I find it difficult to understand the submission that the applicant was not at fault. The applicant's written submission (at paragraph 7) blames his legal representative for not filing submissions as instructed, but portrays the applicant as being personally blameless: it was unclear whether this is a reference to his barrister or solicitor. At any rate, there is no assertion made in the applicant's affidavit in support dated 27 September 2019. Before me, his Counsel suggested the reference was to his barrister. For reasons that I come to now, I do not accept that the plaintiff is personally blameless whatever might be made of the reference to his earlier legal representatives.
[2]
Unsatisfactory explanation for failing to adhere to Court directions
There is no doubt that the applicant had fair and reasonable opportunity to submit as to appropriate costs orders. The applicant's written submissions do not cavil with the correctness of that proposition.
The circumstances in which the Court proceeded to make the costs order were referred to in the reasons for the orders [4] . It is unnecessary to repeat them here.
The Court expects parties to abide by its directions. In the context of dispositive orders, a basic reason for why they are commonly dealt with 'on the papers' is to limit judicial and administrative resources that apply to hearings. That carries a incidental if not direct benefit in savings in further costs being incurred by the parties by appearing in Court. In this case, the applicant plainly did not avail himself of the opportunity to make submissions as to the dispositive orders, including costs. This was not only in the face of a Court direction for him to do so, but also after having been prompted by, if not reminded, by the lawyers for the first defendant of the opportunity afforded to him to make submissions.
The only explanation for this failure to make submissions supplied by the applicant was the asserted existence [5] of a fee dispute with his Counsel at trial. That reference was sketchy: it did not indicate when the fee dispute with Counsel occurred. No indication was made as to any attempts to engage other Counsel. At any rate, nothing was said by the applicant why his solicitor, who acted for him at the trial and who filed the applicant's motion on his behalf, could not have made submissions in place of Counsel; or, if the worse came to the worse, the applicant could not make submissions himself. I reject the proposition that the applicant was 'blameless' in the explanation provided for his failure to put on submissions on costs.
It is only now, after an adverse costs order has made against him, that the applicant seeks the indulgence of the Court to seek an alternative order.
This conduct is not consistent with a party's obligations under s 56 of the Civil Procedure Act and would weigh against the discretion being exercised for the applicant's benefit.
Nevertheless, it is necessary also to consider the justice of the outcome and this focusses attention upon the merits of the argument now raised, albeit belatedly, by the applicant.
Further, the delay is not considerable and prejudice to the first defendant as a result of the bringing of this motion is addressed by the applicant's undertaking to pay the first defendant's costs of the motion.
[3]
The merits of the applicant's argument
In this section of these reasons it is necessary to say more about the way in which the applicant's case was presented and in what respects his case succeeded and failed against each of the defendants. In this regard, familiarity with my reasons in Khabiya No.1 is assumed.
In paraphrase, the applicant succeeded with his case of breach of warranty against the second defendant, the manufacturer and supplier of the product, the wall printing machines, on account of the defectiveness of the product. But he failed on his representation case. That representation case was brought against the first defendant as well as the second defendant. The applicant's argument was that the first defendant made verbal representations about the quality of the product, the provision of all 'after sales services' and what I described, in shorthand as the 'guarantee representation'. He then argued that the representations were all misleading or deceptive (and causative of damage or loss to him) and that the respondent engaged in such conduct not only on his own behalf, but also on behalf of the second defendant [6] .
It will be recalled that there was issue at trial as to whether the first defendant could be directly, or personally liable (the first defendant said he could not be) in relation to any misleading or deceptive conduct; or whether only the second defendant could be liable for misleading or deceptive conduct of the first defendant, who was the second defendant's agent (under s 139C of the Competition and Consumer Act 2010 (Cth)). On that argument, the applicant prevailed: I found that the conduct of the first defendant could result in direct liability being established, and could also be imputed to the second defendant as his principal. But the applicant failed against both defendants in establishing that they actually engaged in misleading or deceptive conduct in trade or commerce. This was because the pleaded representations were not established and/or did not cause any loss or damage.
As noted in my reasons for the costs order, the relevant 'event' (for the purposes of r 42.1 of the UCPR) is that the applicant failed in its case against the first defendant [7] . Conventionally, that would mean that he was liable to pay the first defendant's costs [8] .
Nevertheless the circumstances of other cases where there are multiple defendants (with one succeeding and another failing) do not represent immutable rules. Ultimately, the Court must follow the dictates of justice [9] . In my view, however, an onus rested upon the applicant to disturb the usual operation of the rules in order to establish that the second defendant, and not the applicant, bore the liability for the first defendant's costs in defeating the claim brought personally against him.
The basis for a Sanderson order (and 'Bullock' order) was set out in Gould v Vaggelas (1985) 157 CLR 215 where it was said that two requirements needed to be satisfied: (a) that it was reasonable for the plaintiff to proceed against the successful defendant; and (b) the conduct of the unsuccessful defendant made it fair to impose liability upon it for the costs of the successful defendant.
As I noted, the applicant submits that the Court of Appeal in Naidu recognised that, in some cases, a Sanderson order may be made where defendants are in the relationship of principal and agent. More accurately, the Naidu decision concerned whether it was reasonable and necessary to join an employer who was independent of a third party defendant - it was not clear that agency was part of such arrangement. The context of the decision (at [19]) suggested that there were statutory considerations in that case that might have made it reasonable and appropriate to join the employer. I do not think that the circumstance of any status that attaches to a relationship - be it employer - employee or principal- agent is of any significant weight.
At any rate, in my view, it was reasonable for the applicant to proceed against the first defendant as well: the applicant had a reasonably arguable case of direct liability against him on his representation case.
The usual circumstances [10] in which the second requirement for a Sanderson order are satisfied include where:
The unsuccessful defendant (here the second defendant) created uncertainty as to who was the proper defendant to join;
Where the plaintiff only joined the successful defendant because of information received from the unsuccessful defendant.
The decision of Coombes v RTA (No.2) [2007] NSWCA 70, cited by the applicant in his application, is perhaps an illustration of both of these circumstances. In my view, both requirements are to be assessed objectively, having regard to the position of the Plaintiff and what is actually (or constructively) known.
There is no evidence before the Court that would enable it to find that circumstances of this kind occurred in this case (not that the circumstances enlivening this order are exhaustive). At a practical level, this second requirement indicates that it is not only reasonable for the plaintiff to have joined the successful defendant, but necessary, if not, at least, appropriate to join the successful defendant because of the conduct of the unsuccessful defendant. That connotes some causal contribution by the unsuccessful defendant to the plaintiff's decision to join the ultimately successful defendant.
I am not persuaded that such conduct by the second defendant is established in this case. The plaintiff had what turned out to be a good claim against the second defendant, with whom it contracted, arising independently of any legal responsibility of the first defendant. The history of the proceeding indicates that, subjectively, the plaintiff was doubtful as to the identity of the contracting party. However, evidence before me indicates that even before a contract was finalised, the plaintiff was aware that the first defendant was the second defendant's "Official Global Representative" (see email of 22 May 2015). Then, within a month of the commencement of the proceeding, the First Defendant's lawyers informed the Plaintiff's lawyers that he had contracted with the Second Defendant. Eventually, the final iteration of the pleading indicated the contract claim was brought only against the Second Defendant. It is true that the Second Defendant was located offshore, which might have resulted in certain difficulties, such as in either serving originating process or possibly enforcing any judgment later obtained. Forensically, this meant that there was advantage for the plaintiff in joining the first defendant as well if a good claim could be brought against him. These matters go to the reasonableness of the joinder of the first defendant; but say nothing about the conduct of the second defendant in contributing to the plaintiff's decision to join the first defendant.
There is nothing before the Court to indicate that the applicant's joinder of the first defendant in another cause of action for which the second defendant might be jointly liable was anything other than the product of forensic choice by the plaintiff (who, it appears, was at all times legally represented); and was not contributed to by conduct of the second defendant. I see no reason why the usual risk (in terms of costs exposure) to a plaintiff of failure against one of multiple defendants should be transferred to the second defendant in the circumstances.
Contrary to what the applicant submits, the circumstances of actual or ostensible agency of the first defendant for the second defendant, and acts performed by the first defendant on behalf of the second defendant, did not necessitate the former's joinder. Such conduct provided the platform for the claim against the Second Defendant in contract. Although a representation case could be brought against the Second Defendant and the First Defendant, the Plaintiff took the risk that such claim might fail and that risk has materialised.
[4]
Endnotes
The reasons for the costs order are at Khabiya v Sachdeva (No.2) [2019] NSWDC 498 ('Khabiya No.2'). The timing for the filing of the motion satisfies the time limitation in r 36.16(3A) of the UCPR.
Khabiya v Sachdeva [2019] NSWDC 431 ('Khabiya No. 1')
Sanderson v Blyth Theatre Co [1903] 2 KB 533
Khabiya No.2 at [2]-[9].
No correspondence was tendered to support the assertion.
A further argument was made, but rejected, that the respondent was an accessory to misleading or deceptive conduct by the second defendant.
This being the 'practical result' of the applicant's claim against the respondent: Avopiling Pty Ltd v Bosevski [2018] NSWCA 146 at [172].
What Campbell JA described in Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 388 at [46] as a 'per-defendant order'
Chen v Chen (2009) VSCA 233 at [10b]
Hamilton et al, New South Wales Civil Procedure Handbook (2019) [r 42.1.100], p 990
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Decision last updated: 22 October 2019
Principles applicable to setting aside or varying orders
Ultimately it was put that because the Applicant filed his motion within the 14 day window provided for, the application could be considered under r 36.16(1) of the UCPR without the applicant needing to rely upon rr 36(2) or (3). In my view, the costs order I made did determine a claim for relief (r 36.16(3)(a)) such as to also enliven the Court's jurisdiction to set aside or vary the order. The ultimate issue is whether the Court should exercise its discretion to set aside the costs order and, in its place, substitute the costs order sought by the applicant.
The applicant relies upon the Court's established jurisdiction to re-open matters in accordance with the principles in Autodesk Inc v Dayson (No.2) (1993) 176 CLR 672 at 301-3.
Generally, the exercise of the Court's discretionary powers is shaped by reference to the case management objects referred to in ss 56-60 (incl) of the Civil Procedure Act 2005 (NSW).
Notwithstanding this, the authorities provide a guide to the circumstances by which the Court should exercise its discretion under r 36.16, which include consideration of: (a) whether the absent party had notice of a proceeding (or, in this case, procedure); (b) the reasons for its lack of involvement; and (c) the potential merits of the party's position: Northey v Bega Valley Shire Council [2012] NSWCA 28 at [17] & [29].
Consideration
The applicant submits that the costs order made against him was not made through any fault of the applicant, but because of his legal representative's failure to make the submission that the applicant instructed him to make. He submits that the Court's discretion to make a Sanderson order is appropriately exercised where there is a relationship in the defendants of principal and agent: Nationwide News Pty Ltd v Naidu (No.2) [2008] NSWCA 71 at [19]. The applicant says that the facts in this case clearly demonstrated that the first defendant acted as the agent for the second defendant.
The applicant submits that the Second Defendant's conduct necessitated the joinder of the First Defendant: it cloaked the first defendant as its agent; the Second Defendant partly performed the agreement that the first defendant entered on its behalf and the Second Defendant did not state in its defence that it should be wholly liable to the exclusion of the first defendant. The plaintiff asserts that the first defendant played a critical role in bringing about the loss against which the plaintiff recovered verdict against the second defendant and the making of a Sanderson order would be easily followed up by the First Defendant.
The first defendant questions whether the provisions in r 36.16 are even engaged. He was not an 'absent' party in the sense referred to in r 36.16 He says that if there truly was a dispute about Counsel's fees, then this was presumptively a dispute between Counsel and the applicant's solicitor - not the applicant himself. The first defendant says that assuming the jurisdiction arose, the principles from Northey which I alluded to earlier would not favour the discretion being exercised for the applicant.
Finally, in my view the circumstance that a Sanderson order might be easily followed up is an unwarranted additional requirement to those indicated in Gould and is irrelevant.
This means that even if the applicant had made timely submissions about this particular costs order, I would not have made the 'Sanderson' order which the applicant now seeks.
No basis has been established for setting aside or varying order 6 (or any other order) made on 13 September 2019.
In his Counsel's written submissions prepared for this application, the applicant accepts that he should pay the First Defendant's costs of the motion on the ordinary basis in any event.
Accordingly, the applicant's notice of motion filed on 27 September 2019 is dismissed and the applicant is to pay the first defendant's costs of the motion on the ordinary basis.