HM&O v Ingram

Judgment 1HIS HONOUR: I gave judgment in these proceedings on 31 August 2012 [2012] (NSWSC 958). I shall not repeat what I said in those lengthy reasons as to the nature of the proceedings and the issues that were raised and decided. 2The plaintiffs' claim was for damages of $4.8 million together with stamp duty and acquisition costs (in respect of their purchase of the defendants' business), together with interest. I found that the plaintiffs were entitled to damages of $10,000, including interest, and no more. That finding was based on a discrete and minor part of the plaintiffs' claim. 3In relation to costs, I expressed the tentative view (at [244]) that the plaintiffs had in substance failed and that the defendants should have their costs. 4Today, the plaintiffs submit that they should have their costs on the basis that costs should follow the event (see UCPR r 42.1). Alternatively, and bearing in mind the general discretion as to costs provided by s 98 of the Civil Procedure Act 2005 (NSW), the plaintiffs submit that each party should pay their own costs. 5The defendants seek their costs, and an order that they be assessed on the indemnity basis. Further, the defendants seek interest on costs. 6The plaintiffs submit that there was an "event" in their favour: namely, judgment for the sum of $10,000. To my mind, the assessment of the relevant "event", for the purposes of r 42.1, must be undertaken as a matter of substance, not as a matter of form. I do not accept that a judgment for $10,000, inclusive of interest, in full answer to and discharge of a claim for close to ten million dollars (once interest is taken into account) represents any degree of success. On the contrary, I consider that it represents effectively a loss. 7Thus, looking at the question as one of substance, I do not think that there is a relevant "event" in favour of the plaintiffs. 8If that assessment were wrong, then nonetheless the general discretion provided by s 98 would entitle the Court to come to the same view, and in the exercise of that discretion I would do so. 9Thus, subject to a number of individual considerations, I remain of the view that the defendants have in substance succeeded and should have their costs. 10However, there are particular matters to which Mr Loewenstein of counsel referred. One was the fact that his clients had made an allegation of misleading or deceptive conduct, which allegation had been denied. 11At the end of the day, there is no doubt that the defendants made, in substance, the fundamental representations, as to compliance with the applicable Australian Standard, alleged by the plaintiffs. In saying that, I disregard the absurd and repetitive complexity with which the representation case was pleaded. It was never an issue (nor could it be) that the representations were made, to the extent that they were contained in the documentary material which on any view was given by or on behalf of the defendants to the plaintiffs. 12Nor is there any doubt, having regard to the findings of the referee adopted by consent, that as to seven of the 31 items of equipment in question, the representations were misleading or deceptive. 13Thus, as the proceedings evolved (and they did so with painful slowness), the question was what followed from those, eventually, uncontroversial facts. 14I came to the view that the plaintiffs had conspicuously failed to prove reliance. That view was based on a number of things. One is that I did not find the relevant witnesses called by the plaintiffs to be impressive. The other was that the plaintiffs had failed to call a witness who in my view was relevant to the question of reliance. 15Thus, the plaintiffs failed in their fundamental case, and failed to substantiate their claim for return of the purchase price, acquisition costs and interest thereon. 16Nonetheless, I found that there were costs incurred (or to be incurred) by the plaintiffs, which would not have been incurred had the equipment been compliant in its entirety, as represented, and not non-compliant as to some seven items. That is how I came to the assessment of $10,000 in damages. I repeat that in my view that is, in the context of these proceedings, a nominal award: perhaps, the 21st century equivalent of a farthing. 17The courts have long cautioned against splitting cases up into discrete issues. Nonetheless, I think, in considering the general discretion as to costs, I should not put out of mind entirely the consideration that there was a discrete hearing, pursuant to the order for reference, on the question of compliance. In that discrete hearing, compliance was in issue as to each and every one of the 31 items of equipment. The plaintiffs succeeded as to seven and failed as to 24. One may say, conversely, that the defendants failed as to seven, and succeeded as to 24. 18In my view, it is appropriate to recognise that relative degree of success and failure in respect of the costs of the reference. I come to that view because, as I have said, the reference was a discrete event and the costs in respect of it can be isolated, and quantified either through the process of agreement or through the process of assessment. 19A broad brush way of doing that is to order the defendants to pay one quarter of the plaintiffs' costs of the reference, including of the costs paid or payable to the referee. 20Returning to the proceedings at large, I remain of the view that, subject to what I have just said, the defendants should have their costs. There is, however, an exception. The defendants qualified someone to give what was represented to be expert evidence as to the value of the business. In my view, that expert evidence was entirely useless, because (as it appeared in the course of cross-examination), the expert in question, Mr Bridger, had not attempted to value the business. What he had sought to do was to replicate the approach to assessment and value undertaken by the plaintiffs. See at [212], [213]. I do not think that it is appropriate to order the plaintiffs to bear any part of the costs incurred in respect of Mr Bridger's evidence. 21In circumstances where there will be costs payable each way, it is in my view appropriate that the costs should be set off. It is also appropriate, in my view, that the amount payable by the defendants to the plaintiffs pursuant to the judgment to be entered should be set off against costs payable by the plaintiffs to the defendants. 22I turn to the claim for indemnity costs. Mr Curtin of senior counsel relied on criticisms that I had made of the way in which the plaintiffs presented their case. I do not think that those criticisms, considered individually or jointly, amount to sufficiently delinquent conduct to justify the making of an order for costs on the indemnity basis. Further, I think, there is substance in Mr Loewenstein of counsel's response (for the plaintiffs) that the criticisms that I had made of his client's approach to the case could be applied, in substance, to many details of the defendants' presentation of their case. 23It is hard to escape the impression that each of the parties decided to serve the other as they themselves had been served. In those circumstances, whilst there is room for criticism of the approach taken by each, I do not think that the criticisms that can be made justify the ordering of costs on the indemnity basis. 24Finally, there is an application for interest on costs. Mr Loewenstein submitted that such costs should only be ordered in exceptional circumstances. I do not think that this is correct. 25The question of interest on costs is approached on the basis that costs orders made by the Court should more fully compensate the party in whose favour costs are ordered. That approach was outlined by Campbell J in Lahoud v Lahoud [2006] NSWSC 126, and followed by me in Ingot Capital Investment v Macquarie Equity Capital Markets (No 7) [2008] NSWSC 199. 26In my view, particularly having regard to the delay between commencement of these proceedings and resolution, and having regard to the fact that the resolution was protracted by events that have been recounted in earlier judgments and need not be recounted now, it is appropriate to order interest on costs. 27Because I propose to order a set off of costs, justice demands that interest should run on costs (to the extent that they are payable) incurred by each party. If I were not to make the like order in favour of the plaintiffs, to the extent that they should have their costs, then the set off would work a significant injustice. 28For those reasons, and bearing in mind that I have not yet entered judgment, I make the following orders: