Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd

[2016] VSCA 233

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0041

NOM DE PLUME NOMINEES PTY LTD	Appellant
v
FINGAL DEVELOPMENTS PTY LTD	First Respondent
and
ASCOT VALE SELF STORAGE CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) [NO 2]	Second Respondent

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JUDGES:	TATE and McLEISH JJA and GINNANE AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	Determined on the papers
DATE OF JUDGMENT:	6 October 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 233
JUDGMENT APPEALED FROM:	[2015] VSC 44 (Sifris J)

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COSTS – Appeal – Appellant substantially successful but first respondent resisted some grounds and defended part of judgment – Apportionment of costs – First respondent to pay 80 per cent of appellant’s costs of appeal.

COSTS – Trial – First respondent successful on part of claim and in defending appellant’s counterclaim – Apportionment of costs – Appellant to pay 40 per cent of first respondent’s costs of trial.

PRACTICE AND PROCEDURE – Interest – Calculation – Supreme Court Act 1986 s 60.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr B W Walker SC with Mr B Gibson	SBA Law
For the First Respondent	Mr D J Williams QC with Mr N McAteer	Jane Underwood Lawyers
For the Second Respondent	No appearance

TATE JA
McLEISH JA
GINNANE AJA:

1. The Court delivered judgment allowing the appeal in this matter on 14 July 2016.[1]  The Court invited the parties to file written submissions addressing the question of costs and other matters as described below.  Those submissions have now been received.  These reasons should be read along with the Court’s earlier reasons.

   [1]Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd [2016] VSCA 159.

1. The issues remaining to be determined fall under four headings.  The first concerns the calculation of the amount which the appellant, Nom de Plume Nominees Pty Ltd (‘NDP’), was overpaid in respect of undrawn fees said to be owed to it by the respondent Fingal Developments Pty Ltd (‘Fingal’).  That amount consists of a principal sum together with interest charged by NDP in respect of the amount overpaid.  The second issue concerns the calculation of interest on the ultimate judgment sum.  Thirdly, the question of costs both on the appeal and at trial remains to be determined.  Finally, the parties have made submissions as to the treatment of monies paid by NDP pursuant to earlier court orders. 

Undrawn fees

1. It will be recalled that Fingal succeeded at trial in recovering $152,097 by way of undrawn fees.  On the appeal, it was held that Fingal was only entitled ‘to recover the balance represented by the amount which NDP claimed and now accepts that it received in excess of its entitlement, namely $72,097, along with any interest charged in respect of the excess charges in question’.[2]

   [2]Ibid [206].

1. NDP submits that the amount of overpaid undrawn fees was $79,854.31, consisting of $72,096.77 in overpaid undrawn fees and $7758.54 by way of interest charged on those fees.  Correcting an arithmetic error, the amount claimed by NDP as representing the sum received in excess of its entitlement (including interest) is $79,855.31. 

1. Fingal submits that, when the final loan statement as between NDP and Fingal is examined, it can be seen that NDP did not charge undrawn fees between 31 July 2008 and 31 March 2009.  It is submitted that NDP therefore ‘elected not to charge for all of the fees that the Court has found it was entitled to’.  On this basis, it is submitted that the amount charged was $45,000, and the amount overpaid was $107,096.77. 

1. Fingal’s submission cannot be accepted.  In the first place, it is contrary to the finding of the Court that NDP is entitled to receive $72,097 together with interest.  Secondly, it is a submission which was not made at the hearing of the appeal.  Thirdly, the submission is at odds with the fact that, irrespective of the date on which the undrawn fees in question were charged, it is not in issue that NDP was entitled to be paid $80,000 by way of undrawn fees.

1. The amount of principal recoverable by way of undrawn fees is therefore $72,097.  The calculation of interest on that amount is not straightforward.  The material before the Court shows that the interest rate payable on the account was the 90-day bank bill rate plus a margin of 13.25 per cent, payable daily and compounding monthly.  NDP did not explain how it reached its figure of $7758.54.  Fingal, for its part, calculated interest on the principal sum for which it contended, supported by a table showing the daily calculation, at $18,168.90.  Fingal did not contest the calculation of interest on the part of NDP based on the principal amount of $72,097.  As a matter of general impression, that amount at first seems low when compared to the amount put forward by Fingal.  However, comparison is difficult by virtue of the fact that Fingal was wrongly including interest, compounding monthly, for a period of seven months, which amount continued to increase at compound rates throughout the relevant period. 

1. In circumstances where Fingal has not contested the interest amount put forward by NDP, the proper course is to adopt that amount as the correct figure.  It should therefore be ordered that the total amount payable by NDP to Fingal in respect of undrawn fees is $79,855.31. 

Interest

1. The parties were agreed that Fingal is entitled to interest on the judgment sum from the date of issue of the proceeding by virtue of s 60 of the Supreme Court Act 1986.  The amount of the judgment sum for these purposes is $137,756.81.  That amount reflects both the figure in relation to undrawn fees, $79,855.31, and $57,901.50 in respect of the settlement payment for Apartment 112 in relation to which the Court has already made an order.  Adopting the approach to calculation advanced by Fingal, but substituting the figure in respect of undrawn fees proposed by NDP, the amount of interest to 6 October 2016 is $64,962.71.

Costs

1. NDP submitted that there was no basis for departing from the usual rule, both on appeal and at trial, that costs should follow the event.  By this, NDP meant that the Court should order that Fingal pay its costs, both of the appeal and of the trial, notwithstanding that there will be judgment for Fingal in the amounts set out above.  NDP submitted that the central issue throughout had been whether NDP was a mortgagee in possession and owed Fingal a general duty to account.  It was submitted that, with the exception of the two matters referred to above, NDP had been wholly successful.  NDP submitted that there was no basis for making a proportionate costs order.  In particular, the matter of substance upon which Fingal had succeeded, as to the validity of the Fingal charge, did not alter the fact that Fingal stood to recover only a small fraction (approximately 12 per cent) of the amount it had originally claimed.  NDP submitted that the declaration which was ultimately to be made in respect of the Fingal charge was materially narrower in scope than had been sought, because it did not extend to the unitholders or the Albury investors. 

1. Fingal submitted that the costs of the appeal should lie where they fall.  It was submitted that Fingal had succeeded in one of the two principal issues in the appeal, namely the validity of the Fingal charge.  It had also been successful in two of the five discrete monetary claims.  In the alternative, Fingal submitted that it should be ordered only to pay a proportion of the costs, which it did not specify. 

1. In respect of the trial, as already observed, NDP submitted that it should have its costs of the trial in their entirety.  Fingal submitted that the question of the costs of the trial should be remitted to the trial judge as being best placed to make an assessment of the manner in which the trial was conducted and the time which was taken dealing with the respective issues.  Alternatively, Fingal submitted that it should receive its costs of the trial in full because it had succeeded in respect of a substantial monetary claim.  Moreover, NDP’s counterclaim had been dismissed.  Fingal submitted that the majority of time at trial, arguably more than 70 per cent, had concerned issues in respect of which Fingal was successful or which were matters of necessary background.  Fingal relied also on specific matters related to changes in the pleadings and the evidence, matters not put to witnesses and allegedly unpleaded and irrelevant allegations.  In reply, NDP contended that these were matters for taxation and had not been taken into account when the trial judge determined the question of costs.[3]

   [3]Fingal Developments Pty Ltd v Nom de Plume Nominees Pty Ltd [No 2] [2015] VSC 146 [13].

1. The relevant principles for the resolution of the question as to the costs of the appeal, and in respect of any apportionment of the costs of the trial, are those set out by this Court in Chen v Chan.[4]  In short, for present purposes, while the general rule is that costs should follow the event, where there is a multiplicity of issues and mixed success has been enjoyed by the parties, the court may take a pragmatic approach in relation to costs, taking into consideration the success (or lack of success) of the parties on an issues basis.  Such an approach will be primarily a matter of impression and evaluation.

   [4][2009] VSCA 233 [10] (Maxwell P, Redlich JA and Forrest AJA). See also Spotless Group Ltd v Premier Building and Consulting Pty Ltd (recs apptd) [2008] VSCA 115 [14] (Redlich JA).

1. On any view of this appeal, NDP was substantially successful.  It succeeded in displacing orders that it was obliged to account generally to Fingal and to pay Fingal substantial particular sums.  The existence of the general duty to account was central to Fingal’s case, both at trial and on the appeal.  At the same time, although the relief granted was modified, Fingal was successful in resisting the argument against it as to the validity of its security.  That matter cannot be put out of account.  Moreover, Fingal succeeded on two claims having a substantial monetary value, albeit on grounds other than the general duty to account for which it contended.  In all the circumstances, it would not be fair for Fingal to be ordered to pay the whole of NDP’s costs of the appeal.  In our opinion, NDP’s substantial success on the appeal should be reflected in an order that Fingal pay 80 per cent of NDP’s costs of and incidental to the appeal.

1. Turning to the costs of the trial, the fact that NDP is ordered to pay a substantial monetary amount to Fingal makes it impossible to accept NDP’s submission that Fingal should pay NDP its costs of the trial.  Equally, Fingal’s submission in the alternative, to the effect that it should be paid its costs of the trial in full, fails to acknowledge the significant measure of success which NDP has had in resisting the claims brought against it.

1. NDP submits that, had the claim at trial been confined to the amounts which were ultimately recovered, it would have been much more likely that the matter would have settled and significant costs would have been avoided.  However, NDP did not, for example, seek to rely on any offer of compromise in respect of the aspects of the claim upon which Fingal succeeded.  It is therefore idle to speculate as to what course might have been taken had the claim at trial been confined to the matters upon which Fingal ultimately succeeded. 

1. NDP submits that this Court is well placed to determine the question of costs and that there is no need for it to be remitted to the trial judge.  It submits that to do so would be contrary to the overarching purpose of the Civil Procedure Act 2010 to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute, which purpose guides the Court’s exercise of discretion as to costs.[5]  At the same time, however, NDP has not entered into what it terms ‘the minutiae of issues that go to the reasonableness of costs incurred in the proceeding’.  As mentioned, it submits that those matters are properly for the Costs Court on taxation, and notes that the trial judge did not take the matters in question into account when determining the question of costs below.

   [5]See Kalinic v Acron Engineering Pty Ltd [2013] VSCA 363 [6]–[7] (Warren CJ, Osborn JA and Robson AJA); Batrouney v Forster [No 2] [2016] VSCA 131 [13]–[14] (Santamaria, Beach and McLeish JJA).

1. In our opinion, this Court should deal with the costs of the trial rather than remit the matter to the judge for further argument, with inevitable attendant expense and delay.  It will not be necessary to enter into the minutiae of the issues for that purpose. 

1. The costs of the trial should in our view be approached from the starting point that Fingal was partially successful in its claims against NDP.  It defended the validity of its charge and succeeded on two of its specific claims.  NDP has ultimately been ordered to pay an amount in the order of $137,000 plus interest.  However, the fact that Fingal was unsuccessful in very large measure means that it should not recover all its costs of the trial.  It would do a substantial injustice to NDP were it to be ordered to pay all of Fingal’s costs, having successfully defended the main issue litigated between the parties.  This is therefore a case where apportionment of issues is necessary to do justice between the parties.

1. It is difficult to work out how much of the trial was referable to the various issues.  But inevitably, much of the general background evidence and argument was relevant to the validity of the Fingal charge as well as the various specific claims which were made.  To seek to disaggregate the time spent on various issues would be unproductive.  In the end, after a seven day trial Fingal has been successful in salvaging a relatively small amount from the failure of its much larger claim, and in resisting the counterclaim.  In the circumstances, NDP should pay 40 per cent of Fingal’s costs of the trial. 

Other matters

1. Pursuant to the orders made by the trial judge, NDP had paid $1,180,416.67 to the solicitors for AVSS.  NDP had also paid $50,000 into court by way of security for costs of the appeal.

