Hu v PS Securities Pty Ltd as trustee of the Joseph Family Trust & anor

Conclusion 30As noted in my April reasons for judgment, I was not satisfied that the liquidators' conduct had been such as to warrant a departure from the ordinary position (based on sound policy reasons) that the liquidators should have the conduct of proceedings to enforce the company's claim for indemnification in respect of debts incurred by it as trustee. That was sufficient to dispose of the claims for leave whether brought under the statutory provision or in the Court's inherent or equitable jurisdiction. However, that position did not arise until after Ms Hu had filed her application and it seems to me it cannot be said that she was not justified in so doing. But for the liquidators (on one view belated) steps to recover the debt in question (and others) out of what are alleged to be trust assets, Ms Hu's application would have succeeded before me. 31There is a broad discretion in relation to the award of costs (as recognised in Oshlack v Richmond River Council (1998) 193 CLR 72) but the general rule is that costs follow the event and that there should not lightly be a departure from that rule, as emphasised by McHugh J at [67] - [68]: The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instill in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice. 32That general rule requires the court to determine what in fact is the relevant 'event' ( Owners Strata Plan No 64970 v Austruc Constructions Ltd (in liq) (No 5) [2010] NSWSC 568, per Bergin CJ in Eq). 33There are, however, cases in which, in the exercise of the court's broad discretion in relation to costs, an apportionment of the costs as between various issues in the case or an order other than that which would generally follow the overall outcome of the proceedings will be made, or where a party may not recover the whole of the costs that might otherwise be ordered as following the 'event', having regard to the fact that the exercise of the court's discretion as to costs ultimately requires an assessment of what is fair in all the circumstances ( Bowen Investments Pty Limited v TAB Corp Holdings Limited (No 2) [2008] FCAFC 107 where Finkelstein and Gordon JJ said (at [5]) that if an issue by issue approach would produce a result that is fairer than the traditional rule, it should be applied. 34While there were separate applications before me, it does not seem to me that this is a case where the argument was so clearly divided into clearly defined and separate issues as to make it appropriate to award costs of a separate issue (the strike out application in effect being an adjunct to the main question which was as to whether leave should be granted for Ms Hu to prosecute a claim in the name of Alphena against PS Securities). 35I note that Toohey J in Hughes v Western Australian Cricket Association (1986) ATPR 40-748 said that: It seems to me that the only basis on which it would be appropriate to depart from the general rule that costs follow the event, by reason of the circumstance that the appellant lost what might be regarded as the dominant issue, is that the judgment is made that, had that issue been excluded then, although the dominant issue was not clearly separable, the costs incurred on the appeal would be likely to have been substantially less, perhaps because there was less at stake. 36In the present case, the question seems to me to be one of characterising what, in essence, was the appropriate 'event'. I note that the English Court of Appeal in Roache v News Group Newspapers [1998] EMLR 161 at [168] - [169] (as cited by the Queensland Court of Appeal in Timms v Clift [1998] 2 Qd R 100) posed the question as to who is to be seen as the successful party "in the event" as being a question as to "[w]ho, as a matter of substance and reality, had won? Has the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?" 37Here, I am mindful of the fact that this was very much a mixed outcome for Ms Hu. Her primary objective, it seems to me, was to ensure that proceedings were commenced expeditiously against PS Securities (and to that end, her lawyers had gone to some lengths to seek to persuade the liquidators to bring that action). That objective has been achieved (the liquidators now having been galvanised into action in that regard). True it is that Ms Hu was pressing to be allowed to conduct those proceedings herself and on that aspect of the matter she was unsuccessful. 38There has been recognition in the authorities (albeit usually in cases where there are multiple issues on which the overall successful party has mixed success) that the exercise of the discretion as to costs may be carried out on a relatively broad brush basis or as a matter of impression on the part of the judge who heard the matter ( Fexuto v Bosnjak Holdings Pty Limited (No 3) (1998) 30 ACSR 20) and that mathematical precision is illusory ( Dodds Family Investments Pty Limited v Lane Industries Pty Limited (1993) 26 IPR 261, cited by the Court of Appeal in James v Surf Road Nominees (No 2) [2005] NSWCA 296 and in Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304) (at [272]). 39Taking the above into account, it seems to me that Ms Hu was not acting unreasonably in forming the view that it was necessary to take action herself to seek to enforce Alphena's right of indemnification as trustee, but that once the liquidators did take such action (and the relevant undertakings were proffered by them) then it became unnecessary for Ms Hu to pursue her application. The status of the freezing order in those circumstances remained, however, a matter of concern and was not dealt with until the course of the applications. 40The fair outcome in those circumstances, in my view, is that while Ms Hu should bear the liquidators' costs of the day's hearing before me on 25 March 2011, she should not bear the costs of the application up to that point and those costs should be left to be recouped out of the assets of the company on the winding up in the ordinary course. That does not, in my view, deny the liquidators' restorative justice in terms of their costs - it simply means that Ms Hu (the major creditor of this stage of the company) is not directly responsible for the delays of the liquidators that led to the necessity for the proceedings to be commenced in the first place. Otherwise, I consider that there should be no order as to the costs of the proceedings. In particular, I consider that while PS Securities had a legitimate basis on which to resist the prospect of multiple suits, it seems also to have been its desire to leave the conduct of any proceedings in the hands of the liquidators and that was an argument that could have been left to the liquidators to run. I think it appropriate that PS Securities bear its own costs of the Interlocutory Process and its Notice of Motion. 41As to the submission that Ms Hu should pay the liquidators' costs on an indemnity basis, although there was cross-examination as to the liquidators' conduct, and it was submitted that I should infer that the liquidators were favouring the interests of the Joseph family, I do not think this is a case falling squarely within the principles in Fountain. I note that at this stage Ms Hu is the major creditor of the company and, hence, the payment out of the company's assets at the conclusion of the winding up of any shortfall between the costs now ordered to be paid and the costs incurred by the liquidators (assuming that there is a recovery against PS Securities) will indirectly be borne by Ms Hu. Therefore, I will not order the liquidators' costs be paid on an indemnity basis. 42In circumstances where the liquidators have made arrangements to conduct the proceedings on a speculative costs basis vis a vis their legal representatives (and there are presently limited, if any, assets in the company other than the chose in action now being pursued against PS Securities) and this is a discrete application, I think it appropriate to order that the liquidators' costs of the 25 March 2011 hearing be assessed and payable forthwith.

Orders 43Accordingly, I make the following orders:

1. Ms Hu is to pay the liquidators' costs of the day's hearing on 25 March 2011 on a party/party basis, such costs to be assessed and payable forthwith.
2. There be no other order as to the costs either of the plaintiff's Interlocutory Process filed 14 January 2011 and amended 28 February 2011 or the first defendant's application to strike out the Statement of Claim by Notice of Motion filed 4 February 2011.

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