Osborne Metal Industries v Bullock (No.5)

[2011] NSWSC 684

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Osborne Metal Industries v Bullock (No.5) [2011] NSWSC 684
Hearing dates:	20/06/2011, 21/06/2011, 22/06/2011, 23/06/2011 and 24/06/2011
Decision date:	28 June 2011
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Defendants to pay 50% of first plaintiff's costs. Otherwise no order as to costs.
Catchwords:	COSTS - Whether defendants' non-acceptance of offer of compromise entitles plaintiffs to special costs order - whether offer of compromise otherwise relevant to exercise of discretion - effect of plaintiffs' relying on knowingly untrue evidence and failure on majority of substantive issues on entitlement to costs - order for costs to reflect substantial realities of the case.
Legislation Cited:	Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules
Cases Cited:	Adrian v Romin Pty Limited [2007] QSC 150 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Waters v P C Henderson (Australia) Pty Ltd (1994) 254 ALR 328
Category:	Procedural and other rulings
Parties:	Osborne Metal Industries (NSW) Pty Ltd ACN 003 284 928 (First Plaintiff) Brooker Holdings Pty Limited ACN 003 912 258 (Second Plaintiff) Bullock MFG Pty Ltd ACN 001 199 677 (First Defendant) Roy James Jackson (Second Defendant)
Representation:	Counsel: D B Studdy SC / J H Stephenson (Plaintiffs) F C Corsaro SC / J J Young (Defendants)   Solicitors: Watson Mangioni Lawyers Pty Limited (Plaintiffs) Bundock / Palmer Laywers (Defendants)
File Number(s):	2009/298671

JUDGMENT - COSTS (EX TEMPORE)

1. HIS HONOUR: I gave judgment in these proceedings on 24 June 2011 and directed the parties to bring in short minutes of order to give effect to my reasons this morning. They are agreed on everything except as to costs.

2. The effect of my reasons, as reflected in the draft short minutes of order, is that the first plaintiff succeeds against the first defendant in a sum in excess of $900,00.00 (inclusive of interest until today's date) but that all the other claims fail. There will be judgment accordingly and I will make the appropriate orders in a moment.

3. The starting position, therefore, is that costs should follow the event. If that were reflected in costs orders, the first defendants would be ordered to pay the first plaintiff's costs, the second plaintiff would be ordered perhaps to pay the first defendant's costs of the separate claim made against it by the first plaintiff, and the second and third defendants would be entitled to have their costs paid by both plaintiffs. In the circumstances of this case, the task of a costs assessor to give effect to such costs orders and to apportion costs accordingly would be a nightmare. There are times when such nightmares cannot be avoided, but it seems to me the effect of s 56 of the Civil Procedure Act 2005 (NSW) is, relevantly for present purposes, that the Court should do what it can to lift the burden of such nightmares from assessors and indeed from the parties whose costs claims assessors are charged with administering.

4. There are complicating factors that bear on the question of costs. One is that on 19 April 2011, the plaintiffs served a document purporting to be an offer of compromise. By that offer, the plaintiffs offered to compromise all their claims against all the defendants on terms that the plaintiffs have judgment against the defendants in the sum of $875,000 together with costs. It is apparent that, as between the first plaintiff and the first defendant, the first plaintiff has bettered that offer, although by a relatively narrow margin. As between the second plaintiff and all defendants and as between the first plaintiff and the second and third defendants, the relevant defendants have bettered that offer.

5. Another complicating factor is that evidence which I regarded as crucial on what I called in my principal reasons the misrepresentations claim was served extremely late. That evidence came from Mr Michael Hennessey and was contained in his affidavit sworn 8 April 2011. That affidavit should have been served some months earlier, by 22 October 2010. There is no satisfactory explanation for the delay, although I gather that Mr Hennessey (perhaps understandably) did not wish to be involved if he could avoid it.

6. Further, the defendants urge the Court to take into account the fact that the plaintiffs succeeded only on a relatively small number of the issues that had been agreed between the parties. Looking at the matter broadly, the first plaintiff succeeded on the net receivables claim but failed on the misrepresentation claim and the employee entitlements claim. The first plaintiff failed, even on the net receivables claim, against the second and third defendants. The second plaintiff failed on all its separate claims.

7. I am conscious that the Court does not ordinarily descend into the minutiae of issues and decide costs according to success or failure on individual issues, unless, as has often been said, it can be seen that a particular issue or group of issues is clearly dominant or separate. See Mahoney JA (with whom Kirby P and Priestley JA agreed) in Waters v P C Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331. Of course that decision related to SCR Pt 52 r 11(2), but no different principle applies today.

8. Equally I cannot disregard the fact that I was so unimpressed by the plaintiffs' evidence on the misrepresentation claim that, as I put it, I was forced to conclude that the relevant witnesses had given knowingly untrue evidence. Had the case been limited to the misrepresentation claim, that could well have justified a special order for costs. See Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401.

9. The Court's task is, therefore, to seek to do practical justice between the parties in a way that takes account of the various considerations to which I have referred (and the others stated by counsel in their submissions which I have not summarised exhaustively), bearing in mind, so far as possible, the need to resolve costs issues in a way that is just, quick and cheap.

10. There is, however, a technical issue to be considered in relation to the offer of compromise. It was an offer made by the plaintiffs to the defendants. If it is to work in the plaintiffs' favour, it can only be because of UCPR r 42.14. As sub-r (1) makes clear, that rule applies:

"...if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of offer."

11. In the present case it could be said, as I have indicated, that the first plaintiff, as against the first defendant might fall within the operation of the rule. But it cannot be said that both plaintiffs fall within the operation of the rule as against all defendants. Accordingly, on its face, the rule is insufficient to offer a basis for an indemnity costs order in favour of the plaintiffs against the defendants from 19 April 2011.

12. The plaintiffs sought to counter this difficulty by referring to the decision of Chesterman J in Adrian v Romin Pty Ltd [2007] QSC 150 (affirmed on appeal: [2007] QCA 397). That was a case where the first plaintiff's claim succeeded against the defendant, but the second plaintiff's claim (for loss of the first plaintiff's services) failed. The defendant had made an offer to settle both plaintiffs' claims for an amount greater than that ultimately awarded to the first plaintiff. Thus, the defendant submitted, the plaintiffs had recovered a judgment less favourable than the terms of the offer, and the defendant should have its costs on the basis set out in the appropriate Queensland rule. The plaintiffs took the point that the offer was not within the rules because it was addressed to both plaintiffs and could not have been accepted by one without the other.

13. Chesterman J dealt with that summarily at [27] by saying that the amount offered was "more than sufficient to satisfy both plaintiffs' claims." His Honour acknowledged that one plaintiff perhaps could not settle without the other, but said that:

"..it is equally right that the plaintiffs could jointly have accepted the offer and worked out between themselves their proportion. The offer could have been accepted by the plaintiffs acting jointly."

14. However, as his Honour then said (again at [27]), those considerations made the order for costs sought by the defendant appropriate whether or not the offer came within the relevant Queensland rules. It is clear, in my view, that his Honour fashioned the costs order that he did in the exercise of the Court's general discretion as to costs and not because the particular circumstances of that case came within the particular rule.

15. So too, in this case, the offer does not appear to come within the particular rule. Accordingly, the Court is thrown back to its general discretion as to costs.

16. Although I do not wish to fall into the mistake of isolating issues and making costs orders in respect of particular issues, I do think that, in an attempt to do substantial justice as to costs between the parties, the Court cannot overlook the fact that there was a lot of evidence directed to issues on which the plaintiffs failed entirely. Nor can I overlook the fact that some of the defendants have succeeded entirely.

