El Zain v Vitrafy Life Sciences Ltd
[2025] VSC 144
•28 March 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2021 03631
BETWEEN:
| EDWARD EL ZAIN | Plaintiff |
| and | |
| VITRAFY LIFE SCIENCES LIMITED (ACN 622 720 254) | Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 28 March 2025 |
CASE MAY BE CITED AS: | El Zain v Vitrafy Life Sciences Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 144 |
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PRACTICE AND PROCEDURE – Costs – Interlocutory matters – Taxation of costs – Whether costs should be taxed immediately – Exercise of discretion – Retrospective order – Supreme Court (General Civil Procedure) Rules 2015, rr 47.04, 63.20.1 – Dale v Clayton Utz (No 3) [2013] VSC 593 – Setka v Abbott (No 2) [2013] VSCA 376 – Hall v Nominal Defendant (1966) 117 CLR 423 – Fanissa Pty Ltd & Anor v Versace [2016] VSC 416.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Not applicable | Diakou Faigen Lawyers |
| For the Defendant | Not applicable | Minter Ellison |
HIS HONOUR:
Background
The plaintiff, Edward El Zain (‘Mr El Zain’) commenced this proceeding against the defendant, Vitrafy Life Sciences Limited, (‘Vitrafy’), by writ filed 4 October 2021.
Mr El Zain and Vitrafy were parties to a memorandum of understanding entered into on 18 December 2018 (‘the MOU’). The MOU concerned intellectual property related to high-speed, ultra-low temperature chilling technology designed to preserve food and biological materials. The MOU’s stated purpose was to provide a framework for the facilitating and granting of an exclusive licence from Vitrafy to Mr El Zain.
The MOU was extended for 12 months by notice in writing given by Mr El Zain dated 29 December 2019 (‘the first notice’). It is common ground that the first notice was valid and effectively extended the term of the MOU for 12 months. Just prior to the expiry of the first extended term, Mr El Zain purported to further extend the period of the MOU by issuing a second notice dated 29 December 2020 (‘the second notice’). Vitrafy disputed the validity of the second notice, taking the position that the MOU could only be extended once.
Mr El Zain sought relief including a declaration that the second notice was valid and that the period of the MOU had been further extended by a period of 12 months, to 31 December 2021. Additionally, Mr El Zain also sought damages for alleged breaches of the MOU that occurred in the period prior to the giving of the second notice.
By 5 November 2021, I made orders by consent pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) that the following question be tried as a separate question in the proceeding:
On its proper construction, does clause 4.7 of the MOU allow for more than one extension of the MOU?
The answer to the separate question would necessarily determine that part of Mr El Zain’s claim in which he sought declaratory relief as to the efficacy of the second notice. The answer would also determine whether it would be open to Mr El Zain to serve further notices after the expiry of the extension of the MOU resulting from the second notice (assuming that it was valid).
The trial of the separate question took place on 7 December 2021, and I delivered judgment on 25 February 2022.[1] In the reasons for judgment, I concluded that, on its proper construction, clause 4.7 of the MOU did not allow for more than one extension of the term of the MOU. It followed, therefore, that the MOU expired on 31 December 2020, that the second notice was ineffective to further extend the MOU, and necessarily that no further extension notices could be issued. Orders were made to that effect on 25 February 2022, along with a further order that the matter be listed for a directions hearing.
[1]El Zain v Vitrafy [2022] VSC 79.
By the time the matter came on for directions before the Court, Mr El Zain had determined to seek leave to appeal. Upon Mr El Zain’s undertaking to commence and diligently prosecute an application for leave to appeal, the directions hearing was adjourned by consent to a date to be fixed after the hearing and determination of the application for leave and, if granted, the appeal.
Notwithstanding the further adjournment of the directions hearing, and after hearing arguments from the parties, I made orders on 25 March 2022 that:
1.The plaintiff pay the defendant’s costs of and incidental to the trial of the separate question, on the standard basis, excluding the costs of the directions hearing on 5 November 2021.
2.The plaintiff pay 50% of the defendant’s costs of the directions hearing on 25 March 2022 on the standard basis.
On 13 September 2022[2], the Court of Appeal made orders refusing the application for leave to appeal and ordered that the applicant (Mr El Zain) pay the respondent’s costs of the application for leave to appeal on the standard basis.
[2]See paragraphs 1 and 2 of the Court of Appeal orders made 13 September 2022 in respect of the application for leave; El Zain v Vitrafy [2022] VSCA 195.
Mr El Zain subsequently applied for special leave to appeal to the High Court. The High Court dismissed the application on 9 February 2023. Costs were ordered against Mr El Zain.
On 22 March 2023, I made orders by consent adjourning the directions hearing listed for 24 March 2023 to a date to be fixed. In the ‘other matters’ section of the order, it was noted that the parties had requested that the directions hearing listed for 24 March 2023 be adjourned pending the conclusion of their conferral as to the consequences that followed from the dismissal of the special leave application.
The proceeding then lay in abeyance.
On 13 May 2024, my chambers contacted the parties requesting an update as to the outcome of their conferral following the dismissal of the special leave application and enquiring as to whether further directions were required. Despite a follow-up email sent on 20 May 2024, no response was received until 28 June 2024, when the plaintiff’s solicitor advised that Mr El Zain wished to proceed with his claim in the proceeding and that substantial progress had been made in preparing an amended statement of claim. The solicitor further advised that once the statement of claim was finalised, Mr El Zain would seek Vitrafy’s consent to its filing and would inform the Court once those matters had occurred.
Having received no subsequent updates, by order made 30 July 2024, I listed the proceeding for further directions on 16 August 2024.
On that day, the parties appeared before me, and Mr El Zain confirmed that he had provided Vitrafy with a proposed amended statement of claim on 13 August 2024.
At the directions hearing, Vitrafy submitted that the proposed amended statement of claim did no more than delete those parts of the statement of claim which could no longer be pursued following the orders on the separate question made 25 February 2022 and that there had been no attempt to prosecute the proceeding at all in the period subsequent to the High Court’s dismissal of the special leave application. In the result, Vitrafy submitted that Mr El Zain should not be permitted to proceed with the amended claim until such time as he had paid the costs ordered on 25 March 2022, as well as Vitrafy’s costs of the application for leave to appeal heard by the Court of Appeal and its costs of the application for special leave to appeal.
It emerged during this argument that none of the costs orders had been taxed or their quantum agreed. As such, the costs were not yet payable by Mr El Zain. Notably, the costs ordered by this Court on 25 March 2022 had not been the subject of an order that they be taxed immediately.
After further discussion, I adjourned the directions hearing and ordered that the parties comply with paragraph 8 of the Practice Note SCCC1 (the Commercial Court Practice Note (second revision) (‘the Commercial Court Practice Note’) in respect of the applications foreshadowed by Vitrafy for an order pursuant to r 63.20.1 of the Rules, that the costs order on 25 March 2022 be taxed immediately or otherwise be payable in any event, and if so advised, security for costs. In the ‘other matters’ section of the order, I noted that Vitrafy was not required to give a response to the proposed amended statement of claim until such time as the foreshadowed applications had been dealt with by the Court.
Vitrafy’s solicitors wrote to Mr El Zain’s solicitors on 8 December 2024 foreshadowing an application for an order pursuant to r 63.20.1 of the Rules that the costs ordered to be paid by the order made 25 March 2022 be taxed immediately.
No response was provided by Mr El Zain until 4 March 2025.
The delay in the provision of Mr El Zain’s response was apparently due to difficulties with retained counsel settling the letter of response.
Having received the two response letters, I determined in accordance with paragraph 8.2 of the Commercial Court Practice Note to resolve the outstanding question on the papers, without the need for further evidence or submissions beyond the two letters.
Rule 63.20.1 headed ‘Taxation of Costs on an Interlocutory Application or Hearing’ provides:
63.20.1If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
The parties’ submissions
It is common ground that the established legal principles to be applied in exercising the Court’s discretion to order immediate taxation were summarised by Hollingworth J in Dale v Clayton Utz (No 3) (‘Dale’).[3]
[3][2013] VSC 593, [57]-[65].
Her Honour’s summary included the following statements:
57… Rule 63.20.1 was clearly intended to make a substantial change to the previous position.
58The authorities suggest that there are a number of reasons why rules similar to r 63.20.1 have been introduced in other jurisdictions, including:
(a) Avoiding multiple taxations, and the attendant costs;
(b)Avoiding interlocutory applications being used as a means to exhaust the funds of an opposing party; and
(c)Avoiding unfairness in a case where, for example, a party who is ultimately successful is unable to set off their judgment against an earlier liability to pay costs.
59 Those are all important policy considerations …
60However, … the court’s discretion under r 63.20.1 to order that costs be taxed immediately is not circumscribed in any way by the rule itself, although it must be exercised judicially.
…
65 Courts have recognised that the demands of justice may require a departure from the ordinary rule for one or more of three broad reasons:
(a) Because of the conduct of the unsuccessful party;
(b)Because of the likely delay before the final completion of the proceeding; and
(c)Because the interlocutory application involves a separate or discrete issue.
This summary of principles is consistent with and was applied by the Court of Appeal in Setka v Abbott (No 2).[4]
[4][2013] VSCA 376.
In support of its application, Vitrafy makes the following submissions:
(a) Firstly, that the determination of the separate question was a final order in the manner contemplated by the High Court in Hall v Nominal Defendant.[5] Vitrafy submits that the order made on 25 February 2022 in answering the separate question finally disposed of the rights of the parties in the pending proceeding as to whether the option to extend the MOU could be exercised more than once;
[5](1966) 117 CLR 423.
(b) Secondly, even if the Court finds that the determination of the separate question was not a final order, the Court should exercise its power under r 63.20.1 of the Rules to order that the costs be taxed immediately, as each of the three broad reasons identified in Dale has been satisfied;
(c) There has been excessive delay by Mr El Zain, who took 18 months to provide a proposed amended pleading with no explanation for the delay, with the result that the final completion of the proceeding will not take place now for considerable time. Notably, three years have passed since the determination of the separate question;
(d) Vitrafy also emphasises that the question of whether the right to extend the MOU could be exercised more than once clearly involves a separate and discrete issue.
Mr El Zain accepted that the determination of the separate question constituted a discrete issue in the sense referred to by the Court of Appeal in Setka v Abbott (No 2) and by Hollingworth J in Dale.
Mr El Zain opposed the order for immediate taxation, however, arguing that whilst there had been delay, the delay was not unreasonable given that the determination of the separate question was subject to an application for leave to appeal and then an application for special leave to the High Court. He also submitted that he would suffer financial hardship if he were now obliged to pay the costs and that such an order would deprive him of the funds necessary to continue to conduct the proceeding. Mr El Zain noted the clear rationale behind the rule referenced in Dale, which includes a desire to avoid interlocutory applications from being used as a means to exhaust the funds of an opposing party and to avoid unfairness.
Analysis
Whilst I accept that the order made on 25 February 2022 was a final order insofar as it constituted the final determination of the identified separate question in the proceeding, resolving a substantial element of Mr El Zain’s case, it did not resolve the proceeding in its entirety. In that respect, the hearing was interlocutory albeit that the orders made were final in effect in relation to part of the proceeding.
Mr El Zain’s statement of claim included claims for damages for breaches by Vitrafy of an implied term of the MOU, requiring each party to do all things necessary to enable the other party to have the full benefit of the agreement. The alleged breaches referenced Vitrafy’s conduct during the period from about July 2019 to June 2020, and are said to have been contrary to that implied term and further to have caused or contributed to the circumstances in which the 12 months by which the MOU was extended by the first notice proved to be insufficient. That in turn is relied upon as the basis for the damages claim which is said to comprise the loss of the licence granted to Mr El Zain or its value.
The determination of the separate question did not determine these issues, which involved alleged breaches by Vitrafy during the period when the MOU remained on foot (as all parties agree). Whilst the order made was final in effect on the questions it determined, it was not made following the trial of the proceeding as a whole.
In any case, the key question is whether the costs order is one which was made before the proceeding had been completed. Whether the order is final or interlocutory, or whether the hearing at which, or application upon which the order was made, is properly characterised as interlocutory is not directly to the point. The rule concentrates on whether any taxation of the costs order should occur before the proceeding as a whole has concluded. If that is so, the prima facie position is one where the costs should not be taxed until the proceeding in which the order is made has been completed. This proceeding has not been completed, and accordingly, the starting point is that the costs should not be taxed and hence are not payable at this stage.
However, it is obvious, and so much is conceded by Mr El Zain, that the determination of the separate question involved a discrete issue. It effectively determined the right of Mr El Zain to seek further extensions of the MOU, which necessarily included the validity of the purported extension by the means of the second notice.
Secondly, I accept that there has been substantial delay by Mr El Zain. There was no relevant delay whilst Mr El Zain pursued his application for leave to appeal and then later sought special leave to appeal to the High Court. However, the High Court dismissed the application for special leave on 9 February 2023. In the ensuing 19 months, Mr El Zain took no action to prosecute his claim in the amended form, which was only produced as a draft for Vitrafy’s consideration just prior to the August 2024 directions hearing. This directions hearing had only been convened on the Court’s own motion following the period of inactivity and complete lack of engagement by Mr El Zain.
The proceeding now sought to be prosecuted is entirely different from that determined on 25 February 2022 and subsequently sought to be appealed over the next 12 months. It is overwhelmingly likely that the case will not come to trial until late 2026 at the earliest, even if Mr El Zain obtains leave to amend. Mr El Zain’s case is hardly worthy of expedition, given the dilatory manner in which he has pursued it since 9 February 2023.
A possible trial late in 2026 will mean that the period between the date of the determination of the separate question and the trial date may well be in the order of five years. This regrettable state of affairs lies overwhelmingly at the feet of Mr El Zain. There has been no explanation as to why Mr El Zain did nothing from February 2023 until August 2024. Based on these facts, I would have been disposed to grant the orders sought by Vitrafy without hesitation. Mr El Zain has obtained adverse adjudication regarding a substantial and discrete part of his case and now after lengthy delay seeks to pursue the balance of the case. I have little sympathy for the submission that he will be deprived of the ability to fund the rest of his case if he is now required to pay Vitrafy’s costs. Mr El Zain chose to pursue the matter on appeal and then to the High Court, as was his entitlement. He ought to have appreciated that this course had the potential to deplete his resources and expose him to the risk of adverse costs orders if the applications were unsuccessful. The depletion of Mr El Zain’s resources must be balanced against Vitrafy’s position, which is one where it has been forced to spend its own resources in three fora and now faces a resuscitated claim which will not be heard for years.
The only matter which has given me pause is that no application was made on 25 March 2022 for an order that the costs be taxed immediately when I made orders that Mr El Zain pay Vitrafy’s costs of and incidental to the trial of the separate question. The application is now made retrospectively.
Ordinarily, an application for an order for immediate taxation would be made at the same time as the order for costs is sought.
In Fanissa Pty Ltd & Anor v Versace,[6] Hargrave J rejected a submission that an order for immediate taxation could not be sought retrospectively, noting that r 63.20.1 does not prescribe the time at which an application for immediate taxation needs to be made.
[6][2016] VSC 416.
His Honour nevertheless accepted that the making of the application retrospectively is a relevant consideration which may be taken into account when hearing an application for immediate taxation after the costs order has been authenticated.
Although his Honour put to one side applications based on the delays of the party against whom the order is sought (which is certainly part of the case here), he considered that a significant delay between the occurrence of other circumstances which may justify an order for immediate taxation and the making of such an application is a factor which will ordinarily point against exercising the Court’s discretion to depart from the default position and order immediate taxation.
Further, his Honour noted that even where the application is based on delay, there may be circumstances where the failure to apply promptly when the delay becomes apparent may, in the circumstances of a particular case, point against ordering immediate taxation. Indeed, his Honour concluded that it would require an ‘exceptional case’ for an application made more than a year later to be granted on the basis that the applicant sought to rely on the conduct of the unsuccessful party (the first factor identified by Hollingworth J in Dale).
In my view, this is an appropriate case to make the order retrospectively. His Honour’s reference to the circumstances needing to be exceptional, was not made in the context of there being significant delay by the party against whom the costs order had been made. In any case, in this context, exceptional should be taken to mean ‘out of the ordinary’. I accept that, in the normal course of events, an application for an order for immediate taxation ought be made at the time the initial costs order is made. However, when the original costs order was made, Mr El Zain had foreshadowed an application for leave to appeal to the Court of Appeal and undertook to pursue it expeditiously (which he in fact did). Vitrafy had no reason to apprehend that the application for leave to appeal would put in train a chain of events which would lead to no action whatsoever in the prosecution of the claim until some two-and-a-half years later. Vitrafy was entitled to believe that Mr El Zain would either succeed on appeal, in which case the costs order would be reversed, or that the application for leave to appeal (or the appeal itself) would be dismissed, and the proceeding would return to the trial division. In either case, there was no reason to consider that the proceeding would still be effectively in its very early stages three years hence. Thus, there was no need, or arguably any strong basis, for Vitrafy to seek an order for immediate taxation. That said, the fact that it did not do so, is readily understandable.
Further, and in any event, the very considerable and unexplained delay by Mr El Zain in prosecuting his case since the dismissal of the special leave application, along with the admitted discrete nature of the separate question determination, makes it appropriate in the interests of justice for the order to be made now.
Accordingly, I shall make an order that the defendant’s costs ordered to be paid by the plaintiff on 25 March 2022 be taxed immediately.
It is not necessary for me to make any other orders, save that I do not intend to make any other direction to the effect that the defendant is required to undertake any step in this proceeding until such time as the taxation has occurred.
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