Circuit Finance Pty Ltd v Gardner
[2006] VSC 70
•28 February 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7871 of 2003
| CIRCUIT FINANCE PTY LTD | Plaintiff |
| and | |
| HELEN RAE GARDNER | Defendant |
and
GEOFFREY JULIAN HERCULES and
KEITH ALAN HERCULES Third Parties
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JUDGE: | Hollingworth J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 and 28 February 2006 | |
DATE OF RULING: | 28 February 2006 | |
CASE MAY BE CITED AS: | Circuit Finance v Gardner | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 70 | |
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Practice and procedure – orders – application to amend authenticated orders under rule 36.07 – errors of a trifling nature – delay in making application to amend – steps taken by other side in reliance on authenticated orders – application refused
Practice and procedure – costs – unpaid costs – application to strike out defence to third party claim under rule 63.03(3) – application dismissed – self-executing order made to strike out defence if costs not paid within 48 hours
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | No appearance | |
For the Defendant | Mr A T Strahan | Taylor Splatt & Partners |
| For the First Third Party For the Second Third Party | No appearance Mr P Cosgrave S.C. | Keith Hercules Solicitors |
HER HONOUR:
On 27 and 28 February 2006, I heard interlocutory applications brought on five separate summonses and one notice of appeal in this proceeding, and pronounced orders in respect of each of those applications. I gave oral reasons for decision in the course of the hearing in relation to all matters except the following:
(a) A summons dated 22 December 2005, issued by the second named third party, Keith Hercules, in relation to certain costs orders;
(b) An amended summons dated 2 February 2006, issued by the defendant, Mrs Gardner, seeking to have Mr Hercules’ defence and counterclaim struck out or stayed pursuant to rule 63.03(3).
I indicated that I would provide brief written reasons in relation to those two summonses.
The proceeding
On 13 November 2002, the plaintiff (“Circuit”) filed a complaint in the Magistrate’s Court against the defendant, Mrs Gardner. Circuit claimed the sum of approximately $20,000 owing in connection with the lease by Mrs Gardner of a racehorse called Mountain Princess. Mrs Gardner filed a third party notice, claiming a right to indemnification by Geoffrey Hercules and his brother, Keith Hercules, pursuant to a written indemnity. Geoffrey Hercules is an undischarged bankrupt, so the third party claim is only proceeding against Keith Hercules.
Keith Hercules filed a counterclaim seeking $500,000 in damages flowing from an alleged conspiracy between Mrs Gardner and Geoffrey Hercules to deprive him of Mountain Princess and other racehorses allegedly owned by him. On the application of Keith Hercules, the entire proceeding was transferred to this court. Subsequently, in December 2003, the Chief Justice remitted to the Magistrates’ Court the proceeding between Circuit and Mrs Gardner, leaving the third party claim and counterclaim in this court. Circuit and Mrs Gardner have settled their dispute.
The costs summons
On 27 October 2005, the Taxing Master taxed costs which had been awarded against Keith Hercules by Kaye J on 15 February 2005 and Hansen J on 11 May 2005.
Keith Hercules did not pay the taxed costs, seeking to justify his position by reference to some trifling errors in the form of the master’s orders, which will be discussed shortly. The only dispute which he had as to the amount of the costs related to the sum of $23, on a total bill of approximately $20,000. He was not prepared to pay the amount which was indisputably owing, on his own admission, and argue later about the $23. Eventually, he offered to pay all the costs to an independent solicitor as stakeholder. Given that he must have been well aware that it would cost more than $23 to engage an independent solicitor to act as stakeholder, and that he had no reasonable basis for refusing to pay the balance of the costs to Mrs Gardner, I do not regard Mr Hercules’ stakeholder offer as a reasonable or genuine one.
Neither side made any application to the master to have the errors corrected under the slip rule. There was a disagreement between them as to who ought to make such an application.
On 16 December 2005, Mrs Gardner obtained a warrant of seizure and sale in relation to the taxed costs. That seems to have prompted Mr Hercules to issue his summons on 22 December 2005, just before the Christmas vacation, seeking orders:
(a) That the costs orders “both be rectified so as to be true and correct orders as in fact made by the Taxing Master”; and
(b) That the warrant be set aside.
The application to amend the costs orders is made under rule 36.07, commonly referred to as “the slip rule”, pursuant to which the court may correct a clerical mistake, error or omission in an order. Both sides proceeded on the basis that the power to set aside the warrant derives from the court’s inherent power to control its own procedures to prevent an abuse of process.
The Hansen costs order contains the following agreed defects:
(a) The date of the order is incorrectly recorded as 11 April 2005, instead of 11 May 2005;
(b) Keith Hercules is not noted as having appeared in person, when in fact he did so;
(c) Mr Westacott is incorrectly noted as the solicitor for the plaintiff, instead of the solicitor for the defendant.
