Russo v Resource Developments International Pty Ltd (No 2) [2003] NSWSC 446

New South Wales Supreme Court

CITATION : Russo v Resource Developments International Pty Ltd (No 2) [2003] NSWSC 446 HEARING DATE(S) : 09/05/03 JUDGMENT DATE : 26 May 2003 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Plaintiff to pay the fifth defendant's costs.

CATCHWORDS : PROCEDURE [581]- Costs- General rule- When not followed- Disreputable conduct of party- Conduct not impinging on result- Effect on costs. Bostock v Ramsey Urban District Council [1900] 2 QB 616 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Dicks v Yates (1881) 18 Ch D 76 CASES CITED : Donald Campbell & Co Ltd v Pollak [1927] AC 732 King & Co v Gillard & Co [1905] 2 Ch 7 MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23 Ritter v Godfrey [1920] 2 KB 47 Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129 Vincenzo Russo (P1) Merkado Pty Limited (P2) Resource Developments International Pty Limited (D1) PARTIES : Premier Resources Limited (D2) Hy-Tec Industries Pty Limited (D3) Iyad Rafidi (D4) Placido Costa (D5) FILE NUMBER(S) : SC 1947/02 COUNSEL : F G Lever SC (P) R Seton SC (D5) SOLICITORS : Bartier Perry (P) PricewaterhouseCoopers Legal (D5)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Monday 26 May 2003

1947/02 – RUSSO v RESOURCE DEVELOPMENTS INTERNATIONAL PTY LTD (NO 2) JUDGMENT 1 HIS HONOUR: This judgment concerns the question of costs between the plaintiff and the fifth defendant, Mr Placido (Pat) Costa. 2 I gave judgment on 2 April 2003 [2003] NSWSC 239. The case had, together with an associated matter, involved 9 days hearing. The plaintiff made a number of claims against the defendants. He was successful on only one of those claims and that claim was successful only against the first and fourth defendants. 3 The prayers in the statement of claim show that the relief sought against the fifth defendant was a declaration that he was knowingly concerned in breach of the Trade Practices Act or Fair Trading Act because of the conduct of the other defendants, and for consequential monetary orders. 4 The fifth defendant was not sued as a solicitor. In fact, he had drawn up some documents which were relied on by the plaintiff in his case, but there was no defective drafting of those documents, and indeed, their form actually assisted the plaintiff in his success against other defendants. 5 The plaintiff wholly failed on his Trade Practices claim and accordingly wholly failed against the fifth defendant. 6 Ordinarily, this would be enough for the fifth defendant to obtain an order for his costs against the plaintiff without question. 7 The problem that I have felt and why I have reserved my decision on this matter is that in paras 77 and following of my earlier judgment I found that I could not believe the evidence of the fifth defendant and the evidence of the fourth defendant, Mr Rafidi that they had no reference to each other's affidavits when both were in identical form. Moreover, it was more likely than not that the three documents to which I referred in my earlier judgment were created after the event in order to boost a principal point made by the defendants generally that the share sale agreement was subject to the heads of agreement which had earlier been agreed upon. The principal reason for coming to this view was that one of the documents was written on the reverse side of a used piece of paper which could not have come into existence until well after the date of the document. 8 The question of principle then is how far can a court deprive a successful litigant of his costs because, to put it at its highest, it is found that in a matter not connected with the reasons for which that person succeeded he has fabricated a document which was deployed in evidence and has maintained that the document was not fabricated. 9 There is no doubt at all that there are some circumstances where the court may deprive a successful party of his or her costs of the action. This has been the case even before the Judicature Act, see eg Dicks v Yates (1881) 18 Ch D 76, 85. 10 It is probably appropriate to commence with the House of Lord's decision in Donald Campbell & Co Ltd v Pollak [1927] AC 732. In that case, even though the trial judge gave a verdict for the defendant employee when sued by his ex employer, he ruled that this should be without costs because of the action of the employee in concealing his partnership with the co-defendant which the Judge said was misconduct and the real reason why the action was commenced. The decision on costs was reversed by the Court of Appeal, but restored by the House of Lords. Viscount Cave said at 812 that a successful defendant has in the absence of special circumstances a reasonable expectation of obtaining an order for costs. However, the court always had a discretion but: "the Judge ought not to exercise it against the successful party except for some reason connected with the case. Thus, if – to put a hypothesis which in our Courts would never in fact be realized – a judge were to refuse to give a party his costs on the ground of some misconduct wholly unconnected with the cause of action or of some prejudice due to his race or religion or … to the colour of his hair, then a Court of Appeal might well feel itself compelled to intervene. But when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to the litigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me that a Court of Appeal … is prohibited by the statute from entertaining an appeal from it." 11 The law lords said that it would be quite wrong to lay down any definite rules as to how the discretion was to be exercised. However, with reference to previously decided cases, they gave some guidelines. They indicated that Atkin LJ had gone too far by saying in Ritter v Godfrey [1920] 2 KB 47, that there were three situations where the Judge could deprive a defendant of costs on the basis that the statement was too prescriptive. However, they endorsed the general sentiment as guidelines. The three circumstances were: