Consideration
45It will be apparent that if costs ordinarily follow the event, the discretionary apportionment of costs between successful and unsuccessful claims and issues will be out of the ordinary. To some extent there is an unavoidable circularity in the equation, because the outcome to a great extent depends upon identifying "the event". The issue is not to be decided by discarding common sense or ignoring what is reasonable. Nor should one lose sight of the fact that the conduct of litigation is inherently perilous and unpredictable so that the self-defensive positions reasonably adopted by parties in the early stages of a case and before the outcome is known ought not always or necessarily with the benefit of hindsight be regarded as unreasonable. Burchett J adverted to this in Australian Conservation Foundation Inc v Forestry Commission of Tasmania (1988) 76 LGRA 381; (1988) 81 ALR 166 at 169 as follows:
"A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of the assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment."
46Similar sentiments were reflected in the remarks if Hodgson JA in Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [19]:
"[19] Further, in my opinion, the underlying principles concerning costs identified in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] and Ohn v Walton (1995) 36 NSWLR 77 at 79 (referred to in Turkmani at [13]) suggest that the application of these principles may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may be seen more readily as appropriate that the plaintiff be liable for the costs of unsuccessful severable claims or issues, even if it was reasonable to include those claims or issues."
47His Honour made the same point in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [9] - [10] as follows:
"[9] One further matter that was the subject of submissions was whether the principle that a successful party may be deprived of costs and may be ordered to pay the other party's costs, in respect of issues lost by the successful party where that issue was clearly dominant or severable, operates more strongly against a successful plaintiff: see Australian Conservation Foundation Inc v Forestry Commission of Tasmania (1988) 81 ALR 166 at 169, Richmond River Council v Oshlack (1996) 39 NSWLR 622 at 637, Hendriks v McGeoch [2008] NSWCA 53 at [104], Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [19]-[20], [38]-[39].
[10] In my opinion, generally this is so. Where a plaintiff's case fails, it may sometimes be appropriate to order the plaintiff to pay the costs of issues unsuccessfully raised by the defendant, even if those issues are severable, so long as the defendant acted reasonably in raising those issues. It is I think less often the case that a defendant would be ordered to pay the costs of severable issues unsuccessfully raised by an otherwise successful plaintiff. However, the requirements of s 56 of the Civil Procedure Act 2005 that parties assist the court to facilitate the just, quick and cheap resolution of the real issues on the proceedings, and take reasonable steps to resolve or narrow the issues in dispute, do apply to defendants as well as plaintiffs; and this is relevant to the exercise of the costs discretion."
48In Gold and Copper Resouces Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 345, Stevenson J declined to make a differential costs order against a successful defendant who lost on the issue of breach of contract even though his Honour considered that it was separable from the issue of causation upon which it won. Stevenson J observed that at trial it was apparent that causation was "a central issue" (at [33]) and that the defendant had not conducted its defence in a manner that was "improper or unreasonable" (at [36]). See also Sydney Attractions Group Pty Ltd v Frederick Schulman (No 3) [2013] NSWSC 1544 at [3] and Grace v Grace (No 4) [2013] NSWSC 385 at [9].
49Mr King's submissions necessarily invite a determination of the relative importance of the liability issues on the one hand and the causation and loss issues on the other hand. In this respect the competing percentage assessments are to a large extent unavoidably impressionistic and difficult to compare. Nor are the time and resources allocated by each party to particular issues automatically informative, far less conclusive, upon the question of whether or not it was reasonable strenuously to contest them.
50Mr Benecke's written submissions closely analyse the way in which the respective pre-trial activities of the parties demonstrate just how significant the issues of causation and loss actually were, as revealed by correspondence between them, the pleadings and the affidavit evidence upon which they both relied. I accept that these submissions, in accordance with authority, were intended to establish that the issue was central in the overall scheme of the case. However, it does not seem to me to be a complete answer in this case for Mr Benecke to emphasise only the absolute or relative importance of the causation and loss issues upon which he won, so much as the need also to establish the reasonableness of contesting the issues of duty and breach upon which he lost. After all, Mr King's proposition is most fundamentally that the case should have been fought only upon issues that were really contestable and that the issues of duty and breach were not of that kind. Mr Benecke's obvious response to that proposition is that the issues of causation and loss were equally plain: Mr King should have recognised his vulnerability and either chosen not to sue in the first place or accepted the offer of compromise in the second place.
51It seems to me that a retrospective analysis of the proceedings by the parties, each with the benefit of their current knowledge and understanding of the ultimate outcome, ought not be permitted too readily to determine what the parties should have foreseen or recognised might occur. It is true that Mr Benecke did not rush to make concessions that he should arguably have made. Indeed, as far as I recall, he occasionally appeared to resile from or retract some of his previous admissions and to distance himself from some certain of his earlier concessions. Be that as it may, the facts in these proceedings were not uncomplicated and Mr Benecke was central to most of them. That included the events leading up to the final settlement that was at the heart of Mr King's case, by which time Mr Benecke was no longer formally involved. There were tactical and strategic benefits to Mr King in the prosecution and presentation of his case that were generated by demonstrating the egregious nature of Mr Benecke's breaches and his associated refusal to acknowledge them. That process also very significantly explained and amplified the factual background that was relevant to an understanding of whether or not Mr King settled either on unfavourable terms at all, or because of pressure upon him that was related to Mr Benecke's failings.
52I do not think that Mr Benecke conducted his defence on the questions of duty and breach in a way that was improper or unreasonable. Mr King submitted that Mr Benecke sought to keep liability in issue so as to exhaust his funds. There is no evidence of that assertion and it ought not to have been made.
53Mr King relies generally upon the evidence of Mr Thompson to suggest that Mr Benecke was delinquent in the way in which he defended the proceedings. I do not accept that proposition. To my observation, the proceedings were conducted efficiently on both sides of the record.
54Mr King has also contended that the liability issues, apart from causation, were so clear and one sided that they should have been conceded at an early stage. However, Mr King went to some trouble to establish the existence of breaches of duty by calling expert evidence about it. Whether that was a not unreasonable response to Mr Benecke's defence or an obvious recognition of the complexity of the issue is difficult to discern. That is because the way that the case unfolded has since illuminated that issue in a way that was not so clear when the parties first faced off across the courtroom, or when preparing their respective cases beforehand. The litigation was hard fought and it seems to me to be dangerous to ascribe improper motives to a defendant for tenaciously responding to claims that are intended to impugn his or her professional reputation and integrity.
55Nor do I consider that the issue of causation upon which he succeeded was either not central to the case or alternatively separable from the main issues in it. The very fact that two experienced solicitors, admittedly not at arm's length from the parties to the proceedings, have arrived at opposing views about what issues received what emphasis, alone suggests there is room for doubt about it. Accepting that an issue will not be "clearly severable" if arguments relied upon in relation to it also have "some bearing" on another issue or issues (see Griffith at [11]), it can be seen that the liability issues upon which Mr Benecke failed arguably fell into that category. For example, the terms of the agreement between Mr King and his father in 1999, the Bellamy litigation and the manner in which it was resolved, the assurances given by Mr King's father in the context of a close and trusting family relationship up until about 2006 that he held the 15 Somers shares for Mr King, and Mr Benecke's conflict of interest breaches in 2007 and 2008 all to a greater or lesser extent spanned issues of liability, causation and quantum of loss.
56It follows that I am not satisfied that by reason of the way Mr Benecke approached the issues of duty and breach there should in these circumstances be any order for costs other than the usual order.
57The issue concerning the proportionate liability defence is more difficult. On balance I consider that Mr Benecke's failure to lead any evidence in support of the defence indicates that it was always destined to fail. I appreciate that Mr Benecke says that evidence to support it was both difficult to acquire in the first place and only ever likely to emerge, if ever, in the course of the trial in the second place. However, that seems to me to be a forensic risk that necessarily falls at his feet. It was a separate and severable issue upon which Mr Benecke failed and he took the chance that Mr King would be required to incur legal costs to respond to it. In the events that occurred, Mr King's costs were also significantly increased by the consequent disruption to his preparation occasioned by the need to retain and instruct an entirely different legal team.
58In the circumstances I consider that Mr Benecke should pay Mr King's costs of and incidental to that issue.