HER HONOUR: On 28 August 2014, the Court of Appeal remitted these proceedings to the Common Law Division following a successful appeal by Perpetual Trustee Company Limited against CTC Group Pty Ltd. The matters remitted by the orders of the Court of Appeal were the determination of the amount of damages to be awarded to Perpetual and any consequential orders as to costs or otherwise: Perpetual Trustee Company Limited v CTC Group Pty Ltd (No 3) [2014] NSWCA 290.
On 18 February 2015, I heard and determined the amount of damages to be awarded to Perpetual. The judgment was given ex tempore (following a short adjournment).
Perpetual's claim against CTC was a claim in indemnity for the loss arising from a loan of $480,000 to a third party secured by a forged mortgage. The agreed premise of the assessment of damages was that it was a "nil-transaction" claim (that is, but for CTC's breach of the deed that governed its relationship with Perpetual, the loan funds would not have been advanced).
Perpetual claimed $437,199.41 representing the balance of the debt outstanding under the loan and $1,002,078.13 for legal costs.
I determined that Perpetual should be awarded the sum of $437,199.41 representing the balance of the debt outstanding under the loan. However, as to the claim for the amount of $1,002,078.13 representing legal costs, I acceded to CTC's submission that, owing to the form of the evidence relied upon by Perpetual, it was not possible to be satisfied that the costs claimed arose from the breach of obligation found by the Court of Appeal: Perpetual Trustee Company Limited v CTC Group Pty Ltd [2015] NSWSC 130 at [24] to [28]. I determined that Perpetual should be awarded one of the components of the claim for legal costs (a sum of $100,000 agreed with a third party) but rejected the rest, leaving Perpetual to recover its costs in accordance with the several costs orders in its favour in the proceedings.
After I had published my reasons, Perpetual contended that I had not performed a task that I was required to perform. Mr Simpkins SC, who appears for Perpetual, submitted that I had an obligation to do the best on the material before me to determine an amount. He submitted that, even if Perpetual had not discharged the onus of establishing that the legal fees incurred by Perpetual arose from CTC's breach of the deed, there was material before the Court which the Court was required to go through item by item to determine whether the particular cost was established.
Those submissions were made at the end of the day. Given that orders had not been entered and against the risk of further error, I considered it appropriate to adjourn the proceedings so as to afford Perpetual an opportunity to address that issue.
The proceedings came back before me on 25 February 2015. On that date, Perpetual made an oral application for an order that the judgment be set aside.
Perpetual invoked the principle stated by Barrett J (as his Honour then was) in Wentworth v Rogers [2002] NSWSC 921 at [9] as to when a single judge should re-open a hearing after giving judgment but prior to the entry of orders:
"It seems to me that the relevant principles, as they apply in a case such as the present, can be summarised in one basic proposition, namely, that a single judge whose decision is susceptible to appeal through readily available channels (with or without any preliminary need for leave to appeal) should allow re-opening after judgment where it is obvious to that judge that the decision has miscarried and that the miscarriage may be rectified and the situation retrieved by attention to the matter by that judge rather than by an appeal court…"
On the strength of that statement of principle, Perpetual accepted that the judgment should not be set aside unless I was persuaded to the view that there was error in it. I might add that the principle as stated by Barrett J contemplates a requirement that the error be made obvious to the judge at first instance.
Mr Simpkins submitted that I erred, first, in the approach to determining the causation question, secondly, in failing to give sufficient reasons for determining that causation was not established and, thirdly (if I was correct as to causation), in not then giving consideration to "various factual matters" which would have permitted me to arrive at a figure for indemnity costs.
I do not think it is appropriate for me to consider the alleged error in failing to give adequate reasons. In Wentworth v Rogers, Barrett J set out (at [8] of the judgment) a lengthy passage from the judgment of Santow J in Wentworth v Wentworth [1999] NSWSC 638 where his Honour noted a series of examples serving to illustrate "the constraint observed by the courts in exercise of the discretion [to re-open]". The principle stated in Wentworth v Rogers invoked by Perpetual (set out above) follows that discussion and continues with the following observation:
"What is highly undesirable is that the first instance judge should be cast in the role of hearing what amounts to an appeal against his or her own decision".
In my view, save perhaps in the case of an obvious omission readily made apparent to the first instance judge, the consideration of error alleged to consist in inadequate reasons is likely to cast the judge in exactly that role.
Accordingly, in my view, the issue I should determine on the present application is whether it is obvious that the decision miscarried in the approach to determining the causation question and, if not, whether I was nonetheless required to proceed to give consideration to "various factual matters" which would have permitted me to arrive at a figure for indemnity costs.
In fairness to Mr Simpkins, it should be noted that my judgment was given orally and was not available in writing before the application to re-open was heard. Further, as already noted, one of the complaints is that the reasons I did publish orally were inadequate. Acknowledging those aspects of the context in which the application to re-open was made, I think Perpetual's submissions as to the causation issue proceeded, in part at least, on a misapprehension as to the basis for my decision. It appeared to be apprehended by Perpetual that I applied what was referred to in submissions as a "party test", that is, that I considered that Perpetual was entitled only to recover the legal costs of any proceedings brought against CTC and not those of proceedings brought by Perpetual against any other party. That was not the basis for my decision. The question was one of proof.
I have given anxious consideration to the correctness of my judgment. As noted at [25] of the judgment, Perpetual's claim was not a claim for an order for costs but rather a claim pursuant to the indemnity contained in the Mortgage Origination Deed. Perpetual already has the benefit of a number of costs orders against CTC in respect of most of the categories of costs now claimed, but those costs are to be assessed on the ordinary basis, presumably because that is all that was sought. It would have been open to Perpetual to seek an order that those costs be assessed on an indemnity basis on the ground that the Court should exercise its discretion as to costs in such a way as to reflect the contractual right. There is ample authority for that proposition. However, I was not addressed as to whether that issue was raised at the time the various costs orders were made. If that issue was determined against Perpetual, I assume that fact would have been drawn to my attention.
In any event, Perpetual submitted that it is entitled to pursue a claim under the indemnity notwithstanding its entitlement to recover those costs in accordance with the orders that have already been made in its favour: see Perpetual's written submissions filed 23 April 2014 at para 35 and submissions in reply filed 26 May 2014 at para 27. I determined the matter remitted on that assumption.
However, Perpetual bore the onus of proving that the legal fees claimed represented part of the loss "arising from" CTC's breach.
Perpetual's approach to proof of the legal fees arising from the breach assumed, first, that all of the legal proceedings in respect of which fees are claimed arose from the breach and, secondly, that all of the legal costs charged by Gadens on the files relating to those proceedings arose from the breach. No evidence was adduced directed to the proof of those assumptions. Rather, they were simply assumed to be the fact (or the only available inference).
The affidavit sworn in support of the claim identified, under the heading "legal fees", a series of items (mostly by reference to legal proceedings) stated to be "the legal fees incurred by Perpetual", stating in each case a total amount claimed for that item and, in a number of cases, also identifying a Gadens file number. Nothing further was said in the body of the affidavit about any of the legal proceedings or the fees incurred. The affidavit annexed a narrative breakdown of services performed together with copies of invoices with no further explanation or substantiation.
When the proceedings were still before the Court of Appeal, CTC had suggested to Perpetual in correspondence (in February 2014) that the matter may need to be remitted to the Common Law Division to determine what Perpetual's losses were, whether they were caused by the breach and whether they were recoverable under the deed. Perpetual responded by referring to the Court of Appeal's finding of breach and asserting that "CTC must indemnify Perpetual for its legal costs on a full indemnity basis" (tabs 21 and 22 to the affidavit of Brooke Spain sworn 11 April 2014).
It was accordingly clear that the premise of the application was that every cent of over $1,000,000 invoiced by Gadens in a series of legal proceedings over almost 9 years was a loss arising from CTC's breach within the meaning of the deed.
All of the evidence directed to that issue was placed before the Court of Appeal and submissions were exchanged in that Court, as contemplated in the orders of the Court. Consistent with the correspondence, Perpetual submitted in the Court of Appeal that there was no point in remitting the proceedings to the Common Law Division since "the arguments are legal and can be equally if not more conveniently disposed of by [the Court of Appeal]" as contemplated by the Court's orders. The Court of Appeal did not accept that submission, expressing the opinion that the issues between the parties concerning damages were such that the determination of the amount to be awarded should be remitted to this Division: Perpetual Trustee Company Limited v CTC Group Pty Ltd (No 3) [2014] NSWCA 290 at [4].
Perpetual's letter referred to above (tab 22 of Ms Spain's affidavit) cited the decision of the Court of Appeal of Victoria in Boman Irani Pty Ltd v St George Bank Ltd [2008] VSCA 246; 22 VR 116 as authority for the proposition that "costs are payable on a contractual basis despite Perpetual having the benefit of a costs order". That is the premise on which my judgment proceeded: see [25] of the judgment. However, the decision in Boman Irani does not address the question of proof - that was a case in which the guarantee contained a certificate clause. Perpetual does not appear to have had the benefit of such a clause (if it does, it has not engaged it) and has made no attempt otherwise to bring forward proof of the matter I consider it has to prove, namely, that all of the legal fees charged by Gadens represent Perpetual's loss arising from the breach.
Perpetual also relied upon the decisions of the Court of Appeal in Abigroup Limited v Sandtara Pty Limited [2001] NSWCA 45 and Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87 at [12]-[14]. However, neither of those decisions assists on the question of proof of a contractual claim for legal fees. In Abigroup, the parties agreed on the quantification of the disputed costs on a compromised basis: see [3] of the judgment. The decision in Kyabram Property Investments is silent on the issue of proof of quantum, the Court having rejected the claim for indemnity (contractual) costs on the basis that there was no such claim articulated in the pleadings: at [17] per Beazley JA (as her Honour then was); Hodgson and Ipp JJA agreeing at [25] and [26]. I was not taken to any other authorities.
Perpetual's claim in the present case did not, I think, grapple with the issue of proof. The claim proceeded on the assumption that, if Gadens recorded a charge for services to the relevant file and invoiced Perpetual for that amount, that was a loss "arising from" CTC's breach. In my judgment given 18 February 2015, I rejected that assumption: at [26] to [28]. I have not been persuaded that my decision obviously miscarried in that respect.
The second alleged error is the contention that, having reached that conclusion, I was nonetheless obliged in the proper discharge of my judicial function to go through the narrative of legal fees and the invoices annexed to Ms Spain's affidavit and do my best to quantify Perpetual's loss. The task suggested by Perpetual would be akin to that of a costs assessor. Perpetual did not dispute that characterisation of the task but maintained that the Court is under a duty to perform it. In my view, that illustrates the inadequacy of the proof put forward by Perpetual.
Further, an examination of Ms Spain's affidavit reveals the impossibility of undertaking that task. The content of that material does not enable the Court to know, as to many items, the content or relevance of the services provided, whether the services provided arose from CTC's breach or what quantum of legal costs was charged for any individual item.
For those reasons, I am not persuaded that my decision obviously miscarried. The application to re-open the judgment given 18 February 2015 is refused.
[2]
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Decision last updated: 02 March 2015