Florida Kitchens Pty Ltd v Number One Cutting

Supreme Court of NSW|2020-03-13|Before: Adams J

Judgment

On 5 November 2019, I heard a motion seeking to appeal from the decision of Harrison AsJ ordering that the plaintiff, Florida Kitchens Pty Ltd, provide security for costs to the defendant, Number One Cutting, in the sum of $40,000: Florida Kitchens Pty Ltd v Number One Marble and Granite [2019] NSWSC 574. The principal proceedings in relation to which security for costs were sought is an appeal from a decision of the NSW Civil and Administrative Tribunal Appeal Panel ("NCAT"): Florida Kitchens Pty Ltd v No 1 Cutting Service Pty Ltd [2018] NSWCATAP 281.
Florida Kitchens relies upon 106 grounds of appeal in its appeal against the NCAT decision and there were 30 grounds of appeal relied upon in the appeal against the decision of Harrison AsJ.
On 15 November, I delivered judgment in this matter dismissing the motion, lifting the stay and reserving the question of costs: Florida Kitchens Pty Ltd v Number One Cutting (T/S Number One Marble and Granite) [2019] NSWSC 1568. The reason that I reserved the question for costs was that during the hearing counsel for Number One Cutting foreshadowed that, if successful, third party costs would be sought against the director and sole shareholder of Florida Kitchens, Mr Andre Elias. The parties agreed to set a timetable for the filing of documents in relation to the costs motion through correspondence with my Associate.

Number One Cutting's submissions

Number One Cutting relied on an affidavit of David Simons, which was sworn on 28 January 2020. It was noted that Mr Andre Elias is the sole shareholder, sole secretary and sole director of Florida Kitchens and has been since 3 September 2015. It was submitted, based on the affidavit evidence, that he was put on notice of this application prior to the hearing of the appeal before me on 5 November 2019.
Number One Cutting relied upon a number of findings in the primary decision.
First, there were 30 grounds of appeal relied upon by Florida Kitchens in the appeal against the decision of Harrison AsJ. As disclosed in the principal judgment, none of those grounds disclosed any House v King (1936) 55 CLR 499; [1936] HCA 40 error or any error at all.
In relation to the grounds concerning non-compliance by Florida Kitchens with a subpoena, it was noted at [24] of the principal judgment that when Number One Cutting served a subpoena seeking financial information of Florida Kitchens a note was produced to the court that simply read: NO PROPER SERVICE NO CONDUCT MONEY NO DOCUMENTS
The court was asked to infer that if, consistent with this note, Florida Kitchens has no documents disclosing its current financial status then the company must not be trading. Nor is there any evidence that it has any assets that could be utilised to satisfy any costs order. It was submitted that accordingly the plaintiff is a "person of straw".
I was invited to infer, in the absence of any evidence to the contrary, that it is Mr Andre Elias who has provided instructions to the company's solicitor.
The written submissions filed for Number One Cutting then addressed the relevant authorities in relation to both third party and indemnity costs and I will consider these authorities further below. In relation to the application for indemnity costs it was submitted that the appeal before me could not have been commenced without the direction of Mr Elias and there were no reasonable prospects of success of the appeal. Accordingly, it was submitted, it is in the interest of justice that costs be awarded on an indemnity basis.

Florida Kitchens/Mr Elias' Submissions

The written submissions were filed on behalf of Florida Kitchens rather than Mr Andre Elias, the relevant third party. No distinction was made in the submissions between the plaintiff, Florida Kitchens, and Mr Andre Elias, the third party. I shall proceed on the basis that the solicitor for Florida Kitchens, Mr Georges Elias, has instructions from both Florida Kitchens and Mr Andre Elias.
The written submissions commenced with a submission that in the light of my comments in court on 14 February 2020 it "may not now be appropriate for her Honour to determine this application for costs due to a perception of apprehended bias, lack of impartiality and potential prejudice that the Respondents may suffer as a result". No other authorities or submissions were directed to this preliminary point as to whether I should disqualify myself for apprehension of bias. The submissions then went on for 58 paragraphs addressing why neither third party nor indemnity costs order should be made in this matter.
First, it was submitted that Order 1 (that the plaintiff and Mr Andre Elias jointly and severally pay the costs of the proceedings) should not be allowed nor entertained as it goes beyond "the intention of the leave, and the reason for the leave". It was submitted that Number One Cutting ought not to be allowed to ask for such an order because the proceedings have not been finalised and "it goes beyond the present application".
In relation to Order 2, it was submitted that there are no special circumstances to warrant any departure from the practice that it is the losing party that pays costs rather than a non-party or third party.
In relation to Order 3, it was submitted that there are no reasons to warrant indemnity costs in the circumstances and nor were indemnity costs raised prior to the filing of the notice of motion on 28 January 2020.
It was accepted that, by letter dated 1 November 2019, Mr Andre Elias was advised that this application might be made but reliance was placed on s 160(1) of the Evidence Act 1995 (NSW) to the effect that it is presumed that a postal article sent by paid post is received on the seventh working day after being posted. In those circumstances, it was submitted that Mr Andre Elias was not on notice prior to the hearing of the appeal before me.
As for the email sent to him on 31 October 2019 advising Mr Andre Elias that such an application was foreshadowed, it was submitted that this letter did not state that Number One Cutting's solicitor had received instructions to make an application for costs against Mr Elias; it only indicated that he anticipated receiving such instructions. In those circumstances, it was submitted, Mr Elias had no notice that this application would be made.
As to instructions received, it was submitted that there is no evidence before the court that Mr Elias has given any instructions "in his personal capacity" rather than as a corporate and separate entity. It was submitted that the instructions were obtained from "the plaintiff".
It was then submitted that the findings that I made in my judgment are subject to an appeal to the Court of Appeal.
As for the refusal by Florida Kitchens to produce material on subpoena, it was submitted that there is a factual dispute as to proper service as well as a requirement to tender conduct money. Reliance was also placed on documents in the court book which showed that Florida Kitchens has paid the verdict money of $20,130, offered to pay an additional $20,000 in full and final settlement of the costs and was prepared to forego an additional costs order in its favour in the sum of $29,500 as part of the offer to settle but that this offer was rejected.
As for whether the company is trading, it was submitted that Florida Kitchens has an ABN number and invoices were tendered in the NCAT proceedings. The following submission was then made: "It is peculiar that the Defendant is now suggesting that the Plaintiff is not a trading company, whilst arguing otherwise in the NCAT proceedings. If the Plaintiff is not trading as suggested by the Defendant, then the Defendant has unjustly enriched itself by receiving the sum of $20,130, as a result of an order made in NCAT based on arguments otherwise presented by the Defendant. There was no evidence before the Court to suggest that the Plaintiff is a "person of straw". In fact, all of the evidence suggest to the contrary. The Defendant has failed to produce any evidence to suggest that the company is a "person of straw" and therefore, the Defendant cannot make this submission, unless the Defendant is now admitting that it did not in fact contract or trade with the Plaintiff, which would then suggest that the Defendant now concedes that the judgment for the verdict monies was irregularly obtained in the first instance. It is further concerning that the Defendant is making such submission in circumstances where the Defendant is in possession of a bank transfer receipt showing the payment of $20,130 from the Plaintiff's bank account."
It was further submitted that Mr Andre Elias does not have any interest or control of the proceedings as the proceedings were instigated by Florida Kitchens which is a separate corporate entity. Nor has Number One Cutting adduced any evidence as to what interest he would have in the proceedings, being neither a non-party nor controlling the proceedings. There is no evidence that he has funded the litigation or has an interest in the outcome of the litigation nor is there any evidence that he has unreasonably or improperly influenced the conduct of the litigation.
It was submitted that there is no benefit nor perceived benefit that Mr Andre Elias could derive from the litigation.
Reliance was placed on the decision of VMA Companies LLC trading as Corbis Global v Ridley Capital Holdings Pty Ltd (now known as ACN 151 726 224) (in liquidation) [2016] NSWSC 1567 (26 October 2016), and FPM Constructions Pty Ltd & v The Council of the City of Blue Mountains [2005] NSWCA 147. I will consider these decisions further below.
It was submitted that Number One Cutting had failed to identify any reason why it is in the interests of justice to require Mr Andre Elias to be jointly and severally liable for the costs with Florida Kitchens; he did not pursue the claim for his own benefit or his own expense nor was evidence of this adduced by Number One Cutting.
As for the question of indemnity costs, it was submitted that the proceedings had reasonable prospects of success and are currently on appeal to the Court of Appeal. It was also submitted that there are no reasons or exceptional circumstances to warrant costs being awarded on an indemnity basis nor do the interests of justice warrant this; it was submitted that costs should follow the event and that costs should be paid by Florida Kitchens on the ordinary basis.

Disqualification for bias

Before considering this costs application, I propose to first address the suggestion in Florida Kitchens' written submissions that I should disqualify myself from determining the appropriate costs order in this matter because of "what has transpired on 14 February 2020 and my comments on that day". In light of this it is necessary for me to recount what occurred in court that day.
The matter was listed at 9.30am on 14 February 2020. The only issue to be considered was whether I would continue to stay the order I had made on 15 November 2019 that Florida Kitchens pay $40,000 as security for costs for these proceedings. I had initially granted the stay by consent but nearly three months had passed since my judgment and any further extension was opposed by Number One Cutting. An examination of the transcript reveals that before acceding to Florida Cutting's request that I extend the stay for another week I made a number of comments critical of the delay in this matter.
I observed that this dispute, over a relatively small amount of money, is incurring significant costs as a number of interlocutory applications such as this one are made. I was provided with the summons and observed that it contained 15 grounds of appeal mainly alleging factual error in my judgment.
Counsel for Number One Cutting, Mr Bell, suggested that it might be better if a different judge determined the question of a stay given it concerned the merits of an appeal against my decision. He later observed that there was no motion before the court in relation to a further stay in any event. Despite this, he submitted that an option could be to extend the stay for a week "to allow the plaintiff to go to the Court of Appeal". He otherwise opposed the stay application being heard before me and without a Notice of Motion or evidence.
When I asked Mr Milanovic why it had taken three months to file the application for leave to appeal against my judgment two reasons were provided. First, the Supreme Court Act 1970 (NSW) allows for three months. Secondly, he was waiting for my costs judgment so he could appeal against that too rather than having "two appeals for costs". I then made the following observation: "HER HONOUR: Why would you anticipate that you would appeal against my costs order when you don't even know what that is or whether there would be any error in my judgment[?]. Is this a matter where everything is appealed against, whether there is merit or not, just as a matter of principle? "
I then observed: "If this is such an urgent matter, it is only about an interlocutory issue of security for costs. I would have thought you would have wanted to get your hearing on, being the appeal from NCAT, yet another three months was delayed after the second decision of this Division, ordering you to pay security for costs. They are not objectively facts that favour any extension of the stay, and that is what I am trying to get you to address, in circumstances where [there] has been inordinate delay in relation to security for costs, your explanation is well, we had three months so we took it. We were going appeal against your costs order no matter what you said and so we didn't want to do it twice. Why?"
When I asked whether there were any other reasons for the delay besides the fact that the Act allowed him three months and he wanted to wait for my costs judgment, counsel asked if his solicitor Mr Georges Elias could address the court as he "might be more familiar with the matter". Despite the irregularity of this course I permitted it. I then asked Mr Georges Elias whether there were any other reasons besides the two advanced for the delay in this matter.
Mr Elias sheeted the blame to the defendant before stating "we have been criticised for filing within time, your Honour, while they had two and a half months to bring the [costs] application".
Mr Elias then made the following submission: "… as far as I remember you said, you asked Mr Bell just to work out a timetable and get back to your Associate, that's as far as I remember. We haven't heard from them. We haven't heard from them in relation to this. They didn't write back after 15 November, they didn't write until January, until, they hadn't even raised the costs issue until your Associate wrote to the parties on the 16th saying there is a notice been attached to the appeal, what are you going to do about the costs. Then Mr Bell's instructing solicitor was not available until 20th, this was how it all came into it. The whole intention, your Honour, is not to incur so much costs in relation to this. We are trying to confine costs. The whole idea was to deal with this before 14 February. So in the event, and we say in the event that there is an adverse costs order, for it to be put together instead of filing two sets of summons or instead having two different hearings in relation to this, your Honour. We have been criticised, and I would said with respect, your Honour, unfairly in relation to this. You indicated on the 15th to Mr Bell to work out a timetable with us. We haven't heard from them, in fact, after the 15th, and now we are being criticised in relation to this, your Honour. I find this to be unfair, with the greatest respect."
