Mullett v Nixon (No. 2)
[2016] VSC 641
•26 October 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 01520
| PAUL MULLETT | Plaintiff |
| v | |
| CHRISTINE NIXON | First Defendant |
| KEIRAN WALSHE | Second Defendant |
| WAYNE TAYLOR | Third Defendant |
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JUDGE: | T FORREST J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 7 October 2016 |
DATE OF JUDGMENT: | 26 October 2016 |
CASE MAY BE CITED AS: | Mullett v Nixon & ors (No. 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 641 |
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COSTS – Actions in misfeasance in public office alleged against the first and second defendant – Actions of malicious prosecution alleged against all three defendants – Each and every cause of action alleged against each of the defendants dismissed – Defendants’ application for indemnity costs – Whether or not indemnity costs should be awarded – Date from which indemnity costs should be awarded - Ugly Tribe Company Pty Ltd v Marios Sikola & Ors [2001] VSC 189 - Macedon Ranges Shire Council v Thompson & Ors [2009] VSCA 209 - Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors 81 ALR 397 - Calderbank offer – Hazeldene’s Chicken Farm v Victorian Workcover Authority (No 2) (2005) 13 VR 435.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A. Panna QC | Stephens Lawyers and Consultants |
| For the Defendants | Ms R. Orr QC Mr D. McCredden | Victorian Government Solicitor’s Office |
HIS HONOUR:
Background
By his Amended Statement of Claim of 11 March 2016, the plaintiff alleged the torts of misfeasance in public office against the first and second defendant, and the tort of malicious prosecution against the first, second and third defendants. On 31 August 2016 I found that the plaintiff had failed in every action brought against each defendant.[1] The defendants now seek an order that the plaintiff pay their costs of and incidental to the proceeding on an indemnity basis.[2]
[1]Mullett v Nixon & Ors [2016] VSC 512.
[2]Other than in respect of the costs order already made by J Forrest J on 4 April 2016, being that plaintiff pay the defendants’ costs on a standard basis in respect of a discrete discovery application made by the plaintiff.
The defendants’ primary position is that indemnity costs ought be awarded from the commencement of the proceeding on 26 March 2013.[3] Alternatively, the defendants contend that there are numerous identifiable dates across the approximately three-year history of the proceeding from which an order of indemnity costs could be made. One of the identified dates is 7 May 2016, being the day following the expiration date of a Calderbank offer[4] made by the defendants to the plaintiff on 28 April 2016.
[3]Being the date of the plaintiff’s writ and (original) statement of claim, which initiated the proceeding.
[4]See Calderbank v Calderbank [1975] 3 All ER 333.
Legal principles
Indemnity costs
The Court has a broad, unfettered discretion in awarding costs pursuant to s 24 of the Supreme Court Act 1986.[5] Though unfettered, the discretion must be exercised judicially,[6] and in civil matters costs taxed at a standard basis ordinarily follow the event.[7] By applying for costs on an indemnity basis an applicant party[8] seeks that the Court depart from its usual course.[9] It must demonstrate the existence of special[10] or unusual[11] circumstances to warrant such departure.
[5]Lombardo v Bahnan (No 2) [2014] VSC 438, at [3].
[6]Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201, 207.
[7]Oshlack v Richmond River Council (1988) 193 CLR 72.
[8]In this case, the defendants.
[9]Ugly Tribe Company Pty Ltd v Marios Sikola & Ors [2001] VSC 189, [7] (‘Ugly Tribe’).
[10]Macedon Ranges Shire Council v Thompson & Ors [2009] VSCA 209, [13] (‘Macedon Ranges’).
[11]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors 81 ALR 397, 400 (‘Fountain Selected Meats’)(adopting Preston v Preston [1982] 1 All ER 41).
Categories of circumstances capable of enlivening the discretion are easily derived from the case law, however, as cautioned by Sheppard J in Colgate Palmolive v Cussons[12], these categories are not closed.[13] Every application will turn upon its own facts, and merely meeting or failing to meet an established category ought not be determinative. It is nevertheless helpful to consider examples of special circumstances, insofar as they are referrable to the facts of the present case.
[12](1993) 46 FCR 225 (‘Colgate’).
[13]At 233, citing French J in Tetijo Holdings Pty Ltd v Keeprite Australia [1991] FCA 225.
In Fountain Selected Meats, Woodard J considered that it may be appropriate to award indemnity costs where an action has been continued in circumstances in which a party, properly advised, should have known that it had no chance of success.[14] Elaborating this position in Re J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers & Anor[15] French J was of the view that ‘it is sufficient… to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen as a hopeless case.’[16]
[14]At 401.
[15][1993] FCA 42, (‘Re J-Corp’).
[16]At [5].
The standard of ‘proper consideration’ was examined in Macedon Ranges, where the Court of Appeal reflected:
Where a litigant did not recognise that its case was without merit a court may be disinclined to make a special costs order. The Court must measure the litigant’s conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made, and the legal advice which the litigant ought reasonably to have obtained.[17]
[17]At [15].
The following further categories are set out in Ugly Tribe[18] (citations omitted):
[18]At [7]
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud;
(ii) The making of an irrelevant allegation of fraud;
(iii) Conduct which causes loss of time to the Court and to other parties;
(iv) The commencement or continuity of proceedings for an ulterior motive;
(v) Conduct which amounts to a contempt of court;
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law; and
(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly have avoided, the trial.
Given (i) and (ii) above, I note that it was considered in Maule v Liporoni & Anor (No 2)[19] that ‘the making of a serious allegation of mala fides without evidence to support it is equivalent to making allegations of fraud without any basis, amounts to an abuse of process, and is deserving of the severest condemnation.’[20] The applicant in that case was criticised both for alleging mala fides ‘on suspicion’ absent any supporting evidence, and further for her ‘scattergun approach’, by which she ‘multipli(ed) allegation upon allegation’ causing the other parties to incur costs far beyond what they could reasonably be expected to incur in litigation of genuine issues.[21]
Calderbank offers
[19][2002] NSWLEC 140 (considering an award of costs on an indemnity basis under to the Land and Environment Court Act 1979, this passage is adopted in Fu Chen v Stephen Paul Firth trading as Firths Compensation Lawyers [2013] NSWSC 1873, in which an award of indemnity costs was sought against a parties who’s failed action asserted improper conduct on the part of a lawyer that were based upon suspicion alone and wholly unsupported by the evidence).
[20]Maule v Liporoni, [39].
[21]Maule v Liporoni, [39].
Though rejection of a Calderbank offer does not carry with it a presumption of a special costs order, it is matter to which the Court should have regard when considering whether to order indemnity costs,[22] and is itself an established category upon which a special costs award may be granted.[23] In Hazeldene’s Chicken Farm, the Court of Appeal described that ‘the critical question is whether the rejection of the offer was unreasonable in the circumstances’[24], and set out the following non-exhaustive list of factors said to be relevant to the reasonableness consideration: [25]
[22]Hazeldene’s Chicken Farm v Victorian Workcover Authority (No 2) (2005) 13 VR 435, 440 – 441 (‘Hazeldene’s Chicken Farm’).
[23]Hazeldene’s Chicken Farm (2005) 13 VR 435, 440, 442; Colgate Palmolive Co v Cussons Pty Ltd (1993) FCR 225; Oversea-Chinese Banking Corporation v Richfield Investments Pty Ltd [2004] VSC 351 (‘OCBC’).
[24]At 441.
[25]Hazeldene’s Chicken Farm (2005) 13 VR 435, 442.
(a) The stage of the proceeding at which the offer was received;
(b) The time allowed by the offeree to consider the offer;
(c) The extent of the compromise offered;
(d) The offeree’s prospects of success, assessed as at the date of the offer;
(e) The clarity with which the terms of the offer were expressed; and
(f) Whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.
Demonstration of unreasonableness does not necessarily require demonstration that an offeree acted with wilful disregard of known facts or clearly established law in its rejection a Calderbank offer, nor that it acted with ‘high-handed presumption’.[26] The onus rests on the applicant party (the defendants in this case) to make out unreasonableness.
[26]Hazeldene’s Chicken Farm (2005) 13 VR 435, 442.
Parties’ submissions
Defendants’ submissions
As I have said, the defendants’ primary position is that the plaintiff ought pay their costs on an indemnity basis from the commencement of the proceeding. The plaintiff’s case, they argue, was plainly hopeless from the outset, and the plaintiff, properly advised, should have been aware of this. They cite the total lack of direct or circumstantial evidence at trial capable of establishing anything beyond an inference of motive on the part of any of the three defendants as evidence for this proposition. Had the plaintiff, when initiating his actions, had any positive evidence of wrongdoing on the part of the defendants, then this evidence would surely have emerged at trial. The plaintiff’s case, they contend, was founded upon suspicion alone, and while there was evidence capable of establishing a motive, an established inference of motive could never prove any element of any of the alleged torts. Given that particular elements[27] had to be established to the higher Briginshaw standard[28], the plaintiff should have been aware that he had no prospect of succeeding in any of his actions.
[27]Allegations of ‘malice’ (as it is differentially defined with respect to both of the tort of MIPO and the tort of malicious prosecution (see Mullett v Nixon & Ors [2016] VSC 512, [16] – [17])) and ‘absence of reasonable or probably cause’ (as it is differentially defined with respect to both of the tort of MIPO and the tort of malicious prosecution (see Mullett v Nixon & Ors [2016] VSC 512, [16] – [17]))
[28]As codified by s 140 of the Evidence Act 2009. See Mullett v Nixon & Ors [2016] 512, [19].
The defendants further contend that the nature of the allegations made against them ought weigh into my consideration to make a special costs award in their favour. Each of the actions essentially alleged improper conduct on the part of the relevant defendant. These allegations are ‘grave’ in nature, and are comparable to the mala fides described in Maule v Liporoni. For three years the defendants weathered the weight of the allegations and the accompanying media attention. As acknowledged by Dal Pont,[29] the Court has a role in discouraging unsupported allegations of this kind, given the serious reputational damage that they elicit and can continue to elicit even once a court has pronounced the claims baseless.
[29]Gino Dal Pont, The Law of Costs (2013), [16.48].
In the alternative to a special costs award from the commencement of proceedings, the defendants submitted that the following dates could be appropriate triggers for an indemnity costs order:
(i) 11 December 2014, being the date at which discovery was complete
The discovery process failed to reveal any ‘smoking gun’ for the plaintiff that might substantiate his claim. What had begun as an action founded only in suspicion had remained baseless.
(ii) 30 October 2015, being the date on which the Rapke advice was provided to the plaintiff
Prior to this date, the plaintiff’s statement of claim at paragraph [29] alleged that, as at 29 July 2008, the director had not filed any charges against the plaintiff, notwithstanding the OPP reference, and by inference:
(a) by that time (the Director) had not made any decision as to whether to institute proceedings against the plaintiff in relation to any or all of the charges referred to in the OPP reference; or
(b) alternatively, (the Director) had made a decision not to institute proceedings against the plaintiff in relation to any or all of the charges referred in the OPP reference.
This allegation was repeated at paragraph [34], and was pleaded as a particular of ‘absence of reasonable and probable cause’ in the malicious prosecution claim against each of the three defendants (at [59(c)], [63(c)] and [67(c)]).
The defendants completed discovery on 11 December 2014 and included in their affidavits of documents the Jeremy Rapke letter of 23 April 2008. An initial privilege claim by IBAC had precluded the defendants from providing the plaintiff the content of this advice, however by 30 October 2015 IBAC had waived its privilege, and the Rapke letter[30] was provided. Following its revelation, the defendants contend that the plaintiff ought to have struck out all particulars relating to the Director’s advice. Instead, the plaintiff’s ultimate amendment to his statement of claim inserted that the Director ‘had not advised or recommended to the defendants or any of them that any charges be filed’ while retaining the alternative inferences that either the Director had not made any decision, or alternatively had made a negative decision. Both of these inferences were now demonstrably unsustainable, constituting a wilful disregard of known facts.
[30]affirming the Director’s view that there was, inter alia, evidence to justify charges of perjury or the statutory equivalent against Mr Mullett, as well as evidence to justify a charge of attempting to pervert the course of justice.
(iii) 29 February 2016, being the date upon which the defendants served their answers to interrogatories upon the plaintiff
The answers to interrogatories, given on oath, also failed to provide any support for the plaintiff’s claims. It may have been that the plaintiff had hoped that some admission or unexpected oral evidence from one or other of the defendants would make out his actions. The answers provided by the defendants were exculpatory and were consistent with the documentary evidence. Indicative of the evidence each defendant would give at trial, these answers could have done little more than provide the plaintiff further insight into the weakness of his case.
(iv) 4 April 2016, being the date of J Forrest J’s ruling overturning the privilege claim by the Chief Commissioner over documents sought by the plaintiff
Though the ruling of J Forrest J was effectively in the plaintiff’s favour, the documents discovered provided no substantial support for the plaintiff’s claim. From this date it was now clear which documents would be in play in the proceeding.
The Calderbank offer
Finally, the defendants submitted that indemnity costs ought be awarded from 7 May 2016, being the day following expiration of their Calderbank offer to the plaintiff. The offer was made on 28 April 2016 in the form of a letter signed by Monika Pekevska of VGSO. By this date, the defendants submit, all conceivable evidence for trial was available to the plaintiff. There was no further prospect of a surprise documentary revelation that could assist the plaintiff’s case. The letter set out in detail why each action was bound to fail. It was proposed that ‘each party walk away and bear their own costs to date’, including that the defendants would not pursue recovery of the costs awarded in their favour on 4 April 2016 by J Forrest J, estimated as being in the range of $60,000 - $70,000.
The defendants contend that, taking into account the Hazeldene’s Chicken Farm considerations (set out at [9] above), the plaintiff’s rejection of their offer was unreasonable in all the circumstances. In anticipation of a submission by the plaintiff that the defendants’ offer was to ‘walk away only’, the defendants argue that the 4 April costs award was a discrete and quantifiable amount owed already to the defendants by the plaintiff, waiver of which constituted significant consideration. Rejection of this offer, in the face of a hopeless case in which substantial further costs were anticipated[31], was unreasonable.
Plaintiff’s submissions
[31]The trial was estimated at 15 days, with over 20 potential witnesses.
The plaintiff argued that there was no special or unique feature of the proceeding capable of warranting an award of costs beyond the standard basis. The defendants’ submission that the plaintiff’s case was objectively hopeless from the outset is infected, he contends, by the gloss of hindsight. The credit of the parties (in particular, of the defendants) was crucial. Such credit could not be tested until cross-examination at trial. As is the case for most actions in misfeasance in public office or malicious prosecution, the plaintiff’s actions would be determined on what inferences the Court was prepared to draw from the circumstantial evidence. Although I ultimately found all three defendants to be credible witnesses, and was not prepared to draw the inferences sought by the plaintiff upon any element of any torts, the inference of motive on the part of the first defendant was successfully made out.
The plaintiff plainly believed in the merit of his actions. So much was evident from his examination in chief. Allegations of improper conduct were made, but these allegations were to the core of the plaintiff’s case. Intentional torts, by their nature, involve bad faith, and the plaintiff’s allegations were neither spurious nor ‘scattergun’[32].
[32]Cf Maule v Liporani.
The Rapke advice and associated pleadings, the plaintiff said, were not foundational to his case. While he accepts that the advice offered limited assistance in the determination of the objective limb of reasonable and probable cause, none of the defendants gave evidence of seeing the letter prior to making a decision to institute the prosecution of Mr Mullett. The advice was one small factor of many to be weighed and considered in the evaluation of the alleged torts.
The Calderbank offer
The plaintiff argues that his rejection of the Defendants’ offer was not unreasonable in all the circumstances. The offer was made on 28 April 2016, eleven days prior to the trial, and expired on 6 May 2016, three days prior to trial. The plaintiff had only recently resolved privilege issues claimed by various persons over documents sought for production. The plaintiff’s written submissions attack the offer as being one to merely ‘walk away’, but this characterisation was not pressed orally. However characterised, from the plaintiff’s view, the offer was too little, too late. The plaintiff had expended substantial costs over the previous three years in preparation for trial. It was entirely unrealistic for the defendants to expect the plaintiff to accept an offer to effectively capitulate in order to secure waiver of one set of discrete application costs.
Analysis and conclusion
The plaintiff failed to establish any of his actions at trial. In an adversarial system, where a matter proceeds to trial, there is usually a loser. Sensible litigation concerns balancing the risks of failure against the prospects of success. Settlement is encouraged by the Courts, and under certain statutory rules awards of indemnity costs are made when an offer is refused that should have been accepted.[33] Similarly, the discretion of the Court to make special costs awards vests a trial judge with a public interest role in encouraging sensible and economical litigation.
[33]See for example discussion of the New South Wales rules in Morgan v Johnson (1998) NSWLR 578 at 518. I note that no statutory offer was made in the present case.
The defendants submit that the plaintiff’s case was plainly hopeless from the outset, and was commenced upon mere suspicion without evidentiary support. I accept that the plaintiff must have had little initial evidence to support his contentions, however, I do not consider that to be critical at the earliest stages of the litigation. The plaintiff’s claim, in effect, was that beneath the cloak of the public service, the defendants had conspired to and had proceeded to maliciously suspend and prosecute him. His notice of suspension was signed by his workplace adversary, in the context of a heated and toxic relationship. Criminal charges against him had been pressed and then abandoned. Naturally enough, the plaintiff would not have had access to internal Victoria Police documents that could verify what lay behind his suspicion.
The process of discovery is investigative in nature. I accept that, from the plaintiff’s perspective, it might have been that documents in existence would support the his case, and that absent formal discovery he would have no capacity to access those documents. However, as discovery proceeded, and in particular at the dates outlined by the defendants at [13], it should have become increasingly clear to the plaintiff and his advisors that his contentions lacked documentary or other evidentiary support.
Insofar as the plaintiff’s submissions that this was a case that would turn on credibility are concerned, I repeat my observation that this was not a hard swearing case. Certainly, the plaintiff was able to put his suspicions to the defendants, and, on oath, the defendants denied the conduct alleged. However, the plaintiff was in no position to provide contrary direct evidence of his own. He had not been privy to the prosecution or suspension process. The evidence he was able to give was limited to the manner in which he was made aware of the charges against him, his relationship with Ms Nixon at the relevant times, and comments made in the public sphere. It was entirely possible that I might find all parties to be credible witnesses, and I in fact did so.
With no positive evidence to put to the defendants (save perhaps for the brief time taken by Mr Taylor to consider the evidence that underpinned the charges, and the relatively limited time taken by Mr Walshe to approve the prosecution), the plaintiff should have known that his case was weak. Privilege arguments continued until the week preceding the trial,[34] but were unfruitful. In the fortnight preceding the trial a Calderbank offer was made.
[34]Arguments between the plaintiff and IBAC and the Chief Commissioner were heard as late as 2 May 2016.
Until the refusal of the Calderbank offer, I do not find reason to warrant a special costs award. I agree that the allegations of mala fides were grave. There is no doubt that spurious allegations of bad faith deserve condemnation, however, I do not see that the plaintiff’s claims fall into that category. Though the plaintiff lacked direct evidence of bad faith, the circumstances of his suspension and prosecution warranted suspicion. Circumstantial evidence supported the contention that there had been some departures from standard procedure. As is common in the litigation of intentional torts, without admissions from the defendants, the plaintiff’s case was necessarily to be built upon circumstantial evidence. That I did not draw the inferences sought does not mean that there was no support whatsoever for those inferences. As I have said, there was ample evidence of motive, and there was perhaps some limited support for an aspect of the plaintiff’s claim against the third defendant to be drawn from the brief period he spent examining the proposed charges at the OPI offices.
I accept Mr Panna’s submission that the plaintiff believed in his case to the end. However, subjective conviction on the part of the plaintiff is not sufficient to dislodge the reality that his prospects of success were bleak. By the expiration date of the defendants’ Calderbank offer, all the evidence that would be used at trial was available to the plaintiff. In my view, rejection of the offer in these circumstances was unreasonable. I shall briefly address the Hazeldene’s Chicken Farm factors.
I consider the timing of the offer was entirely appropriate. It was prudent for the defendants to wait until the resolution of discovery and privilege arguments. Had the offer been made sooner, the plaintiff would have been forced to make a decision without full insight into the scope and state of the evidence for trial. The letter containing the offer clearly and accurately set out the weaknesses in the plaintiff’s case, and foreshadowed an indemnity costs application. The offer was open for six days, which is an appropriate timeframe in my opinion.
I consider the offer to forego the costs already incurred in the preparation of the defendants’ defence to the claims together with the costs already awarded[35] to constitute significant consideration. This was not an offer merely to walk away. Further, given the scope of the discovery, including discovery and privilege arguments in this Court, the plaintiff must have had insight into the scale of the total costs incurred by the defendants. The consideration offered was genuine, and its refusal unreasonable.
[35]By the 4 April 2016 order of J Forrest J, estimated to be between $60,000 and $70,000.
I propose to award costs to the defendants on the standard basis from the commencement of the proceeding until 6 May 2016. From 7 May 2016 to the conclusion of the proceeding (excepting the costs application), I shall award costs on an indemnity basis. I will order the plaintiff pay the defendants’ costs of the costs application on the standard basis.
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