Frontlink v Feldman (No 2)
[2017] VSC 9
•25 January 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2011 1075
| FRONTLINK PTY LTD (ACN 074 036 496) | Plaintiff |
| v | |
| CYNTHIA FELDMAN | First Defendant |
| - and - | |
| RAMARIM PTY LTD (ACN 147 722 781) | Second Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 December 2016 |
DATE OF RULING: | 25 January 2017 |
CASE MAY BE CITED AS: | Frontlink v Feldman (No 2) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 9 |
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COSTS – Trial of preliminary questions – Whether any reason to depart from the rule that costs follow the event – Whether there ought to be an apportionment of costs on an issue basis – Whether appropriate for parties to brief senior and junior counsel given modest quantum.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Cook | Belleli King & Associates |
| For the First Defendant | Mr D Williams QC with Mr M McInnis | Mason Black Lawyers |
| For the Second Defendant | Mr M Galvin QC | Aitken Partners |
HER HONOUR:
On 30 November 2016 I delivered my reasons in relation to the preliminary questions set down by my orders of 17 September 2015.[1] I found that the first defendant (‘Mrs Feldman’) was not liable to the plaintiff (‘Frontlink’) for the claims made by it in paragraphs 1 to 5 of the fourth amended statement of claim dated 1 August 2016, pursuant to an agreement between Frontlink on the one part, and Mrs Feldman and her late husband (‘Derek Feldman’) on the other part (‘licence agreement’), but if I was wrong in relation to that matter, Frontlink would have been successful in proving that Mrs Feldman was liable to Frontlink in the sum of $126,564.19. In making the latter finding, I concluded that, subject to some minor adjustments, Frontlink had proved the quantum of its claim, and, while Mrs Feldman had established as a matter of fact that Frontlink had taken possession of a substantial number of cattle belonging to Derek Feldman, the value of the cattle could not be offset against any liability owing by Mrs Feldman by reason of Frontlink’s entitlement to apply any funds or property received by it to which of the debts owed to it by Mrs Feldman and/or Derek Feldman it thought fit. However, the consequence of my finding with respect to the question of liability has brought this proceeding to an end, including claims against Mrs Feldman and the second defendant, Ramarim Pty Ltd (‘Ramarim’) in relation to their conduct in allegedly putting property out of reach of Mrs Feldman’s creditors.
[1]Frontlink v Feldman [2016] VSC 691.
Mrs Feldman sought her costs of the proceeding, including reserved costs, on the basis that there was no basis for any departure from the general rule that costs follow the event. Ramarim, which was not an active party to the trial of the preliminary questions, submitted that Ramarim ought to have its costs of the proceeding. The application by Ramarim to be paid its costs has been adjourned to 13 February 2017.
Frontlink submitted that there ought to be no costs orders made in favour of Mrs Feldman, but rather costs orders ought to be made in its favour because:
(a) Mrs Feldman did not succeed on a number of issues, in particular, issues which occupied an extensive period of time at trial; and
(b) she did not succeed in her counterclaim.
Counsel for Frontlink relied upon the authorities to the effect that a successful party who has failed on certain issues may not only be deprived of the costs of those issues, but may well be ordered to pay the other party’s costs of those issues, including the statements of principle by Robson J in GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) (‘GT Corporation’),[2] where his Honour conducted an extensive survey of the authorities concerning the question of costs, in particular circumstances where costs might be apportioned on an ‘issue’ basis. Counsel for Frontlink submitted that while Mrs Feldman was successful on the matter of her liability to Frontlink, in that Frontlink failed to prove that the licence agreement was extended or renewed, she was unsuccessful in relation to each of the other matters pleaded in her defence and counterclaim, in particular:
[2][2008] VSC 296.
(a) the question of whether she entered into the licence agreement in the first place;
(b) whether the licence agreement was voidable on the grounds of unconscionable conduct or other like grounds;
(c) whether Frontlink had appointed Derek Feldman as its agent for the purposes of obtaining Mrs Feldman’s consent to the licence agreement; and
(d) importantly, insofar as the amount of time the issue took at trial, the question of whether any liability owing by Mrs Feldman to Frontlink ought to be reduced by reason of Frontlink taking possession of Derek Feldman’s cattle (‘cattle issue’), and the quantity of cattle taken by Frontlink.
Senior counsel for Mrs Feldman accepted that the Court has a great flexibility in respect of the award of costs, and that the authorities suggest that it is possible and sometimes appropriate to apportion costs on an issue basis. However, he relied upon the decision of Robson J in the matter of NCON Australia Ltd v Spotlight Pty Ltd (No 7),[3] where a plaintiff had successfully established the existence of a contract, and that the defendant had breached the contract, but failed to prove any damages had costs awarded against it, as authority for his contention that there must be special circumstances, or disqualifying conduct on the part of an otherwise successful party to be deprived of all or part of its costs. His Honour referred to the matter of Chen & Ors v Chan & Ors[4] where the Court of Appeal stated as follows [citations omitted]:
(1)The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2)The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do “substantial justice” as between the parties on matters of costs.
(3)Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.
(4)A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.[5]
[3][2014] VSC 25 (‘NCON v Spotlight’).
[4][2009] VSCA 233, (‘Chen v Chan’).
[5]NCON v Spotlight [25] citing Chen v Chan, [10].
His Honour went on to say:
Here, there was no mixed success. There was no ‘discrete head of claim’ on which the plaintiff succeeded. I see no reason to depart from the decision of Byrne J of this Court, especially as his Honour considered and rejected the possibility of severing issues (albeit without reference to r 63.04 of the then in-force Supreme Court (General Civil Procedure) Rules 1996). I also consider binding the decision of the New South Wales Court of Appeal in Rockcote. The Court’s broad discretion as to costs must be exercised against the general principle that costs follow the event. Here, Spotlight legitimately resisted NCON’s claim, and was ultimately successful as NCON failed to quantify its damages. The successful party should have its costs.[6]
[6]NCON v Spotlight, [26].
Senior counsel for Mrs Feldman also referred to the decision of the High Court in Firebird Global Master Fund II Ltd v Republic of Nauru & Anor[7] where the Court refers to the need to identify ‘special circumstances’ in order to depart from the general rule that costs follow the event.[8] In Chen v Chan, the Court of Appeal refers to ‘disqualifying conduct’.[9]
[7](2015) 327 ALR 192.
[8]Ibid [6].
[9]Chen v Chan.
Senior counsel for Mrs Feldman noted that the two particular issues raised by counsel for Frontlink as amounting to potentially disqualifying conduct were Mrs Feldman’s denial of being bound by the original licence agreement, and the cattle issue, and submitted as follows:
(a) the first issue did not take a substantial amount of time at trial, and the evidence regarding the circumstances of the entry into the licence agreement was relevant to the determination of the real question in issue, being whether there had been any renewal or extension of the licence agreement;
(b) secondly, the counterclaim was essentially defensive in nature;
(c) as for the cattle issue, adverse costs orders were made against Mrs Feldman in the context of her late application to amend her defence to raise the cattle issue, which sufficiently compensated Frontlink for any prejudice suffered by it by the raising of the cattle issue; and
(d) further, having regard to the way in which Frontlink has put its claim, Frontlink itself had raised the cattle issue by asserting that it accounted for the proceeds of the sale of cattle in applying it to Derek Feldman’s debt in relation to another property.
In my view, there are no special circumstances, or disqualifying conduct on the part of Mrs Feldman which would justify a departure from the usual rule that costs follow the event. I agree with the submissions made by senior counsel for Mrs Feldman to the effect that the evidence concerning whether Mrs Feldman was bound by the licence agreement was also relevant to the question of whether the agreement was renewed or extended, and as such, any apportionment would be difficult, even if appropriate.
The question of whether there ought to be any apportionment by reason of the cattle issue is somewhat more problematic. It is fair to say that the cattle issue occupied considerable time at trial. It is also correct that while Mrs Feldman was successful in establishing the factual contentions she made with respect to the number of cattle taken by Frontlink, she was also unsuccessful in that I found that, had she been liable to Frontlink, she would not be entitled to any ‘credit’ for the value of the cattle. However, this finding was premised on an alternative scenario, if I had found that there was a liability on the part of Mrs Feldman to Frontlink pursuant to the licence agreement, which I did not. It should not obscure the fact that Mrs Feldman was ultimately successful on the question of liability.
The authorities make it clear that it is open to the Court to deprive a successful party of its costs in respect of some issues. However, in one of the authorities relied upon by counsel for Frontlink, Mickelberg & Ors v The State of Western Australia & Ors[10] Newnes J referred to the general principles to be applied in the exercise of the Court’s discretion with respect to costs, as stated by Toohey J in Hughes v Western Australian Cricket Association Inc,[11] and went on to say:
But that does not mean that in the exercise of its discretion as to costs a court should as a matter of course embark upon a dissection of the case before it to determine which party was successful on each issue, or necessarily deprive a successful party of some portion of its costs because it has lost on a particular distinct or severable issue.[12]
[10][2007] WASC 140 (‘Mickelberg’).
[11](1966) ATPR 40-748 at 48, 136.
[12]Mickelberg, [35].
Newnes J also referred to other authorities which urged caution upon embarking upon an enquiry as to which party was successful on each discrete issue, including the following statement in Westgold Resources NL v St George Bank Ltd and Ors,[13] where Anderson J said:
The court should not get involved in an excessively detailed analysis of the various issues in an attempt to make intricate dollar-perfect costs orders. To adopt that practice would be to add an extra dimension to litigation which, by and large, is already these days complicated and expensive enough.[14]
[13](1998) 29 ACSR 396 (‘Westgold’).
[14][2007] WASC 140, [38], citing Westgold (Anderson J).
Further, Newnes J stated as follows:
Where it is appropriate to consider the outcome of particular issues in the case, it will be relevant to consider whether there has been any unreasonable or inappropriate conduct on behalf of the successful litigant in relation to that issue, the relative merits or strengths of that party on the issue, whether the length of the hearing was greatly increased by the issue, and whether the issue otherwise was of sufficient significance in proportion to the whole case to warrant an order depriving that party of the costs of that issue.[15]
[15]Ibid [44].
The statement above is consistent with the submissions made on behalf of Mrs Feldman to the effect that, in order to be deprived of its costs, a successful party ought not be deprived of its costs in relation to a particular issue unless it was unreasonable or improper of that party to litigate that issue.
The proposition that the cattle issue was a ‘red herring’ was made on behalf of Frontlink at the conclusion of the trial, after all of the evidence had been heard. It was not a submission made in opposition to Mrs Feldman’s application to amend her defence with respect to the cattle issue: it is difficult to assess in hindsight whether such a submission would have been successful at that time. While I would not concur with the contention of senior counsel for Mrs Feldman to the effect that ‘Frontlink brought in the cattle,’ it is the case that the question of the quantum of Frontlink’s claim, including the accounting for any monies received by Frontlink, was very much a live issue in the proceeding, at least since the judgment of the Court of Appeal setting aside the judgment obtained by Frontlink against Mrs Feldman.[16]
[16]Feldman v Frontlink Pty Ltd [2014] VSCA 27.
Further, the findings I made with respect to the credibility of Mr Mondous’ evidence concerning the cattle issue did increase the caution with which I assessed his evidence with respect to matters going to Mrs Feldman’s liability under the licence agreement, such that the evidence concerning the cattle issue did have a forensic impact beyond the determination of the cattle issue itself.
While Mrs Feldman was unsuccessful in some respect, with respect to the cattle issue, I doubt it could be said that it was improper or unreasonable to litigate the issue. Further, while this is not determinative of the matter, the evidence given by Mrs Feldman’s witnesses concerning the cattle issue was also relevant to my determination as to when Frontlink took possession of the Grices Road property, which did, albeit marginally, affect the quantum of Frontlink’s claim. Accordingly, I will order that Frontlink pay Mrs Feldman’s costs of the proceeding, including reserved costs, on a party-party basis up to 30 April 2013, and on a standard basis thereafter.
The question remains as to whether I should certify for senior and junior counsel, given the quantum of the claim, or simply leave it open for argument in the Costs Court. Having regard to my involvement in the management of the proceeding, and the somewhat unusual aspects of the transaction and the issues in the proceeding, I agree that I am in the best position to make the assessment of whether the parties were justified in briefing both senior and junior counsel. I agree with senior counsel for Mrs Feldman that, given the history of the proceeding (which started out as a much larger claim against Mrs Feldman, in different capacities), the multitude of factual and, to a lesser extent, legal issues involved, and the significance of the claim to Mrs Feldman personally, the briefing of both senior and junior counsel by Mrs Feldman was justified. Further, if it becomes relevant, I would make the same finding with respect to the entitlement of Frontlink to brief senior and junior counsel.
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