MIS Funding No 1 Pty Ltd v Buckley (No 2)
[2013] VSC 702
•16 DECEMBER 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 03689 of 2011
| MIS FUNDING NO 1 PTY LTD | Plaintiff |
| v | |
| PETER SEAN BUCKLEY | Defendant |
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JUDGE: | ELLIOTT J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 29 NOVEMBER 2013 | |
FURTHER WRITTEN SUBMISSIONS: | 2, 6 DECEMBER 2013 | |
DATE OF JUDGMENT: | 16 DECEMBER 2013 | |
CASE MAY BE CITED AS: | MIS FUNDING No 1 PTY LTD v BUCKLEY (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 702 | |
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Costs – order for indemnity costs – loan agreement – default – requirement to pay costs of enforcement on a full indemnity basis – suggested ambiguity in the order – slip rule – plaintiff seeking to amend order previously sought – defendant also seeking clarification – costs of further submissions – Supreme Court (General Civil Procedure) Rules 2005, rr 36.07, 63.28, 63.30.1, 63.34(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P D Crutchfield SC with C T Moller | K & L Gates |
| For the Defendant | G R McCormick | Francisdaniel Lawyers |
HIS HONOUR:
A. Principal issue – costs of the trial
On 15 November 2013, I delivered judgment (“the Principal Judgment”) in favour of the plaintiff, MIS Funding No 1 Pty Ltd (“MIS Funding”).[1] At the time judgment was delivered, I proposed that the following order be made in relation to costs:
The defendant pay the plaintiff’s costs of the proceeding, including reserved costs, on an indemnity basis.
This order, which was order 2 of the orders made, reflected what was sought by MIS Funding at trial.
[1][2013] VSC 607.
I gave reasons as to why costs were awarded on an indemnity basis. After stating in the Principal Judgment that I would order judgment in favour of MIS Funding, I then stated the following in relation to costs:[2]
As the Loan Agreement also expressly provided for costs of any enforcement proceedings to be paid by Buckley “on a full indemnity basis”,[3] the costs order will include this as the basis of awarding costs in favour of MIS Funding. In short, on the facts presently before the court, there is no discretionary consideration which militates against the court making an order in accordance with what was expressly agreed by the parties.[4] However, the costs order will be stayed for 14 days, with liberty to apply, in case there are further matters Buckley would want to put before the court on the question of costs.
(Emphasis added, original footnotes.)
As may be seen, I made express reference to the basis upon which indemnity costs were to be awarded, namely in accordance with cl 4(c) of the Loan Agreement.[5]
[2]At [90].
[3]See clause 4(c).
[4]See, for example, Chen v Kevin McNamara & Son Pty Ltd(No 2) [2012] VSCA 229, [8], [10]-[11], [13].
[5]The Loan Agreement was defined in the Principal Judgment (at [15]) as a loan agreement executed on 28 March 2003 by Buckley.
Purportedly pursuant to the granting of liberty to apply, the defendant, Peter Sean Buckley (“Buckley”), filed submissions with the court on 26 November 2013. I say purportedly because those submissions put no new matters before the court relevant to the exercise of the discretion on costs. Rather, those submissions addressed the evidence already tendered, and sought to re-agitate the basis upon which costs had already been ordered. In summary, the court was invited to exercise its discretion not to award indemnity costs, or, alternatively, to specifically order that the indemnity costs awarded be taxed on an indemnity basis in accordance with r 63.30.1 of the Supreme Court (General Civil Procedure) Rules 2005 and on no other basis.[6] It was further submitted that, since 1 April 2013, there is no longer any power to award solicitor and client costs or party and party costs, and that the only alternative to indemnity costs was a taxation on a standard basis.[7]
[6]Rule 63.30.1(1) provides: … on a taxation on an indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.
[7]Reference was made to r 63.90, which provides for the applicability of the new Rules as to taxation of costs, regardless of the date of commencement of the proceeding.
The submissions continued:
[Buckley] further submits that, to the extent there is any doubt as to what is meant by “indemnity basis” in paragraph 2 of the order of the court made on 15 November, it should be clarified that such is a reference to indemnity as defined in r 63.30.1.
Buckley’s submissions in relation to costs were met with a written response from MIS Funding on 28 November 2013. By those written submissions, MIS Funding agreed with Buckley that the issue as to the meaning of the orders as sought by MIS Funding, and made by the court on 15 November 2013, required clarification. It was submitted that the court should vary the order under the “slip rule”.[8] However, in contrast to Buckley’s position, MIS Funding sought a variation of the costs order as follows:
Paragraph 2 of the orders made on 15 November 2013 in this proceeding be varied by adding, after the word “basis”, the following “, such costs to be calculated by reference to the retainer agreement between the plaintiff and its legal advisers”.
The retainer agreement referred to was not the subject of evidence at trial.
[8]See r 36.07, which provides: The Court may at any time correct a clerical mistake in a judgment or order or an error arising in a judgment or order from any accidental slip or omission.
As a result of these submissions, the matter was listed for further hearing on 29 November 2013. At the commencement of that hearing, I expressed the view that the order that had been made by the court was in accordance with that sought by MIS Funding, and was in a form often made by the court. I expressed some doubt about whether it was appropriate for the parties to be revisiting a matter already determined, especially in light of the provisions of the Civil Procedure Act 2010 (Vic).
Further, at this hearing, Buckley stated he now accepted costs ought to be awarded on an indemnity basis, and withdrew the submission inviting the court to re-exercise its discretion.
Without descending to further detail in relation to the matters raised by the parties on 29 November 2013, both parties sought to provide further submissions to the court in relation to what, if anything, ought to be done in relation to the costs order previously made.
On 2 December 2013, further costs submissions were filed by MIS Funding.[9] Paragraphs 15 to 21 of the earlier costs submissions dated 28 November 2013 were withdrawn, with the effect that the variation of the order previously proffered[10] was no longer sought. MIS Funding’s further submissions contended that the effect of the indemnity costs order was that indemnity costs are to be calculated in accordance with cl 4(c) of the Loan Agreement. It was submitted, correctly in my view, that so much was self-evident from paragraph 90 of the Principal Reasons, when read together with the footnotes contained in that paragraph: see paragraph 2 above.
[9]In addition to these submissions, reply submissions were ordered to be filed and served by 4 pm on 12 December 2013. MIS Funding informed the court on 13 December 2013 it did not want to file any submissions in reply.
[10]See par 5 above.
Having made these submissions, MIS Funding then contended that MIS Funding “could have put the issue beyond any doubt” at trial by adding the words “in accordance with cl 4(c) of the Loan Agreement dated 28 March 2003” at the end of the draft of order 2. Furthermore, I was invited to make this amendment to the costs order to remove any apparent doubt.
By reference to 2 decisions of Wood AsJ, it was contended by MIS Funding that if the order was allowed to remain in its present form, there may be some confusion as to its meaning. The 2 cases referred to were ACN 074 971 109 Pty Ltd (as trustee for the Argo Unit Trust) v National Mutual Life Association of Australasia Ltd[11] and Paper Australia Pty Ltd v Victorian Workcover Authority.[12] It was submitted that these decisions were authority for the proposition that r 63.34 operates such that, absent an order to the contrary, even an order for indemnity costs will be taxed on scale.[13]
[11][2013] VSC 137.
[12][2013] VSC 444.
[13]Rule 63.34(1) provides: Subject to paragraph (3), a legal practitioner for a party to whom costs are payable (whether the basis of taxation is the standard basis or the indemnity basis) shall be entitled to charge and be allowed costs in accordance with the Scale in Appendix A unless the Court or the Costs Court otherwise orders.
I do not read either of those decisions, or the authority referred to in those decisions, as standing for the proposition contended. In the earlier of these 2 decisions, his Honour stated as follows:[14]
The test to be applied for indemnity costs is outlined in r 63.30.1. The basis of calculation is contained in r 63.34(1) which deals with the basis of any entitlement to recover, namely on scale, absent any order of the court to the contrary. Ironically, the same judge who has referred this matter and made the indemnity costs order in this matter (Croft J) also made an indemnity cost order in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[15] On that occasion he added the words “calculated by reference to the retainer between each of the defendants and their respective legal advisers” to the final cost order. The absence of these words in the current order makes it clear therefore that the intention, and the wording of the costs order provides for costs on scale. In Sunland the effect of the order was to make it clear that in that case the entitlement was not on scale but on the basis of existing cost agreements. This is entirely consistent with the rationale in Flotilla Nominees Pty Ltd v Western Australian Land Authority.[16] The absence of these words in the present order means costs are to be taxed on scale consistent with the words in the order and the judge’s intention.
(Emphasis added.)
It is clear from this passage that Wood AsJ was making observations in relation to the circumstances of the case before him, rather than making general statements that were to apply to every case in which indemnity costs are awarded.
[14][2013] VSC 137, [24].
[15][2012] VSC 399.
[16][2003] WASC 122, [30].
In the latter decision, Wood AsJ again referred to Flotilla Nominees Pty Ltd v Western Australian Land Authority. In so doing, his Honour said[17] that that case described “the process whereby a party seeking costs in accordance with the costs agreement produces the costs agreement to the judge at the time the order is made and makes it clear it is not a matter for taxation”. His Honour then quoted from a passage in that case, where Pullin J said as follows:[18]
… it is my opinion that if a party wishes to seek a special costs order or an indemnity costs order to allow costs to be taxed on the rates stated in the costs agreement, then the terms of the costs agreement should be disclosed to the judge who is being asked to make the order. This should not be left to emerge as an issue before the taxing officer.
[17][2013] VSC 444, [19].
[18]At [30].
In my view, what was stated by Wood AsJ in these 2 decisions was no more than, absent any intention expressed by the court to the contrary, an order for indemnity costs will be an order for the taxation of those costs on an indemnity basis pursuant to r 63.30.1. However, as was made clear by Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority, a party can make the position clear before the trial judge by putting before the court any costs agreement, and, I interpolate, any agreement upon which the award of indemnity costs is sought, to make it clear that costs sought on an indemnity basis is pursuant to an agreement (or agreements), rather than in accordance with a taxation governed by the Supreme Court Rules.
It may be that, given the potential confusion of the meaning of “indemnity costs” in light of the introduction of r 63.30.1, the court will adopt a practice of specifying the basis upon which indemnity costs are awarded if it is other than pursuant to the taxation regime prescribed in the Supreme Court Rules. However, the absence of such specificity does not make the basis of the order unclear if the reasons for judgment elucidate the premise upon which the order was made.
In the circumstances of this case, there is no “clerical mistake” or “error” from an accidental slip or omission. Accordingly, r 36.07 is not enlivened.
Further, contrary to the submissions made by Buckley, the decisions make it plain that the ability of the court to award costs is not confined to costs on a standard basis or an indemnity basis (as that term is understood pursuant to rule 63.30.1). The Supreme Court Rules do not limit the court’s ability to award costs on a particular basis which is appropriate to the circumstances; rather they limit the bases upon which costs may be awarded “on a taxation” pursuant to the Rules, unless the court otherwise orders. That this is so is made clear by r 63.28, which provides costs are to be taxed on a standard basis, on an indemnity basis or such other basis as the court may direct.
That then leaves the issue of what was meant by “on a full indemnity basis” in cl 4(c) of the Loan Agreement. This has yet to be determined. It is not appropriate for the court to consider this matter presently, for at least 2 reasons. First, in light of the order now sought by MIS Funding, there is no submission on the part of MIS Funding as to what that phrase means. As I stated on 29 November 2013, if there is any dispute between the parties as to what that phrase means, it may be determined by the Costs Court.
Secondly, as already noted,[19] the actual retainer agreement sought to be relied upon by MIS Funding was not the subject of any evidence at trial. The significance of this fact, if any,[20] may be considered by the Costs Court if further adjudication is required.
[19]See par 5 above.
[20]See par 13 above.
Accordingly, for the reasons stated, I will not make any amendment to the costs order made on 15 November 2013.
B. Further costs
The remaining issue is the costs that have been incurred by the parties in seeking to address the court on the question of costs after 15 November 2013. Buckley submits the additional costs should be paid by MIS Funding. He does so on the basis that MIS Funding stated in their submissions that the issue could have been put beyond doubt by MIS Funding at trial or before the orders were made. Buckley also points out that the costs order as made could be traced back to the draft order prepared by lawyers for MIS Funding, which omitted to specify the basis on which the relevant indemnity costs should be calculated. I do not accept the submission.
First, Buckley sought to be heard pursuant to liberty to apply, but on a basis that went beyond the scope of the liberty granted.
Secondly, both parties thought the orders needed clarification. That issue could have been raised by either party before the orders were made. In any event, I have found the perceived need to clarify the order itself was non-existent.
Thirdly, the issue between the parties as to the meaning of an award for indemnity costs under the Loan Agreement is yet to be determined. As I have stated, if there remains a dispute between the parties in relation to this, it may be determined by the Costs Court. In those circumstances, there has been no further advancement of either party’s position in light of the further submissions.
In the circumstances, I will award no order as to the costs of and incidental to:
(1)the written submissions filed by Buckley on 26 November 2013 and 6 December 2013;
(2)the written submissions filed by MIS Funding on 28 November 2013 and 2 December 2013; and
(3)the costs incurred in relation to the appearances on 29 November 2013.
Given this outcome, and to avoid any further costs, I will publish these reasons without requiring any further attendance from the parties.
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