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

Court of Appeal (Vic)|2016-02-18|Before: Osborn JA, Elliott J, Tate JA

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

PRACTICE AND PROCEDURE - Stay - Application for a stay of a judgment allowing solicitor to tax costs - Application for leave to appeal yet to be heard - Whether prejudice suffered by the applicant if judgment not stayed - Whether prejudice to respondent if execution of judgment not permitted - Application refused.

PRACTICE AND PROCEDURE - Security for costs - Application for security for costs - No apparent material assets - Frequent previous security for costs orders made - Application granted.

1 In this matter I invite Osborn JA to deliver the first judgment.

2 In this matter, Bodycorp Repairers Pty Ltd ('Bodycorp') seeks to stay orders made by Elliott J pending the determination of an application for leave to appeal and if leave is granted, a proposed appeal against such orders.

3 Oakley Thompson seeks an order that Bodycorp provide security for costs in respect of the proposed appeal pursuant to r 64.38(2), alternatively s 1335(1) of the Corporations Act 2001 (Cth).

4 Application has also been made by Bodycorp for leave to appeal Elliott J's orders but that application is not before the Court today.

5 The Court has, this morning, permitted Mr Murdaca, a director of Bodycorp, to appear before it on behalf of the company. It has taken this course having regard to the limited nature of the applications before it this morning, the evidence that the company's legal practitioner is unwell and the need to expedite these interlocutory applications in fairness to Oakley Thompson.[1]

6 In 2002, Bodycorp commenced proceedings in the Federal Court ('the Bodycorp proceeding'). Annuziato Enzo Maisano ('Maisano') was one of the defendants. Bodycorp alleged that Maisano breached a franchise agreement.

7 In 2005, the Bodycorp proceeding was transferred to the Supreme Court of Victoria.

8 During the course of the Bodycorp proceeding, several orders were made for security for Maisano's costs. In total, the security for costs which Bodycorp was ordered to provide in favour of Maisano was $56,400.

9 Oakley Thompson represented Maisano in the Bodycorp proceeding between 2004 and 2010.

10 After ceasing to act for a period, Oakley Thompson recommenced acting for Maisano in the Bodycorp proceeding in March 2012 and continued to so act until after the completion of the trial of the Bodycorp proceeding.

11 Bodycorp was unsuccessful in the Bodycorp proceeding and Maisano obtained orders for his costs against it.

12 Pursuant to these orders, Maisano commenced proceedings in the Costs Court in order to tax his costs.

13 Bodycorp appealed aspects of the decision in the Bodycorp proceeding but that appeal was dismissed.[2] Application has since been made to the High Court for special leave to appeal that dismissal.

14 Maisano terminated his retainer of Oakley Thompson without paying fees due to them by him. Oakley Thompson applied by originating motion for orders allowing it to pursue the taxation of costs in the Costs Court. Both Bodycorp and Maisano opposed this application.

15 The proceeding was heard before Elliott J in May 2015 and judgment was delivered on 30 June 2015. Elliott J made orders to the following effect on 24 July 2015:

(1) The plaintiff ('Oakley Thompson') has an equitable right over the costs judgment awarded in favour of the first defendant ('Maisano') in the order of court made on 4 September 2013 ('the Costs order') in the proceeding, such right being security for payment to Oakley Thompson by Maisano of all costs and disbursements of, and incidental to, legal services rendered by Oakley Thompson to Maisano in the proceeding, being costs and disbursements due and remaining unpaid.

(2) Oakley Thompson is entitled to have the costs, ordered in favour of Maisano in the costs order, taxed.

(3) The taxation assessments completed by the Costs Court in the Costs Court proceeding in the hearings of 5 and 6 August 2014 are not invalid by reason of Oakley Thompson appearing at those hearings on behalf of Maisano.

(4) Maisano and Bodycorp jointly pay Oakley Thompson's costs of this proceeding, including any reserved costs (except for any costs arising out of Bodycorp's applications for the judge to recuse himself for which Bodycorp was ordered to pay Oakley Thompson's costs of such applications) to be taxed in default of agreement.

(5) There is liberty to apply.

16 Bodycorp (but not Maisano) now seeks leave to appeal these orders on grounds which, in large part, reiterate contentions advanced before the trial judge.

17 On their face, his Honour's reasons are careful and comprehensive and deal with the issues between the parties under some 17 headings:

Does Oakley Thompson have an equitable lien (fruits of litigation) over the costs judgment awarded in favour of Maisano in the order of the court made on 4 September 2013 in the Bodycorp Proceeding ('the Costs Judgment')?
Whether Oakley Thompson agreed with Maisano to cap its claim for costs and disbursements (inclusive of counsel's fees) in the amount of $80,000.
Did Oakley Thompson have the authority to engage counsel (for an amount of more than $20,000) on behalf of Maisano in the Bodycorp Proceeding?
Did Oakley Thompson provide costs disclosure to Maisano in accordance with the provisions of the Legal Profession Act 2004 (Vic)?
Did Oakley Thompson provide a bill to Maisano in accordance with the Legal Profession Act?

6 The Legal Profession Act - further matters

Did Oakley Thompson have the right to obtain the sum of $56,400 that was being held as security for costs, when Oakley Thompson was not retained by Maisano?
Does the court have the power in equity to make orders to regularise a common law contractual claim?
In the circumstances of this case, should the court provide equitable relief to Oakley Thompson in the exercise of the court's discretion?
Does the court have the capacity to supervise Oakley Thompson in the exercise of its functions as a solicitor to Maisano?
Does Oakley Thompson have the capacity to meet a substantial judgment against it? If not, is that fact relevant to any exercise of the court's discretion?
Is there a relationship of mutual trust and confidence between Oakley Thompson and Maisano? If not, is that fact relevant to any exercise of the court's discretion?
If yes to issue G.1 above, and in light of the answers to issues G.2 to G.12 above, does the lien entitle Oakley Thompson to:

(a) complete the part-heard taxation in the Costs Court Proceeding (and to adopt what has occurred so far in that taxation); or

(b) have the Costs Judgment taxed in its own name?

If yes to issue G.13 above, and after any taxation of the Costs Judgment has been completed, what steps is Oakley Thompson entitled to take to enforce the quantified costs order against Bodycorp, and Murdaca and Repose, pursuant to the respective undertakings as to costs given by them in the course of the Bodycorp Proceeding?

15 The debt recorded in Oakley Thompson's records

16 Issues of credit

17 Undertakings to the court by Oakley Thompson

18 There are, in turn, some 13 grounds of appeal (omitting particulars):

GROUND 1

The Trial Judge failed to make a decision on whether equity would enforce the judgment dated 4 September 2013 in so far as it related to costs (hereafter called the costs judgment) as it was vitiated by fraud.

GROUND 2

The Trial Judge erred in holding that a solicitor with an equitable fruits of litigation lien was entitled by virtue of that lien to enforce it.

GROUND 3

The Trial Judge demonstrated a reasonable apprehension of bias, and he should have disqualified himself, from the further hearing of the proceeding.

GROUND 4

The Trial Judge erred in holding that the deed of charge dated 2 May 2013 did not limit the total costs payable for the reasons particularised below.

GROUND 5

The Trial Judge erred in holding that the Respondent provided proper costs disclosure to Mr Maisano, when there was no updated estimate provided prior or even during the trial, that the costs would be in the sum of $300,000 (which was the sum is alleged to be due and owing).

GROUND 6

The Trial Judge erred in holding that the Respondent was entitled to be paid their costs when they had failed to make proper cost disclosure.

GROUND 7

The Trial Judge failed to provide proper written reasons for his decision in respect of the matters particularised below herein.

GROUND 8

The Trial Judge palpably misused his advantage in assessing the credibility of Mr Maisano.

GROUND 9

The Trial Judge erred in permitting the Respondent to recover costs, when their trust ledger showed that there was only $145.85 due and owing.

GROUND 10

The Trial Judge erred in failing to draw an inference from the failure of the Respondent to call Maisano's counsel in the costs proceeding.

GROUND 11

The Trial Judge erred in failing to find that the letter of termination dated 28 July 2015 was not sent to the Respondent.

GROUND 12

The Trial Judge erred in making orders that concerned the conduct of the taxation of costs in that proceeding.

GROUND 13

The Trial Judge erred in failing to apportion the costs in the proceeding.

19 The application for leave to appeal categorises the alleged errors made by the trial judge under following headings:

2.1 Lack of a fair hearing due to apprehended bias.

The conduct of the proceedings was permeated by conduct giving rise to an apprehension of bias towards the Applicant so as to deny the Applicant a fair opportunity to present its case. The Applicant will argue that on appeal that the Trial Judge was hearing a contested hearing resulting from costs orders made by him, in Supreme Court proceeding no 9071 of 2005, and that he explicitly disregarded to make a decision on the validity of the costs orders on the basis that the evidence that had been adduced before him had been untrue.

2.2 Failure to properly interpret the law

The Trial Judge failed to properly interpret the case law on a fruits of litigation lien and made an erroneous finding that a solicitor had a right to be a party to a proceeding in which the lien was being assessed in a taxation.

2.3 Failure to properly construe a deed of charge

The Trial Judge failed to properly construe the deed of charge, which is an error of law, and he took into account inadmissible evidence of the pre-contractual negotiations between the parties in doing so. He also failed to take into account that the deed of charge constituted a cost agreement that bound the Respondent even though it was made with a third party payee.

2.4 Failure to properly apply the Legal Profession Act

The Legal Profession Act requires that a solicitor provide disclosure of any material change in the estimate of costs payable (s 3.4.9 and s 3.4.16), which did not occur, as the bill sought to be taxed was in the vicinity of $300,000 whilst the estimates of costs were in the vicinity of $120,000 to $150,000. The failure of the solicitor to provide proper costs disclosure precludes them from obtaining an order that the costs be paid to them, until a taxation of solicitor client costs has been undertaken (s 3.4.17).

20 It is not appropriate at this stage to attempt a preliminary analysis of the relative strength of these grounds but, in my view, his Honour's reasons do not themselves demonstrate obvious error.

21 I turn then to the stay application. Bodycorp seeks to stay Elliott J's orders of 24 July 2015 on the basis that it will allegedly suffer irremediable prejudice if Oakley Thompson is permitted to complete taxation of the costs order made in favour of Maisano and obtain the fruits of that taxation. In particular, it is submitted that Bodycorp will incur liability for costs that may be irrecoverable if the appeal is successful. Bodycorp's written submission states:

The respondent therefore will be entitled to have costs incurred as a matter of right, the parties will incur further costs (and will tie up judicial resources) that will be wasted, if the appeal is successful and which will be likely to be irrecoverable (s 64.25(b) of the Supreme Court Civil Procedure Rules [sic]) .

22 Oakley Thompson opposes the stay. It joins issue with the basis of the claim of prejudice and submits that, if the stay is granted, it will be unfairly prejudiced.

(1) Insofar as Bodycorp raises the question of the costs of the completion of a hearing with respect to the taxation of costs before a Judicial Registrar of this Court, we were this morning advised that the taxation has now in fact been completed.

(2) The underlying liability of Bodycorp to pay Maisano's costs was capable of challenge before the Court of Appeal and was not so challenged in the appeal with respect to the Bodycorp proceeding.

(3) There is no obvious error in the decision of Elliott J now sought to be appealed.

(4) If Bodycorp is granted leave to appeal and if it succeeds in that appeal, the Court of Appeal will have power to award costs thrown away by reason of the unauthorised taxation and to order restitution of costs paid to Oakley Thompson by Bodycorp. The rules of Court do not inhibit these discretionary powers. In particular, r 64.39(b) (upon which I take Bodycorp to place reliance in its written submissions), does not inhibit these powers.

(5) There is, in my view, no real prospect that Bodycorp will be rendered unable to recover those costs from Oakley Thompson if the appeal succeeds.

(6) On the other hand, the financial status of Bodycorp, which is discussed further below, is such that there is a real risk that delay will deprive Oakley Thompson of the fruits of the judgment it has obtained if it is not permitted to complete the taxation of the costs in issue.

24 At one stage in the course of submissions this morning, Mr Murdaca stated, 'Bodycorp is not going anywhere until this litigation is finished'. His statement reinforces the position taken by Oakley Thompson.

25 I am fortified in these conclusions by the reasons given by Elliott J in respect of issue 11 determined by him relating to the creditworthiness of Oakley Thompson. That issue was:

G:11 Does Oakley Thompson have the capacity to meet a substantial judgment against it. If not, is that fact relevant to any exercise of the court's discretion.

This question was raised by Bodycorp on the basis that, if Oakley Thompson were to prosecute the Costs Court proceeding in the future, there was a prospect that a costs order or some other judgment might be made against Oakley Thompson. Bodycorp submitted the Court should be satisfied Oakley Thompson would have the financial capacity to meet any such order or judgment.

However, no submissions were made on behalf of the defendants in closing concerning the capacity or otherwise of Oakley Thompson to meet a substantial judgment against it. Further, there was no evidence before the Court as to the current financial position of Oakley Thompson.

Accordingly, the Court is not in a position to find one way or the other as to whether or not Oakley Thompson presently has the capacity to meet any substantial judgment against it.

