St George Bank Limited v Irani

[2007] VSC 382

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 2003 of 2006

ST GEORGE BANK LIMITED (ACN 055 513 070)	Plaintiff
v
BOMAN IRANI & ORS	Defendants

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JUDGE:	WHELAN J
WHERE HELD:	Melbourne
DATE OF HEARING:	3 October 2007
DATE OF JUDGMENT:	3 October 2007
CASE MAY BE CITED AS:	St George Bank Limited v Irani & Ors
MEDIUM NEUTRAL CITATION:	[2007] VSC 382

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PRACTICE AND PROCEDURE — Order 52 — order for the taking of accounts — terms of order for the taking of accounts — order for a Master to take an account — order for further discovery refused.

PRACTICE AND PROCEDURE — Costs — Indemnity — Solicitor and client — discretion — whether delay in providing unredacted copies of relevant documents and incorrect assertion there was no costs agreement justified costs on a higher basis than party and party — discretion to award costs on a higher basis not exercised. 

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R M Garrett QC Mr  D Bailey	Herbert Geer & Rundle
For the Defendants	Mr G J Parncutt	Comlaw Barristers

HIS HONOUR:

1. This proceeding is related to an earlier proceeding, No 6093 of 2003, in this Court in which the plaintiff bank was the defendant.  That earlier proceeding was the subject of a judgment of Byrne J of 27 August 2004,[1]  a judgment of mine of 13 October 2005,[2] a further judgment of mine of 26 October 2005,[3] and a judgment of the Court of Appeal of 9 March 2007.[4]

   [1][2004] VSC 260.

   [2][2005] VSC 403.

   [3][2005] VSC 456.

   [4][2006] VSCA 33.

1. In this proceeding Dodds-Streeton J dealt with the liability issues, delivering reasons on 12 May 2006[5], and making a declaration and other orders on 4 August 2006.  The declaration made was that the defendants are liable to the plaintiff for the moneys claimed in the proceeding, the quantum of which is to be assessed.

   [5][2006] VSC 217.

1. The quantum issues were heard by me over a series of trial dates in late 2006 and early 2007 and were the subject of reasons which I delivered on 2 May 2007.[6]  The plaintiff bank had endeavoured to prove the outstanding indebtedness by relying upon a conclusive evidence certificate pursuant to the terms of the guarantee executed by the defendants.  Under the relevant provision, the certificate is conclusive except in the case of manifest error.  The issue before me was whether manifest error could be shown.  In this respect the defendants succeeded, principally because of a demonstrated failure on the part of the plaintiff to give the defendants credit for certain rebates of legal costs to which the plaintiff was entitled.

   [6][2007] VSC 116.

1. Manifest error having been demonstrated, the defendants submitted that the proceeding should simply be dismissed.  The plaintiff bank submitted that the appropriate course was to refer the determination of the amount properly due to a Master to determine on the taking of an account without reliance upon the conclusive evidence certificate provision.  For the reasons which I gave on 2 May 2007, I determined to adopt the approach contended for by the plaintiff.

1. Two issues now remain to be determined in this proceeding.  The first is the terms of the order for the taking of the account.  The second is the determination of the issue of who should pay the costs of this proceeding insofar as they have not already been dealt with.

Order for the taking of accounts

1. The plaintiff bank submitted that a general order for the taking of accounts with directions as to the filing of affidavits was appropriate in the circumstances provided that liberty to apply was reserved.  The plaintiff’s counsel were particularly concerned to ensure that the myriad of issues already determined in this proceeding and in the related proceeding should not be raised again on the taking of accounts.

1. The defendants’ counsel also submitted that an order in general terms was appropriate but, in addition, sought an order requiring the plaintiff to file an affidavit of documents.  The defendants’ counsel also indicated that the defendants were concerned that the conclusive evidence certificate should not be implicitly relied upon by the plaintiff bank on the account taking by using the certificate figure as a starting figure and adjusting the rebates and interest re-calculation against that figure.

1. Counsel for the plaintiff resisted any further order for discovery, submitting that discovery had already been given in the proceeding.

1. Upon being queried by me as to what unresolved issue of access to documents there was in the proceeding, counsel for the defendants could only refer to the possibility that there might be undiscovered documents, to the absence of a final comprehensive affidavit, and to what was said to be the unsatisfactory manner in which the plaintiff had given discovery in the course of the proceeding.

1. Given the voluminous material produced on discovery in the two proceedings thus far, given that liability has been finally determined in this proceeding, given the extensive interlocutory disputes concerning discovery which I heard in the course of the hearings on the quantum issues, and given that a trial of the quantum issues has been held and reasons delivered, I am not prepared to order further discovery in relation to the accounting in the absence of affidavit material demonstrating the existence, or likely existence, of specific relevant undiscovered documents.  In the circumstances, I reject the defendants’ application for a further discovery order.

1. In view of the history of the litigation between these parties and the submissions made to me today by counsel for both parties in relation to concerns on each side about the re-agitation of issues already decided, it is important to record the following matters, to which I alerted counsel:

(a)Issues already determined against a party, such as reliance on the conclusive evidence certificate provision in the case of the plaintiff, and the various matters raised by the defendants and others in proceeding No. 6093 of 2003 and the matters already dealt with by Dodds-Streeton J and by me in this proceeding in the case of the defendants, should not be sought to be re-litigated in the course of the accounting.

(b)Given that position and upon the assumption that the balance now allegedly due is, in effect, referable to outstanding legal costs (not including the costs of this proceeding), I would anticipate that, whilst the bank might need to give an account of the balance now owed by reference to the relevant obligations from their inception, the issues of potential controversy in the accounting should be confined to verification of the legal costs incurred and paid, calculation of the appropriate allowance for the rebates referred to in the reasons which I delivered on 2 May 2007, and re-calculation of the interest debits consequent upon due allowance for those rebates.  I say this because I cannot at present conceive of any other issue which, in the context of the extensive litigation which has occurred here, could be said to remain undetermined and/or not be the subject of res judicata or issue estoppel.

1. In the orders I will make today I will endeavour to finally dispose of this proceeding in its entirety save for the accounting which is to be undertaken by a Master.  I will reserve liberty to the parties to apply so that any dispute which arises before the Master can be brought before me if it is thought that that would be the more appropriate way to deal with it.

1. The orders I now make in relation to the accounting are as follows:

1.That an account be taken before a Master of the Court pursuant to Order 52 of the Supreme Court (General Civil Procedure) Rules to determine the amount owing by the defendants to the plaintiff in accordance with the declaration made on 4 August 2006 and the reasons delivered on 2 May 2007.

2.The account be taken in accordance with the following directions, and otherwise as the Master may direct from time to time:

(a)By 4.00 pm on 17 October 2007 the plaintiff shall file and serve an affidavit verifying the amount claimed by the plaintiff.

(b)By 4.00 pm on 31 October 2007 the defendant shall file and serve an affidavit in answer.

(c)The proceeding is referred to the Listing Master for allocation to a Master of the Court in accordance with this order.

(d)The Master so allocated shall determine the amount, if any, owing by the defendants to the plaintiff.

(e)The costs of the accounting are reserved to the Master taking the account.

3.Pursuant to Rule 52.01(2) of the Supreme Court (General Civil Procedure) Rules, the defendants are to pay the plaintiff the amount, if any, found due on the taking of the account.

4.Liberty to apply is reserved to the parties.

Costs of the proceeding

1. Counsel for the plaintiff bank submitted that the plaintiff had succeeded on liability before Dodds-Streeton J and that her Honour had dealt with the costs issues to that point.

1. As to the position since then the plaintiff’s counsel submitted that the plaintiff bank had conducted itself in an appropriate manner.  It was submitted that the plaintiff had redacted bills of costs out of an understandable sensitivity to the confidentiality of the hourly rates charged but had provided unredacted copies when required to do so.  It was acknowledged that the plaintiff bank had initially advised of, and through its solicitor deposed to, an incorrect position in relation to the existence of a costs agreement.  Mr Arthur, an employee at the plaintiff bank’s solicitors, swore on 8 October 2006 that there was no costs agreement.  But, it was submitted, that position had been corrected by a further affidavit sworn by a partner of the firm on 25 October 2006.

1. Counsel for the plaintiff submitted that the starting point on the costs issue was that under the terms of the relevant guarantee the defendants were obliged to pay legal costs incurred by the plaintiff on a full indemnity basis. 

1. Counsel for the plaintiff submitted that the appropriate order was that the defendants should pay the plaintiff’s costs on an indemnity basis from and including 23 June 2006 save for the costs of the hearings on 4 August 2006, 9 October 2006 and 30 October 2006.  A draft order submitted on behalf of the plaintiff contained provision for the plaintiff to pay the defendants’ costs of the hearings on those dates on a party and party basis.

1. Counsel for the defendants, in a written submission and in oral submissions, submitted that the plaintiff should pay the defendants’ costs on and from 23 June 2006 on an indemnity basis.  The submission assumed that the defendants had been successful in the issues litigated since 23 June 2006.

1. It was submitted on behalf of the defendants that the order for costs in their favour should be on an indemnity basis or a solicitor and client basis because of what was said to have been improper conduct on the part of the plaintiff in the manner in which the litigation had been conducted.  In this respect the defendants relied on Bass Coast Shire Council v King.[7]  The improper conduct relied upon was said to be the editing or redacting of relevant bills of costs and the failure to disclose the existence of the costs agreement.

   [7][1997] 2 VR 5.

1. As to the plaintiff bank’s submission that the starting point is that costs should be paid by the defendants on an indemnity basis because that is what the guarantee provides for, it is important to note that the plaintiff bank has always made it clear that the debt it seeks to recover in this proceeding does not include the costs of this proceeding.  The statement of claim refers to legal costs on a full indemnity basis being due but the plaintiff through its counsel has made it clear throughout this proceeding that that claim is in relation to costs other than the costs of this proceeding.  The prayer for relief claims costs in paragraph D but does so in the conventional way and not in such a way as to alert the defendants to a claim for indemnity costs based upon the contractual provision.

1. Thus, in this proceeding the plaintiff bank is not seeking to recover indemnity costs pursuant to or under the relevant provision of the guarantee.

1. Notwithstanding that circumstance, the existence of the obligation in the guarantee remains a relevant matter when considering the Court’s discretion as to costs and that is how I understand that the plaintiff relies on the relevant provision in the guarantee on this application. 

1. The submissions on behalf of both parties before me proceeded on the basis that the only issue to be determined is the issue of costs incurred on and from 23 June 2006.  In the circumstances I accept that that is the only issue to be determined.

1. The first point to be made is that in my view the defendants have been substantially successful in the proceeding as to quantum which I have managed and heard since 23 June 2006.  The plaintiff bank sought to establish its debt by reliance upon a conclusive evidence certificate.  The defendants sought to meet that case by endeavouring to establish that there was manifest error.  In that the defendants succeeded.  Thus, in my view, insofar as the proceeding has continued since 23 June 2006, the defendants have been the successful party.  In those circumstances it seems to me that the provision in the guarantee does not relevantly affect the outcome.  Given that the bank has not succeeded, in my view the plaintiff bank should pay the defendants’ costs since 23 June 2006 notwithstanding the provision in the guarantee.

1. The issue then is as to whether those costs should be paid on a party and party basis, as would be the position unless some other order is made pursuant to Rule 63.31, or on an indemnity or solicitor and client basis.  My conclusion is that they should be paid on the conventional party and party basis.

1. Whilst it was unfortunate that the plaintiff bank for a period of approximately 17 days was responsible for a misconception that there was no relevant costs agreement, that position was corrected and the agreement was produced.  During the short period in which the incorrect assertion that there was no costs agreement remained uncorrected, hearings were held and steps were taken, but my assessment of the position is that no significant time was lost.  Hearings were adjourned on a number of occasions for a variety of reasons. 

1. It does not seem to me that the plaintiff bank should be criticised for initially redacting the relevant bills of costs because of sensitivity about the confidentiality of the hourly rates.  Unredacted copies of the bills were provided to the defendants when the plaintiff was required to do so.

1. In my view there was no improper conduct by the plaintiff warranting a costs order on a basis other than the conventional party and party basis.

1. Accordingly, I will add to the orders previously indicated the following (as Order 5):

5.The plaintiff is to pay the defendants’ costs incurred on and from 23 June 2006 up to and including today on a party and party basis.

1. I record that on the basis of the manner in which the matter was argued before me today, assuming that no application is made pursuant to the liberty to apply which I have reserved, and, of course, subject to any appeal, on completion of the accounting which I have now ordered this proceeding will have concluded.