Sims v The Commonwealth (No 2)

1. [1]

   THE COURT: The Court gave judgment in this matter on 4 October 2022: Sims v Commonwealth of Australia [2022] NSWCA 194. An appeal was allowed and the parties were directed to formulate orders in accordance with the Court’s reasons, and to file written submissions as to costs. These short reasons addressing costs assume familiarity with our earlier reasons.

2. [2]

   Noting that an order has already been made allowing the appeal, the parties are agreed that the following order should also be made:

3. [3]

   The Commonwealth was the plaintiff in the proceedings at first instance and Mr Sims was the defendant. At first instance, the Commonwealth was awarded a verdict in the sum of $316,032.13 plus interest and, by Order 3, Mr Sims was ordered to pay the Commonwealth’s costs.

4. [4]

   In addition to the order upon which the parties are agreed, Mr Sims seeks the following orders:

Costs of the appeal

1. [5]

   On the issue of the costs of the appeal, the Commonwealth contends that the appropriate order as to costs is that it be ordered to pay 75% of Mr Sims’ costs of the appeal. The nub of the Commonwealth’s submission is that such a costs order is appropriate in circumstances where:

   1. (1)

      Mr Sims succeeded on two of his three principal grounds of appeal and therefore has had a significant measure of success but did not succeed on all of the issues he raised (each of which was a discrete and separable issue); and

   2. (2)

      notwithstanding his partial success in the appeal, Mr Sims remains liable to repay the respondent a substantial sum of money.

2. [6]

   It is well established that the Court has a broad discretion as to costs especially where there has been a mixed outcome on appeal. In Ryde Developments Pty Ltd v The Property Investing Alliance Pty Ltd [2018] NSWCA 40 at [6], it was said:

3. [7]

   A convenient summary of the relevant principles for the determination of costs on an issue-by-issue basis may be taken from Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] per Beazley, Ipp and Basten JJA:

4. [8]

   Mr Sims enjoyed substantial success in the appeal and the principal issue on which he succeeded occupied a substantial amount of the hearing time and written submissions on appeal. Conversely, the issues on which he failed did not occupy significant hearing time. We also note that the Commonwealth’s unsuccessful constitutional argument raised by way of Amended Notice of Contention and dealt with at [88]–[98] of the principal judgment raised issues not dealt with at first instance and were of some apparent complexity.

5. [9]

   In our view, the Commonwealth should be ordered to pay 90% of Mr Sims’ costs of the appeal, as agreed or assessed, it being noted that, other than the amounts which he conceded he was obliged to repay, he failed in his argument in relation to certain payments credited to his account with the Australian Tax Office. Written and oral argument on this discrete issue did not occupy a great deal of the hearing of the appeal.

Costs of the trial

1. [10]

   Turning to the question of costs at first instance, the basis of Mr Sims’ proposed order that the Commonwealth pay 80% of his costs at first instance on an ordinary basis up to and including 24 September 2021, and thereafter on an indemnity basis in part reflects that:

2. [11]

   Although this offer was expressed to expire on 17 September 2021, it was extended to close of business on 24 September 2021. It was rejected on that date. This offer was a variation of an offer the Commonwealth had made, the principal differences between the two offers being that the Commonwealth sought an initial payment of $80,000 rather than the $60,000 in Mr Sims’ offer. It was unfortunate that the parties were not able to bridge this gap and avoid a two day hearing in the District Court and a day in the Court of Appeal.

3. [12]

   Mr Sims submits that:

4. [13]

   Subsequent to the rejected offer of 14 September 2021, on 26 October 2021, just over one month after its rejection and about a week prior to commencement of the trial, Mr Sims’ solicitors made a further without prejudice offer to the Commonwealth. The letter of offer, which was annexed to an affidavit of Mr Sims’ solicitor filed in support of the costs argument but which, curiously, was not referred to in the costs submissions filed on his behalf, included the following:

5. [14]

   The letter then continued:

6. [15]

   It is relevant to note that, according to an affidavit filed on behalf of the Commonwealth, its estimated taxable recoverable costs as at 14 September 2021 were slightly over $80,000. Even accepting the fact that these costs would have increased by the time of the further offer of 26 October 2021, the offer was a generous one and exceeded that to which the Commonwealth was entitled, even if it had been awarded all of its costs.

