Scott v Grodd (No 2)
[2025] FedCFamC2G 434
•28 March 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Scott v Grodd (No 2) [2025] FedCFamC2G 434
File number: MLG 2305 of 2023 Judgment of: JUDGE CHAMPION Date of judgment: 28 March 2025 Catchwords: CONSUMER PROTECTION – Interlocutory application as to amendment to Statement of Claim – Where both parties made an application for the other party to pay costs – Ordered that the Applicant pay the costs of the amendment on the basis that he sought a dispensation and on the basis of costs wasted at the interlocutory hearing because the Applicant ultimately sought to amend his statement of claim in a form not provided before or at the hearing – Costs fixed in a set amount by reference to the events based scale in Schedule 2 to the Rules and Schedule 3 to Federal Court Rules where the scale in Schedule 2 to the Rules was insufficient Legislation: Federal Circuit and Family Court of Australia Act 2021 s. 214
Federal Circuit and Family Court of Australia (Division 2)(General Federal Law) Rules 2021 rr. 1.06, 7.01, 22.02(2)(d)
Federal Court Rules 2011 Sch. 3, item 2.1
Cases cited: Barnes v Addy (1874) LR 9 Ch App 244
Chahwan v Euphoric Pty Ltd t/as [2009] NSWSC 805
CIQ17v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (No 2) [2020] FCCA 3467
Commonwealth v Harrison (No 2) (2020) 381 ALR 328; [20202] FCA 786
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
FJS18 v Minister for Immigration, Citizenship and Multicultural Affairs [2024] FCA 433
G. E. Dal Pont, Law of Costs (5th ed, 2021) para. 14.37
Division: Division 2 General Federal Law Number of paragraphs: 41 Date of last submissions: 11 March 2025 Date of hearing: On the papers Place: Melbourne Applicant: In person Solicitor for the Respondents: Suburban Law ORDERS
MLG 2305 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: JUSTIN SCOTT
Applicant
AND: WOLFGANG ULRICH WALTER GRODD
First Respondent
SLEEPING BEAUTIES PTY LTD
Second Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
28 MARCH 2025
THE COURT ORDERS THAT:
1.On or before 28 April 2025, the Applicant pay the Respondents’ costs of and occasioned by the application to amend his statement of claim set in the amount of $6,822.99.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CHAMPION:
INTRODUCTION
On 28 August 2024 Mr Scott, the Applicant, made an interlocutory application to file an Amended Statement of Claim (the Amendment Application) as to which he required leave under r. 7.01 of the Federal Circuit and Family Court of Australia (Division 2)(General Federal Law) Rules 2021 (Cth). Mr Grodd and Sleeping Beauties Pty Ltd (SBPL), together the Respondents, opposed the application.
The issue for decision
In circumstances explained below, in the end, the parties achieved a consent position as to the filing of an Amended Statement of Claim (ASOC). The remaining issue for decision is whether I ought to make an order for costs as to the interlocutory Amendment Application. If I order costs, a consequential issue arises as to the amount of any costs and whether I should set the amount of the costs or refer the costs for taxation.
I made orders (by consent) that I would determine costs on the papers. Both parties filed written submissions as ordered. In a notation to orders made on 18 December 2024 I noted that it was my preference to fix the amount of costs and not to send the matter for taxation.
Underlying dispute
The parties’ underlying dispute is about a 1965 Mercedes-Benz 230 SL vehicle (Vehicle). Mr Scott alleges that he purchased the Vehicle in reliance on Mr Grodd’s representations. Mr Grodd was the sole director and shareholder of SBPL which carried on a business as a restorer of vintage and classic motor vehicles. The parties’ dispute includes issues about ownership and possession of the Vehicle and issues arising under the Australian Consumer Law. A trial is set down on an estimate of five days from 4 – 8 August 2025. It is not necessary to say anything more about the underlying dispute for the purposes of these reasons as to costs of the Amendment Application.
WHAT ARE THE PARTIES’ SUBMISSIONS?
Each party submits that the other party should pay their costs of the Amendment Application.
The Applicant’s submissions
Mr Scott’s primary submission is:
(1)the Respondents pay his costs of and incidental to the Amendment Application fixed in the sum of $8,512.21.
Alternatively, he submits that:
(2)the costs be “costs in the cause”; or
(3)the Respondents’ costs be reserved; or
(4)the Applicant pay the Respondents costs fixed in the sum of $1,440 being the party and party costs on scale for preparing the Respondents defence to the ASOC.
The Respondents’ submissions
The Respondents submit that Mr Scott should pay their costs of and incidental to the Amendment Application and their costs thrown away by reason of the leave granted to amend the statement of claim. The Respondents submit that their party – party costs are “approximately $27,590”. The Respondents acknowledge the amount of their costs is “not the subject of evidence before the court”. They submit the quantum of the claimed costs results from:
the Applicant previously circulating three different proposed amended Statements of Claim, wasted costs of a case management hearing, and significant correspondence between the Applicant and the solicitors for the Respondent.
The Respondents, although they acknowledged my stated preference to fix costs, nonetheless submit that because the Respondents’ costs are both “significant … and complicated” the appropriate course if costs are ordered and the parties cannot agree the amount of those costs is that the costs ought to be taxed.
WHAT IS THE RELEVANT CHRONOLOGY AS TO THE APPLICATION TO AMEND?
It is necessary to set out a little detail as to how the Amendment Application progressed.
On 28 August 2024, Mr Scott filed the Amendment Application and a supporting affidavit. Before the making of the Amendment Application, he had provided at least two iterations of the proposed ASOC to the Respondents. The Respondents had not consented to leave being granted to the Applicant to amend his statement of claim in the form it had been provided to them.
As at the date of the application (28 August 2024) the proposed amendments to the ASOC abandoned some previous claims and pressed some new claims. As Mr Scott described the proposed amended pleading in written submissions dated 13 September 2024:
10. At a high level, the proposed amended pleading does the following:
a. introduces new causes of action including:
i. equitable fraud;
ii. the tort of conversion;
b.abandons certain causes of action in respect of which the Respondents were likely to have a complete defence by reason of a limitation period including:
i. a cause of action founded on the tort of deceit; and
ii. claims in respect of “Alfa Romeo” vehicles.
In the Respondents’ Outline of Submissions in response dated 27 September 2024 opposing the grant of leave to amend the statement of claim, among other matters, the Respondents opposed the application on the basis that certain proposed paragraphs in the ASOC attempted to plead a knowing receipt claim under what is sometimes referred to as the second limb of Barnes v Addy (1874) LR 9 Ch App 244 without pleading its necessary elements.
The Amendment Application came on for hearing on 6 November 2024.
Some of the proposed amendments in the ASOC, notably as to a new claim in conversion, were not sharply contested. The main dispute was about the pleading as to the proposed claim under the “second limb” of Barnes v Addy being a claim against a respondent who assisted an errant fiduciary with knowledge of a dishonest and fraudulent breach of fiduciary duty. There was particular reference to the High Court’s decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [182] –[186].
Then, near the end of the half-day hearing, after about 2½ hours hearing time, but at a stage when the hearing was not yet complete, I had the following exchange with counsel for Mr Scott, initiated by Mr Scott (T65: L20 -23):
COUNSEL: Your Honour, I’ve just received instructions - - -
HIS HONOUR: Yes.
COUNSEL: - - - [t]o not press the proposed amendments in respect of the Barnes v Addy claim against either of the respondents. My client instructs that he presses the claim – the amendments in respect of the claim in conversion, in respect of which I would need to – I suspect I need to present a proposed – a further proposed amendment to the pleading that doesn’t have all of these additional – the additional claims that relate to the allegations of breach of fiduciary duty.
HIS HONOUR: Well, that rather changes the terrain, Mr - - -
Once the Barnes v Addy claim was not pressed, as counsel for the Respondents observed there was “likely to be agreement” on other matters (T67:L40). It was, however, necessary for a further iteration of the proposed ASOC to be provided to the Respondents for their consideration after the hearing on 6 November 2024. As matters transpired, the terrain having changed, the only substantive orders I made on 6 November 2024 were orders to adjourn the Applicant’s claim and to reserve costs.
In due course there was agreement as to the form of the ASOC. On 18 December 2024, I made orders that the Applicant have leave to file an amended statement of claim on or before 20 January 2025. The ASOC was filed in a form to which the Respondents consented. In line with what had occurred at the hearing on 6 November 2024, the Barnes v Addy claim is not pleaded in the ASOC.
In summary, therefore, the parties, after the sequence of events set out above and by consent, agreed to orders for the Applicant to file and serve an ASOC. Since then, the Respondents have filed a defence to the ASOC.
As a result, the only remaining matter for decision is which party should pay the costs as to the Amendment Application given the sequence of events I have outlined above.
WHAT ORDER AS TO COSTS OUGHT TO BE MADE AS TO THE AMENDMENT APPLICATION?
Under s. 214(3) of the Federal Circuit and Family Court of Australia Act 2021 I have a discretion as to costs.
There are two main factors which underpin my decision that Mr Scott ought to pay the costs of the Amendment Application.
First, as an ordinary, but not inflexible, rule a party who seeks a dispensation is ordered to pay the other party’s costs of the application whether or not it succeeds. Professor Dal Pont in the Law of Costs (5th edition, 2021, LexisNexis) at [14.37] gives as an example of a dispensation an application to amend a pleading. Illustratively, Professor Dal Pont refers to Chahwan v Euphoric Pty Ltd t/as [2009] NSWSC 805 at [43] where Brereton J said:
On an application for leave to amend which succeeds, one starts from the position that the successful applicant for leave to amend pays the unsuccessful respondent’s costs, the amendment being an indulgence granted by the court, the costs associated with which could have been avoided had the applicant got the pleading right or complete in the first place. But the court may depart from that ordinary position, in particular where the opposition to the amendment is unreasonable, or where the opposition is on such a scale and to such an extent that it adds unnecessarily to the costs of the application. In such a case, the position involves balancing the relative responsibility of the respective parties for the costs associated with the amendment and the process of seeking leave to amend.
[Emphasis added]
With reference to Brereton J’s observation in Chahwan at [43] above as to when “the court may depart from that ordinary position”, I note that any suggestion of Mr Scott that the Respondents’ opposition to the amendment was “unreasonable” cannot be sustained in circumstances in which at a late stage of the Amendment Application (or at least at a stage where there had been substantial court time expended) the Applicant abandoned the Amendment Application as to its most contentious aspect, namely the Barnes v Addy claim. I qualify any suggestion that the Applicant ought to have “got the pleading right or complete in the first place” by noting that because the conversion claim relies upon the Respondents’ alleged use of the Vehicle which is in the Respondents’ possession the Applicant’s conversion case might not have been apparent when he first pleaded his case.
Second, and more significantly as to my decision that Mr Scott ought to pay the cost of the Amendment Application, the costs of the parties’ appearance on 6 November 2024 were wasted. As events at the hearing transpired, Mr Scott did not have the ASOC in its final form on 6 November 2024. His change of position — mid-application — meant that a further iteration of the ASOC was provided only after the hearing on 6 November 2024. Once that further iteration of the ASOC was provided after the hearing the Respondents consented to it, but the costs of 6 November 2024 had been incurred and, I find, wasted.
In my assessment, the Amendment Application is a discrete matter which means an order for costs in the cause or that costs be reserved is not appropriate.
For the reasons above, it is appropriate that Mr Scott pay the costs of, an occasioned by, the Amendment Application.
SHOULD I FIX COSTS AND, IF SO, IN WHAT AMOUNT?
Under r. 22.02, I may “set the amount of the costs”. As I have noted, in a notation to my orders dated 18 December 2024, I indicated a preference to set the amount of the costs.
I do not accept that the situation is “complicated” as the Respondents assert.
Under the overarching purpose of civil practice and procedure provisions under s. 190(2)(e) of the Act, an objective of the overarching purpose is “the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute”. Referring costs in connection with the Amendment Application for taxation will spawn satellite litigation at a cost to the parties that is contrary to the overarching purpose because it is disproportionate to the complexity of the matters in dispute
Despite being afforded an opportunity to put material before the court as to the claimed amount of costs, by their own admission, the Respondents have provided no evidence as to the asserted costs of approximately $27,590.
I propose to set the amount of costs as best I can having regard to the material provided.
It may be that there are other costs. I have adopted the view that to the extent that there are additional costs the Respondents have incurred as to which they will not receive a partial indemnity that is a result of me proceeding on the material that I have without further delaying an outcome as to this matter. I agree with Mr Scott’s submission the Respondent’s reference to the fact that their costs exceed $27,500 “lacks any evidence and makes no sensible reference to the court scale of costs”. I am left to do the best I can on the material provided.
In FJS18 v Minister for Immigration, Citizenship and Multicultural Affairs [2024] FCA 433 Burley J said at [43] that “the broad jurisdiction to award costs empowers the Court to make orders that fairly indemnify the successful party”. Approving what Judge Manousaridis had said in CIQ17v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (No 2) [2020] FCCA 3467 at [25] –[26], Burley J said in FJS18 at [44]:
The rules in effect lay out a palette of choices for the Court and it will depend on the particular circumstances of the case which is the choice most apposite.
Rule 40.02(b) of the Federal Court Rules 2011 provides that costs may be awarded in a “lump sum”. Fixing a lump sum of costs is often appropriate as it “will avoid the expense, delay and protraction of litigation arising out of taxation” (Commonwealth v Harrison (No 2) (2020) 381 ALR 328; [20202] FCA 786, [110]).
In the current case, however, the Respondents have not provided any itemisation of the actual professional costs incurred, rendering it inappropriate to use the asserted costs of $27,500 as a starting point in making a lump sum costs order.
Therefore, as to what is most apposite in the current case, I have had regard to the events-based scale in Part 1 of Schedule 2 to the Rules in setting the amount of the costs.
Where that events based scale is insufficient, I have had regard to Schedule 3 to the Federal Court Rules 2011. As to having regard to Schedule 3 to the Federal Court Rules 2011, I note that Mr Scott proceeded - on the basis of his fourth alternative submission - that if I were persuaded to order him to pay the costs of the Respondents I ought to order party and party costs on scale for the Respondent’s costs of preparing its defence to the Applicant’s amended statement of claim in the sum of $1440 – 19 folios. Although his submissions do not expressly say so, I have inferred that the scale to which Mr Scott refers is Schedule 3 to the Federal Court Rules 2011. Under r. 1.06 of the Rules in this court “if in a particular case the rules are insufficient… the court may apply the Federal Court rules.” Under item 2.1 of Schedule 3 to the Federal Court Rules 2011 a party is entitled to costs for preparing documents “for each 100 words: $68”. On that basis, the Respondents’ scale costs for preparing the defence to the ASOC would approximate $1,440. In this case, the costs of preparing the Defence to the ASOC are not captured by the events based scale in Schedule 2 to the Rules of this Court.
In summary, in my assessment, I ought to set the amount of the costs by reference to the events base scale as to:
(a)the Respondents’ costs of the contested interim hearing on 6 November 2024;
(b)the costs of this contested costs dispute; and
(c)order an additional amount as to the costs of the preparation of the Defence.
I have calculated costs which total $6,882.99 in accordance with the following table:
Item # Work done Hrs allocated Costs allowed 3 Interim or summary hearing—as a discrete event
[contested Amended Application]$2,093.62 9 Daily hearing fee for 6 November 2024 (half day) $1,255.75 3 Interim or summary hearing—as a discrete event
[contested costs application heard on the papers]$2,093.62 Preparation of defence to ASOC
Per 100 words: $68$1,440 TOTAL $6,882.99
Under r. 22.02(d), I will order that Mr Scott pay costs fixed in the amount of $6,822.99 by 28 April 2025, that is within 30 days of the date of these orders.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate: CH
Dated: 28 March 2025
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