Lillas and Loel Lawyers Pty Ltd v Santo Antonio Celona
[2014] VSCA 70
•25 February 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2012 0042
| LILLAS & LOEL LAWYERS PTY LTD | Appellant |
| v | |
| SANTO ANTONIO CELONA & ORS | Respondents |
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| JUDGES | NEAVE, PRIEST JJA and ROBSON AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 10 September 2013 |
| DATE OF JUDGMENT | 25 February 2014 |
| DATE OF COSTS ORDER | 11 April 2014 |
| MEDIUM NEUTRAL CITATION | [2014] VSCA 70 |
| JUDGMENT APPEALED FROM | Celona v Lillas & Loel Lawyers Pty Ltd (Unreported, Victorian Civil and Administrative Tribunal, Vice President McNamara, 20 February 2012) |
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PRACTICE AND PROCEDURE – COSTS – Costs of appeal – Calderbank offer made by Respondent – Offer was generous and made early – Offer rejected – Respondent successful – Costs against a non-party – Non-party a director of the appellant law practice – Previous offer to guarantee the appellant – Costs order made on a standard basis up to and including date of expiry of the Calderbank offer and thereafter on indemnity basis in favour of respondent
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr A W Sandbach | Lillas & Loel Lawyers |
| For the Respondent | Mr R Kendall QC | Alderuccio Solicitors |
NEAVE JA
PRIEST JA
ROBSON AJA:
Introduction
On 25 February 2014, the Court delivered judgment (by majority) dismissing the subject appeal.[1] The parties were ordered to file and serve written submissions as to costs, the respondents having earlier signalled their intention to apply for indemnity costs and for costs against a non-party.
[1]Lillas & Loel Lawyers Pty Ltd v Celona & Ors [2014] VSCA 19.
Following the oral hearing of the appeal on 10 September 2013, on 30 September 2013 the respondents issued a summons seeking orders which included that the appellant pay the respondents’ costs of the appeal; that the appellant pay those costs on an indemnity basis; and that a non-party, James Beresford Loel (‘Mr Loel’), personally pay any costs ordered against the appellant. The summons was supported by an affidavit of the respondents’ solicitor, John Alderuccio, sworn 19 September 2013. We note that the contents of Mr Alderuccio’s affidavit remain uncontradicted, the appellant not having filed any affidavit or submission addressing the matters deposed to by Mr Alderuccio.
As a result of the important issues touching costs raised by the summons, when delivering judgment the Court made orders with respect to the filing of written submissions as to costs. It was ordered that the respondents file and serve their submissions by 4.15pm on 28 February 2014; and that the appellant file and serve any submissions in response by 4.15pm on 7 March 2014.
When no submissions were filed on the appellant’s behalf by the date ordered, on 17 March 2014 the Registry wrote to the appellant by email pointing out that, in breach of the Court’s order, the submissions were more than a week overdue. In an emailed reply to the Registry the same day, a solicitor in the employ of the appellant[2] asserted that, ‘Counsel has instructed he will have the appellant’s submissions settled by Friday’ [21 March 2014], and stated that the delay ‘was in a small part due to the respondent’s filing and serving their submissions late — to which the appellant’s could not respond without receipt; the labour day (sic) public holiday; and, our firm being busier than normal during last week’. As a result of the appellant’s email, the Court granted an extension for the filing of the appellant’s submissions until 21 March 2014.
[2]The appellant firm is also the solicitor of record.
Following an email from the respondents’ solicitors dated 25 March 2014, pointing out that the appellant had not filed the required submissions, the appellant provided an email to the Registry of the same date claiming that the appellant’s counsel had been ‘chased up’, and he ‘provided his apologies’. The email stated that counsel ‘says that he has been tied up and has said that finalising the submissions will be dependent on what happens in court the next few days and hopes to have them to us on Thursday’ [27 March 2014], and that ‘On that basis we respectfully request that the Appellant be allowed to file its submissions by this Friday’ [28 March 2014]. Having regard to the history of the matter — including the somewhat cavalier attitude displayed to the Court’s orders, the unsatisfactory nature of the appellant’s excuses for failing to comply with them and the fact that at least one extension had already granted — the Court refused the further extension sought. In the result, no submissions as to costs were filed by the appellant.
Respondents’ submissions
In written submissions dated 3 March 2014, provided pursuant to the Court’s direction, senior counsel for the respondents submitted that the Court should make orders for indemnity costs, and for Mr Loel personally to pay them.
