Georgallis v Manly-Warringah Sea Eagles Limited

Relevant legislative provisions and rules

1. Section 98(1) of the Civil Procedure Act 2005 (NSW) ("CPA") provides that, subject to the rules of court, costs are in the discretion of the court: 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. Part 42.1 of the UCPR provides as follows: 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.
3. Part 20.26 and Part 20.27 of the UCPR provide, where relevant, as follows: 20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. … (5) The closing date for acceptance of an offer: (a) in the case of an offer made two months or more before the date set down for commencement of the trial - is to be no less than 28 days after the date on which the offer is made, and (b) in any other case - is to be such date as is reasonable in the circumstances. … (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. … 20.27 Acceptance of offer (1) A party may accept an offer by serving written notice of acceptance on the offeror at any time during the period of acceptance for the offer. … (3) If an offer is accepted in accordance with this rule, any party to the compromise may apply for judgment to be entered accordingly."
4. Part 42.14 of the UCPR provides as follows: "42.14 Where offer not accepted and judgment no less favourable to plaintiff (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and …"
5. As indicated above, the plaintiff seeks an indemnity costs order. The defendant submits that the court should "otherwise order" under UCPR Part 42.14(2) and should make a costs order that the defendant only has to pay 25% of the plaintiff's costs of the proceedings.
6. It is first convenient to deal with whether the usual costs order should be made in favour of the plaintiff under UCPR Part 42.1 before consideration is given to the application for indemnity costs.
7. It is accepted that the "event" for the purposes of Part 42.1 is success for the plaintiff in obtaining a judgment for damages. To that degree the usual rule is that costs would 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.
8. The plaintiff submits that costs should follow the event.
9. The defendant submits that costs should not follow the event, in summary, for the following reasons: 1. By its Statement of Claim the plaintiff sought damages for breach of contract, for breach of Section 18 of the Australian Consumer Law and for estoppels by convention and by conduct. The plaintiff also claimed damages in the amount of $132,133.64; 2. At the hearing the plaintiff abandoned all claims other than the claim for damages for breach of contract which was heavily reduced. The determination of that issue involved a question of construction of the contract between the parties; 3. The plaintiff served affidavits from four witnesses and called evidence from three. It was submitted that that evidence was admissible and relevant only in relation to the misleading and deceptive conduct and estoppel claims. It was also submitted that evidence of the negotiation of the contract was not relevant or admissible in relation to the construction of the contract and that the plaintiff did not argue to the contrary; 4. To the extent the plaintiff was entitled to lead evidence of the relevant background to the contract, that evidence was limited and would not have been controversial; 5. There was ultimately no contest regarding the quantum of damages if the plaintiff succeeded. However, initially the plaintiff claimed a much larger sum which was only reduced when the defendant obtained discovery in relation to the plaintiff's current employment with the Penrith Panthers; 6. By reason of the plaintiff's claims which he abandoned at the hearing, the defendant was put to the expense in dealing with the evidence of the plaintiff's witnesses concerning the negotiation of the contract and the hearing was unnecessarily extended as a result. Also submissions were prepared on the basis of the causes of action which were abandoned; 7. It is clearly established that it may be appropriate to order the successful party be deprived of a proportion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]; 8. Having regard to these matters, the plaintiff should receive no more than 25% of his costs of the proceedings as agreed or assessed.
10. The plaintiff in his submissions submitted, in summary, as follows: 1. There was a valid Offer of Compromise served which was declined by the defendant and this was a proper basis for the award of indemnity costs; 2. There was no substance in the assertion by the defendant that the abandoned causes of action should lead to a different costs order. A court will generally only deprive the successful party of the costs relating to an issue on which it was unsuccessful when that issue was clearly dominant or separable: Tomanovic v Global Mortgage Equity Corp Pty Ltd (No 2) (2011) 288 ALR 385 at [107]. The other causes of action were not dominant or separable. It was submitted that the witnesses called were cross-examined and their evidence was relevant to understanding the history and context of the agreement; 3. The issues which were abandoned took little time and those causes of action were closely related to the factual matrix of the main issues; 4. Paragraph 9 of the Defence asserted a claim in relation to the intention of the parties which required the leading of evidence; 5. The plaintiff's current employment with Penrith Panthers went to the mitigation issue and there was at no time a denial by the plaintiff of this employment.
11. In response the defendant submitted in summary as follows: 1. While it was accepted that the plaintiff has, in a formal sense, obtained a judgment on the claim no less favourable to the plaintiff than the terms of the Offer of Compromise there should be a contrary order of the court. Exceptional circumstances are not necessary before the court may order otherwise: Regency Media v AAV Australia Pty Ltd [2009] NSWCA 368 at [15]. Further, the offer should not be regarded as a genuine compromise because of the limited reduction from the agreed damages; 2. Having regard to the circumstances already outlined, the defendant was never going to be ordered to pay 100% of the plaintiff's costs because of the abandoned causes of action which were clearly separable; 3. The abandoned causes of action were very weak; 4. Paragraph 9 of the Defence could not be rationally construed as an allegation that the parties held a specific and subjective intention. There was no application to rectify the contract and paragraph 9 of the Defence should be regarded as referring to the objective intention of the parties which emerges from the terms of the contract.

