Bostik Australia Pty Ltd v Liddiard

Costs

1. There is a dispute between the parties as to costs. I should first address the applicable case law. The Court has discretion to determine by whom, to whom and to what extent costs are to be paid, and costs will ordinarily 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, in accordance with r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). The onus is on the losing party to establish the basis for a departure from the usual costs rule in UCPR r 42.1: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10]. Here, Mr Wellington is the winning party in his derivative claims and the losing party in his misleading and deceptive conduct claims and Mr Hutchison is in the converse position.
2. Mr Bell refers to Commonwealth of Australia v Gretton [2008] NSWCA 117, where Hodgson JA (with whom Mason P agreed) observed (at [121]) that: "In my opinion, underlying both the general rule that costs follow the event, and the 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. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled … Departures from the general rule that costs follow the event are broadly based on a similar approach." (citations omitted)
3. Mr Bell also refers to Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98], where that observation was cited, with apparent approval, by the Court of Appeal, and to my reference to those decisions in Warburton v County Construction (NSW) Pty Ltd (No 3) [2022] NSWSC 1563 at [12]-[13].
4. Mr Bulley refers to Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 ("Bostik") at [38], where the Court of Appeal noted that, in relation to trials, it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party did not succeed took up a significant part of the trial, either by way of evidence or argument. I also addressed the circumstances in which costs could reflect a mixed result of proceedings in Re Metal Storm Ltd (subject to deed of company arrangement) [2014] NSWSC 1170 at [47] as follows: "In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], the Court of Appeal noted that, 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. However, the Court also pointed to several circumstances in which a different approach might be justified, and noted (at [38]) that: "Whether an order contrary to the general rule of 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." Similarly, in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [28]-[31], in a passage recently approved by McDougall J in The Owners - Strata Plan 61162 v Lipman [2014] NSWSC 622 at [241], Hammerschlag J referred to the general rule and to cases where its application may be displaced. In particular, the Court may deprive a successful party of the costs relating to an issue on which it lost when that issue is clearly dominant or separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64]; Doppstadt Australia Pty Ltd v Lovick & Son Development Pty Ltd (No 2) [2014] NSWCA 219 at [17]. Where there has been a mixed outcome in proceedings, and costs should be apportioned as between different issues, the Court will generally take a relatively broad brush approach, largely as a matter of impression and evaluation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22."
5. In Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 at [6]-[7], the Court of Appeal in turn 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 relevant principles for the determination of costs on an issue-by-issue basis were stated in [Bostik] at [38] per Beazley, Ipp and Basten JJA: "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 Ltd (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.""
6. 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]
7. Mr Wellington seeks an order that Mr Hutchison pay his costs of the proceedings, on an indemnity basis or, alternatively, on a party/party basis up until 21 December 2022, excluding costs incurred up to that date with respect to the relief concerning misleading and deceptive conduct, and on an indemnity basis after that. Mr Bulley points out that Mr Wellington brought the proceedings in two separate capacities, in a representative capacity on behalf of the Company in respect of the Company's property, as to which he was substantially successful, and his personal claim for misleading and deceptive conduct as to which he was not successful. Mr Bulley submits that the decision in Bostik is authority that the Court generally does not attempt to differentiate between those 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, and that the question of apportionment of costs is a matter of discretion. I should not make the order as to costs sought by Mr Wellington where he has failed in his misleading and deceptive conduct claim and that claim was substantial and separable, so that Mr Wellington should pay Mr Hutchison's costs of that claim.
8. Mr Bell submits that the pleadings for misleading and deceptive conduct comprise the majority of the allegations of the Statement of Claim and the Amended Statement of Claim, but it seems to me that little is to be gained by counting paragraphs of the pleadings, which provide no basis to assess the time spent on particular issues at a hearing. He submits, and I recognise, that Mr Wellington was unsuccessful in the misleading and deceptive conduct claim. He also submits that Mr Wellington was unsuccessful in aspects of the relief which he sought in respect of the derivative claim brought on the Company's behalf. Little turns on that where Mr Wellington was substantially successful in that claim and, in particular, established the Company's ownership of Property relating to the Aircraft from its incorporation and its entitlement to an irrevocable licence to that Property that came into existence prior to that date. Mr Bell also submits that Mr Hutchison only formed the view that he was the owner of that Property when the Company sought an assignment of that Property from him. I addressed that matter in the Principal Judgment, but nothing turns on it for the purposes of the costs of the proceedings, which should be determined by reference to the conduct and outcome of the proceedings.
9. Mr Hutchison seeks an order that there be no order as to the costs of the proceedings. Mr Bell in turn refers to several matters as to costs, to which I have had regard, and submits that I found that the proceedings had led to a mixed result and then submits that an appropriate order would be for each party to pay their own costs. This approach implicitly sets off the costs of Mr Wellington's successful derivative claim, which in the ordinary course Mr Hutchison would pay, and Mr Wellington's unsuccessful claim for misleading and deceptive conduct, which in the ordinary course Mr Wellington would pay. I am not persuaded that such a set-off is appropriate, where there is no reason to assume that those costs are identical or substantially identical in quantum, and it is not necessary to determine whether a set-off would also not be available by reason of any lack of mutuality.
10. Where the parties have not agreed the basis for any set-off of costs between the claim brought on the Company's behalf in the derivative proceedings and the misleading and deceptive conduct claim brought by Mr Wellington in his own right, and neither have established the basis of the respective costs orders for which they contend, the proper order is that Mr Wellington pay Mr Hutchison's costs of and incidental to the misleading and deceptive conduct claim, as agreed or as assessed, and Mr Hutchison pay Mr Wellington's (in his capacity as director of the Company) costs of and incidental to the balance of the proceedings, as agreed or as assessed. No doubt, further costs will be incurred in an assessment, including in any attempt to differentiate the costs of the respective parts of the proceedings. That unfortunate result can be avoided by the parties, if they choose to adopt a more constructive approach to resolution of this issue between themselves.
11. As I noted above, Mr Wellington also seeks costs on an indemnity basis, invoking the principles of Calderbank v Calderbank [1975] 3 All ER 333. The applicable principles were summarised by Ward J (as the President then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[15] and I summarised them in Re Alsafe Security Products Pty Ltd atf Alsafe Trust (in liq) [2016] NSWSC 575 at [8], as follows: "[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]-[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16]. In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that: 'If a Calderbank offer is made, but not accepted, the court's discretion to make a special order is enlivened. The court's discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]-[8].'" I also recognise that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Ofria v Cameron (No 2) [2008] NSWCA 242 at [20].
12. Mr Wellington relies on two letters forwarded to Mr Hutchison, the first on 23 June 2022, several months before the commencement of the proceedings, and the second on 21 December 2022 after the making of interlocutory orders and service of Mr Wellington's Statement of Claim and affidavits on which he relied on Mr Hutchison. Mr Wellington there sought to resolve the dispute with Mr Hutchison on the basis that there be a clear acknowledgement on the part of Mr Hutchison that the intellectual property relating to the Aircraft belonged to the Company and that that intellectual property and all related property be returned to the Company. Mr Bell submits that the 23 June letter was sent prior to the commencement of the proceedings, and seeks to contrast it with the position taken by the majority of the board members in a December 2021 board meeting which I addressed in the Principal Judgment. It is not necessary to address that submission in order to determine the question of costs. Mr Bell also submits that it was reasonable for Mr Hutchison to reject the demands made in this letter.
13. I cannot conclude that it was unreasonable for Mr Hutchison not to accept the position put in this letter, where the evidence led in the proceedings has established that at least some design drawings had been done prior to the incorporation of the Company and the Company's right to them is not a right of ownership, but an entitlement to an irrevocable licence to use those drawings. An order for costs on an indemnity basis should not be made for that reason.
14. Mr Bell points out that the letter dated 20 December 2022 makes allegations of misleading conduct, which Mr Wellington has failed to establish in these proceedings, and also refers to the nature of the proposal put in that letter. Again, Mr Bell submits that it was reasonable for Mr Hutchison to reject that offer, and that Mr Wellington has not attained a more favourable result at the hearing. I cannot conclude that it was unreasonable for Mr Hutchison not to accept the position in that letter for both those reasons, and it also does not support an order for indemnity costs against Mr Hutchison.

Orders

1. I therefore make the following orders:
2. Order that the Second Defendant be permanently restrained from accessing, downloading, transferring, interfering with, disclosing, disseminating, altering, removing, deleting, copying, using, or commercially exploiting the Property (as defined below) other than in his role as a director and for the purposes of Carbon Copies Composites Pty Ltd ("Carbon Copies").
3. Declare that: a. the Property, in so far as it was created on or after 17 December 2018, was and is the Property of Carbon Copies. b. in so far as the Property was created prior to the incorporation of the Company on 17 December 2018, Carbon Copies is entitled to an irrevocable licence for the use of the said Property to the exclusion of the Second Defendant.
4. With respect to undertakings given in the proceedings: a. The First Plaintiff is released and discharged from the undertaking as to damages provided by Order No. 1 dated 9 November 2022. b. The First Plaintiff is released and discharged from the undertaking as to damages and the indemnity from adverse costs orders as provided by Order No. 1 dated 2 December 2022, as recorded in paragraph 175 of the Affidavit of Vaughan Stanley Wellington affirmed 27 October 2022, paragraphs 11 and 14 of the Affidavit of Vaughan Stanley Wellington affirmed 30 November 2022 and paragraph 5 of the Affidavit of James Geoffrey Welch sworn 1 December 2022. c. The undertakings given by Trading Consultants Pty Ltd in paragraphs 7 and 9 of the Resolutions passed on 30 November 2022 be discharged. d. The First Defendant is discharged from the undertaking as to the Property provided by Order No. 1(a) dated 2 December 2022.
5. Order that the amount of $100,000 which the First Plaintiff deposited with his solicitors, Access Law Group, as security for an adverse costs order against the First Plaintiff be released.
6. The Second Plaintiff pay the Second Defendant's costs of and incidental to the misleading and deceptive conduct claim as agreed or as assessed.
7. The Second Defendant pay the First Plaintiff's costs of and incidental to the balance of the proceedings as agreed or as assessed.
8. In these orders "Property" means, in relation to the E75 Electron aircraft ("the Aircraft"), the following: a. all designs, plans, drawings, specifications, codes, programs, software, assembly instructions, or hardware (whether in hard copy or in electronic form) for the Aircraft; b. all designs, plans, drawings, specifications, codes, programs, software, assembly instructions, or hardware (whether in hard copy or in electronic form) for any component or part of the Aircraft; c. all designs, plans, drawings, specifications, codes, programs, software, assembly instructions, or hardware (whether in hard copy or in electronic form) that relate to or concern the Aircraft; d. all parts or components, either fully or partially completed, for the Aircraft; e. all patterns, plugs, moulds or parts of patterns, plugs, moulds or parts used in the manufacture of the Aircraft or any part or component of the Aircraft; f. all batteries or other technology for the Aircraft; g. all engines or motors for the Aircraft; h. all computer programmes (whether by way of CAD files or otherwise) used in the design and/or manufacture of the Aircraft and/or any component of the Aircraft, but reserving liberty to apply to the Second Defendant, excluding third party software for design programs that were owned by the Second Defendant and were of general application rather than developed for the Aircraft.

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