and Sunland Group Limited (ACN 063 429 532) v Prudentia Investments Pty Ltd(ACN 091 390 742) Angus John Luxmore Reedmatthew James Joyce

[2013] VSCA 265

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0117

SUNLAND WATERFRONT (BVI) LTD
SUNLAND GROUP LIMITED
(ACN 063 429 532)

First Appellant
Second Appellant

v

PRUDENTIA INVESTMENTS PTY LTD
(ACN 091 390 742)
HANLEY INVESTMENTS PTY LTD
ANGUS JOHN LUXMORE REED
MATTHEW JAMES JOYCE

First Respondent

Second Respondent
Third Respondent
Fourth Respondent

S APCI 2012 0017

SUNLAND GROUP LIMITED
(ACN 063 429 532)

Appellant

v

PRUDENTIA INVESTMENTS PTY LTD
(ACN 091 390 742)
ANGUS JOHN LUXMORE REED
MATTHEW JAMES JOYCE

First Respondent

Second Respondent
Third Respondent

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JUDGES	WARREN CJ, OSBORN JA and MACAULAY AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	15 – 18 April and 29 July 2013
DATE OF JUDGMENT	26 September 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 265

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COSTS – Special costs orders – Where trial judge ordered that appellants pay respondents’ costs of the trial on an indemnity basis – Where appellants’ substantive appeal dismissed – Where appellants’ appeal against award of indemnity costs dismissed – Whether respondents entitled to costs of the appeal on an indemnity basis – Whether appellants should have known appeal had no chance of success – Whether costs to be awarded on a gross sum basis.

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Appearances:	Counsel	Solicitors
For the Appellants	Mr D O’Callaghan SC with Mr P Zappia and Mr S Monks	Thomsons Lawyers
For the First to Third Respondents	Mr J T Rush QC with Mr H R Carmichael	Herbert Smith Freehills
For the Fourth Respondent	Mr P W Collinson SC with Mr N D  Hopkins SC	Norton Rose

THE COURT:

1. On 6 September 2013 the Court delivered judgment in these matters.  The appeals were dismissed and an application to admit fresh evidence refused. The respondents seek costs against the appellants on an indemnity basis.  We will not revisit the primary reasons as they are sufficiently contained therein.[1]

   [1]Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237 (‘Primary Reasons’).

1. We turn then to the question of the nature of costs to be awarded against the appellants.  It is not suggested by Sunland[2] that costs in the ordinary way, that is party - party costs, should not be awarded against it. 

   [2]As no point is taken about any distinction between the appellants, Sunland Group Limited and its subsidiary Sunland Waterfront BVI Ltd, in these reasons, ‘Sunland’ is a reference to the relevant Sunland party or parties as appropriate.

1. The principles upon which a special costs order may be made are well established.[3]

   [3]See Colgate-Palmolive Co v Cussons Pty Ltd (1993) FCR 225; see also the various authorities referred to in Primary Reasons [538]-[551].

1. The first issue in applying the principles in this case is whether an award of indemnity costs in an appeal should follow as a matter of course if an appeal against a decision granting indemnity costs in respect of trial is unsuccessful. Though it may often follow, we do not consider such an award follows necessarily. Rather, it is a factor, albeit a significant one, to be weighed when exercising the discretion to make a special costs order in the appeal.

1. In our view, the question of whether a special costs order for costs in the appeal should be made turns on whether Sunland, having had the benefit of a trial judgment, knew or should have known that the appeal had no chance of success in the sense that (even if an incidental error in the reasoning was made out) it would be unable to alter the result below.

1. Sunland submits that the fact that, first there was no suggestion in this Court’s reasons that the appeal was hopeless and secondly that the appeal involved large and complex litigation, occupied four days of hearing time and the judgment was lengthy, all weigh against a special costs award being made.

1. The force of the first submission is greatly reduced given that this Court did not overturn the award of indemnity costs made by the trial judge. The second submission also is of minimal force since it was largely due to Sunland’s lengthy Notice of Appeal that the hearing and judgment were lengthy.

1. Sunland further submits that this Court’s reasons in some aspects differed from those of the trial judge, and identifies several examples. We are not persuaded that the examples given assist the appellants in establishing that their appeals had merit. The question is whether (even if in fact unsuccessful in the result) the appeals had a prospect of success. We consider that there is little to be gained by identifying features of the trial judge’s reasoning which were inconsistent, or differed from the reasoning of this Court unless those features disclose the kind of error that could have changed the result on appeal.

1. In order to succeed on its substantive appeal, Sunland needed to prove contrary to the findings of the trial judge that (1) the representations were made, (2) that they were false, (3) that they were relied upon and (4) that they caused loss. As we held, Sunland failed at the first hurdle.[4]

   [4]Primary Reasons [285].

1. Sunland sought to succeed on (1) by claiming that the trial judge wrongly confined Sunland’s case to one involving only a legally enforceable right to acquire land and, alternatively, that the trial judge failed to properly consider Sunland’s allegation of joint purpose. Sunland also challenged the trial judge's findings on the credit of its two principal witnesses.

1. This Court, in consideration of Sunland’s pleadings at trial held that Sunland’s pleaded case was that Reed or Prudentia represented that they had a legally enforceable right. The trial judge reached this conclusion.  However his Honour also discussed the possibility of a lesser right and found against Sunland on this case too. We found it was not necessary for the trial judge to address this case. We concluded:

One of the criticisms the trial judge made of Sunland’s case – fairly in our view - was its inability to identify what it meant by its own pleading.  His Honour described Sunland as having ‘floundered in describing the basis of its case’.[5]

[5]Primary Reasons [98].

1. The problem with Sunland’s pleading in this regard was identified by the trial judge and was not overcome on appeal. Even if Sunland succeeded in establishing that its pleading extended to a representation of a lesser right, the prospect of which in our view was highly unlikely, it would then need to establish that such a representation was false and that the representation of the lesser right was relied upon, the prospects of establishing which were also both highly unlikely.

1. This Court, like the trial judge, found that a representation that Reed or Prudentia had an enforceable right to acquire Plot D17 simply was not made and held that Sunland failed at the first hurdle.

1. The allegation of joint purpose, or ‘scheme evidence’ emerged three days before trial when Sunland sought to introduce an allegation of a secret commission, a criminal offence, in circumstances where the documents upon which the allegations were founded had been in the possession of Sunland for over twelve months.  The trial judge refused the amendment taking the view that the new matters amounted to a substantial new allegation of fraud.  Procedural fairness to the defendants would require an adjournment of the trial but for a variety of reasons adjournment of the trial was simply not a practical option.  Given the delay on the part of Sunland in making its application when it had the ability to make the application well in advance of the trial, his Honour refused the amendment.  Sunland did not appeal that decision.

1. We held:

A serious allegation of a covert payment of money to Joyce amounting to a secret commission (whether so identified or not) – either as evidence of joint purpose for the deceit claim or as evidence to aid a conclusion that Sunland was misled or deceived – had to be pleaded with adequate particulars.   For whatever purpose it might have been deployed, such an allegation was an allegation of fraud.  It was not pleaded.  Sunland attempted to amend its pleadings so as to properly raise the allegation, but it failed.  It could not be reintroduced under another guise.  Joyce and Prudentia were entitled to conduct their defence on the basis that the allegation was not to be the subject of evidence.[6]

[6]Primary Reasons [144].

1. In our view, the submission that the trial judge should have considered this evidence was hopeless.

1. Indeed, Sunland failed to establish on appeal any of the essential elements necessary to prove its claim. The reasons for this were various but fundamentally Sunland could not make good a case based upon the inconsistent and inadequate evidence of its own witnesses. The trial judge’s assessment of the evidence fell to be evaluated on appeal in circumstances where the trial judge had had the benefit of seeing those witnesses give evidence before him and the circumstantial evidence (including in particular matters such as prior inconsistent statements) did not in many respects support Sunland’s case. In our view the proposition that the trial judge was bound to accept the critical evidence of those witnesses was hopeless.

1. Sunland’s appeal was essentially a reiteration of its case at trial. It listed 67 grounds of appeal with additional sub-grounds challenging nearly all of the trial judge’s findings. This adds weight to the claim that in the circumstances the trial judge’s finding that ‘Sunland commenced and continued the proceeding in wilful disregard of the known facts and law, and for an ulterior purpose’ carried through to the appeal.

1. In our view, it is open to the Court to find that Sunland ought to have known its appeal was hopeless. Sunland ought to have realised that it would fail at the first hurdle. Even if it could overcome the first by succeeding on its claim that it pleaded a lesser right, then it would have failed at the second, or at the third hurdle.

1. We also consider that Sunland’s appeal against the costs judgment of the trial judge had no chance of success. As we held:

The notice of appeal does not identify any relevant error of underlying principle in his Honour’s approach to the question of costs.  This is not surprising.  His Honour’s explanation of the principles relating to the relevant discretion was both careful and correct.[7] 

[7]Primary Reasons [539].

1. In these circumstances it follows that we are of the view that the appellants should pay the respondents’ costs of the substantive appeal, the costs appeal and the application to introduce fresh evidence on an indemnity basis.  Accordingly, we will make a special costs order in respect of these appeals and the application.

1. As was appropriate, no special costs order was sought in relation to the anti-suit injunction appeal. In relation to this appeal, the appellant should pay the respondents’ costs on a standard basis.

1. We are not persuaded that this is an appropriate case for a gross costs order on appeal. The taxation of the costs in the normal manner should be relatively straightforward.