Dugan v Process Holdings Pty Ltd (No 2)
[2021] VSC 641
•13 October 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2019 04063
| CRAIG FRANCIS DUGAN and others | Plaintiffs |
| v | |
| PROCESS HOLDINGS PTY LTD (ACN 138 041 488) and others | Defendants |
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JUDGE: | LYONS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 13 October 2021 |
CASE MAY BE CITED AS: | Dugan v Process Holdings Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 641 |
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PRACTICE AND PROCEDURE – Costs – Supreme Court Act 1986 (Vic) s 24(1) – Civil Procedure Act 2010 (Vic) s 65C – Nature of discretion as to costs – Interlocutory applications heard on one day – Parties represented by the same counsel and solicitors – Inter-relationship between the applications and overlap in the factual material relied upon – Plaintiffs successful on one application and mixed success on the other two applications – Pragmatic approach adopted as to the costs of the applications – Costs of all interlocutory applications apportioned based upon the Court’s impression and evaluation of success – Plaintiffs entitled to 75% of their costs of the applications – Mandie v Memart Nominees Pty Ltd [2020] VSCA 320 and Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S. Marks QC with Mr B. Gibson | Thomson Geer |
| For the Second to Thirteenth and Fifteenth Defendants | Mr M. Clarke QC with Ms V. Plain | Cornwalls |
HIS HONOUR:
INTRODUCTION
On 9 September 2021, I delivered reasons for judgment on three applications in this proceeding (the ‘applications’).[1] For convenience, I will use the terms defined in the Reasons.
[1]Dugan v Process Holdings Pty Ltd [2021] VSC 555 (‘Reasons’).
In summary, I determined to:
(1) dismiss the restraint application made by the defendants to restrain the plaintiffs’ solicitors from acting;
(2) allow in part the strike out application made by the plaintiffs seeking to strike out a number of paragraphs of the amended defences; and
(3) allow in part the amendment application made by the defendants seeking to address some of the complaints of the plaintiffs in the strike out application.
At the time judgment was delivered, by email from my chambers dated 9 September 2021, I indicated to the parties my preliminary view that, in light of the degree of success on the applications, it was appropriate that the defendants pay 75% of the plaintiffs’ costs of the applications (‘my preliminary view’). I noted that this outcome was consistent with the approach adopted by the Victorian Court of Appeal in Mandie v Memart Nominees Pty Ltd (‘Mandie’).[2]I conveyed my preliminary view in an attempt to avoid the costs and time of costs arguments.
[2][2020] VSCA 320 (‘Mandie’).
The plaintiffs indicated they did not oppose costs orders in accordance with my preliminary view. The defendants indicated they opposed such orders and suggested that the issue be determined on the papers by written submissions. The defendants filed submissions dated 20 September 2021. The defendants submitted that there should be separate costs orders in respect of each application. The plaintiffs filed submissions dated 23 September 2021 maintaining their position that the defendants should pay 75% of the plaintiffs’ costs of the applications. No party requested an oral hearing in their submissions.
By email to my chambers on 30 September 2021, the solicitors for the defendants made some comments in response to the plaintiffs’ costs submissions and requested until 15 October 2021 to file submissions in reply. They sought that, if the request was not granted, the Court take into account the comments in their email. In light of the time and costs already spent on the costs issues, I declined that request but have taken into account the comments in their email in deciding the costs of the applications.
In summary and for the reasons that follow I have concluded that, consistent with my preliminary view, the defendants should pay 75% of the plaintiffs’ costs of the applications.
THE DEFENDANTS’ SUBMISSIONS
As noted above, the defendants sought that separate costs orders be made in each application.
As to the restraint application, the defendants submitted that they should pay only 50% of the plaintiffs’ costs. This was on the basis that ‘substantial costs’ were unnecessarily incurred as a result of the plaintiffs’ further written submissions dated 12 August 2021 (the ‘further memorandum’) and the third and fourth Barrett affidavits filed after the conclusion of the hearing of the applications. The defendants submitted that these documents were only required to substantially correct the plaintiffs’ original and inaccurate submission that Mr Brooks was not involved in the conduct of the proceeding. The defendants do not identify in their costs submissions the ‘substantial costs’ incurred by them which would justify a 50% reduction in the plaintiffs’ entitlement to their costs of the restraint application. However, it would appear to be a reference to the filing of the sixth Kanhai affidavit and further submissions referred to in [56] of the Reasons.
As to the strike out application, the defendants submitted that the plaintiffs should pay 75% of the defendants’ costs. This was because I did not strike out [46A] and [46B] of the amended defences which, together with [46C] (which was struck out), were the only grounds for strike out raised by the plaintiffs prior to issuing the summons for the strike out application on 14 May 2021.
The defendants submitted that the balance of the paragraphs of the amended defences sought to be struck out in the strike out application (in particular, in 1(d)-(k) of the summons) were raised for the first time when the strike out application summons was issued. As a result, they submitted that the defendants did not have a fair and reasonable opportunity to address those matters before the plaintiffs issued the strike out application and, on that basis, the plaintiffs should be liable for those costs.
As to the amendment application, the defendants submitted that the costs of the amendment application should be costs in the cause. This was because the amendment application was only made in an effort to confine the matters in dispute between the parties on the strike out application in circumstances where the amendments primarily proposed changes to the matters in 1(d)-(k) of the summons for the strike out application.
THE PLAINTIFFS’ SUBMISSIONS
The plaintiffs filed submissions in opposition. These submissions supported their original position that it was appropriate to order that the defendants pay 75% of the plaintiffs’ costs of the applications. In their costs submissions, the plaintiffs referred to the well-known principles for the determination of costs. Relevantly:
(1) costs are within the discretion of the Court;
(2) generally a successful party is entitled to its costs of an application; and
(3) where the Court exercises its discretion to apportion costs, that apportionment depends upon matters of impression and evaluation.[3]
[3]Bostik Australia Pty Ltd v Liddiard(No 2) [2009] NSWCA 304, [38] (Beazley, Ipp and Basten JJA); Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5] (Chernov and Ashley JJA and Mandie AJA) (‘Major Engineering’).
In response to the defendants’ submissions as to the costs of the restraint application, the plaintiffs disputed that the further memorandum and the third and fourth Barrett affidavits were filed to correct the plaintiffs’ submission that Mr Brooks was not involved in the proceeding. Further, the plaintiffs disputed that substantial costs were unnecessarily incurred by the defendants as a result.
The plaintiffs noted that both the further memorandum and the third Barrett affidavit were filed with the leave of the Court granted during the hearing to address matters raised by the defendants during the hearing. They noted in particular that the further memorandum responded for the most part to the list of anomalies provided by the defendants to the Court for the first time during the hearing. The plaintiffs noted that the reference to Mr Brooks in the further memorandum was minor. The plaintiffs submitted that the third Barrett affidavit addressed the submission made by the defendants that Mr Brooks had attended a mediation between the parties.
The plaintiffs accepted that the fourth Barrett affidavit corrected the plaintiffs’ submissions to the Court regarding Mr Brooks’ involvement in the proceeding and also corrected part of the third Barrett affidavit. However, they disputed that this resulted in any unnecessary or substantial costs. They noted that the defendants chose to file the sixth Kanhai affidavit (which deposed to Mr Brooks’ participation at the mediation and which the plaintiffs submitted was not in issue) and the supplementary submissions to the effect that the plaintiffs and/or Mr Barrett deliberately failed to be frank with the Court. They noted that while the defendants submitted that the sixth Kanhai affidavit was relevant to the determination of the restraint application, this argument was rejected in the Reasons at [57]-[60] and [139].
In response to the defendants’ submissions as to the strike out application, the plaintiffs noted that the defendants had:
(1) from 14 December 2020 (when the plaintiffs raised the inadequacies relating to [46A]-[46C] by letter) to the hearing on 10 August 2021, failed to address the matters relating to [46A]-[46C] which were the subject matter of paragraphs 1(a)-(c) of the summons for the strike out application; and
(2) from 14 May 2021 (when the summons for the strike out application was issued) until the hearing, failed to address the matters in paragraphs 1(a)-(k) of the summons for the strike out application.[4]
[4]In [52(b)] of the plaintiffs’ costs submissions, the plaintiffs refer to paragraphs 1(a)-(c) of the summons, but this is clearly intended to be a reference to 1(a)-(k) based on the heading to this paragraph and the matters referred to in [53]-[57] of the plaintiffs’ costs submissions.
The plaintiffs submitted that the defendants chose for the most part to contest the strike out application, albeit that they sought to address some of the challenged paragraphs by the amendment application made on the day of the hearing. In any event, the plaintiffs disputed that these periods of time for the defendants to address the issues raised by the strike out application were unreasonable or insufficient.
In addition, the plaintiffs noted that:
(1) the reason for the Court’s unwillingness to strike out [46A] and [46B] was a result of legal arguments raised for the first time at the hearing; and
(2) the plaintiffs did not object to the defendants’ proposed amendments to [53(A)]-[53(D)], the effect of which was that the same material facts that were in [46A] and [46B] were also in [53(A)]-[53(D)]. As a result, the Court found that no additional factual enquiries would arise if [46A] and [46B] were permitted to remain.
In response to the defendants’ submissions as to the costs of the amendment application, the plaintiffs noted that:
(1) the amendment application was made for the first time at the hearing of the other two applications;
(2) the plaintiffs did not oppose some of the proposed amendments; and
(3) the amendment application was only allowed in part.
The plaintiffs submitted that the defendants’ contention, that the costs of the amendment application should be costs in the cause because it was made in an effort to confine the matters in dispute when only limited notice was given of aspects of the strike out application, was contrary to principle.[5]
[5] Relying upon Stanley v Layne Christensen Company [2006] WASCA 56, [51]-[52] (Wheeler JA); Richmond v Ora Gold Ltd [2020] FCA 70, [16] (Colvin J).
Finally, the plaintiffs submitted that they should be entitled to all of their costs of preparing submissions on the costs issue. This is because the plaintiffs offered to consent to the order proposed by the Court that the defendants pay 75% of the plaintiffs’ costs of the applications notwithstanding that, for the reasons set out above, the plaintiffs could have sought their costs of the applications in full. The plaintiffs submitted that it was unreasonable for the defendants to refuse to accept that offer, as a result of which the parties have incurred further costs in preparing written submissions.
THE DEFENDANTS’ COMMENTS ON THE PLAINTIFFS’ SUBMISSIONS
The email from the solicitors for the defendants dated 30 September 2021 raised three issues.
First, the defendants disputed the plaintiffs’ submission that it was not necessary to file the sixth Kanhai affidavit. They maintained that there was a live issue as to Mr Brooks’ involvement and that it was appropriate for the defendants to file an affidavit clarifying their impression of Mr Brooks’ involvement in the mediation.
Second, the defendants submitted that it was not correct that the Court’s unwillingness to strike out [46A] and [46B] was a result of legal arguments raised for the first time at the hearing. They noted that the relevant extract from I Spry, The Principles of Equitable Remedies (‘Spry’)[6] was referred to at [28] of the defendants’ submissions dated 4 June 2021 on the strike out application, and that a copy of the extract was also provided to the Court, copied to the solicitors for the plaintiffs, by email on 9 August 2021.
[6]I Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages (Lawbook Co, 7th ed, 2007).
Third, the defendants disputed the plaintiffs’ submissions that the defendants ought to pay all the costs relating to the determination of the costs issue. The defendants submitted that such an order was not appropriate in circumstances where the plaintiffs were not ordered to file any submissions in respect of costs orders, and where the length of those submissions substantially exceeded the limit of five pages requested by the Court.
CONSIDERATION
I adopt the principles referred to in the plaintiffs’ costs submissions set out in [12] above.
As to the discretion of the Court in relation to costs, it is clear that ‘this discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation’.[7]
[7]Major Engineering (n 3) [5]; Supreme Court Act 1986 (Vic) s 24(1).
Further, s 65C of the Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’) provides that, in addition to any other power a court may have in relation to costs, a court may make any order as to costs it considers appropriate to further the overarching purpose, namely to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.
As to the power of the Court to apportion costs based on the degree of success on the issues determined, in Mandie the Court of Appeal stated that:
(1) it was appropriate to adopt a pragmatic approach where there is mixed success on the issues determined, in that case in an appeal; and
(2) the proper approach to the exercise of the Court’s discretion to award costs in such circumstances is a broad-based one, based on impression and evaluation, rather than an attempt at arithmetical precision on a strictly issue-by-issue basis.[8]
[8]Mandie (n 2) [26]-[28].
Those principles also relate to the costs of a trial where there is mixed success on the issues determined.[9]
[9]Major Engineering (n 3) [5].
I note that, in their costs submissions, the defendants did not seek to engage with these principles or their application to the current situation which involved applications in one proceeding heard on the same day. They simply submitted that separate orders for costs should be made for each application. However, I am of the view that in cases where multiple applications were heard together and the parties were represented by the same counsel and solicitors, the Court is entitled to adopt a pragmatic approach and make one costs order based on the Court’s impression and evaluation of the success of the parties in relation to the issues raised by those applications, including the time and effort relating to those issues. This is particularly so if there is an inter-relationship between the applications and an overlap of materials in the applications.
In my view, this conclusion is consistent with the broad discretion of the Court as to costs and s 65C of the Civil Procedure Act. In reaching this conclusion, I am conscious of the difficulties and expenses associated with taxing costs where the same counsel and solicitors are involved in preparing for different applications in the one proceeding heard on the one day.
As reflected in the Reasons, three applications were heard together on the same day and the parties were represented by the same counsel and solicitors. There was a clear inter-relationship between the strike out application and the amendment application: the latter was a result of the former. Further, before the amendment application was made, I determined to hear the restraint application and the strike out application on the same day. This was because I considered that there was an inter-relationship between the two applications, namely an understanding of the issues raised by the pleadings, including in the strike out application, would assist in understanding the true nature of the restraint application. That view was confirmed at the hearing of those applications.
I am conscious that there were discrete issues of fact and law in each of the applications. For example, separate affidavits and submissions were filed in support of the restraint application and the strike out application. I am also conscious that more substantial material was filed in relation to the restraint application than the strike out application.[10]
[10]The affidavit of Adrian Tembel affirmed on 20 May 2021, the affidavits of Radhika Kanhai affirmed on 26 March 2021, 14 May 2021 and 24 August 2021 (the sixth Kanhai affidavit), and the second, third and fourth Barrett affidavits sworn on 21 May 2021, 16 August 2021 and 23 August 2021 were relied upon in the restraint application. The affidavits of Radhika Kanhai affirmed on 20 May 2021, 28 May 2021 and 9 August 2021, and the first Barrett affidavit sworn on 14 May 2021 were relied upon in the strike out application and amendment application.
However, at the hearing, in addition to the inter-relationship between the three applications referred to in [33] above, there was some overlap in the material referred to in argument. By way of example:
(1) exhibit RAK-17 (Tuckett report) to the affidavit of Ms Kanhai affirmed on 20 May 2021, which was filed in respect of the strike out application, was relied upon in support of the restraint application in oral argument;[11]
(2) the Rundle outline was referred to in oral submissions on the strike out application by counsel for the plaintiffs[12] and the restraint application by counsel for the defendants;[13] and
(3) the affidavit of Ms Kanhai affirmed on 20 May 2021 filed in respect of the strike out application relied upon exhibits to an affidavit of Ms Kanhai which was relied upon in the written submissions for the restraint application (namely exhibit RAK-4 to the affidavit of Ms Kanhai affirmed on 14 May 2021).
[11]T114.4-5.
[12]T144.26-145.19.
[13]T113.12-31.
In all these circumstances, I consider it appropriate that the Court adopt a pragmatic approach and make one costs order based upon the Court’s impression of the success of the parties in relation to the issues raised by the applications, including the time and effort relating to them.
I have formed the clear view that the plaintiffs have had overall success in the applications. First, the plaintiffs successfully opposed the restraint application. In my view, the time and effort involved in preparing for and determining the restraint application was greater than the time and effort involved in preparing for and determining the strike out application and the amendment application. This is reflected in the proportion of the Reasons relating to the restraint application and the material filed in relation to it referred to in [34] above.
Second, the plaintiffs were successful in part in the strike out application and in opposing the amendment application. Relevantly, [46C], parts of [51], and [53(a)]-[53(c)] of the amended defence and/or the PFAD were struck out. This is quite apart from the fact that the PFAD belatedly addressed other paragraphs of the amended defence which the plaintiffs sought to strike out: for example, [35(d)]-[35(l)]. Further, additional parts of [51] were struck out on the Court’s own motion.
Based on my assessment of the material before me in the applications, the conduct of the applications and the outcome of the applications, I have formed the view that the plaintiffs are entitled to 75% of their costs of the applications.
In reaching this conclusion, I wish to record that I have considered, but have not accepted, the submissions of the defendants that the plaintiffs’ further memorandum and the third and fourth Barrett affidavits filed after the hearing caused substantial and unnecessary expense to the defendants.
As to the further memorandum, I accept the submissions of the plaintiffs that the further memorandum addressed for the most part the list of anomalies first submitted by counsel for the defendants during the course of the hearing.
Further, I acknowledge that Mr Barrett’s further enquiries about the involvement of Mr Brooks resulted in the third and fourth Barrett affidavits and thus caused the defendants some further expense. However, the nature of those expenses was not identified. In any event, I do not consider that any such expenses mean that there should be a reduction in the plaintiffs’ entitlement to their costs of the restraint application. As noted by the plaintiffs, the sixth Kanhai affidavit and further submissions were directed to the submission that the plaintiffs or Mr Barrett had deliberately not been frank with the Court and that this fact was relevant to the restraint application. While I accept that Mr Brooks’ involvement at the mediation had relevance to the restraint application, as the Reasons make plain at [139], I did not draw the inference against Mr Barrett and the plaintiffs that they had not been frank with the Court. In any event, I declined to order that the solicitors for the plaintiffs be restrained from continuing to act.
I have also considered, but have not accepted, the submissions of the defendants that they were in some way not given an adequate opportunity to address the alleged deficiencies in their amended defences prior to the hearing on 10 August 2021. On the evidence before me, the defendants were put on notice of the deficiencies:
(1) in [46A]-[46C] of the amended defences from late 2020, approximately 8 months before the hearing of the strike out application; and
(2) in other paragraphs of the amended defences from the time that the strike out application summons was filed on 14 May 2021, approximately three months before the hearing of the strike out application.
In my view, that was more than adequate time to consider and address any concerns raised in the strike out application. However, the defendants declined to do so until shortly before the hearing. Indeed, they informed the Court for the first time at the hearing on 10 August 2021 that they intended to make the amendment application.
In any event, as noted in the Reasons, at the hearing on 10 August 2021, the plaintiffs sensibly conceded that some of the proposed amendments in the PFAD should be allowed. The plaintiffs opposed other proposed amendments in the PFAD on the basis that they were vague, embarrassing and unintelligible. As the Reasons record, I refused to allow many of the proposed amendments on this basis. I refer in particular to the Reasons at [164]-[170] and [171]-[188]. Indeed, in my view, many of these paragraphs which the defendants sought leave to amend should not have been pursued.
Finally, I have considered, but have not accepted, the submissions of the defendants that the amendment application was made to confine the matters in dispute between the parties. Rather, I consider that it was made for the purpose of seeking to address deficiencies in the amended defences, including [46C], [51] and [53]. Further, as recorded in the Reasons, I considered that if some of the proposed amendments were allowed they would have had the effect of expanding the issues at trial. I refer to the passages of my Reasons referred to in the previous paragraph.
For completeness, as to the competing submissions about when the relevant passage of Spry was referred to, it is true that pages 644, 646-647 and 649 were relied upon in the defendants’ submissions dated 4 June 2021 and that pages 644-649 were provided to the Court by email on 9 August 2021. However, during the course of the hearing, counsel relied upon a different passage at page 648 which concerned a different principle, namely that when both common law and equitable claims were heard and determined in one proceeding, equity might limit the quantum of the equitable claim in accordance with common law principles. In any event, I do not consider the time at which the defendants referred to the relevant passage in Spry is in any way determinative of the costs orders to be made in respect of the applications.
Thus, I will order that the defendants pay 75% of the plaintiffs’ costs of the applications on a standard basis.
As noted above, the plaintiffs seek that I make a separate costs order relating to the costs submissions. In the circumstances of this case, I consider that is appropriate, particularly in light of the preliminary views I expressed to the parties set out in [3] above.
Of course, the defendants were entitled to be heard on the question of costs. However, in their costs submissions, the defendants did not engage with the question of whether it was appropriate to deal with the costs of these applications together despite the reference to Mandie in the email from my chambers set out in [3] above. Further, many of the defendants’ submissions were inconsistent with objective facts, the objective documents and, on occasions, the views I formed in the Reasons. I refer to [40]-[46] above.
The defendants contended that such an order was not appropriate in circumstances where the plaintiffs were not ordered to file any submissions in respect of costs orders, and where the length of those submissions substantially exceeded the limit of five pages requested by the Court. On reviewing the relevant emails from my chambers to the practitioners, it is clear that the plaintiffs were invited by me to provide written submissions not exceeding five pages.
In all the circumstances set out in [49]-[51] above, I do not consider that filing submissions of 10 pages is a sufficient basis to disentitle the plaintiffs to their costs of the costs submissions. This is particularly so in light of my preliminary view on costs expressed to the parties set out in [3] above.
As a result, I will order the plaintiffs be paid:
(1) 75% of their costs of the applications on a standard basis; and
(2) all of their costs relating to the preparation of their costs submissions on a standard basis.
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