Khouri v Nicholas

HEARING DATE(S): Written submissions to 17 August 2010

DECISION: Orders as provided for in the judgment

CATCHWORDS: INTEREST - calculation of interest under s 100 - COSTS - applications for special costs orders

LEGISLATION CITED: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2004

Alamdo Holdings Pty Limited v Australian Window Furnishings (NSW) Pty Ltd [2008] NSWSC 7 AWB Ltd v Cole (No 6) [2006] FCA 1274 Booksan Pty Ltd v Wehbe (No 2) [2007] NSWCA 103 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 Colburt v Beard [1992] 2 Qd R 67 Cross v Queensland Newspapers Pty Ltd (No 2) [2008] NSWCA 120 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 Furber v Stacey [2005] NSWCA 242 Hally v Dennis (1955) 95 CLR 661 Hogan v Trustee of the Roman Catholic Church (No 2) [2006] NSWSC 74 Knight v Clifton [1971] Ch 700Lewis v Nortex Pty Ltd [2006] NSWSC 480 Liverpool City Council v Estephan [2009] NSWCA 161 London Welsh Estates Ltd v Phillip (1931)144 LT 693 CASES CITED: Masha Nominees Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2006] VSC 56 Monie v Commonwealth (No 2) [2008] NSWCA 15 NSW v Stanley [2007] NSWCA 330 Oshlack v Richmond River Council [1998] HCA 11 Re Hodgkinson [1985] 2 Ch 190 Roads & Traffic Authority (NSW) v McGregor (No 2) [2005] NSWCA 453 Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 Tarabay v Leite [2008] NSWCA 259 Trikas v Rheem (Australia) Pty Ltd (1964) 81 WN (Pt 1) (NSW) 504 Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 Wentworth v Wentworth [1999] NSWSC 638 Ritter v Godfrey [1920] 2 KB 47 Williams v Lewer [1974] 2 NSWLR 91 Skalkos v T & S Recoveries Pty Ltd [2004] NSWCA 281 Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 Xstrata Qld Ltd v Santos Ltd [2005] QSC 358 Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306

Anthony Khouri (Plaintiff) PARTIES: Joseph Nicholas (First Defendant) Lisbon Waste Depot Pty Limited (Second Defendant)

COUNSEL: Mr M Sahade (Plaintiff) Mr I Griscti (Defendant)

SOLICITORS: Oliveri Lawyers (Plaintiff) Martin Place Lawyers (Defendant)

1. I delivered written reasons for judgment on 13 July 2010 in which I disposed of the substantive proceedings. I made an order that the unsuccessful parties pay the costs of the successful parties in any claim against them, but gave leave to apply for some other costs order or orders, provided any such application was notified in writing to the other party and the court within 14 days, specifying the order sought. Pursuant to that leave, the parties made applications for special costs orders. These reasons relate principally to the costs orders to be made.

2. The substantive proceedings were finalised on the following basis:

· A verdict for the plaintiff against the 2nd defendant for $18,094.58 plus interest to be agreed or assessed. I directed the parties to bring in short minutes of order within 14 days in respect of the interest.

· A judgment for the 1st defendant against the plaintiff on the plaintiff's claim.

· A judgment for the plaintiff against the 1st defendant on the cross claim.

3. The parties agreed on interest payable by the 2nd defendant and I will direct the entry of judgment for the plaintiff against the 2nd defendant in accordance with that agreement.

4. The plaintiff applied for costs orders as follows:

(1) The 2nd defendant is to pay the plaintiff's costs of the plaintiff's claim. (2) The plaintiff is to pay the 1st defendant's costs of the plaintiff's claim if any such costs have been incurred separately to those of the 2nd defendant. (3) The 1st defendant is to pay the plaintiff's costs of the cross claim. 5. The defendants applied for costs orders as follows:

(1) Each party is to bear their own costs of the proceedings.

(1) The 2nd defendant is to pay 50% of the plaintiff's costs. (2) The plaintiff is to pay the 1st defendant's costs of the plaintiff's claim. (3) The defendants are to pay the plaintiff's costs of the cross claim. The substantive proceedings

The substantive proceedings concerned disputes between the plaintiff, Mr Khouri, and the defendants, Dr Nicholas, and his company, Lisbon Waste Depot Pty Limited.

Mr Khouri alleged that he had entered into an oral contract with the defendants, pursuant to which, and in reliance upon certain representations made to him by Dr Nicholas, he provided various sums of money to them totalling $108,154.18, and provided them with a motor vehicle valued at $14,900.00. He contended that the defendants breached the contract and, as against Dr Nicholas, that the representations he made were misleading and deceptive. Mr Khouri claimed damages in a total amount of $123,154.18 plus interest. Alternatively, he made claims for money had and received in respect of the money, and for goods sold and delivered in respect of the motor vehicle.

