Gogetta Equipment Funding Pty Ltd v Mark and Liz Pty Ltd (No 2)
[2018] VSC 212
•2 May 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 05036
| GOGETTA EQUIPMENT FUNDING PTY LTD (ACN 124 102 647) | Plaintiff |
| v | |
| MARK & LIZ PTY LTD (ACN 165 166 290) | Defendant |
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JUDGE: | LANSDOWNE AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 May 2018 |
DATE OF JUDGMENT: | 2 May 2018 |
DATE OF WRITTEN REASONS: | 3 May 2018 |
CASE MAY BE CITED AS: | Gogetta Equipment Funding Pty Ltd v Mark & Liz Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 212 |
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COSTS – Priority dispute – Plaintiff’s interest first in time but defendant found to have the better equity – Whether costs should follow the event – Combined costs of the parties nearly equivalent at trial to the amount in issue – Criticisms made of the extent of the defendant’s inquiries before obtaining its interest – Held that in all the circumstances neither of these considerations warrants departure from the usual approach to costs – Consideration of s 24 Civil Procedure Act 2010 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W H C Forrester | Results Legal Solutions |
| For the Defendant | Mr D Williams QC | Conlan Cummings Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Discussion............................................................................................................................................ 2
Near equivalence of combined costs to the amount in issue................................................. 2
Criticisms of the defendant’s conduct........................................................................................ 4
Other matters raised by the parties............................................................................................ 4
Conclusion and order........................................................................................................................ 5
HER HONOUR:
Introduction
This proceeding concerns a priority dispute between competing interests in the surplus proceeds of sale of land known as 12 McGuire Court Greenvale, which was formerly owned by Mr John Ruffo. The surplus proceeds of the sale after payment of the amount owing to the first mortgagee and costs and expenses have been held, with consent of the plaintiff, in the trust account of the solicitors for the defendant since the settlement on 29 July 2016.
For the reasons I delivered on 1 March 2018 (Principal Reasons)[1] I concluded that the plaintiff’s interest, although earlier in time, should be postponed to that of the defendant. As the surplus funds are insufficient to meet even the defendant’s interest, let alone both, I will make orders that the whole of the funds be paid to the defendant.
[1][2018] VSC 91.
The usual costs order that would follow is that the plaintiff pay the defendant’s costs of the proceeding. In the Principal Reasons I queried whether this was the appropriate course in this case and permitted the parties to put further submissions on that issue.
My original intention was that those submissions would be oral, but due to the unavailability of counsel, the parties agreed that submissions be put in writing. The defendant seeks that the Court exercise its discretion in relation to costs in the conventional way i.e. that costs follow the event. In this case, that would mean an order that the plaintiff pay the defendant’s costs of the proceeding including reserved costs, to be taxed on the standard basis in default of agreement. The plaintiff seeks an order that it be ordered to pay only fifty per cent of the defendant’s costs on the standard basis. For the reasons I now give, I broadly accept the defendant’s submissions and accordingly will make the costs order it seeks.
I gave brief oral reasons to this effect on 2 May 2018. These written reasons elaborate those oral reasons.
Discussion
I expressed my query as to whether the usual costs order should be made in these terms in the Principal Reasons:
87I will ask the parties to prepare orders to give effect to these reasons, and will hear them if required in relation to costs. In that regard, I put the parties on notice that this may be a case where the usual costs consequence, that costs follow the event, is not appropriate, or should be modified to some degree. I make this observation having regard to:
•the near equivalence of the combined costs of the parties to the amount in issue; and
•the criticisms I have made of the defendant’s enquiries prior to entering into its transaction.
88These observations are preliminary and tentative and there may, of course, be submissions that the parties wish to put to the contrary or other factors on which the parties wish to rely that bear on costs.
After consideration of the parties submissions and on reflection, I do not consider that either of these matters, or any of the other reasons advanced by the plaintiff, warrant a departure from the usual approach to costs.
Near equivalence of combined costs to the amount in issue
The surplus funds remaining after the sale were in the sum of $76,862.15 only. I was concerned about the costs of defended litigation in this Court to claim an amount of that size from the outset and for that reason in the procedural orders that I made on 6 March 2017 I reminded the parties of their obligations pursuant to s 24 of the Civil Procedure Act 2010 (Vic) (the Act) to keep costs reasonable and proportionate. Further, prior to the trial which was held on 26 June 2017, I required them to exchange cost estimates. According to those estimates the parties’ combined costs up to and including the trial totalled $73,811.98. Further costs were incurred thereafter.
There is an immediate commercial issue apparent as to whether the costs of litigation were warranted. This is, of course, a matter for the parties unless there is some unfairness as between them in relation to costs. None is apparent, and neither party suggests any. However, the Court must also be concerned to ensure that the parties comply with their obligation under s 24 of the Act. That section states as follows:
24Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
Allied with this obligation is the obligation imposed by s 22 of the Act which states as follows:
22Overarching obligation to use reasonable endeavours to resolve dispute
A person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution, unless—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only judicial determination is appropriate.
In this proceeding it transpires that neither party made any offer to the other to compromise its claim. Accordingly, defended litigation was the only way the dispute could be resolved unless one party was prepared to withdraw its claim entirely.
Neither party has put any submissions to the Court in relation to compliance or lack of compliance with s 22 or s 24 of the Act, in particular as to whether the legal costs were reasonable and proportionate to the complexity or importance of the issues in dispute and the amount in dispute. Further, neither suggests that the costs incurred by the other were excessive and indeed it would be difficult for a party to make that suggestion as the parties’ estimated costs as at trial were broadly similar. I caution of course that this observation should not be taken to limit the discretion of the Costs Court if a taxation becomes necessary.
Neither party is commercially unsophisticated and the underlying transactions on which they claimed their respective interests were in each case commercial ones. In the absence of complaint by either party as to compliance by the other with s 24 of the Act, I conclude that the near equivalence of the total costs to the amount in issue was and remains a commercial matter for the parties and not a matter that should influence the making of a costs order. The parties must be taken to have understood the usual risks of contested litigation, including the possibility that the nature of the case may change form in the course of the proceeding (a matter about which the plaintiff complains) and the likelihood that if unsuccessful the unsuccessful party would have to pay not only its own legal costs but also the costs of the successful party.
Criticisms of the defendant’s conduct
On reflection, I have concluded that taking into account the criticisms I made in the Principal Reasons of the defendant’s conduct in obtaining its interest on the question of the costs of the proceeding would be inappropriate. I accept the defendant’s submission that my criticism of certain aspects of the defendant’s conduct was part of a multi-factorial assessment as to which party had the better equity. The criticisms cannot be said to relate to a distinct issue, on which the defendant was unsuccessful although successful overall, which may in an appropriate case warrant the costs of that issue being dealt with separately.
I also accept the submission that the criticisms were not directed to the conduct of the proceeding by the defendant, but only to its conduct in obtaining its equity.
Other matters raised by the parties
The parties have each spent some time and cost in seeking to identify matters in the conduct of the other to justify their preferred cost outcomes. Save for the matters already discussed, and one other, I do not consider it profitable or necessary to adjudicate on those matters.
The one further exception that I think warrants comment is the offer made by the plaintiff by letter dated 6 April 2018 which accompanied its responsive submissions on costs. By that letter the plaintiff offered to pay a fixed sum of $13,500 being one half of sixty per cent of the defendant’s actual costs as estimated by the defendant as at 13 March 2018. The implication in the offer was that sixty per cent was an appropriate proportion of actual costs incurred to represent what would be recovered on taxation on the standard basis.
I accept the defendant’s submission that the making of this costs offer should not affect the order to be made. The offer was very late, being made after the exchange of correspondence following the Principal Reasons and the defendant’s submissions on costs, and accompanying the plaintiff’s responsive submissions. The sixty per cent reduction on which the offer was premised may be too high given that the basis for taxation is now costs reasonably incurred, not necessarily incurred as under the old party/party basis for taxation. Finally, by proposing a fixed sum for costs the offer differs from the order sought in the plaintiff’s submissions which would allow taxation.
In any event for the reasons already expressed, I do not consider the proposal that the plaintiff pay only one half of the defendant’s costs to be appropriate.
Conclusion and order
Accordingly, the costs order will be that the plaintiff pay the defendant’s costs of the proceeding, including reserved costs, to be taxed on the standard basis in default of agreement.
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