The principal judgment was delivered in this matter on 4 May 2018: Rema Tip Top Asia Pacific Pty Ltd v Grüterich [2018] NSWSC 591.
The parties to the proceedings are the plaintiff, Rema Tip Top Asia Pacific Pty Ltd, and the defendant, Mr Christian Grüterich. The latter was for some time an employee of the former.
I declined to set aside a freezing order made by Parker J on 13 April 2018 against Mr Grüterich in respect of his assets up to an amount of $500,000, but I reduced the amount covered by the freezing order going forward to $250,000.
The parties are at issue as to the costs order that the Court should make in relation to the plaintiff's 13 April 2018 notice of motion, including the application before me in the Duty List on 17 and 20 April 2018. These reasons deal with the resolution of that dispute.
The plaintiff argues that the Court should order the defendant to pay its costs of the notice of motion by which it sought the freezing order, or alternatively a proportion of those costs as determined by the Court.
The defendant counters by submitting that his costs should be ordered to be paid by the plaintiff, or in the alternative the Court should make an order that the costs be the parties' costs in the cause.
Neither party sought an order that the costs be its costs in the cause.
It will be both appropriate and sufficient on an application such as the present for the Court to set out the following extract from the joint judgment of the Court of Appeal (Beazley, Giles and Hodgson JJA) in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142:
Principles governing costs of interlocutory proceedings
[16] The general rule as to costs is that costs follow the event unless it appears to the court that some other order ought to be made as to the whole or part of the costs: see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR). Rule 42.7 deals with interlocutory applications. It provides that unless the court otherwise orders:
The costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
[17] The Association contends that in the case of an application for an interlocutory injunction, the Court will exercise its discretion and order that costs be 'costs in the cause'. The Association described this as the 'usual rule' as to costs on such an application.
[18] An order that the costs be 'costs in the cause' or 'costs in the proceedings' (the terms are interchangeable) means that the costs of the interlocutory proceedings correspond with the final order for costs in the action. Thus if, in the final proceedings, the plaintiff is successful and an order for costs of the final hearing is made in the plaintiff's favour, the plaintiff gets the costs of the interlocutory proceedings as part of the costs of the action against the defendant, regardless of who was successful on the interlocutory application: see J T Stratford Ltd v Lindley [1969] 1 WLR 1547 at 1553 per Lord Denning MR.
[19] In Stratford v Lindley, Lord Denning observed that the House of Lords had made an order on an interlocutory application that costs be "costs in the cause". His Lordship observed that the case was "finely balanced" and that, on final hearing, a slight turn in the evidence might have made all the difference to the outcome. He considered (at 1554) that in those circumstances, the House "thought it right to make the costs of the interlocutory proceedings depend on who won or lost in the main action". In that case, however, the matter settled prior to trial, and the question for the Court of Appeal's consideration was what order should be made in respect of the interlocutory application when the matter had not proceeded to finality. That matter is not in issue here. However, his Lordship's remarks indicate a circumstance in which it is appropriate to make an order of the kind which is sought by the Association in respect of the costs at first instance.
[20] In Boscolo v TCN Channel Nine Pty Ltd (No 2) (New South Wales Supreme Court, Eq Div, 28 April 1994, unreported) Young J (as his Honour then was) dealt with costs in relation to an application for an interlocutory injunction. The application had been commenced ex parte but during the course of the ex parte hearing, legal representatives for the defendants arrived at Court and sought to be heard. His Honour permitted that course so that the matter became a contested application for an interlocutory injunction. In respect of costs, his Honour said:
Although costs are always in the discretion of the court, the usual rule that is applied in the exercise of the court's discretion is that if a person succeeds in getting an interlocutory injunction costs should be costs in the cause …
[21] His Honour did not explain the basis of the rule. That is not of itself unexpected, as practices grow up within particular jurisdictions which routinely deal with a particular type of application. The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court's focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.
[22] Metropolitan Petar submits that the "usual practice" referred to in Boscolo and upon which the first respondents rely does not represent the entirety of the jurisprudence in this area, and that in accordance with both principle and practice of the courts at first instance the order that ought to be made is that the costs of the hearing of the Notice of Motion at first instance should be their costs in the cause. An order that costs be a party's costs in the cause or the proceedings, for example, a plaintiff's costs in the proceedings, means that if that party succeeds on the final hearing, then that party is awarded the costs of the interlocutory proceedings: Stratford v Lindley at 1153, but if that party loses on the final hearing, it will not be liable to pay the costs of the other party on the interlocutory hearing.
[23] In Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (Supreme Court of New South Wales Eq Div, 24 July 1985, unreported), an earlier decision of Young J, his Honour was concerned with the question as to the costs order that should be made when an interlocutory injunction is granted but the proceedings are dismissed on final hearing. His Honour observed (at 2) that there were not any definitive rules governing that circumstance, but that the following seemed to be "what commonly happens". Relevantly for present purposes, his Honour stated:
(a) If the material before the Judge on the interlocutory hearing discloses that there is an arguable or prima facie case and it is more or less conceded in argument that such is the case so that an interlocutory injunction is granted, then costs of the interlocutory injunction are costs in the cause, though sometimes they may be made plaintiff's costs in the cause; (b) If in the situation set out in (a), the defendant does not concede the inevitability of an interlocutory injunction being granted, then the proper order is that the plaintiff's costs be his costs in the cause, or even that the defendant pay the plaintiff's costs in any event …" (Emphasis added)
[24] Young J, in determining what costs order should be made in the matter before him, stated:
… I think it follows from what I have said above that the defendant being successful in the action, it should not have to pay any of the plaintiff's costs. This is because unless there was some extraordinary factor, the appropriate order on the interlocutory motion would have been either that the costs would have been costs in the cause, or alternatively, plaintiff's costs in the cause.
[25] In Ausino International Pty Ltd v Apex Sports Pty Ltd [2006] NSWSC 1119 Campbell J (as his Honour then was) stated:
[55] … the present proceedings before me are brought on the basis that they are an interlocutory process. The usual order which is made as to costs concerning interlocutory processes, is that if the plaintiff is the applicant, and succeeds, then the costs of the interlocutory process become the plaintiff's costs in the cause, while, if the plaintiff is the applicant, and loses, the usual order is that the plaintiff pay the defendant's costs of that application.
[56] The rationale for that arises from the way that interlocutory proceedings are intended to advance the final hearing. If a plaintiff has a victory on the way to a final hearing, whether that victory is ultimately one which is fruitful will depend upon whether the plaintiff succeeds in the final hearing. However, if the plaintiff brings an interlocutory application and loses, then that interlocutory hearing is one which will, irretrievably, have cost the defendant money, and the justice of the situation is that the defendant should be indemnified for those costs, regardless of the outcome of the proceedings. (Emphasis added)
[26] It is unclear from the decision in Ausino International whether there has been some mutation in the "usual order" over the last decade, or whether in Ausino International Campbell J's comments were reflecting the matters to which Young J adverted in Deveraux Holdings. This in itself may reflect a trend of greater contestability of issues once a dispute engages the court process. However, it seems to me there is force in Young J's analysis of the circumstances which justify the making of one order rather than another on an interlocutory application. It should be noted that Campbell J consistently applied that rule in the Equity Division of the Supreme Court: see Russ Australia v Benny [2006] NSWSC 1118; Glen Eight v Home Building [2005] NSWSC 907; see also the decisions of Hamilton J: Scholten v Mobilesoft Pty Ltd [1999] NSWSC 234; Ingersoll-Rand (Aust) Ltd v Industrial Rollformers Pty Ltd [2000] NSWSC 178.
[27] Applications for interlocutory injunctions are commonplace. If there is nothing to distinguish an application from the typical case that comes before the court, then the underlying jurisprudence relating to the exercise of the discretion may warrant the making of what is referred to in the legal vernacular as the "usual order", whether that be costs in the cause or the plaintiff's costs in the cause. The making of such an order does not displace the exercise of the court's discretion. Rather, it is a shorthand form of giving effect to the principles that govern the court's discretion in circumstances where there are no countervailing or different circumstances to warrant the exercise of the discretion in a different manner.
[28] We have already referred to r 42.7 of the UCPR, which is the rule that applies to costs on an interlocutory application unless some other order is made. We have also referred to the fact that if some other order is to be made, that order is made in the exercise of the court's discretion. That discretion cannot be fettered. For the reasons we have given, the making of an order in accordance with a "usual rule" does not, however, involve any fettering of discretion provided a court applies the rule in the exercise of its discretion, and not as a matter of course. It is not necessary, however, that a court explain its reasons for applying the usual rule in every case. The favourable exercise of the court's discretion in ordering the costs to be costs in the cause, or plaintiff's costs in the case, if otherwise unexplained, should be taken to reflect the fact that there is already an established jurisprudence as to the basis upon which the court's discretion should be exercised in a given circumstance.
In my view it would clearly not be warranted in the present case that the Court make an order that either party pay the whole of the costs of the interlocutory application to the other. In the first place, although the plaintiff succeeded in extending the freezing order, the defendant had a substantial measure of success in causing the amount of his assets covered by the order to be halved. In doing that, he freed himself from very restrictive terms of the original freezing order which allowed him only a very small amount for living expenses and legal fees.
In short, I take the view that neither party succeeded on the interlocutory application to the exclusion of the other so that the outcome should be regarded as the "event" in favour of one party such that an order for costs in favour of that party should follow.
I consider the present case to be a quintessential example of the type of case referred to at [19] of the Court of Appeal's reasons, where the case was "finely balanced" and where "a slight turn in the evidence might have made all the difference to the outcome". The case was, and properly so, a complex, contentious and fiercely fought dispute in which the Court was required to make many interlocutory judgments in circumstances where the issues could not be fully litigated. In that sense, almost all of the findings should be considered to be provisional, with the consequence that changes in the available evidence could well justify different findings.
The plaintiff argued that it should get its costs because at the hearing the defendant readily conceded its claim to be entitled to a return of the motor vehicle that the defendant had been given for the purposes of his employment. It is true that the concession was made at the hearing, and perhaps it could have been made earlier. However, to my observation that aspect of the plaintiff's claim was peripheral as a forensic matter and the defendant did not in any real way put the plaintiff to proof of that claim.
The plaintiff then relied upon the fact that a freezing order had been made in the substantial sum of $250,000, even though that amount was substantially less than the initial amount sought of $661,113.56 (in the application before Parker J). I have already explained above why I consider both parties to have obtained a substantial measure of success in the interlocutory application before me.
I place little significance on the plaintiff's next argument that the Termination Payment Claim upon which the plaintiff enjoyed the least success involved virtually no time at the hearing. I do not think it is appropriate on an interlocutory application such as the present for the Court to consider making cost orders based upon assessments of the amount of time taken up in dealing with particular issues.
The plaintiff then sought to explain why there was no basis to the defendant's criticisms of the plaintiff's conduct of the matter before Parker J, in so far as the defendant argued that the plaintiff had presented a case on the ex parte application that suggested that the defendant had been more dishonest than could be supported, having regard to the information that the defendant in fact disclosed to the plaintiff. This may be a good reason for the Court to not order the plaintiff to pay the defendant's costs, but it does not support any argument that the defendant should pay its costs.
The plaintiff made a submission that, by reason of tactical decisions made by the defendant, substantially the whole of the hearing of 17 April 2018 was wasted, before the defendant made an adjournment application to enable him to put on additional evidence to flesh out his case. It is true that, as a result of discussion between counsel for the defendant and the Court the defendant late in the day made a tactical decision to apply for an adjournment. It is fair to conclude that the tactical decision was made as a result of a realisation that the defendant may be unsuccessful in his attempt to persuade the Court that the concerns expressed by the Court should be resolved by the defendant's existing evidence. However, I do not accept that the timing of the defendant's change of tactical position justifies the making of a costs order against him, even if that order be limited to that one day. First, it must be noted that the plaintiff obtained from Parker J a freezing order that only allowed the defendant to pay up to $15,000 on his reasonable legal expenses. It was only late on 17 April 2018 that I made a somewhat arbitrary increase to that limit. I have considerable sympathy for the defendant's position that before that increase the defendant was pressed to try to resist the extension of the freezing order on the first day of the hearing before me, because there was a risk that if there was an adjournment and costs were required to be incurred in further preparation and on a new hearing date the limit of the amount that the defendant was entitled to employ defending himself might be exceeded. Secondly, it is my judgment that more likely than not, given that the application had to be dealt with in the Duty List, the hearing would have taken more than one day in any event.
This is a case, in my view, in which the appropriate order is that the costs of the plaintiff's 13 April 2018 notice of motion, in so far as it sought the making of a freezing order against the defendant, should be each party's costs in the cause. That is the appropriate order, whether or not it be thought that such an order is the "usual order" in the sense discussed by the Court of Appeal.
Even though, in this case, the plaintiff has not sought an order that the costs of the notice of motion be the plaintiff's costs in the cause, I will mention briefly why I do not think that would be an appropriate order. I do not generalise, but in a great proportion of applications for interlocutory relief the order sought is an interlocutory injunction in the same terms as a final injunction that will be sought at the hearing. The issue at the interlocutory stage is whether there is sufficient evidence to support the plaintiff's claim, whether that evidence be thought to establish that there is a serious case to be tried or a prima face case. The point relevant to present purposes is that the final hearing is likely to decide on the basis of the evidence whether the plaintiff indeed had any case to support the granting of the interlocutory injunction. Sometimes, where in a case of this type the defendant unnecessarily makes an issue of whether the evidence is sufficiently strong to satisfy the threshold before the Court goes on to consider the balance of convenience, the appropriate order is that the costs of the interlocutory application be the plaintiff's costs in the cause (if the interlocutory injunction is granted), and that the plaintiff pay the defendant's costs (if it is not).
Interlocutory applications for freezing orders are somewhat different. The plaintiff must demonstrate a sufficiently strong case for final relief, but that relief may be, as in this case, a claim for damages or compensation, and thus be a money claim. Although a sufficiently strong case must be proved, the issue then becomes whether on the evidence there is a sufficient risk that the defendant will act in a way such that the defendant's assets are put beyond the reach, for one reason or another, of the Court's enforcement processes in the event that the plaintiff is successful at the final hearing. As is generally accepted, the making of a freezing order is a significant intrusion upon the personal rights of the defendant. The order is not made to provide the plaintiff security to protect a possible future judgment. It is made to protect the processes of the Court.
The point for present purposes is that, once the Court has made the freezing order, the issue of whether the facts warranted the making of such an order will rarely be decided fully at a contested hearing, because the likelihood that the defendant would have placed his assets beyond the reach of the court's judgment will not be an issue. If the order was that the costs be the plaintiff's costs in the cause, it would always follow that the plaintiff would get its costs of the interlocutory application, provided it succeeded on its substantive case at trial, even if only for a relatively small amount in relation to what was originally claimed. If the plaintiff failed at the final hearing, no order would be made in respect of the costs of the interlocutory hearing at which the freezing order was made. In no event would the defendant get his costs of the interlocutory hearing. That result could be unfair to the defendant, who although losing in some respect on the substantive case, may have been able to prove that there was in fact no real risk that the defendant would have put his assets beyond the reach of the court's judgment. In the ordinary case, the defendant will not get the opportunity at the final hearing to prove that the making of the freezing order was unwarranted. If the costs order made is that the costs of the interlocutory application are each party's costs in the cause, then at least the defendant has a chance of recovering the costs of the interlocutory application, if he is able to defeat the plaintiff's substantive claim on its merits.
It may well be that in this context even an order that the costs of the interlocutory application be each party's costs in the cause is somewhat arbitrary and blunt, and such an order does not logically remedy the problem faced by the defendant that I have outlined above. However, it is at least to some degree even-handed, and gives the defendant some prospect of being awarded the costs of the interlocutory hearing if the defendant can succeed on the final claim.
Accordingly, I order that the costs of the plaintiff's notice of motion filed on 13 April 2018, in so far as it sought a freezing order against the defendant, be each party's cost in the cause.
[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: 18 June 2018