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Federal Court of Australia - Full Court |
Last Updated: 9 February 2010
Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5
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Citation:
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Appeal from:
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Haviv Holdings Pty Limited v Howards Storage World Pty Limited (No 2)
[2009] FCA 652
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Parties:
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File number:
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NSD 665 of 2009
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Judges:
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GRAY, LINDGREN AND EDMONDS JJ
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Date of judgment:
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Catchwords:
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COSTS – multiple claims – where
applicant succeeded on only one claim – whether costs should follow the
event –
whether it was appropriate to apply the "rule of thumb" to
apportion costs between the parties – the award of costs is in the
discretion of the Court – no error has been identified in the manner in
which costs were awarded.
Held: the appeal be dismissed. |
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Legislation:
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Cases cited:
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Currabubula Holdings Pty Ltd v State Bank of
New South Wales [2000] NSWSC 232 considered
Dansk Rekylriffel Syndikat Aktieselskab v Snell [1908] 2 Ch 127 considered Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 referred to Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373 referred to House v R [1936] HCA 40; (1936) 55 CLR 499 applied Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; (2009) 254 ALR 273 cited Haviv Holdings Pty Limited v Howards Storage World Pty Limited (No 2) [2009] FCA 652 cited Hughes v Western Australia Cricket Association (1986) ATPR 40-748 referred to Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited [2009] HCA 43 cited Korner v H Korner & Co Ltd [1951] Ch 10 considered Milne v Attorney General (Tas) [1956] HCA 48; (1956) 95 CLR 460 referred to Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 considered Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 referred to |
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Place:
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Sydney
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Division:
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GENERAL DIVISION
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Category:
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Catchwords
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Number of paragraphs:
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Solicitor for the Appellants:
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Diamond Conway Lawyers
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Counsel for the Respondents:
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Ms J Baird SC and Mr A Connolly
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Solicitor for the Respondents:
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Aron I Mucsnik
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IN THE FEDERAL COURT OF AUSTRALIA
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AND:
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THE COURT ORDERS THAT:
2. The appellants’ pay the respondents’ costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
The text of entered orders can be located using Federal Law
Search on the Court’s website.
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NEW SOUTH WALES DISTRICT REGISTRY
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GENERAL DIVISION
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NSD 665 of 2009
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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HOWARDS STORAGE WORLD PTY LTD (ACN 094 719 490)
First Appellant PLAZA HOME-IMPORTS PTY LTD (ACN 069 891 201) Second Appellant DIRK SPENCE Third Appellant |
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AND:
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HAVIV HOLDINGS PTY LIMITED (ACN 101 265 730)
First Respondent PAUL AGHION Second Respondent |
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JUDGES:
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GRAY, LINDGREN AND EDMONDS JJ
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DATE:
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8 FEBRUARY 2010
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PLACE:
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SYDNEY
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REASONS FOR JUDGMENT
GRAY J:
The nature and history of the proceeding
1 The question in this appeal is whether the primary judge was in error in making the orders her Honour made in relation to the costs of the proceeding at first instance. The orders were made because of the peculiar circumstances of the parties to the case and the outcome of the proceeding at first instance.
2 There are three appellants, Howards Storage World Pty Limited ("Howards"), Plaza Home-Imports Pty Limited ("Plaza") and Dirk Spence. Howards and Plaza are related corporations. Mr Spence is a director of both. The respondents to the appeal are Haviv Holdings Pty Limited ("Haviv") and Paul Aghion. Mr Aghion is a director of Haviv.
3 In the proceeding at first instance, Haviv and Mr Aghion were the applicants. They sued in respect of a franchise agreement. In the initial negotiations for the franchise agreement, it was contemplated that Plaza would be the franchisor. When the franchise agreement was finalised, Howards was the franchisor. Plaza was responsible for the supply of products to Haviv under the franchise agreement. Mr Spence negotiated the franchise agreement on behalf of Plaza and Howards. Mr Aghion was the negotiator for Haviv.
4 Central to the proceeding at first instance were allegations that there were representations, or there was agreement, to the effect that Haviv would be the exclusive franchisee in an area within a radius of 5 kms around a particular store of Haviv. Subsequently, Howards granted another franchise within this radius. The causes of action on which Haviv and Mr Aghion relied were misleading and deceptive conduct, in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act"), and breach of contract. The claims made in the application were for declarations, injunctions, the payment of specified sums of money and damages, as well as for interest and costs.
5 On 18 March 2009, the primary judge delivered reasons for judgment, dealing with the substance of the case. Those reasons are published as Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; (2009) 254 ALR 273. On that occasion, her Honour adjourned the proceeding for further directions. On 7 May 2009, her Honour made some substantive orders. She granted a declaration that Howards had breached the franchise agreement by granting another franchise on a specified date. She ordered that Howards pay Haviv $591,983 in damages, plus interest. Except for the issue of costs, she dismissed the application otherwise. The effect of these orders, in light of her Honour’s earlier reasons, was that Haviv succeeded only in its claim for breach of contract and only against Howards. Howards, Plaza and Mr Spence all succeeded in resisting the claims of Mr Aghion. Plaza and Mr Spence succeeded in resisting the claims of Haviv against them.
6 The question of costs was then argued. On 17 June 2009, the primary judge delivered judgment on that question and made orders. See Haviv Holdings Pty Limited v Howards Storage World Pty Limited (No 2) [2009] FCA 652. Her Honour made three specific orders as to costs. First, Howards, Plaza and Mr Spence were ordered to pay costs incurred by Haviv and Mr Aghion by reason of the adjournment of the hearing of the proceeding on 30 October 2008. Second, Haviv and Mr Aghion were ordered to pay the costs of Howards, Plaza and Mr Spence in so far as those costs were incurred in relation to two specific claims that had been abandoned by Haviv and Mr Aghion. Third, Haviv and Mr Aghion were also ordered to pay the costs of Plaza and Mr Spence, but only in so far as those costs were incurred solely by reason of the joinder of Plaza and Mr Spence to the proceeding. Such costs were not to include any costs jointly incurred by Howards, Plaza and Mr Spence. Subject to those specific orders, her Honour ordered Howards to pay the costs of the proceeding of both Haviv and Mr Aghion.
