These proceedings concern a transaction which was entered into by Elite Group Sydney Pty Ltd ("Elite"), for which Mr Klooster of Counsel appears, for the purchase of nine trucks including trailers owned by Total Equipment Management Pty Ltd ("Total Equipment"). The trucks were the subject of security to the third defendant, the National Australia Bank ("NAB"), for whom Mr Babe of Counsel appears. At the time of the contract alleged, the first and second defendants had been appointed as administrators ("the administrators"), of Total Equipment. Mr Foreman of Counsel appears for the administrators in these proceedings.
Elite claimed that the agreement to purchase nine of the trucks at a price of $165,000 plus GST for each truck and trailer, with the full purchase price payable within seven days, was made on 22 December 2016. Elite says that it was agreed that NAB had to provide a discharge of the security to enable Elite to obtain finance for the transaction.
On 24 January 2017 Elite paid $213,500 to the NAB, that amount being the difference between the amount that Elite could obtain from its financiers and the purchase price. On 25 January 2017 Elite advised the administrators that it was ready to settle.
On 24 January 2017 NAB wrote to the administrators saying that NAB would proceed with an auction of the vehicles if the debt owed by Total Equipment was not paid to the bank that day; that is, from funds to be provided by Elite. Elite believed this change of attitude arose when NAB became aware of the prices that other trucks and trailers owned by Total Equipment had obtained at auction.
NAB set about selling the nine trucks which were allegedly the subject of the Elite agreement and on 30 January 2017 Elite obtained short service of a summons, by which Elite sought to prevent the sale of the trucks by NAB from proceeding. Undertakings were then given on 10 February 2017 that the auction would not proceed. Following the aborted auction there were then discussions between the NAB and Elite which led to a resolution of the proceedings between the NAB and Elite, and which saw the transfer of title in the nine trucks pass from NAB to Elite.
Elite Group Sydney Pty Ltd v Mark Raymond Hutchins in his capacity as... [2017] NSWSC 372 | Case summary | Zoe
Elite then sought to discontinue its proceedings against the administrators. The administrators have no objection to the discontinuance against them; indeed, they have been urging Elite to adopt that course since shortly after they had been served with the summons in these proceedings, but they require Elite to pay their costs and disbursements which are in the order of $31,000 on a solicitor-client basis.
The solicitors for the administrators clearly put Elite's solicitors on notice of the administrator's position, informing them that the administrators were not proper parties to the proceedings and should not have been joined.
Rule 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) provides that when a plaintiff has discontinued, the plaintiff is required to pay the defendant's costs unless the plaintiff can establish some positive ground or good reason for departing from the ordinary course: see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at 53 to 54; Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at 54.
In Ibrahim v PERI Australia Pty Limited [2013] NSWCA 328, Beazley P, with whom Leeming JA concurred, set out the matters to be considered in cases of this kind which I shall enumerate:
1. That the discontinuing party acted reasonably in commending the proceedings;
2. Whether the party sued has acted reasonably.
3. Whether the respondent party has acted reasonably in defending the proceedings.
4. Whether the proceedings were terminated after interlocutory relief had been granted.
5. Whether the Court is satisfied that the party seeking to terminate the proceedings prior to a full hearing had almost a certain chance of success.
Mr Klooster concedes that the administrators have acted reasonably. The proceedings were terminated after the interlocutory relief was granted.
There can be no doubt that Elite acted reasonably in joining NAB to the proceedings and, indeed, as against NAB, it has been entirely successful. It is, however, not NAB that seeks its costs. There has been a separate agreement reached between Elite and NAB in respect of the proceedings between them which, presumably, includes the issue of costs as between those two parties.
Mr Foreman contents that Elite should not have commenced proceedings against the administrators because:
1. The administrators were only ever acting as the agents of the NAB and an agent for a disclosed principal is not liable in a contract made in such circumstances: see Boyter v Thomson [1995] 2 AC 628 at p 1632 C-E for the general principle.
2. The administrators were not at all relevant times the owners of the trucks. The trucks were, in fact, at all relevant times owned by NAB, but even if they had not been, they would have been owned by the company and not the administrators.
3. There is doubt as to whether any contract was formed between Elite and the administrators, even as agents for the NAB.
The third contention is actually inconsistent with correspondence from Mr Foreman's solicitors (see para 24 of exhibit 1, p 8, sent to the plaintiff's solicitors), but the first contention is undoubtedly correct and the second is probably correct, and, at the very least, strongly arguable.
Mr Klooster mounted a detailed argument to show that time for payment was not of the essence of the contract, but that goes to another issue which would need to be considered. Mr Klooster did not dispute the principle from Boyter v Thomson, to which I have referred, and did not have much to say concerning the second issue. I should note that on 30 January 2017 White J raised the question of whether the NAB should be a party to the proceedings: see T3.5. On that date, Mr Klooster informed his Honour that Elite maintained that the contract was one made with the administrators, and that the assets were owned by the company and, "Will now vest with the administrators": see T3 line 10.
On 3 February 2017, it was not disputed, White J raised the question again and referred to the rule that the agent of a disclosed principal is not liable on a contract.
In relation to this point of agency, Mr Klooster contended that Elite did not know that the contract was with NAB. I am unable to accept that submission, having regard not only to the correspondence: see as, for example exhibit A, p 26, 30, 33, 39, 42, 53, 55 and 112, but also to the affidavit of Mr Jason Roberts, the general manager of Elite, in which he described Elite as having entered into a contract with NAB: see para 15 and 18 to 21 of his affidavit. The invoice of 23 December 2016 from the administrators to Elite states that the administrators are acting as agents for the NAB: see exhibit A p 39.
In any event, it is not necessary for me to embark upon a determination as to whether or not Elite could have succeeded against the administrators in damages. Rather, the question is, "Am I satisfied that Elite had an almost certain chance of success of recovering damages against the administrators?" I am far from being satisfied of that.
It might be thought that any order for costs that is imposed on Elite should be laid at the door of the NAB, since it was the NAB that withdrew from the deal on the basis that the money had not been paid to it by 24 January, but later recanted and agreed to proceed with the sale of the trucks. I do not think it is appropriate to venture down such a path, when no notice has been given to the NAB of such a possibility. Elite has not sought such an order against the NAB, and the NAB and Elite have entered into an agreement between themselves. It was open to Elite to make protection against any costs orders sought by the administrators an item of its settlement with NAB.
Accordingly, I am not persuaded that I should depart from the usual order and the appropriate order therefore is that the plaintiff, Elite, pay the costs of the first and second defendants of the proceedings, including the costs of the plaintiff's application today.
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Decision last updated: 07 April 2017
Parties
Applicant/Plaintiff:
Elite Group Sydney Pty Ltd
Respondent/Defendant:
Mark Raymond Hutchins in his capacity as Administrator of Total Equipment Management Pty Ltd ACN 138964708 & Ors