Lucantonio v Kleinert & Ors

Judgment (ex tempore) 1HIS HONOUR: On 20 July 2011 I gave judgment for the defendants on the plaintiff Dean Lucantonio's claims, with costs [ Lucantonio v Kleinert [2011] NSWSC 753]. I directed that any parties seeking special cost orders lodge with my Associate and serve on the other parties by 29 July 2011 documents detailing the orders sought, and a summary of the grounds on which such orders were sought, together with any further evidence to be relied on. 2There was some confusion, initially, as to whether the former second plaintiff Dino Lucantonio remained a party. In fact, he had ceased to be a party on the first day of the trial, when leave was obtained to amend the statement of claim in a manner that omitted him. His standing originally had been as a trustee of the Lucantonio Family Trust. The first plaintiff Dean Lucantonio replaced him as such trustee, and remained the continuing plaintiff in the proceedings. 3Although at the time what took place was described as a "discontinuance" on the part of Dino Lucantonio, that was in truth a misdescription. The true character of what happened was that he ceased to be a necessary party and was removed and replaced by Dean Lucantonio, who was already, in another capacity, a party. No cause of action came to an end when Dino Lucantonio ceased to be a party. The trustee's cause of action continued to be prosecuted until judgment. 4After the confusion as to Dino Lucantonio's status as a party was clarified, the defendants each filed motions and submissions in respect of special costs orders. The first defendant lodged submissions and a motion on 10 August 2011. Meanwhile, between 28 July and 3 August, the first defendant and first plaintiff reached an agreement as to costs as between them. The third defendant filed a motion on 11 August, and, on the same date, lodged consent orders between it and the first plaintiff as to costs. The second defendant lodged submissions in respect of costs on 11 August 2011. No agreement was reached between it and the first plaintiff so far as costs were concerned. Later, on or about 26 October 2011, each of the defendants amended their motions, to add a claim for interest on costs pursuant to (NSW) Civil Procedure Act (2005), s 101(4). 5The agreements between the first defendant and the first plaintiff and the third defendant and the first plaintiff have the consequence that some orders can be made by consent. Accordingly: (1)By consent, I order that the plaintiff pay the first defendant's costs of the proceedings on a party/party basis to 8 September 2005, and thereafter on an indemnity basis. (2)By consent I order that the plaintiff pay the third defendant's costs of the proceedings on a party/party basis to 9 May 2008, and thereafter on an indemnity basis. 6The remaining issues requiring consideration are, first, what orders should be made as between the second defendant and the first plaintiff; secondly, whether any, and if so what, further costs orders should be made against the second plaintiff; and thirdly, whether an order should be made under s 101(4) for interest. 7In respect of the second defendant's claim for costs against the first plaintiff, while it is true, as the plaintiff submits, that he established breach of duty, liability in negligence of course depends not only on breach of duty but on causation of damage, and the plaintiff failed on causation. In those circumstances, the ordinary consequence is that the plaintiff must pay the second defendant's costs. 8The second defendant submits that those costs should be assessed on an indemnity basis from a number of alternative dates, the earliest of which is 6 March 2009, arising from a settlement offer made on 20 February 2009. 9The evidence establishes that on 9 December 2008, the second defendant made an offer, expressed to be "without prejudice save as to costs", to the plaintiff to settle the matter, insofar as it involved the second defendant, for $240,000 inclusive of costs, apportioned as to $180,000 for damages and $60,000 for costs. The letter concluded: In the event that any party does not indicate an acceptance of this offer, and proceedings are continued as against the second defendant, the second defendant will seek to rely upon this letter in any argument as to costs. 