Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd

2 In 2002, Bodycorp Repairers Pty Ltd ('the applicant') commenced a proceeding in the Federal Court, relevantly alleging breach of contract by Mr Anuniziato Enzo Maisano ('the Maisano proceeding'). That proceeding was transferred to the Supreme Court in 2005. Oakley Thompson & Co Pty Ltd ('the respondent') acted as Mr Maisano's solicitors in the proceeding.

3 Ultimately, the applicant was unsuccessful in the Maisano proceeding.[2] Mr Maisano obtained costs orders against the applicant. He then commenced a proceeding for a taxation of costs against the applicant in the Costs Court ('the costs proceeding'). An appeal from the decision of the trial judge in the Maisano proceeding was dismissed,[3] as was an application for special leave.[4]

4 While the costs proceeding remained part heard, Mr Maisano terminated his retainer with the respondent. Fees owing to the respondent remained outstanding. The respondent applied by originating motion for orders allowing it to pursue the taxation of costs in the Costs Court in Mr Maisano's place. Elliott J granted declaratory relief to the effect that the respondent had an equitable right over the costs judgment against the applicant in favour of Mr Maisano and that it was entitled to have the costs order in favour of Mr Maisano taxed.[5] He explained the effect of those conclusions as follows:[6]

In light of the answers to the questions above, it is entirely appropriate for the court to permit Oakley Thompson to complete the part-heard taxation in the Costs Court Proceeding against Bodycorp (and adopt what has occurred so far). The long line of authorities demonstrate that, in appropriate circumstances, courts will grant relief to facilitate solicitors being duly remunerated from the proceeds of a judgment obtained based on the exertions of the solicitor. ... That said, generally speaking, the court should do no more than is necessary to safeguard the solicitor's equitable right.

However, given the complete breakdown in the relationship between Oakley Thompson and Maisano, it would not be appropriate for Oakley Thompson to continue to prosecute the Costs Court Proceeding on behalf of Maisano. Such a position would be entirely unsatisfactory and could give rise to many issues, including the inability of Oakley Thompson to obtain satisfactory instructions from Maisano concerning issues which may arise in the Costs Court Proceeding.

Accordingly, any relief granted by the court must be confined to Oakley Thompson assuming responsibility in its own right for the prosecution of the part-heard taxation in the Costs Court Proceeding. That will have the result that Oakley Thompson, itself, will be exposed to the possible consequences of Oakley Thompson being a litigant.

Furthermore, given the manner in which the issues have arisen in this proceeding, it is appropriate that the relief granted by the court includes declaratory relief. ...

By way of preliminary observation, it appears appropriate that, if Oakley Thompson were to apply to be added as a plaintiff in the Costs Court Proceeding as a result of the declaratory relief granted in this proceeding, then rather than seeking to have Maisano cease to be a party, he ought to be joined as a defendant, as a necessary party. If that course were adopted, it would be a matter for Maisano as to whether he wanted to take any active part in the further hearing of the taxation. Of course, it would also have the consequences that: (1) Maisano will be bound by the outcome of the Costs Court Proceeding; and (2) the Costs Court Proceeding could not be finally settled on all issues without the agreement of Maisano. The parties can be heard as to this issue in due course.

5 By a subsequent application, the respondent sought an order substituting itself for Mr Maisano as plaintiff in the costs proceeding, in order that it could pursue the taxation of costs for itself. That order was not made, because Mr Maisano wished to prosecute the taxation of costs on his own behalf. Elliott J therefore ordered on 24 July 2015 that the respondent be joined as a defendant in the costs proceeding. He said that the respondent would:[7]

be entitled to advance its position as a person having an equitable right over the costs judgment, whether or not that right aligns with the position adopted by Maisano. To that end, Oakley Thompson may file a short points of claim or a short affidavit to state its position clearly. There is no need for formal pleadings on such a simple matter. Precisely the means by which Oakley Thompson's position is to be stated is a matter for the Costs Court.

6 When Elliott J made the above order, the respondent gave an undertaking that it agreed that any amount that the applicant was ordered to pay would be paid into court and that it would not seek payment to itself except by order of the court.

7 The taxation of costs took place before Gourlay JR. The respondent was awarded $233,588.68 in costs.[8] An appeal by Mr Maisano and the applicant was dismissed by Wood AsJ.[9]

8 After the orders of Gourlay JR were made, in a letter which was accompanied by a statutory demand the respondent sought payment to its trust account of the costs awarded.

9 Mr Maisano and the applicant made applications seeking orders that the respondent be dealt with for contempt of court. They alleged that the contempt consisted in prosecuting the taxation of costs, thereby breaching the undertaking recorded in Elliott J's orders of 24 July 2015, and in making demand for payment of costs to its trust account. Those applications were dismissed by Keogh J on 27 April 2016. The applicant seeks leave to appeal that decision.

10 The respondent, as mentioned, seeks security for its costs of the application for leave to appeal. It does so pursuant to r 64.38(2) of the Supreme Court (General Civil Procedure Rules) 2015 and/or s 1335(1) of the Corporations Act 2001 (Cth). It also seeks orders that the application for leave to appeal be stayed until security is given, that the proceeding be dismissed if the applicant fails to comply with the order to provide security within the time specified in the order and that the applicant pay the respondent's costs of the application.

11 The solicitor for the respondent (being himself a principal of the respondent firm) swore an affidavit on 10 June 2016 in support of the application. He deposes that on 30 May 2016 he wrote to the solicitor for the applicant seeking the payment of $20,000 by way of security for its costs. The letter estimated the applicant's costs of the application for leave to appeal at $28,285. That total was broken down into 8 categories, the largest of which were:

(a) research, preparation, filing and service of case in response, commenting on and replying to summary of facts (inclusive of counsel fee $5,500): $8,250;

(b) research of authorities and preparation of list of authorities and extrinsic materials (inclusive of counsel fee $2,750): $4,400; and

(c) preparation for and appearance at hearing for counsel and instructing solicitor (estimate 1 day) (inclusive of counsel fee $5,500): $9,900.

Evidently, the estimate proceeds on the sensible assumption that the application for leave is likely to be heard at the same time as argument on any appeal, and that the whole matter will be prepared accordingly.

12 The affidavit states that numerous successful applications for security for costs have been made against the applicant. In particular, on 18 February 2016 the Court of Appeal made an order for security for costs in the sum of $40,000 in a separate appeal between the same parties,[10] and on 12 May 2016 Daly AsJ made a security for costs order in the sum of $20,000.

13 The solicitor's affidavit exhibits his earlier affidavit sworn 28 September 2015 in respect of the previous application for security. The respondent conducted a further company search of the applicant on 10 June 2016, which did not show any material change in its financial position from previous applications. In short, the material reveals that the applicant has a share capital of $100 and no material assets. The respondent's solicitor swears to his belief that the applicant is impecunious, having neither the assets nor income to satisfy any adverse costs order that might be made in the proceeding.

14 The affidavit, like the 30 May letter, estimated the costs of opposing the application for leave to appeal at $28,285.

15 The applicant filed written submissions in response but did not file any supporting affidavit.

16 The applicant relies on three matters in support of its submission that the application should be refused. First, it claims that the applicant has issued proceedings against its former solicitors (Holding Redlich) alleging the provision of negligent advice. Secondly, it notes that the respondent has sought to enforce the costs order against the applicant in the Maisano proceeding, which is said to show that the respondent believes that the individuals behind the applicant have the capacity to pay those costs and will do so if required. Thirdly, it submits that there was a relationship between the trial judge and the respondent that needs to be adjudicated upon to maintain confidence in the administration of justice. That relationship, it is said, can be proved if the applicant is permitted to adduce further evidence.

17 Alternatively, the applicant contends that the Court should accept an undertaking from the director of the applicant to be personally liable to pay the applicant's costs of the appeal.

18 Finally, the applicant contends that the estimate of costs provided by the respondent is excessive and lacks sufficient particularisation.

19 The power of the Court to order security for costs involves an exercise of discretion. Various factors have been identified as relevant to the exercise of that discretion, including the prospects of success of the appeal, the magnitude of risk that a costs order would not be satisfied, whether the making of the order would be oppressive in that it would stifle a reasonably arguable claim, whether any impecuniosity of the appellant arises out of the conduct complained of in the proceeding, and whether there are aspects of the public interest which ought to be weighed in the balance.[11]

20 The material relied on by the respondent establishes a solid foundation for its solicitor's belief as to the impecuniosity of the applicant. Although the property search relied on is not current, no reason appears for thinking that the circumstances of the applicant have changed in any material way since September 2015 or since the various other orders for security for costs were made. Nor did the applicant advance any evidence to suggest that it would be able to meet an adverse costs order. The Court cannot act on its mere assertion that it has a valuable cause of action against other solicitors. Even if so, of itself that would not change its current financial position.

21 Nor is the fact that the respondent is pursuing the applicant for its costs judgment pertinent. Reliance on that fact falls very far short of establishing that the applicant or persons standing behind it will be able to meet any costs order.

22 Next, in my opinion the asserted public importance of the proposed application for leave to appeal does not weigh heavily in the balance. It is apparent from the written submissions filed on behalf of the applicant that it intends to raise an argument of apprehended bias as a proposed ground of appeal.[12] There is plainly a public interest in claims of that kind being heard and determined. But that is still only one factor in the balancing exercise. In the present case, the applicant has not suggested that, if security is ordered, the application will not proceed and the question of public interest will be left unresolved. To the contrary, it is implicit in the applicant's submissions that its director intends to fund the application. The applicant simply contends that there is a 'public element' to the proposed appeal. While that may be accepted, ordering security would seem unlikely to alter the position and it is therefore not appropriate to give the public interest any significant weight in the present application.

23 Finally, the suggested undertaking by the director of the applicant that he be personally liable to pay costs is not a bar to ordering security. There is no material before the Court by reference to which the value of any such undertaking could be ascertained, even if it were otherwise thought appropriate to adopt that course. To proceed on the basis of such an undertaking would therefore not address the risk to the respondent which security for costs is intended to ameliorate.

24 For the above reasons, the orders sought by the respondent should be made. The remaining issue concerns the amount of security.

25 The applicant contends that the respondent's estimate of $5,500 per day for costs of counsel is excessive. The total counsel fees are estimated at $14,300, largely reflected in a one day hearing and preparation of the written case and associated research. That does not appear excessive in light of the complicated background to this proceeding. The fact that 'research' is not particularised is not significant. Inevitably, there will be legal issues to be researched in the course of preparation. It may be that the applicant is on firmer ground in highlighting that the respondent is acting on its own behalf in the proceeding and therefore is not entitled to an appearance fee for appearing to instruct. It is not necessary to decide that issue, however, because the amount of security sought is substantially less than the solicitor's estimate. Even if the $4,400 amount for instructing were deducted, the total figure would still be $23,885 which I find to be a reasonable estimate of the respondent's likely costs.

26 It will therefore be ordered pursuant to r 64.38(2) that:

(1) The applicant provide security for the respondent's costs of the application for leave to appeal, in the sum of $20,000 by payment into court to the Senior Master or in any other form satisfactory to the registrar of the Court of Appeal.

(2) Subject to order (3), the application for leave to appeal be stayed pending the provision of security.

(3) If security is not provided by 1 September 2016, the application for leave to appeal shall be dismissed.

(4) The costs of the application for security for costs be costs in the application for leave to appeal and, if leave is granted, the appeal.

[1] The application was referred by the Registrar for hearing by a single judge under r 64.15.

[2] Bodycorp Repairers Pty Ltd v Maisano (No 8) [2013] VSC 472.

[3] Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd [2015] VSCA 73.

[4] Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd [2016] HCASL 24.

[5] Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210.

[6] Ibid [116]-[120] (citations omitted).

[7] Maisano v Bodycorp Repairers Pty Ltd (No 2) [2015] VSC 365 [16].

[8] Elliott J had ordered that the amount of any costs order in the costs proceeding be paid to the respondent and not Mr Maisano: Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210 [137].

[9] Maisano v Bodycorp Repairers Pty Ltd (No 2) [2016] VSC 92.

[10] Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [2016] VSCA 19.

[11] Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2015] VSCA 169 [11] (Tate and McLeish JJA); Maher v Commonwealth Bank of Australia [2008] VSCA 122 [80] (Dodds-Streeton JA; Redlich JA agreeing).

[12] Strictly speaking, all that is before the Court on the present application is the assertion that there was a relationship between the trial judge and the respondent that needs to be adjudicated upon. However, the applicant has filed the material on which it seeks to rely in respect of this ground and I have read it for the purposes of this application.