Access Training Group Ltd v Jane

Primary judgment

1. For the purposes of this appeal it is not necessary to summarise the primary judge's conclusions on all the issues then in dispute as the only challenge by the appellants is to the finding (in respect of the claims in the 2020 proceedings) that the payments totalling $1.3 million to VCFA represented loans made by AGT to VCFA (which had the result that the Jane Defendants were able to set-off the amount owing by VCFA on the loan, and interest, against the amounts owing by them to Holdings in relation to the $1.7 million deposit paid in August 2016 in relation to the sale of their shares in AGT).
2. The primary judge noted at [20] that the main dispute in the 2020 proceedings was as to the characterisation of the payments made to VCFA; at [21] that there was no document predating the payments which recorded or referred to either an agreement for services or an agreement for loan and that each of AGT and VCFA contended that the agreement which gave rise to the payments was an oral agreement between Mr Jane of AGT and Mr Lambert of VCFA. His Honour noted at [26] that neither side suggested that the payments made by AGT to VCFA were by way of a gift; and that the argument at trial had proceeded on the basis that the moneys must have been paid either pursuant to an agreement for services or pursuant to a loan agreement; i.e., that one such agreement must have been in place, the question being which one had been formed.
3. As to the proper characterisation of the invoices, the primary judge noted (at [29]) that the transactions in question arose out of conversations between Mr Jane and Mr Lambert some eight years ago, in circumstances where neither could recall the specifics of what was said. His Honour said that it was necessary to examine the objective contemporaneous documentary evidence, including the parties' communications after the time of the alleged agreement, in order to determine the relative probabilities of the parties' respective positions; and in particular, to determine whether those communications revealed a common assumption as to the existence and terms of the agreement between them.
4. His Honour (at [27]) noted the statement of Griffith CJ (O'Connor J agreeing) in Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38 (Howard Smith) to the effect that statements or conduct after the date of an alleged agreement that were inconsistent with the existence of a concluded contract were relevant in determining whether the parties had in fact concluded an agreement at a particular time.
5. His Honour also noted (at [28]) Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 (Brightstars) at [124] where Basten JA (Gleeson JA agreeing) observed that post-agreement conduct of one party known to the other and communications between the parties which reveal a common assumption as to the existence and terms of an agreement may provide evidence of such agreement (but that subjective views or reservations of one party, undisclosed to the other, could not provide a basis for inferring the terms of a pre-existing agreement).
6. The appellants do not cavil with his Honour's statement of principle or the approach his Honour indicated he would adopt but they maintain that his Honour incorrectly applied the principle there stated (see Ground 1).
7. At [30], his Honour set out up front his conclusion that, although there were some materials that supported VCFA's contention (that the moneys were paid as a fee for service), the evidence overwhelmingly supported the conclusion that the moneys were loaned by AGT to VCFA. His Honour then went on to address: from [31]-[51], the three invoices in question (on which the appellants place great weight); from [52]-[61], communications contemporaneous with the payments; from [62]-[76], Mr Lambert's evidence of the common understanding of the parties; and then, from [77]-[101], the First Deed and Second Deed.
8. As to the invoices, his Honour accepted that the fact that GST was included in the invoice and that this was paid by AGT Management provided some evidence in support of the contention that services were rendered by VCFA to AGT ([37]). However, his Honour said that, as against that was the fact that AGT Management did not treat any part of the payment made as being for GST in its own accounts. At [38], his Honour observed that treatment of the payment(s) as "BAS Excluded" was evidence of a contemporaneous view, on the part of AGT Management, that no part of the sum paid represented GST; and said that this was consistent with the view, also expressed in the contemporaneous allocations, that the whole of the amount was paid by way of loan.
9. His Honour pointed out that the descriptions of the work done on the second and third invoices bore no (or, in the case of the third invoice, little) relation to the work that Mr Lambert deposed was the subject of those invoices (see [41]-[43] in relation to the second invoice, and [46]-[47] in relation to the third invoice). His Honour said that Mr Lambert offered no explanation for the discrepancy in the description of the work on the second invoice ([43]) and did not produce any detailed document providing a breakdown of the amounts charged on the third invoice nor did he provide any explanation as to why that invoice wrongly stated that everything except the amount of GST had already been paid ([47]), nor as to why VCFA did not appear to have chased AGT for the payment of the outstanding amount of $20,000 ([49]).
10. At [50] his Honour considered that the fact that the invoices in question provided, on Mr Lambert's own evidence, incorrect information about the work to which they related and, in relation to the third, the amount which was outstanding, cast significant doubt on the reliability of the invoices, particularly where the anomalies were unexplained.
11. His Honour concluded (see [51]) that the evidence of the invoices and payments made following the invoices did not reveal a common assumption by VCFA and AGT as to the existence and terms of the agreement between them.
12. His Honour next turned to the contemporaneous communications, which his Honour considered did reveal a common assumption that the substance of the transactions was that the moneys paid to VCFA were being advanced as loans ([52]); those being the 20 November 2015 from Mr Jane (see above at [36]), and the 15 February 2016 email letter from Mr Lambert (see above at [39]).
13. As to the first, his Honour noted that none of the officers of VCFA to whom the email was addressed disputed the statement that all of the payments to date represented advances to VCFA; nor did they assert that the amounts were in fact paid in relation to services ([55]). As to the second, his Honour said (at [59]) that this letter revealed a common assumption that the payment of $440,000 by AGT to VCFA represented an advance repayable in full; and was inconsistent with any common assumption that the amount had been paid as a fee for service rendered by VCFA. His Honour also referred to the treatment of the various $100,000 payments in the accounts of AGT Management as referable to loans (at [56] and [61]).
14. Turning to Mr Lambert's evidence in his affidavit to the effect that Mr Jane had asked him to say that the money had been loaned to VCFA (when each of them knew this to be not true) in order to deceive Mr Jane's fellow directors of AGT, the primary judge noted that it was not suggested to Mr Jane in cross-examination that he had any intention to deceive his fellow directors or that he had knowingly created a false document in order to do so ([63]) and his Honour (finding Mr Jane to be an honest witness) rejected any such allegation.
15. His Honour also referred to a number of concessions made by Mr Lambert in cross-examination, which he said were inconsistent with Mr Lambert's affidavit evidence, the most significant of which in his Honour's opinion concerned the Loan Acknowledgement, including that Mr Lambert believed it to be true at the time he signed it; and that, as far as Mr Lambert could tell, Mr Jane believed that the moneys had been paid by way of a loan ([69]). His Honour said that those concessions were directly inconsistent with Mr Lambert's evidence that he and Mr Jane in fact believed the opposite to be true and that documents acknowledging the loan were produced at Mr Jane's request ([70]).
16. His Honour referred to other matters which Mr Lambert accepted in cross-examination that his Honour considered were consistent with the terms of the Loan Acknowledgement (see at [71]-[73]), relating to the financial documents prepared by VCFA's accountant.
17. His Honour found implausible Mr Lambert's explanation for the inconsistency between his affidavit evidence and his evidence in cross-examination (see at [74]-[75]). His Honour attached significance to the fact that the treatment of the payments in VCFA's own accounts was consistent with the treatment of the same payments in the accounts of AGT and AGT Management (which allocated all the payments to loan accounts without any element of GST) and said that the consistency of those entries across the two sets of accounts was at odds with Mr Lambert's evidence that the documents describing the payments as a loan were created solely for the purpose of deceiving Mr Jane's fellow directors of AGT ([76]). His Honour said that the more likely explanation (supported by the contemporaneous communications and the treatment of the payments in both companies' records, as well as Mr Jane's own evidence) was that the payments were made by way of loan; and that both companies understood this to be the case ([76]).
18. The primary judge then turned to consider the two deeds that had been signed (from [77]), concluding that the First Deed was significant primarily because it revealed a common assumption on the part of AGT and VCFA (and, in particular, the only officers of those companies involved in the relevant transaction) that there existed an agreement between them that VCFA would repay in full the amount of $1.3 million which had been advanced by AGT to VCFA, together with interest from the date of the payment ([92]); and noting, as to the Second Deed, Mr Lambert's agreement in cross-examination that when he signed the document it was because he accepted that its contents were true ([100]).
19. In considering the import of the First Deed, his Honour referred to the 14 September 2016 email to Mr Kerridge from Mr Poulos. At [94], his Honour said that the terms of this email (which his Honour noted had been drafted by Mr Lambert) were significant. His Honour said that the email did not dispute that the moneys were paid by way of advances from AGT to VCFA but disputed the intention that AGT be able to call for repayment of the advances prior to the float being completed. His Honour extracted the text of this email, emphasising (among other things) the references in the email to the moneys being "an advance"; that there was "never an agreement for repayment"; and that there was never any intention "to turn the advance into a loan". His Honour at [95] said that the language of the email was confused particularly insofar as it stated that the "advances" were not "loans".
20. At [102], his Honour found that: the amount of $1.3 million was advanced by AGT to VCFA; interest accrued on that loan at the rate of 10% from the date of each advance; and no amount had been repaid by VCFA in respect of the principal or interest on the loan. That, however, did not lead to the conclusion that AGT was entitled to an order for repayment of the full amount of the loan and interest thereon (because of the operation of the set-off provided for by cl 5.9(d)(ii) of the Share Sale Agreement - as to the interpretation and application of which the parties were agreed, as noted at [267]).
21. The conclusion ultimately reached, that the claim made by Holdings for repayment of the $1.7m deposit must fail ([269]), followed from the conclusion that the amount payable by VCFA to AGT in respect of the $1.3 million loan funds exceeded the amount of the deposit at the time it fell due for repayment under cl 5.9(d) of the Share Sale Agreement - i.e., 17 July 2019 ([268]); not, I emphasise, because the Jane Defendants would have had no liability to repay the deposit absent the applicable set-off. I only emphasise this because it is of some relevance when considering the cross-appeal as to costs.
22. It is also relevant to note that, in the course of the reasons, his Honour made various findings as to the credibility of the principal witnesses (Mr Lambert and Mr Jane). In the case of Mr Lambert, for example, his Honour noted at [64] that Mr Lambert made various concessions in cross-examination that were inconsistent with his affidavit evidence and his Honour considered that various of the explanations given by Mr Lambert lacked credibility or were implausible (see at [68] in respect of Mr Lambert's explanation for the reason that he sent the Loan Acknowledgement to AGT and at [75] in respect of Mr Lambert's explanation as to why he allocated the amounts paid to VCFA as loans in the accounts). By contrast, his Honour accepted Mr Jane as an honest witness who directly answered questions and whose evidence was consistent with contemporaneous documents (see at [63]).

Additional factual findings sought by appellants

1. Before I address those of the appeal grounds in the consolidated notice of appeal which remain pressed by the appellants, it is relevant to note the additional findings of fact for which the appellants contend, as set out in the revised r 51.36(2) statement annexed to their submissions in reply. Those, with transcript and evidentiary references, are that: (a) VCFA's employee, Ms Leonie Phillips, used FreshBooks accounting software to issue VCFA's invoices 1, 2 and 3. Soon afterwards the subscription for FreshBooks lapsed. When later Ms Philllips was asked by Mr Lambert to locate those invoices, she was unable to do [so] until late 2021 when she remembered those invoices were generated using FreshBooks, the lapsed subscription was renewed, and she retrieved those invoices: Blue 1/375A-361J, Black 119Q-Z (b) Mr Lambert asked Ms Phillips to locate invoices 1, 2, 3, but she was unable to do [so] (until late 2021). So, at the time these financial statements were prepared, in the absence of the invoices, there was no evidence of income. The $1.3 million had to be recorded as either income or a loan. So, until the invoices were found in 2021, a selection of records wrongly reflected that the $1.3 million was a loan. The records were later amended by way of correcting the allocation of the $1.3 million: Blue 1/357A-361J, Black 119Q-Z, Blue 430-434, Black 65D-J, 65N-66U. (c) AGT Management is a company related to AGT: Blue 1/270K. (d) AGT's accounts were prepared on an accruals basis: Black 160R-161R.
2. Pausing here, the significance attributed by the appellants to the factual findings contended for in (a) and (b) above was not altogether clear. Reliance initially seemed to be placed by the appellants on Ms Leonie Phillips' evidence as to the "lost" invoices as relevant to the assessment by the primary judge of Mr Lambert's credibility, the appellants complaining that, in finding (at [68]) that Mr Lambert's explanation for sending the Loan Acknowledgement lacked credibility, his Honour did not have regard to the unchallenged evidence from Ms Phillips as to her not being able to find the invoices (see at AT 22.25-29). However, in response to the respondents' argument that the mere fact that the invoices were not able to be accessed and were not found until December 2021 did not amount to undisputed or incontrovertible facts that would tell against his Honour's finding (i.e., that there was no Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 (Fox v Percy) error in this regard) (see AT 34.25-29), the appellants' response was that the "lost invoice chronology" did not advance the determination of the issues much further or at all, in circumstances where at least the bookkeeper's evidence was that they were lost (see AT 44.43). The appellants appeared in this context to assert that no Fox v Percy issues arise on the appeal, characterising their appeal as one that engaged (as his Honour did) with the objective contemporaneous documents (see at AT 44.40). It may be that in the absence of a challenge to the finding as to Mr Lambert's evidence of the common intention of the parties, these additional factual findings would go nowhere.
3. As to the remaining factual findings that are sought (see (c) and (d)), there was no dispute that AGT Management was related to AGT; nor did there seem to be any dispute that AGT's accounts were prepared on an accruals basis (the respondents accepting in their submissions that it was established in cross-examination that AGT was conducting its affairs on an accruals basis).
4. The significance of those matters on the appellants' case (apart from Ground 13 which was not ultimately pressed) seemed to be as to the weight to be attached to the fact that AGT Management did not record any part of the relevant payments in its accounts as being for GST (see [37] of the primary judgment, for example, in relation to the payment of $660,000). The appellants say that that would be unremarkable on an intercompany loan (i.e., as between AGT Management and AGT) (see AT 9). Although the appellants concede that there would be a recording for GST in the accounts "somewhere" if GST was payable, they argue that, absent evidence from the respondents as to AGT/AGT Management's internal accounting treatment of such payments (and whether the accounts were consolidated), the fact that the invoices included GST for services is consistent with their case and they say that there is nothing internally in the documents that conclusively establishes to the contrary (see at AT 10.29ff). I consider his Honour's treatment of the internal accounting records in the context of Grounds 2-6.

Grounds of Appeal

1. I turn then to the grounds of appeal under the headings set out in the consolidated notice of appeal. The nub of the appellants' complaint is their contention that his Honour paid insufficient weight to the three invoices and had undue regard to the contradictory material after the commercial arrangements between the parties started to "fray" (see AT 4). The appellants did not press Grounds 13-17 of the consolidated notice of appeal (see AT 45.15). Ground 1 - Misapplication of the correct legal principle 1. The court below erred in misapplying the correct legal principle when finding that the evidence overwhelmingly supported the conclusion that the moneys at issue were loaned by the fifth respondent to the second appellant instead of being payment for the second appellant's services, the legal principle being that the terms of an agreement may be evidenced by communications between the parties of a common assumption but not by the undisclosed views of one of them.
2. As to Ground 1, the appellants contend that his Honour erred in the application of correct legal principle in three ways: by treating communications as private conduct; by treating private conduct as communications; and by interpreting communications to find common assumptions in circumstances where the appellants argue that no common assumptions emerge from a fair objective reading of the correspondence. The appellants rely, in support of this contention, on the errors contended for in Grounds 2-6, which I consider next. However, in substance, the complaint is that his Honour treated AGT Management's internal accounting records as evidence of a common assumption between the parties that the payments were a loan, whereas the correct legal principle is that subjective views or reservations of one party, undisclosed to the other, cannot provide a basis for inferring the terms of a pre-existing agreement (see Brightstars as cited above at [65]); and that his Honour did not treat the issue and payment of the invoices as a communication between the parties that evidenced the agreement between them as one for the supply of services.
3. The respondents cavil with the appellants' suggestion that this is an appeal in which there was a misapplication of legal principle to uncontroverted facts. Rather, the respondents argue that the primary judge's decision was substantially affected by his Honour's assessment of the credibility of Mr Lambert in deciding which of the competing versions of the alleged agreement was correct; and they say that the appellants have not identified (in their grounds of appeal or in their submissions) any error in the primary judge's findings capable of surmounting the hurdle identified in Fox v Percy at [29]-[31] (as to which, I note again that the position of the appellants in oral submissions (at AT 10) was that no Fox v Percy issues here arise).
4. In reply submissions, the appellants maintain that the credit of a single witness (whether Mr Lambert or Mr Jane) cannot affect an examination of the objective contemporaneous documentary evidence where, as here, neither the provenance nor the authenticity of the objective contemporaneous documentary evidence was in dispute. The appellants also say that, while the primary judge did not accept and/or found implausible aspects of Mr Lambert's evidence, there was no blanket finding rejecting his evidence generally.
5. For the reasons given in relation to Grounds 2-6 below, I do not accept that the primary judge erred in the application of correct legal principle. Rather, to the extent that his Honour referred to private uncommunicated views as to the proper characterisation of the payments (such as were reflected in AGT Management's internal accounts), this is fairly to be understood as being in the context of exploring whether there was conduct by the respondents that was inconsistent with their assertion in the proceedings that the payments were a loan. As to the weight to be attributed to the specification in the invoices of a GST component, this had to be seen in the context of all the evidence, including the lack of records of work done for which the invoices were purportedly rendered and Mr Lambert's own acknowledgement of the loans.
6. In my opinion Ground 1 is not made good. Grounds 2-6 - The respondent's internal accounts 2. The court below erred in holding that the fact of the fifth respondent [AGT Management] not treating any part of the payments it made to the second appellant [VCFA] as including GST in the fifth respondent's own accounts was evidence of communications between the parties of a common assumption. 3. The court below should have held that the fact of the fifth respondent not treating any part of the payments it made to the second appellant as being for GST in the fifth respondent's own accounts represented the undisclosed and personal view of the fifth respondent. 4. The court below should have held the fact that the second appellant's tax invoices explicitly noted a charge for GST and the fifth respondent paid those invoices in full (including the amount charged for GST), was a communication between the parties evidencing the agreement between them was one for the second appellant to provide services to the fifth respondent, because providing those services was a taxable supply incurring GST and loaning money was not a taxable supply and did not incur GST. 5. The court below erred in holding that the fact of the fifth respondent entering in its own accounts allocations describing the payments it made as "Loan-Ross Lambert" and "Loan-Access Group Training Pty Ltd", disclosed a common assumption that the moneys at issue were loaned instead of being payment for services. 6. The court below should have held that the fact of the fifth respondent describing the payments it made in its own accounts represented the undisclosed and personal view of the fifth respondent.

Appellants' submissions

1. The appellants complain that the primary judge's reasons (at [37]) conflate the two different companies (AGT and AGT Management). In that regard, the appellants take issue with the statement that AGT Management did not treat any part of the payment for the first invoice as being for GST in its own accounts. The appellants place emphasis here on the evidence that AGT incurred an intercompany liability to AGT Management in respect of the whole of the payments (totalling $1,300,035). As noted above, the appellants argue that in this context the fact that there was no entry for GST in the accounts of AGT Management is not inconsistent with the appellants' case that the payments were for services.
2. The appellants, referring to Ms Pearce's affidavit and oral evidence, contend that AGT Management's internal accounting records do not evidence that AGT treated the $660,000 paid on 4 August 2015 as a loan to VCFA; rather, they argue that any loan was for $600,035 and was a loan between AGT as debtor and AGT Management as creditor. In this regard, the appellants say that the change on 5 August 2016 to the relevant entry for the first invoice, recording $660,035 against the ledger corresponding to a loan to AGT, was a simple correction to the ledger and they point to the acceptance by his Honour of Mr Jane's evidence that AGT incurred an intercompany liability to AGT Management.
3. In any event, as adverted to above, the appellants argue that the use of internal accounting records to reason as the primary judge did falls outside the principles in Howard Smith (which they say concern inconsistent conduct, not consistent conduct). The appellants argue that "self-serving" private records consistent with a party's subjective belief cannot legitimately be used to determine whether, objectively, the parties had in fact concluded an agreement at a particular time.
4. The appellants similarly complain as to the reasoning at [38] (having regard to Mr Jane's evidence that if the invoices were bona fide and payable it would have been AGT's normal business practice to claim a GST credit) that treatment of the entirety of the first payment as "BAS Excluded" was evidence of a contemporaneous view on AGT Management's part that none of that payment represented GST. The appellants maintain that, at its highest, this amounts to a finding that AGT usually conducted itself consistently with its "own, self-serving, practice". The same criticism is made in relation to the findings in respect of the second and third invoices.
5. As to the second invoice, the appellants also cavil with any weight being placed on the fact that Mr Lambert's evidence (in 2023) about the work done was in different terms to that described on the invoice in 2015, arguing the difference is unremarkable given the lapse of time; and they complain that Mr Lambert was not challenged that his evidence in his affidavit was anything other than an elaboration on the "opaque" words printed on the invoice "IPO costs".

Respondents' submissions

1. The respondents say that it is incorrect for the appellants to assert (as they do at [13] of their written submissions) that Mr Lambert gave "unchallenged" evidence about the work done, the issue of invoices, and their payment. The respondents note that Mr Lambert was cross-examined as to the veracity of his assertion that the payments were made in answer to the invoices rather than as the receipt of a loan; and that it was put to him that there was no agreement between VCFA and AGT which would have entitled VCFA to issue invoices, no hourly rate for the provision of services by VCFA to AGT, and no documentation by AGT acknowledging those invoices.
2. As to the appellants' criticism of the primary judge's treatment of payments made by AGT Management to VCFA (and their assertion that they should be interpreted as giving rise to an intercompany liability to AGT Management on the part of AGT, rather than a loan to VCFA), the respondents point out that AGT Management was a vehicle used by AGT to make payments on its behalf and that Mr Jane explained that it was AGT that in reality lent the money to VCFA. The respondents note that the loan acknowledgements issued by Mr Lambert treated payments made by AGT Management as payments made by AGT; and that the internal records of AGT Management and AGT also treated the payments as such. The respondents say that the primary judge's treatment of the invoices is unsurprising in light of his conclusions as to the accuracy of the accounts given by Mr Lambert and Mr Jane.
3. As to the appellants' complaint that the evidence of the internal recordings of AGT and AGT Management concerning the payments should not have been treated as evidence of a common assumption between the parties, the respondents say that this ignores his Honour's clear statement (at [51]) that he did not find that the evidence in the internal accounting records regarding the invoices and the payments "reveal[ed] a common assumption", contrasting this (at [52]) with the position in relation to the communications between the parties in November 2015 and February 2016 which his Honour did consider revealed a common assumption as to the payments.
4. The respondents argue that, to the extent that his Honour treated the internal accounts of the parties as relevant, he did not do so as evidence of a common assumption; instead, they maintain that his Honour treated them as contemporaneous and relevant documents from which inferences could be drawn or conclusions made as to the reliability of the competing versions of events.
5. As to the contention in Ground 4 that the primary judge should have held that the GST notation in the invoices, and payment thereof, amounted to a communication between the parties evidencing an agreement to provide services, the respondents note that the primary judge accepted that possibility (referring to the observation by his Honour at [37] that the inclusion of GST in the invoice provided some evidence in support of the contention that services were rendered by VCFA to AGT) but then went on to refer to the fact that AGT did not claim any input credit for the GST amounts included on the invoices as evidence of a contemporaneous view on the part of AGT Management that was consistent with the view expressed in the contemporaneous allocations that the whole of the amount paid was by way of loan ([38]).
6. The respondents point to his Honour's findings that the invoices themselves were unreliable documents which described work different from the work for which Mr Lambert claimed they had been issued and which contained unexplained anomalies ([50]) and that the GST component of the third invoice was never paid or chased by VCFA ([49]). The respondents also note that the finding as to the contradictory evidence of Mr Lambert as to the work done is not the subject of any ground of appeal.

Reply submissions

1. In their reply submissions, the appellants emphasise the evidence of Ms Phillips as to the invoices that were issued and her inability to locate copies of them (when requested by Mr Lambert to do so) until late 2021 because of the lapse of VCFA's subscription to FreshBooks accounting software; it being submitted that, until the invoices were found in 2021, a selection of records wrongly reflected that the $1.3 million was a loan. Complaint is made that the primary judge made no reference to Ms Phillips' evidence, even when finding that Mr Lambert's evidence about "the accounts lady" was implausible.
2. Reliance is placed on that evidence as countering the emphasis placed by the respondents on the fact that VCFA's records failed to record the $1.3 million as income and on Mr Lambert's evidence as to his confidence that VCFA's financial statements were correct when he signed them.

Determination

1. I do not accept the contention by the appellants that the primary judge erroneously conflated the two companies (AGT and AGT Management). His Honour made clear in addressing the invoices rendered and source of the payment of those invoices that he understood that they were different (though related) companies (see at [32], [37] and [44] for example). The evidence that there was an intercompany loan as between AGT and AGT Management in respect of the payments made by the latter to VCFA does not detract from the characterisation of the payments to VCFA being by way of loan and the fact that no input credit was claimed for GST in the internal accounts of AGT Management supports the conclusion that his Honour drew at [38] that this was consistent (and I would emphasise not inconsistent) with the view expressed in the contemporaneous allocations that the whole of the amounts were paid by way of loan. As noted below, the discussion was in any event merely a step on the way to unexceptionable conclusions drawn at [50] and [51].
2. I also do not accept the criticisms here made of the primary judge's reasoning in relation to the internal accounting records of AGT Management as to the invoices in question. What is clear from his Honour's recitation of the applicable principles (with which the appellants do not cavil) was that his Honour was considering the treatment of the amounts paid in the internal records of AGT/AGT Management in order to see whether (consistently with the principles in Howard Smith) that treatment was inconsistent with AGT's contention that the amounts were paid by way of loan - his Honour concluding in effect that the internal accounting records were not inconsistent (by reason of the fact that no GST input credit was claimed) with the view on the part of AGT Management that the amount was paid by way of a loan.
3. In other words, the primary judge did not impermissibly treat these as evidence of communication between the parties of a common assumption (cf Ground 2); nor did his Honour treat these as other than the undisclosed and personal views of the respondents (cf Ground 3). Rather, his Honour was quite permissibly testing whether there was inconsistent conduct on the part of the respondents. Grounds 5 and 6 fail for the same reason.
4. As to Ground 4, his Honour did take into account the fact that the invoices claimed GST and that they were paid in full, noting that this was some evidence in support of the appellants' contention. However, his Honour was entitled to take into account, as against that evidence, the fact that there was contradictory evidence from Mr Lambert as to the work said to have been done for which the invoices were purportedly rendered and the unexplained anomalies in relation to those invoices (which went to the reliability of the invoices) and that there was no other documentary evidence as to work done in relation to the invoiced amounts (something that the appellants conceded on the appeal was "less than ideal", though pointing here to the time that had elapsed between the relevant events - see AT 11.8).
5. The appellants emphasise that there was no suggestion at the trial that the invoices were fraudulent (AT 11.43). However, that does not address the possibility that the invoices were simply unreliable (a conclusion that was open to his Honour to draw, and not demonstrative of error, having regard to the matters referred to at [50]).
6. I thus do not accept that his Honour erred in concluding (at [51]) that the evidence of the invoices and the payments made following the invoices did not reveal a common assumption by VCFA and AGT as to the existence and terms of the agreement between them. His Honour's ultimate conclusion as to the characterisation of the arrangement as being one of loan was, of course, also informed by his Honour's consideration of the contemporaneous communications between the parties (the subject of Grounds 7-12), to which I now turn.
7. Grounds 2-6 are not made good. Grounds 7-12 - Correspondence between the parties about the payments
8. Grounds 7-8 relate to the 26 November 2015 email communication from Mr Lambert; Grounds 9-10 to the 15 February 2016 email letter from Mr Lambert; and Grounds 11-12 to the 14 September 2016 communication from Mr Poulos. 25 November 2015 7. The court below erred in holding that the second appellant's email sent on 25 November 2015 disclosed a common assumption that the moneys at issue were loaned instead of being payment for services. 8. The court below should have held that on 20 November 2015, when the fifth respondent emailed 2 directors of the second appellant describing the payments as "loan funds" and, on 25 [sic] November 2015, one director, Mr Lambert, emailed a reply with the words "Thanks, Jim", the second appellant was merely acknowledging receipt of the 20 November 2015 email.
9. The 26 November 2015 email has been extracted above, as has the email to which it responded (the email dated 20 November 2015 from Mr Jane) (at [36]-[37]).
10. The appellants complain that the 26 November 2015 email was not put to Mr Lambert in cross-examination. They argue that, by using the words "Thanks, Jim", Mr Lambert was most likely simply acknowledging receipt of the 20 November 2015 email; and they contend that, absent a contrary suggestion under cross-examination, there was no persuasive reason for his Honour to take a different interpretation.
11. As to the primary judge's reference to the failure by any of the officers of VCFA to whom the email was addressed to dispute Mr Jane's statement that all of the payments made to date represented advances to VCFA ([55]), the appellants argue that this overlooks the email sent on 14 September 2016 in which Mr Poulos (at Mr Lambert's direction) did dispute Mr Jane's statement and the assertions of a loan more generally. (That email was considered by the primary judge at [94]-[95] in the context of addressing the First Deed.)
12. The appellants maintain that there is nothing confusing about the language used in the 14 September 2016 correspondence (cf his Honour's observation at [95]), arguing that the words "payment" and "advance" bear similar meanings in ordinary use by non-lawyers (and pointing out that neither Mr Lambert (who drafted the email) nor Mr Poulos (who amended the draft and then sent the email) is a lawyer).
13. The respondents contend that the failure of either Mr Lambert or Mr Poulos to respond to the assertion in the 20 November 2015 email that the moneys were advanced as loans was extraordinary, given the appellants' case that the payments were fees for services rendered; and that a failure to dispute such a characterisation was clearly significant evidence of such a common assumption.
14. The respondents say that there was no requirement for them to put this email to Mr Lambert in cross-examination, and that they were entitled to rely upon the absence of a challenge by VCFA (referring to Brightstars at [72]). The respondents note that the appellants were aware of the evidence concerning this email (and AGT's reliance on it), as it was an annexure to Mr Jane's affidavit sworn 9 September 2022 (see [15] of that affidavit); and they say that if the appellants wished to contest the evidence they should have given evidence about it. It is also noted that the appellants did not cross-examine Mr Jane about it. The respondents also point to the parties' agreement (subject to not putting propositions to witnesses concerning actual dishonest conduct) that they would not take a Browne v Dunn [(1893) 6 R 67 (HL)] (Browne v Dunn) point generally.
15. Insofar as the appellants rely on the later email dated 14 September 2016 sent by Mr Poulos as evidence of a challenge to the 26 November 2015 email exchange which the primary judge overlooked, the respondents note that the 14 September 2016 email was not from Mr Lambert and was not addressed to Mr Jane; nor was it sent to anyone at AGT. The respondents also say that the email was not addressed to the acceptance of the payments as a loan in 2015, pointing out that it was sent in the context of the First Deed (which Mr Lambert proceeded to sign).
16. In reply submissions, the appellants discount the delay between Mr Jane's 20 November 2015 email and the 14 September 2016 correspondence, arguing that the delay in that correspondence was due to it only being made plain for the first time, when Mr Jane pressed to have Mr Lambert and Mr Poulos sign the First Deed, that Mr Jane was asserting a loan (and that this was met immediately with loud disagreement, followed up by the 14 September 2016 email).

Determination

1. As to the characterisation of the "[t]hanks Jim" response as merely an acknowledgement of the email itself (as opposed, for example, to thanks being proffered for the payments themselves), I see no basis to make such an assumption but in any event I do not consider that anything turns on this. The point being made by his Honour at [55] was that there was no contemporaneous response in November 2015 (as might have been expected if the assertion of loan funds had been disputed at that time) from Mr Lambert disputing Mr Jane's characterisation of the payments as having been "advanced as loan funds".
2. It is the absence of any quarrel at that stage with the description of the payments as "loan funds" that is significant, not whether the acknowledgement went beyond merely the receipt of the email. One would assume that a recipient acknowledging an email communication such as the 20 November 2015 email would ordinarily read the email (although in oral submissions the submission was made, without making clear on what basis, that it should be inferred that Mr Lambert had not read the body of the text - AT 12.46).
3. In circumstances where there was an appreciable delay between the communications contemporaneous with the relevant payments and the 14 September 2016 email, it is not in my opinion fair to the primary judge to criticise him for having "overlooked" the 14 September 2016 email when considering the import of the contemporaneous communications. The 14 September 2016 email was sent nearly a year later and in a different context, namely in response to pressure for VCFA to countersign the First Deed. What his Honour was emphasising at [55] was the lack of a contemporaneous dispute as to the characterisation of the payments.
4. Further, the suggestion in reply submissions that it was only in September 2016 that it was made plain that Mr Jane regarded the advances as a loan cannot be sustained when reference is made to the text of the 20 November 2015 email, which referred in terms to the payments having been advanced as "loan funds".
5. I see no error in the conclusion that the 20 November 2015 email, insofar as it did not refer to the suggestion that the payments represented an agreed fee for service and did not refer to any invoices, did reveal a common assumption that the substance of the transaction was a loan (see [52]).
6. Hence, Grounds 7 and 8 are not made good.

15 February 2016 9. The court below erred in holding that the second appellant's email sent on 15 February 2016 disclosed a common assumption that the moneys at issue were loaned instead of being payment for services. 10. The court below should have held that on 15 February 2016, when the second appellant's director emailed the fifth respondent to say the second appellant has "been honouring our loan repayments as per our agreement" and confirmed an amount owing of $440,000, that correspondence was not referring to the moneys at issue, because (1) by that date, the second appellant had invoiced the respondent $1.1 million, (2) the fifth respondent had paid the appellant $1.1 million, (3) there was no evidence of any repayment of $660,000, and (4) it was not suggested to any witness called for the appellants that $660,000 had been repaid.

1. Grounds 9 and 10 relate to the email letter dated 15 February 2016 from Mr Lambert to Mr Jane, on VCFA letterhead stating that "we have been honouring our loan repayments as per our agreement and confirm the following loan repayment position".
2. The appellants complain that, although his Honour noted (at [60]) that the suggestion in the letter that loan repayments had been made prior to the date of the letter was incorrect, his Honour did not explain why that, and the other inaccuracies that Mr Jane conceded in cross-examination, made no difference to the outcome.
3. The appellants note that Holdings submitted at first instance that, whatever loan was being acknowledged by that correspondence, it differed materially from the alleged $1.3 million loan. The appellants say that, absent cross-examination of Mr Lambert on this correspondence, this is a sensible way to account for his reference to "loan repayments" when none had been made, pointing also to concessions to similar effect under cross-examination by Mr Jane. The appellants thus contend that his Honour should have held that this correspondence was not referring to the moneys at issue in the proceedings.
4. The respondents say that it was never the appellants' case that some other loan was due and payable from VCFA to AGT; and they complain about the appellants' attempt to portray this correspondence as suggesting some other, unrelated, loan between the parties.
5. The respondents argue that the importance of the 15 February 2016 letter, from the primary judge's perspective (see at [59]), was that it confirmed the loan status of the $440,000 payment to VCFA on 24 September 2015; and they point out that the incorrect assertion that repayments had been made was one made by Mr Lambert, not AGT. The respondents say that this letter is wholly inconsistent with the appellants' case (of a fee for service). They note that the letter being addressed to AGT was in fact accurate in that the $440,000 payment was the only one made (directly) by AGT (as opposed to AGT Management) at that date.
6. The respondents maintain that there was no obligation on AGT to cross-examine Mr Lambert about his error in referring to repayments; and that the relevance of the letter was that AGT accepted Mr Lambert's assumption of a loan. The respondents also emphasise that the appellants make no challenge to the findings made by the primary judge concerning the Loan Acknowledgement that was signed by both Mr Jane and Mr Lambert, recording the payments to VCFA as loans.
7. In reply submissions, the appellants say that the respondents' submission as to the coincidence of the amount of $440,000 referred to in the 15 February 2016 letter with one tranche of the $1.3 million overlooks that the primary judge found that AGT's case was that the total $1.3 million was either payment for services or a loan, not that each separate tranche might be one or the other; a finding that they note is not challenged on appeal. (I note that in the first of those references, the primary judge uses the plural ("payment of fees for services" and "loans"), whereas in the latter, his Honour uses the singular but it is not apparent that anything turns on this difference in his Honour's reasons.)
8. The appellants point to Mr Jane's evidence in cross-examination asserting that there was correspondence (not in evidence) between him and AGT's internal accountant, Mr Michael McGahan, on this issue but conceding that Mr McGahan could have been called to give evidence; and Mr Jane's concession that, whatever that letter was acknowledging, it was not acknowledging any obligation to repay either the $660,000 or the $180,000 deposited into VCFA's bank account by AGT Management.
9. The appellants also seem to suggest that the reference in the 14 September 2016 email (see above) to Mr Jane having asked Mr Lambert earlier that year "as a favour to provide a note confirming that the $1.3M was a loan to satisfy his fellow directors" was to the February 2016 letter (though it might be more plausible that this would be a reference to the Loan Acknowledgement signed around the time that the year's end financial statements were being prepared).
10. The appellants submit that the primary judge was left with an incomplete picture of the financial dealings between AGT and VCFA caused entirely by AGT choosing neither to put into evidence all emails about the financial dealings nor the respondents' internal accountant. In that context, and absent concessions under cross-examination by Mr Lambert, the appellants say that an objective examination of the 15 February 2016 letter results in the conclusion that this is not consistent with the respondents' case.

Determination

1. As to the appellants' complaint that his Honour did not explain why the incorrect statement in the 15 February 2016 letter (or any inaccuracies conceded by Mr Jane) made no difference to the outcome, I see no reason why it was incumbent on the primary judge to do more than note the incorrect statement (about which there was no dispute).
2. That is because what was relevant was that the February 2016 letter, whatever else might be said about it, revealed an assumption that there was an amount owing, as at 31 December 2015, of $440,000 and did not make any reference to an amount payable by way of a fee for service. The amount of $440,000 corresponded exactly to the amount that had been paid directly by AGT to VCFA in September 2015. Therefore, the incorrect assertion that loan repayments had been made to that date (whether or not it may have referred to some other unidentified loan or loans) does not alter the fact that the letter is inconsistent with the $440,000 having been paid as a fee for service. The suggestion that nothing can be made of the coincidence in the sum of $440,000 there being said to be owing, because the case put by the parties was that there was only a binary outcome (the whole sum being a loan or the whole sum being a fee for service), does not in my opinion pay sufficient regard to the fact that the sum "advanced" was indisputably paid in tranches; and hence acknowledgement of a loan owing in relation to the $440,000 is not inconsistent with the claim for a $1.3 million loan in total.
3. As to the complaint that AGT did not put all emails about the companies' financial dealings into evidence, the Court was not taken to any material to sustain such a complaint; nor was any Jones v Dunkel [(1959) 101 CLR 298; [1959] HCA 8] issue in relation to Mr McGahan the subject of the appeal grounds. On the material before the primary judge, his Honour did not err in concluding that the 15 February 2016 letter was one (amongst a number of) matter(s) that together led to the conclusion that it was more likely than not that the payments were advanced as loan funds.
4. Grounds 9 and 10 are therefore not made good.

14 September 2016 11. The court below erred in holding that the second appellant's email sent on 14 September 2016 disclosed a common assumption that the moneys at issue were loaned instead of being payment for services. 12. The court below should have held that on 14 September 2016, when the second appellant's director Mr Poulos emailed the fifth respondent to say the moneys at issue were "never a loan", and Mr Poulos stated reasons for his conclusion, that email evidenced the second appellant disputing the moneys at issue were anything other than payment for services.

1. Grounds 11 and 12 relate to the 14 September 2016 email. This was not referred to by the primary judge in the section of his reasons dealing with communications contemporaneous with the payments (understandably as it was not contemporaneous with them). It was, however, considered by the primary judge when dealing with the First Deed (as noted above).
2. Relevantly, his Honour referred to the 14 September 2016 email in the context of his statement (at [92]) that the First Deed was primarily significant because it revealed a common assumption on the part of the only officers of AGT and VCFA who were involved in the relevant transaction that there existed an agreement between them that VCFA would repay in full the amount of $1.3 million which had been advanced, with interest; and (at [93]) that whether Mr Poulos was of a different view was of little consequence as his only source of knowledge about the transactions was what Mr Lambert had told him.
3. The appellants emphasise that Mr Lambert had drafted the substance of the email sent by Mr Poulos. They maintain that the language of the 14 September 2016 email should be read as disputing that the moneys were a loan, reading the word "advance" as being a reference to a "payment", not a loan. They maintain that this was evidence of VCFA disputing that the moneys were other than payment for services.
4. The respondents point out (as noted earlier) that the email was sent to Mr Kerridge and copied to addressees at VCFA email addresses; and not sent to Mr Jane, nor any staff member of AGT. The respondents say that the contents of the email are inconsistent with the sum of $1.3 million being payment for services rendered, pointing to the description of the payments in that email as an "advance" and the reference to the advance having been provided to "build the various VCFA AGT projects that were being developed to add diversification to AGT to ensure a successful float" and the statement that AGT would "recoup those funds as a result of the listing".
5. The respondents note that the primary judge discounted this email because Mr Poulos admitted that his only source of knowledge about the relevant transactions was what Mr Lambert had told him; and that this was undermined by the earlier evidence of a common assumption and the fact that (despite cavilling about the execution of the First Deed, which was the context of the 14 September 2016 email) Mr Lambert signed the First Deed knowing that it was required by the auditors and would be used as public information for the IPO prospectus. The respondents note that the appellants do not challenge these findings.
6. The respondents say that this was a further instance of the primary judge rejecting the reliability of Mr Lambert's evidence. The respondents argue that the 14 September 2016 email (and the appellants' contention as to the meaning of the word "advanced" in that email) does not provide incontrovertible evidence or compelling inferences against the primary judge's assessment of the email and the evidence of Messrs Poulos and Lambert concerning it.
7. In reply submissions, the appellants say that they now do not challenge that his Honour correctly identified and accepted Mr Lambert's evidence that the First Deed was produced at the behest of Mr Mark Nicholaeff (the auditor), despite AGT not being a person who had loaned money to VCFA. (If this is a reference to the matters set out by his Honour at [67]-[69], then it should be noted that in those paragraphs of his Honour's reasons his Honour was referring to the Loan Acknowledgement, not the First Deed.) Insofar as the appellants seem to suggest that the primary judge accepted Mr Lambert's evidence that he believed the First Deed to be inaccurate but could not prove it with the invoices as they had been temporarily misplaced, that does not accord with his Honour's analysis of Mr Lambert's evidence as to the Loan Acknowledgement, financial statements and First Deed (see from [65]-[97]).
8. The appellants reiterate the emphasis placed by them on Ms Phillips' evidence, which they say his Honour's reasoning (when rejecting Mr Lambert's explanation in relation to the internal records of the company and the First Deed) ignored; and they maintain that, whatever the source and extent of Mr Poulos' knowledge about the $1.3 million, he had orally disputed at the meeting with Mr Jane and Mr Kerridge in September 2016 that the money was a loan.
9. Further, as to Mr Lambert's concession in cross-examination that he believed the loan acknowledgment in the First Deed to be true at the time he signed it, the appellants emphasise Mr Lambert's explanation in cross-examination as to the circumstances in which he signed the deed.

Determination

1. In my opinion, there is no error disclosed in relation to the findings in respect of the 14 September 2016 email. The statement that the $1.3 million was never a loan "as it was an advance … provided to build the various VCFA/AGT projects that were being developed to add diversification to AGT to ensure a successful float" does in terms deny the existence of a loan but the point being made in the balance of the first paragraph of the email extracted at [94] of his Honour's reasons was that there was "never an agreement for repayment" and that the general understanding was that these funds would be recouped as a result of the listing. There was no suggestion at all that the "advance" as so described was payment for services rendered (a matter to which his Honour understandably attached significance [95]).
2. Hence, the scope for confusion in the language of the email which his Honour identified related to the concept of an "advance" that was not the subject of an agreement for repayment but was to be recouped as a loan. In my opinion, his Honour correctly understood this email to be disputing the intention that AGT would be able to call for repayment of the "advance" prior to completion of the float; and correctly rejected the proposition that this revealed an understanding that the moneys advanced were fees for services.
3. That a non-lawyer might use the word "advance" as a synonym for "payment" misses the point in my opinion. Non-lawyers presumably may also use "advance" as a synonym for "loan". The statement that the $1.3 million "was never a loan as it was an advance" is certainly capable of giving rise to confusion, and of bearing the meaning ascribed to it by the primary judge; and the appellants' submission does not grapple with the primary judge's observation that nothing in the email suggests that the "advances" represented payment of a fee for services provided by VCFA to AGT.
4. The reliance placed by the appellants in reply submissions on the circumstances in which the First Deed was signed does not take the matter further. The position, on Mr Lambert's own evidence, appears to be that he was prepared to sign documents in order not to hold up the IPO and where he knew the auditors would be relying on them, believing at the time he signed them that they were true (but only because he did not have the invoices to prove otherwise). Such an explanation lacks credulity, even accepting that the invoices were not available to Mr Lambert at the time.
5. Grounds 11 and 12 are not made good.

Conclusion as to appeal

1. For the above reasons I would dismiss the appeal. There is thus no need to address the submissions made by the respondents as to the "false ghost of the 2019 proceedings" (i.e., the submission that order 3(b) in the amended notice of appeal is anomalous and opposed even if the appeal in the 2020 proceedings were to succeed). As to the costs of the appeal, I see no reason why costs should not follow the event.

Cross-Appeal

1. As noted, the cross-appellants now only press Ground 2 in the respective cross-appeals, in relation to the costs order made by the primary judge that each party bear its own costs. Ground 2 contends that: The court below erred in failing to find that the Respondents had been successful, and so ought to be entitled to its costs of the proceedings.
2. The cross-respondents, having raised with the cross-appellants on 11 June 2024 the question of competency of the cross-appeal, filed a notice of motion to dismiss the cross-appeal for want of competence when no cross-summons seeking leave to appeal had been filed. This was listed at the same time as the appeal/cross-appeal.
3. It is accepted by the cross-appellants that leave to cross-appeal is necessary as the cross-appeal is now restricted to costs (in this regard see the analysis by Leeming JA in Housman v Camuglia at [43]-[84]). The cross-appellants submit that leave should be granted as the issue they seek to raise (challenging the primary judge's departure from the usual approach that costs follow the event) is of relevance beyond their own cross-appeal. They argue that such a departure is a significant matter requiring consideration of the legal principles underlying that approach; and that it should not be made lightly. It is submitted that for costs to be too readily apportioned would be contrary to the principles in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) and Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270; [2015] HCA 53 (Firebird); and that the need for careful consideration of those principles should be re-emphasised.
4. The cross-appellants also submit that regard should be had to the unusual way in which they have come to find themselves requiring leave. It is noted that the cross-appeals did not begin as appeals only on costs; rather, as many of the issues pressed by the appellants have fallen away, so has one claim by the cross-appellants. The cross-appellants say that as submissions have already been exchanged, and costs incurred, on the assumption that the arguments contained in the cross-appeal would be considered, there can be no prejudice to the appellants by a granting of leave to prosecute the cross-appeal.
5. The cross-respondents oppose the grant of leave. The cross-respondents say that there was no error of the House v The King (1936) 55 CLR 499; [1936] HCA 40 (House v The King) type and that leave to cross-appeal should be refused as the questions involved turn on the precise facts determined below and have no wider application beyond the parties themselves.
6. The cross-appellants argue that the issue is "not without general importance" on the basis that if the court too easily assumes that where proceedings concern multiple issues that the result is "mixed", without assessing the practical outcome and "event", the question of costs can elide the jurisdiction into a "no costs" jurisdiction too ready to deprive the successful party of its costs because it had claims, or raised issues, which were rejected.
7. Before considering the application for leave to cross-appeal, it is convenient first to consider the substance of the proposed appeal from the primary judge's costs orders.

Costs judgment

1. The primary judge in his brief costs judgment on the papers ordered that each set of parties bear its own costs of both proceedings.
2. In support of that conclusion, the primary judge noted that the following elements of the cross-appellants' case had not been successful: that AGT had been entitled to recover its loan to VCFA in full; that VCFA's debt was comprised of additional amounts due to rent and outgoings; and that further amounts claimed to be owing by Holdings to AGT in respect of IPO costs should be offset against Holdings' claim.
3. When final orders were made, the primary judge accepted a submission by the cross-respondents (by reference to In the matter of Fewin Pty Ltd [2017] NSWSC 1093) that it was appropriate that there be declarations regarding the amounts owing at the relevant date and the effect of the contractual set-off; judgment in favour of AGT of the balance remaining after the set-off, together with interest, and otherwise to dismiss the proceedings (with an order that each bear its own costs) ([9] of the costs judgment). Hence in each proceeding a declaration was made: in favour of Holdings as to the liability of the Jane Defendants pursuant to the Share Sale Agreement for the sum of $1.7 million; in favour of AGT as to the amount to which VCFA was indebted to it; and pursuant to cl 5.9 of the Share Sale Agreement that the first of those amounts be set-off against the second. The 2019 proceedings were then dismissed and in the 2020 proceedings judgment was entered in favour of AGT for $176,971.63.

