COSTS - whether costs should be apportioned - whether interest should be awarded on costs - no issue of principle.
Source
Original judgment source is linked above.
Catchwords
COSTS - whether costs should be apportioned - whether interest should be awarded on costs - no issue of principle.
Judgment (2 paragraphs)
[1]
Judgment
I delivered judgment in this matter on 15 December 2014: see UGL Rail Pty Ltd v Wilkinson Murray Pty Ltd [2014] NSWSC 1959. In that judgment, I concluded that the defendant had given negligent advice and engaged in misleading and deceptive conduct in 2004 and 2007 concerning reverberation control in the tunnels comprising the Epping to Chatswood Rail Link. I also concluded that the plaintiff had relied on the advice given in 2007, but not 2004, in determining the quantity of acoustic panelling that it would install in the tunnels in order to meet the reverberation specification set out in its subcontract for the installation of the railway systems in the tunnels.
The plaintiff contended that, as a result of the failure to comply with the reverberation specification, it became liable to pay damages to the head contractor in respect of that failure. It contended that it acted reasonably in settling that liability by doing work that it was agreed would, among other things, satisfy the plaintiff's obligations in respect of reverberation control. It paid a lump sum to a related company to do that work and claimed that lump sum as its damages from the defendant, even though, as things turned out, the costs of doing the agreed work were substantially less than the amount of the lump sum payment.
I rejected the plaintiff's claim for damages. However, I accepted that the tunnels failed to meet the reverberation specification and that the plaintiff was required to install additional panelling so that they did so. I also held that the additional costs of installing that panelling, together with certain legal and other costs incurred by the plaintiff, were recoverable as damages from the defendant.
Three issues remain. First, the defendant says the plaintiff was only successful on some issues and consequently should only receive a portion of its costs. Second, the defendant seeks a stay of my judgment pending an appeal. Third, the plaintiff seeks interest on its costs.
As to the first issue, Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides:
Subject this Part, if the court makes any order as to costs, the court is to order that the 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.
The "event" in this case was an award of damages in the plaintiff's favour.
The mere fact that there are multiple issues in proceedings, some of which are decided favourably to the unsuccessful party is not a reason for departing from the general principle stated in UCPR r 42.1: see Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [10].
It may be appropriate for the court to apportion costs where a successful party loses on an issue that is clearly dominant or severable: see, eg, Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [15]ff per Hodgson JA. Ultimately, the question is one of fairness in all the circumstances of the case: see the discussion in McLaughlin v Dungowan Manly Pty Limited [2010] NSWSC 306 at [22] per Ward J (as her Honour then was).
In this case, the defendant submits that the plaintiff was unsuccessful in the way that it put its damages claim and that that claim took up a substantial part of the hearing and for that reason it would be appropriate for the court to award the plaintiff one‑third of its costs.
I do not accept that submission. It is true that the plaintiff was unsuccessful in the way in which it put its damages claim and recovered substantially less damages than the amount that it claimed. However, in my opinion, it is not possible to separate out evidence relevant to that claim alone. Even if the plaintiff had only pursued a damages claim in the form that I accepted, it would still have been necessary for the plaintiff to prove what had actually happened and to prove that it acted reasonably in settling the claim against it and to lead evidence from which the court could assess damages. Much of the evidence lead by the plaintiff fell into one of those categories. Some of the evidence led by the plaintiff was not relevant to the claim on which it ultimately succeeded and some of the defendant's cross‑examination of the witnesses would have been unnecessary had the plaintiff not put its damages claim in the way that it did. However, in my opinion, it could not be said that the issue on which the plaintiff lost was dominant or that it was so clearly severable that a separate costs order should be made in respect of it. The evidence relevant to the way in which the plaintiff put its damages claim was so bound up with relevant evidence concerning what actually happened and evidence that was relevant to the way in which I held damages should be calculated, that I do not think that it is appropriate to depart from the usual rule. The plaintiff was successful in the proceedings for a substantial amount. It should have its costs of the proceedings.
