On 28 March 2023 I granted the plaintiff leave to file a Second Further Amended Statement of Claim and made ancillary orders, including that the plaintiff pay the defendants' costs of and incidental to its Amended Notice of Motion. At the hearing the defendants sought an order for costs to be paid forthwith. By order 6 made on that day, I gave the parties leave to file written submissions on that question on the basis that it would be determined on the papers.
[2]
Background
These proceedings, which commenced by way of a statement of claim filed on 14 November 2018, relate to a claim by the plaintiff that the third defendant (which is the trustee of a unit trust called Mortdale Estate Unit Trust and controlled by the first and second defendants, Mr & Mrs Jerkovic) breached its duties as trustee by moving assets and income of the unit trust to GMJ Investment Holdings Pty Ltd (another company controlled by Mr & Mrs Jerkovic). The plaintiff was one of the unitholders of the unit trust.
The following pleadings have been filed:
1. Statement of Claim on 14 November 2018;
2. Defence on 20 December 2018;
3. Cross-Claim on 20 December 2018
4. Defence to the Cross-Claim on 20 January 2019
5. Reply to the Defence to the Cross-Claim on 4 February 2019;
6. Amended Defence on 6 February 2019;
7. Amended Statement of Claim on 3 June 2019;
8. Amended Defence to the Amended Statement of Claim on 21 June 2019;
9. Reply to the Amended Defence to the Amended Statement of Claim on 27 June 2019;
10. Amended Statement of Cross-Claim on 29 April 2020;
11. Further Amended Statement of Claim on 8 September 2020; and
12. Further Amended Defence to the Further Amended Statement of Claim on 23 September 2020.
The defendants have not filed any substantive evidence in the proceedings.
A summary of the procedural history of the matter is found in the decision of Slattery J in Allsop Investments Pty Ltd v Jerkovic [2021] NSWSC 1399. As noted there at [11]-[12], on 16 April 2020 Hallen J ordered that certain questions relevant to the proceedings be referred out to an expert, Mr Trevor Vella, a forensic accountant. Those questions involve an analysis of the financial position of the unit trust and the impugned transactions with a view to determining, among other things, the amount in dispute.
The orders made by Hallen J required the parties to share the cost of Mr Vella's fees equally, subject to potential variation at the conclusion of the proceedings. Delays occurred in finalising Mr Vella's report (it appears largely due to excessive correspondence by the parties with Mr Vella, delays in the provision of relevant documents to him and the volume and nature of that material) with a consequential increase in Mr Vella's fees (from his original estimate of $38,500 to $93,500). At the date of the hearing on 28 March 2023, Mr Vella's report had still not been finalised and it was necessary for a further amount to be paid in respect of his fees to enable this to occur. I note that Mr Vella's report was ultimately finalised and issued to the parties on 13 July 2023 and that none of the parties have suggested that Mr Vella has failed to conduct himself as required by the Court or to act in accordance with his instructions.
When the matter came before Slattery J in 2021, the defendants sought an order for security for costs and also an order for the payment forthwith of all past cost orders previously made in their favour. Slattery J declined to make either order, but (among other things) made an order that Mr Jeremy Allsop, who controls the plaintiff, be jointly and severally liable with the plaintiff to pay any order for costs made in the proceedings against the plaintiff. Slattery J also identified at [94] the need for the plaintiff to amend its statement of claim to plead properly its allegation of dishonesty and made directions in that respect.
By its Amended Notice of Motion filed on 16 September 2022, the plaintiff sought three orders: (a) leave to further amend its statement of claim; (b) leave to dispense with compliance with rule 19.5(1) of the Uniform Civil Procedure Rules 2005 (UCPR) because the amendments to the statement of claim were so significant; and (c) that the plaintiff (and Mr Allsop) be excused from contributing further to the costs of the court appointed expert, Mr Vella. I granted the leave sought in (a) and (b) (which when the matter was heard were unopposed), but not the relief sought in (c).
The orders made on 28 March 2023 were:
(1) Grant leave to the Plaintiff to file and serve within 7 days a Second Further Amended Statement of Claim in the form annexed to the Amended Notice of Motion filed on 16 September 2022.
(2) The Amended Notice of Motion is otherwise dismissed.
(3) Direct the Plaintiff within 14 days to place $16,500 in its solicitor's trust account to meet 50% of the further costs of the Court appointed expert, Mr Vella, and to notify the Defendants' solicitors when this has been done.
(4) The parties are directed upon receipt of the moneys referred to in Order 3, to request Mr Vella to finalise his expert report and provide it to the parties and that he dispense with the provision of a draft as previously foreshadowed.
(5) Plaintiff to pay Defendants' costs of and incidental to the Amended Notice of Motion, including the Defendants' costs thrown away by reason of the amendment made by the Second Further Amended Statement of Claim.
(6) Grant leave to the Defendants to send by email to the Associate to Richmond J and serve short written submissions on the question of whether the costs in Order 5 should be paid forthwith by 4pm on 4 April 2023, and the Plaintiff to send by email to the Associate to Richmond J and serve short written submissions in reply by 4pm on 11 April 2023.
(7) Subject to further order, the question referred to in Order 6 will be determined on the papers.
(8) Liberty to apply to Registrar in Equity for any further directions regarding the preparation of the case for hearing.
The plaintiff, as it acknowledged in its submissions, has previously struggled to plead and particularise its causes of action clearly, and says that this is because the impugned conduct took many forms over many years and because the allegations are ones of serious misconduct. There is no dispute between the parties that the Second Further Amended Statement of Claim is an entirely new pleading, but none of the causes of action previously raised has been abandoned and, as the defendants acknowledge, the causes of action now pleaded all arise out of the same facts previously alleged. The amendment of the statement of claim was necessary in order to plead clearly the dishonesty aspects of the claim and to particularise the impugned transactions. I accept the plaintiff's submission that the particularisation of the impugned transactions was only possible once it gained access to subpoenaed documents, and had examined them in detail.
The evidence relied on by the plaintiff in support of the plaintiff's Amended Notice of Motion establishes that both the plaintiff and Mr Allsop have very limited financial resources.
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Consideration
Under r 42.7(2) of the UCPR the costs of an interlocutory application do not become payable until the conclusion of the proceedings unless the Court otherwise orders. The Court's discretion to otherwise order requires a consideration of all the circumstances of the case having regard to the interests of justice. However, while the court has a discretion to order that the costs of an interlocutory application be payable forthwith, the usual approach reflected in r 42.7(2) is that such costs will be paid when the proceedings have concluded.
In Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 at [11]-[13], Barrett J (as his Honour then was) identified three factors which tend in favour of making an order that costs of an interlocutory application be payable forthwith, being (a) where the decision represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect; (b) where there is some unreasonable conduct on the part of the party against whom costs have been ordered; and (c) where the anticipated time until the final determination of the proceedings is such that a party will not have the benefit of the award of costs for a considerable period.
In Richmond v Ora Gold Limited [2020] FCA 70 at [33], Colvin J identified from the authorities a further three factors relevant to the exercise of the discretion being: (a) the capacity of a costs order to stultify proceedings, particularly where they are brought by persons who may be seen (even without specific evidence) to have limited resources; (b) whether costs thrown away could be more accurately assessed after the determination of the proposed substantive proceeding; and (c) whether security for costs has been provided.
For the following reasons I am not satisfied that there should be a departure from the usual approach in this case. First, this was not the determination of a separately identifiable matter or discrete aspect of the case. Second, the application to amend was successful and, having regard to the nature of the amendments, the application to amend was not unreasonable. Third, while there has been considerable delay in the proceedings, at the time of the hearing the expert report was close to being finalised and this has now occurred. Hence, there is a reasonable prospect that the preparation of the case for hearing can now proceed in a timely fashion. Fourth, an order that costs be paid forthwith could stultify the proceedings given the evidence referred to at [11] above. Fifth, while it is not clear that the costs thrown away will be more accurately determined at the conclusion of the proceedings rather than now, I regard this matter as neutral in the present case. Sixth, while the plaintiff has not provided security for costs, Mr Allsop is personally liable for any costs awarded to the defendants. I do not regard the lack of security for costs as a relevant matter in the present case given that the defendants were unsuccessful in their application for security and also the fourth matter mentioned above.
Finally, it is apparent from the evidence of the defendants' solicitor that the costs thrown away by the amendment will relate to the preparation of a new defence. In light of the matters noted at [10] above, I am not satisfied that those costs will be significant. Further, it is not suggested that the preparation of the defendants' evidence is at an advanced stage, and even if it were there is no evidence that such work has been wasted. The defendants have known since at least November 2021 that a new pleading was being prepared and so were able to adjust their conduct of the matter accordingly.
Accordingly, for the reasons outlined above, I decline to make an order that the costs referred to in Order 5 made in these proceedings on 28 March 2023 are payable forthwith.
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Decision last updated: 02 August 2023