KAKLIKOS and Anor v Property Alliance Group and Ors (No.2)

[2004] FMCA 345

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KAKLIKOS & ANOR v PROPERTY ALLIANCE GROUP & ORS (No.2) [2004] FMCA 345

TRADE PRACTICES – PRACTICE & PROCEDURE – COSTS – Whether Sanderson or Bullock order.

State of Victoria v Horvath & Ors (No 2) [2003] VSCA 24 (4 April 2003)

Applicants: MICHELLE KAKLIKOS and IAN WOODS

Respondents: PROPERTY ALLIANCE GROUP LTD (ACN 092 256 696), DARREL JOHN McLEOD, MICHELLE ANDREA RYAN and RIGBY COOKE (a firm)

Cross-claimants: PROPERTY ALLIANCE GROUP LTD (ACN 092 256 696) and DARREL JOHN McLEOD

Cross-respondents: MICHELLE ANDREA RYAN, DALE BOWEN and RIGBY COOKE (a firm)

File No: MZ 378 of 2002

Delivered on: 28 May 2004

Delivered at: Melbourne

Hearing Date: 28 May 2004

Judgment of: McInnis FM

REPRESENTATION

Solicitor for the Applicants: Mr M.C. Pryles

Solicitors for the Applicants: Pryles & Defteros

Solicitor for the First and Second Respondents and Cross-claimants: Mr W.K.L. Siebel

Solicitors for the First and Second Respondents and Cross-claimants: Phillips Fox

Third Respondent, First and Second Cross-respondents: No appearance

Counsel for the Fourth Respondent: Mr K.C. Oliver

Solicitors for the Fourth Respondent: Minter Ellison

ORDERS

1. The Order made on 17 June 2002 shall be varied by deleting the third and fourth bullet points in paragraph 2 thereof and inserting in lieu of those bullet points the following:

   ·In the event of the first respondent entering into a contract of sale for the real property the first and/or second respondents agree to retain the net proceeds of sale of the real property in an interest bearing account in the names of the applicants’ solicitors and the solicitors for the first and second respondents with such monies to be retained in an interest bearing account of the solicitors acting for and on behalf of the first respondent in relation to the sale of the real property until further order of the Court or unless otherwise agreed by consent in writing by the applicants, the first respondent and second respondent.

2. The first, second and third respondents pay the first applicant $50,000 together with interest of $11,800 being a total of $61,800.

3. The first, second and third respondents pay the second applicant $60,000 together with interest of $14,160 being a total of $74,160.

4. The first, second and third respondents pay the costs of the applicants of the proceedings pursuant to Schedule 1 of the Federal Magistrates Court Rules to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

5. The first, second and third respondents pay the costs of the fourth respondent of the proceeding (other than the costs incurred by the fourth respondent in dealing with the cross-claim) pursuant to Schedule 1 of the Federal Magistrates Court Rules to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

6. The cross-claimants pay the third cross-respondent its costs of the cross-claim pursuant to Schedule 1 of the Federal Magistrates Court Rules to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

7. The first and second respondents to the cross-claim pay the costs of the cross-claimants the sum of $110,000 together with interest of $25,960 being a total of $135,960.

8. The first and second respondents to the crossclaim pay the costs of the first and second respondents of the proceedings pursuant to Schedule 1 of the Federal Magistrates Court Rules to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

9. The first and second respondents to the crossclaim indemnify the first and second respondents for the costs payable pursuant to orders 4 and 6 above.

10. Pursuant to Rule 21.15 of the Federal Magistrates Court it is certified that it was reasonable for the parties to employ an advocate to appear in these proceedings.

11. Liberty is granted to the parties to apply in relation to any matters arising out of these orders.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 378 of 2002

MICHELLE KAKLIKOS and IAN WOODS

Applicants

and

PROPERTY ALLIANCE GROUP LTD (ACN 092 256 696), DARREL JOHN McLEOD, MICHELLE ANDREA RYAN and RIGBY COOKE (a firm)

Respondents

and

PROPERTY ALLIANCE GROUP LTD (ACN 092 256 696), DARREL JOHN McLEOD

Cross-claimants

and

MICHELLE ANDREA RYAN, DALE BOWEN and RIGBY COOKE (a firm)

Cross-Respondents

REASONS FOR JUDGMENT

(Revised from transcript)

1. In this application the court delivered its judgment on 13 May 2004.  It is sufficient to note that in delivering the judgment the parties were invited to make further submissions in relation to the form of orders sought which would follow on from and arise from the judgment delivered.  It is evident that there is before the court an application and a cross-claim.  When the matter resumed this day counsel for the first and second respondents had produced draft minutes of orders which the parties had the opportunity to consider.  The Minutes provide as follows:-

   “1.The first, second and third respondents pay the first applicant $50,000 together with interest of $11,800 – a total of $61,800.

   2.The first, second and third respondents pay the second applicant $60,000 together with interest of $14,160 – a total of $74,160.

   3.Payment of the amounts in orders 1 and 2 above by the first and second respondents be stayed for a period of four months subject to interest continuing to accrue on the principal amounts of damages to be paid to each of the first and second applicants.

   4.The first, second and third respondents pay the costs of the applicants of the proceeding pursuant to order 21.02(c) and order 21.11(2)(b) of the Federal Magistrates’ Court Rules.

   5.The applicants pay the costs of the fourth respondent of the proceedings other than the costs incurred by the fourth respondent in dealing with the cross-claim pursuant to order 21(02)(c) and order 21(11)(2)(b) of the Federal Magistrates Court Rules.”

   6.The cross-claimants pay the third cross-respondent its costs of the crossclaim pursuant to order 21.02(c) and order 21.11(2)(b) of the Federal Magistrates’ Court Rules.

   7.The first and second respondents to the crossclaim pay to the cross-claimants the sum of $110,000 together with interest of $25,960 – a total of $135,960.

   8.The first and second respondents to the crossclaim pay the costs of the first and second respondents of the proceeding pursuant to order 21.02(c) and order 21.11(2)(b) of the Federal Magistrates’ Court Rules.

   9.The first and second respondents to the cross claim indemnify the first and second respondents for the costs payable pursuant to orders 4 and 6 above.

   10.The costs in order 4, 5, 6 and 8 be referred for taxation under order 62 of the Federal Court Rules pursuant to order 21.11(2)(b) of the Federal Magistrates’ Court Rules.”

2. As a consequence of further submissions being made, it is clear that the issues that remain in a sense in dispute relate to two matters.  The first was the extent and nature of any stay which might be ordered, together with the extent to which a Mareva injunction by consent made on 17 June 2002 might be varied to accommodate the circumstances of the parties which they now face after the judgment.  The second issue is the nature of the order for costs which should be made, both in relation to the applicants and respondents to the claim and arising out of the cross-claim.

3. A further issue which has been dealt with and which should be included in this decision is the nature of what might be described as the appropriate sum of damages to be the subject of payment, having regard to my findings, by the first and second respondents to the cross-claim.  The amount of damages sought against the first cross-respondent had been made clear.  But it was indicated that the amount sought against the second cross-respondent had simply been left to a general claim of damages.

4. I am satisfied that on the material before me it is appropriate that the damages to be paid by the first and second respondents to the cross‑claim should be in the sum set out in order 7 of the minutes of proposed orders namely $110,000.00 together with interest of $25,960.00 making a total of $135,960.00.  In my view, that is a reasonable outcome in relation to the assessment of the damages issue, in particular as against the second respondents to the cross-claim.

5. In relation to the issue of a stay, it was clear that the parties agree that the Mareva injunction order made by the court on 17 June 2002 should be varied to the extent that in order 2 the fourth bullet point should be altered so that it will include that the first respondent agrees to retain the net proceeds of sale of the property in an interest-bearing account of solicitors acting for and on behalf of the first respondent in relation to the sale of the property.  With that preface, although it refers to hearing and determination of the proceeding or further order, I am satisfied that the provision of further order means that that order remains in full force and effect until further order.  Ultimately it may be required that order be discharged.  But as the order presently stands, given the inclusion of liberty to apply, I do not see any need to further vary the order.  Hence, in the circumstances I am prepared to vary the order in the manner I have described, and that order of 17 June 2002 as varied remains in full force and effect.

6. In relation to the issue of costs, it has been submitted for and on behalf of the applicants that I should make an order for costs which might be described on the claim as a Sanderson order, that order being an order effectively providing that the first and second respondents should pay the costs of the fourth respondent; that is, the unsuccessful respondents pay the successful respondents' costs of the proceedings. 

7. The applicants submitted that in this case it is appropriate that I should make a Sanderson order on the basis that it was reasonable for the applicants to join the fourth respondent in these proceedings, and otherwise based upon the principles which apply to matters of this kind, it will be appropriate and just that I should in fact require the unsuccessful respondents to pay the successful respondents' costs.  The first and second respondents have sought orders that in fact the applicants should pay the costs of the fourth respondent of the proceedings.  The order sought is order 5 in the minutes of the proposed orders which provides as follows:

   “The applicants pay the costs of the fourth respondent of the proceedings other than the costs incurred by the fourth respondent in dealing with the cross-claim pursuant to order 21(02)(c) and order 21(11)(2)(b) of the Federal Magistrates Court Rules.”

8. In my view, having heard the submissions that have been made, including submissions on behalf of the fourth respondent who has in fact argued that there may be issues as to impecuniosity and otherwise, it is appropriate to make an order of a kind sought by the applicants. 

9. I have been referred to the unreported decision of the Supreme Court of Victoria Court of Appeal, the State of Victoria v Horvath & Ors (No 2) [2003] VSCA 24 (4 April 2003) at paragraphs 9 and 15 as follows:-

   “9.In general terms, a plaintiff who seeks to have the losing defendant pay the costs of the successful defendant pursuant to a Bullock or a Sanderson order must establish that, in the circumstances of the case, it would be reasonable and just for such an order to be made – see for example, Sanderson, Reid and Gould v Vaggelas.  Additionally, a court will ordinarily not make such an order unless a number of requirements are satisfied.  For example, a costs order in the Bullock or Sanderson form will not be made if the plaintiffs’ claims against the two or more defendants are not interdependent or are not, in essence, alternative claims.  Thus, for example, in Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd, the majority refused to make a Bullock order requiring the unsuccessful defendant (the Co-operative) to indemnify the plaintiff against costs it was required to pay to the successful defendant (the insurer).  Their Honours considered that the plaintiff’s unsuccessful claim on the policy was ‘a straightforward action which was not interdependent with or in any real sense alternative to the claim against the Co-operative.’  See also in this regard Bankamerica.  It is plain enough, we believe, that in this case this requirement is satisfied because the plaintiffs’ essential claim against the State was interdependent with, and was essentially alternative to, its claim against the police defendants.  Unless the plaintiffs established that the police defendants had acted tortiously as alleged, the question whether the State was liable pursuant to s.123 of the Act (or at all) in respect of that conduct would not have arisen for consideration.

   …

   15.Where the court concludes that the losing defendant should bear the costs of the successful defendant, it is entirely within its discretion, subject to it being exercised judicially, whether it makes the relevant costs order in the Bullock or Sanderson form.  See, for example, Sanderson, Mayer v Hart, Bankamerica and Vucadinovic.  Ordinarily, there is no practical difference between the two forms of order, but that is usually not so where the losing defendant is insolvent or, as here, where there is at least a real risk that he is impecunious.  In those circumstances, it seems that the insolvency (or the impecuniosity) of the losing defendant is taken into account, as part of the overall circumstances, for the purpose of determining which form of costs order should be made as a matter of fairness.  In that context, it would ordinarily be appropriate to have regard to the comparative hardships that will be experienced by the relevant parties from one or other form of the costs order.  But that is only one of the matters to be considered, along with factors such as the relevant conduct of the losing defendant in relation to the proceeding and whether the plaintiff had acted reasonably in joining the successful defendant to the proceeding as well as other matters relevant to determining what form of order would be just in the circumstances.”

10. It seems to me in this case the foundation stone for any proposed action by the applicants against the fourth respondent had necessarily, both in fact and law, been required by way of the proceedings as against the first and second respondents.  On a proper reading of the material having regard to the history of discovery and also specifically having regard to the nature and content of documents provided in discovery and otherwise in evidence during the course of the proceedings in part by the applicants against the fourth respondent, that both from a factual point of view and arising out of law, an interdependence in terms of the issues raised by the applicants against the first and second respondents directly relevant to and interrelated to the ultimate claim as it was framed against the fourth respondent.  This is not a case where it could be said that there was a straightforward independent rather than interdependent action by the applicants against the fourth respondent.

11. Likewise, it seems to me that in deciding whether or not there should either a Sanderson order or a Bullock order, I need to take into account on the material before me, whether or not it could be properly said that there is a real risk of impecuniosity in the present circumstances, and whilst that might be in part said to arise by inference from the Mareva orders made by this court and in part by perhaps a superficial analysis of the affairs of the first respondent, I accept it does not necessarily follow in relation to the second respondent.

12. In all the circumstances, applying the principles that I am bound to apply and exercising my discretion in a manner which affords fairness and justice to the parties, it is my view that in this case the appropriate order sought by the applicants should be made. Apart from varying the injunction which I granted on 17 June 2002, I will otherwise make orders consistent with those orders in the draft minute of orders numbered 1, 2, 3, subject to deleting the word "for" on the second line and inserting the word "to", order 4 subject to me altering that order to the extent that it reads, "The first, second and third respondents pay the costs of the applicants of the proceedings pursuant to the Federal Magistrates Court Rules and schedule 1 thereof, to be taxed in default of agreement pursuant to order 62 of the Federal Court Rules."

13. Order 5 will read, "That the first, second and third respondents" and otherwise that order will be pay the costs of the fourth respondent of the proceedings other than the costs incurred by the fourth respondent in dealing with the cross-claim. Again I will add the words which I referred to in the previous order to make those costs applicable to schedule 1 of the Federal Magistrates Court Rules to be taxed pursuant to order 62 of the Federal Court Rules.

14. I will make order 6 in the minutes, again with the alteration according to schedule 1 and order 62 of the Federal Court Rules referred to earlier. I will make order 7 in the form of the minutes. I will make order 8, again with the adjustment in relation to the way in which the orders expressed concerning schedule 1 of the Federal Magistrates Court Rules and order 62 of the Federal Court Rules. I am prepared to make order 9 in the form it appears. The other order I need to make just in case there are any difficulties is that pursuant to rule 21.15 of the Federal Magistrates Court Rules I certify it was reasonable for the parties to employ advocates in these proceedings.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate: 

Date:  28 May 2004