Galati v Deans

Submissions by EJC

1. EJC submits that a large proportion "if not the majority" of the hearing on 16 October 2018 concerned the inadequacy of [175] of the third amended cross-claim which pleaded, among other things, that EJC was knowingly concerned in a range of contraventions alleged by the cross-claimants against the plaintiffs, and against the eighth and ninth cross-defendants. It is submitted that this is a central allegation in the cross-claimants' case against EJC.
2. EJC says that in the course of the hearing on 16 October 2018, Senior Counsel for the cross-claimants articulated a number of alleged material facts which it was submitted supported the accessory liability allegation in [175], none of which were contained in the proposed fourth amended cross-claim that was ultimately served on EJC; and that in the proposed fourth amended cross-claim served in accordance with the directions I made on 24 October 2018 (and which has now been filed with EJC's consent) there are some two pages of additional particulars of the allegation at [175] which were not in previous versions of the pleading, nor in any of the "numerous" further and better particulars provided by the cross-claimants.
3. EJC points to the fact that, prior to the service of the proposed fourth amended cross-claim, there had been two previous iterations of [175] in the pleading, together with three sets of further particulars in relation to the allegation contained in that paragraph of the pleading: namely, the original formulation of [175] contained in the second amended cross-claim filed on 17 July 2018; the further particulars provided under cover of a letter dated 7 August 2018, the revised version of the pleading in the third amended cross-claim filed on 10 August 2018; the further particulars provided under cover of a letter dated 15 August 2018; and the further particulars provided under cover of a letter dated 8 October 2018.
4. Correspondence between the solicitors in relation thereto is annexed to the affidavit of Andreas Peter Piesiewicz sworn 15 October 2018 (see annexures A to F; and the reference thereto at [8]-[9] of his affidavit).
5. It is submitted that it has not been until the cross-claimants' sixth attempt, and following extensive correspondence and a contested hearing on the issue, that the cross-claimants have properly pleaded the allegation at [175]; that this involved effectively the re-writing of the whole of [175] and its particulars; and that the cross-claimants ultimately did what EJC had been requesting they do (namely, to provide an amended pleading which properly pleads the material facts in support of the accessory liability allegations, supported by adequate particulars). In those circumstances, it is submitted that EJC was, in substance, successful in its motion to have [175] struck out and that costs should follow the event.

Submissions by the cross-claimants

1. The cross-claimants cavil with the proposition that the majority of the hearing on 16 October 2018 focussed on the adequacy of the pleading, contending that the majority of the hearing focussed on the question of security for costs (the costs of which have been ordered to be costs in the cause).
2. The cross-claimants argue that EJC's application, both in substance and form, was an attempt to prevent re-pleading and thereby to seek dismissal of a large part of the cross-claim against it: "on a once and for all basis" in respect of the allegation at [154] (pursuant to r 13.4(b) of the Uniform Civil Procedure Rules 2005 (NSW)) and "in substance if not form to strike out without liberty to re-plead, and thereby defeat" the accessorial claim pleaded at [175] (pursuant to UCPR 14.28). It is submitted that this was evident from the repeated references in EJC's submissions to pleading "amendments". In circumstances where EJC failed to prevent litigation on a major part of the cross-claimant's claim, but the cross-claimants were permitted an indulgence in relation to the re-pleading of [175], it is submitted that both parties had a measure of success.
3. As to [154], the cross-claimants point out that [154] of the fourth amended cross-claim is identical in both substance and form to that of the preceding version of the cross-claim and argue that therefore EJC was entirely unsuccessful in respect of its application to dismiss or, in the alternative, strike out that allegation. It is submitted that if this were a clearly severable part of the claim, on usual principles there would be a compelling basis to contend that EJC should pay the cross-claimants' costs with respect to paragraph 1 of the notice of motion.
4. As to [175] (which pleads EJC's knowing involvement in contraventions by Wealth Shift Pty Ltd, Ms Caroline Pritchard, Mr Dominic Galati and Trading Australia Pty Ltd of the Competition and Consumer Act 2010 (Cth)), the cross-claimants describe the allegations contained therein as being "centred around the payment of a so-called 'Secret Commission' by EJC". The cross-claimants cavil with the proposition that they have had effectively to re-write [175] of the cross-claim. They maintain that the amendments were due to other factors.
5. In particular, it is noted that on 3 September 2018 the 8th and 9th cross-defendants filed and served the affidavit of Ms Pritchard sworn 3 September 2018 in which Ms Pritchard set out her dealings and involvement with EJC in relation to the payment of the so-called "Secret Commission" (Pritchard Affidavit). The cross-claimants contend that many of the documents annexed to the Pritchard Affidavit fell within the documents required to be produced under subpoenas issued to EJC on 22 December 2017, to EJ Cooper & Sons Pty Ltd on 22 December 2017, and to Baiada Pty Ltd on 12 April 2018, but were not produced (referring to the affidavit of Matthew Nicholas Robinson, the cross-claimants' solicitor, affirmed 19 September 2018 at [29]-[36]). It is submitted that it was inevitable, following the service of the Pritchard Affidavit, that the cross-claimants would seek to re-plead the cross-claim, but that EJC's notice of motion was filed only eight (8) days after the Pritchard Affidavit was served (from which, as I understand it, the inference is sought to be drawn that the strike-out/dismissal motion was premature).
6. It is also submitted that despite the provision on 8 October 2018 of further particulars of the claims at [175], and the Pritchard Affidavit, EJC "pressed ahead" seeking to strike out [175] of the cross-claim. The cross-claimants argue that it is difficult to contend that EJC did not know the case it had to meet in this regard (noting that the particulars of 8 October 2018 were the subject of discussion at the 16 October 2018 hearing and "subsequently formed the backbone" of the present fourth amended statement of cross-claim).
7. The cross-claimants thus contend that they succeeded in resisting the dismissal or strike-out of [154] and [175] and that EJC enjoyed only partial success in respect of [175], which the cross-claimants "wanted to amend anyway and received an indulgence to do so"; and that in those circumstances both parties had roughly an equivalent measure of success and therefore the costs in relation to paragraphs 1 and 2 of the motion should be costs in the cause.

Determination

1. The applicable principles in relation to the exercise of the discretion to order costs are well-known and were not contested (or even referred to) in the respective costs submissions now before me. The power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is, subject to the rules of court and to statute, discretionary; it is well recognised that the discretion is a very wide one (Oshlack v Richmond River Council (1998) 193 CLR 72; 152 ALR 83; [1998] HCA 11; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322), though it must of course be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case; and the overriding statutory context in which this discretion falls to be exercised (that being the need for parties to conduct their proceedings with a view to the just, quick and cheap resolution of the real issues in dispute)). Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive (Latoudis v Casey (1990) 170 CLR 534; 97 ALR 45; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77).
2. One starts from the general rule that costs follow the event (see UCPR 42.1) unless it appears to the Court that some other order should be made as to the whole or any part of the costs. This, of course, necessitates identification of the relevant "event" or "events". Where there are a number of issues in the proceedings (on which there have been varying degrees of success) it will not always be easy to determine the relevant event (as recognised by Bergin CJ in Eq in Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 568, her Honour there referring (at [22]) to Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172; Hooker v Grilling (No 2) [2007] NSWCA 214, at [25]). In any particular case there may be a number of "events".
3. As I have noted in other cases, a helpful approach to that question is that which was suggested by the English Court of Appeal in Roache v News Group Newspapers Ltd [1998] E.M.L.R. 161 at 168-169. There, the question as to who was to be seen as the successful party "in the event" was posed as being a question as to "who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?"
4. In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, Young J (as his Honour then was), having accepted that where there are multiple issues it may be appropriate for the court to assess the costs on each issue or to make a reduction in the costs which the successful party obtains because of that party's losses on separate issues, said (at 22) (in an approach later cited by Barrett J (as his Honour then was) in Golding v Vella (No 2) [2001] NSWSC 731 at [8]): The cases, however, show that it is unwise to be too technical about what is meant by "event" or "issue" in this context. The judgment of Thomas J in Colburt v Beard (1992) 2 Qd R 67 gives abundant examples which establish this point. In particular one does not look at issues as if they were pleaders' issues, but approaches the matter with a broad brush. (my emphasis)
5. It has been said on more than one occasion that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; 42 FLR 213; (1979) ATPR 40-141; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]), to which I referred in Sayour v Elliott (No 2) [2018] NSWSC 146 (at [40]). In that case, I also noted (at [42]) that, ultimately, fairness should dictate how the costs discretion should be exercised (referring to what was said by Finkelstein and Gordon JJ, her Honour then sitting in the Full Court of the Federal Court, in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5], there citing Hodge v TCN Channel 9 Pty Ltd (No 2) [2006] NSWSC 1272 and Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; 54 ACSR 496). See also a summary of relevant principles in this area by Hammerschlag J in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [30]-[31], his Honour there referring to the relevant authorities collated by White J (as his Honour then was) in Short v Crawley (No 40) [2008] NSWSC 1302 (at [25]-[32]) as to the question when the general rule may be displaced.
6. In the present case, as the parties' submissions recognise, there were two distinct aspects to the hearing on 16 October 2018: EJC's application for security for costs to be provided by FDC, which was unsuccessful (having regard to the undertakings that had been proffered by Mr and Mrs Deans); and EJC's application for the dismissal or strike out of particular paragraphs of the cross-claim.
7. Where there are distinct or severable issues, such as here (as between security for costs and the pleading dispute), and there is a mixed outcome as between those issues, it is well recognised that it may be appropriate to order costs on an issue by issue basis and it is in my view appropriate to do so here - not least because costs orders have already been made in relation to the security for costs aspect of the matter on which EJC was unsuccessful, whereas EJC had a measure of success on the pleading aspects of the matter.
8. The question then is as to how the costs of the pleading aspect should be dealt with: by orders of the kind proposed by EJC or by an order that the costs should be costs in the cause.
9. In Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 (cited by the Court of Appeal in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (at [36]) and again in Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304 (at [38])), Gummow, French and Hill JJ said (at 272): Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.
10. See also the observations of Giles J (as his Honour then was) in NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 (at [25]; [28]); and Lenning v Alexander Proudfoot Company World Headquarters (Kirby P).
11. A broad brush assessment of the time occupied by each of the two aspects of the motion, by reference to the transcript suggests to me that the argument on the pleading occupied more time than that in relation to the security for costs application, though not considerably more time (on a rough and ready estimate some 41 pages of transcript devoted to the former compared to some 28 devoted to the latter, with the balance dealing with general or common matters). I have not attempted to calculate the comparison of time as between the debate on the various criticisms made of the pleading as between [154] and [175] (in part because it was necessary to go through the pleading in detail in order to assess the adequacy of the pleading at [175] in any event). I am not persuaded that it would be of much assistance to use this as a basis for the apportionment of costs as between the respective aspects of the matter.
12. As noted above, there are a number of cases in which it has been said that a broad brush approach to the issue of costs may be appropriate or in which an impressionistic approach is taken.
13. I am of the view that costs should be determined on the basis of a notional 50/50 split of the overall costs of the hearing on 16 October 2018 (as EJC's submissions contemplate, though strictly speaking that probably works against EJC rather than in its favour). Half of those costs have already been dealt with, in practical terms, by the costs orders made on the security for costs application. As to the balance of the 50%, while EJC was not successful in striking out [154] of the pleading, the real issue with the adequacy of the pleading lay in the allegations made at [175] and in this respect I consider that EJC has had a substantial measure of success.
14. I do not consider that it was premature to press the issue as to the adequacy of the pleading of that allegation, in circumstances where there had been a number of attempts to obtain proper particulars of it; and the fact that the cross-claimants "wanted to amend anyway" seems to me not to the point. I do not accept that the pleading in the form that it took on 16 October 2018 properly informed EJC of the case it was required to meet. It was not an answer to say that EJC might have been able to discern this from affidavit evidence in the proceedings. The fact that the cross-claimants were given a final opportunity to plead their case in that regard does not gainsay that what resulted from the hearing of the motion in that regard was that EJC was successful in obtaining that to which it was entitled - a pleading adequately putting it on notice of the material elements of the knowingly concerned claim.
15. Thus I consider that EJC should recover its costs of the motion for strike out or dismissal of the impugned paragraphs of the pleading even though [154] has remained in its then form and even though there was ultimately leave granted (by consent) for the filing of an amended pleading including the (revised) knowingly concerned claim. I do not consider it appropriate to order that these be costs in the cause, given that the matter is still in the stages preparatory to the hearing and EJC has been put to the cost of seeking a proper pleading.
16. I will therefore order that the cross-claimants pay half of EJC's costs of the hearing on 16 October 2018 (with the intent that the balance of the costs of the hearing will be subsumed in the costs orders made for the security for costs aspect of EJC's motion heard on that day) and any additional costs referable to the pleading aspects of EJC's notice of motion dated 11 September 2018.

Orders

1. For the reasons set out above, I make the following order: 1. Order the cross-claimants to pay half of EJC's costs of the hearing on 16 October 2018 of its notice of motion dated 11 September 2018 and any additional costs relating to the pleading aspects in respect of which relief was sought in that notice of motion.
2. I have listed the substantive proceedings in this matter for directions on 1 February 2019. For the avoidance of doubt, that will include directions in relation to the cross-claim.

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