Flinstone Investments Pty Ltd v Champions Quarry Pty Ltd

1. Sun & Co Lawyers pay the Plaintiff's costs of the application accepted for filing on 26 October 2021, such costs to be assessed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

DOWNES J: 1 On 1 October 2021, Registrar Schmidt made orders that the defendant, Champions Quarry Pty Ltd ACN 127 774 949, be wound up in insolvency pursuant to s 459A of the Corporations Act 2001 (Cth). 2 On 26 October 2021, an application under s 35A(5) of the Federal Court of Australia Act 1976 (Cth), for review of this decision, was accepted for filing. 3 The application was filed in the name of the company by Sun & Co Lawyers. 4 At the hearing of the application on 26 November 2021, there was no appearance by the company. 5 Instead, it was accepted by counsel appearing on behalf of Sun & Co Lawyers that the application should not have been filed. 6 Consequently, the plaintiff sought an order that "William Sun and Sun & Co Lawyers, jointly and severally, pay the Applicant's costs of the Application on an indemnity basis." 7 Counsel appearing for William Sun and Sun & Co Lawyers requested an opportunity to file and serve an affidavit to address why a costs order should not be made against them, and that order was made. 8 On 30 November 2021, Mr Sun filed two affidavits, the first at 4.01 pm and the second at 5.21 pm (which corrected the prior affidavit). 9 The Full Court of this Court considered the principles in relation to the power of the Court to make a costs order against solicitors in Levick v Commissioner of Taxation (2000) 102 FCR 155; [2000] FCA 674. In particular, the Full Court stated at [44]: ... it is equally important to uphold the right of a court to order a solicitor to pay costs wasted by the solicitor's unreasonable conduct of a case. What constitutes unreasonable conduct must depend upon the circumstances of the case; no comprehensive definition is possible. In the context of instituting or maintaining a proceeding or defence, we agree with Goldberg J that unreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success. There must be something akin to abuse of process; that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success. 10 While it was also stated in Levick at [39] that there was a "need for caution" in making such an order, the circumstances outlined above support the making of an order for costs against Sun & Co Lawyers. That is because of the concession made by counsel for Sun & Co Lawyers at the hearing. 11 As outlined above, the plaintiff also sought that this costs order extend to Mr William Sun personally and be on an indemnity basis. I will deal with each of these in turn. 12 In relation to costs being ordered against Mr Sun personally, I do not consider that such a costs order is appropriate in circumstances where an order will be made against the law firm which filed the application. As such the order will be limited to Sun & Co Lawyers. 13 I now turn to consider whether costs should be on an indemnity basis, as sought by the plaintiff. 14 The ordinary rule is that an award of costs is on the party-party basis: Re Wilcox; Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, 152-153, 158; [1996] FCA 1132, 2-3 (Black CJ), 8-9 (Cooper and Merkel JJ). 15 However, an order for costs on an indemnity basis may be made where the proceeding exhibits "some special or unusual feature" (Re Wilcox (1996) 72 FCR 151, 152, 156-157) or "special circumstances" (Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383, 388). 16 Orders for indemnity costs are only made in "exceptional" circumstances (see AWN17 v Minister for Immigration and Border Protection (2019) 164 ALD 287; [2019] FCA 440, [92]; Frigger v Banning (No 11) [2020] FCA 1257, [27]), particularly in the context of costs orders against solicitors: see McKewins Hairdressing and Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation (2000) 171 ALR 335; [2000] HCA 27, [16] (Gummow J). 17 Having regard to these principles, the circumstances of this case do not support the making of the costs order on an indemnity basis. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes.