Talacko & Ors v Talacko [2008] VSC 312

(a) that the defendant pay an advance of $600,000 with respect to such costs; or

(b) the defendant pay such costs on an indemnity or solicitor/client basis to be taxed; or

(c) an order the defendant pay such costs on a party/party basis (but if such an order is made the plaintiffs seek to reserve their rights to pursue solicitor/client costs by way of their claim for equitable compensation hereafter).

(a) that no order for costs should be made with respect to the hearing of preliminary issues at this point in the proceeding;

(b) that if an order is made for such costs it should be issues based, and not be made with respect to the whole of the costs of the preliminary hearing;

(c) that if such costs are awarded they should not be awarded other than on a party/party basis and subject to taxation; and

(d) that if a party/party order is made the Court should not countenance the prospect of two taxations on different bases and such an order should be regarded as conclusive of the costs of the preliminary hearing.

5 I reject the defendant's submission that there should be no award in respect of the costs of the hearing of the preliminary issues. The plaintiffs have succeeded on the underlying issue of liability in the present claim. It is said that the Court has yet to resolve the defendant's arguments as to penalty with respect to clause 6 of the terms of settlement and that I have reserved leave to further argue the question of uncertainty with respect to clause 6.

6 If either of these latter arguments were to succeed hereafter, the consequences would not be that the plaintiffs failed in their present claim, but rather that the measure of compensation would be damages for breach of the terms of settlement rather than compensation assessed pursuant to clause 6. On any view, the plaintiffs' victory at the hearing now in issue is determinative of entitlement to compensation of some substance. Accordingly, costs should follow.

7 I turn to the question of an issues based determination of costs. The plaintiffs were successful, first, in the principal construction argument between the parties; secondly, in establishing a breach of the terms arising out of the failure and refusal by the defendant to execute documentation relating to the transfer of land at Dresden; and thirdly, in resisting the defendant's contention that the terms had been repudiated as a result of the plaintiffs' conduct.

8 It is true that the plaintiffs failed to make out further alternative allegations as to alleged breaches of the terms, but the evidence traversed in respect of these allegations also bore on the repudiation dispute in respect of which they were successful and additionally bore on the defendant's credit. In the event, I am of the view the plaintiffs' success was so substantial, they should now get the whole of their costs of this hearing. I am not persuaded by the observations of the Federal Court in Bowen Investments v Tabcorp Holdings Ltd (No. 2)[1] that a different course is justified.

9 In my view, this is a case in which it is apposite to bear in mind the observation of Jacobs J in Cretazzo v Lombardi[2]:

But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.[3]

10 I do, however, accept that costs should be awarded only on a party/party basis. The plaintiffs' claim was for breach of the terms of a contract. It was not a claim founded in equity. It is true, as Mr Howells submitted, that the relief provided for by the contract is equitable compensation with respect to the subject matter of the original claim. But the properties comprising the subject of the terms differed from those the subject of the original claim. The defendant has breached an agreement to give the plaintiffs entire interests in some specific properties only. In my view the basis of the plaintiffs' claim does not provide a consequential reason for the award of costs on a solicitor/client or indemnity basis. No other basis for such an award was suggested. In particular, it was not submitted that the conduct of the defence was so unreasonable as to justify such an award.

11 Insofar as the plaintiffs seek to leave open a further claim for equitable compensation for such costs in the event that they are successful in recovering costs on a party/party basis only at this stage of the proceeding:

(a) I can presently see no basis on which such a claim could sensibly be made hereafter; and

(b) if it were made, it would necessarily have to take into account costs thrown away on any party/party taxation pursuant to the order I propose to make at this point in time.

12 I do not accept that an order should be made for an advance of costs to be taxed hereafter. The costs claimed are very substantial and no proper basis has been advanced for disentitling the defendant from any investigation into them prior to payment in respect of them.

13 Accordingly, I propose to order that the defendant pay the plaintiffs' costs (on a party/party basis) of and incidental to the hearing of preliminary issues in respect of which I gave judgment on 24 April 2008.

[1] [2008] FCAFC 107.

[2] (1975) 13 SASR 4 at 16.

[3] Discussed in the State of Victoria v The Master Builders Association of Victoria, unreported decision of the Appeal Division of the Supreme Court of Victoria, 15 December 1994. Cited with approval by Tadgell J at p.5 and Eames J at p.7.