Hillam v Iacullo

BASTEN JA: For the reasons given by Leeming JA, the respondents’ motion must be dismissed with costs.

WARD JA: I agree that, for the reasons Leeming JA has given, the respondents’ motion should be dismissed with costs.

LEEMING JA: This Court allowed Mr Hillam’s appeal on 16 July 2015: Hillam v Iacullo [2015] NSWCA 196. The unsuccessful respondents, Mr and Mrs Iacullo, were ordered to pay the costs of the appeal. About that there is no dispute. However, Mr and Mrs Iacullo have applied to vary the orders made by this Court in lieu of those made at first instance: Iacullo v Hillam [2014] NSWSC 1021.

This Court set aside the orders made by the primary judge, and in lieu thereof, dismissed the proceedings and ordered Mr and Mrs Iacullo to pay the costs of the proceedings. The substantive orders sought by Mr and Mrs Iacullo’s motion are that:

Essentially, the first proposed order seeks to preserve the favourable costs order in relation to the costs of the proceedings made at first instance. The second proposed order is intended to be by way of clarification (it amounts to inserting the words “the balance of” in the order dismissing the proceedings).

There are two preliminary points. The first is to note the considerable delay in the readying of the motion for determination. That is said to have been attributable to Mr Hillam’s desire to obtain transcript of the occasion when judgment was handed down in the appeal. That may or may not fully explain the delay, but nothing turns on whether that is so. The parties ultimately filed written submissions, in accordance with a relatively relaxed timetable, on 12 November, 3 December and 17 December 2015. The timing of those submissions prevented the motion being determined before the end of the 2015 term. Thus it is that almost six months has now elapsed since the appeal was allowed.

The second preliminary point arises from the fact that Mr and Mrs Iacullo relied, in the alternative, on the “slip” rule. That reliance gave rise to a debate in the submissions as to whether the rule was available and whether there had been a “slip”. None of that is to the point, as Mr and Mrs Iacullo pointed out in reply, because their motion was filed within the time authorised by UCPR 36.16, and invoked the broader power conferred by that rule.

I turn to the substance of the application. It will be recalled that Mr and Mrs Iaculllo entered into, successively, a “First Loan Agreement”, “Second Loan Agreement” and “Third Loan Agreement” with Mr Hillam between July and September 2011. They promised to lend $455,000, but in fact only advanced $380,000, to him. Each Loan Agreement made provision not merely for the repayment of principal plus interest, but also a promise to pay double the amount lent in shares or money (referred to as “the uplift”).

Mr Hillam made very few repayments prior to the commencement of proceedings by Mr and Mrs Iacullo in 2014.

Prior to the matter coming to trial, Mr and Mrs Iacullo applied for judgment in relation to the amounts of principal and interest. Passing over some procedural complexities, after three short hearings before McDougall J, they obtained judgment and a costs order on 27 May 2014.

The hearing before the primary judge occurred on 21 July 2014. By that day, Mr Hillam had repaid the whole of the principal and interest. No issue was taken with the position recorded in my reasons at [42] and [43]:

The orders made by the primary judge were:

The primary judge explained (at [41]) that the judgment amount reflected $710,000 plus interest. His Honour also explained (at [42]) that although Mr and Mrs Iacullo had failed to recover the amount of $910,000 (being double the amount lent pursuant to the Third Loan Agreement), they should still receive all of their costs, in light of the facts that they had been largely successful and that the issues relating to the enforceability of the $910,000 under the Third Loan Agreement were not easily separated from the issues relating to the enforceability of the $710,000 under the Second Loan Agreement.

Two things may be observed. First, the primary judge made no orders in relation to the amounts of principal and interest, because these had already been repaid (as his Honour himself noted at [2]). Secondly, his Honour regarded the only issue as being the enforceability of the additional payments under the Second and Third Loan Agreements.

I turn to Mr and Mrs Iacullo’s submissions. The first point they make is that the orders made by this Court in lieu of those made by the primary judge should only dismiss “the balance of” the proceedings, reflecting the success obtained by them in relation to the recovery of principal and interest. They say that such a clarification is necessary because “[t]he order dismissing the proceedings in their entirety goes beyond the scope of the Appeal proceedings and is inconsistent with the orders of McDougall J.”

I would not accept these submissions. There is no sound basis for any suggestion that the orders made by McDougall J were affected by this Court’s order that the proceedings be dismissed (just as there is no sound basis for any suggestion that the judgment entered by the primary judge in some way supplanted the judgment entered by McDougall J). The subject matters of the orders are different. McDougall J was dealing with principal and interest. The primary judge and this Court on appeal were dealing with – and exclusively with – the “uplift” claimed by Mr and Mrs Iacullo. As much is plain beyond argument on the face of both sets of reasons. The fact that separate judgments were entered at first instance in litigation between the same parties was the consequence of the choice taken by Mr and Mrs Iacullo to split the issues arising in the litigation, so as to have a separate hearing and determination of the questions of principal and interest, on the one hand, and the “uplift” amounts, on the other.

The second point made by Mr and Mrs Iacullo concerns costs. They say that by paragraph 5 of their notice of contention, they maintained that the primary judge’s order as to costs was supportable on the basis of their claims to principal and interest on which they were successful. This was expanded in their written submissions in the appeal as follows:

They say that that submission was not addressed by this Court’s reasons on the appeal. Further, they say that the effect of this Court’s order is unjust, insofar as it would “visit upon the Respondents/Plaintiffs the general costs of the suit in the Court below because the suit was necessitated in any event by the Defendant/Appellant’s failure to pay claims on which he either suffered judgment, or upon which he capitulated during the proceedings by payment”.

Mr and Mrs Iacullo are correct to observe that these submissions were not directly addressed in this Court’s reasons on the appeal. However, I would not vary the orders made.

It is commonplace for plaintiffs to abandon the more extreme elements of their claims prior to trial, and it is commonplace for defendants to concede the least defensible aspects of their defences prior to trial. Ultimately, the issues litigated at trial tend to be a subset of those originally identified in the pleadings.

Notwithstanding that fact, it is commonplace for a plaintiff who is only successful in respect of the issues actually determined by the court to obtain a favourable costs order. Indeed, a plaintiff who only achieves partial success in respect of the issues actually determined by the court still will regularly obtain a favourable costs order. That occurred in the present case, notwithstanding that Mr and Mrs Iacullo continued to press their entitlement to $910,000. Of course, the court has a broad discretion to make a different order as to costs, and may do so if, for example, an issue unsuccessfully advanced by a partially successful plaintiff was substantial and severable.

So too with defendants. A defendant who makes a concession or makes a payment of part of the amount claimed is not thereby disentitled from a favourable costs order in the event that the balance of the plaintiff’s claim, which actually goes to trial, fails. Of course, much will depend on the circumstances in which that occurs, including whether the concession or payment is made promptly or belatedly and whether the issue gives rise to appreciable severable costs.

Another relevant principle is the undesirability of making costs orders referable to particular issues. To do so may lead to further dispute. Thus it has been said, repeatedly, that:

Had this been a situation where there was a single hearing on all issues raised in the pleadings, there would be a strong case for a special costs order, reflecting the success of Mr and Mrs Iacullo’s claim to recover $380,000 plus (substantial) interest but their failure in recovering the “uplift” of $910,000 plus (substantial) interest.

But there was no single hearing. Mr and Mrs Iacullo chose to split the litigation and to obtain the benefit of an earlier judgment in their favour in respect of the only issues on which they are entitled to success. And they obtained a favourable costs order in respect of that application.

The only issues actually fought on a final basis at trial were issues as to which this Court has held Mr and Mrs Iacullo should have failed. It may be acknowledged that it would be possible to frame an order as to costs by reference to issues. It would be possible, for example, to order Mr Hillam to pay Mr and Mrs Iacullo’s costs of the litigation which were attributable to their claim for principal or interest, and to order Mr and Mrs Iacullo to pay Mr Hillam’s costs of the litigation attributable to his defence of the claimed “uplift”. But it is immediately apparent that orders along those lines would give rise to complexity and dispute (which would descend to apportioning costs of the individual pleadings and affidavits and submissions).

In any event, that is not the order sought by Mr and Mrs Iacullo on their motion. The substance of Mr and Mrs Iacullo’s application is to seek an order that Mr Hillam be ordered to pay their costs at first instance. I would not make such an order. This Court has held that they should have lost on all issues determined on a final basis by the primary judge. The quantum of their claim held to be unsuccessful significantly exceeded the claims as to which they were successful in advance of trial. And they have the benefit of costs orders in their favour in respect of their application for judgment.

In short, I accept the submission advanced by Mr Hillam, orally, during the appeal, that “the real fight below concern[ed] the entitlement of the uplift and costs [below] should follow the event of this appeal”.

Finally, Mr Hillam has invited this Court to clarify the interrelationship between the costs orders favourable to Mr and Mrs Iacullo made by McDougall J, and the costs order made by this Court in lieu of that made by the primary judge, in order “to ensure that on assessment, the respondents do not claim or receive pursuant to the orders granting costs of the notices of motion, some component for the costs of the issues on which they were ultimately unsuccessful”. I would not accede to that request. On its face, it conflates two things: the costs of an application within a proceeding, and the costs of an issue in an proceeding. It would also give rise to dispute, and it is contrary to the general principles as to the exercise of the broad discretion as to costs referred to above.

It will be a matter for agreement or assessment to determine Mr and Mrs Iacullo’s costs of their successful interlocutory applications, and I do not think it is appropriate to attempt to provide, necessarily in the abstract, any clarification of how those orders apply to the costs incurred by them.

For those reasons, I propose that the notice of motion filed 24 July 2015 be dismissed. Mr Hillam’s costs of that notice of motion should be paid by Mr and Mrs Iacullo.