Rema Tip Top Asia Pacific Pty Ltd v Grüterich (No 2)

[2019] NSWSC 1692

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Rema Tip Top Asia Pacific Pty Ltd v Grüterich (No 2) [2019] NSWSC 1692
Hearing dates:	On the papers
Date of orders:	29 November 2019
Decision date:	29 November 2019
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	1.   Subject to Order 2, order the defendant to pay 90% of the plaintiff’s costs of the proceedings on the ordinary basis. 2.   Order the defendant to pay the costs of and incidental to the defendant’s 6 May 2019 strike-out application on the ordinary basis but without the 10% discount applicable to the balance of the plaintiff’s costs by reference to Order 1 above. 3.   Note that it has been agreed between the parties that: (a)   interest payable by the defendant on the award of damages in the plaintiff’s favour (i.e. $336,413.69) is $25,205.27 and (b)   the amount payable by the plaintiff in respect of the defendant’s long service leave entitlement is $38,393.86 plus interest in the sum of $2,469; 4.   Order, pursuant to Orders 4, 5, 6, 7 and 8 of the orders made on 18 November 2019, that: (a)   the sum of $40,862.86 (payable to the defendant) is to be set-off against the amounts payable to the plaintiff under Orders 4, 5 and 6 of the orders made on 18 November 2019; (b)   the balance payable to the plaintiff out of the HSBC bank account after the set-off is $270,799.44 (payable pursuant to Order 4 of the orders made on 18 November 2019); and (c)   the total damages (plus interest) payable by the defendant to the plaintiff after the set-off (i.e., the amounts in (a) and (b) above) is $320,756.10 (payable pursuant to Order 5 of the orders made on 18 November 2019).
Catchwords:	COSTS — Party/Party — Bases of quantification — Ordinary basis – order that the defendant pay 90% of the plaintiff’s costs of the proceedings on the ordinary basis – held 10% discount on the costs order appropriate in circumstances where the defendant had been successful on a discrete issue – separate costs order without any discount in relation to the strike-out motion that was not pressed at the hearing.
Legislation Cited:	Civil Procedure Act 2005 (NSW), ss 56-59, 98 Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18 and 31 Long Service Leave Act 1955 (NSW), s 4(2)(a)(iii) Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited:	Barescape Pty Limited as trustee for the V’s Family Trust v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust (No 12) [2012] NSWSC 1591 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 Downer EDI Limited v Gillies [2012] NSWCA 333 Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282 Fire Containment Pty Ltd v Robins (No 2) [2011] NSWSC 547 Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 Green Camel Pty Ltd v Urban Ecological Systems Ltd [2017] NSWSC 362 Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 John Arnold’s Surf Shop Pty Ltd (in liq) v Heller Factors Pty Ltd (1979) 22 SASR 20; (1979) 4 ACLR 492 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 LMI v Baulderstone (No 2) [2002] NSWSC 72 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 2) [2019] NSWSC 1492 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Rema Tip Top Asia Pacific Pty Ltd v Grüterich (No 2) [2018] NSWSC 899 Rema Tip Top Asia Pacific Pty Ltd v Grüterich [2019] NSWSC 1594 Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616; (1987) 73 ALR 289
Category:	Costs
Parties:	Rema Tip Top Asia Pacific Pty Ltd (Plaintiff) Christian Grüterich (Defendant)
Representation:	Counsel: N Furlan and JC Lee (Plaintiff) J Knackstredt and M Connor (Defendant)   Solicitors: Gilbert + Tobin (Plaintiff) Clyde & Co (Defendant)
File Number(s):	2018/00117085
Publication restriction:	Nil

Judgment

1. HER HONOUR: On 18 November 2019 I published my reasons for judgment in this matter (Rema Tip Top Asia Pacific Pty Ltd v Grüterich [2019] NSWSC 1594) (my principal reasons), making declarations to the effect that the plaintiff (Rema Tip Top) would have been justified in terminating the employment contract of the defendant (Mr Grüterich) on 16 March 2018 for serious misconduct and that certain amounts (namely, moneys that I found had been wilfully and dishonestly misappropriated by Mr Grüterich, together with moneys received by Mr Grüterich in breach of fiduciary duty) were held on trust for Rema Tip Top.

2. I ordered Mr Grüterich to pay damages (and/or restitution) to Rema Tip Top in the total amount of $336,413.69 plus interest up to judgment on that sum (which the parties here agree amounts to $25,205.27). I dismissed Rema Tip Top’s claim to recover (by way of restitution or as damages for misleading or deceptive conduct contrary to s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (Australian Consumer Law)) a payment in lieu of notice that had been made to Mr Grüterich at the time of termination of his employment (an amount of $213,655).

3. On Mr Grüterich’s cross-claim, I upheld his claim to accrued unpaid long service leave on termination (that the parties agree is calculated at $38,393.86) and ordered the payment to Mr Grüterich of that amount and interest up to judgment on that amount (agreed by the parties at $2,469) but otherwise dismissed Mr Grüterich’s cross-claim for damages for a contractual debt (quantified at $1,432,772.85) and for declaratory relief and damages for alleged misleading or deceptive conduct by Rema Tip Top contrary to ss 18 and 31 of the Australian Consumer Law.

4. In light of the mixed outcome of the proceedings (as noted by me at [689] of my principal reasons), I reserved the question of costs and made directions for written submissions to be filed with a view to determining the question of costs on the papers. Those submissions have been filed and, having considered those submissions, I now make orders in relation to the costs of the proceedings, which will now dispose of the matter.

Background

5. The background to the proceedings is set out in my principal reasons and I do not repeat it here. I adopt the same abbreviations and defined terms as used in those reasons.

6. The net monetary result of the claim and cross-claim (taking into account the orders for interest up to judgment and the set-off) is calculated by Rema Tip Top as being the sum of $320,756.10 in its favour, with a total of $270,799.44 to be paid out of the HSBC bank account to Rema Tip Top pursuant to Order 4 of the orders made on 18 November 2019. Mr Grüterich does not demur from that arithmetical calculation.

7. As to costs, in summary, Rema Tip Top contends for an order in its favour as to the costs of the proceedings (without apportionment as between the respective issues in the proceedings) whereas Mr Grüterich contends that in light of the mixed outcome of the respective claims an appropriate order is for each party to bear its own costs of the proceedings, including Mr Grüterich’s cross-claim.

8. Insofar as the final orders are concerned, and noting that I granted the parties liberty to apply in relation to the working out of the orders made, Rema Tip Top seeks a further order confirming the outcome following its working out of the interest and set-off calculations (which, as noted above, Mr Grüterich does not contest). I deal with those calculations at the end of these reasons.

Legal principles

9. There was no dispute as to the legal principles applicable on the exercise of the court’s broad discretion as to costs; the general rule being that costs follow the event unless it appears to the court that some other order should be made as to the whole or part of the costs.

10. Reference was made by Rema Tip Top to the approval by the Court of Appeal in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 (at [7]) (Beazley P, as Her Excellency then was, Payne JA and Barrett AJA) of the following statement of the Court (Beazley, Ipp and Basten JJA) in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik (No 2)) (at [38]):

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).

11. Reference was also made to the statement of the Court of Appeal in Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 (Beazley, Ipp and Tobias JJA) (at [24]) that:

… In the case where there are multiple issues litigated, the court may, in the exercise of its discretion, order that a successful party have part only of its costs. However, it does not necessarily follow that that is the appropriate order. The commencing position is that costs follow the event so that a successful party is entitled to costs. It may be appropriate to order that a successful party be deprived of costs or a portion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument. This proposition is well established and does not require any discussion of the caselaw, which is conveniently contained in the annotations to r 42.1 in Ritchie’s Uniform Civil Procedure (NSW): paras 42.1.5; 42.1.10; 42.1.15.

12. Rema Tip Top has noted that where there has been a mixed outcome in proceedings, and it is considered 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.

Rema Tip Top’s submissions

13. In summary, Rema Tip Top seeks an order for costs in its favour on the basis that: it has had a substantial measure of success in relation to both its claims, and the cross-claim (reflected both in the net monetary result in its favour and the number and importance of the issues decided in its favour); even where Rema Tip Top has not been successful (i.e., on its claim to recoup the notice payment or for damages in relation thereto and Mr Grüterich’s claim to long service leave) it nevertheless established that Mr Grüterich had engaged in serious misconduct such as to justify his dismissal, which was a necessary element of both the claim to recoup the notice payment and Rema Tip Top’s defence of the long service leave claim; the serious misconduct issue (comprising each of the separate underlying claims advanced by Rema Tip Top for the recovery of sums from Mr Grüterich under specific heads of claim, such as the car allowance claim) was overall one of the most significant controversies in the proceedings and the determination of it was central to most claims (by both parties) in the case; the grant of declaratory relief to Rema Tip Top supports an award of costs in its favour; and Mr Grüterich’s dishonesty in making payments to himself that were the subject of its proceedings also supports an award of costs in its favour.

14. Rema Tip Top further submits that a separate costs order in its favour is warranted in respect of Mr Grüterich’s unsuccessful notice of motion of 6 May 2019.

