Plaintiff v First Defendant

1 In this proceeding the plaintiff, Mr Zaitsev, sought judicial review of a decision of the first defendant, the Building Appeals Board ('the Board'). The decision of the Board related to an appeal of the second defendant's refusal or failure within a reasonable time to cancel or amend building orders issued by him. Mr Lorenzini, the second defendant in this proceeding, is the appointed relevant building surveyor.

2 On 3 June 2019, I delivered judgment and ordered that the decision of the Board be set aside, and the dispute be remitted to the Board for determination by a differently constituted panel. The question of costs was raised briefly at the delivery of the judgment and deferred to written submissions. Subsequently, in accordance with the Court's directions, written costs submissions were received on behalf of the plaintiff and the second defendant.[1]

3 The plaintiff seeks costs of the proceeding against the second defendant to be assessed on a standard basis in default of agreement. The plaintiff did not seek costs against the first defendant.

4 In his written submissions, the second defendant sought that:

(a) there be no order as to costs; and

(b) if the Court refuses the plaintiff's application for a costs order against the second defendant, that the plaintiff pay the second defendant's costs of the costs application.

(c) that if it were determined that the second defendant pay the plaintiffs costs, that the second defendant be granted a certificate under the Appeals Costs Act 1998 in respect of any such determination as well as for the second defendants own costs of the proceeding.

5 The plaintiff does not oppose the granting of an indemnity certificate to the second defendant under the Appeals Costs Act 1998.

6 In this proceeding, the plaintiff was wholly successful in his appeal to the Court.

7 The Board took no active role in the proceeding, on 10 September 2018 advising the Court by letter that it will abide by the decision of the Court in accordance with the principles enunciated in R v Australian Broadcasting Tribunal & Ors; ex parte Hardiman & Ors ('Hardiman').[2]

8 On 17 September 2018, the solicitor for the second defendant confirmed in a letter that he took no position on the relief sought by the plaintiff but that he reserved his right to be heard on the issue of costs. He subsequently provided his consent for the Court to make orders that the matter would proceed by way of submissions from the plaintiff only.

9 Section 24 of the Supreme Court Act 1986 provides:

Costs to be in the discretion of Court

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

(2) Nothing in this section alters the practice in any criminal proceeding.

10 The power and discretion of the Court as to costs under s 24 shall be exercised in accordance with Order 63 of the Supreme Court (General Civil Procedure) Rules 2015.[3]

11 In Re Munro (Costs),[4] Associate Justice Derham concisely summarised the applicable principles regarding costs as follows:[5]

(a) unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid;[6]

(b) the discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation;[7]

(c) in the exercise of the discretion, practices or guidelines have been developed.[8] These practices or guidelines are not legal rules that confine the exercise of the discretion;[9]

(d) there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary a successful litigant should receive his or her costs.[10] It is not, however, a legal rule devised to control the exercise of the discretion.[11] Where the general rule applies, it has the result that the successful party should be entitled to the whole of its costs;[12]

(e) the purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion;[13]

...

The Appeal Costs Act

12 Section 4(1) of the Appeal Costs Act 1998 ('ACA') states:

Application by respondent for indemnity certificate in respect of appeal

(1) If an appeal against a decision of a court in a civil proceeding -

(a) to the Trial Division of the Supreme Court; or

(b) to the Court of Appeal, including an appeal to the Court of Appeal from a decision of the Trial Division of the Supreme Court; or

(c) to the High Court of Australia from a decision of the Supreme Court -

succeeds, a respondent to that appeal may apply to the Supreme Court for, and the court may grant, an indemnity certificate in respect of costs.

...

13 Section 3(1) of the ACA defines court as follows:

court includes any tribunal or other body -

(a) from whose decision there is an appeal to a superior court on a question of law; or

(b) ...

14 Section 5 of the ACA states:

Certificate entitles respondent to payment of costs

(1) Subject to subsection (2), a respondent granted an indemnity certificate under section 4 is entitled to be paid by the Board, on an application made to it by the respondent in the approved form -

(a) an amount equal to the appellant's costs (if any) -

(i) of the appeal in respect of which the indemnity certificate was granted; and

(ii) if the court makes an order for a new trial - of any new trial that is held as a consequence of that order; and

(b) an amount equal to the respondent's own costs -

(i) of the appeal in respect of which the indemnity certificate was granted; and

(ii) if the court makes an order for a new trial - of any new trial that is held as a consequence of that order; and

...

(c) if the costs referred to in paragraph (b) are assessed, an amount equal to the costs incurred by the respondent in connection with the assessment.

(2) The maximum amount payable to a respondent pursuant to an indemnity certificate granted under section 4 is $50 000 or any other amount that is prescribed.

15 Section 35A of the ACA states:

No payments to certain persons or in respect of certain matters

(1) Despite any other provision in this Act, no amount is to be paid by the Board under this Act, other than on an application under section 6, 9 or 13 -

(a) to a corporation having paid up share capital of $200 000 or more or to a subsidiary of such a corporation; or

(b) to an insurer of a party whose rights under the contract of insurance have been subrogated to the insurer; or

(c) in respect of costs that are recoverable under an insurance policy or would be recoverable but for any amount payable by way of excess under or in relation to the policy.

(2) In subsection (1), corporation and subsidiary have the same meanings as in the Corporations Act.

(a) A costs order against the second defendant is in line with accepted practice that costs follow the event;

(b) Reasonable conduct of an unsuccessful party does not deprive the plaintiff of his entitlement to costs, and a purported focus on the conduct of the unsuccessful party misdirects the relevant principles;

(c) The plaintiff did not conduct the proceeding in such a way to warrant a disentitlement to costs from the second defendant; and

(d) The second defendant did not, and was not entitled to, adopt a Hardiman position.

17 The plaintiff did not otherwise contest the seeking of a certificate pursuant to the ACA by the second defendant.

18 The second defendant submitted that he should not be ordered to pay the plaintiff's costs on the grounds that such an order:

(a) Would not be consistent with compensatory principles;

(b) Is not justified having regard to the plaintiff's conduct in the proceeding;

(c) Would not be consistent with the principles in the Civil Procedure Act 2010;

(d) Is not ordinarily made, under established precedent, where the defendant did not cause the need for the proceeding and did not contest the proceeding; and

(e) Is not ordinarily made, under established precedent, against a defendant who was acting in an official public capacity.

19 In relation to his application made under the ACA, the second defendant sought a certificate with the amount payable out of the Appeal Costs Fund capped at $10,000, being the excess that the second defendant would not recover from his insurer. The second defendant informed the Court that save for the excess, he is indemnified for his own costs of the proceeding and any liability that the second defendant pay the plaintiffs costs of the proceeding. As outlined above, s 35A(1)(c) of the ACA limits the extent of the amount payable in respect of costs that are recoverable under an insurance policy to any amount payable by way of excess only.

20 For the reasons that follow, I have determined that the second defendant should pay the plaintiffs costs on a standard basis in default of agreement, and that the second defendant should be entitled to a certificate under the ACA.

21 I am satisfied that there is no cause to depart from the usual rule in civil proceedings that costs follow the event. The plaintiff was wholly successful in his appeal and conducted the proceeding efficiently and in accordance with the relevant rules and the Civil Procedure Act 2010. There is no disentitling conduct that would deprive the plaintiff from the usual form of costs order.

22 I will address each of the second defendant's submissions against this course in turn.

23 The second defendant submitted that a costs order against him would not be consistent with compensatory principles. He contended that a successful plaintiff is only entitled to costs under the 'compensatory principle' where the proceeding either should not need to have been brought or should not have been defended, and that in this case the second defendant did not cause or contribute to the need for the proceeding, being a proceeding which was necessitated by error of the Board. The second defendant relied upon Oshlack v Richmond River Council[14] ('Oshlack') as authority, where McHugh J stated:

The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party, the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.[15]

24 In my view, this passage from Oshlack explains why, in fairness, a successful party should ordinarily be entitled to its costs. It does not purport to limit the circumstances in which a successful party is so entitled. In fact, the decision makes clear that in guiding the exercise of a discretion to award costs, the focus is on the conduct of the successful party.[16] An analysis which creates a rule limiting the compensation available to a successful party based on the conduct of a defendant, is misguided.

25 The 'compensatory principle' as so described by the second defendant, refers to the guiding principle that the purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party.[17] That purpose is a guide to the exercise of the discretion as set out above in s 24 of the Supreme Court Act 1986.

26 Here, in circumstances where the plaintiff was wholly successful and ran his case expeditiously and efficiently, an award of costs in favour of the plaintiff is entirely consistent with the compensatory purpose, as it indemnifies the plaintiff, the successful party, against expenses incurred by reason of the proceedings.

27 The second defendant submitted that as the plaintiff's originating motion did not state that the plaintiff claimed costs, the second defendant was under the impression that the plaintiff would not claim costs, and on this basis decided not to take a position on the relief sought by the plaintiff in his originating motion while reserving his right to be heard as to costs.

28 As to the plaintiff's conduct, the second defendant in his written submission went on to state:

It is submitted that the plaintiff commenced the proceeding with the intention not to claim its costs of the proceeding from the defendants, most likely because the plaintiff believed when filing the proceeding that the Second Defendant would be less likely to defend the proceeding if no costs were sought (which is in fact what happened)... it is submitted that the plaintiff's conduct deprived the Second Defendant of the opportunity to make an informed decision before the hearing about how it should respond to the proceeding. The plaintiff should not be rewarded with an order for costs in those circumstances.[18]

29 I cannot support this submission for several reasons. Firstly, the second defendant provided no evidence that would convince me that he was under the impression that the plaintiff would not claim costs.[19]

30 Secondly, I am not persuaded that it was reasonable for the second defendant to have assumed, based on the absence of a claim for costs set out in the originating motion, that costs would not be sought in the proceeding. There is no requirement that a claim for costs be set out in an originating motion. As already stated, under s 24 of the Supreme Court Act 1986 the Court has full power to determine by whom and to what extent costs are to be paid. Costs are not a relief or remedy sought in a proceeding[20] and are not obtained by 'an application authorised to be made to the Court'.[21]

31 Thirdly, the second defendant in electing not to participate in the proceeding reserved his right to be heard as to costs. Contrary to the second defendant's submission, this indicates that the second defendant turned his mind to the possibility that there may be an application made as to costs.

32 Finally, I agree with the submission of the plaintiff that the second defendant has provided no evidence to support his allegation and the submission speculates as to the plaintiff's motives in a manner that is improper.

33 I am not satisfied that there has been disentitling conduct on the part of the plaintiff that would deprive him of the usual form of costs order.

Inconsistency with the Civil Procedure Act

34 The second defendant submitted that the Civil Procedure Act 2010 requires the Court to give effect to the overarching purpose contained within s 7 of that Act in the exercise of the Court's powers, being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. He submitted that as he did all he could in the proceeding to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute that it would be unjust and contrary to the overarching purpose to make a costs order against him.

35 In my view, it is not persuasive for the second defendant to assert 'it did all it could in the proceeding to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute'[22] in light of his decision not to participate in the proceedings. He provided no assistance at all. As such, I do not agree that it would be contrary to the overarching purpose to make a costs order against the second defendant.

36 However, it may be said that the second defendant's non-participation did reduce the amount of time for the hearing, the Court only being required to hear from one party. However, this will no doubt be reflected in the quantum of costs claimed by the plaintiff.

The second defendant as a public officer in the proceeding

37 The second defendant attempted to liken his position in the proceeding to that of a public officer performing a statutory function.[23] On that basis, it was contended a costs order should not be awarded against him.

38 By so analogising, the second defendant's position in the appeal is misconstrued. The second defendant, while performing a statutory power, did so in the capacity of a private person in a commercial context. The execution of a function conferred by a statute does not by necessity grant an individual the status of a public officer.[24]

39 The second defendant argued his decision to take no active role in the proceeding warrants the costs of the proceeding to fall upon the plaintiff.[25] However, the second defendant was not a party who had available the option to adopt a position of neutrality pursuant to Hardiman which might otherwise circumvent an order as to costs.

40 Despite being an enduring principle, the exact perimeters of the Hardiman rule are far from defined insofar as to determine in what circumstances its application is justified. However, in TXU Electricity Limited v Office of the Regulator General,[26] Ashley J stated that as the principle would at least apply:

(1) to cases in which application is made for judicial review of an administrative decision of a tribunal where the consequence of success will or may be remission of the matter for reconsideration by the tribunal; and

(2) where the decision of the tribunal involves it undertaking an adjudicatory function in a proceeding which is in substance (whether or not the relevant legislation requires it) inter partes; and

(3) where the tribunal is bound to observe one or both of the rules of procedural fairness. [27]

41 As to the appropriate bodies to which the principle should be enlivened, Ashley J said:

Light may be cast upon the breadth of the principle by considering what is a "tribunal" for Hardiman purposes. Plainly the word includes what have been called "substitute courts": the Australian Broadcasting Tribunal, credit tribunals and small claims tribunals, for example.

In other cases, and for discrete purposes, decision makers have been legislatively accorded tribunal status - for example, by s.3 of the Administrative Law Act 1978.

...

All in all, the context in which the Hardiman observations were made suggests that the High Court was there giving its imprimatur to the course previously adopted in industrial and court matters, and was probably indicating that in proceedings for judicial review the same course should at least be adopted by decision-makers before whom hearings which were in substance inter partes were conducted. In such cases there would be a natural contradictor. Moreover, there might reasonably be as much concern about partiality or the appearance of partiality if a matter was to be remitted to such a decision - maker as there might be in the case of a court or industrial tribunal to which there was to be remitter.[28]

42 This accords with the underlying rationale to achieve 'the avoidance of the fact (and perhaps the appearance) of partiality of a body which may be called upon to redetermine a matter.'[29]

43 Being neither a tribunal nor a quasi-judicial decision maker, however wide those terms extend,[30] the Hardiman principle is no answer to the second defendant's choice to adopt a passive role in the proceedings. It should also be peripherally stated that contrary to the second defendant's claim to have been obligated to adopt a Hardiman position before the Building Appeals Board,[31] the application of that principle in merits review proceedings has been unequivocally rejected.[32] The basis for this is that so often the powers of the review body includes making the decision afresh that the risk of the matter being remitted to the primary decision maker is removed, which would otherwise warrant Hardiman-type neutrality.[33]

44 The question then follows what position the second defendant was required to take and what bearing, if any, that has on the question of costs.

45 In identifying a proper contradictor, the second defendant contended in his reply costs submissions that the first defendant was the proper party to undertake a role in the proceedings.[34] The Hardiman principle is not absolute, and the Building Appeals Board may very well have participated in the proceeding which might have assisted the Court as to its decision-making process. However, it flows from the rationale discussed above that, as a body which exercises adjudicative functions, it was a valid course of action for the first defendant to adopt a Hardiman position and it so did.

46 Although described in the context of merits review proceedings, the unique contribution that may be made by a primary decision maker may be aptly described as follows:

The decision-maker is the repository of the powers and responsibilities conferred on it by the legislative scheme under which it made the relevant decision. As administrator of that scheme, the decision-maker has experience, knowledge and expertise possessed neither by the tribunal nor by any adversary party appearing in the review proceeding. The decision-maker is the only party to the review proceeding whose participation is governed exclusively by the aims and objectives of the statutory scheme.[35]

47 The contribution to be made by a primary decision maker in judicial review proceedings is reflected in Gillard J's comments in Stewart v Building Practitioners Board ('Stewart').[36] While the second defendant in his reply submissions attempted to liken his position to the Building Practitioners Board in Stewart in support of his passive position,[37] this ignores the context in which Gillard J's criticism was directed. His Honour stated that the Building Practitioners Board 'should have appeared in this proceeding and supported the decision made by the Appeals Board, if the decision could be supported'.[38] His Honour was of the view the Building Practitioner's Board was the 'true contradictor to the plaintiff's claim and should have appeared in the review to contest his claim and to assist the Court.'[39] It was only then that, in light of a failure by the Building Practitioners Board to appear in the proceeding, that his Honour commented that an appearance by the Building Appeals Board was warranted. His Honour considered it a compelling factor for the Building Appeals Board to appear that the grounds of appeal included matters regarding the extent of jurisdiction of the Building Appeals Board.[40] This matter, however, contains no such considerations that call upon the Board to participate in lieu of the second defendant.

48 I do not accept that the second defendant did not possess any information which would have assisted the Court in this proceeding. While there was no positive obligation on the second defendant to participate in the proceeding, he ought not be able to assert the validity of non-participation in this proceeding and simultaneously claim no costs order may be made against him. I do not agree that such a position provides any basis to conclude that the usual costs order should not be made. The authorities relied upon by the second defendant do not lead me to a contrary conclusion.[41] At best, the second defendant by not participating has reduced the amount of any costs exposure.

Appeal Costs Act

49 The second respondent sought an indemnity certificate in respect of the costs under s 4 of the ACA. As this proceeding was necessitated by the error of the Board, and as this proceeding is one in the nature of an appeal from a court as defined in s 3 of the ACA I will grant that certificate.

50 The second defendant's position was that if the Court refused the plaintiff's application for a costs order against the second defendant, that the plaintiff pay the second defendant's costs of the costs application. I have found in favour of the plaintiff in this matter and it is therefore not appropriate to address the merits of this submission.

(a) The second defendant pay the costs of the proceeding, including of the costs application, to be assessed on a standard basis in default of agreement; and

(b) The second defendant be granted a certificate under the Appeals Costs Act 1998 for any amount payable by way of excess under his insurance policy, pursuant to s 35A(1)(c) of the Appeals Costs Act 1998.

[1] Boris Zaitsev, 'Outline of submissions on behalf of the plaintiff: costs of the appeal', Submission in Zaitsev v Building Appeals Board & Anor, S ECI 2018 00942, 11 June 2019; Alan Anthony Lorenzini 'Submissions of the second defendant on the issue of costs', Submission in Zaitsev v Building Appeals Board & Anor, S ECI 2018 00942, 11 June 2019; Alan Anthony Lorenzini 'Reply submissions of the second defendant', Submission in Zaitsev v Building Appeals Board & Anor, S ECI 2018 00942, 14 June 2019; Boris Zaitsev, 'Outline of reply submissions on behalf of the plaintiff: costs of the appeal', Submission in Zaitsev v Building Appeals Board & Anor, S ECI 2018 00942, 17 June 2019.

[2] [1980] HCA 13; (1980) 144 CLR 13.

[3] Supreme Court (General Civil Procedure) Rules 2015 r 63.02.

[4] [2019] VSC 243.

[6] Supreme Court Act 1986 (Vic) s 24(1).

1. [7] See, eg, Latoudis v Casey (1990) 170 CLR 534, 537 ('Latoudis'); cited with approval in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86 ('Oshlack').

[9] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 537; Oshlack (n 7), 86.

[10] Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460, 477.

[12] Lollis v Loulatzis (No 2) [2008] VSC 35, 10 [26].

[13] Latoudis (n 7) 563 (Toohey J, Mason CJ agreeing), 567 (McHugh J); Ohn v Walton (1995) 36 NSWLR 77, 79 ('Ohn').

[17] Latoudis (n 7) 563 (Toohey J, Mason CJ agreeing), 567 (McHugh J); Ohn (n 13) 79.

[18] Lorenzini, 'Submissions of the second defendant on the issue of costs' (n 1) 6 [17].

[19] In so concluding I acknowledge the Affidavit of Steven Mark Donley filed 11 June 2019.

[20] Supreme Court (General Civil Procedure) Rules 2015 r 5.02(1), Form 5B.

[22] Lorenzini, 'Submissions of the second defendant on the issue of costs' (n 1) 7 [21].

[24] See, for example, discussion in Moorabul Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55, 83-85 [118]-[130] (Ormiston and Ashley JJA).

[25] Lorenzini, 'Submissions of the second defendant on the issue of costs' (n 1) 4 [8].

[26] [2001] VSC 4; (2001) 3 VR 93.

[28] Ibid 99 [27]-[28], 101-102 [42].

[30] Matthew Groves, 'The Hardiman Rule' (2012) 33 Adelaide Law Review 317, see discussion at 374-377.

[31] Lorenzini, 'Submissions of the second defendant on the issue of costs' (n 1) 4-5 [10].

[32] See New Broadcasting Ltd v Australian Broadcasting Tribunal [1987] AATA 151; (1987) 73 ALR 420.

[34] Lorenzini, 'Reply submissions of the second defendant' (n 1) 3 [7].

[35] Macedon Ranges Shire Council v Romsey Hotel Pty Ltd [2008] VSCA 45; (2008) 19 VR 422, 431-432 [31].

[36] [2001] VSC 349 ('Stewart').

[37] Lorenzini, 'Reply submissions of the second defendant' (n 1) 3 [7].

[41] Lorenzini, 'Submissions of the second defendant on the issue of costs' (n 1) 8-12 [22]-[27].