Plaintiffs v Defendants

2 On 5 September 2014 a freezing order was obtained from Judd J on the application of the plaintiffs, costs were reserved.

3 On 15 September 2014 Judd J extended that freezing order until further order, and costs were again reserved.

4 On 29 January 2015 the second defendant, Rocky Versace, applied to strike-out the amended statement of claim against him. Judd J granted the application, and ordered that the plaintiffs pay the second defendant's costs of the day ('the Costs Order'). No order was made or sought for those costs to be taxed immediately under r 63.20.1 at that time.

5 Following the making of the Costs Order, the second defendant's lawyers sought to claim immediate payment of their client's costs without the benefit of any order for immediate taxation, as is required by r 63.20.1. A summons for taxation was issued. In correspondence the plaintiffs' solicitor explained to the solicitors for the second defendant that the costs were not immediately payable, could not be the subject of a taxation in the absence of such an order being made, and that a subsequent summons for taxation issued in April 2015 was misconceived on that basis.

6 There was further correspondence but the second defendant's lawyers continued to press the summons for taxation. At the mention of this summons on 21 May 2015, costs were ordered in favour of the plaintiffs against the second defendant in a fixed sum. That constitutes a debt which is presently due. The evidence discloses that those costs have not been paid.

7 On 23 June 2015, the second defendant made an application for summary judgment in his favour.

8 On 10 July 2015, the defendants were each charged with criminal offences relating to the alleged defalcations which are the subject matter of this proceeding.

9 On 24 July 2015, the defendants issued a summons seeking an order vacating the trial date which had been fixed for 10 August 2015.

10 On the hearing of that summons, on 3 August 2015, it became apparent that the defendants were in fact seeking an order that the proceeding be stayed until the hearing and determination of the criminal proceedings against them.

11 The application was granted and I ordered that the trial date be vacated, that the proceeding be stayed pending completion of the criminal proceedings or until further order, and that the plaintiffs' costs of the 24 July 2015 summons be costs in the proceeding. At this time, the second defendant did not take the opportunity to seek an order for immediate taxation of the Costs Order under r 63.20.1, notwithstanding that he and the first defendant were together asking for a lengthy delay in this proceeding on the basis of the criminal proceedings commenced against them.

12 Also on 3 August 2015, I ordered that the second defendant's summary judgment application be dismissed and, importantly, that the second defendant pay the plaintiffs' costs of that application. Those costs are not the subject of an order for immediate taxation.

13 On 20 November 2015, the second defendant informed the plaintiffs that he intended to proceed with the summons for taxation of the Costs Order. There was discussion between the solicitors concerning the fact that the previous adjournment of this summons had been to enable the second defendant, if so advised, to apply for an order under r 63.20.1 for immediate taxation. No such application had been made at this time.

14 Finally, the solicitors for the second defendant appreciated their difficulty and, on 23 November 2015, consented to orders that the summons for taxation be withdrawn.

15 There was then a further delay until 1 June 2016, about 16 months after the Costs Order, when a summons was issued by the defendants seeking an order for immediate taxation of the Costs Order under r 63.20.1. The summons does not contain any application to lift the stay, which had been sought on the defendants' application.

16 In the meantime, the criminal proceedings have been proceeding rather slowly. On 5 July 2016 the committal mention was adjourned until a date in November. The affidavit material discloses that the defendants may themselves be responsible for some of the delay in the criminal proceeding, but it is not possible to determine whether any extra delay was caused by their conduct in failing either to seek access to relevant documents from the plaintiffs at an earlier time or to seek a release from their Home Office v Harman undertaking in relation to discovered documents in this proceeding.

17 Against this background, I turn to consider the summons for immediate taxation. The second defendant relies on two grounds as enlivening the Court's discretion to make an order for immediate taxation. First, the considerable delay of this proceeding occasioned by the commencement of the criminal proceedings. He contends that this delay is not his fault as charges were brought against him by the authorities. I accept that the fact charges have been brought is not to be characterised as fault on his part. Second, because the successful application to strike out the amended statement of claim which led to the Costs Order was a discrete application which will not be revisited at trial.

18 The first issue is whether the application for immediate taxation is unsustainable because the proceeding has been stayed and there is no application for that stay to be lifted, even on a temporary basis. In Break Fast Investments Pty Ltd v Gravity Ventures Pty Ltd (No 2),[1] Judd J summarised the principles to be applied on an application for the removal or lifting of a permanent stay in the following terms:

I accept the plaintiff's contention that a stay may be removed or lifted if proper grounds are shown. The proceeding has not been dismissed or discontinued. It can be activated or 'started up again' if the court changes its status. A decision to lift a permanent stay will usually require a 'change in circumstances since the making of the original order'. The plaintiff accepted that it was necessary to show changed circumstances as the basis for its application to lift the stay. [2]

19 I note that his Honour was dealing with a permanent stay, but I can see no reason why the principles should be any different for a stay of the kind presently before me. Some proper grounds must be shown to remove any stay temporary or permanent, in whole or in part.[3] I accept that, viewed in substance in light of the evidence before me, the application for immediate taxation implicitly involves an application for a limited removal of the stay for the purpose of enabling this application to be brought and determined, and for no other purpose.

20 Accordingly, should the justice of the situation require it, I would not dismiss the application on the sole grounds that the proceeding is currently stayed and it is intended that - subject only to this application - the proceeding continue to be stayed until the hearing and determination of the criminal charges against the defendants, or further order.

21 However, for future cases, a summons issued in circumstances such as the present should include an appropriate application for a limited lifting or removal of the stay, and state the orders sought in that regard. Further, and as will appear later in these reasons, the fact of the stay remains a relevant consideration in the exercise of the Court's discretion on the second defendant's application for immediate taxation.

22 I turn to consider the legal principles concerning applications for immediate taxation. I should first mention a preliminary point raised on behalf of the plaintiffs. It was contended that the decision in Shen v Ozbaby Dairy Pty Ltd & Ors[4] stands for the proposition that an order for immediate taxation cannot be sought retrospectively, that is, after the costs order is made. Reliance was placed upon the reasons in that case, in which having referred to the decision of the Court of Appeal in Setka v Abbott (No 2),[5] the associate justice stated as follows:

None of those instances show retrospective application in respect of a costs order already made, and retrospective application would ordinarily be contrary to principle in the absence of a clear intention in the rules to permit it. Further, retrospective application would seem to involve the variation of an order after it has been authenticated which is possible only in very limited circumstances.[6]

23 I do not accept that is a correct statement of the law. Rule 63.20.1 does not prescribe the time at which an application for immediate taxation can be made. Moreover, given that delay in the proceeding can be a ground for the exercise of the discretion to grant an order for immediate taxation, there is no reason why an application cannot be made after the relevant costs order has been made and authenticated without an attendant order for immediate taxation. A later order for immediate taxation operates independently, and does not involve any variation of the original costs order.

24 In my opinion however, the fact that a 'retrospective application' is made is a relevant circumstance which may be taken into account on the hearing of an application for immediate taxation after the costs order has been authenticated. Putting applications based on delay to one side, in my view a significant delay between the occurrence of other circumstances which may justify making an order for immediate taxation and the making of such an application is a factor which will ordinarily point against exercising the Court's discretion to depart from the default position and order immediate taxation. This is particularly so where the reasons for delay in making the application are not adequately explained. Even when the application is based on delay, there may be circumstances where the failure to apply promptly when that delay becomes apparent may, in the circumstances of a particular case, point against ordering immediate taxation. As appears below, this is such a case.

25 I turn to consider the established legal principles to be applied in exercising the Court's discretion to order immediate taxation. The principles to date were summarised by Hollingworth J in Dale v Clayton Utz (No 3).[7] Her Honour's summary included the following statements:

1. ... Rule 63.20.1 was clearly intended to make a substantial change to the previous position.
2. The authorities suggest that there are a number of reasons why rules similar to r 63.20.1 have been introduced in other jurisdictions, including:

(a) Avoiding multiple taxations, and the attendant costs;

(b) Avoiding interlocutory applications being used as a means to exhaust the funds of an opposing party; and

(c) Avoiding unfairness in a case where, for example, a party who is ultimately successful is unable to set off their judgment against an earlier liability to pay costs.

Those are all important policy considerations.

...

1. However, ... the court's discretion under r 63.20.1 to order that costs be taxed immediately is not circumscribed in any way by the rule itself, although it must be exercised judicially.

1. Courts have recognised that the demands of justice may require a departure from the ordinary rule for one or more of three broad reasons:

(a) Because of the conduct of the unsuccessful party;

(b) Because of the likely delay before the final completion of the proceeding; and

(c) Because the interlocutory application involves a separate or discrete issue.

27 This summary of the principles is consistent with and was applied by the Court of Appeal in Setka v Abbott (No 2).[8] In that case, as here, the plaintiff lost a pleading application which was described as being 'in a sense discrete.' The winning defendant sought immediate taxation on the basis that all he had to do to succeed on his application was demonstrate the existence of one of the three reasons summarised by Hollingworth J in Dale v Clayton Utz (No 3) as giving rise to the exercise of the Court's discretion. The Court of Appeal disagreed with that contention, and stated that the discretion to order immediate taxation, which it described as a departure from the 'default position', is confined only by the principle that it must be exercised judicially, and recognised that the three reasons summarised by Hollingworth J may justify departure 'depending upon the circumstances of the particular matter'.[9] In other words, the mere establishment of one of the three reasons stated by Hollingworth J is not of itself a sufficient reason to justify or require that an order for immediate taxation be made.

28 In Setka v Abbott (No 2) the applicants' immediate taxation application was dismissed as, although the plaintiff had been the cause of some delay, the delay was not 'very great',[10] and, although the issue giving rise to the costs order was in a sense discrete, it would 'advance form over substance' to hold it was entirely discrete in the circumstances of the case.[11]

29 As to the first of the three reasons summarised by Hollingworth J as a relevant factor which may justify departure from the default position, concerning the unsuccessful party's conduct giving rise to the relevant costs order, that reason has not been pressed in this application. I note however that if such a reason is to be relied upon as justifying an order for immediate taxation, it should usually be advanced by application made at the time the costs order is made, or very soon thereafter, to the judge making the order - who, having just made the costs order, is in control of all the relevant facts and can exercise the discretion on this ground efficiently. It would in my opinion require an exceptional case for an application made more than a year later to be granted on that ground. Such a late application would be contrary to the overarching purpose as it would waste judicial resources and cause extra costs to the parties.

30 As to the second reason, which is relied upon by the second defendant and concerns substantial delay until the completion of the proceeding, in my opinion mere delay on its own will not ordinarily lead to an order being made for immediate taxation. The Court needs to balance the delay in the context of unfairness to both parties. This is especially so where the delay is no fault of the losing party, as here. For example:

(1) Where the other party has spent a great deal of money on interlocutory applications on which it has succeeded but costs have been reserved, as has occurred in this instance with the freezing order application.

(2) Where the other party is itself the beneficiary of costs orders in its favour which are not the subject of an order for immediate taxation. In such cases it may be unfair to order immediate taxation if the other party is ultimately successful in the proceeding and is unable to set off their judgment against an earlier liability to pay costs.[12] In this case, for instance, the second defendant has been ordered to pay the costs of the summary judgment application. Those costs are likely to be equal to or greater than the relevant costs order in respect of which he seeks immediate taxation.

31 These matters are relevant here. Moreover, there is no evidence from the defendants of any particular need for the Costs Order to be taxed immediately.

32 As to the third reason, concerning discrete or separate applications, I note that in Sharma v Parbhakar Dixon J expressed the view that:[13]

[A pleading summons] ... cannot, in my view, be said to be discrete. A pleading summons is central to the issues to be resolved in the proceeding ...

33 As a general statement I would not accept that that is so. It will all depend upon the circumstances of the particular case. A pleading summons may or may not be discrete for the purposes of considering an application for immediate taxation and, even if it is discrete, that will not necessarily justify departure from the default position. In this case, assuming that the pleading summons was a discrete application, the same discretionary factors as relate to the second reason are apposite. Fairness to both sides remains relevant.

34 Putting the three reasons to one side, it is also relevant to the Court's discretion that the second defendant has had two opportunities to make this application, at times when the proceeding was otherwise before the Court and the extra costs of this separate and late application, including the costs of appearing, could have been avoided.

35 The first of these opportunities arose when the Costs Order was made. The second defendant was at that time represented by senior counsel, and that was the time to make any application based on the fact that the strike-out application was alleged to be a discrete issue which would not arise again in the proceeding.

36 The second and more important of these opportunities arose at the time the summary judgment application was dismissed and costs were awarded against the second defendant, and, on the defendants' own application, the trial date was vacated and the proceeding was stayed until the conclusion of the criminal proceeding or further order. The likely delay in the finalisation of this proceeding was then apparent.

37 In my view, notwithstanding that this application is in part based on delay, the failure to take advantage of these opportunities amounts to a delay of the kind that I have described above, and points against making the order sought.

38 Taking the facts as a whole, I am not persuaded that this is a just or appropriate case to grant the application for immediate taxation of the Costs Order. The application will be dismissed.

[1] [2016] VSC 30.

[3] For example, see Cooper v Williams (1963) 2 QB 567, 580-1.

[4] [2015] VSC 207.

[5] [2013] VSCA 376.

[6] [2015] VSC 207 [57].

[7] [2013] VSC 593 [57]-[65].

[8] [2013] VSCA 376.

[12] See Dale v Clayton Utz No 3 [2013] VSC 593 [58(c)].

[13] [2015] VSC 632 [14].