ACN 131 110 220 Pty Ltd v Lakic and Anor (No.4)
[2017] VCC 464
•28 April 2017
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LIST
Case No. CI-15-00344
| ACN 131 110 220 PTY LTD | Plaintiff |
| v. | |
| BOGDANKA LAKIC and ZDRAVKO LAKIC | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 April 2017 | |
DATE OF JUDGMENT: | 28 April 2017 | |
CASE MAY BE CITED AS: | ACN 131 110 220 Pty Ltd v. Lakic & Anor (No.4) | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 464 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Costs – Calderbank offers – Offers made shortly prior to and during the trial – Offers open for acceptance for limited time – Offeree a self-represented litigant in poor health with many demands upon her by reason of the trial process – Offeree’s failure to accept the offers not “unreasonable” – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. McGirr | Wisewould Mahony |
| For the Defendants | No appearance |
HIS HONOUR:
1A hearing was fixed for 10 April 2017 to determine the issues relating to the costs of the proceeding. The first defendant, Bogdanka Lakic, sought an adjournment of the hearing because of her medical condition.
The adjournment application
2Mrs Lakic is very unwell. The present proceeding arises in relation to legal work performed by the plaintiff (“VCL”) after Mrs Lakic was involved in three motor vehicle accidents on 15 May 2000, 26 January 2002 and 12 September 2006. The injuries from which she presently suffers include the psychological aftermath of the accidents.
3Justice Rush on 20 June 2014 awarded Mrs Lakic damages of $838,802 in respect of the injuries she suffered in the first accident. Justice Rush considered that 90% of Mrs Lakic’s injuries were attributable to the first accident.
4Dr Michael Piperoglou has been Mrs Lakic’s treating psychiatrist for many years. In a report dated 15 March 2017, he diagnosed Mrs Lakic as suffering “residual features of post-traumatic stress disorder, a major depressive disorder and generalised anxiety disorder with panic attacks”. Dr Piperoglou considers that Mrs Lakic is “unfit to attend court and even to instruct… solicitors” and states that she is “not coping well with the stress of having to attend and prepare for court procedures”.
5Various other medical reports have been provided, including from Mrs Lakic’s long time treating general practitioner, Dr Mladen Brkic. In a recent report, Dr Brkic described Mrs Lakic as having “a severe debilitating illness involving features of a post traumatic stress disorder, a major depressive disorder and a generalised anxiety disorder with significant somatic symptoms and associated chronic pain syndrome”. Dr Brkic said that Mrs Lakic “remains incapable of conducting her affairs for the foreseeable future”.
6There is no reason for me to doubt the diagnoses or the significant burden the various court cases has placed on Mrs Lakic. However, there are other matters I must consider, including the desirability of finalising the present proceeding, or at least the issues that were raised in the trial in May 2016.
7Mrs Lakic appeared before me last on 14 February 2017 when I determined the issue of interest and put in place a process for the resolution of the issues of costs. This involved:
a.VCL filing and serving written submissions on 10 March 2017;
b.Mrs Lakic filing and serving written submissions by 7 April 2017;
c.the further hearing on 10 April 2017.
8On 24 February 2017, Mrs Lakic wrote to the Court as follows:
“I am advising the Court and the plaintiff that I was not able to complete the requests made due to my health issues and was not successful in obtaining legal assistance from a solicitor to assist me with this. Due to my health circumstances, I will not be able to attend the scheduled Court hearing today. Please find attached my medical certificates”. Attached were short certificates from Dr Brkic dated 31 January 2017 and from another general practitioner, Dr Geoffrey Hanson dated 24 January 2017.
9At my direction, a letter was sent to Mrs Lakic and the other parties on 27 February 2017. The letter referred to the following matters:
a.it detailed the process for determining the costs issues in the proceeding;
b.it indicated that the hearing on 10 April 2017 may proceed in the absence of Mrs Lakic;
c.these processes would not be varied “simply on the basis of the brief medical reports included with Mrs Lakic’s email”;
d.if Mrs Lakic wished to alter the directions for filing submissions or to adjourn the hearing date, she “should support her application with material, including if possible comprehensive medical reports, which give consideration” to various matters;
e.these matters included:
i.the fact that Mrs Lakic had, in the previous year, participated in two major trials and a number of directions hearings;
ii.the issues raised by the proceedings as set out in various reasons for judgment that had been delivered; and
iii.the possibility that the hearing on 10 April 2017 may finalise all the outstanding issues in the proceeding.
10Mrs Lakic’s application for the adjournment of the hearing on 10 April 2017 was served on 7 April 2017 and attached the report of Dr Piperoglou dated 15 March 2017, a short statement of Mrs Lakic and a collection of court orders and reasons for judgment from this proceeding, the Supreme Court proceeding against Stephen Prior determined by Macaulay J on 30 May 2016 and an unrelated decision of VCAT concerning Mr Bektas, the principal of VCL.
11At the hearing on 10 April 2017, the plaintiff was represented. Mrs Lakic and her husband Zdravko Lakic did not attend. The plaintiff had previously filed and served written submissions on the issues of costs on 10 March 2017. At the hearing on 10 April 2017, the plaintiff’s solicitor Mr McGirr made submissions opposing the adjournment application. Mr McGirr also made whatever further submissions the plaintiff wished on the costs issues.
12I have decided that the adjournment application by Mrs Lakic should be refused and I should proceed to determine the costs issues. The reasons for refusing the adjournment application are as follows:
a.Mrs Lakic was a cross claimant in the present proceeding. She was the plaintiff in the Supreme Court proceeding against Mr Prior;
b.in the present proceeding, Mrs Lakic demonstrated considerable application and competence in pre-trial hearings during 2015 and during a lengthy trial and at subsequent hearings during 2016 and into 2017;
c.these hearings followed the trial before Rush J in 2014 and hearings before Judge Saccardo and Judge Kings in 2012;
d.the issues of costs should be determined by me. I reserved the costs of pleading summonses I heard in late 2015 and early 2016. The costs of the trial in May 2016 and the hearings before me since then raise complex issues which I am best placed to determine;
e.it is possible that further issues may need to be decided in the proceeding, particular as I previously permitted VCL to amend its statement of claim to raise a claim pursuant to section 172 of the Property Law Act 1958. Even if I am unable to decide those further matters, they will be efficiently managed and determined by another judge;
f.my commission as a judge terminates on 11 June 2017, and if at all possible, the issues of costs should be determined by me before that date;
g.the present material in support of an adjournment is inadequate. The submissions by Mrs Lakic and the medical reports fail to address the matters raised in the letter from the Court to Mrs Lakic dated 27 February 2017;
h.no explanation has been given as to why those matters were not addressed by Mrs Lakic or by the reporting doctors, particularly whether the conclusion of the present proceeding would assist in ameliorating the stresses on Mrs Lakic;
i.the application was made late. Essentially, the only further information was the report from Dr Piperoglou dated about 3 weeks earlier;
j.no explanation has been offered by Mrs Lakic as to why she has been unable to secure legal representation. In previous hearings, Mrs Lakic indicated, from time to time, that she had access to legal advice or would engage lawyers;
k.the determination of the costs issues, so far as Mrs Lakic is concerned, would not necessarily be assisted by a delay to permit Mrs Lakic, or lawyers on her behalf, to make further submissions.
Costs issues
13The costs issues which require determination are as follows:
a.whether the costs reserved during pre-trial hearings in late 2015 and early 2016 should be paid by Mrs Lakic;
b.whether VCL’s costs of the proceeding after 22 February 2016 should be paid on an indemnity basis by Mrs Lakic because she included an unwarranted allegation of fraud in her further amended defence and counterclaim;
c.whether Mrs Lakic should be paid the costs of her counterclaim, and whether she unreasonably failed to accept written offers made by VCL on 5 and 13 May 2016;
d.whether VCL’s entitlement to costs should be affected by the application to further amend the statement of claim made near the end of the trial;
e.the costs of the hearings following the trial, including those arising from the plaintiff’s applications for a freezing order, for preliminary discovery and to further amend the claim to add further members of Mrs Lakic’s family as parties and to seek relief pursuant to section 172 of the Property Law Act 1958.
Costs reserved of pre-trial hearings
14VCL seeks the costs of pre-trial hearings on 5 November and 11 December 2015 and 22 January 2016. The costs of each of these hearings were reserved.
15However, as I noted in orders I made on 22 January 2016:
a.VCL’s “application to strike out [Mrs Lakic’s] defence and counterclaim was made by [VCL’s solicitors’] letter dated 7 October 2015 and has been dealt with on 5 November and 11 December 2015 and 22 January 2016;
b.the costs were reserved, “including [for] further argument” as to whether those costs are costs “occasioned by the amendment [to the defence and counterclaim] as provided for in Rule 63A.17(2)”.
16The following is a chronology of the court documents relevant to Mrs Lakic’s defence and counterclaim:
Date Documents 20 January 2015 VCL’s writ issued. 24 May 2015 Mrs Lakic’s defence (without counterclaim). 6 August 2015 Order of Judicial Registrar Burchell – Mrs Lakic to file and serve an amended defence and counterclaim by 9 September 2015. 9 September 2015 Amended defence and counterclaim. 5 November 2015 Order of Judge Anderson – amended defence and counterclaim struck out. Leave to file a proposed further amended defence and counterclaim by 7 December 2015. 6 December 2015 Proposed further amended defence and counterclaim. 11 December 2015 Order of Judge Anderson – areas indicated where Mrs Lakic would be permitted to pursue a counterclaim. Leave to file a further proposed further amended defence and counterclaim by 19 January 2016. 18 January 2016 Proposed further amended defence and counterclaim. 22 January 2016 Order of Judge Anderson – certain paragraphs of the proposed further amended defence and counterclaim struck out. 22 February 2016 Further amended defence and counterclaim. 17Following service of the amended defence and counterclaim on 9 September 2015, VCL made application to strike out the pleading on the basis that it “may prejudice, embarrass or delay the fair trial of the proceeding; or… is otherwise an abuse of the process of the Court”. VCL’s submissions described the document as “a rambling narrative of the history of [Mrs Lakic’s] circumstances and Court proceedings mixed with details of matters relating to her husband which fail to articulate a defence to [VCL’s] claim or a case against [VCL] on the counterclaim”.
18At the hearing on 5 November 2015, I ordered that the amended defence and counterclaim dated 9 September 2015 be struck out. I noted that this order was made because, in respect of the proceeding:
“a. it includes a counterclaim on behalf of the defendant’s husband which has no apparent relationship to any defence or counterclaim of the defendant;
b. it does not raise matters which indicate that there is a defence to the plaintiff’s claim;
c. it does not plead a counter-claim in negligence which demonstrates:
i.specific acts or omissions by the plaintiff constituting a breach of the duty of care the plaintiff owed as the defendant’s solicitor;
ii.that she suffered a specific loss as a result of any breach of duty by the plaintiff”.
19I also recorded in the order that Mrs Lakic had “informed the Court that she will seek the assistance of lawyers as soon as possible to help her prepare the proposed further amended defence and counterclaim” she was directed to file and serve by 7 December 2015. VCL was also given leave to further amend its statement of claim upon it filing certain further material.
20Mrs Lakic filed and served a proposed further defence and counterclaim. VCL contended that the document contained “a narrative of events without articulating how most of those events give rise or contribute to a cause of action [and that the pleading sought] to include a claim for losses suffered by persons who are not parties to the proceeding”. Specific objection was taken to a large number of paragraphs in the proposed pleading.
21At the hearing on 11 December 2015, the orders noted that Mrs Lakic’s proposed further amended defence and counterclaim would “not be allowed to stand” as her pleading. It was also recorded that Mrs Lakic had informed the Court that her intention was to “engage solicitors professionally as soon as possible to undertake the task of preparing a further proposed amended defence and counterclaim and to be represented at the adjourned hearing”.
22The orders also recorded the four areas which Mrs Lakic informed the Court gave rise to the counterclaim in negligence which she wished to pursue against VCL.
23Mrs Lakic filed a further proposed defence and counterclaim which was considered at a hearing on 22 January 2016. Mrs Lakic informed the Court at the hearing that the proposed pleading had been prepared by Mr J Levine of counsel, although the pleading was signed by Mrs Lakic personally and not by counsel.
24I noted in the order I made on 22 January 2016 that “certain allegations included in the defence and counterclaim dated 18 January 2016 are unsupported by any factual basis or are not claims previously foreshadowed by the defendant, particularly during the hearing on 11 December 2015 as recorded in paragraph 2(d)(ii) of the order, or are lacking particulars or rely upon the filing of expert reports in circumstances where no directions for the filing of expert reports have been made”. I struck out a number of paragraphs in the proposed pleading. In respect of allegations in other paragraphs, I limited the scope of the matters pleaded. I also ordered Mrs Lakic to provide further and better particulars of a number of allegations.
25I ordered Mrs Lakic to file and serve “a further amended defence and counterclaim in the form of the proposed defence and counterclaim dated 18 January 2016 with the paragraphs in the pleading as referred to in paragraph 2 of this order as to be struck out, deleted”. The further amended defence and counterclaim was filed by Mrs Lakic on 22 February 2016.
26The following matters are relevant to the determination of the issue of the costs reserved at the hearings on 5 November and 11 December 2015 and 22 January 2016:
a.the principal matter considered at each hearing was the sufficiency of the documents as an articulation of Mrs Lakic’s defence and counterclaim;
b.other matters were considered at the hearings, including, on 5 November 2015, VCL’s application to amend its statement of claim;
c.at the hearings in November and December 2015, Mrs Lakic informed the Court that she would obtain professional assistance by engaging counsel to draw the proposed amended pleading. After the first hearing, this was apparently not done. After the second hearing, the further draft was “ghosted” by counsel. It did, however, contain matters which should never have been included in a pleading required to be supported by appropriate certification under the Civil Procedure Act 2010;
d.by operation of Rule 63A.17(2), Mrs Lakic would ordinarily be required to pay VCL’s costs “occasioned by the amendment” to her defence by the delivery of the amended defence and counterclaim dated 9 September 2015 and the further amended defence and counterclaim dated 22 February 2016;
e.Mrs Lakic was ultimately successful in respect of the following elements of her counterclaim:
i.the claim that VCL was negligent by its failure to pursue claims in respect of the second and third accidents;
ii.the claim that VCL had been negligent in its conduct of the defence of the Magistrates’ Court proceeding brought by Mr Prior;
f.those issues were articulated in each version of the defence and counterclaim (in varying degrees of sufficiency). It was apparent, therefore, that these were always matters of complaint by Mrs Lakic about VCL. The first of the matters was specifically referred to in the order dated 11 December 2015 as a matter in respect of which Mrs Lakic would be permitted to counterclaim;
g.VCL amended its statement of claim on 18 November 2015 and sought to further amend the pleading on 20 May 2016 at the end of the second week of the trial. Although I did not consider it was necessary to decide the issue, I analysed the basis of the unamended claim in some detail in my reasons for judgment. It is unlikely that VCL would have succeeded on its claim for the costs of the serious injury application determined by Judge Saccardo, if VCL’s application for leave to amend made late in the trial had not been allowed;
h.similarly, VCL would have been unlikely to have succeeded in its claim for its costs of the extension of time application determined by Judge Kings, if Justice Macaulay had not included those costs in the damages awarded to Mrs Lakic on her counterclaim in the Supreme Court proceeding initiated by Mr Prior.
27In view of the other decisions I propose to make in relation to the costs of the proceeding, I consider that the appropriate orders in the circumstances are:
a.to otherwise order pursuant to Rule 63A.17(2) that in respect of the opposite party’s costs occasioned by the filing and service of the following amended pleadings, there shall be no order as to the costs of:
i.the first defendant’s amended defence and counterclaim dated 9 September 2015;
ii.the plaintiff’s further amended statement of claim dated 18 November 2015;
iii.the first defendant’s further amended defence and counterclaim dated 22 February 2016;
iv.the plaintiff’s second further amended statement of claim in the form of the document dated 20 May 2016;
b.as for the costs of and incidental to the directions hearings on 5 November and 11 December 2015 and 22 January 2016, there shall be no order as to those costs.
Fraud allegation in Mrs Lakic’s further amended defence and counterclaim
28VCL submitted that as a consequence of an allegation of fraud made by Mrs Lakic in paragraph 16 of her further amended defence and counterclaim dated 22 February 2016, an indemnity costs order should be made in favour of VCL, from that date.
29Paragraph 16 of the pleading was a response to allegations in VCL’s statement of claim concerning the rendering of an account by VCL for the party-party costs and disbursements of the serious injury application determined by Judge Saccardo, and Mrs Lakic’s failure to pay the account.
30Paragraph 16 of the further amended defence and counterclaim reads as follows:
“The defendant denies paragraphs 13-15 and she states that the accounts are not due and payable, and/or that the plaintiff has already been paid as the plaintiff was paid the settlement sum of $848,350.67, from which they remitted the sum of $728,000 to the defendant, and wrongly retained the difference for their costs and disbursements”.
31VCL filed a reply and defence to counterclaim dated 7 May 2016, pursuant to leave granted on 9 May 2016, the first day of the trial. By paragraph 16 of the pleading, VCL denied “the allegations in paragraph 16” of the further amended defence and counterclaim, stating:
“a. the plaintiff was mistakenly paid the sum of $689,824.83 by the TAC on 3 July 2014;
b. the TAC paid the defendant shortly thereafter;
c. the plaintiff refunded the sum of $689,824.83 to the TAC on 31 July 2014”.
32VCL provided particulars of “an email trail from TAC dated 31 July 2014 confirming the TAC’s error and … a copy of the trust matter ledger dated 18 January 2016” confirming “the plaintiff’s repayment”.
33At the trial, these documents were tendered in evidence. In addition Mrs Lakic, at the request of VCL’s counsel, produced a letter from Centrelink to her dated 29 July 2014 which referred to “the recovery of $122,986.17 from your lump sum compensation payment”. Mrs Lakic had conceded in cross-examination that in relation to the sum of $122,986.17 “from your Supreme Court judgment moneys”, that “Centrelink sent me a letter saying that they did the calculation and they received that money”.
34Accordingly, there was no substance in the allegation made in paragraph 16 of the further amended defence and counterclaim. VCL submitted that paragraph 16 contained an “allegation of fraud” as the paragraph alleged “accusations of very serious breaches of ethical conduct, or [of] deceit, trickery, sharp practice or breach of confidence, by which it is sought to gain some unfair or dishonest advantage”.
35VCL referred to the following aspects of Mrs Lakic’s conduct:
a.Mrs Lakic had been “aware from 29 July 2014 that Centrelink retained the difference between what was paid by the TAC pursuant to the judgement by Justice Rush”. It was said that this demonstrated that “the allegation was clearly put without proper basis”;
b.Mrs Lakic had made “an allegation known to be false, that [VCL] is guilty of fraud”;
c.Mrs Lakic had on 2 May 2016, signed certificates under the Civil Procedure Act 2010, including a “proper basis” certificate in respect of the further amended defence and counterclaim;
d.the Centrelink letter dated 29 July 2014 was not produced by Mrs Lakic until late in the trial when she was requested by VCL’s counsel to do so;
e.Mrs Lakic did not at any stage seek to withdraw the pleading;
f.there were other relevant circumstances, as referred to by Harper J in Ugly Tribe v Sikola [2001] VSC 189 at [15], including:
i.“making an irrelevant allegation of fraud”;
ii.“continuation of proceedings in wilful disregard of known facts”;
iii.“the failure … without explanation to discover documents … which would have considerably shortened and very possibly avoided, the trial”.
36It is likely, in my view, that paragraph 16 can be regarded as containing an allegation of fraud; that notwithstanding having deducted its costs from the moneys paid to it by TAC in satisfaction of the judgment of Rush J, VCL was unjustifiably pursuing those costs against Mrs Lakic in the present action.
37However, even if that were so, I do not consider that the circumstances justify the making of a special costs order in favour of VCL. I refer to the following matters:
a.paragraph 16 was only introduced into Mrs Lakic’s defence and counterclaim in the version apparently drafted by Mr Levine of counsel;
b.the “proposed” further amended defence and counterclaim dated 18 January 2016, contained paragraph 16;
c.at the hearing on 22 January 2016, the Court considered each of the paragraphs of the proposed pleading which VCL’s counsel considered should be struck out. This included paragraphs 9 and 10 of the defence, but apparently not paragraph 16;
d.it is likely that counsel who drafted the proposed pleading misunderstood or did not adequately check the instructions given by Mrs Lakic. Another example of this was paragraph 10 of the proposed defence which asserted that VCL “accepted instructions to act on behalf of the TAC before Judge Kings in Lakic v TAC [2012] CC 1530 [on the basis] that the front sheet of the judgment … refers to [VCL] as acting on behalf of the TAC”. This was obviously an error;
e.whilst it is desirable that unrepresented litigants have the assistance of pro bono lawyers, it is not appropriate for counsel to “ghost” pleadings without accepting responsibility for their contents;
f.the inappropriateness of paragraph 16 was not highlighted by VCL until it filed a reply and defence to counterclaim at the commencement of the trial;
g.at the trial, the issue of whether VCL had retained the costs it sued for in the proceeding from the proceeds of the judgment was a very minor matter, dealt within minutes both in evidence and submissions;
h.insofar as VCL submitted that “the Court was forced to adjudicate upon” the issue, that is a clear overstatement.
38In my view, these matters do not justify the making of a special costs order in VCL’s favour. It has not been established that Mrs Lakic’s behaviour demonstrated the sort of lack of honesty or misconduct that would warrant an order for indemnity costs.
39Mrs Lakic had been urged by the Court at the hearing on 5 November and 11 December 2015 to retain lawyers to assist her to draft an appropriate defence and counterclaim. At the hearing on 22 January 2016, the excesses of the pleading apparently drafted by counsel were removed, where those matters were raised by VCL’s counsel. Unfortunately, paragraph 16 remained in the pleading.
40The issue was not then raised until trial, when VCL sought leave to file a reply and defence to counterclaim out of time. The issue was speedily resolved at trial.
41Paragraph 16 does not use the sort of language that often is involved in an allegation of fraud. The pleading simply alleged that VCL “wrongfully retained [from the settlement sum] the difference for their costs and disbursements”. Although it is alleged that the retention was “wrongful”, that was not the allegation of fraud (or indeed “wrongful” conduct), but simply the circumstances which may have made the pursuit of the costs in the proceeding, improper.
42It is unlikely that the issue caused any embarrassment to VCL. By the time the matter came to trial, VCL had not practiced as a lawyer since February 2015 and the plaintiff’s name had been changed to its ACN number.
Mrs Lakic’s counterclaim and the plaintiff’s offers of compromise
43On 14 February 2017, I entered judgment for Mrs Lakic on her counterclaim for $29,318.93, including statutory interest of $4,096.41.
44VCL, as the defendant to counterclaim, made two Calderbank offers, as follows:
a.on 5 May 2016, VCL offered to pay Mrs Lakic “$35,000 in full and final settlement of the counterclaim [together with Mrs Lakic’s] costs of and incidental to the counterclaim to be taxed in default of agreement”. The offer was sent by post to Mrs Lakic and by email to Mrs Lakic’s son Boris, and was “open for acceptance until 10:30am on Monday, 9 May 2016”;
b.on 13 May 2016, VCL offered to pay Mrs Lakic, “$65,000 in full and final settlement of the counterclaim [together with Mrs Lakic’s] costs of and incidental to the counterclaim to be taxed in default of agreement”. The offer was sent by email to Mrs Lakic’s two sons, Boris and Njegos, and was “open for acceptance until 2:00pm on Monday, 16 May 2016”.
45Each offer was by letter from VCL’s solicitors. The letters set out the basis for the solicitors asserting the “reasonableness of our client’s offer” and stated that, in the appropriate circumstances, an application would be made for an order for “costs on a solicitor/client basis and/or indemnity basis from the date of this letter”.
46The trial commenced on Monday, 9 May 2016. The first offer was served on Thursday, 5 May 2016 at a time which is unclear from the material. As well as the email to Boris, the solicitors’ letter was sent by post. The use of Boris’s email was recognised previously, by the parties and the Court, as an efficient means of forwarding documents in the proceeding to Mrs Lakic. Boris was either living with his parents or, if not, was in frequent contact with them. Boris had also provided considerable assistance to his mother as an informal translator of documents, as Mrs Lakic’s proficiency in written and even spoken English was very limited.
47However, some allowance should be made for the fact that Mrs Lakic may not immediately have received the offer and it may have taken some further time to have the document properly translated before she could consider its contents.
48On 9 May 2016, a number of preliminary issues were dealt with at the commencement of the trial, involving Mrs Lakic making submissions on those matters. The submissions by plaintiff’s counsel, discussions between the Court and Mrs Lakic and the evidence of witnesses was interpreted for Mrs Lakic from English to Serbian by an experienced interpreter.
49Mr Bektas commenced his evidence on the first morning of the trial. Mrs Lakic did not commence her cross-examination of Mr Bektas until the morning of Wednesday, 11 May. On the first day of trial, Mrs Lakic produced her 5 volume court book and was given a copy of VCL’s 3 volume court book.
50The second offer was made on Friday, 13 May 2016 at a time which is unclear. From the face of the solicitors’ letter, the offer appears to have only been served by email to the addresses of each of Mrs Lakic’s sons, Boris and Njegos.
51On Wednesday 11 May 2016, Mrs Lakic cross-examined Mr Bektas all day. On Thursday, 12 May, evidence was given by a former VCL solicitor. He was cross-examined by Mrs Lakic for more than 2 hours in the afternoon. On Friday, 13 May, a second former VCL solicitor, gave evidence. She was cross-examined by Mrs Lakic for about 3.5 hours.
52On Monday 16 May 2016, Mrs Lakic concluded her cross-examination of Mr Bektas. Mr McGregor closed VCL’s case at about 2.30pm. Shortly afterwards Mrs Lakic commenced her evidence. Her evidence in chief continued throughout Tuesday, 17 May and concluded early on the morning of Wednesday 18 May. Mr McGregor’s cross-examination continued until the afternoon of Thursday 19 May.
53In these circumstances, I consider that it was not unreasonable for Mrs Lakic to have not accepted either of the offers made by VCL in respect of the counterclaim. I have applied the principles enunciated by the Court of Appeal in Hazeldene’sChicken Farm Pty Ltd v. Victorian WorkCover Authority (No.2) [2005] VSCA 298.
54The principal reasons for my decision are as follows:
a.Mrs Lakic was an unrepresented litigant, in poor health and with limited command of the English language;
b.the offers were made shortly prior to, and during, the trial at times when there was considerable pressure on Mrs Lakic to concentrate on preparation work and fulltime participation in the conduct of the trial or as a witness;
c.the scope of Mrs Lakic’s defence and counterclaim had, after two earlier hearings been finalised at the hearing on 14 February 2017 and by the delivery of the further amended pleading dated 22 February 2017;
d.it is not apparent why VCL delayed making settlement offers until shortly before and during the trial when some days or weeks prior to the trial would have provided a more realistic opportunity for Mrs Lakic to consider the offers;
e.the matters advanced by VCL’s solicitors as to why Mrs Lakic should accept the “reasonableness” of the offers were not fully convincing, particularly in view of the determination at trial of the issues raised by the counterclaim;
f.the time allowed for Mrs Lakic to accept the offers was inadequate. The offers were made at inappropriate times, considering the circumstances, particularly as regards Mrs Lakic. There was little reason, at that time, for Mrs Lakic to lack confidence in her prospects of succeeding on her counterclaim.
VCL’s application at trial to further amend its statement of claim
55Mrs Lakic engaged VCL on a “no win no fee” basis. This was reflected in the costs agreement Mrs Lakic signed on about 31 March 2009. In the circumstances, the bases upon which VCL might recover legal costs against Mrs Lakic were limited.
56By the statement of claim attached to the writ, VCL sought to recover the party-party costs of the successful serious injury application determined by Judge Saccardo, in the sum of $161,999.62.
57The basis of the claim was that:
a.Mrs Lakic had on 22 August 2013, in breach of the costs agreement, “refused the reasonable advice of [VCL] and advised that she had sought to engage other solicitors” with respect to her damages claim;
b.Mrs Lakic had on a date unknown contacted the TAC and withdrawn instructions she had previously given to VCL to recover costs and disbursements from the TAC, without informing VCL.
58By an amended statement of claim dated 13 July 2015 filed pursuant to Rule 36.03(a), VCL included a claim for its solicitor-client costs in the sum of $51,093.45 for the extension of time application determined by Judge Kings on 22 October 2012. No basis for the claim was pleaded, other than Mrs Lakic’s refusal of VCL’s reasonable advice.
59A further amended statement of claim was filed pursuant to leave granted on 5 November 2015. The amendments were limited to the change of name of the plaintiff and to reducing the amount of the claim.
60On 19 May 2016, on the ninth day of the trial, I raised with VCL’s counsel the basis upon which VCL brought its claim for legal costs. On 20 May 2016, VCL’s counsel indicated that application would be made to further amend its statement of claim and filed a proposed second further statement of claim. On 23 May 2016, VCL filed affidavit material in support of its application to amend its pleading. I reserved my decision as to whether leave would be granted.
61When I delivered judgment on 18 July 2016, I granted the leave sought by VCL to further amend its statement of claim. I did so in order to do justice between the parties and so that VCL could:
a.pursue against the TAC the costs order made by Judge Saccardo after the successful serious injury application;
b.recover the amount allowed by Macaulay J on Mrs Lakic’s counterclaim in the Supreme Court proceeding initiated by Mr Prior for the costs of the extension of time application determined by Judge Kings.
62The basis of my decision is set out in my reasons for judgment dated 18 July 2016. I analysed VCL’s previously pleaded claim in respect of both sets of costs. If I had needed to decide the issue, it is unlikely I would have concluded that VCL had satisfied the onus upon it of establishing a proper basis for charging those costs to Mrs Lakic, arising from a breach by her of the costs agreement.
63In relation to the costs of the successful serious injury application, I considered that I should make orders giving VCL the right to pursue Judge Saccardo’s costs order against the TAC. VCL would always have had that right in respect of its own costs pursuant to its solicitor’s “fruits of the action” lien, notwithstanding that the bill of costs also included some costs incurred whilst Prior & Prior, the solicitors acting for Mrs Lakic before VCL, had been acting for her (see Trkulja v. Efron & Associates [2014] VSCA 76 at paragraphs [32] to [34]).
64As it turned out, the TAC facilitated the process I had detailed in the orders made on 18 July and 28 October 2016 and readily reached agreement with VCL. As a result, a payment was made to the Court by the TAC and the distribution of that money was determined, partly by agreement and partly by court order.
65The issue of the costs of the extension of time application was determined on a different basis. VCL’s counsel, Mr McGregor, also appeared opposite Mrs Lakic (for Mr Prior) in the trial before Macaulay J. Mr McGregor informed me at some stage that there was the same professional indemnity insurer for both VCL (in respect of Mrs Lakic’s counterclaim in the present proceeding) and for Mr Prior (in defending Mrs Lakic’s claim in the proceeding determined by Macaulay J).
66In the trial before Macaulay J, Mrs Lakic claimed that she had been required to make an application pursuant to the Limitation of Actions Act 1958 for the extension of the time to bring a proceeding for damages as a result of the negligence of Prior & Prior in failing to protect her position. Mrs Lakic’s claim for damages against Mr Prior included the claim against Mrs Lakic by VCL for its solicitor-client costs of the extension of time application, made in this proceeding. There had not at that time been a determination of VCL’s claim.
67Nevertheless, Macaulay J awarded as damages against Mr Prior the whole of the amount claimed for that matter in this proceeding, together with interest. In those circumstances, it was incumbent upon me to ensure that those damages were passed on to VCL, whatever the basis of the claim. This was reflected in the judgment I ordered on 14 February 2017.
68VCL has had success in the action in the sense that it has recovered money and had a judgment entered in its favour; firstly in respect of the claim for its costs of the serious injury application, but only because of an amendment sought very late in the trial, and secondly in respect of the costs of the extension of time application, because of the damages awarded by Macaulay J in the Supreme Court proceeding.
69In his reasons for judgment, Macaulay J at paragraphs 126 and 127 stated, “VCL charged Mrs Lakic $51,093.45 for solicitor/client costs in relation to the s.23A application. Mr Prior said that if he had completed the application, his professional costs and disbursements would have been about $26,000. He argued that I should infer that Mrs Lakic had been overcharged. Even if that were so - and I make no finding that she was - that would not relieve Mr Prior, as the wrongdoer, of liability for the costs Mrs Lakic incurred, acting reasonably, to avoid a greater loss. Mr Prior did not satisfy me that Mrs Lakic acted unreasonably by engaging VCL to continue her s.23A application.
At the date of trial, it was evident that Mrs Lakic had still not paid VCL its costs and disbursements as VCL was seeking to recover them by action in the County Court. However, there being no evidence to establish that she is not liable for them, I am satisfied that Mr Prior is liable to compensate her for the amount she has been charged, namely $51,093.45”.
70I have, on a number of occasions since I delivered my reasons for judgment on 18 July 2016, alerted Mr McGregor and those instructing him to the fact that I considered the plaintiff’s application at trial to amend its statement of claim may be a matter to be considered in determining questions of VCL’s costs of the proceeding. Notwithstanding this indication, VCL did not present any submissions on this matter, either in Mr McGregor’s written submissions dated 9 March 2017 or in Mr McGirr’s oral submissions at the hearing on 10 April 2017.
Conclusions
71As a consequence, I consider that the most relevant matters I need to take account of in determining the questions of VCL’s costs of its claim and Mrs Lakic’s costs of her counterclaim, are as follows:
a.the resolution of issues relating to the form and content of Mrs Lakic’s defence and counterclaim were the primary focus of the directions hearings on 5 November and 11 December 2015 and 22 January 2016;
b.however, there were other matters discussed at those hearings, particularly on 5 November 2015, when VCL sought leave to change the name of the plaintiff and to amend its statement of claim;
c.most of the considerations at those three hearings related to Mrs Lakic’s counterclaim. It was apparent from the first version of her counterclaim, the general nature of the matters she wished to pursue. These were defined by me in the orders I made on 11 December 2015;
d.at trial, Mrs Lakic succeeded on her counterclaim in establishing that VCL had acted negligently in a number of respects. Although the quantum recovered was relatively small, it was clearly appropriate that the counterclaim had been heard at the same time as VCL’s claims, as the evidence was interrelated;
e.the offers to settle the counterclaim were not, in the circumstance in which they were made, unreasonably rejected by Mrs Lakic;
f.the “allegation of fraud” made in paragraph 16 of the second further amended defence and counterclaim was not such that it should affect any other order for costs;
g.although VCL has recovered significant sums as a consequence of the proceeding, those sums have not directly been paid by Mrs Lakic. The TAC paid the costs it had been ordered to pay by Judge Saccardo. Part of the costs order, paid by the TAC, has also benefited Mrs Lakic as it will be paid to Mr Prior to reduce the net judgment he obtained before Macaulay J, after Mrs Lakic’s judgment in that proceeding was set off against the existing Magistrates’ Court judgment;
h.judgment was entered for VCL for the costs of the extension of time application awarded to Mrs Lakic as damages by Macaulay J. Mrs Lakic’s damages on her counterclaim in this proceeding were set off against VCL’s judgment, leaving a net amount owing by Mrs Lakic to VCL of $32,050.56.
72Accordingly, I consider that the appropriate order as to the costs of the proceeding, including the counterclaim, is to make no order as to costs. In order to ensure that this principle is reflected in the orders in relation to the costs reserved for the pre-trial hearing in November and December 2015 and January 2016, and as a consequence of the various amendments to pleadings made by both sides, I will make further specific orders in relation to those matters.
