Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd

Court of Appeal (NSW)|2010-09-29|Before: Allsop P, McColl JA, Adam P, Barr AJ, Coll JA

CITATION: Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277

JUDGMENT OF: Allsop P at 1; McColl JA at 2; Handley AJA at 45

DECISION: 1. Grant leave to appeal in relation to the primary judge's refusal to order that the costs orders in paragraphs 2, 11 and 12 of the orders made on 30 April 2010 be recoverable forthwith insofar as they were made against each corporate respondent. 2. Appellant to file a notice of appeal confined to the fourth ground of appeal in the draft notice of appeal included in the White Book again confined to those orders insofar as they concerned the corporate respondents. 3. Appeal allowed. 4. In addition to the orders made by the primary judge, order that the corporate respondents pay the costs the subject of paragraphs 2, 11 and 12 of the orders made on 30 April 2010 forthwith. 5. The third respondent, Gabriel Rahme, to pay the costs of the application for leave to appeal insofar as it concerned the question whether the costs he was ordered to pay in paragraphs 2, 11 and 12 of the orders made on 30 April 2010 be payable forthwith. 6. Subject to paragraph 5 above, the first and second respondents are to pay the costs of the application for leave to appeal and of the appeal. 7. The respondents to have a certificate under the Suitors' Fund Act 1951 (NSW) if qualified.

CATCHWORDS: COSTS - whether appropriate to order that costs should be payable forthwith - unreasonable conduct - failure to act expeditiously in conduct of proceedings - failure to assist in furthering overriding purpose - s 56 - 58, s 98, Civil Procedure Act 2005 (NSW) - UCPR 42.7

Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Corporations Law LEGISLATION CITED: Federal Court Rules 1979 (Cth) Land and Environment Court Act 1979 (NSW) Supreme Court Act 1970 (NSW) Supreme Court Rules 1970 (NSW) Uniform Civil Procedure Rules 2005

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 Australian Securities Commission v Marlborough Gold Mines Limited [1993] HCA 15; (1993) 177 CLR 485 BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 D Tannous (No 2) Pty Ltd v Bevillesta Pty Ltd [2009] NSWSC 782 Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 Horrobin v Australia & New Zealand Banking Group Ltd [1997] NSWCA 154 CASES CITED: House v The King [1936] HCA 40; (1936) 55 CLR 499 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Re Will of Gilbert (1946) 46 SR (NSW) 318 Skinner v Jeogla Pty Ltd [2001] NSWCA 15; (2001) 37 ACSR 106 Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 Wentworth v Wentworth [2000] NSWCA 350; (2001) 52 NSWLR 602

Bevillesta Pty Ltd - Appellant PARTIES: D Tannous No 2 Pty Ltd - First Respondent Gabriel Rahme - Second Respondent J & J Rahme Pty Ltd - Third Respondent

COUNSEL: CT Barry QC with JE Richards - for the Appellant RW Washington - for the Respondents

SOLICITORS: Shand & Associates - for the Appellant Benjamin & Khoury - for the Respondents

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 2008/288054

ALLSOP P McCOLL JA HANDLEY AJA

Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd Judgment 1 ALLSOP P: I agree with McColl JA. 2 McCOLL JA: The applicant, Bevillesta Pty Ltd, sought leave to appeal from orders made by Barr AJ granting the respondents, D Tannous No 2 Pty Ltd, Gabriel Rahme and J & J Rahme Pty Limited, leave to file a further amended statement of claim, refusing the applicant's application for security for costs and refusing its application that the costs orders his Honour had made against the respondents consequent upon the amendments be payable forthwith (the "costs forthwith order"): D Tannous (No 2) Pty Ltd v Bevillesta Pty Ltd (Supreme Court of New South Wales, Barr AJ, 7 May 2010, unreported). 3 A detailed narrative of the background to the proceedings can be seen in Hall J's judgment in D Tannous (No 2) Pty Ltd v Bevillesta Pty Ltd [2009] NSWSC 782, which was part of the background to the applications made in these proceedings: see primary judgment (at [6]). 4 The leave application was heard by Handley AJA and myself (the "leave Court"). That Court was of the view that leave to appeal should be granted in respect of the costs forthwith order insofar as the corporate respondents were concerned. The parties consented to the leave Court and a third judge who would read all relevant material, determining the appeal in respect of that point without further oral argument. The President appointed himself as the third Judge. 5 For convenience I will refer to the applicant as the appellant throughout.

Leave to proceed 6 At the outset of the leave application the appellant sought leave pursuant to s 500(2) of the Corporations Act 2001 (Cth) to proceed against the two corporate respondents which were placed in liquidation apparently pursuant to a resolution for voluntary winding up on 24 September 2010. 7 When the leave application was called on the parties' attention was drawn to Skinner v Jeogla Pty Ltd [2001] NSWCA 15; (2001) 37 ACSR 106 in which the Court (Spigelman CJ, Powell JA and Ipp AJA) considered whether the appellant needed leave to proceed pursuant to s 471B of the Corporations Law (a provision not relevantly distinguishable from s 500(2)) against companies placed in liquidation after the institution of the appeal. The parties' attention was drawn, in particular, to the discussion in Skinner of the decision of the Full Court of the Supreme Court of Western Australia in BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857. 8 In BPM the Full Court rejected a submission that s 471B leave was required to appeal from a decision refusing to order security for costs against a plaintiff corporation which went into liquidation after the first instance decision. Anderson J (with whom Kennedy and Ipp JJ agreed) characterised the security for costs application as "procedural" and expressed the view that such an application was "not a proceeding … against the company" within the meaning of s 471B, adding (at 859): "We were not referred to any authority directly in point but in my view the section is concerned with proceedings initiated against the company, not with procedural applications by defendants in an action initiated by the company. If it was intended that the section should operate to cut down the defensive procedural measures that would otherwise be available to a defendant in an action brought by the company, thereby reducing the defendant's normal rights in the litigation whilst leaving the company's rights intact, much clearer language would have been used in the legislation." 9 As Spigelman CJ observed in Skinner (at [19]): 19 The significance of the procedural character of an application for security for costs was also emphasised in obiter remarks by Finn J in Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446 at 448, where his Honour was concerned with s 440D(1), the equivalent provision with the respect to proceedings against companies in administration. (See also Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 13 ACLC 1,792 at 1,794 per Santow J). 10 Skinner did not concern "defensive procedural measures". Spigelman CJ (at [20]) and Ipp JA (at [59]) both distinguished BPM on that basis. Both declined to express a final view as to whether, on the proper construction of s 471B, leave was required in Skinner: (at [20]) per Spigelman CJ; (at [59] - [60]) per Ipp JA. Powell JA (at [54]) was inclined to the view that even in cases such as Skinner, s 471B leave was not required. His Honour was also of the opinion that this Court should follow the Full Court's decision in BPM consistently with the principles enunciated in Australian Securities Commission v Marlborough Gold Mines Limited [1993] HCA 15; (1993) 177 CLR 485. 11 Mr CT Barry of Queens Counsel, who appeared with Ms J Richards for the appellant, was, unsurprisingly, content to accept the proposition that the appellant did not require leave to proceed pursuant to s 500(2). Mr RW Washington, who appeared for the respondents, said they had not intended to oppose the application for s 500(2) leave to proceed in any event and did not wish to be heard on the issue raised in Skinner. 12 The leave Court was of the view that there did not appear to be any substantive differences between s 471B of the Corporations Law and s 500(2) of the Corporations Act insofar as the issue of leave to proceed is concerned. Further, the matters in respect of which the appellant sought leave to appeal appeared to fall within the BPM description of "defensive procedural measures". Accordingly, and bearing in mind the dictates of Australian Securities Commission v Marlborough Gold Mines Limited, it appeared to the Court appropriate to approach the application on the basis that the appellant did not require leave to proceed against the corporate respondents pursuant to s 500(2).

Leave to appeal application 13 On 4 June 2010 by consent, but without prejudice to the appellant 's application for leave to appeal, the parties agreed that the first and third respondents could file and serve a second further amended statement of claim on or before 23 June 2010. This was filed on 17 June 2010. In the light of that development, the appellant did not pursue that aspect of its application for leave to appeal which complained about the leave given to file a further amended statement of claim. 14 Mr Barry initially sought to proceed with the application for leave to appeal against both the refusal of the application for security for costs and the costs forthwith order. The leave Court pointed out, however, that in the light of the changed circumstances brought about by the liquidation of the two corporate respondents, there appeared to be little utility in considering whether or not the primary judge erred in refusing the application for security for costs. Mr Barry then did not pursue that aspect of the leave application. That left the application for leave to appeal in relation to the costs forthwith order for consideration. The costs forthwith order: the personal respondent 15 The issue of the costs forthwith order differs as between the personal and the corporate respondents. 16 The primary judge made the orders dealing with the appellant 's notices of motion on 30 April 2010 and said he would give his reasons when time permitted. Those reasons were delivered on 7 May 2010. 17 The effect of the primary judge granting the respondents leave to file a further amended statement of claim was to delete Gabriel Rahme, the personal respondent, as a party to the proceedings. His Honour noted (at [15]) a submission by Mr Barry that the Mr Rahme had ceased to be a party to the further amended statement of claim without having been given leave to discontinue and said (at [17]) that his order granting leave to file the amended pleading, "contemplated granting leave to Gabriel Rahme to discontinue." 18 His Honour then explained why he had ordered the respondents to pay the costs of the several motions with which he had dealt on an indemnity basis as follows: "18. It was inevitable that the plaintiffs would be ordered to pay the costs of the several Motions . I ordered those costs to be payable on an indemnity basis for the most part, and I should say why. As I have said, the proceedings arise out of commercial arrangements that went over 2005 and perhaps 2006. The original Statement of Claim was not filed until late in 2008. It was hopelessly inadequate and gave the defendant really no idea precisely how the plaintiffs that then existed intended to frame their claim against it, let alone prove it. The defendant was entitled to know those things and whether it had a defence and whether it needed to make provision for the payment of a just claim. Notwithstanding the continued efforts of its solicitor it was unable to do so. The strike-out motion the defendant eventually brought, which came on for hearing before Hall J, was thoroughly justified. Even after his Honour's criticisms and orders, granting to the plaintiffs the indulgence necessary for them to seize an opportunity at last to say how they would frame their claim, nothing constructive was done. The Amended Statement of Claim filed on 7 October 2009 was as hopeless as the document it replaced. I strongly suspect that the plaintiffs' case would never have been properly pleaded but for the continued strenuous efforts of the solicitor for the defendant . It was not until after the pressure so applied before the Registrar and in the listing of the strike-out motions for 30 April 2010 that the Further Amended Statement of Claim materialised. It is not without significance that an attempt was made to file it in the Registry on the afternoon before the day of hearing. I strongly suspect that but for the fixture before me the plaintiffs would not have got their case in order. It seems to me that one side ought not to treat another as the plaintiffs have treated the defendant in the preparation of this matter. For a year and a half the defendant has suffered the exasperation of not knowing how to provide for the claim intended to be raised against it. As French CJ said in Aon Risk Services Australia v Australian National University [2009] HCA 27 at [24], the discretion to give leave to amend and impose the duty to make amendments for the purpose of deciding the real issues in proceedings and avoiding a multiplicity of proceedings is exercised in the context of the common law adversarial system as qualified by changing practice. But that is not a system which today permits disregard of undue delay, which can undermine confidence in the rule of law. To that extent the avoidance of delay, based upon a proper regard for the interests of the parties, transcends the interests of the parties. Another factor which relates to the interest of the parties but transcends them is the waste of public resources and the inefficiency occasioned by the need to reconsider interlocutory processes, vacate fixtures or adjourn them because the non-compliance with timetables and the like. 19. I took the view that the defendant had been sorely tried and put to expense far greater than that which ought ordinarily to have been incurred in a matter of this nature, and that it ought in consequence to have its costs on an indemnity basis." (emphasis added) 19 Orders 11 and 12 which his Honour set out when repeating (at [20]) the orders he had made on 30 April 2010, included an order that the personal respondent pay the appellant 's cost of the proceedings on an indemnity basis. 20 After disposing of the application for security for costs, the primary judge dealt with the issue of whether the costs orders he had made should be ordered to be paid forthwith, an order the appellant sought pursuant to Uniform Civil Procedure Rules 2005 ("UCPR") 42.7 which provides: " 42.7 Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings." 21 His Honour dealt with this application succinctly, saying: "33. The defendant also asked the Court to order that the costs I have awarded in its favour should be ordered to be paid forthwith as assessed or agreed. I do not think that the defendant has made out a case for such an order. I see no reason why the agreement, assessment and the timing of payment of costs cannot be dealt with in the ordinary way." 22 Mr Barry submitted that as the effect of the personal respondent, in substance, being given leave to discontinue, he should have been ordered to pay the costs orders made against him forthwith. 23 The leave Court was of the view that, properly understood, the primary judge's refusal to make the costs forthwith order did not prevent the appellant assessing its costs orders against the personal respondent. 24 The effect of the primary judge's order granting the respondents leave to file a further amended statement of claim which deleted the personal respondent was that his Honour dispensed with the requirement that the personal respondent comply with UCPR 12.1(1) requiring him to file a notice of discontinuance - a dispensation granted pursuant to the power so to act conferred by s 14 of the Civil Procedure Act 2005 (NSW) (the "CP Act"). His Honour's order, insofar as the personal respondent was concerned, was not an order to which UCPR 42.7 applied because that rule contemplates a costs order made in proceedings which are still on foot. That is not the case in relation to the personal respondent. His Honour recognised that, although perhaps, with respect, somewhat elliptically, when he said (at [33]) that the "agreement, assessment and the timing of the payment of costs" could be dealt with in the ordinary way. In such circumstances the appellant could have no complaint about the costs forthwith order insofar as the personal respondent was concerned. 25 A debate in substance in the terms set out concerning whether, in truth, the costs order against the personal respondent could not be enforced until the conclusion of the proceedings now maintained only by the corporate respondents took place during the leave application between the Bench and Mr Barry. Having heard that debate, Mr Washington embraced the proposition that there was no impediment to the appellant assessing the costs against the personal respondent forthwith. That was not, however, the tenor of his solicitor's written summary of argument on the leave application. It was also not apparent to the leave Court that that attitude had been communicated to the appellant. 26 Failure promptly to communicate a position which would obviate the Court having to consider an aspect of a case is inconsistent with the requirement that a party to proceedings is under a duty to assist the court to further the overriding purpose of the CP Act to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(3), CP Act. Accordingly, while the Court hearing the leave application was of the view that leave to appeal should be refused in relation to the costs forthwith application in relation to the personal respondent, the latter should bear the costs of that application.

The corporate respondents: costs forthwith order 27 Mr Barry's argument, in short, was that as, in substance, the primary judge had concluded that the corporate respondents had engaged in unreasonable conduct warranting an indemnity costs order, that conduct also warranted an order that the indemnity costs should be paid forthwith: Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1. 28 Mr Washington submitted that the primary judge had a full discretion to make the costs payable forthwith or at the conclusion of the litigation: s 98(1), CP Act. He contended that the costs orders Barr AJ made related to "principally the rendering into a far more justiciable form (and a form compliant with the orders of Hall J) the substantive allegations of the remaining plaintiffs". He argued that when his Honour made his orders, he was aware of the strength of the respondents' case and their financial position as well as their contention that the appellant's conduct had contributed to that position and that those were factors which supported the exercise of his Honour's discretion in the respondents' favour not to order the costs be payable forthwith.

Consideration 29 Prior to the adoption of the UCPR, the position as to whether interlocutory costs could be ordered to be paid prior to the conclusion of proceedings was governed by Pt 52A r 9 of the Supreme Court Rules 1970 (NSW) which relevantly provided: "(1) Where before the conclusion of any proceedings, other than proceedings entered in the Commercial List or the Technology and Construction List, the Court makes an order for the payment of costs or a motion is refused with costs, the costs shall not, unless the Court otherwise orders, be payable until the conclusion of the proceedings.

…. (3) Where in any proceedings: (a) it appears to the Court that: (i) a party has been subject to unreasonable delay or default on the part of any other party, (ii) the proceedings are unreasonably protracted, or (iii) justice otherwise demands it, or (b) a costs order is made under r 43 or r 43A, the Court may order that costs, or a specified amount on account of costs, be payable forthwith." 30 I have earlier set out UCPR 42.7 which now governs this issue. It no longer contains the guidance as to when a costs forthwith order could be made previously found in Pt 52A r 9(3). However, as the following discussion makes apparent, Pt 52A r 9(3) featured only briefly in procedural history. 31 In Fiduciary Ltd v Morningstar Research Pty Ltd Barrett J held that Pt 52A r 9(3) did not comprise an exhaustive catalogue of the circumstances in which the court may order that costs be payable forthwith but, rather, the words "unless the Court otherwise orders" in Pt 52A r 9(1) were sufficient to preserve a discretion to make such an order in circumstances not within r 9(3). His Honour pointed out (at [5]) that the r 9(3) list "was added, with effect from 1 March 2000, by rules made by the Rules Committee on 20 December 1999" and was part of the collection of measures whose object was "to make it clear that the overriding purpose of the rules is to facilitate the just, quick and cheap resolution of the real issues in civil proceedings". 32 Barrett J also observed (at [7]) that the debate about the effect, if any, of the introduction of r 9(3) was "somewhat sterile" having regard to the fact that one of the circumstances in which that rule contemplated the making of an order that costs, or a specified amount on account of costs, be payable forthwith was where "it appears to the Court that ... justice otherwise demands it". In his Honour's view that was "in the nature of a restatement of the guiding principle which would, in the ordinary course, be applied in determining, under r 9(1), whether it is appropriate that the court 'otherwise orders'." His Honour (at [8]) found comfort in reaching this conclusion in the following observation of Olney J in Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 (at 312), a decision on the provision of the Federal Court Rules 1979 (Cth) similar to r 9(1): "The rule does not suggest any particular criteria by which the court should be guided in approaching such an application, and accordingly I take the view that the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule, namely, that an order for costs of an interlocutory proceeding should not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded." 33 Barrett J then reviewed authorities decided prior to the introduction of r 9(3) which set out the factors which have caused courts to depart from the "normal" rule in Pt 52A r 9(1) that costs are payable at the conclusion of the proceedings. He drew attention to Horrobin v Australia & New Zealand Banking Group Ltd [1997] NSWCA 154 where Priestley JA emphasised that each case should be considered by reference to its own particular facts, but himself identified proceedings which were "sufficiently self contained and detached or detachable from proceedings yet to be heard" as one class of case in which a costs forthwith order might be made. 34 Barrett J concluded that it was possible to identify categories of cases where a costs forthwith order was appropriate. Those categories relevantly for present purposes included unreasonable conduct on the part of the party against whom the costs had been ordered and the fact that the costs orders were made relatively early in the proceedings: Fiduciary Ltd v Morningstar Research Pty Ltd (at [10] - [13]). 35 In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (at [22]) Gaudron and Gummow JJ speaking of s 69(2) of the Land and Environment Court Act 1979 (NSW), which was relevantly in the same terms as s 98(1) of the CP Act, said that the power it conferred was "... unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view' " (quoting from Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 (at 505) per Dixon J). 36 Section 98, like its predecessor s 76 of the Supreme Court Act 1970 (NSW), is expressed to be "subject to Rules of Court...". Authorities dealing with the effect of that phrase in s 76 have concluded that "[t]he area of operation of s 76(1) necessarily depends on the scope, as it exists from time to time, of the provisions of any other enactments dealing with costs": Wentworth v Wentworth [2000] NSWCA 350; (2001) 52 NSWLR 602 (at [161]) per Heydon JA; see also Fitzgerald JA (at [12]). 37 UCPR 42.7 was clearly a rule to which the exercise of the primary judge's s 98 discretion was subject. While UCPR 42.7 confers an unfettered discretion, the power it confers must be exercised in accordance with the "demands of justice". This, as Barrett J explained in Fiduciary Ltd v Morningstar Research Pty Ltd, was established by authorities preceding the passage of the CP Act considering a rule in substantially the same terms as UCPR 42.7 and, in any event, is required by s 58(1) of the CP Act (Court to follow dictates of justice … in deciding whether to make … order of a procedural nature). The Court is required to take into account in determining the dictates of justice in a particular case the matters set out in s 56 and s 57 (s 58(2)(a)) and may have regard to (s 58(2(b)): "(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities" … (iv) the degree to which the respective parties have fulfilled their duties under section 56(3)" 38 In this case the primary judge (at [33]) could "see no reason why the agreement, assessment and the timing of payment of costs cannot be dealt with in the ordinary way." In my opinion, with respect, that was a patent error susceptible to appellate intervention, albeit made in the exercise of an unfettered judicial discretion: cf House v The King [1936] HCA 40; (1936) 55 CLR 499 (at 505). The reasons his Honour gave for ordering the respondents to pay indemnity costs, which demonstrated the entirely unreasonable conduct on their part in their approach to pleading their case as well as the appellant's solicitor's persistent attempts to get them to get their pleadings in order, constituted in my opinion a prima facie basis, having regard to the dictates of justice, for a costs forthwith order. There is no indication that in refusing to make that order his Honour brought to bear, even assuming them to be relevant, the matters Mr Washington relied upon (see [28] above). Accordingly, despite the restraint the Court exercises when considering whether to intervene on matters which involve an exercise of discretion on points of practice and procedure (Re Will of Gilbert (1946) 46 SR (NSW) 318 (at 323) per Jordan CJ; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 (at 177)) this Court, should, in my opinion, re-exercise the s 98 UCPR 42.7 discretion. 39 As I have said, prima facie in my opinion, the appellant was entitled to a costs forthwith order against the corporate respondents. They had clearly failed to act expeditiously (s 58(2)(b)(ii)) and failed to assist the court to further the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: s 58(2)(b)(iv) and s 56(3). 40 It is necessary at this stage to consider the discretionary factors Mr Washington suggested militated against making a costs forthwith order. 41 The first factor he relied upon was the strength of the corporate respondents' case. In my view that factor, accepting for present purposes his Honour's characterisation of the case as "reasonably arguable" (at [29]), does not militate against making a costs forthwith order. All parties, no matter what the strength of their case, are obliged to act reasonably in the conduct of their proceedings. The corporate respondents have lamentably failed to discharge this obligation. 42 The second factor Mr Washington relied upon was the corporate respondents' parlous financial position and their contention that the appellant was responsible for it. That submission was brought into play before the primary judge, as I understand his Honour's reasons, to resist the appellant's application for security for costs. As I have said there is no indication his Honour regarded it as relevant to his decision not to make the costs forthwith order. However, if it contributed to the glacial progress of the pleadings, it is clearly a matter which could be relevant to the re-exercise of the UCPR 42.7 discretion: s 58(2)(vii), CP Act. 43 The short answer to this submission, however, is that there was no evidence that the corporate respondents' financial position was a factor in the events which led to the primary judge making the indemnity costs order. Had it been it is improbable that his Honour would have concluded (at [18]) that they had engaged in "undue delay". 44 I propose the following orders:

Grant leave to appeal in relation to the primary judge's refusal to order that the costs orders in paragraphs 2,11 and 12 of the orders made on 30 April 2010 be recoverable forthwith insofar as they were made against each corporate respondent.

Appellant to file a notice of appeal confined to the fourth ground of appeal in the draft notice of appeal included in the White Book again confined to those orders insofar as they concerned the corporate respondents.

In addition to the orders made by the primary judge, order that the corporate respondents pay the costs the subject of paragraphs 2, 11 and 12 of the orders made on 30 April 2010 forthwith.

The third respondent, Gabriel Rahme, to pay the costs of the application for leave to appeal insofar as it concerned the question whether the costs he was ordered to pay in paragraphs 2, 11 and 12 of the orders made on 30 April 2010 be payable forthwith.

Subject to paragraph 5 above, the first and second respondents are to pay the costs of the application for leave to appeal and of the appeal.

The respondents to have a certificate under the Suitors' Fund Act 1951 (NSW) if qualified. 45 HANDLEY AJA: I agree with McColl JA. **********

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Suitors' Fund Act 1951(NSW)

Federal Court Rules 1979(Cth)

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