Wollongong Coal Ltd v Gujarat NRE India Pty Ltd

Costs in this Court

1. The parties are correct to proceed on the basis that there was not a single "event" (namely, the appeal being allowed) for the purposes of the default position that costs follow the event in UCPR r 42.1, and that some other order should be made. However, at that point, the parties' positions diverged.
2. WLC's submissions in chief as to the costs of the appeal were brief. It submitted that the bulk of hearing time and written submission was devoted to the indemnity claim (stating that 49 of the 66 pages of transcript and 34 of the 51 pages of written submissions related to that claim), as well as the bulk of the paragraphs in this Court's judgment. WLC added that the Indemnity Claim was considerably larger in terms of dollars than the Debt Claim. However, in relation to the cross-appeal and notice of contention, WLC submitted that it was appropriate that costs follow the event, noting that their subject matter related solely to the Indemnity Claim.
3. GNI submitted that there were two issues for determination in this Court, that WLC succeeded on one and that GNI succeeded on the other, that both were legally and factually distinct and indeed that "[t]hey were, in essence, two separate appeals, notwithstanding they were heard together." GNI submitted that the grounds of appeal were severable between the two claims and that submissions were structured in the same demarcated fashion. Accepting that the process of apportionment was an impressionistic rather than a mathematical one, GNI submitted that the correct cost order was that each party should bear its own costs. GNI submitted that neither the indemnity claim nor the debt claim "could be said to have dominated the appeal over the other", while an analysis based on the number of pages of transcript or written submissions was crude such that "it cannot be said, impressionistically, that the indemnity claim took such ascendancy so as to warrant GNI paying a substantial proportion of WLC's costs of the appeal". GNI submitted that the difference in monetary value of the claims was not significant, because that would be to marginalise the significant work and attention devoted to both issues. The submission concluded: "In truth, both were discrete and independent claims. Both were subject to significant analysis. The fact that both claims were heard in a single appeal should not distract from the true analysis that these two claims represented, in effect, two separate appeals, with each party winning and losing one of the appeals. That should be the governing impression in relation to the determination of the costs of the appeal."
4. GNI responded to WLC's submission as to apportionment by reference to the underlying rationale of the approach adopted by courts. By reference to the general rule that "costs follow the event", GNI submitted: "The meaning of that expression was explained by McPherson JA in Interchase Corporation Ltd v ACN 010 087 573 [2003] 1 Qd R 26 at [83], where his Honour stated (with reference to Reid Hewitt & Co v Joseph [1918] AC 717 at 744) that the words were to be read 'distributively' such that 'where there were two or more issues or questions in the action, each of them was, or gave rise to, an 'event' for which the costs were to be determined separately'. This dictum has been approved on subsequent occasions: see, e.g. Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 at [13] and [16] per the court; Alborn v Stephens [2010] QCA 58 at [8] per the court; Queensland Building Services Authority v JM Kelly (Project Builders) Pty Ltd [2013] QCA 336 at [3] per the court. In the present case, the application of that rule should result in GNI being awarded the costs of the Debt Claim, with WLC awarded the costs of the Indemnity Claim (see RS at [3(a)]). That would then result in a protracted assessment process. It is more efficient, and fairer, for the court simply to net-off those orders, which it is entitled to do (see Day v Humphrey [2018] QCA 321 at [13] per the court). Such an assessment will, undoubtedly, be 'rough and ready' (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]), and that is entirely permissible."
5. GNI also submitted in reply that consideration of the percentage reduction in WLC's judgment debt was a distraction. The occasion for the exercise was to apportion the costs of the two issues on the appeal, and the value of each claim was not necessarily related to the costs incurred.
6. WLC submitted that in reality the Debt Claim took on a subsidiary status to the Indemnity claim. It maintained that costs should follow the event as to the cross-appeal and the notice of contention, on the basis that "there can be no doubt that WLC was successful on the cross appeal and notice of contention." It added that: "The notion that an appellant that succeeds in reducing its damages liability by over $15 million on appeal should not be awarded any costs is instinctively unattractive."
7. WLC submitted that whether or not the costs were attributable to the cross-appeal and notice of contention was beside the point, that being a matter for the assessor.

Consideration

1. We think that aspects of WLC's submissions are incorrect in principle.
2. First, we agree with GNI that WLC's emphasis on the monetary outcome (a judgment against it of some $8m as opposed to some $23m) carries little weight. The costs incurred by WLC which will be the subject of a partial indemnity by the order as to costs were not incurred by reference to dollar amounts in the judgment. Putting to one side the cross-appeal and notice of contention, they were incurred in relation to the grounds of appeal, which it is common ground are broken into two relatively discrete and severable issues.
3. Another way of testing this point is to consider the reverse position, had the Indemnity Claim been worth $8 million and the Debt Claim worth $15 million. There is no reason to doubt that the costs incurred in this Court on the various grounds of appeal would have been substantially the same.
4. Secondly, in relation to the costs of the cross-appeal and notice of contention, there is an inconsistency in WLC's submissions. On the one hand, WLC seeks an order that it be paid 75% of its costs of the appeal, representing its success on the indemnity issue and its failure on the debt issue. On the other hand, WLC seeks an order that it be paid the entirety of its costs of the cross-appeal and notice of contention.
5. That combination of orders is apt to give rise to precisely the sort of arid controversy which a proportional apportionment is designed to avoid. The orders sought by WLC would, if made, require attention to be given to whether any particular item of cost was attributable wholly or in part to the cross-appeal or the notice of contention. WLC would only be entitled to recover 75% of its assessable costs of items that were not attributable to the cross-appeal or notice of contention. However, if items were wholly attributable to the cross-appeal or the notice of contention, WLC would be entitled to all of its assessable costs. It is probable, although we express no concluded view for it would turn on the precise formulation of the orders, that an intermediate percentage would be recoverable for items which were attributable to both the appeal and the notice of contention.
6. The reason for spelling out that complexity is that there is no sound reason to adopt a broad-brush apportionment approach for the costs of the appeal insofar as they are directed to both issues (indemnity and debt) but not to extend that approach to the relatively minor costs attributable in whole or part to the cross-appeal and notice of contention, where those costs are apt to overlap. Contrary to WLC's submissions, it is not to the point that the cross-appeal and notice of contention went only to the Indemnity Claim. And also contrary to WLC's submissions, this is not a matter for a costs assessor. It goes directly to the reason for making an order involving the payment of a percentage of the entirety of a party's costs in the first place.
7. We agree with the parties that an apportionment is appropriate. We do not accept that the cross-appeal and notice of contention should be treated separately. That would undermine the purpose of the apportionment. Rather, GNI's abandonment of the cross-appeal and notice of contention, and the fact that these were relatively minor contributors to WLC's costs, are to be taken into account in the apportionment.
8. WLC's submission that it should be paid 75% of its costs is too high. It is to be firmly borne in mind that the application of the default rule that costs follow the event as explained by McPherson JA in Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26 would have GNI paying all of WLC's costs of the indemnity issue and WLC paying all of GNI's costs of the debt issue. On no view could an overall order that GNI pay 75% of the entirety of WLC's costs be a reasonable approximation of the application of the default rule.
9. That said, we do not accept GNI's submission that the two issues should be treated as equivalents, one cancelling the other out. The Indemnity Claim was considerably more complex legally, reflected in the parties' oral and written submissions and the Court's judgment, and our impression is that WLC would have incurred significantly more costs on that claim than on the Debt Claim, notwithstanding that the latter involved a larger factual compass.
10. Adopting an appropriate broad brush approach, the Indemnity Claim was apt to contribute significantly more to WLC's total costs than the Debt Claim, and allowing for WLC's success on the cross-appeal and notice of contention, we think that GNI should pay half of WLC's costs in this Court. Out of an abundance of caution, we note that the effect of that order when considered together with an existing order that the costs of and incidental to the hearing on 8 November 2018 of a stay application be costs of the appeal is that GNI should also pay half of WLC's costs of that application.

Costs of the trial

1. The parties' costs of the trial must be very significantly more than their costs of the appeal. Their submissions concerning costs of the trial were more complex.
2. WLC sought an order that it pay 50% of GNI's costs at first instance on and after 21 May 2015, but that GNI pay its costs up to 20 May 2015. The significance of 21 May 2015 is that it was the date on which GNI filed its Further Amended Statement of Claim, which WLC contends was the first expression of the claim in debt (previously GNI's pleading had been restricted to the indemnity claim).
3. WLC advanced what it described as a table of "quantitative values" designed to support its contention that the indemnity claim was of greater prominence in the Court below. WLC identified the monetary value of each claim, the number of paragraphs in each party's closing submissions, the number of paragraphs in the primary judgment, and the number of documents in the Court Book, associated with each of the indemnity claim and debt claim, and in all cases save for the number of paragraphs in WLC's closing submissions, the indemnity claim was of greater value or occupied a larger number of paragraphs. It submitted that based on those measures, there would be a proportionate split of around 60/40 in favour of WLC. However, WLC accepted that it lost on the issue of the "fabricated sub-underwriting agreement", and on that basis contended that an order that GNI be awarded 50% of its costs (for the period after 21 May 2015) would achieve a fair outcome.
4. GNI submitted that although the indemnity claim received greater attention in oral submissions on appeal, this was not true at first instance, where WLC sought to defend the debt claim on the basis of numerous defences (including equitable set-off) and including on the basis that the sub-underwriting agreement had been fabricated. GNI relied upon what the primary judge had said at [23] of his judgment on costs that the allegation of fabrication "gave rise to the most significant forensic issue in the proceedings": Gujarat NRE India Pty Ltd v Wollongong Coal Ltd (No 2) [2018] NSWSC 1622. In the same judgment on costs, the primary judge said that he was "satisfied that proportionately the defence of the indemnity claim occupied a relatively minor part of the subsequent hearing". GNI submitted that the different way in which the trial had been conducted, including the greater focus on the debt claim (not withstanding its lesser value) was more accurately reflected by WLC being ordered to pay 65% of GNI's costs, which percentage took into account the fact that the debt claim was only raised pursuant to its amended pleading. GNI while accepting that the debt claim was first raised in the proceedings on 21 May 2015, disagreed that none of the work undertaken earlier had no relevance or benefit to that claim.
5. GNI submitted that at trial, unlike on appeal, there was an overlap of factual matters between the two claims, and it contended that WLC's approach was overly mathematical, contrary to the impressionistic approach advocated for by the authorities. GNI submitted by way of fallback that if the Court were unable to decide upon an appropriate order as to costs in respect of the proceeding below, the matter should be remitted to the primary judge for determination. It added that: "This is particularly apposite in light of the impressionistic matters arising from the way in which the trial was conducted and the relative resources (evidence, submissions and time in court) devoted to each of the two issues, about which the learned trial judge is best to adjudicate."
6. In its written submissions in reply, WLC disputed many of the factual assertions made by GNI, pointed to the array of arguments advanced by GNI in relation to the indemnity claim that failed and also opposed the alternative course of remitting the matter to the primary judge. It asserted (without evidence or any attempt at calculation) that the difference between the parties' competing positions of 15% might lead to the result that the cost occasioned by the remitter could exceed its subject matter.
7. GNI, in its submissions in reply, observed that the value of competing claims says nothing about the costs incurred in relation to them, adding that "[t]hat metric is an uninformative guide to the assessment of how cost should be apportioned", while the quantitative metrics based on number of paragraphs were said to be misleading, in part because of the way in which paragraphs with multiple subparagraphs were counted, and in part because the number of documents were silent as to their size, their centrality or the time spent in cross-examination or submissions on them. It maintained that an appropriate rough and ready assessment of an apportionment of cost was 65%, stating that: "It reflects a significant time devoted to the debt claim at trial (on which WLC lost), but also takes into account GNI's failure on the indemnity claim and the time at which the debt claim first arose (which, whilst 10 months after the commencement of the proceedings, was still 2 to 3 years before the final hearing in the matter)".

Consideration

1. If it were possible fairly to re-exercise the discretion as to costs at first instance, then this Court should and would do so. However, we are conscious that the difference between 50% and 65% of GNI's costs of an 11 day trial which stretched over some 16 months with complex questions of fact and law is still apt to be a large amount - well illustrated by the fact that the parties' submissions at first instance exceed 300 pages. On the materials available to this Court, we cannot determine material aspects of the parties' submissions.
2. First we do not have the primary materials. The blue books in this Court occupy two folders. According to their index, the court book at trial was 9 volumes, the large majority of which was not included in the appeal books. Likewise, the red book includes only the form of the pleadings that went to trial. This Court has the Third Further Amended Statement of Claim, but none of its predecessors. It seems to be accepted that the Debt Issue was first pleaded in the Further Amended Statement of Claim, but it is quite impossible to resolve the dispute between the parties as to whether on the earlier versions of the pleadings work would have been done referable to the Debt Issue.
3. Secondly, we agree with GNI's submission that mere length in number of paragraphs is a poor indicator of the extent to which one issue dominated others at trial. It is clear from the judgment of the primary judge on costs that his Honour took an appropriately qualitative approach.
4. Thirdly, the issues at trial were much more numerous than on appeal. It is very difficult for this Court to evaluate the contribution of issues which have not been addressed substantively in this Court to GNI's costs.
5. Fourthly, we do not accept WLC's assertion that remitter would lead to disproportionate incurring of further costs. There is no reason why the detailed submissions which have been exchanged should not be deployed before a judge in the Equity Division. It would seem that the additional costs occasioned by remitting this issue would be small. Whether or not the judge wishes to hear from the parties further is, of course, a matter for the judge hearing the remitted application.
6. For those reasons, the issue as to the costs at first instance will be remitted for determination by a judge in the Equity Division. There is at least one minor aspect of the costs at first instance which appears to be agreed (namely, the costs of WLC's notice of motion filed on 12 October 2018) but it is as well to leave all aspects of those costs to the judge to whom the matter is remitted.

Orders

1. For those reasons, WLC should receive the benefit of an order that GNI pay 50% of its costs in this Court, and the question of costs at first instance will be remitted to the Equity Division. The parties are agreed as to the substantive orders giving effect to the outcome of the appeal.
2. The costs of the application for orders and costs are separate from the foregoing. It is reasonable to divide the costs incurred by the parties equally between submissions as to the re-exercise of the discretion as to costs on the appeal and costs at first instance. WLC has achieved a measure of success in its submissions as to costs in this Court, which would fairly be reflected in GNI being ordered to pay one half of WLC's costs of WLC's submissions as to costs in this Court, which corresponds to one quarter of WLC's costs of submissions as to costs and orders. The parties' costs of preparing submissions as to the re-exercise of the costs discretion at trial must be included in the remitter to the Equity Division.
3. The Court makes the following orders:
4. Set aside order 1 made on 23 October 2018 and orders 1 and 4 made on 26 October 2018.
5. In lieu thereof, enter judgment for the plaintiff against the defendant in the sum of $8,670,215.34, such judgment to take effect from 23 October 2018.
6. The appellant cause its solicitors to release and pay forthwith to the solicitors for the respondent the sum of $8,670,215.34, and all interest that has accrued thereon, that was deposited with those solicitors on 5 December 2018 pursuant to order 1 made on 8 November 2018.
7. The respondent to pay 50% of the appellant's costs in this Court, exclusive of the application for orders and costs.
8. The respondent to pay 25% of the appellant's costs of the application for orders and costs.
9. The question of the appropriate order as to costs at first instance be remitted to the Equity Division, noting that the remitter includes (a) the costs of notice of motion filed on 12 October 2018 and (b) one half of the costs of WLC and one half of the costs of GNI of the application for orders and costs.

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