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Supreme Court of Victoria Decisions |
Last Updated: 17 September 2008
AT MELBOURNE
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v
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Respondent
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JUDGE:
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WHERE HELD:
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Melbourne
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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COSTS – Practice and procedure – Leave to appeal against costs order made in application for security of costs – Principles – Undertaking by a party
- Leave to appeal refused.
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APPEARANCES:
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Counsel
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Solicitors
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For the Applicant
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Mr D. Denton SC
with Mr M. Whitten |
Monahan & Rowell
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For the Respondent
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Mr I. Jones SC
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Isaac Brott & Co
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1 AG Blondell & Associates Pty Ltd (“Blondell”) seeks leave to appeal an order for costs made against it by Master Daly consequential upon an order for security for costs.
2 Blondell was successful in obtaining, in effect by consent, orders that Ilouri Nominees Pty Ltd (“Ilouri”) the plaintiff by counterclaim in the proceeding, provide it with security for its costs. However, the Master ordered that Blondell, the fourth defendant to Ilouri’s counterclaim, pay Ilouri’s costs.
3 I am required to determine whether Blondell should be given leave to appeal[1] and, if leave is granted, then what order should be made in relation to costs.
Background
4 It is not necessary to recite in any detail the facts of the claim, given the discrete nature of the point to be determined. Ilouri, by its amended counterclaim, joins a number of defendants, including Blondell, which carries on business as an accounting firm. The claim against Blondell relates to its handling of Ilouri’s financial affairs over a number of years.
5 In February of this year, Blondell raised with Ilouri the question of it providing security for Blondell’s costs. It was not disputed by Ilouri before Master Daly or on the appeal that Blondell had, pursuant to r.62.02, an entitlement to seek such security for costs from Ilouri.
6 Between February and August of this year, there was considerable correspondence between the solicitors for each party as to the manner and level of such security.
7 On 14 February, Blondell’s solicitors wrote to Ilouri’s solicitors estimating its party/party costs of the proceedings to be in the region of $200,000 and asking for evidence of Ilouri’s capacity to meet any order or, alternatively, to provide “satisfactory security for our client’s costs by way of bank guarantee”.
8 Ilouri’s solicitors replied the next day, noting that Blondell had been the former accountants for Ilouri and were aware of the financial position of Ilouri. In particular, they identified three properties owned by Ilouri in Toorak, Moorabbin and at “The Peninsula” apartment at Surfers Paradise.
9 Subsequent correspondence between the solicitors raised the issue of Ilouri’s true interest and equity in the properties, given that it held such properties as trustee. The question of beneficial ownership of the relevant parcels of real estate was debated by the solicitors, as were the relevant authorities in relation to security of costs where assets were held by a trustee company.
10 The common theme throughout Blondell’s solicitors’ correspondence with Ilouri’s solicitors was its insistence that it required a bank guarantee which would obviate the necessity for an application for security of costs.[2] On the other hand, Ilouri, at times, suggested a form of order such as that approved in Livingspring Pty Ltd v Kliger Partners (A Firm),[3] and at other times debated the level of security to be provided by a bank guarantee.
11 I shall return in a moment to particular pieces of correspondence which appear to have been germane to the Master’s decision.
12 Master Daly heard the application on 21 August 2008. Much of the heat involved in the controversy between Ilouri’s solicitors and Blondell’s solicitors had dissipated by reason of an affidavit of Tova Burakiewicz filed the day before on behalf of Ilouri. The affidavit confirmed Ilouri as the trustee of the Burakiewicz Family Trust and identified with precision the three properties of which Ilouri was the registered proprietor. Mr Burakiewicz, by paragraph 10 of the affidavit, offered undertakings consistent with those approved in Livingspring. They were in the following form:
“(a) To do all such things as are necessary to enable Ilouri Nominees to enforce its right of indemnity against the trust assets.
(b) That Ilouri Nominees will take no action whereby to cause Ilouri Nominees to dispose of either the Malvern Road apartment, the warehouse or the Surfers Paradise apartment.
(c) To give the fourth defendant, by counterclaim, 72 hours notice of any intention to change either the directorship of the trustee or the trustee”.
Those undertakings were acceptable to Blondell and the issue to be resolved by the Master at the hearing on 21 August was confined to costs.
13 After hearing argument from counsel for Ilouri and Blondell, the Master resolved that Blondell should pay Ilouri’s costs. The following account of the Master’s reasons was accepted by the parties on the appeal:
“I find that the solicitor for Ilouri Nominees acted reasonably in dealing with the issue of security for costs. In particular, I find that the offer of undertakings on 27 May 2008 in the form attached to the letter of 27 May 2008 was a reasonable step, and that no doubt, if a copy of the trust deed and valuations had been sought following such letter, that they would have been provided.
In my view, Ilouri has acted reasonably in dealing with the correspondence from the solicitors for AG Blondell concerning the question of security for costs and that AG Blondell acted unreasonably in not taking up the offer of undertakings from Ilouri.
In these circumstances, in my opinion, the order should be that AG Blondell pay Ilouri’s costs of the Summons and that in terms of the draft order submitted to the Court by AG Blondell in paragraph 2 there should be a reversal of the names of the defendant/plaintiff by counterclaim and the fourth defendant by counterclaim.”
Principles relevant to this application
14 The requirement for leave to appeal on the question of costs was considered by Batt JA (with whom Charles and Callaway JJA agreed) in Etna and Anor v Arif and Ors[4] where he said:
“With regard to the discretion to grant leave, Callaway, J.A. in Hanlon v. Brookes at 1632 observed:
It is almost invariably the case that the judge at first instance is better placed to deal with the costs after a long trial and counsel seeking leave ordinarily has a difficult task. The test is not whether we should have exercised the discretion in the same way as his Honour but whether there was or were a ground or grounds on which he could reasonably do so.
In Wentworth v. Rogers (No.3) (1986) 6 N.S.W.L.R. 642, which concerned an application for leave to appeal against an order for costs, Kirby, P. (with whom Glass, J.A. agreed) stated at 644 that the principles requiring leave to appeal from interlocutory decisions applied with special force where the decision in question was one of practice and procedure, referring to the well-known statement of Jordan, C.J. in Re The Will of F.B. Gilbert (Deceased) (1946) 46 S.R.(N.S.W.) 318 at 323 and to subsequent developments. His Honour further stated that the New South Wales provision corresponding in substance to s.17A(1)(b) amounted to a legislative recognition of those considerations. He continued:
Accordingly, it is normally necessary for a claimant for such leave to show something more than that the appeal court would, if exercising its discretion afresh, have come to a conclusion different to that reached by the trial judge. Some error of principle in the exercise of the discretion, a consideration of irrelevant matters or some other manifest mistake is needed to take the case out of the ordinary situation in which, wherever a discretion is to be exercised, minds may differ on the result.
Similarly, Priestley, J.A. stated at 651:
One of the purposes of this provision is to ensure that costs questions, important though they frequently are to litigants not only cannot be further litigated by a party as of right on appeal, but also may only be allowed to be further litigated by appeal if the Court of Appeal thinks there is some good reason, over and above the Court's own opinion of what would have been the best costs order in the particular circumstances, for doing so. In a great many cases, including the present, costs are in the discretion of the Court; they also seem to me to fall within the category of matters of practice and procedure.”
15 Recently, in Spotless Group Ltd v Premier Building and Consulting Pty Ltd and North Suburban Properties Pty Ltd,[5] Redlich JA (with whom Dodds-Streeton JA agreed) cited with approval what had been said by Callaway JA in Hanlon v Brookes[6] and restated the principles in the following terms:
“It is well established that an appellate Court will not, in the absence of strong reasons, interfere with the exercise of discretion by the Court below with respect to the question of costs.
This Court may disturb the costs orders made below where an error in principle is identified, where the judge acted on a manifestly erroneous view of the facts, or where the award is manifestly unreasonable. But the applicant must satisfy a high threshold for such a grant of leave. The test to be applied is not whether the Court of Appeal would have made the same order but whether there is a ground upon which the order by his Honour could reasonably be made. Some manifest error must be exposed to take the case out of the ordinary situation in which, wherever a discretion is to be exercised, minds may differ on the result. Ormiston JA recognised this high threshold in Transport Accident Commissioner v O'Reilly observing that:
It is extraordinarily difficult to show that a court of first instance or a tribunal with wide discretionary powers has erred in the exercise of its powers to award costs, if there be some basis for making an order other than the conventional order in favour of the successful party.”[7]
16 These decisions of the Court of Appeal demonstrate the particularly high hurdle faced by an applicant seeking leave to appeal an order for costs. Each emphasises the necessity for an applicant for leave to expose clearly manifest identifiable error before leave will be granted. As has been emphasised, the opinion of the reviewing Court as to an appropriate costs order is not to the point at this stage.
17 There is no dispute between the parties that the principles stated by Redlich JA in Spotless Group were applicable to this application for leave.
18 Mr Denton SC, who appeared with Mr Whitten for the applicant, argued that the Master took a manifestly erroneous view of the facts before her. He asserted that there were three clear errors.
19 First, the Master’s reference to “an offer of undertakings” by Ilouri through its solicitors on 27 May 2008. It was contended that when the letter of that date was examined, it did not contain any offer, rather, a suggestion as to how the security might be provided. The second matter that Mr Denton relied upon was the Master’s conclusion that if a copy of the trust deed and valuations had been sought from Ilouri, then that material would have been provided by it. It was said that such a conclusion was not open on the evidence. Thirdly, it was said that the Master failed to give any consideration to the fact that the undertaking in its final form was not proffered until the day prior to the hearing.
20 Mr Jones SC, who appeared for Ilouri, emphasised the high hurdle that faced an applicant where leave is sought to appeal an order as to costs. He stated that the correct test was that the impugned order “could not possibly be right” before leave should be granted. He contended that the undertakings proffered on 27 May 2008 were appropriate and were substantively the same undertakings as those which founded the Master’s orders. He submitted that the Master’s reasons needed to be viewed in the light of a decision in a busy jurisdiction in which the argument was directed towards costs, not the legal niceties surrounding exchanges between solicitors. He contended that the Master’s decision was based upon the overall conduct of Blondell in May/June of 2008, rather than the precise terms of the proposed undertakings.
21 It was accepted by both counsel that generally in such an application costs would be awarded on “a costs in the cause” basis.
22 I am of the view that the applicant’s attack on the Master’s order fails. The applicant’s analysis of the Master’s reasons is far too technical and loses sight of the fact, as has been spelt out on numerous occasions, that not only must the error be clear and manifest, but that any statement of reasons need to be viewed contextually; particularly when it involves a decision as to costs. I will now set out my reasons for reaching this conclusion.
The “offer”
23 The letter of 28 May by Ilouri’s solicitors to Blondell’s solicitors was pivotal to the application for costs. I need to refer to some aspects of that letter. Firstly, it did not, as Mr Denton SC correctly submitted, contain an offer to enter into an undertaking such as that ultimately concluded. Rather, it was a suggested type of undertaking which still required confirmation from Blondell. The suggested undertaking was generally in a Living Spring form, although there was no identification of the trust assets. The failure to identify the trust assets, in my view, is not material as in an earlier letter (15 February 2008), those assets had been identified; moreover, Blondell having been Ilouri’s accountants for many years, would have been well aware at least up until very recent times as to the existence of the trust properties.
24 Although there was no offer in the strict legal sense, there can be no misunderstanding as to what Blondell’s solicitors thought was being proffered. On 11 June, Blondell’s solicitors replied acknowledging receipt of the 27 May letter and again requesting a bank guarantee; they also made observations as to any equity that might remain in the trust assets. Six days later, Blondell’s solicitors wrote again stating:
“The undertaking proposed by your client is not acceptable by way of security. It is no more than an undertaking in relation to trust assets which, amongst other things, are themselves the subject of dispute between Tova and Uri Burakiewicz”.
25 I pause to note that there was no suggestion on the part of Blondell’s solicitors that the suggested undertaking was incapable of being accepted or was vague for uncertainty. Quite the opposite. Blondell’s solicitors continued to maintain their insistence upon a bank guarantee. This, then, formed the subject of correspondence over the next couple of months and, particularly, as to the level of the guarantee.
26 The Master’s reference to the offer needs to be seen in the light of the correspondence. By “offer”, the Master was simply referring to the suggested undertaking which had been rejected by Blondell’s solicitors. The Master was not dealing with questions of offer and acceptance in a true legal sense. Rather, she was, in a sense, analysing the conduct of the two firms of solicitors in the light of a potential costs order. In my view, this attack on the Master’s reasons fails.
No evidence as to likely provision of trust deeds and valuations
27 The second basis for the attack on the Master’s reasons is her conclusion that if the suggestion had been followed up, a copy of the trust deed and valuations would have been sought following that letter and that they would have been provided. In my view, it was open to the Master to draw that inference. Ilouri’s solicitors had already provided details of the three properties in February of 2008 and their valuations. The valuations were not proffered because of the brick wall set up by Blondell’s solicitors as a result of its insistence upon a bank guarantee. At no time did Blondell’s solicitors seek the provision of the trust deed or the valuations. The Master was entitled to infer, as she did, that such details would be provided if they had been requested.
No consideration of the undertaking being proffered on the day before the hearing
28 The third basis of the applicant’s contentions needs little discussion. It is inconceivable, in my view, that the Master was not aware that the final formulated undertaking was not made until the day prior to the hearing. Both parties addressed upon it. The absence of reference to it in the context of a ruling about costs is unsurprising. What the Master correctly focused upon was whether the conduct of Blondell’s solicitors in May by its outright refusal to entertain the suggestion of a Livingspring undertaking and its insistence upon a bank guarantee rendered it liable for an order for costs in respect of the application. She thought that it did, and there has been nothing put forward by the applicant to suggest that the Master acted under some misapprehension of the relevant facts or principle.
29 Notwithstanding the “general” practice as to costs in such an application, the order made by the Master was within her discretion. No particular error has been demonstrated which would entitle Blondell to an order for leave to appeal.
30 The application for leave to appeal should be refused with costs.
[1] R.77.05(2)
[2] See for example Blondell’s solicitors’ letter of 14 May 2008
[3] [2007] VSC 443 [75] to [78] and in the Court of Appeal [2008] VSCA 93 [55] to [61]
[4] [1999] 2 VR 353, [67]
[5] [2008] VSCA 115 [10] and [11]
[6] (1997) ACLC 1626
[7] Citations omitted. See: McCauley v McCauley (1910) 10 CLR 434, 455 (Isaacs J); Whiteman v Johnson [1995] 2 VR 637, 639-40 (Phillips JA); ETNA v ARIF [1999] 2 VR 353; Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662, 668 (Kirby ACJ); Wentworth v Rogers [No 3] (1986) 6 NSWLR 642, 644 (Kirby P), Transport Accident Commission v O’Reilly [1999] 2 VR 436, 457.
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