Chiodo Investments Pty Ltd v Rilac Pty Ltd (No 3)

[2023] VSC 84

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2021 03012

CHIODO INVESTMENTS PTY LTD (ACN 110 861 857)	Plaintiff
v
RILAC PTY LTD (ACN 007 275 407)	Defendant

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JUDGE:	John Dixon J
WHERE HELD:	Melbourne
DATE OF HEARING:	6, 8, 16 February 2023
DATE OF JUDGMENT:	24 February 2023 (delivered ex tempore; revised 27 February 2023)
CASE MAY BE CITED AS:	Chiodo Investments Pty Ltd v Rilac Pty Ltd (No 3)
MEDIUM NEUTRAL CITATION:	[2023] VSC 84

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PRACTICE AND PROCEDURE – Costs – Security for costs – Breaches of overarching obligations – Misleading affidavit filed – Documents unjustifiably redacted – Consequence for such breach sounding in costs – Civil Procedure Act 2010 (Vic) ss 21, 26, 29.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr L Virgona of Counsel	Marshalls Dent Wilmoth Lawyers
For the Defendant	Mr CR Northrop of Counsel	Harwood Andrews

HIS HONOUR:

1. The remaining issue is costs.  The defendant submits that the plaintiff should pay the costs of the application before the associate judge and on appeal, assessed on an indemnity basis.  The plaintiff resists that application and contends that the costs of both the hearing and the appeal be costs in the proceeding.

1. The plaintiff submits that the ultimate outcome of the proceeding is unknown.  Whether it is appropriate that security be provided will be informed by the outcome of the proceeding.  In addition, the Court was only misled for a short period by the second affidavit of Mr Chiodo, when he firmly asserted that the properties were not trust properties, and this misleading conduct did not substantially contribute to costs.

1. By s 24 of the Supreme Court Act 1986 (Vic), the Court has a wide and untrammelled discretion in respect of costs and ultimately must make decisions in relation to costs on the basis that best achieves the interests of justice for the parties in the proceeding.

1. The issue is a little complicated as I am satisfied that the plaintiff misled the Court.  The plaintiff suggests that it only did so by the second affidavit, that is the affidavit of 6 February 2023 — that contended wrongly that the Carlton properties were owned absolutely by the plaintiff — which was promptly corrected.  The defendant submits that the plaintiff first began to mislead the Court with its submission to the associate judge that the two properties provided an adequate source of funds from which to pay any adverse costs order because the Carlton properties were owned absolutely by the plaintiff, which was not corrected until the plaintiff’s affidavit sworn 13 February 2023.  On this issue, the defendant’s submission is correct.

1. The second complicating factor is that relevant documents, being the plaintiff’s financial statements, were first discovered in a redacted form, without explanation from the plaintiff.  The plaintiff emphasises that the defendant took no steps to pursue that particular question, but the primary focus must be on the plaintiff’s conduct.  The effect of the redactions was to deny the defendant access to part of the document, and an explanation was necessary.

1. Just as no justification for the redactions was put at the time of initial disclosure, no justification was subsequently proffered when the unredacted versions of the document were produced.  As I commented in my earlier reasons, looking at the unredacted version, there does not appear to be any reason why the redactions were made.

1. I am satisfied that Mr Chiodo was not particularly familiar with the financial affairs of the plaintiff when he ought to have been either familiar with them or properly briefed by the plaintiff’s accountant.  He explained that his accountant runs the Chiodo Group of companies, a number of different entities that undertake different projects.  Be that as it may, the redacted accounts have played a role through the history of this application.  They supported the initial submission to the associate judge, that the plaintiff beneficially the owned Carlton properties, in Mr Chiodo’s first affidavit in opposition to the application for security.

1. When the Court is satisfied that a party has contravened an overarching obligation, it may make any order it considers appropriate in the interests of justice.  That includes orders for the payments of costs and orders as to the manner in which costs are to be assessed.  In that context the defendant seeks, and the plaintiff resists, an order that costs be assessed on an indemnity basis.

1. Although the defendant did not immediately challenge the redactions, when the defendant applied for security for costs, the obligations under s 26 of the Civil Procedure Act 2010 (Vic) became relevant. By that section, there is an overarching obligation to disclose the existence of all documents of which the person is aware and which the person ought reasonably to consider are critical to the resolution of the dispute. I confine the concept of dispute at the moment to the application for security for costs.

1. Given that the unredacted financial statements became critical in resolving the threshold issue and in the resolution of the application, the point when the basis on which the beneficial entitlement to the Carlton properties was first raised was the point when the plaintiff was obliged by its overarching obligations under s 26 of the Civil Procedure Act to look again at the absence of a basis for redactions.  Those documents were critical to the resolution of the security for costs dispute.  This is not to reverse the onus of proof on the applicant for security, which the plaintiff submitted well established, that a plaintiff is not obliged to prove its capacity to pay security.  Once the plaintiff affirmatively asserted that the Carlton properties were beneficially owned by it, the unredacted financials were documents in its possession of which it was aware (having redacted them explicitly for the purposes of discovery) that it ought to have reasonably considered were critical to the security for costs dispute.  Given their voluntary production to the Court of the documents, in the application in support of the plaintiff’s submission that security should not be ordered, the latter consideration is not contestable.  The earliest reasonable time for the production of the unredacted statements was with the plaintiff’s affidavit in opposition filed before the Associate Judge.

1. The overarching obligations are different in nature to discovery obligations and are intended to ensure that the parties properly observe the obligations to the proper administration of justice which requires both, in this case, that there be no misleading of a court (s 21 of the Civil Procedure Act) and that the critical documents are exchanged (s 26).  Had the unredacted statements been produced in a timely manner, I have no doubt there would have been significant costs savings on this application, and an avoidance of delay.

1. Taking all of these circumstances into account, particularly, the need for the Court to respond appropriately to the failure of the plaintiff to observe its overarching obligations, I consider that the interests of justice in relation to this application not to await the outcome of the proceeding but to require that the plaintiff pay the defendant’s costs of the application by summons filed 1 July 2022.  That is, the costs both before the primary judge and the costs on appeal.

1. The costs on appeal follow the event.  The plaintiff has been unable to sustain the judgment of the primary judge.  In those circumstances, it is not uncommon for a litigant to be awarded a certificate under the Appeals Costs Act 1998 (Vic).  In this situation, no application was made for such a certificate and, in my view, that was appropriate as I would not, in the exercise of my discretion, have awarded a certificate because the issues before the primary judge were confused in such a way as to deny her the opportunity to properly resolve that proceeding.  That confusion primarily sits with the plaintiff.  It would have been avoided had the overarching obligations been discharged.  Accordingly, I consider it appropriate that, in the interests of justice, the plaintiff pay the costs of both the hearing at first instance and on appeal.

1. Finally, there is the question of whether I should order that the costs be assessed on an indemnity basis. In this context, I note a number of issues. First, the default position is that costs are assessed on the ordinary basis. It is only in circumstances where there is some conduct on the part of the party to be charged with payment of the costs, described in various ways in the authorities,[1] and amounting to conduct that makes it just that the party whose costs are to be paid ought to receive a full indemnity.

   [1]The cases, and there are many, are gathered in Dal Pont, Law of Costs, 4^th Ed, [16.40] and following.

1. In the present case, although not without some hesitation, I consider that the objects of s 29 of the Civil Procedure Act and the appropriate exercise of the costs discretion are achieved by the orders that I have pronounced, namely that the costs be assessed on a standard basis.

1. The plaintiff did act promptly to inform the court that the affidavit of 6 February 2023 was misleading and that, on proper review, the plaintiff’s position was that not only were the Carlton properties trust assets but so too was the subject matter of the proceeding.  If the plaintiff had required that the defendant expose all of these considerations by doggedly maintaining unjustified redactions, I might have taken a different view, but in the circumstances I have not been persuaded that it is appropriate in the interests of justice that the costs be assessed on an indemnity basis and I am satisfied that it is appropriate to make no special order in relation to the form of assessment of costs.