Morris Finance Ltd v Wyzenbeek (No 2)
[2018] VCC 1098
•23 July 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-05876
| MORRIS FINANCE LTD | Plaintiff |
| v | |
| SUSAN WYZENBEEK and NATIONAL AUSTRALIA BANK LTD | First Defendant Second Defendant |
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JUDGE:HIS HONOUR JUDGE COSGRAVE
WHERE HELD: Melbourne
DATE OF HEARING: 23 June 2018. Further written submissions were filed on 12 July 2018 and 16 July 2018
DATE OF JUDGMENT: 23 July 2018
CASE MAY BE CITED AS: Morris Finance Ltd v Wyzenbeek & Anor (No 2)
MEDIUM NEUTRAL CITATION: [2018] VCC 1098
RULING
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Subject:PRACTICE AND PROCEDURE – COSTS
Catchwords: PRACTICE AND PROCEDURE – COSTS – whether order should be made that first defendant’s solicitors pay plaintiff’s costs on indemnity basis
Legislation Cited: County Court Act 1958 (Vic); County Court Civil Procedure Rules 2008 (Vic); Trade Practices Act 1974 (Cth)
Cases Cited:Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229; Cook v Pasminco Ltd (No 2) [2000] FCA 1819; Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 163 ALR 744; Shepparton Projects Pty Ltd v Cave Investments Pty Ltd [2011] VSC 384; Taree Pty Ltd v Bob Jane Corporation Pty Ltd [2008] VSC 228; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Yam (solicitor) | SLF Lawyers |
For the Defendant | Mr G Walker (solicitor) | Madgwicks |
HIS HONOUR:
Background
1 This application arises from a summons filed by the first defendant, Susan Wyzenbeek (“Wyzenbeek”), on 21 June 2018, seeking to set aside orders made on 13 June 2018 in favour of the plaintiff, Morris Finance Ltd (“MFL”).
2 The orders challenged were primarily those relating to the judicial sale of Wyzenbeek’s property at 250 Warburton Highway, Wandin North, in Victoria (“the property”).
3 On 9 July 2018, I delivered my reasons for ruling (“the principal reasons”)[1] and ordered the parties to file written submissions regarding the issue of costs. These reasons assume familiarity with the principal reasons and adopt the same terminology.
[1]Morris Finance Ltd v Wyzenbeek & Anor [2018] VCC 1028.
4 In response to my order, MFL submitted proposed orders as follows:
(1) The first defendant’s summons filed 21 June 2018 is dismissed.
(2) The stay of paragraphs 2 and 3 of the orders made in this proceeding on 13 June 2018 is lifted.
(3) The first defendant pay the costs of the plaintiff of the summons, including reserved costs, to be taxed on an indemnity basis in default of agreement.
(4) Angelo Conti, Richard Goldberg, Rohan Ingleton, Laurance Davis and Peter Kennedy trading as Madgwicks pay the costs of the plaintiff of the summons, including reserved costs, to be taxed on an indemnity basis in default of agreement.
5 MFL contended that costs were wasted by reason of Madgwicks’ failure to adequately consider its client’s position with regard to the relevant law and facts.
6 Madgwicks conceded that costs should be awarded to MFL on a standard basis, but denied there was any basis for an award of costs on an indemnity basis, whether against Wyzenbeek personally, or against Madgwicks themselves.
Costs against solicitors
7 MFL argued that, pursuant to Rule 63A.23 of the County Court Civil Procedure Rules 2008 (Vic) (“the Rules”), where a solicitor has “caused costs to be incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition”,[2] then the Court has jurisdiction to order the solicitor to pay the opposing party’s costs.
[2]Plaintiff’s Submissions at para 10.
8 MFL submitted that the following considerations warranted making a costs order against Madgwicks:
(a) MFL had written to Madgwicks outlining the reasons why the 21 June 2018 summons was bound to fail;
(b) the Court made comments to the effect that MFL’s position was the preferred view of the matter and that Madgwicks’ position was misconceived;
(c) Madgwicks gave no, or no proper, consideration to the question whether the summons had any prospect of success, and if they had, they would have appreciated it had none.
(d) there was a serious failure by Madgwicks to give attention to the relevant law and facts in relation to the 21 June summons amounting to a serious dereliction of the duty owed by Madgwicks to the Court; and
(e) Madgwicks had caused costs to be wasted by a failure to act with reasonable competence and expedition.
9 The Court’s jurisdiction to order costs against solicitors representing parties in proceedings before it ought to be exercised only when there has been a serious dereliction of duty owed by practitioners to the Court.[3] What constitutes a serious dereliction of duty necessarily differs from case to case.[4]
[3]White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169, 239 (‘White Industries’); affirmed in Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 163 ALR 744.
[4]White Industries (1998) 156 ALR 169, 230.
10 MFL relied upon the decision of the Federal Court of Australia in Cook v Pasminco Ltd (No 2),[5] in which Lindgren J held that “if they [the applicant’s solicitors] had responsibly considered the matter, they would have appreciated that the federal claims had no prospect of success at all”,[6] and ordered the applicant’s solicitors to pay the respondent’s costs of the proceeding on an indemnity basis.
[5][2000] 107 FCR 44.
[6]Ibid at [65].
11 In coming to this conclusion, His Honour considered both the evidence before him and the absence of any relevant evidence offered by the applicant’s solicitors. The court adopted the view that there was demonstrated a lack of responsible consideration by the applicant’s solicitors of the Trade Practices Act 1974 (Cth) claims and their likelihood of success in the Federal Court.
12 In White Industries (QLD) Pty Ltd v Flower & Hart (a firm), Goldberg J highlighted the need for something beyond the mere hopelessness of a case.[7]
[7]White Industries (1998) 156 ALR 169, 231.
13 In that case, the respondent solicitors actively took steps to delay the proceedings and make the litigation as onerous as possible for the opposing party. The solicitors acted in this way notwithstanding their belief that their client’s claim had little prospect of success. The Court found that the solicitors had acted with an ulterior purpose in attempting to achieve a tactical advantage and that their conduct constituted an abuse of process.
14 With respect to earlier authorities regarding the jurisdiction to order that a party’s solicitors pay the opposing party’s costs, Goldberg J said that:[8]
“The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably. It is not clear what is encompassed by ‘unreasonably’ initiating or continuing proceedings if they have no or substantially no chance of success. It seems to me that it involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose orwith a disregard of any proper consideration of the prospects of success. Expressing the principle this way accommodates the competing principle that a party is entitled to have a practitioner act for him or her even in an unmeritorious case.”
[8]White Industries (1998) 156 ALR 169, 236.
15 I do not consider that Madgwicks’ conduct in this case constituted a serious dereliction of duty or was so unreasonable as to warrant the making of a costs order against the firm.
16 There was no evidence in the present case that Madgwicks pursued the 21 June summons for any ulterior purpose or that they failed to responsibly consider their client’s position in light of the relevant law and facts. It seems to me from the context that the solicitors held a genuine, albeit misconceived, belief about the prospects of success of their client’s claim. It was clear from Wyzenbeek’s actions and material that she was anxious about the fate of her property and keen, if possible, to prevent MFL from selling the property. I can well understand why a person would not wish to lose their home through defaulting on a car lease.
17 As to the costs issue more generally, it is well established that under the County Court Act 1958 (Vic) and Rule 63A of the Rules, the Court has a wide discretion on the issue. Although costs always remain in the discretion of the court, costs awarded to a successful party are normally ordered on a party and party basis unless there is conduct warranting the making of a more onerous order or a contractual basis for enlarging the entitlement to costs.[9]
[9]Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 at [7].
18 MFL relies in part upon the provisions of the Commercial Lease Agreement dated 14 January 2016 between itself and Wyzenbeek to claim an entitlement to costs on an indemnity basis.
19 The relevance and effect of contractual provisions regarding costs was set out by the Victorian Court of Appeal in Chen v Kevin McNamara & Son Pty Ltd where Redlich JA, with whom Maxwell P and Robson AJA agreed, said:[10]
“An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a “special basis.” Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the Court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. An agreement to pay costs on a “special” basis is only a factor informing the exercise of the court’s discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order”.[11]
[10]Ibid at [8].
[11]The position adopted by the Court of Appeal was consistent with the views expressed in other cases such as Taree Pty Ltd & Ors v Bob Jane Corporation Pty Ltd & Anor [2008] VSC 228 at [38]-[44] and Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384 at [25]-[26].
20 In the present case, clause 12 of the Commercial Lease Agreement provided that the lessee, Wyzenbeek, would pay the lessor, MFL, all moneys, charges, and expenses including all legal costs and expenses as between solicitor and own client which the lessor shall pay or be liable to pay:
· in the exercise or attempted exercise of any right, power, authority or remedy conferred on the lessor under the agreement; or
· on account of the default of the performance or observance of any covenant which the lessee was to perform.
21 Further, clause 13 of the Commercial Lease Agreement stated that the lessee would indemnify the lessor against all claims, losses, damages, costs, charges, and expenses of any kind whatsoever incurred or expended by the lessor in relation to the exercise of any of its powers, rights, or remedies under the agreement.
22 In circumstances where:
· the written agreement between MFL and Wyzenbeek provided for the payment of costs on a special basis higher than the usual basis;
· Wyzenbeek failed in her application;
· there is no good reason militating against the award of costs on a basis which takes into account the contractual arrangement between the parties,
I consider that it is a proper exercise of the Court’s discretion to allow MFL costs on a basis consistent with the agreement entered into by MFL and Wyzenbeek. The agreement between them allowed for costs on a solicitor and own client basis. Costs taxed on this basis permit recovery of all costs which were reasonably incurred and were reasonable in amount.
23 According to the commentary in Williams Civil Procedure Victoria,[12] the criteria used for a taxation on a solicitor and own client basis are the criteria now used in a taxation on a standard basis – see rule 63A.30. Thus, a party entitled to costs on a standard basis will be entitled to costs insofar as they are reasonably incurred and of reasonable amount.
[12]At [63.02.190].
Conclusion
24 By reference to the matters set out, I order that:
(a) The first defendant’s summons filed 21 June 2018 be dismissed;
(b) The order made on 26 June 2018 in this proceeding staying the operation of paragraphs 2 and 3 of the order made on 13 June 2018 be lifted.
(c) The first defendant pay the plaintiff’s costs of the application, such costs to be taxed on a standard basis in default of agreement.
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