Saitta Pty Ltd v Commonwealth of Australia
[2003] VSC 377
•8 October 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6876 of 1999
| SAITTA PTY LTD (ACN 005 387 833) | Plaintiff |
| v | |
| THE COMMONWEALTH OF AUSTRALIA | Defendant |
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JUDGE: | Williams J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6, 7, 10 – 14, 17 – 21, 24 – 28 February, 3-7, 12 –14, 17 – 20 March, 3 April 2003 | |
DATE OF RULING: | 8 October 2003 | |
CASE MAY BE CITED AS: | Saitta Pty Ltd v The Commonwealth of Australia (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 377 | |
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COSTS – Application for indemnity costs – Whether proceedings commenced for ulterior motive – Whether proceedings were commenced in disregard of facts or law – Whether plaintiff’s conduct justified order for indemnity costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B. Monotti | Colwyn R Lloyd |
| For the Defendant | Mr C. Gunst Q.C. with Mr P Gray | Clayton Utz |
HER HONOUR:
On 12 September 2003 the Court gave reasons for its decision dismissing the plaintiff's claims in this proceeding. The defendant has sought an order that the plaintiff pay its costs of the proceeding on an indemnity basis.
Rule 63.31 of the Supreme Court (General Civil Procedure) Rules 1996 ("the Rules") provides that costs shall be taxed on a party and party basis except as provided by the Rules or any order of the Court. Rule 63.30.1 recognises the Court's power to award indemnity costs.[1]
[1]See: Bass Coast Shire Council v King [1997] 2 VR 5 at 29 per Winneke P.
The defendant relied upon the principles enunciated in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [2] by Woodward J at 401:
"I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts of the clearly established law. Such cases are, fortunately, rare. When they occur, the Court will need to consider how it should exercise its unfettered discretion."
[2](1998) 81 ALR 397 at 401.
In Bass Coast Shire Council v King[3] Winneke P said that the Court’s discretion to order costs on a solicitor and client basis was unlimited but should be exercised judicially and not unreasonably. The President went on to state:
"The circumstances in which the Court might be moved to award costs on the solicitor and client scale should be described as 'special' if only to set them apart from the usual basis upon which costs are awarded: see per Callaway JA Spencer v Dowling (Unreported, Court of Appeal, 26 July 1996)."
[3][1997] 2 VR 5 at 29.
In PCRZ Investment Pty Ltd v National Golf Holdings Ltd[4] Chernov JA considered a challenge to an order for the award of costs on a solicitor and client basis in favour of a respondent to a claim brought to establish "a matter of principle" of little monetary value. His Honour held that the order should be set aside. He referred to the appellant's entitlement to seek a determination from the Court, citing Lord Diplock's statement in Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp Ltd [5] in relation to the citizen's constitutional right to seek a remedy from the courts in relation to any alleged breach of legal or equitable rights by another. Chernov JA said at [36]:
" … the authorities indicate that, generally, the ordinary cost rule should only be departed from where the losing party has misconducted itself in relation to the proceeding or where the institution of the proceeding was plainly unreasonable or where the proceeding was issued for an ulterior or collateral purpose."
He cited the undue prolongation of a case, the making of assertions of fact which were patently groundless or of wild and contumelious allegations as examples of such misconduct. Chernov JA noted that the making of a patently hopeless claim would indicate that the institution of the proceeding was plainly unreasonable.
[4][2002] VSCA 24.
[5][1981] AC 909 at 977.
In their written submissions counsel for the defendant referred to the description of circumstances warranting the exercise of the discretion in favour of indemnity costs by Sheppard J in Colgate Palmolive Company & Anor v Cussons Pty Ltd[6]. They argued that indemnity costs were justified on bases identified by Sheppard J, submitting that:
(a)the proceeding had been commenced or continued in disregard of known facts or clearly established law or in circumstances where the plaintiff should have known it had no chance of success;
(b)allegations had been made which never ought to have been made, or the plaintiff's case was supported by incredible and contradictory evidence;
(c)the proceeding had been unduly prolonged by groundless contentions;
(d)the proceeding had been commenced or continued for the ulterior motive of "staving off" proceedings against the plaintiff by the Commonwealth Commissioner of Taxation for unpaid tax; and
(e)the plaintiff had alleged misconduct against the defendant in relation to concealment of or failure to discover documents, in circumstances where the plaintiff either knew or ought to have known that the allegations were false.
[6](1993) 46 FCR 225 at 233.
The plaintiff resisted the application. It argued that the Court should follow the ordinary course and award costs on a party and party basis. It submitted that there were no special circumstances justifying the characterisation of the case as "out of the ordinary". The plaintiff did not dispute the defendant's contentions as to the relevant law.
The plaintiff's claims
The defendant argued that the plaintiff’s case was comprised of a number of "clearly unsustainable claims".
It referred to the interlocutory history of applications to strike out parts of the statement of claim. It asserted that other causes of action pleaded, although as hopeless as those which had been struck out, were not susceptible to strike out applications being "too entangled with factual questions" and, by inference, remained on foot to be dealt with at trial.
The defendant pointed to the plaintiff's persistence with a cause of action based on an alleged "funding contract" until the twenty second day of the hearing when the claim was abandoned. Counsel for the plaintiff responded that its contractual claim had been abandoned “responsibly at an appropriate time” during the trial. Although the contractual claim was ultimately abandoned on the twenty second day of the hearing, it had been pleaded in such a way as to be intertwined with the plaintiff's surviving claims. Counsel for the plaintiff submitted that little trial time was spent on the issue. In my view, the abandoned contractual claim did not take up a significant amount of the Court's time.
The defendant also relied upon the plaintiff’s jettisoning of other parts of its claim during the trial and the plaintiff responded that it had on each respective occasion done so responsibly. I am not satisfied that this aspect of the plaintiff’s conduct of the trial warranted the imposition of the order sought against it.
The defendant referred to the plaintiff's reliance upon alleged representations which it claimed took place after the plaintiff’s conduct said to have been induced by them. Although this criticism was justified, the plaintiff did also allege that representations had been made prior to that conduct.
The defendant further relied upon the plaintiff’s failure to persuade the Court that the circulars relied upon contained any of the representations alleged to found its surviving estoppel claim. The plaintiff responded that the defendant was simply relying upon the outcome of the litigation in support of its application. It submitted that it had been entitled to put its version of events to the Court for adjudication, even though it had failed to persuade the Court that the alleged representations had been made. I am persuaded by these submissions.
The defendant argued that the plaintiff had made or persisted with claims based on non-payment of a grant of ARF in 1993, in circumstances in which there had been no application by the plaintiff for such a grant until late 1995. Once again counsel for the plaintiff submitted that the defendant was relying upon the outcome of the litigation as the ground for the award of indemnity costs and should not succeed in its application. Again, I consider that the plaintiff was entitled to have this matter determined by the Court.
The plaintiff responded in a similar fashion to the defendant’s argument that the plaintiff had persisted with its ultimately unsuccessful claim that its 28 October 1993 letter had constituted the requisite application for a grant of ARF under s 53. Although the plaintiff failed to persuade the Court that the 28 October 1993 letter had been transformed upon the date from which the nursing home was retrospectively approved, I am not satisfied that its claim in this regard was so patently hopeless that it should justify the award of costs sought.
The defendant pointed to the plaintiff's argument that an undiscovered instrument executed between 20 and 22 December 1993 existed by which the Minister had approved a grant of ARF. The defendant characterised this contention as fanciful. In my view the allegation might be fairly so described, however it did not take such a significant amount of the Court’s time as to put the plaintiff’s claim into a special category justifying the order sought.
The defendant referred to the plaintiff's persistence with a claim based on an alleged entitlement to a grant in the absence of any entitlement to an AIP for a grant. Whilst it was held that the plaintiff was not entitled to an AIP for a grant because it was not building or proposing to build a nursing home, in my opinion it was justified in relying upon the AIP which, after all, had been granted to it by the Department in December 1993.
The defendant claimed that the plaintiff should not have pursued a claim for damages for breach of statutory duty in light of the observations of Gray J in the Federal Court proceeding Saitta Pty Ltd v The Commonwealth.[7] Counsel for the plaintiff responded that this argument should fail. He submitted that the plaintiff had not been obliged to regard its case as hopeless as a result of the decision of a single judge of a court in a different jurisdiction in relation to the different statutory provisions of the Aged Care Act 1997 (Cth), the successor to the National Health Act 1953 (Cth) with which the proceeding was concerned. I consider that the plaintiff was entitled to seek the views of this Court in relation to the interpretation of the legislation with which the proceeding was concerned, despite the failure of its arguments before Gray J in relation to the provisions of the Aged Care Act.
[7][2001] FCA 815 at [35]-[36].
The defendant submitted that the estoppel argument mounted by the plaintiff was not available to it. The defendant further argued that the plaintiff's alleged cause of action in negligence was misconceived, and, to the extent that it challenged the reasonableness of the Court's discretion, partly unfounded. In my view, neither claim was obviously hopeless. Each was at least arguable and deserving of analysis by the Court.
The defendant generally argued that the plaintiff had no reasonable prospects of success in the proceeding, but had nevertheless caused the defendant to incur substantial legal costs in opposing its claims. It cited the unsuccessful proceedings by the plaintiff against the defendant in other courts. It argued that the proceeding was simply one of a series of "frivolous and unsuccessful legal proceedings". However senior counsel for the defendant did concede that the only case dealing with an issue involved in the current proceeding was that which had been the subject of Justice Gray's judgment in the Federal Court referred to above. I did not find the defendant’s arguments based on the plaintiff’s lack of success in other proceedings to be persuasive, in such circumstances.
