Australia and New Zealand Banking Group Ltd v Dzienciol
[2001] WASC 305 (S)
•14 FEBRUARY 2002
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD -v- MOSZKO MEJER DZIENCIOL by his guardian ad litem PHILLIP DZIENCIOL & ORS [2001] WASC 305 (S) |
| CORAM | : McLURE J | ||
| HEARD |
| ||
| DELIVERED | : 9 NOVEMBER 2001 | ||
| SUPPLEMENTARY | |||
| DECISION | : 14 FEBRUARY 2002 | ||
| FILE NO/S |
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| BETWEEN |
|
AND
MOSZKO MEJER DZIENCIOL by his guardian
ad litem PHILLIP DZIENCIOLFirst Defendant
PHILLIP DZIENCIOL as representative of the estate
of the late LEAH DZIENCIOLSecond Defendant
DKD HOLDINGS PTY LTD
Third Defendant
[2001] WASC 305 (S)
Catchwords:
Costs - Personal liability for costs of guardian ad litem - Presumption of reasonableness in relation to indemnity costs
Legislation:
Supreme Court Rules, O 70, O 66
Result:
Costs awarded
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr C P Blaxill |
| First Defendant | : | Mr A Atkinson |
| Second Defendant | : | Mr A Atkinson |
| Third Defendant | : | Mr A Atkinson |
Solicitors:
| Plaintiff | : | Freehills |
| First Defendant | : | Solomon Brothers |
| Second Defendant | : | Solomon Brothers |
| Third Defendant | : | Solomon Brothers |
Case(s) referred to in judgment(s):
Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19
FCR 324
Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 662
Australia and New Zealand Banking Group Ltd v Moszko Mejer Dzienciol by
his guardian ad litem Phillip Dzienciol & Ors [2001] WASC 305
Bolton v Bolton (1884) 28 Sol Jo 737
Gore-Booth v Gore-Booth (1953) 2 All ER 1000
[2001] WASC 305 (S)
Morgan v Morgan (1865) 12 LT 199
Murray v Kirkpatrick (1940) 57 WN NSW 162
NSW Insurance Ministerial Corporation v Abualfoul (1999) 94 FCR 247
Rutter v Rutter (1921) P 136
Surrey Insurance Co Ltd v Nagy [1968] SASR 437
Vivian v Kennelly (1890) 63 LT 778
Willey v Synan (1935) 54 CLR 175
Case(s) also cited:
Catt v Wood [1908] 2 KB 458
Halligan v Lawson (1993) 9 SR (WA) 166
Harrison v O'Donnell [1919] WN 104
Hooper v Mckenzie, The Times, January 23, 1901
Huxley v Wootton (1912) 29 TLR 132
Koh v Tay [1999] WASC 228
Masling v Motor Hiring Company (Manchester) Limited [1919] 2 KB 538
MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236
NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480
O'Brien v The Herald and Weekly Times Limited [1937] VLR 135
Pryor v Hennessy & Cham [1973] VR 221
Rhodes v Swithenbank (1889) 22 QBD 577
Steeden v Walden [1910] 2 Ch 393
[2001] WASC 305 (S)
McLURE J
McLURE J: This is the plaintiff's application for the costs of the action. I handed down my reasons in this matter on 9 November 2001 (Australia and New Zealand Banking Group Ltd v Moszko Mejer Dzienciol by his guardian ad litem Phillip Dzienciol & Ors [2001] WASC 305).
2 I foreshadowed in my reasons that I proposed to dismiss the
defendants' counterclaim and to make orders in favour of the plaintiff for possession of property owned by the first and second defendant which was mortgaged to the plaintiff and a money judgment, the quantum of which was to be determined in accordance with a further Dobbs certificate from the plaintiff.
3 The matter came on again before me on 19 December 2001 in which
the orders foreshadowed in the reasons were made. However, the plaintiff's application for costs was contested. The plaintiff sought the following orders:
"5. The plaintiff's costs of the action and counterclaim:
(a)
be paid by Phillip Dzienciol the Guardian ad litem of the first defendant (without prejudice to any right of indemnity which he may have against the first defendant and his property) taxed:
(1)
on a party and party basis for those costs incurred by the Plaintiff from 8 June 1994 to 6 March 2001; and
(2)
on an indemnity basis for those costs incurred by the Plaintiff from 7 March 2001.
With certificates:
(A) for transcript; (B) for second counsel; (C ) for interrogatories; (D)
that the maximum recoverable by the Plaintiff in relation to getting up (item 13) is $54,000; and
(E)
for the order 38 deposition of Dr Gubbay of 8 June 2001.
[2001] WASC 305 (S)
McLURE J
(b)
be paid by the said first defendant Moszko Mejer Dziencil and by and out of the said real and personal estate of Leah Dzienciol taxed on a solicitor and own client basis so that all costs incurred by the plaintiff of and incidental to the action and counterclaim (including the costs of second counsel, transcript and interrogatories) are to be allowed (irrespective of the limits of the scale) except insofar as they are of an unreasonable amount or have been unreasonably incurred.
Such costs are to be presumed to have been:
(1) reasonably incurred if they were incurred with the express or implied approval of the plaintiff; (2) reasonable in amount if the amount was expressly or impliedly approved by the plaintiff; and (3) unreasonably incurred, if in the circumstances of the case, they are of an unusual nature.
PROVIDED THAT the total costs recoverable by the plaintiff shall not exceed the value of the costs under paragraph 5(b) above."
4 Paragraph 5(b) relies on standard provisions in the mortgages for the
payment of solicitor/client costs. The defendants opposed proposed order 5(a) and consented to proposed order (b) save for the presumptions referred to in (1), (2) and (3) thereof.
5 Phillip was appointed guardian ad litem of the first defendant, Moszko Mejer Dzienciol, by order of the Court dated 8 June 1994. The question in issue is whether a court can, and if so on what grounds, order that a guardian ad litem be personally liable for the costs which would otherwise be payable by the defendant.
Order 70 of the Supreme Court Rules ("SCR") deals with persons under a disability suing or defending court proceedings. Pursuant to O 70 r 2, a person under a disability must have:
[2001] WASC 305 (S)
McLURE J
(a) a next friend in order to bring or make a claim in any proceedings; (b) a guardian ad litem to defend, make a counterclaim or intervene in any proceedings.
7 The position in relation to a next friend is clear. A next friend,
although not a party to the proceedings, is personally liable for costs awarded against the plaintiff: NSW Insurance Ministerial Corporation v Abualfoul (1999) 94 FCR 247 at 254. Indeed, it is said that one of the purposes for requiring a person under a disability to sue by a next friend was so that there would be a person answerable to the defendant for costs: NSW Insurance Ministerial Corporation (supra) at 254. However, the principal purpose must be the protection of the rights of people with a disability.
8 The position regarding the personal liability for costs of a guardian
ad litem is unclear. It was conceded by Mr Atkinson (properly in my view) that the Court has the power to award costs against a guardian ad litem. However, it was submitted that a court in the exercise of its discretion should only award such costs in exceptional circumstances such as for gross misconduct of the defence. There is some authority for that position, albeit without fully reasoned analysis: Morgan v Morgan (1865) 12 LT 199; Murray v Kirkpatrick (1940) 57 WN NSW 162.
9 There is also authority which arguably supports the proposit ion that
the discretion is not confined to exceptional circumstances: Bolton v
Bolton (1884) 28 Sol Jo 737; Vivian v Kennelly (1890) 63 LT 778.10 The plaintiff also relied on Rutter v Rutter (1921) P 136 in support of its claim. However, that was a case in the divorce division of the English Court in which the rules describe the claimant's representative as a guardian ad litem when in fact it is the equivalent of a next friend in other divisions of the English Court ( and in this jurisdiction).
11 However, it is suggested in Seaman Civil Procedure (at par 70.2.1)
that the same purposes, including personal liability for costs, lie behind
the appointment of a next friend and guardian ad litem.
In the circumstances, it is necessary to determine this question as a matter of principle with little assistance from the authorities.
13 A next friend and guardian ad litem have features in common. A person with a disability cannot sue or be sued without a next friend or guardian ad litem respectively. In the case of a defendant with a disability
[2001] WASC 305 (S)
McLURE J
where no guardian ad litem has been appointed, all steps in the action including a judgment will be taken to be irregular and set aside: Surrey Insurance Co Ltd v Nagy [1968] SASR 437 at 439; Gore-Booth v Gore- Booth (1953) 2 All ER 1000 at 1005.
14 Accordingly, the Rules entitle a plaintiff to apply to the court for an
order appointing a guardian ad litem: O 70 r 5. Order 66 r 6 of the SCR makes specific provision in relation to the costs of a solicitor appointed by a court as a guardian ad litem or a solicitor who acts without a court order. The court is given a discretion to direct that the costs incurred in the performance of the duties of the office of guardian ad litem by a court appointed solicitor shall be borne and paid by either of the parties, or by one or more of the parties or out of any fund in court. The court's discretion in relation to a solicitor who acts without an order of the court is in more general terms.
15 It seems there are at least two material differences between the
position of a plaintiff/next friend and defendant/guardian ad litem combination. A plaintiff has a choice as to whether or not to bring or continue proceedings with that choice the responsibility of the next friend. Further, a factor in determining whether to take proceedings is usually (albeit not perhaps in this case) the financial capacity of the proposed defendants to pay any judgment and costs awarded against them. On the other hand, a defendant has no real control over his or her involvement in the proceedings.
16 Further, and most importantly, it is against a defendant's interest for a
next friend to be appointed (thereby enabling suit) whereas it is very much in the interests of a plaintiff for a guardian ad litem to be appointed. Indeed, in the event a guardian ad litem does not (from the plaintiff's perspective) volunteer to assume the office, a plaintiff may need to secure the services of an independent person who will no doubt seek protection in relation to costs.
17 In these circumstances, I see no reason why a guardian ad litem who is in substance and effect defending a claim should be made personally liable for costs orders in favour of a plaintiff unless the guardian has acted unreasonably, whether in the conduct of the defence or otherwise. The plaintiff does not suggest that Phillip acted unreasonably in this case.
18 However, the plaintiff says that in the particular circumstances of
this case the order should be made because Phillip ran the litigation which
[2001] WASC 305 (S)
McLURE J
included a counterclaim for, inter alia , equitable damages. In fact, the
relief sought by the defendants in their counterclaim included:
(a) an injunction forbidding the sale of the mortgaged property; (b) an order setting aside in equity the mortgages; (c) equitable damages; (d) a mandatory injunction under the Trade Practices Act requiring the plaintiff to discharge the Wellington Street Mortgage; and (e) damages for breach of contract and negligence.
19 It is correct that the counterclaim in form is not defensive. It does
not reflect or mirror the defence. However, the court is concerned with substance not form. I am assisted on this question by the authorities relating to security for costs. Security is payable by a defendant/plaintiff by way of counterclaim where the counterclaim does not arise out of the claim made by the plaintiff. So too if the counterclaim of a defendant with a guardian ad litem went beyond the plaintiff's claim then there is no reason in principle why the guardian should not be held personally responsible for the costs of that aspect of the counterclaim.
20 In my opinion the defendants' counterclaim in this case is generally
responsive (and defensive) to the plaintiff's claim notwithstanding the claims for relief and in particular the claim for equitable damages. The claim for damages was in effect to neutralise the impact of a requirement for restitutio in integrum in the event the defendants were successful in their unconscionable conduct defence (see par 411 of my earlier reasons).
21 However, if a guardian ad litem was acting in substance as a next friend because the defendant was in effect the attacker then I see no reason why in the exercise of the Court's discretion the guardian ad litem should not be made personally liable for the costs of the action.
22 The notion of a plaintiff being nominally so but really defending
itself against an attack from the defendants is also well recognised in the law relating to the discretion to order security for costs. Security for costs will not generally be ordered where the plaintiff is the party attacked and is really in the position of the defendant: Willey v Synan (1935) 54 CLR 175 at 184-5; Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 662.
[2001] WASC 305 (S)
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23 In such cases a Court is also guided by the substance and not the
form of the matter. There is usually some pre litigation act of the defendant which is the trigger for the commencement of proceedings. Thus, if a defendant serves a statutory demand under the Corporations Act, it will not be entitled to security for costs if the plaintiff debtor applies to set aside the statutory demand: Aquatown (supra).
24 The principle was also applied by Wilcox J in Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324. In that case Warman's solicitors wrote to a third party (QMS) complaining that QMS had been offering to supply parts made by AMS for Warman pumps thus infringing Warman's copyright in the drawings. The letter concluded by saying that unless QMS desisted, Warman would take proceedings. AMS commenced proceedings against Warman for a declaration that the threats made by Warman were unjustifiable under the Copyright Act 1968. Warman applied for security for costs. The Court rejected the claim on the basis that AMS was in a practical sense forced to take legal action. Wilcox J said (at 328-9):
"If one applies the homely test adopted by Scrutton LJ of asking who, in the litigation, was the attacker and who was the defender, I think it must be said that the first attack came in a letter from [Warman's solicitors]. Although the letter was not written directly to [AMS], it is that company which has an interest in defending and, in a commercial sense, probably has very little alternative other than to take that course."
25 There is little evidence concerning the events leading up to the
commencement of the action by the plaintiff. However, it was admitted on the pleading that the third defendant was in possession of the Wellington Street premises. It is probably the case that the plaintiff had no practical alternative but to obtain orders for possession as a result of a failure to deliver up possession pursuant to the mortgages. In that sense, the plaintiff's action is responsive to the defendants' omission or refusal to deliver up possession. However, in my view that is not enough to make the plaintiff in effect the defendant. Some positive act by a defendant is required.
26 For the reasons detailed above, I refuse in the exercise of my
discretion to make a costs order against Phillip. Further, I see no justification for the plaintiff having the benefit of the presumptions in items (1), (2) and (3) of proposed order 5(b). The reasonableness or otherwise of the amounts paid by the plaintiff should, in the event of a
[2001] WASC 305 (S)
McLURE J
dispute, be determined without the application of presumptions. Accordingly I will make an order in terms of proposed order 5(b) save for the presumption and the proviso, which is unnecessary in the circumstances.
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