Pamamull v Albrizzi

1 On 6 September 2011 the Court published reasons for judgment[1] and ordered that paragraph 2 of the orders made by Pagone J on 25 March 2010 be set aside, reserved the question of costs and directed written submissions on that question. The appeal was otherwise dismissed. The parties having provided their submissions on the question of costs, this judgment deals with that matter.

2 These reasons are to be read with our earlier judgment. Nevertheless the following recapitulation is convenient. The appellant sought the setting aside of orders made in the Commercial Court on 22 and 25 March 2010 on the ground that he had been denied natural justice. He wished to be put back in the position of being able to defend the proceeding contending, and the respondent denying, that he had an arguable defence. The orders made on 22 March had resolved the proceeding in the respondent's favour, having ordered the appellant to pay the respondent $759,447.02 with interest and costs and dismissed the counterclaim. The orders made on 25 March dismissed the appellant's application to set aside those orders and ordered the appellant's solicitor to pay the respondent's costs of the application, fixed at $1,500.

3 We concluded that the appellant had not been afforded natural justice at the hearing on 22 March, and that the hearing on 25 March did not cure that failure. Ordinarily it would have followed that the orders made on 22 and 25 March would have been set aside. But, concluding that the appellant had no arguable defence, it was futile to remit for retrial. Hence, save for setting aside the 25 March order for costs as improperly made (for reasons independent of the natural justice point) the appeal was dismissed.

4 The result is that the orders made on 22 March 2010 remain intact but the order for costs made on 25 March is set aside. This means that save for any question that might have been raised concerning the costs of the hearing on 25 March 2010, the costs of the proceeding in the Commercial Court have been dealt with in the respondent's favour. In fact, as appears below, neither party now seeks an order for the costs of the application on 25 March 2010. This reflects an acceptance - appropriate in our view - that the parties bear their own costs of that application. In the circumstances, for the sake of clarity, we will order that there be no order as to the costs of the appellant's application heard on 25 March 2010.

5 It is further convenient to note that on 16 July 2010 this Court ordered the appellant:

(a) to provide security for the respondent's costs of the appeal in the sum of $17,000; and

(b) to pay into court the sum of $5,000, being the amount of costs which the appellant would properly have been required to pay the respondent if the judge had granted an adjournment on 22 March 2010. The payment into court of that sum was a form of security.

6 The appellant submitted that the parties should bear their own costs of the appeal. That was submitted to be appropriate having regard to the appellant's success on the main grounds of appeal (grounds 1 and 2), and the respondent's conduct at trial which substantially contributed to the judge's error of law outlined in those grounds. It was submitted that the particular circumstances of the case warranted a departure from the ordinary rule that costs follow the event; the relevant event was, of course, that save for the setting aside of the costs order made on 25 March 2010 the appeal had failed. In developing this submission counsel for the appellant referred to a range of matters that occurred in the hearings and observations and conclusions in our judgment.

7 Finally, and as an alternative, it was submitted that if it were considered appropriate to order the appellant to pay costs to the respondent, any such order should be confined to an apportioned amount to account for the appellant's success on the principal issue of a denial of natural justice. As, it was submitted, some 80% of the submissions and the reasons of the Court dealt with that issue and the matter of fairness to the appellant as an unrepresented litigant, the appropriate order would be that the appellant pay the respondent 20% of its costs of the appeal.

8 The respondent's primary submission is that the appellant pay the respondent's costs of the appeal, that the sum of $17,000 paid into court as security be paid to the respondent in discharge of the appellant's liability to pay the costs of the appeal with any balance to be refunded to the appellant, and that the sum of $5,000 paid into court be refunded to the appellant.

9 The order for costs was sought on the basis that costs should follow the event, there being no good reason to depart from the ordinary rule in that respect. Counsel emphasised that on 22 March 2010, and on appeal, the respondent had maintained that the appellant lacked a defence on the merits.

10 As to the one point on which the appeal succeeded, namely the order for costs made on 25 March, counsel pointed out that he had neither sought that order from the judge nor addressed a submission on it at the hearing of the appeal.

11 The respondent then addressed an alternative scenario. If the Court were to order the respondent to pay part of the appellant's costs of the appeal or the respondent did not recover all of its costs of the appeal, the Court should make an order under s 4(1) of the Appeal Costs Act 1998. As to this, the respondent submitted a form of order as an example of that which might be appropriate. This order provided that the appellant pay 80% of the respondent's costs of the appeal and that the respondent be granted a certificate pursuant to s 4(1) with respect to 20% of its costs of the appeal; these percentages were only given as an example of what could be done. The order also included the same orders in respect of the sums paid into court of $17,000 and $5,000.

