Mitrov Homes Pty Ltd v Mustafa (No 4)
[2024] VSC 740
•28 November 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2019 05718
| MITROV HOMES PTY LTD (ACN 618 266 247) | Plaintiff |
| v | |
| BUJAR MUSTAFA | First Defendant |
| NEZ LOCI | Second Defendant |
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JUDGE: | Connock J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 October 2024 and 28 November 2024 |
DATE OF JUDGMENT: | Ex tempore; Revised 2 December 2024 |
CASE MAY BE CITED AS: | Mitrov Homes Pty Ltd v Mustafa (No 4) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 740 |
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PRACTICE AND PROCEDURE — Issue regarding costs of a security for costs application resolved by agreement — Plaintiff agreed to pay defendants’ costs of application — Defendant seeking order that the defendant be entitled to tax the costs of the interlocutory application immediately — Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.20.1 — General principles regarding orders for immediate taxation of the costs of an interlocutory application — Dale v Clayton Utz (No 3) [2013] VSC 593 — Immediate taxation order application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | S Angelatos (solicitor appearing) (until 12:30pm) J Levine (from 12:30pm) | Taylor Rose |
| For the First Defendant | C Fitzgerald | Zarifi Lawyers |
| For the Second Defendant | S Mullaly | Rose Legal Costing |
HIS HONOUR:
Introduction
These reasons address a costs-related issue in respect of one of two security for costs applications (Security Applications) against the plaintiff that were recently resolved by agreement during the period between the first hearing day on 22 October 2024 and the date for the further hearing of the Security Applications on 28 November 2024.
The Security Applications comprised an application by the first defendant (Mr Mustafa) by summons to provide further security for his costs (Mustafa Further Security Application), and an application by the second defendant (Ms Loci) by summons (Loci Summons) seeking security for her costs in the sum of $145,094.20 (Loci Security Application).
The Court was informed that the Security Applications were relevantly resolved on the basis that:
1) The plaintiff’s sole director and shareholder, Mr Nikola Mitrov, would give an undertaking to the Court to abide by any costs orders made in the proceeding against the plaintiff and be personally liable to pay any cost order made against the plaintiff in favour of another party in the proceeding.
2) Consent orders will be made to the following effect:
(a) each of the Security Applications will be dismissed;
(b) the plaintiff will pay Mr Mustafa’s costs of and incidental to the Mustafa Further Security Application up to and including 21 October 2024, taxed on a standard basis if not agreed (Mustafa Further Security Costs Order);
(c) the plaintiff will pay Ms Loci’s costs of and incidental to the Loci Security Application up to and including 21 October 2024, taxed on a standard basis if not agreed (Loci Security Costs Order);
(d) save for the costs referred to, and the costs referred to in paragraphs 6 and 7 of the orders made on 22 October 2024, each party will otherwise bear their own costs of the Security Applications; and
(e) Mr Mustafa and Ms Loci remain at liberty to apply for further or additional security.
The single question remaining for determination is whether Ms Loci should succeed in her application for an order pursuant to r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) that she be entitled to immediately tax the costs the subject of the Loci Security Costs Order.
For the reasons that follow, I have concluded that the answer to that question is no.
Brief Background
As is evident from my decision in Mitrov Homes Pty Ltd v Mustafa,[1] Mr Mustafa previously succeeded in an application for security for costs against the plaintiff in this proceeding. By order dated 30 August 2022, the plaintiff was required to provide $62,000 by way of security for the first defendant’s costs of and incidental to this proceeding up to and including the first day of trial (Mustafa Security). The claims against Mr Mustafa were stayed pending the provision of that security by the plaintiff.
[1][2022] VSC 501.
After some time, and the failure by the plaintiff to provide the Mustafa Security, self-executing orders were made by consent on 21 February 2023 requiring the payment of the Mustafa Security by 17 March 2023, failing which the claim against Mr Mustafa would stand dismissed. The plaintiff failed to pay the Mustafa Security by the due date and, by reason of the operation of the self-executing order, the plaintiff’s claim against Mr Mustafa stood dismissed.
The plaintiff subsequently successfully applied to extend the time for payment of the Mustafa Security and to have the default judgment set aside.[2] The plaintiff then paid the Mustafa Security into court.
[2]See Mitrov Homes Pty Ltd v Mustafa (No 2) [2023] VSC 386.
In the Mustafa Further Security Application, Mr Mustafa sought:
1) an order that the plaintiff provide a further amount of $50,000 as additional security for Mr Mustafa’s costs;
2) an order that the proceeding be stayed against Mr Mustafa until further security for costs is given by the plaintiff; and
3) an order that the plaintiff pay Mr Mustafa’s costs of the Mustafa Further Security Application.
In the Loci Security Application, Ms Loci sought:
1) security for Ms Loci’s costs of the proceeding from the plaintiff in the sum of $145,094.20 up to and including the first day of trial, pursuant to r 62.02 of the Rules; s 1335 of the Corporations Act 2001 (Cth); and/or the Court’s inherent jurisdiction;
2) an order that the proceeding be stayed against Ms Loci until security for costs is given by the plaintiff; and
3) an order that the plaintiff pay the second defendant’s costs of the application.
The plaintiff opposed each of the Security Applications.
Although the Security Applications hearing date of 22 October 2024 had been scheduled for some time, the substantive hearing did not proceed very far on that day. This was because it was necessary to adjourn the hearing of each of the Security Applications until 28 November 2024 as a result of the plaintiff’s late serving of a notice to produce on Ms Loci, and the late filing by the plaintiff of an affidavit of the plaintiff’s sole director and shareholder, Mr Mitrov. That affidavit addressed the plaintiff’s and Mr Mitrov’s strained financial position and related matters, although it is not necessary for present purposes to recite its detail here.
Directions were made at the 22 October 2024 hearing for the filing and service by each of the parties of any further material and revised submissions. Costs orders were also made against the plaintiff in favour of each of Mr Mustafa and Ms Loci in respect of the costs of the hearing that day, and any costs thrown away by reason of the adjournment.
Upon the application of Ms Loci, and pursuant to r 63.20.1 of the Rules, the Court also ordered that Ms Loci was entitled to immediately tax the costs the subject of the costs order made in her favour on 22 October 2024.[3]
[3]Mr Mustafa did not apply for such an order in respect of the costs the subject of the order then made in his favour, and does not now apply for such an order in respect of the Mustafa Further Security Costs Order.
Towards the end of the hearing on 22 October 2024 the Court and the defendants were informed by counsel for the plaintiff that an undertaking could be obtained from Mr Mitrov that he would be personally liable to the defendants for any costs orders made against the plaintiff in the proceeding. Counsel for the parties were requested by the Court to give further consideration to the Security Applications in the light of this development, and they were asked to confer with a view to exploring whether there was any scope to resolve or narrow the issues in dispute between the parties regarding the Security Applications.
Following an enquiry made by the Court regarding the status of the Security Applications on 18 November 2024, in advance of the further hearing scheduled for 28 November 2024, by email dated 19 November 2024 the Court was informed that:
1) Mr Mitrov, being the sole director, secretary and shareholder of the plaintiff, had provided an undertaking that he be personally liable for any costs orders, which will have retrospective effect.
2) The parties had agreed by consent that:
(a) each of the Security Applications will be dismissed; and
(b) the plaintiff will pay Mr Mustafa’s and Ms Loci’s costs in relation to their respective applications.
3) The only issue in dispute was whether the costs the subject of the Loci Security Costs Order should be taxed immediately.
4) The parties were in the process of preparing and circulating orders: reflecting the above; for the hearing on 28 November 2024 to be listed for directions; and for Ms Loci to have an opportunity to be heard in relation to her application that she be entitled to immediately tax the costs the subject of the Loci Security Costs Order.
The parties were informed by the Court by return email that day that, given the agreement between the parties: the Security Applications would not proceed on 28 November 2024; the proceeding would remain listed for directions on 28 November 2024; that Ms Loci should file and serve an outline of submissions not exceeding three pages by 22 November 2024 if it was proposed to pursue an application for an order that Ms Loci be entitled to tax her costs immediately; and that by 26 November 2024 the plaintiff should file and serve any submissions in reply not exceeding three pages.
On 22 November 2024 proposed consent orders were provided to the Court addressing the Security Applications, Mr Mitrov’s undertaking, and other matters and directions. These proposed orders confirmed, relevantly for present purposes, that the only issue remaining in dispute between the parties on the Security Applications was Ms Loci’s application for the immediate taxation order in favour of Ms Loci (Immediate Taxation Order) in respect of the costs the subject of the Loci Security Costs Order.
The undertaking proposed to be given to the Court by Mr Mitrov was recorded in the following terms in the ‘Other Matters’ section of the proposed orders:
Nikola Mitrov is the sole director, secretary and shareholder of the plaintiff. In response to the first and second defendants’ applications for security for costs, he provides the following undertaking to the Court: “I, Nikola Mitrov, director of the plaintiff, Mitrov Homes Pty Ltd, undertake to this Honourable Court to (1) abide by any cost order(s) made in the proceeding against the plaintiff, and (2) be personally liable to pay any cost order made against the plaintiff in favour of another party in this proceeding, including past and future costs orders.”
(Mitrov Security Undertaking).
In support of the application for the Immediate Taxation Order, on 22 November 2024 Ms Loci filed an affidavit of her solicitor, Mr Rose, affirmed 22 November 2024, and a written outline of submissions.
On 25 November 2024 the plaintiff filed an outline of submissions in opposition to Ms Loci’s application for the Immediate Taxation Order but did not file or serve any affidavit material in response.
At the commencement of the hearing on 28 November 2024, Mr Angelatos confirmed that he appeared as solicitor on behalf of the plaintiff and Mr Mitrov, and that he was instructed to give, and did give, the Mitrov Security Undertaking to the Court on behalf of Mr Mitrov. I then made orders by consent in the Security Applications as follows:
Mustafa Further Security Application
1.The first defendant’s application for security for costs, as filed on 25 September 2024 and amended on 12 November 2024 (“Mustafa Further Security Application”), is dismissed.
2.The plaintiff pay the first defendant’s costs of and incidental to the Mustafa Further Security Application up to and including 21 October 2024, to be taxed on a standard basis if not agreed.
3.Save for those costs subject of paragraph 2 above, and of paragraph 6 of the orders made on 22 October 2024, the plaintiff and first defendant otherwise bear their own costs of the Mustafa Further Security Application.
4.The first defendant be at liberty to apply for further or additional security.
Loci Further Security Application
5.The second defendant’s application for security for costs, as filed 6 May 2024 (“Loci Security Application”), is dismissed.
6.The plaintiff pay the second defendant’s costs of and incidental to the Loci Security Application up to and including 21 October 2024, to be taxed on a standard basis if not agreed.
7.Save for those costs subject of paragraph 6 above, and of paragraph 7 of the orders made on 22 October 2024, the plaintiff and second defendant otherwise bear their own costs of the Loci Security Application.
8.The second defendant be at liberty to apply for further security or additional security.
After the Mitrov Security Undertaking was given to the Court and the above orders were made on the Security Applications, I proceeded to hear Ms Loci’s application for the Immediate Taxation Order.
Mr Rose’s 22 November 2024 Affidavit and Other Material
Counsel for Ms Loci confirmed that she relied upon Mr Rose’s affidavit affirmed 22 November 2024 and confirmed Ms Loci’s position that it was considered desirable and appropriate for the Court to have regard to the material previously filed and relied upon by the parties in connection with the Loci Security Application. Mr Angelatos, on behalf of the plaintiff and Mr Mitrov, did not take issue with this course, at least implicitly conveying that the plaintiff and Mr Mitrov also considered this to be the appropriate approach, and the Court proceeded on this basis.
Mr Rose’s affidavit of 22 November 2024 exhibited correspondence passing between his firm and the solicitors for the plaintiff regarding the proposed commencement and later pursuit of the Loci Security Application, including correspondence between solicitors subsequent to the hearing of 22 October 2024 regarding costs, timing and the undertaking to be given by Mr Mitrov. Although I have considered and had regard to the content of this affidavit and the material relied upon by the parties for the Loci Security Application, it is not necessary or desirable for present purposes to set out its detail in these reasons.
Ms Loci’s Submissions
Ms Loci emphasised that the plaintiff had consented to orders requiring it to pay Ms Loci’s costs of and incidental to the Loci Security Application up to 21 October 2024, stating that she now seeks orders that the said costs (Loci Security Costs) be taxed immediately. The matters relied upon in support of the application were referred to in Ms Loci’s written submissions, and supplemented by counsel’s oral submissions, to which I have also had regard.
Reference was made to a number of well-known authorities in this context and it was contended that the Immediate Taxation Order was justified by reason of one or more of:
1) the conduct of the plaintiff;
2) the delay before the conclusion of the proceeding; and/or
3) what was said to be the discrete nature of the Loci Security Application.
It was submitted that the Court need only find one of these grounds to be present to justify an order for immediate taxation.
With respect to the conduct of the plaintiff, it was submitted that the plaintiff had not acted with competence and diligence, and as a result had required Ms Loci to incur significant costs over and above those which otherwise would have been incurred in the proceeding. Reference was made to Mr Rose’s affidavit of 22 November 2024, including the procedural dates set in connection with the Loci Security Application therein referred to. In this context attention was drawn to the following:
1) The plaintiff being put on notice on 26 March 2024 that Ms Loci intended to make the Loci Security Application, and the invitation made to the plaintiff at that time to provide security on the same terms as had been ordered by the Court on 30 August 2022 in favour of Mr Mustafa.
2) The plaintiff’s rejection of the offer; what was said to be the plaintiff’s blanket objection to providing security; the absence of any alternative proposal; and the absence of the offer of a personal undertaking from Mr Mitrov.
3) The personal undertaking of Mr Mitrov not being referred to by the plaintiff until part way through the hearing on 22 October 2024.
4) Ms Loci accepting the Mitrov Security Undertaking shortly after it was confirmed that it would apply retrospectively.
5) The contention that the outcome achieved by Ms Loci in obtaining the Mitrov Security Undertaking from Mr Mitrov was ‘akin to a successful outcome’ in the Loci Security Application. It was said that if the offer of the undertaking had been provided in March 2024, significant costs would have been avoided.
6) Observations made by me at the hearing on 20 October 2024 regarding the plaintiff’s non-compliance with procedural orders and inadequate communication with the defendants’ solicitors by the plaintiff’s solicitor. Reference was made to the plaintiff’s failure to file and serve affidavit material and submissions on time, and the contention that Ms Loci had incurred significant costs over and above those which would otherwise have been incurred had the plaintiff acted with competence and diligence.
With respect to the forward-looking delay before the conclusion of the trial of the proceeding, Ms Loci submitted that there would be considerable delay between the making of the consent orders on the Loci Security Application and the final determination of the proceeding. It was contended that it was unfair to deprive Ms Loci of the benefit of the costs orders for such a lengthy period. In this context reference was made to the slow progress of the proceeding over a number of years, and the absence of a trial date, which it was said would not be until some time in 2026. It was further submitted that the issues were complex and that there would then need to be a period where judgment was reserved before a decision could be handed down.
It was submitted that the period of likely delay in this case will be greater than those in other circumstances and cases where courts have awarded immediate taxation of costs. In this context reference was made to the cases discussed in Dale v Clayton Utz (No 3) (Dale).[4] It was also stated in the submissions that Ms Loci was a mother with no significant source of income and a pension concession card who had incurred significant costs on the application which would have been avoided but for the conduct of the plaintiff. It was submitted that a departure from the ‘ordinary rule’ was appropriate and that Ms Loci should be entitled to immediately tax the costs the subject of the Loci Security Costs Order.
[4][2013] VSC 593, [69]–[71].
Relying on observations of Hollingworth J and others in the decision of Dale, Ms Loci also submitted that the Loci Security Application was a discrete and separately identifiable part of the proceeding that had been resolved in favour of Ms Loci by reason of the Mitrov Security Undertaking being given by Mr Mitrov. It was contended that the materials and submissions were directed to the discrete issue of the Loci Security Application, that they do not overlap with other substantial issues in dispute in the main proceeding, and that therefore the costs associated with the Loci Security Application could be easily identified and apportioned for the purpose of immediate taxation.
Reference was also made to the orders made on 22 October 2024, which allowed for the immediate taxation of Ms Loci’s costs of the hearing on 22 October 2024, and any costs thrown away as a result of the adjournment of the Loci Security Application. It was submitted that the making of any other order now would mean that there would be two taxations commenced at different times relating to the same security for costs application and therefore an order for immediate taxation would avoid that multiplicity of taxations. This was said to be consistent with the relevant principles and the legislative intention behind r 63.20.1 of the Rules.
During oral submissions counsel for Ms Loci emphasised various aspects of the written submissions and made additional observations and submissions, including the following:
1) The Mitrov Security Undertaking would have been accepted earlier had it been given at an earlier time. In this context reference was made to Mr Rose’s 22 November 2024 affidavit and, in particular, the email of 15 November 2024 (10:56am).
2) Even if it was not accepted that Ms Loci was to be characterised as the ‘successful party’, it was of little consequence given the other considerations. It was also submitted that the ‘successful party’ contention related more to the question of the ordering of costs against a party rather than the question of immediate taxation.
3) Upon enquiry from the Bench, counsel for Ms Loci responsibly conceded that the costs of the draft Loci security application and affidavit in support would have been incurred in any event, as was reflected in Mr Rose’s email of 26 March 2024. It was submitted that there were many other additional steps and costs between that time and the hearing on 22 October 2024, and that the costs of the draft application and affidavit in support could be excluded from the Immediate Taxation Order.
4) The time period between the time at which the costs would be taxed immediately compared to the time at which they would be taxed at the end of the proceeding if Ms Loci is successful, was substantial and more significant than periods addressed in other cases.
5) It was accepted that even if the Immediate Taxation Order was not made and the matter proceeded to a taxation at the end of the proceeding, there would be two taxations in any event. This was because the taxation of the costs the subject of the orders made on 22 October 2024 has not yet occurred and will proceed even if Ms Loci’s Immediate Taxation Order application is unsuccessful.
6) Although it was appropriately acknowledged that there was little or no evidence regarding Ms Loci’s limited means, it was submitted that that was of no material consequence given the other circumstances referred to.
7) Although at one stage counsel made some observations from the Bar Table regarding the terms of the conditional costs agreement entered into by Ms Loci, he appropriately was conscious not to give evidence from the Bar Table. Counsel understandably accepted that there was not sufficient evidence before the Court that would allow the Court to conclude on the evidence before it that Ms Loci has a current liability under the conditional costs agreement to pay the costs and expenses associated with the Loci Security Application at this time or in the future.
8) Although submitted not to be significant, the fact that the Loci Security Application was resolved by a compromise agreement was accepted to be a matter proper for the Court to take into account.
9) The fact that Mr Mustafa did not seek an order for an immediate taxation in respect of the costs of the Mustafa Further Security Application was said to be irrelevant, noting also the different character of the application made by Mr Mustafa.
10) In the circumstances it was submitted that it was the poor conduct of the plaintiff in connection with the Loci Security Application that was materially relevant and relied upon by Ms Loci rather than the parties’ conduct in relation to the proceeding more generally.
Plaintiff’s Submissions
The plaintiff opposed Ms Loci’s application for the Immediate Taxation Order and emphasised that the parties had agreed to settle the Loci Security Application on the basis that Mr Mitrov provide an undertaking to be personally liable to pay any costs orders in favour of Ms Loci, and on the basis that the plaintiff would pay Ms Loci’s costs of the application. In this context it was contended that the plaintiff and Ms Loci had complied with their obligations under ss 22 and 24 of the Civil Procedure Act 2010 (Vic) (CP Act).[5]
[5]Section 22 of the CP Act imposes an obligation on relevant persons to use reasonable endeavours to resolve disputes (subject to exceptions), and s 24 of the CP Act imposes an obligation on relevant persons to use reasonable endeavours to ensure that costs are reasonable and proportionate.
The plaintiff submitted that Ms Loci could not be regarded as having been successful on the Loci Security Application because she did not obtain any of the orders referred to in the Loci Summons. It was emphasised that the Mitrov Security Undertaking represented a genuine compromise between the parties, noting also that it covered past costs as well as future costs, which it was said would have been unlikely to have been ordered had the Loci Security Application proceeded.
In the context of the observations of Hollingworth J in Dale,[6] the plaintiff submitted that the submissions in relation to the prosecution of the proceeding generally were irrelevant to the determination of whether the costs should be taxable immediately, further contending that Ms Loci had also been responsible for delay. It was further submitted that there will be minimal forward-looking delay as the pre-trial steps have now been completed and the proceeding can be set down for trial.
[6][2013] VSC 593, [58], [65].
In addition, it was submitted that: there was no evidence of Ms Loci’s assets, income and liabilities; that the plaintiff should not be exposed to the additional costs of taxation; that the costs of the interlocutory application were a minor part of the costs of the proceeding; and that a further taxation should be avoided.
The plaintiff further submitted that there was nothing in Ms Loci’s submissions that demonstrated that it would be in the interests of justice to make an order for the immediate payment of costs, and that it would discourage a plaintiff from making proper offers to settle an application for security for costs if costs were ordered to be taxed forthwith.
The matters addressed by Mr Angelatos during oral submissions included the following:
1) He emphasised that the consent orders agreed reflected a reasonable compromise reached between the parties.
2) Having regard to the terms of the compromise and the relief sought in the Loci Summons, it was emphasised that Ms Loci could not be regarded as the successful party.
3) The plaintiff’s contention that Ms Loci’s application was an unusual one given the basis upon which the Loci Security Application had been resolved. Having regard to the limited evidence before the Court the plaintiff did not ultimately press a contention that the Court had no power to deal with the application, or a contention that Ms Loci was precluded by an agreement reached between the plaintiff and Ms Loci from pressing or proceeding with it.[7]
4) The plaintiff’s contention that, if Ms Loci was successful in obtaining the Immediate Taxation Order, it would result in the plaintiff and Mr Mitrov being punished for acting reasonably and reaching what was said to be a sensible compromise, again also contending that Ms Loci ought not to be seen as having been the successful party given the nature of the compromise and the failure to obtain the relief referred to in the summons.
5) What were said to be aspects of Ms Loci’s dilatory conduct and claimed failures to comply with Court orders in the past, including what were said to be absences from directions hearings.
[7]Which on the material before the Court appeared to be a responsible position for the plaintiff to take, noting that the authority/power contention was devoid of merit in any event.
Principles and Observations
Rule 63.20.1 of the Rules provides that costs of an interlocutory application are not taxable until the completion of a proceeding, unless otherwise ordered. The rule is in the following terms:
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
When addressing a parallel (but not identical) provision in New South Wales, Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd (Fiduciary Ltd)[8] referred to the guiding principle when deciding whether to order payment of costs forthwith as being where it appears to the court that justice otherwise demands it, with the demands of justice being the only determinant.[9] His Honour then referred to factors in some cases that have caused courts to depart from the normal rule, but also citing with approval the observation of Priestley JA in Horrobin v Australia and New Zealand Banking Group[10] regarding the need for cases to be considered by reference to their own particular facts. Barrett J continued by referring to categories of case which may incline a court to make such an order, including where costs relate to the completion of a separately identifiable and discrete aspect; where there is some relevant unreasonable conduct on the part of the party against whom costs have been ordered; and where it can be seen that there will be a fairly long time before proceedings are disposed of.[11]
[8](2002) 55 NSWLR 1, [4]–[13].
[9]Referring to the observations of Olney J in Thunderstone set out in paragraph 64 of Dale extracted below.
[10]New South Wales Court of Appeal, 6 June 1997, unreported, 9.
[11]Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1, [10]–[13].
In Dale, Hollingworth J observed that the court’s discretion to ‘otherwise order’ is not circumscribed in any way by the Rules, but must be exercised judicially.[12] Hollingworth J also addressed introduction of the rule and the reasons behind the introduction of rules similar to r 63.20.1 as follows:[13]
[12]Dale v Clayton Utz (No 3) [2013] VSC 593, [13]. Although it should be noted that the Court is required by s 8(1) of the CP Act to seek to give effect to the overarching purpose in the exercise and interpretation of its powers, and required by s 9(1) of the CP Act to have regard to the objects there referred to and may have regard to the matters in s 9(2) in so doing.
[13][2013] VSC 593.
[55]It is common ground that if I order that costs be taxed immediately, they will be payable forthwith upon taxation.
[56]Rule 63.20.1 provides:
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
[57]Rule 63.20.1 came into operation on 1 April 2013. Prior to that time, there was no equivalent provision in this court’s rules, and a party could seek immediate taxation in respect of any costs order. Rule 63.20.1 was clearly intended to make a substantial change to the previous position.
[58]The authorities suggest that there are a number of reasons why rules similar to r 63.20.1 have been introduced in other jurisdictions, including:
(a)Avoiding multiple taxations, and the attendant costs;
(b)Avoiding interlocutory applications being used as a means to exhaust the funds of an opposing party; and
(c)Avoiding unfairness in a case where, for example, a party who is ultimately successful is unable to set off their judgment against an earlier liability to pay costs.[14]
[14]See for example Australian Competition and Consumer Commission v Chaste Corporation and Ors (No 2) (2003) 127 FCR 433 at [6]; Orrcon Operations Pty Ltd v Capital Steel & Pipe Pty Ltd (No 2) [2008] FCA 24 (“Orrcon”) at [18]; Young v Wylie (No 2) (“Young”) [2010] FCA 616 at [13].
[59]Those are all important policy considerations, which I have borne in mind in considering this application.
[60]However, as with the changes to rr 63.20 and 63.22, the court’s discretion under r 63.20.1 to order that costs be taxed immediately is not circumscribed in any way by the rule itself, although it must be exercised judicially.
[61]Rule 63.20.1 is similar to r 40.13 of the Federal Court Rules 2011, which currently provides:
If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.
Note The Court may order that costs of an interlocutory application be taxed immediately.
[62]Rule 40.13 replaced O 62 r 3(3) of the previous Federal Court Rules, which provided:
An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order.
[63]Both parties agree that the change in wording between the current and former federal rules has not brought about any change of substance.
[64]In Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd,[15] Olney J said of O 62 r 3(3) that:
[15](1992) 36 FCR 297.
The discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule, namely, that an order for costs of an interlocutory proceeding shall not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded.[16]
[65]Courts have recognised that the demands of justice may[17] require a departure from the ordinary rule for one or more of three broad reasons:
(a)Because of the conduct of the unsuccessful party;
(b)Because of the likely delay before the final completion of the proceeding; and
(c)Because the interlocutory application involves a separate or discrete issue.
[16]At 312.
[17]My emphasis.
When considering the above reasons in the context of the circumstances that arose in Dale, Hollingworth J elaborated as follows regarding the application of such reasons:
Unsuccessful party’s conduct
[66]The existence of the first of those grounds is not in dispute, although its scope has been subject to slightly different formulation in the cases. Some of the cases have spoken in terms of the unsuccessful party’s conduct being “unreasonable”[18] or “reprehensible”.[19] Others have considered whether the unsuccessful party has not acted with “competence and diligence”, thereby requiring the successful party to incur significant costs over and above those which would otherwise have been incurred.[20]
[18]For example, Fiduciary Limited v Morning Star Research Pty Ltd (2002) 55 NSWLR 1 (“Fiduciary”). The NSW rule under consideration in Fiduciary, Part 52A r 9(3) specifically refers to the concept of “unreasonableness”, as well as to the broader concept of “justice”, unlike the federal rules or our rules.
[19]For example, Rafferty v Time 2000 West Pty Ltd (No 3) (2009) 257 ALR 503 at [24].
[20]Harris v Cigna Insurance Australia Ltd (1995) 17 ATPR 41-445; cited with approval by Branson J in Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd, Unreported, Federal Court of Australia (No NG 3141 of 1997), 22 May 1998; BC9801995 (“Life Airbag”).
[67]It is not necessary for me to define the precise limits of the first ground, as Mr Dale does not allege that Clayton Utz’s conduct brings it within this ground, however defined.
Delay
[68]At the heart of this ground is the likelihood of there being a considerable lapse of time between the interlocutory application and the final determination of the proceeding, making it unfair to deprive the successful party of the benefit of their costs order for a lengthy period.
[69]In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 14),[21] Lindgren J said that where the final determination of a proceeding was “far away”, it might be appropriate for use to be made of O 62 r 3. In Allstate Life Assurance Co v Australia and New Zealand Banking Group Ltd (No 13),[22] the Full Federal Court, in considering the costs of an interlocutory appeal, noted that the litigation was complex and final judgment was unlikely to be given for at least one year. The court said it would “be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time.”
[70]Those two decisions were cited with approval by Branson J in the Life Airbag case. Her Honour was considering whether to order that the costs resulting from several applications for leave to further amend the statement of claim should be payable forthwith under O 62 r 3(2). In that case, the statement of claim suggested that the litigation would be complex, the matter had proceeded slowly to that date[23] and a hearing date could not realistically be expected “for many months.” Her Honour said that unless she made an order under O 62 r 3, the successful party to the interlocutory application would not receive the benefit of the order for costs in their favour for “a considerable time”. In that case, her Honour was also clearly moved by the fact that the pleading amendments had not been handled with competence and diligence.
[71]Other cases have described this ground in terms of there being “much to come in the proceedings” and there being “a fairly long time before the proceedings are disposed of.”[24]
[72]In my opinion, this case falls fairly and squarely within the principles just discussed.
…
[76]From my knowledge of what occurred in the injunction application, together with a simple examination of the file, it seems that pretty much every conceivable point of fact or law that could be taken by either side has been taken. Sometimes, points have later been withdrawn or modified, but often only after a lot of time and money has been spent on correspondence, affidavits and submissions addressing the point. In making those observations, I am not intending to single either side out; it is an approach that has thus far been adopted by both sides. And, I note that it is not unusual for former partners to take such an approach to their litigation.
[77]It would be desirable for both parties to reflect on their obligations under the Civil Procedure Act 2010, but I have yet to see any evidence that either party intends to adopt a different approach to the litigation going forward. I expect that this will continue to be a hard fought case. There is no basis for me to assume that a trial in this proceeding will take place within the near future.
…
[79]Unless I permit Mr Dale to immediately tax what will be the very substantial costs of the interlocutory application, he would not receive the benefit of the order for costs in his favour for a considerable time. It is fair and just that his costs be taxed immediately on this ground, either alone or in conjunction with the next ground.
[21]Unreported, Federal Court of Australia, 18 August 1995.
[22]Unreported, Full Federal Court, 17 August 1995.
[23]The proceeding had been commenced in June 1997, and by March 1998 five versions of the statement of claim had been delivered.
[24]For example, Fiduciary at [13], and the cases referred to therein, which has been cited with approval in later cases such as Orrcon.
Separate or discrete issue
[80]As with the other two grounds, this third ground has been formulated slightly differently in the cases.
[81]In Fiduciary, Barrett J described this third ground as being where the application determines “a separately identifiable matter or may be viewed as the completion of a discrete aspect” of the case.[25]
[82]In Australian Agricultural Co Ltd v AMP Life Ltd,[26] Sackville J described the application for an interlocutory injunction as “a self-contained part of the proceedings.”[27]
…
[85]In coming to the conclusion that costs should be taxed immediately, I have borne in mind the policy reasons behind the introduction of r 63.20.1. However, I am satisfied that the demands of justice require a departure from the general rule.
[25]At [11].
[26][2003] FCA 1134.
[27]At [14].
In Fairbank Haven Pty Ltd v Merkon Constructions Pty Ltd (No 2),[28] which was a case that addressed the question of whether r 63.20.1 applied to non-parties, Delany J recently observed that the Court of Appeal in Setka v Honourable Tony Abbott MP (No 2) (Setka),[29] when citing Dale, identified a number of factors which potentially might warrant a departure from the default position in r 63.20.1. The Court of Appeal in Setka held as follows:[30]
[27]The discretion to order that the default position not apply is confined only by the principle that the discretion must be exercised judicially. But it has been held, depending upon the circumstances of the particular matter,[31] that the default position may[32] be upset where — (1) there is prospect of considerable delay in completion of the proceeding; (2) the issue the subject of the interlocutory order was discrete from what will finally require determinations; (3) the party against whom the substantive order was made was guilty of unsatisfactory conduct — described variously as “unreasonable” or “reprehensible”, or as involving a want of “competence and diligence”.
[28]In our opinion, in the circumstances of this matter, none of the matters which we have identified is present; and we perceive no other reason why the default position should not prevail.
[28][2024] VSC 104, [16].
[29][2013] VSCA 376.
[30]Ibid, (citations omitted).
[31]My emphasis.
[32]My emphasis.
It should also be noted that, although the Court’s discretion in r 63.20.1 is not circumscribed in any way by the terms of the rule itself, the Court is compelled by s 8 of the CP Act to seek to give effect to the overarching purpose in s 7 of the CP Act in the exercise and interpretation of its powers, and is required to have regard to the objects in s 9(1) of the CP Act in making any order or giving any direction in a civil proceeding. In having regard to such objects, the Court may have regard to the matters referred to in s 9(2) of the CP Act, as well as any other relevant matter.[33]
[33]See ss 7, 8 and 9 of the CP Act.
I also note the observations of the Court of Appeal in Luxmore Pty Ltd v Hydedale Pty Ltd[34] regarding the desirability, in the ordinary case, of the question of costs being dealt with succinctly at the conclusion of argument:
In the ordinary case, it is both appropriate and desirable that a costs question be decided at the conclusion of argument. Rarely will it be necessary for a judge to give detailed reasons for decision adverting to every matter debated in argument. This court will assume, as should the parties, that every matter addressed in argument on costs has been considered. This court will set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons.[35]
[34](2008) 20 VR 481 (Maxwell P and Kellam JA).
[35]Ibid [12].
Consideration and Disposition
I underscore at the outset the importance of looking to the particular circumstances of the case in question in order to determine whether the interests of justice require the Court to depart from the default position under r 63.20.1 by ordering that costs of an interlocutory application may be taxed immediately. So much has been emphasised directly and indirectly in various of the authorities earlier referred to, and it is readily apparent from the nature of the judicial discretion in question, and the Court’s obligations under ss 8 and 9 of the CP Act.
To the extent that it was submitted by Ms Loci that, if one or more of three circumstances relied upon were established, it follows that the default position should be departed from and the Immediate Taxation Order must be made, I do not accept that submission. Such an approach sits in tension with the nature of the judicial discretion under consideration and is not supported by the authorities.
So much is illustrated by relevant authorities, including the observations of the Court of Appeal in Setka[36] referred to earlier. It will be recalled that it was stated that the discretion to depart from the default position is confined only by the principle that it is to be exercised judicially,[37] but that, ‘depending on the circumstances of the particular matter the default position may be upset’ where circumstances of the kind referred to by the Court of Appeal are established.[38] Such an approach is also consistent with the observations of Hollingworth J in Dale, that courts have recognised that the demands of justice may require a departure from the ordinary rule for one or more of three broad reasons referred to.
[36][2013] VSCA 376.
[37]Noting also the Court’s obligations under ss 8 and 9 of the CP Act referred to earlier above.
[38]Setka [2013] VSCA 376, [27] (emphasis added).
The touchstone remains the interests of justice, which are to be considered by reference to the particular facts and circumstances before the Court and in the context of the Court’s obligations under ss 8 and 9 of the CP Act. To state the obvious, whilst the facts of other cases may, where appropriate, provide some guidance, care must be taken to avoid inapposite comparisons to cases involving different facts and circumstances.
Having regard to the circumstances of this case, and taking into account the Court’s obligations under ss 8 and 9 of the CP Act, I have concluded that the interests of justice do not demand or require that the default position under r 63.20.1 be departed from. On the contrary, the interests of justice are best served by refusing the application and leaving the default position under r 63.20.1 undisturbed.
Consequently, Ms Loci’s application for the Immediate Taxation Order will be refused. I elaborate below why I have reached this conclusion.
I accept that the Loci Security Application is a discrete matter that is sufficiently separate from other aspects of the proceeding to enable relevant costs to be taxed separately from costs of the whole or other aspects of the proceeding. I also accept that, having regard to the current progress of the proceeding and the listing pressures in the Court, it is at least likely that the trial date is a material time away and that, if the matter is not resolved, it is inevitable that the trial judge will reserve their judgment at the conclusion of the trial.
I also accept for present purposes and on the material before the Court that aspects of the plaintiff’s conduct in connection with its opposition to the hearing and determination of the Loci Security Application have been shown to be (variously), unreasonable and less than diligent or competent. It is sufficient in this context to refer to the failure of the plaintiff to meet the agreed timetable, the late notice of cross-examination given to Ms Loci for the 22 October 2024 hearing, the late service of the notice to produce on Ms Loci, and the late filing of the affidavit of Mr Mitrov on the morning of the hearing on 22 October 2024. It will be recalled that the last two of these matters resulted in the need to adjourn the hearing of the Security Applications and a costs order and immediate taxation order being made in Ms Loci’s favour.
It was also not controversial that the prospect of Mr Mitrov giving an undertaking to be personally liable for the costs orders made against the plaintiff in the proceeding was not raised by the plaintiff until during the course of the hearing on 22 October 2024.
Insofar as Ms Loci placed reliance on the plaintiff’s alleged lack of diligence in the conduct of the proceeding more generally, I accept that a review of the history of the proceeding reveals numerous instances where it appears the plaintiff has acted with less diligence than it should have. However, such a review also reveals that on various occasions Ms Loci has done likewise, including in relation to Court-ordered dates for the filing and service of material and attendance at directions hearings. In so observing I also take into account the fact that Ms Loci has been self-represented for substantial periods of time since the commencement of the proceeding.
Although accepting the matters referred to above, in order to determine what the interests of justice require in the current context, these matters are to be considered and weighed together with other relevant circumstances. These circumstances include the following (in no particular order).
First, and putting the Mitrov Security Undertaking to one side for the moment, if the hearing had not been adjourned on 22 October 2024 a contested hearing would have proceeded in relation to the Loci Security Application.
Second, if the Loci Security Application had not been resolved by agreement, that contested hearing would have proceeded on 28 November 2024, as directed by the orders made on 22 October 2024.
Third, there were live and material issues for the Court to consider in connection with the merits or otherwise of the Loci Security Application had it proceeded. For example, these included contested issues regarding: previous orders and timetables for bringing security for costs applications not having been complied with by Ms Loci; the lengthy period of time that elapsed before the Loci Security Application was commenced or foreshadowed; Ms Loci’s knowledge of her rights to bring an application for security for costs at various times, which was to be the subject of cross-examination given the matters raised in her affidavit evidence; the alleged impact and unfairness on the plaintiff given the time that has elapsed, legal fees paid, the provision of the Mustafa Security, and the plaintiff’s acknowledged impecuniosity; the extent of a self-represented litigant’s right to seek security for costs; and the existence of Ms Loci’s substantial counterclaim against the plaintiff.
Fourth, the Loci Security Application was resolved by agreement and was not heard and determined. As the authorities make plain, it would be inappropriate to hypothetically seek to determine the outcome or likely outcome for present purposes, even if it were possible to do so, which it is not.[39]
[39]See for example Kevin Hughes Investments Pty Ltd v Ebert Unit Developments Pty Ltd [2020] VSC 167, [19]–[20] and the cases there cited (Connock J); Firkin v Pease [2020] VSC 539 [27]–[40] (Cavanough J); Franpina Developments Pty Ltd v John Anthony Arena Pty Ltd [2022] NSWSC 57, [24]–[27] (Darke J); and In the matter of Blaze Firewood & Sons Pty Ltd (in liq) [2022] VSC 91 [48]–[49] (Attiwill J).
Fifth, this is not a case where it can be said to have been shown that there was a complete capitulation on the part of the plaintiff on the Loci Security Application. No security for costs as sought was provided by the plaintiff, and Mr Mitrov’s financial position as revealed by his affidavit appears to be at least materially challenged.
In any event, even if Ms Loci is correctly to be characterised as the successful party, whether taken alone or in combination with any other matters, this would not change the result of this application in the circumstances of this case.
Sixth, the plaintiff’s poor conduct in relation to the late filing and serving of materials in advance of the hearing on 22 October 2024 was addressed and relevantly dealt with at that time. It was addressed by adjourning the hearing, making limited costs orders in favour of Ms Loci, and permitting her to immediately tax those limited costs should she wish to do so.
Seventh, the Loci Security Costs are a different matter and were agreed to be paid as part of a compromise reached between the parties. On the material before me this appears to have been a reasonable position for the parties to have taken given the evidence, the stated financial position of the plaintiff and Mr Mitrov, and the live issues on the Security Applications.
Eighth, had the Loci Security Application proceeded, the result was unknown and carried risk for each party, noting also that, given the materials and the proposed cross-examination, it would have been at least highly likely, if not necessary, for me to reserve judgment. Each of the parties carried real litigation risk in this context.
Ninth, Ms Loci retains the benefit of the Loci Security Costs Order even if the default (no immediate taxation) position under r 63.20.1 remains undisturbed.
Tenth, given the history of the proceeding, the issues raised, and the foreshadowed length of the trial, the costs the subject of the Loci Security Costs Order will be seen to be a relatively small part of the overall costs of the proceeding, should it proceed to trial and judgment.
Eleventh, neither Mr Mitrov nor the plaintiff were (respectively) compelled by the Court or otherwise to give (or seek to obtain) an undertaking that Mr Mitrov would be personally liable for costs ordered to be paid by the plaintiff, whether past, present or future. This formed part of the compromise reached between the parties.
