Valimi Pty Ltd v Maniotis [2003] VSC 357

8. Briefly the proceeding arises from a dispute between the partners in a wholesale nursery business and the thirdnamed defendant who was appointed by this Court as receiver and manager of the business upon the application of the first and secondnamed defendants.

11. The plaintiffs commenced this proceeding on or about 21 July 1995 alleging causes of action arising from the conduct of the first and secondnamed defendants before and during the course of the receivership and of the thirdnamed defendant during the course of the receivership (which I note had come to an end before the proceeding began).

14. The plaintiffs' claims as against the first and secondnamed defendants include claims for breach of fiduciary duty as former partners, conspiracy to impoverish the firstnamed plaintiff and damages pursuant to an undertaking given to the court during the proceedings as a condition of the appointment of the thirdnamed defendant as receiver.

17. The plaintiffs' claims against the thirdnamed defendant include claims for breach of fiduciary duty as receiver and manager, and negligence in the conduct of the receivership, as well as for an account.

20. On 17 December 2003 the first and secondnamed defendants filed a notice of claim as against the thirdnamed defendant alleging that if they were liable to the plaintiff, which they denied, the thirdnamed defendant was in turn liable to indemnify them in respect of any damage which they might thereby suffer.

23. On about 19 June 2001 Bongiorno J ordered a stay of the proceeding as against the first and secondnamed defendants until payment of interlocutory costs orders which were then outstanding. The stay was lifted when the outstanding costs were paid together with interest on 5 March 2003 and 1 April 2003.

26. On 31 August 2001 the Listing Master set the matter down for a 12 day trial as between the firstnamed plaintiff and the thirdnamed defendant to commence on 27 May 2002. Thereafter extensive preparations were undertaken, including preparation by the firstnamed plaintiff of a court book of over 1500 pages and the proofing of some 12 witnesses whom it was expected would be called.

29. On 15 May 2002 the thirdnamed defendant served a formal offer of compromise under Order 26 of the Rules of Court dated 15 May 2002, in the sum of $100,000, expressed to be open for acceptance until 29 May 2002 (albeit incorrectly referred to in the offer as 2001, but no point is made of that).

32. The offer was not at first accepted and thus the trial began before McDonald J on 27 May 2002. But on the morning of the second day of the trial the firstnamed plaintiff gave instructions during the course of an adjournment for acceptance of the offer, and it was accepted. Upon court resuming his Honour was informed by counsel for the firstnamed plaintiff that counsel had received instructions to accept the offer and thereafter orders were made by consent by his Honour to the effect of striking out the firstnamed plaintiff's claim as against the thirdnamed defendant and making no order as to costs.

35. After those orders were made the firstnamed plaintiff's solicitors sought advice from a costs consultant, and made some attempts to settle the amounts of costs payable by the thirdnamed defendant to the firstnamed plaintiff, but those attempts proved to be unsuccessful.

38. By letter dated 3 June 2002 the firstnamed plaintiff's solicitor wrote to the thirdnamed defendant's solicitors informing them of the costs estimate provided by the firstnamed plaintiff's costs consultant, and seeking agreement as to the payment of costs in that amount.

41. On or about 11 June 2002 the thirdnamed defendant's solicitors tendered to the firstnamed plaintiff's solicitor a cheque in the sum of $100,000 by way of the settlement sum and they asked in their correspondence that the firstnamed plaintiff's solicitor forward the firstnamed plaintiff's bill of costs taxed in accordance with the rules.

44. By letter dated 27 November 2002 the firstnamed plaintiff's solicitors served upon the thirdnamed defendant's solicitors a bill of costs in taxable form and on 13 December 2002 the firstnamed plaintiff's solicitor received from the thirdnamed defendant's solicitor a letter dated 9 December 2002 in which it was stated that:

"We refer to your letter dated 27 November 2002 which enclosed the first plaintiff's Bill of Costs in taxable form in respect of the Order of Master Wheeler made on 27 August 2001 and in respect of the proceeding generally upon the acceptance of our client's offer of compromise. We are currently examining your client's Bill of Costs and will contact you in due course in this respect".

48. There was, however, no contact for some time and thus on 16 January 2003 the firstnamed plaintiff's solicitor sent the thirdnamed defendant's solicitors a letter seeking a response on the issue of costs as soon as possible. The thirdnamed defendant's solicitors responded on or about 24 January 2003 by letter in which they stated:

"We refer to your letter dated 16 January 2003. We are currently examining your client's Bill of Costs and hope to be in a position to contact you in this respect by 3 February 2003."

52. But again there was no response for some time, and thus on 20 February 2003 the firstnamed plaintiff's solicitors contacted the thirdnamed defendant's solicitors by telephone and were told that the delay was regretted but that the thirdnamed defendant's solicitors were having difficulty in obtaining instructions.

55. On 25 February 2003 the firstnamed plaintiff's solicitors e mailed to the thirdnamed defendant's solicitors, complaining, in effect, about the lack of response, and then on 27 February 2003 the firstnamed plaintiff received correspondence from the thirdnamed defendant's solicitors which suggested that the thirdnamed defendant was not liable to pay any amount of the firstnamed plaintiff's costs pursuant to the acceptance of the offer.

58. More correspondence followed, culminating in relevant respects with a letter from the thirdnamed defendant's solicitors dated 27 February 2003 in which several points were taken. One point, no longer pursued, was that the effect of the order made by McDonald J was that costs could not be recovered. Another point, which is still pursued, was that because the amount of the settlement sum was only $100,000, the effect of Rule 63.24 or 63.25 was to limit the amount of costs recoverable by the firstnamed plaintiff to the appropriate County Court scale.

61. In this state of affairs a contested taxation was inevitable and on 26 March 2003 the thirdnamed defendant's solicitors forwarded notice of objections to the firstnamed plaintiff's bill of costs. That notice included the objections based upon the contended application of Rules 63.24 and 63.25.

64. Subsequently, the matter came on for hearing before the Taxing Master. The Master took the view, however, that it was inappropriate that he proceed with the taxation until a judge of the court determined whether Rule 63.24 or Rule 63.25 applied, and if so, whether the court would exercise the discretion for which those rules provide (that costs be recoverable on Supreme Court scale, notwithstanding their application). Thus the matter comes before me.

67. The first question is whether Rule 63.24 is applicable. Rule 63.24(1) provides that:

"Subject to paragraph 1.1, where in a proceeding for debt or damages (other than a proceeding in which the jurisdiction of the County Court is unlimited) the plaintiff recovers by judgment or otherwise an amount (exclusive of costs) not exceeding one half of the amount to which the jurisdiction of the County Court is limited 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 County Court less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the Supreme Court instead of the County 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."

71. The thirdnamed defendant contends that the firstnamed plaintiff's proceeding was a proceeding for debt or damages and that the amount recovered by way of acceptance of the offer of compromise, namely $100,000, plainly does not exceed one half of the amount to which the jurisdiction of the County Court is limited. The firstnamed plaintiff responds that Rule 63.24 has no application because although the proceeding includes claims for debt and damages, it also includes other claims, and in those circumstances it cannot be said that the proceeding is one for debt or damages.

74. In Bantick v Boss Properties Pty Ltd No.2[1], Gillard J said that in order to determine whether a proceeding is one for debt or damages within the meaning of the Rule, one is to look at what is recovered. Thus in a proceeding which is substantially for the recovery of debt or damages but which includes a claim for declaration which might be adjudged unnecessary or superfluous, the proceeding should be seen to be one for debt or damages.

77. With respect, that appears to me to be correct. The rule in question does not apply where a substantial part of the action is directed to obtaining something other than debt or damages: see also Doherty v Thompson[2]; and Keates v Woodward[3]; Harrison San Miguell Pty Ltd v Alfred Lawrence Company[4]; and Hill v Roberts[5].

"The court must look at the judgment in the proceeding to determine whether or not it is a proceeding for debt or damages."

84. I am not sure, however, that that is necessarily correct. Certainly, it has been said that the relief actually recovered is a very material matter[6]. But while the relief recovered may well be a good indicator of whether the action was one in substance for something apart from debt or damages, in my opinion it cannot be determinative of the nature of the action.

87. For example, if an action were pre-eminently for relief other than debt or damages, such as specific performance of contract, and it were compromised upon the defendant paying to the plaintiff a sum certain in consideration of a release from all claims, it surely would not be said that the proceeding was one for debt or damages or even one substantially for debt or damages.

90. Similarly, if the relief sought in a proceeding were a declaration of trust and an account of profits, and the proceeding were settled upon payment of a sum certain in consideration of the release of all claims, it could not properly be said that the action was one for debt or damage. A claim for accounts is not a claim in debt or damages, even if the result of the taking of accounts may be that and amount is found to be due. It is a claim for a decree which affirms a plaintiff's rights at law or in equity, leaving to be inquired into how much is ultimately due[7].

93. In this proceeding, so far as can be told from the amended statement of claim of 29 August 2000, the firstnamed plaintiff's claims against the first and secondnamed defendants include a substantial claim for declaration of constructive trust as well as claims for damages. The firstnamed plaintiff's claims against the thirdnamed defendant appear also to include a substantial claim for the taking of accounts in the court's equitable jurisdiction. Furthermore, there was nothing in the compromise offer of $100,000 to tie it in any way to the claims for damages made. To the contrary, it appears to have been expressed to be in satisfaction of all claims.

96. Accordingly, whether one looks to the relief which was sought or at the relief which was recovered (assuming that "relief recovered" for this purpose includes amounts recovered by acceptance of an offer of compromise), I see nothing which compels the view that the proceeding even as against the thirdnamed defendant was one in substance for debt or damages. In the result, in my opinion, Rule 63.24 does not apply.

99. I turn then to Rule 63.25. It provides so far as is relevant that:

"Rule 63.24 shall, with any necessary modification, apply where a plaintiff obtains by judgment or by acceptance in accordance with Rule 26.03(4) of an offer of compromise relief other than for the recovery of a debt or damages and any amount in dispute in the proceeding or the value of any property to which the relief relates does not exceed one-half of the amount or value to which the jurisdiction of the County Court is limited."

103. Assuming as I do that the proceeding even as against the thirdnamed defendant was not one for debt or damages, the question now is whether the firstnamed plaintiff by acceptance of the offer of compromise has obtained relief other than for recovery of a debt or damages and if any amount in dispute in the proceeding or property to which the relief relates is less than half the value to which the jurisdiction of the County Court is limited.

106. In Lesiac v Foggenberger[8], Hedigan J held that the "value of the property to which the relief relates" refers to the value of the property the subject of the proceeding and not to the value of the proprietary relief that may be granted. With respect, I do not think that can be doubted.

109. I also think it plain that the expression "any amount in dispute" is to be construed as referring to the amount in dispute as alleged in the pleadings and not the amount in which relief may be granted. Thus, speaking generally, if the amount in dispute is equal to or greater than half the jurisdictional limit of the County Court, Rule 63.25 does not apply even if the relief recovered is equal to or less than half that amount.

112. It might be otherwise, perhaps, if a proceeding were compromised on terms that a small amount be paid in respect of a small identifiable part of a proprietary claim and that the balance of the claim be dismissed. It might then be said that, by acceptance of the offer of compromise, the plaintiff would obtain relief other than for the recovery of the debt or damages and that the amount to which it related was less than half the value to which the jurisdiction of the County Court is limited. But that is not this case, as already noted. Here the value of the property to which the relief relates and the amount in dispute to which the relief relates are substantially in excess of the jurisdictional limit of the County Court.

115. I should also say that if I were wrong in the view that I take about the application of Rules 63.24 and 63.25, I should still be disposed to order that the costs recoverable by the firstnamed plaintiff as against the thirdnamed defendant not be limited in the fashion for which those rules provide. There are a number of considerations which inform that view:

* First, the firstnamed plaintiff's claims against the first and secondnamed defendants appear to me to be bound up so closely with the claims as against the thirdnamed defendant that it was just and convenient that all claims were dealt with in one proceeding[9]

* Secondly, the firstnamed plaintiff's claim against the first and secondnamed defendants could not be dealt with in the County Court. The damages sought to be recovered exceed $600,000 and, as I have already noted, the firstnamed plaintiff's claims against the first and secondnamed defendants include claims for declarations of constructive trust and the taking of accounts in respect of property of which the value in gross exceeds $1m.

* Thirdly, the firstnamed plaintiff's claims against the first and secondnamed defendants include claims for the enforcement of the undertakings given by those defendants as a condition of the appointment of the thirdnamed defendant as receiver of the business. It would be inappropriate even if it were permissible to enforce those undertakings in any court other than the court in which they were given.

* Fourthly, because at least part of the firstnamed plaintiff's claims against the defendants is beyond the jurisdiction of the County Court it would not be possible for the proceeding to be transferred to the County Court under the Court's (Case Transfer) Act[10].

* Fifthly, even if it had been possible to split off the claim as against the thirdnamed defendant and transfer it to the County Court, the first and secondnamed defendants' claims for contribution as against the thirdnamed defendant would have remained, and thus there would have been the unappealing prospect of the plaintiffs pursuing their claim against the first and secondnamed defendants and the first and secondnamed defendants pursuing their claim against the thirdnamed defendant, in the Supreme Court, whilst the plaintiffs pursued their claim directly against the thirdnamed defendant, in the County Court.

123. It was urged upon me by Mr Fitzgerald on behalf of the thirdnamed defendant that despite the alleged complexity of the firstnamed plaintiff's claims against the thirdnamed defendant, the decision of Byrne J in Brenner v First Artists' Management Pty Ltd[11] shows that it is nevertheless appropriate that the plaintiff's costs be taxed on the appropriate County Court scale.

126. I think, however, that it is sufficient to say of that argument that because of the views I take about the application of Rule 63.24 and 63.25 the point does not arise, and that even if I am wrong about the inapplicability of those rules, the point to which his Honour's observations were directed seems to me to be different to the one with which I am concerned.

129. In Brenner the relief which was sought was restitution in the nature of a quantum meruit and thus clearly within the description of a claim in contract or tort[12]. Here the relief which was sought included substantial equitable relief, and in my opinion it would have been quite inappropriate, even if it were permissible, to pursue that in the County Court.

135. In the result, I am of opinion that the Taxing Master should be directed to tax the firstnamed plaintiff's costs pursuant to the bill of costs referred to in the firstnamed plaintiff's summons for taxation on 6 March 2003, on the basis that neither Rule 63.24 nor Rule 63.25 is applicable.

[1] [2000] VSC 165 at [21] - [23]

[2] (1906) 94 LT 626

[3] [1902] 1 KB 532

[4] [1912] VicLawRp 67; [1912] VLR 367 at 371, per Madden CJ

[5] unreported, No. 13179 of 1991, 27 October 1995, at p. 2, line 16 and following, per Ashley J

[6] see the observations of Madden CJ in Harrison ibid at p. 371

[7] see Doss v Doss 18 ER 462 at 472 and Maher Gummow & Le Hane's Equity, Doctrines and Remedies 4th Ed at [25.015]

[8] unreported, number 5556 of 1992, 4 September 1995

[9] see Supreme Court Act 1986, s. 29(2) and 94th High Wire Pty Ltd v State Electricity Commission Victoria, unreported, 31 August 1991, No 2198 of 1991; B C 91 0062A, per Ormiston J

[10] see in particular ss. 3(2) and 8(2)

[11] [1993] VicRp 71; [1993] 2 VR 221

[12] see Alexander v Ajax Insurance Co Ltd [1956] VR 436 at p. 445, per Sholl J