FEDERAL COURT OF AUSTRALIA

King v Yurisich (No 2) [2005] FCA 1765

COSTS – application for costs by parties who were successful at trial – whether costs follow the event – Court’s discretion in making costs orders.

Ritter v Godfrey [1920] 2 KB 47 cited

Latoudis v Casey (1990) 170 CLR 534 cited

Oshlack v Richmond River Council (1998) 193 CLR 72 cited

JOHN MILLER CAMPBELL KING & ORS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND v WAYNE JAMES YURISICH & ORS

VID 764 of 2002

LANDER J

2 DECEMBER 2005

ADELAIDE

THE COURT ORDERS THAT:

1.         The applicants pay 70 per cent of the fourth and fifth respondents’ costs on a party and party basis.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 13 September 2005, I made an order dismissing the applicants’ claim against the fourth and fifth respondents.  At that time, the fourth and fifth respondents applied for costs.  Mr Cawthorn, who appeared for the applicants, asked me to reserve the question of costs until such time as he had an opportunity of reading my reasons and considering whether or not the application would be opposed.  I have subsequently been advised that the applicants oppose the fourth and fifth respondents having their costs of action. 

2                     The applicants’ claim against the fourth and fifth respondents is set out in some detail in the reasons which I published on 13 September and it is not necessary to articulate that claim again.  There were a number of issues raised by the applicants and by the fourth and fifth respondents by way of defence.  Those issues, in the end, distilled into questions of liability and damages, although the questions of liability and damages were inter-related by the defences of the fourth and fifth respondents insofar as they claimed there had been no reliance by the applicants on any of the conduct of the fourth and fifth respondents which gave rise to loss or damage.

3                     The applicants succeeded on the question of liability, however, they failed on the question of damage because, in my opinion, they failed to prove that they had suffered any damage as a result of the conduct of the fourth and fifth respondents.  For those reasons, I dismissed the applicants’ claim.

4                     Prior to the trial commencing the fifth respondent wrote a Calderbank letter to the applicants offering to settle the matter upon the basis that the applicants’ claim against the fifth respondent be withdrawn and that each party bear their own costs.  Accompanying that offer to settle was a position statement of the fifth respondent in support of that Calderbank offer.  The position statement asserted why it was that the proceedings ought to be abandoned against the fifth respondent in some detail.  The offer, of course, was rejected.

5                     During the trial of the action the fourth respondent attempted to deflect any finding of liability against it by claiming that it had a limited retainer.  I rejected the fourth respondent’s witnesses’ evidence and their defence in that regard.  The fifth respondent, on the other hand, was a frank and candid witness who accepted that his conduct had fallen short of the standard required of an auditor.  It was put by Mr Cawthorn, on behalf of the applicants in resisting the fourth and fifth respondents’ application for costs that, in the circumstances, the fourth and fifth respondents should have admitted liability and allowed the matter to proceed as to damages only. 

6                     He said that if the fourth and fifth respondents had taken that course of action the trial would have been very much shortened and the fourth and fifth respondents would not have incurred the costs which they subsequently have incurred.  I think there is some force in that submission.  I think that the fourth and fifth respondents, in some respects unreasonably, defended some issues in the proceedings.  I think that the fourth respondent was wrong to claim, as I have said in my reasons, that it had a limited retainer.  I think the fifth respondent should have accepted that his conduct had fallen short of the standard required of an auditor earlier than he did.

7                     If both the fourth and fifth respondents had taken those attitudes during the trial the trial would have been shortened.  However, it is true to say, as the fourth and fifth respondents have said, that the fourth and fifth respondents would not have been put to any cost at all if these proceedings had not been commenced.  They say, not unreasonably, the proceedings should not have been commenced because the applicants could not establish any loss as a result of any conduct on the part of the fourth and fifth respondents.

8                     The purpose of an order for costs is to compensate the successful party, not to punish the unsuccessful party: Latoudis v Casey (1990) 170 CLR 534 per Mason CJ at 543, McHugh J at 567 (‘Latoudis v Casey’); and Oshlack v Richmond River Council (1998) 193 CLR 72 per Brennan CJ at [1] and per McHugh J at [67] (‘Oshlack v Richmond River Council’).  Therefore, I should approach this matter not on the basis that the applicants ought to be punished for failing to establish damage but on the basis that any order for costs would be designed to compensate the fourth and fifth respondents.

9                     It is said that as a general rule costs ordinarily follow the event: Ritter v Godfrey [1920] 2 KB 47 and Latoudis v Casey per Mason CJ at 542-543, Dawson J at 557 and McHugh J at 567, 569.  However, there is no absolute rule to the effect that costs follow the event.  So much was made clear by the majority in Oshlack v Richmond River Council per Gaudron and Gammow JJ at [40] and Kirby J.  I think the Court should approach the question of costs on the basis that the Court’s discretion is unfettered except that the discretion ought to be exercised judicially.

10                  I ought to take into account the conduct of the parties before and during the trial and the result of the proceedings, and what order, in all of the circumstances, would properly reflect the purpose of an order for costs which is intended to compensate the successful party.  In this case, the applicants suggested that the fourth and fifth respondents, notwithstanding they were successful, should have no costs.  As I said to Mr Cawthorn during argument, I was not persuaded that the fourth and fifth respondents should not have some order for costs.  In the alternative, it was submitted that the fourth and fifth respondents should have 20 per cent of their costs.

11                  I am persuaded that the fourth and fifth respondents’ costs order should be reduced to some extent to reflect the way in which the fourth and fifth respondents conducted themselves in the litigation having regard to the evidence of the fourth and fifth respondents at trial.  It seems to me that the fourth and fifth respondents should be entitled to an order for costs.  In the exercise of my discretion I would make that order but reduce the costs payable by the applicants to the fourth and fifth respondents to 70 per cent of the fourth and fifth respondents’ costs.  There will be an order therefore that the applicants pay 70 per cent of the fourth and fifth respondents’ costs on a party and party basis.

Associate:

Dated:              9 December 2005