National Australia Bank Ltd v Bozsa [No 2]

[2013] WASC 397

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   NATIONAL AUSTRALIA BANK LTD -v- BOZSA [No 2] [2013] WASC 397

CORAM:   MASTER SANDERSON

HEARD:   17 OCTOBER 2013

DELIVERED          :   17 OCTOBER 2013

PUBLISHED           :  30 OCTOBER 2013

FILE NO/S:   CIV 2504 of 2011

BETWEEN:   NATIONAL AUSTRALIA BANK LTD (ABN 12 004 004 937)

Plaintiff

AND

PAUL BOZSA
First Defendant

ROBYN JOY BOZSA
Second Defendant

Catchwords:

Costs - Appeal from Registrar - Costs ordered to be paid on indemnity basis by solicitor - Turns on own facts

Legislation:

Nil

Result:

Appeal allowed
Costs order set aside

Category:    B

Representation:

Counsel:

Plaintiff:     Mr C S Gough

First Defendant             :     Mr P G Clifford

Second Defendant         :     Mr P G Clifford

Solicitors:

Plaintiff:     Minter Ellison

First Defendant             :     Alan Rumsley

Second Defendant         :     Alan Rumsley

Case(s) referred to in judgment(s):

Nil

1. MASTER SANDERSON:  This was an appeal from a decision of a registrar.  After hearing argument I indicated to the parties I would allow the appeal and set aside the decision of the registrar.  I also indicated I would publish my reasons and allow the parties to consider those reasons before making further orders.  These are those reasons.

2. On 22 August 2013 the learned registrar made the following order:

   The costs thrown away as a consequence of the re‑pleading of the amended defence and counterclaim are payable by the defendant's solicitor on an indemnity basis to be taxed if not agreed.

3. The circumstances which gave rise to this order were as follows.  The plaintiff was and still is the holder of a registered mortgage over certain property in Cottesloe.  The plaintiff alleged the defendants were in default under the mortgage and it issued these proceedings.  Somewhat belatedly the defendants instructed Mr Alan Rumsley to act on their behalf.  By the time the instructions were given the defence was overdue.  Mr Rumsley took instructions on Friday, 2 December 2011 on an urgent basis.  He drafted the defence and counterclaim over the weekend and filed and served it on Monday, 5 December 2011.

4. At the time Mr Rumsley took instructions the first defendant, who provided the instructions, had in his possession a significant number of files and documents that related to the Cottesloe property.  Some of these related to the loan facility, some of them related to construction of a dwelling which was covered by the loan facility and some related to an arbitration claim by a builder.  In an affidavit sworn 21 June 2013 Mr Rumsley says that throughout his initial dealings with the first defendant he was satisfied the first defendant exhibited a clear understanding of events and was familiar with the relevant documents.

5. The defence as pleaded contained an allegation in par 2(p) that on or about 16 December 2008 the defendants had provided to the plaintiff a document entitled 'Request for Drawing'.  Mr Rumsley says, and I accept, while he did not see the document in question he was told by the first defendant it existed.

6. Furthermore the first defendant reviewed the draft defence and counterclaim and requested no changes in relation to the paragraph referring to the 'Request for Drawing' document.

7. Between 21 December 2011 and 28 February 2012 there was correspondence between the plaintiff's solicitors and the defendants' solicitors over the form of defence and counterclaim.  No reference was made to par 2(p).  This culminated in an amended defence and counterclaim being filed on 29 February 2012.  This document contained par 2(p) in its unamended form.

8. On 14 March 2012 Mr Rumsley received an email from the plaintiff's solicitors requesting a copy of the document referred to in par 2(p).  Mr Rumsley forwarded the email to the first defendant requesting a copy of the document.  On 30 March 2012 Mr Rumsley forwarded to the plaintiff's solicitors a copy of a document dated 16 December 2008 provided to him by the first defendant.  A copy of that document appears as annexure APR2 to Mr Rumsley's affidavit sworn 21 June 2013.  It is common ground between the parties that that document could not satisfy the description of the document contained in par 2(p).  In fact it is common ground the document referred to in the pleading simply does not exist.

9. On 30 March 2012 Mr Rumsley advised the first defendant he had forwarded the document provided to him to the plaintiff's solicitors.  He also pointed out the document was not consistent with what was referred to in par 2(p) of the pleading.  He enquired with the first defendant whether there was any other document available.  It is not clear from the evidence what response Mr Rumsley received.

10. The matter went to mediation on 6 June 2012.  It did not settle.  However the parties continued to negotiate in an attempt to resolve their differences.  The most recent settlement proposal was made on 7 March 2013.  When that offer proved unacceptable the parties moved towards listing the matter for hearing.  Counsel for the defendants then sought to amend the defence.  It was subsequent to the amendment of the defence which removed par 2(p) the registrar made the costs order.

11. From this brief summary of the facts a number of points emerged.  First, the original defence and counterclaim was drafted in some haste and in circumstances where the defendants' solicitor did not have the luxury of ensuring he was in possession of all relevant documents before the pleading was drafted.  Second, so far as par 2(p) is concerned, the defendants' solicitor was provided with direct instructions from the first defendant such a letter existed.  The pleading was not a result of some figment of Mr Rumsley's imagination nor was it inconsistent with the defendants' case.  Third, when a request was made for a copy of the letter in March 2012 Mr Rumsley responded promptly, raised the matter with his client and queried the existence of the letter which gave rise to the plea.  Fourth, once they received a copy of the document of 16 December 2008 the plaintiff's solicitors could have been in no doubt it did not conform with what was pleaded in par 2(p).  They must have realised unless there was another letter the plea could not be maintained.  Fifth, this matter went to mediation.  Of course what occurred at the mediation is confidential.  But it is difficult to imagine the plaintiff was in any way misled by the state of the pleadings.  Sixth, at no time did the plaintiff's solicitors take the view the plea in par 2(p) was so significant and so misleading a strike out application was required.

12. Pleadings which accurately reflect the position of each party in an action are of fundamental importance.  But the modern approach to pleadings is to see them as indicating each party's position.  Any regime which attempts to force the parties to produce pleadings which are perfect leads to endless and pointless strike out applications.  The present approach in this court is what might be described as robust.  The emphasis is on substance rather than form.  That, taken together with the need for parties to keep the costs in litigation to a minimum, mean pleadings may not always receive the attention they deserve.  That does not mean solicitors are lax let alone negligent.  Rather, in many cases - and in my view this is one of them - it means they are focused on the real issues between the parties.

13. Mr Rumsley's evidence makes it clear he was aware of the problems with par 2(p).  His efforts were directed at settling the matter.  He knew if the matter did not settle the defence and counterclaim would require further amendment.  He advised the defendants accordingly.  He made a value judgment to the effect it was not worth the cost and delay of amending the pleading when it was not actively causing mischief and when the matter might settle.  That was a judgment call and in my view it was the correct decision.

14. In these circumstances I am not satisfied that it was appropriate indemnity costs should be awarded against Mr Rumsley personally.  Such orders must necessarily be rare.  There is no suggestion Mr Rumsley acted in bad faith or that he deliberately deceived the plaintiff or their solicitors.  The circumstances of this case do not even suggest incompetence.  In my view it is difficult to fault Mr Rumsley's conduct.

15. In all the circumstances I was satisfied the costs order was inappropriate.  As I indicated it will be set aside.  Within seven days each party is to provide a minute of orders and short submissions as to costs.