Bodycorp Repairers Pty Ltd (ACN 068 589 408) v Anuniziato Enzo Maisano (also known as Michael Maisano and Michael Mason) and Oakley Thompson and Co Pty Ltd (ACN 092 053 239)
[2019] VSCA 187
•22 August 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0047
| BODYCORP REPAIRERS PTY LTD (ACN 068 589 408) | Applicant |
| v | |
| ANUNIZIATO ENZO MAISANO (also known as MICHAEL MAISANO and MICHAEL MASON) | First Respondent |
| OAKLEY THOMPSON & CO PTY LTD (ACN 092 053 239) | Second Respondent |
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| JUDGES: | KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 13 August 2019 |
| DATE OF JUDGMENT: | 22 August 2019 |
| MEDIUM NEUTRAL CITATION: | [2019] VSCA 187 |
| JUDGMENT APPEALED FROM: | [2018] VSC 96 (Riordan J) |
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PRACTICE AND PROCEDURE — Application for extension of time for compliance with security for costs order and timetabling order and for order that application not taken to be abandoned — Whether satisfactory explanation for delay — Prejudice to parties arising from granting or refusing application — Whether application for leave to appeal bound to fail — Application granted.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr R van de Wiel QC with Mr M Goldblatt | SLF Lawyers |
| For the First Respondent | No appearance | |
| For the Second Respondent | Mr J Vagg (solicitor) | Oakley Thompson & Co Pty Ltd |
KYROU JA
McLEISH JA:
Introduction and summary
The applicant has made an application to extend the time for compliance with a security for costs order made by consent by Irving JR on 13 June 2018 (‘security for costs order’) and certain procedural orders also made by Irving JR on 13 June 2018 (‘timetabling order’). The applicant has also sought an order discharging a stay resulting from its failure to comply with the security for costs order and an order that the proceeding is not taken to be abandoned for a failure by it to comply with the timetabling order.
For the reasons that follow, the application will be granted.
Facts and procedural history
There is a complex history of litigation between the parties. Set out below is a brief summary of the events that are relevant to the current application.
In the mid-1990s the applicant was a franchisor of a network of motor vehicle repairers. The first respondent was a franchisee. In June 1998, the applicant entered into an agreement with Australian Associated Motor Insurers Ltd (‘AAMI’) under which the franchisees would obtain the status of ‘recommended repairer’. The agreement required AAMI to remove that status from any franchisee that left the franchise, for a period of at least six months. In 1998, certain franchisees, including the first respondent, left the franchise. AAMI failed to remove the departing franchisees’ recommended repairer status in accordance with the agreement. The applicant subsequently commenced a proceeding against a number of defendants, including AAMI and the first respondent. It relied on several causes of action, including breach of contract and inducing a breach of contract.
On 4 September 2013, Elliott J handed down judgment in which he dismissed the applicant’s claims against all the defendants.[1] Relevantly, Elliott J ordered that the applicant pay the first respondent’s costs.
[1]Bodycorp Repairers Pty Ltd v Maisano [No 8] [2013] VSC 472 (‘Elliott J’s decision’).
On 22 April 2014, the second respondent — who acted as the first respondent’s solicitor in the proceeding before Elliott J — filed a summons on behalf of the first respondent for taxation of Elliott J’s costs order.
On 28 April 2015, this Court dismissed the applicant’s appeal against Elliott J’s decision of 4 September 2013.[2]
[2]Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurance Ltd [2015] VSCA 73.
On 30 June 2015, Elliott J declared that the second respondent had an equitable right over the costs ordered on 4 September 2013 and that it was entitled to proceed with the taxation of those costs.[3] On 24 July 2015, Elliott J ordered that the second respondent be added as a defendant to the proceeding for the taxation of costs.[4] On 11 November 2015, the first respondent’s costs were taxed at $289,988.68 and, after deducting part payment, the applicant was ordered to pay the second respondent $233,988.68.
[3]Oakley Thompson & Co Pty Ltd v Maisano [No 2] [2015] VSC 210. The applicant sought leave to appeal against Elliott J’s decision of 30 June 2015. On 22 February 2017, this Court refused leave: Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 2] [2017] VSCA 23.
[4]Maisano v Bodycorp Repairers Pty Ltd [No 2] [2015] VSC 365.
On 26 May 2016, the applicant commenced a proceeding against the first respondent, the second respondent, AAMI and others in which it relevantly sought an order that Elliott J’s decision of 4 September 2013 be set aside on the basis that it was procured by fraud (‘fraud proceeding’).
On 28 October 2016, Riordan J summarily dismissed the applicant’s claims against the second respondent and AAMI in the fraud proceeding.[5] As the first respondent had not sought summary dismissal of the claim against him, the proceeding continued as against him.
[5]Bodycorp Repairers Pty Ltd v Maisano [No 11] [2016] VSC 645.
On 24 August 2017, the applicant filed a summons in the fraud proceeding seeking summary judgment, or alternatively judgment in default of appearance or defence, against the first respondent. On 8 September 2017, Hargrave J made an order on the Court’s own motion adding the second respondent as a party to that summons.
On 15 September 2017, this Court granted leave to appeal on one ground, dismissed the appeal in relation to that ground, and otherwise dismissed the applicant’s application for leave to appeal against Riordan J’s decision of 28 October 2016.[6]
[6]Bodycorp Repairers Pty Ltd v Maisano [2017] VSCA 252.
On 23 October 2017, the second respondent filed a summons in the fraud proceeding seeking summary dismissal of the applicant’s claim against the first respondent. The second respondent contended that by virtue of its equitable lien over the costs ordered by Elliott J on 4 September 2013, it was entitled to defend the applicant’s application for summary judgment or judgment in default and to prosecute its own claim for summary dismissal.
Prior to the hearing before Riordan J, by summons filed on 10 January 2018, the applicant sought an order that the judge recuse himself on the basis of apprehended bias. It alleged that, as a result of his decision of 28 October 2016, there was an apprehension that Riordan J might not determine its claim against the first respondent impartially. Riordan J previously rejected a similar application on 3 November 2017.
On 6 March 2018, Riordan J delivered judgment in the fraud proceeding in which he found in favour of the first respondent.[7] He made an order (‘impugned decision’) which relevantly provided as follows:
(a)on the Court’s own motion, summary judgment be granted to the first respondent pursuant to s 63 of the Civil Procedure Act 2010;
(b)the applicant’s application for summary or default judgment against the first respondent be dismissed; and
(c) the applicant’s application for Riordan J to recuse himself be dismissed.
[7]Bodycorp Repairers Pty Ltd v Maisano [No 13] [2018] VSC 96.
On 3 April 2018, the applicant sought leave to appeal against the impugned decision on eight grounds. Those grounds are as follows:
1 The Trial Judge was subject to a reasonable apprehension of bias.
2The Trial Judge erred in making an application to grant summary judgment on [the Court’s] own motion.
3The Trial Judge erred in holding that the fraud consisted of the evidence that had been fraudulently suppressed.
4The Trial Judge erred in finding that an inference could not be drawn that the first [respondent] had induced the franchisees to leave [the Bodycorp franchise].
5The Trial Judge erred in failing to permit the matter to proceed to a trial under section 64 of the Civil Procedure Act.
6The Trial Judge erred in applying the tests in Wentworth v Rogers to set aside a proceeding for fraud.
7The Trial Judge failed to provide proper reasons as to why the proceeding would be dismissed as an abuse of process.
8The Trial Judge erred in failing to set aside the judgment on a summary basis due to the first [respondent’s] failure to file a notice of appearance.
As stated at [1] above, on 13 June 2018 Irving JR made the timetabling order and the security for costs order in the application for leave to appeal against the impugned decision.
The security for costs order required the applicant to provide security for the second respondent’s costs of the application for leave to appeal by way of payment of the sum of $17,000 into Court and stipulated that if the security was not provided by 4:00 pm on 27 July 2018, the proceeding would be stayed until further order.
The timetabling order relevantly provided as follows:
9The applicant file in electronic form and serve an agreed list of transcript references on or before 18 July 2018. If the parties do not rely upon transcript references in their written case or submissions, the applicant is to notify the court that no list of transcript references will be filed.
10The applicant file and serve electronically the transcript of proceeding number S CI 2016 02044 on or before 18 July 2018.
11The parties file and serve the agreed summary and their respective written cases amended solely to replace existing references to documents or transcript with references to leave application book pages on or before 25 July 2018.
The applicant failed to comply with paragraphs 9 to 11 of the timetabling order. By virtue of r 64.45(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’),[8] this failure resulted in the proceeding being taken to be abandoned 30 days after the failure to comply with the timetabling order. The applicant also failed to provide security for costs in the sum of $17,000 by 27 July 2018, resulting in the proceeding being stayed in accordance with the security for costs order.
[8]Rule 64.45(1) is set out at [34] below.
As no steps had been taken in the proceeding since July 2018, on 24 April 2019 the Court notified the parties that it was considering dismissing the application for leave to appeal for want of prosecution pursuant to r 64.46(1) of the Rules.
On 22 May 2019, the Court notified the parties that the matter would be listed for a procedural hearing on 28 May 2019 to consider whether an order under r 64.46(1) of the Rules should be made.
At the procedural hearing before Whelan JA on 28 May 2019, the applicant’s solicitor informed the Court that the applicant was in a position to provide the security for costs. Julian Vagg, the principal of the second respondent, informed the Court that the second respondent would resist further prosecution of the appeal on the grounds that there had been no explanation for the delay and that the proposed appeal is futile. However, he conceded that the second respondent had not suffered any prejudice that could not be cured by a costs order.
That same day, Whelan JA made the following order:
1Unless by 4:00 pm on Friday 31 May 2019 the Applicant applies to vary the security for costs order and the timetabling order, and if so advised, to seek an order that the application not be taken to be abandoned under rule 64.45(4)(a) of the Rules, the application for leave to appeal filed 3 April 2018 is dismissed.
On 30 May 2019, the law firm Holding Redlich filed an application in the Trial Division to wind up the applicant in insolvency based on its failure to comply with a statutory demand which required payment of an amount of $16,167.20 due in respect of a costs order.
On 31 May 2019, the applicant made an application to vary the security for costs order and the timetabling order, sought an order discharging the stay and an order pursuant to r 64.45(4)(a) of the Rules that the application for leave to appeal is not taken to be abandoned.
Grounds
The applicant has sought to discharge the stay and vary the security for costs order and the timetabling order on the following grounds:
[1]The Applicant’s failure to comply with the timetabling [order] … did not have the effect that the Application for Leave to Appeal was deemed to be abandoned pursuant to rule 64.45(1)(a) of the … Rules as the said Application was stayed when the said Rule would take effect.
[2]The Application for Leave to Appeal should be deemed not to be abandoned pursuant to rule 64.45(4)(a) of the … Rules as it would be unjust to prevent the Applicant from prosecuting the said Application for Leave to Appeal.
[3]The time to pay the security for costs in the [security for costs order] … should be extended as a matter of discretion.
Orders sought by the applicant and affidavit evidence
The applicant sought the following orders:
1Order 2 of the [security for costs order] … be varied to provide that upon the applicant providing security for the second respondent’s costs of the application for leave to appeal and the appeal from the orders of the Honourable Justice Riordan made on 6 March 2018 in the sum of $17,000 by payment into Court to the Senior Master, within 1 business day of the authentication of these orders, that the stay shall be discharged.
2Order 9, 10 and 11 of the timetabling [order] … be varied to provide for an extension of time of 14 days from the date of the authentication of these orders.
3An order pursuant to Rule 64.45(4)(a) of the … Rules that the appeal is not taken to be abandoned for a failure to comply with … order 9, 10 and 11 of the [timetabling order].