In very brief summary, on the issue of indemnity costs, the respondent relied on the following matters:
· the appellant has failed to pay several orders for costs which have been made against it in favour of the respondents in various VCAT hearings;
· following this Court (Buchanan and Mandie JJA) granting leave to appeal on 3 May 2012, counsel for the respondents made a proposal to the court that the appeal be allowed and the matter be remitted to VCAT without there being any order that the respondents pay the appellant’s costs of the application for leave to appeal (but that did not occur because the appellant wanted its costs of the application); and
· following the hearing of the application for leave to appeal, on 15 June 2012 the respondents’ solicitors sent a Calderbank[3] letter to the appellant which, in effect, was rejected.
Counsel relied on Nolan v Nolan (No 2)[4] and Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd.[5]
[3] Calderbank v Calderbank [1976] Fam Law 93; [1975] 3 WLR 586; [1975] 3 All ER 333.
[4][2003] VSC 136, [52]–[69] (Dodds-Streeton J).
[5](1995) 36 NSWLR 242, 247–250 (Kirby P).
With respect to the claim for costs against a non-party, briefly the respondents relied on the following:
· on 6 August 2012, the respondents’ solicitor sent a letter to the appellant’s solicitors setting out the respondents’ concerns that the appellant would not be able to pay its costs if it were unsuccessful in the appeal and requesting security for costs;
· by letters of 14 August 2012 and 22 April 2013, the appellant’s solicitors stated that Mr Loel was prepared to guarantee payment of any costs ordered in the appeal;
· after an exchange of correspondence between the solicitors for the parties concerning the execution of a guarantee with respect to the costs of the appeal occurring between 29 August 2013 and 9 September 2013 (the afternoon before the date fixed for hearing of the appeal), the respondents’ solicitors received a letter from the solicitors for the appellant enclosing a personal guarantee by Mr Loel (although not in a form acceptable to the respondents’ solicitors);
· searches made of the Australian Security and Investments Commission (‘ASIC’), reveal that Mr Loel is the sole director of the appellant and that there are two issued ordinary shares to the appellant having a paid value of $2.00, those shares being held by Pioneer Investments (Aust) Pty Ltd (of which Mr Loel is sole director);
· searches also reveal that the appellant has granted two separate securities in favour of two separate corporate entities (the precise amounts secured being indeterminable);
· Mr Loel is effectively the person who controls the appellant and knows the nature of the security arrangement; and
· Mr Loel has acknowledged that he is the person who stands behind the corporate appellant.
Counsel relied on Flinn v Flinn.[6]
[6][1999] 3 VR 712, 760–1 [159]–[163].
Indemnity costs
The Court ‘may make such order for the whole or any part of the costs of an appeal as it thinks fit’.[7]
[7]Supreme Court (General Civil Procedure) Rules 2005, r 64.24(1).
Making an order for indemnity costs is a special order. Recently, in Sunland Waterfront (BV) Ltd v Prudentia Investments Pty Ltd (No 3),[8] Croft J dealt comprehensively with the circumstances that justify the award of indemnity costs.[9] He referred to the oft-cited judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd,[10] where some of the criteria justifying the award of indemnity costs were identified, including ‘an imprudent refusal of an offer to compromise’.
[8][2012] VSC 399, [11]–[22].
[9]See also Sunland Waterfront (BV) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [538] et seq.
[10](1993) 46 FCR 225, 233–4. See also Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [18]-[19] (Harper J).
Earlier, in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2),[11] this Court considered the circumstances in which it was appropriate to make a special order for indemnity costs, in a situation where there had been a rejection of a Calderbank offer by an unsuccessful party to an appeal. After an extensive review of authority, the Court (Warren CJ, Maxwell P and Harper AJA) concluded[12] that ‘an imprudent refusal of an offer of compromise’ did not give rise to a presumption that the party rejecting the offer should pay the offeror’s costs on an indemnity basis if the offeree receives a less favourable result. Rather, the Court endorsed the approach of Gyles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council[13] that, ‘… In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs …’. The Court went on to set out six non-exhaustive propositions bearing on whether the rejection of an offer should be regarded as unreasonable:[14]
[11](2005) 13 VR 435 (‘Hazeldene’).
[12]Ibid. 440-1 [17]-[20].
[13][2000] NSWCA 323, [37].
[14]Ibid. Hazeldene, 442 [25] (citation omitted). See also Mischel Holdings Pty Ltd (in liq) v Mischel (in his capacity as executor of estate of Mischel) [2013] VSCA 375, [123].
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
With those principles in mind, it is necessary to refer in a little more detail to Mr Alderuccio’s affidavit of 19 September 2013. He deposed:
13.On 15 June 2012, I caused a letter to be sent to the Appellant’s solicitor containing a ‘Calderbank’ Offer. The said ‘Calderbank’ Offer was an offer to resolve the appeal on the basis that the Respondents would consent to an order that the appeal be allowed and that the Orders of [VCAT] be set aside and that there be no order as to the costs of the appeal with the result that each party would bear their own costs of the appeal including the costs of the application for leave to appeal. …
14.On 25 June 2012, I received by way of facsimile transmission a letter from Appellant’s solicitor, Mr Loel, rejecting the Calderbank Offer dated 15 June 2012 and making a counter-offer that:
‘1. The Appeal be allowed.
2.The Order for costs in respect of the VCAT proceedings on 20 February 2012 be set aside and the costs of the VCAT proceedings be reserved until the final hearing of the Appeal.
3.The costs of the Appeal (including the Application for leave to Appeal) be subject to an indemnity certificate pursuant to the Act.’
…
15.On 29 June 2012, I sent a letter to the Appellant’s solicitors rejecting the Appellant’s counter-offer and suggesting that it reconsider the previous ‘Calderbank’ Offer dated 15 June 2012. …
As Mr Alderuccio’s affidavit sets out, the letter of 15 June 2012 was an offer to resolve the appeal on the basis that the respondents would consent to an order that the appeal be allowed; that the orders of VCAT be set aside; and that there be no order as to the costs of the appeal. The offer was open for acceptance until 4.00pm on 25 June 2012. The letter went on to make plain that if the offer was not accepted, and the respondents succeeded in the appeal (‘or even if the appellant succeeds in the appeal’), then the respondents would seek an order that the appellant pay the costs incurred after the date of expiry of the offer ‘on an indemnity basis or on solicitor client basis’. Specific reliance was placed ‘upon the principles expressed in the case of Calderbank v Calderbank …’.
It may readily be observed that the offer made by the respondents on 15 June 2012 was extremely generous. The offer was made early, being shortly after leave to appeal had been granted and more than a year before the appeal ultimately was heard, and left more than adequate time for the offer to be given mature consideration. It was expressed with clarity, and offered a situation whereby the appeal would be allowed and the impugned orders of VCAT set aside. In these circumstances, in our opinion it is appropriate to make a special costs order in favour of the respondents.
In the circumstances, it is appropriate that the appellant pay the respondents’ costs of the appeal on a standard basis[15] up to and including 25 June 2012, and thereafter on an indemnity basis. We will so order.
[15]This should be on a party/party basis as the calculation of costs on a standard basis did not take effect until 1 April 2013.
Given that the rejection of the offer justifies the making of an order for indemnity costs, it is unnecessary to consider whether the other bases put forward in support of it[16] would have justified the order.
[16]See [7] above.
We turn to the question of whether Mr Loel should bear responsibility for the respondents’ costs of the appeal.
Costs against a non-party, Mr Loel
In our opinion, Mr Loel should bear responsibility for the respondents’ costs.
Mr Loel is, in our view, the ‘real party’ to the appeal. His conduct was the gravamen of the proceedings at VCAT that were the subject of the appeal. He is the sole director of the corporate appellant, and of the company holding the corporate appellant’s two shares. He has not contradicted the claim made by the respondents that he controls the appellant and knows of the security arrangements that apply to it. He has previously stated a preparedness to guarantee the payment of any costs ordered against the appellant (albeit the offered guarantee was not in a form suitable to the respondents), all of which amply demonstrates that in real and practical terms there is but a gossamer thin veil — if any — between the appellant and Mr Loel.
We acknowledge that ‘it would invariably be unjust to make an order against a non party without affording that person a proper hearing’, which ‘should include an opportunity to resist evidence already received in the proceedings’.[17] As we have earlier noted, however, both the summons of 30 September 2013 and the affidavit of 19 September 2013 (which were served on the appellant) flagged in unequivocal terms an intention to apply for costs personally against Mr Loel, yet they remained unanswered. Moreover, the submissions of the respondents’ counsel dated 3 March 2014 set out at some length the reasons why Mr Loel should personally be responsible for the costs of the appeal. Those submissions also went unanswered. Thus it cannot be said that Mr Loel was deprived of an opportunity to resist the mooted order.
[17]Bischof v Adams [1992] 2 VR 198, 205 (Gobbo J). See also Knight v FP Special Assets Ltd (1992) 174 CLR 178, 203.
In those circumstance, it is appropriate to make an order that Mr Loel pay the respondents’ costs of the appeal.[18] We will make orders accordingly.
[18]Oz B and S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128 (Einfeld J); Yates Property Corp Pty Ltd v Boland (No 2) (1997) 147 ALR 685, 694 (Branson J); Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 185 ALR 463, 478-9 [44]-[45]; Knight v FP Special Assets Ltd (1992) 174 CLR 178, 192-3 (Mason CJ and Deane J).
Conclusion
We will make orders to give effect to our intention that James Beresford Loel pay the respondents’ costs of appeal on a standard basis up to and including 25 June 2012, and thereafter on an indemnity basis.
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