Herald & Ors v Worker Bee

[2] Extensive written submissions on behalf of the plaintiffs and the twelfth defendant respectively have been filed in relation to the question of costs. There is no dispute that the plaintiffs should pay the twelfth defendant's costs of the application. The issue that has to be decided is whether those costs should be assessed on the standard basis or on the indemnity basis. There is also no real issue between the parties as to the state of the authorities on the circumstances when it is appropriate to order indemnity costs. Both parties relied on Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 232-234. The solicitors for the twelfth defendant relied on the observations of Shepherdson J in Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1998] QSC 18; [1999] 1 QdR 518 at 521 at 522. Where the parties differ is whether the circumstances that resulted in this application being dismissed by consent justify an order for indemnity costs in favour of the defendant.

[3] I have had the benefit of hearing the application for the Mareva order that was pursued by the plaintiffs on 29 November 2002 against the first, second, fifth, seventh, ninth, tenth and eleventh defendants. My reasons for judgment were delivered on 3 December 2002. I was not satisfied that the second and eleventh defendants (who are natural persons) by making decisions in relation to insolvent companies or companies with no assets that were appropriate decisions having regard to the state of solvency of those companies meant that they were disposing of assets or causing corporate defendants to dispose of assets, so that those defendants were in a position of not being able to satisfy any judgment in the proceeding. I was also not satisfied that each of the relevant defendants had assets that would be amenable to a Mareva order. I observed that the application was premature and misconceived.

[4] Of the corporate defendants, it is alleged in the statement of claim that the twelfth defendant was a director of the fifth defendant from 15 May 1996 to 7 February 2002 and a director of the sixth defendant from 29 April 1998 to 13 November 2001. Allegations are also made about the involvement of the twelfth defendant as either a shareholder or officer of other corporate entities which are the subject of allegations in the statement of claim, but they are not defendants to the proceeding.

[5] The allegation that is made by the first plaintiff in his affidavit of 14 November 2002 in support of the application for the Mareva order against the twelfth defendant is the allegation that:

"From the inquiries carried out by my solicitors, it appears that the defendants are in the process of removing assets from the companies the subject of this proceeding, and having those companies liquidated and deregistered."

[6] There was no material in the supporting affidavits of the first plaintiff or the plaintiff's solicitor, Mr A J Crilly, that was directed against the twelfth defendant personally in a way which attempted to identify and/or value his assets or identify conduct undertaken by him personally in respect of the fifth and sixth defendants that would warrant a Mareva order. By conducting searches upon CITEC on the morning of 27 November 2002, the solicitors for the twelfth defendant were able to ascertain the twelfth defendant's interest in real property in Queensland and details of the twelfth defendant's registered business (which had not been ascertained by the plaintiffs' solicitors) and all his associations with corporate entities. It is apparent that there were no prospects of the plaintiffs being successful against the twelfth defendant for a Mareva order on the basis of the material that was filed by the plaintiffs in support of the application.

[7] The twelfth defendant engaged his solicitors on 25 November 2002 in relation to opposing the application for the Mareva order. From that point there was a constant flow of correspondence between the parties' solicitors. The opposition of the twelfth defendant to the application from the outset was made clear and the intention to seek costs on an indemnity basis was flagged on 27 November 2002. On 28 November 2002 the plaintiffs indicated that they were prepared to withdraw the application against the twelfth defendant and pay the twelfth defendant's "party and party costs". Later that day the twelfth defendant's solicitors indicated that they were prepared to recommend to their client that he consent to an order that the application be dismissed against him and that the plaintiffs pay his costs in an agreed sum of $5,500. Correspondence then ensued about the quantum of those costs. Details of the calculation of those costs were provided by the solicitors for the twelfth defendant and the plaintiffs' solicitors. The parties were unable to agree on the costs order and, as a result, the orders were made by consent on 29 November 2002 in the terms which I have indicated and the question of the appropriate order for costs has been left for determination by the court.

[8] What underlies the plaintiffs' submissions against an order for indemnity costs was that they acted bona fide in bringing the application in the first instance and abandoned it, when satisfied that they could not be successful against the twelfth defendant. The plaintiffs may have acted bona fide in the sense of having no ulterior motive in bringing the application, but they did not act bona fide in bringing an application without material to support the obtaining of an order against the twelfth defendant. This is an exceptional case where the plaintiffs properly advised should have known that they had no chance of success in obtaining a Mareva order against the twelfth defendant on the material on which they were seeking to rely. There was only a relatively short period for the twelfth defendant who resided in New South Wales to consult solicitors about the plaintiffs' proceeding and application, before the application was returnable. It is therefore appropriate in all the circumstances that pertained to the bringing and resolution of the plaintiff's application against the twelfth defendant that the plaintiffs pay the twelfth defendant's costs of the application on an indemnity basis.

That the plaintiffs pay the twelfth defendant's costs of the application filed on 14 November 2002 including the costs of the application for costs in respect of that application to be assessed on an indemnity basis.