Consideration

1. One case in which it is appropriate for the court to depart from the general principle that costs follow the event set out in Part 42.1 of the UCPR is where a successful party has lost a clearly dominant or severable issue: Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [15]-[20] and Choo v Zhang (No 2) [2016] NSWCA 301 at [26].
2. In my view, the abandoned causes of action: 1. Were on the evidence always very weak; 2. Led to the preparing of affidavits and the calling of oral evidence which was unnecessary. Evidence of the background and context to the contract could have been called from the plaintiff; 3. Were abandoned partly at the commencement of the hearing and partly at the end of the hearing; 4. Increased the hearing time and the costs of the proceedings to some extent although not by about 50% as asserted by the defendant; 5. In my view the causes of action were clearly severable within the authorities. They required the plaintiff to establish different and hotly contested facts and raised different legal issues; 6. Were separate from the contractual issues. The plaintiff's point in relation to paragraph 9 of the Defence does not seem to be a strong one. Rectification was not asserted and therefore paragraph 9 of the Defence could only have been a reference to the common intention of the parties as deduced from the contract. This seems to be clear when paragraphs 15 and 16 of the Statement of Claim are reviewed, to which paragraph 9 of the Defence responds.
3. Accordingly, in my view some reduction in the amount of the costs to be awarded to the plaintiff should be made.
4. Standing back and looking at the evidence as a whole and the time which was taken in the proceedings relating to the abandoned causes of action, in my view I should make a different order to the usual order set out in Part 42.1 of the Rules. Taking into account my discretion and all the relevant matters including the submissions and the evidence (affidavit and oral), in my view I should make a prima facie order that the defendant pay 70% of the plaintiff's costs of the proceedings as agreed or assessed.
5. The question therefore turns to the rejected Offer of Compromise made by the plaintiff.
6. In circumstances where there is a valid Offer of Compromise, it is for the offeree to establish a proper basis for depriving the offeror of the prima facie entitlement to costs: Nominal Defendant v Hawkins [2011] NSWCA 93 at [53] following Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [35].
7. As submitted by the defendant, exceptional circumstances are not necessary before the court may "otherwise order" under the indemnity costs provisions: Regency Media v AAV Australia Pty Ltd [2009] NSWCA 368 at [15]. The discretion to otherwise order should be exercised having regard to all the circumstances of the case: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32].
8. Having regard to: 1. The abandonment of the various misleading or deceptive conduct and estoppel causes of action in the course of the final hearing at the trial; 2. The reference to those causes of action in the written submissions prepared by counsel for the purposes of the final hearing; 3. The preparation of affidavits and the calling of oral evidence at the final trial in apparent support of those weak causes of action, in my view the court should otherwise order in the circumstances of the present case.
9. In my opinion in the exercise of my costs discretion this is clearly not a case where an order for indemnity costs is warranted.
10. It is said that such an approach would discourage parties from narrowing the issues in dispute for the purposes of the trial. However, it also encourages parties to carefully review the evidence to determine which are the causes of action which can properly be maintained and supported by the evidence.
11. I therefore dismiss the application for indemnity costs.
12. In all the circumstances I exercise the discretion which I have in relation to costs by making the following orders: 1. The defendant is to pay 70% of the plaintiff's costs of the proceedings as agreed or assessed. 2. The plaintiff's application for indemnity costs is dismissed. .

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