15. As adverted to above, Rema Tip Top says that the main issues in contention at the trial concerned what it has referred to as the Misconduct Issue (namely whether Mr Grüterich was liable in respect of specific heads of claim/wrongdoing (i.e., the car allowance; the double salary payment; private travel budget; Poliform furniture; credit card expenses; and bonus payment), which allegations were also relied on to support findings and a declaration that Rema Tip Top would have been justified in summarily terminating Mr Grüterich’s employment.

16. Rema Tip Top points out that it was successful in relation to every head of claim, save that some of the private travel expenses (i.e., the Prague flights worth $7,392.15, the New York/Boston trip worth $17,089.74 and the New Zealand trip worth $5,740.52) and credit card expenses (i.e., the traffic infringement notices) were disallowed (to a combined value of $30,222.41).

17. It submits that the long service leave claim (on which Mr Grüterich succeeded) was a very minor part of the trial and of the parties’ submissions. Rema Tip Top maintains that it is significant that its main answer to this claim depended on a finding (which was ultimately made) that Mr Grüterich had engaged in serious and wilful misconduct in his employment (albeit that it was concluded by me that, since Mr Grüterich’s employment was not in fact terminated for serious and wilful misconduct, the exemption in s 4(2)(a)(iii) of the Long Service Leave Act 1955 (NSW) was not engaged); and therefore that a substantial contest underlying its defence of this claim was decided favourably to it.

18. Rema Tip Top notes that the Misconduct Issue (on which it succeeded) was an element of the claim to recover the notice payment (as restitution or as damages for breach of s 18 of the Australian Consumer Law); that it was also the main element of the most significant part of Mr Grüterich’s cross-claim (the repudiation claim and consequential claim for recovery (as a contractual debt) of the balance of Mr Grüterich’s remuneration until the expiry of the alleged fixed term (quantified at $1,432,772.85); noting that this was by far the largest claim for monetary relief advanced by either party in the proceedings).

19. Thus it is said that the Misconduct Issue was a common thread that ran throughout the entire case, closely linking the vast majority of the matters in dispute; and that this is not a case where it can be said that the issues won and lost by each party (arising by claim or cross-claim) “were so separate and dissociated … that … they should be treated, for costs purposes, as if they had been the subject of separate trials” (in the language of Barrett J, as his Honour then was, in LMI v Baulderstone (No 2) [2002] NSWSC 72 at [46]). It is submitted that there was considerable overlap between most issues that arose on the cross-claim and Rema Tip Top’s claim and that this was a case in which “all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of” the matter (in the language of the Court (Beazley, Tobias and McColl JJA) in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (James v Surf Road Nominees (No 2)) at [34]).

20. On that basis, Rema Tip Top submits that its substantial success in the proceedings justifies an award of costs in its favour, notwithstanding that it did not succeed in relation to the notice repayment claim and the long service leave claim.

21. Rema Tip Top also points to various other matters in support of its contention that there should be no deduction from an award of costs in its favour.

22. First, the dishonesty findings that were made (in respect of the car allowance, the double salary payments and the expenses incurred under the “private business class travel budget”). It is submitted that it must follow (from the finding that Mr Grüterich acted wilfully and dishonestly when he caused these payments to be made) that he knew (or must be presumed to have known, especially bearing in mind his position, his qualifications and professional experience and his role in the policing of credit card expenditure by other employees of Rema Tip Top), at all times thereafter that he did not have a proper basis to defend these aspects of Rema Tip Top’s claims; and therefore that Mr Grüterich’s decision to contest these claims through to judgment was unreasonable and caused Rema Tip Top unnecessarily to incur costs.

23. Second, that misconduct in relation to the transaction the subject of proceedings can be a basis on which to deny a successful party its costs; Rema Tip Top arguing that in the present case Mr Grüterich’s serious misconduct, breaches of fiduciary duty and dishonest misappropriation of Rema Tip Top’s moneys are matters that provide additional support for an award of costs against him (notwithstanding that Rema Tip Top was not successful on all claims in the matter).

24. Third, Rema Tip Top argues that its success in the proceedings should be measured not solely by reference to the monetary result or the issues on which it succeeded but also by reference to the declaratory relief granted in its favour, referring to Barescape Pty Limited as trustee for the V’s Family Trust v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust (No 12) [2012] NSWSC 1591 where Black J said (at [35]):

In my view, the quantum of damages recovered in the Cross-Claim should also not be treated as the only measure of Bacchus’ success, where it had a proper interest in obtaining vindication of its rights, and there is also a public interest served in enforcing fiduciary duties. As Bacchus points out, in the leading case of Phipps v Boardman [1964] 1 WLR 993, Lord Wilberforce at first instance made an order that the plaintiffs have their costs of the proceedings in which a breach of fiduciary duty had been established, notwithstanding that an account was still to be taken and the amount of the profit which would then be recovered by the plaintiffs was then unknown. The case law also indicates that the Court may award costs in an application in which the plaintiff obtained only declaratory relief: see, for example, Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564. In Ng v Chong [2005] NSWSC 385 at [8], Hamilton J observed that an order for costs in favour of a party may be justified even if it recovers nominal damages (which is not the case here) where some other right is vindicated by the judgment. In Australian Competition and Consumer Commission v Teracomm Ltd [2009] FCA 903, the Court ordered the respondent to pay the costs of a regulatory body that obtained only declaratory relief. In Keller v LED Technologies Pty Ltd [2010] FCAFC 55 at [131], Emmett J treated declaratory relief as sufficient to support an order for costs, and held that a trial Judge’s discretion had miscarried in ordering that an applicant who had established contraventions of the Trade Practices Act 1974 (Cth), but no loss in addition to that recoverable under other causes of action, pay the respondent’s costs of that aspect of the trial. In this case, Bacchus obtained declarations as to its rights and also recovered substantive, rather than merely nominal, damages. I accept Bacchus’ submission that declaratory relief had particular significance where Mr Ventura had previously claimed that its principal, Mr Higgins, had wrongly advanced the allegations made in the proceedings.

25. Rema Tip Top argues that in the present case the public interest in enforcing fiduciary duties was combined with what it argues to be the perhaps even greater public interest in deterring the dishonest misappropriation by senior executive employees of their employer’s funds.

26. Fourth, it is said that the declaration that Rema Tip Top was justified in dismissing Mr Grüterich for misconduct achieved a significant measure of vindication of Rema Tip Top’s position in respect of the termination of Mr Grüterich’s employment in circumstances where Mr Grüterich had wrongfully and publicly (through his cross-claim) accused Rema Tip Top of repudiating his employment contract and causing him to suffer a very substantial loss of over $1.4 million.

25. It is thus submitted that the grant of declaratory relief in this matter supports an award of costs in Rema Tip Top’s favour.

26. However, if, contrary to Rema Tip Top’s principal submission that there should be no apportionment as between the issues on which it succeeded and those on which it did not, some apportionment is considered to be appropriate, it is submitted that a discount of Rema Tip Top’s costs of the proceedings in the order of 10-15% would fairly reflect the respective measures of success enjoyed by the parties in the proceedings overall.

Discrete award of costs – Strike out application

29. As a separate issue, Rema Tip Top submits that there should be a discrete order in its favour in respect of its costs of what it characterises as Mr Grüterich’s unsuccessful interlocutory application of 6 May 2019 to strike out the statement of claim (in whole or in part) on the grounds that Rema Tip Top had given inadequate discovery.

30. In that regard, it is said that Mr Grüterich first notified Rema Tip Top of its intention to make this application on the afternoon of 3 May 2019 with the trial due to commence the following business day (6 May 2019) at 10am. It is noted that, at the commencement of the trial, Mr Grüterich was granted leave to file a notice of motion in court (with a supporting affidavit of his solicitor, Ms Nicole Julia McConochie).

31. Rema Tip Top says that, given the gravity of the relief sought in the strike-out application, it had no choice but to undertake significant preparations over the weekend immediately before the first day of the trial in order to be ready to deal with the application when the trial commenced. It is said that a lengthy and detailed affidavit was prepared over that weekend, written submissions were prepared and separate junior counsel (Mr Lee) was engaged to deal with the application.

32. As adverted to in my principal reasons, the strike-out application was not ultimately pressed; instead the submission was made for Mr Grüterich that an inference should be drawn against Rema Tip Top that the content of documents it had (allegedly) failed to produce would not have assisted its case. It is noted by Rema Tip Top that I made no finding that Rema Tip Top had failed to give adequate disclosure and did not draw any adverse inference against Rema Tip Top in connection with the production of documents.

33. Rema Tip Top submits that Mr Grüterich’s notice of motion was a discrete and separate interlocutory application on which Mr Grüterich failed entirely and that a separate order should be made awarding Rema Tip Top its costs of and incidental to the 6 May 2019 notice of motion.

Mr Grüterich’s submissions

34. Mr Grüterich contends that he was forced to commence a defensive cross-claim (seeking long service leave and damages for breach of contract and for misleading or deceptive conduct in relation to representations made to him regarding his entitlements) in response to the proceedings commenced against him by Rema Tip Top.

