Robby Gordon Entertainment v CAMS (Indemnity Costs)
[2019] VSC 167
•15 March 2019
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT | Not Restricted |
S ECI 2018 1579
| ROBBY GORDON ENTERTAINMENT/SST INC (ARBN 611 263 542) | Plaintiff |
| v | |
| CONFEDERATION OF AUSTRALIAN MOTOR SPORT LTD | Defendant |
---
JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 March 2019 |
DATE OF JUDGMENT: | 15 March 2019 |
CASE MAY BE CITED AS: | Robby Gordon Entertainment v CAMS (Indemnity Costs) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 167 |
---
COSTS – Indemnity Costs – Whether costs should be taxed on an indemnity basis – Whether the Court should order indemnity costs by reason of the terms of a written Agreement between the parties – Whether, in the discretion of the Court, other factors related to the plaintiff’s conduct in the proceeding warrant an order for indemnity costs – Supreme Court (General Civil Procedure) Rules 2015 r 63.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | The plaintiff did not appear but provided written submissions by email on 6 March 2019 | |
| For the Defendant | Mr E Batrouney | Maddocks |
HIS HONOUR:
Background — plaintiff’s application filed 1 October 2018 and subsequent interlocutory events
Robby Gordon Entertainment/SST Inc (plaintiff) served the Confederation of Australian Motor Sport Limited (defendant or CAMS) with a Writ (dated 27 September 2018) and Summons (dated 1 October 2018) both filed 1 October 2018. The plaintiff’s Summons sought an urgent interlocutory injunction requiring the defendant, CAMS, to withdraw a suspension notice issued by CAMS in respect of the plaintiff on 8 May 2018, pursuant to cl 12 of the Competition Management Agreement between the plaintiff and the defendant dated 20 February 2018 (CAMS Agreement). The suspension notice referred to had the effect of preventing the plaintiff from racing its ‘Super Truck’ vehicles at the event referred to below, scheduled for 19-21 October 2018.
The withdrawal or removal of the suspension notice would have allowed the plaintiff to participate in the Vodafone Gold Coast 600 event held between 19-21 October 2018.
The application was heard on 5, 10 and 11 October 2018. On 11 October 2018 I refused the above injunctive relief sought by the plaintiff,[1] and ordered that the plaintiff pay the defendant’s costs of and associated with the plaintiff’s Summons filed 1 October 2018, on a standard basis.
[1]Robby Gordon Entertainment v Confederation of Australian Motor Sport [2018] VSC 600 (Judgment).
On 21 December 2018, the plaintiff filed a Notice of Discontinuance in the proceeding commenced by its Writ dated 27 September 2018.
Parties to the proceeding
CAMS has been the governing body of motor sport in Australia since it was established in 1953.[2] The Director of Racing Operations, Mr Timothy Schenken, describes CAMS as having two core functions: one facilitating the license and approval of various categories of races taking place in Australia, and the other taking responsibility for the provision of facilities at, and the conduct of, such events with a view to ensuring the safety of all participants, officials, referees and spectators.[3]
[2]Affidavit of Timothy Schenken, 4 October 2018, [20].
[3]Ibid [21].
CAMS is affiliated with the Federation Internationale de l'Automobile (FIA). The FIA is a not-for-profit association founded in 1904 which serves as the governing body for world motor sport. It is the federation of the world's leading motoring organisations. The FIA is principally concerned with safety in motor sport, including spectators, volunteers, race team members and the competitors themselves.
Since about 1960, CAMS has been recognised by the FIA as the National Sporting Association governing motor sport in Australia. Essentially, CAMS trains and licences marshals and officials to ensure safety at motor sport events in Australia. While CAMS owns the commercial rights to motor sport in Australia by virtue of its position as a National Sporting Association, in practice it sublicenses those rights to third parties (such as the plaintiff).
The principal of the plaintiff, Mr Robert W Gordon, is an American race car driver. The plaintiff is incorporated in the United States of America and registered as a foreign corporation in Australia. The plaintiff, it is said, created a category of vehicles known as 'SPEED Energy Stadium SUPER Trucks', in response to what it describes as 'the public's overwhelming interest in trucks and off-road racing in the United States'.[4]
[4] Affidavit of Nathan Cayzer, 27 September 2018, [6].
