Sahin v National Australia Bank Ltd
[2013] VSCA 93
•2 MAY 2013
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2011 0167
| EDLIBAN SAHIN | First Appellant |
| CETIN SAHIN | Second Appellant |
| v | |
| NATIONAL AUSTRALIA BANK LIMITED | First Respondent |
| NATIONAL AUSTRALIA FINANCIAL MANAGEMENT LIMITED | Second Respondent |
---
| JUDGES | WARREN CJ, NEAVE JA AND FERGUSON AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 22 OCTOBER 2012 |
| DATE OF JUDGMENT | 2 MAY 2013 |
| MEDIUM NEUTRAL CITATION | [2013] VSCA 93 |
| JUDGMENT APPEALED FROM | National Australia Bank Ltd v Sahin [2011] VSC 505 (Dixon J) |
---
PRACTICE AND PROCEDURE — COSTS — Calderbank offers — Appellants unsuccessful on appeal — Each party seeking costs of appeal — Calderbank offer made by respondents rejected by appellants — Rejection of offer reasonable in circumstances where it required appellants to give up claim whilst requiring very little by way of compromise by the respondents — Whether there should be departure from general rule that costs follow the event where parties failed to raise matter on earlier appeal — Civil Procedure Act2010 (Vic) ss 1, 28.
---
| APPEARANCES: | COUNSEL | SOLICITORS |
| For the Applicants | Mr E Sahin in Person | |
| For the Respondents | Mr R D Shepherd | TurksLegal |
WARREN CJ:
The history of the litigation between these parties is complex and is set out in the judgment of this Court dismissing the appellants’ appeal.[1] Following the dismissal of that appeal, each party now seeks their costs.
[1]Sahin v National Australia Bank Limited [2012] VSCA 317.
Rule 64.24(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provides that ‘the Court of Appeal may make such order for the whole or any part of the costs of an appeal as it thinks fit.’ The Court of Appeal’s discretion to award costs is absolute and unfettered, though it must be exercised judicially and in accordance with established principles.
The general rule in litigation is that costs will follow the event. This rule will be applied unless there are good reasons why such an order ought not be made.[2]
[2]Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394, 407.
Also relevant to the exercise of the Court’s discretion to award costs are the provisions of the Civil Procedure Act2010 (Vic), which has an overarching purpose ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’ in proceedings.[3] Section 28 of that Act provides that the Court may take into account any contravention of the overarching obligations in exercising any power in relation to a civil proceeding, including the exercise of its discretion as to costs.[4]
[3]See Civil Procedure Act 2010 (Vic) s 1.
[4]See Civil Procedure Act 2010 (Vic) s 28.
The respondents made two principal submissions in support of their claim for costs in the appeal. First, they pointed to a Calderbank offer which was rejected by the appellants and secondly, they denied that the circumstances of this case provided a basis for departing from the general rule.
The appellants submitted that the respondents should be deprived of the costs to which they would otherwise be entitled on the basis that their conduct led to unnecessary litigation and the incurring of further costs by the parties. The appellants identified the relevant conduct as consisting principally in the respondents’ opposition to the appellants’ application to amend their pleadings at first instance to include a claim for the tort of deceit. The appellants submitted that, had the joinder of their claim in deceit not been opposed, initiating a second proceeding would have been unnecessary and further costs would not have been incurred.[5]
[5]The appellants informed the Court and the respondents at the hearing of the application that they intended to commence a second proceeding in the event that leave to amend was not granted.
The Calderbank offer
The respondents made a Calderbank offer to the appellants by letter dated 8 November 2011, offering to settle the appeal on the basis that the appellants discontinue the appeal in this Court, and that each party release the other from all claims in relation to orders for costs made in the proceedings, both at first instance and on appeal. The offer foreshadowed an application for indemnity costs in the event it was not accepted, though such an application was not pursued. The offer was refused by the appellants.
The offer was made at an early stage of proceedings, included a release of the appellants’ obligations to pay costs of approximately $6,500 and provided an opportunity to conclude the litigation between the parties. However, in my view, having regard to the factors set out in Hazeldene’s Chicken Farm v Victorian Workcover Authority (No 2),[6] it was not unreasonable for the appellants to reject the offer. The offer required the appellants to give up their claim for deceit whilst requiring very little in the way of compromise by the respondents.[7] Further, the orders made by Dixon J awarding the relevant costs to the respondents were themselves appealed against by appellants (though unsuccessfully) in this appeal.
[6](2005) 13 VR 435, 442.
[7]See, Shaw v Yarranova Pty Ltd & Anor (No 2) [2007] VSCA 48.
Should this court depart from the general rule?
The respondents submitted that there was no basis for the Court to exercise its discretion to depart from the general rule. It was submitted that this was not an appeal in which there had been mixed success. There was no cross-appeal and no notice of contention and therefore, it was submitted, that there was no basis upon which the court should order that any costs of the respondents be disallowed or apportioned.[8] I accept this submission.
[8]Citing Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114 [5]; McFadzean v Construction Forestry, Mining and Energy Union [2007] VSCA 289; (2007) 20 VR 250 [157]–[158]; Spotless Group Limited v Premier Building and Consulting Pty Ltd and Northern Suburban Properties Pty Ltd [2008] VSCA 115 [14]; Tayles v Davis (No. 2) [2010] VSCA 107.
While it may be true that further costs were incurred as a result of the failure of the respondents to consent to the amendment proposed by the appellants, such conduct does not provide a basis for departing from the general rule. The refusal to consent to a pleading amendment does not, in the circumstances of this case, undermine the overarching purpose of the Civil Procedure Act. It appears, regrettably, that because of their lack of legal representation the appellants did not appreciate the need to seek leave to amend their pleadings or the process by which they could do so.[9]
[9]See Sahin v National Australia Bank Limited [2012] VSCA 317 [4], [22].
The appellants’ further submission, that the respondents should be denied their costs because they commenced a second possession proceeding while the appellants’ appeal from the original County Court proceeding was on foot, does not provide a basis for denying the respondents their costs in this appeal. This conduct did not prejudice the appellants in the running of their deceit claim or lead them to incur further costs in pursuing that claim.
I join with both Neave JA and Ferguson AJA in finding that the failure of the respondents to bring the appellants’ counterclaim to the attention of the Court hearing the appeal in the insurance proceeding was regrettable.[10] Although it was the
responsibility of both parties to bring this claim to the attention of the court, one would expect the respondents, being represented by both solicitors and counsel, to better appreciate the importance of this need in ensuring the just and efficient resolution of the dispute. However, given there was no evidence that the failure to raise this matter was a conscious decision on the part of the respondents, I do not consider the omission is sufficient to deprive the respondents of the costs to which they are otherwise entitled having succeeded in the appeal. The general rule of costs following the event should apply.
[10]See Sahin v National Australia Bank Limited [2012] VSCA 317 [4], [99].
For these reasons I would order that the appellants pay the respondents’ costs in the appeal.
NEAVE JA:
FERGUSON AJA:
The appeal in this proceeding has been dismissed[11] and all that remains is the question of the costs of the appeal. The appellants and the respondents each seek their costs.
[11]Sahin v National Australia Bank Limited [2012] VSCA 317.
The history of the litigation between the parties is relevant to determination of the costs orders which should be made. In summary, the first respondent (National Australia Bank Limited) held a registered mortgage over the Sahins’ home and commenced a proceeding in this Court against the appellants (Mr and Ms Sahin) for possession of their property. On the Court’s own motion, that proceeding was dismissed without adjudication on the merits and with no order as to costs. Before the proceeding was dismissed, the Sahins began proceedings in the County Court. They claimed, among other things, that conduct of the bank and the insurer (the second respondent) in respect of a mortgage insurance policy was misleading and deceptive (‘the Insurance Proceeding’). Shortly before the trial, the Sahins applied to amend their pleadings to include a claim for the tort of deceit. Although no formal orders were made, the case proceeded on the basis that the Sahins were not permitted
to amend their pleading. The Sahins failed in their claim in the County Court. They appealed to this Court. While the appeal was pending, the bank began a further proceeding in this Court seeking orders for possession of the Sahins’ property (‘the Possession Proceeding’). The Sahins brought a counterclaim in that proceeding against the bank and the insurer seeking damages for the tort of deceit. After some interlocutory steps were taken in the Possession Proceeding, the parties agreed to take no further steps until the outcome of the appeal in the Insurance Proceeding was known.
The Sahins succeeded on their appeal in the Insurance Proceeding. The bank then sought to discontinue the Possession Proceeding and sought orders staying the Sahins’ counterclaim. An Associate Judge granted that application and made no order as to costs. The Sahins appealed to a judge in the Practice Court from the orders staying the counterclaim. That appeal was unsuccessful and the judge ordered that the Sahins pay the bank’s costs. The Sahins then appealed to this Court. They were unsuccessful — primarily because the claim for deceit which they wished to propound is substantially the same cause of action as one that has already been determined.[12]
[12]Ibid [8], [76].
