Cosmetic Laser Clinic Pty Ltd v Pirintji;; In the matter of Health and Beauty International Limited in Liquidation

The law on costs

1. The starting point is s 98 of the Civil Procedure Act. It relevantly reads: "98 Courts powers as to costs (1) 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. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. …"
2. UCPR 42.1 and 42.2 read: "42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the 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. 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."
3. I also take into account that s 56 of the Civil Procedure Act 2005 (NSW) provides that the overriding purpose of the parties is to facilitate the just, quick and cheap resolution of the real issues in the proceedings before the Court. It is the duty of the parties to bring to the attention of the Court the matters raised so that the Court can determine the most efficient use of court resources.

Submissions on costs

1. Counsel for Mr Pirintji submitted that the basis of his application was that the relationship between the two sets of proceedings made it more efficient to hear the matters together because first, there was an overlap of expert issues and witnesses in both damages claims; secondly, there was an overlap of lay witnesses in each set of proceedings; and thirdly, different credit findings might arise in relation to witnesses in each proceedings.
2. Although I accepted there was an overlap between the two proceedings, I refused the joinder on the basis of the extra legal costs that would be incurred because many of the issues did not overlap and that the joinder would be of little utility in determining damages.
3. Counsel for Mr Pirintji submitted that the application was not unreasonable and its application was dismissed on discretionary grounds.
4. Counsel for the plaintiffs says that there is no basis to depart from the usual position that costs should follow the event and that the plaintiffs incurred significant costs. According to the plaintiffs, the preparation for the hearing of the motion required their counsel and solicitor to familiarise themselves with, and consider, the pleadings and evidence in the liquidator's proceedings and their status and likely future conduct.
5. Counsel for the plaintiffs submitted that it was appropriate for them to resist the motion because of the significant additional costs and delays that would have arisen if the relief sought by Mr Pirintji had been granted. The plaintiffs say that Mr Pirintji's solicitors are experienced and knowledgeable litigants and it can be assumed that they understood that any party who filed a motion was potentially exposed to a costs order if the motion failed. On this basis, counsel for the plaintiffs submitted that an order that Mr Pirintji pay the plaintiffs' costs is appropriate in all the circumstances.
6. Counsel for the liquidator submitted that reasonableness is a factor in respect of an application for indemnity costs, but it is not the basis upon which a court determines an entitlement to party/party costs: see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [51].
7. In its submissions dated 22 April 2015, the liquidator raised the issue of extra legal costs and that the joinder would be of no utility in determining damages.
8. Counsel for the liquidator submitted that the primary purpose of a costs order is compensatory, rather than punitive: see Ohn v Walton (1995) 36 NSWLR 77 at 79. The liquidator says that he has been successful on matters raised in the submissions dated 22 April 2015. The liquidator submitted that he has incurred costs and ought to be compensated. According to the liquidator, Mr Pirintji has not put forward any matters sufficient to displace UCPR 42.1 and so costs ought to follow the event.
9. Costs are discretionary. Costs usually follow the event. In my view, it was not unreasonable for the plaintiffs to oppose Mr Pirintji's motion. Further, there is no real reason why UCPR 42.1 should not apply. Mr Pirintji should pay the costs of the liquidator. In the exercise of my discretion, I order that Mr Pirintji is to pay the plaintiffs' and the liquidator's costs.

Indemnity costs

1. The plaintiffs also seek an order that costs be paid on an indemnity basis.
2. Counsel for the plaintiffs submitted that the plaintiffs sought to address Mr Pirintji's concern as to the possibility of the plaintiffs receiving double compensation in the event a dividend was received by the plaintiffs in the liquidator's proceedings.
3. On 21 August 2015 and on 3, 14 and 15 September 2015, the plaintiffs' solicitor wrote to the solicitor for Mr Pirintji in an effort to resolve Mr Pirintji's motion by agreement and without further costs and court time.
4. The plaintiffs say that if the matter had been resolved it would have entirely avoided the need for the motion to be brought and argued, at significant expense to all parties, but relevantly to the plaintiff. Counsel for the plaintiffs submitted that Mr Pirintji acted unreasonably in refusing to engage with the plaintiffs to resolve his concern about double recovery, despite their repeated invitation for him to do so. This approach, the plaintiffs say, is consistent with s 56 of the Civil Procedure Act.
5. In the alternative to indemnity costs, the plaintiffs seek an order that costs be paid on the ordinary basis.
6. The general rule is that costs are payable on a party/party basis. A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is plainly unreasonable: see Sydney City Council v Geftlick [2006] NSWCA 280 at [90] per Tobias JA, Mason P and Hodgson JA agreeing. Indemnity costs orders should be reserved for the most unreasonable action by an unsuccessful plaintiff: see Leichhardt Municipal Council v Green per Santow JA at [57].
7. The question for this Court is whether it was unreasonable for Mr Pirintji to refuse to engage with the plaintiffs to resolve the issues in the motion by agreement. It is my view that Mr Pirintji was attempting to save time and money and that hearing the proceedings together was the most effective course. Hence, in the circumstances, it is my view that he did not act unreasonably in refusing to resolve the issues before the hearing and by bringing his motion. I decline to make an order that Mr Pirintji pay indemnity costs.

Leave for costs to be assessed forthwith

1. The further amended notice of motion was filed in common law proceedings No 2011/363483 - Cosmetic Laser Pty Ltd v Steven Michael Pirintji. The liquidator, Health & Beauty and Lasersmooth were joined as respondents to that motion.
2. UCPR 42.7(2) provides that costs of interlocutory applications are not payable until the conclusion of the proceedings "unless the Court otherwise orders". The Court also has power under s 98 of the Civil Procedure Act to make an order that costs be assessable forthwith.
3. Counsel for the liquidator referred to Fiduciary v Morningstar [2002] NSWSC 432; (2002) 55 NSWLR 1 at [11]-[13], where Barrett J identified three circumstances which may prompt the exercise of the discretion to order that costs be assessable forthwith. One of those grounds is where "the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect."
4. Counsel for the liquidator submitted that the amended notice of motion was a separately identifiable matter concerning the liquidator, Health & Beauty and Lasersmooth. They are not parties to the common law proceedings and have no further involvement in the proceedings. They should not be penalised by having to wait until their conclusion to be compensated for costs incurred in defending the amended notice of motion in proceedings which do not concern them.
5. It is my view that these are circumstances where this Court should exercise its discretion under UCPR 42.7(2). The liquidator, Health & Beauty and Lasersmooth should not have to wait until the conclusion of proceedings No 2011/363483 - Cosmetic Laser Pty Ltd v Steven Michael Pirintji as those proceedings no longer concern them. The result is that I grant leave and the liquidator's costs of the further amended notice of motion are to be assessed forthwith.

The Court orders that: (1) The defendant in proceedings No 2011/363483 - Cosmetic Laser Pty Ltd v Steven Michael Pirintji is to pay the plaintiffs' costs of the further amended motion filed 21 August 2015 in those proceedings, as well as the plaintiffs' costs of the further amended notice of motion on an ordinary basis as agreed or assessed in equity proceedings No 2012/364677 - the matter of Health and Beauty International Limited in Liquidation. (2) In equity proceedings No 2012/364677 - the matter of Health and Beauty International Limited in Liquidation leave is granted for the liquidator's costs of the further amended notice of motion to be assessed forthwith.

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: 16 December 2015