Boral Resources (Vic) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2)
[2014] VSC 528
•20 October 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 00928
| BORAL RESOURCES (VIC) PTY LTD AND OTHERS (according to the attached schedule) | Plaintiffs |
| v | |
| CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION | Defendant |
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JUDGE: | Derham AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 October 2014 | |
DATE OF JUDGMENT | 20 October 2014 | |
CASE MAY BE CITED AS: | Boral Resources (Vic) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 528 | |
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PRACTICE AND PROCEDURE - Costs - Unsuccessful application by defendant to set aside judgment – Whether costs should be awarded on an indemnity basis - Whether an immediate taxation order should be made - Impact of the Civil Procedure Act 2010, ss 20 and 25 - Supreme Court (General Civil Procedure) Rules 2005, r 63.20.1.
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APPEARANCES: | Counsel | Solicitors |
| For the First to Sixth Plaintiffs | Mr D Ternovski | Herbert Smith Freehills |
| For the Defendant | Ms M Richards SC with Ms P Knowles | Slater & Gordon |
HIS HONOUR:
Introduction
On 10 September 2014 I made orders in this proceeding:
(a) Dismissing the application of the defendant by Summons filed on 8 November 2013 to set aside a default judgment entered on 20 May 2013;
(b) Reserving the plaintiffs’ costs of resisting the application and granting liberty to apply;
(c) Directing the plaintiffs to file any submissions they wished to make about the costs of the Summons by 2 October, and any reply by the defendant by 9 October 2014; and
(d) Fixing 16 October 2014 as the day for argument as to the costs and adjourning the plaintiffs’ Summons for an assessment of damages filed on 14 October 2013 for directions only to the same day.
The plaintiffs have filed an Outline of Submissions seeking to have an order for costs in their favour on an indemnity basis and for an order pursuant to r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2005 (‘Rules’) that the costs, whether they be awarded on an indemnity or a standard basis, may be taxed immediately. The defendant has filed an Outline of Submissions resisting both orders sought by the plaintiffs.
The plaintiffs also seek directions as to the future management of the assessment of damages.
Background
The plaintiffs are all subsidiaries of Boral Limited and manufacture and supply building materials for use in Victorian construction projects. The defendant is an industrial association registered under the Fair Work (Registration of Organisations) Act 2009 (Cth).
On 26 February 2013, the first and second plaintiffs commenced this proceeding by filing a Writ and Indorsement of Claim, together with a Summons returnable the next day supported by various affidavits.[1] Application was made for orders restraining the defendant from (in short) procuring persons employed or engaged to work at certain construction sites that involved working with concrete supplied by the first and second plaintiffs, to fail or refuse to perform that work. Other ancillary orders were also sought. The other plaintiffs were added later and the claims were expanded to encompass other building materials supplied by them.
[1]Affidavit of Alexandra Louise Terrill sworn 22 November 2013 (‘Fourth Terrill Affidavit’), [5].
Notice of the application was given to the defendant, and it was served with the Writ, Summons and all affidavits in support of the injunction application, but the defendant did not appear in the interlocutory stages of the proceeding until 9 September 2013, after contempt proceedings were commenced against it.
The defendant became aware of the default judgment when it was served with the Summons for assessment of damages on 14 October 2013.[2] That Summons came before the Court for directions on 15 October 2013 and directions were then given for the defendant to apply by Summons by 8 November 2013 to set aside the judgment. The defendant duly filed its Summons on that day. The bases on which it sought to set aside the default judgment were, mainly, that it was irregular and should be set aside as a matter of right. On 10 September 2014 I delivered reasons for refusing the defendant’s application and dismissed their Summons. The defendant has appealed that order.
[2]Affidavit of Bradley Colin Annson affirmed 9 October 2014. This affidavit was filed to address matters referred to in the reasons for judgment on the defendant’s Summons to set aside the default judgment: See Boral Resources (Vic) Pty Ltd v Construction, Forestry, Mining and Energy Union [2014] VSC 429 at [118]-[122].
Plaintiffs’ submissions
Indemnity costs
The plaintiffs advanced four reasons to support their application that their costs of the defendant’s Summons should be paid on an indemnity basis, as follows:
(a) their costs were incurred because the defendant breached its obligations under the Civil Procedure Act 2010 (CPA) by failing to participate in the proceeding for many months, thereby breaching the overarching obligations to cooperate, act promptly and minimise delay (see ss 20 and 25 of the CPA);
(b) one of the alleged irregularities on which the defendant relied was hopeless and should not have been pursued. That was the claim that the defendant was not required to file a defence because it had not entered an appearance. That ground was rejected essentially because it ignored the Court’s order which required the filing of a defence;
(c) the other irregularity, that the statement of claim did not disclose a cause of action, was made hopelessly late, the statement of claim having been served on 19 April 2013; and
(d) because a defendant which succeeds in setting aside a regularly entered default judgment may be ordered to pay costs on an indemnity basis, where a defendant has failed to set aside a judgment on the basis that it was irregularly entered, that defendant should be in no better a position.
It was further submitted by the plaintiffs that the evidence adduced in support of its case in response to the defendant’s application, combined with the failure of the defendant to offer any explanation for its default in complying with the orders of the Court, show that the only reasonable conclusion to be drawn is that the defendant deliberately did not cooperate with the plaintiffs or the Court in connection with the conduct of that proceeding and did so for some ulterior motive.
Immediate Taxation
The plaintiffs advanced several reasons to support their application pursuant to r 63.20.1 that the costs be taxed immediately as follows:
(a) there is a prospect of considerable delay in completing the proceeding;
(b) the issue the subject of the failed application by the defendant is discrete;
(c) the defendant has engaged in unsatisfactory conduct in connection with the proceeding.
Future Management
The plaintiffs submitted that, on the Summons for an assessment of damages, orders should be made for the assessment before an Associate Judge on a date to be fixed and for the filing of affidavits by the plaintiffs and by the defendant, with a view to the matter being ready for hearing early next year.
It was noted that the appeal filed by the defendant does not stay the execution of the default judgment and that the plaintiffs are entitled to the fruits of the judgment. The plaintiffs submitted that:
(a) to hold off the process of preparing for an assessment of damages until after the appeal would be to grant a de facto stay of the default judgment; and
(b) there was no suggestion that if the appeal was successful the plaintiffs were not in a position to pay costs thrown away by the defendant in relation to the assessment of damages should those costs be wasted.
I was taken to the decision in Thiess Contractors Pty Ltd v Terokell Pty Ltd.[3] In that case, a similar circumstance faced the Court and his Honour noted that the plaintiff and first defendant, who wished to proceed to assess the quantum of the claim while an appeal process was pending on liability, will at least face the risk of paying the costs of the parties appealing if they succeed, being the costs of preparing for the quantum determination.
[3]Unreported, Supreme Court of Queensland, Ambrose J 17 February 1993, BC9304362.
Defendant’s Submissions
Indemnity Costs
The defendant submitted that there was nothing in its conduct in relation to the Summons to set aside the default judgment that constituted special circumstances capable of justifying an order for costs on an indemnity basis.
The defendant pointed to the fact that it acted promptly after receiving notice of the default judgment on 14 October 2013.[4] The Summons to set aside the default judgment was filed within the time ordered by Mukhtar AsJ. Indeed the timetable set by Mukhtar AsJ on 15 October 2013 was, I was told, arrived at with the agreement of the plaintiffs. The hearing of the Summons proceeded on the day for which it was listed and was completed within the time allowed.
[4]Since the judgment the defendant has filed an affidavit of Bradley Colin Annson affirmed 9 October 2014 which discloses that the plaintiff’s did not give notice of the default judgment to the defendant until the application was made for the assessment of damages.
The defendant submitted that:
(a) whilst the defendant was unsuccessful in its application, it was not dismissed out of hand;
(b) there is no basis for any suggestion of dishonesty (and none has been advanced) or highhandedness on the part of the defendant.
(c) in relation to the four reasons for the plaintiffs’ application for indemnity costs, none include any special or unusual feature warranting the order sought;
(d) the alleged breach of the defendant’s obligations under the CPA in failing to participate in the proceeding cannot be taken into account in deciding to award indemnity costs against the defendant in its application to set aside the default judgment. The relevant considerations must be confined to or relate to costs incurred as a result of the defendant’s Summons. The defendant’s conduct prior to that time is not relevant. Indeed, costs prior to the defendant’s Summons had been reserved on many occasions;
(e) as noted above the defendant acted promptly once it was served with the default judgment on 14 October 2013;
(f) the non-appearance of the defendant at Court prior to the application to set aside the default judgment has not increased the plaintiffs’ costs;
(g) the submission made by the plaintiffs that the defendant’s behaviour is all the more serious because the defendant is a large, well-resourced and advised corporation is unsupported by any evidence. The authority of the case cited by the plaintiffs, SDS Digger Tools Pty Ltd v Rear,[5] relates to commercial litigation between well-resourced companies which were unnecessarily prolonged where both parties were represented for the entire proceeding. By contrast, the defendant’s application to set aside the default judgment was prosecuted efficiently and in accordance with the timetable set by the Court;
[5][1999] FCA 835, at [34]-[35].
(h) the submission that the first ground in the defendant’s Summons was hopeless and should not have been pursued is not supported by the reasons for judgment. The fact that the defendant has not appealed that part of the decision is not a basis for making an order for indemnity costs;
(i) the submission that the defendant’s second ground in its Summons was hopelessly late is not a relevant basis for an award of indemnity costs. The Court’s consideration of this ground was lengthy and it was not suggested that the ground was otherwise hopeless; and
(j) the fourth ground relied upon by the plaintiffs is that in several cases in which a defendant who successfully applied to set aside a regularly entered default judgment was ordered to pay the plaintiffs costs on an indemnity basis. The defendant submitted that there is no general rule to be drawn from these cases. Each case turned on its own circumstances.
Immediate Taxation
Rule 63.20.1 establishes the default position that interlocutory costs orders are not to be taxed until the proceeding is concluded, unless the Court orders that the costs may be taxed immediately. This avoids multiple taxations and leaves the taxation of costs until all issues of costs between the parties have been resolved.[6]
[6]Dale v Clayton Utz (No.3) [2013] VSC 593 at [58].
In Setka v Abbott (No.2),[7] the Court of Appeal summarised the factors that may warrant an order for immediate taxation of costs as one or more of the following:
[7][2013] VSCA 376, at [27]; See also Dale v Clayton Utz (No.3) [2013] VSC 593 at [65].
(a) there is a prospect of considerable delay in completion of the proceedings;
(b) the issue the subject of the interlocutory order is discrete from what will finally require determination;
(c) the party against whom the order was made has been guilty of unsatisfactory conduct, that is conduct that was unreasonable, reprehensible or involving a want of competence and diligence.
The defendant submitted that none of those circumstances were applicable in this case:
(a) although there has been an appeal against the dismissal of the defendant’s Summons, there has been no stay of the default judgment and there is no application to stay the steps necessary to be undertaken for the purposes of having an assessment of damages in consequence of the entry of the default judgment;
(b) the plaintiffs have requested an expedited hearing of the Appeal and it is listed for directions on 21 October 2014;
(c) the suggestion by the plaintiffs that it will only be in the High Court that the defendant can be successful in its contention that the decision of the New South Wales Court of Appeal in Sid Ross Agency Pty Ltd v Actors and Announcers Equity Association of Australia[8] is not correct. A single judge of the Victorian Supreme Court may be persuaded that the decision in Sid Ross is clearly wrong. There is presently no basis for the assertion that the defendant intends to pursue the appeal all the way to the High Court;
[8][1971] 1 NSWLR 760 at 766.
(d) the issues in the defendant’s Summons to set aside the default judgment are not discrete from the balance of the proceeding. That is, they are not wholly unrelated to the substantive dispute between the parties.[9] The second ground of the Summons is quite central to the cause of action relied upon by the plaintiff and the general nature of the pleading and the lack of particulars will be issues in the assessment of damages;
(e) there was no warrant to conclude that the conduct of the defendant in relation to the application to set aside the default judgment was reprehensible, unreasonable or wanting in competence or diligence. There is therefore no justification to depart from the default position; and
(f) the demands of justice do not warrant an immediate taxation. There is no suggestion, nor evidence, that the plaintiffs require an immediate taxation in order to continue to fund the prosecution of the proceeding.
[9]Dale v Clayton Utz (No.3) [2013] VSC 593, at [20].
Future Management
The defendant submitted that the directions in relation to the proceeding for an assessment of damages should have an eye to the fact that there is an appeal on foot against my refusal to set aside the default judgment. The defendant did not submit that the assessment of damages should be stayed altogether. It did submit, however, that it would facilitate the fair and just hearing of that assessment, as well as the Court’s disposition of it, if particulars of the damages claimed were given before any orders were made for the filing of evidence, whether by affidavit or otherwise. This is because the defendant does not know the scope of the claimed damages, how many construction sites and how many contracts or deliveries of building materials are proposed to be the subject of the claimed damages. That arises from the very general pleading of the causes of action and the absence of particulars of such matters.
Consideration
Indemnity Costs
Under s 24 of the Supreme Court Act 1986 the power to award costs is in the discretion of the Court. Whilst the discretion is absolute and unfettered, it has to be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation: see for example Latoudis v Casey.[10]In the exercise of the discretion, practices or guidelines have developed: Oshlack v Richmond River Council.[11] These practices or guidelines are not legal rules that confine the exercise of the discretion: Norbis v Norbis;[12] Oshlack v Richmond River Council.[13]
[10](1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72 at 86 at [34].
[11](1998) 193 CLR 72 at 86 at [35].
[12](1986) 161 CLR 513 at 537.
[13](1998) 193 CLR 72 at 86 at [35].
Although costs are in the discretion of the Court, there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary a successful litigant should receive his or her costs: Ritter v Godfrey;[14] Milne v Attorney-General for the State of Tasmania.[15] It is not, however, a legal rule devised to control the exercise of the discretion: Oshlack v Richmond River Council.[16] The defendant conceded that the general rule applied in this case so that it was appropriate that the defendant be ordered to pay the plaintiffs’ costs, but only on a standard basis.
[14][1920] 2 KB 47 at 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732 at 809.
[15]((1956) 95 CLR 460 at 477.
[16](1998) 193 CLR 72 at 86 at [35].
The purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion: Latoudis v Casey;[17] Ohn v Walton.[18]
[17](1990) 170 CLR 534 at 563 per Toohey J, Mason CJ agreeing; McHugh J at 567.
[18](1995) 36 NSWLR 77 at 79.
The exercise of the discretion to award costs over and above the ordinary is exceptional, being reserved for cases where the losing party has engaged in unmeritorious, or deliberate or high-minded or other improper conduct such as to warrant the Court showing its disapproval and at the same time preventing the successful party being left out-of-pocket.[19]
[19]Australian Guarantee Corp Ltd v De Jager [1984] VR 483 at 502; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24; Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants PtyLtd (1988) 81 ALR 397 at 401.
The most famous statement of the ‘unmeritorious’ ground for an award of costs on an indemnity basis in recent times was made by Woodward J in Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants Pty Ltd[20] as follows:
I believe that it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action had 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.
[20](1988) 81 ALR 397 at 401.
In Ugly Tribe Co Pty Ltd v Sikola,[21] Harper J said that circumstances in which it had been held proper to order indemnity costs, characterised as special circumstances, included the following (citations omitted):
[21][2001] VSC 189 at [7].
(a) the making of an allegation, known to be false, that the opposite party is guilty of fraud;
(b) the making of an irrelevant allegation of fraud;
(c) conduct which causes loss of time to the Court and to other parties;
(d) the commencement or continuation of proceedings for an ulterior motive;
(e) the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law; and
(f) the failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.
In my view the conduct of the defendant before it made its application to set aside the default judgment is not relevant to the question of whether costs on an indemnity basis should be ordered in respect of that application. Although that conduct may be a breach of the defendant’s overarching obligations under ss 20 and 25 of the CPA, it is relevant only to the costs of the proceeding overall, as distinct from the costs on the defendant’s Summons.
These potential breaches of the CPA may yet be significant hereafter, but they do not bear upon the discretion as to costs on the defendant’s Summons to set aside the default judgment. True it is that there would not have been an occasion to set aside the judgment had the defendant participated in the proceeding earlier. It is also true that the conduct of the defendant that led to the default judgment and, in turn, to the application to set it aside the judgment, has put the plaintiffs to the cost and expense of defending the application. But the costs of the application to set aside the default judgment are separate and discrete from the costs of the proceeding as a whole.
The plaintiffs submitted that the first basis for the claimed irregularity of the judgment (the no appearance ground) was hopeless and should not have been pursued. In effect they say that the defendant ought to have known that it was hopeless and dropped it. They did not submit, however, that it involved a wilful disregard of known facts or clearly established law.
In my view, this contention is not supported by the reasons for judgment. As the defendant pointed out, the basis on which I concluded that there was no irregularity on this ground was set out in paragraphs [29]-[39] of my reasons. In the course of doing so I noted:
I pointed out in argument to Ms Doyle SC, who appeared with Ms M Richards and Ms P Knowles, for the defendant, that it seemed that both plaintiffs and defendant bypassed the question that lies at the heart of this aspect of the application, namely, the status of the order made by the Judge who ordered the delivery of the defence. The effect of the argument of the defendant is that order was ineffective, and the defendant was not bound by the order unless and until it entered an appearance. As Ms Doyle put it, the making of the order for a defence cannot have cured the incompetence of the defendant taking any step in the proceeding without first filing an appearance.
The argument advanced by the defendant, although unsuccessful, could not be said to be without substance. It relied, albeit in a technical way, on the operation of the Rules. It had, in addition, an air of technical substance made more plausible by the erudite submissions of the Senior Counsel for the defendant. I tend to agree that mature consideration of the point shows it to have been hopeless, but I am not persuaded that this should have been known to the defendant’s advisors at the outset. Experience tells that some apparently difficult points sometimes succeed.
I also agree with the defendant’s submissions that:
(a) The fact that the defendant has not appealed that part of the decision is not a basis for making an order for indemnity costs;
(b) The plaintiffs’ contention that the second ground in its Summons was hopelessly late is not a relevant basis for an award of indemnity costs. It really amounts to revisiting the failure of the defendant to participate in the proceeding before it did as a ground for an award of indemnity costs on the Summons. This ground was considered at some length in my reasons, as was needed having regard to the extensive submissions made by the parties, and it was not suggested by the plaintiffs either at the time the point was argued or in this application for costs that the ground was hopeless; and
(c) The fact that a defendant who succeeds in setting aside a default judgment may be ordered to pay the plaintiff’s costs on an indemnity basis turns on the particular circumstances of the case and can give rise to no general rule that assists in this case.
Immediate Taxation
There is force in the plaintiffs’ submission that there is a prospect of lengthy delay in the resolution of the proceeding because:
(a) The defendant has appealed that part of my decision concerning the sufficiency of the statement of claim; and
(b) Having regard to the reasons I gave for finding that the statement of claim did disclose a cause of action in respect of the tort of intimidation, it is unlikely that a contrary decision can be reached on appeal without the appeal going to the Court of Appeal, and possibly, to the High Court.
It is possible, but unlikely, that a Judge of the Court could be persuaded that the decision in Sid Ross is clearly wrong, having regard to the law as it has developed in England and elsewhere. It is also possible that if the defendant fails in its appeal, it will take the matter no further. These considerations, however, are insufficient, in my view, to negative the prospect of lengthy delay in the resolution of the proceeding.
