Australian Securities and Investments Commission v Provide Nominees Pty Ltd

Federal Court of Australia|2023-10-30|Before: Kerry J, O'Bryan J

The Defendant pay the Plaintiff's costs of the proceeding (other than with respect to the issue of costs): (a) on a party-party basis until 19 June 2023; and (b) on an indemnity basis between 20 and 26 June 2023 inclusive.
The Defendant pay the Plaintiff's costs of the proceeding with respect to the issue of costs on a party-party basis.
The costs referred to in Orders 1 and 2 be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth).
The quantification of the costs awarded, and the making of such further orders and directions in connection therewith, be referred to a Registrar of the Court for determination. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 By originating process dated 2 December 2022, the plaintiff (ASIC) sought an inquiry by the Court pursuant to s 70(3) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) into the compliance by the defendant (Provide) with a notice dated 28 September 2022 given by ASIC under s 33 of the ASIC Act (Notice). The Notice required Provide to produce certain books as specified in 15 categories of documents enumerated in the schedule to the Notice. ASIC also sought an order pursuant to s 70(3) that Provide produce to ASIC, on a date to be determined by the Court, all books described in the Notice, and an order for payment of its costs. 2 The application was heard on 23 June 2023. ASIC was successful on its application: see Australian Securities and Investments Commission v Provide Nominees Pty Ltd [2023] FCA 1137 (Provide Nominees). On 25 September 2023, I made an order pursuant to s 70(3) in the following form: Within 28 days of the date of this order, the Defendant comply with the notice dated 28 September 2022 issued by the Plaintiff to the Defendant pursuant to s 33(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (Notice) by producing to the Plaintiff, in unredacted form, all books in its possession, custody or control described in paragraphs 1, 2, 3 and 12 of the schedule to the Notice not otherwise produced to the Plaintiff, including an unredacted copy of each document previously produced in redacted form. 3 At the time of delivering judgment, I pronounced an order for Provide to pay ASIC's costs of the proceeding. This reflected my view that ASIC had overall success on its application. At that time, ASIC requested that I defer making an order for costs to enable the parties to file evidence and make submissions as to the appropriate costs orders to be made. I agreed to that course and made orders for the filing of evidence and submissions on the question of costs and for that question to be determined on the papers. On 2 October 2023, ASIC filed an affidavit of James Rutherford Docherty sworn that day and a written submission. On 9 October 2023, Provide filed an affidavit of Jonathan Guy Joseph sworn that day and a written submission. 4 By its written submission, ASIC sought the following orders as to costs: The Defendant pay the Plaintiff's costs of the proceeding: (a) subject to (b), on a party-party basis to 15 June 2023, and thereafter on an indemnity basis; and (b) relating to the preparation and filing of evidence and submissions in response to the affidavits of Mr Henry Hon Chan dated 23 March 2023 and 8 May 2023, and the Defendant's submissions dated 19 May 2023, on an indemnity basis, to be assessed on a lump sum basis in accordance with the Federal Court Costs Practice Note (GPN-COSTS), if not agreed. 5 The indemnity costs order in paragraph (a) was sought on the basis of a Calderbank offer made by ASIC on 15 June 2023, eight days before the hearing, which was rejected by Provide on 19 June 2023. The indemnity costs order in paragraph (b) was sought on the basis that Provide's conduct of the proceeding put ASIC to unreasonable expense. Those separate bases for indemnity costs are discussed below. As can be seen, ASIC also sought an order that its costs be assessed on a lump sum basis in accordance with the Costs Practice Note (GPN-COSTS), if not agreed. 6 Provide submitted that the appropriate order is that Provide pay ASIC's costs of the proceeding on a standard basis only. Provide did not address ASIC's request for a lump sum assessment of costs.

Relevant principles 7 The relevant principles with respect to the award of costs by the Court under s 43 of the Federal Court of Australia Act 1976 (Cth) are well known. The power to award costs is discretionary, but must be exercised judicially by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation: Northern Territory v Sangare (2019) 265 CLR 164 at [24]. The purpose of an order is to compensate the successful party, not to punish the unsuccessful: Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ, 563 per Toohey J and 567 per McHugh J. The circumstances in which indemnity costs may be awarded are not rigid or closed, but such award is usually attended by special circumstances which justify departing from the ordinary practice, based on particular facts and circumstances of the case: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J. To justify a special costs order, there must be conduct by a party deserving of criticism and resulting in greater expense to the innocent party: Clifton v Kerry J Investment Pty Ltd (No 2) (2020) 277 FCR 382 at [31] per Besanko, Markovic and Banks-Smith JJ at [31]. 8 An unreasonable rejection (at the time of the offer) of an offer of genuine compromise may cause the Court to order costs on an indemnity basis, having regard to all relevant considerations: Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at [20] per Warren CJ, Maxwell P and Harper AJA. The mere fact that an unsuccessful party received an offer to settle on terms more favourable than it achieved at trial and rejected that offer is not sufficient to warrant an order for indemnity costs: CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ; Anchorage Capital Partners Pty Ltd v Acpa Pty Ltd (No 2) [2018] FCAFC 112 (Anchorage) at [8] per Nicholas, Yates and Beach JJ. The rejection must have been unreasonable in all the circumstances. In Anchorage, the Full Court observed (at [7]) that the circumstances to be taken into account in determining whether rejection of an offer was unreasonable cannot be stated exhaustively but may include, for example: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

The Calderbank offer 9 On 15 June 2023, ASIC made a Calderbank offer to settle the proceeding. The offer was open for acceptance until 21 June 2023. The terms of the offer were stated as follows: a. Provide Capital will produce to ASIC within 14 days, in compliance with ASIC Notice NTC2215653 dated 28 September 2022 (Notice), in unredacted form, all books in its possession described in paragraphs 1, 2 and 3 of the schedule to the Notice not otherwise produced to ASIC, including: i. an unredacted copy of each document previously produced with redaction in response to the Notice; ii. in respect of all persons who between 26 September 2020 and 28 September 2022 were a counterparty to either any 'credit facility agreement' or any 'bill facility agreement' with Provide Capital as borrower or drawer, all completed, signed or executed: a. application forms and corporate guarantees in relation to such 'credit facility agreements'; and b. application forms, drawdown notices, bills of exchange and corporate guarantees in relation to such 'bill facility agreements'; and iii. all emails and other correspondence in which executed corporate guarantees were provided to persons who between 26 September 2020 and 28 September 2022 were a counterparty to either any 'credit facility agreement' or any 'bill facility agreement' with Provide Capital as borrower or drawer; b. Provide Capital will agree to pay ASIC's costs of the Proceeding, in the amount of $36,500. This figure represents 50% of the costs incurred by ASIC since the commencement of the Proceeding; and c. Provide Capital consent to the making of orders in the terms of Annexure A to this letter. 10 The proposed consent orders contained in Annexure A to ASIC's offer contained the same terms as set out in paragraph "a" of the offer, but not the same terms as set out in paragraph "b". The proposed consent orders stipulated that Provide would pay ASIC's costs of the proceeding but omitted reference to the stipulated amount of $36,500. 11 Provide rejected the offer by letter on 19 June 2023. It gave three reasons for the rejection: (a) first, it claimed that the offer contemplated the provision of documents which did not exist or which had already been provided; (b) second, it claimed that the Court's jurisdiction to hear and determine the matter had not been enlivened; and (c) third, it claimed that the offer did not represent a genuine compromise but contemplated a complete capitulation on Provide's part. 12 I make the following findings with respect to ASIC's offer and its rejection. 13 First, the offer was made only a short time before the hearing when evidence and submissions had been filed and served. This meant that Provide was able to make a fully informed assessment of the offer. 14 Second, the time allowed for acceptance was adequate. Provide considered and rejected the offer within the time allowed. 15 Third, a real compromise was offered. At the time the offer was made, ASIC had filed submissions with the Court stating that it sought an order for compliance with four categories of documents sought by the Notice (categories 1, 2, 3 and 12). By its offer, ASIC offered not to pursue category 12. Further, ASIC sought a contribution to its costs in an amount of 50% of its costs incurred, which is likely to be lower than an award of party-party costs. 16 Fourth, Provide's prospects of success at the time it rejected the offer were poor. On 16 June 2023, Provide informed ASIC that Provide would only contest ASIC's application on the basis of the Court's jurisdiction and would not rely on its affidavits or submissions on the question of compliance with the Notice. In effect, Provide had capitulated on all issues other than jurisdiction. On the issue of jurisdiction, I consider that Provide's argument at the hearing was weak. Ultimately, the question of jurisdiction raised by Provide turned on a short question of construction and a short question of fact. Provide was successful on the question of construction. I concluded that the expression "the failure" in s 70(2) is intended to be a reference to the failure of the relevant person to comply with the relevant requirement made under Pt 3 without reasonable excuse (Provide Nominees at [47]). Accordingly, in this proceeding, ASIC was required to certify to the Court in writing that ASIC was satisfied that Provide had, without reasonable excuse, failed to comply with the requirements of the Notice. The question whether ASIC had given that certification to the Court was principally a question of fact. I concluded that ASIC had given that certification to the Court. At the commencement of the proceeding, a relevant officer of ASIC had sworn an affidavit in which he deposed that ASIC was satisfied that Provide had, without reasonable excuse, failed to comply with the requirements of the Notice. I concluded that certification for the purposes of s 70(2) of the ASIC Act could be given by way of affidavit (Provide Nominees at [53]). That conclusion followed from the ordinary meaning of the word "certify" and the context of s 70(2), which required the certification to be given to the Court. Provide's argument to the contrary did not rise above mere assertion that the word "certify" in s 70(2) does not include a statement on oath. I rejected that argument. 17 Fifth, although ASIC's offer was expressed differently to the order made by the Court, in substance the two conveyed the same requirements (save for the omission of category 12 from ASIC's offer). In that regard, the following parameters of ASIC's offer were the same as ultimately ordered by the Court: (a) the offer only required the production of documents in the possession of Provide and which had not previously been provided to ASIC, which is consistent with the order of the Court; (b) the offer required production of unredacted copies of documents that had previously been provided in redacted form, which is consistent with the order of the Court; (c) the offer required production of application forms, drawdown notices, bills of exchange and corporate guarantees in relation to each "bill facility agreement", and application forms and corporate guarantees in relation to each "credit facility agreement", entered into by Provide with lenders in the period from 26 September 2020 to 28 September 2022, which is consistent with the order of the Court; and (d) the offer required production of all emails and other correspondence in which executed corporate guarantees were provided to persons who between 26 September 2020 and 28 September 2022 were a counterparty to either a "bill facility agreement" or "credit facility agreement" with Provide, which is consistent with the order of the Court. 18 Sixth, the offer was clear in its terms. As noted earlier, there was a lack of conformity between paragraph "b" of the offer, which provided for the payment of ASIC's costs in an amount of $36,000, and the proposed orders that were annexed to the offer which omitted the agreed amount of costs. However, the omission of the agreed amount of costs from the form of the proposed orders was clearly accidental. In my view, there was no lack of clarity with respect to the terms offered by ASIC which included a compromise with respect to the payment of its costs in the amount of $36,000. The offer was capable of acceptance and, if the offer had been accepted, the Court would have corrected the accidental omission from the proposed orders. 19 Seventh, the offer expressly stated that it was made in accordance with the principles set down in Calderbank v Calderbank [1975] 3 All ER 333 and would be relied upon in relation to the costs of the proceeding. Thus, ASIC foreshadowed an application for indemnity costs if Provide rejected the offer. 20 Provide contended that the rejection of ASIC's offer was not unreasonable in the circumstances. It advanced three submissions in support of that contention. 21 First, Provide submitted that the offer was not capable of acceptance because the proposed orders annexed to the offer omitted the proposed amount of costs to be paid and also omitted a procedure as to the dismissal of the proceeding. I reject that submission. For the reasons already given, it is clear that the omission of the proposed amount of costs from the form of order annexed to the offer was accidental and would have been rectified by the Court. As to the dismissal of the proceeding, ASIC's offer stated that it was an offer to settle the proceeding. It is implicit in that statement that, if the offer were accepted, the proceeding would be brought to an end by an agreed dismissal. In my view, ASIC's offer was capable of acceptance and, if accepted, Provide would have been able to enforce the agreement by obtaining orders of the Court that conformed with the offer. 22 Second, Provide submitted that the offer did not involve a real and genuine element of compromise. It argued that the offer "contemplated complete capitulation" and the compromise on costs was derisory. I reject that submission. The extent of a compromise offered depends upon the strength or weakness of the parties' position at the time of the offer. As discussed above, by the day after the day on which the offer was made, Provide had already decided that it would only contest the question of jurisdiction and it would not contest any substantive issue with respect to compliance with the Notice. For the reasons explained above, Provide's argument on jurisdiction was weak. In the circumstances, ASIC's offer to pursue only three categories of the Notice (and not category 12, on which it was ultimately successful), and ASIC's offer to accept 50% of its costs to date, represented a real compromise having regard to Provide's position at the time of the offer. 23 Third, Provide submitted that, at the time of the offer, it was not in possession of sufficient information to make a prediction as to the likely outcome of the proceeding because the jurisdictional issues raised by Provide had not been judicially considered. I reject that argument for the reasons explained above. It is correct that the question of the proper construction of s 70(2) of the ASIC Act raised by Provide had not been judicially considered. However, the question of construction was decided in Provide's favour. The real problem confronting Provide's jurisdictional argument was the question of fact: whether ASIC had certified that Provide had, without reasonable excuse, failed to comply with the requirements of the Notice. At the commencement of the proceeding, a relevant officer of ASIC had sworn an affidavit in which he deposed that ASIC was so satisfied. At the hearing, Provide was unable to advance any tenable argument in support of its contention that certification could not be given to the Court by way of affidavit. 24 Having regard to all of the circumstances referred to above, Provide's rejection of ASIC's offer on 19 June 2023 was unreasonable. It was reasonable for Provide to have a few days to consider ASIC's offer, being the period from 15 to 19 June 2023. It is therefore appropriate that Provide be ordered to pay ASIC's costs on an indemnity basis in respect of costs incurred from (and including) 20 June 2023. The hearing occurred on 23 June 2023 and, at the request of the Court, ASIC provided the Court with a final submission and updated court book on 26 June 2023. I will therefore order that Provide pay ASIC's costs on an indemnity basis in respect of costs incurred between 20 and 26 June 2023 inclusive of both dates.

Unreasonable conduct 25 ASIC submitted that Provide's conduct of the proceeding put ASIC to avoidable expense. ASIC's criticism was directed to the fact that Provide had filed evidence and submissions in the proceeding contesting the issues concerning compliance with the Notice, requiring ASIC to file responsive material. A few days before the hearing, however, Provide chose not to rely on the evidence and submissions it had filed on the question of compliance. 26 In my view, ASIC's submissions do not provide a basis for the award of indemnity costs. ASIC would not ordinarily have been entitled to indemnity costs if Provide had elected to contest the issue of compliance with the Notice at the hearing (based upon its evidence and submissions) and failed. ASIC would only have been entitled to party-party costs. Provide's decision, albeit made late, not to contest the issue of compliance with the Notice reduced the duration of the hearing and the burden faced by ASIC. That decision, of itself, does not justify criticism and does not afford a basis for an indemnity costs order. It goes without saying that ASIC is entitled to its costs, on a party-party basis, of preparing evidence and submissions in advance of the hearing in response to the evidence and submissions filed by Provide, but which were subsequently abandoned by Provide.

Form of assessment 27 ASIC sought an order that its costs be assessed on a lump sum basis in accordance with the Costs Practice Note (GPN-COSTS), if not agreed. It did not, however, advance any submissions in support of that order. Nor did Provide make any submissions in opposition. 28 The Costs Practice Note issued by the Court on 25 October 2016 provides guidance to litigants about the approach to the assessment of costs that will be undertaken by the Court. Relevantly, paragraph 4.1 states that: The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order. 29 In Paciocco v Australia and New Zealand Banking Group Limited (No 2) (2017) 253 FCR 403, the Full Court noted (at [19]) that, while the Costs Practice Note suggests that most cases should have a lump sum costs order approach (unless there is some characteristic that would make it unsuitable), that approach is not mandated in all instances and the Court must exercise the discretion given to it. The Full Court further observed that (at [20]): There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 30 It is well established that a lump sum order may be suitable in simple as well as complex cases: Playcorp Group of Companies Pty Ltd v Bodum A/S (No 2) [2010] FCA 455 at [3] per Middleton J; Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51] per Emmett J. 31 In my view, the present case is suitable for the award of costs on a lump sum basis for four reasons: first, such an award accords with the Court's preference for lump sum costs orders; second, a lump sum assessment will save the parties the time and costs of a taxation process; third, ASIC's estimate of its costs incurred as at 15 June 2023 indicates that the total amount of costs to be estimated will be proportionate to the complexity of the matter; fourth, the evidence adduced at the hearing shows that Provide has been less than cooperative with ASIC and a lump sum assessment will reduce the scope for further dispute. The quantification of the costs will be referred to a Registrar of the Court for determination.

Costs of this determination 32 The final matter for determination concerns the costs of addressing the costs of the hearing. ASIC was successful on its application for indemnity costs based on its Calderbank offer. In the circumstances, I consider that the costs of addressing the costs of the hearing should be treated as costs in the cause. It follows that the appropriate order is for Provide to pay ASIC's costs of the proceeding with respect to the issue of costs on a party-party basis.

Conclusion 33 In conclusion, I will make the following orders as to costs: (a) that Provide pay ASIC's costs of the proceeding (other than with respect to the issue of costs): (i) on a party-party basis until 19 June 2023; and (ii) on an indemnity basis between 20 and 26 June 2023 inclusive; (b) that Provide pay ASIC's costs of the proceeding with respect to the issue of costs on a party-party basis; (c) that the costs be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth); and (d) that the quantification of the costs awarded, and the making of such further orders and directions in connection therewith, be referred to a Registrar of the Court for determination. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.

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