Plaintiff v Defendant

Supreme Court of Victoria|2014-02-11|Before: ROBSON J

COSTS - Action for damages on alleged breach of contract - Plaintiff successfully established existence of contract - Plaintiff successfully established breach - Plaintiff failed to prove damage and awarded nominal damages - Costs awarded in favour of defendant - Discussion of relevant rules.

1 On 12 December 2012, I delivered judgment in this matter awarding nominal damages of $1 to the plaintiff. The plaintiff alleged that it entered into an agreement to rent chattels to the defendant, and that the defendant had breached and repudiated the agreement. The plaintiff sought to claim significant damages in excess of $1 million. For the reasons expressed in my decision, I found that there was an agreement, that the agreement had been repudiated and breached by the defendant, and that the plaintiff had failed to prove the damages alleged. I awarded nominal damages of $1.

2 On 21 December 2012, the plaintiff issued a summons seeking leave to re-open its case, in substance to seek to prove its damages. I heard that summons on 8 April 2013, and on 19 April 2013 I delivered judgment refusing the application for the plaintiff to re-open its case.[2]

3 The parties indicated to me that they sought orders for costs and the parties agreed that if the parties were unable to agree as to the appropriate orders for costs, that written submissions would be filed and that I deliver my decision on the basis of the written submissions. The parties were unable to agree on costs.

4 On 2 May 2013, the plaintiff filed its written submission on costs. On 3 May 2013, the defendant filed its outline of submissions on costs.

5 The plaintiff accepts that the Court has a discretion as to costs, and that normally the successful party is entitled to the costs of the litigation. The plaintiff accepts that where a plaintiff has obtained only nominal damages, the defendant is usually treated as the successful party and is awarded costs.

6 The plaintiff contends, however, that in this case there should be an order for costs in favour of the plaintiff. The plaintiff says that the defendant made six separate contentions in its defence:

(1) that the 'Lighting Systems Energy Reduction Proposal' signed by the parties on about 26 November 2007 contemplated further agreement on essential terms which did not transpire;

(2) that the defendant's 'Services Agreement' formed part of any agreement that had been concluded and permitted a termination of any agreement on one month's notice;

(3) that the plaintiff had repudiated any agreement on or about 17 January when the plaintiff informed the defendant that the plaintiff could not obtain the necessary funding from Société Générale on the basis of the signed documentation;

(4) that as the supply of the Yes Boxes depended on Société Générale purchasing the rental stream, which it did not do, no loss was caused by any breach on the defendant's part;

(5) that the plaintiff's claim was for gross revenue, and not for loss of profits; and

(6) that the defendant was entitled to terminate in any event because demonstrations of the Yes Boxes by the plaintiff to the defendant in April and May 2008 revealed perceptible light loss.

7 The plaintiff says that the defendant has been wholly unsuccessful in all but the fifth contention with respect to damages. The plaintiff says that the failure of the plaintiff to prove its damages does not mean the plaintiff was unsuccessful in the action. The plaintiff contends it was awarded $1 in damages, which meant it was successful in every element required to prove its case. The plaintiff says that the defendant, on the other hand, was unsuccessful in every element required to disprove the plaintiff's case. The plaintiff says that, were it not for the failures of the plaintiff's counsel and the plaintiff's legal team, the plaintiff would have proved its case for damages. The plaintiff says that the defendant has benefited by this unhappy failure and it ought not benefit further by an order depriving the plaintiff of the costs of the trial.

8 In the alternative, the plaintiff says that the defendant was granted leave to amend its defence during the trial on 16 February 2011. The plaintiff says that an order was made that the defendant was to pay to the plaintiff a day's costs of the trial; and that the defendant sought and obtained an adjournment of the hearing at which the plaintiff was to produce further evidence on damages on 12 July 2011, with costs reserved. The plaintiff says that adjournment resulted in costs of preparation for trial of the plaintiff thrown away and the plaintiff's costs of the day thrown away.

9 The defendant says that the proceeding has, at all material times, been a claim for substantial damages, rising from $1,494,556.72 in September 2009 to $2,292,558.32 in January 2011, and further to $2,890,251.60 on 23 February 2011 for breach of agreement.

10 The defendant says that it took a number of defences, as well as disputing from the outset that the plaintiff suffered any loss or damage. The trial ran for 12 days.

11 The defendant accepts that the Court has a discretion under s 24 of the Supreme Court Act 1986 and Order 63 of the Supreme Court (General Civil Procedure) Rules 2005.

Costs to be in the discretion of Court

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

(2) Nothing in this section alters the practice in any criminal proceeding.

13 The defendant submits, and I accept, that the settled practice is that in the absence of special circumstances, the successful litigant should receive costs and that costs follow the event.

14 The courts have consistently held that where a party sues for damages based on alleged breach of contract, that person is not viewed as the successful party if it succeeds in establishing the contract, establishing the breach, but fails to prove any damage flowing from the breach. An exception to that principle which would justify an order of costs in favour of someone who recovered nominal damages is when: "some other right is vindicated by the judgment, eg, the establishment of a legal right irrespective of whether any substantial remedy is obtained".[3]

15 The authorities establish that the essential question is: who was the successful party? Secondly, as mentioned, the authorities establish that a plaintiff who establishes only nominal damages is usually not recognised as the successful party.

16 In MLW Technology Pty Ltd v May (No 4),[4] in which the plaintiff was awarded nominal damages of $5, Byrne J of this Court stated:[5]

In the circumstances of this case the case should be treated as was mentioned in Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited[6] as being for practical purposes a win for the plaintiff, but a win which should not be treated as entitling the plaintiff to costs. His Lordship held that in circumstances in a case such as the present where the claim in truth was for a substantial sum of money, the plaintiff who has succeeded for nominal damages only, should not be regarded as successful for the purposes of costs order.

17 In that case, Byrne J rejected the plaintiff's submissions that he should sever the issues so as to appropriate a portion of the costs to the part of the case in which the plaintiff was successful. Justice Byrne considered that the practice of severance was not readily adopted, and (at any event) not appropriate to the case before his Honour. His Honour held that the plaintiff was required to pay the defendant's costs of the proceeding.

18 In Witcombe v Talbot & Olivier (No 2),[7] Beech J stated:[8]

Where a party claiming damages for breach of contract succeeds in obtaining an award for nominal damages only, the question of which party (if any) was successful will depend upon all the circumstances of the case: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd; [9] Alltrans Express Ltd v CVA Holdings Ltd;[10] Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd.[11]

A number of cases concerning costs after for the award of nominal damages are discussed in Dal Pont GE, Law of Costs.[12]

The cases emphasise that there are no hard and fast rules. The modern cases appear to favour the view that, generally speaking, the event will be regarded as going against the party who receives nominal damages only, unless the establishment of a legal right independent of damages is one of the primary purposes of the proceeding; see, for example, Thiess Contractors;[13] Nexus Minerals NL v Brutus Constructions Pty Ltd;[14] MLW Technology Pty Ltd v May [No 4];[15] Ng v Chong;[16] Grant v Brewarrina Shire Council (No 3);[17] Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak.[18]

19 In Gold and Copper Resources Pty Ltd v Newcrest Operations Ltd,[19] Stevenson J referred to the decision of Campbell JA (with whom McColl JA and Handley AJA agreed) in Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd; Carelli v FS Architects Pty Ltd[20] as authority for the proposition that an award of nominal damages is not sufficient to warrant a costs order.

20 In Rockcote, Campbell JA repeated the remarks he had made in Mid-City[21] to the effect that an award of nominal damages is not sufficient to warrant a costs order, as follows:[22]

... Strictly, when there is an action for breach of contract, and the plaintiff establishes breach, but cannot prove any substantial loss, the plaintiff is entitled to a verdict for nominal damages. ... [A] question remains of whether proof of an entitlement to nominal damages affects the cost orders which should be made.

Since the Judicature Act in England, the award of costs has been discretionary: Oshlack v Richmond River Council. A significant factor taken into account in exercise of that discretion is who is the successful party.

In an action for breach of contract, if a plaintiff establishes liability, and obtains an order for payment of nominal damages, that plaintiff is usually not to be regarded as the successful party in the action: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd; Alltrans Express Ltd v CVA Holdings Ltd; Oshlack v Richmond River Council; Ng v Chong.

21 In Gold and Copper Resources, the Court found that Newcrest Operations had breached a confidentiality agreement but that no loss had been caused. Further to this finding, the plaintiff had sought an account of profits, but failed to convince the Court that the breach would give recourse to the defendant to make a profit. Justice Stevenson held that the plaintiff should pay the costs of the proceeding. His Honour noted that the authorities made it clear that, normally, the defendant was considered the successful party where nominal damages were awarded to the plaintiff.[23] While his Honour was satisfied that the issue of liability (on which the plaintiff succeeded) was separable from the issues of causation and remedy (on which the plaintiff failed),[24] he was not satisfied that it was the 'clearly dominant' issue, important enough to depart from the normal order as to costs.[25] Justice Stevenson held that the plaintiff had to do more than just prove a breach of the confidentiality agreement - it also had to prove that breach had some consequence.

22 In this case, the plaintiff was able to show that it was likely to have suffered in excess of $1 in damages, but, through the failure to call the appropriate evidence, was unable to quantify the loss. The plaintiff was faced with the principle referred to in my judgment of 12 December 2012 that, where the plaintiff is able to reasonably prove the quantity of the loss and damage suffered, the plaintiff must do so on the balance of probabilities and with as much precision as the subject matter permits. I also found that if the circumstances are such that the plaintiff's loss and damages are unable to be quantified, the Court will not deprive a successful plaintiff of an award of damages and that the Court must do its best to fairly estimate the loss and damage suffered by the plaintiff.[26] As indicated in my judgment, the plaintiff was not one who was unable to prove the quantity of its loss and damage; in fact, it was reasonably able to prove the quantity of loss and damage but failed to do so.

23 I accept that the plaintiff succeeded in establishing the contract and succeeded in establishing its breach despite the fierce opposition of the defendant. Nevertheless, the sole object of the litigation was to recover damages. There was no alternative or further objective to the proceeding other than the recovery of damages. Therefore, as indicated above, in my view, the defendant was the successful party in the litigation and is entitled to its costs.

24 Under rule 63.04, the Court does have power to order costs that have been incurred on discrete issues in the case, irrespective of the outcome of the case. In considering this provision, this Court has adjusted costs so that a generally successful party's costs will be reduced proportionately to their failure on a discrete issue. In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3),[27] after considering the history and application of this approach, I summarised the principles as follows:[28]

The award of costs is in the discretion of the Court or Judge: s 24 Supreme Court Act 1986.
The discretion must be exercised judicially: Donald Campbell & Co v Pollak; Cretazzo v Lombardi.
The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation: Cretazzo v Lombardi; or the circumstances leading up to the litigation: Oshlack v Richmond City Council.
Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey.
As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey; McFadzean v CFMBEU.
Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burman; Cretazzo v Lombardi.
The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.
It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO. Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia.
The court may, in its discretion, make an order that is a single order, fixing what proportion of a party's costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie; McFadzean v CFMBEU; Nolan v Nolan.
The caveat referred to by Jacobs J in Cretazzo v Lombardi may have less weight today than when it was decided: Primcom Pty Ltd v Sqarioto; Mickelberg v Western Australia; and Victoria v Master Builders Association of Victoria.
Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.

25 In Chen & Ors v Chan & Ors,[29] the Court of Appeal (Maxwell P, Redlich JA and Forrest AJA) considered the apportionment of costs between multiple appellants (two of whom were partially successful, and one wholly successful). The Court made the following pertinent general observations:[30]

(1) The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.

(2) The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do "substantial justice" as between the parties on matters of costs.

(3) Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.

(4) A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.

26 Here, there was no mixed success. There was no 'discrete head of claim' on which the plaintiff succeeded. I see no reason to depart from the decision of Byrne J of this Court, especially as his Honour considered and rejected the possibility of severing issues[31] (albeit without reference to r 63.04 of the then in-force Supreme Court (General Civil Procedure) Rules 1996).[32] I also consider binding the decision of the New South Wales Court of Appeal in Rockcote. The Court's broad discretion as to costs must be exercised against the general principle that costs follow the event. Here, Spotlight legitimately resisted NCON's claim, and was ultimately successful as NCON failed to quantify its damages. The successful party should have its costs.

27 I have already made orders that the defendant was to pay a day's costs of the trial. The defendant also sought an adjournment with costs reserved of the hearing of 12 July 2011, at which the plaintiff was to adduce further evidence of damages. That adjournment resulted in costs of preparation of trial of the plaintiff being thrown away and the plaintiff's costs of the day thrown away. In my view, those costs should be borne by the defendant.

28 Accordingly, I think the appropriate way to deal with those two costs is to reduce the costs that are otherwise payable by the plaintiff to the defendant. In those circumstances, I consider - in the exercise of my discretion - the appropriate award as to costs is that the plaintiff pay the defendants costs of the proceedings, save for two days of the trial.

[1] NCON Australia Ltd v Spotlight Pty Ltd [No 5] [2012] VSC 604.

[2] NCON Australia Ltd v Spotlight Pty Ltd [No 6] [2013] VSC 186.

[3] Ng v Chong [2005] NSWSC 385 (Ng), [8] (Hamilton J).

[4] [2003] VSC 293 (MLW Technology).

[6] (1951) 1 All ER 873 (Anglo-Cyprian) (Devlin J).

[7] [2009] WASC 173 (Witcombe).

[8] Ibid, [22]-[24] (citations edited).

[9] Anglo-Cyprian [1951] 1 All ER 873, 874.

[10] [1984] 1 WLR 394 (Alltrans), 402-403.

[11] [2001] WASCA 166 (Thiess Contractors), [9].

[13] Thiess Contractors [2001] WASCA 166, [9].

[14] [1997] FCA 926 (unreported, Full Court, Federal Court, 10 September 1997) (Nexus), 12.

[17] [2003] NSWLEC 108 (Grant), [5].

[18] [2006] NSWSC 1149 (Mid-City), [49]-[52].

[19] [2013] NSWSC 345 (Gold and Copper Resources).

[20] [2008] NSWCA 39 (Rockcote).

[22] Rockote [2008] NSWCA 39, [100] (citations omitted).

[23] Gold and Copper Resources [2013] NSWSC 345, [22]-[24].

[24] Gold and Copper Resources [2013] NSWSC 345, [32].

[25] Gold and Copper Resources [2013] NSWSC 345, [33].

[26] NCON Australia v Spotlight Pty Ltd [No 5] [2012] VSC 604, [296].

[31] MLW Technology [2003] VSC 293, [7].

[32] Rule 63.04 is identical in both the 1996 and 2005 Rules.

Court (General Civil Procedure) Rules 2005