The bank and the insurer seek their costs of the appeal in this proceeding on a party/party basis. They do so on two bases. First, they point to a Calderbank[13] offer which they made to the Sahins. That offer was rejected. Second, the respondents contend that in all the circumstances there is no proper reason why costs should not follow the event.
[13]Calderbank v Calderbank [1975] 3 All ER 333.
On the other hand, the Sahins contend that the respondents should pay their costs of the appeal essentially because of the conduct of the respondents.
Discretion as to costs
The Court of Appeal may make such order as to the costs of an appeal as it thinks fit.[14] A successful party is ordinarily entitled to an order for costs unless there are good reasons why such an order ought not be made.[15] The Sahins relied upon Verna Trading Pty Ltd v New India Assurance Co Ltd[16] as an example of a case where the successful party was not only deprived of a costs order in its favour but was ordered to pay part of the costs of the unsuccessful party. In that case, the applicability of an insurance policy was at issue. The plaintiff had made a claim under the policy. After many months, the insurer refused to indemnify the plaintiff but gave no reason for its refusal. Proceedings were commenced. Until the second day of the hearing, the defendant insurer relied upon grounds of defence that were unmeritorious. It was not until the first day of the hearing that the defendant disclosed its true defences to the claim and only sought to rely upon them from the second day of the trial. The plaintiff failed in its claim. Although the defendant was successful, the judge ordered the defendant to pay the plaintiff’s costs on a solicitor/own client basis up to and including the first day of the trial. On appeal, the Full Court held that the circumstances were very exceptional and formed a proper basis for the trial judge to exercise his discretion as to costs in the way that he did.
[14]Supreme Court (General Civil Procedure) Rules 2005 r 64.24(1).
[15]Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394, 407-8.
[16](1991) 1 VR 129.
Where a Calderbank offer has been made, the Court takes into account a number of matters. In Hazeldene’s Chicken Farm v Victorian Workcover Authority(No 2),[17] this Court said:
[17](2005) 13 VR 435.
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a core to considering a submission that the rejection of the Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting the offer.[18]
[18]Ibid [25].
Respondents’ submissions
By way of overview, the respondents submitted that the appeal to this Court was effectively the third consideration of whether the Sahins’ counterclaim ought be stayed. The respondents contended that effectively the same finding as to that issue had been made by the Associate Judge, the Judge, and then by this Court. In those circumstances, they submitted that bearing in mind the principle that there should be an end to litigation and that no‑one should be harassed twice for the same cause, there is good reason to exercise the discretion as to costs in their favour.
As we have mentioned, the respondents made a Calderbank offer to the Sahins. It was made by letter dated 8 November 2011. The respondents offered to settle the appeal on the basis that the Sahins discontinue the appeal in this Court with each party to release the other from all claims in relation to orders for costs made in the proceeding (both at first instance and on appeal). The letter noted that the Judge had ordered that the Sahins pay the costs of the appeal from the orders of the Associate Judge and noted that an amount of approximately $6,450 had been calculated in that regard. The offer was stated to be open for acceptance until 4.00 p.m. on Tuesday 15 November 2011. The letter concluded by stating that if the offer was not accepted, the respondents would seek their costs of the appeal on an indemnity basis.[19] By a letter of 15 November 2011, the Sahins refused to accept the Calderbank offer. Although the respondents foreshadowed in their Calderbank offer that they would seek costs of the appeal on an indemnity basis, they do not press for that and seek an order for costs on a party/party basis.
[19]Extracts from the offer are included in the annexure to these reasons.
The Calderbank offer was made shortly after the appeal had been instituted in October 2011[20] and well before the hearing of the appeal in October 2012. The respondents contend that it was unreasonable for the Sahins to refuse to accept the Calderbank offer. They say that it was made at an early stage and included a release of the Sahins’ obligation to pay the costs ordered of approximately $6,500, although not taxed or agreed. Further the respondents say the Calderbank offer provided an opportunity for the Sahins and the respondents to end the litigation between them and to release and forever discharge each other from all claims in respect of costs (the quantum of which had not then been agreed).
[20]The Notice of Appeal is dated 21 October 2011.
The respondents’ alternative submission was that even if it was not unreasonable for the Sahins to refuse to accept the Calderbank offer, it was a good faith attempt to resolve all disputes between them about costs at that time and, in the circumstances, supports the making of an order for costs in favour of the respondents.
Further, the respondents say that the Sahins failed on all grounds of appeal and, in the exercise of discretion, the Court should apply the general rule of costs following the event. They submitted that there were no circumstances disqualifying them from an order for costs and this was not a case in which there had been mixed success. There was no cross appeal and no notice of contention. Consequently, the respondents submitted that there is no basis upon which in the exercise of discretion the Court should order that any costs of the respondents of the appeal be disallowed or apportioned.[21]
[21]For completeness we note that although the respondents made submissions in respect of the Sahins’ conduct in refusing to attend mediation and the Sahins replied to those submissions, no party’s submissions were supported by any evidence. Consequently, we have disregarded them.
The Sahins’ submissions
The Sahins sought orders that the respondents pay their costs of the appeal. The nub of the Sahins’ submissions was that the conduct of the respondents was such that this was an appropriate case in which the respondents ought be ordered to pay the costs even though they were successful in the appeal.
The Sahins say that the respondents’ conduct led to all parties having incurred further costs. Central to their submissions was a contention that the costs had been caused because the respondents had failed to consent to the pleading amendment in the original Insurance Proceeding in the County Court to enable the deceit claim to be pursued. They noted that they had informed that court and the respondents at the hearing of the application for leave to amend that if the application was not granted, a second proceeding would be commenced. That proceeding having been commenced, they say that the respondents engaged in the interlocutory steps in the proceeding by filing an appearance, a notice of defence, and completing discovery. They submitted that the respondents are estopped from seeking costs of the appeal.
Further the Sahins submitted that the respondents should not have commenced the Possession Proceeding when the appeal from the original County Court judgment in the Insurance Proceeding was on foot.
The Sahins also made a submission based on their unproven theory that the respondents have acted fraudulently (that is, the matters that they say form the basis of their deceit claim) and that there is a public interest basis for declining to award costs to them.
The Sahins contend that:
(a)they have been harassed twice — first, because the insurer did not indemnify them under the mortgage insurance contract and, second, because they have not been permitted to pursue their deceit claim;
(b)it was not unreasonable for them not to have accepted the Calderbank offer given the time spent in preparation for the trial and appeal proceedings, because they were being asked not only to discontinue their claim for the costs of the appeal but also the appeal itself;
(c)they have not been compensated for the amount of time that they spent as self‑represented litigants over the last six years in the preparation and presentation of their case, yet the respondents’ solicitors and barristers are able to seek costs for their time.
The Sahins noted the contention by the respondents that they had failed on all grounds of appeal but in essence the Sahins submitted that the judgment of this Court was in error.
In conclusion, the Sahins submitted that based on the fact that the respondents had opposed the application to join the deceit claim to the Insurance Proceeding, the respondents should pay their costs and all of the Sahins’ costs of having to reinstate the deceit claim up to the date of the appeal, or a significant proportion of the Sahins’ costs of the appeal, or alternatively there should be no order as to costs. They concluded by stating that had they been allowed to join the deceit claim to the Insurance Proceeding, there would have been no need for a second proceeding and further costs would not have been incurred by either party.
We note that in their written submissions relating to costs, in addition to the costs of the appeal, the Sahins sought an order for costs in respect of the appeal to the Judge. In their Notice of Appeal, the Sahins had appealed from the Judge’s order that they pay the respondents’ costs. The order dismissing the appeal deals with that issue and there is no basis for revisiting it again now. The only matter that can now be dealt with is the costs of the appeal.
Conclusion
The Sahins were represented by Mr Sahin on the appeal. Consequently, if an order were made in their favour, the costs that they would be entitled to would essentially be limited to out of pocket expenses.[22] Contrary to their submission, they would not be entitled to compensation for the time that they have spent on the appeal.[23] Even accepting that an award of costs would be limited in scope, in our opinion, this is not an appropriate case in which such an order should be made. First, the Sahins were unsuccessful on the appeal. Secondly, as will be seen from what we say later in these reasons, whilst the conduct of the respondents left something to be desired, it was not so reprehensible as would warrant an order that they bear the Sahins’ costs. Unlike in Verna Trading Pty Ltd v New India Assurance Co Ltd,[24] in their defence to the Sahins’ counterclaim, from an early stage the respondents made their grounds for denying the claim clear, including that they would argue res judicata. It was on that issue that the respondents succeeded.
[22]Cachia v Hanes (1994) 179 CLR 403.
[23]Ibid.
[24](1991) 1 VR 129.
Thirdly, the Sahins’ continued allegations of fraud do not provide a foundation for awarding costs in their favour. Those allegations were dismissed in the Insurance Proceeding. As Ferguson AJA said in her reasons for dismissing the appeal in this case, all of the matters relevant to the question of fraud were pleaded in the Insurance Proceeding and dealt with by Hargrave AJA on appeal. As a consequence, the Sahins did not succeed in their fraudulent misrepresentation claim and cannot now base their claim for costs on the same allegations.[25]
[25]Sahin v National Australia Bank Limited [2012] VSCA 317 [76].
Fourthly, whilst in the absence of an explanation from the bank one might wonder why it allowed the first proceeding for possession to be dismissed without adjudication on the merits and then chose to commence the later Possession Proceeding when the appeal in the Insurance Proceeding was pending, that conduct did not affect the Sahins’ rights in any way and had no effect on their ability to bring a claim for deceit. The bank’s conduct in this regard does not weigh in favour of making a costs order against the respondents.
Turning then to the respondents’ application for costs. It is true that the Calderbank offer was made at an early stage of the appeal proceeding, was clear in its terms, was of reasonable duration and foreshadowed an application for indemnity costs if not accepted (albeit that the respondents do not pursue such an order on this application). Nevertheless, in our opinion, it was not unreasonable for the Sahins to refuse the Calderbank offer. There was very little that the respondents were prepared to give up as part of the offer other than the amount that they estimated they were entitled to in respect of a costs order in their favour. Against that, they were effectively asking the Sahins to release them from the whole of the deceit claim that the Sahins wished to pursue. The issues raised by the appeal were complex and, whilst ultimately the Sahins did not succeed, there was merit in some of the grounds of appeal. In context, the proposal to resolve the dispute did not amount to a real compromise on the part of the respondents. Rather, it required a capitulation on the part of the Sahins.
In our reasons for judgment, we drew attention to the unfortunate failure of the respondents to have brought the existence of the Sahins’ counterclaim to the attention of the Court hearing the appeal in the Insurance Proceeding.[26] There is no evidence that the bank’s failure to raise the matter in the Court of Appeal was the result of a conscious decision. However, that omission led to the Sahins being in a position where the Court was unable to ensure that they were aware of their rights. Had the Court been able to raise the matter with the Sahins, it is quite possible that the present appeal proceeding would have been avoided. Taking the respondents’ conduct into account, in our opinion the just outcome is for there to be no order as to costs of the appeal.
[26]Ibid [4], [99].
---
ANNEXURE – Extract from Respondents’ Calderbank offer of 8 November 2011
Although the Bank considers that your appeal has no reasonable prospects of success, from a purely commercial perspective, taking into account the uncertainty of litigation and in an attempt to come to an agreement without incurring additional legal costs, the Bank offers to settle the Appeal on the following terms:
1.Upon acceptance of this offer, you will, within 1 business day, file a notice pursuant to Order 64.14(2) of the Supreme Court (General Civil Procedure) Rules 2005 in which you state that the Appeal is discontinued, and on the same day you will serve a copy of that Notice upon TurksLegal, solicitors for the Bank.
2.Upon compliance with paragraph 1 above the parties to the Appeal shall be deemed to release and forever discharge each other from any and all claims in relation to orders for costs made in the following proceedings:
(a) Supreme Court Proceeding No S Cl 2010 2931;
(b) Supreme Court of Appeal Proceedings No S APCI 2009 3904.
In his Order made 7 October 2011, the Honourable Justice Dixon ordered that you pay the Bank’s costs of the appeal which we have calculated to be $6,448.81. If you accept the Bank’s offer outlined above, upon compliance with paragraph 1 the Bank will release you from your obligation to pay its costs of $6,448.81.
We advise that this offer is made in accordance with the principles set out in Calderbank v Calderbank (1975) All ER 333 and Cutts v Head (1984) l ALL ER 597, as also applied by the Honourable Justice Byrne of the Supreme Court of Victoria in Mutual Community Limited v Lorden Holdings Pty Ltd (unreported, 29 April 1993).
This offer is open for acceptance until 4.00pm, Tuesday 15 November 2011, at which time it shall lapse.
In the event of you agreeing to accept this offer, please indicate such acceptance by signing the enclosed duplicate copy of this letter where indicated and returning it to our office.
lf the Offer is not accepted and the judgment in the Appeal is less favourable to your clients than the terms of the above Offer, this letter will be produced to the Court in support of an application by the Bank for its costs of the Appeal proceeding to be awarded to the Bank on an indemnity basis.
5
11
0