Ossen Pty Ltd v K&S Developments Pty Ltd (Receivers and Managers Appointed); Clarke v Ossen Pty Ltd (No 2)

1. [1]

   These reasons deal with the question of costs left open in my decision in this matter of 27 February 2024 ([2024] NSWSC 165) (Judgment) concerning the cross-claim brought by Mrs Clarke, the second defendant, against Ossen Pty Ltd (Ossen), the plaintiff, and K & S Developments Pty Ltd (K&S), the first defendant. The parties have provided written submissions on costs and have agreed that I should decide the question of costs on the papers.

2. [2]

   By the cross-claim Mrs Clarke claimed an entitlement to part of the proceeds of the sale of a property at Mackerel Beach owned by K&S which were paid into Court following orders for its sale made by the Court, on the basis that she had a right of contribution from K & S in respect of amounts paid by her to Macquarie Bank in respect of three loans, referred to as Loan A, Loan B and Loan C. The parties were in agreement at the hearing that Mrs Clarke was entitled to contribution in respect of 50% of the principal paid by her to Macquarie Bank in respect of Loan B and all of the principal paid by her to Macquarie Bank in respect of Loan C. The issues that remained for determination at the hearing were the extent to which she was entitled to contribution in respect of amounts paid by her to discharge Loan A and whether her claim for contribution in the cross-claim in respect of Loans A, B, and C also extended to interest she had paid in respect of those loans.

3. [3]

   The result of the Judgment is that Mrs Clarke failed in her claim for contribution in respect of Loan A, but succeeded in her claim for contribution in respect of Loans B and C, in respect of payments by her of both principal and interest on those loans.

The parties’ submissions

1. [4]

   Mrs Clarke contends that the appropriate order as to costs on the cross-claim is that she should pay 70% of Ossen’s costs on a party-party basis. She says that while she was unsuccessful on her claim in respect of Loan A, she was successful on her claim for contribution for interest paid by her in respect of Loan B and Loan C (which was defended by Ossen) and costs should therefore be apportioned. She submits that where there is a mixed outcome in proceedings, the question of apportionment is a matter of discretion and depends on matters of impression and evaluation based on the significance of the issues to the conduct of the proceedings: James v Surf Road Nominees (No 2) [2005] NSWCA 296 at [36]. She submits that given the mixed success of the parties, albeit primarily in favour of Ossen, a reduction should be ordered to the costs payable to it. In the circumstances, it should be on the basis that she only pays 70% of Ossen’s costs, reflecting her partial success on the cross-claim. The precise calculation of the reduction of 30 per cent is not explained but appears to reflect a mathematical calculation of the extent of her recovery of interest on the basis of contribution under the cross-claim.

2. [5]

   Ossen submits that it should be awarded its costs of the cross-claim, on the ordinary basis in accordance with the usual rule that costs follow the event. Ossen submits that there is no “mixed outcome” on the cross-claim, and Mrs Clarke’s contention to the contrary fails to take into account the manner in which the issue in relation to interest on Loans A, B and C came about, and the relative importance of that issue to the conduct of the proceedings.

3. [6]

   Ossen submits that the relative importance (or lack thereof) of the interest payments issue can be seen from the fact that this matter is only referred to in three of the paragraphs in the Judgment, and received very little attention in the written and oral submissions of the parties. As the Judgment indicates at [76], the only point raised by Ossen against taking interest payments into account was that an entitlement to interest was not raised in the relief sought in prayer 4 of the cross-claim, but the Court ruled that prayer 3 of the cross-claim was sufficient to cover both interest and principal payments: Judgment at [77].

4. [7]

   Ossen submits that the question of interest payments regarding Loans B and C involved less than 5 minutes in oral argument and was in substance only a pleading point which, as noted above, received only short attention in both written submissions and in the Judgment. Further, the amount of interest in respect of Loans B and C for which Mrs Clarke is entitled to contribution ($49,974.75) represents only 6 per cent of the overall quantum of principal and interest in dispute and consequently when the matter is looked at simply in terms of quantum, Ossen was overwhelmingly successful in relation to the issues which were before the Court on the cross-claim at the hearing.

Consideration

1. [8]

   The Court has a discretion to determine by whom, to whom and to what extent costs are to be paid although in the exercise of the discretion costs will ordinarily follow the event unless it appears to the Court that some other order should be made: see Civil Procedure Act 2005 (NSW), s 98(1); Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

2. [9]

   The Court of Appeal summarised the relevant principles in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 as follows:

3. [10]

   The proposition stated in James v Surf Road at [36] on which Mrs Clarke relies is summarised in Ryde Developments at [6] as extracted above.

4. [11]

   It is also relevant to note the following observation of Hodgson JA (with whom Mason P agreed) in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]:

5. [12]

   At the hearing, there was no dispute that Mrs Clarke was entitled to contribution in respect of Loans B and C and the real issue was her claim in respect of Loan A. Ossen succeeded in relation to the question whether contribution was available in respect of Loan A.

6. [13]

   The dispute in relation to interest on Loans B and C was, as Ossen submitted, a pleading point. The only reason why Ossen contended that there was no right to contribution in respect of interest on Loans B and C was that the order sought in prayer 4 of the cross-claim extended only to the amounts of principal paid by her in respect of Loans B and C. I concluded in the Judgment that this overlooked prayer 3 of the cross-claim and that accordingly the appropriate order was to allow contribution in respect of both principal and interest on Loans B and C.

7. [14]

   It is clear that Ossen is, in an overall sense, the successful party on the cross-claim. In my view, it is not appropriate to deprive Ossen, as the successful party, of a portion of its costs by reason of Mrs Clarke’s success on the claim for contribution for interest in respect of Loans B and C for two reasons. First, that matter arose essentially because of the narrowness of the order sought in prayer 4 of the cross-claim which led to the argument that the claim for contribution was in respect of only principal on Loans A, B and C. As a matter of substance, the issue arose due to a deficiency in the drafting of the cross-claim which was a problem of Mrs Clarke’s own making. Second, as Ossen submitted, the issue regarding the contribution for interest did not take up a significant part of the hearing, either by way of evidence or argument, indeed quite the contrary.

8. [15]

   Approaching the matter on the basis that costs should be paid in a way that is fair having regard to what the Court considers to be the responsibility of each party for the incurring of costs, Ossen should receive all its costs of and incidental to the cross-claim.

9. [16]

   For these reasons, the Court will order that Mrs Clarke should pay Ossen’s costs of and incidental to the cross-claim on the ordinary basis, as agreed or assessed.