For their part, the defendants alleged a contract different from the one for which Mr Khouri contended. They denied any breach of that contract. They disputed the payments and the delivery of the motor vehicle to them. They disputed the claims for money had and received and for goods sold and delivered. For his part, Dr Nicholas denied the representations alleged and denied any misleading and deceptive conduct. In addition, Dr Nicholas cross claimed alleging misleading and deceptive conduct on the part of Mr Khouri, and breach of the contract for which the defendants contended.

I decided that the plaintiff's claims in contract and pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 failed. I found further that his claims for the return of the sum of $60,000 and for goods sold and delivered to the defendants in respect of the motor vehicle also failed.

In respect of the claim for the recovery of the $108,154.18 paid, on the basis of money had and received, I was not satisfied that any of the payments claimed by Mr Khouri were made to Dr Nicholas. I was, however, satisfied that Mr Khouri paid some amounts of money to, for or on behalf of the second defendant and that in respect of those payments it would not be unjust to order their return to the plaintiff on the basis of money had and received by the second defendant. I therefore allowed the plaintiff's claim for money had and received as against the second defendant for a total amount of $18,094.58.

In respect of the Cross Claim by Dr Nicholas I found that Mr Khouri did not breach his contract with Dr Nicholas, nor did he engage in any misleading or deceptive conduct upon which Dr Nicholas relied. Nor did Dr Nicholas prove any loss. The cross claim failed.

The defendants' principal submission was that the appropriate order concerning costs was that there be no order as to costs in respect of the proceedings as a whole.

An order in the form that each party pay their own costs has been the subject of criticism by the Court of Appeal, the better order being that each party bear their own costs: Liverpool City Council v Estephan [2009] NSWCA 161 at [75]. The effect of an outcome whereby the parties to litigation are to bear their own costs is that no party/party costs are payable: Re Hodgkinson [1985] 2 Ch 190; Trikas v Rheem (Australia) Pty Ltd (1964) 81 WN (Pt 1) (NSW) 504. Such costs as the parties may have incurred themselves, or any liability to pay practitioner/client costs, lie where they fall: Wentworth v Wentworth [1999] NSWSC 638.

The basis for the defendants' contention was, in summary, that the plaintiff was only partially successful, and only succeeded as to a relatively small part of his claim. It was submitted that the greater part the evidence concerned the alleged contractual arrangements and associated representations, at to which the plaintiff failed. To the extent that the plaintiff succeeded on the money had and received claim, this amounted to less than 17% of the total amount claimed. The determination of costs payable under separate orders would be costly and time consuming, and that the sensible and fair approach (the just, quick and cheap approach) is that each party bear their own costs. Reference was made to the decision of Barrett J in Alamdo Holdings Pty Limited v Australian Window Furnishings (NSW) Pty Ltd [2008] NSWSC 7. It was further submitted that in general terms the potential costs orders would mean that the respective entitlement to costs of the parties would cancel each other out.

The defendants' submitted, in the alternative, that the plaintiff should only recover 50% of his costs.

The plaintiff, however, contended that there were no special circumstances justifying a departure from the usual outcome and that costs should follow the event, and that the plaintiff should recover his costs in full. In the absence of any offer of compromise, it would be unjust to deprive the plaintiff of his entitlement to costs merely because he recovered less than he was seeking.

The starting point for any discussion as to costs is s 98 of the Civil Procedure Act 2005 (CPA), which gives the court power to award costs as between parties to litigation. Such costs are commonly described as "party/party costs". The court has full power to determine by whom, to whom and to what extent costs are to be paid, and on what basis. S 98(1) of the Civil Procedure Act 2005 provides: "Courts powers as to costs Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."

This power is subject to the rules and to any other statute: Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11]. It includes the power to make orders that costs be paid for a particular period or stage of the proceedings, or a proportion only of the total costs: s 98(4).

In the exercise of the discretion under s 98(1) the court is required to take account of the Guiding Principles in Div 1 of Pt 6 of the CPA, and in particular s 60: Skalkos v T & S Recoveries Pty Ltd [2004] NSWCA 281.

There is a presumption that the court will order that the costs follow the event: see r 42.1. Party/party costs are to be assessed on the "ordinary basis" unless the court orders otherwise: r 42.2.

These rules reflect the general law: see Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 at [24] - [34]; Ritter v Godfrey [1920] 2 KB 47 and Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271.