The default judgment issue is, in my view, discrete from the other matter presently remaining in the proceeding, namely the assessment of damages. The defendant submitted that the pleading of the claim of intimidation is related to the dispute yet to be determined, namely the assessment of damages. That is true. But that does not connect the two events. The fact that the general nature of the pleading and the lack of particulars may be issues in the assessment of damages does not mean that the determination of the application of whether or not to set aside the default judgment on the ground that the statement of claim does not disclose a cause of action is related to the assessment of damages.
The failure of the defendant to participate in the proceeding and to comply with the obligations imposed on it as a party under the CPA may be evidence of unsatisfactory conduct in the proceeding overall, but for the reasons I have given above, it is not relevant to the costs of the defendant’s Summons to set aside the default judgment.
It can be seen from the above assessment that both the anticipated delay and the discrete nature of the matter before me favour an immediate taxation order. For these reasons it seems to me that the default position should not apply and it is therefore appropriate to make an order that there be an immediate taxation of the costs of the defendant’s summons filed on 8 November 2013.
Future Management
In my view it will facilitate the fair and just hearing of the assessment of damages, as well as the Court’s disposition of the matter, if particulars of the damages claimed were given before any orders were made for the filing of evidence. This is desirable, possibly necessary, because the statement of claim does not give any indication of the scope of the claimed damages, how many construction sites and how many cancelled or frustrated contracts or deliveries of building materials are proposed to be the subject of the assessment. The very general pleading of the causes of action, and the absence of particulars, makes this course a desirable one in the interests of the parties and the Court.
In addition, the Court will be assisted if orders are made that require the plaintiffs to identify the number of witnesses it proposes to call and the estimated time of the hearing, so far as its case is concerned. It will then be necessary to bring the matter back for further directions when the date for the hearing of the appeal is known and the scope of the hearing of the assessment of damages can be understood.
The plaintiffs had proposed that they would have their affidavits in support of their assessment of damages ready by 19 December 2014. In my view they should be able to give particulars of the damages sooner than that. The plaintiffs also indicated that they desire to issue subpoenas under Order 42A of the Rules for the purpose of requiring the production of documents relevant to the assessment of damages. I will make orders requiring particulars by 5 December 2014 and that any subpoenas under Order 42A be issued by 31 October 2014.
Conclusion
For these reasons it seems to me that the appropriate orders are:
(a) that the defendant pay the plaintiffs’ costs of the defendant’s Summons filed 8 November 2013 on a standard basis and that the costs be taxed immediately;
(b) that any subpoenas under Order 42A that the plaintiffs desire to issue, be issued by 31 October 2014.
(c) that the plaintiffs shall file and serve particulars of their damages by 5 December 2014.
(d) that the plaintiffs’ Summons filed 14 October 2013 is adjourned to a date to be fixed.
(e) reserve liberty to the parties to apply on the giving of two days’ notice to the other party.
(f) the costs of the plaintiffs’ Summons filed 14 October 2013 are reserved.
I notified the parties at the conclusion of the hearing on 16 October 2014 that I would publish these reasons in open Court without requiring them to attend, and deliver the reasons to their solicitors by email. Should the orders referred to above give rise for the need for further submissions, the proceeding can be listed at short notice in accordance with the orders set out above.
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SCHEDULE OF PARTIES
| BORAL RESOURCES (VIC) PTY LIMITED | First Plaintiff |
| ALSAFE PREMIX CONCRETE PTY LTD | Second Plaintiff |
| BORAL BRICKS PTY LTD | Third Plaintiff |
| BORAL MASONRY PTY LTD | Fourth Plaintiff |
| BORAL AUSTRALIAN GYPSUM LTD | Fifth Plaintiff |
| BORAL WINDOW SYSTEMS LTD | Sixth Plaintiff |
| - and - CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION | Defendant |
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