before the evidence commenced and should limit the final address to the one narrow issue than that all of the myriad differences between the parties and their witnesses should be litigated to the full.
I do not take counsel’s abandonment of an issue as a concession that that issue was one which, in the first instance, was unreasonably or improperly raised. I cannot infer that Ragata was entirely unjustified in bringing the present case, or that the issues, as originally raised, were issues which Ragata was never justified in litigating.[40]
[40]Ibid page 3 of 4
The observations of Davies J are apposite in this case. Like Davies J, I do not take counsel’s abandonment of issues as a concession that the issue was one which, in the first instance, was unreasonably or improperly raised. I cannot infer that Amare was unjustified in raising those issues in its defence. The allegation of disloyalty was raised before GT commenced the proceedings. Mr Williams did leave Amare to work for Mr Tuckett or his partner. The allegation of lack of diligence was not inconsistent with Amare’s allegations that sales achieved were below budget.
Taking all those matters into account, I find that special circumstances of the kind required to depart from the usual party/party basis of awarding costs have not been established. I therefore decline to make any order that the costs thrown away be taxed on an indemnity basis.
ISSUE BY ISSUE COSTS
Mr Delany, senior counsel for Amare, submitted that GT is not entitled to all of its costs as it has only had some measure of success. In particular, he submitted that the success on the damages for the wrongful termination of the purported termination or the agreement of $125,090.35 constitutes but a small fraction of the amount claimed by GT, which was as high as $943,356. Amare also submits that GT lost its argument that it is entitled to interest pursuant to clause 7.6 of the agency agreement.
In terms of the other four breaches, Amare submits that it has succeeded on two (the territory breach and the exclusivity breach) and lost on two (the first and second commission breaches). Amare submits that, viewed in terms of quantum and by reference to GT’s claimed amounts for the period to October 2006, Amare has succeeded on approximately $268,000 and the plaintiff has succeeded on approximately $145,000. Amare says that, in percentage terms, Amare has had a rate of success of approximately 65% in respect of the four breaches. Amare submits that, given the respective measures of success, GT is entitled to no more than 40% of its costs.
RELEVANT AUTHORITIES
The following authorities establish that costs are a matter for the discretion of the judge but that discretion must be exercised judicially. Although it is said that costs follow the event, where a successful party has failed with respect to an issue of law or fact, any costs order in favour of the successful party may be adjusted to reflect that fact, particularly where the issue of law or fact can be regarded as discrete. In substance, the court may, in its discretion, order costs on an issue by issue basis and should, in exercising its discretion on costs, bear in mind these general principles.
In Woolf v Burman,[41] the plaintiff succeeded, but of the thirteen day trial, several were spent on whether or not a conversation was held on a particular day as asserted by the plaintiff. The trial judge found the conversation did not take place, but declined to alter the order for costs as he said the conversation was not an issue in the pleading sense. The High Court held that the trial judge erred and that the predecessor to r 63.04(1) permitted a court to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding. The High Court amended the order as to costs by:
… excluding all costs which the plaintiff would not have incurred if he had not alleged or deposed [of the conversation] and a question or issue had not arisen at the trial whether such a conversation had in fact taken place and it was further adjudged that the defendant’s costs referable to and occasioned by such question or issue be taxed and that the defendant do recover against the plaintiff the said costs so taxed and it was ordered that the costs recoverable by the defendant against the plaintiff and the costs recoverable by the plaintiff against the defendant be set off and execution do issue for the balance.
[41] (1939) 13 ALJR 431 per Latham CJ, Dixon and Evatt JJ
In Byrns v Davie[42] Gobbo J applied Woolf v Burman[43] to the costs of a successful defendant who had failed on certain issues raised in the defence. Gobbo J distinguished Ritter v Godfrey[44] where Atkin LJ said:
In the case of a wholly successful defendant, in my opinion the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains. These principles require further expansion.
[42][1991] 2 VR 568
[43] (1939) 13 ALJR 431
[44][1920] 2 KB 47 per Atkin LJ at 60-61
Gobbo J said that the decision in Ritter v Godfrey was not applicable to the circumstances before him, both because of its terms (it applying to a defendant who was wholly successful) “and the later comments on it, and also because of the particular rules of this court and its overriding discretions.”[45]
[45][1991] 2 VR 568 at 571
In Cretazzo v Lombardi,[46] the Full Court of the Supreme Court of South Australia considered the jurisdiction of the court to deprive a successful party of a portion of his costs and to order a successful party to pay his opponent’s costs in part or in whole. The plaintiff who sued for damages for personal injuries received in a road accident had exaggerated his symptoms.
