| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : RILEY -v- THE BUZZ CORP PTY LTD [No 2] [2012] WADC 146 (S) CORAM : EATON DCJ HEARD : 21-25 & 28 MAY 2012 & 22 FEBRUARY 2013 DELIVERED : 19 OCTOBER 2012 SUPPLEMENTARY
DECISION : 28 MARCH 2013 FILE NO/S : CIV 2469 of 2007 BETWEEN : MICHAEL MARK RILEY First Plaintiff
RILAND PTY LTD
Second Plaintiff
AND
THE BUZZ CORP PTY LTD
First Defendant
KEVIN ALSTON FYNN
Second Defendant
ANTONIO CANTONI
Third Defendant
Catchwords: Costs - Plaintiff successful on some causes of action but not others - Orders made
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Legislation: Rules of the Supreme Court 1971 O 66 Result: Costs order made
Representation: Counsel:
First Plaintiff : Mr R A Blow
Second Plaintiff : Mr R A Blow
First Defendant : Mr S V Forbes
Second Defendant : Mr S V Forbes
Third Defendant : Mr S V Forbes
Solicitors:
First Plaintiff : Gadens Lawyers
Second Plaintiff : Gadens Lawyers
First Defendant : Vincent Partners
Second Defendant : Vincent Partners
Third Defendant : Vincent Partners
Case(s) referred to in judgment(s):
Keet v Ward [2011] WASCA 139
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1 EATON DCJ: This action was tried before me in May of 2012. The first plaintiff, a management consultant, and his service company, the second plaintiff, sued the first defendant, a 'start-up' company in the field of communications technology, and two of its former directors, the second and third defendants. The first plaintiff claimed against the company damages for breach of contract and, further, and in the alternative, against all defendants, damages for misleading and deceptive conduct with interest and costs. The second plaintiff claimed damages for misleading and deceptive conduct as against all defendants with interest and costs. The three defendants denied that the plaintiffs were entitled to any relief.
2 On 19 October 2012 I published a judgment awarding damages to the first plaintiff pursuant to s 82 of the Trade Practices Act 1975 in the sum of $53,000. There was judgment for the first plaintiff against the defendants in that amount. The second plaintiff's claims were dismissed. 3 Having heard counsel for the parties on that day I made the following orders: 1. The defendants pay the sum of $53,000 to the first plaintiff. 2. Interest be paid on that sum from 21 November 2007 until judgment at the rate of 6% pursuant to s 32 of the Supreme Court Act 1935. 3. The second plaintiff's action be dismissed. 4. Orders for costs be adjourned sine die with liberty to apply on 48 hours notice. 5. Enforcement of the judgment be stayed for 14 days with liberty to apply in that respect thereafter. 4 By letter of 31 January 2013 the solicitors for the plaintiffs advised that the parties had been in conference with respect to the issue of costs but had been unable to reach agreement. Liberty to apply was exercised. The issue was argued before me on 22 February 2013. In addition to oral argument I have the benefit of the plaintiffs' minute of proposed orders and an outline of submissions dated 21 February 2013, the defendants' minute of proposed orders and an outline of submissions dated 19 February 2013 and an affidavit sworn by Sam Peter Paonni, solicitor for the defendants, on 19 February 2013. (Page 4)
5 The plaintiffs, according to their minute, sought orders as follows: 6 The defendants sought by their minute the following orders: 7 The first plaintiff's claim, as pleaded, arose out of a board meeting of the first defendant on 27 November 2006 at which the first plaintiff made a comprehensive presentation as to the future of the company under his management and his proposed terms of employment and the immediate sequelae of that meeting. The principal pleading was that there was an agreement, partly in writing and partly oral, between the first plaintiff and the first defendant on 27 November 2006 whereby the first defendant agreed to employ the first plaintiff as its chief executive officer. 8 I concluded that on 27 November 2006 the parties had not reached finality in all of the terms to be agreed and did not intend to be immediately bound at that point. I concluded, further, that they were intent on negotiating three outstanding matters. In consequence, the plaintiffs failed to prove that there was a contract as at 27 November 2006 appointing the first plaintiff as chief executive officer of the first defendant, as alleged. There was, in accordance with my findings, a mutual expectation that the parties would, in due course, reach agreement on all matters. 9 In the alternative, the plaintiff pleaded that on 27 November 2006 the first defendant made certain representations to the first plaintiff to the effect that he would be appointed CEO of the first defendant and in respect of certain terms of his employment. The plaintiffs pleaded that the representations were made in trade or commerce and that they were misleading and deceptive, contrary to s 52 of the Trade Practices Act 1974. (Page 5)
10 I found that there was a representation made to the first plaintiff to the effect that he would have an ability, in accordance with his contract, to undertake independent consulting work. That representation was made by the first defendant. At all material times both the second and third defendants knew that it had been made and that it was unqualified. I found that each were knowingly concerned in the first defendant's conduct. 11 As to the relationship between the plaintiffs I said (at [128]) as follows: The plaintiffs' claim for damages is cast in the alternative. I propose to approach it on the basis that it was Mr Riley who suffered loss or damage by conduct in contravention of s 52 of the Act and that it is Mr Riley who may recover the amount of that loss or damage. In this matter the second plaintiff was very much the alter ego of the first, being called into the arrangements being made with Ispire as an artifice, depending upon the tax implications arising out of the final terms of the arrangement between Mr Riley and Ispire. 12 The first plaintiff is, undoubtedly, a successful one and ought to be able to recover his costs from the defendants. 13 The plaintiffs submit that a Calderbank offer was made by them before trial and that it was not bettered by the judgment outcome. The defendants, in fact, made no offer to settle the matter pre-trial or during trial. 14 Costs are, of course, subject to the discretion of the court but generally, a successful party to an action, will recover his or her costs. Where a party, though generally successful in an action has, by the introduction of some issue or issues on which he or she has failed, increased costs the court may order such party to pay the costs of such issue or issues. 15 Order 66 r 2 of the Rules of the Supreme Court 1971 provides: In the absence of any special order – (a) where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought; (Page 6)
16 In Keet v Ward [2011] WASCA 139 the Court of Appeal in this State outlined certain propositions relating to the operation of O 66 r 2(a) as follows: (a) the expression 'cause of action' in O 66 r 2(a) is a reference to a factual situation, the existence of which entitles the plaintiff to obtain a remedy; (b) the rule does not provide an inflexible rule which prescribes a mandatory approach to the awarding of costs in cases where there are multiple causes of action. The opening words 'in the absence of any special order' indicate that the court retains the discretion to make a special order departing from the rule in O 66 r 2(a); (c) however, where there are multiple causes of action and a party has succeeded on only one or some, the other party is prima facie entitled to costs on the others but the court will always attempt to do substantial justice in the circumstances; (d) it may not be appropriate to make a costs order in accordance with O 66 r 2(a) where there is in substance one contest, that is, where the causes of action arise from the one course of dealings, the one transaction or the same facts. 17 Of the two discrete causes of action, one in contract and one under the Trade Practices Act, the former was the more compact, not dependent to anywhere near the same extent as the latter, on the conduct of the parties in the months following the board meeting on 27 November 2006. The third issue, estoppel, was closely tied to the cause of action in contract and falls into much the same category. 18 Counsel for the plaintiffs submits that although the first plaintiff was only successful in relation to the claim in misleading and deceptive conduct, all of the work done in relation to the estoppel claim and the majority of the work done in relation to the contract claim was also relevant to the misleading and deceptive conduct claim. 19 Counsel for the defendants, in written submissions makes reference to the authority of Keet v Ward and urges that the court should take a pragmatic approach in framing costs orders which should involve the court's impression and evaluation of, not only the importance of matters, but also the time occupied and the ambit of submissions. Counsel for the defendants further submits that it would be more cost effective and appropriate for orders to me made which generally reflect the varying degrees of success and failure by the parties based on a broad-brush approach. Such an approach should lead to an order that the defendants (Page 7)
pay 30% of the first plaintiff's costs of the action, excluding any costs in relation to valuing the first defendant's shares, but including reserved costs to be taxed if not agreed and that there be no other orders as to costs between the plaintiffs and the defendants. 20 With respect, in a case where the defendants denied that the plaintiffs were entitled to any relief and made no offer pre-trial to resolve the matter, to suggest that the first plaintiff might recover 30% of his costs from the defendant is to take a somewhat meagre approach to the first plaintiff's success. 21 The plaintiffs seek orders in terms of their minute on the basis that, Those orders provide a framework within which the parties can negotiate, or a taxing master can determine, cost entitlements. The extent to which particular costs were reasonably or unreasonably incurred, and the extent to which any costs were incurred solely and exclusively in respect of the contract claim, are matters to be determined at taxation in light of detailed submissions from the parties. 22 With respect to that submission I observe that the parties have for several months, been unable to resolve by negotiation the issue of costs. In consequence, liberty to apply has been exercised. The suggestion is that a taxing officer might be left with the responsibility of determining whether particular costs were reasonably or unreasonably incurred and the extent to which any costs were incurred solely and exclusively in respect of the contract claim as opposed to the claims in trade practices or estoppel. The approach taken by the plaintiffs is strictly in accordance with O 66 r 2(a). 23 As the trial judge I am in a far better position to judge the significance of issues in the context of the trial as a whole and the nuances of the interplay between those issues than a taxing officer would be. 24 Specific reference is made in the minute of proposed orders presented by the defendants and in their submissions to the valuation of Class B shares in the first defendant. Following the withdrawal of its offer of employment to the first plaintiff the first defendant took the view that it was appropriate, given the work that he had undertaken, to offer Class B shares by way of a form of remuneration or compensation. Ultimately, a share certificate was issued to the second plaintiff for 263,750 Class B shares. They were issued to the company by reason of tax advice obtained by the first plaintiff to the effect that the most tax effective way of receiving or acquiring Class B shares was for them to be issued to the company rather than to him. (Page 8)
25 During the trial a chartered accountant was called to give expert evidence as to the value of that parcel of shares. His evidence was inconclusive by reason of an absence of information which would have enabled him to provide a valuation of the shares as at the date of trial. To add to the problems surrounding this particular issue the matter of the validity of the Class B shares emerged during the trial. In a belated amended reply to the defence of the first defendant the plaintiffs, at par 2A, pleaded that the purported issue of Class B shares by the first defendant was invalid in that, at all material times, the first defendant did not have a constitution and prior to 21 June 2007, had only one class of shares capable of issue. In the absence of a special resolution passed by the board of the first defendant, varying the rights attached to shares, no Class B shares existed or could be issued. Counsel for the plaintiffs asserted that, in the absence of a special resolution, the Class B shares issued to the second plaintiff were invalid. 26 In closing witness submissions counsel for the defendants contended that the issue of the purported Class B shares by the first defendant to the second plaintiff was defective in that the rights attaching to those shares were not defined but that the issue of the shares was not beyond power and that the shares were not invalid. I concluded that, in all the circumstances, I was unable to attribute any value to the shares in the exercise of assessing damages to be recovered by the first plaintiff. I observed that, putting aside the question of validity, there was no evidence before me as to the then present value of those shares. 27 The whole issue of the shares, their validity and their value, was left, at the conclusion of the trial, in an entirely unsatisfactory state. This was an issue that was grappled with, somewhat belatedly, by both parties and ultimately remained unresolved. In my view, it was an issue pursued by the plaintiffs that, in the end, became something of a pointless exercise. The defendants should not be asked to pay the costs of that exercise. 28 Although the approach of the plaintiffs is akin, as mentioned, to a strict compliance with O 66 r 2(a) I am inclined to the approach taken by the defendants. I am in a far better position to, as mentioned, adjudge the overall importance of the various issues pursued by the parties. In the exercise of my discretion I make the following orders: 1. The defendants pay two thirds of the first plaintiff's costs of the action, excluding any costs in relation to the valuation of the Class B shares but including reserved costs to be taxed if not agreed. (Page 9)
2. There otherwise be no orders as to costs between the plaintiffs and the defendants. 29 In making those orders I add that I have had regard to the matters raised in the affidavit of Sam Peter Paonni sworn 19 February 2013 but take the view that such matters are for taxation.
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