FEDERAL COURT OF AUSTRALIA

Harvard Nominees Pty Ltd v Tiller (No 3) [2020] FCA 1054

ORDERS

THE COURT ORDERS THAT:

1.    The applicant must pay the respondents' costs of the proceeding.

2.    The quantum of costs is to be assessed if not agreed, with the Registrar to apply a discount of 40% to the quantum assessed.

3.    The fourth respondent has liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JACKSON J:

1    By orders made on 19 March 2020 and 11 May 2020 I dismissed the application of Harvard Nominees Pty Ltd for remedies consequent on allegations of misleading or deceptive conduct against the first to fourth respondents. These reasons concern the costs order that should follow from that result. They assume familiarity with the main reasons: Harvard Nominees Pty Ltd v Tiller (No 2) [2020] FCA 604. Defined terms are used as in the main reasons and save where indicated, paragraph references are to those reasons.

2    Harvard submits that as regards the first, second and third respondents, that is, Mr Tiller, Dimension Agriculture Pty Ltd and Mr Nicoletti, there should be no order as to costs. Alternatively, it submits that the costs of those respondents should be discounted by 60% to 80%. In relation to the fourth respondent, Mr Bryce, Harvard accepts that it should pay his costs, but only insofar as he incurred any costs independently of the other respondents. That is in circumstances where all of the respondents were represented by one law firm and one barrister.

3    Harvard makes no submissions about any costs of the fifth respondent, Felicity Tiller. The respondents' submissions acknowledge that she took no part in the proceeding, as no allegations were made against her. They say that 'minimal cost' was incurred in her defence. I will include Mrs Tiller in the order as to costs to make sure that any minimal costs are covered, but in what follows references to the respondents do not include her.

4    It is open to Harvard to seek a reduction in the costs awarded against it because, while its application has been dismissed, it was (broadly speaking) successful in establishing that most of the respondents engaged in misleading or deceptive conduct. Where it failed was in establishing that the conduct caused it to suffer loss or damage. In that context, Harvard advances two main reasons why the court should depart from the usual order as to costs. The first is that the way in which the respondents conducted their defence against the factual basis of the allegations of misleading conduct was bound to fail, and was so lacking in merit as to be inconsistent with the overarching purpose of the civil practice and procedure provisions. The second was that the question of whether Mr Tiller, Dimension and Mr Nicoletti engaged in misleading or deceptive conduct was a critical and discrete issue which occupied a substantial amount of time at trial.

Principles

5    The general principles in relation to the question of who is entitled to the costs of a proceeding are not in doubt. Ordinarily costs follow the event: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136. But the court has a broad discretion, so it can depart from the ordinary rule for good reason: Federal Court of Australia Act 1976 (Cth) s 43(2) and s 43(3); Oshlack v Richmond River Council (1998) 193 CLR 72 at 97, 120; Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3]; and Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282 at [5] and the cases referred to there. It is incumbent on the party seeking a departure from the rule to satisfy the court that good reason exists: Nikolaou v Papasavas Phillips & Co (No 2) (1989) 166 CLR 394 at 407.

6    Despite its breadth, the discretion to award costs is not unfettered, and must be exercised judicially: see Keet v Ward [2011] WASCA 139 at [17]. In exercising the discretion the court should keep in mind that there are good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 327 ALR 192 at [6]. In Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [51] the Western Australian Court of Appeal (Murphy, Mitchell and Pritchard JJA) said (footnotes removed):

It is well‐recognised that an order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation, and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. Furthermore, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if, by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case.

I read these observations as encompassing a case where a party has been wholly successful in relation to the orders sought but not wholly successful in relation to the issues fought at trial.

7    Each costs order represents the exercise of a discretion based on specific facts: see GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 at [6]. Nevertheless, it is generally accepted that one good reason to depart from the usual rule may be where the party that has been unsuccessful in the result has succeeded on certain issues, 'issue' in that sense meaning any disputed question of fact or law: Hughes v WA Cricket Association at 48,136. It may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. Another (overlapping) consideration that may be appropriately reflected in an order for costs arises where a party has acted unreasonably in a way that has increased costs: see Evans Deakin v Sebel Furniture at [5].

8    As with all decisions under the civil practice and procedure provisions of the court, a decision on these matters must be made in the way that best promotes the overarching purpose of those provisions to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: Federal Court Act s 37M(3). It follows from this that any failure to bring the real issues in dispute to the court for adjudication may justify a reduction in a party's entitlement to costs on issues which were unnecessarily agitated: Kimber v The Owners Strata Plan No 48216 [2018] FCAFC 181 at [86].

9    In circumstances where there are a number of different issues on which the parties have had various levels of success, it may be difficult to disentangle the 'event' or 'events' which an order for costs might follow, and it can similarly be difficult to disentangle the several issues in the case and attribute to each an appropriate quantification of the level of success achieved by the various parties. In those circumstances, a broader approach which awards a percentage or fraction of the costs incurred by a party can be adopted, although it is necessary to ensure that the orders are reflective of a general level of success or failure of each party: see Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2) [2018] FCAFC 113 at [5]. In such a case, the power to limit costs will be exercised broadly, and as a matter of impression, and without any attempt at illusory mathematical precision: Strzlecki Holdings v Jorgensen at [52].

The manner in which the respondents conducted their defence

10    In relation to the first basis for its position on costs, Harvard submits that the respondents put in issue all instances of misleading or deceptive conduct, when there was no realistic or sustainable factual basis on which the defence could have been advanced. Harvard cites numerous instances where the oral testimony of Mr Tiller and Mr Nicoletti was found to be inconsistent with the contemporaneous documents and objective probabilities, and yet they persisted with plainly untrue attempts to explain the documents.

11    It is not necessary to enumerate those instances here. In the present case, in my view, the fact that I did not accept many aspects of the evidence advanced by the respondents is not enough to take the matter outside the normal rule as to costs. Disbelief by the court of much of the evidence adduced by one side often emerges in cases like the present, where the outcome depends on whether the court accepts differing accounts by witnesses of conversations and the circumstances surrounding them.

12    That is especially so in relation to the first instance of misleading or deceptive conduct, which occurred during a conversation which Mr Tiller had with Mr Caratti on 31 January 2019. There was no written record of that conversation. Deciding whether to accept, in substance, Mr Caratti's varying accounts of the conversation required a close examination of the surrounding documentary record and the objective probabilities of the situation. The findings depended to a significant extent on what was common ground in Mr Caratti's and Mr Tiller's evidence about the conversation, namely the fact that Mr Caratti asked Mr Tiller about Mr Nicoletti's involvement with Dimension or the Farms. And they were not findings reached without reservation: see [419]-[423].

13    Harvard relies on the findings I made about the lack of credibility of the evidence of Mr Tiller and Mr Nicoletti, and says that this was a relevant factor in the exercise of the discretion about costs. Harvard relies on dicta of Sifris J in Rozenblit v Vainer (No 2) [2019] VSC 366 at [36]-[44], where his Honour found the fact that a party deliberately gave untruthful and self-serving evidence in an attempt to frustrate another parties' claims was relevant to the exercise of the discretion. But I do not consider that in this case, my findings about credibility weigh in Harvard's favour concerning the exercise of the discretion here. I did not make, and do not make here, any finding that the evidence of either Mr Tiller or Mr Nicoletti was deliberately or knowingly untruthful. The findings I made speak for themselves (see in particular [57]-[61] and [64]-[65]) and I see no need to paraphrase or summarise them and no basis to add to them here. In any event, the findings on credibility cut both ways; while the substance of Mr Caratti's evidence was accepted on key points, much of it was not, and for reasons I summarised at [51]-[56], I found him prone to exaggeration and embellishment and I was required to approach his evidence with caution.

14    More broadly, I do not consider that the fact that parties gave evidence that was not accepted, even a great deal of evidence that was not accepted, is a basis to depart from the usual rule. As I have already said, in a case like the present one, the contest will often be between disparate versions of events, and the outcome will often be that one party is believed over others. That is the nature of litigation of this kind. It is not an outcome which justifies denying the party who won its costs of the proceeding.

15    Also, with one exception, I am not persuaded that the respondents raised any issues which were so lacking in merit that they should not have been raised. They were faced with allegations of misleading or deceptive conduct which to a large extent relied on evidence about conversations between key witness, and that were not recorded in any detail by any independent witness or in some cases not at all. Even where the claim did not rely on conversations but on written correspondence and instruments, it required examination of the effect of silence in the context of that correspondence, including the knowledge of various respondents, where the outcome was not a foregone conclusion.

16    The respondents were entitled to contest all those allegations. Observations of Burchett J in Australian Conservation Foundation Inc v Forestry Commission of Tasmania (1988) 81 ALR 166 at 169 are apposite:

A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment.

While, on analysis, many of the barriers raised by the respondents here failed, I do not consider that it was unreasonable for them to have been raised.

17    The exception I mentioned is a plea the respondents made that Mr Caratti himself engaged in misleading or deceptive conduct: see [42]. That aspect of the case was, with respect, patently tenuous, and it was not ever clear where it would lead even if it were to be established. But no time was spent on it at trial, as it was really just a different characterisation of facts that needed to be established anyway, and counsel for the respondents properly abandoned it in closing. So nothing turns on it for present purposes.

Harvard's success on one of the key issues

18    The other way that Harvard puts its claim for a reduction in costs is that it won on important issues that took up a significant amount of time at trial. The question of whether the respondents engaged in misleading or deceptive conduct was obviously a central question in the proceeding. Although Harvard's victory on that question was not complete, it was substantial. The first instance of misleading conduct was based on a claim that Mr Tiller said misleading things on 31 January 2019. That was established. The second instance depended on claims that in the context of correspondence that was sent, the failure to disclose the existence of the 15 February Deeds was misleading. That was also established. So breaches of the prohibition in s 18 of the Australian Consumer Law (ACL) were made out. Further, Harvard established that it relied on the first instance of misleading or deceptive conduct. It also established that it relied on the second instance, albeit in the limited sense that had it known of the existence of the 15 February Deeds, it would have tried to re-enter the Farms: see [670]-[671]. Where Harvard failed, in both instances, was in establishing that the breaches caused it to suffer loss or damage.

19    Given the symmetry in the result (if not the path of reasoning) in respect of each of the two instances of misleading conduct, there is no need to distinguish between them in the present discussion. In summary, breach and causation of loss were the two key issues in the trial. The principles I have summarised above give the court a degree of flexibility as to what it may characterise as a relevant issue and when it may treat issues as distinct from each other. Here, while those two main issues were logically sequential (not parallel) to each other, they could be considered and resolved separately, as they were in the main reasons. In my view it is appropriate to treat them as discrete issues for the purposes of costs.

20    So, at that level of generality, Harvard substantially succeeded on one of the two key issues and the respondents succeeded on the other one. The other matter which, coupled with that, justifies a departure from the usual rule, is that the first key issue, on which Harvard succeeded, took up most of the time at trial. The bulk of the evidence was spent on whether Mr Tiller said the things on 31 January 2019 he was alleged to have said, whether the matters conveyed then and conveyed subsequently by the correspondence and non-disclosure of the 15 February Deeds were true, and whether Harvard relied on the things that were conveyed. Those were the issues or sub-issues that were factually intensive.

21    The questions of causation on which Harvard failed were, in contrast, resolved by applying legal analysis to largely uncontested facts about the parties' contractual positions before and after the relevant transactions. The submissions for the respondents on costs focus on the conceptual flaws in Harvard's case as to causation and say that this was a matter justifying an award to the respondents of all their party-party costs. But I do not consider that the flaws were so obvious that it was unreasonable to run the case in the way that Harvard did. The important point, in my view, is that Harvard was successful on other issues which should be treated as separate (and anterior) to the causation issue and which consumed most of the time at trial.

22    Once again, Harvard's submissions on costs identify numerous issues or questions at a lower level of detail on which it was successful; for example whether Mr Nicoletti knew of the existence of the 15 February Deeds as at 5 April 2019. I do not consider that the principles I have outlined above are a warrant to parse the result at that level (and Harvard does not submit that they are). Nevertheless, there are some specific respects in which Harvard was not successful which are relevant to the exercise of the discretion and to which reference should be made.

23    First, Harvard only established three of the four pleaded representations it claimed had been made on 31 January 2019. I do not think that matters for present purposes. The three that were established were sufficient to support the plea of reliance. It was at the point of establishing that the reliance caused loss or damage within the meaning of s 236 or s 237 of the ACL where Harvard failed.

24    Second, Harvard failed entirely to establish that Mr Bryce engaged in or was involved in any misleading or deceptive conduct. Even if a broad impressionistic approach is taken to apportionment of costs, the court must not overlook that fundamental fact. The respondents make a more particular submission that an inability to separate the costs of Mr Bryce's defence from the costs of the defences of the other three respondents causes difficulty in apportionment, which I will address below.

25    Third, Harvard failed to establish that Mr Nicoletti was knowingly involved in the contraventions of s 18 in which Mr Tiller and Dimension engaged on 31 January 2019. Recognising that does not involve parsing the issues in the way I have described above. Harvard failed against Mr Nicoletti on a key issue.

26    Fourth, while Harvard succeeded on reliance, much of the time spent at trial on that issue was spent in seeking to establish a basis for reliance which ultimately I did not accept. This was the theory that Mr Caratti preferred Mr Tiller to Mr Nicoletti as a tenant for reasons that included a history of default on Mr Nicoletti's part. As with the defences the respondents raised on which they failed, Harvard was entitled to put its case this way. I do not find that it was so lacking in merit that it was unreasonable to put it. But it did consume a substantial amount of time at trial and in the end the court did not accept it.

27    Taking those matters into account, I consider that there should be a discount in the amount of costs awarded to the respondents, but that discount should not be 60% or 80%, let alone 100%. Taking the impressionistic approach mandated by the authorities - an impression informed by my role and recollection as trial judge and not, for example, on the basis of any detailed assessment of time or transcript pages taken on various sub-issues - I consider that the costs awarded to the respondents should be discounted by 40%. In my view, this reflects Harvard's substantial, but not total, success in establishing misleading or deceptive conduct but also pays due regard to the fundamental fact that Harvard's application was dismissed in its entirety.

Mr Bryce's and Mrs Tiller's position

28    Both the fourth and fifth respondents were wholly successful and, as I have noted, the fifth respondent, Mrs Tiller, took no active part in the proceeding.

29    As I have mentioned, the respondents submit that the fact that the fourth respondent, Mr Bryce, was wholly successful on all issues militates against any discount. The respondents were represented by one firm of solicitors and one barrister so it is not possible to discern the costs incurred independently by any one of the respondents. They submit that there is no basis for Mr Bryce being deprived of any part of his costs.

30    I agree with that last sentence. But the relatively modest discount I will order reflects Mr Bryce's complete success in the proceeding, among other things. The respondents have chosen, as is their right, to be represented by one firm and one barrister. In my view, that entitles the court to treat the costs as indivisible for the purpose of applying a discount. Who will pay how much of the respondents' legal bills, and who will receive the benefit of the costs order made against Harvard, is a matter between the respondents. The respondents have also chosen not to adduce any evidence as to those matters. That too is their right, but it leaves the court with no basis on which to find that the effect of the discount will be to leave Mr Bryce out of pocket as to his costs to any greater extent than an award of 100% of party-party costs would do.

31    I will, however, give Mr Bryce liberty to apply so that if he wishes to contend that the outcome of the discount will be to leave him worse off in that way, he may do so. Since Mrs Tiller's costs were minimal, there is no need to give her liberty to apply.

Method of assessing costs

32    It was common ground that in view of the complexity of the matter, the costs should be assessed by a registrar on the basis of a bill of costs, if they cannot be agreed, and not fixed in any other way such as a lump sum order. I will direct that costs be assessed in the way the parties propose.

Costs of this application

33    There will be no order for the costs of this application for costs. The parties have had mixed success. Although in the end the discount was only 40%, the applicant was required to go into submissions to vindicate its entitlement to a discount and it is just in my view to treat the parties' costs entitlements on the present application as, in effect, cancelling each other out.

Associate:

Dated:    22 July 2020