Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd
[2017] VSCA 198
•4 August 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0132
| MELBOURNE LINH SON BUDDHIST SOCIETY INC | Appellant |
| v | |
| GIPPSREAL LTD | Respondent |
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| JUDGES: | MAXWELL P, KYROU JA and CAMERON AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 4 August 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 198 |
| JUDGMENTS APPEALED FROM: | Gippsreal Ltd v Melbourne Linh Son Buddhist Society Inc [2016] VSC 324; Gippsreal Ltd v Melbourne Linh Son Buddhist Society Inc(No 2) [2016] VSC 696 (Daly AsJ) |
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COSTS – Appeal successful – Whether costs of trial should be remitted to trial judge for determination – Whether issues-based costs order should be made.
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| APPEARANCES: | Counsel | Solicitors |
| No appearances |
MAXWELL P
KYROU JA
CAMERON AJA:
On 23 June 2017, this Court published its reasons for granting leave to appeal and allowing the appeal.[1] At their request, we granted leave to the parties to file written submissions on the form of order to be made by the Court, including on the question of costs.
[1]Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 (‘Substantive Appeal Reasons’).
The parties’ submissions have raised the following issues for determination:
(a) Who should pay the costs of the appeal?
(b)Should a certificate be granted to the respondent under s 4 of the Appeal Costs Act 1998 in respect of the costs of the appeal (‘Indemnity Certificate’)?
(c)Should the costs of the Trial Division proceeding be remitted to the trial judge for determination?
(d)If the costs of the Trial Division proceeding are not remitted to the trial judge for determination, who should pay those costs?
(e)Should any order be made in relation to the respondent’s summons dated 9 August 2016 (‘CPA summons’) which it issued under s 29 of the Civil Procedure Act 2010 (‘CPA’) and which is still pending in the Trial Division?
For the reasons that follow, we have concluded as follows:
(a) The respondent should pay the appellant’s costs of the appeal.
(b) An Indemnity Certificate should be granted to the respondent.(c)The costs of the Trial Division proceeding should not be remitted to the trial judge for determination.
(d)The respondent should pay 80 per cent of the appellant’s costs of the Trial Division proceeding.
(e)No order should be made in relation to the CPA summons.
Issues at trial and orders made by the trial judge
The factual background is set out in our reasons for allowing the appeal and will not be repeated here. It suffices for us to refer to the following facts:
(a)The appellant applied to the respondent for a loan to be secured by a mortgage over a property in Plumpton (‘Plumpton Property’) and received from the respondent a document titled ‘Deed of Offer of Finance’ dated 16 August 2013 (‘Deed of Offer’).
(b)The Deed of Offer described the ‘Proposed Mortgage Sum’ as ‘$1,775,000.00 (or a maximum of 50% Loan to Value Ratio, whichever is the lesser)’. It also specified an establishment fee of $26,625 — which was calculated at 1.5 per cent of $1,775,000 — and an ‘Initial Loan Term’ of one year. A finance broker, John Adicho, who was assisting the appellant to secure mortgage finance, made two handwritten amendments to the Deed of Offer, which the respondent accepted. One of the amendments increased the loan term from one year to two years.
(c)The Deed of Offer granted a charge over the Plumpton Property to the respondent. On 10 September 2013, the respondent lodged a caveat against the title to the Plumpton Property pursuant to the charge.
(d)As a result of receiving a valuation of $1 million for the Plumpton Property, the respondent reduced the proposed loan to $500,000. However, the respondent did not reduce the establishment fee of $26,625 and retained in the amended loan documentation the original term of one year.
(e)The settlement for the loan was scheduled for 30 September 2013 and, when it did not settle on that day, the respondent gave notice to the appellant requiring settlement to take place by 4 pm on 3 October 2013.
(f)The appellant refused to settle by the specified time because it maintained that the loan term should be two years and the establishment fee should be $7,500, being 1.5 per cent of the reduced loan amount of $500,000.
(g)The respondent treated the appellant’s failure to settle by 4 pm on 3 October 2013 as a breach of the Deed of Offer, withdrew its offer of finance on the basis of that breach and claimed from the appellant various amounts — including the establishment fee of $26,625 — as liquidated damages.
(h)The appellant obtained a loan from the ANZ Bank secured by a mortgage over the Plumpton Property, which was lodged for registration.
(i)On 10 January 2014, the respondent commenced this proceeding against the appellant, the ANZ Bank and the Registrar of Titles in order to uphold its caveat. The respondent sought orders restraining the Registrar of Titles from registering the ANZ Bank’s mortgage (‘respondent’s initial caveat application’). The respondent and the ANZ Bank reached an agreement whereby the respondent’s charge would rank ahead of the ANZ Bank’s mortgage. On 12 March 2014, consent orders were made pursuant to which the ANZ Bank and the Registrar of Titles ceased to be defendants and the proceeding continued against the appellant.
(j)On 21 March 2014, the respondent filed a statement of claim in which it pleaded breach of contract, in respect of the appellant’s alleged breach of the Deed of Offer, and quantum meruit. The respondent claimed: a declaration that it was entitled to maintain the caveat as security for the payment of amounts the appellant owed to the respondent; the sum of $111,745.54 or alternatively, damages; further payment of the amount actually incurred by it in relation to the Deed of Offer on an indemnity basis; and interest.
(k)In its defence, as amplified in the course of the trial, the appellant:
(i)alleged that the Deed of Offer, as signed by the appellant, was not a binding contract but a mere counter-offer by the appellant which was never accepted by the respondent;
(ii)alleged that the Deed of Offer was unenforceable because it did not comply with the National Credit Code;
(iii)denied that it breached the Deed of Offer;
(iv)alleged that Mr Adicho was the agent of the respondent and therefore his conduct could be attributed to the respondent;
(v)denied that the respondent was entitled to any payment on the basis of quantum meruit; and
(vi)alleged that only $7,500 should have been charged by the respondent for the establishment fee and that the amount of $26,625 constituted a penalty.[2]
[2]See [188] of the Substantive Appeal Reasons.
In para 72 of her substantive reasons for judgment published on 20 July 2016,[3] the judge identified the following ‘key issues’ for determination:
(a)The ‘contract formation issue’, namely, whether the Deed of Offer amounted to a binding agreement or was merely a counter-offer made by the appellant.
(b)The ‘agency issue’, namely, whether Mr Adicho was the agent of the appellant or that of the respondent.
(c)The ‘breach issue’, namely, whether the appellant’s failure to settle the loan by 4 pm on 3 October 2013 constituted a breach of the Deed of Offer which entitled the respondent to withdraw its offer of finance.
(d)The ‘establishment fee issue’, namely, whether the amount payable as an establishment fee was $26,625 (being the amount specified in the Deed of Offer) or $7,500 (being 1.5 per cent of the reduced loan amount of $500,000), and whether the fee was payable only if the loan was advanced.
(e)The ‘penalty issue’, namely, whether the amount of $41,046.88 for three months’ interest on the original loan amount of $1,775,000, which the respondent claimed by way of liquidated damages, constituted a penalty.
[3]Gippsreal Ltd v Melbourne Linh Son Buddhist Society Inc [2016] VSC 324.
In para 88 of her substantive reasons for judgment, the judge made the following findings in relation to the above key issues:
(a) The Deed of Offer was a binding agreement between the parties.
(b) Mr Adicho was the agent of the appellant.(c)The appellant’s failure to settle the loan by 4 pm on 3 October 2013 constituted a breach of the Deed of Offer which entitled the respondent to withdraw its offer of finance.
(d)The quantum of the establishment fee was $26,625.
(e)On its proper construction, the Deed of Offer entitled the respondent to claim three months’ interest on the reduced loan amount of $500,000 (namely, $11,562.50) rather than on the original loan amount of $1,775,000 (namely, $41,046.88).
In her substantive reasons and separate rulings, the judge also decided the following:
(a) The National Credit Code did not apply to the Deed of Offer.
(b)The respondent was entitled to payment of the establishment fee notwithstanding that the loan was not advanced.
(c)The appellant was not entitled to set off against the damages awarded to the respondent amounts totalling $17,500 which it had previously paid to the respondent by way of ‘commitment fees’.
(d)A ‘without prejudice’ letter from the respondent to the appellant’s solicitors dated 3 October 2013 was inadmissible.
(e)The respondent’s quantum meruit claim was not made out.
On 24 August 2016, the judge made the following declaration and orders:
THE COURT DECLARES THAT:
1The Deed of Offer between the [respondent] and the [appellant] dated 23 August 2013 is binding on the [respondent] and the [appellant].
THE COURT ORDERS THAT:
1There be judgment for the [respondent] in the sum of $49,436.77, comprising:
(a) Liquidated damages:
Establishment fee (including $31,625
mortgage preparation fee)
Three months interest on $500,000 $11,562.50
(b) Valuation fee (incl GST) $5,500
(c) Disbursements (incl GST) $649.67
(d) Disbursements not subject to GST $99.60
2The question of the [respondent’s] entitlement to interest on the judgment sum, the quantum of any interest payable upon the judgment sum, and the parties’ costs of the proceeding, be reserved for hearing and determination on a date to be fixed in the week commencing 5 September 2016.
3For the avoidance of doubt, the [CPA summons] be adjourned to a date to be fixed following the hearing and determination of any application for leave to appeal from these orders …
…
The judge did not decide whether the establishment fee of $26,625 constituted a penalty.
On 15 December 2016, the judge made a further order dealing with interest and costs, and published her reasons for that order.[4] The further order provided as follows:
1Subject to paragraph 2 of these orders, the [appellant] pay the [respondent’s] costs of the proceeding on the standard basis, to be taxed in default of agreement.
2The [appellant] pay the [respondent’s] costs of and incidental to its summons filed 10 January 2014 on an indemnity basis, to be taxed in default of agreement.
3The [appellant] pay interest on the judgment sum of $49,436.77 at the rate prescribed by section 2 of the Penalty Interest Rates Act 1983 from 29 March 2014 to 24 August 2016, and pay interest at 19.25 per cent per annum thereafter.
4Interest is payable upon the sums in paragraphs 1 and 2 of these orders at the rate of 19.25 per cent per annum from the date that those costs are taxed or agreed.
[4]Gippsreal Ltd v Melbourne Linh Son Buddhist Society Inc (No 2) [2016] VSC 696.
The summons referred to in paragraph 2 of the order dated 15 December 2016 related to the respondent’s initial caveat application.
Notice of appeal, notice of contention and outcome of the appeal
In its application for leave to appeal, the appellant relied on seven grounds of appeal. Ground 1 sought to impugn the judge’s finding that the quantum of the establishment fee was $26,625. Grounds 2 and 3 sought to impugn the judge’s finding that the appellant’s failure to settle the loan by 4 pm on 3 October 2013 constituted a breach of the Deed of Offer which entitled the respondent to withdraw its offer of finance. Ground 4 sought to impugn the judge’s finding that the respondent was entitled to payment of the establishment fee of $26,625 notwithstanding that the loan was not advanced. Grounds 5 and 6 sought to impugn the judge’s failure to find that the establishment fee of $26,625 constituted a penalty. Ground 7 sought to impugn the judge’s finding that the appellant was not entitled to a set off in respect of the commitment fees totalling $17,500 which it had previously paid to the respondent.
The respondent filed a notice of contention which sought to impugn the judge’s ruling that the ‘without prejudice’ letter dated 3 October 2013 was inadmissible.
This Court upheld Grounds 2, 3, 5 and 6 and rejected the remaining grounds. The Court did not find it necessary to decide the notice of contention. As stated at [1] above, the Court decided to grant leave to appeal and to allow the appeal.
Following the publication of our reasons for allowing the appeal, the respondent provided a withdrawal of caveat to the appellant.
We now consider each of the issues set out at [2] above.
Who should pay the costs of the appeal?
As the appeal has succeeded, the principle that costs follow the event would, ordinarily, require the Court to order that the respondent pay the appellant’s costs of the appeal.
The respondent submitted that the Court should reduce the costs to which the appellant is entitled up to the hearing of the appeal by 33.3 per cent due to the Court’s rejection of Grounds 1, 4 and 7 and that a further reduction should be made because of the appellant’s non-compliance with certain procedural orders relating to the appeal.
We reject the respondent’s submission. By far the most significant issue on the appeal — and which took up the most time — was whether the judge had correctly found that the appellant’s failure to settle the loan by 4 pm on 3 October 2013 constituted a breach of the Deed of Offer which entitled the respondent to withdraw the offer of finance (Grounds 2 and 3). The procedural orders with which the appellant was said to have failed to comply were of a routine nature and would not have materially increased the costs of the appeal.
Accordingly, we will order that the respondent pay the appellant’s costs of the appeal.
Should an Indemnity Certificate be granted to the respondent?
As the requirements of s 4 of the Appeal Costs Act 1998 are satisfied, an Indemnity Certificate will be granted to the respondent.
Should the costs of the Trial Division proceeding be remitted to the trial judge?
The appellant submitted that the costs of the Trial Division proceeding should be determined by this Court. While the respondent noted that the trial judge ‘may be more appropriately placed to apportion [the] costs of the trial (and to hear the CPA [summons])’, it did not submit that these issues should be remitted to the trial judge.
We accept that the trial judge is more familiar than this Court with the issues at trial and the manner in which the trial was conducted. Nevertheless, this Court is well placed to determine the costs of the Trial Division proceeding. In these circumstances, an order remitting those costs to the trial judge would not promote finality in litigation and would fail to give effect to the overarching purpose in s 7(1) of the CPA. That purpose is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. Accordingly, such an order will not be made.
Who should pay the costs of the Trial Division proceeding?
The appellant submitted that, as this Court has reversed the trial judge’s decision, an order should be made that the respondent pay the appellant’s costs of the Trial Division proceeding.
The respondent conceded that this Court’s reversal of the trial judge’s decision would, ordinarily, entitle the appellant to its costs of the Trial Division proceeding. However, the respondent submitted that those costs should be apportioned on an issues basis and that, as the appellant was unsuccessful on many of the issues it pursued at trial, it should be awarded only 40 per cent to 50 per cent of its costs of the proceeding.
In support of its submission, the respondent relied on the following:
(a)The appellant failed at trial on three of the five key issues which the judge identified, namely the contract formation issue, the agency issue and the establishment fee issue, each of which was either not challenged on appeal or pursued unsuccessfully on appeal. The agency and contract formation issues occupied considerable time at trial and at the interlocutory stage. Contrary to its overarching obligation under s 18 of the CPA, the appellant did not have a proper basis for pleading these two issues.
(b)The appellant failed at trial on the issue of whether the Deed of Offer was void under the National Credit Code and in relation to some other issues.
(c)Contrary to its overarching obligation under s 23 of the CPA, the appellant failed to narrow the issues in dispute. In particular, in its defence, the appellant denied matters that were uncontroversial and served a notice of dispute in relation to all 78 paragraphs of a notice to admit which the respondent served on the appellant. In relation to the notice to admit, the respondent relied on r 63.18 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).[5]
(d)Contrary to its overarching obligation under s 24 of the CPA, the manner in which the appellant conducted interlocutory procedures, including in relation to its pleadings, discovery and the appellant’s principal witness statement, caused delay and added to the costs of the proceeding.
[5]Rule 63.18 of the Rules provides that where, in response to a notice to admit, a party disputes a fact or the authenticity of a document, and afterwards that fact or the authenticity of that document is proved in the proceeding, that party must pay the costs of the proof, unless the Court otherwise orders.
The respondent submitted that, although the damages award in its favour did not exceed $100,000, r 63.24 of the Rules should not be applied.[6] That was said to be because the reason the proceeding was not remitted to the County Court was the appellant’s vacillation as to whether it would file a counterclaim.
[6]Rule 63.24 of the Rules broadly provides that where in a proceeding for debt or damages the plaintiff recovers an amount not exceeding $100,000, the plaintiff shall, unless the Court otherwise orders, be entitled only to the costs to which the plaintiff would have been entitled if the plaintiff had brought the proceeding in the County Court.
The respondent submitted that each party should bear its own costs of the respondent’s initial caveat application on the basis that that application would have been avoided if the appellant had consented to an acknowledgement by the ANZ Bank of the respondent’s prior ranking charge.
In our opinion, this is an appropriate case for an issues-based costs order to be made in relation to the costs of the Trial Division proceeding.[7]
[7]See r 63.04(1) of the Rules, which provides that the Court may make an order for costs in relation to a particular question in or a particular part of a proceeding. See also Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd [2016] VSCA 233 [13] and Talacko v Talacko [2008] VSCA 229 [35].
We accept the respondent’s submission that the contract formation issue and the agency issue were discrete key issues which the appellant unsuccessfully pursued at trial and that an allowance should be made in respect of the costs relating to those issues. An allowance should also be made for the establishment fee issue. We note, however, that much of the evidence relating to these three issues was also relevant to the breach issue upon which the appellant was successful on appeal. The other issues which the appellant unsuccessfully pursued at trial were not significant and the time taken at trial in dealing with them does not warrant an issues-based costs order in relation to them.
We also accept the respondent’s submission that an allowance should be made in accordance with r 63.18 of the Rules due to the appellant’s failure to admit any of the matters set out in the respondent’s notice to admit.
We are not otherwise persuaded that the manner in which the appellant conducted interlocutory steps had a material bearing on the costs of the proceeding.
We reject the respondent’s submission that each party should bear its own costs of the respondent’s initial caveat application. This Court has found that the respondent’s purported withdrawal of its offer of finance constituted a repudiation of the Deed of Offer which the appellant accepted by obtaining a loan from the ANZ Bank.[8] Accordingly, at the time the respondent’s initial caveat application was made, the Deed of Offer had come to an end and there was no longer any legal basis for the respondent’s caveat. This, in turn, meant that the respondent’s initial caveat application should not have been made. In these circumstances, the respondent should pay the appellant’s costs of the respondent’s initial caveat application. Paragraph 2 of the judge’s order dated 15 December 2016 — which relates to the costs of the respondent’s initial caveat application — cannot stand.
[8]Substantive Appeal Reasons [126].
Taking into account all of the above matters, in order to do justice between the parties, we will order that the respondent pay 80 per cent of the appellant’s costs of the Trial Division proceeding.
Neither party submitted that we should disturb any interlocutory costs orders made by the judge.
Should any order be made in relation to the CPA summons?
As stated at [2] above, the CPA summons was issued on 9 August 2016 and remains pending in the Trial Division. It alleged that the appellant and its solicitors had contravened the overarching obligations in ss 18, 23 and 24 of the CPA and sought orders that the appellant and its solicitors pay the respondent’s costs and expenses arising from those contraventions, including the costs of its initial caveat application on an indemnity basis. It was issued after the judge published her substantive reasons for judgment on 20 July 2016 and is undoubtedly predicated on the correctness of the judge’s decision.
The appellant did not seek any order from this Court in relation to the CPA summons. The respondent submitted that, as this Court was in a position to deal with the costs of the Trial Division proceeding, the issues arising under the CPA summons could be subsumed within this Court’s consideration of those costs. On that basis, the respondent did not oppose this Court ‘disposing’ of the CPA summons without making any order as to the costs of the summons.
In our opinion, as the CPA summons has not been determined by the Trial Division and did not form part of the subject matter of the appeal, this Court has no jurisdiction to make any order in relation to it. As we have dealt with the costs of the Trial Division proceeding and, in doing so, considered the respondent’s submissions relating to alleged breaches by the appellant of its overarching obligations under the CPA, the appropriate course is for the respondent to discontinue the CPA summons. If the filing of a notice of discontinuance gives rise to an obligation for the respondent to pay the appellant’s costs of the CPA summons in accordance with r 63.15 of the Rules, that would be appropriate. This is because this Court’s reversal of key findings made by the judge and the discussion relating to costs in these reasons mean that it is difficult for the CPA summons to succeed.
We would add, by way of obvious general observation, that the mere fact that a court dismisses a party’s claim or defence does not, in and of itself, indicate that the party breached its overarching obligation to have a proper basis for the claim or defence. The issuing of a summons seeking relief under s 29 of the CPA is a serious matter and should not be undertaken lightly.
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