By my judgment delivered on 24 July 2015 ([2015] NSWSC 1006), I ordered that an arbitration award in favour of ALYK (HK) Limited ("ALYK") against Caprock Commodities Trading Pty Ltd ("Caprock"), in its capacity as trustee of the SAFE Fund ("Fund"), be enforced as a judgment of the Court pursuant to s 8(2) of the International Arbitration Act 1974 (Cth), and reserved the question of the operation of a limitation of liability provision contained in the contract between ALYK and Caprock. I also ordered that ALYK should have its costs of the proceedings against Caprock which were the subject of the first judgment. The question of costs which I will address below is limited to costs since that date.
In the course of the interlocutory proceedings prior to a further hearing before me on 2 June 2016, I also made specific orders as to costs, including an order on 22 December 2015 that Caprock pay ALYK's costs of its motion for discovery filed 2 December 2015. Those orders are not affected by the question of costs that I will address below.
By my further judgment delivered on 10 June 2016 ([2016] NSWSC 764), I granted leave to enforce the award against Caprock in the amount of $538,261. I held that the limitation provision in the relevant contract had a continuing operation, in parallel to the trustee's right of indemnity, and applied at any point at which that right would be exercised. That approach was somewhat different from the approaches for which the parties had contended as their respective primary positions. I also held that that provision did not prevent enforcement action against Caprock in respect of the award, where the amount that would be enforceable against it did not exceed the assets of the Fund. I indicated that I would hear the parties as to costs, and each party advanced detailed submissions as to costs.
The principles applicable to an award of costs are well-established and not controversial in this application. Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially, and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that:
"Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA with whom Mason P agreed observed (at [121]) that:
"In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled … Departures from the general rule that costs follow the event are broadly based on a similar approach."
That observation was recently cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98].
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Costs of the disclosure applications prior to 28 April 2016
ALYK submits that it should have its costs from 25 July 2015, the day after my judgment dated 24 July 2015 ([2015] NSWSC 1006) until 28 April 2016. The significance of the latter date is, I infer, that Caprock then filed an affidavit of its director, Mr Yassa, dated 28 April 2016 and an affidavit of an accountant who provided accounting services for Mr Yassa and his associated companies, Mr Satusky also dated 28 April 2016, which led evidence of special purpose accounts for the Fund prepared by Mr Satusky as at 5 September 2012, 26 October 2012, 9 November 2012 and balance sheets for the Fund as at 10 February 2015 and 24 July 2015.
ALYK submits, and I accept, that significant costs were incurred by it prior to the second hearing before me in seeking to establish the value of the assets of the Fund at relevant times, at a point when Caprock, by its director Mr Yassa, contended that the Fund had no assets that were available to meet a judgment against it. That position was ultimately abandoned by the time of the second hearing before me on 2 June 2016, when Caprock was represented by Counsel and solicitors. ALYK submits, and I accept, that it was necessary for it to pursue disclosure by Caprock, over an extended period, in order to progress its application for judgment. It seems to me likely that the disclosure that was ultimately obtained by ALYK contributed to the common ground that developed between the parties at the second hearing before me, that the Fund's assets in fact had substantial value as at the relevant dates at which the contractual limitation provision could apply. ALYK also submits, and I accept, that Caprock should be ordered to pay the costs relating to the return dates of subpoenas, which were issued by ALYK as part of the long drawn out process of ALYK seeking access to documents relevant to the proceedings.
Mr Harding, who appears for Caprock, submits that ALYK issued a number of subpoenas and Caprock was put to great expense in complying with notices to produce, and submits that none of the documents produced on subpoena or pursuant to the notices to produce were relevant to Mr Satusky's evidence as to the assets of the Fund, which was accepted by both parties and the Court. I am not persuaded by that submission, which has the obvious difficulty that ALYK pursued disclosure and issued those subpoenas prior to the point at which Caprock filed Mr Satusky's affidavit, when there was no indication that it would do so or that it accepted that the Fund had assets available to meet the arbitration award. As I have noted above, Caprock's initial position, advanced by Mr Yassa, was that the Fund had no assets against which ALYK was entitled to enforce the arbitration award. It was only after ALYK had obtained production of documentation, by the issue of subpoenas, notices to produce and several interlocutory hearings, that Caprock filed Mr Satusky's affidavit that acknowledged the value of the assets of the Fund. It is by no means self-evident that Caprock would have taken that course, had ALYK not first obtained access to documentation which may have allowed it to prove the value of the assets of the Fund had Caprock not conceded that value.
I am reinforced in the view that Caprock should pay the costs over this period by the fact that, had Caprock conceded the position reflected by Mr Satusky's evidence, immediately after my judgment of July 2015, substantial costs incurred by both parties in respect of disclosure would have been avoided. Its failure to do so seems to me to be further reason to order costs in favour of ALYK for the period for which those costs are sought.
ALYK also seeks its costs of appearing at a relisting of the matter on 19 May 2016 for an adjournment application. On that occasion, I vacated a hearing date for the second hearing and allocated a new hearing date, by reason of matters affecting the availability of Caprock's Counsel, which involved no fault on the part of Caprock or that Counsel. I consider that there should be no order as to the costs of that appearance.
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Costs of the hearing on 2 June 2016
Mr Harding advances the ambitious submission that Caprock was successful in respect of the amount for which judgment should be entered at the second hearing before me, and should be awarded its costs of and incidental to the hearing.
Mr Harding submits that ALYK abandoned its claims to larger amounts at earlier dates, by the point of the second hearing, and ultimately failed in its contention that the relevant date for assessing the value of the assets of the Fund was a date in 2012. Mr Harding also points out that Caprock ultimately succeeded on the basis that the assets of the Fund should be determined, for the purposes of the limitation provision, as at later dates, and at the lesser amount of $583,261 although, as I noted above, its success on that basis reflected a somewhat different analysis from that for which it had contended. In making those submissions, Mr Harding does not address the fact that, prior to his engagement, Caprock had, by Mr Yassa, denied that the Fund had assets that were available to meet a judgment in ALYK's favour, contrary to the position which it conceded at the second hearing and which was reflected in my judgment.
Mr Harding acknowledges that the Court did not accept Caprock's submission that the order should be directed only to Caprock in its capacity as trustee. While Caprock submits that submissions as to that matter occupied a relatively small part of the hearing time, and I accept that proposition, it remains that Caprock's position as to that issue would have required the matter to be determined in a contested hearing, even if there had not been a contest between the parties as to the amount recoverable against Caprock.
On the other hand, ALYK accepts that there should be no order of the costs of the second hearing on 2 June 2016. ALYK points out that, at least to some extent, the differences between the parties had narrowed by the point of the hearing, so far as Caprock then conceded that it had significant assets in its capacity as trustee of the Fund, as set out in Mr Satusky's affidavits read at the hearing, and ALYK proceeded on the same basis. ALYK accepts that Caprock was largely successful in its contention that ALYK's recovery should be limited to $538,261 rather than the higher amount of $819,830.81 for which ALYK had contended, but rightly points out that Caprock's success resulted from a different analysis from that which it had contended, which was developed in the course of oral submissions. ALYK rightly points out that it was largely successful in resisting Caprock's claim that the contract prevented enforcement action taken against Caprock personally, as distinct from in some separate capacity as trustee of the Fund, although it accepts that the reasons for its success also evolved in the course of oral submissions at the hearing.
I am satisfied that there is no basis to order costs against ALYK for the hearing on 2 June 2016, where ALYK had at least a significant degree of success at that hearing, where Caprock had not previously acknowledged ALYK's entitlement to bring enforcement action against Caprock other than in a limited capacity as trustee of the Fund, and ALYK was successful in establishing both its entitlement to do so and its entitlement to recover the amount of $538,261. The latter entitlement was also not conceded by Caprock in the lengthy period prior to the hearing, although its position changed shortly before the hearing as noted above.
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Orders
Accordingly, I make the following orders as to costs, in the form for which ALYK contends:
Previous costs orders made by the Court in the proceedings are affirmed.
The First Defendant otherwise pay the Plaintiff's costs, as agreed or as assessed:
(a) From 25 July 2015 to 28 April 2016;
(b) Of the return dates of the subpoenas issued 18 March 2016 on 29 April, 2 May, 3 May, 4 May, 5 May, 9 May, 11 May, 13 May and 18 May 2016.
There otherwise be no order as to costs on and from 28 April 2016.
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Decision last updated: 06 July 2016
Parties
Applicant/Plaintiff:
ALYK (H.K.) Limited
Respondent/Defendant:
Caprock Commodities Trading Pty Limited and China Construction Bank Corporation