Josip Duic v Emil Duic

The judgment in these proceedings was handed down on 16 February 2012. The parties were required to bring in short minutes of order reflecting the reasons for the decision at which time the parties would be given an opportunity to address on costs.

Both parties have now acted accordingly. It falls for the Court to make orders in relation to costs.

While the Court has a wide discretionary power as to costs, which is to be liberally construed, the discretion must be exercised judicially in accordance with established principle: NSW v Stanley [2007] NSWCA 330 at [18]; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [8]; Oshlack v Richmond River Council (1998) 193 CLR 72 at [22].

The principle is that the presumption that the successful party is entitled to costs will only be displaced where there has been some sort of disentitling conduct on the part of the successful party: Oshlack at [40] and [69].

The Court must not exercise its discretion to award costs against a successful party arbitrarily or capriciously, or on no grounds at all: Oshlack at [22]. The discretion must be exercised judicially and "according to rules of reason and justice, not according to private opinion ... or even benevolence ... or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at 95.

The purpose of an order for costs is to compensate the person in whose favour it is made and not to punish the person against whom the order is made: Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33 at [34]; Dr Douglass v Lawton Pty Ltd (No 2) [2007] NSWCA 90 at [22].

It is for the losing party to establish a basis for departure from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10]; NSW v Stanley [2007] NSWCA 330 at [24].

It is common ground that the proceedings were exceedingly unusual as is evidenced by the published judgment.

The defendant submits that the plaintiff has failed to establish any basis on which the Court should depart from the usual rule in UCPR 42.1.

The plaintiff contends that there should be no order for costs so that each party is to bear its own costs.

On 13 May 2011, Emil made a formal Calderbank offer to settle the proceedings on the basis that he receive the legal title to the Mellor Street property, that he pay his father $250,000 and that there be no order as to costs (with the costs order made in Emil's favour by Hall J on 17 March 2011 vacated).

When that offer was received by the plaintiff's solicitors, the legal issues were clear and the plaintiff knew what the effect of the cross-claimant's evidence was to be on the central factual question of the representations. He must also have known that his own evidence in this regard was false.

Had Josip accepted that offer, he would have been significantly better off than he is under the judgment that was ultimately given. Significant further legal costs would not have been spent (by both parties) and the use of five days of the Court's time would have been avoided.

On 7 February 2012, on the second day of the hearing, Emil made a formal Offer of Compromise under UCPR r 20.26 to settle the matter on the basis that he receive legal title to the Mellor Street property and pay his father $200,000. Once again, had Josip accepted that offer, he would have been significantly better off than he is under the judgment that was ultimately given.

To my mind the 7 February 2012 formal offer of compromise should be discarded for the reason that the offer was simply too late.

In all the circumstances the principled approach to the question of costs is as follows :