35. Pausing here, I do not see Mr Grüterich’s cross-claim as defensive in the sense considered by Ormiston J in Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 (Interwest) (at 627) (to the effect that proceedings may be characterised as defensive where they are either directly resisting proceedings already brought or seeking to halt self-help procedures). Examples of what may be characterised as defensive proceedings to halt self-help procedures can be seen by reference to KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 (at [199]-[202]); John Arnold’s Surf Shop Pty Ltd (in liq) vHeller Factors Pty Ltd (1979) 22 SASR 20; (1979) 4 ACLR 492 (John Arnold’s Surf) and Interwest itself; and see the discussion in Green Camel Pty Ltd v Urban Ecological Systems Ltd [2017] NSWSC 362 of this issue. In Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616; (1987) 73 ALR 289 (at 302), Smart J considered that the defendant/cross-claimant was, in the words of Legoe J in John Arnold’s Surf, “one seeking to go out for the recovery from the opposition by attack”. That description is to my mind equally apposite in the present case, where Mr Grüterich, faced with the claims made against him, raised his own very substantial claims based on what he contended to be his contractual entitlements beyond the terms of his written employment contract and representations allegedly made in relation thereto.

36. Mr Grüterich accepts that the usual course is that costs follow the “event” but says that in the present proceedings both parties had measures of success in both prosecuting and defending the respective claims; and that the proceedings did not involve a discrete cause or causes of action, defended by Mr Grüterich, such that there was a clear “event” for the costs of the proceedings to follow.

37. As to the significance of the mixed outcome on the respective claims (which I had noted at [689] of the principal reasons), Mr Grüterich points out that: Rema Tip Top had success in relation to its claims regarding the car allowance, the double salary payments, the travel expenses and other credit card expenses (noting that he had conceded the annual leave overpayment) whereas he was successful in relation to his long service leave claim and in his defence of the restitution and/or misleading or deceptive conduct claim in relation to the notice payment. Mr Grüterich submits that the contest in relation to the notice payment was a significant aspect of the proceedings in relation to the time and costs of the parties in preparation and at the hearing.

38. Mr Grüterich further argues that a significant issue in the proceedings, both in terms of the quantum and the time and costs involved at hearing, was the bonus payment of $103,210.88; and that, although the ultimate finding was that Mr Grüterich ought to make restitution for that payment, a key finding was that the payment was a genuine misunderstanding on Mr Grüterich’s behalf in that it was open to Mr Grüterich to interpret the authorisation email from Mr Zimmer (the current chief executive officer and chief financial officer of Rema Tip Top AG) as referring to the bonus as well as the salary back pay. It is submitted that no costs ought to follow from “a genuine misunderstanding that was as much caused by Mr Zimmer as Mr Grüterich”.

39. As to the last submission, the conclusions that I reached in relation to the bonus payment appear at [471]-[474] of my principal reasons. There, I explained that I considered the interpretation of the relevant spreadsheets to be problematic. I found that Mr Grüterich was not entitled to the €50,000 bonus but considered that there was room for Mr Grüterich honestly to have understood Mr Zimmer’s communication as to the adjustment to his salary to have encompassed agreement to the claimed €50,000 bonus (which was an issue that had been the subject of discussion); and I considered that there was evidence to support the conclusion that this was indeed how Mr Grüterich had understood the relevant email from Mr Zimmer. On balance, I did not find that there was dishonesty involved in Mr Grüterich having made the direction in relation to the booking of the back pay adjustment and bonus in advance of Mr Zimmer’s email communication.

40. However, by the time of the hearing of these proceedings, any such misunderstanding on Mr Grüterich’s part must long ago have been put to rest. He must have understood that Rema Tip Top did not agree that he had been entitled to the amount referred to as the bonus payment (or to make the direction for its payment to him). That dispute was squarely in issue in the proceedings. Therefore, the fact that Mr Zimmer’s email communication may have played a part in a genuine misunderstanding on Mr Grüterich’s part back in 2018 as to his entitlement to that payment does not persuade me that Rema Tip Top should not now have its costs of that issue – it having been put into contest by Mr Grüterich in the proceedings; Rema Tip Top having succeeded in its alternative claim for restitution in relation to that payment.

41. Mr Grüterich next submits that, to the extent that he was unsuccessful in relation to aspects of his cross-claim, he is to be afforded more latitude than Rema Tip Top in respect of its unsuccessful claims (referring to Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282 (Evans Deakin) at [7] per Allsop J, as the Chief Justice then was). In Evans Deakin, the issue was whether the respondent, having been successful in habing an application against him dismissed should have all its costs or only the costs on liability (not on questions of quantum or damages). His Honour, having referred to cases where issues run in a case had been considered differentially, added (at [7]):

I think it is also relevant to take into account the fact that I am here dealing with a respondent brought to court rather than an applicant. It seems to me that this is a consideration to be taken into account not by way of an arbitrary rule altering the discretion, but to assist in recognising that the position and behavour of the person brought to court unwillingly may need to be judged in that light. … It is enough to say, I think, that being brought to court is a relevant consideration in assessing the behavior of a litigating party, as would no doubt be (as was the case in Boral [ACCC v Boral Ltd (No 2) (2000) ATPR 41-738]) the seriousness of the issues about which the party has been brought to court.

42. In that regard, I do not see the circumstances with which his Honour there was dealing to be of any real assistance to the question I am now determining. True it is that Mr Grüterich was brought to court (and serious allegations were made against him). However, the allegations against him (which he in large part contested) were in the main upheld and, moreover, he was not simply someone brought to court to defend claims made against him; he made his own very substantial claims by way of cross-claim against Rema Tip Top. I do not see that he deserves any greater latitude as to costs than Rema Tip Top in those circumstances. In any event, where I am prepared to allow a discount on the costs order to be made against him (see below) it is not necessary in my opinion here to afford Mr Grüterich any further “latitude” in relation to his costs of the kind that he now seeks.

43. Finally, it is submitted that if costs were separately awarded on the successful aspects of each party’s respective claims it would be a difficult, lengthy and costly task for a costs assessor to separate out individual items to come to a sensible assessment; and that the parties would be put to great time and expense of attempting to make sense of that task. It is submitted that:

Mr Grüterich has lost his employment, been forced to move back to Germany and, despite this, travelled back to Australia to defend these proceedings. It is appropriate to allow Mr Grüterich to move on with his life with finality and avoid an ongoing and costly costs assessment process.

44. As to the above submission, the concern as to the difficulty or expense of a future costs assessment process if there were to be an apportionment of costs as between respective issues can adequately be met in my opinion by proceeding to make an award for costs with a percentage deduction (on a broad brush basis) rather than an award of costs issue by issue (assuming any apportionment in the first place). As to the submission based on Mr Grüterich’s personal circumstances, I accept that litigation is stressful for personal litigants and that this litigation has no doubt involved more expense for Mr Grüterich than might otherwise have been the case given that he is now residing back in Germany. However, to a large measure the circumstances referred to above are a consequence of the termination of his employment (which was validly effected on the provision of the requisite notice even leaving aside the later issues as to his now proven misconduct) and the costs of the litigation are in a real sense the function of his own misconduct. They do not persuade me that Rema Tip Top should be deprived of a costs order in its favour in accordance with the general rule that costs follow the event.

45. Ultimately, the submission of Mr Grüterich was that the appropriate order would be for each party to bear its own costs of the proceedings, including the cross-claim. It is said that this is consistent with the approach that was taken by the court in relation to the freezing order, where both parties also had mixed success (see Rema Tip Top Asia Pacific Pty Ltd v Grüterich (No 2) [2018] NSWSC 899). I do not see the relevance of the earlier order as to costs of the interlocutory dispute in relation to the freezing order to the costs now in issue (and, for the reasons I set out below, I do not accept that an appropriate order is for each party to bear its or his own costs).

46. As to the claim for a separate costs order in relation to the strike-out application, Mr Grüterich says that as this was not pressed at the hearing (and not ruled upon) there is no “event” for costs to follow, invoking what was said in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6 (Lai Qin) per McHugh J. Mr Grüterich submits that he acted reasonably in not pressing the application (and in not taking time away from the hearing) and, instead, in simply seeking an adverse inference in relation to the alleged non-production of documents; and hence that in the circumstances no separate costs order ought be made.

Determination

47. There is of course a wide discretion as to the making of costs orders (see s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act)), that discretion being required to be exercised judicially and consistently with the overriding mandate provided for under the Civil Procedure Act in respect of the conduct of civil litigation in this Court (see ss 56-59 of the Civil Procedure Act).

48. In Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274, the Court of Appeal made clear that it is necessary to analyse the whole of the proceedings to determine the appropriate cost order; and noted that the discretion as to costs must be exercised judicially.

49. I have already referred to the reliance placed in submissions on the principles considered by the Court of Appeal in Bostik (No 2) (at [38]) as to when a departure from the general rule may be warranted in cases where there are multiple issues in a case on which there has been a mixed outcome in the final result and that where there are multiple issues in a case, the court will not generally attempt to differentiate between issues on which a party was successful and those which it failed; and that, unless a particular issue or group of issues was “clearly dominant or separable” it will ordinarily be appropriate that costs follow the event. There are cases, however, where it may be that there is seen to be a series of “events”, so to speak.

50. In Bostik (No 2) it was noted that it may be appropriate to deprive a successful party of costs or a portion of 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; or where a party loses on a separate issue which has increased the time taken in the hearing.

51. Whether an order contrary to the general rule should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court. In Bostik (No 2), it was accepted that a “separable issue” can be “any disputed question of fact or law” before a court on which a party fails, notwithstanding that the party is otherwise successful in terms of the ultimate outcome of the matter and, as already noted, that where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory; it being dependent on matters of impression and evaluation (see Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 (cited by the Court of Appeal in James v Surf Road Nominees (No 2) (at [36]) and again in Bostik (No 2) (at [38])), per Gummow, French and Hill JJ at [272]).

52. It has been said on more than one occasion that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (Trade Practices Commission v Nicholas Enterprises Pty Ltd(No 3) (1979) 42 FLR 213; (1979) 28 ALR 201; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]).

53. In In the matter of Optimisation Australia Pty Ltd (Costs) [2018] NSWSC 280 (Re Optimisation) Brereton J (as his Honour then was) said (at [13]):

...The court does not usually apportion costs between issues, but acts on the outcome of the proceedings as a whole, without attempting to differentiate issues on which the party may not have succeeded. However, a successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant’s costs of them. But this course, while open, is one on which the court embarks with hesitation; the authorities reflect consistent themes that (1) justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case; but (2) it may be appropriate to apportion costs where a clearly definable and severable issue, on which the otherwise successful party failed, has occupied a significant part of the trial. The severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general rule. However, the court may depart from the general rule if the ultimately unsuccessful party succeeds on significant issues, particularly if those issues are clearly dominant or separable. [footnotes omitted]

54. I accept the submission for Rema Tip Top that what it characterises as the Misconduct Issue was the central issue in the proceedings (on which it succeeded) in that this was an answer to Mr Grüterich’s claim for damages for alleged repudiation of his employment contract even were he to have succeeded on the claim as to the alleged fixed term of his employment contract and it permeated various of the other issues raised in the claim and cross-claim (including the long service leave issue). I also accept that the time occupied in the course of the hearing on the relatively discrete issue as to the long service leave claim (on which Mr Grüterich succeeded, as a matter of statutory construction) was relatively minor in the scheme of things; and that Mr Grüterich was unsuccessful on the very substantial claim he brought for a monetary sum in relation to the termination of his employment.

55. That said, the issue as to Rema Tip Top’s claim for restitution or damages in relation to the notice payment (on which it did not succeed) was also a relatively discrete issue (and one that involved no little evidence as to the March 2018 spreadsheets). I have had some hesitation as to whether this would appropriately be seen as so clearly separable as to warrant an attempt to differentiate between that particular issue and the issues on which Rema Tip Top was successful. Ultimately, however, I have concluded that it was and that the misconduct arguments on which Rema Tip Top succeeded (and the significance of the declaratory relief obtained by it) do not weigh against the making of an apportionment of costs referable to Rema Tip Top’s lack of success on that issue.

56. I accept that Rema Tip Top obtained declaratory relief in addition to monetary relief and that this was not insignificant in that the judgment it obtained vindicated not only its own commercial interests (both in a monetary sense and, no doubt, in enforcing within its organisation the need for proper compliance by executives with their duties to the company) but also the public interest in the proper performance of duties by fiduciaries (and senior company executives). However, at its heart this liigation was for Rema Tip Top’s ultimate financial benefit in order to recoup moneys found to have been misappropriated or otherwise to have amounted to unauthorised payments. I am not persuaded that the public interest element is sufficient to warrant no apportionment of costs of the kind that I propose to make.

54. I also accept that Mr Grüterich has been found to have engaged in serious misconduct and I accept that he should have been aware at the time that his conduct was morally wrong. However, as adverted to in my principal reasons (see [558] and the passage there extracted from Downer EDI Limited v Gillies [2012] NSWCA 333), the concept of dishonesty encompasses the morally obtuse. I am not persaided that Mr Grüterich’s conduct in defending the proceedings (largely, but not wholly, unsuccessful as that defence was) or in raising the matters he did in his cross-claim, should count against him in a costs sense beyond the ordinary liability for costs that an unsuccessful litigant faces.

55. Accordingly, I consider that an order that each party pay its own costs is not warranted but that there should be a deduction from the costs order in favour of Rema Tip Top to reflect that there were relatively discrete issues on which it did not succeed (defending the long service leave claim and its claim for restitution of the notice payment in particular). In assessing the costs attributable to those issues, I consider that a broad brush approach is warranted (not least because of the matters to which Mr Grüterich points as to the concern to avoid unnecessary difficulty, time and expense in any future costs assessment process) and that a 10% discount on the costs order in Rema Tip Top’s favour would be appropriate in the present case, that being my general impression as to the relative time taken at the trial (and import, as a discrete issue) in relation to those issues.

56. Finally, as to whether there should be a separate costs order in relation to the 6 May 2019 strike-out motion, I accept that there was no no hearing of that application on its merits and that it has been recognised that where there is no hearing of any interlocutory or final relief on the meritsit can be said that there is no “event” to enliven r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (see Fire Containment Pty Ltd v Robins (No 2) [2011] NSWSC 547 at [11]). The general rule in that regard is that the court will make no order as to costs (Lai Qin at 625).

57. There are occasions when it is appropriate to award costs in relation to an application that has not been pressed (and hence has not been the subject of a hearing on the merits) or where issues have been abandoned without a hearing at trial (see, for example, Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 2) [2019] NSWSC 1492 (Macquarie v SLHD (No 2), though there the issue was as to an amendment to the pleaded case that was abandoned at the hearing). However, in the present case the application that was not pressed did not involve the making of such serious allegations as was the case in Macquarie v SLHD (No 2) and it is not appropriate here to entertain an argument as to whether it would have succeded had it been pressed (see Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 per Basten JA (at [8])).

58. Insofar as the overall award of costs in Rema Tip Top’s favour would encompass costs of the kind that were incurred in preparation for the strike-out application that was not pressed (and it would be difficult for Mr Grüterich to suggest that the cost of additional counsel was not warranted in order to deal with the issue at short notice given the then imminence of the trial), it would not in my opinion have been necessary to make any separate costs order in respect of those costs but for the following qualification. Given the discrete nature of the costs of and incidental to the 6 May 2019 strike-out application, I consider that a 10% discount on those costs would not be warranted (and I do not consider that there should be much difficulty or expense in isolating those costs for costs assessment purposes since they will in effect be the costs of preparation of the affidavit evidence and submissions over the weekend of 4-5 May 2019 and the retainer of Mr Lee in anticipation of argument on that application). Therefore, I propose to make a separate costs order in relation to those costs simply to make it clear that the 10% discount does not apply thereto.

Calculations and set-off

62. Returning to the calculations as to interest and set-off, with which Mr Grüterich agrees, I note as follows.

63. Rema Tip Top has calculated interest on the award of damages in its favour (i.e. $336,413.69) to be $25,205.27 and has calculated Mr Grüterich’s long service leave entitlement to be $38,393.86 and interest on that sum to be $2,469).

64. Accordingly, pursuant to Orders 4, 5, 6, 7 and 8 of the orders made on 18 November 2019, it is agreed that:

1. a total of $40,862.86 (payable to Mr Grüterich) is to be set-off against the amounts payable to Rema Tip Top under Orders 4, 5 and 6;

2. the balance payable to Rema Tip Top out of the HSBC bank account after the set-off is $270,799.44 (Order 4); and

3. the total damages (plus interest) payable by Mr Grüterich to Rema Tip Top after the set-off is $320,756.10 (Order 5), noting that any damages payable will be less the figure paid out of the HSBC bank account.

Orders

65. For the above reasons, I make the following orders which will now dispose of these proceedings:

1. Subject to Order 2, order the defendant to pay 90% of the plaintiff’s costs of the proceedings on the ordinary basis.

2. Order the defendant to pay the costs of and incidental to the defendant’s 6 May 2019 strike-out application on the ordinary basis but without the 10% discount applicable to the balance of the plaintiff’s costs by reference to Order 1 above.

3. Note that it has been agreed between the parties that:

1. interest payable by the defendant on the award of damages in the plaintiff’s favour (i.e. $336,413.69) is $25,205.27 and

2. the amount payable by the plaintiff in respect of the defendant’s long service leave entitlement is $38,393.86 plus interest in the sum of $2,469;

4. Order, pursuant to Orders 4, 5, 6, 7 and 8 of the orders made on 18 November 2019, that:

1. the sum of $40,862.86 (payable to the defendant) is to be set-off against the amounts payable to the plaintiff under Orders 4, 5 and 6 of the orders made on 18 November 2019;

2. the balance payable to the plaintiff out of the HSBC bank account after the set-off is $270,799.44 (payable pursuant to Order 4 of the orders made on 18 November 2019); and

3. the total damages (plus interest) payable by the defendant to the plaintiff after the set-off (i.e., the amounts in (a) and (b) above) is $320,756.10 (payable pursuant to Order 5 of the orders made on 18 November 2019).

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Amendments

29 November 2019 - First version did not load correctly

Decision last updated: 29 November 2019