Sante Wines P/L v Heirloom Vineyards Wine Co P/L (No 2) - [2017] SASC 80

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
SANTE WINES P/L v HEIRLOOM VINEYARDS WINE CO P/L & ANOR (No 2)
[2017] SASC 80
Judgment of The Honourable Justice Nicholson
6 June 2017
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - COSTS OF WHOLE ACTION - GENERALLY
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES
The appellant succeeded in two appeals against the respondents. The first was an appeal against the decision of a Master dismissing the appellant’s originating process seeking to have two statutory demands, one served by each respondent, set aside. The second appeal was against the Master’s decision refusing to allow the appellant to amend its originating process in order to correct the perceived defect.
The appellant seeks its costs of both appeals against both respondents on a party and party basis. However, the second respondent submits that it should be relieved of any obligation to pay the appellant’s costs and, further, that the appellant should be ordered to pay its costs. The first respondent submits that it should only be ordered to pay 80 per cent of the appellant’s costs on the basis that the appellant should not be regarded as having succeeded on all issues for which it contended.
Held:
1. The first respondent is to pay the appellant’s costs of the two appeals on a party and party basis.
2. As between the appellants and the second respondent, there is to be no order as to the costs of the appeals.
3. The appellant is to pay the respondents' costs of and incidental to the abandoned appeals to the Full Court.
4. The costs of both proceedings before the Master are reserved to the Master for further consideration.
Corporations Act 2001 (Cth) s 459G; Supreme Court Act 1935 (SA) s 40; Supreme Court Civil Rules 2006 r 263; Supreme Court Civil Supplementary Rules 2014 r 195, referred to.
Sante Wines Pty Ltd v Heirloom Vineyards Wine Co Pty Ltd [2017] SASC 65; Rodda & Anor v Ian Rodda Pty Ltd & Anor; Ian Rodda Pty Ltd v Rodda & Anor (No 3) [2015] SASC 135; Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1279; Cretazzo v Lombardi (1975) 13 SASR 4; Sante Wines Pty Ltd v Heirloom Vineyards Wine Co Pty Ltd & Anor (Unreported, Supreme Court of South Australia, Bochner J, 15 February 2017), considered.

SANTE WINES P/L v HEIRLOOM VINEYARDS WINE CO P/L & ANOR (No 2)
[2017] SASC 80
Magistrates Appeal: Civil
NICHOLSON J.
Introduction

In my principal reasons in this matter,[1] I allowed two appeals instituted by Sante Wines Pty Ltd. The first was an appeal against the decision of a Master dismissing the appellant’s originating process seeking to have two statutory demands, one served by each respondent, set aside. The second appeal was against the Master’s decision refusing to allow the appellant to amend its originating process in order to correct the perceived defect.
[1] Sante Wines Pty Ltd v Heirloom Vineyards Wine Co Pty Ltd [2017] SASC 65.
The parties are now in dispute as to the appropriate cost orders to be made. After delivery of my principal judgment, I allowed the parties time to provide written submissions.
The Master’s decisions were confined to what might be characterised, and meaning no disrespect, as technical or pleading errors in the form of the originating process filed by the appellant. The Master did not determine the merits of the dispute nor was her Honour asked to do so by the parties. As a consequence of the appeals succeeding, I remitted the matter to the Master for further consideration and I set aside her Honour’s costs orders. In these circumstances, a further order to the effect that the costs of the proceedings before the Master be reserved to the Master for further consideration in the context of her Honour’s resolution of the parties’ dispute on the merits is appropriate. Neither party opposes such an order.
The dispute centres on the costs of the appeal itself. The Court has a wide discretion when dealing with matters of costs, although the discretion must, of course, be exercised judicially.[2] Nevertheless, the starting point often referred to in the authorities as ‘the general rule’ or the ‘prima facie position’ or the ‘presumption’ is that costs follow the event.[3]
[2] Supreme Court Act 1935 (SA), s 40; Supreme Court Civil Rules 2006, r 263; Supreme Court Civil Supplementary Rules 2014, r 195.
[3] Rule 263(1) and see, for example, Rodda & Anor v Ian Rodda Pty Ltd & Anor; Ian Rodda Pty Ltd v Rodda & Anor (No 3) [2015] SASC 135 at [5]-[6].
The appellant seeks its costs of both appeals against both respondents on a party and party basis. However the second respondent submits that it should be relieved of any obligation to pay the appellant’s costs and, rather, that the appellant should be ordered to pay its costs. Further, the first respondent submits that it should only be ordered to pay 80 per cent of the appellant’s costs on the basis that the appellant should not be regarded as having succeeded on all issues for which it contended. I will deal with the first respondent’s contention (second issue above) first.
The appellant succeeded with the second appeal only because it succeeded with the first appeal, in that I found that the appellant’s originating process complied with the requirements imposed by s 459G of the Corporations Act 2001 (Cth). As such and there having been a valid originating process before the Master, and contrary to the Master’s ruling, the Master did have jurisdiction to consider the amendment application. However, I also found that if the appellant had failed with the first appeal it also would have failed with the second appeal.
In these circumstances, the first respondent contends that even though the appellant succeeded with the second appeal it should be regarded as having failed with respect to the underlying substantive issues and that the case has given rise to the situation where a successful party should be deprived of a portion of its costs.
I repeat my earlier discussion of some of the relevant authorities in Rodda & Anor v Ian Rodda Pty Ltd & Anor; Ian Rodda Pty Ltd v Rodda & Anor (No 3).[4]
[4] [2015] SASC 135 at [7]-[11] [footnotes omitted].
The defendants maintain that the plaintiffs should only be entitled to a proportion of their costs. In so doing, they rely on that line of authorities an early representative of which is Cretazo v Lombardi. In Cretazo, Bray CJ (with whose reasons Zelling and Jacobs JJ agreed) said this.
A successful party who has failed on certain issues may well not only be deprived of his own costs of those issues, but ordered in addition to pay his opponent’s costs of them, and in this context “issue” does not mean a precise issue in the technical pleading sense, but any disputed question of fact or, in my view, of law...
Jacobs J, whilst in agreement with the Chief Justice, “sounded a note of cautious disapproval” of applications which seek to adjust costs orders on the basis of issues won and lost. His Honour said this:
But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.
A more recent formulation of the approach can be found in the judgment of the Victorian Court of Appeal in McFadzean v CFMEU.
The position as to costs where a party has been partially successful was summarised by Eames J in Pricom Pty Ltd v Sgarioto:
As a general rule costs should follow the event, and a successful party should obtain all of the costs of the action even although it failed to establish some of the alternative heads of its claim: Ritter v Godfrey [1920] 2 KB 47. However, in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748, per Toohey J at 48,136.
The judge below acknowledged that in the normal course, a plaintiff who was only successful on one of a number of pleaded causes of action would be entitled to costs. In our view, the reasons his Honour gave for departing from this course were sound. The Rules of Court are wide enough to permit an apportionment of costs according to issues or causes of action. Importantly, the judge regarded the case brought by the successful appellants as a “substantial failure … whether assessed by references to causes of action or issues”. His Honour observed that the plaintiffs had been successful in eight of the 63 causes of action they had brought, and that, assessed as a proportion of the disputed questions of fact resolved in their favour, the success of the plaintiffs was substantially less than that. In these circumstances, there was clearly a reasonable basis for his Honour’s conclusion that a “substantial injustice” would result from an award of costs in favour of the successful plaintiffs.
The defendants submit to the effect that a cautious approach, as advocated by Jacobs J, is no longer warranted, that the focus should be on a court’s unfettered discretion guided by questions of fairness and that a court should be more ready, than once may have been the case, to apportion costs where a party succeeds in only some of the claims he or she has brought. I accept that this submission, as a general proposition, has some force.
There is a recognition in the more recent authorities that the nature of litigation has changed since Cretazo v Lombardi was decided and that the modern litigation practitioner has a far greater burden of deciding which issues or causes of action should be pursued in a court. The defendants have drawn to the Court’s attention a number of authorities that are said to support a more flexible approach to this issue.
In Hockey v Fairfax Media Publications Pty Ltd (No 2) White J, after reviewing the authorities, said this.
However, courts are now more ready to apportion the costs awarded to a party who succeeds in only some of the claims he or she brings. This may reflect the increasing factual and legal complexity of modern litigation and the multiplicity of factual and legal issues it entails, and the tendency of applicants to pursue multiple claims involving different factual enquiries in the one proceeding. It may also reflect an encouragement by the courts to applicants to exercise some discrimination in their selection of the claims they litigate. It is to be remembered that the inclusion of multiple causes of action in the one proceeding, even if based on a common substratum of fact, adds to the costs of the pleadings, interlocutory activity, preparation and presentation of the evidence at trial as well as of the trial itself. Nowadays, courts are particularly conscious of their role in attempting to control the cost of litigation.
