The Court published its primary judgment at first instance in these proceedings on 28 September 2018: Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2018] NSWSC 1459.
The plaintiff, which in conformity with the primary judgment I will call GNI, wholly succeeded in its claim. Consequently, the Court made substantive orders being, first, a declaration that GNI was entitled to be indemnified by the defendant, who I will call WLC, in respect of the sale of certain shares in WLC that had been charged by GNI to secure the indebtedness of WLC to a third party under a particular deed (the indemnity claim). Secondly, the Court made a declaration that WLC was indebted to GNI in the sum of $6,565,398.06 (the debt claim).
On 19 October 2018, the Court published its second judgment at first instance, which made orders, including order 1 that WLC pay GNI's costs of the proceedings on the ordinary basis up to and including 22 December 2017 and on an indemnity basis thereafter: Gujarat NRE India Pty Ltd v Wollongong Coal Ltd (No 2) [2018] NSWSC 1622.
WLC appealed to the Court of Appeal, and, by judgment delivered on 11 June 2019, that Court allowed the appeal in part and set aside declaration 1 made on 28 September 2018, being the order in GNI's favour on the indemnity claim: Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135; (2019) 372 ALR 165. Consequently, the declaration made in favour of GNI on the debt claim remains in force.
The Court of Appeal delivered judgment on the issue of the costs of the appeal, and the consequential requirement for orders to be made varying the costs of the proceedings at first instance, on 16 July 2019: Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173.
The order made by the Court of Appeal concerning the costs of the proceedings at first instance was:
6. The question of the appropriate order as to costs at first instance be remitted to the Equity Division, noting that the remitter includes (a) the costs of the notice of motion filed on 12 October 2018 and (b) one half of the costs of WLC and one half of the costs of GNI of the application for orders and costs.
The Court of Appeal made the following observations concerning the meaning of par (b) of order 6 set out above:
[37] The costs of the application for orders and costs are separate from the [costs of the appeal]. It is reasonable to divide the costs incurred by the parties equally between submissions as to the re-exercise of the discretion as to costs on the appeal and costs at first instance. WLC has achieved a measure of success in its submissions as to the costs in this Court, which would fairly be reflected in GNI being ordered to pay one half of WLC's costs of WLC's submissions as to the costs in this Court, which corresponds to one quarter of WLC's costs of submissions as to the costs and orders. The parties' costs of preparing submissions as to the re-exercise of the costs discretion at trial must be included in the remitter to the Equity Division.
As I understand the Court of Appeal's reasons, these observations arise out of the fact that the parties made submissions to that Court as to the orders that should be made in respect of the costs of the appeal, and the new orders that should be made concerning the costs of the proceedings at first instance, given that the appeal had succeeded in part. Notwithstanding that submissions had been made to the Court of Appeal concerning the appropriate order to be made as to the costs at first instance, for the reasons given by the Court of Appeal at [30] to [35], that Court decided that it was preferable in the circumstances that the issue of the costs at first instance be remitted to the Equity Division. Consequently, the parties were required to incur the costs of making submissions to the Court of Appeal as to both the costs of the appeal and the costs at first instance, but that Court only decided the first of those questions and remitted the second. The Court of Appeal decided that it was reasonable to divide the costs of the costs argument in that Court equally between the two issues. As to the first issue, the Court of Appeal decided that GNI should be ordered to pay half of WLC's costs. Effectively, that meant that GNI would be ordered to pay half of one half of WLC's costs of the costs issue on appeal. That left half of WLC's costs and half of GNI's costs of the costs issue not having been dealt with, as the Court of Appeal remitted the issue of the costs at first instance, rather than deciding it. As the costs of the costs argument concerning the costs of the hearing at first instance, whether decided by the Court of Appeal or on remitter to the Equity Division, will depend on the order that is made concerning who should pay the costs of the proceedings at first instance, the only course available to the Court of Appeal was to remit to the Equity Division the costs order that should be made in relation to half of the costs incurred by both parties in respect of the costs argument in the Court of Appeal.
The parties exchanged their primary submissions on the issues that have been remitted on 20 December 2019 and reply submissions on 4 February 2020. The outstanding issues have been decided on the papers.
WLC correctly stated the issues that are before the Court for determination in par 2 of its primary submissions as follows:
(a) What is the appropriate order for costs in this Court in respect of the proceedings at first instance?
(b) What is the appropriate order for costs in this Court in respect of the notice of motion filed on 12 October 2018 (Stay Application)?
(c) What is the appropriate order for costs in the Court of Appeal in respect of the application for orders and costs in so far as that application concerned the orders and costs at first instance?
(d) What is the appropriate order for costs in the remitter?
WLC accepts that the appropriate order for issue (b) is that it should be ordered to pay GNI's costs of the stay application, and in due course an order to that effect will be made.
It will be appropriate to deal with the remaining cost issues in turn; the principal issue being the appropriate order for the costs in this Court in respect of the proceedings at first instance in issue (a).
The position taken by both parties, with which I agree, is that the costs of the proceedings at first instance cannot appropriately be dealt with on the usual basis that, as GNI succeeded in establishing a substantial claim against WLC, it should be treated as the successful party, and accordingly awarded its costs of the proceedings against WLC. That is through the exercise of the Court's discretion as to costs under s 98 of the Civil Procedure Act 2005 (NSW) (CPA), and by application of the usual rule in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that ordinarily costs should follow the event.
The parties correctly accepted that the indemnity claim and the debt claim were sufficiently separate and discrete that they should be treated as having raised materially distinct issues for the purpose of determining the appropriate costs order: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [308]; and Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [17].
The parties also agreed that the Court should adopt a broad brush approach in making the judgments necessary to exercise the costs discretion. As the Court of Appeal said in Bostik Australia at [38] (citations omitted): "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".
Realistically, this is the only approach available to the Court in matters as complex as the present, as the Court must largely exercise its discretion from the perspective of the Court itself, looking primarily at the testimonial and documentary evidence that was put before the Court, and having regard to the course of the proceedings. That perspective may differ from the perspective of the parties themselves, who will have an extensive understanding of the actual work undertaken in the conduct of their own cases - though they may be in little better position than the Court in respect of their understanding of the manner in which their opponents have conducted their cases. Disproportionate costs would be incurred in matters of any complexity, if the appropriate costs order were required to be determined on the basis of a collateral investigation, of a factual nature, as to a strict attribution of the parties' costs to the separate issues that have been won and lost.
The positions taken by both parties in their submissions to this Court were the same as the submissions that were made to the Court of Appeal.
GNI submitted, in its written submissions at par 2, that the Court should order WLC to pay 65% of its costs at first instance on the ordinary basis. It is not necessary to consider why it is that GNI accepts that it is no longer entitled to any portion of its costs being paid on the indemnity basis.
WLC's position, as stated in par 3(a) of its primary submissions, is that "WLC is to pay 50% of GNI's costs of the proceedings, on and from 21 May 2015, and other than in respect of GNI's application for a special costs order, as to which there is to be no order as to costs".
As I understand it, the basis for the order contended for by WLC is that the claim pleaded in GNI's original statement of claim was limited to the indemnity claim, upon which GNI ultimately failed. The debt claim was not introduced into the proceedings until an amended statement of claim was filed on 21 May 2015. WLC submits that all work done by the parties up to 21 May 2015 related to the indemnity claim, and accordingly, WLC should not be ordered to pay any of GNI's costs for that period.
WLC submitted that, for the period after 21 May 2015, on a broad brush approach, the Court should attribute the costs of the parties equally as between the two issues.
I assume that the carve out of the costs incurred by GNI for a special costs order relates to GNI's successful claim at first instance for an order that part of its costs be paid on the indemnity basis, which is an order that could not be supported given the monetary consequence of GNI's loss on the indemnity claim on appeal.
GNI responded to WLC's submission by contending that, even though it did not raise the debt claim until 21 May 2015, nonetheless, some of the costs that it incurred in the interim - including the filing fee - have proved to be relevant to the debt claim, and consequently have reduced the costs that GNI would have been required to incur otherwise in respect of that claim after 21 May 2015.
As to the 50% apportionment contended for by WLC, GNI's response was that the true apportionment of costs as between the debt claim and the indemnity claim would have justified an order that WLC pay 70% of GNI's costs of the proceedings, and GNI's reduction of that claim by 5% to 65% recognised that GNI should not be awarded some portion of its costs for the period up to 21 May 2015.
It will be convenient to begin by considering the course of the proceedings between their commencement and 21 May 2015, for the purpose of making a judgment as to how the Court should resolve the dispute between the parties concerning the proper treatment of the costs up to the end of that period.
The proceedings were commenced by GNI filing a statement of claim on 17 July 2014. GNI made the indemnity claim and sought damages or indemnity in the amount of $12,000,000, or in the alternative, restitution.
GNI pleaded the Coal Purchase Agreement, the Original Security Deed, the Tripartite Deed and the Override Deed, using the terms in the same manner as in the Court's principal judgment. GNI based its claim primarily on alleged implied terms in the Override Deed and the Security Deed.
WLC filed a defence which, among other things, relied upon clause 5.3 of the Override Deed, which was the basis upon which it ultimately succeeded in the Court of Appeal.
GNI filed an amended statement of claim on 30 January 2015, which introduced claims based upon an obligation on WLC to act in good faith, and a contribution claim. In this way, GNI increased the number of grounds that it ultimately relied upon at the final hearing.
As my involvement in the proceedings appears to have begun on 13 March 2017, and as the parties have not tendered evidence on the costs issues, it has been necessary for the Court to have regard to the contents of its file. For this purpose, I have not so much made findings of fact, but relied upon the contents of the file to form an overall impression of what happened in the proceedings before 21 May 2015.
It appears that the proceedings came before the Registrar or a judge five times in that period.
Although, on 10 September 2014, the parties were ordered to serve their affidavit evidence in accordance with a timetable, there is material on the file that suggests that GNI did not file any evidence before 21 May 2015. All the affidavit evidence relied upon on the final hearing was prepared after 21 May 2015.
On 26 November 2014, GNI was, by consent, given leave to file an amended statement of claim by 17 December 2014. It appears that GNI did not file the amended statement of claim in time, but did so at a later time without seeking further leave.
On 4 March 2015, WLC filed a notice of motion seeking an order under s 63(3) of the CPA seeking an order that the filing of the amended statement of claim be set aside, and also an order under rule 14.28 of the UCPR or s 61(3)(b) of the CPA that the whole of the amended statement of claim be struck out.
On 24 April 2015, Slattery J made an order that GNI serve on WLC any proposed further amended statement of claim by 27 April 2015.
On 6 May 2015, Slattery J gave leave to GNI to file a further amended statement of claim by 15 May 2015.
His Honour made the following costs orders:
3. The plaintiff pay the defendant's costs thrown away by reason of the amendment.
4. The cost of the motion will be the defendant's costs in the cause.
I take it that GNI exercised the leave granted by Slattery J by filing the further amended statement of claim on 21 May 2015.
The further amended statement of claim made amendments to GNI's indemnity claim by: introducing a claim based upon the proper construction of the Override Deed, amending GNI's good faith claim, introducing a claim based upon an implied term in the Override Deed, introducing a rectification claim, amending the contribution claim, introducing an estoppel claim, amending the restitution claim, and alleging a claim based upon a right of reimbursement.
By and large, it was these many grounds for GNI's indemnity claim that the Court was required to deal with in the primary judgment.
GNI added the debt claim at pars 135 to 164 of the further amended statement of claim.
GNI described the debt claim in the heading to the pleading as "Restitution Claim arising out of Statutory Demand served on 20 March 2014". This heading reflected the fact that GNI had initially attempted to enforce its debt claim against WLC by serving a statutory demand based upon the debt. On 16 March 2015, Wigney J, in the Federal Court of Australia, made an order setting aside the statutory demand: Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2015) 230 FCR 28; [2015] FCA 221.
Consequently, GNI sought leave to amend its amended statement of claim to add the debt claim.
In these circumstances, I am satisfied that WLC's argument that the proceedings in this Court up to 21 May 2015 were substantially concerned only with GNI's indemnity claim. If anything done in these proceedings has had utility for the determination of the debt proceedings, that is a collateral outcome and likely to be relatively insignificant.
It may be that legal work done in respect of the Federal Court proceedings has been of some use to both parties in the preparation of the debt claim in these proceedings. If so, that is also a collateral outcome. Wigney J made an order for costs against GNI when he set aside its statutory demand.
The costs order made in the present proceedings at first instance should not require WLC to pay any of GNI's costs for the period up to 21 May 2015.
The costs orders made by Slattery J on 6 May 2015 stand.
In respect of order 4 made on 6 May 2015, there is a question, in the events that have happened, as to the meaning of the expression "defendant's costs in the cause". As amended by the further amended statement of claim, the Court has had to deal with two claims by GNI, one where it succeeded and the other where it failed. However, GNI's notice of motion filed on 4 March 2015 was concerned only with GNI's pleading of the indemnity claim. GNI responded to WLC's application for an order striking out the amended statement of claim by volunteering amendments to that pleading, which were ultimately accepted by WLC as being adequate to cure the pleading defects that it perceived.
Consequently, in my view, the "cause" to which order 4 referred should be taken to be GNI's indemnity claim. Ultimately, WLC succeeded on that claim, so it is entitled against GNI to the costs contemplated by order 4.
It is now necessary to address the issue of the costs of the proceedings since 21 May 2015.
The question is whether WLC should be ordered to pay 65% of GNI's costs on the ordinary basis, or 50%, as GNI and WLC respectively contended.
I am comfortably persuaded that the proper order is that WLC pay 65% of GNI's costs on the ordinary basis.
This decision necessarily turns upon a broad brush assessment by the Court concerning the relative forensic effort required of the parties in dealing with the debt and the indemnity claims.
In my assessment, the determination of the indemnity claim largely turned on the proper legal analysis of the series of transaction documents dealt with in the primary judgment. That was not a fact-intensive exercise.
Ultimately, it was necessary for the Court to deal with a significant number of legal arguments concerning GNI's claim that WLC was not entitled to rely upon clause 5.3 of the Override Deed. The primary judgment dealt with those arguments in a significant number of paragraphs, being [104] to [270]. However, except for GNI's breach of duty of good faith claim (see [216] to [267]), which required the Court to analyse the evidence concerning WLC's financial position, when GNI alleged WLC ought to have repaid the debt it owed to UIL, the arguments upon which GNI relied required only conceptual legal responses.
The hearing was initially set down for four hearing days, and in my view it was much more likely than not that the hearing could have been completed in that period, or perhaps a day or so more, if WLC had not introduced into the proceedings, at the beginning of the hearing, the claim that the sub- underwriting agreement had been fabricated by GNI.
As GNI's 20 December 2019 submissions correctly note at par 11, I noted in a number of places in the primary judgment that the most significant forensic issue in the proceedings was whether GNI had fabricated the sub- underwriting agreement: see [23], [48], [51] and [60]. Correspondingly, the defence of the indemnity claim occupied a relatively minor part of the hearing after the introduction of the fabrication claim.
I will therefore make an order in respect of the costs of the proceedings at first instance that WLC pay 65% of GNI's costs after 21 May 2015.
That leaves two remaining costs issues for determination.
The first concerns the appropriate order for costs in the Court of Appeal in respect of the application for orders and costs in so far as that application concerned the orders and costs at first instance.
The second issue is the appropriate order for costs in the remitter that is now being determined.
I consider that the same order for costs is appropriate in respect of both issues. The parties, in substance, made the same submissions to the Court of Appeal as those that have been made in this Court. It was not unreasonable for the parties to have thought that the Court of Appeal may have been able to deal with the costs issue itself, although, it turned out that that hope was misplaced.
I consider that the appropriate order in each case is that the parties should bear their own costs of the two costs arguments. First, it was necessary for each of the parties to put submissions to the two Courts, in the absence of agreement. Secondly, each party has enjoyed some success. It may be that success in persuading the Court to give it 65% of its costs from 15 May 2015 is worth more to GNI than WLC's success in respect of the costs up to 25 May 2015 is worth to WLC. However, as the Court of Appeal has observed in respect of the costs of these proceedings, the respective values of the success achieved by each party may be a poor indicator of the costs incurred in prosecuting the respective claims.
Both parties have put submissions on the costs issues succinctly and helpfully, and I consider that, in a broad brush way, they have each achieved an equivalent measure of success.
Accordingly, I make the following orders:
1. Order the defendant to pay 65% of the plaintiff's costs of the proceedings at first instance after 21 May 2015 on the ordinary basis.
2. Note that orders 3 and 4 made by the Court on 6 May 2015 continue in effect.
3. For the purposes of order 4 made by the Court on 6 May 2015, order that the defendant's ultimate success on the indemnity issue has the effect that the defendant is entitled to payment by the plaintiff of the costs contemplated by order 4.
4. Order the defendant to pay the costs incurred in this Court in respect of the notice of motion filed by the defendant on 12 October 2018.
5. The Court makes no order for the costs of the parties in the Court of Appeal in respect of the application for costs and orders in so far as that application concerned the orders and costs of the proceedings at first instance, or the costs of the proceedings in the remitter from the Court of Appeal to this Court, with the intent that each party will bear those aspects of its costs.
[3]
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: 27 March 2020