Preston v Nikolaidis (No 2)

[2021] NSWSC 174

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Preston v Nikolaidis (No 2) [2021] NSWSC 174

Hearing dates:

On the papers. Written submissions received on 16 February and 2 March 2021.

Date of orders:

3 March 2021

Decision date:

03 March 2021

Jurisdiction:

Equity - Applications List

Before:

Williams J

Decision:

Order that the plaintiff pay the defendants’ costs of and incidental to the plaintiff’s application for leave to file the verified pleading on an indemnity basis.

Catchwords:

COSTS – indemnity basis – no issue of principle

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Uniform Civil Procedure Rules 2005 (NSW), rr 36.15, 36.16(3), 42.2

Cases Cited:

Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No. 2) [2009] NSWCA 12

CG Maloney Pty Ltd v Noon [2011] NSWCA 397

Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397

Oshlack v Richmond River Council (1998) 193 CLR 72

Preston v Nikolaidis [2021] NSWSC 36

Preston v Preston [1982] 1 All ER

Category:

Costs

Parties:

In proceeding 1993/23395:
John Preston (First Plaintiff/Applicant)
Western Suburbs Constructions Pty Ltd (formerly Preston Erections Pty Limited) (Second Plaintiff)
Leon Nikolaidis in his capacity as the executor of the estate of the late Mitrofanis Demetrius Nikolaidis (First Defendant/First Respondent)
Leon Nikolaidis trading as M.D. Nikolaidis & Co (Second Defendant/Second Respondent)
Michael Zwar (Third Defendant/Third Respondent)

In proceedings 2015/331795 and 2018/96873:
John Preston (Plaintiff)
Leon Nikolaidis (First Defendant)
Michael Zwar (Second Defendant)

Representation:

In proceeding 1993/23395:

Counsel:
Mr B Zipser (First Plaintiff/Applicant)
Mr T S Hale SC with Mr J Svehla (Defendants/Respondents)

Solicitors:
Livingstone & Company Lawyers (First Plaintiff/Applicant)
Diamond Conway Lawyers (Defendants/Respondents)

In proceedings 2015/331795 and 2018/96873:

Counsel:
Mr B Zipser (Plaintiff/)
Mr T S Hale SC with Mr J Svehla (Defendants)

Solicitors:
Livingstone & Company Lawyers (Plaintiff)
Diamond Conway Lawyers (Defendants)

File Number(s):

1993/23395; 2015/331795; 2018/96873

Publication restriction:

N/A

Judgment

Introduction

1. These reasons for judgment concern the costs of the plaintiff’s application for leave to file a verified pleading dated 17 September 2019 in proceeding 1993/23395 (the Motion). On 2 February 2021, I gave judgment dismissing that application on the grounds that:

1. the doctrine of Anshun estoppel precluded the plaintiff from pursuing certain claims in the verified pleading;

2. the verified pleading was an abuse of process; and

3. the plaintiff’s claims in the verified pleading were so obviously untenable that they could not possibly succeed.

2. These reasons assume familiarity with that principal judgment: Preston v Nikolaidis [2021] NSWSC 36 (the principal judgment).

3. I concluded in the principle judgment that the plaintiff should pay the defendants’ costs of the Motion, but deferred making any such costs order pending a hearing on the papers of the defendants’ contention that their costs should be paid on an indemnity basis rather than on the ordinary basis. I made directions for the defendants to file and serve written submissions in support of their application for an order for indemnity costs by 16 February 2021 and for the plaintiff to file and serve any submissions in reply by 23 February 2021. The defendants filed and served submissions in accordance with these directions. The plaintiffs filed and served submissions on 2 March 2021.

Applicable principles

4. Under s 98 of the Civil Procedure Act 2005 (NSW) and r 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the Court has discretion to order an unsuccessful party to pay the successful party’s costs of proceedings or an application within proceedings on an indemnity basis. The principles governing the exercise of that discretion are well established. The discretion may be exercised where the circumstances are sufficiently “special” or “unusual” to warrant departing from the usual order for costs on the ordinary basis, or there has been “some relevant delinquency” on the part of the unsuccessful party in the conduct of the proceeding: see Oshlack v Richmond River Council (1998) 193 CLR 72 at [44] (Gaudron and Gummow JJ); Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202 at 400-401.

5. Each case turns on its own particular facts.

6. In Colgate Palmolive Co v Cussons Pty Ltd, supra, Sheppard J considered it useful to note examples of circumstances which had attracted the exercise of the discretion to award indemnity costs in previous cases (at 233-234), including commencement or continuation of proceedings in wilful disregard of known facts or clearly established law and the making of allegations which ought never to have been made or undue prolongation of a case by groundless contentions.

7. The Court of Appeal recognised in CG Maloney Pty Ltd v Noon [2011] NSWCA 397 (at [112]-[122]) that, where an Anshun estoppel argument succeeded, this was “a relevant and powerful matter to take into account in exercising a discretion concerning costs” because “there has already been litigation about issues closely related to those in the proceedings in question, and the matter at issue in the proceedings in question was so relevant to the subject matter of a previous action that it would have been unreasonable not to rely on it.” The Court of Appeal stated that the relevance of this consideration to the exercise of the discretion in relation to costs was strengthened if the unsuccessful party’s case was a weak case in any event.

8. In Fountain Selected Meats, supra, Woodward J (at 401) referred to a case in which indemnity costs had been awarded because the pursuit of the action by the unsuccessful party had been found to be a “high-handed presumption”, and continued (my emphasis):

“No doubt the expression ‘high-handed presumption’ was appropriate in the case Tadgell J had to decided, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”

9. I emphasise that Woodward J was referring in this passage to cases where, considered objectively prior to the hearing of the proceedings, the unsuccessful party should have known that they had no chance of success. In this context, it is relevant to consider whether the circumstances prior to the hearing were such that any lawyer would necessarily have advised that there was no chance of success: see Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No. 2) [2009] NSWCA 12. The mere fact that, with the benefit of hindsight after reviewing the reasons for judgment, the unsuccessful party should have known that it was likely to lose, is not generally sufficient to warrant an order for indemnity costs.

10. The object of an indemnity costs order is not to punish the unsuccessful party, but to more fully compensate the successful party for its costs in the circumstances that have called for the exercise of the discretion: Oshlack v Richmond River Council, supra, at [44] (Gaudron and Gummow JJ).

Summary of the parties’ submissions

Defendants’ submissions

11. The defendants submitted that the plaintiff should be ordered to pay their costs of the application for leave to file the verified pleading for five reasons.

12. First, in circumstances where the plaintiff’s claims in the verified pleading were found to be so untenable that they could not possibly succeed, [1] the plaintiff should have known that he had no chance of success, assuming that he was properly advised.

    1. Principal judgment at [354]-[396].

13. Second, the refusal of leave to file the verified pleading on the grounds that it was an abuse of process is, [2] by itself, a sufficient basis for an order that the plaintiff pay the defendants’ costs on an indemnity basis.

    2. Principal judgment at [331]-[353].

14. Third, the refusal of leave to file the verified pleading on the grounds of Anshun estoppel is, [3] by itself, a sufficient basis for an order that the plaintiff pay the defendants’ costs on an indemnity basis.

    3. Principal judgment at [270]-[299].

15. Fourth, the court made significant adverse findings that the plaintiff’s conduct was unreasonable in not having pleaded the Dishonest Conduct Claims and the allegation made in paragraph 208 of the verified pleading prior to the dismissal of the accounting aspect of the 1993 proceeding on 28 February 1995. [4]

    4. Principle judgment at [280]-[296], [332] and [351].

16. Fifth, the defendants submit that these four reasons when taken together in the context of the procedural history of these proceedings, in particular the plaintiff’s history of failed applications to amend the proceedings, and the plaintiff’s position since 6 February 2018 being that he no longer seeks the delivery up of the files the subject of the lien and no longer intends to have the Bill of Costs assessed such that there no longer a purpose for keeping the proceedings alive, meets the threshold of a case where “there is some special or unusual feature in the case which would justify the court exercising its discretion in that way”: Preston v Preston [1982] 1 All ER at 58; principal judgment [11]-[123].

Plaintiff’s submissions

17. In relation to the defendants’ second and third reasons referred to above, the plaintiff submitted that the fact that his application for leave to file the verified pleading had been dismissed on abuse of process and Anshun estoppel grounds did not, without more, warrant an order for indemnity costs. Rather, it is necessary to identify some special or unusual feature of the case over and above the dismissal of the application on those grounds before departing from the usual course of ordering the plaintiff to pay the defendants’ costs on the ordinary basis.

18. The plaintiff emphasised that one of the defendants’ alleged grounds of abuse of process (illegitimate purpose) was rejected.

19. In relation to the ground of abuse of process on which the defendants succeeded (unjustifiable oppression and bringing the administration of justice into disrepute), the plaintiff submitted that there was a comparatively large amount of evidence before the court concerning these matters and his written submissions dated 17 June 2020 had advanced “respectable arguments against a finding of abuse of process”.

20. The plaintiff submitted that:

“Where the abuse of process arises from an improper use of court proceedings by a plaintiff, this may justify an indemnity costs order. But where the abuse of process turns on burdens on the defendant and the administration of justice, as in the present case, this does not involve improper conduct by the plaintiff which justifies an indemnity costs order.”

21. The plaintiff did not cite any authority for this general proposition, other than noting that the case referred to in the defendants’ submissions in which indemnity costs had been awarded against an unsuccessful party where the proceedings had been found to be an abuse of process involved a proceeding maintained for an ulterior purpose.

22. The plaintiff submitted that the defendants’ reliance on Anshun estoppel first emerged when the defendants served further written submissions some months after the hearing (in response to further submissions of the plaintiff). The plaintiff further submitted that his own submissions had raised respectable arguments concerning Anshun estoppel.

23. In relation to the defendants’ first reason referred to above, the plaintiff submitted that this was not a case in which he and his advisers must have known that he had no possibility of success in his application for leave to file the verified pleading. Where it cannot be said that an unsuccessful party did know or must have known that there was no chance of success (as opposed to should have known), caution should be exercised before awarding indemnity costs.

24. The plaintiff raised three matters in support of his submission that this was not a case in which he must or should have known that his application for leave to file the verified pleading had no chance of success.

25. First, the grounds of the defendants’ opposition to the plaintiff’s application for leave were not articulated until the defendants’ written submissions were served on the evening before the hearing of the application. As I have already referred to above, the defendants’ reliance on Anshun estoppel was not articulated until the defendants served further written submissions some months after the hearing (in response to further submissions of the plaintiff).

26. Second, the plaintiff submitted that the principal judgment suggested that his claims in the verified pleading to set aside previous adverse costs orders under r 36.16(3) of the UCPR were arguable.

27. Third, in relation to his claims under UCPR r 36.15(1), the plaintiff’s submissions in support of his application for leave to file the verified pleading did address the issue that there had been no new discovery of something material since the costs orders sought to be set aside were made. The plaintiff’s application for leave to file the verified pleading insofar as it pleaded claims under r 36.15(1) relied on the proposition that there was no clear Court of Appeal authority as to “whether the ‘new discovery of something material’ test applied to interlocutory judgments”.

28. In relation to the defendants’ fourth reason referred to at [15] above, the plaintiff submitted that the circumstances to be considered for the purpose of exercising the costs discretion are the circumstances that applied in the litigation process that is the subject of the costs order, and not circumstances prior to that process.

29. Finally, the plaintiff submitted that the matters raised by the defendants’ fifth reason referred to at [16] above are not relevant to the exercise of the costs discretion.

Consideration and determination

30. Applying the principles summarised at [4]-[10] above and having regard to the parties’ submissions, I consider that this is a case in which the discretion under s 98 of the Civil Procedure Act and UCPR, r 42.2 should be exercised to order the plaintiff to pay the defendants’ costs of and incidental to the plaintiff’s application for leave to file the verified pleading on an indemnity basis. My reasons are as follows.

31. I accept the plaintiff’s submission that it does not necessarily follow from the dismissal of a proceeding or application on the grounds of abuse of process or Anshun estoppel that the unsuccessful party should be ordered to pay the successful party’s costs on an indemnity basis. It is necessary to have regard to all of the circumstances of the case in determining whether they are sufficiently unusual or special to warrant a departure from the usual course of an order for costs on the ordinary basis. However, the fact that the dismissal has flowed from an abuse of process or the operation of the doctrine of Anshun estoppel will undoubtedly be relevant to the exercise of the costs discretion as the Court of Appeal recognised in CG Maloney v Noon, supra.

32. I reject the plaintiff’s submission that an indemnity costs order will not be warranted in any case where the unsuccessful party’s abuse of process consists of conduct that is oppressive to the successful party and/or brings the administration of justice into disrepute, as opposed to the use of the court’s process for an improper purpose. This submission seeks to impose a general constraint on the exercise of the costs discretion that, in my opinion, is unwarranted, finds no support in the authority and is contrary to the well-established approach that the exercise of the discretion to award indemnity costs turns on all of the relevant circumstances of the particular case.

33. In my opinion, this is a case in which the plaintiff should have known that his application for leave to file the verified pleading had no chance of success, and he has unduly prolonged these proceedings by seeking prosecute groundless claims to set aside previous costs orders.

