Jones v The Nominal Defendant (No 2) - [2022] SASC 129

Supreme Court of South Australia
(Appeal to a Single Judge)
JONES v THE NOMINAL DEFENDANT (NO 2)
[2022] SASC 129
Judgment of the Honourable Justice Blue
11 November 2022
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
On 7 October 2022 the appeal by the appellant against an order by a District Court Judge allowing an appeal against a decision of a Master of the District Court and granting leave to the respondent to amend its defence was dismissed: Jones v The Nominal Defendant [2022] SASC 111.
The respondent seeks an order that the appellant pay its costs of the Supreme Court appeal on the ground that it was successful on the appeal. The appellant seeks an order that the respondent pay his costs of the appeal because of the manner in which the appeal evolved and because the appeal was dismissed by reason of the grant of discretionary indulgence in favour of the respondent given its multiple procedural mistakes and misjudgments.
The District Court Judge made an order that the appellant pay the respondent’s costs of the District Court appeal. The appellant seeks reversal of that order. The respondent opposes reversal or alteration of that order.
Held:
1Each party should bear their own costs of the District Court appeal (at [13]).
2The respondent should recover from the appellant one third of its costs of the Supreme Court appeal (at [26]).
3The appeal should be certified fit for senior counsel but not for two counsel (at [28]).
4Liberty to apply to vary the costs orders depending on the ultimate outcome of the action should not be granted (at [36]).

Supreme Court Act 1935 (SA) s 40; District Court Act 1991 (SA) s 42, referred to.
Bell v Deputy Coroner of South Australia (No 2) [2020] SASC 77; Duncan as Liquidator of WDR Iron Ore Pty Ltd (In Liquidation) v SMA Industries Pty Ltd (No 2) [2020] SASC 127; Koonara Management Pty Ltd (Receivers and Managers Appointed) v Fabriano Pty Ltd [2019] SASC 99; Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2) [2021] SASC 75, considered.

JONES v THE NOMINAL DEFENDANT (NO 2)
[2022] SASC 129
Civil

BLUE J: On 7 October 2022 I dismissed an appeal by Robert Jones against an order by a District Court Judge allowing an appeal against a decision of a Master of the District Court and granting leave to the Nominal Defendant to amend its defence.[1]
[1] Jones v The Nominal Defendant [2022] SASC 111.
The Nominal Defendant seeks an order that Mr Jones pay its costs of the Supreme Court appeal on the ground that it was successful on the appeal. Mr Jones seeks an order that the Nominal Defendant pay his costs of the appeal because of the manner in which the appeal evolved and because the appeal was dismissed by reason of the grant of discretionary indulgence in favour of the Nominal Defendant given its multiple procedural mistakes and misjudgments.
The District Court Judge made an order that Mr Jones pay the Nominal Defendant’s costs of the District Court appeal. Mr Jones seeks reversal of that order. The Nominal Defendant opposes reversal or alteration of that order.
Costs principles
Costs are in the discretion of the Court under section 40 of the Supreme Court Act 1935 (SA) and section 42 of the District Court Act 1991 (SA). The discretion is unfettered but must be exercised judicially.
Without fettering the discretion, several general principles have been formulated in relation to the exercise of the discretion, which principles are best regarded as rules of thumb. There is a unifying factor underlying many of these general principles that the Court is endeavouring to ascertain which party caused or contributed to the incurring of the costs in question.[2]
[2] Koonara Management Pty Ltd (Receivers and Managers Appointed) v Fabriano Pty Ltd [2019] SASC 99 at [51]; Bell v Deputy Coroner of South Australia (No 2) [2020] SASC 77 at [24]; Duncan as Liquidator of WDR Iron Ore Pty Ltd (In Liquidation) v SMA Industries Pty Ltd (No 2) [2020] SASC 127 at [29];
Examples of general principles based on this underlying factor include:
·costs generally follow the event, reflecting the fact that generally an unsuccessful applicant caused the incurring of the costs by prosecuting the action or generally an unsuccessful respondent caused the incurring of the costs by defending the action;
·a party may be ordered to pay the costs of their opponent (or at least not recover their own costs) on a relatively discrete and substantial issue on which the opponent succeeded notwithstanding that the first party succeeds overall in the action;
·a party may be ordered to pay the costs of their opponent incurred after that party rejected an offer by their opponent that would have produced a better result to the first party than the ultimate result of the action; and
·a party may be ordered to pay the costs of their opponent caused by misconduct by that party in, relating to or leading up to the action.
Costs of District Court appeal
The District Court Judge ordered on 10 December 2021 that Mr Jones pay the Nominal Defendant’s costs of the District Court appeal. On the premise of the substantive decision of the Judge, that was the correct costs order because the Nominal Defendant was successful on both the outcome of the appeal and the two issues argued before the Judge on the appeal.
However, the costs of that appeal now fall to be considered afresh in light of my determination of the issues on the ultimate appeal. On that premise, there was mixed success on the intermediate appeal.
Considered through the prism of my ultimate determination of the issues, the factors in favour of ordering that one party recover the costs of the intermediate appeal are relatively evenly balanced against the factors in favour of ordering that the other party recover those costs.
Starting with the determination of the several issues argued on the intermediate appeal, Mr Jones should have been successful on the issue whether the Master had dispensed with the need for special circumstances and the Nominal Defendant was and should have been successful on the issue of leave to amend the defence on the merits. The time spent at the hearing of the intermediate appeal comprised approximately one third on general and background matters, a little more than one third on the merits and a little less than one third on the dispensation issue. The time spent before the hearing of the appeal evidently differed between the parties. The Nominal Defendant evidently spent significantly more time on the merits and conversely Mr Jones evidently spent significantly more time on the dispensation issue (each party focusing on its strength). Overall, if and to the extent that it is considered on an issue by issue basis, the position is relatively evenly balanced between the parties.
Turning to the (hypothetical) ultimate outcome of the intermediate appeal, on the one hand, on the two issues actually argued on the intermediate appeal, Mr Jones would have been successful overall because the Judge ought to have concluded that the Master had not dispensed with the requirement for special circumstances. On the other hand, if all issues argued before the Master are taken into account, the Nominal Defendant would have been successful.
The position is complicated by the fact that, if the Judge had determined that the Master had not decided the dispensation question one way or the other, it is likely that the Judge would have invited submissions from the parties on the question whether dispensation should be granted on the merits. That question did not arise because the Judge determined that the Master had granted dispensation.
Weighing all of these factors together, this is an appropriate case in which there should be no order as to the costs of the District Court appeal.
Costs of Supreme Court appeal
On the Supreme Court appeal, the Nominal Defendant was successful on the outcome of the appeal.
There were three broad issues raised on appeal relating to dispensation, special circumstances and the merits of the application for leave to amend the defence. Mr Jones was successful on the first broad issue of dispensation (although not successful on all of the sub issues). The Nominal Defendant was successful on the second and third broad issues (although not successful on all of the sub issues).
The Nominal Defendant did not initially raise the special circumstances issues. This necessitated an adjournment of the hearing of the appeal. Mr Jones did not raise the issue whether leave to amend should be refused on the merits. This necessitated a further adjournment of the hearing of the appeal.
Ultimately at the first hearing on 24 February 2022, the parties addressed primarily dispensation issues; at the second hearing on 23 March 2022 the parties addressed primarily special circumstances issues and at the third hearing on 26 April 2022 the parties addressed primarily the merits of the application for leave to amend (although each hearing did not exclusively address those issues respectively: for example, at the third hearing some reference was also made to the dispensation and special circumstances issues).
In broad terms, approximately one third of the time at the hearings of the appeal was devoted to dispensation issues, approximately one third of the time was devoted to special circumstances issues and approximately one third of the time was devoted to the merits of the application for leave to amend the defence.
The Nominal Defendant contends that, because it was successful on the outcome of the appeal, it should recover the whole of its costs without reduction on account of mixed success on the issues. I reject that contention. First, the three broad issues were each substantial. Secondly, it is appropriate to have regard to the manner in which the Nominal Defendant conducted the appeal and in particular that it did not initially raise the special circumstances issues.
Mr Jones contends that, because he was successful on the issue whether the Master had granted dispensation and that was the only issue initially raised on appeal, he should recover his costs. I reject that contention. Upon its being determined that the Master had not decided the issue of dispensation one way or the other, it was inevitable that the issue of dispensation on the merits would need to be determined. The issue of dispensation on the merits could not be determined independently of the special circumstances issues.
Mr Jones contends that, if the Nominal Defendant had foreshadowed its intention to contend that special circumstances existed, he would have had the opportunity to consider whether to proceed with the appeal. However, when he filed the notice of appeal, Mr Jones did not know what contentions the Nominal Defendant would make and it was certainly foreseeable that the Nominal Defendant would contend that special circumstances existed. In addition, when the Nominal Defendant did, during the initial hearing of the appeal, foreshadow such a contention, Mr Jones chose to take issue with that contention (as he had done before the Master).
Mr Jones also contends that the Nominal Defendant was given the opportunity to address the merits of the application for leave to amend the defence. However, this opportunity was given to Mr Jones, not the Nominal Defendant, because the Nominal Defendant had succeeded on that issue before the District Court Judge. Again, Mr Jones chose to contend on the appeal that the District Court Judge was wrong on that issue.
Mr Jones contends that the Nominal Defendant is seeking indulgences and should bear the costs of the exercise. It is true that in the initial hearing before the Master the Nominal Defendant was seeking an indulgence in that it was seeking to amend its defence when it conceded that it ought to have addressed the question at an earlier stage. The District Court Judge ordered that the Nominal Defendant pay Mr Jones’ costs of the application before the Master and this may have reflected, in part, the fact that the Nominal Defendant was seeking an indulgence. However, the position on appeal is quite different.
It is also true that the Nominal Defendant sought an indulgence in advancing a contention on the appeal (concerning special circumstances) when it had not included that contention in a notice of alternative contention or in its written submissions on appeal. However, Mr Jones also sought indulgences in advancing contentions not included in his notice of appeal or written submissions on appeal.
The fact remains that the Master erred in refusing leave to appeal by accepting submissions advanced by Mr Jones. The Nominal Defendant has ultimately been vindicated in its appeal against the Master’s refusal. It has been successful on the Supreme Court appeal because Mr Jones’ appeal against the District Court Judge’s orders has been dismissed. The Nominal Defendant should recover its costs of the Supreme Court appeal but this is subject to the costs order reflecting the mixed success of the parties on appeal.
The appropriate exercise of the costs discretion is notionally to order that the Nominal Defendant recover from Mr Jones two thirds of its costs of the appeal and Mr Jones recover from the Nominal Defendant one third of his costs of the appeal. This results in an order that the Nominal Defendant recover from Mr Jones one third of its costs of the appeal.
The Nominal Defendant contends that it should recover costs on the basis of both senior counsel and junior counsel appearing on the appeal. Mr Jones opposes the Nominal Defendant recovering costs other than for junior counsel.
On the one hand, the appeal raised issues in respect of which it was appropriate for the Nominal Defendant to brief senior counsel. On the other hand, the appeal did not justify briefing two counsel. The Nominal Defendant will be entitled to recover costs in respect of the appearance of junior counsel, who appeared without senior counsel, at the second hearing on 23 March 2022 of the appeal but not otherwise.
Liberty to apply
Mr Jones filed in the underlying action a formal offer under rule 132.4, and subsequently filed a withdrawal of offer under rule 132.5, of the Uniform Civil Rules 2020 (SA). Mr Jones also made a Calderbank offer.
Mr Jones submits that it is appropriate to grant liberty to apply after judgment in the underlying action to vary the costs orders now made because it might be appropriate in light of the result of the underlying action compared to his offers that different costs orders be made in respect of the District Court and Supreme Court appeals.
I observe immediately that, if this were appropriate, it would need to be mutual such that the Nominal Defendant would also have liberty to apply in light of the result of the underlying action compared to its own offers.
In some cases, it is appropriate to reserve the costs of an interlocutory application to the trial judge because the ultimate outcome of the action may bear on the appropriate costs order in respect of the interlocutory application. The issue is to identify the proximate cause of the incurring of the costs in question: see Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2).[3]
[3] [2021] SASC 75 at [8]-[16]
When the interlocutory application is an unsuccessful application to amend a pleading, often the proximate cause of the incurring of the costs of the application will be seen as the making of the unsuccessful application and the unsuccessful party should pay the successful party’s costs of the application regardless of the ultimate outcome of the action. When the interlocutory application is a successful application to amend a pleading which is opposed, often the proximate cause of the incurring of the costs of the application will be seen as the unsuccessful opposition to the application and the unsuccessful party should pay the successful party’s costs of the argument regardless of the ultimate outcome of the action (although the successful party may bear the costs of the application itself where it ought to have pleaded or amended earlier).
When the costs are the costs of an appeal against an interlocutory order, it will be comparatively rare that the costs of the appeal should be reserved to await the ultimate outcome of the action.
In the present case, Mr Jones’ costs of the Nominal Defendant’s application for leave to amend the defence before the Master are to be paid by the Nominal Defendant regardless of the ultimate outcome of the action.
There is no reason in the present case to reserve the costs of the appeals until after the ultimate outcome of the action and this is not sought by Mr Jones. Orders should be made at this point in relation to those costs. The appropriate orders as to those costs will not be affected by the ultimate outcome of the action or by the fact (if it transpires) that the ultimate outcome may be better for a party than it would have been under an offer filed or made by that party. In these circumstances, there is no basis for granting the liberty to apply sought by Mr Jones.
Orders
I make the following orders:
1Set aside order 3 made on 10 December 2021 in case CIV-21-7802 by the District Court Judge that Mr Jones pay the Nominal Defendant’s costs of the District Court appeal.
2In lieu of that order, order that each party bear their own costs of the District Court appeal in case CIV-21-7802.
3Mr Jones is to pay one third of the Nominal Defendant’s costs of the Supreme Court appeal in case CIV-21-14116.
4 The appeal is certified fit for senior counsel but not for two counsel.