[46][1975] 13 SASR 4
Bray CJ said:
Order 65, rule 1 provides generally that all costs shall be in the discretion of the court or judge, subject to a proviso irrelevant for the present purpose. Time and again attempts have been made to fetter that general discretion by the imposition of judge-made rules. Time and again those fetters have been released by appellate courts. I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co v Pollak,[47] that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation.
[47][1927] AC 732
I should mention, however, two more particular questions which have been specifically dealt with.
The first is that there was once an idea that a successful party, though he might be deprived of his costs, could not be ordered to pay his opponent’s costs. As a matter of fact, the so-called rule never applied to successful plaintiffs. There was a time, however, when it did apply to wholly successful defendants: Dicks v Yates.[48] It has now been held, however, that the rule when it existed was founded on the practice of the old Court of Chancery and that its existence disappeared in England after the enactment of s 5 of the Supreme Court of Judicature Act 1890: Knight v Clifton.[49] The South Australian counterpart of that section is s 40 of the Supreme Court Act 1935-1974, which for the present purpose is in indistinguishable terms and which reads:
‘Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.’
It follows, therefore, that there is now jurisdiction to order a successful party, even a wholly successful party and whether plaintiff or defendant, to pay his opponent’s costs in part or in whole. Of course, it by no means follows that it would be a judicial exercise of the secretion to do so and it may well be that in many cases it would not, since there must be some reason for departing from the settled practice whereby the successful party receives his costs from his opponent; see Donald Campbell & Co v Pollak.[50]
The next matter is this. A successful party who has failed on certain issues may well not only be deprived of his own costs of those issues, but ordered in addition to pay his opponent’s costs of them, and in this context “issue” does not mean a precise issue in the technical pleading sense, but any disputed question of fact or, in my view, of law: Foster v Farquhar.[51] In fact in that case the plaintiff, who succeeded to a substantial extent, was deprived of his costs and ordered to pay the defendant’s costs in relation to certain specific disputed items of special damage on which he failed. Moreover it has been held by the House of Lords that the support of an extravagant claim by fraudulent acts or evidence may be good cause for depriving a successful plaintiff of his costs: Huxley v West London Extension Railway Company.[52]
In this case the grounds on which the learned Judge acted were obviously connected with the litigation. Nor do I think it could be said, apart from the specific question to which I am about to turn, that he did not exercise his discretion judicially. It is nothing to the point that many judges would have exercised it differently or that many judges sitting at first instance have exercised it differently in comparable circumstances; see, for example, Lipman v George Pulman & Sons Ltd;[53] Birmingham and District Land Co Ltd v London and North-Western Railway Co.[54][55]
[48](1881) 18 ChD 76
[49][1971] ChD 700, per Russell LJ at 709-710
[50][1927] AC 732, per Viscount Cave LC at 812
[51][1893] 1 QB 564, per Bowen LJ at 570
[52](1889) 14 App Cas 26
[53](1904) 91 LT 132
[54](1887) 57 LT 185
Jacobs J agreed but sounded what he called “a note of cautious disapproval” of applications to apportion costs according to the success or failure of one party or the other on various issues of fact or law which arise in the course of a trial. He said:
But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.[56]
[56]Ibid 16
In Hughes v Western Australian Cricket Association (Inc),[57] Toohey J, then of the Federal Court, examined the principles relevant to apportioning costs where a successful plaintiff succeeded in obtaining the injunction he sought but failed on several grounds. He cited with approval the words of caution of Jacobs J in Cretazzo v Lombardi[58] and eventually ordered the respondents pay a portion of the applicant’s costs. Toohey J said as follows:
[57](1986) ATPR 40 - 748
[58](1975) 13 SASR 4 at 12
Subsection 43(2) of the Federal Court of Australia Act 1976 vests the award of costs ‘in the discretion of the Court or Judge’. The Federal Court Rules do not purport to qualify that discretion. The only rule to which reference is necessary is O. 62 r. 15 whereby, when costs are reserved, those costs follow the event ‘unless the Court or a Judge otherwise orders’.
The discretion must of course be exercised judicially. There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised. I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.
1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey.[59]
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar.[60]
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi. [61]
There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy. Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v Lombardi.[62] His Honour sounded what he described as ‘a note of cautious disapproval’ of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial.[63]
[59](1920) 2 KB 47
[60](1893) 1 QB 564
[61](1975) 13 SASR 4 at 12
[62]Ibid 16
[63]Ibid 48,136
Toohey J’s decision was cited with approval by the Full Court of the Federal Court of Australia in Queensland Wire Industries Pty Ltd v BHP Co Ltd[64] and also by Cooper J of the Federal Court of Australia in Cummings v Lewis[65] where he said, after referring to the passage from Toohey J’s judgment in Hughes v Western Australian Cricket Association (Inc) [66] quoted above:
This statement of principle was approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd.[67]
It is within the discretion of a trial judge to award only a proportion of a successful party’s costs if the conduct of that party in the trial was such as to unreasonably prolong the proceedings: Latoudis v Casey;[68] Re Elgindata Ltd (No 2).[69][70]
[64](1987) 17 FCR 211 per Bowen CJ, Morling and Gummow JJ at 222
[65](1993) 41 FCR 559
[66](1986) ATPR 40-748 at 48, 136
[67](1987) 17 FCR 211 at 222; 76 ALR 407 at 418
[68](1990) 170 CLR 534 at 544, 565; 97 ALR 45
[69]Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214, 1217
In Victoria v Master Builders Association of Victoria,[71] the decision of Cretazzo v Lombardi[72] was pressed in argument. Tadgell JA said:
I consider that the costs of the appeal should also be borne by the appellant. The several points of argument on which the respondent failed should not, in my opinion, be regarded as discrete and fragmented issues dictating the event or events which costs should follow: cf Cretazzo v Lombardi.[73] Rather, as I have indicated, the event which costs should follow, in accordance with the general rule, is the respondent’s success in obtaining declaratory relief, which was relief of the kind it sought.[74]
[71](Unreported, SCV CA, Tadgell, Ormiston and Eames JJ, 15 December 1994)
[72](1975) 13 SASR 4
[73](1975) 13 SASR 4 per Jacobs J at 16
[74]Ibid at 5
Ormiston JA said:
I was, at first, inclined to the view that the order for costs in favour of the respondent should be varied by reducing them by a percentage, not necessarily large, reflecting the issues upon which the respondent failed. In this era of high costs of litigation, I would not agree with some general propositions cited to the Court, that it is undesirable to allocate costs according to the issues upon which the parties have succeeded, for, regrettably, there are many cases in which issues are raised which unduly extend the time and expense of litigation.[75]
[75]Ibid at 6
Eames JA said:
I add the following observations. The respondent succeeded on the appeal; it established that some of its members had been treated unfairly by the State in that the State had adopted a course of conduct which denied procedural fairness to those members.
In my opinion, unless compelling reason to the contrary was established, the respondent should therefore recover costs of the appeal and should retain the benefit of the orders for costs made in its favour by Hampel J from whose decision the appeal was brought.
I adopt, with respect, the observations made by Jacobs J in Cretazzo v Lombardi,[76] as to the undesirability of a successful litigant being deprived of portion of its costs merely because it did not succeed on all of the grounds or issues which are canvassed in the hearing before the Court. His Honour’s observations have particular force where it is the State which is the unsuccessful party and which has been held to have acted unfairly towards a citizen, whether individual or corporate.[77]
[76](1975) 13 SASR 4 at 16
[77]Ibid at 7 and 8
In Ruddock v Vadarlis (No 2),[78] Black CJ and French J made an extensive examination of the principles and rationale for the awarding of costs. The case concerned the plight of non-citizens aboard the MV Tampa. In referring to Hughes v Western Australian Cricket Association (Inc)[79] and Queensland Wire Industries Pty Ltd v BHP Co Ltd,[80] with approval they said:
Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that:
·Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.
·Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.