17. Finally, I cannot overlook that it is clearly correct to say, as the plaintiffs submitted, that in reality the parties fall into two camps. In particular, it is clear that the interests of the first defendant are so closely allied with the interests of the second defendant as to make them, in reality, the one set of interests, and that the third defendant (as he conceded in his evidence) exercised virtually no independent judgment in relation to the performance of his role in the Jackson International Group (of which the first defendant forms part). The practical effect of the "two camps" analysis is to render the offer of compromise relevant, not as a legally sufficient basis for any particular costs order, but as something bearing on the exercise of discretion (cf Chesterman J in Adrian ).

18. It follows from what I have said so far that the plaintiffs have no entitlement to indemnity costs. Perhaps that requires a little further explanation. Whilst it is true that, in monetary terms, the plaintiffs (considered as one camp) did better than their offer vis a vis the defendants (considered as one camp), it is not appropriate to disregard entirely the terms of the offer. The only offer that could have been accepted was an offer which exposed all the defendants to judgment, for a substantial sum of money, at the suit of both plaintiffs. In other words, had the offers been accepted, not only the first defendant but also the second and third defendants would have been subject to a judgment in favour of not only the first plaintiff, but also the second plaintiff. Thus, the second and third defendants, as well as the first defendant, would have been regarded as judgment debtors and would have been exposed to enforcement action in the event (admittedly, probably unlikely) that the first defendant did not pay the judgment debt.

19. Further, it seems to me, there is no basis for the plaintiffs having the whole of their costs, or anything like that amount. To give them the whole of their costs, in circumstances where they failed on substantial issues which depended on a substantial independent body of evidence, and in circumstances where I expressed the views that I have referred to already about the credibility of some of that evidence, would be a significant injustice to the defendants. It should be noted, among other things, that there was a substantial body of accounting evidence (including reports in chief, a report in reply, a conclave and a general report, and a concurrent evidence session) which was relevant only to the failed misrepresentation claim. (In case it is not clear, I note it was the misrepresentation claim that was based on the evidence that I regarded as knowingly untrue.)

20. Weighing all the factors as best I can, I think that the appropriate order as to costs is that the first plaintiff should have a fraction of its costs, but that otherwise there should be no order as to costs. Further, the costs that are awarded in favour of the first plaintiff should be ordered against the defendants as one camp. An order in that form seems to me to give effect to the substantial realities of this case.

21. What remains, then, is assessment of the fraction. The plaintiffs (as the third of their alternative submissions) suggested 50 per cent. The defendants sought an order that the plaintiffs should pay 20 per cent of their costs of the proceedings.

22. The defendants' submissions can be put to one side. No basis has been shown why the unsuccessful first defendant should have any part of its costs in circumstances where it is about to be the recipient of a substantial judgment against it. Further, to give effect to the defendants' submission, the Court would be required to ignore the fact that the plaintiffs, as a camp, had substantial success on their claim, and that the defendants, as a camp, have suffered a substantial loss. It would also be required to ignore the discretionary influence, as opposed to legal effect, of the offer of compromise.

23. By contrast, the plaintiffs' assessment of the appropriate percentage seems to me to reflect, although in a fairly broad brush way, both the fact that the first plaintiff has had substantial success and the fact that there has otherwise been a substantial success for the defendant. Further, the plaintiffs' approval gives due recognition to the "two camps" argument which, as I have indicated, I think is appropriate in the circumstances of this case.

24. For those reasons I direct entry of judgment in accordance with paras 1, 2 and 3 of the short minutes of order initialled by me and dated today's date. I direct that the judgment take effect as of today's date. I order the defendants to pay 50 per cent of the first plaintiff's costs of the proceedings. Otherwise, I make no order as to costs.

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Subsequent to judgment being delivered, the matter was referred to the Director of Public Prosecutions who commenced a prosecution of Mr Borsak & Mr Christie for perjury but then, in light of evidence not before the trial judge, withdrew that prosecution. 

Amendments

21 July 2017 - Last paragraph added.

Decision last updated: 21 July 2017