Storm Industries Pty Ltd trading as trustee of the T&L Trust v Unicar Australia Pty Ltd

Judgment (5 paragraphs)

[1]

BACKGROUND

I delivered reasons for judgment in this matter on 18 March 2020 [1] , in the course of which (at [366]) I provided my preliminary indication as to the appropriate orders which should be made to dispose of the proceeding. To reiterate, the plaintiff invested $300,000 in the first defendant and I found that he had suffered loss or damage as a result of misleading or deceptive conduct by the defendants in doing so. I indicated my view that the appropriate remedy was one under s 237 of the Australian Consumer Law (adopted under the Fair Trading Act 1987 (NSW)) which would have the effect of a statutory order for rescission, so that in exchange for the plaintiff transferring his shares in the company back to the second and third defendants, the second and third defendants would pay him separate monetary sums. In the case of the second defendant that sum was $225,000 plus interest and in the case of the third defendant, I indicated that the sum should be $75,000 plus interest.
The parties made submissions as to final orders. What follows assumes some familiarity with the Earlier Reasons.
The defendants agree about the monetary sums which should be paid to the plaintiff (including interest). The disputed issue is whether the first defendant, Unicar Australia Pty Ltd, should be jointly and severally liable to make the two payments with the second defendant and the third defendant (respectively).
The other main issue in dispute is whether the costs liability of the third defendant should be altered so that he is only responsible for a proportion of costs in alignment with the proportion of the monetary sum he is to pay the plaintiff; in comparison with the liability of the second defendant.

COSTS

The third defendant submits, apparently with the support of the second defendant, that he should only be liable to pay 25% of the plaintiff's costs.
His reasoning is twofold. First, a proportionate costs outcome would align with the substantive outcome that he pays back only 25% of the purchase price paid by the plaintiff for its investment. Secondly, amongst the range of complaints of misleading or deceptive conduct made against him, the plaintiff only succeeded on one of them. These contentions are conceptually distinct, but they overlap in their practical application.
As to the former submission, the general principle is that where a plaintiff succeeds against multiple defendants, the liability of each of the defendants for costs is joint and several [2] . It is true that acceding to the third defendant's position would yield a level of symmetry between the result on damages and the result on costs. But even where there is an apportionment of damages amongst tortfeasors, that does not automatically lead to any differentiation in costs liability [3] . Further, this would, in my view, obscure the reality in the way that the litigation was conducted; which was that there was a significant degree of commonality in approach as between all the defendants. In the Earlier Reasons it was noted that in many respects the first and second defendants, represented by Junior Counsel, substantially adopted the positions expressed by Senior Counsel for the third defendant. I accept the submission of the plaintiff that numerous arguments were run by the third defendant - for the common benefit of the first and second defendants - which failed. Saying that is not to criticise this combined approach by the second and third defendants - it commendably facilitated the more efficient running of the trial - but it would be incongruous, if not also unfair, to posit that the second defendant (by himself or in combination with the first defendant) effectively contributed to 75% of the costs incurred on the defendants' side of the record in this litigation. Indeed, it is generally not practicable to ascribe what proportions of the plaintiff's costs were incurred in prosecuting its cases against the second and third defendants.
As to the latter submission, it is true that all but one of the complaints of misleading or deceptive conduct against the third defendant (including the claim of ancillary liability) failed. The third defendant invokes what was said to be the principle that the costs order in favour of a successful party may be ameliorated to reflect the successful party's failure on certain issues; notwithstanding that the successful party did not act unreasonably in raising those issues [4] . Here, the third defendant did not suggest that the plaintiff acted unreasonably in prosecuting the complaints of misleading or deceptive conduct by the third defendant in respect to which it failed.
The principles by which a successful plaintiff may be deprived of some of its costs on account of its failure on certain issues were set out by the Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 where the Court of Appeal (Beazley, Ipp and Basten JJA) said (at [38], citations omitted): "[38] The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this court in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: • 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. • 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… 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. • 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. • 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. • 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..."
More recently, in Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 McColl JA (with whom Macfarlan JA agreed) said: "[10] 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. This recognises the proposition that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case. [11] However there is a tension between that proposition and the proposition that, "[i]f parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take." [12] Further, even where there are multiple issues, 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 the particular issues on which it was successful and those on which it failed. [13] However, a court can mould a costs order to take account of the partial success of the party against whom orders have been made at trial insofar as that party identifies particular issues or groups of issues on which it succeeded at the trial. This requires consideration of whether there were "clearly discrete issues for determination" or, rather, whether "all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter". 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. [14] Where there is a mixed outcome in proceedings, the question of apportionment of costs between issues on which the party who has overall been successful, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory."
These authorities clearly indicate the flexibility available to the Court in exercising its discretion. But they also indicate, first, that the starting point is that the Court will lean against drawing sometimes nice distinctions about what issues an ultimately successful party 'succeeded' and 'failed' and, secondly, that an important consideration is that plaintiffs should not be deterred from raising material issues for fear that failure on one or more of them might deprive them, or substantially deprive them, of the benefit of the operation of the usual rule as to costs [5] .
If this was a case which the plaintiff had merely brought against the third defendant alone, rather than with the other defendants, it would not have been easy to characterise the discrete complaints as giving rise to 'dominant' or 'separable' issues in the requisite sense. As the plaintiff correctly submits, insofar as the non-disclosure case was brought against the second defendant, it partly failed because it was a reflection of the representation case which partly succeeded against him.
More generally, and taking into account the added circumstance that the third defendant was one of multiple defendants, at [355] of the Earlier Reasons, I made an observation which generally characterised the third defendant's position. I found that "Mr Radcliff materially assisted Mr Tsingolis in creating an environment where it would have seemed to someone like Mr Burns that this was an investment opportunity too good to reject and there was a need for some haste in committing to such investment lest the opportunity be lost. Mr Radcliff lent his authority and credibility, as a solicitor, in support of Mr Tsingolis' promotional activities..." Those general findings were made having regard to my assessment of the third defendant's conduct as a whole, embracing all the facts, whether they gave rise to an actionable complaint of misrepresentation against the third defendant or not. For example, the circumstances in which the third defendant made the 'ground level price' representation in February 2017, though found to be not misleading, were part of the context for assessing whether his 1 March 2017 email was misleading ([158] of the Earlier Reasons). In such circumstances, it is difficult to see how there would have been any appreciable saving in time and expense had the plaintiff solely selected the one complaint against the third defendant upon which he succeeded (the 1 March 2017 email) rather than prosecuting all of them.
Another way of saying that is that, although the plaintiff failed in respect of some of its complaints against the third defendant, the factual matrix which was established as underlying the plaintiff's complaints against him illuminated the true relationship between all the parties; which is a necessary consideration to assessing claims of misleading or deceptive conduct [6] ; and it particularly illuminated the comparative involvement and role of the third defendant in causing the loss or damage to the plaintiff, as well as his relative culpability. It was these factors which ultimately gave rise to the remedies which the plaintiff will obtain. In that sense, it may be said that the third defendant's success on some of the complaints against him was factored into the significantly reduced monetary judgment against him; in comparison to the monetary judgment against the second defendant. But if the plaintiff had not prosecuted all of the complaints of misleading or deceptive conduct against the third defendant that it did, the true nature of the causal involvement of the third defendant, and his comparative culpability, may not have been sufficiently brought to light.
Further, and as previously indicated, with respect to the third defendant's first submission, the third defendant's position at trial was assimilated, in many respects, to that of the second (and first) defendants. This makes it artificial to distinguish those issues upon which the third defendant singularly succeeded from those upon which he failed (singularly or in combination with the other defendants) so as to justify apportionment.
I am not persuaded that the circumstances are such that the Court should diverge from the usual principle that the defendants should jointly and severally pay the plaintiff's costs.

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Judgment (5 paragraphs)

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