·A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties’ costs of them. In this sense ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.[81]
[78](2001) 115 FCR 229
[79](1986) ATPR 40 - 478
[80](1987) 17 FCR 211
[81]Ibid [11]
In Nolan v Nolan,[82] the Court of Appeal applied r 63.04 where the appellant to the appeal had succeeded on some issues and the respondent on others. Rather than make respective cross-orders, the court confirmed it had
….ample power to make a single order for costs fixing an appropriate proper sum of the party’s costs, obviating cross-orders, but ultimately reflecting that one party has been successful and the other has failed to persuade the court of the ultimate merits of its case.[83]
[82][2004[ VSCA 134 per Ormiston, Chernov and Eames JA
[83]Ibid [6]
The court also said:
In a proceeding taking only five days before a court frequently it is said that costs should follow the event and that courts should not be obliged to have regard to the niceties of argument and the degree of success which each party has had. On the other hand, as in the present case, it is not difficult sometimes to distinguish the issues upon which the parties have had success so that, consistently with Order 63.04 of the Rules, the Court would have been entitled to make orders in relation to the two principal questions in a way which reflected the success of the different parties on those questions.[84]
[84]Ibid
In Mickelberg v Western Australia,[85] Newnes J of the Supreme Court of Western Australia expressed reservations about the relevance of the “note of cautious approval” of Jacobs J in Cretazzo v Lombardi and cited with approval by Toohey J in Hughes v Western Australian Cricket Association Inc.[86] He said:
[85][2007] WASC 140 (S)
[86](1986) ATPR 40-478 at 48,136
While the principles described by Toohey J continue to be relevant to the exercise of the discretion, the exigencies of modern-day litigation have led to a re-assessment of the significance of the caveat to which his Honour referred. In particular, increasing concerns about the high cost of litigation and the burdens imposed on the public resources of the courts have focussed attention on the need for greater economy and efficiency in the conduct of litigation, leading to much more emphasis on the proper identification of, and confinement by the parties to, the real issues.
In Commissioner of Federal Police v Razzi (No 2),[87] Wilcox J said that in light of extensive court delays and the high cost of modern-day litigation, the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. His Honour suggested that if parties come to realise that they will not necessarily recover the whole of their costs if they have unsuccessfully raised a discrete issue, they are likely to give more careful consideration to whether the raising of that issue is a justifiable course to take.
In a similar vein, in R v Secretary of State for Transport; Ex parte Factorfame Ltd,[88] Woolf LJ (with whom Schiemann and Robert Walker LJJ agreed) said:
‘… the practice of the courts does evolve and in recent times there has been a greater emphasis on recognising that the raising of issues in the course of complex litigation … can increase the costs of that litigation. It is therefore important that the parties should pay careful attention to the merits, not only of the whole case but to the issues which arise in the course of a case. In complex litigation, where issues are raised on which a party is unsuccessful, the court should, when appropriate, make orders for costs which reflect the fact that, where as a party may generally be successful, in regard to some of those issues that party has been unsuccessful. Furthermore, if the way in which an issue is conducted or argued has the result of increasing the costs of the litigation, and the court finds it was unnecessary for the party to develop the issue in that way, that again can be reflected in a special order for costs.’
Most recently, in Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2),[89] Bergin J observed, by way of obiter, that ‘litigation has changed somewhat since Cretazzo v Lombardi was decided’. Her Honour commented (at [11]) that ‘[t]he modern litigation practitioner has a far greater burden of deciding which issues or causes of action should be pursued in a Court. The cost consequences not only for parties but also practitioners are a reality that was not present in 1975 when Jacobs J suggested that parties should not be dissuaded from canvassing doubtful issues’.
See also Victoria Master Builders’ Assn of Victoria;[90] Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd;[91] Hayle Holdings Pty Ltd v Australian Technology Group Ltd;[92] and Evans Deakin Pty Ltd v Sebel Furniture Ltd.[93]
But that does not mean that in the exercise of its discretion as to costs a court should as a matter of course embark upon a dissection of the case before it to determine which party was successful on each issue, or necessarily deprive a successful party of some portion of its costs because it has lost on a particular distinct or severable issue.[94]
[87](1991) 101 ALR 425 at 430
[88][1998] EWCA Civ 1155
[89][2007] NSWSC 568
[90](Unreported, SCV CA, Ormiston J, 15 December 1994, No 7981/93)
[91](1993) 26 IPR 261 at 272
[92][2000] FCA 1699 [7]
[93][2003] FCA 282 at [5]
[94][2007] WASC 140 (S) at [30] – [35]
Newnes J, after making an extensive review of the authorities,[95] concluded:
It seems to me, therefore, that the effect of the authorities is that if a successful party fails on some issue, the circumstances may make it reasonable that that party be deprived of their costs of that issue. It is not necessary that the issue concerned was raised unreasonably by the party. But parties should not be dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case, and unless a particular issue or group of issues is clearly dominant or separable from the balance of the proceedings, or there has been some unreasonable or inappropriate conduct by the successful party in relation to an issue, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between the issues on which it was successful and those on which it failed.
Where it is appropriate to consider the outcome of particular issues in the case, it will be relevant to consider whether there has been any unreasonable or inappropriate conduct on behalf of the successful litigant in relation to that issue, the relative merits or strengths of that party on the issue, whether the length of the hearing was greatly increased by the issue, and whether the issue otherwise was of sufficient significance in proportion to the whole case to warrant an order depriving that party of the costs of that issue.
Plainly, however, there can be no hard and fast rules and the discretion must be exercised having regard to all of the relevant circumstances of the case.
Where the Court does take the course of disallowing costs by reference to a particular issue or issues, the exercise of discretion that is involved in doing so will often be more a matter of art than science. As Gummow, French and Hill JJ pointed out in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd,[96] where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial Judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.[97]
[95]Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40 – 748; Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425; R v Secretary of State for Transport (1998) EWCA 2999; Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWC 568; Victoria Master Builders’ Association of Victoria (Unreported, SCV CA, 15 December 1994); Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261; Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1699; Evans Deakin Pty Ltd v Sebel Furniture Ltd [2007] FCA 282; Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602; MacKinnon v Peterson unreported Court of Appeal Supreme Court of NSW 19 April 1989; Oshlack v Richmond River Council (1998) 193 CLR 72; Westgold Resources NL v St George Bank Ltd (Unreported, SCWA, 9 December 1998, library no. 980717); Doric Products Pty Ltd v Lockwood Security Products Pty Ltd(2002) 54 IPR 495; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768; Waters v PC Henderson (Australia) Pty Ltd (Unreported, SCNSW CA, Kirby P, Mahoney, Priestley JJA, 6 July 1994); James v Surf Road Nominees Pty Ltd (No 2) [2005] NSW CA 296 and FAI General Insurance Co Ltd v McSweeney (Unreported, FCA, Lindgren J, 15 September 1998)
[96](1993) 26 IPR 261 at 272
[97][2007] WASC 140 (S) at [43] – [46]
In McFadzean v CFMBEU,[98] the Court of Appeal again visited the issue of costs where a party had failed on some issues. The Court (Warren CJ, Nettle and Redlich JJA) said:
The position as to costs where a party has been partially successful was summarised by Eames J in Pricom Pty Ltd v Sgarioto:[99]
As a general rule costs should follow the event, and a successful party should obtain all of the costs of the action even although it failed to establish some of the alternative heads of its claim: Ritter v Godfrey.[100] However, in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australian Cricket Association Inc.[101] (With respect to the court’s ability to consider the relative success of the parties in respect of the issues raised in the proceeding, as well as with respect to causes of action: See Byrns v Davie.[102] See also Rosniak v Government Insurance Office.[103]
[98][2007] VSCA 289
[99](Unreported, SCV, Eames J, 10 April 1995)
[100][1920] 2 KB 47
[101](1986) ATPR 40 – 748, per Toohey J at 48,136
[102][1991] 2 VR 568
[103](1997) 41 NSWLR 608 per Mason P at 615
In Lollis v Loulatzis (No 2)[104] Kaye J reduced the costs otherwise payable to a successful plaintiff and in doing so said:
[104][2008] VSC 35
Ms Sparke submitted that, as the ordinary rule is that costs should follow the event, the costs awarded to the plaintiff should only be reduced if there has been high-handed conduct on behalf of the plaintiff. In my view, the authorities, to which I have just referred, do not support such a proposition. Rather, the test stated in the authorities is whether the successful party has so conducted itself as to result in an unnecessarily protracted trial. The test was expressed in those terms by McHugh J in Oshlack’s case,[105] and by Ipp J, in Capolingua,[106] to which I have just referred. In Parkinson,[107] one of the circumstances taken into account by Lush J, in depriving successful defendants of their costs, was the excessive cross-examination of the plaintiff. The same principle was stated by the Full Court of Victoria in Keddy v Foxall,[108] where their Honours stated:
‘The cases do show, we think, that in exercising his discretion on costs a Judge may have regard to conduct – not necessarily misconduct – of any party which is calculated to occasion unnecessary expense …’
In my view, that principle is particularly applicable in light of the trend, in recent years, for the trial of cases to take an unduly long period of time to complete. As the consequential burden of costs to all parties is increasing exponentially, it behoves trial judges to be conscious of the principle that a losing litigant ought not to be required to bear that portion of the successful party’s costs which is attributable to conduct of the successful party which has unduly protracted the length of the trial.
Where costs are awarded on the basis of how the issues at trial have been decided, the Court of Appeal has recognised that it is appropriate and convenient that the order for costs be expressed as a proportion of the costs of the successful party. See McFadzean & Ors v Construction Forestry Mining & Energy Union & Ors.[109]
[105]Oshlack v Richmond River Council (1998) 193 CLR 72 at 98
[106]Capolingua v Phylum Pty Ltd (1991) 5 WAR 137 at 140-141
[107]Parkinson v College of Ambulance Ltd [1925] 2 KB 1 at 17
[108][1955] VR 320 at 323-324
[109][2007] VSCA 289, esp [153], [158]
Other authorities touching on these issues include: Dodds Family v Lane Industries;[110] Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3);[111] Commissioner of Australian Federal Police v Razzi (No 2);[112] Hayle Holdings Pty Ltd v Australian Technology Group Ltd;[113] Evans Deakin Pty Ltd v Sebel Furniture Ltd;[114] R v Secretary of State for Transport; Ex parte Factorfame Ltd;[115] Oshlack v Richmond City Council;[116] and Martech International Pty Ltd v Energy World Corporation Ltd (No 4).[117]
[110](1993) 26 IPR 261
[111](1979) 42 FLR 213
[112](1991) 101 ALR 425
[113][2000] FCA 1699
[114][2003] FCA 282
[115][1998] EWCA Civ 1155
[116](1998) 193 CLR 72
[117][2006] FCA 1779 per French J at [14]
UNREASONABLY RAISING ISSUES
In Mok v Minister for Immigration (No 2),[118] Keely J in an immigration case held that the court’s power to order a successful applicant to pay the costs in respect of an issue raised by the applicant, on which the applicant has failed, ought to be exercised only where the court, on a consideration of all of the circumstances, has concluded that the raising of that issue by the applicant was so unreasonable that it is fair and just to make the order.
[118](1993) 47 FCR 81 at 84
Lindgren J, in FAI General Insurance Co Ltd v McSweeney,[119] came to a similar conclusion, saying:[120]
However, the fact that a successful party has failed on a disputed question of fact or law will not, of itself, entitle the other party to its costs on that issue. Rather, what must be shown is that it was unreasonable for the successful party not to have conceded on the issue, and that its failure to do so unreasonably prolonged the proceeding: Cummings v Lewis;[121] see also Australian Conservation Foundation v Forestry Commission.[122]
[119](Unreported, FCA, Lindgren J, 15 September 1998)
[120]Ibid 9
[121](1993) 41 FCR 5
[122](1988) 81 ALR 166 per Burchett J at 169 (FCA)
However, in Rosniak v GIO[123] the Court of Appeal of the Supreme Court of New South Wales rejected the unreasonable test in the sense of a fixed proposition of law.[124]
[123](1997) 41 NSWLR 608
[124]See Mason P at 615, with whom Meagher JA and Clarke AJA agreed
THE ENGLISH APPROACH
The English approach was discussed in Re Elgindata Ltd (No 2),[125] where the Court of Appeal considered a case where a successful petitioner in an oppression proceeding was only awarded one quarter of his costs and ordered to pay three quarters of the respondent’s costs where he had succeeded in obtaining the relief he sought but had essentially failed on three of the four grounds he relied on. Nourse LJ (with whom Stocker and Beldam LJJ agreed) laid down general propositions as follows:
In order to show that the judge erred I must state the principles which ought to have been applied. They are mainly recognised or provided for (it matters not which) by s 51 of the Supreme Court Act 1981 and the relevant provisions of RSC Ord 62, in this case rr 2(4), 3(3) and 10. They do not in their entirety depend on the express recognition or provision of the rules. In part they depend upon established practice or implication from the rules. The principles are these.
(1) Costs are in the discretion of the court.
(2) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made.
(3) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or part of his costs.
(4) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party’s costs.
Of these principles the first, second and fourth are expressly recognised or provided for by rr 2(4), 3(3) and 10 respectively. The third depends on well-established practice. Moreover, the fourth implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs. It was because of his disregard of that principle that the judge erred in this case.
[125][1993] 1 All ER 232 per Nourse, Stocker and Beldam LJJ; [1992] 1 WLR 1207
In R v Secretary of State for Transport; Ex parte Factorfame Ltd,[126] Woolf LJ (with whom Schiemann LJ and Robert Walker LJ agreed), referring to Re Elgindata Ltd (No 2),[127] said the following:
The respondents rely in particular on the concluding remarks from that passage of Nourse LJ’s judgment [in Re Elgindata Ltd (No 2)[128]]. The Court of Appeal were indicating the then approach, recognised by the authorities, adopted by the courts as a matter of practice. The practice of the courts does evolve, and in recent times there has been a greater emphasis on recognising that the raising of issues in the course of complex litigation, of which this case can be considered as an example, can increase the costs of that litigation. It is therefore important that the parties should pay careful attention to the merits, not only of the whole case but to the issues which arise in the course of a case. In complex litigation, where issues are raised on which a party is unsuccessful, the court should, when appropriate, make orders for costs which reflect the fact that, whereas a party may generally be successful, in regard to some of those issues that party has been unsuccessful. Furthermore, if the way in which an issue is conducted or argued has the result of increasing the costs of the litigation, and the court finds that it was unnecessary for the party to develop the issue in that way, that again can be reflected in a special order for costs.
The passage in Nourse LJ’s judgment quite properly focuses on the word ‘unreasonably’. It also mentions the word ‘improperly’. It seems to me, in exercising the general discretion which Order 62 gives the court with regard to costs, the court will always be concerned as to whether an issue has been conducted reasonably before the courts. However there can be situations where, although a party has not behaved improperly, the way the litigation has been conducted has increased the costs. If the court, without concluding that the party has been improper in any way, comes to the conclusion that the costs have been increased because the approach has not been reasonable, that is certainly a matter which should be reflected in an order for costs.
This brings the position in England closer to the Australian approach.
[126][1998] EWCA Civ 1155
[127][1992] 1 WLA 1207
[128][1992] 1 WLR 1207
After the hearing on costs, Amare’s counsel referred me to Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2).[129] There, Finkelstein and Gordon JJ, sitting in the Full Court[130] of the Federal Court, said as follows:
The respondent first of all contends that, as regards the trial, the appellant failed on most of the grounds it had pleaded and argued and, accordingly, the appellant should pay a substantial proportion of the respondent’s costs (it suggests 50 to 80 per cent) or alternatively that there should be no order as to costs.
We think there is force in the argument that the appellant should not benefit from the usual rule that costs follow the event. For many years the traditional rule has been that the winner (once the winner is properly identified) is entitled to recover his costs of the trial. It sometimes happens that there is a departure from the traditional rule and the costs order takes account of the success of the parties on particular issues. But to date the award of costs on an issue by issue basis has only been accepted in limited cases and then only when the circumstances are exceptional.
This approach is, if we may be permitted to say so, quite unfair. Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful. The unfairness of the traditional rule has been recognised in England where, following Lord Woolf’s interim report, Access to Justice,[131] the Civil Procedure Rules were modified to require the judge to have regard to the circumstances (if it occurs) that the unsuccessful party has succeeded on some issues: see r 44.3(4)(b). In Western Australia, the Supreme Court Rules provide that costs should follow the event of each pleaded cause of action: see r 66(2)(a). This is narrower than the English approach but certainly more reasonable than adherence to the traditional rule.
We do not believe there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here. Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of the discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule.[132]
[129][2008] FCAFC 107
[130]Rares J agreed with the reasons of Finkelstein and Gordon JJ
[131](June, 1995) [at para 25.22]
[132][2] – [5]
Lord Woolf said in his report about the rule that costs normally follow the result:
22. The rule could, however, be more effective than it is at present. Normally the court uses the rule as a blunt instrument. The general approach is one which involves the winner taking all. This does not necessarily produce a fair result. My approach to case management involves breaking down the issues which make up the litigation. The court has to be prepared to make different orders for costs in relation to different issues to support the new approach to case management.
In my view, the authorities binding on me are not inconsistent with Lord Woolf’s recommendation relied on in Bowen’s case.
Based on these authorities, the general principles relevant to GT’s application in relation to costs are as follows.
1. The award of costs is in the discretion of the Court or Judge: s 24 Supreme Court Act 1986.
2. The discretion must be exercised judicially: Donald Campbell & Co v Pollak;[133] Cretazzo v Lombardi.[134]
[133][1927] AC 732
[134](1975) 13 SASR 4
3. The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation: Cretazzo v Lombardi;[135] or the circumstances leading up to the litigation: Oshlack v Richmond City Council.[136]
[135][1975] 13 SASR 4
[136](1998) 193 CLR 72 per McHugh J at 97
4. Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey.[137]
[137](1990) 170 CLR 534 per Mason CJ at 543, per Toohey J at 562 – 563, per McHugh J at 566 - 567
5. As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey;[138] McFadzean v CFMBEU.[139]
[138](1920) 2 KB 47
[139][2007] VSCA 289
6. Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burmon;[140] Cretazzo v Lombardi.[141]
[140](1939) 13 ALJR 431 (HC)
[141](1975) 13 SASR 4 at 12
7. The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.[142]
[142][2007] VSCA 289
8. It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO.[143] Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia.[144]
[143](1997) 41 NSWLR 608
[144][2007] WASC 140 (S) per Newnes J at [43] – [46]
9. The court may, in its discretion, make an order that is a single order, fixing what proportion of a party’s costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie;[145] McFadzean v CFMBEU;[146] Nolan v Nolan.[147]
10. The caveat referred to by Jacobs J in Cretazzo v Lombardi[148] may have less weight today than when it was decided: Primcom Pty Ltd v Sqarioto;[149] Mickelberg v Western Australia;[150] and Victoria v Master Builders Association of Victoria.[151]
11. Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.
[145](1991) 2 VR 568 per Gobbo J at 571
[146][2007] VSCA 289 at [153] [158]
[147][2004] VSCA 134 [6]
[148](1975) 13 SASR 4
[149](Unreported, SCV, Eames J, 24 April 1995)
[150][2007] WASC 140 (S) at [30] – [35]
[151](Unreported, SCV CA, 15 December 1994, BC 9408430)
CONCLUSION ON ISSUES
GT relied on five distinct breaches of contract. It has succeeded on three. By far the most attention was given to the wrongful termination of GT’s authority as agent. GT was successful on many issues raised by Amare. The most significant of these was that the agency agreement had automatically terminated in April 2005. It also succeeded on its argument that it validly extended the agency agreement although it did lose its claim to interest under the agreement.
As indicated above, Amare submits that in terms of quantum and by reference to GT’s claimed amounts for the period to October 2006, Amare has succeeded on approximately $268,000 and GT has succeeded on approximately $145,000. Amare submits that in percentage terms Amare had a rate of succuss of approximately 65 per cent in respect of the four breaches. That is, $268,000 is 65 per cent of the total success of both parties of $413,000.
The authorities examined above indicate that the proper approach is to have regard to discrete issues or claims rather than the quantum of success. None of the authorities referred to approached apportionment of costs on the approach put forward by Amare.
In relation to the separate claims I note that of the 103 pages of my judgment dealing with the five breaches of contract and the renewal of the agency, approximately 13 deal with the two alleged breaches on which GT failed.
As indicated by Kaye J in Lollis v Loulatsiz(No 2),[152] it is appropriate and convenient that the order for costs be expressed as a proportion of the costs of the successful party. In my opinion, in the exercise of my discretion, I do not consider that it would be fair or reasonable that Amare bear the whole cost of the trial. After taking into account the above matters and the submissions put to me by counsel for the parties, I consider that Amare should only bear 85 per cent of GT’s costs. This apportionment will not apply to the costs thrown away by reason of the abandoned defences.
[152][2008] VSC 35
NOTICE TO ADMIT
As to Amare’s claim to costs on the notice to admit, Amare tendered, in annexure A to their submissions,[153] the facts in the notice to admit which were disputed by GT and which Amare alleges it proved. I make no finding on whether or not Amare has proved these matters. The relevant rr 35.06 and 63.18 have effect unless I order otherwise. No reason has been put forward why I should order otherwise. Whether Amare recovers any costs by force of these rules will therefore be a matter for taxation.
[153]Submissions of 20 May 2008
CONCLUSION
The orders of the court therefore are:
(a) That the defendant pay:
(i) the plaintiff’s costs occasioned by or referable to the paragraphs of the amended further defence of July 2006 abandoned on 11 February 2008 and otherwise thrown away by reason of the defendant’s amendments to the further defence of July 2006 amended by leave granted on 11 February 2008; and
(ii) 85 per cent of the plaintiff’s costs otherwise of and incidental to the proceedings, including all reserved costs and the costs of today, save where costs otherwise have been ordered.
(b) The plaintiff’s costs are to be taxed on a party/party basis, if not agreed, and when taxed be paid by the defendant after setting off the costs of the defendant, if any, payable under r 63.18.
[55](1975) 13 SASR 4 at 11-12
[70]Ibid 603
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