MacLaw No 469 Pty Ltd v Ilana Accessories Pty Ltd [2000] VSC 563

Supreme Court of Victoria|2000-12-08|Before: HEDIGAN, J.

Costs of proceeding discontinued - Whether plaintiff should pay costs on party-party basis or solicitor-client basis - Applicable principles - Orders made.

With respect to the first and second plaintiffs' summons of 6 December 2000, by which they make application for leave to discontinue this proceeding 622 of 2000 as against the first defendant, that application is not opposed by the first defendant. The dispute before me and in the written submissions that were filed was wholly concerned with the question of costs.

I should say that in the course of discussion this morning it is apparent that there are difficulties occasioned by the want of jurisdiction in this court to deal with the claims by the plaintiffs as formulated against the first defendant, the determination of which is committed by the relevant legislation to the Victoria Civil and Administrative Tribunal.

The plaintiffs ultimately recognised the necessity that if any proceeding against the first defendant arising out of the escape and water and alleged damage was to be maintained, the proceeding had to be commenced before the Victorian Civil Administrative Tribunal and steps were taken to do that. There is simply no jurisdiction in this court to entertain a proceeding against the first defendant having regard to the facts set out in the statement of claim.

I do not find it necessary to set out all of the background to decide the matter of costs, the main order not being opposed. Given the realities of the want of jurisdiction, I propose to make an order granting leave to the plaintiff to discontinue its proceeding in this court against the first defendant.

A debate has taken place in front of me about the question of costs which debate has drawn in a not inconsiderable part of the background. It is perfectly clear and not denied by counsel for the plaintiffs that the plaintiffs wrongly commenced a proceeding in this court in the jurisdictional sense against the first defendant and were not aware of that at the time of commencement. At least one would suppose that that must be the case.

All defendants entered appearances in unconditional form and on 24 August the first defendant filed its defence. That clearly and unmistakably raised the question of want of jurisdiction in the court to deal with the proceeding against the first defendant. Notwithstanding that, there was a lengthy and unproductive correspondence addressed by the solicitor for the first defendant to the solicitors for the plaintiff concerning the jurisdiction deficiency. As early as 21 September Dalton George and James had signalled a consent to the abandonment in one form or another by the plaintiffs of the proceeding against their client, and had sounded the first warning bells about the issue of costs. The costs then being accepted as appropriate up to that time in any event, were the ordinary party-party scale. Thereafter as the affidavit of Serina Jackson filed on 30 November 2000 on behalf of the first defendant (which exhibits the stream of correspondence between the solicitors for the plaintiff and first defendant) makes it clear that notwithstanding the valid claims made by the first defendant, the plaintiffs were on the one hand denying the obligation to withdraw or abandon, at other times appearing to suggest that the action might be maintainable or might have to be "transferred" (in the sense of not being a fresh proceeding) to the Victorian Civil and Administrative Tribunal.

I do not propose to refer in detail to that correspondence but the exhibits numbered 8, 11, 13 and 14, the latter two all being concerned with the early days in October, and subsequently at the end of October (see the exhibits 17 and 18) by which time the levels of complaint and threat on behalf of the defendant about the issue of costs was intensifying. Those letters make it clear that there is not much to be said for the plaintiffs on the score of not being thoroughly and completely warned of the deficiencies of the case against the first defendant. They had been given repeated invitations to withdraw and warnings about the cost penalties that would be involved.

It would seem almost up to last week that the plaintiffs were still attempting to keep some kind of a toe-hold on the proceeding against the first defendant in this Court. This partly may have been due to the developments which had taken place at VCAT and the fact that a leave to appeal application by Roads Corporation against joinder into that proceeding was about to be, and now has been, determined by one of the Masters of this court.

Whilst I do not under-rate the difficulties that faced the plaintiffs once they became aware, as they must have become aware at the time of the filing and service of the first defendant's defence, of the jurisdictional division which was going to afflict the proceeding which had been commenced against all defendants. Nevertheless, those problems were problems of the plaintiffs' making and arose out of the misconception, so it would appear, of its rights against the first defendant in this court.

It is my view, on reading the correspondence, that the first defendants never accepted that they could be sued in the Supreme Court of Victoria. It is also apparent that no step was ever taken by the first defendant to frustrate the abandonment by the plaintiffs in one form or another of the proceeding mistakenly launched against the first defendant.

The plaintiffs now concedes its errors and it is beyond doubt that it should have done so much earlier. Nevertheless, they have argued against costs and particularly against costs on an indemnity basis which, having regard to the history, the first defendant now seeks. I am of the view that the first defendant's position throughout was one of moderation, warnings were given on many occasions, and there could be little doubt that an order should be made, and I propose to make it, that the first defendant's costs of the proceeding should be paid by the plaintiffs. The question really is, in my judgment, on what basis?

