Coomera Resort Pty Ltd v Kolback Securities Ltd & Ors [1998] QSC 296

IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant COSTS ORDER - MACKENZIE J. Delivered 23 December 1998 CATCHWORDS:COSTS - general rule - that costs follow the event - parties successful on some but not all issues - departure from the general rule - Calderbank offer. Cocias v Mt Isa Mines Ltd (1967) QWN 22 Colburt v Beard (1992) 2 Qd.R 67 Theiss v TCN Channel Nine Pty Limited (No 5) 1 Qd.R156 Calderbank v Calderbank (1976) Fam.93 Johns Perry Industries Pty Ltd v International Rigging (Aust) Pty Ltd (1988) 2 Qd.R 556 -- 1 of 11 -- Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited & Anor (1053 of 1994, unreported, 12 March 1998, Shepherdson J) Counsel: Mr S Doyle SC with him Mr L Kelly for the plaintiff Mr J Sheahan for the 7th & 8th defendants Solicitors: Clayton Utz for the plaintiff Thynne & Macartney for the 7th & 8th defendants Hearing date: 31 August 1998 -- 2 of 11 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant COSTS ORDER - MACKENZIE J. Delivered 23 December 1998 1 These reasons are concerned with the costs of Coomera’s action against PRD and Dietz. The trial involved a wide range of issues as between Coomera and Kolback of a kind not infrequently found in large commercial actions. Coomera’s case against PRD and Dietz arose from a transaction principally between Dietz and Bond, but also involving Nagano. The nature of the claims against each of the parties is set out in ch.7 of the first reasons for judgment delivered 20 February 1998. -- 3 of 11 -- 2 2 Coomera succeeded in the action against both Kolback and PRD but not on all bases pleaded. Coomera was unsuccessful against Dietz on both causes of action against him. Coomera had attempted to establish that Pitt, and through him, Kolback were parties to the activities involved in the action between Coomera and PRD and Dietz, but failed to establish that. 3 Where a trial is lengthy and complex and the parties have both succeeded to a degree it is necessary to form an impression of a just outcome on the issue of costs within the framework that costs are a matter for the discretion of the trial judge, and the general rule that costs will follow the event on several issues. Where there are identifiable several issues it may in many cases be possible to distribute costs according to the result of those issues while awarding general costs of the action to the party who is successful on the whole. In Cocias v Mt Isa Mines Ltd (1967) QWN 22, Hoare J, speaking for the Full Court, identified the need to avoid producing unjust outcomes with regard to costs and of the desirability of avoiding the complexities of requiring taxation of costs of particular issues where an apportionment can appropriately be made. The importance of ensuring that any apportionment is fair is also adverted to. Colburt v Beard (1992) 2 Qd.R 67 is an example of that principle in action. Ryan J with whom Thomas J and Mackenzie J agreed said that it was desirable that complicated taxations which would be required to give effect to an order recognising the entitlements to costs of the plaintiff and the defendant where each had succeeded on issues in the trial should be avoided and that a direction should be given for the awarding of costs. Thiess v TCN Channel Nine Pty Limited (No.5) (1994) 1 Qd.R 156, endorses the need for a pragmatic approach to making a costs order. 4 One complication in this case in terms of assessing costs is that after findings on matters of law and fact had been delivered and a timetable put in place for assessment of damages, Coomera and Kolback resolved that issue, and presumably the question of costs as between them, on terms of which I have not been made aware. In any event, any compromise between those parties could not -- 4 of 11 -- 3 dictate the result of the present application. The only consequence is that the ordinary situation where the trial judge can deal with costs of all parties does not apply. 5 The first of Coomera’s basic submissions was that it was substantially successful against PRD and Dietz, even though it did not succeed on all issues it pursued. Pursuit of those issues did not add significantly to the length of the trial nor to the volume of evidence which had to be assembled for the purposes of the trial. If there were to be a discount for time added in consequence of the issues upon which it was unsuccessful , a reduction of only 5 to 10 per cent would be appropriate. 6 The second basic submission was that as costs against PRD and Dietz were only part of the whole costs of trial, the most appropriate result was to assess the costs against the seventh and eighth defendants on the basis of a proportion of costs of the whole trial. It was submitted that this should be fixed at one-third. If a deduction under the first basic submission was considered appropriate the outcome would be an order for 30 per cent of costs of the action. 7 It is correct that Coomera, not PRD, succeeded in the action. However, it should be noted that although Dietz’s conduct was the basis for the finding that PRD was disentitled to commission, Coomera did not obtain judgment against him on any matter pleaded against him. Those were damages for contravention of s.52 of the Trade Practices Act and for conspiracy. However, it is convenient to state at the outset that in view of the findings of fact concerning his conduct it is not justifiable that any costs order against Coomera be made in his favour. His is a clear case where the ordinary rule that awarding costs to follow the event should be departed from in view of what was found against him as a matter of fact. Indeed no submission for costs in his favour was made, and the submissions for the seventh and eighth defendants proceeded on the basis that their interests, and the outcome in costs was identical. -- 5 of 11 -- 4 8 Coomera was also prepared to concede that it should not have the costs of the hearing when it was unsuccessful in establishing a basis for damages under the Salvadori principle. It submitted that it would be appropriate to make no order as to costs for that day. 9 With respect to the discounting of costs by reason of its failure on some issues, it was submitted that Coomera succeeded on the fundamental issue of a collusive arrangement between Dietz and Bond. This finding disentitled PRD to commission even though the allegation of conspiracy failed for want of proof of the element of damage. Further, while reliance on a letter dated 10 December 1991 had not been proved and an allegation of fraud or misleading and deceptive conduct had failed on that basis, it was relevant to credit that the letter and the events preceding its composition be fully explored. In any event it was pleaded as a particular in the claim of breach of fiduciary duty which succeeded. It was submitted that the case against PRD and Dietz was not significantly enlarged by the existence of issues upon which Coomera ultimately failed. 10 It was also submitted that regard should be had to the maintenance by PRD and Dietz of a false denial of a collusive arrangement and the consequent breach of fiduciary duty. It was submitted that if the nature of the arrangement had been disclosed the conspiracy allegation against Kolback may not have been pursued. There was a vigorous attempt to link Pitt to the collusive arrangement and it, in my assessment, occupied a substantial amount of time at trial. Having regard to the way that aspect of the matter was pursued, I am not convinced that it would not have been pursued in any event since the main thrust of this aspect of the case against Kolback was based on inferences which were invited to be drawn from documents generated within Kolback, events in which Pitt was involved, and evidence of what Pitt was alleged to have said to people inside and outside Kolback. If Dietz had exonerated Pitt, it is in my view very questionable whether Omura, in the frame of mind in which he was, would have been disposed to accept that explanation at face value and instruct that Kolback not be pursued as well on the basis of Pitt’s alleged conduct. -- 6 of 11 -- 5 11 With respect to the submission that costs should be assessed as a proportion of costs of the trial the submission was made in the following way. An order that PRD and Dietz pay costs of issues upon which Coomera was successful, so far as they related to them, was impracticable because of the burden it would impose on a taxing master. There is no reason to disagree with that proposition. Alternative approaches propounded were that an order be made that PRD and Dietz pay one-third of Coomera’s costs of the trial. That proportion was based on four days of the trial being taken up with witnesses called by PRD and a proportion of the addresses over 2 days. That is obviously less than one-third but the submission was that regard should be had to Pitt’s evidence where Dietz’s activities were the subject of cross-examination as well. It was submitted that PRD’s and Dietz’s conduct included a failure to give a truthful explanation of the dealings with Bond and had thereby invited litigation including that concerning Pitt’s activities. 12 The joint submission from PRD and Dietz started from the proposition that PRD and Dietz had incurred a large burden of costs by being inextricably bound up in a trial which included complex issues not involving it, as well as issues in which it was involved. It was submitted that a trial against PRD and Dietz in respect of liability for commission only, which was the only issue upon which Coomera succeeded against PRD, would have taken only 5 or 6 days. There is an analysis of the course of the trial which is designed to support this assessment. While that has not been tested it does not seem an unrealistic assessment given the assumptions. It was submitted that PRD and Dietz had incurred greater costs than Coomera would have incurred, in defending the claim against them having regard to their necessary presence at most of the trial and the eventual outcome against them. 13 The claim pursued against them was not only relief from liability for commission but also damages for deceit and misleading or deceptive conduct (both of which failed). It was submitted that because they had failed, without prejudice offers prior to trial to settle the matter on the basis of PRD -- 7 of 11 -- 6 foregoing commission and each party paying its own costs should be taken into account in making the order as to costs. It was submitted that no other commercial basis for resolution of the case against PRD and Dietz had been offered. 14 In this regard it was submitted that it had been accepted that even though a formal procedure exists in O.26 of the Rules of the Supreme Court a court should nevertheless have regard to the principle in Calderbank v Calderbank (1976) Fam.93 in deciding whether an offer to settle affected the issue of costs. It was submitted that the principle had been applied in this Court in Johns Perry Industries Pty Ltd v International Rigging (Aust) Pty Ltd (1988) 2 Qd.R 556 and Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited & Anor. (1053 of 1994, unreported, 12 March 1998, Shepherdson J). 15 I have no difficulty in accepting that in an appropriate case the existence of a without prejudice offer to settle may be a relevant factor in determining costs. The underlying proposition in this case is that it should be found that it was reasonable for the plaintiff to make a commercial decision to settle its claim against PRD and Dietz on the basis that each party bore its own costs. The correspondence sent by the seventh and eighth defendants on the issue concludes (on the third day of the trial) on the note that if the matter was not settled on that basis within a period of a couple of days it would thereafter only be settled if the plaintiff paid $100,000 to the defendants towards costs. 16 While in view of the eventual outcome it would have been appropriate to accept relinquishment of the claim for compensation as an appropriate resolution of the matter, I am not persuaded that it was incumbent on the plaintiff, who had, on a reasonable basis, commenced proceedings seeking that relief, to consider it reasonable to forego costs involved in pursuing the claim in their entirety. The proposition that the trial had become unnecessary because of the offer that was made cannot be sustained. The proposition that the making of that offer should be a major influence on the determination of costs is not made out in this particular case. -- 8 of 11 -- 7 17 Pursuit of the issues upon which Coomera failed did not markedly increase the volume of evidence in the trial. In reality the evidence actually canvassed in the case against PRD and Dietz was necessary to develop the framework within which liability was ultimately determined. If there was any increase in the length of the trial it was by reason of the development of submissions on the nature of liability established by the evidence rather than the evidence itself. It is convenient to mention at this point that the day spent in determining whether Salvadori damages had been proved was effectively conceded by Coomera to be one for which PRD and Dietz should be given credit. On the wider question of damages (apart from relinquishment of the claim to commission) costs related to quantifying damages against PRD and Dietz are not recoverable since Coomera failed on that issue. 18 By far the greatest volume of evidence, both oral and documentary, related to Coomera’s action against Kolback. The difficulty about awarding a proportion of the whole of Coomera’s costs in the action is that resolving the issue on that basis would over-compensate Coomera in respect of its case against PRD and Dietz. My estimation of the course of the trial is that Coomera’s claim for one- third of the costs of the action could not be justified in any event, given the disproportion that it bears to the evidence in respect of the respective parties. 19 At the other extreme PRD and Dietz abandoned an earlier submission that there should be no order as to costs and espoused a submission that, having regard to the failure of Coomera’s substantial damages claim and the position reached prior to trial whereby PRD was prepared to give up any entitlement to commission, there should be no order as to costs up to the commencement of the trial and thereafter the plaintiff should pay PRD’s and Dietz’s costs of the trial, or at least a significant proportion of them. It was submitted that if the plaintiff was to be awarded any costs they should be limited to the additional costs incurred by virtue solely of the issues between the plaintiff and the seventh and eighth defendants on which the plaintiff succeeded. That meant that the plaintiff -- 9 of 11 -- 8 should not have costs of issues upon which it failed and should not have costs which would have been incurred in any event in the litigation with Kolback. 20 It was also submitted that there should be a monetary cap, based on a cost assessor’s opinion, to the cost of a trial solely on the issue of liability for commission. In my opinion the case is one where a costs order specific to the action must be fashioned. No doubt there can be many approaches in such a situation. However, what is proposed is considered to achieve a balance between the parties. 21 It is desirable to avoid complexity as far as possible in making the order for costs. In concluding what order should be made, the matters previously referred to have been taken into account. While fine distinctions can be made in apportioning costs, it is better to try to avoid over- complication and to compensate for a “broad brush” approach in other ways. Perfection is probably unachievable in a complex case. Justice is the aim. 22 In the present action, the cases of conspiracy against Kolback and Pitt and PRD and Dietz both focus on Bond’s use of Landbase as vehicle for obtaining part of PRD’s commission. With respect to the breach of fiduciary duty which was proved against PRD, the allegation and the evidence to prove it were essentially the same as for the unsuccessful allegation of conspiracy against PRD and Dietz. Apart from the focus on the role of Bond and Landbase, the evidence to implicate Kolback and Pitt in the conspiracy was distinct from that relied on to implicate PRD. (See ch.28-30, first reasons). 23 Having regard to the way in which the respective bases of liability are pleaded, as a matter of practicality it should be regarded as legitimate to allow, as costs which are recoverable against PRD and Dietz, the costs of establishing collusion between Bond and PRD through Dietz. The costs should be allowed in full against them since the evidence forms the basis of the submissions as to each form of relief sought. Any prolongation of the trial was by reason of the plaintiff being -- 10 of 11 -- 9 unsuccessful in establishing a particular cause of action on the evidence. That is at the most a prolongation of the trial rather than an expansion of the preparation for trial. There may be some additional costs involved in connection with general costs in respect of which “double dipping” might occur but other than that, in the present case the unsuccessful issues against PRD and Dietz ought not to have involved significant extra costs in the pre-trial phase. Any such costs can be compensated for by making some allowance for any additional costs by adjusting costs for the trial phase. 24 What is proposed is based on pragmatism, not any particular philosophy. Having regard to all relevant factors I order as follows: 1. Subject to order 2, the seventh and eighth defendants are ordered to pay the plaintiff’s costs of and incidental to the action against PRD and Dietz up to the commencement of the trial, to be taxed. 2. Costs incurred in and in connection with the issue of the amount of damages allegedly payable by PRD and Dietz shall not be recoverable under Order 1, or otherwise. 3. The plaintiff is ordered to pay the seventh and eighth defendants’ costs, incurred after delivery of supplementary reasons for judgement on 7 April 1998, of and incidental to the issue whether damages for tortious conspiracy were payable (including costs of and incidental to the hearing on 31 August 1998). 4. Subject to order 3, the seventh and eighth defendants are ordered to pay thereafter the plaintiff’s costs of the trial limited to 4 days’ costs, to be taxed. 5. The question of payment out of the moneys paid into Court pursuant to order of 20 September 1996 is adjourned. -- 11 of 11 --