Tower Australia Ltd v Ambridge Investments Pty Ltd [2003] VSC 478

2 The first to fourth defendants have now applied for orders that the plaintiff pay their costs of the application. They claim costs on an indemnity or alternatively solicitor and own client basis.

4 The plaintiff relied upon Rule 63.20 of the Supreme Court (General Civil Procedure) Rules 1996 ("the Rules") which provides:

"Each party shall bear his own costs of an interlocutory or other application in a proceeding, whether made on or without notice, unless the Court otherwise orders."

5 The plaintiff submitted that the general rule that costs should follow the event did not apply to interlocutory applications. It relied upon the statement of Buckley LJ in Scherer v Counting Instruments Limited[1]:

"When these [general costs] principles fall to be applied to an interlocutory step in an action, the circumstances may be such that it is then not possible to see on which side justice requires that the decision who should bear the costs of that step should ultimately fall. This may depend on how the issues in the action are eventually decided. Consequently, costs in interlocutory matters are often made costs in the cause or reserved."

6 The plaintiff urged the Court to follow the course adopted in Keogh v The Australian Workers Union[2] and order that the costs of all parties be costs in the cause. Alternatively, the plaintiff urged the Court to follow the approach of Harvey CJ in Equity in Piddington v The Attorney-General[3] and McDonald J in Independent Fuels Australia Pty Ltd v Jamieson[4] who dismissed applications for interlocutory injunctions, making no orders as to the unsuccessful plaintiff applicants' costs, but ordering that the costs of the successful defendant be costs in the cause.

7 Further alternatively, the plaintiff sought an order for costs against the fourth defendant as the order which, it submitted, accorded with the justice of the case. It relied upon the evidence to the effect that the fourth defendant had executed the documents, the subject matter of the dispute, without authority from the first, second and third defendants on whose behalf he had purported to act. It pointed out that the fourth defendant had filed no affidavit material in response to the application.

8 In response, the first, second and third defendants submitted that they were entitled to their costs from the plaintiff, as a result of their successful defence of the application. Further, they sought costs on either a solicitor and client or indemnity basis.

9 The fourth defendant resisted the application for costs against him. He submitted that his admissions that he had executed the subject documents without authority did not justify the plaintiff's application for the "wide reaching orders sought". The fourth defendant went on to submit that he was neither a necessary nor appropriate defendant to the application for an interlocutory injunction because, by the date of the application, he was no longer an employee or involved in the operations of the first defendant. He argued that no particular orders or injunctions were sought by the plaintiff against him in respect of matters over which he had any control.

10 I shall deal with the position of each of the parties in turn.

11 The plaintiff failed in its application for an injunction. Whilst I considered that the plaintiff had established a prima facie case against the defendants, I was not persuaded that the balance of convenience favoured the making of the orders sought.

12 Even if the plaintiff were to ultimately succeed in its claims against the defendants, the orders sought in its statement of claim do not expressly extend to the general relief according the priority to its claimed interest sought by way of injunctive relief.

13 In all the circumstances set out in my reasons for decision in relation to the application[5], I am of the opinion that the plaintiff should bear its own costs.

14 I am not persuaded that the fourth defendant should meet the plaintiff's costs, despite his alleged admissions as to lack of authority in relation to the execution of the relevant documents. Like the first to third defendants he has successfully resisted the application.

15 Further, I do not consider that the justice of the case requires that the costs of any of the successful defendants be determined by the outcome of the proceeding.

16 Order 63.20 of the Rules is subject to any order of the Court made in the exercise of its wide discretion as to costs of and incidental to all matters in the Court under s 24(1) of the Supreme Court Act 1986: see Independent Fuels at [6]. In my view that discretion should be exercised in favour of the first to fourth defendants and the plaintiff be ordered to pay their respective costs of the application.

Should costs be ordered on an indemnity or solicitor and own client basis?

17 The first to third defendants have sought an order for those costs on an indemnity basis under Rule 63.01 or, alternatively, on a solicitor and own client basis, under Rule 63.30. They submitted that the plaintiff put them to substantial and unnecessary expense by applying for ex parte relief where there was no basis to do so. I am not persuaded by those submissions. As noted earlier the plaintiff did make out a prima facie case, although it did not persuade me that the balance of convenience favoured the grant of injunctive relief.

18 Rule 63.31 of the Rules provides that costs shall be taxed on a party and party basis except as provided by the Rules or any order of the Court. Rule 63.30.1 recognises the Court's power to award indemnity costs[6].

19 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd[7] Woodward J provided guidance as to when such orders should be made when he said at 401:

"I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts of the clearly established law. Such cases are, fortunately, rare. When they occur, the Court will need to consider how it should exercise its unfettered discretion."

20 In Bass Coast Shire Council v King[8] Winneke P said that the Court's discretion to order costs on a solicitor and client basis was unlimited but should be exercised judicially and not unreasonably. The President went on to state:

"The circumstances in which the Court might be moved to award costs on the solicitor and client scale should be described as 'special' if only to set them apart from the usual basis upon which costs are awarded: see per Callaway JA Spencer v Dowling (Unreported, Court of Appeal, 26 July 1996)."

21 In PCRZ Investment Pty Ltd v National Golf Holdings Ltd[9] Chernov JA considered a challenge to an order for the award of costs on a solicitor and client basis in favour of a respondent to a claim brought to establish "a matter of principle" of little monetary value. His Honour held that the order should be set aside. He referred to the appellant's entitlement to seek a determination from the court[10]. Chernov JA said at [36]:

" ... the authorities indicate that, generally, the ordinary cost rule should only be departed from where the losing party has misconducted itself in relation to the proceeding or where the institution of the proceeding was plainly unreasonable or where the proceeding was issued for an ulterior or collateral purpose."

He cited the undue prolongation of a case and the making of assertions of fact which were patently groundless or of wild and contumelious allegations as examples of such misconduct. Chernov JA noted that the making of a patently hopeless claim would indicate that the institution of the proceeding was plainly unreasonable.

22 In my opinion this case was not one in which the plaintiff had misconducted itself or brought proceedings which were plainly unreasonable or instituted for an ulterior or collateral purpose. I do not consider the circumstances in this case to be such as to set them aside as unusual. I am not persuaded that an order for costs on an indemnity basis is warranted.

23 I will order that the plaintiff pay the costs of the first, second, third and fourth defendants of the application.

[1] [1986] 1 WLR 615 at 222.

[3] (1933) 33 SR (NSW) 317 at 329

[4] [2002] VSC 45.

[5] [2003] VSC 331.

[6] See: Bass Coast Shire Council v King [1997] 2 VR 5 at 29 per Winneke P

[7] [1988] FCA 202; (1998) 81 ALR 397 at 401

[8] [1997] 2 VR 5 at 29

[9] [2002] VSCA 24

[10] Chernov JA referred to Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 at 977 per Lord Diplock