The plaintiffs rely, both in making submissions about costs generally and in relation to the claims for solicitor/client costs being made by the defendant, upon the failure of the defendant to enter a conditional appearance, or put the other way, by filing an unconditional appearance. In my view there is no basis upon which the filing of an unconditional appearance could alter the matter. Mr Laird has referred to me a decision of the Court of Appeal in Wilkinson v. Bark Incorporation (1948) 1 K.B. 721, in which the view was expressed by the Court of Appeal that the filing of an unconditional appearance involves no more than a submission to the jurisdiction of the court to consider the question of jurisdiction where it may arise. Indeed it is my recollection that there are decisions both in the Federal Court of Australia and the High Court of Australia to similar effect.

Accordingly, I do not place any weight upon the filing of an unconditional appearance by the first defendants as militating against a costs order. Whether or not costs should be ordered other than on the party/party basis really depends upon the consideration of the facts to which I have already referred to in broad outline, in the light of the applicable principles.

Both plaintiffs and the first defendant, I think, accept the pronouncement of principle that has been made in a number of cases. The plaintiffs primarily relied upon Fountain Selected Meat Sales Pty Ltd v. International Produce Merchants Pty Ltd (1988) 81 A.L.R. at 397. Subsequently a more expansive analysis of the authorities was made by Sheppard J. of the Federal Court in Colgate Palmolive Co v. Cussons Pty Ltd [1993] FCA 536; (1993) 118 A.L.R. 248. I have considered those principles in two decisions of my own, one of which has been referred to by the plaintiffs in their submissions, that is, Shepherd v. National Mutual Life Association of Australasia v. Broadley & Associates (unreported, 15/11/94) and a later decision of my own in Bendigo Bank Ltd v. Russo and Reichman (unreported, 27 October 1997) in which I acknowledged the general principles as outlined by Sheppard J. in Colgate Palmolive.

Some of the features (although they are by no means exhaustive) to be considered on when one considers whether or not there should be a departure from Rule 63.31 of the rules of this court (namely that party/party costs are the costs ordinarily to be awarded to a successful party if costs are awarded). When should the Court yield to an application to order costs on an indemnity or a solicitor/client basis? Some of those features are described as: (1) An allegation of fraud knowing it to be false or irrelevant to the issues between the parties; (2) Some ulterior motive for making the allegations; (3) Misconduct causing a loss of time, inconvenience to the parties and the court; (4) Proceeding in wilful disregard of known facts or established law; (5) The making of wild and contumelious allegations.

The plaintiffs accept that those principles as being capable of being applied but advanced argument, primarily in the written submissions, that an examination of them really showed that something over and above a failure to recognise the appropriate law, or the making of a mistake either by reason of incompetence or some other reason, had to be perceived.

Mr Laird for the defendant in arguing for solicitor/client costs primarily relied, I think, upon the fourth of the so-called guidelines or principles, that the plaintiff had proceeded in wilful disregard of known facts or established law. His argument was it was apparent enough shortly after the defence on behalf of the first defendant was filed, what the law was, that there was no jurisdiction of the plaintiffs to claim, nor the court to determine, the case as formulated against the first defendant. He argued that the stream of correspondence, to which I have referred, more than amply demonstrated a wilful disregard by the plaintiffs, or those acting for them, of what the situation was, he contending that the plaintiffs from time to time acted virtually legally schizophrenically, accepting that the case could not be gone on with, but failing to accept an early offer of consensual withdrawal by incorrectly expressing what the plaintiffs' intentions. In effect it was claimed that there had been "stonewalling" about the costs of the first defendant and a failure to make the decision that had to be made, at the time it should have been made.

There was much substance in those submissions to my mind. The question of what the misconduct must be which causes a loss of time, money, or inconvenience to the court and the parties is not the subject of any definitive expression. It does not follow that the misconduct has to be misconduct that would amount to fraud or grave misconduct. I think there is no suggestion of any fraudulent behaviour by the plaintiffs but it is beyond doubt that such a long period of indecision, and as it would seem to me a continuation of the proceeding in the teeth of this knowledge and the appropriate law, would verge upon the kind of misconduct envisaged in the guidelines. This hardly matters because there is no doubt that the plaintiff did proceed up until now, at least until the summons seeking to file a notice of continuance was issued this week in maintaining the proceeding.

It is a case therefore in which I think indemnity costs, that is on a solicitor/client basis, should be ordered to be paid. A question arises as from what date. It seemed to me that the submission was that it should be from the date of the filing of the defence of the first defendant on 24 August. I take the view that at that time, although it is beyond doubt the plaintiff ought to have known what the appropriate law was, (I also say that there would be many others who would not) it seems to me that some period of time ought to be reasonably allowed before the conclusion could be reached that the plaintiff was continuing to proceed notwithstanding the knowledge of what the situation was.

I deem that that date ought to be 21 September, the time at which the solicitors for the first defendant gave an unequivocal consent to a withdrawal and a warning of the cost penalties which would ensue if not effected. Accordingly, I propose to order that the plaintiff pay the first defendant's costs of the proceeding on a party/party basis up until 21 September in the year 2000 and thereafter to this date on an indemnity/solicitor client basis.

At a glance

Court

Decision date

Before

Source

Judgment (22 paragraphs)

Parties