34. The plaintiff had achieved substantial success in the proceedings on the limited basis determined by Slattery J in November 2017. Summarised in the briefest possible terms, what the plaintiff sought to do by seeking leave to file the verified pleading boiled down to this: the plaintiff won this case on a narrow basis. Had he not won on that basis, he says that he would have won on a different basis which it was not necessary for the Court to determine, and also on a basis that he never articulated during the course of the proceedings and/or on a basis that he conceded during the proceedings but he now wants to withdraw that concession. The plaintiff wishes to have the Court determine all of those matters (which are based on ancient factual allegations) so that he can now demonstrate that his commencement of these proceedings in 1993 was caused by the defendants’ wrongdoing. He says that he would not have incurred any costs in these proceedings at all but for that wrongdoing, and so all of the costs orders made against him reflecting his lack of success and his conduct of these proceedings at various stages since 1993 should be set aside. The sole purpose of the exercise was for the plaintiff to achieve a potentially better outcome in his application for an order that the defendants pay his costs of the proceedings in a gross sum: see principal judgment at [331]-[338]. The plaintiff, properly advised, should have known that that he had no chance of obtaining leave to file the verified pleading and embark on this exercise. If he did not know, this must be presumed to be attributable to wilful disregard of the effect that it would have on the administration of justice if the plaintiff were permitted to pursue the claims in the verified pleading. I do not consider that the plaintiff required the defendants’ submissions in opposition to the leave application in order to appreciate these matters.

35. Moreover, the claims to set aside the previous costs orders were so untenable that they could not possibly succeed for the reasons explained in the principal judgment at [354]-[396]. I reject the plaintiff’s submission that the principal judgment suggests that his claim under UCPR r 36.16(3) was arguable. I reached the opposite conclusion, despite assuming (in the plaintiff’s favour) that the factual allegations underpinning that claim were arguable. The factual allegations, if proved, did not give rise to a tenable argument that the interests of justice favoured the setting aside of the previous costs orders under r 36.15(1) or r 36.16(3) even assuming (again, in the plaintiff’s favour) that it was not necessary for the purpose of the claim under r 36.15(1) to demonstrate a new discovery of something material since the making of the costs orders in question: see principal judgment at [371]- [396].

36. It is the combination of the circumstances in [34] and [35] above that leads me to the conclusion that this case is sufficiently unusual or special to warrant an order for indemnity costs.

30. Although the refusal of leave to file the verified pleading on the grounds of Anshun estoppel would ordinarily be another factor that would weigh in favour of an indemnity costs order, I do not take that into account in this case having regard to the fact that the defendants raised Anshun estoppel only at the eleventh hour.

31. For completeness, I record that I do not consider that the fourth reason relied on by the defendants is an independent matter relevant to the exercise of the costs discretion. The unreasonableness of the plaintiff’s conduct was one of the matters that contributed to the conclusions that the claims in the verified pleading were an abuse of process and were precluded by the doctrine of Anshun estoppel.

32. The fifth reason relied on by the defendants amounted, in substance, to a complaint about the twists and turns that these proceedings have taken over the very long course of their history. To the extent that those twists and turns involved failed applications by the plaintiff, they have either already been the subject of costs orders or will be the subject of the parties’ submissions in relation to the remaining costs of the 1993 proceeding. [5] To the extent that they involve the plaintiffs’ abandonment of the costs assessment process commenced pursuant to orders made in the 1993 proceeding, that is a consequence of the very long delay in the costs assessment process and the plaintiff’s subsequent success in relation to the limitation issues determined by Slattery J in November 2017. The reasons for the delays attending the costs assessment are addressed in my recitation of the history of the proceedings in the principal judgment. As I remarked in the principal judgment, both parties bear responsibility for that delay. [6]

    5. See principal judgment at [100] and [403].

    6. See principal judgment at [322] and [331].

33. For those reasons, and for the reasons at [398]-[403] of the principal judgment, I make the following orders and notations:

Proceeding 1993/23395

1. Order that the defendants’ costs of and incidental to the notice of motion filed on 25 October 2019, including:

1. the costs of the notice of motion filed by the plaintiffs on 15 November 2018 and referred to in Preston v Nikolaidis [2021] NSWSC 36 at [105]; and

2. all points of claim or statements of claim served, or filed and served, by the plaintiff (whether in draft or final form) during the period between 15 November 2018 and 25 October 2019, including those referred to in Preston v Nikolaidis [2021] NSWSC 36 at [116]-[120],

be paid by the plaintiff on an indemnity basis.

2. Note that the matter is listed for directions at 9.00am on 5 March 2021 for the purpose recorded in order 8 made on 2 February 2021.

Proceeding 2015/331795

3. Note order 1 made in proceeding 1993/23395 on this date.

4. Note that the matter is listed for directions at 9.00am on 5 March 2021.

Proceeding 2018/96873

5. Note order 1 made in proceeding 1993/23395 on this date.

6. Note that the matter is listed for directions at 9.00am on 5 March 2021.

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Endnotes

Amendments

04 March 2021 - Formatting issue.

Decision last updated: 04 March 2021