Conduct of the proceeding
The defendant referred to the plaintiff's failure to make proper discovery, despite pre-trial requests for discovery and particularisation. It referred to alleged late service of witness statements and late delivery of a notice to produce. The defendant submitted that the plaintiff had prolonged the case by amending its statement of claim during the trial.
The defendant alleged that the plaintiff's expert witness, Mr Rockliffe, had been recalled due to the plaintiff's inability to clearly formulate the basis on which it puts its case for damages. It further argued that the plaintiff's cross-examination of the Departmental officer, Mr Moore, was irrelevant, given the ultimate confinement of negative loading claims to an argument based on ultra vires.
The defendant also referred to an affidavit sworn by the plaintiff's expert witness, Mr Wettenhall, in the ATO winding up proceeding. In the affidavit Mr Wettenhall failed to refer to ongoing payments of ARF made to the plaintiff after June 1996. It was submitted that the plaintiff had thereby inflated the amount of its alleged loss by reason of the alleged breach of statutory and common law duties by the defendant. I am not persuaded that this proceeding was so affected by the alleged omission in Mr Wettenhall’s affidavit as to justify a departure from the ordinary course in relation to the award of costs.
The defendant also relied upon what it said was an allegation by counsel for the plaintiff that the defendant had deliberately attempted to conceal documents. This was an allegation which it submitted should not have been made. Whilst the defendant might be justified in its complaint, in my view the plaintiff’s allegation against it would not justify the exercise of the discretion sought.
Further, although the plaintiff made submissions and adduced some evidence in relation to claims which it subsequently abandoned, amended its pleadings, added a further negative loadings claim and persisted with ultimately unsuccessful claims, I am not satisfied that any resulting prolongation of the proceeding should be penalised by an order for indemnity costs.
The credit of Mr Menere
The defendant finally sought to rely in support of its application upon the Court's adverse findings in relation to the credit of the plaintiff's principal witness, Mr Menere.
It referred to the decision of Marshall J of the Federal Court in Hamberger (Employment Advocate) v Williamson and Ors[8] in which His Honour ordered indemnity costs against a Mr Lyten, saying at [24]:
"I consider that indemnity costs should be awarded against Mr Lyten given that he was instrumental in the proceeding being instituted, and was prepared to artificially manufacture evidence to support the success of the proceeding and give incredible and contradictory evidence during the proceeding. The proceeding was commenced at Mr Lyten's instigation in support of an ulterior motive, that is, to attempt to implicate the second respondent in an alleged breach of the [Workplace Relations Act 1966 (Cth)]. The proceeding commenced in circumstances where its success was dependent on Mr Lyten's deception not being detected by the Court. The result was an enormous waste of public money both in the conduct of the case by the applicant and its hearing by the Court. Unfortunately, the respondents were also put to considerable expense in defending their interests in Court."
[8][2001] FCA 189.
However, although Mr Menere’s evidence was not accepted, he was not found to have engaged in any such conduct or to have behaved in a manner warranting the imposition of the order sought.
Ulterior motive
The defendant argued that the evidence established that the plaintiff had commenced the proceeding for the purpose of “staving off” winding up proceedings commenced by the Australian Taxation Office and ASIC. Although it was not disputed that the plaintiff relied upon its claims in the proceeding as the basis for a set off against the Commonwealth in respect of alleged taxation liability, this factor alone would not justify the claimed award of costs on the basis that the proceeding had been commenced for an ulterior motive. I note that, even if the proceeding was commenced just before the expiry of the relevant limitation period, as was submitted by the defendant, that fact would not indicate that it was extraordinary for the purposes of the application.
The defendant however argued that the plaintiff should be presumed to have had an ulterior motive justifying the order sought because it had commenced and continued the proceeding in circumstances in which the defendant contended it should have known that it had no chance of success. Senior counsel for the defendant submitted in this regard that the plaintiff's previous lack of success in litigation reinforced the defendant's argument that the proceeding was engaged in for an ulterior motive.
I have already indicated my view that the plaintiff was entitled in all the circumstances to argue its case and to seek a determination of the Court in relation to its claims.
The plaintiff's submission
The plaintiff urged the Court to adopt the ordinary rule and order costs against it only on a party and party basis. Essentially it argued that it was entitled to bring its claims before the Court, although they were ultimately unsuccessful. Generally, counsel for the plaintiff asserted that there was nothing in relation to its conduct of the proceeding which gave rise to special circumstances warranting an order for indemnity costs.
Conclusion
After taking into account the submissions made by each of the parties in light of the relevant authorities I am not satisfied that the circumstances of the case warrant any departure from the usual course of ordering payment of costs on a party and party basis.
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