Nu Line Construction Group Pty Ltd v Fowler

Judgment 1BASTEN JA: The appeal in this matter was heard on 28 November 2013; judgment was delivered on 17 March 2014: Nu Line Construction Group Pty Ltd v Fowler [2014] NSWCA 51. 2The matter came back before a judge of the Court on 17 April 2014, on the motion of the respondents, seeking variation of two orders made on 17 March 2014. The directions given required that the respondents file a notice of motion with respect to "(a) the identity of the party or parties to be the subject of the orders; (b) as to the proper costs order in the Court below." The motion, together with written submissions in support of the orders sought, were to be filed and served by 2 May 2014. The appellant was directed to file submissions in response by 16 May 2014. 3A notice of motion filed on 2 May 2014 sought the following orders: "1. That pursuant to Rule 36.17, the judgment of this Court be amended to reflect orders against the Second Respondent, Gabriella Grippaudo; 2. That the costs order made by Ward J on 18 July 2012 remain; 3. That the Respondents pay 50% of the appellant's costs of the Appeal; or 4. In the alternative, that the Court order that Respondents to pay the Appellant's costs of the trial at first instance and in the Appeal in whatever other relevant percentage the Court sees fit; 5. The Appellant to pay the Respondents' costs of this Notice of Motion." 4The direction given on 17 April did not extend to variation of the orders made with respect to the costs of the appeal, except to the extent that the party payable might be varied in accordance with order 1 sought in the notice of motion. 5The purpose in identifying in the direction given on 17 April the matters that were to be dealt with by the notice of motion was to avoid a dispute as to whether an application to vary the orders as entered had been made within 14 days, in accordance with r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW). To the extent that the notice of motion sought to raise matters outside the direction, those matters were not raised within the relevant period; accordingly the order as to the costs of the appeal should not be varied. 6The order seeking variation of the party liable was sought under r 36.17, dealing with clerical mistakes and accidental slips or omissions. The orders made on 17 March did contain such an error, giving judgment for the appellant "against the respondent" and ordering that "the respondent" pay the appellant's costs. There were indeed two respondents, namely Mr Peter Fowler and Ms Gabriella Grippaudo. 7The orders of the Court were those proposed by me, with the agreement of Young AJA, at [208]. In my judgment the following passage appears at [38]: "There should be judgment in favour of the appellant against the respondents in that amount. The orders made by the trial judge dismissing the plaintiff's claim and requiring the plaintiff to pay costs should be set aside. The respondents must pay the appellant's costs of the trial and in this Court." 8It is apparent from this passage that the typographical error in the orders was to give judgment against "the respondent" in the singular, rather than "the respondents", which would have encompassed both Mr Fowler and Ms Grippaudo. 9The respondents submitted that the appropriate respondent was the second respondent, Ms Grippaudo. The basis for seeking that order was, it was submitted, that "the first respondent was, and was known to be, at all times the agent of the disclosed principal, the second respondent." That submission should not be accepted. 10Although it was true that the property which had been the subject of a proposed sale was owned by the second respondent, and the first respondent was no doubt an agent for her in seeking to arrange the sale of the property, the relief sought under the statement of claim did not relate to the property, but to payments made to or at the direction of the first respondent. By the time of the trial, the property had been sold and there was no possibility of relief against the second respondent by attaching her property. The further amended statement of claim alleged payments to the first defendant, at par 9A (which was both denied in par 3 of the defence and admitted in part at par 5) and "for and on behalf of, and at the direction of, the first defendant" in par 12 (which was denied). The denials were made on behalf of the first and second defendants. There was no pleading in the defence that the first defendant only acted as the agent of the second defendant in receiving or directing the recipient of the payments. No such finding was made on appeal. Accordingly, the orders should be amended to refer to both respondents, in accordance with [38] of the principal judgment. 11With respect to the costs of the proceedings at trial, the respondents submitted that the appellant had been delinquent in various respects and that a special costs order had been made to take account of the additional costs incurred as a result of the appellant's delinquency. 12An affidavit filed in support of the motion in this Court purported to exhibit six documents: none of them was filed in the Registry - whether any were served is not known. Exhibit "A" was a copy of the judgment of the trial judge on costs and is discussed below. Exhibit "B" was a copy of an affidavit of Ms Grippaudo filed on 24 February 2010 in the Court below. It appears to have been brought to the Court's attention because it was not in the blue book filed for the appeal, and, it was said, the blue book "provided" that the affidavit was "not read." That was incorrect: it was true that the affidavit was not included, but the annotation in the index to the transcript correctly referred to the page noting that it was read and the annotation in the index was marked "NR", meaning "not reproduced" (several other documents were so marked). The submissions in support of the motion did not refer to the contents of the affidavit and its absence from the court file appears to be immaterial. Exhibits "C" to "F" were single documents of no obvious significance. 13There remains the question of the costs order made by Ward J in the Equity Division. That judgment, although not provided with the affidavit, is available online: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816. 14Ward J noted submissions by Nu Line that it should be liable for costs, to be assessed on the ordinary basis. The respondents sought orders for indemnity costs on two bases, namely an offer which had been bettered and because "the way in which the case was conducted was in direct contravention of the regime for the conduct of litigation in this Court as provided for in ss 56, 57, 58 and 59 of the Civil Procedure Act 2005 (NSW)": at [4]. 15The respondents did not succeed upon the offer to support a special costs order, nor was the offer relied on in this Court. As to the other basis of the order below, the difficulty with the primary position for the respondents, namely that this Court not interfere with the order made below, is that in the ordinary course, the respondents should pay Nu Line's costs of the trial, the appeal having reversed the judgment below. 16Although the notice of appeal sought to have the costs order set aside and sought an order that the respondents pay the appellant's costs of the trial, neither party presented any submissions as to costs. It was therefore assumed by this Court that costs were consequential on the outcome of the appeal. In particular, the respondents did not put on a notice of contention seeking to justify the costs order made by the trial judge in any event. 17Although Ward J conducted the trial, and was no doubt familiar with the history of the pleadings and the interlocutory steps taken, her findings did not extend to particular detail as to the costs incurred through the derelictions of the appellant, although some were accepted. Rather, and not inappropriately, she dealt with the matter with a "broad brush" stating at [84]: "In the circumstances, I consider that it is likely that the manner in which Nu Line Construction conducted the litigation leading up to the hearing was likely to have caused the defendants to incur additional costs over and above those which it would have incurred had the litigation been conducted with a view at the outset to the real issues in dispute and as to the evidentiary basis on which those were to be tested. This must be considered alongside the principle that the award of costs orders in favour of the successful party in proceedings is compensatory not punitive." 18Ward J declined to award costs on an indemnity basis: at [87]. Rather, the order and the reasons for it were reflected in the following passage at [90]: "In all the circumstances, I have concluded that the appropriate order is to award the defendants 85% of their solicitor/client costs of the proceedings. That will compensate them for something more than the 70-80% of those costs that might be recoverable on an assessment (if I take judicial note of the percentage recovery estimates that have been provided on other matters in this Court) and will provide a measure of compensation for the dilatory conduct of the proceedings by Nu Line Construction and its non-compliance with the orders of this Court, as permitted by s 56(5) of the Act." 19In the absence of any material identifying additional costs caused by any departure from proper standards of litigating, the adjustment of the usual order should be adopted. The adjustment by Ward J appears to have involved the award of a 10% margin on top of costs recoverable on a party/party basis. The resulting orders were as follows: 1. Save as to costs already the subject of orders made in these proceedings, Nu Line Construction is to pay to the defendants 85% of the defendants' solicitor/client costs of the proceedings (including, for the removal of doubt, any costs that have been hitherto reserved). 2. On the provision of an undertaking by the defendants to the effect set out in [94] above, order that the sum presently held in Court by way of security for costs, and any interest accrued thereon since the payment into Court, be paid out to the defendants towards the satisfaction of order 1 above. 20There is some awkwardness in this approach. The variable recovery of party/party costs has led to an assumption as to a precise proportion, which should perhaps be a proportion of allowable solicitor/client costs, although the terms of any costs agreement are unknown. It is also unclear what approach has been taken to disbursements: there may well have been additional counsel's fees. 21The variation required by the outcome of the appeal involves awarding costs of the trial in favour of Nu Line, but with a discount which allows for its delays and ineptitude and the additional costs caused to the respondents. Not only should the appellant be deprived of 10% of the costs recoverable on a party/party basis, but there should be a further allowance against the costs unnecessarily incurred by the respondents, but which cannot now be recovered directly. The appropriate result may be achieved by the following steps. (1) Reduce the appellant's solicitor/client costs by 10%, so that the party/party costs are calculated by reference to 90% of the total. (2) Assuming, in accordance with the assumption made by the trial judge, that party/party costs constitute 75% of solicitor/client costs, (and disbursements) the appellant would then recover 75% of 90% of its costs, namely 67.5%. (3) The respondents are also entitled to a 10% reduction calculated on their costs which would not otherwise have been incurred. That can be allowed for by reducing the party/party costs by 10% of the total costs sought, thus allowing the appellant to recover 67.5% - 10% = 57.5%. (4) The result is to allow the appellant 57.5% of its allowable solicitor/client costs of the trial. (The apparent precision is quite misleading, but may be retained because actual figures are unknown and the proportion reflects the process.) 22This approach assumes a degree of equivalence between the costs incurred by the parties at trial. Whether this is true is not known and cannot be allowed for, except in the assessment process.