Loustas v Sier (costs ruling)
[2018] VSC 709
•21 November 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST
S CI 2011 04822
| ARTHUR LOUSTAS | Plaintiff |
| v | |
| PETER JOHN SIER | First Defendant |
| VINCENT SIER | Second Defendant/Applicant |
| and | |
| BRUCE WILKINSON & ORS | Respondents |
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JUDGE: | Macaulay J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 September 2018 |
DATE OF RULING: | 21 November 2018 |
CASE MAY BE CITED AS: | Loustas v Sier & Ors (costs ruling) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 709 |
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PRACTICE AND PROCEDURE – Costs – Application for personal costs orders against plaintiff’s legal advisors and expert accounting witnesses – Underlying proceeding concerned property development on land which remained ongoing throughout interlocutory phase of litigation – Plaintiff awarded nominal damages at trial only – Jurisdiction to award personal costs orders – Supreme Court Act1986, s 24 and Supreme Court (General Civil Procedure) Rules 2015, O 63 considered – Knight v FP Special Assets Limited [1992] 174 CLR 178, considered – Overarching obligations – Applicant contends plaintiff’s legal advisors and expert accounting witnesses contravened overarching obligations by continuing to act once it became reasonably clear the property development would return a substantial loss – Civil Procedure Act 2010, ss 17, 19, 21(b), 22, 23, 24 and 29, considered – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Second Defendant/Applicant | Mr M McKenzie | Adams Maguire Sier |
| For the First, Second and Third Respondents | Mr J Tesarsch | Clyde & Co |
| For the Fourth, Fifth and Sixth Respondents | Mr D Luxton | Minter Ellison |
HIS HONOUR:
Introduction and summary
On 31 January 2018 I published reasons[1] for awarding nominal damages of $1 on the claim by the plaintiff (Arthur Loustas) and more substantive sums of $217,652 and $101,734 (plus interest in each case) on the counterclaims of the first defendant (Peter Sier) and the second defendant (Vincent Sier) respectively. Formal orders were made on 14 February 2018, including an order that Mr Loustas pay the Siers’ costs of the proceeding.[2] By consent, the parties agreed to an order that the Siers have ‘liberty to apply by 9 March 2018’ for orders that ‘any other individual or company pay their costs of the proceeding’.
[1]Loustas v Sier & ors [2018] VSC 13 (31 January 2018) (‘Reasons’).
[2]On a standard basis until 28 July 2017 and on an indemnity basis thereafter.
Although there were some administrative problems attending the actual filing of the documents, on the afternoon of 9 March 2018 Vincent Sier, the sole applicant in this application, notified the Court that he wished to apply for personal costs orders against the legal practitioners who acted for Mr Loustas in the proceeding and the expert forensic accountants called by Mr Loustas to give evidence on his behalf (collectively, ‘the respondents’).[3] The legal practitioners are Gerald Parncutt, barrister, and Kiatos & Co and Con Kiatos, solicitors (‘the legal practitioners’); and the expert accountants are Munday Wilkinson Pty Ltd, Mr Bruce Wilkinson (director of Munday Wilkinson) and Ms Sanchia Veale (a forensic accounting consultant with Munday Wilkinson) (‘the expert witnesses’).
[3]After opportunity was given to the respondents to do so, ultimately no issue was taken as to whether the application had been brought within time, whether founded upon s 29 of the Civil Procedure Act 2010 or otherwise.
For reasons I give below, I dismiss Mr Sier’s application.
Proceeding and findings
Before December 2008, through a company related to him, Mr Loustas had commenced a commercial and residential property development on land in High Street, Northcote (‘the land’) owned by the company. The land was sold to the Siers at mortgagee auction in December 2008. Prior to the auction, Vincent Sier, a solicitor, had been Mr Loustas’ legal advisor.
Construction of the property development was ultimately completed on the land by the Siers, in a joint venture with other investors, in December 2016. Mr Loustas claimed that pursuant to an oral agreement made with the Siers in December 2008 and a written agreement made with them in January 2009, the Siers held 38 per cent of the land on trust for him and were obliged to pay him the same proportion of any profit made from the development. No distribution was made to Mr Loustas from the development and the Sier’s denied that they held any of their interest in the land on trust him.
In the proceeding Mr Loustas claimed that the Siers had breached both the oral and written agreements by failing to recognise his equitable interest in the land and his entitlement to profit in the distribution of proceeds from the development. He claimed loss and damage equating to what he alleged should have been his distribution had those entitlements been properly taken into account.
He further alleged that the Siers breached fiduciary duties owed to him as a co- venturer in the development when they later entered into the joint venture with the other investors. Against Vincent Sier alone, he also made claims based upon misleading and deceptive conduct, breach of fiduciary duty as solicitor and breach of a solicitor’s retainer.
The Siers’ counterclaims were based upon a guarantee executed by Mr Loustas, guaranteeing repayment of monies the Siers had lent to Mr Loustas’ company.
Mr Loustas failed to establish that the Siers held 38 per cent of the land on trust for him or that he otherwise had any equitable interest in the land. Importantly, for the purpose of this application, he also failed to establish that the development made any profit from which he was entitled to a 38 per cent share (an entitlement which was not disputed in the event any profit was made).
However, Mr Loustas did establish that both Siers breached a term of the written agreement,[4] and that Vincent Sier breached a fiduciary duty owed to Mr Loustas as his solicitor.[5] But, because Mr Loustas failed to establish that he held any equitable interest in the land and because the development on the land otherwise failed to make any profit, he was unable to establish any damage by reason of not having received a distribution from the proceeds of the development. Thus, his claim for loss and damage for breach of the contract or breach of fiduciary duty did not reap anything more than nominal compensation.
[4]Reasons, [168].
[5]Reasons, [188].
Munday Wilkinson was the expert forensic accounting firm retained by Mr Loustas for the purpose of the proceeding to analyse his commercial relationship with the Siers and the numerous transactions affecting the property, over many years. They were asked to form an opinion as to what (if any) distribution Mr Loustas was entitled to receive, either from profit or capital, upon the completion of the development. The Siers also engaged an expert forensic accountant for a similar exercise. Those accountants produced numerous reports, cooperated in the conduct of an expert conclave and produced a joint expert report, gave evidence in court and were cross-examined.
It is vital to understand that the litigation brought by Mr Loustas against the Siers commenced in 2011, well before the development was completed on the land. Throughout the whole of the interlocutory phase of the litigation, construction was being undertaken on the land, disputes occurred between the developers and the builder, units in the development were sold, disputes arose over some sales and the distribution of their proceeds and, for a time, the litigation also embroiled the investors in the joint venture with the Siers.
In the result, the progress of the development was messy and suffered delay. In turn those factors impacted the financial viability of the development. Similarly, those factors impacted the progress of the litigation, and the subject matter of the claim itself shifted as the development, and the analysis of it, unfolded. A final accounting reconciliation of the development was only possible in or about late 2016 or early 2017.
The notion that Mr Loustas maintained some equity in the land after it was sold by mortgagee’s auction in December 2008 was a key element underpinning his claims. It underpinned his case against the Siers on breach of agreement. It also underpinned his claim for damages because as time progressed and it became less likely that the development would yield a profit, it also became more likely that he would not succeed in a claim for damages without establishing an equity interest in the land.
The analysis of the expert witnesses that lead them to conclude that Mr Loustas was entitled to a distribution from the development of $502,204 (his final damages calculation) commenced with the assumption that Mr Loustas had been promised a 38 per cent equity in the land on which the development was built. That assumption, in turn, was sourced in Mr Loustas’ instructions to them that the Siers had agreed that he would have such an equity. There is nothing unusual or wrong in that. Expert witnesses are typically required to give opinions based on assumed facts when they have no independent means of ascertaining those facts for themselves. Making that assumption, the expert witnesses interpreted a particular clause of the written agreement, clause 3(ii),[6] as being consistent with the Siers’ agreement to hold an interest in the land on trust for Mr Loustas.[7]
[6]Clause 3(ii) of the written agreement extracted at [99] of the Reasons.
[7]See Reasons [124], [128], [131] – [143].
The opinion of the expert witnesses, based on that assumed fact, supported the view that Mr Loustas was entitled to a distribution from the proceeds of the development which had not been paid to him. Relying upon that opinion, and also relying upon Mr Loustas’ instructions concerning the agreements he claimed were made with the Siers, the legal practitioners framed and pursued Mr Loustas’ claim for damages.
Following a trial of the issues, as already stated, I rejected the account of Mr Loustas that the Siers had orally agreed to hold a 38 per cent interest in the land on trust for him or that he otherwise retained an equitable interest in the land after they purchased it. That conclusion was reached after hearing the rival versions of discussions between the Siers and Mr Loustas. I also rejected Mr Loustas’ construction of clause 3(ii) of the written agreement.
With that background I turn to the application for personal costs orders against the expert witnesses and the legal practitioners (‘the application’).
Jurisdiction for making personal costs orders
There are three available jurisdictions for making personal costs orders in Victoria:
(a) the power and discretion of this Court under s 24 of the Supreme Court Act1986, exercised in accordance with O 63 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules), and in particular r 63.23 (‘Costs liability of lawyer’);
(b) Section 29 of the Civil Procedure Act 2010 (‘the CPA’), based upon a person having contravened an overarching obligation prescribed in Part 2.3 of that act (ss 16 – 27); and
(c) the common law ‘wasted costs’ jurisdiction recognised by the High Court of Australia in Knight v FP Special Assets Limited.[8]
[8][1992] 174 CLR 178 (‘Knight’).
Because of its significance to the determination of the application, it is necessary for me to set out in some detail the changing nature of the basis upon which Vincent Sier (hereafter, ‘the applicant’) put the application against each of the legal practitioners and the expert witnesses.
The application made in this case
In support of the application, the applicant filed an affidavit sworn on 9 March 2018 by Anthony Di Benedetto, a solicitor acting on his behalf. In that affidavit, Mr Di Benedetto stated that the application was brought upon three bases, namely the principle established in Knight,[9] r 63.23 of the Rules and ss 29 and 18(d) of the CPA. Section 18(d) of the CPA prescribes, as an overarching obligation, that a person must not make a claim that lacks a proper basis on the factual and legal material available at the time the claim is made (‘the proper basis requirement’).
[9]Affidavit of Anthony Di Benedetto sworn 9 March 2018, [1] & [9].
At a hearing before a judicial registrar on 23 March 2018, counsel for the applicant accepted it was necessary for the applicant to serve on the respondents a pleading which identified the formal basis upon which the costs orders were sought.[10] Without particularising the precise grounds, counsel foreshadowed that the elements of the claim would include the ‘common law basis’, the ‘Supreme Court rules basis’ and the ‘CPA basis’.[11]
[10]Transcript of Proceedings, 23 March 2018, T.05.25–28.
[11]Ibid T.08.24–26.
The judicial registrar ordered that the applicant state in the pleading as against each of the respondents the basis of his claim at common law, pursuant to the Rules and pursuant to the CPA.[12] The order was unusually prescriptive, no doubt reflecting the Court’s concern that the grounds for the application had not been adequately identified. As well as requiring the applicant to identify the relevant legal principles, the order also required him to identify ‘with particularity’ those parts of the reasons and the evidence which founded the application.
[12]Order of Judicial Registrar Clayton made 23 March 2018.
On 26 April 2018 the applicant filed a document entitled ‘Pleadings’ which identified (without differentiating between respondents) the following three bases for his claim:
(a) the ‘fundamental plank’ basis - namely, that from the earliest date on which it was reasonably clear that the project was to return a substantial loss the proceeding should have been discontinued;[13]
(b) the CPA generally,[14] and ss 20, 23 and 24 specifically;[15] and
(c) rule 63.23 of the Rules.[16]
[13]Applicant’s Pleadings filed 26 April 2018, [1]. This is arguably more a submission rather than an identified legal basis for the claim, but it is articulated under the heading ‘THE BASIS FOR THE APPLICATION’.
[14]Ibid Schedule B under heading ‘The authorities, the statutes and the law’. The applicant says the CPA is applicable to the expert and the legal practitioners as to all overarching obligations save and except paragraphs 18, 19, 22 and 26.
[15]In discussing s 24 of the CPA, the applicant raises – against the ‘advisers to the plaintiff’ – the proper basis issue, but does not refer to s 18(d) of the CPA expressly.
[16]Ibid Schedule B, [11].
The so-called ‘fundamental plank’ basis was not described by reference to any particular legal principle. Yet, if anything, it appears to resemble a complaint that the respondents were promoting a claim that lacked a proper factual basis because, no matter what legal wrong was proven, it could not result in any provable damage. In other words, it resembled a claim brought for a breach of the proper basis requirement, a ground originally mentioned in the affidavit of Mr Di Benedetto. But that provision was not expressly mentioned in the pleading. Instead, the overarching obligations to which the three sections of the CPA mentioned in paragraph (b) above corresponded, were those requiring a person to cooperate in the conduct of the proceeding (s 20), to narrow the issues in dispute (s 23) and to ensure that costs are reasonable and proportionate (s 24).
At a directions hearing on 3 August 2018, the respondents submitted that the applicant's ‘Pleadings’ was an impenetrable document,[17] and that they were still ‘in the dark’ as to the claims brought by the applicant.[18] Having read that document, I consider that the respondents were justified in making those submissions. The judicial registrar ordered a revised interlocutory timetable, including making provision for the filing of submissions by the parties.[19]
[17]Transcript of Proceedings, 3 August 2018, T.02.20. This submission was made on behalf of the expert witness respondents but adopted by counsel for the legal practitioner respondents.
[18]Ibid T.05.18.
[19]Order of Judicial Registrar Clayton made 3 August 2018.
In his written submissions filed on 13 August 2018, the applicant reiterated the ‘fundamental plank’ basis of his claim.[20] The submissions concentrated on an argument that the loss-making nature of the development was so overwhelmingly obvious to anyone who looked at it that, beyond a certain point in time (numerous possibilities were suggested), ‘no viable claim … could reasonably be pursued’ and ‘the case should never have been run’. [21]
[20]Brief Outline of Submissions of Vincent John Sier for Non Party Costs against Solicitor, Barrister and Accounting Experts, [1].
[21]Ibid [30], [31].
Insofar as legal principles were concerned, the submissions only referred to the ‘CPA principles related to reasonable and proportionate costs and practical and sensible resolution of disputes’, presumably alluding to the overarching obligations prescribed in ss 23 and 24 of the CPA.[22] However, in context, it is unclear whether those references were directed to how this application should be resolved or to the content of the duties the respondents were obliged to adhere to in the underlying proceeding.
[22]Ibid [42].
In their written submissions filed on 28 August 2018, the legal practitioners complained that they were yet to have been provided with full and sufficient notice of how the costs claim was being made against them.[23] In light of what I have said above, again there was some justification for that complaint. That is, there was an apparent disconformity between the factual contentions being made by the applicant and the legal principles he was relying upon to fix the respondents with any liability to pay his costs. In that situation, the legal practitioners stated in their submissions that they would proceed on the assumption that the application was based only on the wasted costs jurisdiction and ss 18(d) and 29 of the CPA.[24] At no time before the hearing of the application, on the 19 September, did the applicant inform the legal practitioners that their assumption was wrong.
[23]Outline of Submissions of the Fourth to Sixth Respondents, [4] and [13].
[24]Ibid [15].
In their submissions filed 29 August 2018, the expert witnesses addressed the three bases for the application that had been specified in Mr Di Benedetto’s affidavit: namely, the Knight basis, the r 63.23 basis and the CPA basis.[25]
[25]Outline of Submissions of the First to Third Respondents, [3].
On 19 September 2018, at the hearing of the application, the applicant informed the Court and the respondents that he was no longer relying on r 63.23 or Knight as bases for his claim, but was instead relying solely on s 29 of the CPA as against all respondents.[26] Further, he announced that in relation to the expert witnesses he relied upon alleged breaches of ss 17, 21(b) and 24 of the CPA.[27] In relation to the legal practitioners, he announced he relied upon alleged breaches of ss 17, 19, 21(b), 22, 23 and 24 of the CPA.[28]
[26]Transcript of Proceedings, 19 September 2018, T.17.31, T.22.28–31—T.23.01–12.
[27]Ibid T.20.07–26.
[28]Ibid T.21.03–24.
Section 17 of the CPA obliges a person to act honestly in relation to a civil proceeding. Section 21(b) prohibits a person from engaging in conduct in relation to a civil proceeding that is likely to mislead or deceive. Alleging a breach of either provision is a serious matter. Alleging breaches of both provisions, against professional persons and without prior notice – let alone any particularisation of the allegations raised – was a very serious development. Understandably, all respondents immediately objected to the applicant being able to raise such grounds in those circumstances.
In my opinion, this is a case in which the Court is justified in refusing to grant relief insofar as any claim for costs is founded upon grounds of dishonesty or misleading or deceptive conduct without any detailed consideration of that aspect of the claim.[29] If ever there is a requirement that an applicant should provide notice of what is alleged and a sufficient opportunity to answer it,[30] such requirement arises in relation to allegations of that kind. I can and will dismiss the applicant’s claim against all respondents insofar as they depend on any alleged breaches of ss 17 or 21(b) of the CPA, on the basis that no notification was given of any such allegations until counsel for the applicant stood to his feet on the hearing of the application. I would also add that there is no evidence to support such allegations.
[29]Giles v Jeffrey [2016] VSCA 314 (14 December 2016) [126]—[127].
[30]See for example Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (No 4) [2013] VSC 14 (4 February 2013) [25]; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) (2014) 48 VR 1, [57].
The applicant has expressly eschewed reliance upon r 63.23 of the Rules or the ‘wasted costs’ jurisdiction of Knight (both of which, in any event, could only have applied to the legal practitioners). That leaves for consideration breaches of the overarching obligations not to take any step unless the person reasonably believes it necessary to facilitate the resolution or determination of the proceeding (s 19), to use reasonable endeavours to resolve the dispute (s 22), to narrow the issues in dispute (s 23) and to ensure costs are reasonable and proportionate (s 24).
I propose to analyse the applicant’s ‘fundamental plank’ argument in the light of those legal principles. Despite the ground having been expressly abandoned, I will also briefly consider that argument against the ‘proper basis requirement’ in s 18(d) of the CPA.
‘Fundamental plank’
The applicant’s central argument is that the development venture could never have made a profit and that that reality should have been apparent to anybody who looked at this matter, in particular Mr Loustas’ lawyers and forensic accountants. The applicant contends that it should have been obvious, even from the date of the mortgagee’s auction in 2008, that the development project was ‘doomed’. Accepting that proposition, so the argument goes, it was then equally obvious that Mr Loustas could never succeed in a claim for damages regardless of what legal wrong he might have established against the defendants in the proceeding. If he could not succeed on a claim for damages, then his action was ‘doomed’ and a ‘dead duck’.[31]
[31]Both expressions taken from the applicant’s Brief Outline of Submissions filed 13 August 2018; See heading above [14] and at [30].
A number of points need to be made or reiterated.
First, the development project was being undertaken while the litigation was proceeding. It was not realistic to say the project was ‘doomed’ to fail in 2011 when the claim was commenced. Construction was only completed in December 2016 and unit sales were still being undertaken into 2017. Final accounting reconciliation remained a matter of controversy right up to and during the trial itself. It was a project of considerable significance with final expenditure in the order of $26M and income in the order of $23M.
Secondly, although the parties’ accounting experts more or less agreed on a primary loss figure,[32] Munday Wilkinson contended there should be some ‘add-backs’ for a number of irregularities which, if accepted, would have turned a loss of around $3M into a modest profit of around $650,000.[33] It became unnecessary to finally decide the question of those variations but I would not describe them all as implausible.
[32]See Reasons [208] – they were within about 7 per cent of one another.
[33]Reasons [209].
Thirdly, in addition to apportioning their respective shares of the adjusted profit/loss, a separate allocation of capital entitlements (if any) had to be made among the project partners. It was at this point that the question of whether Mr Loustas had an equity entitlement became critical. In fact, arithmetically, that issue was determinative of his success or failure in the litigation given that he established legal wrongdoing on the part of both defendants. Assuming he had an equitable interest in the land (quantified by Munday Wilkinson at $604,235) and further assuming the validity of the add-back variations to profit (as contended by Munday Wilkinson), Mr Loustas was entitled to a distribution of $502,204.[34] With fewer of the add-backs the distribution would have reduced, possibly to the point of extinguishment.
[34]Reasons [213].
Fourthly, from the foregoing it became clear, and was accepted at trial by those acting for Mr Loustas, that, having regard to the final reconciliation of profit/loss from the project, unless he established an equitable interest in the land Mr Loustas would not establish an entitlement to any distribution from the project. It would follow that he would not establish any loss and damage consequent upon any legal wrongdoing on the part of the defendants.
Fifthly, on an analysis of contested factual propositions and contractual construction, I concluded that Mr Loustas had no equitable interest in the land. That conclusion necessarily carried with it the result that Mr Loustas could only succeed on nominal damages for the breach of contract he had established against the defendants and could not establish a basis for compensation for the breach of fiduciary duty he established against the applicant.
Sixthly, as I have endeavoured to make plain above, the question whether Mr Loustas had an equitable interest in the land after December 2008 turned on my findings of fact about conversations between him and the Siers, and my construction of clause 3(ii) of the written agreement. Each of those matters was properly contestable. And the question of construction was, in part, linked to my findings on the factual matters because those findings helped to determine the objective factual matrix in which the contract was to be construed.[35]
[35]Reasons [113]—[116].
So, I come to the applicant’s contention. He argues that the combination of the inevitability that the project would make a loss and the ‘totally unmeritorious claim for some capital’ meant that the proceeding should never have been brought or continued because no loss or damage could ever have been established.[36]
[36]Applicant’s Brief Outline of Submissions filed 13 August 2018 [30].
That argument must be rejected. I have already addressed the point about the so-called inevitability that the project would make a loss. But, in summary, I do not accept that it must always have been regarded as inevitable. The question of there being an actual loss and the amount of that loss remained in contention right up to and during the trial. Even if the project did make a loss, so long as there was the possibility the court might accept that Mr Loustas was entitled to a capital return due to an equitable interest, the fact of the loss itself was not determinative of the success of his claim. Additionally, the precise amount of that loss remained relevant.
Whether Mr Loustas had an equitable interest and, if so, how it was to be quantified, were matters for this Court to decide. They were not matters for either the legal practitioners or the expert witnesses to decide. This seems to be the fundamental misconception underlying the applicant’s claim against all respondents. In fact, not only was it not for the respondents to decide those matters, the respondents were bound to accept Mr Loustas’ instructions as to what took place.
No doubt he gave them instructions that accorded with the version of the facts he gave in evidence, namely that the defendants had orally promised they would hold a 38 per cent interest in the land on trust for him. As for the written agreement, clause 3(ii) was a difficult and ambiguous clause.[37] If one was to accept Mr Loustas’ version of the facts leading up to the written agreement, as the legal practitioners and expert witnesses were bound to do, the construction of that clause for which they contended was a reasonable one. Their construction was consistent with the notion that the debts owed to the defendants and secured on the land were to be treated as Mr Loustas’ capital in the project, equivalent in nature to the known (but unstated) equitable interest which Mr Loustas held, all to be returned on the completion of the development. Assuming that to be the case, the expert witnesses developed an argument from an accounting perspective that when Peter Sier received his ‘capital’ from the proceeds of the December 2008 sale, the amount of that receipt effectively stood as – and, therefore, quantified – Mr Loustas’ equitable interest in the project.
[37]Reasons [109], [110].
Mr Loustas’ claim to hold an equitable interest was rejected because I rejected his evidence about conversations between him and the defendants prior to and soon after the December 2008 auction. Rejecting his evidence about those conversations, and other factual matters, had a bearing both on the construction I gave to the written agreement and on my ultimate rejection of the thesis that the mortgage debt repaid to Peter Sier stood as and quantified the asserted equitable interest belonging to Mr Loustas.
To the extent that Mr Loustas’ claim that he held an equitable interest in the land (and thus the development) lacked merit, it lacked merit because his version of events was rejected. That is not a circumstance for which the legal practitioners or the expert witnesses are to be held accountable.
Does this conclusion vary if an analysis of these facts is made in the light of the respondents’ obligation (assuming that to be so) to take steps only to facilitate the resolution of the proceeding, to use reasonable endeavours to resolve the dispute, to narrow the issues in dispute or to ensure costs are kept reasonable and proportionate? In my view the application of any of those legal standards makes no difference to the conclusion. And if I was to evaluate the respondent’s conduct against the proper basis requirement (assuming it was pressed), I would reject any submission that the respondents’ contravened that obligation.
On whatever legal basis the applicant was relying to have the respondents made personally liable for his legal costs[38] – as to which it was not entirely clear – the application must be rejected.
[38]The basis was not clear.
Other matters
There remain two matters about the applicant’s submission I wish to address briefly.
One concerns a comment which I made in the Reasons at [135], namely, ‘[t]ruly, it is a recent invention.’ It was a comment I made about the thesis that Mr Loustas held an equitable interest equivalent to Peter Sier’s withdrawn mortgage debt. The applicant appeared to draw an inference from that comment that I was attributing to the expert witnesses the ‘invention’ of the very notion of an equitable interest for Mr Loustas. Seen in context,[39] the comment was directed toward Mr Loustas himself who I found not to have been promised an equitable interest but who opportunistically embraced the argument advanced by his accountants (who, as I have explained, assumed the truth of his account) as to how that interest could be represented by the surplus funds from the proceeds of the sale in December 2008.
[39]See in particular [133] and the balance of [135].
At [134] of the Reasons, I mentioned that the idea of Mr Loustas’ equity being represented by the amount Peter Sier had received from the 2008 sale proceeds was one first put forward by the expert witnesses in July 2017. I was apparently wrong about that; it had been put forward by them at an earlier date. In that paragraph I was critical of the legal practitioners for failing to have made that contention clear in the pleadings before the opening of the trial. My mistake as to the origin of that idea only makes the delay in pleading worse. But that pleading failure caused no delay in trial nor caused any loss, and the defendants (quite sensibly) did not object to an amendment to align the pleading with the expert opinion which they had known about for some time.
The second matter I wish to address relates to the applicant’s use of findings that I made at [116] and [117] of the Reasons concerning the knowledge with which the ‘reasonable business person’ should be attributed for the purpose of objectively construing the terms of the written agreement. The applicant wished to draw support from those paragraphs for his argument as to what the legal practitioners and expert witnesses must be taken to have known when formulating and framing claims, and expressing expert opinions, on Mr Loustas’ behalf.
Thus, because I, as judge, used those findings to assist in a constructional exercise – which, in part, lead to my rejection of Mr Loustas’ claim – the applicant argued I should now apply those same findings to hold the respondents accountable for conducting (or supporting) an allegedly spurious claim. I need not discuss this at any length. The argument is misconceived. There is no rational basis for comparing the attributed knowledge of the notional reasonable person in a construction exercise with the actual state of mind of legal practitioners and expert witnesses for the purpose of deciding whether they are personally liable for legal costs.
The application is dismissed with costs.
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