Highfields Australia Pty Ltd v Advanced Motor Dealers Group Pty Ltd

Submissions

1. There is no dispute that in principle the plaintiff is entitled to its costs of the proceedings as it has been successful. The issue is whether the burden of those costs should be borne largely by Mr Touma rather than the first and third defendants, given their limited involvement in the proceedings.
2. The plaintiff seeks a costs order against all of the defendants jointly and severally. The plaintiff argued that the first and third defendants' conduct of the proceedings, by merely filing an appearance and taking no other steps in the proceedings (including by not appearing at the hearing) is inconsistent with the obligations in Civil Procedure Act 2005 (NSW) (CPA) s 56(3) to participate in the processes of the court and to comply with directions of the court. If the first and third defendants were going to take that approach, the plaintiff submits that they should have filed a submitting appearance.
3. AMDG (the first defendant) submits that it should only be required to pay a small proportion of the plaintiff's costs on the basis that the moving defendant at all times was Mr Touma and that almost all of the costs incurred by the plaintiff, including costs relating to evidence and the final hearing, were incurred as a consequence of Mr Touma's defence of the proceedings. The first defendant relies on Probiotec Ltd & Ors v The University of Melbourne (2008) 166 FCR 30; [2008] FCAFC 5, where certain unsuccessful defendants (referred to as the 'Probiotec parties') who had filed a defence requiring the plaintiff to prove its claim, but otherwise were inactive in the proceedings, were ordered to pay only 10 per cent of the plaintiff's costs. Rares J (with whom Finn J agreed) said at [73] (omitting citations): In most proceedings where one party fails, it will be 'usual' and just to order that party to pay the successful party's costs. Often it will be unexceptionable for the Court to proceed upon the basis that the successful party should have the benefit of an order for costs in that party's favour because the substantive decision of the proceedings warrants that outcome. But, there was a marked difference here between the positions of the NSI parties, who were active protagonists in the battle, and the Probiotec parties, who were found by his Honour to have taken 'no active part in argument or in the conduct of the proceeding'. In my opinion, the Probiotec parties did not put the University parties to the expense of the fully contested hearing conducted against the NSI parties. Once the Probiotec parties had pleaded a denial of the validity of the complex patent and had not admitted the validity of the phosphopeptide patent, the University parties were obliged to prove their validity as against them. But that proof would have been in an uncontested trial had the NSI parties not been actively pursuing their similar defences and the separate invalidity proceedings. The costs which were incurred by the University parties were due largely to the extensive contest fought out between them and the NSI parties in which the Probiotec parties took no part. There is no basis to throw onto the Probiotec parties the whole burden of costs based on the conduct of the NSI parties.
4. His Honour went on to conclude at [77] that the appropriate order on the facts of that case was that the Probiotec parties pay 10% of the costs being equivalent to the costs of a one-day uncontested trial.
5. AMDG submitted that in the present case where AMDG filed no defence at all and did not file submissions or appear at the hearing, it could be said that it was Mr Touma's conduct which resulted in the incurring of virtually all of the plaintiff's costs, and accordingly it would be unjust to hold AMDG jointly and severally liable with Mr Touma for all of the plaintiff's costs. The plaintiff would not have been required to proceed to a contested hearing without Mr Touma's defence, as it could have obtained summary judgment against AMDG. AMDG proposed alternative formulations of order 3, with the intention that it pay 10% of the plaintiff's costs, or alternatively, the plaintiff's costs of the proceedings, excluding all costs occasioned by Mr Touma's defence of the plaintiff's claim.
6. The Receiver (the third defendant) submits that there should be no costs order against him because, apart from the first directions hearing at which the Receiver appeared and indicated that he was prepared to give undertakings to preserve the property the subject of the proceedings, the Receiver has never been actively involved in the proceedings. Mr Oramazabal states in his affidavit that at the first directions hearing he, on behalf of the Receiver, informed the plaintiff's counsel that the Receiver did not intend to take any further steps or be involved in the proceedings apart from giving the undertaking.
7. The Receiver points to the absence of any procedural directions being made at any point in the proceedings requiring the first or third defendants to file any points of defence or submissions in the proceedings. The Receiver also points out that his conduct was not impugned in the proceedings and that indeed it may not have been necessary for the plaintiff to have joined him personally to the proceedings. The Receiver also notes that costs orders are not normally made against receivers (and other insolvency practitioners) personally in proceedings, whether the receiver is a party or a non-party, where the receiver's conduct is not impugned: GE Dal Pont, Law of Costs (5th ed, 2021) at [10.58] and [22.44].
8. The Receiver seeks an additional order that he: (a) is not liable for any damages or costs ordered against the first defendant, including any damages ordered with respect of hiring fees as may be determined in accordance with Order 7 above; and (b) is excused from further appearance in the proceedings.

Consideration

1. I accept the first and third defendants' submissions on this point. As regards the Receiver, there was no issue in the proceeding that concerned him personally, and, despite some criticism in the plaintiff's reply submission, I do not see why I cannot accept Mr Oramazabal's evidence that he communicated the Receiver's intention not to participate in the proceedings at the first directions hearing. Indeed, the plaintiff could have sought orders for the filing of a points of defence by both the first and third defendants if it was in doubt as to their approach to the proceedings.
2. I also do not accept that merely leaving open the prospect of future participation in the proceedings by not filing a submitting appearance has any bearing on the question of apportionment of costs. The plaintiff has failed to point to any aspect of the proceedings that was affected by the position taken by the Receiver, outside of some potential uncertainty that was never fully explained.
3. In relation to AMDG, it also did not take an active part in the proceedings. I agree that there is a close analogy to Probiotec, and indeed the position of AMDG is stronger given that, unlike the Probiotec parties, AMDG did not file a defence. Had it not been for Mr Touma's defence of the proceedings, the hearing would have been very short, rather than 3 days. While AMDG may have benefited in a theoretical sense if Mr Touma's defence of the proceedings had succeeded, the entity which really stood to benefit in that event was Bilpin (of which Mr Touma at the time of the hearing was a director and a shareholder). Recognising that it is not possible to do a precise assessment of the proportion of the costs for which AMDG is responsible, and bearing in mind that AMDG accepts responsibility for 10% of the plaintiff's costs, in all the circumstances I consider that it would be just to require AMDG to pay only 10% of the plaintiff's costs.
4. I propose to make the Receiver's proposed additional order set out at [14] above, except that as I have determined that order 7 should not be made, the third defendant's reference to that in proposed additional order (a) is not necessary.

Order 6

1. The plaintiff seeks an order requiring Mr Touma to remove a charge registered on the PPSR in favour of Bilpin on the basis that he is a director of that company. The plaintiff submits that it would be a "triumph of procedure over substance" if the Judgment could determine ownership of the vehicles but could not give effect to that determination by not removing the Bilpin charge from the PPSR.
2. The second defendant opposes this order as Bilpin is not a party to the proceedings, and Mr Touma is only one of two directors of Bilpin and therefore does not have sole authority to cause the removal of the charge by Bilpin as directors must act collectively as a board: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32.
3. I am not satisfied that order 6 as proposed by the plaintiff is appropriate. As a matter of principle an order which directly affects a third person's rights against or liabilities to a person should not be made unless the person is joined as a party: Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56 at [77], Westpac v Bell Group (No 3) (2012) 44 WAR 1; [2012] WASCA 157 at [3527]. Bilpin is not a party to the proceeding and the proposed order would affect its rights as holder of a charge. I note that proposed order 6 was not included in the Summons and was raised for the first time in the plaintiff's submissions as to the form of the final relief. I note also that on the evidence before the Court, it is to be inferred that the Receiver is the agent of AMDG and not Bilpin: GE Dal Pont, Law of Agency (4th ed, 2020) at [1.43]. It was open to the plaintiff to apply to join Bilpin as a party to the proceedings but it chose not to do so.

