Australian Securities & Investments Commission v Perpetual Trustee

Federal Court of Australia|2000-12-15|Before: Gyles J

EX TEMPORE REASONS FOR JUDGMENT 1 On 29 November last, I made orders that the application and the cross claims in this matter should be dismissed. I reserved costs for further argument and that issue has been taken up today. I will not repeat any explanation of the matter generally, which should be taken from my judgment in the case ([2000] FCA 1726). I will refer to the parties by the same description as I did in that judgment.

Nature of proceedings 2 Counsel for Perpetual submits, firstly, that the nature of the proceedings should lead to an order for indemnity costs against ASIC. He submits that the proceedings were brought by ASIC for the benefit of the unitholders of the Capital Property Trust ("the Trust"). He says that on the evidence which has been filed on this application any excess of costs over party and party costs will, in fact, be paid by the Trust pursuant to various indemnities, and that this is a sufficient special circumstance to make the order for payment of indemnity costs. It is suggested that it would be anomalous for the Trust, on whose behalf (but without whose consent) the proceedings were brought, to in fact end up bearing a substantial amount of the costs. Mr Speakman, for Perpetual, was unable to cite any authority in point, although it is fair to say that the principles concerning a grant of indemnity costs have substantially emerged over recent years. 3 Mr Lawler, for ASIC, submits that the proceedings are not properly to be characterised as a claim on behalf of the Trust. He puts that ASIC was exercising its regulatory function in bringing the proceedings. I do not think that this is a relevant answer. The proceedings were, of their nature, compensatory and, in effect, brought on behalf of the Trust. Whilst the legislation gives locus standi to ASIC to bring the proceedings, it does not mean that the proceedings are regulatory in nature. It is also argued on behalf of ASIC that the reasoning behind Perpetual's submission would mean that similar applications could be made in many cases, including all cases in which the defendant occupies the position of trustee or a like position. This submission has some force, because Mr Speakman certainly suggested that the choice the Court has in the present situation is to decide which of two innocent parties should bear the excess of costs. In my opinion, that basis put forward by Perpetual for an order of indemnity costs is unsound as well as novel. In order to give effect to it, it is necessary to decide collateral issues such as the right to enforce indemnities on behalf of both Perpetual and its insurer, in circumstances where other parties are not present. It would be unduly disruptive to have to go into such collateral issues on a costs application.

Calderbank offer 4 On 14 September 2000, Perpetual made an offer to compromise, which involved accepting a sum towards its costs of the proceedings which was then clearly less than the amount which Perpetual would recover on taxation if successful. The offer was open for acceptance until 5pm on 29 September. That was rejected, and a counter-offer made, and then, on 13 October 2000 a similar offer was repeated, open for acceptance until 4pm on Friday, 20 October. It is accepted by ASIC that each of these offers involved a result more favourable to ASIC than that which results from my orders of 29 November. It is also accepted that the provisions of O 23 r 11 of the Federal Court Rules do not cover the situation where a respondent's offer is rejected and the applicant is wholly unsuccessful, and that this is a relevant circumstance in considering the proper order for costs. 5 ASIC submits that it is not enough to point only to the result of the litigation, it must also be found that the refusal of the offer was unreasonable. There has been some debate in the authorities as to the proper approach which is to be taken in this connection, the most recent to which I have been referred was the decision of Lehane J in Hadid v Lenfest Communications Inc [2000] FCA 628, in which the relevant previous authorities were examined. These cases, of course, cannot circumscribe the discretion given by the statute, but Mr Lawler is on sound ground in suggesting that they indicate that the mere result of the case will not necessarily decide the issue of costs where there has been a Calderbank offer. 6 Mr Speakman, for Perpetual, referred not only to the result of the case, but to other indicia that would indicate that the case was always plainly without merit, and referred to various passages from my judgment. There is a good deal to be said for this view, but the decision of the Full Court ([1999] FCA 250) in relation to the separate question makes it a difficult argument. Whilst I have taken a view as to the proper scope of that decision, the answer was by no means straightforward. In my view, ASIC was entitled to take comfort from that decision in relation to the litigation, and I am not surprised that its submission as to the effect of the judgment was put at the forefront of its case. The fact that I took a different view is by no means decisive for present purposes. 7 The reasons advanced by ASIC at the time for rejecting the Calderbank offer did not, however, refer to the Full Court decision in any presently relevant way. The response, the substance of which is contained in the letter of 19 September 2000 (which is also incorporated by reference in the later letter of 19 October) was far more wide-ranging and could properly be described as provocative (particularly the fourth paragraph). That letter of rejection of the first Calderbank offer included a counter-Calderbank offer, foreshadowing an application for indemnity costs in favour of ASIC on a fairly optimistic view of the case. A reading of the contemporaneous correspondence concerning costs indicates to me that each party had firmly taken up a position no later than 19 October (when the second offer was rejected) with each content to take their chances as to the result of the case, and with each contending that it would be entitled to indemnity costs if a more favourable result were achieved. In those circumstances, it seems to me appropriate that the parties should now be held to the position then taken. The effect of the Full Court judgment was only one among a number of factors to be considered by the litigants, and was not put forward at the time as being decisive. This result, in the circumstances of this case, arrives at a position similar to the principle behind O 25 r 11. 8 Mr Lawler has put that the fact that Mr Parkinson's evidence had not been provided at the time of expiry of the second offer meant that it was reasonable to reject the offer. I do not agree. This was not mentioned at the time as a reason for rejection of the offer. In any event, as Mr Speakman submits, it can only have been assumed that if there were a statement forthcoming it would have advantaged Perpetual rather than ASIC. That would provide no basis for rejection of the offer. I therefore propose to make an order for costs along the lines of that formulated by Wilcox J in Coshott v Learoyd [1999] FCA 276.

COSTS OF THE SNOW INTERESTS 9 It is argued by Mr Harris on behalf of the Snow interests that Perpetual should pay their costs of the proceedings, including any costs that they have been ordered to pay ASIC by virtue of the order of the Full Court made on 25 March 1999, viz: "The respondents pay the Commission's costs of the appeal and of the hearing, before the primary judge, on the question set for separate determination." 10 It is accepted by Mr Harris that the Snow interests are properly described as respondents before the Full Court, as was Perpetual. He submits that in the end result the Snow interests have been completely successful in relation to the Perpetual cross claim, that they did not initiate the proceedings themselves, or the separate question, and they were not joined to the proceedings at all until after the application for the order for the separate question had been made. The only basis for them entering into that question was the existence of the cross claim as there was no issue between them and ASIC. It is submitted that there is no reason, in the result, why the Snow interests should relieve Perpetual of any burden of costs they bear. 11 Mr Speakman, for Perpetual, (and Mr Lawler in case it affected his client) submitted that either I have no jurisdiction to make any order relating to the costs dealt with by the Full Court or, if I have, I should decline to exercise it. Whilst I can see that in the end the order of the Full Court leads to a result that is arguably unfair, those costs did relate to a discrete issue upon which ASIC was successful. The Snow interests did elect to enter the fray and, in doing so, must have taken their own chances. There is no proper basis upon which I could order that Perpetual pay the costs of the Snows of those proceedings without ordering that ASIC reimburse Perpetual for those costs. Viewed in this way, the effect of my orders would be to directly negate the orders of the Full Court. Even if I have power to do so, I do not think it appropriate to exercise that power. BULLOCK ORDER 12 A question arose as to whether a Bullock order or a direct order that ASIC pay the costs of the Snow interests should be made. I see no reason to depart from the usual practice that there be a Bullock order. COSTS OF TODAY 13 I do not propose to order any costs of these applications today. There has been varying success between ASIC and Perpetual, and the Snows' unsuccessful application has hardly affected costs. CONCLUSIONS 14 I order that the cross claimant pay the costs of the second and third cross respondents of the proceedings, excluding the proceedings dealt with by the order of the Full Court on 15 March 1999 . 15 I order that the applicant pay the costs of the respondent of the proceeding excluding the proceedings dealt with by the order of the Full Court on 15 March 1999: (a) incurred up to and including 20 October 2000 - taxed or assessed on a party and party basis; (b) incurred after 20 October 2000 - as taxed or assessed on the basis that such costs are to include all costs except insofar as they are of an unreasonable amount or unreasonably incurred so that, subject to such exceptions, the respondent will be completely indemnified by the applicant for its costs, including the costs which I have ordered that the respondent (cross claimant) should pay to the second and third cross respondents. 16 I make no order for the costs of and incidental to today's proceedings. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Counsel for the Applicant: MJ Lawler

Solicitor for the Applicant: Australian Securities & Investment Commission

Counsel for the Respondent: MR Speakman

Solicitor for the Respondent: Minter Ellison

Counsel for the Second and Third Cross Respondents: JD Harris

Solicitor for the Second and Third Cross Respondents: Corrs Chambers Westgarth

Date of Hearing: 15 December 2000

Date of Judgment: 15 December 2000

At a glance

Court

Decision date

Before

Source

Judgment (12 paragraphs)

Parties

Cases Cited (4)