Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Hach Private Capital Pty Ltd v Dahata Pty Ltd [2024] NSWCA 115 Hearing dates: 15 May 2024 Date of orders: 16 May 2024 Decision date: 16 May 2024 Before: Meagher JA at [1]; Kirk JA at [2] Decision: Application for leave to appeal dismissed with costs Catchwords: APPEALS – Leave to appeal – Appeal from orders as to costs only – Order on alternative bases – No clear injustice – Caution in granting leave from decision pertaining to practice and procedure – Proper reticence to grant leave in matters relating to costs alone APPEALS – Procedural fairness – Non-success in argument gives no cause for complaint about procedural fairness – Issue well and truly raised at hearing – Absence of reasons for rejecting procedural application for standing over issue of costs not sufficient basis to grant leave to appeal on substantive decision on costs Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Supreme Court Act 1970 (NSW), s 101(2)(c) Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 20.27(3), 42.1, 42.13A Cases Cited: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 T & H Pty Ltd v Nguyen [2022] NSWCA 180 The Age Company Ltd v Liu [2013] NSWCA 26; (2013) 82 NSWLR 268 Wilson v Mirus Australia Pty Ltd [2024] NSWCA 111 Category: Principal judgment Parties: Hach Private Capital Pty Ltd (First applicant) Fergus Richard Herbert (Second applicant) Sean Fyans Cortis (Third applicant) Knights of the Round Table Pty Limited (Fourth applicant) Fyans Enterprises Pty Limited (Fifth applicant) Dahata Pty Limited (First respondent) Darren Heathcote (Second respondent) Representation: Counsel: T Brennan SC (Applicants) J Horowitz with M Hazan (Respondents) Solicitors: SBA Lawyers (Applicants) Benjamin Lawyers (Respondents) File Number(s): 2023/442446 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity – Corporations List Citation: Not applicable Date of Decision: 13 November 2023 Before: Black J File Number(s): 2021/333527 [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. MEAGHER JA: I agree with Kirk JA. 2. KIRK JA: The applicants seek leave to appeal from a decision by Black J to order that they pay the respondents' costs of proceedings which were settled after the applicants had accepted three interdependent offers of compromise said to have been made under r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The application should be refused. 3. The context of the application is as follows. The applicants and respondents were involved in running a corporate advisory and capital raising business through the first applicant, Hach Private Capital Pty Ltd. Disputes arose between three of the principals from 2021. The respondents – being one of the principals and his corporate vehicle – commenced proceedings in the Corporations List in that year against Hach along with the other two principals in question and their corporate vehicles. 4. The proceedings appear to have moved slowly, with both sides incurring significant costs. By October 2023 the respondents' further amended points of claim raised a series of claims, including that the other two principals had diverted certain business opportunities from Hach to their own benefit; that they had invalidly removed the second respondent as a director of Hach; and that they had invalidly resolved that the respondents were a "bad leaver", which had certain consequences under a shareholders agreement. The relief sought included reinstatement of the second respondent as a director of Hach; declarations that certain shares (being the fruits of the business opportunities) were held on constructive trust, with those shares to be transferred; and damages or equitable compensation. 5. On 23 October 2023 the respondents sent the applicants the three interlinked offers of compromise. The respondents proposed to "compromise all of their claims" against the applicants on the basis that judgment be entered for the second respondent against Hach in the sum of $5,500, and that declarations of constructive trust, and transfer orders, be made in favour of the first respondent with respect to some shares in one significant business opportunity in dispute. The offers did not address expressly what was to occur with the other claims. 6. By letter dated 30 October 2023 the applicants accepted the offers of compromise, but in doing so stated that "the offers of compromise are not compliant with UCPR r 20.26, as they do not identify the proposed orders for disposal of all of the [respondents'] claims" (emphasis in the original). The letter attached a proposed set of orders which, in addition to the orders proposed by the respondents, relevantly included a declaration that the second respondent ceased to be a director of the first applicant on a certain date, an order that the remainder of the respondents' claim be dismissed, and that costs were to be reserved and separately determined. 7. The respondents filed an interlocutory process on 1 November 2023 seeking that "[i]n accordance with UCPR r 20.27(3)" judgment be entered in the terms of the offers of compromise; orders that the applicants were to pay the respondents' costs of the proceedings up to and including 23 October 2023, along with costs of the interlocutory process; and such further or other orders as the Court deemed fit. 8. The applicants then filed their own interlocutory process on 7 November 2023, again said to be "under UCPR r 20.27(3)", applying for orders that judgment be entered in terms essentially the same as those proposed in their letter of acceptance, plus that the respondents were to pay the applicants' costs of the interlocutory process. The applicants also sought an order that the costs of the proceedings be reserved, with the matter to be listed for directions in relation to the determination of costs. 9. The two interlocutory applications were heard concurrently by Black J on 13 November 2023. His Honour delivered a short ex tempore judgment on the same day. 10. The applicants made several arguments below as to why the offers of compromise did not comply with r 20.26 of the UCPR, such that r 42.13A did not apply. Rule 20.26 specifies requirements for making a formal offer of compromise. Rule 20.27 addresses the acceptance of such offers. Rule 42.13A relevantly provides that if an accepted offer of compromise did not make provision for costs then an offeror is entitled to costs up to the time when the offer was made. 11. The applicants' arguments were rejected by the primary judge. Notably, his Honour concluded that it was clear from the offers that what was proposed was that all of the applicants' claims be determined by the making of the relevant orders. He rejected the submission that the offers were "mixed offers" in the sense that they produced a result partly in favour of the respondents and partly in favour of the applicants, such that r 42.13A did not entitle the respondents to seek costs. 12. His Honour proceeded to make the orders sought by the respondents in their interlocutory process. His Honour also made an order that "[f]or the avoidance of doubt, the proceedings otherwise be dismissed" (as had effectively been sought by the applicants), along with an order that the applicants be released from an interlocutory undertaking given in December 2021. He did not make the declaration sought by the applicants as to the second respondent no longer being a director. 13. Importantly, his Honour concluded his judgment as follows: … finally, it seems to me, even if UCPR r 42.13A did not apply in the relevant circumstances, an order would have been made in favour of the [respondents] on the ordinary basis in any event. The [respondents] have had a substantial measure of success in the proceedings, and it is not to the point that they have not succeeded on all issues or for the entire amount that was claimed or on all bases on which they advance claims. The Court can, but it is not obliged to, segregate aspects of a claim, and it will only do so where to do so would promote the interests of justice in a particular case. Here, there is no reason that the usual principle that costs follow the event would not apply in the ordinary course, quite apart from the application of UCPR r 42.13A. The event here involves several judgements in favour of the [respondents], which are matters of substance, and are sufficient to support an order for costs in their favour, quite apart from the application of UCPR r 42.13A. The application for leave to appeal 1. The applicants seek leave to appeal only from the orders that they pay the respondents' costs of the proceedings up to 23 October 2023, that they pay the costs of the respondents' interlocutory process, and the order that their interlocutory process be dismissed. The challenge to the latter two orders depends upon the challenge to the order relating to the costs of the proceedings. The reason for challenging the last order is in order to reinstate their application that costs in the proceedings below be reserved. They seek that the issue of costs be remitted to the Supreme Court for determination. 2. Leave is required to appeal from orders as to costs only: Supreme Court Act 1970 (NSW), s 101(2)(c). Generally speaking it is appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or a reasonably clear injustice going beyond something that is merely arguable: The Age Company Ltd v Liu [2013] NSWCA 26; (2013) 82 NSWLR 268 at [13]. Caution is called for in granting leave from a decision pertaining to practice and procedure: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 176; PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [3]; T & H Pty Ltd v Nguyen [2022] NSWCA 180 at [16]. In particular, there is a proper reticence on the part of the Court to grant leave to appeal in matters relating to costs alone: note Wilson v Mirus Australia Pty Ltd [2024] NSWCA 111 at [16]. 3. The applicants have articulated five proposed grounds of appeal. The first four were said by the applicants to raise the following questions of general importance: 1. When in a purported offer of compromise a plaintiff offers to compromise all claims made in a proceeding but specifies orders which would not bring to an end all those claims: i. Does such an offer comply with UCPR 20.26? ii. Is such an offer sufficient to entitle a party pursuant to UCPR 20.27(3) to obtain orders bringing to an end claims that would not be brought to an end by the orders specified by the plaintiff? 2. When in a purported offer of compromise a plaintiff offers to compromise all claims made in a proceeding and proposes orders which would not, on ordinary principles, result in a judgement estoppel in respect of all those claims, does an estoppel nevertheless arise in respect of all those claims from the making of the orders as specified by the plaintiff? 3. When, consequent upon an offer of compromise by a plaintiff orders are made in favour of a plaintiff on some causes of action and in favour of the defendant on other causes of action pleaded in the compromised proceeding, is the offer a "mixed offer" such that UCPR 42.13A does not apply? 1. In relation to question 2, the claim that this matter raises issues of res judicata or issue estoppel is artificial. No dispute has arisen on that front, as illustrated by the following emphatic submission of the respondents: had judgment been entered in accordance with the offers of compromise, would the respondents have been able to bring new proceedings against the applicants on any of the causes of action pleaded in the Court below? The answer is clearly "no". 1. At first blush questions 1 and 3 do raise issues of principle, but it is not necessary to consider those questions further. 2. The core difficulty faced by the applicants is that the primary judge also reasoned that he would reach the same result "on the ordinary basis in any event", plainly referring to the fact that costs are in the Court's discretion, where costs generally follow the event: Civil Procedure Act 2005 (NSW), s 98; UCPR, r 42.1. That independent and discretionary basis for his Honour's resolution of the costs dispute is not affected by the first four proposed grounds of appeal. 3. It is attacked by the fifth ground, however, which states: By purporting to exercise the discretion to determine costs of the proceedings apart from consideration of the offers of compromise that had been accepted when the only applications before the Court concerned the offers of compromise and there was no material available to the Court rationally to assess the relative significance to the parties or in the conduct of the litigation of the relief obtained by the plaintiffs in accordance with their offers and the claims abandoned by the plaintiffs by those offers. 1. In effect, the ground complains of a lack of procedural fairness in making the order dealing with the costs of the proceedings. The applicants submitted that the only applications before the primary judge were the two interlocutory applications, where the respondents' application was said to seek "an order pursuant to r 42.13A", and the applicants' application sought a finding that that rule did not apply. It was said that: There was simply no material before the Court to enable a rational assessment of the respective success and failures of the respondents in the proceedings and neither party was on notice, prior to the hearing before his Honour, that such an exercise would be undertaken. 1. These submissions are unpersuasive. Prayer 1(f) in the respondents' interlocutory process sought the following: "Order that the [applicants] pay the [respondents'] costs of the proceedings up to and including 23 October 2023". The chapeau in prayer 1 stated: "In accordance with UCPR r 20.27(3), judgment be entered in the following terms". That subrule provides that if an offer of compromise "is accepted in accordance with this rule, any party to the compromise may apply for judgment to be entered accordingly". The subrule deals with entry of judgment in accordance with the offer of compromise; it does not address costs in terms. The offers of compromise here did not deal with costs. That is why the parties argued about the application of r 42.13A, which does address the issue. But prayer 1(f) was unqualified; it did not mention or depend upon r 42.13A. The issue of the costs of the proceeding up to that date generally was raised by the prayer, and the applicants were on notice of that claim. In any event, it is hardly surprising that the Court would seek to address costs when making final orders disposing of the proceeding. 2. The fact that the applicants' responsive interlocutory process sought an order that costs be reserved and stood over for directions itself indicates that the applicants understood that the issue of costs generally was raised by the respondents' interlocutory process. The applicants sought that the issue be addressed in a different way. The fact that they did not succeed in arguing that the issue should be stood over gives them no cause for complaint about procedural fairness. They had an opportunity to rely on whatever evidence and make whatever submission they wished to in relation to costs at the hearing before the primary judge. 3. The applicants argued that both sides had been proceeding on the basis that the costs issue for determination by his Honour hinged on consideration of rr 20.26, 20.27 and 42.13A. Even if that were so, the primary judge raised with senior counsel for the applicants that his submissions had been directed to the proposition that r 42.13A did not apply – which senior counsel accepted – and then asked "[w]hy do you say the plaintiff should not have its costs in any event?". Senior counsel then made submissions in response, the thrust of which was that "the result has been truly mixed and the Court would enquire into that mixing". He said that "[o]nce we get to that end" his instructions were that offers had been exchanged. His Honour replied: "We have got to that point; I am hearing you on that question now and it is not apparent to me why I shouldn't [sic – should] receive offers or counter offers where all that is sought is an order that costs be paid on the ordinary basis". Whether or not an order for costs should be made as an exercise of the general discretion was thus well and truly raised. 4. The applicants argued that the primary judge did not have before him any material from either party addressing the significance of the degree of success that each side had had, where such material was said to be fundamental to the exercise of the Court's general discretion on costs. That submission links to the suggestion that his Honour was not in a position to make "a rational assessment of the respective success and failures of the respondents". Yet his Honour could make a sufficient assessment by comparison between on the one hand the orders made and, on the other, what had been sought in the further amended originating process as supported by the further amended points of claim. The applicants' interlocutory process itself listed the claims for orders in the further amended originating process which they said should be dismissed. Indeed, senior counsel for the applicants addressed his Honour about the significance of all the claims which were sought to be dismissed. 5. The applicants also complained that his Honour gave no reasons for rejecting the application that the matter be stood over. That submission is correct, although it may readily be inferred that his Honour considered it appropriate that the matter be brought to an end then and there. In any case, the absence of reasons for rejecting the procedural application for standing over the issue of costs is not a sufficient basis to grant leave to appeal on the substantive decision on costs. 6. Senior counsel for the applicants accepted that the second basis for the decision of the primary judge was a concurrent finding, and that the applicants could not get leave if that finding stands. The applicants have not established a clear injustice going beyond something that is merely arguable as regards that basis. And no issue of principle or general importance has been raised in relation to it. That there might be issues of principle involved in the first basis is not a sufficient reason to grant leave to appeal. Order 1. The order of the Court should be as follows: application for leave to appeal dismissed with costs. ********** 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: 16 May 2024