Raedel & Raedel v Shahin (No 2) - [2018] SASC 119

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RAEDEL & RAEDEL v SHAHIN (NO 2)
[2018] SASC 119
Judgment of The Honourable Justice Hinton
31 August 2018
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - GENERAL PRINCIPLES AND EXERCISE OF DISCRETION
Applications by both parties for costs following orders for the reinstatement of the lapsed appeals in actions SCCIV-1117 of 2017 and SCCIV-1118 of 2017.
The appellants contended in view of their success on the applications for reinstatement that there was no reason to depart from the general rule that costs follow the event. In addition the respondent’s opposition to the applications was never likely to succeed.
The respondent contended that the applications were filed because of the appellants’ inaction. Nothing done by the respondent contributed to this. The appellants’ had no option but to seek an indulgence from the court. In addition it was submitted that the respondent’s opposition to the applications was reasonable.
Held:
1. The appellants to pay the respondent’s costs of the applications on a party-party basis to be taxed if not agreed.
Supreme Court Act 1935 (SA), s 40; Supreme Court Civil Rules 2006 (SA), r 263, referred to.
Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors [2013] SASCFC 105; Lyons v Legalese (No 2) [2017] SASC 2; Golski v Kirk (1987) 72 ALR 443; Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd (in liq) and Anor (No 3) [2013] SASC 107; Riv-Oland Marble Co (Vic) Pty Ltd v Settef SPA (1989) 63 ALJR 519, applied.

RAEDEL & RAEDEL v SHAHIN (NO 2)
[2018] SASC 119
Civil.

HINTON J: On 10 July 2018, on the applications of the appellants, I ordered that the lapsed appeals in actions SCCIV-1117 of 2017 and SCCIV-1118 of 2017 be re-instated over the opposition of the respondent. Both parties now seek an order that the other pay their costs occasioned by those applications. I order that the appellants pay the respondent’s costs of the applications on a party-party basis to be taxed if not agreed. My reasons, which must be read in the light of, and together with, those given in allowing the applications for reinstatement, follow.[1]
[1] Raedel and Raedel v Shahin [2018] SASC 95.
Section 40 of the Supreme Court Act 1935(SA) (SCA) vests a broad power in this Court to award costs. Section 40(1) provides:
40—Power of court with regard to costs
(1)Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
Nothing express in the SCA, nor in the rules of the court made pursuant to the rule making power contained in s 72 of the SCA, fetters the broad discretion to award costs conferred by s 40.
As to the rules, rule 263 SCCR provides:
263—Court's discretion as to costs
(1)As a general rule, costs follow the event.
(2)The general rule is, however, subject to specific rules to the contrary¹ and also to the following exceptions (which apply subject to the Court's order to the contrary) –
(a)     the costs of an amendment are to be awarded against the party making the amendment;
(b)     the costs of an application to extend time fixed by or under these Rules are to be awarded against the applicant;
(c)     the costs of an application that should have been (but was not) made at an earlier stage of the proceedings are to be awarded against the applicant;
(d)     the costs of an adjournment arising from a party's default are to be awarded against the party in default;
(e)     the costs of proving a fact or document that a party has unreasonably failed to admit are to be awarded against that party;
(f)    in an action founded on a claim for defamation, general costs of action are not to be awarded in favour of the successful plaintiff unless the damages exceed $50,000;
(g)     in an action founded on a claim for damages or any other monetary sum (other than a claim for defamation), general costs of action are not to be awarded in favour of the successful plaintiff unless the amount awarded exceeds $120,000.
Example—
For example, the special provisions as to costs where a party fails to accept an offer of settlement and the amount obtained by judgment does not exceed the amount of the offer (see rule 188).
Two observations should be made here; first, the general rule as stated in rule 263(1) is exactly that, the general rule. So framed the rule does not purport to fetter the discretion conferred by s 40 SCA. Second, to the extent that rule 263(2) purports to prescribe a number of exceptions to the general rule, its impact upon the discretion conferred by s 40 SCA is dictated by the extent to which the general rule does so. In short, neither rule fetters the broad discretion conferred by s 40. As much has been held by the Full Court.[2] There is good reason for this; an unfettered discretion allows the Court flexibility to do justice in all cases.[3] That said, both the general rule and the exceptions referred to in rule 263(2) SCCR reflect relevant factors calling for those outcomes. In relation to the general rule:[4]
It is settled that costs are compensatory in nature and are awarded “to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings” and not by way of punishment of the unsuccessful party. Three points should be made here; first, the party in whose favour an award of costs is made is compensated for work done or expenses incurred by their lawyers or persons working for their lawyers and not for their loss more generally. Second, whilst it is true that a costs order is not intended to punish, costs may be awarded on a ‘solicitor and client’ or ‘indemnity basis’ if the unsuccessful party engages in some “relevant delinquency”. Costs awarded on a ‘solicitor and client’ or ‘indemnity basis’ result in the successful party being “more fully or adequately compensated”. Third, the power contained in s 40 SCA is not confined to making an award of costs against a party. The power may be exercised adverse to a non-party.
Once it is accepted that an order for costs is compensatory in nature two things follow. First, the outcome of the proceedings becomes the primary consideration in the exercise of the discretion as it identifies who is to be compensated. Second, the general rule subject of r 263(1) necessarily becomes “a relevant consideration in any exercise of the discretion in relation to costs”.
Fairness and policy dictate that it is the successful party who ordinarily should be compensated. An order in terms of the general rule is ordinarily fair because if the proceedings had not been brought the successful party would not have incurred costs. From a policy perspective the sobering effect that the potential liability for costs has on would be litigants contributes to discouraging unnecessary litigation. That, in turn, eases the burden on scarce judicial resources, and prevents angst more generally. The same sobering effect encourages responsibility in the conduct of litigation. This is not to contend that a court in exercising the discretion contained in s 40 SCA should factor in some sort of general deterrent component. But, as McHugh J commented in Oshlack v Richmond River Council, it highlights the risk associated with the “[l]arge scale disregard of the principle of the usual order as to costs”.
(footnotes omitted)
[2]    Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors [2013] SASCFC 105 at [58] (Stanley J, with whom Gray and Sulan JJ agreed).
[3]    See Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 at 975 quoted with approval in Oshlack v Richmond River Council (1998) 193 CLR 72 at [32] (Gaudron and Gummow JJ). See also Norbis v Norbis (1986) 161 CLR 513 at 519 (Mason and Deane JJ); Latoudis v Casey (1990) 170 CLR 534 at 541-2 (Mason J), 558 (Dawson J).
[4]    Lyons v Legalese (No 2) [2017] SASC 2.
In the present case the appellants embrace this line of reasoning. They applied for the reinstatement of the appeals and, over the opposition of the respondent, succeeded.
The respondent points to the fact that the applications had to be made by the appellants because they allowed the appeals to lapse. Nothing done by the respondent contributed to this. The appellants were required to seek an indulgence because of their own inaction. In such circumstances the respondent contends that he should be awarded his costs.
In support of his application the respondent refers to the judgment of the Full Court of the Federal Court in Golski v Kirk (Golski) where Beaumont J, with whom Kelly J agreed on this point, said:[5]
…Costs are, of course, discretionary, and it will only be in rare cases that leave to appeal from a decision to award costs will be granted. There is nothing extraordinary about the order for costs made by Miles CJ. On the contrary, it is usual for a party seeking an indulgence to pay the costs of the application, especially where, as here, the application throws up a difficult legal question. …
[5] (1987) 72 ALR 443 at 457.
Golski was a case concerning an application for leave to amend a statement of claim that was opposed by the defendant-cum-appellant on the grounds that the proposed amendment was in effect an additional cause of action which, due to the relevant limitation period, was time barred. The plaintiff-cum-respondent succeeded in persuading Miles CJ that the amendment did not amount to a fresh cause of action. However, despite granting the application the Chief Justice ordered that the plaintiff pay the defendant’s costs of the application. That is, the failed opposition to the application did not disentitle the defendant to its costs of the application. As the passage from the judgment of Beaumont J reproduced above indicates, permission to appeal the costs order was refused by the Full Court.
The rationale expressed by Beaumont J may be said to underpin rule 263(2)(a), (b) and (c) SCCR. To similar effect in Oshlack v Richmond River Council McHugh J, with whom Brennan CJ agreed, said:[6]
The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
“Misconduct” in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
(footnotes omitted)
[6] (1998) 193 CLR 72 at [69].
I do not understand Gaudron and Gummow JJ in Oshlack v Richmond River Council to qualify this principle.[7]
[7] (1998) 193 CLR 72 at [40]-[42].
In Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd (in liq) and Anor (No 3) (Riviera)[8] Nicholson J considered the “usual principle” as relevant to an award of costs in an action for relief against forfeiture. In exercising the discretion conferred by s 40 of the SCA to award costs Nicholson J said:
The position, with respect, is well summarised by Campbell J in Nardell Coal Corp (in liq) v Hunter Valley Coal Processing:
Sometimes a statute which confers on a Court power to alter what would otherwise be people’s rights expressly provides that the person who seeks such alteration is to pay the costs, unless the Court otherwise orders — for example section 88K(3) Conveyancing Act 1919 (NSW), re the Court creating an easement.
However, even if, as is the case in section 419A(7) Corporations Act 2001, there is no such express statutory provision concerning costs, it is usual for a party seeking an indulgence to pay the costs of the application: Golski v Kirk (1987) 14 FCR 143 at 157; Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158 at 160. But, it is not an invariable rule. In Langley v Foster (1909) 10 SR(NSW) 54 at 62 A H Simpson CJ in Eq said, concerning costs in an application for relief against forfeiture of a lease:
By coming into Equity to ask for relief against forfeiture, and by paragraph 6 of the Statement of Claim, the plaintiff admits he has committed a breach of covenant, and asks the Court to relieve him against forfeiture. Prima facie one of the terms imposed should be the payment of all costs, for the plaintiff’s own breach of his agreement has given rise to the litigation. This has accordingly been made a term in Quilter v Mapleson (9 QBD 672); Mitchison v Thompson (1 Cab & E 72); Bond v Freke ([1884] WN 47); and Bridge v Quick (67 LT 54). On the other hand this is not a hard and fast rule, for, if it were, a lessor might always oppose relief being granted knowing he would always get his costs from the lessee. If the Court thinks the lessor ought not to have opposed in toto the grant of relief from forfeiture, the Court may make the lessor pay the costs so far as they have been increased by the lessor resisting the claim to relief on any terms: Howard v Fanshawe ([1895] 2 Ch 581, 592); Humphreys v Morten ([1905] 1 Ch 739). But the Court may make, and has in one case at any rate made, the lessee pay all the costs, notwithstanding the lessor contested his claim to relief at all; Quilter v Mapleson (supra). It is a question for the Court’s discretion in each case.
That passage was quoted and applied in Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 at 9256.
The usual principle, that the person seeking the indulgence pays the costs, might be inappropriate in the circumstances of a particular case. Thus, where a party who opposed relief lost, but had raised issues which were more extensive than was reasonable, the party who obtained the indulgence was ordered to pay only a proportion of the costs of that person: Re Freightlines Northern Territory Pty Ltd (In liq) [1999] QSC 209 at [29]-[31]; (2000) 2 Qd R 384 at 392 (applicant seeking registration of charge out of time); Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 at 9256 (applicant seeking relief against forfeiture). Indeed, if the opposition to a grant of indulgence is unreasonable, intransigent and thorough, the person who opposes the granting of the indulgence might be ordered to pay all the costs of the person seeking it: Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158.
[8] [2013] SASC 107.
The respondent submitted that his opposition to the application was reasonable given an absence of authority on SCCR 296. In particular it was reasonably arguable that the appellant was required to demonstrate special reasons for the reinstatement of an appeal under rule 296(2). Further the respondent submitted that in the absence of the appellants providing any explanation for their failure to meet the time limits set by the rules prior to the hearing of the applications and revealing nothing that could amount to a special reason, his approach to the applications was reasonable.
The appellants submit that none of the exceptions contained in rule 263(2) apply to an application for the reinstatement of an appeal. The general rule that costs follow the event remains applicable. The appellants add that not only was the respondent unsuccessful, but his opposition to the applications was never likely to succeed. In this regard the appellants noted the injustice that would follow from the appellants being denied a relatively short extension of time in which to advance their appeals, particularly in the absence of any significant prejudice to the respondents.
Further the appellant submits that the respondent should be denied his costs because through his counsel he conceded that he was aware that s 48 of the Limitations of Actions Act 1936 (SA) and the decision of Calvaresi & Rota Forma Pty Ltd v Lawson & Lawson[9] was relevant to the Court’s resolution of the application.
[9] (1995) LSJS 147.
In the present case the applications for reinstatement were necessitated by the appellants’ default in complying with the rules. As I indicated in my primary reasons in referring to Riv-Oland Marble Co (Vic) Pty Ltd v Settef SPA[10], it is the duty of solicitors to familiarise themselves with the rules of court and to observe them.[11] As much is necessary to the efficient administration of the court’s business. It should also be observed that the orders made by the trial court are in no sense conditional. Ordinarily the orders quelling the controversy are intended to apply immediately and the parties entitled and required to order their affairs accordingly. If one party appeals, and may appeal as of right, the other party has the right to expect the appeal to be prosecuted expeditiously. In the circumstances, I agree with the respondent that the appellants should not benefit from their delinquency by way of an award of costs and accordingly refuse the appellants’ applications.
