Marlow v Linct Rentals Pty Ltd (Costs)
[2024] VCC 1559
•9 October 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-22-01645
| Shaun Brian Marlow | Plaintiff |
| V | |
| Linct Rentals Pty Ltd (ACN 106 759 264) | Defendant |
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JUDGE: | Her Honour Judge Kirton | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 October 2024 | |
DATE OF RULING: | 9 October 2024 | |
CASE MAY BE CITED AS: | Marlow v Linct Rentals Pty Ltd (Costs) | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 1559 | |
RULING
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Subject:COSTS
Catchwords: Late application to amend statement of claim – meaning of ‘costs of and occasioned by the amendment’ in r 63A.17 – J.C. Jarol Pty Ltd & Anor v Novamex International LLC(Costs ruling) [2023] VSC 378 – costs thrown away by reason of amendment of the statement of claim – timing of taxation of costs
Legislation Cited: County Court Civil Procedure Rules 2018 rr 63.20.1, 63A.17 & 63A.20.1; Supreme Court (General Civil Procedure) Rules 2015 (Vic) Appendix A;
Cases Cited:Edelman v Badower [2010] VSC 427; J.C. Jarol Pty Ltd & Anor v Novamex International LLC (Costs ruling) [2023] VSC 378; Mancini Made Pty Ltd and LGS Solutions Pty Ltd [2023] VCC 441; Pathik v Bata & Ors (Costs) [2023] VCC 765; Burke v Ash Sounds Pty Ltd (No 2) [2019] VSC 290; Cassimatis v Australian Securities and Investments Commission (ASIC) (2016) 334 ALR 350; Ziliotto v Hakim(No 2) [2012] NSWSC 1079; Sobey v Commissioner of Taxation [2008] FCA 1621; Dale v Clayton Utz (No 3) [2013] VSC 593; Setka v Honourable Tony Abbott MP [2013] VSCA 376; Fairbank Haven Pty Ltd v Merkon Constructions Pty Ltd (No 2) [2024] VSC 104;
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | J Styring, of counsel | Falcone & Adams Lawyers |
| For the Defendant | K Weston-Scheuber, of counsel | Duffy & Simon Lawyers |
HER HONOUR:
Introduction
1After the proceeding had been on foot for more than two years, and less than three months from the third allocated trial date, the plaintiff applied for leave to file and serve an amended statement of claim.[1] The plaintiff provided a proposed amended pleading in August 2024. The defendant objected to this pleading on various grounds, including that it did not set out the case the defendant must meet, and it did not disclose a cause of action. At a directions hearing on 13 September 2024 I gave the plaintiff another opportunity to prepare a further proposed amended pleading.
[1]By summons dated 19 August 2024.
2The plaintiff then provided a second proposed amended statement of claim in September 2024. The defendant is keen to maintain the trial date (November 2024) and consented to this document being filed, on the condition that the plaintiff provides further and better particulars of matters requested by the defendant to address what the defendant says are continued deficiencies in the pleading.
3At a directions hearing on 3 October 2024 I gave the plaintiff leave to file the second proposed amended statement of claim (the ASOC).
4Both parties agreed that the defendant will have to significantly replead their defence in response to the ASOC.
5The defendant applied for orders that the plaintiff pay their costs, as follows:
(a) the defendant’s costs of and incidental to the plaintiff’s summons dated 20 August 2024 to be paid on the standard basis, to be taxed in default of agreement.
(b) The defendant’s costs thrown away by reason of the amendment to the statement of claim, to be fixed in the sum of $70,000.00, alternatively to be taxed in default of agreement.
6The defendant’s solicitor, Damien Luke McKenna, provided evidence of his calculation of the sum of $70,000.00 in his affidavit affirmed 10 September 2024 (the McKenna Affidavit). His evidence is that the defendant had prepared the matter for trial on the basis the case was as set out in the plaintiff’s statement of claim dated 2 May 2022. In addition to the preparation of responsive pleadings, this included extensive investigative and preparatory work; conferring with witnesses and the preparation of expert evidence, and other numerous steps required to prepare a matter for trial and otherwise advise the defendant. They contend that should the plaintiff be granted leave to amend his pleading, many of those steps will need to be repeated and there will be significant costs thrown away.
7Mr McKenna prepared an estimate of the costs that he said would be thrown away on a solicitor client basis (including Counsel fees) which totalled $93,499.00 exclusive of GST.[2] He then applied the rates under the County Court costs scale, being 80% of the costs scale set out under Appendix A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and concluded this would result in costs thrown away of $86,104 exclusive of GST.[3] The defendant contends that the amount sought of $70,000 is therefore a reasonable amount to be fixed.
[2] Affidavit of Damien Luke McKenna affirmed 10 September 2024, 7 [42].
[3] Ibid, 7 [43].
8The plaintiff submitted that the appropriate costs orders at this point in time are that:
(a) the costs of the application for leave to make the amendment; and
(b) the costs of and occasioned by the amendment;
are the parties' costs in the proceeding, in accordance with Rule 63A.17 of the County Court Civil Procedure Rules 2018 (the Rules).
9For the reasons set out below, I accept the defendant’s submission in part. I will order that the plaintiff pay the defendant’s costs on a standard basis to be taxed in default of agreement, of and incidental to:
(a) the plaintiff’s summons dated 20 August 2024; and
(b) the defendant’s costs thrown away by reason of the amendment to the statement of claim.
10However I do not accept the amount proposed to be fixed, or that the costs should be taxed earlier than the conclusion of the proceeding.
Issues
11The issues to be determined are:
(a) the application of r 63A.17 of the Rules, including what is meant by the phrase ‘the costs of and occasioned by the amendment,’ having regard to the recent authority of J.C. Jarol Pty Ltd & Anor v Novamex International LLC (J.C. Jarol);[4]
(b) whether the Court should depart from the default position in rule 63A.17
(c) whether the amount of costs should be fixed as proposed by the plaintiff, or taxed; and
(d) the timing of the taxation, having regard to r 63A.20.1 of the Rules.
[4]J.C. Jarol Pty Ltd & Anor v Novamex International LLC (Costs ruling) [2023] VSC 378 (‘J.C. Jarol’).
Legal context
The application of r 63A.17 of the Rules
12The parties acknowledge that the starting position is r 63A.17 of the Rules which provides that:
Where a pleading is amended (whether with or without leave) 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, unless the Court otherwise orders.
13There must be proper justification for the Court to make an order departing from the starting point of r 63A.17. However, the party that applies for the order does not bear an onus of demonstrating special or unusual circumstances. In J.C. Jarol, Associate Justice Irving stated:[5]
… 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.
[5]Ibid, 17 [50].
14The parties disagreed as to what is meant in r 63A.17 by ‘the costs of and occasioned by the amendment.’ Does the phrase include costs incurred prior to the date of the amendment (i.e. costs looking backwards, or costs thrown away), or only prospective costs (i.e. costs looking forward)?
15The plaintiff referred to the leading authority of Associate Justice Mukhtar in Edelman v Badower (Edelman),[6] and noted this has been followed in numerous decisions, including in this Court, those of her Honour Judge Burchell in Mancini Made Pty Ltd and LGS Solutions Pty Ltd[7] and Pathik v Bata & Ors (Pathik).[8] The position was summarised by Burchell J in Pathik[9] as follows:
In Edelman v Badower,[10] Associate Justice Mukhtar considered the meaning of the phrase “costs of and occasioned by the amendment” in r63.17 of the Supreme Court Rules 2015 (the equivalent to r63A.17 of the Rules). His Honour held that this phrase does not include costs incurred prior to the date of an amendment. Rather, r63.17 of the Supreme Court Rules 2015 is concerned with prospective or consequential costs. The conclusions of Mukhtar AsJ were more recently affirmed by Justice McDonald in Burke v Ash Sounds Pty Ltd (No 2)[11] and Justice Edelman in Cassimatis v Australian Securities and Investments Commission (ASIC).[12]
[6][2010] VSC 427 (‘Edelman’).
[7][2023] VCC 441.
[8](Costs) [2023] VCC 765.
[9]Ibid, 4 [14].
[10][2010] VSC 427, 9-10 [29]–[30].
[11][2019] VSC 290, 4 [11].
[12](2016) 334 ALR 350, 360 [56]–[57] (‘Cassimatis’).
16The defendant acknowledged those authorities, but referred to the more recent authority of J.C. Jarol,[13] where Associate Justice Irving noted that Edelman had been decided in the context of the previous wording of r 63.17. The Rule has since been amended, and in Associate Justice Irving’s view, the change in its wording is significant. Instead of a distinction between costs looking backwards and costs looking forwards, his Honour concluded that the Rule now encompasses all parties’ costs, including those thrown away. He held as follows:[14]
In Edelman v Badower (Edelman), 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, i.e.. 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’. 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.
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.
…
… 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.
[13]J.C. Jarol (n 5).
[14]Ibid, 15 – 16, 17 [43] – [44], [51] (emphasis added).
17At this point in time, I am not aware of any reported decisions referring to Associate Justice Irving’s reasons in J.C. Jarol.
18I accept the reasoning of Associate Justice Irving and agree that the amendment to the wording of the Rule is a significant factor in the differing opinions found in J.C. Jarol and in Edelman (and the subsequent authorities relying on Edelman). I adopt his Honour’s interpretation of the new version of the Rule: that it does not distinguish between costs looking backwards and costs looking forwards, and that there is no reason to exclude costs thrown away.
19If I am wrong about that, and r 63A.17 of the Rules does not confer power on the Court to award costs thrown away by reason of an amendment, I note that in any event, the Court has power to do so at any stage of the proceeding pursuant to r 63.03(1)(a) of the Rules.[15]
[15]Burke v Ash Sounds Pty Ltd (No 2) [2019] VSC 290 [12] (per McDonald J).
The amount of costs
20The defendant seeks both its costs of the plaintiff’s summons and the costs thrown away by reason of the amendment, on the basis that the plaintiff has been granted an indulgence and the defendant has incurred costs which have now been wasted.
21The assessment of costs thrown away is an exercise that looks back at the costs wasted by reason of the amendment.[16]
[16]Edelman (n 7) 11 [36].
22It is well established that “costs thrown away” are those costs that “have been reasonably incurred that relate to work done and wasted”.[17]
[17]Sobey v Commissioner of Taxation [2008] FCA 1621 [21] (per Kenny J); approved by Edelman J in Cassimatis (n 13) 360 [56].
23The question of whether costs are thrown away involves a causal enquiry. It is necessary to ask whether costs that were incurred would not have been incurred but for the relevant event, here: the amendment of the statement of claim.
24In Ziliotto v Hakim(No 2),[18] Justice Davies expressed it in this way:[19]
The enquiry must be directed to what costs were expended which would not have been expended had it not been for the adjournment and what prompted the need for the adjournment. I agree with Mukhtar AsJ’s analysis that “costs thrown away” is looking to past costs — compensation for work already done and wasted because of the adjournment, or amendment or error. It does not refer to costs which have not yet been incurred even though they would not have been incurred but for the adjournment.
[18][2012] NSWSC 1079, 16 - 17 [47].
[19]The judgment of Davies J was overturned in part on appeal in Zilliotto v Hakim [2013] NSWCA 359 however, not on this point.
The time for taxation of costs r 63A.20.1 of the Rules
25Further, costs are ordinarily taxed at the conclusion of proceedings, as set out in r 63A.20.1 of the Rules:
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
26Given the fact that interlocutory applications usually do not conclude a proceeding, the Court is not generally in a position to determine where costs should fall between the parties. However, the Court does maintain its discretion under r 63.20.1 to order that costs be taxed immediately. The discretion is not circumscribed in any way by the rule itself, although the discretion must be exercised judicially.[20]
[20]Dale v Clayton Utz (No 3) [2013] VSC 593, 3,13 [13], [60] (per Hollingworth J).
27In Dale v Clayton Utz (No 3) (Dale),[21] Hollingworth J referred to three broad reasons that may require a departure from the general rule concerning taxation. These are:
(a) the conduct of the unsuccessful party;
(b) the likely delay before the final completion of the proceeding; and
(c) the interlocutory application involving a separate or discrete issue.
[21]Ibid, 14 [65].
28In Setka v Honourable Tony Abbott MP (Setka),[22] the Court of Appeal, cited Dale and identified the following factors which potentially warrant a departure from the default position in r 63.20.1 of the Rules:
The discretion to order that the default position not apply is confined only by the principle that the discretion must be exercised judicially. But it has been held, depending upon the circumstances of the particular matter, that the default position may be upset where — (1) there is prospect of considerable delay in completion of the proceeding; (2) the issue the subject of the interlocutory order was discrete from what will finally require determinations; (3) the party against whom the substantive order was made was guilty of unsatisfactory conduct — described variously as “unreasonable” or “reprehensible”, or as involving a want of “competence and diligence”.
[22][2013] VSCA 376, 7 -8 [27] (‘Setka’); cited in Fairbank Haven Pty Ltd v Merkon Constructions Pty Ltd (No 2) [2024] VSC 104.
Analysis
29In the present matter the costs sought by the defendant are set out in a table included in the McKenna affidavit. They are largely costs already incurred which they say have been wasted as a result of the amendment, such as:
(a) drawing their defence and counterclaim and responding to the plaintiff’s reply;
(b) costs of attending two mediations; and
(c) costs incurred in responding to the plaintiff’s request for further and better particulars.
30They also include some costs already incurred which they say will be wasted if the trial is adjourned, such as:
(a) costs incurred in connection with filing and serving of subpoenas for the trial, which will have to be re-issued in the event of an adjournment; and
(b) costs incurred in obtaining the orders of 24 March 2023 and 1 December 2023 which will have been wasted if there is a further adjournment of the trial, as there will be a need to obtain further orders for conduct of the proceeding to trial.
Is there a basis to depart from r 63A.17 of the Rules?
31In determining whether there is proper justification to make an order departing from r 63A.17, the history of the proceeding is relevant. Having said that, I note that the defendant is not required to demonstrate special or unusual circumstances.
32The plaintiff commenced the proceeding on 2 May 2022, with a writ and statement of claim. The defendant filed their defence and counterclaim on 24 June 2022. Directions were made, including listing the proceeding for trial on 5 June 2023.
33On 12 October 2022 the defendant obtained judgment on its counterclaim, in default of the plaintiff filing a defence to counterclaim. That default judgment was set aside by consent by orders made on 11 November 2022. Further directions were made for the timing of pleadings, discovery and a mediation.
34The parties filed proposed minutes of consent orders on 22 March 2023, which included vacating the trial date of 5 June 2023, and setting a new timetable for discovery, expert evidence, subpoenas, witness outlines, court books and trial aids. The Court made those orders on 24 March 2023 and allocated a new trial date of 14 February 2024.
35The parties again filed proposed minutes of consent orders on 29 November 2023, which included vacating the trial date of 14 February 2024. These orders also allowed the defendant to file an amended defence and counterclaim, the plaintiff a reply, and set a new timetable for requests for particulars, additional discovery, expert evidence, further mediation, witness outlines, subpoenas, court books and trial aids. The Court made those orders on 1 December 2023 and allocated a new trial date of 18 November 2024.
36At the time the defendant advised of its intention to amend its defence and counterclaim in November 2023, the plaintiff had the opportunity to amend his pleading if he wished. It did not make its application to amend until August 2024.
37The parties have attended two mediations that were conducted on the basis of a pleading that the plaintiff now resiles from.
38The plaintiff concedes that the changes proposed by the plaintiff are substantial and may mean the work involved in drafting the original defence and amended defence is wasted.
39I accept the defendant’s submission that it has incurred significant costs over two years which will be wasted as a result of the amendment of the claim.
40I am satisfied that the lateness of the application to amend, the substantial nature of the amendments, and the significant amount of wasted costs incurred by the defendant, provide a proper justification to depart from the application of r 63A.17.
Should the amount of costs be fixed or taxed?
41Having said that, I am not prepared to accept the calculation of the amount put forward by the defendant’s solicitor in the McKenna affidavit. The amounts include items which may not be wasted, as the trial date of 18 November 2024 has not been vacated. These include:
(a) costs incurred in issuing subpoenas for the trial;
(b) costs incurred in obtaining the orders of 24 March 2023 and 1 December 2023.
42Further, the plaintiff has not accepted the amounts claimed for each of the items listed by Mr McKenna. Many of them are sizeable, such as $23,965.00 for the costs incurred in connection with the first mediation, $21,067.00 for the second mediation, $19,598.00 to draw the defence and counterclaim and respond to the plaintiff’s reply (all on a solicitor client basis).
43In the absence of the plaintiff’s consent, and noting the sizeable amounts for each item claimed, I am not prepared to fix the amount. I will order that the costs be taxed by the Costs Court, in default of agreement.
When should the costs be taxed?
44As for the timing of the taxation, I do not accept there is a sufficient basis to depart from r 63A.20.1 of the Rules, and to order that the costs of the interlocutory application be taxed before the proceeding is completed.
45Referring to the three relevant matters identified in Dale, the defendant submitted:
(a) the plaintiff’s conduct by delaying its application to amend until more than two years into the proceeding, without providing any real explanation for the delay, justifies a departure from the rule;
(b) there will be a significant delay before the completion of the proceeding; even if the trial goes ahead in November, judgment is unlikely until mid-2025;
(c) this interlocutory application involves a separate or discrete issue, being the complete amendment of the claim.
46In respect of the plaintiff’s delay, the plaintiff concedes that he did delay in making his application to amend. An explanation was provided by his solicitors in the affidavit of Sandakalum Wickramasinghe.[23] The reasons are sparse, but include issues with the volume of work required and the process of taking instructions. Further, and in any event, I note the Court of Appeal in Setka[24] indicated that when considering the plaintiff’s conduct, something more serious than a poorly explained delay may be required to found a sufficient basis to depart from the rule. In Setka,[25] the Court referred to “unreasonable” or “reprehensible” conduct, or as involving a want of “competence and diligence.” The plaintiff’s conduct in the present proceeding does not fall into those categories. Instead, the contrary may be true: the plaintiff properly agreed to, and has paid the previous costs order made on the setting aside of the default judgment.
[23]Affidavit of Sandakalum Wickramasinghe dated 19 August 2024, 3 [13] – [16].
[24]Setka (n 24) 7 – 8 [27].
[25]Ibid.
47As for the second factor, based on the information presently before me, I do not accept there will be a significant delay before the completion of the proceeding. The trial is listed to commence on 18 November 2024 and the defendant is keen to keep that trial date. The plaintiff had sought an adjournment of the trial, but this has been refused. I do not consider the time from trial to judgment to be a significant delay.
48As for the third factor, I do not accept that the plaintiff’s application involves a separate or discrete issue. As noted above, some of the costs thrown away will not be known until the final version of the statement of claim and further and better particulars are filed and the defendant has prepared its amended defence and counterclaim. While the amended statement of claim includes new and differently cast claims, some of the original pleading remains. At the present time it does not appear to me to be possible to isolate the amendments from the original claim, both in terms of calculating the costs applicable to the amendments and in dealing with the new claims during the trial. For that reason, I am not satisfied that the application can be said to involve a separate or discrete issue.
49Further, any reply that follows the amended defence may or may not be extensive, and the defendant’s costs of addressing it will not be known at this time. Any material put forward and negotiations which occurred during the two mediations may still be relevant to the ultimate resolution of the proceeding. Whether the trial date can be maintained is still a live question, and if the trial is adjourned before November 2024, the defendant may well have incurred further costs thrown away (such as issuing subpoenas and attending directions hearings, as set out above).
50For those reasons, I do not consider there are grounds to depart from r 63A.20.1 of the Rules. I will order that the costs of the interlocutory application are to be taxed on the completion of the proceeding.
51Lastly, for completeness, I note that the defendant had originally submitted that the proceeding should be stayed until the plaintiff paid its costs. However, the defendant no longer pursues that submission.
Conclusion
52Accordingly, I will order that the plaintiff pay the defendant’s costs on a standard basis to be taxed in default of agreement at the conclusion of the proceeding, of and incidental to:
(a) the plaintiff’s summons dated 20 August 2024; and
(b) the defendant’s costs thrown away by reason of the amendment to the statement of claim.
53There will be liberty to the defendant to apply for further orders in respect of costs thrown away if the trial listed for 18 November 2024 is adjourned as a result of the plaintiff’s conduct.
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Certificate
I certify that these 14 pages are a true copy of the ruling of her Honour Judge Kirton delivered on 9 October 2024.
Dated: 9 October 2024
Jessica Meaney
Associate to Her Honour Judge Kirton
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