7 The power of the Court to award costs in a proceeding is conferred by s 43(1) of the Federal Court of Australia Act 1976 (Cth). Section 43(2) provides expressly that "the award of costs is in the discretion of the Court or Judge." This appeal is therefore from the primary judge’s exercise of that discretion. It is not for this Full Court to ask itself what order it would, or might, have made in respect of costs. The principles on which an appeal from an exercise of discretion is to be dealt with are well understood. They are set out in a passage in the judgment of Dixon, Evatt and McTiernan JJ in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505. That passage has been cited so often that it is unnecessary to set it out in these reasons for judgment.
The issues on appeal
8 The tension in this appeal is between two different ways of approaching the question of costs in the circumstances of the case. The approach for which counsel for Howards, Plaza and Mr Spence contended is to treat the proceeding at first instance as if it were really six separate proceedings. This approach breaks down the proceeding into an action by Haviv against Howards, an action by Haviv against Plaza, an action by Haviv against Mr Spence, an action by Mr Aghion against Howards, an action by Mr Aghion against Plaza and an action by Mr Aghion against Mr Spence. Counsel for Howards, Plaza and Mr Spence then pointed to the fact that only one of these six actions was successful, that of Haviv against Howards. They contended that the ordinary principle, that costs follow the event, should lead to the conclusion that the successful parties should have orders for costs in their favour. They invoked the principles discussed by Einstein J in Currabubula Holdings Pty Ltd v State Bank of New South Wales [2000] NSWSC 232 at [89]- [95], which deal with cases of multiple parties, some successful and others unsuccessful. In particular, they referred to what is called the "rule of thumb", discussed by Einstein J at [95]. As his Honour said, the principle is designed:
to achieve substantial justice in the awarding of costs as between a partially successful plaintiff and variously successful and unsuccessful defendants. The rule operates upon the premise that defendants are proportionately responsible for and liable for the joint costs involved in mounting the defence. Thus, a successful defendant cannot claim from the plaintiff more than a proportionate share of the joint costs of the action in addition to any costs separately referable to that defendant. Conversely, the partially successful plaintiff is prevented from looking to each of the unsuccessful defendants for more than an equal proportionate share of the costs not solely referable to the plaintiff’s case against one or other of the defendants individually, in addition to the costs which are so referable. In this way, the rule of thumb prevents both the unjust enrichment of the partially successful plaintiff or successful defendant and the casting of an unfair burden on the unsuccessful defendants. Where the premise is falsified or the rule does not achieve its intended effect, it finds no application.9 Thus, counsel for Howards, Plaza and Mr Spence claimed that all three of their clients should have proportionate costs orders against Mr Aghion, who had been totally unsuccessful against any of the three. In addition, Plaza and Mr Spence should have costs orders against Haviv, which had been unsuccessful against both of them. With respect to costs as between Haviv and Howards, counsel for Howards, Plaza and Mr Spence contended before the primary judge that there should be no order as to costs, because Haviv had succeeded against Howards only in respect of one of its two main causes of action. The argument was bolstered by reference to the fact that there were two separate main causes of action in each of the actions, and by reference to the fact that the amount of damages awarded to Haviv on the single cause of action on which it succeeded involved a very substantial diminution from the amount of damages claimed in the proceeding.
10 The alternative approach, taken by the primary judge and supported by counsel for Haviv and Mr Aghion in this appeal, was to aggregate the parties and the causes of action, so as to view the contest in the primary proceeding as being essentially one between two entities about a single dispute (save for some subsidiary causes of action that are not of concern in this appeal).
The primary judge’s reasons for judgment
11 In the course of summarising the submissions of the respective parties, the primary judge said at [16] of her reasons for judgment of 17 June 2009:
During the hearing on costs I observed that the practical effect of the respondents’ submissions is that the respondents would obtain orders entitling them to claim all of their costs from one or other of the applicants. In other words, irrespective of the circuitous route by which the outcome was achieved, the respondents were in fact claiming the usual order as to costs in their favour despite the fact that Haviv succeeded in obtaining a substantial award for damages on its claims for breach of the franchise agreement.12 At [18]-[19], her Honour justified the aggregation of the parties by reference to the relationships between them, their representation in the proceeding and their involvement in the transactions the subject of the proceeding. Mr Aghion is a director of Haviv and the two were represented by a single solicitor. Mr Spence is a director of Howards and Plaza, which are related companies, and all three were represented by a single solicitor. Mr Aghion and Mr Spence were the negotiators on behalf of their respective companies and the decision to grant the franchise that constituted the breach of the franchise agreement between Haviv and Howards was made by Mr Spence. At [20]-[21], her Honour justified the aggregation of the causes of action. Haviv’s claim for breach of the franchise agreement was in relation to the exclusivity of Haviv’s territory. The claims of Haviv and Mr Aghion for misleading and deceptive conduct also concerned alleged representations about Haviv’s exclusive territory. The quantum of damage claimed by Haviv against Howards for breach of the franchise agreement was the same as that claimed by Haviv and Mr Aghion against Howards and Plaza for misleading and deceptive conduct. Howards was substituted for Plaza as the franchisor after the negotiations had been completed, because of a restructure of the corporate group of which they were part. In addition, as her Honour pointed out at [22], the claims of Haviv and Mr Aghion against Mr Spence were that he was an accessory in respect of claims against Howards and Plaza under the Trade Practices Act. Further, at [24], her Honour pointed out that, because Howards ultimately admitted breach of the franchise agreement, the reasons for judgment of her Honour given on 18 March 2009 were concerned principally with assessment of damages. Her Honour did not accept all of Haviv’s case on damages. Nor did she accept Howard’s case that Haviv had suffered no loss or minimal loss. Haviv obtained a substantial order for damages.
13 At [29] of her reasons for judgment, the primary judge held that the rule of thumb had no application to the particular case. At [32], her Honour again referred to the necessity "to give weight to the applicants’ success in obtaining a substantial award of damages." Her Honour’s reference to both Haviv and Mr Aghion in this context (even though Mr Aghion had not succeeded in relation to any claim) is justified by the aggregation of parties, to which I have referred above.
14 Her Honour then proceeded at [34] to reject the approach for which Haviv and Mr Aghion advocated at first instance, that costs should follow the event, with the exclusion only of costs relating to the two claims Haviv and Mr Aghion abandoned at the start of the trial. Her Honour said that this approach failed to recognise not only that the two claims had been abandoned at the start of the hearing after Howards, Plaza and Mr Spence had incurred costs of meeting those claims, but "the applicants" succeeded only in the claim for breach of the franchise agreement and failed altogether against Plaza and Mr Spence.
15 At [36]-[37], her Honour dealt in more detail with the aggregation of causes of action. The evidence in respect of damages for the alleged representations about exclusive territory was the same as for the assessment of damages for breach of the franchise agreement, on which "the applicants" succeeded. There was only one set of submissions on the quantum of damage by Haviv and Mr Aghion. The quantum of damage was the most significant issue in terms of evidence and hearing time. The evidence in relation to the alleged exclusive territory representations overlapped substantially with the evidence relating to the breach of the franchise agreement, which Howards ultimately conceded. Evidence of the circumstances in which the franchise agreement was negotiated and executed, and the opening of the new franchise that constituted the breach of the franchise agreement, was relevant to both claims. The evidence relating solely to the exclusive territory representations could not fairly be described as dominant or separable in the context of the proceeding as a whole. As a result, her Honour did not accept that there should be any apportionment of costs on the basis that Haviv and Mr Aghion failed on the exclusive territory representations.
16 At [38], her Honour dealt with the discrete issue of alleged misleading and deceptive conduct in relation to rebates and financial benefits, the subject of paras 3(a) of the orders her Honour made on 17 June 2009. Her Honour reached the conclusion that Howards, Plaza and Mr Spence should be compensated for their successful defence of that claim, as well as the abandoned claims. At [39], her Honour said that Plaza and Mr Spence, having been wholly successful in their defences, should be compensated in respect of costs referable solely to their joinder as parties. Accordingly, her Honour made orders in favour of Haviv and Mr Aghion, subject to the exceptions to which she referred in her reasons for judgment of 17 June 2009.
The appropriateness of the costs orders
17 The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding. In the circumstances of this case, there was ample justification for the primary judge taking the view that aggregation of parties, and of causes of action, was appropriate. The artificiality of the result that would have been achieved if the submissions on behalf of Howards, Plaza and Mr Spence had been adopted, to which her Honour referred in [16] of her reasons for judgment of 17 June 2009, and to which she returned in [32], provided ample justification for the adoption of the aggregation approach. It was that approach that produced substantial justice between the parties, whereas the adoption of the approach advocated by Howards, Plaza and Mr Spence would have produced substantial injustice.
18 Submissions made in the appeal by counsel for Howards, Plaza and Mr
Spence, to the effect that a failure to allow the appeal would
set a very bad
precedent in respect of costs are unpersuasive. The outcome of the argument
about the proper approach to costs is
dictated by the specific circumstances of
the case. To extrapolate that outcome into a principle, and to attempt to apply
it to
other cases, would be to produce error. In the same way, the mechanical
application of the principle that costs follow the event,
or of the principles
expounded in Currabubula, would have produced injustice in the present
case. The primary judge avoided such injustice. Her conclusion should be
upheld.
This appeal should be dismissed with costs.
Associate:
Dated:
3 February 2010
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NEW SOUTH WALES DISTRICT REGISTRY
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GENERAL DIVISION
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NSD 665 of 2009
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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HOWARDS STORAGE WORLD PTY LTD (ACN 094 719 490)
First Appellant PLAZA HOME-IMPORTS PTY LTD (ACN 069 891 201) Second Appellant DIRK SPENCE Third Appellant |
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AND:
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HAVIV HOLDINGS PTY LIMITED (ACN 101 265 730)
First Respondent PAUL AGHION Second Respondent |
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JUDGES:
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GRAY, LINDGREN AND EDMONDS JJ
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DATE:
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8 FEBRUARY 2010
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PLACE:
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SYDNEY
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REASONS FOR JUDGMENT
LINDGREN J
19 I have had the benefit of reading drafts of the reasons for judgment of Gray J and Edmonds J.
20 I agree that the appeal should be dismissed with costs for the reasons given by their Honours, but wish to add the following two observations.
21 First, it is opportune to set out [16] and [17] of the primary Judge’s reasons for judgment which illustrate the problems associated with treating the "rule of thumb" as a rigid rule of universal application:
During the hearing on costs I observed that the practical effect of the respondents’ submissions is that the respondents would obtain orders entitling them to claim all of their costs from one or other of the applicants. In other words, irrespective of the circuitous route by which the outcome was achieved, the respondents were in fact claiming the usual order as to cost in their favour despite the fact that Haviv succeeded in obtaining a substantial award for damages on its claims for breach of the franchise agreement. The respondents did not embrace this description. Nevertheless, I remain unable to adopt any different characterisation of the respondents’ submissions and proposed orders. The effect of the orders sought by the respondents would be for one or the other applicant to pay each of the three respondents one third of the respondents’ total costs whilst leaving the applicants to meet their own costs. By this route, the respondents would be wholly compensated for having defended a proceeding over ten hearing days which culminated in an order that HSW pay Haviv nearly $600,000 by way of damages for HSW’s wrongdoing in breaching the franchise agreement. The injustice of this result confirms two matters. First, the award of costs involves a discretionary, not a mathematical exercise (...). Second, close attention to the circumstances of the individual case, part of which includes an evaluation of the real degrees of success and failure, is required. ...I agree with her Honour.
22 The second matter is this. Her Honour dismissed the proceeding in so far as it was brought by Mr Aghion. The only claim that he made was the Trade Practices Act claim. That claim was pleaded as being made by "the applicants" (the present respondents) and was dismissed in its entirety. Mr Aghion therefore had no success at first instance and the appellants submit that he should have been ordered to pay their costs of resisting his claim against them. For the reasons given by the primary Judge, and by Gray J and Edmonds J, that order should not be made.
23 Arguably, however, her Honour should have made a fifth order as follows:
5 The second applicant [Mr Aghion] is to pay any costs of the respondents [present appellants] as agreed or taxed but only in so far as such costs were incurred solely by reason of the joinder of the second applicant as a party to the proceeding (and for avoidance of doubt, such costs are not to include any costs incurred by the respondents in defending claims made by the first applicant [Haviv]).
24 As can be seen, such an order would be modelled on order 4 that was made by her Honour (set out at [42] of the reasons of Edmonds J).
25 One searches the statement of claim in vain for a particularised claim that Mr Aghion suffered loss or damage that would support an award of damages in his favour as claimed in para 12 of the application. The statement of claim simply alleges that the misleading and deceptive representations were made to "the applicants" and that "the applicants" entered into the Franchise Agreement in reliance on those representations and suffered loss. However, the losses alleged were losses in Haviv’s business.
26 The joinder of Mr Aghion as an applicant was superfluous.
27 In accordance with the principled approach that her Honour took in respect of the unwarranted joinder of Plaza and Mr Spence, arguably Mr Aghion should have been ordered to pay any additional costs incurred by the appellants solely by reason of his joinder.
28 Apparently, however, the inclusion of Mr Aghion as an applicant did not cause the appellants to incur any additional costs, that is to say, any costs additional to those that they would have incurred in defending the Trade Practices Act claim made by Haviv. The appellants did not suggest otherwise. So far as the statement of claim reveals, Mr Aghion was simply the person through whom Haviv believed the pleaded representations and acted in reliance on them.
29 In these circumstances I approach the matter on the basis that the
appellants incurred no costs solely by reason of Mr Aghion’s
having
been included as an applicant and that an order 5 as outlined above would
have no work to do. I am therefore content
to join in the orders proposed by
Gray J and Edmonds J, namely, that the appeal be dismissed and that
the appellants pay
the respondents’ costs of the appeal.
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I certify that the preceding eleven (11) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice
Lindgren.
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Associate:
Dated: 8 February 2010
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IN THE FEDERAL COURT OF AUSTRALIA
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NEW SOUTH WALES DISTRICT REGISTRY
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GENERAL DIVISION
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NSD 665 of 2009
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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HOWARDS STORAGE WORLD PTY LTD (ACN 094 719 490)
First Appellant PLAZA HOME-IMPORTS PTY LTD (ACN 069 891 201) Second Appellant DIRK SPENCE Third Appellant |
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AND:
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HAVIV HOLDINGS PTY LIMITED (ACN 101 265 730)
First Respondent PAUL AGHION Second Respondent |
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JUDGES:
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GRAY, LINDGREN AND EDMONDS JJ
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DATE:
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8 FEBRUARY 2010
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PLACE:
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SYDNEY
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REASONS FOR JUDGMENT
EDMONDS J
30 This is an appeal from a judge of this Court against orders as to costs: Haviv Holdings Pty Limited v Howards Storage World Pty Limited (No 2) [2009] FCA 652 (‘the costs judgment’). There was no appeal from the anterior judgment: Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; (2009) 254 ALR 273 (‘the substantive judgment’).
BACKGROUND TO THE SUBSTANTIVE JUDGMENT
31 The relevant facts are summarised in [2] – [4] of the reasons in the substantive judgment:
[2] Howards Storage World is a specialty retailer of household storage items. The franchise agreement, made on 18 July 2002 between Howards Storage World Pty Ltd (HSW) (as franchisor) and Haviv Holdings Pty Limited (Haviv) (as franchisee), related to a Howards Storage World business in a store within the Westfield shopping centre at Burwood (the Burwood store). Paul Aghion is a director of Haviv and negotiated the franchise agreement on Haviv’s behalf. Plaza Home-Imports Pty Ltd (Plaza) is a company related to HSW, initially proposed to be the franchisor and subsequently responsible for the supply of products to Haviv under the franchise agreement. Dirk Spence is a director of HSW and Plaza. He is responsible for the day-to-day operations of both companies and negotiated the franchise agreement on their behalf. [3] By the franchise agreement HSW granted to Haviv an exclusive franchise territory for a radius of 5 kilometres around the Burwood store. However, in August 2004 HSW entered into another franchise agreement for a Howards Storage World business in a store within the Rhodes shopping centre (the Rhodes store). The Rhodes store, and indeed the whole of the Rhodes shopping centre, is within the exclusive franchise territory HSW granted to Haviv (the Rhodes store being between 4837 and 4843 metres from the Burwood store). Haviv vacated the Burwood store on 17 August 2007 leaving it to HSW to operate. Haviv and HSW each purported to terminate the franchise agreement in early 2008, some three years after the opening of the Rhodes store in late November 2004. [4] Haviv claimed to have suffered loss and damage by reason of HSW’s breach of the franchise agreement (the contract claims). Haviv and Mr Aghion also claimed to have suffered loss and damage by reason of two representations by HSW and Plaza allegedly in breach of the Trade Practices Act 1974 (Cth) concerning: - (i) the true position with respect to Haviv’s exclusive franchise territory, and (ii) the lack of any financial benefit to Plaza for the supply of goods to Haviv (the trade practices claims). Haviv and Mr Aghion claimed further that Mr Spence is liable as an accessory of HSW and Plaza with respect to the trade practices claims.32 The primary judge found that the first appellant (‘HSW’) had breached the contractual promise of an exclusive franchise territory which it gave the first respondent (‘Haviv Holdings’) in the franchise agreement by granting the franchise for, and permitting the operation of, the Rhodes store. Her Honour was satisfied that Haviv Holdings suffered loss caused by HSW’s breach of the franchise agreement. The claims made by both respondents under the Trade Practices Act 1974 (Cth) (‘Trade Practices Act’) against all three appellants were not accepted by her Honour.
THE COSTS JUDGMENT
The Submissions Below
33 Before the primary judge, the respondents submitted that there were no special circumstances justifying the displacement of the ordinary principle that costs follow the event. As for the rejected Trade Practices claims, it was submitted that as these claims were based on the same substratum of facts as the breach of franchise agreement claim, the failure of the claims should not affect the award of costs. The respondents did, however, accept that the two claims abandoned at the hearing (with respect to rebates and GST) should be excluded from any costs order in their favour.
34 The appellants submitted to the primary judge that: (i) Haviv Holdings should pay each of the second and third appellants (‘Plaza’ and ‘Spence’ respectively) one third of the appellants’ total costs; (ii) the second respondent (‘Aghion’) should pay the appellants one third of the appellants’ total costs; and (iii) as between Haviv Holdings and HSW, each party should pay its own costs or HSW should pay one half of Haviv Holdings’ costs. The appellants relied on the ‘rule of thumb’ as described in Currabubula Holdings Pty Ltd v State Bank of New South Wales [2000] NSWSC 232 at [89] – [95]. From the outset, the primary judge observed that the practical effect of the appellants’ submissions was that the appellants would obtain orders entitling them to claim all of their costs from one or other of the respondents: [16]. The appellants were in fact claiming the usual order as to costs in their favour despite the fact that Haviv Holdings succeeded in obtaining a substantial award for damages on its claim for breach of the franchise agreement.
