The applicants seek an order pursuant to s 135 of the Civil Procedure Act 2005 (NSW) and the inherent jurisdiction of the Court, that a judgment for costs against them in favour of the respondents be stayed until an order for costs that one of the applicants has obtained against the respondents is quantified by assessment.
Section 135 of the Civil Procedure Act relevantly 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:
…
(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,
…
The application was commenced by notice of motion filed in the District Court of New South Wales at Newcastle on 15 February 2018.
On 6 March 2018, Ashford DCJ granted a short stay of execution pending a full hearing of the motion. The hearing took place before Gibson DCJ, who published her reasons for judgment in Ventura v Higgins [2018] NSWDC 49 on 14 March 2018.
Her Honour made an order pursuant to ss 140 and 144 of the Civil Procedure Act that the proceedings be transferred to the Supreme Court Equity Division for hearing of the applicants' notice of motion. The stay made by Ashford DCJ was continued until further order.
With respect to Gibson DCJ, it is doubtful that it was necessary for the proceedings to be transferred to the Supreme Court, and it would be preferable if this course could be avoided wherever that outcome is possible. I will make some additional observations below on that matter, after I have dealt with the substance of the notice of motion.
The judgment as to which the applicants seek a stay of execution is a judgment entered on 19 October 2017 in the District Court in the sum of $538,311.43 (the costs judgment), and is a judgment that was entered upon the registration of a certificate of costs dated 18 October 2017 under s 71 of the Legal Profession Uniform Law Application Act 2014 (NSW), and Rule 36.10 of the Uniform Civil Procedure Rules 2005 (NSW).
The order for costs made in favour of the respondents that has given rise to the costs judgment was made in proceedings in this Court between the parties to the notice of motion, which were heard by Black J and were decided by judgment delivered on 27 August 2012: Barescape Pty Limited as trustee for The V's Family Trust & Anor v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust & Anor (No 9) [2012] NSWSC 984.
The plaintiffs in those proceedings were the respondents to the notice of motion, Mr Anthony Ventura and Barescape Pty Limited as trustee for the V's Family Trust (Barescape). The defendants were the present applicants, Mr Matthew Gordon Higgins and Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust (Bacchus). In that matter, Bacchus filed a cross claim against the plaintiffs and another party. Mr Higgins was not a cross claimant.
The issues in the principal proceedings were complex and have been stated in the judgment of Black J. It is sufficient to note that the corporate parties entered into a partnership for the purpose of operating a restaurant and function centre in the Newcastle area called the Bacchus Restaurant.
It is significant for the present dispute to note that, at [2], Black J recorded that it was the corporate parties who were members of the partnership, and Mr Ventura and Mr Higgins were guarantors under the relevant partnership deed. In that sense, it was the corporate parties who were the principal protagonists in the proceedings.
The circumstance that lead to the primary dispute was Mr Ventura's involvement in the establishment and operation of a function centre called "Longworth House", at a place that was in relatively close proximity to the Bacchus Restaurant. Longworth House was operated by a partnership that included the third defendant to the proceedings, which was the trustee of a trust that was associated with Mr Ventura and Barescape.
Longworth House operated to some extent in competition with the Bacchus Restaurant, and Mr Ventura's activities gave rise to complicated disputes concerning whether he and Barescape had breached the relevant partnership deed, and whether breaches of fiduciary duty had occurred. Bacchus, which held the majority interest in the partnership, summarily dismissed Mr Ventura as the general manager of the business. Under the partnership deed, for reasons that do not now require any detailed consideration, the partnership was terminated and Bacchus became obliged to acquire Barescape's interest in the partnership at a discounted value. A primary issue in the claim made by the present respondents was the quantification of the price that Bacchus was required to pay.
The primary issue on the cross claim filed by Bacchus was whether the present respondents were liable to Bacchus to pay compensation for breaches of fiduciary duty.
Black J summarised his findings at [283]. In short, he found that Bacchus was required to buy out Barescape's interest in the partnership at a value of $160,818, adjusted for a discount of 40% of goodwill. His Honour also found that Barescape's interest as shareholder in the third defendant and as a beneficiary of the trust of which the third defendant was trustee and Mr Ventura's involvement with Longworth House were breaches of fiduciary duty owed to Bacchus. Bacchus was entitled to recover equitable compensation and damages on a basis set out by his Honour.
The significance of this outline of the findings made by Black J is: (1) the circumstances in which Barescape became entitled to be paid for its share in the partnership were intimately connected with Bacchus' entitlement to a remedy for breach of fiduciary duty, because it was the breaches that lead to the termination which ended the partnership and triggered the obligation to pay Barescape for its share in the partnership; and (2) Black J hardly mentioned Mr Higgins during his judgment, except in his capacity as a principle of and witness for Bacchus. In so far as Black J ultimately entered judgment against Mr Higgins, it was to bind him as a guarantor of Bacchus' obligations.
It is also of some significance that the obligation of Bacchus and Mr Higgins to buy out Barescape's interest in the partnership did not flow from any wrongdoing on their part. The essence of the dispute on the statement of claim filed by Mr Ventura and Barescape was a difference of opinion as to how the amount that was required to be paid by Bacchus under the partnership deed was to be quantified. Mr Ventura and Barescape were, on the other hand, found to have engaged in breaches of fiduciary duty owed to Bacchus.
Black J gave a further judgment in Barescape Pty Limited as trustee for The V's Family Trust & Anor v Bacchus Holdings Pty Ltd as trustee for The Bacchus Holdings Trust & Anor (No 10) [2012] NSWSC 1275.
One of the issues raised before Black J was a claim by the present applicants that their obligation to pay Barescape the discounted value of its interest in the partnership should be set-off against the amount of the judgment for Bacchus against Barescape and Mr Ventura, and whether there should be a further set-off of the amount payable by Bacchus to Barescape against the cost orders in the proceedings in favour of Bacchus: see [13].
Black J found, at [16], that there was no set-off in respect of the independent claim of Barescape against Mr Higgins under clause 20 of the partnership deed, which contained Mr Higgins' guarantee: see [16]-[17].
On the issue of whether Bacchus' obligation to pay the discounted value of Barescape's interest in the partnership to Barescape should be set-off against Barescape's and Mr Ventura's obligations under the costs orders against them in the proceedings, Black J, at [18], referred to the judgment of White J (as his Honour then was) in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560; (2006) 58 ACSR 22 at [68]-[70]. As White J's observations are relevant to the determination of the present dispute, it will be convenient to set out [18]-[19] of Black J's judgment here:
[18] Bacchus also submits that payment of any amount due to Barescape and Mr Ventura under the Cross-Claim should be conditional on Barescape and Mr Ventura first paying costs orders made against them in the proceedings. In Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560 ; (2006) 58 ACSR 22 at [68]-[70], White J observed 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. …
This jurisdiction is accurately described in R Derham, The Law of Set-Off, 3 ed, 2003, at paras 2.71-2.83. Although in Edwards v Hope, Brett MR and Bowen LJ (at 926 and 927) described the jurisdiction as an equitable jurisdiction, in truth, it was not a creature of the Court of Chancery, but was applied by all courts. Indeed, it was applied more liberally in the Courts of law than in the Court of Chancery owing to Lord Eldon's care that solicitors should not be deprived of liens for their costs (Puddephatt v Leith (No 2) at 174-179).
Dr Derham says at para 2.80 that: "The basis of the set-off is the general jurisdiction of the Court over the suitors in it", citing Mitchell v Oldfield (1791) 4 Term Rep 123; 100 ER 929. There, in a case where each party had recovered judgment against the other for separate debts in separate actions, Lord Kenyon CJ stated that the case did not depend on the statutes of set-off, but the general jurisdiction of the Court over the suitors in it.
[19] In Padkohe Pty Ltd v Fletcher [2006] NSWSC 1239, Barrett J noted that a corresponding issue was to be addressed by asking:
… what the justice of this case requires by way of exercise of the general jurisdiction of the court over the suitors in it, having regard to the application now before the court.
Black J reached the following conclusion at [20]:
[20] On balance, I do not consider that I should order either a set-off, or a stay, of the judgment in favour of Barescape in the proceedings pending a determination of the question of costs. Costs orders have been made in favour of each party in the proceedings from time to time; those costs orders will result in obligations to pay amounts of costs as agreed between the parties or as assessed; the assessment process may in the ordinary course take some time; and it is not presently possible to determine the overall outcome as to costs in the proceedings. A decision of a costs assessor could be appealed in accordance with the provisions of the Legal Profession Act 2004 (NSW) and, in some circumstances, in a further application to the court. In my view, it would not be appropriate to defer the parties' rights under the principal judgment pending the outcome of any costs assessment, either in respect of the interlocutory steps in the proceedings which are the subject of separate costs orders or the costs of the proceedings generally.
The fact that Black J declined to make orders for set-off as between the primary judgment in favour of Barescape for the discounted value of its interest in the partnership against costs orders made in favour of Bacchus does not necessarily mean that the Court should not grant the stay sought by the applicants on the present notice of motion, as the issues that arise in relation to the granting of stays in the context of costs orders for and against the parties to the proceedings raise different considerations. The present respondents did not make any submission to the contrary.
Black J delivered a separate judgment on the issue of costs on 19 November 2012, in Barescape Pty Limited as trustee for the V's Family Trust & Anor v Bacchus Holdings Pty Limited as trustee for the Bacchus Holdings Trust & Anor (No 12) [2012] NSWSC 1591. His Honour made the following costs orders at [47]:
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.
Black J made separate orders on the claim and the cross claim because those claims raised "essentially different issues" and the parties succeeded in the claims that they made: see [6]. His Honour reduced Bacchus' costs of its cross claim by 20% because of his view that it had attempted to prove its loss "in a manner that was unduly complex and unduly time-consuming for the amount of the claim": see [38]. Black J made order 3 because the applicants on the present motion had failed in their attempt to tender an expert report: see [44].
In my view, Black J's decision that the statement of claim and the cross claim raised different issues for the purpose of determining whether separate costs orders should follow the event in respect of each claim does not exclude a finding by this Court that the two claims arose out of substantially the same circumstances, for the purposes of determining whether a stay of execution should be granted on the costs judgment.
It appears that, as the applicants put it in their written submissions, the "parties spent almost 3 years skirmishing in relation to costs of certain interlocutory applications", before the respondents commenced the formal assessment process in relation to the costs order made by Black J in their favour on the statement of claim. The rights and wrongs of that delay are beyond the Court's ken, and it is simply to be noted that both parties, for reasons of their own, delayed in the pursuit of the costs orders in their favour.
It is not necessary or appropriate for the Court to analyse in detail the process whereby the respondents obtained a certificate for the costs that Black J ordered the applicants to pay them. The respondents claimed an amount of $1,955,885.31 in their application dated 30 March 2016. Eventually, costs were assessed in their favour in the amount of $538,311.43 by assessment issued on 29 November 2016. That is a reduction of $1,417,573.88.
However, the applicants gave evidence that, when the costs assessor issued the certificate of determination of costs on 29 November 2016, he determined that the respondents were liable for the costs of the assessment in the amount of $12,962.59, and that the applicants were liable for $5555.55. The applicants paid their portion of the costs on 8 March 2017. The respondents did not pay their share until on or about 18 October 2017, when the certificate of determination was released. The respondents then registered the certificate of costs on 19 October 2017, and a judgment in their favour was issued by the District Court on 23 January 2018.
This history of the assessment process demonstrates considerable dilatoriness on the part of the respondents, whereby a period of almost one year slipped by as a result of the respondents not paying to the costs assessor his costs of $12,962.59.
The applicants say that they did not become aware of the cost judgment against them until January 2018, when Mr Ventura served on Mr Higgins a bankruptcy notice attaching the costs judgment.
That bankruptcy notice was dismissed by consent on the basis that it was defective in form. The Court was advised that the respondents have indicated expressly that they intend to serve a further bankruptcy notice in the correct form on Mr Higgins if the execution of the costs judgment is not stayed.
That is the practical issue at the heart of the present application. The respondents obtained a judgment on their statement of claim against Mr Higgins as well as Bacchus, as Mr Higgins was a guarantor of Bacchus' obligations under the partnership deed. Consequently, the respondents obtained an order for costs against Mr Higgins as well as against Bacchus. They now have the costs judgment against both applicants. Mr Higgins does not have an order for costs against the respondents. Accordingly, Mr Higgins does not personally have any entitlement that he can claim to set-off against the judgment against him. The practical effect may be that the respondents may be able to obtain a sequestration order against Mr Higgins, notwithstanding that they have not yet paid the costs that they have been ordered to pay to Bacchus, unless Mr Higgins pays the amount of the costs judgment to them.
That is the practical reason why the applicants have sought the stay of the costs judgment under the notice of motion that is presently before the Court.
The applicants acknowledged that Bacchus did not commence the assessment process in respect of the costs order in its favour until August 2017, although that was after considerable preparatory work had been done. The explanation that they gave for that circumstance was that the resources available to them were limited, the firm of solicitors that acts for the applicants is a small firm, and considerable time and effort was required for them to address the assessment of the costs that were to be paid to the respondents. In that process the applicants enjoyed considerable success, in that they achieved a reduction of $1,417,573.88 as mentioned above.
The applicants' solicitor gave considerable evidence of the work necessary for the applicants to prepare their own application for the assessment of the costs ordered in favour of Bacchus. He said that the application comprised of a narrative (21 pages), the itemised bill (337 pages) and supporting material (3 volumes), consisting in total of 4 volumes of approximately 3000 pages. He said that the applicants were then required to respond to a considerable number of objections raised by the respondents and that the amended application comprised 5 volumes.
The applicants say that the amount claimed in respect of the costs order in favour of Bacchus outstrips the costs judgment in favour of the respondents by almost $1 million, being a claim for $1,571,184.60. The applicants concede that it is likely that the amount that is ultimately ordered to be paid as costs to Bacchus may well be substantially less than the amount of costs that has been claimed, but they say nonetheless, there are good prospects that the amount will exceed the $538,311.43 that they have been ordered to pay to the respondents.
It is important for the determination of the present dispute that the applicants have taken two steps in aid of their application for a stay of the costs judgment by way of protecting the position of the respondents.
First, the applicants have made an open offer to pay the full amount due under the costs judgment to the respondents, subject to adequate security being given over that sum to protect the applicants' position once the costs order in favour of Bacchus is quantified. The respondents have not responded to that offer. This, the applicants say, reinforces their fear that they may not be able to recover any amount paid under the costs judgment if, following the assessment of Bacchus' costs claim, a balance is payable in its favour.
Secondly, the applicants have caused the whole of the sum due under the costs judgment to be paid into a trust account held by their solicitors. They offer that, as a condition to the continuation of the stay, that sum will remain in the trust account pending quantification of the costs order in favour of Bacchus, and/or further order of the Court. They also proffer the usual undertaking as to damages, and accept that it should be a condition of the continuation of the stay that Bacchus prosecute its assessment of costs with all reasonable diligence.
As I have noted above, the applicants base their claim for a stay of execution of the costs judgment on s 135 of the Civil Procedure Act and the Court's inherent jurisdiction. They do not claim that Bacchus is entitled to an equitable set-off in respect of the costs orders in the strict sense. They recognised that Mr Higgins has no right of set-off.
The applicants rely upon the following statement of principle by the Court of Appeal in Wentworth v Wentworth [1996] NSWCA 553 (BC9600213 at 2-4):
Young J came to the conclusion that he should make the foregoing orders on two bases.
The first was the defendant was entitled to an order under the court's inherent power, on the basis of fairness, that there should be set off of the various orders for costs one way or the other in the overall proceedings and that to implement this there should be no execution on any costs order until the ascertainment of the amounts payable under all costs orders was complete, and a final balance struck. He thought this all the more appropriate in the present case, where, in his view, the evidence showed that the plaintiff was "in such financial straits as it may be difficult to balance out the orders after all the taxations are completed if she is permitted to execute on orders in her favour in the meantime". He added, that if through the fault of one party some taxations were needlessly prolonged then it might be that the other party could apply to the court for leave to issue execution on orders in that party's favour.
…
However, so far as the first basis of his orders is concerned, we are in agreement with Young J's approach. The court's general control of its own processes must permit it both to prevent possible unfairness in the working out of payment of costs orders and in doing so balance as well as it can the possibilities in a case such as the present: see, in addition to the authorities mentioned by Young J, the decision and discussion of this subject by Bowen CJ in Eq in Ryan v South Sydney Junior Rugby League Club Ltd (1975) 2 NSWLR 660.
We also agree with Young J's comment that in a case such as the present, where there are numerous costs orders made at quite long intervals of time from one another, that if a stay is granted such as Young J in effect imposed, then application for variation of the stay may be made if one party is in a position to contend that the other is deliberately prolonging the finalisation of costs assessment procedures in order to postpone unreasonably the day when the eventual balance will be struck.
Further, we would observe that in cases such as the present when a court is deciding whether or not to stay enforcement of some duly quantified costs orders pending final quantification of others, matters to be considered in exercise of the discretion must include: the connection between the matters in which the orders for costs have been made; the degree of diligence shown by the person seeking the stay in bringing to finalisation the quantification of the costs to which that person is entitled; and the possibilities, should a stay be refused, of recovery by the person who has paid, of the eventual balance in that person's favour, if the balance falls that way.
The applicants also rely upon the observations by Barrett J (as his Honour then was) in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106, where at [46], his Honour set out the observations by White J (as his Honour then was) in Australian Beverage Distributors Pty Ltd the Evans & Tate Premium Wines Pty Ltd [68]-[70] that I have set out above in the extract from Black J's judgment.
Finally, the applicants relied upon [49] of Barrett J's judgment:
[49] Of greater relevance here is the decision of the Court of Appeal in Wentworth v Wentworth (unreported 21 February 1996 BC9600213) which approved the conclusion at first instance that there should be no execution on any costs order until the ascertainment of the amounts payable under all orders was complete and a final balance was struck. That was a case where each party had the benefit of costs orders, some of which had been quantified while others had not.
His Honour then at [50] extracted part of the judgment of the Court of Appeal that I have set out above.
See also O'Neill v Williams [2007] NSWSC 51 (Brereton J) at [15]; Australian Receivables Ltd V Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) [2011] NSWSC 1425 (Ward J, as her Honour then was) at [97]; and Anthony Simon Bell v Rittal Pty Ltd [2013] NSWSC 398 (Hidden J) at [10]-[14].
The applicants submit that these principles are available to Mr Higgins even though he does not personally have a costs order against the respondents. That is so, they say, for two reasons. The first is that Bacchus does have a costs order against the respondents, and if those costs were paid by the respondents to Bacchus, it could use that money to reduce the amount that both Bacchus and Mr Higgins are required to pay to the respondents under the cost judgment. Mr Higgins as well as Bacchus would be pro tanto discharged as regards the amount payable under the costs judgment.
Secondly, Mr Higgins submits that the real protagonists in the primary proceedings were the respondents on the one hand and Bacchus on the other. Mr Ventura was a protagonist because it was his conduct that was the primary source of breaches of fiduciary duty. Mr Higgins was only ever a party as the guarantor of Bacchus' obligation under the partnership deed to pay the discounted value of Barescape's interest in the partnership.
As a matter of principle, I accept the applicants' submission. If, as the Court of Appeal has established in Wentworth v Wentworth: "The court's general control of its own processes must permit it both to prevent possible unfairness in the working out of payment of costs orders and in doing so balance as well as it can the possibilities in a case such as the present", then the mere fact that in this case no costs order was made in favour of Mr Higgins personally does not prevent the Court from ensuring that overall the conflicting costs orders operate fairly.
The only real questions in my view are, first, whether the delay on the part of Bacchus in formally commencing the assessment process for the costs order in its favour should disentitle both applicants to a stay of the costs judgment. Secondly, are there grounds for the Court to find that there would be unfairness if the respondents were able to force Mr Higgins to pay the amount of the costs judgment to them in order to avoid bankruptcy, so that the risk might arise that, when the amount of the costs payable by the respondents to Bacchus is finally determined, Bacchus will be unable to recover any balance payable to it?
As to the first of these matters, it appears that all parties have been dilatory in pursuing the assessment of the costs orders in their favour. The Court is not in a practical position to be able to determine reliably whether or not Bacchus was justified in concentrating on responding to the assessment of the costs payable to the respondents, before it formally commenced the process of the assessment of the costs payable to it. I think the applicants fairly acknowledged that, in hindsight Bacchus could have proceeded more expeditiously, which is no doubt true.
However, I am satisfied that the Court should be realistic and have some sympathy for parties to litigation who have to address what may be the enormous task of responding to an assessment process for costs where the amount involved is well into seven figures. A very great deal is at stake, and the issues that are involved in an assessment on a line by line basis may be as complex as any that must be addressed in ordinary litigation.
The respondents submitted that there is no evidence that they will not be able to repay any balance that may be found to be payable, after the completion of the assessment process in respect of the costs that they have been ordered to pay to Bacchus. That is true, in the sense that the evidence tendered by the applicants does not enable the Court to make a judgment on that issue. The respondents submit that the applicants should draw some comfort from the fact that Mr Ventura conducts a successful practice as a solicitor.
On the other hand, it is true that the respondents have not responded to the applicants' offer to pay the amount of the costs judgment to them, provided satisfactory security is offered to protect the applicants.
Having considered all of these issues I have come to the conclusion that it will be appropriate to grant a stay of the cost judgment on the following terms:
1. Upon the applicants, Matthew Gordon Higgins and Bacchus Holdings Pty Ltd, by their counsel, proffering to the Court the usual undertaking as to damages, order that execution of the judgment in proceedings in this Court 2017/316734 for the sum of $538,311.43 (the costs judgment sum) entered on 19 October 2017 be stayed until the further agreement between the applicants and the respondents, Anthony Ventura and Barescape Pty Ltd, or further order of the Court.
2. Note that order 1 is made upon the undertaking by the applicants by their counsel made to the Court that the amount of the costs judgment sum referred to in order 1 will be retained in a controlled moneys account by the applicants' solicitor as security for the amount of the costs judgment sum pending agreement between the applicants and the respondents or further order of the Court.
3. Order that the applicants must ensure that the amount held in the controlled moneys account referred to in note (2) is increased from time to time by the amount necessary to pay interest to the respondents on the amount of the costs judgment sum in accordance with s 101 of the Civil Procedure Act 2005 (NSW).
4. Note that order 1 is made on the condition that Bacchus Holdings Pty Ltd take all steps reasonably necessary for the expeditious determination by assessment of the costs order against the respondents made in its favour in proceedings in this Court 2017/316734.
5. Grant leave to the respondents to apply for a variation of, or the vacation of, the stay of judgment made in order 1 on the ground that (a) Bacchus Holdings Pty Ltd is not prosecuting the determination by assessment of the amount of costs orders payable to it reasonably expeditiously; or (b) the time taken to complete the assessment of the amount of the costs order, including by reference to any application for review or appeal, is so great that, in the circumstances then prevailing, it would be unjust to continue to prevent the respondents from enforcing the cost judgment referred to in order 1.
In respect of the costs of the notice of motion, the applicants have submitted that the Court should order the respondents to pay those costs. On the one hand, the applicants have substantially succeeded on their notice of motion. On the other hand, it was not unreasonable for the respondents to contest the granting of the relief sought. There is substance in the respondents' argument that Bacchus ought not to have delayed the commencement of the assessment process in relation to the costs order made in its favour. I have decided the matter on balance, and I take the view that the granting of the stay of judgment is in the circumstances an indulgence to the applicants.
I have decided that the fair order in respect of costs is that all parties should bear their own costs of the notice of motion, with the consequence that the Court will not make any order as to costs.
I said above that I would return to the issue of the transfer of the applicants' notice of motion from the District Court to this Court.
In a carefully reasoned judgment, Gibson DCA considered whether the District Court had jurisdiction to deal with the application for the stay of judgment that was before her in the following terms. First, she set out s 135 of the Civil Procedure Act at [15], and then said:
[16] 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.
[17] 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].
[18] 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).
[19] 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].
[20] 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.
[21] The same is the case with equitable relief (Mahommed v Unicomb at [39]-[47]).
[22] 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.
[23] How should the court deal with an application which seeks orders which are effectively outside the jurisdiction of the court?
…
[26] 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.
[27] 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.
[28] 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.
[29] 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].
[30] 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.
It therefore appears that, because the present applicants went further than to rely upon s 135 of the Civil Procedure Act, and also relied upon the "inherent jurisdiction", Gibson DCJ felt that the District Court was unable to proceed upon that basis. Also, her Honour felt that the District Court did not have jurisdiction because of the "equitable nature" of the relief claimed.
The ultimate result of this logic would be to require every application for a stay of judgment under s 135 of the Civil Procedure Act, where the cost certificate had been filed in the District Court, and accordingly a judgment issued by that Court, to be transferred into the Supreme Court to be dealt with, wherever the parties raised the Court's "inherent jurisdiction", or raised an argument based upon the availability of an "equitable set-off".
The correctness of the decision by Gibson DCJ to transfer the application to the Supreme Court is not a matter that is now before this Court, and I am not called upon to decide that question. However, I would respectfully suggest that when the issue arises again it would be preferable for the Court that decides the issue to resist any application by the parties based upon a submission that it was necessary for the Court to transfer the application to the Supreme Court, because the Court lacked jurisdiction to decide the question. In my submission, s 135 of the Civil Procedure Act was intended to give the District Court all necessary powers to stay its own judgments. It is nothing to the point whether or not the District Court also has the power described by White J (as his Honour then was) in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd as "the control a court exercises over its own proceedings", because the power in s 135 is ample. Whatever the power of control is, it does not involve the exercise of equitable jurisdiction. Misplaced reliance by parties to the application on "equitable set-off" does not require the District Court automatically to transfer applications under s 135 of the Civil Procedure Act to the Supreme Court.
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Decision last updated: 22 June 2018