Murphy v Lewkovitz; Lewkovitz v Murphy

Defendants' Submissions

1. The Defendants' have sought that the Court should consider making one of two alternative orders: 1. An order that each party bear their own costs of the proceedings; 2. In the alternative, an order that: 1. The Defendants' pay the Plaintiff's costs (as agreed or assessed), but that any such order necessarily involve a reduction in the amount of costs payable by the Defendants' to the Plaintiff's, to represent the measure of success and failure that each party had; and 2. The Plaintiff pay the Defendants' costs of their Cross-Claim (as agreed or assessed).
2. In support of their proposal, the Defendants contended that both parties enjoyed the measure of success. It was noted that the Plaintiff has received an award of damages but this amount was significantly less than the sum of $194,675.82 contended for in its Schedule of Damages (MFI 4 (2)) with an ultimate amount of $56,513.74 being less than a third of what the Plaintiff originally contended for.
3. The Defendant also drew attention to the fact that the Plaintiff agitated claims which were wholly unnecessary to the disposition of the real issues but which were nonetheless ventilated being contentions concerning section 26 of the Residential Tenancies Act 2010 (NSW) (the 2010 Act) and under the Australian Consumer Law (the ACL). The Defendants' contended that these costs should not be visited on them.
4. The Defendants' contended that the Court is faced with a situation where the overall result could be described as "a very mixed bag of success and failure" for the Plaintiff with an emphasis on failure rather than success such that it is neither just nor appropriate that costs should simply follow the event and that the Defendants' are ordered to pay the Plaintiff's costs. In this respect, attention was drawn to ABB Engineering Construction Pty Limited v Abigroup Contractors Pty Limited [2003] NSWSC 867 at [15] where Einstein J (referring to his judgment in Mobile Innovations ltd v Vodafone Pacific Ltd [2003] NSWSC 423 observed that: "caution needs to be exercised in a 'multiple issues' case, in terms of awarding the successful party all of its costs, where it has failed on a number of discrete issues, less an injustice be perpetrated against the unsuccessful party. [(cf Fexuto v Bosnjak Holdings (No 3) (1998) 30 ACSR 20 per Young J)]". [3]
5. The Defendants argued that the time devoted to issues at trial on which the Plaintiff failed were significant and the Plaintiff's failure is a factor to which regard must be had in considering the disposition of costs overall so far as the second alternative costs is concerned. The Defendants' relied on Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272 pointing out that "mathematical precision is illusory", and the exercise of reduction or apportionment should be carried out on the basis of "impression and evaluation".
6. The Defendants highlighted that the total sum awarded to the Plaintiff represented the 29% of its claim particularised in his Schedule of Damages and applying an "impressionistic and evaluative" approach of costs payable by the Defendants to the Plaintiff should be reduced with the result that the Defendants be ordered to pay only 30% of the Plaintiff's costs as agreed or assessed. However, it was contended that the most appropriate and fair approach would be for the Court to Order that the parties bear their own costs.

Plaintiff Submissions

1. The Plaintiff argued that it succeeded in its claim for damages and that the Defendants have not enjoyed a measure of success such as it would have the effect of disentitling the Plaintiff from an award of any portion of its costs. It emphasised that the Defendants' resisted the Plaintiff's claim at every stage and a global assessment of the Plaintiff's success in the proceedings is appropriate in the exercise of the Court's costs discretion on the facts of the case. [4]
2. With respect to the Plaintiff's claim under section 26 of the 2010 Act and the claim under the ACL, these were described as minor claims demonstrated by the extent to which they were dealt with in the written submissions and the matters were not improperly or unreasonably raised and did not unnecessarily increase the costs of the litigation or length of the time required to hear the matter.
3. The Plaintiff argued that the Court must strike a balance between not discouraging litigants from canvassing all material issues and not rewarding them for unreasonable conduct in pursuing issues. It submitted that issue apportionment on the question of costs should be sparingly exercised relying on Mond v Berger (2005) 21 BCL 125, [2004] VSC 150 at [54], per Dodds-Streeton J.
4. The Plaintiff contended that the primary focus of the litigation was on breaches by the Defendants of the duty of care owed to him and their failure to provide the property in a state that was fit for habitation, and their failure to maintain the property in a reasonable state of repair. Those issues occupied almost all of the time at trial and were the subject of all the expert liability and quantum evidence relied upon by the Plaintiff in proving its claim for damages.
5. So far as the Cross-Claim is concerned, the Plaintiff/Cross-Defendant contended that from the outset he had acknowledged that he had not paid the outstanding rent and it was only in the course of the hearing that the second Defendants/Cross-Claimants acknowledged that the claim should be reduced by the amount of the rental bond that had been obtained by them on 14 July 2017. The evidence relied upon by the Plaintiff/Cross-Defendant in support of its contentions that it was not obliged to pay rent was the same as that relied upon on the damages claim and in respect of which he should be awarded his costs. In these circumstances, it was argued that the appropriate Order is that the Defendants/Cross-Claimants pay the Plaintiff/Cross-Defendant's costs.

