Solicitors:
Gilbert + Tobin (Plaintiff)
Norton Rose Fulbright Australia (First Defendant)
Gadens (Second to Fourth Defendants)
Baker McKenzie (Fifth Defendant)
File Number(s): 2018/104383
[2]
Judgment
On 9 April 2019, I delivered judgment on an application by the plaintiffs to amend their claim by joining additional plaintiffs and Mr Bakewell as a fifth defendant and pleading new causes of action arising from the joinder of those parties (Anchorage Capital Master Offshore Pty Ltd v Sparkes [2019] NSWSC 384). This judgment concerns the costs of that application. It assumes familiarity with my earlier judgment.
The application was resisted by the defendants on two bases. First, each defendant resisted the amendments on the basis that they were futile because they sought to advance claims which depended on assignments that the plaintiffs had no reasonable prospects of establishing were valid. Second, the second to fourth defendants also resisted the amendments on the ground that the plaintiffs had not properly pleaded factual causation in respect of their negligence claims. I rejected the first argument of the defendants, but accepted the second. Consequently, I did not give leave to the plaintiffs to file their amended claim. However, I made directions giving the plaintiffs an opportunity to correct the defects identified by the second to fourth defendants. In accordance with those directions, an amended claim was filed on 6 May 2019.
The plaintiffs' position is that they were substantially successful on the amendment application following a contested hearing on a point of substance. In those circumstances, they submitted that costs should follow the event in accordance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1. Moreover, the plaintiffs submit that, having regard to the nature of the amendments, it is unlikely that any costs would have been wasted by the defendants as a consequence of the amendments. It is said that that must be true of the fifth defendant, Mr Bakewell, since he was only joined as a consequence of the amendments. Consequently, they submitted that it was unnecessary for the Court to make an order that the plaintiffs pay the defendants' costs thrown away by reason of the amendments.
The defendants on the other hand submit that the plaintiffs should pay their costs in accordance with the indulgence principle - the principle that a party seeking an indulgence from the Court must normally pay the costs of doing so, except where the party opposing the application has done so unreasonably: see J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd (No 4) [2015] FCA 218 at [7] per Pagone J.
I was referred to various cases which have applied the indulgence principle, including cases where the principle has been applied in respect of amendment applications: see, for example, Media Ocean Limited v Optus Mobile Pty Limited (No 6) [2009] FCA 1319 at [34] per Jagot J; Global Brand Marketing Inc v Cube Footwear Pty Ltd (2005) 66 IPR 19 at [48] per Goldberg J; Ingot Capital Investment v Macquarie Equity Capital Markets [2003] NSWSC 1012 at [54] per McDougall J.
In my view, two things may be said about the indulgence principle. First, it is not a substitute for the costs discretion conferred by s 98 of the Civil Procedure Act 2005 (NSW) (the CPA): see Salvation Army (South Australia Property Trust) v Rundle [2008] NSWCA 347 at [109]-[111] per McColl JA (with whom Bell JA agreed); [145]ff per Basten JA. At best, it is a rule of thumb the application of which will depend, among other things, on the nature of the indulgence sought and the circumstances which have given rise to it.
Second, in my opinion, the principle is of less relevance to amendment applications having regard to the development of modern approaches to case management, particularly in the Commercial List, and the principles now set out in ss 56-60 of the CPA. The focus of those procedures and principles is not so much on whether an application should be characterised as an indulgence, but what orders should be made "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": see s 56(1). An important issue in relation to the exercise of the costs discretion will be the extent to which the parties' conduct in relation to the relevant application was consistent with that "overriding purpose".
In the present case, I have concluded that the most appropriate order in relation to costs is that the costs of the motion should be the plaintiffs' costs of the amended claim. That order would normally be formulated as an order that the costs of the motion be the plaintiffs' costs in the cause. However, in the present context an order in those terms may be ambiguous. The intention of the order I propose is that if the plaintiffs are successful in respect of the claims introduced by the amendments, then they should have their costs of the motion, but not otherwise.
I have reached that conclusion for several reasons.
First, the application was a substantive contested application that was the subject of a special fixture. The hearing lasted the best part of a day and it was plain that in view of its contested nature it was necessary for the plaintiffs to marshal a great deal more material than otherwise would have been necessary, even treating the application as an indulgence in respect of which the plaintiffs owed an independent obligation to satisfy the Court that leave should be granted, irrespective of the position that the defendants took.
Second, the plaintiffs were largely successful on that application, since they were permitted to amend their claim substantially in the way sought.
Third, before it was amended, the claim already raised the question whether the relevant assignments were effective. No attempt was made to strike out that claim. It appears that at least in part the issue was only raised because the plaintiffs sought to join Mr Bakewell as a defendant and Mr Bakewell took the point. It was not suggested that the plaintiffs had delayed in joining Mr Bakewell. The evidence indicates that it only became apparent to the plaintiffs that they may have had a claim against him following public examinations conducted by the deed administrators of Arrium. Moreover, it would have been open to the plaintiffs to commence fresh proceedings against Mr Bakewell, in which case the onus would have been on him to seek to strike out the proceedings. Had he done so and failed, in the normal course of events, he might well have been ordered to pay the plaintiffs' costs. Plainly, it was more sensible for the plaintiffs to seek to join Mr Bakewell in the current proceedings. If the plaintiffs have otherwise acted reasonably, which they have, they should not be prejudiced in relation to costs because they chose the most sensible procedure to resolve the issues between them and Mr Bakewell. Nor does it seem reasonable to require them to pay the first to fourth defendants' costs when the amendments were resisted on a basis that, absent any further application by the defendants, will require a final determination by the Court in any event, since the issue on which the amendments were resisted was already raised by the unamended claim.
On the other hand, it seems to me that it would not be reasonable to permit the plaintiffs to recover their costs if the amended case fails. In that event, the defendants can hardly be criticised for seeking to avoid the costs of the amended case by resisting the amendments. They should not be penalised for doing so by having to pay the plaintiffs' costs of the amendment application itself.
The plaintiffs were not wholly successful. However, the second issue was only a minor part of the application. It is the type of issue that, in the normal course of events, would have been resolved as part of the normal case management process, in which case the likelihood is that the relevant costs would have been costs in the cause. Having regard to those matters, I do not think that the second to fourth defendants' limited success is a reason for making some different costs order.
That leaves costs thrown away. The plaintiffs' main point in relation to those costs is that there are unlikely to be any costs thrown away. In my opinion, that is not a reason for not making the order. If the order is made and the defendants are unable to establish that any costs were wasted as a consequence of the amendments, then there will be nothing to pay in accordance with the order. On the other hand, if the defendants are able to satisfy a costs assessor that costs were wasted as a consequence of the amendment, I can see no reason why the plaintiffs should not pay those costs.
Consequently, the orders of the Court are:
1. the costs of the motion filed on 6 December 2018 be the plaintiffs' costs of the amended claim;
2. the plaintiffs' pay the defendants costs thrown away by reason of the amendments.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 14 May 2019