Agricultural & Rural Finance Pty Ltd v Atkinson

Consideration

In considering this application, I note the comments of Allsop P, with whom Beazley and Campbell JJA agreed, in Baulderstone Hornibrook Engineering (No 2) v Gordian Runoff Limited [2009] NSWCA 12 at [5]: Three things need be borne in mind in a judgment such as this on costs: the desirability of avoiding unnecessary recitation of cases (abounding as they are in this area); the desirability of not restating, in different terms, approaches to the broad discretion that have been well settled; and the desirability of dealing with the arguments without over-elaboration, if this is possible.
In respect of whether a costs order should be made at all given the manner in which these proceedings have been resolved, the default position is as described by McHugh J in Lai Qin at 624-5: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. His Honour was there considering the principles which govern an application for costs "when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means": at 624. However, McHugh J also noted that such an order may be made where the Court is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the cost of the action, or a judge may feel confident that, although both parties acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried: at 625.
The Court of Appeal's consideration of Lai Qin in such circumstances is helpfully collated by Payne JA in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [26]-[29]. A recent example of the application of these principles is Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 where the Council commenced proceedings challenging the Minister's amalgamation of local government areas. Two days before the hearing of the appeal, the Minister decided not to proceed with the amalgamations. The appellant discontinued the appeal and sought an order for costs on the basis that the Minister's abandonment of the proposed amalgamation was "a complete capitulation" and, if the appeal had proceeded, the Council would "almost certainly" have succeeded. Whilst the Court of Appeal agreed that, if either characterisation was correct, the Court could award costs against a party who has capitulated, the Court did not find the descriptions by the Council to be correct. The Court found that, whilst the Council obtained the result it sought in the litigation as a result of a political decision by the Government, the resistance by the Minister to the proceedings was not unreasonable and there was no basis to make a different costs order.
It is also important to note the distinction drawn by Burchett J in One.Tel Ltd v Deputy Commissioner of Taxation at [6]: In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
Properly characterised, these proceedings were not resolved by settlement or extra-curial means. Rather, Mr Xing having commenced proceedings, Awesome Rubber immediately agreed to allow access to the documents he had been seeking, but then failed to provide many of the documents sought, such that Mr Xing continued to a hearing - which was contested. After cross-examination of Mr Sha, Awesome Rubber agreed to and did produce further documents, many of which should have been produced earlier, albeit that some were only brought into existence after these proceedings had been commenced, but before the hearing. It seems to me that this is a case where the Court is able to conclude that one of the parties acted so unreasonably that the other party should obtain its costs of the action, or where the Court may feel confident that one party was almost certain to have succeeded if the matter had been fully tried. As such, having regard to the history of these proceedings as earlier described, I consider it appropriate that Mr Xing have his costs of these proceedings.
As to whether Mr Xing should have his costs on an indemnity basis, section 98(1)(c) of the Civil Procedure Act 2005 (NSW) provides: Courts powers as to costs (1) Subject to rules of court and to this or any other Act: … (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
In In the matter of Indoor Climate Technologies Pty Ltd [2019] NSWSC 356, Black J recently summarised the applicable principles relating to the making of indemnity costs orders at [8]: The principles on which an order for indemnity costs may be made are also well established. Section 98(1)(c) of the Civil Procedure Act 2005 (NSW) permits the Court to order costs on an ordinary or indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, unless the Court otherwise orders or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 of the Uniform Civil Procedure Rules deals with an order for costs on an indemnity basis. Costs are awarded on the ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. An order for indemnity costs is not made to punish an unsuccessful party for persisting with a case that fails, but to compensate a successful party fully for costs incurred, when the Court takes the view that it was unreasonable for the other party to have subjected the successful party to the expenditure of costs: Hamod v New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20]. Whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]; Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6]. That is to be determined by reference to the conduct of the proceedings, not the conduct that is the subject of the substantive dispute.
I do not think it is accurate to describe Mr Sha's evidence on 5 August 2019 as a capitulation. Nor should his agreement to enter into further discussions with Mr Xing's legal representatives and produce further documents be treated as an exceptional circumstance providing the basis for an indemnity costs order. The Court does rely on parties continuing to negotiate and resolve matters of detail, particularly in respect of document production, so that the Court does not have to go through each document and each category of documents sought and ascertain with precision what has been, has not been and should be produced. Having said that, it is clear that Awesome Rubber's production of documents had not been timely or comprehensive to that point in time. Weighing all of these matters, I consider it appropriate to make the usual costs order.

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Judgment (8 paragraphs)

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Legislation Cited (3)

Cases Cited (21)