In support of its application, the applicant relied on two affidavits sworn by Antonio Murdaca, its sole director, on 31 May 2019 and 7 August 2019.
In his affidavit of 31 May 2019, Mr Murdaca deposed that the security for costs was not provided in accordance with the security for costs order because the applicant had been involved in settlement discussions with Mr Vagg since June 2018. He stated that Mr Vagg made representations to him that the applicant and the second respondent would be able to settle all matters and that there was no need to provide the security for costs.
In his affidavit of 7 August 2019, Mr Murdaca deposed that it was agreed between him and Mr Vagg that provision of the security for costs was subject to the outcome of the settlement negotiations and was therefore put on hold until they were finalised. Mr Murdaca stated that the only reason the security for costs was not provided was the continuation of settlement negotiations until March 2019, and that he was willing and able to provide the security for costs.
The second respondent relied on an affidavit sworn on 28 June 2019 by Patrick Dunell, a solicitor employed by the second respondent, and an affidavit of Mr Vagg sworn on 12 August 2019. As Mr Dunell’s affidavit overlaps with that of Mr Vagg, we will focus only on the latter.
In his affidavit, Mr Vagg denied making the representations or reaching the agreement alleged by Mr Murdaca. He referred to an email he sent to the applicant’s former solicitor on 12 November 2018, in which he gave the applicant two options: to agree to the dismissal of the application for leave to appeal; or to provide the security for costs by 23 November 2018 and prosecute the application for leave to appeal. It is common ground that the applicant did not take either of these courses of action. Mr Vagg also referred to an email of 23 May 2019, from the applicant’s former solicitor, requesting that the second respondent consent to an extension of time for provision of the security for costs to 31 May 2019.
Relevant legal principles
Under r 64.45 of the Rules an application for leave to appeal or an appeal is taken to be abandoned if certain steps are not taken. It relevantly provides:
64.45 Application or appeal taken to be abandoned
(1)Without limiting or affecting any power of the Court of Appeal or any order that the Court of Appeal may make in relation to compliance with the requirements of these Rules (including this Order) or compliance with any direction given or order made in or in relation to a proceeding in the Court of Appeal, an application, including for leave to appeal, or an appeal is taken to be abandoned if an applicant or appellant does not—
(a)take any step required to be taken by or under this Order within 30 days after the expiry of the time fixed or allowed by or under this Order;
(b)comply with any direction given or order made by the Court of Appeal (constituted by one or more Judges of Appeal) or by an Associate Judge or by the Registrar within 30 days after the expiry of the time fixed or allowed by the direction or order.
In accordance with r 64.45(4)(a), the Court may order that an application or appeal is taken not to be abandoned under r 64.45(1). Rule 64.45(4) provides:
(4) Notwithstanding paragraph (1)—
(a)the Court of Appeal may at any time order that an application, including for leave to appeal, or an appeal is not taken to be abandoned;
(b)within 28 days after the day on which an application, including for leave to appeal, or appeal is taken to be abandoned, the Registrar may order by consent of all the parties that the application or appeal is not taken to be abandoned.
The Court has a ‘broad, wide and deep’ discretion to make an order under r 64.45(4)(a).[9] In exercising that discretion the Court must determine whether, in the circumstances, it is unjust for the appeal to be taken to be abandoned. In Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd, Tadgell J (with whom Cummins J agreed) stated:
If, upon the material before it, the court perceives that it would be unjust to an appellant that an appeal should be taken to be abandoned despite non-compliance with the relevant rules, it may exercise a discretion in favour of the appellant if it seems appropriate to do so, taking account of the legitimate interest of the respondent to the appeal to insist on an adherence to the rules. … [T]he court is required to determine what, in its opinion, is the just way in which its discretion should be exercised. This would involve weighing up the extent to which the appellants would be prejudiced by leaving the appeal to stand as though abandoned and any prejudice to the respondent to the appeal by ordering that it not be taken to be abandoned. [10]
[9][1995] 1 VR 150, 152 (‘Lagarna’). See also Longreach Family Living (Vic) Pty Ltd v Simonds Homes Melbourne Pty Ltd [2013] VSCA 274 [35]; Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 2] [2016] VSCA 183 [21]; Jambere Pty Ltd v Body in Balance Chiropractic Pty Ltd [2017] VSCA 143 [28].
[10][1995] 1 VR 150, 152.
The Court may decline to make an order under r 64.45(4)(a) if it would be futile to allow the appeal to proceed because it is so devoid of merit that it is bound to fail. In Sedrak v Carney, Chernov JA stated:
[I]t is necessary to consider whether the making of the order sought would be futile and thereby create an injustice to the respondents and cause needless expenditure of public funds if the appeal were otherwise to proceed. This involves consideration of whether the appeal is so devoid of merit that it would be futile to make the order sought. It is recognised that what must be clearly shown before the applicant is denied the right to have his or her appeal heard, is that the appeal would fail.[11]
[11][1999] 3 VR 95, 97 [16].
However, arguments as to the prospects of success of the appeal will ordinarily not be encouraged unless the failure of the appeal is plainly demonstrable.[12]
[12]Lagarna [1995] 1 VR 150, 152.
In determining whether the discretion under r 64.45(4)(a) should be exercised, the Court must also seek to give effect to the overarching purpose in s 7 of the Civil Procedure Act 2010 (‘CPA’).[13] The overarching purpose is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.
[13]CPA s 8(1). See Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 2] [2016] VSCA 183 [22].
The same principles apply in the context of an application for extension of time to comply with a security for costs order, the breach of which has resulted in a stay of an appeal. In Body Bronze International v Fehcorp Pty Ltd,[14] the Court ordered that the appeal no longer be stayed and that an extension of time be granted for compliance with a security for costs order. Redlich JA stated that the Court is required to determine the just way in which the discretion should be exercised, taking into account the extent of the respective prejudice to each party if the stay were to stand or be lifted.[15]
[14][2010] VSCA 72 (‘Body Bronze’).
[15]Body Bronze [2010] VSCA 72 [6].
Parties’ submissions
The applicant relied on four principal submissions in support of its contention that the Court should exercise its discretion to order that the application for leave to appeal is not taken to be abandoned and extend the time for provision of security for costs and the time for compliance with the timetabling order.
First, the applicant submitted that it had failed to provide security for costs by 27 July 2018 due to the settlement negotiations between Mr Murdaca and Mr Vagg between June 2018 and March 2019, as well as Mr Vagg’s representation that there was no need to provide security in the light of the attempt to settle all outstanding proceedings. According to the applicant, this provided a clear and justifiable reason for the non-provision of the security for costs.
Secondly, the applicant submitted that at the procedural hearing before Whelan JA, the second respondent conceded that it had not suffered any prejudice as a result of the applicant’s non-provision of security for costs. According to the applicant, the risk that it will be wound up pursuant to the Holding Redlich winding up proceeding was highly speculative.
Thirdly, in relation to its breach of the timetabling order, the applicant submitted that it could not comply with paragraphs 9 to 11 of that order after the stay became effective. According to the applicant, this meant that r 64.45(1) could not operate to deem the proceeding as being abandoned 30 days after the failure to comply with the timetabling order.
Fourthly, the applicant contended that its grounds of appeal have a real prospect of success.
The second respondent submitted that the affidavit evidence of Mr Vagg and Mr Dunell demonstrated that the second respondent never agreed that the applicant was not required to provide the security for costs by the date ordered. It contended that settlement negotiations occurred only during October and November 2018 and that there was no explanation for the applicant’s failure to provide security for costs when the negotiations ceased, notwithstanding the second respondent’s offer to extend the time for compliance to 23 November 2018.
Regarding the timetabling order, the second respondent argued that the applicant’s submissions ignore the fact that the procedural steps were ordered to be completed prior to the deadline for the provision of security for costs.
