Workplace Safety Australia Pty Limited v Simple OHS Solution Pty Limited

Judgment 1REIN J: On 11 December, I handed down my reasons for concluding in favour of Simple that it was entitled to judgment in its favour on WSA's claim against it and to judgment in its favour for approximately $208K on its cross-claim against WSA. 2There has been an amendment today to the orders made to reflect the fact that judgment should also have been in favour of Ms Bottrell, the second defendant, and that her cross-claim should be dismissed, the entitlement to relief being that of Simple. 3Simple and Ms Bottrell seek an order that WSA pay its costs of the proceedings on the usual basis. WSA resists that order and seeks an order that WSA pay only 50% of Simple's and Ms Bottrell's costs. 4To understand the issues, it is necessary to have regard to the reasons in my judgment handed down last week (Workplace Safety Australia Pty Limited v Simple OHS Solution Pty Limited [2013] NSWSC 1936) and I will use the abbreviations used in that judgment. WSA sued Simple for $101,890, being the outstanding instalments under the Agreement, and $816,400 as damages for breach of contract but the latter amount was reduced to $46,000 by the time of closing submissions. Simple's claim commenced as one for in excess of $2M and was reduced at the hearing to a claim for approximately $208K. 5Simple succeeded in establishing that the agreement was a franchise agreement and hence caught by section 51AD of the Competition and Consumer Act 2010 (Cth) and the FCC and in resisting WSA's contention that if it was a franchise agreement, Simple was estopped from so contending. 6Simple also succeeded establishing that: (1) a representation was made by WSA that precluded it from relying on a breach of the minimum customer requirement; and (2)that although the next instalment for the customer list was due on 23 March 2012, that failure to pay, as at the 26 March 2013, was not a reason to permit WSA to terminate the agreement without notice 7By reason of my conclusions on the first two points and alternatively, on the next two points, I did not need to determine whether the clause in question was a penalty or whether there had been unconscionable conduct on WSA and Ms Schekeloff's part in relying on the minimum customer clause. 8I received detailed written submissions from WSA as to why there should be a reduction in the costs ordered to be paid by WSA and detailed written submissions in reply from Simple as to why that should not occur. I have heard oral submissions this morning from both Mr Alexis SC for WSA and Mr Ashhurst SC for Simple. 9Simple has not failed on any issue that was left to the court to determine. It did abandon its claim for substantial damages, but so did WSA, and no point is made in relation to that aspect other than the question of the costs of an expert report provided by an accountant. Simple does not seek the costs of that expert report. 10In some ways this case demonstrates the need for legal advisors to be cautious in their approach to damages which are claimed on the assumption that the plaintiff or cross-claimant is successful because to fail to do so can lead to expenditure which is out of all proportion to the "real value" of the case. 11WSA made several points in its written submissions on costs ("WSOC") of 13 December 2013 which I shall summarise: (1)WSA accepts the general rule is that the unsuccessful party should be ordered to pay the successful party's costs. (2)The court has a discretion to: (a)make a proportionate order by which the successful party does not receive any of its costs; and (b)to make on order in favour of the unsuccessful party that the successful party pay some or all of the unsuccessful party's costs. (3)That Simple claimed that the amount of control exerted by WSA was part of the reason for Simple's failure to meet the minimum customer requirement in respect of which Simple presented a significant amount of evidence ("control/ obstruction issue"). (4)That the evidence relating to Simple's control/obstruction claim was not read at the hearing. (5)That Simple amended its further amended cross-claim and dropped: (a)contractual representations relating to Simple's ability to distribute WSA packages; (b)breaches of implied term re the control/obstruction point; (c)misleading and deceptive conduct claim; and (d)the unconscionable conduct claim relating to the requirement to comply with unreasonable conditions imposed by WSA. (6)Much of Simple's evidence was not read. The plaintiff had, in a number of affidavits, responded to the detailed allegations and having been informed of the material which Simple had decided not to read, it did not read that responsive material. (7)Simple had served an expert report from Mr Lavelle an expert accountant which Simple on the first day of the hearing advised it would not read. WSA by the WSOC asserts that it incurred expenses in considering the report in deciding on whether to respond. 12Simple, by its written submissions in reply ("WSIR") responded: (1)The court will hesitate to exercise its power to deprive a successful defendant of its costs or order it to pay the plaintiff's costs on issues on which it has failed. It sites a number of cases, including Cretazzo v Lombardi (1975) 13 SASR 4 at 16 and Paul v Cooke [2012] NSWSC 1203 at [6] where his Honour Justice Brereton said this: The starting point is that the defendant, having been brought to court by the plaintiff and having succeeded, is entitled to his costs. It is for the plaintiff to establish a basis for departing from that rule. A successful defendant who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the plaintiff's costs of them [Hughes v Western Australian Cricket Association (1986) ATPR 40-7489]. This course, whilst open, is one on which the court embarks with hesitancy [Cretazzo v Lombardi (1975) 13 SASR 4, 16; Trade Practices Commission v Nickloss Enterprises Pty Ltd (No 3)(1979) 28 ALR 201; Walkers v Henderson (Australia) NSWCA, 6 July 1994, unreported; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768; Mobile Innovations Ltd v Vodaphone Pacific Ltd [2004] NSWCA 15; and Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1111]. From these cases emerge consistent themes: first, that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues that might be material to the decision in the case; but, secondly, that it may be appropriate to award costs of a separate issue where a clearly definable and severable issue, on which the otherwise successful party failed, has occupied a significant part of the trial. (2)The WSIR draw attention to what was said by Goldberg J on ACCC v Australian Safeway No 3 [2002] FCA 1294 at 55 per Goldberg J, who said: I consider that a court should look more benignly on the question of costs of a respondent who has been compelled to come to court and defend itself on a ground not of its own choosing, than on an applicant who chooses to raise issues on the ground of its choosing. (3)Simple's abandoned claims were not clearly definable and severable and did not by themselves add to the evidence at the hearing. (4)WSA was contending until shortly before closing submissions, that in order to determine whether the agreement was a franchise agreement or not, it was appropriate to examine the course of conduct between the parties after entry into the contract. In its closing written submissions, the day before the last day of the hearing at which oral submissions were made, the plaintiff conceded that subsequent conduct was not relevant in the light of a decision of Rafferty v Madgwicks; Time 2000 Systems (Aust) Pty Ltd v Rafferty (2012) 203 FCR 1, [2012] FCAFC 37 referred to in my reasons for judgment. (5)Simple would not have been deprived of its costs if it had run the abandoned arguments and failed, and it would be against the policy of the Courts to encourage the reduction of issues to deprive Simple of costs because it had abandoned one or more arguments. Simple calls in aid a passage from the judgment of Brereton J in Hexiva Pty Ltd v Lederer (costs) [2006] NSWSC 1259 where his Honour said the following at para 10: Parties and their advisors should not be discouraged from abandoning claims that they ultimately come to view as untenable by the risk of costs outcomes more adverse than they were to persist unsuccessfully in those claims. (6)Simple does not accept that it abandoned claims that were untenable and there is nothing, it says, to indicate that there was anything unreasonable or inappropriate in it having run the arguments that it did up to the first day of the hearing when those claims were abandoned. (7)A significant portion of the evidence of Ms Bottrell and Ms Bently that were not read was relevant to what Ms Bottrell would have done after she had entered into the agreement if there had been a 7-day cooling off period, and if it had in fact, been treated as a franchise agreement. (8) (9)So long as WSA maintained the manner of implementation was relevant, the defendants had to show the level of control until a concession was made by the plaintiff at the close of the case. (10)Evidence that was obtained by Simple from earlier distributors was designed to establish that what Ms Bottrell said she was told by them when she did ring them after the problems arose was in fact what they would have said to her had she spoken to them before entering into the PLA. 13I have referred to some authorities that have been mentioned in Simple's submissions. I would add as an authority to which regard can be had, that of Macquarie International Health Clinic Pty Limited v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 per Hodgson J, with Allsop P and Macfarlan JA agreed, actually citing from an earlier Court of Appeal judgment, namely Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304 at 38. The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this court in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: ● Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported) . ● In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. ● If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue:Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27]. ● Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). ● A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. ● Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279. 14I am not persuaded this is a case in which the Court should exercise its discretion to deprive Simple of some of its costs for the following reasons: (1)Simple has not failed on any issue which it ran at the hearing. Even if it had, the general rule is that which I have set out previously. I should make it clear that Mr Alexis for WSA, indicated he could not point to any issue on which Simple had failed at the hearing. Rather, his focus was on the abandoned claims. (2)Simple abandoned some claims, but the abandoned claims are closely intertwined with the claims which were maintained, and for example, in relation to the franchise agreement, matters said to be unnecessary were also relevant to the question of the degree control pertinent to the franchise which Simple wished to maintain until a concession was made by WSA that events after the entry into the agreement were not relevant. (3)Some of the evidence that Simple did not rely on was because of the further concession made by WSA that Simple and Ms Bottrell would not have entered into the agreement and guarantee had she known that the Agreement was a franchise agreement. (4)Simple put WSA on notice even before WSA commenced proceedings that it contended that the agreement was a franchise agreement, and hence, that the requirements of the Act and the FCC had not been met. That is one of the bases upon which Simple was successful in these proceedings. (5)I accept the approach identified in ACCC v Australian Safeway No 3 [2002] FCA 1294 that a defendant should be treated with more latitude than a plaintiff although I would say not considerably more latitude. (6)It follows from what I have said above, that I am not persuaded that the issues which Simple abandoned were wholly discrete and separable issues and I have noted that they do not seek the cost of the accounting report. (7)I think it would be unfortunate and this, in a sense, is reflected in Brereton J's comments in Hexiva, if a party, on being advised by its lawyers that a particular defence or particular evidence can be safely abandoned or ought to be abandoned, were discouraged from abandonment for fear that it would be interpreted as an admission that the point should never have been run, and hence, had significant cost consequences. (8)Linked to the last point is the need to avoid detailed investigation of issues that were not run in order to determine costs outcomes. That would be inconsistent I think, with the need for regard to be had to sparse judicial resources, and the approach mandated by ss 56 to 59 of the Civil Procedure Act 2005 (NSW). 15It is unfortunate that rather than advancing the ultimately realistic claims figures which were well below the maximum threshold for the District Court, both parties made very large claims that gave the case the appearance of a far more extensive one requiring the retention of silk. 16In my view, the order that will be made is that WSA pay Simple's and Ms Bottrell's costs of the proceedings on the ordinary basis.