Cross-Appellants' submissions

1. The cross-appellants submit (as they did before the primary judge) that the outcome of the 2019 proceedings was that Holdings' claim against the Jane Defendants was defeated by a set-off for the complete sum. Therefore, they submit that Holdings was wholly unsuccessful and that the Jane Defendants were wholly successful. The cross-appellants accept that the outcome of the 2020 proceedings was that AGT's claims against VCFA were partially successful (in that the rent and outgoings claimed were not established) but they emphasise that AGT nonetheless succeeded in obtaining judgment in the sum of $176,971.63. Further, the cross-appellants say that it is not incumbent upon a defendant to prove more by way of set-off than the claim it seeks to defeat. Hence, it is argued that the result was still the "total nullification" of Holdings' claim against the four Jane Defendants.
2. The cross-appellants argue that, but for Holdings commencing the 2019 proceedings, they would not have incurred the expense of the 2019 proceedings nor would they have been required (in order to resist the 2019 proceedings) to bring the 2020 proceedings. The cross-appellants thus say that it follows that their expense in both proceedings is a direct consequential result of Holdings choosing to file its statement of claim in the 2019 proceedings.
3. The cross-appellants again submit that the discretion to depart from the general rule (that costs follow the event) must be exercised judicially and according to rules of reason and justice; and that it is for an unsuccessful party to show why the usual approach ought not apply. They submit that, if considering a departure from the ordinary rule, the court should have regard to the principles of fairness underlying the making of any costs order.
4. The cross-appellants argue that, by ordering both parties to bear their own costs, the primary judge treated the proceedings as if they were a draw; i.e., that some of the cross-appellants' arguments had succeeded, some had failed, and the result had been a judgment in favour of the cross-appellants as opposed to a judgment against them for a considerable sum as sought by Holdings. The cross-appellants complain that his Honour did not take account of the defensive necessity of the 2020 proceedings; and they argue that it follows that his Honour's discretion miscarried.
5. The cross-appellants submit that they were triumphant in the 2019 proceedings; defeating the claim brought against them. They accept that a court may order to deprive a successful party of the costs relating to an issue on which it was unsuccessful, but they submit that this will usually only be done where that issue was clearly dominant or separable; and that a court will generally only deprive the successful party of the costs relating to an issue on which it was unsuccessful when that issue was clearly dominant or separable. The cross-appellants say that this was not the case here - that the claims which the cross-appellants lost did not take up much time or space in terms of the evidence or the space allocated to them by the primary judge in the combined judgment.
6. The cross-appellants submit that the primary judge erred by treating the outcome as "mixed success" in issues as if they were equal in terms of weight, evidence time taken up at trial and in the combined judgment and capacity to generate costs; and therefore erred in exercising his discretion to order that each set of parties is to bear its own costs. The cross-appellants maintain that the appropriate order was for Holdings to pay the Jane Defendants' costs of the 2019 proceedings and to pay AGT its costs in the 2020 proceedings.
7. In the alternative, if a judicial exercise of the discretion warranted some recognition in the making of costs orders that the cross-appellants had lost on some claims, even though they succeeded in the overall event, the cross-appellants say that the appropriate exercise of discretion would have been to order that the cross-appellants' costs be paid in each proceedings with some adjustment by a percentage reduction in the total amount of costs to be paid.

Cross-respondents' submissions

1. As to the cross-appeal, the cross-respondents submit that the primary judge correctly recognised a mixture of success by the various parties in the respective proceedings (rejecting the contention that the result of the two sets of proceedings was a complete victory deserving of costs in both proceedings).
2. The cross-respondents say that, in the 2019 proceedings: Holdings succeeded in proving its claim for $1.7 million against the Jane Defendants (over their denial) of that claim; the Jane Defendants' defence of a set-off for $985,029.76 for "IPO Expenses" failed against Holdings' claim; but there was no judgment in the 2019 proceedings because of an agreed set-off of the result of the 2020 proceedings; and the result of the 2020 proceedings was in favour of AGT $1,300,035 (plus interest at 10%) for greater than Holdings' claim for $1.7 million (plus interest at Civil Procedure Act 2005 (NSW) (Civil Procedure Act) rates).
3. The cross-respondents point out that, in the 2020 proceedings: AGT's claim that $1,300,035 paid to VCFA was a loan to be repaid with interest at 10% succeeded, but that AGT's claim concerned with leased office premises and other claims failed.
4. Thus, the cross-respondents say that the primary judge correctly characterised the result, after making declarations in favour of Holdings for $1.7 million in the 2019 proceedings and in favour of AGT for $1,834,371.27 in the 2020 proceedings, as mixed success of each set of parties - as the outcome of the trial was that each set of parties owed debts of similar size to the other, being an outcome for which no party contended.
5. The cross-respondents argue that the primary judge correctly exercised the discretion as to costs. The cross-respondents refer in that regard to the authorities as to costs where there is a mixed outcome in proceedings, noting that the question of apportionment of costs is a matter of impression, evaluation and judgment; and that where parties enjoy mixed success on separate issues, two possible ways of dealing with costs at trial are, first, to award each party a portion of their costs reflecting their success and, second, that there be no order as to costs with the intention that each party should bear its own costs (citing Croc's Franchising Pty Ltd u Alamdo Holdings Pty Ltd (No 3) [2023] NSWCA 316 per the Court (Payne JA, Stern JA and Basten AJA) at [19]-[20]).
6. It is 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; and that the exercise of the discretion depends upon matters of impression and evaluation (see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 per Beazley, Ipp and Basten JJA at [38]).

Reply submissions

1. In reply submissions, the cross-appellants say that the court should have regard to the purpose, rationale and principles of fairness which inform the usual approach before departing from it; and, in particular, the court should have regard to the relative responsibilities of the parties for the incurring of costs. Reference is made to what was said in Firebird per French CJ, Kiefel, Nettle and Gordon JJ at [6]: … the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like.
2. The cross-appellants say that the primary judge did not refer to the usual approach, nor any of the principles to be considered when departing from it. They submitted that the failure to consider and apply those principles led the primary judge into error in assuming that, because there were some issues on which the cross-appellants lost, there was a "mixed result". The cross-appellants say that the result was that the primary judge unjustifiably departed from the usual approach, an error of the sort contemplated in House v the King at 505 per Dixon, Evatt and McTiernan JJ.

