James v Australia and New Zealand Banking Group Ltd

Principles governing leave to appeal

1. The applicant drew the Court's attention to two decisions of the Full Court of the Federal Court, namely Decor Corporation Pty Ltd v Dart Industries Inc [4] and Johnson Tiles Pty Ltd v ESSO Australia Pty Ltd. [5] This Court has developed its own statements of principle, deriving from Carolan v AMF Bowling Pty Ltd t/a Bennetts Green Bowl, [6] more recently summarised in Jaycar Pty Ltd v Lombardo [7] and restated by Bathurst CJ in The Age Company Ltd v Liu. [8] However, the weight to be given to particular factors will depend upon the circumstances in issue.
2. An important factor generally in favour of a grant of leave is the appearance of an issue of principle or general public importance, extending beyond the interests of the immediate parties. There was no such issue in the present case. Further, where all that is alleged is an error in the application of established principle, the error should be (a) clear from a limited perusal of the papers (and not merely arguable), and (b) indicative of a substantial injustice if left unremedied. [9] As will be seen, there was no clear error in the present case. Further, although the amount in issue is not insignificant, there is a risk that permitting further litigation by way of appeal will increase the amount at stake between the parties disproportionately, a factor which bears significant weight in a case in which the only issue in dispute is as to costs.

Extension of time

1. There was a further obstacle facing the applicant, namely that the appeal was filed out of time. The order sought to be challenged was made on 23 June 2016; an application for leave to appeal, or a notice of intention to appeal, should have been filed and served within 28 days, that is by 21 July 2016. A notice of intention was not in fact served until 22 July 2016, although it may be assumed that that delay was inconsequential. Nevertheless, it remained necessary, assuming a notice of intention had been filed and served within time, to file the summons seeking leave to appeal within three months of the orders made by the primary judge, namely by 22 September 2016. The summons was in fact filed on 23 December 2016. The explanation for the delay related to the financial difficulties in which the applicant finds himself. It will be necessary to return to that matter in due course.

Bases of application for leave

1. The principle basis upon which the challenge was mounted was that the primary judge had "insufficient evidence" to arrive at an informed assessment of the costs of the respondents, so as to do justice to both parties.
2. The primary judge referred to the evidence before him, which included an affidavit by the respondents' solicitor as to the costs incurred in resisting the motion, said to amount to almost $340,000, excluding GST. Secondly, there was an affidavit of a costs consultant obtained by the present applicant. It was said in the proposed grounds of appeal to be "an error of legal principle" for the judge to rely upon the evidence of the respondents' solicitor, rather than that of an independent costs consultant.
3. That issue was raised by senior counsel for the applicant appearing on the costs application. [10] The primary judge addressed the objection, noting that "[t]he question is whether the evidence before the court is sufficient to enable the court to arrive at a rational and reasonable assessment of the defendants' costs which does justice to both parties." [11] That statement was legally correct. The judge continued: "What information is necessary to enable the court to undertake that task depends on the particular case. Also relevant will be the amount involved and the need to ensure that the costs of the evidence relevant to the assessment of a gross sum are proportionate to the amount claimed. In some cases, if the evidence in relation to a particular category of cost is inadequate, it may be more appropriate to adopt a discount that reflects that fact rather than to refuse to make a gross sum costs order at all."
4. It is self-evident that that approach involved no error of legal principle.
5. Secondly, the proposed grounds alleged "material errors of fact", of which four were identified. It is necessary to have regard to the four proposed grounds, but it will be seen that the applicant's characterisation was unwarranted. The trial judge did not mistake established facts; rather, he drew inferences from the evidence before him, with which the applicant takes issue. Unless those inferences can be said to be clearly unwarranted or unreasonable, such a complaint would be generally insufficient to warrant a grant of leave to appeal.
6. Taking the four matters in the order in which they were dealt with by the trial judge, being the logical order, rather than that set out in the draft notice of appeal, the first concerned the finding by the judge that the applicant "will not be able to discharge the costs liability in any event." [12] That was a material matter because the judge was also satisfied that the applicant was likely to contest any costs assessment and said, "it is not reasonable to put the defendants to the additional costs of having their costs assessed when the likelihood is that they will not recover those costs or the costs of assessment."
7. The principal factual basis from which that inference was drawn was that a debt in excess of $11.7 million was outstanding in favour of the Bank, for which the applicant was liable on a guarantee. The basis of the challenge was that the companies had a claim to be set off against the Bank's debt, and that claim was said to be worth in the order of $76 million. However, the justification for, and calculation of the value of, the claim were not before the Court; the amount of the debt to the Bank and the applicant's liability for it were not in dispute. The inference drawn was not unreasonable in circumstances where the claim was to be brought by the companies, not the applicant.
8. The second factual matter was the finding that the applicant "was unable to provide a meaningful indemnity in respect of the costs of the companies on whose behalf he sought to bring the derivative actions." [13] The applicant's written submissions in support of that ground of appeal merely stated that the applicant "had in fact offered an indemnity limited to $250,000 for that purpose." The evidential basis for the challenge was unclear and there is, in any event, no reason to doubt the availability of the inference.
9. The third issue of fact was a finding that the applicant's conduct had "unnecessarily contributed to the costs of the proceedings". The judge dealt with that matter in the following terms, as the second of two matters which persuaded him that a gross sum costs order should be made. [14] "Second, in my opinion, Mr James has unnecessarily contributed to the costs of the proceedings. The notice of motion raised two substantive issues. One is whether there was a solid foundation for the claims that Mr James sought to bring. The other was whether Mr James could provide a meaningful indemnity in respect of the relevant companies' costs. It must have been obvious from the start that Mr James was unlikely to satisfy the second of these requirements. Nonetheless, he persisted with the application until 15 June 2016. That was in circumstances where a similar application that Mr James had brought on behalf of other companies failed before Black J for the same reason: see In the matter of Sundara Pty Ltd [2015] NSWSC 1694."
10. Nothing was said in submissions in support of the application to cast doubt upon that reasoning.
11. The final factual finding challenged was the availability of sufficient information to allow an informed assessment of the actual costs incurred by the respondents. As explained, there was no error of legal principle in the approach adopted by the primary judge in relation to this issue.
12. The judge made a careful assessment of the claims, rejecting two aspects in full. [15] He also dealt separately with the costs claimed by the solicitors and those on behalf of counsel. With respect to the former, he noted a complaint that "the work done by each solicitor is not identified." [16] He responded, stating: "But in the context of this case, that information seems to me to be of limited utility. It is not for the court to go through each item of cost to determine whether work was duplicated. Rather, the question is one of impression."
13. The judge then noted that the summary of the work undertaken did not strike him as unreasonable, [17] and that the respondents' solicitor had discounted the amount claimed by one-third to arrive at an estimate of costs that would be recovered on assessment. [18] The judge applied a discount of 40% to the actual costs claimed. [19]
14. With respect to counsels' fees, the judge noted the evidence of the costs consultant that junior counsel would generally be allowed fees at a rate of about 80% of that claimed and that senior counsel would generally be allowed fees at a rate of about 70% of that claimed. [20] He accepted the evidence of the solicitor for the respondents that "the work done by counsel is normally allowed in full on assessment". [21] Although that finding was challenged in the course of the hearing, the total amount was discounted and the Court would not grant leave to challenge a finding on conflicting evidence on an interlocutory application. While it was not possible to assess the reasonableness of the fees in circumstances where the time spent by counsel was not identified, the judge accepted that the time spent would probably not be discounted, but allowed 75% of the amount claimed for counsels' fees.
15. There was nothing unreasonable or clearly wrong in this exercise in drawing inferences; the applicant did not demonstrate that the judge mistook any material fact.
16. The final ground of the proposed appeal alleged that the result was "so unreasonable or unjust as to suggest … error"; that allegation should not be accepted. The reasoning of the trial judge was transparent and methodical. Further, that reasoning took into account the underlying nature of the proceedings, including the fact that the applicant claimed that the receivers had "sold wine for which they have not accounted or sold the wine belonging to the companies at a gross undervalue." He also noted that they were said to have taken control of assets that did not belong to any of the companies to which they had been appointed as receivers. [22] The applicant himself asserted that the claims were worth $76 million, to be set off against the debt of $11.7 million. As the judge noted, it was appropriate to take into account that the costs had been incurred in preparation for a lengthy and complex case, [23] and that the allegations against the respondents were "serious". [24] He considered that the respondents were entitled to challenge the allegations and that "that involved the Receivers giving detailed evidence of what happened during the course of the receivership", an exercise which, it might be expected, "would require a substantial amount of work and would incur substantial costs." [25] Accordingly, the final ground gave rise to no basis for challenging the exercise of the discretionary power.

Conclusions

1. Had the application for leave been brought in a timely way, leave would have been refused. In circumstances where there has been a significant delay in bringing the application, although the delay has been explained, the appropriate course is to refuse the application to extend time.
2. Accordingly, the Court makes the following orders: 1. Refuse the applicant an extension of time within which to seek leave to appeal from the judgment of Ball J of 23 June 2016. 2. Order that the applicant pay the respondents' costs in this Court.
3. SIMPSON JA: I agree.

Endnotes

1. James v Australian and New Zealand Banking Group Ltd [2016] NSWSC 833.
2. Civil Procedure Act, s 60.
3. See Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 at [57].
4. (1991) 33 FCR 397 at 398-400 (Sheppard, Burchett and Heerey JJ).
5. (2000) 104 FCR 564; [2000] FCA 1572 at [42]-[44] (French J, Beaumont and Finkelstein JJ agreeing).
6. [1995] NSWCA 69.
7. [2011] NSWCA 284 at [46] (Campbell JA, Young and Meagher JJA agreeing). See also Be Financial Pty Ltd v Das [2012] NSWCA 164.
8. (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13] (Beazley and McColl JJA agreeing).
9. Gibson v McIntosh [2015] NSWCA 112 at [17] (Leeming JA, JC Campbell AJA agreeing).
10. James at [16].
11. James at [17]
12. James at [12].
13. James at [13].
14. James at [14].
15. James at [22] (work by paralegals) and [24] (disbursements).
16. James at [21].
17. James at [22].
18. James at [20].
19. James at [23].
20. James at [8] and [25].
21. James at [26].
22. James at [2].
23. James at [10].
24. James at [15].
25. James at [15]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 April 2017