Cleary Bros (Parramatta); Parker Constructions; Icehot Pty Ltd; Michael Francis Buggy v Commonwealth Bank; National Australia Bank; Victorian Securities Corporation; Bendigo and Adelaide Bank Ltd [2009] ACTSC 72 (2 July 2009)

Last Updated: 20 July 2009

CLEARY BROS (PARRAMATTA) PTY LIMITED; PARKER CONSTRUCTIONS PTY LIMITED; ICEHOT PTY LIMITED; MICHAEL FRANCIS BUGGY v COMMONWEALTH BANK OF AUSTRALIA; NATIONAL AUSTRALIA BANK LIMITED; VICTORIAN SECURITIES CORPORATION LIMITED; BENDIGO AND ADELAIDE BANK LIMITED [2009] ACTSC 72 (2 July 2009)

COSTS – application for leave to amend statement of claim – at hearing, plaintiff’s counsel had different version of proposed amended statement of claim from version filed and served – counsel unable to identify differences – application dismissed – leave to amend later granted by consent – defendants sought indemnity costs of dismissed application – indemnity costs requires misconduct or conduct deserving of criticism, but does not require ethical or moral delinquency – failure to file and serve correct version of proposed amended statement of claim was inadvertent but careless – no explanation for carelessness – events surrounding failure considered as part of context although those events already covered by other costs orders – indemnity costs payable.

Australian Securities and Investments Commission Act 2001, s 12CA
Court Procedures Rules 2006 (ACT), r 1721(5)

Federal Court of Australia Act 1976, s 43
Federal Court Rules 1979, rr 12 and 19 of O 62

Colgate-Palmolive Company and Ors v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225

Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412

David Charles Robinson v Aware Ind Ltd [1998] FCA 1256
Fairplay Newspaper and Printing Works Pty Ltd v Currico Nominees Pty Ltd (Federal Court of Australia, Carr J, 22 May 1998, unreported)

No. SC 584 of 2006

Judge: Penfold J
Supreme Court of the ACT
Date: 2 July 2009

IN THE SUPREME COURT OF THE )
) No. SC 584 of 2006
AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CLEARY BROS (PARRAMATTA) PTY LIMITED (ACN 105 359 957)

First plaintiff

PARKER CONSTRUCTIONS PTY LIMITED (ACN 008 469 743)

Second plaintiff

ICEHOT PTY LIMITED

(ACN 085 175 867)

Third plaintiff

MICHAEL FRANCIS BUGGY

Fourth plaintiff

AND: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

First defendant

AND NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937)

Second defendant

AND VICTORIAN SECURITIES CORPORATION LIMITED (ACN 004 496 208)

Third defendant

AND BENDIGO AND ADELAIDE BANK LIMITED

Fourth defendant

ORDER

Judge: Penfold J
Date: 2 July 2009
Place: Canberra

THE COURT ORDERS THAT:

1. the plaintiffs are to pay the defendants’ costs of the application dismissed on 5 June 2008 on an indemnity basis; and
2. the plaintiffs are to pay the third and fourth defendants’ costs of submissions in relation to the costs of the application dismissed on 5 June 2008 on a party and party basis.

Introduction

1. Cleary Bros (Parramatta) Pty Ltd, two other companies, and Mr Michael Buggy, who has an interest in the three companies (the plaintiffs) have brought proceedings against the Commonwealth Bank of Australia, the National Australia Bank Ltd, the Victorian Securities Corporation Ltd and the Bendigo and Adelaide Bank Ltd (the defendants) in respect of actions taken by the defendants in relation to loan facilities made available to the plaintiff companies.
2. This judgment relates to an application for indemnity costs by the defendants in connection with the dismissal of an application by the plaintiffs for leave to amend the statement of claim. That application, among other things, sought leave to join Mr Buggy as the fourth plaintiff and Bendigo and Adelaide Bank Ltd as the fourth defendant. For that reason, although those new parties were not formally joined in the action until consent orders to that effect were made about a month after the application was dismissed, they were concerned in the dismissal of the application; written submissions in this matter were lodged on behalf of the third and fourth defendants jointly, and on behalf of all the plaintiffs jointly, and the orders reflect the involvement of the fourth plaintiff and the fourth defendant.

Background

3. On 5 June 2008 an application for leave to amend the amended statement of claim came before me. The hearing was unable to proceed because of problems with the documents, and I dismissed the application. I also ordered that any new application by the plaintiffs for leave to amend be filed and served by 19 June 2008, and made consequential orders about the timing of any affidavits to be provided by the defendants in response.
4. When the application was dismissed, counsel for the defendants sought an order for indemnity costs. At a further hearing on 4 July 2008, I made orders by consent that, among other things:
(a) gave the plaintiffs leave to file and serve a further amended statement of claim;
(b) provided for both parties to file and serve written submissions in relation to the question of indemnity costs; and
(c) noted the consent of the parties to the application for indemnity costs being determined on the papers without further oral argument.
5. In due course the defendants and the plaintiffs exchanged their written submissions about the costs order. Submissions were made on behalf of the third and fourth defendants and later adopted by the first and second defendants. The last submissions were dated 19 August 2008.
6. Under r 1721(5) of the Court Procedures Rules 2006 (ACT), the costs of an application in a proceeding “are in the discretion of the court”.

The scope of the claim

7. It is useful first to clarify the costs that are in issue.
8. On 28 March 2008 a trial date was vacated because of the plaintiffs’ wish to file and serve a further amended statement of claim described by their solicitor as “claiming causes of action in negligence, defamation, intentional harm, conspiracy to harm, breach of contractual provisions, Privacy Act, (Cwth) to the Trade Practices Act provisions [sic] in addition to the cause of action pleaded in paragraphs 29 and 30 of the existing Amended Statement of Claim”.
9. Between 11 April and 5 June 2008, the plaintiffs served on the defendants five versions of the proposed further amended statement of claim. Another version of this document was prepared by the plaintiffs but not provided either to the court or to the defendants; this would not have mattered except that this was the version that the plaintiffs’ counsel sought to refer to at the hearing of the application for leave to amend on 5 June 2008. When it emerged at the beginning of the hearing that this version had not been served on either the court or the defendants, and the plaintiffs’ counsel was unable to identify the differences between that version and the version most recently provided to the court and the defendants, counsel for the plaintiffs conceded that the application could not be heard that day. Accordingly, as indicated above, I dismissed the application and made orders dealing with any new application that was to be made to amend the statement of claim.
10. Finally, on 20 June 2008, the plaintiffs served a seventh version of the proposed further amended statement of claim, and leave to amend was granted by consent on 4 July 2008.
11. The costs arising from the vacation of the trial date in March 2008, and the costs arising from the plaintiffs’ efforts to redraft the statement of claim, have already been dealt with in earlier costs orders.
12. Thus, the only costs outstanding are the costs of the application that was dismissed on 5 June 2008. Furthermore, the plaintiffs concede that they are liable for the defendants’ costs on a party and party basis; the only argument is as to the availability of indemnity costs.
13. This case has much in common with cases involving the vacation of a trial date. Although the hearing date in this case was not technically vacated, the dismissal of the 5 June application did not dispose of the proposal to amend the statement of claim. That is, the hearing was no more useful than if it had simply been vacated.

Submissions

The defendants’ submissions

14. In their written submissions in favour of the award of indemnity costs, the defendants recite the history of the plaintiffs’ attempt to amend their statement of claim, as outlined in [8] to [10] above.
15. The defendants point out that in spite of the plaintiffs’ stated intentions as quoted in [8] above, the further amended statement of claim as amended by consent on 4 July 2008 contained only one new cause of action, namely a claim of breach of s 12CA of the Australian Securities and Investments Commission Act 2001.
16. The defendants note that they provided a number of comments on various versions of the further amended statement of claim in the context of their repeated refusals to consent to the proposed amendments. They point out that they are not obliged to provide explanations of this sort to the plaintiffs but that they have done so with the aim of minimising expense. The defendants also point out that as soon as the proposed further amended statement of claim had been put into what they describe as a “tolerable form”, they consented to the amendment.
17. The third defendant says that “it had been intimated” to it that the plaintiffs’ application on 5 June 2008 would be made by senior counsel, and as a result it felt compelled also to brief senior counsel (who is based in Sydney) to appear on the application. The plaintiffs did not dispute the third defendant’s reason for briefing two counsel on the application, even though in the event the plaintiffs were represented only by junior counsel.
18. The defendants also assert that no explanation has been given for why the earlier versions of the proposed further amended statement of claim were defective or why the plaintiffs were not in a position to make their application on 5 June 2008 as scheduled.
19. Finally, the defendants assert that there is no good or just reason why they should be required to bear any of the costs that they have incurred as a result of the plaintiffs’ repeated provision of inadequate drafts of the proposed further amended statement of claim.
20. In support of their application, the defendants referred me to the cases of Colgate-Palmolive Company and Ors v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225 (Colgate-Palmolive), Fairplay Newspaper and Printing Works Pty Ltd v Currico Nominees Pty Ltd Federal Court of Australia, Carr J, 22 May 1998, unreported (Fairplay) and David Charles Robinson v Aware Ind Ltd [1998] FCA 1256 (Robinson).
21. All these cases involved the application of s 43 of the Federal Court of Australia Act 1976, and rr 12 and 19 of O 62 of the Federal Court Rules 1979. These provisions respectively give the court jurisdiction to award costs in proceedings (subject to express exceptions) and specify that (again subject to express exceptions) the award of costs is in the discretion of the court; permit solicitors to charge specified fees; and specify the costs that are to be allowed on taxation. The relevant ACT rule, r 1721(5), specifies that costs “are in the discretion of the court”. There is no reason why the principles expressed in the Federal Court cases cited should not apply to the ACT power to award costs that is being exercised in this case.
22. The principles set out by Sheppard J in Colgate-Palmolive are summarised by the defendants as follows:
(a) the usual basis upon which costs will be ordered is the party and party basis;
(b) the court may depart from the usual orders where the justice of the case might so require, or a special or unusual feature of the case justifies the court doing so;
(c) one circumstance in which a departure from the usual orders might occur is where particular misconduct causes loss of time to the court and to the other parties;
(d) the categories in which a departure from the usual orders may occur are not closed.
23. The defendants also submitted (relying on comments made by Gummow J in Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415 and implicitly adopted in Colgate-Palmolive at [18]) that “ethical or moral delinquency is not essential for an indemnity costs order”.
24. In Fairplay, Carr J (BC9802472 at 4) said in relation to an application to amend a statement of claim made 11 days before the trial date (but three years after the original statement of claim was filed and nearly nine years after the cause of action arose):

The applicant, in its written submissions, says that this is not an appropriate case for an order for indemnity costs. It suggests that the authorities disclose that indemnity costs are generally reserved for those cases in which the conduct of a party has been deserving of criticism.
The categories of cases in which an order for indemnity costs may be made are quite clearly not closed: Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Federal Court of Australia, 3 May 1991 at 8). However, accepting for the moment the applicant’s proposition that generally an indemnity costs order is not made unless the conduct of the paying party has been deserving of criticism, I think that the applicant’s conduct warrants criticism. The explanation tendered (such as it was) for the lateness of this third application to amend was really no explanation at all. I do not think that the conduct has to be described (as the applicants submits) as “reprehensible” or “high-handed” before anything other than the usual order for costs can be made. In my view, the manner in which the applicant has approached the conduct of the preparation and presentation of its case is simply not good enough, to the extent that it should be ordered to pay indemnity costs ... .

25. In Robinson, Weinberg J adopted Sheppard J’s approach in Colgate-Palmolive and relied on his reference to “misconduct that causes loss of time to the Court and to other parties” to award indemnity costs against a party whose failure to make any effort to prepare for a scheduled trial led to the vacation of the trial date.

The plaintiffs’ submissions

26. The plaintiffs seek to explain the difficulties in providing an adequate draft of the further amended statement of claim by reference to the need to brief a new junior counsel in April 2008 after the previous junior counsel returned her brief due to competing obligations. They also provide descriptions of the kinds of change that had been made to successive drafts of the further amended statement of claim (for instance, there were some technical and typographical errors pointed out in the draft of 14 April 2008; the 5 May 2008 draft apparently did not comply with the ACT Court Procedures Rules in relation to how deletions should be shown, and some of the changes made in the 8 May 2008 draft were apparently made for the purpose of making the draft compliant with those Rules). The plaintiffs submit that “there is nothing to suggest” that the “mistake” constituted by the plaintiffs’ failure to serve the correct draft of the further amended statement of claim before the 5 June hearing was “intentional, deliberate or planned”.
27. The plaintiffs do not appear to challenge the authorities identified by the defendants and mentioned at [20] and [23] above, and in particular they agree that indemnity costs should not be awarded against them unless “misconduct” or conduct “deserving of criticism” can be established against them such as to justify the court exercising its discretion otherwise than on the usual basis of ordering party and party costs. However, the plaintiffs submit that “misconduct” (as mentioned in Colgate-Palmolive and adopted in Robinson) or conduct “deserving of criticism” (as mentioned in Fairplay) must be deliberate, knowing or intended conduct, and dispute that their conduct satisfies that test. The plaintiffs raise several matters in support of that submission.
28. First, the plaintiffs say, the multiple drafts of the proposed further amended statement of claim provided to the defendants were provided consistently with the plaintiffs’ “desire to negotiate and make further changes to the draft proposed further amended statement of claim in response to the objections of the third and fourth defendants”.
29. Secondly, the plaintiffs assert, of their failure to file and serve the correct version of the proposed further amended statement of claim, that “there is nothing to suggest that it was other than an office mistake and in no way intended or designed or made for some anterior purpose [sic]”. The plaintiffs referred to several events set out in the defendants’ chronology (being the creation, filing or serving by the plaintiffs of specified documents on specified dates) as “facts in which by reason of the mistake above referred to made in the office of the Plaintiffs’ solicitors, the error remained undetected to all parties involved including the Plaintiffs’ legal team”. The meaning of those words is not entirely clear to me, but the fact that certain documents were dealt with on certain days within the period during which the error remained undetected does not in any way seem to explain either the making of the error or the failure to detect it.
30. Thirdly, the plaintiffs’ abandonment of most of the foreshadowed new causes of action in the proposed further amended statement of claim served on 20 June 2008 is explained as “emphasis[ing] the continuing desire of the plaintiffs to reduce the complexity of the litigation, the number of causes of action, and the duration of the hearing”. This is a rather odd description of the plaintiffs’ intentions, given that the process of drafting a further amended statement of claim, and the associated vacation of the trial date, had been explained only a few months earlier by the plaintiffs’ intention to add at least five and possibly more new causes of action.
31. Finally, having provided detailed submissions about such events, the plaintiffs submit that it would be impermissible for the court to take account of anything that had happened before 13 May 2008 for the purpose of determining the level of the costs awarded on 5 June 2008. The argument was that the costs relating to “events [before 13 May 2008] were resolved by the order for party/party costs made by consent on 28 March 2008 and again by consent in the Minutes of Proposed Consent Orders made on 4 July 2008”.

Conclusions

32. All parties agree that I need to find “misconduct” or “conduct deserving of criticism” before indemnity costs can be ordered. I do not accept the plaintiffs’ submission that this conduct must be “deliberate, knowing or intended conduct”. The fact that in many cases it will be deliberate, knowing or intended conduct that produces an award of indemnity costs does not seem to me sufficient to establish that only such conduct can justify such a costs award. In reaching that conclusion I rely on the comments of Carr J quoted at [24] above.
33. It is true that the costs of resolving the form of the proposed further amended statement of claim were dealt with in Order 4 of the 4 July consent orders, and that the current matter for decision is the level at which costs are payable in respect of the application that was dismissed on 5 June 2008. On this basis, most of the events mentioned and submissions made by each of the parties have no direct relevance to the current decision. Neither the defendants’ claims about the inconvenience caused by repeated attempts to amend the statement of claim, nor the plaintiffs’ problems with retaining counsel and their assertion that their conduct in relation to the various versions of the statement of claim was not only innocent but actually engaged in for virtuous reasons (namely in an attempt to reach agreement with the defendants and to reduce the complexity of the litigation), are directly relevant. In particular, the defendants’ assertion (see [19] above) that they should not have to pay any of the costs of the plaintiffs’ repeated provision of inadequate drafts of the proposed further amended statement of claim seems to be beside the point, since this argument is about the costs of the application that was dismissed, not the costs of dealing with the repeated redrafts.
34. However, I do not consider that, in determining the appropriate level of costs to be awarded in connection with the dismissal of the application on 5 June 2008, I am precluded from taking account of the sequence of events that culminated in that dismissal. Noting that sequence of events, there are two directly relevant facts about the abortive 5 June hearing.
35. The first relevant fact is that, when the hearing began on 5 June, it quickly became apparent:
(a) that the document sought to be relied on by counsel for the plaintiffs had not been made available either to the defendants or to the court;
(b) that counsel for the plaintiffs was unable to advise the court of the differences between that document and the last document filed and served; and
(c) that in those circumstances, counsel could not continue with the hearing.
36. I note in particular that if counsel had been in a position to identify the differences between the draft amended statement of claim that he had and the versions that the court and the defendants had, and if it had been clear that those differences were not significant, the hearing might have been able to proceed that day after a short adjournment.
37. The second relevant fact is that there has been no explanation of how the documents filed and served for the 5 June hearing came to be different from the documents in the possession of the plaintiffs’ counsel when he appeared at the hearing. None of the need to brief new counsel, the nature of the changes to successive drafts of the statement of claim, and the asserted virtuous explanations for the preparation of multiple redrafts and the abandonment of extra causes of action provide any explanation at all for the fact that a revised draft statement of claim was brought to the 5 June hearing but not served on the defendants or filed in court. The assertion that the failure to ensure that the court and defendants had the same documents as the plaintiffs’ counsel was not “intentional, deliberate or planned” may be readily accepted, and there may be no basis for finding any ethical or moral delinquency on the part of the plaintiffs, but persuading the court that there was no ethical or moral delinquency is not the same as providing an explanation for how the mistake happened that might have engaged the court’s understanding.
38. No doubt in the normal course of the conduct of a long and complex proceeding, the occasional mistake will be made, and the parties (usually including the party making the mistake) will be inconvenienced and sometimes put to further expense. I would not wish to be taken to suggest that every minor error in the conduct of legal proceedings will justify an award of indemnity costs against the party who has made the mistake. However, in the interests of the community, in the interests of the administration of justice, and in the interests of other parties (not to mention in their own interests) parties must accept responsibility to act at all times with appropriate care and attention to detail in the conduct of legal proceedings. In the words of Carr J, it is “simply not good enough” for a party to serve the wrong draft statement of claim in preparation for a hearing date, and then to fail to check that the correct draft had been served until discrepancies between the draft referred to by counsel and the draft on the courts file is raised during the hearing. This carelessness, especially in the context of other problematic conduct as described in [8] to [10] above, albeit already dealt with in other costs orders, is sufficiently deserving of criticism to justify an award of indemnity costs for a hearing that was effectively vacated as a result of the carelessness.
39. I note in passing that, subsequent to the 5 June hearing, another trial date was vacated on the plaintiffs’ application made when, very shortly before the hearing date, the plaintiff Mr Buggy’s attention was distracted by a family tragedy. In that case, having regard to the reason for vacating the trial date, I refused the defendants’ application for indemnity costs.

Costs of costs argument

40. The plaintiffs submitted that not only should the application for indemnity costs be dismissed, but that the third and fourth defendants should be required to pay the plaintiff’s costs of the written submissions. This latter claim was not supported by either argument or reference to authority. Noting the circumstances in which the defendants’ claim for indemnity costs was made, that the plaintiffs could have consented to such an award and avoided the exchange of written submissions, and that I have found that indemnity costs are justified, the implication that the plaintiff should not have to bear the cost of resolving the claim for indemnity costs does not deserve serious consideration. However, in the absence of any reason to depart from the usual orders, those costs will be paid by the plaintiffs only on a party and party basis.

Orders

41. The orders are as follows:

(a) the plaintiffs are to pay the defendants’ costs of the application dismissed on 5 June 2008 on an indemnity basis; and
(b) the plaintiffs are to pay the third and fourth defendants’ costs of submissions in relation to the costs of the application dismissed on 5 June 2008 on a party and party basis.

I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.

Associate:

Date: 2 July 2009

Counsel for the plaintiffs: Mr A J Tudehope

Solicitor for the plaintiffs: Nelson & Co Solicitors as agents for Malcolm Johns & Company

Counsel for the first and second defendants: Mr D Shillington

Counsel for the third and fourth defendants: Mr R T Wright with Mr T Faulkner
Solicitor for the first and second defendants: Moray & Agnew
Solicitor for the third and fourth defendants: Moray & Agnew as agents for Middletons
Date of hearing: 5 June, 4 July 2008
Date of judgment: 2 July 2009