New South Wales Supreme Court CITATION : Anzaway v Maroun Corporation (No.2) [2003] NSWSC 725 HEARING DATE(S) : 7 August 2003 JUDGMENT DATE : 7 August 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : See under heading "Conclusions" CATCHWORDS : COSTS - contraventions found against second and fourth defendants - plaintiffs failed to establish that defendants' caused them loss - whether plaintiffs should be ordered to pay second and fourth defendants' costs - whether second and fourth defendants, though successful, should be ordered to pay plaintiffs' costs - apportionment of costs between defendants - whether plaintiffs should be ordered to pay cross-claimants' costs LEGISLATION CITED : Trade Practices Act 1974 (Cth) ss 52, 82 Aristotite v Gladstone Park Shopping Centre Pty Ltd (1984) 55 ALR 387 Colgate Palmolive v Cussons Pty Ltd (1993) 118 ALR 248 Donald Campbell & Co Ltd v Pollak [1927] AC 737 Edginton v Clark [1964] 1 QB 367 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants (1988) 81 ALR 397 Igaki Australia Ltd v Coastline Pty Ltd (Federal Court of Australia, Drummond J, 2 November 1994, unreported). Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 CASES CITED : JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 Jones v Merioneth Shire Permanent Benefit Building Society [1892] 1 Ch 188 Re Bond Corporation Holdings Ltd (1990) 1 ACSR 350 Ritter v Godfrey [1920] 2 KB 47 Rosnik v Government Insurance Office (1997) 41 NSWLR 608 Russo v Resource Development International Pty Ltd (No 2) [2003] NSWSC 446 Scherer v Counting Instruments Ltd [1986] 1 WLR 615 Zelino Pty Ltd v Budai [2001] NSWSC 501 Anzaway Pty Ltd (P1) Neville James Green (P2) Frederick Geoffrey Marles (P3) Warren Gilbert Scott (P4) PARTIES : Maroun Corporation Pty Ltd (D1) Fribeau Pty Ltd (D2) Joseph Maroun (also known as Joseph Boutros) (D3) Estphan (Estephan) Maroun (also known as Steve Boutros) (D4) Michael Doueihi (D5) Joe Nasr (D6) FILE NUMBER(S) : SC 3403/00 N Cotman SC with G Thomas (P) COUNSEL : D Officer QC (D1-D4) S D Robb QC (D5) M Mudge (Solicitor) (D6) K O'Malley, Jones & Williamson (P) SOLICITORS : Tress Cocks & Maddox (D1-D4) Acuiti Legal (D5) Corrs Chambers Westgarth (D6) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J THURSDAY 7 AUGUST 2003 3403/00 ANZAWAY PTY LTD & ORS V MAROUN CORPORATION PTY LTD & ORS (NO. 2) JUDGMENT (Revised) 1 HIS HONOUR: In my reasons for judgment published on 3 July 2003, I reached the following conclusions: · the second defendant contravened s 51(1) of the Trade Practices Act, and the fourth defendant was involved in that contravention for the purposes of s 75B; · subject to submissions, there was no utility in making any declaratory orders with respect to that contravention; · the plaintiffs failed to establish any causal link between the contravening conduct of the second defendant and any loss by the plaintiffs, and therefore they were not entitled to recover damages from the second or fourth defendant; · no contravention or grounds for relief had been established against the first and third defendants; · the plaintiffs failed to establish that the fifth and sixth defendants were involved in any contravening conduct for the purposes of s 75B; · even if there had been such involvement, the plaintiffs failed to establish any causal link between that involvement and the loss they claimed to have suffered, and therefore the plaintiffs were not entitled to any relief against the fifth and sixth defendants. 2 I invited submissions with respect to some parts of the cross-claims, and with respect to costs. I stood the matter over until today for the purpose of hearing those submissions and making orders. 3 It is clear, in consequence of my reasons for judgment, that the proceeding should be dismissed. I have received no submissions to the effect that there would be any utility in my making declaratory orders with respect to the contravention and involvement of the second and fourth defendants. The parties to the cross-claims had no submissions to make other than that the cross-claims should be dismissed in consequence of my findings. The remaining issues relate to costs of the proceeding and of the two cross-claims. 4 The plaintiffs did not demur from the proposition that they should be ordered to pay the costs of the proceeding of the first, third, and sixth defendants, on the basis that those costs should follow the event. The parties to the two cross-claims agreed that there should be no order for costs of the cross-claims, with the intention, inter se, that they pay their own costs of the cross-claims. The issues that have emerged from submissions are these: · What order for costs of the proceeding should be made as between the plaintiff and the second and fourth defendants? · Should an order be made for the apportionment of the joint costs of the first four defendants between the first and third and the second and fourth, and if so, what should that apportionment be? · Should be plaintiffs be ordered to pay the fifth defendant's costs? · If so, should the fifth and sixth defendants have their costs on the indemnity basis? · Should the plaintiffs be ordered to pay the cross-claimant's costs of each cross-claim? Cost of the proceeding as between the plaintiffs and the second and fourth defendants 5 The plaintiffs submitted that the appropriate order was either that the second and fourth defendants pay the plaintiffs' costs, or that there be no order for costs as between those parties. The second and fourth defendants submitted that they, like the first and third defendants, should have an order that the plaintiffs pay their costs. I have decided that the correct course is to make no order for costs of the proceeding as between the plaintiffs and the second and fourth defendants. 6 It is often pointed out that costs are in the discretion of the Court, having regard to s 76(1) of the Supreme Court Act 1970 (NSW), but that the principles upon which the discretion is to be exercised are well settled: see, for example, Zelino Pty Ltd v Budai [2001] NSWSC 501 (24 July 2001), at [224]-[225]; Scherer v Counting Instruments Ltd [1986] 1 WLR 615, 621. The discretion extends to denying a successful defendant his costs: Donald Campbell & Co Ltd v Pollak [1927] AC 737, 811-812. In Ritter v Godfrey [1920] 2 KB 47, 60, Atkin LJ identified circumstances where a successful defendant might be denied costs, referring to cases where the defendant brought about the litigation, or did something to occasion unnecessary litigation or expense, or did some wrongful act in the course of the transaction of which the plaintiff complains. In cases where the successful litigant should recover some costs, he may be deprived of the costs in respect of an issue upon which he has failed: Jamal v Secretary, Department of Health (1988) 14 NSWLR 252, 271. 7 The plaintiffs gave other examples where costs were not awarded to successful defendants: Jones v Merioneth Shire Permanent Benefit Building Society [1892] 1 Ch 188; Igaki Australia Ltd v Coastline Pty Ltd (Federal Court of Australia, Drummond J, 2 November 1994, unreported). The breadth of the Court's discretion was underlined by Young C J in Eq in Russo v Resource Development International Pty Ltd (No 2) [2003] NSWSC 446 (26 May 2003). 8 I received submissions as to whether some of the cases to which I have referred are applicable directly or analogously in the circumstances before me now. My opinion is that these cases are of assistance for the principles laid out, but they are of less assistance as to the exercise of discretion pursuant to those principles. The facts and circumstances of each case must be taken into account, in a manner that means that other cases are necessarily distinguishable. 9 While the second and fourth defendants successfully resisted the plaintiffs' claim for damages, I found that the fourth defendant engaged in misleading and deceptive conduct on behalf of the second defendant, during the telephone conference on 12 March 1999 and from that time until 17 March 1999. My findings were findings of intentionally misleading and deceptive conduct (see paragraph [89]). I regard the fourth defendant's conduct on behalf of the second defendant as a serious and deliberate contravention of the law. The second and fourth defendants were successful only because there was no causal link established between the contravention and any loss by the plaintiffs. My view is that, in the exercise of my discretion with respect to costs, I should not make an order entitling the second and fourth defendants to recover their costs in these circumstances. 10 Relying on my findings of contravention and involvement against the second and fourth defendants, the plaintiffs submitted that I should go further than simply not ordering them to pay the second and fourth defendants' costs. I should, according to the plaintiffs' preferred position, order the second and fourth defendants to pay the plaintiffs' costs. 11 That is a difficult submission to justify, given that the second and fourth defendants successfully resisted the plaintiffs' claims for relief against them. It is true, according to my observation of the hearing, that until the first hearing day the plaintiffs anticipated that there would be a full contest on liability, and I infer that they prepared for the hearing accordingly. At the hearing all defendants informed the Court that they would not read the affidavits that had been filed on their behalf. The focus of the hearing as regards the first four defendants then switched, broadly speaking, from liability to causation of loss, an issue on which the first four defendants were successful. The plaintiffs say that as the damages case was a minor part of the pre-trial and trial time and documentation, and they were successful against the second and fourth defendants on the question of contravention, they should have a costs order against those defendants. 12 The breadth of the Court's discretion is such that conceivably, where the facts justify it, an order might be made, not only denying costs to the successful party, but requiring that the successful party pay the unsuccessful party's costs. However, accepting for present purposes that such an order is permissible, this is not a case where, on the facts, the order would be justified. Proof of damage under s 82 is an essential element of the cause of action for damages for contravention of s 52: JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237. It must have been obvious to the plaintiffs at all times that causation would be an issue in the present case. While it is appropriate to disentitle the second and fourth defendants from recovery of their costs, notwithstanding their success, there is in my opinion no case for making an order for costs in favour of the plaintiffs that would disregard their failure on an important ingredient of the cause of action upon which they have relied. Apportionment of the first four defendants' costs of the proceeding 13 The plaintiffs submitted that if there was to be an order that the plaintiffs pay the first and third defendants' costs, the order should be confined to costs in relation to the plaintiffs in respect of any separate and incremental costs associated with their participation in the proceeding. Counsel for the plaintiffs pointed out that the first four defendants had the same legal representation and acted in the same interest in the proceeding. 14 The first to fourth defendants submitted that the appropriate order should be for the plaintiffs to pay 50% of the costs of the first four defendants. This submission was on the basis that the first four defendants had joint representation and should be treated as contributing equally to the overall costs, as the first and third defendants were entitled to full representation at the hearing and for the purpose of preparing their case, as were the second and fourth defendants. It was submitted that, as a matter of discretion, the totality of the costs ought to be split 50% to the successful defendants and 50% to the defendants found to have contravened or been involved in contravention. 15 I have considered whether the best course might be simply to order the plaintiffs to pay the costs of the first and third defendants, and to make no order for costs as between the plaintiffs and the second and fourth defendants, leaving it to the costs assessor to work out which items should be attributed to the first and third defendants, and which to the second and fourth defendants, and then to make an appropriate determination with respect to joint costs. However, to do that would leave a fertile field for further disputation between the parties, and would leave the costs assessor to make decisions without any guidance in principle. All things considered, it is better that (having heard submissions on the issue) I should make a determination. 16 I have decided to accept the plaintiffs' submissions on this point. Much of the evidence at the hearing was directed to issues going to the plaintiffs' misleading and deceptive conduct case. The conduct of the fourth defendant was at the centre of evidentiary attention. I found that his conduct caused the second defendant to contravene s 52. As I have said, that was a deliberate and serious contravention. The second and fourth defendants should not have the benefit of costs recovery from the plaintiffs. It is not unfair, given the emphasis of the evidence, to confine the first defendant (a corporation belonging to the Maroun family) and the third defendant (the fourth defendant's brother, who was a co-director of the second defendant and executed the deeds of assignment) to their incremental costs, and to deny the second and fourth defendants the element of windfall that they would derive if costs were apportioned on a 50-50 basis. The fifth defendant's costs 17 The plaintiffs say that the fifth defendant was "sufficiently privy to the breaching conduct of the Marouns as to justify him being deprived of an order for the plaintiffs' to pay his costs". The plaintiffs say that the fifth defendant facilitated the misleading conduct of the second defendant by continuing the "blind" as to the real identity of the purchasers after 12 March 1999. They rely on paragraph 26 of the fifth defendant's affidavit, tendered by the plaintiffs, which was to the effect that the fourth defendant informed him on 12 March 1999 that they new deal had been struck to buy the options over the Rockdale properties and that the fourth defendant and his brother had used their family name "Boutros" during the negotiations and had nominated the sixth defendant as solicitor. 18 In my opinion, this submission is inconsistent with my findings. I found (my judgment of 3 July 2003, paragraph [103]) that the fact that the fifth defendant knew his clients had made a number of offers to purchase on behalf of the first defendant and had then secured an agreement in the name of Boutros, did not give the fifth defendant actual knowledge of any misleading or deceptive conduct. I said there was no basis for concluding that the fifth defendant knew, prior to settlement on 17 March, anything about the bargaining process in the telephone conference on 12 March, or anything about the reasons why the fourth defendant used the name Boutros in the negotiations, or why he and the third defendant used the name Boutros in the deeds of assignment. 19 I do not attach any significance, in this regard, to the fact that the fifth defendant did not give evidence and thereby expose himself to cross-examination. That was the result of a forensic decision, successful as it happened, not to go into evidence in any substantial way and to contend that the plaintiffs failed on their own case. Fifth and sixth defendants' claim for indemnity costs 20 The fifth and sixth defendants say that the plaintiffs should be ordered to pay their costs on an indemnity basis, having regard to my findings of lack of evidence against them. They contend that there was simply no proper evidentiary basis for the plaintiffs to make such serious claims against them. They say that this was a case where the proceedings had been commenced and continued against them by plaintiffs who, properly advised, should have known they had no chance of success. I was taken to the familiar principles about indemnity costs enunciated in such cases as Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants (1988) 81 ALR 397, 401; Colgate Palmolive v Cussons Pty Ltd (1993) 118 ALR 248, 257; Re Bond Corporation Holdings Ltd (1990) 1 ACSR 350, 363; Rosnik v Government Insurance Office (1997) 41 NSWLR 608,216, 627. 21 I disagree with this submission. There was some evidence available to the plaintiffs that suggested a connection between the fifth and sixth defendants and the misleading and deceptive conduct involving use of the Boutros name. The evidence against the sixth defendant is summarised at paragraph [99] of the judgment, and the evidence against the fifth defendant is summarised at paragraphs [103] and [104]. I was asked to draw some inferences from this evidence as to their involvement in the deception. The submission that I should do so was not beyond plausible contention, even though it was unsuccessful. Cross-claimants' claim for an order that the plaintiffs pay their costs of the respective cross-claims 22 The fifth and sixth defendants say that, although the parties to the cross-claims have agreed that there should be no orders for costs on the cross-claims as between them, the fifth and sixth defendants as cross-claimants should nevertheless recover their costs of instituting and maintaining their respective cross-claims from the plaintiffs. 23 The jurisdiction of the Court to make such an order, which is analogous to a "Bullock" or "Sanderson" order, is considered in Ritchie's Supreme Court Procedure NSW, paragraph [s76.5]. As to the occasions for making such an order, reference is made to Edginton v Clark [1964] 1 QB 367, 279-384, and Aristotite v Gladstone Park Shopping Centre Pty Ltd (1984) 55 ALR 387, 392. 24 Counsel for the fifth defendant submits that it is appropriate that the plaintiffs be ordered to pay the fifth defendant's own costs of the second cross-claim, because the plaintiffs' claim against the fifth defendant was the effective cause of the second cross-claim, having regard to the following matters: (a) the reason for the fifth defendant's filing the second cross-claim was that allegations were made by the plaintiffs in the Further Amended Statement of Claim as to the wrongful use by the Maroun parties (the first four defendants) of the name "Boutros"; (b) the alleged ancillary liability of the fifth defendant for the conduct of the Maroun parties could only be established if the plaintiffs succeeded against the Maroun parties; (c) the fifth defendant took a reasonable course by filing the second cross-claim, as a third party proceeding, to obtain contribution or indemnity from the Maroun parties (whether in equity, or under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), or in tort or contract); (d) it was proper for the fifth defendant to avoid the risks inherent in the second cross-claim being dealt with in separate, later proceedings, given the possibility of inconsistent findings of fact; (e) the commencement of the second cross-claim was the most cost-efficient use of the Court's time and resources; (f) the fifth defendant could only effectively test the claim as between the plaintiffs and the Maroun parties, which was the only underlying basis of his potential liability, by filing the second cross-claim; (g) "… the real and only fight was between the [plaintiffs] and [the Maroun parties], the third parties" (see Edgington v Clark at 384). 25 I agree with these submissions, on the basis that the "real and only fight" referred to in paragraph (g) is the contest to which the cross-claim was relevant. I also agree with the six defendant that the matters relied upon by the fifth defendant in relation to the second cross-claim apply with equal force to his position in relation to the first cross-claim. Conclusions 26 I shall make the following orders: 1. Proceeding dismissed. 2. First and second cross-claims dismissed. 3. Plaintiffs to pay the costs of the proceeding, of fifth and sixth defendants. 4. No order for costs as between plaintiffs and second and fourth defendants, with the intention that second and fourth defendants pay their own costs of the proceeding. 5. Plaintiffs to pay first and third defendants' costs of the proceeding, but only to the extent of separate and incremental costs associated with their participation. 6. No order for costs on the first and second cross-claims as between the parties to the cross-claims, with the intention that they bear their own costs of the cross-claims. 7. Plaintiffs to pay the cross-claimant's costs of each of the cross-claims. ********** Last Modified: 08/15/2003 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.