I recognise that courts are now more ready to apportion costs according to issues than once might have been the case. Nevertheless, in my view it would not be appropriate in the present case to deprive the appellant of a portion of its costs. The second appeal involved a very narrow point of law. Its resolution was largely, if not entirely, to be determined by and dependent on the outcome of the first appeal. The resolution of the second appeal was informed by the decision and reasoning of Barrett J in Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd.[5]That decision was also central to the submissions by each party and my decision concerning the first appeal.
[5] [2010] NSWSC 1279.
The second appeal will have added relatively little, in terms of the parties’ time and consideration, to that already required by the first appeal. I am satisfied that this case lends itself to the more cautious approach advocated by Jacobs J in Cretazzo v Lombardi[6] and set out above. I see no good reason in this case to depart from the usual position that, given the appellant’s success on both appeals, it should have its costs at least as against the first respondent.
[6] (1975) 13 SASR 4 at 16.
I turn now to consider the position of the second respondent. The second respondent’s principal contention is that it should not have been made a party to the appeal. In this respect, the second respondent relies on what is said to have been common ground between the parties before the Master that the second respondent’s statutory demand had been met in full after the filing of the appellant’s originating process and before the argument before the Master. The Master observed as follows.[7]
It is not disputed that since the filing of the [appellant’s] originating process, the [appellant] has now paid the debt to [the second respondent] in full; as a result, [the second respondent] no longer presses its demand, but does seek costs in relation to the [appellant’s] application.
[7] Sante Wines Pty Ltd v Heirloom Vineyards Wine Co Pty Ltd & Anor (Unreported, Supreme Court of South Australia, Bochner J, 15 February 2017) at [2].
At the conclusion of the matter before her, her Honour made a costs order in favour of the second respondent. The second respondent submits that, given that its debt was paid in full, the originating process should not have been issued against it in the first place. And, as such, it was entitled to a costs order with respect to the proceedings before the Master whether or not the respondents were to be successful in having the appellant’s originating process dismissed. Whether or not this is so is not an issue before me. In addition, it was not expressly articulated by the Master as being the basis for the costs order made in favour of the second respondent. It is something that may need to be ventilated before the Master when the costs issues are revisited now that the matter has been remitted for her Honour to consider the merits of the parties’ dispute.
In this respect, I note, based on the submissions received from the appellant concerning the costs of the appeals, that the apparent common ground to the effect that the appellant had earlier discharged the second respondent’s debt in full may not be common ground at all. Whilst the second respondent contends that it should never have been joined as a party to the appeal because the originating process should never have been issued against it, that is not something I can or should determine. It is now a matter for the Master when she considers the merits.
The issue before me concerns the costs of the appellant’s successful appeal. The parties conducted the matter before the Master (and therefore on appeal) on the ground, in effect selected by the respondents, that the originating process, because of its form, was invalid and thus the appellant’s application to have the statutory demands set aside should fail in limine. The second respondent participated before the Master if only to protect its position as to costs. It received a costs order in its favour. The appellant pursued its appeal, as it was entitled to do, on the same limited basis, that is, by challenging that its originating process was invalid as a matter of form. As part of its appeal, the appellant sought to have the costs orders in favour of both respondents set aside. In order to do so, it had no choice but to join the second respondent. Similarly, the second respondent had a costs order in its favour which it wished to preserve. In order to do so, it was interested in the appeal.
As it happened, the one counsel and solicitors were engaged to represent both respondents at the appeal. It is a matter for the respondents as how this single set of solicitor/client costs might be met as between them. However, the respondents’ submissions are to the effect that the appeal was, in all practical terms, responded to by or on behalf of the first respondent with the second respondent’s presence at the appeal confined to protecting its position as to its entitlement to costs in the proceedings below. At the end of the day, and once the issue has been argued before the Master that the second respondent should still be entitled to its costs before her Honour, come what may, it may ultimately succeed in this respect.
However, and whilst the second respondent was interested in the outcome of the appeal and a proper party thereto, its presence at the appeal did not add to or did not add appreciably to the burden on the appellant and its costs of running the appeal.
In all the circumstances, there should be no order as to the costs of the appeals as between the appellant and the second respondent.
Initially, when the appellant commenced the appeals they were directed to the Full Court. It became common ground that both appeals should be heard by a single Judge and the notices of appeal were amended and directions made accordingly. The appellant should pay the respondents’ costs of and incidental to the abandoned appeals to the Full Court.
Conclusion
I make the following orders.
1.The first respondent is to pay the appellant’s costs of the two appeals on a party and party basis.
2.As between the appellant and the second respondent, there is to be no order as to the costs of the appeals.
3.The appellant is to pay the respondents’ costs of and incidental to the abandoned appeals to the Full Court.
4.The costs of both proceedings before the Master are reserved to the Master for further consideration.