Eleventh Klingon Pty Ltd –v– Lalos and Ors

[2016] VCC 892

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

 Revised
Not Restricted
Suitable for Publication

EXPEDITED LIST

Case No. CI-14-05036

ELEVENTH KLINGON PTY LTD	Plaintiff
v
LOUIS NORMAN LALOS	First Defendant
and
TOLKIMEX PTY LTD	Second Defendant
and
TERPSITHEA LALOS	Third Defendant
and
GARY NEEDHAM	Third Party

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JUDGE:	His Honour Judge Cosgrave
WHERE HELD:	Melbourne
DATE OF HEARING:	24 June 2016
DATE OF JUDGMENT:	28 June 2016
CASE MAY BE CITED AS:	Eleventh Klingon Pty Ltd –v– Lalos & Ors
MEDIUM NEUTRAL CITATION:	[2016] VCC 892

REASONS FOR JUDGMENT
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Subject:  COSTS

Catchwords:             COSTS – whether plaintiff entitled to statutory interest where assigned debt under deed of assignment

Legislation Cited:     County Court Act 1958 (Vic); Supreme Court Act 1986 (Vic);

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms M Harris	T F Grundy Lawyers
For the First Defendant For the Second Defendant For the Third Defendant For the Third Party	In person Mr D Dealehr	Waters Lawyers Pty Ltd

HIS HONOUR:

1       I handed down my reasons for judgment in this proceeding earlier this month.  I gave the parties an opportunity to read the judgment and agree upon the orders which would give effect to it.  Because the parties could not agree, they returned to court to argue about the final orders and costs. 

2       When the court convened on 24 June 2016, counsel retained by Lalos applied for an adjournment of the hearing.  He said that he had been briefed the day before and only received all the necessary papers about half an hour before court began.  The plaintiff and third party (“Needham”) opposed the adjournment.  In circumstances where:

·there was no affidavit material in support of the application;

·there was no proper explanation by Lalos for the delay in preparing for the 24 June 2016 hearing or why he was not ready to proceed; 

·there was no evidence to support an appropriate basis for an adjournment;

·the plaintiff and Needham had incurred costs in preparing for Court and those costs would be wasted if the matter were adjourned;

·because Lalos said that he was impecunious, there was little chance that the costs would be recovered;

·Lalos did not pay or offer to pay the other parties’ costs thrown away by reason of the adjournment sought; and

·the conduct of Lalos was inconsistent with the objects of, and his obligations under, the Civil Procedure Act 2010 (Vic)

I refused the application.  Subsequently during the morning, Lalos made an offer to pay the costs of the plaintiff and Needham thrown away but then, after further discussion, withdrew the offer. 

3       The plaintiff seeks judgment in the sum of $50,000 together with interest at the statutory rate from the time the proceedings were issued until judgment.  The plaintiff sought interest on the basis of its rights under the Deed of Assignment dated 6 February 2013 (the Deed).  The recitals to the Deed recorded that the assignee (the plaintiff) agreed to buy the debt detailed in Item 3 of the Schedule to the Deed and the assignor (Ace Parking Pty Ltd) agreed to assign and transfer to the assignee all of the assignor’s right, title and interest in the debt for the consideration and upon and subject to the terms and conditions appearing in the Deed.  Clause 1 of the Deed provided that Ace agreed to assign, transfer, convey and make over to the plaintiff all of Ace’s estate, title and interest in and under the Deed debt together with the full benefit and advantage of the debt to hold the same under the use of the plaintiff absolutely subject to the terms of the Deed.

4       Item 3 of the Schedule to the Deed stated that the amount of the debt was $50,000 and it arose from a debt facility agreement dated 18 February 2011.  The debtors were Lalos, Tolkimex Pty Ltd and his mother, Terpsithea Lalos.  Ace issued its writ in the Magistrates’ Court on 27 March 2012 before the defendants applied to transfer the case to the County Court.  The first administrative mention in the County Court was scheduled for 24 November 2014. 

5       The plaintiff says that the interest on the debt for the period 27 March 2012 until 24 June 2016 is $21,934.79. 

6       Lalos contends that the plaintiff is not entitled to this interest because it did not become a party to the proceeding until well after the action began, namely on 12 February 2015.  For this reason, Lalos says that the appropriate amount of interest is about $6,507. 

7       Because this point raised by the defendants had some novelty to it and was not merely a dispute about the appropriate rate of interest to apply or a calculation, I granted the plaintiff and Lalos the chance to file further submissions on the point by 10.00am on 27 June 2016.  During the afternoon of 24 June 2016, my associates received an email from Stefan De Palma, the solicitor acting for Lalos, who said that his instructions had been withdrawn and Lalos would not be filing any submissions.

8       The plaintiff, in its further submissions contended that under the assignment, Ace transferred the contractual rights under the debt facility agreement along with the incidental right to litigate arising from those rights.[1] Also the plaintiff argued that there was no reference in section 60 of the Supreme Court Act 1986 (Vic)[2] (Supreme Court Act) to interest being awarded to “the party”. Unlike section 58 of the Supreme Court Act, section 60 does not specify in terms who should receive an award of interest. Accordingly, it was said that there was no requirement that the plaintiff had to be a party to the proceedings other than at the date of judgment. The Deed, properly construed, meant that if the debt were recoverable from the date of default so must have been the right to litigate, and interest was payable on such a debt as a result of the litigation.

[1]Ellis v Torrington [1920] 1 KB 399 at 412; Re Kenneth Wright Distributors Pty Ltd (In liq); W J Vine Pty Ltd v Hall [1973] VR 161 at 166-167.

[2]By virtue of section 50 of the County Court Act 1958 (Vic), sections 58 and 60 of the Supreme Court Act 1986 (Vic) apply to proceedings in the County Court of Victoria.

9       In my opinion, the plaintiff should be able to obtain the interest claimed. The purpose of the assignment was to put the plaintiff in the position of Ace in respect of the debt owing as a result of the loan by Ace under the debt facility agreement. Integral to such a transaction was the transfer of the other rights and obligations which Ace enjoyed under the terms of the facility or otherwise as the creditor.

10      Both the plaintiff and Needham each seek costs on an indemnity basis from the defendants.  They contended that such an order was appropriate because of the way in which the defendants conducted the litigation.  The plaintiff pointed to the letter from Lalos’s former solicitors dated 25 September 2012 in which the solicitors admitted that the debt of $50,000 was due and payable to Ace and said that Lalos and Tolkimex wanted to pay Ace in full.  The plaintiff also referred to the letter from Lalos to the plaintiff’s solicitor dated 27 November 2012 in which he referred to his instruction to Needham to pay out Ace from the settlement funds available after the sale of his wife’s property.  In part of the letter, Lalos said that because Needham had not been able to settle the dispute, Lalos had no alternative but to tie the matter up in Court.  The plaintiff argued that this evidenced, in effect, an admission by Lalos that the money was owing but that, for tactical reasons, he proposed to engage in litigation rather than admit responsibility for the repayment of the moneys.

11      The plaintiff contended that the defendants were aware by at least September 2012 that there was no valid defence to the plaintiff’s claim and that they owed the money sought by the plaintiff.  In those circumstances, the plaintiff said there was no proper basis to delay the proceedings and cause the plaintiff the extra cost and expense in obtaining an order for the moneys to which it was plainly entitled. 

12      In relation to the third party, Lalos alleged in effect that Needham and/or Melbourne Legal Partners (“MLP”), the firm at which he worked, received the loan funds from Ace but did not give the funds to the defendants for their personal use.  Rather, it was said that Needham used the funds to pay outstanding legal fees owed by Lalos and Tolkimex to MLP.  Lalos said that later, when the defendants sold a property at Elwood, Needham and/or MLP disbursed the funds contrary to the instructions of Lalos and retained funds for costs when there was no entitlement to that money.  Lalos alleged that Needham and MLP had thereby breached their retainer and fiduciary and other duties owed to the defendants.  At trial, Lalos and the other defendants did not pursue any claim against Needham but abandoned that part of their case.  Again, Needham was put to considerable expense, inconvenience and trouble as a result of the allegations made by the defendants which were not pursued and were, to that extent, without merit.

13      The authorities support the award of indemnity costs in a variety of circumstances such as:[3]

[3]Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7]; Shepherd v National Mutual Life Association of Australasia Ltd (Unreported, Hedigan J 17 November 1994 at p. 5-6); Colgate Palmolive Co v Cussens Pty Ltd (1993) 46 FCR, 233-4.

·the making of an allegation, known to be false, that a party is guilty of fraudulent behaviour;

·conduct which causes loss of time to the court and other parties;

·the commencement or continuation of proceedings for an ulterior motive;

·commencement or continuation of proceedings in wilful disregard of known facts or clearly established law;

·making an allegation with a ulterior motive;

·making wild and contumelious allegations.

14      In the present case, I find that the defendants made and pursued to trial defences to the plaintiff’s claim and allegations against Needham which had no proper basis.  Further, the defendants knew that Ace made the loan and knew, or should have known, how the funds were used in accordance with the signed disbursement order. To admit the debt, and then resolve to litigate the dispute was inappropriate. Likewise, the defendants made allegations against Needham which had no basis in fact. It was fundamentally wrong to say that because the defendants had not received the loan funds in person, Needham had effectively misappropriated them. In these and other ways, the defendants did not comply with their obligations under the Civil Procedure Act 2010 (Vic). By their actions in relation to the litigation, the defendants:

(a)      commenced or continued the proceedings in wilful disregard of known facts and clearly established law;

(b)      commenced or continued proceedings (or their defence) for an ulterior motive;

(c)       made wild allegations without foundation and probably for an ulterior motive;

(d)      wasted the time of the court and the other parties.

15 Accordingly, in all the circumstances, I find that this is an appropriate case to award indemnity costs in favour of the plaintiff and Needham. In so doing, I have also taken into account section 28 of the Civil Procedure Act 2010 (Vic).

16      I make the following orders:

(a)There be judgment for the plaintiff against the defendants in the sum of $50,000;

(b)The defendants pay the plaintiff interest in the sum of $21,960.78 being interest at the statutory rate from 27 March 2012 until 29 June 2016;

(c)The defendants’ claim against the third party be dismissed;

(d)The defendants pay the plaintiff’s costs of the proceeding, including reserved costs:

(i)on the Magistrates’ Court scale from the inception of the complaint in the Magistrates’ Court until 24 November 2012, such costs to be taxed on a standard basis until 25 September 2012 and thereafter on an indemnity basis; and

(ii)on the County Court scale from 25 November 2012, such costs to be taxed on an indemnity basis;

(e)The defendants pay the third party’s costs of third party’s claim including reserved costs, such costs to be taxed:

(i)on the Magistrates’ Court scale from the inception of the third party claim until 24 November 2012 with the costs to be taxed on an indemnity basis; and

(ii)on the County Court scale from 25 November 2012, such costs to be taxed on an indemnity basis.