Solicitors:
Johnson Winter & Slattery (Plaintiff)
Bartier Perry (First defendant)
NSW Crown Solicitor's Office (Second defendant)
File Number(s): 2016/173505
[2]
Judgment
HIS HONOUR: On 5 December 2016, I ordered that the defendant (the University) be restrained from giving effect to a notice dated 4 April 2016 whereby it purported to terminate an agreement between it and the plaintiff (IHL). Under that agreement, IHL managed (as for many years it had done) the University College known as "International House".
As part of my reasons [1] , I reserved costs and directed a regime for submissions as to costs.
My reasons referred to the University's cross-claim, as did the issues (as stated by the parties) that were set out [2] . Unfortunately, although I dealt with the specific issues raised by the cross-claim (including issues 8 and 9), I made no formal order disposing of the cross-claim.
I should note that the Attorney-General was joined as a defendant. She appeared by Counsel, and (as one would expect) put helpful submissions to the court.
IHL seeks orders dismissing the University's cross-claim, and an order that costs follow the events (namely, that it succeeded both on its claim and on the University's cross-claim). The University asks that I grant declaratory relief to reflect such success as it had had on the cross-claim (because I concluded that the reserves generated over the years by the operation of International House were trust property [3] ). The University also seeks orders that it and IHL should bear their own costs.
The Attorney-General seeks an order that her costs be paid, but made no submission as to which of the other parties should be liable for them. IHL made no specific submission as to the Attorney-General's costs. The University accepted that she should have her costs, and proposed that it and IHL should share them.
As to the declaration sought by the University, IHL contended that the issue as to characterisation of its reserves was dependent on the proposition that the management agreement had been validly terminated. It submitted that, since the management agreement has not been validly terminated, the court's conclusion on that point (reflected in issue 8) was obiter.
The parties' submissions amplified the outlines that I have given. It is not necessary to go into further detail.
[3]
The Attorney-General's costs
The Attorney-General was a necessary party. The submissions put for her were helpful. In my view, she should have her costs. The general rule is that where the Attorney General is a necessary party in a charitable trust case, her or his costs should be paid out of the trust fund. See for example Tantau v MacFarlane [4] .
I see no reason why that general rule should not be applied in the present case.
[4]
The University's cross-claim
It is correct to say, as was submitted for IHL, that as issue 8 was framed, the question of characterisation of IHL's reserves appeared to be contingent on the proposition that the management agreement had been validly terminated. However, the declaration sought by the University's Further Amended Statement of Cross-Claim was not so confined. Nor was it so confined by the manner of the pleading in that document.
Were I to make an order dismissing the University's cross-claim, the effect would be to preclude the University from claiming the same relief in respect of the same course of action in any subsequent proceedings, because (by hypothesis) there would be an order of dismissal following a hearing on the merits. That is the effect of s 91(2) of the Civil Procedure Act 2005 (NSW), read in conjunction with the definition of "plaintiff" in s 3(1) of that Act. Since I have concluded that the relevant funds are held on trust, it would be quite extraordinary, nonetheless, to make an order that precluded the University from so contending in any future proceedings.
Accordingly, I think, it is appropriate to grant the declaratory relief sought, but otherwise to dismiss the cross-claim.
The fact that the Attorney General's costs are to be paid out of the assets of the trust provides a practical demonstration of the utility of the declaration, although this is not something that either IHL or the University mentioned in their submissions.
[5]
Costs as between IHL and the University
The simple fact is that in this case, IHL and the University each raised a number of issues on which they failed, and some issues on which they succeeded. For example, although IHL succeeded in persuading me that the University's notice of termination was void and of no effect, it did so "on a narrow basis" [5] . The hearing took three days. Although it was run efficiently and with a focus on the issues raised by the pleadings, the simple fact is that three days were needed because of the multiplicity of those issues.
As s 98(1) of the Civil Procedure Act makes clear, costs are at large (subject to that Act and to the Uniform Civil Procedure Rules 2005 (NSW)). UCPR r 42.1 provides a general guideline to the exercise of the discretion: costs should follow the event unless the court otherwise orders. In this case, there are two clear events: IHL's success in obtaining declaratory relief as to the notice of termination, and the University's success in obtaining declaratory relief as to the characterisation of IHL's reserves. A simplistic application of r 42.1 might suggest that the University should pay IHL's costs of the claim, and that IHL should pay the University's costs of the cross-claim.
The ultimate aim of the discretion confirmed by s 98(1) (I say "confirmed", because clearly the court has inherent power to deal with the costs of proceedings conducted in it) is to do two things:
1. to compensate the successful party for at least some of the expense that it has had to incur in vindicating its rights; and
2. thus, and in so far as costs can ever do it, to seek to achieve some further measure of justice as between the parties.
In my view, a simplistic or mechanistic comparison of outcomes is not always (although in many cases it may be) a proper indicator of how the interests of justice should be reflected in costs orders. There will be many cases where some more detailed understanding of the issues is necessary before an appropriate costs order can be fashioned.
I am not to be taken as saying that it is always desirable to undertake an issue by issue analysis of the issues in any litigious proceeding, and to seek to fashion a costs order that gives effect to that analysis. On the contrary, I think (and in any event, I accept) that the general indication given by r 42.1 should be applied except where the circumstances of the individual case suggests that it would be relevantly unjust to do so.
In the present case, the relevant considerations, as between IHL and the University, seem to me to be these:
1. each party enjoyed a limited measure of success;
2. each party opposed resolutely each of the issues advanced by the other; and
3. each party was put to expense in resisting issues on which, ultimately, it succeeded.
In those circumstances, I conclude that that appropriate costs order is that each of IHL and the University should pay its own costs of IHL's claim and the University's cross-claim. Such an order, in my view, achieves, admittedly on a broad-brush basis, practical costs justice between the parties, measuring both their success and failure in terms of "events" and their success and failure on the various issues that were argued so vigorously.
There are two further points. The first is that if, for any reason, it were inappropriate to order that the Attorney-General's costs be paid out of the trust's assets, I would order them to be paid by IHL, and order the University to indemnify IHL for one half of the costs so paid. The second point is that in my view, neither IHL nor the University ought to resort to the assets of the trust for the purpose of paying any costs related to these proceedings, at least without the prior leave of a judge of the court. Accordingly, I shall reserve liberty to apply for that purpose (although I do not want it to be thought that I am encouraging any such application).
[6]
Orders
I make the following orders:
1. Declare that the reserves of money that the cross-defendant has accumulated during its time as manager of International House and holds in its own name, which reserves have been derived from the operation of International House, form part of the assets of a trust ("the Trust") of which the cross-claimant is the trustee.
2. Order that the further amended statement of cross-claim be dismissed.
3. Order that the Attorney-General's costs of the proceeding be paid out of the assets of the Trust.
4. Make no further order as to the costs of the proceedings, including the cross-claim.
5. Order that, without the prior leave of the court, neither the plaintiff nor the defendant are to resort to the funds of the Trust for the purpose of paying or recouping their costs incurred in connection with the proceedings.
6. Reserve liberty to apply in respect of order 5.
[7]
Endnotes
[2016] NSWSC 1709.
See [3(ii)], [5].
See my earlier reasons at [130].
[2010] NSWSC 224 at [169].
See my earlier reasons at [138].
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Decision last updated: 31 March 2017
Parties
Applicant/Plaintiff:
University of New South Wales International House Ltd