McBride v Christie's Australia Pty Limited [2015] NSWSC 754 | Case summary

Supreme Court of NSW|2015-04-01|Before: Bergin CJ

Solicitors: McLachlan Thorpe Partners (Plaintiffs) Minter Ellison (1st Defendant) Levitt Robinson Solicitors (2nd and 3rd Defendants) Ash Street Partners (4th Defendant) File Number(s): 2013/46775 Publication restriction: Nil

Judgment

The parties to this litigation are once again at loggerheads, this time about the form of final orders consequent upon the findings in the judgment in this matter delivered on 4 December 2014: McBride v Christie's Australia Pty Ltd [2014] NSWSC 1729 (the Judgment). The Judgment should be read with these reasons in which the same nomenclature is adopted.
The proceedings were commenced in February 2013 (J [119]). The plaintiff brought proceedings against the defendants in respect of three artworks: the Painting; the Sculpture; and the Smart. The plaintiff sued each of the defendants in respect of the Painting. The plaintiff sued only Ms Sharpe in respect of the Sculpture and the Smart. The claim in respect of the Sculpture was abandoned on the ninth day of the ten day trial (J [14]). The trial took place over ten days from 21 to 31 July 2014 and 1 August 2014.
It is necessary to refer to the correspondence and various discussions the subject of evidence on the application for costs and interest to consider the contentions of the respective parties in context.

Relevant correspondence and discussions

The "problem" in respect of the Painting came to the plaintiff's knowledge in February 2010 (J [112]). On 29 April 2010 Ms Sharpe's solicitors wrote directly to the plaintiff offering to pay her $30,750 in respect of her allegations that Ms Sharpe had sold the Sculpture below the reserve price of $350,000 (at $300,000). Although it appears that the plaintiff was willing to accept the offer, difficulties were encountered in respect of the release that was to be signed. In a letter of 5 May 2010 Ms Sharpe's solicitors advised that she was concerned that the plaintiff intended to bring other claims against her.
There were discussions between the plaintiff and Mr Holland in 2012 with subsequent correspondence in that year and in 2013 (J [114]-[118]).
On 28 June 2012 Ms Sharpe's solicitors wrote to the plaintiff's solicitors advising that Ms Sharpe offered to instruct Menzies to release to the plaintiff any amount that it was holding in relation to the proceeds of sale of the plaintiff's artworks. That letter also contained an offer that neither Ms Sharpe nor her son would make any claim for payment in relation to that sale.
On 14 February 2013 the Statement of Claim was served. On 15 February 2013 Ms Sharpe's solicitors requested documents in relation to the Fund with notice that they would seek a special costs order should the Fund proceed against Ms Sharpe in relation to the sale of the Sculpture. On 14 March 2013 the plaintiff's solicitors suggested that any application for security for costs against the Fund could be avoided by the plaintiff's confirmation that she was controller of the Trustee and the only member of the Fund; that the assets of the Fund included the whole proceeds of sale of the Sculpture; and the proceeds would be more than sufficient to meet any adverse costs order. On 20 March 2013 Ms Sharpe's solicitors advised that the confirmation by the plaintiff in respect of these matters relating to the Fund was insufficient. They suggested that an alternative would be for the plaintiff to provide a personal guarantee or a bank guarantee in the amount of $300,000.
On 21 March 2013 the plaintiff's solicitors advised that the plaintiff would personally meet any adverse costs order made against the Fund, if the Fund failed to comply with such order.
On 10 May 2013 after a Notice of Motion for security for costs had been filed on Ms Sharpe's behalf, the plaintiff's solicitors provided the audited financial statements of the Fund for the years 2011 and 2012 with a copy of the Superannuation Fund Deed. On 13 May 2013 Ms Sharpe's solicitors advised that having received those documents they would not press the Notice of Motion.
On 27 September 2013 Ms Sharpe's solicitors wrote to the plaintiff's solicitors making an offer in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. That letter dealt with each of the claims in respect of the Painting, the Sculpture and the Smart as identified in the plaintiff's Statement of Claim and included the following: Despite our client's expectation that she will successfully defend every aspect of the proceedings, our client is nevertheless prepared to make a substantial compromise without admission in order to seek to resolve the disputes between our respective clients on agreed terms and avoid further costs for both sides. To that end, our client is prepared to settle the proceedings on the following bases: 1. Our client refund the first plaintiff within 14 days of acceptance the $2,000 paid to our client in relation to the purchase of the Tucker. 2. Our client pay the second plaintiff within 14 days of acceptance $30,750 being the difference between the amount it received for the sale of the sculpture and the amount it would have received if it had sold for $350,000, plus interest on that amount at court rates for the period 25 March 2010 to the date of payment being $8645.72 to the date of this offer plus $5.69 per day thereafter to the date of payment. 3. Our respective clients send a joint letter to Menzies Art Brands Pty Ltd within 7 days directing Menzies to pay to the first plaintiff the $42,000 still held by Menzies in relation to the Jeffrey Smart and the $5,720 in relation to the Boyd and the Gleeson. The letter can be in the form attached and marked A or a form otherwise agreed between the parties. 4. The plaintiffs discontinue the proceedings against our client in their entirety, upon the basis that there be no order as to costs and each party pay their own costs of the proceedings; 5. The plaintiffs fully release and discharge our client and her agents from any claims relating to services provided by our client to the plaintiffs including the claims the subject of the proceedings; 6. The terms be kept confidential. This offer is open to be accepted for a period of 28 days from today's date. Our client intends that it be binding upon the parties upon acceptance. This offer is made in accordance with the principles enunciated in Calderbank v Calderbank. Therefore, if your client does not accept the offer, and our client obtains a judgment more favourable than the terms of this offer or otherwise satisfies the court that it was unreasonable for your client not to accept the offer, then our client will tender this letter in an application that the plaintiffs pay costs on an indemnity basis from the date of this letter.
Although there is no express rejection of this offer in evidence, it is clear that it was not accepted.
In September 2013 HFA and Mr Holland authorised Mr Holland's father to try to resolve the dispute directly with the plaintiff. Mr Holland Snr and the plaintiff had a luncheon meeting on 19 September 2013 at which Mr Holland Snr informed the plaintiff that he would "buy back" the Painting and "reverse the sale". He asked the plaintiff whether they could "talk about a price". The plaintiff advised him that she would think about it and get back to him.
On 11 October 2013 the plaintiff's solicitors wrote a Calderbank letter to each of the defendants' solicitors in terms that included the following: This letter deals with our client's offer in respect of the Tucker claim made to all Defendants. Our client will separately deal with the other aspects of the claim directly with Ms Sharpe. Our client is not prepared to release any of the parties in respect of the Tucker claim, unless all Defendants agree to a resolution of the proceedings. Our client quantifies her claim in respect of the Tucker as follows: ● 28 May 2000 Payment made to Christie's $10,000.00 ● 28 May 2000 Payment made to Vivienne Sharpe $2,000.00 Total $12,000.00 ● Interest from 28 May 2000 to 31 October 2013 on $10,000 $12,118.01 ● Interest from 28 May 2000 to 31 October 2013 on $2,000 $2,423.60 For ease of reference, we have calculated the interest on the $10,000 and $2,000 separately. ● The cost of the Lease on the balance of the purchase price: (see Exhibit "LM 1-19") $98,436.26 ● The cost of the 2nd Lease on the residual amount: (see Exhibit "LM 1-22") $44,381.81 ● Interest on $143,818.07 from 1 January 2007 to 31 October 2013: $85,426.95 Total loss in respect of the Tucker inclusive of interest: $255,786.63 Our client is prepared to forego any claim for loss of opportunity. Our client is prepared to resolve the claim on the payment of $240,000.00 plus costs in the sum of $100,000, which we estimate to be the costs associated with the proceedings on a reduced ordinary basis, relevant to the Tucker Claim, or alternatively as agreed or assessed. Please note the costs in respect of this matter, excludes the costs associated with the Smart and Oliver claim. Our client would be prepared to execute a Deed of Release in respect of the Tucker. The offer is to be accepted for a period of 28 days from today's date. The offer is binding upon the parties' acceptance of the offer.
After the plaintiff's Calderbank letter was received Mr Holland Snr attended another luncheon meeting with the plaintiff on 14 October 2011 at which he informed her that he would like to buy the Painting back for $86,000 on the condition that she "drop the case" against HFA and Mr Holland. The plaintiff said that she would accept the $86,000 offer on the condition that Mr Holland Snr got releases from Christie's and Ms Sharpe because, as the plaintiff said, "I am not going to drop my claims against them".
During the week following this luncheon Mr Holland Snr spoke with Ronan Sulich of Christie's and also met with Ms Sharpe. Mr Sulich advised Mr Holland Snr that it was not up to him and that he had to check with Christie's in England. Subsequently Mr Sulich advised him that Christie's in London would not release HFA and Mr Holland unless Christie's was "out too". Ms Sharpe also advised Mr Holland Snr that she would not agree to the terms of the release.
On 18 October 2013 HFA and Mr Holland's solicitors made a Calderbank offer that included the following: In a final effort to settle this matter and to save the considerable legal costs on both sides associated with the final extensive preparation of this matter for hearing with Counsel, including arranging lay and expert evidence, we advise that our client would be prepared to pay the sum of $89,000 (inclusive of GST, interests and costs) in full and final settlement of this matter on the strict understanding that this settlement must be affected (sic) on or before 31 October 2013. Such settlement would, of course, involve the proceedings being dismissed against our clients (the Second and Third Defendants), the appropriate Deed of Release and the return to our client of the oil painting entitled Faun & Parrot by Albert Tucker circa 1967, the subject of the Supreme Court proceedings.
On 22 October 2013 the plaintiff's solicitors wrote by email to the solicitors for HFA and Mr Holland advising: "We have instructions to reject your client's offer".
On 25 October 2013 the plaintiff's solicitors wrote to each of the defendants' solicitors noting that the plaintiff felt that it was not possible at that stage to resolve the matter without the agreement of all defendants and proposing an informal settlement conference in November 2013. It is apparent that the settlement conference occurred and the parties were not successful in settling their differences.
On 16 December 2013 the plaintiffs served a Notice of Offer of Compromise on HFA and Mr Holland in the following terms: 1. The First Plaintiff offers to compromise her claim against the Second and Third Defendants in the proceedings, by accepting a Judgment against the Second and Third Defendants in favour of the Plaintiffs in the sum of $240,000, inclusive of interest in relation to the Tucker portion of the claim. 2. The Second and Third Defendants to pay the First Plaintiff's costs as agreed or assessed. 3. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005, and remains open to be accepted for 28 days from the date hereof.
On 2 May 2014 the plaintiff's solicitors served a Notice to Admit Facts. Those facts were as follows: 1. The painting entitled "Faun and Parrot" purporting to be an oil painting by Albert Tucker circa 1967 ("the Painting") was not a painting by Albert Tucker but was a forgery by a person or persons unknown. 2. The Painting was not painted by Albert Tucker in 1967. 3. The Painting had not been purchased from Tolarno Gallery, St Kilda, in Victoria in 1969-70. 4. The Painting had not been purchased from the Dominion Galleries in Sydney in 1970. 5. Albert Tucker did not exhibit a painting entitled "Faun being attacked by Parrots 1967". 6. Albert Tucker did not paint a painting entitled "Faun being attacked by Parrots 1967".
On 7 May 2014 Ms Sharpe's solicitors advised that she did not know and could not admit the facts in the Notice to Admit Facts, but also advised that she did not propose to advance a positive case that the Painting was by Albert Tucker. The solicitors observed that it was the plaintiff's allegation that the Painting was a forgery and the onus of proving that allegation remained on the plaintiff. A Notice disputing all the facts was served by Ms Sharpe on that date.
On 13 May 2014 the solicitors for HFA and Mr Holland disputed facts 1 and 2 in the Notice to Admit Facts, did not admit facts 3 and 4 and admitted facts 5 and 6.
On 16 May 2014 Christie's disputed all the facts in the Notice to Admit Facts.
The parties proceeded to private mediation in either late June or early July 2014. However they were not able to settle their differences.
On 4 July 2014 Christie's solicitors wrote to the plaintiff's solicitors on behalf of all of the defendants in the following terms: The defendants jointly offer to settle all claims in the proceedings that relate to the Tucker painting ('Tucker claims') on the following terms: 1. the defendants will pay to the first plaintiff the sum of $300,000; 2. the payment will be made within 10 days of the acceptance of the offer; 3. on receipt of payment the plaintiff must immediately sign and file with the Court all documents necessary to have the Tucker claims dismissed against each defendant, with each party to bear their own costs of the Proceedings relating to the Tucker claims and to vacate any existing costs orders concerning the Tucker claims; and 4. this offer is open for acceptance until 4pm on Monday, 7 July 2014 and will immediately thereafter lapse.
Also on 4 July 2014 the plaintiff's solicitors wrote to the solicitors for each of the defendants referring to the events that occurred at the mediation and the failure to settle the matter. That letter included the following: We confirm that our clients will accept, in full and final satisfaction of their claims, in respect of damages, interest and costs the sum of $750K. For the sake of good order, that amount is comprised of a figure of $480K for damages, interest and costs in relation to the Tucker, and $270K for damages, interest and costs in relation to the Oliver and the Smart. Your clients are well aware of the amount of costs our clients have incurred to date, and well aware from our clients' pleadings and the evidence, as to the range of damages being claimed by our clients, and should understand that the lump sum amount of $750K is a substantial discount representing a realistic assessment of litigation risk faced by our clients. With respect, we do not think the position taken by your clients reflect (sic) such a realistic appraisal. This is particularly so, in light of the view that we hold that collectively, your clients will expend at least $1 million in legal fees during July 2014. Our clients will leave this offer open until 9.00 am on Monday, 7 July 2014, at which time it will close. Any offers by your clients made after that date must take into account the incurring of legal fees by our client from 9.00 am on Monday, 7 July 2014, which will be substantial, as our clients' senior and junior Counsel will commence intensive preparation from that date.
On 15 July 2014 Christie's solicitors wrote to the plaintiff's solicitors on behalf of all of the defendants in the following relevant terms: The defendants wish to negotiate the Tucker claims separately to the other claims in the proceedings. We have authority to put the following joint offer to your client on behalf of our client and the second, third and fourth defendants. We also have authority to convey the offer set out below on behalf of the fourth defendant, in relation to the Oliver and Smart claims. The defendants jointly offer to settle all claims in the proceedings that relate to the Tucker painting ('Tucker claims') on the following terms: 1. the defendants will pay to the first plaintiff the sum of $400,000; 2. the payment will be made within 14 days of the acceptance of the offer; 3. the terms of the settlement offer and any resulting settlement are confidential; 4. on receipt of payment the plaintiff must immediately sign and file with the Court all documents necessary to have the Tucker claims dismissed against each defendant, with each party to bear their own costs of the Proceedings relating to the Tucker claims, and to vacate any existing costs orders concerning the Tucker claims; 5. the plaintiff will indemnify the defendants against any claim that might be made against any of them by the liquidator of Laurentine Pty Ltd in relation to the Tucker painting; and 6. this offer is open for acceptance until 12 noon on Wednesday, 15 (sic) July 2014. The fourth defendant offers to settle all claims in the proceedings that relate to the Oliver sculpture and the Smart painting ('Oliver and Smart claims') on the following terms: 7. the fourth defendant will pay to the plaintiff the sum of $120,000; 8. the payment will be made within 14 days of the acceptance of the offer; 9. the terms of the settlement offer and any resulting settlement are confidential; 10. on receipt of payment the plaintiff must immediately sign and file with the Court all documents necessary to have the Oliver and Smart claims dismissed against the fourth defendant, with each party to bear their own costs of the Proceedings relating to the Oliver and Smart claims, and to vacate any existing costs orders concerning the Oliver and Smart claims; 11. the plaintiff will direct Menzies Art Brands ('Menzies') to pay to the fourth defendant the whole of all moneys held by Menzies in respect of introductory commissions payable to the fourth defendant relating to the sale of the Smart painting (namely some $42,000 plus interest if any) and two other paintings (Gleeson and Boyd) (namely some $5,720 plus interest if any) at auction on 25 March 2010; 12. this offer may only be accepted by the plaintiff if the joint offer above in relation to the Tucker claims is also accepted; and 13. this offer is open for acceptance until 12 noon on Wednesday, 15 (sic) July 2014. We and the solicitors for the other defendants reserve our respective clients' rights to raise this letter on the issue of costs.
The date 15 July 2014 in paragraphs 6 and 13 of this letter was a typographical error. It should have been 16 July 2014.
On 16 July 2014 the plaintiff's solicitors made a further Calderbank offer to each of the defendants' solicitors in terms that included the following: We are instructed that our clients are prepared to settle all matters in dispute on the following basis: 1. Judgment for the First Plaintiff against the Defendants in respect of the Tucker Claim for the sum of $135K. 2. Defendants to pay the First Plaintiff interest on the amount stated in 1 above on a simple basis at Supreme Court rates, interest to be calculated from the date of each payment made by the First Plaintiff or on her behalf between 2000 and 2007, to the date of acceptance of the offer. (In this respect we will deliver to you as soon as possible a schedule which calculates the amount of interest as stated, but for guidance purposes, we anticipate the amount of interest will be approximately $105K). 3. Judgment for the Second Plaintiff against the Fourth Defendant in respect of the Oliver Claim for the sum of $30K. 4. Fourth Defendant to pay interest to the Second Plaintiff in respect of the amount stated in 3 above on a simple basis at Supreme Court rates from 25 March 2010, to the date of acceptance of the offer. 5. Judgment for the First Plaintiff against the Fourth Defendant in respect of the Smart claim for the sum of $65K. 6. Fourth Defendant to pay interest to the First Plaintiff in respect of the amount in 5 above on a simple basis in accordance with Supreme Court rates from 25 March 2010, to the date of acceptance of the offer. 7. Defendants to pay the First Plaintiff's costs as assessed or as agreed in respect of the Tucker Claim. 8. Fourth Defendant to pay the Second Plaintiff's costs as assessed or as agreed in respect of the Oliver Claim. 9. Fourth Defendant to pay the First Plaintiff's costs in respect of the Smart Claim as assessed or as agreed. In considering this offer we wish to advise you of the following matters: (a) Each proposal in respect of each work of art involves a payment of damages, a payment of interest and costs. If a defendant wishes to accept in relation to a work of art, the offer to pay the specified amount of damages in respect of that work of art, it must also accept the related offers to pay interest and costs in respect of the same work of art. For example, if the Defendants wish to accept the offer to pay damages in respect of the Tucker in paragraph 1 above, they must also accept the proposals in paragraphs 2 and 7 above. (b) Subject to (a) above the offers are not interdependent as between the three separate works of art. In other words, the Defendants may accept offers 1, 2 and 7 in respect of the Tucker Claim, even though the Fourth Defendant may not accept the offers in relation to the Oliver or the Smart. Conversely, the Fourth Defendant may accept the offers in respect of either or both of the Smart or the Oliver, but not the offers in relation to the Tucker. … (g) It goes without saying that the joint offer contained in the letter from Minter Ellison dated 15 July 2014 and sent at 6.12pm is rejected. In rejecting that offer, we are instructed to advise you of the following matters: (i) The offers are unreasonable, because the offers are rolled up amounts in respect of the Tucker firstly, and in respect of the Oliver and Smart secondly, such that it is not possible to determine how much is offered as damages, how much is interest and how much as costs. (ii) The offers are unreasonable because of the short time frame given in which to consider the offers. In this respect, we note the letter was served at 6.12pm on Tuesday, 15 July 2014, and called for a response at midday on 15 July 2014. (iii) The offers are unreasonable because they were made in the absence of service of any written submissions from the defendants, and on the basis that we only this morning at 10.20am were able to inspect Christie's file at Minter Ellison, although the file had been held by that firm for some time, and we had previously written requesting an urgent inspection. (iv) For the reasons stated in (i)-(iii) above, our clients contend that the joint offers contained in the letter from Minter Ellison failed to satisfy the Calderbank principles and in any event, cannot be relied upon by the defendants in respect of costs, whatever the outcome of the proceedings.
On 17 July 2014 Ms Sharpe's solicitors wrote to the plaintiff's solicitors in response to the plaintiff's offer of 16 July 2014. That letter rejected the offers in relation to the Sculpture and the Smart. It included an offer in respect of the Smart that Ms Sharpe would pay the plaintiff $100,000 inclusive of interest and costs and would direct Menzies to pay to the plaintiff $42,000 held in respect of the Painting and also the moneys held in respect of the two other paintings (Gleeson and Boyd). Those other paintings were the subject of some claims in the original pleading which had dropped away. The letter also included an alternative offer to settle both the Sculpture and the Smart claims jointly by Ms Sharpe paying to both plaintiffs the sum of $150,000 inclusive of interest and costs with the same conditions in respect of the amounts held by Menzies. This offer remained open until the following Monday 21 July 2014, the first day of the trial.
The plaintiff's solicitors wrote to Christie's solicitors on 18 July 2014 setting out information on the legal costs incurred by the plaintiff as at 17 July 2014. The total amount of the costs in the schedule was $507,445.
The evidence discloses that the total legal costs incurred in the litigation by HFA and Mr Holland are $387,000, made up as to $287,000 incurred by their present solicitors and $100,000 by their previous solicitors.
Ms Sharpe's costs and disbursements incurred up to and including 1 August 2014, the last day of the hearing, were approximately $930,000.
It is appropriate to deal with the parties' arguments in respect of each of the artworks and causes of action relating to them. Each of the parties made submissions in respect of the Painting claim. The only parties to make submissions in respect of the Sculpture claim and the Smart claim were the plaintiff and the Fund and Ms Sharpe. I will deal with the Painting claim first.

THE PAINTING CLAIM

I will deal with the plaintiff's claim against each of the defendants separately.

The plaintiff and Christie's

The plaintiff's case against Christie's that it engaged in misleading or deceptive conduct was successful and damages were awarded as to 85% of $118,788.71 being $100,970.40 (J [469]-[470]). The plaintiff was also successful in her claim against Christie's in deceit and for unconscionable conduct (J [346]; [348]). The plaintiff's claim against Christie's for money had and received failed (J [357]-[358]).
It is not in issue that judgment should be entered for the plaintiff for the amount of $100,970.40. However there is an issue about any interest that may be awarded. There is also an issue about the appropriate costs order to be made as between the plaintiff and Christie's.
The plaintiff submitted that Christie's should pay her costs relating to the Painting claim on an indemnity basis. The fundamental justification for such an order is said to be the finding against Christie's that it knew before the transaction for the purchase of the Painting had been completed in late June 2000 that its representation that there was no doubt that the signature on the Painting was the signature of Albert Tucker was false (J [342]).
It was submitted that Christie's conducted its entire defence of the proceedings knowing that it had made a false representation as to the signature on the Painting and that its defence was hopeless. Although Christie's had indicated during the trial that it may call the witnesses whose affidavits had been served, it did not do so and defended the case without calling any evidence and by vigorously cross-examining the plaintiff. It was submitted that in those circumstances it is appropriate that Christie's pay the plaintiff's costs on an indemnity basis. In this regard the plaintiff relied upon the decision on Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353. In that case Basten JA, with whom Giles JA and Young CJ in Eq agreed, observed that more recent case-law (that is up to 2008) showed a tendency to grant indemnity costs orders more readily than in the past (at [111]). Basten JA also said at [113]: While the general rule remains that costs should be assessed on a party and party basis, it is important that the standard to be applied in awarding indemnity costs not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part. A test of unreasonableness should not be upheld on other than clear grounds.
The plaintiff submitted that there were no offers of compromise made by Christie's in relation to the Painting claim that were more favourable to the plaintiff than the result that she obtained. It was also submitted that the "costs inclusive" nature of the larger offers made by Christie's meant that, at the time those offers were made, they were less favourable than the outcome achieved by the plaintiff.
The offers in the Calderbank letters are not relied upon in the strict sense by Christie's to suggest that the offers were better than the outcome achieved, but rather to point up what is submitted to be the disproportionate amount of costs compared to the outcome.
The Uniform Civil Procedure Rules 2005 provide as follows: 42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court (1) This rule applies if: (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.
The plaintiff submitted that there could be no doubt that these proceedings involved complex facts and weighty issues appropriate for determination in this Court.
The plaintiff seeks an alternative order that her costs of proving that the Painting was a forgery should be paid on an indemnity basis pursuant to UCPR 42.8 which provides: 42.8 Dispute of fact subsequently proved or admitted (1) In this rule: disputing party means the party who serves a notice disputing a fact under rule 17.3(2). fact in dispute means the fact that is the subject of a notice served under rule 17.3(2). requesting party means the party who is served with a notice disputing a fact under rule 17.3(2). (2) Unless the court orders otherwise, the disputing party must, after the conclusion of proceedings in which a fact in dispute is subsequently proved or is subsequently admitted by the disputing party, pay the requesting party's costs, assessed on an indemnity basis, being costs incurred by the requesting party: (a) in proving the fact, or (b) if the fact has not been proved - in preparation for the purpose of proving the fact. (3) An entitlement to costs under this rule is not affected by any order as to costs unless that order makes particular reference in that regard.
The Painting is a forgery (J [216]). In those circumstances it is submitted that the plaintiff is entitled to the costs of proving that the Painting is a forgery on an indemnity basis.
Christie's accepts that by operation of UCPR 42.8 it must pay the plaintiff's costs of proving that the Painting is a forgery and that those costs are to be assessed on an indemnity basis after 16 May 2014, the date on which it served its Notice Disputing Facts.
Christie's does not accept that it is liable to pay the balance of the plaintiff's costs of the proceedings on an indemnity basis or at all. Christie's contends that it would be appropriate in all the circumstances for the Court to either make no order as to costs as between the plaintiff and Christie's; or order that Christie's pay a percentage of the plaintiff's costs assessed on an ordinary basis.
In support of these contentions Christie's relied upon the decision of McDougall J in Shield Mercantile Pty Ltd v Citigroup Pty Ltd [2013] NSWSC 287 as factually analogous to the present case. In that case Shield had initially claimed a loss of $9.1 million. That claimed loss dwindled to $708,000 after 12 days of trial ([2]; [20]-[21]). In the present case the plaintiff's claim changed over time by reason of the exposure of the arrangements through Laurentine with Capital Finance under the leases. It is true that the detail of the plaintiff's claimed loss changed but in my view it certainly could not be said that these changes are factually analogous to those in Shield Mercantile Pty Ltd v Citigroup Pty Ltd.
Another aspect of the facts in Shield's claim against Citigroup relied upon by Christie's was that Citigroup had been required to meet various articulations of the claim in the pleadings. Shield had brought claims against Citigroup for breach of contract including loss of opportunity to make other profitable agreements. Ultimately it was only successful in respect of the claim for underpaid commissions. McDougall J concluded that the way that Shield conducted the case had caused considerable loss to Citigroup (at [24]). His Honour did not accept Shield's contention that it had enjoyed substantial success (at [25]). I respectfully agree with his Honour's statement that the discretion as to costs is a "broad one" and that it is appropriate to consider, amongst other things, "a proportionate relationship between the amount that was recovered and the costs that might be allowed" (at [29]).
McDougall J concluded that to give Shield costs of the proceedings (which were apparently "many hundreds of thousands of dollars, if not more") would be a "rank injustice" and would mean that Shield would make a substantial recovery in costs "far exceeding the ultimate amount of its claim" (at [29]).
It was submitted that the manner in which this case was conducted on the plaintiff's behalf has caused considerable loss to Christie's. Christie's submitted that it had to contend with various articulations of the plaintiff's claim both in her pleadings and evidence, including what was said to be a "fairly radical change of position" in the evidence filed on her behalf immediately prior to the commencement of the hearing. Some of these matters are set out in the Judgment between paragraphs [167] and [196].
The plaintiff was put to proof on all of the matters in the Notice to Admit Facts. The plaintiff was required to prove that the Painting is a forgery. The plaintiff had to do this in circumstances where, whilst giving her evidence, she was not aware that Christie's did not intend to call its witnesses, whose affidavits had been served. This is of course a facet of litigation with which parties live and Christie's was entitled to take this forensic step and put the plaintiff to proof. However in doing so, Christie's knew that one of its representations it had made in respect of the signature of Albert Tucker was false. If that had been revealed, the conduct of the trial could have been shortened, or indeed avoided. In these circumstances I regard Christie's reliance on Shield Mercantile Pty Ltd v Citigroup Pty Ltd as misplaced.
In oral submissions on the question of costs Christie's noted that it "did not advance an affirmative defence" that the Painting was genuine. It said (tr 12-13) Christie's position was, it does not know whether or not this painting is or is not genuine as a matter of fact. Christie's found itself in the invidious position where, having properly accepted that the scientific evidence, if I could use that term, or the expert evidence cast doubt as to the authenticity of the painting, quite properly in my submission, Christie's said from the outset of this case, from the outset of the hearing, it's accepted that this evidence casts very great doubt. … the difficult position which Christie's found itself in, as did the fourth defendant, is that the Holland parties filed and expressed an intention to rely upon evidence from Mr O Sullivan and Mr Gant which in effect said, "This is genuine, it was in my family's possession from the late 1960s to early 1970s", and the difficulty for Christie's is, it could on the one hand have said, "Maybe he won't be called or maybe he won't be accepted", neither of which was within Christie's knowledge, and therefore, Christie's will proceed on the basis of what the experts have said albeit not in a conclusive way but in a, as I said in opening, on a balance of probabilities basis.
These matters were no doubt to be considered in the light of the fact that Christie's knew in 2000 that there was serious doubt about the genuineness of the Painting. It chose to keep that knowledge to itself vis-a-vis the plaintiff. The predicament in which it found itself as described in the extract of the transcript above was fourteen years later. Even then it chose not to disclose that it had such knowledge at the time close to the very transaction in respect of it had been sued by the plaintiff. As I have said earlier I regard Christie's conduct as commercially reprehensible. To now suggest that the plaintiff's conduct of the trial caused "considerable loss" is in my view a submission that is not sustainable. It is true that the plaintiff failed in her causes of action against Mr Holland and in some of her causes of action against Ms Sharpe. However I am not satisfied that the conduct of the plaintiff's claim against Christie's disentitles her to an order for costs in her favour.
There were numerous aspects of the plaintiff's claims and the defences that were complex both factually and legally. Questions of equitable relief and laches were raised on the pleadings. Notwithstanding that the amount recovered by the plaintiff is less than $500,000, I am satisfied that it was appropriate for the plaintiff to bring these proceedings in this Court.
Christie's submitted that the plaintiff unnecessarily prolonged the length of the hearing by persisting in the claim that Ms Sharpe exceeded her authority by offering to purchase the Painting for more than the reserve contrary to her instructions, in circumstances where her Senior Counsel conceded that her evidence in this regard was "somewhat confused" (J [365]). Christie's also submitted that the length of the hearing was unnecessarily prolonged by the plaintiff persisting in the Sculpture claim until it was abandoned at closing submissions and persisting in the Smart claim in the face of an open offer made by Ms Sharpe at the beginning of the trial. It was also submitted that the costs of conducting the trial were entirely disproportionate to the sum ultimately recovered.
Christie's contended that it is impossible to untangle from the costs generally incurred by the plaintiff in the proceedings all of those costs which are properly attributable to the Painting claim. It was submitted that the plaintiff's contentions that Christie's case was hopeless ignores the primary basis upon which Christie's defended the proceedings referred to in the Judgment (J [167]-[196] and [217]-[228]).
Much of the plaintiff's evidence relating to the claim against Ms Sharpe in respect of the Sculpture was relied upon by all defendants in support of their submissions regarding the Painting claim. The evidence in relation to the Smart claim did not take up a great deal of time in the trial particularly because a concession was made on Ms Sharpe's behalf at the outset of the trial that the $42,000 would be paid to the plaintiff.
The first step for the plaintiff in her case against Christie's was to establish that the Painting was a forgery before she could make out her case against it (and each of the defendants) for misleading or deceptive conduct. Each of the defendants was interested in attacking the plaintiff's credibility and reliability to defeat the plaintiff's claim for misleading or deceptive conduct. Notwithstanding inroads that were made in respect of the plaintiff's credibility and reliability, the plaintiff was successful in establishing that each of the defendants (except Mr Holland) was guilty of misleading or deceptive conduct.
It is true that the plaintiff's evidence changed as described in the Judgment. Christie's was entitled to test whether the plaintiff was the owner of the Painting given the way in which the evidence developed. However Christie's knew that it had information that called into question the genuineness of the Painting. It is true that Christie's did not put forward a positive case that the Painting was genuine. However it kept to itself the information that the plaintiff had to elicit in evidence and prove as against Christie's. Had Christie's informed the plaintiff prior to the conclusion of the transaction between Christie's and Capital Finance that there was now serious concern about the genuineness of the Painting, or at the very least that there was now a doubt about whether the signature on the Painting was that of Albert Tucker, the whole of the proceedings in respect of the Painting claim may have been avoided. I am satisfied that Christie's conduct was unreasonable.
I am satisfied that a just result in respect of the costs as between the plaintiff and Christie's is that Christie's should pay the plaintiff's costs of the proceedings in respect of the Painting claim on an indemnity basis.
The next issue is the amount of interest to be awarded on the damages that have been awarded. There are two matters that arise in respect of Christie's contentions regarding the payment of interest. The first is that Christie's contends that interest should only be payable in respect of those amounts actually paid by the plaintiff personally and not those amounts that were found to have been paid by Laurentine or Mr Daniel, but in respect of which the plaintiff would in any event be liable to account.
The award of interest is compensatory for the party being out of the funds: Screenco Pty Ltd v RL Dew Pty Ltd (2003) 58 NSWLR 720. It was submitted that there is no satisfactory evidence as to when and/or if the plaintiff has reconciled the Laurentine amounts with Mr Daniel and there should be no payment of interest on those amounts. It was also submitted that notwithstanding the evidence that was given by both the plaintiff and Mr Daniel, there was no evidence of any arrangement, as "untidy" as they were found to be, that the plaintiff was required to pay any interest on the funds that were advanced on her behalf.
The next matter is the date from which interest should be awarded. Section 100(1)(b) of the Civil Procedure Act 2005 provides that the Court may include interest on the whole or any part of the judgment amount "for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect". The plaintiff has calculated interest for the period from 2000 (when the payment for the Painting was made to Christie's) to 4 December 2014 at $99,931.01 on the whole of the judgment amount entered against it.
Christie's submitted that interest should not commence to run until March 2010, when the Painting would have sold at auction had it not been withdrawn. It was submitted that the plaintiff enjoyed the Painting until 2010 and suffered loss in connection with the Painting only when she wished to convert it into money and found she was unable to do so. It was submitted that Christie's liability for interest on the sum awarded (85% of $118,788.71) from March 2010 calculated at the rates used by the plaintiff is $37,169.45 (being 85% of $43,728.76).
The plaintiff submitted that it does not follow that the expression "from the time the cause of action arose" in s 100(1)(b) of the Civil Procedure Act means the same thing as the expression "the date upon which the cause of action first accrues" for the purposes of s 14 of the Limitation Act 1969. In this regard the plaintiff relied upon Deane J's observations in Hawkins v Clayton (1988) 164 CLR 539 at 590, that references to the expression "the cause of action first accruing" must be construed so as to accord with the legislative intent of the provision in which they appear. It was submitted that the legislative intent may differ in different contexts. In respect of limitations defences, the High Court observed in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527 that it would be unjust to compel the plaintiff to commence proceedings "before the existence of his or her loss is ascertained or ascertainable". Similar observations were made by Sackville J in Karedis Enterprises Pty Ltd & Greenfriars Pty Ltd v Antoniou (1995) 59 FCR 35 at 47 (J [220]). It was submitted that these observations make plain that loss, albeit not ascertainable at a particular time, may arise before a cause of action accrues. The plaintiff contended that the time a cause of action arises for the purposes of s 100(1)(b) of the Civil Procedure Act should be construed to refer to the date upon which the loss was in fact suffered (the date of the payment for the forged Painting), even if it only became ascertainable at a later time.
The plaintiff's argument in this regard is delicate having regard to the submissions made in the trial as to whether the cause of action was statute barred (J [217]-[228]). It was held that the plaintiff suffered loss when the defect in the Painting was discovered and it was withdrawn from the March 2010 auction (J [228]). In Nu Line Construction Group Pty Ltd v Fowler (No 3) [2014] NSWCA 229 Basten JA, with whom Barrett JA and Young AJA agreed, noted that the determination of the time at which the cause of action "arose" was "central" to the resolution of the defence under the Limitation Act (at [11]). In that indirect sense his Honour equated the terminology of a cause of action arising to the cause of action accruing.
The argument that the plaintiff raises in this regard was raised in Star & Anor v O'Brien (1996) 40 NSWLR 695. In that case the Court of Appeal was dealing with the cause of action to recover a preference payment in which an issue arose as to whether interest should be awarded at a particular time. Clarke JA (although in dissent on the main issue) in dealing with s 94(1) of the Supreme Court Act 1970 which is reflected in s 100 of the Civil Procedure Act said at 700: The appellant submits that the word "arose" in s 94(1) means something other than "accrued" so that it is possible to award interest in respect of a period prior to the accrual of the cause of action. I must confess to being unable to understand the subtlety of the argument or how it could be suggested that a party could be ordered to pay interest on a sum of money which it became liable to pay in satisfaction of a cause of action covering a period before the existence of that cause of action. I need to say no more than that I think the argument is without foundation.
Similarly I am of the view that the plaintiff's argument in this regard is without foundation. I am satisfied that the award of interest should be from the date on which the cause of action arose or accrued in 2010 (J [228]).
The plaintiff and Mr Daniel each claimed to be owed moneys by the other and no final reconciliation was reached prior to the conclusion of the trial. It is just not known who may have to account to the other until such reconciliation is performed. Certainly the plaintiff's liability in respect of the payments for the Painting made by Mr Daniel will have to be brought to account in that reconciliation. She is entitled to the judgment moneys either for her own use or for the discharge of her obligation to Mr Daniel (if that is how it turns out) and has been kept out of those moneys.
I am satisfied that interest should be awarded on the whole of the amount from 2010. There will therefore be an award of interest in the amount of $37,169.45.

The plaintiff and HFA

The plaintiff's claim against HFA for misleading or deceptive conduct was successful and damages were awarded as to 10% of $118,788.71 being $11,878.87 (J [267]). There is no issue that judgment should be entered for the plaintiff against HFA for $11,878.87. That payment has been made together with post-judgment interest (tr 58). There is an issue as to whether pre-judgment interest should be awarded and as to the appropriate costs order in the circumstances.
The plaintiff seeks an order that HFA pay her costs of the proceedings in respect of the Painting claim in relation to the question of the authenticity of the Painting on an indemnity basis and otherwise on an ordinary basis. It was contended that there were no offers of compromise made by HFA, either alone or in conjunction with the other defendants, in relation to the Painting claim that were more favourable to the plaintiff than the result that has been achieved. Once again it was submitted that the "costs inclusive" nature of the larger offers made by HFA meant that those were less favourable than the outcome the plaintiff has achieved.
HFA submitted that there should be no order for costs against it. Alternatively HFA seeks an order that the costs that it should pay the plaintiff in respect of the Painting claim should be limited to 10% of the plaintiff's costs assessed on an ordinary basis until 18 October 2013 or alternatively 22 October 2013. It also seeks an order that Christie's pay to HFA such costs as HFA is ordered to pay to the plaintiff.
HFA also seeks an order that the plaintiff pay HFA's costs incurred in respect of all matters other than the Painting claim for the period until 22 October 2013 assessed on an ordinary basis and on an indemnity basis thereafter. HFA seeks a notation that the issues relevant to it in respect of the Painting claim constituted less than 25% of the issues in the proceedings.
The plaintiff submitted that Mr Holland Snr's offer to re-purchase the Painting could not reasonably be accepted. The plaintiff pointed out that the offer was not to pay money on account of damages, interest and costs. Rather it was to re-purchase the Painting. It was submitted that the plaintiff could not responsibly or ethically allow the Painting to return into circulation. The plaintiff also contended that because the offer was to re-purchase the Painting, the potential impact on her claims against Christie's and Ms Sharpe was difficult to gauge. It was contended that it was not possible for the plaintiff to accept the offer without acknowledgement from the other defendants as to the absence of any effect on the claims against them. Finally it was submitted that no amount was offered in respect of interest or costs.
The offers made on 4 July 2014 (for $300,000) and 15 July 2014 (for $400,000) jointly with the other defendants were inclusive of interest and costs. It was submitted that given the rolled up nature of the offers it was not unreasonable for the plaintiff to reject them.
The plaintiff submitted that it is inappropriate to compare the individual results obtained by the plaintiff against HFA or the other defendants with the amount that HFA agreed, amongst the other defendants, to contribute to the joint offers. It is contended that such a comparison is inappropriate because the individual contributions of the particular defendants were never identified in the joint offers and the offers were not capable of acceptance in respect of individual defendants. Accordingly the plaintiff submitted that the relevant comparison must be between the overall result that the plaintiff achieved in relation to the Painting claim and the combined offers that were made.
The plaintiff was successful against HFA. HFA made the forensic decision during the course of the trial to call evidence from Mr Gant and disputed facts in the Notice to Admit Facts in relation to the genuineness of the Painting. It was the only party that propounded evidence to call into question the expert evidence in respect of the genuineness of the Painting.
I regard Mr Holland Snr's efforts to settle the proceedings as commendable. However the complexities of the forensic positions of each of the parties in circumstances where it was clear that the plaintiff had an obligation to prove that the Painting was a forgery impeded his success. HFA could have taken a neutral position in respect of the genuineness of the Painting and did not do so. I am satisfied that the plaintiff should have her costs against HFA in respect of the Painting claim on an ordinary basis. However the costs of proving the Painting was a forgery are to be paid on an indemnity basis from 13 May 2014.
HFA made similar submissions to those made by Christie's as to the amount on which interest should be awarded and the date from which interest should be paid. For the reasons given above interest is to be awarded on the whole of the amount of the judgment and is to date from 2010. The parties are to agree on the appropriate amount.
HFA also seeks an order that the first defendant should pay its costs and any interest it is ordered to pay to the plaintiff. Having regard to the disputation of the four facts in the Notice to Admit Facts and the calling of Mr Gant's evidence in the trial, I am not satisfied that I should make such an order.

The plaintiff and Mr Holland

The plaintiff's claims against Mr Holland that he was knowingly concerned in HFA's misleading or deceptive conduct failed (J [297]). There is no issue that the plaintiff should be ordered to pay Mr Holland's costs of the proceedings against him. There is an issue as to whether the plaintiff should pay Mr Holland's costs on an indemnity basis from 22 October 2013.
The plaintiff seeks an order that limits the costs to those "referable solely to the claim against" Mr Holland. It was submitted that the purpose of the limitation is "simply" to reflect that costs referrable to the claim against HFA would have been incurred even if Mr Holland had not been sued.
I am not satisfied that the costs order against the plaintiff in respect of Mr Holland's costs should be limited in this way. An order will be made that the plaintiff pay Mr Holland's costs of the proceedings. He was brought into proceedings that were structured in a manner that would require him to be present throughout and incurred costs accordingly.
The claim for indemnity costs made by Mr Holland is based on the letter of 18 October 2013 referred to earlier in these reasons. That was in fact a combined offer by HFA and Mr Holland with a demand that the settlement had to be effected on or before 31 October 2013 in respect of both HFA and Mr Holland. That was an offer inclusive of interest and costs and it is not possible to know exactly what the plaintiff's costs were as at 31 October 2013. However having regard to the correspondence in relation to costs that is in evidence they would appear to be much greater than the amount offered. I do not regard the plaintiff's rejection of Mr Holland's offer rolled up with HFA's offer in the circumstances as unreasonable. I am not satisfied that the plaintiff should pay Mr Holland's costs on an indemnity basis.
An order is also sought that Christie's pay Mr Holland's costs of the proceedings. Having regard to my findings in respect of Mr Holland's conduct (J [292]-[296]), the disputation of the four facts in the Notice to Admit Facts and the calling of Mr Gant's evidence in the trial, I am not satisfied that I should make such an order.

The plaintiff and Ms Sharpe

The plaintiff's claims against Ms Sharpe for breach of contract, breach of fiduciary duty and in negligence failed (J [365]; [421]-[422]). The plaintiff's claim against Ms Sharpe for misleading or deceptive conduct was successful. The plaintiff was awarded damages as against Ms Sharpe as to 5% of $118,788.71 being $5,939.44 (J [373]; [469]-[470]). There is no issue that judgment should be entered in the plaintiff's favour against Ms Sharpe in that amount and that interest should be paid on that amount. Ms Sharpe did not raise the issues in relation to interest that were raised by Christie's and HFA. Indeed Ms Sharpe has already paid the judgement amount plus post-judgment interest. However there is an issue as to the appropriate costs orders to be made in the circumstances.
The costs orders sought against Ms Sharpe are that she pay the plaintiff's costs of the proceedings relating to the Painting claim in relation to the question of the authenticity of the Painting on an indemnity basis and otherwise on an ordinary basis.
Ms Sharpe submitted that the plaintiff should be ordered to pay her costs of and incidental to the Painting claim on an ordinary basis and further or in the alternative that Christie's should pay her costs of and incidental to the Painting claim on the ordinary basis.
The first basis upon which Ms Sharpe contends that her costs should be paid by the plaintiff is that she "succeeded on every disputed issue of fact" in relation to the Painting claim. Ms Sharpe relied upon the rejection by the Court of the claim against her in negligence (J [421] and [460]) and the claims against her for breach of fiduciary duty and unconscionable conduct (J [365]). Ms Sharpe also relied upon the rejection of the claim against her that she exceeded her authority in bidding at the auction and the finding that it was "extraordinary" that the plaintiff maintained that claim (J [365]). It was submitted that these claims protracted the hearing and increased the costs of the proceedings particularly for Ms Sharpe.
Ms Sharpe emphasised the attribution of a 5% share of liability to her in respect of the misleading or deceptive conduct claim and the finding that she was herself duped by the forgery and kept in the dark by Christie's (J [460]).
It was also submitted that the issues on which Ms Sharpe succeeded on the Painting claim (every issue but one) were not minor or subsidiary issues. It was contended that they meet the test of being dominant and separable from the single discrete and narrow matter on which the plaintiff succeeded. Ms Sharpe relied upon a number of cases in support of the proposition that when a party enjoys substantial success on one or more discrete causes of action and/or factual issues it should be entitled to its costs of that cause of action or issue: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [9]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]; OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1702; Lewis v Nortex Pty Ltd (in liq); Lamru Pty Ltd v Kation Pty Ltd [2006] NSWSC 480; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72.
Ms Sharpe submitted that the quantum of her liability (being less than $6,000 before interest and less than $12,000 inclusive of interest) is an exceptionally low figure and "wildly disproportionate" to the costs of the elaborate litigation which the plaintiff pursued against her. In those circumstances it was submitted that the plaintiff should pay Ms Sharpe's costs of defending the Painting claim or, at the very least, the plaintiff should not be entitled to any costs against Ms Sharpe in relation to the Painting claim. In support of this submission Ms Sharpe also relied upon Shield Mercantile Pty Ltd v Citigroup Pty Ltd at [24] and [27]-[29] and UCPR 42.34.
It is not in issue that "misconduct" by a party entitles the Court to depart from the usual order as to costs: Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [69]. Ms Sharpe submitted that "misconduct" may include unnecessarily protracting the proceedings. In this regard Ms Sharpe once again relied upon the finding that the plaintiff's maintenance of the claim that Ms Sharpe exceeded her authority was "extraordinary" (J [365]).
Ms Sharpe does not seek indemnity costs and recognises that the plaintiff has had some "albeit it very small" success on the Painting claim against her. However it was submitted that the various offers of settlement made by Ms Sharpe, including her participation in the joint offer made on 15 July 2014, also point to the appropriateness of an award of costs being made in Ms Sharpe's favour on an ordinary basis in respect of the Painting claim.
Ms Sharpe submitted that the 15 July 2014 offer may well have been more favourable than the overall outcome achieved by the plaintiff on the Painting claim. In written submissions it was contended that Ms Sharpe's contribution to the joint offer of $400,000 was $40,000 and seems clearly to have been a better outcome than that ultimately achieved by the plaintiff.
It was submitted that if a costs order in the plaintiff's favour is to be made it should be limited to 5% of those costs.
The plaintiff submitted that Ms Sharpe's contentions in support of her claim for costs should be rejected. First it was said that the fundamental success on critical issues was with the plaintiff. It was submitted that even though some of the facts were found in Ms Sharpe's favour, it does not mean that she "won". In those circumstances the Court should not depart from the ordinary rule as to costs following the event.
Secondly the plaintiff submitted that the general rule is that the Court should not seek to apportion costs on the basis of success or failure on discrete issues: Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331. Nor should the Court engage in a "nit-picking exercise which would obscure and ignore the ultimate result": Telstra Corporation Ltd v Australian Competition Tribunal (No 2) [2009] FCAFC 34 at [15]. The plaintiff also submitted that it is only in exceptional circumstances that the Court should approach the apportionment of costs on an issue by issue basis: Sanders v Snell (No 2) (2000) 174 ALR 53 at 57 [15].
The plaintiff submitted that there is a danger in looking at the matter from the perspective of each individual defendant. It was also submitted that when the plaintiff's case against all defendants is analysed, it becomes plain that the plaintiff enjoyed substantial success overall regardless of the "division of labour" between the defendants. It was submitted that in large measure a united front was deployed against the plaintiff.
The plaintiff submitted that the emphasis on the quantum of damages awarded against Ms Sharpe may skew the appropriate approach to an award of costs and illustrates the danger in looking at matters solely from the perspective of one of the three defendants against whom the plaintiff succeeded. It was contended that the corollary of the proportionate liability regime is that a plaintiff may need to proceed against a number of individual defendants to recover 100% of their loss. It was also contended that the proportionate liability regime does not envisage that where the share of responsibility of one or more individual defendants is relatively small, the plaintiff ought not to proceed against them. Any question of proportionality must look to the total amount recovered, not the amount recovered from one defendant.
The plaintiff rejected any suggestion that her conduct would disentitle her to a costs order against Ms Sharpe. It was submitted that the pursuit of claims that were not ultimately successful cannot, on that ground alone, constitute relevant disentitling conduct.
The plaintiff reiterated her submission that the rejection of the settlement offers was not unreasonable and would not provide a basis for ordering the plaintiff to pay Ms Sharpe's costs of the Painting claim. It was submitted that costs should follow the event and Ms Sharpe should pay the plaintiff's costs of the Painting claim.
The same facts and the majority of the evidence relied upon by the plaintiff in support of her claim against Ms Sharpe for misleading or deceptive conduct in respect of the Painting were relevant to and relied upon by her in support of her other unsuccessful claims against Ms Sharpe. The issue was really whether those facts supported each of the causes of action. They did not. The stark reality of the plaintiff's failure in respect of those other causes of action must be brought to account in assessing the appropriate costs orders that should be made.
I am not satisfied that the plaintiff's maintenance of the causes of action on which she failed is "misconduct" such that it would disentitle the plaintiff otherwise to an order for costs. Rather the question is what is just in the circumstances of the plaintiff having achieved success in respect of the misleading or deceptive conduct claim in the light of her failure on the other causes of action.
Ms Sharpe served a Notice disputing all of the facts in the Notice to Admit Facts on 7 May 2014. The plaintiff alleged that Ms Sharpe made representations, three of which mirrored the matters of fact in the Notice to Admit Facts (1 to 3) and included a representation that the Painting "would be a sound investment" (Amended Statement of Claim par [11]). Ms Sharpe denied that she made those representations "on 1 or 2 May 2000 or at any other time" (Amended Defence par [9]). The plaintiff claimed that on 1 May 2000 Ms Sharpe said that the Painting "would be a good buy" and a "great buy" (J [47]). Ms Sharpe denied this (J [51]). She claimed that she informed the plaintiff that the Painting was "from a good period" and that she thought it was probably worth $75,000 (J [54]). Although there was some controversy post-judgment in respect of my findings relating to the conversations between the plaintiff and Ms Sharpe, these were clarified in my reasons on 3 February 2015: Louise McBride v Christie's Australia Pty Limited [2015] NSWSC 231.
Ms Sharpe maintained throughout that she did not represent to the plaintiff that the Painting was a painting by Albert Tucker or that it would be a good investment. These were matters found against Ms Sharpe and she was held liable to the plaintiff for misleading or deceptive conduct (J [370]-[373]).
Ms Sharpe had to call evidence from an art dealer/expert, Mr Browne, in relation to the negligence claim against her. She was also required to cross-examine the plaintiff's witness, Ms Diggins, whose evidence was called to support a finding of negligence against Ms Sharpe. It was an important aspect of the case not only from the plaintiff's point of view but also in respect of Ms Sharpe's reputation as an expert in the relevant field. Ultimately Ms Sharpe was successful in defending the claim with a finding that "she took the steps that a reasonably competent and diligent art dealer would be expected to take in the circumstances of this case" (J [421]).
There was a finding that the plaintiff's maintenance of her claims for breach of contract and breach of fiduciary duty after she gave her evidence was "rather extraordinary" (J [363]-[365]).
I am cognisant of the caution that should be exercised in dissecting individual aspects or issues in a case for the purpose of a costs award. I am also cognisant of those cases referred to by Ms Sharpe in relation to issues that are "separable" (at [93] above). However the question of whether an order contrary to the general rule that costs follow the event should be made depends upon the circumstances of the case viewed against the wide discretionary powers of the Court which should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18]; Elite Protective Personnel Pty Ltd & Anor v Salmon at [8].
Having regard to the plaintiff's measure of success, the Notice to Dispute Facts and the measure of Ms Sharpe's success I am satisfied that the just result is that there be no order as to costs as between the plaintiff and Ms Sharpe in respect of the Painting claim.
Ms Sharpe seeks a separate order that Christie's pay her costs of the proceedings relating to the Painting claim. It was submitted that the findings that Christie's conduct was "commercially reprehensible" should be taken into account in respect of this application. It was submitted that Christie's did not correct the false representation in 2000. Neither the plaintiff nor Ms Sharpe knew of this. It was submitted that had Christie's concerns about the Painting been raised the loss suffered by the plaintiff could probably have been avoided (J [455]). Ms Sharpe submitted that she like the plaintiff was kept in the dark by Christie's (J [460]). It was contended that Christie's conduct thus prevented Ms Sharpe from taking any steps to avoid the plaintiff's loss. I agree.
The breadth of the discretion in relation to the orders for costs after these complex proceedings is broad. I am satisfied that it is fair in the circumstances to make an order that Christie's pay Ms Sharpe's costs of defending the Painting claim. However those costs should be limited to the plaintiff's claim in respect of the misleading or deceptive conduct claim.
The award of interest on the judgment amount will be made on the same basis referred to in paragraph [81] of these reasons in respect of the claims against Christie's. The parties are to agree on the appropriate amount.

THE SCULPTURE CLAIM

The tortuous path that the plaintiff and the Fund took in respect of their claims against Ms Sharpe for breach of contract, breach of fiduciary duty and unconscionable conduct in respect of the sale of the Sculpture is described in the Judgment (J [11]-[14]; [140]-[158]).
Ms Sharpe seeks entry of a verdict and judgment in her favour in respect of the Sculpture claim. There is no issue that the Fund should be ordered to pay Ms Sharpe's costs in respect of this claim. There is an issue as to whether there should be a separate order against the plaintiff in respect of these costs and there is a further issue as to whether the costs should be paid on an indemnity basis.
The plaintiff and the Fund submitted that the defence raised by Ms Sharpe under s 66 of the SIS Act was manifestly hopeless. Even if there were a breach of s 66 it was submitted there was no basis for finding that the Fund did not acquire property in the Sculpture: Miller v Miller (2011) 242 CLR 446 at [11]-[29] and Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101. The plaintiff submitted that the whole issue was only ever relevant to credit.
It was submitted that the fact that the plaintiff had signed a document in which the reserve was recorded as $300,000 cannot be said to have made the claim hopeless. The plaintiff and the Fund contended that the real problem with the Fund's case was that it could not prove that the Sculpture was worth more than $300,000. It was contended that the moment it became apparent that there was sufficient doubt about whether the Sculpture was worth more than $300,000 it became proper to "concede defeat". That is said to have been a proper concession based on the evidence, rather than an acknowledgement that the claim was always hopeless.
It was submitted that even if the Sculpture claim had been abandoned before the hearing, the time saving would have been minimal.
The plaintiff submitted that it was not unreasonable to reject Ms Sharpe's offers relating to the Sculpture claim. The offer of 27 September 2013 in respect of the Sculpture claim also required acceptance of offers relating to the Painting claim and the Smart claim. The amount offered in relation to the Painting claim was only $2,000. It was submitted that the rejection of the offer of 15 July 2014 was reasonable because it was a joint offer for the Sculpture and the Smart and was conditional upon acceptance of another offer relating to the Painting, the rejection of which was reasonable. It was submitted that the rejection of the offer of 17 July 2014 was reasonable because it was made on the eve of the trial and expressed to remain open for only three days, one only of which was a working day. In addition that offer was also a joint offer for the Sculpture claim and the Smart claim and could not be accepted unless the Smart claim was also settled.
The plaintiff submitted that it would not be appropriate for Ms Sharpe to receive all costs relating to the Sculpture claim having regard to the fact that much of the evidence relating to it was pertinent to the Painting claim.
Finally it was submitted that there is no basis for making an order that the plaintiff be liable for the costs of the Sculpture claim because that was a claim made by the Fund. The plaintiff offered an undertaking to personally meet any adverse order for costs in the event that the Fund did not comply with an order against it. It was submitted however that no direct order should be made in this regard.
The plaintiff contended that the costs order against the Fund should be that it pay Ms Sharpe's costs of the proceedings "referrable solely" to the Sculpture claim.
Ms Sharpe seeks an order that the Fund pay her costs of and incidental to the Sculpture claim on an indemnity basis out of the assets of the Fund. Ms Sharpe also seeks an order that the plaintiff pay her costs of and incidental to the Sculpture claim on an indemnity basis.
I am unable to agree with the plaintiff's contention that even if the Sculpture claim had been abandoned before the hearing, the time saved would have been minimal. But for this claim, the plaintiff would not have been exposed to the withering cross-examination referred to in the Judgment. The plaintiff's cross-examination was not just limited to credit. Ms Sharpe was entitled to test whether the Fund was the true owner of the Sculpture and entitled to bring the proceedings. It is not known what the outcome would have been in respect of those issues.
Ms Sharpe submitted that the plaintiff's reasons for abandoning the claim should not be accepted. It was submitted that the "real reasons" for the abandonment of the Sculpture claim included the realisation by the plaintiff that the claim was hopeless and a wish to avoid adverse findings as to her credit. It is true that although the plaintiff's Senior Counsel submitted that the plaintiff's credit was not relevant to the remaining issues in respect of the Painting claim such submission was not accepted (J [160]). I do not need to comment upon any innuendo that might flow from the use of the expression the "real reasons" in Ms Sharpe's Counsel's written submissions. Rather I intend to accept (as I should) Senior Counsel's indication to the Court as to the reason for the abandonment of the claim. However this does not assist the plaintiff or the Fund. Both must have known the position in respect of the capacity of the plaintiff or the Fund to prove the loss or damage at the outset of the trial, or at the very least at the close of the plaintiffs' case. Ms Sharpe prepared for trial and fought vigorously claims made against her that she was guilty of breach of contract, breach of fiduciary duty and unconscionable conduct in the sale of the Sculpture.
The plaintiff seemed to suggest that she signed the document authorising the sale of the Sculpture for $300,000 without noticing what the document said. There was no suggestion that Ms Sharpe or any of her agents sought to trick the plaintiff or the Fund into signing such a document. Rather it was a document, a copy of which it appears the plaintiff was given, recording the instructions that she gave on behalf of the Fund to Ms Sharpe (or her son) in respect of the auction of the Sculpture. It was always Ms Sharpe's position that she was willing to pay the plaintiff or the Fund the difference between a sale at $300,000 and a sale at $350,000.
I understand that the plaintiff was under financial and personal pressure at the time that she authorised the sale of the Sculpture. However the path that she took in respect of this claim described in the Judgment satisfies me that it should never have been brought. I am satisfied that the Fund should be ordered to pay Ms Sharpe's costs in respect of the claims against her regarding the Sculpture for breach of contract, breach of fiduciary duty and unconscionable conduct on an indemnity basis.
I am also satisfied that an order should be made that the plaintiff pay any shortfall of costs that are not paid by the Fund.

THE SMART CLAIM

The plaintiff claimed that Ms Sharpe breached her fiduciary obligations to her by arranging a secret commission in respect of the sale of the Smart. That claim was successful and Ms Sharpe was ordered to account to the plaintiff for the amount of $42,000 held in trust (J [444]).
There is no issue that there should be orders reflecting the requirement for Ms Sharpe to account to the plaintiff for $42,000. That has already occurred. There is an issue as to which party should pay the costs in respect of the claim.
At the outset of the trial Ms Sharpe indicated that the amount held in trust could be released to the plaintiff. She also gave evidence that she had made that offer and that it was never her intention to somehow profit at the plaintiff's expense (J [431]). However the plaintiff sought equitable compensation in the amount of $84,000. The plaintiff contended at trial that had she been made aware of the true circumstances of the side letter she would not have proceeded with the guaranteed price for the Smart (J [439]). This contention was rejected (J [440]).
The plaintiff seeks an order that Ms Sharpe pay her costs of the proceedings relating to the Smart claim on an ordinary basis.
Ms Sharpe makes a claim for an order that the plaintiff pay her costs of and incidental to the Smart claim on an indemnity basis.
There is no issue that Ms Sharpe made an offer to pay the amount of $42,000 to the plaintiff well before the trial and the offer was repeated at trial. On 28 June 2012 Ms Sharpe offered to instruct Menzies to release to the plaintiff not only the $42,000 but also the amounts in respect of two other works of art, the Boyd and the Gleeson. In that offer Ms Sharpe warranted that neither she nor her son would make any claim to be paid any amount in relation to the sale. On 16 May 2014 Ms Sharpe made an open offer to the plaintiff to pay to her the amount of $42,000 plus interest (Ex D4-5).
It appears the only reason the plaintiff continued with this claim was to achieve the higher figure of $84,000 on the basis of her evidence which was ultimately rejected. The plaintiff submitted that it was not unreasonable for her to reject the offer of 16 May 2014 because it did not include an offer to pay any of her costs.
The plaintiff did not respond to the offer of 16 May 2014. Ms Sharpe submitted that if there were any genuine concern about costs it could have easily been raised at the time. The offer could have been accepted and the parties could have made separate submissions in relation to costs.
Had the plaintiff accepted the offer on 16 May 2014 or within the 28 day period, there would have been no need to agitate the Smart claim at the trial. Had the plaintiff settled the Smart claim on the basis offered and then argued about costs, I think it would have been difficult for Ms Sharpe to resist an order up to that date. I am satisfied that the appropriate order in the circumstances is that Ms Sharpe is to pay the plaintiff's costs of the Smart claim up to 16 May 2014 on an ordinary basis. Thereafter, that is from 16 May 2014, the plaintiff is to pay Ms Sharpe's costs in respect of the Smart claim on an indemnity basis.

THE CROSS-CLAIMS

There is no issue that an order should be made dismissing the Cross-Claims brought by HFA, Mr Holland and Ms Sharpe (J [462]-[468]). I am satisfied that the appropriate order in respect of each of the Cross-Claims is that there be no order as to costs.

OTHER MATTERS

Ms Sharpe made submissions that she should not be burdened with having to pay the plaintiff any costs in circumstances where she has an order for costs in her favour because it would appear that both plaintiffs may be impecunious and she may not be able to recover the costs the subject of the orders in her favour. There is no doubt that the Court has power to make an order for the recognition of this position. Although it has been referred to as a "set off" the provisions of s 90 of the Civil Procedure Act enable the court to make an order as the nature of the case requires.
Ms Sharpe also made submissions that it would be appropriate in the circumstances for a gross sum to be awarded. She submitted that it would be in the interests of all parties that the quantum of the various orders be specified by the Court in a gross sum amount pursuant to s 98(4)(c) of the Civil Procedure Act. I am not persuaded at this stage that this is appropriate. With the guidance of the orders that I intend to make the parties can proceed to mediation to settle their differences in relation to the manner in which the costs of this litigation are to be reconciled before any further application may be made.
During the course of the trial and final submissions there was discussion as to what might happen with the Painting if a finding were to be made that it is a forgery. Reference was made to Vickery J's order in Blackman v Gant [2010] VSC 229; (2010) 29 VR 29 that the forged paintings be destroyed so that they do not go back into circulation (J [287]-[288]).
The plaintiffs relied upon the affidavit of Sifa Jasmine Mtango sworn on 26 March 2015 in respect of what should happen with the Painting. The Painting is Exhibit F in the proceedings. Ms Mtango is a solicitor employed by the plaintiff's solicitors. Her affidavit annexes some correspondence with Professor Sloggett of the Centre for Culture Materials Conservation at the University of Melbourne, who was referred to in the proceedings (J [24]). It is apparent that the plaintiff wrote an article for the press after the Judgment was delivered. Professor Sloggett wrote to Ms Mtango advising that she had received a copy of the "piece" that was published in The Age on 8 December 2014. Professor Sloggett claimed that she read in that article that the "fake Tucker is likely to be burnt". Professor Sloggett asked Ms Mtango whether it was possible to discuss this with the plaintiff because "fakes are important evidence for the source of other Tucker fakes and probably many others, and can still provide important information".
Ms Mtango's evidence was that she had a conversation with the plaintiff who said that she would be happy to "loan the painting" to Professor Sloggett's team for "research purposes".
I understand the reasoning outlined by Vickery J for the order in Blackman v Gant. However I am not satisfied that it is appropriate in the circumstances of this case to make such an order. Certainly there is no application by Christie's or HFA to have the Painting returned to them. The usual order that the exhibit may be returned to the party who tendered it is in my view the appropriate one in the circumstances. Thus the Painting will be returned to the plaintiff.

The Painting claim As between the plaintiff and Christie's

Enter judgment for the first plaintiff against the first defendant in the sum of $100,970.40 in respect of the Painting claim.
Pursuant to s 100 of the Civil Procedure Act 2005, order the first defendant to pay the first plaintiff the sum of $37,169.45 as pre-judgment interest (to 4 December 2014) on the sum referred to in order 1.
The first defendant is to pay the first plaintiff's costs of the proceedings in respect of the Painting claim on an indemnity basis. As between the plaintiff and HFA
Enter judgment for the first plaintiff against the second defendant in the sum of $11,878.87 in respect of the Painting claim.
Pursuant to s 100 of the Civil Procedure Act 2005, order the second defendant to pay the first plaintiff pre-judgment interest (to 4 December 2014) on the sum referred to in order 4 on the basis set out in paragraph [81] of these reasons.
The second defendant is to pay the first plaintiff's costs of the proceedings in respect of the Painting claim on an ordinary basis subject to order 7.
The second defendant is to pay the first plaintiff's costs of proving the Painting is a forgery on an indemnity basis from 13 May 2014. As between the plaintiff and Mr Holland
Dismiss the first plaintiff's claim against the third defendant.
The first plaintiff is to pay the third defendant's costs of the proceedings on an ordinary basis. As between the plaintiff and Ms Sharpe
Enter judgment for the first plaintiff against the fourth defendant in the sum of $5,939.44 in respect of the Painting claim.
Pursuant to s 100 of the Civil Procedure Act 2005, order the fourth defendant to pay the first plaintiff pre-judgment interest (to 4 December 2014) on the sum referred to in order 10 on the basis set out in paragraph [115] of these reasons.
Dismiss the first plaintiff's claims against the fourth defendant in respect of the Painting claim in negligence, breach of contract, breach of fiduciary duty and unconscionable conduct.
As between the plaintiff and the fourth defendant I make no order as to costs in respect of the Painting claim.
The first defendant is to pay the fourth defendant's costs of the proceedings in respect of the first plaintiff's claim against the fourth defendant for misleading or deceptive conduct in respect of the Painting claim. The Cross-Claims
Dismiss each of the Cross-Claims of the second, third and fourth defendants with no order as to costs.

The Sculpture claim

Enter verdict and judgment for the fourth defendant against the second plaintiff in respect of the Sculpture claim.
The second plaintiff is to pay the fourth defendant's costs of the proceedings in relation to the Sculpture claim on an indemnity basis.
The first plaintiff is to pay the fourth defendant any shortfall in the costs paid by the second plaintiff pursuant to order 2.

The Smart claim

The fourth defendant is to account to the first plaintiff for the sum of $42,000 in respect of the Smart claim.
It is noted that the fourth defendant has complied with the order to account to the plaintiff.
The first plaintiff's claim in respect of the Smart claim against the fourth defendant is otherwise dismissed.
The fourth defendant is to pay the first plaintiff's costs of the proceedings in respect of the Smart claim up to 16 May 2014 on an ordinary basis.
The first plaintiff is to pay the fourth defendant's costs of the proceedings in respect of the Smart claim after 16 May 2014 on an indemnity basis.
Exhibit F, the Painting, is to be returned to the plaintiff. Any question of post-judgment interest that is not already agreed can be dealt with inter partes.

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: 16 June 2015

McBride v Christie's Australia Pty Limited

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Cases Cited (24)

Cited By (3)