Slattery v Fordyce; Fordyce v Slattery - [2019] NSWSC 1729 - NSWSC 2019 case summary — Zoe

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Slattery v Fordyce; Fordyce v Slattery

[2019] NSWSC 1729

Supreme Court of NSW|2019-12-05|Before: Walton J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2019-12-05

Before

Walton J

Source

Original judgment source is linked above.

Judgment (5 paragraphs)

[1]

Solicitors: PMF Legal (First Defendant / Cross-Claimant) File Number(s): 2017/240216

[2]

Judgment

HIS HONOUR: On 13 June 2018, an appeal was brought by a further amended summons filed in Court on 13 June 2018 ("the further amended summons") from a decision of Pierce LCM of 10 July 2017, insofar as that judgment determined that Ms Rhonda Daily Slattery ("the plaintiff") was liable to pay the professional costs of Mr Paul Mervyn Fordyce (trading as PMF Legal) ("the first defendant") and a consequential order for the plaintiff to pay indemnity costs to the first defendant. There were also other defendants, party to those proceedings, which were not found to be the subject of any liability.
On 16 March 2018, the first defendant filed an amended cross-summons ("the cross appeal"), effectively seeking to have the remaining defendants declared party to the First Costs Agreement and the obligations to pay professional costs arising therefrom.
The relevant background to the further amended summons and the cross appeal (collectively, "the applications") was set out in Slattery v Fordyce; Fordyce v Slattery [2019] NSWSC 173 ("Slattery No 1") at [9]-[46].
On 28 February 2019, the Court gave judgment in relation to the applications: Slattery No 1.
In Slattery No 1, the Court reached the following conclusions at [306]-[308]: [306] In view of the findings earlier made, grounds of appeal 1-5 are dismissed; leave is refused to bring ground 6 and leave to extend time is refused with respect to the bringing of ground 7, although if it were found time should be granted, leave should be refused or the appeal dismissed. In the result, the appeal brought by the plaintiff is not upheld. [307] The primary relief in the cross-summons should be granted. [308] In the circumstances, upon the principles that costs follow the event, an award for costs of the further amended summons commencing an appeal and the cross-summons would normally be made in favour of the first defendant as against the plaintiff with no order as to costs against Mr Slattery. Any costs orders against other parties will require further submissions, having regard to that fact that Mr Slattery, together with the third and fourth defendants, entered submitting appearances save as to costs. I will make provision to hear the parties as to costs.

In support of the order sought with respect to costs of the cross appeal, the first defendant submitted: 8. The costs of the cross appeal, at least as against the first cross defendant, should also not be controversial. The Court found that the Magistrate below had erred in finding that there was no agreement or disclosure with the second and third cross defendant, that the error should be corrected and made orders in favour of the cross claimant, PMF Legal, as set out above. 9. The Court indicated at [308] of the Judgment, that upon the principles that costs follow the event an award for costs of the cross summons would normally be made in favour of the cross claimant "as against the plaintiff [first cross defendant] with no order as to costs against Mr Slattery. " Such an award of costs is entirely appropriate in circumstances where Mrs Slattery's counsel made written and oral submissions opposing the relief sought in the Amended Summons. However, the Court also noted that: "Any costs orders against other parties will require further submissions, having regard to the fact that Mr Slattery, together with the third and fourth defendants, entered submitting appearances save to costs. " 10. In support of an order that each of the first, second and third cross defendants pay the cross claimant's costs of the cross appeal on the ordinary basis PMF Legal says: a) the submitting appearances filed by Dee-Tech Pty Ltd (the third defendant/second cross defendant) (Dee-Tech) and Bright Star Laundry Pty Ltd (the fourth defendant/third cross defendant) (Bright Star) were filed in respect of the plaintiffs summons and not in respect of the cross summons, which was filed after the submitting appearances were filed; b) contrary to UCPR Rule 10.1(1), the submitting appearances were not served on PMF Legal and PMF Legal was not aware that Dee-Tech and Bright Star (or Mr Slattery) had filed submitting appearances until the Judgment was delivered where reference was made to those appearances; consequently no objection was taken when submissions were made by Ms Castle of Counsel at the hearing on 13 June 2018, in opposition to the relief sought in the amended cross summons, which submissions were ostensibly only in the interests of Dee-Tech and Bright Star, and not in the interests of Mrs Slattery, the first cross defendant, as explained below; c) as submissions were made on behalf of Dee-Tech and Bright Star, they took an active step in the cross appeal, which is not permitted when submitting to the orders of the court; and d) in any event, both Dee-Tech and Bright Star wrongly opposed in the Local Court, a finding that they were jointly and severally liable with Mrs Slattery for the legal costs incurred in respect of the Court of Appeal proceedings, and did not subsequently consent to the relief sought in the Cross Summons or Amended Cross Summons and in those circumstances, and consistent with authority, they should be made liable for the costs of the cross appeal, regardless of having filed submitting appearances.

In light of that authority, the first defendant advanced the following submissions: 14. On 16 August 2017, each of the second, third and fourth defendants, that is, Mr Slattery, Dee Tech and Bright Star filed submitting appearances which stated that each defendant "appears and submits to the making of all orders sought and the giving or entry of judgment in respect of all clams made save as to costs. " 15. At the time of the filing of the submitting appearances the cross summons had not been filed and self-evidently, the statements made in the submitting appearances, referred to the claims made in the summons, and were not expressed to apply and could not have been intended to apply, to the claims made in the cross summons, in relation to which Dee-Tech was not the "Third Defendant" as identified in its submitting appearance and Bright Star was not the "Fourth Defendant" as identified in its submitting appearance. Submitting appearances were not filed by the second cross defendant, Dee Tech or the third cross defendant, Bright Star, in respect of the cross summons, following the filing and service of the cross summons on or about 28 August 2017. 16. Contrary to UCPR 10.1(1) the submitting appearances that had been filed by Dee-Tech and Bright Star in respect of the appeal were not served on PMF Legal and it only became aware, via its solicitor, that submitting appearances had been filed by those parties when Judgment was delivered on 28 February 2019. PMF Legal was hence unable to 'challenge" or 'impugn" the submitting appearances, as Bignold J spoke of in Develtor. In those circumstances, Dee-Tech and Bright Star cannot hide behind the costs protection prima facie afforded by the submitting appearances. 17. Had PMF Legal, via it solicitor, been aware that submitting appearances had been filed by Dee-Tech and Bright Star in respect of the cross summons, PMF Legal would have opposed any submissions being made in opposition to the relief sought in the amended cross summons, given that there is clear authority to the effect that a submitting party is not entitled to contest a plaintiffs claim. 18. Mrs Slattery, for whom Ms Castle of Counsel ostensibly appeared, was only named as the first cross defendant because she was named as the liable party in the impugned judgment below. No relief was sought against her per se and certainly no relief was sought that was adverse to her interests. 19. The transcript of the hearing on 13 June 2018 records, at pages 29.24 -31.23 and 55.45 - 56.46,10 submissions made by Ms Castle of counsel, in opposition to the relief sought in the cross summons. Such submissions could only have been made on behalf of Dee-Tech and Bright Star, given that if the cross appeal was successful, as it was, the result would be and is, that instead of a judgment against Mrs Slattery only, there is a judgment in the Court below that Mrs Slattery, Dee-Tech and Bright Star are each jointly and severally liable for the judgment sum of $63,389.40 and 90% of the costs, on the ordinary basis up to and including 27.1.15, and thereafter on an indemnity basis. Put simply, Mrs Slattery now shares the burden with the corporate entities and in these circumstances the submissions made at the hearing opposing the cross appeal were prima face against Mrs Slattery's interests. It must be inferred that these submissions were in fact made in the interests of Dee-Tech and Bright Star. 20. Having in fact contested the cross appeal and lost, in circumstances where PMF Legal was unaware of the restriction Dee-Tech and Bright Star were apparently under, both Dee-Tech and Bright Star should be made liable to costs in the usual way: Highland v Labraga (No 3) [2006] NSWSC 871; Douglas v James (No. 2) [2015] NSWSC 969. [Footnotes omitted.]

The first defendant also placed emphasis upon the role of the third and fourth defendants, namely, that they caused the cross appeal. Those submissions are extracted below: 21. Moreover, the 'true position' as explained by the Court of Appeal (Beazley P, Barrett JA and Gleeson JA) in Kisimul Holdings Pty Ltd v Clear Position Pty Ltd (No 2) [2014] NSWCA 317 as regards the question as to whether a submitting party should be made liable for costs "should be approached not by reference to prima facie expectations but according to an appraisal of the circumstances of the case. In particular, attention must be paid to the context in which the submitting appearance was filed. " 22. In Kisimul the submitting respondent on an appeal, who had successfully opposed the relief sought by the appellant at first instance, was ordered nevertheless to pay the appellant's costs of the appeal. As the Court of Appeal explained at [15] - [18], in defending the proceedings below the respondent stove to obtain a commercial benefit. In not consenting to the relief sought by the appellants, the respondent forced the appellant to prove its case on appeal and while the lack of active opposition may have meant that the appellant's task was less onerous than it would otherwise have been, effort and expenditure ''were incurred beyond that which would have been necessary had the respondent consented." As the Court of Appeal said at [19]: "....the filing of a submitting appearance by a party occupying a true adversarial position in a commercial dispute and concerned with nothing but Us own economic welfare cannot be allowed to operate as some form of insulation from the costs consequences of requiring the appellant's claim to proceed to curial determination rather than cooperating in a consensual resolution of it. " 23. Both Dee-Tech and Bright Star opposed the Local Court making a finding that they were jointly and severally liable with Mrs Slattery for the legal costs incurred in respect of the Court of Appeal proceedings, and did not subsequently consent to the relief sought in the Cross Summons or Amended Cross Summons. In those circumstances, and consistent with authority, if the Court considers that the submitting appearances prima facie operate with respect to the cross appeal, Dee-Tech and Bright Star should nevertheless be made liable for the costs of the cross appeal. [Footnotes omitted.]

[3]

General Principles

As to the principles applicable in that respect I refer to my judgment in Moseley v AB (No 2) [2017] NSWSC 1812 at [65]-[79], extracted below: [65] The court's primary task is to determine whether the facts of the case or specific costs provisions impact upon the court's jurisdiction to make costs orders. Unless there are statutory provisions to the contrary, the court's discretion to determine such issues is unfettered: Civil Procedure Act 2005 s 98(1) (extracted above at [59]). [66] The central and overriding principle in this regard is that of doing justice to the parties in each particular case. This involves a heavily contextual assessment that focuses upon the conduct of the litigation itself. A discretion exercised on grounds unconnected with the litigation, or on no grounds at all, is arbitrary or capricious rather than fair or just (see Peters v Peters (1907) 7 SR (NSW) 398 at 399 (per Street J); Cretazzo v Lombardi (1975) 13 SASR 4 at 11 (per Bray CJ); Scharer v Counting Instruments Ltd [1986] 1 WLR 615 at 621 (per Buckley LJ). [67] The discretion must be exercised judicially and "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at 95. [68] This discretion may be exercised whenever the circumstances warrant, having regard to the scope and purpose of the s 98 of the Civil Procedure Act: Oshlack v Richmond River Council (1998) 193 CLR 72; Hamod v State of NSW [2011] NSWCA 375 at [813]. However, the discretion must be exercised on a principled basis (see Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11]), and in accordance with the principles of proportionality: Civil Procedure Act s 60. [69] In Oshlack v Richmond River Council, McHugh J observed the discretion, whilst unfettered, is not to be applied without guidance or qualification (at [65]-[67]): The discretion must be exercised judicially [65] Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity. [66] By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2), when setting aside an arbitrator's costs award: the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure. The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the "usual order as to costs". The usual order as to costs [67] The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. [70] Equally, the "general rule" (or "usual order as to costs") does not amount to a fetter on the court's discretion. The terms of r 42.1, "unless it appears to the court that some other order should be made", clearly envisage that the court may, in its discretion, make a costs order other than one following the event. [71] The most common circumstance in which the general rule may be displaced is evidence of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council at [40] and [69]; G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct; it may simply be any conduct "calculated to occasion unnecessary expense": Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]; Keddie v Foxall [1955] VLR 320 at 323-4. [72] In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA addressed the principles of fairness underlying the making of a costs order, which may at times warrant departure from the general rule (at [121]): [121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach. [73] Further factors identified as relevant to informing judicial discretion were identified in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]-[98] (per Campbell JA) (see also, Oshlack v Richmond River Council at [69] (McHugh J); and Ritter v Godfrey [1920] 2 KB 47). They include, but are not limited to, the following: (1) whether the successful party effectively invited the litigation; (2) whether the successful party unnecessarily protracted the proceedings (3) whether the successful party succeeded on a point not argued before a lower court; (4) whether the successful party prosecuted the matter solely for the purpose of increasing the costs recoverable; and (5) whether the successful party had obtained relief which the unsuccessful party had already offered in settlement of the dispute. [74] The onus lies on the losing party to establish a basis for any departure from the general rule: Waterman v Gerling (Costs) [2005] NSWSC 1111 at [10]. Only in an exceptional case would a successful party both be deprived of costs and also ordered to pay the opponent's costs: Arian v Nguyen (2001) 33 MVR 37. [75] The fact that the proceedings involve some public interest aspect does not, of itself, necessarily warrant departure from the general rule that costs follow the event: Oshlack v Richmond River Council at [90] (McHugh J); Re Kerry (No 2) [2012] NSWCA 194 at [13], [15]; CSR Ltd v Eddy (2005) 226 CLR 1. [76] Where there is a divergence of authority on a particular issue, this may be a factor, but in Rinehart v Welker (No 3) [2012] NSWCA 228 the importance of the subject matter did not provide a basis for refusing costs to the successful party in private litigation (at [15]). [77] The Court should, however, have careful regard to the facts of the case: EKO Investments Pty Limited v Austruc Constructions Ltd [2009] NSWSC 371 at [18]-[23]; Knight v Clifton [1971] Ch 700 at 725. [78] Additionally, in a case where there are multiple issues litigated, the Court may, in the exercise of its discretion, order that a successful party have only part of its costs. It may be appropriate to order that a successful party be deprived of costs or a portion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument: see Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. [79] The appropriate starting point, nonetheless, remains the presumption under r 42.1, and the enquiry then becomes whether in the exercise of the court's discretion, the presumption should be displaced, or whether some other order is to be preferred.