Auburn Council v Austin Australia Pty Limited

Supreme Court of NSW|2007-03-30|Before: Einstein J, French J, Mr J

CITATION : Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 286

HEARING DATE(S) : 30/3/07 JURISDICTION : Equity Division Commercial List

DECISION : Claim to indemnity costs disallowed.

CATCHWORDS : Practice and procedure - Indemnity cost - Principles

Colgate-Palmolive & Co v Cussons Pty Ltd (1993) 118 ALR 248 Crisp v Kent [unreported, Supreme Court of New South Wales Court of Appeal, 27 September 1993] Harrison & Anor v Schipp; Cameron & Anor v Schipp [2001] NSWCA 13 Latoudis v Casey (1990) 170 CLR 534 CASES CITED : Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Messiter v Hutchinson (1987) 10 NSWLR 525 Oshlack v Richmond River Council (1998) 193 CLR 72 Ritter v Godfrey [1920] 2 KB 47 Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [unreported, Federal Court of Australia, French J, 3 May 1991] Thors v Weekes (1989) 92 ALR 131

PARTIES : Auburn Council (Plaintiff) Austin Australia Pty Limited (Defendant)

COUNSEL : Mr TEF Hughes QC, Mr ID Faulkner SC, Mr MK Condon (Plaintiff) Mr J Simpkins SC, Mr AA Henskens (Defendant)

SOLICITORS : Matthews Folbigg Pty Limited (Plaintiff) Colin Biggers & Paisley (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Friday 30 March 2007 ex tempore Revised 2 April 2007

50138/06 Auburn Council v Austin Australia Pty Limited (in liquidation)

JUDGMENT The remaining issues 1 The reserved judgment in these proceedings was delivered on 6 March 2007: ([2007] NSWSC 130) 2 The parties have been granted leave to address on costs. The defendant's submissions 3 The gravamen of the submissions put by the defendant has been that it should have an order for indemnity costs in respect of its costs incurred in connection with the plaintiffs allegations of delay on the part of the defendant in respect of the period June 2001 up to December 2003 [hereinafter referred to as "the first period"] using the defendant's terminology. 4 The defendant's contentions in this regard are as follows:

i. The first period of delay alleged by the plaintiff covers the period from the commencement of the arbitration proceedings by the defendant (as claimant in the arbitration), to the close of the arbitration hearing in December 2003.

ii. In the present proceedings, the relevance of the events that occurred during the first period is limited to providing a context for the examination of events which occurred during the second and third periods, respectively.

iii. Notwithstanding the limited relevance of the first period events to the substantive proceedings, approximately 12 volumes of the 14 volumes comprising the Court Book prepared by the plaintiff, contained documents relevant to the first period, and significant time was spent reviewing those documents.

iv. In opening its case on day 1 of the hearing, the plaintiff conceded that "The various matters of non-compliance alleged in paragraph 12 of the Amended Commercial List Statement are not relied upon now as a basis of justifying termination, but they will be relied upon as creating a context in which to consider the termination which the council [plaintiff] sought to effect by its notice of 13 September 2006" (per Mr T Hughes QC, at Transcript, page 4, lines 41 to 44; see also comments on page 5, lines 5 to 9).

v. This was the first occasion on which the defendant had been notified that the plaintiff did not intend to rely upon the events in the first period, save for providing a context as described. Prior to that time, the defendant had prepared its case in reliance upon the plaintiff's conduct in the proceedings, in pleading delay during the first period and serving detailed submissions going to the alleged delay in the first period. The defendant incurred significant costs in preparing this part of its case.

vi. Despite the plaintiff's express position in respect of the first period, the plaintiff spent significant time in the hearing examining the events that occurred during the first period in fine detail, causing unreasonable delay and expense.

vii. The plaintiff, in commencing the closing of its case on day 7 of the hearing, altered its position in respect of the first period of delay, and sought to rely upon the events that occurred during the first period, in relation to the plaintiff's substantive case. The following extract from the Transcript makes this plain (see Transcript page 456, line 45 to page 457, line 14): "HIS HONOUR: Mr Hughes, early in the piece in the course of your address when you opened and Mr Simpkins pick up on this in the course of his address I had understood that you were confining your reliance upon what period from June '01 to April '03 upon particular contentions and cross contentions as creating a context in which to consider the termination which the council later sought to effect and so on.

MR HUGHES: Yes, that's on the termination question.

HIS HONOUR: I see. Well, I hadn't quite appreciated that. Mr Simpkins put to me at page 47 "although Mr Hughes has indicated that focus is no longer directed to the period of first delay, he has told your Honour that apparently this period will suit the context for consideration of the delay that took place in the second period" but in any event I have the document and I have heard what you have said, yes. So you are up to page 5(u)."

viii. The plaintiff's first period delay claim was always hopeless, given the conduct of the plaintiff in the same period and the events antecedent to the first period.

ix. In the course of the hearing, the Court noted (at transcript page 47, lines 35 to 45) that "…this suit of the plaintiff's could start on the day when the administrators were appointed and that everything before then, whilst it might in some circumstances be of huge significance, some might suggest is simply writ in water, as it were, because an arbitration having continued, starting in fits and starts, all sorts of problems, up until the moment when the company goes into liquidation is a live, breathing animal and it is arguably the events which occurred after that which, if the Plaintiff has a case, will make that same case."

x. Counsel for the defendant, and indeed the Court, understood that the plaintiff was not seeking to rely upon the first period of delay in relation to the matters of substance in the proceedings. This is evident from the following exchange on day 8 of the hearing (see transcript page 541, lines 13 to 22): [SIMPKINS]

"Your Honour, I had taken, it appears from what was said by Mr Hughes earlier today, mistakenly that we could all largely assume that the first period of delay was of peripheral importance to any issue that your Honour really was being called upon to decide in this case but since it now appears that it is something that is urged to be of relevance I do need to say something about it.

HIS HONOUR: I had the same misapprehension, but you proceed."

xi. Ultimately in relation to the first period of alleged delay, the Court found (at [20]) that "both parties on occasion failed to comply with directions and that where Austin is shown to have failed to comply with directions the matter is of relatively slight significance only. The Council too was sometimes to blame."

xii. The defendant submits it should be entitled to recover all of its costs incurred in the preparation and hearing in respect of the first period of delay alleged by the plaintiff, because the plaintiff conducted this part of its case in such a way as to maintain a claim that had no prospect of success, and to cause unreasonable delay in the hearing of the proceedings, forcing the defendant to incur unnecessary and excessive costs. The defendant should not have to incur the difference in award between party and party costs and indemnity costs on this issue.

xiii. In summary, the defendant should receive an award of costs in its favour:

a) on an indemnity basis in relation to its costs of the preparation and hearing time taken in respect of the first period of delay alleged by the plaintiff, including the hearing on costs; and

b) on a party and party basis in relation to the balance of its costs of and concerning the proceedings. Indemnity Costs-the principles 5 It is plain that beyond the need for a sufficient special or unusual feature in a particular case no fixed rule can be laid down as to when an award of costs on an indemnity basis is appropriate. I accept that the categories in which the discretion to order payment of indemnity costs may be exercised are not closed, as was made plain by French J in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, Federal Court, French J, 3 May 1991). 6 In Harrison & Anor v Schipp; Cameron & Anor v Schipp [2001] NSWCA 13, the New South Wales Court of Appeal had occasion to examine the principles which obtain where delinquency in the conduct of the proceedings is put forward as justifying an order for indemnity costs. Dealing with the issue 7 It is clear that the current application for a partial order for indemnity costs, is grounded upon the proposition that there was relevant delinquency in the conduct of the litigation in so far as reliance upon the first period was concerned. 8 Whilst I accept that the plaintiff failed entirely in relation to reliance upon the first period, in my view it cannot be said that the degree of delinquency necessary to support an order for indemnity costs was displayed in the plaintiff's approach to that issue. 9 The case is somewhat removed from other circumstances which have on the authorities been deemed fit to warrant the exercise of the discretion to order indemnity costs: instance for example the following circumstances [which have been held to warrant such an order] noted by Sheppard J in Colgate-Palmolive v Cussons (1993) 118 ALR 248:

i. the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152.

ii. evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo );

iii. the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp );

iv. the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata );

v. an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525 ; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal) ; Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). 10 Whilst that listing is of course not a closed class, nothing in the present case qualifies for the indemnity costs orders sought. In particular the substantial question concerning the extent to which credit had been a vital issue in the arbitration or was likely on the pleadings to be so regarded by the Arbitrator at the least meant that disparate parts of the transcript would require examination on the hearing. 11 Whilst I accept that the defendants have contended that they were required to expend costs in preparation for dealing with the first period, it does not seem to me that in the particular circumstances of these particular proceedings it is appropriate to order indemnity costs.

12 It follows that the limited claim for an award of costs in favour of the defendant in respect of the preparation and hearing time taken in respect of the first period of delay fails The adjournment of 15 February 2007 13 The plaintiff contends that it should be granted costs of the adjournment which took place on 15th February 2007 which it contends was caused by the defendant's failure to comply with the Court orders for discovery and inspection. 14 Certainly it is true that the court adjourned at approximately 11.15 a.m. on 15 February 2007, the adjournment having been necessary for the reason that the plaintiff's leading counsel had to hold cross-examination until diaries of Mr Hutchison were copied and then inspected. 15 The parties are at issue as to whether or not the diaries called for [those not only of Mr Hutchison, but also of Mr Harris and Ms Robertson of Ernst and Young] were discoverable pursuant to the discovery order regime put in place as part of the partial case management. 16 It is strictly unnecessary to decide this issue. Having said that it may be noted that:

i. The defendants contend that the diary entries in the documents did not record the substance of any of the meeting attended by the liquidator of Austin, and/or any of any of his staff, regarding attempts to obtain litigation funding. They are said not to record any "communications" and so not to have fallen within the Order for Discovery.

ii. The plaintiff did not make use of the diary material in its cross examination of Mr Hutchison. This arguably supports the contention that the documents were irrelevant. 17 I am not satisfied that even had the documents been discoverable, the short interregnum justifies a costs order. There were other occasions during the hearing when one or other of the parties' conduct caused some delays. Adjudicating upon the responsibility for such delays is always difficult. The touchstone is that costs usually follow the event: [r 42.1 of the Rules; see also Latoudis v Casey (1990) 170 CLR 534 at 566-7; Oshlack v Richmond River Council (1998) 193 CLR 72 at 97; Ritter v Godfrey [1920] 2 KB 47. The short delay during the adjournment does not [in the scheme of this closely contested litigation] justify interfering with the usual requirement that costs follow the event. The orders as to costs 18 The Court orders that the plaintiff pay the defendant's costs of the proceedings as agreed or assessed.

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.

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Cases Cited (8)