On 13 May 2016 I provided my reasons for judgment in these proceedings on the cross-claim and directed that the parties should bring in short minutes to reflect those reasons and to deal with the matter of excess legal costs which had been resolved: Arab Bank of Australia Ltd v Jeitani [2016] NSWSC 617. On 3 June 2016 the parties produced Short Minutes of Order as directed. They indicated, however, that they wished to make submissions about costs.
In my judgment of 13 May 2016 I said at [130]:
I will hear the parties on costs. My prima facie view is that each party has succeeded on one ground and failed on another with the result that there should be no order as to costs to the intent that each party should bear his and its own costs of the proceedings.
The Bank accepted that the appropriate order was as set out in that paragraph. Mr Gittany submitted that a costs order more favourable to him should be made. His principal submission was that the Bank should be ordered to pay his costs of the cross-claim, alternatively that the Bank should be ordered to pay 70% of his costs.
The basis for what was sought by Mr Gittany was, first, that there were essentially three aspects to the claim and he had been successful on two of them. Those two related to the discharge of the Earlwood mortgage and the excessive legal costs. Mr Carruthers of Counsel for Mr Gittany pointed to prayer 6 in the Amended First Cross-Claim and to his written submissions which, in the first instance, identified a number of anomalies in relation to the costs and then submitted that those matters were sufficient for an order for the taking of an account, alternatively, an order for a reference out under Uniform Civil Procedure Rules 2005 (NSW) 20.15 to a costs assessor.
Prayers 5 and 6 in the Cross-Claim were as follows:
5. A declaration that the Cross Defendant has breached the terms of the Merrylands Mortgage, the Earlwood Mortgage and the Bass Hill Mortgage by charging legal fees exceeding its reasonable costs of enforcing its rights under the said mortgages.
6. In the alternative to order 5, an order for the appointment of a costs assessor for the assessment of the reasonable costs of the Cross Defendant in enforcing the said mortgages.
Mr Carruthers drew attention to the Short Minutes of Order agreed between the Bank and Mr Gittany and in particular to paragraph 2(a) as follows:
2. Without admissions, in respect of the Cross-Claimant's claims for relief in prayers 5, 6 and 7 of the Amended First Cross-Claim filed 16 January 2014 (to which paragraphs 25 - 28 relate) but, for the avoidance of doubt, excluding the claim in paragraph 3 of the particulars subscribed to paragraph 22 of the Amended First Cross-Claim, to the effect that the fees claimed by the Cross-Defendant exceed the Cross-Defendant's reasonable costs of its mortgages, the Plaintiff / Cross-Defendant (Bank) undertakes:
(a) On the Second Defendant / Cross-Claimant's (Mr Gittany's) undertaking to the Court to pay for the application fee for the costs assessment, the Bank will, within 28 days, do all things reasonably necessary to have the legal fees claimed by the Bank in its M.G.G. Group P/L & RCJ Holding P/L - Realisation Cost Account numbered 00700038202 (Bank's costs) sent to a costs assessor mutually acceptable to Mr Gittany and the Bank to determine whether any amounts claimed in Bank's costs are in excess of its right to be reimbursed in respect of those costs, in accordance with the terms of the Bank's security documents including:
(i) The Merryland Mortgage, registered memorandum 5300281P;
(ii) The Earlwood Mortgage, registered memorandum AD493353;
(iii) The Bass Hill Mortgage, registered memorandum 5300281P; and
(iv) The Guildford Mortgage, registered memorandum AD493352.
The assessment is to be conducted by the cost assessor in accordance with the usual cost assessment rules as applied in the state of New South Wales.
He submitted that Mr Gittany was largely successful in achieving what was sought in prayer 6, albeit that this success was achieved by settlement rather than judicial determination.
Counsel submitted further that the claim in relation to Earlwood essentially involved two aspects on both of which Mr Gittany was successful. The first concerned whether the mortgage was governed by the Credit Code and the second was whether the Bank had behaved unreasonably in any event.
He submitted that if the GST claim was put out of consideration, the trial in relation to the Earlwood matter would have taken two days to hear, noting in that regard that the whole of the trial took three days. He pointed also to the fact that in relation to the GST claim the Bank was unsuccessful in some of its arguments.
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Legal principles
In Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40,748 Toohey J said at p.48,136:
1. Ordinarily costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order - Ritter v Godfrey [1920] 2 KB 47.
2. Where a litigant has succeeded only on a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed - Forster v Farquhar [1893] 1 QB 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law - Cretazzo v Lombardi (1975) 13 SASR 4 at 12.
In Waters v P C Henderson (Aust) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 Mahoney JA (with whom Kirby P and Priestley JA agreed) approved Toohey J's observations in Hughes ([22] above) and went on to say:
[34] Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. In Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent's Notice of Contention. This is not to say that so-called "discrete issues", for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above, it can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter.
In Permanent Trustee v FAI (unreported, NSWSC, 3 June 1998) Hodgson CJ in Eq also said (at 13):
Apart from that consideration, in general terms I accept that if an issue is raised reasonably and is not disproportionate to the whole case, then normally the successful party should get his or her costs. However, particularly in relation to severable issues, the lesser the strength of the point raised and the greater the proportion it bears to the whole case, the more likely it is that the successful party may be deprived of costs; and if the Court comes to the view that it was unreasonable to raise the issue, then the successful party may have to pay the costs of that issue.
Those authorities speak of cases involving multiple issues. A more correct designation of the present litigation was that it contained three separate claims. The fact that they were separate claims and not just issues involved in the proof or defence of one claim only strengthens the conclusions in those cases as they can be applied to the present matter.
In the first instance, those cases support a conclusion that the appropriate order in the present case for the issues that were tried should be that the Bank should pay Mr Gittany's costs of the Earlwood mortgage claim and that Mr Gittany should pay the Bank's costs of the GST claim: see also Laguillo v Haden Engineering Pty Ltd [1978] 1 NSWLR 306 at 309.
As far as the claim for excessive costs is concerned a principal authority in the area is the decision McHugh J in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622. In that case McHugh J said (at 624-625):
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
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. This approach has been adopted in a large number of cases.
It was not suggested in the present case that the Bank acted unreasonably in its approach to this claim relating to excessive costs. Counsel for Mr Gittany sought to distinguish Ex parte Lai Qin on the basis that those proceedings were settled within a week of being commenced. I am not satisfied that this provides any basis for saying that the principles contained in it do not apply here. In the absence of it being shown that the Bank acted unreasonably the appropriate order in relation to the settled claim of costs is that there be no order as to costs.
As far as the two issues that were tried are concerned what was said by the Full Court of the Supreme Court of Queensland in Thiess v TCN Channel 9 Pty Ltd (No. 5) [1994] 1 Qd R 156 is relevant:
While in the end the matter is largely one of impression, we consider that, whatever approach is adopted, the trial judge's apportionment of two-thirds of the costs to the plaintiff was unduly favourable having regard to the comparative success achieved by the defendants in the litigation. Out of the total of 21 imputations alleged they succeeded in proving truth in the case of 13 of them. It is not illegitimate to regard those 13 as representing the more important, and, from the standpoint of the plaintiff's public image, certainly the most serious, of the issues at the trial. In all the circumstances we consider that the discretion of the trial judge as to costs has miscarried. His order that the defendant TCN 9 should pay two-thirds of the plaintiff's costs should be set aside.
The effect of that order is to require the defendant TCN 9 to pay most of the plaintiff's costs of action while continuing to bear all of its own. As such it discounts too severely the extent of the defendant's success in the action by remitting only one-third of the plaintiff's costs of the action. Even if the defendant TCN 9 were ordered to pay only one-third instead of two-thirds of the plaintiff's costs, it would unduly favour the plaintiff by leaving the defendant burdened with payment of all of its own costs of the action. A more realistic reflection of the outcome of the litigation would be to require each party to pay the costs of the other to the extent of the latter's success in the action. Approached in this way, we think it a fair assessment of the relative victories of each party to say that the plaintiff succeeded as to one-third of his claims for defamation, whereas the defendant was successful in establishing a defence to the remaining two-thirds. The net result of such an approach would be to oblige the plaintiff to pay one-third of the costs of the defendant TCN 9. Approximate though this may be, it seems to us to be preferable to the alternative of apportioning costs according to the success of either party in relation to particular issues, which would produce a process of taxation that seems to be almost universally deplored.
When assessing the time spent on separate claims or issues in a matter, a broad brush approach is appropriate. My assessment is that the time spent on each of the two claims took up roughly the same period of time. It is true that I made a separate finding of the Bank acting unreasonably in relation to the discharge of the Earlwood mortgage but my principal determination was that the Credit Code applied to that mortgage so that the Bank acted wrongfully. The consideration of the Bank's unreasonableness otherwise was expressly considered only in case I was wrong in my determination concerning the Credit Code - see [124]. The evidence relating to that unreasonableness finding was largely the same evidence that resulted in the finding concerning the Credit Code.
In my opinion, and applying Thiess to avoid two costs orders for the issue each party succeeded on, I consider that the appropriate order is that there should be no order as to costs to the intent that each party should pay his and its own costs. That will have the effect of avoiding two possible costs assessments with judgments set off against the other.
Accordingly, the order will be that there be no order as to costs of the Cross-Claim to the intent that each party should bear his and its own costs.
The orders I make are these:
1. Judgment in favour of the Cross-Claimant in the amount of $77,429.54.
2. Without admissions, in respect of the Cross-Claimant's claims for relief in prayers 5, 6 and 7 of the Amended First Cross-Claim filed 16 January 2014 (to which paragraphs 25 - 28 relate) but, for the avoidance of doubt, excluding the claim in paragraph 3 of the particulars subscribed to paragraph 22 of the Amended First Cross-Claim, to the effect that the fees claimed by the Cross-Defendant exceed the Cross-Defendant's reasonable costs of its mortgages, the Plaintiff / Cross-Defendant (Bank) undertakes:
(a) On the Second Defendant / Cross-Claimant's (Mr Gittany's) undertaking to the Court to pay for the application fee for the costs assessment, the Bank will, within 28 days, do all things reasonably necessary to have the legal fees claimed by the Bank in its M.G.G. Group P/L & RCJ Holding P/L - Realisation Cost Account numbered 00700038202 (Bank's costs) sent to a costs assessor mutually acceptable to Mr Gittany and the Bank to determine whether any amounts claimed in Bank's costs are in excess of its right to be reimbursed in respect of those costs, in accordance with the terms of the Bank's security documents including:
(i) The Merryland Mortgage, registered memorandum 5300281P;
(ii) The Earlwood Mortgage, registered memorandum AD493353;
(iii) The Bass Hill Mortgage, registered memorandum 5300281P; and
(iv) The Guildford Mortgage, registered memorandum AD493352.
The assessment is to be conducted by the cost assessor in accordance with the usual cost assessment rules as applied in the state of New South Wales.
(b) Should the assessor determine that the Bank does not have any right to be reimbursed in respect of any such legal costs (excess costs):
(i) To the extent the Bank is owed any money under the securities to which the excess costs (and any interest that accrued thereon), or any part, relate, the Bank may offset the excess costs (and any interest that accrued thereon) against any such indebtedness; and
(ii) Otherwise the Bank undertakes to pay the excess costs (and any interest that accrued thereon), or the balance of the excess costs (and any interest that accrued thereon), as remain after satisfaction of (i) above, into the Court within 28 days.
3. No order as to costs.
[5]
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Decision last updated: 08 June 2016