Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors [2010] NSWSC 1208 | Case summary

1 On 14 October 2010 I delivered a judgment in this matter in relation to a separate question ordered by White J: see Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors [2010] NSWSC 1133. That separate question concerned which of the parties owned equipment located in a factory which was owned by the second and third defendants, which was mortgaged to the fourth defendant and which, in exercise of its power of sale under the mortgage, the fourth defendant sold to the first defendant. 2 The plaintiff claimed ownership of the equipment on the basis of a contract he had entered into with the second and third defendants (among others). The first defendant originally claimed ownership of the equipment on the basis that the items comprising the equipment were fixtures and were sold to it with the factory. However, the first defendant did not appear at the hearing and it appears that it has repudiated the contract of sale. The second and third defendants claim that they owned the equipment on the basis that the relevant items were not fixtures and were not sold to the plaintiff. 3 I found in the plaintiff's favour. The only outstanding question is costs. I invited the parties to make written submissions in relation to that question by 19 October 2010. 4 The general principle is that costs should follow the event: UCPR r 42.1. The "event" in this case is the determination of the separate question. There is no reason why a costs order should not be made in relation to that separate question; and none of the parties submitted otherwise. 5 The plaintiff was successful in relation to the separate question and for that reason he should have his costs in relation to it. That, however, leaves four outstanding issues. First, should the plaintiff have his costs on the ordinary basis or some other basis? Second, should the plaintiff's costs be reduced for any reason? Third, who should pay the plaintiff's costs and in what proportions? Fourth, what should happen in relation to the fourth defendant's costs? Should the plaintiff recover his costs on the ordinary basis? 6 In my opinion, the answer to this question is that he should. The plaintiff submitted that this may be a case where it is appropriate to order that his costs be paid on an indemnity basis. That submission was made on the basis that the second and third defendants should have known that they had no real prospect of success: see, eg, Rosniak v GIO (NSW) (1997) 41 NSWLR 608. 7 I do not accept that submission. The agreement on which the plaintiff sued was not clearly expressed and it seems to me that there was nothing improper in the second and third defendant resisting the plaintiff's claim on the basis of that unclear agreement. Should the plaintiff's costs be reduced for any reason? 8 The second and third defendants submit that the plaintiff should not recover all his costs in relation to the separate question. They advance two reasons. First, they say that the costs of the court appointed expert who examined the computers of the plaintiff and second and third defendants to determine whether they contained a particular document and, if so, when it was created, should be met jointly and severally by the parties in accordance with UCPR r 31.53(2). That rule provides that, subject to any direction of the court, "the parties affected are jointly and severally liable to a court-appointed witness for his or her remuneration". Second, the second and third defendants say that the plaintiff served important evidence late and that fact should be reflected in any costs order. 9 I do not accept either of these submissions. UCPR r 31.53 is concerned with who, as between the parties and the court-appointed expert, should be responsible for the court-appointed expert's fees. The rule makes it clear that, in the absence of some other direction by the court, each of the relevant parties should be jointly and severally liable for those fees - with the result that the expert can seek to recover his or her fees against all or any of them. The rule is not concerned with costs as between the parties. There is no reason why, as between the parties, a successful party should not be entitled to any costs that party has to pay to a court-appointed expert. 10 As to the second and third defendants second point, I do not think that late service of the plaintiff's evidence justifies some special order in relation to costs. The evidence in question was served late in large part because it was responsive to issues raised by the report of the expert which itself was only served shortly before the hearing commenced. In any event, the mere fact that a party has served evidence late does not justify some special order in relation to costs. Who should pay the plaintiff's costs? 11 The plaintiff submits that an order should be made that the first, second and third defendants' pay his costs on the basis that he was successful against all of them. 12 In my opinion, that is not an appropriate order in this case. The issues between the plaintiff and first defendant and plaintiff and second and third defendants were different. The plaintiff needed to succeed against each of them to succeed in his claim. The claim against each of them raised quite different legal and factual issues. In those circumstances, the plaintiff's costs should be apportioned between the first defendant on the one hand and the second and third defendants on the other. 13 In my opinion, it is appropriate to apportion costs by reference to a percentage of the total costs recoverable by the plaintiff. The alternative approach of apportioning costs by reference to individual items of work seems to me to be impractical and to impose unnecessary costs and an unnecessary burden on the parties in the event that costs must be assessed. Necessarily, a percentage apportionment involves a broad brush approach and depends very much on an impression of the proportion of time spent in relation to the claim against each group of defendants. 14 The second and third defendants suggested that costs should be apportioned so that the first defendant bears 10 percent of the plaintiff's costs, the second and third defendants bear 65 percent of his costs and the plaintiff bear 35 percent of his own costs. I have already rejected the submission that the plaintiff should be required to bear any proportion of his assessed costs. Moreover, it is clear that a much greater proportion of the costs should be attributed to the second and third defendants - particularly having regard to the fact that the first defendant did not appear at the hearing. Even so, a considerable amount of work was done in relation to the claim against the first defendant before it became apparent that the first defendant did not intend to appear at the final hearing. In addition, it was still necessary for the plaintiff to establish his case against the first defendant and, indeed, the first defendant through its solicitors still sought to rely on written submissions that its solicitors had prepared. In those circumstances, I think it is appropriate that the first defendant pay 20 per cent of the plaintiff's costs in relation to the separate question and the second and third defendants pay 80 percent of the plaintiff's costs. Who should pay the fourth defendant's costs? 15 The fourth defendant submits that the plaintiff should pay its costs on the basis that it should not have been joined to the proceedings and it must have been clear, at least at the time of the initial directions hearing on 4 August 2010, that it asserted no interest in the relevant equipment. The fourth defendant says that, despite that, the plaintiff filed points of claim in which he asserted an equitable interest in the factory, which was a claim that it had to defend. The fourth defendant submits that this is not a case where it is appropriate to make a "Bullock" or "Sanderson" order since its joinder did not flow from the defence raised by any of the other defendants. 16 I accept, for the reasons given by the fourth defendant, that this is not an appropriate case for a Bullock or Sanderson order. The question remains whether the plaintiff should bear the fourth defendant's costs in relation to the separate question. In my opinion, he should not do so. 17 In my opinion, the fourth defendant's submissions tend to confuse the costs in relation to the separate question with the costs of the proceedings generally. It was open to the fourth defendant to indicate to the court that it was prepared to abide by any decision of the court in relation to the separate question. It chose not to do that. Instead, it participated in the hearing in relation to the separate question and, during the course of the hearing, sought to adduce evidence and to make at least one application which was relevant to other aspects of the case. In particular, during the hearing of the separate question, the fourth defendant sought orders against the first defendant in relation to its failure to complete the contract of sale of the factory. 18 In addition, I do not think it was unreasonable of the plaintiff to join the fourth defendant in relation to the separate question. The fourth defendant had an interest in the answer to that question because the answer affected precisely what it could sell in exercise of its power of sale. 19 In those circumstances, I think the appropriate order is for the fourth defendant to bear its own costs in relation to the separate question. Whether the fourth defendant is entitled to its costs in relation to some other aspect of the case is a different question. Orders 20 The court orders that:

Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors

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