Hawcroft General Trading Co Pty Ltd v Hawcroft

Hawcroft General Trading Co Pty Ltd v Hawcroft - [2017] NSWCA 148 - NSWCA 2017 case summary — Zoe

Judgment

THE COURT: On 11 May 2017, this Court allowed the appeal brought by Hawcroft General Trading Co Pty Ltd (the Company), set aside the orders made at first instance, and declared that it was entitled both legally and beneficially to the proceeds of a particular life insurance policy: Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91. The Company's success resulted from acceptance of a submission which had not been advanced before the primary judge, based on the effect of an entire agreement clause in a "Development Agreement" between the parties, entered into months after the transactions which were at the forefront of the trial. Indeed, the construction placed upon that clause was inconsistent with the Company's pleaded case, and had only been faintly raised in its written submissions on appeal.
This Court granted leave to the parties to provide submissions on the form of the declaration, and also on the question of costs at first instance and on appeal. Submissions have been filed within the time specified.
Neither party wished to be heard as to the form of the declaration, and so no further orders are required in that respect. However, the parties have made substantially divergent submissions as to the exercise of the discretion as to costs, both at first instance and on appeal.
The Company submitted that costs should follow the event on the appeal, given that it was entirely successful, and that the respondent (Jennifer) was entirely unsuccessful, including on her notice of contention. In respect of the costs at first instance, the Company "entirely accepts that the entire agreement clause (clause 15.7) was not pleaded and a conceptually different - and indeed inconsistent - case was pleaded and presented at trial" (submissions filed 2 June 2017, paragraph [11]). The Company accepted that it ought not receive the entirety of its costs at first instance, but noted that Jennifer's claimed beneficial interest contentions, as to which she was entirely unsuccessful, had taken up a substantive period of time, and by corollary, costs. The Company submitted that Jennifer should be ordered to pay one half of its costs of the proceedings below.
Jennifer submitted that this was an appropriate case to deny the successful Company its costs, both of the appeal and of the proceedings at first instance. She emphasised that the point on which the Company succeeded on appeal was not argued before the primary judge and was inconsistent with the pleaded case advanced by it below, and that, but for that point, the primary judge would have been correct to grant relief in favour of Jennifer. She said that she should be compensated for her costs in achieving a successful result at trial, which was the correct result on the arguments advanced at trial.
In respect of the costs in this Court, Jennifer submitted that the appeal answered the description given in Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [123]: "[I]f the circumstances are such that the entire appeal process has been necessitated by the failure of an appellant to take a point in the court below, it can sometimes be appropriate for the appellant to pay the costs of both parties of the appeal notwithstanding that the appellant has succeeded in the appeal (Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 378 concerning the costs in the Full Court), particularly when that point is not taken until at or very shortly before the hearing of the appeal (Miller v Miller (1978) 141 CLR 269 at 276-277)."
Jennifer observed that the new point was not taken by the Company until the commencement of oral address, that if it had been taken below, Jennifer's claim would have been dismissed, that there was no apparent reason for the point not to be taken below, and so the entire appeal process had been necessitated by the Company's failure to do so.
Finally, Jennifer pointed to the fact that as executrix and sole beneficiary of the deceased estate of Martin, she held one third of the issued share capital in the Company, such that a decision that there be no order as to the costs, either at first instance or on appeal, would work a practical injustice to her, because she would effectively be burdened with not only her own costs but also a one-third share of the Company's costs.
We agree that the Company should pay Jennifer's costs at first instance. The point on which the Company succeeded was inconsistent with the case advanced by the Company at first instance. The point on which the Company succeeded was a pure question of law which could have been raised at first instance. It may be that the reason for that course related to the circumstances in which Jennifer had originally sought a declaration, as described in this Court's primary judgment at [19]-[25] and [128]-[133], but it is not necessary for present purposes to express a view as to why this occurred. The fact remains that it is that consideration which warrants the highly unusual exercise of discretion as to costs ordering that the Company pay the whole of Jennifer's costs at first instance. It is only because the Company was permitted (without opposition by Jennifer) to maintain a new submission on appeal which was inconsistent with its case at first instance that the Company has enjoyed any substantial success at all. In those circumstances it is appropriate for the Company to bear all of Jennifer's costs at first instance. Although Jennifer failed in relation to her submissions based on beneficial interest, this is not a case where a more limited costs order should issue.
In relation to the costs of the appeal, the critical consideration is that the new and decisive point was only barely mentioned in written submissions, and even then was not advanced as a complete answer to the appeal. As a matter of substance, the point on which the Company succeeded was only advanced orally when the appeal was heard. In those circumstances, there is force in Jennifer's submission that the entire appellate process was caused by the Company's delay in taking what turned out to be the determinative point. However, it remains the fact that Jennifer was unsuccessful not only in relation to this issue, but also in relation to the submission based on beneficial interest. Further, although we note Jennifer's submission that she will end up bearing one third of the costs incurred by the Company, we do not consider that this impacts upon the discretion as to costs, because that was always the consequence of Jennifer commencing proceedings against the Company.
In this Court's principal judgment, one of us expressed the preliminary view that the Company should not receive its costs at first instance or on appeal, while the other members of the Court flagged for the parties' attention the Company's different stance on appeal as relevant to the discretion as to costs: see at [4], [51]-[52] and [168]. Having considered the parties' submissions on costs, we are all of the view, for the reasons stated above, that the Company should pay Jennifer's costs at first instance, but that there be no order as to the costs of the appeal.
Accordingly, the Court's orders are: 1. The defendant (Hawcroft General Trading Co Pty Ltd) pay the costs of the plaintiff (Jennifer Hawcroft) at first instance. 2. There be no order as to the costs of the appeal, with the intent that the parties bear their own costs of the appeal.

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