Waks v Chabad Properties Inc Ltd
[2020] VSC 426
•23 July 2020
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COSTS COURT
S ECI 2019 04845
IN THE MATTER OF:
An application by notice under s 17HA Supreme Court Act 1986 and r 63.94 of the Supreme Court (General Civil Procedure) Rules 2015
BETWEEN
| YAAKOV SHIMON WAKS | Applicant |
| v | |
| CHABAD PROPERTIES INC LTD | First Respondent |
| YESHIVAH BETH RIVKAH SCHOOLS LTD | Second Respondent |
| CHABAD INSTITUTIONS OF VICTORIA LTD | Third Respondent |
JUDGE: | Wood AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 July 2020 (on the papers) |
DATE OF DECISION & REASONS: | 23 July 2020 |
CASE MAY BE CITED AS: | Waks v Chabad Properties Inc Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2020] VSC 426 |
DECISION & REASONS
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LEGAL COSTS – Leave to review interlocutory order – Rule 63.94(1)(b) Supreme Court(General Civil Procedure) Rules 2015 - Interpretation of scope of costs orders – Discontinued proceeding as against some defendants - No order as to costs - Rules 25.05 and 63.15.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr DG Collins QC with Ms SF Cherry | Mazzeo Lawyers |
| For the Respondents | Mr R Heath QC with Mr A Weingart | CIE Legal |
HIS HONOUR:
The applicant filed a ‘Notice of Application for Review’ (‘Review’) on 3 March 2020. The ability to do so arises from s 17HA(1) of the Supreme Court Act 1986 and r 63.94(5) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). The decision that is sought to be reviewed is that of a Judicial Registrar published on 20 February 2020. The decision was an interlocutory ruling which concerned the interpretation of party/party costs orders. The Judicial Registrar had the benefit of oral and written submissions at a hearing on 12 December 2019 and produced comprehensive reasons in a ‘Ruling‘ on 20 February 2020.
That ruling was not a ‘final determination’ in the ‘form of an order’ so leave is required pursuant to r 63.94(1)(b). In the event that leave is granted, review of the Ruling can proceed. The Review was listed for hearing on 2 July 2020 however, the parties elected to have the Review dealt with ‘on the papers’. I now publish my decision and reasons.
Whether there is a real prospect of success and there are any arguable grounds of review are relevant factors in the granting of leave. Kennedy v Shire of Campaspe[1] is authority for the proposition that even assuming there was a real prospect of success leave can still be refused if there is no substantial injustice.[2] Delays in the disposal of cases and increasing costs can be factors to be considered when granting leave.[3]
[1](2015) VSCA 47.
[2]Ibid at [12] and [14].
[3]In re the Will of FB Gilbert (1946) 46 SR (NSW) 318 (Jordan CJ) quoted in Kennedy at [77].
The relevant history of the matter commences in October 2017 when the applicant (in the capacity of plaintiff) commenced proceedings against eight defendants in proceeding SCI 2017 4208 (‘the substantive proceeding’). The first and second respondents to the current proceeding in the Costs Court were the second and third defendants in the substantive proceeding.
There have been three events, embodied in orders made in the substantive proceeding, which are relevant to the controvery that exists between the parties in the current proceeding and underpin the Review. Two of those orders have the most significance for the Review.
The first event occurred on 18 February 2019 when an order (‘first order’) was made by Ierodiaconou AsJ in the substantive proceeding that significantly included a provision that those proceedings as against five of the defendants (fourth, fifth, sixth, seventh and eighth defendants inclusive) be discontinued pursuant to r 25.02.[4] This first order recites that the parties who consented were the plaintiff and the second to eighth defendants. That means that the first and second respondents (in their capacities as second and third defendants) were also consenting to letting the fourth to eighth defendants out of the substantive proceeding. The first defendant did not consent as he was in the United States of America and had not entered an appearance. Absent the consent of all parties, leave of the Court was required by virtue of the operation of r 25.02(2)(b). Hence the reference to r 25.02 in the order.
[4]Paragraph 3 of the order of Ierodiaconou AsJ made 18 February 2019.
The first order also included other provisions including leave for the addition of a ninth defendant to the substantive proceeding (being the third respondent in the current proceeding), a name correction for the third defendant, the provision of a further amended writ and statement of claim, a defence and discovery by the ninth defendant, service on the first defendant and an extended timetable for experts, interrogatories and mediation.[5]
[5]Paragraphs 1, 2, 4, 5, 6, 7, 8, and 9 of the order made 18 February 2019.
The final paragraph of the first order[6] was that there be ‘No order as to costs.’ It was a stand alone paragraph, not linking its application to any particular element of the matters covered in the order. There was no qualification or restriction attached to that order dealing with costs. It therefore potentially had broad application to the contents of the order.
[6]Paragraph 11 of the order made 18 February 2019.
References in this judgment to the ‘plaintiff’ in the substantive proceeding are to the ‘applicant’ in the current proceeding and vice versa. References to the ‘second, third and ninth defendants’ in the substantive proceedings are to the ‘respondents’ in the current proceeding and vice versa.
There are several matters that can be noted about the contents of that first order. The order does not contain an entitlement for the remaining defendants to ‘costs thrown away’ or costs ‘of and occasioned by’ the amended statement of claim to follow. Absent such an order the costs of an amendment to a pleading are costs in the proceeding.[7] There was no specific reference to costs consequences arising from the inclusion in the substantive proceeding of the parties that the plaintiff was in effect now acknowledging he was no longer seeking relief from and, he should now discontinue against. That is, there is no specific reference to costs of the defendants who are discontinued against and were unnecessarily joined by the plaintiff. However, the words ‘No order as to costs’ are in a separate paragraph and arguably apply to the whole of the order without distinguishing between the various components of the order, all of which potentially have cost consequences. Obvious issues include whether those discontinued defendants have an entitlement to costs as against the plaintiff in view of the effect of r 63.15 and whether the plaintiff was bearing his own costs of the proceedings up to that point for costs incurred in pursuing those defendants, who he was now discontinuing against.
[7]Rule 63.17.
The second event resulted from the failure of the first defendant to enter an appearance in the substantive proceeding. Judgment in default was entered on 3 July 2019 with the plaintiff’s costs fixed at $5,646.80.
The third event occurred on 26 August 2019 when a consent order was made in the substantive proceedings by Digby J (’second order’). This second order provided that :
1.The second, third and ninth defendants pay the plaintiff’s costs on a standard basis, to be assessed by the Costs Court in default of agreement.
2.The proceeding as against the second, third and ninth defendants is otherwise dismissed, without adjudication on the merits, with a right of reinstatement.
As a result the plaintiff (applicant) has initiated these proceedings in the Costs Court against those second, third and ninth defendants (first to third respondents). The controvery that has arisen between the parties that required a ruling by the Judicial Registrar stems from the fact that the costs of $438,071.30 that the applicant seeks to assess, and recover from these three parties arising from the order of 26 August 2019, are all the costs of the applicant in the substantive proceeding, without any differentiation between common costs, non-common costs or exclusive costs as between all nine defendants.
In other words, the applicant is seeking all of his costs from only three of the nine defendants in the substantive proceedings. This includes the costs incurred by the applicant in initiating, and maintaining, proceedings against the fourth to eighth defendants up to the point he subsequently discontinued against them and was no longer pursuing after that time. It also includes costs in relation to the first defendant, in circumstances where costs had already been quantified in a fixed sum costs order against that defendant on 3 July 2019. Those same costs were now being sought jointly and severally from the ‘last standing’ defendants in addition to the first defendant.
As stated above in paragraph 6, the order of 18 February 2019 correctly referred to r 25.02.[8] However, there are two other rules of significance.
[8]Rule 25.02(1) and (2).
Rule 25.05 provides that where a proceeding or part of a proceeding is discontinued the liability for costs shall be determined in accordance with r 63.15.
Rule 63.15 states that unless the Court otherwise orders, a party who discontinues shall pay the costs of the party to whom the discontinuance relates up to the time of the discontinuance.
When the plaintiff discontinued against the fourth to eighth defendants at the time of the first order on 18 February 2019 he was potentially liable for their costs from October 2017 up to that time unless ‘the Court otherwise orders.’ The relevant parties consented at that point that there be ‘no order for costs’ attaching to an order which included the discontinuance.
A number of critical questions surround the effect of the first and second orders made 18 February 2019 and 26 August 2019. Obviously the second order must be considered in the context of the existence of the first order.
Did the inclusion of ‘no order as to costs’ in the first order of 18 February 2019 relieve the plaintiff (applicant) of that prima facie obligation to pay the costs of the fourth to eighth defendants in the substantive proceeding, and finalise his entitlement to costs of the proceeding in respect of work performed in pursuing the fourth to eighth defendants? The second order of 26 August 2019 was not expressed to vary or set aside the order of 18 February 2019. Therefore did the second order of 26 August 2019 only give the plaintiff (applicant) an entitlement to his costs of the proceeding as against those second, third and ninth defendants (respondents) or were those defendants (respondents) liable for all the plaintiff’s costs of the proceeding, including costs incurred in relation to the defendants he had already discontinued against? The plaintiff’s costs as against the first defendant were obviously determined on 3 July 2019. Can the costs relating to the first defendant now also be sought by the plaintiff (applicant) from the second, third and ninth defendants (respondents)?
In the respondents’ written submissions relied upon at the hearing before the Judicial Registrar (28 November 2019), a number of definitions were included. ‘Common costs’ were defined to be the plaintiff’s costs in taking steps against all defendants. ‘Exclusive costs’ were defined as costs incurred only in taking steps against the second, third and ninth defendants (repsondents). ‘Non exclusive costs’ were defined as steps taken against defendants other than the second, third and ninth defendants (respondents). The ‘Rule of Thumb’ was defined as being applicable where defendants are jointly represented and there is success. In those circumstances the plaintiff would be liable to the successful defendants for costs attributable to those defendants and a proportionate share of costs in common with all defendants.[9]
[9]Paragragh 2 of the Respondents’ written submissions dated 28 November 2019.
In summary, the respondents contended that the plaintiff was entitled to 100 per cent of their exclusive costs, nothing for non-common costs and a pro rata proportion of the common costs. The plaintiff was not entitled to costs referrable to the defendants they were ‘unsuccessful’ against. In this case the ones discontinued against. To find otherwise was said to be unjust.
Before the Judicial Registrar the applicant relied upon written submissions (dated 5 December 2019). In summary it was put that the second order for costs made by Digby J was an order for costs of the entire proceedings.[10] It was also contended that the Rule of Thumb was not applicable[11] and there would an injustice to the applicant if there were to be any apportionment at all,[12] or any pro rata apportionment.[13]
[10]Paragraph 5 of the Applicant’s written submissions dated 5 December 2019.
[11]Paragraphs 6 to 14 of the Applicant’s written submssions dated 5 December 2019.
[12]Paragraphs 15 to 18 of the Applicant’s written submissions dated 5 December 2019.
[13]Paragraphs 19 to 24 of the Applicant’s written submissions dated 5 December 2019..
The Judicial Registrar concluded that the plaintiff’s costs of the substantive proceedings that are recoverable from the second, third and ninth defendants are restricted to exclusive costs, and an apportionment of common costs. The orders were interpreted so that the plaintiff (applicant) could not recover costs exclusively referrable to work conducted in the proceeding in relation to the fourth to eighth defendants, from the second, third and ninth defendants (respondents). The respondents’ position before the Judicial Registrar was that the effect of the first order made 18 February 2019 did not effect the entitlement of the defendants discontinued against to seek costs from the applicant. In those circumstances the applicant could therefore not seek their costs against the remaining second, third and ninth defendants.[14]
[14]Paragraph 13 of the Judicial Registrar’s Ruling dated 20 February 2020.
The Judicial Registrar reached a number of conclusions. First, that the ‘Rule of Thumb’ had no application.[15] Secondly, that the effect of the first order of 18 February 2019 was that neither the plaintiff nor the fourth to eighth defendants have a claim for costs against each other.[16] Thirdly, that the applicant cannot recover any common costs or exclusive costs relating to the first defendant from any other party.[17] Finally, that the applicant is entitled to a proportion of common costs as to one quarter to 18 February 2019 and three quarters from 18 February 2019 to 3 July 2019 (these portions were referrable to the number of defendants in the substantive proceedings during those periods) and 100 per cent of his costs from 3 July 2019 to 26 August 2019 equally as between the three remaining defendants (the respondents).[18] The final conclusion reached was that ‘I would uphold each of the respondent’s general objections’.[19]
[15]Paragraph 23 of the Judicial Registrar’s Ruling dated 20 February 2010.
[16]Paragraph 21 of the Judicial Registrar’s Ruling dated 20 February 2020.
[17]Paragraph 22 of the Judicial Registrar’s Ruling dated 20 February 2020.
[18]Paragraph 23 of the Ruling (and incorporating by reference, pargraph 3(a)).
[19]Paragraph 24 of the Ruling.
The applicant’s Review expresses the ‘Extent of Objection’ as follows – “Save for the determination that the ‘Rule of Thumb’ has no application, the Applicant objects to the whole of the determination of the judicial registrar’.[20]
[20]Paragraph A of the Review.
Leaving the ‘Grounds for Leave’ aside for the moment, the ‘Grounds of Objection’ are stated as follows:
1.The learned judicial registrar ought to have found that the proper construction of the Order made by consent on 26 August 2019 (the “Order”) was that it entitled the plaintiff to all of his costs of the proceeding on the standard basis.
2.The learned judicial registrar erred in determining that the order made on 18 February 2018 meant the plaintiff could not recover his costs of the proceeding referable to the claims against the fourth to eighth defendants from any other defendant (Reasons at paragraph [21]).
3.The learned judicial registrar erred in determining that the orders made on 3 July 2019 meant that the plaintiff could not recover any common costs or exclusive costs relating to the first defendant from any other party in the proceeding (Reasons at paragraph [22]).
4.The learned judicial registrar erred in determining that as a result of the Order not specifically providing for payment of all the costs of the proceeding, the applicant’s costs recovery from the respondents is limited to that proportion of common costs in respect of each of them, so that the ‘common costs’ of the proceedings must be apportioned (Reasons at paragraph [23]).
5.The learned judicial registrar erred in determining that the ‘common costs’ must be apportioned as follows (Reasons at paragraphs [23] and [3(a)]): –
a.as to one quarter until 18 February 2019 as the second and third defendants were two of eight defendants;
b.as to three quarters from 19 February 2019 until 3 July 2019 (being the date of judgment being entered against the first defendant as the second, third and ninth defendants were then three of (sic) defendants; and
c.thereafter until 26 August 2019 all costs borne equally between the three remaining defendants.
The applicant filed written submissions (‘first written submissions’) and a list of authorities on 14 April 2020 as part of the Review.
The respondents filed written submissions and a list of authorities on 12 May 2020 as part of the Review.
The applicant filed submissions in reply (‘reply submissions’) on 1 June 2020 with an updated list of authorities as part of the Review.
The issue of leave can be dealt with in short compass. Section 17HA(1) of the Supreme Court Act 1986 provides that ‘subject to the Rules’, a party can apply to a Costs Judge for a review of a determination of a judicial registrar. As outlined in paragraph 2 above, in this matter the Rules require leave to review the Ruling. The respondents do not take issue with ‘dispensation’ with the section.[21] I take this to mean that the granting of leave as required by r 63.94(1)(b) is not opposed. The determination of the correct interpretation of the costs order will assist in negotiation to respolve the proceedings. To refuse leave and then potentially have a taxation by the Judicial Registrar, reconsideration by the Judicial Registrar, review by a Costs Judge and then second taxation if the review were to be successful, would only add to delay and costs. I am prepared to grant leave to review the Ruling.
[21]Paragraph 3 of the Respondents’ written submissions dated 12 May 2020.
The applicant’s first written submissions address the five grounds of objection reproduced at paragraph 27 above. The first ground is that the proper construction of the second order of 26 August 2019 entitled the applicant to all the costs of the proceeding on a standard basis and it is put that the Judicial Registrar did not address the construction of the order.[22]
[22]Paragraph 17 of the Applicant’s first written submissions dated 14 April 2020.
The first written submissions make reference to three authorities. They are Parker v Borg (‘Parker’),[23] Dimos v Willetts (‘Dimos’),[24] and Geatches v Anglo Coal (Moranbah North Management) Pty Ltd (‘Geatches’).[25]
[23](2002) QSC 215.
[24](2000) VSCA 154.
[25](2014) QSC 106.
In summary, Parker was a case where costs were ordered in favour of the plaintiff in circumstances where there were three defendants. In the trial the plaintiff failed against the first two defendants and obtained judgment only against the third defendant. An order for indemnity costs of the proceeding was made in the plaintiff’s favour. Chief Justice de Jersey found that the order covered all costs, even those incurred in pursuing the defendants that they were unsuccessful against. His Honour considered the context within which the order was made. Those defendants were joined because it was not clear who the claim would succeed against. The applicant submits that those circumstances are analogous to the situation here.[26] The applicant also submits the argument is stronger here because the applicant’s case did not fail against any defendant. However, it could be argued it is in fact weaker here because the applicant discontinued against the five defendants at an earlier stage in the proceedings in recognition they were not necessary, or appropriate, defendants to continue to seek relief against. In other words, when the second order is considered in the conext of when it was made, there were no longer proceedings on foot in relation to those five discontinued defendants.
[26]Paragraph 20 of the Applicant’s first written submissions dated 14 April 2020.
Dimos was decided before Parker and concerned a case where a plaintiff succeeded against the first defendant and failed against the second. Costs orders were made that the first defendant pay the plaintiff’s costs of the proceeding. There was also an order that the second defendant recover costs of the proceeding from the plaintiff. The plaintiff unsuccessfully argued that the order in their favour enabled recovery of non common costs from the first defendant referable to the claim against the second defendant. The case appears to be of little relevance to the situation here.
The case of Geatches is one where a consent order provided that the plaintiff recover costs of the proceeding from the first defendant. There was a second defendant. The order was interpreted as including recovery of the whole of the common costs from the first defendant.[27] The rationale appears to be that the words ‘of and incidental to the claim against the first defendant’ were sufficiently wide enough to pick up all common costs without apportionment as between the claim against the first defendant (where there was an entitlement to costs) and the second defendant (where there was no entitlement to costs). It should be noted here that Geatches was a decision of a single judge in Queensland and the Victorian Court of Appeal in Fifteenth Eestin Nominees Pty Ltd v Rosenberg & Anor (No 2)[28] has concluded that the words ‘of and incidental to’ add nothing extra to an order for costs.
[27]{2014) QSC 106 at p.5 and paragraph 27 of the Applicant’s written submissions.
[28](2009) VSCA 76 at [9] (Maxwell P, Neave and Redlich JJA).
The additional list of authorities submitted by the applicant with their reply submissions added the UK case of Haynes v Department for Business, Innovation and Skills (‘Haynes’).[29] This case will be discussed below at paragraphs 61 and 62.
[29](2014) EWHC 543_2(QB).
The respondents’ written submissions set out three reasons why Geatches should be distinguished. For example, the reference in that case to ‘or some component’ was said to be a recognition of divisible common costs.[30]
[30]Paragraphs 34 and 35 of the Respondent’s written submissions.
The second ground of objection was that there was an error made in relation to the construction of the first order of 18 February 2019. This centres around the inclusion of the words ‘no order as to costs’ and the conclusion reached by the Judicial Registrar made that neither the applicant nor the fourth to eighth defendants can claim their costs of the proceeding from any other party.[31] The applicant’s submission is that those words only precluded the discontinued defendants from claiming costs from the applicant and the applicant’s costs remained at large and they were resolved by consent against the respondents without qualification in the second order of 26 August 2019.
[31]Paragraph 31 of the Applicant’s written submissions dated 14 April 2020.
The third ground of objection relates to the effect of the order for costs made on 3 July 2019 against the first defendant in default of appearance. The applicant challenges the conclusion that the applicant’s costs in relation to the first defendant cannot be recovered from any other party in the proceeding. In effect the argument centres around whether the second order of 26 August 2019 encumbers the respondents with joint and several liability for the applicant’s costs as against the first defendant.
The fourth ground of objection relates to what flows from the interpretation of the second order of 26 August 2019 if there was to be an apportionment of costs.
The fifth ground of objection deals with the conclusion for a pro rata apportionment by the Judicial Registrar on the basis of the number of defendants rather than grouping the fourth to eighth defendants as one block on the basis they had the same interests, were members of an unincorporated entity, and were replaced by the ninth defendant, an incorporated entity.
