Clark v Lester - [2018] SASC 107

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CLARK & ORS v LESTER & ORS
[2018] SASC 107
Judgment of The Honourable Justice Hinton
26 July 2018
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
Application by the sixth defendant, Ms Nakic, for a costs order to be made upon the dismissal of the action against her in a lump sum solely against the first plaintiff, Mr Clark.
The plaintiffs conceded that costs follow the event and that an award of costs should be made in Ms Nakic’s favour. However the plaintiffs argued that a costs order should not be made against the first plaintiff solely, nor made in a lump sum.
The first plaintiff is the sole director and sole shareholder of each of the second, third and fourth plaintiffs. Ms Nakic argued that the first plaintiff should be solely responsible for the payment of costs as he had conducted the litigation for his own benefit and had twice informed the Court that he would personally pay any award of costs made in her favour. She detailed the solicitor/client costs she had incurred and proposed that that amount be discounted by 30% to reflect costs incurred on a party/party basis. The plaintiffs made a number of objections to costs Ms Nakic included in the lump sum sought.
Held, granting the application in part:
1. The first, second, third and fourth plaintiffs are to pay the costs of the sixth defendant on the basis that each is jointly and severally liable for those costs, such costs to be taxed if not agreed.
Supreme Court Civil Rules 2006 rr 194(6), 264(5)(c); Supreme Court Act 1935 (SA) s 40(1), referred to.
Lyons v Legalese Pty Ltd (No 2) [2017] SASC 2; Kopilovic & Others v Gatley & [2005] WASC 62; Paciocco and Another v Australia and New Zealand Banking Group Ltd [No 2] (2017) 253 FCR 403, applied.

CLARK & ORS v LESTER & ORS
[2018] SASC 107
Civil
HINTON J
Introduction

This is an application by the sixth defendant seeking an order for costs against the first plaintiff. It arises as follows; in mid-2013 the first plaintiff, Mr Clark, and the first defendant, Mr Lester, agreed to go into the olive oil production business. Mr Clark was to provide the knowledge necessary to the operation of olive groves and the commercial production of olive oil, whilst Mr Lester was to finance the operation. The plan was to be effected by a partnership between corporate bodies and trusts controlled by Mr Clark and Mr Lester. The business was to operate in two States, South Australia and Queensland. For the purposes of the operation of the business in South Australia Mr Clark caused Bevo Agricultural Investments Pty Ltd (BAI), the second plaintiff, to be incorporated for the purpose of entering into a partnership (the Lameroo Station Partnership) with Lameroo Station Pty Ltd (LSPL), a company incorporated by Mr Lester. In Queensland the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Clark v Lester

Details

AGLC: Clark v Lester [2018] SASC 107
Case: [2018] SASC 107
Decision Date: 26 July 2018

CaseChat Overview and Summary

In the matter of Clark v Lester, the dispute arose from the proceedings related to a complex commercial matter. The parties involved were Clark, the first, second, third, and fourth plaintiffs, and Lester, the sixth defendant. The central legal issue was the determination of the appropriate order for costs to be borne by the plaintiffs. Specifically, the court had to decide whether the costs incurred by the sixth defendant, Lester, should be awarded against all plaintiffs jointly and severally, and if so, whether a lump sum order for these costs should be made.

The reasoning of the court was rooted in the principles of procedural fairness and the specific provisions of the Federal Court Rules and Practice Direction. The court noted that while it had the authority to make a lump sum costs order, it would depart significantly from the usual practice and procedure. The court found that the plaintiffs had not been given a fair opportunity to make submissions on the appropriateness of such an order. Moreover, the court determined that the quantum of costs was not virtually unarguable, as suggested, and thus, the plaintiffs should be given the opportunity to participate in a dispute regarding their costs liability. Consequently, the court ruled that the first, second, third, and fourth plaintiffs were jointly and severally liable for the costs of the sixth defendant, Lester, and that these costs would be taxed if not agreed.

The final orders of the court were that the first, second, third, and fourth plaintiffs would pay the costs of the sixth defendant, Lester, on the basis of joint and several liability, and these costs were to be taxed if not agreed. This decision underscored the importance of procedural fairness and adherence to the established rules and practice directions concerning costs orders in the Federal Court.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The passage taken from Paciocco and quoted above must be understood in the context of the Federal Court Rules and the Practice Direction dealing with lump-sum costs orders. Whilst the power possessed by this Court would allow for a similar approach, it would be a significant departure from the ordinary approach of this Court. In any event, the Federal Court Rules and the related Practice Direction ensure that the parties are given a fair opportunity to make submissions on the appropriateness of utilising the lump-sum order. It is also contemplated that a substantial hearing take place on the question of quantum. Here that same opportunity has not been provided. In such circumstances an order in a specified amount should only be made where the justice of making an award and the amount of the award are virtually unarguable. In that connection, regrettably, I do not share Ms Nakic’s confidence on the question of quantum to the extent that I am prepared to deny the plaintiffs the opportunity to participate in a dispute as to their costs liability in accordance with the normal practice and procedure.Conclusion For these reasons I order that the first, second, third and fourth plaintiffs pay the costs of the sixth defendant on the basis that each is jointly and severally liable for those costs, such costs to be taxed if not agreed.

Ratio Decidendi

Legal Principle Established

Lastly, it is contended that the first plaintiff was on notice as to the application since 15 November 2017 when the interlocutory application (FDN 84) was filed and served.Consideration There is no dispute that an order for costs should be made in favour of Ms Nakic. Two questions arise, however; first, should the order be made in terms rendering the first plaintiff liable for the costs occasioned Ms Nakic by the second, third and fourth plaintiffs? Second, should an order be made in a lump sum? Section 40(1) of the Supreme Court Act 1935 (SA) (SCA) provides the Court with a broad power to award costs. The breadth of the power is to be preserved so as to maximise the ability to do justice in every case.[1] Putting to one side procedural niceties such as notice, rule 264(5)(c) makes plain that this Court may make an order in a lump sum. [1] Lyons v Legalese Pty Ltd (No 2) [2017] SASC 2 at [5]–[8] and the authorities there cited. I understood counsel for the plaintiffs to concede that it would be appropriate for the Court to make an order for costs in favour of Ms Nakic for which the first, second, third and fourth plaintiffs would be jointly and severally liable. In circumstances where the plaintiffs have been represented by the same solicitors and counsel, or by Mr Clark himself, without any differentiation in interests between them such order seems appropriate.[2] This being so, the debate over the appropriateness of making an order against the first plaintiff alone becomes sterile. An order which has the effect that the plaintiffs are joint and severally liable for the costs of Ms Nakic achieves the same purpose.[2] Kopilovic & Others v Gatley & Others [2005] WASC 62. The expedience and cost savings that attach to making an order in a specified sum make such outcome attractive. In the absence of any application that a non-party costs order be made against the plaintiffs’ former solicitors, any responsibility the plaintiffs’ former solicitors might bear for costs incurred by Ms Nakic falls to be resolved between the plaintiffs and their solicitors. It does not then of itself provide reason not to make the order sought. In Paciocco and Another v Australia and New Zealand Banking Group Ltd [No 2] the Full Court of the Federal Court provided some assistance as to when the power possessed by that court to make a lump sum costs order should be exercised.[3]We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] (‘Sigalla’). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee’s report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable.… In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19].There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. [3] (2017) 253 FCR 403 at [18]-[20] (The Court).