Colgate-Palmolive Co v Cussons Pty Ltd

Judgment 1In my judgment delivered on 21 June 2012 ([2012] NSWSC 679), I held that orders should be made striking out a Statement of Claim filed by Brentwood Village Limited ("BVL") in these proceedings, with leave for BVL to file an Amended Statement of Claim against the Fourth Defendant, Brentwood Village Management Pty Limited ("BVM") and any other proper parties within a short time, and dismissed the proceedings against the Second Defendant, Industry Funds Management (Nominees 2) Pty Ltd ("IFM2"). I indicated that BVL should pay the costs of and incidental to the motions heard before me and directed the parties to bring in agreed Short Minutes of Order to give effect to my judgment within 7 days, or if no agreement could be reached, their respective drafts of those Short Minutes and short submissions in respect of the differences between them. 2On 28 June 2012, IFM2 submitted draft orders in respect of the proceedings against it and noted that it and BVL had been unable to agree those orders and provided an outline of submissions in respect of those orders. Also on 28 June 2012, BVM submitted draft orders in respect of the proceedings against it and noted that it and BVL had also been unable to agree those orders to give effect to the judgment with BVL, and also provided short submissions in respect of its draft orders. On 31 July 2012, BVL submitted draft orders and made submissions to those orders. Orders in respect of IFM2 3IFM2's proposed orders provide for BVL's claim against IFM2 to be dismissed in accordance with my earlier judgment. IFM2 also seeks an order that BVL pay its costs of the proceedings (including its interlocutory application to strike out the proceedings against it) on an indemnity basis. BVL's proposed orders provide only for it to pay IFM2's costs of and incidental to IFM2's Interlocutory Process and Amended Interlocutory Process filed 22 May 2012. 4Section 98(1) of the Civil Procedure Act 2005 (NSW) relevantly provides that: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." Uniform Civil Procedure Rules 2005 (NSW) r 42.1 ("UCPR") provides that, if an order is made as to costs, the Court is to order 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. UCPR r 42.2 states the general rule that costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis. UCPR r 42.5 provides for orders for indemnity costs. 5I am satisfied that the order for costs in favour of IFM2 should extend to the costs of the proceedings generally, not only the costs of its Interlocutory Process and its Amended Interlocutory Process, where the dismissal of the proceedings means that it has been successful in its defence of the proceedings. 6As IFM2 acknowledges in its submissions, special circumstances are necessary to warrant a departure from the usual course of an order for payment of costs on a party/party basis. In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 at 256-257, Sheppard J summarised a number of principles as to an order for indemnity costs as follows: "It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred: ... 2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. ... In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity. 3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. ... 4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require''. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: "the categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata. 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice." 7In Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20], the Full Court of the Federal Court noted that: "Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs." 8In White Constructions (ACT) Pty Ltd (in liq) v G B White [2004] NSWSC 303 at [5]-[11], in a passage subsequently quoted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24], McDougall J also summarised the applicable principles to an award of indemnity costs as follows: "The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 at 256-257. What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant. In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard. At the most basic level, the statements of principle indicate - not unsurprisingly - that there must be some sufficient special or unusual feature to justify departure from the ordinary rule. I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 9. Their Honours said at [44] (I omit citations): It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part. I read what their Honours said on the basis that "some relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415; NMFM Property Pty Limited v Citibank Limited (No 2) (2000) 109 FCR 77." 9The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was also applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18]. In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) above at [26], McDougall J referred to that summary of principles and observed that: "Nonetheless, it is important to bear in mind that the principles distilled by his Honour out of the authorities are guides to the exercise of the discretion. They neither define the circumstances in which the discretion is to be exercised nor limit its width. It remains, as I said in White ACT [Pty Ltd (in liq) v JB White above], a discretion that is constrained only by the requirement that it be exercised judicially. That is to say, it is a discretion to be exercised on a consideration of all (and only) relevant facts, taking into account relevant statements of principle and revealing a conclusion supported by principled and logical reasoning. A party is not entitled to indemnity costs simply because (for example) one or more of the factors identified in cases such as Colgate Palmolive is present. Nor is a party disentitled to indemnity costs simply because none of those factors is present." 10In Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure. 11IFM2 relies on several matters to support an application for indemnity costs. Inter alia, IFM2 notes that its solicitors wrote to BVL's solicitors concerning the then unfiled version of the Statement of Claim on 20 September 2011, contending that that Statement of Claim provided no basis for the relief sought against IFM2 in the Originating Process. IFM2's solicitors again raised those concerns with BVL's solicitors on several subsequent occasions, including by letters dated 13 October 2011, 14 October 2011 and, in respect of the Statement of Claim which had now been filed by BVL, on 18 November 2011. IFM2 subsequently sought further and better particulars of the claims against it from BVL, with a first response to those particulars being provided after the date required by the Court's directions and further particulars not having been provided despite an order made by the Court on 6 February 2012 requiring that they be provided. IFM2's solicitors also followed up with BVL's solicitors in respect of the failure to provide those particulars and no response had been received prior to the filing of the Interlocutory Process which was the subject of my judgment. Those additional particulars were not provided, notwithstanding advice by BVL's Counsel to the Court on 12 March 2012 that they would be provided. When IFM2's application for summary judgment was heard on 22 May 2012, BVL did not press a claim for relief against IFM2 and contended that IFM2 was a proper party to the proceedings although no relief was sought against it. I rejected that contention for the reasons set out in my earlier judgment. BVL resists an order for indemnity costs in favour of IFM2 and submits that, at the time the proceedings were commenced, it was appropriate for IFM2 to be joined to clarify its position as a second ranking security holder. 12BVL's delays in responding to, and failures to respond to, proper requests for identification of the basis of the claims against IFM2, and its conduct in maintaining the claim for relief against IFM2, requiring it to incur the costs of an application for summary judgment, only to abandon that claim at the hearing of that application, were unreasonable and will inevitably have imposed additional costs on IFM2. No explanation was given for the lateness of the realisation that no relief should be pressed against IFM2 nor was the proposition that IFM2 should remain party to the proceedings, although no relief was sought against it, properly justified. I consider that the conclusion is properly open that the proceedings were commenced and continued against IFM2 in circumstances where BVL, properly advised, should have known that the proceedings could not be maintained against IFM2. I consider than at an order for indemnity costs in favour of IFM2 against BVL is justified for these reasons. Orders in respect of BVM 13BVM submits that an order should be made that the Statement of Claim be struck out. I accept BVL's submission that the proceedings should only be struck out against the parties who filed applications for such an order. 14BVL should have leave to file an Amended Statement of Claim against the First Defendant, Australian Property Custodian Holdings Limited (in liquidation) (receivers and managers appointed), the Third Defendant, Prime Retirement Aged Care Property Trust and BVM within 14 days of the making of these orders. In making an order in that form, I express no view as to whether proceedings can be maintained by BVL against the Third Defendant, a managed investment scheme, as distinct from the responsible entity of that scheme, which was not a matter raised in argument before me. BVM also submits that BVL should pay BVM's costs thrown away by reason of any amendment to the Statement of Claim, and that is the usual order in respect of an amendment application. 15BVM submits that BVL should pay the costs of and incidental to BVM's Interlocutory Process dated 27 February 2012 and its Amended Interlocutory Process filed 22 May 2012. That order reflects the result of my judgment as to which BVM was substantially successful in those applications. BVL accepts that costs will follow the event in that regard. 16BVM also seeks an order under UCPR r 42.7(2) that the costs of the Interlocutory Process be payable forthwith. BVL opposes such an order. An order made under UCPR r 42.7(2) changes the usual position that costs of an interlocutory application are not payable until the conclusion of the proceedings. Ritchie's Uniform Civil Procedure NSW at [42.7.20] notes that such an order may be made, inter alia, where a costs order is relevant to a discrete, separately identifiable part of the proceedings or the costs liability will not be affected by the final outcome of the proceedings. In Ritson v Gay & Lesbian Community Publishing Ltd [2012] NSWSC 586 at [4], Beech-Jones J held that it was appropriate to make an order under this rule where the result of the motion represented complete success for a party on a discrete and substantial part of the proceedings and, absent that order, costs would not be payable for a significant period. I consider that this is a proper case for an order that BVM's costs of the Interlocutory Process be payable forthwith, since it was successful in its application to strike out the existing Statement of Claim and, if an Amended Statement of Claim is filed, the proceedings may well not be determined and the relevant costs would not be payable for a substantial period. Orders 17Accordingly, I make the following orders: