Tipto Pty Ltd v Yuen

Judgment

1. I gave judgment in this matter on 7 August 2015: see Tipto Pty Ltd v Yuen [2015] NSWSC 1086.
2. I dismissed the plaintiffs' claim and ordered the plaintiffs to pay the costs of the defendants, Mr Yuen and his company, which I called CoWealth Partners in the judgment.
3. Because of particular features of the proceedings, I made directions that allowed the parties to make submissions concerning the basis upon which the costs payable by the plaintiffs should be assessed.
4. The defendants delivered written submissions dated 21 August 2015, and the plaintiffs responded on 4 September 2015.
5. This judgment deals with the basis upon which the plaintiffs should be ordered to pay the defendants' costs.

Legal principles

1. The defendants invited me to accept the following statement of the legal principles applicable to the determination of the costs of proceedings given by Ward J (as her Honour then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816, and I gratefully do so. The reversal of her Honour's decision on appeal is irrelevant to the validity of her statement of principle: see Nu Line Construction Group Pty Ltd v Fowler (No 2) [2014] NSWCA 188. I note the observation made by Basten JA, with whom Barrett JA and Young AJA agreed, at [20], about the terms of the costs order that Ward J made. I will return to this issue below. Her Honour said: [5] The applicable legal principles when determining the costs of contested proceedings may be briefly stated and are not in dispute. [6] The power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is (subject to the Rules of Court and to statute) discretionary and the discretion is recognised to be a very wide one (Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; (1998) 152 ALR 83; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322). The discretion must be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case). [7] The overriding statutory context in which this discretion falls to be exercised is that for which provision is made in the Civil Procedure Act, including the statutory mandate for the just, quick and cheap resolution of the real issues in dispute imposed by s 56 of that Act (that being part of the statutory regime on which the defendants rely as the second basis for their claim for indemnity costs). [8] As noted earlier, Nu Line Construction accepts that the general rule (for which provision is made in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW)) is that costs follow the event. In turn, it is accepted by the defendants that costs orders are compensatory in nature (to reflect the vindication of the successful claim or defence thereof) not punitive (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45; Ohn v Walton (1995) 36 NSWLR 77). [9] The rationale for the principles applied in relation to Calderbank offers was outlined in Commonwealth v Gretton [2008] NSWCA 117 by Beazley JA, her Honour noting (at [41]) that the public policy considerations underpinning the making of favourable costs orders where a Calderbank offer has been made (and not accepted) are the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants. [10] The Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 recently reiterated the public policy objectives of special costs orders in the context of offers of compromise. Basten JA (with whom McColl and Campbell JJA agreed) referred at [6] to the objects underlying the formal offer of compromise procedures under the then court rules that were identified in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 as including: 1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line "will be revealed to the court; 2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation. [11] The onus is on the party seeking to rely on a Calderbank offer (in this case, the defendants) to satisfy the court that it should exercise the costs discretion in its favour (Evans Shire Council v Richardson (No 2) [2006] NSWCA 61). An indemnity costs order will not automatically follow from the fact that a genuine offer of compromise more favourable than the final judgment was made nor is there any presumption to that effect (Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790; Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd [2001] NSWCA 461). What must be considered is the reasonableness of the offeree's rejection or non-acceptance of the offer, having regard to the relevant circumstances at the time that the offer fell to be considered (i.e., here, as at September 2006) (citing MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd [1996] 70 FCR 236 per Lindgren J). The question is whether, in all the circumstances, the failure to accept the offer "warrants departure from the ordinary rule as to costs" (SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 per Giles JA at [37]). [12] Counsel for the defendants (Mr Stitt) submits that, insofar as the Court is to have regard to the particular circumstances of the case, this includes the evidence advanced, the conduct of the parties and the ultimate result (referring to Knight v Clifton [1971] Ch 700; Hally v Dennis (1955) 95 CLR 661 at 664) and that relevant conduct of the parties to be taken into account may include not only conduct in the course of the proceedings (Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137) but also conduct leading up to commencement of the proceedings (Peters v Peters (1907) 7 SR (NSW) 398 at 399). [13] Save where there is a special costs order by reference to the procedure provided for under the Rules or in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 ; 3 WLR 586, it has been said that a court should depart from the general rule (and award indemnity costs only where the conduct of the party against whom the order is sought is "plainly unreasonable" (Sydney City Council v Geftlick [2006] NSWCA 280; Dunstan v Rickwood (No 2) [2007] NSWCA 266). In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA (at [57]) said that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs. [14] In that regard, it remains to be seen whether the exhortation in the above cases as to the category of case in which conduct by an unsuccessful plaintiff would warrant an indemnity costs order is to be reconsidered having regard to the regime now in place in relation to the conduct of litigation in this court and, in particular, the recognition in s 56(5) of the Civil Procedure Act that non-compliance with the statutory objectives provided for in that legislation may be taken into account in the exercise of a discretion as to costs. (In a different context, Hammerschlag J in Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455 considered the potential import of the statutory case management objectives on tests stated in earlier authorities.)