Home | Databases | WorldLII | Search | Feedback Supreme Court of Victoria

You are here: 

Brott v FGD Pty Limited & Ors (No 2) [2018] VSC 424 (2 August 2018)

Last Updated: 7 August 2018

AT MELBOURNE

COMMON LAW DIVISION

MAJOR TORTS LIST

S CI 2018 00063

---

---

COSTS – Costs of defendants’ strike out application and plaintiff’s application under s 23B of the Limitation of Actions Act 1958 (Vic) sought by defendants from plaintiff – Costs of proceeding sought by defendants on an indemnity basis – Defamation Act 2005 (Vic) s 40 – Civil Procedure Act 2010 (Vic) s 29 –Plaintiff sought that there be no order as to costs – Whether any special circumstances warranting a departure from usual position that defendants ought have their costs of the proceeding – Plaintiff ordered to pay defendants’ costs of proceeding on a standard basis – Consideration of principles relevant to the award of indemnity costs – Consideration of relevance of factors including plaintiff’s late service of s 23B application, failure to comply with Court orders and failure to accept prior settlement offer – Application that costs be paid by plaintiff’s solicitor – Gdanski v Palms Court Management Pty Ltd [2017] VSCA 348, referred to- No order for indemnity costs, or any order that the costs be paid by the solicitor.

PRACTICE AND PROCEDURE – Application by plaintiff to restrain defendants’ counsel from continuing to represent the defendants – Plaintiff was a client of defendants’ counsel 14 years prior – Consideration of factors relevant to exercising discretion to restrain a legal practitioner from acting for a former client – Application dismissed.

---

HER HONOUR:

1 On 24 April 2018, I refused an application by the plaintiff, Mr Brott, for an extension of time to bring this proceeding pursuant to s 23B of the Limitation of Actions Act 1958 (Vic),^[1] and, as a consequence, granted summary judgment in favour of the first and second defendants (‘defendants’). This ruling concerns the question of costs of the proceeding.

2 On 24 April 2018, I made the following orders:

1. The plaintiff’s application filed pursuant to section 23B of the Limitation of Actions Act 1958 (Vic) on 9 April 2018 be dismissed.
2. There be judgment for the first and second defendants in the proceeding.
3. Any application with respect to costs be filed and served by 4pm on 18 May 2018, returnable on a date to be fixed not before 1 June 2018.
4. In the event that no application is made pursuant to paragraph 3 of these orders, the plaintiff pay the first and second defendants’ costs of the proceeding, including reserved costs.

3 On 21 May 2018, the defendants issued a summons seeking the following orders:

1. Pursuant to s 40 of the Defamation Act 2005 (Vic) and the Court’s inherent jurisdiction, the plaintiff be ordered to pay the defendants’ costs of and incidental to the proceeding, including:

(a) the defendants’ application to strike out the plaintiff’s statement of claim;

(b) the plaintiff’s application for an extension of time under s 23B of the Limitation of Actions Act 1958 (Vic); and

(c) all other costs of the proceeding on an indemnity basis.

2. Pursuant to the Court’s inherent jurisdiction, and pursuant to s 29 of the Civil Procedure Act 2010, the plaintiff’s solicitors, Efron & Associates, be ordered to pay the defendants’ costs of and incidental to the proceeding, including (a), (b) and (c) in paragraph 1 of the summons.
3. Alternatively, pursuant to r 63.23(1)(b) of the Supreme Court (General Civil Procedure) Rules 2015, the plaintiff’s solicitors, Efron & Associates, be ordered to pay to the plaintiff all or any of the costs which the plaintiff is ordered to pay to the defendants in this proceeding, including the costs set out in order 1 above.

4 Both parties filed written submissions in respect of the question of costs.

5 The plaintiff did not file any formal application with respect to costs, but in his written and oral submissions advanced the contention that the proper order with respect to costs be that there be no order as to the costs of the proceeding. I accept that there is sufficient ambiguity in paragraphs 3 and 4 of the orders to enable the plaintiff to seek to depart from the usual position with respect to costs, that is, that the plaintiff pay the defendants’ costs of the proceeding on a standard basis.

6 However, having considered the arguments of the parties, which I will discuss further in these reasons, I do not intend to depart from the usual order, and will order that the plaintiff pay the defendants’ costs of the proceeding on a standard basis, including any costs thrown away by reason of the adjournment of the hearing with respect to costs from 16 July to 27 July 2018. I will refuse the defendants’ application that these costs be payable by the plaintiff’s solicitor (‘Mr Efron’).

7 Prior to turning to the issues in the substantive application, I note that at the commencement of the hearing on 27 July 2018, the plaintiff made an oral application to restrain counsel appearing for the defendants, Mr Goldblatt, from continuing to represent the defendants in this proceeding. I rejected that application, for the following reasons:

(a) I accept that while the plaintiff was unable to point to any specific confidential information Mr Goldblatt might have had in his possession as a result of his previous dealings with the plaintiff acting both for him personally and for his clients, there may be occasions where it is appropriate to restrain a legal practitioner from acting for a former client on the basis of what are described in the authorities as ‘getting to know you factors’;

(b) taking the plaintiff’s evidence at its highest and best (albeit noting that there is a fierce dispute about the accuracy of paragraph 18 of the plaintiff’s affidavit affirmed on 27 July 2018), there is nothing to suggest that Mr Goldblatt’s prior dealings with the plaintiff, which ceased 14 years ago, would disadvantage the plaintiff in any way in the course of this application;

(c) I note that the plaintiff personally did not give any evidence in relation to the substantive application for an extension of time, rather, he relied upon the evidence of Mr Efron;

(d) the substantive application itself was a relatively straightforward matter, again, taking Mr Efron’s evidence at its highest and best, it did not meet the very high threshold imposed by the relevant legislation for an extension of time in defamation matters;

(e) I could not see how any information in Mr Goldblatt’s possession could affect his ability to argue the defendants’ position concerning a dispute about costs: as I noted during the course of the hearing, given that the parties had both provided extensive written submissions, it was not beyond the realms of possibility that I could have dealt with the matter on the papers, such that Mr Goldblatt would not have been required to appear;

(f) I accept the defendants’ submission that given the extensive dealings between the defendants themselves and the plaintiff in a litigious context over the course of recent years, it is unlikely that Mr Goldblatt would have had any additional knowledge regarding the plaintiff’s approach to litigation that they otherwise did not possess; and

(g) given that this proceeding is effectively partheard, the balance of convenience overwhelmingly told against the granting of the application to restrain Mr Goldblatt from continuing to act for the defendants. Regardless of the outcome of the costs application, in the absence of any appeal, this proceeding will be at an end.

8 Turning now to the disposition of the issues in the applications, s 40 of the Defamation Act 2005 (Vic) states that:

1. In awarding costs in defamation proceedings, the Court may have regard to –

(a) the way in which the parties to the proceedings conducted their cases (including any misuse of a party’s superior financial position to hinder the early resolution of the proceedings); and

(b) any other matters that the Court thinks relevant.

2. Without limiting sub-s (1) a court must (unless the interests of justice require otherwise) –

(b) if defamation proceedings are unsuccessfully brought by a plaintiff and the costs in the proceedings are to be awarded to the defendant – all the costs of and incidental to the proceedings to be assessed on an indemnity basis if the Court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.

9 The defendants rely upon the following matters in order to support their application for indemnity costs:

(a) the defendants’ response on 21 August 2017 to the plaintiff’s concerns notice (‘response’) put the plaintiff squarely on notice in respect of the limitation issue. The plaintiff should have made an application for an extension of time in his statement of claim, given that his claim was prima facie statute barred;

(b) the plaintiff’s failure to accept a settlement offer made by the defendants on 25 January 2018 (‘settlement offer’), which again raised the question of the limitation issue, and offered to settle the claim on the basis that the plaintiff would withdraw the claim and each party would bear their own costs;

(c) the settlement offer was made in accordance with both s 40 of the Defamation Act 2005 (Vic) and also in accordance with the principles in Calderbank v Calderbank;^[2]

(d) upon receipt of the response and the settlement offer, the plaintiff was well aware of the prospects of success in the proceeding in the absence of any application to extend time; and

(e) the reasons for the delay in issuing the proceeding were all rejected. In particular, I found that many of the justifications for an extension of time were of no real impediment to issuing the proceeding.^[3] The defendants achieved a result which was better than the outcome proposed by the settlement offer.

10 The defendants also rely upon the unreasonable conduct of the plaintiff in support of an award for indemnity costs under the inherent jurisdiction of the Court. The defendants submitted as follows:

In our submission, the plaintiff’s conduct has consistently departed from acceptable standards during this proceeding. The following matters demonstrate that the plaintiff’s conduct was unreasonable in the circumstances.

11 In particular, the defendants relied upon:

(a) the plaintiff’s failure to comply with the orders made by John Dixon J on 2 March 2018. Rather, the application for an extension of time and evidence and submissions in support were served at 3.00pm on Sunday, 8 April 2018, the day prior to the hearing of the defendants’ summary judgment application. The defendants submitted as follows:

In this matter the delay in the plaintiff’s filing and serving the extension application and accompanying material placed an unreasonable burden on the defendants’ counsel and solicitors, requiring them to revisit and reassess the claims levelled by the plaintiff in a short time frame. There was no reasonable justification for the late filing. The defendants’ summary judgment application was filed on 20 February 2018. The Dixon order allowed the plaintiff one month to file any extension application. In any event the contents of the summary judgment application should not have been surprising to the plaintiff in light of the content of the settlement offer and the response. The late filing of the extension application is inexplicable and plainly unreasonable in these circumstances.

12 The defendants also sought an order that any costs order to them be payable by Mr Efron pursuant to r 63.23 of the Rules and the inherent jurisdiction of the Court. The defendants submitted ‘an order of costs against a practitioner will be appropriate where costs have been wasted by their failure to act with reasonable competence and expedition or they have exhibited a serious dereliction of duty, serious misconduct or gross negligence.’ The defendants relied upon the following matters in support of their contention that this was an appropriate occasion for the Court to exercise its powers under what is often described as the ‘wasted costs jurisdiction’:

(a) the plaintiff’s case was hopeless in that the proceeding was prima facie statute barred;

(b) Mr Efron should have been aware that the arguments presented in support of the plaintiff’s application for an extension of time ‘fell well short of the high bar needed to be cleared for time to be extended in a defamation claim’. Given that the plaintiff has refused to disclose counsel’s advice, I should not have regard to any submissions concerning that advice;

(c) the conduct of Mr Efron in instituting a proceeding in circumstances when it was bound to fail and filing and serving an application in breach of the Court orders was a breach of the overarching obligations under the Civil Procedure Act 2010 (Vic) (‘CPA’);

(d) Mr Efron’s conduct in paying the filing fee in the proceeding and prosecuting the plaintiff’s case, amounted to enabling a litigant with no financial resources; and

(e) Mr Efron is fully appraised of the information concerning the plaintiff’s impecuniosity. The defendants submitted:

In circumstances where on his own evidence, the plaintiff will not be able to pay the defendants’ costs and where Mr Efron has taken responsibility, not only for the legal carriage of this case, but also the financial carriage of the case, it is submitted that it is appropriate that he be ordered to pay the defendants’ costs.

13 Unsurprisingly, the plaintiff opposed the defendants’ application for a special costs order, and submitted that, rather, there should be a departure from the usual rule that costs follow the event. In particular, the plaintiff relied upon the following matters in support of his application that there be no order as to costs of the proceeding:

(a) the alleged wrongful acts of the defendants, being the malicious and false disclosure to the Australian Taxation Office (‘ATO’) of matters concerning his financial affairs for the purpose of seeking an advantage for the plaintiff’s former partner in Family Court proceedings; and

(b) there is an element of general public importance or interest in the examination of the alleged misuse of the voluntary disclosure procedures of the ATO. The characterisation of litigation as being brought in the public interest has been held to be a special circumstances justifying the exercise of a discretion not to order costs.

14 Notwithstanding the plaintiff’s submission that there be no order as to costs, the plaintiff submitted in the alternative that indemnity costs ought not be payable to the defendants. In particular, it was not unreasonable for the plaintiff to fail to accept the settlement offer. The plaintiff submitted that:

(a) the rejection of the settlement offer was reasonable in the circumstances, where the plaintiff had obtained the considered advice of an experienced defamation barrister that the plaintiff’s proceeding was not doomed to fail, as the plaintiff had reasonable prospects of persuading the Court to exercise its discretion to extend time in his favour;

(b) the settlement offer completely failed to articulate any reason why an extension of time would not be granted to the plaintiff; and

(c) the reasonableness of rejection of a settlement offer is to be judged at the time of the offer, and the settlement offer was an invitation to capitulate rather than a genuine compromise.

15 The plaintiff also submitted that the allegedly unreasonable conduct of the plaintiff was not conduct of a kind which would ordinarily cause the Court to make an award of indemnity costs. The conduct relied upon by the defendants related to only one application in the proceeding, and in any event both parties were ready to proceed on the day of the application.

16 In relation to the issue of whether any costs payable to the defendants should be paid by Mr Efron personally, the plaintiff noted that the wasted costs jurisdiction must be exercised ‘with care and discretion and only in clear cases’. The mere fact that litigation is resolved adversely to a party does not mean that costs should be ordered against the legal practitioner who provided legal services to that party. The plaintiff rejected the contention that Mr Efron had pursued a hopeless case or a case without reasonable prospects of success and submitted as follows:

In this matter the instructing solicitor reasonably relied on the advice of counsel experienced in the defamation jurisdiction to both issue the proceedings and apply for an extension of time. Mr Dibb who drafted the original defamation claim against PKF and Natalie McAra which was successful and which led to the then defendants issuing letters of retraction and apology, advised that notwithstanding time limitations the Court has a discretion to extend time. Counsel who appeared, Mr Myles Tehan, advised that the plaintiff issued an application for an extension of the time as a cross-application.

It is important to guard against hindsight and essential to bear in mind that the question of whether a case is hopeless is to be judged at the time the decisions were made by a practitioner and by reference to the material available to him at the time. Nonetheless the acknowledgement in the reasons (at para 18) that ‘some issues arose which needed to be considered’ demonstrates that there is scope for reasonable minds to differ as to the outcome of the matter. The further acknowledgement (in page 20 of the reasons) that ‘there is a tension between the policy considerations underlying the limitation provisions ... and the obligations imposed upon parties and legal practitioners not to bring proceedings without a proper basis for doing so’ is further demonstration of this matter.

17 Finally, in respect of the question of whether the plaintiff is impecunious, counsel for the plaintiff noted that he has been discharged from bankruptcy, and that he has a family law claim for at least fifty per cent of an eight million dollar pool of assets which is the subject of a reserved decision. Further, any impecuniosity is not in itself a proper basis for making a costs order against the plaintiff’s solicitor.

18 The defendants’ submissions in reply in relation to the question of whether the plaintiff should pay any costs at all, are as follows:

(a) the plaintiff’s claim that the defendants’ disclosure to the ATO was malicious has not been tested in court, and the defendants deny that the disclosure to the ATO is malicious or that the disclosure was made for the purpose of seeking advantage for Ms McAra in the Family Court proceedings’; and

(b) the plaintiff’s suggestion that his defamation claim is in the public interest should be rejected.

19 In relation to the question of whether they ought receive an order for indemnity costs, the defendants submitted:

(a) the plaintiff’s submission that the rejection of the settlement offer was not unreasonable is irrelevant in circumstances where the plaintiff had not filed an application for an extension of time;

(b) the plaintiff had been on notice that the claim was statute barred since 21 August 2017;

(c) the settlement offer was a simple and straightforward proposal;

(d) it was not for the defendants to evaluate the prospects of success of any application by the plaintiff to extend time in circumstances where no such application had been made, and the settlement offer was not required to particularise the reasons why an application for an extension would fail, as the defendants were not and could not have been privy to the plaintiff’s grounds for applying for an extension;

(e) the authorities relied upon by the plaintiff to support its contention that the offer was an invitation to capitulate differs substantially from the circumstances of the current proceeding, and the monetary value of the plaintiff’s claim was likely to be minimal; and

(f) it is difficult to conceive what the defendants could otherwise have done as an affirmative step towards ending the litigation.

20 In relation to the defendants’ application that Mr Efron pay any costs awarded in their favour, the defendants submitted as follows:

(a) Mr Efron did not simply act for the plaintiff but paid for the filing fee and represented the plaintiff on a credit basis and as such has personally funded the claim;

(b) the hopelessness of the plaintiff’s case was brought to Mr Efron’s attention on two occasions: first, in the response, and again in the settlement offer. All of the material facts identified by Mr Efron in his affidavit of 9 April to support the application for an extension of time were known to both Mr Efron and the plaintiff prior to the issue of the proceeding;

(c) the mere fact that the Court has the discretion to extend time does not as a matter of course indicate that the Court will in fact exercise that discretion in favour of the applicant; and

(d) the evidence of Mr Efron himself in support of the plaintiff’s application to extend time refers to the plaintiff’s impecuniosity.

21 The defendants submitted as follows:

In circumstances where on Mr Efron’s own evidence, the plaintiff will not be able to pay the defendants’ costs and where Mr Efron has taken responsibility, not only for the legal carriage of this case but also the financial carriage of the case it is submitted that it is appropriate that he be ordered to pay the defendants’ costs.

22 There seems to be little dispute between the parties concerning the applicable principles governing the applications concerning costs, which can be summarised, without need for reference to authority, as follows:

(a) the default position is that costs follow the event, in the absence of special circumstances;

(b) an established ground for the award of indemnity costs (here, confirmed by statute) is an unsuccessful party’s unreasonable refusal to accept a settlement offer;

(c) a breach by a party of the overarching obligations which causes the other party to incur unnecessary costs and inconvenience may be a basis for an award of indemnity costs against the party in breach (or its legal representatives); and

(d) while the Court must exercise caution in the exercise of the wasted costs jurisdiction, there may be special circumstances which warrant the making of a costs order against a party’s legal practitioner.

23 Applying the principles above to the current applications, in my view:

(a) there are no special circumstances which warrant a departure from the usual position that the defendants ought have their costs of the proceeding;

(b) it was not unreasonable for the plaintiff to fail to accept the settlement offer at the time it was made;

(c) while the conduct of the plaintiff in failing to comply with the orders made by John Dixon J on 2 March 2018 was unexplained, and egregious, there is no evidence that the defendants incurred any additional costs by reason of the plaintiff’s conduct; and

(d) the matters relied upon by the defendant do not support an award of costs against Mr Efron.

24 In relation to paragraph 23(a) above, being the plaintiff’s submission that there should be no order as to costs, the plaintiff’s submissions are without merit. As submitted by counsel for the defendants, there has been no finding that the defendants’ involvement in sending the letter to the ATO was motivated by malice and/or for a collateral purpose. Defamation proceedings are private litigation, not public interest litigation, and there are other avenues of complaint open to the plaintiff concerning the defendants’ conduct.

25 In relation to paragraph 23(b) above, I agree that the settlement offer did no more than invite a total capitulation on the part of the plaintiff. I do not consider that it was unreasonable for the plaintiff to fail to accept the settlement offer, given the terms of the compromise between him and the defendants in the previous proceeding concerning the same publication, which could be seen as providing the plaintiff with some vindication of his grievances. Further, while the monetary compensation involved in that compromise was modest, it is axiomatic that defamation proceedings often do not have financial compensation as their sole objective, but also seek the vindication of a plaintiff’s reputation.

26 As for the question of whether the plaintiff and his advisors must have known the proceeding was doomed to fail, as no application had been made for an extension of time, counsel for the plaintiff was correct in noting that a claim brought outside the limitation period can still give rise to a valid cause of action: it is the remedy, not the claim, that is statute barred. I also do not consider that it was unreasonable for the plaintiff not to assume that any application for an extension of time was doomed to fail.

27 As for the delay on the part of the plaintiff in making the application for an extension of time, and the late service of the application and the affidavit in support, while I accept that orders made under s 29 of the CPA are punitive as well as compensatory in character,^[4] the reality is that the application was heard on the day it was listed, such that no further costs were caused to be incurred by the defendants. The fact that the late service of the application put the defendants in a difficult (albeit, as matters unfolded, not a fatal) forensic position on the day is not a basis for making an order under s 29 of the CPA.

28 As for the question of whether Mr Efron should pay the defendants’ costs, I do not consider that the reasonably high bar for making such an order has been cleared. As stated recently by the Court of Appeal in Gdanski v Palms Court Management Pty Ltd,^[5] ‘The making of an order for costs against a nonparty is an exceptional course for a court to take’. Further, as indicated during the course of the hearing, I cannot see how, taken in isolation, the fact that a solicitor has provided some modest financial accommodation to a client could expose that solicitor to an order for costs should the client be ultimately unsuccessful. Further, I do not accept that the proceeding was doomed to fail. As noted above, a previous proceeding concerning the same publication resulted in a compromise with a moderately favourable outcome to the plaintiff. It could also not be said that the plaintiff’s application to extend time was doomed to failure: rather, he was unsuccessful in meeting the very high threshold provided for by the relevant legislation. The matter was certainly contestable. Finally, given the size of the pool of assets being contested by the plaintiff in the Family Court, I could not form the view that any judgment in favour of the defendants would be unsatisfied, if indeed that was a determinative matter. It just may take some time for the defendants to recover the judgment.

29 Accordingly, I will order that the plaintiff pay the defendants’ costs of the proceeding on a standard basis, and hear further from the parties with respect to the question of costs of the parties’ costs applications.

---

SCHEDULE OF PARTIES

S CI 20187 00065

---

^[1] See [2018] VSC 182.

^[2] [1975] 3 All ER 333.

^[3] Brott v FGD Pty Ltd [2018] VSC 182, [19].

^[4] Yara Australia Pty Ltd v Oswal [2013] VSCA 337; [2013] 41 VR 302.

^[5] [2017] VSCA 348, [1].