Morris v Riverwild Management Pty Ltd & Ors [2009] VSC 439 (2 October 2009)


MICHAEL MORRIS	Plaintiff

and

RIVERWILD MANAGEMENT PTY LTD (ACN 070 089 860) and others (according to the schedule attached)	Defendants

PRACTICE & PROCEDURE – Costs – Rule against double recovery – How to apportion costs between multiple parties.

ESTOPPEL – Whether Plaintiff estopped from making claim – Whether the question of apportionment was determined in previous proceedings by the Victorian Civil and Administrative Tribunal.

1 Michael Morris seeks to prevent the defendants from enforcing an order for costs made on 8 April 2008 by the Victorian Civil and Administrative Tribunal (“VCAT”) and subsequently registered in this Court. Mr Morris contended that the costs awarded by that order have been satisfied in whole or in part by reason of amounts received by the defendants in settlement with other parties in the VCAT proceeding in which the costs order was made. The principle upon which Mr Morris relied is that a plaintiff is not entitled to recover more than the damages which have been suffered.[1] The defendants contended that the principle is not engaged in this case but that, in any event, Mr Morris is estopped from making his claims because the issue was effectively determined against him either by another decision of VCAT (dated 17 February 2007) or by the orders made by VCAT on 8 April 2008.

2 There was little dispute about the facts before me and it will not be necessary to recite them in detail other than to provide context or where necessary to explain my reasons. The genesis of the present dispute arose from the settlement of claims made at VCAT about the development of units and apartments at Falls Creek. Those proceedings began with claims by the developer (Bilbarin Nominees Pty Ltd) and the owner of one of the units against Mr Morris and others. Mr Morris was the architect in the development. A second claim was made in VCAT by Riverwild Management Pty Ltd (“Riverwild”), the owner of the common areas, against substantially the same respondents, including Mr Morris. Riverwild was substituted as applicant in the first proceedings on the basis of an assignment by Bilbarin.

3 On 16 July 2004 Mr Morris served upon the applicants and the cross-applicants in the VCAT proceedings, an offer of settlement pursuant to s 112 of the Victorian Civil and Administrative Tribunal Act 1998 offering to pay the claimants the sum of $1.4m together with their party and party costs to be taxed on the Supreme Court scale of costs. There were other settlement offers and settlement discussions between the other litigants in the VCAT proceedings at about the same time. In late July and early August the VCAT proceedings were all resolved. The offer made by Mr Morris was accepted by the VCAT claimants and separate terms of settlement were entered into by the VCAT claimants with each of the other VCAT respondents. The certifying engineer (“Mr Holland”) and his company (“GHA Engineers”) agreed to pay $1.5m in settlement of all claims “including any and all claims for costs”. AMP General Insurance Ltd (the insurer to the insolvent builder) agreed to pay an “all in” settlement amount of $175,000 to Riverwild. Mr Lorenzini, the building surveyor, agreed to pay $1.85m “inclusive of interest and costs”. Mr Huggard, the structural engineer, agreed to pay $150,000 inclusive of interest and costs upon the basis that the obligation could be discharged by paying the reduced sum of $79,188. Only Mr Morris was left with an independent obligation to pay costs of an unspecified amount.

4 On 13 September 2004 Senior Member Walker made an order in the VCAT proceeding that Mr Morris pay the party and party costs of the present defendants for their claims against Mr Morris up to and including 26 July 2004 to be assessed by the Registrar by reference to the Supreme Court scale of costs. Bills of costs totalling $2,104,599.16 were served upon Mr Morris in accordance with those orders. Some of the items related to the proceeding against Mr Morris which had initially been commenced by the developer and subsequently maintained by Riverwild pursuant to the assignment. The balance of the items related to the cross proceeding maintained by the owners directly. The bills contained items for costs incurred by the present defendants in pursuing not only Mr Morris but also the other respondents to the VCAT proceeding, that is, costs incurred in pursuing the respondents in common.

5 The taxation of Mr Morris’ costs was finalised on 8 April 2008 when the parties consented to an order that the party and party costs of the claimants in VCAT be assessed in the sum of $1.8m. On or before 16 May 2008 the claimants registered the VCAT costs order in this Court. On 30 June 2008 Mr Morris commenced this proceeding seeking to prevent the claimants from executing upon, or recovering, the order for costs on the basis that it would constitute impermissible double recovery.

6 The principle against double recovery is well established. In Boncristiano v Lohmann[2] Winneke P observed as fundamental that a “plaintiff cannot recover more than the total damage which he or she has sustained”.[3] Thus, where “the claims for damages are concurrent, in the sense that the claims ‘overlap’, recovery by the plaintiff of the whole or part of the loss claimed from one defendant will necessarily be taken into account in assessing the damages to be recovered from the other”.[4] His Honour went on to observe that the principle would prevent double compensation whatever procedural device [was] used irrespective of the cause of action upon which a plaintiff had proceeded against various defendants.[5]

7 The defendants maintained that the principle against double recovery does not apply on the facts facing Mr Morris or that it can be distinguished from them. I do not agree. Each of the contractual terms of settlement the defendants entered into dealt with claims for costs against an alleged concurrent wrongdoer. The terms of settlement dated 3 August 2004 with Mr Holland and GHA Engineers Pty Ltd provided that they pay the settlement sum in full and final settlement of all claims including “any and all claims for costs”. The release granted by clause 5 included a release for claims for costs. The terms of settlement dated 4 August 2004 with Mr Lorenzini provided that he pay “the sum of $1,850,000 inclusive of interest and costs”. Clause 3 provided a release of all claims including ones for costs against Mr Lorenzini. The terms of settlement entered into with Mr Huggard also provided that “the sum of $150,000” was paid “inclusive of interest and costs (including any reserved costs and any orders for costs previously made)”. The releases in his case also released claims for costs. The settlement with AMP provided that upon payment of the settled sum there was to be a release from all claims including “costs or other expenses whatsoever arising from or in any way connected with” the relevant policy of insurance. That deed of settlement also gave to AMP an indemnity by Riverwild in the event that the deed of assignment relied upon by Riverwild might not have effect. That indemnity extended to any costs or other expenses which AMP might suffer. In each case consideration was provided for the money received and the releases given. The “consideration establishes the matter in respect of which the moneys are received”.[6] It would be wrong “to read the contract [constituted by the terms of settlement] as if the words ‘including claims for costs’ were not there”.[7] Nor is there anything in the terms of settlement which would displace the general principle that the credit to be given to one wrongdoer in respect of recovery from another wrongdoer should be adjusted to take into account any additional or separate claim which the claimants in VCAT had against the various wrongdoers.[8]

8 In my view the claimants in VCAT (namely, the defendants in the proceeding before me), settled against all of the respondents in VCAT on a basis by which some proportion of the proceeds of settlement were referrable to, and received in part as, the costs which had been incurred in pursuing the VCAT proceeding, including costs incurred against them in common with the claims pursued against Mr Morris. All things being equal, therefore, the defendants in the proceeding before me should not be permitted to recover all of the costs sought against Mr Morris to the extent that those costs were referrable to, and were part of, the costs comprised in the settlements with the other respondents in the VACT proceeding.

9 The defendants contended that notwithstanding the terms upon which they settled with the other parties to the VCAT proceeding, no proportion of the settlement sum was referrable, apportioned or apportionable to costs whether common or otherwise. The decision in Allsop v Federal Commissioner of Taxation[9] was called in aid of that submission to the extent that the decision established that an undissected, and undissectable, lump sum payment might not be brought to account as income. The principle in Allsop arose from the circumstance that assessability of a receipt depended upon its character as income. The relevant provisions bringing receipts to tax as income (unlike the provisions allowing deductions) did not contemplate an apportionment of undissected amounts as between income and capital.[10] Accordingly, in Allsop no part of an undissected amount could be said to have the character needed for it to be brought to account as income. The common law principle against double recovery, in contract, has embedded in it a requirement for apportionment in order to do justice between the parties and to ensure that there is not double recovery.

10 A difficulty in applying the principle in this case is that of determining how to account or apportion any of the amounts received by the defendants when considering the common claims sought against Mr Morris. The task is made more difficult by the fact that the respective parties to each of the settlements did not allocate, and doubtlessly had no need to allocate, the agreed settlement amounts as against any of the items claimed against them, whether for costs or otherwise. As Steyn J observed in Banque Keyser: “In multi-party disputes an element of arbitrariness frequently enters into the calculation of recovery by way of overall settlement”.[11] It is in part for that reason that the burden may fall upon the recipient of the money seeking further amounts from other potential wrongdoers to show, in effect, that there is not double recovery. In Townsend v Stone Toms & Partners (a firm),[12] in a passage adopted in Boncristiano,[13] Oliver LJ said:

Statements to similar effect, also referred to with apparent approval in Boncristiano, were made in Townsend by Purchas LJ[15] and Waller LJ.[16]

11 The particular problem in this case is not so much who has the burden of proof but how that burden may be discharged in the case of apportionment of common costs between the various parties against whom they were incurred. At common law the right to recover costs was created by statute[17] and was not part of the loss or damage in the claim.[18] In equity they were discretionary.[19] The costs payable here are those awarded by VCAT under its statutory power to award costs and made enforceable as an order of the Supreme Court upon it being filed and registered pursuant to s 121 of the Victorian Civil and Administrative Tribunal Act 1998.

12 In this case Mr Morris relied upon the expert evidence of Mr John David White who concluded, in effect, that Mr Morris examined the bills of costs and allocated the costs claimed (over distinct time periods) as between (a) costs clamed which were solely referrable to the claim against Mr Morris, (b) costs claimed which were referrable to all VCAT respondents at the time of the item, and (c) costs claimed which were referrable to Mr Morris and one or more VCAT respondents. The basis of his calculations was partly explained in a letter dated 21 August 2009 tendered in evidence as an exhibit to Mr White’s witness statement and in part explained in oral evidence given in cross-examination. It was clear from the evidence of Mr White, a man with considerable relevant experience, that apportionment of common costs between different parties is imprecise, difficult and at times arbitrary. Mr White’s opinion as an expert was that various methods might be used to apportion common costs between different parties. The method Mr White seemed to favour as a pragmatic method for apportionment was simply the division of the costs between the number of parties engaged in the dispute. That pragmatic method has much to commend it for simplicity and, more importantly, as a mechanism calculated to end further disputes between the parties. There is otherwise a danger that disputes about costs may simply become a continuation of, and a substitute for, the principal dispute which should otherwise have been finalised.

13 A pragmatic, albeit inexact, measure for apportioning costs between parties on the basis of the number of parties may not always be appropriate or fair, but in many cases it may well be appropriate and fair in the interest of producing finality of dispute between the parties. The discretionary nature of costs orders may permit a less rigorous apportionment of costs as between different parties than might be required when determining the apportionment of liability to reflect fault or causation. The apportionment of costs between parties should bear some relationship to the part played by the parties in the overall proceeding however imprecise that relationship must be in any given case. A measure based upon the number of parties (with appropriate adjustments where two or more parties should be considered as in effect one) may be inexact but is rational. Similarly, a measure that apportions the costs against the quantum recovered from each contributor to the overall settlement proceeds (if the costs component can be excised from the settlement figures) would also be appropriate where the facts allow and would also be rational, albeit imprecise. In this case the relevant issue to determine, however, is what proportion of the $1.8m ordered to be paid should be reduced on the basis that it has effectively already been recovered from the respondents with whom the defendants entered into “all in” terms of settlement. The plaintiffs have not satisfied me that they have not in part been compensated for costs by the amounts received in settlement from the other VCAT respondents. On the contrary, by the terms of the settlement agreements I am satisfied that some proportion of the amount received was referrable to costs and received as such. The difficult question is: how much? At one extreme it may be arguable, perhaps, that all of the amounts received by the defendants pursuant to the terms of settlement should all be appropriated to costs: after all, the costs were almost all incurred before the settlements where entered into and, in the absence of evidence of the costs not otherwise having been paid or having been payable, it may be reasonable to assume that the costs were either in fact paid by the defendants from the amounts they received in the settlements or that the amounts they received in the settlements replaced other funds that had previously been used to pay the costs which had been incurred and paid. At the other extreme is the contention for the defendants that none of the amounts they obtained in settlement were paid for or were referrable to the common costs incurred in the proceeding notwithstanding the consideration expressed in the contractual terms.[20]

14 The VCAT proceedings were settled between all claimants and respondents at about the same time with settlement discussions occurring largely contemporaneously. No inference can reliably be drawn from the order in which the settlements occurred or are dated. Mr Morris was the architect. The builder was in liquidation and the settlement amount received through the builder’s insurer is, in the scheme of the amounts involved, modest. The other settling parties were the building supervisor, the structural engineer and his company, and the certifying engineer and his company. The amount recovered from Mr Huggard and his company (Finmay Pty Ltd) was also small relative to the other amounts. In other words, the bulk of the sums recovered by settlement were from three “camps”, namely Mr Morris, Mr Holland (including his company) and Mr Lorenzini. Accordingly, I would apportion the common costs equally between these three camps as to 90% of the claim leaving 10% as attributable to Mr Huggard (including his company and the builder through AMP). It follows that I would reduce by 70% the amount of common costs payable by Mr Morris on the basis that 30% of the common costs have been recovered by settlement from each of Mr Holland (including his company) and Mr Lorenzini, and 10% from the others.

15 A practical mechanical difficulty arises of determining how much of the $1.8 million ordered is to be regarded as common costs. The difficulty arises from the fact that the order pronounced by consent on 8 April 2008 assessing the quantum of the costs at $1.8m was based upon previous orders made about costs. In particular the order made on 17 February 2007 by Mr Walker was to the effect that on the taxation of the bills against Mr Morris, there was to be no reduction for any common costs. The practical difficulty would seem to be that the global order of $1.8m for costs does not distinguish between those costs which are wholly referrable to Mr Morris and those which might be regarded as common. The order made on 8 April 2008 was simply the assessment of the quantum of the party and party costs of the proceeding which had been ordered on 13 September 2004 (and amended on 20 September and 6 October 2004 in ways that are not relevant to the problem of calculation). It is, in other words, unsafe to assume with certainty that the $1.8m was all referrable to common costs. On the other hand the agreement between the parties that the costs in issue were, in quantum, to be identified as $1.8m without dissection or further apportionment should, I think, be regarded as if they were wholly common costs to be apportioned in the way I have indicated. That would result in Mr Morris being required to pay 30% of $1.8 million, namely $540,000.

16 The problem for Mr Morris is, however, that the issue raised before me has been finally determined against him by the decision of Senior Member Walker on 17 February 2007 and by the consent order made on 8 April 2008 giving effect to an agreement between the parties.

17 A decision by VCAT may create an estoppel where, as here, the Tribunal has jurisdiction to decide finally a question arising between parties.[21] An estoppel may arise even though the judgment relied upon was made in error where it is not itself impeached by appeal.[22]

18 The order relied upon by the defendants was that made by Senior Member Walker on 17 February 2007. The relevant order is in the following terms:

This order, including the question and its answer, arose in an application by Mr Morris to prevent the claimants (the defendants in the proceeding before me) to recover against him the whole of common costs to the extent that they were in the bills of the costs which had been produced. His application had sought declarations, injunctions and other relief. It was originally made on 7 December 2006 but subsequently amended to seek a declaration that the defendants were not entitled to recover from Mr Morris, in effect, those common costs not appropriately apportionable to him. The issue for determination on that application included a question of law which had been referred by the Registrar (Mr Jacobs) to Senior Member Walker on 20 October 2006. On 19 December 2006 Mr Walker heard the application brought by Mr Morris and the question that had previously been referred by the Registrar and Mr Walker’s decision and orders were made on 17 February 2007.

19 The transcript of the VCAT proceeding suggests that submissions were made on behalf of both Mr Morris and the defendants to the effect that the Tribunal was not to consider in that hearing how the common costs might be apportioned to Mr Morris. It seems that the parties were seeking to have Mr Walker determine the question of double recovery in principle without determining how an apportionment might be made if Mr Walker decided that apportionment was appropriate. At various points in the transcript, one or other party may fairly be understood as submitting that the actual apportionment to be made (assuming that apportionment was appropriate in principle) was not a matter that Mr Walker needed to consider on that occasion.

20 Mr Walker’s decision was that the items of costs payable by Mr Morris should not be reduced by any amount or proportion. Indeed, Mr Walker went on to order the formal dismissal of the other applications by Mr Morris for injunctive and other relief. On the face of the orders made by VCAT, constituted by Mr Walker, on 17 February 2007, the whole of the application commenced by Mr Morris, and the whole of the question which had been referred by the Registrar, had been answered against Mr Morris. No appeal was brought against that order at any time. Furthermore, on 8 April 2008 the parties agreed by consent, after negotiations, that the party and party costs payable pursuant to the orders of Senior Member Walker which had previously been made on 13 September 2004 (as subsequently amended) be assessed in the sum of $1.8m.

21 The reasons of Mr Walker deal with the double recovery argument and plainly, and unequivocally, reject the submissions by Mr Morris. It is possible (although it is not relevant for my determination) that Mr Walker’s conclusion was in part based upon what he perceived to be an impossibility of apportionment. If that were so, it is arguable that Mr Walker erred in his conclusion given that the parties seemed in agreement that the process of apportionment (if apportionment were to be made) was for another occasion. It is nonetheless the case that, for whatever reason, Mr Walker concluded that there was to be no reduction of the costs payable by Mr Morris by reference to the principle against double recovery. The written submissions filed by the parties, and in particular those filed on behalf of Mr Morris, did not limit the proceeding before Mr Walker by excluding questions of recovery from his determination. The orders made by Mr Walker have not, as I have already said, been the subject of an appeal and on their face appear to determine the rights of the parties.[23] If anything, the orders made on 17 February 2007 were effectively adopted by the subsequent consent orders of 8 April 2008.

22 The arguments for Mr Morris against the plea of estoppel is essentially that the proceeding before Mr Walker was about liability rather than about recovery and that the matter finally determined in the proceeding by Mr Walker does not extend to the recovery proceedings before me. In Chamberlain v Deputy Commissioner of Taxation[24] it was said in the joint judgment of Deane, Toohey and Gaudron JJ:

In that regard it is important to bear in mind the principle in Henderson v Henderson[26] enunciated by Wigram VC:

In my opinion it is not to the point to contend that the issue before me is concerned with recovery whilst that before Mr Walker was about liability. The critical question is whether in the recovery proceedings before me an element in the case for Mr Morris was necessarily determined against him in the other proceedings. In my view it was. A necessary element in the recovery proceedings before me involves his entitlement that items of cost sought against him be reduced by an amount or a proportion to prevent double recovery. That is the very question submitted to Mr Walker and decided by him against Mr Morris.

23 It was also contended for Mr Morris that an issue estoppel cannot arise because all that can be concluded from the orders made by Mr Walker is that an application was dismissed without deciding anything as between the parties. Reliance was placed upon a passage from the second edition of Bower and Turner, The Doctrine of Res Judicata, cited with approval in D A Christie Pty Ltd v Baker,[28] in which the learned authors said:

In my view the very passage relied upon on behalf of Mr Morris concludes the issue against him. What occurred was not that Mr Walker simply dismissed an application but, rather, by reference to the record and all materials to which I have been taken, it is clear that he determined the very matter upon which recovery is sought by Mr Morris to be resisted. The proceeding maintained by Mr Morris before me inevitably seeks to litigate the very issue that was “legally indispensable” to the matter (in particular the question referred to and determined by Mr Walker) which is legally indispensable to the proceeding he now seeks to maintain.[29] The orders sought by Mr Morris in the proceeding before me cannot be determined in his favour without a reconsideration of the issue determined against him by Mr Walker. The first order he seeks in the proceeding for my determination is a declaration that the orders for costs made on 8 April 2008 “has been satisfied in whole or in part by reason of the amounts received by the Defendants pursuant to the ‘all in’ settlements agreed with” the other respondents in the VCAT proceeding. It is not possible to answer that question without reconsidering the question answered by Mr Walker adversely to Mr Morris. The second order seeks injunctions restraining the defendants from executing upon, or seeking to recover, the order made on 8 April 2008. Such injunctions as are sought cannot be granted without reconsidering the issue previously answered by Mr Walker adversely to Mr Morris in the question which had been referred to him by Mr Jacobs.

24 Accordingly, it follows that the proceeding by Mr Morris cannot now be maintained. I will dismiss the proceedings.


	No. 6968 of 2008

BETWEEN:


MICHAEL MORRIS	Plaintiff

- and -

RIVERWILD MANAGEMENT PTY LTD (ACN 070 089 860)	Firstnamed Defendant

JOHN CARLYLE KENLEY	Secondnamed Defendant

CATHERINE ELIZABETH HALLIDAY	Thirdnamed Defendant

KENNETH NOEL JOHNSON	Fourthnamed Defendant

BRUCE MICHAEL STILLMAN	Fifthnamed Defendant

COOLUMBOOKA HOLDINGS PTY LTD (ACN 005 783 933)	Sixthnamed Defendant

PLUMPTON PLACE PTY LTD (ACN 005 644 226)	Seventhnamed Defendant

HEADINGTON INVESTMENTS PTY LTD (ACN 006 747 682)	Eighthnamed Defendant

JASPER NOMINEES PTY LTD (ACN 008 518 269)	Ninthnamed Defendant

GRANTALI PTY LTD (ACN 005 524 854)	Tenthnamed Defendant

[5] Ibid 89. See also: Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635 [20], [37], [40], [46] (Gleeson CJ and Callinan J), [53], [63] (Gummow and Hayne JJ); Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 522 (Lord Nicholls); Law Society of New South Wales v Glenorcy Pty Ltd [2006] NSWCA 250; (2006) 67 NSWLR 169, 184 [74] (Mason P); SAS Trustee Corporation v Budd [2005] NSWCA 366 (Unreported, Mason P, Handley and McColl JJA) [33] (Mason P); Franklins Self Serve Pty Ltd v Wyber [1999] NSWCA 390; (1999) 48 NSWLR 249, [29] (Mason P); Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159, 176 (Walsh J), 187-8 (Asprey JA).

[7] Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd (No 2) [1988] 2 All ER 880, 882, g., (Steyn J).

[10] Deductions may be allowed “to the extent” that a loss or outgoing may be on revenue account but the relevant provisions assessing the amounts as income had no equivalent apportioning mechanism.

[17] Garnett v Bradley (1878) 3 AC 944, 962 (Lord Blackburn); see also G.E. Dal Pont, Law of Costs (2003) [6.2], 190-191.

[18] W. Blackstone, Commentaries on the Law of England (The Legal Classics Library, 1983) vol 3, 399.

[23] See also: O’Toole v Charles David Pty Ltd (1990) 171 CLR 232, 259 (Brennan J).

[27] Ibid 319; see also Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, 613-4 (Brennan J); Vervaeke v Smith [1983] 1 AC 145, 157 (Lord Hailsham), 163 (Lord Simon); Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502, 509 (Deane, Toohey, Gaudron JJ); Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 522 (Lord Nicholls).

[28] [1996] VicRp 89; [1996] 2 VR 582, 583 (Brooking JA); see also G. Spencer Bower and A.K. Turner, The Doctrine of Res Judicata (2nd ed, 1969) 51.

JUDGE:	PAGONE J
WHERE HELD:	Melbourne
DATE OF HEARING:	16-17 and 21 September 2009
DATE OF JUDGMENT:	2 October 2009
CASE MAY BE CITED AS:	Michael Morris v Riverwild Management Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2009] VSC 439

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Dixon SC with Mr A.M. Dinelli	DLA Phillips Fox

For the Defendants	Mr P.B. Murdoch QC with Mr J. Pizer	Giannakopoulos Solicitors

Supreme Court of Victoria

Morris v Riverwild Management Pty Ltd & Ors [2009] VSC 439 (2 October 2009)