Lavender View v North Sydney Council

A General Overview 15 The essential issues for determination on the inquiry into damages were, firstly, whether the defendant's admitted negligence was causative of damage to the plaintiff and, if it was, the amount of such damages. If the first issue was decided adversely to the plaintif it did not mean that the second issue did not have to be decided although it became irrelevant for my orders. Generally, however, it is desirable for the Court at first instance to decide as many matters as possible, so that if the Court of Appeal considers the finding is wrong, it can make final orders. Those issues occupied all but a few minutes of the hearing time. The very short time taken on the wasted costs' issue was brought about by the plaintiff's inability to say what the amount was. 16 The second issue involved the disputes between the experts and, whilst as a matter of law I accepted the plaintiff's position so far as interest was concerned, in so far as there was a conflict between the experts as to the correct methodology to be adopted, I preferred that of the defendant's expert: paragraph 367. Accordingly, even if the plaintiff had been successful on the causation issue, it would only have recovered damages, (subject to recovering interest on the principal sums in the manner for which it contended), based on the amounts put forward by the defendant's expert. I do not think it could have been said in those circumstances that the plaintiff would not have been entitled to its costs of the inquiry because, on that hypothesis, it would have established causation and thus an entitlement to substantial damages. 17 The issues to which I have just referred were the issues fought at trial. The amount recovered by the plaintiff was conceded by the defendant. It may be that it was not conceded until the hearing, but in the overall context of a claim for many millions of dollars, that does not seem to me to be a matter of any significance. The fact remains that the time occupied in coming to that concession and the amount which was payable, in the context of this litigation, was minute. 18 None-the-less the plaintiff has recovered a not insubstantial sum, although, in the context of its basic claim, it pales into some insignificance. It is the recovery of this sum, which founds the plaintiff's claim that the defendant should pay its costs. Unless that amount had been recovered it is difficult to see what argument the plaintiff could have put forward in support of its submission that the defendant should pay its costs. Indeed, it is difficult to see what argument it could have put forward in opposition to the defendant's submission that it pay the defendant's costs.

The Relevant Principles 19 The very wide discretion the Court has in relation to ordering costs is enshrined in s.76 of the Supreme Court Act 1970. Part 52A rule 4(1) provides that the powers and discretions of the Court under that section shall be exercised subject to and in accordance with that Part, and rule 11 states that if the Court makes any order as to costs, it shall, subject to this Part:- ".. order that the costs follow the event, except where it appears to the court that some other order should be made as to the whole or any part of the costs".

Prima facie the relevant event is that the plaintiff has recovered judgment in contested proceedings. (In this regard it will be remembered that the defendant remains liable to pay the costs of establishing liability.) The amount for which it recovered judgment exceeds by a substantial degree the amount set forth in rule 33(2)(e) for proceedings commenced between 1 July 1993 and 1 October 1997, in so far as that is a relevant consideration, and, once again, in so far as it is relevant, it also exceeds the amount referred to in sub-rule (f)(ii). Therefore, the plaintiff would not have been put in a position, pursuant to that rule, of not being entitled to payment of its costs unless it appeared to the Court that it had sufficient reason for commencing or continuing the proceedings. 20 I should mention, merely for the purpose of disposing of the point, that there was no suggestion in this case that either party had conducted itself in a way which would disentitle it to costs, which it may otherwise recover. 21 Therefore, the short, although perhaps not simple, question is whether the almost total failure by the plaintiff, that failure being total on the principal issue of causation, and the success arising by virtue of the concession, leads to the conclusion that the plaintiff is none-the-less entitled to its costs from the defendant, or is obliged to pay the defendant's costs.

The Submissions 22 It was submitted for the plaintiff that it has recovered "substantial damages", and that the defendant "took none of the steps available to avoid the necessity for a hearing, despite the ultimate consent finding that it had been negligent". 23 The steps to which reference is made, presumably, are the making of an offer of compromise either formally or informally. It is necessary to put that submission into context. Let it be assumed that the defendant had made an offer of compromise of, e.g. $250,000, because it took the view that that covered the only amount for which it considered it was liable, being its assessment of the amount of wasted costs. It cannot, in my respectful opinion, be inferred that the plaintiff would have accepted that in circumstances where its claim was for the various amounts to which I have referred. Although, on its best case as I determined the matter, it would have been entitled to some $24m, on its best case as propounded by its expert, it would have been entitled to considerably more. In my opinion, the only reasonable inference is that the plaintiff would not have compromised for so low a figure. It would, of course, have been very useful from the defendant's point of view for it to have made such an offer, because that would have founded a claim for indemnity costs. Therefore, I consider that any attempt by the defendant to settle on the basis of the amount for which it was prepared to concede liability must have failed and the case would still have proceeded. The parties were too far apart. No evidence was called that the plaintiff would have settled for so low an amount. Further, I do not consider that a party should be, generally speaking, penalised by a costs' order because it does not attempt to settle the proceedings. In this case the defendant established its defence based on causation and, throughout the hearing, was asserting that whilst it was prepared to make the concession, the plaintiff had not established to its satisfaction or sought to prove the amount payable pursuant to it. 24 The plaintiff's submissions then responded to the central submission for the defendant, namely that it is generally accepted that the phrase "follow the event" refers to the practical result of a particular claim: Windsurfing International Inc v Petit (1987) AIPC 37861. I consider that is essentially correct. The defendant's submission was that the application of that test led to the result that as its principal contention was accepted, and the plaintiff's contentions were rejected, the practical result of the claim was that the defendant won. The submissions continued:- "5. The defendant's principal position was that no substantial losses have been suffered by the plaintiff as the plaintiff would have, absent any negligence of the defendant, acted in the same way as it actually did with the negligence. 6. Virtually all of the time at the hearing was devoted to determining what the plaintiff would have done absent the negligence of the defendant. 7. The Court accepted the defendant's principal contention and held that the plaintiff had failed to establish that it suffered any substantial loss as a result of the negligence of the defendant (see paragraph 362 of the judgment)." 25 The plaintiff submitted that it has recovered substantial damages and referred to Part 52A rule 33(2)(e). It submitted that it is not the law that, simply because the amount recovered is small compared to the amount claimed, the plaintiff is not entitled to recover costs. 26 So much may be accepted. However, in each case it is necessary for the Court to look at why the plaintiff only recovered a small amount and, if there are various components of damage, decide whether some special order should be made apportioning the costs on the basis of those on which the plaintiff succeeded and those on which it failed. In considering that the Court must take a somewhat broad brush approach. There are few cases in which it can be said one party has been wholly successful and one has completely failed. It is, in this area of the law, difficult to generalise. For example in this case the plaintiff succeeded on the limited issues of the rate of interest and wasted costs. Each case will depend upon its particular circumstances: Oshlack v Richmond River Council (1998) 72 ALJR 578 and Fexuto Pty Limited v Bosnjak Holdings Pty Limited & Ors (No 3) (Young J - 10 December 1998 - unreported). In Oshlack, at p.591, McHugh J said:- "Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis v Casey (1990) 170 CLR 534 at 541: 'it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity.' By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sasson I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484, when setting aside an arbitrator's costs award: 'the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure.' The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the 'usual order as to costs'. 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: Latoudis at 543, Cachia v Hanes (1994) 179 CLR 403 at 410. 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."

In Fexuto , Young J said:- "However, these matters only go to the ultimate question, and, as noted by Bowen LJ at that page, a judge has got to look at the matter globally and in the circumstances of each case and make an order for costs that is fair and reasonable after taking into account the general guidelines."

The particular circumstances applicable to this case are that the plaintiff failed, save in so far as there was a concession and on the question of the rate of interest, and, accordingly the costs and expenses of the hearing and its preparation were costs and expenses it incurred and obliged the defendant to incur in circumstances where it basically failed. 27 The plaintiff nextly submitted that Windsurfing does not assist the defendant as Waddell J referred with general approval to decisions to the effect that in recent years the approach has been that a successful party should have the whole costs of the proceeding, including the costs of an issue on which he has failed, unless in respect of that issue the successful party has "unfairly, improperly, or unnecessarily increased the costs". In my opinion, his Honour acknowledged, in a passage to which I shall refer, that in an appropriate case a costs' order may be moulded to reflect the degree of success on issues. 28 In Windsurfing the defendants succeeded on the claim and counter claim and sought an order that the plaintiffs pay the whole of their costs. The plaintiffs submitted that, having regard to the fact that they succeeded on several issues, the appropriate order should be that they pay fifty per cent or thereabouts of the defendants' costs. 29 His Honour referred to the predecessor to Part 52A rule 11 and, at pp.37861-37862, said:- "It is, I think, probably generally accepted that the words 'follow the event' refer to the event of the claim or counter claim. However, it may be noted that in other contexts similar words have been held to refer to the event of distinct issues with the result that the general costs went to the party who on the whole succeeded in the action but that the other party got the costs of separate issues on which he succeeded." 30 His Honour referred to the decision of the Court of Appeal in Morosi v Mirror Newspapers Limited [1977] 2 NSWLR 749 at p.809. That case, as I think did Windsurfing, involved far more complex and inter-related issues than the present. In saying that I am not to be taken as suggesting that the issue of causation was not complex, nor that the calculation of damages did not raise difficulties. But they were the two issues, which I was called on to decide, and, once the issue of causation was determined adversely to the plaintiff, its entitlement to any substantial damages disappeared. 31 Waddell J then referred to a number of authorities in England and in the High Court, which dealt with the question of patent infringement with which Windsurfing was concerned. After doing so he said:- "In my opinion this approach is the one which is likely to be appropriate in perhaps the majority of cases. But clearly there must be limits to the extent to which it can be regarded as just to require a party who has succeeded on an issue to pay the costs of the generally successful party in respect of that issue on the ground that he acted reasonably in raising or opposing it. For instance, an issue may have been sufficiently distinct from other issues and have involved sufficient time and expense to justify ordering a party who has been generally successful to pay the costs of the party who succeeded on that issue even if the generally successful party acted reasonably in raising or opposing it".

Thereafter his Honour turned to consider the particular facts of that case. 32 As I have suggested, when one stands back from this case the generally successful party, on the issue of damages, was the defendant. It is, in my respectful opinion, impossible to contend to the contrary. This success was not limited to quantum, but to the entitlement to recover notwithstanding the admitted negligence. All but a short part of the hearing was taken up in determining the issues on which the defendant succeeded. 33 The plaintiff's submissions then turned to the wasted costs of the Class IV proceedings always having been issue. I think I have dealt with this matter sufficiently, save that it will be necessary for me to give consideration to whether I should allow some costs to the plaintiff in relation to it. 34 Nextly, the plaintiff's submissions returned to the abandonment of the defences of failure to mitigate, and the submission was made that the "ultimate defence to the claim for damages was not clearly foreshadowed in the pleadings". It was submitted that a fair reading of paragraphs 30 to 34 indicated that the principal issues to be raised by the defendant were mitigation and contributory negligence. It was added that "the causation defence arises (if at all) in paragraphs 30(b) and 31(b) of the Defence merely as a denial". I have already referred to the way in which the absence of causation was pleaded and expressed my view about this submission. 35 The case was fought as one based on lack of causation and, if that was decided adversely to the defendant, the amount of damages, although there is no doubt that the failure to mitigate was pleaded and not pursued. However, before one ever reached that issue, it was clear from the pleadings that the plaintiff had to establish a causative link between the admitted negligence and the damage it was claiming. 36 Nextly the submissions dealt with the costs of re-opening. The plaintiff applied for leave to re-open by a Notice of Motion filed on 7 April 1999, if agreement could not be reached between the experts, as to the amount of its damages. This was not concerned with the wasted costs' issue. The defendant opposed the application on the basis that the experts had agreed on figures, it had accepted that agreement and there should be finality in litigation. It did not contend that it was prejudiced in the sense of not being able to respond, but rather that it was too late for the plaintiff to be seeking to recast its case on damages. On the basis that the Court's primary duty is to determine all matters in issue, I decided, in the exercise of my discretion, to grant leave to re-open. This, of course, was a concession to the plaintiff and was necessitated because the plaintiff wished to bring forward further evidence as to the damages it had suffered. Thus it had failed to prove at the appropriate time the amount it claimed. I reserved the question of costs and, in the event, the re-opening did not assist the plaintiff, although the final figures, if others think the plaintiff is entitled to succeed further, reflect the fact that the plaintiff had such leave. I do not see any basis on which the plaintiff is entitled to the costs of the re-opening, in which observations I include the written submissions in support of and opposition to that course. In my opinion those costs should be treated as general costs in the proceedings.

