This is the Court's second judgment in these proceedings. In the Court's first judgment given on 3 October 2019, the Court dismissed various claims of the plaintiff, Mr Spyrides, against the first defendant, Mr Marsh: Spyrides v Marsh [2019] NSWSC 1289. The plaintiff's unsuccessful claims were for alleged breaches of contract, of trust and of fiduciary duty. But the Court found in the first judgment that the plaintiff had made out a case in contract against the corporate second defendant, Used Cars Plus Pty Ltd.
Subsequent to its first judgment on 25 October 2019, the Court ordered that judgment be entered against the second defendant in the amount of $688,467.23, inclusive of pre-judgment interest calculated up to 3 October 2019, and it otherwise dismissed the Amended Statement of Claim.
The Court also made directions for the parties to file submissions on costs with a view to those issues being decided in Chambers. The Court has considered those submissions in Chambers and makes costs orders in Chambers in accordance with these reasons.
This judgment should be read with the Court's first judgment. Events, matters, and persons are referred to in both judgments in the same way.
In relation to the costs issues, the subject of these reasons, Mr Spyrides continued to be represented by Mr J. Halley SC and Ms E. Bathurst, instructed by Nicholas George Lawyers. Mr Benjamin Hemsworth of Somerville legal represented Mr Marsh.
The parties initially were also in contest about whether or not a judgment should be entered in favour of Mr Marsh against Mr Spyrides. But Mr Marsh no longer pursues that argument, recognising that the order for dismissal of the proceedings against him made on 25 October is all that is necessary finally to conclude the action against him. That argument is no longer pursued. All that now remains is a contest about costs.
The respective positions of the parties on costs may be shortly stated. Mr Marsh argues that Mr Spyrides should have a costs order against Used Cars Plus but that he should have a costs order against Mr Spyrides. On the other side, Mr Spyrides argues that the Court should approach the question of costs by making a single order for costs in favour of both defendants for 50% of their combined costs.
On this issue for the reasons that follow, the Court finds Mr Spyrides' arguments more persuasive. The Court will make an order for costs in favour of both the first and second defendants, Mr Marsh and Used Cars Plus, against Mr Spyrides for 50% of their combined costs. It is not necessary to deal with the position of the third defendant, HB Motors, which has been deregistered and against which relief was not pressed. The Court's analysis below accepts much of Mr Spyrides' arguments as well as dealing with Mr Marsh's responses.
[2]
Some Applicable Legal Principles
The principle is that "costs are in the discretion of the court": Civil Procedure Act 2005, s 98(1)(a). Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1 provides that costs follow the event "unless it appears to the court that some other order should be made as to the whole or any part of the costs".
Fairness dictates that the unsuccessful party typically bears the liability for costs, such that this is regarded as the "usual rule" but there is no absolute rule with respect to the exercise of the Court's discretion and the successful party has no right to an order for costs, notwithstanding its success in the litigation: Oshlack v Richmond River Council (1998) 193 CLR 72 ("Oshlack"), (at [67] and [134]; (1998) 152 ALR 83; [1998] HCA 11.
The principle that costs follow the event is subject to the ability of the Court, confirmed by rule 42.1, to make such orders as to costs as appears to the Court that the justice of the case may require: Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274. The ultimate aim of the discretion confirmed by s 98(1) is to compensate the successful party for at least some of the expense that that party has had to incur in vindicating rights; and secondly, and in so far as costs can ever do it, to seek to achieve some further measure of justice as between the parties: University of New South Wales International House Ltd v University of New South Wales (No 2) [2017] NSWSC 306, (at [17]) ("UNSW"). A mechanistic comparison of outcomes is sometimes, but not always, a proper indication of how the interests of justice should be reflected in costs orders: UNSW, (at [18]). The general indication given by rule 42.1, that costs should follow the event, ought be applied except where the circumstances of the individual case suggest that it would be unjust to do so: UNSW, at [19], and see also Commonwealth of Australia v Gretton [2008] NSWCA 117, (at [121]), (per Hodgson JA).
In the exercise of the discretion as to costs the Court encounters commonly recurring themes, the decisions on which will inform the judicial discretion as to whether "some other order should be made": Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No. 2) (2011) 288 ALR 385; (2011) 86 ACSR 119; [2011] NSWCA 256 ("Tomanovic"), (at [97]-[98]) and Oshlack, (at [69]). Two such themes arise in this case. One is that the plaintiff has been successful against one defendant but unsuccessful against the other. And another is that aspects of this litigation were both invited and lengthened by the conduct of the successful first defendant.
[3]
Analysis
For several reasons, this is an appropriate case for the making of a special costs order in order to do justice between these parties.
First, here the plaintiff has been successful against one defendant but unsuccessful against the other, where both defendants were jointly represented by the same solicitors and counsel and where both defendants were related parties: Mr Marsh controlled Used Cars Plus.
It is not uncommon in such situations for the Court to make a costs order structured so that the successful defendant should recover a proportionate share of the "common" costs referable to the claim pressed against each defendant. This rule of thumb is said to be convenient for the "ordinary case" but is not to be automatically applied in every case: King Network Group Pty Ltd v Club of the Club's Pty Ltd (No 2) [2009] NSWCA 204, at [25] - [35]), (per Young JA, Hodgson and Campbell JJA agreeing) ("King Network Group").
These proceedings are apt for the application of this approach in the making of a costs order. The Court is not treating the statements in King Network Group as a rule to be followed but rather as a guiding insight, which is particularly apt in the present case, where there was a very close, indeed a controlling, relationship between the two defendants in the events that led up to the litigation and in the conduct of the litigation itself.
This King Network Group combined approach to making an award of costs against two defendants achieving different trial outcomes is also supported by another consideration: that the Court should be mindful of minimising inconvenience to the parties in the later assessment of costs. Attempting to separate out the respective legal costs incurred by Mr Marsh and by Used Cars Plus is likely to be a difficult, time-consuming, artificial and conflict-prone exercise during a cost assessment. The way the case was conducted in the adducing of evidence and the putting of submissions on behalf of Mr Marsh and Used Cars Plus makes clear to the Court that attempting to separate out the costs of each defendant during an assessment is inviting expense and delay that is readily avoidable by the approach that the Court is now taking.
Mr Marsh's submissions seek to answer this reasoning by emphasizing that as Mr Marsh and Used Cars Plus are "separate legal entities", that "each should receive an order reflective of their success". But in my view, this fails to get to grips with the sound reasons for making a combined costs order of the King Network Group type.
Secondly, a sense of ordinary fairness and justice is offended by the conclusion that Mr Spyrides, although unsuccessful, should bear the burden of all the defendants' costs, which include Used Cars Plus' costs of the proceedings. The Court said in the first judgment (at [136]): "Mr Spyrides has clearly suffered the loss claimed from Used Cars Plus' breach of contract. It was obliged to deliver the McLaren and failed to do so." Mr Spyrides should be clearly insulated from paying the costs of a party against which he has been entirely successful and at the hands of which he has suffered significant losses. The best way to ensure this does not happen this to take the apportionment approach discussed in King Network Group. Mr Marsh submits that Used Cars Plus' costs are low. But this does not seem likely given the way the case was run. His submissions serve to highlight how contentious a cost assessment will be if the Court does not take the King Network Group approach.
Thirdly, the contract documentation in this case has been extensively discussed and closely analysed in the first judgment, (at [115]-[130]). One of the factors that generated this litigation was the seriously confusing and contradictory nature of documentation that Mr Marsh deployed in his dealings with Mr Spyrides and then failed to clarify in his conduct of the litigation. Mr Marsh himself was the person who was significantly responsible for this confusion, which not only invited the litigation but itself lengthened the litigation: Tomanovic, at [97] and Oshlack at [69]. In the conduct of their defence, both active defendants did not specify which of Mr Marsh's companies entered into a contract with Mr Spyrides. They left it to the Court to work out, if the contract was not made with Mr Marsh, whether it was made between Mr Spyrides and Used Cars Plus, or Prestige Preowned. In my view, Mr Marsh should not recover all his costs for conducting a trial in this way.
Fourthly, the conduct of proceeding occasioning unnecessary expense or delay can be a basis for reducing a successful party's costs: Dr Douglass v Lawton Pty Ltd (No 2) [2007] NSWCA 90 and Oshlack at [69]. The Court's findings meant that it did not have to examine the detail of the Zervas/Alvez defaults during the period March to May 2017. But on those issues, the Court assessed Mr Marsh as an unreliable witness who could not readily answer difficult questions and who was prepared to adhere to plainly improbable explanations of events. The proceedings took longer than they should have because of his conduct in the witness box. Had he been more candid and forthright about these events, which occupied much of the cross-examination, the proceedings would have been shorter.
Added to this was the late service of Mr Marsh's affidavit about the Zervas/Alvez defaults, sworn on 12 March 2019, and served just before the hearing. Mr Spyrides' legal representatives responded flexibly to this late service but responding to its late service undoubtedly increased Mr Spyrides' overall costs.
In my view, taking these various matters into account, the appropriate costs order in this case is the one proposed by Mr Spyrides: that he pay 50% of the defendants' combined costs on the ordinary basis, as agreed or assessed.
[4]
Conclusions and Orders
For these reasons the Court orders that the plaintiff pay 50% of the first and second defendants' combined costs of the proceedings on the ordinary basis, as agreed or assessed.
[5]
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Decision last updated: 02 December 2019