Martyniuk v King (No 2)
[2000] VSC 441
•27 October 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL AND EQUITY DIVISION | Not Restricted |
No. 7115 of 1999
| Vladymir Martyniuk | Plaintiff |
| v | |
| Cecil King | First Defendant |
| and | |
| Illawong Retirement Living Pty Ltd | Second Defendant |
| and | |
| Illawong Retirement Equity Pty Ltd | Third Defendant |
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JUDGE: | McDonald J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Written submissions 9 and 17 October 2000 | |
DATE OF JUDGMENT: | 27 October 2000 | |
CASE MAY BE CITED AS: | Martyniuk v King and Ors (No.2) | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 441 | |
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Costs recovered by successful party sued as trustees.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr D. Christie | Corrs Chambers Westgarth |
| For the first Defendant | Mr P. Riches (Solicitor) | Mahony Galvin Rylah |
| For the second Defendant | Mr P. Bornstein | Efron & Associates |
| For the third Defendant | Mr P. Lustig (Solicitor) | Peter Lustig |
HIS HONOUR:
On 8 February 2000, the Listing Master ordered, inter alia, that the proceedings be listed for trial on 26 May 2000 with an estimated duration of three to four days. At that time the second and third defendants were represented by the same solicitors, Efron & Associates. On 24 May 2000 there was filed on behalf of the plaintiff a summons whereby the plaintiff sought leave to amend his statement of claim. That summons was returnable before the court on 26 May 2000. On that day orders were made by the court that the plaintiff have leave to amend his statement of claim. The amendment to the plaintiff’s statement of claim comprised the additions thereto of paragraphs 28 to 32 and an amendment to paragraph “B” of the plaintiff’s prayers for relief. By such amendment the plaintiff alleged that on 8 May 2000 the second and third defendants had made offers to the plaintiff in settlement of the plaintiff’s proceedings against them which offers were accepted by the plaintiff on 19 May 2000. The plaintiff sought specific performance against the second and third defendants of the agreement allegedly entered into between him and such defendants. It was alleged that the agreement was constituted by the plaintiff’s acceptance of offers made by the second and third defendants in settlement of the proceedings. On 26 May 2000 the second and third defendants appeared by separate legal practitioners wherein before that time they had been represented by the same legal practitioner. Shortly after 26 May 2000 there was filed on behalf of the third defendant a Notice of Change of Practitioner.
It appeared from the material placed before the court on 26 May 2000 that the solicitors for the plaintiff had been contending for some time that there existed a conflict of interest between the second and third defendants and that they should not be represented by the one solicitor but that each defendant should be separately represented. Before 26 May, the contention made on behalf of the plaintiff that there existed a conflict of interest between the second and third defendants had been resisted. However, on 26 May I was informed by counsel appearing for the second defendant that he had reassessed the position of each of the second and third defendants in the light of the plaintiff’s application to amend his statement of claim and to seek, pursuant to such amendment, orders against such defendants for specific performance of the alleged agreements that had been reached between the plaintiff and second and third defendants. Counsel appearing for the second defendant on 26 May 2000 informed the court that he had advised the second and third defendants that with respect to the relief then sought by the plaintiff pursuant to the amendments sought to his statement of claim there existed a conflict of interest between such defendants. As referred to on 26 May 2000, the second and third defendants were separately represented before the court.
The solicitor acting for the third defendant on 26 May 2000, informed the court that since agreeing to act for the third defendant, on the previous day, he had not had time to obtain full instructions from the third defendant. He informed the court that he wanted time to obtain instructions from the third defendant. Counsel then appearing for the plaintiff initially resisted that request on behalf of the plaintiff and pursued the plaintiff’s application to amend the statement of claim. On 26 May 2000, after some discussion a short adjournment was had to give the legal practitioners of the respective parties an opportunity to speak together. After the hearing was resumed the court was informed that agreement had been reached between the parties and that it had been agreed that the plaintiff’s summons be adjourned to enable the second and third defendants to file affidavits opposing the plaintiff’s claim made pursuant to the amendments sought to the statement of claim whereby it was alleged that settlement of the proceedings had been reached between the plaintiff and second and third defendants respectively which agreement was able to be enforced by the court.
The course then sought to be followed on behalf of the plaintiff was that orders be made giving leave to the plaintiff to amend his statement of claim and that amended defences be filed and delivered and that any affidavit sought to be relied on by the parties in opposition to the plaintiff’s claim for relief as constituted by the amended statement of claim be filed and served by such parties.
In the result, orders were made by the court granting leave to the plaintiff to amend his statement of claim and for the defendants to file and serve amended defences to the plaintiff’s statement of claim. It was ordered further, that the issues raised by the plaintiff’s amended statement of claim and by the amended defences of the defendants be tried before the trial otherwise of the proceedings. It was further ordered that the trial of those proceedings, that is, the proceedings constituted by the amendments to the plaintiff’s statement of claim and by amendments to the defences of the defendants, be adjourned to 9 June 2000. I ordered that the costs of 26 May 2000 and the costs of the plaintiffs and defendants consequent upon such amendments be reserved to the trial and determination of the issues raised by the amendments to the pleadings.
The trial of the proceedings as constituted by the amendments to the plaintiff’s statement of claim and by amendments to the second and third defendants’ defences to that amended statement of claim commenced on 9 June 2000 and concluded on 14 June 2000.
I delivered my judgment in those proceedings on 28 September 2000.
For the reasons expressed in my written judgment, I ordered that the proceedings of the plaintiff against the second and third defendants as constituted by the amendments to the plaintiff’s statement of claim be dismissed. I ordered and directed that otherwise the proceedings be referred to the Listing Master for her to fix a date for the trial of the proceedings in this action. On that day I ordered that the plaintiff pay the second defendant’s costs of the proceedings as constituted by paragraphs 28 to 33 of the plaintiff’s amended statement of claim and by amendments to paragraph “B” of the amended prayers for relief, including reserved costs. Counsel for the third defendant sought on behalf of his client an order that the plaintiff pay the third defendant’s costs of the proceedings as constituted by paragraphs 28 to 33 of the amended statement of claim and the amendment to paragraph “B” of the plaintiff’s prayers for relief including costs reserved relevant to those issues. Dispute arose as to this matter between the plaintiff and the third defendant. Accordingly, I reserved the question of costs as between the plaintiff and third defendant of the issues the subject of the trial to date and ordered and directed the plaintiff and third defendant to file and serve written submissions on this question of costs and any further material on which either party sought to rely relevant to this question. I have now received written submissions on behalf of each of the plaintiff and the third defendant together with affidavits relied on on behalf of each party.
In the proceedings which were constituted by paragraphs 28 to 33 of the amended statement of claim and by the amendment to paragraph “B” of the plaintiff’s prayers for relief, the third defendant was successful and such proceedings of the plaintiff against the third defendant failed. The third defendant seeks in respect of those proceedings an order for costs against the plaintiff and submits that it should have its costs against the plaintiff in respect of those proceedings including the costs of 26 May 2000 and that such costs should be ordered on an indemnity basis. On behalf of the plaintiff it has been submitted that in respect of the proceedings under consideration the third defendant should not have its costs against the plaintiff but should bear its own costs of those proceedings and that if costs are to be ordered against the plaintiff in favour of the third defendant then such costs should be on a party/party basis and not on an indemnity basis.
The issues arising on the question of costs in respect of the proceedings constituted by paragraphs 28 to 33 of the amended statement of claim and the amendment to paragraph “B” of the plaintiff’s prayers for relief give rise to a number of issues to be determined by the court at this point. The first is whether it should be ordered in the circumstances as existing, that the third defendant should have its costs of these proceedings against the plaintiff. The second issue is whether the third defendant, if it recovers its costs against the plaintiff, should have its costs in respect of 26 May 2000 that at present stand reserved. The third issue is in the event of the third defendant having its costs against the plaintiff in respect of these proceedings whether such costs should be on a party/party basis or on some other basis.
The power of the court to make an order for costs of and incidental to a matter in the court is vested in the court pursuant to s. 24(1) of the Supreme Court Act 1986. That power vests in the court a wide discretion as to costs which must be exercised by the court judicially. In Donald Campbell & Co v Pollak[1] Viscount Cave L.C.[2] said:
“A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the court awards them to him and the Court has an absolute and unfettered discretion to award or not award them. This discretion like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case.”
[1][1927] AC 732 at pp. 811-2
[2]At p.811
In my view there exists in the proceedings determined by the court to this point no circumstance which should cause me to exercise the court’s discretion other than to award costs in favour of the third defendant against the plaintiff. The question thus arises is whether such costs should be ordered in favour of the third defendant against the plaintiff on a party/party basis or on an indemnity basis and whether the costs so awarded should include the costs of 26 May 2000.
As previously referred to on 26 May 2000, the solicitor for the third defendant who had been retained by the third defendant on the preceding day sought an adjournment of the proceedings then before the court in order that he may obtain full and proper instructions from the third defendant. It was on 26 May 2000 that on the application of the plaintiff leave was granted to him to amend his statement of claim by adding thereto paragraphs 28 to 33 and by amending paragraph “B” of his prayers for relief. On such leave being granted to the plaintiff it was then necessary for the defendants to amend their respective defences in answer to the plaintiff’s amended statement of claim and to obtain instructions from their clients relevant to the claim then pursued by the plaintiff as constituted by such amendments to his statement of claim. It was as a consequence of the plaintiff being granted leave to amend his statement of claim on 26 May 2000 that the proceedings as constituted by such amendments did not proceed that day. In such circumstances the need for an adjournment of the proceedings did not arise in order that the solicitor for the third defendant may obtain instructions from his client, but rather the need for the adjournment arose directly out of the leave being granted to the plaintiff to amend his statement of claim. In such circumstances the solicitor for the third defendant had time and the opportunity to obtain full instructions from his client. In my view in the proceedings of the plaintiff against the third defendant as constituted by the amendments to the plaintiff’s statement of claim as I have referred to being unsuccessful against the third defendant that party should have its costs of those proceedings against the plaintiff including the costs of 26 May 2000 for it was on that day that the plaintiff, pursuant to leave granted to him, initiated the proceeding whereby the plaintiff alleged that his proceedings against the second and third defendants as pleaded in the unamended statement of claim had been settled as between him and the second defendant and the third defendant.
Ordinarily the court will order costs against a party to proceedings on a party/party basis. That such is the settled practice or ordinary rule of the court has been accepted by the court over a long period of time. It is reflected in Rule 63.31 of the Supreme Court (General Civil Procedure) Rules. That rule provides:
“Except as provided by these rules or any order of the court costs shall be taxed on a party/party basis.”
However, in the exercise of its discretion to award costs against a party the court may order costs on a measure higher than on a party/party basis if there exists circumstances which warrant the court from departing from the ordinary rule as to costs. The question that must be addressed in each case where costs are sought other than on a party/party basis is whether in the circumstances as existing justice requires that an order for costs be made other than on a party/party basis. If such circumstances exist then in the exercise of the court’s discretion it would be appropriate for an order to be made for costs otherwise than on a party/party basis.[3]
[3]Spencer v Dowling [1997] 2 VR 127 Winneke P, at p. 147
The bases of taxation of costs as provided by Rule 63.28 is that on taxation of costs they shall be taxed on:
“(a) a party/party basis;
(b) a solicitor/client basis; or
(c) such other basis as the court may direct.”
The distinction between the taxation of costs on a party/party basis as against a solicitor/client basis is that which is provided by Rule 63.29 and Rule 63.30. Those rules state:
“63.29 Party/Party Basis
On a taxation on a party/party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of a party whose costs are being taxed shall be allowed.
63.30 Solicitor/Client Basis
On a taxation on a solicitor/client basis all costs reasonably incurred and of reasonable amount shall be allowed.”
The question that arises in the circumstances of this case and in respect of the proceedings determined by the court to this point of time is whether there exists any circumstances which ought to warrant the court ordering costs in favour of the third defendant against the plaintiff on a basis other than a party/party basis.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd,[4] Woodward J, after referring to Australian Guarantee Corporation Ltd v de Jager,[5] in which Tadgel J allowed solicitor/client costs on finding that the pursuit of the action had been a “high-handed presumption” said[6]:
“I believe that it is appropriate to consider awarding ‘solicitor/client’ or ‘indemnity’ costs whenever it appears that an action has been commenced or continued in circumstances where the applicant properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of known facts or clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”
[4](1988) 81 ALR 397
[5][1984] VR 843,
[6]At p. 401
In J-Corp Pty Ltd v BLF (No.2)[7] French J[8] after referring to Fountain Selected Meat said:
“Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award costs that, for whatever reason, a party persists in what should on proper consideration, be seen as a hopeless case.”
[7](1993) 46 IR 301
[8]At p. 303
In Botany Municipal Council v Secretary, Department of Arts, Sport, Environment, Tourism and Territories[9] Gummow J referred to that which was said by Woodward J in Fountain Selected Meats, said[10]:
“… I accept that the discretion conferred by s. 43 [of the Federal Court of Australia Act 1977 (C’th)] is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party.”
[9](1992) 34 FCR 412
[10]At p. 415
It is an accepted fact that a successful defendant who recovers costs against an unsuccessful plaintiff will be out of pocket notwithstanding that such defendant has been successful in the action instituted by the plaintiff. That such is the case has on occasions been said to work an injustice against a successful defendant. The practice of awarding a successful party costs on a party/party basis was said by Winneke P in Spencer v Dowling[11] to be a practice which “is designed to reflect a compromise between the interests of a successful and unsuccessful litigant”.
[11]At p.147
It is not submitted on behalf of the third defendant that the plaintiff ought to have known that his case against the third defendant, pursuant to the amendments to his statement of claim, was hopeless nor is it suggested that the plaintiff pursued proceedings against the third defendant for some ulterior motive. However, to the extent that the third defendant as trustee of the trust will be out of pocket if it only recovers against the plaintiff party/party costs in the proceedings as constituted by the amendments to the plaintiff’s statement of claim will not only be “visited” on the plaintiff as a unit holder of the trust but it will also be “visited” on the other unit holders in the trust, namely, the first and second defendants. In such circumstances I consider that there exists circumstances which should oblige the plaintiff to pay to the third defendant its costs of the proceedings as constituted by the amendments to the plaintiff’s statement of claim on a solicitor/client basis. That such costs may be ordered where a party is sued as a trustee is provided by R. 63.32(2)(b).
In the result I order that the plaintiff pay to the third defendant its costs of the proceedings against it as constituted by the amendments to the plaintiff’s statement of claim including the costs of the third defendant of 26 May 2000, such costs to be taxed on a solicitor/client basis.
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