Determination

1. Both parties accept that the starting point for an award of costs is the broad discretionary power in s 98 of the Civil Procedure Act, which is conferred "[s]ubject to rules of court and to this or any other Act" (see s 98(1)). One such relevant rule is r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the general rule that costs follow the event. What is required is that the Court be satisfied that, in the particular circumstances of the case, a departure from the general rule is justified.
2. Where there are a number of issues in the proceedings on which there have been varying degrees of success, it will not always be easy to identify the "event" for the purpose of the application of the general rule as to costs following the event. In the present case, this was complicated by the fact that there were two sets of proceedings (with different thought related parties) and, at least on first blush, mixed success in both sets of proceedings.
3. In the 2019 proceedings, as noted earlier, Holdings' primary claim was an entitlement to the recovery of $1.7 million as money had and received by reason of a total failure of consideration (on the basis that there had been no execution of the Share Sale Agreement). Its alternative claim was based on recovery of that amount pursuant to the Share Sale Agreement. The Jane Defendants denied any obligation to repay the amount but also pleaded a defence of set-off pursuant to that the Share Sale Agreement.
4. Holdings did not succeed on its (primary) restitutionary claim for money had and received because that claim was premised on the contention (contrary to his Honour's findings) that no Share Sale Agreement had been executed and hence there had been a total failure of consideration for the payment of $1.7 million deposit ([240]). However, Holdings succeeded on its alternative claim at least to the extent that his Honour held that there was an obligation to repay the $1.7 million under the terms of that agreement, subject to any set-off that could be established. His Honour concluded (this being an issue determined in the 2020 proceedings) that VCFA was indebted to AGT as at 17 July 2019 in respect of the principal advances of $1,300,035 and interest thereon at the agreed rate of 10%. As the interest calculation produced an amount greater than the total indebtedness of the Jane Defendants to Holdings (see [266]), the result of the application of the contractual set-off was that no amount was payable to the Jane Defendants in respect of the deposit ([268]).
5. What then is the relevant "event" for the purpose of the general rule as to costs? As already noted, the difficulty of ascertaining such an event where there are multiple issues in proceedings has been recognised in a number of cases (see Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 568 per Bergin CJ in Eq at [22], for example, her Honour there referring to Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172 and Hooker v Grilling (No 2) [2007] NSWCA 214 at [25]).
6. In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, Young J (as his Honour then was), having accepted that where there are multiple issues it may be appropriate for the court to assess the costs on each issue or to make a reduction in the costs which the successful party obtains because of that party's losses on separate issues, said (at 22) (in an approach later cited by Barrett J (as his Honour then was) in Golding v Vella (No 2) [2001] NSWSC 731 at [8]): The cases, however, show that it is unwise to be too technical about what is meant by "event" or "issue" in this context. The judgment of Thomas J in Colburt v Beard (1992) 2 QD R 67 gives abundant examples which establish this point. In particular one does not look at issues as if they were pleaders' issues but approaches the matter with a broad brush. (my emphasis)
7. The rationale underlying the general rule is reflected in the observation made by Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 (at 16) that: … 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.
8. As against this, the rationale underlying a departure from the ordinary costs rule appears to be that where there are multiple issues the application of the general rule may involve hardship where a party succeeds on some issues but not others (James v Surf Road Nominees (No 2) [2005] NSWCA 296, per Beazley, Tobias and McColl JJA (at [32]) citing Waters v P C Henderson (Aust) Pty Limited per Mahoney JA (Court of Appeal (NSW), Kirby P, Mahoney and Priestley JJA, 6 July 1994, unreported) (Waters)).
9. There is thus a tension between the accepted general rule that a successful party should have the whole costs of the proceeding (including the costs of an issue on which it has failed) (as noted in Windsurfing International Incorporated v Petit (1987) AIPC 90-441 (Windsurfing)) and the recognition that in an appropriate case a costs order may be formulated to reflect the degree of success on distinct issues (see for example Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775 per Rolfe J; Uniline Australia Ltd (ACN 010 752 057) v S Briggs Pty Ltd (ACN 007 415 518) (No 2) (2009) 232 FCR 136; [2009] FCA 920 per Greenwood J; Leallee v Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518 per Price J; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 per Slattery J at [36]).
10. This highlights the complaint by the cross-appellants that in the present case his Honour did not address the circumstances in which an apportionment of costs as between the different issues was here considered appropriate. Relevant circumstances in which apportionment across different issues have been said to include: where a successful party has, in respect of one or more issues, "unfairly, improperly, or unnecessarily increased the costs" (Waddell J, as his Honour then was, in Windsurfing); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (Mahoney JA in Waters; Toohey J in Hughes v Western Australian Cricket Assn (1986) ATPR 40-748); where a particular issue or group of issues is clearly dominant or separable (Mahoney JA in Waters; McColl JA in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373). See also the summary of principles in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 by Hammerschlag J (as his Honour then was), there referring to the relevant authorities collated by White J (as his Honour then was) in Short v Crawley (No 40) [2008] NSWSC 1302, at [28]-[32] as to when the general rule may be displaced.
11. The purpose of costs orders is, compensation not punishment (Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59) and ultimately, as Finkelstein and Gordon JJ observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5], fairness should dictate how the costs discretion is to be exercised.
12. In the present case, the difficulty I have (and the reason that I have concluded that leave to cross-appeal should be granted) is that while the primary judge clearly identified separate issues or different "events", his Honour's decision to exercise the costs discretion by reference to the different events seems to have been based solely on his Honour's acceptance that "the outcome of these proceedings was, in essence, that each set of parties owed debts of similar size to the other, this being a position for which no party contended" (at [9] of the costs judgment). While I consider that there should be a reluctance to grant leave to challenge orders confined to costs, I have concluded that the fact that the primary judge did not address (beyond reference to the similarity in size of the debts) why there should be a departure from the general rule (or why the separate issues gave rise to different "events" in respect of which separate costs orders would be warranted) indicates that there is an issue of general principle here raised (see Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]; Jaycar v Lombardo [2011] NSWCA 284 at [46]), warranting the grant of leave.
13. I make no criticism of the fact that the primary judge dealt only briefly in the costs judgment with the principles applicable in relation to the question of costs. Formulaic recitation of those principles is not necessary. It is clear that his Honour was addressing (and rejecting) the contention by the cross-appellants that there had been a complete victory by the cross-appellants. Moreover, at [8] his Honour noted the issues on which the cross-appellants had not succeeded.
14. That makes clear enough in my view that his Honour was identifying that there were distinct or severable issues on which the parties had had mixed success. Thus, the discretion to apportion costs across the respective issues fell for consideration. However, what is not clear is to why the similarity in amount of the competing debt claims should have deprived the cross-appellants of any order for costs in their favour, particularly where (as here) there was a reasonable argument that the second set of proceedings was defensive and in response to the first set of proceedings in which, in substance, the cross-respondents lost (notwithstanding that there was a declaration in favour of Holdings on the issue as to repayment of the deposit). That said, I do not accept that the approach adopted by his Honour is one that elides the jurisdiction into a "no costs" jurisdiction. As to the criticism that his Honour failed to assess the "practical outcome" of the litigation, I do not accept that to be justified. It seems to me that his Honour was only too well aware of that outcome. Nevertheless, as I consider that there was error in the application of principle in the exercise of the costs discretion it is necessary to consider what order should now be made.
15. On the re-exercise of the costs discretion, the relevant events across the two proceedings can readily be understood as being: whether there was a liability to repay the $1.7 million (either as money had and received or under the contractual arrangements); whether there was a liability to repay float expenses which could be set-off against that liability; whether there was an obligation to repay the $1.3 million loan which could be set-off against the first liability; and whether there was a liability to repay amounts under the alleged rental agreement which could be set-off against the first liability. Each was a separate claim, albeit that the claims were related (by reason of the fact that the set-off claims were raised in order to resist the claim by Holdings in respect of the $1.7 million deposit). So much is implicit in his Honour's treatment of the claims at [8] of the costs judgment.
16. The cross-appellants succeeded on the second and third of those issues but failed in their denial of liability to repay the $1.7 million (the first issue) and the last. The practical outcome, however, was that the cross-appellants obtained an order for judgment in their favour as a result of the application of the set-off claim on which they were successful.
17. Without having the familiarity that the primary judge had as to the conduct of the trial (and without the benefit of submissions as to time spent on particular issues or the like) it is difficult to apportion costs across those separate "events". However, the authorities to which I have referred above make clear that the apportionment of costs across multiple issues can properly be done on an impressionistic basis.
18. In all the circumstances, I am persuaded that there should be some departure from the general rule in order to reflect that costs were incurred on the set-off claims that failed (the IPO expenses claim and the rent claim). I consider that the $1.7 million deposit claim and the $1.35 million claimed set-off by reference to the loan were sufficiently interlinked so as not to warrant a deduction from the costs payable to the successful cross-appellants. On the basis that the set-off claims which failed seem to have occupied a relatively small proportion of his Honour's reasons ([104]-[121]) in relation to the rent claim, which did not appear to involve much in the way of evidence; and [272]-[281] of the reasons in relation to the IPO float expenses, again with relatively little evidence, I would adopt a broad brush approach and conclude that the appropriate costs order would be that the cross-respondents pay 75% of the costs of the cross-appellants in the respective proceedings.

Orders

1. For the above reasons, I would make the following orders: 1. Dismiss the appeal with costs. 2. Grant leave to the cross-appellants to cross-appeal against the costs orders made in the respective proceedings. 3. Allow the cross-appeal and set aside order (3) made in 2019/374869 and order (5) in 2020/219022 and in lieu thereof order: 1. in proceeding 2019/374869, leaving aside any previous interlocutory costs orders, that the plaintiff pay 75% of the costs of the defendants of the proceedings; and 2. in proceeding 2020/219022, leaving aside any previous interlocutory costs orders, that the defendant pay 75% of the costs of the plaintiff of the proceedings. 1. Order the cross-respondents to pay the cross-appellants' costs of the cross-appeal. 2. Dismiss the cross-respondents' motion as to incompetency of the cross-appeal with no order as to costs.
2. PAYNE JA: I agree with Ward P.
3. BASTEN AJA: : For the reasons given by the President, I agree that the appeal should be dismissed with costs. I also agree that the cross-appeal should be allowed, and orders for the payment of costs of the trial to the cross-appellants made, but would not discount the orders. My reasons with respect to the cross-appeal follow.
4. The cross-appeal raises two issues, namely whether: 1. the cross-appellants require leave to appeal, and 2. the trial judge erred in making no order as to the costs of the proceedings in the Division.

Leave to appeal

1. Because there was no commonality of parties between the two proceedings in the Division, it is necessary to address the cross-appeals separately. Both were filed on 9 April 2024. In relation to the 2020 proceeding, Access Group Training Pty Ltd (AGT) sought in ground 1 of its cross-appeal to raise a contractual claim dismissed by the trial judge, Nixon J. That ground was abandoned in written submissions filed on 7 June 2024. Ground 2 challenged the failure of the trial judge to award the company its costs of the trial. It was the only ground pursued at the hearing in this Court.
2. In relation to the 2019 proceeding, the defendants at trial (the Jane parties) raised four grounds in their cross-appeal. Ground 1 involved the same contractual challenge as that raised by AGT; it was abandoned in the common written submissions. Ground 2 addressed the absence of a costs order in their favour. Grounds 3 and 4 were matters which should properly have been raised in a notice of contention, as they sought to support the orders in fact made by the trial judge on other grounds than those he had relied on.
3. It followed that, by the time the cross-appeals were heard, each related to a question of costs only. An appeal from a judgment or order "as to costs only which are in the discretion of the court" requires leave: Supreme Court Act 1970 (NSW), s 101(2)(c). The cross-appellants conceded that they required leave. However, the question is whether an appeal which was not as to costs only at the time it was commenced, because it included non-colourable challenges to substantive orders, became susceptible to the leave requirement when the challenge to the substantive orders was abandoned or, as in this case, fell away because the appellants abandoned the relevant part of the primary appeals.
4. On one view, the right of appeal conferred by s 101 of the Supreme Court Act, in so far as it is conditional, sets jurisdictional conditions which must be satisfied at the time the notice of appeal is filed and served. That view is consistent with the established principle that failure to obtain leave, where leave is required, renders the appeal incompetent and liable to summary dismissal. For example, in Oertel v Crocker [1] the High Court considered whether the interest of a tenant in possession, being the subject matter of the proceedings, had a value in excess of a prescribed amount permitting an appeal. Accepting the concession that it did not, the appeal was dismissed as incompetent. [2] A similar approach was accepted by Meagher JA in Ghosh v NineMSN Pty Ltd. [3]
5. As a matter of statutory construction, that approach must be correct, a right of appeal being purely a creature of statute and thus subject to the conditions imposed by the statute. The right of appeal to this Court in the present case was granted by s 101(1) of the Supreme Court Act, relevantly from "any judgment or order of the Court in a Division", but "[s]ubject to this and any other Act". The right is therefore subject to s 101(2), which is a qualified prohibition, commencing: (2) An appeal shall not lie to the Court of Appeal, except by leave of the Court of Appeal, from….
6. That language is apt to withhold the right granted under s 101(1), in relation to the matters identified in subs (2), unless and until leave is granted. There is, however, no suggestion that the right originally engaged is defeasible where circumstances change; nor is there any provision in the rules for seeking leave in circumstances where an appeal has been commenced prior to a change in circumstances.
7. This case is not concerned with the possibility that an inchoate right may arise upon the delivery of a judgment or the making of orders which might be lost where circumstances change after that date, but before a timely notice of appeal is filed.
8. The issue appears not to have arisen for determination (and was not the subject of submissions in the present case), no doubt partly because in most cases the requirement for leave will be determined by the nature of the judgment or order sought to be the subject of an appeal. However, in respect of an appeal as to "costs only", while the question whether the order is as to costs will be determined by reference to the matter under appeal, the possibility that the notice of appeal may contain other matters is a variable which may change over time. It is possible that a similar issue could arise with respect to s 101(2)(r), requiring that the matter at issue be of a particular value, which may also change over time. One such circumstance may arise where part of the appeal is conceded, so as to leave in dispute only an amount under the jurisdictional requirement.
9. The history of the requirement for leave with respect to appeals from judgments or orders as to "costs only" was considered by this Court in Housman v Camuglia. [4] The precise issue now under consideration did not arise, but, after considering cases with respect to cross-appeals as to costs, Leeming JA concluded: "84 The upshot of the above is that an appeal raising bona fide substantive grounds as well as costs is not an appeal as to 'costs only' within the meaning of s 101(2)(c) of the Supreme Court Act 1970 or s 127(2)(b) of the District Court Act 1973, and that remains so even if the substantive grounds are rejected."
10. While it is unsurprising that the right of appeal from one order does not depend upon the outcome of the appeal with respect to other orders, the analysis in Housman is nevertheless consistent with the view that once the right of appeal is invoked, the appeal will be competent, without leave.
11. An analogous situation arises in relation to the jurisdiction of the Federal Court, being a court of limited jurisdiction which depends on the existence of a "matter" under Ch III of the Constitution. A matter may involve claims under both federal and state law arising from a common substratum of circumstances. Questions of the continuity of jurisdiction, once engaged, may arise where the federal law claims fall away. In Petrotimor Companhia de Petroleos SARL v Commonwealth of Australia, [5] Black CJ and Hill J observed: "6 It is now well established that the mere fact that a federal claim which is brought within the jurisdiction of the Court is not tenable will not prevent the Court from proceeding with a non-federal element which is within the accrued jurisdiction of the Court: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212; Post Office Agents Association Ltd v Australian Postal Commission (1988) 16 ALD 428." To similar effect, Beaumont J stated (emphasis in original): "33 … It may be accepted, as was held in Burgundy Royale Investments Pty Ltd … v Westpac Banking Corporation (1987) 18 FCR 212; that failure on a federal issue which is legitimately raised, will not deprive the Court of authority to adjudicate on other non-federal claims which are part of the one 'matter', in the sense explained in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 585-6. But what is necessary is that the Court's jurisdiction is legitimately invoked; and this can only occur if there is a federal, justiciable controversy (Moorgate Tobacco Co Ltd v Phillip Morris Ltd (1980) 145 CLR 457 at 477 …)."
12. In Post Office Agents Association Ltd v Australian Postal Commission, [6] Davies J held: "The jurisdiction of the court under the ADJR Act has been invoked. The application is brought thereunder as a matter of substance, not as a matter of artificiality or subterfuge. The court has jurisdiction to deal with the claim and jurisdiction to deal with all other claims not otherwise within its jurisdiction arising out of the subject matter of the dispute: see Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd and Fencott v Muller…"
13. Despite the concession by the cross-appellants as to the need for leave, in the circumstances which had arisen, in my view the cross-appeals were competently commenced and did not thereafter cease to be competent, absent a grant of leave. However, if leave were required, then it should be granted because the case raises an issue at least as to the application of principle, if not as to the scope of the relevant principle, and a substantial miscarriage.

Costs following the event

1. The issue raised on the cross-appeals was whether the trial judge erred in failing to make appropriate costs orders with respect to the proceedings determined by him. That question may be broken down into two parts, namely whether the judge (i) failed to correctly identify the "event" for the purposes of Uniform Civil Procedure Rules 2005 (NSW), r 42.1 or, (ii) erred in making "some other order" because it appeared to him, pursuant to the power conferred by the rule, that "some other order should be made".
2. Broadly speaking, the "event" referred to in r 42.1 is not to be broken down by reference to individual issues or findings, but refers to the outcome of the proceeding. There is no great magic in the word "event": many cases involve mixed success. Even where there is one issue, namely the assessment of compensation, it will be common that the successful plaintiff receives less than he or she sought.
3. The relevant principles in dealing with cases of mixed outcomes were identified by this Court in Galati v Deans (No 2) [7] in the following passages: "6 The broad and unfettered discretion as to costs conferred by s 98 of the Civil Procedure Act 2005 (NSW) is expressly rendered subject to rules of court. The general rule applying to a hearing determined on the merits is that 'the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs': … r 42.1. Rule 42.1 has been construed on the basis that 'the event' which costs should prima facie follow can be identified as a judgment for the plaintiff or the defendant on the claim. [8] 7 In applying this principle, it need not be assumed that each trial or appeal involves a singular 'event'. That was not the case in relation to the present trial or the current appeal. There were entirely separate questions as to the beneficial interests in the shares held by TRHS Pty Ltd in Felan's Fisheries Pty Ltd and a claim for disgorgement of part of a secret commission obtained by one party in relation to the acquisition of those shares. 8 Further, even in relation to a particular matter, such as the determination of the beneficial ownership of the shares, it may be appropriate to allocate costs or limit the costs recoverable by the successful party where a clearly dominant issue has been determined against it, or where there are clearly separable issues on some of which it has failed. [9] On the other hand, as stated in Bostik Australia Pty Ltd v Liddiard (No 2): [10] '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.' 9 The Court has a broad discretion, to be exercised according to the purpose of compensating, at least in part, the costs reasonably incurred by a successful party in establishing its rights, subject to the need to accord fairness to each party in the particular circumstances of the case. [11] "
4. These principles have been restated from time to time, sometimes with more citation of authority and sometimes with a focus on the specific matters in issue. [12] In considering whether a party should be deprived of its costs because it has failed on particular issues, it may be important to have regard to whether or not it was the moving party. As Burchett J noted in Australian Conservation Foundation v Forestry Commission: [13] "A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to rise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs."
5. In this case, the proceedings were commenced in 2019 by Access Training Group Ltd ("Holdings") against the Jane parties (being the shareholders of AGT). Although the trial judge made a declaration that the Jane parties were obliged to pay Holdings $1.7 million on 17 July 2019, that entitlement did not give rise to a judgment, because it was subject to a set-off by reference to any amount owing by Holdings' related company, Venture Capital Fund Australia Ltd (Venture Capital) to AGT. As the latter debt was found in the 2020 proceedings to exceed the former, the substantive result in the 2019 proceedings was that the proceedings be dismissed.
6. Because AGT was not a party to the 2019 proceedings, in order to establish the amount of the set-off, fresh proceedings were commenced by AGT against Venture Capital in 2020. In those proceedings AGT obtained a judgment for $176,971.63, being the balance owing after the setting-off exercise.
7. Although AGT was not successful in all its claims in the 2020 proceedings, it was a defensive proceeding forced upon it and its shareholders as a result of the proceedings commenced by Holdings. Accordingly, AGT was only in a formal sense the moving party in those proceedings. Further, although the judgment in favour of AGT was in a relatively small amount (some 10% of the amount owing by its shareholders to Holdings), its true entitlement (before the set-off) was $1,834,371.27, as against Venture Capital.
8. A further consideration in the present case is that the trial judge appears to have set-off costs against each other. In principle, that approach was not open: the parties to the proceedings did not overlap. Indeed, no party was common to both proceedings.
9. The hearing of the two proceedings ran for five days, but two were very short and the transcript suggested there were less than three full days of hearing. The parties went to significant length to deal with the matters expeditiously. Indeed, some claims were dismissed for want of evidence.
10. Further, the cross-appeal was also dealt with expeditiously in this Court. The cross-appellant's written submissions ran to 20 paragraphs; the cross-respondents' written submissions were of a similar length. Whilst the cross-appellant laid the responsibility for initiating the proceedings at the feet of Holdings, neither party alleged that any particular claim was unreasonable and without foundation, nor that the other party acted unreasonably in the conduct of the proceedings. The cross-respondents did not contend that the cross-appellant had failed on matters constituting a dominant part of the proceedings.
11. The appropriate order in the 2019 proceedings is that Holdings pay the Jane defendants their costs of that proceeding. In the event, they were successful. The fact that aspects of their earthworks collapsed should not be held against them unless their defensive positions were unreasonable, were pursued in a manner which unreasonably extended the hearing of the matter, or were entirely severable and dominant. Absent one of those elements, none of which was established, the Jane defendants should have their costs of the trial against Holdings without diminution.
12. With respect to the 2020 proceedings, AGT was successful in its claim against Venture Capital and should have its costs of that proceeding. It failed only on minor and entirely subsidiary issues, not warranting some proportionate reduction.
13. Those entitlements should not be reduced by reliance on an inchoate principle of fairness, as that would be to invite reducing costs awards which are otherwise appropriate by reference to the outcomes of individual issues. The authorities referred to above warn against that.
14. In these circumstances, the following orders should be made in the cross-appeals: 1. Allow the cross-appeals and vary the orders entered on 18 and 25 March 2024. 2. In the 2019 proceeding - 1. set aside order (3) and 2. in lieu thereof, and without disturbing interlocutory costs orders, order that the plaintiff pay the defendants' costs in the Division. 1. In the 2020 proceeding - 1. set aside order (5) and 2. in lieu thereof, and without disturbing interlocutory costs orders, order that the defendant pay the plaintiff's costs in the Division.

Endnotes

1. (1947) 75 CLR 261; [1947] HCA 40.
2. Oertel at 263 (Latham CJ).
3. [2014] NSWCA 180 at [8].
4. (2021) 104 NSWLR 615; [2021] NSWCA 106 (Leeming JA, Bell P and White JA agreeing).
5. (2003) 128 FCR 507; [2003] FCAFC 83.
6. (1988) 84 ALR 563, 565.
7. [2023] NSWCA 252 (White JA; Basten AJA) (footnotes in original).
8. Baker v Towle [2008] NSWCA 73 at [11]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8] applied in Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin (No 2) [2021] NSWCA 98 at [11] (White JA, Basten and Macfarlan JJA agreeing).
9. State of New South Wales v Stanley [2007] NSWCA 330 at [18] (Hislop J, Beazley and Tobias JJA agreeing).
10. [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA).
11. Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] (Finkelstein and Gordon JJ).
12. See Oikos Constructions (No 2) at [10]-[16]; citing, amongst other cases, Bostik Australia (No 2) at [38].
13. (1988) 81 ALR 166, 169; [1988] FCA 225. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 August 2024