Gamboni v Bendigo and Adelaide Bank Ltd
[2013] VSCA 282
•11 October 2013
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2011 0207
| WILLIAM BERNARD GAMBONI | Appellant |
| v | |
| BENDIGO AND ADELAIDE BANK LTD ACN 068 049 178 | Respondent |
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| JUDGES | TATE JA and KYROU AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 3 September 2013 |
| DATE OF JUDGMENT | 11 October 2013 |
| MEDIUM NEUTRAL CITATION | [2013] VSCA 282 |
| JUDGMENT APPEALED FROM | Gamboni v Bendigo and Adelaide Bank Ltd [2011] VCC 1442, Judge Ginnane |
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PRACTICE AND PROCEDURE — Slip rule — Inherent jurisdiction of the Court to make a supplemental order — Appeal from a judgment of the County Court — Through inadvertence, counsel for the appellant did not inform the Court of Appeal, when the Court made a costs order consequent upon allowing the appeal, of the making of an offer of compromise prior to the trial below — After the costs order was entered, the appellant sought an order under r 26.08(2)(b) of the County Court Civil Procedure Rules 2008 that the respondent pay costs of the County Court proceeding on an indemnity basis for costs incurred after the day the offer of compromise was made — Slip rule inapplicable because real differences of opinion could exist on the issues raised — Inherent jurisdiction of the Court inapplicable because the order sought would vary rather than merely supplement the existing order for costs — Certificates granted for counsel’s fees for the trial below — Supreme Court (General Civil Procedure) Rules 2005 r 36.07.
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| Appearances: | Counsel | Solicitors |
| For the Appellant | Mr G H Golvan QC | Gary Rothville & Associates |
| For the Respondent | Mr C E Shaw | Hall & Wilcox |
TATE JA
KYROU AJA:
Introduction and summary
On 2 May 2013, this Court[1] published its reasons for allowing an appeal from a judgment of a County Court Judge[2] in a proceeding in which the appellant, William Gamboni, was the plaintiff and his former employer, Bendigo and Adelaide Bank Ltd, was the defendant (‘Principal Judgment’).[3]
[1]The Court comprised Harper and Tate JJA and Kyrou AJA. Harper JA has since retired and, accordingly, the application the subject of this judgment has been heard by Tate JA and Kyrou AJA pursuant to a determination of the President under s 11(1A) of the Supreme Court Act 1986.
[2]The decision below is Gamboni v Bendigo and Adelaide Bank Ltd [2011] VCC 1442 (Judge Ginnane).
[3]The Principal Judgment is Gamboni v Bendigo and Adelaide Bank Ltd [2013] VSCA 92.
The proceeding below concerned a claim by the appellant under the respondent’s redundancy policy (‘Policy’). The Policy defined ‘redundancy’ relevantly as follows:
‘Redundancy’ means a situation where the work being done or position held by an employee, or a major portion of it is no longer required:
a as a result of changes in economic or business conditions; or
…
cbecause of reorganisation (whether internal, external, group wide or at Business Unit level); or
d because of changes to business or management practices …
In the proceeding below, and on the hearing of the appeal, the appellant was represented by senior and junior counsel while the respondent was represented by junior counsel.
The trial judge decided that the appellant did not satisfy the requirements of the Policy. His Honour held that, although there had been a reorganisation within the respondent’s business, the major portion of the appellant’s work and position continued to be required after the reorganisation.
On 12 December 2011, the trial judge made the following order (‘order below’):
1. That the proceeding is dismissed.
2.[That] the plaintiff pay the defendant’s costs of the proceeding to be taxed on scale D in default of agreement. Certify for defendant’s counsel’s fees for 4 days of trial at $3,300 per day and 2 days of preparation at $3,300 per day, both inclusive of GST.
On 2 May 2013, this Court made the following order (‘Order’):
1. The appeal is allowed.
2.The orders made by his Honour Judge Ginnane on 12 December 2011 are set aside. In lieu of those orders, it is ordered that there be judgment for the appellant in the sum of $187,261.50 together with interest on that amount in the sum of $47,566.99.
3.The respondent pay the appellant’s costs of the appeal.
4.The respondent pay the appellant’s costs of the hearing below.
5.The respondent repay to the appellant the sum of $70,420.00 paid by the appellant pursuant to an order for costs made by his Honour Judge Ginnane.
At the time that this Court made the Order, we had not been informed by the appellant’s counsel that, on 13 May 2011, the appellant had served an offer of compromise upon the respondent in the amount of $150,000.
Following the publication of the Principal Judgment, a dispute arose between the parties as to the basis of the appellant’s entitlement to costs of the proceeding below.
The appellant’s position is that he is entitled to an order that he be paid costs on a party and party basis for costs incurred up to and including 13 May 2011 and on an indemnity basis for costs incurred thereafter, in accordance with r 26.08(2)(b) of the County Court Civil Procedure Rules 2008 (‘CC Rules’).[4] The appellant submits that para 4 of the Order ought to reflect a costs award on the above basis and should make clear that that paragraph applies to all of the costs of the proceeding below rather than simply the costs of the hearing below. He also seeks an order specifying the applicable scale and certificates regarding counsel’s fees. The appellant has submitted that this Court has the power to grant the relief he has sought pursuant to the slip rule in r 36.07 of the Supreme Court (General Civil Procedure) Rules 2005 (‘SC Rules’) or pursuant to this Court’s inherent jurisdiction.
