Supreme Court New South Wales Medium Neutral Citation: Dynamics Co Pty Limited v G and M Nicholas Pty Limited (No 2) [2012] NSWSC 301 Hearing dates: 20 February 2012 Decision date: 30 March 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Defendant to pay Plaintiffs' costs of and incidental to application to set aside statutory demand incurred between 29 August 2011 and 7 November 2011 as agreed or as assessed. Defendant to pay Plaintiffs' costs of and incidental to hearing as to costs on 20 February 2012 as agreed or as assessed. Catchwords: COSTS - Costs of costs argument - Costs of costs argument to be determined by reference to the level of success in that argument. Legislation Cited: - Uniform Civil Procedure Rules 2005 (NSW) r 42.1 Category: Costs Parties: Dynamics Co Pty Limited (Plaintiff) G and M Nicholas Pty Limited (Defendant) Representation: Counsel: J.C. McDonald (Plaintiff) D. Sulan (Defendant) Solicitors: William Roberts Lawyers (Plaintiff) Slater & Gordon (Defendant) File Number(s): 11/274934 Judgment 1On 20 February 2012, I heard argument as to the costs of an application to set aside a Statutory Demand ("Demand") served by G and M Nicholas Pty Limited ("G and M") on Dynamics Co Pty Limited ("Dynamics") which had been set aside by consent on 9 November 2011. Dynamics contended that G and M should pay its costs of the application and G and M contended that each party should pay its own costs of the application. 2I delivered my judgment on 9 March 2012 and ordered that G and M pay Dynamics' costs of and incidental to the application to set aside the Demand incurred over a specified period. Since that order was less favourable to Dynamics than the order that it had sought but more favourable to Dynamics than the position for which G and M had contended, I indicated that I would need to hear the parties as to the question of the costs of the costs application, if that question could not be agreed between them. I directed the parties to seek to agree orders to give effect to the judgment and to serve their respective draft orders and submissions if such agreement could not be reached. Agreement has not been reached between the parties as to the costs of the costs application. Dynamics' submissions 3Dynamics submits that the costs which it incurred after the Demand was withdrawn by G and M on 7 November 2011 are not properly treated as the subject of an order for costs but as relating to its application to set aside the Demand. Dynamics contends that the application for costs was always part of and integral to its principal application to set aside the Demand. It is correct that, by its original application, Dynamics sought an order setting aside the Demand and an order for costs. However, G and M unconditionally offered to withdraw the Demand on 7 November 2011 and orders were made by consent that the Demand be set aside on 9 November 2011. In my view, it necessarily follows that costs incurred after that date can only relate to the question of the argument as to costs. 4Dynamics also submits that the Court should vacate the order made in my earlier judgment that G and M should pay its costs for the period which I had indicated, and in lieu thereof order that G and M pay its costs of and incidental to the application to set aside the Demand incurred from 29 August 2011. Dynamics submits that, contrary to the Court's finding at paragraph 30 of my earlier judgment, G and M had not made an unconditional offer to set aside the Demand on 7 November 2011 and its offer on that date was substantively the same as that which it had made on 20 September 2011. I do not pause to consider whether that submission is appropriately raised in respect of submissions as to costs, since it is sufficient to note that I do not consider that that submission is well founded. As I noted in my earlier judgment: By letter dated 20 September 2011, G and M's solicitors had made an offer to withdraw the Demand "on the basis that the proceedings be dismissed with no order as to costs". By letter dated 7 November 2011, G and M's solicitors advised that their client withdrew the Demand and, on 8 November 2011, accepted that an appropriate order was that the Demand be set aside. That order was in fact made on 9 November 2011. The offer made by G and M's solicitors on 7 November 2011 was substantively different from that made on 20 September 2011, because the acceptance that the Demand should be set aside in the later offer was not conditional on a particular treatment of costs. 5Dynamics also contends that it is "usual" for the Court, after determining the substantive relief sought by a party, to make an order which covers the entire costs of the proceedings including any time spent arguing the question of costs. I do not agree. It is not the case that a party that is successful in respect of substantive orders will necessarily, or even usually, have its costs of an unreasonable position subsequently taken in respect of costs. 6In my view, the question of the costs of the costs argument that took place after 7 November 2011 is to be determined by reference to the success of the parties in that argument. Had Dynamics been wholly successful in that costs argument, then it would in the ordinary course have had its costs of that argument under Uniform Civil Procedure Rules 2005 (NSW) r 42.1. Had G and M been wholly successful in that costs argument, then in the ordinary course Dynamics would have been ordered to pay G and M's costs of that argument under UCPR r 42.1. I therefore do not propose to vacate or vary the order made in my earlier judgment. 7Dynamics submits that the fact that G and M succeeded in having Dynamics' costs limited by excluding costs incurred "during a relatively short period (19 days)" does not alter the fact that Dynamics has succeeded in obtaining an order for costs of its application to set aside the Demand. In my view, the true position is that Dynamics has been partly successful in its application for costs of the Demand, and G and M has been partly successful in resisting the costs of the Demand. The extent to which each party has benefited from that partial success will depend upon the extent of costs which were incurred during the 19 day period which will, it might be noted, include all of the costs of preparation of the affidavits filed by Dynamics in support of its initial application to set aside the Demand. 8Dynamics also relies on two offers of compromise made prior to the hearing on 20 February 2012, including an offer of 10 February 2012 which proposed the alternatives that G and M pay the sum of $59,767.97 or that G and M pay 95% of Dynamics' costs as agreed or assessed. Dynamics contends that neither of these offers were accepted. However, it is unclear whether the result which Dynamics has achieved is more favourable than those offers, where G and M has been held liable for only part of the costs that Dynamics has incurred. G and M's submissions 9On the other hand, G and M submits that the just and fair result which reflects the outcome of the argument as to costs is that each party should bear their own costs of the hearing on 20 February 2012 and that any other order fails to properly recognise the partial success achieved by each party. Outcome of the costs argument 10In the present case, Dynamics had sought its costs of and incidental to the application to set aside the Demand for the period from the date on which the Demand was served (8 August 2011). I held that Dynamics was only entitled to its costs of and incidental to the application to set aside the Demand incurred between 29 August 2011 and 7 November 2011, the date on which the Demand was set aside. Dynamics was therefore only partly successful in its costs application. 11On balance, I consider that I should order that G and M pay Dynamics' costs of and incidental to the hearing before me on 20 February 2012, for a different reason than any of those articulated by Dynamics in its submissions. 12Dynamics was in fact successful in obtaining an order for its costs of the application to set aside the Demand for part of the relevant period and this provides prima facie support for an order for costs in its favour. The order sought by G and M that each party pay their own costs would not reflect the extent to which Dynamics was successful. I have considered whether the costs awarded in favour of Dynamics should be discounted by reason that it was successful only in part, but I do not consider that such a discount is warranted where Dynamics would have had to lead substantially the same evidence to support an order for costs over part of the period as it led to claim an order for costs over the whole of the period, and the hearing before me was not substantially lengthened by argument as to the question of period. 13Accordingly, I order that: 1. The Defendant pay the costs of and incidental to the application to set aside the Demand incurred between 29 August 2011 and 7 November 2011 as agreed or as assessed. 2. The Defendant pay the Plaintiff's costs of and incidental to the hearing as to costs on 20 February 2012 as agreed or assessed. ********** 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. Decision last updated: 11 April 2012