COSTS - Appeal and cross-appeal - Appellants succeeded on majority of issues - Respondents' cross-claim succeeded in part with several issues remitted for determination by trial division judge - Whether costs should be reserved - Apportionment of appellants' costs ordered.

1 On 3 August 2012, a bench comprising Neave and Mandie JJA and Judd AJA handed down its judgment allowing an appeal,[1] and setting aside orders made by a trial division judge which required (inter alia) Mr David Marriner ('Marriner') to pay $412,113 to Australian Super Developments ('ASD'). The Court also allowed a crossappeal by ASD in part and remitted several issues to be determined by a judge of the trial division.[2]

2 The Court reserved the question of costs and directed the parties to provide written submissions on that question. Because of Mandie JA's retirement, the parties agreed to have the costs issue dealt with by a bench of two judges. Having received the parties' submissions, we now address that question.

3 The issues raised on the appeal and cross-appeal were complex. The complexity was, for the most part, a product of overworked and sometimes ambiguous pleadings, and the failure of the parties at trial to address what became important issues on appeal. The way in which the trial was conducted made the resolution of the issues unusually difficult for the trial judge.

4 In essence, the dispute between the parties raised two overlapping issues. First, ASD claimed that Marriner had induced or procured payments of bond moneys expended in breach of a trust of which ASD was the beneficiary. It was alleged that the bond moneys were held on a Quistclose[3] trust in favour of ASD. It was also alleged that some of the bond moneys were held on a solicitor's trust by ASD's solicitors, Wallace & Wallace ('Wallaces'). ASD failed on these issues at the trial and cross-appealed.

5 On the cross-appeal, the Quistclose trust claim failed, as did ASD's contention that Marriner procured or induced a breach of that trust by Mr Peter Jephson, the company secretary of ASD ('Jephson'). The one area on the cross-appeal in which ASD achieved a measure of success was in relation to funds held on a solicitor's trust by Wallaces. The Court concluded that the trial judge erred in holding that Wallaces were not liable for payments made in breach of the solicitor's trust.

6 Thus, the real issue on the cross-appeal became whether Marriner was, or his associated companies were, liable for a breach of trust which occurred as a consequence of directions given by Jephson to Wallaces to disburse the money to third party creditors, or for a payment of $80,000 which Marriner directed Wallaces to pay to WS Group. The trial judge stopped short of reaching any conclusion on that issue, having erroneously found that there was no breach of the solicitor's trust by Wallaces.

7 The Court concluded that it would be unfair to both sides to reach any conclusion on that issue, for the reasons expressed in paragraph 164 of the judgment. Instead, this part of the case was remitted for determination by a judge in the trial division.

8 Secondly, ASD claimed that an expenditure limit of $4.7 million, which was imposed on Marriner as Chief Executive Officer and Director of ASD, was exceeded by him to the extent of $824,890, without ASD Board approval. The capital expenditure claim succeeded in part at the trial.

9 There were 35 grounds of appeal relating to ASD's claims and two grounds of appeal relating to the trial judge's dismissal of Marriner's counterclaim. Grounds 1 to 17 related to the capital expenditure claim. Marriner's main arguments on appeal related to that claim. Although Marriner succeeded in having the trial judge's order requiring him to pay $412,113 as compensation for expending money in excess of the limit set aside, his success was, to a significant extent, based on an argument about the effect of the alleged expenditure cap, which was not advanced at trial.

10 Marriner also appealed against the decision of the trial judge rejecting various defences raised by him at trial (grounds 18 to 35). On appeal, the Court concluded that Marriner's reliance on cl 11(b) of an agreement made on 19 October 2001 as a release from liability failed. However, Marriner also relied upon the conduct of ASD in the period leading to that agreement. He alleged that ASD had failed to disclose an intention to sue him or his companies to recover the bond moneys, as well as an amount equal to the excess capital expenditure. These affirmative defences relied upon a complex web of facts and inferences. Unfortunately, the trial judge failed to provide adequate reasons for rejecting the defences.

11 The Court remitted these issues for determination by a trial division judge. The same course was adopted in relation to the appeal against the trial judge's dismissal of the counterclaim made by Marriner (grounds 36 and 37), which was based on the same or similar facts and matters as those relied upon by him as affirmative defences to ASD's capital expenditure claim.

12 The question of the liability of Marriner companies, Goldworthy Pty Ltd, Laguna Australia Pty Ltd, and Stage Design Pty Ltd for the breaches of trust committed by Wallaces (including the applicability of any defences and related counterclaims), and the liability for the costs of the hearing before the trial judge, were also remitted for determination by a trial division judge.

13 The Marriner parties argued that their costs of the appeal should be paid by ASD on a party and party basis. They relied on the general rule that 'costs should follow the event' and that, in the absence of disqualifying conduct, a successful party should recover its costs even where it has not succeeded on all heads of claim.[4]

14 Where a party succeeds on some issues and not others, it may be awarded a proportion of its costs, rather than the full amount.[5] As an alternative to their primary submission, the Marriner parties argued that they were successful on the majority of the issues raised on appeal and that ASD had only partial success on its cross-appeal because the Court remitted several issues to a trial division judge. In these circumstances, the Marriner parties argue that any apportionment of costs should be fixed in their favour at 90:10 or 85:15. In the event that the Court should make an order for costs in favour of ASD, the Marriner parties sought an indemnity certificate pursuant to s 4 of the Appeals Costs Act 1998.

15 In contrast, ASD argued that as the Court's decision did not determine the claims made by the appellants other than Marriner, the costs of those appellants should be reserved pending the determination of the remitted issues. ASD argued that reserving costs is appropriate, in circumstances where the overall outcome of the litigation remains uncertain. The issues which have been remitted to the trial division could result in a substantial change in the overall outcome of the proceeding despite the appellants' apparent success on appeal. This possibility founded ASD's contention that all costs should be reserved for the time being.

16 We are of the opinion that each stage of litigation should ordinarily be closed with an order for costs. This appeal is no exception.

17 We are not persuaded that the costs of this appeal and cross-appeal should be reserved pending the outcome of the hearing and determination of the remitted issues. In our opinion, the Marriner parties were substantially successful in their appeal and they are entitled to an order for costs.

18 The only question is whether there should be some apportionment of liability for costs, and whether cross orders should be made. We are mindful of the burden imposed on the taxing officer when complex orders for costs are made on an issue by issue basis, and when cross orders are made on the appeal and cross-appeal.

19 We are persuaded that some allowance should be made for ASD's success on the cross-appeal, but consider that this should be reflected in a proportional reduction in the costs order in favour of the Marriner parties, rather than a cross order in favour of ASD. Doing the best we can, we conclude that the appropriate reduction in the Marriner parties' entitlement, to reflect our estimation of the differing degrees of success of the parties, is to require the respondents to pay 80% of the appellants' costs of and incidental to the appeal on a party and party basis. By this order, we do not intend to disturb the order for costs made by Lansdowne AsJ on 2 December 2010.

20 Having regard to the fact that a number of potentially significant issues have been remitted to the trial division which might, following their determination, substantially change the outcome as between the parties, it is not appropriate to make any order for the costs of the trial. For that reason, we will also remit the question of the order which should be made relating to the costs of the trial for determination by the judge in the trial division.

21 We would grant the respondents a certificate under s 4 of the Appeals Costs Act 1998 in respect of their liability for the costs of the appeal.

[1] [2012] VSCA 171.

[2] We refer only to Marriner and ASD as the parties to the appeal and cross-appeal, although their associated entities were also involved in the proceedings.

[4] See, eg, Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97−8.

[5] Spotless Group Ltd v Premier Building & Consulting Pty Ltd (recs apptd) [2008] VSCA 115 [15].