Bronze Wing Ammunition Pty Ltd v Australian Sporting Arms Pty Ltd and Anor (Ruling)

[2016] VCC 955

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

 Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-14-06278

BRONZE WING AMMUNITION PTY LTD (ACN 142 151 291))	Plaintiff
v
AUSTRALIAN SPORTING ARMS PTY LTD (ACN 152 375 570)	First Defendant
and
BRANT IAN WOODWARD	Second Defendant

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JUDGE:	HIS HONOUR JUDGE O'NEILL
WHERE HELD:	Melbourne
DATE OF HEARING:	4 July 2016
DATE OF RULING:	11 July 2016
CASE MAY BE CITED AS:	Bronze Wing Ammunition Pty Ltd v Australian Sporting Arms Pty Ltd & Anor (Ruling)
MEDIUM NEUTRAL CITATION:	[2016] VCC 955

RULING
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Subject:  COSTS

Catchwords:             Application for additional costs consequent upon the joining of the second defendant by the plaintiff – application for indemnity costs; alternatively, costs on a standard basis – overarching obligations of the Civil Procedure Act 2010 – conduct of the defendants in amending a Defence as to the appropriate party with whom the plaintiff made agreement

Legislation Cited:       Civil Procedure Act 2010, s16, s17, s18, s19, s20, s21, s23, s28, s29, s30(2)

Cases Cited:Setka v Abbott [2013] VSCA 345; Yarra Australia Pty Ltd v Oswal (2013) 41 VR 302; Expense Reduction Analysts Group Pty Ltd & Ors v Armstrong Strategic Management and Marketing Pty Ltd & Ors (2013) 250 CLR 303; Oshlack v Richmond River Council (1998) 193 CLR 72; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354; Harrison v Schipp [2001] NSWCA 13; Commonwealth Bank of Australia v Saleh & Ors [2007] NSWSC 990

Ruling:  Application granted – second defendant to pay part of the plaintiff’s costs on an indemnity basis.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Connors	Rothwell Lawyers Pty Ltd
For the First Defendant	No appearance	-
For the Second Defendant	The Second Defendant appeared in person	-

HIS HONOUR:

1       By a Summons,[1] the plaintiff seeks orders:

“1That the second defendant pay the plaintiff’s costs on an indemnity basis, alternatively on a standard basis.

2Such orders or directions as the Court thinks fit.”

[1]The Summons appears undated

2       The application was supported by an affidavit of Caroline Claire Mense, sworn 29 June 2016.  The second defendant, Mr Brant Woodward, relied upon an affidavit sworn 29 June 2016. 

3       According to the original Statement of Claim, filed in December 2014, the proceeding concerns a claim by the plaintiff, Bronze Wing Ammunition Pty Ltd (“Bronze Wing”), against the defendant, then only Australian Sporting Arms Pty Ltd (“ASA”), for recovery of an amount of approximately $500,000 said to be due pursuant to an agreement made between Marcello Casella, on behalf of Bronze Wing, and Mr Brant Woodward, on behalf of ASA, in or about September 2011 (“the agreement”).

4       On 5 February 2015, solicitors for ASA filed and served a Defence, which pleaded:

“3.In further answer to paragraph 2(a), the Defendant asserts that at the time the oral agreement was made between Mr Brant Woodward and Mr Marcello Casella, Australian Sporting Arms was not incorporated.  Australian Sporting Arms was incorporated on 29 July 2011 …

…

6.In further answer to paragraph 3, the Defendant asserts that no agreement was ever made between itself and the Plaintiff.  An oral agreement was made between Mr Brant Woodward and Mr Marcello Casella on or around September 2010.  At no time was the Plaintiff a party to the agreement.”

5       According to Ms Mense’s affidavit, upon receipt of that Defence and because of those allegations, Bronze Wing joined Mr Woodward as a second defendant.

6       The first and second defendants filed an Amended Defence in May 2015, which pleaded:

“6.In further answer to paragraph 4, the Defendants assert that no agreement was ever made between the First Defendant or the Second Defendant and the Plaintiff.  An oral agreement was made between the Second Defendant and Mr Marcello Casella on or around September 2010.  At no time was the Plaintiff a party to the agreement.”

7       Mediation occurred in September 2015 and did not result in a resolution of the proceeding.  Discovery was an ongoing issue and in fact eight Affidavits of Documents were filed on behalf of the defendants.  The proceeding was set down for trial in October 2015, but application was made to vacate the trial date on the basis that the plaintiff’s Amended Statement of Claim was inadequate.  The trial date was vacated and an order for costs made in the defendants’ favour.  In March and April 2016, the proceeding was before a Judicial Registrar in the Commercial List as a pleading summons. As a result, the plaintiff’s Statement of Claim was further amended.

8       On 30 May 2016, Mr Woodward filed and served a Defence, which said:

“4.As to paragraph 4, it is denied.  The Second Defendant asserts that the agreement was between the Plaintiff and the First Defendant only.

…

In so far as it was oral, it was constituted by several conversations between Marcello Casella as director of the plaintiff, on behalf of the plaintiff and the second defendant, on behalf of the first defendant. 

… .”

9       On 31 May 2016, Bronze Wing’s solicitors received an email from Mr Woodward, which said, in part:

“… no defence for the first defendant will be lodged as the first defendant is now in voluntary liquidation as per attached ASIC Form 505.”

10      An ASIC company search noted Mr Woodward as the sole director and shareholder of ASA. 

11      I was informed by Mr Connors, counsel for Bronze Wing, that by reason of ASA being placed in voluntary liquidation, the proceeding against it has been discontinued.  He further informed the Court that eventually, it was intended that Bronze Wing’s proceeding against Mr Woodward would be discontinued.  He said Bronze Wing had registered as an unsecured creditor with the liquidator in respect of the debt claimed in the proceeding.  It was, and had been at all times, Bronze Wing’s position that the agreement was between it and ASA, and not Mr Woodward, even although initial negotiations were between Mr Casella and Mr Woodward and at a time before the incorporation of ASA.

12      The orders sought in Bronze Wing’s Summons are not accurate.  What is sought is an order that Mr Woodward pay that proportion of Bronze Wing’s costs and disbursements, on an indemnity basis, alternatively, on a standard basis, as reflects the work undertaken to join Mr Woodward as a party to the proceeding and all consequent costs flowing therefrom. 

13      Mr Connors submitted that overwhelmingly, the evidence showed the agreement was between the two companies.  All the monies paid under the agreement were paid from the bank account of Bronze Wing to that of ASA. The initial Defences filed by ASA’s solicitors pleading Mr Woodward and Mr Casella were the contracting parties, were wrong and an attempt to deflect blame from ASA.  The Defence filed in May 2016, while reflecting the true position, was mischievous and a convenient way for Mr Woodward to shift responsibility for the outstanding loan to the company, then in voluntary liquidation, and away from him.

14      Mr Connors claimed the conduct of Mr Woodward was in breach of the various provisions of the Civil Procedure Act 2010, in particular:

· Section 16 – the paramount duty to further the administration of justice

· Section 17 – the overarching obligation to act honestly

· Section 18 – the overarching obligation requiring a response (or a defence) to have a proper basis

· Section 19 – the overarching obligation to avoid undue delay and expense

· Section 20 – the overarching obligation to co-operate in the conduct of a civil proceeding

· Section 21 – the overarching obligation not to mislead or deceive

· Section 23 – the overarching obligation to narrow the issues in dispute.

15 Pursuant to s29 of the Act, Mr Connors said the Court had power to make appropriate orders as to costs. He noted that pursuant to s30(2) of the Act, an application for a costs order pursuant to s29 must be made prior to the finalisation of the civil proceeding to which the application related.

16      In his affidavit sworn 29 June 2016, Mr Woodward said that the major focus of the dispute between the parties was not so much as to who the agreement was between, but rather as to its terms.  In particular, he said the agreement was to the effect that the amount advanced by Bronze Wing was to be repaid from the profit made by ASA from the sale of certain goods, rather than being payable upon demand by Bronze Wing.  He said the original discussions which were the basis for the agreement, were between himself and Mr Casella.  He said it was not until “recent times” when counsel, Mr Shane Thomas, became involved, that he came to understand that the agreement was, in fact, between Bronze Wing and ASA.  He said the original legal advice from solicitors in New South Wales, Reimer Winter Williamson, was that the agreement was between the two individuals.  On the basis of that advice, the original Defences were filed.  The placing of ASA into voluntary liquidation was coincidental and unrelated to the filing of his Defence in May 2016.

17      Mr Woodward went on to refer to other occasions in the course of the litigation where he said Bronze Wing or its solicitors had misled and deceived the defendants and the Court.  None of those matters are relevant to this application.

18      In the course of submissions, Mr Woodward expanded upon the advice he received from Mr Thomas.  He said a week or so before ASA went into liquidation, he and his wife had a meeting with Mr Thomas and spent several hours with him.  Mr Thomas gave advice that the facts suggested to him that it was the companies, Bronze Wing and ASA, which were the parties to the agreement and that this advice was the catalyst for the filing of the Amended Defence.  Subsequently, after the company went into liquidation, Mr Woodward did not have the funds to retain either solicitors or counsel.

19      In reply, Mr Connors noted that originally, ASA and Mr Woodward were represented by New South Wales solicitors, Reimer Winter Williamson Lawyers. That firm used Wisewould Mahony as Melbourne agents.  Wisewoulds subsequently became the solicitors on record for ASA and Mr Woodward.  Initially, experienced counsel, Mr Baume, was retained to provide advice to the defendants.  Mr Thomas came on the scene later and in fact appeared on the two pleading Summonses in March and April 2016 when there was no mention to the Court that Mr Woodward was improperly joined as a defendant.  In fact submissions were made to the Court at that time that the pleading as against Mr Woodward required further particulars.  Further, Mr Connors noted that although the discussions between Mr Woodward and Mr Thomas were privileged, nonetheless he was in a position to waive privilege and obtain evidence either from Mr Thomas or his former solicitors that he had been given the advice as claimed.  No such evidence was before the Court.  He said that all of the material necessary to make a determination as to the parties to the agreement was in the possession of Mr Woodward and his solicitors well before May of this year when the Amended Defence was filed.

20      It is necessary to determine whether the filing of the Amended Defence by Mr Woodward in May 2016 was, as he would have it, an appropriate forensic step taken following the advice of counsel, or rather, whether it was a convenient ploy to deflect the prospect of a judgment against him personally, to the company, ASA, which was by that time in liquidation.

21      It is clear from the original Defences filed on behalf of ASA that sole responsibility for any obligation under the agreement lay with Mr Woodward, as he was the contracting party.  At the time, Mr Woodward was the sole director and shareholder of ASA.  Despite, as Mr Connors claims, the evidence pointing clearly to ASA as the contracting party, Bronze Wing joined Mr Woodward out of an abundance of caution.  That was understandable in the circumstances. From that time up until May of this year, at least so far as Bronze Wing and its advisors were concerned, an aspect of the defendants’ defence was that Mr Woodward was the appropriate party with whom the agreement had been reached. 

22      In May 2016, there was a complete “about face” and Mr Woodward pleaded in clear language that the agreement was between Bronze Wing and ASA only.  It is difficult to conceive how such an abrupt change could come about.  There is nothing to suggest that there was any new evidence which came to the knowledge of Mr Woodward or his lawyers to justify such a change.  In fact it would appear clear that all of the relevant material was at hand at an early time, at least well before May 2016.

23      The matter relied upon by Mr Woodward is that he had received new advice from Mr Thomas, a barrister recently retained, to the effect that the true agreement was between the companies and not the individuals.  I do not accept this submission on a number of bases.  The defendants were represented by competent solicitors and, I am told, experienced counsel, at an early time.  In a commercial dispute such as this, the first thing that would be asked would be as to who the contracting parties were.  Further, it is difficult to reconcile Mr Woodward’s claim that he received new advice from Mr Thomas when, I am told, Mr Thomas appeared before this Court on pleading Summonses in March and April 2016 where there was nothing said to the Court about any change of direction in the defendants’ camp.  Mr Woodward was the sole director and shareholder of ASA, and it could not be said that the intervention of another director or shareholder, bringing new evidence to bear, caused the change.

24      Further, even accepting Mr Woodward is representing himself, in my view, it would have been clear that given his claim about Mr Thomas’ intervention with new advice, privilege could have been waived by a short affidavit which deposed that as a result of a view of the case that he took, it was his advice to Mr Woodward that indeed the company was the appropriate defendant as contracting party, and not him personally.  No such evidence was provided and I infer that his evidence would not have helped Mr Woodward.

25      In all these circumstances, I have concluded that the filing of the Defence by Mr Woodward in May this year was nothing more than a convenient attempt to deflect costs away from him, and onto the company in liquidation.  Given this finding, it is clear that his conduct represented a breach of the various provisions of the Civil Procedure Act 2010, to which I have referred.

26      As was said by Warren CJ, Ashley and Whelan JJA in Setka v Abbott:[2]

“… the over-arching purpose which, by operation of the Civil Procedure Act 2010, applies to both litigants and their advisers, is not simply a pious but toothless statement of the considerations which are to motivate participants, lay and professional, in civil litigation. So much was powerfully emphasised by this court in Yara Australia P/L v Oswal.  The just, efficient, timely and cost effective resolution of the real issues in dispute in a case cannot be facilitated if a party and the party’s advisers do not take adequate steps to identify the issues which require determination early in the life of the proceeding.  This is not to deny that the circumstances of litigation may develop in unpredictable ways. But here, the plaintiff was confronted with a pleadings issue of a kind which for years and years has been the meat and drink of defamation lawyers. And yet the plaintiff’s preferred arguments, by March this year, were remote from the arguments pursued in October 2012.  It may be that the explanation for the radical change of tack is attributable to the change in plaintiff’s senior counsel. But of course we refrain from speculation.”[3]

[2][2013] VSCA 345

[3](ibid) at paragraph [31]

27      In Yarra Australia Pty Ltd v Oswal,[4] the Court addressed the provisions of s28 and s29 in relation to the sanctions for contravention of the overarching obligations. The Court said:

“The court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations as the heading to Pt 2.4 indicates. In our view, these powers are intended to make all those involved in the conduct of litigation — parties and practitioners — accountable for the just, efficient, timely and cost effective resolution of disputes. Through them, Parliament has given the courts flexible means of distributing the cost burden upon and across those who fail to comply with their overarching obligations. A sanction which redistributes that burden may have the effect of compensating a party…”[5]

[4](2013) 41 VR 302

[5](ibid) at paragraph [20]

28      With the advent of the Civil Procedure Act, the emphasis has been on a more robust and proactive approach on the part of the courts.  Technical and costly disputes are to be avoided and the focus is upon a just, quick and cheap resolution of the real issues in the proceedings.[6]

[6]Expense Reduction Analysts Group Pty Ltd & Ors v Armstrong Strategic Management and Marketing Pty Ltd & Ors (2013) 250 CLR 303 at paragraph [57]

29      As stated, I am satisfied there was a breach of the various provisions of the Civil Procedure Act to which I have referred. In those circumstances, it is appropriate that a costs order be made pursuant to s29 of the Act. That costs order ought be only in respect of the costs properly incurred by Bronze Wing in joining Mr Woodward as a party to the proceeding and the costs and disbursements which flow as a result. An appropriate amount can only be determined by the Costs Court.

30 The issue remains as to whether costs sought be awarded on a standard, or indemnity basis. Section 65C of the Civil Procedure Act 2010 provides a wide discretion to the Court to award costs. The power to award costs is an absolute and unfettered discretion, to be exercised judicially.[7]  The guiding principle in relation to whether an order for indemnity costs should be made, is whether the circumstances of the case involve some relevant delinquency on the part of the unsuccessful party or parties.[8]  Courts have awarded indemnity costs where an unsuccessful party had prolonged a trial by filing deliberately false defences and allegations of fact.[9]

[7]Oshlack v Richmond River Council (1998) 193 CLR 72 at 81

[8]Oshlack v Richmond River Council (ibid) per Gaudron and Gummow JJ at 89, paragraph [44]

[9]Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 at 358; See further Harrison v Schipp [2001] NSWCA 13 at paragraph [139], and Commonwealth Bank of Australia v Saleh & Ors [2007] NSWSC 990 at paragraphs [5] – [6]

31      Given my findings in this matter, it is appropriate that the costs which are found to flow from Bronze Wing joining Mr Woodward ought be ordered on an indemnity basis.

32      I shall consult with the parties further as to the appropriate orders.

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