A successful party has a "reasonable expectation" of being awarded costs against the unsuccessful party: Oshlack v Richmond River Council [1998] HCA 11 at [134]. Fairness dictates that the unsuccessful party typically bears the liability for costs: Oshlack at [67]. This means that the successful party in litigation is generally awarded costs: Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]; Masha Nominees Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2006] VSC 56, unless it appears to the court that some other order is appropriate, either as to the whole or some part of the costs: Foots v Southern Cross Mine Management Pty Ltd[2007] HCA 56 at [26] - [27]; Furber v Stacey[2005] NSWCA 242 at [30] - [32].

The discretion to displace the presumption is to be exercised judicially in accordance with established principles: Oshlack, above at [22]; and it must be exercised judicially and "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer[1974] 2 NSWLR 91 at 95. The court may have regard to the particular circumstances of the case, including the evidence adduced, the conduct of the parties and the ultimate result: Knight v Clifton[1971] Ch 700; London Welsh Estates Ltd v Phillip(1931)144 LT 693; Hally v Dennis(1955) 95 CLR 661 at 664. It is for the losing party to establish a basis for any departure from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2)[2005] NSWSC 1111 at [10]; NSW v Stanley[2007] NSWCA 330 at [24].

In cases involving multiple issues, the general approach of the court is to order costs in accordance with the outcome of the proceedings as a whole without attempting to differentiate between particular issues on which a party may not have succeeded.

But the court may make a different order, particularly where the losing party has succeeded on particular issues: Cross v Queensland Newspapers Pty Ltd (No 2)[2008] NSWCA 120 at [13]; Tarabay v Leite[2008] NSWCA 259 at [76]; Roads & Traffic Authority (NSW) v McGregor (No 2)[2005] NSWCA 453 at [20]; Lewis v Nortex Pty Ltd[2006] NSWSC 480 at [18]ff .

There is no general rule as to identification of issues and the separation of discrete parts of proceedings: Colburt v Beard [1992] 2 Qd R 67. However, a court may more readily depart from the usual rule where an issue, or group of issues, is separable. Usually, however, a court will only deprive the successful party of the costs relating to an issue on which it lost when that issue was clearly separable, or dominant: Monie v Commonwealth (No 2)[2008] NSWCA 15 at [63] - [66]; Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 at [114] - [116]; Elite Protective Personnel Pty Ltd v Salmon (No 2)[2007] NSWCA 373 at [6].

Where there has been a mixed outcome in proceedings justifying apportionment, and mathematical precision is illusory, the exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11]; Booksan Pty Ltd v Wehbe (No 2) [2007] NSWCA 103; Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd[2008] NSWSC 7 at [32]; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2)[2008] FCAFC 107 at [5]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd(1993) 26 IPR 261 at 272.

It may also be appropriate, where each party has had substantial success, to order that there be no order as to costs: Hogan v Trustee of the Roman Catholic Church (No 2)[2006] NSWSC 74 at [40]; Xstrata Qld Ltd v Santos Ltd[2005] QSC 358; AWB Ltd v Cole (No 6)[2006] FCA 1274.

I agree with the general thrust of the defendants' submissions.

In my view the plaintiff has had limited success, restricted to a partial victory on one only of a number of claims. I am satisfied that the issues in respect of those claims were clearly separate, and dominant. I am further satisfied that the greater part of the time taken at the trial, and the preparation of the evidence for that hearing, related to the issues on which the plaintiff failed. But for the defendants' proposal I would have ordered that the plaintiff's recoverable costs as against the 2nd defendant be limited to 50%, and that he pay the costs of the 1st defendant.

I agree with the submission that, in those circumstances, the costs liabilities of the respective "camps" will effectively cancel each other out. To make conventional orders would be to put them both to further expense in quantifying their respective entitlements. If that were to involve assessment, that process is lengthy and expensive. The process is paper driven. It is a user (loser) pays system, commenced by application to the Manager, Costs Assessment. The filing fee is calculated by reference to the total costs claimed, and not just that proportion that is still in dispute between the parties. If the ultimate result is that the present parties would waste time and money coming to an outcome whereby the costs of the present proceedings were to cancel each other out, it would be contrary to common sense to make orders that require that course to be undertaken, and contrary to s 59 and s 60 of the Civil Procedure Act 2005.

For these reasons I am satisfied that the appropriate costs order in the present case is that each party is to bear their own costs, and I propose to exercise my discretion accordingly.

I enter a verdict for the plaintiff against the 2nd defendant for $18,094.58 plus the interest as agreed in the sum of $5,671.29, a total of $23,765.87.

I direct the entry of judgment for the plaintiff against the 2nd defendant in the sum of $23,765.87. This judgment is in addition to the judgments set out in my reasons dated 13 July 2010.

I revoke the costs order made on 13 July 2010 and order instead that each party is to bear their own costs of the substantive proceedings.

Insofar as the parties have incurred additional costs in respect of the interest issue and the applications for special costs orders, consistent with my reasons above, I order that each party is to bear their own costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.