The second respondent submitted that the position regarding prejudice to it had changed as a result of the Holding Redlich winding up proceeding, which is listed for a third return date on 21 August 2019. That was said to be because if a winding up order is made, any payment to the second respondent from funds paid into Court pursuant to the security for costs order might be challenged on the basis that it constitutes an unfair preference.
In relation to the merits of the applicant’s underlying application for leave to appeal, the second respondent submitted that the application is so devoid of merit that it would be futile to make an order under r 64.45(4)(a). This was said to be principally because, in its claim to set aside Elliott J’s decision in favour of the first respondent, the applicant seeks to rely on evidence and arguments which this Court rejected in the context of the applicant’s claim to set aside Elliott J’s decision in favour of AAMI and certain other defendants.[16]
[16]See [12] above.
Decision
The factors in favour of granting the applicant’s application and those militating against it are finely balanced. Not without considerable hesitation, we have decided to grant the application.
The delay in compliance with the security for costs order in the present case is considerable. Although the applicant was required to provide security for costs by 27 July 2018, it did not apply for an extension of time until 31 May 2019. However, the applicant provided an explanation for the delay, namely settlement negotiations between the parties which, had they been successful, would have resolved the application for leave to appeal and obviated the need to provide security for costs.
Although the contemporaneous documents do not disclose a concluded agreement that the applicant was not required to provide the security for costs by the date ordered, Mr Vagg frankly conceded that the second respondent was not insisting on compliance with the security for costs order while settlement discussions were taking place.
The time when settlement negotiations between the parties ceased is not clear from the contemporaneous documents. There is some support in those documents for the applicant’s contention that the negotiations continued until the end of March 2019. On this basis, the unexplained delay was confined to the period from 1 April 2019 until 31 May 2019, when the current application was made.
The efficient conduct of proceedings requires timely compliance with court orders. As this case demonstrates, it is clearly imprudent for a party to fail to comply with a court order made for the benefit of another party on the basis that a settlement of the proceeding may obviate the need for compliance. This is because there is an obvious risk that settlement will not eventuate. Although the applicant’s conduct in the present case deserves criticism, it was not of such a nature as to warrant refusal of its application.
The applicant’s delay in not complying with the timetabling order subsisted for only a few days because, once the proceeding was stayed on 27 July 2018 for non-compliance with the security for costs order, it was not possible for the applicant to take any steps in the proceeding unless and until the stay was lifted.
In our opinion, the prejudice to the applicant if its application is not granted outweighs the prejudice to the second respondent if the application is granted.
The prejudice that the applicant would suffer is that it would be denied the opportunity to have its application for leave to appeal considered on its merits.
Although Mr Vagg submitted that the applicant’s delay will cause prejudice to the second respondent due to the Holding Redlich winding up proceeding, he qualified that submission. He properly conceded that there is always a risk that a company which is required to provide security for costs may be wound up and that a payment pursuant to an order releasing the security may be challenged as an unfair preference. This is because a company will not be ordered to provide security for costs unless its financial position is such as to call into question its ability to meet a costs order that may be made against it.
In relation to the overarching purpose in s 7(1) of the CPA, the applicant’s conduct has certainly not been conducive to efficiency, timeliness or cost-effectiveness. However, if its application is refused, the real issues in dispute will not be considered.
Having regard to the above analysis, we have concluded that, on balance, the interests of justice favour the granting of the applicant’s application.
It now remains for us to consider whether granting the applicant’s application for leave to appeal would be futile because it is so devoid of merit that it is bound to fail. There is obvious force in the second respondent’s submission that the applicant will have difficulty in making out some of the grounds of appeal insofar as they seek to agitate matters that have already been the subject of an adverse decision by this Court. However, not all of the grounds raise matters that have been dealt with previously by this Court. In particular, grounds 1 and 2 raise new matters. In an interlocutory application such as the present, we are not in a position to determine whether any of the grounds are bound to fail.
Conclusion
For the above reasons, the applicant’s application will be granted.
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