Baxter Global Investments Pty Ltd (ACN 159 246 670) v Marco

Consideration and decision on alternative applications

The award of indemnity costs is a matter within the Court's discretion. That discretion is broad but must be exercised judicially having regard to the circumstances of the case: Civil Procedure Act 2005 (NSW) (CPA), s 98(1)(c); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [22], [65], [134].
A range of circumstances have been recognised as capable of warranting an indemnity costs order. They include where a party has acted unreasonably or the conduct of the party has involved some delinquency: Oshlack at [44]; Harrison v Schipp [2001] NSWCA 13 (Harrison v Schipp) at [139]; Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6]. That conduct must be connected to the litigation itself, in the way the litigation is conducted, as opposed to conduct the subject matter of the litigation: Harrison v Schipp at [133]-[139].
In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 at [24], Sheppard J set out some principles and guidelines as to the circumstances in which the Court might award indemnity costs. They include where there has been particular misconduct of a case which has caused loss of time to the Court and to other parties; where proceedings were commenced or continued in wilful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
The authorities recognise that the Court may order indemnity costs where it appears that a party has continued their claim or defence in circumstances where, properly advised, they should have known that it had no chance of success: Bookarelli Pty Ltd v Katanga Developments Pty Ltd (No 2) [2017] NSWCA 94 at [9]; Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [4].
Abandonment of a claim or a defence is not, in itself, sufficient to warrant an order for indemnity costs. Abandoning unwinnable points or bad arguments is not to be discouraged, although indemnity costs may be awarded where abandonment amounts to an admission that the issue abandoned was hopeless: Lahoud v Lahoud [2006] NSWSC 126 at [38], [40]; Ghougassian v Fairfax Community Newspapers Pty Limited [2015] NSWCA 307 (Ghougassian)at [53]-[57].
It has also been recognised that the purpose of a costs order is to compensate or indemnify the person in whose favour the order is made and not to punish the person against whom it is made: Oshlack at [44]; Hamod v New South Wales [2002] FCA 424; [2002] FCAFC 97 (Hamod v NSW) at [20].
Applying those principles in this case, I have come to the conclusion that the plaintiffs have not established an entitlement to an indemnity costs order from 13 August or 18 September 2020.
The plaintiffs' submission in support of their alternative applications for indemnity costs assert, in essence, that the relevant delinquency or misconduct of the defendants was their continued defence and failure to truncate or resolve the trust claims from 13 August and late abandonment of the hearing on 18 September 2020. It seems to me that, underlying this submission is the premise that the defendants were obliged to and should have withdrawn their opposition to the trust claims earlier and, if they had, the plaintiffs would have avoided significant cost and time they incurred with preparing for a defended hearing.
A difficulty I have with the submission is that, irrespective of whether the defendants withdrew their defence or agreed to resolve the trust claims during the period 13 August to 18 September 2020, the substantive issue raised by that claim still had to be considered by the Court in order to be satisfied that declaratory relief of the nature that was ultimately sought should be granted.
The critical question for the plaintiffs' trust claim was whether the circumstances in which they had invested money with Mr Marco gave rise to a relationship of trust. As determined by the judgment, the Court held that it did. But that was not necessarily a foregone conclusion as the plaintiffs had the burden of establishing that the facts gave rise to a trust relationship and that declaratory relief should be granted. While the Markopoulus decision was very persuasive, the decision in this case depended, in part, on the particular interactions between the parties, as evidenced by their discussions and the terms of the material sent by Mr Marco to Mr Batchelar: see for example, judgment at [29] - [32] and [49].
Nor would declaratory relief have been granted by consent, even assuming the parties had reached some resolution between them on the trust aspect of the case: HOOSH Inc (Haberfield out of school hours) v State of New South Wales [2017] NSWSC 379 at [7].
In other words, the position of the defendants did not obviate the need for a hearing on the merits of the plaintiffs' trust claims and the cost and time associated with that hearing.
The case was set down for hearing and the court documents and evidence had been served prior to 13 August 2020. At the hearing, the plaintiffs relied on parts of the defendants' commercial list response and Mr Marco's evidence as they provided some evidentiary basis for their trust claim and entitlement to damages: see judgment at [35], [36] and [55]. The plaintiffs' also relied on the written submissions and chronology they had prepared in advance of being told that the defendants were not going to appear. In that context, it is difficult to understand how the defendants' continued defence of the trust claims and late abandonment of the hearing caused the plaintiffs to have incurred wasted legal costs to a significant degree in relation to that hearing.
I accept that the terms of Ms Sierakowski's affidavit and the correspondence from the defendants' solicitors in the week leading to the hearing, including its settlement offer dated 17 September 2020, are indicative of an acceptance by the defendants that Mr Marco's defence to the trust claims had little, if any, prospects of success on the basis of the Markopoulus decision. But the defendants' position after 13 August 2020 is to be assessed in the light of the circumstances of this case. Those circumstances include the existence of the asset preservation orders and the appointment of receivers to the property of the defendants. While those matters may not have prevented the defendants from seeking to resolve the trust claims entirely, the evidence indicates that, at least until 17 September 2020, the defendants considered they impacted when and on what terms the proceedings could be resolved. In my view, these were not illegitimate concerns and militate against a finding that the defendants engaged in disentitling conduct by failing to take steps on and from 13 August 2020 to resolve or truncate the proceedings, as the plaintiffs submit.
The evidence also indicates that the defendants had, through their solicitor, taken steps to seek to resolve the proceedings in the week prior to the scheduled hearing. Relevantly, the defendants did not seek to assert a defence to the trust claims but raised, amongst other matters, an issue about whether the plaintiffs could take steps to enforce any judgment made by way of consent.
The question of whether the plaintiffs can enforce the relief they have obtained continues to be the subject of debate. It also seems to me to be an issue that was unlikely to have been finally resolved even if Mr Marco's defence to the trust claims had not been pressed at an earlier time on the basis of the Markopoulus decision or he appeared at the hearing and was made available for cross-examination.
A relevant factor in this case is the late notice to the plaintiffs and the Court that the defendants would not be appearing at the hearing. While accepting that a party has no duty to defend a case, the defendants abandoned their opposition to the claims only two days after emailing the Court and the plaintiffs on 16 September 2020 to confirm who would be attending the hearing of behalf of the defendants.
Added to this is the question raised by the evidence as to precisely when the defendants were aware that they lacked the necessary funds to continue their defence and have legal representatives appear at the hearing. No evidence has been put forward by the defendants to explain when they became aware that funds were not available, why a lack of funds impacted their ability to conduct a defence when they had the option to seek further funds by variation to the asset preservation orders, and why that option was not explored. Nor does their evidence explain why it was that the defendants waited until 8.04pm on the Friday before the hearing to notify the Court and the plaintiffs of the position. In that regard, I note that the defendants' 8.04pm email to the Court was sent only four hours after the defendants' solicitor sent an email to the plaintiffs regarding the 17 September 2020 settlement offer indicating that they would rely on the email on the question of costs.
The defendants say that their decision not to oppose the claims for relief meant that the proceedings were able to be heard unopposed, faster and cheaper. That is right in some respects; the hearing of the trust and damages claims was unopposed and completed, in effect, within half a day. However, the defendants' submission ignores that, by the time the defendants notified my Associate of their position, the Court (and the plaintiffs) had set aside two full days for the hearing. If the defendants had withdrawn their defences to the trust claims and notified they would not be appearing earlier, the Court may have been able to provide other litigants with the opportunity of an earlier hearing.
The above events are, in my view, suggestive of a disregard by the defendants of their obligation to assist the Court in furthering the overriding purpose of the CPA and the rules of Court, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings: CPA, s 56. That said and while their conduct may be open to criticism, of itself, that conduct does not, in my view, justify an order for indemnity costs: Ghougassian at [55].
As to the plaintiffs' submission that their application for indemnity costs should also be viewed through the prism of the defendants' conduct of the proceedings more generally, which they contend has been delinquent pointing to the defendants past failures to comply with timetabling directions, those delinquencies have already been dealt with by previous costs orders.
An order for indemnity costs is not made to punish a party but to more fully or adequately compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part: Oshlack at [44].
For these reasons, and while somewhat finely balanced, I am not satisfied that the defendants' conduct during the period from 13 August through to 17 September 2020 was of a nature to be characterised as delinquent or misconduct of the type that warrants an indemnity costs order. Nor am I persuaded that the plaintiffs have shown that any such conduct has led to them incurring significantly increased costs or has prolonged the case such that they need to be compensated by way of an indemnity costs order from either of the alternative dates proposed. 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: 01 December 2020

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