It does not necessarily follow that the costs orders otherwise appropriate should be affected. 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 raise 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. Ultimately, the question is one of discretion and judgment.
In my respectful opinion the same reasoning applies to a successful plaintiff who fails on some issues. To extend Burchett J's military metaphor, the plaintiff is not to be regarded as culpable because he attacked at points of the defendant's fortifications other than the place where success came. He is not to be forced, at his peril in respect of costs, to abandon every flank attack.
It can also be said that both the law itself and the culture of adversarial litigation encourages, indeed almost compels, the raising of every possible issue which might achieve success. A litigant cannot keep a point in reserve to raise at a later time: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. Many of the notable cases of modern times which have changed the law fundamentally from that learned in law school days by present members of the Bench were cases in which very competent lawyers could have advised at the outset that the claim was unlikely to succeed, or even hopeless. And as Dr Johnson explained to Boswell:
An argument which does not convince yourself, may convince the Judge to whom you urge it: and if it does convince him, why then, Sir, you are wrong, and he is right.
(Boswell's Johnson, Vol 1 at 455)
There is jurisdiction in this Court to award costs on an indemnity basis: see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. One circumstance which may justify such an award is the imprudent refusal of an offer to compromise: Colgate-Palmolive at 233. As to the rejection of offers, Oliver LJ, with the concurrence of Fox LJ, said in Cutts v Head [1984] 1 Ch 290 at 306:
As a practical matter, a consciousness of a risk as to costs if reasonable offers are refused can only encourage settlement whilst, on the other hand, it is hard to imagine anything more calculated to encourage obstinacy and unreasonableness than the comfortable knowledge that a litigant can refuse with impunity whatever may be offered to him even if it is as much as or more than everything to which he is entitled in the action.
I respectfully adopt what was said by Byrne J in the Supreme Court of Victoria in Mutual Community Limited v Lorden Holdings Pty Ltd (unreported, 28 April 1993, at 12-13):
The policy of the Court is to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to serious offers of settlement.
The response of a litigant in receipt of an offer of settlement will always be affected by the prospect that the sum which the Court might order including party and party costs may be less advantageous than the terms of the offer. Experience, however, shows that this prospect alone is not always sufficient to compel a litigant to face up to the offer. The further prospect of a super-added costs penalty if a reasonable offer be not accepted is a salutary inducement to an offeree to undertake this often painful task.
2. Costs of the Applicants and the Walkers
(a) Suggested Reductions
The applicants' claim against Metzke & Allan was settled on the basis of the latter's payment of $300,000 towards the applicants' costs. That amount will need to be credited against orders for costs made in favour of the applicants; otherwise no further consideration is needed in respect of Metzke & Allan as far as the applicants and the Walkers are concerned. Richard Ellis need special consideration because some of the applicants succeeded against that respondent and some failed.
As to the remaining respondents, the applicants and the Walkers obtained against each one the relief they sought. The applicants and the Walkers failed on the Hudson Conway/Gray & Winter agency issue and the unconscionable conduct issue (including the allegation of sham). In relation to Nevett Ford the applicants only succeeded on the ratchet clause issue as a head of negligence and failed on the discrete claim alleging advice by Mr Wilson.
I do not think it profitable to embark on a detailed analysis of the 94 day hearing, hour by hour and witness by witness, in an attempt to allocate different periods of time to different issues. Apart from anything else, a great deal of evidence was relevant to more than one issue and more than one respondent and more than one applicant. Nevertheless, I think it is broadly true to say that in respect of the issues on which the applicants and the Walkers failed, most of the evidence was also relevant to issues on which they succeeded, or was evidence which would have been heard in any event. For example, theevidence as to what took place at the settlement was relevant tothe claim by the Morgans and was led and cross-examined beforethat claim was settled. Much of the dispute between the Morgans and Hudson Conway arose out of the quite inexplicable conduct of Hudson
Conway's solicitor in accepting at settlement a purported undertaking as to the signing of personal guarantees by the Morgans, an undertaking given by Mr Garrick Gray who on no rational basis could be seen to have been the Morgans' solicitor and who had an obvious conflict of interest with them. Also the dealings between Hudson Conway, Gray & Winter and Richard Ellis and the evidence as to the marketing of the property, while relevant to the unsuccessful unconscionable conduct claim, were also relevant to the issue of the 31 May letter and the question of the value of the property.
It is true that the Hudson Conway/Gray & Winter agency allegation meant that counsel for Hudson Conway had to face the possibility of their client being liable for any misrepresentation by Gray & Winter as marketers of the scheme. Since Hudson Conway's counsel were the first to cross-examine, of necessity they spent a great deal of time dealing with issues as to the making of representations, falsity, reliance etc. However that cannot properly be regarded as wasted time. At an early stage of the trial I gave a direction that, in the light of the multitude of respondents and the need to avoid time-wasting and repetitious cross-examination, I would, generally speaking, not permit more than one counsel to cross-examine on the same issue or topic. Thus the fact that senior and junior counsel for Hudson Conway cross-examined across the board as it were (and, if I may say so, very thoroughly and skilfully) meant it was not necessary for following counsel to cover the same ground - indeed they were prevented by my ruling from doing so. Had the Hudson Conway/Gray
& Winter agency allegation not been made the Hudson Conway cross-examination would still have been done by others.
To the extent that Hudson Conway spent time, money and effort on issues which ultimately became irrelevant for them because of the rejection of the Gray & Winter agency allegation, that is work which enured to the benefit of the other respondents and substantially lightened their load. Any unfairness to Hudson Conway can be substantially mitigated by orders as to contribution in respect of costs which will throw the burden back on the other respondents. The question of contribution will be considered subsequently.
As to Nevett Ford, it is I think a little simplistic to count up the number of allegations of negligence, which came to nine, and say that because the applicants only succeeded on one they should get only one-ninth of their costs against Nevett Ford. Probably the major issue between the applicants and Nevett Ford was the latter's contention that it owed no duty of care at all because its role was only that of a conveyancing sub-contractor to Gray & Winter. Nevett Ford failed on that issue. Comparatively little extra time was spent on the specific allegations of negligence which failed and on the Wilson issue.
A separate ground was argued by Hudson Conway for a reduction of costs, namely the seriousness of the allegations of unconscionable conduct against Hudson Conway. To the extent that the applicants' case included allegations of discreditable conduct against Hudson Conway which failed, I believe my rejection of such allegations is expressed sufficiently clearly to vindicate Hudson Conway. I do not however think in the circumstances of this case that there should be a costs consequence. The situation the applicants faced was not merely one of ruinous financial loss, but one of betrayal by supposedly reputable professional and commercial firms. As investigation revealed to the applicants matters like the criminal corrupt secret commissions received by their long-trusted accountants, the strange happenings at the settlement such as the acceptance of Mr Garrick Gray's purported undertaking, the part played by Richard Ellis in the 31 May letter, and Mr Gray's previous brushes with the law, the applicants and their advisers can perhaps be forgiven for putting sinister interpretation on events.
Counsel for the applicants in final submissions said some hard things about Hudson Conway personnel, but counsel for Hudson Conway did not exactly let the applicants off lightly. In particular he sternly criticised what he referred to as "formula" evidence. The necessary inference appeared to be that the applicants were, at best, stupid people who would swear to anything put in front of them or, at worst, people who had got their heads together and concocted an artificial story.
I must say I could never see why it would come as any surprise that Gray & Winter, who were marketing the one investment to different investor groups over the space of one or two weeks, would be described by investors as making virtually identical statements about the merits of the investment. And, ironically enough, when it suited Hudson Conway's case to rely on applicants' evidence of this kind - as for example evidence that Mr Garrick Gray said he was "putting together a partnership to buy the Coles Myer building" - there was no suggestion its reliability was diminished by reason of its according with a "formula".
I do not intend to be critical of counsel. As I have acknowledged elsewhere in these reasons, all counsel handled this difficult trial in a highly competent and professional manner. The point I wish to make in the present context is that our trial tradition encourages displays of rhetoric at times verging on the theatrical. Some very hurtful things are said by counsel to and about litigants. Counsel tend to give as good as they (or their clients) get. Certainly this was so in the present trial. The applicants were not responsible for the existence of this style of conducting litigation. To recover the large losses they suffered as a result of what I have held to be the wrongful conduct of the respondents, the applicants had no choice but to embark on litigation carried on in this way. It is not reasonable in my view that they should be penalised for this.
Finally, I also take into account in deciding against any reduction of the applicants' costs the fact that the root cause of this litigation was the Amadio mortgage. It should not be overlooked that Amadio brought a cross-claim to enforce this mortgage against mortgagors and guarantors. That cross-claim wholly failed and the primary claim of the applicants succeeded.
(b) Richard Ellis
The Ballarat applicants succeeded against Richard Ellis but the other applicants and the Walkers failed. Any costs increase by the participation of the Walkers on this issue would be minimal. As far as the unsuccessful applicants were concerned, they were all represented by the same solicitors and counsel and incurred the one set of costs. From the point of view of Richard Ellis, it opposed the one case and was partly successful but partly unsuccessful and, I might add, unsuccessful on an issue which amounted in substance to a finding of fraud. I think the simplest and fairest solution is to make no order as to costs on the claim of the applicants and the Walkers against Richard Ellis or in favour of Richard Ellis against the applicants or the Walkers.
(c) Indemnity Costs
The applicants urged a number of grounds for the award of costs on an indemnity basis. Most of these turned on the nature of the findings against the respondents, that is to say the finding of illegality involving a major public company (Hudson Conway) with access to the best legal advice, the finding that professional solicitors and accountants had engaged in misleading and deceptive conduct in circumstances where they had a vested interest in the investment, the negligence and breach of retainer by accountants and solicitors, the findings tantamount to fraud
on the part of Hudson Conway and Richard Ellis in relation to the 31 May letter and the receipt of secret commissions by the accountants. The general breadth and complexity of the case was also urged as separate ground.
I do not think any of these circumstances, either individually or collectively, are sufficient to justify an award on an indemnity basis.
In Colgate-Palmolive 46 FCR at 226-228, Sheppard J discusses the modern perception that the disparity between costs incurred and costs recovered is widening. His Honour notes some conflicting judicial views, including that of Rogers J in Qantas Airways Ltd v Dillingham Corporation (NSW Supreme Court, unreported, 14 May 1987) that there is a "yawning gap" between costs recovered by a successful party and the costs payable by the successful party to its own solicitors and that there is "a great deal to be said for the proposition that a successful party should always be fully indemnified for costs". A contrary view was expressed by Handley JA in Cachia v Hanes (1991) 23 NSWLR 304 at 318 to the effect that the limited indemnity provided "reflects a compromise between the interests of successful and unsuccessful litigants" and is "also an important spur to settlement". With respect, my personal preference is for the view expressed by Rogers J, but I agree with Handley JA that "if the existing rule is to be changed this must be done either by the High Court or by Parliament". This was also the view of Sheppard J (Colgate-Palmolive at 233). While not forgetting the fundamental rule that costs, including the question of indemnity costs, remains a matter of discretion in the individual case, the authorities cited by Sheppard J in his summary in Colgate-Palmolive at 233 suggest that the improper conduct of an unsuccessful party which will lead to an award of indemnity costs is usually related to the way the litigation is conducted, rather than the inherent badness of the conduct which gave rise to the litigation. This is not universally true; for example contempt of court usually attracts costs on an indemnity basis. Nevertheless, it seems to be rare that findings of serious misconduct such as fraud of itself gives rise to an order for costs on an indemnity basis.
As to the general breadth and complexity of the case, I think that the very fact that the law retains the party and party rule as the general principle means that it has been seen fit to confer some protection on unsuccessful litigants. As I say, the wisdom and justice of that law may be open to question, but plainly that is the law at the moment. Therefore it might be said that the more complex and expensive the case is, the more the unsuccessful party is entitled to claim that protection.
However the applicants relied on a separate basis, namely the non acceptance of offers which were more favourable to the respondents than the ultimate outcome. As already noted, this is a relevant circumstance for the possible grant of indemnity costs.