Maglio v Hino Motor Sales Australia Pty Ltd; McCoy v Hino Motors Ltd (No 2)
[2024] VSC 479
•13 August 2024 (on the papers)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST
S ECI 2022 03869
BETWEEN:
| DOMINIC MAGLIO | First Plaintiff |
| and | |
| MOLEDINA TRANSPORT SERVICES PTY LTD (ACN 622 411 025) | Second Plaintiff |
| v | |
| HINO MOTOR SALES AUSTRALIA PTY LTD (ACN 064 989 724) | First Defendant |
| and | |
| HINO MOTORS LTD | Second Defendant |
S ECI 2023 01521
BETWEEN:
| JAMES KENDALL McCOY | Plaintiff |
| v | |
| HINO MOTORS LTD | First Defendant |
| and | |
| HINO MOTOR SALES AUSTRALIA PTY LTD (ACN 064 989 724) | Second Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF JUDGMENT: | 13 August 2024 (on the papers) |
CASE MAY BE CITED AS: | Maglio v Hino Motor Sales Australia Pty Ltd; McCoy v Hino Motors Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 479 |
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COSTS – Group proceedings – Overlapping group proceedings – Whether appropriate to stand over costs orders pending the outcome of appeal against carriage decision – Whether appropriate to reserve plaintiffs’ costs of the stayed proceeding in the proceeding granted carriage – Sharing of information and documents between plaintiffs – Whether reasonable for the defendants’ costs of responding to the carriage applications be paid by the unsuccessful plaintiffs – Costs of applications for group costs orders – Ordinary principles governing award of costs – Fair and just in all the circumstances – Court’s discretion in awarding costs - Allen v G8 Education Ltd (No 3) [2022] VSC 302.
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WRITTEN SUBMISSIONS: | Counsel | Solicitors |
| For the Plaintiffs in the Maglio proceeding | Dr P K Cashman with Dr D J Townsend | Gerard Malouf & Partners |
| For the Plaintiff in the McCoy proceeding | C Moore SC with R May | Maurice Blackburn Lawyers |
| For Hino Motor Sales Australia Pty Ltd and Hino Motors Ltd | C Winnett with L Mills | Clayton Utz |
HIS HONOUR:
Introduction
S ECI 2022 03869 (the ‘Maglio Proceeding’) and S ECI 2023 01521 (the ‘McCoy Proceeding’) are group proceedings issued under Part 4A of the Supreme Court Act 1986 (Vic) (the ‘Act’). On 15 December 2023, I handed down reasons for judgment in the proceedings in relation to the plaintiffs’ respective applications concerning the multiplicity of proceedings (the ‘Carriage Applications’) and for a group costs order (‘GCO’) pursuant to s 33ZDA of the Act (the ‘GCO Applications’). I determined that the Maglio Proceeding should be stayed and the McCoy Proceeding would proceed with sole carriage. I was also satisfied that it was appropriate to make the GCO sought by the plaintiff in the McCoy Proceeding (‘McCoy Plaintiff’).[1] I made directions for the filing of submissions with respect to costs.
[1]Maglio v Hino Motors Sales Australia Pty Ltd; McCoy v Hino Motors Ltd [2023] VSC 747 (‘Reasons’).
On 29 January 2024, the plaintiffs in the Maglio Proceeding (‘Maglio Plaintiffs’) lodged an application for leave to appeal the decision in respect of the Carriage Applications (the ‘Appeal’). The Appeal was discontinued on 26 July 2024.
This judgment concerns the costs of the Carriage Applications and the GCO Applications.
Proposed orders
The parties submitted competing orders as to costs on 21 December 2023 and subsequently filed written submissions by 8 March 2024. By their written submissions, both the Maglio Plaintiffs and the defendants in each proceeding, Hino Motors Ltd and Hino Motor Sales Australia Pty Ltd (together, the ‘defendants’), revised some of the orders they were seeking resulting in there being more overlap between the parties as to the appropriate costs orders to be made.
The Maglio Plaintiffs sought an order standing over the making of costs orders to a date to be fixed, pending the outcome of the Appeal. This order was proposed to the McCoy Plaintiff for his consent, which was declined. The defendants’ consent was not sought as it was considered otiose in the circumstances.
Since the discontinuance of the Appeal that issue can be put to one side. The parties’ written submissions indicate that it is not controversial that the following orders are appropriate:
(a) the Maglio Plaintiffs shall bear their own costs of and incidental to their GCO application and the determination of the multiplicity of proceedings;
(b) the McCoy Plaintiff shall bear his own costs of and incidental to his GCO application and that his costs of and incidental to the determination of the multiplicity of proceedings be reserved; and
(c) the defendants’ costs of and incidental to the McCoy Plaintiff’s GCO application be reserved.
I see no impediment to issuing orders consistent with the above subject to my determination of the remaining issues in dispute between the parties as follows:
(a) the Maglio Plaintiffs’ costs of the Maglio Proceeding that are unrelated to their GCO application and the determination of multiplicity of the proceedings. The Maglio Plaintiffs submit their costs should be reserved in the McCoy Proceeding. The McCoy Plaintiff and the defendants submit the Maglio Plaintiffs should bear the whole of their costs of the Maglio Proceeding;
(b) the defendants’ costs of the Carriage Applications. The defendants and the McCoy Plaintiff submit that 50% of the defendants’ costs should be reserved in the McCoy Proceeding and the other 50% paid by the Maglio Plaintiffs.[2] The Maglio Plaintiffs submit the defendants’ full costs of the Carriage Applications should be reserved in the McCoy Proceeding; and
(c) the defendants’ costs of the Maglio Plaintiffs’ GCO application. The Maglio Plaintiffs and the defendants submit these costs should be reserved in the McCoy Proceeding. The McCoy Plaintiff proposed an order that the Maglio Plaintiffs should pay the defendants’ costs of and incidental to their GCO application.[3]
[2]In the alternative, the defendants and McCoy Plaintiff propose the defendants’ full costs of the Carriage Applications be reserved in the McCoy Proceeding.
[3]In the alternative, the McCoy Plaintiff proposed an order that the defendants’ costs of and incidental to the Maglio Plaintiffs’ application for the GCO be reserved in the McCoy Proceeding.
Relevant principles
The ordinary principles governing the award of costs are well understood and were helpfully summarised by Nichols J in Allen v G8 Education Ltd (No 3)[4] as follows:[5]
[4][2022] VSC 302 (‘G8’).
[5]Ibid [5].
…
(a) The power to award costs is in the Court’s discretion, which must be exercised judicially and in accordance with principle.[6]
[6]Northern Territory v Sangare (2019) 265 CLR 164, 172-173 [24]-[25] (‘Sangare’).
(b) The ordinary rule is that costs follow the event. That rule is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. It recognises that if the litigation had not been brought or defended by the unsuccessful party, the successful party would not have incurred the expense which it did.[7] In this way the indemnity principle is compensatory in nature: costs are awarded to indemnify the successful party against the expense to which they have been put by reason of the legal proceedings.[8]
[7]Oshlack v Richmond River Council (1998) 193 CLR 72, 96-97 [66]-[67].
[8]Latoudis v Casey (1990) 170 CLR 534, 543.
(c) Where one party has clearly succeeded the discretion will ordinary be exercised in accordance with the guiding principle that costs follow the event.[9] Conduct on the part of a successful party in relation to the litigation may provide a reason to depart from the ordinary rule.
[9]Sangare (n 6) [24]-[25].
(d) Rule 63.20 of the Supreme Court (General Civil Procedure) Rules 2015 sets out the default position that costs of an interlocutory application are costs in the proceeding unless the Court otherwise orders. That rule reflects the fact that interlocutory applications do not usually result in the final determination of the proceeding, with the result that the Court will not be in a position to assess where the justice lies between the parties until the conclusion of the proceeding.[10] Section 24 of the Act confirms that the Court retains a broad discretion concerning costs and may depart from the default position in an appropriate case.
[10]Dale v Clayton Utz (No 3) [2013] VSC 593, [13]; Sangare (n 6) 172-173 [24]-[25].
(e) The “event” may be contestable, and the contest usually arises where there is a multiplicity of issues upon which the parties have enjoyed mixed success.[11]…In Australian Receivables v Tekitu (a case requiring the resolution of multiple issues) Ward J set out the principles that guide the determination of the event in this way:[12]
[11]Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs & Citizenship (2013) 251 CLR 322, 393 [241].
[12]Australia Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) [2011] NSWSC 1425, [24]-[26], [60].
The first question, therefore, is as to what (for the purposes of that general rule) is the “event”. The need carefully to determine the relevant “event” in a case involving multiple issues was recognised in Owners Strata Plan No 64,970 v Austruc Constructions Ltd (in liq) (No 5) [2010] NSWSC 568, by Bergin CJ in Eq.