12 Order 64.24(1) of the Supreme Court (General Civil Procedure) Rules 2005 provides that the Court of Appeal may make such order for the whole or any part of the costs of an appeal as it thinks fit. Ordinarily a successful appellant will be entitled to costs unless there are good reasons, or special circumstances, to order otherwise; see Nikolaou v Papasavis, Phillips & Co (No 2),[2] Armstrong v Boulton,[3] Verna Trading Pty Ltd v New India Assurance Co Ltd.[4]

13 In our opinion, regarding the relevant facts and circumstances overall, the general rule that costs follow the event should not apply. The just and equitable disposition is that there should be no order for the costs of the appeal, thus leaving the parties to bear their own costs. We further consider that the alternative approach of apportioning the costs, whether in favour of one party or the other, not to be appropriate.

14 These conclusions turn on our consideration of the relevant facts and circumstances. They are referred to in our reasons for judgment. They commence with the denial of natural justice, and a fundamental failure in the due administration of justice, which denial was encouraged by the attitude and submissions of the respondent's counsel (including the lack of constructive assistance which counsel ought to have provided to the judge). It is unnecessary to repeat the discussion and conclusions relating to these matters in our judgment. These failures, in combination, constituted a lamentable state of affairs with which the appellant should never have been confronted. The readily apparent disposition was an adjournment of relatively short compass which would have avoided the present appeal with its attendant cost and vexation.

15 As mentioned, the appellant's written submission referred to a range of matters in support of the submission that the parties should bear their own costs. Those matters focussed upon the conduct of the respondent's lawyers at the hearings on 22 and 25 March. The various matters, or the essence thereof, are referred to in our judgment. We accept them as points of substance pertaining to the critical role of the respondent's legal representatives.

16 A further relevant factor is that on the appeal the respondent opposed - unsuccessfully - the admission of Mr Waters' affidavit. In the circumstances there was no sensible basis for this opposition. The appellant had to file a summons with supporting material and written submissions. The effect was to add to the costs and vexation consequent upon the denial of natural justice.

17 We do not overlook the ultimate conclusion that the appellant had no arguable ground of defence. Nor do we overlook that the respondent so submitted in opposing the adjournment on 22 March. But, in a sense, the less said about what occurred on that day, including as to the respondent's finessing conduct as to the matter of the survey, and the inflated amount sought as the price of an adjournment, the better. Further, the judge was then in no proper position in justice to assess the merits and should not have done so. It was only on appeal in this Court that the matter was able to be, and was, argued. But the central point on the appeal, and that which occupied most time, was that concerned with the contention that the orders made on 22 and 25 March 2010 should be set aside on account of the denial of natural justice. That denial was the fundamental problem.

18 If the adjournment had been granted on 22 March the matter of the merits would not have arisen, or at least would not have been dealt with in the peremptory and unsatisfactory way to which we have referred in our judgment. The refusal of the adjournment resulted in the present unnecessary appeal. Hence, regarding the matter overall, the matter which gave rise to the appeal was the refusal to adjourn with the attendant denial of natural justice.

19 For these reasons also, the suggested alternative of apportioning costs on a percentage basis is not just or appropriate. If, however, observance of the general rule meant that the respondent should properly receive costs it would be for a small proportion having regard to the importance of the issues other than the ultimate merits of the defence, and because the appeal came about only because of the denial of natural justice, the refusal of the application on 25 March and the erroneous order made on that day, on all of which matters the appellant succeeded. If the denial of natural justice had not occurred, that is if the adjournment had been granted, the proceeding would have concluded in the Trial Division in the ordinary way and with such order for costs as was considered appropriate. But, and this is the inescapable point, that would have occurred without the present appeal. In the circumstances, we consider that an apportionment of costs, or an issues based order, is not appropriate.

20 In the light of these reasons, the amounts of $17,000 and $5,000 should be refunded to the appellant.

21 That leaves the matter of a certificate under s 4(1) of the Appeal Costs Act 1998. Section 4(1) provides that if an appeal against a decision in a civil proceeding 'succeeds' the Supreme Court 'may grant an indemnity certificate in respect of costs'. The difficulty is that the appeal has succeeded only to the extent that the order for costs made on 25 March 2010 has been set aside. Bearing in mind the overall context and circumstances, including that the respondent did not seek the 25 March order below and made no submission about it on appeal, and that it occupied little time in the appellant's submissions, we consider that it is inappropriate to exercise the discretion to grant the certificate sought and we refuse to do so.

22 For these reasons we propose to order as follows:

1. In lieu of paragraph 2 of the orders made in the Commercial Court on 25 March 2010 it is ordered that there be no order for the costs of the appellant's application to set aside the orders made on 22 March 2010.

3. The sums of $17,000 and $5,000 paid into Court by the appellant pursuant to the orders of the Court of Appeal made 16 July 2010 be refunded to the appellant.

4. The respondent's application for a certificate under s 4(1) of the Appeal Costs Act 1998 be refused.

[1] Pamamull v Albrizzi (Sales) Pty Ltd (No 2) [2011] VSCA 260.

[2] [1989] HCA 11; (1989) 166 CLR 394, 407-8.

[3] [1990] VicRp 20; [1990] VR 215, 223.

[4] [1991] VicRp 11; [1991] 1 VR 121, 152-156.