Plaintiffs v Defendant

Supreme Court of Victoria|2015-02-13|Before: SIFRIS J

COSTS - Proceeding dismissed for want of prosecution - Failure to properly plead cause of action despite several attempts - Whether order for indemnity costs should be made.

1 On 19 December 2014 I refused the plaintiffs' application for leave to amend their statement of claim and indicated that I proposed to dismiss the proceeding essentially for want of prosecution. Despite several attempts over a period of about a year, the plaintiffs have been unable to properly articulate a cause of action. I published my reasons.[1]

2 It was agreed that costs would be decided on the papers and each side has filed written submissions.

3 There is no dispute that the defendant should have its costs. The only question is whether, in the circumstances, costs on an indemnity basis should be awarded for all or part of the case.

4 The defendant submitted that an order for costs on an indemnity basis was appropriate for the following reasons:

(a) the proceeding has been commenced and continued in circumstances where the plaintiffs, properly advised, should have known that they had no real chance of success;[2]

(b) in cases where plaintiffs have persistently failed to plead a proper statement of claim, and are attempting to advance a hopeless case, the court may in its discretion order indemnity costs to the defendant so that the defendant is not placed at a financial disadvantage by the inability of the plaintiffs to properly plead their case;[3]

(c) the above conduct has caused loss of time to the Court and to the defendant and is a basis for an order for indemnity costs;[4] and

(d) the latest version of the statement of claim includes a baseless allegation of fraud (deliberate concealment) which has not been expressly stated nor particularised as required under the Supreme Court (General Civil Procedure) Rules 2005.[5] Despite this, the plaintiffs' counsel made this serious allegation in open Court on 3 December 2014. Baseless allegations of fraud clearly fall into one of the categories which enlivens the jurisdiction of the Court to award indemnity costs.[6]

5 The defendant submitted further that the plaintiffs have repeatedly ignored 'the rules of pleading, previous rulings of the Court and numerous letters from the defendant's solicitors'. The letters referred to were detailed and set out with some precision the substantial and substantive defects and deficiencies alleged.

6 The history and progression of the various versions of the statement of claim and their fate are fully set out in the Judgment. I will assume familiarity with the Judgment and my earlier judgment, dealing with a previous application to amend, delivered on 22 August 2014.[7]

7 The plaintiffs submitted that throughout the course of the proceeding they have endeavoured to address all of the concerns of the defendant and have acted properly and in accordance with their obligations under the Civil Procedure Act 2010 (Vic) ('CPA'). Despite the result, they submit that an order for indemnity costs is not warranted particularly in circumstances where the new standard costs order goes much further than the former party and party costs regime. Finally the plaintiffs denied having pleaded any allegation of fraud and did not make any allegation knowing it to be false.

8 The Court has a wide discretion to order indemnity costs under s 24(1) of the Supreme Court Act 1986 and r 63.31 of the Rules.[8]

9 It is not easy to properly plead the suggested causes of action proposed by the plaintiffs and for this reason some leeway was in my view properly given to the plaintiffs. However, in my view, the point was reached where it was not in the interests of justice to permit the plaintiffs to proceed any further.

10 In my opinion a defining moment in this case, so far as the proposed pleading is concerned is my judgment delivered on 22 August 2014[9] refusing the plaintiffs leave to file and serve a second further amended statement of claim. The reasons for such refusal are compendious and clear. From this date the plaintiffs were properly on notice and at risk that if they did not produce a properly pleaded and particularised claim, an order for indemnity costs was probable as well as dismissal for want of prosecution.

11 The plaintiffs failed to produce a properly pleaded and particularised claim and in my opinion, giving the plaintiffs as much leeway as is possible and appropriate, indemnity costs should be awarded from 23 August 2014. The defendant submitted that 3 March 2014 was the appropriate date and there is some substance in this submission.[10] However, I consider that in the exercise of my discretion the more appropriate date is 23 August 2014. The plaintiffs were entitled to a further opportunity to properly plead their case without 'penalty'.

12 The chronology of events from 22 August 2014 is set out in paras [12]-[19] of the Judgment. From 23 August 2014 it is apparent that there has been a persistent failure to adequately plead a case. Further and more relevantly, pleading rules have been ignored and so has the limited guidance and pointers offered by the Court. The logical and inescapable conclusion must be that there is no case.

13 A significant element in determining whether indemnity costs should be awarded is the fact that on each occasion a proposed statement of claim was delivered, the defendant's solicitors wrote in considerable detail explaining the deficiencies in those pleadings. This was an element identified as being relevant in Liberty Financial, where Harper J referred to the reasons of Goldberg J in Russo Stores Pty Ltd v Safeway Stores Pty Ltd.[11] Goldberg J in Russo Stores in turn referred to a passage of the decision of Drummond J in Davids Holdings Pty Ltd v Coles Myer Ltd[12] in which his Honour said:

If a respondent at any appropriate stage, which may be at the very outset or at some later stage, eg, after it has received a pleading or after discovery, puts an applicant on notice that it regards the action as misconceived and goes further and sets out its detailed reasons for so thinking, then if the applicant nevertheless proceeds without indicating any justification for doing so and fails, there may be good reason to consider whether indemnity costs should not be ordered.[13]

14 Another relevant consideration is the provisions of the CPA.[14]

15 The main purposes of the CPA include 'the overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute' (s 1(1)(c)).

16 Parties have a paramount duty to the Court to further the administration of justice (s 16) and an overarching duty to act honestly (s 17). Further and perhaps more relevantly the parties must have a proper basis for making a claim or defence (s 18).

17 Parties to a dispute have a number of other overarching obligations. They must not engage in conduct which is misleading or deceptive or likely to mislead or deceive (s 21). They must endeavour to narrow the issues in dispute (s 23). They must ensure costs are reasonable and proportionate (s 24). They also have an ongoing overarching obligation to minimise delay (s 25).

18 Part 2.4 of the CPA deals with sanctions for contravening the overarching obligations. There is no specific power to dismiss a proceeding. However, under s 29(f) the Court can make 'any other order that the Court considers to be in the interests of any person who has been prejudicially affected by the construction of the overarching obligations. Further, s 29(3) provides that the section 'does not limit any other power of a Court to make any order, including any order as to costs'.

19 Accordingly, I consider that recourse to the CPA provides a further separate and independent basis for awarding indemnity costs from 23 August 2014.

20 In the result the plaintiffs' claim will be dismissed and the plaintiffs shall pay the defendant's costs on the standard basis up to 22 August 2014 and on an indemnity basis from 23 August 2014.

[1] MacFadyen & Ellis v Bank of Queensland (No 2) [2014] VSC 653 ('Judgment').

[2] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401; Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237 [538]-[572] and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2012] VSC 399 (Croft J).

[3] Liberty Financial Pty Ltd v Scott [2005] VSC 472, [10]-[12] ('Liberty Financial').

[4] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd & Ors [2012] VSC 399 [14] (Croft J).

[6] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 400-401; Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd & Ors [2012] VSC 399 [16] (Croft J, citing the Victorian Court of Appeal in Macedon Ranges Shire Council v Thompson [2009] VSCA 209, [15]).

[7] MacFayden & Ellis v Bank of Queensland [2014] VSC 394.

[8] See Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237, [538]-[572].

[9] MacFayden & Ellis v Bank of Queensland [2014] VSC 394.

[10] On 3 March 2014 Almond J struck out the then current Statement of Claim.

[11] [1998] ATPR 41-641 ('Russo Stores') 41,098 referred to in Liberty Financial [11]-[12].

[13] Ibid 40,303 cited in Russo Stores.

[14] See Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237 [19]; Knörr v CSIRO & Ors [2014] VSCA 84.

Court (General Civil Procedure) Rules 2005

At a glance

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Judgment (41 paragraphs)

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Legislation Cited (6)

Cases Cited (1)