Davidson v Suncorp-Metway Limited (No 5)

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FEDERAL COURT OF AUSTRALIA

Davidson v Suncorp-Metway Limited (No 5) [2021] FCA 256

File number: QUD 18 of 2020
Judgment of: JACKSON J
Date of judgment: 23 March 2021
Catchwords:

COSTS - discretion to award costs against a party's lawyers - primary applications were wholly unsuccessful - no apparent reason why lawyers commenced proceedings on behalf of one prospective applicant - no costs order made against lawyers

COSTS - discretion to award costs - one prospective applicant did not actively participate in proceedings after lawyers ceased acting - whether inactive prospective applicant should be jointly and severally liable for costs with active prospective applicant - inactive applicant not liable for costs incurred after first hearing
Legislation:

Federal Court of Australia Act 1976 (Cth) s 43

Federal Court Rules 2011 (Cth) rr 7.23, 7.24, 26.12
Cases cited:

Barkhazen v Conair Australia Pty Ltd (No 2) [2018] FCA 992

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 4) [2009] FCA 1448; (2009) 263 ALR 63

Bitzer Australia Pty Ltd v Japp [2014] FCA 1040

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195; (2011) 184 LGERA 150

Davidson v Suncorp-Metway Limited [2020] FCA 795

Davidson v Suncorp-Metway Limited (No 3) [2020] FCA 1593

Davidson v Suncorp-Metway Limited(No 4) [2021] FCA 25

Dyczynski v Gibson [2020] FCAFC 120; (2020) 381 ALR 1

Ford Motor Co of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397

FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340

Goritsas v Barakat [2012] NSWSC 36

Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435

Jack Brabham Engines Ltd v Beare [2010] FCA 1096

Mitry Lawyers v Barnden [2014] FCA 918

Oshlack v Richmond River Council (1998) 193 CLR 72

Probiotec Ltd v The University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30

Registrar v Unnamed Respondent (1994) 234 FLR 248

Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388

WA Property Holdings Pty Ltd v Hampton Transport Services [2017] FCA 1310

Young v Hughes Trueman Pty Ltd (No 4) [2017] FCA 456
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 48
Date of hearing: Determined on the papers
Counsel for the Prospective Applicants: The prospective applicants did not appear
Counsel for the Prospective Respondent: Mr DJ Ananian-Cooper
Solicitor for the Prospective Respondent: Gadens Lawyers
Counsel for the Non-party: Anthony JH Morris QC
Solicitor for the Non-party: Kelly Legal

ORDERS

QUD 18 of 2020
BETWEEN:

WILLIAM JAMES ALEXANDER DAVIDSON

First Prospective Applicant

RISA NAGATSUMA

Second Prospective Applicant
AND:

SUNCORP-METWAY LIMITED (ABN 66 010 831 722)

Prospective Respondent
KELLY LEGAL
Non-party

ORDER MADE BY:

JACKSON J

DATE OF ORDER:

23 MARCH 2021

THE COURT ORDERS…

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Details
Case
[2021] FCA 256
Decision Date

CaseChat Overview and Summary

In the case of Davidson v Suncorp-Metway Limited (No 5), the parties involved were the prospective applicants, Mr Davidson and Ms Nagatsuma, and the prospective respondent, Suncorp-Metway Limited. The dispute centered on the costs incurred during the proceedings related to a preliminary discovery application and a subsequent application for a declaration that a mortgage was unenforceable. The Federal Court was tasked with determining the liability for these costs among the parties and their legal representatives.

The court was required to decide several legal issues regarding the costs. Firstly, whether Kelly Legal, the solicitors who initially represented the prospective applicants, should be liable for the costs of the preliminary discovery application. Secondly, whether Mr Davidson should be jointly and severally liable for the costs on an indemnity basis. Thirdly, whether Ms Nagatsuma, who ceased to participate actively after her legal representation ended, should bear any part of the costs. Lastly, the court needed to address the costs of the application concerning the mortgage.

The court concluded that Kelly Legal should not be held liable for any of the costs of the preliminary discovery application due to insufficient evidence. Mr Davidson was ordered to pay the costs of the preliminary discovery application on an indemnity basis. Ms Nagatsuma was only liable for the bank's costs up until 21 February 2020, on an indemnity basis. Finally, Mr Davidson was ordered to pay the costs of the application for a declaration concerning the mortgage, on a party-party basis.

The court issued specific orders regarding the costs. The prospective applicants were to jointly and severally pay the prospective respondent's costs of the preliminary discovery application incurred up to and including 21 February 2020, on an indemnity basis. Mr Davidson alone was to pay the costs incurred after 21 February 2020, and the costs of the interlocutory application filed on 11 June 2020, on an indemnity and party-party basis, respectively. Kelly Legal was permitted to submit written submissions on its costs, and the prospective respondent and Kelly Legal were also given the opportunity to file their respective submissions. Any issues raised by these submissions were to be determined on the papers.

Orders

Orders of the court

1. The prospective applicants must jointly and severally pay the prospective respondent's costs of and incidental to the preliminary discovery application incurred up to and including 21 February 2020, on an indemnity basis.

2. The first prospective applicant must pay the prospective respondent's costs of and incidental to the preliminary discovery application incurred after 21 February 2020, on an indemnity basis.

3. The first prospective applicant must pay the prospective respondent's costs of and incidental to paragraph 4 of the interlocutory application filed 11 June 2020, on a party‑party basis.

4. Kelly Legal may file any outline of written submissions on the subject of its costs of this matter, not more than three pages in length, on or before 8 April 2021.

5. The prospective respondent may file any submissions not more than three pages in length, on or before 22 April 2021.

6. Kelly Legal may file brief submissions in reply, not more than three pages in length, on or before 29 April 2021.

7. Any issues raised by the submissions mentioned in the preceding orders will be determined on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I have delivered two judgments disposing, respectively, of the prospective applicants' application for preliminary discovery, and the application of the first prospective applicant, Mr Davidson, for a declaration that a mortgage was unenforceable: Davidson v Suncorp-Metway Limited (No 3) [2020] FCA 1593 (the Discovery Decision) and Davidson v Suncorp-Metway Limited(No 4) [2021] FCA 25 (the Mortgage Decision). These reasons relate to the costs of the matter. The issues about costs are:(1)whether Kelly Legal, the solicitors who represented the prospective applicants at the time they commenced the proceeding, should bear any liability for the costs of the preliminary discovery application;(2)whether Mr Davidson, should be liable on an indemnity basis to pay the costs of the successful prospective respondent bank, Suncorp-Metway Limited, in relation to the preliminary discovery application;(3)whether the second prospective applicant, Risa Nagatsuma, should bear any part of the costs of the preliminary discovery application, whether on an indemnity basis or at all; and(4)the costs of the application for a declaration concerning the mortgage. For the reasons below I determine those issues as follows:(1)there is insufficient evidence to require any order that Kelly Legal is liable for some or all of the costs of the preliminary discovery application;(2)Mr Davidson will be ordered to pay the costs of the preliminary discovery application on an indemnity basis;(3)Ms Nagatsuma will only be liable for the bank's costs of the preliminary discovery application, up until 21 February 2020, on an indemnity basis; and(4)Mr Davidson must pay the costs of the application for a declaration concerning the mortgage, on a party-party basis.The position of Kelly Legal Sean Kelly of Kelly Legal commenced the preliminary discovery application in his capacity as legal representative of Mr Davidson and Ms Nagatsuma on 21 January 2020. The application was supported by an affidavit of Mr Davidson and an affidavit of Mr Kelly both dated 21 January 2020. No affidavit of Ms Nagatsuma has ever been filed in the proceeding. Mr Kelly filed a notice of ceasing to act on 19 February 2020. A different lawyer represented Mr Davidson for a brief time after that, but for most of the proceeding he was self-represented, and Ms Nagatsuma had no legal representation at all after 19 February 2020. Except for the commencement of the proceeding in her name, she took no part at all in the proceeding. In the Discovery Decision at [32]‑[34] I said:The bank adduced evidence to the effect that it had no contractual relationship with Ms Nagatsuma. It never provided any facilities to her and she has provided no guarantee or security for Mr Davidson's or FNQ's liabilities to the bank. That evidence was not contested.No possible claim by Ms Nagatsuma against the bank was articulated in submissions. It appears that she was a party to the proceedings before Ryan J in the Supreme Court of Queensland because she was occupying the Heidke Road property at the time those proceedings were commenced. It also appears from the evidence that at the time of the hearing of this application, she was no longer at that property, having separated from Mr Davidson.No basis has been put on which Ms Nagatsuma could have a claim against the bank in this court. Nor is there any evidence at all as to whether Ms Nagatsuma has a reasonable belief that she may have a claim. I am satisfied that no orders for preliminary discovery should be made in her favour.

Ratio Decidendi

Legal Principle Established

Kelly Legal have proposed that the parties should be at liberty to make submissions about the costs of the issue concerning its costs liability. I will make directions for that matter to be determined on the papers.The costs of the application for a declaration that the mortgage was invalid Mr Davidson was unsuccessful in the aspect of the proceeding which resulted in the Mortgage Decision. The bank seeks its costs of that aspect, and did not submit that they should be indemnity costs. The bank made no suggestion that Ms Nagatsuma should be liable for those costs, which were occasioned by an interlocutory application which Mr Davidson alone filed on 11 June 2020. The bank is entitled to its costs of the application made at paragraph 4 of that interlocutory application on the usual party-party basis, payable by Mr Davidson alone.