CB Australia Ltd v Shepherd

Costs

1. The parties disagree on the appropriate costs order. CB argued that, overall, it had succeeded in the proceedings, and Mr Shepherd should be ordered to pay its costs of the proceedings (including the cross-claim). Alternatively, CB contended that the Court should make an order for costs in its favour in the order of 90 per cent of the costs of the proceedings.
2. It was argued for Mr Shepherd that each party has been equally successful: CB on its claim and Mr Shepherd on his cross-claim. Counsel for Mr Shepherd argued that there should be no order as to costs; or, alternatively, that if an order for costs were to be made against Mr Shepherd, it should not be greater than 25 per cent of the costs of the proceedings (again, taken as a whole).
3. Counsel for CB's argument started with the Uniform Civil Procedure Rules 2005, r 42.1, which provides that costs 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. Counsel submitted that the outcome of these proceedings should be seen as a single "event" representing the "final flow of money" between CB on the one hand and Mr Shepherd and LS Bell on the other. On this analysis, so it was submitted, CB had achieved overall success in that it recovered a substantial amount of money (albeit only approximately half of the amount it claimed) from Mr Shepherd.
4. Counsel acknowledged that the Court has power even where a single "event" is involved to make orders reflecting the parties' success on an issue-by-issue basis, but stressed the authorities which show that the Court should exercise restraint in identifying individual issues for this purpose. These authorities may be summarised in the language of Ritchie's Uniform Civil Procedure [42.1.15] as establishing that, in general, the Court will not make orders based on separate issues unless the issues on which the otherwise successful party failed were "clearly separable from the matters on which the parties succeeded". As I understood counsel's submission he contended that the cross-claim should not be characterised as a separate issue for these purposes; or, to the extent that it was a separate issue, it was a very minor one.
5. Counsel for the defendant characterised the outcome of the proceedings in terms of equitable set-off. On counsel's argument Mr Shepherd's successful cross-claim for orders in the nature of specific performance requiring payment by CB to LS Bell had been pleaded as, and should be seen as, a set-off against the plaintiff's claim against Mr Shepherd. In the end this is not very different from counsel for CB's contention that there was a single "event" in the proceedings. However, I do not adopt the analysis of either counsel.
6. The term "event" in r 42.1 is not defined. However, I think it is quite clear that there can be more than one event in proceedings. Where a plaintiff makes a claim against the defendant and the defendant makes a cross-claim against a third party, it can be readily seen that there are two events involved in the proceedings. So too, when a plaintiff makes a claim against one defendant and another unrelated claim against another defendant.
7. In this case Mr Shepherd's cross-claim was made back against CB rather than against a third party. But I do not accept that it is properly seen as a matter of defence or equitable set-off. The form of the orders to be made by the Court do not reflect that. The orders will require the full amount of $856,291 to be paid by Mr Shepherd to CB and (independently) that CB pay LS Bell (which is not a party to these proceedings) the sum $440,363.
8. Although the sources of these claims both lie in the same contract, they are distinct in their origin and different in their outcome. In my opinion the better analysis is that there were two "events" in the proceedings. One, CB's successful claim and the second, Mr Shepherd's successful cross-claim.
9. This analysis might lead to the conclusion that the appropriate order would be for Mr Shepherd to be ordered to pay CB's costs of the proceedings on its claim and CB ordered to pay Mr Shepherd's costs of the proceedings on his cross-claim. The difficulty with this is, of course, that the claims were heard together; most of the costs incurred by each party were referable both to pursuing its claim and defending the other party's claim.
10. In Medway Oil & Storage Co Ltd v Continental Contractors Ltd [1929] AC 88, the House of Lords was faced with a costs order which had been made in a claim between commercial parties where the defendant had made a cross-claim back against the plaintiff. Both the plaintiff's claim and the defendant's cross-claim failed and both the claim and cross-claim were dismissed with costs. The House of Lords decided that on the true construction of the order, the costs awarded on the cross-claim were only the costs solely referable to the bringing of the cross-claim. Thus the effect of the order was that the plaintiff bore the bulk of the costs of the proceedings.
11. However, the decision was one as to the construction of the order and it is clear that the Court is not bound to make an order having that effect in a case where the claim and the cross-claim both fail, or an order to the opposite effect where claim and cross-claim both succeed. I do not think that a costs order on the claim and a separate costs order on the additional costs of the cross-claim would fairly reflect the commercial consequences of my decision; rather I think that those commercial consequences should be reflected by an order for costs covering the proceedings as a whole.
12. In making such an order I accept, up to a point, the submission by counsel for CB that the preponderance of the case concerned its claim rather than Mr Shepherd's cross-claim. However, I consider that it is somewhat of an over-statement to characterise CB's claim as having accounted for the vast bulk of the costs. The truth is that some of the time in the hearing related to evidence and submissions which were solely referable to the plaintiff's claim, and some time was solely referable to the cross-claim, but a great deal of the evidence and the submissions dealt with matters of background and analysis which were relevant to both. On my admittedly impressionistic judgment and allocating the common matters equally between the claim and the cross-claim I would see CB's claim as preponderant but not overwhelmingly so.
13. The other factor which I consider to be relevant is that as a matter of commercial substance CB has achieved a net receipt of approximately half of the monies which it claimed.
14. In these circumstances, I consider the appropriate order is that Mr Shepherd should pay 50 per cent of CB's costs of the proceedings (that is, the proceedings as a whole including CB's claim and Mr Shepherd's cross-claim).
15. The orders of the Court are:
16. Order that the defendant pay the plaintiff the sum $856,291.
17. The defendant pay the plaintiff the amount of $75,260.37 on account of interests payable on the amount in order 1 from 16 August 2016 to the date of this order.
18. Order that the plaintiff pay to LS Bell Pty Limited the sum of: (a) $440,363.98; (b) $42,541.63 on the account of the interests payable on: (i) the amount of $339,251.80 from 8 June 2016 to the date of this order; and (ii) the amount of $101,112.18 from 10 August 2016 to the date of this order.
19. Order that the defendant pay 50 per cent of the costs of the plaintiff of the proceedings (including the proceedings on the cross-claim).

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