7. [16]

   The Commonwealth resists any disturbance of the costs order in its favour at first instance. It submitted that:

8. [17]

   The Commonwealth also contends that it was not unreasonable for it not to accept Mr Sims’ first settlement offer because the initial lump sum component of that offer was marginally less than the figure conceded to be owing at the end of the hearing, and that with adjustments for interest and costs, the judgment sum component of the offer was just under the judgment sum now due. It was then submitted that:

Consideration

1. [18]

   In our view, there is no basis for maintaining the primary judge’s order that Mr Sims pay the Commonwealth’s costs of the trial. Although the net result of the appeal is that Mr Sims must pay an amount of $117,253.03 to the Commonwealth together with interest, the amount sought by the Commonwealth was considerably in excess of this and the principal issue at first instance which separated the parties was the matter upon which Mr Sims succeeded on appeal.

2. [19]

   That having been said, Mr Sims’ formal concessions as to the Commonwealth’s at least partial entitlement to restitution were belated, and his first settlement offer was not without complexity although it broadly mirrored the structure of the Commonwealth’s offer. It was understandable that he wished to pay part of the settlement sum in instalments over what would have been close to 3 years ($170,000, being $230,000 less $60,000, to be paid in monthly instalments of $5,000).

3. [20]

   While we do not consider that it was unreasonable for the Commonwealth to reject this offer so as to result in an award of indemnity costs to Mr Sims after the date of the offer’s rejection, the offer was a no doubt good faith attempt to resolve a dispute attended by legal complexity, involving a modest amount from the Commonwealth’s perspective but a significant amount of money from Mr Sims’ perspective. The offer is a matter that may be taken into account in the exercise of the Court’s discretion.

4. [21]

   As noted above, Mr Sims made a further offer to resolve the dispute a week out from trial. The inclusion of this letter as an attachment to the solicitor’s affidavit implies that it was intended to be relied upon although no submission was made by reference to it. Nevertheless, it is a relevant matter to be taken into account on the question of costs. Although a relatively short time was given for its consideration, the proximity of the trial meant that the Commonwealth should have been in a position to consider its attraction. It represented a significant increase in the previous settlement amount.

5. [22]

   Bearing in mind Mr Sims’ success on appeal and the fact that, had such success been enjoyed by him at first instance, the Commonwealth would not have succeeded in the whole of its claim, and in view of Mr Sims’ evident desire, as reflected in both of his offers, to resolve the matter without a hearing in a way that involved a substantial (re)payment to the Commonwealth, the Commonwealth should be ordered to pay 75% of his costs at first instance. Although in the ultimate result, Mr Sims remained and remains liable to pay a certain amount to the Commonwealth, the litigation that ensued following the rejection of these offers was principally concerned at trial with the issues upon which the Commonwealth was ultimately unsuccessful, namely in relation to the limitation period attaching to the Commonwealth’s claim for restitution of moneys mistakenly paid to Mr Sims, Ms Dalton and Jones King Lawyers.

6. [23]

   Accordingly, the orders of the Court are:

   1. (1)

      Vary orders 1 and 2 made by the District Court of New South Wales on 19 November 2021 as follows:

   2. (2)

      Set aside order 3 made by the District Court of New South Wales on 19 November 2021.

   3. (3)

      The Commonwealth is to pay 75% of Mr Sims’ costs at first instance on an ordinary basis.

   4. (4)

      The Commonwealth is to pay 90% of Mr Sims’ costs of the appeal on an ordinary basis.