Talacko v Talacko (No 2)
[2015] VSC 496
•22 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2009 7819
| JAN TALACKO (As executor of the Estate of Helena Marie Talacko) AND ORS (According to the schedule attached) | Plaintiffs |
| v | |
| JAN EMIL TALACKO AND ORS (According to the schedule attached) | Defendants |
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JUDGE: | McDONALD J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 2, 3, 5, 6, 9, 10, 11, 12, 13, 25, 26, 27 March 2015 |
DATE OF JUDGMENT: | 22 September 2015 |
CASE MAY BE CITED AS: | Talacko v Talacko (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 496 |
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COSTS — Whether first plaintiff suing as administrator of his mother’s estate should be treated differently than second to fifth plaintiffs suing in personal capacity — Award of 20% of costs to reflect partial success of plaintiffs’ causes of action against defendants — First and fourth defendants denied costs by reason of misconduct in respect of the transaction in proceedings.
INDEMNITY COSTS—Whether special circumstances existed justifying costs orders in favour of fifth and sixth defendants on indemnity basis.
Supreme Court Act 1986 (Vic) s 24(1); Evidence (Miscellaneous Provisions) Act 1958 (Vic) s 42E; Administration and Probate Act 1958 (Vic) s 9; Foreign Judgments Act 1991 (Cth) s 15; Civil Procedure Act 2010 (Vic) s 7(1), s 9(1)(a),(c),(d) and (f); Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 63.22; Property Law Act 1958 (Vic) s 172.
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | In person | |
| For the Second to Fifth Plaintiffs | Mr S Howells with Dr M Sharpe | Tolhurst, Druce & Emmerson |
| For the First, Second and Third Defendants | No appearance | |
| For the Fourth Defendant | Mr L Glick QC with Mr J Masters | Strongman & Crouch |
| For the Fifth and Sixth Defendants | Mr P Crutchfield QC with Ms F Bentley | SBA Lawyers |
| For the Seventh Defendant | No appearance |
HIS HONOUR:
On 7 August 2015, the court delivered judgment (‘the principal judgment’) following a trial which ran for 12 days in March 2015. The history of this proceeding is set out in some detail in the principal judgment and does not need repeating. For present purposes it is sufficient to observe that the proceeding dates back to July 2009. In the intervening years there has been a raft of interlocutory proceedings. At the conclusion of a number of these proceedings, costs were reserved.
In addition to making costs orders arising out of the trial, the court must determine what final orders should be made in respect of the costs which have hitherto been reserved. In approaching this latter task, I have placed particular weight upon the overarching purpose prescribed in s 7(1) of the Civil Procedure Act 2010 (Vic) (‘the Act’) and the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Rules’) of Court to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute. I have also had regard to the objects, couched in mandatory terms, in s 9(1)(a),(c),(d) and (f) of the Act. As to the Rules of Court, I have had particular regard to r 63.22 which prescribes that:
Where by order of the Court the costs of an interlocutory or other application, or of any step in a proceeding, are reserved, the reserved costs are the parties’ costs in the proceeding, unless the Court otherwise orders.
The present litigation has consumed significant resources of the Supreme Court of Victoria. The court is obliged to balance a number of discretionary considerations when determining the orders to be made in respect of reserved costs. Amongst these is the need to achieve a just outcome in a way that entails an efficient use of judicial resources.
After delivering judgment on 7 August 2015, in addition to addressing the costs of the trial, the parties filed written submissions in respect of the following interlocutory proceedings which were the subject of reserved costs orders:
(i)directions hearings on 1 March 2010, 8 June 2010, 11 December 2012, 28 May 2013, 26 September 2014, 11 November 2014 and 17 December 2014;
(ii)the costs of the plaintiffs’ contempt summons in respect of the second and third defendants;
(iii)the plaintiffs’ application to inspect documents produced by Peter Talako in response to a subpoena;
(iv)the plaintiffs’ application for discovery from the first to fourth defendants;
(v)the costs in respect of the dismissal of the fourth defendant’s application for the proceeding to be dismissed for want of prosecution;
(vi)the costs of the second to fifth plaintiffs’ summons dated 25 May 2015 to re-open their case to adduce further evidence; and
(vii)the cost of the fifth and sixth defendants’ appeal from orders of Zammit AsJ (as her Honour then was) joining them as defendants and granting leave to the second to fifth plaintiffs to file and serve a third amended statement of claim.
I have concluded that the outcome which best gives effect to the objectives of a just outcome consistent with an efficient use of judicial resources is as follows.
First, the reserved costs in respect of items (i), (iii) and (iv) above will be costs in the cause. Thus, the liability of the parties will be in accordance with the orders of the court in respect of the costs of the trial. Second, there will be no order for costs in respect of item (ii), as the plaintiffs never pursued their application that the second and third defendants be dealt with for contempt. Third, the court will make specific costs orders, departing from the costs otherwise flowing from the costs of the trial, in respect of items (v) to (vii).
Second to fifth plaintiffs application for a stay of proceedings
In their written submissions dated 21 August 2015, the second to fifth plaintiffs sought ‘a stay of these proceedings to permit her Honour Justice Sloss to hand down her decision in [sic] which the defendants are seeking to challenge the validity of a certificate signed under the Foreign Judgments Act 1991 (Cth).’[1] An application for a stay is not properly sought by way of written submissions. Any application should have been made by way of summons supported by affidavit. The application for a stay advanced the same grounds as those put forward in support of the second to fifth plaintiffs summons dated 25 May 2015. Insofar as the grounds include the contention that the ‘Plaintiffs loss will have crystallised’ if Sloss J concludes that the plaintiffs were not judgment creditors within the meaning of s 15 of the Foreign Judgments Act 1991, the application is misconceived. If the plaintiffs are not entitled to a certificate under s 15 of the Foreign Judgments Act 1991, any loss attributable to their failure to obtain a certificate has no nexus with the 2009 May Donation Agreement (‘Donation Agreement’) for the reasons set out at [171] to [181] of the principal judgment. If the plaintiffs could never have enforced the equitable compensation judgment in the Czech Republic, then the Donation Agreement of itself caused no loss for the purpose of their cause of action in unlawful means conspiracy.
Should the first plaintiff be treated differently than the second to fifth plaintiffs on the question of costs?
[1]Second to fifth plaintiffs’ submissions, 21 August 2015 [72].
When the proceedings were commenced on 17 July 2009, the first plaintiff was Helena Marie Talacko by her litigation guardian Jan Talacko. Helena Talacko died on 10 May 2012. Dr Jan Talacko obtained a grant of probate on 13 August 2012 and was given leave to appear as the executor of Helena Talacko’s estate by order of the court of 11 December 2012. The estate of Helena Talacko was ordered to be substituted for the first plaintiff and the writ and statement of claim amended accordingly.
Subsequent to the court’s orders of 11 December 2012, the first plaintiff appeared in his capacity as executor of the estate of Helena Talacko, without legal representation. Dr Talacko adopted the position advanced by counsel retained by the second to fifth plaintiffs who had carriage of the plaintiffs’ case, but who did not represent the first plaintiff.
The written submissions filed on behalf of the first plaintiff in respect of the question of costs contend that the court should adopt a different approach when considering the potential liability of the first plaintiff compared to that of the second to fifth plaintiffs. The submissions point to the history of costs orders in respect of interlocutory applications in the proceedings. Of the costs orders which were made in respect of interlocutory applications, the only order which required the first plaintiff to pay costs was an order of Kyrou J on 21 August 2009. Five subsequent costs orders were made against the second to fifth plaintiffs, with no order made directed to the first plaintiff.
For reasons set out below, the primary costs liability of the plaintiffs in the current proceeding flows from the unsuccessful pursuit of claims against the fifth and sixth defendants. The joinder of the fifth and sixth defendants was a consequence of a summons filed by the second to fifth plaintiffs. That summons was filed on 26 August 2014 and sought leave to join the fifth and sixth defendants and to file a further amended statement of claim making specific allegations against the fifth and sixth defendants. The joinder application was heard by Zammit AsJ in September 2014. An issue arose during the course of those proceedings as to whether the first plaintiff supported the application. On 16 September 2014, Dr Talacko, in his capacity as executor of his mother’s estate, wrote to the court in the following terms:
At the commencement of the Application on 12 September … I indicated to the Court that I hadn’t had the benefit of any legal advice in relation to that Application and that my mother’s Estate was in no position to make a contribution to costs
…
As I stated at the hearing on 12 September, I do not seek to advance a different case to the case advanced by the 2nd to 5th Plaintiffs in relation to the Joinder and associated Amendment to the Statement of Claim. I confirm that the First Plaintiff supports the Application and does wish to seek relief in the form set out in the 3rd Amended Statement of Claim lodged on behalf of the 2nd to 5th plaintiffs.[2]
[2]First plaintiff’s submissions on costs, 21 August 2015 [5].
Dr Talacko’s involvement in the proceedings subsequent to September 2014 is consistent with the terms of the correspondence set out above. He appeared sporadically during the course of the 12 days of hearing of the trial in March 2015. He gave evidence on 5 March 2015. His evidence in chief and cross-examination took up 23 pages of 1299 pages of transcript. He made no submissions orally or in writing. Plainly, he was not an active participant in the proceedings. Does it follow, however, that the estate of Helena Talacko should be treated differently from the second to fifth plaintiffs on the question of costs?
The fifth amended statement of claim, although filed on behalf of the second to fifth plaintiffs, makes claims and seeks relief on behalf of all plaintiffs including the first plaintiff. Although the first plaintiff did not actively participate in the proceedings and was not legally represented, if the claims contained in the second to fifth amended statement of claim had been upheld, the estate of Helena Talacko would have benefited directly. Indeed, it is likely that the estate will benefit as a consequence of the orders made pursuant to s 172 of the Property Law Act 1958 (Vic) (‘s 172 claim’) setting aside the transfer of the first defendants interests in the Glenferrie Road property to the fourth defendant in October 1998. Based on the evidence before the court in the principal proceeding, the Glenferrie Road property is a very valuable piece of real estate. An amount equivalent to 50% of the value of that property will find its way into the first defendant’s estate in bankruptcy. It will be available for distribution to the first defendant’s creditors. The first plaintiff, along with the second to fifth plaintiffs, is a significant creditor of the first defendant by reason of the judgment debt arising from the equitable compensation proceedings before Kyrou J.
