Toohey v Golder (No 3)[2022] QSC 176

SUPREME COURT OF QUEENSLAND

1. [1]
   The applicants, who were the defendants at the trial of this proceeding, sought leave to appeal to the Court of Appeal against costs orders 2 to 5 made in this proceeding on 20 May 2022. This application is made pursuant to s 64 of the Supreme Court of Queensland 1991 Act (Qld) (the Act). That section provides that an appeal from a judgment or order in the trial division, which is only in relation to costs, may only be pursued with the leave of the judge who gave the judgment or order or, if that judge is not available, another judge of the trial division.

The Background

2. [2]
   At the material time, Andrew Golder, the first defendant, acted as trustee for the As Good as Golder Trust. In January 2014, the As Good as Golder Trust acquired real property located at the corner of Malt Street and Brunswick Street, Fortitude Valley, in the State of Queensland (the High Church property).
3. [3]
   On 24 February 2015, Andrew Golder and Emma Golder (the second defendant) entered into an agreement with Nicolle Toohey (the plaintiff/respondent). The agreement concerned the conduct of the business of making a particular part of the High Church property available for events such as wedding ceremonies, wedding receptions, and corporate functions. Pursuant to the agreement, the plaintiff was responsible for the marketing of the business. Amongst other things, the agreement specified that the plaintiff would earn 20% of the gross income of both venue bookings and ancillary income.
4. [4]
   The 5-year contract term was conditional upon the business achieving a turnover of $250,000 during the initial 18-month period. If the plaintiff failed to reach the minimum total revenue target, the first and second defendants were entitled to terminate the agreement, provided they paid the plaintiff any future commissions confirmed on bookings acquired during the initial 18-month period.
5. [5]
   On 14 September 2016 the first defendant terminated the plaintiff’s contract. The following day, the plaintiff commenced proceedings. The plaintiff pleaded that the defendant’s termination breached the contract. She sought damages for breach of contract and sued for a debt due and owing for unpaid commission. Whether the first and second defendants were the parties to the contract, as opposed to the third defendant, was in issue. The defendants defended the proceeding, including by contending that the termination of the contract was lawful and in exercise of their contractual right to terminate. The defendants also advanced a counterclaim seeking, amongst other things, declaratory relief and orders pursuant to the Australian Consumer Law (ACL).
6. [6]
   The trial of the proceeding was heard from 15 to 18 February 2021 and on 19 April 2021. In their written submissions, filed after the close of evidence in the trial, the defendants abandoned their counterclaim.
7. [7]
   On 28 October 2021 Bond J delivered his judgment with reasons. The orders were as follows:

   1. Judgment for the plaintiff (on her unpaid commission claim) against the first and second defendants, in the amount of $18,668.07, exclusive of interest;
   2. The plaintiff’s claim against the third defendant is dismissed;
   3. Judgment for the plaintiff on the defendant’s counterclaim; and
   4. The parties will be heard on the order which should be made for interest in respect of the plaintiff’s judgment and also on the question of costs.
8. [8]
   The question of costs and interest was decided on the papers. On 20 May 2022, his Honour delivered the following costs orders:

   1. The plaintiff’s costs of her claim against the third defendant are to form part of the plaintiff’s costs of her claim against the first and second defendant;
   2. The first and second defendants should pay 40% of the plaintiff’s costs of her claim against them, to be assessed on the standard basis;
   3. The first, second and third defendants should pay the plaintiff’s costs of the counterclaim, to be assessed on the standard basis;
   4. The costs which the plaintiff may recover under the two previous orders must be assessed as if the proceeding (including the counterclaim) had been started and continued in the District Court.
9. [9]
   In reaching this decision, Bond J noted:

   1. The plaintiff was given judgment on the counterclaim, as the defendants abandoned their counterclaim after the close of evidence in the trial;
   2. The plaintiff was correct to contend that her contract was with the first and second defendants;
   3. The plaintiff should not be made to pay the third defendant’s costs, because its joinder was occasioned by the first and second defendants flawed allegation concerning the contracting party;
   4. The issues encompassed in the damages claim were not straightforward; and
   5. The plaintiff succeeded on her claim for unpaid commission.
10. [10]
    As explained, pursuant to s 64(1) of the Act, the defendants must seek leave from the trial division of this court to appeal Bond J’s costs orders. The legal basis for this application is discussed below.
11. [11]
    The defendants contend that the learned judge erred in law in the exercise of his discretion in making the costs orders by:

    1. Failing to properly or adequately consider or give weight to:
       1. (i)
          The relative success of the parties in the discrete substantive issues agitated in the proceedings;
       2. (ii)
          The respective quantum of time and resources expended by the parties in the proceedings in agitating the respective substantive issues;
       3. (iii)
          The respective conduct of the parties in the proceedings;
       4. (iv)
          The offers of compromise of the defendants (by means of Calderbank offers) and plaintiff’s responses; and
       5. (v)
          The defendants’ submissions in the proceeding relevant to the question of costs.
    2. Failing to properly and adequately consider and apply:
       1. (i)
          Correct principle in the exercise of the discretion to make orders on costs; and
       2. (ii)
          Those considerations of law and fact relevant and binding in the exercise of the discretion to make orders on costs.
    3. Those orders being, in respect of the defendants, manifestly unreasonable and unjust.
12. [12]
    The defendants seek to set aside of the costs orders made by Bond J, and in lieu, it be ordered that:

    1. The defendants pay the plaintiff’s costs of the claim and counterclaim on the Magistrates Court scale of costs fixed in the sum of $13,000; and
    2. The plaintiff pay the defendants’ costs of the proceeding after 10 November 2022 on an indemnity basis;
    3. Alternatively, the defendants pay the plaintiffs costs of the claim and counterclaim on the Magistrates Court scale of costs fixed in the sum of $21,778.
    4. Alternatively:
       1. (i)
          the defendants pay the plaintiff 10% of the plaintiffs’ costs of the claim;
       2. (ii)
          the plaintiff pay the defendants 90% of the defendant’s cost of the claim;
       3. (iii)
          the defendants pay the plaintiff’s costs of the counterclaim.
13. [13]
    The defendants submit that the effect of the costs order for their client is significant and onerous – considering the length of the proceeding (4.5 years) and a 5-day trial. This is not a substantial point. All who engage in litigation, especially those who are legally represented, are likely to be aware that either party may be made to pay the other’s costs. It is a well-known risk of a loss in litigation.^[1]

Legal Basis for Appeal

14. [14]
    There was some argument concerning the legal basis for the application. For that reason, it is necessary to return to s 64 of the Act. The section reads:

64 Leave required to appeal in relation to costs

1. (1)
   An appeal only in relation to costs lies to the Court of Appeal from a judgment or order of the court in the Trial Division only by leave of the judge who gave the judgment or made the order, or, if that judge is not available, another judge of the court in the Trial Division
2. (2)
   However, if, after an appeal to the Court of Appeal is properly started, the appeal becomes an appeal only in relation to the costs of the original proceeding –

   1. Subsection (1) does not apply; and
   2. The appeal may be heard and determined only by leave of the Court of Appeal.

[Emphasis added]

15. [15]
    Bond J, the judge who gave the judgment and made the orders, is unable to hear this application due to his Honour’s elevation from the Trial Division to the Court of Appeal. Thus, this application was referred to the Trial Division’s Applications List.
16. [16]
    In assessing whether this application ought to be granted, there are two threshold questions the defendants must overcome. First, whether the application was made in time. Second, whether the Trial Division of the Supreme Court should grant leave to appeal to the Court of Appeal on a pure question of costs.

Timing

17. [17]
    Rule 748 of the Uniform Civil Procedure Rules (Qld)(UCPR) requires that an appeal “be filed within 28 days after the date of the decision appealed from”. Relevantly, Bond J made orders as to costs on 20 May 2022 and the defendants filed a Notice of Appeal in the Court of Appeal on 15 June 2022. Thus, the filing of the appeal was effected within the requisite 28 days from the time of the costs orders.^[2]
18. [18]
    Thus, timing is not an issue.

Sufficient Grounds to Attack the Orders as to Costs

19. [19]
    Section 64 of the Act is a provision in which parliament recognises that costs orders ought to be left to the discretion of a judge, and only appealed with leave of the trial judge, or another trial division judge with the requisite authority.^[3]
20. [20]
    In assessing whether leave ought to be granted, the court must be satisfied that the discretion miscarried, not merely that the Court of Appeal might exercise the discretion differently. In House v The King,^[4] the High Court of Australia found that the discretion miscarries when “the judge acts upon a wrong principle, … allows extraneous or irrelevant matters to guide or affect [them], if [they] mistake[] the facts, if [they do] not take into account some material consideration…”.^[5]
21. [21]
    Similarly, in Grundman v Georgeson^[6] Dowsett J (with whom McPherson JA agreed) said:

Leave should not be given unless the applicant demonstrates that there is a cogent argument against the order. It will not usually be enough to assert dissatisfaction or that the judge may not have correctly applied a well established principle.^[7]

22. [22]
    The defendant relied on Emmanuel Management Pty Ltd (in Liq) v Foster’s Brewing Group Ltd,^[8]  where Chesterman J stated that a “judge who is asked for leave to appeal should not be defensive about the orders made or overly reluctant to give leave”.^[9] However, this statement ought to be read in light of his Honour’s following statement that “[n]evertheless the cases make it clear that leave should not be given unless there is an arguable case that, applying the principles of House v The King, the discretion will be overruled on appeal.” 
23. [23]
    Thus, before granting an application for leave to appeal against the costs order, the court must be satisfied that there exists an “arguable case that the judge committed an error of law, or misapprehended the facts or that the result is inconsistent with the facts”.^[10]
24. [24]
    The defendants point to three categories of grounds of appeal, being: 

    1. The offers of compromise;
    2. The apportionment of costs; and
    3. The correct costs scale.
25. [25]
    Each category will be assessed in turn.

Offers of Compromise

26. [26]
    During the course of this proceeding, the defendants made two Calderbank offers of settlement to settle the entire proceeding, including the claim and the counterclaim, (the Calderbank Offers), as follows:

    1. On 2 November 2020, the defendants offered to pay the plaintiff the sum of $50,000 inclusive of interest and costs (“the First Offer”). The First Offer remained open until 4:00 pm on Friday 6 November 2021; and
    2. On 10 November 2020, the defendants offered to pay the plaintiff the sum of $70,000 inclusive of interest and costs (‘the Second Offer”). The Second Offer remained open for written acceptance until 5:00 pm on 11 November 2021. 
27. [27]
    It will be observed immediately that both offers are what can be described as ‘all up’ offers in that the offer is in the language of ‘$X all up’. Offers in that language are difficult to translate to the language of court judgments which are almost always expressed as ‘$Y for damages, plus interest, plus costs to be assessed’.
28. [28]
    The plaintiff did not accept the offers and allowed both offers to lapse. At that point, it would have been obvious to the plaintiff’s legal advisers that the defendants would, in the event they succeeded at trial, seek costs on a basis more favourable than the usual order which would require the payment of costs on the standard basis. However, as explained, the offers contained the problem that they were “all up” offers.
29. [29]
    In assessing the relevance of the Calderbank Offers, Bond J relied on his own useful summary of the relevant law in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2),^[11] which reads:

First, the usual rule is that where the Court orders the costs of one party to litigation to be paid by another party, the order is for assessment of those costs on the standard basis.

Second, the Court will depart from the usual rule where the circumstances of the case warrant that course.

Third, one feature which may justify a departure from the usual rule is the rejection of a Calderbank offer to compromise. However, it is wrong to think that an offeree’s rejection of a Calderbank offer gives rise to a presumption that the offeree should pay the offeror’s costs on an indemnity basis if the offeree obtains a less favourable result than contained in the offer. Rather, the correct approach is to consider whether the rejection of the Calderbank offer, in all the circumstances, justifies a departure from the usual rule.

Fourth, the balance between the competing policy considerations of, on the one hand, appropriately encouraging settlement and, on the other, not discouraging potential litigants from bringing their disputes to the courts, is found by applying a test of “reasonableness”. The policy rationale for requiring the offeree to indemnify the offeror for costs incurred after the offeree’s unreasonable rejection of an offer is that, from the time of the unreasonable rejection, notionally the real cause and occasion of the litigation is the unreasonable attitude adopted by the offeree.

Fifth, deciding the critical question of whether the offeree’s rejection of the offer is unreasonable in all the circumstances will always involve matters of judgment and impression. However, the discretion as to costs must be exercised judicially and is subject to review in accordance with the principles set out in House v The King (1936) 55 CLR 499 at 505. Without being exhaustive concerning the considerations which should be taken into account, a court should ordinarily have regard to at least the following matters:

1. (a)
   the stage of the proceeding at which the offer was received;
2. (b)
   the time allowed to the offeree to consider the offer;
3. (c)
   the extent of the compromise offered;
4. (d)
   the offeree’s prospects of success, assessed as at the date of the offer;
5. (e)
   the clarity with which the terms of the offer were expressed; and
6. (f)
   whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.^[12]

