Pizza Fellas Pty Ltd v Eat Now Pty Ltd (No 2)
[2017] VSC 296
•1 June 2017
| IN THE SUPREME COURT OF VICTORIA[1] | Not Restricted |
[1]See Pizza Fellas Pty Ltd v Eat Now Pty Ltd [2017] VSC 226; [2017] VCAT 589, [5].
AT MELBOURNE
VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
CIVIL CLAIMS LIST
VCAT Reference No: C4345/2015
| PIZZA FELLAS PTY LTD (ACN 116 619 713) | Applicant |
| v | |
| EAT NOW PTY LD (ACN 138 659 588) and MENULOG PTY LTD (ACN 120 943 615) | First Respondent Second Respondent |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Written submissions (all parties — 19 May 2017) |
DATE OF JUDGMENT: | 1 June 2017 |
CASE MAY BE CITED AS: | Pizza Fellas Pty Ltd v Eat Now Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 296; [2017] VCAT 786 |
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PRACTICE AND PROCEDURE – VCAT – Application for costs – Costs thrown away – Extent of “damnification” – VCAT Act 1998, s 109 – Martin v Fasham Johnson [2007] VSC 54; Earnshaw v Loy (No 2) [1959] VR 252.
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APPEARANCES (at previous hearing): | Counsel | Solicitors |
| For the Applicant | I. Martindale QC with J. Samargis | Lennon Mazzeo Lawyers |
| For the Defendants | E. Heerey QC with E. Moon | Clifford Chance Sydney via Hall + Wilcox Melbourne |
HIS HONOUR:
Background
On 5 May 2017, I published reasons with respect to applications by the Respondents for summary dismissal of the Applicant’s claim pursuant to ss 75 and 78 of the Victorian Civil and Administrative Tribunal Act 1998 (“the Act”) and for payment of the Respondents’ costs of the proceeding pursuant to s 109 of the Act.[2] As set out in those reasons, the application for summary dismissal was not successful, but I did express preliminary views in relation to costs issues, on the following basis:[3]
6During the hearing of 21 April 2017, I indicated to the parties that I would hear further submissions on the Respondents’ application for costs prior to making a final determination. In order to minimise the unfortunate expenditure of further costs in disputes over costs, I nonetheless express my views on this issue in the hope that this will enable this question to be resolved by agreement, or at least by a more efficient determination at a later date. Consequently, while these reasons express my final decision on the questions of whether to grant leave to file the PFAPOC and whether to summarily dismiss the Applicant’s claim, my views on the question of costs are preliminary. Thus it is open for parties to make further submissions on the issue of costs if they are of the view that there are further matters which will disturb my present preliminary conclusions on this issue.
[2]Pizza Fellas Pty Ltd v Eat Now Pty Ltd [2017] VSC 226; [2017] VCAT 589 (“Reasons”).
[3]Reasons, [6].
On this basis, I expressed my views on the costs issue:[4]
[4]Reasons, [29]–[32].
29In s 109(1) of the Act, the starting point is that each party is to bear their own costs. Section 109(2) empowers the Tribunal to make a costs order and s 109(3) restricts the circumstances in which such an order may be made, relevantly providing:
(3)The Tribunal may make an order under subsection (2) only if satisfied that it is fair to do so, having regard to—
(a)whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as—
(i)failing to comply with an order or direction of the Tribunal without reasonable excuse;
(ii)failing to comply with this Act, the regulations, the rules or an enabling enactment;
(iii)asking for an adjournment as a result of (i) or (ii);
(iv)causing an adjournment;
(v)attempting to deceive another party or the Tribunal;
(vi)vexatiously conducting the proceeding;
(b)whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding;
(c)the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law;
(d)the nature and complexity of the proceeding;
(e)any other matter the Tribunal considers relevant.
30In Martin v Fasham Johnson Pty Ltd, Bell J provided a helpful introduction to the award of costs under the Act:[5]
The Tribunal’s costs discretion is broad in scope. It is subject to the express statutory requirements of ss 109(1)–(3), 111 (and 78(2)(c)). The considerations relevant to the exercise of the discretion may be discerned from the subject matter, scope and purpose of these provisions, interpreted in the context of the Act as a whole. The discretion must be exercised judicially, which means the Tribunal must act fairly, impartially and by reference to relevant considerations and not arbitrarily, capriciously or by reference to irrelevant considerations and not in a manner that frustrates the legislative intent.
[citations omitted]
31In the circumstances, I am satisfied that it is fair to order that the Applicant pay the Respondents’ costs. The Applicant has, as indicated above, failed to comply with orders of the Tribunal without reasonable excuse. It has, by the conduct outlined in [3], caused adjournments. But most importantly, it has been responsible for prolonging unreasonably the time taken to complete the proceeding. These proceedings have been on foot since 1 September 2015 and the points of claim are yet to be finalised. Before me, the Applicant has failed to produce satisfactory points of claim on two occasions, despite the most helpful and constructive criticism of opposing counsel. In the most recent pleading, entirely new claims were introduced and it may be that the whole or much of work done thus far by the Respondent is thrown away. The Applicant has dismissed six firms of solicitors and has currently engaged a seventh. In doing so, the Applicant has incurred legal costs of over half a million dollars, undoubtedly causing similar expenditure by the Respondent. What is more, it was not until August 2016 that the Applicant obtained the expert report of Dr Brent Coker which is now the basis for the quantification of the vast majority of its loss. Given Dr Coker’s apparent lack of accounting expertise, it is possible that the Applicant may seek to adduce further expert evidence. Consequently, in view of these circumstances and the broader picture recounted above at [3], I am satisfied that it is appropriate to make an order for costs.
32Under s 109(6) of the Act, the Tribunal may require that a costs order be complied with before the proceeding continues. Given the basis for making the costs order is essentially the failure of the Applicant to properly pursue its claim, I am satisfied that it is in the interests of justice to require costs to be taxed and paid forthwith, with the proceedings stayed until the completion of that process.
[5]Martin v Fasham Johnson [2007] VSC 54, [27].
The parties did choose to make further submissions on the issue of costs — the Applicant in Applicant’s Submissions on Costs (19 May 2017) (“Applicant’s Submissions”) and the Respondents in Respondents’ Supplementary Submissions — Proposed Costs Order (19 May 2017) (“Respondents’ Submissions”). The parties agreed that no further hearing was required and that the costs issues should be determined on the basis of these written submissions.
Positions of the parties
Significantly in the present context, the Applicant did not seek to resist a costs order, but submitted that it should be of more limited scope than that sought by the Respondents.
Thus, the Applicant submitted that the appropriate order in the exercise of VCAT’s discretion would be that:[6]
The Applicant pay the Respondents’ costs of the application made by it on 3 March 2017, and the costs of and incidental to the application made by it on 21 April 2017, and the costs thrown away by reason of the amendment for which leave is given by these orders.
(“the Applicant’s proposed order”)
[6]Applicant’s Submissions, [2].
In summary, the basis for the Applicant’s submissions with respect to the Applicant’s proposed order is as follows:[7]
3.Having regard to the matters set out in s 109(2) of the VCAT Act[8] and the statement of principle made by Bell J in Martin v Fasham Johnston Pty Ltd[9] the Applicant does not contend that an order for costs should not be made under s 109. The Applicant contends that an order should not be made in terms of the proposed order.
4.The proposed order will require the Applicant to pay costs that, if the discretion were being exercised after judgment for the Applicant, the Applicant, being successful, ordinarily would not be required to pay (ie those costs generally described in paragraph 1(a) above). After judgment, a successful party is not ordinarily required to pay the losing party’s costs in whole or in part.
[7]Applicant’s Submissions, [3], [4].
[8]Reasons, [29].
[9][2007] VSC 54, [35]; Reasons, [30].
The Respondents, on the other hand, seek orders in broader terms, namely that:[10]
[10]Respondents’ Proposed Orders (19 May 2017), [2], [3].
2.The Applicant pay the Respondents’ costs of and incidental to these proceedings save:
(a)in relation to the costs of and incidental to the applicant’s Application for Directions Hearing or Orders filed on or about 31 December 2015, which remain reserved; and
(b)where such costs have been paid pursuant to a previous order of this Tribunal,
to be taxed by the Costs Court in default of agreement, on a standard basis under the Supreme Court scale, with such costs to be taxed and paid forthwith.
3.The proceedings be stayed pending taxation and payment of the costs referred to in paragraph 2.
In addition to their written and oral submissions addressed at the hearing on 5 May 2017 and in the Reasons, the Respondents’ rely, particularly, in support of their submissions on the costs issue, upon the matters set out in paragraphs 31 to 38 of the Reasons—the nub of which is, in the present context, contained in paragraphs 31 and 32, which are set out above.[11]
[11]See above, [2].
The Respondents’ Submissions also rehearse the matters raised generally or more particularly at the 5 May hearing;[12] matters which are also in more general and, in some instances, dealt with in more particular terms in the Reasons. To the extent that these submissions might appear to be canvassing indemnity costs issues—given the reference to paragraphs 33 to 37 of the Reasons—in their submissions, I should make it clear that nothing now raised in those submissions causes me to depart from my view that there is no sufficient basis to order indemnity costs. Coming back to the primary basis of the Respondents’ position, they submit:[13]
[12]Respondents’ Submissions, [8]–[34].
[13]Respondents’ Submissions, [35]–[37].
35.The Tribunal has a broad discretion in making the costs order.[14] Given:
[14]See generally Jason Pizer and Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 5th ed, 2015) [VCAT.109.40].
(a)the applicant has withdrawn claims in respect of franchise restaurants and unauthorised discounts and reduced significantly the quantum of other claims, being the refund of commissions paid, lost gross margin and restoring customer volumes; and
(b)the applicant has failed to produce a satisfactory further amended points of claim,
the Tribunal ought to infer that the substantial majority of the costs incurred by the respondents to date have been wasted. In that case, the respondents submit that the Tribunal should order the applicant to pay its costs of the proceedings (excluding the injunction application) because:
(c)of the insoluble difficulty on a taxation of costs in awarding payment of some but not other costs;[15]
(d)the applicant has not served the further amended points of claim on which it intends to rely;
(e)accordingly, until the applicant files and serves its further amended points of claim, the costs which are thrown away are not capable of being identified; and
(f)the comments of the applicant’s Senior Counsel (as set out above) that interlocutory processes will, effectively, have to start again.
36.To do otherwise (as the applicant proposes), and award costs in respect of some, but not all, of the applicant’s claims or the respondents’ various Tribunal appearances, may create extreme difficulties for both the applicant and the respondents in the taxation of those costs. The Costs Court would be asked to speculate as to the final form further amended points of claim to be filed and served by the applicant once the stay is lifted. This is obviously unsatisfactory.
37.The Tribunal has found that it is fair that the applicant pay the respondents’ costs. In the whole of the circumstances of the case, but particularly because the applicant is starting again after 20 months in which significant costs have been incurred and because the applicant has not yet filed its further amended points of claim, it is appropriate that the applicant pay the whole of the respondents’ costs. It does not matter that not all of the respondents’ costs will be thrown away, if and when the applicant finally serves its further amended points of claim, because it is fairer, and in the interests of justice, that the applicant is ordered to pay those costs to the respondents. Put another way, even if the applicant gets its house in order and succeeds in its claim against the respondents, given its conduct of the proceedings to date, it is still fair that the applicant pay the respondents’ costs (save in relation to the injunction application).
[15]See generally Jason Pizer and Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 5th ed, 2015), 608; A K Fruend Pty Ltd v Kameel Pty Ltd [2004] VCAT 1336, [48] (Macnamara DP).
The difference between the party positions—having regard to the Applicant’s concession as to costs liability[16]—is that the Applicant says that the broad costs order proposed would indemnify the Respondents beyond their “damnification”:[17]
[16]See above, [4].
[17]Applicant’s Submissions, [5]–[11].
5.Dal Pont[18] cites a statement of principle made by Bramwell B in Harold v Smith[19] for the proposition that costs are given by the law as an indemnity to the person entitled to them and not as a punishment on the party who pays them, nor as a bonus to the party who receives them. Bramwell B says “[t]herefore if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained”.
[18]G E Dal Pont, Law of Costs (LexisNexis Butterworths, 1st ed, 2003) (“Dal Pont 2003”) [see now G E Dal Pont, Law of Costs (LexisNexis Butterworths, 3rd ed, 2013) (“Dal Pont 2013”)].
[19](1860) 5 H&N 381, 385; 157 ER 1229, 1231: set out at Dal Pont 2003, 213 [7.8] [Dal Pont 2013, 161 [7.5]].
6.The proposed order will either be punitive of the Applicant or give a bonus to the Respondents to the extent that it requires the Applicant to indemnify the Respondents beyond their “damnification” — that is to say, requires the Applicant to indemnify the Respondents in respect of costs that they would have incurred in any event, regardless of the conduct enlivening the power to award costs under s 109 of the VCAT Act.
7.The proposed order requires consideration of the principles on which courts and tribunals act to order a successful party to pay the unsuccessful party’s costs in whole or in part. These principles are engaged because the proceeding is continuing and the Applicant may be the successful party. The proposed order would not be fair now if it would not be made after judgment for the Applicant at trial.
