By my Judgment delivered on 23 April 2021 ([2021] NSWSC 413) ("Judgment") I held that there should be judgment for the First Defendant, Sirrah Pty Ltd (in prov liq) ("Sirrah") in derivative proceedings brought by the Plaintiffs on its behalf in respect of certain claims, and ordered that the First Defendant be wound up on the just and equitable ground. I set out the orders that I proposed to make in paragraph 173 of that Judgment.
Proposed orders 3 and 5 set out in my Judgment dealt with the amount of the judgment which I proposed to order in favour of Sirrah against the Second Defendant, Mr William Harris ("WH") and the Fourth Defendant, Harris Health Care Pty Ltd ("HHC") respectively. I noted an issue as to the form of those orders in paragraph 170, as follows:
"The Plaintiffs' proposed orders, and in particular orders 3, 8, 13, 15 and 19 against WH and orders 5, 10 and 17 against HHC include overlapping money judgments against WH in respect of the separate heads of liability, for example, in respect of loan balances and disputed expenses, and seek to address that overlap by a qualification that the amount payable would not exceed the total amount of the liability of WH and HHC in respect of the loan balances. I do not consider that is an appropriate form of order, where it would leave at least WH to engage in further calculations to seek to work out what he had to pay to meet any judgment, and it does not expose or resolve any dispute between the parties in that respect. I have reformulated the orders that I propose to make to quantify the total amounts payable by each of WH and HHC, in respect of all heads of liability, and I will allow the parties the opportunity to make further submissions as to that matter. The judgment against WH comprises the amount of his loan account ($1,014,244); the amount of HHC's loan account ($11,044,660.24) where I have found that loan was made in breach of his fiduciary duty; a portion of the management fees paid to HHC ($3,754,902.58), which I have held was paid in breach of that duty; and the amount of the "reimbursement" to HHC ($875,173) which I have held was also paid in breach of that duty. The judgment against HHC comprises the amount of its loan account ($11,044,660.24), that part of the management fees which it received ($3,754,902.58) and the "reimbursement" to it ($875,173). The judgments against WH and HHC do not include any additional amount in respect of the "disputed expenses" where it appears they are already reflected, wholly or partly, in WH's loan account and the Plaintiffs have not quantified the amount of any overlap. The Plaintiffs rightly accept that they cannot recover more than their total loss against WH (under paragraphs 3 and 4) and HHC (under paragraphs 5 and 6) under these judgments."
I directed the parties to make any further submissions within 7 days as to the form of those orders and they have now done so.
By their further submissions, the Plaintiffs adopted the form of orders which I proposed, but indicated that the amount set out in proposed order 3 should be reduced from $16,699,789.82 to $16,688,979.82, correcting a mathematical error. The Second and Fourth Defendants did not take issue with the amount of that order and order 5, although they made submissions as to the form of those orders.
The Second and Fourth Defendants respond that the form of orders proposed in the Judgment has the potential for the Plaintiffs to recover a total sum in the order of $31-32 from the Second and Fourth Defendants. I do not accept that proposition where I had observed in paragraph 170 of the Judgment that the Plaintiffs rightly accepted they could not recover more than their total loss against WH and HHC under the judgments against each of them. However, the Second and Fourth Defendants also submit, with greater force, that there should be judgment for Sirrah against WH and HHC jointly and severally in the sum of $15,674,735 (being the claims as to which both WH and HHC were found liable, excluding the loan to WH personally) and an additional judgment for Sirrah against WH only in the amount of $1,014,244 reflecting the amount of his loan account.
I accept that an order in the form now proposed by the Second and Fourth Defendants would be consistent with the principle that, where multiple defendants are found to be in breach of duty they will be jointly and severally liable, and that should be reflected in the form of orders. I have regard to the observations of Santow J in that regard in Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 at [116]-[119], to which the Second and Fourth Defendants refer, as follows:
"The remaining issue concerns a matter raised in argument. It is this. If it be the case that each of the Defendants should have their responsibility gradated or differentiated in some way in relation to the compensation, recognising that compensation could never exceed the loss, thus precluding over-compensation, is it open to a Court to obviate the need for contribution proceedings by reflecting this in some way in the orders made?
The principles are clear enough and were not disputed. First, where a plaintiff obtains separate judgments against defendants jointly and severally liable, as would be the case here, whilst it may be desirable that at least one of the judgments should contain words making it clear that the plaintiff cannot have double satisfaction, the law provides that he cannot have double satisfaction even if the words are omitted; see P O Morris Ltd v Perrott and Bolton [1945] 1 All ER 567 and the statement of principle in "Joint Obligations" by Glanville L Williams (Butterworths, 1949) at 84.