As to the second issue, the general principle is that a party is entitled to the fruits of its victory unless the unsuccessful party can demonstrate that sufficient reasons exist for the granting of a stay. Those reasons do not have to be special or exceptional: see, eg, Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 at [17]ff.
In the present case, the defendant has not appealed, although it has filed a notice of intention to appeal. It has filed no evidence setting out the grounds on which it intends to appeal. Nor has it filed any evidence of hardship it would suffer if my judgment took effect immediately. Moreover, there is no evidence to suggest that the plaintiff could not repay the amount of any judgment if the defendant is successful on appeal. It is common ground that this is a subrogated action brought by the plaintiff's insurer against a defendant which itself is insured. Having regard to those matters, I am not satisfied that there is any reason to grant a stay in this case.
The defendant submits that it would at least be appropriate to grant a stay in respect of any costs order. It submits that if both the plaintiff and the defendant pursue their appeals there are a number of possible outcomes that could affect the costs order that is ultimately made and that consequently the costs of assessment now may prove to be wasted. Two points, however, may be made about that submission. First, as things stand, it is still not clear whether either the plaintiff or defendant will appeal. Secondly, and more importantly, the defendant's submission simply amounts to a submission that a costs order should be stayed because the outcome on appeal may be different, with the result that costs incurred in assessing costs will be wasted. However, that is true of any appeal. It is not a sufficient reason for depriving the plaintiff of the benefits of the costs order it has obtained.
As to the third issue, it is generally accepted that in long running commercial cases where the parties have paid costs as and when they are incurred that it is appropriate to award interest on costs. The purpose of such an order is to compensate a party having the benefit of a costs order for being out of pocket in respect of the relevant costs it has paid: Lahoud v Lahoud [2006] NSWSC 126 at [82]; Gilfillan v Australian Securities and Investments Commission (No 2) (2013) 94 ACSR 543 at [33].
The defendant does not dispute that general principle. However, it submits that there was excessive delay in these proceedings caused by the plaintiff and that, as a consequence, the court should limit the period for which interest runs. The defendant submits that that is particularly the case in respect of costs incurred before the proceedings were commenced.
I am not satisfied that the delays in this case have been so long that the plaintiff should be deprived of an award of interest on costs which is essentially compensatory in nature. I accept the plaintiff's submission that the case, particularly the technical aspects of the case, were complicated and that the delay, at least in part, can be attributed to those complexities and the fact that the defendant chose to contest the case on all possible issues. There is a question of the extent to which costs incurred before the proceedings were commenced are recoverable. However, to the extent that they are, I do not see why the plaintiff should not be entitled to interest on those costs to compensate it for the delay in their payment.
I accept the plaintiff's submission that the appropriate order for interest was the one adopted by the Court of Appeal in Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 at [9].
On that basis, the orders of the court are:
1. The defendant to pay the plaintiff's costs assessed on the ordinary basis;
2. In this order:
X equals the total amount of costs and disbursements paid or liable to be paid to the plaintiff's legal advisers in connection with these proceedings;
Y equals the total amount of costs and disbursements allowed on assessment to the plaintiff in connection with these proceedings; and
The Allowed Percentage equals ((Y/X) x 100)%
Defendant to pay to the plaintiff interest on costs and disbursements, at the rates set out in section 36.7 of the Uniform Civil Procedure Rules, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to its legal advisers by or on behalf of the plaintiff, from the date of payment of each such amount until the first to occur of:
1. such time as the defendant has paid the costs due to the plaintiff under order 1 above;
2. any further order relating to interest on costs in these proceedings.
1. The defendant's application for a stay be dismissed.
[2]
Amendments
27 March 2015 - Amended paragraph 1 to include citation for 15 December 2014 judgment
16 October 2015 - Amended order 2 at paragraph 17 by deleting the words "Schedule 5 to" and replacing them with "section 36.7 of"
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Decision last updated: 16 October 2015