Wilson v Richards (No 4)

[2021] VCC 1977

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No.  CI-16-05583

PETER JOHN WILSON	First Plaintiff/ First Judgment Creditor
And
DAVID ROBERT WILSON	Second Plaintiff/Second Judgment Creditor
V
KENNETH NORMAN RICHARDS & ORS (according to the Schedule attached)	Defendants

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, written submissions filed 1 December 2021
DATE OF RULING:	10 December 2021
CASE MAY BE CITED AS:	Wilson & Anor v Richards & Ors (No 4) (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2021] VCC 1977

COSTS RULING
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Subject:PRACTICE AND PROCEDURE – COSTS

Catchwords:              Whether costs orders made in an application to vary an instalment order should be set aside on application for review – alternatively, the costs payable be reduced – whether defendants entitled to indemnity costs.

Legislation Cited:      Appeal Costs Act 1998; Civil Procedure Act 2010; County Court Civil Procedure Rules 2018; Judgment Debt Recovery Act 1984

Cases Cited:Byrns v Davie [1991] 2 VR 568; C Tina Pty Ltd v Barham-Floreani; Same v Vouzas and C Tina Pty Ltd [2019] VSC 819; Chen v Chan [2009] VSCA 233; Nolan v Nolan (No 2) [2004] VSCA 134; Parkesinclair Chemicals v ASIA Associates, Non-Party Burton & Parkes [2000] VSC 336; Wilson v Richards [2018] VCC 1755; Wilson and Anor v Richards & Ors (No 3) [2021] VCC 1732

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr W H C Forrester	DSA Law
For the Defendants	Mr C Möller	Gadens Lawyers

SCHEDULE OF PARTIES

PETER JOHN WILSON	First Plaintiff/First Judgment Creditor
and
DAVID ROBERT WILSON	Second Plaintiff/Second Judgment Creditor
V
KENNETH NORMAN RICHARDS	First Defendant/First Judgment Debtor
and
JAMES ALBERT BURGESS SHERGOLD	Second Defendant/Second Judgment Creditor
and
KJAAW NOMINEES PTY LTD (ACN 147 546 790)	Third Defendant/Third Judgment Creditor
and
JUMBO NOMINEES PTY LTD (ACN 163 435 578)	Fourth Defendant/Fourth Judgment Creditor

HER HONOUR:

1On 18 November 2021, I delivered my ruling in this matter (“the principal reasons”).[1]  I allowed the defendants’ application for review of orders made by Judicial Registrar Burchell (as her Honour then was) on 12 August 2020, and confirmed the original instalment order made on 15 November 2018.  These reasons assume familiarity with the principal reasons and adopt the same terminology.

[1]Wilson and Anor v Richards & Ors (No 3) [2021] VCC 1732

2The parties were directed to confer and file a minute of proposed orders, or failing agreement, to file and serve submissions regarding the orders to be made, including costs.  The parties filed submissions dated 1 December 2021.

3While accepting they were unsuccessful in the hearing de novo before me, the plaintiffs submit that costs should not follow the event.  In essence, the plaintiffs contend they should not have to pay the costs of the hearing before the judicial registrar and the order of the judicial registrar for costs should not be set aside.   Alternatively, there should be a reduction in the overall costs awarded to the defendants.

4The defendants seek an order that the plaintiffs pay their costs on an indemnity basis (by reason of the plaintiffs rejection of an offer in a letter dated 14 April 2020).  The defendants’ alternative position is that costs should follow the event as proposed at paragraph 67 of the principal reasons.

Plaintiffs’ submissions as to costs

5The plaintiffs submit that costs should not follow the event due to special circumstances that should be considered by the Court in exercising its discretion to award costs.  As the plaintiffs were successful before the judicial registrar on the evidence filed by both parties at that time, and there is properly no finding in the principal reasons that the orders of the judicial registrar were incorrect, it is submitted that the plaintiffs should not pay the costs of the hearing before Judicial Registrar Burchell.

6The plaintiffs submit they did succeed on a particular “issue” both before the judicial registrar and at the hearing de novo (namely that Mr Shergold had obtained a substantial increase in his property),[2] and as such, the general discretion of the court authorises the Court to apportion costs according to particular issues against a party ultimately successful who has failed on those issues.[3]

[2]        Ibid at [60]

[3]        Byrns v Davie [1991] 2 VR 568; Nolan v Nolan (No 2) [2004] VSCA 134 at [17]

7The plaintiffs argue that the defendants caused a significant increase in the costs of the proceeding. It is submitted that the defendants contravened their overarching obligations under ss 16, 19, 20, 22, 23, 24, 25 and 26 of the Civil Procedure Act 2010 by failing:

(a)   to file material (including an additional 11 affidavits filed between the hearing before the judicial registrar and the hearing de novo); and

(b)   to provide relevant information at the application before the judicial registrar that they then relied upon at the review hearing.

8It is submitted that the majority of the material contained in the 11 further affidavits was available to have been filed before the judicial registrar, by which time only one affidavit of Mr Shergold dated 30 June 2020 and no materials of Mr Richards had been filed. The plaintiffs submit that the defendants cherry-picked the financial information they chose to disclose before the judicial registrar in the hope of succeeding with minimal disclosure, and only saw fit to provide their true position to the Court and the plaintiffs after failing at first instance. It is submitted that such conduct is contrary to r 84.03(7) of the County Court Civil Procedure Rules 2018,[4] and the defendants’ obligations under the Civil Procedure Act.

[4]The plaintiffs rely in this regard on C Tina Pty Ltd v Barham-Floreani; Same v Vouzas and C Tina Pty Ltd [2019] VSC 819 at [27]

9It is further submitted that the defendants’ failure to provide relevant information until the hearing de novo led the plaintiffs to reasonably believe that there was a good cause of action, and to induce the plaintiff to commence the litigation.[5] Had the defendants been full and frank at first instance, it is possible that there would have been no need for the additional costs involved in the plaintiff seeking the hearing de novo.

[5] Civil Procedure Victoria [I 63.02.105]

10The plaintiffs submit that they ought not be penalised with a costs order against them because of this stark change in circumstances between the original application and the review,[6] particularly as they were not privy to the new information.  When determining where fairness and justice dictate where the costs should lie,[7] the plaintiffs submit that the Court should exercise its discretion to not set aside the judicial registrar’s order for costs, or alternatively, reduce the overall costs awarded to the defendants to account for the delay in their disclosures.

[6]        Wilson and Anor v Richards & Ors (No 3) [2021] VCC 1732 at [53]

[7]        See discussion in Chen v Chan [2009] VSCA 233 at [10]

11The defendants note that, while its primary position is that it is not relevant to the Court’s exercise of discretion as to costs, all 11 additional affidavits were filed with the consent of the plaintiffs or following an order of the Court prior to the hearing de novo.  These included four affidavits in response to the 27 August 2020 affidavit filed by Mr Nestel for the plaintiffs, which was originally filed without notice or leave.

12Having considered the various submissions put, I am persuaded that there is some force in the plaintiffs’ argument regarding the way in which the application substantially changed following the hearing before the judicial registrar.  The materials before me were far more extensive.  Mr Richards, for example, swore two affidavits which he had not done before the judicial registrar.  Both of the defendants’ wives swore affidavits in the review application which they had not done previously.  The scope of the matters for consideration were considerably widened in the review application.  As noted in the principal reasons, the review process is a hearing de novo and therefore there is no need to find error on the part of the judicial registrar.  Had all the materials placed before me been placed before the judicial registrar, then the outcome of the application to vary the instalment order may well have been different and the need for review avoided.  I accept the plaintiffs’ submission that it was incumbent upon the defendants to put their full case before the Registrar and that they could have done more.  I am not persuaded however that the serious allegations of contraventions of the Civil Procedure Act 2010 are made out as alleged in the plaintiffs’ submissions, nor that there should be a reduction of the costs otherwise payable having regard to the defendants’ conduct.

13Overall, I am persuaded that it is in the interests of justice that the costs orders made by the judicial registrar should not be disturbed.  Accordingly, the previous costs order will stand.

14The plaintiffs seek an indemnity certificate in respect of costs under the Appeal Costs Act 1998. The plaintiffs rely on Hedigan J’s ruling in Parkesinclair Chemicals v ASIA Associates, Non-Party Burton & Parkes [2000] VSC 336 at [5] (“Parkesinclair”) to submit that the hearing de novo (as an order to review) was a successful appeal pursuant to s 4(2) of Appeal Costs Act 1998. Accordingly, it is submitted that, as the hearing de novo involved questions closely analogous to questions of law (namely construction of relevant sections of the Judgment Debt Recovery Act 1984), the Court ought therefore grant an indemnity certificate to the plaintiffs as to the costs of having an erroneous adjudicative decision made in the appeal.[8]

[8]        See also Radman v Open Plan [2020] VSC 318 at [33]-[34]

15I am not satisfied that the hearing de novo was an ‘order to review’ as contemplated in Parkesinclair.  As a hearing de novo,[9] I do not agree that a review of a judicial registrar’s decision amounts to a review by a superior authority of the decision of a subordinate authority, but is rather a fresh hearing of the application filed before the Court. Section 4(2) of the Appeal Costs Act 1998 refers to an appeal to the County Court against a decision of a court in a civil proceeding succeeding. I am not satisfied that a review application which is heard de novo under r84.03 is an appeal within the meaning of s4(2). Therefore, I decline to grant an indemnity certificate to the plaintiffs. The issue in any event is now otiose as I have determined that the costs order made by the judicial registrar should stand.

[9]        County Court Civil Procedure Rules r 84.03(5)

Defendants’ application for indemnity costs

16The defendants submit that the plaintiffs rejected the defendants’ invitation in a letter dated 14 April 2020 to discontinue the proceeding.  This invitation was made on the basis that the plaintiffs’ own material contained an admission that the plaintiffs did not understand the quantum of proceeds received by either Shergold or Richards.  As of 14 April 2020, the defendants had not taken any step in the application, and as such any costs payable to them by the plaintiffs would have been negligible.  In the letter, the defendants put the plaintiffs on express notice that an application for costs, including a special costs order, would be made if the plaintiffs proceeded with their applications.  Accordingly, the defendants seek an order that the plaintiffs pay the defendants’ costs on an indemnity basis.

17To support the defendants’ submission, the material filed in support of the plaintiffs’ original application reveals that there was no evidence, but rather assumptions, that either of the defendants had enjoyed the requisite substantial increase in property or means required by s 8(2)(a) of Judgment Debt Recovery Act 1984.

18The defendants submit that the apparent sole basis substantiating the application against Shergold was an assumption that the shares were sold, as deposed by Mr Nestel in his 2 April 2020 affidavit. In relation to Richards, the defendants submit that the plaintiffs ignored my prior finding that he did not have any claim to the Hawthorn Property,[10] and relied on another assumption (as deposed by Mr Nestel in his 2 April 2020 affidavit) that Mrs Richards, following the property’s sale, would repay Richards for his contribution in renovations.

[10]        Wilson v Richards [2018] VCC 1755 at [35]

19Further, the defendants submit that on 6 March 2020, prior to the plaintiffs bringing their application, the plaintiffs wrote to the defendants and noted their knowledge that Richards had recently lost his job, stating:

“Mr Richard’s lack of net income is not necessarily grounds for an application to vary or cancel the Instalment Orders, we believe that the Court will consider whether Mr Richards has the means to satisfy the judgment by instalments, in an application to vary or cancel the Instalment Orders.”

20It is submitted that this casts a further shadow over the basis upon which the plaintiffs brought their application, and rejected the defendants’ invitation to discontinue the application in light of my finding that “[t]he ability to pay an increased amount cannot be dealt with in isolation by simply looking at payments received”.[11]

[11]        Wilson and Anor v Richards & Ors (No 3) [2021] VCC 1732 at [55]

21The defendants submit that, if the Court is not satisfied that a special costs order should be made, costs should follow the event and the order as to costs proposed in paragraph 67 of the principal reasons should be made.

22I am not persuaded that the defendants should have their costs on an indemnity basis for the following reasons.  The offer was in effect a demand to capitulate and not proceed with the application.  As with Calderbank letters, the relevant question is always whether the plaintiffs’ non-acceptance of the offer was unreasonable in all the circumstances.  I am not persuaded that the plaintiffs acted unreasonably in persisting with their application.  As the voluminous amount of material filed both by way of affidavits and submissions demonstrate, the ultimate outcome could not have been predicted with any certainty such that it was obvious the plaintiffs should not have continued.  In my view, the plaintiffs were entitled to “test the waters” having become aware of the increase in fortunes of the defendants since the instalment order was made in November 2018.  I was not persuaded by the other matters raised by the defendants in their submissions that an order for indemnity costs warrants being made.  Accordingly, having succeeded on the application to review, the defendants should have their costs on the standard basis.

Conclusion

23In my view, the costs of the review application should follow the event.  I was not satisfied however that the defendants should have their costs of the application on an indemnity basis.  Given the foregoing, I will not set aside the previous costs order made by the judicial registrar.

24I will make the following orders:

(1)    Paragraphs 1 and 2 of the orders made by Judicial Registrar Burchell on 12 August 2020 are set side.

(2)     Paragraph 4 of the orders made by Judicial Registrar Burchell on 12 August 2020 is confirmed. 

(3)    The instalment orders made by Judge Ryan on 15 November 2018 are otherwise confirmed.

(4)     The plaintiffs pay the defendants’ costs of and incidental to the defendants’ application for review dated 19 August 2020 to be taxed on a standard basis in default of agreement.

(5)    Reserve liberty to the parties to apply by email to the Commercial Registry ([email protected]) for further directions upon giving reasonable notice to all other parties.

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Certificate

I certify that these 7 pages are a true copy of the Ruling of Her Honour Judge A Ryan delivered on 10 December 2021.

Dated:  10 December 2021

Associate to her Honour Judge A Ryan