[10] (1989) 63 ALJR 519.
[11] Raedel and Raedel v Shahin [2018] SASC 95 at [72]-[73].
I make plain here that in refusing the appellants’ applications for costs I am satisfied that it is appropriate to deal with the parties’ applications and that the question of the costs of the reinstatement applications should not be left as costs in the cause. The reinstatement applications may be considered separate and distinct to the substantive proceedings to which they relate.
The more difficult question is whether the respondent’s application should be granted. The respondent advised the appellants very early in the piece that he was of the view that they needed to establish special reasons before the appeals could be reinstated. I consider the argument advanced by the respondent in relation to the construction of rule 296(2) SCCR reasonably arguable. That said, I agree with the appellants that, absent any requirement for special reasons, their prospects of success were significant. Still I do not think the respondent can be criticised for mounting the argument that under rule 296(2) SCCR the appellants were required to establish special reasons before the appeals could be reinstated in an endeavour to retain the benefit of the orders made by the trial judge.
I turn to the question of the respondent’s knowledge of s 48 of the Limitations of Actions Act 1936 (SA). It was conceded that counsel for the respondent had given thought to an argument opposing the application of s 48 in the event that the appellants sought to invoke that power. In fact the view was taken that s 48 did not apply. I do not know when in the course of preparing for the applications this occurred. Nor do I know to what extent counsel had prepared a considered argument or entertained and researched the possibility that they were wrong. Counsel said:
It was not something that we had considered as a ground, it’s not something that we thought was part of the application, it was not something that was agitated and there was no law raised by the appellant that dealt with any case under the Limitation of Actions Act. However, because I have read widely I was aware that in some old cases there was an argument in different circumstances under the Limitation of Actions Act but they weren’t similar to this and it was not something that was before you or before us or raised with us.
In my primary reasons I refer to Calveresi and Rota Forma Pty Ltd v Lawson and Lawson.[12] I did not understand the concession made by counsel to necessarily include knowledge of that case specifically nor the counter argument to address that case. The respondent’s position had long been that special reasons needed to be established as was made plain in correspondence passing between solicitors. My impression is that that view focussed the minds of counsel on both sides and appears to have framed the dispute causing all at the Bar table to concentrate their resources on that question. Counsel for the respondent do not appear to have given the possible application of s 48 such close consideration that it occurred to them that they may have been duty bound to draw the Court’s attention to the Limitation of Actions Act 1936. I have not been pressed to inquire into the matter beyond considering counsel for the respondent’s concession. I note that, on the resumption of consideration of the question of costs, the appellants made no submission that the respondent’s knowledge of s 48 was disentitling. That submission was belatedly made in written submissions after the hearing. In the circumstances I do not think that the possible application of s 48 and counsel for the respondent’s awareness of it should disentitle the respondent to an award of costs. Here it must also be remembered that I did not determine the question of whether s 48 applied in my primary reasons and neither party has been heard on the issue. It would be wrong then to consider awarding costs on the assumption that the issue is necessarily foreclosed. Many a clear case has turned out to be far from clear.[13]
[12] (1985) 184 LSJS 147.
[13] John v Rees [1970] Ch 345 at 402 (Megarry J).

In my primary reasons I have accepted that the respondent has been inconvenienced and occasioned cost both personal and monetary as a result of the appellants’ delay. I also accept that the explanation for the appellants’ delay was not made clear to the respondent prior to the applications being made, but I do not think this carries much weight. It surely must have been obvious to the respondent that the appellants were intent on pursuing their appeals, albeit without seeming urgency, particularly having regard to the associated proceedings and arrangements made for interim measures to be taken in the light of the trial judge’s orders pending the outcome of the appeal.
In the end this is a case where through no fault of the respondent the appellants were required to seek an indulgence from the Court due to their failure to comply with the rules of court. I do not consider anything in the respondent’s conduct to detract from that position. I am not persuaded that the respondent’s opposition to the applications or conduct more generally disentitles him to an award of costs. Even though the respondent unsuccessfully opposed the applications, in my view it would be inappropriate to order that the parties bear their own costs. The fact is, the time and expense incurred by the parties as a consequence of the applications could have been avoided had the appellants complied with the rules or applied at the appropriate time for any extension of time. I consider it appropriate that the appellants pay the respondent’s costs of the applications on a party-party basis such costs to be taxed if not agreed.