Guss v Geelong Building Society

Supreme Court of Victoria|2001-08-21|Before: Ashley J

Costs - Order against solicitor - Order on solicitor and client basis - Non-party costs. Supreme Court (General Civil Procedure) Rules 1996, r. 63.23.

I heard a costs argument in this matter. It occupied one and a half days of evidence and submissions. The successful defendant sought orders for costs against the plaintiff and also against Mr Joseph Guss, Mr Antony Guss and Miss Marilla Guss. The orders which were sought against Mr Antony Guss and Miss Marilla Guss were initiated by summons filed 19 March 2001.

In the case of all the applications the orders sought were for costs on a party and party basis up to 2 February 2001, and thereafter costs on a solicitor and client basis.

It is necessary to say something about the principles which guide the making of costs orders against non-parties, the making of a costs order against the solicitor for a party, and the making of costs orders on a solicitor and client basis.

The orders sought by the defendant against each of Joseph, Antony and Marilla Guss were sought against non-parties. That is so although all of them were at one stage or another parties to the proceeding (or to the two actions which, when consolidated became the proceeding).

In the case of Joseph Guss, who remained a party until 2 February 2001, orders were sought on two bases: first, in respect of the period up to 2 February, as a non-party generally. Second, in respect of the period after 2 February, as the solicitor for the plaintiff, as to which see r. 63.23 of Chapter I of the Rules.

In the case of Antony and Marilla Guss the orders sought could only sensibly relate to the period after 25 March 1999. On that date orders were made discontinuing the proceeding so far as they were concerned. Discontinuance had costs consequences: see rr. 25.05 and 63.15, no order otherwise for the purposes of the latter rule having been made.

The Court's power to award costs under s. 24(1) of the Supreme Court Act is wide enough to order that costs be paid by a non-party. Focussing upon the general situation - that is, putting the circumstances raised by r. 63.23 to one side - it may be said that such an order is always exceptional. In the vast majority of cases it would be unjust to make an award of costs against a non-party[1]. It may also be said that whilst certain categories of persons have been identified as persons against whom such orders may be made, the Court's discretion is not confined to those categories of persons[2]. A further proposition may be put, that is, that a non-party against whom an order is made must have a connection with the proceeding in question[3]. Gobbo J dealt with the matter of connection in Bishof. His Honour concluded that in the exercise of the discretion it would be pertinent to take into account the extent of the connection between the non-party and the proceeding and the causal connection between the third party and the costs.[4] His Honour pointed out, correctly in my respectful opinion, that in some cases the connection between the non-party and the proceeding may be slender, but there may be a close relationship between the non-party and costs (or increased costs) incurred. At the other extreme it may be that the non-party stands to benefit greatly from a proceeding, but may not have had any real part in supporting the proceeding, and so any real part in the incidence of costs.

Before parting from consideration of the Court's jurisdiction generally to make costs orders against non-parties I should refer to Knight and Anor v FP Special Assets Ltd and Ors[5] which was referred to in argument, most particularly a passage in the joint judgment of Mason CJ and Deane J[6]. Even if it be the situation that the "general category of case" to which their Honours referred was one necessitating the cumulative presence of the three circumstances there set out, I do not understand their Honours to have said that such a category marked the boundaries of a proper exercise of discretion. What they said elsewhere in their judgment[7] tends against such a reading of the particular passage which was highlighted in debate before me.

I turn to consider r. 63.23. According to the defendant's argument Joseph Guss, as solicitor for the plaintiff, caused costs to be incurred improperly or without reasonable cause after 2 February 2001. For that reason an order should be made against him under r. 63.23(1)(c) that he pay a part of the defendant's costs. Counsel for the defendant, then, did not seek an order under paragraph (1)(b) - that is, that Mr Guss pay to the plaintiff some part of the costs which she might be ordered to pay to the defendant.

Despite what seems to me to be the unusual wording of r. 63.23(1)(c) its English counterpart, O. 62 r. 11 (formerly O. 62 r. 8), has been understood to authorise the order which the defendant sought here[8].

It is not necessary in the present case to traverse all the learning concerning various descriptive words and phrases which have been used from time to time in r. 63.23, its predecessors and its English counterparts. But I must advert to some matters concerning the language of the rule and its interpretation.

In the present case the defendant relied specifically upon conduct of Mr Guss in one respect in connection with the trial. In substance, counsel contended, Mr Guss had in his possession before the trial began a document which at the least bore heavily upon, if it was not decisive of, an issue which the plaintiff much debated at trial, and which the plaintiff claimed was not susceptible of definite answer. The document, adverse to the plaintiff, was not discovered, and the case went to trial, counsel evidently being not fully instructed, on a false basis. Costs had been run up in consequence. The defendant submitted, in effect, that this conduct should be described as improper according to a consensus of professional opinion, whether or not it violated the letter of a professional code[9].

There are two parts to the opening portion of r. 63.23(1). The first deals with conduct which causes costs to be incurred in certain circumstances. The second deals with conduct which causes costs to be wasted. The statutory description of the circumstances which are pertinent to the wasting of costs was amended by SR No. 36/2000. The earlier formulation was considered in Abrahams and Anor v Wainwright Ryan[10] and in Etna v Arif[11]. What was said, particularly in Etna, concerning "negligence" has, I think, been overtaken by the change in the language of the rule. But even if a failure to act with reasonable competence bespeaks something more stringent than would make out a case of negligence in a professional negligence claim - which I doubt is the case - it would not touch the present matter having regard to the way that counsel for the defendant advanced his client's case.

More to the point is the amendment which was made to r. 63.23(2) by SR No. 36/2000. Before the amendment, paragraph (2) commenced:

"Without limiting paragraph (1), a solicitor is in default for the purpose of that paragraph where..."

"Without limiting para. (1), a solicitor fails to act with reasonable competence and expedition for the purpose of that paragraph where..."

Before amendment, then, para. (2) related to both situations encompassed by the opening portion of para. (1); but after the amendment it related only to the second of them.

In Abrahams, Beach J at first instance set a limit to the circumstances in which the negligence component of r. 63.23(1) as it then stood could be put. Thus:

"Rule 63.23(1) deals with costs which have been incurred improperly or without reasonable cause or to be wasted by undue delay or negligence or by any other misconduct or default. Clearly a solicitor's negligence in the preparation and/or presentation of a case may cause a client loss in that having failed to establish his claim the client is required to bear his own costs of the proceeding and to pay those of the other side. But when the rule talks about costs to be wasted by negligence, in my opinion it is talking about costs thrown away by reason of the negligence of the solicitor in performing an interlocutory step in the proceeding or function related to the proceeding, for example filing a defective affidavit of documents thereby being required to prepare and file a further affidavit which complies with the rules; subpoenaing witnesses to attend Court on the wrong day; or failing to appear at Court on the day fixed for the trial of the proceeding. If a client contends that his solicitor has been negligent in the preparation and presentation of his case thereby causing him loss, the appropriate course of action for the client is to institute a proceeding against the solicitor seeking damages. In my opinion such a claim cannot be litigated in the original proceeding let alone upon the hearing on an application such as the one presently before the court."

J.D. Phillips JA, on the appeal, described the function of the Rule generally, this way:

"As I see it, r. 63.23 provides for summary relief where, by reason of some specific act, neglect or default on the part of a practitioner, a procedural step along the way has been so taken or not taken as to occasion costs improperly or unnecessarily or to cause costs to be wasted; where the case is plain enough, a summary remedy is available under r. 63.23 - subject always, of course, to para. (3). That was the view of the rule taken by Beach J. and, with respect, I agree."[12]

It may well be that what their Honours said was conditioned, notwithstanding the non-limiting opening words of paragraph (2), by the matters there set out - the paragraph applying, before the amendment, to any conduct alleged to infringe para. (1). As r.63.23 now stands it appears to me that there is ample reason, at least with respect to the first of the situations to which para. (1) applies, to give the paragraph an application which would extend to evidently improper behaviour by a solicitor which caused costs of trial to be inflated.

Orders for costs on a solicitor and client basis

The circumstances in which an order for solicitor and client costs may be made are clear. The Rules show that normally costs are to be awarded on a party and party basis. There is a discretion, however, to award costs on a solicitor and client basis. The exercise of the discretion is reserved for what may be called exceptional cases. Situations which may call for the exercise of the discretion were discussed in Colgate Palmolive Co v Cussons Pty Ltd[13]. See also, in this Court, Australian Guarantee Corporation Ltd v De Jager[14]; Shepherd v National Mutual Life Association of Australasia Ltd[15]; Yunghanns and Anor v Elfic Ltd[16]; National Australia Bank v Petit-Breuilh (No.2)[17]; and, MacLaw No. 469 Pty Ltd v Ilana Accessories Pty Ltd [18]. For the purposes of the defendant's application for costs partly on a solicitor and client basis I have been guided by those authorities.

I turn to consider the defendant's application for costs against the plaintiff and the three other persons.

Mrs Guss was a plaintiff throughout the time when the proceeding was on foot. It is not in doubt that she should be liable for party and party costs of the consolidated proceeding. The contrary was not argued. The only question for my determination is whether she should be made liable for costs on a solicitor and client basis after 2 February 2001.

Later in these reasons I conclude, for reasons which I set out, that Mr Joseph Guss should pay the defendant's costs for one day of the trial on a solicitor and client basis. The question, then, is whether the plaintiff should also be made liable to pay costs for that period on such a basis. There is no reason, I make it clear, why she should be required to pay costs on a solicitor and client basis for a period of more than a day.

I accept that, ordinarily, it is correct to treat the client and the solicitor as one, in the sense that the client is, in effect, ultimately responsible for the way in which a proceeding is conducted. But in this case I was left with the clear impression after a lengthy trial that the litigation was controlled by Mr Joseph Guss, and that his wife's role was entirely passive. Not only, indeed, was the litigation controlled by Mr Joseph Guss, he evidently considered that he had a stake in its being successful. The default on his part which in my opinion makes him liable to pay solicitor and client costs should not, in the particular circumstances, be visited upon his wife, the plaintiff.

Mr Antony Guss is the son of Joseph and Sandra Guss. He was a plaintiff in one of the two proceedings which were commenced in 1998, and which were consolidated by order made on 25 March 1999. He ceased to be a party in consequence of the Master's order on that day that proceedings brought by he and by his sister Marilla be discontinued.

The costs consequences of discontinuance are set out in Rules 23.05 and 63.15. As I noted earlier, no order otherwise, for the purposes of the latter rule, was made in the case of Mr Antony Guss. It follows that, whether or not the defendant has in fact made any claim for costs in respect of the period up until discontinuance, such a claim could be made. Whether it would be likely to attract any costs in fact may be doubted. But that is another matter.

The defendant sought to rely, in its application for costs against Antony Guss, on letters which its solicitors wrote to him and which were dated 23 October 2000 and 2 February 2001. Mr Guss acknowledged receipt of the first letter but denied receipt of the second. I reject his denial. His evidence upon that matter was thoroughly unimpressive.

The two letters were written for a judicial audience on an application such as this, rather than for a laymen. That was acknowledged by counsel for the defendant.

That said, the thrust of the letters was that this proceeding was hopeless and that its core allegations had been so described in related proceedings in the Federal Court. Further, the Portsea property in part comprised trust property of a trust of which Antony Guss was a beneficiary. He should take steps to bring the case to an end, and so save costs.

Antony Guss said that he had some, but limited awareness of the existence of a trust pertinent to the Portsea property. Notwithstanding that he had previously been involved in litigation where the existence of such a trust was alleged, and had been a plaintiff in the present proceeding at its inception, I can readily accept that he had an imperfect knowledge of the trust. Why that should be so emerges from my reasons for judgment delivered on 20 February 2001, which show the way in which Mr Joseph Guss dealt with the property over the years, and the nature of and circumstances in which various documents were executed with respect to it.

Antony Guss said that he did nothing on receipt of the one letter which he acknowledged receiving. He said that he regarded the defendant and its solicitors as the opposition, whose communication should be viewed sceptically if not with hostility. The state of mind which he alleged can readily be accepted. The evidence at the trial of the proceeding showed that there has been an unrelenting war between the defendant and the Guss family since 1991. Antony Guss has been involved in that war. Its rights and wrongs are, in a sense, beside the point.

The proceeding was, as I said, commenced in 1998. Antony Guss ceased to be a party in early 1999. But not until late October 2000 did the defendant's solicitors write the first of the letters upon which they relied in support of the costs application. By that time the date fixed for hearing was quite close. Notwithstanding, the defendant sought costs against Antony Guss from the inception of the proceeding.

Counsel for the defendant described possible courses which Mr Guss might have taken in consequence of receipt of the letters. He might have made application to remove the trustee. He might have given directions to the trustee with respect to the trust property.

In my opinion there was an air of unreality about the defendant's submissions, particularly having regard to the late time at which the letters were sent, and the fact that the Portsea property was split, by joint tenancy, into three parcels - one parcel comprising trust property of the trust of which Antony Guss was beneficiary and one parcel each trust property of trusts of which Marilla Guss and Alistair Guss were beneficiaries. In practice, if not in theory, multiple consonant directions would have been required; or, from a practical standpoint, joint application for the removal of the trustee. That says nothing about likely problems of enforcing a direction, or of removing Mr Joseph Guss as trustee.

I further consider that the letters relied upon by the defendant marked an ambiguous course. They relied upon the existence of trusts, the existence of which the defendant strenuously denied at trial, to call upon Antony and Marilla Guss to act. It seems to me that this course contained an element of the defendant having its cake and eating it too. If the argument that the property was not trust property had succeeded it would have removed the basis upon which it was said that Antony and Marilla Guss could have prevented the proceeding going forward. But had that argument succeeded the defendant's potential liability in the proceeding would have been, upon its submission, halved.

Counsel argued that a costs order should be made because, had the proceeding succeeded, Antony and Marilla Guss stood to reap a benefit. That was nominally so, but I think it is very unlikely that Antony Guss ever saw a benefit for himself in this litigation. Never before had any of the Guss children gained any direct benefit from the trusts. Furthermore, Mr Joseph Guss claimed in his evidence a right (supported, he said, by the opinion of senior counsel) to recompense himself from any proceeds of the litigation.

Making an order for costs against a non-party is not the usual course. Such an order should be made very cautiously. In the present case I am not at all persuaded that such an order should be made against Antony Guss. The fact that I consider him to have been evasive and unreliable in some respects in his evidence does not touch that conclusion. My conclusion is based upon the various considerations which I have outlined. I only add that, had I thought it right to make any order for costs against Antony Guss, it would not have been an order in respect of all the costs of the proceeding; and it would not have been made on a solicitor and client basis as to any part.

Like Antony Guss, Marilla Guss was a party at the commencement of the proceedings which were in due course consolidated, and she ceased to be a party in consequence of the order of the master made on 25 March 1999. In her case also, discontinuance carried a costs consequence.

The basis upon which counsel for the defendant contended that there should be an order for costs of the proceeding against Marilla Guss was the same basis upon which an order for costs was sought against Antony Guss. I decline to make such an order, essentially for the same reasons as in the case of Antony Guss.

Having said that I should note, for the sake of completeness, that Miss Guss admitted receiving the letters of 23 October 2000 and 2 February 2001, contended that she had an extraordinarily incomplete understanding of what was involved in the litigation spawned by the defendant taking possession of and selling the Portsea property - to the point where she seemed to say that she was unaware of a proceeding in the Federal Court by which an attempt was made to set aside a bankruptcy notice served upon her - and expressed a strong and hostile appreciation of the defendant.

I consider it probable that the knowledge which Marilla Guss had of the detail of all the litigation that has taken place since 1991 - litigation that has attained, really, the status of an industry - was at relevant times imperfect; and that she did, I think understandably, instinctively mistrust the defendant and its solicitors. That said, she was an unimpressive witness and in some measure it might fairly be said that her success in defending the present application was despite rather than because of her evidence.

Counsel for the defendant submitted, concerning Mr Joseph Guss, that the application for costs should be broken up into three periods: first, the period before a sequestration order was made against him (the order was made on 21 December 1998); second, the period between 21 December 1998 and the date on which the trial began, 2 February 2001 (which was also the day on which Mr Guss ceased to be a party to the proceeding); and third, the period commencing on 2 February, that is, the period of the trial.

According to the submission of counsel for Mr Guss no order for costs could or should be made against his client in respect of the first two of those periods by reason of provisions of the Bankruptcy Act 1966 (the Act).

I understand the arguments which were advanced in this connection to be as follows:

First, it had been held by Gray J in the Federal Court[19] that Mr Guss' trustee in bankruptcy had made a valid election to prosecute the proceeding by letter dated 12 February 1999[20]. The consequence of the election was that, in the ordinary course, the trustee would have been liable for the costs of the proceeding in the event that it failed, this including costs pertaining to the period before the bankruptcy and the election[21]. The fact that here the trustee was only late substituted as a party[22] and that on his application he was removed as not being a necessary party[23] did not detract from the validity of the general proposition. It would be anomalous if, by resort to a non-party order for costs in respect of the period up to the trustee's removal, a successful defendant could effectively circumvent the principle that it is the electing trustee who faces the costs burden. In this connection I note that when ordering the substitution and then the removal of the trustee on 2 February 2001 I reserved costs; and I further note that in the course of the costs debate which followed the trial the defendant did not seek any costs order against the trustee.

Second, with respect to the period before the making of the sequestration order - that is, 21 December 1998 - any costs liability of Mr Guss was a debt provable in his bankruptcy. The defendant should lodge proof of debt[24]. Moreover, by reason of s. 58(3) of the Act the defendant could not pursue a costs application against him without leave of the Federal Court; and no such leave had been obtained. The costs liability was properly described as a "contingent liability", contingent upon the election of the trustee whether or not to prosecute the proceeding.

Third, with respect to the period between 21 December 1998 and 2 February 2001, Mr Guss was at all times a bankrupt. True it was that there had been stays on the sequestration order originally made by Kenny J in the Federal Court, and upon the order of the Full Federal Court upholding her Honour's order; but the effect of such stays had been only to stay the taking of administrative steps upon the sequestration order, not to suspend its operation[25].

Counsel for the defendant conceded with respect to the first period that election exposed the trustee to the costs of the whole of the action. But he submitted that if the argument for Mr Guss was correct, it would mean that the successful party could not prove in the bankruptcy for costs referable to the pre-bankruptcy period; and that could or should not be so. He further submitted that s. 58(3) of the Act had nothing to say about the right of his client to pursue a claim for non-party costs against Mr Guss.

Counsel for the defendant submitted, in respect of the period between 21 December 1998 and 2 February 2001, that his client could not prove in the bankruptcy. The claim for costs would not constitute a provable debt. He contended that his client should have non-party costs against Mr Guss referable to those parts of that period when a stay order was in place. During those parts of that period, he submitted, the trustee in bankruptcy could not have prosecuted the action; but Mr Guss in fact did so. He met the submission that to make a non-party order would subvert the conception that once a trustee has elected it is the trustee should bear any costs by emphasising that the costs claim in respect of the period under discussion was confined to those times when a stay was in place. He argued that the fact that the trustee might be liable for costs said nothing about the court's jurisdiction to make a non-party order.

Let it be supposed, for argument's sake, that there were circumstances which would otherwise justify an order for non-party costs being made against Mr Guss in respect of the first and/or second period. Can and should such an order be made?

So far as I can see, neither counsel for the defendant or for Mr Guss contended that the defendant could not prove in the bankruptcy in respect of any non-party costs which I might order Mr Guss to pay referable to the period up to 21 December 1988. Counsel for the defendant argued that a consequence of the submission made for Mr Guss that it was the trustee who should be liable for costs was that the defendant would be denied a right to prove in the bankruptcy. But that is not what counsel for Mr Guss submitted. True it is he submitted that an order for costs should properly be made against the trustee. True also it is he submitted that no order could be made against his client referable to the period in question. But a liability for costs may enure against more than one person; and counsel for Mr Guss submitted, indeed, that his client's potential liability for costs referable to the first period would, absent any order against his client, be provable in the bankruptcy.

The question is then whether s. 58(3) has anything to say about the situation; and, if it does not, whether there is any other reason why a non-party order should not be made.

I reject the submissions of counsel for Mr Guss concerning s. 58(3). Sub-paragraph (a) concerns enforcement of a remedy in respect of a provable debt. Sub-paragraph (b) precludes a creditor commencing any legal proceeding in respect of a provable debt or taking any fresh step in such a proceeding except by leave. An application for costs by a successful defendant in a proceeding initiated by the bankrupt in my opinion fits neither of those disjunctively expressed situations.

But should an order be made? I think not. If an order was made, it (or its money consequences) would be provable in the bankruptcy. That is the end point of the arguments advanced by counsel. The defendant, however, would in any event be entitled in the ordinary course to a costs order against the trustee, who might well have a right of indemnity against the bankrupt's estate. Even if the circumstances of the matter otherwise justified me making an order for non-party costs I see no reason why I should exercise a rarely exercised discretion to make such an order against Mr Guss in the situation described, perhaps particularly where, for unexplained reasons, the defendant has not sought a costs order against the trustee.

I turn to the second period. In the ordinary course the trustee's liability for costs would embrace that period. I do not consider it at all likely that an order would be confined because, for part of the period, there was a stay on the sequestration order of the type which I have described. If it be the case that Mr Guss took steps in the proceeding whilst a stay was in place which (by reason of the stay) the trustee could not then have taken, and that a costs order would for that reason have a larger content, I still see no reason why an order in the ordinary form would not be made. Fault, if there be fault, could be said to lie with the trustee for his delay in taking steps to be substituted as a plaintiff.

Assume the correctness of the defendant's argument that the defendant could not prove in the bankruptcy against Mr Guss in respect of costs referable to the second period. The question which then arises is whether s. 58(3) of the Act would stand in the way of an application for non-party costs against Mr Guss. I think that it would not do so. What I said earlier about the operation of the subsection is in point. That leaves the question whether, in the exercise of my discretion, an order should be made against Mr Guss. Again, I consider not. The making of such an order, in circumstances where no order has been sought against the trustee for reasons unexplained, would in substance replace the ordinary costs regime with a regime which is rarely put in place. True it is that an order for costs may be made against more than one person. But I am not persuaded (quite apart from the issue whether the circumstances generally would justify an order of non-party costs) that an order for non-party costs should be made. A fortiori that is so when the order sought was based upon a distinction between parts of the second period which I consider was not sound.

Having explained why I will not make a costs order against Mr Guss for periods up to 2 February 2001, I turn to consider the defendant's application for a costs order against him for the period of the trial, that order being sought on a solicitor and client basis.

Counsel for Mr Guss did not submit that the provisions of the Act precluded an order being made in respect of such period. He argued, however, that the circumstances in which a non-party order might be made were specified in the judgment of Mason CJ and Dean J in Knight v FP Special Assets[26], that the circumstances did not fit the template, that the circumstances did not meet the criteria according to which an order will be made against a legal practitioner, and that the circumstances did not in any event justify an order for costs being made on a solicitor and client basis. He further submitted that if I was to make a costs order under r. 63.23 it should be for no more than two days' costs - on the footing that any default of his client led to no more than costs of that dimension being incurred.

I have already dealt with the legal issues which counsel raised. What is left is the factual debate. According to the defendant's case Mr Guss had in his hands, before the trial, the plan prepared by Mr Tyrell in 1997. It unequivocally showed that the south east corner of the buildings erected on the property encroached onto the eastern lot. That impeached the plaintiff's case, which was that the precise location of the buildings was not ascertainable. The document should have been discovered by the plaintiff, but was not. Counsel should have been briefed about the document, but in view of his opening, and what he said to me on 12 February 2001[27], it is apparent that he was not so briefed. The plaintiff, Mr Guss' wife, should have been informed about the document, but by inference she had not been so informed. Mr Guss' evidence upon the matter, when the defendant belatedly learned of the existence of the document, was untruthful. The case had proceeded upon a false basis for a prolonged period. Additional costs had been run up.

In answer to those allegations counsel for Mr Guss relied upon evidence given by Mr Muir, the surveyor engaged by Mr Guss. He had obtained the Tyrell plan on 31 January 2001. Counsel relied also upon the evidence of Mr Guss at trial, the gist of which was, he submitted, that Mr Guss had considered the plan to be ambiguous and uncertain after he had viewed it and discussed it with Mr Muir.

I have a very clear view about the factual debate. I have carefully considered Mr Muir's evidence on the costs application. It has not caused me to alter the unfavourable view I reached at trial concerning Mr Guss' conduct.

The substance of Mr Muir's evidence was that he obtained the Tyrell plan on 31 January. He sent a copy to Mr Guss and discussed the plan with him. He did so on 31 January. He told Mr Guss that he could not conclude whether or not the house was over the title boundary. He said nothing to Mr Guss (or, would have said nothing) about what he described as the "brick building", although he had no doubt that it substantially encroached onto the eastern lot. The brick building was a "minor structure", and discussions were to do with the "main house".

Pertinent evidence at trial, admitted as to credit, is at trial transcript 636-652. Mr Guss said that he had only seen part of the Tyrell plan before the day on which he was recalled - that is, 12 February. His answer was shown to be wrong, and I think that it was a deliberately untruthful answer. He was taken to evidence he had earlier given that he had always believed that there was no encroachment. He said that when he gave that evidence he had not received a copy of the plan, but that communication with Mr Muir had led him to believe that there was no encroachment, or that information was inconclusive. The first part of the answer was clearly wrong, and I think deliberately so. The second part of the answer was, I think, based at least in part upon things which Mr Guss said that the plan, which he had denied having seen in full before giving evidence, showed.

Mr Guss' evidence when recalled was, regrettably, not credible. He obviously received a full copy of the plan on 31 January. He was closely familiar with the property and the buildings that were on it at pertinent times - more so than Mr Muir, who could not have seen them. He had the capacity, more than Mr Muir, to understand the significance of the obvious encroachment onto the eastern lot of the "brick building" (called at trial the rumpus room) which was shown by Mr Tyrell's plan. Even if Mr Muir did not mention to Mr Guss the undoubted encroachment of that building onto the eastern lot, I reject entirely the import of Mr Guss' evidence that at the commencement of the trial he considered the Tyrell plan to be inconclusive.

I am, in the event, well satisfied that Mr Guss did not discover a document that should have been discovered, did not brief counsel fully, and permitted the trial to proceed on a false basis for six of its nine days. That was very wrong. It is conduct which, compatibly with the principles which guide the making of an order for costs against a legal practitioner, well justifies the making of such an order. It is further conduct which justifies the making of an order on a solicitor and client basis. In the latter connection I take into account the circumstances that this was litigation which, despite the allegation that the property was trust property, was at the heart of Mr Guss' attempts to have his bankruptcy set aside; and that it was litigation which I am sure he had sponsored and promoted throughout.

In making findings adverse to Mr Guss, I have had well in mind the gravity of the misconduct (using the term in a non-technical sense) alleged against him. I have therefore set the bar high before finding any allegation made out against him. That heavy onus has been satisfied.

I consider, then, that an order for costs should be made against Mr Guss. It should only be made, however, to the extent that his misconduct caused the trial to be prolonged. He should not be made the subject of an order for costs reflecting the harm which might have been done had the trial proceeded to conclusion and judgment before his default was discovered. Fortunately, from his standpoint, that did not happen.

It is not easy to calculate with precision the amount of time that was added to the trial because it was not conceded by the plaintiff at the outset that part of the premises encroached onto the eastern lot. It would still have been relevant to ascertain the belief of the various witnesses whether or not there was encroachment at relevant times. That belief would have been pertinent to what steps should reasonably have been taken by the defendant, through the agents, to ascertain the objective situation. Had I been satisfied that the defendant had not by its agents taken such steps, or had the plaintiff satisfied me on the available material that there was no encroachment, then putting other issues to one side the plaintiff could have hoped for a judgment. Again, had I been satisfied that those steps had not been taken, and had the plaintiff satisfied me that it could not be said as a matter of probability whether or not there had been encroachment, then putting other issues to one side the plaintiff again might have hoped for a judgment.

Evidence of belief, then, would have been pertinent in any event, as would evidence of what steps were taken by the actors - particularly Mr Guss, Mr Anderson, Mr Sutherland and Mr Ellis. By the afternoon of 9 February 2001 of those witnesses only Mr Guss and Mr Anderson (in part) had given evidence.

It seems to me, however, that if the Tyrell plan had been discovered by the plaintiff and the true situation conceded at the outset rather than on 12 February 2001, then -

* the opening would have been a very little shorter;

* Mr Guss's evidence (before his recall) would have been a very little shorter;

Doing the best I can, I think that the trial was extended by about a day by reason of the default of Mr Guss. I think that the appropriate way in which to reflect his default is to order that he pay the costs of a specific day of the trial. I have selected 12 February 2001, on which day Mr Tyrell gave evidence and Mr Guss was recalled.

Subject to anything that counsel may say as to form I shall make orders that -

1. The defendant's costs of the proceeding, including reserved costs, be paid by the plaintiff on a party and party basis.

2. The defendant's costs referable to the hearing on 12 February 2001 be paid by Joseph Guss on a solicitor and client basis.

3. Satisfaction of the order made by paragraph 2 be satisfaction of the order made by paragraph 1 so far as the defendant's costs referable to the hearing on 12 February 2001 are concerned.

4. Satisfaction of the order made by paragraph 1 be part satisfaction of the order made by paragraph 2 so far as the defendant's costs referable to the hearing on 12 February 2001 are concerned.

5. The defendant's summons dated 19 March 2001 be dismissed with costs.

[1] Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 at 980.

[2] Bishof & Anor v Adams & Anor [1992] VicRp 61; [1992] 2 VR 198 at 202-204; and, as examples of that last proposition, Burns Philp & Co Ltd v Bhagat [1993] VicRp 13; [1993] 1 VR 203 (see particularly at 221 and 223), Yates Property Corporation Pty Ltd v Boland (No.2) [1997] FCA 760; (1997) 147 ALR 685, Cabot v City of Keilor [1994] VicRp 14; [1994] 1 VR 220 (a case concerning s. 58 of the Planning Appeals Board Act 1980 and s. 150 of the Planning and Environment Act 1987 - see particularly at 227), and Flinn v Flinn [[1999] VSCA 109; 1999] 3 VR 712.

[3] Aiden at 980 per Lord Goff, see also Bhagat at 219 per Brooking J.

[8] See: Ridehalgh v Horsefield [1994] Ch 205 at 227-228, [1994] 3 All ER 848 at 857.

[9] Paraphrasing Ridehalgh, supra, at Ch 232.

[13] [1993] FCA 536; (1993) 46 FCR 225 at 233 per Sheppard J.

[15] Hedigan J, 15 November 1994, unreported.

[16] Gillard J, 16 July 1998, unreported.

[19] Lofthouse (in the matter of Guss) [2001] FCA 5 at [23].

[21] Lofthouse at [23], Watson v Holliday (1882) 20 Ch D 780, Crotty v Anderson (1896) 22 VLR 120.

[22] See R. 9.09(1)(2) of Chapter I of the Rules, see also Emden v Carte (1881) 17 Ch D 768.

[23] See R. 9.06. His application that he be removed was founded on Mr Guss, as he claimed, having removed himself as a trustee of the trusts in favour of the children on the day before the trial commenced and upon the footing that, as the statement of claim was framed, the claim for damages arose with respect to trust property.

[25] Guss v Johnstone & Anor [2000] FCA 1593 at [6] and [14].

Supreme Court (General Civil Procedure) Rules 1996

Planning Appeals Board Act 1980

Environment Act 1987

At a glance

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Judgment (105 paragraphs)

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