Scholl Nicholson Pty Ltd v Chapman (No 2)
[2001] VSC 462
•3 December 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 7238 of 1998
| SHOLL NICHOLSON PTY (ACN 052 098 012) | Plaintiff |
| v | |
| PHILIP ANDREW CHAPMAN (as the legal personal representative of the Estate and Will of ELLEN AMELIA CHAPMAN deceased) PHILIP ANDREW CHAPMAN REGISTRAR OF TITLES | Firstnamed Defendant Secondnamed Defendant Thirdnamed Defendant |
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JUDGE: | Balmford J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 and 16 November 2001 | |
DATE OF JUDGMENT: | 3 December 2001 | |
CASE MAY BE CITED AS: | Sholl Nicholson v Chapman (No 2) | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 462 | |
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COSTS – Indemnity costs – the Court’s power to award costs on other than a party and party basis - circumstances under which costs should be awarded on a solicitor and client or indemnity basis, rather than merely a party and party basis.
Supreme Court (General Civil Procedure) Rules 1996 - Rule 63.30.1.
Bass Coast Shire Council v King [1997] 2 VR 5.
Botany Municipal Council v Secretary, Department of The Arts (1992) 34 FCR 412.
Colgate Palmolive v Cussons (1993) 46 FCR 225.
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301.
Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103.
Spencer v Dowling [1997] 2 VR 127.
Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr AW Sandbach | Sholl Nicholson Lasky Pty |
| For the Defendant | Mr AD Robertson | Russell Kennedy |
HER HONOUR:
Introduction
In this matter I delivered judgment for the plaintiff on 12 November 2001 and invited submissions from counsel as to the appropriate orders to be made. Those submissions have now been received. No formal orders have yet been made. These reasons should be read with the reasons for judgment delivered on 12 November (“the reasons”).
Judgment has already been entered against the secondnamed defendant (“Philip”) in his personal capacity as set out in [4] of the reasons, but it appears that that judgment has not yet been satisfied. Ellen Chapman, originally the firstnamed defendant, died after the proceeding commenced, and the name of the firstnamed defendant (“the defendant” throughout these reasons) was changed by order of Master Kings on 13 June 2001 (see [5] of the reasons).
Draft orders were submitted by Mr Sandbach, for the plaintiff, essentially in accordance with the orders sought in the prayer for relief contained in the statement of claim. I was informed by Mr Sandbach, and Mr Robertson, for the defendant, did not dispute, that in accordance with Rule 55.03(1) of the Supreme Court (General Civil Procedure) Rules 1996, (“the Rules”) notice of the proposed order for sale of the land referred to in the reasons as “Canterbury Road” and here referred to as “the land”, had been given to every person interested in the land, whether or not a party to this proceeding. In accordance with Rule 55.03(2), the draft order includes the following statement under the heading Other Matters:
Notice of this proceeding has been given to all persons interested in the land situate at and known as 771 Canterbury Road, Surrey Hills in the State of Victoria being the land more particularly described in Certificate of Title Volume 7021 Folio 186.
The draft order otherwise reads (omitting formal parts):
The judgment of the Court is that:
1.There be judgment for the plaintiff against the firstnamed defendant for the following relief:
(a)The firstnamed defendant pay the plaintiff the sum of $51,454.42 together with statutory interest in the sum of $21,289.63, a total sum of $72,744.14.
(b)The firstnamed defendant be and is hereby perpetually restrained from, whether by himself, his servants or agents or otherwise howsoever, transferring the estate or interest of the firstnamed defendant or any part thereof in the property situate at and known as 771 Canterbury Road, Surrey Hills in the State of Victoria being the land more particularly described in Certificate of Title Volume 7021 Folio 186 (“the land”) or taking any other step in derogation of the firstnamed defendant’s grant of a charge over the aforesaid estate or interest in the land to the plaintiff.
(c)The Court declares that the plaintiff has an interest in the land as chargee as claimed in caveat No. T851245T.
(d)The land be sold out of Court.
(e)The plaintiff be appointed to have the conduct of the sale and be permitted to sell the land in such manner as it thinks fit, and in particular, it be permitted to determine the manner of sale, the conditions of sale, the remuneration to be allowed to any estate agent or auctioneer and the reserve price.
(f)The firstnamed defendant forthwith deliver possession of the land to the plaintiff for the purpose of the sale.
(g)The plaintiff be authorised to execute all necessary contracts, transfers and other documents to effect the sale of the land.
(h)The amount secured by the plaintiff’s charge over the land at the time of settlement of the sale of the land including the said sum of $72,744.14 together with statutory interest and the costs of this proceeding, and the costs and expenses of the sale be paid to the plaintiff out of the proceeds of sale of the land.
(i)Liberty to apply for further orders and directions in respect of the sale of the land is reserved to the parties.
(j)The firstnamed defendant’s counterclaim be dismissed.
(k)The firstnamed defendant pay the plaintiff’s costs, including all reserved costs, of the claim and the counterclaim, such costs to include all costs of the plaintiff except insofar as they are of an unreasonable amount or have been unreasonably incurred and so that, subject to the above exceptions, the plaintiff will be completely indemnified by the firstnamed defendant for its costs.
2.There is judgment for the plaintiff against the thirdnamed defendant for the following relief:
(a)The Court directs the Registrar of Titles not to register dealing No. V623949B or to permit Caveat No.T851254T to lapse without the written consent of the plaintiff.
Mr Robertson, for the defendant, submitted that the order should provide that, after satisfaction of the amounts referred to in paragraph 1(k) of the draft order and all other moneys secured to other persons interested in the land, the balance of the proceeds of sale be payable to his client. In response to that submission, Mr Sandbach proposed the inclusion at the end of order 1(h) of the proposed order of the words, “The plaintiff pay any balance, after satisfaction of all encumbrances, into Court”, which appears to me appropriate.
Mr Robertson submitted further that the order should provide that the sale of the land be conducted by an independent body rather than by the plaintiff, in order to protect the interests of his client. However, that does not appear to me to be necessary. By virtue of the definition of “mortgage” in section 18 of the Property Law Act 1958 as including “any charge or lien on any property for securing money or money’s worth”, the chargee has the power of sale conferred on a mortgagee by section 101 of that Act where (as in this case) the mortgage was made by deed. The chargee is therefore subject to the obligation to the chargor to act in good faith which is imposed by the general law. [1] It should be noted that that obligation is unrelated to the specific requirement in section 77 of the Transfer of Land Act 1958 that a mortgagee exercising the power of sale is to act “in good faith and having regard to the interests of the mortgagor”, which is not applicable in this matter, the word “charge” in that Act being limited, by virtue of section 74(1) thereof, to an instrument charging land with the payment of an annuity.
[1]See Forsyth v Blundell (1973) 129 CLR 477 and the consideration of that decision by Murphy J in Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257.
Mr Robertson submitted that interest should be charged only from 17 September 1998, the date of issue of the writ. However, Mr Sandbach indicated that the amount of interest shown in paragraph 1(a) of the draft order was calculated, as claimed in the prayer for relief, from 27 June 1998, on the ground that interest under the Legal Profession Practice Act 1958 [2] had been calculated up to that date. Mr Robertson did not challenge the actual calculation, and I accept that paragraph 1(a) should be expressed in the terms of the draft order.
[2]and presumably also the Legal Practice Act 1996.
Costs
The principal dispute between the parties arises from the claim of the plaintiff for indemnity costs.
It is well established that there is a power to award costs on other than a party and party basis, a power which is wholly in the discretion of the Court, save that the discretion must be exercised judicially and not unreasonably. Winneke P said in Bass Coast Shire Council v King: [3]
Although, as a general rule, the court will order costs to be taxed and paid on a party and party basis (see r. 63.31 of the Rules of Civil Procedure) it none the less is invested with the discretion to order costs to be taxed and paid on a solicitor and client basis (see r. 63.32 of the Rules). That discretion is not limited to the particular circumstances described in the rule: see per Batt J. Regal Life Insurance Ltd. v. Pacific Financial Resources Pty. Ltd. (unreported, 16 November 1994). The discretion to award costs on a solicitor and client basis is, thus, an unlimited one although it must be exercised judicially and not unreasonably. The circumstances in which a 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 J.A. Spencer v. Dowling [[1997] 2 VR 127].
[3][1997] 2 VR 5 at 29.
In Spencer v Dowling, Callaway JA [4] considered the use of the expressions “solicitor and client costs” and “indemnity costs”, which appear sometimes to be used indiscriminately in the cases. His Honour said:
Solicitor and client costs are themselves of different kinds. . . . Sometimes they are taken to afford less than a complete indemnity, but on other occasions their purpose is to do what the court can to ensure that a party is not out of pocket. . . . It was for that reason that Woodward J., in Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988) 81 ALR 397 at 401-2, decided that costs should be paid on a solicitor and client basis but adopted the language of indemnity in the actual order he made to provide greater certainty.
[4]at 164.
It is clear that the same principles are applicable to the exercise of the discretion to award indemnity costs as to the exercise of the discretion to award solicitor and client costs per se, and it is not necessary to distinguish between the two in consideration of the relevant authorities. The issue remains in the discretion of the judge.
Rogers CJ Comm D said in Singleton v Macquarie Broadcasting Holdings Ltd: [5]
As I endeavoured to explain in Qantas Airways Ltd v Dillingham Corporation (unreported, 14 May 1987) it became necessary to make orders for indemnity costs because of the ever widening gap that had opened up between the costs payable by a successful party to his, or her, own solicitors and the amount recoverable on a party and party taxation. It seemed to me wholly inappropriate that a party, forced to take legal proceedings, entirely through the wrongful and inappropriate conduct of the other party, be left badly out of pocket at the successful conclusion of the proceedings, simply by reason of an inappropriate method of taxation of costs.
[5](1991) 24 NSWLR 103 at 105.
Rule 63.30.1 of the Rules, which came into operation on 25 October 2001, provides:
63.30.1Indemnity basis
(1)Subject to paragraph (2), on a taxation on an indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.
(2)any doubt which the Taxing Master may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.
In Colgate Palmolive v Cussons, [6] Sheppard J considered at some length the authorities
as to the principles relating to the award of indemnity costs. At 231 His Honour set out the following passage from the judgment of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd: [7]
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 or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
[6](1993) 46 FCR 225.
[7](1988) 81 ALR 397 at 401.
Sheppard J then cited Gummow J in Botany Municipal Council v Secretary, Department of The Arts, [8] who also referred to what Woodward J had said in Fountain Selected Meats. Gummow J there expressed the view that the discretion was not so circumscribed that an order might be made only against an ethically or morally delinquent party. Sheppard J also cited the similar view of French J expressed in J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers, Western Australian Branch (No. 2) [9] in the following terms:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
[8](1992) 34 FCR 412 at 415.
[9](1993) 46 IR 301 at 303.
Sheppard J continued at 233:
Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo [Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, 3 May 1991)]: “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at p 6) similar views in Ragata [Developments Pty Ltd v Westpac Banking Corporation (unreported, 5 March 1993)].
His Honour went on to enumerate a number of circumstances which have been thought to warrant the exercise of the discretion, including:
the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
evidence of particular misconduct that causes loss of time to the Court and to other parties;
the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and
an imprudent refusal of an offer to compromise.
Winneke P said in Spencer v Dowling at 147:
There can be no doubt that, in litigation in superior courts, the usual measure of costs awarded is costs on a party/party basis. There is, likewise, no doubt that a court does have the power to award costs on a higher measure if the circumstances require it. This practice in the superior courts is, in my experience, universal although it is well recognised that there is occurring an ever increasing gap between party/party costs and those actually incurred. In the case of Bass Shire Council v. King (unreported, 15 August 1994), Nathan J. expressed at 1 the practice in what are, in my view, appropriate terms:
It is undoubtedly a principle of law that costs follow the event on a party and party basis, but that the courts are free to depart from that principle if confronted with circumstances where the conduct of one or other of the parties … would warrant the ordering of costs on an indemnity basis. There must be special circumstances which lift the case out of the ordinary.
This practice has continued to apply notwithstanding expressions of view by individual judges that it is capable, in today’s circumstances, of working injustice: see, for example, per Rogers J. (as he then was) in Qantas Airways Ltd. v. Dillingham Corp. (unreported, 14 May 1987). The practice is designed to reflect a compromise between the interests of successful and unsuccessful litigants. As Handley J.A. observed in Cachia v. Hanes (1991) 23 N.S.W.L.R. 304 at 318 the practice is also adopted to provide an “important spur to settlement”. Sheppard J. in Colgate-Palmolive Co. v. Cussons Pty. Ltd. (1993) 46 F.C.R. 225 at 233 restated the practice and pointed out:
This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation … or a decision of an intermediate court of appeal or of the High Court would be required to alter it.
Commenting on that passage, Harper J said in Ugly Tribe Co Pty Ltd v Sikola[10]
11.The compromise about which Winneke P spoke is perhaps justifiable on the basis that potential litigants must not be unnecessarily discouraged from bringing their disputes to the courts. After all success can seldom be guaranteed, if only because – where the facts are in dispute, as they generally are – it is seldom possible to predict with certainty what findings of fact will be made. In these circumstances, an honest plaintiff or defendant might be discouraged from bringing or defending a claim were an adverse result to be followed by an order that the losing party indemnify, or go close to providing an indemnity to, the successful party against the latter’s costs.
12.The position changes where a litigant acts dishonestly in the litigation, or where the rights and privileges of a litigant are flouted or abused. Then, the rationale for refusing to order that the losing party indemnify an opposite party against that party’s costs is less compelling. Indeed, costs are more frequently if not invariably awarded on an indemnity or like basis (such as that of solicitor/client) where findings of dishonesty or serious misconduct have been made against the party ordered to pay.
[10][2001] VSC 189.
Mr Sandbach made submissions as to the aspects of the conduct of the matter by the defendant on which he relied as justifying the application for the payment of indemnity costs. However, many of his assertions, in particular those relating to the motivation behind certain actions of the defendant and the knowledge of the defendant, were not supported by reference to evidence.
His submission that the grounds of defence relied upon at the hearing are a recent invention is not supported by an examination of the original defence filed on 19 February 1999. That defence was clearly not prepared by a lawyer, and has various defects, but the intention to raise those grounds is clear.
Mr Sandbach also submitted, referring to paragraph 46 of the reasons, that Ian Chapman “sought to utilise this proceeding to redress numerous old grievances which had no relevance to the plaintiff’s claim”. That is an extension of my expression of my view as to the credibility of Ian Chapman as a witness. Ian Chapman is not a party to the proceeding, and the irrelevance of much of his evidence is not relevant to the present issue.
To the extent that the submissions of Mr Sandbach rely on delay resulting from the actions of the defendants, the payment of statutory interest is intended to compensate a successful party for delay in the conduct of litigation. The material before me does not enable me to determine the reasonableness of the actions claimed by the plaintiff as resulting in delay.
The writ was issued on 17 September 1998, and there have been numerous interlocutory proceedings before Judges and Masters of this Court. Orders for costs were made in respect of those proceedings on the basis which appeared appropriate to the Court at the relevant time. The judgment against Philip provides for payment by him of costs on a solicitor-client basis. Many of the costs incurred by the plaintiff, and the conduct relied upon by the plaintiff as justifying this application, relate to actions by Philip rather than by Ellen or her estate. The material before me does not enable me to distinguish between the two.
Taking into account what has been said in the authorities to which I have referred, on balance I am not satisfied, in all the circumstances of this case, that it is appropriate to make an order for indemnity costs.
Conclusion
For the reasons given, there will be orders as set out in paragraph 4 hereof, save that
§order 1(h) be amended as set out in [5] above; and
§order 1(k) be amended to read:
(k)
(i)the firstnamed defendant pay the plaintiff’s costs, including all reserved costs, of the claim and the counterclaim;
(ii)those costs be paid on a party and party basis, save as to matters in respect of which orders have already been made on any other basis, which orders are here, for the avoidance of doubt, confirmed.
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