Slaveski v Nanevski Developments Pty Ltd (No 2)

THE COURT: The Court handed down its judgment in this appeal on 29 June 2023: Slaveski v Nanevski Developments Pty Ltd [2023] NSWCA 145 (Judgment). Four issues were raised challenging factual findings made by the primary judge. The context of the judgment and the issues in dispute will not be repeated here, and familiarity with that judgment will be assumed.

The result of the appeal, the Court’s reasoning as to why the parties should bear their own costs of the appeal, and its preliminary view as to the costs orders in the proceeding below, were explained in the Judgment as follows:

The parties have now provided written submissions as to what costs order should be made in the proceedings below. There is no reason why this point should not be determined on the papers.

The applicable principles were not in dispute. Costs are in the discretion of the Court: Civil Procedure Act 2005 (NSW), s 98(1). Any costs order should in general follow the event unless it appears that some other order should be made as to the whole or any part of the costs: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. In Allianz Australia Insurance Ltd v Rawson Homes Pty Ltd (No 2) [2021] NSWCA 334, White JA stated at [16] (with the agreement of Meagher and Leeming JJA):

As it was put in DSHE Holdings Ltd (Receivers and Managers) (in liq) v Potts (No 2) [2022] NSWCA 258 at [9], “[p]ut simply, the Court should seek to make an order that is fair in all the circumstances, taking account of the extent to which issues are separable, and without aspiring to the false hope of mathematical precision”.

Neither side adopted the Court’s provisional view, each claiming more generous provisions for themselves. Three issues are raised in the submissions: as to the costs of Mega-Top Cargo Pty Ltd, as to the costs of Tom (Nanevski), and as to what proportion of the remaining costs should be awarded to the respondent.

As for the first issue, the appellants claim that Mega-Top should not be liable to pay any costs of the respondent’s claim below and should also have its costs on the cross-claim. In support of the former point the appellants say that it appears the only allegation of fact made by the respondent connecting the company with the relief sought was a particular in the amended statement of claim alleging that one of the contributions of Ken (Slaveski) to the partnership was the $590,000 payment from Mega-Top to the respondent. This Court has now found that that payment was a loan made outside of the partnership. The respondent submits in response that it was proper for Mega-Top to be joined to its claim so as to be bound by the result, and refers to an allegation in the appellants’ further amended defence that a particular payment of $67,500 made by the respondent was in fact a payment to Mega-Top. The primary judge impliedly found that that payment was instead a partnership contribution: Nanevski Developments Pty Ltd v Slaveski [2022] NSWSC 1066 at [153]-[157]. There is force in these responsive points. Mega-Top is bound by the finding against its interests as regards the $67,500 payment. Further, Mega-Top seems to have been intimately interlinked with Ken’s interests and dealings in the matters in dispute. In the circumstances Mega-Top should not be relieved of all liability for costs below.

In relation to the costs of the cross-claim, it is true that Mega-Top succeeded on the cross-claim to the extent of establishing that the $590,000 payment to the respondent was by way of a loan outside of the partnership. However, any costs incurred in making this argument below were de minimis as the point was barely raised. The appellants submit that this factor has already been taken into account in the Judgment in deciding to make no order as to costs of the appeal. It is correct that this was one factor in the Court’s exercise of discretion when addressing costs on appeal. That does not mean it has no remaining significance when considering costs at trial, recalling that costs orders are compensatory. Moreover, as explained in the Judgment in the portion extracted above, to make a separate costs order for the cross-claim will likely add to the difficulties and costs of assessment. The better course is to make just one costs order with appropriate adjustments. Thus Mega-Top should not obtain a costs order in its favour on the cross-claim.

The second issue is raised by the respondent with respect to the costs of the cross-claim as relates to Tom. The current order below, order 18, requires that the appellants pay the costs of the cross-claim. The only capacity in which Tom was a party in the proceedings below was as a cross-defendant. He was not joined to the appeal, as those aspects of the cross-claim directly affecting him were not raised on appeal. The respondent submits Tom’s entitlement to a full costs order cannot and should not be reduced when he is not a party to the appeal and where, in any case, he succeeded on all issues below involving him. Although it is somewhat regrettable that an additional complication is introduced into the costs orders, the respondent is correct to submit that this Court should not interfere with the order in his favour where he is not a party to this appeal. For simplicity, the orders relating to costs below will be set aside but a separate order will be made addressing Tom’s costs of the cross-claim.

As for the third issue, relating to what proportion of the respondent’s costs the appellants should have to pay, the appellants submit that in light of the result in the appeal they have had significant success on what was at issue below. They submit that the practical effect of the appeal is a likely saving to them of some $1.0 million. They submit that they should only have to pay 60% of the remaining costs at issue. However, as the respondent points out, it should not be forgotten that to a substantial extent the issues on which they succeeded were barely argued below. The 60% ambit claim is thus inadequate. Conversely, the respondent submits that the appropriate order is that the appellants pay 90% of the remaining costs. But that ambit claim undervalues the significance of the matters at issue. It also fails to take account of the fact that, as indicated, some allowance should be made in the appellants’ favour for not ordering any costs to them on the cross-claim.

By perhaps unsurprising coincidence, the mid-point of the two ambit claims is 75%, being the figure provisionally suggested in the Judgment. That is an appropriate allocation in all the circumstances, taking account of the degree of success the parties can now be seen to have had on the issues in dispute, along with the resources expended below in dealing with those issues.

The further, final orders of the Court should be as follows: