Sims v The Commonwealth

Court of Appeal (NSW)|2023-02-23|Before: Bell CJ, Meagher JA, White JA

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT

THE COURT: The Court gave judgment in this matter on 4 October 2022: Sims v Commonwealth of Australia [2022] NSWCA 194. An appeal was allowed and the parties were directed to formulate orders in accordance with the Court's reasons, and to file written submissions as to costs. These short reasons addressing costs assume familiarity with our earlier reasons.
Noting that an order has already been made allowing the appeal, the parties are agreed that the following order should also be made: "Vary orders 1 and 2 made by the District Court of New South Wales on 19 November 2021 as follows: (a) Judgment and verdict for the plaintiff in the sum of $117,253.03; (b) Interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act 2005 (NSW) commencing on and from 5 February 2018 to 19 November 2021."
The Commonwealth was the plaintiff in the proceedings at first instance and Mr Sims was the defendant. At first instance, the Commonwealth was awarded a verdict in the sum of $316,032.13 plus interest and, by Order 3, Mr Sims was ordered to pay the Commonwealth's costs.

Costs of the appeal

On the issue of the costs of the appeal, the Commonwealth contends that the appropriate order as to costs is that it be ordered to pay 75% of Mr Sims' costs of the appeal. The nub of the Commonwealth's submission is that such a costs order is appropriate in circumstances where: 1. Mr Sims succeeded on two of his three principal grounds of appeal and therefore has had a significant measure of success but did not succeed on all of the issues he raised (each of which was a discrete and separable issue); and 2. notwithstanding his partial success in the appeal, Mr Sims remains liable to repay the respondent a substantial sum of money.
It is well established that the Court has a broad discretion as to costs especially where there has been a mixed outcome on appeal. In Ryde Developments Pty Ltd v The Property Investing Alliance Pty Ltd [2018] NSWCA 40 at [6], it was said: "Section 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs. Under rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the general rule is that the Court is to order that costs follow the event. The 'event' may be characterised in more than one way. Generally the 'event' refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] per Ward, Emmett and Gleeson JJA. Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22."
A convenient summary of the relevant principles for the determination of costs on an issue-by-issue basis may be taken from Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] per Beazley, Ipp and Basten JJA: "Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). A separable issue can relate to 'any disputed question of fact or law' before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272."
Mr Sims enjoyed substantial success in the appeal and the principal issue on which he succeeded occupied a substantial amount of the hearing time and written submissions on appeal. Conversely, the issues on which he failed did not occupy significant hearing time. We also note that the Commonwealth's unsuccessful constitutional argument raised by way of Amended Notice of Contention and dealt with at [88]-[98] of the principal judgment raised issues not dealt with at first instance and were of some apparent complexity.
In our view, the Commonwealth should be ordered to pay 90% of Mr Sims' costs of the appeal, as agreed or assessed, it being noted that, other than the amounts which he conceded he was obliged to repay, he failed in his argument in relation to certain payments credited to his account with the Australian Tax Office. Written and oral argument on this discrete issue did not occupy a great deal of the hearing of the appeal.

Costs of the trial

Turning to the question of costs at first instance, the basis of Mr Sims' proposed order that the Commonwealth pay 80% of his costs at first instance on an ordinary basis up to and including 24 September 2021, and thereafter on an indemnity basis in part reflects that: 1. the Commonwealth should not have succeeded to the extent it did at first instance (for the reasons given in our earlier judgment) but that there would still have been a mixed result at trial, as there was on appeal; and 2. on 14 September 2021 (following a settlement conference on 13 September), Mr Sims offered to settle for the sum of $230,000 payable in instalments, with a payment of $60,000 to be made within 10 weeks, and the balance in $5,000 monthly instalments to be paid over 36 months, with Mr Sims consenting to the entry of judgment in the sum of $350,000 inclusive of interest and costs (less amounts paid pursuant to the offer) if there was any unremedied default in the payment plan.
Although this offer was expressed to expire on 17 September 2021, it was extended to close of business on 24 September 2021. It was rejected on that date. This offer was a variation of an offer the Commonwealth had made, the principal differences between the two offers being that the Commonwealth sought an initial payment of $80,000 rather than the $60,000 in Mr Sims' offer. It was unfortunate that the parties were not able to bridge this gap and avoid a two day hearing in the District Court and a day in the Court of Appeal.
Mr Sims submits that: "At that time, the [Commonwealth] was entitled to judgment in the sum of $117,253.03, being the amounts received by Mr Sims directly (including superannuation) and the PAYG receipts for which he received a benefit. The interest on the PAYG receipts accrued from 1 November 2018 being the common issue date for the Notices of Assessment. The interest on the balance was claimed by the Respondent from 5 February 2018. The total interest owing to the Respondent as at the expiry of the Appellant's Offer was less than $20,000."
Subsequent to the rejected offer of 14 September 2021, on 26 October 2021, just over one month after its rejection and about a week prior to commencement of the trial, Mr Sims' solicitors made a further without prejudice offer to the Commonwealth. The letter of offer, which was annexed to an affidavit of Mr Sims' solicitor filed in support of the costs argument but which, curiously, was not referred to in the costs submissions filed on his behalf, included the following: "Your client claims for mistaken payments paid during the period 22 September 2009 until 26 March 2015. On your case as pleaded, our client is not actually the recipient of the $700 payments by 143 pay cycles. This amount totals $100,100. There is on your own facts no basis for an equitable claim against him for this sum, together with the considerable additional interest (and costs) accruing to this part of your claim. Indeed, this aspect forms a very substantial portion of the quantum of your case. Putting to one side our limitation arguments, and solely for the purposes of our attempt here to resolve this dispute without having to incur the additional and we say unnecessary expense of a final hearing, we propose a resolution to this matter."
The letter then continued: "Taking account of the above information in respect of the quantum of your claim, together with the inevitable and possibly disproportionate further amounts of legal costs which might be incurred litigating the above dispute, our client makes the following offer in full and final settlement of this matter, without any admission or prejudice: 1. Our client to pay the Commonwealth the sum of $290,000. 2. This offer is inclusive of any costs and interest. 3. This offer is open until 1 November 2021, after which time it is withdrawn. 4. The payment of this sum would be for a full and final settlement of the subject matter of the entire claim against our client and would be subject to appropriate releases. 5. The precise terms of the settlement deed as to payment increments and time to pay to be determined between the parties. 6. The settlement terms to remain confidential."
It is relevant to note that, according to an affidavit filed on behalf of the Commonwealth, its estimated taxable recoverable costs as at 14 September 2021 were slightly over $80,000. Even accepting the fact that these costs would have increased by the time of the further offer of 26 October 2021, the offer was a generous one and exceeded that to which the Commonwealth was entitled, even if it had been awarded all of its costs.
The Commonwealth resists any disturbance of the costs order in its favour at first instance. It submitted that: "… despite partial success in the appeal, the appellant remains liable for a substantial sum. In the court below, it was only at the outset of the hearing that the appellant conceded he was liable to pay about $54,000, in respect of amounts paid to him only within the 6-year period before commencement of the proceedings and ignoring any ATO payments, but he did not indicate any consent to immediate entry of judgment. In final submissions at trial, the appellant conceded that this figure was $56,511.10 paid directly to his account and $3,645.93 paid to superannuation, a total $60,157.03. Pre-judgment interest would add another $11,004.95, a total of $71,161.98. The appellant thus required the respondent to prove all aspects of its claim up to the conclusion of a two-day hearing; on the orders now made, it did even better than was conceded. The respondent ought be entitled to its ordinary costs as agreed or assessed, at least untiI the date of the offer."
The Commonwealth also contends that it was not unreasonable for it not to accept Mr Sims' first settlement offer because the initial lump sum component of that offer was marginally less than the figure conceded to be owing at the end of the hearing, and that with adjustments for interest and costs, the judgment sum component of the offer was just under the judgment sum now due. It was then submitted that: "Whilst an assessment may produce more or less costs recoverable, it cannot be said on any reasonable view that the amount offered was certainly better than the result the respondent obtained from trial, and the amount offered was payable only over some years whilst the judgment sum is immediately recoverable. It was not unreasonable for the respondent to have rejected the offer as put."

Consideration

In our view, there is no basis for maintaining the primary judge's order that Mr Sims pay the Commonwealth's costs of the trial. Although the net result of the appeal is that Mr Sims must pay an amount of $117,253.03 to the Commonwealth together with interest, the amount sought by the Commonwealth was considerably in excess of this and the principal issue at first instance which separated the parties was the matter upon which Mr Sims succeeded on appeal.
That having been said, Mr Sims' formal concessions as to the Commonwealth's at least partial entitlement to restitution were belated, and his first settlement offer was not without complexity although it broadly mirrored the structure of the Commonwealth's offer. It was understandable that he wished to pay part of the settlement sum in instalments over what would have been close to 3 years ($170,000, being $230,000 less $60,000, to be paid in monthly instalments of $5,000).
While we do not consider that it was unreasonable for the Commonwealth to reject this offer so as to result in an award of indemnity costs to Mr Sims after the date of the offer's rejection, the offer was a no doubt good faith attempt to resolve a dispute attended by legal complexity, involving a modest amount from the Commonwealth's perspective but a significant amount of money from Mr Sims' perspective. The offer is a matter that may be taken into account in the exercise of the Court's discretion.
As noted above, Mr Sims made a further offer to resolve the dispute a week out from trial. The inclusion of this letter as an attachment to the solicitor's affidavit implies that it was intended to be relied upon although no submission was made by reference to it. Nevertheless, it is a relevant matter to be taken into account on the question of costs. Although a relatively short time was given for its consideration, the proximity of the trial meant that the Commonwealth should have been in a position to consider its attraction. It represented a significant increase in the previous settlement amount.
Bearing in mind Mr Sims' success on appeal and the fact that, had such success been enjoyed by him at first instance, the Commonwealth would not have succeeded in the whole of its claim, and in view of Mr Sims' evident desire, as reflected in both of his offers, to resolve the matter without a hearing in a way that involved a substantial (re)payment to the Commonwealth, the Commonwealth should be ordered to pay 75% of his costs at first instance. Although in the ultimate result, Mr Sims remained and remains liable to pay a certain amount to the Commonwealth, the litigation that ensued following the rejection of these offers was principally concerned at trial with the issues upon which the Commonwealth was ultimately unsuccessful, namely in relation to the limitation period attaching to the Commonwealth's claim for restitution of moneys mistakenly paid to Mr Sims, Ms Dalton and Jones King Lawyers.
Accordingly, the orders of the Court are: 1. Vary orders 1 and 2 made by the District Court of New South Wales on 19 November 2021 as follows: "(1) Judgment and verdict for the plaintiff in the sum of $117,253.03. (2) Interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act 2005 (NSW) commencing on and from 5 February 2018 to 19 November 2021." 1. Set aside order 3 made by the District Court of New South Wales on 19 November 2021. 2. The Commonwealth is to pay 75% of Mr Sims' costs at first instance on an ordinary basis. 3. The Commonwealth is to pay 90% of Mr Sims' costs of the appeal on an ordinary basis.

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: 23 February 2023

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