Dai v Bluestars Real Estate Pty Ltd
[2019] VCC 17
•22 January 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-04667
| MINH QUAN DAI (TRADING AS AUSTRALIAN LEGAL ADVISORY CENTRE) | Plaintiff |
| v | |
| BLUESTARS REAL ESTATE PTY LTD and MING XU | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 January 2019 | |
DATE OF RULING: | 22 January 2019 | |
CASE MAY BE CITED AS: | Dai v Bluestars Real Estate Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 17 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Love | Australian Legal Advisory Service |
| For the Defendants | Mr S Buchanan | Victorian Legal Costs Assessors |
HIS HONOUR:
1 In 2016, a proceeding was commenced by Ms Xing in the Fair Work Division of the Federal Circuit Court of Australia. That proceeding arose out of an arrangement whereby the applicant was to obtain sponsored employment by the first respondent, Bluestars Real Estate Pty Ltd (“Bluestars”), with a view to obtaining permanent residency in Australia.
2 In the event, the arrangement did not prove to be satisfactory and effective. Relations between the parties broke down and the proceeding in the Federal Circuit Court resulted.
3 Bluestars filed a Defence which, amongst other things, stated that, to the extent that there was a migration agreement entered into, despite any terms to the contrary in any document, such arrangement was in fact between Mr Zhu, as the head of one family, and the applicant’s father, as the head of the other family. Hence, Bluestars could in no way be liable upon a contract to which it was not, upon proper analysis, a party.
4 Further, Bluestars contended that the agreement by whomever made was, as a matter of Commonwealth statutory law, illegal and therefore unenforceable. That proceeding eventually was settled upon terms which have not been disclosed to me. Its relevance for present purposes is that it led to the rendering of a bill of costs by the plaintiff in this proceeding identifying the first defendant, Bluestars, as the client.
5 This proceeding initially sought judgment for an amount said to be owing under that bill in accordance with a costs agreement entered into between Australian Legal Advisory Centre (the Plaintiff’s legal practice) and Bluestars in pursuance of the disclosure made of costs and disbursements.
6 The Statement of Claim has now been the subject of some two amendments. The Further Amended Statement of Claim adds Second defendant, Mr Xu, who is the principal (or director) of Bluestars. It may be inferred, though the matter is not distinctly admitted by the parties, that Mr Xu (a person standing behind and in partial or total control of Bluestars) would be a solvent defendant in a way in which Bluestars itself would not be.
7 Paragraph 16 of the Further Amended Statement of Claim says:
“On several occasions since receiving the Bill of Costs the Second Defendant [that is, Mr Xu] has acknowledged that, insofar as Bluestars (the First Respondent) has not paid the Bill of Costs, he (scil is) liable to indemnify the Plaintiff for payment of the amount stated in the Bill of Costs.”
8 Without going to the detail for the prayer for relief, the claim is now directed principally against Mr Xu. However, paragraph 23 of the pleading says:
“Further or in the alternative to paragraphs 3-21 above, in the event that the Second Defendant is not found to be a third party payer as claimed in paragraph 4A above, and/or is not found to have indemnified the Plaintiff as to the costs of the proceeding as claimed in paragraph 13 above, Bluestars remains liable for the Bill of Costs."
9 The reference to a third party payer is to a concept appearing in the Legal Profession Uniform Law as rendered applicable in Victoria under the Legal Profession Uniform Law Application Act 2014 as Schedule 1 to that statute. Section 171 of the law provides that a person is a third party payer in relation to a client of a law practice if the person is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client. The section further provides that a third party is an associated third party payer if the legal obligation referred to is owed to the law practice whether or not it is also owed to the client or another person.
10 Therefore, the effect of the Further Amended Statement of Claim is, as I understand it, to allege that Mr Xu is, with respect to the plaintiff and Bluestars, an associated third party payer.
11 Meanwhile, however, the bill of costs which is the subject of the present proceeding, has been the subject of an application for assessment of costs by Bluestars. Section 198(1) of the law provides inter alia that a client who has paid or is liable to pay costs to a law practice is entitled to apply for an assessment of legal costs in Victoria by the Costs Court, which is a division of the Supreme Court of Victoria. A Summons for taxation of the relevant bill and other bills is pending before that Court.
12 Sub-section (7) of s198 of the law provides:
“If an application for a costs assessment is made in accordance with this Division—
(a) the costs assessment must take place without any money being paid into court on account of the legal costs the subject of the application; and
(b) the law practice must not commence any proceedings to recover the legal costs until the costs assessment has been completed.”
13 There are further detailed requirements with respect to costs agreements. In particular, an obligation as to disclosure imposed by s174 of the law. Sub-section 1(a) provides:
“must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs;”
14 I have been taken to the costs agreement, which is the only relevant one, between Bluestars and the plaintiff, and this makes disclosure of a small quantum of costs relative only to taking the matter in the Federal Circuit Court to mediation.
15 It is common ground that the matter proceeded far beyond mediation and the costs now sought are far greater than the costs which were originally disclosed.
16 Section 178(1) of the law provides:
“(1) If a law practice contravenes the disclosure obligations of this Part—
(a)the costs agreement concerned (if any) is void; and
(b)the client or an associated third party payer is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority; and
(c)the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation;”
17 It is against that background that the first defendant, Bluestars, through its counsel, Mr Buchanan, has, by Summons filed 3 December 2018, sought an order that the proceeding be struck out and that the plaintiff pay Bluestars’ costs.
18 Mr Love, who appears on behalf of the plaintiff, submits that no such order should be made. He says that, as alleged in paragraph 16 of the Further Amended Statement of Claim, Mr Xu, the second defendant, made plain on a number of occasions that he would accept liability for the relevant legal costs.
19 Further, he says that Mr Xu likewise accepted liability for the costs of the third respondent in the Federal Circuit Court proceeding, a Ms Yuhui Fang. Nevertheless, in the circumstances says Mr Love, given that Bluestars is the client to whom the bill is rendered, it remains necessary to make good the liability alleged against Mr Xu under paragraphs 16 and 23 of the Further Amended Statement of Claim that a claim as against Bluestars should remain in existence and unimpaired.
20 According to this analysis, Bluestars is the party primarily responsible, with a secondary liability attaching to Mr Xu by way of indemnity. He says that if the proceeding in this Court against both defendants is not permitted to proceed, with this Court making a determination as to the relative liability as between the two defendants, a determination in the Costs Court might shut out his client from attaching liability to Mr Xu as, in the circumstances, she, carrying on practice as Australian Legal Advisory Centre, is entitled to do. Therefore, there should be no order of strikeout stay, much less dismissal, to be made as against Bluestars, or rather in favour of Bluestars.
21 Mr Love stressed that the application for costs assessment, which is now pending in the Costs Court, pertains not merely to the particular bill of costs, which is the subject of this proceeding, but to a number of other bills, including a proceeding quite separate from the Federal Circuit Court proceeding which took place in the Supreme Court. There would be great difficult in disaggregating these bills.
22 Mr Love says that requests from his client for a disaggregation of the bills, so that they could be dealt with separately, had not been consented to by Bluestars (presumably acting under the control of Mr Xu). This phenomenon of aggregation was a further reason why it was essential that the liability of Bluestars be maintained and in no way diminished.
23 Mr Buchanan has gone a step beyond the relief sought in his client’s Summons. He says that by virtue of s178(1)(c), given the failure to make a proper disclosure of the relevant legal costs, one of the consequences is that the plaintiff, as a law practice, “must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed”.
24 The reference to `maintaining’ a proceeding, he says, entails an obligation on the part of this plaintiff not to suffer the claim against Bluestars to continue in existence pending the assessment in the Costs Court.
25 What then is one to make of these conflicting contentions?
26 Mr Buchanan submitted that despite the difficulties which the plaintiff faces in the complex and unhappy circumstances which I have described, the statutory regime already described is mandatory and cannot be modified or relaxed to accommodate the difficulties which this plaintiff may encounter in these complex circumstances.
27 In my view, in light of the language in the provisions which I have quoted, this accurately states the situation. To enable a matter to proceed in this Court, with the assessment in the Costs Court incomplete, would, in my view, clearly contravene two of the provisions in question.
28 Section 198(7) provides that the plaintiff must not commence any proceeding to recovery legal costs. A fortiori, there is a prohibition on continuing the proceedings. Likewise, s178 prohibits commencement or maintenance of proceedings for the recovery of legal costs in circumstances which I accept have occurred here with a deficiency in disclosure.
29 I do not, however, accept the contention that the word “maintain” has so sweeping a meaning as is attributed to it by Mr Buchanan. The effect is that whilst proceedings in this Court are frozen pending resolution of the assessment in the Costs Court, the statute does not require their extinction in the meantime. In my view, a proper order is that the proceeding against Bluestars should be stayed pending the hearing and determination of the application for assessment of the costs in the relevant bill by the Costs Court.
30 I accept that the situation is complicated by the aggregation of bills which have been brought before the Costs Court. However, I accept the contention made by Mr Buchanan that it would be open to the Costs Court, if it were persuaded it were in the interests of justice, to deal with the bill separately. In particular, to deal with the bill which is the subject of this proceeding.
31 In my view, the effect of the provisions in the uniform law requires that there be no less than an order of stay, such as I have described. Accordingly, that is the order which I propose to make. To go further and dismiss the proceeding would, in my view, go beyond what the statute mandates and potentially might destroy the basis for a liability which the plaintiff could otherwise make out as against Mr Xu in terms of her Further Amended Statement of Claim or some further iteration thereof. [I do not accept that a determination by the Costs Court that Bluestars is liable for some or all of the cost claimed in the bill would shut out a claim against Mr Xu. They are not alleged to be jointly or jointly and severally liable for the costs, rather Mr Xu’s liability is said to be as an indemnifier. A judgment against a principle debtor would not bar a subsequent claim for the same debt against a surety.]
Costs
32 I have given my reasons for determining that the claim in this proceeding, insofar as it relates to the first defendant, Bluestars, should be stayed. As a consequence of that order, Mr Buchanan, on behalf of the successful applicant, Bluestars, seeks an order that his client’s costs of the application be paid by the plaintiff.
33 In opposition to that proposal, I have been taken to two items of correspondence, the first of which was dated 15 January 2019. It is the first in the sense of it is the first one to which I was referred. It proposes consent orders which entailed the staying of this proceeding, as I have determined should occur, but also includes a proposal that the court should declare that the second defendant, Mr Xu, is liable as the third party payer for the relevant bill of costs. That is, it would entail a surrender by the party which, according to Mr Love, is the defendant which the plaintiff now seeks to place its major effort into holding liable.
34 It is unsurprising that this proposal was not accepted by Bluestars, and its existence in no way negates the operation of the usual rule that costs follow the event.
35 In a different category, however, is the second piece of correspondence to which I was referred albeit earlier in date, namely 12 December 2018, including a proposal that there be a stay with costs reserved. Mr Buchanan has said that when the matter was before me on 18 December, and I made orders for the filing of a Further Amended Statement of Claim, that was not the position which the plaintiff took. Therefore, the proposal in the open correspondence of 12 December, should be regarded as ineffective for costs purposes.
36 Given that the two items of correspondence to which I have just referred were not designated without prejudice or even without prejudice save as to costs, it is surprising that they come to my attention only now. The only realistic interpretation is that whatever the plaintiff may have thought in December of last year, she had repented of that and her counsel appeared today seeking to persuade me not to make the stay order which I ultimately determined should be made.
37 Accordingly, in my view, the usual rule of costs which follow the event should operate and the first defendant should have its costs of this application.
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