Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2)

[1991] FCA 45

Re: INN LEISURE INDUSTRIES PTY LTD (Provisional Liquidator Appointed)
And: D.F. McCLOY PTY LTD and DONALD FRANCIS McCLOY
No. WA G124 of 1989
FED No. 45
Costs
28 FCR 172

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Costs - apportionment - discretion to award partial costs - applicant successful on one cause of action - unsuccessful on others - substantially common substratum of fact - some severable issues - two respondents - jointly represented - company and its director - applicant - three quarters of costs recoverable from first respondent - no order in relation to second respondent.

Trade Practices Act 1974

Federal Court of Australia Act 1976 sub-s.43(2)

Hughes v Western Australian Cricket Association (Inc) and Ors (1986) ATPR 40-748

Cretazzo v Lombardi (1975) 13 SASR 4

Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201

HEARING

PERTH

#DATE 28:2:1991

Counsel for the Applicant: Ms. J. McCutcheon

Solicitors for the Applicant: Freehill Hollingdale and Page

Counsel for the Respondents: Mr C. Colvin

Solicitors for the Respondent: Robinson Cox

ORDER

The first respondent pay three quarters of the applicant's costs of the application.

There be no order as to costs as against the second respondent.

The $20,000 deposited in a trust account in the joint names of Freehill Hollingdale and Page and Robinson Cox by way of security for the respondents' costs, together with all accrued interest on that amount, be paid out to Freehill Hollingdale and Page forthwith.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

On 15 February I gave judgment for the applicant against the first respondent in the sum of $112,360 inclusive of interest and ordered that the application as against the second respondent be dismissed. I also ordered that the parties have liberty to apply within 7 days for orders as to the costs of the application. Both the applicant and the respondents have filed notices of motion, returnable today, seeking orders as to the costs of the application. The applicant seeks an order that the first respondent pay the applicant's costs of the application, including this motion, and also for the disposition of $20,000 deposited in a joint trust account by way of security for the respondent's costs. The respondents, on the other hand, seek an order that the applicant should pay 90% of the first respondent's costs of the action and the entirety of the second respondent's costs.

1. The case as pleaded was based upon causes of action in misleading or deceptive conduct, breach of contract and money had and received under a mistake of fact and alternatively, a mistake of fact and law. In the event and for reasons which were published at the time of the judgment being delivered on 15 February, the claim based on the Trade Practices Act 1974 failed, the claim based on contract was abandoned at trial, and the claim for money had and received succeeded on the basis that the money in question was paid under a mistake of law. Counsel for the applicant submits that in accordance with the usual rule, costs should follow the event and that her client should have the costs of the action as against the first respondent. The first respondent and the second respondent having been jointly represented, she contends there should be no order as to costs in relation to the second respondent. Counsel for the respondents, on the other hand, submits that the case was prepared substantially on the basis that it was a claim under the Trade Practices Act and for breach of contract and, alternatively, a claim for money had and received under a mistake of fact or fact and law. In the event the case went off on the basis that the money was paid under a mistake of law. It is said therefore, that a substantial part of the preparation of the case and of the issues arising out of the pleadings had to do with matters on which the applicant was not successful. Certainly, so far as misleading or deceptive conduct is concerned, there are elements of misrepresentation which it was not necessary to establish as part of the cause of action for money had and received. On the other hand, it seems to me that much of the factual substratum underlying the claim for misleading or deceptive conduct was relevant to the question of recovery under mistake of law. I exclude from that comment evidence of the circumstances in which an audit was conducted by the Australian Taxation Office and a compromise reached on payment of outstanding sales tax and penalties. That evidence arose in relation to the issue of causation of loss which was a necessary element of the claim under the Trade Practices Act.

2. The Court has a general discretion under sub-s.43(2) of the Federal Court of Australia Act to award costs. As Toohey J. said in Hughes v Western Australian Cricket Association (Inc) and Ors (1986) AT PR 40-748 at 48,136, the discretion must be exercised judicially. His Honour referred in a summary way to the effect of decisions of Australian and English Courts and made the following points:
   1. Ordinarily, costs follow the event and a successful
   

litigant receives his costs in the absence of special circumstances justifying some other order.

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.

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. In this sense, issue does not mean a precise issue in the technical pleading sense, but any disputed question of fact or law.

Those principles are subject to the caveat referred to by His Honour and expressed by Jacobs J. in Cretazzo v Lombardi (1975) 13 SASR 4 at p 12, where it was said that trials occur daily in which a 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."

I was also referred in the course of argument to the judgment of Fisher J. in Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 and in particular at p 208. His Honour was considering an unsuccessful plaintiff's claim to have its costs or a portion thereof paid by successful defendants and said:

"In my opinion, although I have, in accordance with the reasoning of Bray C.J. in Cretazzo v Lombardi, supra, jurisdiction in my discretion to award such costs, it is a discretion which I should exercise only in the most exceptional circumstances. I refer to the discussion on the point in the reasons of Russell and Sachs LJJ. in Knight v Clifton (1971) 2 All ER 378 at 386 and 390 respectively."

And further at 209:

"Forbes v Samuel, supra, and Gold v Patman and Fotheringham Ltd (1958) 2 All ER 497, are authorities for the proposition that if a considerable portion of the trial is taken up in determining issues upon which a defendant fails, it is a proper exercise of discretion to reduce the costs allowed that defendant. Bray C.J. in Cretazzo v Lombardi, supra, at p 14, was of opinion that it was proper to split costs in accordance with the success of the parties on various disputed questions of fact and law, and this view was shared on the facts of that case by Zelling and Jacobs JJ. the other members of the Full Court."

And I extract from that that even where an applicant is not successful on all issues, the usual rule that governs the discretion is that costs will follow the event, but that according to the circumstances of the case and where there are special circumstances an apportionment may be made of the amount of costs to be paid. In my opinion, in this particular case which occupied at trial, although listed for some five days, only half a day of evidence and half a day of argument, there was a common substratum of fact applicable both to the misleading and deceptive conduct claim and to the claim of mistake at law. There were certain elements of the factual matters to which I have already referred which were canvassed at the hearing and were distinct and severable from those issues on which the applicant succeeded. I am of the view that in this particular case, it is appropriate to recognise that fact. I propose therefore to make a minor apportionment of the costs recoverable by the applicant from the first respondent.

1. So far as the position of the second respondent is concerned, he was a director of the first respondent, he was jointly represented and I have no reason to believe that anything other than one set of costs was involved. Nor do I have any reason to believe that the costs of the action were significantly affected by the fact of his involvement. Orders will be made in the following terms:
   1. That the first respondent pay three quarters of the
   

applicant's costs of the application; and

2. That there be no order as to costs as against the second

respondent.

There will also be an order for payment out to the applicant's solicitors of moneys held by the parties' solicitors by way of security for costs.