Finestyle accepts that it should be ordered to pay a proportionate amount of Cooperbrown's costs within a range of 15%-20%, as agreed or as assessed. Mr Katsinas pointed out that, as I had noted in the Judgment, the Plaintiff advanced five grounds to set aside the Demand; was successful on two of them; failed in its submission that a judgment based upon s 25 of the Building and Construction Industry Security of Payment Act 1999 (NSW) did not constitute a judgment debt and required verification by affidavit; sought to establish an offsetting claim, in submissions which I noted were unlikely to succeed but did not need to finally determine; and made a formal submission that Re Douglas Aerospace Pty Ltd [2015] NSWSC 167 was wrongly decided, which I rejected.
Mr Katsinas submits that the approach adopted by Cooperbrown to the proceedings caused unnecessary evidence to be led and inappropriately prolonged them and increased their costs. He submits that the two grounds on which Cooperbrown succeeded could and should have been dealt with, with little evidence, submissions or hearing time, and that the vast majority of hearing time was taken up by Cooperbrown in advancing grounds on which it ultimately failed (or, more precisely, in respect of one ground, was unlikely to succeed and was ultimately not decided). Mr Katsinas also points to the volume of Cooperbrown's affidavit evidence and submissions, which largely addressed the issues on which it did not succeed. Mr Katsinas also points out that Cooperbrown did not seek to set aside the judgment which founded the Demand in the Local Court, and had made an unsuccessful application to pay the judgment debt by instalments in that court, rather than challenging the validity of that judgment, and only raised a challenge to the validity of the judgment in this application. Mr Katsinas also points out that I had observed (Judgment [43]) that the evidence was not capable of supporting Cooperbrown's restitutionary claim; and that I had also observed (Judgment [52]) that the affidavit evidence led by the Plaintiff to support a suggested offsetting claim would arguably not have risen above the level of a "mere assertion". Mr Katsinas submits that, by reason of these matters, the issues on which Cooperbrown lost were dominant and severable, and Finestyle should be ordered to pay a proportion of its costs in the range of 15%-20%.
Bostik Australia Pty Ltd v Liddiard [2019] NSWSC 1521 | Case summary | Zoe
Mr Hume responds that Finestyle should be ordered to pay 75% of Cooperbrown's costs on an ordinary basis as agreed or as assessed. Mr Hume points out that, as is common ground, Cooperbrown was successful on two of the five grounds it advanced, was unsuccessful on two other grounds, as to one of which it had advanced only the formal submission that Re Douglas Aerospace Pty Ltd above was incorrect, and the Court ultimately did not decide whether it ought to succeed in respect of its offsetting claim (although, I interpolate, Mr Katsinas pointed above to the observations that I had made in that respect, to which I have referred above). Mr Hume also submits that there was nothing "exceptional" about this case, and that Cooperbrown advanced a number of reasons why the Demand should be set aside, and was successful on some grounds but not others. I would prefer to think that it is out of the ordinary, in a summary proceedings such as an application to set aside a creditor's statutory demand, that extensive evidence and voluminous submissions are made as to offsetting claims that are unlikely to succeed, at least where a straightforward basis for setting aside the creditor's statutory demand is available on another ground. Mr Hume also made submissions about, and I have had regard to, other aspects of the circumstances in which the Demand was issued and the hearing was conducted. Nonetheless, Mr Hume accepted that the Plaintiff was unsuccessful on two of the four grounds it had advanced and proposed a 25% reduction in the usual costs order on that basis.
I am satisfied that this is a proper matter for apportionment of costs, as Cooperbrown impliedly conceded in accepting that there should be a 25% reduction in the usual costs order in favour of Cooperbrown, and the real question is the extent of a reduction in the costs which should be awarded to Cooperbrown. A question of that kind is necessarily a matter of impression and not of mathematical certainty. It seems to me that the reduction which Cooperbrown concedes is too little, and the reduction proposed by Finestyle is too large, having regard to the extent of evidence that was led and time that was spent on issues as to which Cooperbrown was unsuccessful or was likely to have been unsuccessful, had it been necessary to decide the question.
Having regard to the parties' respective successes, and the extent of time spent on issues on which Cooperbrown did not succeed, the proper course, to do justice between the parties, is to order that the Defendant pay one-half of the Plaintiff's costs of the proceedings, as agreed or as assessed. For completeness, Mr Hume also addressed a brief submission to whether a lump sum costs order should be made. Finestyle did not seek such a costs order in its submissions and I need not address that matter.
Accordingly, I make the following order as to costs:
The Defendant pay 50% of the Plaintiff's costs of the proceedings, as agreed or as assessed.
[2]
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Decision last updated: 06 November 2019
By my judgment delivered on 4 October 2019 ([2019] NSWSC 1341) ("Judgment"), I ordered that a creditor's statutory demand ("Demand") served by the Defendant, Finestyle Kitchens Pty Ltd ("Finestyle"), on 12 April 2019 on the Plaintiff, Cooperbrown Pty Ltd ("Cooperbrown"), be set aside. I noted, at paragraph 6 of the Judgment, that:
"Cooperbrown relied on five grounds to set aside the Demand, supported by voluminous affidavit evidence, and elaborated by written submissions of some 27 pages and by oral submissions. As will emerge below, two of those grounds were straightforward, and could have been addressed with limited affidavit evidence and short written and oral submissions. Two of those grounds would have failed, and the third occupied a substantial amount of hearing time and would likely also have failed, although it is strictly not necessary to determine it. … "
In paragraph 54 of the Judgment, I also observed that the Demand should be set aside and that:
"… My preliminary view is that this will be a proper case to order that Finestyle pay a proportion of Cooperbrown's costs of the application to set aside the Demand, where two of the arguments Cooperbrown advanced would likely have failed, and a third involved voluminous evidence and took up substantial hearing time and would arguably also have failed: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Re Employ (No 96) Pty Ltd (in liq) [2013] NSWSC 456 at [8]; Correa v Whittingham (No 2) [2013] NSWCA 471 at [35]. However, I will hear the parties as to the costs orders to be made in respect of the application."
I subsequently made orders, inter alia, that the parties submit agreed orders as to costs within 7 days or, if there was no agreement as to costs, their respective draft minutes of order and short submissions as to the differences between them. The parties did not reach agreement as to costs and each made written submissions as to costs. I extended the time for Cooperbrown to do so, where Finestyle did not oppose that course.
The applicable principles
Mr Katsinas, who appears for Finestyle, submits, uncontroversially, that the Court has power to deal with costs under s 98 of the Civil Procedure Act 2005(NSW) and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). Mr Katsinas referred to Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64] and to Correa v Whittingham (No 2) [2013] NSWCA 471 as authority for the proposition that the Court may deprive a successful party of part of its costs, relating to an issue on which the unsuccessful party lost, when that issue was clearly dominant or separable.
Mr Katsinas also referred to the observation in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] that:
"The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:
● 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: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).
● In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.
● If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].
● Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).
● A separable issue 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: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].
● Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279."
Mr Katsinas also referred to my observation in Re Employ (No 96) Pty Ltd (in liq) [2013] NSWSC 456 at [8] that:
"… the Court may limit the costs awarded to a party, or not award costs to that party, if its conduct has obscured the issues, caused unnecessary evidence to be led and inappropriately prolonged proceedings and increased their cost".
Mr Hume, who appears for Cooperbrown, also points to the principle that a successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation: Northern Territory of Australia v Sangare [2019] HCA 25 at [25]. That principle does not, of course, imply that a successful party should be entitled to all of its costs of proceedings, without regard to the manner in which they were conducted or the nature of the issues on which it was successful and the issues on which it was unsuccessful. Mr Hume submits that apportionment of the costs is not the norm and that, unless a particular issue or group of issues is clearly dominant or separable, it would ordinarily be appropriate to award the successful party its costs without attempting to differentiate between issues on which it was successful and those on which it was not: Jones v Trad (No 3) [2013] NSWCA 463 at [18]; Real Estate Property Management Pty Ltd v WaterCorp Investments Pty Ltd [2018] NSWCA 194 at [31].
I also have regard to the decision in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 at [6]-[7], where the Court of Appeal noted that:
"Section 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs. Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the general rule is that the Court is to order that costs follow the event. The "event" may be characterised in more than one way. Generally the "event" refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] per Ward, Emmett and Gleeson JJA. Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22."
The Court of Appeal then quoted the passage in Bostik Australia Pty Ltd v Liddiard (No 2) above which I have set out in paragraph 5 above.
In Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [9], McColl JA (with whom Macfarlan JA agreed) observed that:
"Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs." [footnote omitted]
In Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 2) [2019] NSWCA 19 at [5], the Court of Appeal noted that:
"There is no issue as to the relevant principles. The discretion under Civil Procedure Act 2005 (NSW), s 98 is ordinarily exercised by requiring that "costs follow the event": Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. This default position was historically understood to mean (so as to preserve the practice, where any issue was tried with a jury, that those costs followed the outcome of that event) "that the costs of the several issues went to the party who succeeded on them respectively, while the general costs went to him who on the whole succeeded on the action" … But more recent authority favours the award of the costs of proceedings to the party successful overall without any differentiation as to issues, at least "unless a particular issue or group of issues is clearly dominant or separable" … And the costs arising from such issues have more readily been apportioned where the party successful overall is the plaintiff ..." [citations omitted]