Down Town Visuals v Panorama Investments (No 3)
[2018] VSC 691
•13 November 2018
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT | Not Restricted |
The Down Town Proceeding - S CI 2017 3990
| DOWN TOWN VISUALS PTY LTD | Plaintiff |
| v | |
| PANORAMA INVESTMENTS PTY LTD | Defendant |
The Possession Proceeding - S CI 2017 3283
| PANORAMA INVESTMENTS PTY LTD | Plaintiff |
| v | |
| NICK MELLOS and STEPHEN ROBERT DIXON (as Joint and Several Trustees of the Bankrupt Estate of Dr Nicholas William Sevdalis (a Bankrupt)) and ors (according to the attached Schedule of Parties) | Defendants |
The First Mortgage Proceeding - S CI 2017 4334
| PANORAMA INVESTMENTS PTY LTD | Plaintiff |
| v | |
| N.B. SERVICES (AUST) PTY LTD and ORS (according to the attached Schedule of Parties) | Defendants |
---
JUDGE: | DIGBY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 November 2018 |
DATE OF RULING: | 13 November 2018 |
CASE MAY BE CITED AS: | Down Town Visuals v Panorama Investments (No 3) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 691 |
---
COSTS – Interest on costs – Jurisdiction as to Costs – Discretion as to costs – Where parties seek determination on interest entitlement – Whether interest should run from the date invoices were paid – Whether claimant should be indemnified for costs under loan agreement – Supreme Court Act 1986 (Vic) s 101.
APPEARANCES FOR: | Counsel | Solicitors |
| Down Town Visuals Pty Ltd | Mr M Colbran QC with Mr A Solomon-Bridge | Arslan Lawyers |
| Panorama Investments Pty Ltd | Mr L Magowan | Barraket Stanton Lawyers |
| Receivers of Native Bond Pty Ltd (Receivers and Managers Appointed) (In Liquidation) | Mr C Moller | White Cleland |
| Joint and Several Trustees of the Bankrupt Estate of Dr Nicholas William Sevdalis (a Bankrupt). | No appearance | No appearance |
| Liquidator of Native Bond Pty Ltd (Receivers and Managers Appointed) (In Liquidation) | No appearance | No appearance |
| NB Services (Australia) Pty Ltd (Receivers Appointed) | No appearance | No appearance |
| Nicholas Bochrinis | No appearance | No appearance |
| Champion Investment Group Pty Ltd | No appearance | No appearance |
| Bendigo and Adelaide Bank Ltd | No appearance | No appearance |
HIS HONOUR:
Introduction
On 31 January 2018, Panorama Investments Pty Ltd (Panorama), the plaintiff in the First Mortgagee Proceeding (S CI 2017 4334) and the Possession Proceeding (S CI 2017 3283) and the defendant in the Down Town Proceeding (S CI 2017 3990), paid the sum of $3,708,785.95 (the Settlement Proceeds) into the Supreme Court of Victoria’s Funds in Court. This payment was made pursuant to paragraph [2] of the Orders of Elliott J dated 24 January 2018 in the Possession Proceeding. The Settlement Proceeds represent the surplus from the sale of the land located at 895 Yan Yean Road, Doreen, Victoria.
This litigation arises out of the default of Mr Nicholas Sevdalis, who is now bankrupt, and associated entities in respect of a number of secured and unsecured loan agreements. The parties to the present proceeding assert competing interests in respect of the Settlement Proceeds. Those proceeds were generated by the sale of the above secured properties.
During applications made on 12 November 2018, it emerged that a likely impediment to the active parties before the Court being able to resolve or partially resolve their various applications and positions in respect of the orders required to dispose of cost and interest and appropriate orders for the distribution of the Settlement Proceeds, was the variant position of the active parties in relation to Panorama’s entitlement to the interest as asserted by Panorama in its submissions dated 7 November 2018, in particular at [2].
The remaining active parties seek a determination as to the extent of the interest entitlement of Panorama on the legal costs to which it is entitled from the Settlement Proceeds.
For brevity, I adopt the background facts and abbreviations set out in Down Town Visuals v Panorama Investments [2018] VSC 427 (the first judgment) and Down Town Visuals v Panorama Investments No 2 [2018] VSC 584 (the second judgment).
Jurisdiction to determine interest on costs
Section 24(1) of the Supreme Court Act 1986 (Vic) (Supreme Court Act) provides:
Costs to be in the discretion of Court
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
The Trial Division of the Supreme Court of Victoria, constituted by a Judge of the Court, may hear and determine all matters, whether civil or criminal, not required by or under an Act or the Rules to be heard and determined by the Court of Appeal.[1] For this reason, pursuant to s 24(1) and s 101 of the Supreme Court Act (which is addressed below), I consider that I have jurisdiction to make a determination as to Panorama’s interest entitlement in respect of its legal costs.
[1]Supreme Court Act 1986 (Vic) s 17(1).
The parties acknowledged, and I note, that in many circumstances such a determination would be made by the Costs Court of this Court. To this end r 63.05 of the Supreme Court (General Civil Procedure) Rules 2015 provides:
By whom costs to be taxed
Unless the Court otherwise orders, costs taxed in accordance with this Order shall be taxed—
(a) in the Costs Court by a Costs Judge; or
(b) if a Costs Judge so directs, by a judicial registrar, a Costs Registrar, a Deputy Costs Registrar, the Prothonotary or a Deputy Prothonotary, as the case requires.
However, the active parties have accepted that, in this instance, it was suitable that I make such a determination.[2] Ultimately, the question of ‘jurisdiction’ was not the subject of substantive argument. Further, the active parties each sought an immediate decision as to Panorama’s asserted entitlement to interest on its cost and as sought to be calculated by Panorama.
[2]See, eg, T91.3–11 (9.4.18).
Accordingly, to the extent that it is necessary, I am, pursuant to the caveat in r 63.05, order that the discrete question of Panorama’s interest entitlement be determined here; and that certain residual costs issues be directed to the Costs Court, if that is ultimately necessary.
The Parties’ Submissions
Panorama
In the First Mortgagee Proceeding (S CI 2017 4334), and of application to both the Possession Proceeding (S CI 2017 3283) and the Down Town Proceeding (S CI 2017 3990), Panorama seeks the following order in respect of its legal costs:
5In accordance with section 100(1) of the Supreme Court Act, the Court directs that Panorama is entitled to be paid penalty interest in accordance with the Penalty Interest Rate Act 1983:
(1)on its assessed costs (if the issue proceeds to the Costs Court); OR
(2)costs ordered by way of an order by this Court (see Order 4(2) hereof),[3]
from the date each of the invoices the subject of the assessment or order was paid to the date that the Costs are paid out of the Fund.
[3]Panorama Proposed Minutes of Order.
Accordingly, in substance, Panorama seeks penalty interest on its costs and to have the calculation of such penalty interest run from the dates on which Panorama paid each invoice from its lawyers in respect of legal costs.[4] Panorama also repeats certain oral submissions made at the trial on 9 April 2018.[5] These submissions were as follows:
[4]Panorama Submissions, 7 November 2018 (Panorama Submissions), [2].
[5]Ibid [2].
(a) Firstly, the ‘presumptive position’ in s 101(1) of the Supreme Court Act is that interest runs from the date judgment was given. However, that position can be displaced and the Court can order an alternative date in certain circumstances.[6]
[6]T79.26–80.11 (9.4.18).
(b) Secondly, Panorama paid its legal costs on time consistently between 2014 to 2017. Moving from 2017 to 2018, the invoices were not being paid. Such invoices were then paid when properties settled in 2018 and Panorama received a judgment sum plus penalty interest.[7]
[7]T80.27–81.5 (9.4.18).
(c) Further, Counsel for Panorama observed:
In this case, you have a combination: over five years, Panorama paying its legal fees and losing the time value of that money, and then as from February 2018, having part of its proceeds of litigation used to fund the payment of the outstanding legal fees.[8]
[8]T80.9–14 (9.4.18).
(d) Panorama also relied on Osborne v Kelly.[9] In Osborne the Chief Justice made the following observation as to the Court’s discretion to award interest on legal costs under the South Australian legislation:
[9](1999) 75 SASR 392.
Bearing in mind the purpose of an award of costs, the purpose of an award of interest, and the way in which the section operates, did a proper exercise of the discretion in this case require that the defendant be ordered to pay interest from a date preceding the date of the certificate of the taxing officer?[10]
[10]Ibid 400 [34].
If the plaintiff had already paid legal costs or disbursements, there may be a sound basis for the exercise of the discretion to fix an earlier date from which interest is to run. In that event the plaintiff will have met a cost for which the defendant is liable, and will have been out of pocket from the time of the payment until the costs are paid. Compensation to the plaintiff, and the giving of a partial indemnity, would require that an earlier date be fixed than the date of the taxing officer's certificate. In saying this I am putting to one side the possibility of the existence of other relevant factors that might support a contrary decision. The same reasoning might apply if the plaintiff has not paid costs or disbursements, but had agreed to pay interest on them if recovered from the defendant. An agreement to pay interest on unpaid costs raises issues that do not have to be considered in this case. I am not to be taken as deciding that such an agreement would be a reason for fixing an earlier date.[11]
In light of the above authority, which supports an exercise of the Court’s discretion of the type Panorama seeks in certain cases, Panorama submitted that the Court can take a ‘fairly rough and tumble approach’ to the issue, especially where relevant costs invoices have already been paid.[12]
(e) Panorama also submitted that it has suffered further prejudice by being ‘effectively injuncted by Down Town from obtaining any of its costs in relation to the proceeds of sale’.[13] That stands in contrast to the ‘ordinary course: where a mortgagee in possession would sell the property and other parties with interests could recoup their costs from the proceeds.[14] Here, that did not occur.
[11]Ibid 400 [35].
[12]T82.24–83.4 (9.4.18).
[13]T83.5–13 (9.4.18).
[14]T83.23–84.2 (9.4.18).
In summary, Panorama submitted that, despite five years of litigation and at least six independent cases, it has been prevented from accessing the Settlement Proceeds to pay its legal costs. This is despite the fact that it for the most part paid its costs over the course of the proceedings, as invoices received in respect of legal costs became due. Panorama also complained that, when it did on occasion fail to pay its costs, the costs were pulled out of the actual judgment sum.[15] Counsel for Panorama submitted that this amounted to a curtailment of his client’s rights,[16] and urged an order should be made awarding interest from the date each invoice was paid.[17]
[15]T84.22–29 (9.4.18).
[16]T84.30–85.11 (9.4.18).
[17]T85.18–23 (9.4.18).
Now, Panorama also makes a submission, which I consider to be somewhat inconsistent with the above, that costs should be assessed without reference to specific proceedings,[18] and up to and including the hearing on 12 November 2018.[19] Panorama points out that it has served two cost related reports of Blackstone Legal Costings (Blackstone Report) which assess its costs on a standard basis in accordance with the first judgment. Part of Panorama’s position is that any party challenging its entitlement to be paid from the Settlement Proceeds ought to challenge the assessment in the Costs Court at the risk of an adverse costs order.[20] I consider however that this is an issue to be addressed on another day, if necessary, together (again if necessary) with the residual cost related issues, including the Down Town claim that Panorama’s costs should be adjusted to reflect its lack of success on what Down Town asserts were a number of ‘ambit claims’ made by Panorama.[21]
[18]Panorama Submissions, [3].
[19]Ibid [3].
[20]Ibid [3].
[21]Down Town Submissions, 7 November 2018 (Down Town Submissions), [12].
Down Town
Down Town contests Panorama’s entitlement to interest on costs including, from the date of payment of the relevant invoices.[22] Down Town, in summary, submits as follows:
[22]Down Town Submissions, [1].
(a) While the Court is empowered to order that interests on costs run from a date other than that on which the costs were assessed, such a claim is ‘usually’ between the date of assessment of those costs and the date on which judgment was entered with costs to be assessed.[23]
[23]Ibid [1](a).
(b) In Osborne v Kelly,[24] the Chief Justice observed that the ‘[t]he fixing of a date from which interest is to run should not become, of itself, a substantial and complex issue’.[25] On Down Town’s submission:
[24](1999) 75 SASR 392.
[25]Ibid 400 [36].
(i) Panorama’s proposed order seeking an awarding of interest on cost on different sums and running from different dates, will require a number of discrete calculations and will lead to further disputes and complications;[26]
[26]Down Town Submissions, [1](b).
(ii) Down Town also observes that such an intricate and complex calculation of costs will also probably involve deciding in relation to each relevant cost’s invoice whether that invoice relates to a cost properly recoverable as party part legal costs on the part of Panorama;
(iii) The Chief Justice ‘expressly disapproved’ of fixing a number of different dates from which interest was to run, which Down Town describes as Panorama’s proposed approach in this instance;[27]
[27]Ibid [1](c).
(iv) Discretions such as provided for by and in relation to s 101 of the Supreme Court Act are not attended by ‘untethered notions of fairness’.[28] The default position prescribed in the Supreme Court Act should be given weight, such that the Court should be disposed to find that interest on costs runs from the date of assessment.[29]
(c) Thirdly, Down Town points out that Panorama appears to contend for a ‘lump sum costs order’ in reliance on the Blackstone Report.[30] To the extent that is so, Down Town observes that the calculation of interest running on different dates will be ‘almost impossible’, because the specific amounts allowable on each invoice will not be discernible.[31]
[28]Ibid [1](c).
[29]Ibid [1](c).
[30]Ibid [1](b).
[31]Ibid [1](b).
Receivers of Native Bond
In response to Panorama’s submission that it should have interest on its costs ‘from the date of payment’, the Receivers make the following submissions:
(a) The ‘gist’ of the argument appears to be that Panorama is indemnified for such costs under the Loan Agreement; and that it is now entitled to that indemnity by reason of the borrower’s default.[32] The document recording the Loan Agreement does not, however, contain a provision to this effect.[33]
[32]Receivers Reply Submissions, 9 November 2018 (Receivers Submissions), [5].
[33]Ibid [5](a).
The relevant clauses of the Loan Agreement provide as follows:
(b) Payment of costs & fees in General
All other legal costs, valuation fees, government charges and expenses that may [sic] incurred by the lender in relation to the loan, the implementation of the security and/or the discharge of such security will be payable by the borrower which are not specified in item 9 of the schedule are to be paid by the borrower on the expiry date along with the loan amount and outstanding interest thereon.
(c) Costs on Default
The borrower shall be responsible for any and all legal costs, enforcement expenses, fees, charges and other costs including but not limited to any reasonable costs for the lender’s time where there is a default by the borrower of the terms and conditions of this letter of offer and/or any security.
The clauses on which Panorama relies, despite referring variously to ‘legal costs’, fees, charges and expenses, do not incorporate a claim for interest on legal costs.[34] Nor has Panorama opted to claim interest on legal costs under ‘some other head’ such as damages following the borrower’s breach or some other indemnity.[35]
[34]Ibid [5](b).
[35]Ibid [5](c).
(b) The first judgment held that Panorama was entitled to party-party costs,[36] and Panorama was not entitled to costs in respect of its third party claim against former solicitors.[37] There is therefore an antecedent question of what party-party costs, if any, Panorama is entitled to recover. This makes it inappropriate to make orders incorporating an interest liability running from the date Panorama paid invoices for legal costs.[38]
(c) Panorama has not identified a basis on which the Court can award interest on costs.[39] Section 101(1) of the Supreme Court Act deals with ‘interest on judgment’ and provides that interests on costs assessable by the Costs Court runs ‘from the date of the order of the Costs Court stating the result of the assessment or such other date as the Court order’. The Receivers for Native Bond submit that, first, Panorama’s costs remain assessable by the Costs Court and therefore, at present in any event, there is no entitlement to interest until the Costs Court makes a relevant order.[40] Second, Panorama has provided no reason for why the Court should order an alternative date.[41] And third, it has been suggested that the Court does not have an inherent power to award interest on party-party costs,[42] a position that Panorama did not seriously contradict.[43]
(d) Finally, the Blackstone Reports on which Panorama relies have not been the subject of any formal contest,[44] and have not (in the case of the second report) even been formally adduced as evidence.[45] These reports per se are no basis on which the Court can determine the proper basis for Panorama’s costs.[46]
[36]First Judgment [52].
[37]Receivers Submissions, [5](d); First Judgment [74].
[38]Receivers Submissions, [5](d).
[39]Ibid [5][e].
[40]Ibid [5][e].
[41]Ibid [5][e].
[42]GE Dal Pont, Law of Costs (LexisNexis Butterworths, 2013, 3rd ed) [19.23]–[19.25].
[43]Receivers Submissions, [5][e].
[44]Ibid [6].
[45]Ibid [6].
[46]Ibid [6].
Considerations
Section 101(1) of the Supreme Court Act provides:
101 Interest on judgment
(1)Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the judgment was given or, in the case of costs which are assessable by the Costs Court, from the date of the order of the Costs Court stating the result of the assessment or such other date as the Court orders.
(2)The amount of the interest must be stated in the body of, and may be levied under, a warrant of execution on the judgment.
In relation to the Victorian legislation, Professor Dal Pont has observed:
The Supreme Court Act 1986 s 101(1) provides that every judgment debt carries interest at the rate for the time being fixed under the Penalty Interest Rates Act 1983 s 299 from the time the judgment was given or, in the case of costs assessable by the Costs Court, from the date of the order of the Costs Court stating the result of the assessment or such other date as the court orders. It follows that where taxed costs are ordered, the proper approach is the allocatur approach.[47]
[47]Dal Pont, Costs [19.21].
At 19.23 of his work Law of Costs, Professor Dal Pont states:
Whether superior courts have power to award interest on party and party costs independent of the specific provisions discussed above is the subject of conflicting authority. Once view is that the general statutory costs discretion conferred upon courts carries the power to award interest on party and party costs. Rogers CJ explained the logic for this view in McWilliams Wines Pty ltd v Viaweena (NSW) Pty Ltd as follows:[48]
It does not require much commercial acuity to perceive the financial hardship that could be imposed on a litigant who is required … by its own solicitors, to pay its costs to them and remain bereft of any compensatory interest payment until, in the fullness of time, the costs are taxed and then only from that date. The problem has become more acute by reason of two facts. First, there is a much longer time lapse between the date when litigants are required to pay an amount on account of costs to their own solicitor s and the time when taxed bills of costs are brought in. Second, because of the sheet size of the amount involved in the payment of costs.
[48](1993) 32 NSWLR 190 at 191; BC303918 (Comm D) (paragraph break omitted).
Counsel for Panorama acknowledged that there is an unresolved question as to whether the Court retains a discretion, independently of the Supreme Court Act, to award interest on party-party costs. On this respect Professor Dal Pont states:
The problem with the McWilliams Wines approach is that in no jurisdiction is the term ‘costs’, in so far as it refers to the general statutory costs discretion, expressly defined to include interest. This indeed may explain why the parliaments in each jurisdiction have enacted specific provisions designed, inter alia, to confer a jurisdiction to award of interest on party and party costs.[49]
[49]Ibid [19.25].
The Receivers relied on the statement in the last preceding paragraph but ultimately contested the power of the Court, as opposed to the Costs Court, to order an award of interest on party-party costs.[50] However, Panorama contends that the Court has power to award interest on cost, including party-party costs, and Down Town also similarly contends.[51]
[50]Receivers Submissions, [5][e].
[51]Down Town Submissions, [1(e)].
In my view, I have power, including pursuant to s 101(1) of the Supreme Court Act, to order interest on costs (including party-party costs). The last eight words of that section clarify that the legislature intended that a Judge of this Court, in addition to the Costs Court of the Supreme Court of Victoria, can so order. For present purposes, the question then is whether the Court should exercise its discretion, pursuant to s 101(1) of the Supreme Court Act, to order the interest that is sought by Panorama and calculated as Panorama submits it should be calculated.
The considerations attending the Court’s discretion under s 101(1) were discussed by Hampel J in Knowles v Gutteridge[52] as follows:
Clearly s 101 contemplates that as a general rule interest on costs will run from the date of the taxation order. The Court must have good reason to exercise its discretion to change that primary position. The mere fact that the first instance decision is reversed on appeal is not enough…In my view there is nothing about this case which warrants the departure from the rule. There has been no abuse of process of significant delay on the part of either side in relation to the taxations of costs. To all intents and purposes, the reasons for the applicants having to wait three years after the first instance judgment for their costs to be taxed lies in the first instance error having to be corrected by the Appeal process. There is nothing extraordinary in a first instance error being overturned on Appeal or in the delays caused by that process.[53]
[52]Knowles v Gutteridge; Haskins and Davey Pty Ltd (SCV, Hampel J, 30 July 1993, unreported).
[53]Ibid 6.
In Victoria, the primary position is that interest on costs will run from the judicial determination of the relevant costs.[54] Concomitantly, the Court will ordinarily require ‘good reason to exercise its discretion to change that primary position’.
[54]Supreme Court Act, s 101. The Court however has power, and a discretion, to fix another date from which interest will run in respect of cost, including party-party costs, pursuant to s 101(1) of the Supreme Court Act when appropriate discretionary factors justify.
Disposition
Here I am unpersuaded that Panorama is entitled to interest on the amounts it has paid in relation to legal costs in the relevant proceedings.
I do not consider that Panorama is so entitled as a result of the terms of the provisions of the Loan Agreement, or any other contractual stipulation, because Panorama was unable to identify any such stipulation which prima facie extended to a claim for interest as asserted here by Panorama or which established an entitlement to any form of relevant indemnity.[55]
[55]Loan Agreement clauses 4(b) and 4(c), CB65.
In my view, in addition to Panorama failing to satisfy me that a proper and sufficient basis exists for the exercise of my discretion in favour of its application for interest on costs, as contended for by Panorama, no such order should here be made because:
(a) to grant Panorama the relief it seeks would very considerably complicate the exercise of attempting to calculate any such interest entitlement, including by creating very numerous potentially relevant interest calculations with very numerous dates for the commencement of such interest calculations;
(b) further to the likely creation of the substantial and complex exercise referred to in (a) above, relief as to the type sought by the plaintiff in relation to interest on its expenditure from time to time on legal costs is also likely to generate very numerous potential disputes about the recoverable character of the costs referred to in the individual costs invoices relied upon by Panorama in relation to its interest on costs claims;
(c) because Down Town, in particular, has notified a number of arguments on the basis of which it will contend that Panorama’s legal costs should be disallowed or reduce in certain respects, significant parts of the above exercise of ascertaining interest on Panorama’s costs may be rendered irrelevant; and
(d) the likely and substantial complications referred to in (a), (b) and (c) above, are themselves also likely to generate additional disputes between the potentially affected parties, in particular Down Town, and thereby likely give rise to the expenditure of more time and cost and create the need for additional court resources.
For the above reasons, I consider that in this case the usual positon should obtain and that Panorama’s interest entitlement in respect of its costs should be run from the date those costs are judicially determined.
Decision
Accordingly, for the above reasons I reject Panorama’s claim that it is entitled to interest, at the penalty interest rates, on its costs from the dates on which Panorama paid those costs.
---
2
0