1. NDP seeks an order that the above monies be released and returned to it.  It also seeks an order that the order for payment to Fingal be stayed pending taxation of any costs order made in favour of NDP and that the judgment amount be set off against the costs awarded to NDP.

1. Fingal submits that the amount held by the solicitors for AVSS should first be paid in discharge of the amounts owing to Fingal including interest, with the balance to be paid to NDP and any interest earned to be apportioned accordingly.  Fingal submits that payment out of court of the amount held by way of security should follow and be determined by the overall costs outcome as between the parties, as taxed if necessary. 

1. The amount held by the solicitors for AVSS was ordered to be paid in partial discharge of the obligation to account, which has been found on appeal not to have existed.  There is no reason why the solicitors for AVSS should continue to hold that amount.  Fingal submits that it should first be paid before the balance is returned to NDP.  As noted, NDP seeks a stay in respect of the amount owing to Fingal pending the taxation of costs.  However, there is no basis upon which Fingal should be denied the fruits of its judgment, nor any reason why it should in effect be compelled, as the unsuccessful respondent to the appeal, to give security for NDP’s costs of the appeal.  It should be ordered that the amount held by the solicitors for AVSS be disbursed, first in satisfaction of the judgment in favour of Fingal (including as to interest), and secondly by payment to NDP.  Interest earned on the amount held by the solicitors should be paid to NDP, rather than being apportioned.  Fingal’s share of the amount already includes interest, and so to apportion interest as Fingal suggests would involve double payment.

1. The amount should be disbursed as outlined above, notwithstanding that NDP is liable for part of Fingal’s costs of the trial. The amount was not paid in satisfaction of the costs order made by the trial judge,[6] and there is no basis for NDP to be required, in effect, to give security for the amount it must pay in respect of those costs.

   [6]Fingal Developments Pty Ltd v Nom de Plume Nominees Pty Ltd [No 2] [2015] VSC 146 [11] (Sifris J).

1. Turning next to the amount paid into court by NDP by way of security for costs, it represented security for any amount it might be ordered to pay to Fingal in respect of the costs of the appeal.  As explained in these reasons, there will be no such amount.  There is therefore no basis for the amount held by way of security to be retained.  Fingal’s submission that the amount should be held so as to act as security for its costs more generally should be rejected.  It should be ordered that the amount paid into court by NDP by way of security for costs of the appeal be returned to NDP.

1. Fingal applied for an indemnity certificate under s 4 of the Appeal Costs Act 1998, on the basis that the appeal raised difficult and substantial questions of law concerning the rights and obligations of prior ranking holders of securities to subsequent encumbrancers and the circumstances in which the former may be obliged to account to the latter.[7]  The appeal has been successful.  It is appropriate that a certificate be granted in this case.[8]

   [7]Fingal referred to McLennan v McBroom [1969] VR 566, 573 (Winneke CJ and Newton J) and Blackall v Trotter [No 2] [1969] VR 946 (Winneke CJ for Winneke CJ, Little and Menhennitt JJ).

   [8]See Eureka Funds Management Ltd v Freehills Services Pty Ltd [No 2] [2008] VSCA 177 [7]–[9] (Cavanough AJA).

Orders

1. The following orders should be made:

(1)       The appellant pay the first respondent the amount overpaid in respect of undrawn fees, fixed at $79,855.31 (inclusive of interest).

(2) The appellant pay the first respondent interest on the judgment sum of $137,756.81 under s 60 of the Supreme Court Act 1986 in the amount of $64,962.71.

(3)       The first respondent pay 80 per cent of the appellant’s costs of and incidental to the appeal, including the application for leave to appeal.

(4)       The appellant pay 40 per cent of the first respondent’s costs of the trial.

(5)       The sum held by the solicitors for the second respondent pursuant to order 1 of the orders of the Trial Division made on 23 April 2015 be paid, as to $202,719.52 to the first respondent, and as to the balance (including interest) to the appellant.

(6)       The amount paid into court to the Senior Master by the appellant by way of security for costs of the appeal, $50,000, be released to the appellant. 

(7) The first respondent have a certificate under s 4 of the Appeal Costs Act 1998.

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