Argyle Lending Pty Ltd & Ors v Lantouris (No. 2) [2021] VCC 480 (30 April 2021)

Last Updated: 4 May 2021

IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION

Revised Not Restricted Suitable for Publication

EXPEDITED LIST

Case No. CI-17-05165

ARGYLE LENDING PTY LTD (ACN 142 250 057)	First Plaintiff
And
NICOLA MAZZEO and PATRICK LENNON trading as Lennon Mazzeo Lawyers (a firm)	Second and Third Plaintiffs
V
MARIA LANTOURIS	Defendant
and
MORRY BLUMENTHAL	Third Party

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, submissions received on 16 and 20 April 2021
DATE OF RULING:	30 April 2021
CASE MAY BE CITED AS:	Argyle Lending Pty Ltd & Ors v Lantouris (No 2)
MEDIUM NEUTRAL CITATION:	[2021] VCC 480

REASONS FOR RULING
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Subject: PRACTICE AND PROCEDURE – COSTS

Catchwords: Whether indemnity costs order should be made following Calderbank offers – whether there should be certification for two counsel – disposition of reserved costs – costs payable of discontinued counterclaim

Legislation Cited: County Court Civil Procedure Rules 2018; Civil Procedure Act 2010

Cases Cited: Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; Berrigan Shire Council v Ballerini (No.2) [2006] VSCA 65; Stewart v Atco Controls Pty Ltd (in liq) (No 2) [2014] HCA 31; Withers v Chalmers Industries Pty Ltd (Costs) [2020] VSC 694; O’Brien v Greater Bendigo City Council [2016] VSC 33; Henwood v Nansor Australia Pty Ltd [2013] VSC 655; Just Group Ltd v van Dyk & Ors [2016] VSC 66; Soteriadis v Nillumbik Shire Council [2015] VSC 363

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr T J Scotter	Spoke Legal
For the Defendant	Mr S D Hay QC with	Melbourne Legal Chambers
	Mr J Nixon

HER HONOUR:

1. On 25 March 2021, I delivered reasons for judgment in this matter (“the principal reasons”). I found the plaintiffs had failed to establish their claims with the result that the plaintiffs’ claims must be dismissed. These reasons assume familiarity with the principal reasons and adopt the same terminology.
2. The parties were directed to file submissions regarding the orders to be made consequent upon the judgment, including costs. The parties filed submissions in support of the orders to be made, together with submissions in reply on 16 and 20 April 2021 respectively.
3. Four matters arise for determination, namely:

(i) Should the defendant receive part of her costs on an indemnity basis by reason of various offers made;

(ii) Should there be certification for two counsel for the defendant;

(iii) Should the defendant pay some of the plaintiffs’ costs, being the reserved costs identified in Order 4 of the proposed Minute of Order filed by the plaintiffs; and

(iv) Should the defendant pay all the plaintiffs’ costs of the counterclaim which was abandoned at trial or only part of those costs?

(1) Whether the defendant should receive any of her costs on an indemnity basis

4. Three offers were referred to in the defendant’s submissions on costs, copies of which were attached to the submissions. The defendant did not seek to rely upon a third offer which was made by letter dated 12 July 2020.^[1]
5. The offers which are relied upon by the defendant were contained in an email dated 15 March 2019 and a letter dated 30 June 2020.
6. In support of her application for indemnity costs, the defendant relies upon the well-known principles contained in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).^[2] The rejection of a Calderbank offer not later bettered by a judgment does not automatically lead to an indemnity costs order in favour of the offeror. The critical question in assessing such offers is whether the rejection of the offer was unreasonable in all the circumstances.^[3] Deciding whether the conduct is unreasonable involves matters of judgment and impression. Various matters which a court should have regard to include:

(a) the stage at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of compromise offered (for a Calderbank offer to be effective it must constitute a real element of compromise of the claim. An offer made simply to trigger costs sanctions would usually not be effective.);

(d) the offeree’s prospects of success, assessed at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.^[4]

7. The first offer sent by the defendant’s solicitor was short in compass. The author of the email expressed his view that the plaintiff’s claim was likely to fail and that Lennon and his firm, Lennon Mazzeo Lawyers, who were not yet parties were also exposed. The email did not set out any basis for that view although there was reference made to an earlier telephone discussion with Lennon in respect of settling the matter. Purely for commercial reasons, the defendant was prepared to offer $25,000 in full and final settlement of all claims which it (Argyle) or Lennon Mazzeo Lawyers may have against her. It was also proposed payment would be made by five equal monthly instalments commencing 30 days after execution of a Deed of Settlement.
8. The plaintiffs described the first offer as token and derisory. The offer was for $25,000 “all in” which would also include the first plaintiff’s costs of the proceeding which had been on foot since 2017. The claim by the first plaintiff was for $523,885 plus interest at 20 per cent from 20 October 2017. Additionally, the payment was to be made over a period of five months. The offer when properly analysed was a demand to the plaintiff to capitulate and did not represent a genuine compromise and therefore, failed the reasonableness test. The plaintiffs noted that the second and third plaintiffs were not parties at the time the offer was made. Another difficulty with the offer was that it did not foreshadow an application for indemnity costs in the event of rejection. Additionally, it could not be said that Argyle’s prospects of success were so hopeless that the first offer was a reasonable one which it ought to have accepted.
9. In response, the defendant relies on Stewart v Atco Controls Pty Ltd (in liq) (No 2)^[5] and in particular, paragraph [5] of that decision. In that case, the High Court noted that the appellant was willing to not pursue a costs order made in its favour in the Federal Court, which it described as being an accommodation in favour of the respondent, when considering the terms of a Calderbank offer. The defendant submitted that the offer made on 15 March 2019 contained accommodations in favour of the plaintiffs. Had they accepted the offer; the plaintiffs would have an entitlement to recover $25,000 as well as no adverse costs consequence in favour of the defendant. The fact that the offer was made to Lennon Mazzeo Lawyers before they were joined as a party was reasonable and sensible, given that an offer of compromise could not be made at that time, the offer made in this format was the defendant’s only option.
10. In my view, the rejection of the first offer of $25,000 “all in” was not unreasonable so as to found a basis for awarding indemnity costs in favour of the defendant. Although the plaintiffs ultimately failed, it could not be said that their claim was so hopeless as to the prospects of success, that they ought to have accepted the first offer. The position here is somewhat different to the Stewart case as there was no costs order in place when the offer was made. Whether a costs order would be made against the plaintiffs depended upon the likelihood of the defendant’s defence succeeding at trial, which was not a foregone conclusion. The quantum of the offer was very low and would probably have been insufficient to cover Argyle’s costs incurred as at the date of the offer. I accept the plaintiffs’ submission that the offer which sought to include the second and third plaintiffs who were not yet parties, is a further factor why the rejection of such an offer was not unreasonable. Further, the offer did not foreshadow any application being made for indemnity costs if it was rejected. For all those reasons, I am not persuaded it was unreasonable for the plaintiffs not to have accepted the first offer, such that an order for indemnity costs should now be made in favour of the defendant.
11. The second offer was contained in a letter from the defendant’s solicitors dated 30 June 2020, some two weeks before trial. It was pointed out that the claims made by the plaintiffs had significant difficulties and were bound to fail. It was said that should Argyle’s claim fail, it was the defendant’s solicitors’ view that the security documents relied upon by Argyle will be deemed to be void and/or will be set aside. If that were to occur, then the appointment of the receiver by Argyle pursuant to those documents would be invalidated and the claim by the receiver in a related proceeding referred to as the “Receiver proceeding” would also fail.
12. The proposal put was to settle both Argyle and the Receiver proceeding. The defendant offered to pay the plaintiffs in the Argyle proceeding the sum of $200,000 in full and final settlement of the Argyle proceeding. As a condition of the settlement, the parties in the Argyle proceeding together with the Receiver proceeding would consent to orders that the proceeding be dismissed with no orders as to costs. It was also stated in paragraph 4 of the letter that the plaintiffs in the Argyle proceeding were to remove at their own cost all caveats lodged over the properties owned by the defendant and all other securities lodged or held by the plaintiffs, including any PPSR registrations. The caveats and the securities together with the properties referred to in the letter were not identified.
13. It was also a term of the offer that Argyle would terminate the appointment of the Receiver over 22 Park Street Pty Ltd. The plaintiffs in the Argyle proceeding were also asked to consent to the release forthwith of the surplus funds from the sale of a property in Alphington which were held in the defendant’s solicitors’ trust account. Finally, the parties were to execute mutual releases in both the Argyle and Receiver proceedings. The offer was open for acceptance until 4:00pm on 7 July 2020. The letter did foreshadow an application for indemnity costs being made relying upon the well-known principles associated with Calderbank letters.
14. The plaintiffs contend this offer is not effective because it was not an offer to compromise just this proceeding but required many other matters to be resolved. It included an offer to settle both this proceeding and a separate proceeding with a different party, namely, the receiver of 22 Park Street Pty Ltd in proceeding No. CI‑19‑02345. The offer also referred to the removal of various caveats and securities and the termination of the receiver which was not relief sought in this proceeding nor was the consent to release certain funds from trust. A release was sought from the receiver which again was not relief claimed in this proceeding. The plaintiff argues that as none of these matters were sought or obtainable in this proceeding, the offer cannot be measured against the result at trial.
15. Further, the offer of $200,000 “all in” was at best modest given the quantum of the claim made in the proceeding. The defendant in her submissions estimated the quantum of the claim at around one million dollars. The plaintiffs contended the same factors for the first offer applied regarding the prospects of success. Additionally, by then the claim had been expanded to include reliance upon a guarantee executed in favour of the second and third plaintiffs, which could not be remotely described as a hopeless claim.
16. In my view, there is some force in the submissions put by the plaintiffs. The second offer made did cover matters which were well outside the scope of the proceeding on foot. This included the separate receiver proceeding, the release of trust funds and removal of caveats and securities over various properties. There was a lack of clarity as well given these securities and properties were not specified. The offer was also conditional upon obtaining the consent of a non-party to the Argyle proceeding, namely, the receiver of 22 Park Street Pty Ltd.
17. I accept that the plaintiffs’ prospects of success at the time the second offer was made could not be regarded as hopeless. As the principal reasons demonstrate, there were quite a few complicated legal arguments, the result of which could not be foreseen as being obvious. The offer was only open for one week which was a relatively short period of time. Again, coming back to the ultimate question, was the conduct of the plaintiffs in rejecting the offer so unreasonable as to justify an award of indemnity costs, I consider the answer to that question to be “no”. I find it was not unreasonable of the plaintiffs to have rejected the second offer made by the defendant.

(2) Should there be certification for two counsel for the defendant?

18. The defendant seeks an order that the Court certify for two counsel for the defendant. This is opposed by the plaintiff.
19. The defendant argues it is within the discretion of the Court to make an order certifying for two counsel. Reference was made to the relevant principles set out by Richards J in Withers v Chalmers Industries Pty Ltd (Costs).^[6] Her Honour referred to the relevant principles summarised by J Forrest J in O’Brien v Greater Bendigo City Council.^[7] The principles set out in that decision are as follows:

“(a) The Court possesses an overriding discretion in relation to the fixing of an award of costs, including allowances for counsel’s fees.

(b) The Costs Court is empowered by the Supreme Court (General Civil Procedure) Rules 2015 (the ‘Rules’) to fix counsel’s fees for attending a hearing or trial as ‘subject to the provisions of any applicable scale’.

(c) There is no uniform practice in the Court in relation to certification of counsel’s fees. It is open to a judge to refer questions of this nature to the Costs Court in these circumstances. Alternatively, a judge may consider it appropriate to resolve the issue at or around the time of trial.

(d) Some judges certify for two counsel; some certify for two counsel and fix the brief fee. Others prefer to let the Costs Court sort the issue out. It is entirely up to the judge.

(e) The Court’s discretion in fixing a fee is to be exercised subject to a number of factors, such as: the complexity of the matter, the extent of the legal practitioner’s involvement in the matter, and any specialised knowledge or skills required.

(f) The Supreme Court scale of costs 2015 – 2016 makes provision for counsel’s fee for certain types of work. Whilst the scale cannot fetter a judge’s discretion in the fixing of costs, it is regarded as a cogent guide to the appropriate allowance.”

20. Competing submissions were put forward by both parties regarding the complexity or otherwise of the proceeding. In paragraph 28 of the defendant’s submission, it is noted that certification of specific sums for daily fees for counsel was not sought as that question is simply determined by the Costs Court.
21. The taxation of costs by officers of the Costs Court ensures that costs are evaluated on a logical, fair and reasonable basis by those who are experienced and familiar with the assessment of costs.^[8] In my view, the question of whether two counsel were necessary to represent the defendant should be left to the Costs Court as it is best placed to determine this issue given its expertise in such matters. As noted by the defendant, the question of the rate of counsels’ fees will have to be determined by the Costs Court in any event.

(3) The defendant pay the plaintiffs’ costs of the four steps referred to in Order 4 of the plaintiffs’ proposed Minute of Order

22. The parties agreed to jointly construct a table that put each of the parties’ position in respect of the four items of reserved costs.
23. The first of the four steps concern an application before Judge Saccardo on 27 November 2018. The plaintiffs seek their costs thrown away by reason of an adjournment because the defendant’s affidavit supporting her application to set aside judgment was inadequate. The defendant’s position is that the plaintiff had been tardy in complying with a notice to produce documents filed on 21 November 2018. The defendant sought and obtained an order requiring the plaintiff to provide her with the documents in question and the application was adjourned part heard so that the documents could be subsequently considered. The default judgment was later set aside as irregularly obtained by Judge Saccardo on 12 February 2019. In the circumstances, I am not persuaded the plaintiffs should receive their costs thrown away of the hearing on 27 November 2018.
24. A directions hearing was listed before Judicial Registrar Tran (as her Honour then was) on 9 April 2019. The costs were reserved. The directions hearing was sought by the plaintiffs to obtain various procedural orders. The plaintiffs seek their costs because of the refusal by the defendant to consent to the late filing of the plaintiffs’ amended statement of claim and to consent to various timetabling orders. The defendant’s stance is a Minute of Consent Orders was filed and orders were made on the papers on 9 April 2019, including an order giving the plaintiffs leave to file an amended statement of claim and adjusting the interlocutory timetable. It was said that the orders were made in part because of the plaintiffs’ failure to comply with an order made on 12 February 2019 in respect of filing and serving an amended statement of claim. As best as I can see, the hearing on 9 April 2019 did include orders regarding interlocutory timetabling and given they were made by consent, I am not persuaded that costs should be ordered in favour of the plaintiffs.
25. The third order was made on 15 May 2019 in chambers on the papers and by consent. The plaintiffs argue the minute proposed by the defendant initially required the plaintiff to make discovery on specific but overly broad categories which the defendant subsequently resiled from and consented to the orders that were made. The defendant’s position is that the orders assisted both parties as neither party complied with prior orders for discovery and mediation and neither were ready for trial given the second and third plaintiffs had been joined on 30 October 2019 and the defendant subsequently filed and served a third party notice. Based on the stated positions put before me, I cannot be satisfied that the costs of this application which was made on the papers and by consent should be awarded in the plaintiffs’ favour.
26. The last matter concerned orders made by Judicial Registrar Burchell on 28 February 2020. The plaintiffs say the defendant applied to consolidate this proceeding with the proceeding concerning the receiver’s action. They say the defendant resiled from this application ultimately and agreed to consent orders which went no further than resetting or confirming deadlines for remaining interlocutory steps. The defendant’s stance is that the orders were made in chambers and by consent which assisted all parties, particularly the order extending the time for the parties to make discovery. Again, based on the matters set out in the table prepared by the parties, I have not been persuaded there should be an order for costs in favour of the plaintiffs as is sought. As counsel for the plaintiffs noted, the table contained many assertions but the Court was not provided with the material relied upon. It was said it would be open to the Court to seek to have the parties put together a bundle of relevant documents. In my view, if the plaintiffs wished to pursue this matter in greater detail, it was incumbent upon them to provide any further material upon which they wished to rely rather than leave it up to the Court to determine whether or not any other documents were required. The matter was put before the Court based on the competing contentions set out in the table and this is the document upon which the Court has relied. The plaintiffs submitted in the alternative that the Court could specify there be no orders as to costs for the four steps outlined.
27. In my view, the onus was upon the plaintiffs to satisfy the Court that the costs of the four steps should be awarded in their favour. The plaintiffs have not provided sufficient material or proof that these reserved costs should be paid to them. In the circumstances, I am not prepared to depart from the usual order as set out in Rule 63A.22, that reserved costs are the parties’ costs in the proceeding unless the Court orders otherwise. I was not persuaded by any of the matters addressed in the table that I should order otherwise.

(4) Should the defendant pay all the costs of the plaintiffs’ counterclaim or a portion?

28. The Court was informed on the first day of the trial that the defendant no longer pursued her counterclaim.
29. Rule 63A.15 of the County Court Civil Procedure Rules provides:

“Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.”

30. Under Rule 63A.15 the Court retains a discretion by reason of the phrase in the rule that “unless the Court otherwise orders”. The rule does not give rise to the presumption that costs will be ordered against the discontinuing party. Instead it creates a starting position and the burden is on the party who seeks to persuade the Court that a different order should be made to prove the relevant facts. This includes all the relevant circumstances and not just the fact of discontinuance. Factors will include the reasonableness of the conduct of the party; for example, whether the party acted reasonably in commencing the proceeding and whether the defendant acted reasonably in defending it. The reasons for discontinuance will also bear upon the exercise of the discretion as to costs.^[9]
31. Accordingly, the starting position is that having discontinued her counterclaim, the plaintiffs should receive their costs unless the Court otherwise orders. The burden is then placed upon the defendant to persuade the Court that a different order ought to be made. It should also be remembered that there has potentially been a saving of costs by reason of the withdrawal of the counterclaim which benefits the plaintiffs as well. Under s24 of the Civil Procedure Act 2010, parties are required to use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the proceeding are reasonable and proportionate to the complexity or importance of the issues of dispute and the amount in dispute. The defendant did achieve practical success in the proceeding which is a relevant factor to take into account in considering the application of the rule.^[10]
32. The plaintiffs unsurprisingly seek their costs of the counterclaim. The defendant’s position is that she should only have to bear two-thirds of the plaintiffs’ costs of the counterclaim. The defendant withdrew the unconscionable conduct counterclaim at the commencement of the hearing but argues it was reasonable for the defendant to bring the other claim in the proceeding, namely a claim for the removal of the wrongfully registered mortgage from the title to the Northcote property. It is submitted that numerous requests for the removal of the mortgage were either ignored or refused and it was only after being served with the counterclaim that the mortgage was in fact removed.
33. Paragraphs 42 to 46 of the counterclaim dated 7 February 2020 set out the defendant’s claim to have a mortgage registered over 17 Green Street, Northcote removed. It is alleged the mortgage was wrongly registered relying on a mortgage signed by 22 Park Street Pty Ltd because the defendant personally owned the Northcote property and not her company. The plaintiffs’ defence to counterclaim pleaded that on 12 March 2020, the first plaintiff caused the relevant mortgage to be discharged. Mr Lennon did not dispute in his evidence that the mortgage over the Northcote property had been incorrectly lodged. The plaintiffs argue there was little cost devoted to this issue and that no extra court fees would have been incurred. The remainder of the counterclaim was, inter alia, a wide-ranging allegation of unconscionable conduct contrary to s20 and s21 of the ACL. It was said the costs of the mortgage issue are de minimis and the defendant ought to pay all the costs of the counterclaim. Alternatively, the defendant should pay all the costs of the counterclaim save for the matters referred to in paragraphs 42 to 46 of the counterclaim.
34. In my view, the defendant has enjoyed some success on the counterclaim even accepting it was withdrawn on the first day of trial because the filing of the counterclaim resulted in the first plaintiff removing the mortgage over the Northcote property which had been incorrectly lodged. I consider the defendant ought to receive her costs incurred in respect of this aspect of the counterclaim. There were four types of relief sought in the counterclaim, of which this issue represented one. In all the circumstances, I consider a fair outcome is rather than allowing costs associated with the prosecution of the matters alleged in paragraphs 42 to 46 of the counterclaim, which may be difficult and protracted to assess, the defendant should be ordered to pay 75 per cent of the plaintiffs’ costs of the counterclaim.

Conclusion

35. Having considered the various submissions that have been put, I will make the following orders:

(1) The plaintiffs’ claims are dismissed.

(2) The plaintiffs pay the defendant’s costs of and incidental to the plaintiffs’ claims, including any reserved costs, to be taxed on the standard basis in default of agreement.

(3) The counterclaim is dismissed.

(4) The defendant pay 75 per cent of the plaintiffs’ costs of and incidental to the defendant’s counterclaim, including any reserved costs, to be taxed on the standard basis in default of agreement.

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Certificate

I certify that these 13 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 30 April 2021.

Dated: 30 April 2021
Associate to Her Honour Judge A Ryan

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^[1] See paragraph 17 of the defendant’s first submissions.

^[2] [2005] VSCA 298.

^[3] per Nettle JA in Berrigan Shire Council v Ballerini (No.2) [2006] VSCA 65 at [33].

^[4] Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298 at [25].

^[5] [2014] HCA 31.

^[6] [2020] VSC 694 at [8] – [13].

^[7] [2016] VSC 33 at [13].

^[8] Henwood v Nansor Australia Pty Ltd [2013] VSC 655.

^[9] See Sloss J in Just Group Ltd v van Dyk & Ors [2016] VSC 66 at [25] – [28].

^[10] Soteriadis v Nillumbik Shire Council [2015] VSC 363 at 12(g).