Solicitors:
Clyde & Co (Plaintiffs)
Nelson McKinnon Lawyers (First and Second Defendants)
Dentons (Third Defendant)
Colin Biggers & Paisley (Interested Person)
File Number(s): 2019/155238
[2]
Judgment
Following a hearing over 3 days on 27-28 June and 2 July 2019, I delivered judgment on 16 July 2019 ([2019] NSWSC 892) ("Judgment") and dismissed the Plaintiffs' claim for "interlocutory relief"; held that no order should be made for the replacement of the liquidators. I observed, in paragraph 171 of the Judgment that:
"The Plaintiffs' application for interlocutory relief should be dismissed with costs. I am inclined to a preliminary view that, in the particular circumstances, the Plaintiffs should also pay C[olin] B[iggers &] P[aisley Pty Ltd]'s costs of the application, although this is the exception rather than the rule in respect of parties heard under r 2.13 of the Supreme Court (Corporations) Rules. The parties should bring in agreed short minutes of order to give effect to this judgment, including as to costs and the orders to be made to progress the Plaintiffs' claims for final relief, within 7 days, or, if there is no agreement between them, their respective draft short minutes of order and short submissions as to the differences between them."
The parties were in disagreement as to the form of orders to be made. The Plaintiffs submitted one form of short minutes of order and the Third Defendant submitted a different form, which was supported by the other parties, and by Colin Biggers & Paisley Pty Ltd ("CBP") which was heard in the proceedings under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). The position was complicated by the fact that the Plaintiffs revised their short minutes of order, in the version submitted to the Court, from an earlier version which was addressed in the First and Second Defendants' and the Third Defendant's respective submissions, narrowing the issues in dispute to some extent.
On 25 July 2019, I made the following orders, indicating that I would deliver reasons for making those orders in due course:
"THE COURT NOTES
1. Subject to further order of the Court, the Third Defendant undertakes that, in the event the plaintiffs are successful in obtaining the final relief sought in the Amended Originating Process filed 28 June 2019 (Amended Originating Process), it will pay to the liquidator of the first defendant, or as otherwise directed by the Court, any monies it receives from the proceeds of the sale of Lot 3 in Deposited Plan 1233744 in purported discharge of mortgage AP31287.
THE COURT ORDERS:
2. Prayers 1 to 5 of the Amended Originating Process (Initial Claims for Relief) are dismissed.
3. The Plaintiffs are to pay the First, Second and Third Defendants' costs of, and incidental to, the claims in prayers 1-2 and 4-5 of the Amended Originating Process in the amount or amounts agreed between them, or failing agreement, as assessed.
4. The Plaintiffs are to pay Colin Biggers & Paisley Pty Ltd's costs of, and incidental to, the claims in prayers 1-2 of the Amended Originating Process in the amount agreed between them, or failing agreement, as assessed.
5. The costs in orders 3 and 4 are to be assessed and paid forthwith.
THE COURT DIRECTS:
6. The directions hearing in the Corporations Directions List on 5 August 2019 at 10am is confirmed.
These are my reasons for making those orders.
Paragraph 1 of the orders
There was initially a dispute as to the form of the notation to be made by the Court as to an undertaking offered by the Third Defendant. However, the version of the short minutes of order submitted by the Plaintiffs to the Court adopted the form of undertaking proposed by the Third Defendant, reflecting the form of undertaking previously offered by the Third Defendant's Counsel in Court, and can appropriately be noted by the Court.
Paragraph 2 of the orders
The Plaintiffs referred, in their proposed orders, to "interim relief" and defined the application for relief sought in prayers 1-5 of the Amended Originating Process as "Interim Relief Application". The First, Second and Third Defendants preferred to have that relief described as "Initial Claims for Relief", on the basis that they contended that some of the relief that was sought was not of an interim character. At least some of the relief sought, namely the application for the removal of the liquidators, would arguably have final effect. It seems to me that the description proposed by the First, Second and Third Defendants is appropriate, so far as it does not characterise the relevant relief as either interlocutory or final in character, and simply recognises, as is the fact, that it was brought first. I have adopted that description in the proposed orders, although it has no operative effect.
Mr Cheshire, who appears for FW Projects Pty Limited ("Company") and its liquidators, initially submitted that, although prayer 6 was removed by amendment on 28 June (being the second day of the hearing), it should be dismissed for the avoidance of doubt. It seems to me that there is no doubt that the Amended Originating Process was amended to delete that claim, and it need not be further addressed. The form of order submitted by the Third Defendant, with which the liquidators ultimately agreed, did not seek to have that prayer addressed in the proposed orders.
Paragraphs 3 and 4 of the orders
The Plaintiffs proposed that they be ordered to pay the Second and Third Defendants' costs in respect of prayers 1, 2 and 5 of the "Interim Relief Application" on the ordinary basis. The Plaintiffs accepted that they must also pay CBP's costs but again limited those costs to those prayers for relief. The Plaintiffs' proposed order did not extend to the First Defendant, the Company, to the extent that it had incurred any relevant costs, and did not extend to orders 3-4 sought in the Amended Originating Process which were dismissed. The First, Second and Third Defendants and CBP sought to have the order for costs extended to the costs of and incidental to the Plaintiffs' application for "Initial Claims for Relief".
The Plaintiffs submit that costs should only be awarded in respect of prayers 1, 2 and 5 of the Amended Originating Process, with no order as to costs in respect of prayers 3, 4 and 6 for several reasons. The Plaintiffs submit that there should be no order as to prayer 3, which had sought the production of various documents from the liquidators, where that was not the subject of the hearing on 27-28 June and 2 July 2019; that matter was not dealt with or determined in the Judgment; and many of the documents were produced by the liquidators in the period leading up to the hearing. The Plaintiffs characterise that as a capitulation by the liquidators to the Plaintiffs' position. While I do not accept that characterisation, it seems to me that the application for production of documents had become moot by the time of the hearing, and the Court has not determined its merits. In those circumstances, there should be no order as to the costs of prayer 3.
The Plaintiffs submit that they should not be ordered to pay the costs of prayer 4 which sought an order restraining Mills Oakley from acting for the liquidators, where that application was not the subject of the hearing on 27-28 June 2019 and 2 July 2019; was not dealt with or determined by the Judgment; and the liquidators confirmed in affidavit evidence that they would engage independent lawyers to advise on all aspects of a disputed transaction and, in the course of the hearing, indicated they would terminate the retainer of Mills Oakley on delivery of the Court's judgment. The Plaintiffs submit that the liquidators have, in substance, capitulated to the Plaintiffs' position. I do not accept that submission. The Plaintiffs brought, but ultimately did not press, an application to restrain Mills Oakley from acting and the First, Second and Third Defendants should have their costs of that application to the extent that it was ultimately not pressed. The Plaintiffs also pointed out in submissions that prayer 6 of a previous form of the Originating Process had been deleted in the Amended Originating Process. It is not necessary to deal with the position as to prayer 6, since the First, Second and Third Defendants did not seek costs of that prayer.
The Plaintiffs submit that there is no good reason for the words "and incidental to" to be included in the orders, and such words depart from the ordinary formulation of costs orders and are superfluous. Those words are commonly included in costs orders and should be included, if only for the avoidance of doubt as to the scope of recoverable costs.
The Plaintiffs also submit that the Company should not be awarded any costs because its interests were represented by the liquidators throughout the proceeding. Mr Cheshire submits that it is appropriate that the Plaintiffs pay the Company's costs, where it was joined in the proceedings and appeared together with the liquidators. The Plaintiffs joined the Company as a defendant in the proceedings and, to the extent that it incurred costs in responding to the application, as distinct from the liquidators doing so, those costs are properly ordered in its favour. The Plaintiffs also submit that costs should not be ordered in favour of the Fourth and Fifth Defendants, which did not appear at the hearing. There is no suggestion to the contrary and I need not address that question further.
Mr Shearer, who appears for the Third Defendant, submits that it is appropriate for the costs orders to extend to reserved costs, where costs were reserved at directions hearings leading up to the hearing of the "Initial Claims for Relief" and in respect of applications for the production of documents. Mr Shearer also points out that r 42.7(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides that, in the ordinary course, costs of any application or other step in any proceedings including reserved costs are to be dealt with in the same way as the general costs of the proceedings. It seems to me preferable that that rule be permitted to take effect, in the ordinary way, without a further order in that respect.
In these circumstances, the Plaintiffs should pay the First, Second and Third Defendants' costs of and incidental to prayers 1-2 and 4-5 of the Amended Originating Process. They should also pay CBP's costs, of and incidental to the Plaintiffs' application in prayers 1-2 of the Amended Originating Process, where those prayers (relating to the treatment of the sale proceeds of a particular unit) were the only matter in which CBP had an interest or took any role in the proceedings.
Paragraph 5 of the orders
The First, Second and Third Defendants and CBP seek an order that the costs in orders 3 and 4 are to be assessed and paid forthwith. Mr Cheshire submits that an order that costs be assessed and paid forthwith should be made, by reference to the distinct nature of the matters that were heard and the fact that they included final claims for relief. Mr Shearer also submits that the liquidators' proposal that costs be payable and assessed forthwith is appropriate, where this application involved a discrete phase and some aspects of the relief sought were final relief.
The Plaintiffs respond that, under r 42.7(2) of the UCPR, the general rule is that the costs of an interlocutory application are not ordinarily payable until the conclusion of the proceeding. The Plaintiffs submit that there is no good reason to depart from this general rule.
Rule 42.7(2) of the UCPR provides that, unless the Court otherwise orders, the costs of any interlocutory application in proceedings are to be paid and otherwise dealt with in the same way as the general costs of the proceedings and do not become payable until the conclusion of the proceedings. An order that costs be payable forthwith is most commonly made where a costs order is relevant to a discrete, separately identifiable part of the proceedings or the costs liability will not be affected by the final outcome of the proceedings. The question when the Court could make such an order was considered by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1, where his Honour observed (at [18]) that it was appropriate to make such an order where an interlocutory hearing involved a separate and completed phase of the proceedings; the orders made had the result that, in effect, there would be a new beginning of the proceedings after that application; the defendant's costs of the application were increased by the service of voluminous material, much of which was not referred to; and the likely timing of a final hearing, in that case, was in the order of a year after the interlocutory hearing.
In Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13], Emmett J identified the rationale of the principle that costs of interlocutory proceedings were not ordinarily payable forthwith as that:
"… since an interlocutory proceeding does not resolve the final issues between the parties, it would, in ordinary circumstances, be inappropriate that an unsuccessful party in an interlocutory proceeding be required to pay costs immediately, since that party might ultimately be entitled to an order for costs in the substantive proceeding. The general principle appears to be that costs ought to be resolved when the proceeding has been concluded, and the rights of the parties have been finally determined."
On the other hand, his Honour noted (at [14]) that the principle might not be applied where costs have been incurred by reason of an application that is misconceived and should never have been brought, and that it would be relevant that a final decision is some way off in a proceeding, because it is lengthy and complex or for some other reason.
In Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503, Besanko J observed that the usual approach that costs are not resolved until the end of a proceeding serves the general interests of justice because it avoids multiple taxations and an apparent unfairness where a party who is initially successful is ultimately unsuccessful or vice versa; and prevents interlocutory proceedings being used as a weapon to exhaust the financial resources of one of the parties; and also recognised (at [21]) that:
"the court may order that costs be paid forthwith, and the cases suggest that [this] power may be exercised in circumstances in which there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceeding and the conclusion of the principal proceeding."
Such an order has been made in this Court, for example, where the result of a motion represents complete success for a party on a discrete and substantial part of the proceedings and, absent that order, costs would not be payable for a significant period: Ritson v Gay & Lesbian Community Publishing Ltd [2012] NSWSC 586 at [4]-[5]. In UGL Services Pty Ltd v F1 Solutions Pty Ltd [2012] FCA 245, Jagot J departed from the usual rule and made an order for costs forthwith where her Honour was satisfied that a summary judgment application was misconceived. I applied those principles in Re Punters Show Pty Limited [2017] NSWSC 605 and Re Tiaro Coal Limited (in liq) [2018] NSWSC 1043 on which I have drawn for the summary of the applicable principles that appears above.
It seems to me that this is a proper case for an order that costs be paid forthwith. This was a substantial and discrete application; the Plaintiffs were unsuccessful in that application; and it is likely to be a significant time until the balance of the issues in the proceedings are determined, given the scale of the Plaintiffs' claims. That position is a fortiori in respect of CBP which will likely have no further role in the proceedings. For these reasons, it seems to me that an order that costs be assessed and payable forthwith should properly be made.
Paragraph 6 of the orders
Dealing now with paragraph 6 of the orders, the First, Second and Third Defendants sought an order that the Plaintiffs file and serve their Statement of Claim in respect of prayers 7 and 8 of the Amended Originating Process by 4pm on 2 August 2019, and that a directions hearing on 5 August 2019 at 10am be retained. The Plaintiffs sought to have the directions hearing listed on that date vacated, and the matter listed for further directions on 26 August 2019.
The Plaintiffs submit that it is not appropriate to direct that they file a Statement of Claim because the period to lodge an appeal in respect of the Judgment, being 13 August 2019, has not yet expired, and the Plaintiffs are still taking advice and considering their position in this respect; and the Plaintiffs are still taking advice on and considering their overall position in respect of the proceeding, having regard to particular matters. I am not persuaded that the possibility of an appeal would be sufficient basis to defer the progress of the proceedings. To the extent that the Plaintiffs wish to appeal from the Judgment, by leave or by right, then the filing of their Statement of Claim in the balance of the proceedings will not prejudice their ability to do so. The filing of a Statement of Claim does not bind the Plaintiffs to continue the proceedings, if they ultimately consider that it is not appropriate to do so.
Mr Cheshire responds that the remaining matters in issue are claims for final relief set out in prayers 7 and 8 of the Amended Originating Process, based upon s 37A of the Conveyancing Act 1919 (NSW) and s 42 of the Real Property Act 1900 (NSW) and that a Statement of Claim is now required. Mr Cheshire submits that the Plaintiffs provided a draft (and detailed) Statement of Claim on or about 28 May 2019 and have been in possession of the relevant material at least since the earlier hearing that there is no reason why they should not file their Statement of Claim in short order, as the Third Defendant proposes, with the matter to be listed for directions on 5 August and that it is not appropriate that, as the Plaintiffs propose, the matter be adjourned until 26 August.
Mr Shearer submits that it is not appropriate for the proceedings to stand in abeyance for a five week period, after the Judgment, before returning to the Court for directions and the Plaintiffs should now be expected to "get on with" the proceedings with due expedition. Mr Shearer points out that the directions hearing date was discussed when the Judgment was delivered, and was set having regard, inter alia, to the convenience of the Plaintiffs' legal representatives, and he submits that the Plaintiffs should not now revisit that question. Mr Shearer also points to the time available to the Plaintiffs since the proceedings were commenced and the extensive documentary production which has also been made available to them.
I am not persuaded that the proceedings should now be left with no further progress until late August 2019, where they were commenced by the Plaintiffs as an application to the Corporations Duty Judge and conducted with an emphasis on their urgency. I therefore do not propose to vacate the directions hearing listed on 5 August 2019.
I also recognise that a draft of the Plaintiffs' Statement of Claim was previously made available at the earlier hearing. However, on balance, it seems to me that the just, quick and cheap resolution of the real issues in dispute would not be promoted by requiring the Plaintiffs to file their Statement of Claim without a further opportunity for consideration of the issues addressed in the Judgment, including issues as to the scope of s 37A of the Conveyancing Act and the possibility that an action may be available to the Company, and potentially to the Plaintiffs by way of derivative action, arising from breach of directors' duties and knowing receipt by the Third Defendant, of the kind considered in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 89 ACSR 1. It seems to me that it is likely to be preferable that the Plaintiffs have the opportunity to address these issues, rather than seeking to force them to file a Statement of Claim in its present form in short order, with the risk that it would shortly thereafter be amended in the light of the issues addressed in the Judgment.
[3]
Orders
For these reasons, I made the orders which I have set out above.
[4]
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 August 2019