Legal principles - costs
78It is necessary to deal with the question of costs. This issue was considered at the same time as the hearing of the substantive issues, and it is therefore appropriate for me to determine the issue in this judgment. I should observe that costs are a subject about which whole textbooks are written. This is understandable because in many cases they often equal, or perhaps even dwarf, the amount being contested.
79Under section 98 of the Civil Procedure Act 2005, subject to rules of court, costs are in the discretion of the Court: section 98(1)(a). Furthermore, the Court has full power to determine by whom, to whom and to what extent costs are to be paid: section 98(1)(b).
80It is clear that the exercise of the costs discretion is compensatory rather than punitive: Ohn v Walton (1995) 36 NSWLR 77 at 79 (per Gleeson CJ).
81In general terms, the exercise of the discretion in relation to costs depends upon matters of impression and evaluation: James v Surf Nominees Pty Ltd (No 2) [2005] NSWCA 296 (in relation to apportionment). The exercise of the Court's discretion as to costs ultimately requires an assessment of what is fair in all the circumstances: McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 at [22] per Ward J.
82Under rule 42.1 of the Uniform Civil Procedure Rules 2005, 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. It has been noted that the rule "speaks for itself. However, judicial exposition has noted that it means that a person seeking to displace its prima facie effect must show that there is something out of the ordinary in the case in order to justify the departure": Hastings Point Progress Association v Tweed Council [2010] NSWCA 39 at [18] (per Young JA). Clearly some greater justification is required to order costs against a successful party, as opposed to refraining from ordering that costs follow the event.
83In Oshlack v Richmond River Council (1998) 193 CLR 72, the High Court considered the exercise of a discretion not to award costs in relation to proceedings in the Land and Environment Court. Section 69(2) of the Land and Environment Court Act 1979 (NSW) provided that, subject to the rules and subject to any other act, costs of and incidental to proceedings were in the discretion of the Court and that the Court might determine by whom and to what extent costs were to be paid. Importantly, section 74(1)(e) authorised the making of rules with respect to the costs of proceedings in the Court, but no rules made thereunder were relied upon in argument on the appeal: see [19] (per Gaudron and Gummow JJ).
84Gaudron and Gummow JJ observed at [22] that the power conferred under section 69 of the Land and Environment Court Act "is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent". Whilst the legislative context in Oshlack is far removed from the present one it is plain that the relevant discretion is to be likewise exercised.
85McHugh J however observed at [67]-[69]:
[67] The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[68] As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.
[69] The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
"No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct."
"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
86After quoting the above passage of McHugh J from Oshlack, Campbell JA in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 (with whom Macfarlan and Young JJA agreed) observed at [98]:
Though McHugh J's judgment was a dissenting judgment, I did not see anything in the joint judgment of Gaudron and Gummow JJ or in the judgment of Kirby J (all three of whom made up the majority) that is to the contrary. Its statement of principle seems to me, with respect, to be correct as far as it goes. However, because it states when the court may properly depart from the usual order as to costs it still leaves a discretion as to whether, in any particular case that falls within the scope of the examples that McHugh J gives, it is appropriate for the court actually to depart from the usual order as to costs. Further, the list of examples that McHugh J gives does not purport to be an exhaustive listing of the circumstances in which an overall successful party ought not receive costs, or ought bear costs of the other side. Nor does his Honour seek to differentiate the sort of circumstances in which an overall successful party should not receive costs (with the effect that each side bears its own costs) from the circumstances in which the overall successful party should pay the costs of the loser.
87The lack of reliance placed on any rules in Oshlack is of some importance to the present case, in which the discretion encapsulated in section 98 of the Civil Procedure Act 2005 is subject to rule 42.1 of the Uniform Civil Procedure Rules 2005. Indeed, in Hastings Point Progress Association v Tweed Council [2010] NSWCA 39, Young JA observed:
[22] Care must be taken in this area of the law of costs, when considering past authorities, to distinguish between cases under the former s 69 of the Land and Environment Court Act 1979, those under the general law as it existed before 2005 and those decided under the Civil Procedure Act 2005 and the UCPR: see Anderson v NSW Minister for Planning (No 2) [2008] NSWLEC 272; 163 LGERA 132.
...
[24] Oshlack has been considered on over 40 occasions in reported cases. The actual decision depended on the terms of the cost provisions in the Land and Environment Court Act 1979, s 69(2) (legislation which contained no equivalent to UCPR Pt 42(1)) and only Kirby J considered the fact that the litigation might be classed as "public interest litigation" to be a relevant factor. However, despite this, in time it has come to be generally recognised that, in appropriate circumstances, the fact that litigation can properly be classed as "public interest litigation" may be a proper reason for making no order for costs despite the provisions of UCPR Pt 42(1).
88Of course, it should be noted that there is no suggestion that Mr Bryant was engaging in what could be described as 'public interest litigation' in the present case.
89Finally, it should be noted that in the passage quoted from McHugh J in Oshlack, citing Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, there is a reference to misconduct taking the form of a party prosecuting the matter solely for the purpose of increasing the costs recoverable (although the case cited, being Hobbs v Marlowe [1978] AC 16, is an insurance case concerned with an increase in an amount claimed by the plaintiff in order to be awarded costs appropriate to that larger amount). There was some suggestion in the submissions of the defendant that Mr Bryant did not want reinstatement but his intention was to bankrupt the defendant and force it into liquidation (see defendant's final submissions at [47] and [54]). I will return to this point later.
90In final submissions, counsel for the plaintiff brought my attention to Ritter v Godfrey [1920] 2 KB 47. The headnote suggests that the defendant in that case wrote to the plaintiff "warmly repudiating" the action and was written "in a tone of levity and in somewhat insulting terms". The action was subsequently dismissed but the trial judge refused to give the defendant costs on the ground, mainly, of the attitude taken by him in the correspondence.
91The Court of Appeal however held the correspondence did not provide a basis for the exercise of the judicial discretion to refuse to award costs to the successful defendant. Atkin LJ came to the conclusion that although discourtesy or insulting language were not as uncommon as they might be, a plaintiff provoked to bring unfounded litigation was not entitled to have his feelings salved by escaping costs: at 63.
92Of course the circumstances in the present case are somewhat different as it is the successful plaintiff, Mr Bryant, who would have a reasonable expectation that costs would follow the event.
93In Dal Pont, The Law of Costs (2nd edition, 2009), the author makes it clear that the fact that an unsuccessful party would find it financially onerous to pay costs is not by itself a ground for the court not to make the usual order as to costs (see [8.28] and the cases discussed there), nor is the fact that the unsuccessful party is a voluntary association (see [8.30]). However the refusal to mediate or negotiate is regarded as a relevant factor (see [8.46]) and sits well with the statutory prescription to facilitate the just, quick and cheap resolution of the real issues in dispute: section 56, Civil Procedure Act 2005.
94Allsop P made the following observations in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd and Ors [2008] NSWCA 243 in relation to a number of sections of the Civil Procedure Act:
[160] Giving due weight to the realities of life in running a long and complex trial and the vicissitudes of the appreciation of the evidence given, it cannot be emphasised too strongly that it is the responsibility of the parties, through their legal representatives, to exercise a degree of co-operation to express the issues for trial before and during the trial. Such co-operation can now be taken as an essential aspect of modern civil procedure in the running of any civil litigation, including hard-fought commercial cases. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overland [2001] FCA 1333 at [4], expressly approved in Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116 (Heydon JA, with whom Mason P and Young CJ in Eq agreed); Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 at [59]-[60] (Ipp JA, with whom Sheller and Hodgson JJA agreed); Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265 at [4] (Bryson JA with whom Basten JA agreed); and Hooker v Gilling [2007] NSWCA 99 at [52] (McColl JA, with whom Ipp and Basten JJA agreed).
[161] The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives therefore flows most clearly from the statutory duty of a party and his, her or its legal representatives in civil proceedings to assist the court to further the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute and to participate in the processes of the Court to that end: see Civil Procedure Act 2005 (NSW), 56. It may be that the provision no more than restates the proper approach of the modern law of procedure reflected in cases such as Nowlan v Marson Transport. It places the proper approach, however, on a firm statutory foundation. These principles can be seen to be reflected in the longstanding rules of pleading requiring any matter that may cause surprise to be pleaded.
[162] An enhanced requirement of clarity and disclosure in modern civil litigation can be seen in Australia and England from at least the early 1990s: see the discussion of the "cards on the table" approach by Ipp J (as his Honour then was) in Boyes v Colins [2000] WASCA 344; 23 WAR 123 (with whom Pidgeon and Wallwork JJ agreed), citing Mercer v Chief Constable of the Lancashire Constabulary [1991] 1 WLR 367 and Khan v Armaguard Ltd [1994] 1 WLR 1204. Indeed, from the late 1970s and early 1980s, the Commercial List of this Court (in which List this hearing took place) has been sought to be run on the strict basis of the clear and full enunciation of issues for trial, in a way that has always demanded the fullest co-operation among parties and legal practitioners to delineate and illuminate the real issues in dispute.
[163] The clear statutory duty to assist the Court, and, in a practical way, to co-operate to bring forward the real issues in dispute, encompasses the requirement to be clear and precise in the illumination of the issues for trial. The occasion for this is not merely pleading (using the word broadly to encompass the modern commercial list summons and defence), it extends to all aspects of the engagement in the Court's processes. For similar responsibilities in the conduct of references, see Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 at [55]-[56].
95On several occasions in the Court of Appeal, His Honour had made similar comments: see Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36]-[38]; Bi v Mourad [2010] NSWCA 17 at [47]; Richards v Cornford (No 3) [2010] NSWCA 134 at [98]-[110].
96Of course, parties (although none here) may choose to make an offer of compromise under UCPR rule 20.26 or rely upon a Calderbank offer. Both types of offers are the subject of many decisions in this Court. Depending upon the outcome in the litigation serious costs consequences may follow. These species of offer play no part in the current case.
97However even in the absence of a rule 20.26 offer or a Calderbank offer, the Court is entitled to look at the conduct of the parties throughout the proceedings, including unsuccessful attempts made at settlement, in the exercise of a discretion on costs: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [40]; Old v McInnes and Hodgkinson [2011] NSWCA 410 at [28]-[34]; Whitney v Dream Developments [2013] NSWCA 188 at [41]-[44].
98Hence an offer which could be regarded as not genuine, or alternatively an unreasonable rejection of a proposal, could equally be taken into account in the exercise of the relevant discretion.
99In considering an offer, and in particular whether or not it can be regarded as reasonable the usual factors are relevant, namely the stage of the proceedings, any time provided for acceptance, the extent of the compromise, the offeree's prospects of success and the clarity of the offer: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344.
100Offers that do not involve only monetary conditions warrant special attention. Where what was offered is not something sued for, or even with amendment available in the litigation, a Court is entitled to consider the reasonableness of such an offer.