The Court is in the unfortunate position of having to decide costs issues in two proceedings that were determined by another judge. That is unfortunate because the decisions must be made without any working familiarity with the course of the proceedings.
The costs issues have arisen in two proceedings among the significant number of claims that have been litigated between the two parties, being Chateau Constructions (Aust) Ltd (Chateau) on the one hand, and Dr Vitomir Zepinic, his wife Milla and their daughter, Nina, on the other hand. I will use the expression "the Zepinics" to refer to whichever members of the Zepinic family are parties to particular proceedings. Chateau should, however, in preparing the short minutes of order to which I refer below ensure that each order refers to the correct members of the family.
On 5 September 2016, Pembroke J published reasons for judgment in Zepinic v Chateau Constructions (Aust) Ltd, being proceedings 2016/097515 in this Court: [2016] NSWSC 1254. On 25 May 2017, his Honour delivered further reasons for judgment in those proceedings, and also proceedings Chateau Constructions (Aust) Ltd v Zepinic, being proceedings 2009/290598: [2017] NSWSC 582. I will call the two proceedings the 2009 and the 2016 proceedings by reference to the year in which they were commenced. I will call Pembroke J's two judgments the 2016 and the 2017 judgments respectively.
The history of the whole of the dispute between the parties, and even the histories of the 2009 and the 2016 proceedings, are beyond the scope of these reasons, and have been dealt with at length in other judgments, including the judgments published by Pembroke J.
It is sufficient for present purposes to note that the 2009 proceedings arose out of a building contract between Chateau as builder and Dr and Mrs Zepinic as owners, which led to a substantial judgment being given by the then Consumer, Trader and Tenancy Tribunal in favour of Chateau against the Zepinics. The 2009 proceedings were commenced by Chateau in order to obtain orders for the judicial sale of the property the subject of the building contract in order to enforce a charge granted by the Zepinics to secure Chateau's rights arising under the building contract. Chateau succeeded in the proceedings, a trustee for sale of the property was appointed, the property was sold to a third party, and the third party became registered as the proprietor of the property.
In summary, the 2016 proceedings were commenced by Dr and Nina Zepinic in order to establish that the original real owner of the property was not Dr and Mrs Zepinic, but their daughter Nina. In essence, the plaintiffs in the 2016 proceedings sought orders which if granted would undo the effect of the 2009 proceedings, even though the 2009 proceedings had proceeded to final judgment and that judgment had been implemented in a way that had led to a third party purchaser of the property without any notice of the Zepinics' claims becoming its registered proprietor.
It is also material that in association with the commencement of the 2016 proceedings, Dr Zepinic filed a notice of motion in the 2009 proceedings in which he sought sundry orders that also would have had the effect of undoing the consequences of the earlier orders in favour of Chateau in the 2009 proceedings, including the sale of the property to the third party purchaser. Dr Zepinic also sought the payment of compensation for breach of the building contract and costs incurred as a result of Chateau's original claim.
The effect of the 2016 judgment was that Pembroke J dismissed the 2016 proceedings. He also made an order dismissing the Zepinics' notice of motion filed on 8 June 2016. There is some scope for confusion here, and the confusion might be mine. The 8 June 2016 notice of motion was filed by Dr and Nina Zepinic in the 2016 proceedings, and sought an order setting aside the contract for the sale of the property, consequential orders for the delivery of vacant possession of the property, and the payment of large sums of money by Chateau. As I have mentioned above, Dr Zepinic had earlier filed a different motion on 13 May 2016 in the 2009 proceedings which sought comparable but differently worded orders. It appears from the face of the 2016 reasons for judgment that Pembroke J gave that judgment only in the 2016 proceedings. Indeed, at par [3] Pembroke J commented that he had two applications before him. One was a notice of motion filed on 3 June 2016 by Chateau seeking summary dismissal of the proceedings. The second was a notice of motion filed by Dr Zepinic on 8 June 2016 as a response to Chateau's notice of motion. It therefore seems clear from Pembroke J's point of view that he was dealing with the 8 June 2016 notice of motion.
The reason that I have suggested that there is some confusion is that one of the applications made by Chateau that I am required to decide arises out of Chateau's notice of motion filed on 28 September 2016, by which it seeks an order that Dr Zepinic pay Chateau's "costs of and incidental to [Dr Zepinic's] notice of motion filed on 13 May 2016".
It therefore appears that Chateau misunderstood the subject-matter dealt with by Pembroke J in the 2016 judgment. That misunderstanding is to some degree understandable because the 13 May 2016 notice of motion in the 2009 proceedings and the 8 June 2016 notice of motion in the 2016 proceedings substantially overlapped in respect of the orders that they sought.
It may be that the misunderstanding does not matter, as it seems clear from the 2016 judgment that Pembroke J would have dismissed the 13 May 2016 notice of motion for the same reasons that he did dismiss the 8 June 2016 notice of motion. I propose to proceed to consider the issues raised by Chateau's 28 September 2016 notice of motion as if the two notices of motion filed by the Zepinics were interchangeable. It is sufficient for present purposes to note that in the 2016 judgment Pembroke J reserved costs.
The 2017 judgment was given in both the 2009 and the 2016 proceedings, and in essence concerned separate notices of motion filed by Chateau in each proceeding in which it sought orders from the Court under s 8(7)(a) and (b) of the Vexatious Proceedings Act 2008 (NSW) against Dr and Mrs Zepinic, staying all proceedings relating to various enumerated proceedings in different tribunals and the property; as well as prohibiting Dr and Mrs Zepinic from instituting further proceedings in New South Wales relating to or arising out of the enumerated proceedings and issues.
Chateau filed separate notices of motion in each of the 2009 and 2016 proceedings in which it sought vexatious litigant orders against Dr and Mrs Zepinic in mirror image terms. It has not been explained to me why orders under the Vexatious Proceedings Act were sought by Chateau in this duplicated manner.
By his 2017 judgment, Pembroke J made the vexatious litigant orders sought by Chateau in each of the two proceedings.
Chateau informed his Honour before he gave judgment that it intended to apply for costs on the indemnity basis and in a gross sum under s 98(4)(c) of the Civil Procedure Act (NSW). Apparently, Pembroke J's diary did not allow him to deal with the outstanding costs questions in the two proceedings in open Court at an early time, so his Honour made an order in the following terms: "In my absence, Chateau's application for costs on the indemnity basis and in a specified gross sum should be listed for hearing before another judge at a date to be fixed by the Registrar".
Orders were made from time to time for the case management of the outstanding costs questions, and eventually they came on before me sitting in the Applications List on 11 August 2017. Although it is ordinarily expected that the matters dealt with in that list will be decided in a relatively summary way, I felt obliged to reserve judgment because of the complexity of the issues and my relative ignorance of the course of the proceedings.
It should be recorded that Mr Loel, Chateau's solicitor, appeared for Chateau on both occasions before Pembroke J and before me on 11 August 2017. Dr Zepinic appeared before Pembroke J on 5 September 2016, but there were no appearances for the respondents to Chateau's notices of motion before Pembroke J on 9 May 2017 or before me on 11 August 2017.
The following motions are before the Court for determination:
1. Notice of motion in the 2009 proceedings in which Chateau claims an order that Dr Zepinic pay its costs of the notice of motion filed on 13 May 2016 on an indemnity basis and in a specified gross sum, together with interest under s 101(4) of the Civil Procedure Act. The total amount of the costs claimed is $12,703.92excluding GST (see Chateau's submissions on this notice of motion par 34).
2. Notice of motion in the 2016 proceedings in which Chateau claims an order that Dr Zepinic and his daughter pay its costs of the proceedings on an indemnity basis and in a specified gross sum, together with interest. The total amount of the costs claimed is $72,033.58 excluding GST (see Chateau's submissions on this notice of motion par 36).
3. Paragraphs 4 to 6 of a notice of motion in the 2009 proceedings in which Chateau claims an order that Dr and Mrs Zepinic pay its costs of the application for orders under the Vexatious Proceedings Act on an indemnity basis and in a specified gross sum, together with interest. The total amount of costs claimed is $66,855 excluding GST (see Chateau's submissions on this notice of motion par 36).
4. Paragraphs 4 to 6 of a notice of motion in the 2016 proceedings in which Chateau claims an order that Dr and Mrs Zepinic pay its costs of the application for orders under the Vexatious Proceedings Act on an indemnity basis and in a gross sum, together with interest. The total amount of costs claimed is $69,147.84 excluding GST (see Chateau's submissions on this notice of motion par 38).
The total amount of Chateau's costs that it claims is therefore $219,740.34. Chateau accepts that whether its costs are assessed on the indemnity or the ordinary basis, the amount that it has claimed must be discounted to reflect the probability that all of the costs incurred would not be allowed if it were necessary for the costs claims to be assessed. Nonetheless, it may be observed that in an absolute sense the total amount of costs incurred is surprisingly high, given that both hearings were completed in a single day each, and it does not appear that the application for orders under the Vexatious Proceedings Act was contested. (It is difficult to tell with confidence from a perusal of the Court's files, in the absence of submissions or experience of the course of the proceedings, but there does not appear to be any affidavits on the files made by the Zepinics contesting the applications under the Vexatious Proceedings Act).
At the hearing, Chateau read an affidavit of service sworn by Mr Loel on 10 August 2017. There is evidence of a street address given by Dr Zepinic in a notice of motion filed in the 2009 proceedings on 15 March 2016, and in another notice of motion filed in those proceedings Dr Zepinic gave an email address. Mr Loel gave evidence of serving the four notices of motion at the street address and by email addresses that have historically been addresses of the Zepinics. On the 25 May 2016, an offer of compromise was served by Chateau on Dr Zepinic and Nina at the street address and by the known email address, which prompted a response on 12 July 2016 from Dr Zepinic rejecting the offer. The letter contained a statement that Dr Zepinic's address for service was the street address used by Chateau. I am satisfied that the steps taken by Chateau to serve the notices of motion on the Zepinics, and also the steps taken by Chateau to inform the Zepinics of the outcomes of the various directions hearings that were held, were adequate service.
I will now deal with the merits of Chateau's claims in its four notices of motion.
It will be convenient at the outset for me to state the conclusions that I have reached, before I give my reasons.
1. First, as Chateau succeeded on each of the underlying applications, there is no reason why costs should not follow the event.
2. Secondly, I am satisfied that it will be appropriate for the Court to make a gross sum costs order in respect of each of the costs claims made by Chateau.
3. Thirdly, it is also appropriate that the Court order that interest be paid in relation to the costs that are ordered to be paid.
4. Fourthly, Chateau is entitled to its costs of the dismissal of the 2016 proceedings on the indemnity basis, and also in principle its costs of obtaining an order dismissing the associated notice of motion on the same basis, whether it be the notice of motion filed on 13 May or on 8 June 2016.
5. Fifthly, I am not satisfied that Chateau has established an entitlement to its costs of obtaining the orders under the Vexatious Proceedings Act on the indemnity basis.
6. Sixthly, in relation to the dismissal of the Zepinics' claims in the 2009 and 2016 proceedings, whereby they attempted to overturn the earlier judgment entered against the Zepinics, I am satisfied that the evidence before the Court is sufficient to enable it to make a determination of the appropriate amount of costs to be allowed as a gross sum.
7. Finally, I am not satisfied that the evidence concerning the costs incurred by Chateau in obtaining the orders under the Vexatious Proceedings Act is sufficient at this stage to enable the Court to fix the gross sum costs that should be allowed.
It is self-evident that the Zepinic parties should be ordered to pay the costs sought in each of the notices of motion on the basis that costs should follow the event.
Given the basis for Pembroke J's findings that the Zepinics were vexatious litigants, it is clear that Chateau should not be subjected to the possibility that the Zepinics will be able to delay the assessment of the costs during the course of an ordinary assessment process, or to conduct the assessment vexatiously. It is therefore warranted that the Court make a gross sum costs order.
As Chateau has been out of pocket in respect of the costs that it has paid over considerable periods, there is no reason why the relevant Zepinics should not be ordered to pay interest at the Court rates from the time when Chateau has paid each part of its costs: see Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331; and Grace v Grace (No 9) [2014] NSWSC 1239 at [63]-[69].
It is clear in my view that the proceedings instituted by Dr Zepinic and Nina, both by new proceedings and by the notice of motion, for the purpose of undoing the consequences of the earlier orders in favour of Chateau in the 2009 proceedings were entirely misconceived and delinquent: see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at 89. Apart from their being an unmeritorious attempt to establish legal consequences that were inconsistent with the final determination in the 2009 proceedings, the orders made in those proceedings have been completely implemented in a manner that cannot be undone because the purchaser of the property following the judicial sale that was ordered now is entitled to an indefeasible title. It is hard to imagine more delinquent proceedings, and it is entirely warranted that Chateau be paid its costs of the 2016 proceedings and the associated notice of motion on the indemnity basis.
I have not been satisfied that Chateau should be awarded its costs of obtaining the vexatious litigant orders against the Zepinics for the following reasons. While I accept from my limited understanding of the evidence that was before Pembroke J that the evidence clearly and fully justified the making of the vexatious litigant orders, I do not think that it follows automatically from the fact that a litigant has acted vexatiously in the past that the party who obtains vexatious litigant orders against that litigant is entitled to indemnity costs for the application. The vexatious conduct may justify indemnity costs in respect of the litigation vexatiously undertaken when the proceedings involved in that litigation are dismissed. However, the prior vexatious conduct of the litigant does not in some way taint that litigant so that necessarily a later application for vexatious litigant orders should also carry with it an entitlement to indemnity costs. In my view it is necessary for the Court to consider the circumstances of the application for the vexatious litigant orders on its own terms. A litigant who is ultimately the subject of vexatious litigant orders may not act unreasonably in resisting those orders, as the case for the making of those orders may not be self-evident. The making by the Court of a vexatious litigant order is an extreme step in so far as it curtails the ordinary rights of the citizen to avail him or herself of the opportunity to institute court proceedings without some institutional approval. The Court should not automatically award indemnity costs if the defence by a litigant of an application for vexatious litigant orders is unsuccessful.
In the present case the Court's understanding of the full circumstances of the vexatious litigant proceedings may be limited because of my non-involvement in those proceedings, but it does not appear to me that the Zepinics mounted any significant contest to avoid the orders being made, and they did not appear at the hearing to oppose the orders. Accordingly, I am not persuaded that Chateau should be awarded its costs of the vexatious litigant proceedings on the indemnity, rather than the ordinary basis.
As I have noted above, Chateau gave evidence that its total costs of proceeding on its notice of motion in the 2009 proceedings for the dismissal of Dr Zepinic's notice of motion are $12,703.92, excluding GST. I accept Chateau's evidence supporting that amount. Chateau provided evidence of the likely proportion of that amount that it would recover on an assessment, but stated (reasonably in my view) that it would accept that an order for the payment of 90% of its costs on the indemnity basis would be reasonable. That would give an amount of $11,433.53. It is usual for the Court to adopt a broad approach in assessing an appropriate lump sum, and to discount the amount awarded to reflect the fact that the party entitled to the costs order will be spared the expense and inconvenience of undertaking an assessment process in relation to the costs. In these circumstances I would award Chateau costs in the lump sum of $11,000 in respect of this notice of motion.
Chateau gave evidence that its total costs of proceeding on its notice of motion in the 2016 proceedings for the dismissal of the Zepinics claim are $72,033.58, excluding GST. That is a substantial amount, but in my view in the absence of challenge the evidence provided by Chateau in support of the claim should be accepted. On the same basis as the previously considered notice of motion, Chateau informed the court in its submissions that it would be content to accept 90% of its costs as falling within the range likely to be awarded on the indemnity basis. Adopting that approach, the amount would become $64,830.22. I would make a lump sum costs order in favour of Chateau on this notice of motion in the amount of $60,000.
As I have said, I would also order the relevant Zepinic parties to pay interest on these costs orders in the manner claimed in the relevant notices of motion under s 101(4) of the Civil Procedure Act 2005 (NSW). Chateau should provide appropriate short minutes of order to my associate so that orders can be made in chambers.
The principal difficulty that I have had in dealing with Chateau's notices of motion has arisen in relation to its claims for the costs of the two notices of motion by which it succeeded in obtaining vexatious litigant orders against the Zepinics. The total amount of the costs claimed in respect of the two notices of motion is $136,002.84. Superficially, that appears to me to be an unduly large amount of costs in respect of two notices of motion which I understand to have been effectively not contested. In saying that, I understand that the application required Chateau's legal representatives to present to the Court a lengthy history of the Zepinics' litigious activities.
Additionally, I do not know why it was necessary for Chateau to file separate notices of motion in the 2009 and the 2016 proceedings. If particular litigants acted vexatiously by commencing multiple proceedings against a particular party, if that party wishes to obtain vexatious litigant orders it is not necessary for the party to seek that relief separately by notice of motion in all of the proceedings that have been commenced. It is permissible for the party to commence one proceeding to obtain the vexatious litigant orders, and to rely upon evidence of all of the earlier proceedings to support the claim. Not only am I concerned about the total amount of the costs claimed by Chateau in obtaining the vexatious litigant orders, but I am also concerned about whether the duplication of the procedure has led to the duplication of some of the costs.
It is unfortunate that it has taken the Court as long as it has to deliver these reasons for judgment on the outstanding costs issues in this matter. Upon reflection, it would have been more expedient for the Court to have relisted this matter earlier to give Chateau an opportunity to provide additional evidence and submissions on the difficulty that the Court has faced that I have described in the preceding paragraph.
In the circumstances, it is clear that Chateau should be given an opportunity to respond to the Court's concerns, if it is able to do so, by explaining why it was necessary that there be two notices of motion seeking the vexatious litigant orders, why there has not been duplication of costs as a result of that approach, and why the total amount of the costs is reasonable notwithstanding the total amount of the costs claimed.
In these circumstances I would invite Chateau to supply to my associate any additional evidence and submissions upon which it may wish to rely, and to arrange with my associate a further hearing at which I would seek to finally resolve the outstanding issues in a summary way.
[3]
Amendments
21 June 2018 - Typographical corrections in pars 2, 6, 17, 18, 19, 29 and 32 and replaced Zepenic with Zepinic (where necessary)
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Decision last updated: 21 June 2018