IMF Pty Ltd v Ambridge Investments Pty Ltd (Receiver Appointed) (In Liquidation)
[2013] VSC 371
•19 JULY 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2012 01022
| AMBRIDGE INVESTMENTS PTY LTD (ACN 077 299 051) (Receiver Appointed) (In Liquidation) | Applicant |
| v | |
| THEODORE BAKER AND OTHERS | Respondents |
IN THE MATTER of an application by IMF Pty Ltd (Third Respondent)
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JUDGE: | ELLIOTT J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18 JULY 2013 | |
DATE OF JUDGMENT: | 19 JULY 2013 | |
CASE MAY BE CITED AS: | IMF PTY LTD v AMBRIDGE INVESTMENTS PTY LTD (Receiver Appointed) (In Liquidation) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 371 | |
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COSTS – stay of order for costs pending dispute with solicitors – discretion of court – party entitled to fruits of litigation – no circumstances justifying stay - Supreme Court (General Civil Procedure) Rules 2005, rr 63.23(1), 66.16
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant (3rd Respondent) | Mr P Corbett SC with Ms L Kirwan | Mark J Ord |
| For the Respondents | Mr PW Collinson SC with Ms JC Collins | Foster Nicholson Jones Lawyers |
HIS HONOUR:
A. Introduction
This application arises out of a stated intention of the applicant in the Costs Court, and a successful respondent in the Court of Appeal, Ambridge Investments Pty Ltd (Receiver Appointed) (In Liquidation) (“Ambridge”) to enforce an award of costs. The award was made in Ambridge’s favour against 5 parties who were appellants (“the Appellants”) in the appeal (“the Appeal”) and respondents in the Costs Court. Those 5 parties include the applicant before me, who was the 3rd appellant and the 3rd respondent respectively, namely IMF Pty Ltd (“IMF”).
The Appeal was from a decision of his Honour Vickery J made 12 March 2010. The Appeal was dismissed. On 1 December 2011 the Court of Appeal ordered that the Appellants pay the respondents’ costs of the Appeal to be taxed on a party and party basis.
On 4 July 2013 Wood AsJ ordered Ambridge’s costs of the Appeal, together with 2 interlocutory orders, be taxed in the sum of $237,500 (“the Costs”).
That order was made pursuant to an amended summons filed by Ambridge on 15 March 2012 (“Ambridge’s Summons”).
IMF now seeks a stay in order to prevent Ambridge recovering the Costs. Ambridge has written to IMF demanding payment from IMF.
B. IMF’s application against solicitors
By summons filed by IMF on 11 May 2012, IMF has made an application to reinstate the Appeal for the purposes of seeking further orders (“the IMF Costs Summons”). Paragraph 2 is the critical paragraph of the IMF Costs Summons for the purposes of this application. It reads as follows:
2.Pursuant to rules 63.23(1), 64.22(1) and (2) and 64.24 of the Rules of Court, alternatively pursuant to sections 10(3) and 24 of the Supreme Court Act 1986 (Vic) and/or the inherent jurisdiction of the Court of Appeal, the former solicitors for the third appellant pay:
(a)to the third appellant, alternatively to the respondents, all costs that have been ordered to be paid by the third appellant to the respondents in the Appeal;
(b)the third appellant’s costs of this application and any costs ordered to be paid by the third appellant in respect of the respondents’ summons for taxation dated 24 February 2012 and amened summons for taxation filed 15 March 2012.
Senior counsel for IMF acknowledged that the relief sought in subparagraph (b) of paragraph 2 is in the alternative to subparagraph (a). In other words, if IMF were to obtain the relief in subparagraph (a), there would be no need or proper basis to pursue subparagraph (b).
For completeness, I refer to paragraph 3 of the IMF Costs Summons. That paragraph seeks orders under the same provisions as paragraph 2 to obtain, effectively, an indemnity from the former solicitors (“the Solicitors”)[1] in relation to any costs incurred by IMF beyond the Costs.
[1]Although the Solicitors are described in the IMF Costs Summons as “the former solicitors”, IMF’s contention is that the Solicitors were never retained to act for IMF (ie both at first instance and on appeal).
C. Further background
This matter has already had an extensive history. For the purposes of this application it is not necessary to refer exhaustively to the relevant background. The material facts for this application may be briefly stated.
As stated above, on 12 March 2010, Vickery J gave judgment on a preliminary question (“Vickery J’s Judgment”).[2] His Honour answered the question in favour of Ambridge, thereby determining that Ambridge had a 25% interest in a joint venture vehicle company named Break Fast Investments Pty Ltd (“Break Fast”). IMF held, and still holds, a 10% interest in Break Fast, but at all relevant times has been a very passive investor.
[2][2010] VSC 59.
Although judgment was given on the preliminary question on 12 March 2010, the matter has not been finally disposed of at first instance. I was informed that there are still outstanding issues on quantum and the form of final relief. Also no orders for costs have been made at first instance.
Although IMF was a party to the proceeding at first instance, it took a relatively minor role in the conduct of the matter. Probably consistent with the level of direct involvement taken by IMF in relation to the joint venture,[3] IMF was joined as a necessary party.
[3]As to which see Vickery J’s Judgment at [312]-[313].
There was evidence before me suggesting IMF has received advice from senior counsel that it has no costs exposure given its minimalist role at trial. Obviously, such advice cannot fetter the discretion of the trial judge, but is likely to be reflective of a passive role. The evidence now before the court also notes that the solicitors who represented, or purported to represent, IMF at trial, including the preparation for trial, have not charged any professional fees or disbursements.
On this evidence, I am willing to proceed on the basis that IMF’s involvement in the trial was relatively minor, notwithstanding that the sole director of IMF, Todd McCrouther (“McCrouther”), gave evidence at the trial.
The Appeal was heard in July and November 2011, for a total of 3 days. On 1 December 2011 judgment was delivered by the Court of Appeal.[4] As I have stated, the Appeal was dismissed.
[4][2011] VSCA 400.
It is IMF’s position that it was totally unaware of the fact that an appeal had been instigated following Vickery J’s Judgment. The evidence from IMF’s solicitor, sworn on information and belief, is that McCrouther, and therefore IMF, did not know of the Appeal until it was over and judgment had been delivered. The affidavit evidence is that IMF never instructed any lawyers to commence an appeal. In short, McCrouther has informed his solicitor he never discussed an appeal with any lawyer at any time before judgment was delivered by the Court of Appeal.
These events have resulted in IMF filing and serving the IMF Costs Summons.
Two days after the IMF Costs Summons was filed, Ambridge’s Summons came before the Costs Court. Wood AsJ ordered the taxation be adjourned to 9 August 2012. In so doing, his Honour directed that any objections by IMF or the Solicitors “(depending on the outcome of the [IMF Costs summons]) be filed and served by 13 July 2012”.
The IMF Costs Summons came before the Court of Appeal on 2 August 2012. It was adjourned to 12 October 2012. By reason of that adjournment, Ambridge’s Summons was adjourned by consent to 22 November 2012.
On 12 October 2012, the Court of Appeal made orders in relation to the IMF Costs Summons. It ordered that the proceeding be referred, in the first instance, to Vickery J for the purpose of his Honour adjudicating on factual matters relevant to the determination of issues arising from the IMF Costs Summons. Specific orders were made in relation to how the referral was to occur. Those orders included:
Justice Vickery, or any Judge of the Trial Division or Associate Judge to whom the matter may be subsequently referred, may make orders or give directions as to any matter associated with or ancillary to the issues raised by the summons.
On 12 October 2012, Ambridge did not oppose the referral to the trial division. However, it sought to have the court impose a condition that the taxation pursuant to Ambridge’s Summons should proceed to be heard on 22 November 2012, with the Costs Court being directed not to take into account the matters raised on the IMF Costs Summons. No such direction was made by the Court of Appeal. In any event, the submissions made by Ambridge made it clear that Ambridge wished to proceed with the taxation against each of the Appellants, including IMF. The position adopted by Ambridge was that the dispute between IMF and the Solicitors ought not prejudice Ambridge. Ambridge accepted that both IMF and the Solicitors would be entitled to be heard on the taxation.
Ambridge’s Summons was further adjourned by consent on 2 more occasions. This occurred on 22 November 2012 and 7 March 2013. On the latter of these 2 occasions the Ambridge Summons was adjourned to 30 May 2013.
On 10 May 2013, IMF applied to the Costs Court to adjourn the taxation, to a date to be fixed after the hearing and determination of the IMF Costs Summons. On 10 May 2013 Wood AsJ declined to make the orders sought by IMF. His Honour adjourned the hearing date of the taxation from 30 May 2013 to 4 July 2013, on an estimate of 2 days.
While these matters were occurring, the referral was also being dealt with by Vickery J. His Honour has addressed certain matters and made rulings, the detail of which is not necessary to go into. Suffice to say that the matter is now before Macaulay J as the judge in charge of the professional liability list. The matter is to be the subject of a directions hearing before his Honour on 1 August 2013.
As noted above, on 4 July 2013 Wood AsJ made an order that the Costs are taxed and allowed in the sum of $237,500.
Having set out the relevant procedural history of this matter, there are further matters relied upon by IMF in support of the orders it now seeks.
As can be seen from the title above, Ambridge is in liquidation. The liquidator was appointed on 17 August 2004. The most recent accounts provided by the liquidator indicate there are 5 unsecured creditors for an estimated value of $301,484.25. In addition, the total amount owing to secured lenders is $1,340,000.
In these circumstances, IMF contends, correctly, that the impecuniosity of Ambridge means that IMF can have no certainty that if moneys are paid over to Ambridge that Ambridge will be able to refund them if a court were to subsequently so order. It is principally for this reason that IMF contends it ought not be required to pay the Costs to Ambridge until the hearing and determination of the issues arising under the IMF Costs Summons.
IMF also relies on the fact that, on its case against the Solicitors, it should never have been a party to the Appeal. It submits, in substance, it is contrary to the due administration of justice for an order to be enforced against a person who should never have been a party in the first place. This is particularly so, according to the submission, where there are 4 other respondents in the Costs Court against whom the order might be enforced.
D. Principles in relation to a stay
Ambridge contended that it is necessary for IMF to establish special circumstances before it is entitled to have the court’s discretion exercised in its favour. IMF contended that the discretion of the court was broad and was so confined.
IMF referred to a number of cases in support of its contention that the discretion was not confined to special circumstances. The first of those was Joskovitz v Bonnick.[5] In that case Herring CJ stated[6] that a court or a judge had a very wide discretion when considering whether or not to grant a stay in relation to previous orders for costs. That discretion required a judge “to take into account all the circumstances of the case”.[7]
[5][1964] VR 654.
[6]At 656.8.
[7]At 656.9.
The passage relied upon in Joskovitz v Bonnick was referred to with approval in State Bank of Victoria v Parry.[8] However that does not take the matter any further for IMF. In that case Malcolm CJ was considering whether or not to grant a stay pursuant to a rule of court that required the court to consider whether it was satisfied that “by reason of special circumstances it is inexpedient to enforce the judgment”. The Chief Justice then went on to find that in fact special circumstances existed.
[8][1989] WAR 240 at 244.5.
The next case relied upon by IMF was Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2).[9] Whelan J granted a stay without making any specific finding that special circumstances existed. Indeed, his Honour contrasted the rules of this court with rules of courts of some other jurisdictions which expressly required special circumstances to be shown.[10]
[9][2005] VSC 137.
[10]At [43], fn 16.
Finally, IMF referred to Re S & D International Pty Ltd (In Liq) (No 6).[11] In that case Robson J referred to each of Joskovitz v Bonnick, State Bank of Victoria v Parry and Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) with approval. However, his Honour also referred to a line of cases,[12] which includes Cellante v Kallis Industries Pty Ltd.[13] Those cases expressly required an applicant to show special or exceptional circumstances before being entitled to the grant of a stay. Indeed, his Honour seems to expressly adopt the approach that the applicant bears the onus of establishing that special circumstances exist before a stay should be granted.[14] Accordingly, this case seems to be contrary to the contention of IMF on the threshold that needs to be met.
[11][2011] VSC 119.
[12]Re S & D International Pty Ltd (In Liq) (No 6) [2011] VSC 119, [125]-[130].
[13][1991] 2 VR 653.
[14]At [130].
For the purposes of this application, I am prepared to assume, without deciding, that the discretion in relation to the stay of a costs order is a broad one and does not necessarily require special circumstances in order for it to be exercised in favour of an applicant.[15] That said, it is irrefutable that the starting position is that a successful litigant is, prima facie, entitled to the fruits of its litigation.[16] Accordingly, whichever test is adopted, an applicant seeking a stay bears a substantial onus before the successful litigant is to be deprived of immediately enforcing its judgment.
[15]For completeness, as has been noted, r 66.16 makes no reference to “special circumstances” in its terms. As to this, see Kakavas v Crown Melbourne Ltd [2010] HCASL 207, [9] (Heydon and Bell JJ), where it was observed that intermediate courts of appeal in jurisdictions outside Victoria do not apply the requirement of special or exceptional circumstances in relation to such a rule.
[16]Re S & D International Pty Ltd (In Liq) (No 6) [2011] VSC 119, [130]; Luxmore Pty Ltd v Hydale Pty Ltd (2008) 20 VR 481, 484 [15]; Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, [43]; State Bank of Victoria v Parry [1989] WAR 240 at 244.8.
E. Consideration of the issues
As can be seen from the above background, IMF finds itself in the position where it has the Costs awarded against it in circumstances where it says it never intended to be, and ought never have been, a party to the Appeal. In those circumstances, it contends it ought not be out of pocket at all until the hearing and determination of its dispute with the Solicitors.
IMF accepts that this is a dispute between IMF and the Solicitors. Ambridge has nothing to do with the dispute, and has not in any way caused the difficulty that IMF now faces. However, senior counsel for IMF stated that although this proposition as to Ambridge’s involvement is accepted “to a certain extent”, he submitted IMF finds itself in the position it is now in because of the impecuniosity of Ambridge. In other words, IMF contends it is at risk because of the impecuniosity of Ambridge and the fact that it is required to pay the Costs to Ambridge in those circumstances.
On the evidence before the court, in my view the risk referred to is minimal, and perhaps almost non-existent. It was accepted by IMF that if they were successful in establishing their claim against the Solicitors, there is no suggestion that the Solicitors would have any incapacity to pay the Costs, and any other related costs.
Rule 63.23(1) of the Supreme Court (General Civil Procedure) Rules 2005 provides:
Where a solicitor for a party, whether personally or through a servant or agent, has caused costs to be incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition, the Court may make an order that—
…
(b)the solicitor pay to the solicitor's client all or any of the costs which the client has been ordered to pay to any party;
(c)the solicitor pay all or any of the costs payable by any party other than the client.
As things presently stand IMF has costs “which [IMF] has been ordered to pay to [Ambridge]”. In those circumstances, assuming IMF is able to establish that the costs so ordered were incurred improperly or without reasonable cause, there is a specific power under the Supreme Court Rules to enable the court to require the Solicitors to pay IMF. This position does not change if IMF were to pay the Costs to Ambridge. After that payment there would still be extant “costs which the client has been ordered to pay to [a] party”. In other words, the absence of a stay in no way fetters the ability of IMF to obtain relief under this rule. Senior counsel submitted there was a risk the Solicitors might argue r 63.23(1)(b) does not apply if the Costs were paid by IMF. In my view, such a submission would simply not be open given the clear words of the rule.
IMF also sought to rely upon r 63.23(1)(c). In my view, any such reliance is misplaced. There are no “costs payable by any party other than the client” which are the subject matter of the IMF Costs Summons. Relevantly, the only costs referred to in paragraph 2 of the IMF Costs Summons are the Costs (payable by IMF).
A further submission put on behalf of IMF was that, if a stay were not granted, IMF would be precluded from seeking the relief it seeks in paragraph 2(b) of the IMF Costs Summons. Insofar as the relief sought in paragraph 2(b) seeks to avoid IMF having to pay the Costs itself and to have the Solicitors pay the Costs in its stead, I accept this submission. However, in my view, this does not render nugatory the substance of the application the subject of the IMF Costs Summons. As noted above,[17] paragraph 2(b) is in the alternative to paragraph 2(a). Further, if relief is granted under paragraph 2(a) (together with the ancillary relief under paragraph 3), then IMF will be completely indemnified for the costs it has incurred by reason of its alleged wrongful involvement in the Appeal. As I have already stated, the fact that the payment for the Costs is made by IMF does not in any way prejudice the ability of IMF to obtain relief under r 63.23(1)(b).
[17]See par 7 above.
Accordingly, the only prejudice apparent on the above facts is that IMF will be out-of-pocket for the period of time between payment to Ambridge and its recovery from the Solicitors (assuming IMF is successful in that regard). In circumstances where there is no suggestion that IMF cannot pay the Costs, or that such payment would cause any hardship to IMF, the prejudice is minimal.
Senior counsel sought to demonstrate further prejudice to IMF. He referred to the possibility of a statutory demand being served on IMF if the stay were not granted. He also referred to the possibility of having to apply to set it aside, and probably having no basis to do so. The simple response to these submissions is that IMF can pay the Costs in the short term, with the prospect of recovering those moneys from the Solicitors. As I have noted elsewhere, if the applications the subject of the IMF Costs Summons succeed, there is no real doubt the moneys will be recovered from the Solicitors.
IMF also referred the court to charges it has granted to its bank. I was referred to 3 provisions in the charges which were put as the basis that IMF “might” be prejudiced. Without going into the detail of the provisions I was taken to, it is clear there will be no prejudice if the Costs are duly paid. Even if a statutory demand were served, the relevant cause of the charge provides that if that demand were served on IMF’s bank by IMF and the moneys were promptly paid, there would be no default.
Finally, IMF sought to rely on the conduct of Ambridge in relation to its consent to previous adjournments in the Costs Court and also its decision not to seek the Costs from the other Appellants. As to the first matter, there was no reason given as to why Ambridge was not entitled to change its attitude to the continuous adjournments in the Costs Court. This is particularly so when it became apparent the dispute between IMF and the Solicitors could be delayed for a considerable period of time into the future. In relation to the second point raised, it is a matter for Ambridge as to which of the Appellants it chooses to pursue to recover the Costs.
Accordingly, in my view very little weighs in favour of a stay being granted. Conversely, given the prima facie position a successful litigant enjoys, and the likely further delay[18] of the resolution of the dispute between IMF and the Solicitors, the balance of the considerations weighs heavily in favour of Ambridge.
[18]For completeness, I note senior counsel for Ambridge did not seek to rely on any delay to date.
There is also a fundamental issue in relation to this application. The fact that IMF finds itself in its present position with respect to its costs exposure is in no way attributable to the conduct of Ambridge. Speaking generally, it would be contrary to the interests of justice to deny a successful litigant, whether impecunious or otherwise, of the fruits of the litigation simply because there is a dispute between the unsuccessful party and its solicitors.
That is particularly so in circumstances where there is no date fixed for the issues to be determined between IMF and the Solicitors. I was informed that the matters raised by IMF against the Solicitors are likely to be hotly contested. Affidavits have been filed by the Solicitors presenting a different version of events to that put forward by IMF. Therefore it is possible, with the possibility of appeals, that the dispute between IMF and the Solicitors may not be determined for a very considerable period of time. This exacerbates the position and weighs heavily against a stay being granted.
The position before me is to be distinguished from that before Judd J in Bray v Dye (No 2).[19] That case involved a claim made by the 2nd plaintiff. The 2nd plaintiff claimed she had been made a party to the proceeding without authority. In contrast to this case, when the matter was before Judd J, it was common ground that the 2nd plaintiff in that case did not authorise the solicitor or counsel to commence or continue the proceeding on her behalf.[20] Accordingly, the court was able to immediately substitute the solicitor and counsel in question for the 2nd plaintiff and require the solicitor and counsel to be responsible for the costs.
[19](2010) 27 VR 324.
[20]At 325 [1], 334 [48].
As circumstances presently stand, there is no ability of IMF to provide any meaningful comfort to Ambridge about when, or even if, the Solicitors will ultimately be liable to pay the Costs.
Further, it is clear Judd J was not suggesting that substitution of the solicitor and counsel for a wrongly joined party was the only appropriate remedy.[21] One can readily envisage circumstances where a substitution, rather than an order as contemplated by r 63.23(1)(b), could prejudice the interests of the innocent party.
[21]I note his Honour’s reference to “usually” at 338 [67], and “may” at 340 [76].
The IMF Costs Summons also refers to other rules of the Supreme Court Rules, ss 10(3) and 24 of the Supreme Court Act and the inherent jurisdiction of the court. There is no need to consider each of these individually. They do not alter the analysis set out above.
F. Injunctive relief
In the alternative, IMF seeks an injunction to prevent Ambridge from enforcing the Costs.
The principles in relation to injunctive relief are well established. To broadly summarise those principles, before an injunction will be granted the court must be satisfied that there is a serious question to be tried; if the injunction is not granted the applicant will suffer irreparable harm for which damages will not be an adequate remedy; and the balance of convenience favours the granting of the injunction.[22]
[22]See for example Perfection Fresh Australia Pty Ltd v Melbourne Market Authority [2013] VSC 287, [43].
Senior counsel for IMF identified the serious question for determination as being whether IMF ought to be held liable for the payment of the Costs, or whether some other party ought to be liable for the payment of those Costs. It was said that this was a serious question as between IMF and Ambridge. Although I accept that Ambridge may well have an interest in the outcome of this question, it is really a question to be determined as between IMF and the Solicitors. Once that question is determined, Ambridge will have an interest in the orders consequent upon any finding of that serious question. In my view, the fact that it is possible that those consequential orders might involve a party being substituted for IMF does not mean that the “serious question” involves Ambridge directly. It is necessary for IMF to have a proper legal or equitable basis for a claim against Ambridge before it can properly identify a serious question for the court.[23]
[23]Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 241 [91] (Gummow and Hayne JJ).
In any event, if I am wrong about my conclusion in relation to the serious question, in my view, for reasons already expressed, the balance of convenience overwhelmingly favours Ambridge. The inconvenience to IMF amounts to little more than being out-of-pocket for a period of time (albeit that ultimately it may be proved that it ought not to have been out-of-pocket at all). In circumstances where Ambridge did nothing to cause IMF to wrongfully be joined as an appellant, it is difficult to see why, particularly in the circumstances of this case, Ambridge ought to be put to any material inconvenience at all.
Accordingly, in my view there is no proper basis to grant the injunction sought.
G. Other matters
In light of the conclusion I have reached on the merits of the application, it is not necessary for me to consider whether a single judge of this court has the power to stay an order of the Court of Appeal. I was referred to a number of authorities concerning this issue.[24]
[24]Branch v Lawrence [2003] WASC 124; Paradise Grove Pty Ltd v Stubberfield [2002] 2 Qd R 612; Bridge Wholesale Acceptance Corp (Australia) Ltd v Lagarna Pty Ltd (unreported, Supreme Court of Victoria, 20 April 1994) (Hedigan J); Grollo & Co Pty Ltd v Palmdale Insurance Ltd (In Liq) (unreported, Supreme Court of Victoria, 21 December 1984) (Kaye J); Joskovitz v Bonnick [1964] VR 654.
Without expressing any concluded view on the matter, I simply observe there is a real issue on this point. Further, it is not necessary for me to consider what, if any, bearing the order made by the Court of Appeal on 12 October 2012[25] has on this issue.
[25]See par 20 above.
H. Conclusion
For the reasons stated, the summons filed by IMF on 15 July 2013 seeking a stay, alternatively injunctive relief, should be dismissed.
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