There is no rational reason for treating the first plaintiff any differently from the second to fifth plaintiffs on the question of costs. The fact that the first plaintiff decided to represent himself in the proceedings to avoid incurring legal costs does not provide a sound basis for relieving the estate which he represents of any liability to pay costs. The key consideration which supports this conclusion is the fact that the estate of Helena Talacko joined with the second to fifth plaintiffs in pursuing claims against the defendants and would have benefitted if those claims had been upheld. The fifth and sixth defendants have incurred costs in defending claims which were pursued jointly by all of the plaintiffs. The costs consequences flowing from the rejection of the plaintiffs’ claims should therefore flow through to all of the plaintiffs.
Are the plaintiffs entitled to a costs order in respect of the successful s 172 claim?
The fifth amended statement of claim pleads five causes of action against the defendants:
(a) The s 172 claim;
(b) Conspiracy to injure;
(c) Unlawful means conspiracy;
(d) Inducing breach of contract; and
(e) Knowing assistance/receipt in breach of trust.
There was considerable overlap in the evidence which underpinned the claims in conspiracy to injure and unlawful means conspiracy. There were two discrete claims under s 172 of the Property Law Act: one directed to setting aside the transfer of the first defendant’s interests in the Glenferrie Road property to the fourth defendant and a second claim directed at setting aside the transfer of the fifth defendant’s interests in the Ethel Street property to the sixth defendant.
Save for the s 172 claim in respect of the Glenferrie Road property, the plaintiffs have not made out any of the claims against the first to fourth defendants. Also, none of the claims against the fifth and sixth defendants succeeded.
An issue arises as to what proportion, if any, of the plaintiffs’ costs should be met by the first and fourth defendants consequent upon my finding that the transfer of the first defendant’s interest in the Glenferrie Road property to the fourth defendant was void. The second to fifth plaintiffs submit that their success in pursuing the s 172 claim should translate into an order that the first and fourth defendants pay 20% of their costs of the proceeding.
The fourth defendant submitted that although she failed in respect of the s 172 claim, her conduct in relation to the claim did not support any reduction in the costs that might otherwise be awarded to her in respect of her successful defence of the plaintiffs’ claims. At the trial, the fourth defendant did not oppose the making of an order, the effect of which would be to set aside the transfer of the first defendant’s interests in the Glenferrie Road property to her. The fourth defendant submitted that as a result of the position taken by her, there was in effect, no controversy at trial in relation to the s 172 claim concerning the Glenferrie Road property.
On the first day of the trial, 2 March 2015, Mr Glick QC stated that he would be seeking instructions not to contest the s 172 claim in respect of the Glenferrie Road property. In due course, Mr Glick received those instructions. The fourth defendant’s defence to the fourth amended statement of claim was filed in court on 10 March 2015, the sixth day of the trial. Prior to the filing of this amended defence, the fourth defendant’s defence had contested the plaintiffs’ claim in respect of the Glenferrie Road property. The fourth defendant’s concession came late in the piece. Further, as conceded by Mr Glick, the evidence given by the first defendant in proceedings before Osborn J on 19 December 2007 that the transfer had occurred after the commencement of the 1998 proceedings, coupled with the fact that the transfer was not for valuable consideration, posed a significant obstacle to a successful defence to the s 172 claim.
The concessions made by counsel for the fourth defendant cannot obscure the fact that the concessions came only after the commencement of the trial in the face of a very strong case. The plaintiffs are entitled to a costs order referable to their successful pursuit of the s 172 claim in respect of the Glenferrie Road property. By reason of the concessions which were made on behalf of the fourth defendant, the claim did not consume a significant proportion of court time. Nevertheless, the monetary value of the claim is significant. There was evidence before the court that in February 2002 the fourth defendant advised family members that based on the sale of a neighbour’s property, the value of the Glenferrie Road property ‘should be getting close to $2 million’.[3] Based on this evidence, and the passage of 13 years, I infer that the value of the property is currently well in excess of $2 million dollars.
[3]Exhibit P68: Email from fourth defendant to first to third and fifth defendants dated 23 February 2002 at 8:43pm.
The second to fifth plaintiffs are entitled to an order that the first and fourth defendants pay 20% of their costs of the proceeding. As to the order that the first defendant pay 20% of the second to fifth plaintiffs’ costs, I shall order that the costs are payable by his estate. The first defendant is an undischarged bankrupt. He passed away on 4 November 2014 intestate, with the consequence that his estate vested in the State Trustees Ltd.
Are the first and fourth defendants entitled to an order for costs?
