(2001) 33 MVR 37
Mannix v Loumbos Pty Ltd [2000] NSWCA 32
Maestrale v Aspite [2014] NSWCA 182
Source
Original judgment source is linked above.
Catchwords
(2001) 33 MVR 37
Mannix v Loumbos Pty Ltd [2000] NSWCA 32
Maestrale v Aspite [2014] NSWCA 182
Judgment (3 paragraphs)
[1]
Judgment
On 24 June 2021, I dismissed a charge of contempt against Mr Rimon Ghaly (Mr Ghaly) which had been made by NHB Enterprises Pty Ltd and Finn Pharmaceuticals Pty Ltd (the Applicants). These reasons concern the costs of those proceedings and assume a familiarity with my reasons in NHB Enterprises Pty Ltd v Corry (No 7) [2021] NSWSC 741 (the principal judgment). The charge against Mr Ghaly was specifically dealt with at [367]-[432] of those reasons.
Costs are in the discretion of the Court with the usual rule being that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. Consistent with the usual rule Mr Ghaly seeks his costs. In submissions filed in support of his application for costs, it was put that, in circumstances where Mr Ghaly has been "wholly successful in defeating the motion", the Applicants should be required to pay his costs of and incidental to the motion.
It was emphasised by Mr Ghaly that not only did he succeed by reason of and by reference to the terms of settlement of the 2019 Proceedings, but in terms of the case put against him in relation to retention of documents, the Applicants did not pursue their claim in relation to a number of documents, and with respect to those that they did pursue, the only three documents in relation to which they succeeded were documents which Mr Ghaly conceded were caught by the terms of the April 2018 Consent Orders.
In relation to these three documents, Mr Ghaly did not succeed in his defence that they had been inadvertently retained. At [425]-[427] of the principal judgment, I said:
"425 I do not accept Mr Ghaly's claim that his retention of these three documents was inadvertent. Had they been the only three Bova Chemist documents found on his MacBook computers, that claim may have had more plausibility. But they were not. The Applicants demonstrated through the evidence of Mr Bova, their cross-examination of Mr Ghaly and in final submissions, that Mr Ghaly had retained very valuable Competitor Analysis documents created using the PK Software on his Small MacBook ...
426 The fact that his retention of these documents was not the subject of the Statement of Charge, whilst perhaps curious, did not mean that these further documents were irrelevant. Their retention bore on the likelihood or otherwise that Mr Ghaly's retention of the three documents in question was intentional or, as Mr Ghaly claimed, inadvertent.
427 My conclusion that the retention of Documents 1, 6 and 9 was not inadvertent is supported by the adverse view I formed as to Mr Ghaly's credit."
In the principal judgment, I accepted that much of Mr Ghaly's evidence was clearly designed to give a false impression of innocence on his part, when quite the opposite was true (at [430]), and, at [432], I did not accept:
"Mr Ghaly's claims of inadvertent retention of documents and … were it not for what I consider to be the preclusive effect of the Second Settlement Terms, I would have found the charge against Mr Ghaly made out, albeit limited to Documents 1, 6 and 9."
On the other hand, my conclusion on the question of inadvertence and my adverse finding as to Mr Ghaly's credit were ultimately immaterial given that his argument by reference to the terms of settlement was a complete answer to the charge against him.
The Applicants submit that, notwithstanding their failure to succeed against Mr Ghaly, the usual rule that costs follow the event should be departed from. They submit that Mr Ghaly should either be ordered to pay their costs or that there should be no order for costs as between the Applicants and Mr Ghaly.
The Applicants have drawn attention to the decision of the High Court in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) and that of the Court of Appeal in Maestrale v Aspite [2014] NSWCA 182; (2014) 13 ASTLR 262 (Maestrale). In Oshlack at [69], McHugh J said (omitting footnotes):
"The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
'No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.'
'Misconduct' in this context means misconduct relating to the 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 had already offered in settlement of the dispute."
Although McHugh J was in dissent in Oshlack, these observations were not controversial: see Arian v Nguyen [2001] NSWCA 5; (2001) 33 MVR 37 at [36] (Arian), in turn citing Mannix v Loumbos Pty Ltd [2000] NSWCA 32; see also Maestrale at [84].
The Applicants placed particular reliance on Arian, in which the primary judge had ordered an appellant who, as plaintiff, had only succeeded in recovering certain out of pocket expenses, to pay the respondent's costs in circumstances where she considered the plaintiff to be guilty of "conscious exaggeration" and a "conscious effort to deceive both the [respondent and the Court] in respect of the claims made": at [34].
The Court of Appeal held that the order made was within the primary judge's discretion but interfered with the exercise of that discretion to make a different costs order on the basis that the primary judge had not taken into account a settlement offer which the appellant had made and bettered (slightly) in the final judgment. In the result, Ipp AJA (with whom Foster AJA agreed) ordered that "a fair result would be achieved were the respondent to be ordered to pay the appellant's costs up to and including the first day of the trial, and the appellant ordered to pay the respondent's costs of the rest of the trial": at [49]. In this context, the Court can still be seen as penalising the appellant for what the primary judge described as "conscious exaggeration" and a "conscious effort to deceive both the [respondent and the court] in respect of the claims made", albeit not to the same extent as had the primary judge.
Ipp AJA observed, at [37]-[38], that:
"37 The making of an order that a successful party pay his or her opponent's costs requires strong justification (Ottway v Jones [1955] 1 WLR 706 at 708, 714, Scherer v Counting Instruments Limited [1986] 1 WLR 615 at 618) and exceptional circumstances must exist before a party will not only be deprived entirely of costs but also required to pay part of the opponent's costs (Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201; Robinson v Australian Association of Social Workers Limited [2000] SASC 239). Where a party raises issues or makes allegations improperly or unreasonably, this may constitute misconduct such that the court may not only deprive it of its costs but order it to pay the whole or a part of the unsuccessful party's costs: Trade Practices Commission v Nicholas Enterprises Pty Ltd at 208 per Fisher J, Re Elgindata Limited (No 2) [1993] 1 All ER 232 at 237 per Nourse LJ; Ashby v Marshall, (unreported, SC(SA), 28 November 1991); Popovic v Murray (unreported SC(Tas), 15 March 1991).
38 It is rare for a successful party who is guilty of misconduct in the litigation to be ordered to pay the unsuccessful opponent's costs where the misconduct does not lengthen the proceedings unnecessarily, cause unnecessary issues to be canvassed or otherwise cause the costs of the litigation to be increased. Indeed, the court's entitlement to depart from the usual order that costs follow the event has sometimes been said, in effect, to be subject to the qualification that the misconduct in question occasioned unnecessary litigation and expense (see Huxley v West London Extension Railway Company (1899) 14 App Cas 26 at 32-33 per Lord Halsbury LC; Ritter v Godfrey [1920] 2 KB 47 per Atkin LJ at 60). In other cases, however, this qualification has not been mentioned: see for example Donald Campbell & Co v Pollak [1927] AC 732 at 811-812; Thorne v Doug Wade Consultants Pty Ltd [1985] VicRp 48; [1985] VR 433 at 500; Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 271-272; Re Elgindata Limited (No 2) (supra). On balance, it seems to me that while delay and increased expense brought about by improper conduct in the course of the litigation are highly relevant factors in the discretion to depart from the usual order as to costs, they are not essential to the exercise of that discretion. It would, in any event, be very unusual for misconduct of that kind not to cause unnecessary delay and expense."
The Applicants placed strong reliance on Mr Ghaly's evidence as to his interaction with Mr Corry on the day of the execution of the Second Search Order, about which he was extensively cross-examined and which led to my strongly adverse credit findings. They also pointed to his claims, which I rejected, only inadvertently to have retained documentation belonging to the Applicants. They submitted that Mr Ghaly's improper conduct "inevitably and unnecessarily prolonged the hearing and increased expenses". Mr Ghaly's cross-examination occupied one day of the trial.
The Applicants also submitted that the argument upon which Mr Ghaly ultimately succeeded, namely in relation to the terms of settlement of the 2019 Proceedings, was "refined" in the course of the hearing, as reflected in the Applicants being granted and taking up leave to file further written submissions in respect of that argument.
In response, Mr Ghaly submitted that the Applicants' submissions glossed over the fact that the Contempt Motion should never have been brought against him. This was the effect of the settlement and the Applicants' agreement to have the 2019 Proceedings dismissed as against Mr Ghaly. Whilst there may have been some refinement of the argument, it was submitted that the essence of the argument was always explicit and indeed a written submission had been made by Mr Ghaly in the course of the interlocutory hearing before Parker J (see NHB Enterprises Pty Ltd v Corry [2019] NSWSC 1659) that the releases contained in the terms of settlement "on their face release Mr Ghaly from the allegations made by [the Applicants] in the 2019 proceedings and [the Applicants] now have no right to insist on the enforcement of the April 2018 Orders through the Contempt Motion in these proceedings or otherwise".
Mr Ghaly also submits that whilst it is correct that much attention at trial was directed to his actions on the day of the execution of the Second Search Order, that cross-examination was partly directed towards seeking to establish the charges against Mr and Mrs Corry as well as Mr Ghaly. Reference was made in this regard to the fact that the Applicants originally sought to have Mr Ghaly called in their case against Mr and Mrs Corry. It was also submitted, correctly, that the actual charge against Mr Ghaly (as opposed to some of those against Mr and Mrs Corry) did not in fact involve his actions on the morning of the execution of the Second Search Order.
[2]
Consideration
On balance, I do not consider it appropriate to depart from the usual order, namely that costs follow the event, notwithstanding my adverse credit findings against Mr Ghaly.
He succeeded on an argument turning on the construction of terms of settlement which the Applicants had entered into with him. Whilst his argument was refined in the course of hearing, that is by no means an unusual characteristic of litigation, especially in the oral tradition. The argument was not without complexity, as the reasons in the principal judgment make plain. Moreover, the refinement of a legal argument could scarcely be described as involving disqualifying misconduct of the kind described in some of the cases referred to above.
Mr Ghaly found himself in a lengthy trial. He had sought to agitate his construction argument based on the settlement terms on a summary basis before Parker J and also sought a separate hearing of the charge against him. Both of these courses were opposed for perfectly legitimate reasons but the Applicants must have appreciated that one forensic consequence of Mr Ghaly being caught up in proceedings which were likely to be lengthy because of the multiplicity of charges against Mr Corry as well as the charge against Mrs Corry was that, if he succeeded in his construction argument, they would be liable for his costs.
As to his cross-examination regarding the events of the morning of the Second Search Order, whilst Mr Ghaly was not an impressive witness, the principal thrust of that cross-examination was directed to advancing the case against Mr and Mrs Corry. Indeed, that conclusion is inescapable when one has regard to what ultimately was an extremely narrow charge against Mr Ghaly. As I pointed out in the principal judgment, a much more extensive case could have been advanced against him (subject to his contractual defence) but, for whatever reason, it was not.
The bulk of oral submissions in the context of the charge against Mr Ghaly were concerned with his defence based upon the terms of settlement and, to the extent submissions were made in respect of particular documents, it must be recalled that Mr Ghaly in fact succeeded in repelling the case made against him in relation to the two documents which he did not concede as having fallen within the terms of the April 2018 Orders.
Insofar as reliance was placed on Arian, decisions on costs classically turn on their own facts. Arian was a case where the successful party about whom strongly adverse credit findings had been made was the moving party in the proceedings and was found to have brought a seriously exaggerated claim. That is a very different case from the present, where Mr Ghaly had entered into a settlement agreement with the Applicants which purportedly released him from further claims only to find himself, within a matter of months, as the respondent to a motion for contempt of court in relation to the very conduct which had been the subject of the settlement.
For all of these reasons, the Applicants must pay Mr Ghaly's costs of the proceedings.
[3]
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: 11 February 2022