Bloomingdale Holdings Pty Ltd v 87 Stevedore Street Pty Ltd
[2006] VSC 513
•4 December 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7021 of 2005
| BLOOMINGDALE HOLDINGS PTY LTD | Plaintiff |
| v | |
| 87 STEVEDORE STREET PTY LTD AND OTHERS | Defendants |
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JUDGE: | OSBORN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 4 DECEMBER 2006 | |
DATE OF RULING: | 4 DECEMBER 2006 | |
CASE MAY BE CITED AS: | BLOOMINGDALE HOLDINGS v 87 STEVEDORE STREET | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 513 | |
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Appeal against decision to make no order as to costs in dismissed application for security for costs- Supreme Court Rules 2005 rule 77 – Leave to appeal order as to costs given – where application for security for costs should not have been brought – Part costs awarded on solicitor/client basis – specific discovery
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr R. Kendall QC with Mr S.V. Palmer | Alderuccio Solicitors |
| For the Respondent | Mr P. Duggan | Wickens & Roche |
HIS HONOUR:
This proceeding arises out of what Bloomingdale alleges are in effect joint venture arrangements entered into for the development of two properties, one in Williamstown and one in Maidstone. Bloomingdale, which is controlled by Mr Gangemi, makes claims against two companies allegedly holding the properties as trustees and against the third named defendant, Mr Lanciana, who controls such companies.
The matter comes before me by way of appeal from Master Efthim. On 2 June 2006 the Master dealt with cross-applications brought by the parties in relation to a number of interlocutory matters. Insofar as the defendants were concerned, he dismissed an application made by them for security for costs which was instituted by summons, dated 25 November 2006. He further ordered that there be no order as to costs in relation to this summons. Bloomingdale now challenges this latter order.
He does so, on the basis of the facts summarised and stated by the Master under the heading of "Other Matters", at the time he made his order, and insofar as necessary points to affidavit material which supports the Master's statement with respect to the background facts.
Under the heading "Other Matters" Master Efthim stated as follows:
"(1)An application for security for costs was listed on 12 December 2005 and was adjourned to 14 February 2006 so that defendant could file further affidavits. The matter was part heard on 14 February 2006. It was adjourned to 6 March 2006;
(2)On 6 March 2006 at approximately 6 p.m. Bloomingdale filed an affidavit of Mr Gangemi which contained statements of assets and liabilities and referred to allegations that moneys were owed by the third defendant to the plaintiff. Had that affidavit been filed on the first return of the summons seeking security the plaintiff would have been successful. Had that affidavit not been filed at all the plaintiff would not have succeeded.
(3)There are affidavits filed on behalf of the plaintiff alleging a debt was owed by the third defendant to the plaintiff. Those affidavits were responded to by the third defendant.
(4)Documents were subpoenaed by the plaintiff in relation to that issue. Due to the late filing of the affidavit on 6 March 2006 the third defendant was given leave to inspect those documents. For the purposes of the application for security only, on 23 May 2006 counsel for the third defendant conceded that a debt was owed to the plaintiff. The plaintiff was not given leave to inspect the subpoenaed documents. It is inferred that the third defendant must have known that a debt was owed and thereafter, an application for security for costs should not have been brought. In the circumstances, the plaintiff ought not to be awarded costs even though costs normally follow the event nor should the defendants be awarded costs."
Bloomingdale submits that having found that the application for security for costs should not have been brought the Master should have awarded Bloomingdale the costs of the defendants’ summons. Mr Duggan who appears for the defendants submits firstly, that leave to appeal an order as to costs is required by Supreme Court Rules 2005 rule 77.05(2) which states:
"No judgment or order of a Master given or made by consent or order of a Master as to costs only shall be the subject of an appeal under Paragraph (1) except by leave of a Judge or the Master."
I agree that leave is necessary in this matter. It seems to me that this is in substance an order as to costs only, in terms of what is in issue. There must however, be cases in which the fundamental tests, identified by Mr Duggan as relevant to leave, are met. In my view this is such a case.
First the decision sought to be appealed is attended by sufficient doubt in all the circumstances of the case to justify leave to appeal and secondly a substantial injustice will be done by leaving the decision unreversed because of the quantum of costs in issue. This quantum involves several days of hearing.
In the present case, I am satisfied that the fount and origin of the costs incurred with respect to the defendant's application was the bringing of such application when the third defendant knew or should have known that the defendants were indebted to Bloomingdale in the sum of $218,000 or thereabouts.
This fact was ultimately conceded before the Master and again conceded before me. The concession was not however made until relevant bank records were obtained by subpoena and produced before the Master, although once the concession was made it was unnecessary to have recourse to them. It seems to me that the inference drawn by the Master was not only open to him but the only proper inference in the circumstances. Namely that the third defendant must have known that a debt was owed and thereafter an application for security for costs should not have been brought.
In these circumstances it seems to me that the unfortunate complications that arose with respect to the full disclosure of Bloomingdale's financial position during the course of the hearing of the defendant's summons, should never have arisen. In short, the summons should not have been instituted. In these circumstances the defendants must bear the costs of their unsuccessful summons. The circumstances are such first that leave to appeal is justified and secondly, that the exercise of the discretion, favourably to Bloomingdale, is justified in rehearing de novo Bloomingdale's application for costs pursuant to Supreme Court Rules 2005 rule 77.
The other matter raised on appeal is the question of specific discovery. An order in this regard has not been resisted but was consented to by solicitor’s letter of Friday last.
I have further indicated that I regard the amended defence filed in this matter as totally unsatisfactory. In response to an order of the Master, the defendants have simply deleted certain matters contained in the original defence but failed to plead the substance of the matters relied on by them with any particularity whatsoever.
In these circumstances I will order firstly in the terms of the relevant summons, that there be specific discovery given by the defendants by the making and filing of further affidavits of documents on or before 31 January 2007. Secondly that the defendants file and serve a further amended defence on or before 31 January 2007. Thirdly that Bloomingdale have leave to appeal Order 5 of the order of Master Efthim made on 2 June 2006 with respect to the costs of the defendant summons dated 25 November 2005 seeking security for costs.
Fourthly that such order of Master Efthim be set aside. Fifthly that the defendants pay the Bloomingdale's costs of the defendants summons dated 25 November 2005 seeking security for costs.
As to the question of the costs of today, Bloomingdale seeks the costs of the defendant's summons of 25 November 2006 on an indemnity basis.
It does so pursuant to the principal articulated by His Honour Justice Woodward in Fountain Selected Meat (Sales) Pty Ltd v. International Produce Merchants Pty Ltd & Ors[1] as follows, when his Honour said at p.401:
"I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion."
[1](1988) 81 ALR 397.
There is other authority which is essentially to the effect that the party against whom solicitor and client or indemnity costs are awarded must be guilty of conduct which is so unreasonable that it justifies an award of that nature. As I have indicated already, I have concurred in the inference drawn by the Master that the third defendant must have known that a debt was owed and thereafter an application for security for costs should not have been bought on behalf of the defendants. When reference is made in greater detail to the affidavit material filed in the matter, it can be seen that at the outset of the action, Mr Gangemi deposed on 6 July 2005 that part of the purchase money for the Maidstone property was contributed by way of an amount of $200,000 from Bloomingdale and proceeds of various other projects in which Gangemi and Lanciana had interests. The application for security for costs was instituted by a summons issued on 25 November 2005. That summons was issued after a letter seeking security for costs was sent on 21 September 2005. No response was made to the letter and the circumstance might be thought to suggest that the issue of the summons was not totally unreasonable.
After the summons was issued there was an initial exchange of limited affidavit material sworn on behalf of each side of the parties to the dispute. The matter came on before the Master on 12 December and was adjourned over to 14 February 2006. On 7 February 2006 Mr Gangemi deposed in substantial detail to the raising of the sum of $218,000 from Bloomingdale for the purpose of acquisition of the Mitchell Street property. After setting out the course of dealings which resulted in this outcome he deposed the amount of $218,000 which Bloomingdale is owed is more than sufficient to satisfy any costs order which might be made against Bloomingdale in the event that it is unsuccessful in these proceedings. At that time security for costs was sought in the sum of $60,000 only and it is apparent that unless the defendants could satisfactorily answer the allegation relating to the $218,000 the defendants' summons, seeking security for costs, was doomed.
Thereafter Mr Lanciana swore an affidavit which purported to state the sources of the funds for the purchase of the Mitchell property including some $200,000 provided by a company called Pre Needs Services Pty Ltd which he described as "His company". He went on to say:
"As to Paragraph 25, i.e. Paragraph 25 of Mr Gangemi's affidavit of 7 February 2006, I say that the amount of $218,000 is not owed to Bloomingdale by any entity in this proceeding. The assertion that Bloomingdale or Gangemi has any entitlement from any of the entities it is deposed to in this proceeding is denied. This issue is the underlying reason for this dispute and will be hotly contested. There is no debt owing to Bloomingdale or Gangemi in the sum of $218,000. It is disputed that they have any entitlement at all."
Thereafter the matter continued and at the conclusion of the hearing on 6 March 2006, affidavit material deposing comprehensively as to the financial position of Bloomingdale was produced.
In the course of February, Bloomingdale's solicitors had invited the defendants’ solicitors to withdraw the application for security for costs on several occasions and expressly threatened to apply for solicitor/client costs in the event that it was not withdrawn. Ultimately on 23 May 2006, counsel for the third defendant conceded that the debt of $218,000 was owed to Bloomingdale. As I have already stated that concession was made when relevant bank records were subpoenaed which would have indicated the nature of the dealings undertaken with the $218,000 provided by Bloomingdale. In my view, this is a case where the application should not have been proceeded with after the receipt of the affidavit of Mr Gangemi of 7 February 2006. It seems to me that it is clear from the concession ultimately made that the forensic response which was initially attempted on behalf of the third defendant should not have been made. And that, as the Master concluded, there was simply no proper basis for the application once it was understood Bloomingdale was entitled to the $218,000. Accordingly in my view, Bloomingdale should get the costs of the summons on a party/party basis up until 14 February 2006, and should get the costs of and from 14 February 2006 on a solicitor/client basis.
I have considered whether Bloomingdale should get the costs on an indemnity basis but it seems to me that firstly what was foreshadowed on its basis was an application for solicitor/client costs. And secondly, that such costs are sufficient in the circumstances to meet the justice of the situation. Accordingly I propose to make the orders which I foreshadowed earlier today, but including costs on the basis that I have just identified.
In my view Bloomingdale is entitled to the costs of the appeal but should only get those costs on a party/party basis. In respect of the discovery issue, the defendants have consistently taken the position that they would make further and better discovery in the matter and it appears to me that the Master's order cannot be said to have been so unreasonable that it was unreasonable in turn of the defendants to have sought to defend it up until Friday last. In relation to the question of the costs of the application before the Master, it seems to me that ordinarily the court would not interfere with the discretion of the Master and it was not so unreasonable to contest the question of leave in the present case as to mean that costs should be awarded on a higher than party/party basis. In addition, Bloomingdale has not been wholly successful, it has not achieved an award for indemnity costs for the whole of the costs sought. It has achieved an award of solicitor/client costs with respect to a part albeit a large part of the costs sought. Lastly, the appeal has been conducted in a rational and reasonable manner before me conducive to its expeditious resolution and I see nothing in the manner in which it has been conducted to persuade me from departing from the above considerations and going further.
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