Illawong Village Pty Limited v State Bank of New South Wales [2005] NSWSC 524 | Case summary

3426/00 ILLAWONG VILLAGE PTY LTD v STATE BANK OF NSW LTD JUDGMENT - Ex Tempore (application to stay costs order) 1 HIS HONOUR: The principal proceedings in this case were an application by a borrower from a bank to seek to recover from that bank an amount of interest which the borrower claimed the bank had overcharged it. The hearing took 14 hearing days. It concluded on 24 November 2003, and judgment was delivered on 4 February 2004. The judgment was one which dismissed the plaintiff's claim. Orders were eventually made, including an order that the plaintiff pay the defendant's costs, on 10 March 2004. Those orders were entered on 15 March 2004. 2 On 7 April 2004 the plaintiff filed a notice of appeal, which was amended on 8 June 2004. 3 The appeal has now come to be set down for hearing for three days commencing on 12 September 2005. The appeal was set down in November of last year. 4 On 21 June 2004 the solicitors for the defendant wrote to the plaintiff's solicitors providing a costs estimate in the sum of $538,000, and requesting some detailed information about the plaintiff's capacity to pay those costs and the costs of the appeal. 5 No information was provided about the plaintiff's capacity to pay the costs. Further, an invitation to agree on an amount of costs was not productive of any agreement. 6 The defendant proceeded to draw up a formal bill of costs which was served on 15 November 2004. It was for an amount of a little over $650,000. 7 On 19 November 2004 the plaintiff wrote to the solicitors for the defendant seeking a stay of the costs order pending appeal. 8 In December 2004 the plaintiff took steps to have the defendant's bill of costs referred for assessment, and on 30 December 2004 the Principal Registrar wrote to the solicitors for the plaintiff notifying that Mr O'Brien had been appointed as assessor. 9 On 5 January 2005 the solicitor for the plaintiff wrote to Mr O'Brien requesting that his assessment await determination of the appeal. Surprisingly, a copy of that letter was not sent at that time to the solicitors for the defendant. On 24 January 2005 the solicitors for the plaintiff wrote to Mr O'Brien informing him that they proposed to apply to the trial Judge as soon as possible for a stay of the costs order. Mr O'Brien wrote back on 2 February 2005 saying that the application for a stay should be made within 21 days of his letter of 14 January 2005, failing which he proposed to set a timetable for the further conduct of the assessment. By his letter of 14 January 2005, Mr O'Brien had told the solicitors for the plaintiff, correctly, that he had no power to stay the assessment which had been referred to him. 10 There were various attempts made to obtain from the Court a date which was suitable for the hearing of the stay application. The Court had a date available on 25 February 2005, but that was not suitable to the plaintiff's counsel. Another date which the Court had available was 23 March 2005, but through what I accept was a failure of communication rather than anything ulterior, that date was not availed of. Another date which was available to the Court was 5 May 2005, but that date was not suitable to the plaintiff's counsel either. Eventually, the date of 31 May, today, was one which was availed of, and a Notice of Motion has been taken out returnable today. 11 The first basis upon which the plaintiff contends that it ought to have a stay of the costs order is that there are reasonably arguable grounds of appeal. I was referred to the decision of Maxwell J in Andrews v John Fairfax and Sons Limited [1979] 2 NSWLR 185 at 189, where his Honour in turn referred to an unreported decision of the Court of Appeal in Bridges v Australian Consolidated Press Limited (Court of Appeal, 16 June 1970, unreported) in which Sugerman P (with whom Jacobs and Mason JJA agreed), said: "The two primary requirements which need to be fulfilled in order that a stay of proceedings upon a verdict at common law should be granted appear to be, first of all, that if the damages and costs were paid, there would be no reasonable probability of getting them back if the appeal succeeds, and, secondly, that there should be reasonably arguable grounds of appeal." 12 That test has also been applied by Morling J in Australian Federation of Consumer Organisations Incorporated v The Tobacco Institute of Australia Limited (No 2) (1991) 30 FCR 548 at 551. 13 As I was the trial Judge, the hearing of this Notice of Motion places me in a situation where I would prefer not to have to decide whether there were reasonably arguable grounds of appeal. I indicated to counsel my embarrassment in that respect, and the argument has proceeded upon an assumption that there are reasonably arguable grounds of appeal. 14 Even on that assumption, however, the test which Sugerman P articulated in Bridges v Australian Consolidated Press (Court of Appeal, 16 June 1970, unreported) is not satisfied. That is because the test is a two part test, and in the present case there is no basis at all for believing that if the costs were paid and the appeal were to succeed there would be no reasonable probability of getting the costs back, given that the defendant is a subsidiary of a major bank. 15 I accept that since the judgment in Alexander v Cambridge Credit Corporations Limited (receivers appointed) (1985) 2 NSWLR 685, the attitude of the Courts has softened somewhat towards the granting of stays pending appeal to the attitude which prevailed prior to that time. 16 As the Court (Kirby P, Hope and McHugh JJA) said at 694: "… it is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour." 17 Thus, the test is a general discretionary one, not confined to the two factors identified in Bridges v Australian Consolidated Press (Court of Appeal, 16 June 1970, unreported). The starting point of a consideration of whether a stay ought be granted is still that "[p]rima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct": per Mahoney JA (with whom Moffatt P and Glass JA agreed) in Re Middle Harbour Investments Ltd (In Liq) (Court of Appeal, 15 December 1976, unreported), approved in Alexander v Cambridge Credit at 694. As well, in Alexander v Cambridge Credit at 694, the Court said: "There are other principles to be kept in mind. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties. The mere filing of an appeal would not of itself provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears. The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the Court may, in the exercise of its discretion refuse to grant a stay." (citations omitted) 18 In the present case the plaintiff has established that the costs of the assessment may well be significant. The costs could, at the top end of the possible range, run as high as $120,000 or thereabouts. The plaintiff submits that, if it were to succeed on the appeal and the costs order were to be overturned, the costs and effort involved in conducting the assessment at this stage would be wasted. That is undoubtedly true. However, insofar as the time of professional people is involved, whether they be solicitors, cost assessors or costs consultants, that is a loss which can be adequately compensated for by a costs order. There is no real doubt that if the plaintiff were to succeed in the appeal it would receive a costs order from the Court of Appeal, and that the costs of carrying through an order for costs made at first instance, by assessing those costs, are part of the costs concerning which a successful appellant's costs order would be recovered. 19 The plaintiff also submits that the plaintiff ought not be distracted, while there is a substantial appeal in preparation, by needing to answer inquiries and so on in the course of a costs assessment. I am not prepared to accord a great deal of weight to this factor. Ordinarily, most of the burden of a costs assessment falls upon the solicitor who has had the carriage of the file. While there might be some need for a client to be involved in some matters concerning it, I would not be prepared to conclude that there would be such a burden as to be unreasonable in expecting the plaintiff to both deal with the costs assessment, and deal with such preparations as that there might be for the appeal as well. I say "such preparation as there might be for the appeal", because in the ordinary course of things it will be counsel appearing on the appeal who will have the main bulk of work to do concerning the appeal. In the present case, written submissions for the appeal are already complete. 20 There is some evidence that it could take between four and six months for a costs assessment to reach its conclusion. That is a matter which, in my view, tends to favour the rejection of the present application. That is because of its impact on interest, which I will come to later. 21 The plaintiff submitted that there had been delay by the defendant in enforcing the order for costs, and that that had led to a situation where the parties assumed that no steps would be taken to enforce the order for costs pending the appeal. There is no evidence of any such assumption being made by the plaintiff, and, even if such an assumption had once been made, the opposition which the defendant has made clear, at least since the beginning of this year, that it would be making to a stay of the costs order should have dispelled any such assumption. 22 The plaintiff submitted that there would be no prejudice to the defendant, in light of the fact that it has offered to pay the costs of the assessment if the appeal succeeds. I do not regard that as a complete measure of the potential for prejudice that there is to the defendant. 23 There had been returnable on 23 May 2005 before the Registrar a notice to produce, which the defendant served on the plaintiff, requiring it to produce various financial records. That notice to produce came to be stood over to today, and was called on this morning. While some documents were produced pursuant to it, the notice to produce called for certain other categories of documents which were not produced, namely: "5. The most current creditors ledger/accounts payable ledger of the plaintiff showing amounts owed by the plaintiff to its creditors. 6. The most recent bank statements from St George recording what amount is owing to St George by the plaintiff. 7. The financial year end accounts of the plaintiff as at 30 June 2004. 8. The most recent accounts of the plaintiff subsequent to those in paragraph 7." 24 It was made clear by counsel for the plaintiff that the response that there was nothing to produce meant that there were no documents of that category in the custody or possession of the plaintiff which were capable of being produced - it did not mean simply that there was nothing available to produce today. That means that this plaintiff is in the extraordinary situation of being a corporation which is lacking some of the most basic tools of financial management of a corporation. In those circumstances, it could not be concluded that it is inevitable, or likely, that the plaintiff would be able, ultimately, to pay in full any costs order which might be awarded against it, together with any interest which might accrue on that costs order. 25 The possibility of interest accruing on the costs order arises in the present application as follows. Section 95(1) Supreme Court Act 1970 provides that: "Where judgment is given or an order is made for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid." 26 So far as a costs order is concerned, Part 40 rule 3(4) Supreme Court Rules 1970 provides: "Notwithstanding subrules (1) and (3), where an order of the Court directs the payment of costs and the costs are, pursuant to any Act or the rules, to be taxed, the order shall take effect as of the date of the certificate of taxation." 27 That rule in its terms is not applicable to a quantum of costs which is ascertained by assessment rather than taxation. However, section 215 of the Legal Profession Act 1987 brings into effect Schedule 8 to that Act, and paragraph 45 of Schedule 8 provides that: "… a reference in any Act or other instrument (however expressed) to the taxation of costs is taken to be a reference to the assessment of costs under Division 6 of Part 11." 28 It follows that the order for costs does not take effect until a certificate of assessment is issued, and hence will not bear interest under section 95 until that certificate is issued. It follows also that if the issuing of the certificate is delayed, there will be a period of time, equal to the period of the delay, by reference to which the defendant will be deprived of its entitlement to interest on costs under section 95(1). When there is a possibility that it could take four to six months for a costs assessment, and the amount of costs claimed is large, that is a matter which is a potential item of real prejudice to the defendant. 29 I mention that the defendant has filed a Notice of Motion, which has not yet been heard, in which it seeks a more expansive order for interest on costs. At this stage, the prospects of that Notice of Motion are quite unknown. If it succeeds, the defendant would be entitled to interest on costs from the date it paid its own solicitor the various amounts of costs. In that event, delay in achieving or completing the assessment would not prejudice the defendant at all. However, as I say, the prospects of that Notice of Motion are at present unknown. What can be said, however, is that the defendant will, by delay, lose the certainty of having interest available to it under section 95(1) for the period of the delay. 30 The history which I have outlined shows that there has been considerable delay in this application being heard. That is something which has achieved a de facto stay. The fact that there has been a de facto stay, in that way, is not, however, something which leads to any conclusion about whether it should be continued. 31 I am, taking all these matters into account, not persuaded that an appropriate case has been made out to stay the costs order. The plaintiff's Notice of Motion is dismissed. 32 The defendant seeks costs of the Notice of Motion. The plaintiff opposes that, on the ground that there has been a significant delay since the initial costs order was made, and that there are also significant matters which need to be taken into account concerning costs in the assessment. I do not regard those matters as a reason for displacing the prima facie rule that costs should follow the event. I order the plaintiff to pay the defendant's costs of this Notice of Motion. 33 Counsel for the defendant also seeks a specific order that the costs of the motion for a stay include costs on the topic of a stay of the judgment which were incurred prior to the date of the filing of the Notice of Motion for a stay. The evidence establishes that the topic was debated between the solicitors for the respective parties well before the Notice of Motion was actually filed. 34 Counsel for the plaintiff submits that, first of all, no such order is necessary, because it would be within the scope of a cost assessor's discretion to include those items. As well, he submits, that it would be some sort of an imposition upon the cost assessor to have an order in those terms. 35 I prefer the view that it would be preferable to make the matter clear to the costs assessor, and that a principle underlying costs orders is the provision of an indemnity for costs in relation to an issue on which one of the parties in litigation has succeeded. I therefore order that the costs of the motion for a stay should include costs incurred on the topic of a stay prior to the date of the filing of the Notice of Motion for a stay. **********

Illawong Village Pty Limited v State Bank of New South Wales

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