Bolitho v Banksia Securities Limited (No 13)
[2020] VSC 706
•22 October 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST
S CI 2012 07185
| LAURENCE JOHN BOLITHO | First Plaintiff |
| AUSTRALIAN FUNDING PARTNERS PTY LIMITED (ACN 167 628 597) | Second Plaintiff |
| v | |
| BANKSIA SECURITIES LIMITED (ACN 004 736 458) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) & ORS (according to the attached Schedule) | Defendants |
---
JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 22 October 2020 |
CASE MAY BE CITED AS: | Bolitho & Anor v Banksia Securities Limited & Ors (No 13) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 706 |
---
COSTS – Application for recusal of trial judge – Application made at trial of questions remitted from the Court of Appeal – Application unsuccessful – Group proceeding – Whether applicant ought pay costs of two responding parties – Where responding parties not private litigants – Significant prospect of conflicting consequences for further conduct of proceeding if application successful – Responding parties not put on notice by applicant about potential objection to duplicated costs – Whether unreasonable that unsuccessful party should bear the costs of each of the parties successfully opposing the application – Discretionary considerations.
---
| Written submissions | Counsel | Solicitors |
| For the Applicant/ Fifth Defendant | Mr G Kozminsky of counsel | Garland Hawthorn Brahe Lawyers |
| For the First Defendant | Mr J A Redwood SC with Mr M Grady of counsel | Maddocks |
| As Contradictor | Mr P Jopling QC with Ms J Collins of counsel | Corrs Chambers Westgarth |
HIS HONOUR:
On 7 September 2020, I dismissed the summons filed by the fifth defendant (‘Mr Elliott’) seeking that I recuse myself for apprehended bias.[1] The remaining issue is the costs of that summons.
[1]Bolitho v Banksia Securities Limited (No 11) [2020] VSC 567. Leave to appeal was refused: Elliott v Lindholm [2020] VSCA 260.
Mr Elliott did not resile from the usual rule that costs follow the event, at least for the first defendant (‘SPR’). He contended that:
(a) the general principle that a losing party ought not be liable for the costs of multiple parties was enlivened, and none of the recognised exceptions applied; and
(b) the Contradictor had no entitlement to its costs, as:
(i) the summons was addressed to the SPR and not the Contradictor, who was only provided a copy ‘as a courtesy’; and
(ii) it had no role to play in the recusal, as Mr Elliott’s joinder to the proceeding arose as a result of the SPR’s application for non-party costs orders.
The general rule is that costs should follow the event and that, absent disqualifying conduct, the successful party should recover its costs, even where it has not succeeded on all heads of claim.[2] That said, the court has an absolute and unfettered discretion in relation to costs,[3] and, in appropriate circumstances, may examine the realities of the litigation and attempt to achieve substantial justice as between the parties on the matter of costs.[4] An underlying justification is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs in issue.[5]
[2]Ritter v Godfrey [1920] 2 KB 47; Oshlack v Richmond River Council (1998) 193 CLR 72, 97–8, 124.
[3]Supreme Court Act1986 (Vic) s 24(1).
[4]Spotless Group Limited v Premier Building & Consulting Pty Ltd (rec appt) & Anor [2008] VSCA 115, [14].
[5]Commonwealth of Australia v Gretton [2008] NSWCA 117, [121].
Mr Elliott submitted that the well-established proposition presently relevant to that discretion was that a court will generally not make multiple sets of adverse costs orders in favour of successful parties who, despite having the same interest in the litigation, have been separately represented.
So in Statham v Shephard (No 2) (‘Statham’), the court stated:
[T]he court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases. I would add to this basic proposition three provisos.
In the first place, if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between defendants.
Secondly, there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arm’s length during the general course of litigation.
Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.[6]
[6](1974) 23 FLR 244, 246–7. See also Taylor v Owners - Strata Plan No 11564 (No 2) [2013] NSWCA 153, [6]; HP Mercantile Pty Ltd v Hartnett [2017] NSWCA 79 (‘HP Mercantile’).
In Van Eeden v Henry (‘Van Eeden’), Spigelman CJ described the exception in more general terms:
One of the powers which the Court must exercise in such manner, is the power to award costs. In my opinion when exercising the discretion to award costs the Court should only do so in a way which accepts double representation where the requirements of justice require that to be done. I accept that such cases will arise but, in my opinion, would do so rarely.[7]
Later, his Honour said:
The exercise of the costs discretion should be directed to giving the litigant and his insurer an equal incentive to ensure that only one set of legal representatives are involved… That incentive would arise if, in the normal case, a successful plaintiff would only receive one half of his or her costs if he or she were separately represented in the capacity of a defendant. Similarly a successful defendant would only receive one half of his or her costs.[8]
[7]Van Eeden v Henry (2005) 62 NSWLR 301, 303 [33] (‘Van Eeden’).
[8]Ibid, 308 [67].
In Ex parte McCay, the court stated:
There are two applications before us, both arising out of the same paragraph, by two of the persons whose actions may be prejudicially affected. Each of those persons was, of course, entitled to bring the matter to the notice of the Court. But it does not follow that, if an order for costs should be made against the respondent, it should necessarily include costs of both applications… In the present case, it must have been manifest by the time that the rules nisi were granted that there was no possible cleavage between the two applicants, and no reason why they should not thenceforth join forces in presenting their applications to the Court, apart, of course, from a natural desire to be represented each by counsel of his own choice. But this is a desire that they are not entitled to indulge at another person’s expense, in the absence of some good reason.[9]
[9](1936) 36 SR (NSW) 592.
Mr Elliott submitted that either the SPR or the Contradictor bore the onus to justify a sufficient basis for departing from the general principle,[10] which would require making out one of the exceptions recognised in Statham. No conflict or potential conflict existed between them. Accordingly, as the summons was directed to the SPR, Mr Elliott ought only be ordered to pay his costs. Alternatively, if the Contradictor was found to be entitled to its costs, the order must be one that Mr Elliott pay the costs of the SPR and the Contradictor on the basis that they be treated as having had a single counsel and solicitor team.
[10]HP Mercantile (n 6), [14]–[15], [17].
Mr Elliott submitted that my decision not to grant the Contradictor leave to appear on the application for leave to appeal my decision on the summons supported his contention that the Contradictor and the SPR each had the same interest in the litigation.
The SPR submitted that that Mr Elliott had interpreted the exceptions to the general principle too narrowly, and he relied on the broader expression of the exception in Van Eeden. The SPR and the Contradictor each have played distinct roles in the litigation. Initially, the SPR’s purpose was to protect the interest of debenture holders and to assist the court in understanding relevant factual matters, while the Contradictor opposed the claims for legal costs and funding commission sought by the second plaintiff (‘AFP’), while advancing contentions that group members be compensated for alleged breaches of overarching obligations under the Civil Procedure Act 2010 (Vic), and other obligations.[11]
[11]Since the commencement of the trial, AFP has abandoned its claim for a payment of $12.8 million in funding commission, and has substantially abandoned its claim for $4.75 million in legal costs.
As events have unfolded in the course of the remitter, the SPR has taken on a further obligation: to consider the question of recovery of sums that may ultimately be awarded in debenture holders’ favour. The SPR and the Contradictor each act, in different ways, for the benefit of group members/debenture holders, and each also acts in the broader public interest to assist the court to determine serious issues concerning the proper administration of justice.
The SPR invited rejection of Mr Elliott’s submission that the recusal application was limited to the SPR’s application for non-party cost orders. Mr Elliott was joined as a party to the remitter itself and not just joined for the purpose of that application. Any recusal would have consequences for the ongoing conduct of the remitter. Mr Elliott also sought more than just recusal, having suggested in his written submissions that the court could ‘recall’ its order joining him to the proceeding. If granted, that ‘recall’ could have affected the conduct of and outcome in the remitter broadly, when the interests of the SPR and the Contradictor may not necessarily have aligned.
The SPR raised two further matters. First, Mr Elliott did not object to the involvement of both the Contradictor or the SPR in the application. Second, a relevant consideration in the court’s exercise of discretion ought include that the speed the summons was brought on and determined, together with then-extant timetabling orders in the remitter generally, meant that there was not sufficient time to facilitate any joinder of representation between the SPR and the Contradictor.
The Contradictor rejected the contention that it had acted beyond its remit. It had been provided with a copy of the summons and acted upon it in a manner that was appropriate, having regard to its role, the relief sought, and the direct impact that the application may have had on the conduct and disposition of the remitter proceeding.
I am satisfied that it is not unreasonable that Mr Elliott should bear the costs of each of the SPR and the Contradictor for the following reasons.
First, the foundational principle of the rule on which Mr Elliott relies is not met. The Contradictor and the SPR did not have the same interest in the application, except in simplistic terms that they each opposed it.
Mr Elliott was initially a party to the SPR’s application for a non-party costs order that was returnable at a directions hearing in the remitter proceeding. The court of its own motion joined him to the proceeding as the fifth defendant, which necessarily extended his involvement in the proceeding beyond the SPR’s application. Consideration of whether Mr Elliott might have breached overarching obligations, as elsewhere explained,[12] arose from evidence before the court on the remitter and had little to do with the SPR’s non-party costs application. Mr Elliott became a defendant to applications for relief being pressed by the Contradictor on behalf of group members. Before he was named as a party to the SPR’s application, Mr Elliott knew that the court had appointed a contradictor to represent group member’s interests in the funds remaining for distribution following settlement of the group proceeding.
[12]Bolitho & Anor v Banksia Securities Limited & Ors (No 10) [2020] VSC 524.
Although the summons was on its face directed only to the SPR, a copy of it was served on the Contradictor ‘as a courtesy’. Mr Elliott could not have reasonably considered that he was entitled to notify the Contradictor of his application in this way. Plainly, the relief sought by Mr Elliott on his application directly affected the interests represented by the Contradictor. The summons sought that I recuse myself from hearing and determining, in addition to the SPR’s non-party costs summons:
a.any application against the Fifth Defendant for orders under section 29 of the Civil Procedure Act 2010 (Vic) in respect of any matter the subject of or connected with the Contradictor’s Revised List of Issues dated 21 July 2020;
b.any application in which it is alleged that in relation to this proceeding (Action No S ECI 2012 07185) the Fifth Defendant has breached any “overarching obligation” imposed upon him by the Civil Procedure Act 2010 (Vic).
Given the scope of the relief Mr Elliott sought, it would have been inappropriate for the court to have heard the summons in the absence of the Contradictor. The summons identified that the Contradictor had a real interest in the application, because it was not confined to recusal in respect of the SPR’s non-party costs application. In substance, recusal was sought from the hearing and determination of the Contradictor’s allegations against Mr Elliott. In particular, the application was directed at the case being advanced by the Contradictor. So much is made clear from the terms of the summons. The requirements of justice required that the Contradictor contest the summons.[13]
[13]Van Eeden (n 7), 303 [33].
The Contradictor ought to have been formally served with the application as required under the Rules—not merely ‘as a courtesy’—and was entitled to appear on its hearing, as it did without objection. It is not, as he would have it, for Mr Elliott to dictate who is permitted to respond to his summons by restricting service to exclude persons who might be affected by the relief he seeks. As already stated, the court could not fairly determine the application in the absence of the Contradictor. Had the Contradictor not been present at the hearing of the application, its absence would have been raised by the court at the outset.
Secondly, Mr Elliott’s characterisation was that the SPR and the Contradictor had indulgently opted for separate legal representation on the application. That submission failed to properly understand not only the Contradictor’s role, but also the role of the SPR. While the Contradictor has the usual rights and powers of a party,[14] it is not one in the usual sense. The Contradictor has been appointed[15] to ensure that, in the absence of a proper party,[16] there is a real contest between conflicting interests where the outcome will be a res judicata affecting unrepresented group members/debenture holders.[17] By the very nature of the role, a contradictor must act independently and, absent direction from the appointing judge, cannot abrogate its duty to the court to another party. Mr Elliott’s submission that the SPR and the Contradictor made a conscious and deliberate decision to (unnecessarily) maintain separate representation demonstrated a misunderstanding about the Contradictor’s role and that of the SPR, as well as the circumstances that led to the appointment of each in the first place.
[14]Bolitho v Banksia Securities Ltd (No 6) [2019] VSC 653, [123] (‘Bolitho No. 6’).
[15]After a finding by the Court of Appeal that the court had erred by not appointing a contradictor for the original approval application: Botsman v Bolitho (2018) 57 VR 68, 136 [336] (‘Botsman’).
[16]Bolitho No. 6 (n 14), [75]–[76].
[17]Ibid [110].
Neither can the SPR be characterised as a ‘normal’ litigant defending his private interests. The SPR was appointed by the Supreme Court of New South Wales to pursue the causes of action that resulted in the settlement, aspects of which are on remitter to this court.[18] It is significant that neither the Contradictor nor the SPR is acting in furtherance of any private interest.
[18]In the matter of Banksia Securities Limited (in liq) (receivers and managers appointed) [2019] NSWSC 1899, [14]; Botsman (n 15), 126 [270].
It should be noted that the costs of each of the SPR and the Contradictor will fall on the group members/debenture holders. It was reasonable for the SPR as the party served with the summons to incur costs in opposing it. It was also reasonable for the Contradictor to incur costs opposing an application that might have significant consequences for group members/debenture holders. I would add that there was no substantive repetition in the submissions of counsel for the SPR and the Contradictor. Put another way, I saw no evidence of duplication of costs by either the SPR or the Contradictor during the course of the application before me.
Thirdly, Mr Elliott’s mischaracterised the nature of his application. As already noted, it was not an application where the orders sought would only affect the SPR in respect of its application for non-party cost orders. It was not an application with confined and discrete consequences. Rather, it was, as the SPR submitted, an application that struck at the very heart of the ongoing conduct of the remitter. Made towards the completion of the trial, its potential to affect the further conduct of the proceeding had implications for every party to the proceeding. That is why, as said above, it was erroneous to contend that provision of a copy of the summons ‘as a courtesy’ was relevant on the issue of costs.
Fourthly, Mr Elliott’s application, had it succeeded, could have had significant implications for the Contradictor in the future conduct of the proceeding. The Contradictor makes overlapping allegations against, and seeks relief from six parties, of whom Mr Elliott is one. If recusal was appropriate, as Mr Elliott had suggested, it would have been necessary to consider the consequences. As the SPR noted, Mr Elliott proposed that the order joining him be recalled. Alternatively, another judge might have been required. This would have raised complex issues for assessment, such as whether the remitter was apt for bifurcation or ought be referred to another judge in its entirety, and the issues of delay, cost and prejudice that would have been inevitably consequent on those considerations. The SPR rightly submitted that he may well have had different positions on those issues from the Contradictor.
Fifthly, I accept the SPR’s submission that the compressed timetable in which the application was made, heard and determined, together with the pressure of the existing timetabling orders, are matters that support the exercise of the court’s discretion to make costs orders in favour of the SPR and the Contradictor. At this late stage of the remitted proceeding, with the prospect of substantial costs being thrown way and the complexity of the issues that might have followed on a successful recusal application, it was not inappropriate for each of the SPR and the Contradictor to separately appear at the hearing of the summons. That is not to say that the same reasoning would apply to the application for leave to appeal. It would not.
Finally, it is relevant that it was Mr Elliott, and not the SPR or the Contradictor, who did not act reasonably. It was not reasonable for Mr Elliott not to have put his objection to the prospect of duplicated costs when the Contradictor first participated in the application. The consequence of not considering Mr Elliott’s contentions in a timely fashion would now be, if they were accepted, to throw a burden from the costs orders onto group members/debenture holders.
There is no evidence that Mr Elliott placed either the SPR or the Contradictor on notice of such an objection prior to the hearing of the summons.[19] There was ample opportunity for him to have done so. Not only did Mr Elliott’s senior counsel have the benefit after the directions hearing of time to consider a submission put by the Contradictor against him appearing on the recusal application by reference to Spincode Pty Ltd v Look Software Pty Ltd,[20] Mr Elliott had time to consider the cost implications knowing that he would be served with submissions in opposition from both the Contradictor and the SPR. Despite these opportunities, very experienced senior counsel saw no reason to raise the possibility of costs duplication. The terms of the summons make clear why that objection was not taken until after I had ruled on the application.
[19]Compare HP Mercantile (n 6), [9].
[20](2001) 4 VR 501.
It was only when the Contradictor raised the issue of it requiring leave to appear on the application for leave to appeal that Mr Elliott raised the prospect of duplicated costs being incurred on that application. It was not reasonable for Mr Elliott not to have taken the point he now wishes to take at a time when the costs exposure of group members might have been minimised, or better managed.
I will order that the fifth defendant pay the costs of each of the SPR and the Contradictor to be assessed on a standard basis.
SCHEDULE OF PARTIES
S CI 2012 07185
BETWEEN:
| LAURENCE JOHN BOLITHO | First Plaintiff |
| AUSTRALIAN FUNDING PARTNERS PTY LIMITED | Second Plaintiff |
| - and - | |
| JOHN ROSS LINDHOLM IN HIS CAPACITY AS SPECIAL PURPOSE RECEIVER OF BANKSIA SECURITIES LIMITED (ACN 004 736 458) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) | First Defendant |
| NORMAN O’BRYAN SC | Second Defendant |
| MICHAEL SYMONS | Third Defendant |
| ANTHONY ZITA AND PORTFOLIO LAW PTY LTD | Fourth Defendant |
| ALEXANDER CHRISTOPHER ELLIOTT | Fifth Defendant |
| PETER TRIMBOS | Sixth Defendant |
1
12
0