The Application — defendant’s application filed 13 February 2019
By Amended Summons dated 13 February 2019 the applicant/defendant now seeks the following:
(a) that paragraph [2] of the orders made 11 October 2018, being that costs be paid on a standard basis, be set aside; and
(b) an order that the plaintiff pay the defendant’s costs of and incidental to the proceeding, including the costs of the plaintiff’s Summons dated 1 October 2018, on an indemnity basis.[5]
[5]The costs of the plaintiff’s Summons dated 1 October 2018 is the subject of the cost order referred to in paragraph [3] above.
Further on 7 March 2019, during the course of its oral submissions in an exchange prompted by the Court, the defendant clarified that if it did not succeed on its application for indemnity costs, then in the alternative it sought the costs of and incidental to the proceeding, and the costs of its Amended Summons dated 13 February 2019, on a standard basis.
The Parties’ Submissions
Defendant’s Submissions
The applicant/defendant submitted that:
(a) on 21 December 2018, the plaintiff’s solicitors, Hall & Wilcox, filed a Notice of Discontinuance and notified the defendant that it no longer held instructions to act, and that any further correspondence be sent directly to the plaintiff;
(b) cl 12(d) of the CAMS Agreement provides CAMS with an indemnity for, ‘any costs and expenses’ incurred in connection with a notice of suspension. Clause 12(d) provides:
Where CAMS suspends the Series Managers rights in relation to this Agreement under clause 12(a), the Series Manager must indemnify CAMS in respect of any actual:
i.any cost or expense suffered by CAMS as a result of the suspension; and
ii.loss or damage suffered by CAMS as a result of any claim by any third party arising out of the suspension
unless the Series Manager proves that CAMS was acting in bad faith at the time it issued the notice of suspension and did not have reasonable grounds to issue a notice of suspension. (Emphasis added);
(c) cl 12(d) demonstrates a clear intention that legal costs incurred by CAMS in connection with a suspension notice should be awarded on an indemnity basis;
(d) there is no discretionary factor which militates against awarding costs otherwise than in accordance with what was expressly agreed between the parties;[6]
[6]MIS Funding No 1 Pty Ltd v Buckley (No 2) [2013] VSC 702, [2].
(e) an agreement to pay costs will be construed as an agreement to pay costs on a standard basis, unless it is plain from its terms that costs are to be paid on a ‘special basis’.[7] In instances where a contract between the parties provides in plain and unambiguous language that the costs of litigation are to be paid on a basis other than standard, the Court may, in the exercise of its discretion, award costs on that other basis;[8]
[7]Chen & Anor v Keven McNamara & Sons Pty Ltd [2012] VSCA 22, [8].
[8]Abigroup Limited v Sandtara Pty Ltd [2002] NSWCA 45, [17]; Chen & Anor v Keven McNamara & Sons Pty Ltd [2012] VSCA 229, [8]-[13]; MIS Funding No 1 Pty Ltd v Buckley (No2) [2013] VSC 702, [2].
(f) in Taree Pty Ltd v Bob Jane Corp Ltd,[9] Vickery J held that it is ‘firmly established’ where a contractual right to costs exists the discretion to award costs will ordinarily be exercised to reflect the contractual right;
[9][2008] VSC 228, [43].
(g) the plaintiff's application for an injunction failed, ‘on all three bases’, including because it failed to demonstrate a serious question to be tried;
(h) the plaintiff unilaterally withdrew the proceeding without prosecuting any substantive claim;
(i) at the time the plaintiff withdrew the proceeding, the plaintiff's Australian solicitors ceased to act for the plaintiff and no other Australian lawyer has been engaged;
(j) an email sent to the Court on 30 January 2019, by the plaintiff's American lawyer was, ‘at best, discourteous and disrespectful of the Court and its processes’;
(k) the authorities cited by the applicant support the conclusion that a clause like cl 12(d) of the CAMS Agreement provides a basis for an order for indemnity costs.
Plaintiff’s Submissions
In an email sent to the Court on 6 March 2019, the plaintiff submitted that:
(a) it rejects the defendant's claim for indemnity costs as a result of the defendant's, ‘material breach and fraudulent inducement’ and misrepresentations;
(b) the defendant fraudulently induced the plaintiff into entering the CAMS Agreement executed 20 February 2018;
(c) the defendant's actions, misconduct and multiple breaches of the CAMS Agreement have resulted in the plaintiff’s loss of millions of dollars;
(d) the defendant failed to adhere to the express terms of the CAMS Agreement and published defamatory and slanderous statements about the plaintiff;
(e) the amount claimed by the defendant is excessive;
(f) the CAMS Agreement expressly provides for non-exclusive jurisdiction dispute resolution terms, including the United States Federal District Court;
(g) the plaintiff intends to seek damages from the defendant in the United States District Court for fraud, breach of contract, unfair business practices, unfair competition and trade libel.
The legal principles
The standard basis of costs allows for all costs reasonably incurred and of a reasonable amount.[10]
[10]Supreme Court (General Civil Procedure) Rules 2015 r 63.30.
Whether to award costs to a party other than on the usual basis, that is, on an indemnity basis, is at the discretion of the Court.[11] However the exercise of the Court's discretion to award costs, other than on the standard basis, is exceptional and is generally reserved for cases such as where the losing party has engaged in unmeritorious or deliberately high-handed or other improper conduct such as to warrant the Court’s disapproval and concomitantly so as to prevent the successful party from being kept out of pocket.[12]
[11]Ibid r 63.28.
[12]Australian Guarantee Corp Ltd v De Jager [1984] VR 483 at 502; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24; such cases may include clear instances of breaches of a parties’ obligations under the Civil Procedure Act 2010 (Vic).
In Ugly Tribe Co Pty Ltd v Sikola,[13] Harper J stated, not exhaustively, a number of circumstances which may relevantly be characterised as ‘special circumstances’ which may give rise to an order for indemnity costs, namely:
[13][2001] VSC 189 at 7.
(a) the making of an allegation, known to be false, that the opposite party is guilty of fraud;
(b) the making of an irrelevant allegation of fraud;
(c) conduct which causes loss of time to the Court and to other parties;
(d) the commencement or continuation of proceedings for an ulterior motive;
(e) conduct which amounts to a contempt of Court;
(f) the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law; and
(g) the failure until after the commencement of the trial, and without explanation, to discover documents, the timely discovery of which would have considerably shortened and very possibly avoided, the trial.[14]
[14]For more recent cases to Ugly Tribe see; GT Corp Pty LTY v Amare Safety Pty Ltd [2008] VSC 296; see also Vink v Tuckwell (No 3) [2008] VSC 316.
The existence of an agreement between the parties which itself reflects their consensus that relevant legal costs will be paid on a special basis may give rise to an exercise of discretion to order the recovery of higher than standard levels of legal cost recovery, including indemnity costs.
However, other considerations aside and in relation to the effect of an agreement in that regard, Courts will only ordinarily depart from a party-party or standard basis for legal cost recovery if there is ‘plain and unambiguous’ language in a relevant agreement between the parties which demonstrates that the parties intended that costs would be recovered on a special basis. In Chen v Kevin McNamara & Son Pty Ltd,[15] Redlich JA of the Victorian Court of Appeal held:
An agreement to pay costs as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a ‘special basis’. Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. [16]
[15][2012] VSCA 229.
[16]Ibid [8] (emphasis added).
The above approach is consistent with the remarks of Vickery J in Taree Pty Ltd v Bob Jane Corporation:[17]
It is well established that a mortgagee may rely upon its contractual entitlement to costs so as to claim an order other than on a party/party basis…the prima facie rule was that costs were awarded on a party/party basis unless some alternative basis was shown ‘either on some well-recognised principle, or under some contract plainly and unambiguously expressed’…even where a contractual term for the payment of costs on a basis other than the usual party and party basis exists and is expressed in plain and unambiguous language, the Court continues to have a discretion in relation to making orders for the payment of such costs.
[17][2008] VSC 228.
Evaluation
Clause 12(d) of the CAMS Agreement states that the Series Manager, must indemnify CAMS in respect of any actual:
(a) any cost or expense suffered by CAMS as a result of the suspension; and
(b) loss or damage suffered by CAMS as a result of any claim by any third party arising out of the suspension.
Notwithstanding the words ‘costs or expense’ no express reference is made to legal costs.
I reject the defendant's submission that cl 12(d) demonstrates an intention by the parties that legal costs incurred by CAMS in connection with the suspension notice should be awarded on an indemnity basis.
I consider that the language employed by the parties in cl 12(d)(i) of the CAMS Agreement is intended to address the cost and expense which might be suffered by CAMS resulting from having to suspend the Series Manager’s rights, principally to race in CAMS’ controlled events.
It can be readily envisaged that CAMS’ exercise of its powers to suspend might result in CAMS suffering cost or expense in relation to, for example, loss of revenue or expenses in respect of an event or series of events unexpectedly suspended.
