J.C. Jarol Pty Ltd v Novamex International LLC (Costs ruling)
[2023] VSC 378
•5 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2020 02078
BETWEEN:
| J.C. JAROL PTY LTD (ACN 616 082 510) & ANOR (according to the attached Schedule) | Plaintiffs |
| v | |
| NOVAMEX INTERNATIONAL LLC | Defendant |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 June 2023 |
DATE OF RULING: | 5 July 2023 |
CASE MAY BE CITED AS: | J.C. Jarol Pty Ltd & Anor v Novamex International LLC (Costs ruling) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 378 |
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COSTS – Application by Plaintiffs for costs with respect to Plaintiffs’ further amendment of pleading – Costs of and occasion by Plaintiffs’ application for leave to further amend their statement of claim and the costs of the Plaintiffs’ further amendment are the parties’ costs in the proceeding – Plaintiffs ordered to pay the Defendant’s costs of the costs hearing on an indemnity basis – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 63.17.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr V Murano | Gadens Lawyers |
| For the Defendant | Mr L Hawas | Rigby Cooke |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
The plaintiffs’ submissions.......................................................................................................... 2
The defendant’s submissions...................................................................................................... 8
Relevant legal principles............................................................................................................ 14
Consideration.............................................................................................................................. 16
Conclusion.................................................................................................................................... 18
HIS HONOUR:
Introduction
On 5 May 2023, following a contested hearing, I granted leave to the plaintiffs to further amend their statement of claim. This ruling relates to the costs of the plaintiffs’ leave application and the costs occasioned by the filing of the further amended statement of claim.
The plaintiffs sought the following orders:
(a) The defendant pay the plaintiffs’ costs of and incidental to the plaintiffs’ summons filed on 18 October 2022 (Summons) on a standard basis, to be taxed in default of agreement.
(b) The parties’ costs of and occasioned by the filing and serving of the plaintiffs’ further amended statement of claim on 10 May 2023 be costs in the proceeding; and
(c) The Summons be amended such that paragraph 2 of the Summons is deleted and relief in respect of costs be sought on the terms set out in paragraph 2(a) and 2(b) above.
The defendant sought:
(a) The defendant’s costs:
(i) of the Summons including the hearing on 1 December 2022;
(ii) of and occasioned by the plaintiffs further amending their amended statement of claim in accordance with the leave to amend given by the orders made 5 May 2023; and
(iii) thrown away by reason of the plaintiffs further amending their statement of claim in accordance with the leave to amend given by the orders made 5 May 2023,
be paid by the plaintiffs on a standard basis to be taxed in default of agreement.
(b) In the alternative to paragraph 3(a), in accordance with r 63.17 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules), the parties costs of and incidental to:
(i) the Summons;
(ii) the plaintiffs further amending their statement of claim in accordance with the leave to amend given by the orders made 5 May 2023,
are the parties’ costs in the proceeding.
(c) The plaintiffs pay the defendant’s costs thrown away by reason of the plaintiffs further amending their statement of claim in accordance with the leave to amend given by the orders made 5 May 2023 on a standard basis.
(d) The plaintiffs pay the defendant’s costs of and incidental to the hearing on 31 May 2023 on an indemnity basis.
For the reasons given below I have decided to order that the parties’ costs of and incidental to the Summons and occasioned by the plaintiffs further amending their statement of claim are the parties’ costs in the proceeding. I will also order that the plaintiffs pay the defendant’s costs of and incidental to the hearing on 31 May 2023 on an indemnity basis.
The plaintiffs’ submissions
In addition to oral submissions the plaintiffs relied upon the affidavit of Simon Anthony Theodore sworn 18 October 2022 and a further affidavit of Mr Theodore sworn 30 May 2023.
The plaintiffs submitted that, by virtue of r 63.17 of the Rules unless the Court otherwise orders, where a pleading is amended, the costs of and occasioned by the amendment and the costs of any application for leave to make the amendment are the parties’ costs in the proceeding.
The plaintiffs submitted that there were three reasons why, in the circumstances of this case, the Court should ‘otherwise order’.
The first reason was that the defendant’s opposition to the plaintiffs’ application for leave to amend was, in part, based on a misunderstanding of the plaintiffs’ pleading. The plaintiffs submitted that the Court made findings about the defendant’s misunderstanding in its reasons for the grant of leave (Reasons).[1] The plaintiffs cited the following to make good their argument:
[1]J.C Jarol & Anor v Novamex International LLC [2023] VSC 232.
(a) At paragraph [61] of the Reasons the Court did not accept the defendant’s submission that the alleged unconscionable conduct was limited to the termination of the Varied and Extended EDA,[2] finding that it was clear on the face of the plaintiffs’ pleading that requiring the plaintiffs to agree to the new MORs was also alleged as unconscionable conduct;
[2]I have adopted some defined terms in the Reasons in this Ruling.
(b) At paragraph [64] of the Reasons the Court did not accept that paragraphs [7(d)] and [8BB], which go to the defendant’s knowledge and acceptance of the Endorsed Strategy and its effect of increasing profit margin and sales, are irrelevant to the alleged unconscionable conduct;
(c) At paragraph [65] of the Reasons the Court stated that ‘the plaintiffs’ profit margin amendments are not as difficult to follow as [the defendant’s] counsel submitted’; and
(d) At paragraph [66] of the Reasons the Court did not agree with the defendant’s suggestion that the plaintiffs have not alleged that the defendant required the plaintiffs to reduce their profit margin because the relevant paragraph included the words, ‘and, as a consequence, the profit margin at which the Products were sold’.
The plaintiffs submitted that had the defendant properly understood the proposed pleading the proper course would have been for it to consent to, or at least not oppose, the proposed amendment and pursue the point at trial. The plaintiffs argue that by opposing the amendment the defendant introduced a further step into the proceeding thereby increasing the parties costs.
The second reason the plaintiffs identified as justifying the Court making an order other than in accordance with r 63.17 was that the defendant opposed the plaintiffs’ application for a collateral purpose of avoiding any obligation to make discovery in relation to its profit margins.
In making this point the plaintiffs referred to various correspondence between the parties’ legal representatives about the plaintiffs’ proposed further amended statement of claim. In particular the plaintiffs referred to:
(a) a letter dated 8 June 2022 from the defendant’s solicitor to the plaintiffs’ solicitor in which the defendant’s solicitor indicated that, subject to clarification of the meaning and intent of paragraph [6B(c)] of the plaintiffs’ proposed further amended statement of claim relating to the Endorsed Strategy and profit margins, he would recommend to the defendant that it not oppose the plaintiffs’ application for leave to amend;
(b) a letter dated 23 June 2022 from the defendant’s solicitor to the plaintiffs’ solicitor stating, ‘[i]n the main, the defendant does not object to the proposed amendments in the PFASOC, however the defendant does object to the pleas in paragraphs [6BB] and [7(d)] of the PFASOC in particular’;
(c) a letter dated 12 July 2022 from the defendant’s solicitor to the plaintiffs’ solicitor in which the defendant’s solicitor indicates the defendant will not oppose (but not consent to) the plaintiffs’ proposed further amended statement of claim on the basis that the defendant held a certain understanding of the meaning of paragraph [6BB] and reserved its right to apply to have paragraph [6BB] (and associated paragraphs) struck out as irrelevant;
(d) a letter dated 28 July 2022 from the defendant’s solicitor to the plaintiffs’ solicitor indicating the defendant did not agree that documents relating to the profit margin at which the Products were sold by the defendant to its distributors were discoverable by the defendant in the proceeding; and
(e) a letter dated 26 May 2023 from the defendant’s solicitor to the plaintiffs’ solicitor rejecting the plaintiffs’ assertion that the defendant had opposed the grant of leave for the collateral purpose of avoiding discovery and noting that the ‘authorities make plain that it is always open to a party to resist discovering documents on the grounds that the documents go to allegations in pleadings that are irrelevant’.
The plaintiffs submitted if the defendant had resisted discovery once the further amended statement of claim was filed, its opposition would have been futile and it would have likely faced an adverse costs order. The plaintiffs submitted that by pressing ‘the point’ on the application for leave to further amend, the defendant was seeking to obtain a costs advantage by r 63.17 that would not have otherwise been available to it.
The plaintiffs’ third reason was that the defendant, in opposing the plaintiffs’ application, had re-enlivened complaints about prolixity that had been settled in substance between the parties prior to the hearing.
The plaintiffs referred the Court to paragraph [72] of the Reasons, which states, ‘I accept the plaintiffs’ submission that [the defendant] has not pointed to specific parts of the PFASOC and explained how the new pleading is so prolix that [the defendant] is unable to plead to it.’ Further, the plaintiffs pointed to paragraph [73] of the Reasons in which the Court stated, ‘In reaching my view on the issue of prolixity, I have had regard to the fact that [the defendant] has previously filed both a defence and a defence to the plaintiffs’ ASOC.’ The plaintiffs also referred to correspondence between the parties’ legal representatives suggesting that the defendant had decided from at least 21 April 2022 not to press its prolixity claims. According to the plaintiffs, after it became apparent that the plaintiffs would have to make an application for leave to file a further amended statement of claim, the defendant informed the plaintiffs on 7 October 2022 that it intended to renew its prolixity arguments. The plaintiffs submitted these factors show that the defendant’s prolixity argument was never capable of succeeding. Further, the plaintiffs submitted that the defendant’s renewal of its prolixity complaints was inconsistent with its obligations under ss 23, 24 and 25 of the Civil Procedure Act 2010 (Vic) (CPA): to narrow the issues in dispute between the parties, ensure costs are proportional and minimise delay respectively.
The plaintiffs referred the Court to the comments of Hoeben JA (with whom Campbell and Barrett JJA agreed) in Wilkinson v Perisher Blue Pty Ltd[3] that there is a public interest in solicitors being held to their agreements in the course of litigation, particularly when the solicitors are experienced and know exactly what they are agreeing to. The plaintiffs also referred to Allsop J’s statements in White v Overland:[4]
However, by way of general principle I would simply like to make perfectly plain my view that in the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Any practice of quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue should be discouraged firmly. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. Litigation is not a game. It is a costly and stressful, though necessary, evil.
[3][2012] NSWCA 250, [96].
[4][2001] FCA 1333, [4].
The plaintiffs submitted that the defendant pressed the prolixity argument after earlier abandoning it in its correspondence to the plaintiffs’ solicitor and that justifies the Court making an adverse costs order against the defendant. According to the plaintiffs, such a course is contemplated in s 65C(1) of the CPA and the ability of the Court, pursuant to s 9 of the CPA, to have regard to the degree to which each person to whom the overarching obligations apply has complied with those obligations.[5]
[5]Nyong Pty Ltd & Anor v Di Blasi & Anor (Costs Ruling) [2018] VSC 5, [27]–[28].
The plaintiffs referred the Court to the statement of Wheeler JA (with whom Steytler P and Pullin JA agreed) in Stanley v Layne Christensen Co & Ors (Stanley):[6]
The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party’s conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence.
[6][2006] WASCA 56, [52].
In relation to the defendant’s application that the plaintiffs pay its costs of and incidental to the application for leave to amend, the plaintiffs submitted:
(a) the defendant’s argument that the plaintiffs have failed, without explanation, to promptly formulate their case cannot be sustained given the plaintiffs raised their profit margin allegation, albeit in a different form, in their amended statement of claim and the defendant pleaded to that allegation;
(b) in fact the defendant’s position on the profit margin allegation has been ‘somewhat inconsistent, shifting and evolving since 24 December 2021’;
(c) the defendant’s correspondence of 29 June 2022 sought to impose unreasonable conditions, ie that the plaintiffs would effectively abandon their profit margin allegation, on the defendant’s consent to the plaintiffs’ proposed amendments;
(d) far from ambushing the defendant with their application for costs, the plaintiffs put the defendant on notice from 30 November 2022, ie before the hearing of the plaintiffs’ application for leave.
The plaintiffs submitted there is no basis for the order sought by the defendant that the plaintiffs pay the defendant’s costs of the costs hearing held on 31 May 2023.
Lastly, the plaintiffs submitted that there is no necessity for the Court to order that the plaintiffs pay the defendant’s costs thrown away by reason of the amendment. First, the plaintiffs say the costs of and incidental to the application include work performed since the defendant’s letter dated 24 December 2021, in which the defendant raised complaints about the plaintiffs’ proposed further amended pleading, up until the hearing of the application on 1 December 2022. According to the plaintiffs, this means that any costs thrown away are limited to parts of the amended statement of claim which the defendant has already pleaded to in its amended defence which are no longer being pursued by the plaintiffs. The plaintiffs said this is limited to five paragraphs of the pleading.
The defendant’s submissions
The defendant submitted that the Court needed to determine appropriate orders in relation to three categories of costs. The first category was the costs of the plaintiffs’ application for leave to further amend their statement of claim. The second category was the costs occasioned by the amendment. The third category was costs thrown away by reason of the amendment.
The defendant submitted that the first and second category of costs are dealt with by r 63.17 and that there was no reason for the Court to depart from the starting position articulated in that rule. The defendant submitted that the moving party bears the burden of showing exceptional or unusual circumstances justifying the Court ordering otherwise than in accordance with the starting position of the rule and that the Court should make the order sought.[7]
[7]Transcript of Proceedings, J.C Jarol & Anor v Novamex International LLC (Costs ruling) [2023] VSC 378 (Supreme Court of Victoria, S ECI 2020 02078, Irving AsJ, 31 May 2023) 33.
The defendant submitted that where the Court has ordered otherwise than in accordance with the starting position in r 63.17, it has usually ordered that the amending party pay all the costs. Further, the defendant submitted that where the Court has ordered the other party to pay the costs of an amendment, it has been on the basis that the other party’s opposition to the proposed amendment was misconceived or unarguable.[8]
[8]See, for example, Thyssenkrupp Materials Handling Pty Ltd v Trans Global Projects Pty Ltd (No 1) [2014] FCA 817.
The defendant claimed that its arguments on the plaintiffs’ leave application were neither misconceived nor not open to be made. While the defendant accepted that ultimately the Court did not agree with its arguments in opposition to the plaintiffs’ leave application, it submitted that is very different to the Court finding those arguments were not open to be made or were misconceived. The defendant noted that the Court found the defendant’s arguments about irrelevance and the profit margin allegations being illogical were open to be put and determined at trial. The defendant said this demonstrated that the Court did not find those arguments misconceived or not open to be made.
In relation to the third category of costs, the term ‘costs thrown away’ is not found in the Rules. An order for costs thrown away can arise when a party seeks the Court’s ‘indulgence to accurately formulate its pleadings which, in an ideal world, it should have got right in the first place’ and ‘is compensation for work already done but wasted as a result of the other party’s error or failure to comply’ with the Rules. [9]
[9]Edelman v Badower [2010] VSC 427, [31].
The defendant submitted that the plaintiffs had not explained why they ought not pay the defendant’s costs thrown away by reason of the further amendment.
The plaintiffs commenced the proceeding by writ and statement of claim on 7 May 2020. On 12 October 2021, after the defendant had served its defence, the plaintiffs filed an amended statement of claim containing substantial amendments to the original statement of claim, including the introduction of the concepts of the Endorsed Strategy and the New Strategy. In the amended statement of claim, the references to profit margin were limited to the definition of the Endorsed Strategy which included a reference to the profit margin at which the products were being sold in the USA and the alleged communication between the defendant and Bloustein. The defendant submitted that the references to profit margin in the amended statement of claim did not include any formulation of the consequences of profit margin in the Endorsed Strategy or the alleged communication so the amended statement of claim contained no explanation of the relevance of profit margin to the two instances of alleged unconscionable conduct. The defendant submitted that the plaintiffs application for leave to further amend included profit margin allegations that were substantially different to the profit margin allegations that appeared in the amended statement of claim.
The defendant submitted that its solicitor’s letter of 12 July 2022 concerned a draft proposed further amended statement of claim dated 15 June 2022, ie. an earlier iteration of the proposed further amended statement of claim that was ultimately the subject of the plaintiffs’ application for leave. The defendant said the profit margin allegation in paragraph [6BB] was different in material respects to paragraph [6BB] in the version of the further amended statement of claim that the Court ultimately granted leave to amend. Further, the defendant submitted that a fair reading of the letter does not suggest that the defendant was seeking to impose conditions on the grant of leave but rather reserving its right to object to paragraph [6BB] in its defence.
The defendant submitted that the plaintiffs’ solicitor’s letter of response dated 15 July 2022 enclosed a further iteration of the proposed further amended statement of claim. Again, that version was not the version that was ultimately put before the Court on the plaintiffs’ application for leave to amend. The defendant’s solicitor responded by letter dated 28 July 2022 expressing concern that the plaintiffs’ position on paragraph [6BB] and other parts of the proposed further amended statement of claim ‘evolves and shifts each time we query you on the import of some allegations’. The letter then set out the defendant’s requirement that the proposed further amended statement of claim include all particulars upon which the plaintiffs would rely in relation to the pleaded allegations.
That response elicited a further draft proposed further amended statement of claim in a letter from the plaintiffs’ solicitor dated 19 August 2022. This was the draft that was the subject of the plaintiffs’ application for leave to amend. The defendant submitted that this draft included new proposed amendments to paragraphs [6BB] and [7(d)] and new paragraphs [6BBB], [8BB], [40A(e)(vii)] and [40B(b)(iv)]. At this point the defendant’s solicitor responded by letter dated 7 October 2022 asserting that over the preceding months the defendant had worked with the plaintiffs to remedy defects in their pleading, and had been provided with multiple versions of the proposed further amended statement of claim that each introduced new problems which ultimately meant the pleading was embarrassing. The defendant stated that it could not now, ‘in protection of its own position, consent to the PFASOC’.
The defendant submitted its conduct was not unreasonable in the circumstances of the case. It notes the Court granted an indulgence to the plaintiffs to further amend their statement of claim but not in the form proposed by the plaintiffs but rather with yet further amendments. Further the defendant submitted that while the plaintiffs mooted the possible further amendments in their letter dated 17 October 2022, it did not squarely put the defendant on notice that it would seek leave to amend subject to those possible further amendments. The letter of 17 October 2022 predated the Summons seeking leave to amend and so it was open to the plaintiffs to incorporate the yet further amendments mooted in the letter into the version of the further amended statement of claim the subject of the Summons.
The defendant submitted that the Summons seeking leave to amend expressly sought no order as to costs and that nothing has occurred since the filing of that summons to justify a costs order in favour of the plaintiffs. The defendant submitted that the Court’s decision to grant the plaintiffs leave to further amend would not, of itself, justify the plaintiffs’ change of position on the question of costs, particularly when the Court did not grant leave to amend in the form put forward by the plaintiffs.
The defendant submitted that Stanley is not authority for the proposition that a party who unreasonably withholds consent to cause an unnecessary hearing of a contested application for an indulgence should pay the other side’s costs. Rather the principle expounded in that case is that the party who has caused the costs to be unnecessarily incurred will not obtain its own costs of the application merely because the application is for some indulgence.
The defendant submitted that in this case there was no reason why the plaintiffs did not properly formulate their case initially. No new facts have come to light following the commencement of the proceeding. All of the plaintiffs’ new allegations in their further amended statement of claim occurred well before the proceeding was issued. The references to profit margin in the amended statement of claim demonstrate the plaintiffs were broadly aware of the issue but did not plead the case which is now pleaded in the further amended statement of claim. Rather, the defendant said the plaintiffs first provided the defendant with a proposed further amended statement of claim in May 2022, two years after the proceeding was commenced. The draft proposed further amended statement of claim contained profit margin allegations that were substantially different to the profit margin allegations the subject of the Court’s leave. Indeed, the plaintiffs provided five different versions of the proposed further amended statement of claim none of which represented the basis of the leave granted by the Court. In fact, the Court granted the plaintiffs leave to further amend on the condition that the plaintiffs make even further amendments set out in their letter of 17 October 2022. Accordingly, the defendant said there is no reason for the Court to depart from the usual position.
The defendant submitted that the consultation between the parties about the plaintiffs’ five drafts of their proposed further amended statement of claim has resulted in the defendant incurring substantial costs thrown away. The defendant refuted the plaintiffs’ submission that these costs were minimal.
The defendant refuted the plaintiffs’ submission that the defendant was improperly withholding consent to avoid its discovery obligations in relation to the profit margin allegations. First, the defendant submitted that at the time the defendant was engaging with the plaintiffs on that issue it was open to it to say that it would not object to the pleading but reserve its rights in relation to discovery. The defendant referred to Cooper J’s statement in Expectation Pty Ltd v PRD Realty Pty Ltd[10] that, “[p]leading to an irrelevant allegation or leading evidence in respect of it, does not make it relevant and one in respect of which discovery must be given. Nor is it necessary that the allegation must be struck out before discovery can be resisted.’ The defendant submitted that putting the plaintiffs on notice that discovery in relation to price margin would be resisted did not amount to conditioning consent for an impermissible collateral purpose. The defendant submitted this was a legitimate position to take and could not justify an order that the defendant pay the plaintiffs’ costs of the amendment.
[10][1999] FCA [1207], [27].
The defendant denied there was any agreement between the parties that the defendant would not raise an argument about the prolixity of the plaintiffs’ proposed further amended statement of claim. The defendant said its prolixity argument should be understood as being that the amended statement of claim was already prolix, containing excessive cross-referencing, and the prolixity was exacerbated by the plaintiffs’ proposed further amendments. The defendant noted that the Court’s ruling agreed that the cross-referencing in the pleading made it cumbersome and challenging to navigate and that this amounted to the Court acknowledging that the defendant’s prolixity argument was open to be made.
The defendant submitted that it was unnecessary for the Court to convene for oral submissions on costs in circumstances where the defendant had offered to settle the issue of costs, including the defendant’s costs thrown away, on the basis of an order in the terms of r 63.17. The defendant argued that this offer went beyond the requirements of r 63.17 and that the plaintiffs acted unreasonably in refusing the defendant’s offer. That unreasonable conduct, submitted the defendant, justified the Court making an order that the plaintiffs pay the defendant’s costs of the costs hearing on an indemnity basis.
Relevant legal principles
There was no dispute between the parties about the legal principles relevant to the Court’s broad discretion to award costs.
Section 24(1) of the Supreme Court Act 1986 (Vic) provides that unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
The discretion is unfettered but must be exercised judicially, that is, upon facts connected with or leading up to the litigation and not by reference to irrelevant or extraneous considerations.[11] Practices or guidelines have been developed but they ‘are not legal rules that confine the exercise of the discretion’.[12]
[11]Soteriadis v Nillumbik Shire Council [2015] VSC 363, [9].
[12]Ibid.
Rule 63.17 modifies the Court’s wide discretion as to costs and creates a starting position that the costs of the application for leave and occasioned by the amendment will be the parties’ costs in the proceeding. The onus is on the party seeking to move the Court to depart from the starting position to satisfy the Court that some other order should be made. If the moving party seeks to rely on particular facts, that party bears the onus of proving the relevant facts.[13] Generally the discretion will be exercised on the basis of the objective circumstances established on the evidence and not involve the subjective considerations of one party. Usually there must be some proper justification, sound positive ground or good reason for departing from the starting position.[14]
[13]Ibid [12].
[14]Ibid.
In Edelman v Badower (Edelman),[15] Mukhtar AsJ discussed the meaning of costs ‘thrown away’ in the context of the wording of r 63.17 as it was at the time of that judgment. His Honour’s view was that the phrase ‘costs of and incidental to’ was interchangeable with ‘costs of and occasioned by', which was the language of the rule. Mukhtar AsJ went on to consider whether costs occasioned by an amendment included both past costs, ie. costs of work done in preparing pleadings rendered useless by amendment, and prospective or consequential costs. His Honour noted that there was support for both views and that to add to the confusion, ‘in practice not much attention is given to this, and it is not uncommon for practitioners and Judges to regard r 63.17 as being the same thing as costs thrown away, that is looking to past costs’.[16] In his Honour’s view, r 63.17 carried a connotation of being forward looking or consequential while an assessment of costs thrown away is an exercise that looks back.
[15][2010] VSC 427, [29].
[16]Ibid [30].
It is worth noting that at the time Mukhtar AsJ was considering the rule it provided that unless the Court otherwise ordered, a party who amends a pleading shall ‘pay the costs of and occasioned by the amendment’. The current wording of r 63.17, introduced by an amendment in 2013, contemplates that each parties’ costs of and occasioned by an amendment are the parties’ costs in the proceeding, unless the Court orders otherwise. In my view the change in the wording of the rule is significant. The requirement, subject always to the Court ordering otherwise, that the amending party pay the costs has been replaced by a requirement, still subject to the Court ordering otherwise, that all parties’ costs of an amendment are costs in the proceeding. As I apprehend it, the new words of the rule reflect several policy considerations including that it is not uncommon for pleadings to be amended several times in the course of a proceeding, that it can be difficult to ascertain at the pleading stage what costs order would do justice as between the parties and that a trial judge is often best placed to make that assessment at the conclusion of a proceeding. Added to that is the desirability of avoiding multiple taxations of costs within one proceeding.
In Ugly Tribe Co Pty Ltd v Sikola & Ors,[17] Harper J set out some of the types of special circumstances that might justify a Court to make an order for indemnity costs. While noting that the categories of special circumstances are not closed, Harper J referred to ‘[c]onduct which causes loss of time to the Court and to other parties’ and ‘commencement and continuation of proceedings in wilful disregard of known facts or clearly established law’.[18] In relation to the latter category, Harper J noted that it is necessary for the Court to be satisfied that the party in fact appreciated the hopelessness of its position.[19]
[17][2001] VSC 189.
[18]Ibid [7].
[19]Ibid [18].
Consideration
I am not satisfied that the circumstances of this case justify a departure from the starting position in r 63.17 that the parties’ costs of and occasioned by the amendment, and the costs of the leave to make the amendment are the parties’ costs in the proceeding. I have reached that view for the following reasons.
First, while I ultimately did not agree with the defendant’s submissions on the amendment application, I did not and could not have found their submissions unarguable, impermissible or improper.
Second, I accept the defendant’s submission that, at the time it was raised in correspondence between the parties’ solicitors, it was open for the defendant to consent to the filing of the further amended statement of claim while reserving its right to challenge discovery in relation to the profit margin issue on the basis of irrelevance.
Third, I also accept the defendant’s submission that its prolixity argument was put on the basis that the proposed further amendments exacerbated an already prolix pleading. The fact that the defendant had agreed not to mount the prolixity argument in relation to earlier iterations of the plaintiffs’ proposed further amended statement of claim, did not disqualify the defendant from raising prolixity in relation to a different version of the pleading. As I explained at the hearing, consideration of a proposed amendment must be undertaken in the context of the entirety of the pleading. I found that the proposed further amended statement of claim was heavily cross-referenced and cumbersome to navigate. In my view the defendant was well within its rights to raise a prolixity argument on the plaintiffs’ application to amend.
Fourth, I do not accept the defendant’s submission that the moving party bears an onus of demonstrating special or unusual circumstances to justify the Court ordering otherwise than in accordance with rule 63.17. There must be proper justification, based on relevant facts proven by the moving party, for the Court to make an order departing from the starting point of the rule. To import a requirement for the moving party to demonstrate special or unusual circumstances is unhelpful and inconsistent with the authorities.
Fifth, given the change to the wording of the rule I am reluctant to adopt Mukhtar AsJ’s comments in Edelman to the current rule. Respectfully, it appears to me that to make an order in terms of the current rule and a separate order in relation to costs thrown away on the basis that one order is intended to look back and one forward would create unnecessary confusion and undermine the policy behind the wording of the new rule. In my view, the phrase ‘and occasioned by’ in the current rule encompasses costs thrown away.
It remains for me to decide the costs of the costs hearing. I agree with the defendant that a hearing on costs was unnecessary given the defendant’s offer to consent to an order in the terms of r 63.17. Given the indulgence granted to the plaintiffs was conditional upon yet further amendments being made to the plaintiffs’ proposed further amended statement of claim, that document the subject of the Summons was itself the fifth iteration proposed by the plaintiffs in discussions with the defendant, it is difficult to see how the plaintiffs’ application for costs was considered arguable. This is especially the case in the context of the plaintiffs offering no explanation why they were not able to properly plead their case in the first instance. This was not a case where new facts only came to light after the initial statement of claim or even the amended statement of claim had been filed. Stanley is authority for the proposition that a party who unreasonably withholds consent to another party’s application to the Court for an indulgence will not obtain its costs. It does not stand for the proposition that the party seeking the indulgence should be awarded its costs in such a situation. I find that the plaintiffs must have been aware of each of these matters prior to their application for costs. Accordingly, it was unreasonable for the plaintiffs not to accept the defendant’s offer that the costs of and occasioned by the Summons be the parties’ costs of the proceeding. It is appropriate that the plaintiffs pay the defendant’s costs of the costs hearing on an indemnity basis.
Conclusion
I will order that, subject to the costs of the hearing in 31 May 2023, the costs of and occasioned by the plaintiffs’ further amendment and the costs of the plaintiffs’ application for leave to further amend their statement of claim are the parties’ costs in the proceeding.
I will further order that the plaintiffs pay the defendant’s costs of the hearing on 31 May 2023 on an indemnity basis.
SCHEDULE OF PARTIES
| S ECI 2020 02078 | |
| BETWEEN: | |
| J.C. JAROL PTY LTD (ACN 616 082 510) | First Plaintiff |
| ERNLU PTY LTD (ACN 146 718 096) | Second Plaintiff |
| - v - | |
| NOVAMEX INTERNATIONAL LLC | Defendant |
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