Ali v Hartley Poynton Pty Ltd

Supreme Court of Victoria|2002-07-26|Before: SMITH J.

The remaining issue to be determined in this matter is the appropriate costs order.

The plaintiff seeks an order that the defendant pay the plaintiff's costs (including reserved costs) on an indemnity basis. In making its case for an order on that basis, it relies upon the conduct of the defendant which led to the litigation (the antecedent conduct ground), the manner in which the litigation was conducted (the litigious conduct ground) and the alleged refusal of an offer of settlement made on 20 April 2001 (the Calderbank ground). The plaintiff argues that the three grounds relied upon, both independently and in combination, support an order of the kind sought.

In the alternative, the plaintiff seeks an order,

(a) that the defendant pay the plaintiff's costs (including reserved costs) on a party/party basis up to 20 April 2001 and thereafter on an indemnity basis, or (b) for an increase of 30% on solicitor's charges in respect generally to the proceeding.

The defendant initially argued that the usual order as to costs should be made - the plaintiff to receive his costs on a party/party basis - save and except the costs associated with the conduct of the Schedule C claim and certain reserved costs. It also sought an order that the plaintiff pay the defendants costs associated with the defence of the Schedule C claim.

In the course of the costs hearing, the plaintiff filed further evidence relating to the Calderbank ground following which the defendant revised its position indicating that it no longer opposed an indemnity costs order in favour of the plaintiff in respect of costs incurred as and from 21 April 2001. Minutes were provided setting out the defendant's final position as follows:

"1. The defendant pay the plaintiff's costs of the proceeding (including reserved costs) and excluding the following costs:

(a) The plaintiff's costs of and associated with pursuing his Schedule C claims;

(b) Mr Selimi's costs of reading in to the case;

(c) costs reserved by the Court during the period November 1999 to March 2000;

(d) Any reserved costs associated with the McKenzie friend application made for and on behalf of the plaintiff;

2. The defendant pay the plaintiff's costs as ordered, on a party/party basis up until 20 April 2001 and thereafter pay the plaintiff's costs on the basis that such costs are to include all costs except in so far as they are of unreasonable amount or were unreasonably incurred so that, subject to such exception, the plaintiff will be completely indemnified for his costs (as defined in 1 above) as and from 21 April 2001 to the handing down of judgment on 16 April 2002. 3. The plaintiff pay the defendant's costs of and associated with its defence of the plaintiff's Schedule C claims; and

(a) such costs as were reserved by the Court during the period November 1999 to March 2000;

(b) any reserved costs associated with the McKenzie friend application made for and on behalf of the plaintiff,

such costs to be paid on a party/party basis."

In light of the defendant's concession, the primary issue is whether the plaintiff is entitled to indemnity costs up to and including 20 April 2001.

It was common ground that the result of the Supreme Court Act provisions and the Rules of the Court are that in exercising the costs discretion, a general rule applies that costs shall be taxed on a party/party basis unless the court otherwise orders (Supreme Court Act s. 24; Rule 63.28 and 63.31). Thus the general rule will apply unless there is good cause to the contrary[1].

I was referred to the continuing, and growing, judicial discussion of relevant considerations commencing with Colgate Palmolive v Cussons[2]. I do not propose to repeat that discussion but will address particular issues that have arisen.

Counsel for the defendant challenged the proposition that the pre-litigation conduct alone could justify an indemnity cost order. Attention was drawn to the case of Harrison & Anor v Ship [3] where it was held that, in proceedings successfully brought for unconscionable conduct or breach of fiduciary duty, it will be necessary to establish more to obtain an indemnity order as to costs[4]. That authority was cited with approval in MNFM Property Pty Ltd v Citibank Ltd[5]. In the latter case Lindgren, J stated[6]:

"It seems to me that the presumption which prevails in favour of party and party costs requires the Court to accept the underlying or background facts of the case as `a given' and to consider how the parties have conducted themselves subsequently as litigants, while taking into account their knowledge of past events which they carry into that role".

If his Honour was attempting to limit the costs discretion there may be difficulties in the quoted statement. Further, there are judicial statements to the effect that the conduct giving rise to the litigation can justify departure from the ordinary rule[7].

On any view, however, the wrongs done to the successful party will provide the context within which to judge the subsequent conduct leading up to and during any subsequent litigation. It may make the subsequent conduct more difficult to justify and appear more high handed[8]. It appears to me that the present case should be approached in this way.

Turning to the antecedent conduct, I refer to my reasons for judgment delivered on 16 April 2002. They contained very serious findings against the defendant about its conduct during the retainer. They included gross negligence, prolonged deception and manipulation, wilful breach of contract, an absence of supervision and, generally, a contempt for the rights of its client, the plaintiff. The conduct was the complete antithesis of that to be expected of a sharebroker in the position of a fiduciary agent.

Despite approaches in late 1999 and early 2000 by the plaintiff to investigate the issues, it failed to respond even though it must have been concerned about Martin's conduct. The defendant was well aware of the recklessness and deception practiced by Martin on it. It must have known that there was a real likelihood that Martin had misconducted himself with the plaintiff in similar ways. Martin himself had warned his superiors of a "can of worms". Instead it chose to fight the plaintiff aggressively as the best way of defeating the plaintiff's claim. On any view, it adopted a strong adversary position, refusing to hold back the sale of Burns Philp shares (it not being in the business of providing funds to people so they could sue them), and counter-attacked by threatening to sue for unpaid commission.

Its conduct was that of a party attempting to make its powerful financial position relatively more powerful and to use it to defeat a claimant. It may fairly be said that despite the plaintiff's attempts to avoid litigation, he was forced to sue by the defendant's conduct. These matters are all relevant to a consideration of the conduct of the parties in the litigation itself.

The principal argument of the plaintiff is that the defendant conducted the defence to frustrate and delay the swift determination of the claim with a view to applying pressure on the plaintiff. The plaintiff drew attention to the following issues:

Counsel referred to the issue of illegality raised in relation the Telstra transaction referring to the fact that the issue was raised although the defendant had no independent evidence to support the conclusion of illegality and had itself, through Martin, promoted as acceptable the course now said to be unlawful.

This defence was not raised in the original defence. It was raised in subsequent pleadings. The plaintiff submitted that the defendant prolonged the proceedings unreasonably by falsely denying knowledge that Rahmat Ali was the client. Counsel submitted that this was a very serious allegation because it involved the proposition that the plaintiff and his son were attempting to deceive the Court as to the identity of the real plaintiff. Counsel referred also to the fact that the position taken by the defendant was contradicted by the letter sent to Martin on 17 September 1997 and drew attention to the fact that the file note of Barba (CB 130) recording a conversation with Martin about the true identity of the principal was not cross-examined upon despite the fact that counsel cross-examined on many other file notes. I note also that despite counsel being reminded of Browne v Dunn obligations, it was not challenged and Martin gave no evidence to contradict it.

Counsel for the plaintiff submitted that the defence for the Telstra claim that the shares were sold on instructions was contradicted by documents in the defendant's possession, in particular, the correspondence to and from Martin and the existence of a No 2 Account statement and should not have been run. Counsel also pointed to disparities between O'Halloran's oral evidence and witness statement, arguing that they supported the argument that the defence was not bona fide. Counsel also referred to the failure to give discovery of the No 2 Account statement and the evidence that Martin had been unable to give a satisfactory explanation to his superior, Karlson, for opening the No 2 Account.

Counsel submitted that the defendant unreasonably prolonged the proceedings by contesting the allegation of negligent trading and negligent supervision when it had no defence and in fact called no evidence that fairly addressed the issue.

The plaintiff's counsel submitted that the defendant unreasonably prolonged the proceedings by attempting to deny that Martin had received and ignored the Schedule C instructions. The plaintiff relied upon the extensive written admissions from Martin acknowledging his receipt of the instructions and his refusal to follow them. As to Martin's explanation of alleged threats, counsel for the plaintiff relied upon the points made in my reasons for judgment as to the lack of credit in that explanation which, it was argued, were readily apparent and should have been apparent to the defendant.

The plaintiff's counsel submitted that the defendant denied the reality, that it must have known would be established, that Martin controlled the account not Lyiakat Ali. Again reference was made to the documents, including those emanating from Martin.

The plaintiff argued that the defendant, to prolong the proceedings and add to costs, unreasonably challenged the diary and file notes arguing that they had been fabricated.

The plaintiff alleged that the defendant had no reasonable basis for advancing these defences, as was, it was said, demonstrated by the reasons for judgment.

The plaintiff submitted that the apprehended bias applications early in the trial and the allegedly serious discovery failures, pointed to a deliberate tactic of attempting to frustrate and delay the determination of the claim.

The defendant submitted that every litigant within an adversarial system is entitled to pursue vigorously the relief or defence which it properly believes is its entitlement and that it had done no more than that[9]. The defendant also submitted that the plaintiff cannot demonstrate that the conduct of the defence was unreasonable in a number of the areas alleged because the case was one which depended upon findings of credit and those findings could only be made after a full exploration of the evidence[10]. The defendant submitted that the key issues in the proceedings turned on the assessment of the credibility of the main protagonists - Chris Martin and Lyiakat Ali. It submitted that the documentary evidence was ambiguous and required explanation and, in the end, the finding was made that both witnesses lacked credibility. It was further submitted that while in the end the judgment was based upon the acceptance of the evidence of Dominic Barba, even he was found to have given untruthful answers to some questions put by defence counsel.

The defendant also submitted that it was successful on a number of the issues, including key issues. As to the retainer, counsel noted that while the defendant's interpretation was rejected, so also was the plaintiff's interpretation. In particular, it was submitted that, in the reasons for judgment, a key term of the retainer as pleaded for the plaintiff, was rejected - namely, that the defendant was obliged to act upon the instructions of the plaintiff. Instead an interpretation placed on events by the defendant was accepted that the alleged instructions given (Schedule C, in particular) were in fact no more than recommendations. Counsel submitted that thus it could not be said that the defendant's denial of the retainer as pleaded was improper or unreasonable. Counsel also drew attention to the fact that the plaintiff failed to establish other elements of the pleaded retainer, notably the terms alleged as to stop loss, rate of return and extended settlement and credit. He also referred to the dismissal of the Schedule A, B and C claims, each of which, it was put, occupied significant court time and was linked to the issue of whether the defendant was obliged to follow instructions and whether instructions were given.

The defendant denied that the case relating to negligent trading was hopeless. Again, it was put that credit was a critical issue in that the issue was closely connected with the question of who the client was and what the client's profile was and thus was connected to the credit of the key witnesses. Counsel also submitted, contrary to the plaintiff's submission, that the evidence of Mr Jasch was contradicted by a defendant witness, Mr Chappel, who suggested Jasch's conclusions were overly rigid and didn't reflect the realities of the market and the tools available to a stockbroker. The defendant also submitted that it was entitled to instruct Mr Chappel to assume that Martin's version of events was correct. Counsel submitted that the defendant in confining its approach to expert evidence upon the version of events put forward by its key witness could not be described as acting improperly. Again, the credit of the key witnesses was the key and something to be determined in light of all the evidence after it was properly tested. Counsel also noted that Jasch's evidence did not materialise until mid to late 2001 causing the vacation of the trial date of 29 August 2001.

The defendant also submitted that on the face of it there was an inherent conflict between the claim pursued by the plaintiff in Schedule C, which was based largely on alleged instructions to trade in very speculative investments and the plaintiff's case that the intent was to pursue investment to develop a retirement nest egg. It was put that the making of the Schedule C claim was consistent with the defendant's position that the profile of the client was that of an aggressive trader who was risk tolerant.

As to the pursuit of the defence of the Telstra claim on the basis that the sale was authorised, the defendant again points to the issue of credit as being critical to the resolution of that matter. Counsel noted that the significant findings that Martin was aware of Rahmat Ali's existence and the retirement nest egg objective and the finding of an intention to margin lend were based on Dominic Barba's evidence not on the plaintiff's or Lyiakat Ali's. Counsel asserted that the documentary evidence was ambiguous and, again, credit was the key. Counsel also noted that the Seatscan evidence was not produced until the trial and argued that the case remained arguable even after that evidence.

As to the raising of the illegality defence, the defendant has submitted that the issue was plainly arguable in light of the discussion of it in the reasons for judgment. It was submitted that this defence like the others was not improper or unreasonable in the circumstances. As to the pleading of the illegality defence, I accept the defendant's proposition that it was pleaded in response to a suggestion made by me. The defendant should not, therefore, be prejudiced by the fact that it did plead the illegality defence.

As to the defence of the claim of negligent supervision, the defendant has submitted that the issue was linked to the question of the client profile and the appropriateness of Martin's conduct in that context. Thus, it is said, again credit was the issue and there was nothing unreasonable in the defendant pursuing fundamental matters of credit including those relevant to supervision and there was also an issue of causation.

I have stated in my reasons for judgment that this case has been the most hard fought and hostile case that I have experienced. In making that comment I was referring to the conduct of the case on both sides. I accept, however, that there is little doubt, having regard to the conduct of the dispute immediately prior to the issuing of proceedings, subsequently and before me, that the defendant adopted the tactic of fighting the case so as to apply maximum pressure to the plaintiff. It was only the remarkable resolve of the plaintiff, and Lyiakat Ali, that withstood that pressure.

It is true that a number of the critical issues depended on the assessment of the credibility of witnesses including Christopher Martin. I do not, however, accept that reliance by the defence upon him as its key witness was, in the circumstances, reasonable.

The experience of other employees of the defendant of Martin should have caused the defendant and its legal advisers to have grave reservations about the likelihood of him being believed and to have had grave reservations about accepting his account of events in the first place. His explanation of the Inovax transactions in his witness statement also raised issues reflecting badly on him. Further, an examination of the contemporaneous documents, received by and emanating from Martin, which were on their files and subsequently discovered, supported the plaintiff's assertion that Martin had acted without instructions, had refused to follow instructions, exercised a discretion in trading and had sold the Telstra shares contrary to instructions.

The letters admitting the failure to follow instructions were referred to in the Lyiakat Ali witness statement and in the plaintiff's pleadings, but, significantly, were not addressed in either of Mr Martin's witness statements. These were critical documents and the lawyers acting for the defendant must have appreciated their significance and the need to explain them. It is reasonable to assume that they did not, when preparing the witness statements, have an explanation that could be advanced. Thus, at that point the case was being fought with clear contemporaneous documentary evidence supporting the plaintiff's case on key areas and contradicting Martin, for which the defendant apparently had no answer on which it could rely.

It was not until he gave oral evidence that an explanation for them was offered and that appears to have been the first time the defendant was provided with an explanation for these highly damaging documents. I refer to my assessment of that evidence in my reasons for judgment.

The raising of the issue of illegality in the Telstra claim and the challenge to the identity of the plaintiff were examples of issues raised without any reasonable evidentiary foundation being then available to the defendant. On the identity issue, the defendant's position was also contradicted by contemporaneous documents which Martin could not contradict. Both challenges by the defendant were inconsistent with the defendant's own original conduct.

On the issue of negligent trading, the defendant chose not to call expert evidence based on the plaintiff's assumptions and instead called expert evidence based on Martin's evidence. Even so, its expert conceded two areas of negligent conduct - as noted in my reasons for judgment.

Such matters, and the conduct before me of the trial, left me with no doubt that the defendant was engaged in what counsel for the plaintiff has described as "trench warfare" and that this added significantly to the cost of the trial.

It does not follow, however, that the defendant acted unreasonably in not admitting negligence and the various breaches alleged. There were major issues with the plaintiff's case as pleaded - in particular the terms of the retainer. Also, the conduct of Lyiakat Ali during the relevant events and the Schedule C transactions were, on one view, consistent with the position of the defendant that in fact the profile to which Martin was required to perform was that of a highly-aggressive, speculative trader. In addition, the plaintiff, through Lyiakat Ali, allowed the situation to continue for approximately 12 months, in spite of constant complaints about the performance and failure to follow instructions. The situation and the events were difficult for all to analyse. This is borne out by the problems that the plaintiff had in formulating his case and by the fact that, the conclusion I reached, in effect, rejected the primary legal analyses of the retainer put forward by both sides. Most importantly, while the position of the defendant as to the terms as to instructions was not accepted, so too the position of the plaintiff was not accepted, the end result being that the major claim under Schedule C failed. It did so in part, however, because of the acceptance of the proposition that the instructions in question were essentially recommendations, an alternative advanced by the defendant. Thus considerable time and costs were expended on issues on which the plaintiff was unsuccessful[11].

Other matters were raised by the plaintiff which have not affected my assessment of the litigious conduct of the parties.

The plaintiff submitted that a matter adding to the cost of the litigation was the defendant's poor performance in giving discovery. Particular reference was made to the important statement of account for the No 2 account which for some inexplicable reason was not discovered. Reference was also made to the documents obtained during the hearing, relating to the defendant's Debtors' Committee and its dealings with Martin. The plaintiff, however, also did not adequately address his discovery obligations and accordingly I regard that issue as one where there was fault on both sides.

The plaintiff also relied upon the apprehended bias applications made early in the proceedings. The plaintiff argued that these were further evidence of the tactics of the defendant of trying to bring pressure to bear on the plaintiff; if the applications had been successful the trial would have been aborted and the costs incurred by the plaintiff wasted. I have no doubt that such tactical considerations played a considerable part, but the applications did not add significantly to the cost of the trial.

Having regard to the antecedent and litigious conduct, I am not persuaded that a departure is warranted from the ordinary rule that the plaintiff's costs be taxed on a party/party basis up to and including 20 April 2001. While the plaintiff can point to conduct of the defendant which may be criticised and which caused significant additional costs, he lost on a number of issues which also added significantly to costs. To receive indemnity costs on the basis of the antecedent and litigious conduct would overcompensate the plaintiff.

I turn to the specific issues raised by the defendant. The first is the defendant's application that the plaintiff be denied his costs of and associated with pursuing the Schedule C claims and pay the defendant's costs of and associated with the defence of that claim.

Counsel for the defendant submitted that it is well established that it is within the Court's jurisdiction to apportion costs between issues on which successful parties succeeded and those on which it failed. Reliance was placed on the statement of Drummond, J in Coogi Australia Pty Ltd v Hysport International & ors[12]. His Honour considered a number of authorities[13] and reached the conclusion that "costs can be apportioned between issues on which the successful party succeeded and those on which it failed, even in the absence of unreasonable conduct by that party.".

Counsel for the plaintiff referred me to a number of authorities[14] on the issue of whether it was relevant to consider the reasonableness of the conduct of the plaintiff in bringing and pursuing the Schedule C claim. Bearing in mind that the Court is given a broad discretion as to costs, it is not possible to lay down strict rules which limit the discretion in all cases. Each case must be examined on its merits. There may be cases where it is appropriate to make costs orders in respect of issues lost by a party, even though it was reasonable for the party to bring them. On the other hand, it would be contrary to principle, in my view, to suggest that it must always be irrelevant to consider the reasonableness or otherwise of the conduct of the party who brought the claim and pursued it. I do not understand Drummond J, to be suggesting otherwise.

The Schedule C claim was introduced into the proceedings in February 2000. It involved a large number of potential transactions and a claim in excess of at least $6 million. There was much work done by both sides in preparation for the handling of this claim and that activity involved, amongst other things, an analysis of individual transactions and the assessment of material obtained from the ASX in relation to the securities and their trading. The plaintiff's expert, Mr Francis, produced a two-volume report, most of which concerned the claim. A significant part of his cross-examination over some six days related to his evidence relevant to the Schedule C transactions. There were also several days of cross-examination of Lyiakat Ali in relation to the Schedule C transactions. Final written submissions of the defendant were specifically directed to the individual instructions and occupied nearly 100 pages of the final submissions totalling in excess of 600 pages.

I proceed on the basis that the work associated with the claim was sufficiently discrete (at least on quantum and causation) for it to be able in fact to be assessed separately from the work done on other issues.

In my reasons for judgment, I referred to the Schedule C claim as one which was exaggerated. The Schedule C claim quantum was plainly excessive. It was, however, an alternative claim that it was reasonable for the plaintiff to plead in view of the fact that the defendant was taking the position that the retainer required it to follow the client's instruction at all times. If that defence position succeeded, the plaintiff would fail on his primary case but would have a very strong claim to make that, on a number of occasions, admitted by Martin in writing, the defendant had failed to follow instructions. The difficulty that would have then faced the parties was quantifying the loss.

What Mr Francis produced was essentially the starting point on the issues of causation and quantification. Proceeding further was difficult. It could not be assumed, for example, that each of the later instructions would have been given. The giving of the very first instruction, and the carrying out of it, would have affected the capacity of the plaintiff and defendant to carry out any subsequent transactions. Further, many of the later transactions, in all probability, could not have been carried out for lack of funds - at least to the extent of the instruction given.

In the end, while the amount claimed loomed large and the amount of work involved in the matter was considerable, I am not persuaded that it formed such a significant and separate part of the case that it would itself warrant separate consideration. While the time spent in cross-examination of Mr Francis and Lyiakat Ali occupied six and "several" days respectively, this was in a trial that occupied 115 days. In addition, the claim was linked with other issues. In particular, the plaintiff failed on this issue because he succeeded in establishing his primary position (contested by the defendant), which was that Martin had throughout acted exercising his own discretion pursuant to a discretionary arrangement. I note also that the evidence relating to the instructions for the Schedule C transaction was also relevant to the issue of the terms of the retainer and to the credit of Martin and Lyiakat Ali.

If, however, the correct view is that the costs of the Schedule C claim formed a significant and separate part of the case, I do not consider it appropriate to treat the Schedule C costs separately and do not consider the defendant should be entitled to any costs compensation in respect of that item. It is relevant to weigh in the balance on this aspect the extent to which the defendant has added to the cost of the proceedings by its conduct. In the end, to achieve just and reasonable compensation for the plaintiff, an order should be made in favour of the plaintiff for party/party costs up to 20 April 2001, including the Schedule C costs. I turn to the remaining issues raised by the defendant.

The defendant seeks its costs of 30 May, 31 May and 1 June 2001, and any costs thrown away by reason of the adjournments on those days, and the exclusion of such costs of the plaintiff from his award of costs.

On 30 May 2001, the solicitor for the plaintiff, Mr Boden, applied to the Court to be excused as an advocate and replaced by Lyiakat Ali. The matter was adjourned to the following day, 31 May 2001, to give Mr Boden the opportunity to seek advice. On 31 May 2001, Mr Boden informed the Court that his instructions had been withdrawn. Mr Lyiakat Ali then made an application to appear as a McKenzie friend. It appears from what Mr Lyiakat Ali said that the instructions were withdrawn because Mr Boden believed he was not in a position to cross-examine Mr Martin. It was said by Mr Lyiakat Ali that Mr Boden had not prepared for the cross-examination. It was also revealed, however, that it was proposed that Mr Boden would continue to act as the plaintiff's solicitor. The situation was confused. The matter was further adjourned to 1 June 2001. On that day, Mr Selimi appeared on behalf of the plaintiff. The matter was then adjourned to 12 June 2001 to enable Mr Selimi to prepare. On 12 June 2001 the defendant applied for costs relating to the three days of the hearing and adjournments. The application was deferred on the basis that Mr Selimi wished to put matters after delivery of judgment.

Counsel for the defendant submitted that not only was the McKenzie friend application unsuccessful, but both Mr Ali and Mr Boden were less than candid with the Court and failed to give satisfactory explanations as to the reasons for Mr Boden's withdrawal or termination and the time at which that had been planned.

For the plaintiff it was put that no order should be made in favour of the defendant because the application was necessary because the defendant had dragged out the proceedings. It is sufficient to note that, in my view, both sides were at fault in dragging out the proceedings.

It is unnecessary to express a view about the conduct of Mr Ali or Mr Boden. The fact is that the defendant incurred costs on each of the days in question and there may have been costs thrown away by reason of each of the adjournments. The plaintiff cannot demonstrate any relevant responsibility on the part of the defendant and must, himself, bear the responsibility. The defendant is entitled to such costs and the plaintiff is not.

Costs reserved in relation to Statement of Claim Amendments

On 10 December 1999, the parties appeared before Byrne, J to argue, amongst other things, an application by the plaintiff for leave to file and serve a proposed Further Amended Statement of Claim. Because of inadequacies in the particulars, his Honour ordered the delivery of the amendment to be made on 1 February 2000, subject to specific requirements as to particulars. His Honour at the time expressed the view that the plaintiff should pay the costs of the day because the costs had been incurred in furtherance of amendment of the Statement of Claim and the amendment itself would in any event be at the expense of the plaintiff. He ordered that the plaintiff pay the costs of the day.

The Amended Statement of Claim was not delivered as directed on 9 February 2000, and there was a further adjournment of a directions hearing scheduled for 11 February 2000. On that occasion, Warren, J expressed concern about the lack of pace in the litigation and whether it should remain in the Commercial List. On the further adjourned directions hearing on 18 February 2000, submissions were made for the plaintiff by senior and junior council as to why the matter should remain in the list. Their submissions were accepted and orders made for the filing and service of an Amended Statement of Claim by 21 February 2000, and consequential orders. Costs were reserved on both 11 February 2000 and 18 February 2000.

The defendant seeks an order that the costs reserved on 11 and 18 February 2000 be dealt with by an order that the plaintiff pay the defendant's costs of those applications and bear its own.

I am satisfied that the plaintiff must accept responsibility for such costs. Accordingly, it would appear to me to be proper that such orders be made.

It appears that on 5, 19 and 26 November 1999, directions hearings were adjourned. On each occasion, counsel appeared for the plaintiff and there was no appearance for the defendant. The adjournments were prompted by amendments proposed to the plaintiff's Statement of Claim, which application was subsequently heard by Byrne, J on 10 December 1999.

The defendant submitted that the only order that should be made in respect of costs reserved on those occasions, is that an order be made against the plaintiff in favour of the defendant. It is unclear what its costs would be.

Again, the adjournments were the plaintiff's responsibility. I propose to order that the costs of the directions hearings of 5, 19 and 26 November 1999, be dealt with by ordering that the plaintiff pay the defendant's costs, if any, of and incidental to the adjournments that occurred on those days and that the plaintiff not recover his costs of those adjournments from the defendant.

The defendant has argued that it should not be liable to pay the costs incurred by the plaintiff in engaging Mr Selimi so far as his preparation costs were concerned. It was submitted that these costs were incurred through no fault of the defendant and arose out of matters for which the plaintiff was responsible.

Assuming for present purposes that the incurring of the costs was the responsibility of the plaintiff, the costs would have been foreseeable at the time of the Calderbank letter negotiations in the event that counsel was engaged. I am not persuaded, therefore, that an order should be made, relieving the defendant of payment of those costs.

For the foregoing reasons I propose to make orders to the following effect.

1. The defendant pay the plaintiff's costs of the proceeding (including reserved costs) but excluding the following costs:

(a) the plaintiff's costs incurred on 30 and 31 May 2001 and 1 June 2001 of an incidental to the adjournment of the proceedings on those days,

(b) the plaintiff's costs reserved on 11 February 2000 and 18 February 2000,

(c) the plaintiff's costs reserved on 5, 19 and 26 November 1999.

2. The defendant pay the plaintiff's costs as so ordered, on a party/party basis up until 20 April 2001 and thereafter on an indemnity basis. 3. The plaintiff pay the defendant's costs, if any, of and incidental to the adjournments on 5, 19 and 26 November 1999, 30, 31 May 2001 and costs reserved 1 June 2001 and 11 February 2000 and 18 February 2000, such costs to be paid on a party/party basis.

[1] MT Associates Pty Ltd v Aqua - Max Pty Ltd (3) 2000 VSC 163 para 28-41; Spencer v Dowling [1996] VSC 51; (1997) 2 VR 127; 147.

[2] [1993] FCA 536; 46 FCR 225. See cases referred to in fn.1. and, for example, CGU Workers' Compensation (Vic) Ltd v Carousel Bar Pty Ltd (No 2.) [1999] VSC 237, Harris v Bennet & anor. (No.2) [2002] VSC 163, Tuohey v Toohey (No.2) [2002] VSC 181, Ugly Tribe Co. Pty Ltd v Sikola & Ors. [2001] VSC 189, Banco Villa Pty Ltd v Montedeer Pty Ltd [2002] VSC 184, Czerwinski v Syrena Royal Pty Ltd (No.2) [2000] VSC 135.

[7] Latoudis v Casey (1990) 173 CLR 534, at para 27 per Dawson J; Oschlack v Richmond River Council [1998] HCA 11 per Brennan CJ para 26, McHugh J para 8; NAB v Petit-Breuith (3) [2000] VSC 291 Singleton.

[9] Westcoast Clothing Co Pty Ltd v Freehill, Hollingdale and Page [1999] VSC 309; FAI General Insurance Co v Burns & Anor (1997) 9 ANZ Insurance Cases; 61-384, 77, 220.

[10] Citing for example Hill J and John S Hayes v Kimberley-Clarke (1994) 52 FCR 201.

[11] For reasons set out below, I have concluded that the costs of the Schedule C claim should not be dealt with separately.

[12] [1998] 1331 FCA (22 October 1998)

[13] Hughes v Western Australian Cricket Association (Inc) (1986) 18 ATPR 40-748, 48,136; Queensland Wine Industries Pty Ltd v BHP Co Ltd (1987) 17 FCR 211, 222; Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (2) (1991) 28 FCR 172 at 174; Commissioner of the Australian Federal Police v Razzi (2) [1991] FCA 267; (1991) 30 FCR 64, 67-68; Verna Trading Pty Ltd v New India Insurance Co Ltd [1991] VicRp 12; [1991] 1 VR 129, 151-4; Cretazzo v Lombardi (1975) 13 SASR 4, 16

[14] In Re Elgindata Ltd (2) [1993] 1 ALLR 232, 237; Westpac Banking Corporation v Tanzone Pty Ltd & Ors [2000] NSW CA 77 (5 April 2000); Permanent Trustee Australia Ltd v FAI General Insurance (unreported, NSW SC, 3 June 1998, Hodgson, C.J. in Eq.); Rolls Royce Industrial Power (Pacific)v James Hardy & Co Pty Ltd [2001] NSW CA 461; Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSW SC 1051 (25 October ).

At a glance

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Judgment (91 paragraphs)

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Cases Cited (7)