Keeley v Horton (No 2)[2014] QDC 260

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   On 15 October 2014 I made orders in this proceeding. I granted to all parties leave to file, and serve, further submissions, in accordance with the findings made in my conclusions reached, though limited to the assessment of nominal damages, interest and costs, by a stated date.

2. [2]
   Both sets of parties have filed and served relevant submissions.

Objection to further material

3. [3]
   The defendants, along with these submissions, filed an affidavit which exhibited correspondence from the plaintiffs’ solicitors to the defendants’ solicitors dated 23 February 2006. The plaintiffs have objected to the affidavit and exhibit on the basis that privilege attaches to the communication in question, asserting that it was a “genuine negotiation with intent to compromise an existing dispute”. While it could not be used for interest, or even nominal damages, it might arguably have relevance to offers of settlement.

4. [4]
   The use sought to be made of such material in the defendants’ submissions is, nevertheless, much more limited then that. It was used, simply, to support a contention that the plaintiffs, at all times, understood that the fundamental nature of the transaction was that of a sale of shares in the second plaintiff and not the sale of the business conducted by the second plaintiff.

5. [5]
   Given the way in which the trial ran before the adjournment which was the subject of the appeal in Horton & Anor v Keeley & Ors,^[1] the way in which the pleadings were thereafter amended after the appeal was unsuccessful and the way in which the trial was thereafter run, there is little point in examining such additional correspondence, in the absence of any proof of a probative nature that there has been, somehow, an abuse of process. 

6. [6]
   Accordingly, I will simply look at the material that has become the subject of evidence at trial, along with the pleadings (as originally pleaded, amended and submitted on at the end of presentation of evidence).

Interest

7. [7]
   The issue of interest is raised because I concluded that the defendants should be the subject of an order directing a payment of $271.48 to the first plaintiff: see [107] of the Reasons in [2014] QDC 234. As I noted there, no detailed arguments were presented concerning interest on such a sum.

8. [8]
   The plaintiffs’ contend that interest can be awarded under s 58 of the Civil Proceedings Act 2011 and that, given the historical decline in residential and commercial interest rates since 2008, a rate of 5% per annum for 6.4 years would be appropriate.  The choice of the period flows from the fact that the particular sum was a loss that finally accrued, essentially, with respect to the 2007-2008 financial year, although there were accretions to that final loss that began for the 2006-2007 year.

9. [9]
   The defendants’ submissions are that:

• the “first demand” was only made on 9 November 2007 when the plaintiffs instituted the present proceeding;
• the plaintiffs did not plead, as required by the Uniform Civil Procedure Rules 1999 (“UCPR”), any calculation or rate of interest: see rr 150(1)(h) and 159;
• any interest to be awarded should only be from the date the proceeding was filed to the date of judgment; and
• an appropriate rate would be 7% per annum, since this more closely reflects interest rates over the period.

10. [10]
    First, the period in question is really not in dispute. Secondly, there has been no evidence lead of any kind about prevailing interest rates over time, either generally or applicable to the second plaintiff’s business. Thirdly, the practice direction applicable to default judgements is the place to which resort is had in circumstances where the court receives no assistance as to appropriate rates of interest.

11. [11]
    For all these reasons, I find that the period in question should be from 9 November 2007 to 15 October 2014, that the amount should be $271.48 and that, therefore, pursuant to District Court Practice Direction 6 of 2013, when using the relevant calculator, the interest awarded should be $174.68.

12. [12]
    Since the plaintiffs have not, correctly in my view, sought interest on nominal damages and since the defendants would have opposed it in any event, it need not be considered.

Nominal damages

13. [13]
    In my Reasons for decision I raised the issue of nominal damages with respect to the defendants’ breach of what I termed as a “trading position” warranty: at [84] and [109].

14. [14]
    The plaintiffs did not plead, expressly, that they sought nominal damages.

15. [15]
    As Malabar RSL Sub-Branch Club Pty Ltd v RSL Custodians Pty Ltd^[2]  demonstrates, both New South Wales and Western Australia appellate authority support the proposition that the party suing on a breach of contract is entitled to nominal damages where it establishes breach, “even where it has not expressly sought such an order”: at [14].  As observed by Rein J in the circumstances that he considered, since, in that case, a breach of a lease had been established, “an order for nominal damages must follow”: also at [14].

16. [16]
    As just observed, there are recent appellate decisions in other States which have considered not only the nature of nominal damages but the content of such damages, if awarded.

17. [17]
    In State of New South Wales v Stevens^[3] McColl JA, with whom Ward JA agreed (although she also agreed with Sackville AJA), observed that (with reference to cited authority):

• “nominal damages is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet it gives you a right to the verdict or judgment because your legal right has been infringed”, noting that the term does not mean “small” damages;
• it is clear that a breach of contract by one party always gives the other party the right to recover damages for the breach;
• if the breach is not proved to have caused any loss, the party that has breached the contract is liable to pay nominal damages;
• nominal damages is not a case of damages being quantified on a non-compensatory principle but a method of recording a verdict where no compensation is required;
• historically, the purposes of nominal damages are those both of vindicating a plaintiff’s right and of being “a mere peg on which to hang costs”;
• the latter purpose – concerning costs – is no longer an appropriate purpose because of the discretion now residing in the court concerning costs;
• nominal damages are not “real damages” and, in particular, they are “vindicatory, not compensatory”; and
• after considering many recent authorities, $100.00 was “an appropriate amount to award by way of nominal damages as a token of the (party’s) breach”;

: at 110-114 [14]-[37].

18. [18]
    Stevens also canvassed principles with respect to costs in nominal damages cases.  I will not do so at this stage, although I will discuss them when moving to that issue. 

19. [19]
    One of the cases particularly relied upon in Stevens was Motium Pty Ltd v Arrow Electronics Australia Pty Ltd.^[4]  It is also unnecessary to review this case in detail because of the use of it in the summation just made in Stevens.  Even so, it should be noted that nominal damages were awarded there in the sum of $100.00, as well: at [92] (in the original decision). 

20. [20]
    Since the other cases concerning nominal damages to which I have been referred to, or otherwise have obtained, deal primarily with the issue of costs, it is unnecessary to canvas them here, subject to one exception. In Hyde Park Residence Ltd v Yelland,^[5] Jacob J declined to make any award of nominal damages in a copyright action, holding that the plaintiff had “in reality lost” and “in reality” the defendant had “established a complete defence”: at 670.  In the latest edition of McGregor on Damages (19^th Edition) (Sweet and Maxwell) the text presents the “thought”, referring to Jacob J’s decision (though containing an error in transcription), that the awarding of nominal damages (absent establishing a right) may be seen “as a pointless exercise”: at [12-011].  But no Australian intermediate appellate court has taken that path - so neither will I in this case.

21. [21]
    From the considerations just undertaken, I therefore conclude that I will award the sum of $100.00 for the “trading position” breach.

22. [22]
    For reasons discussed, no interest is awarded on this sum.

Costs

23. [23]
    The respective submissions by the parties are, perhaps unsurprisingly, completely contrary to each other.

24. [24]
    In summary terms, the plaintiffs seek, besides judgment for the two separate amounts (plus interest on the established loss), costs to be assessed on the District Court Scale. The contended basis is that they have been “entirely successful” on liability (which was the “substantive issue” in the trial) and partially successful on the “quantum” issue. Addressing the special rules about “nominal damages”, the plaintiffs contend that they have recovered both nominal damages and “actual” damages, also contending that they were successful after a lengthy trial “on substantial credit and breach of contract issues” (in a case of complexity). 

25. [25]
    For their part, the defendants contend, generally, that:

• if the plaintiffs are entitled to recover any costs at all, then they should only be entitled to their costs relative to the breach of warranty concerning the employee claim, with such to be on the standard basis of the Magistrates Court Scale “A” (for matters under $751.00); and
• the defendants should have their costs (including costs thrown away) of successfully defending the claim for the “trading position” breach on the standard basis calculated on the District Court Scale.

