Macks v Tucker & Ors & QBE Insurance (Australia) Ltd (No 3) - [2007] SASC 16

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
MACKS v TUCKER & ORS & QBE INSURANCE (AUSTRALIA) LTD (No 3)
[2007] SASC 16
Judgment of The Honourable Justice Bleby
19 January 2007
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
Application by plaintiff for award of indemnity costs in relation to an unsuccessful application by the second defendant for leave to file a counterclaim - discussion of relevant principles - indemnity costs awarded for portion of proceedings.

PROCEDURE - COSTS - TAXATION
Application by plaintiff for leave for immediate taxation of costs and for payment of costs notwithstanding proceeding not concluded - Supreme Court Rules 1987, r 101.01(7) and r 101.01(6) - discussion of relevant principles - order for immediate taxation and payment of costs.
Bankruptcy Act 1966 (Cth) s 249; Supreme Court Act 1991 s 40(1); Supreme Court Rules 1987 r 101.01, r 101.07, referred to.
Colgate-Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225, applied.
Alston Power Ltd v Yokogawa Australia Pty Ltd & Ors (No 2) [2006] SASC 87, discussed.
Macks v Tucker & Ors & QBE Insurance (Australia) Ltd [2006] SASC 272; Macks v Tucker & Ors & QBE Insurance (Australia) Ltd (No 2) [2006] SASC 350; Batten v CTMS Ltd [1999] FCCA 1576, considered.

MACKS v TUCKER & ORS & QBE INSURANCE (AUSTRALIA) LTD (No 3)
[2007] SASC 16
BLEBY J:
Introduction

On 1 September 2006, for reasons then published, I dismissed the second defendant’s application for leave to file a counterclaim in these proceedings.[1] The plaintiff now seeks an order for indemnity costs of the application, an order pursuant to r 101.01(7) of the Supreme Court Rules 1987 that the plaintiff have leave to tax his costs of the application forthwith and an order pursuant to r 101.01(6) of the Rules that the second defendant pay to the plaintiff forthwith the plaintiff’s costs of the application, notwithstanding that the proceeding is not concluded.
[1] Macks v Tucker & Ors & QBE Insurance (Australia) Ltd [2006] SASC 272.
It is necessary to give a brief account of the course that the hearing of the application took. The original version of the proposed counterclaim (exhibit “MRB11” of the affidavit of Mark Raffaele Bevilacqua sworn on 6 April 2006) sought to bring a claim against the plaintiff in his capacity as trustee of the deceased bankrupt estate. It was alleged that the instrument relied on, dated 8 December 1990, operated as an actual assignment. The proposed counterclaim also alleged that notice of the assignment was given to two trustees of the W W McGregor estate and that the trustees, without the knowledge of the second defendant made payments from the estate to the plaintiff allegedly to the use of the second defendant, and that the plaintiff as trustee had wrongfully deprived the second defendant of the monies and converted the same to his own use.
The application was listed for mention on 5 May 2006 when it was adjourned for hearing to 26 May 2006.
Affidavits were filed on behalf of both parties and written outlines of argument were delivered. The second defendant’s outline acknowledged that the proposed counterclaim required amendment to plead that the relevant document was an assignment effective in equity rather than as an executory agreement, that there would need to be a consequential amendment to the claim based on constructive trust and that the claim in conversion would be abandoned.
At the hearing on 26 May the second defendant made submissions. There was insufficient time for counsel for the plaintiff to address, but that would have been inappropriate in any event, given the defendant’s foreshadowed amendments which counsel in oral argument said would in fact go further than foreshadowed in the written outline. Nothing had been said about the capacity in which Mr Macks was to be sued on the counterclaim. Argument was therefore adjourned to 14 June 2006.
A revised version of the proposed counterclaim was delivered on 2 June, still directed to the plaintiff in his capacity as trustee in bankruptcy of the deceased’s estate. As foreshadowed, the claim in conversion was abandoned, but it was contended that the alleged agreement was both an executory agreement and an assignment in equity. There were other significant amendments to the proposed counterclaim. Further outlines of argument were delivered before the hearing.
On 14 June 2006, apart from a brief explanation by the second defendant’s counsel of the proposed amended counterclaim, most of the hearing time was taken up by the plaintiff’s address directed towards the proposed amended counterclaim. However, in the course of submissions in reply, counsel for the second defendant, in response to the plaintiff’s submission based on s 249(3) of the Bankruptcy Act 1966 (Cth), suggested that the section did not apply because the action was not against the plaintiff as trustee in bankruptcy but against Mr Macks in a personal capacity. However, that was subsequently altered to a submission that he did receive the funds in his capacity as trustee of the bankrupt estate. Judgment was reserved on the application.
Subsequently, the second defendant made further written submission to the Court suggesting that in fact the counterclaim was against the plaintiff in his personal capacity. As a consequence, the matter was re-listed for further argument on 18 July 2006. Counsel for the second defendant on that occasion acknowledged that further amendment would be required in order to reflect the second defendant’s assertion that the counterclaim was directed to Mr Macks in his personal capacity. The matter was adjourned to enable the second defendant to produce a third version of the proposed counterclaim. That was delivered in due course, and all references to the plaintiff as trustee were deleted.
Further submissions were made on 2 August 2006 accompanied by a further outline from the plaintiff. Judgment was again reserved and the application was dismissed on 1 September 2006.
Indemnity costs
The discretion to award costs under s 40(1) of the Supreme Court Act 1991 (SA) is very wide. The Court clearly has power to award indemnity costs as that expression is defined in r 101.07(6) of the Supreme Court Rules. The award of indemnity costs will generally only be justified by special and unusual features.[2] In Colgate Palmolive Co Pty Ltd v Cussons Pty Ltd[3] Sheppard J, having referred to a number of relevant authorities, said:
In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J In Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher(No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on party and party basis.
[2] Colgate-Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225.
[3] Ibid at 233 - 234.
As can be seen from my outline of the course that the proceedings took, it was not until the final version of the proposed counterclaim was before the Court that the real issues could be identified. The changes that were made at each stage were in response to comprehensive submissions put or foreshadowed by the plaintiff, rendering much of the plaintiff’s previous argument irrelevant to the ultimate issues, even though some of it did have ongoing relevance to the final version of the proposed counterclaim.
The refusal to grant leave to file the counterclaim in this case would not of itself justify the payment of indemnity costs by the defendant. It cannot be said that the application to bring the counterclaim as finally proposed was unarguable or that it contained allegations which ought never to have been made. What did cause substantial delay and costs in effect thrown away by the plaintiff was the abandonment of the first version of the proposed counterclaim in favour of the second version and the further amendment of that version before the final version was produced. For that, the plaintiff is entitled to some recompense beyond the payment of mere party and party costs. I think justice will be done if the plaintiff receives indemnity costs in respect of the actual hearings which, for the most part, were superseded by revised versions of the proposed counterclaim. The order will therefore be:
That the second defendant pay the plaintiff’s costs as to the hearing (including outline of argument) on 26 May 2006 and as to the hearings and matters incidental thereto on 14 June 2006 and 18 July 2006 on an indemnity basis, and as to the balance of the application on a party and party basis.
Certify fit for senior counsel.
Taxation forthwith and immediate payment
Once again, the discretion to order immediate taxation and payment of costs of the interlocutory application is not fettered by anything contained in the Rules.
As I pointed out in the reasons for refusing leave to file the counterclaim, the subject of the alleged assignment of the deceased’s prospective share in his father’s estate to the second defendant forms part of the plaintiff’s pleading in the statement of claim. However, there is no relief claimed as a consequence of that transaction, and the effect of the alleged deed is not in question. Absent the counterclaim, that will remain the case in these proceedings. There is therefore unlikely to be any future event in this action other than total failure of the plaintiff’s claim which will result in some benefit or offsetting advantage to the second defendants following from work done in connection with this application. As I also pointed out in the previous reasons, the proposed counterclaim in its final form was directed to the plaintiff in a capacity different from that in which he is party to this action. That can only enhance the discrete nature of the issue decided on this application and the unlikelihood of any future offsetting benefit to the second defendant in these proceedings.
The proposed counterclaim was also a discrete issue between the plaintiff and the second defendant, not involving other parties to the action, and there could be no offsetting benefit or advantage to be brought into account concerning those parties if the costs of this application are to be taxed and paid forthwith.
The second defendant has now commenced a fresh action in respect of the subject matter of the proposed counterclaim, and any future costs concerning that issue are now likely to be incurred in those proceedings.
The plaintiff’s action is a complex one. It is unlikely to be resolved for some time. Applications for the trial of certain issues before the trial of other issues has been rejected.[4] The trial is therefore likely to be a long one. Unless an order for immediate taxation is made, the plaintiff will be unlikely to receive the benefit of this order for costs for a considerable time.[5] For an interlocutory application, the costs are likely to be substituted. It is not reasonable for the plaintiff to be denied the benefit of that order until resolution of the action.
[4] Macks v Tucker & Ors & QBE Insurance (Australia) Ltd(No 2) [2006] SASC 350.
[5] See Batten v CTMS Ltd [1999] FCA 1576.
Among factors which Debelle J took into account in making such an order in Alston Power Ltd v Yokogawa Australia Pty Ltd & Ors (No 2)[6] were the fact that the interlocutory proceeding was a discrete issue, that the principal proceedings were not likely to be resolved for some time, that the subject matter of the interlocutory application removed a particular issue altogether from the action and that there was a degree of unreasonable conduct by the party against whom costs were ordered. The relevant conduct in this case was the failure properly to identify the nature and content of the proposed counterclaim other than by way of continued reaction to arguments put by the plaintiff.
[6] [2006] SASC 87.
In the circumstances it is appropriate that there be an order that the plaintiff be at liberty at any time to have a bill of costs taxed in relation to the order for costs now made and that there be an order that the costs be paid forthwith.