On 31 March 2015 the Court dismissed the Plaintiff's amended notice of motion seeking summary judgment against the Second Defendant, RAM Nominees Pty Ltd ("RAM") (Bayton Cleaning Co Pty Ltd v Woods [2015] NSWSC 369 ("Bayton (No 1)")). The only outstanding issues at this point are the costs of that motion and its earlier iteration which sought summary judgment against both RAM and the first defendant, Richard Woods.
[2]
Costs of the application against RAM
Each party sought their costs of the application so far as it concerned RAM. The starting point so far as concerns the application against RAM is that the motion was unsuccessful. However in Bayton (No 1) I noted the following matters which may warrant a departure from the usual rule that costs follow the event:
"30. First, as noted, at the hearing of the motion the defendants sought leave to file and serve an amended defence. In the ordinary course they will be required to pay the costs thrown away by reason of that amendment.
31. Second, as I understand the position, prior to the hearing of this motion of the summary judgment, the defendants had stated that they would only seek leave to file an amended defence if summary judgment was not granted. However, as it became clear that RAM sought to resist summary judgment on the basis, inter alia, of a Limitation Act point which was not pleaded in the original defence, it was necessary for the defendants to apply to amend the defence during the hearing. As events transpired, one of the principal reasons for it being successful in resisting summary judgment was the Court's conclusion that a triable issue was raised that recovery of so much of the loan account as was referable to events prior to 30 April 2008 may be statute barred.
32. Third, another significant reason why RAM was able to successfully defend summary judgment was that it took issue with the method of allocating advance payments of dividends to RAM which were cash transfers to Mr Woods' account. This 'defence' only appeared to assume any significance once summary judgment was no longer pressed against Mr Woods. As I have stated, it may disappear again at final hearing. As noted, Bayton contends that it only decided not to pursue summary judgment against Mr Woods because of his two unpleaded, but asserted, counter-claims which are now expressed in the proposed amended defence."
Following the judgment in Bayton (No 1) the parties filed written submissions which addressed these and other issues.
In relation to the Second Defendant's reliance on the Limitation Act 1969, the material supplied by the Plaintiff confirms that on 20 March 2015 the Defendants' solicitor advised that they would seek leave to file an amended defence raising a Limitation Act defence "which our client proposes to seek leave to file in the event your client's application is dismissed". The Plaintiff noted that, if the Limitation Act point had not been raised, summary judgment for a particular amount would have been entered against RAM. Accordingly it contends that it should have its costs on the basis that often an unsuccessful party recovers their costs up to the point that an amendment was granted which defeated their claim (Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318 at [9] to [10]).
The Defendants submitted that the Plaintiff had notice of its reliance on the Limitation Act because it was referred to in written submissions filed on their behalf on 30 January 2015, and was referred to in a draft defence it sent to the Plaintiff on 10 March 2015. They submitted that there is a distinction between a triable issue and the pleading of a reasonably arguable defence submitting that "on a summary judgment application, the real issue is whether there is an underlying defence, not simply whether one is pleaded" (relying on Spencer v Commonwealth of Australia [2010] HCA 28; 241 CLR 118 at [23]). They contend that the Plaintiff was aware it would be relied on because it was addressed in its written submissions. Finally they noted that the Plaintiff proceeded with the motion even when the defence was amended
There is a distinction between a pleaded issue and a triable issue, but it does not assist RAM in resisting a costs order. A party must specifically plead reliance on the Limitation Act 1969 (Uniform Civil Procedure Rules 14.14(3)). The necessity to do so is of particular significance because a Limitation Act defence can be waived. RAM floated reliance on the Limitation Act in correspondence but consciously chose not to bring in a pleading to reflect it. While the existence of an underlying defence that is not pleaded may be a basis for refusing to enter summary judgement, it does not assist RAM in resisting a costs order where it succeeds on a previously unpleaded claim, especially in circumstances where it deliberately chose not to amend its pleading to reflect that claim.
Bayton may have anticipated that reliance might be placed on the Limitation Act to resist summary judgment, but that was presumably because it did not trust the statement that an amended defence would not be sought to be filed. Subject to what follows, in circumstances where a late amendment raised the issue upon which the application for summary judgment against a party failed, then the costs of the motion up to that time are costs thrown away by the amendment.
The Defendants also pointed to another matter upon which they successfully defended the Plaintiff's notice of motion, namely the possible failure to account for dividend payments (Bayton (No 1) at [19]). The Defendants contended that this was "raised" in advance of the motion in various ways. Given the manner in which the Plaintiff frames its case it is not entirely clear that it needed to be pleaded in the defence. In those circumstances I will discount the amount ordered to reflect the Defendants' "success" on this issue. I will adopt the same approach to the matter noted in Bayton (No 1) at [27].
The Defendants also submitted that the issue in relation to the authority to deduct sums advanced to Mr Woods from RAM'S account only emerged from the substantiation audit conducted by Mr Jenkin. The Plaintiff disputed this contending that it could have been raised by perusing the ledgers. However I accept that it was only Mr Jenkin's affidavit that made it sufficiently clear. I will discount the amount ordered by only a modest amount to reflect this as the issue was only first raised at the hearing of the motion some months later, and I otherwise adhere to the observation in Bayton (No 1) at [32].
Accordingly I will make an order that RAM pay 70% of the Plaintiff's costs of its original notice of motion and amended notice of motion referable to the Second Defendant. Three matters should be noted. First, I will expressly exclude the costs of the substantiation audit and the preparation of the affidavit of Mr Jenkin from those costs. Their overall effect was to reduce the amount said to be owing by the Defendants. Instead they may be recovered by the Plaintiff as costs of the proceedings if they become otherwise entitled. Second, this order will exhaust the costs thrown away by reason of the filing of the amended defence. No separate order will be made to that effect. Third I will not order that the costs be payable forthwith.
[3]
Costs of the application against Mr Woods
Each party sought the costs of the motion against Mr Woods. In Bayton (No 1) at [32] I noted that Bayton claimed that it did not press its motion against Mr Woods following the raising of two counter claims or alleged "credit entries" which were not pleaded but which are now included in the amended defence. The submissions filed on behalf of Mr Woods stated that these claims were raised in Mr Woods' affidavit of 18 January 2015 and the written submissions filed on his behalf on 30 January 2015. They also noted that a letter of demand sent prior to the proceedings allowed these claims in Mr Woods' favour, although they appear to be an obligation of another entity.
Each of these credit entries or counter claims should have been expressly pleaded. Nevertheless, unlike the application against RAM, the Court does not have the means of determining whether, leaving aside these credit entries, the application would have been successful. In those circumstances, I will order that the costs of the motion against the First Defendant be each party's costs in the cause.
Accordingly the Court orders that:
1. the Plaintiff's and the First Defendant's costs of the Plaintiff's notice of motion dated 11 July 2014 be costs in the cause;
2. the Second Defendant pay 70% of the Plaintiff's costs of its notice of motion dated 11 July 2014 and its amended notice of motion filed 30 March 2015 referable to the Second Defendant, such costs not to include the costs of the substantiation audit conducted by Mr Ross Murray Jenkin and the costs of the preparation of his affidavit sworn 16 February 2015.
[4]
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Decision last updated: 23 April 2015