Gold Dealers Exchange Pty Ltd v Williams (No 2)

[2022] VCC 209

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IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No.  CI-21-01391

GOLD DEALERS EXCHANGE PTY LTD (ACN 611 812 536)	Plaintiff
V
REECE WILLIAMS	Defendant

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, written submissions filed 23 February 2022
DATE OF RULING:	4 March 2022
CASE MAY BE CITED AS:	Gold Dealers Exchange Pty Ltd v Williams (No 2) (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2022] VCC 209

COSTS RULING
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Subject:PRACTICE AND PROCEDURE – COSTS

Catchwords:              Application for review of a decision of a judicial registrar – whether costs should follow the event - whether the plaintiff entitled to indemnity costs payable forthwith – whether the defendant should be ordered to provide security – certificate under the Appeal Costs Act 1988

Legislation Cited:      Appeal Costs Act 1998; County Court Act 1958; County Court Civil Procedure Rules 2018; Civil Procedure Act 2010

Cases Cited:Coxon v Duggan [2013] VSC 168; Eureka Funds Management Ltd v Freehills Science (No 2) [2008] VSCA 177; French v Triple M Melbourne Pty Ltd [2006] VSC 36; Hogg v J Isherwood-Hicks Pty Ltd (1992) 108 FLR 262; Lubura v Nezirevic [2013] VSCA 215; Microscience (International) Pty Ltd v Total Peripherals Pty Ltd [1998] VSC 50; Stuart v Mordialloc Sporting Club Inc (No 2) [2020] VSC 744

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Levine	Matrix Legal
For the Defendant	Mr T Bevan	Colin Biggers & Paisley

HER HONOUR:

1On 17 February 2022, I delivered a ruling in this matter (“the principal reasons”).[1]  I allowed the defendant’s application for review of orders made by Judicial Registrar Muller on 7 December 2021.  For the reasons stated, I determined that the default judgment entered by the plaintiff against the defendant on 28 May 2021 should be set aside and the defendant be given leave to defend.

[1]Gold Dealers Exchange Pty Ltd v Williams (No.1) [2022] VCC 120

2The parties were directed to confer and file a minute of proposed orders, or failing agreement, to file and serve submissions on the orders to be made, including costs.  The parties did not reach agreement and filed submissions on 23 February 2022.

The plaintiff’s submissions on costs

3Although having unsuccessfully opposed the application for review, the plaintiff submits that costs should be awarded in its favour.  The primary reason is that the defendant was given an indulgence in having the default judgment set aside and that the usual order in such circumstances is the defendant should pay the costs, including any costs thrown away.

4In support of its application that the defendant pay its costs, the plaintiff referred to a decision of Derham AsJ in Coxon v Duggan.[2]  His Honour noted the ordinary course in applications to set aside judgments was that the party seeking the relief should pay the costs thrown away and the costs of the application to set aside the judgment, except in special circumstances.  The plaintiff contends there are no special circumstances in this case.

[2][2013] VSC 168 at [16]

5The plaintiff argues that the matters raised by the defendant, particularly those in his  written submissions which were received on the morning of the hearing, did not give it sufficient time to consider the application for review.  It was taken by surprise regarding allegations that the loan agreement was void, voidable or unenforceable, and of non est factum, neither of which were pleaded in the draft defence.

6In addition to the costs of the application, the plaintiff also seeks its costs in enforcing the judgment, including associated costs incurred in commencing bankruptcy proceedings in the Federal Circuit Court.  In support of that contention, the plaintiff relied upon a passage from Robson AJA in Lubura v Nezirevic [2013] VSCA 215. His Honour said at [120]:

“In my opinion it would be appropriate that the appellant pay the costs of and incidental to the application to set aside judgment entered in default of appearance and the costs thrown away by reason of judgment being entered including the costs of assessing the respondent’s damages and the respondent’s attempted enforcement of the judgment, such costs to be taxed on an indemnity basis in the absence of agreement.”

7The plaintiff seeks an order that the defendant should pay $40,000 as security for its costs as a condition for having the judgment set aside.  This figure is calculated based on the costs set out in paragraph 7 of the outline of submissions.  Counsel’s fees are claimed in the sum of $10,500.  An estimate is made of the solicitor’s costs for the application to set aside of $10,000 with no break-up provided of how this figure is calculated.  A figure is then claimed for the cost of the default judgment of $3,864.90.  In addition, costs are sought in respect of the bankruptcy proceedings, which include a creditors’ petition claimed at $3,840, an application for a bankruptcy notice of $470, together with solicitors and counsel’s fees of the bankruptcy proceeding claimed in the amount of $12,500.  In all, a total sum was sought of $41,174.90.  Not only does the plaintiff seek these amounts but says that the costs should be paid forthwith.

8In paragraph 6 of the written outline on the costs submissions, the plaintiff referred to cases where defendants had been ordered to provide security for the payment of costs thrown away by a plaintiff as a result of a judgment being set aside.  Self-evidently, there can be no dispute that a Court may order security be given as a condition of the judgment being set aside. 

9A bald claim is made in paragraph 10 of the plaintiff’s submissions that the defendant should be required to pay a further sum of $150,000 for security.  No basis is put why the Court should make such an order or any reason why that figure is appropriate.  Such a request ignores the usual rule that a Court will not order a defendant to provide security. 

10It was further contended that the defendant failed to act in accordance with s25 of the Civil Procedure Act 2010 because he took his time in making the application to set aside the judgment and did not act promptly in doing so.

11If the Court does not make an order in favour of the plaintiff, the plaintiff applies for an indemnity certificate pursuant to s4(2) of the Appeal Costs Act 1998.

Defendant’s submissions on costs

12The defendant, in line with the indication given in paragraph 34 of the principal reasons, seeks his costs of the review application.

13As part of the submissions put forward on behalf of the defendant, the defendant refers to the chronology of events.  The defendant was served with a writ on 30 April 2021.  On the same day, the plaintiff’s director sent an SMS to the defendant stating “I assume you will be representing yourself.  I will let you know the court date, all good?”  On 27 May 2021, the defendant sent an SMS to the plaintiff’s director which said: “My solicitor has asked if you could please send the court case papers to me”.  Rather than doing so, the plaintiff entered judgment in default without notice on the following day, namely 28 May 2021.  The defendant’s solicitors were informed on 7 June 2021 that default judgment had been entered.  On 3 August 2021, the defendant’s solicitors sought the plaintiff’s consent to have the judgment set aside with costs reserved.  This offer was not accepted.  It is submitted that the defendant then acted promptly to make the application to set aside the default judgment.

14In preparing the application to set aside the default judgment, the defendant says he did not have key documents available to him.  This was said to be largely due to the obstructionist attitude taken by the plaintiff; in particular, the fact that the plaintiff did not produce a copy of the loan offer and the lender’s certificate referred to in the plaintiff’s statement of claim, despite requests made by the defendant.  They were produced for the first time and annexed to an affidavit of the plaintiff’s director dated 3 December 2021, two business days prior to the hearing before the judicial registrar.  The plaintiff refused to produce the loan ledger or the so-called pink book until the defendant served a summons for its production.  Ultimately, only extracts from the pink book were provided just prior to the review hearing.

15Additionally, reference was made to the conduct of the plaintiff in respect of the bankruptcy proceedings in the Federal Circuit Court which were launched because of the default judgment.  The matter had been listed in that Court on 20 January 2022, but although the review application was listed to be heard before me on 31 January 2022, the plaintiff refused to consent to an adjournment of the creditor’s petition filed in the Federal Circuit Court. 

