Eunson v Beaulieu United Ltd

procedural history 5 The applicant has sought to institute an action for damages for breach of contract for the supply by Beaulieu of carpet to him, an action for damages for negligent misstatement, an action for damages for fraud, and an action for damages for misleading and deceptive conduct contrary to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1999 (Vic). 6 The applicant filed an application and a statement of claim on 26 April 1999, which was served on the respondent on 28 April 1999. By notice of motion dated 24 June 1999, Beaulieu applied for various orders, including that the whole or part of the statement of claim be struck out. I heard the motion on 9 August 1999 and, on 24 August 1999, made some of the orders sought by the respondent, including an order for costs in its favour. The applicant filed a new statement of claim on 15 September 1999. (This referred to an "expert opinion" that was to be provided in the "near future".) 7 On 29 October 1999, the applicant filed what was termed an "Amended Statement of Claim", and on 3 November 1999, an "Amended Further and Better Particulars of Statement of Claim". By notice of motion dated 10 November 1999, Beaulieu made another strike out application. On 1 March 2000, Registrar Efthim ordered that certain particulars in the applicant's pleading be struck out (with liberty to re-plead), and that the question of costs be reserved. 8 On 31 March 2000, the applicant filed what was termed a "Further Amended Statement of Claim". On 5 April 2000, Registrar Efthim ordered that: 1. Paragraph 10(d) of the further amended statement of claim be struck out. 2. Particulars of damage be provided by 16 May 2000. 3. The respondent's defence to be filed and served by 16 May 2000. 4. Categories of discoverable documents to be exchanged by the parties by 26 April 2000. 5. Discovery and inspection to be completed by 28 May 2000. 6. Adjourn for further directions to 7 June 2000 at 9.30am. 7. The applicant pay respondent's costs of the notice of motion to be taxed. 8. Costs of today be reserved. 9. Leave to the applicant to file a notice of motion within 21 days to seek permission to plead a further paragraph 10(d) which contains proper particulars. 9 The applicant delivered particulars of loss and damage on 17 May 2000, and on 22 May 2000, the respondent filed and served a defence to the Further Amended Statement of Claim. On 8 August 2000, the respondent filed an "Amended Defence to the Further Amended Statement of Claim". In August and September 2000, the parties sought further and better particulars of one another's pleading. 10 The applicant had made an application for non-party discovery on 8 December 1999. The parties exchanged schedules of documents to be discovered by one another between 27 April and 11 May 2000, and supplementary schedules on 19 May and 31 May 2000. The parties entered further upon the process of discovery and inspection during July 2000. Between 29 September 2000 and 17 November 2000, the parties continued the processes of discovery and inspection. (On 2 July 2001, Registrar Efthim delivered his decision on an application seeking further discovery.) 11 On or about 28 September 2000, a mediation fixed for 29 September 2000 was adjourned until 24 October 2000, to allow the applicant's non-party discovery to be completed. On or about 11 October 2000, the mediation fixed for 24 October 2000 was adjourned, at the applicant's request, until 21 November 2000. On or about 20 November 2000, the mediation fixed for 21 November 2000 was adjourned, again at the applicant's request, until 15 December 2000. On 8 December 2000, the applicant's solicitors delivered to the respondent an expert report dated 18 April 2000 prepared by Mr Peter Haslock (a forensic accountant) of Canterbury Consulting Group. On 13 December 2000 it seems that the mediation fixed for 15 December 2000 was vacated, the applicant's solicitors indicating that they would be applying to cease to act on behalf of the applicant in the proceedings. 12 No notice of the applicant's solicitors ceasing to act was in fact filed by his solicitors. As noted above, the applicant deposed that he ultimately entered into a payment arrangement with them, and they have remained the solicitors on the record. the respondent's submissions 13 The respondent submitted that an order should be made, pursuant to O 62, r 3 of the Federal Court Rules ("the Rules"), that the orders for costs made on 24 August 1999 and 5 April 2000 be taxed and paid forthwith. It relied on the following matters: · the applicant's failure to put his case in order; · the applicant's failure to attend appointed mediations; and · the applicant's delays generally. The applicant's failure to put his case in order 14 The costs orders made on 24 August 1999 and on 5 April 2000 were made in the respondent's strike out applications. As the respondent noted, the applicant delivered four statements of claim between 26 April 1999 and 31 March 2000. A fifth and last statement of claim was the subject of Registrar Efthim's order on 5 April 2001, in respect of which the Registrar gave reasons on that date. The first statement of claim was, of course, the subject of my order of 24 August 1999, in respect of which I gave reasons also on that date. 15 The respondent submitted, as indeed seems to be the case, that the applicant's pleadings were not finally in order until the respondent received the applicant's particulars of loss and damage on 17 May 2000. This was about twelve months after the institution of the proceeding. Failure to attend appointed mediations 16 The respondent also relied on the failures, on the applicant's part, to proceed with the mediations scheduled for 29 September 2000, 24 October 2000, 21 November 2000, and finally 13 December 2000. As already stated, the last mediation failed because the applicant's solicitors had indicated an intention to cease to act, apparently because they had not been paid by the applicant. General delay 17 The affidavit evidence relied upon by both parties, together with the Court file, established that there had been comparatively minor slippage from the timetable for the litigation agreed upon by the parties or directed by the Court. Some slippage had occurred by consent. Both the parties had failed to meet the timetable to some degree. 18 In summary, the respondent submitted that, by reason of the dilatory and inefficient way in which the applicant had conducted his case to date, it had been put to been "enormous expense" in defending itself. The respondent submitted that it was being held out of its costs by the failure of the applicant to pursue its action properly.

the applicant's submissions in reply 19 In written submissions filed 4 April 2001, the applicant contended: The gist of the Applicant's opposition to the Respondent's application is that: (a) he is impecunious; (b) his impecuniosity was caused by, or significantly contributed to by, the Respondent; (c) the pleading problems experienced by him largely arose out the wording of the Deed of Arrangement pursuant to Part X of the Bankruptcy Act entered into by the Applicant because of his impecuniosity; (d) the Respondent has previously admitted liability; (e) the Respondent's prospects of succeeding in its defence are very low; (f) the Respondent has supplied faulty carpet to many others who have complained and taken or threatened legal action against it; (g) the Respondent is a company with greater financial resources than the Applicant and it has no hesitation in deploying them fully in this proceeding, including arranging for Counsel from Queensland to travel to Melbourne regularly for appearances; (h) if the application is granted it will stifle the Applicant's claim and deprive him of the opportunity to secure an almost certain victory against the Respondent; and (i) each of the decisions of the Court relied upon by the Respondent are distinguishable. 20 I consider each of these matters in turn below.

consideration of the submissions The applicable law 21 In Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136, the Full Court of this Court granted an order under O 62, r 3(2) of the Rules that the costs of an application for leave to appeal against an interlocutory decision be paid forthwith, noting (at 145): The policy behind O 62, r 3 is that, in the ordinary course of litigation, costs awarded in interlocutory proceedings need not be paid until the conclusion of the proceeding when set-offs can be made in the light of the ultimate orders for costs. There is an access to justice aspect of this. Impecunious litigants who have a meritorious claim or defence should not be forced out of court because of inability to meet interlocutory costs orders. However, applications for leave to appeal in interlocutory matters of practice and procedure stand on a different footing. There is a strong public policy against the proliferation of such applications, for the reasons given by Jordan CJ and endorsed by the High Court in Adam P Brown [(1981) 148 CLR 170 at 177] (above). The applicants in the present case having failed in this application, the respondents should not have to wait for a year or more before being paid. The discretion that arises under O 62, r 3(2) is unfettered, although, of course, it must be exercised judicially and, as it requires a departure from the general practice, it is to be exercised in favour of the applicant for costs only where the interests of justice in the particular case require such a departure. 22 In Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Limited [1998] FCA 545 and McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 respectively, Branson J and Weinberg J discussed a number of relevant decisions on the operation of O 62, r 3(2). They included Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (No. 14) (18 August 1995, unreported, Lindgren J); Vasyli v AOL International Pty Ltd (2 September 1996, unreported, Lehane J); Harris v Cigna Insurance Australia Ltd (1995) ATPR 41-445 (Kiefel J); Mitanis v Pioneer Concrete (Vic) Pty Ltd (1998) ATPR 41-623 (Goldberg J); Batten v CTMS Ltd [1999] FCA 1576 (Kiefel J); Real Tech Systems Integration Pty Ltd v Merouss (1998) 82 FCR 150 (Lehane J); Nelmac Pty Ltd v Construction, Forestry, Mining and Energy Union [1999] FCA 929 (Madgwick J); and Marshall v Sheahan [1999] FCA 1249. It is unnecessary to do other than note their Honour's discussions. 23 In All Services Australia Pty Ltd v Telstra Corporation Ltd (2000) 171 ALR 330 ("All Services Australia"), Kiefel J summed up the effect of the authorities at 333, saying that: The making of an order under O 62, r 3 is justified where a court can conclude that a party in whose favour costs orders have been made to date should not be required to wait until the finalisation of the proceedings to obtain payment of them. This may be so where, through no fault of that party, there has been substantial delay in the proceedings, having the effect of substantially postponing a final determination in the matter. This most commonly arises where an applicant has attempted a number of versions of the statement of claim with the result that additional directions hearings were necessary, which should not have been; interlocutory applications had to be brought; and, moreover, substantial delays were incurred in the attempt to plead a case: see Life Airbag Company of Australia Pty Ltd v Life Airbag Company (NZ) Ltd (Fed C of A, Branson J, 22 May 1998 unreported); Harris v Signa Insurance Australia Ltd (1995) ATPR 41-445; Batten v CTMS Ltd [1999] FCA 1576 and generally McKellar v Container Terminal Management Services Limited [1999] FCA 1639. In Batten, the effect of the delay was that the matter could not advance, since the respondent could not be required to plead to the statement of claim in its earlier forms. That there has been some delay in a proceeding does not of itself suggest an order for payment, in the interim, of costs is appropriate. Telstra points to the overall delay which includes the two earlier amendments of the substantial claim. It is not, however, every occurrence of delay which will be relevant; rather it will be the effect upon the proceeding and the position in which the other party is then placed. Kiefel J declined to make the order sought because she was not satisfied that the delay arising from a failure to provide particulars of loss and damage would ultimately amount to much in what was to be a complex trial. Compare also Brasington v Overton Investments Pty Ltd [2001] FCA 571, BC200102374 at [14]-[17] per Emmett J. 24 More recently, in Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd [2000] FCA 1732, BC200007392 ("Murran Investments"), Mansfield J refused an application that costs be taxed and be payable forthwith. His Honour said at [66]-[70]: In my view, it is necessary for the respondents to demonstrate that the demands of justice require a departure from the general rule: Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312. The respondents point principally to the history of these proceedings in support of their application. The proceedings were commenced on 17 June 1999, and there have since been three orders striking out various versions of the statement of claim as well as other versions of a proposed statement of claim upon which, in private communications, the respondents made comments. The scope of the allegations has expanded to encompass conduct said to be in contravention of representations, and in breach of warranties, prior to 1 July 1997. It is only after an excess of fifteen months that an apparently satisfactory and final version of the statement of claim has been settled upon. In my view, those events do demonstrate that the course of the proceeding is out of the routine conduct of such a proceeding. I am, however, not satisfied that it warrants the exercise of the power under O 62 r 3. 25 After referring to All Services Australia at 333, his Honour continued: There have, in this matter, been substantial delays in the attempt to plead a case. The respondents to now have not been able to plead a defence. However, as her Honour pointed out, it is not the fact of delay which is relevant but its effect upon the proceeding and the position in which the other party is then placed. Here, the respondents have been put to significant expense which, as the costs orders indicate, has been expense which they are entitled to recover from the applicants. There is no evidence that the respondents will be seriously disadvantaged by being delayed in receiving the costs to which they are entitled until the completion of the matter. Nor is there any evidence that the applicants will be disadvantaged in any practical sense by having to pay those costs at this point. The contention of counsel for the applicants that the making of the order sought may "have the effect of stifling the proceedings" is not established on the material before me. There is no special reason to think that the applicants … will be unable to pay those costs at the completion of the matter. Moreover, a consideration relevant to the exercise of the discretion to make the order sought by the respondents is the undesirability of having taxation issues dealt with seriatim rather than at the completion of a matter, and the possible consequence of a recovery of costs which might otherwise be the subject of some overall resolution of such issues when the final result of the application is known. I have also had regard to the fact, as deposed to by Deegan, that her knowledge of the affairs of Murran was significantly less than that of Mr Deegan, and it was only following his sudden death in early 1999 that she had to assume the role as its manager. Her progressive knowledge of its affairs thereafter does provide some explanation for at least part of the need to recast the third and fourth versions of the statement of claim. 26 His Honour concluded, on balance, that "the effect on the proceedings in the circumstances, or the consequences to the respondents or the position in which they presently find themselves in the conduct of the proceedings, are not sufficient to warrant a departure from the general rule at this point". Application of the law in this case 27 I turn to consider the matters raised for consideration by the parties, commencing with the respondent. 28 The respondent has, plainly enough, incurred costs which it would not have incurred if the applicant had not had to amend its statement of claim on four occasions. Absent an order of the kind sought, the respondent will be kept out of these costs until after the trial. This is, I think, the major factor in the respondent's favour. It may also be borne in mind that, if the applicant proceeds to adduce evidence from 80 of his customers, the trial is unlikely to be of short duration. This will make it more difficult to give it a speedy trial date. 29 The evidence does, however, provide sufficient explanations for the failure to proceed with mediation. And as already indicated, I do not think anything much can be drawn from the matter of general delay upon which the respondent relied. 30 I referred above to the matters relied on by the applicant and indicated that I would discuss them in due course. This I now do. Impecuniosity (factors (a) and (b)) 31 The applicant has deposed to his impecuniosity. This is confirmed, in part, by his entry into a deed of arrangement with his creditors. This is a matter that may be taken into account. 32 In the course of argument, counsel for the applicant described the nature of the applicant's case at trial in the following terms: What's said is that Mr Eunson conducted a business in country Victoria. … Mr Eunson says that in the relevant period he supplied 80 people with the respondent's carpets. He doesn't say that he's been required to refund the purchase price to those 80 people, and in fact that will not be part of the applicant's case. He says … evidence will be given from approximately 50 people that (a) they purchased carpet from Mr Eunson; (b) it was one of these carpets manufactured by the respondent; and (c) it deteriorated by becoming black and sticky. Now, essentially the case is about whether or not there was too much extractable matter in these carpets, that is, spinning oil, … and … that is also the issue in the other proceeding, the Mega Carpets proceeding. … All they're saying is, 'I bought carpet from him. The carpet became black and sticky and ugly, and as a result I was not going to buy any further carpet from him'. So his reputation was badly affected and his business collapsed. That's how it's put. This, I think, makes it clear that an issue for trial will be whether, and to what extent, the pecuniary loss allegedly suffered by the applicant was caused or contributed to by the respondent's supply of defective carpets. It would not be appropriate for the Court to express a view on the outcome of the issue at this stage of the proceedings. The only matter that might fall for consideration, to be given the weight thought appropriate, is the fact that the applicant alleges that his impecuniosity resulted from the respondent's defaults. The nature of the claim (factors (c) to (f)) 33 I would reject the applicant's submission that the pleading problems experienced by the applicant arose solely or mainly out of the wording of the deed of arrangement. This submission is not, I think, supported by the reasons given by me in August 1999 and by the Registrar in April 2000. 34 Further, it would inappropriate for the Court to express a view on the applicant's or the respondent's prospects at trial and to attempt to take this matter into account on this application. I reject the applicant's submission that the respondent has admitted liability. In written submissions filed in relation to another application in the proceeding, the respondent acknowledged that it had provided faulty carpet to the applicant. It did not, however, admit that it had supplied faulty carpet to the extent alleged by the applicant. Rather, its acknowledgment apparently related to the supply of faulty carpet to 7 (and not 80) of the applicant's customers: see, e.g., Amended Defence to the Further Amended Statement of Claim, par 8.8. It denied that this supply had occasioned the applicant the loss and damage that he alleged. 35 The applicant also relied on exhibit EKE 3 as evidencing an admission on the respondent's part. The respondent objected to the admissibility of the exhibit and the associated part of paragraph 10 of the applicant's affidavit. As, in my view, the exhibit does not contain any admission of the kind suggested by the applicant, I put it to aside. It is unnecessary to determine the objection. 36 There is sufficient shown, however, to warrant the conclusion that the applicant may have some real basis for his claim. First, there are the 7 complaints about faulty carpets. Secondly, the respondent has discovered court and tribunal documents apparently relating to other claims similar to the applicant's own claim about the respondent's carpets. Thirdly, the applicant has apparently received the results of tests on the carpets in question, and received a report from a forensic accountant concerning his loss. The fact that the applicant may have some real basis for his claim is a factor that may be taken into account. Position of the respondent (factor (g)) 37 There was evidence that the respondent was associated with "Beaulieu of America", and presumably had greater financial resources than had the applicant. This too is a matter that may be taken into account. Stifling the applicant's claim (factor (h)) 38 As already noted, the applicant deposed to difficulty in paying his solicitors, and that this difficulty had been met by a payment arrangement. The applicant contended that, if an order for costs were made in the terms sought by the respondent, he would be unable to pay the costs as taxed "forthwith". An order of the kind sought would, the applicant said, stifle the litigation and deprive him of a claim that a forensic accountant had valued at $805,000. The applicant submitted that the respondent's application was intended to bring the proceeding to an end. 39 The respondent submitted that these submissions seriously exaggerated the position of the applicant, since all that the respondent could do was commence recovery proceedings and, if it obtained judgment, set about instituting bankruptcy proceedings which might be successfully opposed. It may be that the order would not of itself bring this proceeding to an end, but I accept that it might increase the difficulty faced by an impecunious litigant, such as the applicant, and that, for this reason, he might simply give up the fight. This is a consideration that may be taken into account. 40 The respondent also sought to make something of the fact that none of the applicant's creditors or the deed trustee was providing financial support for the proceeding. The applicant denied the significance of this, and there is insufficient material before me to draw any inference one way or the other on this aspect of the matter. Other authorities (factor (i)) 41 As already indicated, I accept that each case turns on its own facts. Summarising 42 Drawing these matters together, I begin by noting that, in contrast to some of the cases mentioned above, the claim in the present proceeding is not especially complex. Although the statement of claim has been amended from time to time, the substance of the applicant's claim has not changed essentially from what it was at the outset of the proceeding. It is, however, better defined. Further, in contrast to a number of the decisions referred to earlier, the applicant's impecuniosity is a consideration supported by evidence: contrast, e.g., McKellar at [22]. The evidence indicates that the applicant may have some real basis for his claim, and the claim attributes his alleged impecuniosity to the respondent's defaults. Further, if an order of the kind sought were made, it may have effect of making it more difficult for the applicant to pursue this litigation, with the result that he will give up the fight. 43 There was no evidence that the respondent was likely to suffer any disadvantage other than of the general kind to which I have referred. There was no evidence as to the likely quantum of the taxed costs. In particular, there was no evidence of the "enormous expense" to which the respondent referred. 44 When asked by the Court why it was that this application was made at this stage of the proceeding, the respondent referred to the fact that, with the failure of the last mediation, steps towards finalisation of the action had ceased for a time (and no costs were incurred) but at the time the application was made, further steps in the action were being taken with a view to trial. If anything, this tended to support the applicant's claim that the respondent was intent on bringing the applicant's proceeding to an end, although it is unnecessary to determine whether or not this was in fact the case. The respondent, by its counsel, also stated that it wanted to know how much the applicant owed it by way of taxed costs. It seems to me that the experienced practitioners representing the parties were unlikely to need a taxing in order to estimate the amount of the taxed costs in question. 45 There is, moreover, the consideration mentioned by Mansfield J in Murran Investments at [70], namely, the undesirability of having taxation issues dealt with seriatim rather than at the completion of a matter, and the possible consequence of a recovery of costs which might otherwise be the subject of some overall resolution of such issues when the final result of the application is known. 46 On balance, in the circumstances of the case, I am not persuaded that it is appropriate to depart from the general rule and to make an order under O 63, r 3(2) of the Rules. I would dismiss the application. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.