Morbidelli v Resourceco Pty Ltd - [2010] SASC 107

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
MORBIDELLI v RESOURCECO PTY LTD
[2010] SASC 107
Judgment of The Full Court
(The Honourable Justice Bleby, The Honourable Justice White and The Honourable Justice Kelly)
22 April 2010
PROCEDURE - COSTS - JURISDICTION - PERSONS NOT PARTIES TO PROCEEDINGS
Appeal against an order of costs against a non-party to proceedings - plaintiff's action against the defendant failed comprehensively - Judge acted under the erroneous assumption that the appellant was a director of the plaintiff - appellant did not directly fund the litigation and did not control it - consideration of principles relating to circumstances in which it is appropriate to award costs against a non-party.
Held: not an appropriate case to order payment of costs against a non-party - appeal allowed.
District Court Act 1991 (SA) s 42; Supreme Court Civil Rules 2006 r 281(b), r 288(10(b), referred to.
Oxer v Astec Paints Australia Pty Ltd (2008) 254 LSJS 57; Vestris v Cashman (1998) 72 SASR 449; Australian Academy of Natural Medicine Pty Ltd v Walters [2003] SASC 56; Knight v F P Special Assets Ltd (1992) 174 CLR 178; Bischof v Adams [1992] 2 VR 198; McVicar v S & J White Pty Ltd [2007] SASC 199; Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685; Carborandum Abrasis Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757; B E Studio Ltd v Smith & Williamson Ltd [2006] 2 All ER 811, considered.

MORBIDELLI v RESOURCECO PTY LTD
[2010] SASC 107
Full Court; Bleby, White and Kelly JJ

BLEBY J: I agree with the orders proposed by White J and with his reasons. I have nothing to add to those reasons.
WHITE J: The issue in this appeal is whether a non-party should have been ordered to pay the costs of the successful defendant in proceedings in the District Court.
Between 1997 and 10 February 2001, the plaintiff in the District Court proceedings TGM Civil Pty Ltd was engaged in the cartage of recycled concrete rubble. It supplied trucks and drivers for this purpose. Before 1997, Mr Tony Morbidelli had operated the cartage business as a sole trader. On the incorporation of TGM Civil, he became its sole shareholder and its sole director.
The appellant is his wife. She worked in the business attending to all aspects of its bookwork.
After TGM Civil ceased providing the trucking services in February 2001 it commenced proceedings against the defendant Resourceco Pty Ltd. It claimed damages for breach of contract and misleading or deceptive conduct by Resourceco, and asserted a promissory estoppel against it. TGM Civil’s claim against Resourceco failed comprehensively, with the trial Judge finding that the claims were misconceived. On the Judge’s findings TGM Civil did not have a contract with Resourceco at all but had been working under an arrangement with CSR Limited (trading as CSR Recycled Products); even if it did have a contract with…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] SASC 107
Decision Date: 22 April 2010

CaseChat Overview and Summary

Morbidelli v Resourceco Pty Ltd is an appeal against an order of costs against a non-party to the proceedings. The plaintiff's action against the defendant failed comprehensively, and the Judge had ordered the appellant, Mrs Morbidelli, to pay the defendant's costs. Mrs Morbidelli appealed the decision, arguing that she was not a party to the proceedings and therefore should not be liable for costs. The court was required to determine whether it was appropriate to award costs against a non-party in this case.

The court found that the Judge had acted under the erroneous assumption that Mrs Morbidelli was a director of the plaintiff, which was not the case. The court held that Mrs Morbidelli did not directly fund the litigation and did not control it. The court considered the principles relating to circumstances in which it is appropriate to award costs against a non-party and concluded that in this case, it was not one of the rare and exceptional cases in which such an order was appropriate. The court held that the Judge's reasons revealed a number of misapprehensions, indicating that the discretion had miscarried.

The appeal was granted, and the order made by the Judge was varied by deleting Mrs Morbidelli’s name from the list of persons from whom Resourceco is entitled to recover its costs of the District Court proceedings. The court held that it should not interfere with the Judge’s decision unless satisfied that he made some error of principle, or failed to have regard to a relevant consideration, or took into account an irrelevant consideration. In this case, the court was satisfied that the decision was so unreasonable that it must have been infected by some error even if it is not possible to identify the particular error. The final orders were that permission to appeal was granted, the appeal was allowed, and the order made by the Judge was varied as described above.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

In my opinion, in this combination of circumstances, it should not be said that this is one of the rare and exceptional cases in which an order for payment of costs by Mrs Morbidelli as a non‑party was appropriate.Conclusion Accordingly, I would grant permission to appeal and would allow the appeal. I would vary the order made by the Judge on 20 August 2008 by deleting Mrs Morbidelli’s name from the list of persons from whom Resourceco is entitled to recover its costs of the District Court proceedings. KELLY J: I agree with the orders proposed by White J and the reasons he has given.

Ratio Decidendi

Legal Principle Established

Finally, the Judge rejected an argument which had sought to distinguish Mrs Morbidelli’s position from that of her husband:[22]Mr O'Brien submitted that, particularly in relation to Kirsten Morbidelli, it would not be just to order her to pay costs because she did not control the plaintiff, she did not take part in the discussions between Mr Morbidelli and Mr Brown, and had no independent knowledge of the relevant facts.[23]In my view, that submission is a little disingenuous. Mrs Morbidelli financed the litigation to the tune of several hundred thousand dollars, and the litigation would not have been possible if she had not. To that extent she was in control. Further, if she chose to blindly accept her husband’s word for what happened, in the face of clearly contradictory objective evidence, then it is just that she should be personally liable for the costs of the action.Consideration of Appeal The Judge’s decision involved the exercise of a discretion. The usual appellate restraint in interfering with a discretionary decision therefore applies. This Court should not interfere with the Judge’s decision unless satisfied that he made some error of principle, or failed to have regard to a relevant consideration, or took into account an irrelevant consideration. Even if no error of these kinds can be established, the Court may still intervene if satisfied that the decision is so unreasonable that it must have been infected by some error even if it is not possible to identify the particular error. In my opinion, the Judge’s reasons reveal a number of misapprehensions on his part which indicate that the discretion has miscarried.Directorship In the first place, the Judge was mistaken in thinking that Mrs Morbidelli was a director of TGM Civil. Mrs Morbidelli has not at any time been an office holder of the company, whether as director or secretary. This was confirmed by Mr Morbidelli in his cross-examination at trial.[28] Mrs Morbidelli did work for TGM Civil but this was office work doing “all the bookwork, invoicing, chasing up money, banking, pretty much everything as a role in the office I would say”.[29] [28] T224, line 7.[29] T558, line 20. This mistake is significant because it appears to underpin the Judge’s conclusions about Mrs Morbidelli’s control of the litigation and the extent of her decision-making in relation to it.Extent of Funding of the Litigation As can be seen from the passages in the Judge’s reasons quoted above, he attached considerable significance to what he considered to be the funding of the litigation by Mrs Morbidelli, saying that she had “financed the litigation to the tune of several hundred thousand dollars, and that the litigation would not have been possible if she had not”. The evidence did disclose that Mrs Morbidelli had lent substantial sums to TGM Civil, but not that she had done so to finance the litigation, let alone that she had done so to the tune of several hundred thousand dollars. Mrs Morbidelli was able to make the loans because she was the owner of the family home which provided the security for loans she obtained from financiers. Mrs Morbidelli’s loans to TGM Civil are shown in the following table: