Gerald Jaworski v Chartered Accountants Australia and New Zealand (No 5)

By my judgment delivered on 13 May 2025 (Gerald Jaworski v Chartered Accountants Australia and New Zealand (No 4) [2025] NSWSC 457 (“Principal Judgment”), I dismissed an application brought by the Plaintiff, Mr Jaworski, seeking an order that the Defendant, Chartered Accountants Australia and New Zealand (“CA ANZ”), indemnify him for the costs of proceedings that he sought to bring in CA ANZ’s name against its directors, officers and former directors and officers. I observed in the Principal Judgment (at [75]-[77]):

I then made orders for submissions in chief and in reply as to costs, with the question of costs to be determined in Chambers. I now address the question of costs.

It is, of course, uncontroversial that s 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs, and the Court has discretion to determine by whom, to whom and to what extent costs are to be paid; costs will ordinarily follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs, in accordance with r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). A successful party in proceedings has a “reasonable expectation” of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. In Commonwealth v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:

The principle that costs should follow the event is the “guiding principle” with respect to costs, and the onus is on the losing party to establish the basis for a departure from the usual costs rule in UCPR r 42.1: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10]; Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]-[25] (“Sangare”). Mr Giles, with whom Mr Puttick appears for CA ANZ, also points to authority that the Court’s discretion to depart from the general rule must be exercised judicially, “according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy”, and that the impecuniosity of an unsuccessful party is insufficient justification to deny costs to a successful party: Williams v Lewer [1974] 2 NSWLR 91 at 95; Sangare at [27]ff.

Mr Jaworski submits that, if a costs order was made, it should be that each party bears its own costs, because it would be “inappropriate and/or unjust for the general rule to be applied”. Mr Jaworski submits that his claim forms the preliminary stage of a general law derivative action, and he addresses the nature of such an action. He submits that he was not taking action on his behalf, or on behalf of members generally, but on behalf of CA ANZ. I do not fully accept that characterisation of the proceedings. First, as I observed in the Principal Judgment (at [10]):

Mr Jaworski also submits that I did not follow an “ex parte” approach suggested in Wallersteiner v Moir (No 2) [1975] 1 QB 373 (“Wallersteiner”). As I have noted in earlier judgments (and, in particular, in the Principal Judgment at [12]-[20]), Mr Jaworski also did not follow the approach contemplated by Wallersteiner by providing an opinion of Counsel that indicated that his proposed proceedings had merit, so as to allow the Court to proceed on that basis without a further inquiry in which procedural fairness required that CA ANZ be allowed an opportunity to be heard. In any event, I have considered the approach that should be adopted in four previous judgments, and the correctness of my view is now properly a matter for the Court of Appeal, if an appeal is brought from those judgments.

Mr Jaworski also advanced further submissions that seek to establish breach of duty by the directors of CA ANZ, reagitating aspects of the issues which I determined in the Principal Judgment, and as to the constitutional purpose of CA ANZ. Mr Jaworski also submitted that:

There are a number of difficulties with this submission. The order for costs which CA ANZ seeks against Mr Jaworski reflects the ordinary position, where Mr Jaworski has been unsuccessful in his claim against CA ANZ, and a costs order is not punitive of an unsuccessful party but compensatory of the other party. I accept that Mr Jaworski believes that his criticisms of CA ANZ and its officers and former officers over many years are well-founded, but that does not establish that they are objectively well-founded. I recognise that Mr Jaworski has said that he is impecunious, but there is no evidence as to his financial position. I do not accept that Mr Jaworski was “forced” to bring the proceedings, although I accept that I was not prepared to order that CA ANZ indemnify him for his costs of the proceedings without allowing it an opportunity to be heard as to whether that order should be made. Indeed, in earlier stages of the proceedings, Mr Jaworski had rightly recognised the costs risk to which he would be exposed, if CA ANZ was joined as party to the proceedings, and I had made orders in a manner that reserved to him the option not to proceed with his application so as to avoid that costs risk.

Mr Jaworski also rightly draws attention to several factors noted in Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia (2016) 248 FCR 280; (2016) 113 ACSR 600; [2016] FCAFC 80 at [73] as weighing in favour of an unsuccessful party, on the question of costs, namely:

Here, I do not accept that there was any particular issue of novelty or difficulty in respect of the bringing of a derivative action generally, although I accept that general law derivative actions are now rarely seen in Australia, and the legal issues raised by Mr Jaworkski’s claims were not novel or of general importance. I accept that Mr Jaworski had no financial interest in the outcome, although he appears to have a personal interest in vindication of his views in a long running dispute. It does not seem to me that the course that Mr Jaworski proposed to adopt, in bringing proceedings in CA ANZ’s name against many directors and officers of CA ANZ, over a period of some 10 or so years, in respect of some historical matters, the scope of the “true and fair” view standard and the application of accounting principles, was likely to promote any real public interest in the resolution of those issues.

Mr Jaworski also submits that:

As a first instance Judge, I should apply the recognises principles as to costs by which I am bound by appellate authority. It would be a matter for the legislature to adopt different costs rules in “public interest” proceedings if it considers it appropriate to do so, although this may not be the strongest case to establish a need for a significant change to the Australian approach to costs.

Mr Giles and Mr Puttick submit, in chief, that an order for costs should be made against Mr Jaworski and in favour of CA ANZ on the basis that Mr Jaworski was unsuccessful in seeking the order that he sought as to the costs of the proceedings, by reference to each of the four claims that provided the primary focus for potential proceedings. Mr Giles and Mr Puttick submit, and I accept, that there can be no suggestion that CA ANZ had protracted the proceedings or traversed irrelevant issues, although the issues were narrowed by the position that Mr Jaworski adopted in reply, at the primary hearing, that he only sought funding to pursue proceedings in the name of CA ANZ against its officers and former officers and did not seek declaratory or other relief which might have arguably been available to him in his personal capacity.

In submissions in reply, Mr Jaworski contends that, by contrast with the position contemplated in Sangare, this was not a case where he had forced CA ANZ to litigate but the litigation was “forced through the controlling officers [sic] refusal to allow anyone but themselves to review their conduct”. I do not accept that submission where the litigation was commenced because Mr Jaworski commenced it; CA ANZ was joined as party because it was entitled to procedural fairness; and that proposition assumes the underlying merit of Mr Jaworski’s allegations, which have not been established. Mr Jaworski also submits that:

Mr Jaworski also submits in reply, but I do not accept, that CA ANZ’s status should result in the application of a different approach to costs; even if it is property characterised a “public” body, public authorities often recover the costs of proceedings against them in which they are successful. Mr Jaworski also submits that the economic costs incurred by him as a non-lawyer dealing with CA ANZ’s “evasion of accountability” have “significantly contributed to [his] present financial position”. That submission is not properly made in reply and neither the fact of those costs nor Mr Jaworski’s present financial position have been established by evidence. Mr Jaworski also submits that the proceedings did not “wholly fail”, because “key issues were not dealt with”; however, the question of costs is addressed by reference to the result of proceedings at first instance and a party’s criticisms of that result are a matter for an appellate Court.

In reply, Mr Giles and Mr Puttick repeat the proposition, which I have accepted above, that Mr Jaworski’s unsuccessful application for an order that CA ANZ pay his costs should not be treated as brought on behalf of CA ANZ. CA ANZ also submits, and I accept, that Mr Jaworski was not “forced to commence” the proceedings, notwithstanding his belief in the rightness of his cause, and I have addressed that proposition above. CA ANZ also submits, and as I have also observed above, that a costs order is not properly characterised as “penalising” Mr Jaworski, where its purpose is to compensate CA ANZ for the costs to which it has been exposed rather than to “punish” Mr Jaworski for any aspect of the conduct of the proceedings.

I am satisfied that, for the reasons noted above and on the usual basis that costs follow the event, Mr Jaworski should be ordered to pay CA ANZ’s costs of the proceedings. I am not persuaded that any perceived public character of the relief sought, from Mr Jaworski’s perspective, is here sufficient to displace the general rule as to costs. I have also borne in mind that, although that outcome is plainly adverse to Mr Jaworski, the risk that he might face a costs order if he was unsuccessful in this aspect of the application had previously been disclosed, in a manner that identified the decision which he faced as to whether to expose himself to that risk.

I make the following order: