Plaintiff v Defendant

McDermott v Black [1940] HCA 4; (1940) 63 CLR 161

Bartlett v Mouncey [1988] FCA 418

National Australia Bank v Pollak [2001] FCA 1408; (2001) 186 ALR 44

Pollak v National Australia Bank [2002] FCA 237

PRACTICE AND PROCEDURE - Whether any relevant controversy - whether declaratory relief should be granted.

Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] AC 438

Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421

Ruhani v Director of Public Prosecutions [2005] HCA 42

Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70

COSTS - Whether successful party should be deprived of costs order in his favour - whether his conduct induced the plaintiff to institute the proceeding.

Introduction

1 In March 2000 the plaintiff ("Hollyburton") lent the defendant, Dr Irani, the sum of $416,000. Dr Irani did not repay that sum when it was due and on 12 June 2003 Hollyburton obtained judgment against him in this Court in proceeding number 6302 of 2000 for a total sum, inclusive of interest and costs, of $569,589.65.

2 In September and October 2003, an arrangement was made between the then solicitors for Hollyburton, Galilee and Associates, and the solicitors for Dr Irani, Comlaw, under which Dr Irani was to pay specified sums, including monthly instalments of $10,000 per month. Dr Irani made payments until 28 July 2004. The total amount he paid was $140,000. He has not paid anything since 28 July 2004.

3 Prior to an amendment made during the trial, Hollyburton's only claim in this proceeding was to enforce what are alleged to be terms of an agreement reached in September/October 2003. During the trial, pursuant to leave I granted, Hollyburton added an alternative claim seeking a declaration as to the continuing enforceability of the judgment in proceeding 6302 of 2000 and as to the amount presently outstanding under that judgment. It took this course in response to the position taken by Dr Irani on the trial which was, in substance, that no binding contract had been made in September/October 2003, that what had occurred then amounted to what is referred to in the cases as a "mere accord executory", that Hollyburton's rights under its judgment remained unaffected, and that the claim in this proceeding was accordingly misconceived and ought to be dismissed.

4 Dr Irani's position as set out above had not been pleaded in Dr Irani's defence. In my view it ought to have been pleaded given the provisions of Rule 13.07(1). Rather than insisting upon amendment of the defence, which would have prompted an amended statement of claim and a further amended defence, I gave leave to amend the statement of claim and directed the filing of an amended defence.

5 Two matters were raised for determination in the trial.

6 The first was the issue I have outlined concerning whether there was an agreement of the nature pleaded by Hollyburton.

7 The other issue raised was whether Hollyburton had proved its own incorporation. The evidence that was led on that issue was accepted subject to objection and I will deal with that issue and the objection in these reasons.

The arrangement in September/October 2003

8 The only relevant evidence given before me in relation to the arrangement reached in September/October 2003 was given by Mr Ian Jackson. Mr Jackson is a solicitor. During the relevant period, he was the solicitor with carriage of the matter on behalf of Hollyburton at Galilee and Associates. Mr Jackson produced a series of letters between Galilee and Associates on behalf of Hollyburton and Comlaw on behalf of Dr Irani. Save for some evidence he gave in relation to payments, his oral evidence did not add to or amplify what was set out in that correspondence.

9 I indicated in the introduction that Hollyburton obtained judgment against Dr Irani on 12 June 2003. On 19 September 2003 Galilee and Associates wrote to Comlaw (exhibit P3). The subject matter of the letter was expressed as follows:

"Hollyburton UK Ltd v B Irani

Bankruptcy Notice VN1226/2003"

10 The content of the letter is not of significance, other than that it indicates that by 19 September 2003 there had been discussions concerning the outstanding judgment between the solicitors.

11 By a facsimile transmission of 23 September 2003 from Comlaw to Galilee and Associates (exhibit P4), a proposal was set out, which it seems was premised upon discussions as to which there is no evidence. Relevantly, the facsimile transmission reads as follows:

"We are instructed that the first $30,000.00 is able to be paid upon acceptance of the offer.

The monthly installments of $10,000.00 are to be paid monthly after the first payment of $30,000.00.

Our client is prepared to have the issue of the outstanding debt reviewed in say four or five month's time. By that time a number of other matters we expect will have been resolved."

12 On 29 September 2003 Comlaw faxed a further document to Galilee and Associates (exhibit P5). It relevantly reads as follows:

"Re: Boman Irani ats Hollyburton UK Ltd

Bankruptcy Notice No. VN1226/03

We refer to our telephone conversation on the 25 September 2003.

We are instructed that our client is able to enter into the following arrangement concerning the judgment, the subject matter of the above bankruptcy notice.

Our client pay by bank cheque payable to your firm (unless otherwise advised by you) the following sums;

1. The sum of $30,000 upon acceptance of this arrangement;

2. The sum of $20,000 within 14 days of acceptance of the arrangement; and

3. Monthly instalments of $10,000 to be paid monthly after the second payment above.

Our client is prepared to have the issue of the outstanding debt reviewed in preferably five months time. It is expected that by that time a number of other matters will have been resolved. Our client would also like the option of paying out your client's debt at an earlier stage in the event that matters arise which will permit him to do so.

We have explained to the client that the interest on the debt continues to accrue and that the earlier the debt is finalised the better the position for him concerning the amount to be paid.

We confirm that as part of the above arrangement that previous costs which our client has obtained in the Federal Magistrates' Court against your client are compromised on acceptance of the arrangement by your client."

13 On 14 October 2003 Galilee and Associates faxed a letter to Comlaw (exhibit P6) which relevantly reads as follows:

"Hollyburton UK Ltd and Boman Irani

Creditors Petition

Further to recent conversations we confirm our client will accept an initial payment of $30,000.00 by 4pm on Wednesday, 15 October with a further instalment of $10,000 by 29 October and thereafter monthly payments of $10,000, due the 29 day of each month. This arrangement to be reviewed prior to the expiration of the 6 months from the date of the issue of the Bankruptcy Notice.

Provided Irani complies with this arrangement Hollyburton UK Ltd will not issue a Creditors Petition within the aforesaid period but reserves the right to do so in the event of a default and prior to the expiry of the Bankruptcy Notice if the matter is not resolved or a further satisfactory arrangement is not reached with our client."

14 In response to that facsimile of 14 October 2003 Comlaw replied as follows in a fax of 15 October 2003 (exhibit P7):

"Re: Boman Irani ats Hollyburton UK Ltd

Bankruptcy Notice No. VN1226/03

Thank you for your letter of 14 October 2003. We have the cheque in the amount of $30,000, a copy of which follows with this transmission. As you are aware, Dr Irani is dependent upon the largesse of others to make the offer of settlement to your client.

Our client instructs that in relation to any default that obviously the arrangement would be breached and of course will seek to ensure that such does not occur. In relation to the time within which to review the payment arrangement our client accepts that such payment arrangement can be reviewed within six months but in relation to the matter being resolved as a whole we can only agree to reviewing the payment arrangement because at this stage our client cannot say with certainty that your client's judgment debt would be paid out in full by that time, although it is hoped that it may eventuate if he is successful in other litigation, failing which he will continue the $10,000 per month arrangement.

On the basis of the above we enclose bank cheque in the sum of $30,000 being the first instalment. Please note that we understand the second instalment is for $20,000 and that the subsequent monthly payments will be $10,000."

15 In January 2004 Comlaw wrote to Galilee and Associates (exhibit P8) indicating that in view of the state of litigation in which Dr Irani was then involved:

"Our client at this stage will be continuing the arrangement reached with your client."

16 By a facsimile transmission of 17 May 2004, as a consequence of what Galilee and Associates maintained was a failure to address the matter since the expiry of "the six month period", Gaililee and Associates advised Comlaw they were instructed "to proceed with the Bankruptcy proceedings" (exhibit P9).

17 By a letter dated 21 February 2005 Comlaw wrote to the new solicitors for Hollyburton, Erica Strugnell & Co., asserting, amongst other things that bankruptcy proceedings may constitute "an abuse of process" (exhibit P10). The letter asserted that it was "clear that there has been accord and satisfaction".

18 As I indicated in the introduction, Dr Irani made payments until July 2004 and has not made any payment since.

Contentions of the Parties

19 When the matter came on for trial, the only case pleaded on behalf of Hollyburton was that an agreement had been made in September and October 2003 pursuant to which:

"... the Plaintiff agreed to waive its rights to enforce the judgment, in consideration of the Defendant waiving his rights to enforce costs orders obtained by him in Federal Court proceedings and to pay the judgment and interest thereon by instalments".

It was further alleged that there were express and implied terms of this agreement whereby in default of any payment the full amount would again become due and payable and that at the expiration of six months the defendant was to repay the balance of the judgment debt and interest accrued thereon.

20 In support of that case, counsel for Hollyburton submitted that the correspondence established that there had been an agreement; that the term of the agreement was six months, at the end of which there would either be a new arrangement entered into or repayment in full; and that it was agreed that if there was any default the whole amount would be due and payable. The submission was that it was also agreed that interest would accrue pursuant to the Penalty Interest Rates Act 1983 (Vic). The terms of the agreement were said to be both express and implied.

21 Counsel on behalf of Dr Irani submitted that there had been no repayment agreement creating fresh obligations and no agreement by which Hollyburton's rights under the judgment had been waived. The submission made was that the only agreement made was to refrain from execution or other enforcement procedures. It was submitted that whilst an agreement had been concluded by the letters, culminating in the Galilee and Associates facsimile of 14 October 2003 (exhibit P6), the only content of that agreement was that Hollyburton would forebear from enforcement proceedings for as long as the specified payments were made. It was submitted that the Comlaw facsimile transmission of 15 October 2003 (exhibit P7) was not relevantly part of this very limited agreement. Counsel for Dr Irani submitted that on this analysis there was no basis for the implication of terms concerning default or interest. Counsel relied upon the Court of Appeal decision in Osborn v McDermott ("Osborn").[1] The submission was that what had occurred in September and October 2003 was mere accord executory in the sense explained in that decision.

22 In reply on this issue, counsel for Hollyburton submitted that the agreement is properly to be characterised as what was described in Osborn as accord and conditional satisfaction. In the alternative, he sought leave to amend so as to seek a declaration as to the continuing enforceability of the judgment, and as to the amount now outstanding pursuant to it. I gave Hollyburton that leave in the circumstances to which I referred in the introduction. A further amended statement of claim was delivered pursuant to that leave and a further amended defence was filed and served.

Characterisation of the Arrangement Made - Applicable Legal Principles

23 The Court of Appeal decision in Osborn identified three categories of what might be generically described as compromises. At the two extremes are what were referred to as mere accord executory and as accord and satisfaction. There is a third alternative described in Osborn which is between these two extremes, and which the Court of Appeal characterised as accord and conditional satisfaction.

24 Where the arrangement amounts to mere accord executory, it does not operate to discharge existing rights and duties unless and until the accord is performed. A compromise arises only if and when something is done. In this situation the claimant in return for abandoning its existing rights accepts an act, or agrees that he will accept an act, and there is no discharge for the other party in relation to those existing rights unless and until the act is performed. As explained by the Court of Appeal, in this situation until there is performance there is nothing to be enforced, and once performance occurs there will "ordinarily" be nothing left to enforce. Phillips JA who wrote the judgment with which Winneke P and Charles JA concurred, went on to observe "...although the resultant discharge of existing obligations may of course be insisted upon." [2]

25 An issue arises in this context as to whether it can be said that there is any contract at all in cases falling within this category. I will return to that issue.

26 At the other extreme is the category of case referred to as accord and satisfaction. Here discharge from pre-existing liabilities occurs immediately the accord or agreement is reached. The claimant agrees to compromise the pre-existing claims in return for a promise that something will be done. In this category of compromise, it is only the agreement which can be enforced as the agreement as soon as it is made supplants all prior rights.

27 In between the two types of case referred to above, the Court of Appeal in Osborn identified a third category of case, adopting in that respect the analysis of Fullagar J in Scott v English ("Scott").[3] Phillips JA described this third category as accord and conditional satisfaction. Here, there is an immediately binding agreement for a compromise but satisfaction and discharge of the pre-existing liabilities is deferred until performance. The original liabilities are suspended unless and until there is performance, and the plaintiff is bound to await the time for performance before seeking to enforce those original liabilities and to accept performance if it is tendered. Phillips JA explained the consequences of default as follows:

"... but if there is no performance, then the plaintiff may proceed according to general principles called into play when any agreement is repudiated; the plaintiff may either treat the agreement (the accord) as at an end and proceed on his original cause of action; or he may, at his option, sue on the compromise agreement, in face of the original cause of action."[4]

28 I indicated earlier that an issue arises as to whether cases within the category described as mere accord executory are cases where there is any contract at all. In Scott Fullagar J expressed the view that where there was a mere accord, there was no contract at all.[5] Phillips JA in Osborn appeared to accept that analysis, although he also observed that upon performance discharge of existing obligations could "of course" be insisted upon and that upon performance a suit would "ordinarily" be unnecessary.[6] The premise that there is no contract at all, leads to the conclusion that the claimant in these situations is not bound to accept performance, and Fullagar J observed that the plaintiff was not so bound in Scott.[7] With respect, there seems to me to be tension between that analysis and the description of mere accord given by Dixon J in McDermott v Black,[8] which is quoted in Osborn,[9] and which is in the following terms:

"Promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim." (Emphasis is mine.)

29 The reason the issue may be significant is that if it were accepted that a mere accord involves no contract at all, then as soon as one identified a circumstance in which the plaintiff was bound to accept performance and to discharge the obligation upon performance, then one would be outside the category of mere accord executory and in some other category.

30 These issues are all issues of construction of the particular agreement which was in fact made or the arrangement reached. The important thing is to carefully identify what has been agreed and what has not been agreed.

31 Every case in this context will be decided on its own facts, but a consideration of the factors seen to be significant in some of the decided cases is of assistance.

32 In Scott the plaintiff who had sub-let premises to the defendant brought an action for possession. The matter was listed for trial and on the trial date an arrangement was reached between counsel whereby the plaintiff was to give the defendant vacant possession and assign the tenancy to him and the defendant was to pay a sum of money within a specified period. The defendant did not pay within the specified period and the plaintiff then indicated that it proposed to have the matter relisted and proceed with the hearing. At the hearing Fullagar J permitted the defendant to amend her defence so as to allege accord and satisfaction. Fullagar J undertook a careful analysis of the historical position and identified the three categories of situation subsequently dealt with in Osborn. In the particular facts Fullagar J held that the compromise was not a mere accord executory because the arrangement contained "mutual promises". The arrangement in Scott was held to be what the Court of Appeal in Osborn categorised as accord and conditional satisfaction.

33 Osborn itself concerned a settlement in a County Court proceeding of a claim on the one hand for the return of a motor vehicle and a claim on the other for a sum of money in relation to work done on that vehicle. The settlement in question provided for the return of the vehicle and payment at the same time of a sum of money. The arrangement was characterised by the Court of Appeal as mere accord executory. The important features of the arrangement in that respect were the unlikelihood in the particular facts of the party seeking return of the vehicle agreeing to accept a promise of return, rather than the act of return, and the express concurrency of the payment and return of obligations.

34 Cooper J in the Federal Court of Australia, considered a compromise concerning a judgment debt in Bartlett v Mouncey.[10] Cooper J held that the particular arrangement was not accord and satisfaction as it was clear that the claimant's rights under the judgment were not to be given up otherwise than upon receipt of the agreed sum. Cooper J held that the arrangement was not mere accord executory because he found that if the sum had been tendered then the judgment creditor was bound to have accepted it. Cooper J held that there was an immediately binding agreement, but that it was accord and conditional satisfaction "of the type discussed" in Scott and in Osborn. Cooper J held that the applicant had accepted repudiation of the agreement and that it was accordingly entitled to proceed to enforce the original judgment.

35 An arrangement concerning a judgment debt was also the subject of a decision of Madgwick J in National Australia Bank v Pollak,[11] and by the Full Court of the Federal Court in the same matter, there entitled Pollak v National Australia Bank.[12] In the particular facts of that case it was important to determine at what point one co-debtor had obtained a release. Madgwick J held that the particular arrangement in issue there was accord and conditional satisfaction and his analysis was upheld by the Full Court. The terms of the particular arrangement were held to be fatal to a conclusion that there was accord and satisfaction, in particular because it was expressly provided that "upon" certain matters being completed, the judgment creditor would execute terms of settlement. Madgwick J also held that the arrangement was not mere accord executory because under the arrangement, new obligations, not referrable to the existing judgment, were immediately imposed upon the debtor. In particular, the debtor forewent rights of appeal and granted additional equitable interests over property to the judgment creditor.

Characterisation of the Arrangement Here

36 It was not contended by any party in submissions before me that the arrangement in September/October 2003 was accord and satisfaction. Such a conclusion would be inconsistent with the relevant correspondence.

37 In analysing the arrangement made it seems to me that the following characteristics are important:

1. The arrangement proceeds on the assumption that the relevant primary obligation, being the judgment itself, will continue notwithstanding the making of the arrangement and notwithstanding its performance. In particular the correspondence in dealing with the issue of "review" seems to me to be only consistent with the continued existence of the obligation under the judgment unaffected by the arrangement reached, or at least unaffected save for a period of suspension of enforcement. This conclusion also follows from the references to the bankruptcy notice and a creditor's petition. It must be concluded that those steps would have been based on the existing judgment. It seems to me that the reason the arrangements in relation to "review" are vague is because the primary obligation under the judgment was clear and was not intended to be affected. The solicitors for Dr Irani correctly characterised the arrangement, in exhibit P5, as being "an arrangement concerning the judgment, the subject matter of the Bankruptcy Notice". This conclusion is fortified by the approach taken in the correspondence on the issue of interest. No reference is made to any agreement about interest, the only reference is to the continuing accrual of interest. This must be interest accruing on the judgment pursuant to the Penalty Interest Rates Act. It is continuing to accrue because the judgment is not affected by the arrangement, save in the sense contended for by counsel for Dr Irani before me that enforcement is to be suspended.

2. Dr Irani did become subject to a fresh obligation pursuant to the arrangement, being the compromise of the costs claims which he had in the Federal Magistrates' Court.

3. Hollyburton was bound to accept performance as provided for in the arrangement and was obliged not to enforce the judgment which it had for so long as the arrangement subsisted and for so long as it was complied with. The arrangement was not an indefinite one. Identification of its precise duration is now unnecessary. On no view did the arrangement govern a period beyond six months.

38 My conclusion is that the arrangement was correctly characterised by counsel for Dr Irani. What was agreed here was of a very narrow ambit. It could not properly be described as either an accord executory or as accord and conditional satisfaction in the senses used in the authorities to which I have referred, because the arrangement did not involve a release from the judgment in any circumstance. What was agreed here was no more than that Hollyburton would not proceed to enforce the existing judgment for so long as the payment arrangement subsisted and was adhered to. I accept counsel for Dr Irani's submission that there was no contract of the kind pleaded by Hollyburton. There was a limited accord and Hollyburton had some obligations under that limited accord. It was obliged not to enforce the judgment for so long as the arrangement subsisted and was adhered to. Otherwise the parties' positions remained unaffected. I accept counsel for Dr Irani's contention that the only present obligation of Dr Irani is that due under the judgment. There is no new obligation under the arrangement, which has long since come to an end either as a result of the elapse of time or because of non compliance by Dr Irani, it matters not which.

Declaration

39 Counsel for Dr Irani submitted that a declaration embodying the conclusion which I have reached consistently with his submissions ought not to be made as there is no relevant controversy to be resolved. It is necessary to set out more of the history of the dealings between the parties in order to determine whether a declaration is appropriate.

40 As indicated earlier, Hollyburton initially foreshadowed an intention to proceed by way of bankruptcy (exhibit P9). Dr Irani's solicitors asserted, amongst other things, that there had been accord and satisfaction and that such a course may be an abuse of process (exhibit P10).

41 Hollyburton then relevantly adopted the position put forward by Dr Irani's solicitors and issued a writ to enforce the alleged agreement on 1 April 2005. Dr Irani's defence was filed on 23 May 2005. The defence does not admit every allegation. One of the allegations not admitted included the allegation that judgment had been obtained on 12 June 2003.

