CAG v Cheruku and Kosaraju (No 2)
[2020] VCC 457
•22 April 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No. CI-19-01630
| CAG COMPANY PTY LTD (ACN 155 257 855) | Plaintiff |
| v | |
| REVATHI SHIRISHA CHERUKU | First Defendant |
| and | |
| NITHIN KOSARAJU | Second Defendant |
---
JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF RULING: | 22 April 2020 | |
CASE MAY BE CITED AS: | CAG v Cheruku and Kosaraju (No 2) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 457 | |
REASONS FOR RULING
---
PRACTICE AND PROCEDURE – COSTS – application for indemnity costs by successful defendants – basis of plaintiff’s claim altered at commencement of trial – offers to walk away from claim made by defendants and not accepted – standard costs ordered – turns on own facts
PRACTICE AND PROCEDURE – COSTS – WASTED COSTS – application for wasted costs order against plaintiff’s solicitor by successful defendants – s 29(1)(a) of the Civil Procedure Act 2010 (Vic) and rule 63A.23(1)(c) of the County Court Civil Procedure Rules 2018 (Vic) – basis of plaintiff’s claim altered at commencement of trial – standard costs ordered – turns on own facts
---
APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr S Hopper | Lennon Lawyers |
| For the defendants | Mr A Silver | Welner Lawyers |
Contents
Introduction
The initial claim, and the claim run at trial
Should indemnity costs be awarded?
No proper basis
Offers to settle
Wasted costs?
Conclusion
HER HONOUR:
Introduction
On 29 January 2020, I delivered reasons for judgment in this proceeding: CAG v Cheruku and Kosaraju [2020] VCC 13 (the principal judgment). I found that the plaintiff had not established its case.
These reasons deal with the costs of the proceeding. They assume an understanding of matters detailed in the principal judgment and use the same definitions.
The plaintiff and defendants each filed written submissions as to costs. An affidavit was filed for the plaintiff, sworn by Patrick Lennon on 28 February 2020, and for the defendants sworn by Zahra Rahmani on 7 February 2020.
The defendants seek their costs of the proceeding on an indemnity basis because they say:
· There was no proper basis for the plaintiff’s original claim; and
· The plaintiff unreasonably refused two open offers the defendants made to it to settle the proceeding.
They also seek a wasted costs order against the plaintiff’s solicitors, Lennon Lawyers, that the solicitors pay the defendants’ costs of the proceeding.
The plaintiff and its solicitors oppose the orders for indemnity costs, and for a wasted costs order.
The plaintiff says that it should pay the defendants’ costs of the proceeding on the standard basis. I agree that this is the appropriate order.
For the reasons that follow, I will not order the plaintiff pay indemnity costs, or that the plaintiff’s lawyers pay costs.
The initial claim, and the claim run at trial
As set out in the principal judgment at [28]-[30], the plaintiff’s initial claim sought specific performance – to have the defendants execute the ‘Licence Agreement’ – and loss and damage. The initial claim was not pursued at trial. Instead the new claim was put – that $16,500 was due to the plaintiff as a debt, because of the handwritten clause. The case was run on the basis of this new claim.
Should indemnity costs be awarded?
No proper basis
The defendants say that the initial claim had no proper basis either in fact or law. They submit that it was brought in breach of section 18 of the Civil Procedure Act 2010 (Vic) (‘CPA’):
[5]. The plaintiff initiated a case for specific performance of the Licence Agreement, however:
(a)that case was wholly abandoned on the day of trial; and
(b)notwithstanding the case was abandoned, the Court found that the defendants were not compelled to execute the Licence Agreement, which was sufficiently plain on the face of the evidence.
[6]. There was plainly no proper basis for the original claim. It was agitated by the plaintiff in breach of section 18 of the Civil Procedure Act 2010 (Vic). While some cases might fall into the ‘grey area’ of whether a case has merit, this was never such a case.
I am not satisfied that there was no proper basis for the initial claim. That case was never argued. As submitted for the plaintiff:
(a)the handwritten clause arguably contemplates a ‘licence agreement’ that is separate from the contract of sale and is arguably a category 1 Masters v Cameron agreement (see The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2019] VSCA 91 at [18] to [22]);
(b)the [defendants] never sought to strike out the plaintiff’s statement of claim;
(c)performance of the handwritten licence agreement (if the plaintiff’s construction was accepted) would always have involved payment of the licence fee;
(d)the proceeding was issued before the contract of sale settled. However, the trial did not take place until after settlement. Consequently, execution of a more detailed licence agreement by that stage served no purpose and the only real issue in dispute was payment of the licence fee;
(e)the trial was conducted on a more narrow basis than the pleaded claim in order to reduce the issues before the Court. The plaintiff should not be criticised for seeking to narrow the issues at trial; and
(f)the defendants adopted that approach at trial without protest. The defendants may have been entitled to an order for costs thrown away on account of the change in the way the case was argued at trial. However, that issue does not arise given that the plaintiff was unsuccessful.
The fact the defendants instituted a counterclaim in case the plaintiff’s initial claim was upheld, indicates that they too contemplated at least a risk the plaintiff’s initial claim might be successful – and hence have a ‘proper basis’.
Offers to settle
The defendants rely on two open offers they made to settle the proceeding, each on the basis of each party walking away. They say that those offers ought to have been accepted as the plaintiff's case was obviously hopeless.
The first offer was made on 12 April 2019, before the defendants had filed an appearance. It was only open for one business day.
The second was made on 6 September 2019, just after the contract time for settlement of the property. It did not state any reasons the plaintiff’s initial claim would not succeed.
Neither offer was described as a Calderbank offer, and neither complied with the requirements of an offer of compromise.
They defendants say that it was ‘wholly unreasonable’ for the plaintiff to refuse the offers because:
(a) the cause of action in the Writ, to which the offers were directed, was
wholly abandoned at trial;(b) the offers were to withdraw and discontinue respectively; they
preserved the plaintiff’s right to bring a fresh cause of action (including
the one run at trial) in the Magistrates’ Court;(c) the proceeding was pointless: even if the plaintiff were successful, the
plaintiff’s unrecoverable legal costs (particularly due to rule 63A.24 of
the Court rules) were likely to exceed the claim sum of $16,500; the
plaintiff put everyone (including the Court) to the cost of a proceeding
for nothing.However, I agree with the plaintiff that it was not unreasonable for it to reject the offers. Both offers effectively sought capitulation by the plaintiff and did not represent a genuine compromise.
Wasted costs?
The wasted costs order against Lennon Lawyers is sought on the basis that the initial case was hopeless, and the plaintiff’s solicitors ought never have commenced the proceeding. The defendants submit that the continuation of the proceeding was a ‘severe failure’ by the plaintiff’s solicitors to comply with the overarching obligation not to make any frivolous, vexatious, abuse of process, or improper basis claims under section 18 of the CPA.
The Court may make a wasted costs order under s29(1)(a) of the CPA or rule 63A.23(1)(c) of the County Court Civil Procedure Rules 2018 (Vic) (the ‘Rules’).
Section s29(1)(a) of the CPA states:
(1) If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;
Rule 63A.23(1)(c) of the Rules provides:
Costs liability of lawyer
(1) Where a solicitor for a party, whether personally or through a servant
or agent, has caused costs to be incurred improperly or without
reasonable cause or to be wasted by a failure to act with reasonable
competence and expedition, the Court may make an order that—
…
(c) the solicitor pay all or any of the costs payable by any party
other than the client.
Her Honour Judge Ryan sets out a useful analysis of the law regarding wasted costs in PropertyShares Holdings Pty Ltd v Ujma & Ors (No 3) [2019] VCC 440: see paragraphs [29]-[41] in particular. These orders should only be made in clear cases, and with caution.
This is not such a case.
As indicated above, I am not satisfied there was no proper basis for the initial claim. The fact that the initial claim was amended at trial does not mean that it was not properly brought when instituted. There is nothing to suggest the claim was brought for a reason unconnected with the merits of the case. I am not satisfied that the plaintiff’s solicitors acted improperly, or without reasonable cause, or failed to act with reasonable competence and expedition, or that there was a failure to comply with the overarching obligations imposed by the CPA.
I will not order costs against the plaintiff’s solicitor.
Conclusion
I will order the costs orders sought by the plaintiff.
As the defendants unsuccessfully sought orders for indemnity costs, and a wasted costs order, the defendants should pay the plaintiff’s costs of its written submissions on costs.
I will order:
1.The plaintiff pay the defendants’ costs of the proceeding (excluding the defendants’ costs of and incidental to the provision of written submissions on costs) on the standard basis to be assessed by the Costs Court in default of agreement.
2.The defendants pay the plaintiff’s costs of and incidental to its written submissions on costs on the standard basis to be assessed by the Costs Court in default of agreement.
---
Certificate
I certify that these 7 pages are a true copy of the reasons for ruling of Her Honour Judge Marks, delivered on 22 April 2020, revised on 4 May 2020.
Dated: 22 April 2020
Zeinab Ali
Associate to Her Honour Judge Marks
0
3
0