Pavlovic v Universal Music Australia Pty Ltd (No 2)

THE COURT: On 6 October 2015, the Court allowed an appeal from the determination of separate questions by the primary judge, Sackar J, that a contract between the appellants and the first respondent had come into existence on 24 December 2014 and that that contract had not been validly terminated: Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 (the principal judgment).

The Court’s orders were as follows:

By notice of motion filed 20 October 2015, said to be filed on behalf of Mr Pavlovic, an order was sought that the costs of the appeal and in the court below ordered to be paid by “the First Respondent to the Appellants”, be payable forthwith as agreed or assessed: order (1) in the notice of motion. A further order was sought seeking a variation of order (6) made on 6 October 2015, by insertion of the words, “to a judge other than Sackar J, the primary judge in the matter”: order (2) in the notice of motion. Although the notice of motion states that it is filed on behalf of Mr Pavlovic, given that the second and third appellants are business entities of Mr Pavlovic, we consider it appropriate to treat the notice of motion as filed on behalf of all appellants.

The notice of motion was supported by two affidavits of Benjamin Brady, the solicitor with the conduct of the matter on behalf of the appellants, the first sworn 20 October 2015 and the second sworn on 4 November 2015. In response, the active respondent, Universal Music Australia Pty Ltd (Universal), filed an affidavit of Michael John Williams sworn 10 November 2015. The parties also filed written submissions in accordance with the Court’s directions.

At the time of making its orders on 6 October 2015, the Court overlooked that the second and third respondents had filed submitting appearances, save as to costs. As already mentioned, Universal was the only active respondent in this Court and was the active moving party in the court below. It follows that the reference to “the respondents” in each of orders (4) and (5) ought to have been a reference to “the first respondent”. The Court proposes to correct its mistake pursuant to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.17.

The Court’s costs orders were made pursuant to the Civil Procedure Act 2005 (NSW), s 98 and UCPR, r 42.1 and r 42.7(1). Pursuant to the latter rule, the costs of any application in any proceedings are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. The determination of the separate question in this case was such an application. The application that the appellants now make is pursuant to UCPR, r 42.7(2) which provides that “unless the court orders otherwise, the costs of [an application in any such proceedings] do not become payable until the conclusion of the proceedings”.

The appellants advanced three bases upon which they contend they were entitled to an order under UCPR, r 42.7(2):

Subject to disputation as to the quantum of costs, the first and second of these bases do not appear to be factually in dispute and may be accepted. The real question is whether it is appropriate in the circumstances for the Court to “otherwise” order that costs be paid forthwith: UCPR, r 42.7.

The bases upon which the appellants sought an order for costs to be payable forthwith were contained in the affidavit of Benjamin Brady, filed 20 October 2015. Those bases were as follows:

Mr Brady contended that the appeal proceedings “involved a matter that was entirely distinct from any of the substantive issues in dispute, or likely to be in dispute, in the ongoing proceedings between the parties”.

Universal opposed the making of an order that the costs be paid forthwith on three principal bases. First, that part of the proceedings that remained to be litigated involved, inter alia, substantial monetary claims, which, should they be successful, would involve the award of damages in larger amounts than Universal presently owes to the appellants pursuant to the costs orders made by this Court on 6 October 2015, as varied on 20 October 2015.

Secondly, that the amount of costs claimed by the appellant’s solicitors was unlikely to represent the costs that would be assessed on a party/party basis. In this regard, Universal contended that the likely recoverable costs would be in the order of $170,000.

Thirdly, that Mr Pavlovic’s present financial circumstance of having been unable to earn an income since December 2014 was of his own making. He had resigned voluntarily from Modular and there was no impediment, from Universal’s point of view, in his obtaining alternative employment.

The circumstances in which it is appropriate that a court orders costs of an interlocutory judgment to be payable forthwith were discussed by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1, at [11]-[13]. In that case, the court was concerned with Supreme Court Rules 1970 (NSW), Pt 52A, r 9, the predecessor provision to UCPR, r 42.7. However, the factors referred to by his Honour have been held to apply to the rule in its current form: see, for example, Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [31]-[37].

In Fiduciary Ltd v Morningstar Research Pty Barrett J identified three factors relevant to the determination of whether such an order should be made, namely:

UCPR, r 42.7(2) confers a general discretion on the Court to make “some other order” than the rule otherwise prescribes. As is the case with any judicial discretion where no criteria for its exercise are specified in the conferring legislation, its proper exercise depends upon a consideration of all the circumstances of the case having regard to the interests of justice. It is uncontroversial that such discretions are to be “exercised judicially, according to rules of reason and justice, and not arbitrarily or capriciously or according to private opinion”: House v The King [1936] HCA 40; 55 CLR 499 at 503; see also King v Commercial Bank of Australia Ltd [1920] HCA 62; 28 CLR 289 at 292-293; Lucas v Yorke (1983) 50 ALR 228 at 229; Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [22]. Olney J adverted to this in Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312, a decision on the Federal Court Rules 1979 (Cth), O62, r 3(3), which was in similar terms to UCPR, r 42.7:

In Bevillesta v D Tannous McColl JA, Allsop P and Handley AJA agreeing, stated, at [37], that beyond factors such as those described by Barrett J in Fiduciary v Morningstar, in making a determination under UCPR, r 42.7, regard must also be had to the “dictates of justice”, as required by the Civil Procedure Act, s 58.

Section 58 provides that, in deciding to make an order or direction for the management of proceedings, consideration is to be given to the “dictates of justice”, which includes, inter alia, having regard to ss 56 and 57 of the Civil Procedure Act: s 58(2)(a). A range of other factors are set out in s 58(2)(b). Whilst it is not necessarily apparent to us that s 58 applies to an application under UCPR, r 42.7, there is no doubt, as we have said, that in exercising a discretion otherwise unconfined by the conferring statute, the Court is required to take into account all relevant circumstances and determine the matter having regard to the interests of justice.

On the basis of the evidence of Mr Brady, it is apparent that the appellants’ circumstances reflect the first and third factors identified by Barrett J in Fiduciary v Morningstar Research as being relevant to the making of an order that costs be payable forthwith. As to the first factor, the determination of the question whether a contract had been entered into between the parties on 24 December 2014 involved “the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect” of the case.

As to the third factor identified by Barrett J, it was not contended that Mr Brady’s view, that the balance of the proceedings would involve considerable time and expense, was erroneous. The consequence of the Court’s determination that no contract was entered into on 24 December 2014 is that the parties remain in dispute on all issues arising out of Mr Pavlovic’s employment with Modular and it is for that reason that there remain substantial issues to be determined in the proceedings. Indeed, the substantial cost of the proceedings in this Court, being the appeal from the separate determination of the two questions in the proceedings, indicates that the resolution of the remaining issues between the parties in all probability will be costly. Particularised pleadings by Universal, or a finalised cross-claim by the appellants, are not required to demonstrate that this will probably be the case. Having regard to the history of the litigation to date, it can be expected that the balance of the proceedings are likely to be the subject of vigorous agitation by both parties.

There is another consideration that is relevant. Until such time as the costs ordered by this Court are paid, the appellants will not have the use of those monies in circumstances where the appellants’ solicitors have been paid their costs of that part of the proceedings subject of the costs order. Unlike any damages Universal may be awarded should it be successful in the balance of the litigation, which will bear interest, the costs to which the appellants were entitled as a result of the Court’s order will not, unless and until they are assessed and a certificate of costs is registered in the Court pursuant to the Legal Profession Uniform Law Application Act 2014 (NSW), s 70.

Although Universal disputes that there is any reason why Mr Pavlovic cannot work, it is not contested that he has not done so since his employment with Modular ceased. The fact that the parties are still engaged in litigation may impact on his ability to be employed on a full time basis. In short, it is evident that the proceedings between the parties will be on foot for a considerable length of time, and that the appellants’ ability to fund this litigation will be hampered if the orders proposed by way of the notice of motion are not granted.

We consider that granting the orders sought by the appellants accords with the dictates of justice. As was held by Hodgson JA in Richards v Kadian [2005] NSWCA 373 at [7], the question as to whether costs should be payable forthwith is “one of time of enforcement” rather than a determination as against whom or for what amount a costs order should be made. It necessitates a consideration of practical impediments to justice. This includes, in this case, keeping a party out of costs of a finally determined aspect of the claim for a considerable period of time. Finally, we do not place much store in the submission that the appellants did not seek any such order as part of the orders sought on the appeal. That may be relevant as to whether an order for the costs of the present notice of motion ought to be made in his favour. That is considered further below.

In the Court’s opinion, the interests of justice are such that it is appropriate in all the circumstances that the Court make the orders now sought. In coming to this decision, the Court has not found any unreasonable conduct on the part of Universal, being one of the factors that may be relevant on such an application: Fiduciary v Morningstar Research. However, no such finding is necessary; it is not essential that all three factors outlined in Fiduciary v Morningstar Research be satisfied for the favourable exercise of the discretion to determine that costs should be payable forthwith.

By order 6, the Court ordered that the proceedings be remitted to the Supreme Court for the determination of the remaining issues on the summons. By their notice of motion, the appellants sought a variation of this order to include as part of the order that the matter be remitted to a judge other than Sackar J.

The scope of the Court’s power to order a remittal was considered in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178. Young JA, with whom Beazley JA agreed, stated, at [119]:

His Honour, at [121], set out matters relevant to whether such a determination should be made:

In Seltsam Pty Ltd v Ghaleb Mason P, with whose reasons on this point Ipp JA agreed stated at [12]-[13]:

In Universal Music Australia Pty Ltd v Pavlovic [2015] NSWSC 791, at [113], Sackar J expressed the following views as to Mr Pavlovic’s credit:

At [127], Sackar J stated:

These statements clearly constitute “strong findings about the credibility of a party”: Walker Corporation at [121]. It is appropriate therefore, in the interest of justice, that the remaining issues in dispute be dealt with by a differently constituted court.

The appellants have been successful on both aspects of the notice of motion. In the ordinary course, they would be entitled to the costs of the motion, unless the court made some other order: UCPR, r 42.1. As indicated above, the orders sought on the notice of motion were both orders that could have been included in the orders sought on the appeal. Nonetheless, at the time that the matter was before the Court for the hearing of the appeal, it is unlikely that the Court would have permitted evidence to be filed in support of order 1 sought in the notice of motion. At the least, it is unlikely that the Court would have had regard to that evidence until it had determined the appeal.

Likewise, it would have been inappropriate for the Court as part of the hearing of the appeal to have heard submissions on whether the orders now sought ought to have been made. Any such submissions would have had to prognosticate as to the outcome. Further, there most likely would be reasons in the Court’s judgment relevant to the consideration of the appropriate orders to be made. This is so in respect of both orders sought in the notice of motion, but in particular as to whether the matter ought to be remitted to a judge other than the primary judge. Accordingly, we are not persuaded that this is an appropriate case in which to make some other order pursuant to UCPR, r 42.1 in respect of the costs of the notice of motion.

Finally, for the reasons we have already given in respect of order (1), it is appropriate that the costs of the notice of motion be payable forthwith. Accordingly, the Court makes the following orders: