Morris v Riverwild Management Pty Ltd & Ors

[2012] HCATrans 72

[2012] HCATrans 072

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M142 of 2011

B e t w e e n -

MICHAEL MORRIS

Applicant

and

RIVERWILD MANAGEMENT PTY LTD (ACN 070 089 860)

First Respondent

JOHN CARLYLE KENLEY

Second Respondent

CATHERINE ELIZABETH HALLIDAY

Third Respondent

KENNETH NOEL JOHNSON

Fourth Respondent

BRUCE MICHAEL STILLMAN

Fifth Respondent

COOLUMBOOKA HOLIDNGS PTY LTD (ACN 005 783 933)

Sixth Respondent

PLUMPTON PLACE PTY LTD (ACN 005 644 226)

Seventh Respondent

HEADINGTON INVESTMENTS PTY LTD (ACN 006 747 682)

Eighth Respondent

JASPER NOMINEES PTY LTD (ACN 008 518 269)

Ninth Respondent

GRANTALI PTY LTD (ACN 005 524 854)

Tenth Respondent

Application for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM MELBOURNE BY VIDEO LINK TO SYDNEY

ON FRIDAY, 9 MARCH 2012, AT 1.31 PM

Copyright in the High Court of Australia

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MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR A.M. DINELLI, for the applicant.  (instructed by DLA Piper Australia)

MR P.B. MURDOCH, QC:   May if please the Court, I appear with my learned friend, MR J.D. PIZER, for the respondents.  (instructed by Giannakopoulos Solicitors)

HAYNE J:   Yes, Mr Walker.

MR WALKER:   Your Honours, that the principle against double recovery is important cannot be overstated.  It is why there is an equity to obtain judicial relief against its occurrence.

CRENNAN J:   But is this really a double recovery case or more correctly described as a case about the indemnity in relation to costs, as Justice Nettle put it?

MR WALKER:   Yes, at application book 46, paragraph 44, I think, is the passage to which your Honour is drawing attention.  In our submission, these are not mutually exclusive concepts.  In our submission, the vice, among other things, that is sought to be prevented by application properly enforced of the rule against double recovery is that it prevents, among other things, the indemnity rule from being breached as well. 

The equity of contribution is in the same general area of operation.  They are not displaced by giving attention to the indemnity rule.  Rather they are all serving a set of congruent values and principles in the administration of justice and, in particular, in the supervision of the enforcement of remedies.  It is for those reasons, in our submission, that the importance of the equity and the fact that it will be occasioned by a number of different circumstances raises the question and, we say, urges the merit of a grant of special leave in this case for the following reasons. 

We have seen in Michael Wilson & Partners recently an, as it were, incidental importance given to the principle in order to lay to rest a spectre that had been raised during argument in that case.  The equity would apply to the substance of the matter to ensure that there would not be double recovery.  The same thing applies, with respect, in relation to the notion that somebody might be paid more on account of costs than is necessary in order to reflect that which follows from the award of an amount in this case because the settlement had been made plus costs. 

HAYNE J:   Now, does your argument depend upon making some division of some or other of the offers or the settlements that were all‑in settlements?

MR WALKER:   Your Honour, ultimately there has to be something of that kind but it is reached perhaps indirectly rather than directly.

HAYNE J:   But, however it is reached, how do you divide the all‑in sum?

MR WALKER:   Now, the all‑in sum so far as costs are concerned, and that is not the same as the all‑in sum so far as each of the settling defendants is concerned, but as to the all‑in sum so far as costs are concerned, what I will call, I hope not tendentiously, the common costs of $1.8 million, that can and should have been dealt with in some such fashion as unexceptionably Justice Pagone did.  It is of significance that that was achieved on the basis of some expert evidence, challenged but not answered, if I can put it that way. 

Those, in our submission, may not be the unique way in which one can divide up the costs so as to allocate them to parties responsible for them having been incurred, which is the idea underlying that allocation, but it does not accept indirectly of course having the effect in relation to discovering, as a matter of evidence, what historically was, if there was any, prorating between costs and damages in the all‑in costs agreed to by each other defendant.

Can I turn to that issue, particularly by reference to the application book, page 49, paragraph 52?  A first observation to be made is that the criticism expressed there of the idea that a judicial discretion was being exercised is one which, in our submission, is not appropriate to be made against the first instance reasoning, reasoning which included the need to do justice between the parties, particularly in relation to costs and decisions which estimated and by allocation, visited costs upon a party to a particular extent only does not involve a discretion in any of the usual ways in which that word can be deployed in this context.  It would be an evaluative assessment at most, and of course it is an evaluative assessment not unlike general damages.

Furthermore, the first instance judge was guided by the appropriate principle, that is to ensure against double recovery and that then leads to the question of what the Court of Appeal calls a general principle of proration.  See at about line 25 on paragraph 26 on page 49.  It is not, of course, our case below, nor the one we would seek to put in this Court, that there is some rule, inflexible, more or less, of proration by reference to some proportionality, for example, of recovery. 

Obviously each case as was argued, and adjudicated in this case, would supply its own factors as to the way in which one might prorate or allocate or divide an all‑in sum between the damages or restitutionary remedy which it represents a compromise of and the costs which are said to be included in it.

HAYNE J:   What would be the object of that division?  Would it be to reflect what was in the mind of the settling adviser?  Just one moment, Mr Walker, we seem to have an issue with the link.

MR WALKER:   Your Honour, I can hear you.

HAYNE J:   Right.  We are back on.

MR WALKER:   Thank you, your Honour.

HAYNE J:   What is the object that one is pursuing?  To work out what was in the mind of the settling adviser, work out what was in the mind of the settling party, apply some other standard - what are you doing?

MR WALKER:   Your Honour, in some cases if evidence were adduced then it may turn into just that - examination and a finding as to what was in a party’s mind, just as that material can, in certain cases, be relevant and perhaps decisive in taxation inquiries concerning distributions between capital income in otherwise all‑in figures. 

That, however, cannot be a complete explanation because what we would seek to advance by way of the arguable principle for which we seek special leave for this Court to consider cannot be a principle that applies only where somebody has either (a) adverted in measurable monetary figures to how much of the figure is attributable costs or, (b) have kept records of it or, (c) have taken the risk of going into evidence so as to be cross‑examined about it. 

It would not be a principle if it depended upon such accidental factors.  We accept that.  Far, however, from that being a criticism or a weakness of that which we propose for this Court to consider it, in our submission, rather places heavy emphasis on what the court had before it in this case of a routine and ordinary kind, apt to be repeated thousands of times in the future. 

That is, first of all, multiparty litigation.  Second, litigation which involves claims on account of detriment said to be suffered by the plaintiff, claimed to be suffered by the plaintiff, of a kind that may have been caused by one or more of the defendants joined.  Third, claims which involve common matters of fact and argument in such a fashion that as is very usual many of the costs can fairly be said to have been incurred, regardless of whether there was one or eight of the defendants, that is, they are common to matters which are in narrative or in dispute, relevant between all of the parties.

Next, we concede that as many of the court rules will require comprises or resolution can be reached by an agreement which is the costs plus or the plus costs form, which applies to my client in this case.  Then finally one adds that which is very common, indeed mundane, namely agreements reached by simple agreement between parties that a sum of money would be accepted by a plaintiff in full and final settlement of the claims made against the particular defendant, inclusive of costs.

Your Honours have seen how that was in all but one of the cases in question, the actual verbal formula employed.  Now, that is either just a verbal formula devoid of any semantic content and any substantial content, or it is not.  For the reasons we have put in writing there is a high importance in discovering whether or not those formulae are just meaningless mantras. 

In our submission, when one is looking at the material which was available to Justice Pagone and asking the question that Justice Hayne has asked me to address, what exercise is involved here, it suffices to express it at the level that his Honour did, namely, discovering first of all whether anything has been received on account of costs by the party seeking to enforce the full extent of the costs order against the plus costs defendant and second, working out when the party who would know gives no evidence about that, working out how much that should be. 

Now, as to the second of those steps we have already put the argument that there are more ways than one of skinning that cat and the way Justice Pagone went about it on the evidence, which my client adduced, was unexceptionable, cannot be criticised in principle, obviously could not be said to be uniquely correct or exclusively available, but when it comes to the primary question, has anything been received on account of costs by the plaintiff who has been paid pursuant to an agreement for a compromise inclusive of costs, then, with respect, the answer really should have been all the other way from the way the Court of Appeal reasoned.

Inclusive of costs would be not merely meaningless but positively misleading if it meant inclusive of costs but they are zero.  Second, it would be contrary to principle, that is, and authority, as to where the onus ought lie if it meant inclusive of costs but unless the party who is not party to that transaction can adduce evidence, there being no onus on the party who was involved in the transaction, it will be zero as a result of an onus of proof.

There is no reasoning in the Court of Appeal to support that departure from established authority placing the onus on the party with the knowledge of how much was accepted on account of costs.  For that reason, in our submission, partly because all the knowledge is on those parties involved in that transaction as to what costs were included, and partly because it would fly in the face of the use of those words to say there were no costs accepted, we are left with that which is extremely obvious about all such multiparty litigation, indeed, one could say all litigation.

One starts with the proposition would it have cost anything to have progressed the litigation against those paying defendants, paying inclusive of costs, anything at all.  Well, of course it would, that is, there were costs incurred in that forensic exercise completed by agreement rather than by adjudication.  Next question, was anything agreed to be paid on account of those costs?  Leaving aside the question begging matter of a sum of money, one can say from the party’s use of the phrase “inclusive of costs” that yes it was, and expressly so. 

That then left the question which, in our submission, in principle and satisfactory for the point of view of practical justice, is addressed by placing an evidentiary burden on the party who knows about it as opposed to the party who, by definition, does not know about it.

HAYNE J:   Now, that proposition presupposes, does it not, that the all‑in settlement is computed by separate consideration of claim and costs, rather than being no more than a single undivided sum taken in satisfaction of a number of claims?

MR WALKER:   No, although I should say, if it did the argument should fail and I would not have the point of principle that I seek to raise.  As I said earlier, if there is a principle of a kind for which we seek to contend, bottomed and expressed as the rule against double recovery and the observance that there must be some fact in the phrase “inclusive of costs”, if there is a principle it surely cannot be one that depends upon whether or not people did in fact build up a figure by components rather than, as your Honour has asked me to consider, what must be well known to everybody involved in litigation, that very often it is a figure which is inscrutable as to the way in which it was reached.  It was reached by horse bargaining and in the last iteration of negotiation, probably by split the difference.  Nonetheless, it is inclusive of costs.

CRENNAN J:   But the point is inclusive of costs so frequently will not involve any separate or distinct consideration of costs.

MR WALKER:   No question about that and to the extent that a separate consideration or an actually overt designated component of the all‑in figure for costs was seen by your Honours to be a necessary part of my argument, then I would invite your Honours to reject my argument that that could not be right.  I accept that. 

However, of course, I say that it is not a premise that applies to the way we put the case at all.  We say yes, take that which is the mundane expectation of litigators and those advising litigants that the all‑in figure has not been produced by some ponderous scientific method of saying, “Well, I think I may have caused you to incur $100,000 costs.  I think I have got such and such a prospect of beating you.  I will pay you in my settlement 23 per cent”.  That is laborious, fictitious and not to be contemplated.

But there was a claim for damages.  There was a claim which would be made if success was enjoyed for an order for costs.  Both were, on one side, the contentions of the claiming party at the instant before compromise was reached.  Both are given up.  We know that there has to be something done under the rubric of double recovery in, for example, truly concurrent claims with respect to damages and ‑ ‑ ‑

CRENNAN J:   Because there is no separate or distinct consideration of costs with an all‑in offer, the kinds of considerations you are raising would normally be raised by someone in your client’s position on a taxation because there is no possibility, one would apprehend, generally speaking, of being able to do any arithmetical exercise in relation to the all‑in settlements.

MR WALKER:   We would not be involved in the taxation between one of the other paying defendants who agreed to pay inclusive of costs.

CRENNAN J:   No, I mean what you are raising could have been raised as a consideration on your own taxation.

MR WALKER:   Well, no, your Honour, because if there is to be an order for costs, whether only against us or anybody else who is vulnerable to it, we are all ordered to pay all of the costs unless there is a special order allocating because obviously if the plaintiff has been put to expense then the several judgment debtors will be liable for all of the costs.  The equity of contribution, of course, between those judgment debtors will look after the matter then.  But obviously there is no, as it were, proportionate liability reduction in our favour for a costs order. 

We suffer the whole costs order, but then by dint of first the principle against double recovery and second, the exercise of the equity of contribution, we do not pay more than the solvency of our companions in misery and the claim, that is the total claim of costs by the plaintiff, would require as a matter of justice. 

So that this is not something that could have been dealt with by us in the aggregating of the figure of $1.8 million; this is us saying those are the costs.  They must include common costs.  You have received something because you say so in your terms of settlement on account of costs.  You do not tell us how much that is.  We are, therefore, put to the expedient which the authorities we have drawn to attention approve of the various proportioning or prorating methods, all of which will be case specific, we accept, so as to ensure that on account of the common costs you are not getting more than is necessary for you to be fully compensated, that is fully made good to the extent that the costs order intends to do so. 

Now, your Honours, that leaves the question that we have raised concerning Boncristiano.  At page 49 again of the application book in paragraph 53 there is, in our submission, an unsatisfying distinction or distinguished in a way of Boncristiano.  There is, of course, an analogy between concurrent claims or alternative claims on the one hand and costs being costs which are incurred which would be incurred for fighting the whole case compared to costs which are incurred only in pursuing a case against one particular defendant. 

It means that for the common costs, which raise the question of principle in this case, Boncristiano does indeed show that the principle positively requires, and the principle being the principle against double recovery, positively requires that there be brought into account that part of the settlement sum which, given the paying defendant’s refusal to show – I should say the receiving plaintiff’s refusal to show - how much was received on account of costs, can and should have been determined in the way Justice Pagone did.

It is for those reasons, in our submission, your Honours, that there is a matter of very considerable practical importance when it comes to the settlement and the working out after settlement of multi‑defendant litigation, there being no doubt that there ought to be no discouragement of course to settlements.  Equally, there should be no discouragement to settlements, some of which, by dint of rules, will need to be plus costs, and some of which, by dint of the common commercial practice will, by agreement, be inclusive of costs. 

It would be an unfortunate message that that kind of blend, which is not within the power of any one defendant to dictate, that that kind of blend is, as it were, something which visits a particular disadvantage upon the plus costs paying defendant.  There is a huge disadvantage, in our submission, best summed up by this outcome of the case:  inclusive of costs is held without any evidence or argument based on evidence from the receiving plaintiff to mean that the costs paid in that all‑in sum was zero.

They have to say was zero because if it simply, according to them, was unknown then one swings into action with the kind of approach that Justice Pagone took.  It is not unknown.  It requires inferences from the kind of circumstances that his Honour took into account.  But it starts with the fact that of course costs were incurred and it starts with the fact that if you say that you paid money inclusive of costs, then you did just that.  May it please the Court.

HAYNE J:   Thank you, Mr Walker.  We will not trouble you, Mr Murdoch.

Because the settlement sums in issue in this case cannot be divided into parts, one attributable to the substantive claims made and the other to the costs of pursuing those claims, the questions of principle relating to double recovery and indemnity, which are the questions the applicant would seek to agitate in this Court, would not fall for consideration if special leave to appeal were to be granted.

In our opinion, an appeal to this Court would enjoy insufficient prospects of success to warrant a grant of special leave to appeal.  Special leave to appeal is refused with costs.

The Court will adjourn to 10.15 am on Tuesday, 27 March 2012, in Canberra.

AT 1.56 PM THE MATTER WAS CONCLUDED