…
The English Court of Appeal in Roache v News Group Newspapers [1992] TLR 551, as cited by the Queensland Court of Appeal in Timms v Clift [1998] 2 Qd R 100, usefully posed the question as to who is to be seen as the successful party “in the event” as being a question as to:
… who, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?…
The exercise of the court’s discretion as to costs ultimately requires an assessment of what is fair in all the circumstances. In Bowen Investments Pty Ltd v TAB Corp Holdings Ltd (No 2) [2008] FCAFC 107 Finkelstein and Gordon JJ said (at [5]):
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.
(f) The analysis in Australian Receivables illuminates two propositions: first, that inherent in a compensatory award of costs is recognition of the fact that the successful party has had to engage in a contest against the opposing party in order to obtain what has been won. Secondly, the question is ultimately one of fairness.
(g) The “fairness” inquiry also permits of consideration of responsibility for the incurring of costs. In Commonwealth of Australia v Gretton[13] Beazley JA said:
[13][2008] NSWCA 117.
One question which arose was whether the determination as to who should pay the costs was dependent upon which party should be seen as being responsible for the ongoing legal costs in the matter. This was part of a consideration of the larger question as to the underlying juridical basis of the Court’s powers to award costs. I agree with Hodgson JA that the exercise of the discretion must be based on fairness and that underlying that concept itself involves a consideration of the responsibility of parties in incurring the costs. As the cases also illustrate, a wide variety of circumstances fall for consideration where costs orders (other than costs follow the event) are sought. Those circumstances are not confined to cases involving Calderbank offers and include cases where the costs of a particular issue is in question. However, the concern in this case is with Calderbank offers and it is that upon which attention needs to be focussed.[14]
[14]Ibid [85].
Similarly, Hodgson JA said, concurring:
In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant’s responsibility because the plaintiff was caused to incur costs by the defendant’s failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.[15]
[15]Ibid [121].
Against the background of her Honour’s observations as to the general principles governing costs, I shall now address the parties’ competing proposed orders.
Submissions and determination
The Maglio Plaintiffs’ remaining costs of the Maglio Proceeding
The Maglio Plaintiffs seek an order that their costs, other than those costs of and incidental to the their GCO application and the determination of the multiplicity of proceedings, be reserved in the McCoy Proceeding.
The Maglio Plaintiffs submit that if the Appeal is unsuccessful, Gerard Malouf & Partners (‘GMP’), their solicitors, will share all relevant information and documents gathered or produced in the Maglio Proceeding with Maurice Blackburn Lawyers (‘MB’), the McCoy Plaintiff’s solicitors. I shall proceed on the basis that its submissions has equal application in the event of discontinuance. The Maglio Plaintiffs argue this material, including a list of punitive group members, expert evidence as to the operation and application of Japanese law, correspondence with regulators and automotive industry information, could reduce the time and costs of the conduct of the McCoy Proceeding.[16] If MB is provided with and uses such information and documents, it is submitted that it would not be possible to determine what costs incurred by the Maglio Plaintiffs may be properly characterised and awarded as costs in the McCoy Proceeding. This is as until such time as the McCoy Proceeding is resolved it cannot be determined what and the extent to which information and documents were used. In view of that, it is submitted an order reserving the Maglio Plaintiffs’ costs is appropriate to allow deferral of the consideration of costs to the conclusion of the McCoy Proceeding.
[16]The Maglio Plaintiffs propose to do this in furtherance of the overarching purpose of civil litigation set out in s 7 of the Civil Procedure Act 2010 (Vic) and GMP’s duty to further the administration of justice pursuant to r 3.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.
The McCoy Plaintiff opposes such an order. First, he submits the Maglio Proceeding has in effect come to an end with the Court ordering the proceeding be permanently stayed and so, it is appropriate that the question of costs be determined now. Secondly, there is no reason to think that the Maglio Plaintiffs could obtain any better order (than bearing their owns costs) at any later stage that would justify an order reserving their costs in the McCoy Proceeding. Thirdly, such an order has the potential to interfere with the disposition of the McCoy Proceeding. The McCoy Plaintiff submits an order that the Maglio Plaintiffs bear their own costs of the Maglio Proceeding is the appropriate course.
The defendants also oppose the Maglio Plaintiffs’ proposed order. The defendants submit such an order would be inappropriate, unprecedented and contrary to the Reasons which expressly recognise that staying the Maglio Proceeding would have the effect that GMP would have to bear sunk costs incurred by it to date. Such sunk costs being a risk assumed by GMP in entering into the field of commercialising litigation, not a burden borne by the plaintiffs of the class.[17] Nor would it be just or fair to make the defendants ultimately responsible for Maglio Plaintiffs’ costs, in the event the defendants are unsuccessful in defending the McCoy Proceeding. They further argue that GMP continued to incur significant and avoidable costs after it was on notice of the commencement of the McCoy Proceeding and after it commenced (such as costs relating to the issuing and setting aside of subpoenas and inappropriate interlocutory applications). In that context, the defendants submit the appropriate order is that the Maglio Plaintiffs should bear their own costs of Maglio Proceeding.
[17]Reasons [93].
The Maglio Plaintiffs have been entirely unsuccessful in their GCO and carriage applications, resulting in a stay of the Maglio Proceeding. In such circumstances, the usual course would be for the Maglio Plaintiffs to bear their own costs of the Maglio Proceeding. However, the final determination as to costs lies within the court’s discretion and should be guided by principles of fairness, considering each party’s responsibility for incurring the costs.[18]
[18]See above [8].
In my view, the Maglio Plaintiffs should bear their own costs of the Maglio Proceeding. It would be neither fair nor just to effectively transfer the sunk costs of the Maglio Proceeding to the McCoy Proceeding on the basis that GMP will share information and documents relevant to the issues in dispute with MB. Whilst I accept the sharing of information and documents has the potential to assist MB and thus shorten the time and costs incurred in the conduct of the McCoy Proceeding, which is in furtherance of the overarching purpose of civil litigation, there is no indication or guarantee that MB requires or is not already in possession of such information and documents. I do not consider that it is necessary nor appropriate to reserve the Maglio Plaintiffs’ costs in the McCoy Proceeding to enable the determination of what costs (if any) incurred by the Maglio Plaintiffs may be awarded as costs in the McCoy Proceeding. If MB seeks the information and documents offered by GMP, it is open to the parties to negotiate alternative arrangements for payment of these materials.
Additionally, the consequence of reserving the Maglio Plaintiffs’ costs in the McCoy Proceeding is that, unless there is any subsequent order, those costs will be the parties’ costs in the proceeding.[19] The risk of sunk costs are inherent in the initiation of class actions and fairness dictates that neither plaintiffs of the class nor the defendants should have to bear same. Further, despite being informed by MB of a potential competing class action within six weeks of the commencement of the Maglio Proceeding, GMP continued to incur costs meaning it is responsible for incurring costs after it was on notice.[20] Moreover, requiring MB to consult with GMP regarding the disposition of the McCoy Proceeding, which would be the situation if settlement negotiations were on foot and there was a question of the reserved costs to be resolved, would be entirely inappropriate. Accordingly, the Maglio Plaintiffs’ should bear their own costs of the Maglio Proceeding.
[19] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.22.
[20]Reasons [2]-[6].
The defendants’ costs of the Carriage Applications
The defendants seek orders that 50% of its costs of and incidental to the Carriage Applications be reserved in the McCoy Proceeding and the other 50% be paid by the Maglio Plaintiffs. In the alternative, the defendants seek an order that its full costs of and incidental to the Carriage Applications be reserved in the McCoy Proceeding.
It is not controversial between the parties that at least 50% of the defendants’ costs of the Carriage Applications should be reserved in the McCoy Proceeding. However, the defendants submit it is appropriate that the Maglio Plaintiffs pay the other 50% due to the expansive claims made by them that affected the defendants’ interests and required them to invest significant time and incur costs in responding even though the defendants did not take a position as to which plaintiff should be granted carriage. In support of its submission, the defendants draw attention to the fact that all the matters raised in its outline of submissions in relation to carriage and GCO applications dated 13 November 2023 were directed to matters raised by the Maglio Plaintiffs. Especially its submissions in respect of the Maglio Plaintiffs’ reliance on their co-counsel arrangement with United States law firm Lieff Cabraser Heinmann & Bernstein (‘LCHB’) and the omission from their evidence of the Stipulated Protective Order which the defendants submit was material to the Reasons insofar as they related to carriage.[21]
[21]See Reasons [37]-[43]. The co-counsel agreement with LCHB was considered not to materially assist the Maglio Plaintiffs due to the Stipulated Protective Order made in the US Hino proceeding which contains a prohibition on disclosure by LCHB of any highly confidential information to any third person or entity which extends to GMP.
