Yuanda Vic Pty Ltd (ACN 166 473 089) v FAÇADE Designs International Pty Ltd (ACN 099 706 859) [No 2]
[2021] VSCA 85
•1 April 2021
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2020 0095
| YUANDA VIC PTY LTD (ACN 166 473 089) | Appellant |
| v | |
| FAÇADE DESIGNS INTERNATIONAL PTY LTD (ACN 099 706 859) [NO 2] | Respondent |
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| JUDGES: | McLEISH, NIALL and SIFRIS JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 1 April 2021 |
| MEDIUM NEUTRAL CITATION: | [2021] VSCA 85 |
| JUDGMENT APPEALED FROM: | [2020] VSC 570 (Riordan J) |
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COSTS – No order as to costs of trial – Respondent pay 70 per cent of appellant’s costs of appeal, including reserved costs.
APPLICATION FOR STAY OF ORDERS – Exceptional circumstances justifying a stay not established – Funds paid into Court to be paid out to appellant.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr R Fenwick Elliott with Ms L Mills | Fusion Legal |
| For the Respondent | Mr M Roberts QC with Ms C Symons | Piper Alderman |
McLEISH JA
NIALL JA
SIFRIS JA:
On 5 March 2021, the Court, by majority, allowed an appeal from a decision in the Trial Division.[1] In accordance with leave given by the Court, the parties have filed submissions on the costs of the appeal and of the trial. In addition, an issue has arisen in relation to a payment into Court made by the appellant as a condition of the grant of a stay of the orders made by the primary judge.[2] The respondent seeks an order that the money remain in Court pending the making and determination of an application for special leave to appeal to the High Court.
[1][2021] VSCA 44 (‘Reasons’).
[2][2020] VSCA 269.
These reasons deal with costs and the money paid into Court.
Costs of the appeal
Submissions
The appellant seeks an order that the respondent pay the appellant’s costs of the application for leave to appeal and the appeal, including reserved costs. The costs reserved include the costs of the contested application for a stay.
The appellant submits that, in accordance with the usual rule, costs should follow the event and there is no justification for a departure from that rule. It describes the outcome of the appeal as ‘binary in nature’ with each ground directed to overturning the primary judgment. It succeeded in that endeavour, and even though it did not succeed on all grounds, each ground was directed to that endpoint and sufficiently arguable to attract a grant of leave to appeal. It succeeded on ground 2, which, it says, was the primary focus of the appeal.
The respondent submits that the appellant’s success on a single ground is tempered by what the respondent describes as its ‘comprehensive failure’ on the remaining grounds and that this justifies a departure from the usual order.
It submits:
The corollary of the appellant’s failure on four grounds, is that the respondent enjoyed substantial success in the appeal. In consequence, the order of costs should reflect the fact that the respondent was put to the expense of incurring costs on fact intensive (but ultimately, unmeritorious) issues upon which it succeeded. For that reason, the appellant should not recover all of its costs of the appeal. Instead, the Court should apportion costs (in a single costs order) as responsive to the relative success of both parties. The respondent submits that the appropriate apportionment would involve the appellant paying the respondent 70% of its costs of the appeal and the respondent paying the appellant 30% of its costs of the appeal. Grounds 4 and 5 especially, occupied a significant amount of time at the hearing and these grounds were clearly divisible from the discrete argument upon which the appellant prevailed. These grounds involved an allegation of fraud that should never have been made and which placed a heavy burden on the respondent to resist. The indiscriminate raising of grounds of appeal which lack evident merit is a matter that should not be endorsed.[3]
[3]Citations omitted.
Consideration
The applicable principles that apply to costs are not in doubt. They are founded on the principle that costs are discretionary and awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. Although the statutory power is expressed in the widest terms, as a matter of practice, the usual rule is that costs follow the event.
In Paragreen v Lim Group Holdings Pty Ltd [No 2],[4] it was said:
[I]t is recognised that where multiple issues have been agitated, and the successful party has only enjoyed mixed success in respect of some of them, a court may, in an appropriate case, adopt a pragmatic approach by which it awards the successful party a proportion of its costs, but not the full amount.[5]
[4][2020] VSCA 97.
[5]Ibid [5] (Tate, Kaye and Niall JJA) (citations omitted).
It is neither possible nor desirable to be prescriptive about the circumstances in which it is appropriate to make a partial costs order reflecting mixed success. The proper approach to the exercise of our discretion to award costs is a broad-based one, based on impression and evaluation, rather than an attempt at arithmetical precision on a strictly issue-by-issue basis.[6]
[6]Mandie v Memart Nominees Pty Ltd [No 2] [2020] VSCA 320, [28] (Tate, Niall and Emerton JJA) (‘Mandie’).
We can say immediately that this is not a case where it is appropriate to make a costs order, even a partial one, in favour of the unsuccessful respondent. The respondent sought to defend the judgment below and was unsuccessful. Although the appellant failed on a number of grounds, its conduct was not such as to require it to indemnify the respondent’s costs.
That said, the appellant chose the ground on which it wanted to fight the appeal, and put forward arguments that involved questions of statutory construction (grounds 1 and 2) and arguments that were fact dependent and in respect of which it advanced a case of vitiating fraud (grounds 3, 4 and 5).
Although the appellant failed on ground 1, the arguments and consideration of that ground overlapped[7] with ground 2, and both required an analysis of the same statutory provisions. They both required a consideration of the scheme, its text and purposes, and ground 1 could not be divorced entirely from ground 2. The appellant should not suffer any reduction in its costs on account of the fact that it ran and failed on ground 1.
[7]Reasons [2].
Grounds 3, 4 and 5 stand in a different position. The appellant was not content to run its case at trial, or on appeal, solely on the strength of its construction arguments. It sought to run a factual contest, including an allegation of fraud, that, on its own construction, was unnecessary. It lost those factual grounds.
Although the strategy of mounting an alternative attack was not entirely unreasonable, nevertheless these grounds expanded the scope of the appeal and required the respondent and the Court to examine the factual record in some detail. The respondent ought bear some consequences for the failure of those grounds.
In our view, the appropriate course is to reduce the costs that the appellant is entitled to recover. In saying that, we make it plain that the purpose of the order is not to punish the appellant or to act as a deterrent to others, it is simply to reflect the fact that it should not be indemnified for costs incurred in a factual contest that was an alternative pathway for the appellant and in respect of which it failed.
As in Mandie, there is no sure mathematical basis for arriving at a suitable reduction. Taking a broad approach, we consider that the appellant should have 70 per cent of its costs of the appeal, including reserved costs.[8]
[8]The reserved costs include those of the stay application, in which the proposed grounds of appeal were also significant to the argument.
In a draft order provided to the Court with its submissions on costs, the appellant seeks an order under r 63.34 of the Supreme Court (General Civil Procedure) Rules2015 (‘the Rules’) that the costs of the appellant’s leading counsel be allowed at the senior counsel rate. No submissions were made in support of the proposed order. Rule 63.34(1) of the Rules provides that, subject to sub-paragraph (3), a party is allowed costs in accordance with the scale in Appendix A to the Rules. The scale sets the maximum amounts that can be recovered for junior and senior counsel. At present,[9] the maximum daily fee payable for junior counsel is $6,340 and for senior counsel $9,500.[10]
[9]With effect from 1 April 2021.
[10]They were slightly less than that figure at the time fees were incurred in the present proceeding. Nothing turns on that for present purposes.
Sub-paragraph 63.34(3) provides that the Court may, ‘on special grounds arising out of the nature and importance or the difficulty or urgency of the case, allow an increase not exceeding 30 per cent of the legal practitioner’s charges allowed’.
The order sought should not be made for two reasons. First, the appellant has not identified the special grounds necessary to support the exercise of the power in r 63.34(3). Indeed, no submissions were advanced in support of the proposed order. Second, even an uplift of 30 per cent would take the maximum fee for junior counsel to $8,242, which is less than the amount referable to senior counsel. In other words, the power in r 63.34 does not permit the order sought, which would have the effect of applying the senior counsel scale to the appellant’s leading counsel.
Costs of the trial
As the reasons of the Court explain, the respondent sought to enforce a payment claim under the Building and Construction Industry Security of Payment Act 2002 (‘the Act’). The appellant resisted the action on a number of bases. They included:
(a) the payment claim included an excluded amount and therefore;
(b) the payment claim was invalid because it did not sufficiently identify the construction work or related goods and services to which the progress payments related within the meaning of s 14(2)(c) and therefore the appellant did not become liable to pay the amount claimed to the respondent under s 15(4); and
(c) the payment claim included claims that as a matter of fact (as distinct from on their face) were claims for excluded amounts within the meaning of ss 14(3)(b) and 16(4)(a)(ii).
Because of the way the appellant framed its case at trial, a great deal of time was spent on irrelevant factual inquiries. The consequence of pursuing factual matters which, on the correct construction of the Act, were irrelevant, was that substantial Court time and the resources of the parties were wasted. The judge lamented these consequences in his judgment at paragraph 71. Those observations remain pertinent. It is true that the appellant has ultimately been successful in resisting the payment claim but that was on a basis that arose on the construction of the Act and an agreed fact that the claim as originally formulated included a claim for interest. It could have been resolved in a single day hearing. Moreover, the appellant lost its factual case at trial, and failed to disturb the relevant findings on the appeal.
In the circumstances there should be no orders as to the costs of the trial.
Payment of money into Court
The effect of the primary order was to require the appellant to pay the respondent the sum of $3,357,664.67 plus interest in the sum of $296,210.42 (‘Judgment Debt’) pursuant to s 12(2) of the Act. The appellant sought a stay of the judgment pending the hearing and determination of the application for leave to appeal. This Court granted the stay.
The stay was granted because the Court considered that there was a real and unacceptable risk that the appeal would otherwise be rendered nugatory and that, in the exercise of our discretion, an expedited hearing and a payment of the Judgment Debt into Court sufficiently balanced the interests of the parties. Colloquially speaking, the ‘price’ of the stay was a requirement that the appellant pay the Judgment Debt into Court, which it subsequently did.
A purpose of the requirement to pay money into Court was to protect the interests of the respondent in the Judgment Debt that it had successfully obtained. Once the appeal was allowed, the decision of the judge set aside and the respondent’s proceeding under the Act was dismissed, there was no longer a Judgment Debt and the respondent has no entitlement to the money. In the usual course, the money should be returned to the appellant.
The respondent seeks an order that the money remain in Court until an application for special leave to appeal to the High Court, which it has foreshadowed but not yet made, is heard and determined. It puts that submission on the basis that it should be given ‘the same indulgence’ afforded to the appellant when it obtained a stay of the Judgment Debt.
With respect, the position the respondent confronts is very different to that which existed on the appellant’s stay application. As observed, the appellant got a stay on the condition that it pay the money owing. The respondent seeks a stay but offers nothing in return to balance the impact that a stay would have on the appellant: it simply says it should get ‘the same indulgence’.
In substance, although not in form, the appellant seeks to preserve the funds in Court as security over its claim in circumstances where it succeeded at trial but has lost the Judgment Debt on appeal. The purpose of such an order could only be to guard against the possibility that the respondent will not be able to enforce any judgment it obtains in the event it succeeds in the High Court and the orders of the primary judge are reinstated.
There is no doubt that this Court has the power to freeze assets to prevent the frustration of its processes. The purpose of a freezing order is not to obtain security for judgment but to facilitate the process of execution or enforcement which will arise when, but only when, the judgment for payment of an amount of money has been obtained.[11] Further, such an order fastens on assets and keeps them in place as an aid to enforcement.
[11]Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 400 [41]; [1999] HCA 18 (Gaudron, McHugh, Gummow and Callinan JJ); PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1, 19 [46]; [2015] HCA 36 (French CJ, Kiefel, Bell, Gageler and Gordon JJ).
Given the substantive effect of the application, the principles that inform the discretion to provide a freezing order provide a surer guide than would the application of the general principles that govern a stay.
In Rozenblit v Vainer,[12] this Court summarised the principles governing an application for a freezing order pending appeal as follows:
[12][2019] VSCA 164.
(1)The purpose of granting a freezing order is to prevent the frustration or inhibition of the Court’s process by seeking to meet a danger that a prospective judgment of the Court will be wholly or partly unsatisfied. Its purpose is not to provide security in respect of a prospective judgment or order.
(2)A freezing order is to be viewed as an extraordinary interim remedy. The order is a drastic remedy which calls for a high degree of caution on the part of the Court before an order is made.
