Mathieson Nominees Pty Ltd v AJH Lawyers Pty Ltd t/a AJH Lawyers Barristers and Solicitors
[2017] VSC 377
•27 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2015 05894
| MATHIESON NOMINEES PTY LTD | First Applicant |
| IAN MATHIESON | Second Applicant |
| v | |
| AJH LAWYERS PTY LTD T/A AJH LAWYERS BARRISTERS & SOLICITORS | Respondent |
---
JUDGE: | EFTHIM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 and 2 March 2017 |
DATE OF JUDGMENT: | 27 June 2017 |
CASE MAY BE CITED AS: | Mathieson Nominees Pty Ltd & Anor v AJH Lawyers Pty Ltd t/a AJH Lawyers Barristers & Solicitors |
MEDIUM NEUTRAL CITATION: | [2017] VSC 377 Second Revision: 9 August 2017 |
---
CIVIL PROCEDURE – Whether breach of sections 19, 20, 21, 22, 23, 24, 25 of Civil Procedure Act 2010 (Vic) – Overarching obligations – Unfounded allegations – Conduct causing undue delay and expense – Review invoked to prevent or delay taxation of costs – Unmeritorious issues raised.
---
APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr D Williams QC | Victorian Legal Cost Assessors |
| For the Respondents | Mr A Sandbach | AJH Lawyers |
HIS HONOUR:
On 17 November 2015 the applicants, Mathieson Nominees Pty Ltd and Ian Mathieson, issued a summons for taxation to quantify the costs ordered in their favour against the respondent, AJH Lawyers Pty Ltd. Orders for costs have been made against the respondent by Gourlay JR, Wood AsJ, McDonald J and the Court of Appeal. The applicant has filed a bill of costs claiming $421,109.43. That bill is currently before the Costs Court and is yet to be taxed.
In relation to that bill, on 31 August 2016 Gourlay JR ordered:
1.The Respondent’s application that the appearance of Mr Williams QC be refused is dismissed.
2.The Respondent’s application that it have leave to cross-examine Mr Alan Mathieson in relation to his affidavits sworn on 15 July 2016 and 27 July 2016 is dismissed.
3.The Respondent’s Notice to Produce dated 26 July 2016 is dismissed.
4.The Respondent’s application for Orders seeking declarations, that the Summons for Taxation and the bill of costs be stuck [sic] out and orders for costs in its favour as contained in the Notice of Applications dated 22 July 2016 are dismissed.
5.Pursuant to the Orders made 30 June 2016 I will extend the time for the Respondent to file and serve a Notice of Objection to the bill of costs to 15 October 2016.
6.The taxation of the bill of costs dated 16 November 2015 is listed for 28, 29 and 30 November 2016 and 1 and 2 December 2016.
7.The cost of each of the respondent’s applications, including costs of 30 June 2016, 20 July 2016, 28 July 2016 and 5 August 2016 are reserved.
On 14 September 2016, a notice of review was filed by the respondent which seeks to review paragraphs 1, 2, 3, 4 and 7 of those orders.
On 21 September 2016, Gourlay JR ordered:
1.The Respondent pay the Applicants’ costs of the applications from 4 May 2016 to 21 September 2016 on a standard basis.
2.The Applicants have leave pursuant to Order 63.20.1 to tax the costs immediately.
3.The Respondent file and serve a Notice of Objection to the bill of costs by 15 October 2016.
4.The bill of costs be assessed on the papers pursuant to Order 63.86.
The review was listed before me on 24 November 2016. On that date senior counsel for the applicants informed the Court that an application would be made that there had been breaches of the Civil Procedure Act 2010 (‘CPA’) by the respondent. Orders were made for the applicants to provide particulars of the breaches of the CPA and further orders were made for the filing of affidavit evidence.
On 16 December 2016, this application was listed for hearing and was adjourned on an application by the respondent to 1 March 2017 as I was of the view that the matter could not be concluded prior to the Christmas break and should be heard in one sitting of the Court.
The relief sought by the applicants is for the review to be dismissed without a hearing. The application pursuant to the CPA must therefore be determined first prior to any review.
The applicants allege that the respondent has breached the following provisions of the CPA:
- Section 19. Overarching obligation to only take steps to resolve or determine dispute;
- Section 20. Overarching obligation to cooperate in the conduct of civil proceeding;
- Section 21. Overarching obligation not to mislead or deceive;
- Section 22. Overarching obligation to use reasonable endeavours to resolve dispute;
- Section 23. Overarching obligation to narrow the issues in dispute;
-Section 24. Overarching obligation to ensure costs are reasonable and proportionate; and
-Section 25. Overarching obligation to minimise delay.
The applicants rely on three affidavits sworn by Sergey Sizenko, principal of Victorian Legal Costs Assessors, solicitors for the applicants, sworn on 20 September 2016, 23 November 2016 and 29 November 2016. In response the respondent relies on the affidavit of Edward Charles Foxall Cormie, solicitor, sworn 13 December 2016.
Mr Cormie was cross-examined in relation to the contents of his affidavit. An application was made to cross-examine Mr Sizenko but was deemed not necessary as the respondent was successful in having parts of Mr Sizenko’s affidavits struck out. Mr Cormie was in my view a truthful witness who answered questions put to him to the best of his ability.
Background
Part of the background to this application has been summarised by the Court of Appeal in AJH Lawyers v Mathieson Nominees Pty Ltd.[1] Hansen and McLeish JA said:
AJH rendered three bills of costs in the total amount of $35,709.10 in February and March 2012. Mathieson filed and served a summons for taxation in respect of those bills of costs. After extensive hearings, including the hearing and determination of a matter referred to a judge in the Trial Division pursuant to r 63.51 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’), Gourlay JR ordered on 17 February 2014 that AJH pay Mathieson the sum of $1,000 in respect of the bills of costs. Gourlay JR then heard submissions as to costs and ordered that AJH pay Mathieson 50 per cent of their costs of the proceeding, save for the costs of the referral to the Trial Division and the costs of 17 February 2014. No order was made as to AJH’s costs.
AJH purported to seek reconsideration of the decision of Gourlay JR by filing a notice of application for reconsideration pursuant to r 63.56.2 of the Rules. The only aspect of the decision which was the subject of challenge was the orders in respect of costs. In their place, AJH sought an order wholly ‘disallowing’ Mathieson’s costs and ‘allowing’ its own costs in full. It is not now in issue that the notice was ineffective as a notice under r 63.56.2 but that it was properly treated in the Costs Court as an application for review by a Costs Judge pursuant to s 17HA of the Supreme Court Act 1986. The relevant provisions are set out later in these reasons.
Wood AsJ, the Costs Judge constituting the Costs Court, dismissed the application on 26 June 2014. In doing so, he held that the costs order of Gourlay JR could only be overturned if ‘clear error’ was demonstrated. AJH then appealed pursuant to s 17I of the Supreme Court Act to a judge sitting in the Trial Division. That appeal raised 14 grounds, all of which were dismissed. Most of those grounds are not pressed in the present application for leave to appeal.
[1][2015] VSCA 227 [2]-[4].
The Court of Appeal dismissed an appeal from the decision of McDonald J and an order was made that the respondent pay the applicants’ costs. The parties were ordered at the commencement of the appeal to provide the Court with submissions regarding breaches of the CPA. The Court of Appeal did not deal with that issue.
The respondent then sought special leave from the High Court to appeal the decision of the Court of Appeal. That application was dismissed and costs were awarded in favour of the applicants. I am advised that those costs have not been taxed and the High Court is waiting to see what happens in the case before this Court prior to taxing those costs.
According to Gourlay JR, the bill of costs which claims $421,109.43 can be roughly divided as follows:[2]
[2]Ruling 31 August 2016 Gourlay JR at [2].
(a)costs in relation to the costs review are claimed at $174,913.23, of which 50% is payable, therefore total claim is $87,565.15;
(b)costs in relation to the orders of 16 February 2015 and 26 August 2015 are claimed at $212,998.81 and disbursements are claimed at $91,402.60, being a total of $304,401.41. These sums can be further divided:
(i)items relevant to the order of Associate Justice Wood made 26 June 2014 claim $48,253.16 for professional costs and $916.20 for disbursements, being a total of $49,169.36;
(ii)items relevant to the order of Justice McDonald made on 16 February 2015 claim $55,370.74 for professional costs and $33,344.00 for disbursements, being a total of $88,714.74;
(iii)items relevant to the order of the Court of Appeal made 26 August 2015 claim $66,345.15 for professional costs and $57,142.40 for disbursements, being a total of $123,487.55; and
(iv)item 1490 claims a loading to the professional costs in items 604 – 1489 of 25%, being the sum of $42,599.76; and
(c)the final part of the bill is a claim for the costs of the taxation claim $28,889.90 for professional costs and $361.50 for disbursements, being a total of $29,251.14.[3]
[3]Of this sum $22,110.00 is a claim for the costs of drawing and engrossing the bill of costs.
The applicants do not rely upon the background prior to the taxation before Gourlay JR to found their claim under the CPA. Their complaint is in relation to the conduct of the respondent before Gourlay JR commencing with the current taxation. The respondent on the other hand contends that the background is relevant to demonstrate that there has been no breach of the CPA.
The alleged breaches of the Civil Procedure Act 2010
Section 19 of the Civil Procedure Act
Section 19 of the CPA provides:
19Overarching obligation to only take steps to resolve or determine dispute
For the purpose of avoiding undue delay and expense, a person to whom the overarching obligations apply must not take any step in connection with any claim or response to any claim in a civil proceeding unless the person reasonably believes that the step is necessary to facilitate the resolution or determination of the proceeding.
The applicants allege four breaches of the CPA by the respondent. The applicants contend that in breach of the overarching obligation contained in s 19, the respondent has made unfounded allegations that:
(a) since the commencement of this proceeding (the taxing of the costs before Gourlay JR), the applicants have breached their obligation to keep costs proportionate to the subject matter of the dispute;
(b) the applicants have breached the cost indemnity principle;
(c) the applicants’ lawyers have engaged in improper fraudulent practices; and
(d) are otherwise acting improperly.
The applicants contend that the purpose of making these allegations by the respondent has not been to facilitate the resolution or determination of the proceeding but rather has been to delay the resolution and determination of the proceeding and/or to make the continuation of the proceeding more costly and burdensome to the applicants so as to deter them from pursuing it.
(a) Unfounded allegations re proportionality
On 16 May 2016, the taxation of the costs was listed before Gourlay JR. In her reasons for decision on 1 June 2016, Gourlay JR stated:
Counsel further submitted that no sensible client would have, at the start of the proceeding, agreed to pay for all the costs that followed the issue of the initial summons for taxation and that the applicants should have walked away from the proceedings and never questioned the respondent’s bill of costs. This submission is, in my view, both unreasonable and wrong.[4]
[4]Mathieson v AJH Lawyers Pty Ltd (Unreported, Gourlay JR) 1 June 2016 at [22].
The applicants refer to the submission made to Gourlay JR by counsel for the respondent and the objection made by the respondent to the applicants’ bill of costs as an unfounded allegation.
The applicants submit that at the time the applicants decided to have the bill taxed they did not know they were going to get caught up in an eight day taxation. They only agreed to have $1,000.00 taxed off a $35,000.00 after eight days of taxation when they had enough of the process. I agree with the Judicial Registrar that the submission was unreasonable. I accept that no client would know that it would take eight days to tax a bill of costs for $35,000.
The applicants also refer to a statement made in the Notice of Objections to the Applicants’ Bills of Costs as another unfounded allegation. The respondent made the following objection:
In any event, the amount of costs and disbursements totalling $421,109.43 in the bill of costs dated 16 November 2015 is manifestly absurd, excessive, disproportionate, greedy, unreasonable, unnecessary, and, if the Applicants have paid or incurred and are liable to pay costs equalling or in excess of what is clamed in the Applicants’ bill of costs dated 16 November 2016, it is in contravention of the statutory obligations of the Applicants (Mathieson) and the legal practitioners acting for the Applicants (Mathieson) under the Civil Procedure Act 2010 (Vic), and constitute professional misconduct of the legal practitioner acting for the Applicants (Mathieson) under the Legal Profession Act 20014 (Vic), and / or the Legal Profession Uniform Law Application Act 2014 (Vic), specifically, the costs and disbursements amounting to:
1.$174,913.23 (50% reduction pursuant to order of Gourlay JR) for the taxation of the Respondent’s bills of costs before Gourlay JR, in circumstances, where the Respondent’s bills of costs was the total sum of $35,709.10, and where the Applicants (Mathieson) in real terms achieved nothing. The Applicants (Mathieson) have completely failed, by getting only a de minimis reduction of $1,000 from the Respondent’s bills of costs in the sum of $35,709.10, being only a 2.8% reduction. Put another way, the Applicants are claiming over four (4) times the total amount of the costs, in circumstances, where on any view, incurring $174,913.23 in costs is patently absurd, disproportionate and greedy by the Applicants (Mathieson) and their legal practitioner, and over one hundred and seventy four (174) times the de minimis reduction of $1,000 from the Respondent’s disputed costs. The ludicrous nature of the claim by the Applicants (Mathieson) that they have paid or incurred $174,913.23 in costs to achieve nothing in real terms, by getting a de minimis reduction of $1,000 from the Respondent’s bills of costs in the sum of $35,709.10 is self-explanatory to demonstrate that the Applicants (Mathieson) have completely failed.
2.$49,169.16 (excluding the 25% loading claimed) for the review of the determination of Gourlay JR before Wood AsJ, in circumstances where only four (4) months elapsed between the determination of Gourlay JR and the decision of Wood AsJ, minimal work should have been required by the Victorian Legal Cost Assessors to prepare for the review before Wood AsJ, there were no interlocutory applications, and the final hearing should have run for less than 1 day.
3.$90,508.48 (excluding the 25% loading claimed) for the appeal to McDonald J, in circumstances where the Respondent undertook all the work to prepare the Appeal Book and the Authorities Book, there were no interlocutory applications, and the final hearing only ran for 1 day.
4.$122,198.81 (excluding the 25% loading claimed) for the application for leave to appeal and the appeal to the Court of Appeal, in circumstances where there were three (3) discrete grounds of appeal, the arguments were essentially the same as those before McDonald J (as submitted by the Applicants’ lawyers), the Respondent carried out the work to prepare the Application Book and the Authorities Book, the application for leave to appeal and the appeal were heard at the same time, and the hearing only ran for 1 day.
Further, out of the $122,198.81 claimed for the Court of Appeal proceedings, $57,142.40 is counsel fees and other disbursements, which is manifestly disproportionate and unreasonable given the total amount of costs and disbursements claimed, particularly given that senior counsel was at times performing administrative tasks and work not requiring legal skill, which would usually be performed by a solicitor, but for the absence of the Applicants’ solicitor for a time during the Court of Appeal proceedings.
The amount of costs and disbursements claimed in the Applicants’ bill of costs dated 16 November 205, being $421,109.43, is disingenuous, clearly absurd and ludicrous for the nature of the legal proceedings for which the costs are being claimed. If the Applicants (Mathieson) wish to indulge themselves in luxuries, on the assumption that the Applicants (Mathieson) have paid costs or incurred costs equal to or exceeding $421,109.43, such luxuries lie where they fall, as such luxuries are not allowable and are solely the liability of the Applicants (Mathieson).
In cross‑examination of Mr Cormie, Mr Williams QC on behalf of the applicants put the history of this matter to Mr Cormie and referred to the objection referred to above. The evidence given by Mr Cormie is as follows:
MR WILLIAMS: Could I take you to C in this document. Are these words ‘manifestly absurd, excessive, disproportionate, greedy, unreasonable, unnecessary’, all of these adjectives, are they matters which Mr Ho directed you to include?---Yes.
Did he also direct you to include an allegation that it was in contravention of the statutory obligations of both the client and the lawyers?---Yes.
And that it was professional misconduct or – yes, that it is professional misconduct?---Yes.
Could you tell us what the basis of all of those allegations is?---The amount claimed in costs.
You do know don’t you that the amount claimed in costs involves a number of discrete legal proceedings including an entire review proceeding – the proceedings before Judicial Registrar Gourlay as to part, because of course there was a partial order. the whole proceeding before Wood AsJ, the whole proceeding before McDonald J and the whole proceeding in the Court of Appeal?---Yes.
How is it manifestly absurd, excessive, et cetera for the costs of all of those processes, taken together, to come to more than $400,000?---The argument has always been on the basis that the initial dispute was over $35,000 worth of bills where $1,000 was ordered to be – or taxed off in the terms.
Doesn’t that rather overlook that Mathieson Nominees has not been the moving party in any but the very first of those processes?---Well, the fact that they were the moving party in the first process, without that none of the rest of it follows.
Sure, but the $421,000 by and large wasn’t incurred then, most of it certainly wasn’t, was it?---No.
It was your client’s decision to make a referral to Ferguson J wasn’t it?---Yes.
And it was your client’s decision not to do that until after a couple of days taxation had passed since the ruling which you took up to Ferguson J?---Yes.
It was your client’s decision to seek a review before Wood AsJ?---Yes.
And your client’s decision to go to McDonald J?---Yes.
Your client’s decision to go to the Court of Appeal?---Yes.
And then indeed in turn of course, beyond what we’re talking about now, your client’s decision to seek special leave in the High Court?---Yes.
In those circumstances how can it make any sense at all to assert that the opponent, who has been the respondent in all of those procedures, is the one acting absurdly, excessively, disproportionately, greedily, et cetera in causing this high level of cost to be incurred? How can that make sense? Explain it to His Honour please, I’m sure His Honour would love to hear?---On the basis that the amounts claimed are substantial for the amount – for – for instance, the review before Wood AsJ, $49,000, it was a two day hearing, it was effectively – it was – the argument has always been that based on the original – considering what the original dispute was incurring $421,000 in costs over all the proceedings was excessive and not proportionate.
Just on the subject of adjectives, can I go a bit further into this document, further into C on p. 3. You said that – the earlier adjectives I went to – you were instructed by Mr Ho to include, does that occur also within the middle of one, ‘patently absurd, disproportionate, greed’, and three lines further down, ‘ludicrous’. Is that all subject to instruction from Mr Ho, that those epithets should be added?---I believe so, yes, I’d have to check the original drafts.
Then on p. 4 to the same effect, at the top, four lines down, ‘disingenuous, clearly absurd and ludicrous’, are they in the same category?---I believe so but, again, I’d have to double check.
HIS HONOUR: So you prepared this notice and he settled it, is that what happened?---Yes.
MR WILLIAMS: Do you think that the use of extreme language of that kind and the making of serious allegations of misconduct in those terms is conducive to the effective process of the court in a civil proceeding of this kind?---The firm – it was the firm’s position, whether or not it was conducive to resolving it, it was decided it needed to be put.
And it needed to be put in those terms?---Yes.[5]
[5]T99-102.
Mr Ho is a principal of the firm which employs Mr Cormie and was a partner of the firm engaged to do the work. Mr Ho has not sworn an affidavit in this matter but it was he that was giving instructions as to how the taxation should be conducted. That is clear from the evidence of Mr Cormie.
The respondent denies that the allegations are not unfounded for the reasons summarised in submissions that were given to the Court of Appeal relating to breaches of the CPA. In those submissions the respondent stated:
This litigation was commenced by the present Respondents who chose, after paying them, to dispute in the Costs Court almost every item of the three bills for legal services which had been rendered by the Applicant. The Respondents conducted the litigation as follows, which caused unnecessary costs to be incurred by the parties and also caused unnecessary amount of time to be spent on prolonged the matter: (a) They began by alleging that the Applicant’s bills were not in itemised form and subsequently conceded that the bills were in fact in itemised form; (b) They objected to 236 out of a total of 273 items in the Applicant’s bills as well as making 3 general objections that were baseless; (c) They made extensive serious allegations, wrongly, that the Applicant had breached its obligations under the Legal Profession Act 2004 (“LPA 2004”), and that the Applicant had not complied with its disclosure requirements under the LPA 2004, which was ultimately rejected by the Judicial Registrar; (d) They failed to cooperate with the Applicant to arrange an appropriate and reasonable time for the Respondents’ cost consultant to inspect the Applicant’s file and made unreasonable demands of the Applicant in relation to the inspection; (e) They made false allegations in relation to the content of the Applicant’s file that was made available for inspection; (f) They failed to limit the scope of their objections to the bills after inspecting the Applicant’s file; (g) They filed false and scandalous affidavits, parts of which were struck out, which required the Applicant to file affidavits in response; (h) They opposed the Applicant’s interpretation of sections 3.4.44 and 3.4.44A of the LPA 2004 during the taxation before the Judicial Registrar and opposed the referral of the question of the meaning of those provisions to a Judge, only to abandon their position at the hearing before Ferguson J; (i) They continued to file and served excessive objections at the re-hearing afresh of the taxation following the judicial determination by Ferguson J establishing that the Judicial Registrar had erred, despite being asked by and then ordered by the Judicial Registrar to limit the scope of their objections which conduct prevented the taxation of any individual items at the re-hearing afresh.[6]
[6]Paragraph 4.
I agree with Gourlay JR that the submission made to her was unreasonable and wrong. I am also of the view that the language used in paragraph C of the Notice of Objections is inappropriate.
I do note that the applicants received only 50% of their costs before Gourlay JR. There is no doubt that the cost incurred to undertake an eight day taxation for a bill of $35,000.00 are not proportionate. It would appear from the decision of the Judicial Registrar that it is likely that the respondent is more to blame as the Judicial Registrar awarded the applicants 50% of their costs of the taxation. That does not mean that the applicants will not share some of the blame because they were not awarded 100% of their costs. The real issue here is the harsh allegations contained in paragraph C of the Notice of Objections. There is no foundation for saying that the applicants have contravened the statutory obligations of the Legal Profession Act 2004. Most of those costs relate to applications made by the respondent which were defended by the applicants.
The Costs Court was required to deal with these unfounded allegations and some time must have been spent in dealing with these allegations. Those allegations were not necessary to facilitate the resolution of the dispute. A party could not possibly believe these allegations would facilitate the resolution of proceedings. This conduct would have caused a delay, albeit a small one to the determination of the taxation. It is a breach of the CPA.
(b) Breach of the Cost Indemnity Principle
In her Reasons on 1 June 2016, Gourlay JR in relation to the production of documents to the respondent said:
At present, the costing arrangements and method of charging by the legal practitioners for the applicants is unknown. The taxation of the costs orders has not commenced and the amounts payable pursuant to each costs order is therefore unknown. The respondents speculated about these arrangements and whether there is a breach of the indemnity principle. As a first step they seek the production of various documents they allege will assist them in arguing that the breach exists. The documents sought are wide-ranging and based on what appears to be wild speculation of side agreements and attempts to increase costs or recover costs that the applicants are not entitled to. In my view, the only reasonable step the Court can take is to order production of relevant documents being costs agreements, disclosure statements and bills and receipts for the costs and disbursements charged to and paid by the applicants as detailed in paragraph 2.
According to the applicants, the disclosure documents and costs agreement did not prove the costs indemnity principle has been breached and there was no basis to say that they would have. They rely on the comments of the Judicial Registrar regarding wild speculation of side agreements and attempts to increase costs to recover costs to which the applicants are not entitled.
In Shaw v Yarranova Pty Ltd[7] the Court of Appeal considered the costs indemnity rule. The Court of Appeal stated that an unsuccessful party may wish to investigate the scope of the successful party’s obligation to pay the solicitors costs by reference to the retainer of the successful party’s solicitors.
[7][2011] VSCA 55 at [23].
In relation to the production of documents in order to challenge costs on the basis of the cost indemnity rule, Mandie JA said:[8]
Once it is recognised that it will ordinarily be presumed in the case of a solicitor who acts on the record for a party that there is a retainer and that the party for whom the solicitor acts is liable for the solicitor’s costs notwithstanding that the party is indemnified by another for the payment of those costs, there was nothing before the Costs Judge that made it likely that any of the material sought by the applicant would advance the contention that the indemnity principle had been displaced. The evidence did not raise the likelihood that the costs that had been or were to be paid were less than those that had been taxed. Beach J correctly concluded that the applicant was on a ‘fishing expedition’ to determine whether there may be relevant retainer documents or indicia of payment that might support an argument that the indemnity rule did not in whole or part apply.
By contrast, in Kuek v Devflan Pty Ltd there were circumstances placed before the Costs Judge which gave him reason to order the production of retainer letters and costs agreements.[9] The material was there sufficient to raise the likelihood that the party/party costs may have exceeded the successful party’s actual liability to its lawyers.[10] But there must be evidence before the Costs Court that renders it likely that the indemnity principle has either in whole or part been displaced.
[8]Ibid [27]-[28].
[9][2011] VSCA 25, [60].
[10]Ibid [70].
When the taxation commenced before Gourlay JR there was no evidence before the Costs Court that it was rendered likely that the cost indemnity principle had been displaced. There is nothing before me to demonstrate that there was more than mere speculation by the respondent that the costs indemnity principle had been breached. I note that at paragraph [24] of her Reasons of 1 June 2016, the Judicial Registrar said:
The respondent also seeks any ‘Blyth’[11] disclosures, however these disclosures are relevant to the costs payable by the client on a solicitor own client taxation and not costs of a party party taxations as is the case here. The allowances for Counsel’s fees and other disbursements will be determined on the basis provided by Order 63.28 at the time the work was done.
[11]Re Blyth & Fanshawe (1882) 10 QBD 207 (‘Blyth’).
A Blyth disclosure can only be relevant if the taxation relates to a taxation of a solicitor client bill. It is not relevant to the taxation of costs on a party party basis which was the basis upon which Gourlay JR was taxing the bills before her. One must therefore question why the respondent was seeking a Blyth disclosure.
On 30 June 2016, orders were made by the Judicial Registrar for the applicants to provide affidavits regarding the indemnity principle. Gourlay JR said:
Argument about the retainer of each lawyer is based on the evidence of costs agreements and other documents of retainer. The presumption is lawyers are retained even where there is no written agreement for payment of reasonable legal fees. Here, the respondent has argued that the affidavits and other documents produced are not good enough. However, on 30 June 2016 the respondent’s counsel advised the Court that an affidavit stating the applicants’ liability to pay would be satisfactory. There was no rider put on this and the affidavit was ordered and sworn. In my view cross-examination of Mr Mathieson would not provide any further information that would assist the Court in considering the argument of the question of whether the indemnity principle has been breached. The presumption of retainer is the question for decision and the respondent must demonstrate that there is no liability to pay any of the lawyers. The costs of Armytage in the bill of costs are very small and the bulk of the costs relate to Sizenko and counsel.
The applicants submit that the affidavits were plainly intended to put an end ‘once and for all’ the question about the indemnity principle and the obligation to pay.
In her reasons,[12] Gourlay JR summarised the contents of Mr Mathieson’s affidavit as follows:
[12]Reasons of Gourlay JR dated 31 August 2016 at [9].
(a)He is a director of the company and he swears the affidavit on both his behalf and on behalf of his brother Ian who is the second applicant[13] and also a director of the first applicant;
(b)At that time Ian Mathieson was holidaying in North Queensland and had intermittent access to mobile telephone coverage. Ian read a draft of the affidavit and advised his brother that he approves the contents[14];
(c)That the applicants engaged Samuel Armytage (‘Armytage’) to review the AJH bills of costs in April 2012.[15]
(d)Armytage did not enter into a costs agreement as Armytage has for many years acted for the Mathieson interests as their lawyer. They do not generally receive a costs agreement, they receive bills of costs when the work is completed and the bills are paid.[16] The affidavit states that the applicants do not ‘dispute that Armytage is entitled to charge us for his work at whatever rate is appropriate under the scales of costs normally applicable to lawyers in Victoria’.
(e)In April 2012 the applicants engaged Victoria Legal Costs Assessors (‘Sizenko’) to act in the Costs Court matter.[17] Sizenko provided a costs agreement which the applicants accepted by continuing to give instructions in the costs review and the Mathiesons believed that the costs agreement continued for each stage of the matter. The costs agreement provided for charging on the Supreme Court scale. No further costs agreement was given at any stage.
(f)In February 2013 in an attempt to end the cost review the applicants sought advice from Sizenko about making an offer. Sizenko advised that any offer made should include the respondent paying the costs of the taxation. In the context of these instructions Sizenko advised that if any offer was accepted at that time he would limit his costs to ‘whatever sum was recovered from AJH as to the costs of the taxation’[18]. A number of offers were made but not accepted and Sizenko’s offer lapsed.
(g)After AJH initiated appeal to the Court of Appeal Sizenko again offered to limit his costs of the appeal to the amount recovered (if any) from AJH.[19] This offer remains in effect and is relied on by the applicants.
(h)The affidavit at paragraph 19 states ‘Sizenko is entitled to be paid by Mathieson Nominees for all of his work, subject only to the limitation that he is not entitled to seek payment in relation to his work for the Court of Appeal phase in any greater sum than is recovered from AJH for that work’.
(i)In relation to the fees of Mr Williams QC[20] (‘Williams’), he was engaged by Sizenko initially to appear on 11 February 2013 to argue issues on [sic] arising during the cost review and then on each of the appeals. Williams rendered two invoices, the first of which has been paid and the second is part paid. There was ‘no agreement, arrangement or understanding with Williams which could eliminate his entitlement to charge and be paid by Mathieson Nominees at his usual professional rates, for all his work for us in this matter, at every stage of the process to this day and continuing’.[21]
[13]Affidavit of Alan Ross Mathieson sworn 15 July 2016 (‘First affidavit’) paragraph 1 and second affidavit of Alan Ross Mathieson sworn 27 July 2016 (‘Second affidavit’).
[14]First affidavit paragraph 2 and Second affidavit.
[15]First affidavit paragraph 9.
[16]First affidavit paragraph 3.
[17]First affidavit paragraphs 10–19.
[18]First affidavit paragraph 15.
[19]First affidavit paragraph 16 and exhibit ARM-2.
[20]First affidavit paragraphs 20–21.
[21]First affidavit paragraph 21.
The respondent submits that the affidavit speaks only about the liability of one of the applicants namely the company and neither of them accept any personal liability on behalf of Mr Ian Mathieson. That has no relevance whatsoever in relation to the costs indemnity principle. It does not give a basis for continuing to argue that a breach of the costs indemnity principle applies.
It was raised at the hearing before Gourlay JR that the costs agreement and disclosure documents may have founded an allegation that the appellant has breached the costs indemnity principle.
It is clear that even though the costs estimate was for $3,000.00-$5,000.00 and that there was lack of disclosure, the applicants will not be limited to pay only up to $5,000.00 in relation to costs. The result of the non-disclosure and lack of updates given by the costs consultant to the applicants could simply mean, that on a taxation for costs on solicitor/client basis initiated by the applicants, the Costs Court could exercise a discretion to reduce costs if it chose to,[22] if the applicants complained about the costs that they were being charged. It has nothing to do with the costs indemnity principle.[23]
[22]Legal Profession Act 2004 (Vic) s 3.4.17(4).
[23]Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [32].
When being re-examined by counsel, Mr Cormie was asked questions in relation to the arrangements between the applicants and Mr Armytage, their solicitor. He gave the following evidence:
MR SANDBACH: … The knowledge of the firm in relation to the arrangements between the client and their lawyers are derived in part from the firm’s knowledge of Mr Armitage’s professional modus operandi, didn’t it?
MR WILLIAMS: My learned friend can’t give the evidence. This is re‑examination.
MR SANDBACH: I withdraw that. Does the firm’s knowledge relate in any way - - -
MR WILLIAMS: That’s still leading.
MR SANDBACH: Well, what was the firm’s knowledge of Mr Armitage’s modus operandi as at February 2016?---In terms of the principles of where the – as I understand it, Mr Armitage doesn’t – when Mr Armitage is working with a client in relation to one of the other businesses, which is Armitage Capital something, the legal work is used as value add, rather than something that’s actually billed to a client.
How long had Mr Ho known Mr Armitage as of 2012?---I believe they went to school together.
How frequently was work referred by Mr Armitage to Mr Ho?---I understand – I’m not sure how frequently work was referred, or what work was referred, but I now that they spoke reasonably regularly before 2012.
Did the firm have any knowledge of whether or not Mathieson Nominees had retained the services of Armitage Capital as well as Mr Armitage as a lawyer?---Yes.
What was the basis of that knowledge?---That Mr Armitage had told the principal that Mathieson had retained him for its work.[24]
[24]T121-2.
I also note that in her Ruling of 31 August 2016 she stated:
In this matter the applicants were been successful at every stage of the costs review proceeding. To support the retainer of their lawyers they have produced documents they claim evidence the retainer of Sizenko and Williams. In addition, the affidavits have provided a plausible explanation for the retainer of Armytage. All the respondent has argued is an implication that the applicants are seeking costs for which they have no entitlement without any evidence to support that. Mr Sandbach stated that his instructions are that the arrangements in relation to Armytage’s fees are based on a long standing commercial arrangement that the Mathiesons do not pay the Armytage’s fees. But he has no evidence to put to the Court of this by way of affidavits or the like.[25]
[25]Mathieson Nominees Pty Ltd v AJH Lawyers Pty Ltd (Unreported) 31 August 2016 at [16].
The applicants object to this evidence which they say is no more than hearsay. The applicants submit re‑examination of Mr Cormie has no relevance as to whether the costs indemnity principle applies. I agree.
When I consider the voluminous request for documents including Blyth disclosures, the lack of evidence regarding the position of Mr Armytage, the incorrect assertions arising out of the disclosure and retainer documents, there is nothing before the Court to found an allegation that the indemnity principle has been breached. The only conclusion that I can come to is that these applications are made to either delay the paying of costs or frustrate the applicants from obtaining their costs. There is nothing in the evidence or materials that are before me that leads to the conclusion that there is a prima facie case to argue that there has been a breach of the cost indemnity principle.
It is my view that there has been undue delay and expense caused by the respondent because the respondent has taken a step in the proceeding which was not necessary to facilitate the resolution or determination of the proceeding. It has breached s 19 of the CPA.
(c) Improper or fraudulent billing practices
In his affidavit opposing this application, Mr Cormie sought to refer to his affidavit sworn 11 May 2016 in which he deposed:
7.At 6.20pm on 18 February 2016, I received an email from Mr Sizenko attaching, amongst other things, a purported bill of costs, that is, an invoice from Messrs Sizenko (Victorian Legal Cost Assessors) to only the first applicant, Mathieson Nominees Pty Ltd dated 15 February 2016 (Invoice No. 00000599) in the sum of $352,000. …
…
9.On 24 February 2016, I attended a mention hearing in this matter listed before Judicial Registrar Gourlay. Mr Sizenko and Mr Alan Sandbach of Counsel also attended the mention hearing.
10.At the mention hearing on 24 February 2016 before Judicial Registrar Gourlay:
a.Mr Alan Sandbach of Counsel appearing for the Respondent made an application before Judicial Registrar Gourlay for this proceeding to be stayed or adjourned;
b.Mr Sizenko appearing for the Applicants opposed the Respondent’s application for a stay or an adjournment. Mr Sizenko made representations to Judicial Registrar Gourlay in opposition to the application. These representations made by Mr Sizenko included that:
i.The Applicants had been prejudiced by the delay of this matter; and
ii.The Applicants had suffered financial burden as a result of the ongoing proceedings in this matter.
c.In response to Mr Sizenko’s representations to the court, Mr Alan Sandbach of Counsel:
i.Warned Mr Sizenko to be careful about the submissions he makes to the court;
ii.Made submissions that the Applicants had not suffered prejudice, as they had not paid any costs for any of the proceedings in this matter;
iii.Handed up to Judicial Registrar Gourlay the invoice of Mr Sizenko dated 15 February 2016 and exhibited to this affidavit as EC-3; and
iv.Made submissions regarding the invoice dated 15 February 2016 and exhibited to this affidavit as EC-3, including that the invoice covered all the proceedings in this matter, that the invoice was for the amount of $352,000.00, and that there was no evidence that the invoiced amount had been paid by the Applicants.
d.Mr Sizenko made false representations to the court to the effect that the Applicants have paid the costs claimed in these proceedings when the Applicants had not paid such costs.[26]
[26]Affidavit of Edward Charles Foxall Cormie sworn 13 December 2016, pages 17 and 18.
In relation to that invoice, Mr Cormie when cross-examined gave the following evidence:
MR WILLIAMS: So, Mr Cormey, I was asking you just before lunch – but not very competently, so let’s start again and I’ll see if I can get the question a bit clearer. I was at p.18 of your affidavit - - - Yeah.
And I was asking you about subparagraph D. Do you recall? - - - Yeah.
And, in particular, my question is this: we are here looking at – in the meantime, I think you wanted to look at the full affidavit. Did you satisfy yourself about that?‑‑‑Yes.
So can we use this – go back to using this extract now?‑‑‑Yes.
Good, thank you. So you recall that what you are recording here is the contents of an affidavit that you made on 11 May last year?‑‑‑Yes.
And on 11 May last year, you swore that at the mention on 24 February 2016, for Judicial Registrar Gourlay, the things set out in subparagraphs A, B and C and D all happened?‑‑‑Yes.
And one of things is D. So you swore on 11 May that on 24 February Mr Sizenko made false representations?‑‑‑Yes.
And so as of the 24th – sorry, at the – as of 11 May, when you swore that, it was your view, was it, that he had made a representation and it was false?‑‑‑On 24 February, yes.
On 24 February that was your view? Yes.
Had that view changed by 11 May? Not by the 11th, no.
So on 11 May when you swore this, you were saying so – all right, so let's take both dates then. So on 24 February you had formed the view that the representation was false, because the applicant had not paid the costs? Yes.
On what basis have you formed that view? In terms of the cost from the invoice, the 599. The invoice itself says that the entitlement is outstanding, and Mr Sandbach made submissions at the hearing on the 24th that none of the invoices have been paid, and that it hadn't been corrected by Mr Sizenko, who was appearing on the other side.
The fact that Mr Sizenko didn't say anything was
enough? Didn't correct - yeah.
You had formed the view that he had made a false representation to the court? Yes, I believe that was correct, yes.
On what basis did you instruct Mr - well, first of all, I assume you instructed Mr Sandbach to make that submission, that no invoices were
MR SANDBACH: Well, Your Honour, I object to that. Again, whether it was this solicitor or some other solicitor in the company, it is plainly fishing as to plainly privileged matters.
MR WILLIAMS: Well, let me ask you this question. As at 24 February, did you have any way of knowing whether or not the invoices had been paid? On 24 February?
Yes? Not before the hearing.
At the moment that Mr Sandbach made those submissions, that the invoices had not been paid, he was making a submission about which you had no knowledge? Apart from the fact that the invoice itself said that there was no amount paid.
Well, is that not true of almost every invoice ever issued in the entire world? Not every invoice. I know what we have invoices where there's part payment.
HIS HONOUR: Speak up, please? Sorry, my apologies, Your Honour.
I am terribly sorry. It is bad acoustics. I really need to hear what you say? Yep, so I wouldn't say that was for every invoice.
MR WILLIAMS: I said almost for every invoice? Almost every invoice. In my experience, yes.
The mere fact that an invoice records that as at the moment the invoice is issued, it hasn't been paid, tells you nothing about whether, by a date nine days after the date of the invoice, it's been paid, does it? The amounts claimed in the invoice did go back a long way, but no, at that time, no.
Mr Sandbach made a submission to the court that the invoice had not been paid, at a time when you and your client, who were instructing him, had no way of knowing whether or not that was correct? Yes.
As at 11 May, when you swore the affidavit, did he have any different information? I don't believe so.
Is it not the fact that your client, through Mr Sandbach, and then - as to what was said on that day, and then, through your affidavit here, had made allegations of a serious nature about matters which he could not know whether they were true or not? We believed them to be true.
On what basis? On the basis that it was a substantial invoice that - at the time it had been rendered, it certainly hadn't been paid. The hearing was not long after it'd been rendered.
Do you think that without more, it's a sufficient basis to make an allegation of very serious misconduct, namely the misleading of a court? At that stage, at the stage that the paragraph (d) comes in, the hearing had occurred, the submission had been put, and it hadn't been challenged or corrected.
Let me take you to the notice of objections that were filed on behalf of your client initially, as a document entitled, "Notice of objections". It is your EC29.
HIS HONOUR: Where was that again?
MR WILLIAMS: EC29, Your Honour.
HIS HONOUR: I'm sorry, thank you.
MR WILLIAMS: Do you have it, Your Honour?
HIS HONOUR: I have got EC26, I've got EC28. Do I have EC29? No, I have EC30.
MR WILLIAMS: Well, you got even numbers, Your Honour.
HIS HONOUR: No, I have got 27 as well. I am just going through them all again, just to see if I could - if something is stuck together.
MR WILLIAMS: Do we have another copy we could provide His Honour? I looked on yours. I will give His Honour my clean - it's not clean, mine is marked. Could we hand up for Your Honour's use - momentarily, at least - a copy of that document?
HIS HONOUR: It is amazing. I have got everything but 29. Thank you. I will keep this.
MR WILLIAMS: You do not have it because I took it out earlier. I took you to it in opening.
HIS HONOUR: I have got it, I found it.
MR WILLIAMS: Right, so…[27]
[27]T88-91.
The applicants submit that the allegations made by Mr Cormie were made to delay the proceeding and incur further expense. They also submit that Mr Cormie received instructions from Mr Andre Justin Ho and it was Mr Ho who made all of the decisions. It is clear to me that Mr Ho was making all of the decisions and providing instructions for the respondent to this matter. It is clear from the evidence that Mr Ho was in fact providing instructions to Mr Cormie.
The respondent submits that the invoice for $352,000 ‘gave quite a number of reasons for concluding there was a foundation to allege it was false’.[28] It submits that the bill was ‘not for the purpose of demanding payment for the fine’ (sic), but for the purpose ‘of shutting AJH up’.[29]
[28]T212.
[29]T 212.
In relation to their complaints about the breach of the indemnity principle, the respondent also raised that there was no evidence at all that the invoice had been served on the client, or that any request had been made to the client to pay. Also, there was no correlation between the bill which had been prepared and the invoice. It is submitted that there are very good reasons to infer and to conclude that the invoice did not reflect the genuine amount actually due on the face of it.
In my view, allegations of improper billing practices, on the basis of Mr Cormie’s evidence, had no foundation and should not have been made. Further, the invoice, whether it is false or not, has no bearing on whether the indemnity principle has been breached. The respondent must have known that raising allegations about a false invoice would do nothing more than delay the taxation of the bill of costs and incur further costs.
The respondent has therefore taken a step in the proceeding which has indeed caused undue delay and expense. I am of the view that the respondent could not reasonably believe that the step was necessary to facilitate the resolution or determination of the proceeding. The fact that an invoice was sent will make no difference whatsoever to whether the respondent is required to pay the taxed costs or can avoid doing so by operation of the costs indemnity principle. There has again been a breach of s 19 of the CPA.
(d) Acting improperly
Mr Cormie, at paragraph 44 of his affidavit, refers to the mention hearing on 24 February 2016 before Judicial Registrar Gourlay. He deposes that:
Mr Sizenko made false representations to the court to the effect that the Applicants have paid the costs claimed in these proceedings when the Applicants had not paid such costs.[30]
[30]Affidavit of Edward Charles Foxall Cormie sworn 13 December 2016 para 44d.
The applicants submit the statement is an unfounded accusation that Mr Sizenko has misled the Court. They also state that at no time did Mr Sizenko mislead the Court or say that the applicants paid the costs. It is submitted that that proposition made by the respondent could not have been made at the time because Mr Cormie and Mr Ho did not know, and could not have known, whether it was correct.
The respondent submits that the allegation made was not put for the purposes of saying that Mr Sizenko was misleading the Court but was put for recounting what had actually gone on. All that the respondent was endeavouring to do was to say that Mr Sizenko was wrong.
Mr Sizenko did not at the time the allegation was made correct or refuse the allegation. Mr Sizenko did advise the Court that his clients were being gravely prejudiced by delay and that they were suffering a financial burden. The respondent submits that they have subsequently discovered that the applicants have agreed to pay Mr Sizenko whatever he recovers in respect of at least part of the work which is the subject of the bill. They say, given that the applicants are not required to pay a single cent earlier, it is quite proper to suggest that Mr Sizenko was overstating matters to the Court.
It appears that Mr Sizenko should not have said his clients were suffering from a financial burden. That does not excuse an allegation being made that Mr Sizenko made false representations to the Court. However, I cannot be satisfied that the purpose of those allegations were to delay the resolution or determination of the proceeding, or make the proceeding more costly and burdensome.
Section 20 of the Civil Procedure Act
Section 20 of the CPA provides:
Overarching obligation to cooperate in the conduct of civil proceeding
A person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding.
The applicants allege three breaches of s 20 of the CPA by the respondent. They contend that in breach of the overarching obligations in s 20 the respondent has not cooperated with the applicants in that:
(a) the respondent has declined to respond to reasonable requests for information;
(b) the respondent has failed to file and serve notices of objections as directed by the Court; and
(c) the respondent has invoked a review mechanism so as to prevent the taxation of costs proceeding on 28 November 2016.
(a) Request for information
Mr Sizenko deposes that on 28 July 2016 he searched the Register of Legal Practitioners and law practices maintained by the Legal Services Board for any law practice with the name containing the letters ‘AJH’. The search produced:
Entity name: AJH Lawyers [sic]
Business Name: AJH Lawyers
L4, 170 Queen Street Melbourne 3000Entity name: AJH Legal Group Pty Ltd Business Name: AJH Legal Group Pty Ltd
L4, 170 Queen Street Melbourne 3000
On 24 November 2016, he performed a further search of the same register which produced:
Entity name: AJH Lawyers Pty Ltd
Business Name: Ajh (sic) Lawyers
L4, 170 Queen Street Melbourne 3000Entity name: AJH Legal Group Pty Ltd
Business Name: AJH Legal Group Pty Ltd
L4, 170 Queen Street Melbourne 3000
On 29 July 2016, he obtained an ASIC business name extract of the business name of AJH Lawyers. The business name indicates that Mr Andre Justin Ho ceased being a holder of the business name AJH Lawyers on 16 November 2015. According to Mr Sizenko, that is the same day the applicants filed and served a bill of costs dated 16 November 2015 initiating this proceeding.
Mr Sizenko also deposes that AJH Lawyers firm website does not identify AJH Lawyers Pty Ltd as the entity carrying out the firm’s practice. What appears at the foot of the page is the name AJH Legal Group Pty Ltd. The ACN for AJH Legal Group Pty Ltd differs from that of AJH Lawyers Pty Ltd, so clearly they are different entities.
He says this proceeding concerns the taxation of multiple costs orders obtained by the applicants against AJH Lawyers Pty Ltd in litigation which has been on foot since 2012. The applicants were third party payers of those bills of costs but sought to tax them.
Mr Sizenko deposes that on 10 August 2016 he sent an email to Mr Cormie seeking clarification of the business structure of the firm AJH Lawyers. That email was not replied to or acknowledged. On 24 August 2016, he sent a letter and forwarded a copy of the email and attached letter dated 10 August 2016 to AJH Lawyers’ email address and to Mr Cormie. The letter and email was neither replied to or acknowledged. On 18 November 2016, he sent an email to Mr Cormie with an attached letter seeking clarification of the business structure of the firm and reiterating questions asked in the letter dated 10 August 2016. That letter was neither replied to or acknowledged.
The applicants submit that Mr Cormie was specifically instructed not to respond to those three pieces of written communication and was specifically instructed not to respond in his affidavit of 13 December 2016.
In response to this allegation, Mr Cormie, in his affidavit, deposes that immediately prior to the hearing before Judicial Registrar Gourlay on 21 September 2016 he informed Mr Daryl Williams QC, counsel for the applicants, in a conversation in the court room that:
(a) AJH Lawyers Pty Ltd was the correct party to these proceedings;
(b) the respondent’s letters, court documents and bills to the applicants clearly identify AJH Lawyers Pty Ltd as the correct party to these proceedings;
(c) he offered to provide Mr Daryl Williams QC with copies of a selection of letters, court documents and bills of the applicants referred to above; and
(d) AJH Lawyers Pty Ltd was still trading.
The respondent referred the Court to Amcor Ltd v Barnes.[31] That case concerned an application for security for costs. Vickery J considered a situation where the plaintiff failed to provide financial information in the face of a valid court process. His Honour said:
[31][2015] VSC 90 at [40]-[45].
Accordingly, a failure to provide financial information in the face of a valid Court process, either in answer to a subpoena or a notice to produce, or in response to a reasonable request on the part of a defendant, may assist or fortify a conclusion based on direct evidence or upon inferences to be drawn from the other evidence as to the inability of the plaintiff to pay the defendant’s costs should the defendant be successful. But it cannot of itself provide such evidence or give rise to that conclusion.
In any event, Achilla seeks to explain its failure to put on evidence as to its financial position by reason that:
(a)In circumstances where a defendant has not proffered evidence of the plaintiff’s financial position, the plaintiff is entitled to decline to provide an account of its financial position; and
(b)Achilla’s reluctance to expose its financial information to the Amcor Parties in this case is explicable on the basis that it is the confidential information of a privately-owned family company, when the Amcor Parties have been aggressively pursuing Achilla and its director and a related company in litigation since 2007.
In Christou v Stanton Partners Australasia Pty Ltd[32] Newnes JA, with whom Murphy JA agreed, said:[33]
I also do not accept that the filing by the appellants of an application for security for costs gave rise to some obligation on the second respondent to provide a full account of its financial position. That is to put the cart before the horse. In order to enliven the court's discretion there must be material before it which is sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the second respondent would be unable to pay the appellants' costs if the second respondent were to be unsuccessful in the action; mere speculation as to the second respondent's insolvency or financial difficulties is not sufficient: see Warren Mitchell Pty Ltd v Australian Maritime Officers' Union (1993) 12 ACSR 1; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 [60]-[61]. In circumstances where the appellants had not troubled themselves to put any material before the court relating to the second respondent's financial position, it was not incumbent upon the second respondent to fill that gap. The second respondent apparently took the view (rightly, in my opinion) that the discretion had not been enlivened and was content to leave the matter at that. It was entitled to do so.
I respectfully adopt this analysis of Newnes JA in Christou.[34]
In the present case, there was no obligation on the part of Achilla to provide a full account of its financial position. I accept that Achilla took the view that the threshold issue could not be answered in favour of the Amcor Parties on the material before the Court, and that the discretion could not be enlivened. It was entitled to take this course and not put on any detailed financial evidence.
As to the second matter, the explanation advanced by Achilla for not supplying details of its financial circumstances may well have provided an explanation for not putting on such evidence for the purposes of Jones v Dunkel,[35] but for reasons already explained, no Jones v Dunkel[36] inference is capable of being drawn in this case.
[32][2011] WASCA 176, (‘Christou’).
[33]Christou [2011] WASCA 176 [34].
[34][2011] WASCA 176.
[35](1959) 101 CLR 298.
[36](1959) 101 CLR 298.
The respondent concedes that Mr Ho deliberately made the decision not to provide the information sought. It did not want to give any information to the applicants. It says it was not required to do so as the applicants may have been intending to issue an application for security for costs.
In my view, there is not a breach of the CPA. Had Mr Sizenko received this information I do not think it would have made any difference to Mr Sizenko as to whether the claim would have continued or not. If the respondent did not want to make information available as it may have impacted on an application to obtain security for costs, then this is a plausible explanation. Restructuring the company on the date the bill of costs was served goes to the execution of the taxed costs order. It is not a breach of the CPA but may be conduct that the Victorian Legal Services Commissioner may be interested in.
(b) Failure to provide Notice of Objection
On 31 August 2016, Judicial Registrar Gourlay ordered the respondent to file and serve notice of objections to the applicants’ bill of costs dated 16 November 2015 by 15 October 2016. To date, no objections have been filed. According to the applicants, the failure to file a notice of objection is a breach of s 20 of the CPA.
When cross-examined, Mr Cormie gave the following evidence relating to the failure to file notice of objection:
The present review mechanism that his Honour is now charged with hearing, which we've now moved into a hearing within a hearing about the Civil Procedure Act, but the review mechanism itself?‑‑‑Yes.
That was one instituted by your client?‑‑‑Yes.
You were obviously instructed therefore to do it?‑‑‑Yes.
At or about the time of instituting that review mechanism were you instructed to cease work on the objections?‑‑‑What was the date of the - sorry, can I just get the dates right?
Sure. You might want to go back into your affidavit for this purpose if all of the material is there. Just let me assist you if I can. You may find it before I do?‑‑‑So what date?
What date is - what are you looking for, the date of the review?‑‑‑What date - just ask the question again.
Sure. So in your paragraph 55 you say that on 14 September the respondent filed and served a notice of review. Do you see that?‑‑‑Yes.
Go back to the previous paragraph. You will see that this is the context where, 31 August, so exactly two weeks earlier, the Judicial Registrar had ordered your client to file a notice of objections ‑ ‑ ‑?‑‑‑Yes.[37]
[37]T103-4.
…
MR WILLIAMS: So that’s the orders. (To witness) I am asking about the order in 54A. That order was made two weeks later. You filed and served a notice of review? Yes.
Were you then instructed at or about the time of filing that notice of review to stop work on the objections, or had you already been instructed to that effect? No.
Were you instructed later? Yes.
How much later? I believe it was after the - it was - it was definitely after the next hearing in September and before they were due. The exact date I can’t remember.
You would agree with me, wouldn't you, that one outcome of the filing of the notice to review and ceasing work on the objections was that it became impossible or impracticable for the taxation to proceed as her Honour had ordered that it would do in November? Impracticable, yes.
And that was an entirely predictable outcome of those steps, wasn't it? Yes.
And in fact not only predictable but predicted in as much as you took those steps knowing that they would have that outcome? We did try to get - if the taxation (indistinct). We did try and get this done before the taxation.
But even if you had, the taxation couldn’t have proceeded without your objections, could it? I’m speculating but I’m - if the review had been done before the taxation, I believe that - if the taxation was going to proceed (indistinct) notice of objections, but again I can’t say, that’s just speculation.
That notice of objections would in those circumstances have been filed at best very, very close to the time of the taxation? Yes.
Which would have almost inevitably resulted in the taxation being adjourned? Not necessarily.
Really? You don't think that in a matter of this kind, with substantial bills and where you were going to file substantial objections, that there wasn’t a reason why her Honour ordered that the notices of objection be filed in mid-October for a taxation to occur late November? Yes. I'm not saying (indistinct) given any extra time.
But it wasn’t at all practicable for the two reviews that you instituted to have been heard and determined in time for you to then complete the objections and still file them within her Honour's orders. That wasn't possible, was it? Within the orders, no.[38]
[38]T104-6.
The respondent submits that had it produced what would be undoubtedly a voluminous set of objections at great expense in circumstances, where it had on foot a proceeding, would have rendered those costs completely wasted is not a breach of the CPA. To do proper objections for a large bill of costs requires a great deal of work and if the work was totally wasted, that would be quite contrary to the obligations of the party under the CPA. The respondent also points out that if Judicial Registrar Gourlay had wished to tax the bill she could have done so without the objections.
Here the respondent has deliberately not complied with the Court order. Failure to comply with court orders in this proceeding is not excusable. A remedy for not providing objections without a good reason would be to tax the bill without objections from the respondent. If orders are not complied with then this should be brought to the Court’s notice for it to be dealt with. However, this does not in my view constitute a breach under s 20 of the CPA in the circumstances of this application.
(c) Invoking of the review mechanism so as to prevent the taxation of costs
On 31 August 2016, Judicial Registrar Gourlay dismissed the following:
- an objection by the respondent to Mr Darryl Williams QC appearing on behalf of the applicants;
- an application by the respondent for Mr Alan Mathieson to be cross‑examined;
- an application for the applicants to produce further documents under a notice to produce; and
- an application that the bill of costs be struck out because the cost indemnity principle had been breached.
The applicants submit that the review of the Judicial Registrar’s decision was brought to prevent the taxation of costs. They contend that a reasonable inference can be drawn from the evidence that the purpose of the review was to delay the taxation. The applicants say ‘everything’ leading up to the review supports this conclusion. They also submit that the taxation should have been concluded prior to my review.
In response, the respondent submits that it commenced the review to obtain the proper result. It submits the central question for the Court is what are the merits of the review. If that review is well-founded then a grievous injustice will be done if the applicants are given the remedy that they seek. The respondent submits that the applicants do not want the Court to look at this review on the merits.
It is clear that after numerous appeals and interlocutory hearings the applicants wish to put an end to this litigation. It is difficult to decide whether there has been this alleged breach without in some way looking at the merits. Clearly, the amount of time spent by both parties has been totally disproportionate to the original claim seeking to tax $35,000. A great majority of the blame must go against the respondent and a minor part to the applicants. Minor, because it must be inferred that of the original taxation the applicants only received half of their costs of taxation.
In order to determine whether this review was invoked to prevent the taxation of costs the following factors are in my view important:
- the history of appeals taken by the respondent. They were all dismissed with costs orders;
- the Judicial Registrar’s reasons of 31 August 2016 indicate that there was no real merit to the applications made. In relation to the application for costs, Judicial Registrar Gourlay stated:
16In this matter the applicants were been successful at every stage of the costs review proceeding. To support the retainer of their lawyers thes [sic] have produced documents they claim evidence the retainer of Sizenko and Williams. In addition, the affidavits have provided a plausible explanation for the retainer of Armytage. All the respondent has argued is an implication that the applicants are seeking costs for which they have no entitlement without any evidence to support that. Mr Sandbach stated that his instructions are that the arrangements in relation to Armytage’s fees are based on a long standing commercial arrangement that the Mathiesons do not pay the Armytage’s fees. But he has no evidence to put to the Court of this by way of affidavits or the like.
17As during the costs review there has been delay and the respondent has, in effect, taken every possibly arguable point. The respondent argues that procedural fairness dictates that it should have leave to cross-examine Mr Mathieson, however this application, as with the seeking of extensive production of documents and to examine the metadata of the documents appears to be a fishing expedition. The respondent is seeking argue that there is no liability to pay the fees of any of the lawyers in the face of the evidence of retainer of Armytage, Sizenko and Williams.
18However the question of the indemnity principle is arguable without cross-examination and procedural fairness flows both ways. Refusal of leave to cross-examine Mathieson is both a fair, reasonable and just result.
19There are three costs orders being taxed in the bill of costs as detailed in paragraph 2 above.
- In relation to the notice to produce, Judicial Registrar Gourlay stated:
24On 1 June 2016 I ordered that the applicants file documents evidencing the retainer of Sizenko, Armytage and Counsel. The documents produced include a costs agreement, costs disclosures, invoices, receipts and documents evidencing communications between the applicants and their lawyers in relation to the charging of legal costs in these matters. The respondent submitted that as the sums claimed in the bill of costs may be more than the amount payable by the applicants here may breach the indemnity principle. As a starting point with the Notice to Produce many of the documents sought had been included in the order for production made earlier. Each of the lawyers are officers of the court and bound by overarching obligations under the Civil Procedure Act 2010 to narrow issues and to disclose the existence of all documents.
…
28The applicants submitted that the order for production of documents made on 1 June 2016 had been complied with and that every relevant document has been produced. At the conclusion of argument on 5 August 2016 in relation to the Notice to Produce and having dismissed each paragraph of the Notice to Produce it was struck out in its entirety.
- As to paragraph 4 of the notice to produce, Judicial Registrar Gourlay stated:
38I ruled that this category of work does not raise any issue in this retainer and is not relevant to the current taxation. Past retainer invoices, bills and surrounding documents do not inform the issue in dispute relating to the present retainer. The issue of the Mathieson’s dealings with Armytage Capital are not relevant. There is no evidence put by the respondent about loan dealings or other litigation. Paragraphs 3 and 4 were struck out of the Notice.
- As to paragraph 5 of the notice to produce, Judicial Registrar Gourlay stated:
43The request was dismissed as it was too wide and not relevant to argument in relation to the indemnity principle. The cost agreement relating to Sizenko’s work governed the basis of charge and any variation offered at this time was not effective as the respondent did not accept the offers that included payment of costs. If any further documents exist that limit Sizenko’s right to recover costs from the applicants these were ordered to be produced earlier and as no documents of this type has been produced they are unlikely to exist. It is possible that the documents sought might have been claimed in the bill of costs however, when questioned the respondent could not point to any such claim. Paragraph 5 was struck out of the Notice.
- In relation to the cost indemnity principle, Judicial Registrar Gourlay stated:
…I have no doubt that Ian Mathieson, as well as Mathieson Nominees are entitled to be parties to the taxation of the costs orders made in their favour. Therefore the applications numbered 1-6 of the Notice of Applications are dismissed.
62The respondent’s submissions in relation to the costs of each of the lawyers retainers and fees have changed from the initial applications made at the commencement of the proceedings. Initially, the respondent submitted that the costs indemnity principle must have been breached as no sane litigant would incur $421,000 in costs to review bills of approximately $35,000. However, the cost review was conducted from 24 September 2012 to 17 February 2014 and included two call overs, four applications to argue questions of law each instituted by the respondent, a referral to Justice Ferguson instituted by the respondent for a decision on a question of law which had been raised and ruled on at least 9 months earlier, and eight days of taxation of the bills. There were then three appeals commenced by the respondent.
…
71The applicants gave copies of a costs agreements and retainer letters to the respondent. The respondent, on 30 June 2016, submitted that the costs agreements, retainer documents and invoices raise more questions than they answered and the documents contributed to the respondent’s apprehension that the costs claimed in the bill exceed the applicants’ liability for costs to their legal practitioners. Contrary to the authorities counsel for the respondent submitted that as the total sum claimed was so large the onus lies with the applicants to show that the indemnity principle has not been breached. He stated that the respondent believed that the applicants had failed to produce all documents required to be produced and that the applicants should produce all original electronic documents, including all email chains relied on. He proposed that all documents (in both electronic and hard copy form) should be produced to the Prothonotary so that the respondent could interrogate the meta-data and be satisfied that there was no tampering with the documents, that the terms of the retainer were as detailed by the documents and that a liability to pay the costs did exist so the indemnity principle had not been breached.
72This submission, in my view, is contrary to the obligation on parties under the Civil Procedure Act 2010 (‘CPA’) to narrow issues in dispute and to minimise delay and to only make claims that have a proper basis. The applicants’ lawyers are bound by the CPA not to engage in misleading or deceptive conduct and to disclose the existence of all documents that are critical to the resolution of the dispute. On these basis alone I take the view that the respondent is fishing and that any documents sought after the initial disclosure and the affidavit do not, as the applicants’ counsel stated, exist.
I am concerned about the merits of the review application. It is difficult to determine this application without considering the merits of the review. After reading carefully the decision of Judicial Registrar Gourlay and all of the difficulties referred to in the decision and also all of the affidavits filed, I am of the view that the merits of the review have an extremely low chance of success.
From the evidence, the history of this litigation and the way in which the litigation has been conducted, I can only conclude that the review can only have been invoked to prevent or delay the taxation of costs. There is therefore a breach of s 20 of the CPA.
Section 21 of the Civil Procedure Act
Section 21 of the CPA provides:
21 Overarching obligation not to mislead or deceive
A person to whom the overarching obligations apply must not, in respect of a civil proceeding, engage in conduct which is—
(a) misleading or deceptive; or
(b) likely to mislead or deceive.
The applicants allege that the respondent is in breach of the obligation not to engage in conduct which is misleading or deceptive or likely to mislead or deceive. The applicants contend that the respondent has communicated with the applicants in the Court in connection with this proceeding through its legal representative ‘AJH Lawyers’ in such a way as to give misleading appearance that AJH Lawyers is the respondent’s own business, and the respondent is an incorporated legal practice carrying on a substantial business under that name, whereas the respondent is in fact an empty shell company which does not carry out legal practice and which has no or negligible assets.
I have found that the failure to respond to requests about the structure of the AJH Lawyers Pty Ltd was not a breach of s 20 of the CPA. Here the allegation is that the respondent has engaged in misleading conduct.
In his affidavit in opposition to the applicants’ allegations of breach of the CPA, Mr Cormie deposes that the respondent is an incorporated legal practitioner and is currently registered as a law practice with the Legal Services Board and Commissioner and as at the date of swearing his affidavit continues to be an incorporated legal practitioner. He says AJH Lawyers is the company name of the respondent.
Mr Cormie was cross-examined at length regarding the structure of the respondent. He gave evidence that the respondent does not employ lawyers and that he is employed by Arians Pty Ltd. Mr Ho is the principal of Arians Pty Ltd. The lessee of the premises of the respondent is also Arians Pty Ltd and Mr Cormie assumes that Arians Pty Ltd owns the furniture. He could not say that the respondent had been restructured so that it does not have any assets. He did not know what the assets of the respondent are.
Mr Cormie was shown the searches conducted by Mr Sizenko and gave the following evidence:
If a client does walk in these days, just walks in off the street with an immigration law matter and say, ‘I want to hire Mr Tran’s services”, what company will contract with that client for the provision of those services?---Typically it would be AJH Legal Group Pty Ltd.
Is that true in relation to all of the other lawyers in the firm as well?---Yes. The AJH Legal Group Pty Ltd is the private practice.
How long has that been the case?---At least insofar as me, August 2015.
Before that what was the primary practice?---AJH Lawyers Pty Ltd.
So in August 2015, AJH Lawyers Pty Ltd ceased being the principal practice and AJH Legal Group Pty Ltd started being the principal practice?---Yes.
That rather suggests that that material we went to in the search is entirely correct, doesn’t it?---Yes.
You have got a branch office, main office, principal practice, non-principal practice. Primacy is now with AJH Legal Group Pty Ltd?---Yes.[39]
[39]T73-4.
With regards to the consequences of the changes made to the structure of the respondent, Mr Cormie gave the following evidence:
You understand where I am going with all this. To go back to the proposition of if AJH Lawyers Pty Ltd went broke tomorrow would there be any real interruptions to the practice, that change that was made in 2015 makes it even less of an interruption, doesn't it, because AJH Legal Group Pty Ltd is now the contracting party in relation to virtually every new client?---Exempt [sic] the clients in AJH Lawyers Pty Ltd and I am not sure how many there are currently still, yes. There’s no reason to imagine, is there, that there would be any loss of goodwill if AJH Lawyers Pty Ltd went broke because clients would continue to deal with AJH Legal Group Pty Ltd which is effectively in the same ownership of Mr Ho?---I would assume so.
Can I take you to paragraph 81 of your affidavit. In that paragraph you say: “AJH Lawyers is the company name of AJH Lawyers Pty Ltd.” What do you mean by that sentence?---That - so the Pty Ltd is standard if you want a Pty Ltd company and the AJH Lawyers is the actual name.
You know well, don't you, that a company name and a business name are not the same thing?---Yes.
You know that AJH Lawyers is a business name?---Yes.
When you wrote and swore to that paragraph of your affidavit, were you deliberately avoiding the question of the business name, AJH Lawyers?---No.
You were swearing this affidavit, were you not, in response to Mr Sizenko’s affidavits in which he had raised questions about the ownership of the firm and the way in which it was conducted?---Yes.
Do you accept it as correct that Mr Sizenko has deposed that you did not respond to any of his three written pieces of communication asking you a number of questions about this matter?---We didn’t respond in writing.
You didn’t respond in writing?---Apart from this affidavit.[40]
[40]T75-6.
The applicants submit that Mr Cormie’s affidavit on the business structure conveys a false impression about the true situation as to who conducts AJH Lawyers. They say it was not until cross-examination that the real truth as to who conducts the business of AJH Lawyers was put before the Court. The objective effect of the affidavit was misleading according to the applicants.
In Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd[41] Dixon J said:
First, as I have explained above, courts have always expected that they will not be accidently misled or deceived in any respect by legal practitioners. That expectation is not limited to intentional conduct that may breach professional conduct rules and rightly may be sanctioned as professional misconduct. I do not accept the premise that if the just, efficient, timely and cost effective resolution of disputes be the only purpose relevantly being considered in the Act, achieving that purpose is best promoted by reading a requirement of knowledge into s 21, lest the floodgates be opened.
[41][2014] VSC 567 [181].
His Honour also considered s 21 of the CPA and said:
I am satisfied that by s 21 of the Civil Procedure Act, the legislature intended to establish a norm of conduct in the conduct of civil proceedings that persons by whom overarching obligations are owed shall not engage in misleading or deceptive conduct, whether or not that was their intention. …[42]
[42]Ibid [194].
The respondent submits that there is a complete lack of evidence that Mr Sizenko was misled. It says that the only way Mr Sizenko could have been misled is that if he formed the view that the respondent was not the entity that he was dealing with and there is not any evidence to show that he ever formed that view. Furthermore, it is submitted that the respondent at all relevant times was the relevant party and that was the party that Mr Sizenko was dealing with. It is also said that there is no basis whatsoever to think that Mr Sizenko was misled into thinking that the respondent is an asset rich company.
Mr Cormie in his affidavit did not refer to the structure of the respondent and there has been no correspondence regarding the restructure of the respondent. I note that he was instructed to provide his affidavit in the way he did by Mr Ho. I am not satisfied on the evidence that there was an intention to mislead or deceive. I repeat these matters as to the structure of the respondent are not relevant to the taxation. They may well be relevant to any recovery by the applicants from the respondent for their costs. There has been no breach of s 21 of the CPA here.
Section 22 of the Civil Procedure Act
Section 22 of the CPA provides:
22Overarching obligation to use reasonable endeavours to resolve dispute
A person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution, unless—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only judicial determination is appropriate.
Example
A proceeding where a civil penalty is sought may be of such a nature that only judicial determination is appropriate.
The applicants allege that the respondent has breached s 22 of the CPA because it has rejected a generous open offer of compromise served on 13 April 2015 and has not at any time offered to pay any sum at all towards the applicants’ bill of costs the subject of this proceeding.
On 13 October 2015, an offer of compromise was served by the applicants on the respondent. It was an open offer. The applicants offered to compromise their entitlements for costs in the amount of $270,000.00.
On 4 March 2016, the applicants made a further open offer of compromise in relation to the quantum of the costs of solicitor/client taxation and subsequent appeals to the sum of $220,000.00 plus legal costs for the summons for taxation of the bill of costs.
Neither offer was accepted and no counter offer was made. When cross-examined Mr Cormie did not know why a counter offer had not been made. On re-examination Mr Cormie gave the following evidence:
Just work backwards for a bit. You were taken to a series of offers of compromise that had been made by applicants. If the argument that there is no substantial liability as between either applicant and any of their lawyers is correct, what would be the ultimate outcome, taking into account the costs, in your estimation of these proceedings? Sorry, can you just repeat that?
I'll put it another way. If the respondent's arguments are successful and taking into account the costs consequences of success on those arguments, is there likely to be money ordered to be paid by AJH Lawyers Pty Ltd to the applicants or vice versa? If the - AJH Lawyers Pty Ltd is successful in its reviews, then the applicants will I assume be ordered to pay its costs. And also, in regards to the bill of costs, if anything was ordered - eventually ordered to pay based on AJH Lawyers Pty Ltd's arguments, it would be a nominal amount in the context of the bill as a whole, if any.[43]
[43]Transcript p 119 and 120 lines 18-4.
The applicants submit that the Court is entitled to treat with some scepticism any reason that is advanced by the respondent for not making a counter offer. It submits that Mr Ho should have come to Court and told the Court why he refused to make an offer but he chose not to do so.
The respondent submits that a Court would have to have evidence about the risks and likely outcomes of the litigation to know, or form any judgment, as to whether or not it was reasonable to accept an offer.
There has been no response by the respondent to the offers to settle the case. The costs sought by the applicants relate to numerous failed attempts to appeal or review the initial order of Gourlay JR. Costs orders have resulted at every step of the way and it is obvious that the respondents would be liable to pay some costs unless they were successful in demonstrating that the cost indemnity principle would apply.
When the offer was made there was no evidence that the costs indemnity principle would apply. At that time and when the second offer was made there was no effort whatsoever by the respondents to resolve the dispute by agreement. There was no response. If the respondent genuinely believed it could succeed on the costs indemnity principle it should have replied to the offer and told the applicants that it would succeed. It could have made an offer that both parties bear their own costs. No such offer was made. Nothing was done, which must have been on instruction from Mr Ho.
There has been a breach of s 22 of the CPA.
Section 23 of the Civil Procedure Act
Section 23 of the CPA provides:
23 Overarching obligation to narrow the issues in dispute
If a person to whom the overarching obligations apply cannot resolve a dispute wholly by agreement, the person must use reasonable endeavours to—
(a)resolve by agreement any issues in dispute which can be resolved in that way; and
(b) narrow the scope of the remaining issues in dispute—
unless—
(c) it is not in the interests of justice to do so; or
(d)the dispute is of such a nature that only judicial determination is appropriate.
The applicants allege that the respondent has breached s 23 of the CPA because it has failed to file and serve a Notice of Objections as directed by the Court. Further, the respondent has instead widened the issues in dispute by raising unmeritorious additional issues:
- as to the proportionality of costs incurred and claimed by the applicants;
- as to the costs indemnity principle;
- as to the applicants’ lawyer’s alleged improper billing practices; and
- other alleged misconduct.
The applicants submit that the complaint under this section is repetitive of a complaint made under earlier sections of the Act, and no further submission was made in relation to this allegation.
I have found that the failure to file objections was not a breach of s 20 of the CPA. A Notice of Objection would identify which items in the applicants’ bill are contested. It has nothing to do with the review and therefore does not narrow the issues in the review.
The unmeritorious issues raised by the respondent in relation to the costs indemnity principle and improper billing and as to the costs indemnity principle, amount to a breach of s 19 of the CPA. By raising these issues, the respondent has not used reasonable endeavours to narrow the issues in dispute. There is therefore a breach of s 23 of the CPA.
Section 24 of the Civil Procedure Act
Section 24 of the CPA provides:
Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
The applicants allege a breach of s 24 of the CPA and raised the same matters referred to in relation to ss 19, 20 and 23 of the CPA.
No submission was made by either party in relation to this alleged breach. I have dealt with those matters and in my view the unfounded allegations made by the respondent, the invoking of a review mechanism so as to prevent the taxation of costs have caused the legal costs that are incurred to be not reasonable to the complexity or the importance of the issues in dispute and the amount in dispute. There is therefore a breach of s 24 of the CPA.
Section 25 of the Civil Procedure Act
Section 25 of the Act provides that:
Overarching obligation to minimise delay
For the purpose of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to—
(a) act promptly; and
(b) minimise delay.
The applicants rely on the matters raised to demonstrate breaches of ss 19, 20 and 23 of the CPA. They say that those matters lead to a conclusion that s 25 of the CPA has been breached because the respondent has not used reasonable endeavours to properly minimise delay. Again, neither party made submissions regarding the breach of s 25.
I have found that the respondent has taken steps in the proceeding with a purpose to delay taxation and has caused expense to the applicants. It has made unfounded allegations that the applicants have breached the costs indemnity principle and has invoked the review mechanism so as to prevent the taxation of costs. It has also failed to narrow the issues in dispute. Therefore, in my view it follows that the respondent has not used reasonable efforts to act promptly and minimise delay. There is a breach of s 25 of the CPA.
The Remedy
Section 29(1) of the CPA provides:
Court may make certain orders
(1)If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
(a) an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;
(b) an order that the legal costs or other costs or expenses of any person be payable immediately and be enforceable immediately;
(c) an order that the person compensate any person for any financial loss or other loss which was materially contributed to by the contravention of the overarching obligation, including—
(i) an order for penalty interest in accordance with the penalty interest rate in respect of any delay in the payment of an amount claimed in the civil proceeding; or
(ii) an order for no interest or reduced interest;
(d) an order that the person take any steps specified in the order which are reasonably necessary to remedy any contravention of the overarching obligations by the person;
(e)an order that the person not be permitted to take specified steps in the civil proceeding;
(f) any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.
Particulars of the alleged breaches of the CPA were provided to the Court by the applicants. The applicants sought the following relief:
Section 29(1) of the CPA empowers the Court to make a wide range of orders if it is satisfied on the balance of probabilities that a party has contravened any overarching obligation. Here, the interests of justice would be served by orders to the following effect:
(a)under paragraph (d) and/or paragraph (f) of s.29(1), requiring the Respondent to fully disclose to the Court and the Applicants the ownership structure (both current and historical) of the firm “AJH Lawyers”, and the financial position of the Respondent;
(b)under paragraph (e) of s.29(1), that until further order the Respondent be not permitted to initiate or proceed with any interlocutory application, application for review, application for leave to appeal, or any other step in this proceeding which may have the effect of further delaying the taxation of the Applicants’ bills of costs;
(c)under paragraphs (a) and (b) of s.29(1), obliging the Respondent to pay the Applicants’ costs and expenses caused by the contravention(s), such obligation to be immediate, and immediately enforceable;
(d)under paragraph (c)(i) of s.29(1), that the Respondent pay interest in accordance with the penalty interest rate on all sums which it is ordered to pay in this proceeding, for such period as the Court deems just; …[44]
[44]Particulars of Applicants’ Civil Procedure Act Application para 8(a)–(d).
At the conclusion of the hearing, the relief sought by the applicants is that the review be stopped and that the taxation be commenced forthwith.
In Yara Australia Pty Ltd v Oswal,[45] the Court of Appeal held that s 29 of the CPA provides the Court with broader and more flexible powers than the Supreme Court (General Civil Procedure) Rules 2005 or under its inherent jurisdiction.
[45][2013] VSCA 337 at [18].
The Court of Appeal gave examples of sanctions incurred pursuant to s 29 of the Act for a breach of the CPA. Redlich JA, Priest JA and Macaulay AJA stated:[46]
Section 29 was considered by Dixon J in Hudspeth and Scholastic Cleaning and Consultancy Services (No 4),[47] His Honour concluding that the jurisdiction has both compensatory and punitive elements where there is a finding of a contravention of an obligation.[48] A number of judges at first instance have emphasised that the Act requires the Court to be proactive and innovative in its approach to achieve its objects.[49] This approach led Derham AsJ to justify the exercise of the Court’s power to order the production of documents in Matthews v SPI Electricity Pty Ltd & Anor (No 3).[50] A failure to act promptly and minimise delay in contravention of s 25 of the Act was relied upon to support the striking out of proceedings by Digby J in Chan & Ors v Chen & Ors.[51] J Forrest J in Matthews v SPI Electricity Pty Ltd & Anor (No 2)[52] accepted that s 29 authorises the Court to order a person who the Court is satisfied on the balance of probabilities has contravened an overarching obligation, to pay the costs of any other person ‘arising from the contravention of the overarching obligation’ but refused to make the order sought. In Bare v Small,[53] Hansen and Tate JJA recently gave effect to the Court’s discretionary power to fix or cap a party’s liability for costs in advance of an appeal, as it considered such an order appropriate to further the overarching purpose identified in s 7 of the Act, namely ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. In Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors,[54] Warren CJ, Osborn JA and Macaulay AJA approved the approach of Croft J in taking the nature and extent of contraventions of the overarching obligations of the Act into account in making an order as to costs.[55]
[46][2013] VSCA 337 [24].
[47][2013] VSC 14.
[48]Ibid [5]–[7].
[49]Hodgson v Amcor Ltd; Amcor Ltd & Ors v Barnes & Ors (2011) 32 VR 495, 504 [26]; Thomas v Powercor Australia Ltd[2010] VSC 489, [41] (Forrest J); Crowe v Trevor Roller Shutter Services Pty Ltd[2010] VSC 536, [19]–[20] (Beach J).
[50][2013] VSC 116.
[51][2013] VSC 538.
[52][2013] VSC 86.
[53][2013] VSCA 204.
[54][2013] VSCA 237.
[55]Ibid [553]–[554].
I have taken into account the long history of this matter and the conduct of the respondent. In my view it is appropriate to grant the relief that the applicants request. The breaches of the CPA are serious. It also appears to me that to allow the review to continue would start another chain of hearings which would cause disproportionate costs, particularly when on all the evidence I have seen there is little or no merit in the review. This case has been going on for far too long over the taxation of a bill of $35,000. There have been costs incurred allegedly up to $421,000, plus the cost of this application and the costs of the taxation which is yet to take place. It is time to say enough is enough.
I order that the review of the respondent be dismissed.
3
0