HIS HONOUR: By judgment delivered on 4 July 2019 I directed the parties to supply short minutes of order resolving the proceedings consistently with the reasons given that day following a trial on 24, 25 and 26 June 2019: Broughton v Leslie [2019] NSWSC 827. In the time period provided by those orders, the parties constructively provided short minutes of order resolving all aspects of this litigation save for costs, and substantive orders to that effect have been made.
The parties have today supplied oral and written submissions in support of costs. As noted during the hearing, the exercise of the discretion in this case is not without difficulty. The difficulties stem in part from the facts as summarised in [127]-[129] of the main judgment, namely, that the plaintiffs have succeeded in obtaining declaratory relief in relation to the water rights, but have failed in relation to their fallback submission relating to resignation and reallocation. The matter was further complicated by the fact that, shortly before the hearing, the plaintiffs indicated that they did not press a claim based on rectification in equity and estoppel, which led to their not reading a number of affidavits and not tendering a large portion of the court book, as indicated in [4] of the judgment.
The plaintiffs submit that costs should follow the event. They say the event is the declaratory relief relating to water rights which they obtained, and they should obtain the benefit of an order that the first and fifth defendants pay the whole of their costs.
Realistically, Mr Pritchard SC who, with Mr Notley, appeared for the plaintiffs, accepted by way of fallback that some lesser proportion of the plaintiffs' costs should be ordered. The primary fallback submission was that I should make a proportionate costs order reflecting as fairly as might be the plaintiffs' success on the point of contractual construction and their absence of success on their fallback claim for resignation and reallocation. They suggested that they should have 80% of their costs.
It was put that, because the claim for equitable rectification and estoppel was "defensive", the fact that it was not pressed should not significantly bear upon the exercise of costs discretion. It was also put, by reference to McHugh J's decision in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, that I should not embark upon an assessment of the strengths or weaknesses of that claim.
Throughout the hearing today, I observed that, in the absence of evidence about the actual costs incurred, although I did not doubt that they were substantial on both sides, it would be difficult to exercise even a broadbrush proportionate discretion in accordance with what was said in Doppstadt Australia Pty Ltd v Lovick & Sons Pty Ltd (No 2) [2014] NSWCA 219 at [15].
The representative defendants, for whom Mr Gyles SC and Mr Barnett appear, say that an exercise of the discretion as to costs by issues is appropriate. They proposed alternative formulations, one based by reference to paragraphs of the pleadings, the second by reference to issues described as (a) the contractual construction case on the question of water entitlements, (b) the rectification/estoppel case, and (c) the resignation/reallocation case.
There is ordinarily much to be said in favour of a proportionate order of costs, for example an order that the defendants pay 80% of the plaintiffs' costs, where as here there has been a measure of success on both sides. The premise of litigation going to trial is that the parties have been unable to resolve their differences, and the more traditional approach of exercising a costs discretion by reference to issues in cases where there has been success on both sides leads inevitably to the possibility that not merely one party's but both parties' costs become the subject of contested assessments. However, there are cases where that possibility is the lesser of two evils.
It can be very difficult from the position of a trial judge to express a meaningful view and therefore fairly to exercise a discretion as to costs in relation to the relative magnitude of the costs expended on issues that were litigated compared to the costs expended on issues that were not litigated. One may be able, in a rough way, to form a view about the relativities of costs of issues that were litigated. However, when, as here, large volumes of the court book were returned to the parties with the abandonment of the plaintiffs' equitable rectification and estoppel case, it is, in my view, too difficult fairly to estimate the relative contribution of those costs to the parties' overall costs in order to, even in a broadbrush way, identify a percentage appropriate to the parties' success.
That said, the disadvantages - within which I include delay and further disputation and the incurring of costs of having both sides legal costs the subject of assessment - may not be so great as indicated, because doing the best I can I am of the view that the categories of costs associated with the plaintiffs' equitable rectification and estoppel case and the plaintiffs' resignation and re-allocation case are likely to be relatively discrete, at least in large measure.
I do not accept the plaintiffs' submission that because the rectification and estoppel case was "defensive" no or only limited account should be had to the defendants' incurring costs responding to that case, which ultimately was not pressed. The choice was that of the plaintiffs: either to run the narrow contractual construction (including contractual rectification) with which their pleading commenced or to expand it, necessarily thereby increasing both sides' costs to non-contractual relief in equity based on rectification or estoppel. It was also their choice not to litigate the expanded equitable case at trial. The consequence of those choices, it seems to me, is that in a relatively discrete but probably significantly expensive component of litigation, the defendants have been put to responding to a case which ultimately was abandoned. I think a fair exercise of the discretion as to costs should acknowledge this with the consequence that the plaintiffs should pay that component of the defendants' costs, namely responding to the equitable rectification and estoppel case which ultimately was not pressed by them. I also think that it would be wrong for the plaintiffs' success on the issues that were litigated to extend, in the formulation of a costs order to their costs of preparing their own equitable rectification and estoppel case which ultimately was not pressed.
Those reasons lead me to adopt in general terms an alternative formulation of the exercise of the cost discretion proposed by the defendants, rather than in a broad brush way to award the plaintiffs a proportion of their costs. To reiterate, a proportionate order such as was at the forefront of Mr Pritchard's submissions, would have the difficulty of not fairly accommodating the defendants' entitlement to a discrete and in all probability relatively large component of their costs in responding to a case which the plaintiffs after originally commencing proceedings chose to advance but ultimately chose not to press.
I have considered whether, putting to one side the particular costs associated with the defendants responding to the equitable rectification and estoppel case, nonetheless in relation to the balance of the plaintiffs' costs a broad brush percentage costs order should be ordered. That has something to be said for it, but in circumstances where I form the view that it is appropriate to make an order of the defendants responding to the plaintiffs' equitable rectification and estoppel case, the advantage ordinarily achieved by a proportional costs order, namely, simplicity and the need for only one bill of costs if there be contest to go to assessment, would not be achieved in any event. Accordingly, rather than identifying by way of percentage an exercise of discretion to fairly reflect the fact that the plaintiffs succeeded on what they regarded as and what I regard as the main issue in this litigation but also that the defendants succeeded on the "resignation/re-allocation" case, I think it is better to exercise the discretion of the costs wholly as to issues.
The formulation propounded by the defendants by reference to named issues, rather than paragraphs in the pleadings, itself perhaps carries some capacity for disputation which is to be avoided if at all possible. I understood both sides to agree that one way of reducing the capacity for dispute would be to make it plain that the obligation of the defendants to pay the plaintiffs' costs on water entitlements did not extend to the plaintiffs' costs relating to the rectification/estoppel case or the resignation/reallocation case on which they failed, and I will put in that qualification in order to seek to minimise the complexities that arise on these orders. With that qualification, the order I propose to make reflects order 3 as proposed by the defendants.
It was conceded during argument that proposed order 4, which was expressed in terms of the first cross-claim, went no further than order 3(c) and it is common ground that proposed order 5, which is confirmatory of the existing cost orders, was not needed. There was some mention of an application for gross sum costs order. Nothing that I do today can prevent either party, but only within the time specified by UCPR Rule 36.16, from applying for any such order.
[Discussion as to form of orders]
Accordingly I make the following orders.
1. The first and fifth defendants pay the plaintiffs' costs of and incidental to the plaintiffs' contractual construction case on the question of water entitlements, such costs not including the plaintiffs' costs of their equitable rectification/estoppel case nor the costs of the plaintiffs' resignation/reallocation case.
2. The plaintiffs pay the first and fifth defendants' costs of and incidental to the plaintiffs' rectification/estoppel case, not including the first and fifth defendants' costs of the contractual construction case on the question of water entitlements.
3. The plaintiffs pay the first and fifth defendants' costs of and incidental to the plaintiffs' resignation/reallocation case, not including the first and fifth defendants' costs of the contractual construction case on the question of water entitlements.
[Discussion as to costs]
I am grateful for the practical and realistic acceptance by both counsel that each has enjoyed a measure of success in the application for costs. Accordingly, I propose to make no order as to the costs of the application for costs heard and determined today with the intention that the parties bear their own costs of that application.
[2]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 02 August 2019