Thus applying the analogy applicable to multiple tort-feasors, as is appropriate to a civil compensation order made under statute, where the same damage to the plaintiff may be the result of tortious conduct by more than one person, the plaintiff is free to choose which of such persons to sue. If the plaintiff chooses to sue only one of them, the plaintiff is entitled to judgment against that person for the full amount of any damages awarded. Where a plaintiff sues more than one defendant in tort in respect of the same damage, and more than one are held liable, the plaintiff is entitled to judgment against each and every one for the full amount of the damages awarded whether their liability is joint (Bell v Thompson (1943) 34 SR(NSW) 431 at 435 per Jordan CJ) or several and concurrent (Barisic v Devenport [1978] 2 NSWLR 111 at 116-7 per Moffitt P), such that the liability of the multiple tort-feasors is "solidary" rather than "proportionate" to their "responsibility" for the loss suffered; see the discussion in "The Law of Torts in Australia" by Trindade and Cane (Oxford) 3rd ed at 746.
Thus it is not open to any of the Defendants to argue, as against the Plaintiff, that their contribution to the damage was smaller than that of others or that they were only partly responsible, for such arguments can only be put in contribution proceedings between the Defendants, where the aim is to apportion liability amongst the tort feasors according to their relative responsibility. The Court can however conclude in relation to any particular Defendant, that in all the circumstances no compensation order should be made for the Court has a discretion whether or not to order compensation, denoted by the word "may" in s1317H(1). The Plaintiff is entitled to recover the whole of the amount of the loss against any one Defendant, or against a combination of the Defendants but may, of course, only recover in total the full amount of the loss; D'Angola v Rio Pioneer Gravel Co Pty Ltd [1979] 1 NSWLR 495."
The form of the orders that the Second and Fourth Defendants now propose does not give rise to a difficulty which had arisen from the form of order that they had previously proposed, also noted by Santow J in Adler, of exposing Sirrah to the risk of being unable to recover its judgment on the insolvency of one or other of defendants who are jointly and severally liable for that judgment. I will make orders in that form.
The Plaintiffs also updated their interest calculations, to identify interest payable in respect of several heads of damages. The amounts on which the interest calculations were based correspond to those set out in paragraph 170 of the Judgment. As against WH, the Plaintiffs calculated pre-judgment interest in the amount of $1,533,879 to 30 April 2021, referable to interest on loans to WH and HHC, interest on three elements of the management fees claim for three periods and interest on the reimbursement of expenses claim for a specified period. They separately calculated interest as against HHC, which contained interest on the loan to HHC, interest on the three elements of the management fees claim and interest on the reimbursement of expenses claim. The difference in the interest calculations as against WH and HHC reflects the treatment of a loan to WH personally as to which interest is recoverable only against WH and not against HHC. It seems to me that the judgment in respect of the interest calculations should take the same form as judgment in respect of the principal. I do not consider that I need to adopt the explanation of the components of calculation of the interest set out in the Plaintiffs' proposed orders, which will be apparent from the parties' submissions which I will place in the file.
The Second and Fourth Defendants did not take issue with the balance of the orders proposed in the Judgment.
[3]
Costs
The Plaintiffs submit that, consistent with my preliminary observation at Judgment [172], WH and HHC should be ordered to pay their costs of and incidental to the proceedings, on the basis that costs follow the event. The Plaintiffs accept that the costs of paragraphs 59X-59AD of the Further Amended Statement of Claim should be excluded from this order. The Second and Fourth Defendants did not resist this order.
There is a controversy as to whether the Plaintiffs should be ordered to pay the costs of the Third Defendant, Ms Michelle Harris ("MH"), where the claim against MH was withdrawn by the Plaintiffs and dismissed in the course of the hearing. The Plaintiffs submit that no order as to costs should be made in favour of MH, where she, WH and HHC have throughout been represented by the same firm of solicitors and Counsel, although the firm representing them changed in June 2020; the evidence suggests that costs incurred by them were paid, in whole or in part, using Sirrah's assets; and there is no evidence to suggest that MH has personally paid any legal fees or incurred any liability for legal fees. The latter proposition requires qualification, to some extent, by reference to a letter of engagement that I address below. Alternatively, the Plaintiffs submit that, if a costs order is to be made in favour of MH, it should exclude costs incidental to the preparation of parts of MH's affidavit that were irrelevant and which she was not granted leave to read out of time, and in respect of which I previously identified a question whether orders should be made that would prevent her solicitors seeking to recover the costs of the preparation of that "obviously inadmissible and irrelevant evidence".
MH accepts that the indemnity principle applies to her claim for costs. I summarised the scope of that principle in Re Ryals Hotel Pty Ltd [2021] NSWSC 42 at [6] as follows:
"Broadly, the indemnity principle in respect of costs permits recovery of costs by a successful party which is under a legal liability to pay them, although that liability may be qualified: Mourik v Von Marburg [2016] VSC 601 at [20] ff. Mr Elliott also rightly submits that that principle has the result that costs are usually confined to those that the successful party is primarily and potentially legally obliged to pay to his solicitor and the existence and scope of the successful party's duty to pay his or her own solicitors is central to that party's ability to recover costs: Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [9] . Mr Elliott accepts that, although that principle does not require that that party has already paid those costs, it does require that it be liable to pay them: Wentworth v Rogers (2006) 66 NSWLR 474; [2006] NSWCA 145 at [126] ; Maineri v Cirillo (2014) 47 VR 127; [2014] VSCA 227 at [43]. Mr Elliott also points to authority that the indemnity principle does not require that an invoice had been rendered: eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (2015) 90 NSWLR 451; [2015] NSWCA 284; Gibson v Drumm [2016] NSWSC 570. In the latter case, Young AJ referred to the decision of the Federal Court of Australia in Angar Pty Ltd v Ilick Motor Co (1992) 37 FCR 65 at 71 and observed (at [15]) that:
"Under the legislation a client is not able to be successfully sued on a solicitor's bill until the client has received a signed bill. However it would be absurd to require a signed bill at the time when a costs order is made and the Victorian Court of Appeal has held that the fact that client may not actually be sued until he or she receives a signed bill does not prevent the court from making an order for the payment of costs by the client."
MH submits that the application of the indemnity principle is to be assessed at the time of quantification, not at the time a costs order is made. MH also submits that "[t]his is particularly so when solicitor/client costs are still to be paid and a liability exists or potentially exists to pay solicitor/client costs". However, there is an open question whether, and to what extent, that is the case here. MH submits that she is liable to meet the costs of her solicitors and relies on an affidavit of her solicitor, Mr Amirbeaggi dated 30 April 2021, for that proposition. That affidavit refers to a letter of engagement dated 2 June 2020 addressed to HHC, WH and MH, which recorded that Mr Amirbeaggi's firm operated on the basis of having funds from clients in trust in advance of the work that was to be carried out. Mr Amirbeaggi does not there say that MH had at any relevant time paid funds into trust or paid any invoice issued by his firm on any other basis. Mr Amirbeaggi also raises the prospect that, if WH is made bankrupt or HHC is placed in liquidation, claims could be made (presumably against Mr Amirbeaggi's firm) by a trustee or liquidator to recover funds alleged to have been paid by WH or HHC for MH's benefit in circumstances where, he recognises, such benefits may be (or alleged to be) unreasonable or uncommercial transactions.
It seems to me that, where the retainer between Mr Amirbeaggi's firm and MH provided for the payment of funds into trust in advance and there is no evidence that MH was required to or did place any funds in trust or paid any invoices, a question may arise as to whether it would be open to that firm now to recover costs from MH in arrears, particularly if they were previously paid by WH or HHC. There seems to me to be a real possibility, not recognised in the submissions made for MH in this application, that her interests and that firm's interests may diverge in that respect, so that she ought now to have the opportunity to take independent advice. Any amount that that firm could now recover against MH may also be affected by any application that she makes (again, presumably, with independent advice) that she should not be required to pay the wasted costs incurred by that firm of preparing irrelevant affidavit evidence, which she did not seek to or was not permitted to read. I do not express any concluded view as to these matters, where they were not addressed in MH's submissions and there is no suggestion that she has had access to independent legal advice about them.
Given these complexities, the extent to which MH's liability to costs may depend on future events including recoveries by a liquidator against Mr Amirbeaggi's firm and the desirability of MH having access to independent legal advice in respect of these issues, it seems to me that the preferable course is to continue to reserve the costs of and incidental to the proceedings against MH. I reserve liberty to all parties to apply including if, at any point, MH pays or confirms that she accepts liability to pay those costs, in the light of the matters noted above and any independent advice she obtains.
[4]
Orders
Accordingly, I make the following orders:
Pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth), the First Defendant, Sirrah Pty Ltd (in prov liq) be wound up.
Alan John Hayes be appointed as liquidator of the First Defendant.
Judgment for the First Defendant against the Second and Fourth Defendants jointly and severally in the sum of $15,674,735.
The Second and Fourth Defendants jointly and severally pay pre-judgment interest in the amount of $1,423,738.18 up until 30 April 2021 and continuing thereafter up until judgment.
Further to order 3, judgment for the First Defendant against the Second Defendant in the additional sum of $1,014,244
6 Further to order 4, the Second Defendant pay pre-judgment interest on the amount of $110,135.82 and continuing thereafter up until judgment.
The Second and Fourth Defendants pay the Plaintiffs' costs of and incidental to the proceeding (other than the claim made in paragraphs 59X to 59AD of the Further Amended Statement of Claim), as agreed or assessed, on the ordinary basis.
The costs of the proceedings as against the Third Defendant be reserved with liberty to apply on three business days' notice.
[5]
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Decision last updated: 09 May 2021