Is set-off available?
17 Vegas submits that the Court has the power, in relation to matters in which it has jurisdiction, to make such orders as the Court thinks appropriate under s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA). Further, by s 21 of the FCA, the Court is entitled to make binding declarations of right, and can do so in the interests of justice under R 1.32 of the Federal Court Rules 2011 (Cth).
18 Vegas notes that in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 at [68]; [2006] NSWSC 560, White J said that:
set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings.
19 Vegas also observes that in a recent case, Broadlex Services v RCR Resolve FM (No 3) [2015] NSWSC 1668, McDougall J at [21] said that:
the court must seek to do substantial costs justice, as between the parties, on a more broad-brush and less precise basis. To my mind, the appropriate way to do this is to take a view of the proceedings overall and to make a costs order that reflects both the plaintiff's success overall and the defendant's undoubted success in reducing the amount otherwise payable. The costs order should also, in my view, reflect the fact that many of the issues raised by the defendant in its cross-claim failed.
See also Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd (2010) 182 FCR 84 at [17]-[18]; [2010] FCAFC 5.
20 Vegas submits that the right it asserts to set-off one order against the other is not based in equity. Rather, Vegas is seeking to have the Court exercise its inherent jurisdiction to set-off the costs orders relying on the control this Court exercises over its own proceedings. Vegas says it asserted the set-offs in the February 2015 email (immediately after the cross-claim costs order was assessed); in its June 2015 letter; by bringing these proceedings; and (consistent with the assertions of set-off) by not paying the assessed amount of the cross-claim costs order to Mr Rumsley.
21 Vegas submits that the reasons the Court ought to exercise its jurisdiction to order a set-off are that:
(1) the orders were both made in WAD 28 of 2015 against parties to those proceedings;
(2) the purported assignment was made in circumstances where Mr Rumsley knew Vegas was seeking costs from Mr Clifford that would exceed any amount assessed in respect of the cross-claim costs order;
(3) the 'right, title and interest in the cross-claim costs order that Mr Clifford purported to assign to Mr Rumsley can only be as good as Mr Clifford's rights to costs. That right was subject to the potential for set-off by the ultimately successful party;
(4) the purported assignment was avoided by the Trustees in their January 2015 letter - the Trustees declared pursuant to s 120 and s 121 of the Bankruptcy Act 1966 (Cth) that the purported assignment of the cross-claim costs order to him was avoided; and
(5) on 9 January 2015, before Barker J in WAD 28 of 2009, Vegas reserved its rights with regards to Mr Rumsley's purported assignment when Mr Rumsley was joined as a party;
(6) Vegas' right to assert a set-off had not expired and remained available to Vegas; and
(7) if no set-off is ordered then Vegas is unlikely to recover any costs from Mr Clifford's estate.
22 Vegas submits that a set-off that exists at law derives from Statutes of Set-off, Insolvent Debtors Relief 1728 (UK) (2 Geo II c22 s 13), which relevantly provides that where there are mutual debts between a plaintiff and a defendant, one debt may be set-off against the other. See Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR at 62. For set-off at law to exist, it contends, the debts must be: (a) liquidated (see Harbeck & Ors v Vasse Dozer Hire Pty Ltd [2009] WADC 48 at [24]; Blacksheep Productions Pty Ltd v Waks [2008] NSWSC 488 at [19]); (b) mutual (see Hazcor at 67; Harbeck at [34]-[37]); and (c) capable of standing as independent proceedings (see Rawley v Rawley (1876) 1 QBD 460).
23 A debt is 'mutual', it contends, if the debts are between the same parties and in the same right. See West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435 at 438. Mutuality refers to the identity of the parties. See Harbeck at [34]-[37]. The debts need not have been incurred at the same time. See Day and Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1982) 150 CLR 85; [1982] HCA 20. In this case, the debts are between the same parties and in the same right.
24 Vegas argues that the liquidated sums of both orders are able to be set-off due to their mutuality, as the orders have both been made in WAD 28 of 2015 against parties to those proceedings. The certificates of taxations comprised assessments of the costs of the parties to the proceedings. Thus, immediately the cross-claim order was quantified, Vegas asserted a set-off.
25 Mr Rumsley submits the claim is unfounded, on the following grounds:
(1) Mr Rumsley has a judgment debt against Vegas. Mr Rumsley does not owe Vegas anything. He has never owed them anything. There is nothing to "set-off" against his judgment debt.
(2) There is no basis in fact or law for the assertion by Vegas that before assignment to Mr Rumsley, Mr Clifford's costs judgment against Vegas was affected by some limitation or defect in title (that is, the countervailing Vegas judgment), so that Mr Clifford could not transfer a "better title" to Mr Rumsley than he had. While Vegas has disavowed reliance on equitable set-off in its submissions and seeks to rely therein only on the Court's inherent jurisdiction, Gilmour J has already held in the closely analogous situation of equitable set-off, that "There is no equity of set-off that can attach to a costs order" (Williamson at [15]). His Honour added that the only way to claim set-off is to rely on the Court's inherent jurisdiction. So unless and until the Court has made a set-off order in the exercise of this jurisdiction, Mr Rumsley's judgment is unaffected.
(3) Vegas seems to seek to argue that because it could have claimed a set-off of the costs orders in its favour in WAD 28 of 2009 against Mr Clifford, against the cost order in favour of Mr Clifford against it (subsequently assigned to Mr Rumsley), the Court should now somehow, in its inherent jurisdiction, retrospectively order such set-off or declare that it is has happened. Vegas did not seek to invoke any set-off on its part until recently (late June 2015). The assignment had taken place more than 3 years earlier, on 16 March 2012. Mr Clifford went bankrupt on 26 February 2013. The judgment debt owing by Mr Clifford to Vegas then disappeared and transmogrified to a right for Vegas to prove in the bankrupt estate - which Vegas exercised. Since 26 February 2013, there has been no debt owing by Mr Clifford to Vegas against which the judgment debt held by Mr Rumsley against Vegas could be "set-off". See: Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 at 594-595; McNamara v San & Ors (No 3) (2010) 183 FCR 328 at [66]; [2010] FCA 227).
(4) Unsurprisingly, there is no case where a Court has ever ordered set-off in its inherent jurisdiction between a judgment debt (in this case held by Mr Rumsley) and a disappeared judgment debt (Vegas' erstwhile judgment debt against Mr Clifford).
(5) On 27 February 2016, Mr Clifford was discharged from bankruptcy. In terms of s 153 of the Bankruptcy Act, he was thereby released from all provable debts. The costs orders Vegas had against Mr Clifford no longer exist and Mr Clifford is also no longer subject to the claims in bankruptcy referred to in the previous sub-paragraph. Vegas simply has no claim whatsoever in respect of him or his bankrupt estate. See: Coventry v Charter Pacific Ltd (2005) 227 CLR 234 at [88]; [2005] HCA 67; Robertson v Deputy Commissioner of Taxation (2003) 53 ATR 824 at [23]; [2003] FCA 944; Sampson v McInnis [2007] FMCA 1656 at [36]-[37].
26 Mr Rumsley contends that, even assuming (contrary to the above submissions) that the foundational facts are present so that the Court could exercise its inherent jurisdiction to order a retrospective set-off as sought by Vegas, then the Court should not do so, on the following grounds:
(1) The very substantial delay on the part of Vegas to rely on or actually set-off.
(2) The conduct of Vegas in failing to pay a costs judgments held by Mr Rumsley against it - and not moving for any stay of it before Mr Rumsley obtained the debt appropriation order. See further below.
(3) The circumstances that Mr Rumsley proceeded to act on the judgment assigned to him (in payment for legal services) without any intimation of set-off by Vegas prior to June 2015 - Mr Rumsley had even obtained the debt appropriation order before Vegas purported to assert set-off.
(4) Even when Vegas then asserted set-off in its letters of 26 June and 29 June 2015 (TB 44 and 45, p 235-238), it did so on spurious grounds apparently not currently pursued in argument - the letters are however still pleaded in the Amended Statement of Claim and the relief is based on the 26 June 2015 letter. These grounds advanced in the 29 June 2015 letter are: equitable set-off, set-off by the Trustees and set-off by its own "assertion". They were rejected by Gilmour J in Williamson: a finding which binds Vegas who is a party to that case. (This applies even though Vegas had filed a submitting appearance in that matter: see Spautz v Butterworth (1996) 41 NSWLR 1 at 19F to 20D.)
(5) While the letter of 29 June 2015 states that Vegas will pursue the set-off matter in WAD 17 of 2015 (at TB p 238), it did nothing of the sort. The current matter was then instituted on 4 August 2015.
(6) Vegas has engaged in manipulative conduct. It put up and funded the Trustees to run their "misconceived" set-off claim while ostensibly just abiding the outcome of WAD 17 of 2015. See TB 50 (p 246); Agreed Facts paragraph 43; T 36 (p 203).
(7) When it suited Vegas to put forward a larger claim against the Clifford bankrupt estate, it did not invoke any set-off in relation to the judgment debt held by Mr Rumsley. See its first proof at TB 17, p 72; note, by way of contrast, the express set-off claimed at p 75 for Federal Magistrates Court costs. Its later proof asserts set-off against Mr Clifford's estate. So it is now claiming the same set-off twice, this time against Mr Rumsley.
27 Mr Rumsley further notes that the orders in WAD 29 of 2008 on 15 March 2010 and 9 January 2015, required Vegas to pay the cost of the cross-claim to Mr Rumsley. This was confirmed when Gilmour J found "the cross-claim costs are not owed to the applicants as trustees of Clifford's bankrupt estate. They are owed to Rumsley". Mr Rumsley submits that, when the amount, agreed between Vegas and Mr Rumsley, was allowed, in the 2 February 2015 certificate, Vegas was required by orders of the Court to pay Mr Rumsley $110,000, and continues to refuse to do so. Mr Rumsley submits that Vegas does so contrary to "the public interest in the administration of justice [which] requires compliance with all orders" (Witham v Holloway (1995) 183 CLR 525 at [15]; [1995] HCA 3). Mr Rumsley notes that recently, Judge Lucev stated that a failure to pay money the court ordered to be paid is arguably contempt of court (Blackman v Leppard (No 3) [2016] FCCA 272). Mr Rumsley contends this fact weighs very heavily, if not conclusively, against the exercise of any discretion in favour of Vegas.
28 Mr Rumsley further submits that in relation to the discretion on the part of the Court, it should also be noted that:
(1) the two costs orders in issue deal with very different issues and have no relevant interconnection;
(2) Vegas had pleaded a cross-claim against Mr Clifford in the proceedings. It did not (and could not have) pleaded any set-off based on the allegations in its cross-claim;
(3) Vegas then abandoned its cross-claim before trial;
(4) Mr Clifford obtained an order for his cost of the cross-claim brought by Vegas when Vegas agreed (and entered into a consent order) that the cross-claim against him be dismissed. The nature of the cross-claim was some alleged wrongful conduct on the part of Mr Clifford towards Vegas, including alleged breach of a fiduciary duty;
(5) Vegas obtained its relevant costs order against Mr Clifford when he failed after trial in his action against Vegas, mainly premised on misleading or deceptive conduct of Vegas and two directors of the company. On the importance of the lack of contemporaneity of competing claims where equitable set-off is considered: see Young v National Australia Bank Ltd (2004) 29 WAR 505 at [34].
29 Mr Rumsley submits the relevant factors listed below in relation to Anshun estoppel should also weigh with the Court, so as not to order set-off.
30 As to the legal set-off contention of Vegas, Mr Rumsley submits this has not been pleaded but the argument is also plainly misconceived. Before the assignment, Vegas had not invoked any set-off and it could not rely on legal set-off, as both bills of costs were unliquidated (untaxed) at the time of the assignment. After the assignment, there was no mutuality between Vegas and Mr Rumsley.
31 Mr Rumsley submits that Anshun estoppel should also prevent Vegas from pursuing the set-off. He submits that Vegas has acted unreasonably in not pursuing set-off earlier in WAD 28 of 2009, the case in which the costs orders in issue were made. That was the case wherein it should have been done. Vegas has had multiple opportunities over many years to do so, but did not do that. The opportunities were there before the assignment and before the bankruptcy of Mr Clifford.
32 Additionally, Mr Rumsley submits Vegas was a party to the proceedings before Gilmour J in WAD 17 of 2015, as a respondent, so is bound by the findings of Gilmour J. The Trustees claimed a set-off in respect of the same costs orders in issue in the present case. Vegas chose to file a submitting notice (TB p 203-204) two weeks after reading the defence pleaded by Mr Rumsley in WAD 17 of 2015 (TB p 192-202), yet brought the stay application in those proceedings when it required relief. After the substantive hearing of the Trustees' set-off claim by Gilmour J on 11 June 2015 in Williamson, Mr Luscombe for Vegas wrote to Mr Rumsley stating Vegas "has always asserted a set-off" (TB p 237) and if Mr Rumsley did not concede the set-off "Vegas will seek leave to be heard in WAD 17 of 2015 and in that event, we will bring this letter to the attention of the Court" (TB p 238). Mr Luscombe's letter of 29 June 2015 is an admission that any set-off asserted in that letter was so relevant to the subject matter of the action that it was unreasonable not to pursue it in that action.
33 Mr Rumsley says that although the position of Vegas as a respondent is sufficient to establish the Anshun estoppel, the Trustees confirmed that Vegas was actually the de facto applicant in Williamson. The Trustees wrote that they "provided consent to the Application as a mechanism to assist the creditor, Vegas" (TB p 246). Vegas admits that it "indemnified the Trustees for any costs incurred, for any adverse costs orders and agreed to pay remuneration up to $5,000", in paragraph 43 of the statement of agreed facts.
34 Mr Rumsley submits that even if an estoppel were not available Vegas would be precluded from maintaining this action where it was an abuse of process. It is well-established by a long line of authority, including Reichel v Magrath (1889) 14 App Cas 665 and Walton v Gardiner (1993) 177 CLR 378; [1993] HCA 77, that the principles of abuse of process are not confined by the doctrines of res judicata, issue estoppel and Anshun estoppel. A court may invoke those principles to prevent attempts to litigate an issue which should have been litigated in earlier proceedings, as well as to prevent attempts to re-litigate an issue which has, in substance, been litigated and determined in earlier proceedings (Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4 at [11]).
35 Mr Rumsley submits that the attempt by Vegas to again litigate a set-off in this proceeding is "unfairly burdensome, prejudicial or damaging or productive of serious and unjustified trouble and harassment", so as to be an abuse of process (Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [14]). To use the words of Heydon J, Vegas is "attempting a second bite at the cherry [which] would be open to dismissal as an abuse of process" (Magill v Magill (2006) 226 CLR 551; [2006] HCA 51).
36 Mr Rumsley contends that Vegas has subjected him to what Allsop J (as he then was) described as the costly and stressful evil of litigation (White v Overland [2001] FCA 1333 at [4]) in WAD 17 of 2015 and now WAD 398 of 2015, both in relation to set-off claims for the same costs orders. In both proceedings it has made allegations "of the most serious and grave character" (Rumsley at [22]). Note the unfounded assertions in paragraphs 50(b) and (c) of the Vegas submissions. Vegas cannot now submit that the claim for set-off in relation to the same costs orders in this proceeding is anything other than "unfairly burdensome, prejudicial or damaging or productive of serious and unjustified trouble and harassment".
37 The primary submission made by Vegas is that the Court has an inherent jurisdiction to set-off the costs order relying on the control of the Court over its own proceedings.
38 It is usually accepted that this Court does not have an "inherent jurisdiction" in the manner of superior courts exercising a common law jurisdiction, but that it may have implied statutory powers for various purposes, including to protect its own proceedings. See Chen v Monash University (2016) 337 ALR 525; [2016] FCAFC 66.
39 Assuming there is an implied power to make a set-off order in the circumstances of this particular case, I am not satisfied that the Court should exercise the power.
40 The simple fact of the matter is that Mr Clifford assigned the cross-claim costs order in his favour to Mr Rumsley at a time when no set-off had been ordered. Unless that assignment can be impugned it must be accepted as valid and effectual. There has been no order setting aside the assignment.
41 In those circumstances the situation is, as Mr Rumsley has submitted, that the costs order is now held by him and that he is an entirely separate person from Mr Clifford. He is entitled to the benefit of the cross-claim costs order he holds.
42 No application was made to be able to set-off an actual or a prospective proceedings costs order against the cross-claim cross order at the time the cross-claim costs order was made.
43 That consideration however tends to tie into the discretionary considerations which might come into play, should it be considered the Court retains the power, following the assignment of the cross-claims costs order to Mr Rumsley, to set off the cross-claim costs order against the proceedings costs order.
44 While Vegas sought to claim set-off, at a particular point, the assignment had already occurred. Unless there is some other basis for impugning the assignment, Mr Rumsley is entitled to the benefit of the costs order he has obtained by assignment. To order a set-off under any implied statutory power to do so, would in my view, in the particular circumstances of this case, result in a re-ordering, without proper justification, of the legal rights of Mr Rumsley which are, as I have said, independent of those of Vegas.
45 While on one view of the events that have transpired, the assignment made by Mr Clifford to Mr Rumsley was opportunistic, it is also suggested by Mr Rumsley that the assignment was for consideration for legal services provided. In any event, the assignment has not been impugned, whether opportunistic or not.
46 For those reasons I consider that if there is an implied statutory power to set-off, it should not be exercised in this case.
47 In these circumstances, I do not need to deal with other submissions made by Mr Rumsley concerning the conduct of Vegas in relation to supporting the trustees' claims or the other abuse of process arguments made by him.
48 As to the further argued question of legal set-off put by Vegas, for similar reasons I accept the submission made that, after the assignment, there was no mutuality between Vegas and Mr Rumsley. For that reason alone, no legal set-off is available.