Mareva Building Consultants v Zevon (No 2)

Mareva Building Consultants v Zevon (No. 2) [2012] ACTSC 24 (8 February 2012)

COSTS – Discretion to order costs –Apportionment of costs where plaintiff is partially successful –Court Procedure Rules 2006 (ACT) – r 1725 – Whether costs should be limited to costs the plaintiff would have been entitled to recover if the proceedings were started in the Magistrates Court

Court Procedures Rules 2006 (ACT) rr 21, 1705, 1721, 1725
Legislation Act 2001 (ACT) s 75B

Mareva Building Consultants v Zevon [2012] ACTSC 18
Hughes v Western Australian Cricket Association (Inc.) & Ors [1986] ATPR 40-748
Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261
EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92
Keddie v Foxall [1955] VR 320

No. SC 676 of 2009

Judge: Katzmann J
Supreme Court of the ACT

Date: 8 February 2012

IN THE SUPREME COURT OF THE     )
  )          No. SC 676 of 2009
AUSTRALIAN CAPITAL TERRITORY           )

BETWEEN:MAREVA BUILDING CONSULTANTS
Plaintiff

AND:HARRY ZEVON
First Defendant

VIDA ZEVON
Second Defendant

ORDER

Judge:  Katzmann J
Date:  8 February 2012
Place:  Sydney/Canberra

THE COURT ORDERS THAT:

The defendants pay 50% of the plaintiff’s costs.

The amount of costs be determined in accordance with r 1725 of the Court Procedures Rules 2006 (ACT) as in force until 31 December 2011.

On 27 January 2012 I delivered judgment in this matter, making an award of damages of $19,887 (including interest) in favour of the plaintiff (Mareva): Mareva Building Consultants v Zevon [2012] ACTSC 18.
Mareva was only partially successful. It failed to establish one of its two pleaded causes of action, with the result that it recovered less than a fifth of the damages it sought, although it succeeded in relation to all but one issue. My provisional view was that in all the circumstances Mareva should have only half its costs and foreshadowed an order to that effect. I asked the parties whether they wished to be heard against the order I proposed, indicating that if they did, I would make orders in chambers for written submissions. In the meantime, however, each of the parties made and exchanged submissions, obviating the necessity for orders to be made.
Both parties oppose an order that the defendants (Mr and Mrs Zevon) pay half of Mareva’s costs.
Mareva urges that costs be adjusted to take into account the amount of court time taken up with points about which Mr Zevon was unsuccessful, including matters on which the Court did not accept his evidence. It asserts that the proceeding was originally scheduled for “one plus” days but contends that Mr Zevon’s conduct increased the time for hearing to five days.
Whether or not Mr Zevon’s conduct increased the time of the hearing, in my opinion, an estimate of “one plus” days was wildly optimistic, having regard to the issues in the proceeding, the fact that the defendants were unrepresented, the disorganised state of the documentary evidence (on both sides) and the failure of the parties to exchange statements of evidence or obtain orders for evidence to be taken by affidavit, which would have been the most convenient and efficient way of proceeding. I will come to the other point Mareva raises later in these reasons.
Mr Zevon made submissions urging that the proper order was that the parties bear their own costs. He contends that Mareva’s legal representatives prosecuted the unsuccessful cause of action solely for the purpose of increasing their recoverable costs.
Alternatively, Mr Zevon asks that the percentage costs awarded in Mareva’s favour be reduced from 50% to 20–25%, a figure, he submits, that more fairly reflects the time and resources spent in prosecuting the successful claim. He argues (correctly) that the purpose of a costs order is to compensate the successful party, not to punish the unsuccessful. He claims that, given the relative proportions of time and resources spent on the two causes of action, the costs order I foreshadowed would have the effect of punishing the defendants. He also draws attention to the terms of r 1725 of the Court Procedures Rules 2006 (ACT) (“the Rules”).
I reject Mr Zevon’s primary submissions. There is no evidence to support his contention concerning the conduct of Mareva’s legal representatives. I also think that it is inappropriate to order that the parties bear their own costs where the plaintiff has had a measure of success, justifying the institution of proceedings.
In principle, Mr Zevon’s alternative submission has merit; most of the time in the case was devoted to the cause of action upon which Mareva failed. On the other hand, I also accept Mareva’s submission that a disproportionate amount of that time was spent litigating issues upon which the Zevons were unsuccessful. In the result, for the reasons more fully explained below, I have decided to adhere to my provisional view that Mr and Mrs Zevon pay half of Mareva’s costs.
The Rules provide that the costs of the proceeding are in the discretion of the Court: r 1721. The Court also has a discretion to order costs in relation to a particular issue in, or a particular part of, a proceeding and to declare the percentage of the costs attributable to that issue or part: r 1705. The discretion is unfettered in its terms but, obviously enough, it must be exercised judicially.
There is a wealth of authority about the factors that may influence the exercise of the discretion. In Hughes v Western Australian Cricket Association (Inc.) & Ors [1986] ATPR 40-748 at 48,136 (a case about the exercise of the power under s 43(2) of the Federal Court of Australia Act 1976 (Cth), which also provides that costs are in the discretion of the Court) (“Hughes”), Toohey J summarised the effect of the authorities:
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 (1920) 2 K.B. 47.
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 (1893) 1 Q.B. 564.
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 (1975) 13 S.A.S.R. 4 at p.12.
Thus, it is relevant (though not, as his Honour said in Hughes, conclusive) to consider how much time was taken up in a hearing (and, I would add, in preparation) with evidence and submissions relating to that part of the case upon which the moving party failed. For this reason, Mr Zevon’s submission that Mareva should be confined to the costs of the successful cause of action has some attraction. I considered this option before expressing my provisional view. But I decided against it. First, like Toohey J in Hughes, I was concerned that an order of this kind might impose an unreasonable burden on the parties and, potentially, the registrar on an assessment of costs. It seemed to me, therefore, that the better course was to award costs on a proportionate or percentage basis. I remain of this opinion. A question arises, however, about whether the proportion I tentatively fixed upon is fair and just. Both parties submit, in effect, that it is not.
The task of determining costs where apportionment is appropriate does not call for mathematical precision. As the Full Court of the Federal Court said in Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272, mathematical precision is illusory. The exercise depends on impression and evaluation. The result should be one that best reflects the interests of justice in the overall circumstances of the case: EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].
Having reflected on the matter with the benefit of the submissions, I maintain my provisional view. The parties raise factors that pull in opposite directions. Whilst the time taken up in the preparation and hearing of the successful cause of action is likely to be closer to the figure Mr Zevon nominated, a good deal of the overall time in preparation and hearing was taken up dealing with issues upon which Mareva was successful, including challenges to Mr Zevon’s credit.
The stated purpose of the Rules is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense: r 21. The costs rule, like any other, must be applied by the Court with that objective in mind. The parties are required to help the Court achieve that objective: see r 21. It seems to me that it would not further the objective if Mareva were limited to 20–25% of its costs, despite its success on all but one issue. It is true that much of the time in the case was occupied with proving the cause of action on which Mareva failed, but, if Mr and Mrs Zevon had focussed on the real issues, the whole of the proceeding would have been disposed of much more quickly and at much less cost. The Rules apart, in Keddie v Foxall [1955] VR 320 at 324 the Victorian Full Court observed that the authorities show that in exercising its discretion a court may have regard to “conduct – not necessarily misconduct of any party which is calculated to occasion unnecessary expense”.
In summary, although Mareva was successful in the proceeding, it should not have all its costs. Taking into account the competing considerations raised by the parties, it seems to me that an order that gives Mareva 50% of its costs is a fair and just outcome.
Finally, I come to the matter of r 1725.
Having regard to the amount of Mareva’s claim, during submissions I raised with Mareva’s counsel whether I should take into account on the question of costs that the proceeding could have been brought in the Magistrates Court. Counsel’s response was that at the time the proceeding was started (28 July 2009), the limit of the jurisdiction of the Magistrates Court was $50,000. (It increased to $250,000 on 25 July 2011, before the hearing of this case.) Still, counsel’s response did not deal with the possibility that the proceeding might be caught by the provisions of r 1725.
Rule 1725 limits the amount of costs recoverable by a plaintiff in certain circumstances. The rule has been amended once since the originating claim was filed. On 1 January 2012 (after the hearing but before judgment) a number of amendments to r 1725 came into effect. Before the recent amendments, the rule provided as follows:
(1)     This rule applies to a proceeding in the Supreme Court if—
(a)     the Magistrates Court—
(i)     would have had jurisdiction and power to hear and decide the proceeding; or
(ii)would, apart from the amount claimed, have had jurisdiction and power to hear and decide the proceeding; and
(b)     the plaintiff is entitled to the costs of the proceeding; and
(c)the plaintiff is awarded an amount (excluding costs) of not more than $40,000.
(2)     The plaintiff is only entitled to—
(a)the costs that the plaintiff would have been entitled to recover had the proceeding been started in the Magistrates Court; and
(b)the amount of any Magistrates Court determined fee that the plaintiff would have been entitled to recover had the proceeding been started in the Magistrates Court.
(3)The costs (including any Magistrates Court determined fee) that the plaintiff is entitled to under subrule (2) must be reduced by—
(a)the additional costs properly incurred by the defendant because the proceeding was started in the Supreme Court instead of the Magistrates Court; and
(b)the difference between the amount of any Supreme Court determined fee incurred by the defendant and the amount of the equivalent Magistrates Court determined fee.
(4)However, the plaintiff is not required to pay the defendant any amount that the defendant's costs (including determined fees) exceed the costs (including determined fees) payable to the plaintiff.
(5)This rule does not apply in relation to disbursements (other than determined fees).
(6)Despite subrules (2) to (4), the court may order that the plaintiff is entitled to a different amount for the costs (including the amount of any Magistrates Court determined fee).
Note Pt 6.2 (Applications in proceedings) applies to an application for an order under this subrule.
(7)In this rule:
“Magistrates Court determined fee” means the relevant determined fee under the Court Procedures Act 2004 , part 3 (Court and tribunal fees) in relation to a proceeding in the Magistrates Court (and includes a fee determined under any other territory law that applied to a proceeding in that court before the commencement of that part).
“Supreme Court determined fee” means the relevant determined fee under the Court Procedures Act 2004 , part 3 (Court and tribunal fees) in relation to a proceeding in the Supreme Court (and includes a fee determined under any other territory law that applied to a proceeding in that court before the commencement of that part).

The amendments made some significant changes. They include increasing the threshold in subrule (1)(c) from $40,000 to $175,000, placing additional restrictions on a plaintiff’s entitlement to costs and introducing limits on the recovery of disbursements. If the amended rule were to be applied in this case, Mareva would still be entitled to the Magistrates Court determined fee had the proceeding been started in the Magistrates Court, but it would have no entitlement to costs and would only be able to recoup 50% of the disbursements it would have been entitled to recover in this Court had the judgment been more than $250,000.
Neither party made any submissions on the effect of the amendments. Nevertheless, the amendment must not be taken to commence retrospectively, there being no clear indication to that effect: Legislation Act 2001 (ACT), s 75B. If, contrary to this view, the amendment is to be taken to have retrospective effect or to apply to those costs incurred since 1 January 2012, I would exercise my discretion under subrule (3) of the amended rule to order that Mareva’s costs and disbursements be determined without regard to the amendment. Otherwise, it would be quite unfair. It would penalise Mareva because of the time judgment was delivered. Mareva made no application that the discretion to depart from the costs limitations in r 1725 be exercised in its favour and, with this qualification, I see no good reason to do so.
I therefore order that Mr and Mrs Zevon pay 50% of Mareva’s costs. For more abundant caution I also order that costs be determined in accordance with r 1725 of the Rules as in force until 31 December 2011.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Katzmann.

Associate:
Date: 8 February 2012

Counsel for the plaintiff:  Mr P Walker
Solicitor for the plaintiff:  S & T Lawyers
Counsel for the defendants:  The defendants appeared in person.
Date of hearing:  19-23 September 2011
Date of last submissions:  3 February 2012
Date of judgment:  8 February 2012

[2012] ACTSC 24

February 8, 2012