30. [30]
    While Bond J acknowledged that the terms of the Calderbank Offers in this case were clear and offered a genuine compromise, his Honour was not persuaded to reach the conclusion that the plaintiff’s failure to accept either of the offers should be regarded as unreasonable. In coming to that decision, Bond J considered the following relevant facts:

    1. The First Offer was left open for something less than 4 days and the Second Offer was left open for something less than 2 days;^[13]
    2. Each offer was made after the plaintiff’s accounting report had been delivered;
    3. The plaintiff’s accounting report supported a quantum significantly in excess of the amounts contained in the Calderbank Offers, namely $246,832;
    4. Had the plaintiff met the contractually stated revenue goal, it seemed likely to Bond J that it would have been reasonable to conclude that the plaintiff would have been able to recover a claim for lost earnings for the remaining contract period which would have exceeded the amount of the Calderbank Offers;
    5. At the time the Calderbank Offers were made, the defendants had not yet delivered their accounting report;^[14]
    6. Neither of the Calderbank Offers contained any explanation as to why the plaintiff would not do better than the offer;^[15] and
    7. Given that the offers were made inclusive of costs of both the claim and counterclaim [i.e. on an ‘all up’ basis] and the lack of any evidence as to what the costs were, it was all the more difficult to reach a view as to whether the offers were reasonable.^[16]
31. [31]
    The defendants’ written submissions argue that the state of the pleadings, evidence, or knowledge of the plaintiff regarding these matters was erroneously not considered or applied by Bond J. The defendants relied on the following four factors.
32. [32]
    First, the defendants say that their case was closed at the time of the Calderbank Offers and the pleading of the entitlement to terminate was fatal to the plaintiff’s damages claim. The pleadings had closed approximately 2.5 years before the Calderbank Offers were made. In the Second Further Amended Defence of the Defendants and Counterclaim, filed on 28 March 2018, the defendants pleaded:

“On or about 15 September 2016 High Church terminated the consulting contract pursuant to the express terms of that contract because the plaintiff failed to reach the target, as the total revenue in gross income of the business from 20 February 2015 to 20 August 2016 was $225,380.58 and not $250,000.00 as required by the Agreement and the consulting contract”

(Amendments omitted).

33. [33]
    However, Bond J explicitly acknowledged this point, stating ‘[a]t the time the offers were received, the pleadings had closed and disclosure was complete.’^[17]
34. [34]
    Second, the defendants point out that full disclosure was made by the parties. That disclosure included evidence supporting the parties’ respective pleadings including direct documentary evidence. That point was plainly also considered by His Honour.
35. [35]
    The real complaint here is not that the discretion miscarried but that his Honour’s exercise of the discretion did not place sufficient weight on the factor of the maturity of the proceedings and the fact that disclosure had been completed. On 29 June 2017, the then solicitors for the defendants forwarded to the plaintiff’s solicitors correspondence attaching the documents listed in the defendants Amended List of Documents. The disclosure included:

    1. Forty (40) emails from Andrew Golder (the first defendant) copied to Nicolle Toohey (the plaintiff) which periodically confirmed quantum of gross turnover;^[18] and
    2. This disclosure also included High Church’s bank statements^[19] and accountants’ spreadsheets evidencing the full spectrum of payments upon which the plaintiff’s damages claim and the right to termination was entirely founded.^[20]
36. [36]
    While it is true that the plaintiff had the documentary evidence needed to calculate the total revenue in gross income of the business from 20 February 2015 to 20 August 2016, this kind of documentary evidence is typically analysed by financial experts.  That was the case here. Both parties relied on their respective expert accountants.
37. [37]
    Notably, the plaintiff had commissioned an expert report from an accountant. In my view, it is superficial for the defendants to contend that the plaintiff had the requisite evidence to personally assess her prospects of success on the threshold point. In a sense the submission requires the plaintiff to make her own assessment contrary to the position reached by the expert she commissioned. This is in a context where the defendants themselves amended the calculation twice at the time of filing their Second Further Amended Defence of the Defendants and Counterclaim, and subsequently commissioned their own expert accountant report. The defendants concede that, at the time of the Calderbank Offers, they had not yet delivered their last accounting report.
38. [38]
    The plaintiff’s forensic accountant’s report, a report of Lytras & Company made the following findings:

1. 2.1I have assessed the unpaid commission owed to Ms Toohey as totalling $25,486.97 (excluding GST)

…

1. 2.7Ms Toohey achieved the Initial Term Revenue Target comfortably within the 18 month permitted time period – irrespective of which of the three alternative commencement dates (20 February 2015, 7 March 2015 or 1 August 2015) are adopted”.

….

1. 8.3My own investigations of the information disclosed to me indicate that unpaid commission owed to Ms Toohey is slightly higher and totals $28,015.87 (including GST) or $25,486.97 (excluding GST).

39. [39]
    That report’s findings are significant. As previously stated, bank statements and accountants’ spreadsheets are evidence traditionally assessed by accountants or other financial experts. Here, the expert found that the threshold point had been reached. Of course, the position would have been different had the expert made a contrary finding, or if the expert been asked to assume that the threshold point was reached. In those scenarios, it may not have been reasonable for the plaintiff to rely on the report. That was not the case. Here, Bond J plainly took the view that the plaintiff acted reasonably in relying on her expert report, which, at the time was the only expert evidence on whether the threshold had been reached.
40. [40]
    Third, the defendants assert that the counteroffer of $200,000.00 made by the plaintiff by letter dated 17 November 2020 should be interpreted to mean that the plaintiff “must have sufficiently considered the First [Calderbank] Offer on the same terms (except quantum) and fully understood her position at that time such that a counter-offer (sic) could not otherwise be made”.^[21]
41. [41]
    The fact that the plaintiff made an offer lower than the amount stipulated in their expert report does not necessarily point to the plaintiff understanding their position to be fatal.  Offers of compromise are made for a variety of reasons, including an appreciation of the merits of the case and the risks, the costs, the exposure to costs orders, the advantage of an early resolution before trial, and even the likely emotional toll of a trial. It is a dangerous enterprise to use a single figure as a window to a party’s understanding.
42. [42]
    Fourth, in their written submission, the defendants assert that the “failure to explain a basis of the Offers was referred to as the sole basis by the Court to decline to accept the rejection as unreasonable, in confluence with “the very short period of time” for acceptance of the Offers…” This submission does not accurately or fairly describe Bond J’s reasoning. Bond J’s reasoning is best understood in light of the relevant paragraph as a whole. It reads:

32. [32]
    If some suggestion had been made in the offers as to why it should have been that any confidence in the plaintiff’s expert calculation on that point would be misplaced, I might have been more favourably disposed to the defendants’ argument. However, neither of the defendants’ offers explained the way in which the amounts which they offered were justified. Logical analysis would have suggested that the offers must be founded on the proposition that the damages claim would absolutely fail., But it was not suggested why that should be so. Logically it would have been for the reason the claim ultimately did fail, namely, failure to reach the $250,000 goal meant that termination was justified. But no basis was set out in support of the conclusion why it should be that the plaintiff’s expert’s calculations were in error. I am not persuaded by anything which the defendants have placed before me that at the time the offers were made, and in light of the expert accounting advice she had, it was unreasonable for the plaintiff to reject the offer.
33. [33]
    In making the observations in the previous paragraph, I acknowledge that there is no general rule that Calderbank offers must set out with reasonable specificity the basis for the offeror’s contention that the offeree should accept the compromise: see Hazeldene’s Chicken Farm at [26] to [28]. However, in this particular case I think that the lack of an explanation as to why the plaintiff should not place any confidence in her being able to prove that she had met the revenue goal, sounds strongly against the conclusion that her failure to accept the offers was unreasonable in all the circumstances…

[Emphasis added]

43. [43]
    It is apparent from this extract that Bond J did not consider this contention as the “sole basis” to decline to accept the rejection of the Calderbank Offers as unreasonable. Rather, Bond J recognised that the plaintiff’s prospects of success must be assessed at the date the offer is made and not based on the ultimate outcome of the proceedings. At the time, the plaintiff was in possession of an expert report which found that she had met the revenue goal. In the above extract, Bond J highlights that the defendants provided no expert evidence, or assertion in their offers, to displace the plaintiff’s impression that she had a reasonable cause of action.
44. [44]
    For those reasons, I am not satisfied that the discretion miscarried. It was open to Bond J to consider that the plaintiff’s reliance on the expert report in rejecting the Calderbank Offers was reasonable.
45. [45]
    Each of the seven reasons given by Bond J (see paragraph [29] above) was a sound basis for the exercise of that discretion. There is no proper basis for saying that the exercise of the discretion miscarried. Indeed, the fact that the Calderbank Offers were expressed in the language of ‘all up’ offers makes it difficult for the court to assess whether the offer was a reasonable one or that the rejection of the offers was unreasonable. There is an absence of evidence as to costs and interest which would enable a proper comparison to be made between the Calderbank Offers and the judgment. 

Apportionment of Costs

46. [46]
    Bond J held that it “was common ground between the parties that this was a case which would not warrant a costs order on an issue-by-issue basis, but rather [his Honour] should make an order that the defendants would only be responsible for a proportion of the plaintiff’s costs of its claim”. The defendants argued, by way of alternative,^[22] that they should be responsible for 10% of the plaintiff’s costs, while the plaintiff argued for 50%. Ultimately, Bond J, acknowledging the ‘rough and ready’ nature of the assessment,^[23] ordered that the defendants pay 40% of the plaintiff’s costs, to be assessed on the standard basis.
47. [47]
    The principles which the Bond J considered are those set out in Speets Investment Pty Ltd v Bencol Pty Ltd (No 2).^[24] They are:

    1. The general rule provides that costs of a proceeding follow the event unless the court orders otherwise.^[25]
    2. The court may make orders as to the whole or part of the costs of an appeal it considers appropriate.^[26]
    3. The successful party in litigation, subject to certain limited exceptions, is entitled to an award of costs in its favour. That is, by reasons of fairness and policy, the purpose of costs orders is not to punish a successful party, but to indemnify the successful party from expense it would not have otherwise incurred.^[27]
    4. The word “event” in the general rule should be approached distributively according to the event of an issue or each separate issue, if more than one exists, in the proceeding.^[28]
    5. Costs orders need not reflect the different results of separate events or issues; the court is given a broad discretion to determine the appropriate orders.
    6. In practice, courts often identify “heads of controversy” or “units of litigation”, and award costs in accordance with their relative success of failure.^[29]
    7. There must be special or exceptional circumstances to warrant depriving a successful party of its costs. Failure by the successful party on some issue(s) will not ordinarily be sufficient to warrant deviation from the general rule.^[30]
    8. Courts prefer to avoid an approach which might result in a protracted costs assessment of different issues which were determined in different directions as between the parties and to award costs in respect of such issues.^[31]
    9. A more efficient and fairer approach assessment was applied by McMurdo J in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2):

“Where there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party’s costs as a way to reflect fairly the parties’ comparative success or failure in the outcome which was obtained. Courts often prefer to avoid the complicated form of costs assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues.”

48. [48]
    The defendants submit that there were two “events”: the plaintiff’s damages claim, and the plaintiff’s commissions claim. With respect to the damages claim, the defendants argue Bond J’s failure to award the defendants any costs in respect of its successful defence of the plaintiff’s ill-founded damages claim, means the defendants were not afforded the benefit of the principle in Oshlack, that costs are not awarded to punish an unsuccessful party but to indemnify the successful party. The defendants contend that as between the parties, fairness dictates that the unsuccessful party typically bears the liability for costs of the unsuccessful litigation.
49. [49]
    However, in their original costs submissions, the defendants had argued by way of alternative, that “where the plaintiff has failed on all issues save for part of her unpaid commission claim… this is an appropriate matter for the court to make an order… and limit any award of costs in favour of the plaintiff to that part only and declare the percentage of the costs of the proceeding attributable to that part to be say, 10%”.
50. [50]
    The defendants contend that Bond J’s order that the defendants pay 40% of the plaintiff’s costs in no way “reflects[s] fairly the parties’ comparative success or failure in the outcome which was obtained”. The defendants submit that they “successfully defended” the claim and the cause of action brought by the respondents was “ill-founded”, noting that the “entire trial… was occupied by the contractual damages claim of the plaintiff (and the discrete issues within it) which ultimately failed.”
51. [51]
    In my view, the defendants overstate their success.
52. [52]
    First, the defendant’s contention fails to acknowledge the existence of the counterclaim which it abandoned only at the conclusion of the trial. The counterclaim was a substantial one where it sought a declaration that the contract was between the plaintiff and the third defendant, damages for negligent misrepresentation, alternatively damages or compensation pursuant to s 236 of the ACL, or further or alternatively for and order that the contract was void or voidable pursuant to s 237(1) of the ACL, or a declaration that the contract had been lawfully terminated.^[32] In a sense, the case was a commercial case where each side made substantive claims against the other.  
53. [53]
    Second, the defendants’ contention fails to recognise that the plaintiff did succeed on some of the discrete issues within the plaintiff’s contractual claim. It is worth noting Bond J’s reasons on the damages claim ‘event’, so as to understand the plaintiff’s and defendants’ relative success:

