These are my reasons for orders made on 31 January 2022 in relation to the costs of these proceedings and an informal application by the plaintiffs to adjourn the hearing of the defendants' notice of motion in relation to costs.
The need to make costs orders at this stage arose following a partially successful appeal by the plaintiffs in 2021 against the dismissal of the proceedings at first instance in 2019. The Court of Appeal set aside the costs order made by the primary judge (Rees J) and remitted the question of the costs of the proceedings at first instance to the Equity Division.
These reasons assume familiarity with the judgment of the primary judge dismissing the plaintiffs' claims, [1] the judgment of the Court of Appeal upholding the defendants' appeal only insofar as it related to a claim that the primary judge had not identified as being pressed by the plaintiffs at trial but that the Court of Appeal held had not been abandoned, [2] and the judgment of the Court of Appeal in relation to the costs of the appeal and the remitter of the costs of the trial to the Equity Division. [3] The following matters in those judgments are important for present purposes.
The first plaintiff (Mr Lambourne), second plaintiff (Mr Pollett) and first defendant (Mr Baker) were shareholders in the third plaintiff (Punters Show Pty Limited) at the time of the events relevant to the proceedings. Mr Baker was the sole director of the company at the time of those events, although Mr Lambourne was a director by the time of the trial.
Prior to the trial, the plaintiffs had been represented by solicitors and counsel. At the trial, they were no longer legally represented and Mr Lambourne represented himself and also spoke on behalf of Mr Pollett who supplemented Mr Lambourne's submissions where he felt it necessary to do so. With the leave of the Court, Mr Lambourne also represented Punters Show Pty Limited (Punters Show).
Mr Baker was represented at trial by solicitor and counsel. The second to fifth defendants were separately represented by a different solicitor and counsel.
The primary judge identified two claims that the plaintiffs pressed at trial out of several causes of action that had been pleaded:
1. a claim by Mr Lambourne against the second and third defendants for $30,000 alleged to be owing to Mr Lambourne for certain services that he claimed to have rendered to the second and third defendants (the money claim); [4] and
2. a claim by Mr Lambourne and Mr Pollett, or alternatively by Punters Show, against Mr Baker for alleged breaches of fiduciary duty in causing Punters Show to enter into an arrangement with the second to fifth defendants referred to as a strategic partnership and against the second to fifth defendants under Barnes v Addy (the equitable compensation claim). [5] The amount of compensation sought exceeded $1,500,000. [6]
The primary judge held that Mr Lambourne had failed to prove the money claim and the plaintiffs had failed to prove the equitable compensation claim. Her Honour dismissed the proceedings.
After the hearing of the subsequent appeal, but while judgment on appeal was reserved, Mr Lambourne and the second and third defendants reached a settlement in relation to the money claim and a consent judgment was entered giving effect to that settlement. [7]
The Court of Appeal identified a third claim that had been pleaded, had not been abandoned, and had not been determined by the primary judge. That claim was a claim by Punters Show for amounts totalling $210,249 withdrawn from its bank account by Mr Baker for his own personal use in breach of his duties to as a director of Punters Show (the improper withdrawals claim). [8] The Court of Appeal upheld that claim and entered judgment in favour of Punters Show against Mr Baker in the sum of $210,249.
The appeal was otherwise dismissed.
As I have already mentioned, the Court of Appeal subsequently determined the costs of the appeal and remitted the costs of the proceedings at first instance to the Equity Division.
In accordance with directions made by Black J on 6 December 2021, the defendants filed a notice of motion on 13 December 2021 setting out the following costs orders they sought in relation to the trial:
"1 The Plaintiffs to pay the First Defendant's costs of the proceedings other than costs associated with the Improper Withdrawals Claim.
2 The First Defendant to pay the Third Plaintiff's costs associated with the Improper Withdrawals Claim.
3 The Plaintiffs to pay the Second to Fifth Defendants' costs of the proceedings other than costs associated with the Money Claim.
4 Notwithstanding any orders made, all outstanding interlocutory costs orders in favour of any party not be disturbed.
5 The Plaintiffs to pay the Defendants' costs associated with the application that Black J rescue [sic - recuse] himself on the basis of bias, dismissed on 27 April 2017.
6 Interest at the Court rate to be paid on all costs to which a party is entitled from the date on which they were paid.
7 To the extent that it is opposed, the Plaintiffs pay the Defendants' costs of this application."
In support of that motion, the defendants relied on an affidavit of their solicitor, Ms Nicola Craven, sworn on 13 December 2021 and written submissions also filed on the same date.
The directions made on 6 December 2021 required the plaintiffs to file and serve any evidence and submissions on which they intended to rely in relation to the question of costs by 17 January 2022. It came to my attention on 28 January 2022 that the plaintiffs had not filed any evidence or submissions. At my request, my Tipstaff sent an email to the parties noting the plaintiffs' non-compliance with the orders made on 6 December 2021 and asking whether the plaintiffs opposed the orders sought by the defendants. Mr Lambourne replied apologising for the plaintiffs' non-compliance, stating that he was in the process of "preparing documentation to seek an adjournment and to explain the failure" and stating that the plaintiffs did intend to oppose the orders sought in the defendants' notice of motion. At my request, my Tipstaff replied advising the parties that any adjournment application would be dealt with at the commencement of the hearing at 2pm on 31 January 2022 and, if no adjournment was granted, the hearing of the defendants' motion would proceed immediately thereafter.
There was no appearance for the plaintiffs at the commencement of the hearing at 2pm on 31 January 2022. No notice of motion or other material relating to the adjournment application foreshadowed by Mr Lambourne's email had been filed or sent to my chambers. For abundant caution, I adjourned the hearing briefly and requested my Associate to contact Mr Lambourne by email advising him that the hearing was proceeding and he should join the virtual hearing without further delay if he wished to participate. No response was received to that email during the short adjournment, but a Mr de Robillard joined the virtual hearing soon after it resumed. Mr de Robillard informed the Court that he was neither a solicitor nor a barrister but that Mr Lambourne had requested him to appear for the limited purpose of apologising to the Court for Mr Lambourne's failure to appear and requesting the Court to read written submissions that Mr Lambourne had prepared seeking an adjournment. No such written submissions had been received from Mr Lambourne, and I adjourned the hearing for a further short period to allow Mr de Robillard to send those submissions by email to my Associate and to the defendants' solicitors and counsel.
Mr Lambourne's submissions asserted that the defendants had failed to comply with orders made by the Court of Appeal for the filing of any notice of motion and supporting materials concerning the costs of the appeal and the trial. The submissions also complained that Mr Baker had failed to make any arrangement or proposal to pay the sum of $246,000 that he had been ordered to pay. I assume that is a reference to the judgment in favour of the third plaintiff/third appellant in respect of the improper withdrawals claim together with interest and the costs of the appeal.
Mr Lambourne's submissions then referred to "previous unchallenged evidence" to the effect that his professional commitments require him to prepare video presentations on Mondays, Wednesdays and Fridays and that he is "a home parent" (which I understand to mean primary care giver) to two teenagers under the age of 15. The submissions stated that Mr Lambourne "should not have been required to deal with these complex matters during the school vacations" and that "it would be in the general interest of the administration of justice for this matter not to be listed for hearing until all parties have been provided with an equal opportunity to make written submissions." The submissions also stated that an adjournment would not result in wasted costs because "it has always been clear that the [plaintiffs] would not be in a position to proceed with a defended hearing today." Finally, the submissions asserted that the defendants had not prepared the matter properly for hearing in accordance with applicable practice directions, including the revised hearing arrangements issued on 28 October 2021.
The submissions set out the orders proposed by Mr Lambourne on behalf of the plaintiffs, namely:
"1 That the matter is listed for mention on a Tuesday or Thursday.
2 That the orders made by Black J be vacated on the grounds of apprehended bias.
3 That the costs of today be reserved."
Having received and read those submissions, I resumed the hearing and dismissed Mr Lambourne's informal application for an adjournment on the basis that I would publish reasons for that decision in due course. My reasons are as follows.
First, assuming (without deciding) that the defendants failed to comply with orders made by the Court of Appeal concerning the filing of any motions relating to the costs of the appeal and the trial, that has been overtaken by the fact that the Court of Appeal did subsequently hear a motion or motions relating to those costs and remitted the costs of the trial to the Equity Division for determination. The orders then made by Black J on 6 December 2021 are the orders with which the parties were required to comply in relation to any applications concerning the costs of the trial. The defendants have complied with those orders.
Second, if Mr Baker has failed to pay the judgment in favour of Punters Show in relation to the improper withdrawals claim and/or any costs of the appeal, it is a matter for the plaintiffs to enforce those judgments and orders. It is not relevant to the orders to be made concerning the costs of the trial.
Third, I reject the submission that the question of what costs orders should be made in relation to the trial following the plaintiffs' limited success on appeal is a complex matter. For Mr Lambourne himself, who has played an active role in the proceedings from the outset, it is a straightforward matter. Moreover, it is the only matter remaining to be resolved in order to bring these proceedings to a close.
Fourth, the plaintiffs had been on notice since 6 December 2021 that the hearing in relation to the costs of the trial would be held on 31 January 2022. The defendants' notice of motion, supporting evidence and submissions had been filed and served on 13 December 2021 in accordance with the directions made by Black J on 6 December 2021. I reject the submission that the defendants had failed to prepare for the hearing in accordance with the Court's requirements.
Fifth, Mr Lambourne's submission articulated no grounds for Black J's orders made on 6 December 2021 to be set aside on the grounds of apprehended bias.
Sixth, the matters raised by Mr Lambourne in objecting to the hearing proceeding at the listed time of 2pm on 31 January 2022 concern his professional and parental commitments. Generally speaking, the Court is not able to accommodate parties' regular professional and family commitments in setting hearing dates. Involvement in litigation necessarily carries with it the need to prepare for and attend court hearings in addition to the litigants' other commitments in life. The plaintiffs have been on notice of the costs hearing for approximately seven weeks and Mr Lambourne's submissions offered no reason why, with that advance notice, his professional and family commitments could not be arranged to participate in the hearing. The plaintiffs have had ample time to prepare any written submissions in response to the defendants' notice of motion, evidence and submissions filed on 13 December 2021.
Seventh, there was simply no explanation for the plaintiffs' failure to take any steps to apply for an adjournment well before the hearing date. The defendants had fully prepared for the hearing and costs would be thrown away if the hearing were adjourned.
For those reasons, I considered that it would be inconsistent with the overriding purpose, the objects of case management and the dictates of justice in ss 56-58 of the Civil Procedure Act 2005 (NSW) to adjourn the hearing of the defendants' notice of motion filed on 13 December 2021.
I now return to the defendants' notice of motion.
In my opinion, the costs orders sought by the defendants in paragraphs 1 to 3 of the notice of motion appropriately reflect the mixed outcome of the proceedings following the ultimate success of one plaintiff only (Punters Show) against one defendant only (Mr Baker) in relation to the improper withdrawals claim and the failure of all other claims of all the plaintiffs against all defendants, save for the money claim which was settled.
It is plain from the subject matter of the improper withdrawals claim compared to the subject matter of the other claims, and from Emmett AJA's detailed description of the course of the trial (which was adopted by Basten and Gleeson JJA), that the improper withdrawals claim was distinct and severable from the money claim and the equitable compensation claim. It was a claim that could only be made by Punters Show. The evidence adduced in support of the claim was limited to three paragraphs of Mr Lambourne's affidavit and schedules exhibited to his affidavits listing and describing certain withdrawals from the bank account of Punters Show. [9] Mr Lambourne was not cross-examined on this evidence and the first defendant did not read any responsive evidence. [10] The improper withdrawals claim occupied almost no time at trial, being mentioned only in the plaintiffs' reply submissions. [11] In my opinion, it would be unjust if the outcome of the improper withdrawals claim, which the plaintiffs did not abandon but which they barely mentioned at trial, were to be determinative of the costs outcome between all parties in relation to all claims, including the whole of the costs of the two day trial. At the same time, it would be unjust if Punters Show were to be deprived of any legal costs that it may have incurred in relation to the improper withdrawals claim (noting that Punters Show did have professional legal representation during pre-trial stages of these proceedings).
It is well known it may be appropriate to exercise the discretion under s 98 of the Civil Procedure Act to apportion costs between issues or claims in a range of circumstances, including where there has been a mixed outcome on issues in the proceedings and those issues are clearly severable from one another. [12] In my opinion, it is appropriate in this case for the reasons explained above to make an order for costs in favour of Punters Show reflecting its success on the improper withdrawals claim that is limited to an order against Mr Baker in respect of its costs of that claim only and, at the same time, to make an order requiring the plaintiffs to pay Mr Baker's other costs (that is, his costs of defending the proceedings other than the improper withdrawals claim). The defendants' proposed orders 1 and 2 reflect that outcome.
As between the plaintiffs and the second to fifth defendants, the defendants' proposed order 3 reflects the usual position that costs follow the event, subject to an appropriate exception for the costs of the money claim that was settled. [13] In circumstances where the second to fifth defendants were represented separately from the first defendant at trial and succeeded in defending all of the plaintiffs' claims, I do not consider that there is any reason to depart from that usual position. An order in the terms of paragraph 3 of the defendants' notice of motion is therefore appropriate.
There is no reason why the orders I have referred to above require any variation of the interlocutory costs orders that have been made in the proceedings to date. Those costs orders, which were exhibited to Ms Craven's affidavit, were made in respect of specific interlocutory applications or events rather than in anticipation of any particular outcome of the substantive claims in the proceedings. There has been no application to set aside the interlocutory costs orders, and there is no evidence of any reason why the orders should be set aside or varied now. An order in terms of paragraph 4 of the defendants' notice of motion is appropriate to avoid doubt.
In the course of a hearing before Black J of the plaintiffs' application to vary or discharge orders dismissing the proceedings for the plaintiffs' failure to prosecute them with due dispatch, the plaintiffs made an application on 27 April 2017 for his Honour to recuse himself on the ground of apprehended bias. In an ex tempore judgment delivered on that day, Black J dismissed the application. His Honour made an order reserving the costs of the application. Pursuant to r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW), those costs will be paid and dealt with in the same way as the general costs of the proceedings unless the Court orders otherwise. The effect of orders 1 to 3 referred to above is that the plaintiffs are to pay the defendants' costs, with the exceptions of the costs of the improper withdrawals claim and the costs of the money claim. Neither of these exceptions is applicable to the costs of the plaintiffs' unsuccessful recusal application. Accordingly, in the absence of a specific order made in relation to those costs, the defendants' costs will be payable by the plaintiffs. In my opinion, that is the appropriate outcome in respect of that unsuccessful interlocutory application made by the plaintiffs during the hearing in which the defendants were appearing and were represented by solicitors and counsel. For those reasons, I do not consider it necessary to make an order in terms of paragraph 5 of the defendants' notice of motion, with the result that the defendants' costs of the plaintiffs' recusal application will be payable by the plaintiffs by operation of r 42.7.
Pursuant to s 101(4) and (5) of the Civil Procedure Act, interest is payable on an amount payable under an order for the payment of costs unless the court orders otherwise. The interest is payable at the prescribed rate from the date of the costs order or from such other date as the court orders. Paragraph 6 of the defendants' notice of motion seeks an order for interest on costs to which a party is entitled from the day on which those costs were paid (that is, paid by the party to their legal representative). The defendants' submission in support of proposed order 6 was the same as their submission made to the Court of Appeal in support of a similar order sought in respect of interest on their costs of the appeal that were payable by the plaintiffs/appellants. I reject the defendants' submission in relation to interest on costs for the same reasons as the Court of Appeal rejected the same submission in relation to the appeal costs, including that the submission misstates the effect of s 101(4) and (5). [14] The parties' entitlement to interest will be governed by s 101(4) and (5).
Finally, the defendants sought an order that the plaintiffs pay their costs of the notice of motion. In my opinion, there is no reason why the costs of the motion should not follow the event. The defendants have been successful save only in relation to interest on costs which was a very minor aspect of the costs application. An order in terms of paragraph 7 of the defendants' notice of motion is appropriate.
For the foregoing reasons, I made orders on 31 January 2022 in terms of paragraphs 1 to 4 and 7 of the defendants' notice of motion filed on 13 December 2021.
[2]
Endnotes
In the matter of Punters Show Pty Ltd [2019] NSWSC 1777 (the primary judgment).
Lambourne v Baker [2021] NSWCA 229 (the appeal judgment).
Lambourne v Baker (No. 2) [2021] NSWCA 282 (the appeal costs judgment).
Primary judgment at [4] and [57]-[64].
Primary judgment at [4] and [65]-[90].
Primary judgment at [1].
Appeal judgment at [2]; appeal costs judgment at [16].
Appeal judgment at [5]-[27] (Basten and Gleeson JJA). Although Emmett AJA dissented in concluding that the trial was conducted on the basis that the improper withdrawals claim was not pressed ([174]-[187]), Basten and Gleeson JJA adopted (at [6]) his Honour's description of the course of the trial, including the pleadings, evidence and submissions (at [130]-[173]).
Paragraphs 86, 145 and 164 of Mr Lambourne's affidavit sworn on 28 May 2016; see appeal judgment at [8] (Basten and Gleeson JJA) and [155]-[158] and Appendix 2 (Emmett AJA).
Appeal judgment at [12]-[14] (Basten and Gleeson JJA).
Appeal judgment at [19] and [25] (Basten and Gleeson JJA).
See Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2021] NSWSC 1374 at [746]-[747] and the authorities there referred to.
Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
See the appeal costs judgment at [12]-[15].
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Decision last updated: 02 February 2022