Naumovski v Ugrinovski
[2015] VSC 49
•25 February 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2014 00088
| VLADO NAUMOVSKI AND OTHERS | Plaintiffs |
| v | |
| ROBERT UGRINOVSKI AND OTHERS | Defendants |
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JUDGE: | Zammit J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 February 2015 |
DATE OF JUDGMENT: | 25 February 2015 |
CASE MAY BE CITED AS: | Naumovski & Ors v Ugrinovski & Ors |
MEDIUM NEUTRAL CITATION: | [2015] VSC 49 |
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COSTS - Subpoenas - Subpoena issued to non-party – Objection to subpoena - Costs on an indemnity basis – Breach of overarching obligations – Court power to sanction – Sections 19, 20, 23, 24 and 29 Civil Procedure Act 2010 (Vic)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M J Galvin SC with Mr C R Brown | Frenkel Partners |
| For the First Defendant | Mr N Lucarelli QC with Ms H Tiplady | Thomson Geer |
| For Zest Accounting Pty Ltd | Mr P J Booth | Behan Legal |
HER HONOUR:
Introduction
Between 1 December 2014 and 17 December 2014, the plaintiffs filed five subpoenas (‘the subpoenas’) directed to George Metaxas/Metaxas Architects, Louis Kortesis/Zest Accounting Group Pty Ltd (‘Zest’), Nicole Dickson, Tony Jovcevski and Aneta Jovcevska.
The first defendant, Robert Ugrinovski, objected to the subpoenas. Zest (a non‑party) objected to the subpoena addressed to it.
Zest seeks an order that its costs be paid on an indemnity basis, fixed at $24,315 and that they be paid forthwith. The plaintiffs agree that Zest’s costs be taxed on a standard basis and in default of agreement be taxed and that such costs be paid immediately. The first defendant seeks that his costs be paid on an indemnity basis, fixed in the sum of $55,000 and that they be paid forthwith. The plaintiffs submit that the first defendant is entitled to his costs on the standard basis and that in default of agreement such costs be taxed.
The plaintiffs no longer oppose the setting aside of the subpoenas.
The first defendant relies on the affidavit of Julie Callea‑Smyth, solicitor, of Thomson Geer, sworn 13 February 2015, and written submissions dated 13 February 2015.
Zest relies on the affidavit of Isaac Szmerling, solicitor, of Behan Legal, sworn 13 February 2015 and written submissions dated 16 February 2015.
Chronology
The proceeding was filed with the Court by originating process dated 16 September 2014. On 21 November 2014, Sifris J made detailed interlocutory orders. The orders included dates for the service of pleadings; mediation; and fixed the proceeding for trial on 10 March 2015 on an estimate of four to five days. The trial is ‘limited to the relief sought by the first plaintiff and the first defendant on the grounds of oppression and/or the just or equitable ground and any relief associated’.[1]
[1]Order of Sifris J made 21 November 2014 [26].
Evidence and submissions regarding the quantification of any loss or damage suffered by the first plaintiff or the first defendant will not be dealt with during this phase of the trial, and the first plaintiff’s application for leave pursuant to s 237 of the Corporations Act 2001 (Cth) is adjourned until after the trial listed for 10 March 2015.[2]
[2]Ibid [27].
Sifris J made no orders in relation to discovery and indicated that the parties were to provide reasonable discovery without the making of any orders.[3] On 8 January 2015, Frenkel Partners for the first time wrote to the defendants’ solicitors requesting discovery of documents. The issue of discovery is the subject of a proposed application by the plaintiffs.
[3]Affidavit of Bill Lambros sworn 16 February 2015 [4]; Transcript page 1, Line 27.
The subpoenas were filed between 1 and 17 December 2014.
On 4 December 2014, Thomson Geer wrote to Frenkel Partners requesting, amongst other things, a complete list of all subpoenas served by Frenkel Partners on behalf of the plaintiffs in the proceeding.
On 5 December 2014, Thomson Geer sent a letter to Frenkel Partners in respect of the subpoenas, stating, amongst other things, that it was evident from the subpoenas that they were an attempt by the plaintiffs to circumvent the proper process for obtaining discovery from third parties and that the subpoenas were an abuse of process. It is relevant to note that the subpoenas in question were lengthy and the active parts of the subpoenas were approximately 70 pages. The letter also put the plaintiffs’ solicitors on notice that the first defendant would be seeking his costs of the objections hearing. Thomson Geer never received a response to the 5 December 2014 letter.
On 8 December 2014, Behan Legal gave notice to the Supreme Court Subpoena Coordinator that Zest objected to the subpoena issued to it by the plaintiffs.
On 18 December 2014, the Supreme Court emailed the parties a Notice of Hearing of Objection and confirmed that the objections to the subpoenas were to be heard on 6 February 2015 at 10.30am. On 18 December 2014, Andrew Fraser, of the Court’s Subpoenaed Documents section, sent an email requesting that written submissions be filed by 30 January 2015 and that the parties narrow the issues in dispute.
On 19 December 2014, Thomson Geer sent an email to Frenkel Partners requesting further information about the objections hearing. No response was received.
On 19 December 2014, Behan Legal wrote to Frenkel Partners, enclosing by way of service, a Notice for Appointment of Practitioner. Behan Legal confirmed that their client had lodged an objection to the subpoena dated 5 December 2014 and requested documents and evidence as to the relevance of the subpoenaed documents.
On 7 January 2015, a further email was sent from Thomson Geer following up the correspondence that had been forwarded to Frenkel Partners. No response was received.
On 12 January 2015, Frenkel Partners sent a letter to Behan Legal attaching current pleadings and noting that the relevance of the subpoenas would be apparent from the pleadings. Frenkel Partners complained that the subpoena had not been complied with and said failure to comply was a contempt of court, which they would raise with the Court.
On 12 January 2015, a further email was sent by Thomson Geer to Frenkel Partners seeking responses to their 19 December 2014 and 7 January 2015 correspondence. No response was received.
On 27 January 2015, Thomson Geer emailed Frenkel Partners requesting correspondence about communications to the subpoenaed parties.
On 30 January 2015, the first defendant’s written submissions were filed and on 2 February 2015, written submissions were served on Frenkel Partners.
On 3 February 2015, Zest’s written submissions were filed with the Court.
On 5 February 2015, at approximately 4.00pm, Frenkel Partners circulated significantly amended subpoenas and the plaintiffs’ written submissions.
On 6 February 2015, the plaintiffs provided an affidavit of Mr Lambros to the Court and the parties.
At the hearing on 6 February 2015, counsel for the first defendant and Zest indicated that they were ready to proceed with the objections hearing, save for the oppression argument in relation to Zest.
Senior counsel, Mr Galvin, for the plaintiffs, indicated at the 6 February 2015 hearing that the plaintiffs had not filed their reply and counterclaim as required and that it would be difficult for the Court to consider the issue of relevance without the pleadings being closed. Mr Galvin indicated that he was ready to proceed if the Court so wished.
On 6 February 2015 orders were made that, amongst other things, the objections hearing be adjourned to 16 February 2015, and the plaintiffs file and serve a reply and defence to counterclaim by 11 February 2015. The plaintiffs filed the latter documents on the morning of this hearing, 16 February 2015.
On 11 February 2015, Frenkel Partners advised the parties that the plaintiffs no longer opposed the subpoenas being set aside.
On 12 February 2015, Thomson Geer sent a letter to Frenkel Partners indicating that the first defendant consented to the orders setting aside the subpoenas being made on the papers. The first defendant sought costs thrown away and fixed in the amount of $30,000, by reason of the filing of the subpoenas and the plaintiffs’ subsequent consent to them being set aside. The letter set out the composition of the sum sought. Thomson Geer also demanded that the costs be paid by 12.00 noon on 16 February 2015 and sought a response by 1.00pm on 13 February 2015. The letter put the plaintiffs’ solicitors on notice that if the offer was rejected, the first defendant reserved his right to costs from the plaintiffs on a full indemnity basis. No response was received to the offer.
On 12 February 2015, Behan Legal forwarded a letter to Frenkel Partners informing them that Zest would seek a special costs order upon the striking out of the subpoenas addressed to it and the basis on which it was considered that this was a case for a special costs order.
Submissions
The plaintiffs submit that in circumstances where the subpoenas have been set aside by consent, indemnity costs are not appropriate. They submit that in circumstances where the subpoenas were for a legitimate forensic purpose and not issued for an alternative purpose or an abuse of process, it is not appropriate to award indemnity costs.[4]
[4]Kennedy v Wallace (2004) 136 FCR 114, 121.
The Court did not consider any evidence or substantive submissions as to whether the subpoenas were an abuse of process; for a collateral purpose; or for a legitimate forensic purpose. Given the setting aside of the subpoenas was by consent, it was not necessary to traverse what would have amounted to a hearing of the substantive arguments in the setting aside applications. However, I make the following observations:
1. The active part of the five subpoenas were lengthy and amounted to approximately 70 pages;
2. on 5 February 2015, the plaintiffs served and filed amended subpoenas significantly reducing the documents sought;
3. on 11 February 2015, the plaintiffs consented to not opposing the setting aside of all subpoenas, reserving their right to issue fresh subpoenas. In effect the plaintiffs abandoned the subpoenas;
4. no explanation has been given why the subpoenas in their original form or amended form are not pursued by the plaintiffs;
5. discovery is not completed and no applications have been made for third party discovery. At the time the subpoenas were served no applications had been made for discovery between the parties and/or for third party discovery; and
6. the plaintiffs filed their points of reply and defence to counterclaim on 16 February 2015, along with a proposed application for discovery from the first to fourth defendants and a request for further and better particulars of the first defendant’s point of defence and counterclaim.
The plaintiffs concede that it is highly likely that some of the categories in the amended subpoenas may have been struck out by the Court but that the subpoenaed parties would have been required to produce some documents to the Court under the terms of the amended subpoenas. Further, the plaintiffs submit it is highly likely that the plaintiffs will issue fresh subpoenas which ‘aim to target only the relevant documents’.[5]
[5]Plaintiffs’ written submissions dated 16 February 2015 [16].
In their written submissions the plaintiffs submit that ‘[g]iven that the fresh subpoenas will be issued, it is probable, in any event, that the costs of complying with the current subpoenas, including legal advice, will not be thrown away as it may be relevant to the fresh subpoenas.’[6]
[6]Plaintiffs’ written submissions dated 16 February 2015 [16(d)].
There was argument as to whether the plaintiffs had an obligation to prove that the subpoenas were appropriate. The first defendant and Zest submitted that the obligation rests with the party that issued the subpoenas.[7] The submissions on the whole were unhelpful to the extent that the plaintiffs no longer opposed the setting aside of the subpoenas. To embark upon a detailed analysis of whether the subpoenas amounted to an abuse of process or were issued for a collateral purpose is not, in my mind, of assistance in the current costs application. As noted, the plaintiffs by their own admission and conduct have demonstrated that the subpoenas in their original form were inappropriate and in relation to the amended subpoenas have said that in all likelihood, on their own assessment, the Court may have allowed some of the categories for documents. In any event, the plaintiffs have not pursued their application opposing the setting aside of the subpoenas. It is not known if fresh subpoenas will be issued.
The Civil Procedure Act 2010 (Vic) (‘CPA’)
[7]Sunderland Steamship P. and I. Association v Gatoil International Inc. [1988] 1 Lloyd’s Rep 180, 184.
The first defendant and Zest submit that by their conduct the plaintiffs are in breach of ss 19, 20, 23 and 24 of the CPA. The sections state:
19.Overarching obligation to only take steps to resolve or determine dispute
For the purpose of avoiding undue delay and expense, a person to whom the overarching obligations apply must not take any step in connection with any claim or response to any claim in the civil proceeding unless the person reasonably believes that the step is necessary to facilitate the resolution or determination of the proceeding.
20.Overarching obligation to cooperate in the conduct of civil proceeding
A person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding.
23.Overarching obligation to narrow the issues in dispute
If a person to whom the overarching obligations apply cannot resolve a dispute wholly by agreement, the person must use reasonable endeavours to—
(a) resolve by agreement any issues in dispute which can be resolved in that way; and
(b)narrow the scope of the remaining issues in dispute—
unless—
(c)it is not in the interests of justice to do so; or
(d)the dispute is of such a nature that only judicial determination is appropriate.
24.Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
Sections 28 and 29 of the CPA set out sanctions for contravening the overarching obligations. Section 29 in particular states:
29.Court may make certain orders
(1)If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;
(b)an order that the legal costs or other costs or expenses of any person be payable immediately and be enforceable immediately;
(c)an order that the person compensate any person for any financial loss or other loss which was materially contributed to by the contravention of the overarching obligation …
(3)This section does not limit any other power of the court to make any order, including any order as to costs.
The Court of Appeal in Yara Australia Pty Ltd & Ors v Oswal (‘Oswal’)[8] discussed the implications of making orders as to costs against persons in breach of the overarching obligations under the CPA.
[8]Yara Australia Pty Ltd & Ors v Oswal [2013] VSCA 337 [51] (‘Oswal’s Case’).
The Court of Appeal heard the parties on the question whether in the conduct of a leave application from the orders of Whelan J (in which he set aside the order of Efthim AsJ for security for costs), any party had breached their overarching obligations under the CPA. The Court of Appeal considered whether the parties were overrepresented by counsel and whether the parties produced unnecessary or excessive materials to the Court on the hearing of the application.
The Court of Appeal considered the general principles in relation to the Court’s power to impose sanctions on persons in breach of their overarching obligations. The overarching obligations apply to parties, legal practitioners, representatives or law practices acting for or on behalf of a party in a proceeding.[9] Such persons have, among others, an obligation to use reasonable endeavours to ensure the costs incurred in a proceeding are reasonable and proportionate to the complexity and importance of the issues and the sums in dispute.[10] Further, the participants in a civil proceeding must only take steps that are necessary to resolve or determine the dispute.[11] Practitioners must act in accordance with their overarching obligations throughout the interlocutory and trial process, even when the interests and demands of clients may at times dictate otherwise.[12]
[9]Civil Procedure Act 2010 (Vic) (‘CPA’) s 10; Oswal’s Case [2013] VSCA 337 [10].
[10]CPA s 24.
[11]CPA s 19; Oswal’s Case [2013] VSCA 337 [8], [11].
[12]Team Diamond Headquarters Pty Ltd v Main Road Property Group Pty Ltd & Ors (2009) 25 VR 189; Oswal’s Case [2013] VSCA 337 [19].
The Court of Appeal recalled that the purpose of the overarching obligations is (as outlined in s 1(1)(c) of the CPA) to improve standards of conduct in litigation and to facilitate the just, efficient, timely and cost‑effective resolution of issues in dispute. The CPA is focused on minimising unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource.[13] To this end, the CPA gives the Court power to actively manage the conduct of parties to litigation and the culture of litigation itself. The Court of Appeal referred to the Attorney‑General’s second reading speech to the CPA, in which he highlighted the Court’s role in encouraging lawyers to work towards resolving disputes, rather than ‘attempting to win at all costs’.[14]
[13]Oswal’s Case [2013] VSCA 337 [6]-[8]; CPA s 1(1)(c).
[14]Oswal’s Case [2013] VSCA 337 [7].
The Court of Appeal discussed the use of a flexible test to determine whether the parties used reasonable endeavours to ensure the legal costs were proportionate. The Court must weigh the costs against the complexity and gravity of the issues and the amount in dispute.[15] This involves an objective evaluation of solicitors’ and counsels’ conduct, considering the issues and disputed sum in the proceeding. The Court should be satisfied on the balance of probabilities that a party to litigation has contravened the overarching obligations,[16] and have regard to the nature and extent of contraventions are relevant in making an order.[17]
[15]Ibid [13].
[16]Ibid [24]; CPA s 29.
[17]Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237 (Warren CJ, Osborn JA and Macaulay AJA approving the approach of Croft J) [553]-[554]; Oswal’s Case [2013] VSCA 337 [24].
The Court of Appeal in Oswal stated that legal representatives must ensure that the extent and level of representation proposed is reasonable and proportionate, with regard to the issues in dispute.[18] However, given the gravity and complexity of the proceeding, as well as the likely costs of the proceeding and the amount in dispute, the Court of Appeal considered that counsel’s submissions were discrete and brief but also important and relevant to their client’s position. It also considered that each of the applicants were entitled to their own representation, as they each had separate and distinct interests.[19]
[18]Oswal’s Case [2013] VSCA 337 [15].
[19]Ibid [38]-[39].
The Court of Appeal considered that where a large volume of material is provided to the Court that is unnecessary and excessive, there will be a prima facie case that the overriding obligations have been breached. Such conduct limits court resources and increases costs to the parties.[20] The Court of Appeal stated that, on the facts of the case, oral argument referred only to a small amount of the documents, most of which were irrelevant to the primary issues in dispute.[21] The Court of Appeal was satisfied that on the balance of probabilities, the overarching obligations in s 24 of the CPA had been breached by the filing of excessive, extraneous and repetitious material.[22] The Court of Appeal noted that the obligations in ss 18 and 19 may have been relevant if applications had been bound to fail.[23]
[20]Ibid [40].
[21]Ibid [49].
[22]Ibid [49].
[23]Ibid [54].
The Court of Appeal stated there will be cases where a breach of an obligation under the CPA may support an order for indemnity costs. The Court of Appeal did not consider this point in detail but stated that the breach may reflect existing bases for making such an order.[24]
[24]Ibid [56].
Have the plaintiffs breached their overarching obligations?
Section 19 – Overarching obligation to only take steps to resolve or determine dispute
The first defendant and Zest submit that the plaintiffs breached s 19 of the CPA in that they issued the subpoenas in circumstances where they could not have considered that such a step was necessary to facilitate the resolution or determination of the proceeding. It is submitted that the significant amendment to the subpoenas, followed by the plaintiffs’ consent and subsequent withdrawal of the subpoenas is objective evidence of their breach of s 19 of the CPA.
The plaintiffs submit that the subpoenas were issued in circumstances where there was a reasonable belief that the step was necessary to facilitate the resolution and determination of the proceeding. Even if the subpoenas were thought to be necessary for the plaintiffs to prepare their case, the scope and form in which the subpoenas were filed and served have not rendered any benefit to any party, including the plaintiffs. The subpoenas in their original form were unsustainable, which is evident by the plaintiffs’ decision to significantly amend the subpoenas, and the subsequent abandonment by the plaintiffs of the subpoenas altogether. Objectively, it is difficult to see how issuing the subpoenas at first instance or even in their amended form was necessary to facilitate the resolution or determination of the proceeding.
I consider that the plaintiffs have breached s 19 of the CPA.
Section 20 – Overarching obligation to cooperate in the conduct of civil proceeding
The plaintiffs submit that in assessing whether there has been a breach of any of the overarching obligations, the Court must look at the entirety of the plaintiffs’ conduct. In this case, the plaintiffs submit that by 5 February 2015 they had significantly amended the subpoenas and by 11 February 2015 had informed the parties and the Court that the subpoenas would not be pressed.
In relation to Zest, the evidence demonstrates a failure by the plaintiffs to endeavour to cooperate at all in relation to the subpoenas. Zest is a non‑party to the litigation. Zest’s solicitors endeavoured to communicate with the plaintiffs’ solicitors and sought information about the relevance of the subpoena. Given the breadth of the subpoena this was not an inappropriate course taken by Zest. It is incumbent on the plaintiffs (as the party that filed the subpoena) to expressly and precisely identify the legitimate forensic purpose for seeking access to the documents. It is therefore remarkable that Frenkel Partners’ only response to the Behan Legal letter dated 19 December 2014, was to threaten Zest with contempt of court by letter dated 12 February 2015.
In court, Mr Galvin conceded that there had been no formal costs discussions with and/or offers put to Zest in relation to the application. The plaintiffs have not explained to the Court to why they took no such steps to engage with Zest’s solicitors.
By 5 December 2014, Thomson Geer sent a detailed letter to Frenkel Partners setting out the concerns they had with the subpoenas. Further correspondence was sent on 19 December 2014, 7 January 2015, 12 January 2015, 27 January 2015 and 2 February 2015. The plaintiffs did not respond to any of this correspondence.
There has been no explanation given as to why the plaintiffs failed to respond to Thomson Geer before 6 February 2015. Since 6 February 2015, there has been no real engagement by the plaintiffs’ solicitors with Thomson Geer on the issue of costs.
I consider the plaintiffs’ conduct amounts to a breach of s 20 of the CPA in relation to both Zest and the first defendant.
Section 23 – Overarching obligation to narrow the issues in dispute
The plaintiffs ought to have filed any amended subpoenas well before 5 February 2015. As described by counsel for the first defendant and Zest, doing so on 5 February 2015 ‘was too little too late’.
Frenkel Partners had an opportunity to engage in discussions to endeavour to narrow the dispute from 5 December 2014, when Thomson Geer sent a letter setting out the bases of their client’s objections, and from 19 December 2014, when Behan Legal wrote to the plaintiffs on behalf of Zest. Frenkel Partners failed to do so.
Section 24 – Overarching obligation to ensure costs are reasonable and proportionate
The plaintiffs issued the subpoenas and subsequently made significant amendments to the subpoenas. Shortly after, the plaintiffs abandoned the subpoenas. I do not consider that the plaintiff employed ‘reasonable endeavours’ to ensure legal costs and other costs incurred in connection with the subpoenas were reasonable and proportionate. This is particularly relevant when a coercive power is adopted compelling a non‑party to litigation to take action in a proceeding.
Even if inadvertent, the plaintiffs’ conduct has resulted in the incursion of unnecessary costs by parties and non‑parties to the litigation, and has been wasteful of the Court’s time and resources.
Should the plaintiffs pay Mr Ugrinovski and Zest’s costs on an indemnity basis?
The Court has discretion under rr 63.28 and 63.30 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Rules’) to award costs other than on the standard basis. The exercise of the discretion to award costs over and above the ordinary is exceptional and is generally reserved for cases where the losing party has engaged in unmeritorious, deliberate, high minded or other improper conduct such as to justify the Court showing its disapproval and at the same time preventing the successful party being left out of pocket.[25]
[25]Oswal’s case [2013] VSCA 337 [57].
The plaintiffs’ conduct in this proceeding has resulted in loss of time to both the Court and the parties. The plaintiffs persisted with the subpoenas in circumstances where, if properly advised, the plaintiffs should have known that they were on the whole not likely to withstand the objections. In addition, the breaches of the overarching obligations are in this case sufficiently significant to justify the ordering of indemnity costs. Section 29(1) of the CPA confers a power on the Court to make any order it considers appropriate in the interests of justice.
As noted in Oswal’s case, the enactment of s 29 with s 28(2) of the CPA gives the Court broad disciplinary powers that may be reflected in the costs orders that are made.[26]
[26]Ibid [21].
This is a case where the first defendant and a non‑party, Zest, repeatedly raised legitimate concerns about the scope of the subpoenas. Other than serving the amended subpoenas on 11 February 2015 and the 12 January 2015 response to Behan Legal, no response was ever received from the plaintiffs’ solicitors. This is the precise conduct which the CPA requires the Court to exert control over.
In the circumstances, I consider that pursuant to the Rules and s 29 of the CPA, the plaintiffs should pay the first defendant and Zest’s costs of their objections to the subpoenas issued to them, and that such costs should be on an indemnity basis.
I do not consider it appropriate to fix the sums as it requires the Court to embark on a quasi‑taxation of costs. The actual sum is best left to the parties at first instance and, failing agreement, the costs can be taxed.
Should the plaintiffs pay the costs immediately?
Rule 63.20 provides:
Where an interlocutory or other application is made in a proceeding and—
(a) no order is made on the application; or
(b) the order made is silent as to costs—
the costs are the parties’ costs in the proceeding, unless the Court otherwise orders.
Hollingworth J said in Dale v Clayton Utz (No 3)[27] that rr 63.20 and 63.22 reflect the fact that interlocutory applications usually do not conclude a proceeding, so the Court is often not in a position at that stage of the proceeding to determine where the justice lies between the parties in any costs order. However, the Rules empower the Court to ‘otherwise order’ in an appropriate case. The Court’s discretion to ‘otherwise order’ is not circumscribed in any way by the Rules, but must be exercised judicially.
[27]Dale v Clayton Utz (No 3) [2013] VSC 593 [13].
Her Honour noted that where the application was misconceived because the applicant ought reasonably to have appreciated that the application would fail, then the normal practice may not prevail.[28]
[28]Ibid [17].
In this case, the plaintiffs elected not to oppose the setting aside applications and in effect abandoned the subpoenas. It is not known if fresh subpoenas will be issued given the recent filing of pleadings and discovery applications.
As the subpoenas have been abandoned, the Court will not have to wait in this instance to see if the subpoenas were reasonably issued or justified
In the circumstances, I consider it appropriate to make an order at this time dealing with the costs of the objection proceeding. The first defendant and Zest have been wholly successful in their application. I will not repeat what I have already set out in my reasons but I consider the conduct of the plaintiffs and the contraventions of the overarching obligations of the CPA to be such to justify departure from the ordinary rule.
The proceeding is listed for trial commencing 10 March 2015 on an estimate of four to five days. The trial is ‘limited to the relief sought by the first plaintiff and the first defendant on the grounds of oppression and/or the just or equitable ground and any relief associated’.[29]
[29]Order of Sifris J made 21 November 2014 [26].
Evidence and submissions regarding the quantification of any loss or damage suffered by the first plaintiff or the first defendant will not be dealt with during this phase of the trial, and the first plaintiff’s application for leave pursuant to s 237 of the Corporations Act 2001 (Cth) is adjourned until after the trial listed for 10 March 2015.[30]
[30]Ibid [27].
As such, there is likely to be significant delay before the final completion of the proceeding.
In conclusion, I consider that the demands of justice require a departure from the general rule.
Conclusion
For these reasons, I order:
1.The subpoenas for production to:
(a)George Metaxas of Metaxas Architects dated 1 December 2014;
(b) Louie Kortesis of Zest Accounting Pty Ltd dated 5 December 2014;
(c)Nicole Dickson of Essential Assistance dated 5 December 2014;
(d)Tony Jovcevski dated 17 December 2014; and
(e)Aneta Jovcevska dated 17 December 2014
be set aside.
2.The plaintiffs pay the first defendant’s costs of its objections to the subpoenas, including reserved costs, such costs to be taxed immediately on an indemnity basis in default of agreement; and
3.The plaintiffs pay Zest Accounting Group Pty Ltd’s costs of its objection to the subpoena, including reserved costs, such costs to be taxed immediately on an indemnity basis in default of agreement.
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