NHB Enterprises Pty Ltd v Corry (No 6)

Case •

[2021] NSWSC 2

•

06 January 2021

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: NHB Enterprises Pty Ltd v Corry (No 6) [2021] NSWSC 2
Hearing dates: On the papers
Decision date: 06 January 2021
Jurisdiction:Equity
Before: Ward CJ in Eq
Decision:

1. The Respondents pay 15% of the Applicants’ costs of the notice of motion seeking costs orders pursuant to s 99 of the Civil Procedure Act 2005 (NSW), such costs to be assessed on the ordinary basis, and otherwise there be no order as to costs with the intent that each party bears its or his own costs of the application.

Catchwords:

COSTS — Party/Party — Costs orders in interlocutory proceedings — Wasted costs jurisdiction — Indemnity basis

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98, 99

Cases Cited:

Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

Commonwealth of Australia v Gretton [2008] NSWCA 117

Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423

Harrison v Schipp [2001] NSWCA 13

Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748

Jamal v Secretary, Department of Health (1988) 14 NSWLR 252

Kelly v Jowett (2009) 76 NSWLR 405; [2009] NSWCA 278

King v Muriniti (2018) 97 NSWLR 991; [2018] NSWCA 98

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153

Nadarajapillai v Naderasa (No 2) [2015] NSWCA 209

NHB Enterprises Pty Ltd v Corry (No 5) [2020] NSWSC 1838

Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Hodgson CJ in Eq, 3 June 1998, unrep)

Re Felicity (No 4) [2015] NSWCA 19

Ridehalgh v Horsefield [1994] Ch 205; [1994] 3 All ER 848

Short v Crawley (No 40) [2008] NSWSC 1302

Tonna v Mendonca (No 2) [2020] NSWSC 306

Waters v PC Henderson (Australia) Pty Ltd (Court of Appeal (NSW), 6 July 1994, unrep)

White Constructions ACT Pty Ltd (in liquidation) v White [2004] NSWSC 303

Texts Cited:

Ritchie’s Uniform Civil Procedure NSW (loose-leaf)

Category:Costs
Parties: NHB Enterprises Pty Ltd (First Applicant)
Finn Pharmaceuticals Pty Ltd (Second Applicant)
George Gerges (First Respondent)
Christopher Athanassios (Second Respondent)
Representation:

Counsel:
A T S Dawson SC with T B Senior (Applicants)
R A Dick SC with A R Zahra (Respondents)

Solicitors:
HWL Ebsworth (Applicants)
Sparke Helmore Lawyers (Respondents)
File Number(s): 2019/00054125
Publication restriction: Nil

Judgment

  1. HER HONOUR: On 17 December 2020, I published reasons for judgment on an application by the Applicants for an order that the Respondents indemnify them for wasted costs pursuant to ss 99 and 98(4)(c) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) (NHB Enterprises Pty Ltd v Corry (No 5) [2020] NSWSC 1838 (NHB v Corry (No 5)).

  2. I ordered that the Respondents indemnify the Applicants for wasted costs in the fixed sum of $70,000, payable forthwith. I also directed the parties to file brief written submissions within seven days on the question of costs, with a view to dealing with costs on the papers, if possible. Those submissions were filed within the time stipulated and I have had the opportunity to consider those submissions.

  3. I now deal with the remaining issue in relation to the application and, in so doing, I will adopt, for convenience, the abbreviations used in the principal judgment (i.e., NHB v Corry (No 5)).

  4. In essence, the respective parties’ positions as to costs may be summarised as follows.

Parties’ respective positions in outline

  1. The Applicants submit that the Respondents should pay the Applicants’ costs of and incidental to the application, in light both of the result (and the findings) made in NHB v Corry (No 5) and also of the fact that the application was one which it was appropriate for the Applicants to bring (as to which, see my observations in NHB v Corry (No 5) at [6]; [572]).

  2. Moreover, the Applicants submit that those costs should be paid on an indemnity basis pursuant to s 98(1)(c) of the Civil Procedure Act, contending that the Respondents unreasonably resisted the application and unnecessarily prolonged the hearing of the application. It is to be noted that the Applicants sought an order for the costs of the application to be payable on the indemnity basis in their Points of Claim (see at [91]).

  3. The Respondents, on the other hand, submit that the appropriate order as to costs is that which I had foreshadowed in NHB v Corry (No 5) (at [573]), namely that each party bear his or its own costs:

573.   … If it be of assistance, I note that my tentative view is that it may be appropriate for each party to bear his or its own costs in circumstances where there has been a mixed outcome and emotions have run high. However, that is by no means a concluded view.

  1. With that outline, I turn now to consider the submissions for the Applicants.

Applicants’ submissions

  1. In support of their submission that costs should be ordered in their favour, the Applicants first invoke the usual order as to costs and point out that their application was substantially successful. They cite the recent decision of the High Court in Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 (at [24]) for the proposition that the discretion to award costs must be exercised judicially and by reference only to considerations relevant to its exercise and upon facts connected with, or leading up to, the litigation, and note that the High Court affirmed (at [27]) that the usual order as to costs principle is founded on “basic justice that a successful party should be compensated for expenses that it has incurred because it has been obliged to litigate by the unsuccessful party”.

  2. Furthermore, reference is made in this context to the oft-quoted judgment in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) (at [67] per McHugh J) for the recognition that the principle is grounded in reasons of fairness and policy and, as between parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation; and that costs are not punitive, with the primary purpose of an award of costs being to indemnify or compensate the successful party (see also, for example, Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59).

  3. The Applicants accept that, although a successful application under s 99 of the Civil Procedure Act involves a finding of serious neglect, incompetence or misconduct, which might indicate that the usual order for costs should be an indemnity costs order, courts have generally not approached the question of costs in that manner (noting that costs of an applicant’s successful motion for a wasted costs order were made on the ordinary basis in, for example, Re Felicity (No 4) [2015] NSWCA 19 at [44] per Basten JA, with whom I and Emmett JA agreed, Nadarajapillai v Naderasa (No 2) [2015] NSWCA 209 at [19] per Emmett JA, with whom McColl JA and Macfarlan JA agreed and King v Muriniti (2018) 97 NSWLR 991; [2018] NSWCA 98 at [101] per Emmett AJA).

  4. The Applicants here rely on the fact that they were successful in obtaining the wasted costs order (on a specified gross sum basis) on the basis of the finding that the Respondents’ failure to disclose that Mr Corry was monitoring the Applicants’ solicitors’ review of the Dynamics Account amounted to serious incompetence or neglect of their professional and ethical obligations, which caused the Applicants to incur wasted costs in the period from 24 April 2019 to 5 June 2019 in seeking to determine the cause of the disruption in accessing the Dynamics Account (see NHB v Corry (No 5) at [505]-[520]; [574]-[576]) and that there was a finding that the Second Respondent’s evidence that there would have been no (or no potential) forensic advantage in the monitoring by Mr Corry of the Applicants’ review of the Dynamics Platform was “simply not credible” (see NHB v Corry (No 5) at [242]).

  5. The Applicants say that the fact that there was not a finding (as had been sought) that the Respondents’ conduct in respect of other allegations in the Points of Claim reached the threshold of serious misconduct, neglect or incompetence within the meaning of s 99 of the Civil Procedure Act would not justify a departure from the usual order as to costs. In this regard, the Applicants emphasise the findings made against the Respondents that: the Respondents’ breaches of the Undertaking amounted to incompetence in the sense of a lack of care (see at [389]); the Respondents’ investigation into the circumstances in which the Password had been disclosed was inadequate and (in that sense) incompetent and that the further investigation carried out after the 29 April 2019 Letter was also inadequate (see at [429]); and the Respondents’ response to the 29 April 2019 Letter in relation to the deletion of documents did not make clear that there had been the deletions referred to in Mr Corry’s email, instructions as to those deletions should have been conveyed to the Applicants and that it was troubling that the references to deletions in the May Affidavits did not make reference to the deletions that Mr Corry had referred to in his email (see at [542]).

  6. The Applicants say that those matters are not severable so as to enable differential costs orders to be made, as they formed part of the factual matrix of the relevant events. It is said that the Applicants would always have been required to make all of the allegations in the Points of Claim because those allegations were factually interlinked. Moreover, it is said that, in light of the other adverse findings referred to above, while the outcome might be characterised as “mixed” (as, indeed, I had characterised it at [573]), the Applicants were successful overall on their application, noting that the costs orders obtained covered the costs sought other than for the period between 15 March and 23 April 2019. The Applicants say that they did not lose on any contested issue; rather, there were findings made in their favour albeit that the Respondents’ conduct was not characterised as reaching the threshold required by s 99 of the Civil Procedure Act.

  7. The Applicants note that there was no finding of disentitling conduct on their part such as would constitute a basis for departing from the usual order as to costs.

  8. Second, the Applicants note that I rejected (see at [6]; [572]) the Respondents’ submissions that the making of the application was inconsistent with the admonition by McColl JA in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153 (Lemoto) (see at [92](g)) or that it was otherwise inappropriate for the Applicants to have brought the application.

  9. As to the Respondents’ criticism of the Applicants’ conduct of the proceedings, it is noted that I considered that the submission that the elongation of the hearing was at least in part caused by the Respondents’ “recent construction argument” having been advanced for the first time by the Respondents’ written submissions was “not without force” (at [7]), although I did not explore the extent to which the hearing of the application was lengthened thereby (nor the Respondents’ allegation that the Applicants had adopted a belated contention that the orders were premised on there being only one access point to the Dynamics Account). The Applicants point to the findings that: the orders made by Kunc J, properly construed, were not restricted to one particular password (the password to the First Corry Email Account) or means of access to the Dynamics Account, but that they required the provision of “all passwords” to the Dynamics Account and that, had all those passwords been provided, the content of the Dynamics Platform would have been secured (see at [301]) (notably, that being the construction contended for by the Applicants); and the Respondents’ understanding of the orders at the relevant time was not that there were multiple logins and passwords to the Dynamics Account that allowed multiple users to access the Dynamics Account and to amend or alter documents on that account (as they had contended in submissions and in their evidence), but that they proceeded on the assumption that provision of Mr Corry’s password would preserve the integrity of the Dynamics Account (see at [360]; [361]).

  10. The Applicants also say that, although there was no finding that the Respondents had consciously lied about their understanding of the orders, I did make observations to the effect that the Respondents had engaged in a process of (not dishonest) reconstruction of events by fostering on an explanation that made sense of their conduct in the most favourable light to them (the Applicants here emphasising what was said at [362]).

  11. Following, the Applicants submit that the Respondents’ conduct in advancing the recent construction argument is such as to warrant the making of an order that costs be paid on the indemnity basis.

  12. It is also noted that the power to make indemnity costs orders (see s 98(1)(c) of the Civil Procedure Act) requires an exercise of discretion; that the discretion is not confined or limited, except that it is required to be exercised judicially (see Oshlack at [22] per Gaudron and Gummow JJ; Harrison v Schipp [2001] NSWCA 13 at [139] per Giles JA); and that there must be some special or unusual feature or circumstances in the case (concerning the conduct of the party against whom the order is made and relating to the proceedings in question) to justify such an order (i.e., some “relevant delinquency” by the party as a litigant – see Oshlack at [44] per Gaudron and Gummow JJ). It is further noted that “relevant delinquency” does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case (see, for example, White Constructions ACT Pty Ltd (in liquidation) v White [2004] NSWSC 303 at [11] per McDougall J).

  13. In this regard, the Applicants argue that the Respondents’ conduct, in seeking to portray events in the most favourable light to themselves, was delinquent in that their evidence was rejected and involved a construction of the orders put forward after the application had been made and in an effort to excuse or downplay their conduct and the seriousness of it (referring to my observations at [362]).

  14. More specifically, the Applicants contend that the practical effect of the Respondents’ recent construction of the relevant orders was unnecessarily to prolong the proceedings and to cause the Applicants to incur costs they should not have been required to incur in responding to that construction of the orders. In particular, it is noted that the recent construction argument was deployed a few days before the hearing of the application commenced, it being asserted in opening submissions dated 3 April 2019 that the Applicants’ case had proceeded on the “false premise” that the orders prevented or restrained Mr Corry from accessing the Dynamics Account (cf the finding made in this regard as to the operation of the orders). It is said that, had the Respondents not raised the recent construction argument, the only issue for determination on the application would have been whether the Respondents’ conduct (which was not in dispute) in respect of each of the relevant allegations made against them in the Points of Claim constituted serious misconduct, neglect or incompetence within the meaning of s 99 of the Civil Procedure Act and the hearing would have been significantly shorter and “may well have finished” within the two days originally allocated. Instead, it is said that it was necessary for the Applicants to cross-examine the Respondents as to their knowledge or understanding of the construction of the orders and to address the actual construction of those orders (matters said to be reflected in the fact that a significant amount of the reasons is dedicated to the consideration and determination of those issues – see at [275]-[363]). It is further said that the cross-examination of Mr Wallman was almost entirely focused on seeking concessions in support of the recent construction argument, including why he did not make enquires as to the operation of and access to the Dynamics Account, and his understanding of the operation of the orders (referring to my observations at [322]).

  15. It is submitted that, even if the Respondents had convinced themselves of the recent construction argument in order to excuse their conduct, they must have known that it was entirely inconsistent with their own conduct at the relevant time and the content of relevant documents but they nevertheless pressed that construction during the hearing and in the evidence they gave (by way of example, reference is made to my observations at [156] and [162]).

  16. In the circumstances, the Applicants submit that the unreasonable elongation of the hearing by the Respondents constituted relevant delinquency in respect of their conduct of the case such as to warrant the making of an order for indemnity costs.

  17. Fourth, it is submitted that it would be an “ironic and incongruous outcome” if a party who had successfully prosecuted an application pursuant to s 99 of the Civil Procedure Act were to be left out of pocket by reason of the costs involved in so doing, particularly in circumstances where applications made under s 99 of the Civil Procedure Act enable concerns about the conduct of legal practitioners to be raised before the Court and to be determined, including in its supervisory jurisdiction, and applicants to be indemnified for costs that have been incurred by the serous neglect, serious incompetence or serious misconduct of a legal practitioner.

  18. It is submitted that, where it has been determined that the application was appropriate and raised important issues as to the professional and ethical obligations of officers of the Court (see again at [6]), any costs order that leaves the Applicants out of pocket, for having made and successfully prosecuted the present application, would be unfair.

  19. The Applicants say that the Respondents’ response (when the prospect of the wasted costs application was first raised in correspondence), namely, to deny that there was any basis for such application and to threaten to make an application for costs against the solicitors for the Applicants, left the Applicants with no choice but to make the present application, which has necessarily involved them incurring substantial costs, including in the preparation of a notice of motion and supporting affidavit, Points of Claim, further affidavit evidence, written submissions and in preparing for and appearing at the hearing of the application (which, again, the Applicants submit was unnecessarily elongated by the Respondents’ conduct of the proceedings).

  20. It is submitted that all of that work and the accompanying costs was necessary because the Respondents refused to accept that they had been responsible in any way for the Applicants having incurred wasted costs (which position was maintained throughout the proceedings) and that, in the circumstances, the Applicants should not be left out of pocket in respect of the costs incurred, having successfully established that s 99 of the Civil Procedure Act was engaged and that an order should be made.

  21. In this connection, reference is also made to my observation (at [575]) to the effect that the purpose of the wasted costs jurisdiction is not to punish legal practitioners but, rather, to protect and indemnify the party who has incurred the wasted costs. Similarly to the preceding, it is submitted that it would be a “jarring result” if, having made out an entitlement to be so protected and indemnified, a successful applicant were left unprotected and not indemnified in respect of the further costs incurred to make out that entitlement.

  1. The Applicants submit that, if a costs order is not made in their favour (whether on an ordinary or indemnity basis), they will not only suffer a substantial loss but, in effect, will be punished for having brought the present application, which was not only entirely appropriate as the Court has determined, but which was unsuccessfully contested by the Respondents and their insurer.

  2. Further, it is submitted that, if a costs order is not made in favour of the Applicants, other litigants will undoubtedly be deterred from making similar applications in the future. It is said that such an outcome would be contrary to the purpose of, and public interest in, the wasted costs jurisdiction (namely, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their lawyers – as noted at [47] of NHB v Corry (No 5) and, for example, Lemoto at [91]ff, Kelly v Jowett (2009) 76 NSWLR 405; [2009] NSWCA 278 at [60] per McColl JA, with whom Beazley JA, as Her Excellency then was, and Barrett JA agreed, and Ridehalgh v Horsefield [1994] Ch 205 at 226; [1994] 3 All ER 848 per Bingham MR, as his Lordship then was).

  3. Finally, the Applicants specifically refer to the correspondence between the parties prior to the bringing of the wasted costs application, in which the Respondents refused to accept that they had acted inappropriately, including in a manner that might warrant the making of a wasted costs order against them, and which necessitated the making and prosecution of the present application. It is submitted, again, that this “intransigence” was a further factor that elongated the hearing.

  4. In particular, reference is made in this regard to the letter dated 18 July 2019 from HWLE, the solicitors for the Applicants, to the Second Respondent foreshadowing the present application and setting out the basis for that application, in which the Respondents were invited to respond to the matters raised in that letter and to agree to appropriate orders to avoid the need for the present application; to the response sent on or about 26 July 2019, in which the First Respondent indicated, inter alia, that, in the event that the present application was brought and successfully defeated, the Respondents would seek their costs against HWLE “directly” and on the indemnity basis; and also to the letter from the Respondents’ solicitors, Sparke Helmore Lawyers, on or about 25 March 2020, on a without prejudice save as to costs basis, indicating that their costs to date were in excess of $170,000 (exclusive of GST) and offering to compromise the application on the basis that there be judgment for the Respondents with no order as to costs. HWLE responded to that offer on or about 27 March 2020, in which they indicated, inter alia, that they did not consider that to be a real and genuine compromise by the Respondents in an attempt to resolve the application.

  5. Following, the Applicants submit that this correspondence indicates that the Respondents took an intransigent approach to the application from the beginning and that they and their insurer “doggedly” resisted it, including in circumstances where it is said that it must have been apparent to them that the recent construction argument was entirely inconsistent with their own conduct at the relevant time. It is said that the Respondents’ entrenched attitude towards this application regrettably prolonged the matter and necessitated its determination after a fully contested hearing.

  6. Thus it is submitted that any costs order other than an order in favour of the Applicants would be seriously unfair to the Applicants, contrary to the usual order as to costs and highly likely to deter litigants from making similar applications in the future; and that the costs order should be on an indemnity basis because the Respondents’ conduct in raising the recent construction argument shortly before the hearing and pressing that argument, which was ultimately rejected, unnecessarily elongated the hearing.

  7. I now turn to consider the Respondents’ submissions.

Respondents’ submissions

  1. As noted above, the Respondents submit that the appropriate costs order would be that which I expressed tentatively in NHB v Corry (No 5) (at [573]). They say that this is so by reference to the following circumstances: the findings (at [6]; [572]) that it was appropriate for the application per se to be brought and the very limited success enjoyed by the Applicants; the high bar required for the jurisdiction under s 99 of the Civil Procedure Act to be enlivened, including the application of the standard articulated by Dixon J, as his Honour then was, in Briginshawv Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw) (and noting that such applications are appropriate only in the clearest of cases); and the over-reaching and disproportionate way in which the Respondents say that the application was prepared and conducted by the Applicants (over a six-day hearing), which included multiple alternative allegations of serious misconduct, serious incompetence or serious neglect said to enliven the s 99 jurisdiction (all but one of which failed), countless allegations that the Respondents had deliberately breached duties, acted dishonestly or lied to the Court (all of which were rejected) and sustained (and unsuccessful) attacks on the Respondents’ credit both during unnecessarily lengthy cross-examination (which resulted in adjournments and additional hearing days) and in submissions. The Respondents invoke the admonition by the Court of Appeal against applications such as the present becoming a new and costly form of satellite litigation (referring, as they did at the hearing of the application, to what was said in Lemoto at [92](g) per McColl JA; and also to my reasons at [5]).

  2. The Respondents maintain that the way in which the Application was conducted by the Applicants resulted in six hearing days (which exceeded the initially allocated hearing by about four days), unnecessarily complicated and multi-pronged allegations of serious misconduct, unnecessarily sustained cross-examination and unnecessary (and unsuccessful) personal and professional attacks on the Respondents; and, therefore, that this application became precisely the type of inappropriate and costly satellite litigation against which the courts have forewarned; and that the recovery of ‘wasted costs of $70,000 was wholly disproportionate to a six-day hearing of a notice of motion in this Court.

  3. The Respondents invoke the principles relevant to the exercise of discretion where a successful party has failed on multiple issues or pursued or persisted with issues without merit (which were considered in Tonna v Mendonca (No 2) [2020] NSWSC 306 at [167]-[181] (Tonna v Mendonca (No 2)), and by Hammerschlag J in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [31], his Honour there referring to the relevant authorities collated by White J, as his Honour then was, in Short v Crawley (No 40) [2008] NSWSC 1302 at [25]-[32] (Short v Crawley (No 40))).

  4. Relevantly, the Respondents note that a costs order in favour of a successful party can be modified to reflect its failure on particular issues even if the successful party did not act unreasonably in raising those issues (see, for example, Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Hodgson CJ in Eq, 3 June 1998, unrep) at 10-11); that if a party unreasonably pursues or persists with points which have no merit then such conduct will constitute a consideration relevant to the ordering of costs even in circumstances where that party is generally successful (see, for example, Oshlack at 122); that conduct in relation to the matter may be discreditable to an extent warranting a party being deprived of costs (see, for example, Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 271 per Mahoney JA); that where a litigant has succeeded only upon a portion of his claim then the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which it has failed (see, for example, Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 at 48,136 (Hughes v WACA)).

  5. It is noted that where the proceedings involve multiple issues then departure from the general rule may be warranted particularly where the losing party has succeeded on issues which occupied significant time but that, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed (see Ritchie’s Uniform Civil Procedure NSW, looseleaf, at [42.1.15]; Waters v PC Henderson (Australia) Pty Ltd (Court of Appeal (NSW), 6 July 1994, unrep) at 5); Short v Crawley (No 40) at [27]-[28]). Indeed, it is also noted that 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 (see Hughes v WACA at 48,136).

  6. The Respondents point to nine matters that they contend indicate that an appropriate exercise of discretion is for there to be no order as to costs, with the intent that the parties to the application each bear their own costs. These nine matters are as follows.

  7. First, that no costs were wasted by reason of the breach of the undertaking to the Court (which was the circumstance in which the wasted costs application was made), noting that the application was not a contempt proceeding.

  8. Second, that the Application was brought in circumstances where there was significant animosity between the parties and emotions ran high, something which it is submitted plainly drove an approach to the application that put to one side commerciality and the objectives of s 56 of the Civil Procedure Act and, instead, “left no stone unturned to attack the Respondents in every conceivable way, including by making the most serious of allegations and seeking to impugn their personal and professional integrity” (reference being made to my observations at [13]).

  9. Third, it is said that the application raised only one important issue as to the professional and ethical obligations of officers of the Court, namely circumstances where one party to proceedings becomes aware during the course of those proceedings that another party has secretly put in place a system by which that person could monitor the opposite party’s review of documents in the course of that party’s preparation for the conduct of the proceedings (see at [6]), that being the important issue that it was found warranted the bringing of the application and the only basis upon which the Application succeeded (see at [505]-[520]). It is noted that, although there was a finding that there had been serious incompetence on the part of the Respondents (at [505]), the Applicants’ submission that the Respondents had engaged in serious misconduct was rejected because, although there had been a serious failure to appreciate their professional and ethical obligations, they had not adverted their minds to the issue (see at [520]).

  10. Pausing here, although I did emphasise in my reasons the importance of the issue raised in relation to the conduct which I found amounted to serious incompetence, it should not be thought that allegations of serious misconduct of the kind that had been made would not have warranted the bringing of a wasted costs application. The relevant point is that those other allegations were not established in the present case. However, I would not wish it to be suggested that bona fide concerns as to such misconduct would not properly be the subject of a wasted costs application.

  11. Fourth, that the Applicants strenuously propounded (but failed to establish) each of the following groups of very serious allegations (referred to by the Respondents as the “Unsuccessful Allegations”): allegations adverse to the credibility of the Respondents, including that their evidence was demonstrably false (see at [305]-[316] cf the finding at [323]); allegations as to misleading and inappropriate conduct in relation to the Respondents’ understanding of the February and March 2019 orders and that they had lied to the Court as to their state of mind at the relevant time (see at [325]-[343]) about which the Respondents were cross-examined at length (see the findings at [360]; [362]- [363]); the initial allegation that breach of the undertaking amounted to serious misconduct and subsequent allegations pressed as to serious neglect or incompetence in relation to the breaches of the undertaking (see at [23], [367] cf [390]); allegations as to the failure to disclose breach of the Undertaking by provision of the Password (see at [25]; [396]; [407]; [412]), including that the Respondents in fact became aware of their breach of the Undertaking on the night of 23 April 2019 (see at [397]) (and an attack on the Respondents’ credit in that regard – see at [398]; [400]-[406]) (all of which were rejected – see at [425]; [429]); allegations as to the failure to disclose the existence of the Second Corry Email Account (see at [25] cf [504]); and allegations as to a failure to disclose the deletion of documents (see at [29]; [522] cf [543]).

  12. Fifth, that the Unsuccessful Allegations were allegations of the most serious kind against legal practitioners and officers of the Court and were made (and maintained) in circumstances where there was no issue between the parties as to the authorities relevant to the Court’s jurisdiction to make costs orders against legal practitioners. It is noted, in particular, that there was no dispute that the jurisdiction had to be exercised, inter alia, “with care and discretion and only in clear cases”, where “full allowance must be made for the exigencies of [the lawyer] acting in that environment” and “only when, with all allowances made, a legal practitioner’s conduct of court proceedings is quite plainly unjustifiable” (see at [46]-[56]) and that the Briginshaw standard applied (see at [57]).

  13. Following, it is submitted that, by reason of those uncontroversial principles (well known to the Applicants and accepted by them) and the Court’s rejection of the many and varied Unsuccessful Allegations, it is apparent that the Applicants “substantially overreached” and it is said that the Applicants’ “overzealous” approach to such a serious and rare type of application unreasonably expanded the hearing, the evidence and the parties’ costs.

  14. Sixth, that those Unsuccessful Allegations represented six of the seven (i.e., 85%) of the key allegations/issues made and maintained by the Applicants and requiring determination by the Court. Again, it is said that the Unsuccessful Allegations resulted in a substantially expanded hearing with adjournments and additional hearing days, unnecessarily lengthy (and often repetitive) cross-examination, voluminous submissions, significant cost and unnecessary utilisation of judicial and Court resources (and, indeed, that the fault for that lies with the Applicants). The Respondents say that they cannot be criticised for defending the allegations they successfully defended.

  15. Seventh, and related or following from the preceding, it is submitted that the application inappropriately became a costly and disproportionate piece of satellite litigation contrary to the Court of Appeal’s admonition in Lemoto.

  16. Eighth, that the application, as framed, was directed to the Applicants’ claim for compensation of about $100,000 which has ultimately resulted in an order in their favour for $70,000. It is noted that this is a monetary award well within the usual jurisdiction of the Local Court of New South Wales and that it will likely “pale into insignificance” when compared to the costs incurred by the parties in prosecuting and defending the application. The Respondents say that this cannot justify a six-day interlocutory hearing in this Court in which some 85% of the allegations or issues advanced by the Applicants, and requiring determination by the Court, were unsuccessful and rejected.

  17. Ninth, that there were no settlement offers that would otherwise be relevant to the Court’s exercise of discretion as to costs. It is submitted that it is open to the Court to find that the “unreasonable and indefatigable” way in which the Applicants propounded the Unsuccessful Allegations, “and left no stone unturned in seeking to attack the Respondents”, likely ensured that there could be no real prospect of any sensible commercial resolution in any event.

  18. Thus it is submitted that the Applicants have recovered only a small amount of monetary compensation at the end of a long and hard-fought notice of motion hearing in which they tirelessly attacked the personal and professional conduct of the Respondents. It is noted that the Applicants’ vigorous credit attacks failed and most of the different ways in which they claimed s 99 relief were rejected. While it is said that, on one view, the Respondents may have some entitlement to costs in respect of the numerous attacks they successfully resisted, the Respondents submit that, in all of the circumstances, the appropriate and fair result is that there should be no order as to costs.

Determination

  1. The relevant legal principles are well known and have been referred to by both sides in their submissions. I have excerpted many of these principles above.

  2. In summary, the broad discretion as to costs under s 98 of the Civil Procedure Act is to be exercised judicially and having regard to the overriding statutory mandate in respect of the conduct of litigation in this Court for the just, quick and cheap resolution of the real issues in dispute (see s 56 of the Civil Procedure Act). Specifically, the underlying principle is that of fairness (see, for example, Commonwealth of Australia v Gretton [2008] NSWCA 117 at [85] per Beazley JA, as Her Excellency then was, and [121] per Hodgson JA, with Mason P agreeing with both at [1]). I have considered those principles recently in a number of cases, including in Tonna v Mendonca (No 2) (where, as noted above, I considered the principles applicable where there was a mixed outcome on the success of different issues). I do not propose here to revisit them.

  3. At the outset, I remain of the view that it was not inappropriate for the Applicants to have brought the wasted costs application. However, I must emphasise my concern at the likely disproportionate cost of that application when compared with the amount of the wasted costs that were sought, let alone ultimately recovered, by the Applicants. At least in this sense, I see force to many of the submissions made for the Respondents.

  4. I am also of the view that it was not inappropriate for the Respondents to have defended the application, and to have done so with some vigour, particularly in circumstances where the allegations raised serious issues of misconduct that could have had serious consequences for their professional reputation and could have led to disciplinary proceedings.

  5. Further, as I endeavoured to make clear in my principal judgment, I am conscious of the admonition against costly satellite litigation in relation to the wasted costs jurisdiction. That said, where serious allegations of misconduct are made against officers of the Court, they are entitled to a proper hearing and they must be permitted a proper opportunity to defend the allegations.

  6. Insofar as the Applicants’ submissions suggest that the Respondents should have capitulated to their demand for costs in advance of the foreshadowed application, I cannot accept that. Indeed, the ultimate result belies that – since the Applicants succeeded only on one aspect of the Respondents’ conduct and one in respect of which there had not been, as far as I am aware, previous judicial consideration precisely on point (it being described by Senior Counsel for the Respondents as a novel proposition).

  1. Otherwise, I remain of the view that it is unedifying to seek to explore in detail the reasons for the “elongation” of the hearing. As I have previously indicated, I consider that some responsibility for that can be levelled at both sides. Relevantly, I must record that I do not accept that the blame lies solely in the raising by the Respondents of the particular construction of the relevant orders for which the Respondents contended at the hearing of the wasted costs application, nor, however, do I accept that it lies solely in the (admittedly extended) cross-examination on behalf of the Applicants on that aspect of the matter.

  2. Accordingly, I do not accept that there was unreasonable conduct on one or other side such as would warrant an indemnity costs order (whether as a departure from the usual costs order or otherwise).

  3. Therefore, I am left with a situation where very serious allegations were made against the Respondents (including allegations of perjury to this Court which were not made out), the Applicants succeeded only on one aspect of the conduct on which they relied as enlivening the s 99 wasted costs jurisdiction and, on any view of the matter, the costs of the application must be considered to be wholly disproportionate to the amount in issue.

  4. As to the last of those matters, it does not seem to me to be an answer to the point to the say that there was an important ethical issue here raised (although I certainly accept that there was an important ethical issue raised), since that issue could have been raised by referring the matter to the Legal Services Commissioner or the Law Society of New South Wales for disciplinary review. Similarly, nor do I accept that if no costs order were to be made in favour of the Applicants then this would have the inhibiting effect on the future pursuit of wasted costs that the Applicants contend (at least to the extent that the reason for not making a costs order related to the disproportionate cost of the application). It must be recognised that there is a public interest in discouraging the pursuit of such applications in circumstances where the costs of taking that course are or are likely to be disproportionate to the amount sought to be recovered (whether because of the quantum of wasted costs in issue or the manner in which the application is pursued).

  5. Indeed, while I fully accept the purpose of and public policy underlying the wasted costs jurisdiction as explained in NHB v Corry (No 5), I must also take into account the statutory mandate applicable to the conduct of litigation in this Court, including the requirement for proportionality. To take an extreme example (and I accept the dangers of inapt analogy), if egregious misconduct by a solicitor had caused minimal wasted costs, it would surely not be appropriate for the wasted costs jurisdiction then to be invoked at inordinate expense – rather, as I have adverted to above, the appropriate course would surely be to refer that matter for disciplinary review.

  6. Following the above, and balancing the various matters that have been raised by the respective parties, having regard to the costs principles in the authorities to which I have referred (both here and in the other costs judgments to which I have there referred), I am of the view that the usual rule as to costs would warrant an order in favour of the Applicants; that there has not been misconduct or impropriety of the kind that would warrant departure from the usual costs order, as such, although the unsuccessful making of very serious credit allegations is a strong factor against an unqualified costs order in favour of the Applicants; and that the fact that there were discrete instances of conduct in respect of which complaint was made and differing outcomes as to both makes this a case where a differential costs order would be warranted and the disproportion between the costs claimed and the likely costs of the hearing (even had it not been elongated) is a matter of significant concern. Meanwhile, I do not consider that the Respondents can fairly be criticised for defending the very serious allegations made against them (and with the benefit of the legal advice they had obtained including, no doubt, as to the available construction of the orders for which they contended). Indeed, that is all the more so given several of the allegations made against them ultimately failed. More specifically, I certainly do not consider that the Respondents’ conduct of their defence of the wasted costs application or their failure to capitulate at the outset warrants an indemnity costs order against them, nor do I consider that the pre-application correspondence (or their threatened costs application) warrants this.

  7. With these matters in mind, I am also concerned not to inhibit the proper invocation of wasted costs orders in other cases (though I emphasise that care needs to be taken to ensure that the conduct of such applications is proportionate to the amount claimed).

  8. Accordingly, while I was initially of the tentative view that an appropriate order in the circumstances would be for each party to pay its or his own costs, I have concluded that, taking into account all of the above, the appropriate order is that the Respondents pay 15% of the Applicants’ costs of the wasted costs application, those costs to be assessed on the ordinary basis.

  9. To my mind, this appropriately reflects the differential success that the Applicants have had on the application while also taking into account the very serious allegations that the Applicants made against the Respondents on which they were unsuccessful (along with those various other matters that I have traversed in these reasons).

Orders

  1. For the above reasons, I order as follows:

  1. The Respondents pay 15% of the Applicants’ costs of the notice of motion seeking costs orders pursuant to s 99 of the Civil Procedure Act 2005 (NSW), such costs to be assessed on the ordinary basis, and otherwise there be no order as to costs with the intent that each party bears its or his own costs of the application.

**********

Decision last updated: 06 January 2021

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0

Cases Cited

18

Statutory Material Cited

1

Briginshaw v Briginshaw [1938] HCA 34
Briginshaw v Briginshaw [1938] HCA 34
Briginshaw v Briginshaw [1938] HCA 36