That said, the history of both this proceeding and the Bodycorp Proceeding has demonstrated a capacity on the part of Oakley Thompson to advance its own case and Maisano's case respectively from its own resources. There is no suggestion that Oakley Thompson does not have the financial capacity to prosecute the proceeding to enforce its equitable right as it seeks to do. Equally, there is no basis to conclude that Oakley Thompson would not be able to meet any costs order or other possible judgment that might be made against it in the future of the Costs Court Proceeding.[3]

28 There are no special circumstances justifying departure from the presumption that an appeal should not ordinarily deprive a successful litigant of the fruits of litigation by operating as a stay of execution.[4]

29 Furthermore, the balance of convenience does not favour the grant of a stay.

30 In so concluding, I accept that, when factual matters are put in issue upon an appeal, the Court, when considering a stay application, will generally focus on the matters related to the enforcement of the judgment rather than matters related to its validity or correctness.[5] Nevertheless, for the reasons explained above, the application for a stay is premised upon a hypothetical risk which I do not accept as having probable substance and is counterbalanced by the risk of real prejudice to Oakley Thompson if the stay is granted.

31 Accordingly, the application for stay will be refused.

32 Oakley Thompson seeks an order for security for costs pursuant to r 64.38(2) of the Supreme Court (General Civil Procedure) Rules 2015 or alternatively, as I said, pursuant to the Corporations Act 2001 (Cth). The application is made on the grounds of the probable inability of Bodycorp to pay the costs of the appeal if it is unsuccessful.

33 Oakley Thompson relies on the considerations identified by Smart J in the case of Sydmar Pty Ltd v Statewise Development Pty Ltd.[6]

34 The affidavit material filed on behalf of Oakley Thompson demonstrates that:

(a) company and property searches indicate Bodycorp has no material assets;

(b) Bodycorp has been the subject of a series of orders for security for costs in the proceedings related to this matter and has consistently failed to demonstrate that it should not be the subject of orders for security for costs;

(c) on the appeal brought by Bodycorp in the underlying proceeding, Bodycorp gave security for costs in accordance with an order made by consent on 6 November 2013; and

(d) there is no evidence that Bodycorp's financial position has materially changed.

35 No answering material has been filed by Bodycorp demonstrating a capacity to pay costs if the appeal is unsuccessful.

36 In my view, Oakley Thompson has established special circumstances justifying an order requiring Bodycorp to give security for costs.

37 Mr Murdaca has, this morning, raised various grievances concerning the history of these proceedings but none of them goes relevantly to the critical question that governs the discretion as to whether security for costs should be provided, namely whether special circumstances exist because of Bodycorp's lack of apparent resources.

38 An affidavit filed on behalf of Oakley Thompson estimates the costs of contesting the leave application at $57,000 and of resisting the stay application at $24,000. No opposing estimates have been made on behalf of Bodycorp.

39 Nevertheless, having carefully considered the stated basis of the estimates, I would require Bodycorp to give security for costs in the sum of $40,000. I am influenced in this regard by the fact that the appeal substantially seeks to re-ventilate the matters canvassed at trial.

(1) Bodycorp's application for a stay of the orders of Elliott J made on 24 July 2015 be dismissed.

(2) Bodycorp provide security for the respondent Oakley Thompson's costs of the application for leave to appeal and, if leave is granted, the appeal in the sum of $40,000 by payment into court to the Senior Master or in any other form satisfactory to the Registrar of the Court of Appeal.

(3) Subject to order 4 hereof, the application for leave to appeal be stayed pending the provision of security.

(4) In the event that security is not provided by 18 March 2016, the application for leave to appeal should be dismissed with costs.

(1) Bodycorp's application for a stay of the orders of Elliott J made on 24 July 2015 be dismissed.

(2) Bodycorp provide security for the respondent Oakley Thompson's costs of the application for leave to appeal, and if leave is granted, the appeal, in the sum of $40,000 by payment into court to the Senior Master or in any other form satisfactory to the registrar of the Court of Appeal.[7]

(3) Subject to order (4) hereof, the application for leave to appeal be stayed pending the provision of security.

(4) In the event that security is not provided by 18 March 2016, the application for leave to appeal shall be dismissed with costs.

(5) The costs of today's applications be costs in the application for leave to appeal and, if leave is granted, the appeal.

[1] See Supreme Court (General Civil Procedure) Rules 2015 r 1.17; Lettieri v Strangio [2008] VSCA 205 [3]-[5].

[2] Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurances Ltd [2015] VSCA 73.

[3] Oakley Thompson & Co Pty Ltd v Maisano [No 2] [2015] VSC 210 [110]-[113].

[4] Neate v Thoroughbred International Marketing [2012] VSCA 65; (2012) 34 VR 318; Saville v Hallmarc Construction Pty Ltd [2015] VSCA 144 [17]-[19].

[5] Neate v Thoroughbred International Marketing [2012] VSCA 65; (2012) 34 VR 318, 320-1 [8].

Supreme Court (General Civil Procedure) Rules 2015

Court (General Civil Procedure) Rules 2015

At a glance

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Judgment (76 paragraphs)

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