The fourth defendant submits that a costs order should be made in her favour by reason of her successful defence of the plaintiffs’ claims in conspiracy, inducing breach of contract and the Barnes v Addy claims.
Section 24(1) of the Supreme Court Act 1986 (Vic) provides that, unless otherwise expressly provided by legislation or by the Rules, the costs of and incidental to all matters in the court, including the administration of estates and trusts, is in the discretion of the court and the court has full power to determine by whom and to what extent the costs are to be paid. There are a number of discretionary considerations in the present proceedings which weigh heavily against any order for costs being made in favour of the fourth defendant.
First, the fourth defendant was a party to an agreement with the first to third defendants to injure the plaintiffs by the first defendant divesting himself of properties against which a judgment debt could attach. The manifestation of this agreement was the Donation Agreement between the first to third defendants. That agreement was an equitable fraud. Although the fourth defendant was not a party to the Donation Agreement, she was a party to the agreement to injure the plaintiffs, and is therefore tainted by the finding that the agreement constituted an equitable fraud.
Second, the first and fourth defendants jointly proposed to the first defendant’s solicitor in the equitable compensation proceedings, Mr Michael Witt, that an affidavit be prepared giving a false explanation for the Donation Agreement by deposing that the first defendant was gifting the properties to the second and third defendants in order to avoid Czech inheritance laws.
Third, whilst the fourth defendant was entitled to refrain from giving evidence in the current proceedings, she was not entitled to waste the court’s time whilst vacillating whether or not to do so. The principal judgment records my findings relating to the fourth defendant’s foreshadowed application under s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) (‘s 42E application’) to give evidence via video link rather than in person. A hearing on 4 March 2015 was confined solely to this foreshadowed application. Further time was taken up with the matter on 5 March and 6 March 2015. Ultimately, the fourth defendant did not pursue the s 42E application and did not give evidence in the proceedings. The foreshadowed application resulted in a waste of time and necessarily resulted in costs being incurred by the second to fifth plaintiffs and fifth and sixth defendants.
Fourth, the fourth defendant failed to comply with her discovery obligations. Her tax returns and bank statements for the period 2000 to 2002 were discoverable. Her failure to discover these documents was a serious breach of her discovery obligations. No satisfactory explanation was provided for this breach. This was in circumstances where the fourth defendant had been placed squarely on notice from 30 September 2014 when served with the third amended statement of claim that the plaintiffs would rely upon her conduct in taking out a mortgage over the matrimonial home in May 2000 as evidence of her common purpose with the other defendants to deny the plaintiffs access to the Glenferrie Road property.
A defendant who has been wholly successful may be deprived of some or all of their costs where they have done some wrongful act in the course of the transaction of which the plaintiff complains.[4] In Ritter v Godfrey,[5] Atkin LJ observed that a successful defendant might be denied costs where they have engaged in conduct which constitutes a fraud or preparation for a fraud in the course of the transaction complained of. It does not automatically follow that an otherwise successful defendant is to be denied their costs by reason of having engaged in misconduct.[6] Nevertheless, the circumstances of the present case warrant an order to the effect of that the fourth defendant will not be entitled to any order for costs. The Donation Agreement was the critical transaction underpinning the current proceedings. It was the catalyst for the plaintiffs to seek leave in June 2009 to amend the statement of claim in the equitable compensation proceedings to join the second and third defendants. The Donation Agreement constituted an equitable fraud. It was the vehicle pursuant to which the first to fourth defendants sought to give effect to their common purpose of injuring the plaintiffs by denying them access to restituted properties. The fourth defendant’s conduct in respect of the Donation Agreement involved a level of impropriety which justifies the exercise of the court’s discretion to deny her any costs. In reaching this conclusion, I have also had regard to the fourth defendant’s conduct in jointly proposing with the first defendant that an affidavit be prepared in the equitable compensation proceedings giving a false explanation for the Donation Agreement. Although not implemented, this proposed course of action constituted a ‘preparation for a fraud’ of the type referred to by Atkin LJ in Ritter v Godfrey.
[4]Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 10) [2012] VSC 294 [40]-[42]; Youseff v Victoria University of Technology (No 2) [2005] VSC 385, [14]-[15].
[5][1920] 2 KB 47, 60-61 (‘Ritter v Godfrey’).
[6]Verna Trading v New India Assurance Co Ltd (1991) 1 VR 129, 154.
When the court delivered judgment on 7 August 2015, the parties were requested to file submissions on the question of whether the fourth defendant had breached her overarching obligations under the Act, and if so, whether any costs consequences should flow. It is unnecessary to make a finding as to whether the conduct of the fourth defendant constituted a breach of her overarching obligations under ss 20 and 26 of the Act. The fourth defendant’s conduct in respect of the Donation Agreement coupled with her conduct in jointly proposing the preparation of a false affidavit provides a sound basis for the making of an order the effect of which, subject to two exemptions discussed below, will be to deny her any entitlement to costs.
The reasoning set out above applies equally to the first defendant. He was a party to the equitable fraud constituted by the Donation Agreement and also jointly proposed the preparation of a false affidavit. Prior to his death in early November 2014, the first defendant had been legally represented and had undoubtedly incurred legal costs in pursuing his defence to the claims in the current proceedings. There will be no order for costs in his favour.
In addition to being jointly liable with the first defendant for paying 20% of the s 172 claim relating to the Glenferrie Road property, the fourth defendant is ordered to pay the costs of the hearing on 4 March 2015 incurred by the second to fifth plaintiffs and the fifth and sixth defendants. These costs should be paid on an indemnity basis to fully compensate the second to fifth plaintiffs and the fifth and sixth defendants for the costs actually incurred in attending court on this day. Such an order is warranted in circumstances where the foreshadowed s 42E application arose out of an improper request by the fourth defendant’s solicitors for an undertaking from the second to fifth plaintiffs’ solicitors that if the fourth defendant returned to Victoria to give evidence no application would be made seeking to restrain her leaving the jurisdiction.
Costs reserved in respect of the fourth defendant’s application for dismissal of the proceedings for want of prosecution
On 21 December 2012, the fourth defendant filed a summons seeking an order that the plaintiffs’ claims be dismissed for want of prosecution. The application was heard by Zammit AsJ on 19 and 25 February 2013 with judgment delivered on 19 April 2013. On 2 May 2013, her Honour made an order dismissing the application but reserving the question of costs for the trial judge. Nothing in her Honour’s comprehensive reasons for judgment provides any support for the fourth defendant’s contention that the second to fifth plaintiffs should be deprived of an order for their costs. Her Honour rejected the contention advanced by the fourth defendant that the plaintiffs had been dilatory in pursuing their claims. Her Honour concluded at [78] of her judgment:
Ultimately, in exercising my discretion to dismiss a proceeding for want of prosecution, I should only do so if the interests of justice so require. I do not consider it to be in the interests of justice to dismiss the plaintiffs’ claim against the fourth defendant and/or all the defendants. The history of this dispute is littered with the plaintiffs having to take steps which have taken time through no fault of their own. Most importantly, once they obtained an order from the Federal Court granting leave to proceed against JET, they took immediate action. It would not now be in the interests of justice to deny the plaintiffs the opportunity to pursue their claim against the defendants.[7]
[7]Talacko v Talacko (unreported) Supreme Court of Victoria, Zammit AsJ, 19 April 2015, [78].
The fourth defendant shall be ordered to pay the second to fifth plaintiffs costs of and incidental to the fourth defendant’s summons dated 21 December 2012.
The second to fifth plaintiff’s summons of 25 May 2015
The second to fifth plaintiffs filed a summons dated 25 May 2015 seeking leave to reopen their case to adduce further evidence. The application was heard on 5 June 2015. I dismissed the application during the hearing. I made the following statement:
If the plaintiffs can establish that any of the six categories of loss is a legitimate category of pecuniary loss in respect of a cause of action in lawful and/or unlawful means conspiracy, then subject to establishing that there has been some loss and subject to making out the other elements of the cause of action, they will have established liability.
The question of quantum of damages they are entitled to will need to then be the subject of a separate hearing. My preliminary view of course subject to hearing from the parties, is that all of the matters which are sought to be agitated by the plaintiffs in respect of their application to reopen are relevant to quantum of loss, if the court accepts that costs incurred in other proceedings be they in the Czech Republic or by way of further bankruptcy proceedings in the Federal Court, is a relevant category of pecuniary loss for the causes of action pleaded.
Whilst it is of assistance to the court that the matters relating to the certification of the Foreign Judgments Act certificate and the prospect of fresh applications in the Federal Court have been brought to my attention, I cannot see any basis for delaying the delivery of judgment on liability, pending Justice Sloss’ judgment that I will describe as the certificate proceedings.
That judgment may be relevant to issues of quantum if I conclude that the plaintiff have made out the elements of the causes of action in lawful and/or unlawful means conspiracy. However my current thinking is I cannot see any proper basis for delaying delivery of judgment on liability pending that judgment being delivered.[8]
[8]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 5 June 2015) T2 L16 — T3 L17.
Following this statement, Mr Howells did not press the application. As for the question of costs of the application, Mr Howells stated:
…we don't want to excite an application for costs given that this material is material which might ultimately then at a second hearing, if there is one, need to be determined.[9]
[9]Ibid, T4 LL15-18.
Given the Court’s conclusion on liability there will be no further hearing on quantum. The further material which underpinned the application was only relevant to the quantum of damages. As such, the costs of the second to fifth plaintiffs’ summons should follow the event. The second to fifth plaintiffs should pay the costs of the fourth to sixth defendants’ costs of the summons.
The costs in respect of the fifth and sixth defendants’ appeal from the orders joining them as defendants and granting leave to the second to fifth plaintiffs to file the third amended statement of claim
On 26 September 2014, Zammit AsJ granted leave to the second to fifth plaintiffs to join the fifth and sixth defendants to the proceeding and to file and serve a third amended statement of claim. The orders of 26 September 2014 included orders that the fifth and sixth defendants provide discovery by 30 October 2014. The trial was fixed for hearing on 16 February 2015.
On 9 October 2014, the fifth and sixth defendants filed a notice of appeal against the joinder and amendment orders. On 20 October 2014, the fifth and sixth defendants also filed a summons seeking orders that the third amended statement of claim be struck out insofar as applied to them. Further or alternatively, they sought orders that judgment be entered in their favour.
The appeal and the summons were listed for hearing on 18 November 2014. As at that date, the fifth and sixth defendants had not complied with the orders for discovery. I expressed the view during the course of the hearing on 18 November 2014 that the plaintiffs had been prejudiced by reason of the fifth and sixth defendants’ failure to comply with the discovery orders made on 26 September 2014. The hearing of the appeal and the strike out summons was adjourned to 10 December 2014. Orders were made vacating the discovery orders of 26 September 2014. In lieu thereof, the fifth and sixth defendants were ordered to provide discovery by 28 November 2014. When the matter returned for hearing on 10 December 2014 the fifth and sixth defendants had made discovery. However, they claimed legal professional privilege over 687 documents. They did so not on their own behalf, but on the basis that there were documents over which the first to fourth defendants would be likely to claim legal professional privilege. In a practical sense the second to fifth plaintiffs were in precisely the same position as they had been in on 18 November 2014. Nevertheless, the solicitors for the fifth and sixth defendants pressed for the hearing to proceed on 10 December 2014.
On 8 December 2014, the solicitors for the fifth and sixth defendants wrote to the solicitors for the second to fifth plaintiffs advising that the fifth and sixth defendants were not prepared to consent to any further adjournment of the appeal and strike out application. In support of this position, the solicitors for the fifth and sixth defendants relied upon, inter alia, [59] of the judgment of Croft J in Murphy v State of Victoria and Anor:
For the reasons indicated previously, it is not open to the plaintiff to seek to avoid stating exhaustively the conduct upon which he relies, particularly in respect of the issues the subject of the first and second questions. In the first instance, the plaintiff must identify with the requisite degree of precision the conduct on which he relies. Given the objects of the Civil Procedure Act, and given the overarching obligations imposed by that Act, the plaintiff cannot maintain the reservation in the hope that further documents might emerge from the discovery process and, or alternatively, to resist the use of the preliminary trial procedure having regard to the likely savings in time and cost which would flow from it adoption, matters to which I now turn. [10]
[10][2014] VSC 363, [59].
As I pointed out to Mr Osborne, who appeared for the fifth and sixth defendants on 10 December 2014, the passage from the judgment of Croft J set out above was expressly over-ruled by the Court of Appeal:
With respect, however, we think that reasoning was misplaced. It is one thing to make an allegation without any basis for it — which is plainly impermissible — and quite another to make allegations — as the appellant did in this case — which ex facie were soundly based on the best particulars which could be given until after discovery (and which, it should be noted, were not sought to be struck out as being something else). In a case like this, where ex hypothesi the documents needed to prove the appellant’s allegations were within the respondents’ exclusive possession or power, and the respondents refused to produce them, the appellant not only had no option other than to plead his case as he did but was perfectly entitled to do so. The propriety of so proceeding is established by a long line of authority dating back to the nineteenth century. [11]
[11]Murphy v State of Victoria and Anor (2014) 313 ALR 546, [35].
It reflects poorly upon the legal advisers for the fifth and sixth defendants that in pressing for the appeal hearing to proceed on 10 December 2014 they relied on a judgment of the Supreme Court of Victoria which had been expressly over-ruled by the Court of Appeal. The refusal of the fifth and sixth defendants to consent to a further adjournment of the appeal on 10 December 2014 necessarily resulted in the other parties to the appeal incurring costs.
The further hearing of the appeal on the strike out summons was adjourned to February 2015. This was to allow for the hearing and determination of the appeal and strike out summons prior to the scheduled commencement of the trial on 2 March 2015. However, shortly prior to the scheduled hearing in February, the parties consented to the hearing being further adjourned to the commencement of the trial. Neither the appeal nor the summons was pressed at the trial. Mr Crutchfield QC who appeared for the fifth and sixth defendants, informed the court that this was a consequence of advice which he had provided to the fifth and sixth defendants. At page 1214 of the transcript of the trial in these proceedings, the following exchange took place between myself and Mr Crutchfield:
His Honour: Can I just raise with you, Mr Crutchfield, just so there’s no confusion about this issue.
Mr Crutchfield: Yes.
His Honour: The position is that your strikeout application on behalf of the fifth and sixth defendants I think was adjourned.
Mr Crutchfield: To the start of the trial.
His Honour: No, no, it was adjourned until earlier than that.
Mr Crutchfield: All right.
His Honour: It was adjourned to a date which would have allowed the matter to be heard and determined prior to the commencement of this trial and I received – my chambers received correspondence that it was an agreed position between the parties that the issue be put off until the trial.
Mr Crutchfield: That’s absolutely right, yes.
His Honour: I don’t want any misapprehension about this, the court had timetabled your application to allow for it to be determined in advance of the hearing and for reasons set out in correspondence which were received there was an agreed position between the parties that it be pushed off to the trial.
Mr Crutchfield: Let’s make it crystal clear Your Honour for the transcript. We, I made a decision not to pursue that application.
His Honour: Yes, all right.
Mr Crutchfield: That’s the position Your Honour’s entirely correct.
His Honour: Yes.[12]
[12]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 27 March 2015) T1214 L29 — T1215 L26.
The fifth and sixth defendants submit that no costs order should be made against them in respect of the appeal and strike out summons. They conceded that their inability to provide discovery by 30 October 2014 caused the first adjournment of the appeal on 18 November 2014. However, they submit that thereafter delays were caused by matters outside of their control: the claims for legal professional privilege over the discovered documents made by the first and fourth defendants, which were not resolved until late February 2015 and the plaintiffs’ application to have the documents inspected by the court.
The fifth and sixth defendants’ written submissions on costs acknowledge that the appeal and strike-out application could have been heard and determined in late February 2015.[13] The fifth and sixth defendants submitted that their decision not to proceed with the appeal reflected their concern not to lose the trial date.
[13]Fifth and Sixth Defendants written submissions on costs, 21 August 2015 [29].
The fifth and sixth defendants must bear responsibility for their failure to comply with the discovery orders which were made by Zammit AsJ on 26 September 2014. The orders requiring discovery to be made by 30 October 2014 were not by consent. However, the timetable embodied in the orders made by Zammit AsJ reflected an agreed position between the parties. This was accepted by Mr Osborne when he appeared before me on 18 November 2014.[14] Further, when Zammit AsJ made the discovery orders on 26 September 2014 her Honour stated:
But in the interim there’s liberty to apply and, as I said, if its contemplated that your clients cannot contemplate (sic) with any of these orders it is not satisfactory to just breach the orders … And even by consent it’s not satisfactory. I will need you to come back — and it might be by way of email to the court, obviously copied in to all the other parties, that an extension is required and why it’s required, but from this point on it really is strict compliance with all of these orders unless there is the leave of the court to extend these dates.[15]
[14]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 18 November 2015) T35 LL22.
[15]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, Zammit AsJ, 26 September 2015) T32 L31 —T33 L11.
Her Honour could not have been any more emphatic in stressing the importance of compliance with the orders made by the court. Contrary to the direction by Zammit AsJ, the fifth and sixth defendants did not seek any extension to the date by which discovery was to be made. Rather, they simply failed to comply. The appeal which they lodged from Zammit AsJ’s orders did not operate as a stay of the orders.
Given the circumstances set out above, it would be most unfair if the second to fifth plaintiffs and the fourth defendant were required to bear the costs which they incurred in relation to the appeal and strike-out summons. An order will be made requiring the fifth and sixth defendants to pay the costs of the appeal dated 7 October 2014 and the summons dated 20 October 2014. It is appropriate that the costs in respect of the adjourned hearing of 18 November 2014 be paid on an indemnity basis. Any costs incurred post 18 November 2014 will be on a standard basis. The costs of the hearing on 18 November 2014 are a direct consequence of the failure of the fifth and sixth defendants to have complied with their discovery obligations. The costs of the adjournment on 10 December 2014 arose in circumstances where in a practical sense, the plaintiffs were in the same position as they had been on 18 November 2014 in that they had not had access to the discovered documents. The fifth and sixth defendants pressed for the hearing to proceed on 10 December 2014 in reliance upon reasoning of Croft J which had been expressly overturned by the Court of Appeal. Ultimately, as conceded by Mr Crutchfield, the fifth and sixth defendants decided not to press their application prior to or at the commencement of the trial even though they had the opportunity to do so.
Are the fifth and sixth defendants entitled to indemnity costs?
In Ugly Tribe Co Pty Ltd v Sikola,[16] Harper J noted that special circumstances must exist before the court will award costs on an indemnity basis. According to his Honour those circumstances include:
[16][2001] VSC 189.
(i)The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(ii) The making of an irrelevant allegation of fraud.
(iii)Conduct which causes loss of time to the Court and to other parties.
(iv)The commencement or continuation of proceedings for an ulterior motive.
(v) Conduct which amounts to a contempt of court.
(vi)The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
(vii)The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided the trial.[17]
[17]Ibid [7] (citations omitted). See also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233-4.
In Legal Services Commissioner v Bone,[18] Morrison JA (with whom Fraser and Gotterson JJA agreed) cited with approval the following passage from the judgment of Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (A firm):
The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably. [19]
[18][2014] QCA 179, [71].
[19][1998] 156 ALR 169, [236].
The fifth and sixth defendants submit that there are special circumstances which warrant a costs order on an indemnity basis against the plaintiffs. They point to the fact that the plaintiffs made a number of very serious allegations of dishonesty and misconduct against the fifth defendant. They submit that there was no prospect of success and/or no proper basis for the making of these allegations.
The claims pursued by the plaintiffs against the fifth defendant, although lacking merit, are not attended by special circumstances such as to warrant an award of indemnity costs. There is no basis for the court to conclude that the plaintiffs made allegations of dishonesty against the fifth defendant which they knew to be false. I have taken into account the findings in the principal judgment that between 2000 and January 2009 the fifth defendant was a party to the common purpose with the first to fourth defendants to deny the plaintiffs access to the matrimonial home.[20] This finding does not reflect favourably upon the fifth defendant.
[20]Talacko v Talacko [2015] VSC 287, [152].
Further, the fifth defendant admitted in cross-examination that the only purpose of the advice which he provided to his mother in January 2009 was to encumber the Glenferrie Road property. The evidence regarding the fifth defendant’s critical role in facilitating the mortgage of the Glenferrie Road property in May 2000 and his advice to his mother in January 2009 to mortgage the property, provided a proper basis for the plaintiffs’ allegation that in April/May 2009 the fifth defendant shared a common purpose with the first to fourth defendants to take all of the restituted properties out of the reach of the plaintiffs.
Ultimately, I have rejected the plaintiffs’ contention that the fifth defendant shared a common purpose with the first to fourth defendants at the time they entered the Donation Agreement to take all of the restituted properties out of the reach of the plaintiffs. Nevertheless, the conduct of the plaintiffs falls short of constituting the making of allegations known to be false.
In support of their claim for indemnity costs, the fifth and sixth defendants also point to the findings in the principal judgment as to the weakness of the plaintiffs’ Barnes v Addy claims and for the inducing breach of contract. It is true that the court has found that these claims were weak. However, of itself, this is insufficient to warrant an order for indemnity costs.
Conclusion
The orders of the court will be as follows:
(a) The court declares that the transfer of the interest of Jan Emil Talako in the land described in Certificate of Title Vol 3567 Folio 390 to Judith Gail Talako effected by the transfer of land registered on 16 October 1998 in dealing number V696935V, is void and of no effect.
(b) The estate of the first defendant is to bear its own costs of the proceeding.
(c) Save for the costs of:
(i) the appeal from the order dated 26 September 2014 joining the fifth and sixth defendants as parties to the proceeding and the fifth and sixth defendants’ summons filed on 20 October 2014 to strike out the third amended statement of claim (‘Appeal and Summons’); and
(ii) the costs of the second to fifth plaintiffs’ summons dated 25 May 2015 (‘Application to Re-Open’);
the fourth defendant is to bear her own costs of the proceeding.
(d) The costs of the second to fifth plaintiffs and the fifth and sixth defendants incurred on 4 March 2015 are to be paid by the fourth defendant on a full indemnity basis.
(e) The second to fifth plaintiffs’ costs of and incidental to the fourth defendant’s summons dated 21 December 2012 are to be paid by the fourth defendant.
(f) Save for the costs of 4 March 2015, the estate of the first defendant and the fourth defendant are to pay 20% of the second to fifth plaintiffs’ costs:
(iii) of the trial;
(iv)that were reserved costs of the directions hearings on 1 March 2010, 8 June 2010, 11 December 2012, 28 May 2013, 26 September 2014, 11 November 2014 and 17 December 2014;
(v) that were reserved costs of the second to fifth plaintiffs’ application heard by Daly AsJ on 16 May 2014 to inspect documents produced by Peter Talacko; and
(vi)that were reserved costs of the second to fifth plaintiffs’ summons dated 31 July 2014.
(g) The first to fifth plaintiffs are to pay the costs of the fifth and sixth defendants, save for:
(vii) the costs of 4 March 2015;
(viii) the costs of the Appeal and Summons; and
(ix) the costs of the Application to Re-Open.
(h) The second to fifth plaintiffs are to pay the fourth defendant’s costs and the fifth to sixth defendants’ costs of the Application to Re-Open.
(i) The fifth and sixth defendants are to pay the second to fifth plaintiffs’ costs and the fourth defendant’s costs of the Appeal and Summons. The costs of 18 November 2014 are to be paid on a full indemnity basis and the balance of the costs on a standard basis.
| SCHEDULE OF PARTIES | |
BETWEEN: | |
| JAN TALACKO (as Executor of the Estate of Helen Marie Talacko) | Firstnamed Plaintiff |
| ALEXANDRA BENNETT | Secondnamed Plaintiff |
| MARTIN TALACKO | Thirdnamed Plaintiff |
| ROWENA TALACKO | Fourthnamed Plaintiff |
| MARGARET HELEN TALACKO | Fifthnamed Plaintiff |
| - and - | |
| JAN EMIL TALACKO | Firstnamed Defendant |
| DAVID TALACKO | Secondnamed Defendant |
| PAUL ANTONY TALACKO | Thirdnamed Defendant |
| JUDITH GAIL TALACKO | Fourthnamed Defendant |
| PETER ANDREW NOEL TALACKO | Fifthnamed Defendant |
| AMANDA MAREE FISCHER | Sixthnamed Defendant |
| STATE TRUSTEES LTD | Seventhnamed Defendant |
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