ARKRIVER PTY LTD and ANOR v COLLY FARMS COTTON LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER and SHELLER JJA and WADDELL AJA 27 March 1996, 7 June 1996 [1996] NSWCA 22 DEED OF RELEASE — INDEMNITY COSTS — SUCCESSFUL CLAIM OR DEFENCE SUCCESS IN LITIGATION INCLUDES... FACTS: Whether in an indemnity costs agreement the phrase "a successful claim or defence in the proceedings" included a settlement favourable to the parties in that they retained part of the whole monies claimed. HELD: By Meagher JA; Sheller JA, Waddell AJA agreeing - (1) It is not an unnatural use of language for a defendant to describe a favourable settlement inter partes of litigation as "success" in that litigation. (2) Success in litigation includes settlement by court order whereby orders of the court below are set aside pursuant to the Deed of Release allowing a defendant to retain a portion of the proceedings. ORDERS: 1. Appeal allowed. 2. Judgment and order of Cole J set aside. 3. In lieu thereof, judgment for the appellants against the respondent for an amount equal to the costs of the appellants in these proceedings as agreed or assessed. 4. Order that the respondent pay to the appellants interest on the said amount from 10 July 1992 to 1 October 1993. 5. These orders to take effect as from 1 October 1993. 6. The respondent to pay the appellants' costs both of the proceedings before Cole J and of the appeal, but to have a certificate under the Suitors' Fund Act, 1951 in respect of the latter. Meagher JA This is an appeal from a judgment of Cole J, in what at first blush looks a simple matter. Initially my inclination was to agree with everything his Honour said, but on further reflection I feel unable to do so. The Bank of New South Wales Nominees Pty Ltd as plaintiff sued Colly Farms Cotton Ltd, the respondent to the present proceedings, to recover $804,413.88. Colly Farms Cotton Pty Ltd defended the case by way of a cross-claim against the Bank of New South Wales Nominees Pty Ltd, and also by the same cross-claim sued Arkriver Pty Ltd, the Governor of the Bank of Scotland, and a number of other cross-defendants including Anglo-American Agricultural PLC. Colly Farms Cotton Pty Ltd claimed that, if the Bank of New South Wales Nominees Pty Ltd was successful against it, it was entitled to be indemnified by both Arkriver Pty Ltd and Anglo-American Agricultural PLC. To complete the circle, Arkriver Pty Ltd and Anglo-American Agricultural PLC themselves claimed against both the Bank of New South Wales Nominees Pty Ltd and Colly Farms Cotton Ltd. 2 UNREPORTED JUDGMENTS On the day the matter came on for hearing before Rogers J, a settlement was reached between Colly Farms Cotton Ltd, Arkriver Pty Ltd and Anglo-American Agricultural Pty Ltd. That settlement was Paral and para2(a) recorded in a document entitled "Short Minutes of Order" of that settlement were in the following terms: "1. Cross Claim by CFC dismissed insofar as it makes any claim against Arkriver or AAA. "2. Note the agreement between CFC, Arkriver and AAA that in consideration of the settlement of the cross claim in the above terms: "(a) CFC agrees to pay the costs to Arkriver and AAA of the proceedings in the event that CFC, Arkriver or AAA is successful in any claim or defence in the proceedings which results in CFC, Arkriver or AAA retaining or becoming entitled to the sum of $804,419.88 or any part thereof made the subject of the present proceedings:" What was left of the litigation proceeded before Rogers J who eventually ordered Colly Farms Cotton Ltd to pay the Bank of New South Wales Nominees Pty Ltd the $804,419.88 which it claimed. At that stage nothing had happened to enliven the provisions of CL2(a) of the Short Minutes. His Honour had decided that Colly Farms Cotton Limited failed in its defence against the Bank of New South Wales Nominees Pty Ltd and had failed to succeed in its cross-claim against the Bank of New South Wales Nominees Pty Ltd. It thus was not entitled to retain the sum of $804,419.88 in whole or in part. Roger J's decision resulted in a multiplicity of appeals and cross-appeals. Mercifully, none of them came on for hearing. Instead, they were settled by a Deed of Release, the material parts of which were in the following form: "1. The Orders made in the first and second proceedings shall be vacated. "2. The Defendant in the first proceedings is to pay to the Governor and Company of the Bank of Scotland, account number BSE0004971, Westpac Banking Corporation, Investment Division, Head Office, GPO Box 1, Sydney, NSW, 2001, the sum of $250,000.00 in full and final settlement of all claims made against it in those proceedings, inclusive of interest and costs, within 28 days of this Deed being executed by the parties. "3. Each party in the first set of proceedings is to pay its own costs of those proceedings. "4. In consideration of CL2, the Banks hereby release the Defendant in the first proceedings as well as the plaintiff in the second proceedings from any further claim, demand, mortgage, charge, lien or other encumbrances howsoever arising, including those as may be arising out of the facility arrangement dated 15 February 1988 between the Governor and Company of the Bank of Scotland as agent and Arkriver Pty Ltd of 50 Bridge Street, Sydney, New South Wales, 2000. "5. The Plaintiff in the second proceedings releases the Banks from any claim for damages arising out of the allegations referred to in recital B hereof and hereby further agrees that the Banks and the Plaintiff in the second proceedings will each pay the costs incurred by them in those proceedings. "6. Upon the repayment of the said sum of $250,000.00 referred to in CL2 hereof, the parties will join the application to the Court for orders giving effect to the agreements herein recorded. Without limiting the orders to be so made, such order shall include orders to the following effect: (a) Orders vacating all orders, including all orders for costs, in the first and second proceedings; URJ ARKRIVER PTY LTD and ANOR v COLLY FARMS COTTON LTD (Waddell AJA) 3 (b) Appeals to the Court of Appeal in the first and in the second proceedings to be dismissed with no orders as to costs." The present appellants claimed that, when the Deed of Release was executed, the provisions of CL2(a) of the Short Minutes had become activated. This was the claim which Cole J rejected and which has now been re-agitated before this Court. The argument for the appellant, both before his Honour and again before us, is that after the execution of the Deed of Release, Colly Farms Cotton Ltd was not obliged to pay $804,419.88 in whole or in part to the Bank of New South Wales Nominees Pty Ltd, despite Rogers J's earlier order. Indeed its only obligation was to pay $250,000 to the Governor of the Bank of Scotland. As a result, it was submitted, it had retained either the whole sum of $804,419.88 or else that sum less $250,000.00. His Honour's rejection of this argument can be simply expressed: whatever was in the parties' minds, the words they used required a particular result (ie the total or partial retention of a sum of money) to have been caused by the success of "a claim or defence in the proceedings." The appellants' success could not be so described. As his Honour put it, "Any retention of the sum of $804,419.88, or part thereof, flowed from the terms of settlement between the parties." As I have said, initially I found this argument convincing. With the greatest respect I no longer do so, for two reasons. First, I think it not an unnatural use of language for a defendant to describe a favourable settlement of litigation as a "success" in that litigation. Secondly, and to my mind quite conclusively, if a curial determination be necessary where the order of Rogers J was (or will be) vacated by an appellant pursuant to the Deed of Release, one then has a court order making Colly Farms Cotton Ltd "successful in" its "defence in the proceedings which results in retention of portion of the proceedings". Either way, then, Colly Farms Cotton Ltd had its requisite "success": by settlement inter partes or by Court order. In my view, the following orders should be made: 1. Appeal allowed. 2. Judgment and order of Cole J set aside. 3. In lieu thereof, judgment for the appellants against the respondent for an amount equal to the costs of the appellants in these proceedings as agreed or assessed. 4. Order that the respondent pay to the appellants interest on the said amount from 10 July 1992 to 1 October 1993. 5. These orders to take effect as from 1 October 1993. 6. The respondent to pay the appellants' costs both of the proceedings before Cole J and of the appeal, but to have a certificate under the Suitors' Fund Act, 1951 in respect of the latter. Sheller JA I agree with the orders Meagher JA proposes and the reasons his Honour has given for making them. Waddell AJA I agree with Meagher, JA. 1. Appeal allowed. 2. Judgment and order of Cole J set aside. 3. In lieu thereof, judgment for the appellants against the respondent for an amount equal to the costs of the appellants in these proceedings as agreed or assessed. 4 UNREPORTED JUDGMENTS 4. Order that the respondent pay to the appellants interest on the said amount from 10 July 1992 to 1 October 1993. These orders to take effect as from 1 October 1993. The respondent to pay the appellants' costs both of the proceedings 5 before Cole J and of the appeal, but to have a certificate under the Suitors' Fund Act, 1951 in respect of the latter. aun Counsel for the appellant: D Robinson SC 10 Solicitors for the appellant: Mallesons Stephen Jaques Counsel for the respondent: RG Forster SC Solicitors for the respondent: Abbott Tout