Further conduct of the proceeding and post-trial hearings
73Since the trial of the proceeding there have been further hearings, as follows:
Date Details 18 July 2016 To hand down judgment. 21 October 2016 To make orders consequential upon the reasons for judgment. Mrs Lakic was unwell and left the court. Ex parte orders were made restraining dealings with the Ferntree Gully property. 28 October 2016 Continuation of the injunction. Orders in relation to the taxation of the costs order made by Judge Saccardo on the serious injury application in 2012. 11 November 2016 Continuation of the injunction and freezing order. Determination of the application for preliminary discovery. 14 November 2016 Continuation of the injunction and freezing order. 18 November 2016 Continuation of the injunction and freezing order. 14 December 2016 Continuation of the injunction and freezing order. 14 February 2017 Questions of interest determined. Judgment entered for VCL on the claim and Mrs Lakic on the counterclaim. 10 April 2017 To determine issues of costs. 74The proceeding has been broadened to include issues not directly related to the issues litigated at the trial in May 2016, as follows:
a.an application for a freezing order in anticipation of an order being made in VCL’s favour for the costs of the proceeding;
b.application for preliminary discovery by VCL against Mrs Lakic, Zdravko Lakic, Boris Lakic and Njegos Lakic in respect of the property at Ferntree Gully;
c.the joinder by VCL of Mrs Lakic’s husband Zdravko Lakic, as a defendant in a further claim pursuant to section 172 of the Property Law Act 1958 seeking to set aside a transfer of Mrs Lakic’s half interest in the property at Ferntree Gully into the sole ownership of Zdravko Lakic;
d.the contemplation by VCL of a further amendment to join Mrs Lakic’s sons, Boris Lakic and Njegos Lakic, in respect of a caveat lodged by them claiming an interest in a property at Ferntree Gully, presently registered in the sole ownership of Zdravko Lakic.
75As a consequence of the judgment of Macaulay J in the Supreme Court proceeding between Mrs Lakic and Mr Prior, orders were made as follows:
a.on 17 June 2016, by Macaulay J, as a consequence of his reasons for judgment delivered on 30 May 2016, following the trial in February 2016;
b.on 13 October 2016, by Riordan J restraining Mrs Lakic from transferring her interest in a property at Cranbourne to Zdravko Lakic;
c.on 7 April 2017, by Ginnane J in action no. SCI 2017 D1163, restraining Zdravko Lakic from dealing with the property at Ferntree Gully.
76It is appropriate that the parties in the present proceeding (VCL, Mrs Lakic and Zdravko Lakic) reassess their respective positions in light of the orders I propose to make following on from the hearing on 10 April 2017. I will require VCL to make clear to the other parties in writing what it proposes in relation to the present proceeding.
77A further direction hearing will be fixed, at which time the Court will determine the future conduct of the proceeding and if appropriate, the issues of costs arising from the various hearings following the trial in May 2016.
78In relation to the post-trial hearings, if the issues dealt with at a directions hearing were primarily involved with the consideration of issues arising from the trial, then in line with the orders made today relating to the pre-trial costs and the costs of the trial, no order for costs should be made.
79In respect of other matters, including the freezing order or other applications in anticipation of or in pursuance of execution, or to amend the proceeding to add parties and further causes of action, consideration will need to be given as to what is to happen with those claims and whether orders for costs should be made.
80In the meantime, it is appropriate that the injunctive relief which prevented Mrs Lakic and Zdravko Lakic from dealing with the property at Ferntree Gully should not be further extended. It seems that the orders in place in the Supreme Court will continue, for the foreseeable future, to preserve the present position.
81If the further hearing can take place before 2 June 2017, I shall hear the matter. Otherwise, another judge will need to conduct the hearing.
Orders
82In the circumstances, I will make the following orders:
1.The application by the first defendant to adjourn the hearing on 10 April 2017 is refused.
2.In respect of the costs of the proceeding, otherwise than as dealt with in paragraphs 3 and 4 hereof, up to and including the trial of the proceeding and the delivery of reasons for judgment on 18 July 2016, no order shall be made and each party shall bear their own costs, which in the plaintiff’s case shall include the transcript of the trial and the transcript of any hearing following the trial.
3.Otherwise order pursuant to Rule 63A.17(2) that, in respect of the opposite party’s costs occasioned by the filing and service of the following amended pleadings, there shall be no order as to the costs of:
a.the first defendant’s amended defence and counterclaim dated 9 September 2015;
b.the plaintiff’s further amended statement of claim dated 18 November 2015;
c.the first defendant’s further amended defence and counterclaim dated 22 February 2016;
d.the plaintiff’s second further amended statement of claim in the form of the document dated 20 May 2016;
4.As for the costs of and incidental to the directions hearings on 5 November and 11 December 2015 and 22 January 2016, there shall be no order as to costs and each party shall bear their own costs.
5.By 4pm on 12 May 2017, the plaintiff must file and serve upon the defendants and upon Boris Lakic and Njegos Lakic a written notice informing those parties of what it proposes in relation to:
a.the injunctive relief previously granted which prevented the defendants from dealing with the property at Ferntree Gully;
b.the proceedings contemplated against Boris Lakic and Njegos Lakic in respect of the caveat lodged in respect of the property at Ferntree Gully;
c.the claim pursuant to section 172 of the Property Law Act 1958 in respect of the transfer of the first defendant’s interest in the property at Ferntree Gully to the second defendant absolutely;
d.the costs of the post-trial hearings;
e. any further matter related to the proceeding or to any dispute between the plaintiff and the defendants.
6.There shall be a further directions hearing on 26 May 2017 to consider the further conduct of the proceeding and any outstanding costs issues.
7.Costs reserved.
8.Reserve liberty to apply.
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Certificate
I certify that the preceding 21 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 28 April 2017.
Dated: 28 April 2017
Mi-Lin Chen Yi Mei
Associate to His Honour Judge Anderson
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