Geatches v Anglo Coal

Its argument draws upon a line of authority about costs in respect of claims and counterclaims. The relevant principle in that context was explained by Justice Dixon in Smith v Madden [1946] HCA 19; (1946) 73 CLR 129 at 132 - 134.

"It often happens that one party is to pay the costs of the action and the opposite party is to pay the costs of the counterclaim. There may be, as in this case, judgment for the plaintiff upon the claim in the action with costs and for the defendant upon the counterclaim with costs ... In such cases the rule is that, in the absence of special order, there is no apportionment of costs. Apportionment of costs was a principle followed in the Courts of Equity before the Judicature Act ...

But at common law apportionment was not practised. If issues were found, some for one party, some for the other, then that party who was considered to have succeeded in the result became entitled to the general costs of the action and the costs of the issues upon which he had nevertheless failed, went to his adversary. In the common law courts in such circumstances, upon a taxation, the party entitled to the general costs of the action received all the costs necessarily or reasonably incurred in order to enable him to achieve the success in result and the party entitled to the costs of the issues on which the former had failed received only the extra costs caused to him by the inclusion of those issues.

Counterclaims were a product of the Judicature Act, and, at first, there seems to have been some uncertainty as to the manner in which costs were to be taxed under orders disposing of the costs of the action or claim in one way, and of the costs of the counterclaim in another. But the analogy was soon adopted of the common law practice in dealing with the general costs of an action and the costs of issues found against the party succeeding in the action. In such a case the taxation of the costs of the action and of the counterclaim is governed by the principle that the party receiving the costs of the claim should recover the general costs and whatever was reasonably incurred in bringing and maintaining or defending the action, as the case may be, considered as if there had been no counterclaim, and that the party receiving the costs of the counterclaim should recover the further or increased costs reasonably incurred in bringing and maintaining or defending the counterclaim."

That historical and pragmatic approach had the potential to favour a successful claimant to a much greater extent than a successful counter-claimant in that while each received awards of costs solely related to their actions, the claimant's award was also for the common costs. The first defendant contorts the plaintiff's position against it to that of being a successful counterclaimant, and its position against the second defendant as that of an unsuccessful counterclaimant. It in turn advances the argument that, as with a successful counterclaimant, the plaintiff is entitled only to the costs solely associated with its claim against the first defendant to the exclusion of any costs common to its action against both the first and second defendants.

The analogy, and its application here is flawed. The analogy of claim and counterclaim is not apt in this case. There was no counterclaim. Further, there is no sensible justification to apply the analogy of a practice which favours a successful plaintiff, by granting such a plaintiff common costs, against the plaintiff here by not granting the plaintiff the costs common to his actions against both defendants.

The first defendant justifies such an application of the analogy by recourse to the words of the terms of settlement and release and discharge. In particular, the express indication in the terms of settlement that the plaintiff is not entitled to costs of the claim and proceeding against the second defendant, and, as the release and discharge put it, that the plaintiff is not entitled to costs in relation to the claim against the second defendant.

The plaintiff objects to any recourse being had to the terms of settlement and release and discharge. Its objection is properly made. The cost assessor, in carrying out the assessment under the rules, did so by authority of an order of the court, not an anterior agreement between the parties. It is the order that falls to be construed, not the anterior terms of settlement. In effect, once the terms of settlement were overtaken by the consent order, the terms of settlement, at least from the perspective of the cost assessor became irrelevant and would be at least arguably inadmissible in an examination of whether the cost assessor made any error in his assessment of costs pursuant to the order.

However, if the first defendant's argument is correct and the consent order has failed to correctly reflect the agreement of the parties then the first defendant submits there should be an order setting aside or varying the consent order pursuant to rule 742(6). It is doubtful whether such an order could be made in light of rule 667's limitation on the varying or setting aside of consent orders, although the court arguably has a residual power to correct unintended error in the wording of its orders. These arguments do not require resolution here, in that, even if recourse is had to the words of the terms of settlement and release and discharge, it would not alter the meaning which is in any event conveyed by the consent order.

The words of the terms of settlement and release and discharge, in referring to the plaintiff not being entitled to costs in relation to or of or incidental to its claim or claim and proceeding against the second defendant, are obviously intended to protect the second defendant. They do not speak to the plaintiff's costs entitlement as against the first defendant. The words which do speak to that entitlement are clear and are of the same effect as the words which appear in the order; that is that the first defendant is to pay the plaintiff's standard costs of and incidental to the claim against the first defendant.

In the order of 17 June 2013 the words "the plaintiff's standard costs of, and, incidental to the claim against the first defendant" include a cost incurred in relation to that claim, notwithstanding that it was also, or formed part of, a cost incurred in relation to the claim against the second defendant. The fact that an item of cost was to some extent incurred in relation to the claim against the second defendant does not exclude the assessment of all or some component of that cost as payable by the first defendant, as long as the assessed amount can be said to have been incurred in relation to the claim against the first defendant. The determining criteria is that the cost, as assessed, was a cost of or incidental to the claim against the first defendant.

To remove doubt, even if regard is had to the words of the terms of settlement and the release and discharge, I would arrive at the same conclusion. The words of these documents protected the second defendant from liability for costs. They did not exclude the first defendant from any liability for all or some component of an item of cost merely because all or some component of that item was also incurred in relation to the claim against the second defendant.

There lingers the question whether, applying this interpretation, the cost assessor erred in including some component of a particular cost item in favour of the plaintiff, when it was, in fact, a component of cost attributable solely to the action against the second defendant. The issue only arises if there were single cost items which were properly so divisible. This issue was also discussed in Smith v Madden where Justice Dixon observed at 136 - 137:

"... [A]lthough there can be no apportionment of items of costs between the two parts of the cause, it may be necessary to divide an item of costs in two parts. This will occur when there is a single charge for work, but a severable part of that work relates to the claim, and the other severable part of the work relates to the counterclaim. It will then be necessary to divide the single charge in accordance with the two classes of work it covers. Division of charges in this way must be distinguished from apportionment, but it is easy to see that under cover of division, apportionment in the sense of the chancery practice may be really be applied. The likelihood of a disguised apportionment thus occurring is not lessened by the use of the word "apportion" to describe the division necessary. Indeed, the subject is embarrassed by the ambiguity, generality and indefiniteness of much of the terminology employed in the cases. Some attempt, however, has been made to find more specific terms. Charges which cover, without discrimination, work referable to the action and work referable to the counterclaim have been called "mixed" ... An example of such a mixed item is a fee of a pleader for drawing the defence and counterclaim or drawing a reply that includes a defence to a counterclaim. Such a fee covers work that belongs to the claim and severable work that belongs to the counterclaim. In contrast to such mixed items, there are items that serve as much the purpose of the claim as the counterclaim. These are "common" items. Thus, the costs of witnesses whose evidence relates to an issue arising both on the claim and on the counterclaim would be a common item ... But there are many items ... which are not common ... They, of course, all form part of the costs of the action, but so do the common items. The mixed items must, however, be divided, and a proper part attributed, to so much of the work covered by the charges as belongs to the counterclaim and the rest of the action ... It is possible that a charge or item may cover some work belonging to the claim, some work belonging to the counterclaim and some that is common to both. In such a case the division should be of the amount properly attributable to the work relating to the counterclaim from that representing the work with reference to the claim and from the work common to both. The two latter form part of the costs of the action."

Thus, a so-called "mixed cost" may result in a division of the cost attributable to the action against one party compared to the action against another; whereas a so-called "common cost" would not be so divided and a successful party would get the whole of the assessed amount. On the face of it, the only way to achieve an apportionment of the latter category is for the court to order it expressly. The need for that exceptional course to be specifically articulated was emphasised by the Chief Justice in Parker v Borg [2002] QSC 215 where his Honour said:

"The meaning of this order is plain and the implicit rationale for it having been made as covering all costs, equally plain.

I would think it falls to a defendant in this situation, seeking to have the recoverable costs limited, to ensure that the order made is specifically limited, otherwise where an order is made in the terms used by this learned judge it should, in my view, receive its natural interpretation; that is, as covering the costs of the proceedings as against all defendants."

In the circumstances of this case the natural interpretation of the order and for that matter the words of the terms of settlement and release and discharge, ought apply here. Applying this interpretation to the task which befell the cost assessor would mean in the assessment of a single cost item which all or some component of was incurred in relation to the claim against the first defendant:

(a) if there was information before the cost assessor allowing him to conclude that an identifiable portion of that cost was not incurred in relation to the claim against the first defendant, that portion should not have been assessed as a cost of or incidental to the claim against the first defendant;

(b) but where there was no information before the cost assessor allowing him to be able to make such a conclusion, other than the general proposition that the item was for the benefit of the plaintiff's claim against each defendant, then the whole of the costs amount should have been assessed as a cost of or incidental to the claim against the first defendant.

In my view these conclusions flow naturally from the words of the order, the terms of settlement and the release and discharge. To have achieved a contrary outcome as urged by the applicant first defendant would have required the specific articulation in the order that there be an apportionment of common costs. That did not occur. In consequence of these findings, most, if not all of the argument to be advanced on the review, will fall away.

I pronounced my findings in the course of argument and having done so, acceded to an adjournment of the application before its final determination to allow the applicant to consider its position and make written submissions on the review. I also stayed the orders of the Registrar pending the final determination of the application when it resumes. Ancillary orders were made.