26. [26]
    The grounds relied upon by the defendants are many. Summarised, they include that:

• there should be an “issues based costs order” in respect of the trial;
• the issue of the “trading position” breach, insofar as it concerns damages, “occupied almost the entirety of the case”;
• the breach of warranty concerning the employee claim was, by comparison, the subject of an insignificant amount of time and expense;
• to the extent the plaintiffs were successful in the award of $271.48, they were “ultimately unsuccessful in establishing any loss near that which was claimed”;
• as for the costs “thrown away”, they were contended to result from:
• the reframing of the plaintiffs’ case following the 2012 adjournment;
• the plaintiffs’ reliance on further expert reports which were required to be prepared on different assumptions;
• the recalling of witnesses, in part, to establish those different assumptions;
• the adjournment itself being due to the conduct by the plaintiffs which extended the hearing time and expense of the matter and which ultimately proved futile; and
• relying upon Devlin J (as he then was) in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd^[6](at 874), a plaintiff who recovered nominal damages ought not necessarily to be regarded in the ordinary sense of the word as a “successful” plaintiff.

27. [27]
    Before dealing with the particular situation that applies to a “nominal damages” case, very recently, in Murdoch v Lake^[7] the plurality of Morrison JA and Boddice J considered what was seen by them as the relevant matters for determining costs questions, particularly as to the effect of r 681 of the UCPR.  It was held (with reference to many relevant authorities) that:

• a party which has not been entirely successful is not inevitably or even, perhaps, normally deprived of some of its costs;
• the usual rule is that the costs of the proceeding follow the event, with that rule embodying the general principle that, subject to certain exceptions, a successful party to litigation is entitled to an award of costs in its favour;
• the “event” is not to be determined merely by reference to the judgment or order obtained, but is to be determined by reference to the events or issues, if more than one, arising in the proceedings;
• the court’s discretion to order costs is an unfettered one but one which “must be exercised without caprice, having regard to relevant considerations and established principles”;
• the primary purpose of an award of costs is to indemnify the “successful” party;
• the power to deprive a successful party of some of its costs or, alternatively, order that party to pay costs, has been long recognised and accepted;
• where the litigant has succeeded only upon a portion of the litigant’s claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he has failed; and
• a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered, as well, to pay the other party’s costs of them (with “issue” meaning that it can be any disputed question of fact or law);

: at [19] – [24].

28. [28]
    As to whom is a “successful” party in a case involving the awarding of nominal damages, there is appellate authority both in Queensland and elsewhere that supports an outcome that the defendant in such circumstances is the “successful” one. 

29. [29]
    Starting with Queensland, in McDowall v Reynolds,^[8] McPherson JA, with whom Davies JA and Mullins J agreed, made brief reference to the then latest edition of McGregor on Damages (being the 16^th Edition): at [9].  He summarised that text as saying that an award of nominal damages had traditionally had two functions.  Although these functions, or purposes, are discussed elsewhere, it is important to reiterate that McPherson JA also held that the first is “as a means of vindicating a legal right” and that the second is “to enable costs of the proceedings to be awarded in favour of a successful plaintiff who has not otherwise claimed or recovered damages”: at [9]–[10].  As for the first, McPherson JA held that this had ceased to be critical with a more frequent use of the remedy of injunction and since the introduction in the mid-19^th century of a power to make simple declarations of right (with the case then under consideration having that function served by particular orders made): at [9].  With respect to the second, again by reference to McGregor, he held that the need for such an order had become less pressing since court rules have (as they now do in Queensland) “conferred a general discretion as to costs”: at [10].

30. [30]
    That analysis resonates with both Stevens and Motium.  In the former, McColl JA stated, as a proposition that warranted repetition, that costs should be awarded against a plaintiff who has obtained an order for nominal damages because that award “was not the event at which the plaintiffs were aiming”: at [22].  The edition of McGregor referred to by McColl JA was the 17^th Edition.

31. [31]
    In Motium, in the supplementary judgment of the Court given on 11 May 2011, the Court unanimously held - after referring to the Courts of Western Australia having a broad discretion as to costs and that, generally “the successful party is entitled to its costs” - that it does not follow that the party which is awarded nominal damages is entitled to an order for the costs of the proceedings, referring to Anglo-Cyprian Trade Agencies.  They then referred to the judgment by McHugh J in Oshlack v Richmond River Council^[9] (at [70]) where he had observed that, consistent with the principle that a successful party is entitled to an order for costs as being grounded in reasons of fairness and policy, the Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages on the basis that, in reality, the successful party lost the litigation and the unsuccessful party won, noting that, although McHugh J was in dissent in that case, his statement of principle concerning costs was not in dispute: at [9].  Lastly, in Motium, that subsequent judgment held that, while each case must depend on its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but, instead, to recover substantial damages, “ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings” because, in such a case, the “party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have bought proceedings to recover”, stating that it “would be contrary to modern notions of efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantially failed in the action”: at [10].

32. [32]
    In the most recent edition of McGregor (referred to earlier) the general import of what has been analysed to has not changed.  With respect to the purposes of nominal damages – with the text rewords as being the “practical advantages to the claimant of such a barren judgment over an out-and-out judgment for the defendant” – it describes the first “as creditable but infrequent today” (i.e. the “use of a verdict as a means of establishing, determining or protecting a legal right, with such a right being of any kind, but generally a property right, whether over land, goods or immaterial things”: at [12-008]-[12-009].  In that discussion the text states that today there are generally more direct means available to a claimant for protection of property rights; and, in particular, there is the injunction: at [12-009]. 

33. [33]
    The second “advantage” noted by McGregor is that of being “a mere peg on which to hang costs”: at [12-010].  The text remarks that, apart from those cases determining or protecting some right, a rule that an award of nominal damages carries costs with it “serves only to encourage unnecessary litigation”: also at [12-010].  In the following paragraph, the text then states that, fortunately, such an advantage cannot today be reaped by an undeserving claimant, since it is provided by statute and by rules of court that the costs of a proceeding are in the discretion of the court: at [12-011]. 

34. [34]
    Very recent decisions confirming the characterisation of a defendant being awarded costs as a “successful” litigant are NCON Australia Ltd v Spotlight Pty Ltd (No 7)^[10] and King v Benecke.^[11]  In the former, by reference to authority, Robson J, in the Common Law Division of the Commercial Court, held that modern cases appear to favour the view that, generally speaking, the event will be regarded as going against the party who receives nominal damages only, unless the establishment of a legal right independent of damages is one of the primary purposes of the proceeding: at [18].  With particular reference to Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd^[12] – and its reference to earlier appellate authority – it was held that where it had been found that there was a breach of a confidentiality agreement but that no loss had been caused and that, while the plaintiff had sought an account of profits, it failed to convince the court that the breach would give recourse to the defendant to make a profit, the plaintiff was ordered to pay the costs of the proceeding: at [21].  Reference was also made in NCON Australia to that particular case where it was held that while the court was satisfied that the issue of liability (on which the plaintiff succeeded) was separable from the issues of causation and remedy (on which the plaintiff failed), the court was not satisfied that it was the “clearly dominant” issue so as to be important enough to depart from the normal order as to costs; it being held that the plaintiff had to do more than just prove a breach of the confidentiality agreement, it also had “to prove that the breach had some consequence”: at [21]. 

35. [35]
    In the latter, Harrison J held that he did not consider that the issue of causation upon which the defending party succeeded was either not central to the case or, alternatively, separable from the main issues in it: at [55]. This was during an examination of whether the otherwise “successful” defendant had conducted its defence in a manner that was “improper or unreasonable”: see, for instance, at [48].

