Creak v Ford Motor Company of Australia Ltd

Creak v Ford Motor Company of Australia Ltd - [2023] NSWCA 323 - NSWCA 2023 case summary — Zoe

JUDGMENT

GLEESON JA: I agree with White JA.
WHITE JA: On 13 September 2023, this Court allowed in part an appeal by Mr Creak from orders of the primary judge. In accordance with the directions given, the parties have filed written submissions as to the orders which should be made for the costs of the proceedings below and of the appeal, having regard to Mr Creak's partial success.
Reference should be made to the reasons of this Court in Creak v Ford Motor Company of Australia Ltd [2023] NSWCA 217. Those reasons explain how the issues concerning costs of the proceedings below and of the appeal arise.
Mr Creak submitted that there should be no order made as to the costs of the proceedings below or of the appeal with the intent that each party bear his and its own costs.
Ford submitted that Mr Creak should be ordered to pay Ford's costs of the proceedings below and of the appeal. This submission was made notwithstanding that Mr Creak was partially successful on the appeal and that the order below entering judgment for Ford against Mr Creak in the amount of $145,000 plus interest was set aside.
The parties provided evidence as to their negotiations in seeking to resolve both the contempt proceeding against Tallevine and the 2019 proceedings. Neither party relied upon the correspondence as showing that he or it had made an offer which bettered the outcome in this Court.
Mr Creak submitted that Ford obtained only a small part of the injunctive relief it sought over Mr Creak's resistance. He submitted the reason there was continued dispute about the injunctions was largely because of overreach by Ford.
He submitted: "20. Mr Creak relies upon that correspondence to contend that any result that required him to pay part of Ford's costs of the proceedings would be unjust. 21. That is not because the correspondence shows Ford acted unreasonably in pursuing the litigation: as will be seen as a matter of substance there is a small part of the injunctive relief Ford sought which it obtained against Mr Creak's resistance. 22. However, the correspondence shows first, that the injunctions remained in play largely because of overreach by Ford, and secondly that the issue of primary commercial importance to both parties was the quantum of damages, rather than the terms of the injunctions. The litigation ran because either Ford overreached on both injunctions and quantum, or Ford's only real concern was quantum in circumstances in which Mr Creak was ready and willing to compromise on injunctions. 23. In any event it was the combination of Ford's overreach on the injunctions, and refusal to accept substantial monetary offers, which resulted in the matter proceeding to litigation including on appeal."
Ford submitted that it was the successful party at first instance and on appeal. It submitted that, except for a single issue, namely, the quantum of Ford's entitlement to damages and indemnity, Mr Creak's appeal was wholly unsuccessful. The issue on which it failed did not substantially add to the length of the trial or the appeal. It also submitted that it was compelled to commence proceedings by reason of Mr Creak's flagrant disregard of the orders that bound Tallevine and his obligations under the deed.
I do not wholly accept either party's submissions.
These proceedings were commenced on 24 May 2019. It appears from a letter from Lander & Rogers, who acted for Ford, to Agility Legal Pty Ltd, who then acted for Mr Creak and Tallevine, that at that point the parties were reasonably close to settling both the contempt proceedings against Tallevine and the 2019 proceedings. On the face of Lander & Rogers' letter, it would appear that the major sticking point would be whether Tallevine would be prepared to pay more than the $225,000 which it offered for Ford's costs of both proceedings, where Ford was asking for $510,000, and required that Mr Creak, as well as Tallevine, be liable to pay those costs.
It may well be that further settlement discussions would in any event have foundered when the precise terms of a settlement agreement came to be drafted. Ford proposed that orders be made that restrained Mr Creak and Tallevine from engaging in or procuring any conduct similar to that proscribed by the consent orders and the deed of settlement. This was agreed in principle, subject to certain qualifications to which it is unnecessary to refer. As later correspondence reveals, and the course of proceedings attests, the parties were at odds as to what conduct was proscribed by the consent orders and the deed of settlement. Reaching agreement on what "similar conduct" would be proscribed would be fraught with difficulty.
By 18 June 2020, Mr Holmes of Adrian Holmes Law had become Mr Creak's solicitor. There was extensive correspondence between Lander & Rogers and Adrian Holmes Law in an attempt to settle the proceedings. Much of that correspondence involved the respective solicitors reiterating and making arguments in support of their client's position.
