Supreme Court New South Wales Medium Neutral Citation: Anthony Simon Bell v Rittal Pty Limited [2013] NSWSC 398 Hearing dates: 21 June 2012 Decision date: 23 April 2013 Jurisdiction: Common Law Before: Hidden J Decision: Orders made, including stay of payment of costs of second cross-claim Catchwords: CIVIL PROCEDURE - application for stay of payment of costs order until completion of current proceedings - discontinuance of proceedings - cross-claim in those proceedings - order that defendant pay cross-claimant's costs - plaintiff's agreement to pay those costs - institution by plaintiff of fresh proceedings against cross-defendant - application to stay payment of cross-defendant's costs in original proceedings until completion of new proceedings Legislation Cited: Civil Procedure Act 2005 Cases Cited: - Australian Beveridge Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560, 58 ACSR 22 - Padkohe Pty Ltd v Fletcher [2006] NSWSC 1239 - Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 - Lahoud v Lahoud [2012] NSWSC 284 - Tanlane Pty Ltd v Moorebank Recyclers Pty Ltd (No. 3) [2012] NSWSC 90 - Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106 - in Re A Debtor No. 21 of 1950 (No. 2) [1951] 1 Ch 612 - Landini v State of New South Wales [2009] NSWSC 431 Category: Interlocutory applications Parties: Anthony Simon Bell (plaintiff) Rittal Pty Ltd (1st defendant) Rittal GmbH & Co KG (2nd defendant) Rittal Pty Ltd (cross claimant) Abell Electrical Industries Pty Ltd (1st cross defendant) Johnson & Johnson Pacific Pty Ltd (2nd cross defendant) Representation: Counsel: T Davy (plaintiff) B Williams (1st & 2nd defendants, mentioning 1st cross-claimant/defendant) N Chen (2nd cross-defendant) Solicitors: Tiana Daly - Watkins Tapsell (plaintiff) Brett Williams - Vardanega Roberts Solicitors (1st & 2nd defendants, mentioning 1st cross-claimant/defendant) Stewart Cameron - Hicksons (1st cross-defendant) Christopher John Pagent - Corrs Chambers Westgarth (2nd cross-defendant) File Number(s): 2010/110237 Judgment 1On 6 December 2007 the plaintiff, Anthony Bell, was injured when a switchboard fell on him while he was moving it on premises occupied by Johnson & Johnson Pacific Pty Ltd (to which I shall refer as "JJP"). In May 2010, he brought proceedings in this court for personal injury against two companies, Rittal Pty Limited and a related German company, Rittal GmbH & Co KG, as first and second defendants respectively. They were said to be the manufacturers of the switchboard, and it was alleged that they had failed to manufacture it adequately and safely. It is convenient to refer to the first and second defendants jointly as "Rittal." 2It is unnecessary to go to the detail of the pleadings thereafter, except to note that Rittal denied being the manufacturer of the switchboard. Nevertheless, Rittal filed a cross-claim against JJP, alleging a failure to maintain a safe place and system of work, which caused or contributed to the plaintiff's injuries. 3Late in September 2011, the plaintiff became aware that Rittal was not the manufacturer of the switchboard. On 3 January 2012, fresh proceedings were commenced against JJP: 2012/1871, to which I shall refer as "the JJP proceedings". 4For the purpose of disposing of the original proceedings, the plaintiff has filed a motion seeking a number of orders. The parties have agreed that the first four of those orders should be made. They are to the following effect: (1) judgment for Rittal; (2) Rittal's cross-claim against JJP is discontinued; (3) Rittal is to pay JJP's costs of that cross-claim; (4) the plaintiff is to pay Rittal's costs, but it is noted that the effect of an agreement between the plaintiff and Rittal is that those costs are limited to the costs which Rittal is liable to pay to JJP in respect of the cross-claim. 5There remains a fifth order sought, and it is only that order which is in contest. The plaintiff seeks a stay of the order for payment of JJP's costs of the cross-claim until the completion of the JJP proceedings. 6Counsel for the plaintiff, Ms Davy, pointed out that, rather than commencing fresh proceedings, the plaintiff could have joined JJP as a defendant in the original proceedings, pursuant to UCPR r 6.19, and sought to amend the original statement of claim to include the allegations currently made against JJP. In that event, payment of costs would not have been required until the whole dispute between those parties was resolved. Even though the plaintiff chose to institute fresh proceedings, she submitted, that is how the present issue should be approached. 7Reference was made in written submissions to r 42.20, whereby the plaintiff would be required to pay Rittal's costs following the dismissal of his claim against it, just as Rittal would be required to pay JJP's costs following the dismissal of its cross-claim. In the light of the agreement referred to in the fourth of the orders set out above, the plaintiff was said to be under "concurrent obligations" in respect of both those costs liabilities, so that, in the absence of a stay, the plaintiff would be required to pay JJP's costs of the cross-claim in circumstances where the controversy between them is yet to be determined. 8Ms Davy argued that, as it was put in the written submissions, there is "some inevitable commonality" between the JJP's costs of its cross-claim in the original proceedings and in the JJP proceedings, and that any assessment of costs in the original proceedings at this stage would be unable to take that commonality into account. Further, it was submitted, if payment of the costs were not stayed, JJP would gain an unwarranted advantage by receiving effectively "an advance payment" of its costs prior to the resolution of the issues between it and the plaintiff. 9Ms Davy acknowledged that a stay would cause some prejudice to JJP, to the extent that some of the costs to which it would be entitled upon dismissal of the cross-claim are not common to the JJP proceedings, but she argued that that is a prejudice not uncommon in complex litigation, where costs are not ordered until the completion of the proceedings. On the other hand, it was put, to require the payment of JJP's costs prior to the completion of the proceedings would be seriously prejudicial to the plaintiff, a man of limited means. If the plaintiff were successful in the JJP proceedings, there would likely be an order that JJP pay some or all of his costs. Further, if all costs were assessed at that time, any need to set off costs owing by one party to the other could be resolved. 10Section 135(1) of the Civil Procedure Act 2005 empowers the court to give directions with respect to the enforcement of its judgments and orders. Ms Davy referred to authority for the long-standing inherent jurisdiction of the court to stay the execution of costs orders for the purpose of set-off in other proceedings. She cited two passages from the judgment of White J in Australian Beveridge Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560, 58 ACSR 22, at [68] and [77]: "[68] ... set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings (Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618). ... [77] ... The Court has jurisdiction to stay its own proceedings wherever the requirements of justice so demand. The jurisdiction is one to be exercised with caution. This jurisdiction extends to staying execution of judgments and orders. The jurisdiction is an inherent one and is, in any event, specified in wide terms in subs 135(1) of the Civil Procedure Act. The stay of execution of a judgment to give effect to a set-off between two judgment debts is but an instance of the control which the Court exercises over its own proceedings." 11Ms Davy referred to a number of subsequent decisions in which the judgment of White J was cited and the principle that the setting-off of costs orders is an exercise of the court's inherent jurisdiction to control its own proceedings. Among those was Padkohe Pty Ltd v Fletcher [2006] NSWSC 1239, a decision of Barrett J (as he then was). In that case proceedings in this court were settled, giving judgment to a plaintiff against two defendants. In separate proceedings costs orders had been made against that plaintiff in favour of the same defendants. The defendants sought a stay of execution of the judgment against them on the basis that the balance owing on the judgment was likely to be exceeded by the amount of those costs. 12In the event, Barrett J refused that application for reasons arising from the circumstances of the case. However, Ms Davy relied upon a passage in his Honour's judgment at [4], as follows: "I was taken to ss.21 and 96 of the Civil Procedure Act 2005 both of which deal with the general issue of set-off but neither of which is of any relevance. Both counsel approached the matter on the basis that the question of stay of execution and the more general issue of recognising any set-off are matters for the court's discretion. So far as staying execution of judgment is concerned, there is express power under s.135 of the Civil Procedure Act. There also exists an aspect of the inherent jurisdiction for the court to allow what is effectively set-off by granting a stay of execution of a judgment 'if it be just': Re A Debtor No 21 of 1950 [1951] Ch 612 at p.621." 13The other cases referred to were the decisions of Ward J (as she then was) in Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 at [92] ff and Lahoud v Lahoud [2012] NSWSC 284 at [72] ff, and the decision of Young AJ in Tanlane Pty Ltd v Moorebank Recyclers Pty Ltd (No. 3) [2012] NSWSC 90 at [27] - [28]. 14A further case in which White J's judgment was referred to was Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106, another decision of Barrett J. Ms Davy cited it as authority for the proposition that where there are multiple costs orders in the same proceedings, there should be a stay of execution on any of those orders until the amounts payable under all of them had been ascertained. That was the effect of an order made by Barrett J in that case. After referring to, and explaining, his decision in Padkohe Pty Ltd v Fletcher at [47] - [48], his Honour continued at [49] - [50]: "[49] Of greater relevance here is the decision of the Court of Appeal in Wentworth v Wentworth (unreported 21 February 1996 BC9600213) which approved the conclusion at first instance that there should be no execution on any costs order until the ascertainment of the amounts payable under all orders was complete and a final balance was struck. That was a case where each party had the benefit of costs orders, some of which had been quantified while others had not. [50] The Court of Appeal said: 'The court's general control of its own processes must permit it both to prevent possible unfairness in the working out of payment of costs orders and in doing so balance as well as it can the possibilities in a case such as the present: ... Further, we would observe that in cases such as the present when a court is deciding whether or not to stay enforcement of some duly quantified costs orders pending final quantification of others, matters to be considered in exercise of the discretion must include: the connection between the matters in which the orders for costs have been made; the degree of diligence shown by the person seeking the stay in bringing to finalisation the quantification of the costs to which that person is entitled; and the possibilities, should a stay be refused, of recovery by the person who has paid, of the eventual balance in that person's favour, if the balance falls that way.'" 15Ms Davy's argument, as expressed in the written submissions, was that the circumstances of the present case "are analogous to the making of multiple costs orders during the progression of a unified proceeding and that any costs order should therefore be stayed until all obligations as to costs are ascertainable." 16Rittal was represented when the motion was argued, but did not wish to be heard. 17JJP opposed the order sought by the plaintiff for reasons developed in written and oral submissions by its counsel, Mr Chen. He argued that the application was unconventional. The orders agreed to be made are for the payment by the plaintiff of Rittal's costs of the original proceedings, and for Rittal to pay JJP's costs of the cross-claim. However, by agreement, the plaintiff will discharge his liability for Rittal's costs by paying the costs of that cross-claim. Thus, said Mr Chen, the court is being asked to make an order giving effect to what he described as "this private arrangement", a course which he submitted was impermissible. If any stay were to be granted, he argued, it should be in respect of the order that the plaintiff pay Rittal's costs. 18Further, Mr Chen argued that the cases dealing with set-off upon which the plaintiff relied did not assist him. They demonstrate that, as he put it, the "essential pre-condition" to ordering a stay on that basis is the existence of an extant set-off. Such was the case in Australian Beveridge Distributors v Evans & Tate, where the set-off was directed to the enforcement of a costs assessment by one party which was found to be a "net debtor" of the other. The same is true of one of the cases referred to by White J, in Re A Debtor No. 21 of 1950 (No. 2) [1951] 1 Ch 612, where the set-off related to a judgment debt against an order for the payment of a quantified amount of costs. 19On the other hand, one of the reasons why a stay was refused in Padkohe v Fletcher was that the costs orders sought to be set-off against the judgment debt had not been quantified. By contrast, as Barrett J noted, the judgment debt was for an "uncontroversial amount", and was "immediately enforceable": [15]. Mr Chen noted that Hall J had taken a similar approach in Landini v State of New South Wales [2009] NSWSC 431, in which his Honour declined to set-off costs orders that could be made in favour of a defendant against the judgment entered against it on the basis that there was not then any "enforceable debt that can be set-off ...": [53]. 20The effect of authority on this question, Mr Chen submitted, is that a party is entitled to the benefit of a judgment or order, although the realisation of that benefit might be stayed in circumstances where justice required it. He noted the admonition of White J in Australian Beveridge Distributors v Evans & Tate at [77] that the jurisdiction to order a stay should be exercised "with caution." In the present case, he pointed out, the plaintiff has no extant set-off. At best, he has the prospect of a judgment and an order for costs in his favour if he is successful in the JJP proceedings. Moreover, on the limited material before me, I could not assess the strength of that prospect. Similarly, it was argued, the plaintiff could not rely upon authority, such as Tim Barr v Narui Gold Coast, dealing with multiple costs orders in the same proceedings, as he does not have an order for costs and may never obtain one. 21Mr Chen submitted that there were other reasons of a discretionary nature why a stay should not be ordered. As he pointed out at the outset of his argument, the plaintiff is not to be bound by an order of the court to pay the costs of the cross-claim. Rather, he has chosen to enter into an agreement whereby he has undertaken that responsibility. In answer to Ms Davy's argument about the commonality between the costs of the cross-claim and those of the JJP proceedings, and the suggestion that JJP would receive the unwarranted benefit of an advanced payment of its costs, he pointed out that JJP incurred costs in respect of the cross-claim, such as preparing a defence, responding to subpoenas, and attending directions in interlocutory hearings, which are referable to the original proceedings and will not be incurred in the new proceedings. They are costs to which JJP will be entitled, whatever the outcome of the new proceedings might be. 22I can see the force of these submissions but, on balance, I am satisfied that the plaintiff is entitled to the stay he seeks. The application is an unusual one for the reasons Mr Chen identified. It arises from the plaintiff's assumption by contract of Rittal's obligation to pay the costs of the cross-claim. It is true that he does not have a set-off at this stage and, depending upon the outcome of the proceedings, may never have one. However, I understand Ms Davy to have referred to the cases on set-off, and the enforcement of multiple costs orders in the one proceeding, only by way of analogy, relying on them primarily for their affirmation of the court's power to control its own processes in the interests of justice. She recognised that there would be costs arising from the cross-claim referable only to the original proceedings, to which JJP would be entitled even if it succeeded in the new proceedings. 23That said, it does appear that the case JJP has to meet in the new proceedings is the same as that which it faced in the cross-claim. There must be a significant measure of commonality between its costs in both proceedings. In my view, there is force in the parallel Ms Davy drew between the JJP proceedings and the course the plaintiff might have taken by joining JJP as a defendant in the original proceedings. 24I accept that the plaintiff is a man of limited means, and that he would suffer considerable hardship if required to meet JJP's costs at an early stage. There was some evidence before me of his financial situation, although not enough to make a complete assessment of it. Nevertheless, in oral argument Mr Chen fairly acknowledged "the broad proposition" that he might suffer financial stress. In all the circumstances, I am satisfied that justice would be served by deferring payment of JJP's costs of the cross-claim until the completion of the JJP proceedings. 25Accordingly, each of the five orders in the plaintiff's notice of motion should be made. However, given the time that has elapsed since the matter was argued, I shall consult the parties before making final orders. ********** 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: 23 April 2013