Mr Elias spoke very quickly and in order for the court reporter to record what he was saying I attempted to interrupt him but he kept on talking until I was able to stop him. I then observed the following: "HER HONOUR: I'll just stop you there, when I say I will just stop you there you don't keep making submissions. This is the Supreme Court of New South Wales, if you don't want to show any respect to me at least please show respect to the institution that is the Supreme Court."
Mr Elias responded that he was showing respect. A further exchange then ensued in relation to his contention that he was waiting to appeal the costs decision that I had not as yet heard. I then observed the following: "...it seems to me that you have a fundamental misunderstanding of the legal issues required to seek leave to the Court of Appeal on an error. You do not appeal just because you don't like the result. You appeal if there is error of law or an error established in the judgment."
Mr Elias then added: "[w]e have to review it obviously before the appeal" to which I responded: "HER HONOUR: That is the step that seems to be missed from the chronology that you have advanced. Why do you say I am being unfair[?]. ELIAS: Well, your Honour, we have been criticised on the last occasion and on this occasion in relation to this matter. You have granted the stay on 18 December. That stay was extended. If that stay doesn't continue then that would mean the proceeding would be dismissed and that would render the appeal otiose. So we are asking your Honour, please, if you are not prepared to give us a stay until the hearing just to give us some time to go before the Court of Appeal."
After further discussion, I extended the stay until Friday 21 February 2020 so that Florida Kitchens could approach the Court of Appeal for a stay. Given that the stay application concerned, inter alia, the question of any error in my judgment, and given that Mr Elias had suggested I was being unfair in my comments about the delay in this matter, it was agreed that I would not hear any further applications concerning any stay.
It is, apparently, on the basis of these exchanges that Florida Kitchens has submitted that if I was to consider the question of the appropriate costs order following my judgment of 15 November 2019 there would be a "perception of apprehended bias, lack of impartiality and potential prejudice that [Florida Kitchens] may suffer as a result." I shall proceed on the basis that the allegation made is one of apprehended rather than actual bias.
The relevant test is well settled. I would disqualify myself from considering this costs application if I was satisfied that a "fair-minded lay observer or bystander" "might" reasonably apprehend that I "might" not bring an impartial mind to the resolution of the question or questions that I am required to make in this matter: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 344; [2000] HCA 63 at [6].
Any party seeking disqualification of a judicial officer must identify what it is that "might" lead the judicial officer to decide the case other than on its legal and factual merits: Ebner v Official Trustee in Bankruptcy at 345 at [8]. I will proceed on the basis that it is the fact that I was critical of the delay in this matter, as reflected in the transcript I have summarised above.
Having identified this criticism, the party seeking disqualification would then usually identify the logical connection between my criticism of the delay and the feared deviation from the course of deciding the case on its merits: Ebner v Official Trustee in Bankruptcy at 345 at [8].
It has been held that a judicial officer should not too readily accede to an application that he or she is subject to a reasonable apprehension of bias: Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 294; [1983] HCA 17; Johnson v Johnson (2000) 201 CLR 488 at 504; [2000] HCA 48 at [45]. As Johnson J observed in Gaudie v Local Court of New South Wales and Anor [2013] NSWSC 1425 at [81]-[82]: "Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a Judge, they will have their case tried by someone thought to be more likely to decide the case in their favour: Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342 at 352. However, the principle that a judicial officer should not disqualify him or herself too readily is not 'a blanket that smothers the effect of disqualification where it has already arisen': Antoun v The Queen [2006] HCA 2; 224 ALR 51 at 60 [35] (Kirby J). Where (as here, at least in part), prejudgment is relied upon, what must be firmly established is a reasonable fear on the part of the bystander that the decision-maker's mind is prejudiced in favour of a conclusion already framed, so that he or she will not alter that conclusion irrespective of the evidence or arguments presented. That reasonable fear must be firmly established because it is to be expected that judicial officers may have formed views or inclinations of mind with respect to particular subjects in the course of their professional careers, which will be put to one side in the determination of proceedings on the evidence and on the merits: CUR24 v Director of Public Prosecutions at [36]."
It is with these principles in mind that I consider Florida Kitchens' complaint. I have had close regard to the transcript of proceedings on 14 February. It is to be accepted that I was critical of the fact that it had taken Florida Kitchens until the last day permitted under the Supreme Court Act to file the appeal against my decision. That delay needs to be considered in the context of the chronology of this litigation. I have set out that chronology in some detail in the principal judgment. Putting to one side the correspondence between the parties, the procedural history of this matter is as follows.
The proceedings commenced in the Local Court on 1 June 2016. Number One Cutting filed a statement of claim seeking payment of $20,130 said to be owed to it by Florida Kitchens. Florida Kitchens later made application that the proceedings be transferred to NCAT pursuant to s 48K of the Home Building Act 1989 (NSW). On 5 December 2017, an NCAT Senior Member found in favour of Number One Cutting and Florida Kitchens was ordered to pay $20,130 to Number One Cutting and costs. It paid this amount but not the costs.
On 12 June 2018, an NCAT Senior Member varied the costs order and ordered that Florida Kitchens pay Number One Cutting's costs on an indemnity basis.
On 10 July 2018, Florida Kitchens appealed to the Appeal Panel of NCAT.
On 27 November 2018, the NCAT Appeal Panel refused leave to appeal both the Tribunal Member's decision and the costs order. No costs order was made in relation to that Appeal.
On 20 December 2018, Florida Kitchens filed a summons in this court seeking leave to appeal the decision of the Appeal Panel under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW). Such an appeal is confined to a "question of law". 106 grounds of appeal were relied upon.
On 20 February 2019, Number One Cutting made an application under r 42.21 of the Uniform Civil Procedure Rules ("UCPR") for security for costs.
On 20 May 2019, Harrison AsJ ordered Florida Kitchens to pay $40,000 security for costs for the appeal. Florida Kitchens filed a notice of motion appealing against that decision.
On 5 November 2019, I heard the appeal against the decision of Harrison AsJ and on 15 November I dismissed it.
The appeal to this court from NCAT commenced on 20 December 2018 and has not advanced any further since that time. Nor has the matter progressed any further since 15 November 2019 because of the recent appeal against my decision to the Court of Appeal.
I accept that I was critical that Florida Kitchens had waited until the last day for filing such an appeal which has added further delay in this matter. Nor did I find the explanations proffered for this to be satisfactory. But to suggest that a judicial officer criticising counsel for delay is a basis for an apprehension of bias misunderstands two important issues.
First, the court has a role to play in ensuring the "just, cheap and quick" disposal of matters: s 56 of the Civil Procedure Act 2005 (NSW). These proceedings commenced in the Local Court in 2016 over a $20,000 dispute. As is to be inferred from the rejection of the settlement offer in this matter, the main dispute now is as to costs which clearly well exceed the amount in dispute. There has been nothing quick or cheap about these proceedings.
Second, it is important to have regard to what it is that is left for me to determine in this matter. I have already judged the substantive proceedings. I found that the appeal from Harrison AsJ had no merit. What I am now being asked to determine is the relevant costs order ancillary to those proceedings. It seems to me that it would be highly unusual for a judicial officer who had already determined a matter to not by then have some views as to the conduct of the proceedings.
It should also be noted that I ultimately acceded to Florida Kitchen's request to extend the stay for a week on 14 February 2020 so that it could approach the Court of Appeal for a stay; that is, it got the result it wanted.
I am not satisfied that the criticism I made about the delay in this matter means that a "fair-minded lay observer or bystander" "might" reasonably apprehend that I "might" not bring an impartial mind to the costs application.
Consistent with the principles set out above, I am satisfied that I should discharge my duty and finalise my involvement in this matter by considering the appropriate costs order following my decision of 15 November 2019.