10The plaintiff apparently responded with a counter offer to settle the claim against the second defendant alone for $600,000, plus costs, on some additional conditions. By a letter dated 20 February 2009, the second defendant rejected that offer, but extended the previous offer of $240,000 inclusive, on the same terms. That offer was not accepted. A further offer of compromise was made on the eve of the trial on 29 July 2009, although it remained open only for a very short time. 11While the offer of December 2008 and February 2009 was not in the form stipulated for a formal offer of compromise under the rules of court [(NSW) Uniform Civil Procedure Rules, r 20.26 and r 42.13], that does not mean that it cannot have costs consequences, especially where it was expressed to be without prejudice save as to costs. That is more particularly the case where an offer is made by a defendant who is ultimately successful. Although, had the plaintiff obtained some measure of success, it might have been difficult to compare these offers with the degree of success the plaintiff obtained, in circumstances where the defendant succeeded, the offer is readily capable of comparison. It is transparently plain that, had the plaintiff accepted the offer, he would have been much better off, by a very substantial sum, than transpired as a result of the determination of the proceedings. In my view a proper exercise of discretion in the particular circumstances of this case, in the light of that offer, requires that the costs payable to the second defendant be assessed on the indemnity basis from 6 March 2009. 12Accordingly, I order that the plaintiff pay the second defendant's costs of the proceedings on the party/party basis to 6 March 2009, and thereafter on the indemnity basis. 13The next question to which I turn is the claim made by all defendants for special cost orders against the second plaintiff, who, as I have recorded, ceased to be a party on the first day of the trial, namely, 3 August 2009. 14At the time at which Dino Lucantonio ceased to be a party, the question of costs was raised by the defendants. Mr Darke SC, who appeared on behalf of the first defendant, said: Subject to the discontinuance being effected, which is another question, we don't have any difficulty with the third further amended statement of claim. 15Mr Curtin SC, for the second defendant, said: "Similarly, your Honour, subject to costs". Mr Ashhurst SC, for the third defendant, said:, "We are of the same view". I asked "What is going to happen about the discontinuance?", an observation which I would now concede misstated the true effect of what was happening. Mr Laughton, then for both plaintiffs, replied, "I need to formally seek leave to discontinue on behalf of Mr [Dino] Lucantonio, and I don't seek to say anything about the costs issue, your Honour". 16I then made orders to the following effect: Grant leave to the second plaintiff, Dino Lucantonio, to discontinue the proceedings. I order that the second plaintiff pay the defendants' costs of the proceedings to date. I grant leave to the first plaintiff to amend the statement of claim by filing the third further amended statement of claim in the form initialled by me dated this day and placed with the papers. 17Had the first plaintiff succeeded in the substantive proceedings, which plainly was not known and could not have been foretold on 3 August 2009, the interaction of an order that the second defendant pay the plaintiff's costs of the proceedings to date, with whatever costs order might in that eventuality have been made in favour of the first plaintiff, would have required further consideration in the events which have happened. It does not, however, now pose a problem. 18However, as I have foreshadowed, the second plaintiff ceased to be a party because he was no longer a necessary or proper party, having been replaced as trustee of the plaintiff trust. No cause of action brought by the second plaintiff came to an end on that occasion. 19There were several options open to the parties. One was to defer dealing with the question of costs against the second plaintiff until the outcome of the substantive proceedings. They did not seek to do so. Another was to accept the ordinary costs order, but reserve the right to claim a special costs order, depending on the outcome of the proceedings. None of the parties sought to do that. A third was for Dino Lucantonio to submit that no adverse costs order should be made against him at that stage, because the outcome of the proceedings was unknown, and to contend that the question should await the outcome of the substantive proceedings. He did not seek to do that, but suffered an adverse costs order without arguing to the contrary on the occasion. 20It seems to me that, while it was not a negotiated compromise, what happened on 3 August represented some elements of forensic give and take on all sides: Dino Lucantonio suffered an adverse order to some extent, and otherwise extracted himself from the proceedings. 21I am inclined to accept and proceed on the basis that this is not a true case of a non-party costs order. Rather, what is sought is a further costs order in respect of a person who once was a party, arising out of his participation in the proceedings as a party. I do not think any of the special limitations that apply in the case of non-party costs orders would apply here. 22I was referred to the decision of Bryson J in Harris v Schembri (NSWSC, Bryson J, 7 November 1995, unreported). In that case, his Honour had made orders in (NSW) De Facto Relationships Act (1984) proceedings - including, at the time of delivering judgment, that each party pay his or her own costs of the proceedings, in circumstances where the parties had not been afforded an opportunity to debate costs prior to the order being made. Subsequently, the plaintiff applied for a costs order. His Honour said (at 2-3): The defendant's counsel contended that it is no longer possible for an order for costs to be made and that the court is functus officio on the question of costs as an order was made on the subject on 11 August. Counsel also contended that there had been ample opportunity during addresses to put forward any issue related to costs. In my view the question of costs remains open for consideration. There was no real opportunity to deal with the question before the publication of my reasons and orders on the principal issue. There was no opportunity between publishing the reasons and pronouncing orders for any party to debate the question of costs, and I make the order in that form because it seems to me to be appropriate as a matter of course. However where courts make orders without giving the party affected, or for that matter without giving either party an opportunity to debate the order which should be made, a party affected has an opportunity to obtain reconsideration. My order of 11 August has not been entered and there is no obstacle to consideration of the discretionary question of costs. 23In the circumstances that faced his Honour, I would with respect agree entirely with those observations [see Kallinicos & Anor v Hunt & Ors [2008] NSWSC 149]. However, the circumstances in the present case are rather different. In this case there was an opportunity, before the relevant costs order was made against Mr Dino Lucantonio, to debate the question of costs. The parties were offered and had that opportunity, although as it turned out, little debate took place. 24It seems to me that making further costs orders against Mr Dino Lucantonio now would disturb expectations reasonably brought into being by the orders made on 3 August 2009, in the circumstances in which they were made. Assuming that, as I am inclined to think, there is no legal or jurisdictional objection to me further considering the question of costs against Mr Dino Lucantonio, nonetheless, as a matter of discretion, having regard to the circumstances in which the order was made, and the basis on which it was made, and that his role was merely as a trustee of a trust, which involved no additional costs, or which involved incurring no additional cost, and in circumstances where the replacement trustee remains a party and has had adverse costs orders made against him, I am unpersuaded that any further order should be made against Mr Dino Lucantonio. 25That then brings me to the question of interest on costs. As I sought to explain in Inglis v Inglis Research Pty Ltd [2010] NSWSC 749, a party that obtains a costs order will ordinarily - in the absence of any countervailing discretionary factor - also obtain an order for interest on those costs, if it seeks one. The third defendant's motion include the form of order for interest, approved now in a number of cases, which, if it is appropriate to make an order, is the form in which I would make it. 26It is clear that an interest order under Civil Procedure Act s 101(4) can be made after the costs order has been made, so long as it is made before there is a judgment for costs effected by registration of the certificate of assessment [see Seiwa Australia Pty Ltd v Seeto Financial Circumstances Pty Ltd (No 2) [2010] NSWSC 118, and Simmons v Poly Cotton Marketing Pty Ltd [2007] NSWSC 1092]. Accordingly, there is no question of the Court being functus officio at this point in respect of considering an application for interest on costs. 27There is evidence that costs have been paid as and when they were billed, and accordingly, that each of the defendants has been out of pocket in respect of costs. Subject to one matter, to which I shall come, none of the usual discretionary factors that would tell against making an interest order are present in this case. 28The only contrary consideration is that the consents between the first defendant and the plaintiff, and the third defendant and the plaintiff, as well as containing the costs order to which I have referred and which I have, by consent, made, also contained a term "no other order as to costs". The question is whether, properly construed, that term was intended by the parties to address and exclude an order for interest under s 101(4). The evidence before me to inform that question is limited. The starting point for construction of that term are the words themselves, namely, "no other order as to costs". I think this is different, for example, from an order "in respect of costs", which might well have expressly captured an interest order. But an order "as to costs" would conventionally be understood as an order allocating responsibility for costs, not necessarily whether they should bear interest. 