On 1 September 2020, Mr Holmes, on behalf of Mr Creak, offered that Mr Creak would consent to restraining orders that bound him personally, provided they were consistent with his freedom to trade. Mr Holmes observed that a proposed order prohibiting engagement in "similar conduct" to that already proscribed would be too uncertain and said: "30. Further, in consenting to Orders against him Mr Creak will seek drafting which enables him to conduct his foreshadowed business independently of, and without inappropriate interference from Ford. In practical terms, without seeking to engage in definitive drafting at this stage, that would require clarification of Order 10 so that it was clear that any consent orders would leave Mr Creak, and any entity other than Tallevine that is controlled by him, free to: a. Trade in second-hand vehicles with whatever fittings (including Ford counterfeit fittings) are attached to them when they are purchased by Mr Creak or his controlled entities. b. Advertise and otherwise market second-hand vehicles under their correct brand names including make and model, including by reference to Ford and its models. c. Advertise the sale of F Series trucks as imported including the words 'Ford' and 'Raptor' as relevant to the model description. d. Conduct and promote a service centre for all market vehicles including those supplied by Ford."
On 26 August 2021, Mr Holmes made an offer that addressed the amount Ford was claiming for its costs, seemingly, its costs of both the contempt proceedings and the 2019 proceedings. Mr Creak offered to pay $130,000 or $150,000 (the latter on a particular condition) in addition to the $150,000 that had been provided by way of security for costs. The offer was rejected by Lander & Rogers, who said that the settlement proposal represented less than 50% of Ford's total costs incurred up to 30 August 2021. By correspondence of 2 September and 20 September 2021, Ford stated that it would not accept anything less than $450,000 in full and final settlement of its claims against Mr Creak. Lander & Rogers also said that: "It is also important to note that this proceeding is significant to Ford, not just in relation to prosecuting its claim against Mr Creak, but also sending a wider message to relevant stakeholders that Ford will not tolerate behaviour of the kind the subject of Ford's allegations in the proceeding."
Mr Creak did not succeed either at first instance or on appeal in his argument that, as a matter of construction of the orders or by having the orders declared void as being in restraint of trade, he could trade in second-hand vehicles to which Ford counterfeit fittings had been attached when they were purchased by him or his controlled entities.
It is not clear from the pre-trial settlement correspondence what meaning Ford contended should be given to order 10(b). But that does not mean that Ford overreached itself in pressing for a reiteration of the orders to apply both to the conduct restrained and "similar conduct" and by seeking orders that directly bound Mr Creak. Mr Creak did not offer to consent to injunctive relief in terms more favourable to him than the orders made.
Mr Creak submitted that it was not until its submissions for trial that Ford identified what it contended to be the meaning of "good faith" use as allowed by order 10(b).
That may be so. Nonetheless, Ford was successful on appeal in maintaining the injunctive relief it had obtained at trial. I do not accept that the differences in the reasoning of the primary judge and the reasons of this Court as to the construction of order 10(b) mean that Ford was not the successful party in relation to this claim.
Nor do I accept Mr Creak's submission that Ford's only real concern was quantum because Mr Creak was ready and willing to compromise on injunctions. Mr Creak did not offer a compromise in respect of the claim for injunctive relief that Ford ought to have accepted. Nor is it possible to say which of the issues was more important to the parties. Lander & Rogers' letter of 20 September 2021, part of which is quoted at [13] above, indicates that Ford considered there was considerable importance in enforcing the terms of its dealer agreement to send "…a wider message to relevant stakeholders". It may well be the case that, from Mr Creak's perspective, it was Ford's claim for damages or an indemnity that was of most significance. It could not be said that one issue or the other was more significant to both parties.
Nor can I accept Ford's submission that it was wholly successful in the proceedings because it succeeded in its claim for injunctive relief. Ford submitted that its real and primary purpose in bringing the proceedings was to restrain Mr Creak's conduct by injunction. That may have been its primary purpose, but it was not its only purpose.
I take into account that, on the claim for which Ford was ultimately unsuccessful, it succeeded in establishing that Mr Creak contravened cl 4.1 of the deed of settlement. It obtained nominal damages only because it failed to prove its costs of defending Tallevine's cross-claim. The award of nominal damages does not give Ford a prima facie entitlement to its costs of the claim. Nor did it contend otherwise.
Both parties have had mixed success and failure on appeal and, following the judgment on appeal, it can be seen that both parties should have had mixed success and failure at trial.
I venture to repeat what I said (with the concurrence of Basten and Macfarlan JJA) in Oikos Constructions Pty Ltd v Ostin & Anor (No. 2) [2021] NSWCA 98: "[10] Subject to rules of court, costs are in the discretion of the court (Civil Procedure Act 2005, s 98). Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1 relevantly provides that 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 should be made as to the whole or any part of the costs. [11] Rule 42.1 has been construed on the basis that "the event" which costs should prima facie follow can be identified as a judgment for the plaintiff or the defendant on the claim (Baker v Towle [2008] NSWCA 73 at [11]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8]). [12] This was so, notwithstanding that in relation to a similarly worded rule in England it had been held that, where distinct causes of action were included in the same writ or statement of claim, the defendant was entitled to his costs of a cause of action on which he succeeded, even though the plaintiff was otherwise successful (Myers v Defries (No 2) [1880] 5 Ex D 180) and that the expression "the costs shall follow the event" meant that costs were to be distributed according to the results of the several issues, while the party who was successful on the whole, got the "general costs" (Reid, Hewitt & Co v Joseph [1918] AC 717 at 724-725, 733, 742). [13] That the relevant "event" should be considered more straightforwardly as whether there was judgment for the plaintiff or for the defendant on the claim can be traced to the judgment of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 16. [14] In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, this Court identified the principles to be applied as follows: "The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279." [15] A successful party may be denied the whole of its costs or may be required to pay costs in respect of its failure on particular issues, even though that party did not act unreasonably in raising or defending the issues on which it failed (Permanent Trustee Australia v FAI General Insurance Co (Supreme Court of NSW, Hodgson CJ in Eq 3 June 1998 unrep at 10-11); Short v Crawley (No 40) [2008] NSWSC 1302 at [32]; Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [31]). [16] In Bowen Investments v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107, Finkelstein and Gordon JJ said (at [5]) that if an issue by issue approach produces a result that is fairer than giving the successful party all of his or her costs, notwithstanding his or her failure on particular issues, then the issue by issue approach should be adopted. … [28] Once it is decided that an otherwise successful plaintiff has failed on a severable or dominant issue such that it is not appropriate that the plaintiff receive all of his or her costs, in deciding how the discretion as to costs should be exercised to achieve fairness (Bowen Investments v Tabcorp Holdings Ltd (No 2)) the perspective of both parties should be considered."
Considering only Ford's claim for damages or an indemnity, I would not characterise the ground on which Mr Creak succeeded as being a separable issue such that, if that had been the only claim, he would not have been entitled to all of his costs of the claim.
There is no reason that Ford should not be entitled to all costs of its claim for injunctive relief.
Neither party suggested that the court should make separate costs orders by reference to the issues.
It is apparent from the affidavits, the transcript of hearing at trial, and the primary judge's reasons, that the latter claim took up substantially more time of hearing and costs of preparation than did the claim for damages or indemnity. It was also the principal issue that was argued on appeal.
Arithmetical precision is impossible. Notwithstanding Ford's success in establishing a contravention of cl 4.1 of the deed of settlement, if the claim for damages and indemnity had been the only claim litigated, Mr Creak would have been entitled to his costs of that claim. These can notionally be set off against the costs to which Ford is entitled for its success on the claim for injunctive relief. I consider that a fair assessment is that Mr Creak pay 80% of Ford's costs of the proceedings below and 75% of the costs of the appeal.
Ford submitted that Mr Creak should be ordered to pay interest on costs. Since 2015 the default position has been that interest is payable on an amount payable under an order for the payment of costs at the prescribed rate from the date on which the order for costs is made. Section 101 of the Civil Procedure Act 2005 (NSW) relevantly provides: "(4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs. (5) Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders. ... (7) In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section."
Mr Creak did not submit that the Court should make a contrary order under s 101(4).
Order 16 made on 10 March 2022 provided that interest on costs should run from the date of payment by Ford of each amount of costs until the date of payment by Mr Creak. Mr Creak did not submit that a similar order should not be made if he were ordered to pay the whole or a percentage of Ford's costs. An order should be made accordingly using the substance of the formula proposed by Campbell J (as he then was) in Lahoud v Lahoud [2006] NSWSC 126 and by this Court in Drummond v Rosen (No 2) [2009] NSWCA 331.
As to interest on costs of the appeal, Ford did not seek a contrary order under s 101(5). Interest on costs of the appeal will run from the date of the costs order. No order is required.
I propose the following orders: 1. In lieu of order 15 made in the court below on 10 March 2022, order that the second defendant pay 80% of the plaintiff's costs of the proceedings below. 2. Order that interest on the plaintiff's costs provided for by order (1) be payable at the prescribed rate as from the dates of payment by the plaintiff of each amount of costs until the date of payment by Mr Creak. 3. Order that the appellant pay 75% of the respondent's costs of the appeal. 4. Order that, subject to any contrary agreement of the parties, the interest on costs payable to Ford pursuant to order (2) and the interest on costs of the appeal payable to Ford pursuant to s 101(4) and (5) of the Civil Procedure Act be calculated according to the proportion that the costs and disbursements allowed on assessment bears to the actual costs and disbursements paid by Ford and multiplied by 80% and 75% respectively.
KIRK JA: I agree with White JA.

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