On 29 January 2018 the Court continued a stay upon the enforcement of certain costs orders that the plaintiffs have against the sixth defendant and other defendants in these proceedings: His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand v Lambe Mitreski [2018] NSWSC 13 ("[2018] NSWSC 13"). The first plaintiff had sought to have the stay lifted. But the sixth defendant opposed the lifting of the stay. The other defendants supported the sixth defendant's opposition but put no additional submissions. The sixth defendant's opposition was based on its desire to bring proceedings itself, and on behalf of the other defendants, to set aside the various judgments that underpinned the costs orders in question, on the basis that those judgments had been procured by fraud.
In its 29 January 2018 judgment the Court concluded that the stay should not be lifted. But as a condition of the continuation of the stay the sixth defendant was put on terms to act expeditiously to seek judicial advice concerning the commencement of proceedings that it had foreshadowed to set aside the judgments that were the substratum of the costs orders, and if judicial advice given, to permit such proceedings to be commenced, then to commence and conduct those proceedings and any related proceedings expeditiously: see [2018] NSWSC 13 at [55].
The Court's orders directed that if the parties could not agree upon costs outcomes of the plaintiffs' motion that the parties should exchange submissions on issues of costs by 5 March 2018; and the proceedings were then listed for costs argument today: [2018] NSWSC 13 at 55 and (5).
The parties could not agree upon costs. The Court heard argument on costs on 9 March 2018. These reasons resolve the issue of costs.
These reasons should be read with the Court's previous judgment: [2018] NSWSC 13. Events, matters and persons are referred to in both judgments in the same way. The appearances were as before. Although representatives of the Attorney General were excused as the Attorney General neither sought costs nor was the object of any application for a costs order.
The Court declined to grant the relief that the first plaintiff sought in his Notice of Motion dated 21 July 2017 ("the motion"). The first plaintiff failed in his application to lift the stay. So the sixth defendant's primary submission is that costs should follow the event and that an order for its costs of and incidental to the motion should be made in its favour: Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1. The other defendants, who were respondents to the motion, also seek costs orders in their favour on the motion.
But the first plaintiff argues that "some other order should be made". The first plaintiff argues that the defendants, other than the Attorney General, effectively invited this litigation by taking no steps whatsoever between 2013 and 2017 to move the Court for orders that they be entitled to an indemnity out of trust assets. The first plaintiff submits that for that reason the defendants bear some responsibility for its bringing the motion seeking an order that the stay be lifted.
The first plaintiff supported this argument by citing the principles of fairness that underly the making of a costs order, which may at times, and the first defendant submits should here, warrant departure from the general rule under UCPR, r 42.1. Hodgson JA set out those principles in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] as follows:
"In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach."
In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No. 2) [2011] NSWCA 256 at [97]-[98], the Court of Appeal identified further factors that may inform the judicial discretion to "otherwise order". These further factors included whether or not the successful party has effectively invited the litigation.
The first defendant says that is just what has happened here by the other defendants undisputed failure to move the Court for the orders contemplated by the Court of Appeal invited the motion he filed in July 2017.
In my earlier judgment [2018] NSWSC 13 at [23]-[24] I dealt with the rationale for the Court of Appeal's orders and what happened thereafter:
"[23] In the Court of Appeal's second judgment, Macedonian Orthodox Community Church of St Petka Incorporated v Metropolitan Petar (No 2) [2013] NSWCA 385 the Court of Appeal gave judgment varying the cost orders made at first instance and also made costs orders on the appeal. The Court of Appeal varied order (3) made by Brereton J on 21 December 2012 by substituting 50% for the percentage of 75% and substituting 10% for the percentage of 25%. The Court of Appeal then stayed order (3) of the orders made by Brereton J 21 December 2012 and Young CJ in Eq's costs orders of 9 June 2009, in the following terms:
"(3) Stay order (3) made by Brereton J on 21 December 2012, as varied, and also the cost orders made by Young CJ in Eq on 9 June 2009, against the defendants until the earlier of the date upon which the defendant's entitlement to indemnity from the trust assets is determined and a date appointed by a judge of the Equity Division for this stay to conclude."
[24] These Court of Appeal orders contemplated that the Association would be able to make an application to have itself indemnified out of trust assets in order to meet the enforcement of any costs order against it. Those indemnity arrangements should be in place, for the protection of the Association, before the first plaintiff actively moved to enforce the costs orders. But between 2013 and 2017 the Association did nothing to move the Court for orders that it be entitled to an indemnity out of trust assets. It explains this delay by saying that the first plaintiff and nothing to enforce the costs orders."
The Association disputed that it had invited the motion by its inaction. It contended that not only had it not invited the motion but the true picture was that the first plaintiff had done nothing to enforce the costs orders and provided no warning to the Association of his intention to bring the motion. The Association contended that if the first plaintiff had initiated enforcement proceedings or foreshadowed the motion that the Association's response would have been to flag its intention to seek judicial advice about setting aside the costs orders and seeking continuation of the stay in the meantime.
The Court should ordinarily be cautious to reward a policy of inaction such as that adopted by the Association. But several factors weigh here in favour of the conclusion that costs prima facie should follow the event.
The first factor indicating costs should follow the event is that the first plaintiff did not provide the Association with any warning of its intention to file a motion. It says, with some justification, that it would have immediately alerted the first plaintiff to the proposal to bring a judicial advice proceedings if the motion had been foreshadowed. The incurring of legal costs can be averted by correspondence before action. Had the first plaintiff initiated such correspondence here it is probable, given what did occur soon after the motion was launched, that the Association would have foreshadowed the judicial advice proceedings.
The second factor indicating that costs should follow the event is that once the first plaintiff filed the Motion and the judicial advice proceedings were foreshadowed the first plaintiff persisted in the Motion to a full contest in December last year. The motion could have been withdrawn or adjourned pending the outcome of the judicial advice proceedings.
The third factor indicating that costs should follow the event is that the history of bitterness between these parties is so great that a policy of inaction, of not applying to seek to have it self-indemnified out of trust assets can be justified on the basis that taking any steps in these proceedings risked stirring up bitter litigious reprisals on the other side. Given the history of these proceedings such a judgment was not unreasonable. Moreover, the Association could anticipate that enforcement was not possible against it unless a motion to remove to stay was filed and in the ordinary course they could anticipate some notice of that motion would be foreshadowed to them first.
For these reasons prima facie the appropriate order is one for the first plaintiff to pay the Association's costs.
But that prima facie picture is complicated by another factor in this case. The Association has commenced the proceedings for judicial advice. There is at least the possibility that the Association will not obtain judicial advice to commence proceedings to set aside for fraud the judgments that underly the costs orders that the first defendant wishes enforce. If the Association were to fail in its endeavour and not receive judicial advice to go ahead with its contemplated proceedings then the costs incurred on the contest of the motion will have been expended in pursuit of an objective that was without merit. If the Association does not succeed in obtaining judicial advice then although the Association wanted time to secure the opportunity to seek judicial advice, there was never any substantive basis to oppose the lifting of the stay and the enforcement of the costs orders. I do not see in those circumstances why the first plaintiff should still have to bear the costs of the Association's application to pursue an opportunity that was in truth a chimera.
But whether that opportunity has substance or not will not be known until the judicial advice proceedings are determined. In my view, if the Association does not get judicial advice to proceed with action to set aside the underlying judgments the costs order contemplated by these reasons should be vacated. In truth, to paraphrase in Commonwealth of Australia v Gretton [2008] NSWCA 117 Hodgson JA's words, the incurring of all these costs would be "the [Association's] responsibility because the [first plaintiff] was caused to incur costs by the [Association's] failure to otherwise accord to the [first plaintiff] that to which the [first plaintiff] was entitled", namely the lifting of the stay to allow enforcement of the costs orders.
But Mr Horowitz on behalf of the Association submits that the costs orders should not be changed and particularly should not be reversed on this account. He says that the Association made clear at the hearing in December last year that if the Court declined to give judicial advice that the Association was justified in bringing proceedings to set aside the underlying costs orders then the Association would have no basis for continuing to oppose the lifting of the stay: [2018] NSWSC 13 at [35].
But Mr Simpkins' answer to this on behalf of the first plaintiff is persuasive. The Court cannot be confident that the Association or the other defendants would have taken such a reasonable position immediately, particularly given the history of these proceedings. Moreover, although the motion was filed on 21 July 2017 it was not for another two and a half months until 4 October 2017 that the Association's intention to pursue the fraud proceedings and seek judicial advice was first raised.
In those circumstances, in my view, it may be too harsh to reverse the costs orders on the motion, if the Association does not gain judicial advice to proceed. The appropriate order in my view is that if the Association does not obtain judicial advice to commence proceedings then each party should bear its own costs of the first plaintiff's motion.
[2]
Conclusion and Orders
For these reasons the Court makes the following orders and directions:
1. Order the first plaintiff to pay the first, second, third, third, fourth, fifth and sixth defendants' costs of and incidental to the first plaintiff's Notice of Motion dated 21 July 2017.
2. Stay Order (1) pending the outcome of the judicial advice proceedings ("the judicial advice proceedings") the subject of Order (2) of the Orders made on 29 January 2018, being the seeking of judicial advice as to whether or not the sixth defendant is justified in commencing proceedings to set aside certain costs orders ("the set aside proceedings").
3. If the outcome of the judicial advice proceedings the sixth defendant does not receive advice that it would be justified in commencing the set aside proceedings then the Order (1) will be vacated and in substitute therefore Order (4) below will be entered.
4. Order that there be no order as to costs of the motion to the intent that the first plaintiff and each of the first, second, third, fourth, fifth and sixth defendants should bear their own costs of and incidental to the first plaintiff's Notice of Motion dated 21 July 2017.
[3]
Amendments
12 March 2018 - [23(1)]- 'third defendant' added
[14] "defendant" at the beginning of the last sentence should read "plaintiff" [18] in the penultimate line "first defendant's" should read "Association's"
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Decision last updated: 12 March 2018
Parties
Applicant/Plaintiff:
His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand