Gough Bay Group Pty Limited v Jones Lang Lasalle (Vic)

[2011] VCC 1439

IN THE COUNTY COURT OF VICTORIA	Revised
AT MELBOURNE CIVIL DIVISION DAMAGES & COMPENSATION LIST GENERAL DIVISION
IN THE MATTER OF

Case No. CI-09-02632

MIHO (MICHAEL) KORLEVSKI V LEA GROUP NORTH (VIC) PTY LTD & ORS and

IN THE MATTER OF

Case No. CI-09-00311

VWA V JONES LANG LASALLE (VIC) PTY LTD & ORS

IN THE MATTER OF

An application for indemnity costs by Gough Bay Group Pty Ltd against Jones Lang Lasalle

(Vic) Pty Ltd

JUDGE:	HER HONOUR JUDGE HOGAN
WHERE HELD:	Melbourne
DATE OF HEARING:	10 October 2011
DATE OF RULING:	9 December 2011
CASE MAY BE CITED AS:	Gough Bay Group Pty Limited v Jones Lang Lasalle (Vic) Pty Limited
MEDIUM NEUTRAL CITATION:	[2011] VCC 1439
REASONS FOR RULING

Application for indemnity costs refused – Court not satisfied that Applicant had demonstrated that Respondent’s claim was hopeless or had no chance of success or commenced or continued for some ulterior motive – Order for party/party costs made with certification for specific fees of Counsel.

APPEARANCES:	Counsel	Solicitors
For Gough Bay Group Pty	Mr J Gorton	Molton & Kearney Lawyers
Ltd
For Jones Lang Lasalle (Vic)	Mr R Dyer	Marque Lawyers
Pty Ltd  HER HONOUR:

1          In the proceeding of Korlevski v Lea Group North (Vic) Pty Ltd & Ors [2011] VCC 1168, Gough Bay Group Pty Ltd (“GB”), the fourth defendant and third party, seeks indemnity costs against Jones Lang Lasalle (Vic) Pty Limited (“JLL”), the third defendant.

2          In the proceeding of Victorian WorkCover Authority v Jones Lang Lasalle (Vic) Pty Ltd & Ors [2011] VCC 1169, GB, the third defendant and third party, also seeks indemnity costs against JLL, the first defendant.

3          It is common ground that GB is entitled to a costs order against JLL in both matters. What is in contention is whether GB is entitled to an order beyond the usual party/party costs.

4          This ruling comes after litigation, the subject of earlier decisions of mine in the two related proceedings. Korlevski was a proceeding instigated by an injured worker, Mr Korlevski, who sustained injury in the course of cleaning duties in the employment of Lea Group North (Vic) Pty Ltd, the first defendant. This occurred at Barkly Square Shopping Centre (“the shopping centre”), premises owned by ISPT Pty Ltd (“ISPT”), the second defendant. The shopping centre was managed by JLL pursuant to an agreement with ISPT dated 11 September 2009.[1] GB’s predecessor in law, Reflections Group Services Pty Ltd (“Reflections”) had entered into an agreement dated 8 September 2003 with ISPT to provide cleaning services for the shopping centre.[2] In the latter agreement, GB (Reflections) had agreed to provide certain indemnities to ISPT and also to ISPT’s servants and agents. The second proceeding was a recovery action under s.138 of the Accident Compensation Act 1985 (“the Act”) by the Victorian WorkCover Authority (“VWA”), seeking to recover compensation which it had paid to Mr Korlevski under that Act.

[1] Exhibit N in Korlevski’s case.

[2] Exhibit M in Korlevski’s case.

5          GB was joined as a third party to the Korlevski proceeding by JLL on 26 March 2010. Shortly thereafter, it was both added as a defendant by Mr Korlevski and served with notices of contribution by the other parties. It was also joined as a third party to the second proceeding by JLL and as a defendant by the VWA.

6          Both proceedings were listed for hearing together and the mode of trial was that the first proceeding was to be heard and the evidence in it (together with additional evidence) was to be used to determine the outcome of the second proceeding. GB retained counsel who attended the hearing dates of both proceedings. During the course of the hearing, all other parties, except JLL, settled their actions or claims against GB, with orders by consent being made on 22 March, 25 March and 31 May 2011.

7          The trial of the first proceeding was commenced before a jury, but the jury was discharged without verdict some days into the trial. It then proceeded, by consent, as a cause before me. In the result, I determined both proceedings in reasons delivered on 26 August 2011. I found JLL liable in both.

8          In the application for indemnity costs I have not been taken by either party to the pleadings, but Mr Gorton for GB submitted to me that the claim by JLL against it was based on an indemnity clause in a written agreement to which JLL was not a party.[3] Mr Dyer for JLL did not gainsay this. Apparently the effect of the clause was that GB would indemnify ISPT and its servants and agents, at least in respect of legal costs, but only in the event that ISPT or its servants or agents were not negligent or liable. If JLL was able to otherwise enforce that clause against GB, it could not succeed in invoking it by reason of my determination that JLL was liable or at fault or negligent.

[3] Exhibit M in Korlevski’s case.

9          Now Mr Gorton argues that, even if JLL had been found not liable, it could not enforce any contractual promise given by GB in it’s contract with ISPT because JLL was not a party to it: Coulles v Bagot’s Executor and Trustee Company Ltd & Ors [1967] 119 CLR 460 and Trident General Insurance Co. Ltd v McNiece Bros. Pty Ltd [1988] 80 ALR 574. It follows, Mr Gorton argues, that JLL’s claim was “hopeless” and “had no chance of success” which, in turn, enlivens the court’s ability in its absolute discretion to award indemnity costs under Rule 63A.30: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Others [1988] 81 ALR 397, Colgate Palmolive Co. & Another v Cussons Pty Ltd [1993] 118 ALR 248 and Macedon Ranges Shire Council v Thompson & Anor.[2009] VSCA 209 and Manderson M & F Consulting v Incitec Pivot Limited [2011] VSC 441.

10        Mr Dyer responds that the cases of both Coulles and Trident contain passages which are either part of the ratio decidendi or obiter dicta that disclose exceptions to the rule requiring privity of contract. Barwick CJ in Coulles at page 478 stated that the lack of privity:

“does not mean that it is not possible for that person to obtain the benefit of a promise made with another for his benefit by steps other than enforcement by himself in his own right”;

Gaudron J in Trident at page 622 stated:

“The source of the obligation to perform a contractual promise is the contract itself, but there is no reason in logic or in law why the existence of a contract should preclude the existence of another obligation ordinarily corresponding in content and duration with the contractual obligation, but having its source in law rather than in the contract”.

It is conceded, for example, that JLL was at least an agent of ISPT. Further, Mr Dyer asks rhetorically that, if the point was so plain and JLL’s case so hopeless, why was there not an application by GB to strike out the pleadings or to have the point determined at an early stage in the action.

11        The leading statement of the principle invoked by GB in this application is that of Woodward J in the Fountain Selected Meats case at page 401:

“It is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs whenever it appears that an action has been commenced or continued in circumstances, where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”.

12        The claim made by JLL against GB may well have been weak, but that is not the same as “hopeless” or “having no chance of success”. I am not persuaded that JLL’s claim was for some ulterior motive or because of some wilful disregard of the known facts or clearly established law. The following factors weigh against the proposition advanced by Mr Gorton:

1.	JLL was one of only four parties who joined GB to the first proceeding and one of three parties who joined it to the second proceeding.
2.	GB continued to be joined to the proceedings by parties other than JLL as late as 31 May 2011.
3.	There was no application by GB to strike out JLL’s proceedings or to have the point determined early in the proceedings and there is no evidence that GB warned JLL or it’s legal advisors that the claim was hopeless and without any chance of success.
4.	In my determination of the s.138 proceeding[4] I set out the complex factual matrix which led Mr Korlevski to believe that GB under it’s former description, Reflections, was his employer.

[4]             VWA v Jones Lang Lasalle (Vic) Pty Ltd & Ors [2011] VCC 1169

13        In the circumstances, I order that JLL pay GB costs on a party/party basis in the first proceeding and for any non-common items in the second proceeding. I also certify in respect of fees for counsel. However, I do not certify all of the fees set out in the Schedule attached to Mr Gorton’s written submissions. I do not certify in respect of the fees of Mr Carmody of counsel (as he then was) on 12 November 2010, 15 November 2011 (sic), 17 March 2011 or 6 April 2011 or the item of undated preparation in the sum of $3,300.00. These matters can be dealt with by the Costs Court. In relation to the fees of Mr Carmody’s fees by way of appearance at trial, namely on 22, 23, 24, 25, 28, and 29 March 2011 and 23, 24, 25, 26, 27, 30 and 31 May 2011 I certify the fee on brief at $3,300.00 together with 14 refreshers at $2,200.00 for each refresher. I also certify the fee on brief for Mr Gorton at $3,300.00 per day for five days including one day of preparation and appearances in court on 8, 9 and 10 June 2011 and 10 October 2011.