This is the Court's third judgment in these proceedings. It concerns questions of costs. This judgment should be read together with the Court's principal judgment (Sydney Markets Credit Services Co-operative Ltd v Taylor [2014] NSWSC 754) and the Court's second judgment (Sydney Markets Credit Services Co-operative Ltd v Taylor (No.2) [2015] NSWSC 499). Events, persons and matters are referred to in this judgment in the same way as they are in both prior judgments. A convenient summary of the relevant facts and issues in the proceedings appears in the Court's second judgment between paragraphs [4] and [12].
The ACN 123 proceedings and the Sydney Markets proceedings were heard together. Cost orders must be made on that basis. On 16 June 2015 the parties advanced costs submissions about the relative importance of the two proceedings and the roles that the various parties played in each proceeding.
ACN 123 was the plaintiff in the ACN 123 proceedings, which ACN 123 brought against Natale Piscuineri's bankrupt estate (the first defendant), Ferdinando Piscuineri (the second defendant) and Sydney Markets (the third defendant). Sydney Markets brought the Sydney Markets proceedings against the bankrupt estate of Natale Piscuineri (the first defendant). Thus, the bankrupt estate of Natale Piscuineri was a common defendant in both proceedings. Ferdinando Piscuineri was a defendant only in the ACN 123 proceedings and Sydney Markets was both the plaintiff in the Sydney Markets proceedings and the third defendant in the ACN 123 proceedings. But ACN 123 was not a party to the Sydney Markets proceedings. This structure of the proceedings created its own costs complexities.
Sydney Markets was unsuccessful in the Sydney Markets proceedings. ACN 123 was successful in the ACN 123 proceedings.
Mr D. Roberts of counsel continues to appear for ACN 123 and Mr A. Bulley of counsel continues to appear for Sydney Markets. Ms B. Oliak of counsel appears for the interests of the late Ferdinando Pisciuneri.
All costs issues between Ferdinando Piscuineri and ACN 123 were resolved by agreement in the course of argument on 16 June 2015. The remaining disputes were between Sydney Markets and ACN 123. ACN 123 submits that it should have a costs order against Sydney Markets because it was successful in the ACN 123 proceedings. But Sydney Markets submits that costs should not follow the event and that in the Court's discretion Sydney Markets should be entitled to its costs of the proceedings up to and including the last amendment to the pleadings in the ACN 123 proceedings, which was made on the first date of the hearing on 10 March 2014. And for costs incurred thereafter, Sydney Markets submits on a quite separate basis, that it is entitled to its costs, by reason of the fact that those subsequent costs were incurred in the proceedings arising out of the fraudulent conduct of Mr Natale Piscuineri in his dealings with Sydney Markets.
Finally, there is a separate issue as to what should happen with costs thrown away by reason of the adjournment of the costs argument on 18 May 2015. These matters require a short introduction to the amendments to the pleadings and to the procedural history of the matter.
A Short Procedural History
ACN 123 commenced the ACN 123 proceedings on 3 September 2012. On 8 October 2012 ACN 123 filed an amended summons and then on 26 February 2013 an amended statement of claim. On 5 November 2013 the proceedings were set down for hearing for two days on 10 and 11 March 2014. But before that on 27 February 2014 the proceedings had been listed for pre-trial directions.
On the first day of the hearing on 10 March 2014 the Court gave leave to ACN 123 to amend the statement of claim. The amended statement of claim was the first time that ACN 123 had sought a declaration that it is the trustee of the Superannuation Fund or sought an order vesting the land in ACN 123. With some justification Sydney Markets now submits that it was never made precisely clear to it prior to 10 March 2014 just what role ACN 123 sought to maintain in the proceedings and given that ACN 123 had become the trustee of the Superannuation Fund in 2011, why its role in the proceedings was not made clear earlier.
Costs Rising out of the Amendment
Sydney Markets seeks costs against ACN 123 both before and after the ACN 123 pleading amendment at the commencement of the trial.
As to the costs sought up to the time of the amendment, Sydney Markets submits that ACN 123 should pay all of its costs up to that point. It relies upon the well-established principle that where a plaintiff has made a late amendment to its pleadings to include a claim which had not been previously claimed and which was the only basis on which the plaintiff was entitled to succeed, the defendant is entitled to the costs of the action down to the date of the amendment: Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154 (Beoco). and Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318 ("Murrihy") at [8] and [9] and Ciaglia v Ciaglia [2010] NSWSC 723 ("Ciaglia") at [9] and [10]
In Beoco the plaintiff had made a late amendment to its pleadings to include a claim for damages under a head of damage that had not been previously claimed. In the result the Court found this to be the only basis for which the plaintiff was entitled to succeed. The Court said (at 154):
"As a general rule, where a plaintiff makes a late amendment as here, which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to costs of the action down to the date of the amendment".
Beoco Ltd v Alfa Laval Co Ltd has been followed in New South Wales and referred to with apparent approval in a number of cases: Murrihy at [8] and [9] (Murrihy); Ciaglia at [9] and [10]; David v Abdishou [2007] NSWSC 890 at [10] (Abdishou) and Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No.2) [2007] NSWSC 568 at [13] - [15] ("Kiri Te Kanawai").
A similar principle applies to the consequences of late amendments that raise new grounds of defence which provide the only basis upon which a defendant succeeds. White J said in Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 at [14]:
"A successful defendant may also be deprived of some or all of his costs if the grounds of defence upon which he succeeds are raised late (eg Capolingua v Phylum Pty Ltd (1991) 5 WAR 137; Monier Ltd v Metalwork Tiling Co of Aust Ltd (No 2) (1987) 43 SASR 588)."
Sydney Markets argued that these principles are applicable and that a costs order should be made in its favour up to the date of the 10 March 2014 amendments. Sydney Markets further argues that the general Beoco principle should apply: (i) because these amendments were exceptionally late, being made only on the first day of the hearing; and (ii) because the amendments were the first time that any comprehensible basis upon which ACN 123 could succeed in the proceedings was actually pleaded.
Another matter that Sydney Markets argues is relevant to the exercise of the Court's discretion is that the late service of ACN 123's evidence upon which it ultimately relied, namely Mr Dominic Fedele's evidence (the Superannuation Fund's accountant at the time of the relevant transactions) and Mr Natale Piscuineri's evidence, which was only served on 3 March 2014, one week before the hearing. Until that point of time ACN 123 had only relied upon two affidavits, one of them by Dominic Piscuineri, who was not a trustee of the Superannuation Fund until September 2003, well after the transactions that were being impugned in the proceedings.
Sydney Markets says that at all times prior to service of this further evidence on 3 March 2014 it was entitled to defend the proceedings based upon the evidence then served and being relied upon. Sydney Markets' submission has considerable force. It is quite true that numerous paragraphs in Mr Dominic Piscuineri's affidavits purporting to establish the purchase of the Goulburn proeprty with monies from the Superannuation Fund were rejected as inadmissible. Moreover it was only the amendment of the statement of claim on the first day of the hearing which set out the true relief that ACN 123 itself sought, and which also made ACN 123's case understandable in light of the late served evidence of Mr Dominic Fedele and Mr Natale Piscuineri. It is difficult to avoid the impression that had this evidence been served a great deal earlier, then Sydney Markets would have had a fair and reasonable opportunity to assess it, respond to it through witnesses such as Mr Mendonca, and reassess its own attitude to defending the proceedings. Because of the late service of the material such evidence gathering and such a dispassionate assessment well prior hearing was never possible.
In my view the amendment to the statement of claim was only part of the relevant pre-trial dynamic. The combination of ACN 123's late evidence and the late amendments severely disadvantaged Sydney Markets in assessing the proper course it should take in preparing for and defending these proceedings. For example, it was only Mr Fedele's evidence served after 3 March 2014 which explained the underlying transactions in a sufficiently comprehensive way (including as to ACN 123's own role as trustee) to allow ACN 123 to succeed at all in the proceedings. No doubt the service of this evidence was in part a product of Mr Roberts' careful preparation of the case for hearing. But until that effort had been committed, ACN 123's prospects of success in the proceedings were dubious. I accept Sydney Markets' submission that much of the Court's reasoning in finding for ACN 123 was dependent upon Mr Dominic Fedele's evidence. The Court's favourable assessment of Mr Fedele as a witness is quite clear from the Court's principal judgment.
In my view Sydney Markets' overall position is not to be judged by the course that it took in defending the proceedings immediately after 3 March 2014. By then it must have committed substantial resources to the appointed hearing and would have had little practical choice but to continue.
Sydney Markets also submits that the various trustees of the Superannuation Fund from time to time have failed to discharge their duties as trustees to vest the Goulburn property in the correct trustees duly appointed from time to time, and that had they done so these proceedings would never have been brought. Sydney Markets further says that had these trustees done their duty as trustees the parties to the 1996 Guarantee would not have been the registered proprietors of the Goulburn property and Sydney Markets would be unlikely to have claimed the interest that it did. Because the trustees did not change the register due to their own inaction or negligence, it is said that Mr Natale Piscuineri was able to represent, as he did, that he was the registered proprietor of the Goulburn property.
In my view this is a matter at least relevant to assessing whether Sydney Markets was reasonably entitled to keep advancing the defence that it did on the materials available to it, up until the March 2014 amendments and associated service of evidence. Looked at from the outside, the affairs of the Superannuation Fund were certainly clouded before the service of evidence on 3 March 2014 and the making of amendments on 10 March 2014 and the eternal picture made it difficult for Sydney Markets to work out who was the trustee of the Superannuation Fund and what ACN 123's case was.
Mr Roberts on behalf of ACN 123 opposes any special order on account of the late amendment. He points to a number of matters that ought be weighed in the balance against giving weight to the amendment as a relevant factor on costs. First he points to a Calderbank letter that was sent on 12 July 2013 which sets out ACN 123's case. But the fact that Mr Roberts needs to rely at all upon a Calderbank letter to explain ACN 123' case is some evidence in itself of how inarticulate the original pleadings were. With commendable frankness Mr Roberts described the ACN 123's pleading pre-amendment as "inelegant, inarticulate and perhaps erroneous".
Mr Roberts' next point is to say that even the late serving of evidence was not prejudicial because the striking out of much of Mr Dominic Pisciuneri's evidence did not alter the fact that the underlying documents annexed to his affidavit remained in evidence and were the source of ACN 123's final submissions as to why the superannuation fund had indeed funded the purchase of the Goulburn property. But the difficulty with this submission is that this was not a case where the documents simply spoke for themselves. The explanations of knowledgeable persons able to speak with authority about the transactions, such as Mr Fedele, were very important to the Court's reasoning about who had funded the purchase of the Goulburn property. And the underlying documents needed to be interpreted for the Court by someone with such knowledge. Moreover, submissions were necessary on behalf of ACN 123 to bring the material together. This is evident from paragraphs [39] to [84] of the Court's principal judgment.
Mr Roberts' next submission is that the submission was that the amendments constituted merely mechanical and facilitative amendments. It should be evident from the Courts by reasoning that this is not so. Indeed the original statement of claim sought a declaration that the properties were held by the superannuation without indicating who the current trustees of that fund were.
Mr Roberts argued that the amendments did not lead to an application for an adjournment to the proceedings. I do not find this argument persuasive. Mr Bulley says with some force that Sydney Markets was already financially committed to the proceedings at that stage. Moreover, it was commendable on Sydney Markets' part to attempt to hold the hearing date and deal with the amendments as it did without seeking an adjournment in a way which would reduce overall costs of all parties. Sydney Markets' failure to seek an adjournment should not be held against it.
Costs in respect of Natale Piscuineri's conduct
Sydney Markets also argues that ACN 123 should pay its costs for the period after ACN 123's amendment of its pleadings and covering the hearing in March 2014. Sydney Markets relies upon the Court's findings in its principal judgment that Mr Natale Piscuineri misled Sydney Markets into extending further credit to him in 2011. This argument seems at first attractive because Mr Natale Piscuineri's conduct was reprehensible.
Mr Bulley argued that Mr Natale Pisciuneri had been more straightforward with Mr Mendonca in 2011 then Sydney Markets would not have extended more credit and some, perhaps all, the proceedings would not have been necessary. There are several difficulties with this argument. It requires an exploration of causation issues and the quantification of the credit extended at various times which were not part of the proceedings.
Mr Natale Piscuineri's conduct in misleading representatives of Sydney Markets occurred pre-trial and was not misconduct as a litigant during the trial and did not obviously lead to a lengthening of the trial. Whilst it might be argued that Mr Natale Piscuineri's persistence in evidence in a version of events that attracted the Court's adverse findings was conduct that caused the proceedings to be protracted, the events the subject of the adverse findings were not so dominant a part of the proceedings that it could be said that his conduct did increase costs in the proceedings. There is therefore no proper basis to make an award of costs against ACN 123 on this basis. It therefore becomes unnecessary to consider ACN 123's alternative argument that it should not have to pay costs in respect of Mr Natale Piscuineri's misconduct because when that misconduct occurred he was not acting on behalf of ACN 123.
[2]
How Should Costs be Ordered?
Finally there remains the question of what is the proper basis on which costs should be ordered. Mr Roberts submitted that I should make orders separately and in each set of proceedings. But that does not, in my view, reflect the substance of the matter. Proceedings were heard together. The true protagonists in the proceedings were ACN 123 and Sydney Markets. The Court has extensive powers under Civil Procedure Act, s 98(1) in relation to costs. The costs order should reflect the reality of the contest. Therefore costs orders will be made between ACN 123 and Sydney Markets.
The bankrupt estate of Natale Pisciuneri took no active part in the proceedings. Taking all the above matters into account, it is better in my view for the Court to simply make a percentage assessment of costs to reflect the issues the subject of debate rather than making separate costs orders before or after a particular date. Taking into account all the submissions made the Court will order that Sydney Markets pay 40 per cent of ACN 123's costs of these proceedings.
Other costs issues
The date originally listed for costs argument was 18 May 2015. But the date was vacated and the costs of the day were reserved. Those reserved costs are the subject of a remaining contest.
Sydney Markets submits that ACN 123 should pay the cost thrown away, including all costs associated with the wasted appearance on that day and the preparation of subsequent submissions filed by Sydney Markets.
ACN 123 opposes an order for costs against it for the 18 May 2015 date. It submits in reply that it could have put the submissions orally that were the subject of its written submission delivered that morning and that Sydney Markets would have needed to have been ready to deal with those oral submissions on the day. ACN 123 submits that there is no basis for the making of a costs order against it in respect of the costs of 18 May 2015.
ACN 123 should not have its costs of the vacated 18 May 2015 hearing. But a costs order should not be made for Sydney markets against ACN 123 for that date. This is because there was no specific Court order made in advance of that date for the filing of written submissions, so ACN 123 was not in breach of such an order in failing to serve written submissions in advance of 18 May. And there is some force in Mr Roberts' submission that had he put in oral form the submissions which were reduced to writing and handed up on that day then Sydney Markets would have had to have been in a position to deal with those oral submissions that very day.
On the other hand I do not think that ACN 123 should have its costs of this day against Sydney Markets. The written submissions which ACN 123 handed up on the day were substantial. The matter was only listed for a short hearing at 9:30am. It could have been anticipated that this amount of additional material would to a degree take Sydney Markets by surprise and forethought would suggest that the more efficient course would have been to serve the material in advance. Because of this ACN 123 should not have its costs of that day and the result will be that each party will bear its own costs of the day.
Conclusions and Orders
In the result both parties have had a measure of success in their costs arguments. The costs orders in the proceedings will be as follows:
1. Subject to order (2), order that Sydney Markets pay 40 per cent of ACN 123's costs of both these proceedings.
2. Order that each party bear its own costs of the vacated costs hearing date of 18 May 2015, to the intent that the parties' costs of this hearing date should not be included in the costs assessment the subject of order (1).
3. Grant liberty to apply on two days' notice.
[3]
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Decision last updated: 28 August 2015