Yalda v Mshref

Supreme Court of NSW|2021-06-02|Before: McColl JA, As Beazley JA

Judgment

HER HONOUR: On 2 June 2021, I delivered judgment in Yalda v Mshref [2021] NSWSC 624. I made an order accordance with s 41 of the Local Court Act 2007 (NSW), that the amount of damages awarded in the second proceedings be varied from $20,597.93 to $20,000. Otherwise the appeal is dismissed. I affirmed the order for costs made by her Honour Magistrate Swain ("the Magistrate") on 4 August 2020 and reserved the question of costs in relation to the appeal.
On 2 July 2021, orders were made that Ms Yalda provide short written submissions on costs by 12 July 2021 and that Ms Mshref do the same by 19 July 2021. On 15 July 2021 by consent, the parties requested an extension for the submissions to be filed. I have now received those submissions.

Ms Yalda's submissions

Ms Yalda submitted that it appears from Order 1 made in these proceedings that she had been partly successful in her appeal, specifically, she had succeeded on Ground 3.
Ms Yalda submitted that the consequence is that an order for costs should be made in her favour.
She referred to Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 ("Cellarit"). In Cellarit, McColl JA stated at [7]-[14]: "7 Section 98 of the Civil Procedure Act 2005 (NSW) confers a wide discretion on the court with respect to costs. The "general rule" is that court costs follow the event unless the court makes "some other order" pursuant to the discretion conferred by Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1. 8 As Beazley JA explained in Baker v Towle, in most litigation, UCPR r 42.1 "operates in a straightforward way, 'the event' being readily identifiable as a judgment for the plaintiff or the defendant on the claim. In that sense, 'the event' to which the rule refers is the result of the proceedings, so that the party who succeeds on the claim before the court is awarded costs, unless the court, pursuant to the discretion conferred by r 42.1, makes 'some other order'". 9 Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. 10 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. This recognises the proposition that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case. 11 However there is a tension between that proposition and the proposition that, "[i]f parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take." 12 Further, even where there are multiple issues, 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 the particular issues on which it was successful and those on which it failed. 13 However, a court can mould a costs order to take account of the partial success of the party against whom orders have been made at trial insofar as that party identifies particular issues or groups of issues on which it succeeded at the trial. This requires consideration of whether there were "clearly discrete issues for determination" or, rather, whether "all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter". 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. 14 Where there is a mixed outcome in proceedings, the question of apportionment of costs between issues on which the party who has overall been successful, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory."

Ms Mshref's submissions

Ms Mshref submitted that Ms Yalda should pay her costs on an indemnity basis or alternatively, that Ms Yalda should pay her costs on an ordinary basis.

Indemnity costs

The indemnity costs order was made in the Court below because Ms Mshref had made an offer of compromise in which she had offered to resolve her claim for $15,000 including interest. The Magistrate found this to have been a genuine offer of compromise because it represented a discount of more than 25% of Ms Mshref's claim. Accordingly, her Honour ordered pursuant to UCPR 42.14 that Ms Yalda pay Ms Mshref's costs of the proceeding on an ordinary basis until 27 July 2020 and on an indemnity basis from 28 July 2020.
UCPR 20.26(1) permits a party to make an offer "in any proceedings … to compromise any claim in the proceedings". UCPR 42.14(1) applies where such an offer is made by a plaintiff and Ms Yalda "obtains an order or judgment on the claim no less favourable to Ms Yalda than the terms of the offer". Pursuant to r 42.14(2), where (as here) the offer was made before trial, Ms Yalda is then entitled to "the plaintiff's costs in respect of the claim" on an ordinary basis up to the date on which the offer was made, and on an indemnity basis from the following day.
As emphasised in the previous paragraph, the relevant rules refer to the costs in respect of the claim to which the offer relates, and not the proceedings in which the offer is made. Accordingly, where a UCPR 20.26 offer of compromise is made at first instance in relation to a particular claim, UCPR 42.14 continues to be engaged in appeal proceedings concerning the same claim: Berrigan Doube Lawyers v Millar Eagger Pty Ltd [2016] NSWSC 235 at [76] (Beech-Jones J); South Sydney Council v Walsh (No 2) [2003] NSWCA 111 at [12]-[15] (Ipp JA; Foster AJA and Bell J agreeing).
It follows that UCPR 42.14 continues to be engaged in relation to this appeal. Notwithstanding the reduction in the judgment amount of 3% on appeal, it remains the case that Ms Mshref has obtained a judgment on the claim no less favourable to her than the terms of the offer of compromise. It follows that unless the Court orders otherwise, Ms Mshref is entitled to an order against Ms Mshref for the costs of the appeal, to be assessed on an indemnity basis. There being no reason to order otherwise, the Court should make that order.

Costs on the ordinary basis

Alternatively, Ms Mshref submitted that Ms Yalda should be ordered to pay her costs on an ordinary basis.
The first point to make is that Ms Yalda has not been substantially successful. She sought to have a $20,597.93 judgment against her set aside, and she succeeded only in reducing it by 3%. She remains liable for 97% of the judgment. That cannot, on any view, be described as "substantial success".
In Falcetta v Commissioner of Taxation [2004] FCAFC 194; 56 ATR 265 ("Falcetta"), the appellant succeeded in increasing an allowable deduction from $1,815 to $2,835, out of a total claimed deduction of $9,411.21.4 At [4], the Court held that "The true impression we have of the appeal is that the appellant was unsuccessful. It is therefore appropriate that the appellant pay the costs of the Commissioner of the appeal."
In Guides Australia Inc v McMartin [2006] NSWCA 20; (2006) Aust Torts Reports 81-828, the appellant failed to overturn the decisions in relation to liability or damages, but it succeeded in overturning an order that it indemnify the respondent for costs the respondent was ordered to pay another party. Campbell JA held at [202] that "The appeal has succeeded in part, albeit only as to a minor matter", and accordingly ordered the appellant to pay 95% of the respondent's costs.
In this case, to the extent that Ms Yalda has succeeded, it was in an extremely minor way. The appeal on a whole was unsuccessful. She should thus be ordered to pay Ms Mshref's costs.
There is an additional discretionary reason why Ms Yalda should have her costs. As this Court observed at [58] of the principal judgment "at the hearing in the Local Court and in this Court, the amount in dispute is a modest $20,000. The legal costs of both parties would far outweigh the judgment amount."
It is entirely disproportionate to commence and run to finality an appeal in this Court in relation to a sum just shy of $600. Ms Mshref was successful in the Court below, and Ms Yalda failed in this Court to overturn the judgment against her. The 3% reduction in the judgment sum does not affect that calculus, in circumstances where that amount is vastly outweighed by the costs of the appeal to both parties.
For those reasons, Ms Mshref should have her costs of the appeal.

Conclusion

Costs are discretionary. Ms Yalda succeeded on a discrete minor legal point that had not been raised before the Magistrate. That argument raised on appeal was no inseparable nor sufficiently liked to the disposition of the appeal. These grounds of appeal were very weak. As in Falcetta, the true impression I have is that Ms Yalda was unsuccessful. That being so, in the exercise of my discretion the appropriate order for costs is that Ms Yalda should pay Ms Mshref's costs of the appeal. As to whether or not the costs should be paid on an indemnity basis, in my view as Ms Yalda had a minor success on appeal, costs should be awarded on an ordinary basis. The Court orders that: 1. The plaintiff is to pay the defendant's costs of the appeal on an ordinary basis.

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At a glance

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Judgment (7 paragraphs)

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Cases Cited (9)