45. [45]
    The plaintiff succeeded in proving that the contract was with the first and second defendants and not with the third defendant. That required an examination of all the circumstances of contract formation, and also required defeating the defendants’ arguments concerning the authority of the first defendant to bind the second defendant, the existence of a preincorporation contract, novation and estoppel by convention. The examination of the way in which the contract was formed took up a significant portion of both the trial and of the submissions.…
46. [46]
    The plaintiff also succeeded in persuading me that the evaluation of the defendants’ conduct would justify a conclusion that the defendants would be regarded as having repudiated the contract, unless the termination could be justified by reliance on the failure to meet the contractual revenue target. But it was on the latter issue which she failed. And that meant that the damages case failed. She persuaded me that she would have had an entitlement to damages in the event that she had met the contractual target, but I did not find it necessary to calculate that entitlement with any precision. And, as I have said, she failed completely to persuade me that there would have been any award calculated by reference to attributing value to the option. The examination of the issues on which the plaintiff failed also took up a significant portion of both the trial and of the submissions.

[Emphasis added]

54. [54]
    Third, the defendants noted that the residual commission claim was, as accepted by the court, “comparatively small”^[33] and “uncontroversial”.^[34]  However, the plaintiff at least partially won that commissions claim.
55. [55]
    Bond JA, as the trial judge, was in a unique position to consider the parties’ relative loss and success of both events. Payment of costs by the losing party on each event, being each distinct issue in the proceeding, is the default position of the general rule in the interests of justice and established authority. However, the court has a wide discretion to order otherwise. Assessing costs is an exercise largely based on impression, in circumstances where the court is not aware of the preparation time, effort and expense involved in each issue. Bond J deviated from the default position and provided reasons for doing so at [45] to [47] of his Honour’s reasons. His Honour was entitled to exercise the court’s discretion in that fashion.
56. [56]
    Others may have reached a different result. But that does not expose a miscarriage of the discretion. As outlined by Starke J in House v The King, the discretion “must be exercised judicially, according to rules of reason and justice, and not arbitrarily or capaciously or according to private opinion”. There is certainly force in the submission that a trial judge in the position of Bond J may well have had more regard to the ultimate result and would have made the defendants responsible for a lower percentage of the plaintiff’s costs. However, in assessing whether leave ought to be granted, the court must be satisfied that the discretion miscarried, not merely that the Court of Appeal might exercise the discretion differently. Here, the discretion appears to have been exercised consistently with the principles outlined in House v The King.
57. [57]
    For those reasons, I am not satisfied that the Bond J’s exercise of the discretion miscarried.

Costs on the Magistrates Court Scale

58. [58]
    The defendants contend that, pursuant to UCPR 697(2), the claims made by the plaintiff ought to have been brought in the Magistrates Court, as evidenced by the result.
59. [59]
    UCPR 697 provides:

    1. (1)
       Subrule (2) applies if the relief obtained by a plaintiff in a proceeding in the Supreme Court or District Court is a judgment that, when the proceeding began, could have been given in a Magistrates Court.
    2. (2)
       The costs the plaintiff may recover must be assessed as if the proceeding had been started in the Magistrates Court, unless the court orders otherwise.
60. [60]
    The prescribed limit of the Magistrates Court’s jurisdiction was, at the time this proceeding was commenced, and remains, $150,000.^[35] There is no question that judgment in the amount of $18,668.07 (incl. GST) falls within the prescribed monetary limit of the Magistrates Court.
61. [61]
    However, the relief sought by the defendants by way of counterclaim, namely the declaratory relief and the s 237 order, do not fall within the Magistrate Court’s jurisdiction.  Thus, Bond J was minded to award costs on the basis that the case had been prosecuted in the District Court, being a court with jurisdiction to hear the relief pursued in the counterclaim. 
62. [62]
    Whether declaratory orders allow the plaintiff to escape the consequences of UCPR 697(2) was considered in JA & JB Boyle Pty Ltd v Major Furnace Australia Pty Ltd (No 2).^[36] In that case, Porter DCJ noted that while ss 69(1)(a) and (2)(b) of the District Court of Queensland Act 1967 (Qld) conferred on the District Court the general power to grant declaratory relief, no equivalent provision confers such power on the Magistrates Court. Thus, the Magistrates Court does not have the power to grant a declaratory order as a remedy in a proceeding. As the plaintiff could not have obtained in the Magistrates Court the declaration granted in the proceeding, his Honour found that UCPR 697 was not engaged.
63. [63]
    JA & JB Boyle Pty Ltd v Major Furnace Australia Pty Ltd (No 2),^[37] is different from this case because in that case declaratory relief was granted. As Porter DCJ pointed out “Rule 697 takes as the relevant consideration the relief obtained in a proceeding.”  Thus, if clause 697(1) is interpreted in accordance with its ordinary or natural meaning, the defendants should be required to pay the plaintiff’s costs on the Magistrates’ Court scale, as the relief obtained by the plaintiff could have been given in the Magistrates Court.
64. [64]
    However, the wording of s 697(2), namely the phrase ‘unless the court orders otherwise’, means the rule takes effect unless the party entitled to costs applies to the court for a different order and the court is minded to make a different order. Here, the plaintiff, the party entitled to costs, requested such a deviation from the standard order. Bond J accepted that invitation to deviate from the typical position. That is highlighted in his Honour’s reasons:

37. [37]
    The plaintiff contended that there was reason to order otherwise because the counterclaim sought remedies which could not have been obtained in the Magistrates Court. It was common ground before me that the Magistrates Court would not have had jurisdiction to grant declaratory relief, nor would it have had jurisdiction to make an order under s 237. Support for those conclusions is found in JA & JB Boyle Pty Ltd v Major Furnace Australia Pty Ltd (No 2) [2019] QDC 215, per Porter QC DCJ.
38. [38]
    The defendants replied by submitting that if the plaintiff’s claim had been advanced in the Magistrates Court in the first place, the only orders which would have been pursued in the counterclaim would have been altered in such a way as would have been open to have been dealt with by the Magistrates Court. They submitted that it could not be right that the plaintiff could escape the consequences of r 697(2) of the UCPR by pointing to the relief sought in a counterclaim that was made to resist those parts of the plaintiff’s claim that have failed.
39. [39]
    To accept the logic underpinning the defendants’ submission I would have to make assumptions about the nature of the instructions which the defendants would have given their solicitors which I am not prepared to make in the circumstances of this case. There is no evidence which supports it and, having regard to the conduct of the first defendant during the trial, I would not be prepared to draw the inference that those instructions would necessarily have been forthcoming. In particular is that so because an order pursuant to s 237 was an alternative basis to defeat the damages claim even if the plaintiff succeeded on the threshold point and the defendants may well have been motivated to keep that claim for relief. If the defendants had insisted on a counterclaim containing that relief, it would have been inevitable that the proceeding including the counterclaim ended up in the District Court. [emphasis added]

65. [65]
    An analogous case is Faulkner-Mounsey v Baird (No 2),^[38] where Horneman-Wren DCJ ordered costs be assessed on the District Court Scale from and including 13 June 2018, being the day upon which the Ipswich Magistrates Court proceeding was transferred to the District Court of Queensland at Ipswich. The proceeding was transferred, as the defendants’ counterclaim exceeded the Magistrates Courts’ jurisdiction. The counterclaim was valued at $575,110.43. Ultimately, the court ordered costs be assessed on the District Court scale from the 13 June 2018, despite the defendants’ counterclaim being wholly unsuccessful.
66. [66]
    Here, it is difficult to conceive how the discretion can have miscarried in the circumstances where the defendants sought relief outside of the Magistrates Court’s jurisdiction and where Bond J directly considered and rejected the prospect that, if the plaintiff had claimed in the Magistrates Court, the defendants would have not pursued declaratory relief and relief based on s 237. As can be seen from the description above, the defendants’ counterclaim was a substantive one which it pursued until closing addresses. That reinforces the conclusion that Bond J reached, namely that the defendants would have pursued that substantive relief in the event that the proceeding had been commenced in the Magistrates Court.
67. [67]
    Applying the logic articulated in Faulkner-Mounsey v Baird (No 2), it is irrelevant that the counterclaim ultimately failed, as the counterclaim could not have been commenced in the Magistrates’ Court. Bond J was entitled to exercise the discretion to deviate from the standard order under UCPR 697(2) and to discount, as unlikely, the defendants’ hypothetical scenario that, had the matter commenced in the Magistrates Court, the nature of the instructions which the defendants would have given to their solicitors would have been limited to the remedies available in the Magistrates Court’ jurisdiction. 
68. [68]
    For those reasons, the exercise of the discretion by Bond J did not miscarry.

Orders

69. [69]
    For those reasons there is no basis for interfering with the discretion exercised by Bond J. Thus, the orders will be:

    1. The application for leave to appeal against the costs order is refused; and
    2. The parties be heard as to the costs of the application for leave.