Bendigo and Adelaide Bank Limited v Benedetta Russo and Sid Russo; ; Bendigo and Adelaide Bank Limited v Sid Russo;

Judgment (6 paragraphs)

[1]

Judgment

In these proceedings I made orders on 18 November 2016 (inter alia) setting aside the default judgment entered against each of the defendants. I made consequential orders allowing the parties to provide written submissions as to costs: Bendigo and Adelaide Bank Limited v Benedetta Russo and Sid Russo; Bendigo and Adelaide Bank Limited v Sid Russo [2016] NSWSC 1493.
It is now necessary for me to determine the question of costs.

[2]

Submissions of the plaintiff

Counsel for the plaintiff emphasised that the defendant in each proceedings had failed to file defences within the 28 day period prescribed by r. 14.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("the Rules"). It was submitted that any issue as to who may have been responsible for such failure was a matter between the respective defendants and their solicitors.
Counsel submitted that when a defendant successfully applies for a default judgment to be set aside, it was "usual" for the court to order that the defendant pay the costs of the application, and the costs of any steps which were rendered useless by the judgment being set aside. It was submitted that the appropriate exercise of discretion in circumstances where: 1. the defendants had failed to file defences; 2. the default judgments were obtained regularly; and 3. the plaintiff had not acted unreasonably, 4. was that the defendants be ordered to pay the plaintiff's costs of, and incidental to, the notices of motion.

Submissions of the second defendant

Senior counsel for the second defendant emphasised that the second defendant (and indeed the first defendant) were the successful parties on the motions. He submitted that an order that a successful party pay the costs of an unsuccessful opponent "could rarely, if ever, be justified" and that the jurisdiction to make such an order had been held to be restricted to cases that are "most exceptional". Senior counsel submitted that the number of authorities supporting the proposition that departures from the rule that costs should follow the event, so as to deprive a successful party of its costs, are sparse.
It was submitted that where a party was faced with an application to set aside a default judgment, that party had a choice of accepting that the judgment should be set aside, or opposing the application. It was submitted that having decided to take the latter course, and having been unsuccessful in its opposition, the plaintiff should pay the second defendant's costs of the motion. It was submitted that to conclude otherwise would not only be contrary to principle, but would be tantamount to encouraging plaintiffs to (as senior counsel put it) "have a go" in opposing an applications, unconstrained by the risk that they may have to pay the costs if such opposition was unsuccessful.
It was submitted that in all of these circumstances, the plaintiff should pay the second defendant's costs of the motion.

Consideration

The submission of counsel for the plaintiff that in circumstances such as the present it is "usual" for the court to make an order requiring the defendant to pay the costs was advanced by reference to number of older authorities including Federal Bank v Bate (1889) 5 WN (NSW) 67, Burgoine v Taylor (1878) 9 Ch D 1, and Cockle v Joyce (1877) 7 Ch D 56. Although in each of those cases such an order was made, there was no discussion of the general rule that costs follow the event (enshrined in r. 42.1 of the Rules), nor was there any discussion of the relevant principles which guide the exercise of the discretion to depart from that general rule. In those circumstances, those authorities are of limited assistance in determining the present issue.
The circumstances in which a Court may depart from the general rule were considered by Ipp JA (with whom Foster AJA agreed) in Arian v Nguyen (2001) 33 MVR 37; [2001] NSWCA 5 at [36] and following. His Honour made reference to (inter alia) the long standing rule that, subject to certain limited exceptions, a successful party in litigation is entitled to an order for costs. His Honour made reference to the decision of McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97; [1998] HCA 11 where reference was made to the fact that the traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. His Honour went on to say (at [38]): 38] It is rare for a successful party who is guilty of misconduct in the litigation to be ordered to pay the unsuccessful opponent's costs where the misconduct does not lengthen the proceedings unnecessarily, cause unnecessary issues to be canvassed or otherwise cause the costs of the litigation to be increased. Indeed, the court's entitlement to depart from the usual order that costs follow the event has sometimes been said, in effect, to be subject to the qualification that the misconduct in question occasioned unnecessary litigation and expense (see Huxley v West London Extension Railway Company (1899) 14 App Cas 26 at 32-33 per Lord Halsbury LC; Ritter v Godfrey [1920] 2 KB 47 per Atkin LJ at 60). In other cases, however, this qualification has not been mentioned: see for example Donald Campbell & Co v Pollak [1927] AC 732 at 811-812; Thorne v Doug Wade Consultants Pty Ltd [1985] VicRp 48; [1985] VR 433 at 500; Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 271-272; Re Elgindata Limited (No 2) (supra). On balance, it seems to me that while delay and increased expense brought about by improper conduct in the course of the litigation are highly relevant factors in the discretion to depart from the usual order as to costs, they are not essential to the exercise of that discretion. It would, in any event, be very unusual for misconduct of that kind not to cause unnecessary delay and expense." (emphasis added).
In Permanent Custodians Limited v El Ali (No. 2) [2008] NSWSC 1391 Rothman J found that the failure to file a defence constituted misconduct of the kind to which Ipp JA referred, such that the appropriate exercise of the discretion was to order that the successful defendant on an application to set aside judgment pay the plaintiff's costs. Whether such a failure will, in every case, constitute relevant misconduct is a matter about which I have some doubt, although it is not necessary for me to resolve that question. Even if it were accepted that it did, I am not satisfied that in the present case it has been productive of the delay and expense of which Ipp JA spoke. In my view, any delay and expense is properly viewed as emanating from the decision of the plaintiff to oppose the defendants' applications.
Put simply, the defendants made applications to set aside the respective judgments, and the plaintiff chose to oppose those applications. The defendants were successful. In my view, there are no circumstances which justify a departure from the general rule.
Accordingly I make the following orders: 1. In proceedings 2015/337145 the plaintiff is to pay the costs of the first and second defendants of the notice of motion, as agreed or assessed. 2. In proceedings 2015/337116 the plaintiff is to pay the costs of the defendant of the notice of motion, as agreed or assessed.

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