New South Wales Supreme Court CITATION : Vella v Australia and New Zealand Banking Group Ltd; Vella v Permanent Mortgages Pty Ltd; Mitchell Morgan Nominees Pty Ltd v Vella [2009] NSWSC 123 HEARING DATE(S) : Post judgment submissions: 1/7/2008; 11/8/2008; 13/11/2008. Then written submissions JUDGMENT DATE : 6 March 2009 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Rulings made on outstanding cross-claims and orders made for costs. CATCHWORDS : PROCEDURE [552]- Costs- Consolidated proceedings- Multiple parties- Overlapping issues- How costs dealt with. TORTS [22]- Negligence- Economic loss- Lender on mortgage sues mortgage originator- Held no duty of care. Civil Liability Act 2002, s 5 O, s 35 LEGISLATION CITED : Civil Procedure Act 2005, s 98 Fair Trading Act 1987, s 42, s 72 Uniform Civil Procedure Rules 2005, r 36.1, r.42.15 ACQ v Cook (No 2) [2008] NSWCA 306 Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 Bryan v Maloney (1995) 182 CLR 609 Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643 Furber v Stacey [2005] NSWCA 242 Gould v Vaggelas (1985) 157 CLR 215 CASES CITED : Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 Mills v Sheahan (2007) 65 ACSR 75 National Commercial Banking Corp of Aust Ltd v Robert Bushby Ltd [1984] 1 NSWLR 559; affirmed (1986) 160 CLR 251 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745 SCEGS Redlands Ltd v Barbour [2008] NSWSC 928 Simos v National Bank of Australasia Ltd and Guelman (1976) 10 ACTR 4 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 Alessio Emanuel Vella (P) Mitchell Morgan Nominees Pty Ltd (D1: 4059/06) Mitchell Morgan Nominees (No 2) Pty Ltd (D2: 4059/06) PARTIES : Permanent Mortgages Pty Ltd (D: 4122/06) Australia and New Zealand Banking Group Limited (Cross-Defendant in Third Cross-Claim: 4059/06; D1: 3957/06) Hunt & Hunt (Cross-Defendant in Second Cross-Claim: 4059/06) James Rutty (Third Cross-Defendant in Fifth Cross-Claim: 4059/06) Vanessa Tsokos (Third Cross-Defendant to Second Cross-Claim: 3957/06) FILE NUMBER(S) : SC 3597/06; 4122/06; 4059/06 M J Slattery QC, D A Smallbone and D P O'Connor (P) B A Coles QC and G A Sirtes SC for Mitchell Morgan companies R G Forster SC and P J Dowdy for ANZ Bank COUNSEL : R A Parsons for Permanent Mortgages P Morris for Rutty J Stevenson SC and N Kabilafkas for Hunt & Hunt R D Marshall and C H Cassimatis for Tsokos Slater & Gordon Lawyers (P) HWL Ebsworth (for Mitchell Morgan companies) Kells The Lawyers (for Permanent Mortgages) SOLICITORS : Henry Davis York (for ANZ Bank) Moray & Agnew (for Rutty) Mallesons Stephen Jaques (for Hunt & Hunt) JGP Lawyers (for Tsokos) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Friday 6 March 2009 3957/06 – VELLA v AUSTRALIA & NEW ZEALAND BANKING GROUP LTD 4122/06 - VELLA v PERMANENT MORTGAGES PTY LTD 4059/06 – MITCHELL MORGAN NOMINEES PTY LTD v VELLA JUDGMENT 1 HIS HONOUR: I gave reasons for judgment in these and associated matters on 28 May 2008, coded [2008] NSWSC 505. 2 I said at [717] of my reasons that it was possible that I may have overlooked a point which required my reasons and that, if such had occurred, it should be drawn to my attention at the short minute stage. 3 Some counsel did take up this invitation and raised a series of issues as well as making claims that some questions argued had not been adequately considered in those reasons. 4 The issues involved were identified and submissions were made in writing. 5 Unfortunately, the submissions came in dribs and drabs and it was difficult to know whether they were completed. 6 In September 2008, I sent a memo to all concerned setting out the issues remaining as I perceived them. There was one correction to my draft which I accept. 7 Thus, by agreement of all concerned, I need to deal with the following issues, which I will do so in order and under the following headings: 8 The issues are: 1. How far can I or should I supplement what was said in my original reasons? 2. Should I modify what I said about what I called "the Tsai principle" in my reasons? 3. Should I give further reasons as to why I did not place more value on the Dobbs clause in the Mitchell Morgan mortgage? 4. Did I fail to deal adequately with the evidence of Gary Welsh? 5. Should Mr Vella's claim to amend the statement of claim in 3957/2006 be allowed? 6. Did I deal with the cross-claim ANZ Bank v Caradonna? 7. What amount is due by Ms Palumbo to Permanent Mortgages? 8. I should deal with the cross-claim Permanent v James Rutty. 9. I should deal with Mr Vella's claim for damages for trespass. 10. What should be done about the proposed amendment to cross-claim, Mitchell Morgan v Vella? 11. Costs. 12. Questions of Bullock/Sanderson orders. 9 There is a thirteenth issue and that is the assessment of damages in 3957/06, Vella v Caradonna which will need to be referred to an Associate Judge. However, I will make some comments about this following the submissions of Mr Vella's counsel dated 25 August 2008. 10 After the list of remaining issues was agreed, I held a further directions hearing on 13 November 2008. By consent orders were made that the absolutely final date for the submission of further material was 28 November 2008. This date was not strictly adhered to, but was almost achieved. Unfortunately in December, the list was too heavy for me to finalize the reasons for judgment on the remaining issues. 11 I now provide my final reasons, using the headings set out above. 12 1. I did not intend, when issuing the invitation, to have matters reargued or to review the principal matters decided in the judgment. What the invitation was intended to cover was the omission of proper consideration of a peripheral aspect of the case, such as a cross-claim or the omission to give sufficient reasons for a finding which I made. 13 Although there have been orders passed and entered in relation to part of what I decided, as I understand it, the matters under present consideration have not been the subject of an order that has been entered. Nonetheless, whilst the court may reopen a matter it is reluctant to do so and needs to bear in mind the observations of the High Court in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300. 14 I do not consider that, in the present case, I should review what I have already done. Thus, I will very quickly deal with items 2-4 on the above list as they call for re-examination of what has been decided. 15 2. Mr Sirtes for Mitchell Morgan Nominees submitted that the approach I took in Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745 and in the present case were different from other decisions and should be reviewed. Further, I did not take into account the significant fact that in the present case Mr Vella actually received the funds from the mortgagee in that they were paid into a joint bank account he held with Mr Caradonna. 16 Very detailed submissions were made as to the ambit of the Tsai principle before I delivered my principal set of reasons. 17 I believe that I adequately considered those submissions as to the applicability of the so-called Tsai principle in detail and do not consider that I should revisit this matter. 18 3. The criticism here as I understand it is that I failed to give adequate or proper consideration to the presumption referred to by the High Court in Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643. The riposte was that the relevant clauses were not "genuine Dobbs clauses". The point was then abandoned. 19 4. Mr Gary Welsh was an ANZ Bank Manager at Liverpool at the relevant time. He swore two affidavits principally about the opening of the joint account by Messrs Vella and Caradonna at his branch of the bank. He was strongly cross-examined. 20 There is little or no reference to Mr Welsh's evidence in the judgment. The reason is that I did not consider it strong enough to displace any of the other material germane to the principal issues. 21 Mr Welsh said that Mr Vella called Mr Caradonna "Bro". This fact is of little value of itself as the two men were close at the relevant time. 22 The contention is that Mr Caradonna's statement in the presence of Mr Vella to Mr Welsh that the joint bank account being opened was to be the repository of funds raised against properties to be used for a business of boxing promotion, if accepted, tends to show that Mr Vella was more closely involved with the mortgaging of his properties than he would have me believe. 23 Mitchell Morgan submits that Mr Welsh gave evidence that Mr Vella mentioned that large sums were coming in from the Enmore property. Mr Vella disputed this. Mitchell Morgan say that this evidence is particularly significant as it shows that Mr Vella knew that the Enmore property was to be used for raising funds at least for his boxing enterprise. 24 Mr Slattery QC's cross-examination of Mr Welsh indicated to me that, whilst Mr Welsh's memory was strong about the boxing promotion statement, it was not reliable about the realization of funds from properties. 25 I did not consider Mr Welsh's evidence was significant in reaching the findings of fact I made. 26 5. Mr Vella seeks to amend his statement of claim in 3957/2006 by inserting two further prayers #1A and 1B as follows: " 1A. An order that the first defendant restore to the said account the sum of $150,000 with effect from 3 February, 2006 and do such things if any as may be necessary to reinstate the said account. 1B. An order that the second and third defendants be restrained from applying to withdraw from the account the said sum of $150,000 and any interest earned thereon except with the written and signed consent of the plaintiff." 27 In the relevant proceedings, the first defendant is the ANZ Bank, the second defendant is Mr Caradonna, the third defendant is Mr Robinson, Mr Caradonna's trustee in bankruptcy. 28 The background to this request is what appears in the principal judgment at [433] ff and concerns the joint bank account of the plaintiff and Mr Caradonna with the Bank. 29 It seems to me that this amendment should be allowed for at least two reasons. 30 First, under rule 36.1 of the Uniform Civil Procedure Rules 2005, the Court is entitled to make whatever order is appropriate whether sought in the originating process or not. Of course, this power is only exercised if matters have been sufficiently ventilated at the hearing. 31 Secondly, my discussion in the earlier judgment shows that the matter really is within the ambit of what was being dealt with in the main hearing. 32 6. At [707] of the principal judgment I said that the ANZ Bank's cross-claim against Mr Caradonna was indefensible and that he was liable to indemnify the bank against its loss. 33 Mr Caradonna is now a bankrupt. Doubtless the Bank will be proving in his bankruptcy. As I said Mr Caradonna needs to indemnify the Bank, I cannot see why I need expand on what I have already said. 34 7. I considered this cross-claim at [696] ff of the principal judgment. 35 I there noted that Ms Palumbo took no part in the hearing and did not file any evidence. 36 The prime allegation against Ms Palumbo is that she falsely certified that she had witnessed the signature purporting to be that of Mr Vella on some vital documents. 37 I said at [700] that there should be a verdict for Permanent against Ms Palumbo for the sum claimed, namely $1,151,500. 38 I am not at all sure what further matter needs consideration. However, I assume the problem is that s 35 of the Civil Liability Act 2002 requires the court only to award against each concurrent wrongdoer, the share of the loss which is just having regard to the particular defendant's involvement. That requirement applies notwithstanding that the relevant defendant did not file a defence or participate in the proceedings. 39 The fact that Ms Palumbo was a cause, but not the sole cause, of Permanent's loss would not, of course, be relevant except after the coming into force of s 35 of the Civil Liability Act. 40 I have already discussed the scope of s 35 at [572] ff of the principal reasons. 41 At [634] of the principal judgment I dismissed Permanent's claim against Mr Vella, and, as will appear later in these reasons, I have also dismissed its claim against Mr Rutty. 42 Apart from Permanent's own possible negligence, other persons who may have contributed to Permanent's loss would be Mr Caradonna, Permanent's solicitors Mr Flammia and possibly La Trobe. 43 It seems to be that when I am assessing the respective contributions, Permanent's attitude in disregarding the sound advice of Ms Thornhill and that lady's employer for countermanding her assessment of the situation means that the great bulk of the loss lies with those parties and Mr Caradonna. I would consider that Ms Palumbo's contribution to the loss is not more than 17.5%. 44 Accordingly, the judgment against Ms Palumbo should be 17.5% of $1,151,500 (on my calculation $201,512.50) plus the appropriate amount of interest. 45 8. By its cross-claim, Permanent sues Mr Rutty for misleading conduct and negligent misstatement. It says that, if (as has happened) it fails in its defence against the principal claim, Mr Rutty should pay it the amount it has lost pursuant to s 72 of the Fair Trading Act 1987. 46 It seems clear that, although the cross-claim was before the court and counsel addressed it in submissions, somehow or other it "slipped through the net" and I failed to deal with it. The parties are entitled to have me do so now. 47 Mr Parsons, for Permanent, submits that Mr Rutty submitted documentation to La Trobe, knew what was expected of a mortgage originator under agreements with La Trobe, knew that not only La Trobe but also those higher up in the lending hierarchy would be relying on the documentation he was submitting. Yet,he proffered documents which were misleading because of over reliance on Mr Caradonna and his failure to take precautions to ensure that Mr Vella's purported signature was genuine. 48 As to negligence, it is put that there is sufficient proximity between Permanent and Mr Rutty to give rise to a duty of care which was breached by the same defaults as I have noted in the previous paragraph. 49 As to the statutory count, it must be remembered that under s 42 of the Fair Trading Act 1987, the intent of the defendant is largely irrelevant and it matters not that it is careless, rather than fraudulent, behaviour which causes the defendant to make the misrepresentation in question, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 197. 50 Mr Rutty submits that he never was a party to any originator agreement with La Trobe as La Trobe well knew. Further, the structure of the mortgage industry of which both Permanent and Rutty were regular participants was that operators in the position of La Trobe were not concerned with establishing systems or protocols for the avoidance of identity fraud but rather with the transfer of risk to the aggregators. 51 Mr Rutty says that La Trobe could not have held any reasonable belief that by executing the cover page of the application he was making any representation relevant to these proceedings. 52 He further submits that he at all times believed that the application was genuine and that in the mortgage industry there is no room for any implied warranty from the sub-broker who submits the original application that all statements in the application are genuine, truthful and accurate. 53 Indeed, any reasonable originator would naturally expect that those parting with large sums of money would themselves have systems in place to check information and to guard against identity fraud. 54 In any event, Mr Rutty submits, the evidence does not support a finding that Permanent relied on any misrepresentation by Mr Rutty that the information in the application was correct and the signature "A Vella", genuine. 55 As to this last submission, Permanent says that 'there is a fair inference of reliance' and cites Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242. 56 In my view, I should not infer reliance even if all other matters were to be decided in Permanent's favour (and I am not at all sure that this is the case). This is not a case where I can find that Mr Rutty made a representation calculated to deceive. Even if he was nonchalant in his activities, I find that he did reasonably expect that the lenders would make their own enquiries and the information in the application was merely the start of the process. Furthermore, the evidence shows that, in fact, Permanent relied on solicitors and on other documents in fact signed by Mr Vella. 57 I should make it completely clear that I appreciate that liability under s 42 of the Fair Trading Act may attach notwithstanding that the representation in question is not the sole inducement, Gould v Vaggelas (1985) 157 CLR 215, 236. 58 Accordingly, I find for Mr Rutty on the statutory count. 59 As to common law negligence, Mr Rutty says that he did not owe any duty of care to Permanent. 60 There have been a number of recent cases dealing with economic loss to a person further removed from the defendant than the person with whom the defendant has had direct dealings, but who is foreseeably affected by the defendant's conduct. 61 In the instant case, it would have been clear to Mr Rutty that the ultimate lender would be affected, at least to some extent, by the application he was submitting. 62 The majority of these cases involve builders and the like being sued by subsequent proprietors of the building, eg Bryan v Maloney (1995) 182 CLR 609; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 and see Witting, Liability for Negligent Misstatements (OUP 2004). 63 In a case involving the alleged liability of a company liquidator for economic loss to a third party, Debelle J when giving the leading judgment in the South Australian Supreme Court in Mills v Sheahan (2007) 65 ACSR 75, 82 said: "…in an action seeking to recover damages for economic loss, it is necessary for a plaintiff to establish more than that the negligence of the defendant was a cause of the plaintiff's loss and that the loss was reasonably foreseeable". 64 His Honour then referred to Woolcock at [22]-[24] and noted that four justices identified: "some of the factors relevant to the determination of the question whether dames for economic loss were recoverable. They included vulnerability and knowledge of the risk and its magnitude." 65 In the instant case, the factors generally tell against there being a duty of care. Mr Rutty's forwarding of the application was a causa sine qua non towards the grant of a loan. However, Mr Rutty was not in factual or legal control of the process, the persons dealing with the application were by no means vulnerable people, they were seemingly experienced people in the mortgage market, there was ample opportunity at each stage of the process for checks and appropriate enquiries to be made and a reasonable person originating the process would probably expect such checks and enquiries to be made. 66 Accordingly, I am not satisfied that Mr Rutty owed Permanent a duty of care and there must be a verdict for Mr Rutty on this count. 67 Permanent has submitted that it would be wrong to view Mr Rutty as a mere conduit: it says that the finessing by Mr Caradonna of false applications mediated through Mr Rutty was the causa causans of the loss. 68 There is a fair amount of force in this submission, but, as there is no duty of care, I need not take the matter further. 69 It is, thus, unnecessary to enter into the submissions as to the affect of s 35 of the Civil Liability Act. 70 9. Mr Vella has made a claim against the Mitchell Morgan companies for trespass to his Enmore land. 71 There is no doubt, indeed it is admitted on the pleadings that the Mitchell Morgan companies did take possession of the Enmore land pursuant to their claim of right to do so as mortgagee. 72 Possession was taken on 18 July, 2006 and the locks were changed. The Vella interests rechanged the locks between 27 and 31 July, 2006. Mitchell Morgan again changed the locks on 31 July or 1 August. 73 Mr Vella says that he is entitled to an occupation fee for this trespass for the period 1 August, 2006 to 17 September 2007. 74 The evidence was that Mr Vella wanted to have the property leased, but that the Mitchell Morgan companies declined to allow this to occur stating that they intended to sell it with vacant possession. 75 There is some evidence that the property could be let at a gross rental of between $70,000 and $80,000 per year. However, Mr Smallbone for Mr Vella suggests that this aspect of the proceedings stand over for the receipt of more detailed evidence on quantum. 76 Mitchell Morgan say that damage is the gist of an action in trespass and there is no evidence of any damage. 77 With respect, this submission is wrong. Trespass is actionable per se. 78 Mitchell Morgan then say that there is no reason now to split the hearing and allow an enquiry as to damages. There was ample opportunity to seek such a split earlier and nothing was done about it. 79 Mitchell Morgan allege that in fact Mr Vella was handed back the keys to Enmore on 11 August 2006 and thereafter it understands the property was let. 80 Mr Vella seems to agree with this, but says that because Mitchell Morgan refused to allow the lease he had given over the Enmore premises to be registered, there was still a cloud over the title which caused him loss. 81 An action in trespass is a common law claim and the traditional rule has been that common law claims are determined in the one hearing rather than liability being established before the judge and a reference as to damages before a Master. 82 Present court procedure allows greater flexibility, but what I have said remains the norm. The court may, of course, order otherwise in a particular case for good cause. 83 Does such cause exist here? 84 When Mr Slattery was addressing on this point he said that it could be done by way of taking accounts in equity. Had there been a valid mortgage, this might have been the case. However, even under the more flexible modern procedures, one cannot deal with the assessment of damages for a tort at common law by taking accounts in equity. 85 I do not consider that cause has been established in the instant case. There is little put forward by Mr Vella as to why either an order for separation of damages issues was not sought earlier or the evidence prepared. 86 Thus, I need to assess the damages doing the best I can on the material before me. 87 As to the issue of fact as to the time that Mr Vella was out of possession, there is an admission of 20 days. The material as to the alleged loss after that time because of the inability to register the lease is speculative. 88 Accordingly, I fix only nominal damages. I think an appropriate sum is $4,000. This is just a nominal figure, but I reached it by taking guidance from an annual rent of $72,000 and taking one-eighteenth. 89 10. Mitchell Morgan wish to amend their cross-claim against Mr Vella to add a count for money had and received. 90 The proposed amendment pleads that, should the Court find that the Mitchell Morgan mortgages are void as forgeries then it advanced $1,001,748.85 under the mistake that the mortgages were valid. 91 The initial version of proposed pleading says that Mitchell Morgan electronically transferred that sum into "the Vella account". Alternatively, the proposed pleading says that the money was paid out "upon the direction of Vella". 92 The final version of the proposed pleading put that "Mitchell Morgan electronically transferred into an ANZ bank account XXXXXXXXXX of which Vella was the co-owner (the Vella account) the amount of $1,001,748.85. 93 Mitchell Morgan say that it is proper to allow this amendment, even at this late stage. No further evidence will be called and the consequence of not allowing it will be that fresh proceedings will be commenced on the same cause of action. 94 Mr Smallbone's submissions in opposing the amendment rest on futility and the lack of particulars rather than on any esoteric point of the law of restitution. 95 However, the principal thrust of the amendment is that the money was paid into a joint account partly in the name of Mr Vella and thus was received by Mr Vella. 96 There is authority for the proposition that, if money is paid into a partnership joint account on behalf of a third person then each of the partners may be liable to that third person under a count for money had and received, if, and only if the money was received in the ordinary course of business or a partner had knowledge of the receipt of the money to the use of a third person see eg National Commercial Banking Corp of Australia Ltd v Robert Bushby Ltd [1984] 1 NSWLR 559 (CA) affirmed (1986) 160 CLR 251. 97 I referred to this decision at [638] of my judgment and noted that there had not been adequate argument put on the point, but that it appeared that unless knowledge was shown in Mr Vella, the mere fact that the money found its way into his joint account would be insufficient to attach liability to him. However, I said that an interested party had liberty to raise the point at the short minute stage. 98 As Rein J said in SCEGS Redlands Ltd v Barbour [2008] NSWSC 928 after his Honour had digested a number of authorities, there is no room for any constructive notice in this area of the law. 99 There is not a scintilla of evidence that Mr Vella had actual knowledge that the money paid by Mitchell Morgan into the joint bank account had been so paid. 100 There is also an issue as to $26,500 made up of $25,000 paid to "On the Spot Maintenance" and $1,500 paid to accountants. 101 Messrs Slattery and Smallbone for Mr Vella say that this is an entirely new claim and is not connected with the money had and received claim at all. It relates to money paid out of the joint account. 102 I agree with that submission. It is now too late to raise this matter. 103 Thus, it would be futile to allow the amendment sought and it must be refused. 104 11. I now turn to perhaps the most significant matter remaining, the question of costs. This section does not deal with questions as to whether any Bullock or Sanderson Order should be made, a matter which is considered in the next section. 105 The basic question of costs is easily resolved. Mr Vella was successful in all his claims and he should have his costs against the persons he sued. However, the costs of the cross-claims and subsidiary proceedings need close consideration. 106 I will set out a summary of the various submissions on costs and then evaluate them. 107 Permanent submits that there are three major strands running through the proceedings, viz: (a) The litigation between Mr Vella and Permanent ("the Permanent strand"); (b) The litigation between Mr Vella and Mitchell Morgan ("the Mitchell Morgan strand"); (c) The litigation between Mr Vella and the ANZ Bank ("the ANZ strand"). 108 Each of those strands was, of course, accompanied by a series of cross-claims. 109 Permanent submits, and this would seem to be axiomatic, that it must not be ordered to pay costs except such costs as are attributable to the Permanent strand. 110 Permanent submits that there was good sense in hearing all three strands together, but it would be quite unjust if, for instance, Mitchell Morgan became insolvent, for Permanent to bear costs properly attributable to other strands. 111 The submissions deal with difficulties in separating the three strands at various points, a matter to which I will need to return. 112 Permanent seeks an order for costs against Mr Rutty in respect of its cross-claim. In view of my decision on that cross-claim, Permanent must pay Mr Rutty's costs. 113 Permanent also seeks that Mr Rutty pay some of the costs of Mr Vella's actions even though he was not a party to them. 114 Permanent also submits that there is no legislative mandate for the proposition that proportionality of damages determines contributions to costs. There is a separate discretion to be exercised in relation to costs which should be exercised by reference to the outcomes in the proceedings and the actions of the parties which here respectively affected the proceedings. 115 Mitchell Morgan submit that: (a) Hunt & Hunt should pay the costs that Mitchell Morgan will have to pay Mr Vella in 4059/06; (b) Hunt & Hunt pay the costs of Mitchell Morgan on a party/party basis on the Second Cross Claim at least up until 29 May 2007. 116 The significance of 29 May 2007 is that on that day, Hunt & Hunt served an Offer of Compromise: the offer was $450,000. This exceeded the amount for which Mitchell Morgan succeeded. 117 The rule is that, unless the court otherwise orders, in these circumstances the cross-defendant pays the cross-claimant's costs up to the Offer of Compromise and the cross-claimant pays the cross-defendant's costs on the indemnity basis thereafter: Pt 42 r 15 of the Uniform Civil Procedure Rules. 118 Mitchell Morgan say that the Court ought to "otherwise order", as the question of acceptance or not of the compromise involved a large amount of guesswork particularly in the light of the fact that there had been few precedents as to how courts apportioned liability when a solicitor was part of the cause of a loss. 119 The submission puts that considering whether or not to accept the offer involved Mitchell Morgan in assuming ; (i) that Mr Vella's claim would succeed; (ii) that the negligence claim would succeed only in part and that the Court would reject the defence under s 5 O of the Civil Liability Act and; (iii) that the Court would make a particular apportionment of Hunt & Hunt's liability. 120 Hunt & Hunt's opposing submissions are to the effect that there is always a fair amount of guesswork in lawyers advising a proper settlement and that in any event, the offer really assumed that Hunt & Hunt would fail on all their contentions. 121 Further, authority shows that the position set out in Pt 42.15 is only displaced in exceptional situations as the whole purpose of the rule is to encourage early settlement. 122 I basically agree with Hunt & Hunt's submissions. 123 In my view, a court should take the stance that difficulty in assessing a situation is not normally a good reason for varying the consequences of Pt 42.15. There are a large number of pieces of litigation in this court where it is extremely difficult to predict whether a witness will be accepted or whether the court will construe documents in a particular way. 124 Mitchell Morgan merely suggest that there be no order for costs after 29 May 2007. Whilst I can see some justification for this, I do not consider, in view of the pubic interest in reinforcing the offer of compromise procedure, that there is enough justification for making an order otherwise than that in the rule. 125 Mitchell Morgan then say that Hunt & Hunt should be ordered to pay some or all of the costs that it will have to pay Mr Vella. It relies for this submission on the principles restated by Campbell JA in ACQ v Cook (No 2) [2008] NSWCA 306. 126 Those principles, in summary, require the court to consider the conduct of Hunt & Hunt and find something in their conduct which would make the exercise of discretion as to a costs order a proper exercise of discretion. 127 Mitchell Morgan say that as a result of this case it has lost about $1,200,000 through little fault of its own. It is a complete stranger to the fraud. 128 Mitchell Morgan retained Hunt & Hunt to deal with the transaction. Hunt & Hunt contributed to the loss. Moreover, Hunt & Hunt maintained throughout that the mortgage was valid and that there was no negligence on their part. Had Hunt & Hunt acknowledged the invalidity, the costs of the proceedings that Mitchell Morgan now have to bear would have been much reduced. 129 Mitchell Morgan could not have consented to the relief sought by Mr Vella as, if it had done so, Hunt & Hunt would have used that fact against it. (I would interpolate here that there is nothing to suggest that, realistically, concession by Mitchell Morgan was ever on the cards.) 130 Hunt & Hunt's reply to this is that what was decided in ACQ v Cook (No 2) has little relevance to the present case. ACQ was a case where a plaintiff sued two defendants, was successful against one, but not the other. 131 The present situation is that Hunt & Hunt were not sued by Mr Vella. They were a cross-defendant and the costs of the cross-claim are discrete. 132 Again, I accept the submissions of Hunt & Hunt. The Mitchell Morgan companies were the lenders. They sought to uphold their mortgages and to lay off liability against Hunt & Hunt and others. The appropriate way to view costs is that costs may be added to damages on cross-claims where proper but otherwise the costs of the action and of the various cross actions should be considered as discrete matters. 133 The ANZ Bank submits that it must be recognised that it was only a party to two of the proceedings, 3957/2006 where it was a defendant, and 4059/2006 where it was the cross-defendant to the third cross-claim brought against it by Mitchell Morgan. 134 In the latter, the cross-claim was unsuccessful. The Bank says, and I would agree, that that cross-claim should be dismissed with costs. 135 In 3957/2006, the position is more complicated. In the majority of his claims, Mr Vella failed against the Bank. However, he did so because he succeeded in prior claims against the mortgagees so that he suffered no loss because of the Bank's activities, save for $150,000, being half the Cartisano monies. 136 As between the Bank and Mr Vella, the Bank says that two costs issues arise. First there are the costs of resisting Mr Vella's claim on the Bank. Secondly, whether the Bank is entitled to recover from Mr Vella its own costs of prosecuting the cross-claims and the costs which the Bank was ordered to pay Mr Annous and Ms Tsokos in respect of cross-claims. 137 As to the first of these issues, the Bank says that it never disputed that it was liable for the $15,000 plus interest. Mr Vella, however, wanted the whole of the $300,000 Cartisano money, an issue on which he failed. 138 On 28 February 2008, the Bank sent Mr Vella an Offer of Compromise offering to settle on the same terms as the Court eventually found for Mr Vella. That offer was not accepted. 139 The Bank submits that Mr Vella must pay its costs of the proceedings with the Bank's costs on and after 3 March 2008 to be paid on the indemnity basis. 140 If the Court is against the Bank on those issues, the mortgagees should pay the Bank's costs. 141 As to the second issue, the Bank succeeded against Rimridge with costs. It seeks against Mr Vella its costs. 142 The Bank relies on the decision of the Court of Appeal in Furber v Stacey [2005] NSWCA 242 at [30]-[34]. It submits that the principles are that if a defendant is prompted by the plaintiff's claim to join a third party and acts reasonably in doing so, an unsuccessful plaintiff will ordinarily be responsible for any costs which the defendant is ordered to pay the third party. 143 The Bank says that, in the instant case, it was only because Mr Vella sued the Bank that the Bank was forced to pursue the cross-defendants and it was reasonable for it to do so. 144 Mr Vella resists the Bank's submissions on both issues and I will now pass to Mr Vella's submissions on costs generally. 145 There is virtually no opposition to Mr Vella receiving an order for his costs against Permanent and Mitchell Morgan. 146 Mr Vella submits that the proper order is that each of those defendants be ordered to pay his costs of the consolidated proceedings except for his costs of pleading against other parties and except for any separate costs that relate to 5103 of 2006. 147 As I have already noted, Permanent and Mitchell Morgan object to this on the basis that they should not bear the costs associated with the other mortgagee. 148 There does not appear to be any special learning as to any default position as to costs orders when proceedings are consolidated. In any event, in a case such as the present where not all the evidence went to the case made against a particular defendant, it would not be a proper exercise of discretion in my view to make some global order for costs. 149 It must also be borne in mind in this case that at least one of the mortgagees was probably a nominee for a group of investors and that nominee may or may not have assets to meet orders made in the proceedings, let alone orders for costs. 150 It, thus, seems to me that I should adopt the three strand approach advocated by Permanent. 151 This means that Permanent must pay Mr Vella's costs of the Permanent strand and Mitchell Morgan must pay Mr Vella's costs of the Mitchell Morgan strand. 152 I appreciate that there will be considerable difficulty in dissecting Mr Vella's costs and that the costs assessor dealing with the bill may experience extreme difficulty. I regret that, but it seems to me that it is the only just and equitable way to order costs. 153 The costs assessor should proceed by isolating the costs strictly referable to one mortgagee. Thus, pleadings and expenses relating to witnesses who were only relevant to one mortgagee will be chargeable to that mortgagee only. Apart from costs referable to the ANZ Bank strand, the other costs should be divided equally between the two mortgagees. I formally give a direction to that effect. 154 As to the costs in the ANZ Bank proceedings, Mr Vella submits that there are a number of good and valid reasons why he should not be ordered to pay the Bank's costs or be deprived from obtaining an order that the Bank pay his costs. 155 First, he puts that the Bank's offer did not deal with the declarations sought by Mr Vella in his amended pleading, but which, it is said was always part of his case. 156 This, to my mind, has little significance as the court does not make declaratory orders when an order that can be directly enforced will put an end to the dispute. 157 Secondly, the so-called "Offer of Compromise" did not comply with the rules. It was made too late, it gave an impossibly short time for reaction and it made a stipulation as to what part of the plaintiff's costs it would agree was apportionable to the $150,000. 158 In virtual acknowledgment that the offer was inadequate, the offer claimed to operate as a Calderbank letter. However, apart from the fact that Part 42 of the Rules do not apply of their own force, this does not advance the bank's claim. 159 If the Bank had always taken the view that there was no contest as to the $150,000 and put that in a proper Offer of Compromise, the normal rules as to costs after an Offer of Compromise apply. However, that is not the case. 160 Thirdly, as counsel put it, "The Bank is in the fortuitous position of having breached its mandate but escaped liability only because of Mr Vella's successful defence against the mortgagees". 161 Mr Vella submits that it is quite unreasonable for the Bank not to submit to judgment for whatever might be owing after the proceedings against the mortgagees were concluded, to force Mr Vella to proceed concurrently against both the mortgagees and the Bank and then, when Mr Vella had succeeded against the mortgagees, claim the Bank's full costs against him. 162 The practicalities of the situation are that the Bank did not limit the conduct of its defence to the point that Mr Vella was not liable to the Bank because the mortgages were void. It elected to pursue all possible legitimate defences including ensuring that Mr Vella was put to full proof of his allegations against the mortgagees. 163 This is a fairly unique situation. I have not found any precedent directly on point, nor have counsel referred me to one. 164 Costs are in the discretion of the court under s 98 of the Civil Procedure Act 2005. However, the general guidelines for the exercise of that discretion is that winners get costs and losers pay costs. 165 It seems to me that, commercially, the Bank and Mr Vella were really common combatants against the mortgagees. However, the Bank, to boost its forensic position, also attacked Mr Vella and his reliability as a witness to ramp up its position if Mr Vella failed against the mortgagees. 166 I do not consider that it would be appropriate in those circumstances to order Mr Vella to pay the Bank's costs. 167 In my view, in this unusual situation, I consider the proper order is that there be no order for costs as between the Bank and Mr Vella. 168 As to the costs of the Bank's cross-claims, I agree with the submissions made on behalf of Mr Vella that there is no reason why Mr Vella should pay the Bank's costs where the Bank has been successful in its cross claim. Further, where the Bank has failed in its cross claim, that is because the Bank, in contrast to Mr Vella, made a forensic decision to pursue those claims. 169 I now turn to consider questions as to the costs of what might be thought to be the minor players. 170 Mr Rutty is the second cross-defendant to the second cross-claim in 4122/06. 171 I have dismissed Permanent's claim against Mr Rutty and costs should follow the event. 172 I now need to consider the position of the costs with respect to Mrs Tsokos. I have already dismissed the cross claim against her with costs. 173 However, Mrs Tsokos claims that her costs should be paid by the Bank on the indemnity basis after 6 February 2007 because the Bank declined to accept two offers which would have given it more than it obtained from the hearing. 174 The Bank opposes this. First, it pleads that the application for indemnity costs is too late, nothing having been said when the cross-claim was dismissed. 175 In the present circumstances, I do not consider that this is a good answer to the claim. It was clear at the time of delivery of the principal reasons that 'loose ends' would be dealt with subsequently. Although I cannot remember any forecast of this issue even up to July, 2008, the general method of future procedure was clear and no prejudice is caused by a late application. 176 Secondly, the Bank says the offers were not genuine offers within the meaning of the authorities, they were, in the jargon of litigation, "walk away offers" and walk away offers are rarely considered by courts to be genuine offers to settle. 177 It is dangerous to apply general rules to particular cases. In any event, the statute requires the exercise of discretion according to the factors in each case. 178 It seems to me that in the circumstances of the present case where Mrs Tsokos was embroiled in long and complex litigation as a minor player, and offer a walk away deal which, had it been accepted would have put the Bank in a better position than that which it ultimately obtained, Mrs Tsokos is entitled to indemnity costs after 6 February, 2007. 179 The Bank says that with respect to its cross claims against Dux and Tannous they should be dismissed with no order as to costs. I agree, 180 I believe I have now covered all aspects of questions of principle as to costs. Short minutes will need to be brought in dealing with matters of detail. 181 12. Some detailed submissions were filed by a number of parties with respect to the making of Bullock Orders or Sanderson Orders if the primary orders as to costs fell out in particular ways. Those submissions were in writing and have been placed with the papers. 182 For the reasons given in the previous section, such orders do not require me to consider those submissions save in the case of Mitchell Morgan v Hunt & Hunt. 183 I have already held that Hunt & Hunt should bear 12.5% of Mitchell Morgan's loss . Mitchell Morgan conducted its case against Mr Vella vigorously (though fairly) and did all that it could to prevent any loss being suffered. 184 It would be impossible to argue that Mitchell Morgan did not defend its interest (and Hunt & Hunt's) reasonably. 185 In my view, either as part of its damages or by way of a costs order, Hunt & Hunt should pay one-eighth of Mitchell Morgan's costs including costs which they were ordered to pay Mr Vella. 186 13. I noted that there was one matter of assessment of damages which was agreed should be remitted to an Associate Judge. Mr. Slattery and Mr Smallbone noted in their submissions the heads of damage that would be claimed before an Associate Judge. It is useful to note these and I do so below. 187 The heads of damage are: (a) First head of damage. An amount calculated to give to the plaintiff indemnity for his costs of the various proceedings which have been before the Court in the consolidated suit. (b) Second head of damage. The unrecouped costs if any on abortive caveat extension proceedings by Mr and Mrs Conridge against Mr Vella. (c) Third head of damage. Any interest which the plaintiff may be held liable to pay to Cartisano above the agreed amount of $25,000. (d) Fourth head of damage. In the event that the plaintiff does not succeed in his application and submissions above concerning injunctive relief in relation to the second moiety of the Cartisano money, damages in respect of that sum, as the plaintiff should have been able to look to the entire sum to meet his joint liability to repay the Cartisano borrowing. The amount of that head of damage is therefore $150,000 plus interest to be calculated up to judgment. 188 As to the first head, I note that counsel submit that these costs are recoverable, notwithstanding what has been said about the recovery of such costs from the bank on the contractual measure. They are recoverable from Mr Caradonna because of the wider measure of damages recoverable in a claim of fraud (which is made against him in the fifth count in the statement of claim). 189 They further note that in Simos v National Bank of Australasia Ltd and Guelman (1976) 10 ACTR 4, Connor J said that costs of this nature would have been recoverable in tort, but refused them as the only claim made in that case was for moneys had and received. 190 They say that the most convenient way to quantify this is to order (as against Mr Caradonna) that there be an assessment upon the indemnity basis by a costs assessor of the plaintiff's costs of the various consolidated proceedings and order that Mr Caradonna pay to the plaintiff the amount certified by the assessor. This assessment could then with the least expense be done at the same time as any party/party costs assessment. 191 As to the third head, counsel say at this stage, the quantification of this is still an open question as between the plaintiff and Cartisano. The plaintiff's position is that the $25,000 was a fixed sum and not a rate. As the matter is not settled, the plaintiff asks that further consideration of this head of damage be reserved. Conclusion 192 First, I should note some minor corrections to the principal judgment. These were submitted by Mallesons on behalf of Hunt & Hunt and so state the true position: (a) at paragraph [489]: the reasons state, incorrectly, Mr Virago was cross-examined: see paragraph 568; (b) at paragraph [318]: Mr Carkagis was called by Mitchell Morgan; and (c) at paragraph [565]: his Honour correctly notes an inaccurate cross-reference in Hunt & Hunt's written submissions. The reference should have been to MFI 32B, Hunt & Hunt supplementary submissions relating to Damages, in which Hunt & Hunt adopted the submissions of Mr Vella on these issues. 193 I have endeavoured to cover all the outstanding aspects of the consolidated proceedings. I am not inviting any cavilling with previous rulings or for anyone to reargue any point. However, if I have inadvertently omitted any matter, that can be brought to my attention by mail and mentioned when the short minutes are brought in. 194 All I will do at present is to order that the parties bring in short minutes. I will be away from Chambers until Anzac Day. To ensure that the matters are not lost in the system, I will provisionally fix 11 May 2009 at 9:30am to consider short minutes, but my Associate will make contact with counsel for the four major players in early May to firm up an appropriate date. I would be obliged if other counsel could keep in contact with one of the counsel for the four major parties to save administrative work for my Associate. *************************** 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.