Pesec v Consolidated Builders Limited (No 2)

[2019] ACTSC 157

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Pesec v Consolidated Builders Limited (No 2)

Citation:

[2019] ACTSC 157

Hearing Date:

On the papers

Submissions received:

Decision Date:

13 June 2019

17 June 2019

Before:

McWilliam AsJ

Decision:

See [25]

Catchwords:

COSTS – Where application for preliminary discovery previously determined – where success of plaintiff arose out of amended argument during hearing – plaintiff to pay majority of costs on application

Cases Cited:

Pesec v Consolidated Builders Pty Ltd [2019] ACTSC 142

Parties:

Anthony Pesec (Plaintiff)

Consolidated Builders Limited (ACN 008 654 411) (Defendant)

Representation:

Counsel

R Markham (Plaintiff)

M O’Meara (Defendant)

Solicitors

Adero Law (Plaintiff)

Clayton Utz (Defendant)

File Number:

SC 181 of 2019

McWilliam AsJ

1.        On 5 June 2019, I granted an application for preliminary discovery (see Pesec v Consolidated Builders Pty Ltd [2019] ACTSC 142 (Pesec) and indicated that I would hear from the parties as to the appropriate costs orders to be made in respect of the application, with the issue to be determined on the papers.  Knowledge of the reasons for granting preliminary discovery has been assumed in the reasons that follow.

2.        The parties have now each filed submissions on costs.  The plaintiff, Mr Pesec, has sought his costs of the application.  The defendant seeks that the plaintiff pay its costs. 

Plaintiff’s submissions

3.        The plaintiff submits that the defendant’s opposition to the application was unreasonable and necessitated the requirement to file an application for preliminary discovery.

4.        The plaintiff argued that he sought the documents (in respect of which production was ordered) well prior to filing the application and that at no stage was there any objection as to the purported cause of action.  Instead, the plaintiff asserts the correspondence went unanswered or was non-responsive.

5.        The plaintiff’s submissions focused on the timing of the defendant’s objection to the proposed causes of action, which it says was first raised only on 17 May 2019, in submissions filed shortly before the hearing of the application.  The argument was that the necessity to bring the application was unrelated to the defendant’s objections in relation to the causes of action upon which the plaintiff relied.

6.        If the Court were against that argument, the plaintiff submitted that the Court could not be satisfied that the defendant would have consented to the application at any stage, given its previous failure to engage in any dialogue on the question of production.  

Defendant’s submissions

7.        The defendant submitted that the defendant had not contested the first two of the four causes of action on which the plaintiff relied to found his application for preliminary discovery, and that the Court had rejected the fourth cause of action relied upon, so that the plaintiff truly only succeeded in respect of one of four causes of action, being the ‘Third Claim’.

8.        With respect to the one cause of action that was contested and on which the plaintiff was successful (being the Third Claim), the plaintiff abandoned the claim as it had been framed in the application.  The plaintiff then reformulated the claim during the hearing in reply submissions, meaning the defendant had no opportunity to properly consider the claim as reformulated, or advance evidence or argument to meet the reformulated claim.

9.        Even when it was found that the Third Claim as articulated met the low hurdle necessary to ground an application for preliminary discovery, the categories of documents that were sought were found to be too broad, and a more limited form of discovery was ordered.

10.      In such circumstances, not only would it be inappropriate to visit any costs on the defendant, but it is appropriate for the plaintiff to pay the defendant’s costs.

Consideration

11.      Costs are in the discretion of the court and are compensatory.  Although it may seem that the plaintiff was successful because orders were made for discovery of certain categories of documents, the reality is that the orders made in part reflected agreement between the parties (due to the defendant not contesting certain issues) and in part were made after a change in argument belatedly raised by the plaintiff in relation to the Third Claim, once it was clear that the primary argument on that cause of action had no foundation.

12.      The arguments upon which the plaintiff had relied, up to and even during the hearing, were either abandoned or were rejected.  That is, to the extent that the application as initially identified was contested, the plaintiff was unsuccessful, as he failed to establish either the Third Claim or the Fourth Claim as presented to the Court.  Further, after the Third Claim was reformulated, the documents in respect of which discovery was ordered were more limited than those being sought by the plaintiff.

13.      As to the submission that the defendant’s conduct was unreasonable, the plaintiff has overlooked that he bore the onus in respect of the application. Having read the prior correspondence, the limited basis on which the plaintiff ultimately succeeded, being discovery in respect of the reformulated Third Claim, was not properly articulated in any of the earlier correspondence leading to the application.  In any event, it was not the stated basis for the application as filed. 

14.      It is difficult to argue that the defendant should have acted differently prior to the bringing of the application when the defendant only knew of the totality of the four causes of action relied upon by reading the affidavit evidence filed by the plaintiff.  The defendant raised its objections when it had the opportunity, namely when it filed submissions in accordance with the orders of the Court. 

15.      It was not for the defendant to trawl through prior correspondence in an attempt to divine potential causes of action that might be relied upon by the plaintiff to give rise to the asserted need to seek discovery.  Rather, the defendant was entitled to respond to the application as filed and argued. 

16.      As referred to in Pesec, the plaintiff’s position changed repeatedly during the argument before the Court, with the plaintiff abandoning the key plank of the Third Claim (fraudulent design), and reframing the argument at the hearing once it became apparent that the remaining aspect of the claim that had been identified (a constructive trust) was not a cause of action, but rather a form of relief.

17.      Contrary to the plaintiff’s submission, had the Third Claim been properly articulated when the application was filed, and appropriate consideration given to the scope of documents reasonably necessary to assist with determining whether to commence proceedings in respect the Third Claim, the defendant may have taken an entirely different attitude, as is evident from the fact that it did not contest that there was a reasonable basis for either of the first two causes of action relied upon and indeed agreed to produce the documents requested.

18.      For those reasons, there was no unreasonable conduct on the part of the defendant in respect of the Third Claim, or at all.

19.      In light of the foregoing, it would be unjust for the defendant to have to pay the plaintiff’s costs.  The question is whether the plaintiff should pay any of the defendant’s costs.

20.      The defendant did devote resources to addressing the claims that were initially articulated, and to the extent that those claims were abandoned or amended by the plaintiff, such costs were wasted. 

21.      As a matter of procedure, a plaintiff who fails to properly set out the basis for the application, and then amends the basis during oral argument, should not be in a better position than a party who properly sets out the grounds in the application and then is required to formally amend the application.  In the latter case, the plaintiff may be ordered to pay the costs thrown away by the amendments. 

22.      In my view, an equivalent order is appropriate here.  Because of the lateness of the change in argument, the wasted costs incurred includes a substantial portion of the hearing and the preparation for it.  However, as there was no clearly severable issue, given the nature and duration of the application, the better course is to express the position in terms of a percentage, based on impression rather than mathematical precision.

23.      The plaintiff has obtained some documents through the bringing of the application, and this fact should be reflected in the costs order by not requiring the plaintiff to pay the entirety of the defendant’s costs.  Otherwise, the defendant should be compensated for the costs incurred in defending arguments which were unsuccessful.

Conclusion

24.      For the above reasons, I consider the just exercise of the discretion is to order that the plaintiff pay 75% of the defendant’s costs of the application.  The defendant submitted that it would again be appropriate for the Court to order that, as with the costs of production dealt with in the application for preliminary discovery, any costs of the application itself that are payable should be subject to any further order of the Court in the event that the plaintiff does commence proceedings.  I agree.

25.      The orders of the Court are as follows:

(1)  The plaintiff is to pay 75% of the defendant’s costs of the application.

(2)  The costs referred to in Order 1 are to abide by any further order made in subsequent proceedings, on any cause of action alleged to have arisen out of the information contained in the documents in respect of which preliminary discovery has been ordered.

I certify that the preceding twenty-five [25] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam

Associate:

Date: 17 June 2019