His Honour sounded what he described as 'a note of cautious disapproval' of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial. His Honour commented:
'But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues .'" (My emphasis)
104 Mr Jacobs noted that in Jennings v Zihali-Kiss and MK Tremaine & Co Pty Limited (1972) 2 SASR 493, Bray CJ allowed a successful defendant a portion only of its costs on the basis that in such a case it was proper to split the costs having regard to the success of the parties on various issues of disputed questions of fact and law.
105 Mr Jacobs submitted that issues in relation to the alleged crime (on which the Dr Monks lost) had occupied a considerable amount of time. He analysed, in paragraph 4 of his submissions, the transcript in order to estimate the extent of the time occupied by evidence which, he said, went to the illegality/crime issue. In total, he estimated that 304 pages of the 453 pages of transcript (approximately two-thirds) of the transcript and the hearing went to issues on which Dr Monks lost, to which he said there would need to be added preparation time, affidavit evidence and written opening addresses plus the cost of pleadings and particulars in relation to that issue. (Mr Faulkner takes issue with this estimate and submits that the time devoted to this as a separate issue was only in relation to submissions.)
106 It is said that because I held that Dr Monks did not establish a bona fide and reasonably tenable charge of crime she could not have had a bona fide or reasonable belief that an offence had been committed; that this allegation had been commenced and persisted in until the bitter end; and that Mr and Mrs Brand should not have had this serious allegation hanging over their heads for the duration of the litigation. It was suggested that Dr Monks had "stooped to scraping the bottom of the legislative barrel" in order to find a crime.
107 I do not accept that Dr Monks did not hold a bona fide or reasonable belief that the clearing activities of Mr Brand amounting to an offence and certainly did not mean to suggest otherwise. The reasonableness of such a belief is supported by the fact that, with the benefit of legal advice, Gosford City Council took the serious step of instituting proceedings to prosecute Mr Brand. I can only assume that this was not a decision any Council would lightly take in the proper exercise of its powers and functions. Lest there remain any doubt as to my view in relation to this issue, I note that I accept that Dr Monks had a bona fide view that a serious environmental offence was occurring and that she had a duty in the public interest to seek to have it stopped. What I did not and do not accept, after engaging in the rather tortuous analysis of the environmental planning legislation and instrument in order to answer this question, was that a reasonably tenable charge of crime had been established. On that basis, the composite test of there being established a prima facie case of both a bona fide and reasonably tenable charge of crime was not satisfied.
108 However, as Mr Faulkner pointed out, the legislation in question was complex. Submissions on the legislation from both parties were detailed. Mr Jacobs was assisted in his oral submissions on this point by one of his Junior Counsel (Mr Bambagiotti). I did not find this a point on which there was an immediately apparent or easy answer. Having regard to the caution sounded in the cases on costs which I have extracted above, I do not consider that a defendant, who has a bona fide belief that there has been an offence of the kind pleaded (whether or not being cognisant of the particular legislative framework within which such an offence would have to be established) which, if correct, would have provided an answer to the allegations pleaded against her, should be dissuaded from raising in her defence such an issue by the risk of an adverse costs order.
109 Further, it is by no means easy to describe this as a separate part of the costs incurred in the proceedings. I accept that most of the witnesses called by the defence would (for the reasons adverted to by Mr Faulkner) have been called by the defence to meet the contract case pleaded against the defendant even had the issue of illegality not been raised. Mr Faulkner submitted that if there were to be any reduction in relation to this aspect of the matter (and he submits there should not be) should be of a minor amount (in the order of no more than 5%).
110 I am of the view that there should be no departure from the usual costs order for the reason that it does not appear to me that the allegations of public interest defence were ones in which Dr Monks improperly persisted. There was a reasonable argument in that regard and it was one which Dr Monks might well have considered had reasonable prospects of success. It must be remembered that this was an alternative to the principal defence (on which Dr Monks succeeded), which was that there was no breach of contract in the first place. While attention was drawn by Mr Jacobs to the difficulty Dr Monks had in articulating the offence which it was said had been committed, the same is true of the Brands' difficulty in articulating precisely what was the confidential information said to have been disclosed by Dr Monks in breach of contract (uncertainty as to which persisted well through the hearing and even after the closing submissions had been completed - as outlined in my December judgment). The relevance of this is that I cannot be satisfied that, had the illegality defence not been raised, the evidence (and the time the trial occupied) would have been significantly reduced.
111 Mr Faulkner relies on the usual rule that costs should follow the event. He emphasises that Dr Monks has been wholly successful in defending the proceedings. He submits that there has been no disentitling conduct on Dr Monks' part and that it was reasonable for her to raise the defence of illegality in the circumstances of the case. I agree. I also take into account the fact that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances: Trade Practices Commission v Nicholas Enterprises Pty Limited (No 3) (1979) 42 FLR 213. As noted above, it has been said that a court should be mindful not to discourage litigants from canvassing all material issues for fear of an adverse costs order. Reliance was placed by Mr Faulkner on Stena Rederi Aktiblag v Austal Ships Sales Pty Limited [2006] FCA 1141 and Cretazzo v Lombardi (1975) 13 SASR 4 at 12.
112 Ultimately, the claim for breach of contract failed for reasons not associated with the public interest defence but it seems to me that it was not unreasonable of Dr Monks to pursue that defence.
113 I have considered whether there should be a reduction in the costs ordered in Dr Monks' favour to reflect the fact that, when the proceedings commenced, Dr Monks did not press that part of her defence which related to the tree preservation orders. Mr Jacobs submits that the abandonment of the defences raised in paragraphs 12 (b)(i)(A) and (B) and 17(a)(i)(ii) of the Defence (concerning an alleged requirement of the Tree Preservation Order) should carry with it an appropriate order in regard to costs.
114 The concession by the defence in this regard was expressly put on the basis that Mr Jacobs accepted that the matter would be run on the case as pleaded. As I understood the submissions later put by Mr Faulkner, the significance of that concession related in part to the argument that, in order to maintain any damages for breach of the contractual obligation of confidence (assuming that were to be made out in the case) it would be necessary for Mr Brand to rely upon the extent of the clearing activities he had carried out (which it was said was inconsistent with a denial that there had been any such activities). I adverted to this argument in paragraph 149 of my December judgment, in a different context.
115 It seems to me that the evidence in relation to what clearing activities were undertaken (and whether they involved the clearance of trees or, as ultimately contended, native vegetation and weeds) would have been broadly the same whether or not the aspects of the illegality defence which was were not pressed at the hearing had been raised in the first instance, not least because until the hearing it appeared that what the plaintiffs were contending was that it was the disclosure of the fact of the clearing activities which amounted to the breach of confidence - hence the issue as to whether that was information in the public domain. There was no relevant departure from the defendant's case as to what had happened on the land. How it was properly characterised for the purposes of the Land and Environment Court legislation, does not seem to me likely to have added to the costs in any significant way and these allegations were withdrawn on the basis of a concession that, had it not been made, it might have required evidence in relation to the tree clearing still to have been adduced.
116 Mr Faulkner further submitted that Mr Jacobs' analysis of the time spent on the illegality issue was not correct in that it did not take into account that the various witnesses called by the defence (other than perhaps Mr Scorgie) were needed in order to establish precisely and entirely all of Mr Brand's activities, in circumstances where the defendant's legal representatives had thought the scope of the information was the extent and nature of clearing the land, which required evidence of that kind to be adduced.
117 In the circumstances, where there would have been a need to ascertain the scope of any restrictions placed on Mr Brand's land clearing activities by reference to the environmental planning legislation and the approvals obtained in relation to the land, whether or not the offence pleaded was that relating to the tree preservation order or, as ultimately pleaded, the mechanical clearing of native vegetation and weeds, I am not satisfied that there should be any reduction in costs to reflect the forensic decision apparently made at the commencement of the hearing not to press certain aspects of the illegality defence.
118 Accordingly, I am not satisfied that there should be a departure from the usual costs order. The next question is the basis on which those costs should be ordered.
Indemnity costs?
119 Dr Monks seeks costs on an indemnity basis relying upon a Calderbank letter which sent on 21 December 2007. That offer was to compromise the proceedings by way of a verdict for the defendant and for the plaintiffs to pay her the sum of $15,000 on account of the defendant's costs incurred as at that date. The letter asserted that the defendant's costs as at that date on a party/party basis were approximately $20,000. Needless to say, given the present application, that offer was not accepted by the Brands.
120 The solicitor with carriage of the matter for Dr Monks, Ms Golovanoff, has affirmed an affidavit on 2 February 2010 in which she states that as at 21 December 2007 costs totalling $49,324.50 had been incurred in respect of the conduct of the defence in these proceedings. Following objection from Mr Jacobs, I read that portion of the affidavit simply as evidence of the charges that had been levied by Ms Golovanoff's firm. Of those charges, approximately $7,300 were fees described as incurred by Conditsis. There was no evidence as to who Conditsis is or are. Even discounting that amount, the costs that Ms Golovanoff says were charged as at 21 December 2007 in respect of Kennedys' charges and counsel's fees amounted to roughly $42,000. (The costs will no doubt have substantially increased since then by reference to the length of the hearing at the very least.)
121 Ms Golovanoff has estimated that approximately $10,000 of the costs as at December 2007 were unrecoverable solicitor/client costs. The basis on which that estimate was made was not set out in her affidavit and I do not consider that I can attribute any weight to it for that reason. However, I do consider that I can infer that the costs were regularly incurred in relation to the conduct of the litigation, particularly as there was no cross-examination of Ms Golovanoff who I observed was in court during the course of the recent application. Even assuming that there were to be, say, somewhere in the order of a 50% reduction in the solicitor/client costs in arriving at the recoverable party/party costs, the offer to accept $15,000 would represent a compromise (albeit a small compromise) in that regard. I do not accept that this offer should be treated as a total capitulation, since it necessarily involved Dr Monks bearing a not insignificant amount of legal costs herself, for proceedings in which she has now been wholly successful in the result, particularly when the offer was made at an early stage of the proceedings and it might be assumed that both parties' costs would be relatively low.
122 What the letter of compromise asserted was that the defendant was prepared to accept a $10,000 discount on what she was advised were her party/party costs in order to resolve the proceedings at that stage. There is no suggestion that the plaintiffs were unable to give proper consideration to that offer due to insufficient information as to how the costs were comprised or as to how the assessment was formed as to what component represented party/party costs. Rather, the plaintiffs tendered on this application an affidavit from Mr Fitzgibbon, Junior Counsel who has acted in these proceedings since the outset, which affidavit was sworn on 9 February 2010, deposing to the advice he had given to reject the offer and which he said had been confirmed by Senior Counsel then briefed in the matter, together with an affidavit sworn by Mr Brand on 9 February 2010, deposing to his acceptance of Counsel's advice in that regard.
123 Broadly speaking, Counsel advised that the offer should be rejected for reasons solely connected to the second of the grounds raised in the letter as to why the information was not confidential (namely that there was no confidence in an iniquity). The first reason adverted to in the letter (that local residents had complained to Council in relation to the plaintiffs' activities prior to the letter having been sent), was a matter going to whether the information was in the public domain. It would appear from the evidence of Mr Fitzgibbon that no consideration was given as to the reasonableness of the offer in light of the assertion that the information was not confidential or was in the public domain.
124 In Commonwealth of Australia v Gretton [2008] NSWCA 117, it was said:
41 There are public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made. In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA said at [14]:
"… the practice of Calderbank letters is allowed because it is thought to facilitate the public policy objective of providing an incentive for the disputants to end their litigation as soon as possible. Furthermore, however, it can be seen as also influenced by the related public policy of discouraging wasteful and unreasonable behaviour by litigants."