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[2005] VSCA 268
Court of Appeal (Vic)
2005-11-09
CHERNOV, EAMES and ASHLEY, JJ.A.
Original judgment source is linked above.
Practice and procedure - Costs - County Court - Award of damages not exceeding one-half of jurisdiction in Magistrates' Court - Discretion exercised to allow costs on County Court scale - Exercise of discretion - Refusal to award costs to successful defendant for whom unsuccessful defendant was alter ego - County Court Rules; R63A.24.
CHERNOV, J.A.:
1 I ask that Eames, J.A deliver the first judgment in this matter.
2 This is an appeal against an order with respect to costs made by a judge in the County Court on 9 September 2004. Unlike the situation of an appeal as to costs from a judge of the trial division, leave is not required for an appeal on costs from a judge of the County Court. This appeal provides further evidence why that anomaly ought be removed.
3 The proceedings brought by the respondent arose out of the sale of a house by auction in Toorak on 27 October 2001. The sale price was $2.302 million. The first appellant, being the vendor company, had as one of its two directors the second appellant. A special condition in the contract of sale provided that the purchaser was obliged to pay to the vendor any amount of GST payable by the vendor in respect of the sale. Unbeknown to the respondent the house had been subject to "substantial renovations", as that term was defined in the GST legislation. Those renovations were not apparent to intending purchasers because the period facade of the property had been retained and old and used material had been employed for the purpose of the renovations so as to give the appearance that the entire property was in its original condition. Thus, in due course the respondent, as purchaser, was called upon to pay to the first appellant, as vendor, the sum of $45,400 for GST, and did so under protest.
4 The respondent then brought proceedings claiming the sum which had been paid for GST as damages. He brought claims under the Trade Practices Act 1974 (Cwlth) alleging that conduct of the first appellant constituted misleading and deceptive conduct, misrepresentation as to price or, alternatively, unconscionable conduct. The respondent also brought a claim for negligent misrepresentation. The respondent claimed that the second appellant aided and abetted, counselled, procured or induced the contraventions under the Trade Practices Act perpetrated by the first appellant.
5 In addition to the claim with respect to GST, the respondent also claimed damages for breach of contract, on the basis that the property and chattels were not in the same condition as they had been at the date of the contract of sale. The various items addressed under that claim totalled $15,028.
6 The learned trial judge dismissed the respondent's claims against both appellants with respect to the payment of the sum for GST. The judge also dismissed all other claims against the second appellant. The judge, however, awarded damages against the first appellant in the sum of $4,384 for breaches of the contract of sale with respect to some only of the claimed deficiencies in the property which were the subject of that head of claim.
7 The learned trial judge entered judgment for the plaintiff/respondent against the first-named defendant/appellant in the sum of $4,384 as damages for breach of contract, together with interest of $1,021, being a total of $5,405. Her Honour did not make a formal order dismissing the respondent's claim against the second appellant, but that was the intended effect of her findings and reasons for judgment.
8 Following judgment the second appellant sought costs as the successful party, such costs to be paid on a solicitor/client basis. The first appellant, too, sought costs on the basis that in reality it had succeeded in the action. Alternatively, the first appellant urged her Honour to make no order as to costs. In the further alternative, the appellants contended that R.63A.24 ought be applied, so that if the respondent was to recover any costs, then those costs should be on the appropriate Magistrates' Court scale, only.
9 The respondent, in turn, sought costs against the first appellant and successfully submitted that her Honour ought exercise her discretion under R.63A.24 in a manner that did not confine the respondent to costs on the Magistrates' Court scale.
10 In the result, her Honour ordered the first appellant to pay 50 per cent of the respondent's costs of the proceeding on County Court scale A, with certification for counsel's fee on brief and for ten refreshers.
11 The appellants now appeal the orders as to costs and seek, in turn, orders that the respondent pay the costs of both appellants on the County Court scale; alternatively, that there be no order as to costs as between the first appellant and the respondent, but there be an order of costs in favour of the second appellant on the appropriate County Court scale.
12 An appellate court will not overturn a decision on costs unless the judge failed to exercise his or her discretion or, in so doing, applied a wrong principle or a manifestly erroneous view of the facts. See Mitchison v. Bullock[1], Macauley v. Macauley[2]; Whiteman v. Johnson[3].
13 The complaints of error raised by the grounds of appeal may be considered under a number of headings. The first contention is that her Honour wrongly exercised her discretion in holding that the costs penalty under R.64A.24 should not apply.
14 Rule 63A.24(1) of the County Court Rules provides:
"Where in a proceeding for debt or damages the plaintiff recovers by judgments or otherwise an amount (exclusive of cost) not exceeding one half of the amount to which the jurisdiction of the Magistrates' Court (at the time the proceeding commenced) [sic] the plaintiff shall, unless the Court otherwise orders, be entitled only to the costs to which he would have been entitled if he had brought the proceeding in the Magistrates' Court less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the County Court instead of a Magistrates' Court, but shall not be required to pay to the defendant any amount by which the additional costs exceed the costs payable to the plaintiff."
15 Mr Robins submitted that this Rule applied to the case because the sum awarded was less than one third of the applicable jurisdictional limit in the Magistrates' Court.
16 In the course of submissions made to her Honour below, counsel for the respondent noted that scale A of the County Court applied to awards of damages not exceeding $7,500, hence, he submitted, it was appropriate that costs ought be awarded on that County Court scale since there was express provision for such an amount being recovered in the County Court.
17 It is unnecessary to further address those jurisdictional arguments because it seems to me, and it was not disputed, that on any view the amount recovered here would bring the case within the scope of R.63A.24. The real question is whether her Honour erred in exercising her discretion under the Rule not to confine the respondent to costs on the Magistrates' Court scale.
18 In exercising her discretion in favour of the respondent her Honour had regard to a number of factors. First, she considered that there was a degree of complexity in the Trade Practices Act claims and the unconscionable conduct claims. Secondly, she had regard to the overall conduct of the litigation; referring both to the length of the case and the issues that were raised in it as making it a case more appropriately dealt with by a judge, rather than by a magistrate. Thirdly, her Honour had regard to the fact that the claims with respect to GST and with respect to the contract dispute were sufficiently intertwined as to make it inappropriate to bring separate proceedings.
19 Counsel for the appellant submitted that her Honour erred in the exercise of her discretion as to R.63A.24. Her Honour was wrong, so Mr Robins said, to conclude that the proceedings had such complexity as justified them being brought in the County Court rather than the Magistrates' Court. It was submitted that this was not a case involving "complicated questions of law or fact", such as was identified in Brenner v. First Artist Management Pty Ltd[4]. Furthermore, it was submitted the question of complexity was relevant only if it was the successful claim that had that complexity, whereas here the complexity was in the GST claim, which had failed. Counsel referred to O'Doherty v. McMahon[5], but that case, in my view, does not limit a judge in that way, especially in a case where, as here, the judge found, as I have said, that the successful and the unsuccessful claims were so interlinked as to have, as her Honour observed "considerable common evidence."
20 Mr Robins further submitted that even if her Honour did have regard to the complexity of the GST case, she ought to have had equal regard to, and balanced the consideration of complexity against the fact that, as he submitted, the GST claim was hopeless and had clearly failed. I am not persuaded, however, that her Honour did not have regard to that factor in exercising her discretion. In addition to these considerations, her Honour had regard to the further considerations to which I have also already referred in exercising her discretion under R.63A.24.
21 This was a trial which occupied ten days with substantial legal and factual argument being advanced by the parties. In my view, it was open to her Honour to conclude that the case did entail such complexity as to justify the proceedings being brought in the County Court, even though the GST claim failed. The claim, with respect to GST in particular, had unusual features and required the calling of expert building evidence and expert accounting evidence with respect to the instance of and calculation of GST. Legal argument in this case occupied some 121 pages of transcript in the court below.
22 I am not persuaded that her Honour's discretion in the application of R.63A.24 miscarried, in the circumstances of this case.
23 I turn then to the complaint that her Honour had regard to erroneous considerations or based her orders as to costs on wrong principles. First, it was submitted that her Honour ought to have held that in reality the respondent's claim failed against both appellants. At the very least, so it was submitted, there ought to have been no order as to costs.
24 In my opinion, although the respondent was unsuccessful in his claim with respect to GST, most of the case was taken up arguing the contract claim in which the respondent was successful. The award made in favour of the respondent, although significantly less than claimed under the contract claim, was nonetheless neither nominal nor trivial: contrast All Trans Express Ltd. v. CVA Holdings Ltd[6] and Anglo-Cyprian Trade Agencies Ltd v. Pathos Wine Industries Ltd[7]. Thus, in my view it was open to her Honour to conclude that the respondent's claim succeeded and to decide that costs ought follow the event as to the respondent's claim against the first appellant. There is no obligation on the trial judge to apportion costs according to the success of parties on particular issues.
25 The second area of suggested error was in her Honour having regard to the Calderbank offer made by the respondent to settle the action, and in having regard to the approach adopted in the litigation by the parties. Her Honour concluded that all parties pursued the litigation without regard to the time and costs involved, having regard to the amounts of money at stake. Her Honour noted, "The Court directed mediation and various invitations by me to at least limit hearing time and costs passed without success".
26 Her Honour noted that what she called a "meagre offer of compromise had been made by the appellants, that offering being in the derisory sum of $434". Mr Robins submitted that that factor was completely irrelevant to her Honour's consideration on the question of costs, but in my view that cannot be said, because the offer made demonstrates that the amounts recovered were substantially greater than the value of the claim as assessed by the appellants.
27 The respondent, in turn, offered to compromise the proceeding a month prior to trial by way of a Calderbank letter offering to accept the sum of $15,000 inclusive of costs. The respondent contended unsuccessfully to her Honour that the appellants had failed to better that offer and that he ought to be awarded indemnity costs in consequence. That contention is not pursued by him on appeal. Her Honour did, however, regard the Calderbank offer and its rejection as relevant to the exercise of her discretion on costs.
28 In my view the Calderbank offer was relevant in the way it was used by her Honour. The fact that it was an "all in" offer did not detract from its utility for this purpose. I agree with counsel for the respondent whose written submissions addressed this contention that whilst the fact that an "all in" offer was made by a defendant might deny the defendant the right to rely on it in order to seek indemnity costs, that was not the issue with which her Honour was concerned in this case. An "all in" offer can embarrass a plaintiff attempting to determine whether to accept it, because the component elements of the offer are not known. Equally, a court may have difficulty determining whether the "all in" offer had been bettered. But here the "all in" offer was made by the plaintiff (now the respondent), not by the defendants to the proceedings. Her Honour found it to be a genuine offer made with the intent of resolving the proceedings and it is plain that it ought to have been accepted, even though its "all in" character meant that no direct costs consequences by way of an indemnity costs order could or did flow from it in favour of the respondent.
29 In the circumstances, where proceedings occupied the court for ten days, her Honour was perfectly justified in having regard to the Calderbank offer as she did.
30 The third area of suggested error lay in her Honour's decision not to award costs to the second appellant, although no claim against her succeeded. On her behalf it was submitted to the judge that not only did she merit an award of costs as a successful party, she ought to have had her costs on a solicitor/client basis because the claims brought against her amounted to allegations of fraud.
31 The orders sought on appeal do not seek costs on any basis other than party/party costs. Mr Robins emphasised the nature of the allegations inherent in the claims made against the appellant. He submitted that the seriousness of the filed allegations against the second appellant, in particular, were not given proper or any weight by her Honour, nor indeed did her Honour have regard to the seriousness of the unsubstantiated allegations made against the first appellant.
32 In my view it is clear from her Honour's judgment as to costs that her Honour did consider the contentions with respect to the nature of the claims and the seriousness of the allegations made against the two appellants, but was not persuaded by those arguments in her conclusion as to costs. However, it must be noted that in her Honour's assessment of this case she concluded by awarding only 50 per cent of costs on the lowest County Court scale to the respondent. In my view, it must be taken that in so doing her Honour has had regard to all of the arguments which were addressed before her as to the relevant merits and seriousness of the allegations that were made and the limited degree of success which flowed from them to the respondent.
33 Mr Robins submitted that her Honour rejected costs for the second appellant on an irrelevant basis, namely, that she incurred no costs since all cost were born by the first appellant. He submitted that the amount by which the costs of the second appellant might have been reduced on account of the fact that the same counsel and solicitor represented both defendants at trial was a matter for the Taxing Master and that consideration ought not preclude an otherwise appropriate award of costs.
34 The respondent submitted that no costs should be awarded to the second appellant having regard to the findings made by her Honour that she had engaged in sharp practice. In written submissions for the respondent it was submitted that it would amount to an award of costs to the first appellant, against whom the action succeeded, were costs to be awarded to the second appellant. The first appellant, so it was submitted, was the alter ego of the second appellant.
35 Her Honour found that she was not satisfied that the second defendant (now, the second appellant) had in fact incurred any costs over and above those incurred by the first appellant in running its defence. Indeed, as her Honour noted, that was conceded before her and that concession, in my view, cannot now be challenged. Her Honour concluded that the second appellant was the main force behind the breaches of the contract of sale which were held to be the sole basis of liability against the first appellant. As I have noted, her Honour held that the second appellant was herself guilty of what amounted to sharp practice in the manner in which the GST clause was inserted in the contract of sale.
36 The discretion of a judge in awarding costs is an extremely broad one. In this case her Honour had the advantage of close observation of the parties in the conduct of the proceedings and whilst others may have reached a different conclusion as to whether the second appellant was entitled to some portion or all of her costs, I am not prepared to say that given her vantage point her Honour's exercise of discretion was erroneous. I reject the contention that her Honour was bound to award costs to the second appellant in the circumstances of this case.
37 In concluding, and without being critical of counsel, whose endeavours we appreciate and the thoroughness of their submissions was helpful to the court I must observe that this appeal demonstrates why it would be appropriate that appeals as to costs from County Court judges ought require the grant of leave.
38 In this case very lengthy written submissions have been filed and the appellants' list of authorities, copies of which were supplied to all judges, ran to 28 cases. I should add that Mr Robins came into this case only at the last minute and was not the author of the submissions which were filed on behalf of the appellants.
39 The approach of the appeal, however, in terms of the volume of material advanced in support of the contentions on both sides, gives us some insight into the conduct of the trial and provides all the more reason why we ought to be slow to conclude that the judge's careful reasons for her decisions on costs betray any error in approach.
40 In my opinion the appeal should be dismissed.
41 I am also of the view that the appeal should be dismissed for the reasons given by Eames, J.A. There is much to be said for the view that there should have been no orders as to costs having regard to the outcome of the substantive proceedings, the extravagance of them and the unmeritorious conduct of the parties, as her Honour found in her comprehensive judgment. But her Honour plainly considered whether there should be no orders as to costs and at the end of the day she exercised her discretion to make the impugned order for costs. The real question for us is whether her Honour relevantly erred in the exercise of that discretion.
42 Mr Robins said everything that could be said for the appellants, but for the reasons given by Eames, J.A. no such error has been made out.
43 I agree, for the reasons given by Eames, J.A. that this appeal should be dismissed.
44 The order of the court is that the appeal is dismissed with costs.
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[1] [1886] VicLawRp 111; [1886] 12 V.L.R. 512 at 520.
[2] [1910] HCA 16; (1910) 10 C.L.R. 434 at 455.
[3] [1995] VicRp 81; [1995] 2 V.R. 637, at 639-640.
[4] [1993] VicRp 71; [1993] 2 V.R. 221 at 276.
Semco Developments Pty Ltd & Anor
Graham [2005] VSCA 268