The Maglio Plaintiffs submit the appropriate order is that the whole of the defendants’ costs in respect of the Carriage Applications be reserved in the McCoy Proceeding. They argue that the standard principle that costs follow the event should not be applied in the instant case as it is not a simple case of an ‘event’ whereby the defendant ‘wins’ and the plaintiff ‘loses’.[22] The Maglio Plaintiffs say further that the Maglio Proceeding was commenced first thus the carriage dispute was not necessitated by the Maglio Plaintiffs, there was no conduct on the part of the Maglio Plaintiffs which delayed or added unnecessary complexity or expense to resolving the issue of carriage and the resolution of the multiplicity of proceedings was also in the interest of the defendants.
[22]Thomas v The A2 Milk Company Ltd; Xiao v The A2 Milk Company Ltd [2022] VSC 319, [51].
The McCoy Plaintiff makes no substantive submission in respect of the defendants’ costs relating to the Maglio Proceeding other than agreeing that the order sought by the defendants is the appropriate order.
I do not accept that the Maglio Plaintiffs should be required to pay 50% of the defendants’ costs of the Carriage Applications. The courts have long dealt with competing proceedings and there is no rule that the losing party will be fixed with the defendants’ costs.[23] There was no defect in the Maglio Proceeding, it was genuinely instigated with well-considered claims.
[23]Lidgett v Downer EDI Ltd; Kajula Pty Ltd v Downer EDI Ltd; Jowene Pty Ltd v Downer EDI Ltd; Teoh v Downer EDI Ltd [2023] VSC 574, [151].
Nevertheless, I accept that the defendants have incurred costs and expense in considering and responding to the Carriage Applications. Regardless of the extent to which resolution of the Carriage Applications required consideration of matters raised by the Maglio Plaintiffs as opposed to the McCoy Plaintiff, the issue of multiplicity had to be resolved. The contest was at its essence between the Maglio Plaintiffs and the McCoy Plaintiff and in particular which firm of solicitors would have carriage of the proceeding. Appropriately the defendants played only a limited role.
I consider that the entirety of the defendants’ costs of the Carriage Applications should be reserved in the McCoy Proceeding.
The defendants’ costs of the Maglio Plaintiffs’ GCO application
That leaves the defendants’ costs of the Maglio Plaintiffs’ GCO application. Initially, the defendants sought an order that the Maglio Plaintiffs pay its costs of their GCO application however by its written submissions, the defendants indicated they no longer sought such an order instead seeking its costs of the Maglio Plaintiffs’ GCO application be reserved in the McCoy Proceeding. The Maglio Plaintiffs seek the same order.
The McCoy Plaintiff proposed the same order initially sought by the defendants and by his written submissions, the McCoy Plaintiff submits he has no particular interest in the defendants’ costs in the Maglio Proceeding but submits that the initial order sought by the defendants is the appropriate order.
I consider that the defendants’ costs of the Maglio Plaintiffs’ GCO application should be paid by the Maglio Plaintiffs. The Maglio Plaintiffs were unsuccessful in that application because of the outcome of the Carriage Applications. The consequence of this was that the Maglio Proceeding was stayed. Unlike the defendants’ costs of the Carraige Applications which inevitably involved a comparison of the two actions, the Maglio Plaintiffs’ GCO application is a discrete matter confined to that action. If the defendants’ costs are reserved, they may well end up forming party of the costs of the McCoy Proceeding, despite their being no relationship to the McCoy Proceeding. The risk of being required to pay the defendants’ costs of the GCO application must be taken to form part of the risk borne by the Maglio Plaintiffs in commencing proceedings of this nature.
Conclusion
In conclusion:
(a) I will make the following orders in the Maglio Proceeding:
(i) The plaintiffs shall bear their own costs of this proceeding.
(ii) The plaintiffs pay the defendants’ costs of and incidental to the plaintiffs’ application for a group costs order.
(iii) The defendants’ costs of and incidental to the determination of the multiplicity of proceedings be reserved in proceeding S ECI 2023 01521.
(b) I will make the following orders in the McCoy Proceeding:
(i) The parties’ costs of and incidental to the determination of the multiplicity of proceedings and the defendants’ costs of and incidental to the plaintiff’s application for a group costs order be reserved.
(ii) The plaintiff shall bear his own costs that are separately identifiable as solely relating to paragraphs 3 and 4, under the hearing ‘Group Costs Orders’, of the plaintiff’s summons dated 6 October 2023.
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