This summary has often been referred to in subsequent decisions of Full Courts of this Court with approval: see eg Australian Trade Commission v Disktravel [2000] FCA 62.
5 Forster v Farquhar [1893] 1 QB 564 was a case in which a successful plaintiff was ordered to pay the defendant's costs of the items of special damage which the plaintiff failed to recover. The claims were not made vexatiously or oppressively - they merely failed. At p 570 Bowen LJ said:
"The real controversy in the present action was as to the damage suffered, and the question as to damage, though not an issue in the pleader's sense of the word, was a matter in controversy and one which could be split up into separate heads, each involving a different class of evidence. For all purposes of justice these separate heads of controversy were different issues, though not different issues, nor even issues at all, in the sense in which pleaders use the term. Why should the defendants, whose defence has succeeded on the most expensive and the most important of these heads of controversy, bear the cost of litigating it? If by making a special order as to costs the judge could apply distributively to these heads of controversy the maxim that he who loses pays, was it not fair and reasonable so to direct? It seems to us that it was. So far from thinking that Cave, J., had no good cause for making the order he did, what he has directed appears to us, on the contrary, to be an exact and admirable instance of the way in which, in the hands of a competent and accurate judge, the rule as to good cause can usefully be applied."
6 As against that, in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 Jacobs J issued a caveat against too ready a resort to apportionment according to issue based outcomes, a caveat endorsed by the Full Court in Disktravel. The mere fact that the party against whom the judgment goes is successful on particular issues, does not of itself mean that this party should receive the costs of those issues. Yet the Full Court in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261, after referring to Hughes and Cretazzo, said that the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption (as to which see the majority in Oshlack) that a successful party is entitled to its costs.
7 Lord Woolf, MR, in R v Secretary of State for Transport; ex parte Factortame Ltd [1998] EWCA 2999 made the point that, at least to some extent, decisions of courts on costs reflect established practice, and the practice of courts does evolve. In His Lordship's view, in more recent times there has been greater concern with the extent to which the costs of litigation have been increased by the inclusion of issues on which the successful party failed. That is consistent with the views expressed by the Full Court of this Court in Dodds Family Investments (supra).
8 The third of the principles enunciated by Toohey J in Hughes, is that a successful party who fails on certain issues may be deprived of the costs of those issues, and may also be ordered to pay the other party's costs of those issues. When is it appropriate to order that a successful party should not merely be deprived of its costs of an issue on which it failed, but should also pay the other side's costs of that issue?
9 Re Elgindata Ltd (No 2) [1993] 1 All ER 232 at 237, in the judgment of Nourse LJ, contains a statement of applicable principles. Principle (3) is that if a successful party has caused a significant increase in the length or cost of proceedings by raising issues or making allegations on which he fails, then he may be deprived of the whole or part of his costs. Principle (4) is:
"Where the successful party raises issues or makes allegations improperly or unreasonably, the Court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party's costs."
A successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not, in the judgment of the English Court of Appeal, be ordered to pay any part of the unsuccessful party's costs.
10 As the decision of Nourse LJ makes plain, principle (4) flows from the terms of Order 62 rule 10 of the English Rules of the Supreme Court as they then stood; a provision which has no equivalent in the Federal Court Rules. But in Oshlack, at p 97, McHugh J described the traditional rule as being one in which a successful plaintiff ought not to be made to pay the costs of the other side unless he has been guilty of some sort of misconduct.
11 The applicants failed to obtain relief in relation to all bar one of the thirty-one representations on which they relied. But each representation should not be treated as if it were a separate case. In addition to individual representations, the applicants relied upon a course of conduct which was alleged to be misleading or deceptive.
12 The misleading and deceptive conduct which was the basis for the applicants' success on the representation alleged in par 69 of the Second Further Amended Statement of Claim ("2FASC"), first occurred on 27 October 1993. But events which occurred before and after that date were relevant to the issue of whether there was misleading and deceptive conduct, and to the question of causation. Thus the "line in the sand" drawn by Mr Browne, the negotiations in relation to it, and the whole process by which the terms of the proposed deal changed from the inception of the negotiations, were relevant to the case on which the applicants succeeded. Events which occurred after 27 October 1993 were also relevant, as they threw light upon the basis on which the ATG board approved the investment in Hayle. They were also relevant to the credit of Dr Westlake and Dr Harbour, which was a central issue.
13 I reject the submission that the costs awarded to the applicant should be confined, in terms of liability, to the issue tendered by par 69 of 2FASC. The whole course of dealing between the parties was relevant to the issue on which the applicants succeeded. It was not unreasonable or inappropriate for the applicants to expose the whole of the course of dealing between the parties. The fact that aspects of it were alleged to be representations which, for a variety of reasons, were either not established, or did not found any relief, provides an insufficient reason for denying the applicants their costs on the issue of liability.
14 The applicants sought to quantify their damages claim at a sum in excess of $40 million. They are entitled to the costs referrable to the quantification of the trading losses incurred as a result of postponing the close of Hayle Sydney from 15 November 1995 to 14 February 1996, as that is the foundation of the damages which I awarded.
15 An expensive and important aspect of the claim was the contention, on which the applicants failed, that but for the respondents' misleading and deceptive conduct, Hayle would have succeeded in obtaining venture capital in USA, and established a successful business there, or alternatively lost the chance of establishing such a business. I have no direct evidence as to the extent to which the costs of the proceedings were increased by the inclusion of this claim, but the evidence of two Australian accounting experts, and two American venture capitalists would not have been necessary had this claim not been made. The costs of preparing and adducing this evidence must have been substantial. The applicants also failed in recovering expenses incurred in attempting to secure a licensing arrangement, and expenses incurred in developing the 3M relationship.
16 It would be unfair for the respondent to be required to pay the applicants' costs referrable to the quantification of heads of damage which the applicants failed to recover. That is because the costs of the litigation must have been substantially increased by the inclusion of the unsuccessful damages claims, and because of the very limited measure of the applicants' success in relation to the overall damages claim.
17 The applicants did not act improperly or unreasonably in raising the issue of whether they would have obtained venture capital in the USA, and established, or had the chance of establishing, a successful business there. There was some evidence in support of the claim, but nevertheless the claim failed for the reasons given in my earlier judgment. No offer of compromise was made by the respondent, subject to the possible qualification that at an early stage in the proceedings, an offer of settlement of $20,000 was made by the respondent.
18 Counsel for the respondent accepted during the course of submissions that, consistently with established principle, the respondent would only be entitled to its costs of this issue if I came to the conclusion that the applicants had acted improperly or unreasonably in raising the issue. In those circumstances it would not be appropriate to follow the course adopted in Forster (supra). As I am not of the opinion that the applicants acted improperly or unreasonably in raising the issue, I decline to order that the applicants pay the respondents' costs of the issue.
19 The applicants sought an order that certain costs, thrown away by reason of the respondent changing the basis of its case, should be paid by the respondent in any event. The respondent did not oppose the making of an order to that effect. In view of the conclusion which I have reached on the issue of costs it may not be necessary for a specific order to be made in relation to some or all of these costs, but for more abundant precaution, I will make a specific order.
20 The orders which I make as to costs are:
(a) the respondent pay the applicants' costs of the proceedings, excluding costs referrable to the quantification of the damages claimed, other than costs referrable to the quantification of trading losses incurred as a result of postponing the close of Hayle Sydney from 15 November 1995 to 14 February 1996.