Pilmer v the Duke Group Ltd (in Liquidation) No. Scciv-92-1874

PILMER v THE DUKE GROUP LTD (IN LIQUIDATION)
[2002] SASC 230
Full Court: Perry, Williams and Bleby JJ

PERRY J. This is an appeal and a cross-appeal, both by leave, against a costs order made by a judge of this Court following a successful application by certain of the defendants to the action, whom it is convenient to refer to collectively as “Nelson Wheeler”, for an order staying execution of a judgment pronounced in favour of the plaintiff (“Duke”) pending an application for leave to appeal to the High Court.
The proceedings came to trial before Mullighan J. In a judgment (“the trial judgment”) delivered by him on 30 January 1998, he found Nelson Wheeler liable to pay to Duke damages and interest totalling in all approximately $93 million. Mullighan J granted a stay of execution of the judgment until the hearing of an appeal to the Full Court.
On 20 May 1999, the Full Court published its decision on an appeal and cross-appeal from the trial judgment. The Full Court effectively increased the judgment in favour of Duke against Nelson Wheeler to an amount of approximately $117 million, although the formal order giving expression to the decision of the Full Court was not pronounced until 13 August 1999.
Upon the making of the formal orders on that date, Nelson Wheeler sought a further stay of execution of the judgment pending an application for special leave to appeal to the High Court. Subject to a conditional, interim stay of a short period, the application for a stay of proceedings was referred by the Full Court for hearing and determination by Doyle CJ.
The hearing before Doyle CJ of the stay application took place over several days, following which, on 8 September 1999, he delivered reasons in which he indicated that he proposed to grant a stay of execution subject to certain undertakings and terms. He gave an opportunity for the terms to be worked out by the parties, following which, on 12 October 1999, he made a formal order granting the stay. This was on terms which included an obligation on Nelson Wheeler to pursue their application for leave to appeal expeditiously, payment into court of certain moneys by various insurers and underwriters, and a restraint upon the Nelson Wheeler defendants from disposing of assets. He reserved the question of costs of the stay application.
In the events which happened, both the application for leave to appeal to the High Court and the appeal to that court were successful. In a judgment pronounced on 31 May 2001, the High Court reduced the damages payable by Nelson Wheeler to approximately $32 million inclusive of interest.
Subsequently, in December 2001, Doyle CJ was asked to deal with the question of the costs of the stay application, which had been reserved. Duke and Nelson Wheeler both sought an order for costs in their favour.
On 19 December 2001, at the conclusion of the argument as to costs, Doyle CJ pronounced reasons ex tempore, and ordered that there be no order as to the costs of the stay application and no order as to the costs of the application before him for costs orders.
At the same time he gave leave to both parties to appeal to the Full Court against the costs orders.
Nelson Wheeler and Duke lodged notices of appeal and cross-appeal respectively, in which they each assert that the Chief Justice should have made a costs order in their favour.
In his reasons, Doyle CJ first referred to the circumstances in which the order for a stay was made. He pointed out that the application for a stay was opposed by Duke, but that it succeeded, albeit on terms “substantially more onerous than those that Nelson Wheeler proposed or contemplated in its application”. But the terms were not as onerous as those which Duke had sought in the alternative to its submission that no order should be made.
He went on to observe:
“To say simply that Nelson Wheeler were successful, and leave it at that, is to overlook the fact that they succeeded on terms that they opposed. On the other hand, Duke’s opposition to any stay was unsuccessful.”
As for the result of the appeal, he noted that this left Nelson Wheeler liable to Duke for a substantial sum.
There was a dispute as to the extent of Nelson Wheeler’s insurance cover, in that although it was nominally for an amount of $50 million, the cover could be confirmed, at least at the stage at which the stay was ordered, only to the extent of $32.8 million.
On the other hand, when seeking the stay, Nelson Wheeler did not admit liability for any amount. Although the insurers in due course paid a substantial amount into court, the stay was granted, at least in part, in respect of moneys which Nelson Wheeler was found liable to pay pursuant to the judgment as varied on the appeal to the High Court.
The hearing of the application for a stay extended over about six days. Nelson Wheeler were late in supplying certain information which had been requested, and when they did comply, it was in some respects inadequate. But on the other hand, Doyle CJ noted that “a number of Duke’s demands for information from Nelson Wheeler seemed excessive ...”.
Against that background, Doyle CJ considered that it was not appropriate to approach the matter on the footing that costs should follow the event, the event being the outcome of the application for a stay.
He took that view for a number of reasons. The first was that although Nelson Wheeler’s application resulted in the grant of a stay, Duke had been prevented from enforcing a judgment which still stood, at least in part.
The second reason was that despite Nelson Wheeler’s success on the application, much time was spent on the question of appropriate terms, an issue upon which neither party was wholly successful.
The third reason was that the usual rule was that a judgment was enforceable according to its terms, and that Nelson Wheeler sought a departure from the usual rule.
The final factor which he took into account in that respect was that the onus was on Nelson Wheeler to demonstrate that proper grounds existed for the exercise of the discretion, and in the circumstances there were matters which “properly warranted inquiry”. Duke was entitled to preserve its rights to recovery so far as possible, and it was not unreasonable for them to be afforded an opportunity to scrutinise the claim of inability to pay.
He then went on to refer to the approach taken by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments (No 1).[1] In that case, Brennan J ordered that the costs of a successful application for a stay be the respondent’s costs in the cause of the application for special leave. By analogy, Doyle CJ reasoned that an appropriate starting point was to approach the matter on the footing that:
“... absent some good reason to order otherwise, Duke should not have to pay the cost of the stay application and its entitlement to recover the costs of the application from Nelson Wheeler should take into account the outcome of the appeal.” (para 19)
[1] (1986) 161 CLR 681 at 686.
On the other hand, the fact that Nelson Wheeler substantially succeeded on the appeal made it inappropriate to order it to pay all of the costs of the stay application.
Doyle CJ then addressed the question whether they should be ordered to pay any of the costs. He went on to comment that:
“If the only issue had been a stay in respect of the amount of about $32 million [the insured amount] the stay would have been granted quite readily on appropriate terms ... .. that leads me to think that in relation to the appeal Nelson Wheeler had by and large succeeded on appeal in relation to the part of the judgment really in issue on the stay application.” (paras 23 and 24).
After going on to comment that it was “impossible to do perfect justice” in a case such as this, he concluded that the appropriate order was that there be no order as to the costs of the stay application. In so concluding he reasoned that the case was one:
“... in which Nelson Wheeler substantially succeeded in the appeal in relation to the amount really in issue on the stay application, and ....... [the] .... starting point was that Duke should not have to pay the costs of the stay application, and that its entitlement to the recovery of those costs should take into account the outcome of the ultimate appeal.”
On the hearing of the appeal, Mr Wells QC submitted that Doyle CJ took the wrong “starting point”. He submitted that to commence with a “presumption or predisposition” that Duke should not have to pay the costs of the stay application was “incompatible with the exercise of an unfettered discretion to award costs”.[2] He further submitted that the costs order made by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments (No 1) (supra) should not be taken to represent “the usual costs order” to be made in such circumstances, and was limited to its special facts. He submitted that the usual order, at least the order commonly made by single justices of the High Court on applications for a stay pending the hearing of an application for special leave, is that the costs be costs “in the special leave application”. He referred to a number of authorities which he submitted supported that view. Furthermore, the costs of a successful special leave application normally became costs in the appeal.
[2] Written outline of submissions, para 5.2.
In substance, Mr Wells QC went on to argue that costs should have followed the event, that is, the successful outcome of Nelson Wheeler’s application.
I do not pause to deal with all of the arguments put by Mr Wells QC. It is sufficient to say that, in my view, he did not identify any error of principle in the approach taken by Doyle CJ. Furthermore, I am not satisfied that the exercise of the discretion by Doyle CJ in any other respect miscarried.
Mr Whitington QC for Duke put at the forefront of his argument that the starting point on the stay application was that Duke, being a successful plaintiff, was entitled to the fruits of its judgment against Nelson Wheeler. It followed that in seeking a stay, Nelson Wheeler sought what he described as “an indulgence” from the Court.
He then referred to the fact that in some respects the affidavits which had been filed by the Nelson Wheeler defendants as to their financial affairs were insufficient to enable Doyle CJ to come to any firm conclusion as to their net worth. So Mr Whitington QC reasoned, not only did Nelson Wheeler seek an indulgence, but they sought it on the basis of affidavit material which did not sufficiently reveal the true state of their financial affairs.
When those considerations were taken into account against the background of what he described as Nelson Wheeler’s limited success on the stay application and Nelson Wheeler’s limited success on the special leave application, Doyle CJ should have been led to order costs in Duke’s favour.
The onus on a party who brings an appeal against a costs order is a high one. In their joint judgment in Southern Resources Ltd and Ors v Residues Treatment and Trading Co Ltd and Ors[3] Jacobs ACJ, Prior and Mullighan JJ acknowledged:
“... the wide discretion of the trial judge on questions of costs with which an appellate court ought not generally to interfere. The appellants have to show that the discretion was so unreasonable and unjust as to require the appellate court to substitute its own discretion ......”[4]
[3] (1991) 56 SASR 455 at 480.
[4] Citing Norwest Refrigeration Services Pty Ltd v Baine, Dawes (WA) Pty Ltd (1984) 157 CLR 149 per Brennan J at 176.
Section 50 of the Supreme Court Act, which deals with appeals against decisions of judges and masters, provides, inter alia:
“(2)No appeal shall lie without the leave of the judge from any order-
(a) ............
(b) as to costs only which by law are left to the discretion of the judge.”
The requirement for leave as a pre-condition to appealing against a discretionary costs order is clearly predicated on the view that the judge who has the responsibility of hearing the proceedings is in the best position to determine the incidence of costs.
Doyle CJ recognised the limited circumstances in which it is proper to give leave to appeal on costs when he commented before proceeding to make the order:
“It’s not usual for the court to grant leave to appeal on costs.”
He went on to say:
“However, in this case I am prepared to grant leave to appeal and I so order. I do so, because having searched quite extensively I have been unable to find any cases indicating an appropriate approach to stay applications, and it may be that on appeal, the Full Court would find it possible to lay down some rough guidelines or starting points that might be of assistance in these matters. I recognise that underlying my approach is a choice as to what I will call the starting point, although in the end I have justified my decision by reference to all of the factors before me.
So I grant leave to each party, if so advised, to appeal against my decision.”
With respect to those observations, it seems to me that it would be wrong for this Court to attempt to lay down any guidelines, even “rough guidelines or starting points” which might be thought to be applicable to assist in the determination of applications for costs.
The circumstances in which such applications may be made vary enormously. It would be wrong to attempt to circumscribe the exercise of the discretion by the judge who has had the carriage of the proceedings.
In most cases, the appropriate order for costs will be more or less obvious. In cases where that is not so, the matter is best left to the discretion of the judge. It does not follow that the discretion may be exercised arbitrarily. It must be exercised in a principled way, but that means simply that the judge must recognise and give due weight to the competing considerations. There is no ready-to-hand formula which can give more guidance than that.
For an appeal court to be acquainted with the various factors which may be relevant to the exercise of the discretion as to costs will often be a lengthy and unrewarding task. In order to put before the Full Court all of the documents necessary to identify factors relevant to the exercise of the discretion in this case, a substantial appeal book was prepared. On top of that, the parties submitted lengthy and detailed written outlines of argument, replete with the citation of much case law.
Reference to other cases was of no real assistance, as they can only illustrate the manner in which the costs discretion has been exercised in different circumstances.
The argument on costs occupied a full day’s hearing, with senior counsel briefed on both sides.
This Court should discourage parties from approaching arguments as to costs on the footing that they are entitled to embark on a mini-trial.
In my opinion, neither the appeal nor the cross-appeal should succeed. Indeed, in my view, this Court should revoke the leave to appeal.
I would revoke the order giving leave to the parties to appeal, and I would strike out the notices of appeal and cross-appeal.
WILLIAMS J. I agree.
BLEBY J. I have had the advantage of reading the reasons for judgment of Perry J. I agree with those reasons and with the order he proposes.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1. (1986) 161 CLR 681 at 686.
2. Written outline of submissions, para 5.2.
3. (1991) 56 SASR 455 at 480.
4. Citing Norwest Refrigeration Services Pty Ltd v Baine, Dawes (WA) Pty Ltd (1984) 157 CLR 149 per Brennan J at 176.

[2002] SASC 230

30 July 2002