Australiawide Airlines Ltd v Aspirion Pty Ltd

Orders in respect of the DoA, monetary orders and interest

1. The Defendants initially submitted that orders 1 - 4 of their proposed orders reflected orders sought in the Defendants' IP, but had been amended to reflect NB's success in his challenge to the DoA under the Contracts Review Act 1980 (NSW). In supplementary submissions, the Defendants did not press their proposed order 2 and pressed order 3, that the DoA was void under s 7(1) of the Contracts Review Act, on the basis of my finding (Judgment [112]) that such an order should be made. MB and AB did not make submissions so as to oppose these orders and DK did not contest that these orders should be made, and I will make them in the form of the Defendants' proposed orders 1, 2 and 4.
2. The Defendants submit that orders 5-13 of their proposed Orders reflect their success on the claim in respect of unauthorised transactions and refer to paragraph 182 of the Judgment, where I held that RHPL was entitled to judgment against DK in the amount of $350,000 and interest being the total amount paid out to him, MB and AB outside the scope of his authority, and to judgment against each of MB and AB of $100,000 plus interest, although it could not recover more than $350,000 plus interest by reason of those judgments. I will make those orders in favour of RHPL rather than all Cross-Claimants to the Defendants' IP, consistent with the Judgment, and the Defendants' did not oppose that approach in supplementary submissions. DK sought, and the Defendants did not oppose, an order recording the observation in the Judgment that RHPL cannot recover more than $350,000 in total pursuant to those orders, and interest, reflecting the overlap between the judgments against each of DK, MB and AB. I will make that order.
3. The Defendants calculated the amount of pre-judgment interest payable in respect of those amounts, and also sought an order for post-judgment interest under s 101 of the Civil Procedure Act 2005 (NSW). DK did not take issue with those calculations or with an order for post-judgment interest and orders in those terms should be made, again providing for payment to RHPL rather than to all of the Cross-Claimants to the Defendants' IP.

Costs

1. The parties did not address the applicable legal principles in their submissions as to costs, but I bear certain well-established principles in mind. Section 98 of the Civil Procedure Act 2005 (NSW) provides for orders for costs. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides that, generally, costs will follow the event, and UCPR r 42.20 provides that: "If the Court makes an order for dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the Court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed."
2. A successful party has a "reasonable expectation" of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that: "… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs." That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98].
3. In Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [7]-[9], McColl JA in turn observed that: "Section 98 of the Civil Procedure Act 2005 (NSW) confers a wide discretion on the court with respect to costs. The "general rule" is that court costs follow the event unless the court makes "some other order" pursuant to the discretion conferred by Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1. As Beazley JA explained in Baker v Towle [[2008] NSWCA 73; (2008) 39 Fam LR 323 at [11] (Mathews AJA agreeing)], in most litigation, UCPR r 42.1 "operates in a straightforward way, 'the event' being readily identifiable as a judgment for the plaintiff or the defendant on the claim. In that sense, 'the event' to which the rule refers is the result of the proceedings, so that the party who succeeds on the claim before the court is awarded costs, unless the court, pursuant to the discretion conferred by r 42.1, makes 'some other order'". Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs." [footnotes omitted]
4. I have here drawn on my summary of the applicable principles in Re ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited (2019) 135 ACSR 443; [2019] NSWSC 174 at [5]ff.
5. The Defendants submit that, for the purpose of the principle in UCPR r 42.1 that costs follow the event, the relevant "event" in these proceedings is the failure of the Plaintiffs' claim and the success of the Defendants' IP. They also submit, and I accept, that this is not a case where there are clearly dominant or separable issues on which the successful parties lost. However, I address the narrower scope of the claim brought against DK in the Defendants' IP below.
6. The Defendants initially sought an order that MB and AB pay their costs of and incidental to their claim as Plaintiffs, on which they failed, on an ordinary basis as agreed or as assessed. MB and AB and DK did not make submissions in opposition to that order and I will make that order.
7. The Defendants also sought an order that MB, AB and DK pay their costs of and incidental to the Defendants' IP on an ordinary basis as agreed or as assessed, but rightly amended that position in supplementary submissions to distinguish the position in respect of MB and AB on the one hand from that of DK on the other. MB and AB did not contest the making of such an order against them and I will make such an order against them. The Defendants ultimately did not press, and I could not properly make an order that DK pay the costs of the Defendants' IP in respect of issues relating to the validity of the DoA to which DK was not party and as to which no relief was pressed against him. It seems to me that an order for costs against DK is properly made in respect of that part of the Defendants' IP that was directed to the unauthorised transactions, as to which the Defendants were substantially successful against him, for the reasons noted below.
8. DK in turn sought an order that the Defendants pay the costs of the "principal claim" on the ordinary basis up to 5 March 2021, and contends that there should be no order as to costs against him in respect of the Defendants' IP against him. DK relies on the somewhat imprecise phrasing of prayer 5 of the Defendants' IP, by which they sought a declaration that the DoA "was procured by the Respondents by the exercise of undue influence over [NB] and/or unconscionable conduct of the respondents, and ought to be set aside". It seems to me that the context of the claims and the fact that DK was not party to the DoA indicated that the reference to the "Respondents" should not be read as extending to a claim against DK. DK also refers to the Points of Claim filed by the Defendants in respect of the Defendants' IP, which repeated aspects of their Points of Defence which involved allegations against DK.
9. DK also points to matters raised by the Defendants in their written opening submissions and to the "potential" that they were seeking to implicate DK in the conduct impugning the DoA and obtain a declaration adverse to his interests. It is plain enough that the Defendants were seeking to implicate DK in the conduct impugning the DoA, as a step in seeking relief against MB and AB in respect of the DoA, and that remained the case throughout the hearing. However, there was no reason to think that the Defendants were seeking any declaration adverse to DK, where he was not party to the DoA and they did not need any declaration against him in order to set aside the DoA against MB and AB. As DK points out, the Defendants amended the Defendants' IP on the third day of the hearing, 5 March 2021, to make clear that the reference to the "Respondents" in the relevant claim was to MB and AB as the parties to the DoA.
10. If (as seems likely) DK's reference to the "principal claim" is intended to refer to the Plaintiffs' claim against the Defendants, I cannot see any basis on which the orders sought by the Defendants in the Defendants' IP could support an order that they pay DK's costs of that claim, to which he was not party and in which no relief was sought against him. His role in that claim was as a witness called in the Plaintiffs' unsuccessful case, and there is no basis for the successful Defendants to pay his costs in that respect. If the reference to the "principal claims" is instead to costs incurred in respect of that part of the Defendants' IP relating to the DoA, there also seems to me to be no basis for DK to recover those costs for the reasons noted below.
11. The Defendants respond, in respect of their clarification on the first day of the hearing that no relief was sought against DK in relation to the DoA, that it was always clear that DK's involvement was as a participant in the relevant events, not a party against whom relief was sought in respect of the DoA. It seems to me that that must have been apparent to all parties, where DK was not party to the DoA and there was no need to bind him in respect of any orders setting aside the DoA. DK was, however, properly party to the Defendants' IP, since it also sought recovery of significant monetary sums from him. The Defendants also point out that DK was, on the Court's finding, a significant participant in the relevant events, but it is not necessary to address that matter in order to determine the question of costs.
12. It seems to me that no order for costs should be made in DK's favour in respect of that part of the Plaintiffs' claim or the Defendants' IP that was directed to the DoA, because it would, or should, have been apparent to him and his advisers that no relief was sought against him in respect of the DoA, because he was not party to it. To the extent that DK devoted efforts to preparing evidence and submissions relating to those issues, it seems to me likely that that was directed to seeking to advance MB's and AB's case and to seek to justify his participation in events surrounding the DoA, rather than to any misapprehension as to the scope of the orders sought against him. It seems to me that I also could not properly make the order sought by DK that there be no order as to costs in respect of the Defendants' IP against him, where RHPL had substantial success in respect of its money claim against him relating to the unauthorised transactions.
13. DK also submits that there should be no order as to his costs incurred in respect of that part of the Defendants' IP that related to unauthorised transactions, because the Plaintiffs originally sought an order that he pay RHPL the amount of $510,000, maintained that claim throughout the hearing, reduced that claim to the amount of $393,872 after the close of evidence and submissions, and succeeded in respect of a claim as to $350,000. DK submits that the Court "cannot condone the prosecution of cases for relief where aspects of the claim are not properly maintainable" and that that amounted to a "serious waste of the Court's time and the parties' resources". DK reiterated that submission in strong terms in supplementary submissions as to the questions raised by the Court.
14. The Defendants respond, in supplementary submissions, that: "First, the relevant "event" is the success of the [Defendants'] claim against [DK] in respect of the unauthorised transactions claims. In particular, this is not a case where the claims against [DK] upon which [RHPL] did not succeed were "clearly dominant or separable": Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [63]-[66] per Campbell JA. On the contrary, [DK's] principal defence against the unauthorised transactions claim was the same for both the payments to family members and the payments to law firms: namely, that he had the authority to make the payments: see [154] of the principal judgment. The Court rejected that argument and held that the transfer of the relevant funds (i.e. including the $160,000 paid to law firms) was unauthorised: at [166]. [DK's] secondary defence, in relation to the Shanahan Tudhope payments only, was that Shanahan Tudhope was in fact acting for [RHPL]. The Court also rejected that argument: [175]-[177]. Accordingly, it cannot be said that that [DK] enjoyed even partial success on any of the arguments which he mounted in his defence (and which therefore occupied the Court's and the parties' time). As the Court noted at [179]: "It may have been arguable that RHPL was entitled to maintain the full amount of the claim against DK, so far as that was the amount paid out of RHPL and the NBF Trust without authority and that amount had not been restored to the trust, provided that it did not then recover more than the amount that was paid away." Mr Kentrotis bore the onus of raising a defence that the payments in question had been repaid: Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 569-570. No such defence was ever pleaded or sought to be proved. [RHPL] itself did not have any record of any repayment (see T407.34ff), and had had receivers appointed to it for the majority of the time that the proceedings were on foot."
15. I accept these submissions, and I cannot accept DK's submission as to the costs of the unauthorised transactions claim. The Defendants pursued a substantial money claim against DK and succeeded in respect of a large part of that claim. That is success by any measure, in respect of a claim which was properly brought, and it is not to the point that the Defendants ultimately recovered less than they had sought in that respect. There is, in my view, no basis for a submission that DK had "an element of success", where the ultimate result of the Defendants' IP was a substantial judgment against him for the larger part of the claim brought against him. The evidence and submissions as to that part of the claim as to which the Plaintiffs failed would have contributed little to either the time or the costs which will have been incurred in the proceedings generally.
16. DK alternatively submitted that the Defendants should pay his costs on an indemnity basis regarding that part of the unauthorised transactions case as to which they did not recover compensation, and DK should pay their costs on the ordinary basis regarding the successful aspect of the unauthorised transactions case. I do not consider that order should be made, for the reasons put by the Defendants. In any event, its practical outcome would likely be little different from that of the order which I propose to make, where I have noted above that the costs relating to the unsuccessful aspect of the unauthorised transactions case brought by the Defendants would have been minimal.
17. SB in turn seeks an order that NB, RHPL and SHM pay her costs of and incidental to the claim against her on an indemnity basis. SB submits that the Defendants' written submissions, filed on 25 February 2021, noted that certain prayers which sought compensation in respect of breaches of directors' duties against, inter alia, SB were not pressed. She refers to a letter sent by SB's solicitors on 2 March 2021 proposing orders that the proceedings against SB be dismissed with costs on the ordinary basis and notes that UCPR r 42.20 would, unless the Court otherwise orders, entitle her to an order for costs up to and including the first day of the hearing, where the proceedings against her had been dismissed. SB also submits that an order for costs should be made on an indemnity basis because the Defendants had abandoned "untenable" claims against SB, and there was no proper basis to join SB to the proceedings. I do not accept either aspect of that submission. There is no basis for holding that the claims against SB were "untenable", or would not have succeeded, where the Court has not determined those claims on the proceedings. It seems to me there was a proper basis to join SB to the proceedings where the position in respect of the General Security Deed and the Heads of Agreement relating to the sale of Mr B's hotel was initially put in issue by the Plaintiffs' claim.
18. The Defendants also submit that it would be inappropriate to make an order that they pay SB's costs of the claim in these circumstances, and that an order that there be no order as to costs should be made, to displace any application of UCPR r 42.20(1). They point out that, on the first day of the hearing on 3 March 2021, the Court dismissed the Interlocutory Process as against SB and reserved the question of costs, by consent (T7-9). They point out that MB and AB had initially sought to establish that they were entitled to appoint receivers to RHPL pursuant to a General Security Deed, and contended that a Heads of Agreement to sell the Mr B's hotel was a binding contract. The Defendants point out that they then sought relief against SB in the Defendants' IP, contending that a directors' meeting on 12 June 2020 that authorised the entry into the General Security Deed was invalid, and that the Heads of Agreement relating to the sale of Mr B's hotel had not been authorised by RHPL's board and was at an undervalue. The Defendants then point out that MB and AB did not press their claims under the General Security Deed or in respect of the sale of Mr B's hotel at the hearing, because other events had intervened, and the Defendants therefore did not press those aspects of the Defendants' IP. It seems to me that there is force in the Defendants' contention that SB was a necessary, or at least a proper party, to the Defendants' IP so far as it concerned a challenge to the resolution authorising entry into the General Security Deed or the Heads of Agreement for the sale of Mr B's hotel, and was properly joined as a respondent to the Defendants' IP while those matters were in issue.
19. Alternatively, the Defendants submit that an order should be made that the Plaintiffs pay SB's costs of the Defendants' IP, where the aspect of the claim affecting SB was brought in response to aspects of the Plaintiffs' claim that were not pressed at the hearing. They also point out that SB's affidavit evidence was largely directed to supporting MB's and AB's claim, rather than to a response to the claim against her.
20. Although the parties again did not refer to the applicable principles, I have regard to Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274, where McColl JA (with whom Beazley JA agreed) observed that the "default order" in UCPR r 42.20 does not establish a presumption that costs will be ordered against the plaintiff upon the dismissal of the proceedings, and other relevant considerations included those identified in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6 ("Lai Qin"). Santow JA there agreed with that observation and also noted that the onus is on a discontinuing party to justify such an order by reference to the normal costs outcome in such an event. An order contrary to the default position in UCPR 42.20 will therefore involve an exercise of discretion to depart from that position contemplated by the rule, where "some sound positive ground or good reason for departing from the ordinary course" is established: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [10], [54]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54] per Hodgson JA. The fact that parties were justified or acted reasonably in commencing or defending the proceedings may but will not necessarily support a departure from the provision of the UCPR: Australiawide Airlines at [64]; see also McNamara v Bao San & Ors [2010] NSWSC 809 at [12].
21. It seems to me that there should be no order in respect of SB's costs of the claim against her, on a somewhat narrower basis. The Court has not determined the claim against SB on its merits, and the Defendants did not pursue it in circumstances that its relevance had been displaced, after MB and AB did not press their claims under the General Security Deed or in respect of the sale of Mr B's hotel. In Lai Qin above, McHugh J observed that, where proceedings are determined without a hearing on the merits, the Court would generally not make an order for costs, where that would require the determination of a hypothetical proceeding, in order to determine the question of costs. While there is a potential exception to that approach where a party's position amounts to a capitulation, the Defendants' not pursuing the claim against SB did not here amount to a capitulation or reflect any obvious reason to think that they would have failed in that claim. Where there has been no determination of the merits of the claim, it seems to me that the Court should not order that the Defendants' pay SB's costs of that claim.

Orders

1. Accordingly, I make the following orders and declarations: Plaintiffs' claim 1 The Plaintiffs' claim be dismissed. Defendants Interlocutory Process ("Defendants' IP") 2 Declare that the Deed of Assignment dated 9 July 2018 between Nicolas Balagiannis ("NB") as assignor and Mary Balagiannis ("MB") and Angelique Balagiannis ("AB") as assignees ("Deed of Assignment") ought be set aside pursuant to Contracts Review Act 1980 (NSW). 3 Order pursuant to s 7(1) of the Contracts Review Act 1980 (NSW) that the Deed of Assignment is void. 4 Order that all executed copies of the Deed of Assignment be cancelled. 5 Order that Dimitri Kentrotis ("DK") pay Reserve Hotels Pty Ltd ("RHPL") the sum of $350,000 ("Judgment against DK"). 6 Order that MB pay RHPL the sum of $100,000 ("Judgment against MB"). 7 Order that AB pay RHPL the sum of $100,000 ("Judgment against AB"). 8 Order that DK pay RHPL pre-judgment interest on the Judgment against DK pursuant to section 100 of the Civil Procedure Act 2005 (NSW) in the amount of $12,202.84 for the period of 17 June 2020 to 14 April 2021, and continuing at a rate of $39.32 per day to the date these orders are entered. 9 Order that MB pay RHPL pre-judgment interest on the Judgment against MB pursuant to section 100 of the Civil Procedure Act 2005 (NSW) in the amount of $3,486.53 for the period of 17 June 2020 to 14 April 2021, and continuing at a rate of $11.23 per day to the date these orders are entered. 10 Order that AB pay RHPL pre-judgment interest on the Judgment against AB pursuant to section 100 of the Civil Procedure Act 2005 (NSW) in the amount of $3,486.53 for the period of 17 June 2020 to 14 April 2021, and continuing at a rate of $11.23 per day to the date these orders are entered. 11 Order that DK pay RHPL post-judgment interest on the Judgment against DK pursuant to section 101 of the Civil Procedure Act 2005 (NSW). 12 Order that MB pay RHPL post-judgment interest on the Judgment against MB pursuant to section 101 of the Civil Procedure Act 2005 (NSW). 13 Order that AB pay RHPL post-judgment interest on the Judgment against Angelique pursuant to section 101 of the Civil Procedure Act 2005 (NSW). 14 Order that RHPL cannot recover more than $350,000 in total plus interest in respect of orders 5-13. Costs 15 Order that the Plaintiffs pay the Defendants' costs of and incidental to the Plaintiffs' claim on an ordinary basis as agreed or assessed. 16 Order that MB and AB pay the Defendants' costs of and incidental to prayers 5-8 of the Defendants' IP on an ordinary basis as agreed or assessed. 17 Order that DK pay the Defendants' costs of and incidental to prayers 9-10 of the Defendants' IP on an ordinary basis as agreed or assessed. 18 No order as to costs as to Susan Balagiannis' participation in the proceedings, including for the avoidance of doubt participation in the Plaintiffs' claim and the Defendants' IP.

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