Ventura v Higgins

Background

1. This was an urgent ex parte application for a stay which first came before the court on 6 March 2018 when Ashford DCJ made the following orders: 1. The defendants withdraw pray 1 sought on the motion. 2. In respect of prayer 2 a stay is granted until 4pm Monday 12th March 2018 pending full hearing of the motion.
2. This application is made in proceedings which were commenced by the filing of a statement of claim in the Newcastle registry of the court. The nature of the relief sought meant that the proceedings had to be placed in the next available sittings. On 12 March 2018, as the judge in the Newcastle sittings, I amended the expiry date of these orders to "until further order" and listed these proceedings for argument on 13 March 2018 in the Newcastle circuit sittings which had commenced that week.
3. The subject matter of the application for stay is a costs order obtained by Anthony Ventura and Barescape Pty Ltd ("the plaintiffs"), against Matthew Higgins and Barescape Holdings Pty Ltd ("the defendants"), for a judgment upon registration for costs of $538,311.43. This judgment was for costs in proceedings in the Supreme Court of New South Wales in which the plaintiffs were successful: Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 12) [2012] NSWSC 1591 at [47]. One of the defendants had brought a cross-claim in which it was also successful and, as the trial judge's costs orders show, the cross-claimant was awarded 80% of its costs.
4. The costs orders made by the trial judge, Black J, were as follows: 1. The Defendants pay the Plaintiffs' costs on the ordinary basis of and incidental to the determination of the Statement of Claim as agreed or as assessed. 2. The Plaintiffs/First and Second Cross-Defendants pay 80% of the Cross-Claimant's costs on the ordinary basis of and incidental to the determination of the Cross-Claim against them as agreed or as assessed. 3. The Defendants pay the Plaintiffs' costs on the ordinary basis of and incidental to the tender of reports of the Defendants' accounting expert, Mr Claude Jugmans dated 6 July 2011 and 5 August 2011, including the costs of and incidental to the argument about the admissibility of those reports and the costs reserved on 18 August 2011.
5. The facts of this case indicate the difficulties parties subsequently encounter where costs orders of the "issue by issue" basis, rather than the "broad axe" approach (see the explanation of the reasons for this in In the matter of Optimisation Australia Pty Ltd (Costs) [2018] NSWSC 280 at [16] per Brereton J). That is not a criticism of the trial judge who carefully considered whether an aggregated costs order should be made, and took into account a number of factual issues which appear to have been such as to make this case the exception rather than the rule. Nor is it a criticism of the costs assessor, whose powers to seek rulings on issues such as this by the court relate essentially to issues of law (see, for example, Griffiths v Australian Broadcasting Corporation [2013] NSWSC 750).
6. The disadvantage to the plaintiffs of this staggered costs assessments process is clearly demonstrated by the chronology of events. After winning their case in 2012, they immediately set about having their costs of $538,311.43 assessed. However, the second defendant/cross-claimant refused to have its own costs (namely the 80% of the cross-claim costs) assessed concurrently with those of the plaintiffs, despite a series of requests to do so (see the correspondence dated 28 March, 11 June and 17 June 2013), correspondence to which (judging by the contents of the email of 17 June 2013) the cross-claimant did not even deign to reply. The only costs assessment undertaken by the defendant was the first defendant's assessment of costs of an interlocutory application, namely for the setting aside of a subpoena; when those costs were assessed ($19,712.61), the first defendant (Mr Higgins) sought to enforce this against the first plaintiff (Mr Ventura) in the Bankruptcy Court.
7. As the years rolled by, in the face of a series of objections from the defendants, the plaintiffs inched forward towards obtaining a Certificate of Determination of Costs on 18 October 2017. There was no appeal or review sought and, on 23 January 2018, the plaintiffs obtained a default judgment in relation to the sum in the costs certificate. At all relevant times the defendants were given credit for the $19,712.61 offset for Mr Higgins, who has no other offset entitlement as he had only this one costs order (for the subpoena) in his favour.
8. A bankruptcy notice dated 23 January 2018 was then served on Mr Higgins.
9. This bankruptcy notice appears to have triggered two events: the serving of a costs assessment for the cross-claim part of the 2012 proceedings, and the bringing of this application for a stay.
10. On 2 February 2018, the second defendant/cross-claimant, after having done nothing since the 80% cross-claim costs orders were made on 19 December 2012, lodged an application for costs assessment of its cross-claim costs in the Supreme Court registry. The quantum of the costs sought in that application is over $1.5 million. Although Black J noted at [38] - [39] the unsatisfactory conduct of the cross-claim which resulted in his reducing the cross-defendant's entitlement to costs to 80%, the costs claimed in this 2 February 2018 application for costs assessment for the cross-claim are therefore nearly three times the size of the assessed costs of the plaintiffs. This suggests another lengthy costs assessment (complicated by the lapse of time and the interaction of the earlier costs assessment) is on the cards.
11. The bankruptcy notice relates to the defendant in person, who was not a party to the cross-claim. It will be readily apparent, from the above account of facts, that, apart from the costs order of $19,712.16 (for which the plaintiffs have given credit to the defendant in the bankruptcy proceedings against him), the costs assessment for the cross-claim (to which the defendant was not a party) cannot relate to any set-off in relation to any costs issues between the plaintiff and the defendant in person. It is acknowledged that the costs assessment filed by the second defendant/cross-claimant on 2 February 2018 cannot operate as a set-off in the bankruptcy proceedings.

The issues before the court

1. As set out in their Notice of Motion, the defendants jointly ask this court to stay the enforcement of the judgment entered in these proceedings under s 135 Civil Procedure Act 2005 (NSW) ("the Act") and/or by reason of the court's inherent and/or equitable jurisdiction.
2. The plaintiffs submit that this court does not have such jurisdiction and ask the court to dismiss the notice of motion, either on a jurisdictional basis or on the basis that, given the history of these proceedings, the court should not exercise its discretion to make the orders sought in favour of the defendants.

The jurisdiction argument

1. Section 135 provides: "135 Directions as to enforcement (1) The court may, by order, give directions with respect to the enforcement of its judgments and orders. (2) Without limiting subsection (1), the court may make any of the following orders: (a) an order authorising the Sheriff to enter premises for the purpose of taking possession of goods under a writ of execution, (b) an order prohibiting the Sheriff from taking any further action on a writ, (c) an order prohibiting any other person from taking any further action, either permanently or until a specified day, to enforce a judgment or order of the court, (d) an order requiring the Registrar-General to cancel any recording of a writ for the levy of property that, under section 105 of the Real Property Act 1900, has been made in the Register under that Act, either generally or in relation to specified land."
2. The first challenge to jurisdiction arises by reason of the asserted limited scope of s 135 of the Act, which identifies the sheriff and the Registrar-General but goes on to note the entitlement of "any person" in s 135(2)(c) and as to whether the seeking of such an order in relation to a judgment on costs is available.
3. Any kind of costs order of this court, not merely a costs order resulting in a judgment (as is the case here), can be stayed pursuant to s 135: Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57 at [138].
4. The main challenge to jurisdiction, however, is that the notice of motion appeals to this court's "inherent jurisdiction" (there are also references, in the written submission, to this court's "equitable jurisdiction": submissions, 15 February 2018, paragraph 7).
5. The claims for relief in the Notice of Motion create jurisdictional difficulties. Firstly, this court does not have inherent jurisdiction as it is a creature of statute (Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435; [1999] HCA 19 at [121]; Jago v District Court of NSW (1989) 168 CLR 23; [1989] HCA 46). Secondly, the relief sought would clearly fall outside this court's equitable jurisdiction, the limited nature of which is described by Ward JA in Mahommed v Unicomb [2017] NSWCA 65 at [39] - [47].
6. There can be no doubt that the inherent jurisdiction of this court could be relevant to applications such as the present. In Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd, the Court, in the course of determining a s 135 application of a similar nature to that sought here, specifically referred (at [140]) to such an application as falling within the inherent jurisdiction of the court in circumstances "including where a defendant claims a right of set-off", citing Re A Debtor, No 21 of 1950 (No 2); Ex parte the Petitioning Creditors v Debtor [1951] Ch 612.
7. The same is the case with equitable relief (Mahommed v Unicomb at [39] - [47]).
8. I also note that one of the exercises I am called upon to perform by the defendants is to determine that a Supreme Court judge would, in the exercise of the inherent and/or equitable powers of the court, exercise discretion to stay these proceedings, and to take this factor into account in the exercise of my discretion under s 135.
9. How should the court deal with an application which seeks orders which are effectively outside the jurisdiction of the court?

Section 144 Civil Procedure Act 2005 (NSW)

1. Section 144 provides: "144 Transfer of certain proceedings from District Court to Supreme Court (1) This section applies to proceedings under Subdivision 2 of Division 8 of Part 3 of the District Court Act 1973. (2) If, during proceedings to which this section applies, the District Court decides that it lacks, or may lack, jurisdiction to hear and dispose of the proceedings, the District Court must order that the proceedings be transferred to the Supreme Court. (3) Proceedings that are transferred to the Supreme Court under subsection (2): (a) are to be continued in the Supreme Court: (i) as if the proceedings had been duly commenced in the Supreme Court on the date on which they were commenced in the District Court, and (ii) as if any cross-claim in the proceedings had been duly made in the Supreme Court on the date on which it was made in the District Court, or (b) if the Supreme Court so orders, are to be remitted to the District Court and continued in the District Court as if they had not been transferred. (4) The District Court has, and may exercise, jurisdiction to hear and dispose of proceedings the subject of an order by the Supreme Court under subsection (3)(b), including such jurisdiction as is necessary to determine any question arising in any such proceedings. (5) If, during proceedings to which this section applies, the District Court decides that it is appropriate to do so for any reason other than the reason referred to in subsection (2), the District Court may order that the proceedings be transferred to the Supreme Court. (6) Proceedings that are transferred to the Supreme Court under subsection (5), are to be continued in the Supreme Court: (a) as if the proceedings had been duly commenced in the Supreme Court on the date on which they were commenced in the District Court, and (b) as if any cross-claim in the proceedings had been duly made in the Supreme Court on the date on which it was made in the District Court. (7) Subject to the rules of court applicable in the Supreme Court, the power of the Supreme Court to make orders as to costs includes a power to make orders with respect to the costs of: (a) the application for, and the making of, an order under subsection (2) or (5), and (b) any step taken in the proceedings before an order under subsection (2) or (5) was made. (8) The making of an order under subsection (2) or (5) does not invalidate any order previously made by the District Court in the proceedings."
2. Section 140 provides: "140 Transfer of proceedings to higher court (1) The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or the Local Court, order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court. (2) The District Court may, of its own motion or on application by a party to proceedings before the Local Court, order that the proceedings, including any cross-claim in the proceedings, be transferred to the District Court. (3) Proceedings in the District Court on a claim for damages arising from personal injury or death are not to be transferred to the Supreme Court under this section unless the Supreme Court is satisfied: (a) in the case of a motor accident claim or a workplace injury damages claim: (i) that the amount to be awarded to the plaintiff, if successful, is likely to be more than $1,000,000, and (ii) that the case involves complex legal issues or issues of general public importance, or (b) in any other case: (i) that the amount to be awarded to the plaintiff, if successful, is likely to exceed the jurisdictional limit of the District Court, or (ii) that there is other sufficient reason for hearing the proceedings in the Supreme Court. (4) Proceedings in the Local Court are not to be transferred to a higher court under this section unless the higher court is satisfied that there is sufficient reason for hearing the proceedings in the higher court. (5) This section extends to proceedings that have been transferred to the District Court or the Local Court pursuant to a previous transfer order under this Division or under Division 2."
3. As the District Court possesses neither an equitable jurisdiction nor the inherent jurisdiction to which appeal is made, independently or in conjunction with s 135, it appears that the relief sought "may" (s 144(2) of the Act) be of an equitable nature or otherwise not fall within the jurisdiction of the Court (as an appeal is made to the court's inherent jurisdiction), in which case the court "must" (s 144(2)) transfer the proceedings to the Supreme Court, as occurred in Mahommed v Unicomb.
4. The use of the word "may" sets a low bar for this court in applications such as the present. It is a task made easier by the language of the orders sought in the defendants' Notice of Motion and in the written submissions, which are replete with references to equitable principles.
5. Such a transfer must be made even over the vehement opposition of the parties; given the interpretation taken of the word "must" by Ward JA, if the issue of jurisdiction arises, and the court is satisfied that it "may lack" jurisdiction, the transfer must be made, if necessary over the protests of one or even both parties. The language of ss 144 and 140 (which refers to the court taking such a step of its own motion) is such that the wishes of the parties do not play a part in the equation.
6. This is what occurred in Mahommed v Unicomb. No litigant could have been more earnest - indeed, obdurate - in his desire to remain in the District Court than Mr Mahommed, as his legal representative's submissions to the Court of Appeal demonstrated. However, the use of the word "must" in s 144(2) meant that Mr Mahommed's claim had to be transferred, even though Mr Mahommed had repeatedly refused to accede to the wishes of the defendants (and, for that matter, the court, in the hearing of the defendants' application) to bring the proceedings in the Supreme Court, as Ward JA noted in Mahommed v Unicomb at [51] - [57].
7. The same is the case here. In the course of submissions as to jurisdiction of a similar nature, the defendants have challenged the jurisdiction of this court to make the orders sought on bases which include, inter alia, the absence of inherent or equitable jurisdiction. That is sufficient to trigger s 144.
8. The final challenge to jurisdiction (perhaps a challenge to standing would be more accurate) made by the plaintiffs relates to the status of Mr Higgins (who is, as noted above) one of two defendants but not a cross-claimant) to seek relief under s 135. While the corporate entity, Bacchus Holdings, successfully brought and maintained a cross-claim and has a set-off, Mr Higgins was the unsuccessful co-defendant in the Supreme Court proceedings. The plaintiff submits that any entitlement to a stay must apply only to Bacchus Holdings, and not to Mr Higgins.
9. The defendants' answer to this argument is to refer, once again, to the court's inherent and/or equitable powers. That underlines the inevitability of a s 144 transfer order.
10. As this application was heard in the course of a busy circuit list with over 60 matters, I invited the parties to provide me with additional written submissions. This resulted in the defendants making an application in the following form: "8. If the Court were not minded to grant an order that execution of the costs judgment be stayed pending further order, an alternative order that the Court could make would be that the execution be stayed for a period of 14 days to allow the defendants to make the relevant set-off application in the Supreme Court."
11. This submission appears to acknowledge that the plaintiffs are in the wrong court. It is an order that would have the practical effect of ensuring the proceedings were commenced in the right court.
12. However, I do not propose to accede to the defendants' wishes. Their belated request not only shows a lack of awareness of s 144 and s 140, but will most probably lead to further delay. The cross-claimant in the 2012 proceedings is just as likely to continue to conduct the cross-claim costs assessment in the same dilatory fashion that it has done to date. By transferring the proceedings, this court can do its best to fast-track the application the defendants should have brought in the Supreme Court in the same efficient way as it did in relation to Mr Mahommed.
13. It was for the reasons set out above that I was satisfied that the form and content of the orders sought required the immediate transfer of these proceedings to the Supreme Court pursuant to ss 140 and 144 of the Act.
14. In the event that my observations as to the merits of the application are of assistance, I briefly note the reasons why, if asked solely to make these orders on the basis of s 135, I would have refused to make the orders sought and dismissed the application with costs.

Section 135 factors and the exercise of discretion

1. The history of the costs assessment process, as set out in the affidavits of both parties, paints a compelling picture of plaintiffs diligently prosecuting their claim for costs incurred more than five years ago where there is no satisfactory explanation for the delay and where, given the cross-claimant's conduct to date, there is every likelihood that these Fabian tactics will continue. The plaintiffs are out of pocket for costs incurred between 2009 and 2012 and are likely to remain so for some time, given the size of the cross-claim costs assessment (many of which Mr Ventura claims are without basis) and the conduct of the costs assessment to date.
2. The provisions of ss 56 - 62 of the Act and the requirement that justice be "just, quick and cheap" are intended to dissuade the dilatory conduct of costs assessments. The warnings of McColl JA in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 as to the dangers of costs turning into "satellite litigation" which renders victory Pyrrhic are well known. Those principles militate against the endorsement of the defendants' conduct of these proceedings.
3. Other factors pointed to by the defendants, such as the solvency of the corporate plaintiff (which I note is more solvent than the corporate defendant) tend to fall away when one considers that the remaining plaintiff is a solicitor of the Supreme Court of New South Wales, and not a man of straw.
4. All of the discretionary factors point in favour of the application for a stay being refused. If the cross-claimant elected to delay the costs assessment for the cross-claim and to ignore the requests of the plaintiffs for both costs to be assessed together, it has only itself to blame. Nor should the defendant in person, Mr Higgins, be entitled to rely upon that delay, which has been and remains contrary to the principles underlying ss 56 - 62.
5. Accordingly, if I had been satisfied that the proceedings could remain in the District Court, I would not have granted the relief sought by the defendants.

Should the stay continue?

1. As I propose to ensure that these proceedings are listed in the Supreme Court of New South Wales at the earliest opportunity, any delay will be of short duration. However, it is in the interests of justice to maintain the status quo and may be contrary to s 144 for me to disturb that status quo in any event.
2. The future conduct of these proceedings, and the speed with which they are conducted, will be matters for the Supreme Court, which will apply appropriate case management requirements designed to prevent further delay (see, for example, Mahommed v Unicomb [2018] NSWSC 291.

Delays in bringing and prosecuting costs assessments

1. An efficient system for the regulation of legal costs is of central importance to the proportional and fair conduct of litigation in accordance with ss 56 - 62 of the Act. Significantly, these central provisions include many references to costs issues, and proportionality figures largely in the new costs legislation (under which, unhappily, the cross-claimant's costs of the 2012 litigation will not fall to be assessed).
2. By way of general observation, the period of time taken by the assessment of costs (coming into its sixth year at the end of 2018) is close to being twice as long as the commencement and completion of the trial (from 2009 to 2012, a period of three years), yet the defendants have only just lodged their assessment of costs last month. The progress of this costs application is likely to be just as drawn out as the previous one. In order to respond, the plaintiffs will be called upon to review their documentation over the past decade, in circumstances where memories have dimmed and where problems may well arise as a result of the determination of issues in the plaintiffs' 2013 costs assessment.
3. This is a most unsatisfactory situation; I will be providing a copy of this judgment to the Manager of Costs Assessment in the Supreme Court for his consideration, as statutory amendment to prevent this occurring in future costs assessments may be necessary.

Costs

1. The defendants seek an order for costs in the Notice of Motion.
2. Although the orders made appear to reflect a degree of success for the defendants in their notice of motion, in practical terms, they have wasted the court's time, as well as that of the plaintiffs, by seeking relief which they ought to have known was available in the Supreme Court and by their failure to refer to the relevant provisions (ss 140 and 144) for transfer from this court to the Supreme Court.
3. Given the history of these proceedings I invite the parties to make submissions as to what costs orders should be made, having regard to the general principles of r 42.1 Uniform Civil Procedure Rules 2005 (NSW), and whether any costs order made should be a gross sum costs order and/or on any basis other than the usual basis, pursuant to s 98 of the Act. I have set down a strict timetable for this so that these proceedings can be concluded in the course of the Newcastle sittings.

Orders 1. Pursuant to ss 140 and 144 Civil Procedure Act 2005 (NSW) these proceedings are transferred to the Supreme Court Equity Division for the hearing of the defendants' Notice of Motion filed on 15 February 2018. 2. The registry of the District Court is to obtain a date for the hearing of the application in the Supreme Court on an urgent basis within seven (7) days if possible. 3. The stay order made by Ashford DCJ on 6 March 2018 to continue until further order. 4. Written submissions concerning costs of the notice of motion (including the costs of proceedings before other judges of this court) to be exchanged by 5 pm Monday 19 March 2018. 5. Replies to submissions on costs to be exchanged by Wednesday 21 March 2018. 6. Matter relisted for argument on Friday 23 March 2018 before Gibson DCJ in the Newcastle District Court sittings.

Amendments 15 March 2018 - Paragraph 1 - typographical error DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2018