Mr Prescott's estoppel defences
238Only Mrs Marshall was a party to the Prescott proceedings and the Marshall proceedings. Thus, to the extent that recovery was sought in these proceedings of the solicitor/client component cost of those proceedings, then only Mrs Marshall can recover them. Kim Marshall's rights of recovery are limited to the claim for exemplary and punitive damages.
239Mr Kelly SC contended that, even if Mrs Marshall established a cause of action against Mr Prescott, she was not able to recover the solicitor/client component of her costs in the Prescott proceedings and the Marshall proceedings. He contended that the issue of the costs of those proceedings has already been determined by the costs orders that were made in each of those proceedings. For the reasons that follow I accept Mr Kelly SC's contention so far as it concerns the solicitor/client component of the Prescott proceedings, but reject it so far as it concerns the solicitor/client component of the Marshall proceedings.
240At the outset Mr Bevan contended that Mr Prescott "waived" his right to rely on these defences because it was said they had been withdrawn in January 2011 and only reinstated this year following an application by Mr Prescott to amend his defence (Marshall v Prescott (No 4) [2013] NSWSC 455) (plaintiffs' written submissions dated 15 August 2013 at [143]). He pointed to the cost and disbursements incurred in the meantime as well the "stress" of the litigation occasioned in the interim when there was no risk of these defences being upheld. Although the submission referred to the defences being "waived", the footnote to the submission referred to numerous passages from Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 which discuss both estoppel and waiver. Other than the incurring of costs which can be addressed if necessary, the balance of the claimed detrimental reliance was not the subject of any evidence so that no question of any estoppel sufficient to preclude these defences being relied on even arises. As for waiver, only Toohey and Gaudron JJ in Verwayen found that there was some form of "waiver" that precluded the Commonwealth's reliance on the limitation defence. Further, Gaudron J did so in the context of "deliberate action or inaction which has resulted in a changed relationship to which the parties will be held whether or not detriment is actually established" (Verwayen at 485). This has no relevance to this case and thus the particular form of waiver found in Verwayen by their Honours has no application here.
241In relation to the solicitor/client costs of the Prescott proceedings, Mr Kelly SC pointed to a stream of judicial statements that precludes one party from recovering further costs from another in a separate action where there was a judicial pronouncement of the parties' respective costs entitlements in a previous proceedings (defendant's written submissions dated 15 August 2013 at [144] to [150]). Thus in Anderson v Bowles [1951] HCA 61; 84 CLR 310, Dixon, Williams, Fullagar and Kitto JJ stated at 323:
"It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred: Barnett v. Eccles Corporation (1900) 2 QB 423, at p 428. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld."
242This passage does not specify the precise basis for this "general rule". At least in cases involving a previous "judicial determination" it seems that it is a form of res judicata in that the entitlements of the parties in respect of costs merge in the order that is made. In cases where the "rule of law" precluding recovery is a statute then presumably the general rule derives from an ascertainment of a statutory intention that the legislation deals exhaustively with the topic of costs, although it is not necessary to consider this further.
243Mr Kelly SC also referred to Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1. In Avenhouse one issue that arose on appeal was whether in proceedings in this Court against the Council for negligence the appellants could recover their costs of litigating against the Council in the Land and Environment Court at the conclusion of which there had been "no order as to costs". The Court of Appeal upheld the trial judge's refusal to allow recovery of those costs. Sheller JA, with whom Mason P and Priestley JA agreed, found (at 37) that:
"[The appellants] having agreed that there should be no order for costs, they cannot, in my opinion, now seek to go behind that agreement by claiming the costs as damages in the present proceedings."
Of precise relevance to this case, Sheller JA noted (at 36) that:
"Had [the appellants] obtained an order for costs in the Land and Environment Court, principle would suggest that they could not recover in the present proceedings the difference between the costs assessed and the actual costs or expenses they incurred."
244Sheller JA did not refer to Anderson in his judgment. Presumably this is so because his Honour treated "no order as to costs" as only an agreement between the parties that precluded later recovery and not as a "judicial determination or ... positive rule of law" as referred to in Anderson.
245Mr Bevan contended that there is an exception to the "general rule" stated in Anderson as expressed in the following passages from McGregor on Damages, 17th Ed (2003) at 632:
"More difficult are the cases where the now claimant claims that a separate tort was involved in instigating, assisting or causing the previous proceedings and sues for damages for that tort. Such torts could be malicious prosecution, false imprisonment or conspiracy. If the now claimant is thus capable of establishing a separate cause of action, it may be that he has found a sufficient peg upon which to claim as damages costs incurred by him in the earlier proceeding. Devlin L.J. in Berry v British Transport Commission [footnote: [1962] 1 Q.B. 306] certainly thought this should be so. He said:
'I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from an additional wrong.' (emphasis added)
...
(c) Conspiracy. Conspiracy is another tort which might be held to arise from instigating, assisting or causing the previous proceedings. This would be analogous to malicious prosecution but would also require an agreement between two parties to bring or defend the previous proceedings: it might however be wider in that, for instance, it could, unlike malicious prosecution under the present law, apply to all civil actions. On principle there is no reason why the now claimant should not recover as damages costs incurred by him in the previous proceedings. In Hathaway v Barrow [footnote: (1807) 1 Camp. 151] the now defendants had unsuccessfully brought a petition against the now claimant and costs had been awarded against them. The now claimant claimed to recover as damages the costs he had incurred above those awarded, but the court refused their recovery, Sir James Mansfield saying that those already awarded 'must be considered as satisfaction'. This, however, is the only case and it is a decision of 1807, which was long before the general principles were worked out by the courts; moreover, it is at odds with the general view of Devlin L.J. already referred to. [footnote: In Berry v British Transport Commission [1962] 1 Q.B. 306, CA at 322. See para. 17-005, above]"
246Mr Bevan contended that Mrs Marshall falls within this exception as she sues in conspiracy (plaintiffs' written submissions dated 15 August 2013 at [165]). I reject this contention for two separate reasons.
247First, at this point I am dealing with Mrs Marshall's claim for the solicitor/ client costs of the Prescott proceedings. Mrs Marshall does not allege that any "separate tort" on the part of Mr Prescott was "involved in the instigat[ion], assisting or causing" of those proceedings, as opposed to Ms Carruthers' defence of the Marshall proceedings. Thus, even if the first passage from McGregor on Damages was to be read as a definitive statement of an exception to the general rule stated in Anderson and the words "will be" were substituted for "may", it does not assist Mrs Marshall's claim to recover the solicitor/client costs component of the Prescott proceedings.
248Second, I do not accept that the exception alluded to in the passage from McGregor on Damages operates in circumstances where there has been a previous order addressing costs by a Court with full power to award them. In Avenhouse at 35 Sheller JA noted this possible exception as stated in earlier edition of McGregor on Damages, and then discussed various cases that bore upon the existence of the exception (namely Berry; Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674 and Jack L. Israel Ltd v Ocean Dynamic Lines SA & Ocean Victory Ltd [1982] 2 Lloyd's Rep 88). His Honour then referred to Hanrahan v Ainsworth (1985) 1 NSWLR 370 in which a plaintiff claimed damages for the defendant's alleged abuse of legal process by instituting defamation proceedings and sought to recover costs incurred as a result of those defamation proceedings.
249In Hanrahan at 375 Hunt J stated:
"The first defendant objects that the actual temporal loss upon which the plaintiff relies in the present case (the expenses which he incurred in travelling to see his legal advisers) cannot be recovered in these proceedings. Those expenses, he says, are costs properly recoverable in the earlier defamation action, and only in that action. The expenses necessarily incurred in defending criminal proceedings are recoverable in a subsequent action for damages for malicious prosecution: Savile v Roberts (1698) 1 Ld Raym 374 at 378; 91 ER 1147 at 1150. But, where the action for malicious prosecution is based upon a civil action and not upon criminal proceedings, those costs are recoverable in the earlier action, and not in the action for malicious prosecution: Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674 at 690. This is because the successful party in civil proceedings (but not in criminal proceedings) is - so the theory goes - compensated in those proceedings by an order for costs, and the law does not permit that successful party's entitlement to costs in the earlier civil proceedings to be litigated a second time in the claim for damages for malicious prosecution: Berry v British Transport Commission [1962] 1 QB 306 at 320; Coleman v Buckingham's Ltd [1963] SR (NSW) 171 at 176, 177-178; 80 WN 593 at 596-597, 598.
The first defendant's argument does not, however, take into account the fundamental differences between an action for damages for abuse of process and an action for damages for malicious prosecution. (Those differences are also recognized in Coleman v Buckingham's Ltd (at 179; 599).) The difference principally relevant here is the need in the action for malicious prosecution, but not in the action for abuse of process, for the plaintiff to plead and to prove that the earlier proceedings have terminated in his favour. Thus there is not in the action for abuse of process (as there is in the action for malicious prosecution) necessarily an adjudication in the earlier proceedings in relation to the present plaintiff's entitlement to costs. If the earlier proceedings had terminated in favour of the present plaintiff, then his expenses would have been recoverable in those proceedings and they would not support his subsequent action for abuse of process. But, where those earlier proceedings have not so terminated in favour of the present plaintiff, I see no reason why his expenses in relation to those proceedings should not validly support his present claim." (emphasis added)
250In Avenhouse at 36 Sheller JA specifically cited the latter part of this passage but I take his Honour as having endorsed the entirety of Hunt J's analysis. Hunt J's analysis was such that it precluded recovery in the latter proceedings of solicitor/client costs in earlier (civil) proceedings where there was an "adjudication in the earlier proceedings" as to costs. There was no such adjudication in Hanrahan but there was in this case. I take Sheller JA (with whom Mason P and Priestley JA agreed) in Avenhouse as having endorsed Hunt J's analysis in Hanrahan which confines the operation of any exception of the kind identified in McGregor on Damages in the manner I have stated at [248].
251Otherwise it should be noted that this analysis is only apposite to the circumstance where the earlier proceedings were conducted in a court exercising a civil jurisdiction with full powers to award costs on a variety of bases and in respect of a range of circumstances. Since Hanrahan and even Avenhouse the powers of this Court hearing civil proceedings to award costs have only expanded so that the rationale for these decisions is even more appropriate now than it ever was. However the power to award costs in, say, criminal proceedings is more limited. Thus a different approach has been adopted where the earlier proceedings involve a criminal prosecution (see Berry at 317, 323 to 332 and 336 to 339).
252Mr Kelly SC sought to apply the same analysis to Mrs Marshall's claim to recover the solicitor/client costs component of the Marshall proceedings. Mr Bevan contended that the authorities relied upon by Mr Kelly SC and noted above have no application where the earlier proceedings were not between the same parties. He contended that, as a matter of principle, there was no difficulty with a party recovering from, say, their solicitor all the costs they incurred in other proceedings against a different party, provided that the usual preconditions for recovery such as causation and remoteness, etc, are satisfied. I agree (see Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156 at [13] to [17], and cases cited at [14], per Macfarlan JA with whom Sackville AJA agreed).
253Mr Kelly SC sought to rely on an Anshun estoppel as precluding recovery by Mrs Marshall of the solicitor/client costs in the Marshall proceedings. As I understand this contention it concerns Mrs Marshall's alleged failure to either seek a solicitor/client costs order against Ms Carruthers in the Marshall proceedings or to make such an application against Mr Prescott in the Marshall proceedings, presumably under ss 98 and 99 of the Civil Procedure Act 2005. It is not necessary to address all the potential difficulties with this contention because it suffices to state that I am not satisfied that it was "unreasonable" for Mrs Marshall not to have made any such application (Anshun at 602 per Gibbs CJ, Mason and Aickin JJ). To have done so would have put at risk the favourable settlement she had negotiated with Ms Carruthers. Moreover I consider that a litigant in her position was entitled to take stock and consider the financial effect of all the costs orders and costs she had incurred before deciding to embark upon further litigation.