Consideration

Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) provides that the court has "full power to determine by whom, to whom and to what extent costs are to be paid". This discretion is subject to the qualification that it "must be exercised judicially in accordance with established principle and factors directly connected with the litigation": Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65], per McHugh J. Among the fetters on the discretion to award costs are the rules of the court contained in Part 42 of the UCPR. The usual rule is that costs follow the event, unless it appears to the court that some other order should be made: UCPR, r 42.1.
The terms of s 98 are sufficient to confer on the court a general power to make orders against non-parties. The High Court confirmed that this was the case in Knight v FP Special Assets Limited (1992) 174 CLR 178; [1992] HCA 28. Mason CJ and Deane J observed the following at 192 (footnotes omitted): "Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long established categories of case in which equity recognised that it may be appropriate for such an order to be made. For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made." (at pp 192-193) [Emphasis added.]
In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, Basten JA (with whom Beazley JA (as her Honour then was) and Giles JA agreed, identified five criteria for the exercise of the discretion to award costs against a third party at [210] as follows: "(a) The unsuccessful party to the proceedings was the moving party and not the defendant; (b) The source of funds for the litigation was the non-party or its principal; (c) The conduct of the litigation was unreasonable or improper; (d) The non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) The unsuccessful party was insolvent or could otherwise be described as a person of straw."
In Yu v CAO (2015) 91 NSWLR 190; [2015] NSWCA 276, McColl J (with whom Sackville JA and Adamson J agreed) observed the following in relation to the relevant principles at [138]-[139] (footnotes omitted): "Non-party costs orders have been said to be exceptional. They should not be made where 'an exercise of the jurisdiction against a non-party would be extravagant and unjust.' Elsewhere it has been said that such applications should be treated 'with considerable caution' and that the power should be 'exercised sparingly'. '[E]xceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense … [t]he ultimate question [being] whether in all the circumstances it is just to make the order.' The power to order non-party costs 'is inevitably to some extent a fact-specific jurisdiction and … there will often be a number of different considerations in play, some militating in favour of an order, some against'."
In Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 Gleeson JA, with whom Macfarlan and Leeming JJ agreed) at [82]-[81] said this about the relevant test: "In May v Christodoulou at [111], Sackville AJA pointed out that the criteria identified by Basten JA in FPM Constructions (at [210]) (set out at [26] above), are not intended to be and cannot be exhaustive and that other factors may bear on the exercise of the discretionary power in a particular case. What needs to be emphasised is that the exceptional jurisdiction to make a non-party costs order is only to be exercised where, in the circumstances of the case, the interests of justice require that such an order be made: see Yu v Cao [2015] NSWCA 276 at [137] and [139]: 'Exceptional in the context of the exercise of the non-party costs jurisdiction means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.' There is a further consideration. Care must be taken not to apply the criteria identified by Basten JA in FPM Constructions mechanically. This is because as Basten JA observed (at [214]), it will often be the case that a non-party, be it a company officer or solicitor, will be active in the conduct of litigation and obtain some direct or indirect financial benefit from its success. His Honour continued (at [214]): 'Careful attention is required as to the conduct of the party said to be involved in the litigation and the nature of the "interest" in its outcome or subject matter.'"
In VMA Companies LLC trading as Corbis Global v Ridley Capital Holdings Pty Ltd (now known as ACN 151 726 224) (in liquidation) [2016] NSWSC 1567, Rein J conveniently summarised the above principles at [15]. More recently Simpson AJA surveyed the relevant case law in Brand2Content t/as Franchise Works v Dalby [2019] NSWCA 16 at [6]-[26] observing at [12] that "[t]he over-riding consideration is whether it is in the interests of justice to make the order".
With these principles in mind I turn to consider Number One Cutting's application.
First, the financial status of Florida Kitchens is unclear. Number One Cutting has been unable to find any evidence that it could cover the costs order and Florida Kitchens has consistently refused to provide any information about it. I set out the details in relation to these efforts at [16]-[21] of my principal judgment. Before an order for security for costs can be made the court must be satisfied that there are reasons to believe that the party will be unable to pay costs if ordered to do so: UCPR r 42.21(1)(d) I have already found in the principal judgment that Harrison AsJ did not err in finding that this threshold was satisfied (grounds 17, 18, 19, 21 and 29).
Although I was not satisfied that there was any error in AsJ Harrison's finding in this regard, it seems to me to be a slightly different test than whether Florida Kitchens is a "man of straw" as described by Mason CJ and Deane J in Knight v FP Special Assets. There is some force in the submission of Number One Cutting that the failure by Florida Kitchens to produce any such documents on subpoena suggests that it might no longer be actively trading. Further, it seems to me that the fact that Florida Kitchens after having twice been ordered to pay $40,000 as security for costs (first by Harrison AsJ and then by me) is now seeking a third hearing on this issue in the Court of Appeal is not an irrelevant consideration in this regard.
I am unable to accept Florida Kitchens' submission that Number One's submission that the failure to produce documents on subpoena suggests it is not trading means that it is suggesting that Florida Kitchens was not a corporate entity when the proceedings were before NCAT. This is a submission without substance and conflates issues of corporate identity with present financial status.
I am satisfied that Mr Andre Elias is the real "driving force" behind the proceedings in circumstances where he is the only shareholder, the only director and sole secretary of the company and has been so since 3 September 2015. The submissions made on his behalf consistently emphasised that Florida Kitchens is a separate legal identity to Mr Elias. So much is to be accepted but I cannot accept a submission that he has no interest in the proceedings in circumstances where he is the sole shareholder and thus stands to either benefit or suffer depending on the outcome of this litigation. The four appeals in this matter already over a $20,000 debt (against the single NCAT member decision, against the Full NCAT decision, against the decision of Harrison AsJ and now against my decision) could only have been brought on instructions and those instructions could only have come from Mr Andre Elias.
I have had regard to the authorities which make it clear that just because a particular director provides instructions in relation to litigation does not necessarily render him or her liable for third party costs. As Simpson JA observed in Brand2Content t/as Franchise Works v Dalby, regarding the five criteria identified by Basten JA in FPM: "It will frequently be the case that an officer of a company who takes responsibility for the management of the litigation is also the ultimate, or an ultimate, beneficiary of the litigation in the event that it is successful. That is certainly so where the director is a shareholder."
I have had regard to all of the relevant principles and criteria applicable in an application such as this. I am satisfied that the unsuccessful appeal before me is now part of a pattern of unsuccessful appeals over such a small sum of money that it was unreasonable and the person that benefits the most from this is the sole shareholder and director of Florida Kitchens which is Mr Andre Elias.
As for the submission that Mr Andre Elias was not on notice of this application prior to the hearing before me on 5 November 2020 because he had only been informed by email that it might be made rather than it was going to be made is without substance.
As for the complaints made by Florida Kitchens suggesting that Number One Cutting is somehow seeking costs orders in relation to costs incurred prior to my involvement in this matter, these are misconceived. The Notice of Motion makes clear that it is seeking costs of the proceedings before me as well as costs of this motion seeking third party indemnity costs.
Having addressed the relevant criteria for the making of a third party costs order I am mindful that the over-riding consideration is whether it is in the interests of justice to make the order. I am satisfied that it is in the interests of justice that Florida Kitchens and Mr Andre Elias are made jointly and severally liable for Number One Cutting's costs of the appeal before me.
That leaves the question of the basis upon which such costs ought to be paid. The only submissions made by Florida Kitchens/Mr Andre Elias on this issue are that "no reasons or exceptional circumstances to warrant" such an order have been identified. The other submission was to submit that the decision in Heath v Greenacre is distinguishable on its facts and that the appeal to the Court of Appeal has reasonable prospects of success.
Indemnity costs are not made to punish an unsuccessful party for persisting with a case that fails. Rather, such an order is made to compensate a successful party for costs incurred in certain circumstances. Such circumstances include when litigation has been conducted unreasonably or in bad faith. In Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; [1988] FCA 364, Woodward J explained that where an action is commenced or continued in circumstances where "the applicant, properly advised, should have known that he had no chance of success" then: "…the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law."
Similarly, in Hamod v State of New South Wales (2002) 188 ALR 659; [2002] FCA 424 at [20] it was held that indemnity costs can be ordered when the court takes the view that it was unreasonable for a party to have subjected the other party to the expenditure.
I have already found that the proceedings were unreasonable for the purposes of making a third party costs order against Mr Andre Elias. I see no reason to depart from that finding for the purposes of determining whether the costs ought to be paid on an indemnity costs basis.
In these circumstances, I am satisfied that the costs should be paid on an indemnity basis.
Finally, as for the costs of the motion, although I am satisfied for the reasons I have already stated that they ought to be paid on a third party basis, I am not satisfied they should be ordered to be paid on an indemnity basis. Florida Kitchens and Mr Andre Elias defended the third party indemnity costs order. It was not unreasonable for them to do so.

ORDERS

Accordingly, I make the following orders: 1. The defendant's costs of the motion appealing the decision of Harrison AsJ are to be paid by the plaintiff and Mr Andre Elias jointly and severally on an indemnity basis. 1. The defendant's costs of this costs motion are to be paid by the plaintiff and Mr Andre Elias jointly and severally on the ordinary basis.

Amendments 17 March 2020 - [3] line 4 - "the" deleted before "Florida Kitchens" [44] line 1 - "to" deleted before "reporter" [77] line 1 - "than" instead of "that" [78] line 1 - "it" inserted before "is" [85] line 2 - "are" instead of "is"; "an order the interest of justice warranted" deleted; full stop inserted after "identified"; "the" capitalised; "only" deleted; "was" instead of "that is" [89] line 1 - "not" deleted before "satisfied" 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: 17 March 2020

First, the Supreme Court Act 1970(NSW)

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