The Primary Judge
35 The relationship between the parties and the causes of action in the present case was outlined in [18] – [24] of her Honour’s reasons:
[18] I do not have any evidence about the arrangements between the parties and their respective solicitors with respect to their joint or individual liability to pay costs (be it their own costs or that of any opposing party). However, I do know the following matters: - (i) Mr Aghion is a director of Haviv and hence the applicants are related in that sense, and were represented by a single solicitor, (ii) HSW and Plaza are related companies forming part of a group of companies which is managed as a group, (iii) Mr Spence is a director of HSW and Plaza, and (iv) hence, HSW, Plaza and Mr Spence are related in that sense, and were also represented by a single solicitor. Nothing I have said is intended to undermine the fact (emphasised by the respondents) that corporations have separate legal identities. Nevertheless, when dealing with a discretionary issue such as costs, it is relevant to consider the relationships between the parties and whether they share a common interest or not. [19] I also know that: - (i) Mr Aghion negotiated the franchise agreement for Haviv, (ii) Mr Spence negotiated the franchise agreement, first, for Plaza and, second, for HSW, after a corporate restructuring of the group, and (iii) Mr Spence decided to grant the franchise agreement for the Rhodes store in breach of the contractual promise that Haviv would enjoy an exclusive franchise territory within a certain area. [20] The principal causes of action in the proceeding may be described as follows: - (i) Haviv claimed damages against HSW for breach of the provisions of the franchise agreement relating to Haviv’s exclusive territory, and (ii) Haviv and Mr Aghion claimed damages from HSW and Plaza for breach of the Trade Practices Act in respect of allegedly misleading and deceptive conduct about Haviv’s exclusive franchise territory. [21] Importantly, from the outset of the hearing (and, indeed, from the evidence as filed) it was clear that the quantum of damage claimed by Haviv against HSW for the breach of the franchise agreement was the same as the quantum claimed by Haviv and Mr Aghion against HSW and Plaza for the allegedly misleading and deceptive representations about Haviv’s exclusive franchise territory. Further, and as disclosed in [2] of my principal reasons, Plaza was initially proposed to be the franchisor under the franchise agreement and thus all negotiations before the restructure of the group of companies of which Plaza and HSW form part involved Mr Spence on behalf of Plaza. The restructure occurred before the franchise agreement was signed with the result that HSW, not Plaza, was the contracting party to the franchise agreement. [22] The subsidiary causes of action in the proceeding were that: - (i) Haviv and Mr Aghion claimed damages from HSW and Plaza for breach of the Trade Practices Act in respect of alleged misleading and deceptive conduct about Plaza’s entitlement to financial benefits from the supply of goods to Haviv under the franchise agreement; these damages, unlike the damages sought under the principal causes of action, were additional damages, and (ii) Haviv and Mr Aghion claimed that Mr Spence was liable as an accessory in respect of all of the claims under the Trade Practices Act. [23] I have characterised the causes of action as "principal’ and "subsidiary" based on my evaluation of the importance of the claims in the context of the overall proceeding, the amount and nature of the evidence relevant to the claims, the time taken in the proceeding to deal with the claims, and the nature of the relief sought. This characterisation, I note, generally accords with the way in which I dealt with the claims in my principal reasons. [24] As HSW ultimately admitted the breach of the franchise agreement, the majority of the principal reasons concerned the many issues arising on the evidence and submissions relating to the assessment of damages (at [6]-[87]). While I did not accept all of Haviv’s case on damages, I also did not accept HSW’s case that Haviv had suffered no or minimal loss. Haviv succeeded in obtaining a substantial order for damages. I dealt with the trade practices claims in [88] - [108] and Mr Spence’s accessorial liability in [109] of the principal reasons. Haviv and Mr Aghion failed on all the trade practices claims.36 At [25] – [29] the primary judge considered the utility and suitability of applying the ‘rule of thumb’ in the circumstances described above. The present case was not an ‘ordinary or straightforward’ case in which to apply the rule of thumb as between successful and unsuccessful respondents to ensure the costs were not unfairly borne. Further, her Honour did not accept that the rule had application to the present case which involved multiple applicants, respondents and claims, both as a matter of principle (for the reasons given by Einstein J in Currabubula) and on the facts of the present case: [28] and [29].
37 Notwithstanding, her Honour recognised that the usual order as to costs, save for the two claims which the respondents abandoned at the start of the proceeding, was also not appropriate: [34]. Such an order would fail to recognise that: (i) the respondents simply abandoned two claims at the start of the hearing (after the appellants incurred costs in meeting those claims); (ii) the respondents succeeded in obtaining an award of damages by reason only of the breach of the franchise agreement claim, and (iii) the respondents failed against Plaza and Spence.
38 In relation to the abandoned claims, her Honour observed that due to the ‘proper demands of the community for greater economy and efficiency in the conduct of litigation’ (Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272), the appellants should have the benefit of an order for costs in their favour in relation to these claims: [35].
39 Her Honour, at [36] – [39], sought to identify whether the two Trade Practices claims pursued by the respondents, which were ultimately rejected, were clearly dominant or separable so as to warrant displacement of the usual order as to costs in the respondents’ favour. The evidence for the exclusive territory representation could not be fairly described as dominant or separable in the context of the proceeding as a whole and therefore could not provide a basis for the displacement of the ordinary principle: [37].
40 The position was not as straightforward in relation to the financial benefits representation. This issue was not clearly dominant in terms of the amount of evidence or the time taken at the hearing. It was, however, clearly separable. As the respondents were unsuccessful with respect to this discrete issue, her Honour was of the opinion that departure from the usual order as to costs was appropriate. In common with the abandoned claims, the respondents should be compensated for their successful defence of this claim: [38].
41 Subject to the above considerations, her Honour concluded at [40] that the present respondents should have the benefit of an order for costs against HSW. At [41], her Honour concluded it would be impossible for her to attempt to synthesise all of her conclusions and impose a percentage apportionment and that the fairest course was for the orders to be framed by reference to the claims, with the actual apportionment to be left to taxation.
42 The primary judge then made the following orders in relation to costs:
1. Subject to the orders below, the first [appellant] is to pay the [respondents’] costs of the proceeding as agreed or taxed.
2. The [appellants] are to pay any costs incurred by the [respondents] by reason of the adjournment of the hearing on 30 October 2008 as agreed or taxed.
3. The [respondents] are to pay the [appellants’] costs of the proceeding as agreed or taxed insofar only as those costs were incurred in relation to the claims that:
(a) the second [appellant] received rebates and other financial benefits from the supply of goods as set out in paragraph 27 of the statement of claim; and
(b) the first [respondent] overpaid GST as set out in paragraphs 39 to 46 of the statement of claim.
4. The [respondents] are to pay the costs of the second and third [appellants] as agreed or taxed but only insofar as such costs were incurred solely by reason of the joinder of those parties to the proceeding (and, for the avoidance of doubt, such costs are not to include any costs jointly incurred by the [appellants]).
AMENDED NOTICE OF APPEAL
43 On the hearing of the appeal, the appellants sought leave to file and rely on an amended notice of appeal. The amended notice of appeal contained a further ground of appeal and included minor amendments to the remaining grounds. Leave was not opposed by the respondents and was granted.
GROUNDS OF APPEAL
44 On the hearing of the appeal, the appellants relied on the following grounds:
1. (a) The primary judge, in exercising the discretion as to costs, erred in principle by ordering that HSW pay Aghion’s costs of the proceeding;(b) The primary judge, in exercising the discretion as to costs, erred in principle in not ordering that Aghion pay the appellants’ costs related to Aghion’s claim against the appellants.
2. The primary judge, in exercising the discretion as to costs in accordance with principle, ought to have ordered that the respondents pay Plaza and Spence’s costs of the proceeding.
3. The primary judge, in exercising the discretion as to costs in accordance with principle, ought to have:
(a) held that the costs payable to Plaza and Spence as contended in the second ground of appeal be determined on the premise that each of the three appellants was proportionately responsible and liable for the appellants’ joint costs of mounting the appellants’ defences; and(b) ordered that the respondents pay each of Plaza and Spence one third of the appellants’ joint costs of the proceedings.
4. The primary judge, in exercising the discretion as to costs in accordance with principle, ought to have ordered that HSW pay Haviv Holdings one third of the total costs of both respondents (such total costs to exclude those disallowed by the primary judge in Order 3).
The fifth ground in the amended notice of appeal was not pressed on the hearing of the appeal.
45 The appellants seek the following orders in lieu of the orders made by the primary judge:
(1) Haviv Holdings pay Plaza and Spence’s costs of the proceedings below.
(2) The costs payable pursuant to (1) be, in the case of each of Plaza and Spence, one third of the total costs of the appellants.
(3) HSW pay Haviv Holdings’ costs of the proceedings below, being one third of the total costs of the respondents.
(4) Unless otherwise payable under order (1), the respondents pay the appellants’ costs of the proceeding insofar as those costs were incurred in relation to the claims that:
(a) Plaza received rebates and other financial benefits from the supply of goods as set out in para 27 of the statement of claim; and(b) Haviv Holdings overpaid GST as set out in paras 39 – 46 of the statement of claim.
(5) The total costs referred to in (3), part of which are recoverable by Haviv Holdings from HSW pursuant to (3) above, are not to include the costs of the matters referred to in (4) above.
(6) Aghion to pay the appellants’ costs exclusively related to Aghion’s claim against them.
First Ground of Appeal
Appellants’ Submissions
46 The appellants submitted that as Aghion failed completely against all three appellants, the primary judge erred in ordering that HSW pay the costs of both Haviv Holdings and Aghion. ‘It is a general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary’: Milne v Attorney General (Tas) [1956] HCA 48; (1956) 95 CLR 460 at 477; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [35]. Only in the most extraordinary circumstances would a court order a successful respondent to pay the costs of an unsuccessful applicant. No such circumstances arose in this case and therefore the order made by the primary judge does not conform to the principled exercise of the Court’s discretion. The order is unreasonable and plainly unjust: cf, House v R [1936] HCA 40; (1936) 55 CLR 499 at 505.
47 The appellants further submitted that Aghion, given the rejection of his claims, should pay the appellants’ costs related to his claim against them. Absent a finding of any disentitling conduct on behalf of the appellants, it was an error of law to depart from the usual course that costs follow the event.
Respondents’ Submissions
48 The respondents submitted that the appellants’ approach is equivalent to the imposition of a rigid rule as to the award of costs without allowance for the individual circumstances of each case. The relevant circumstances in this case were: (i) costs order 1 was in favour of both respondents, not just the second respondent; (ii) the primary judge found that the respondents could be considered as one for the purpose of costs (including those payable by them); (iii) costs order 1 is expressed to be subject to other costs orders; and (iv) even if the second respondent had any separate costs in relation to the remaining Trade Practices claim (the exclusive territory representation claim), they did not warrant separate treatment.
Further, in relation to ground 1(b) of the amended notice of appeal, the respondents drew the Court’s attention to the primary judge’s order that Aghion pay the appellants’ costs related to two of his three claims against the appellants (see costs order 3) and that costs order 4 requires both respondents to pay Plaza and Spence’s costs insofar as those costs were incurred solely by reason of their joinder. Accordingly, the order accords with the principled exercise of discretion and in all the circumstances does not produce a result that is unreasonable or unjust.
Second and Third Grounds of Appeal
Appellants’ Submissions
49 The appellants submitted that the primary judge erred in limiting Plaza and Spence’s recovery of costs to those incurred solely by reason of joinder, notwithstanding that all claims by the respondents against Plaza and Spence failed completely. There is no basis in principle for depriving them of their costs and the primary judge’s application of the principles in Currabubula was incorrect. Given that the primary judge concluded that ‘the question of the quantum of damage ... was by far the most significant issue in the proceeding in terms of both evidence and hearing time’, it would be factually wrong to conclude that the application of the rule of thumb in the present case, as her Honour did, would ‘fly in the teeth of the generally accepted principle ... "that a successful party is to be recompensed the liability he has reasonably incurred in defending himself".’ The circumstances of the present case cannot be characterised in such a way as to bring the case within the scope of the exception recognised in Korner v H Korner & Co Ltd [1951] Ch 10 and Dansk Rekylriffel Syndikat Aktieselskab v Snell [1908] 2 Ch 127. Her Honour, therefore, erred in principle in concluding that Plaza and Spence were not entitled to their proportionate share of costs.
Respondents’ Submissions
50 The respondents submitted that it is incorrect to suggest that Plaza and Spence will receive only their costs referable solely to their joinder. Rather, in addition to the costs related to their joinder, Plaza and Spence are to receive their costs of the rebate and financial benefits representations claims: costs order 3 and [35] and [38] – [39] of her Honour’s reasons. The primary judge’s approach to the costs of the Trade Practices claims was in accordance with the principles pronounced in Dodds Family Investments and Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. The orders appropriately reflected Haviv Holdings’ success on the exclusive territory claim, which was its primary claim.
51 In relation to the third ground of appeal, to the extent that a ‘rule of thumb’ is to be applied, it is only to be applied in an ordinary and straightforward case and where it would not produce an unjust result: Korner at 17 – 18. It was submitted that the primary judge was correct in her rejection of the application of the ‘rule of thumb’ to the present case on the basis that it did not achieve a just result and that the present case involved multiple applicants, respondents and claims and was therefore not the kind of ordinary or straightforward case to which it was convenient to apply the rule of thumb.
52 The appellants’ approach would see the respondents subsidise HSW’s costs of its unsuccessful defence of the claim for breach of contract. Further, insofar as the rule of thumb depends on the presumption that defendants will have several liability for their costs, the primary judge had reason not to adopt such a presumption in this case due to the relationships between the parties.
Fourth Ground of Appeal
Appellants’ Submissions
53 The appellants submitted that, in accordance with Einstein J’s decision in Currabubula at [95], the partially successful applicant is prevented from looking to each of the unsuccessful defendants for more than an equal proportionate share of the costs (not being costs solely referrable to the applicant’s case against one or other of the defendants individually).
54 By ordering HSW to pay all of Haviv Holdings’ costs, the primary judge has created a situation where HSW is required to pay Haviv Holdings’ costs in unsuccessfully pursuing its claim in the quantum of in excess of $7 million against Plaza and Spence. There is nothing in Dansk and Korner to support this conclusion.
Respondents’ Submissions
55 The respondents submitted that the extension of the rule of thumb to the apportionment of costs between multiple applicants, as contended for by the appellants in this ground of appeal, should not be accepted by the Court. Even if the rule of thumb can apply to one of multiple applicants, the Court is not bound to apply it in that or any other circumstance: Korner at 17 – 18.
56 To uphold this approach would deprive Haviv Holdings of proper compensation for the cost of vindicating its rights, by reducing the costs it may recover to one third of the costs relating to its successful claim in the proceeding; such an outcome would be unjust. Further, the appellants’ approach fails to take into account that each side can properly be treated as a single entity.
57 In addition, the appellants’ submission that the primary judge has ordered HSW to pay all of Haviv Holdings’ costs ignores the express wording of costs order 1. The order against HSW is expressly subject to the other costs orders. Costs orders 3(a) and (b) may account for more than 40% of the appellants’ costs: [38] of her Honour’s reasons below.
APPLICABLE LAW
58 Section 43(2) of the Federal Court of Australia Act 1976 (Cth) provides that ‘[e]xcept as provided by any other Act, the award of costs is in the discretion of the Court or Judge.’ Like all discretions it must be exercised judicially and not against the successful party except for some reason connected with the case: Ruddock v Vardalis at 234.
59 In Hughes v Western Australia Cricket Association (1986) ATPR 40-748 at 48,136, Toohey J suggests that three principles as to the exercise of the discretion are evident from the cases:
(1) Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.
(2) Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which it has failed.(3) A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.
60 To these considerations, the Court in Dodds added the following observations (at 271 – 272):
The propositions enunciated in that case are subject to the further consideration 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... ... Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.61 In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, McHugh J, at 97, expanded on the justification for the general principle that costs follow the event:
[S]ubject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy ... The primary purpose+-+e of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.These comments were cited with approval by Hayne J in Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited [2009] HCA 43 at [55].
62 The general rule, that costs follow the event, becomes somewhat complicated where there are multiple applicants or respondents who are variously successful and unsuccessful. In Currabubula, Einstein J recognised that one device that has been developed to overcome these difficulties is the principle of taxation called the ‘rule of thumb’: [95]. The ‘rule of thumb’ is that where a solicitor acts for more than one defendant, each defendant (if successful) is entitled to its proportion of the costs jointly incurred and any costs incurred solely on its behalf. At [95] Einstein J observed:
These decisions reveal that the concern of the rule of thumb is to achieve substantial justice in the awarding of costs as between a partially successful plaintiff and variously successful and unsuccessful defendants. The rule operates upon the premise that defendants are proportionately responsible and liable for the joint costs involved in mounting the defence. Thus, a successful defendant cannot claim from the plaintiff more than a proportionate share of the joint costs of the action in addition to any costs separately referable to that defendant. Conversely, the partially successful plaintiff is prevented from looking to each of the unsuccessful defendants for more than an equal proportionate share of the costs not solely referrable to the plaintiff’s case against one or other of the defendants individually, in addition to the costs which are so referable. In this way, the rule of thumb prevents both the unjust enrichment of the partially successful plaintiff or successful defendant and the casting of an unfair burden on the unsuccessful defendants. Where the premise is falsified or the rule does not achieve its intended effect, it finds no application.63 Einstein J discussed two situations where the application of the ‘rule of thumb’ was inappropriate: Korner and Dansk. In Korner, the plaintiff had brought an action against eight defendants, but only succeeded against one. The issue on which the plaintiff was ultimately successful was the primary issue. Wynn-Parry J upheld the decision of the Taxing Master not to apply the rule of thumb because to apportion the costs equally in a situation where the issue on which the plaintiff was successful, was the most substantial issue and was distinct from the issues on which the plaintiff failed against the other defendants, was to apply the rule to achieve an unjust result. In Dansk, a plaintiff succeeded in his action against two defendants, but succeeded against one summarily and succeeded against the other after the trial of the action. Neville J held that in these circumstances it would be unjust to apportion the costs equally, for to do so would be to require the defendant who did not proceed to trial to bear the costs of the trial over which they had no control. Accordingly, Neville J altered the award of costs to require the Taxing Master to determine how much of the costs were incurred for the defendants jointly and how much were attributable to each defendant separately.
64 In Elite Protective Personnel, Beazley, McColl and Basten JJA discussed the apportionment of costs in these terms:
[6] Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which the appellant 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). [7] As the appellants submit, the commencing position is that costs follow the event so that a successful party is entitled to costs. 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 Limited (No 2) [2007] NSWCA 306 (at [24]). A similar approach is adopted in the Court of 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 & Ors (No 2) [2006] NSWCA 374 (at [27]).ANALYSIS
65 The award of costs involves a discretionary, not a mathematical exercise. Review of such a discretionary exercise requires the identification of an error of the kind described in House v R. Dixon, Evatt & McTiernan JJ observed at 504 – 505:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.66 The primary judge was in the best position to know how the trial ran, how the case was conducted and what might or might not have been any additional costs. The question is not, therefore, whether I would have made different orders as to costs. Rather, for the appeal to be allowed an error must be identified.
67 Her Honour was correct in identifying, at [17], that ‘close attention to the circumstances of the individual case, part of which includes an evaluation of the real degrees of success and failure, is required’ when awarding costs. An examination of the relationship between the parties is necessary to ensure that cost orders do not bring about a situation where a successful applicant winds up with a costs order against it and an unsuccessful applicant is awarded costs. The primary judge correctly identified that the relationship between the parties was such that the parties could be divided into groups; each side could properly be treated as a single entity. On the hearing of the appeal, the appellants did not challenge her Honour’s description of the relationship between the parties. Rather, it was contended that her Honour did not rely on aggregation in awarding costs. I cannot accept this submission. The primary judge’s reliance on the aggregation of the parties is evident from [32] of the reasons below:
The difficulty with the second aspect of this submission is that it fails to give weight to the applicants’ success in obtaining a substantial award of damages. (Emphasis added).Indeed, this is the principal difficulty with the appellants’ appeal. Where the appellants sought to separate the parties, her Honour sought to aggregate the parties. This aggregation, which was open on the facts before the primary judge, shaped the way in which her Honour applied the principles described at [58] – [64] above to the present circumstances.
First Ground of Appeal
68 This ground of appeal concerned her Honour’s apparent rejection of the principle that costs follow the event in ordering that HSW pay both respondents’ costs despite Aghion failing in all of his three claims. Her Honour was perfectly aware of the general principle but for the reasons she gave, formed the opinion that the ordinary principle should not apply in the present circumstances. The effect of this order was not, as Counsel for the appellants’ submitted, to give a ‘free ride to a co-plaintiff [Aghion] who has failed entirely on matters different to those which his co-plaintiff [Haviv Holdings] succeeded on.’ Not only was the first order as to costs made subject to other orders which recognise the necessity of compensating the appellants for abandoned claims but there are circumstances in this case that differentiate this from a simple case in which Aghion sued the three respondents and failed against all three of them. Given the nature of the relationship between the parties outlined at [67] above, an order against one respondent was tantamount to an order against the other. This order was consistent with her Honour’s attempt to indemnify the successful party. As McHugh J identified in Oshlack, at 97, such indemnity is the primary purpose of an award of costs.
Second and Third Ground of Appeal
69 The second and third grounds of appeal concern the costs of Plaza and Spence and the applicability of the ‘rule of thumb’. As the respondents submitted, the cost orders must be viewed together rather than isolation. When viewed together, it is apparent that Plaza and Spence will receive more than merely the costs referable solely to their joinder. In relation to the Trade Practices claims, I agree with her Honour’s observation that the evidence for ‘the exclusive territory representations ... could not fairly be described as dominant or separable in the context of the proceeding as a whole’ and therefore could not provide a basis for the displacement of the ordinary rule: Elite Protective Personnel at [6]. It was appropriate, therefore, that her Honour did not order that there should be any apportionment of costs on the basis that the appellants failed on the exclusive territory representations.
70 As for the applicability of the ‘rule of thumb’, it is evident from the cases referred to at [62] – [64] above that to the extent that a ‘rule of thumb’ is to be applied in apportioning costs, it is only to be applied in ordinary and straightforward cases. It is a convenient guide, rather than a rigid device to be applied irrespective of the individual circumstances. Mechanical application of the ‘rule’ without careful consideration of the individual circumstances could bring about the very injustice the rule is designed to remedy. The primary judge recognised, and I agree, that the present circumstances, with a multiplicity of parties and claims together with the nature of the relationships between the parties, are not the kind of ordinary or straightforward case to which it was convenient and appropriate to apply a ‘rule of thumb’ in the apportionment of costs.
Fourth Ground of Appeal
71 The appellants’ submission on this ground of appeal once again ignored both the reality of the relationship between the parties and the totality of the orders made by her Honour. HSW was not ordered to pay the entire costs of Haviv Holdings. The order is expressly subject to the other costs orders. Indeed, as the respondents submitted, cost orders 3(a) and (b) may account for more than 40% of the appellants’ costs: [38].
72 As for whether the rule of thumb extends to situations involving successful and unsuccessful applications, I agree with the observations of Einstein J in Currabubula at [104] that:
‘There is no logical reason why a defendant who is sued by several plaintiffs who are variously successful and unsuccessful should be in a more advantageous position qua joint costs ... than would be an unsuccessful defendant sued by one successful plaintiff alone.’73 Even if the ‘rule of thumb’ extends to situations involving multiple applicants, it would still be limited to situations where its application fulfils the purpose of the rule. In the present circumstances, the relationship of the parties and multiplicity of claims makes its application inappropriate.
CONCLUSION
74 The primary judge exercised her discretion to award costs in a judicial, principled and well-reasoned manner with reference to the relevant authorities. The appellants have been unable to identify an error in the primary judge’s decision to award costs in the manner in which she did. The appellants’ approach, if adopted, would unduly fetter the Court’s discretion as to costs and produce an unjust result.
75 Accordingly, the appeal must be dismissed. The appellants must pay the
respondents’ costs of the appeal.
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I certify that the preceding forty-six (46) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice Edmonds.
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Associate:
Dated: 8 February 2010
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