Russo v Resource Developments International Pty Ltd (No 2)

[2003] NSWSC 446

CITATION:	Russo v Resource Developments International Pty Ltd (No 2) [2003] NSWSC 446
HEARING DATE(S):	09/05/03
JUDGMENT DATE:	26 May 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Plaintiff to pay the fifth defendant's costs.
CATCHWORDS:	PROCEDURE [581]- Costs- General rule- When not followed- Disreputable conduct of party- Conduct not impinging on result- Effect on costs.
CASES CITED:	Bostock v Ramsey Urban District Council [1900] 2 QB 616 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Dicks v Yates (1881) 18 Ch D 76 Donald Campbell & Co Ltd v Pollak [1927] AC 732 King & Co v Gillard & Co [1905] 2 Ch 7 MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23 Ritter v Godfrey [1920] 2 KB 47 Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129
PARTIES :	Vincenzo Russo (P1) Merkado Pty Limited (P2) Resource Developments International Pty Limited (D1) Premier Resources Limited (D2) Hy-Tec Industries Pty Limited (D3) Iyad Rafidi (D4) Placido Costa (D5)
FILE NUMBER(S):	SC 1947/02
COUNSEL:	F G Lever SC (P) R Seton SC (D5)
SOLICITORS:	Bartier Perry (P) PricewaterhouseCoopers Legal (D5)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Monday 26 May 2003

1947/02 – RUSSO v RESOURCE DEVELOPMENTS INTERNATIONAL PTY LTD (NO 2)

JUDGMENT

1 HIS HONOUR: This judgment concerns the question of costs between the plaintiff and the fifth defendant, Mr Placido (Pat) Costa.

2 I gave judgment on 2 April 2003 [2003] NSWSC 239. The case had, together with an associated matter, involved 9 days hearing. The plaintiff made a number of claims against the defendants. He was successful on only one of those claims and that claim was successful only against the first and fourth defendants.

3 The prayers in the statement of claim show that the relief sought against the fifth defendant was a declaration that he was knowingly concerned in breach of the Trade Practices Act or Fair Trading Act because of the conduct of the other defendants, and for consequential monetary orders.

4 The fifth defendant was not sued as a solicitor. In fact, he had drawn up some documents which were relied on by the plaintiff in his case, but there was no defective drafting of those documents, and indeed, their form actually assisted the plaintiff in his success against other defendants.

5 The plaintiff wholly failed on his Trade Practices claim and accordingly wholly failed against the fifth defendant.

6 Ordinarily, this would be enough for the fifth defendant to obtain an order for his costs against the plaintiff without question.

7 The problem that I have felt and why I have reserved my decision on this matter is that in paras 77 and following of my earlier judgment I found that I could not believe the evidence of the fifth defendant and the evidence of the fourth defendant, Mr Rafidi that they had no reference to each other's affidavits when both were in identical form. Moreover, it was more likely than not that the three documents to which I referred in my earlier judgment were created after the event in order to boost a principal point made by the defendants generally that the share sale agreement was subject to the heads of agreement which had earlier been agreed upon. The principal reason for coming to this view was that one of the documents was written on the reverse side of a used piece of paper which could not have come into existence until well after the date of the document.

8 The question of principle then is how far can a court deprive a successful litigant of his costs because, to put it at its highest, it is found that in a matter not connected with the reasons for which that person succeeded he has fabricated a document which was deployed in evidence and has maintained that the document was not fabricated.

9 There is no doubt at all that there are some circumstances where the court may deprive a successful party of his or her costs of the action. This has been the case even before the Judicature Act, see eg Dicks v Yates (1881) 18 Ch D 76, 85.

10 It is probably appropriate to commence with the House of Lord's decision in Donald Campbell & Co Ltd v Pollak [1927] AC 732. In that case, even though the trial judge gave a verdict for the defendant employee when sued by his ex employer, he ruled that this should be without costs because of the action of the employee in concealing his partnership with the co-defendant which the Judge said was misconduct and the real reason why the action was commenced. The decision on costs was reversed by the Court of Appeal, but restored by the House of Lords. Viscount Cave said at 812 that a successful defendant has in the absence of special circumstances a reasonable expectation of obtaining an order for costs. However, the court always had a discretion but:

"the Judge ought not to exercise it against the successful party except for some reason connected with the case. Thus, if – to put a hypothesis which in our Courts would never in fact be realized – a judge were to refuse to give a party his costs on the ground of some misconduct wholly unconnected with the cause of action or of some prejudice due to his race or religion or … to the colour of his hair, then a Court of Appeal might well feel itself compelled to intervene. But when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to the litigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me that a Court of Appeal … is prohibited by the statute from entertaining an appeal from it."

11 The law lords said that it would be quite wrong to lay down any definite rules as to how the discretion was to be exercised. However, with reference to previously decided cases, they gave some guidelines. They indicated that Atkin LJ had gone too far by saying in Ritter v Godfrey [1920] 2 KB 47, that there were three situations where the Judge could deprive a defendant of costs on the basis that the statement was too prescriptive. However, they endorsed the general sentiment as guidelines. The three circumstances were:

(1) Where the defendant brought about the litigation.

(2) Where the defendant has done something connected with the institution or the conduct of the litigation calculated to occasion unnecessary litigation and expense; or

(3) Where the defendant has done some wrongful act in the course of the transaction of which the plaintiff complains.

12 Lord Atkinson in the Donald Campbell case at 815 basing himself on Bostock v Ramsey Urban District Council [1900] 2 QB 616, points out that the Judge must consider the whole of the circumstances of the case and everything which led to the action and that a good cause for depriving the defendant of costs is not confined to a cause founded upon the conduct of the successful party in the course of the litigation.

13 In Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129, 152 and following, Kaye J, in giving the leading judgment in the Full Court analysed the cases. At 154 his Honour made it clear that whilst special circumstances are required both to deprive a successful defendant of costs, even more compelling circumstances are required for the exercise of the discretion as a result of which a successful defendant is compelled to pay part or all of the plaintiff's costs. Generally speaking, the Victorian court approved the guidelines in Ritter v Godfrey.

14 In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233, Sheppard J, when a member of the Federal Court, whilst recognising that the discretion was unlimited, gave illustrations from the decided cases as to when the discretion had been exercised in the unsuccessful party's favour. Without noting the case named, I quote:

"I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud … evidence of particular misconduct that causes loss of time to the Court and to other parties … the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law … the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions … an imprudent refusal of an offer of compromise."

15 The Colgate-Palmolive case is one involving indemnity costs, but the general principles are much the same.

16 A recent instance in which costs were denied a successful party is to be found in MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23, where, as is disclosed at p 39, counsel for FAI persisted with issues in cross examination for four days before he announced to the Court that following an interview with an employee of FAI which had taken place during lunch on the fourth day, that question would not be pursued. The Full Court upheld the trial judge's decision not to allow costs.

17 It should be noted that in the present case the conduct of the fifth defendant in fabricating the documents did not induce the plaintiff to believe that there was a good case when there was not one, nor did it goad the plaintiff into litigation in which he would never have embarked but for the misconduct (using the words of Eve J in Ritter v Godfrey [1920] 2 KB 47, 66). Nor was the case one where the act of the defendant occasioned unnecessary litigation or expense in the way in which the trial was conducted. The material was material which would have affected Mr Costa's credit in any event. Accordingly, it would only be if the matter came within the class mapped out by Atkin LJ as "some wrongful act in the course of the transaction of which the plaintiff complains". This category has never been fully explored. However, the Court looks for something which is close to the cause of action sued upon or the transaction flowing from which the cause of action arises. General amoral behaviour of a party is no reason to deprive that party of costs. Indeed, even if the facts on which the cause of action are based show that the defendant is not "a decent chap", this again is no reason to deprive a successful defendant of his costs. The conduct must be intimately connected with the reason why the litigation was brought or lasted as long as it did or as one might colloquially say "in that ball park".

18 Although I have generally resisted looking at earlier cases, it is probably of value to note King & Co v Gillard & Co [1905] 2 Ch 7, where, in a passing off suit, Kekewich J gave judgment for the defendant, but refused to order the plaintiffs to pay the defendants' costs on the ground that the defendants had indicated that their goods had obtained certain medals and awards at exhibitions which were false. This matter was not connected with the issue between the plaintiffs and the defendants. The Court of Appeal held that the improper conduct, assuming it to be so, was not connected with the issue between the plaintiff and the defendant and was not material which could be used to exercise the Judge's discretion to deprive the successful party of costs.

19 I am not at all happy that a solicitor of this Court would fabricate a document in the sense of dating it a date it could not bear, and then persisting with evidence that it must have been prepared on the date it bore. Clearly, one document could not have been prepared on the date it carried. This conduct was exacerbated by the continued assertion of the document's validity and also, to a lesser extent, by the continued assertion that the solicitor and Mr Rafidi had independently prepared identical affidavits.

20 However, it does seem to me that, bearing in mind the general guidelines outlined in the cases which I have digested, the conduct is too collateral to the cause of action between the plaintiff and the fifth defendant.

21 Accordingly, in my view, the ordinary order must follow and the plaintiff must pay the fifth defendant's costs.

22 I should note that no argument has been directed to me as to the appropriateness of the defendants who were represented by three sets of solicitors and counsel being separately represented. Presumably, this is a matter which the costs assessor will have regard to when considering any disputed bill of costs.

23 I note that the outstanding matters in the proceedings will be considered by me on 22 July 2003.

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Last Modified: 05/27/2003