FEDERAL COURT OF AUSTRALIA

Kojic v Commonwealth Bank of Australia [2016] FCA 455

ORDERS

THE COURT ORDERS THAT:

1.    The first respondent pay to the applicants damages in the sum of $636,796.47.

2.    The second respondent pay to the applicants damages in the sum of $159,199.12.

3.    The first respondent pay to the applicants costs of the proceedings.

4.    The second respondent pay to the applicants costs of the proceedings incurred from the date upon which the second respondent was joined to the proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MANSFIELD J:

1    On 15 April 2016, judgment was delivered in this matter: Kojic v Commonwealth Bank of Australia [2016] FCA 368 (the main judgment). The main judgment left two issues to be finally addressed:

(1)    whether the first respondent, Commonwealth Bank of Australia (CBA) should have the benefit of its liability being reduced for contributory negligence or treated as an apportionable liability under the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (the Contribution Act); and

(2)    as to the appropriate order for costs.

2    These reasons deal with each of those issues, and proceed in the light of them to making final orders in the action. I adopt the definitions used in the main judgment.

APPORTIONABLE LIABILITY

3    I discussed the liability of the CBA in the main judgment at [166]-[191]. I expressed the view at [222], at least provisionally, that the foundation for the liability of the CBA, namely unconscionable conduct, did not attract the apportionable liability provisions in the Contribution Act for reasons briefly expressed at [223]-[225]. As that matter had been only shortly argued, at the conclusion of the hearing I gave the CBA the opportunity to make further submissions in relation to it.

4    Its further written submission is quite brief. It did not seek to make submissions on the availability of contributory negligence. It says that its liability falls within the definition of “negligent wrongdoing” in s 3 of the Contribution Act, and discussed at [221] of the main judgment because it is “innocent” conduct. It is said that the findings at [183]-[190] reflect a finding that the CBA itself had the relevant knowledge to engage in unconscionable conduct, but that the findings do not indicate that it intended to cause loss to the Kojics. The absence of a finding of intention, it is said, means that the conduct of the CBA is “innocent” wrongdoing so as to fall within the definition of “negligent wrongdoing” in s 3 of the Contribution Act. There is no authority presented in support of that proposition.

5    I do not accept that submission. In my view, the finding, in particular at [190] of the main judgment does not accommodate that characterisation. In short, I have found adversely to the CBA that its role in the transaction was undertaken knowing that the Kojic payment, as a payment by one of its clients, was intended by those clients to secure a half interest in the property, but would not do so because of the CBA’s proposed registered mortgage, and furthermore, it was a payment by clients of the CBA to the detriment of the clients and to the clear benefit of the CBA when the clients did not understand that that was the case, and the knowledge of the CBA (as distinct from the individual knowledge of its two officers) was that that was the nature of the transaction. Although there was no express finding of an intention on the part of the CBA to engage in (and it would be surprising if there were such a finding) unconscionable conduct, in my view it intended to engage in that conduct with the knowledge of the facts which rendered it unconscionable. To some extent, the reference by the Kojics to Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) (2012) 270 FLR 1 at [2187] supports that view.

6    The short answer to the contention, therefore, is that I do not accept that the conduct of the CBA was innocent wrongdoing in the sense in which that expression is used in the definition of “negligent wrongdoing” in s 3 of the Contribution Act. Consequently, for these reasons and as provisionally expressed in the main judgment, I adhere to the view that the CBA is not entitled to have the extent of its liability reduced either for the contributory negligence of the Kojics or for the other conduct which, in the case of McDonald, I found was conduct contributing to the loss of the Kojics and which led to the liability of McDonald being apportioned in the way described in the main judgment.

COSTS

7    The Kojics seek an order for costs against the CBA, which they say should simply be costs following the event as they have succeeded in their claim against the CBA. They also seek an order that those costs should be paid on an indemnity basis. The basis of the indemnity cost claim is first that (it is said) the CBA maintained an unreasonable and high-handed refusal to engage in any pre-action settlement discussions although the CBA was aware of the points proposed to be made by the Kojics, and on which the Kojics largely succeeded. Secondly, the Kojics point to the quality of discovery given by the CBA, particularly by its two officers, which ultimately and with some persistence led to the discovery of certain significant documents which had not earlier been discovered.

8    For its part, the CBA does not oppose an order for costs but submits that the costs ordered should be limited to a percentage of the Kojics’ costs having regard to the conduct of the trial, the findings of the Court in relation to each of the witnesses (as recorded in the main judgment) and by the Kojics having re-opened their case almost at the conclusion of the hearing for purposes which proved to be insignificant in the ultimate resolution of the case.

9    In the case of the CBA, I do not think it is appropriate to break up different elements of the conduct of the case, or of the findings made, to inform the appropriate order for costs. Such matters are features of many cases. The Kojics succeeded, substantially to the full extent of their claim, notwithstanding some findings adverse to Kojic and notwithstanding some observations made by the Court about the utility of the evidence in the re-opened case. On the other hand, having regard to the particular perspectives of the two officers of the CBA directly involved in the transaction, and the findings made in relation to their evidence, I am not persuaded that the conduct of the proceeding by the CBA, or its responses to the pre-action communications from the Kojics through their solicitors, amounted to high-handed and unreasonable conduct. Having regard to the respective contentions about the conduct of the hearing, each of which has some merit, in my view the appropriate order is simply that the Kojics be entitled to the costs of the proceedings against the CBA. I do not order that those costs be taxed on an indemnity basis.

10    In relation to McDonald, whilst he accepts that ordinarily costs should follow the event, he contends that in this instance a confined order for costs of a percentage of the costs of the proceeding only should be made.

11    I accept that he should not be liable for any costs of the action prior to his joinder in the proceedings. Any order for costs to be made against him will operate only in respect of costs incurred subsequent to that date. That will exclude the pre-trial preparatory work because, had that preparatory work been directed towards the possible liability of McDonald, one would have expected him to have been joined in the proceeding when it was commenced.

12    McDonald asserts four broad reasons why it is appropriate that he should only be liable for a relatively small proportion of the costs of the Kojics. First, he points to the process of apportionment of liability, and the findings as to how that apportionment should operate in this matter. I do not think that consideration diminishes in any meaningful way the entitlement of the Kojics to costs against him. It was open to him, if so advised, to have protected his position, in the eventuality of a finding with apportionment such as was made, by making an appropriate offer. No such offer has been drawn to the attention of the Court. Secondly, he refers to his late joinder into the proceedings and in those circumstances the absence of any pre-action steps to resolve the claim against him. In my view, those considerations are reflected in the proposed order for costs which I will make, that is that he should be liable for the costs only from the time he was joined in the proceedings.

13    Thirdly, he says that the cross-examination of Kojic, directed to showing a significant earlier transaction in which she had advanced unsecured funds to Blanusa in 2008 to support Blanusa or one of his entities purchasing another property should be taken into account specifically to reduce the costs payable by McDonald to the Kojics. It was (as pointed out), necessary to have subpoenaed certain documents to confront Kojic with the evidence of that transaction when she should readily have acknowledged it. Fourthly, it is said, the application to re-open the cross-examination of McDonald, and the steps necessary to achieve that, proved to be unnecessary so that the Kojics’ costs involved in that process should not be required to be paid by McDonald.

14    In my view, those two factors, although legitimately raised, do not lead to the exercise of the discretion available to the Court to award to the Kojics less than an appropriate amount for costs. In the give and take of what was a lengthy hearing, the particular elements of the cross-examination of Kojic referred to did not occupy such a significant proportion of the hearing, relative to other steps taken in the course of the hearing, to warrant the distinction of that particular section of the cross-examination as justifying other than the normal order for costs, and the same may properly be said of the fourth point. There was a significant dispute between Kojic and McDonald as to the events surrounding the settlement, and there was apparently some basis for determining or suspecting that there existed additional material which might be of assistance to the Court in determining where the true facts lay. Ultimately, that particular evidence did not have that effect. However, in my view, it was not an inappropriate exercise to have undertaken in the course of the hearing, and also it might properly have been undertaken at an earlier stage in the hearing so that it did not inappropriately extend the hearing itself.

15    Accordingly, in my view, McDonald should pay the costs of the Kojics of the action as incurred subsequent to the date of McDonald’s joinder as a respondent to the proceeding.

16    The formal orders will be firstly that there be judgment for the Kojics against the CBA for $636,796.47 including interest, and that the CBA pay to the Kojics the costs of the proceeding; and secondly that there be judgment for the Kojics against McDonald for $159,199.12 including interest, and that McDonald pay to the Kojics their costs of the proceeding, as incurred from the date upon which McDonald was joined as a respondent. Clearly, to the extent that the liability of the CBA and of McDonald overlaps either as to the damages or costs, those liabilities are joint and several.

Associate:

Dated:    2 May 2016