Mr Hercules also asserted that the Hansen costs order incorrectly recorded an amount of costs of $4,955.66, instead of the amount which he asserted was allowed by the master, namely $4,932.66, a difference of $23. An inspection of the master’s taxation notes clearly shows that the larger figure is the correct one. Had Mr Hercules checked the master’s notes on the court file, as Mrs Gardner’s lawyers did, how many thousands of dollars of legal costs might have been saved on this application?
Mr Hercules also quarrelled with the appropriateness of someone having inserted the words “this is a matter proper for an interim order” next to “other matters” in the Hansen costs order. I am not satisfied that this is an error in the order. Even if it were an error, it would not be material to Mrs Gardner’s right to enforce the Hansen costs order.
The Kaye costs order contains the following agreed defects:
(a) Mr Westacott is incorrectly noted as the solicitor for the plaintiff, instead of the solicitor for the defendant;
(b) Mr Gardner is incorrectly noted as having appeared for the defendant, when no such person appeared at all;
(c) The order incorrectly records that the costs were taxed on a summons dated 7 June 2005, instead of 1 March 2005.
An application under the slip rule should be made as soon as the mistake is discovered. The court’s power under the slip rule is a discretionary one. The court may refuse an order if something has intervened which would render it inexpedient or inequitable that it be made[1].
[1]L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590 at 597.
In the present case, Mr Hercules knew of the errors by 15 November 2005, but issued no such application until 22 December 2005, only after the warrant had first been threatened, and finally issued and served. Between those two dates, instead of making a simple application to amend the orders (which could probably have been done “on the papers” and without the need for any attendance), he engaged in behaviour, the only purpose of which seems to have been to delay paying the substantial costs which were undoubtedly owing to Mrs Gardner.
The agreed errors in the costs orders are trifling in nature and do not go to the substance of the orders. Mr Hercules could not point to any prejudice which might flow to him if the orders were not rectified. On the other hand, acting in reliance on the costs orders, Mrs Gardner has already obtained a warrant, which the sheriff has sought, unsuccessfully, to enforce on several occasions.
In all the circumstances, I concluded that the fair and just result was to decline to amend the costs orders under the slip rule. I ordered that Mr Hercules’ summons dated 22 December 2005 be dismissed with costs.
Application to dismiss
On 27 January 2006, I granted Mrs Gardner leave to amend her summons dated 22 February 2005, to include an application that Mr Hercules’ defence be struck out, and his counterclaim be stayed, pursuant to rule 63.03(3). Alternatively, the amended summons sought a self-executing order in respect of the outstanding costs under the Kaye and Hansen costs orders.
Rule 63.03(3) empowers the court to order that a proceeding (which includes a third party claim) be stayed or dismissed, or a defence struck out, in the case of a party who has failed to pay an interlocutory costs order. Prior to the introduction of that rule, the court had limited power to dismiss a proceeding for failure to pay a costs order[2].
[2]Exell v Exell [1984] VR 1.
As the Court of Appeal has recently stated, the power under rule 63.03(3) is one which ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order[3]. Such an order is not to be adopted as a day-to-day means of recovering costs ordered by the court[4] or as a form of debt collection[5]. It may be appropriate to make such an order if there has been frequent litigation of minor interlocutory points, in the sense of deliberately harassing the other side, such that the conduct calls for some condemnation by the court.
“Ordinarily, therefore, one would assume before making an order of this kind that there would be a series of orders for costs and that they would usually be of a kind which did not involve the genuine resolution of disputes relating to interlocutory matters which have to be resolved before the matter can go to trial. For this purpose, then, the way in which each interlocutory dispute has been contested may well be relevant. From time to time appeals, at least to a judge in the Practice Court, may be justified, but to pursue them further to both this court and the High Court, in cases where the issues are essentially peripheral, may evidence an effective harassing of the other party of a kind which may justify a stay or the putting to an end of the litigation.”[6]
[3]Gao v Zhang [2005] VSCA 200 at [12] per Ormiston JA, with whom Vincent JA agreed.
[4]Ibid at [11].
[5]Ibid at [14].
[6]Ibid at [17].
In the present case, Mrs Gardner’s counsel argued that, since his joinder as a third party in August 2003, Mr Hercules has taken every avenue available to him to avoid a fair trial of this proceeding. In particular, it was said that his conduct had caused the proceeding to be delayed for the whole of 2005. Reliance was placed both on the total number of interlocutory applications, as well as specific applications before Kaye and Hansen JJ, and an application for leave to appeal from the decision of Kaye J; Mrs Gardner’s counsel argued that each of the latter three applications was “totally misconceived.” He also argued that Mr Hercules has deliberately engaged in delaying tactics in relation to payment of the Kaye and Hansen costs orders.
This proceeding certainly has a long, complicated and expensive interlocutory history. There have been approximately one dozen different interlocutory applications brought by either Mrs Gardner or Keith Hercules, including the five summonses and one notice of appeal heard by me on 27 and 28 February 2006. The various applications have related to matters such as pleadings, discovery, interrogatories and the like. Whilst it is fair to say that Mr Hercules has been unsuccessful more often than Mrs Gardner, both parties have had some successes and failures at an interlocutory level. On each occasion that Mr Hercules has lost before a master, he has appealed, unsuccessfully, to a judge. On one occasion he sought leave to appeal from the decision of a judge to the Court of Appeal but abandoned the application before it was heard. Mr Hercules was also unsuccessful in respect of all of the substantive applications heard by me on the 27th and 28th.
Mr Hercules has also filed and served more than 20 affidavits and 100 exhibits, many of which are repetitive, irrelevant or argumentative.
Mrs Gardner’s counsel conceded that the mere numbers of applications and affidavits were not in themselves sufficient to justify the making of an order under rule 63.03(3). I will therefore consider the three specific applications said by Mrs Gardner to be totally misconceived.
On 15 February 2005, Kaye J heard an appeal by Mr Hercules from orders and directions made by Master Wheeler on 7 December 2004. The master had ordered that documents produced by the Victorian Racing Committee in answer to a subpoena should be released to Mrs Gardner’s counsel, for copying. Mr Hercules’ then counsel argued before Kaye J that the subpoena was an abuse of process on five different bases. Kaye J considered and dismissed each of those bases and held that the subpoena was not an abuse of process. Although Mr Hercules lost the appeal, Kaye J did not criticise him or suggest that it was wholly inappropriate to have brought the appeal.
On 1 April 2005, Mr Hercules filed an application for leave to appeal the decision of Kaye J. On 26 April 2005, Mr Hercules issued a further summons seeking to have the third party proceeding declared a nullity on the basis inter alia that the magistrate had no power, or ought not to have allowed Mrs Gardner to file and serve the original third party notice. On 29 April 2005, the summons before the Court of Appeal was adjourned pending determination of the nullity summons. On 10 May 2005, Hansen J dismissed the nullity summons. On 14 June 2005, Mr Hercules abandoned his application for leave to appeal and his Court of Appeal summons was dismissed by consent.
In dismissing the nullity summons, Hansen J said that “this is an application which was without merit and should not have been brought.”[7] He also opined that Mr Hercules’ motive in bringing the application might have simply been to “seek a weapon of vexation on costs” in relation to Mrs Gardner[8].
[7][2005] VSC 111 at [47].
[8]Ibid at [46].
The current status of the pleadings is that Keith Hercules has a bare defence to the third party notice and no counterclaim. That position has arisen in the following circumstances.
On 27 January 2006, I refused Keith Hercules leave to further amend his defence and counterclaim dated 25 November 2004 and to add additional defendants to counterclaim. The proposed amended pleading was seriously deficient in a number of respects. I granted leave to bring a further application for leave to amend before me on 27 February 2006, at the same time as I was to hear a number of other applications between the parties.
Mr Hercules delivered a further proposed pleading headed “second further amended defence and counterclaim.”[9] Whilst a few of my earlier criticisms had been addressed, many of them had not. Of particular concern was that the alleged conspiracy remained poorly pleaded and lacking in adequate particulars. Senior counsel for Mr Hercules sensibly conceded that the further proposed pleading was still deficient and did not press the application[10] for leave to file and serve it. I dismissed the application with costs against Mr Hercules.
[9]Exhibit “KH117” to the affidavit of Keith Hercules sworn 13 February 2006.
[10]By summons dated 13 February 2006.
Accordingly, I allowed Mrs Gardner to proceed with her summons dated 6 December 2004, to strike out the existing pleading, being the further amended defence and counterclaim dated 25 November 2004. Her counsel made persuasive submissions as to why the entire counterclaim and the conspiracy allegations in the defence ought be struck out pursuant to rule 23.02, submissions with which Mr Hercules’ counsel did not quarrel. Accordingly, I struck out paragraphs 15 and following in the defence and counterclaim. Whilst poorly drafted, I did not strike out paragraphs 1 to 14 of the defence, containing essentially a bare denial of Mrs Gardner’s claim. I also awarded the costs of this application against Mr Hercules.
There are two fundamentally different versions of the events which gave rise to this proceeding, which are, in very general terms, as follows.