Conclusions 37 In my opinion this is an appropriate case in which the plaintiff should pay the defendant's costs of the inquiry into damages. There can be no doubt that the defendant was the generally successful party. The only question which remains is whether I should reduce the amount to which the defendant is entitled by some percentage to recognise the conceded success the plaintiff achieved. I have come to the view I should not. Traditionally that exercise is performed, and I do not see any reason why one would depart from that approach in this case, by awarding a percentage of the costs. However, the costs in this case are so influenced by the costs of the issues on which the plaintiff failed, that to award a percentage of the costs for the small amount of time taken in resolving the issues on which it succeeded would be to penalise the defendant, in the sense that the amount to which a percentage figure would be applied is inflated by the areas in which the plaintiff failed. In any event I would not adopt this approach because it seems to me that such success as the plaintiff enjoyed, in the context of this litigation and in the circumstances in which it occurred, were those minimal successes that the generally unsuccessful party usually achieves in all litigation and which, in most cases, is never raised as justifying some special order as to costs. 38 The apportionment of costs requires distinct issues, which have been litigated, giving rise to some reasonably substantial success to the "generally unsuccessful party". In this case if the issues of liability and damages had not been separated, and the same results had followed, an apportionment of costs based on the plaintiff's success on liability and the defendant's on damages would have been justified. To some extent the separating of the issues may have caused the costs' questions to be viewed in a somewhat different light. However, in substance it should not change the result. The plaintiff succeeded on liability and received the costs of that issue. The defendant succeeded, for all materially relevant purposes, on the issue of damages and it should receive its costs to mark that general success. 39 In my opinion there is no basis upon which it would be a proper exercise of discretion to order the defendant to pay the plaintiff's costs. Further, in my opinion, there is no basis for denying the defendant its costs or for making any apportionment of costs. Consistently with what I wrote earlier, the costs should include the costs of re-opening. 40 I have now been advised that the agreed amount for the wasted costs, inclusive of interest, is $227,025.66.

One Other Matter 41 The parties agreed that paragraph 5 of my reasons could give rise to some difficult in that the necessity for the application to modify DA1 was a requirement of BA1, and, accordingly, they agreed that the following words should be deleted from paragraph 5:- "… and that an application be made to modify DA1 pursuant to s.102 of the Act."

(a) Judgment for the plaintiff against the defendant in the sum of $227,025.66.

(b) The plaintiff pay the defendant's costs of the proceedings, including reserved costs, save in so far as no other orders for costs have been made.

(d) By consent there be deleted from the third sentence of paragraph 5 the words:- "… and that an application be made to modify DA1 pursuant to s.102 of the Act." **********

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