Order 7

1. The plaintiff seeks this order on the basis that the Court had identified a potential entitlement of the plaintiff to hiring fees accrued prior to the bailment at Judgment [158], and that it was appropriate for the Court to exercise its discretion to allow a further hearing on quantum with a narrow evidentiary basis: Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 at 478. In particular, where the failure to lead evidence is the result of an "accident, mistake or want of foresight" the Court may exercise its discretion: Brown v Petranker (1991) 22 NSWLR 717 at 728-729. In this instance, the plaintiff submits that it could not have foreseen the findings as to the terms of the agreement, and the consequences for its quantification of damages. Further, it submits that there is very limited prejudice to the defendants as the evidence will be entirely documentary.
2. The second defendant notes that while the relief does not directly affect him, he would otherwise be affected by the continuation of the case. Mr Touma submits that the plaintiff should have known that its case would have required it to prove an entitlement to recover the amount it paid to the third-party mortgagees.
3. I am not satisfied that I should make proposed order 7. The plaintiff had an opportunity at the hearing to put forward evidence in support of its case on damages and did not do so on this aspect. The effect of proposed order 7 would be to enable the plaintiff to reopen its case to prove an aspect of its claim. I agree with the submissions made by the second defendant that it is inappropriate in the circumstances.
4. The plaintiff did not seek that there be a separate hearing on damages once liability had been determined. In my view, s 56 of the CPA requires that all issues be dealt with by reference to the evidence at trial. The plaintiff made a forensic choice not to lead that evidence and must now live with the consequences of that choice.

Stay

1. The second defendant seeks a stay to consider whether to appeal the principal judgment. Mr Touma has not identified possible grounds of appeal, in part due to the unavailability of counsel. Mr Touma offered the usual undertaking as to damages, and to prosecute any appeal as expeditiously as reasonably possible.
2. The plaintiff opposes any stay on the basis that Mr Touma has failed to meet the criteria for a stay to be granted, being that the applicant must show that the appeal "raises serious issues for the determination of the appellate court, and that there is a real risk that he will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal": McLean Tecnic Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737; [2002] NSWCA 383 at [17]-[18]. The plaintiff submits that Mr Touma has neither demonstrated that there were any serious issues or arguable grounds of appeal (merely seeking a stay to contemplate whether an appeal should be brought) nor indicated any prejudice that would flow to him if the orders were not enforceable forthwith.
3. I am not satisfied that it is appropriate to stay the costs order. The plaintiff has demonstrated no reason why a costs order should not be made against him in the circumstances, or any prejudice that would flow from such an order.
4. In relation to proposed order 4, while Mr Touma has not articulated any proposed grounds of appeal, I accept that reasonable minds may differ on the issues dealt with in the Judgment and that a short stay would serve the purpose of maintaining the status quo in relation to the vehicles. I will grant a stay in relation to proposed order 4 for a period of 7 days from the date of entering the orders to enable the second defendant to bring any proposed appeal. The issue of a further stay of those orders could then be addressed by the Court of Appeal. I make this order bearing in mind that the second defendant has had a significant period of time to review the Judgment, due to the length of time agreed between the parties for submissions to be made on the form of the final orders, and the time of year at which these reasons are being handed down.

Orders

1. Accordingly, I will make the following orders: 1. Judgment entered in favour of the plaintiff against the first defendant in the amount of $21,552 (exclusive of GST) on account of the monies paid by Highfields for the costs of the storage of the Vehicles. 2. With respect to costs: 1. the second defendant is to pay the plaintiff's costs on the ordinary basis, as agreed or assessed; 2. the first defendant is jointly and severally liable with the second defendant for 10% of the plaintiff's costs on the ordinary basis, as agreed or assessed. 1. The third defendant: 1. is not liable for any damages or costs ordered against the first defendant; and 2. is excused from further appearance in these proceedings. 1. The undertakings noted in orders made by Robb J on 8 December 2020 be discharged. 2. Stay the execution of Order 4 until 5pm on 8 February 2024. 3. The first and third defendants take all necessary steps to remove the PPSR charge numbered 202011060058102 in favour of the first defendant or cause such charge to be removed within 7 days from the date of these orders.

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: 01 February 2024