- Ballam v Ferro

Supreme Court of NSW|2023-03-16|Before: Black J

Solicitors: Allsop Glover Lawyers (Plaintiff) Uther Webster & Evans (Second Defendant) File Number(s): 2022/00166505

Background

On 13 December 2022 and 17 February 2023, I heard an application brought by Mr Peter McNamee (to whom I will refer, without disrespect, as "Peter") for leave under s 237 of the Corporations Act 2001 (Cth) ("Act") to bring derivative proceedings in the name of Wonga Pastoral Development Co Pty Ltd ("Wonga"). I outlined the manner in which that hearing proceeded in paragraphs 6-7 of my judgment delivered on 23 February 2023, as follows: "Wonga was initially joined as the only Defendant to the application and has taken no role in it. Peg was joined as a Second Defendant in the application at her request and initially opposed the application. The hearing of the application commenced on 13 December 2022 and, after Peg was provided with evidence of funds that had been deposited by Peter to support Wonga's costs of the proposed proceedings, Mr Pritchard (with whom Mr Macauley appeared for Peg) advised that: "[Peg] no longer wishes to be heard against the application. My client does seek an opportunity, in writing, in a short period of time suitable to your Honour, to make submissions about the issue of costs of the application." Mr Pritchard and Mr Macaulay then withdrew from the hearing of the application. The hearing was later adjourned in the course of closing submissions at Peter's request, and then continued on 17 February 2023. Ms Whittaker and Mr Mirzai appeared for Peter on the first day of the hearing and, as I noted above, Mr Condon appeared for him on the second day of the hearing."

Affidavit evidence

Peg relies on the affidavit dated 9 March 2023 of her solicitor, Ms Evans, in respect of the costs application. Ms Evans notes that, when Peter commenced the application on 8 June 2022, he joined Wonga as the only Defendant, and Peg was later joined as Second Defendant in the application at her request, allowing her the opportunity to be heard in opposition to the application. Ms Evans refers to work done in preparing the affidavits on which Peg relied in opposition to the application, and to correspondence between her firm and Peter's solicitors in relation to whether Peter would provide an indemnity as to Wonga's costs of the proposed derivative proceedings. Ms Evans also notes that Peg's legal representatives were provided with additional information relating to Peter's proposal as to how the costs of the proceedings would be met at the commencement of the hearing on 13 December 2022 and, as I noted above, Peg then withdrew from the hearing. Ms Evans also refers to a Notice to Produce dated 8 December 2022 that Peter proposed to issue; to her advice to Peter's solicitor that Peg would apply to set aside that Notice to Produce; and to the ultimate position that Peter did not call on that Notice to Produce on the second day of the hearing on 17 February 2023.

The parties' submissions

Mr Pritchard, with whom Mr Macauley appears for Peg, outlines the history of the application in submissions as to costs. He refers to the basis on which Peter brought the application for leave under s 237 of the Act, and contended that the proposed claim by Wonga was not in Wonga's best interest; and he notes my findings that there was no suggestion that Wonga's board had reached the decision not to bring that claim other than in good faith; that authorising the action would undermine the governance arrangements that had previously been put in place in respect of Wonga, and particularly notably the appointment of an independent director to exercise a casting vote; and that the proposed claims against Peg, in her own right and as the executrix of her late husband's estate, and against a current director of Wonga and a third party were not seriously arguable.
Mr Pritchard points to my observation at the conclusion of my judgment that, consistent with Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 42.1, costs would ordinarily follow the event. He submits there is no reason why Peter should not be liable to pay Peg's costs of the proceedings at least up to 13 December 2022, on the basis that she was justified in her opposition to the application for leave. He points to the fact that I had accepted, in my judgment, several of the written submissions made by Peg in opposition to the application, prior to her withdrawal from the oral hearing. Mr Pritchard also submits that, although Peg did not read her affidavit evidence, some of it was tendered by Peter on the application; that Peg's intervention in the matter brought about the result, between the parties, that Peter did not seek to pursue a claim in respect of another transaction; and that Peg incurred legal costs in liaising with Peter's legal representatives as to the form of indemnity offered by Peter at the hearing on 13 December 2022, and as to Peter's proposed Notice to Produce dated 8 December 2022. Mr Pritchard submits that, in these circumstances, there is no principled basis to depart from the ordinary rule that Peter should pay Peg's costs of the proceedings.
Mr Condon, who appears for Peter, makes relatively brief submissions, which do not take issue with Peg's account of the relevant events, or the extent to which Peg's submissions were accepted in my judgment, or the extent to which her affidavit evidence was relevant to the proceedings. He instead submits that, where Peg had elected to participate in the proceedings, the compensatory principles applicable to an order for costs were not enlivened. He refers to an observation by Professor Dal Pont in Law of Costs, 4th ed (at [11.42]) that: "… there is no usual practice that an intervener will receive his or her costs, even if the intervenor's contentions are accepted or the outcome of the proceedings otherwise accord with the arguments the intervenor advanced, as the plaintiff is entitled to choose the person(s) whom he or she wishes to sue."
Mr Condon also refers to the decision in Johnston v Cameron [2002] FCAFC 301, where costs were not ordered in favour of an intervenor in a proceeding under the Workplace Relations Act 1996 (Cth) and to authority that an intervenor can recover costs only if the intervention was necessary to protect an interest not in common with the main parties. Mr Condon submits that: "The submissions filed on behalf of Peg do not reveal that she was protecting an interest unique to her or not common with Wonga's - which, with respect, the Court was able to identify of its own accord. Consistently with the authorities cited above, it is not determinative that Peg articulated the outcome ultimately found by the Court - even if it adopted some of the submissions advanced by her ….

Determination

It seems to me that, as I had foreshadowed in my substantive judgment, an order for costs should be made in Peg's favour, up to and including 13 December 2022 when she withdraw from the oral hearing, on the basis that costs follow the event. That order should also extend to the costs of Peter's Notice to Produce and the costs of this application. I reach that result for the following reasons.
First, I bear in mind that UCPR r 42.1 provides that, subject to Pt 42, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. In Ballam v Ferro (No 2) [2022] NSWSC 1358 at [53]ff, Hallen J summarised the applicable principles as follows: "How costs are to be borne is a matter for the exercise of broad discretion by the Court: s 98 Civil Procedure Act 2005 (NSW); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11. The section is expressed without any qualification and is unconfined, although, naturally, it must be exercised judicially (i.e. not arbitrarily or capriciously), having regard to any statutory context, established principle and the circumstances of the relevant case. The Court, also, must have regard to the requirement imposed by s 56 of the Civil Procedure Act to give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceeding. The exercise of the discretion must be appropriately reasoned: House v R (1936) 55 CLR 499; [1936] HCA 40 at 503 and 505 . Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive: Latoudis v Casey (1990) 170 CLR 534 at 543; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77; Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA agreed. The exercise of discretion will be guided by well-established principles in order to promote consistency in decision-making: Norbis v Norbis (1986) 161 CLR 513 at 519; [1986] HCA 17 (Mason and Deane JJ, with whom Brennan J generally agreed); Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]-[25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ). Effectively, "[t]he disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires": Gray v Richards [No 2] (2014) 89 ALJR 113; [2014] HCA 47 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ). In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Mason P agreed) wrote at [121]: [U]nderlying 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. The observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] (Gleeson JA, with whom Macfarlan and Leeming JJA agreed). The usual order as to costs is that a successful party in litigation is entitled to an award of costs in his, her, or their, favour, and an unsuccessful party bears the liability for the costs of the litigation: UCPR r 42.1, unless it is considered that some other order ought to be made. That is, costs follow the event. The relevant 'event' is success in the action or on particular issues: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6 (McHugh J). The onus lies on the unsuccessful party to demonstrate a basis for departing from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] (Brereton J); Maxwell v Maxwell (No 2) [2022] NSWSC 1146 at [10] (Ward P).
Peg was joined as party to the proceeding on the basis that she was a necessary or at least a proper party to the proceedings, and had a proper interest in defending the proceedings, and I ultimately accepted a substantial part of her submissions. In those circumstances, an order for costs is properly made in her favour to compensate her for the costs she incurred up to the point that Peter offered an improved indemnity as to Wonga's costs of the proposed proceedings and she withdrew from the oral hearing.
Second, the case law to which Mr Condon refers recognises that a successful intervenor can recover costs if the intervention was necessary to protect an interest not common with the main parties. Here, Wonga had rightly not taken an active role in the application, where it was the subject of that application and its directors (with the exception of an independent director) and shareholders were the family members in dispute. Absent Peg's intervention in the application, the Court would have had no proper contradictor to the application brought by Peter. Peg's intervention was necessary to protect an interest that would not otherwise have been protected, albeit she ultimately withdrew prior to the point of oral submissions.
Third, even if, contrary to the fact, Peg was not party to the proceedings but had been heard in them under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), an order for costs would properly still have been made in her favour where her submissions had provided substantial assistance to the Court. In Re Pan Pharmaceuticals Ltd; Selim v McGrath (2004) 48 ACSR 681; [2004] NSWSC 129 at [20], Barrett J observed that the Court had power to make a costs order against a party to proceedings in favour of a non-party, although such an order would be "extraordinary and exceptional" and require "some very special factor outside the ordinary and expected course of events and engendering a justifiable expectation of compensation in the mind of the non-party". In Re HIH Casualty and General Insurance Ltd [2006] NSWSC 6, Barrett J made such an order where the parties there heard under r 2.13 made submissions that were highly relevant to the task of the Court in reaching its decision and I took the same approach in Re Gia Firenze Investments Pty Ltd [2013] NSWSC 99 and in Knox v Nile [2022] NSWSC 638. The order for costs that is sought by Peg is consistent with that approach.
For these reasons, I make the order as to costs sought by Peg as follows: 1. The Plaintiff pay the Second Defendant's costs of the proceedings up to and including 13 December 2022, together with any costs incurred by the Second Defendant thereafter arising out of or in relation to the Plaintiff's Notice to Produce dated 8 December 2022 and the question as to the appropriate order as to the costs of these proceedings, as agreed or as assessed.

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. Decision last updated: 23 March 2023

Workplace Relations Act 1996(Cth)

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