16The defendant accepts that ordinarily, if a judgment has been irregularly entered, it is not unusual that a Court setting aside judgment will impose terms on the defendant as to costs.  However, the Courts have been critical of plaintiffs “snapping on judgments”.  Reference was made to well-known extract of the decision of Bongiorno J in French v Triple M Melbourne Pty Ltd [2006] VSC 36 where costs were awarded against the plaintiff in such circumstances where his Honour said at [23]:

“… the entry of a default judgment at the earliest possible opportunity without warning against parties known to the plaintiff’s solicitor to be represented constituted a precipitate and unwarranted, if nonetheless legal, attempt to advance his client’s case by taking advantage of what any reasonable and experienced solicitor should have realised was an oversight or perhaps several oversights by the defendants and their legal advisors.  It would be contrary to justice for this Court to allow this tactic to be successful by refusing to set aside the judgment entered by default.  Litigation is not a steeple chase nor even a bike race where a fall can determine the outcome.”

17The defendant says that having succeeded in his application; costs should follow the event.  Although the review concerned an application to set aside default judgment, it is not appropriate that costs be awarded to the plaintiff on the review.  It is noted that the Court has not chosen to disturb the judicial registrar’s costs order and the plaintiff still has the benefit of that order.

18It was said that when the judgment was entered, the plaintiff knew the defendant was legally represented and intended to contest the proceeding. In fact, the request for papers then caused the plaintiff to instruct his solicitors to apply immediately for a default judgment before the defendant could put on a proper defence. The plaintiff’s subsequent conduct, it was said, has been of a kind seeking to hold on to this procedural advantage and avoid any scrutiny of the judgment on the merits in a way which is inconsistent with civil procedure obligations. It was also said that the plaintiff had been in breach of its obligations under ss20 and 26 of the Civil Procedure Act 2010 by reason of withholding key documents. The defendant submits that the belated disclosure of the pink book shows that many of the advances on which the plaintiff now relies were made prior to the parties entering into the loan agreement and there is no proper basis for the claim as it is currently pleaded. It was said in oral argument the plaintiff’s counsel conceded there were triable issues of fact, including whether the loan agreement might need to be rectified and that evidence would be required to decide the “penalty” points.

19Finally, the defendant says the plaintiff may apply for an indemnity certificate pursuant to s4(2) of the Appeal Costs Act 1998 referring to a decision of Kennedy J in Stuart v Mordialloc Sporting Club Inc (“Stuart”).[3]

[3](No 2) [2020] VSC 744 at [32]

Analysis

20Although the general rule is that costs incurred in having the default judgment set aside are to be payable by the defendant, this can be displaced in special circumstances. 

21In my view the circumstances here are somewhat different from the usual application to set aside judgment. The first point is that this is an application pursuant to a review under Rule 84.03 of the County Court Civil Procedure Rules 2018. Although the subject matter involves the setting aside of a default judgment, it does not automatically mean that the plaintiff should have its costs because the defendant has been successful. I have, as has already been noted, determined not to disturb the initial costs order made in favour of the plaintiff by the judicial registrar.

22The second matter which I consider to be relevant to the exercise of my discretion is the conduct of the plaintiff in respect of the application more generally.  I am satisfied that the plaintiff did seek to “snap on” a judgment and did so in circumstances where the defendant had asked the plaintiff’s director to send court documents to him.  The plaintiff was clearly on notice that the defendant was engaging legal representation, but rather than provide the documents that had been requested, immediately entered judgment in default.  Whilst the judgment was regular to that extent, the sentiments expressed by Bongiorno J in French v Triple M Melbourne are apposite.  The plaintiff sought to adopt a tactic by which it thought that it would obtain an advantage in circumstances where the plaintiff was aware that the defendant was intending to defend the matter. 

23Additionally, the conduct of the plaintiff in failing to provide relevant documents and only producing the pink book following the subpoena show that it was engaging in a war of attrition, contrary to the paramount duty and overarching obligations imposed under the Civil Procedure Act 2010. Similarly, the issue of the bankruptcy application was precipitous in circumstances where the plaintiff knew the defendant had engaged lawyers.

24Although the judgment was regular, conduct of this sort, namely snapping on judgments, should be discouraged.[4]   It serves no useful purpose and increases the costs of litigation unnecessarily.  Accordingly, that is another reason why, in the exercise of my discretion, I do not consider the plaintiff is entitled to an award of costs, let alone the considerable amount sought on an indemnity basis both in this proceeding and costs said to have been incurred in the Federal Circuit Court.  Given these findings, it is unnecessary to consider whether any security should be ordered. 

[4]See Microscience (International) Pty Ltd v Total Peripherals Pty Ltd [1998] VSC 50 [13] (Beach J), citing Hogg v J Isherwood-Hicks Pty Ltd (1992) 108 FLR 262 at 264 (Kearney J)

25The plaintiff could, had it wished to do so, have consented to the application for review.  It chose not to do so and was unsuccessful.  In my view, costs should follow the event.

Certificate under the Appeal Costs Act 1998

26The plaintiff seeks a certificate under s4(2) of the Appeal Costs Act 1998 (“the Act”) if it is ordered to pay costs. Having regard to the reasoning of Kennedy J in Stuart, I am satisfied that this Court has jurisdiction to grant a certificate in circumstances such as this, where there is a review of a decision of the court constituted by a judicial registrar.[5] The definition of appeal in s3 of the Act is very broad and would extend to a review under r84.03. Her Honour arrived at this position in Stuart, which was a case concerning an appeal from a judicial registrar involving an application for security for costs.

[5]        See County Court Act 1958, s 17V; County Court Civil Procedure Rules 2018, r 84.03

27The Court is not bound to grant a certificate but has a discretion whether to do so or not.[6]  A relevant discretionary factor which might mitigate against the grant of an indemnity certificate is whether the need for an appeal was generated by the inappropriate conduct of the respondent.[7] The refusal to grant a certificate is not appellable under s37(2) of the Act. In my view, the plaintiff should not be entitled to recover funds from the public purse in circumstances where this application was the result of the plaintiff snapping on a judgment, as opposed to there having been some identifiable judicial error for which the plaintiff is not responsible. As I noted in the principal reasons, the case before the registrar was qualitatively different to the case before me. It was not necessary to find any error as the hearing was de novo but, having said that, no error was shown in the approach taken by the registrar at first instance.  I therefore refuse to grant a certificate.

[6]Appeal Costs Act 1998, s37(1); Eureka Funds Management Ltd v Freehills Science (No 2) [2008] VSCA 177

[7]        See Kukulka v Floatcast Technology Pty Ltd [2021] VSC 198 (Forbes J)

28I will make the following orders:

(1)  Paragraph 2 of the orders made by Judicial Registrar Muller on 7 December 2021 is set aside.

(2)  The default judgment dated 28 May 2021 is set aside and the defendant is given leave to defend.

(3)  The defendant has leave to file and serve a defence within 14 days from the date hereof.

(4) Paragraph 3 of the orders made by Judicial Registrar Muller on 7 December 2021 is confirmed.

(5)  The plaintiff pay the defendant’s costs of and incidental to the defendant’s application for review filed 21 December 2021, to be taxed on a standard basis in default of agreement.

(6)  The proceeding is listed for a subsequent Administrative Mention on 7 April 2022, by which time the parties are to advise the Court in writing whether they are ready to proceed and if so whether any orders are sought by consent on the papers for the listing of the proceeding for trial.

(7)  Failure to comply with the Administrative Mention by the date specified may result in the proceeding being struck out without further notice.

(8)  Reserve liberty to the parties to apply by email to the Commercial Registry ([email protected]) for further directions upon giving reasonable notice to all other parties.

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Certificate

I certify that these 9 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 4 March 2022.

Dated: 4 March 2022

Associate to Her Honour Judge A Ryan