New South Wales Supreme Court CITATION : HOWELL v FIORENZA [2008] NSWSC 709 HEARING DATE(S) : 11 June 2008 JUDGMENT DATE : 16 July 2008 JURISDICTION : Equity JUDGMENT OF : Hall J at 1 DECISION : Order that each party pay his and her own costs of the proceedings. CATCHWORDS : COSTS – application for indemnity costs against successful party – whether disentitling conduct on the part of the successful party – alleged unwillingness by the successful party to negotiate – manner in which successful party pressed his claim Civil Procedure Act 2005 LEGISLATION CITED : Property (Relationships) Act 1984 Uniform Civil Procedure Rules 2005 Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873 CASES CITED : Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 Hooker v Gilling (No 2) [2007] NSWCA 214 Oshlack v Richmond River Council (1998) 193 CLR 72 PARTIES : Iain HOWELL v Irene FIORENZA FILE NUMBER(S) : SC No 3017 of 2006 COUNSEL : P: A Jamieson D: E Pender SOLICITORS : P: Zerrin Jamieson D: Winn Legal IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HALL J WEDNESDAY 16 JULY 2008 No 3017 of 2006 IAIN HOWELL v IRENE FIORENZA JUDGMENT 1 HIS HONOUR: Judgment was delivered in this matter on 3 May 2008. The only issue that remains for determination is the question of the costs of the proceedings. 2 In written submissions, the defendant sought an order for costs in her favour on the ordinary party/party basis from the commencement of proceedings until the date of a purported Calderbank letter, and thereafter, an order for costs in her favour on an indemnity basis: written submissions for the defendant dated 23 April 2008 at [1]. The defendant subsequently revised her position. This is as reflected in the terms of the proposed minutes of order dated 11 June 2008, in which she seeks orders that the defendant pay 50% of the plaintiff's costs on the ordinary basis from the commencement of proceedings until the date of the purported Calderbank letter, and thereafter, that the plaintiff pay the defendant's costs on an indemnity basis. 3 The plaintiff, on the other hand, contends that each party should bear their own costs: written submissions for the plaintiff dated 23 April 2008 at [4]. History of the Substantive Claim 4 By way of statement of claim filed on 22 November 2005, the plaintiff commenced proceedings, claiming relief pursuant to the Property (Relationships) Act 1984. The hearing before this Court took place on 7 and 8 June 2007, 27 July 2007 and 24 August 2007. On 3 March 2008, judgment was given in favour of the plaintiff, in the amount of $45,000 pursuant to s.20(1) of the Act. 5 The defendant submitted that on 17 October 2006 (in the period between the commencement of proceedings and the start of the hearing) her legal representatives made what she describes as a Calderbank offer to the solicitors for the plaintiff, said to have been submitted by post and facsimile. 6 The offer of settlement from the solicitor for the defendant was brief, simply stating:- " We are instructed to make an offer pursuant to the principles set out in Calderbank v Calderbank to settle this matter in the amount of $60,000 plus costs. We ask that you seek your client's instructions in relation to this offer. " 7 The solicitor for the plaintiff denied having ever received this letter, either by post or facsimile. 8 The solicitor for the defendant sent a subsequent letter (dated 23 March 2007) to the plaintiff's solicitor. It did not contain an offer of settlement. Instead, within the last line of one of the paragraphs, there was a reference to a past offer as follows:- "… His share of $100,000 less $65,000 leaves him $35,000 which is a figure substantially less than we offered him some months ago, before incurring more legal costs." 9 Following receipt of the defendant's letter of 23 March 2007, counsel and the solicitor for the plaintiff had a discussion in which counsel for the plaintiff indicated to the solicitor for the plaintiff that he could not recall any offer of more than $35,000 having been made orally by the defendant's counsel. 10 The plaintiff's solicitor replied to the defendant's letter of 23 March 2007, addressing certain matters raised within the defendant's letter. The solicitor for the plaintiff did not, however, direct any discussion to the reference of an offer "some months ago". Cost Submissions of the Parties 11 Upon receiving the written costs submissions of both parties – submissions for the defendant dated 23 April 2008 and submissions in reply for the plaintiff dated 28 April 2008 - the matter was listed for the purpose of clarifying the issues in dispute. 12 In seeking an order for costs in her favour (in particular, a costs order on an indemnity basis) from the date of the purported Calderbank letter, the defendant relied upon what she submitted was disentitling conduct by the plaintiff: Submissions for the defendant dated 23 April 2008 at [1]. At the further hearing, counsel for the defendant properly conceded that in determining the appropriate cost orders, I must, having regard to the evidence of the plaintiff's solicitor, proceed on the basis that the plaintiff never received the defendant's Calderbank letter. Accordingly, the defendant's argument is not one based upon the unreasonable rejection or non-acceptance of a Calderbank offer by the plaintiff. 13 Rather, the defendant submits that other aspects of the plaintiff's conduct can be characterised as conduct disentitling him to costs and, in fact, provides support for the defendant's proposed orders. 14 The defendant submitted that the plaintiff's conduct evidenced an unwillingness to negotiate and a failure to consider an efficacious means of resolving the dispute between the parties. To this end, the defendant relies upon its second letter (dated 23 March 2007) in which the defendant outlined her concern that costs would outrun any judgment obtained by the plaintiff and in which the defendant made brief reference to its past offer. The defendant submits this letter should have prompted the plaintiff to enquire into what past offer had been made and more generally, to investigate the prospects for settlement. 15 Additionally, the defendant submitted that the plaintiff pressed his substantive claim without regard to any adjustment for notional rent, an adjustment which the defendant's legal representatives advised was necessary and which would reduce the plaintiff's entitlement under the Property (Relationships) Act 1984. The defendant contended that the impact of legal principle in this area on the plaintiff's claim was "painstakingly set out in the letter of 28 [sic] March 2007 in order to provide a basis for realistic negotiation": Submissions for the defendant dated 23 April 2008 at [10]. 16 The plaintiff submitted that each party should bear his and her own costs. In the written submissions for the plaintiff, it was stated that "there is nothing in any of the material to suggest that there should be departure from the discretion of the Court to order that each party should bear their own costs": Submissions for the plaintiff dated 28 April 2008 at [4]. The plaintiff repeated this submission at the hearing: see transcript (11 June 2008) at p.7. Legal Principles on Costs 17 Section 98 of the Civil Procedure Act 2005 confers on the Court a broad discretion to award costs. Section 98 provides that:- " (1) Subject to rules of court and to this or any other Act:- (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." 18 This statutory discretion is to be understood in light of Rule 42.1 of the Uniform Civil Procedure Rules 2005. Rule 42.1 provides that:- "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made a to the whole or any part of the costs." 19 Rule 42.1 of the Uniform Civil Procedure Rules 2005 reflects the well-accepted order or "rule" concerning costs:- " No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilt of some sort of misconduct… ": Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874. 20 In appropriate circumstances, the Court may depart from the ordinary rule as to costs. In exercising the statutory discretion, a successful party may, in appropriate circumstances, be ordered to pay the costs of an unsuccessful party where the Court finds disentitling conduct, or misconduct, on the part of the successful party such as to warrant a costs order against it: Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873 at 874; 21 In determining whether the successful party is guilty of misconduct (or disentitling conduct), the conduct must relate either or both to the litigation and/or the circumstances leading up to the litigation: Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 per McHugh J. 22 A successful party may engage in disentitling conduct where the successful party has unnecessarily protracted the proceedings: Oshlack v Richmond River Council (1998) 193 CLR 72 at 98 per McHugh J. It is sometimes said that the unreasonable or improper raising of issues or allegations by the successful party may constitute misconduct by that party. However, as Ipp AJA (as his Honour then was) observed in Arian v Nguyen, such conduct is unlikely to result in an order that the successful party pay the opponent's costs unless it has unnecessarily lengthened the litigation and increased the costs: Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 at [37]. 23 Ultimately, "the making of an order that a successful party pay his or her opponent's costs requires strong justification and exceptional circumstances must exist before a party will … be … required to pay part of the opponent's costs": Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 at [37]; Hooker v Gilling (No 2) [2007] NSWCA 214 at [21]. Determination of the Costs Claim 24 Although the plaintiff succeeded before this Court in respect of his substantive claim, receiving an award of $45,000 pursuant to the Property (Relationships) Act 1984, he did not seek a costs order in terms of Rule 42.1 of the Uniform Civil Procedure Rules 2005. Instead, counsel for the plaintiff submitted that this matter was one in which each party should bear their own costs. 25 I do not consider that the plaintiff has been guilty of engaging in disentitling conduct such as to warrant an order that he, as the successful party, should pay part or all of the defendant's costs. 26 The failure of the plaintiff's representatives to pursue the subject of an offer with the opposing party following receipt of the defendant's second letter cannot be classed as conduct disentitling him to a costs order. The defendant's letter dated 23 March 2007 made only passing reference to an offer "of some months ago". It failed to stipulate the amount of the earlier offer referred to and was unclear as to whether that offer was still on foot. 27 Whilst the plaintiff failed on some of the issues raised within his claim, in particular his pursuit of damages without regard to any adjustment for notional rent, that does not in itself constitute exceptional circumstances that warrants the making of a cost order in favour of the defendant. The plaintiff, as in many cases, did not succeed in establishing all points within his claim. That is reflected in the amount of the award received by him. However, that does not transform the case into one of "exceptional circumstances". 28 In determining the appropriate cost orders for the present matter, I have not overlooked the evidentiary shortcomings in the plaintiff's case, shortcomings to which I referred in the judgment of 3 May 2008. In those circumstances, the position that has been adopted by the plaintiff, namely, that he is to bear his own costs, in my opinion, is hardly a disadvantageous outcome for the unsuccessful defendant. 29 Accordingly, I consider that the appropriate exercise of discretion on the question of costs is an order that each party pay his and her own costs of the proceedings and I so order. ********** 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.