Rolfe v Investec Bank (Australia) Ltd
[2013] VSCA 293
•18 October 2013
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2013 0002
| JAMES GEOFFREY ROLFE | Appellant |
| v | |
| INVESTEC BANK (AUSTRALIA) LIMITED (ACN 071 292 594) | Respondent |
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| JUDGES | OSBORN and SANTAMARIA JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 11 October 2013 |
| DATE OF JUDGMENT | 18 October 2013 |
| MEDIUM NEUTRAL CITATION | [2013] VSCA 293 |
| JUDGMENT APPEALED FROM | Rolfe v Investec Bank (Australia) Ltd & Ors [2012] VCC 2020 (Judge Kings) |
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APPLICATION ON SUMMONS
PRACTICE AND PROCEDURE - Security for costs – Special circumstance - Impecunious appellant – Delay in making application – Estimate of costs to be made by an experienced practitioner – Estimate must disclose matters upon which it is based and cost assigned to each of those matters – Applications may be renewed if initial order inadequate - Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 64.24(2).
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| Appearances: | Counsel | Solicitors |
| For the Appellant | Mr C R Northrop | Goldsmiths Lawyers |
| For the Respondent | Dr O Bigos | Arnold Bloch Leibler |
OSBORN JA:
I agree with the reasons of Santamaria JA.
SANTAMARIA JA:
Applications
These applications arose out of orders made 19 December 2012 by Judge Kings in the County Court pursuant to reasons delivered by her on that day after a trial lasting 11 days in February 2012.[1] In the orders, the claims of the present appellant were dismissed. By notice of appeal dated 2 January 2013, the appellant has appealed from the judgment given on 19 December 2012.
[1]Rolfe v Investec Bank (Australia) Ltd & Ors [2012] VCC 2020 (‘Reasons’).
Subsequently, his Honour Judge Saccardo heard submissions in respect of costs. On 27 June 2013, his Honour made orders in respect of the costs of the proceeding. His Honour rejected Investec’s argument that the appellant should be liable for the costs of Gadens Lawyers and Sutherland Farrelly. He also rejected an argument that the appellant should be liable for costs on an indemnity basis on the ground that he did not accept a Calderbank offer. Remaining questions of costs, it seems, have yet to be determined.
On 30 May 2013, the respondent filed a notice of contention.
By summons filed on 15 August 2013, the respondent seeks security for the costs of the appeal in the amount of $161,668.25 and an order that the appeal be stayed unless security is provided.
The application is supported by the following material.
Deponent Date sworn or affirmed Joseph Anthony Mazzeo 2 August 2013 Matthew David Lees 14 August 2013 Matthew David Lees 28 August 2013 Joseph Anthony Mazzeo 7 October 2013 Matthew David Lees 7 October 2013
Lees is the solicitor for the respondent. Mazzeo is its costs consultant.
The application is opposed by the following material.
Deponent Date sworn or affirmed Gary David Goldsmith 6 September 2013 Catherine Mary Dealehr 9 September 2013 Gary David Goldsmith 9 October 2013
Goldsmith is the solicitor for the appellant. Dealehr is his costs consultant.
The various claims in the County Court
The plaintiff (Rolfe) was a director of a company called James Rolfe Transport (Vic) Pty Ltd (JRT Vic). JRT Vic operated a container shipping business from premises at 363-367 Francis Street, Yarraville in Victoria (the premises). JRT Vic leased the premises from Glodale Pty Ltd (Glodale). Rolfe was also a director of Glodale.
The first defendant (Investec) was a bank which entered into a loan with Glodale. The loan was secured by a mortgage over the premises, a fixed and floating charge over the assets of JRT Vic, Glodale and a personal guarantee of Rolfe. Mr Andrew Hirst and Mr Michael Sack were the employees who managed the loan on behalf of Investec.
The second defendant (Gadens) was the firm of solicitors retained by Investec to advise it on the realisation of the security for the loan. Mr David Reichenberg was the partner at Gadens responsible for the file. He was assisted by Ms Karen McMaster.
The third defendant (Sutherland Farrelly) was the real estate agent for the sale of the premises. Mr Paul Sutherland was the agent responsible for handling the sale. He was assisted in the sale of the real property assets by Mr Paul Farrelly and Mr Grant Sutherland.
In 2002, Glodale defaulted on the loan agreement. Investec moved to realise the assets against which the loan was secured.
In 2009, Rolfe filed a Writ against Investec. Mr Rolfe alleged:
(a)that on or about 11 February 2003, Investec granted him consent to continue to store seven shipping containers (“the containers”) containing various chattels, including Porsche motor vehicles, car parts and personal chattels;
(b)the agreement was verbal and was entered into between himself and Ms McMaster, a solicitor at Gadens, in a telephone conversation on or about 11 February 2003; and
(c)there was an implied condition of the agreement that Investec would keep the containers safe and return them to him on demand.[2]
[2]Reasons [7].
Rolfe alleged causes of action in bailment, contract, negligence and misleading and deceptive conduct.
In the alternative, Rolfe alleged:
(a)that there was an agreement allowing him to store personal possessions on the premises by virtue of the fact that Sutherland Farrelly knew he was doing so and did not object;
(b)Investec knew he was storing the containers on the premises and did not request him to remove them; and
(c)that by virtue of enforcing the mortgage and taking possession of the land, Investec assumed responsibility for taking care of the containers and keeping them safe.[3]
[3]Reasons [9].
Rolfe also made a claim in detinue.
In March 2011, on the application of Investec, orders were made joining Gadens as second defendant and Sutherland Farrelly as third defendant. It seems that, on 22 March 2011, Investec filed and served a notice seeking contribution or indemnity from Gadens and Sutherland Farrelly.
In the event that Rolfe was successful, Investec alleged that Gadens and Sutherland Farrelly breached their retainers and their duty of care to Investec. As Rolfe was not successful, it is unnecessary to pursue the claims against Gadens and Sutherland Farrelly any further. On 24 April 2013, Investec’s claims for contribution and indemnity were dismissed.
The facts
In 2001, Glodale borrowed $11.8 million from Investec. The loan was secured by, amongst other things, a real property mortgage of the premises, a fixed and floating charge over the assets of JRT (Vic), and a personal guarantee given by Mr Rolfe.
By mid-2002, Glodale had defaulted on the loan. Investec retained Gadens.
On 14 January 2003, voluntary administrators (SimsPartners) were appointed by Rolfe to JRT (Vic) and took possession of the premises. On 10 February 2003, SimsPartners became the company’s liquidators. On 11 February 2003, Investec took possession of the premises under the mortgage.
On 20 February 2003, Dominions Auctioneers conducted an auction of JRT (Vic)’s assets at the premises. The goods that were sold were removed and the proceeds were paid to Investec, as secured creditor of JRT (Vic).
The third defendant, Sutherland Farrelly, a firm of estate agents, was appointed to market and sell the premises on behalf of Investec.
A contract of sale of land was entered into on 20 March 2003 with Jean’s Team Pty Ltd (Jean’s Team) owned by Mr Paul DeLutis. On 21 March 2003, Investec sent a letter to Rolfe advising that settlement was to take place on 19 May 2003. Settlement of the sale occurred on 19 May 2003. After settlement, Jean’s Team leased the premises to Maersk.
On 25 September 2003, Rolfe was declared bankrupt.
In November 2006, Rolfe was discharged from bankruptcy.
On 13 May 2009, Rolfe commenced this proceeding by filing a Writ which was served on Investec in May 2010.
On 30 July 2010, the plaintiff’s solicitor filed an affidavit exhibiting a deed of assignment from Rolfe’s trustee in bankruptcy assigning the cause of action, the subject of this proceeding, to Rolfe. It was accepted the deed of assignment was executed on 30 July 2010.
Rolfe alleged Investec knew and consented to the shipping containers remaining on the premises. In support of his allegation, he relied on three claims:
(a) First, that on or about 11 February 2003, he had a conversation with Ms McMaster. She agreed that he could store the containers at the premises.
(b) Second, that Sutherland Farrelly, by virtue of his facsimile dated 1 April 2003, knew that he stored personal property at the premises and did not request him to remove them.
(c) Third, that the presence of the containers on the premises after 11 February 2003 was conspicuous and known to Investec and Investec made no request of him to remove them.[4]
[4]Reasons [60].
The trial judge did not accept Rolfe’s account of his conversation with McMaster. Her conclusions were as follows:
[77] I concluded that Mr Rolfe’s evidence was confused, uncertain, inconsistent and unreliable. He could not be certain whether there was one or two conversations with Ms McMaster and he was unsure of whether he had referred to the Porsches or not.[5] I formed the view that his evidence was based not on actual recollections, but rather attempts to reconstruct what he believed must have happened based on contemporaneous records and the recollections of others. Accordingly, I formed the view that he was an unsatisfactory witness and I could only accept his evidence when supported by independent evidence. Such independent evidence was not available to the Court. There were no contemporaneous records of, or references to, the conversation. None of the contemporaneous correspondence prepared by Mr Rolfe mentions the alleged conversation; there is no file note of the conversation and no reference to it in the bill Gadens rendered to Investec.
[78] Consequently, I accept the evidence of Ms McMaster that there was no conversation with Mr Rolfe and there was no agreement as alleged under which she agreed to allow him to store his containers or goods on site.
[5]T126, L28; T135, L12.
In the alternative, Rolfe claimed that Sutherland Farrelly, by virtue of his facsimile dated 1 April 2003, knew that he stored personal property at the premises. He relied on a letter he alleged he sent by facsimile to Sutherland Farrelly dated 1 April 2003.
The trial judge did not accept that the letter was ever sent. She said:
[85] It was Mr Rolfe’s burden to prove that he sent the letter and he did not satisfy it. I accept the evidence of Paul Sutherland, Paul Farrelly and Grant Sutherland that the letter was not received. They were witnesses of truth. Their evidence was consistent with Mr Rolfe’s admission that he could not recall sending the letter and the lack of documentary records referring to the letter. Accordingly, I do not consider that Sutherland Farrelly had knowledge that Mr Rolfe was storing property at the premises by virtue of the facsimile of 1 April 2003. It follows that without knowledge, there can be no consent from Sutherland Farrelly for the containers to remain at the premises and no duty to Mr Rolfe in respect of the containers.
Finally, the trial judge made findings about Investec’s knowledge. She said
[93] Given all the evidence, I conclude that Investec did not know, nor did it consent to, Mr Rolfe storing the containers at the premises. Without the knowledge and consent of Investec, there can be no bailment relationship between it and Mr Rolfe. Given my findings, I do not propose to address the nature and extent of the duty owed in bailment or whether Investec breached the duty.
As a result, the trial judge dismissed the claims in bailment. She also dismissed the claims in negligence and in misleading and deceptive conduct.
Similarly, a claim that Investec had duties to Rolfe in respect of the containers when, as mortgagee it took possession of the premises, was dismissed on the basis that a mortgagee who takes possession is under no obligation to look after chattels left on premises pending their removal.
The claim in detinue was dismissed in the absence of any evidence that Investec was in possession of the containers.
In his notice of appeal, the appellant maintains only his claims in bailment and breach of mortgagee’s duty.
Jurisdiction
In the circumstances, it must be held that Rolfe is impecunious. The impecuniosity of an appellant has been held to be a ‘special circumstance’ within r 64.24(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).[6] The Court has jurisdiction to entertain this application.
[6]Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972; Maher v Commonwealth Bank of Australia [2008] VSCA 122, [78]-[81] (Redlich and Dodds-Streeton JJA); Abbie Li and Forever Young Pty Ltd v Herald and Weekly Times and Keith Moor (Unreported, Supreme Court of Victoria, Court of Appeal, Nettle and Redlich JJA, 25 July 2007).
Delay
Delay in the making of an application for security is a factor which can be taken into account in deciding whether or not to accede to the application.[7] In Smail v Burton,[8] Gillard J said:
First, it is well established that an application for security of costs should be made promptly. If an appellant has expended sums of money preparing the appeal for hearing and all the matters necessary to be performed have already been performed and the appeal is ready for hearing, it would be patently unjust to permit a respondent who stood by and allowed that work to be done to come to court and to ask for security after such expenses have been incurred. Accordingly, it is well established by authority that applications for security of costs should be made promptly and before considerable expense is incurred by the appellant.[9]
[7]Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301, 389; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744, [68]. On the significance of delay in the making of an application for security in respect of an application for special leave in the High Court, see Devenish v Jewel Food Stores Pty Ltd ( 1990) 64 ALJR 533.
[8][1975] VR 776.
[9]Ibid 777 (Newton and Norris JJ agreeing) (citations omitted).
The chronology is important. It may be summarized in the following table.
19 December 2012 Judgment and orders 2 January 2013 Notice of appeal 23 January 2013 Letter from Arnold Bloch Leibler to Goldsmiths Lawyers asking for security for the costs of the respondent for the appeal. 1 February 2013 Without prejudice letter re costs 11 April 2013 Directions given by Judicial Registrar for the preparation of the appeal. [10] Unspecified Without prejudice correspondence between the parties regarding security[11] 15 April 2013 Without prejudice letter re costs [12] 16 April 2013 Without prejudice letter re costs [13] 7 May 2013 Appeal Book filed (form rejected) 16 May 2013 Appeal Book re-filed (form accepted) 30 May 2013 Notice of contention 7 June 2013 Letter from Arnold Bloch Leibler to its costs consultant Mazzeo 23 June 2013 Letter from Arnold Bloch Leibler seeking security 27 June 2013 Judgment on costs 17 July 2013 Filing of summary for Court of Appeal 2 August 2013 Preparation and filing of Outline of submission on behalf of Appellant. 2 August 2013 Report of Mazzeo 15 August 2013 Summons applying for security 22 August 2013 Letter from Goldsmith Lawyers to its costs consultant Dealehr 4 September 2013 Report of Dealehr [10]In the order of the Judicial Registrar made on 11 April 2013, para 4 of Other Matters reads as follows: ‘The respondent advised that it was considering an application for security for costs’.
[11]See paras 5-6 of the third affidavit of Matthew David Lees sworn 7 October 2013.
[12]See para 4 of the second affidavit of Gary David Goldsmith sworn 9 October 2013.
[13]Ibid.
It is true that the respondent promptly raised with the appellant the question of security for its costs. A letter was sent on the subject on 23 January 2013. In that letter, the solicitors for the respondent, Arnold Bloch Leibler, sought the appellant’s consent to security for its client’s ‘costs of and incidental to the Appeal, such security to be provided in an amount and manner to be agreed or, failing such agreement by 8 February 2013, in an amount and manner as fixed by the Court’. In his first affidavit, Mr Lees says (para 19) that ‘there was no open response to’ that letter.
Again, on 11 April 2013, the issue of an application for security was mooted before the Judicial Registrar.
In his third affidavit sworn 7 October 2013, Mr Lees deposes that, following the directions hearing held 11 April 2013, there was ’further “without prejudice” correspondence between the parties regarding security for costs’.
In his affidavit sworn 6 September 2013, Mr Goldsmith, the solicitor for the appellant referred only to the letter of 23 January 2013 and to the application filed 15 August 2013. He made no reference to there being any ‘without prejudice’ correspondence on the matter. However, in his second affidavit, Mr Goldsmith said that there had been one ’without prejudice’ letter dated 1 February 2013, and 2 more on successive days in the middle of April 2013.
However, it was not until 15 August 2013 that any application was made. In the meantime the appellant had complied with the directions that had been made to prepare the appeal for hearing. The appeal books have been prepared. The appellant has filed his outline of submissions.[14] Nothing more needs to be done by the appellant. He has done all that is required of him pending the hearing of his appeal. It cannot be doubted that he has spent considerable costs in preparing the matter for hearing.
[14]In para 9 of his affidavit sworn 6 September 2013, Mr Goldsmith deposes that the appellant has incurred significant costs between January 2013 and August 2013. He points out that the appellant had filed and served his ‘outline of argument before the (respondent) made its application’.
I am conscious that there have been ‘without prejudice’ communications on the question of security. But, it seems that it was not until 7 June 2013 that any approach was made to Mazzeo for his estimate of costs, and, then, it was not until 10 July 2013 that Mr Mazzeo’s requisitions were satisfied.
Counsel for the respondent resisted the argument that delay should count against it by pointing to the fact that the appellant had not adduced any evidence that he had been prejudiced by any delay.[15] In response, counsel for the appellant said that the relevant consideration was delay; there was no requirement that an appellant show lack of prejudice. Second, he asked rhetorically what evidence could be led? Any evidence would necessarily be hypothetical and self-serving. An appellant will decide how to deploy personal resources in the circumstances that he or she faces; and, there is an unfairness if, retrospectively, the relevant matrix in which such decisions are made is changed.
[15]He referred to Ravi Nominees Pty Ltd v Phillips Fox (1992) 10 ACLC 1313, 1318; Dal Pont, Law of Costs (LexisNexis Butterworths, 2nd ed, 2003) 1051-1056.
Counsel for the appellant said that there was a difference between applications for security before trial and those on appeal. Not only were such applications regulated by different rules,[16] the principles that governed them were not identical. For example, security was rarely ordered against a natural person plaintiff before trial; but, after a claim has proved unsuccessful, security will more readily be ordered against such a litigant. In particular, applications in appeals had to be made promptly. Reference was made to Re Indian, Kingston and Sandhurst Mining Co,[17] Re William Henry Vagg,[18] Ellis v Stewart,[19] and Ryan v Johnston (No 1).[20]
[16]Supreme Court (General Civil Procedure) Rules 2005 (Vic): before trial, r 62.02; on appeal, r 64.24(2).
[17](1882) 22 Ch D 83.
[18](1887) 13 VLR 172, 184-185.
[19](1887) 35 Ch D 459.
[20][1940] VLR 17.
Counsel for the appellant contended that the appeal raised several questions of general importance relating to: the nature of the duty of a mortgagee in possession of real estate with respect to the mortgagor’s chattels on the real estate. The trial judge referred to Jones v Foley,[21] a decision made at a time when the duties of mortgagees in possession were more attenuated than they are now.
[21][1891] 1 QB 730.
I do not think that I need to determine whether the appeal will turn out to be a suitable case in which this question can be addressed. For present purposes, it will be enough to say that this question arguably arises. It cannot be held that the appeal is without merit and has no prospects of success.[22]
[22]In contending that the prospects of success in the appeal were low, counsel for the applicant also said that Rolfe did not have standing to maintain the appeal. He said that the appellant’s acquisition of title to sue from his former trustee in bankruptcy had not been effective to confer upon him title to sue; and, further, that the claim being made was the subject of a set-off which had extinguished it. Counsel for the appellant said that the mutuality necessary for a set-off was lacking as the debts did not arise out of the same dealing: the applicant was making its claim pursuant to a guarantee; the appellant was claiming damages against a mortgagee in possession.
In the circumstances there has been delay. To a certain extent that delay has been explained. A prompt request for security was made; then, things seem to have stalled. Part of the explanation may lie in the ‘without prejudice’ communications, although, I note the content of para 4 of Mr Goldsmith’s second affidavit: their effect may not have been all that significant. But, it was not until almost 2 months had expired after the hearing before the Judicial Registrar that Mr Mazzeo was consulted. This further delay seems to be explained by the decision to have prepared an estimate of costs based upon what was tantamount to a bill in taxable form. Since that was the course being followed, Mr Mazzeo was justified in making further requisitions of the solicitors instructing him. All this caused time to pass while the appellant was incurring costs in complying with interlocutory directions.
An application for security may be based upon an estimate of costs made by an experienced practitioner. That estimate may be broad, although it should have a reasonable degree of specificity. It must be informed by the Supreme Court (Chapter 1 New Scale of Costs and Other Costs Amendments) Rules 2012.[23] Such an estimate must be sufficiently clear so as to reveal to the appellant and to the Court not only the matters upon which it is based, but also the cost that has been assigned to each of those matters. It is unnecessary that it be in the form of something which is akin to a bill in taxable form. Applications for security are not once-and-for-all; they can be remedied if an initial order has proved to be inadequate. If that course is adopted, it should prevent what has happened in this case where two experts in costs have engaged in a sophisticated discourse about what costs would eventually be allowed on a taxation.
[23]S.R. No. 142/2012.
Discussing the jurisdiction of the High Court to order security in Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd,[24] Kirby J pointed out that the discretion to do so was a judicial discretion that was govern by ‘what is required by the justice of the matter’.[25]
[24](1998) 193 CLR 502.
[25]Ibid 513-514.
I am not satisfied that the respondent has prosecuted its entitlement to seek security in a timely manner. The failure of the respondent to bring its threatened application on a more timely basis may have encouraged the appellant to continue in the belief that none was to be made.[26]
[26]The application has been brought ‘at the heel of the hunt’. See Devenish v Jewel Food Stores Pty Ltd ( 1990) 64 ALJR 533, 534 (Mason CJ).
In my opinion, the application should be dismissed on the sole ground of delay.
In the circumstances, it is unnecessary to resolve the arguments between the solicitors and the costs consultants as to the appropriate sum for security.
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