Adrenalin International Powersports Pty Ltd v John Caines Management Pty Ltd

REASONS FOR JUDGMENT 1 These reasons for judgment concern an application by the applicant ("AIP") for indemnity costs, in respect of the Court's determination of the substantive proceedings in its favour. The question for determination is whether the Court should award the costs of those proceedings to AIP and its directors on the usual basis, or on an indemnity basis. 2 These reasons for judgment must be read together with the reasons for judgment of the Court published on 10 March 2004 which dealt with and determined the substantive proceedings (that is, AIP's application and the cross claimants' cross claim). See: Adrenalin International Powersports Pty Ltd v John Caines Management Pty Ltd [2004] FCA 206 ("the 10 March judgment"). 3 In the 10 March judgment, the Court dismissed a cross claim advanced by the cross claimants. It also granted an application made by AIP. The vast bulk of the case was occupied by evidence and submissions concerning the cross claim. The cross claim was entirely devoid of merit. It was based on evidence which the Court described in an unfavourable way. 4 A major plank in the cross claim concerned an allegation that the directors of AIP had conspired to defraud the shareholders of AIP and Adrenalin International Powersports Centre Pty Ltd. It was said that the directors engaged in conduct alleged to have been in furtherance of the conspiracy. Part of that conduct allegedly involved the making of false representations by AIP directors. The cross claimants' case in that regard was considered by the Court to be supported by evidence which it described, by reference to particular witnesses referred to in the paragraphs below. 5 Mr Caines at [176] was found to be a witness whose evidence was not to be accepted where it conflicted with that of Mr Thomas. At [178], Mr Caines was held to have been engaged in "a recent invention", with respect to evidence about an alleged misrepresentation by Mr Thomas. At [180], Mr Caines was described as "indifferent to the truth". At [181] he was considered to have been involved in "a concoction". The "manner in which [he] gave evidence" was also the subject of adverse comment at [181]. 6 Mr Rossney's oral evidence was contrasted with his affidavit evidence. Mr Benson's evidence, like Mr Rossney's, was said to be vague and uncertain. 7 The principles which guide the Court's wide discretion to award indemnity costs are well known. They were stated by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 ("Colgate") and have been applied by Full Courts, including in Re Wilcox; ex parte Venture Industries (1996) 72 FCR 151 ("Wilcox") at 156 to 157. 8 These principles recognise that ordinarily a court will not depart from the rule that costs be ordered on a party-party basis unless the circumstances of the case warrant a departure from the usual course. They also recognise, as the Full Court said in Wilcox, that: "the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course". (emphasis supplied) 9 As Lander J recognised in Williams v Minister for Environment & Heritage [2004] FCAFC 58, special or unusual circumstances are not a precondition to the exercise of the power to award indemnity costs, if the justice of the case requires it. 10 Counsel for AIP and the cross-respondents relied on the fact that the respondents and cross-claimants made allegations of fraud against the directors of AIP. They referred to a passage in the judgment of Colgate where Sheppard J said at 233: "…it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud…" 11 The only person who the Court considers may fit the description of someone who made allegations of fraud, knowing them to be false, is Mr Caines. Mr Caines is not a party to the litigation. The first respondent, although controlled by him, is nonetheless a different legal person. There was no application before the Court for it to award indemnity costs against a non party: compare Hamburger v Williamson (2001) 104 IR 163 at 166 to 167, [2001] FCA 189 at [22] to [25]. 12 The applicant and cross-respondents also sought an indemnity costs order against Mr Knight, on the basis that he failed to give evidence after making serious allegations of fraud which he did not withdraw. That evidence was not before the Court because the sworn affidavit made by Mr Knight was withdrawn. I do not consider that there is a valid reason for the award of indemnity costs against Mr Knight. 13 In conclusion, I consider that no case has been established for the grant of indemnity costs to the successful parties with respect to any respondent or cross-claimant. The Court will make the usual costs order as follows: "The respondents and cross-claimants pay the costs of the applicant and the cross-respondents of, and incidental to, the proceedings, to be taxed in default of agreement". I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.