42 The plaintiff issued two summonses for final judgment. The first was unsuccessful for reasons which are not relevant. In response to that application, however, Dr Irani swore an affidavit (expressed to be on 22 June 2005 but probably on 22 July 2005). The affidavit gives no hint of the position put on Dr Irani's behalf before me. The affidavit repeatedly refers to conduct by him "in accordance with", "pursuant to", or in reliance on what he referred to as "the agreement" (in particular I refer to paragraphs 6, 8, 9, 10, 11 and 12). The defence implicit in the affidavit appears to me to be that there was no basis for acceleration of the amount due or for interest.

43 In an amended statement of claim dated 25 August 2005 Hollyburton's allegations concerning the repayment agreement were set out in greater detail. The defence to that amended statement of claim which is dated 9 September 2005 in substance continued the approach of not admitting any of the relevant allegations, including an allegation that judgment had been obtained on 12 June 2003 in proceeding number 6302 of 2000 in the sum of $569,589.65. The defence again gave no hint of the case put in the trial before me.

44 A second summons for final judgment was issued pursuant to leave and was eventually determined by Master Efthim. Counsel who appeared before me appeared in that application, and before me there was some controversy as to how the issue as to whether the agreement made had supplanted the judgment or not had arisen. It is unnecessary to determine that question as it is clear that the issue was ventilated on the second summons for final judgment application. Master Efthim dismissed the second summons for final judgment and noted in other matters as follows:

"It is arguable that the plaintiff can sue in the original judgment. The plaintiff does not need a further judgment. Consideration is in issue. NAB v Pollak..."

45 From the written submissions on the file it seems that, at least in one context, on the second summons for final judgment application the defendant was keeping its options open. The defendant's written submissions dated 21 December 2005 read as follows:

"1. By this proceeding the Plaintiff claims to enforce a purported agreement relating to the enforcement of a judgment claimed by it on 12th June 2003. On the face of it the Plaintiff's claim is misconceived as it could seemingly rely on the existing judgment and enforce same without the necessity for further action.

2. However, it is submitted that on closer analysis the rights of the parties, at least on the Plaintiff's case, are regulated by a supervening agreement..."

The submission then dealt with the question of whether the supervening agreement was supported by consideration.

46 Dr Irani's position was made clear upon filing of the amended defence to the amended statement of claim delivered during the trial. In answer to the plaintiff's alternative claim, Dr Irani admits there is no binding agreement, contends that the judgment remains enforceable, and admits that $619,757.22 remains outstanding as at 11 October 2006 pursuant to the judgment. The amended defence also suggests that these contentions have been made by Dr Irani "at all stages" and that there has not been any relevant controversy at any time since commencement of the proceeding, save for that occasioned by Hollyburton's primary contentions.

47 I was not addressed at any length on the authorities concerning declarations, but the principles so far as they apply here are well established.[13] The Court will not make an order of an advisory nature. There must be a real controversy to be resolved. The person seeking the declaration must have a real interest to raise it. There must be a real contradictor.

48 There is a relevant controversy here. Although the argument has evolved in a somewhat unexpected manner, I have heard argument as to the proper characterisation of the arrangement made between contending positions. Whilst Dr Irani has admitted the allegations relevant to Hollyburton's alternative claim, he has adopted a different position in the past and his pleaded admissions will not necessarily prevent him from changing position again in other proceedings.[14]

49 It seems to me to be important that the controversy between Hollyburton and Dr Irani be brought to an end. Dr Irani has adopted a shifting position in relation to the proper characterisation of the events in September/October 2003 and the position ought to be clarified beyond doubt. Accordingly, I will make declarations which effectively reflect the position contended for on Dr Irani's behalf before me.

Proof of Incorporation

50 It was submitted on behalf of Dr Irani that Hollyburton had failed to prove its own incorporation.

51 In the further amended statement of claim, it is alleged that Hollyburton is a company duly incorporated in Scotland in the United Kingdom. A director of Hollyburton, Mr Robert Guy Scott, gave evidence that Hollyburton was incorporated in Scotland and produced an original Certificate of Incorporation purportedly from the Registrar of Companies for Scotland and purportedly notarised by a Notary Public in England. All of this evidence was objected to and I received it subject to that objection. In submissions it was put by counsel for Dr Irani that there was no evidence of the law of Scotland or the United Kingdom and that there was no evidence of corporate activity from which it could be inferred that Hollyburton was indeed incorporated. Counsel for Hollyburton referred to a decision of the Victorian Full Court in Picturesque Atlas v Searle.[15]

52 The existence and incorporation of a company are matters which, when relevant, may be proved by parole evidence.[16] I find that Mr Scott's evidence is admissible. On the basis of that evidence I conclude Hollyburton is incorporated and is capable of suing. Given these findings it is not necessary to consider the admissibility of the Certificate of Incorporation.

Costs

53 Counsel for Dr Irani submitted that if the analysis he contended for were accepted, the costs should follow the event. If that were not accepted, he submitted that the costs of the second day of the hearing, being 13 October 2006, should be paid by Hollyburton, as that second day was a consequence of the late amendment of the amended statement of claim.

54 Counsel for Hollyburton submitted that if the alternative claim founded on the analysis contended for on behalf of Dr Irani succeeded Dr Irani should nevertheless pay the costs as he had brought about or induced the litigation by the position adopted by his solicitors before the proceeding was instituted, and because his position had never been clear until the trial.

55 There are circumstances in which the Court's discretion might properly be exercised so as to deprive a successful party of its costs, or even so as to require a successful party to bear the costs of an unsuccessful party. The factors which might lead to a departure from the settled practice include the following:

1. Conduct by the successful party which has brought about the litigation. Such conduct might include conduct inducing a belief that the opposite party had a good claim or had a valid defence.

2. Conduct by the successful party which has resulted in unnecessary litigation or expense.

3. Wrongful conduct by the successful party in the course of the matters with which the proceeding is concerned.

56 The principles to which I have referred have been drawn from the judgment of Kaye J in Verna Trading Pty Ltd v New India Assurance Co Ltd,[17] and from the judgment of Lord Sterndale in Ritter v Godfrey,[18] upon which Kaye J substantially relied.

57 In my view Dr Irani and his solicitors did engage in conduct which induced Hollyburton to institute the proceeding and to make the claim in the way which it did. In substance, the claim as originally constituted adopted the position contended for by Comlaw on what has now become the critical issue. Dr Irani gave no indication of a change in this position until the hearing of the second application for summary judgment at the earliest and he did not plead the case contended for at trial until Hollyburton introduced that case as an alternative claim.

58 Dr Irani ought to have pleaded the case he proposed to argue at trial in accordance with Rule 13.07(1).

59 In all the circumstances I propose to make no order as to costs. I do so in relation to all aspects of the proceeding not already the subject of costs orders, including the costs of the amendments made during the trial which would otherwise be dealt with under Rule 63.17.

Conclusion

60 The declaration and orders I will make are as follows:

1. I will declare that the judgment obtained by the plaintiff in proceeding number 6302 of 2000 remains enforceable and that the sum of $619,757.22 remains outstanding as at 11 October 2006 pursuant to the said judgment.

2. There will be no order as to costs in relation to all aspects of the proceeding not already the subject of a costs order, including the costs of the amendments made during the trial which but for this order would be dealt with by Rule 63.17.

[1] [1998] 3 VR 1.

[2] [1998] 3 VR 1, 8.

[3] [1947] VicLawRp 67; [1947] VLR 445.

[4] [1998] 3 VR 1, 10-11.

[5] [1947] VicLawRp 67; [1947] VLR 445, 453.

[6] [1998] 3 VR 1, 10.

[7] [1947] VicLawRp 67; [1947] VLR 445, 453.

[8] [1940] HCA 4; (1940) 63 CLR 161, 184-5.

[9] [1998] 3 VR 1, 8.

[10] [1988] FCA 418.

[11] [2001] FCA 1408; (2001) 186 ALR 44.

[12] [2002] FCA 237.

[13] Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] AC 438; Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421; Ruhani v Director of Police [2005] HCA 42.

[14] Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70, 85-86, 98.

[15] [1892] VicLawRp 122; (1892) 18 VLR 633.

[16] Cuevas v Freeman Motors (1975) 8 ALR 321, 324 and Morris v Healy [1968] VicRp 77; [1968] VR 597, 598.

[17] [1991] VicRp 12; [1991] 1 VR 129.

[18] [1920] 2 KB 47.