8.Dal Pont says “[t]here is now jurisdiction to order a successful party, even a wholly successful party and whether plaintiff or defendant, to pay his or her opponent’s costs in part or in whole, although as an exercise of discretion the court will not do so other than … in very exceptional circumstances.”[20]
9.Dal Pont cites Earnshaw v Loy (No 2)[21] as illustrative of the circumstances in which a successful plaintiff was ordered to pay part of the defendant’s costs. In that case, the circumstances included that the plaintiff had succeeded but the verdict was contemptuous,[22] that the plaintiff had made a large and exaggerated claim, that the plaintiff had unnecessarily increased the defendant’s costs by having sued in the Supreme Court,[23] and had raised issues that extended the trial to more than twice the length it would otherwise have had,[24] on which he had lost.[25]
10.In those circumstances Sholl J ordered the successful plaintiff to pay half the defendant’s costs.
11.The effect of the plaintiff’s conduct in Earnshaw v Loy (No 2) was known and could be determined by the court.
[emphasis omitted]
Reference is also made to Alginates (Australia) Pty Ltd v Thompson & Carroll Pty Ltd.[26] Moreover, it is said that VCAT has already declined to order costs in favour of the Respondents[27] and that the Applicant’s conduct since July 2016 does not justify the proposed order.[28]
[20]Dal Pont 2003, 263 [8.48] [contra Dal Pont 2013, 233 [8.62] “The courts have jurisdiction to order a successful party, whether plaintiff or defendant, to pay an opponent’s costs in part or in whole, and judicial remarks that premise its exercise on proof of ‘exceptional’ circumstances should not be viewed as an attempt to alter the discretionary character of such decisions” (citations omitted)].
[21][1959] VR 252.
[22][1959] VR 252 at 253.
[23][1959] VR 252 at 256.
[24]Five days in fact when it should have been only two days: [1959] VR 252 at 257.
[25][1959] VR 252 at 255–6.
[26][1970] VR 570, esp at 575 (Smith J).
[27]Applicant’s Submissions, [16], [17].
[28]Applicant’s Submissions, [18], [20].
As to the latter, nothing in the Applicant’s Submissions—directed to post July 2016 or any other period—causes me to depart from previously expressed views, in the Reasons or otherwise, as to the unsatisfactory conduct of those proceedings. In any event, the Applicant has conceded a basis for a costs order under s 109.
Conclusions
For the preceding reasons, there is no basis, in my opinion, for taking any different view from that expressed in the Reasons for a costs order against the Applicant and on the scale rate indicated in those reasons.
The points raised in the Applicant’s Submissions in relation to a costs order going no further than addressing the extent of “damnification” are well taken. Clearly, costs orders are not a punishment but a means of doing justice between the parties. It follows that the justice to be done here is to compensate the Respondents for costs thrown away as a result of recasting—and in a very unsatisfactory manner at that—by the Applicant of its claim, as previously discussed in the Reasons.
In the present circumstances, the ultimate result of this proceeding is unknown and that does, naturally, affect the nature and extent of costs orders appropriate at this time.
It is, however, clear that as a result of the examination of and the recasting of the Applicant’s case in the hearings before me and the steps necessarily taken to deal with the pleadings deficiencies, extra costs have been, or will be, incurred—costs thrown away with respect to work done since the commencement of the VCAT proceedings in 2015 and costs which will be incurred in the future. The latter must, of course, be considered when the outcome of the proceeding is known, but the former are now wasted as a result of the Applicant’s conduct of the proceedings.
Having regard to the history of this matter, it is, in my view, entirely appropriate that all costs thrown away in these proceedings—since their commencement—be assessed and paid forthwith. In my view, this is to do justice to the parties, particularly the Respondents, which should not have to suffer any delay in being compensated for costs thrown away as a result of the Applicant’s conduct of these proceedings. Moreover, this is not a position dependent upon the ultimate outcome of the proceedings. Even if the Applicant were successful, the injustice would have been done to the Respondents in meeting the cost of now pointless work. This is the feature which distinguishes the present situation from the authorities relied upon by the Applicant. However, it should also be observed that a broader costs order, as sought by the Respondents, would not, in my view, do justice between the parties as it would more than compensate the Respondents—beyond their “damnification”.
In this respect, the fact that VCAT may or may not have made costs orders previously is not relevant to this approach, as the costs position with respect to costs now thrown away is, and can only be, assessed in light of the outcome of the hearings before me. Obviously though, there must not be any “double counting” and costs orders already made must be allowed by the Respondents as a “credit” in the assessment of costs payable now by the Applicant. In any event, these are now matters for the Costs Court, which is to assess, settle, tax and, if necessary, review costs.[29]
[29]Victorian Civil and Administrative Tribunal Act 1998, s 111(b).
Finally, having regard to the manner in which these proceedings have been conducted, it is entirely appropriate that no further steps be taken in the proceedings until these costs are assessed and paid.
The parties are to bring in orders to give effect to these reasons.
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