Zepinic v Eventus Lawyers Pty Ltd t/as SLF Lawyers

Supreme Court of NSW|2023-10-06|Before: Rothman J, Giles J

Solicitors: Self-Represented (Plaintiff) Moray & Agnew (Defendant) File Number(s): 2021/82526

JUDGMENT

HIS HONOUR: On 23 June 2023 this Court issued judgment in favour of Eventus Lawyers Pty Ltd trading as SLF Lawyers ("SLF"), the defendant in these proceedings (the "June Judgment"). [1] The orders entered by the Court included Order 4, namely that the plaintiff, Mr Zepinic, pay SLF's costs of and incidental to the proceedings, as well as Order 5, granting liberty to the parties to make an application for a different or special costs order on the papers, if so advised.
SLF has now applied to the Court seeking a further order that its costs be paid by the plaintiff on an indemnity basis, for some or all of the proceedings. The plaintiff resists the making of such an order. For the reasons that follow, I am satisfied that an indemnity costs order is warranted for some of the proceedings.

Facts

It is necessary to reiterate the facts of the case, which are set out more fully in the June Judgment. To put it simply, the plaintiff claimed that SLF had been negligent in the provision of legal services to him, and that it had acted in breach of several retainers for the provision of legal services that were entered into in 2017 and 2018.
The alleged breaches included a failure to represent the plaintiff in proceedings which sought to classify him as a vexatious litigant, a failure to institute fresh proceedings against several third parties in relation to past property proceedings, and a failure to institute defamation proceedings - or facilitate the plaintiff seeking alternative representation to institute defamation proceedings - prior to the expiry of relevant limitation periods. The plaintiff also sought to set aside a judgment that had been entered in the Local Court in favour of SLF which required the plaintiff to pay outstanding legal fees that he owed to SLF.

Defendant's Submissions

SLF now seeks further costs orders to the effect that the plaintiff pay its costs: 1. on an indemnity basis for the entire proceedings as they were commenced and maintained in wilful disregard of facts known to the plaintiff and were groundless; or 2. in the alternative, on an indemnity basis as and from 27 May 2021 on the basis that the plaintiff unreasonably refused to accept a Calderbank offer; and 3. on an indemnity basis in respect of the plaintiff's Notice of Motion filed 28 September 2022 as it was an abuse of process and vexatious.
In support of its application, SLF submits that the proceedings were commenced by the plaintiff when he knew or ought to have known that the allegations had no proper basis. SLF says that this is exemplified in the plaintiff's criticism of SLF for failing to appear at the hearing of the vexatious proceedings hearing, when the plaintiff later gave evidence that he himself was not even aware of the date of the hearing, and the plaintiff's claim that SLF failed to institute proceedings against the trustee appointed to sell his property when SLF had in fact prepared and filed an application for an independent referee to review the trustee's conduct.
SLF also relies on a Calderbank offer which it sent to the plaintiff on 26 May 2021. The offer was to the effect that SLF would consent to the proceedings being dismissed with no order as to costs, and that provided the parties enter into appropriate releases, SLF would agree not to enforce the Local Court judgment for unpaid fees (being some $19,000).
The plaintiff responded to that offer on 27 May 2021. He did not accept the offer and categorised its terms as "bullying". SLF says that it was unreasonable for the plaintiff not to accept the offer. SLF submits that the offer was made after the pleadings had closed, such that the plaintiff ought to have been well-apprised of the difficulties with his claim.
The offer was open for 14 days, which SLF says was more than sufficient, particularly as the plaintiff was able to respond the next business day. SLF also submits that the offer was clear on its face, was made at a time when SLF's prospects were strong, and foreshadowed an application for indemnity costs in the event that the offer was not accepted.
Finally, SLF submits that the Notice of Motion filed by the plaintiff (which was also disposed of in the June Judgment) was groundless, vexatious, and an abuse of process, such that SLF's costs of opposing it ought to be granted on an indemnity basis.

Plaintiff's Submissions

In reply to SLF's application for special costs orders, the plaintiff filed a three-page document entitled "Plaintiff's response on defendant's submissions on costs", together with two annexed documents, being a copy of an email sent to the plaintiff by a solicitor at the International Criminal Tribunal for the Former Yugoslavia, and a section of an article published by the Brisbane Times in 2008 about the plaintiff.
Unfortunately, the submissions filed by the plaintiff do not respond in any meaningful way to SLF's submissions on costs. Instead, the plaintiff has used his submissions as a vehicle to re-agitate his allegations against SLF with which I have already dealt in the substantive judgment.
Taken at their highest, the submissions filed by the plaintiff would seem to intimate that some time in late 2019, Ms Angela Smith (a partner of SLF) had admitted to the plaintiff that SLF had breached its duty of care or legal obligations towards him. In light of this, the plaintiff submits that this Court has no power to "… repeal or disobey statutory requirements related to the solicitor's undertaken obligations …". The plaintiff also makes submissions going to the retainers he entered into with SLF, the making of vexatious litigant orders against him and his family, and the conduct by SLF of his potential claim for defamation.
It is sufficient presently to emphasise that a costs dispute arising from a judgment of the Court is an inappropriate occasion to argue the correctness of that judgment. The Court, as presently constituted, is not entertaining an appeal from the June Judgment.

Defendant's Submissions in Reply

In response to the submissions filed by the plaintiff, SLF submitted that the Court should not take the plaintiff's submissions into account as they are not responsive to the defendant's submissions on costs and inappropriately re-agitate substantive matters that were dealt with in the June Judgment. SLF submitted that it is impermissible to advance submissions which go beyond the scope of the leave which was granted. [2] As such, SLF urged the Court to disregard the plaintiff's submissions in their totality.

Applicable Law

The Court's power to make orders as to costs arises at least in part from the Civil Procedure Act 2005 (NSW). Section 98 of the Civil Procedure Act grants the Court a broad discretion to determine by whom and to what extent costs are to be paid.
The prima facie position is that costs will follow the event. [3] Where proceedings are dismissed, the initiating party may generally expect to pay the costs of the defending party to the extent that the costs relate to the matters that have been dismissed. [4]
The Court's power to order indemnity costs may be enlivened when there is a sufficient or unusual feature present which warrants the making of such an order. [5] This may include where a party commences or maintains proceedings which are manifestly groundless or destined to fail. [6] In this way, the power to order indemnity costs is an important tool available to the Court to discourage litigation when there are no reasonable prospects of success. [7]
In Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009, Ward P said at [45] that: "Circumstances in which indemnity costs may be awarded include: where a party has made allegations that ought never to have been made; where an action has been commenced or continued where the plaintiff, properly advised, should have known the applicant had no chance of success; and where proceedings have been commenced in wilful disregard of known facts or clearly established law. An award of indemnity costs serves the purpose of compensating a party fully for costs incurred when the Court takes the view that it was unreasonable for the party against whom the order was made to have subjected the innocent party to the expenditure of the case."
The Court may also order indemnity costs in circumstances where a party chose not to accept a Calderbank offer, the terms of which would have been more favourable to the party than the ultimate outcome of the proceedings. While the rejection or non-acceptance of such an offer does not create a presumption of an indemnity costs order in favour of the offeror, it is a relevant consideration in the exercise of the costs discretion. [8]
Nevertheless, it is important to emphasise the comments of Ward P, above, to the effect that an order for costs is compensatory, not punitive. [9]

Costs of the Proceedings

The June Judgment had the effect that the proceedings commenced by the plaintiff were dismissed and judgment was entered in favour of SLF. Accordingly, on the basis of the principles I have outlined, SLF has a prima facie entitlement to its costs of the proceedings on an ordinary basis, for which reason I made an order to that effect. The plaintiff has not put forward any reason that SLF should not be entitled to its costs of the proceedings.

No Reasonable Prospects

SLF's submits that it ought to be entitled to the entirety of its costs of the proceedings on an indemnity basis because the claims made by the plaintiff against it were groundless and destined to fail. Similarly, SLF contends that the Notice of Motion filed by the plaintiff which was also disposed of in the June Judgment was an abuse of process and vexatious, and the plaintiff should meet SLF's costs of responding to that Motion on an indemnity basis.
As is made clear in the June Judgment, the plaintiff's allegations against SLF were largely contingent on his evidence being accepted. The plaintiff's evidence was, for the most part, inconsistent and contradicted by contemporaneous records. I did not find his evidence to be convincing.
SLF contends that the plaintiff must have known that his case was hopeless, as the findings of fact which led to judgment being entered for SLF were all matters that were within the plaintiff's knowledge, such as whether he had instructed SLF to commence defamation proceedings, or whether he informed SLF of the date of the hearing of the vexatious orders application.
It is not unusual for much to turn on findings of fact. While the plaintiff was no doubt taking a risk that the Court would not accept his evidence, I am not convinced that this factor alone would be sufficient or unusual so as to warrant an indemnity costs order. The Court has not found that the plaintiff did not genuinely believe the facts alleged by him, even though there were many inconsistencies in his evidence. It is not unusual for persons who consider they have been wronged to recall wrongly the events that led to that wrong.
In the June Judgment, I highlighted that the plaintiff seemed to interpret his evidence through the prism of his perceived injustices. Unfortunately, such a method of perceiving and presenting events renders a person liable to disregard facts and circumstances which do not support their chosen narrative. This was true of the plaintiff. As a consequence, his decision to maintain the proceedings, especially once presented with the contemporaneous records which contradicted his evidence, put SLF to the cost of defending proceedings which were doomed to fail.
In the circumstances, I am not wholly satisfied that the mere commencement of the proceedings by the plaintiff was unreasonable, at least to the extent that indemnity costs should flow from that date. The plaintiff was, as I stated in the June Judgment, perhaps understandably aggrieved by events that had taken place. Such aggravation may give rise to a selective recollection of key events. I am however satisfied that the plaintiff's decision to maintain the proceedings, after receiving SLF's detailed and corroborated lay evidence and the supporting independent documents and material which contradicted his recollection, was unreasonable and should give rise to indemnity costs in favour of SLF.
The Affidavit evidence relied upon by SLF was an Affidavit of Margaret Pavey dated 13 April 2022 and an Affidavit of Angela Smith dated 19 April 2022. Although I do not have available to me the precise dates that these Affidavits were served upon the plaintiff, an examination of the interlocutory orders made in these proceedings by the Common Law Registrar would indicate that service took place in either late April or early May 2022. Certainly, by 30 May 2022 the plaintiff ought to have been in a position to have read and understood the Affidavits and the contemporaneous records exhibited to them.
It has been stated that an order for indemnity costs in cases such as these requires conduct by a party which is plainly unreasonable or would amount to a "relevant delinquency". [10] I am satisfied that this test is satisfied in this case, given that as at 30 May 2022 or thereabouts the plaintiff knew, or ought to have known, that the factual bases for his claims were inaccurate. As such, I consider that SLF is entitled to its costs of the proceedings on an indemnity basis from 30 May 2022.
I am also satisfied that the Notice of Motion which was filed by the plaintiff was an abuse of process. As set out in the June Judgment, the Motion was largely an attempt to re-litigate issues that the plaintiff is barred from pursuing, to seek further primary relief from the Court, or to compel the production of documents for an ulterior and improper purpose. The Motion was dismissed in its entirety. I consider that an order of indemnity costs of the Motion is warranted as it was unreasonable for SLF to be put to the expense of responding to the Motion in the circumstances.

SLF's Calderbank Offer

I now deal with the costs implications of the Calderbank offer made by SLF on 27 May 2021. For the following reasons I am satisfied that the plaintiff's non-acceptance of the Calderbank offer was unreasonable such that an indemnity costs order from that date should flow.
The Calderbank offer was obviously compliant with the guiding principles for offers of that nature. The letter was marked "without prejudice save as to costs", was clear and precise in its terms, had a specified period of acceptance, and stated that it was made in accordance with the Calderbank principles. The letter also foreshadowed an application for special costs in the event that the offer was not accepted. The offer was only open for acceptance for a period of 14 days, but I do not find that to be overly brief when the plaintiff could and did respond in that timeframe.
SLF's offer was that it would forego its costs in these proceedings, as well as the enforcement of the costs judgment that it had obtained against the plaintiff in the Local Court, if the plaintiff agreed to the proceedings being dismissed and to enter into appropriate releases. This was a genuine attempt at compromise on SLF's part. Although the terms of the offer were brief and did not particularise why it was said that the offer was a reasonable one, at the time it was sent the pleadings had closed and the plaintiff ought to have been aware of what SLF saw as the deficiencies in his claim.
In light of these findings, it falls to me to determine if the terms of the offer were more favourable to the plaintiff than his eventual outcome in the proceedings. I have stated that SLF was prepared to compromise on the costs of these proceedings as well the costs judgment in its favour that had been granted by the Local Court. In failing to accept the offer the plaintiff now finds himself facing not only the payment of the Local Court costs judgment, but also the costs of these proceedings. SLF's offer was decidedly more favourable to the plaintiff than his current situation and, as stated, notwithstanding that it required the plaintiff to forego his substantive claim, it was a genuine compromise in which the defendant offered to forego costs already awarded and other costs already incurred.
A term of the offer was that the plaintiff would release SLF and its associated parties in relation to the matters subject of the proceeding, the matters subject of the proceedings listed in the order made by Pembroke J on 25 May 2017, and any matter in connection with any and all retainers between the plaintiff and SLF.
This is a matter that requires consideration in evaluating the reasonableness of refusing the offer. This proposed release may go further than the outcome which was achievable by SLF in the proceedings.
A similar issue was discussed by Peek J (speaking for the Court) in Rapuano (t/as RAPS Electrical) v Karydis-Frisan [2013] SASCFC 93, whose helpful summary of pertinent case law, which follows, I respectfully adopt: "[46] A similar issue arose in New South Wales v Dueeasy Pty Ltd. The applicant, the Minister for Public Works NSW, had retained the respondent, Dueeasy Pty Ltd, to construct portion of a sewerage scheme. Disputes arose and were referred to arbitration in accordance with the contract. On 26 November 1991, the arbitrator published an interim award whereby he found the applicant liable to pay $144,640.26 to the respondent and ordered that the applicant pay the respondent's costs and the costs of the arbitration. [47] The applicant subsequently appealed against the award of costs. The dispute centred on a putative Calderbank offer from the applicant to the respondent dated 23 August 1991 which was rejected by the respondent on 27 August 1991. It read in part: 'The [applicant] is prepared to pay your company $190,000 in full settlement of all claims under or arising out of the Contract, including but not limited to those raised by your company in the arbitration.' [48] The applicant submitted that the respondent had not bettered the offer and should therefore be deprived of its costs. The arbitrator accepted the respondent's submission that no regard should be had to that offer since it did not purport to be in settlement solely of the matters in the arbitration. In upholding that decision of the arbitrator, Giles J stated: '… There has been no evidence presented to the effect that no other claims are contemplated by the Claimant outside those that were the subject of the arbitration.' The words contained in the letter 'All claims under or arising out of the Contract' together with "Not limited to those raised by your Company in the Arbitration" are singularly wide and would encompass not only direct claims by the Claimant for work done under the Contract, but any other claims that may be contemplated by the Contractor as related to or incidental to the making of the Contract or the execution of the works thereunder. It is apparent that the Respondent's offer made on 23rd August was not in settlement solely of the matters in Arbitration. It is accordingly not a valid offer of compromise in respect of these proceedings. (Emphasis added.) [49] The judgment of Giles J was subsequently approved by Wallwork J in Australian Medical Innovations v Go Medical Industries Pty Ltd. In that case, several letters passed between the parties offering to settle on the basis that the parties agree to waive any claim that they may have against each other arising out of the agreement of 4 May 1993 "or howsoever arising". Wallwork J referred to the above passage from the judgment of Giles J and stated: 'The words "or howsoever arising" refer to matters outside the scope of the action itself which action was only concerned with the agreement of 4 May 1993 and the counterclaim allegedly arising from it. It could not strictly be described as a true Calderbank letter …' … 'It is my opinion that the letters offering to settle this matter which passed from the defendant to the plaintiff cannot be regarded as true Calderbank letters due to the fact that they covered matters which were not involved in the action instituted by the plaintiff against the defendant being CIV 2219 of 1994, the reasons for judgment which were delivered by me on 31 October 1995.'"
While I accept the foregoing authority as correct, I consider that the Calderbank letter prepared by SLF must be viewed in the subjective circumstances of these proceedings. In New South Wales v Dueeasy, [11] the Court found that there was at least a likelihood of other claims existing beyond the scope of the dispute which was being adjudicated. Giles J held that the wording of the Calderbank letter itself gave rise to an implication that the offering party had in mind the possibility of other claims, which his Honour found was why it framed the letter in the clear and broad terms which it did. [12]
In these proceedings, significant evidence was led by each party about their dealings with the other over the course of several years. There was no suggestion raised by either party that any other retainers (whether express or implied) had been entered into, or that other work had been performed by SLF for the plaintiff at all, except for the work that was the subject of these proceedings.
Furthermore, it seems to me that the terms of the Calderbank offer do not give rise to an inference that SLF contemplated that there would be further claims made against it by the plaintiff in respect of other retainers or subject matters. It must be borne in mind that the plaintiff has been found by this Court and the Court of Appeal to be a vexatious litigant. His history before the Courts, which has been addressed in the June Judgment, would cause any reasonable defendant such as SLF to be concerned about the possibility of the plaintiff making numerous further claims arising from the same retainers or subject matters.
In my view, the only inference that may be drawn from the terms of SLF's Calderbank offer is that SLF sought to reduce the chances of such re-litigation by arming itself with a more broadly-worded release of liability. Further, there is a real issue as to whether, given the breadth of the plaintiff's claim and the evidence adduced, the plaintiff is now free to commence other proceedings against SLF because such a claim, if there were one, should have been commenced and agitated with this claim. [13]
Overall, I do not think that the evidence establishes that any additional benefit which SLF may have obtained from the acceptance of the Calderbank offer (in the form of a more expansive release of liability) was real and not illusory. In coming to that conclusion, I am comforted by the fact that the existence of any such benefit was not put forward or argued by the plaintiff.
Finally, the last issue which I must consider is whether SLF has proved that it was unreasonable for the plaintiff to reject the Calderbank offer. The offer was made on 27 May 2021. As I have stated, at that time the pleadings had closed but evidence had not been exchanged. While I have concluded at [28] that the plaintiff's continuation of the proceedings was not unreasonable until SLF's evidence had been served, that finding was in the context of an indemnity costs order on the basis of wilful disregard only, which is a separate exercise.
I am satisfied that as at 27 May 2021, having been served with SLF's detailed Defence, the plaintiff ought to have had sufficient understanding of the case to be made by SLF. He also ought to have appreciated that SLF's offer was a genuine offer of compromise, given that it was prepared to forego the enforcement of the Local Court costs judgment, which was an outcome agitated for by the plaintiff. The rules relating to Offers of Compromise and the principles underpinning Calderbank often are assessed on a "commercial" basis to encourage resolution and discourage unnecessary or unreasonable litigation.
In all of the circumstances I am satisfied that the plaintiff's non-acceptance of the Calderbank offer was unreasonable. I am also satisfied that an order of indemnity costs should follow.

Orders

Accordingly, the Court makes the following orders: 1. Vary Order 4 made on 23 June 2023 as follows: The plaintiff shall pay the defendant's costs of and incidental to the proceedings on a party-party basis until 26 May 2021 and on an indemnity basis from 27 May 2021. 1. The plaintiff shall pay the defendant's costs of the plaintiff's Motion filed on 28 September 2022 on an indemnity basis.

Endnotes

Zepinic v Eventus Lawyers Pty Ltd t/as SLF Lawyers (No 2) [2023] NSWSC 699.
Wollongong City Council v Papadopoulos [2019] NSWCA 178 at [49].
Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
Uniform Civil Procedure Rules 2005 (NSW), r 42.20.
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234; [1993] FCA 801.
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4].
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 257; [1993] FCA 801.
Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [8].
Ohn v Walton (1995) 36 NSWLR 77 at 79.
Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009 at [44].
New South Wales v Dueeasy (Supreme Court (NSW), Giles J, 28 February 1992, unrep)
Ibid at 6.
Chamberlain v Deputy Commission of Taxation (1988) 164 CLR 502; [1988] HCA 21; Port of Melbourne v Anshun (1981) 147 CLR 589; [1981] HCA 45. 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: 09 October 2023

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