First Applicant v Respondent

First Applicant v Respondent - [2017] VSC 377 - VSC 2017 case summary — Zoe

[44]

$174,913.23 (50% reduction pursuant to order of Gourlay JR) for the taxation of the Respondent's bills of costs before Gourlay JR, in circumstances, where the Respondent's bills of costs was the total sum of $35,709.10, and where the Applicants (Mathieson) in real terms achieved nothing. The Applicants (Mathieson) have completely failed, by getting only a de minimis reduction of $1,000 from the Respondent's bills of costs in the sum of $35,709.10, being only a 2.8% reduction. Put another way, the Applicants are claiming over four (4) times the total amount of the costs, in circumstances, where on any view, incurring $174,913.23 in costs is patently absurd, disproportionate and greedy by the Applicants (Mathieson) and their legal practitioner, and over one hundred and seventy four (174) times the de minimis reduction of $1,000 from the Respondent's disputed costs. The ludicrous nature of the claim by the Applicants (Mathieson) that they have paid or incurred $174,913.23 in costs to achieve nothing in real terms, by getting a de minimis reduction of $1,000 from the Respondent's bills of costs in the sum of $35,709.10 is self-explanatory to demonstrate that the Applicants (Mathieson) have completely failed.
$49,169.16 (excluding the 25% loading claimed) for the review of the determination of Gourlay JR before Wood AsJ, in circumstances where only four (4) months elapsed between the determination of Gourlay JR and the decision of Wood AsJ, minimal work should have been required by the Victorian Legal Cost Assessors to prepare for the review before Wood AsJ, there were no interlocutory applications, and the final hearing should have run for less than 1 day.
$90,508.48 (excluding the 25% loading claimed) for the appeal to McDonald J, in circumstances where the Respondent undertook all the work to prepare the Appeal Book and the Authorities Book, there were no interlocutory applications, and the final hearing only ran for 1 day.
$122,198.81 (excluding the 25% loading claimed) for the application for leave to appeal and the appeal to the Court of Appeal, in circumstances where there were three (3) discrete grounds of appeal, the arguments were essentially the same as those before McDonald J (as submitted by the Applicants' lawyers), the Respondent carried out the work to prepare the Application Book and the Authorities Book, the application for leave to appeal and the appeal were heard at the same time, and the hearing only ran for 1 day.

[47]

MR WILLIAMS: Could I take you to C in this document. Are these words 'manifestly absurd, excessive, disproportionate, greedy, unreasonable, unnecessary', all of these adjectives, are they matters which Mr Ho directed you to include?---Yes.

Did he also direct you to include an allegation that it was in contravention of the statutory obligations of both the client and the lawyers?---Yes.

And that it was professional misconduct or - yes, that it is professional misconduct?---Yes.

Could you tell us what the basis of all of those allegations is?---The amount claimed in costs.

You do know don't you that the amount claimed in costs involves a number of discrete legal proceedings including an entire review proceeding - the proceedings before Judicial Registrar Gourlay as to part, because of course there was a partial order. the whole proceeding before Wood AsJ, the whole proceeding before McDonald J and the whole proceeding in the Court of Appeal?---Yes.

How is it manifestly absurd, excessive, et cetera for the costs of all of those processes, taken together, to come to more than $400,000?---The argument has always been on the basis that the initial dispute was over $35,000 worth of bills where $1,000 was ordered to be - or taxed off in the terms.

Doesn't that rather overlook that Mathieson Nominees has not been the moving party in any but the very first of those processes?---Well, the fact that they were the moving party in the first process, without that none of the rest of it follows.

Sure, but the $421,000 by and large wasn't incurred then, most of it certainly wasn't, was it?---No.

It was your client's decision to make a referral to Ferguson J wasn't it?---Yes.

And it was your client's decision not to do that until after a couple of days taxation had passed since the ruling which you took up to Ferguson J?---Yes.

It was your client's decision to seek a review before Wood AsJ?---Yes.

And your client's decision to go to McDonald J?---Yes.

Your client's decision to go to the Court of Appeal?---Yes.

And then indeed in turn of course, beyond what we're talking about now, your client's decision to seek special leave in the High Court?---Yes.

In those circumstances how can it make any sense at all to assert that the opponent, who has been the respondent in all of those procedures, is the one acting absurdly, excessively, disproportionately, greedily, et cetera in causing this high level of cost to be incurred? How can that make sense? Explain it to His Honour please, I'm sure His Honour would love to hear?---On the basis that the amounts claimed are substantial for the amount - for - for instance, the review before Wood AsJ, $49,000, it was a two day hearing, it was effectively - it was - the argument has always been that based on the original - considering what the original dispute was incurring $421,000 in costs over all the proceedings was excessive and not proportionate.

Just on the subject of adjectives, can I go a bit further into this document, further into C on p. 3. You said that - the earlier adjectives I went to - you were instructed by Mr Ho to include, does that occur also within the middle of one, 'patently absurd, disproportionate, greed', and three lines further down, 'ludicrous'. Is that all subject to instruction from Mr Ho, that those epithets should be added?---I believe so, yes, I'd have to check the original drafts.

Then on p. 4 to the same effect, at the top, four lines down, 'disingenuous, clearly absurd and ludicrous', are they in the same category?---I believe so but, again, I'd have to double check.

HIS HONOUR: So you prepared this notice and he settled it, is that what happened?---Yes.

MR WILLIAMS: Do you think that the use of extreme language of that kind and the making of serious allegations of misconduct in those terms is conducive to the effective process of the court in a civil proceeding of this kind?---The firm - it was the firm's position, whether or not it was conducive to resolving it, it was decided it needed to be put.

And it needed to be put in those terms?---Yes.[5]

[50]

This litigation was commenced by the present Respondents who chose, after paying them, to dispute in the Costs Court almost every item of the three bills for legal services which had been rendered by the Applicant. The Respondents conducted the litigation as follows, which caused unnecessary costs to be incurred by the parties and also caused unnecessary amount of time to be spent on prolonged the matter: (a) They began by alleging that the Applicant's bills were not in itemised form and subsequently conceded that the bills were in fact in itemised form; (b) They objected to 236 out of a total of 273 items in the Applicant's bills as well as making 3 general objections that were baseless; (c) They made extensive serious allegations, wrongly, that the Applicant had breached its obligations under the Legal Profession Act 2004 ("LPA 2004"), and that the Applicant had not complied with its disclosure requirements under the LPA 2004, which was ultimately rejected by the Judicial Registrar; (d) They failed to cooperate with the Applicant to arrange an appropriate and reasonable time for the Respondents' cost consultant to inspect the Applicant's file and made unreasonable demands of the Applicant in relation to the inspection; (e) They made false allegations in relation to the content of the Applicant's file that was made available for inspection; (f) They failed to limit the scope of their objections to the bills after inspecting the Applicant's file; (g) They filed false and scandalous affidavits, parts of which were struck out, which required the Applicant to file affidavits in response; (h) They opposed the Applicant's interpretation of sections 3.4.44 and 3.4.44A of the LPA 2004 during the taxation before the Judicial Registrar and opposed the referral of the question of the meaning of those provisions to a Judge, only to abandon their position at the hearing before Ferguson J; (i) They continued to file and served excessive objections at the re-hearing afresh of the taxation following the judicial determination by Ferguson J establishing that the Judicial Registrar had erred, despite being asked by and then ordered by the Judicial Registrar to limit the scope of their objections which conduct prevented the taxation of any individual items at the re-hearing afresh.[6]

[67]

(a) He is a director of the company and he swears the affidavit on both his behalf and on behalf of his brother Ian who is the second applicant[13] and also a director of the first applicant;

(b) At that time Ian Mathieson was holidaying in North Queensland and had intermittent access to mobile telephone coverage. Ian read a draft of the affidavit and advised his brother that he approves the contents[14];

(c) That the applicants engaged Samuel Armytage ('Armytage') to review the AJH bills of costs in April 2012.[15]

(d) Armytage did not enter into a costs agreement as Armytage has for many years acted for the Mathieson interests as their lawyer. They do not generally receive a costs agreement, they receive bills of costs when the work is completed and the bills are paid.[16] The affidavit states that the applicants do not 'dispute that Armytage is entitled to charge us for his work at whatever rate is appropriate under the scales of costs normally applicable to lawyers in Victoria'.

(e) In April 2012 the applicants engaged Victoria Legal Costs Assessors ('Sizenko') to act in the Costs Court matter.[17] Sizenko provided a costs agreement which the applicants accepted by continuing to give instructions in the costs review and the Mathiesons believed that the costs agreement continued for each stage of the matter. The costs agreement provided for charging on the Supreme Court scale. No further costs agreement was given at any stage.

(f) In February 2013 in an attempt to end the cost review the applicants sought advice from Sizenko about making an offer. Sizenko advised that any offer made should include the respondent paying the costs of the taxation. In the context of these instructions Sizenko advised that if any offer was accepted at that time he would limit his costs to 'whatever sum was recovered from AJH as to the costs of the taxation'[18]. A number of offers were made but not accepted and Sizenko's offer lapsed.

(g) After AJH initiated appeal to the Court of Appeal Sizenko again offered to limit his costs of the appeal to the amount recovered (if any) from AJH.[19] This offer remains in effect and is relied on by the applicants.

(h) The affidavit at paragraph 19 states 'Sizenko is entitled to be paid by Mathieson Nominees for all of his work, subject only to the limitation that he is not entitled to seek payment in relation to his work for the Court of Appeal phase in any greater sum than is recovered from AJH for that work'.

(i) In relation to the fees of Mr Williams QC[20] ('Williams'), he was engaged by Sizenko initially to appear on 11 February 2013 to argue issues on [sic] arising during the cost review and then on each of the appeals. Williams rendered two invoices, the first of which has been paid and the second is part paid. There was 'no agreement, arrangement or understanding with Williams which could eliminate his entitlement to charge and be paid by Mathieson Nominees at his usual professional rates, for all his work for us in this matter, at every stage of the process to this day and continuing'.[21]

[85]

MR WILLIAMS: So, Mr Cormey, I was asking you just before lunch - but not very competently, so let's start again and I'll see if I can get the question a bit clearer. I was at p.18 of your affidavit - - - Yeah.

And I was asking you about subparagraph D. Do you recall? - - - Yeah.

And, in particular, my question is this: we are here looking at - in the meantime, I think you wanted to look at the full affidavit. Did you satisfy yourself about that?Yes.

So can we use this - go back to using this extract now?Yes.

Good, thank you. So you recall that what you are recording here is the contents of an affidavit that you made on 11 May last year?Yes.

And on 11 May last year, you swore that at the mention on 24 February 2016, for Judicial Registrar Gourlay, the things set out in subparagraphs A, B and C and D all happened?Yes.

And one of things is D. So you swore on 11 May that on 24 February Mr Sizenko made false representations?Yes.

And so as of the 24th - sorry, at the - as of 11 May, when you swore that, it was your view, was it, that he had made a representation and it was false?On 24 February, yes.

On 24 February that was your view? Yes.

Had that view changed by 11 May? Not by the 11th, no.

So on 11 May when you swore this, you were saying so - all right, so let's take both dates then. So on 24 February you had formed the view that the representation was false, because the applicant had not paid the costs? Yes.

On what basis have you formed that view? In terms of the cost from the invoice, the 599. The invoice itself says that the entitlement is outstanding, and Mr Sandbach made submissions at the hearing on the 24th that none of the invoices have been paid, and that it hadn't been corrected by Mr Sizenko, who was appearing on the other side.

The fact that Mr Sizenko didn't say anything was

enough? Didn't correct - yeah.

You had formed the view that he had made a false representation to the court? Yes, I believe that was correct, yes.

On what basis did you instruct Mr - well, first of all, I assume you instructed Mr Sandbach to make that submission, that no invoices were

MR SANDBACH: Well, Your Honour, I object to that. Again, whether it was this solicitor or some other solicitor in the company, it is plainly fishing as to plainly privileged matters.

MR WILLIAMS: Well, let me ask you this question. As at 24 February, did you have any way of knowing whether or not the invoices had been paid? On 24 February?

Yes? Not before the hearing.

At the moment that Mr Sandbach made those submissions, that the invoices had not been paid, he was making a submission about which you had no knowledge? Apart from the fact that the invoice itself said that there was no amount paid.

Well, is that not true of almost every invoice ever issued in the entire world? Not every invoice. I know what we have invoices where there's part payment.

HIS HONOUR: Speak up, please? Sorry, my apologies, Your Honour.

I am terribly sorry. It is bad acoustics. I really need to hear what you say? Yep, so I wouldn't say that was for every invoice.

MR WILLIAMS: I said almost for every invoice? Almost every invoice. In my experience, yes.

The mere fact that an invoice records that as at the moment the invoice is issued, it hasn't been paid, tells you nothing about whether, by a date nine days after the date of the invoice, it's been paid, does it? The amounts claimed in the invoice did go back a long way, but no, at that time, no.

Mr Sandbach made a submission to the court that the invoice had not been paid, at a time when you and your client, who were instructing him, had no way of knowing whether or not that was correct? Yes.

As at 11 May, when you swore the affidavit, did he have any different information? I don't believe so.

Is it not the fact that your client, through Mr Sandbach, and then - as to what was said on that day, and then, through your affidavit here, had made allegations of a serious nature about matters which he could not know whether they were true or not? We believed them to be true.

On what basis? On the basis that it was a substantial invoice that - at the time it had been rendered, it certainly hadn't been paid. The hearing was not long after it'd been rendered.

Do you think that without more, it's a sufficient basis to make an allegation of very serious misconduct, namely the misleading of a court? At that stage, at the stage that the paragraph (d) comes in, the hearing had occurred, the submission had been put, and it hadn't been challenged or corrected.

Let me take you to the notice of objections that were filed on behalf of your client initially, as a document entitled, "Notice of objections". It is your EC29.

HIS HONOUR: Where was that again?

MR WILLIAMS: EC29, Your Honour.

HIS HONOUR: I'm sorry, thank you.

MR WILLIAMS: Do you have it, Your Honour?

HIS HONOUR: I have got EC26, I've got EC28. Do I have EC29? No, I have EC30.

MR WILLIAMS: Well, you got even numbers, Your Honour.

HIS HONOUR: No, I have got 27 as well. I am just going through them all again, just to see if I could - if something is stuck together.

MR WILLIAMS: Do we have another copy we could provide His Honour? I looked on yours. I will give His Honour my clean - it's not clean, mine is marked. Could we hand up for Your Honour's use - momentarily, at least - a copy of that document?

HIS HONOUR: It is amazing. I have got everything but 29. Thank you. I will keep this.

MR WILLIAMS: You do not have it because I took it out earlier. I took you to it in opening.

HIS HONOUR: I have got it, I found it.

MR WILLIAMS: Right, so...[27]

[116]

Accordingly, a failure to provide financial information in the face of a valid Court process, either in answer to a subpoena or a notice to produce, or in response to a reasonable request on the part of a defendant, may assist or fortify a conclusion based on direct evidence or upon inferences to be drawn from the other evidence as to the inability of the plaintiff to pay the defendant's costs should the defendant be successful. But it cannot of itself provide such evidence or give rise to that conclusion.

In any event, Achilla seeks to explain its failure to put on evidence as to its financial position by reason that:

(a) In circumstances where a defendant has not proffered evidence of the plaintiff's financial position, the plaintiff is entitled to decline to provide an account of its financial position; and

(b) Achilla's reluctance to expose its financial information to the Amcor Parties in this case is explicable on the basis that it is the confidential information of a privately-owned family company, when the Amcor Parties have been aggressively pursuing Achilla and its director and a related company in litigation since 2007.

In Christou v Stanton Partners Australasia Pty Ltd[32] Newnes JA, with whom Murphy JA agreed, said:[33]

I also do not accept that the filing by the appellants of an application for security for costs gave rise to some obligation on the second respondent to provide a full account of its financial position. That is to put the cart before the horse. In order to enliven the court's discretion there must be material before it which is sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the second respondent would be unable to pay the appellants' costs if the second respondent were to be unsuccessful in the action; mere speculation as to the second respondent's insolvency or financial difficulties is not sufficient: see Warren Mitchell Pty Ltd v Australian Maritime Officers' Union (1993) 12 ACSR 1; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 [60]-[61]. In circumstances where the appellants had not troubled themselves to put any material before the court relating to the second respondent's financial position, it was not incumbent upon the second respondent to fill that gap. The second respondent apparently took the view (rightly, in my opinion) that the discretion had not been enlivened and was content to leave the matter at that. It was entitled to do so.

I respectfully adopt this analysis of Newnes JA in Christou.[34]

In the present case, there was no obligation on the part of Achilla to provide a full account of its financial position. I accept that Achilla took the view that the threshold issue could not be answered in favour of the Amcor Parties on the material before the Court, and that the discretion could not be enlivened. It was entitled to take this course and not put on any detailed financial evidence.

As to the second matter, the explanation advanced by Achilla for not supplying details of its financial circumstances may well have provided an explanation for not putting on such evidence for the purposes of Jones v Dunkel,[35] but for reasons already explained, no Jones v Dunkel[36] inference is capable of being drawn in this case.

[121]

The present review mechanism that his Honour is now charged with hearing, which we've now moved into a hearing within a hearing about the Civil Procedure Act, but the review mechanism itself?Yes.

That was one instituted by your client?Yes.

You were obviously instructed therefore to do it?Yes.

At or about the time of instituting that review mechanism were you instructed to cease work on the objections?What was the date of the - sorry, can I just get the dates right?

Sure. You might want to go back into your affidavit for this purpose if all of the material is there. Just let me assist you if I can. You may find it before I do?So what date?

What date is - what are you looking for, the date of the review?What date - just ask the question again.

Sure. So in your paragraph 55 you say that on 14 September the respondent filed and served a notice of review. Do you see that?Yes.

Go back to the previous paragraph. You will see that this is the context where, 31 August, so exactly two weeks earlier, the Judicial Registrar had ordered your client to file a notice of objections ?Yes.[37]

...

MR WILLIAMS: So that's the orders. (To witness) I am asking about the order in 54A. That order was made two weeks later. You filed and served a notice of review? Yes.

Were you then instructed at or about the time of filing that notice of review to stop work on the objections, or had you already been instructed to that effect? No.

Were you instructed later? Yes.

How much later? I believe it was after the - it was - it was definitely after the next hearing in September and before they were due. The exact date I can't remember.

You would agree with me, wouldn't you, that one outcome of the filing of the notice to review and ceasing work on the objections was that it became impossible or impracticable for the taxation to proceed as her Honour had ordered that it would do in November? Impracticable, yes.

And that was an entirely predictable outcome of those steps, wasn't it? Yes.

And in fact not only predictable but predicted in as much as you took those steps knowing that they would have that outcome? We did try to get - if the taxation (indistinct). We did try and get this done before the taxation.

But even if you had, the taxation couldn't have proceeded without your objections, could it? I'm speculating but I'm - if the review had been done before the taxation, I believe that - if the taxation was going to proceed (indistinct) notice of objections, but again I can't say, that's just speculation.

That notice of objections would in those circumstances have been filed at best very, very close to the time of the taxation? Yes.

Which would have almost inevitably resulted in the taxation being adjourned? Not necessarily.

Really? You don't think that in a matter of this kind, with substantial bills and where you were going to file substantial objections, that there wasn't a reason why her Honour ordered that the notices of objection be filed in mid-October for a taxation to occur late November? Yes. I'm not saying (indistinct) given any extra time.

But it wasn't at all practicable for the two reviews that you instituted to have been heard and determined in time for you to then complete the objections and still file them within her Honour's orders. That wasn't possible, was it? Within the orders, no.[38]

At a glance

Court

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Before

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Judgment (242 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (2)