36. [36]
    The concern whether a defendant, successful in the result but unsuccessful on some issues, is to be treated more favourably than a plaintiff who achieves a similar outcome was addressed by Peter Lyons J in McDermott & Ors v Robinson Helicopter Company (No 2).^[13]  He was the Judge who expressed a different view on some aspects - though not from the ultimate outcome - to the others in Murdoch v Lake.  His conclusion was that, although the basis for that particular view appeared to be that a defendant has little choice, short of settlement, but to defend the plaintiff’s claim, the validity of taking a different approach seemed to him to be “open to question”: at [51].  As he went on to remark, it is not self-evident that, as a matter of principle, such a party should be treated differently on a question of costs from a successful plaintiff, who has been unsuccessful on some issues: also at [51].  He remarked, though, in the next paragraph, that, at least in other jurisdictions, there was a clear preponderance of judicial statements in favour of such an exception: at [52]. 

37. [37]
    Accepting that no different position should apply to a “successful” defendant than to a similarly placed plaintiff - and noting that other decisions mentioned here are from “other” jurisdictions - it is necessary to sort out what happens in a case such as this, where there is not only an award of nominal damages but an award of a sum for a different breach of the same contract, however small that award might be.

38. [38]
    I do conclude that the sole object of the litigation, from the plaintiffs’ side, was to recover damages. The very fact that “nominal damages” were not sought for either breach, taken together with the fact that a significant sum was sought for both (noting the relative importance of each), bolsters that conclusion. Similar to the decision reached in NCON Australia, there was no alternative or further objective to the proceeding than the recovery of damages.  Therefore, at least with respect to the “event” of the breach of the “trading position” warranty, the defendant ought to be found to be the successful party, even though – to use the term applied in NCON Australia – the plaintiffs succeeding in establishing breach “despite the fierce opposition” of the defendants. 

39. [39]
    But it is also important to note that another “event” was the breach of the warranty concerning the employee claim. The amount apart, the plaintiffs must be seen as the successful parties.

40. [40]
    The event upon which the defendants were successful was “clearly dominant”. Nevertheless, the event upon which the plaintiffs were successful was “clearly separable”.

41. [41]
    The solution which is, thus, appropriate is to apply the provisions of r 684(2) of the UCPR in conjunction with r 681.  They permit a percentage calculation to be made in order to avoid the complexity involved in teasing out on assessment what aspects of the case go to a particular event.

42. [42]
    Having regard to the established principles discussed and the considerations particular to this proceeding, I hold it to be appropriate that separate orders as to costs be made. As for the breach of warranty concerning the employee claim, I will order that the plaintiffs have 10% of their costs of the proceeding, which I judge to be the relevant percentage applicable, doing the best that is possible in the circumstances. Although the amount would mean, consequent upon r 697(2) of the UCPR, that the costs in such circumstances “must” be assessed as if the proceeding had been started in the Magistrates Court, there is the proviso of “unless the Court orders otherwise”.  Although initially inclined to order “otherwise”, given the strong precedential approach to viewing the defendants in this case as successful on the clearly dominant matter, it leaves the plaintiffs’ success as a success on a small sum only, in the context where the total amount claimed itself for this breach was always well within the Magistrates Court’s jurisdiction.  Accordingly, I intend to order that the defendant pay 10% of the plaintiffs’ costs of the proceeding to be assessed on the amount appropriate to the Magistrates Court Scale for judgment for sums “Under $751”.

43. [43]
    As for the other costs, given all matters canvassed, and assessing those costs as relating to 90% of the proceeding, I will order that the plaintiffs pay 90% of the defendants’ costs of the proceeding.

44. [44]
    As for the costs “reserved” in 2012 on the adjournment, pursuant to r 698 of the UCPR, unless otherwise ordered, the costs so reserved follow the event.  As the event in this aspect in this proceeding is the one on which the defendants were successful and, therefore, is that on which the defendants have been given their costs - an outcome that the percentages reflect - those reserved costs are within the order made in their favour.  To the extent that it might be contemplated that 90% is insufficient to reflect the overall outcome inclusive of those reserved costs, attention should be directed to the appeal decision at [15] and [29].

45. [45]
    The form of the orders as to costs acknowledges the default provisions (as far as is possible) analysed in Mio Art Pty Ltd v Macequest Pty Ltd & Ors (No 2).^[14]