Yalda v Mshref (No 2)

HER HONOUR: On 2 June 2021, I delivered judgment in Yalda v Mshref [2021] NSWSC 624. I made an order accordance with s 41 of the Local Court Act 2007 (NSW), that the amount of damages awarded in the second proceedings be varied from $20,597.93 to $20,000. Otherwise the appeal is dismissed. I affirmed the order for costs made by her Honour Magistrate Swain (“the Magistrate”) on 4 August 2020 and reserved the question of costs in relation to the appeal.

On 2 July 2021, orders were made that Ms Yalda provide short written submissions on costs by 12 July 2021 and that Ms Mshref do the same by 19 July 2021. On 15 July 2021 by consent, the parties requested an extension for the submissions to be filed. I have now received those submissions.

Ms Yalda submitted that it appears from Order 1 made in these proceedings that she had been partly successful in her appeal, specifically, she had succeeded on Ground 3.

Ms Yalda submitted that the consequence is that an order for costs should be made in her favour.

She referred to Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 (“Cellarit”). In Cellarit, McColl JA stated at [7]-[14]:

In Cretazzo v Lombardi (1975) 13 SASR 4 (Cretazzo”). In Cretazzo, Jacobs J stated at p16:

Similarly, in Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 28 Mahoney JA, at 330-331, approved of a statement in Ritchie that:

In James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (“James’). In James, the Court of Appeal stated at [34]:

On this basis an order for costs should be made in her favour.

First, Ms Yalda submitted that she was partly successful on Ground 3 of the appeal. Second, each of the three grounds of appeal on which she relied were closely linked and inseparable. Each of the three grounds of appeal related to the earlier default judgment that had been obtained by Ms Mshref, in respect of the same motor vehicle collision. By Ground 1, Ms Yalda argued that Ms Mshref had engaged in an abuse of process by relitigating the same issues that had been disposed of in the earlier proceedings, by seeking inconsistent findings to those she had sought in the earlier proceedings, and by failing to join her to the earlier proceedings which would have avoided a multiplicity of proceedings. By Ground 2, Ms Yalda argued that its notice of motion seeking an order under UCPR 13.4 should not have been dismissed; that notice of motion sought to argue that Ms Mshref was engaging in an abuse of process and was barred from relitigating the same issues that had been disposed of in the earlier proceedings. By Ground 3, Ms Yalda argued that s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) required the Magistrate to have regard to the earlier proceedings and the default judgment that had been obtained therein. There is an obvious and identity of issues between the three grounds of appeal. They are ‘inseparable’ or at least ‘sufficiently linked’, to use the language of the Court of Appeal in James v Surf Road Nominees Pty Ltd (No 2), that the Court should not make some other order as to costs other than the order that costs follow the event.

Ms Mshref submitted that Ms Yalda should pay her costs on an indemnity basis or alternatively, that Ms Yalda should pay her costs on an ordinary basis.

The indemnity costs order was made in the Court below because Ms Mshref had made an offer of compromise in which she had offered to resolve her claim for $15,000 including interest. The Magistrate found this to have been a genuine offer of compromise because it represented a discount of more than 25% of Ms Mshref’s claim. Accordingly, her Honour ordered pursuant to UCPR 42.14 that Ms Yalda pay Ms Mshref’s costs of the proceeding on an ordinary basis until 27 July 2020 and on an indemnity basis from 28 July 2020.

UCPR 20.26(1) permits a party to make an offer “in any proceedings … to compromise any claim in the proceedings”. UCPR 42.14(1) applies where such an offer is made by a plaintiff and Ms Yalda “obtains an order or judgment on the claim no less favourable to Ms Yalda than the terms of the offer”. Pursuant to r 42.14(2), where (as here) the offer was made before trial, Ms Yalda is then entitled to “the plaintiff’s costs in respect of the claim” on an ordinary basis up to the date on which the offer was made, and on an indemnity basis from the following day.

As emphasised in the previous paragraph, the relevant rules refer to the costs in respect of the claim to which the offer relates, and not the proceedings in which the offer is made. Accordingly, where a UCPR 20.26 offer of compromise is made at first instance in relation to a particular claim, UCPR 42.14 continues to be engaged in appeal proceedings concerning the same claim: Berrigan Doube Lawyers v Millar Eagger Pty Ltd [2016] NSWSC 235 at [76] (Beech-Jones J); South Sydney Council v Walsh (No 2) [2003] NSWCA 111 at [12]-[15] (Ipp JA; Foster AJA and Bell J agreeing).

It follows that UCPR 42.14 continues to be engaged in relation to this appeal. Notwithstanding the reduction in the judgment amount of 3% on appeal, it remains the case that Ms Mshref has obtained a judgment on the claim no less favourable to her than the terms of the offer of compromise. It follows that unless the Court orders otherwise, Ms Mshref is entitled to an order against Ms Mshref for the costs of the appeal, to be assessed on an indemnity basis. There being no reason to order otherwise, the Court should make that order.

Alternatively, Ms Mshref submitted that Ms Yalda should be ordered to pay her costs on an ordinary basis.

The first point to make is that Ms Yalda has not been substantially successful. She sought to have a $20,597.93 judgment against her set aside, and she succeeded only in reducing it by 3%. She remains liable for 97% of the judgment. That cannot, on any view, be described as “substantial success”.

In Falcetta v Commissioner of Taxation [2004] FCAFC 194; 56 ATR 265 (“Falcetta”), the appellant succeeded in increasing an allowable deduction from $1,815 to $2,835, out of a total claimed deduction of $9,411.21.4 At [4], the Court held that “The true impression we have of the appeal is that the appellant was unsuccessful. It is therefore appropriate that the appellant pay the costs of the Commissioner of the appeal.”

In Guides Australia Inc v McMartin [2006] NSWCA 20; (2006) Aust Torts Reports 81–828, the appellant failed to overturn the decisions in relation to liability or damages, but it succeeded in overturning an order that it indemnify the respondent for costs the respondent was ordered to pay another party. Campbell JA held at [202] that “The appeal has succeeded in part, albeit only as to a minor matter”, and accordingly ordered the appellant to pay 95% of the respondent’s costs.

In this case, to the extent that Ms Yalda has succeeded, it was in an extremely minor way. The appeal on a whole was unsuccessful. She should thus be ordered to pay Ms Mshref’s costs.

There is an additional discretionary reason why Ms Yalda should have her costs. As this Court observed at [58] of the principal judgment “at the hearing in the Local Court and in this Court, the amount in dispute is a modest $20,000. The legal costs of both parties would far outweigh the judgment amount.”

It is entirely disproportionate to commence and run to finality an appeal in this Court in relation to a sum just shy of $600. Ms Mshref was successful in the Court below, and Ms Yalda failed in this Court to overturn the judgment against her. The 3% reduction in the judgment sum does not affect that calculus, in circumstances where that amount is vastly outweighed by the costs of the appeal to both parties.

For those reasons, Ms Mshref should have her costs of the appeal.

Costs are discretionary. Ms Yalda succeeded on a discrete minor legal point that had not been raised before the Magistrate. That argument raised on appeal was no inseparable nor sufficiently liked to the disposition of the appeal. These grounds of appeal were very weak. As in Falcetta, the true impression I have is that Ms Yalda was unsuccessful. That being so, in the exercise of my discretion the appropriate order for costs is that Ms Yalda should pay Ms Mshref’s costs of the appeal. As to whether or not the costs should be paid on an indemnity basis, in my view as Ms Yalda had a minor success on appeal, costs should be awarded on an ordinary basis.