Smith v JZ Lee Interiors Pty Ltd (No 2)
[2016] VSCA 161
•14 July 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0038
| BRENDON ASHLEY SMITH (NO 2) | First Appellant |
| DONAMIS CONSULTANTS (VIC) PTY LTD (ACN 125 343 268) | Second Appellant |
| v | |
| J Z LEE INTERIORS PTY LTD (ACN 075 815 093) | Respondent |
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| JUDGES: | WEINBERG and TATE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 17 June 2016 |
| DATE OF JUDGMENT: | 14 July 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 161 |
| JUDGMENT APPEALED FROM: | J Z Lee Interiors Pty Ltd v Smith & Anor (Unreported, County Court of Victoria, Judge Kennedy, 16 April 2015) |
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COSTS – Whether successful appellants should be granted costs of the applications to amend statement of claim and stay the trial below in addition to the costs of the appeal – Proceedings below included claims under Corporations Act 2001 which County Court had no jurisdiction to hear – Issue of jurisdictional impediment not the subject of a specific ground of appeal but raised between the practitioners - Whether unusual circumstances apply to displace the ordinary rule that costs follow the event where an appeal succeeds.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Ms M B Loughnan QC with Mr S Dyrenfurth | Altus Lawyers |
| For the Respondent | Mr I W Upjohn QC with Mr J P Carney | Webb Korfiatis Commercial |
WEINBERG JA
TATE JA:
Overview
Brendan Smith (‘Smith’) and Donamis Consultants (Vic) Pty Ltd (‘Donamis’) were the defendants in proceedings for damages brought against them by J Z Lee Interiors Pty Ltd (‘Lee’). Those proceedings were originally brought in the County Court, but have since been transferred to the Trial Division of this Court.
The matter presently before this Court concerns the costs of an application for leave to appeal brought by Smith and Donamis that was heard on 16 July 2015. On that day, leave to appeal was granted, and the appeal was treated as having been heard instanter and was allowed in part (‘the Appeal’). On 3 August 2015, we published our reasons for decision.[1]
[1]Smith v J Z Lee Interiors Pty Ltd [2015] VSCA 203 (‘Reasons’).
At that time, the Court reserved on the question of costs. It considered that it was necessary to resolve the issue of the transfer of the proceedings from the County Court to the Trial Division before costs were finally determined.
The Court stated:
Having regard to the peculiar features of this case, and the somewhat unsatisfactory manner in which the various issues that have arisen for determination have come to notice, we consider it appropriate to do nothing more than reserve costs, both of the application for leave to amend below, and of the application for leave to appeal before this Court. We will provide the parties with an opportunity to make submissions on costs once the outcome of the application for transfer has become known, either as part of the balance of the appeal or as the sole remaining issue of the two applications before us.[2]
[2]Reasons [50].
The outcome of the application for transfer being now known, Smith and Donamis have applied to this Court seeking costs against Lee.
More specifically, Smith and Donamis seek the costs of and incidental to Lee’s various applications to the County Court for leave to amend its statement of claim, including costs reserved on 23 January 2015 and 27 March 2015 and incurred on 16 April 2015. On 16 April 2015, Judge Kennedy granted Lee leave to amend its statement of claim, and that was the decision that was sought to be appealed.
Smith and Donamis also seek the costs of and incidental to an application made to Judge Anderson on 29 May 2015 for a stay of the County Court proceedings and an order vacating the trial date of 21 September 2015. In addition, they seek the costs of an application which they say they were compelled to make on 15 June 2015 for an extension of time within which to file a defence and amended counterclaim.
Finally, Smith and Donamis seek the costs of and incidental to their application for leave to appeal to this Court, and the costs of the Appeal itself. This last application encompasses an application for a stay of the County Court proceedings.
Background
The Appeal arose out of a claim for damages brought by Lee against Smith and Donamis which was originally instituted in the County Court.[3] The circumstances giving rise to that proceeding are set out in our reasons for judgment on the Appeal (‘Reasons’) and need only be briefly summarised here.
[3]There was a second related matter between these parties also in the County Court, which was not the subject of the Appeal.
For many years up until 2013, Smith managed Lee’s business. Although the exact nature of his role was somewhat unclear, he was broadly described as having performed the functions of a general manager, or CEO. He was, and at the time of the Appeal continued to be, the sole director and shareholder of Donamis.
In summary, the central allegations made by Lee were that:
a) Smith caused Lee to make payments totalling $525,309.17 to various suppliers in connection with works to be carried out on properties that Smith owned;
b) Smith directed Lee personnel to carry out building works at one of those properties to the value of $122,663.18; and
c) Smith caused a rebate in the amount of $39,300, which Lee was entitled to receive from a third party, to be applied to the acquisition by Donamis of a motor vehicle.
By Lee’s original statement of claim, it sought relief from Smith and/or Donamis based upon a number of separate and alternative causes of action. These included claims for breach of contract, and various breaches of equitable and fiduciary duties said to have been owed by Smith to Lee by reason of Smith having been an employee of Lee or, alternatively, by reason of the nature of the functions that Smith had been performing.
Lee also sought orders for compensation under s 1317H and/or s 1324 of the Corporations Act 2001 (‘Corporations Act’), on the basis that Smith was, in truth, a ‘director’ or ‘officer’ of Lee within the extended meaning of those terms in s 9 of that Act. It was said that Smith had breached the duties imposed upon such persons under ss 180, 181 and 182 of the Act.
There were also various claims by Lee against Donamis. These were put on several alternative bases.
The history of this proceeding is somewhat complicated. In summary:
· On 13 January 2015, after pleadings had closed and discovery had been completed, Lee applied by notice for leave to file an amended statement of claim. That proposed amended statement of claim sought to add several entirely new claims against Smith and Donamis, alleging further breaches of the duties to which we have already referred;
· On 4 February 2014, Lee served a second proposed amended statement of claim which bore the same date as the original amended statement of claim, 13 January 2015. That second proposed amended statement of claim contained two additional claims, one for of $73,636.50, and the other for $7,505,689.68. That latter claim was characterised as being for ‘excessive payments’ by Lee to Donamis for administration services. Counsel for Smith and Donamis submitted at that time that the fresh claims, if permitted to be pleaded, would add an estimated five days to the trial and over $200,000 in costs to their clients;
· on 27 March 2015, Judge Kennedy heard Lee’s application to amend its statement of claim and reserved her decision;
· on 16 April 2015, Judge Kennedy granted that application;
· thereafter, Smith and Donamis sought a stay and also sought leave to appeal against Judge Kennedy’s order; and
· on 3 June 2015, Judge Anderson heard that application and, of his own motion, ruled that it was appropriate that this Court deal with the stay application, rather than the County Court.
Disposition of the Appeal
Before this Court, Smith and Donamis sought leave to appeal against the orders made by Judge Kennedy on 16 April 2015 granting Lee leave to file an amended statement of claim. They also sought from this Court a stay of the trial and an order vacating the proposed trial date. They did so principally on the basis that the newly expanded case against them would require greater time for preparation.
On 23 June 2015, the solicitors for Smith and Donamis wrote to the solicitors for Lee in the following terms:
BRENDON SMITH & DONAMIS CONSULTANTS (VIC) PTY LTD v J Z LEE INTERIORS PTY LTD
SUPREME COURT OF VICTORIA – COURT OF APPEAL S APCI 2015 0038
1. We refer to your client’s Amended Statement of Claim dated 23 April 2015 (Claim), which is the subject of our clients’ application for leave to appeal in the above Proceeding.
2.The Claim alleges contraventions of sections 180, 181 and 182 of the Corporations Act 2001 (Cth) (CA): paragraphs 13.121(b), 35(b), 39, 40, 46(b), 49 and 50 of the Claim.
3.For these alleged contraventions, your client seeks an order for compensation pursuant to section 1317H and/or section 1324 of the CA (prayer for relief A of the Claim).
4.Section 1317H(l) provides that “A Court may order a person to compensate a corporation...” (our emphasis added).
5.Section 1324(10) provides that “Where the Court has power under this section..., the Court may... order that person to pay damages to any other person” (our emphasis added).
6.Both ss 1317H and 1324 use the word “Court” with a capital “C”. They confer jurisdiction on “a Court” and “the Court” respectively: see In the matter of Douglas Webber Events Pty Ltd (ACN 160 966 914) [2014] NSWSC 1544, [34].[[4]]
[4]Reported at (2014) 291 FLR 173.
7. Section 58AA (Meaning of court and Court) of the CA provides:
(1) Subject to subsection (2), in this Act:
court means any court.
Court means any of the following courts:
(a) the Federal Court;
(b) the Supreme Court of a State or Territory;
(c) the Family Court of Australia;
(d)a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act;
(2)Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject to Part 9.6A, be brought in any court.
8. In relation to (d) of “Court” in s 58AA(1), the only Proclamation made to date pursuant to subsection 41(2) concerns the Family Court of Western Australia. By a Proclamation dated 4 November 1991, the Governor–General declared that, from 5 November 1991, s 41 applies to the Family Court of Western Australia (see the Australian Government Gazette No S300 of 1991).
9. By s 58AA, “Court” means any of the Federal Court, the Supreme Court of a State or Territory, the Family Court of Australia, or the Family Court of Western Australia. No other court may exercise the powers given by sections 1317H and 1324 of the CA. Thus, the County Court of Victoria cannot exercise the said powers.
10. As Brereton J said in In the matter of Douglas Webber Events Pty Ltd (ACN 160 966 914) [2014] NSWSC 1544, [35]:
... where a function under the Act is given to a “Court” (as distinct from a “court”), only a Court as so defined can exercise that function. Sections 237, 1317H, 232 and 233 are such provisions, and jurisdiction under them is limited to such “Courts” and is not given to other courts...
11. The County Court has the jurisdiction of Part 9.6A of the CA in civil matters arising under the Corporations legislation, other than matters which the CA clearly intends (as by use of “Court” with a capital “C”) to be dealt with only by the superior courts (ie. the Federal Court, the Supreme Court of a State or Territory, the Family Court of Australia, and the Family Court of Western Australia): CA s 1337E and meanings of “lower court”, “superior court” and “superior court matter” in CA s 9.
12. Put simply, the County Court has no jurisdiction to grant relief under sections 1317H and 1324 for the alleged contraventions of sections 180, 181 and 182, being relief that can be granted only by a “Court” within the meaning of the CA.
13. In view of the above, please advise us what steps your client intends to take by this Friday 26 June 2015.
14. Our clients reserve all their rights in relation to the issue the subject of this letter.[5]
[5]Formal parts omitted.
That letter elicited the following email response, on 26 June 2015, from the solicitors for Lee:
We refer to your letter of 23 June 2015 regarding the County Court’s jurisdiction and advise our clients will be filing an application under the Courts (Case Transfer) Act 1991 to have both County Court Matters (CI–14–03344 & CI–14–03345) transferred to the Supreme Court.[6]
[6]Formal parts omitted.
The application for leave to appeal filed on 15 May 2015 contained 17 proposed grounds of appeal. For present purposes, the only ground to which we need refer is ground seven. That ground is in the following terms:
The learned Judge erred in granting leave to amend in respect of paragraphs 46(b), 49 and 50 [of the second amended statement of claim] as they apply to alleged breaches of the statutory duties … and alleged payments by [Lee] to Donamis … made prior to 16 April 2009, alternatively 11 July 2008, because such claims are statute–barred.
On 13 July 2015, only three days before the hearing in this Court, the solicitors for Smith and Donamis brought to the Court’s attention the fact that they had recently raised with Lee that the County Court had no jurisdiction to hear any of the Corporations Act claims. Lee’s response indicated that it accepted that this was so, and that it would deal with the matter in due course by seeking a transfer of the proceeding to the Trial Division.
As a result, by the time the matter reached this Court for hearing, the very many grounds of appeal upon which Smith and Donamis had sought to rely had been overtaken by the fact that it was clear that the appeal would have to be allowed. Judge Kennedy’s decision allowing Lee to amend its statement of claim could not be permitted to stand since a number of the claims sought to be pursued were not justiciable in the County Court.
In these circumstances, the Court approached the matter not on the basis of whether there was any specific error to be discerned in Judge Kennedy’s decision, but rather in the hope that there might be a practical solution to the problems that seemed to have beset this entire litigation.
The Court concluded as follows:
Given the significance of a possible transfer of the proceeding to the Supreme Court, the need to consider that matter afresh seems paramount. It would be wholly artificial to assess the reasons of Judge Kennedy without appreciating the fundamental concern that they were given in a proceeding that should never have been commenced in the County Court. On any view, Judge Kennedy’s ruling cannot stand. Her Honour has granted leave to amend the statement of claim to include a number of causes of action that the County Court simply is not competent to hear. Plainly, a pleading that includes allegations that cannot be entertained should not be permitted to go forward.[7]
[7]Reasons [40].
On the question whether Lee might be prejudiced by a transfer of the proceedings to the Trial Division (by way of relevant limitation periods in respect of the Corporations Act and/or the Limitations of Actions Act 1958), the Court considered (without finally deciding) that:
a judge of this Court, having taken over the carriage of a case initially brought in the wrong court, cannot make an order nunc pro tunc protecting Lee from the ordinary effect of limitation bars where those bars extinguish the claims.[8]
[8]Ibid [42].
The Court went on to say:
Whatever prejudice Lee may suffer is a direct result of having commenced a proceeding in the County Court when that Court is incompetent to hear the proceeding. A civil proceeding is made up of the claims relied upon by a plaintiff. It is not a matter of a court being competent to hear and determine a portion of a proceeding. The inclusion of the relevant Corporations Act claims deprived the County Court of jurisdiction to hear the proceeding. Furthermore, upon realising that the proceeding was incompetent Lee was not prepared to abandon any claim that did not fall within the jurisdiction of the County Court to maintain the proceeding in the Court in which it had been commenced or the benefit of any orders made in its favour. Of course, Lee has every right to rely upon claims it has identified as properly available on the facts and circumstances of the case. However, the consequence of Lee seeking to maintain the relevant Corporations Act claims is that the proceeding can only be heard in the Supreme Court and Lee must accept the consequences of that being so. As we have indicated, in our view, if the matter is transferred to the Supreme Court the question of the scope of the proceeding, and the range of permissible claims that can be tried, should be a matter for the trial judge. This is in order to ensure that all relevant issues are properly ventilated in the Supreme Court and the proceeding is put on a proper footing.[9]
[9]Ibid [48].
As mentioned previously, the application for leave to appeal was granted, and the appeal was treated as having been heard instanter and was allowed in part.
The Court also ordered (in summary) that:
· the order of Judge Kennedy made on 16 April 2015 granting the respondent leave to amend its statement of claim be set aside, insofar as that order related to the claims based on breaches of the Corporations Act;
· in the event that the proceedings were, ultimately, transferred to the Trial Division, the balance of Judge Kennedy’s order would also be set aside. The question whether leave to amend should be granted was then to be heard by the judge in the Trial Division to whom the proceedings were allocated;[10]
[10]An order was also made to hear the balance of the application for leave to appeal, in the event that the proceedings were not ultimately transferred from the County Court to the Supreme Court, which it turns out they were.
· the trial date then fixed for the hearing of these proceedings, 21 September 2015, be vacated;
· the proceedings in the County Court be stayed until further order of this Court; and
· Any further hearing of the appeal (if necessary) be adjourned to a date to be fixed.
The transfer of the proceedings to the Trial Division
Following the Appeal, the proceedings were, ultimately, transferred from the County Court to the Trial Division.
On 3 December 2015, Elliott J heard two applications for security for costs, one brought by Smith and Donamis and the other by Lee. His Honour also heard Lee’s application to amend its statement of claim. Certain of the amendments sought by Lee at that time differed from those that had previously been sought before Judge Kennedy.
On 8 December 2015, Elliott J published reasons.[11] Among other things, his Honour granted Smith and Donamis’s application for security for costs relating to the amendment application brought in the Trial Division. He refused leave in respect of certain proposed claims in the amendment application, but granted leave in respect of others. Lee was granted leave to file and serve an amended statement of claim in a form that accorded with his Honour’s reasons for judgment. We understand that an amended statement of claim in those terms was filed and served on 14 December 2015.
[11]J Z Lee Interiors Pty Ltd v Smith [2015] VSC 693.
We also note that Elliott J made certain orders as to the costs of the proceedings before him.
On 16 March 2016, Lee again sought, in the Trial Division, to amend its statement of claim. It proposes to add still further claims against Smith and Donamis. That application has been listed for hearing on 22 July 2016.
The present application before this Court
In broad terms, the issue before this Court is whether, Smith and Donamis having succeeded in the Appeal, they should have their costs, and if so on what terms.
The problem arises because the Appeal was allowed on the basis of a point of law that was not reflected in any of the grounds in the notice of appeal. All that could be said is that ground seven challenged the claims brought under the Corporations Act, alleging that they were ‘statute-barred’ by reason of the expiry of the relevant limitations period. Nothing was said in the proposed grounds of appeal, or in the written submissions filed in support of the grant of leave to appeal, regarding jurisdiction.
However, as Smith and Donamis point out, ground seven in the application for leave to appeal did assert, quite directly, that the Corporations Act claims could not be pursued as a matter of law. That is, in fact, the true position.
Appellants’ submissions
In their written submissions, and in oral argument, counsel for Smith and Donamis referred to this Court’s normal practice with regard to costs in circumstances where an appeal has been successful.[12]
[12]Referring to Supreme Court (General Civil Procedure) Rules 2015 r 64.38(1)
It was correctly submitted that, as a general rule, the costs of an appeal will follow the event. Unless special circumstances exist, a successful appellant will recover both the costs of the appeal and the costs incurred below.[13]
[13]Solomon v Miller (1865) 2 WW & A’B (E) 135; Learmonth v Bailey (1875) 1 VLR (E) 34; and Olivant v Wright (1875) 45 LJ Ch 1.
Counsel submitted that Lee was entirely responsible for all of the problems which had beset this case. It was Lee that sought to include in its amended statement of claim various causes of action under the Corporations Act that Lee ought to have known could not be heard in the County Court.
To make matters worse, Lee had been told in the clearest possible terms, on 23 June 2015, several weeks before the hearing of the appeal, that the County Court could not entertain its Corporations Act claims. The appeal was bound to succeed on that ground alone. Yet Lee declined to concede the appeal, forcing the parties to prepare arguments, and to come before this Court for an oral hearing.
For these reasons alone, it was submitted that Lee should pay the costs of and incidental to the Appeal. It was further submitted that Lee should also pay the costs arising out of the various amendment applications in the County Court, as well as the applications for stays and the vacating of the trial date, as well as Smith and Donamis’s application for an extension of time.
Lee’s submissions
In their written submissions, counsel for Lee argued that there should be no order for costs in respect of the Appeal, other than costs in the cause. They submitted that the same order, namely costs in the cause, was also appropriate with regard to the various amendment applications that had been made in the County Court and the applications ancillary thereto. Alternatively, the question of who should bear those costs should be dealt with by Elliott J.
Lee submitted that the default position that costs follow the event in relation to a successful appeal should, in the unusual circumstances of this case, be displaced. Lee referred in that regard to Great Gulf Company v Sutherland,[14] where Barry J said:
[W]here in a County Court appeal the case is decided on a point which has, for the first time, been noticed in this court, the rule generally prevailing will be that no costs will be allowed.[15]
[14](1873) 4 AJR 164. Applied in Armstrong v Boulton [1990] VR 215, 223.
[15]Ibid 164.
Lee also referred to Miller v Miller,[16] where the High Court allowed the respondent to an appeal the costs of the appeal, even where the appeal was successful. There, the appellant had notified the respondents, about 10 or 12 days prior to the hearing, of an additional ground. The Court granted leave to add the ground at the commencement of the hearing. In those circumstances, Barwick CJ said:
I am of the opinion that … the costs of the day, the hearing of the appeal taking less than the day, should be paid by the appellant. I do not think that the order for costs should go further than that as the Court has not dealt with any of the other grounds of appeal.[17]
[16](1978) 141 CLR 269.
[17]Ibid 277.
As regards the costs associated with the various applications to amend the statement of claim in the County Court, counsel for Lee referred to Armstrong v Boulton[18] which, it was submitted, demonstrated the ‘usual outcome on costs of an appeal allowed on grounds not raised below’. In that case, the Court noted that:
In McCracken v Dacomb (1890) 16 VLR 378, at 385-6, this [C]ourt gave no costs either of the proceedings below or of the appeal, ‘because the ground upon which we decide the case does not appear to have been presented to the learned primary judge’.[19]
[18][1990] VR 215.
[19]Ibid 223.
Lee did acknowledge, however, that ‘[o]ther approaches are taken from time to time’.[20]
[20]The respondent referred again to Armstrong v Boulton [1990] VR 215 in which a reference was made to Goddard v Jeffreys (1882) 46 LT 904, where the Court of Appeal left the question of who was to pay the respondent’s costs to the court below. The respondent also referred to Bondi Beachside Pty Ltd v Chief Commissioner of State Revenue [No 2] [2014] NSWCA 128. In that case, the point raised on appeal, though new, was closely linked to and not divorced from the matters argued before the primary judge.
Lee referred to four matters which, counsel submitted, were particularly relevant in considering the costs application in this case. In summary, those matters were:
· the application to amend is still on foot before Elliott J. Therefore, there is merit in leaving the entire question of costs to his Honour;
· a ‘substantial part’ of the application to amend was successful on the basis of Elliott J’s decision on 8 December 2015;
· in late 2015, Elliott J directed the parties to inform him of their costs to date. On 3 December 2015, Lee reported that it had spent $412,500.00 to date. Smith and Donamis reported that they had spent $542,000.00 by that stage. A great deal more had been spent since that date filing, for example, a 14 page affidavit on behalf of Smith and Donamis to which were annexed 225 pages of exhibits. Much of that material was said to be objectionable. In addition, it was said that the affidavit was incomplete, and for that reason lacked any real utility; and
· the leave application alleged bad faith on the part of Lee and its counsel, an allegation that it was submitted was ‘plainly unsustainable’. Lee submitted that this was relevant for two reasons. First, because the general conduct of an appellant is to be taken into account in considering a question of costs. And secondly, because although responsibility for the jurisdictional error was initially Lee’s, where an application has been ‘inappropriately tested’ such errors are more likely to be overlooked.
Analysis and conclusion
In his reasons for judgment on the application for leave to amend the statement of claim, and in respect of the various applications for security for costs, Elliott J was critical of the parties for the manner in which they had conducted this case. His Honour said:
The above reasons deal with the applications presently before the court. However, further comments need to be made in relation to the conduct of this case. For the purposes of the applications before the court, a total of 15 affidavits were filed by the parties. A number of these were voluminous. Based on my review of the file, this appears to be typical of the approach of the parties in this proceeding.
As a result of the concern about the level of costs being incurred, I required the parties to inform the court as to the amount of costs incurred to date. Remarkably, the plaintiffs have already incurred $412,500 with respect to claims that are unlikely to exceed $1 million in total. It is difficult to form any conclusion other than, by the time this matter is ready for trial, the costs incurred will be completely disproportionate to the amounts involved.
The Defendants have incurred even further costs, totalling $542,000. In other words, the total costs already incurred by the parties to date are likely to have exceeded the total of the amounts claimed.
In the circumstances, it is appropriate to record that no party should assume that the conduct of this case moving forward should be conducted other than strictly in accordance with overarching obligations. Although the allegations made by the Plaintiffs are of a serious nature, this does not diminish the applicability of the overarching obligations.[21]
[21]J Z Lee Interiors Pty Ltd v Smith [2015] VSC 693, [69]–[72] (footnotes omitted)(emphasis in original).
We would, with respect, echo his Honour’s concerns. It is nothing short of astonishing that a commercial dispute involving substantial large sums of money, and raising extremely serious allegations against one of the parties, should, in this day and age, find its way into a court which has no jurisdiction to entertain significant aspects of the claims brought.
Plainly, Lee brought that problem upon itself. Nonetheless, it can also be said that for a long time, Smith and Donamis did nothing to bring this matter to a head. It was late in the piece that their legal advisers identified the jurisdictional issue as an insuperable obstacle to the continuation of the County Court proceeding.
The amount spent on this litigation thus far (in excess it would seem of $1million) seems to us to be quite extraordinary.
Both sides perhaps need to be reminded of the provisions of the Civil Procedure Act 2010, and its requirement that civil disputes be conducted appropriately and with a sense of proportion.
It is unnecessary for present purposes to go through each and every one of the numerous and quite intricate arguments that were advanced before this Court on the costs application. To take but one example, the parties were in dispute as to whether it had truly been necessary to pursue an application for a stay in circumstances where senior counsel for Lee had proffered the equivalent of an undertaking not to seek judgment in default, but had seemingly qualified that undertaking by using the expression ‘at this stage’. That issue presented as something of a distraction, since it was entirely clear that no judge would permit Lee to retain a judgment entered in default after an oral assurance of that kind had been given by senior counsel.
We recognise that there are circumstances in which it may be appropriate to depart from the ordinary rule that costs follow the event in relation to a successful appeal. Where, for example the appeal succeeds upon a ground that first emerged during the course of argument, perhaps having been raised by the court itself, there might be sound reasons for not invoking the general rule.
In the present case, however, not only was there a ground of appeal challenging the viability of the Corporations Act claims (ground seven), but Lee had been notified by the email of 23 June 2015 of the jurisdictional problem well before the hearing of the Appeal.
The terms of that email are important. They make it crystal clear, and beyond argument, that the County Court had no jurisdiction to entertain the Corporations Act claims. Indeed, they set out with commendable precision exactly why that was so.
At the stage at which there was this exchange of correspondence, all that was lacking, so far as Smith and Donamis were concerned, was an application by them to amend their proposed grounds of appeal. The amendment would make it clear that the jurisdictional point was being taken in support of ground seven.
Counsel for Lee frankly conceded before this Court that had Smith and Donamis made such an application to amend the grounds of appeal, Lee would have been constrained to concede at least that part of the Appeal. There might still have been argument regarding the other grounds, if they were pressed, but the appeal itself, insofar as it sought to have Judge Kennedy’s decision to allow Lee to amend its statement of claim quashed, would have had to succeed.
We note that the application for leave to appeal characterised the decision from which leave to appeal was sought as being the ‘whole’ of the decision sought to be appealed.
Taking a practical view of this case, it seems to us that Lee bears by far the greater responsibility for what has now transpired. Certainly from 23 June 2015, Lee’s position in seeking to defend any part of Judge Kennedy’s decision seems to us to have become untenable.
It is true that ground seven focussed attention upon certain of the Corporations Act claims only, and raised limitation defences in support of the contention that these claims were statute barred. However, the fact remains that there were even more fundamental reasons why those claims could not be advanced.
Counsel for Lee submitted that the divergence between ground seven as drafted, and the jurisdictional impediment which had been flagged in correspondence, but not reflected in the ground itself, was so great as to make it appropriate that there be no order for costs in the appeal.
Plainly, a submission of that kind raises questions of degree. In the end, however, the one unalterable fact is that the Corporations Act claims should never have been included in either the original, or the proposed amended, statement of claim. Perhaps belatedly, that point was picked up, and properly addressed, by those representing Smith and Donamis.
Lee had various options available to it at that stage. It could have abandoned the Corporations Act claims entirely and continued the proceeding in the County Court. The appeal could perhaps then have proceeded in the ordinary way. Lee chose not to do so.
Alternatively, Lee could have conceded the appeal without the need for any oral argument. It could then have sought to transfer the entire proceedings into the Trial Division, and re-agitated the question of the proposed amendments.
Ultimately, and after this Court had heard the matter, Lee did seek that transfer. However, it elected to have the appeal heard, as regards the various grounds contained in the application for leave to appeal. That was a course that many would regard as both inefficient and inappropriate. Plainly, if the matter were to be transferred to the Trial Division, it would be best to have all pleading questions determined by the judge to whom the case was allocated.
In short, Lee’s representatives had a number of options available to them. With the benefit of hindsight, it can be said that they chose unwisely.
For these reasons, we consider that Lee should pay the costs associated with the Appeal to this Court.
However, in our view, the costs of the various applications for leave to amend in the County Court which gave rise to the Appeal (the merits of which we have not considered) should be determined by Elliott J, who will have a better understanding of where the justice of the case lies than the members of this Court.
In these circumstances, we consider that the orders with regard to costs will be as follows:
Orders
1. The costs of and incidental to the application to this Court for leave to appeal dated 15 May 2015, including the costs of this application for costs, be paid by Lee.
2. The costs associated with the application to the County Court dated 29 May 2015, for a stay of the proceedings and for the vacation of the trial date of 21 September 2015, be paid by Lee.
3. The costs of and incidental to each of the various applications for leave to amend made by Lee pursuant to its notice to the County Court dated 13 January 2015 (including costs reserved on 23 January 2015, 27 March 2015, and costs of the hearing and consequential directions on 16 April 2015) be determined by Elliott J in the Trial Division.
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