Pavlovic v Universal Music Australia Pty Ltd

Court of Appeal (NSW)|2016-03-07|Before: Bathurst CJ, Beazley P, Meagher JA, Sackar J

Solicitors: Levitt Robinson (Appellants) Gilbert + Tobin (First and Second Respondents) File Number(s): 2015/219232 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: [2015] NSWSC 791 Date of Decision: 19 June 2015 Before: Sackar J File Number(s): 2015/77691

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Per the Court: (1) The costs of any application in any proceeding, including the costs of the determination of a separate question, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. Unless the court orders otherwise, the costs of an application do not become payable until the conclusion of the proceedings. [6] (2) UCPR, r 42.7(2) confers a general discretion on the Court to make "some other order", including an order that costs be payable forthwith. [16] (3) As is the case with any discretion conferred in general terms, the discretion in UCPR, r 42.7(2) is to be exercised judicially, having regard to all the circumstances of the case and the interests of justice. [14]-[18] House v The King [1936] HCA 40; 55 CLR 499 at 503; see also King v Commercial Bank of Australia Ltd [1920] HCA 62; 28 CLR 289 at 292-293; Lucas v Yorke (1983) 50 ALR 228 at 229; Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [22]; Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312. (4) In determining whether an order should be made that costs be payable forthwith, a number of factors may be of relevance. These factors include: (1) that the decision in question represents the determination of a separately identifiable matter or discrete aspect of the proceedings; (2) that some conduct of the unsuccessful party may be seen as being unreasonable; and (3) that there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order immediately. [14]-[15] Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1, at [11]-[13]; Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [31]-[37]. (5) The Court has power to remit a matter to a differently constituted court, so as to ensure the perception of a fair trial. [26] Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 at [119]. (6) In considering whether remitter should be made to a differently constituted court, a number of factors may be relevant. These factors include: (1) that the power to remit to a differently constituted court should be exercised sparingly and in the interests of justice; (2) that there have been strong findings about the credibility of a party in the court as originally constituted; (3) that there has been stringent criticism of the originally constituted court in the appeal court; (4) that there is a reasonable likelihood of the appearance of pre-judgment if remitter is to the originally constituted court; and (5) that the appeal throws up a reasonable suggestion of bias in the originally constituted court. [26]-[28] Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 at [119]; Steedman v Baulkham Hills Shire Council (No 2)(1993) 31 NSWLR 562 at 576; (1993) 80 LGERA 323 at 336; Castle Constructions Pty Ltd v North Sydney Council [2007] NSWCA 164; (2007) 155 LGERA 52 at 87; Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; (2005) 3 DDCR 1 at [12]-[13]; Smith v New South Wales Bar Association (1992) 176 CLR 256 at 269; Brackenreg v Comcare Australia (1995) 56 FCR 335 at 352; Baulkham Hills Shire Council v Basemount Pty Ltd [2003] NSWCA 189; (2003) 126 LGERA 339 at 345; Castle Constructions Pty Ltd v North Sydney Council [2007] NSWCA 164; (2007) 155 LGERA 52 at 73.

Judgment

THE COURT: On 6 October 2015, the Court allowed an appeal from the determination of separate questions by the primary judge, Sackar J, that a contract between the appellants and the first respondent had come into existence on 24 December 2014 and that that contract had not been validly terminated: Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 (the principal judgment).
The Court's orders were as follows: "(1) Appeal allowed; (2) Set aside declarations and orders made by the primary judge; (3) Declare that no contract came into existence on 24 December 2014 between the appellants and the first and second respondent; (4) Order the respondents to pay the appellants' costs of the appeal; (5) Order the respondents to pay the costs of the appellants in the court below; (6) Remit the matter to the Supreme Court for the determination of the remaining issues on the summons."
By notice of motion filed 20 October 2015, said to be filed on behalf of Mr Pavlovic, an order was sought that the costs of the appeal and in the court below ordered to be paid by "the First Respondent to the Appellants", be payable forthwith as agreed or assessed: order (1) in the notice of motion. A further order was sought seeking a variation of order (6) made on 6 October 2015, by insertion of the words, "to a judge other than Sackar J, the primary judge in the matter": order (2) in the notice of motion. Although the notice of motion states that it is filed on behalf of Mr Pavlovic, given that the second and third appellants are business entities of Mr Pavlovic, we consider it appropriate to treat the notice of motion as filed on behalf of all appellants.
The notice of motion was supported by two affidavits of Benjamin Brady, the solicitor with the conduct of the matter on behalf of the appellants, the first sworn 20 October 2015 and the second sworn on 4 November 2015. In response, the active respondent, Universal Music Australia Pty Ltd (Universal), filed an affidavit of Michael John Williams sworn 10 November 2015. The parties also filed written submissions in accordance with the Court's directions.
At the time of making its orders on 6 October 2015, the Court overlooked that the second and third respondents had filed submitting appearances, save as to costs. As already mentioned, Universal was the only active respondent in this Court and was the active moving party in the court below. It follows that the reference to "the respondents" in each of orders (4) and (5) ought to have been a reference to "the first respondent". The Court proposes to correct its mistake pursuant to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.17.

Order 1 of the notice of motion: should costs be ordered to be paid forthwith?

The Court's costs orders were made pursuant to the Civil Procedure Act 2005 (NSW), s 98 and UCPR, r 42.1 and r 42.7(1). Pursuant to the latter rule, the costs of any application in any proceedings are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. The determination of the separate question in this case was such an application. The application that the appellants now make is pursuant to UCPR, r 42.7(2) which provides that "unless the court orders otherwise, the costs of [an application in any such proceedings] do not become payable until the conclusion of the proceedings".
The appellants advanced three bases upon which they contend they were entitled to an order under UCPR, r 42.7(2): "(a) first, the costs were incurred on the determination of separate questions, which were substantial and relate to a discrete and separately identifiable aspect of the proceedings below; (b) second, the proceedings are in their infancy and considerable time and money will have to be expended by both sides before the proceedings are concluded; and (c) third, Universal is far better able than [Mr Pavlovic] to bear the continuing costs of the litigation, as it must have appreciated when it sought the determination of separate questions."
Subject to disputation as to the quantum of costs, the first and second of these bases do not appear to be factually in dispute and may be accepted. The real question is whether it is appropriate in the circumstances for the Court to "otherwise" order that costs be paid forthwith: UCPR, r 42.7.

Appellants' evidence in support of the proposed order 1

The bases upon which the appellants sought an order for costs to be payable forthwith were contained in the affidavit of Benjamin Brady, filed 20 October 2015. Those bases were as follows:

The unresolved issues between the appellants and Universal were likely to involve considerable time and expense. Although Universal had not properly particularised its claim against the appellants, Mr Brady envisaged that the claim was likely to involve extensive case management, preparation of evidence, discovery and interlocutory applications. Further, the appellants intended to bring a cross-claim against Universal, which would similarly involve time and resources. Having regard to these factors, Mr Brady expressed the view that the trial was unlikely to be heard until 2017.
Mr Pavlovic's financial circumstances had been affected as a result of his disputation with Universal. He had incurred significant legal costs as a result of the proceedings to date. In particular, Mr Pavlovic's solicitors, Levitt Robinson, had billed the appellants a total amount of $353,413.20 since 20 January 2015. Mr Pavlovic had not been paid a salary in his capacity as the director of Modular Recordings Pty Ltd (Modular) since 14 November 2014. Further, uncertainty as to his employment status and possible future with Modular had "led to Mr Pavlovic being unsure as to whether to seek alternative employment in the music industry".
Mr Pavlovic has now sold his residence. The implication from the evidence in Mr Brady's affidavit was that Mr Pavlovic was obliged to do so to pay his legal costs, to fund the legal proceedings that remain on foot, to repay the mortgage obligations with which he had been unable to comply, as well as to support himself and his eight year old daughter.

Mr Brady contended that the appeal proceedings "involved a matter that was entirely distinct from any of the substantive issues in dispute, or likely to be in dispute, in the ongoing proceedings between the parties".

Universal's submissions

Universal opposed the making of an order that the costs be paid forthwith on three principal bases. First, that part of the proceedings that remained to be litigated involved, inter alia, substantial monetary claims, which, should they be successful, would involve the award of damages in larger amounts than Universal presently owes to the appellants pursuant to the costs orders made by this Court on 6 October 2015, as varied on 20 October 2015.
Secondly, that the amount of costs claimed by the appellant's solicitors was unlikely to represent the costs that would be assessed on a party/party basis. In this regard, Universal contended that the likely recoverable costs would be in the order of $170,000.
Thirdly, that Mr Pavlovic's present financial circumstance of having been unable to earn an income since December 2014 was of his own making. He had resigned voluntarily from Modular and there was no impediment, from Universal's point of view, in his obtaining alternative employment.

Relevant principles

The circumstances in which it is appropriate that a court orders costs of an interlocutory judgment to be payable forthwith were discussed by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1, at [11]-[13]. In that case, the court was concerned with Supreme Court Rules 1970 (NSW), Pt 52A, r 9, the predecessor provision to UCPR, r 42.7. However, the factors referred to by his Honour have been held to apply to the rule in its current form: see, for example, Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [31]-[37].
In Fiduciary Ltd v Morningstar Research Pty Barrett J identified three factors relevant to the determination of whether such an order should be made, namely: 1. That the interlocutory decision represents "the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect" of the case (at [11]); 2. That some conduct of the unsuccessful party may be seen as being unreasonable (at [12]); and 3. That there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order now (at [13]): see also Solarus Projects v Vero Insurance (No 4) [2013] NSWSC 1012 at [4]; Francis v CPI Graphics Ltd [2011] NSWSC 317 at [22]; ASIC v Rich [2003] NSWSC 297 at [86].
UCPR, r 42.7(2) confers a general discretion on the Court to make "some other order" than the rule otherwise prescribes. As is the case with any judicial discretion where no criteria for its exercise are specified in the conferring legislation, its proper exercise depends upon a consideration of all the circumstances of the case having regard to the interests of justice. It is uncontroversial that such discretions are to be "exercised judicially, according to rules of reason and justice, and not arbitrarily or capriciously or according to private opinion": House v The King [1936] HCA 40; 55 CLR 499 at 503; see also King v Commercial Bank of Australia Ltd [1920] HCA 62; 28 CLR 289 at 292-293; Lucas v Yorke (1983) 50 ALR 228 at 229; Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [22]. Olney J adverted to this in Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312, a decision on the Federal Court Rules 1979 (Cth), O62, r 3(3), which was in similar terms to UCPR, r 42.7: "The rule does not suggest any particular criteria by which the court should be guided in approaching such an application, and accordingly I take the view that the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule, namely, that an order for costs of an interlocutory proceeding should not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded."
In Bevillesta v D Tannous McColl JA, Allsop P and Handley AJA agreeing, stated, at [37], that beyond factors such as those described by Barrett J in Fiduciary v Morningstar, in making a determination under UCPR, r 42.7, regard must also be had to the "dictates of justice", as required by the Civil Procedure Act, s 58.
Section 58 provides that, in deciding to make an order or direction for the management of proceedings, consideration is to be given to the "dictates of justice", which includes, inter alia, having regard to ss 56 and 57 of the Civil Procedure Act: s 58(2)(a). A range of other factors are set out in s 58(2)(b). Whilst it is not necessarily apparent to us that s 58 applies to an application under UCPR, r 42.7, there is no doubt, as we have said, that in exercising a discretion otherwise unconfined by the conferring statute, the Court is required to take into account all relevant circumstances and determine the matter having regard to the interests of justice.

Consideration

On the basis of the evidence of Mr Brady, it is apparent that the appellants' circumstances reflect the first and third factors identified by Barrett J in Fiduciary v Morningstar Research as being relevant to the making of an order that costs be payable forthwith. As to the first factor, the determination of the question whether a contract had been entered into between the parties on 24 December 2014 involved "the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect" of the case.
As to the third factor identified by Barrett J, it was not contended that Mr Brady's view, that the balance of the proceedings would involve considerable time and expense, was erroneous. The consequence of the Court's determination that no contract was entered into on 24 December 2014 is that the parties remain in dispute on all issues arising out of Mr Pavlovic's employment with Modular and it is for that reason that there remain substantial issues to be determined in the proceedings. Indeed, the substantial cost of the proceedings in this Court, being the appeal from the separate determination of the two questions in the proceedings, indicates that the resolution of the remaining issues between the parties in all probability will be costly. Particularised pleadings by Universal, or a finalised cross-claim by the appellants, are not required to demonstrate that this will probably be the case. Having regard to the history of the litigation to date, it can be expected that the balance of the proceedings are likely to be the subject of vigorous agitation by both parties.
There is another consideration that is relevant. Until such time as the costs ordered by this Court are paid, the appellants will not have the use of those monies in circumstances where the appellants' solicitors have been paid their costs of that part of the proceedings subject of the costs order. Unlike any damages Universal may be awarded should it be successful in the balance of the litigation, which will bear interest, the costs to which the appellants were entitled as a result of the Court's order will not, unless and until they are assessed and a certificate of costs is registered in the Court pursuant to the Legal Profession Uniform Law Application Act 2014 (NSW), s 70.
Although Universal disputes that there is any reason why Mr Pavlovic cannot work, it is not contested that he has not done so since his employment with Modular ceased. The fact that the parties are still engaged in litigation may impact on his ability to be employed on a full time basis. In short, it is evident that the proceedings between the parties will be on foot for a considerable length of time, and that the appellants' ability to fund this litigation will be hampered if the orders proposed by way of the notice of motion are not granted.
We consider that granting the orders sought by the appellants accords with the dictates of justice. As was held by Hodgson JA in Richards v Kadian [2005] NSWCA 373 at [7], the question as to whether costs should be payable forthwith is "one of time of enforcement" rather than a determination as against whom or for what amount a costs order should be made. It necessitates a consideration of practical impediments to justice. This includes, in this case, keeping a party out of costs of a finally determined aspect of the claim for a considerable period of time. Finally, we do not place much store in the submission that the appellants did not seek any such order as part of the orders sought on the appeal. That may be relevant as to whether an order for the costs of the present notice of motion ought to be made in his favour. That is considered further below.
In the Court's opinion, the interests of justice are such that it is appropriate in all the circumstances that the Court make the orders now sought. In coming to this decision, the Court has not found any unreasonable conduct on the part of Universal, being one of the factors that may be relevant on such an application: Fiduciary v Morningstar Research. However, no such finding is necessary; it is not essential that all three factors outlined in Fiduciary v Morningstar Research be satisfied for the favourable exercise of the discretion to determine that costs should be payable forthwith.

Principles

By order 6, the Court ordered that the proceedings be remitted to the Supreme Court for the determination of the remaining issues on the summons. By their notice of motion, the appellants sought a variation of this order to include as part of the order that the matter be remitted to a judge other than Sackar J.
The scope of the Court's power to order a remittal was considered in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178. Young JA, with whom Beazley JA agreed, stated, at [119]: "The Court certainly has power to remit a matter to a different judge … The key question is whether there will be a perception of a fair trial if the case is remitted to the judicial officer who previously heard it."
His Honour, at [121], set out matters relevant to whether such a determination should be made: "(1) Ordinarily, the Court of Appeal will not interfere with the assignment of the matter by the trial court: Steedman v Baulkham Hills Shire Council (No 2)(1993) 31 NSWLR 562 at 576; (1993) 80 LGERA 323 at 336 per Kirby P; Castle Constructions Pty Ltd v North Sydney Council [2007] NSWCA 164; (2007) 155 LGERA 52 at 87 per Basten JA. (2) The power to direct a remittal to a fresh person is to be exercised sparingly: Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; (2005) 3 DDCR 1 at [12]. … (5) It may well be a ground for remitting a matter to a differently constituted court or tribunal where there have already been strong findings about the credibility of a party; see eg Smith v New South Wales Bar Association (1992) 176 CLR 256 at 269 per Brennan, Dawson, Toohey and Gaudron JJ. (6) If there has been stringent criticism of the judge or tribunal member in the appeal court, the appearance of justice might recommend that the matter be remitted to a fresh mind: Brackenreg v Comcare Australia (1995) 56 FCR 335 at 352 per Sheppard J. (7) If there is a reasonable likelihood that a judicial officer or tribunal member will be perceived to have pre-judged an issue to be remitted to him or her, the matter should be remitted to a fresh mind: Baulkham Hills Shire Council v Basemount Pty Ltd [2003] NSWCA 189; (2003) 126 LGERA 339 at 345 per Tobias JA with whom Handley and Ipp JJA agreed. (8) If the appeal hearing throws up a reasonable suggestion of bias in the original decision maker, remittal to a different person will be ordered: Castle Constructions Pty Ltd v North Sydney Council [2007] NSWCA 164; (2007) 155 LGERA 52 per Tobias JA at 73." (emphasis added)
In Seltsam Pty Ltd v Ghaleb Mason P, with whose reasons on this point Ipp JA agreed stated at [12]-[13]: "12 The power to direct a hearing by other than the original judicial officer is used sparingly and only when it appears to the appellate court that it is appropriate in the interests of justice (see Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at 538[62], 556[123] and authorities there cited). Something more than error, to which all are prone, must be demonstrated. Where the proceedings below have been conducted in such a manner as to give rise to a reasonable apprehension of bias this will usually ground such an order. But the power is not limited to such a situation. 13 There can be cases where a complicated process of fact-finding has miscarried through a combination of factors. The interests of justice, including its appearance, may require that the new trial take place before a differently constituted court or tribunal. This is particularly so where, as in the present case, the first trial resulted in a judgment turning upon credibility-based findings." (emphasis added)

Consideration

In Universal Music Australia Pty Ltd v Pavlovic [2015] NSWSC 791, at [113], Sackar J expressed the following views as to Mr Pavlovic's credit: "I formed a most unfavourable opinion of Mr Pavlovic. He is a self-confessed liar who, it seems, effortlessly resorts to mendacity if he thinks it will suit his commercial ends."
At [127], Sackar J stated: "Insofar as an issue to be determined requires a consideration of [Mr Pavlovic's] credit, I would not accept any evidence from him as truthful without corroboration."
These statements clearly constitute "strong findings about the credibility of a party": Walker Corporation at [121]. It is appropriate therefore, in the interest of justice, that the remaining issues in dispute be dealt with by a differently constituted court.

Costs of the notice of motion

The appellants have been successful on both aspects of the notice of motion. In the ordinary course, they would be entitled to the costs of the motion, unless the court made some other order: UCPR, r 42.1. As indicated above, the orders sought on the notice of motion were both orders that could have been included in the orders sought on the appeal. Nonetheless, at the time that the matter was before the Court for the hearing of the appeal, it is unlikely that the Court would have permitted evidence to be filed in support of order 1 sought in the notice of motion. At the least, it is unlikely that the Court would have had regard to that evidence until it had determined the appeal.
Likewise, it would have been inappropriate for the Court as part of the hearing of the appeal to have heard submissions on whether the orders now sought ought to have been made. Any such submissions would have had to prognosticate as to the outcome. Further, there most likely would be reasons in the Court's judgment relevant to the consideration of the appropriate orders to be made. This is so in respect of both orders sought in the notice of motion, but in particular as to whether the matter ought to be remitted to a judge other than the primary judge. Accordingly, we are not persuaded that this is an appropriate case in which to make some other order pursuant to UCPR, r 42.1 in respect of the costs of the notice of motion.
Finally, for the reasons we have already given in respect of order (1), it is appropriate that the costs of the notice of motion be payable forthwith. Accordingly, the Court makes the following orders: (1) Order pursuant to the Uniform Civil Procedure Rules 2005 (NSW), r 36.17 that orders (4) and (5) made on 6 October 2015 be amended so as to insert the words "first respondent" in lieu of the word "respondents"; (2) Order that the costs ordered to be paid by the first respondent to the appellants of the appeal and in the court below be payable forthwith as agreed or assessed; (3) Vary order 6 of the orders made on 6 October 2015 by inserting the words "to a Judge other than Sackar J" after the words "Supreme Court"; (4) Order that the first respondent pay the appellants' costs of the motion, such costs to be payable forthwith.

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: 07 March 2016

Federal Court Rules 1979(Cth)

(2003) 126 LGERA 339

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