Carbure Pty Ltd v Brile Pty Ltd (No 2)
[2002] VSC 313
•8 August 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 6367 of 2000
| CARBURE PTY LTD (ACN 006 930 570) | Plaintiff |
| and First Defendant to Counterclaim | |
| v | |
| BRILE PTY LTD (ACN 005 523 044) | Defendant |
| and Plaintiff to Counterclaim | |
| and | |
| ROBERT KEITH CLUTTON | Second to Fifth Defendants to Counterclaim |
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JUDGE: | Balmford J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 July 2002 | |
DATE OF JUDGMENT: | 8 August 2002 | |
CASE MAY BE CITED AS: | Carbure v Brile (No 2) | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 313 | |
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COSTS – court’s discretion to award costs on a solicitor-client or indemnity basis – whether that discretion gives way to agreements between the parties – the lease did not “plainly and unambiguously” provide for costs to be taxed on other basis
Supreme Court (General Civil Procedure) Rules 1996 – rules 63.29, 63.30, 63.30.1
Abi Group Ltd v Sandtara Pty Ltd [2002] NSWCA 45
Bass Coast Shire Council v King [1997] 2 VR 5
Ensabella & Sons Pty Ltd v Players Down Under Pty Ltd [2000] VSCA 73
Gomba Holdings (UK) Ltd v Minories Finance [1993] Ch 171
Leda Holdings Pty Ltd v Oraka Pty Ltd [1999] FCA 444
National Australia Bank v Petit-Breuilh (No 2) [1999] VSC 395
Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T R Messer | Alpass & Associates |
| For the Defendant | Dr C E Croft SC with Mr G K Moore | Price Higgins |
HER HONOUR:
Judgment in the substantive proceeding in this matter was delivered on 17 July 2002 [1] , when I gave judgment for the landlord as defendant on the claim and also as plaintiff on the counterclaim, save that the counterclaim was dismissed as against the second to fifth defendants thereto. On 23 July counsel made submissions on costs, as to which I reserved my decision. These reasons on the question of costs should be read with the reasons for judgment delivered on 17 July.
[1][2002] VSC 272
Dr Croft, for the defendant landlord, conceded that his client should pay the costs of the second to fifth defendants to the counterclaim, including any reserved costs. Mr Messer, for the plaintiff tenant, did not dispute that, in accordance with the general practice, the plaintiff should pay the costs of the successful defendant on the claim and also on the counterclaim in so far as it was brought against the plaintiff.
The principal issue between the parties is whether the defendant’s costs as plaintiff on the counterclaim should be paid, as Dr Croft contends, on an indemnity basis. No issue arises as to the basis of payment of any other costs in the proceeding.
The three bases on which costs may be payable are defined as follows in Rules 63.29, 63.30 and 63.30.1 of the Supreme Court (General Civil Procedure) Rules 1996 (“the Rules”):
Party and party basis
63.29On a taxation on a party and party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed shall be allowed.
Solicitor and client basis
63.30On a taxation on a solicitor and client basis all costs reasonably incurred and of reasonable amount shall be allowed.
Indemnity basis
63.30.1(1)Subject to paragraph (2), on a taxation on an indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.
(2) Any doubt which the Taxing Master may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.
Rule 63.30.1 was introduced with effect from 25 October 2001. However, the power to order costs on an indemnity basis was available at common law before the enactment of that Rule [2] .
[2]See National Australia Bank v Petit-Breuilh (No 2) [1999] VSC 395
It is well established that, as a general rule, the court will order costs to be taxed and paid on a party-party basis, but that there is a power to award costs on other bases. That power is wholly in the discretion of the court, and the discretion must be exercised judicially and not unreasonably [3] .
[3]See Bass Coast Shire Council v King [1997] 2 VR 5 at 29
Dr Croft did not suggest that there was any aspect of the conduct of the plaintiff or its legal advisers which would justify the taxation of the defendant’s costs of the counterclaim on a solicitor-client or indemnity basis according to the usual principles, some of which are conveniently set out by Harper J in Ugly Tribe Co Pty Ltd v Sikola[4] . Instead he relied on clause 2.1.10 of the lease between the parties, which reads:
[4][2001] VSC 189 at [7]
2.Tenant’s covenants
2.1The Tenant shall
.. .
2.1.10pay the Landlord’s reasonable expenses of:
.. .
(d)any default by the Tenant in observing the provisions of this Lease;
(e)the exercise or attempted exercise of any right or remedy of the Landlord against the Tenant.
The defendant’s counterclaim was a claim for failure to pay rent due under the lease.
Dr Croft referred to the decisions in Abigroup Ltd v Sandtara Pty Ltd[5] and Ensabella & Sons Pty Ltd v Players Down Under Pty Ltd[6] as authority for the proposition that the general rule that costs are payable on a party-party basis gives way to any agreement providing for payment on some other basis; it was a matter simply of construing the agreement which the parties had made.
[5][2002] NSWCA 45
[6][2000] VSCA 73
In Abigroup v Sandtara judgment was given for a landlord as against the guarantor of the obligations of the tenant. The lease relevantly provided:
The Guarantor . . . agrees at all times hereafter to keep the Landlord unconditionally indemnified from and against all . . . costs and expenses which the Landlord may suffer or incur consequent upon . . . any breach or non-observance by the Tenant of any of the covenants . . . in this lease contained or implied . . .
The judge at first instance found that the landlord was entitled under the indemnity to recover its solicitor-client costs. On appeal, counsel for the guarantors made a number of submissions in support of his argument that the entitlement was to party-party costs only. Stein JA, with whom Giles JA and Young CJ in Eq agreed, rejected the submission that the legislative provisions that costs be in the discretion of the court [7] , and that a party could not recover costs except under an order of the court [8] , displaced any contractual entitlement to recover costs. The Court considered that ultimately it was a matter of construing the words of the indemnity, and that “the language of the indemnity, in particular its reference to all costs and expenses, is to costs on a solicitor/client basis” [9] .
[7]Section 76 Supreme Court Act 1970 (NSW)
[8]Part 52A rule 8 Supreme Court Rules (NSW)
[9][2002] NSWCA 45 at [17]
In Ensabella v Players On Down Under the landlord had obtained in the Victorian Civil and Administrative Tribunal (“the Tribunal”) an order for costs on a party-party basis, the amount of which was reduced by one-third for an issue on which the landlord was unsuccessful. The Court of Appeal overturned the decision of the Tribunal on that issue, with the result that the costs order was also overturned. In the Court of Appeal the landlord claimed costs on an indemnity basis, by virtue of two provisions in the lease. Clause 1(20)(a) obliged the tenant to pay “costs charges and expenses” incurred by the landlord “in consequence of any default in the performance or observance of any covenant or agreement” in the lease. Clause 1(21) obliged the tenant to pay “costs of and incidental to . . . any renewal [of the lease]“ or “other costs charges and expenses” incurred by the landlord “as a result of any default by the lessee in the performance or observance of any covenants or agreements contained or implied herein”.
Phillips JA, with whom Ormiston and Charles JJA agreed, said: [10]
Supposing that the costs of this proceeding, which is the subject of the dispute, fall within clause 1(20)(a) and further or alternatively clause 1(21) of the lease, neither provision refers expressly to how such costs should be taxed and there is some authority that, in the absence of express mention, such costs of a proceeding should be taxed on a party-party basis. The landlord claims costs on an indemnity basis by virtue of the provisions of the lease, although why that should be was not made clear. . .
It seems to me that, if the general discretion as to costs was called into play under section 109 of the [Victorian Civil and Administrative Tribunal Act 1998], the order should have been for the tenant to pay the landlord's costs. As I have said, there seems no reason now to deprive the landlord or any part of those costs. But should those costs have been awarded simply on a party-party basis or, as the landlord claims, on an indemnity basis by reason of the provisions of the lease?
The matter was adjourned for further submissions to be made as to that question. In a judgment delivered on 10 May 2000 (with the same citation as the judgment on the substantive issue) the Court found no sufficient reason for ordering anything but party-party costs, there being “nothing in the lease to compel another view”.
[10]at [43] and [44]
In Gomba Holdings (UK) Ltd v Minories Finance[11] the English Court of Appeal found, after lengthy consideration of authorities, that an order for the payment of costs of proceedings by one party to another was always in the discretion of the court, but that where there was a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.
[11][1993] Ch 171 at 194
It is clear from those authorities that the issue before me as to the basis on which the costs of the landlord on the counterclaim are to be taxed depends on the words of the lease, the relevant words in this case being the tenant’s undertaking to pay “the landlord’s reasonable expenses” of default or of the exercise of the landlord’s rights and remedies. I have not found assistance in the interpretation of that specific expression in any of the authorities to which I have referred.
The Court in Gomba Holdings examined a number of cases in which courts had considered provisions for the payment of costs of litigation by a defaulting mortgagor, in the context of whether those provisions justified taxation of the costs on a party-party or an indemnity basis (there being no provision in the relevant rules for solicitor-client costs). The expression “reasonable expenses” did not arise for consideration in any of those cases. Further, the general law relating to the powers and duties of mortgagees was perceived by the Court as relevant to the enunciation of the principles to be applied.
Mr Messer submitted, on the basis of the words of Burchett J in Leda Holdings Pty Ltd v Oraka Pty Ltd[12] , that costs should be taxed on a party-party basis unless the lease “plainly and unambiguously” provided for costs to be taxed on some other basis. On my reading of that decision, His Honour, when he enunciated that principle, was referring particularly to the mortgage cases, and I have already referred to the limitations on the relevance of those cases to the question before me. However, in my view of the decision His Honour saw the principle as equally applicable to the consideration of the provision in the lease with which he was concerned. The expression “reasonable expenses” was not relevant in that case, or in any of the cases there cited.
[12][1999] FCA 444 at [19]
Dr Croft submitted that the effect of Rule 63.30.1 of the Rules and clause 2.1.10 of the lease was the same, although they were differently expressed, and accordingly the costs in issue should be payable on an indemnity basis.
However, clause 2.1.10 of the lease can be seen as employing the language of Rule 63.30, allowing all costs “reasonably incurred and of reasonable amount”, rather than that of Rule 63.29 or 63.30.1. That being so, it might be argued that, in exercising the discretion of the Court in such a way as to reflect the contract between the parties, I should find that the defendant’s costs as plaintiff on the counterclaim be taxed on a solicitor-client basis.
On the other hand, I note that in Ensabella [13] the Court of Appeal found that the two undertakings to pay “costs, charges and expenses” without any qualifying adjective imported an obligation to pay party-party costs only. It does not seem to me that it is appropriate to decide that the addition of the adjective “reasonable” requires the tenant to pay more of the landlord’s expenses than would have been the case without that addition, which would be the effect of an order for solicitor-client rather than party-party costs. One might have thought that the converse would apply. It cannot be said that clause 2.1.10 of the lease “plainly and unambiguously” requires the costs to be paid on any other than a party-party basis. Accordingly there will be an order that the landlord’s costs of the counterclaim be paid on that basis.
[13]see [10] above
Finally, the issues raised by Dr Croft as to certification for two counsel, and by Mr Messer as to compensation for the hire of a bus relevant to an earlier stage of this proceeding, are matters for the Taxing Master, and I say no more about them.
For the reasons given, there will be the following orders:
1.that the plaintiff pay the defendant’s costs of the claim, including any reserved costs, on a party-party basis;
2.that the plaintiff as first defendant to the counterclaim pay the defendant’s costs as plaintiff on the counterclaim, including any reserved costs, on a party-party basis; and
3.That the defendant as plaintiff on the counterclaim pay the costs of the second, third, fourth and fifth defendants to the counterclaim, including any reserved costs, on a party-party basis.
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