Testel Australia Pty Ltd v Rickard (No 2) - [2015] SADC 141

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TESTEL AUSTRALIA PTY LTD v RICKARD AND ORS (No 2)
[2015] SADC 141
Reasons for Decision of His Honour Judge Slattery
16 October 2015
PROCEDURE - COSTS
Costs - Appeal against a Master’s decision
The plaintiff failed in its two appeals against orders of a Master of the Court refusing its request for further and better disclosure and for delivery up of documents under R61 of the Rules of Court. The first defendant seeks costs orders in his favour.
Whether a decision on the costs of the Appeal should abide the trial of the action.
Whether the first defendant is entitled to an elevated order of costs above party and party costs.
Whether an order should be made for costs to be assessed by the Court and paid forthwith.
Held:
1. Issues of costs of the appeals should be dealt with before the trial of the action.
2. The first defendant is entitled to its costs of the second appeal and half of its costs on the first appeal on a party and party basis.
3. The first defendant is entitled to half of his costs of the first appeal on a solicitor and client basis.
4. The first defendant is entitled to an order for costs of the argument about the costs of the appeal.
5. In light of the total amount of costs claimed by the first defendant of the argument on the appeal and the costs argument, the Court is in a position to assess a lump sum costs amount for the first defendant.
6. The costs in favour of the first defendant under all costs orders in his favour fixed in the amount of $5000 inclusive of all disbursements.
District Court Rules 2006 (SA) R256, 264(5(a), 274, referred to.
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 141 ALR 727; Alstom Power Limited v Yokogawa Australia Pty Ltd (No 2) [2006] SASC 87, considered.

TESTEL AUSTRALIA PTY LTD v RICKARD AND ORS (No 2)
[2015] SADC 141
Application on behalf of the first defendant for an order for costs in his favour of the appeal

In this action, I heard two appeals from a decision of a Master of this court: the first appeal concerned a refusal, in part, of the application of the plaintiff for further and better disclosure. The second appeal was brought against a refusal by the learned Master to order production of documents pursuant to Rule 61 of the Rules of Court. I dismissed both appeals.
The appeals were heard on 24 July 2015 and I delivered judgment on 19 August 2015. At that time the matter was set for trial to commence in this court on 7 September 2015.
The first appeal concerned a number of separate claims for further and better disclosure. One of those claims concerned whether particular payslips should be disclosed. This aspect of the appeal turned largely upon the content of pleadings. Another aspect of that appeal turned on the breadth of the request made, the detail of which is set out in paragraph [10] of my reasons. In particular, one form of request sought all documents before or after August 2012, the date upon which the first defendant Mr Rickard formally became involved in the business of the second and third defendants as an employee of Active Safety Services Pty Ltd (Active). This request was directed to the plaintiff’s contention that Mr Rickard was not merely an employee of Active but, if proper disclosure was made, it could be shown that he was the guiding hand and mind of that company and was properly to be seen as its owner or as one of its proprietors.
On both of those aspects of the first appeal but predominantly in relation to the second aspect of the appeal, the plaintiff raised the further and better disclosure made by the second and third defendants on the day before the hearing of the appeal. At that time the second and third defendants were separately represented. The plaintiff addressed that material in its submissions on the appeal without any serious objection being made by the first defendant. The second and third defendants did not appear at the appeal hearing but are now represented by the same solicitors and counsel as the first defendant. The material disclosed in the letter of the solicitors for the second and third defendants of 23 July 2015 consisted of text messages sent between the first defendant and the second defendant. That material had not been before the Master. In the absence of submissions to the contrary on behalf of the first defendant, I still considered those further texts for the sake of completeness (in the event that any decision of mine was, in turn, to be the subject of an application for leave to appeal). I came to two principal conclusions. The texts were quite apparently communications between the first defendant and the second defendant concerning matters that were identifiable as directly relevant to the pleaded issues because they had been disclosed. Some of these messages required some degree of speculation (on the material before me) in order to support the plaintiff’s submissions. And on the materials before me, they were not decisively relevant to the issues on appeal and that any argument on relevance was based in part upon speculation that was not of assistance to me in the appeal. The question of relevance on the appeal and speculation went ‘hand in glove’ because the appellant’s counsel made submissions about the meaning of the texts which meaning was strenuously disputed by counsel for the first defendant. I dealt with the texts in the solicitor’s letter of 23 July 2015 at paragraphs [18] - [32] of the appeal decision, based upon the material before me on the appeal
This discussion emphasises one quite difficult aspect of this type of situation where there is disclosure made or there are substantial developments that occur between the time that the Master makes his decision and the hearing of the appeal. The court is placed in a quite difficult position if the exchanges between the parties about topics that may perhaps be relevant to the appeal continue to occur as took place here. The appeal court is for that reason generally not the appropriate place to re-canvass the matter by the introduction of fresh material in the appeal where there is arguably a continuing evolution of the parties’ cases.
A Judge of this court made a search order against the first defendant on the application of the plaintiff. This order enabled the production of materialion computer records that answered the plaintiff’s requests described in B4 and B7 in the appeals. That material has now been assessed and provided by the defendants to the plaintiffs. This material, on the plaintiff’s contentions, discloses the material sought by it in paragraphs B4 and B7 as relevant documents. The contentions on that topic are further complicated by the fact that the first defendant has now filed amended pleadings (a fourth defence) and the second and third defendants have now filed further pleadings (a fourth defence and set-off) which were not before the Master or before me. The plaintiff contends that these further pleadings demonstrate the correctness of its claims for further and better disclosure.
At paragraph 10.16 of his new pleading, the first defendant makes the following admissions: that the first defendant provided the second defendant with general business advice on the incorporation of Active and on the administration of Active; between November 2011 and February 2012 the first defendant provided assistance to Active on a voluntary and unpaid basis; and that the first defendant assisted the second defendant to prepare an initial quote for work for a Flinders Medical Centre contract, that entity being a previous customer of the plaintiff. I have intentionally only selected some of the facts arising from a portion of these further pleadings in order to disclose the evolution of the pleaded case of the first defendant which, by ordinary extension of logic, may have an effect on the position of the second and third defendants. In the result, it is impossible to gauge what further material may be made available and what, in its proper context, is the relevance of that material. This emphasises again the difficulty of an appeal being argued on a basis that was different to the position at first instance.
That difference may have more usefully been the basis for another application to the Master for further and better disclosure rather than to pursue the appeal process. Alternatively, the plaintiff could have sought a Judge management of that aspect of the litigation so that these matters could be dealt with in that arena when the matter was so close to its trial date. The plaintiff chose to prosecute the appeal with the attendant difficulties that I have set out.
At paragraphs [33], [34] and [35] of my judgment I dealt with the plaintiff’s arguments on the appeal and decided that I could find no error on the approach of the Master to the claims for further and better disclosure described as A, B4 and B7.
Decision: The costs of the Appeal
The first defendant has therefore succeeded on this ground and he is entitled to his costs. It would be inappropriate now to re-canvass the appeal and the decision of the Master in the way that the plaintiff contends about how the case has evolved since the appeal. This was the approach of the plaintiff on the costs argument. I am unable to accept that approach of the plaintiff.
The first defendant has also succeeded in defeating the plaintiff’s second appeal. I am satisfied that the first defendant is entitled to an order for costs in his favour on both appeals. I also do not accept the argument of the plaintiff that the issue of costs should await the outcome of the trial. I hold this view for a number of reasons including that my judgment on these appeals are subject to a further appeal. All matters in these appeals should be resolved by the time that the further appeal is heard.
The defendant seeks an elevated costs order
The first defendant seeks an order for costs on both appeals at an elevated level. There was no contest about the applicable authorities that guide the exercise of my discretion to grant such an order.[1]
[1] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 at 256, per Sheppard J: Re, Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 141 ALR 727.
On the first appeal, the first defendant points to two main bases for an elevated order: the appeal was doomed to fail and that the plaintiff was imprudent in not accepting proposals for resolution.
Whilst it may be said that it will (and should) always be a difficult task to overturn the exercise of a discretion on an interlocutory matter, the successful appeals from such decisions gainsay the proposition that such applications are, ipso facto, doomed to fail. The question then becomes the grounds stipulated by the first defendant in support of an elevated costs order. On the first issue of the appeals, the first defendant points to the fact that the decision of the Master turned on content of the plaintiff’s pleadings. The request made was not directed to an issue joined on the pleadings in paragraph 35.4 of the then Statement of Claim. The issue raised in those pleadings did not relate to the topic of the software cash flow manager. No basis was made out on the pleadings justifying the request for further and better disclosure against the first defendant.
By letter of 13 July 2015 the first defendant made the following offers:
Given the orders made by Master Rice on 8 July 2015, the appeal is now redundant in so far as it relates to our client (Troy Rickard).
Our client is prepared to bear his own costs on the appeal, if it is discontinued against him by no later than 16 July 2015. If your client persists with appeal, our client will rely upon this letter and the terms of Master Rice’s order of 8 July 2015 on the question of costs of the appeal.
By letter of 16 July 2015, the plaintiff’s solicitors responded as follows:
Our client is prepared to discontinue paragraph 2 of the orders sought on appeal and paragraph 1 of the grounds of appeal set out in the Notice of Appeal filed on 25 May 2015 (i.e. those parts of the appeal affecting your client) on the following terms:
1. The plaintiff and the first defendant bear their own costs of the appeal.
2. The first defendant abandons his application for costs to be paid on an indemnity basis in respect of the underlying application for disclosure determined by Master Rice.
3. The first defendant abandons his application for costs to be paid forthwith in respect of the underlying application for disclosure determined by Master Rice.
By letter of 20 July 2015 the solicitors for the first defendant responded, by correcting the plaintiff’s solicitors’ contentions about the claim for indemnity costs and the costs on the application before the Master and said as follows:
The orders and observations made by Master Rice on 8 July 2015 are irrelevant to the basis for the application for further and better disclosure FDN 55 because those orders and observations took into account material, in particular in connection with the gurney’s receipt (the motor vehicle issue) that was not before the court on the application for further and better disclosure.
Our client is prepared to resolve the appeals on the following basis:
1. That your client discontinue both appeals, being the rule 61 appeal and the previous appeal filed on 25 May 2015.
2. Our respective clients each bear their own costs of the appeals.
3. Your client pay our client’s costs of and incidental to paragraph 2 of FDN 55, to be agreed or adjudicated.
4. Our client will not continue to seek that those costs be payable forthwith, nor will he continue to seek that his costs of and incidental to the rule 61 application, FDN 83, be payable forthwith.
This offer is open only until 5.00pm on Tuesday 21 July 2015.
The response of the plaintiff on this issue was to point to the content of the pleadings of the defendants in each of their fourth defences and to the further material disclosed by the defendants following the investigation of the defendant’s computers pursuant to the orders of Judge Barrett.
The plaintiff spent considerable time in the costs argument going through the further disclosed materials. This disclosure was made pursuant to the orders of Master Rice following the orders of Judge Barrett and the documents were therefore produced as part of the defendants’ disclosure requirements. A number of strong submissions were made by the plaintiff based upon the content of this further disclosure. Although the first defendant contended that a number of the plaintiff’s submissions were speculative (and that may be correct in relation to some of the documents) there was sufficient disclosed in that material to suggest that there may be grounds for cross-examination of the defendants’ witnesses by the plaintiff, but that is a matter for trial.
This discussion again exposes the difficulty of dealing with issues on an appeal when the substratum of the action in which the appeal is brought is allegedly changing and evolving. Any decision about whether to take those matters into consideration ex post facto the appeal is fraught; even more difficult is the assessment of cost consequences in those circumstances.
After giving this matter considerable thought and reflection, I have decided that the only appropriate way to proceed is to decide these matters on the bases of the material that was before me on the appeal. It is difficult, if not impossible, to divorce the further pleadings and disclosure made by the defendants referred to in argument by the plaintiff from the question of the exercise of my discretion. It would be foolhardy to suggest that this could be completely achieved. However, I will proceed on that basis.
On the second appeal, the first defendant asserted that the appeal was doomed to fail because the court was bound to apply settled authority which it did apply and so there was no sufficient prospect of the success of the appeal. The plaintiff’s response was that it had not ignored the relevant authorities but had argued that those authorities were distinguishable on the relevant facts of this matter. In my view this matter can be dealt with separately and briefly. I accept the plaintiff’s submissions. A litigant who genuinely contends that the facts situation before the court does not fit within or demonstrably stands outside of settled authority will not necessarily or automatically be visited with an order for an elevated level of costs. The first defendant is entitled to an order for costs on the second appeal on the usual party and party basis.
On the first appeal, the first defendant is entitled to an order for half of its costs on a solicitor/client basis and half of its costs on a party and party basis. I agree with the first defendant’s submissions that the appeal on the disclosure connected with paragraph 35.4 of the pleadings was doomed to failure. It was without merit for the reasons set out by the learned Master in his reasons. It is not necessary for me to consider the question of the imprudent refusal to accept a proposal for resolution, but if it were necessary, I agree with the submissions of the plaintiff that the court must deal with the offers and counter-offers on different bases.
The defendant also makes application for an order that the costs in his favour be paid forthwith on a lump sum basis pursuant to r 265 of the Rules. The first defendant relies upon the decision of Debelle J in Alstom Power Limited v Yokogawa Australia Pty Ltd (No 2) [2006] SASC 87.[2]
[2] This case was decided before the introduction of rule 265 but the parties did not contest the fact that there was no meaningful distinction between rule 265 and the former rule.
The first defendant relied upon the observations of Debelle J at [4] in Alstom that, in general, a taxation of costs will occur at the conclusion of a proceeding but the discretion of the court in the circumstances is unfettered and the overiding issue is the interest of justice in particular individual cases. His Honour discussed the policy considerations applicable and which inform the factors the court might take into account. At paragraphs [8]-[10] in Alstom Debelle J discussed the factors justifying a departure from the general rules.
The first defendant’s contentions are that it is in the interests of justice that such an order be made for a number of reasons. The first is that the determination of the appeal concerned discrete interlocutory issues. The second, is that there is proof that the first defendant has limited financial resources. The third is that the appeals were doomed to fail. The fourth is that the costs of the appeal may be assessed on a lump sum basis once and for all and that there is no need for a series of costs adjudication. The first defendant also points to the fact that the plaintiff was put on notice that the first defendant would seek his costs be paid forthwith.
In the particular circumstances of this case, it is not necessary that I come to any final conclusion about those matters. That is because of the situation which is quite peculiar to this case. The first defendant informed me that his costs on the appeals are as follows:
1.     Counsel fee: $3,613.50;
2.     Solicitors fee: $193.60;
3.     Counsel fees on costs argument: $1,650.
The first defendant has succeeded on the argument on the costs of the appeal and he is entitled to an award of costs for that argument.
I have reviewed the Supreme and District Court indicator on counsel fees applicable from 1 July 2007. I have also familiarised myself with the file generally. In light of that information, and keeping in mind my unfettered discretion under the Rules I have reached a number of conclusions: the fees charged in respect of the appeal for counsel fees are slightly in excess of the daily rate scale applicable at the time but that does into take into account any allowances for conferences on the appeal or other similar types of attendances. A very important feature here is that (as a matter of simple logic), the absence of any real claim for solicitors fees on the appeal reveals the greater share of the work on the appeal was done by counsel and so it may be anticipated that an allowance would be made for sundry attendances by counsel on the appeal in any taxation of costs.

I am in the same position as any taxing Master in giving consideration to the first defendant’s costs claimed on the appeal. I can see no utility in the interests of the administration of justice or the expenditure of any public funds to require a process of taxation of costs within this court. In my opinion, any such process would needlessly waste costs and occupy valuable court time unnecessarily.
I have the same power as a taxing Master to fix a lump sum for costs under the Rules. In light of the above and being familiar with the process adopted by the first defendant’s representatives in this appeal, it is my opinion that in large part the costs claimed by the first defendant are properly allowable. I therefore fix the first defendant’s total party and party costs in the amount of $5,000 for the appeal and the costs argument as a lump sum under the Rules of Court. I have not been required to give further consideration to the solicitor/ client costs order made in favour of the first defendant as set out above. This is because of the conclusion reached by me after considering the whole file, that the claim of the first defendant for costs very closely approximates a claim for party and party costs. If there is a difference it is so small that no further public and private resources should be expended in any dispute on that topic. I make this order pursuant to Rules 264(5)(a), 256 and 274 of the District Court Rules. The first defendant is entitled to apply for the issue of an allocatur for his costs in respect of the appeals and on the costs of the argument on costs of the appeal together in a lump sum amount of $5,000.00. This amount includes any allowance for counsel fees or for any other disbursements.