Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd

Federal Court of Australia|2024-09-27|Before: O'Sullivan J

The application for costs 17 The first interested party seeks an order in the following terms: Costs be payable on an indemnity basis, and that the requirements of r 40.13 of the Federal Court Rules 2011 (Cth) (FCR) be dispensed with such that his costs be paid forthwith and assessed in a lump sum by this Honourable Court or by a Registrar of the Court and certified fit for Senior Counsel. 18 Mr Tucker seeks costs for the case management hearings held on 13 and 22 February 2024, his application filed 4 April 2024, and the hearings held on 11 April 2024, 4, 18 and 25 June 2024. 19 It is for the reasons that follow that there will be orders: (1) The second interested party pay the first interested party's costs of and incidental to the first interested party's interlocutory application filed 4 April 2024 on an indemnity basis to be assessed on a lump sum basis by a Registrar of the Court if not agreed; (2) The costs as assessed or agreed are to be paid within 28 days of such assessment or agreement; (3) For the avoidance of doubt, the costs do not include the costs of the case management hearings held on 13 and 22 February 2024, but do include the hearings following the filing of the interlocutory application on 4 April 2024. To the extent I ordered Mr Lutfi pay the costs of the hearing on 18 June 2024 at which I delivered an ex tempore decision, those costs are to be paid on an indemnity basis.

Principles governing the award of indemnity costs 20 The principles are well known. 21 The Court has a broad discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth). That discretion is not to be read down otherwise than in accordance with accepted principle. Nonetheless, generally a successful party is entitled to an order for its costs on a party and party basis only. However, that ordinary rule as to costs may be departed from so as to award costs on an indemnity basis where the justice of the particular case so requires or where there is some special or unusual feature of the case justifying a departure from the ordinary rule: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233 (Sheppard J). 22 The purpose of an award of indemnity costs was explained by Gray J (with whom the other members of the Court agreed) in Hamod v New South Wales (2002) 188 ALR 659 at 665: Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. 23 While the categories of cases in which such an award may be made are not closed, cases in which such an order may be warranted include those where there is evidence of misconduct that causes loss of time to the court and other parties, the institution of proceedings in disregard of known facts or clearly established law. "The question", as Sheppard J said in Colgate-Palmolive Company at 234, "must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." 24 See also the summary of relevant principles by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246 at [6]-[12].

Principles regarding costs payable forthwith 25 In Watson v Kriticos (Costs Payable Forthwith) [2022] FCA 4, [4]-[7] Perram J set out some of the factors which may justify the exercise of the discretion to order that costs be assessed and be payable forthwith: 4. Rule 40.13 of the FCR is in these terms: 40.13 Taxation of costs awarded on an interlocutory application If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. Note: The Court may order that costs of an interlocutory application be taxed immediately. 5. The notation refers to a discretion in the Court's hands to dispense with r 40.13. Probably, that discretion is sourced not in the notation itself but rather in the provisions of r 1.34 or r 1.35 but there is no doubt that the discretion exists: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19 ('FKP v Spirits') at [6]. 6. The principles governing the exercise of the discretion are similarly well-established. As a general proposition, the discretion should be exercised in favour of a party who establishes that the demands of justice require a departure from the ordinary rule embodied in r 40.13: FKP v Spirits at [7]; Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312 per Olney J. Always to be borne in mind, however, are the twin policy considerations underpinning r 40.13: first, that it is generally undesirable that the parties should be exposed to multiple taxation processes during the life of one proceeding; and second and relatedly, that during the balance of the litigation, costs orders may be made in the opposite direction which will normally be capable of being set-off against earlier costs orders. 7. The exercise of the discretion may be justified in a number of circumstances, including where (FKP v Spirits at [9]): (a) the final determination of the proceeding is far away: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459 at [5]; (b) a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in handling the proceeding with competence and diligence: Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545; (c) following a successful amendment application, a case is essentially a new proceeding: McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [19] and [40]; (d) a discrete issue has been resolved: Australian Flight Test Services v Minister for Industry, Science and Technology [1996] FCA 1425 (sic) 288 at [7]; or (e) there is some reason to think that interlocutory disputation is draining the ability of one side to conduct the litigation: Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [12]. 26 In Watson v Kriticos (Costs of Summary Judgment Application) [2021] FCA 917, [23]-[26] Perram J noted: 23 The ordinary rule is that costs cannot be taxed or assessed until the determination of the proceeding: FCR r 40.13. Relevant matters include the possibility that costs orders made in favour of one party in the course of a proceeding may be set off against costs orders made in favour of the other and the desirability of avoiding multiple taxations: Capic v Ford Motor Company of Australia Limited (Costs Forthwith) [2019] FCA 1065 ('Capic') at [17]. The ordinary rule may be departed from where a party has engaged in unreasonable behaviour which has caused the other party to incur additional expenditure which would have not have been incurred if the other party had acted with competence and diligence: Capic at [18]. It is also relevant to take into account the length of time between when the costs order is made and when the costs might finally be taxed, ie, how long the matter will take to get to trial and judgment. On the other hand, a costs payable forthwith order is not to be seen as akin to an indemnity costs order.

Mr Tucker's submissions 27 Mr Tucker's application for indemnity costs is on two bases. 28 First, on the basis that Mr Lutfi made false representations relating to the whereabouts of the missing funds. Specifically, Mr Tucker was notified by the plaintiff, Nicholas David Cooper as Joint and Several Receivers of Green Grain Processing Technologies Pty Ltd (Receivers Appointed), by letter dated 27 June 2023 that the sum of $34,013.46 and $250,000 was withdrawn on 21 April 2023 and on 8 May 2023 respectively, by Mr Lutfi and transferred to LPH. From that date, Mr Tucker submits that Mr Lutfi maintained that the sum was "readily available", when in fact it had been disbursed by LPH. Mr Tucker submits that in reliance on that representation he actively pursued the recovery of those funds which amounted to a waste of time and costs. 29 Second, the Mr Tucker submits that Mr Lutfi failed to correct his false representation as to the availability of the money. He refers to orders made on 11 April 2024 and 4 June 2024, directing Mr Lutfi to file an affidavit as to the current whereabouts of the missing amount and when those sums were transferred. Mr Tucker submits that Mr Lutfi's representations were not fully corrected until the filing of his affidavit on 21 June 2024, nearly 12 months after the initial representation was made. Had Mr Lutfi corrected the falsity of his representation earlier, Mr Tucker submits that nearly the entirety of the proceedings from 13 February 2024 to date, could have been avoided. 30 Next, Mr Tucker submits that he is entitled to an order for the costs to be paid forthwith and assessed in a lump sum on the following bases: (a) "The demands of justice require that there be a departure from general practice": Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 291; (1992) 36 FCR 297 at 312; (b) It is highly unlikely and remote that "the prospect of subsequent events in the litigation generating cost orders in the opposite direction": Bailey v Beagle Management Pty Ltd [2011] FCA 60; (2001) 105 FCR 136 at 145 [37]. (i) Mr Tucker submits that Mr Lutfi is unrepresented and has been wholly unsuccessful thus far in having three interlocutory applications filed by him dismissed with costs orders against him; (ii) Mr Tucker is represented by solicitors and senior counsel; and (iii) Mr Lutfi has failed to comply with Court orders which has resulted in a wasted hearing. (c) "A final determination of the proceedings is far away": Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459 at [5]: (i) The second interested party has intimated at expanding his claims; (ii) Defences are yet to be filed in this action and the derivative proceedings (SAD 91/2024); (iii) No discovery has been made; (iv) Expert accounting evidence is required; and (v) All other procedural steps remain. (d) Mr Lutfi has failed to handle the proceedings with "competence and diligence": Mr Tucker claims Mr Lutfi has: (i) Failed to make production of documents in accordance with the production orders; (ii) Withheld documents on a false assertion of privilege; (iii) Failed to correct his representations that the Missing Amount was "available"; and (iv) Failed to comply with Court's orders. (e) The application filed on 4 April 2024 concerned a discrete issue of the recovery of the money said to be "available". That discrete issue has now been resolved: Australian Flight Test Services at [7], however nearly the entirety of the proceedings from 13 February 2024 to date, could have been avoided had Mr Lutfi corrected the falsity of his representation as to the availability of $284,013.46 withdrawn by him from the defendant's account.

Mr Lutfi's Submissions 31 Mr Lutfi advances four reasons as to why Mr Tucker's submissions for costs should be rejected. 32 First, he submits that the orders made on 4 June 2024: (a) Limit the costs issue subject of these submissions to those associated with the interlocutory application only; and (b) Separately distinguish between costs incurred with respect to other aspects of these proceedings. By seeking a 'global costs order', Mr Lutfi submits that the first interested party's submission asks the Court to overturn orders previously made. 33 I do not accept that submission. It is clear that Mr Tucker seeks the costs of and incidental to the interlocutory application filed 4 April 2024. 34 Second, Mr Lutfi submits that it would be inappropriate to make a costs order for the whole of the proceedings in circumstances where Mr Tucker has mischaracterised why and for what purpose he sought to be joined to the proceedings. 35 I do not accept that submission. No application is made for the costs of the proceedings as a whole. Further, I do not accept that Mr Tucker 'misunderstood' why and for what purpose he sought to be joined to the proceedings. That purpose was to pursue a sum to which he contends he is entitled on the basis of security. 36 Third, Mr Lutfi submits that the first interested party misunderstands the meaning of "available funds", and at all times Mr Tucker was aware that the funds in question had in fact been paid to American Express in order to satisfy a debt that Mr Lutfi had incurred. 37 I reject that submission. "Available funds" means what it says. Contrary to what Mr Lutfi informed the Court and Mr Tucker, the money was not "available" and had not been "available" since May 2023. 38 Fourth, Mr Lutfi contends that a more appropriate approach would be for costs to be considered at the conclusion of the proceedings, as the financial position vis-à-vis the parties at the end of the proceedings is not yet known. 39 I do not accept that submission and there is no reason why the application for costs should not be considered now. 40 As to the question of indemnity costs, I note the following: (a) First, the interlocutory application raises a discrete issue; (b) Second, that discrete issue could have been avoided had Mr Lutfi not represented that the missing amount was "readily available" when that was not the case, and had not been the case since May 2023; (c) Third, an order for indemnity costs will compensate Mr Tucker for what I consider to be the costs he has incurred as a result of the unreasonable actions of Mr Lutfi: Hamad at p 665; (d) Fourth, this was not a case where there was an argument attended by uncertainty. Mr Lutfi represented that the missing amount was "readily available" in circumstances where it was never "available"; and 41 In all those circumstances, I consider that justice of the case requires an order that Mr Tucker's costs be paid on an indemnity basis. 42 As to the order that the costs be paid forthwith, the interlocutory application was a discrete issue: Australian Flight Test Services and Mr Tucker has incurred significant costs over and above that which he would have incurred had Mr Lutfi revealed the missing amount was not "readily available", and had not been since May 2023: Life Airbag. 43 I consider that in all the circumstances, the demands of justice require a departure from the ordinary rule embodied in FCR 40.13: Watson (Costs Payable Forthwith) at [6], such that an order dispensing with FCR 40.13 is appropriate.

CONCLUSION 44 There will be orders that: (1) Mr Lutfi pay to Mr Tucker his costs of and incidental to the interlocutory application filed 4 April 2024 on an indemnity basis certified fit for senior counsel to be assessed by a Registrar of the Court in a lump sum if not agreed; and (2) The costs assessed or agreed be paid within 28 days of the assessment or agreement as the case may be. 45 As I have noted above, the order for costs in favour of Mr Tucker made on 18 June 2024 is to be paid on an indemnity basis. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Sullivan.

Associate: Dated: 27 September 2024 SCHEDULE OF PARTIES SAD 144 of 2023 Respondents Third Interested Party: LUTFI-PROCTOR HOLDINGS PTY LTD Fourth Interested Party: JT NOMINEES PTY LTD Fifth Interested Party: JT INVESTMENTS PTY LTD

THE COURT ORDERS THAT:

The second interested party pay the first interested party's costs of and incidental to the first interested party's interlocutory application filed 4 April 2024 on an indemnity basis, certified fit for senior counsel, to be assessed if not agreed.
The indemnity costs as amended or agreed in accordance with order 1 be paid within 28 days of such assessment or agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT O'SULLIVAN J: 1 On 26 May 2023, Dominic Charles Cantone and Nicholas David Cooper were appointed as joint and several Receivers of Green Grain Processing Technologies Pty Ltd (Receivers Appointed) (Company). 2 The Company was placed in liquidation on 28 November 2023. 3 There are number of interested parties in this matter, the first is David John Tucker, one of two directors of the Company. The second and third interested parties are Ihab Anthony Rockwell Lutfi, the second director of the Company and Lutfi-Proctor Holdings Pty Ltd (LPH), the trustee of the Lutfi-Proctor Superannuation fund. LPH is a company of which Mr Lutfi is the sole director and shareholder. The fourth and fifth interested parties are JT Nominees Pty Ltd (ACN 007 775 206) and JT Investments Pty Ltd (ACN 007 552 525). Mr Tucker has been a director and either one of two equal, or the sole, shareholder of each of the companies. 4 A dispute has arisen between Mr Tucker and Mr Lutfi as to the proper construction and legal effect of instruments said to be securities granted by the Company to secure loans to it and which remain unpaid despite demands. 5 Within that dispute, an issue has arisen in relation to the sum of $284,013.46, withdrawn by Mr Lutfi from the Company's account. In May 2023, Mr Lutfi had informed the Receivers that $34,013.46 was in his superannuation fund and $250,000 was "readily available". 6 On 4 April 2024, Mr Tucker, filed an interlocutory application in which he sought, inter alia, the following orders:
…
Pursuant to rule 14.11(2) of the Federal Court Rules 2011 (Cth), the Third Interested Party, Lutfi Proctor Holdings Pty Ltd (ATF the Lutfi-Proctor Superannuation Fund), is to pay into Court by close of business on 12 April 2024 the sum of $34,013.46 which was withdrawn from the account of Green Grain Processing Technologies Pty Ltd and paid to Lutfi-Proctor Holdings Pty Ltd by Mr Lutfi on or about 23 April 2023.
Pursuant to rule 14.11(2) of the Federal Court Rules 2011 (Cth) the Third Interested Party, Lutfi-Proctor Holdings Pty Ltd, is to pay into Court by close of business on 12 April 2024 the sum of $250,000 which was withdrawn from the account of Green Grain Processing Technologies Pty Ltd and paid to Lutfi Proctor Holdings Pty Ltd on or about 8 May 2023.
…
…
Costs. 7 The interlocutory application was made specially returnable to 11 April 2024 at which time Mr Tucker was represented by senior counsel. The following orders were made: THE COURT NOTES THAT there is an issue over the whereabouts of the sums of $34,013.46 and $250,000, totalling $284,013.46 THE COURT ORDERS THAT:
By on or before the close of business 19 April 2024, the second and third interested parties are to file and serve an affidavit explaining: a. The current whereabouts of the sums of $34,013.46 and $250,000 referred to in the affidavit of Ihab Anthony Rockwell Lutfi, sworn and filed on 28 March 2024; and b. When those respective sums were transferred to their current whereabouts; and c. Annexing documents evidencing the transfers in question. … 8 Mr Lutfi filed an affidavit on 19 April 2024. 9 On 4 June 2024, the matter came before the Court at which time the solicitor for Mr Tucker, Ms Wood, made lengthy submissions about deficiencies and inaccuracies in Mr Lutfi's affidavit filed on 19 April 2024. On that occasion, the Court made a further order that by 5.00pm on 11 June 2024, Mr Lutfi and LPH were to file and serve an affidavit annexing certain documents. That order was made because on previous occasions, Mr Lutfi had represented, either by himself or through his solicitor, that the sum of $284,013.46 was "available" but now apparently was not available: Cooper (Receiver), the matter of Green Grain Processing Technologies Pty Ltd (Receivers Appointed) (No 2) [2024] FCA 683 10 On 4 June 2024, a further order was made reserving the question of Mr Tucker's costs as well as the costs of JT Nominees and JT Investments of the interlocutory application filed 4 April 2024. The matter was adjourned to 18 June 2024. 11 The matter came back before the Court on 18 June 2024 at which time Mr Lutfi had filed numerous interlocutory applications and had not complied with the order to file an affidavit by 11 June 2024. 12 On 18 June 2024, I delivered ex tempore reasons and made orders in relation to Mr Lutfi and LPH, respectively in relation to their failure to comply with the Court's orders made 11 April 2024 to file and serve an affidavit explaining the whereabouts of $284,013.46: Cooper (No 2) at [7]. Order 5 of those orders ordered Mr Lutfi to pay the first, fourth and fifth interested parties' costs of and incidental to the hearing on 18 June 2024. 13 Mr Lutfi filed an affidavit on 21 June 2024, which revealed that the $284,013.46 in question had been disbursed. 14 When the matter returned to Court on 25 June 2024, solicitors for the Mr Tucker were able to inform the Court that it was now privy to information not available to them previously which demonstrated that the money in question was "gone". 15 Since there were no funds left to deposit into the Court, a position which had existed since May 2023, the interlocutory application filed by Mr Tucker on 4 April 2024 never served any useful purpose. 16 At the hearing on 25 June 2024, the solicitors for Mr Tucker made an oral application for costs of the interlocutory application. I directed parties to file written submissions on that application. Both parties agreed for the matter to be dealt with on the papers.

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