[4]All references to the CC Rules are to those rules as in force when the order below was made.
The respondent contends that the slip rule and the Court’s inherent jurisdiction apply to only one aspect of the appellant’s application, namely, the clarification that the reference to ‘the appellant’s costs of the hearing below’ should be a reference to ‘the appellant’s costs of the proceeding below.’ According to the respondent, r 26.08(2)(b) of the CC Rules does not apply because it is displaced by r 26.08(8) of the CC Rules. Rule 26.08(8) of the CC Rules would render r 26.08(2)(b) of the CC Rules inapplicable if the amount of damages was not in issue in the proceeding below, but only the question of liability was in dispute, unless the appellant has satisfied the Court that the amount of his offer was ‘of a genuine compromise’.
For the reasons that follow, we will make an order which:
(a) amends para 4 of the Order by substituting the word ‘proceeding’ for the word ‘hearing’; and
(b) supplements para 4 of the Order by adding: that costs be taxed on Scale D; a certificate for two counsel; a certificate for the appellant’s junior counsel for four days of trial at $3,300 per day inclusive of GST and two days of preparation at $3,300 per day inclusive of GST; and a certificate for the appellant’s senior counsel for four days of trial and two days of preparation at such daily rate as is determined by the Costs Court.
Relevant provisions of the CC Rules and the SC Rules
Rules 26.08(2)(b) and (8) and 63A.31 of the CC Rules provided as follows:
26.08 Costs consequences of failure to accept
…
(2)Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled—
…
(b)… to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was served, taxed on a party and party basis, and for the plaintiff's costs thereafter taxed on an indemnity basis.
…
(8)Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise.
63A.31 General basis
Except as provided by these Rules or any order of the Court costs shall be taxed on a party and party basis.
Appendix A to the CC Rules contained four scales of costs, which were applied as between party and party according to the amount recovered.[5] Scale D applied when the successful party recovered an amount of over $50,000. Item 31 of app A to the CC Rules was titled ‘Fees to Counsel’. Item 31(h)(v)(A) relevantly provided:
(v) Despite anything contained in these Rules—
(A)where a trial has commenced, the Judge ONLY may allow such higher fee for counsel for the trial and may allow fees for more than one counsel as the Judge thinks fit …
[5]CC Rules r 63A.34A(3)(a).
Rule 36.07 of the SC Rules provides as follows:
36.07 Amendment of judgment or order
The Court may at any time correct a clerical mistake in a judgment or order or an error arising in a judgment or order from any accidental slip or omission.
The proceeding below and the offer of compromise
The proceeding below was commenced by writ on 2 December 2010. The appellant delivered a statement of claim with the writ in which he claimed damages for breach of the respondent’s redundancy obligations in the amount of $175,257.56, damages representing salary in lieu of notice in the amount of $12,003.94, interest and costs.
On 25 January 2011 the respondent delivered a defence which admitted a number of matters, including the appellant’s employment and the existence of the Policy. However, the defence denied that the appellant was entitled to any damages on either of the two bases set out in the statement of claim. Although the defence did not contain any admission in relation to the quantum claimed by the appellant, it did not allege that, if the appellant’s claims succeeded, the appellant would be entitled to a different quantum of damages.
As we have already mentioned, on 13 May 2011, the appellant served on the respondent an offer of compromise. The offer was made in accordance with O 26 of the CC Rules and offered to compromise all of the appellant’s claims in the proceeding by the payment from the respondent to the appellant of the amount of $150,000. The respondent did not accept the offer.
The proceeding below was heard on 9, 10, 11 and 15 August 2011. During the hearing, counsel for the respondent informed the Court that the respondent did not challenge the quantum of damages. The parties were given leave to file and serve amended pleadings which they did on 15 and 16 August 2011, respectively.
The appellant made three changes to the statement of claim. The first was to expressly refer to para (a) of the definition of ‘redundancy’ in the Policy, as set out at [2] above. The second and third changes were to add allegations that, as a result of ‘changes in economic or business conditions’ that affected the appellant’s area of work, his position with the respondent, or a major portion of it, was no longer required. The amounts claimed by the appellant were not altered. The respondent did not make any substantive changes to the denials in its original defence.
In the Principal Judgment, we concluded that the major portion of both the appellant’s position and the work he performed were no longer required after the reorganisation to the respondent’s business. In arriving at our conclusion, we took into account the impact on the appellant’s work of the changes in economic and business conditions brought about by the Global Financial Crisis.[6]
[6]Principal Judgment, [19], [79].
Application to this Court for a variation to the Order
On 25 July 2013, more than two months after the making of the Order, the appellant filed and served a summons seeking an order to clarify para 4 of the Order. At the hearing of the summons on 3 September 2013, the appellant sought leave to amend the summons without any opposition from the respondent. In its amended form, the appellant’s summons sought an order that para 4 of the Order be replaced by the following paragraph:
4.The Respondent pay the Appellant’s costs of the proceeding below to be taxed on a party and party basis on Scale ‘D’, certifying for the Appellant’s Senior Counsel’s for 4 days at $7,700 per day and 2 days of preparation at $7,700 per day, and the Appellant’s Junior Counsel’s for 4 days at $3,900 per day and 2 days of preparation at $3,900, until the date of the service of the Offer of Compromise served 13 May, 2011, including the day the Offer was served, and thereafter his costs taxed on an indemnity basis.
At the hearing of the appellant’s summons on 3 September 2013, the respondent made oral submissions that were not reflected in its outline of written submissions. As a result, the respondent was ordered to file and serve supplementary written submissions addressing the additional matters raised during the hearing, and the appellant was given leave to file and serve any written submissions in response.
The key issue for determination is whether the Court has jurisdiction to grant the relief sought by the appellant pursuant to the slip rule in r 36.07 of the SC Rules or the Court’s inherent jurisdiction. In deciding the applicability of the slip rule, it will be necessary for us to consider whether the amount of damages was not in dispute below and, if so, whether the amount of the appellant’s offer was ‘of a genuine compromise’, as these questions will affect whether r 26.08(8) of the CC Rules displaced r 26.08(2)(b) of the CC Rules. It will also be necessary for us to consider whether, if r 26.08(2)(b) was not displaced, the appellant would have obtained an order under that rule.
We will consider the above issues in turn.
Court’s jurisdiction under the slip rule
It was common ground between the parties that, on the hearing of an appeal, this Court stands in the shoes of the primary judge in relation to the costs of the hearing below.[7]
[7]Sands & McDougall Wholesale Pty Ltd (in liq) v Commissioner of Taxation (Cth) [No 2] [1999] 2 VR 114, 118 [14] (‘Sands & McDougall’).
The slip rule in r 36.07 of the SC Rules applies where an order contains a ‘clerical mistake’ or ‘an error arising … from any accidental slip or omission.’ The error in an order may be one that arises from inadvertence on the part of the Court or counsel for a party and may be remedied even where the order has been drawn up, passed and entered.[8]
[8]L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590, 594–5.
In Sands & McDougall Wholesale Pty Ltd (in liq) v Commissioner of Taxation (Cth) [No 2],[9] the appellant had been successful before the Court of Appeal, and was awarded its costs of the trial and the appeal. The fact that the appellant had made an offer of compromise, which was rejected by the respondent, was not raised prior to the order for costs being made. The appellant sought to rely on the slip rule to substitute an order for solicitor and client costs from the date of the offer of compromise. The offer of compromise under consideration was made under the former r 26.11 of the SC Rules, which has since been repealed.
[9][1999] 2 VR 114.
The former r 26.11 of the SC Rules relevantly provided:
Costs consequences where other claim by plaintiff
(1)Where in a proceeding … —
(a)the plaintiff has made an offer in writing to the defendant … to compromise the claim on the terms specified in the offer;
(b) the offer was open to be accepted for a reasonable time; and
(c)the plaintiff obtains a judgment on the claim no less favourable to him than the terms of the offer —
the Court shall take those matters, and also the stage of the proceeding at which the offer was made, into account in determining what order for costs to make in respect of the claim.
(2)The Court may, in exercising its discretion as to costs in accordance with paragraph (1), order that the defendant pay the costs of the plaintiff in respect of the claim, taxed on a solicitor and client basis, from the commencement of the proceeding, from the day the offer was made or from such other time as the Court thinks fit.
In Sands & McDougall, the Court of Appeal held that the slip rule only applies where the proposed amendment is one upon which no real difference of opinion could exist and where it is not a matter of controversy.[10] Brooking JA, with whom Charles and Chernov JJA agreed, concluded that, in the circumstances of that case, the above test was not satisfied and the slip rule was not engaged. This was because, although it was probable that the Court of Appeal would have awarded solicitor and client costs had the matter been raised at the right time, it was impossible to say, ‘with the necessary degree of conviction’, that such an award would have been made.[11] His Honour added that he was ‘not prepared to say that the matter [was] beyond argument.’[12]
[10]Sands & McDougall [1999] 2 VR 114, 119 [21].
[11]Sands & McDougall [1999] 2 VR 114, 121 [25].
[12]Sands & McDougall [1999] 2 VR 114, 121 [25].
Brooking JA contrasted the prima facie position in relation to costs in r 26.08(2) of the SC Rules (which is in the same terms as r 26.08(2) of the CC Rules) with the discretionary considerations in the former r 26.11 of the SC Rules. His Honour said that the former r 26.11 could not be construed as if it made the same provision for costs as r 26.08(2).[13]
[13]Sands & McDougall [1999] 2 VR 114, 117 [11].
In Newmont Yandal Operations Pty Ltd v The J Aron Corporation,[14] the New South Wales Court of Appeal stated that the terms ‘controversy’ and ‘real difference of opinion’ are directed to matters of substance.[15] The mere fact that there is more than one way to amend an order to carry into effect the actual intention of the Court, does not mean that no order can be made under the slip rule. Spigelman CJ, with whom Santow JA and Handley AJA agreed, stated that the ‘existence of a choice between alternative means of carrying the Court's intention into effect, does not involve an evaluative or discretionary judgment in the sense used in the authorities.’[16]
[14](2007) 70 NSWLR 411 (‘Newmont’).
[15]Newmont (2007) 70 NSWLR 411, 435 [142].
[16]Newmont (2007) 70 NSWLR 411, 435 [143].
In the current proceeding, the respondent correctly conceded that, insofar as the appellant has sought clarification that the reference to ‘the appellant’s costs of the hearing below’ in para 4 of the Order extended to all of the appellant’s costs of the proceeding below, the slip rule applies. It was not this Court’s intention to confine para 4 of the Order to the costs of the hearing below. Rather, the expression ‘hearing below’ was intended to refer to the proceeding below. Accordingly, insofar as there is any ambiguity about this, the ambiguity should be rectified under the slip rule.
The appellant submitted that the order he seeks will have no impact on the finality of the decision made by this Court — rather, the order turns on the ancillary question of the basis of the costs order which should be made in relation to the proceeding below. The appellant also submitted that the mere fact that his application for indemnity costs is opposed cannot form a valid basis for challenging his assertion that, had the matter been raised before the Court originally, an order under r 26.08(2)(b) of the CC Rules would most likely have been made.
The respondent submitted that the slip rule does not apply beyond the clarification discussed at [32] above because the issues that are raised are not ones upon which no real difference of opinion can exist.
This Court did not previously deal with the effect of the offer of compromise on the appellant’s entitlement to costs because, although counsel had been successful on the appeal, through their inadvertence, we were not informed of the offer of compromise.[17] However, the fact that an issue has not been decided by the Court due to the inadvertence of counsel is not in itself sufficient to engage the slip rule. In order for the slip rule to be engaged, the principles set out in Sands & McDougall and Newmont must be satisfied.
[17]The inadvertence was regrettable because, as we discuss below, the costs consequences in r 26.08(2)(b) of the CC Rules only apply where they are incorporated in an order.
According to those principles, the key issue is whether no real difference of opinion or controversy could exist in relation to the appellant’s entitlement to the relief sought. This issue requires consideration of whether r 26.08(8) of the CC Rules applied to the present case. We now turn to that question.
Applicability of r 26.08(8) of the CC Rules
Rule 26.08(8) of the CC Rules will only apply in the present case if:
(a) ‘the amount of … damages was not in dispute, but only the question of liability’; and
(b) the appellant’s offer was not ‘of a genuine compromise’.
The parties raised two issues about the scope of r 26.08(8) of the CC Rules. First, whether the absence of a dispute about the quantum of damages must be stated expressly in the pleadings. Secondly, whether the time at which quantum was not in dispute is the time when an offer of compromise is made or the time at which the proceeding is heard. In addition, the parties disagreed on whether the appellant’s offer was ‘of a genuine compromise’. While there is some authority on the meaning of ‘genuine compromise’, there does not appear to be any authority on the first two issues.
The respondent submitted that quantum was plainly not in dispute, and that the Court ought not be satisfied that the appellant’s offer was of a genuine compromise. The respondent stated that it was not necessary that there be an express admission about quantum on the pleadings in order to demonstrate that it was not in dispute. According to the respondent, it was clear on the substance of the pleadings that quantum was not in dispute. This was because, so it was said, the respondent’s pleadings admitted the length of the appellant’s service and that the Policy formed part of his contract of employment, and no alternative calculation of the appellant’s redundancy entitlement was advanced. As such, the respondent contended, quantum was the product of a simple mathematical calculation.
The appellant contended that r 26.08(8) of the CC Rules contemplates a situation where damages have never been in dispute, not a position where damages are disputed on the pleadings, but ultimately admitted at trial, as occurred in this case. The appellant submitted that if quantum was not in dispute, the respondent ought to have made this clear in its defence rather than waiting until the trial to clarify the position.
The question of whether an offer is ‘of a genuine compromise’ does not depend simply on the magnitude of the discount embodied in the offer. While that is clearly a relevant consideration — in the sense that a trivial, contemptuous or derisory discount would not involve a genuine compromise[18] — other factors are also relevant. They include the apparent strength of the defendant’s case at the time the offer was made,[19] whether the case is an ‘all or nothing’ case which makes it difficult to select a discount based on an assessment of particular aspects of the case,[20] and the stage at which the offer was made.[21]
[18]EnerkaApex Belting Pty Ltd v Vickers Systems Pty Ltd [No 2] [2002] VSC 409, [14] (‘Enerka’); Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368, [26], [30] (‘Regency’).
[19]Enerka [2002] VSC 409, [14]; Regency [2009] NSWCA 368, [34].
[20]Enerka [2002] VSC 409, [13]; Regency [2009] NSWCA 368, [29].
[21]Regency [2009] NSWCA 368, [30].
In EnerkaApex Belting Pty Ltd v Vickers Systems Pty Ltd [No 2],[22] Habersberger J concluded that the onus of proof is on the plaintiff to satisfy the Court that the offer was ‘of a genuine compromise’.[23] That case was described as an ‘all or nothing’ case. There were serious questions as to liability, and it was by no means clear that the plaintiff would succeed in its claim.[24] His Honour stated that the purpose of rules relating to offers of compromise such as r 26.08(2) of the CC Rules is not achieved by ‘rewarding’ a plaintiff in respect of costs when in all the circumstances, its offer of compromise did not represent a genuine or reasonable attempt at settlement, and therefore did not hold any real attraction for the defendant as it did not make a sufficient reduction in the claim.[25]
[22][2002] VSC 409.
[23]Enerka [2002] VSC 409, [9].
[24]Enerka [2002] VSC 409, [13]–[14].
[25]Enerka [2002] VSC 409, [15].
In Enerka, Habersberger J held that ‘a six per cent reduction in the claim was not an offer “of a genuine compromise”’.[26] In Regency Media Pty Ltd v AAV Australia Pty Ltd,[27] the defendant made an offer of $10,000 at an early stage of the proceeding in respect of the plaintiff’s claim of approximately $600,000. The New South Wales Court of Appeal concluded that the offer ‘was an invitation to surrender, rather than any form of commercial compromise.’[28]
[26]Enerka [2002] VSC 409, [14].
[27][2009] NSWCA 368.
[28]Regency [2009] NSWCA 368, [30].
In the current proceeding, the respondent submitted that the appellant’s offer was not of a genuine compromise because it did not reflect a proper assessment of the risks and strengths and weaknesses of the parties’ cases; it amounted to an invitation to the respondent to surrender. According to the respondent, this case was an ‘all or nothing case’, since the appellant was either entitled to a redundancy payment, or he was not. The respondent’s case was plainly not hopeless, so it was said, as it was successful at first instance.
The appellant submitted that the offer of compromise was genuine and effectively reduced the sum claimed as at the time of the offer by $46,042.20 or 23 per cent.[29] According to the appellant, the amount offered was appropriate in all the circumstances, particularly where he had good prospects of recovering the full value of his claim from the respondent and therefore the offer could not properly be seen as an invitation to surrender.
[29]The appellant’s calculation is based on a claim of $196,042.20 as at 13 May 2011 (comprising damages of $187,261.50 and interest of $8,780.70) compared with the offer of $150,000 that was made on that day. The difference of $46,042.20 represents a discount of 23 per cent.
In our opinion, the above discussion demonstrates that, had the appellant sought an order under r 26.08(2)(b) of the CC Rules at the hearing of the appeal, this Court would not have been able to make such an order without first hearing detailed submissions on the three matters referred to at [38] above that affect the scope and applicability of r 26.08(8) of the CC Rules.
In order for r 26.08(2)(b) of the CC Rules to apply, it would have been necessary for us to be satisfied that:
(a) the time for determining whether the amount of damages was not in dispute is when an offer of compromise is made rather than when the proceeding is heard; and
(b) the question of whether the amount of damages was not in dispute depends on the express admissions made in a defendant’s pleadings rather than inferences to be drawn from the pleadings as a whole; and
(c) in the present case, the amount of damages was in dispute at the time the appellant made the offer of compromise; or
(d) if (a), (b), or (c) are wrong, the offer made by the appellant was of a genuine compromise.
The answer to each of the issues in (a), (b), (c) and (d) above is not immediately obvious but requires a consideration of existing authorities, the rules of statutory interpretation (including the context and purpose of r 26.08 of the CC Rules) and general principles of law. In relation to issue (d), the authorities make clear that a determination of whether an offer is of a genuine compromise does not involve a mere mathematical computation but, rather, involves a weighing up of relevant considerations and the exercise of judgement.
We accept that the appellant’s submissions on the issues referred to at [47] above have much to commend them. It may be that, had those issues been raised at the hearing of the appeal, we would have resolved them in the appellant’s favour. Having said that, it must immediately be acknowledged that reasonable judicial minds could have different views on those issues and that one could not have the ‘necessary degree of conviction’[30] that they would have been resolved in the appellant’s favour.
[30]See [29] above.
Applicability of r 26.08(2)(b) of the CC Rules
Initially, the appellant contended that, as the damages awarded by this Court were no less favourable than the terms of the offer and, as this Court did not otherwise order, he was entitled to costs incurred after 13 May 2011 on an indemnity basis automatically by virtue of r 26.08(2)(b) of the CC Rules without the need for an express order to that effect. At the hearing on 3 September 2013, the appellant correctly acknowledged that the words ‘shall be entitled … to an order’ in r 26.08(2) mean that the costs consequences in r 26.08(2)(b) only apply where they are incorporated in an order.
In Simonovski v Bendigo Bank Ltd [No 2],[31] Ashley J stated that while the Court retains a discretion under r 26.08(2)(b) of the CC Rules, an ‘order otherwise’ should not be lightly made, and that the prima facie position established by the rule ‘is a strong one, not easily displaced.’[32]
[31][2003] VSC 139 (‘Simonovski’).
[32]Simonovski [2003] VSC 139, [17].
In the current proceeding, the appellant submitted that the authorities strongly encourage compliance with the offer of compromise procedure and the enforcement of the costs consequences which flow if there has been an unreasonable rejection of an offer of compromise. The appellant contended that it was unreasonable for the respondent to reject the offer of compromise, at the time that it was made, which resulted in the appellant incurring significant additional costs of preparation and trial. According to the appellant, there is no reasonable basis on which the respondent should avoid the costs consequences of failing to accept the offer.
The respondent submitted that even if r 26.08(8) of the CC Rules were not an impediment to the making of an order under r 26.08(2)(b) of the CC Rules, the appellant would not be entitled to an order for costs on an indemnity basis because there was a reason for the Court to ‘otherwise order’. That reason was that the appellant’s statement of claim was amended on 15 August 2011, well after the offer of compromise, to add the allegation that the Policy applied because the appellant’s work or a major portion of it was no longer required as a result of changes in economic or business conditions.
According to the respondent, the offer of compromise was made when the pleading was in a different state from the pleading adjudicated on by both the trial judge and this Court. The respondent contended that it is not required to satisfy the Court that it would have succeeded in having the Court otherwise order, but only that it is not beyond argument that it could have done so. The amendments with respect to changed economic conditions were said to be an important component of this Court’s decision.
The respondent relied on Simply Irresistible Pty Ltd v Couper[33] for the proposition that amendments to pleadings after an offer of compromise has been served may be considered to be a special circumstance entitling the Court to otherwise order. In that case, the amendments to the pleadings were ‘significant’ and were one of two factors which were accepted by the Court as constituting ‘special circumstances’ warranting a departure from the usual order.[34]
[33][2011] VSC 33 (‘Simply Irresistible’).
[34]Simply Irresistible [2011] VSC 33, [5], [16], [21], [28].
The appellant submitted in response that the amendments to his statement of claim on 15 August 2011 do not warrant the significance attached to them by the respondent. This is because there was never a real issue between the parties that at least one of the alternative requirements in the definition of ‘redundancy’ in the Policy had been satisfied.[35] Rather, the key issue in the proceeding was whether, for the purposes of the Policy, the work done by the appellant or a major part of it was no longer required. The case did not turn on whether this was caused as a result of changes in economic or business conditions or otherwise.
[35]See [2] above.
The appellant sought to distinguish Simply Irresistible from the present case on the ground that the former involved a significant amendment to the defence, expanding the evidence on which the defendant relied, and increasing the costs of the proceeding by approximately 18 per cent.[36] The factual and legal issues added to the proceeding as a result of the amendments materially contributed to the findings of the Court in respect of causation.[37] The appellant contended that the amendments to his statement of claim in the present case, by contrast, had virtually no impact on the costs of the proceeding or its outcome.
[36]Simply Irresistible [2011] VSC 33, [14].
[37]Simply Irresistible [2011] VSC 33, [15].
In our opinion, it cannot be said with the ‘necessary degree of conviction’[38] that if our attention had been drawn to the offer of compromise at the hearing of the appeal, we would have decided to make an order under r 26.08(2)(b) of the CC Rules. This is because, in order for that rule to be engaged, the appellant would have had to satisfy us of the matters set out at [47] above in relation to r 26.08(8) of the CC Rules.
[38]See [29] above.
Even if the appellant had been successful in engaging r 26.08(2)(b) of the CC Rules, while that rule — unlike the former r 26.11 that was considered in Sands & McDougall — sets out a prima facie entitlement to a special costs order, discretionary factors can displace that entitlement. Although the discretionary matter upon which the respondent relied might not appear very persuasive, it is certainly arguable and requires careful consideration.
In the end, we have concluded that the slip rule cannot apply to the making of an order for indemnity costs under r 26.08(2)(b) of the CC Rules. This is because there are too many issues upon which the Court must find in the appellant’s favour before such an order could be made. Those issues involve questions of fact and law and matters of degree upon which real differences of opinion and controversy could exist.
It is not necessary for us to decide whether the slip rule applies to the specific orders sought by the appellant in relation to counsel’s fees. This is because if the slip rule were applicable, it would not have extended beyond the Court’s inherent jurisdiction to make those orders, which is discussed at [75] to [82] below.
Inherent jurisdiction to make supplemental order
Independently of the slip rule, this Court has inherent jurisdiction to make a supplemental order. The scope and effect of that jurisdiction was described by the Victorian Court of Appeal[39] in VFS Group Pty Ltd v BM2008 Pty Ltd[40] as follows:
The inherent jurisdiction of the court permits the setting aside or recall of an order which was intended to be made but which has had unforseen or unintended legal consequences. The inherent jurisdiction is not confined by the scope of the slip rule …
An application of the inherent jurisdiction of the court to correct an order which, although made in the terms the court pronounced, had legal consequences that were unforseen or unintended, has the effect that the rights and obligations of the parties at the time the initial order was made, are to be deemed to be, at that time, the rights and obligations in accordance with the order as corrected. With similar effect to an application of the slip rule, the ‘later order corrects the earlier order, and speaks from the date of the earlier order, which then operates with full force as corrected’. The earlier order is deemed or treated as having always operated as corrected. The presence of supervening events is a consideration to be taken into account in the exercise of discretion; it does not preclude the correction.[41]
[39]Tate JA (with whom Nettle and Harper JJA agreed).
[40](2010) 80 ACSR 240 (‘VFS’).
[41]VFS (2010) 80 ACSR 240, 245–6 [24]–[25] (citations omitted).
In Newmont, Spigelman CJ stated that the Court has inherent jurisdiction to correct a duly entered judgment where the orders do not truly represent what the Court had intended to pronounce.[42]
[42]Newmont (2007) 70 NSWLR 411, 425 [79].
In Victoria Legal Aid v County Court of Victoria,[43] Chernov JA, with whom Warren CJ and Dodds-Streeton AJA agreed, stated that the Court has inherent jurisdiction to make a supplemental costs order when it is ‘necessary’ to do so in the circumstances, provided that the order can be properly characterised as being supplemental to an order that the Court has made and that it does not vary or alter the initial order.[44]
[43](2004) 9 VR 686 (‘Victoria Legal Aid’).
[44]Victoria Legal Aid (2004) 9 VR 686, 694 [15].
In Westsub Discounts Pty Ltd v Idaps Australia Ltd [No 2],[45] judgment was entered for the appellant, including costs, notwithstanding that the respondent had earlier paid an amount into Court in excess of the total award. Woodward J found that the case was inappropriate for the application of the slip rule because the order to be substituted for the order said to be in error was not obvious or easily to be found, but required both argument and deliberation.[46] However, his Honour considered that it would be ‘manifestly unfair’ to the respondent, in the circumstances of the case, if the Court were unable to reconsider its order for costs after having learnt of the payment into Court.[47]
[45](1990) 94 ALR 310 (‘Westsub’).
[46]Westsub (1990) 94 ALR 310, 316.
[47]Westsub (1990) 94 ALR 310, 317.
In Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd,[48] the Full Federal Court held that it had no jurisdiction to make a supplemental order which would vary or alter the initial order.[49] The rationale for this restriction on the Court’s jurisdiction is the need for finality of litigation. However, the exercise of the jurisdiction to make a supplemental order, while requiring caution, is not limited merely to the making of orders in aid of the enforcement and working out of original orders.[50]
[48](1993) 45 FCR 224 (‘Caboolture Park’).
[49]Caboolture Park (1993) 45 FCR 224, 235.
[50]Caboolture Park (1993) 45 FCR 224, 235.
In McDermott v Richmond Sales Pty Ltd (in liq),[51] Kenny J heard an application filed on 23 February 2006 to vary orders made by consent on 10 October 2005. Her Honour stated that the Court had no power to vary the orders, or any power to issue a supplemental order, and said:
As a Full Court said in Caboolture Park … ‘[c]ritical to the jurisdiction of the court is first that the application not be one in any way to vary or alter the initial order’. The applicants seek orders to vary the orders in paras 2 and 2A of the 10 October 2005 orders; and O 35 r 7(4) does not give power to do this. In the face of Full Court authority, the earlier decision in Westsub … is either to be distinguished or is no longer good authority.[52]
[51][2006] FCA 248 (‘McDermott’).
[52]McDermott [2006] FCA 248, [23] (citations omitted).
In Akedian Co Ltd v Royal Insurance Australia Ltd,[53] Byrne J gave judgment for the plaintiff and ordered the third defendant, an insurance broker, to pay the plaintiff’s costs. His Honour subsequently held that the Court could entertain an application for an order that the broker’s professional indemnity insurer, a non-party that had conducted the broker’s defence, be jointly and severally liable with the broker for the plaintiff’s costs. Byrne J found that the orders sought against the professional indemnity insurer were truly supplemental and did not affect the legal impact of the judgment as pronounced.[54]
[53][1999] 1 VR 80 (‘Akedian’).
[54]Akedian [1999] 1 VR 80, 100 [58].
The respondent submitted that the Court’s inherent jurisdiction does not extend to the relief sought by the appellant because that relief would require a variation of the Order. The respondent asserted that Caboolture Park suggested that the circumstances making a supplemental order necessary would ordinarily arise after the making of the initial order. Accordingly, the respondent submitted that the appellant’s application could only properly be made under the slip rule and not for a supplemental order. Finally, nothing had happened since the Order was made to make a supplemental order necessary or appropriate.
The appellant submitted that the orders sought are properly supplemental to the Order, and do not purport to vary or amend it. It was said to be necessary in the interests of justice that the Court make the additional order sought, in order to ensure the appellant has the relief to which he is entitled as a consequence of the decision to allow his appeal, and the costs awarded in the Order. The appellant submitted that, contrary to the respondent’s assertion, Caboolture Park does not support the proposition that the circumstances making a supplemental order necessary would ordinarily arise after the making of the initial order.
In our opinion, contrary to the respondent’s submissions, Caboolture Park is not authority for the proposition that the Court’s inherent jurisdiction to make a supplemental order is enlivened only in relation to circumstances arising after the making of the initial order. The Full Court in that case did not say that the jurisdiction is limited in this manner and there is no reason in principle why the jurisdiction should be so limited.
However, the Court’s inherent jurisdiction to make a supplemental order is not engaged in the present case in relation to the appellant’s application for indemnity costs. This is because, as a result of r 63A.31 of the CC Rules, if we were to accede to that application, we would not be supplementing the Order, but would be altering it.
As set out at [12] above, r 63A.31 of the CC Rules provided that, if the Court did not specify another basis of taxation, costs are to be taxed on a party and party basis. That is precisely the basis upon which we intended that costs be taxed pursuant to the Order, as no submissions were made to us that any other basis should apply. Accordingly, if this Court now made an order that some of the appellant’s costs be taxed on an indemnity basis, we would not be specifying a basis of taxation where none previously applied, but we would be substituting an order for taxation of some costs on an indemnity basis for an order that had the effect of requiring taxation of all costs on a party and party basis.
Although it is true that, when we made the Order which had the effect of requiring that all of the appellant’s costs be taxed on a party and party basis, we were not aware of the offer of compromise, there was nothing unintended about the effect of the Order. On the basis of the information available to us on 2 May 2013, we intended by the Order that all of the appellant’s costs be taxed on a party and party basis. Accordingly, the substitution of an order for taxation of some of the appellant’s costs on an indemnity basis, as sought by the appellant, would not be a supplemental order or an order to overcome unforseen or unintended consequences of the Order or any ambiguities in its meaning. Rather, such an order would vary the legal consequences that we intended the Order to have at the time that we made it.
Specific order about the applicable scale and certificates for counsel’s fees
The relief sought by the appellant includes a specific order about the applicable scale and certificates relating to counsel’s fees.
The appellant submitted that, at the time the Order was pronounced, counsel did not appreciate the restrictions in item 31(h)(v)(A) of app A to the CC Rules, which required that where a trial had commenced only the trial judge could allow higher fees than the scale fees for the trial, and allow fees for more than one counsel, as the judge thought fit. According to the appellant, if certificates are not given for the attendance of two counsel, and at the higher rate charged by those briefed by him in the proceeding below, it is likely that he will not be able to recover those costs. The appellant submitted that, had this matter been raised at the hearing of the appeal, it is highly probable that the Order would have included certificates as a matter of course.
The appellant contended that in the interests of preventing injustice in this proceeding, the certificates should be granted, either pursuant to the slip rule or the inherent jurisdiction of the Court. In the appellant’s submission, he ought not be precluded from having the benefit of the certificates which would have been granted as a consequence of his successful appeal, merely due to the inadvertence of counsel. It would be ‘grossly unfair’ if the appellant were required to meet costs which should be paid by the respondent as a result of this inadvertence at the time the Order was made.
The appellant submitted that it was not unreasonable to brief two counsel in a case of this complexity and significance to him, in which he sought to recover a redundancy payment from his employer of 23 years. In considering the appropriate level of representation, the most critical factors were said to be the significance of the case to the appellant and the financial consequences which may follow if he were unsuccessful. The appellant argued that the certificates sought by him merely reflect the preparation time allowed to the respondent’s counsel by the trial judge, and cannot be seen as excessive. The fees charged by counsel are within reasonable limits given the seniority and experience of the counsel briefed.
The respondent submitted that the question of whether the fees for the appellant’s counsel ought to be certified is not beyond argument, and that even if those fees could be certified, this should not occur at this stage of the proceeding. The case involved a four day trial in the County Court, for a claim of less than $200,000. The respondent did not brief senior counsel for the trial. The respondent submitted that the issues did not warrant the briefing of senior counsel, and senior counsel’s fees ought not be certified for two days of preparation in addition to the fees for two days of preparation by junior counsel. If the Court is to certify for counsel’s fees, the certification should be no different from the certificate given to the respondent by the County Court.
In our opinion, in the present case, the inherent jurisdiction of the Court extends to making the order and granting the certificates sought by the appellant in relation to counsel’s fees. That order and those certificates would not vary any aspect of the Order but would supplement it by adding details about the quantum of counsel’s fees that are presently absent. Those details would assist the process of taxation.
We are satisfied that it is appropriate to exercise the Court’s inherent jurisdiction to order that costs be taxed on Scale D. Under r 63A.34A(3)(a) of the CC Rules, Scale D applied where the amount of damages recovered exceeded $50,000. Having regard to the complexity of the issues in the proceeding below, we are also satisfied that it is appropriate to certify for two counsel. Further, having regard to the trial judge’s certificate for the defendant’s counsel’s fees for four days of trial and two days of preparation at $3,300 per day inclusive of GST, we are satisfied that it is appropriate for a similar certificate to be granted in relation to the appellant’s junior counsel’s fees.
In relation to the fees of the appellant’s senior counsel, we are satisfied that it is appropriate to certify for four days of trial and two days of preparation. However, in the absence of any evidence or any objective benchmark by which to assess the reasonableness of a daily rate of $7,700 inclusive of GST for senior counsel, we are unable to grant a certificate for that or any other amount. We will leave it to the Costs Court to decide an appropriate daily fee for senior counsel.
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