Toohey v Golder (No 2)[2022] QSC 93

SUPREME COURT OF QUEENSLAND

Introduction

1. [1]
   On 28 October 2021, I published my reasons for judgment in Toohey v Golder [2021] QSC 277. 
2. [2]
   The orders which I made were:

1. Judgment for the plaintiff on her 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 defendants’ counterclaim.

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.   

3. [3]
   The present judgment deals with the two questions reserved for subsequent consideration by order 4, the parties’ written submissions having been received.
4. [4]
   For reasons which follow, the orders which I will make are:

1. The amount which should be paid to the plaintiff by the first and second  defendants for interest is $5,575.56.

2. 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 defendants.

3. 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.

4. The first, second and third defendants should pay the plaintiff’s costs of the               counterclaim, to be assessed on the standard basis.

5. The costs which the plaintiff may recover under orders 3 and 4 must be assessed               as if the proceeding (including the counterclaim) had been started and continued               in the District Court.

Relevant background

5. [5]
   In January 2014 the first defendant, as trustee for 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).
6. [6]
   On 24 February 2015 a contract was formed between the plaintiff on the one hand and the first and second defendants on the other pursuant to which the parties agreed on the following terms:

   1. (a)
      The plaintiff on the one hand and the first and second defendants on the other agreed to conduct the business of making a particular part of the High Church property available for events such as wedding ceremonies, wedding receptions and corporate functions.
   2. (b)
      The plaintiff was responsible for the marketing of the business in return for which on an ongoing basis she would take 20% of the gross income of both venue bookings and ancillary income.
   3. (c)
      The first and second defendants would be responsible for all setup costs, would waive rent and would act as caretakers to the building, in return for which they would take 80% of the gross income of both venue bookings and ancillary income.
   4. (d)
      Those provisions concerning remuneration were based on a minimum total revenue of $250,000 in gross income (including both venue bookings and ancillary income) achieved over the first 18 months of a 5-year contract term.
   5. (e)
      If the business failed to achieve $250,000 in gross turnover over the first 18 months of a 5-year contract term, the first and second defendants could terminate the contract at their option, although they would be obliged to pay out to the plaintiff any future commissions confirmed on bookings acquired during the initial 18-month period.
   6. (f)
      But if the business achieved turnover of $250,000 gross in that period, the contract would be secure for the balance of the 5-year contract term.
   7. (g)
      At the end of the 5-year contract term:

      1. The plaintiff had the first option to buy the business if the first and second defendants decided they wanted to sell, for a price of 50% of market value, where market value was determined as 3 times annual net earnings after including the cost of the agreed rent for the space going forward.
      2. The first and second defendants would also have the option to buy the business, for the price of 50% of market value, calculated in the same way.
      3. The parties could renegotiate at that time for the plaintiff to continue as a consultant on a new agreement or could dissolve the contract again requiring the first and second defendants to pay out any commissions due on future confirmed bookings acquired during the initial 5-year contract term.
7. [7]
   The plaintiff conducted the business until about 14 September 2016 when the first defendant terminated the contract.  The plaintiff commenced this proceeding against the first and second defendants the following day.  The plaintiff’s case as ultimately pleaded was that the termination breached the contract and she sought damages for breach of contract in the amount of either $1,268,285 or $713,897^[1] and also sought to recover $28,035.67 (GST inclusive) as a debt due and owing for unpaid commissions.
8. [8]
   The first and second defendants defended the proceeding, including by contending that it was their company which had contracted with the plaintiff, and not them personally.  The plaintiff later joined the first and second defendants’ company as the third defendant, advancing her claims against it in the alternative, in the event that the defendants’ case as to the proper contracting party succeeded. 
9. [9]
   The defendants maintained that the termination of the contract was lawful and in exercise of a contractual right to terminate because the business had not achieved the $250,000 revenue goal.  Accordingly, they denied any liability for damages.  It appeared uncontroversial that the plaintiff was owed some unpaid commission, however the parties differed on the precise amount owing and, in any event, the defendants by their opening made clear that they sought to set off the amount they claimed in their counterclaim as would reduce the amount owing to Ms Toohey to nil. 
10. [10]
    The counterclaim advanced by the defendants sought:

    1. (a)
       a declaration that the contract was between the plaintiff and the third defendant;
    2. (b)
       damages for negligent misrepresentation;
    3. (c)
       further or alternatively damages or compensation pursuant to s 236 of the Australian Consumer Law;
    4. (d)
       further or alternatively, an order that such contract as may be found, was void, voidable or unenforceable against the contracting party, pursuant to s 237(1) of the Australian Consumer Law; and
    5. (e)
       further or alternatively, a declaration that such contract as may be so found, was lawfully terminated or rescinded on or about 15 September 2016 (either pursuant to a contractual right to terminate, or because the plaintiff’s breaches of contract conferred a right to terminate).
11. [11]
    The pecuniary claims advanced by the counterclaim were for:

    1. (a)
       damages in the amount of $123,535.83 on an altered transaction basis in the form of the profits which would have been made if the plaintiff had not misled and deceived them; and
    2. (b)
       damages in the form of the amounts which might be found to be owed to the plaintiff for unpaid commission or for damages for breach of contract.
12. [12]
    The defendants abandoned their counterclaim in their written submissions delivered after the close of evidence in the trial.  That was why I gave judgment for the plaintiff on the counterclaim.  As I observed in my previous judgment, prima facie costs on the counterclaim should follow the event.
13. [13]
    In my previous judgment, I concluded that the plaintiff was correct to contend that her contract was with the first and second defendants: see Toohey v Golder at [13] to [78].  Having succeeded against them, her claim against the third defendant had to be dismissed.  However, I concluded she should not pay the third defendant’s costs, because its joinder was occasioned by the defendants’ flawed allegation concerning the contracting party.  There remained for determination the damages claim.  The issues arising in relation to the damages claim were not straightforward.  I described them in this way (at [81], footnote omitted):

“The remaining issues in the trial concern whether the contract was lawfully terminated by [the first and second defendants] in reliance upon their contention that the business had not achieved the contractual revenue target. If the contract was lawfully terminated, then that would be the end of [the plaintiff’s] damages claim. But if it was not, then the question of the proper assessment of damages would remain. That would involve working out the extent of compensation required to place [the plaintiff] in the position in which she would have been if the contract had been performed according to its terms. Amongst other issues, it would be necessary to make an assessment of the value of the commission income which would have been earned over the remaining 5-year contract term and whether any regard should be paid to the possibility of a further earnings from the business beyond the initial contract term. That issue raises questions whether the option should be regarded as a valuable contractual right; whether it would have been exercised; and, if not, whether there would have been a further contract term. The defendants contend the option had no value because the option was uncertain and unenforceable, and in any event depended upon them wanting to sell. They contended that there would have been no further contract term. In that context, it might become necessary to determine an argument which [the plaintiff] advanced, namely that there was implied into the contract, as a matter of necessity and to give efficacy to it, a term to the effect that for so long as the business continued, [the first and second defendants] would ensure that the Event Space remained available to the business.”

14. [14]
    Ultimately, I concluded that the plaintiff’s damages claims must fail because the first and second defendants were entitled to exercise the contractual right to terminate, the business not having achieved the contractually stated revenue goal of $250,000 within the contractually stated period: see Toohey v Golder at [83] to [112].   But reaching that result was not straightforward either.  It required an examination of the correctness of the negative adjustments made by the defendants’ accounting expert to the calculations made by the plaintiff’s accounting expert; accepting two of those adjustments and rejecting one; and reaching a conclusion that the proper analysis was that the plaintiff fell about $19,000 short of reaching the contractual goal.   Based on that calculation, I concluded that the plaintiff’s damages claim failed. 
15. [15]
    That meant that the only part of her claim on which the plaintiff succeeded was her claim for unpaid commissions.   In that regard, she had advanced a GST inclusive claim for $28,035.67 and obtained a GST inclusive judgment only for $18,668.07.

The interest award

16. [16]
    In their written submissions addressing the appropriate award for interest, the parties approached the question by the application of a different starting date.  However in their reply submission the defendants suggested that given the very small size of the difference between their respective calculations, it was prepared to accept the plaintiff’s methodology.
17. [17]
    Accordingly, I have adopted the plaintiff’s starting date, and used the Court’s website interest calculator by inputting the following variables:

    1. (a)
       The judgment amount;
    2. (b)
       Date interest calculated from: 1 February 2016;
    3. (c)
       Date interest calculated to: 20 May 2022;
    4. (d)
       Interest rate used: Reserve Bank of Australia Pre-judgment rate.
18. [18]
    The calculated interest payable is $5,575.56.

The issues which arise out of the parties’ written submissions.

19. [19]
    Having regard to the written submissions which have been filed in relation to costs, the following issues may be identified as necessary for resolution:

    1. (a)
       What is the effect on the exercise of the discretion as to costs of the plaintiff’s failure to accept either of the two Calderbank offers which were made by the defendants?
    2. (b)
       Should the Court make an order changing what would otherwise be the impact of r 697 of the Uniform Civil Procedure Rules on the nature of any costs order which should be made in favour of the plaintiff and, if so, in what way?
    3. (c)
       Having regard to the extent of the issues on which the plaintiff succeeded and those on which she failed, is it appropriate to limit the plaintiff to recovering only a percentage proportion of the costs of the claim and, if so, what percentage?
20. [20]
    I address those issues under separate headings below.

The significance of the Calderbank offers

21. [21]
    On Monday 2 November 2020, the defendants’ solicitors delivered an offer to settle explicitly couched as one sent “in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333.”  The offer was stated to be “open for written acceptance until 4:00pm on Friday 6 November 2020, after which time it will immediately lapse and not be capable of acceptance.”
22. [22]
    The main operative terms of the offer were these:

“Our clients accept that a trial of the matter will require each party to incur substantial costs, and there are inherent risks in all litigation. It is for these reasons that our clients have instructed that they are prepared to settle the entire proceeding, including the counterclaim, on the following basis:

1. That the defendants and defendant added by counterclaim (Defendants) pay the plaintiff the sum               of $50,000 inclusive of interest and costs within 28 days of acceptance of the offer.

2. That the plaintiff discontinue her claim.

3. That the Defendants discontinue the counterclaim.

4. That each party bear their own costs of the claim and counterclaim, including reserved costs.

5. That the plaintiff and Defendants release each other from any and all causes of action related or               incidental to the fact, matters and circumstances the subject of the claim and counterclaim.”

23. [23]
    The plaintiff did not accept the offer within the time it was open and it lapsed. 
24. [24]
    At some time before Tuesday 10 November 2020, the plaintiff’s counsel communicated a counteroffer to the defendants’ counsel to settle for the sum of $200,000. 
25. [25]
    By letter dated 10 November 2020, the defendants’ solicitors responded, rejecting that offer.  The letter made a further offer to settle which was also explicitly couched as a Calderbank offer.  The main operative terms were the same as those of the defendants’ previous offer, save in these three respects:

    1. (a)
       the amount of the offer was increased to $70,000;
    2. (b)
       the offer was “open for written acceptance until 5:00pm on Wednesday 11 November 2020, after which time it will immediately lapse and not be capable of acceptance”; and
    3. (c)
       unlike the previous offer, the letter foreshadowed an intention to seek indemnity costs in these terms:

“For the avoidance of doubt, in the unfortunate event this further counter-offer is rejected, and the Supreme Court of Queensland later finds the offer was better than or equal to what your client ultimately obtains at the conclusion of the trial, we hold instructions to rely on this correspondence in support of your client paying our clients’ costs from the date of this letter on the indemnity basis.”

26. [26]
    The plaintiff did not accept that offer within the time it was open and it lapsed.
27. [27]
    By letter dated 17 November 2020, the plaintiff made her own offer, said to be in accordance with both the “offer to settle” part of the Uniform Civil Procedure Rules and the principles in Calderbank v Calderbank.  The relevant operative terms of the offer were these:

“We are instructed that our client is prepared to settle the entire proceeding on the following basis:

1. That the defendants and the defendant-added-by-counterclaim (Defendants) pay the plaintiff the               sum of $170,000 inclusive of interest and costs within 28 days of acceptance of this offer.

2. That the plaintiff discontinues her claim.

3. That the Defendants discontinue the counterclaim.

4. That each party bear their own costs of the claim and counterclaim, including reserved costs.

This offer is open for written acceptance for 14 days after the date of this letter, after which time it will immediately lapse and will not be capable of acceptance.

We are further instructed that this is our client’s final offer and that she will not accept anything less than the sum contained in this offer.”

28. [28]
    I summarised the relevant principles in relation to Calderbank offers deriving from judgments of intermediate courts of appeal in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2) [2020] QSC 323 at [8] to [14] in these terms (footnotes in original):

“The relevant considerations were identified in J & D Rigging Pty Ltd v Agripower Australia Limited [2014] QCA 23 at [5] to [6] per Holmes JA and Applegarth and Boddice JJ, and in Hadgelias Holdings and Waight v Seirlis [2014] QCA 325 at [11] to [12] per Holmes JA with whom Gotterson and Morrison JJA agreed.  In each case, the Queensland Court of Appeal followed the approach taken by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435. 

The following propositions may be distilled from those appellate decisions.

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.^[2] 

Second, the Court will depart from the usual rule where the circumstances of the case warrant that course.^[3]

Third, one feature which may justify a departure from the usual rule is the rejection of a Calderbank offer to compromise.^[4]  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.^[5]  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.^[6]

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”.^[7]  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.^[8]

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.^[9]  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.^[10]  Without being exhaustive concerning the considerations which should be taken into account, a court should ordinarily have regard to at least the following matters:^[11]

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.”

29. [29]
    The defendants invited me to conclude that having regard to those factors the plaintiff’s conduct in refusing to accept the offers which they had made should be regarded as so unreasonable as to warrant a costs order in their favour for the costs of the proceeding after 10 November 2020, on either the indemnity basis or the standard basis.
30. [30]
    I acknowledge that the terms of the offers were clear.  Further, they did offer a genuine compromise.  And though the first offer failed to identify the costs consequence of rejection, the second offer did.  Nevertheless, I am not persuaded to reach the conclusion that the plaintiff’s failure to accept either of the offers should be regarded as unreasonable, such as would warrant the making of such an order.
31. [31]
    At the time the offers were received, the pleadings had closed and disclosure was complete.  The matter was listed for trial in mid-February 2021, some 3 months away.  However, and notably, the plaintiff had served her expert report, but the defendants had not.  The plaintiff’s expert report supported a quantum significantly in excess of the amounts contained in either of the defendants’ offers, because it supported success on the threshold point, namely achieving the plaintiff having met the contractually stated revenue goal and then calculated the amount of lost earnings over the remaining contract period at $246,832.  Even accounting for the fact that in Toohey v Golder at [115] to [120] I suggested that adjustments would have to be made to that calculation had the plaintiff achieved the revenue goal, it seems likely to me that it would have been reasonable to conclude that if the plaintiff was able to overcome the threshold point, she would have been able to recover a claim for lost earnings for the remaining contract period which would have overtopped the amount of the offers.  Putting aside the question of the quantum of notionally recoverable costs, the assessment of prospects of beating the offers then turned on the prospects of success on the threshold point.
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 could 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 offers. 
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.  Particularly is that so in view of the very short time period during which the offers would remain open.  For the first offer that period was only 4 days and for the second offer it was only 1 day.  I reject the defendants’ submissions that I should regard those time periods as reasonable in all the circumstances.  I do not think the fact that there might have been subsequent negotiation or that the plaintiff’s counsel must have been involved in some way in assisting the plaintiff to respond to the offers makes good the defendants’ argument.
34. [34]
    I am further comforted in reaching the conclusion I have reached by the fact that the offers were made inclusive of costs of both claim and counterclaim, and it is difficult to reach a confident view on the quantum of those costs in such a way as would put me in the position to be confident that the result actually obtained would be less than the offer, even on the assumption that the only reasonable assessment of quantum was by reference to success on the outstanding commission claim only.  The defendants sought to do by quantifying what the costs entitlement would be if it was assessed on a particular Magistrates Court scale, but, as will shortly appear, that argument turned on my reaching a view as to the impact of r 697(2) which I am not prepared to reach.

The impact of r 697

35. [35]
    Rule 697 is, relevantly, in these terms:

“697  Costs of proceeding in wrong court

3. (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.

3. (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.

3. (3)
   ....

3. (4)
   ...”

36. [36]
    The defendants contended that by virtue of r 697(1), r 697(2) applied and there was no reason to exercise the power under to order otherwise.
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.
40. [40]
    I am prepared to make an order which would allow the plaintiff to escape the consequences of r 697(2).  However, it does not follow that the order which I make should be one which should allow the plaintiff’s costs to be assessed in the ordinary way as if the proceeding had been properly commenced and continued in the Supreme Court. 
41. [41]
    In my view it was never appropriate for this proceeding to be in the Supreme Court.  The only reason which could have justified that course was the extravagant quantum which the plaintiff placed on her damages claim by reference to the possibility of income being earned from the business beyond the contract term.  As to the strongly adverse view I had as to the merits of that claim, see the observations I made in Toohey v Golder at [121] to [126].  Having regard to the pleadings, but for advancing that case the proceeding would have been advanced in the District Court and then the counterclaim could also have been pursued in that court.
42. [42]
    I would order that the costs the plaintiff may recover must be assessed as if the proceeding had been started and continued in the District Court.

The assessment of the significance of the extent of success and failure by the plaintiff

43. [43]
    The principles which I will adopt here are those set out in Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39 per Bond J (with whom Sofronoff P and Callaghan J agreed) at [11] to [17]:

“The applicable general rule is that costs of a proceeding are in the discretion of the Court but follow the event unless the court orders otherwise: r 681 Uniform Civil Procedure Rules 1999 (Qld).  The rule which specifically relates to appeals is r 766(1)(d).  It provides that the Court may make the order as to the whole or part of the costs of an appeal it considers appropriate.  However that rule is not regarded as altering the general rule: see Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) [2009] QCA 239 at [3]–[4] and Allianz Australia Insurance Ltd v Swainson [2011] QCA 179 at [5].

The policy considerations which underly both rules are those McHugh J explained in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [67]-[68], namely:

“… the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour.  The principle is granted in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant.  Costs are not awarded to punish an unsuccessful party.  The primary purpose of an award of costs is to indemnify the successful party.  If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did.  As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved.  Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.”

The word “event” in the general rule is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding: Thiess v TCN Channel 9 Pty Limited (No 5) [1994] 1 Qd R 156 at 207–8; Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26 at 60-1 [82]–[84]; Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) at [3]–[7]; Allianz Australia Insurance Ltd v Swainson at [4]–[5].

It is important to recognise, however, that it does not follow from the foregoing that the application of the general rule should usually lead to costs orders which reflect different results on separate events or issues.  The Court is given a broad discretion and is specifically empowered to determine that some other order is more appropriate. 

In practice, courts often take the approach of identifying heads of controversy or “units of litigation” (rather than what might technically be regarded as issues on the pleadings) regarding success or failure on the head of controversy or unit of litigation as the criterion for awarding costs: see Thiess v TCN Channel 9 Pty Limited (No 5) at 207-8 and Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 168 at [1]. 

The general approach is that there must be special or exceptional circumstances to warrant depriving a successful party of its costs and the mere fact that the successful party has been unsuccessful on some issues will ordinarily not be sufficient to do so: Courtney v Chalfen [2021] QCA 25 at [5].  On an appeal, for example, where a party has succeeded on one of two ways to the same outcome, the Court of Appeal might well regard the costs of the second way on which that party failed as not so distinct conceptually or practically as to warrant making a costs order which reflected that party’s failure: Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd at [1].  On the other hand, one circumstance in which it might be appropriate to award costs of a particular question or part of a proceeding is where that matter is definable and severable and has occupied a significant part of the proceeding: see Courtney v Chalfen, in which the Court of Appeal referred with approval to the decision of McMurdo J (as his Honour then was) in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64 at [8]. 

Of course, it does not follow that an issues-based costs order should always be made in circumstances analogous to those described 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.  In this regard, in Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173, the New South Wales Court of Appeal observed at [9] where taking such an approach might result in a protracted assessment process:

“… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do (see Day v Humphrey [2018] QCA 321 at [13] per the court).  Such an assessment will, undoubtedly be ‘rough and ready’ (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]), and that is entirely permissible.””

44. [44]
    Regard to my reasons for judgment in Toohey v Golder reveals that, so far as the plaintiff’s claim is concerned, there were issues on which the plaintiff succeeded and issues on which she lost.
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 pre-incorporation 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.  And although the commission claim on which she succeeded was comparatively small, it did require an examination of all the invoices and the payments which had been made in order to calculate it successfully.  Accordingly, it would be wrong to associate with the issues on which the plaintiff failed all the costs of the expert reports and the time taken at trial in dealing with the experts.
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.
47. [47]
    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 I should make an order that the defendants would only be responsible for a proportion of the plaintiff’s costs of its claim.  I think that is the right course in this case.  The plaintiff suggested that the appropriate order was that the defendants pay 50% of the plaintiff’s costs, to be assessed on the standard basis.  The defendants suggested that that the order should make them responsible for only 10% of the plaintiff’s costs.  I think both sides have adopted a position too favourable to themselves.  Doing the best I can, and acknowledging the rough and ready nature of the assessment, the estimate which I make is the defendants should pay 40% of the plaintiff’s costs, to be assessed on the standard basis.

Conclusion

48. [48]
    The orders which should be made are those set out at [4] above.