Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Taylor v Stav Investments Pty Ltd as trustee for the Stav Investments Family Trust (No 2); Taylor v LK Group Investments Pty Ltd (No 2) [2023] NSWCA 322 Hearing dates: On the papers Date of orders: 19 December 2023 Decision date: 19 December 2023 Before: Mitchelmore JA at [1]; Simpson AJA at [34]; Basten AJA at [35] Decision: (1) Set aside Order 4 made on 9 March 2022 in each of proceedings 2018/00245168; 2019/00376795, and otherwise make no order as to the costs of those proceedings. (2) The respondents pay 60% of the appellants' costs of the appeals. (3) The respondents pay the appellants' costs of the cross-appeals. Catchwords: COSTS — party/party — appeals — exceptions to general rule that costs follow the event — apportionment of costs — where mixed outcome on appeal — where issues sufficiently discrete to warrant apportionment — unsuccessful appeal on causation — significant reduction of damages on appeal COSTS — party/party — exceptions to general rule that costs follow the event — offers of compromise/Calderbank offers — whether offer of compromise complied with requirements of Uniform Civil Procedure Rules 2005 – whether offer complied with Calderbank principle Legislation Cited: Civil Procedure Act 2005 (NSW), ss 98, 101 Evidence Act 1995 (NSW), s 131 Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.15, 42.34, 42.35, 51.36, 51.47, 51.48 Cases Cited: Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 Australian Conservation Foundation v Forestry Commission (Tas) (1988) 81 ALR 166 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116; [2001] NSWCA 346 Redwood Anti-Ageing Pty Limited v Knowles (No 2) [2013] NSWSC 742 SWM Financial Services Pty Ltd v Lloyd (No 2) [2012] NSWSC 202 Sze Tu v Lowe (No 2) [2015] NSWCA 91 Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 Category: Costs Parties: 2022/96995 Andrew George Taylor (First Appellant) John Thomas Charles Wilkinson (Second Appellant) Stav Investments Pty Ltd (ACN 166 722 845) as trustee for the Stav Investments Family Trust (Respondent) 2022/97003 Andrew George Taylor (First Appellant) John Thomas Charles Wilkinson (Second Appellant) LK Group Investments Pty Ltd (ACN 166 731 728) (Respondent) Representation: Counsel: H Somerville (Appellants) A Casselden SC, S Danne (Respondent) Solicitors: TPS & Co Lawyers (Appellants) Marque Lawyers (Respondents) File Number(s): 2022/96995; 2022/97003 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2022] NSWSC 208 Date of Decision: 9 March 2022 Before: Ward CJ in Eq File Number(s): 2018/245168; 2019/376795 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] JUDGMENT 1. MITCHELMORE JA: On 1 September 2023, the Court allowed in part appeals brought by the appellants, Andrew Taylor and John Wilkinson, from decisions in two proceedings heard together in the Equity Division: Taylor v Stav Investments Pty Ltd as trustee for the Stav Investments Family Trust; Taylor v LK Group Investments Pty Ltd [2023] NSWCA 204. This judgment assumes familiarity with those reasons and adopts the same defined terms for convenience. 2. In the proceedings at first instance, Ward CJ in Eq ordered the appellants to pay damages of $1,012,500 to the respondent in the first proceeding, Stav Investments, and the respondent in the second proceeding, LK Group Investments, for contraventions of s 1041I of the Corporations Act 2001 (Cth), s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law (NSW). The aspect of the appeal that was allowed concerned the basis upon which those damages were assessed and the apportionment of responsibility between the appellants and Yatango Mobile. The appeal was also allowed in respect of the "roll-up" representations, but this was inconsequential due to the Court's findings on representations as to ownership of the intellectual property. 3. The Court varied the damages award from $1,012,500 to $27,330. In my reasons at [126], I stated that as the appellants had a considerable measure of success but not complete success, it may be appropriate to make some apportionment of the costs payable. The parties were given an opportunity to make written submissions on the costs of the appeals and cross-appeals, together with any amendment sought to the costs orders in the court below, with a view to determining the question of costs on the papers. 4. No party contends for an apportionment of the costs at first instance or the costs of the appeal. Rather, the appellants submit that the respondents should pay all of their costs of the appeals and the proceedings below; and that the costs of the appeals to paid on an ordinary basis until 11 October 2022 and on an indemnity basis thereafter. The respondents submit that each party should bear their own costs at first instance and on appeal. 5. For the following reasons, I consider that it is appropriate for the respondents to pay 60% of the appellants' costs of the appeals, and to pay all of the appellants' costs of the cross-appeals. In relation to the proceedings at first instance, the order that the appellants should pay the respondents' costs should be set aside, and no order for costs should be made in its place. Costs of the appeal 1. The starting point is s 98 of the Civil Procedure Act 2005 (NSW), which provides that the award of costs is in the discretion of the Court. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that if the Court makes an order as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. 2. The Court summarised 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 in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]: … • 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 Limited (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 & Ors (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: State of 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. … 1. The appellants submit that they were successful in overturning the fundamental aspects of the judgment as illustrated by the respondents ultimately being awarded less than 3% of the amount claimed. The appellants next submit that the respondents failed to make out the majority of their misrepresentation claims, noting that only two of the fifteen alleged representations were found to have caused loss. The appellants further submit that in circumstances where the respondents adopted an adversarial approach on the appeals and did not concede any points, that should have costs consequences. 2. The respondents submit that the appellants' characterisation of their success is inconsistent with Senior Counsel's characterisation of the appeal as one in which the "no transaction" case was central, together with the treatment of expert evidence. The appellants only enjoyed success in relation to damages and apportionment, and their success in relation to aspects of the representational appeal points were inconsequential. The respondents submit that the grounds on which the appellants failed contributed more significantly to hearing time than the issues in which they succeeded. The respondents further submit that in light of the purpose of a costs order being to compensate the successful party and not punish the person against whom the order was made, the varying successes at first instance and appeal, where damages were so finely a balanced point, should lead to both parties bearing their own costs. 3. As I foreshadowed in my reasons, the appellants have had a considerable measure of success, albeit not complete success. The "no-transaction" issue and the basis of the calculation of damages are discrete issues. However, the facts relevant to the "no transaction" issue, with which both parties engaged in detail, shed some light on the difficulties with the assumptions that underpinned Mr Potter's Scenario 1, which the primary judge had adopted. The error in adopting that scenario has led to a substantial reduction of the damages. The appellants should be compensated for the costs expended in achieving that result. 4. It follows that I do not accept the respondents' submission that it should follow from the result that the parties should bear their own costs. Nor do I accept, however, that the appellants should be awarded all of their costs. In my view, the justice of the case warrants some apportionment of damages to reflect that the appellants were unsuccessful on the "no-transaction" issue in circumstances where the issue consisted of seven grounds of appeal and required a factually intensive analysis. In circumstances where the respondents maintained the "causative" element of their loss through their success on the "no-transaction" issue, the fact that they did not succeed on all of the representations they alleged, which the appellants seek to emphasise, is not highly material. 5. As a matter of impression, and adopting a broad brush approach, I consider that the appellants should have 60 per cent of their costs of the appeal. 6. In reaching this view, I have not relied on what the appellants described as the respondents' adversarial approach to the appeal. In my view, the respondents' approach to defending the appeals was not unreasonable, particularly having regard to the result they obtained at first instance. 7. I have also considered the respondents' submissions that the appellants' conduct of the appeal was disentitling due to the significant quantity of unnecessary material, materials that were filed late, and the oral challenge to factual findings that were not foreshadowed in the written submissions pursuant to a schedule in accordance with r 51.36(2). I do not consider the quantity of the appeal materials to be unnecessary let alone extravagant, as the respondents submit. Further, I agree with the appellants that it is unclear how the lateness of the materials would disentitle them to a costs order in the circumstances. As to the challenge to findings of fact, the appellants did not provide a schedule and should have done so, although the nature of the appellants' challenge to the conclusions of the primary judge was apparent from their written submissions, at least to some degree. Indemnity costs 1. The appellants submit that they presented an offer to compromise the proceedings to the respondents on 11 October 2022 and thus there should be an order for indemnity costs from this date. The appellants note that this offer contained a far inferior outcome to the one ultimately attained on appeal. 2. On 11 October 2022, Mr Taylor sent Mr Stavretis an email, which stated the following: Without Prejudice Dear Scott, Thank you for taking the time to meet with me on Wednesday Sep 28. With reference to the matters we covered in our meeting, we are prepared to offer you $370,000 as a settlement to immediately conclude the matter. Sincerely, Andy Taylor 1. On 14 October 2022, Mr Stavretis responded to the 11 October 2022 email stating that the "offer is far too low to accept." On 17 October 2022, Mr Taylor sent Mr Stavretis an email requesting "an indication of a realistic offer [he] would be prepared to accept". On 18 October 2022, Mr Stavretis replied to Mr Taylor stating that he did not "see much point working out the exact number" as he suspected that his offer would not be in the realm of what Mr Taylor wanted. 2. On 24 October 2022, Mr Taylor sent an email to Mr Stavretis stating: Without prejudice Dear Scott, We are of course optimistic about the appeal, whilst acknowledging that a loss for either party is not a good outcome. It would not make commercial sense for us to settle at 'a small discount to the amount previously awarded by the courts plus legal fees.' Nor would it make commercial sense for you if you were to win the appeal, as the debt is simply not recoverable and would instead just result in the protracted personal bankruptcy of John and I. I would instead like to propose an offer of $1,025,000 with each party bearing their own legal costs. We are prepared to meet you in the middle, immediately conclude the matters and uphold the initial judgement. I await your reply. Regards, Andy Taylor 1. There was no response to the email sent on 24 October 2022 in the correspondence provided. On 1 December 2022, which was the date of the hearing of the appeal, Mr Taylor emailed Mr Stavretis withdrawing the offer in the email of 24 October 2022. 2. The respondents submit that offers the appellants put to them do not provide an appropriate basis for indemnity costs, as it did not meet the requirements of a formal offer of compromise in r 20.26 of the UCPR. I accept that submission. 3. Rule 51.47(1) of the UCPR provides for the making of offers of compromise in writing to compromise any claim in proceedings in this Court. Rule 51.47(2) provides that the provisions of Pt 20 Div 4 apply to any offer of compromise made under r 51.47(1), including r 20.26. Rule 51.48(1) provides that the provisions of Pt 20 Div 3 apply, which is the division that provides for the indemnity costs sought by the appellants. If an offer to compromise does not comply with r 51.47, r 51.48 does not apply. 4. Even on a generous interpretation, Mr Taylor's email dated 11 October 2022 does not meet the requirements in r 20.26. The offer failed to identify the proposed orders for disposal of the claim (r 20.26(2)(a)(ii)), it did not bear a statement to the effect that the offer was made in accordance with the UCPR (r 20.26(2)(d)), and it did not specify a period of time within which the offer was open for acceptance (r 20.26(2)(f)). The same deficiencies mark his later email of 24 October 2022. 5. I also accept the respondents' submission that neither of the offers constituted a Calderbank offer. In particular, the appellants did not sufficiently foreshadow the intended use of the offer to support a special costs order: Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 at [43]. 6. It follows that the offers in the emails dated 11 October 2022 and 24 October 2022 do not justify an order for indemnity costs in these proceedings. Costs of the cross-appeal 1. I have reviewed the respondents' brief submissions on costs in relation to the cross-appeal and have found no reason why the Court should depart from the ordinary position that costs follow the event. The respondents are to pay the appellants' costs of the cross-appeal. Costs of the proceedings below 1. At first instance, the primary judge ordered that Mr Taylor and Mr Wilkinson pay the plaintiffs' costs of the proceedings: Stav Investments Pty Ltd v Taylor; LK Group Investments Pty Ltd v Taylor [2022] NSWSC 208 at [551]. Given the variations that this Court has made to the orders of the primary judge, it is necessary to reconsider the question of costs of the proceedings below. 2. The appellants submit that the respondents should pay their costs of the proceedings below. They contend that costs below require an assessment of the quantum recovered on appeal, which brought the proceedings within the jurisdictional limit of the Local Court. In circumstances where the respondents did not seek to vindicate a right but sought only damages, the appellants submitted that the disproportionality between the costs expended in the proceedings to the amounts recovered should be considered as supporting an award of costs in their favour. 3. The respondents submit that each party should bear its own costs of the proceedings below. Further to the submissions made in relation to the costs of the appeal, the respondents submit that it does not follow from the fact that the damages awarded ultimately fell below the threshold referred to in UCPR rr 42.34 or 42.35 that the appellants are entitled to a favourable costs order. The Court should be satisfied that the proceedings were appropriately commenced and continued in the relevant court because of the significant amount of money invested and the adverse findings against the appellants at first instance: see Redwood Anti-Ageing Pty Limited v Knowles (No 2) [2013] NSWSC 742 at [18]-[20]. 4. The respondents submit that unnecessary costs were incurred on expert evidence, in circumstances where the scope of Mr Potter's work would have been significantly reduced had the appellants put the respondents on notice as to the licensing arrangements. The respondents submit that the appellants' failure to disclose the details of the licensing structure (ultimately revealed through the cross-examination of Mr Apps) was an ambush of the type described in Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116; [2001] NSWCA 346 at [28]-[32], [40]-[46]. Earlier disclosure would have removed the need for Mr Potter to traverse three scenarios, none of which were found to comfortably suit the facts of the case. The respondents further submit that the appellants were rightly criticised for running untenable arguments at first instance. 5. I do not accept the respondents' submission that unnecessary costs were incurred on expert evidence in light of the evidence that came to light regarding the licensing arrangements. As the appellants submit, it is unusual for a party to rely on an ambush from their own witness, in circumstances where there was otherwise no suggestion that Mr Apps was a reluctant witness for the respondents. Further, even with that evidence, the appellants maintained their contention that Scenario 1 was the appropriate damages scenario. In so far as the appellants further submitted that details of the licensing structure were contained in their individual affidavits, which, although served, were not read in the proceedings for the greater part, I have not relied upon the submission. 6. Costs at first instance must be assessed as if the result before the primary judge had been as this Court has found: Sze Tu v Lowe (No 2) [2015] NSWCA 91. I accept the appellants' submission that it is relevant for the Court to consider the amount sought and the amount recovered, and the disproportionality of the costs expended in the proceedings to the amount recovered. However, it is also relevant that the respondents succeeded on the factually intensive claim that underpinned the damages case, that they were misled into entering into the First Contract and the Second Contract and that but for the representations that were made in that respect they would not have entered into those contracts. Further, the manner in which the appellants have succeeded on appeal, in so far as the adoption of Scenario 3 is concerned, was not the focus of their submissions below, the gist of which was that the Court should place no weight on Mr Potter's opinions as expressed in his reports. I do not go so far as to accept the respondents' submission that on appeal the appellants departed from their submissions at first instance, noting that in oral closing submissions the appellant did contend that damages should be awarded in line with Scenario 3. However, the emphasis was different. 7. Again adopting a broad brush approach, given the outcome of the proceedings as varied by the appeal, I consider that the parties should bear their own costs at first instance. Orders 1. I propose the following orders: 1. Set aside Order 4 made on 9 March 2022 in each of proceedings 2018/00245168; 2019/00376795, and otherwise make no order as to the costs of those proceedings. 2. The respondents pay 60% of the appellants' costs of the appeals. 3. The respondents pay the appellants' costs of the cross-appeals. 1. SIMPSON AJA: I agree with Mitchelmore JA. 2. BASTEN AJA: As explained by Mitchelmore JA, pursuant to leave granted in the primary judgment with respect to the appeals, the parties have sought widely different orders as to the costs of the proceedings in this Court and of the trial. It is convenient to deal first with the costs of the appeal. Costs of appeal 1. The appellants were largely successful in their appeals, reducing two judgments against them for $1,025,000 and costs, to $27,000 each with no liability to pay costs. In broad terms, there are two issues to be resolved with respect to the costs of the appeal. One is whether it is appropriate to apportion costs between the issues on which the appellants were successful and those on which they were not. The second concerns the appellants' claims for indemnity costs based on offers of compromise made between the trial and the appeal. The first matter to be resolved is the order in which these issues should be addressed. 2. The principles suggest that the correct order will generally be to consider the offers of compromise first. That is because, had the offers been accepted, the matter would not have proceeded to a hearing and judgment, with the result that no question of apportionment of costs according to degrees of success or failure would have arisen. That may be stated as a general proposition, allowing for the possibility that, for example, conduct by the successful party after its offer was refused may disentitle it to recovery of costs in full. Offers of compromise 1. The appellants, through Mr Taylor, sought to engage with both Mr Stavretis and Mr Kestelman. The latter directed Mr Taylor to deal with Mr Stavretis. The offers occurred through an exchange of emails set out at [16]-[18] above. Although each clearly involved a "communication between parties in dispute" and involved "an attempt to negotiate a settlement of the dispute", they were not thereby inadmissible pursuant to s 131(1) of the Evidence Act 1995 (NSW). At least, that would be so, so long as "the communication … is relevant to determining liability for costs": s 131(2)(h). Understandably, there was no challenge to their admissibility: the relevance of offers of compromise to the exercise of the Court's broad discretion with respect to costs is reflected in, but not limited by, provisions of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). [1] 2. With respect to the appellants' reliance on the offers, the respondents contended that it was "not apposite to any application for indemnity costs pursuant to r 42.15 of the UCPR, or otherwise". [2] The appellants did not rely upon the formal offer of compromise process under the UCPR. With respect to the "otherwise" reliance, the respondents submitted that (i) the offer did not constitute a "Calderbank letter" and therefore generated "no presumptive effect in relation to costs considerations; (ii) did not attract the level of consideration afforded to a Calderbank letter, in the exercise of the Court's discretion"; [3] (iii) the lack of formality gave rise to "cause for doubt as to whether the Offer was a genuine offer of compromise" and, in any event, (iv) the appellants "should have sufficiently foreshadowed its intended use to support a special costs order". Finally, the respondents submitted that if it were in a form eligible for consideration in support of a special costs order, the failure to accept it was not unreasonable in the circumstances, stating: "16 Reasonableness did not require the respondents to abandon their defence of the appeal, given the matters of obvious commercial and financial importance that were at stake. That ought to be accepted as so, even though the 'Offer' indicated that the appellants were prepared to bear their own costs. The 'Offer' did not communicate the quantum of costs to the respondents and so the respondents were not placed in a position to reasonably consider the true value of that offer… ." 1. The suggestion that no genuine offer of compromise had been made was gratuitous. Mr Stavretis' response to the first offer engaged with the offer but said it was "far too low to accept". An invitation to him to make an offer was dismissed. The second offer made on 24 October 2022 involved a payment of $1,025,000, (that is, 50% of the judgments given at trial) with each set of parties to bear their own legal costs which, in effect, meant the respondents foregoing their entitlement to costs of the trial. The offers were clearly not derisory and were actively pursued, apparently commencing with a meeting. However, Mr Stavretis' response to the withdrawal of the second offer, "Good – I feel less insulted already", indicated no interest in negotiating on his part. 2. The other four issues as to the form of the offer suggest that there are necessary elements of a "Calderbank letter", absent which an offer should not form the basis of a special costs order. These should be clarified. First, it is usual to identify a period during which an offer will remain open. Although no date was fixed with respect to either offer, the first was responded to immediately. The second was in fact left open for more than five weeks, before being withdrawn on the day of the hearing of the appeal. No complaint was made that the respondents had no time to consider the offer properly. 3. Secondly, the complaint of lack of formality was vague, but may have been intended to raise the point that, according to statements in Whitney v Dream Developments Pty Ltd, [4] an offer could not take effect as a "Calderbank offer" unless it indicated an intention on the part of the offeror to the effect that it would be relied upon on a question of costs. [5] However, the offer in that case specifically purported to engage the UCPR provisions for offers of compromise, but failed to comply with the somewhat rigid requirements of the rules, as then in force. Further, the Court accepted that there need not be express reference to the proposed use, which might be inferred from context or other conduct. In any event, the case did not preclude the use of an offer as a factor going to the general discretion conferred on the Court under s 98 of the Civil Procedure Act 2005 (NSW), where the offer was relevant and admissible as evidence of an intention to compromise a claim. There is nothing in the broad discretion conferred by s 98 which precludes consideration of offers which do not comply with the rules and do not contain what was seen to be an essential element of a "Calderbank offer". 4. Thirdly, although the offers were made between individuals, the respondents submitted that the informality should count against the appellants in circumstances where they had legal representation and undoubtedly had access to legal advice as to the appropriate form of an offer. However, that is a consideration which might also count against the respondents, on the basis that they had ready access to legal representation if they wished to consider the appropriate way of responding to the offer. 5. Although the first offer was based on a payment of $370,000, which was by no means an insignificant sum, particularly in the light of the outcome of the appeal, it was less than 20% of the total trial judgments and may not have covered much beyond the respondents' costs of the trial. (The respondents could have made that point by reference to their known costs, but did not.) 6. I am not persuaded that rejection of that offer was so unreasonable as to form the basis for an indemnity costs order from 11 October 2022. 7. The second offer, however, contained a substantially larger sum. The respondents may have been quietly confident as to their chances of complete success on the appeal, but, without more, that did not provide a reasonable basis for refusing to engage with the second offer. Their submissions did not identify a reasonable basis for rejecting the offer, other than their belief in the likelihood of success. Further, the complaint as to the failure of the appellants to quantify any costs to be foregone was misconceived. The costs of the trial which the respondents would not recover would have been known to the respondents, being their costs. The offer contained no claim for payment of the appellants' costs, either of the trial or of the appeal. 8. Given the outcome of the appeal, and the absence of any justification for the failure to engage with the second offer, in my view the appellants are entitled to their costs of the appeal, to be assessed on an indemnity basis from 24 October 2022, being the date of the second offer. 9. There are no circumstances relevant to the conduct of the appeal which warrant some departure from this result. The fact that the appellants were unsuccessful as to a small proportion of the damages awarded at trial is immaterial. Further, the fact that they were unsuccessful in relation to a number of issues raised on the appeal is of marginal significance, but does not require any variation of the order in favour of the appellants, for two reasons. 10. The first and less important reason is that the appeal was listed for one day and completed in one day. Had some issues not been pursued, it is unlikely that it would have been completed in a shorter period, although it may be accepted that the preparation for the appeal would have been curtailed and the costs thus reduced. 11. More importantly, although the appellants were the moving parties on the appeal, they were the defendants at trial resisting the claims made by the respondents. As Burchett J explained in Australian Conservation Foundation v Forestry Commission (Tas): [6] "… I must have regard to the fact that the applicants launched proceedings against the first respondent …, and the applicants wholly failed in their application. Concentrating for the moment upon the first respondent's right to an order for costs, I think it would be fair to say in favour of the applicants that the objections raised by that respondent which failed added the last halfday to the time of the hearing. It does not necessarily follow that the costs orders otherwise appropriate should be affected. A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs." 1. In Griffith v Australian Broadcasting Corporation (No 2) [7] Hodgson JA stated: [8] "19 Further, in my opinion, the underlying principles concerning costs identified in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] and Ohn v Walton (1995) 36 NSWLR 77 at 79 … suggest that the application of these principles may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may be seen more readily as appropriate that the plaintiff be liable for the costs of unsuccessful severable claims or issues, even if it was reasonable to include those claims or issues." 1. I said in Griffith, after repeating the reasons of Burchett J set out above: "39 Even were it otherwise, caution should be taken in allowing an unsuccessful plaintiff to resist payment of costs in respect of particular independent defences which are unsuccessful or need not be addressed." 1. The propriety of distinguishing between the position of successful defendants and successful plaintiffs was also recognized by Gleeson JA in Sze Tu v Lowe (No 2). [9] 2. It was not demonstrated that the appellants, as defendants to the respondents' claims, raised unreasonable defences, nor prosecuted such defences unreasonably on the appeal. It follows that, the respondents, having failed to demonstrate that they acted reasonably in refusing the second offer of compromise, should bear the costs of the appeal from the date of the offer on an indemnity basis. Costs of trial 1. As to the costs of the trial, the respondents submitted that each party should bear its own costs. The appellants sought a general order for costs in their favour as their primary position; they also identified alternative bases upon which costs might be apportioned. 2. Two principles suggest that the appellants should have their costs of the trial. First, according to the principle that costs follow the event, "the event" should be the practical result achieved by the appeal, as explained by Gleeson JA in Sze Tu v Lowe (No 2): [10] "The costs position below must now be assessed as if the result before [the trial judge] had been as this Court has found." 1. Secondly, as noted above, the defendants should not be discouraged, under threat of being deprived of costs or even an adverse costs order, from raising any reasonable defence, if successful on one defence but not another. 2. The appellants submitted that as the respondents had been successful only in obtaining what must, in the circumstances of the claims, be considered a largely nominal award of damages; and as the only material issue was the appropriate compensation for misrepresentations, there being no other elements such as public vindication, the principle that a plaintiff should not recover costs for small awards should apply. As reflected in UCPR, r 42.34, no costs would ordinarily have been made in the plaintiffs' favour. Indeed, that rule is engaged where the award is less than $500,000, an amount almost 10 times the award in fact made in the present case. The question is then whether the appellants are entitled to recover all or any of their costs of defending the proceedings. 3. In support of their claim for a costs order in their favour, the appellants relied upon the principle applied by Ball J, identified in the following terms in SWM Financial Services Pty Ltd v Lloyd (No 2): [11] "25 In Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [684] Campbell JA (Giles JA agreeing) said: If a plaintiff sues for breach of contract and obtains an award of nominal damages, that empty victory usually does not bring with it an entitlement to costs, as the plaintiff usually is not to be regarded as the successful party in the action ... His Honour referred to a number of authorities in support of that proposition including Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394; [1984] 1 All ER 685; Oshlack v Richmond River Council (1998) 193 CLR 72 at 98 [70] per McHugh J; Ng v Chong [2005] NSWSC 385; Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 1149 at [47]-[52]. 26 There is no reason to depart from that general principle in this case. This is not a case where some right of the plaintiffs is vindicated by the judgment. The plaintiffs' right to a judgment for a nominal amount arises from a minor breach by the third and fourth defendants in failing to tell the plaintiffs their true reasons for leaving the employment of the first plaintiff. That breach hardly went to the heart of the plaintiffs' case and, to use the words of Stephenson LJ in Alltrans Express Ltd v CVA Holdings Ltd at 401, 'was not the event at which the plaintiffs were aiming'. In those circumstances, the plaintiffs should pay the costs of the third, fourth and fifth defendants." 1. As the appellants noted, the result as compared with the claim in Alltrans Express was close to that in the present case, justifying an order for costs in their favour. However, the appellants accepted that the circumstances of the trial could be seen to warrant a small reduction in the recoverable costs. Without attempting to analyse the complexity of the litigation, or the allegations of unreasonable conduct levelled by each against the other, in my view the appropriate award is that last identified by the appellants, namely that they should receive 70% of their costs of the trial, calculated on the ordinary basis. Interest on costs 1. Finally, the appellants sought orders for the payment of interest on costs pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW). This claim was not supported by evidence as to what costs had been paid, and was in fact ignored by the respondents. However, unless the Court otherwise orders interest will run from the order for payment of costs in accordance with s 101(5). No order is required to give effect to interest under s 101(4). Accordingly, there is no need for an order to that effect and the conclusions set out in the appellants' written submissions appeared to acknowledge as much. Orders 1. Each side had a single set of legal representatives during the litigation. However, the respondents brought separate proceedings and obtained equal judgments in their favour. The appellants can only obtain their costs once, but there is no reason why the respondents should not be jointly and severally liable for the appellants' costs. Nevertheless, there should be separate orders in each proceeding but covering the whole of the costs of the trial. 2. The cross-appeals brought by the respondents were dismissed, but it is undesirable to make separate orders with respect to those costs. The appellants will receive their costs "in this Court", thus covering all proceedings. 3. On the basis set out above, the following orders should be made, namely: In matter 2022/96995: 1. Set aside order 4 made on 9 March 2022 in proceedings 2018/245168 and in lieu thereof order that the plaintiffs pay 70% of the defendants' costs in the Equity Division. 2. Order that the respondent pay the appellants' costs in this Court, to be calculated on the ordinary basis until 14 October 2022 and thereafter on an indemnity basis. In matter 2022/97003: 1. Set aside order 4 made on 9 March 2022 in proceedings 2019/376795 and in lieu thereof order that the plaintiff pay 70% of the defendants' costs in the Equity Division. 2. Order that the respondent pay the appellants' costs in this Court to be calculated on the ordinary basis until 14 October 2022 and thereafter on an indemnity basis. Endnotes 1. See Pt 20, Div 4 – Compromise; Pt 42, Div 3 – Offers of Compromise. 2. Respondent's reply submissions, 20 October 2023, par 10. 3. Ibid, par 11. 4. [2013] NSWCA 188 (Bathurst CJ, Beazley P, McColl, Barrett and Emmett JJA). 5. Whitney at [43], [46]-[47], [58]-[59] and [77]. 6. (1988) 81 ALR 166 at 169. 7. [2011] NSWCA 145. 8. McClellan CJ at CL agreeing at [41]. 9. [2015] NSWCA 91 (Meagher and Barrett JJA agreeing). 10. [2015] NSWCA 91 at [63]. 11. [2012] NSWSC 202. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 December 2023