29In Timms & Ors v Commonwealth Bank of Australia (No 3) [2004] NSWCA 25 (at [11]), Beazley JA observed, in respect of the former (NSW) Supreme Court Act 1970 , s 95(4), that a claim for interest under the section is "part of the claim that a party has in relation to costs", and not a separate and independent course of action. Her Honour went on to say that if no application for interest were made and determined before entry of judgment for costs, the claim merged with the judgment, as had occurred in that case when final judgment for costs was obtained upon filing the costs certificate. Her Honour's observations do not necessarily mean that a claim for interest is a claim "as to", as distinct from "in relation to", costs. 30However, viewing the circumstances objectively, it is not unreasonable to think that the plaintiff, in consenting to these orders, thought that they would bring the costs dispute to an end. That is particularly so when, at that stage, no application had been made for interest on costs. Although there was tacit if not explicit acceptance that the time for filing a motion for a special costs order was extended beyond the time limited in the direction made at the time of giving judgment, even when the original motions were filed they contained no claim for interest, that claim being introduced only by amendment in late October. 31It needs to be borne in mind that while the costs orders consented to may have done little more than recognise the inevitable, they did involve the plaintiff foregoing arguments on the question of whether there should be an indemnity order, and that is a concession rarely made. Doing the best I can to look at this objectively from the position of both parties, on the one hand it is unlikely that either party had specifically adverted to the question of a claim for interest when they executed the consents; on the other hand, it is self-evident that in executing the consent, the plaintiff would have thought that it brought questions of cost disputation between him and the consenting defendants to an end, and that the defendants would, or ought have realised that, even though not specifically adverting to the interest question. 32For those reasons, ultimately I conclude that, by reason of the terms of the consents of August 2011 between the plaintiff and the first defendant and the third defendant, it would be inappropriate to make an interest order in respect of costs between them. There is no such consent between the plaintiff and the second defendant who, therefore, is entitled to an interest order. 33I order that: The plaintiff pay interest on the second defendant's costs: (a) at the rate set out in UCPR, r 36.7; (b) on the allowed percentage of each amount of costs and disbursements actually paid by the second defendant; (c) interest to be payable from the date of payment by the second defendant of each such amount of costs and disbursements until such time as the plaintiff has paid the costs and disbursements due to the second defendant under these orders, or the court otherwise orders; where the allowed percentage equals Y over X by one hundred per cent. X equals the total amount of costs and disbursements which the second defendant has paid or is liable to pay in connection with these proceedings, and Y equals the total amount of costs and disbursements agreed or assessed under the costs order made in favour of the second defendant herein. 34The plaintiff applies for a stay of execution of the costs order in favour of the second defendant pending the outcome of the plaintiff's appeal from the judgment in favour of the second defendant. As will be recalled, the plaintiff established breach of duty against the second defendant but failed on causation, and the appeal is against the finding that causation was not established. 35On a stay application it is ordinarily necessary for there to be some evidence at least of hardship to the judgment debtor, risk that the judgment, if paid, will not be able to be recovered from the judgment creditor, and/or sometimes other discretionary considerations. At this stage, there is no such evidence on which the court could evaluate a stay application. It may well be that the application is superfluous in that, by the time the costs have been assessed, the appeal will have been heard and determined, or its hearing will be so proximate that the parties can reach some sensible agreement in the meantime. If it is necessary to make a stay application when there is some realistic threat of execution, it remains open to the plaintiff to return to this court to seek such a stay on appropriate evidence, but at this stage there is not evidence upon which I can grant a stay. 36I there make the following further orders: (1) That the first defendant pay the costs of the plaintiff and of Dino Lucantonio of the first defendant 's costs motion. (2) That the second defendant pay the costs of Dino Lucantonio of the second defendant's costs motion. (3) That the plaintiff pay the second defendant's costs of the second defendant's costs motion. (4) That the third defendant pay the costs of the plaintiff and of Dino Lucantonio of the third defendant's costs motion.