Australian and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited & Ors

Australia and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited & Ors [2010] NSWSC 1000 CASES CITED : AW v LM Forest Beamish (1998) 146 FLR 450 Hillig v Darkinjung Pty Ltd (2) [2008] NSWCA 147

Australian and New Zealand Banking Group Limited (Plaintiff) Aldrick Family Company Pty Limited (First Defendant) Brighton Associates Pty Limited (Second Defendant) PARTIES : Lyn Dulcie Brighton (Third Defendant) Wayne Brighton (Fourth Defendant) Dulcie Catherine Aldrick (Fifth Defendant) Diane Patricia Bowen (Sixth Defendant)

COUNSEL : Mr MB Lee, Mr Cowpe (Plaintiff) Mr TJ Morahan (First, Third, Fourth, Fifth and Sixth Defendants)

SOLICITORS : Kemp Strang (Plaintiff) Brydens Law Office (First, Third, Fourth, Fifth and Sixth Defendants)

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

Wednesday 17 November 2010 ex tempore Revised 22 November 2010

2008/283775 Australia and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited & Ors

JUDGMENT 1 There is before the Court a Notice of Motion pursuant to which the ANZ and New Zealand Banking Group seek an order again Brighton Associates Pty Limited [in liquidation], Robert Stanley Bryden and Bandeli Hagipantelis trading as Bryden Law Office such that the respondents would pay the plaintiff's costs associated with any claim or step taken by Brighton Associates Pty Limited in liquidation, the second defendant in the proceedings, since 9 April 2009, on an indemnity basis as agreed or assessed. 2 The motion relates to proceedings 2010 NSWSC 1000. That judgment encapsulates the reasons. It is therefore unnecessary to repeat those reasons. 3 The proceedings were dismissed on a number of bases, importantly for present purposes on the ground that the relevant parties which could have suffered damages were not the claimants for damages in the proceedings, but rather a claim was made by Mr and Mrs Brighton who were not proper plaintiffs. 4 As I have understood the position, in essence, the plaintiff seeks an order that the solicitors trading as Bryden's Law Office pay the plaintiff's costs of and associated with any claim made or step taken by Brighton Associates in liquidation, the second defendant in the proceedings since 9 April 2009.

The general background 5 The essential general background relied upon by the plaintiff in seeking this relief has been the subject of an affidavit filed by the plaintiff's solicitors. That affidavit [with the omission of the exhibits] is in the following terms:

i. On 4 April 2008, ANZ filed a statement of claim in these proceedings against a number of defendants including the second defendant, Brighton Associates Pty Limited (which is now in liquidation) ("Brighton Associates).

ii. The statement of claim sought the following relief in respect of Brighton Associates: (a) an order that Brighton Associates give to ANZ possession of the land contained in certificate of title folio identifier 92/27236 known as 23 Dolphin Avenue, Batemans Bay, New South Wales and the improvements erected on it;

(b) an order that the plaintiff have leave to issue a writ of possession forthwith upon the making of the order detailed in subparagraph (a) above;

(c) an order that Brighton Associates pay to ANZ the sum of $2,224,262.95 together with interest on that sum at the rates prescribed by section 100 of the Civil Procedure Act 2005 from 2 April 2008 until payment or judgment and

iii. On 15 July 2008, Mills Oakley filed a defence on behalf of the first to ninth defendants.

iv. No defendant was file don behalf of the tenth defendant, Sea-Slip Marinas (Qld) Pty Limited (in liquidation).

v. On 23 July 2008, Mills Oakley filed an amended defence on behalf of the first to ninth defendants.

vi. On 25 July 2008, the eighth defendant, Sea-Slip Manufacturing Pty limited (in liquidation) went into liquidation.

vii. On 12 August 2008, the ninth defendant, Sea Slip (Marinas (International) Pty Limited (in liquidation) went into liquidation.

viii. On 22 January 2009, Brydens Law Office filed a notice of change of solicitors on behalf of the first to sixth defendants replacing Mills Oakley as the legal representative of the first to sixth defendants.

(a) a further amended defence on behalf of the first to seventh defendants; and

(b) a first cross-claim on behalf of the first to seventh cross-claimants.

x. Brighton Associates was listed as the second cross-claimant on the first cross-claim.

xi. On 9 April 2009, David Gregory Young was appointed as liquidator of Brighton Associates.

x. On 1 May 2009, ANZ filed a defence to cross-claim and reply to further amended defence.

xii. On 17 June 2009, Ms Rita Furfaro, a solicitor employed by Brydens Law Office attended our office with the third defendant, Ms Lyn Brighton. At that time, I had a conversation with Ms Furfaro and Ms Brighton in words to the following effect:

"I said: I understand that Brighton Associates is in liquidation. Pitcher Partners have reported you to ASIC.

I said: The liquidator has told us that he does not have a problem with us taking possession of the property. Can you tell me if its occupied or vacant.

Ms Brighton said: Its occupied. There are tenants in there. They have a lease.

I said: We want to take possession of it. Can you tell me the contact details of the tenant so that we can write to them.

Ms Brighton said: The property doesn't come under the liquidation. Its an asset of the trust.

I said: Brighton Associates is the registered proprietor of the property and the mortgagor.

Ms Brighton said: No the property is owned by the trust.

I said: Please let me know whether you will give us the contact details of the tenant because if not we will send an agent up there to get them.

Ms Furfaro said: We will get back to you." xiii. On 25 March 2010, an order was made, among others that the proceedings be transferred from the Common Law Division (Possession List) to the Equity Division (Commercial List).

xiv. On 31 March 2010, ANZ filed a commercial list statement.

xv. On 12 May 2010, Brydens Law Office filed a commercial list response on behalf of the first to seventh defendants.

xvi. On 31 May 2010, ANZ filed a commercial list cross-claim response.

xvii. On the first day of the trial, 16 August 2010, leave was granted to the defendants to file an amended commercial list cross-summons, amended commercial list cross-claim and amended commercial list response. The amendments had the effect that, among other things, Brighton Associates ceased to be a party to any of those proceedings.

Orders made on 18 October 2010 and subsequent correspondence

xviii. On Thursday 28 October 2010, I received a phone call from Ms Sonia Jagodzinska, a law clerk employed by Brydens Law Office, during which we had a conversation in words to the following effect: "She said: Rita is in a hearing today but she wanted me to tell you that we were instructed by Lyn Brighton.

I said: The question is whether you had a retained to act for Brighton Associates. You do not have to answer that on the phone now but you might want to respond in writing. If I do not receive any response by the end of the day I will assume that you do not intend to respond."

xix. On Friday 29 October 2010, I phoned Ms Jagodzinska and had a conversation with her in words to the following effect:

"I said: We need to make a decision by Monday as to whether we file an application seeking costs order against Brydens and that is why we required a response to our letter.

She said: I understand, I will find out when we can respond.

I said: If I do not hear from you, I will have to swear an affidavit and depose to this conversation in the affidavit.

xx. At the time of swearing this affidavit, I had not received any response to the letter from Kemp Strang to Brydens dated 28 October 2010. 6 On the first day of the trial, leave was granted to the defendants to file an amended commercial list cross summons, an amended commercial list cross claim and an amended commercial list response. It is common ground that the amendments had the effect that, amongst other things, Brighton Associates ceased to be a party to any of those pleadings The affidavit evidence put on by the respondents to the motion 7 An employed solicitor of the respondents has usefully set out certain salient details. And affidavit includes the following:

i. On 7 May 2009 the solicitors were instructed that Brighton associates proprietary Ltd had been wound up;

ii. In around August 2010 the plaintiff filed a notice of motion seeking to continue proceedings against Brighton associates;

iii. On 5 August 2010 The deponent Ms Furforo had a conference with Council and the solicitor for the plaintiff following a directions hearing of the court. It was at this conference that the plaintiff's legal representatives first raised the issue that the current respondents had no authority to act on behalf of Brighton Associates;

iv. It is common ground that the final hearing of the proceedings before the court commenced on 16 August 2010 and was completed on 25 August 2010;

v. On the first of September 2010, Ms Brighton forwarded to the current respondents a copy of the letter she had received from the Australian securities and investments commission indicating that the plaintiff's solicitors had made an application to defer the deregistration of Brighton associates;

vi. In late October 2010 the current respondents, by a law clerk employed by them, telephone ASIC confirm that the liquidator had just resigned.

8 It is common ground that on the first day of the trial leave was granted to the defendants to file an amended commercial list cross-summons and amended commercial list cross claim and an amended commercial list response. It is common ground that the amendments had the effect that amongst other things, Brighton Associates ceased to be a party to any of the pleadings. . 9 An employed solicitor of the respondents has usefully set out certain further salient details. Her affidavit includes the following.

i. On 7 May 2009 the solicitors were instructed that Brighton Associates Pty Limited had been wound up to in around August 2010 the plaintiff filed a Notice of Motion seeking to continue proceedings against Brighton Associates.

ii. 5 August 2010 the deponent had a conference with counsel and the solicitor for the plaintiff following a directions hearing of the Court. It was at this conference that the plaintiff's legal representatives first raised the issue that the current respondents had no authority to act on behalf of Brighton and Associates.

iii. It is common ground that the final hearing of the proceedings before the Court commenced on 16 October 2010 and were completed on 25 August 2010.

iv. On 1 September 2010 Ms Brighton forwarded to the current respondents a copy of letter that she had received from the Australian Securities and Investment Commission indicating that the plaintiff's solicitors had made an application to defer the deregistration of Brighton Associates.

v. In October 2010 the current respondents, by a law clerk employed by them telephoned ASIC confirming that the liquidator had just resigned. Dealing with the matter 10 There is of course power in the Supreme Court to determine by whom and to what extent costs are to be paid. The Court's power has been the subject of a number of relatively recent catchments including the judgement of the Court of Appeal in Hillig v Darkinjung Pty Ltd (2) [2008] NSWCA 147. 11 In that decision McColl J with whom Beazley J and Giles J agreed, made the point that:

"Subject to the rules of court, costs are generally in the discretion of the Court which has full power to determine by whom, to whom and to what extent costs are to be paid, referring to s 98(1) of the Civil Procedure Act 2005. The power conferred by s 98(1) is subject inter alia to UCPR 42.3 which relevantly provides one, subject to rule 42.7 the Court may not in the exercise of its powers and discretion under s 98 of the Civil Procedure Act 2005 make any order for costs against a party who is not a party and next, this rule does not limit the power of the Court (d) to make an order for costs against a person who purports without authority to conduct proceedings in the name of another person." 12 At paragraph 47, McColl AJ observed:

"That it is a common order where a solicitor has taken unauthorised steps in litigation to require the solicitor personally to pay the costs he has thereby caused other parties to incur". 13 At paragraph 51 her Honour referred to the decision of Brighton J in Zimmerman who had considered Young J, statement in AW v LM Forest Beamish (1998) 146 FLR 450 that:

"The ordinary rule [as to costs] is that the solicitor's whose retainer is challenged, pay all the costs of the proceedings up until the order is made, as referring to the outcome which would usually be produced in a sound exercise of discretion but not as a general rule."

The reference to "the general rule" was an indication that on adequate grounds the ordinary rule may be departed from. Unusual parameters of the current litigation 14 It is necessary in determining the proper exercise of the principled discretion in relation to the current application to recognise that the proceedings were beset by many complexities, not the least of which involved the disentangling of the respective positions of the relevant entities within the so-called SSM Group. 15 It is clear that only days before the hearing did ANZ make an application for leave to continue against the second defendant Brighton associates in liquidation and it was only on the first day of the hearing that leave was granted by the Court 16 As was submitted by counsel appearing for the respondent, that leave may not have been granted as a discretionary matter so that any steps that ANZ had taken pride to the granting of that leave were taken on the risk that the leave may not have been granted. There was no explanation as to why an application was not made at an earlier stage, months or even over a year after Brighton associates went into liquidation. 17 In my view the circumstances which have been adumbrated by counsel appearing for the bank fall within the rule that on adequate grounds the ordinary rule may be departed from. 18 For those reasons, in my view the principled exercise of the material discretion is to order make Order 4 in the Notice of Motion. Orders 19 The Court makes orders in accordance with Order 4 as sought in the notice of motion filed on 3 November 2010.

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.