Twelfth, although it was said that the costs of the Loci Security Application would not have been incurred if the plaintiff had offered either security or the Mitrov Security Undertaking after Ms Loci’s solicitors wrote to the plaintiff on 26 March 2024, aspects of this point have only limited force, noting also that the issue relates more to the question of awarding costs to a party, rather than making an order for immediate taxation in the present circumstances. In any event, the plaintiff was entitled to contest the Loci Security Application, and the matters raised by the plaintiff demonstrated that there were genuinely contestable issues to be considered and determined by the Court if the application proceeded.
Thirteenth, the evidence of Mr Rose suggests that, even if it is assumed that Ms Loci is required to pay her relevant legal costs to her solicitor, the alleged cost savings would have been less than what was submitted they would have been, as was appropriately conceded by counsel for Ms Loci. This is because the email of Mr Rose dated 26 March 2024 first requesting security states that the he had ‘already prepared’ the draft security for costs application and supporting affidavit. If this was so, it is apparent that at least those costs would not have been avoided even if the plaintiff had agreed to provide security at that time.
I note for completeness that counsel for Ms Loci sought to address this aspect by stating that the Immediate Taxation Order could be made in a form that excluded costs incurred prior to (say) 2 April 2024.
Fourteenth, although there was no evidence of Ms Loci’s financial position, I proceed on the assumption that she is a person of limited means in the way that was submitted. However, in paragraph 7 of her affidavit Ms Loci deposed that she had signed a conditional costs agreement with Rose Legal. Although this was not exhibited, Ms Loci explained that she would only have to pay legal costs ‘… in the event that I receive a successful outcome in this proceeding’, and that she was agreeable to enter into the conditional costs agreement on this basis. Consequently, on the limited evidence before the Court it appears at least possible that Ms Loci may never be liable to pay expenses in relation to the Loci Security Application, and that this will not be known until the proceeding is later determined or resolved by agreement.
I add that, on the evidence before the Court, there is no sound or legitimate evidentiary basis upon which the Court could conclude at this point that Ms Loci already has an existing liability to pay her solicitors some or all of the costs and expenses incurred in connection with the Loci Security Application, whether pursuant to her conditional costs agreement with her solicitors or otherwise.
Fifteenth, given Mr Mitrov’s evidence regarding his and the plaintiff’s financial position, it appears that there is at least a possibility that he may not be in a position to pay the Loci Security Costs if they were taxed immediately. This carries at least some risk that it would prevent the plaintiff pursuing the claim notwithstanding the steps taken and costs and expenses incurred to date, and the fact that the trial date is to be fixed shortly.[40]
[40]Albeit some time away. In so concluding the evidence to which I have had regard includes the affidavit evidence of Mr Angelatos and Mr Mitrov regarding the plaintiff’s and Mr Mitrov’s financial position.
Sixteenth, I accept Ms Loci’s submission that the approach taken by Mr Mustafa in relation to the costs order in his favour regarding the Mustafa Further Security Application is not a relevant consideration in the context of Ms Loci’s related but different application. But even if that were not so, whether alone or in combination with any other circumstances, it would not impact on the outcome of this application.
Finally, in the present context and taking into account all the circumstances, I consider there to be little force in the ‘multiple taxation’ submissions made on behalf of Ms Loci. As was understandably acknowledged by her counsel, on the submissions and material currently before the Court there will be a need for two taxations whether or not the Immediate Taxation Order is made. In this context I note the costs orders made on 22 October 2024, and Ms Loci’s expressed intention, conveyed through submissions, that Ms Loci proposes to pursue an immediate taxation in respect of the costs order made in her favour on 22 October 2024.
For completeness, I add that, on the evidence currently before the Court on this application, I am not able to conclude that the compromise agreement reached between Ms Loci and the plaintiff operated in some way so as to preclude Ms Loci from bringing this application. That said, given the limited evidence and the absence of argument on the point, I am not in a position to make, and I am understandably not asked to make, any determination regarding Ms Loci’s and the plaintiff’s respective rights and obligations under the agreement reached between them.
Taking into account the particular circumstances of this case, the principles and observations earlier referred to regarding the terms and operation of r 63.20.1 of the Rules, and the Court’s obligations under ss 8 and 9 of the CP Act, I have concluded that the interests of justice do not require or demand that the default position under r 63.20.1 be displaced. On the contrary, the interests of justice are best served by r 63.20.1 operating in accordance with its terms in respect of the Loci Security Costs, and Ms Loci’s application being refused.
In arriving at the conclusion that the interests of justice are best served by refusing Ms Loci’s application, I have sought to give effect to the overarching purpose in s 7 of the CP Act, as required by s 8 of that Act. I note in this context that the interests of justice are better served by the conclusion I have reached, and that making the Immediate Taxation Order cannot be seen to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute more effectively than not making such an order and leaving the default position under r 63.20.1 undisturbed. I also record that, in making the order that I propose to make dismissing Ms Loci’s application for the Immediate Taxation Order pursuant to r 63.20.1 of the Rules, I have had regard to the objects referred to in s 9(1) of the CP Act. Although it is neither necessary nor desirable to further detail my consideration of these objects in these reasons, it should be apparent that in so doing I have had regard to the matters I have referred to above, which can be seen to include aspects of the matters referred to in ss 9(2)(b), (c), (d), (e), (f), and (h) of the CP Act.
Conclusion and Proposed Orders
For the reasons referred to above, I have determined that an order should not be made allowing Ms Loci to immediately tax the Loci Security Costs.
Subject to addressing the precise form of orders with the parties, I propose to make an order dismissing Ms Loci’s application for the Immediate Taxation Order pursuant to r 63.20.1 of the Rules, and to make further directions for the future conduct and trial of the proceeding.
The question of the costs of Ms Loci’s application was addressed after I gave my oral reasons on 28 November 2024. I accepted the submission of counsel for the plaintiff, Mr Levine, that the costs of and incidental to Ms Loci’s application ought to be each party’s costs in the proceeding, which was a position supported by counsel for each of Ms Loci and Mr Mustafa. Orders will be made accordingly.
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