A decision of a Judicial Registrar may only be challenged for error and the review shall be ‘in the nature of a rehearing, not a review de novo.’[32] The respondents’ written submissions state they do not seek to argue that the reasons were free from error.[33] They reference Ground 1 of the applicant’s Grounds of Objection[34] and question the conclusion in relation to the effect of the reference to ‘no order as to costs’ in the order of 18 February 2019.[35] It should be noted that the respondents have not initiated a review of the Ruling. Also, so far, the fourth to eighth defendants have not initiated a Costs Court proceeding based on an alleged entitlement to costs based on r 63.15 and the interpretation of the first order of 18 February 2019.
[32]Rule 63.94(11).
[33]Paragraph 3 of the Respondents’ written submissions.
[34]Footnote 1 of the Respondents’ written submissions.
[35]Footnote 26 in the Respondents’ written submissions.
The respondents’ written submissions refer to paragraph 2 of the second order of 26 August 2019 which provides that ‘the proceeding as against the second, third and ninth defendants is otherwise dismissed’ (emphasis added). Accordingly, it is said, the costs order contained in paragraph 1 of that order must be read in that context. That is, that the part of the costs order that refers to liability must only refer to costs necessarily incurred by the applicant in the prosecution of the claim as against those particular defendants.[36] It is of note that paragraph 1 of the second order of 26 August 2019 just says ‘pay the plaintiff’s costs’. It does not add the words ‘of the whole proceeding’. Therefore there is merit in the argument that where paragraph 2 of the order states ‘the proceeding as against the second, third and ninth defendants is otherwise dismissed’ the order for costs in paragragh 1 relates to the proceeding against those defendants. If the word ‘otherwise’ was omitted there would be a stronger argument that paragraph 1 is stand alone and catches all the plaintiff’s costs of the entire proceeding. The inclusion of ‘otherwise’ suppports the proposition that the costs order in paragraph 1 is linked to, and restricted to, the proceedings as against the second, third and ninth defendants. It is worth bearing in mind there was no proceeding in existence at that time against the fourth to eighth defendants as it had been discontinued and finalised against them six months earlier.
[36]Sub-paragraphs 5 (b),(c), and (d) of the Respondents’ written submissions.
The existence, and impact of, the first order made on 18 February 2019 is relevent to the interpretation of the second order of 26 August 2019 and this distinguishes the present case from the circumstances of the authorities relied upon by the applicant.
Before the Judicial Registrar the parties had different interpretations on the significance of the words ‘no order as to costs’ in an order that contained a discontinuance of proceedings against some of the defendants. The applicant argued that the order was in effect ‘silent as to costs’ in relation to the discontinuance.[37] If this was an accurate interpretation then the applicant would in effect be acknowledging that he is still liable for the costs of the fourth to eighth defendants from October 2017 to 18 February 2019.
[37]Paragraph 16(c) of the Ruling of the Judicial Registrar dated 20 February 2020.
The respondents argued that ‘no order as to costs’ was not the court ordering otherwise under r 63.15 and that the applicant was still liable for the costs of the defendants discontinued against.[38]
[38]Ibid at paragraph 13.
The first order of 18 February 2019 is clear on its face. The inclusion of the words ‘no order for costs’ in the first order of 18 February 2019 where the plaintiff discontinued against the fourth to eighth defendants relieved the plaintiff of his obligation to pay their costs pursuant to r 63.15. The effect of this was to finally dispose of the proceeding as against those defendants and the effect of that order is that each party ‘bear their own costs’ for work in relation to the proceeding against those defendants from October 2017 to 18 February 2019.
In Trikas v Rheem (Australia) Pty Limited[39] Taylor J dealt with the interpretation of an order of Else-Mitchel J which contained the words ‘no order as to costs’ in relation to an aborted jury trial. His Honour was dealing with an appeal from a decision of a Deputy Prothonotary who applied Re Hodgkinson;Hodgkinson v Hodgkinson,[40] a case in which Lindley LJ was dealing with an order which was practically identical and in which the Lord Justice stated that ‘the effect of the order was that each party must pay his own costs’. Taylor J stated ‘The learned Deputy Prothonotary concluded that the principle of this decision governed the present case and I agree with him’.[41]
[39](1964-5) NSWR 645.
[40](1895) 2 Ch. 190 per Lindley LJ.
[41]Op.cit. at 646.
Here, the first order of 18 February 2019 effectively contains an acknowledgement by the applicant that the proceedings as against the fourth to eighth defendants inclusive were similarly aborted. These cases are referenced in Dal Pont ‘Law of Costs’[42] and the following passage also appears in ‘Williams Civil Procedure’ :
An order in the form ‘no order as to costs’ means that the court, having had its attention called to the matter, and being asked to make an order for the payment of costs, declines to do so. It has the effect that each party must pay his or her own costs.[43]
[42](3rd edition) at [1.24].
[43][I 63.20.30].
It is also worth noting that the Australian position in this regard is substantially consistent with that in the United Kingdom. Their ‘Civil Procedure Rules – Practice Direction 44’ is entitled ‘General Rules About Costs’ and codified the common law position.
The UK Rule contains the following definition :
No order as to costs Each party is to bear that party’s own costs of the part of the proceedings to which the order relates whatever costs order the court makes at the end of the proceedings (emphasis added). Each party to opay own costs
This UK position actually goes further as it makes specific reference to the fact that effectively an order that states ‘no order as to costs’ cannot be impacted by any subsequent order made at the end of the proceedings.
In relation to the questions posed in paragraph 20 above – a critical question is whether the first order of 18 February 2019 finalised the applicant’s right to costs incurred in undertaking work in relation to the discontinued defendants? At that point in time it did. The applicant was consenting to, and in fact was ordered to, bear the burdern of his own costs of the proceedings in relation to work conducted in relation to those five defendants he was no longer proceeding against. The order represented the bargain struck between the relevant parties at that time. It contained the conditions under which the applicant was relieved from paying the fourth to eighth defendants’ costs (who were individuals) and for those defendants to bear their own costs in relation to the applicant joining them and proceeding against them from October 2017 to 18 February 2019. The second and third defendants gained an advantage from this because at that stage when they consented there was no ability for them to be liable for the applicant’s costs in relation to the discontinued defendants and they agreed to forgo any entitlement to costs ‘thrown away’ or ‘of and occasioned by’ the amended statement of claim as part of that bargain. They were also the conditions under which the proposed ninth defendant agreed to step up and be a party. Similarly they presumably did so in the knowledge that the applicant was bearing his own costs in relation to work in relation to work referrable to the discontinued defendants at that time.
The respondents’ submissions make a concession that the costs order of 26 August 2019 is not ‘unambiguous’.[44] Where there is some doubt as to its true meaning it is permissible to look at the surrounding circumstances. Given their adopted position the respondents’ written submissions address what flows. Reference is made to the principle that ordinary rules of construction can be applied utilising surrounding circumstances to assist in determining the true meaning where the order is not clear.[45] They make reference to a UK authority for the proposition that a consent order is to be construed like a commercial instrument.[46] Further, they rely on the principle that where two constructions are open the one that avoids an unjust or unreasonable result should be preferred.[47]
[44]Paragraph 13 of the Respondents’ written submissions.
[45]Paragraphs 7 to 9 and Repatriation Commission v Nation (1995) FCR 25 at 33-34, Livingspring v Ng (2007) VSC 9 fn. 19, and Dimos v Willets (2000) 2 VR 170 at [21] to [23].
[46]Paragraph 11 and Sirius International Insurance Co v FAI General Insurance Ltd (2010) EWHC 1967 (Ch) at [7].
[47]Paragraph 10 and Arnold v Britton (2015) AC 1619 at [77], Electricity Generation Corporation vWoodside Energy Ltd (2014) 25 CLR 640 at 657 and Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at 464.
The submissions set out the contextual matters relied upon.[48] The conclusion put is that the decision to join the fourth to eighth defendants was unreasonable. The Statement of Claim alleged they were members of an unincorporated association that ran the Yeshivah Centre. This was maintained in the applicant’s first written submissions.[49] Rule 63.94(10)(a) allows the receipt of further material on the review. The respondents rely on the applicant’s original Statement of Claim dated 18 October 2017 which alleged ‘Chabad Institutions of Australia Inc’ was unincorporated. After the discontinuance against the fourth to eighth defendants the ninth defendant (third respondent ‘Chabad Institutions of Victoria Ltd’) was described in the Further Amended Statement of Claim as the successor in title to that organisation. A Consumer Affairs extract shows the ‘Chabad Institutions of Australia Inc’ had been incorporated since 1988. The respondents rely on the discontinuance itself, the fact that there was no legal foundation to claim against the individual fourth to eighth defendants,[50] and the fact the seventh defendant denied being a member.[51] In those circumstances it was said to be unfair for the applicant to interpret the order as giving the applicant an entitlement to costs for work performed in pursuit of these defendants.[52] This is all extraneous material that is said to be relevant to the first order.
[48]Paragraphs 14 to 20 of the Respondents’ written submissions.
[49]Paragraph 31 of the Applicant’s written submissions dated 14 April 2020.
[50]Paragraphs 28 to 30 of the Respondents’ written submissions.
[51]Paragraph 33 of the Respondents’ written submissions.
[52]Paragraph 32 of the Respondents’ written submissions.
Did the second order of 26 August 2019 alter the effect of the first order of 18 February 2019? There was no reference to the first order of 18 February 2019 in the second order of 26 August 2019. It was not expressed to vary it or set it aside. The two orders therefore sit side by side for interpretation. The second order has to be read in the context of the first order being valid and of full effect.
Was the plain wording of the second order of 26 August 2019 enough to revive any entitlement of the plaintiff (applicant) to alter the fact he was already ordered to bear his own costs up to the first order in relation to the discontinued defendants and now recover his costs in respect of work performed in the prosecution of the abandoned substantive proceeding against the fourth to eighth defendants and shift that liability for all that work to the second, third and ninth defendants (respondents)? Or, did the second order of 26 August 2019 only give the plaintiff (applicant) an entitlement to receive costs incurred in the substantive proceedings in relation to work as against the second, third and ninth defendants (respondents) with all the apportionment that would flow?
The respondents’ submissions contend that the answer to the first question in the above paragraph is ‘No’ and the answer to the second question is ‘Yes’. This is the same conclusion reached by the Judicial Registrar.
The applicant filed reply submissions (dated 1 June 2010). They take issue with the nomenclature employed by the respondents and confusion caused by the use of the terms ‘non specific common costs’ for ‘common costs’ and ‘specific common costs for ‘mixed costs’, obviously adopting the terms in Smith v Madden.[53] The alternative terms derive from UK authorities. For example in Haynes reference is made to ‘non-specific general or common costs’.[54]
[53](1946) 73 CLR at 129.
[54]At [34].
The additional authority relied upon by the applicant (referred to in paragraph 37 above) was Haynes. However, there are several differences at play in that case. There were ten defendants and an offer made by one of them made reference to the relevant rule which referred to the acceptance of the offer including the ‘costs of the proceedings.’ An attempt was made to recover all costs including the costs in relation to the other nine defendants. This argument was unsuccessful, however the court had the benefit of the contemporaneous correspondence between the parties and the court was ‘deriving the intention of the parties from the language they have used against the known factual matrix of the case, applying ordinary objective contractual principles’.[55] The conclusion was that the cost recovery was restricted to ‘the costs of the proceeding against the defendant whom the deemed order has been made’.[56]
[55]At [19].
[56]At [21].
In relation to apportionment the court recognised that ‘as a matter of convenience or pragmatism the costs judge would in most cases choose to divide those costs according to the number of defendants.’[57] But the court (comprising Jay J (sitting with an assessor, Senior Costs Judge Hurst), went on to state that ‘The general rule must be that evidence-based decisions are required, rather than an approach which simply identifies the number of defendants’.[58] True it is, there may be some items in a taxation of costs where there is sufficient material to apportion on a basis other than by the number of defendants, but these would be the exception rather than the rule. The court in Haynes referred to the example of a conference with counsel. It is only on a taxation proper that this level of detail could be explored. The Judicial Registrar was merely dealing with the high level interpretation of the second order. Any ruling in relation to apportionment could be on a prima facie basis.
[57]At [36].
[58]At [38].
The bench in Haynes had no problem with percentages on the basis of the number of defendants in circumstances where the Court had no access to the solicitor’s file.[59] That is the same as the situation here. The Judicial Registrar was asked to make a ruling at an early stage prior to the taxation and the production of the file of the solicitor acting for the applicant.
[59]At [39].
The applicant in the reply submissions responded to the authorities relied upon by the respondents and asserted they ‘have little or no bearing on the current Review. They are primarily cases involving determination by a court of the costs order which should be made in a given set of circumstances, and not interpretation or application of a costs order which has already been made’.[60] That is an accurate summation. The primary reply submission is that the second order of 26 August 2019 is not ambiguous and is clear.[61] There is therefore no need to resort to extraneous material. On that basis the respondent’s reliance on the corporate status of Chabad Institution of Australia Inc is said not to be relevant. The applicant in the reply submissions seeks to rely on correspondence between the parties in 2018 and other material in the event that this extraneous material is relevant.[62] In my view, the first order of February 2019 and second order of August 2019 are clear on their face. I do not agree with either party however in relation to their proper construction.
[60]At [18].
[61]Paragraphs 17 to 24 in the Applicant’s written submissions dated 14 April 2020 and paragraph 8 in the Applicant’s Reply Submissions dated 1 June 2020.
[62]Paragraphs 10 and 11 of the Applicant’s Reply Submissions.
The applicant concedes in the reply submissions that the Review can ‘properly be determined based on the submissions in respect of Ground 1 alone. It accepts the matter turns on the proper construction of the Costs Order.[63] Further, it is submitted that there was no exercise of a discretion and questions of ‘fair and reasonable’ are irrelevant. I agree with this analysis and in large part the authorities relied upon by both parties are not germaine. It is not necessary to deal with the reply submissions taking issue with the respondents’ analysis of the authorities relied upon by him as the matter can and should be determined on the basis of clear wording of the two orders.
[63]Paragraph 27 of the Applicant’s Reply Submissions.
Subject to some minor comments below the overall conclusions of the Judicial Registrar do not contain error.
If there was a ‘meeting of the minds’ and the intention of all parties to the second order on 26 August 2019 was that the plaintiff’s costs against those five discontinued defendants be revived and become part of the costs in the proceedings to be borne by the surving three defendants the order should have made that clear. The fact that the relevant parties are having an argument now about its proper interpretation means there was not a meeting of the minds as to its meaning and the nature of the settlement. Further, if it is to be construed on the same basis as a commercial transaction and we are to utilise contemporaneous extraneous materials, there is no such material from any party about what was intended by that particular second order made by consent. The Court has been provided with no specific information or documents in relation to what their respective clients were told, or thought they were signing up to at that time. The question could be posed - why would the respondents agree to pay the applicant’s costs in relation to pursuing discontinued defendants when they already had the benefit of the first order that the applicant bear his own costs of that work?
In relation to Ground 3, the finding of the Judicial Registrar was said by the respondents to be that the order of 3 July 2019 in relation to the first defendant meant that the plaintiff could not recover any common costs or exclusive costs relating to the first defendant from any other party. The concluded interpretation of the second order of 18 August 2019 does not enable the applicant to hold the respondents jointly and severally liable with the first defendant for the applicant’s costs in relation to the first defendant.
If the intention, advice to, and instructions from the plaintiff (applicant) to his legal representatives at the time of the first order on 18 February 2019 was to relieve the fourth to eighth defendants of liability for costs to that date but preserve them as costs in the cause or reserve his right to later claim them as costs in the proceedings against any other surviving defendant, then that should have been stated in the first order and they have failed to achieve this. That order could have provided that the applicant’s costs in pursuing the fourth to eighth defendants were to remain costs in the proceeding or that the applicant’s reserved their rights in relation to those costs.
Similarly, if the intention, advice to, and instructions from the plaintiff (applicant) at the time of the second order on 26 August 2019 was to incorporate all his costs into the settlement with the respondents (second, third and ninth defendants), including the costs incurred against the discontinued defendants and first defendant, then the order should have stated so.
If the applicant is liable to his lawyers for costs incurred between October 2017 and February 2019 in relation to the fourth to eighth defendants he should obtain independent legal advice about his options.
In summary, both the first and second orders are clear.
The first order finalised the proceedings as against the fourth to eighth defendants. Thereafter there was no proceeding in existence in relation to them and the applicant was ordered in the first order to bear his own costs in relation to work performed in relation to those defendants.
The second order did not alter the effect of the first order. The second order did not refer to the plaintiff’s ‘costs of the whole proceedings’ in paragraph 1 of the order. It just referred to the plaintiff’s costs and the only proceeding on foot at that time was the proceeding as against the three respondents. The reference in paragraph 2 to the proceeding as against the three respondents as being ‘otherwise dismissed’ (emphasis added) makes it clear that the costs referred to in paragraph 1 only relate to costs as against those three respondents.
For the applicant’s position to succeed the first order should have preserved the applicant’s costs incurred in pursuing the discontinued defendants as part of their costs in the proceedings. Paragraph 1 of the second order should have specified what these costs attached to. The inclusion of the word ’otherwise’ in paragraph 2 of the second order linked the costs in paragraph 1 to the proceedings only involving the second, third and ninth defendants. Omitting the word ‘otherwise’ would have ‘uncoupled’ it from paragraph 1 and the argument that paragraph 1 covered all the plaintiff’s costs might have been stronger.
Even if I am wrong about the effect of the first order, the wording in the second order is sufficiently clear to restrict the applicant’s recovery of costs from the respondents in the manner maintained by them and ruled by the Judicial Registrar.
There is no basis to overturn the rulings made by the Judicial Registrar identified in grounds numbered 1, 2, 3, 4.
The basis of the Review in relation to Ground 5 is separate from the considerations in relation to the other grounds. This Ground relates to the apportionment of common costs. The applicant submits that there should be no pro rata apportionment at all. In the alternative, if there is to be an apportionment then for the period prior to 18 February 2019 (when there were eight defendants) a pro rata apportionment is not appropriate because the fourth to eighth defendants had the same interest and should be treated as one party and additionally because they were replaced by one party, namely the ninth defendant.[64] The result would therefore be one quarter each for the first, second and third defendants, with the fourth quarter to be attributable to the fourth to eighth defendants inclusive as a block. The result would be that the first and second respondents (as second and third defendants) would comprise 50 per cent. The Judicial Registrar ruled that there should be pro rata apportionment across the eight defendants and therefore the first and second respondents (as second and third defendants) would comprise 25 per cent. The respondents correctly contend that knowledge of the four individuals are in issue and their respective positions are not identical. I find no error in the general approach of the Judicial Registrar but would make an additional comment in relation to the period prior to July 2019. For the reasons in paragraph 62 above, it might be that on taxation there is evidence in relation to particular items that require a departure from the prima facie apportionment formula identified on the basis of the number of defendants.
[64]Paragraph 40 of the Applicant’s first written submissions dated 14 April 2010.
Between 18 February 2019 and 3 July 2019 there were four defendants (first, second, third and ninth). The Judicial Registrar ruled that the common costs should be apportioned as to 75 per cent for the respondents. The applicant’s written submission is critical that the ruling does not disclose a basis for apportionment. It is obvious and apparent that consistent with the interpretation of the orders apportionment has occurred on a pro rata basis. There is no error in this approach, subject to the additional comment in the paragraph above.
From 3 July 2019 to 26 August 2019 the respondents were the three remaining defendants. The Judicial Registrar ruled that the costs be ‘borne equally’ by them. The applicant’s written submission contends they are jointly and severally liable. The latter characterisation correctly describes the effect of the second order of 26 August 2019. This is not relevant to the overall quantum of the applicant’s recoverable costs. It does not need to be clarified by this Review of the interlocutory Ruling. The issue would evaporate as the order at the conclusion of the taxation would merely be that the respondents pay a specific sum to the applicant pursuant to the second order of 26 August 2019. They will be jointly and severally liable by virtue of the operation of that second order of 26 August 2019.
Leave to review is granted but the Review is dismissed. The parties are invited to consult each other and draft orders which advances the proceeding and also addresses the question of the costs of this Review. Given the nature of the allegations in the substantive proceeding a speedy resolution of this matter may be beneficial to all parties, but more particularly the applicant. A further attempt at meditaion should be seriously considered.
Liberty to apply is granted in the event that consensus cannot be achieved.
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