Ossen Pty Ltd v K&S Developments Pty Ltd (Receivers and Managers Appointed); Clarke v Ossen Pty Ltd (No 2)

[2024] NSWSC 509

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Ossen Pty Ltd v K&S Developments Pty Ltd (Receivers and Managers Appointed); Clarke v Ossen Pty Ltd (No 2) [2024] NSWSC 509

Hearing dates:

On the papers

Decision date:

02 May 2024

Jurisdiction:

Equity

Before:

Richmond J

Decision:

Cross-claimant to pay the first cross-defendant’s costs of and incidental to the cross-claim filed on 10 October 2022 on the ordinary basis, as agreed or assessed.

Catchwords:

COSTS — party/party — general rule that costs follow the event — application of the rule and discretion — application for alternative order to reflect partial success — application dismissed

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

James v Surf Road Nominees (No 2) [2005] NSWCA 296

Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40

Commonwealth of Australia v Gretton [2008] NSWCA 117

Category:

Costs

Parties:

Ossen Pty Ltd (Plaintiff/First Cross-Defendant)
K & S Developments Pty Ltd (Receivers and Managers Appointed) as trustee for the Midnas Trust (First Defendant/Second Cross-Defendant)
Sandra Gail Clarke (Second Defendant/Cross-Claimant)

Representation:

Counsel:
Mr M Young SC (Plaintiff/First Cross-Defendant)
Mr A Fernon SC and Ms E Keynes (Second Defendant/Cross-Claimant)

Solicitors:
Sunfield Chambers Solicitors & Associates (Plaintiff/First Cross-Defendant)
Osborne Lawyers (Second Defendant/Cross-Claimant)

File Number(s):

2021/346521

Publication restriction:

Nil

JUDGMENT

1. These reasons deal with the question of costs left open in my decision in this matter of 27 February 2024 ([2024] NSWSC 165) (Judgment) concerning the cross-claim brought by Mrs Clarke, the second defendant, against Ossen Pty Ltd (Ossen), the plaintiff, and K & S Developments Pty Ltd (K&S), the first defendant. The parties have provided written submissions on costs and have agreed that I should decide the question of costs on the papers.

2. By the cross-claim Mrs Clarke claimed an entitlement to part of the proceeds of the sale of a property at Mackerel Beach owned by K&S which were paid into Court following orders for its sale made by the Court, on the basis that she had a right of contribution from K & S in respect of amounts paid by her to Macquarie Bank in respect of three loans, referred to as Loan A, Loan B and Loan C. The parties were in agreement at the hearing that Mrs Clarke was entitled to contribution in respect of 50% of the principal paid by her to Macquarie Bank in respect of Loan B and all of the principal paid by her to Macquarie Bank in respect of Loan C. The issues that remained for determination at the hearing were the extent to which she was entitled to contribution in respect of amounts paid by her to discharge Loan A and whether her claim for contribution in the cross-claim in respect of Loans A, B, and C also extended to interest she had paid in respect of those loans.

3. The result of the Judgment is that Mrs Clarke failed in her claim for contribution in respect of Loan A, but succeeded in her claim for contribution in respect of Loans B and C, in respect of payments by her of both principal and interest on those loans.

The parties’ submissions

4. Mrs Clarke contends that the appropriate order as to costs on the cross-claim is that she should pay 70% of Ossen’s costs on a party-party basis. She says that while she was unsuccessful on her claim in respect of Loan A, she was successful on her claim for contribution for interest paid by her in respect of Loan B and Loan C (which was defended by Ossen) and costs should therefore be apportioned. She submits that where there is a mixed outcome in proceedings, the question of apportionment is a matter of discretion and depends on matters of impression and evaluation based on the significance of the issues to the conduct of the proceedings: James v Surf Road Nominees (No 2) [2005] NSWCA 296 at [36]. She submits that given the mixed success of the parties, albeit primarily in favour of Ossen, a reduction should be ordered to the costs payable to it. In the circumstances, it should be on the basis that she only pays 70% of Ossen’s costs, reflecting her partial success on the cross-claim. The precise calculation of the reduction of 30 per cent is not explained but appears to reflect a mathematical calculation of the extent of her recovery of interest on the basis of contribution under the cross-claim.

5. Ossen submits that it should be awarded its costs of the cross-claim, on the ordinary basis in accordance with the usual rule that costs follow the event. Ossen submits that there is no “mixed outcome” on the cross-claim, and Mrs Clarke’s contention to the contrary fails to take into account the manner in which the issue in relation to interest on Loans A, B and C came about, and the relative importance of that issue to the conduct of the proceedings.

6. Ossen submits that the relative importance (or lack thereof) of the interest payments issue can be seen from the fact that this matter is only referred to in three of the paragraphs in the Judgment, and received very little attention in the written and oral submissions of the parties. As the Judgment indicates at [76], the only point raised by Ossen against taking interest payments into account was that an entitlement to interest was not raised in the relief sought in prayer 4 of the cross-claim, but the Court ruled that prayer 3 of the cross-claim was sufficient to cover both interest and principal payments: Judgment at [77].

7. Ossen submits that the question of interest payments regarding Loans B and C involved less than 5 minutes in oral argument and was in substance only a pleading point which, as noted above, received only short attention in both written submissions and in the Judgment. Further, the amount of interest in respect of Loans B and C for which Mrs Clarke is entitled to contribution ($49,974.75) represents only 6 per cent of the overall quantum of principal and interest in dispute and consequently when the matter is looked at simply in terms of quantum, Ossen was overwhelmingly successful in relation to the issues which were before the Court on the cross-claim at the hearing.

Consideration

8. The Court has a discretion to determine by whom, to whom and to what extent costs are to be paid although in the exercise of the discretion costs will ordinarily follow the event unless it appears to the Court that some other order should be made: see Civil Procedure Act 2005 (NSW), s 98(1); Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

9. The Court of Appeal summarised the relevant principles in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 as follows:

[6] Section 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs. Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the general rule is that the Court is to order that costs follow the event. The “event” may be characterised in more than one way. Generally the “event” refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] per Ward, Emmett and Gleeson JJA. Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22.

[7] The relevant principles for the determination of costs on an issue-by-issue basis were stated in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] per Beazley, Ipp and Basten JJA:

Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. 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: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: SabahYazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27].

Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296, citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.

10. The proposition stated in James v Surf Road at [36] on which Mrs Clarke relies is summarised in Ryde Developments at [6] as extracted above.

11. It is also relevant to note the following observation of Hodgson JA (with whom Mason P agreed) in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]:

In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant’s responsibility because the plaintiff was caused to incur costs by the defendant’s failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.

12. At the hearing, there was no dispute that Mrs Clarke was entitled to contribution in respect of Loans B and C and the real issue was her claim in respect of Loan A. Ossen succeeded in relation to the question whether contribution was available in respect of Loan A.

13. The dispute in relation to interest on Loans B and C was, as Ossen submitted, a pleading point. The only reason why Ossen contended that there was no right to contribution in respect of interest on Loans B and C was that the order sought in prayer 4 of the cross-claim extended only to the amounts of principal paid by her in respect of Loans B and C. I concluded in the Judgment that this overlooked prayer 3 of the cross-claim and that accordingly the appropriate order was to allow contribution in respect of both principal and interest on Loans B and C.

14. It is clear that Ossen is, in an overall sense, the successful party on the cross-claim. In my view, it is not appropriate to deprive Ossen, as the successful party, of a portion of its costs by reason of Mrs Clarke’s success on the claim for contribution for interest in respect of Loans B and C for two reasons. First, that matter arose essentially because of the narrowness of the order sought in prayer 4 of the cross-claim which led to the argument that the claim for contribution was in respect of only principal on Loans A, B and C. As a matter of substance, the issue arose due to a deficiency in the drafting of the cross-claim which was a problem of Mrs Clarke’s own making. Second, as Ossen submitted, the issue regarding the contribution for interest did not take up a significant part of the hearing, either by way of evidence or argument, indeed quite the contrary.

15. Approaching the matter on the basis that costs should be paid in a way that is fair having regard to what the Court considers to be the responsibility of each party for the incurring of costs, Ossen should receive all its costs of and incidental to the cross-claim.

16. For these reasons, the Court will order that Mrs Clarke should pay Ossen’s costs of and incidental to the cross-claim on the ordinary basis, as agreed or assessed.

**********

Amendments

17 June 2024 - [8] - change "in" to "see".

06 November 2024 - [8] and [9] - typographical corrections.

Decision last updated: 06 November 2024