Burkett v Bendigo and Adelaide Bank (No 4)

[2019] VSC 140

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S CI 2018 00837

PAUL BURKETT	Plaintiff
v
BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178)	Defendant

S CI 2018 00839

BENDIGO AND ADELAIDE BANK LIMITED
(ACN 068 049 178)

First Plaintiff

and

ABL NOMINEES PTY LIMITED (ACN 106 756 521) AS TRUSTEE FOR THE LIGHTHOUSE TRUST NO 12

v

Second Plaintiff

PAUL BURKETT

Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the Papers
DATE OF JUDGMENT:	8 March 2019
CASE MAY BE CITED AS:	Burkett v Bendigo and Adelaide Bank (No 4)
MEDIUM NEUTRAL CITATION:	[2019] VSC 140

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PRACTICE AND PROCEDURE – Costs – s24(1) Supreme Court Act 1986 – Part 4.5 Civil Procedure Act 2010 – rr63.02 and 63.04 Supreme Court (General Civil Procedure) Rules 2015 – Where plaintiff has been successful – Where costs follow the event - Whether plaintiff should be granted indemnity costs – Where plaintiff seeks to rely on contractual agreement for allocation of costs – Where trial judgment found no valid and enforceable contractual agreement – Where plaintiffs do not submit any other basis for award of indemnity costs - Application for indemnity costs refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A. Harding	StevensVuaran Lawyers
For the Defendants	Mr D.C. Gration	Turks Legal

HIS HONOUR:

1. This matter comprises two proceedings with respect to the same subject matter:

(a)A proceeding commenced by Mr Paul Malcolm Burkett (“Burkett”) against Bendigo and Adelaide Bank Limited (“BEN”) – S CI 2018 00837 – (“the Burkett Proceedings”); and

(b)A proceeding commenced by BEN and ABL Nominees Pty Ltd as Trustee for the Lighthouse Trust No 12 (“ABLN”) against Burkett – S CI 2018 00839 – (“the Bank Proceedings”).

1. On 7 December 2018, I delivered judgment in Burkett v Bendigo and Adelaide Bank Ltd (No 2) (“the trial judgment”).[1] Inter alia, the case concerned a claim made by BEN and ABLN (“the Bank Parties”) against Burkett in respect of liability outstanding under a loan agreement to which Burkett was borrower, pursuant to which it was claimed that ABLN advanced the sum of $251,250. Burkett sought declarations that he was not liable under the agreement sought to be enforced. I concluded that the terms of a Deed of Settlement approved by this Court on 11 December 2014 under s33V Supreme Court Act 1986, properly construed, precluded the raising of the Defences that Burkett sought to raise.[2] Accordingly, I delivered judgment in favour of the Bank Parties.

   [1][2018] VSC 723.

   [2][2018] VSC 723 [143].

1. By summons filed on 20 December 2018 in the Bank Proceedings, Burkett sought:

(a)Orders granting leave to Burkett to withdraw the admission in paragraph 36(a) of the Amended Defence to the Amended Statement of Claim filed 13 April 2017 (“the Amended Defence”) that Burkett was a group member in the Great Southern group proceeding (S CI 2011 04071) (“the Group Proceeding”); or

(b)Alternatively, an order pursuant to s33KA Supreme Court Act 1986 bringing his group membership to an end.

1. The application, if granted, would have had the effect of enabling Burkett to avoid the adverse consequences of the trial judgment. On 11 February 2019, I refused the application. My reasons are contained in Burkett v Bendigo and Adelaide Bank Ltd (No 3) [2019] VSC 45.

The Application for Costs

1. The Bank Parties now seek judgment in proceeding S CI 2018 00839 in the amount of $668, 491.07, being the outstanding balance of Burkett’s loan at 13 February 2019. The relief sought will be granted. They further seek orders as to costs in relation to both proceedings (S CI 2018 00837 and S CI 2018 00839), save for the “Guarantee Claims”, which were dismissed by consent on 19 October 2018.

1. The Bank Parties also seek costs on an indemnity basis, relying solely on clause 7.1 of a Loan Deed purportedly executed on behalf of Burkett with respect to the 2007 High Value Timber Scheme on 1 July 2007 (“the Burkett Loan Deed”). Burkett opposes the Bank Parties’ application.

1. Clause 7.1 of the Burkett Loan Deed relevantly provides:[3]

   [3]High Value Timber Scheme Project Loan Deed, 1 July 2007, cl 7.1.

7.1      Borrower’s Costs

The Borrower must pay to the Lender…

…

(c)all costs and expenses incurred by the Lender in relation to the enforcement, protection or waiver of any rights under this Document including … legal costs and expenses…on a full indemnity basis …

1. Section 24(1) of the Supreme Court Act 1986, in conjunction with Part 4.5 of the Civil Procedure Act 2010 and rr63.02-63.04 Supreme Court (General Civil Procedure) Rules 2015 provide the Court with a broad discretion in determining the question of costs. Ordinarily, where a party is successful, costs should follow the event and the successful party will obtain the costs of the action on a standard basis.[4] The primary purpose of such an award is to indemnify the successful party, rather than to punish the unsuccessful party.[5]

   [4]Supreme Court (General Civil Procedure) Rules 2015 (Vic), r63.31.

   [5]Latoudis v Casey (1990) 10 CLR 534 at 543; Cachia v Hanes (1994) 179 CLR 403 at 410.

1. In most cases, the grant of indemnity costs is only justified in limited circumstances where the case exhibits some unusual feature warranting departure from the ordinary standard basis of calculation. This typically involves some form of procedural misconduct on the part of the losing party, or where the proceeding was issued for an ulterior or collateral purpose.[6]

   [6]PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 [36].

1. However, where a contractual agreement between the parties allocates the award of costs, the discretionary power of the Court should be exercised so as to reflect the contractual rights of the parties, in the absence of disentitling circumstances.[7]

   [7]Gomba Hodlings (UK) Ltd v Minories Finance Ltd [1993] Ch 171 at 192–94; Shapparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384 [24]-[26].

1. In Chen v Kevin McNamara & Son Pty Ltd, Redlich JA (with whom Maxwell P and Robson AJA agreed) said:[8]

An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a “special basis.” Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. An agreement to pay costs on a “special” basis is only a factor informing the exercise of the court’s discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order.

[8]Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 [8].

Consideration

1. The Bank Parties were successful in each of the substantive proceedings, as well as the recusal application and withdrawal application. There is no reason to depart from the ordinary rule that costs should follow the event, and be awarded in favour of the Bank Parties on a standard basis.

1. It remains to consider whether I should exercise my discretion so as to reflect the contractual rights of the parties in accordance with clause 7.1 of the Burkett Loan Deed. Having regard to my earlier conclusions in the trial judgment, an application for indemnity costs grounded by the Burkett Loan Deed fails at the outset. Notwithstanding my conclusions in the trial judgment regarding the effect of the Deed of Settlement, I also concluded that there was no valid and enforceable Loan Deed as alleged by the Bank Parties which would impose any liability on Burkett.[9] The Bank Parties are thus precluded from relying on clause 7.1 of the Burkett Loan Deed.

   [9][2018] VSC 723 [97].

1. The Bank Parties do not submit an alternative basis on which they say they should be entitled to an order for indemnity costs. There is no reason to depart from the usual allocation of costs on a standard basis. Accordingly, it is unnecessary to further address the matter.

1. Orders will be made granting judgment in favour of the Bank Parties in the amount of $668, 491.07, as well as the legal costs incurred by the Bank Parties on a standard basis. The proceeding is otherwise dismissed.

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