Defendant's Submission in Reply

1. The Defendants argued that to characterise the Plaintiff's claim as one for unliquidated damages was an adventitious. Although it acknowledged that the proceedings were framed as one for unliquidated damages, it contended that this was because the Plaintiff had not yet quantified his damages as proceedings were transferred to this Court from the NSW Civil and Administrative Tribunal.
2. It was argued that it was no longer the case that an award of damages (however greatly reduced in scope from that originally contended) constitutes an "event" justifying an order for costs. [5]
3. The Defendants contended that the "global" approach favoured by the Plaintiff would not result in a costs order contended for by him as it is necessary "that an order for costs should be made that recognises that each of the parties has had a degree of success" (Tetbury Pty Ltd [2017] NSWSC 139 at [7]).
4. So far as the Cross-Claim is concerned, the Defendants/Cross-Claimants pointed to paragraphs [326]-[328] of the primary judgment as being contrary to the submissions made by the Plaintiff. Further, the argument that in resisting the Cross-Claim, the Plaintiff/Cross-Defendant relied on evidence that sought to prove his damages claim cannot be relied upon because of the Court's conclusion as to the obligation to pay rent subsisted. Moreover, reliance on that evidence did not entitle the Plaintiff/Cross-Claimant to his costs of the Cross-Claim which was a matter unexplained in the Plaintiff's/Cross-Defendant's submissions.

Consideration

1. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that subject to Part 42 costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs.
2. The question of what constitutes the "event" was described by Beazley JA (as her Excellency then was) in Baker v Towle [2008] NSWCA 73 (Mathews AJA agreeing). Her Honour stated: [22] … It would be odd and, indeed, unfortunate, if the identification of "the event" in one way resulted in an order for costs, on the basis of "costs follow the event" whereas a different, but equally appropriate identification of "the event" meant a different application of the rules. The oddness in there being different possible applications of the rule (in this respect I am not referring to the exercise of the discretion under the rule) depending on the identification of "the event" raises in my mind the question whether this is the correct approach. In most cases, the costs order will almost invariably depend upon the exercise of the discretion. [23] The real question is what is the appropriate order for costs. An obvious starting point is the pleadings. However, the identification of the issues in the pleadings is likely to be only one of several considerations relevant to the costs order that ought to be made. The considerations may include whether any offers of settlement have been made and if so what those offers were. The discretionary considerations may also include the manner in which the proceedings are conducted. These are but 2 examples. There may be a whole range of relevant circumstances depending upon the particular case.
3. In Boden v Gleeson [2013] NSWCA 447 the Court at [17] stated: ….The discretion as to costs is a wide one, which may be exercised in an appropriate case (a) separately in respect of particular issues within the same proceedings, or (b) separately as between statement of claim and cross-claim, or (c) globally in relation to the whole of the dispute between the parties. There is no rule that there is a single "event" for the purposes of costs for each and every pleading, or for that matter for each and every judgment entered. Section 90 of the Civil Procedure Act 2005 (NSW) empowers a court to give separate judgments in respect of the claim and the cross-claim, or alternatively to give a single judgment for the balance.
4. However, in Sze Tu v Lowe (No 2) [2015] NSWCA 91 Gleeson JA (Meagher and Gleeson JJA agreeing) at [39] held: How "the event" should be defined will depend upon the nature of the litigation. Generally the "event" refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861-37,862 (Waddell J). [6]
5. Whilst it is true that the evidence and submissions in the two claims overlapped, each claim is still capable of being viewed as an "event." Viewed in this way, the practical result is that the each party has been successful albeit more modestly than each originally sought. The question in these circumstances is what costs order(s) should follow.
6. The Defendants advanced a submission to the effect that the Plaintiff's claim was framed as unliquidated only because at the time of transfer to this Court it had not been quantified and Mr Chan's report had not been served. This overlooks the essential character of the Plaintiff's claim which could not be "ascertained by calculation or fixed by any scale of charges, or other positive data." [7]
7. So far as the proportion of the amount claimed by the Plaintiff relative to that to which he was ultimately awarded, there is neither evidence nor any submission as to any unreasonable refusal to mediate such that the Court should make an Order reflective of that refusal. [8]
8. Beyond that, the Defendants did not submit an offer of compromise under UCPR 20.26 nor did they seek to activate the principles in Calderbank v Calderbank. [9] In his own claim, the Plaintiff's success was in an amount well within the Court's jurisdiction and not merely nominal. I see no basis for departing from the general rule on this basis.
9. Next, the Defendants' raised the Plaintiff's failure in respect of two aspects of its claim being section 26 of the 2010 Act and the ACL claim. [10]
10. The relevant principles were referred to in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] which in turn were derived from Elite Protective Personnel Pty Ltd v Anor v Salmon (No 2) [2007] NSWCA 373. What emerges from these cases is that costs would ordinarily be awarded to the successful party unless the particular issues are dominant or separable and further if the matters by which the party was unsuccessful took up a significant part of the trial by way of evidence or argument. Whether or not 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 Court's wide discretionary powers which are powers that should be liberally construed.
11. Bostik and Elite also need to be considered in the context of what was said in Hooker v Gilling (No 2) [2007] NSWCA 214 by McColl JA. [11] In that case, Her Honour referred to the discussion by Ipp AJA in Arian v Nguyen [2001] NSWCA 5; (2001) 33 MVR 37 of McHugh J's decision in Oshlack v Richmond River [1998] HCA 11; (1998) 193 CLR 72. McColl JA stated: 22 It is useful to extract the full passage from McHugh J 's reasons in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 which Ipp AJA summarised (at [36]). McHugh J said (at [69]): " 'Misconduct' in this context means misconduct relating to litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party has already offered in settlement of the dispute." (emphasis added) 23 Further, in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 (at 874) (to which McHugh J referred in Oshlack) Devlin J said that in applying the ordinary rule that a successful plaintiff ought not to be deprived of costs, or made to pay the costs of the other side, unless that party has been guilty of some sort of misconduct: "… [I]t is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a 'successful' plaintiff. In certain cases he may be, eg, where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case. " 24 While it might be accepted that there was no disagreement in the High Court as to McHugh J's observations of general principle, I would also point out that, as I said in Fordyce v Fordham & Anor [2006] NSWCA 274 (at [74], Beazley and Santow JJA agreeing), the majority in Oshlack rejected the proposition that there was any absolute rule with respect to the exercise of the s 98 power such as that "in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party": see Gaudron and Gummow JJ (at [40]), Kirby J (at [134]). I also drew attention (Fordyce v Fordham & Anor at [80]) to observations made by Hodgson JA (with whom Einstein J agreed) in Furber v Stacey & Anor [2005] NSWCA 242 that the "prima facie principle …that costs follow the event" expressed in District Court Rules 1973 Pt 39A r 9 and Pt 21 r 8 was: "…subject to the ability of the Court, referred to in those Rules, to make such orders as it appears to the Court to be made, as the justice of the case may require ." [12] (emphasis added)
12. Although Hooker v Gilling (No 2) was not referred to in Bostic and Elite, Sabah Yazgi v Permanent Custodians Limited (No 2) [13] was. [14] In the latter case the Court ultimately held: 25 In this case, although there were multiple issues, none of the claims made were inappropriately brought; there was no evidence, and it was not apparent from the reasons of the associate judge that Sabah Yazgi had in any way unnecessarily protracted the trial; and the matter that occupied most of the time taken in giving evidence related to the question of the forgery, which, as is indicated above, was the fulcrum around which the entitlements of both Sabah Yazgi and Permanent Custodians revolved.
13. G E Dal Pont in his book "Law of Costs" 4th ed summarised the legal principles as he saw them stating: In approaching apportionment of costs, a court must strike a balance between not discouraging litigants from canvassing all material issues, and not rewarding them for unreasonable conduct in pursuing issues. Consistent with this balancing act, there is no fixed rule, only discretion; the court in each case seeks to achieve the outcome most consonant with the justice of each case. In particular, courts have warned of the difficulty of revisiting each issue and tallying 'wins and losses', a concern being that a just and equitable decision on the question of costs is not 'reached simply as a matter of arithmetic'. Judges have remarked, to this end, that '[t]he judgment as to apportionment is … an evaluative one', and the exercise of discretion is one 'based largely on impression'. There is the further concern that to embark on detailed inquiries as to success or failure on issues may add uncertainty and complexity to the outcome of litigation, derogating from the prospect of settlement and obliging the court to hear lengthy and frequent arguments as to costs. [15]
14. Somewhat analogous statements were made by Kirby J in Sanders v Snell (No 2) [16] "It is not usual for the court to specify that costs will only be payable in respect of particular issues. Accordingly it is not usual or appropriate for a taxing officer to proceed in such a nice way unless there are good and exceptional reasons in the particular case to do so. A court will not ordinarily specify that cost will only be payable in respect of particular issues as the marginal expense of calculation the costs of arguing particular issues, themes, ideas, facts cases or argument will ordinarily be outweighed by the inutility of doing so."
15. In the present case, the issues raised pursuant to section 26 of the 2010 Act and under the ACL raised little by way of additional evidence and relatively short submissions. The Defendants' themselves accepted that both claims cover substantially the same ground as the breach of duty claim. [17] In respect of the ACL claim, the Defendants' had submitted that in the event that the Plaintiff succeeded on his primary claim it would be unnecessary for the Court to consider the matter further. [18] Beyond that, the Defendants' did not submit that the Plaintiff unreasonably pursued these claims. In my view, it is neither appropriate nor practical to depart from the general rule that that would otherwise entitle the Plaintiff to his costs in so far as these issues are concerned.
16. In respect of the Cross-Claim, this was resisted by the Plaintiff/Cross- Defendant relying on the same evidence which was advanced in his claim in addition to establishing that part payment of the amount had been made through a claim on the bond monies. However, at no point did the Plaintiff/Cross Defendant accept the entitlement of the Defendants/Cross Claimants to payment of any monies although in the alternative, sought to setoff any monies payable against any damages payable to himself. The fact that the same evidence was relied on as with the primary claim is not a basis for departure from the general rule in respect of the costs of the Cross-Claim let alone grounds to an entitlement to a costs order in his favour.
17. The question remains whether in the Court's discretion it should make a single order taking into account the respective parties' success.
18. Whilst the bulk of the proceedings were occupied with advancement of the Plaintiff's claim this intersected with its defence of the Cross-Claim. At trial, the quantum of the Cross-Claim was crystallised after payment of the bond monies were acknowledged and occupied relatively little time. As noted the Plaintiff/Cross-Defendant's defence did not just raise a set off against his own claim but also put in issue the Defendants'/Cross-Claimants' entitlement to be paid any amount.
19. There is an absence of evidence as to the respective quantum of the parties' costs and I am unable to assess the time spent by each party. I would accept that the Plaintiff's disbursements particularly relevant to the engagement of experts were likely significant. In the circumstances, I do not consider ordering each party to pay their own costs as the Defendants'/Cross-Claimants' proposal would accord with the justice of the matter and result in a fair outcome. Nor am I satisfied that the Defendants'/Cross Claimants proposal to pay 30% of the Plaintiff's cost as one that would result in a fair outcome.
20. In a practical sense the parties' submissions do no assist me in coming to any conclusion as to how any single order should be framed.
21. In the circumstances, it appears to me that fairness to both parties requires that the ordinary consequence envisaged in UCPR 42.1 be applied.
22. For these reasons I order: 1. The Defendants' to pay the Plaintiff's costs on the Plaintiff's claim; 2. The Cross-Defendant to pay the Cross-Claimants' costs on the Cross- Claim. [19]

Endnotes

1. Murphy v Lewkovitz; Lewkovitz v Murphy [2021] NSWDC 361.
2. Principal judgment at [329].
3. The decision in this case as well as the costs order were reversed on appeal in Vodafone Pacific Ltd & v Mobile Innovations Ltd [2004] NSWCA 15.
4. Boden v Gleeson [2013] NSWCA 447 at [17].
5. See Boden v Gleeson [2017] NSWCA 447 at [17]. See also Dal Pont, The Law of Costs [7.2].
6. See also McInnes v Rheem Australia Pty Limited [2021] NSWCA 89 at [28].
7. Arnold v Forsythe [2012] NSWCA 18 a [44] per Sackville AJA with whom McColl and Young JJA agreed (citing Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; 32 CLR 138 per Knox CJ and Starke J at 142).
8. Halsey v Milton Keynes General NHS Trust; Steel v Joy [2004] ALL ER (D) 125.
9. [1976] Fam Law 93; [1975] 3 All ER 333; [1975] 3 WLR 586.
10. There were two claims foreshadowed by the Plaintiff however only the claim under section 30 of the ACL ultimately proceeded.
11. Ipp and Basten JJA agreeing.
12. Ipp JA agreeing.
13. [2007] NSWCA 306.
14. In Bostic at [38] and Elite at [7].
15. G E Dal Pont 4th ed, 213-214 [8.7].
16. (2000) 174 ALR 53 at 57, [15].
17. Defendant's written submissions on primary judgment at [2].
18. Defendant's written submissions on primary judgment at [101].
19. Amended on 27 September 2021 pursuant to UCPR 31.27 to the parties described. 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: 28 September 2021