(3)An applicant for a freezing order pending appeal will be required to establish that there is a good arguable case that the appeal will succeed. This means that it can be seen from the available material that the appeal has a real prospect of success.
(4)It must be shown that there is a reasonable possibility, not necessarily more than a 50 per cent chance, that assets may be disposed of or dealt with or diminished in value if an order is not made.
(5)In the case of an order against a third party, it must be shown that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the third party’s ability to exercise power in respect of the relevant assets, or that a court process may be available to the applicant as a result of a prospective judgment, under which the third party may be obliged to disgorge assets or contribute to satisfying the prospective judgment.
(6)The value of the assets covered by a freezing order should not exceed the likely maximum amount of the applicant’s claim, including interest and costs.
(7)As a condition of making a freezing order it will normally be appropriate to require the applicant to give undertakings to the Court, including the usual undertaking as to damages, supported if necessary by the provision of security.
(8)The order being discretionary, other considerations including the balance of convenience may bear upon the Court’s ultimate decision, but it is not a distinct requirement that the balance of convenience favours the making of the order.
(9)The inherent jurisdiction of the Court is preserved and r 37A.05 simply addresses the minimum requirements that ordinarily need to be satisfied in an application.[13]
[13]Ibid [19] (McLeish and Niall JJA) (citations omitted).
The respondent has made no attempt by way of submissions or evidence to meet the high hurdle that must be overcome in order to obtain a freezing order. Given the additional hurdles that exist in relation to an application for special leave, in our view, even greater caution is warranted before a freezing order is granted. The respondent did not address the above matters directly. As to prosects of success, it may be accepted that the issue of construction on which this Court split is not straightforward. However, whether the constructional point, which relates to the concept of ‘excluded amount’, which is unique to Victoria, raises a point of general importance, may be open to debate. For present purposes, however, we are prepared to assume in the respondent’s favour that there is a reasonable prospect that special leave may be granted.
Even so, and critically, the respondent has not shown that there is a danger that any of the appellant’s assets may be disposed of or dealt with or diminished in value pending determination of an appeal in the High Court if an order is not made.
It is also notable that, according to the respondent, the contract that gave rise to the progress claims ended in November 2019. That has the effect that the respondent cannot issue a further progress claim. However, it also means that the respondent is not currently dependent on a stream of revenue from the appellant to keep the building project going and the respondent retains such contractual rights as it has to recover amounts owing under the contract or damages.
Even if the present application were assessed by reference to the principles that usually apply to an application for a stay of a judgment pending appeal, the respondent would have to show sufficient reason to engage that ‘extraordinary jurisdiction’.[14] A stay is only granted, and the benefits of a judgment delayed, in exceptional circumstances.
[14]Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [No 1] (1986) 161 CLR 681, 684; [1986] HCA 84 (Brennan J); Mann v Paterson Constructions Pty Ltd [2018] VSCA 313, [17]–[26] (Kyrou, McLeish and Hargrave JJA).
In Maher v Commonwealth Bank of Australia,[15] Dodds-Streeton JA, in the course of a summary of the relevant principles, said:
In Scarborough’s v Lew’s Junction Stores Pty Ltd (approved in Cellante), Adam J recognized that special circumstances might exist where a successful appellant would be deprived of the fruits of the appeal if a stay of execution were not granted. In such a case, the appeal might be rendered nugatory.
In Cellante, Young CJ stated that special circumstances would ‘exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed’.
An appeal could be rendered nugatory in that sense in a variety of ways. The test could be satisfied where a defendant appeals and there is a real risk that the plaintiff would remove the proceeds of the judgment from the jurisdiction. Similarly, special circumstances may be recognised where, for example, although the respondent is solvent, the subject matter of the appeal is, in substance, irreplaceable.
The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment. A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.[16]
[15][2008] VSCA 122.
[16]Ibid [24]–[27] (citations omitted).
In this case, the respondent has failed to establish that any appeal would be rendered nugatory. We are not prepared to infer, in the absence of evidence, that the respondent would be unable to recover any amount in the event it obtains special leave to appeal and wins the appeal.
The respondent has not established exceptional circumstances justifying a stay of the orders of this Court.
The money paid into Court should be paid out to the appellant.
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