Loureiro v Mac Aus Unit Pty Ltd

Supreme Court of NSW|2022-03-24|Before: Gleeson J

Solicitors: Jeresyn Legal (Plaintiffs) Somerset Ryckmans (Defendants) File Number(s): 2020/135763

Judgment

This judgment deals with the question of costs, which were reserved when judgment was given on 8 March 2022: Loureiro v Mac Aus Unit Pty Ltd (No 2) [2022] NSWSC 226 (the principal judgment).
The Court made directions for the filing and service of submissions on costs with that issue to be decided on the papers. Those submissions have now been received.
The essential issue for determination is how the plaintiffs mixed success against the defendants should be reflected in the costs orders. It is of assistance first to say something about the proceedings.

Outline of costs issues

The plaintiffs seek an order that Antonio pay their costs, either on the ordinary or on an indemnity basis.
As against the other defendants - Mac Aus, Patricia and David - the plaintiffs say that there should be no order as to costs, despite the usual rule that costs follow the event.
The plaintiffs advanced several reasons why it would be unjust to order them to pay the costs of the successful defendants, including:

the defendants had the same legal representation, and this would result in paying three-quarters of the defendants' costs in circumstances where many of those costs were costs common to Antonio (who was wholly unsuccessful);
Mac Aus and Patricia had identical defences in terms of issues maintained in final submissions so it cannot reasonably be said that one-half of the defendants' total costs had been incurred by Patricia and Mac Aus;
while David was successful in his defence against the plaintiffs' claims for equitable relief, this issue took up very little time in evidence (documentary and testimonial) and in argument; and
Patricia and David are guilty of misconduct relating to the litigation, and Mac Aus's costs are indistinguishable from Patricia's.

In addition, the plaintiffs say that it is open to the Court to make a costs order against David despite his success, on the grounds of grave misconduct in respect of the property at 11 Chester Street and the expense that the plaintiffs were put to in having to disprove the matters that David gave evidence of in his affidavit.
Alternatively, the plaintiffs say that if the Court is minded to apply the "rule of thumb" described by Young J in Rogers v Kabriel (No 2) [1999] NSWSC 474 at [14]-[16], the defendants' costs should be apportioned between what are obviously joint costs and what appear to be costs applicable to each particular defendant and the plaintiffs should not be ordered to pay those costs that are common to Antonio.
The defendants say that the Court should adopt an "issues" approach to awarding costs against Antonio who was unsuccessful and in favour of Mac Aus, Patricia and David who were successful because this was a multiple issues case, and the plaintiffs did not get everything they wanted: Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115 at [13]-[14].
On the defendants' assessment, 25 per cent of the trial was taken up with issues concerning Antonio, 50 per cent was devoted to issues concerning Mac Aus, 15 per cent was devoted to issues concerning David and 10 per cent devoted to issues concerning Patricia. On this basis, the defendants seek the following costs orders: 1. Order that Antonio pay 25 per cent of 100 per cent of the plaintiffs' costs on a party/party basis as agreed or assessed, excluding: 1. the plaintiffs' costs of the directions hearing on 22 October 2020; and 2. the plaintiffs' costs to prepare and tender the report of Chris Katehos and Cecilia Tang dated 25 January 2022. 1. Order in favour of Mac Aus, Patricia and David that the plaintiffs pay 75 per cent of 100 per cent of the defendants' party/party costs of the proceedings as agreed or assessed, including: 1. 75 per cent of the reserved costs of the directions hearing on 25 June 2020; 2. 75 per cent of the reserved costs of the directions hearing on 15 October 2020; 3. 100 per cent of the costs of the directions hearing on 22 October 2020; 4. 75 per cent of the costs of the defendants' notice of motion filed 7 December 2020, including the directions hearing on 8 February 2021; and 5. 100 per cent of the costs of the applications heard by Harrison J on 28 July 2021.
As to Antonio's position, the defendants say that it would be unfair to make an order that Antonio should bear the whole of the general costs of the proceedings when the bulk of the proceedings and trial involved a multiplicity of unsuccessful claims against Mac Aus, Patricia and David, as well as several unsuccessful (or at least withdrawn) claims against Antonio himself.
As to Patricia and David's position, the defendants' written submissions (at par [15]) accepted that their conduct in apparently participating in a scheme, whose seeming purpose was to delay or defeat the claims of creditors, is "doubtless to David and Patricia's discredit", however, the defendants say that such conduct does not have any material bearing on the question of costs since no additional costs were directly attributable to that conduct, and in any event the disentitling conduct was not relevant to any pleaded claim.

Consideration

The usual rule is that costs follow the event of the plaintiffs' successful and unsuccessful claims, unless it appears to the Court that some other order should be made as to the whole or any part of the costs: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. The essential issue is how the plaintiffs' mixed success against multiple parties should be reflected in an order for costs.
The Court does not usually award costs on an issue-by-issue basis. However, some adjustment may be made if an otherwise successful party fails on an issue which is clearly dominant or separable, or there is otherwise good reason to make some adjustment to the costs order. The principles are stated in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]. See also: Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [10]-[14].
Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [19], citing James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22.
This is not a case where an issues approach is appropriate to apportioning the costs of the successful and unsuccessful defendants. The clearly dominant issue was the money claims; however, the factual substratum of these claims involved evidence capable of application to the claims on which the plaintiffs succeeded and failed. By contrast, the equitable claims which failed against Mac Aus and David occupied little time in evidence and argument, noting that the equitable claim against Mac Aus was an alternative claim which was not pressed after concessions by Antonio in closing submissions.
Neither party suggested that the Court should adopt the "rule of thumb" approach to the apportionment of costs that, when a plaintiff succeeds against one jointly represented defendant but not another, each is liable to pay a proportion a rateable proportion of the costs: Rogers v Kabriel (No 2) [1999] NSWSC 474 at [14]-[16]; Currabubula v State Bank NSW [2000] NSWSC 232 at [90]-[106] (Einstein J). The effect of the rule is that, in addition to costs solely referable to a successful defendant: …that a successful jointly represented defendant recovers a proportionate share of the "common" costs which are referrable to claims pressed against each of the defendants. See: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [25] (Young JA)]
The application of the rule depends on the nature of the case and the defences raised: Spotless at [43]. The Court is not obliged to apply the rule, described as "rough and ready", in every case of joint representation, and will not do so where its application would involve an injustice: Spotless at [42]. As McDougall J observed in James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No.2) [2015] NSWSC 970 at [56]: Both the Currabubula approach and the rule of thumb may be used in some "ordinary and straightforward cases" as a safe guide to the exercise of the costs discretion. However, neither should be used mechanically, as a substitute for that exercise.
Here, the rule of thumb has no application because this is not a straightforward case. Although involving little time in evidence or submissions, the successful defendants raised separate and distinct defences to Antonio, based on their peculiar factual position.
The defendants' submission that Antonio should pay only 25 per cent of the plaintiffs' costs, subject to certain exclusions, cannot be accepted. That would not be a fair result as between the parties, having regard to the manner in which the trial was conducted, including that Antonio denied or otherwise did not admit the plaintiffs' money claims, positively asserted a limitation defence, and only belatedly made concessions in closing submissions, following which the plaintiffs did not press several alternative claims against Antonio and Mac Aus. Nevertheless, I am not satisfied that Antonio's conduct of the litigation was unreasonable so as to attract a special costs order.
Although the defendants properly acknowledged that the claims against Mac Aus and Patricia were identical, their submission that 50 per cent of the trial was devoted to issues concerning Mac Aus and only 10 per cent to issues concerning Patricia cannot be accepted. Mac Aus and Patricia had identical defences in terms of issues maintained in final submissions (relevantly, that they were not parties to any loan agreements and that a limitation defence applied). The additional claim against Mac Aus for equitable relief was not the subject of evidence beyond the evidence relied upon for the money claims against Antonio, this claim occupied very little time in argument and, as indicated, the claim was not pressed after concessions by Antonio in closing submissions. Further, the money claims against Mac Aus and Patricia also occupied very little time in argument; their limitation defences which were successful, involved a single question of construction of whether the confirmations signed by Antonio were also made on their behalf.
Turning to the position of David, he was not joined as a party until the amended statement of claim filed 6 March 2021; there are no common costs before that date. David's costs relate to successfully defending the separate and distinct claim against him which derived from the 2017 loans made by Carlos and Claudio to Antonio. This claim took up little time in evidence, documentary and testimonial, and in argument.
Making no order as to costs of the successful defendants, as suggested by the plaintiffs, would not be fair or just. Nor should Patricia and David, and Mac Aus (whom the plaintiffs say is indistinguishable from Patricia), be denied costs on the ground of their participation in conduct for the apparent purpose to delay or defeat the claims of creditors of Antonio. That conduct, whilst no doubt relevant to David's credit and reliability as a witness, was not relevant to any pleaded claim.
Nor do I consider that a costs order should be made against David, despite his success. The adverse credit and unreliability findings in relation to David's evidence ultimately did not affect the result against David.

Costs as against Antonio

Subject to two exclusions, Antonio should pay 70 per cent of the plaintiffs' costs of the proceedings. The exclusions from this costs order, which are explained below, are: 1. the plaintiffs' costs of the directions hearing on 22 October 2020; and 2. the plaintiffs' costs to prepare and tender the report of Chris Katehos and Cecilia Tang dated 25 January 2022.
As to (1) above, the exclusion is made because the Registrar made an order on 22 October 2020 that "the plaintiff (sic) is to pay the defendant (sic) costs of today".
As to (2) above, the exclusion is made because the foreshadowed tender of the report, seemingly as expert evidence, was not pursued by the plaintiffs, and the tender of the report under s 50 of the Evidence Act 1995 (NSW) as a summary of documents was rejected: Loureiro v Mac Aus Unit Pty Ltd [2022] NSWSC 139. This exclusion does not extend to the tender of the documents attached to the report, which were admitted into evidence without objection.

Costs in favour of Mac Aus, Patricia and David

The plaintiffs should pay Mac Aus, Patricia and David's costs solely referable to the respective claims made against them, including the following costs of Mac Aus and Patricia (as the case may be): 1. 50 per cent of their costs of the directions' hearings on 25 June 2020, 15 October 2020 and 22 October 2020; 2. their costs of the notice of motion filed 7 December 2020, including the directions hearing on 8 February 2021; and 3. Mac Aus' costs of the applications heard by Harrison J on 28 July 2021.
As to (1) above, the costs of two of the directions hearings were reserved by the Court in circumstances where there was no appearance on behalf of the plaintiffs on 25 June 2020, and the plaintiffs had not filed any evidence by 15 October 2020. The costs of the directions hearing on 22 October 2020 was the subject of an order in favour of the defendants: see [31] above. The plaintiffs should pay Mac Aus and Patricia's proportion of the defendants' costs of those directions hearings, which I assess to be 50 percent of the defendants costs, treating Mac Aus and Patricia as a block of ultimately successful defendants. (It is to be observed that David had not been joined as a party at the time of these directions hearings.)
As to (2) above, the order made on 8 February 2021 in respect of Mac Aus and Patricia's notice of motion filed 7 December 2020 in relation to monies held by Owen Hodge Lawyers, was that costs be "costs in the cause". Given that the plaintiffs did not press their claim for equitable relief against Mac Aus, the plaintiffs should pay the costs of this motion.
As to (3) above, Harrison J made an order on 30 July 2021 that the costs of Mac Aus' notices of motion seeking orders that the monies paid into court by Owen Hodge Lawyers be paid out of court to Mac Aus and for expedition of the proceedings, be the costs in the proceedings. Again, given the result of the claim against Mac Aus, the plaintiffs should pay these costs.

Orders

Accordingly, the Court makes the following orders: 1. The second defendant pay 70 per cent of the first, second and third plaintiffs' costs of the proceedings excluding: 1. the plaintiffs' costs of the directions hearing on 22 October 2020; and 2. the plaintiffs' costs to prepare and tender the report of Chris Katehos and Cecelia Tang dated 25 January 2022. 1. The plaintiffs pay the first, third and fourth defendant's costs solely referable to the respective claims made against them, including pay to the first and third defendants (as the case may be): 1. 50 per cent of their costs of the directions' hearings on 25 June 2020, 15 October 2020 and 22 October 2020; 2. 100 per cent of the costs of their notice of motion filed 7 December 2020, including the directions hearing on 8 February 2021; and 3. 100 per cent of the first defendant's costs of the applications heard by Harrison J on 28 July 2021.

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. Decision last updated: 31 March 2022

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