However, I do not consider it likely that the parties intended that a cost, or expense as a result of such a suspension would extend to the cost or expense incurred by CAMS in prosecuting or defending legal proceedings in connection with a disputed suspension. If there was such an intent by the parties it would have been a simple matter for the parties to expressly refer in cl 12(d)(i) to the recovery of legal costs associated with a suspension by CAMS which was imposed on a Series Manager. There is no express plain and unambiguous language to that effect nor in my view is there any proper basis upon which to infer such an intent.
Further, in my view it is supportive of the above construction of cl 12(d)(i), that cl 12(d)(ii) of the CAMS Agreement expressly deals with another species of claim, namely a ‘third party claim’ arising out of a suspension. In this respect the parties have in their agreement in cl 12(d)(ii), addressed to some degree, the topic of a claim, including a legal claim, which a third party might make arising out of a suspension. Without intending to decide the matter, it may well be that cl 12(d)(ii) extends to indemnify CAMS in relation to a third party ‘claim’ and legal costs associated with such a third party claim. The parties have not gone so far in respect of the CAMS Agreement in cl 12(d)(i) to indemnify CAMS as a result of suspension.[18]
[18]A similar position obtains in relation to the two subjects of indemnity agreed in cl 13.3(iv).
Further, in relation to this particular case, I am unpersuaded as to the assistance to be derived from the authorities cited by the applicant/defendant. In my view the particular language of cl 12(d) of the subject CAMS Agreement is quite distinct from, and materially different to, the language used in the clauses referred to in those authorities, including in particular the language used in the agreement considered in Abigroup Limited v Sandtara Pty Ltd.[19]
[19][2002] NSWCA 45, [5].
The defendant also submits that there is no discretionary factor which militates against awarding costs, otherwise that in accordance with what was expressly agreed between the parties.
For the reasons I have earlier referred to, I do not accept that the parties have expressly agreed that in the instant situation CAMS’ costs of defending a challenge to its exercise of power to suspend under the CAMS Agreement entitles CAMS to an award of costs in such a proceeding, or entitles CAMS to such costs on an indemnity basis.
Therefore, reverting to the usual footing, any discretionary factor is to be evaluated in the usual setting, and here the discretionary factors identified by the defendant as supporting an order for indemnity costs, are wanting.
I also reject the defendant’s submission that the plaintiff’s application for an injunction failed on all three bases including because it failed to demonstrate a serious question to be tried. The plaintiff’s application for an injunction did fail, however that outcome was not on the basis that it was unarguable or forlorn for the plaintiff to contend that a relevant serious issue could be identified, but rather that on all relevant considerations the plaintiff had failed to demonstrate the existence of a serious question to be tried. Here the former may have supported an order for costs on an indemnity basis; however, the latter conclusion, in the circumstances, does not.
Finally, in relation to the factors which the defendant argues should justify an indemnity cost order, I can see no reasonable basis upon which to conclude that the plaintiff’s lawyers’ email communication of 30 January 2019 is discourteous or disrespectful of the Court or its processes.
I also reject the defendant’s submission that costs should be awarded on an indemnity basis as a result of the plaintiff unilaterally withdrawing the proceeding without prosecuting any substantive claim.
The plaintiff’s discontinuance was unexceptional and carried with it a cost consequence provided for by the Rules of this Court. That action by the plaintiff does not in itself, or overall in this instance, justify an exceptional costs order.
Neither in the circumstances does the conduct of the plaintiff’s former solicitors withdrawing and no legal representatives taking their place, provide any proper basis for an exceptional costs order.
As to the general matters raised by the plaintiff in its email of 6 March 2019, I am unassisted by this communication because of its generality and because of the plaintiff’s failure to explain and prosecute the connection and relevance of the general matters raised with any matter relevant to the subject exercise of discretion.
Conclusion
Accordingly, for the above reasons I consider that the proper course is to refuse the defendant’s application for indemnity costs and order that costs be paid by the plaintiff on a standard basis.
Orders
I order that:
1.The defendant’s Amended Summons dated 13 February 2019 be dismissed with no order as to costs.[20]
[20]The defendant’s Amended Summons dated 13 February 2019 and its Submissions dated 4 March 2019 sought payment by the plaintiff of the costs of and incidental to the proceeding on an indemnity basis, and that the cost order made on 11 October 2018, be set aside. Those applications by Amended Summons dated 13 February 2019, were wholly unsuccessful. The focus, and defendant’s legal effort, in relation to its application by Amended Summons dated 13 February 2019 was in relation to obtaining an order for indemnity costs from the plaintiff.
2.The plaintiff pay the defendant’s costs of and incidental to the proceeding on a standard basis.
0
4
0