Dwyer v Canning Vale Weaving Mills Ltd (No 2)

[2005] SASC 145

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

DWYER & ANOR v CANNING VALE WEAVING MILLS LTD (NO 2)

Reasons of Judge Lunn a Master of the Supreme Court

21 April 2005

PROCEDURE

Costs - security for costs - defendant's application for security for costs not so contrary to settled law as to be classified as hopeless - order for costs on solicitor/own client scale refused - order made under R101.01(7) for costs of interlocutory application to be taxable immediately as in the circumstances this was required by the demands of justice.

DWYER & ANOR v CANNING VALE WEAVING MILLS LTD (NO 2)
[2005] SASC 145

Reasons on the Plaintiff’s Applications for Costs on a Solicitor/Client Scale and for their Immediate Payment

1. Judge Lunn On 11 March 2005 I dismissed the defendant’s application for security for costs against the plaintiffs. (Judgment no [2005] SASC 80). The background of the matter is set out in those earlier Reasons. I now deal with the oral applications by the plaintiffs that their costs should be on a solicitor/own client scale and that under R101.01(7) they should be payable immediately.

   Costs on solicitor/client scale

2. The defendant did not dispute the plaintiffs should have any costs on a party and party scale, but only that the costs should be on a solicitor/own client scale.  There must be some special and/or unusual features to justify an award on this scale:  Casley-Smith v F S Evans & Sons Pty Ltd (No 6) (1989) 248 LSJS 483. The plaintiffs’ counsel submitted that the defendants had brought the application in the face of settled and clear authority that liquidators suing personally would not be ordered to give security for costs other than in exceptional circumstances. Prior to the defendant making the application the plaintiffs’ solicitors had drawn these authorities to the attention of the defendant and had warned it that it would face an application for solicitor/own client costs if it failed. However, while such a warning can be taken into account the exercise of the discretion, in itself it is not a basis on which to order solicitor/own client costs. If the defendant had pursued an application which was hopeless and foredoomed to failure, an order for solicitor/own client costs would be justified: Health & Lifecare v SA Asset Management Corporation (1995) 65 SASR 48. However, not all applications which are contrary to settled law lack such merit as to be classified as hopeless: CitiCorp Aust Ltd v Cirillo (No 4) [2001] SASC 233. Here the authorities relied upon by the defendant, which are set out in my previous Reasons, were not decisions of Courts which were binding on me. As I stated in the previous Reasons, the jurisdiction of this Court to order security for costs differs from that of many other Courts, although it may be that it was narrower rather than wider than other Courts. The scope of R100.01(e), which in its precise wording is peculiar to this State, has not been exhaustively explored in reported decisions in this State. While the defendant faced major difficulties in succeeding in its application I do not consider that its application was so weak or hopeless that an order for solicitor/own client costs is warranted in the circumstances.

   Whether the Costs should be Payable Immediately

3. Rule 101.01(7) provides:

   “(7)An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order.”

4. The application for security was an interlocutory proceeding for the purposes of subrule (7).  The onus is on the plaintiffs to satisfy me that the Court should “otherwise order”.  Decisions on the equivalent Federal Court O 62 r 3 are to the effect that no order should be made for immediate taxation unless the demands of justice require such a departure from the norm, which is that no costs of any interlocutory proceedings should be payable until the conclusion of the proceedings:  Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd (2000) 191 ALR 579 at (64-71); Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1982) 36 FCR 297 at 312. There is no more specific criterion for the exercise of the discretion, and each case must be assessed on its own particular circumstances.

5. An integral part of the defendant’s case was the substantial difficulties being encountered by the plaintiffs in funding this and similar litigation.  I infer that the defendant, realising that on the authorities it did not have a great prospect of success, brought this application because if it had succeeded in obtaining an order for security it would have created a major problem for the plaintiffs in continuing the action and may thereby have caused its abandonment.  This was a legitimate tactical manoevre by the defendant.  It was prepared to risk incurring substantial costs both to its own solicitors and for those payable to the plaintiffs on the chance that it could thereby deliver a knockout blow to the plaintiffs’ action.  Certainly an order for security would have protected the defendant in the unlikely event that the liquidators did not pay costs ordered against them personally if the defendant was ultimately successful, but this was not the sole reason for bringing the application. 

6. A necessary consequence of the application is that the liquidators have incurred substantial expenses in resisting it.  This was a major application where the plaintiffs’ costs as between party and party would be likely to tax out at many thousands of dollars.  In the context of this litigation, either the plaintiffs and/or their solicitors will be out of pocket for these costs, as well as other costs relating to major pending litigation in the liquidation, for a substantial time.  The likelihood is that it will take a year or two to complete this action, and probably even more if there are appeals.  In these circumstances the demands of justice require that the costs of the application should be taxable and payable immediately.

7. I do not accept the defendant’s submission that the costs order should be that the plaintiffs should have the costs in the cause, meaning that if the plaintiffs fail in this action they would not recover any costs.

   The order is:

   1The plaintiffs’ application for costs as between solicitor/client is refused.

   2The defendant is to pay to the plaintiffs their costs as agreed or taxed, and as between party and party, of this application.

   3Fit for counsel.

   4Under R 101.01(7) the costs payable under this order may be taxed immediately.

8. The same orders for costs will be made in the other related actions where similar applications for security have been dismissed.  The effect of such orders will be that the defendants in such actions are all jointly liable for the costs where the hearings have proceeded jointly:  Mulcahy v Hydro-Electric Commission Heery J, Fed Ct 2/7/98, Tas 0834/98, BC 9803419; Turner v Kostoglou Sulan J, 8/4/05, Judgment No [2005] SASC 132, unreported.