On the one hand, Mrs Gardner has deposed that she entered into the lease with Circuit at the request of Geoffrey Hercules, an old friend (and former boyfriend) of hers. She understood that the leased horse, Mountain Princess, was a racehorse which had been owned by Keith and Geoffrey Hercules. She had lent Geoffrey money in the past and entered into this transaction as yet another favour to him. Geoffrey Hercules told her not to worry, that he would make all the lease payments and it would not cost her anything. The indemnity was executed by Geoffrey Hercules in his own capacity and under a power of attorney granted to him by Keith Hercules. She was given a copy of the indemnity and the power of attorney by Geoffrey Hercules. She signed the paperwork which Geoffrey asked her to, and he assured her that his brother was well aware of the transaction. She knows nothing about the current whereabouts of Mountain Princess and has never had it or any other horse belonging to either of the Hercules brothers in her possession.
On the other hand, Keith Hercules has deposed that he knows nothing about the lease or indemnity documents and had revoked the power of attorney long before these transactions. He alleges that Mountain Princess and almost 20 other racehorses have been taken from him without his consent. His allegations of a conspiracy to deprive him of his horses is based substantially on what he alleges his brother, Geoffrey, has told him; allegations which Mrs Gardner strenuously denies in so far as they involve her. As the conspiracy allegations have been struck out on the pleading summons, there is no need for me to examine them in further detail here. Nevertheless, there are unusual features of some of the transaction documents upon which Mrs Gardner relies, which call for some explanation.
The person most able to explain all the relevant documents and events to the court is Geoffrey Hercules, an undischarged bankrupt, and a solicitor whose legal practice was placed in receivership due to allegations of misappropriation of client monies. Unfortunately, he has not favoured the court with any affidavit and whether he will ultimately give any, and if so what, evidence seems somewhat doubtful.
The factual issues are not capable of resolution on an interlocutory basis. The evidence will need to be tested by cross-examination. In particular, for the purposes of the current application, I cannot conclude at this stage that Keith Hercules has no arguable defence to Mrs Gardner’s claim.
Leaving aside the merits of the various applications, Keith Hercules has not conducted himself well in this litigation. Given that he is a very experienced solicitor, some of his conduct has been particularly inappropriate for an officer of this court.
For example, Mr Hercules has made a number of gratuitous allegations about Mrs Gardner, which are irrelevant and offensive. For example, he pleaded that she and Geoffrey Hercules had been in a de facto relationship “which included sexual relations”. Based on that completely irrelevant allegation, he then asked numerous highly offensive interrogatories about Mrs Gardner’s sex life. Some of his affidavits make allegations about Mrs Gardner’s current marriage which have no conceivable relevance to this case and would obviously cause embarrassment and offence to anybody in the position of Mrs Gardner and her husband.
Mr Hercules’ conduct of the litigation has been less than ideal in many other respects. For example, his correspondence (written on the letterhead of his firm) is frequently intemperate and has on occasion contained inappropriate threats to, or unfounded accusations of professional misconduct by, Mrs Gardner’s solicitors.
Mr Hercules has been conducting the proceeding himself, generally avoiding paying legal costs, save for the odd occasion on which he has briefed counsel. On the other hand, I have no doubt that Mrs Gardner’s actual legal costs to date must have exceeded, many times over, the $20,000 or so which she is seeking from Mr Hercules under the indemnity.
I have no doubt that this litigation, and the attendant delay and expense, has placed great stress on Mrs Gardner. Whilst much of that may well be attributable to Mr Hercules’ conduct of the proceeding, not all of the blame for delay can be placed there. Some of the delays have been due to the sheer number and nature of contested interlocutory applications, and the need to find masters and judges to deal with them.
Up until the hearing of the six applications before me on 27 and 28 February 2006, the comments of Hansen J appear to be the only recorded judicial criticism of Mr Hercules’ conduct of the proceeding. That may in part be because different applications have in the past been dealt with by different judges and masters who may not have had a detailed overview of the proceeding. During the course of the hearing on 27 and 28 February 2006, and in these reasons, I have been critical of a number of features of Mr Hercules’ conduct and his attitude to this proceeding. His position in relation to some of the applications before me was utterly without merit.
As I said earlier, the power to stay or dismiss under rule 63.03(3) is one to be exercised sparingly. In my opinion, whilst meriting judicial criticism, Mr Hercules’ conduct has not yet reached the stage where it would be appropriate for me to effectively deny him the opportunity of defending the third party proceeding, without giving him one last chance to pay the outstanding costs and get this proceeding “back on track”.
The proceeding is now subject to ongoing case management by me. I have reserved liberty to Mrs Gardner to bring a fresh application pursuant to rule 63.03(3), if the future conduct of this proceeding is marked by further time-consuming and unmeritorious applications by Mr Hercules.
For these reasons, I declined to stay or dismiss under rule 63.03(3). Instead, I made a self-executing order, requiring Keith Hercules to pay the outstanding costs within 48 hours or have his defence struck out. I chose the period of 48 hours because it was a period nominated by Mr Hercules as a time within which he could make the payment.
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