By my Judgment delivered on 16 November 2020 ("First Judgment"), I declined to grant leave for the Plaintiff, Ms Lin, to join the Defendants' solicitor, Mr Junn, as party to the proceedings, which had been under way for some 15 months, or file a proposed Amended Statement of Claim which would bring a claim against him, and declined to make a freezing order that was sought against him. By my Judgment delivered on 11 December 2020 ([2020] NSWSC 1884) ("Second Judgment") I granted leave to Ms Lin to file a proposed Amended Originating Process and a revised Amended Statement of Claim, omitting the claims against Mr Junn, and also granted leave under s 237 of the Corporations Act 2001 (Cth) for her to bring a derivative claim in the name of Australian International Yacht Club Pty Ltd, subject to her providing an indemnity as to costs in an agreed form.
Cassegrain v Gerard Cassegrain & Co Pty Ltd [2021] NSWSC 18 | Case summary | Zoe
A question as to the costs of the application remains to be determined. The parties made written submissions as to the question of costs, and agreed that question should be determined on the papers. There was little contest as to the applicable principles. Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that costs are in the discretion of the Court and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to Part 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 those costs. UCPR r 42.7 provides that, unless the Court otherwise orders, the costs of an interlocutory application are to be paid and dealt with in the same way as the general costs of the proceedings. In McGuirk v University of New South Wales [2011] NSWSC 361, Johnson J observed that:
"The discretion as to costs is to be exercised having regard to the circumstances of the particular case, with a view to reaching a just outcome on the question of costs."
In Re Mudgee Dolomite and Lime Pty Ltd [2020] NSWSC 1675 at [8], I referred to Short v Crawley (No 40) [2008] NSWSC 1302 at [25]-[33], and observed that costs orders can accommodate the extent to which a successful party has not succeeded on all issues raised.
Turning now to the parties' submissions, Ms Lin concedes that she should pay the Defendants' costs thrown away by the amendment to the pleading and I had already made order 9 to that effect following the Second Judgment. Mr Campbell, who appears for Ms Lin, submits that the Court might be minded to deal with costs on an issue by issue basis in this application, and refers to several aspects of her Amended Interlocutory Process and the application for leave to commence the derivative action. Mr Campbell submits that the Defendant was largely successful in the matters addressed in the First Judgment and the Plaintiff was largely successful in the matters addressed in the Second Judgment. Mr Young, who appears for the First Defendant, Mr Zong, similarly identified several parts to the Interlocutory Process filed on 7 November 2020 and the Amended Interlocutory Process dated 10 November 2020, namely an application in respect of the inspection of books; an application for a freezing order against Mr Junn; an application for substituted service; and an application to amend the Statement of Claim. Mr Young submits that Mr Zong incurred costs of appearing for and preparing the 16 November and 11 December 2020 hearings; and that the 16 November hearing was solely concerned with the Interlocutory Process (and, I interpolate, largely with the claims against Mr Junn) and the 11 December hearing was concerned both with the Interlocutory Process and the leave application under s 237 of the Act. Mr Zong's primary submission is that Ms Lin should pay his costs of the Interlocutory Process filed on 7 November 2020 (and subsequently amended) and of the associated leave application under s 237 of the Act, on the ordinary basis, and notwithstanding that leave under s 237 of the Act was permitted and an amendment was ultimately allowed, albeit on a narrowed basis. I am not persuaded that such an order could be made. Alternatively, Mr Zong submits that he should receive his costs of the Interlocutory Process up to and including 16 November 2020, with the costs after that date to be reserved.
Approaching the matter by reference to the several issues raised, the Court did not determine the merits of an application for documents made by Ms Lin, where the Defendants conceded the Plaintiff's right of access to the documents on 16 November 2020. Mr Campbell submits, in substance, that that amounted to a capitulation as to that form of order. Mr Young submits that the Court declined to entertain the application for inspection of books, where it sought similar relief to the final relief sought in the Originating Process. I would not put that proposition in that way, where the Court indicated it would determine that application at the substantive hearing. I am not persuaded there is reason to make an order as to the costs as to that issue, which was not determined on the merits and took up little time at the hearing.
Mr Young points out that Ms Lin was unsuccessful in respect of her application to join Mr Junn as a party to the proceedings and for a freezing order against him, which was heard on 16 November 2020. I am satisfied that the proper order as to costs is that Ms Lin should pay the costs of and incidental to that discrete application, where costs should follow the event. Ms Lin was successful in an application for substituted service on 16 November 2020, which was not opposed, also took up little time at that hearing, and does not seem to me to warrant an order as to costs.
Mr Campbell in turn submits that the costs of Ms Lin's application for leave to bring a derivative claim should be costs in the cause. I have referred to s 98 of the Civil Procedure Act above, and s 242 of the Corporations Act deals specifically with orders for costs in respect of an application for leave under s 237 of the Corporations Act, and provides that the Court may at any time make orders it considers appropriate about the costs of, inter alia, the person who applied for or was granted leave, the company or any other party to the proceedings or application, and that an order under that section may require indemnification for costs. There are several cases where the costs of such an application, or some part of them, have been treated as the applicants' costs in the cause of the substantive proceedings: Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 1159 at [19]; Re Imperium Projects Pty Limited [2015] NSWSC 123; Re Legal Practice Management Group Pty Ltd [2018] 125 ACSR 513; [2018] NSWSC 527 at [101]. I am satisfied that the costs of Ms Lin's application under s 237 of the Corporations Act should be her costs in the cause, so that she recovers those costs if she is successful in the proceedings and not otherwise.
When the amendment application was renewed on 11 December 2020, Ms Lin did not press proposed amendments to the Statement of Claim to add claims for unconscionable conduct and to plead breach of several duties against the First Defendant, and was successful in sustaining other aspects of the amendments over Mr Zong's opposition. Mr Young submits that a significant part of the amendments proposed were "incompetent" to the extent they would require leave to bring a derivative action. I do not accept that submission, although it was desirable to hear the amendment application and the application for leave under s 237 of the Act at the same time, as I did. There should be no orders as to the costs of the amendment application, given the mixed result, and there should otherwise be no order as to the costs of the applications heard on 16 November and 11 December 2020 for the same reason.
I therefore order that:
1 The Plaintiff pay the costs of and incidental to her application to join Mr Junn as party to the proceedings and for a freezing order against him heard on 16 November 2020, as agreed or as assessed.
2 The costs of the Plaintiff's application under s 237 of the Corporations Act be the Plaintiff's costs in the cause.
3 There otherwise be no costs of the applications heard on 16 November and 11 December 2020.
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Decision last updated: 31 January 2021