Court of Appeal (WA)|2015-09-15|Before: Martin CJ

HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2015] WASCA 101 (15 September 2015)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2015] WASCA 101

BETWEEN : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

SILKCHIME PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST -v- PERPETUAL NOMINEES LTD [No 2] [2014] WASC 217

Appeal - General principles - Leave to appeal from interlocutory decisions - No substantial injustice

Practice and procedure - Denial of procedural fairness - Denial of right to be heard - No factual basis for complaint of denial of procedural fairness

Practice and procedure - Security for costs - Assessment of merits of substantive proceedings not ordinarily appropriate in course of application for security - Delay in bringing and prosecuting application - Delay not unreasonable or unjustifiable - No error in assessment of amount of security

Rules of the Supreme Court 1971 (WA), O 1 r 4A, O 1 r 4B

First Respondents : Mr J Thomson SC & Mr M Feutrill

Second Respondent : Mr J Thomson SC & Mr M Feutrill

Carey v Korda & Winterbottom [No 2] [2011] WASC 220

Huntingdale Village Pty Ltd (Receivers and Managers Appointed) ATF Huntingdale Village Unit Trust v Perpetual Nominees Ltd [No 2] [2014] WASC 217

Korda and Winterbottom v Silkchime Pty Ltd [2010] WASC 155

Oswal v Carson [2012] FCA 341

Silbert v Steinberg [2010] WASCA 113

1 The applicants for leave to appeal are five companies (the Westpoint companies) forming part of a related group of companies known as the Westpoint Group. That group was founded by Mr Norman Carey, who is a director of each of the Westpoint companies. In September 2005, each of the Westpoint companies granted a fixed and floating charge over the whole of their assets and undertakings or, in the case of Silkchime Pty Ltd, specific assets, in favour of Perpetual Nominees Ltd (Perpetual) as security for funds advanced pursuant to a loan agreement. Pursuant to those charges, on 24 January 2006, Perpetual appointed Mark Anthony Korda, David John Winterbottom and Oren Zohar (the Receivers) as receivers and managers of various entities, including the Westpoint companies.

2 On 4 September 2009, the Westpoint companies commenced proceedings in the Victorian registry of the Federal Court of Australia against Perpetual, the Receivers and Westpoint Corporation Pty Ltd, which was then in liquidation, alleging misconduct by the Receivers. The Federal Court of Australia ordered that the proceedings be transferred to the Supreme Court of Western Australia, where they became action COR 223 of 2009.

3 In circumstances which it will be necessary to explain in more detail below, on 20 December 2010 the Receivers applied for an order that the Westpoint companies provide security for their costs of defending the proceedings. For reasons which it will be necessary to explain, the Receivers' application for security for their costs was not heard until May 2014. Their application was successful and the Westpoint companies were ordered to provide $150,000 by way of security for the Receivers' costs of defending action COR 223 of 2009 up to the point of close of pleadings.

4 The Westpoint companies apply for leave to appeal from that order. However, for the reasons which follow, they have failed to establish that they would suffer substantial injustice if the order that they provide security for the Receivers' costs of defending the proceedings which they have brought against the Receivers is not reversed. That failure is of itself sufficient to justify the refusal of leave to appeal. Furthermore, for reasons which also follow, each of the proposed grounds of appeal is entirely baseless, with the result that the Westpoint companies have failed to establish that the decision which they seek to challenge is wrong, or at least attended with sufficient doubt to justify the grant of leave to appeal, which is, in itself, also a sufficient basis for refusing leave to appeal.

The principles governing the grant of leave to appeal from interlocutory decisions

5 The evident lack of merit in this application for leave to appeal from an interlocutory decision of the court suggests that it is again necessary to reiterate the principles which govern the grant of leave to appeal from such decisions. Those principles were conveniently summarised by Martin CJ in Silbert v Steinberg:[1]

The fact that this application for leave to appeal was brought at all suggests that it may be timely to reiterate and reinforce the principles governing the grant of leave to appeal against interlocutory decisions. The obvious objective of the statutory provision limiting the jurisdiction of this court to hear appeals from interlocutory decisions to those in respect of which leave is granted is to reduce appeals from decisions of that kind as much as possible - see Wilson v Metaxas [1989] WAR 285, 294. While there is a general discretion to grant leave to appeal (see Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177; and State of Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40, 56 - 67, 74) it must be shown that the decision in respect of which leave is sought is wrong, or at least attended with sufficient doubt to justify the grant of leave, and, in addition, that substantial injustice would be done by leaving the decision unreversed (see Wilson v Metaxas; WA v Bond Corporation and, more recently see: Joyce v Palassis [2008] WASCA 151 [26] and David Regan & Co Pty Ltd v West Australian Newspapers [2007] WASCA 14 [11].

In Adam P Brown Male Fashions Pty Ltd, the plurality cited with approval the following passage from the judgment of Sir Frederick Jordan in Re the Will of Gilbert [1946] NSWStRp 24; (1946) 46 SR (NSW) 318, 323:

... I am of opinion that ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of judges at first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.

A decision of a Judge or Master managing a case to the effect that summary judgment should be refused and the parties proceed to trial is a decision of a procedural character (see In de Braekt v Powell [2007] WASCA 55; (2007) 33 WAR 389 [35]) which, in this court, will be taken in the context of the case management regime established by the Rules of the Supreme Court 1971 (WA). It follows that the principles enunciated in O 1 r 4A and r 4B will govern determinations of this kind. Those principles require particular weight to be given to the elimination of delay, the reduction of cost, and the efficient disposal of the business of the court, subject, of course, to the overriding requirement that there be a fair and just determination of the issues bona fide in contention between the parties. It also follows that the various considerations identified by the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 will also bear upon not only the initial consideration of an application for summary judgment, but also upon applications for leave to appeal from interlocutory decisions.[2]

6 The decision to order the Westpoint companies to provide security for the Receivers' costs of defending the proceedings brought against them is obviously a decision of a procedural character which was taken in the context of the case management regime established by the Supreme Court Rules 1971 (WA) (Rules). It follows that the overarching principles enunciated in O 1 r 4A and r 4B of the Rules governed the application. Generally speaking, those overarching principles require case managers to ensure that the time and resources deployed in the resolution of interlocutory disputes are proportionate to the impact which the resolution of that dispute will have upon the just resolution of the substantive issues in the proceedings.

7 These considerations inform the manner in which this court will exercise its discretion to grant leave to appeal from interlocutory decisions. They serve to reinforce the proposition that, ordinarily, leave to appeal will not be granted unless the applicant for leave establishes that substantial injustice would follow if the challenged decision is not reversed. Contrary to the submission put by counsel for the Westpoint companies in this case, the requirement to establish substantial injustice is quite separate and distinct from the requirement to establish error or at least sufficient doubt to justify the grant of leave. The former requirement necessitates a consideration of the consequences for the parties in the context of their future conduct of the proceedings if the challenged order is not reversed, whereas the latter requirement necessitates consideration of the merits of the proposed appeal. While it is not possible to exhaustively define the circumstances in which substantial injustice will follow if an erroneous decision is not reversed, ordinarily it will be necessary to show that the challenged decision will cause prejudice of a substantial character which cannot be remedied or mitigated by the future course of the proceedings.

8 In this case, the effect of the challenged order was to require the Westpoint companies to provide $150,000 as security for the Receivers' costs of defending the proceedings as a condition of their further prosecution. The security was to be provided either by payment of that amount into court, or by the provision of an unconditional bank guarantee from an Australian trading bank in favour of the Receivers, or by some other means to be agreed by the Receivers. It can also be accepted that the order exposes the Westpoint companies to the risk of further orders of a similar kind at later stages in the proceedings.

9 Unless the provision of such security would cause financial hardship to the person or persons funding the proceedings brought by the Westpoint companies, it is difficult to see how the challenged order could cause substantial prejudice which cannot be remedied or mitigated by the future course of the proceedings. If the Westpoint companies fail in their claims against the Receivers, there is no injustice in the party or parties who stood to benefit from the proceedings having been required to provide security which would enable orders for costs in favour of the Receivers to be satisfied. On the other hand, if the Westpoint companies are successful in their claims against the Receivers, the security which has been provided will be returned to them in full. Interest at commercial rates on the funds posted by way of security can be easily derived by utilising the option of posting security by way of unconditional bank guarantee which could no doubt be obtained for a fee, if funds equivalent to the guarantee were deposited into an interest-bearing account with the relevant bank. On this scenario, the only loss suffered by the provision of security would be the fee charged by the bank for the provision of the guarantee. In the absence of evidence, there is no reason to suppose that the relevant fee would be substantial, when viewed in the context of the legal costs likely to be incurred in complex commercial proceedings of the kind which have been brought against the Receivers. It should also be noted that the challenged order contemplated the provision of security in any form agreeable to the Receivers, leaving it open for the parties to make a sensible arrangement for the deposit of the funds to be provided by way of security into an account bearing interest at commercial rates in the joint names of the parties or their solicitors, thereby avoiding any bank fee for the provision of a guarantee.

10 The judge at first instance found that there was reason to believe that the Westpoint companies would be unable to pay the costs of the Receivers if successful in their defence of the proceedings brought against them, for reasons which it is unnecessary to enunciate. That aspect of the judge's decision is not challenged by any proposed ground of appeal. However, it can be fairly inferred that the legal costs incurred by the Westpoint companies in their prosecution of the proceedings against the Receivers are being met by a person or persons who would stand to benefit from the success of those proceedings. As the judge at first instance noted in his reasons, Mr Norman Carey swore an affidavit in opposition to the application for security in which he deposed to the Westpoint companies having already spent 'about $1.4 million'. However, the Westpoint companies led no evidence as to the source of those funds, nor was any evidence led as to Mr Carey's financial position. As the primary judge noted:

Mr Carey does not say that he could not raise the funds to meet an order for security for costs.[3]

11 So, in this case there was no finding by the primary judge to the effect that the requirement to provide security for the Receivers' costs of defending the proceedings would cause financial hardship to the person or persons funding the Westpoint companies' prosecution of the proceedings against the Receivers. None of the proposed grounds of appeal contends that there should have been a finding to that effect and in any event, as we have noted, there was no evidence capable of sustaining such a finding. Nor was there any finding, nor any evidence capable of sustaining a finding, to the effect that an order requiring the provision of security for the Receivers' costs of defending the proceedings would stultify or preclude the further prosecution of those proceedings.

12 It follows that in this case the only prejudice suffered by the Westpoint companies which could be characterised as unjust if the challenged decision is not reversed is, at its highest, the amount of the fee charged by a bank for the provision of an unconditional guarantee, and that prejudice would only be suffered if the Westpoint companies and the Receivers were unable to come to some sensible arrangement for the deposit of the funds to be provided by way of security into an account bearing interest at a commercial rate in the joint names of the parties to the proceedings or their solicitors. Viewed in the context of complex commercial proceedings of this kind, prejudice of that kind cannot be said to be substantial. It follows that the Westpoint companies have failed to establish that substantial injustice would follow if the decision which they seek to challenge is unreversed.

13 Having regard to the general principles we enunciated above, this conclusion is sufficient to dispose of the application for leave to appeal. However, as the merits of the grounds of appeal were fully argued, out of deference to that argument we will enunciate as briefly as possible our reasons for concluding that each proposed ground of appeal is entirely without merit.

14 Proposed ground 1 merely asserts that the decision of the primary judge should be set aside by reason of one or other of the errors specified in the other proposed grounds of appeal. It serves no point or purpose and should not have been included.

The learned Judge erred in law in depriving the appellants of a right to be heard and denying the appellants procedural fairness insofar as:

2.1 after part hearing the Application on 21 May 2014 His Honour ordered that:

(a) the appellants file and serve a further amended statement of claim by 20 June 2014;

(b) the appellants and the receivers have leave to file and serve any affidavits and submissions in relation to the further amended statement of claim by 4 July 2014;

(c) each of the appellants and the receivers have leave until 11 July 2014 to apply for a further oral hearing of the Application;

(d) if neither the appellants nor the receivers applied for a further oral hearing then the Application would be determined without any further oral hearing;

2.2 on 24 June 2014 the appellants filed and served a second further re-amended statement of claim;

2.3 on 2 July 2014, without prior notice to the appellants, His Honour published reasons for decision on the Application, made orders requiring the appellants to pay security for the receivers [sic] costs and vacated the orders made 21 May 2014 in 2.1(b), (c) and (d) above;

2.4 no reasons were given for the variation of the orders made on 21 May 2014; and

2.5 the appellants were denied the opportunity to adduce additional evidence in support of their submissions that the receivers had caused the appellants impecuniosity.

16 Because of the allegations contained within this proposed ground, it is necessary to recount the course of the hearing and determination of the application for security for costs in some detail.

17 As we have noted, the Receivers applied for security for their costs on 20 December 2010. However, the application did not come on for hearing until 21 May 2014. The reasons for the delay in the hearing of the application will be considered in the context of the various grounds of appeal which assert that the application should have been dismissed because of delay.

18 Because there was insufficient time available to complete the hearing of the application for security on 21 May 2014, the hearing was adjourned until 23 May 2014. At the commencement of the hearing on that day, counsel for the Westpoint companies proposed to file an amended statement of claim modifying the relief sought against the Receivers and specifying in detail the manner in which their charges were said to be excessive. The amendments were said to be relevant to the question of whether the proceedings brought against the Receivers would be heard in a series of stages - the first being limited to ascertaining whether an inquiry into their conduct was warranted. If and to the extent that the foreshadowed amendments to the statement of claim supported the proposition that the proceedings against the Receivers would be heard in a series of stages, they were obviously relevant to the application for security for costs, and in particular to the question of whether any security should be ordered to be provided in a series of stages.

19 There was then a lengthy interchange between counsel for the Westpoint companies and the primary judge in relation to the nature and effect of the proposed amendments to the statement of claim. At the conclusion of that interchange the primary judge expressed the tentative view that if changes were made to the statement of claim of the kind foreshadowed by counsel, the Receivers would have to be given the opportunity to adduce further evidence with respect to the likely cost of defending the proceedings, given the potential impact which the amendments would have upon those costs. In that context, counsel for the Westpoint companies submitted:

METAXAS, MR: Your Honour, with respect, if the receivers want to put something else up on quantum they can do that in the next two weeks or something. Really, there's no reason why I shouldn't proceed, I wouldn't have thought. Of course your Honour needs to hear from my learned friend but I would have thought I should complete my submissions. If the receivers want to put something else in on quantum they can do so but the proposition that we should all go away and come back just because there's going to be an amended draft bill prepared seems to me to be unnecessary.[4]

20 Counsel for the Receivers then put submissions to the effect that the amendment to the statement of claim which had been foreshadowed by counsel for the Westpoint companies could potentially have a significant impact upon the Receivers' costs of defending the proceedings. After further debate between counsel with respect to the ambit and effect of the foreshadowed amendments to the statement of claim, the primary judge stated to counsel for the Westpoint companies:

LE MIERE J: What I'm considering doing is this: is to direct first that you file a further amended statement of claim, which insofar as it seeks an inquiry in regard to the conduct of the receivers, specifies the conduct of the receivers which should be inquired into. (2) For you to continue your submissions today, to give both sides leave to file further submissions after receiving your amendment. And liberty to either party to apply to relist the matter for further argument if they wish to conduct further argument, having received your amendment.[5]

21 Counsel for the Westpoint companies responded that he did not have any difficulty with the proposal, although if the revised pleading was to provide particulars of all overcharging by the Receivers, more time would be required to amend the pleading. Counsel for the Receivers responded to the proposal by submitting that the application for security for costs then before the court should be resolved on the basis that the Receivers receive their costs of the application on an indemnity basis, and that the question of security for costs should be reconsidered after the proposed amended statement of claim had been filed and served. The primary judge then ruled in the following terms:

LE MIERE J: ... I propose as follows, that - order that the plaintiffs file and serve a further amended statement of claim on or before a certain date, stating amongst other things the conduct of the receivers in regard to which an inquiry should be ordered.

Secondly, the parties have leave to file and serve any affidavits and submissions in relation to the further amended statement of claim on or before a certain date. Thirdly, each party have leave on or before a certain date to apply for a further oral hearing of the application for security for costs. Fourthly, if no party applies for a further oral hearing, the application for security for costs may be determined without any further oral hearing. So I propose then you should continue and complete your submissions.

...

Mr Thomson has made submissions, the matter has proceeded this far, in my view the most efficient - or least inefficient way of now dealing with the matter is to complete the submissions, that the plaintiffs make the submissions on the basis that they wish. Insofar as they are predicated upon an amended pleading, that amended pleading will have to be filed within a certain time. Each party may then put on any further evidence and submissions in light of that.

I have in mind that the receivers may either stick with what they've got or, if they see fit, put on some further evidence whether in relation to the costs of the changed scope of inquiry if there is one, or otherwise, and each party may then put on any further written submissions in relation to that matter. If any party considers that further oral hearing is required - and that would include for the making of some further application or further directions, then they may request it within a certain time and we will deal with it.[6]

22 The primary judge then asked counsel for the Westpoint companies to nominate a time by which the amended statement of claim would be provided. Counsel suggested 20 June because 'I'm going away for a week after 20 June'. Counsel for the Receivers then nominated 4 July as the date by which any further submissions or affidavits might be provided in response to the amended statement of claim, and the primary judge then ruled that either party might request a further oral hearing within seven days after that date - namely, by 11 July 2014. He then invited counsel for the Westpoint companies to complete his submissions, which counsel then did by addressing various aspects of the application for security. Counsel concluded, 'So please the court, they're my submissions'.[7] Counsel for the Receivers then presented substantial submissions in reply after which the primary judge observed:

I will reserve my decision, thank you, on the basis of directions I made this morning.[8]

23 During the afternoon of 20 June 2014, the solicitor for the Westpoint companies (who had appeared as counsel at the hearing on 23 May 2014) sent an email to the solicitors for the Receivers noting that the amended pleading and further affidavits were due that day. The email stated:

I am flying out tomorrow for a week. I will try and complete them before I leave which may mean you won't have them until the middle of next week.

I will be back in my office on 30 June 2014.

The solicitor acting for the Receivers responded by email observing that the previous email was unclear, and inquiring whether the amended pleading was proposed to be served by the middle of the following week (being 25 June) or the middle of the week after Mr Metaxas returned to his office (being 2 July). Mr Metaxas responded by email to the effect that the amended pleading would be provided on 25 June.

24 On 25 June 2014, Mr Metaxas sent an email to the solicitor acting for the Receivers advising that he had sent to his client what he expected to be the document that would be filed or close to it, and that the document would be filed the next day, as he had holiday commitments which would preclude an earlier filing. The amended pleading was in fact filed and served on 26 June 2014.

25 In the meantime, on 20 June 2014, the associate to the primary judge advised the parties by email that the reserved decision in relation to the application for security for costs would be delivered on 25 June 2014. Mr Metaxas responded by email advising that he would be overseas on that day and requested that the delivery of the decision await his return. In response, the associate to the primary judge advised the parties by email, also on 20 June 2014, that the reserved decision would be delivered on 2 July 2014. At no time between the provision of that advice and delivery of the reserved decision on 2 July 2014 did Mr Metaxas request any opportunity to provide further submissions or affidavits relating to the impact which the proposed amended statement of claim would have upon the application for security for costs. Nor were any such submissions or affidavits provided prior to delivery of the reserved decision - the only document which was filed and served on behalf of the Westpoint companies was the amended statement of claim, and that document was filed outside the time directed by the court and without leave or an extension of time within which to file that document.

26 In accordance with the protocol relating to the delivery of reserved decisions, on 1 July 2014 reasons for the primary judge's decision were provided to the parties. On the morning upon which the reserved decision was delivered, the solicitors for the Receivers provided to the solicitors for the Westpoint companies a minute of the orders which they proposed. Included within that minute was a proposed order numbered 7 which provided that the orders made on 23 May 2014 with respect to the filing of further submissions and affidavits dealing with matters arising from any amendments to the statement of claim and empowering the parties to request a further oral hearing of the application for security for costs be vacated.

27 Mr Metaxas appeared on behalf of the Westpoint companies at the time the reserved decision was delivered. Prior to delivery of the decision he made no complaint with respect to the procedure which had been followed, nor did he request any further time within which to file any further submissions or affidavits.

28 After delivery of the reserved decision, debate occurred by reference to the minute of orders which had been prepared by the solicitors for the Receivers. The primary judge asked Mr Metaxas for his response to proposed order 7. He replied:

METAXAS, MR: And then so we come to 7. Well, I must say that when we adjourned on 23 May I thought we were coming back to complete the application but it seems that we're not. So that's probably appropriate ... on that basis and that brings us to paragraph 8.[9]

29 It can thus be seen that every aspect of proposed ground 2 is affected by error. In relation to item 2.1, the orders listed in that paragraph were not made on 21 May 2014, but on 23 May 2014 and, more significantly, the application was not part-heard. Rather, the hearing of the application was completed consistently with the submission made by counsel for the Westpoint companies to that effect. Orders were made which would have enabled further materials to be filed, and perhaps a further hearing to occur limited to addressing any consequences flowing from the proposed amendment to the statement of claim. However, the statement of claim was not amended within the time directed by the court.

30 Turning to item 2.2 of the proposed ground, the amended statement of claim was not filed and served on 24 June 2014, but on 26 June 2014. This error is not of great significance.

31 The assertion in item 2.3 to the effect that the reserved decision on the application for security for costs was published on 2 July 2014 without prior notice to the Westpoint companies is not correct. During oral argument counsel sought to justify the assertion with the proposition that the paragraph should be read as asserting that the primary judge did not give prior notice of the terms of his decision. However, there is no way the words used in the proposed ground can be construed in that way and even if they were, the assertion remains incorrect, as the reasons for decision were provided to the solicitors for the Westpoint companies on the day prior to their publication.

32 The assertion in item 2.4 of the proposed ground to the effect that no reasons were given for the variation of the orders relating to the provision of additional materials flies in the face of counsel's express acknowledgement, during the hearing on 2 July 2014, that he understood the reasons for the revocation of the orders, and that the revocation of those orders was 'probably appropriate'.

33 Item 2.5 of the proposed ground asserts that the Westpoint companies were denied the opportunity to adduce additional evidence in support of their submission that the Receivers had caused their impecuniosity when, in fact, no such opportunity was ever to be provided, as it is clear that provision was only made for additional materials relating to the consequences of the foreshadowed amendments to the statement of claim. There had never been any suggestion during the hearing of the application for security that the parties were to be at liberty to provide additional materials at large, nor were there any orders to that effect. Nor is there any evidence to the effect that any additional evidence with respect to the cause of the Westpoint companies' impecuniosity was ever prepared or tendered to the court, in a context in which the solicitor for the Westpoint companies was given more than 10 days notice of the delivery of the reserved decision, and made no complaint with respect to the timing proposed, nor was any request made to adduce further evidence.

34 The oral submissions advanced on behalf of this ground during the hearing of the application for leave by counsel who had appeared before the primary judge similarly misstated what had occurred during that hearing. Counsel submitted that the orders that were made enabling the parties to file further submissions and affidavits, and to apply for a further hearing, were not confined to issues raised by the new pleading.[10] That assertion is not correct. It is directly contrary to the rulings made by the primary judge and the express terms of the orders which he made. In that context, counsel for the Westpoint companies sought to draw a distinction between the written record of the orders made, contained in the associate's record of the proceedings, and an order extracted under the Rules.[11] That distinction is disingenuous not only because under current practice, in the absence of an extracted order, the associate's record maintained in the records of the court provides the best evidence of the orders made by a court, but also because the terms of the associate's record in this case correspond exactly with the terms of the orders pronounced by the primary judge in open court, although counsel for the Westpoint companies submitted, again incorrectly, that the transcript showed that the orders were not so limited.[12]

35 Counsel for the Westpoint companies also submitted that the hearing of the application for security had not concluded when it was adjourned on 23 May 2014.[13] That assertion is also not correct, as the transcript clearly reveals. In fact it was counsel for the Westpoint companies who submitted that the hearing should be completed, against a contrary submission presented by counsel for the Receivers.

36 Counsel for the Westpoint companies also denied that after the primary judge announced the orders that would be made with respect to the proposed amended statement of claim and any matters consequential to it, he proceeded to complete his submissions in relation to the application for security.[14] The assertion implicit in this denial is not correct, as is his further assertion that the parties could file additional submissions and affidavits at large.[15]

37 Further, counsel's assertion that 'the additional material was not confined to ... the proposed amended pleading'[16] is contrary to the orders enunciated orally by the primary judge, and which were recorded in writing in both the transcript and the associate's record, and which were reproduced as part of proposed ground 2. The order made expressly limits any further affidavits and submissions to those relating to the further amended statement of claim.

38 Counsel's assertion that the hearing was adjourned part-heard[17] is also incorrect - as we have noted, at the conclusion of the hearing the primary judge announced that he had reserved his decision subject to the orders he had made with respect to the provision of further material arising from the foreshadowed amendments to the statement of claim. It is quite clear from the transcript of the hearing that, in accordance with the submission put by counsel for the Westpoint companies, the hearing of the application was concluded save for any issues arising from the foreshadowed amendments to the statement of claim. In the event, because the statement of claim was not amended within the time directed by the court, the orders made for the provision of additional materials had no application.

39 As advocacy is a human process, it is inevitable that inadvertent mistakes will be made by counsel from time to time. However, counsel's duty to not mislead the court carries a positive and correlative responsibility to take all necessary steps to ensure that there is a proper factual basis for submissions put to the court. The terms of proposed ground 2 and the oral submissions put in support of that ground represent a significant departure from that duty.

40 As the factual premises upon which ground 2 is based are false, it is entirely without substance.

41 Proposed grounds 3, 4, 5 and 7 each go to the assertion that the primary judge erred by not dismissing the Receivers' application for security on the ground of delay. It is unnecessary to set out the terms of the proposed grounds, which are repetitive and overlap to a significant extent. They are all without substance for the reasons which follow.

42 As we have noted, the proceedings which became COR 223 of 2009 in this court were commenced in the Federal Court of Australia in September 2009. After they were transferred to this court, on 2 December 2009, the primary judge ordered that the matter should proceed by way of pleadings and the Westpoint companies filed a statement of claim. During the early months of 2010, there were communications between the solicitors for the parties in which the solicitors for the Receivers alleged defects in the statement of claim, and the parties considered the prospect that the statement of claim might be amended. In the meantime, the Receivers had commenced proceedings seeking directions pursuant to s 424 of the Corporations Act 2001 (Cth) in relation to a number of matters, including whether they were obliged to retire when there were claims outstanding against them, including the claims advanced in COR 223 of 2009.[18] Those proceedings were heard in the latter part of February 2010, by the same primary judge. On 30 March 2010, the solicitors for the Receivers asserted in correspondence that there was no utility in progressing the Westpoint companies' claims in COR 223 of 2009 until judgment had been delivered in the proceedings commenced by the Receivers. Judgment in the proceedings commenced by the Receivers was delivered on 25 June 2010. It seems that no further substantive steps were taken in matter COR 223 of 2009 until the Westpoint companies filed a reamended statement of claim on 24 August 2010.

43 In the meantime, on 4 August 2010, the solicitors for the Receivers requested that the Westpoint companies make arrangement for the provision of security for the Receivers' costs. When no such arrangements were made, the application for security was filed by the Receivers on 20 December 2010.

44 As the primary judge noted, little had been done to progress the action before the solicitors for the Receivers put the Westpoint companies on notice that security for costs would be required on 4 August 2010. Although a statement of claim had been filed and served, it was allegedly deficient and was replaced by an amended pleading filed and served after the Westpoint companies were on notice that security was required. As the primary judge noted, there is no evidence, nor any material from which it might be inferred that the Westpoint companies would not have proceeded with the action if they had been put on notice that security for costs would be required prior to 4 August 2010.

45 Unreasonable delay in the bringing of an application for security for costs can militate against the exercise of the discretion to order the provision of security because of the risk that a party might be lulled into a belief that security would not be required, and might incur expenditure prosecuting proceedings in that belief, which expenditure will be thrown away if security is ordered which the party lacks the capacity to provide. Accordingly, as the primary judge noted, it is the time at which a party is put on notice that security for costs is required that is ordinarily most significant, as compared to the time at which an application for security for costs is commenced. As the primary judge correctly noted, in this case the most significant period, from the perspective of delay, was the period between the commencement of the proceedings and the time at which the Westpoint companies were put on notice that security would be required, which was 4 August 2010. However, as the primary judge noted, little was done to progress the action over that period.

46 After the Westpoint companies were put on notice that arrangements should be made for the provision of security for the Receivers' costs, some months elapsed before the application was commenced. However, as the primary judge correctly noted, there can be no suggestion that this delay could have induced the Westpoint companies to believe that security would not be required. To the contrary, as the primary judge noted, during that period the Receivers' solicitors confirmed that their clients pressed their demand for the provision of security. Accordingly, the primary judge was correct to conclude that the lapse of time between the time at which the Westpoint companies were put on notice that security would be required, and the time at which the application for security was commenced, did not militate significantly against the exercise of the discretion to order the provision of security.

47 During that period, Mr Norman Carey commenced proceedings against the Receivers and Perpetual[19] in which he claimed relief relating to the inspection and copying of financial records relating to the Westpoint companies. On 15 October 2010, the Receivers applied to disallow the amendments which had been made to the statement of claim in matter COR 223 of 2009. In the course of a directions hearing on 7 December 2010 relating to that application, counsel for the Westpoint companies observed that inspection of the documents sought by Mr Carey in the proceedings which he had commenced would inform and affect the terms of the statement of claim in the proceedings commenced by the Westpoint companies against the Receivers.[20] For that reason, on 7 December 2010, the primary judge made a direction deferring the Receivers' application to disallow the amendments to the statement of claim until Mr Carey's application for inspection of documents had been resolved.[21] It was in that context that the Receivers' application for security for costs was commenced.

48 The Receivers' application for security came before the primary judge for directions on 21 December 2010, along with the various other related matters. Counsel for the Receivers submitted that the application should be adjourned indefinitely because its resolution depended to a significant extent upon the ambit of the claims brought against the Receivers, which in turn depended upon the precise terms of the statement of claim which were in a state of flux because of the suspended disallowance application and the pending application for inspection of documents which, if successful, would likely have a bearing upon the terms of the pleading. Counsel for the Westpoint companies submitted that the application for security should nevertheless proceed and be determined. However, the primary judge acceded to the submissions put on behalf of the Receivers, essentially for the reasons enunciated in those submissions, and directed that the application for security should not be heard until the various steps required to enable the Westpoint companies to plead a statement of claim with some certainty had been resolved.

49 The primary judge ordered that a number of issues raised in Mr Carey's claim for inspection of documents be heard and determined separately. He also ordered that the Receivers' claim of legal professional privilege be referred to another judge for determination. Accordingly, Edelman J heard and determined the privilege argument, and upheld the Receivers' claim for privilege.[22] However, an appeal against that decision was allowed in part by this court on 15 November 2012,[23] and orders giving effect to those reasons were made on 6 February 2013.[24]

50 On 13 June 2013, the primary judge decided that the Receivers' application to disallow the amended statement of claim filed in August 2010 should be heard in August 2013. On 21 June 2013, in the proceedings which Mr Carey had brought, orders were made by consent for the inspection of documents by Mr Carey, and those documents were produced for inspection on 31 July 2013. The Receivers' application to disallow the amended statement of claim was heard on 28 August 2013, and substantively upheld for reasons delivered on 26 September 2013. On 22 October 2013, the Westpoint companies were ordered to file and serve a further reamended statement of claim by 25 November 2013. During the hearing held on 22 October 2013, the Receivers applied for special costs orders in relation to their application to disallow the reamended statement of claim and raised again the question of the provision of security for their costs of defending the proceedings.

51 On 10 December 2013, orders were made requiring the Westpoint companies to file their further reamended statement of claim by 21 January 2014, and during the early part of 2014 orders were made by consent extending that time. In the result, the reamended statement of claim was filed by the Westpoint companies on 3 April 2014. As we have noted, the Receivers' application for security for costs was heard on 21 and 23 May 2014. As we have also noted, questions arose during that hearing as to the impact which a foreshadowed further amendment to the statement of claim might have upon the application for security.

52 Accordingly, as the primary judge correctly noted, after the Receivers filed their application for security on 20 December 2010, no substantive steps were taken in the proceedings in which security was sought until the application to disallow the reamended statement of claim was heard on 28 August 2013. The reasons for that delay are explained by the interplay between the various proceedings to which we have referred. In particular, the ambit of the statement of claim was said to be affected by Mr Carey's inspection of the documents he sought in matter COR 147 of 2010, and the issues in those proceedings were not resolved until June 2013, and inspection was provided on 31 July 2013. The lapse of time between the filing of the Receivers' application and the hearing of the Receivers' application to disallow the reamended statement of claim on 28 August 2013 is entirely explicable because, as the primary judge correctly noted, the proceedings were effectively on hold over that period.

53 Because the ambit of the proceedings brought against the Receivers was obviously relevant to the resolution of the Receivers' application for security for their costs of defending the proceedings, it was appropriate to defer hearing of the application for security until the statement of claim had been finalised. The significance of the ambit of the statement of claim to the proper resolution of the application for security became manifest during the hearing in May 2014, as we have noted. The reamended statement of claim was not in fact filed and served until early April 2014 and further amendments were foreshadowed during the hearing of the application for security. It follows that the lapse of time between the hearing of the Receivers' application to disallow the reamended statement of claim in August 2013, and the hearing of the application for security in May 2014 is also entirely explicable.

54 In these circumstances, the primary judge was correct to conclude that there was no unreasonable or unjustifiable delay which would militate against the exercise of the discretion in favour of ordering the provision of security, essentially for the reasons which he gave. There is no substance in any of the proposed grounds of appeal which contend otherwise.

55 Proposed ground 6 asserts that the primary judge erred by concluding that the merits of the Westpoint companies' allegations with respect to misconduct by the Receivers were matters to be determined at trial rather than in the course of the Receivers' application for the provision of security for their costs of defending the proceedings.

56 Consistently with established principle and practice, and also with the overarching principles embodied in O 1 r 4A and r 4B of the Rules, it will not ordinarily be appropriate to undertake an assessment of the merits of the substantive proceedings in the course of an application for the provision of security for the costs of those proceedings. However, there will be exceptional cases in which a view of the merits of the substantive proceedings will be relevant to the exercise of the discretion with respect to the provision of security for costs - for example, if the claim is self-evidently implausible or tenuous on its face, or if the defendant has admitted liability either in whole or in part.

57 Reliance was placed on cases falling within the latter category in support of this proposed ground of appeal. That reliance was misplaced. This is not a case in which the Receivers have made any admissions of liability. To the contrary, they filed a defence to an earlier version of the statement of claim in which they denied all liability. Further, in the context of the application for security, the Receivers filed and served an affidavit in which issue was joined with many of the more significant allegations made in an affidavit sworn by Mr Carey and filed on behalf of the Westpoint companies, and in which it was deposed that the Receivers would join issue with all allegations of misconduct but did not propose to respond in detail to the myriad less serious allegations made in Mr Carey's affidavit in the context of the application for security for costs.

58 In the course of oral argument in support of this proposed ground, in answer to a question from the bench, counsel for the Westpoint companies denied that there had been a joinder of issue in relation to the allegations of misconduct.[25] The assertion implicit in that denial is not correct. As we have noted, the Receivers had joined issue with the allegations of misconduct in the defence which they filed, and in the affidavit which they filed in response to Mr Carey's affidavit.

59 The approach taken by the Receivers was entirely appropriate. Having joined issue with the allegations of misconduct, it was not appropriate to undertake a preliminary trial of the merits of the substantive proceedings in the context of an application for security for costs and the primary judge was correct to rule accordingly. The Westpoint companies' submissions to the contrary, and proposed ground 6, are misconceived.

60 Proposed ground 8 asserts that the primary judge erred in concluding that the proceedings brought by the Westpoint companies were not properly characterised as defensive in nature, in the sense that they were brought in order to defend themselves against action taken by the Receivers.[26]

61 The fundamental difficulty with this proposed ground is that the proceedings commenced by the Westpoint companies against the Receivers are quite plainly and self-evidently offensive in character. In the pleading current at the time the application for security for costs was heard, the Westpoint companies made a large number of allegations of misconduct on the part of the Receivers and sought various substantive remedies including orders for the discharge of the securities granted to Perpetual, orders for removal of the Receivers, repayment of amounts allegedly overcharged by the Receivers, damages pursuant to provisions of the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), and an order for compensation pursuant to the Corporations Act 2001 (Cth). Even if the claims were regarded as a claim for an inquiry in the first instance, as counsel for the Westpoint companies contended, the claim is nevertheless appropriately characterised as offensive, rather than defensive.[27]

62 In the course of written and oral argument, the Westpoint companies sought to overcome this fundamental obstacle in the path of proposed ground 8 by relying upon the terms of the orders made by the primary judge in the proceedings commenced by the Receivers in 2009, and to which we have already referred.[28] As we have already noted, in those proceedings the Receivers sought certain directions with respect to various aspects of their receivership. By the time those proceedings came to be heard and determined, the Westpoint companies had commenced the proceedings in which they alleged misconduct on the part of the Receivers, although those proceedings were then at a preliminary stage.

63 Amongst the issues ventilated by the Receivers in those proceedings was an issue with respect to the obligation of the borrowers and guarantors to indemnify the lender in respect of the costs of the receivership. The primary judge concluded that it was appropriate to make a declaration to that effect. In that context, the primary judge observed:

The Receivers also seek a declaration that the Borrowers and Guarantors are liable to indemnify ING against those liabilities. In my view it is appropriate to make that declaration. That declaration concerns only the proper construction of the instrument. I am not of course, deciding that the Borrowers and Guarantors are liable to indemnify ING against the costs of defending COR 223 of 2009 or in relation to costs that are the subject of those proceedings.

In this case whether or not whether the Borrowers and the Guarantors are liable to indemnify ING against any liability to indemnify the Receivers for their costs in defending COR 223 of 2009 and any other proceedings arising out of the receiverships may depend upon facts and circumstances that cannot be resolved in these proceedings. Whether or not the Borrowers and the Guarantors are liable to indemnify ING against any legal fees and other costs and expenses which it incurs in relation to COR 223 of 2009, including indemnifying the Receivers against the costs incurred by them in defending those proceedings, depends upon the findings that might be made in the course of COR 223 of 2009 and the consequential orders made by the court in those proceedings.[29]

64 Another issue raised by the Receivers in those proceedings concerned the question of whether they were obliged to retire, having realised sufficient funds to discharge the debt due under the securities, or whether they were entitled to remain in possession of the assets of the charged companies while the claims made by the Westpoint companies were pending against them, and in respect of which costs were likely to be incurred in defending those proceedings. By parity to the reasoning in the passage set out above, the primary judge concluded that any declarations made on that subject should also be made subject to any findings or orders made in the proceedings brought by the Westpoint companies against the Receivers.

65 Having regard to the inchoate character of the claims against the Receivers for misconduct, the qualifications imposed by the primary judge upon the relief granted in the proceedings brought by the Receivers were entirely appropriate. The proposition that those qualifications somehow convert the character of the allegations of misconduct by the Receivers into allegations which are defensive in character is incomprehensible and nonsensical. Counsel for the Westpoint companies sought to justify that proposition by an assertion that the Receivers could have brought proceedings seeking a broader form of relief in which they sought orders vindicating all of their actions and validating all of the fees which they charged. That may well be so, but the fact is that the Receivers did not bring proceedings of that kind, but brought proceedings of a much more limited character. There is no sense in which the Westpoint companies' claims of misconduct can be said to be defensive to the relief sought by the Receivers in those proceedings.

66 Counsel for the Westpoint companies also sought to justify proposed ground 8 by referring to the entitlement of the lender to recover the costs of the receivership as debts due under the securities. While the existence of that right may be accepted, it is impossible to see any sense in which the lenders' exercise of rights granted by borrowers and guarantors under securities somehow results in allegations of misconduct made against the Receivers, and claims for relief brought against the Receivers, being properly characterised as defensive proceedings.

68 This ground challenges the quantum of the security ordered by the primary judge for two reasons. First, it is said that the amount allowed should not have included a component in respect of the Receivers' costs of the application to disallow the reamended statement of claim, and second, it is said that the amount ordered in respect of the costs likely to be incurred by the Receivers after the close of pleadings was excessive.

69 It should first be observed that, having regard to the very limited circumstances in which this court will review interlocutory decisions, it is most unlikely that leave to appeal would ever be granted for the purpose of reviewing the exercise of discretion with respect to the amount to be provided by way of security for costs. For that reason, this proposed ground can be dealt with very briefly.

70 In relation to the first aspect of the proposed ground, in the absence of delay or some other reason specific to a particular case, there is no reason in logic or principle why allowance should not be made for costs already incurred by a defendant when an order is made for the provision of security for that defendant's costs. To the contrary, failure to make appropriate allowance for those costs would very likely result in the inadequacy of the security provided. In relation to the second aspect of proposed ground 9, the primary judge, as the manager of the case before him and other related proceedings was singularly well equipped to make an assessment of the amount appropriately provided by way of security for the Receivers' costs up to the close of pleadings. Appellate intervention in the exercise of a discretionary assessment of that kind would only be justified if error of the kind enunciated in House v The King[30] was demonstrated. No error of that character has been identified in argument in support of the proposed ground or is evident from the reasons of the primary judge. Assessments of amounts to be provided by way of security for costs are appropriately undertaken at a level of generality and as matters of impression rather than science. While it will always be appropriate to make an assessment of the range of costs likely to be awarded in favour of the party seeking security for those costs, it will seldom be appropriate to descend to the level of detail required for a hypothetical taxation of those costs for the purpose of making such an assessment.

71 In this case, the Receivers had incurred costs of a little over $200,000 at the time the application for security was heard. The primary judge considered that the Westpoint companies should provide security in an amount of $70,000 in respect of those costs. He concluded that a further $80,000 should be provided by way of security for the further costs to be incurred by the Receivers up to the close of pleadings in a context in which there was evidence before him that the Receivers expected to incur further costs of $325,000 up to that point. In the context of the evidence, the amount which the primary judge ordered the Westpoint companies to provide was appropriately conservative and fell manifestly and significantly short of any attempt to provide an amount which would fully indemnify the Receivers. No error has been demonstrated in the approach taken by the primary judge and proposed ground 9 is without substance.

72 For these reasons, the Westpoint companies have failed to establish either that the decision of the primary judge was wrong or attended with sufficient doubt to justify the grant of leave, or that substantial injustice would follow if the decision of the primary judge was not reversed. Ordinarily, both requirements must be satisfied before leave to appeal from an interlocutory decision will be granted. As it has not been suggested that there is any other reason why leave to appeal should be granted in this case, leave should be refused.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2015] WASCA 101 (S)

BETWEEN : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

SILKCHIME PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST -v- PERPETUAL NOMINEES LTD [No 2] [2014] WASC 217

Costs - Application for special costs order - Whether order for costs should be made against a third party - Applicants insolvent - Third party was the effective litigant

Costs - Application for special costs order - Whether costs should be awarded on an indemnity basis - Applicants persisted in hopeless case

The applicants and Mr Norman Phillip Carey jointly and severally pay the first respondents' costs of the application for leave to appeal and of the appeal, and all reserved costs, on an indemnity basis, to be taxed if not agreed.

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195

Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Korda [2015] WASCA 101

Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Perpetual Nominees Ltd [2013] WASC 352 (S)

Knight v FP Special Assets Ltd (1992) 174 CLR 178

Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516

Owston Nominees [No 2] Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 (S)

Quancorp Pty Ltd v McDonald [1999] WASCA 101

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Yara Australia Pty Ltd v Oswal [2012] WASCA 264

1 On 27 May 2015 we published our reasons for concluding that the application for leave to appeal from the decision of the primary judge ordering the applicants to provide $150,000 by way of security for the receivers' costs of defending the substantive proceedings should be dismissed.[31] Orders were then pronounced dismissing the application for leave to appeal and the appeal itself.

2 Counsel for the receivers (who are the first respondents in the appeal) moved for orders that the applicants and Mr Norman Phillip Carey (who is not a party to the appeal or the substantive proceedings) pay the receivers' costs of the application for leave to appeal on an indemnity basis, such costs to be taxed if not agreed. Counsel appearing on behalf of the applicants advised the court that he no instructions to appear on behalf of Mr Carey, and that therefore the application for an order against Mr Carey would have to be adjourned in order that he could be served with the application and engage separate legal representation. That advice was provided to the court notwithstanding that:

(a) Mr Carey has already been ordered to pay the receivers' costs of an interlocutory application in the substantive proceedings;[32]

(b) Mr Carey is the person from whom counsel for the applicants receives all his instructions;[33]

(c) shortly after the application for leave to appeal was brought, the solicitors for the receivers wrote to the solicitors for the applicants and to the solicitors who had previously represented Mr Carey in relation to costs matters advising that an order for costs would be sought against Mr Carey if the appeal was unsuccessful.

3 The court proceeded to hear oral argument on the topic of whether the receivers should be awarded their costs on an indemnity basis. However, because Mr Carey was not represented, it was necessary to make programming orders for the service of documents relating to the receivers' application upon him, and for the exchange of written submissions in relation to that application. Orders were made programming that part of the receivers' application for costs toward a further hearing, but in the event, solicitors engaged by Mr Carey advised the court that he did not seek the opportunity to present oral argument at the time they filed and served written submissions on his behalf. Accordingly, the costs issues relating to Mr Carey are being resolved on the papers.

4 There are two issues which must be resolved. They are:

(a) should an order for costs be made against Mr Carey; and

(b) should the receivers be awarded their costs on an indemnity basis?

Should an order for costs be made against Mr Carey?

5 In the written submissions filed on Mr Carey's behalf, Mr Carey agrees to an order for costs being made against him, but does not agree to the order being made on an indemnity basis. Notwithstanding that concession, the submissions go on to present argument in apparent opposition to the award of costs against a person other than a party to the proceedings, ostensibly for the purpose of providing context for the argument relating to the question of whether costs should be awarded on an indemnity basis.

6 Assuming that the portion of the written submissions to which we have referred should not be taken as withdrawing the concession made earlier in the submissions, the concession is properly made. When ordering Mr Carey to pay the receivers' costs of another interlocutory application in the substantive proceedings, the primary judge found that the corporate plaintiffs (who are the applicants for leave to appeal in these proceedings) were insolvent, and would have no capacity to pay any costs ordered against them in those proceedings if they were unsuccessful. That finding has not been challenged.

It is common ground that Mr Carey caused the plaintiffs to bring this proceeding and is the person instructing the plaintiffs' solicitors to continue this proceeding. The plaintiffs' solicitors are acting on the instructions of Mr Carey ...

Mr Carey is the person who stands behind the plaintiffs and for whose benefit, as a shareholder, these proceedings have been brought and are being maintained ...

The plaintiff companies are insolvent. Mr Carey is the effective litigant conducting the litigation by the plaintiff companies. He stands to benefit if the plaintiff companies are successful in the proceeding. Those are circumstances which justify ordering Mr Carey to pay the Receivers' costs personally.

8 No appeal was brought from that decision. There is no evidence to suggest that the circumstances which prevailed at the time of that decision have changed in any way. To the contrary, the evidence before this court is to the effect that the material circumstances have not altered in any way.[35]

9 Further, as we have already noted, the evidence establishes that shortly after the application for leave to appeal was lodged, the solicitors for the receivers wrote to the solicitors for the applicants and to the legal practitioner who had previously represented Mr Carey in relation to costs matters advising that an order for costs would be sought against Mr Carey in the event that the appeal failed.

10 These circumstances entirely justify an order that Mr Carey pay the receivers' costs of the unsuccessful application for leave to appeal.[36]

Should costs be awarded on an indemnity basis?

11 The receivers submit that they should be awarded their costs on an indemnity basis because the application for leave to appeal was brought and continued in circumstances in which the applicants, properly advised, should have known that they had no chance of success or, put another way, persisted in what should have been seen, on a proper consideration, to be a hopeless case. There is ample authority to support the award of indemnity costs on this basis.[37]

12 The written submissions filed on behalf of Mr Carey do not contest that proposition. However, on his behalf it is submitted that a party should not be discouraged by the prospect of an unusual costs order from persisting in an action where success of the action is not certain, given that uncertainty is inherent in many areas of the law, and it is further submitted that a case should not be too readily characterised as 'hopeless'.[38] Further, it is submitted that a different approach ought to be taken to a non-party in the light of the legal advice which Mr Carey received and to which he deposes in an affidavit filed in opposition to the application.

13 The written submissions filed and served by the receivers succinctly and accurately characterise our earlier decision in these terms:[39]

[T]he application for leave to appeal was doomed from the outset because there was no ground for contending that the appellants would suffer substantial injustice if the decision of the primary court were not reversed ...

...

(a) ground 1 served no point or purpose and should not have been included;

(b) the factual premise upon which ground 2 was based was false and it was entirely without substance;

(c) there was no substance in any of proposed grounds 3, 4, 5 or 7 of the appeal;

(d) proposed ground 6 was misconceived;

(e) proposed ground 8 ... was based upon submissions that were incomprehensible and nonsensical ... Otherwise, the proposed ground was misconceived;

(f) no error of the character required by House v The King[40] was identified in argument in support of the proposed ground 9...

14 It should be clear from our reasons that this is one of those cases in which the applicants and Mr Carey, properly advised, should have known that they had no chance of succeeding either in obtaining the grant of leave to appeal or in succeeding upon the appeal if leave was granted.

15 This is not a case in which either the facts or the applicable principles of law were uncertain in any respect. Nor is this a case in which characterisation of the application for leave to appeal as hopeless and inevitably doomed to failure could be described as unduly harsh or improperly influenced by hindsight.

16 As we have mentioned, Mr Carey has sworn an affidavit in opposition to the application made against him. In that affidavit, Mr Carey deposes that the appeal was instituted and prosecuted by the applicants on the basis that their lawyer, Mr Metaxas, had advised him that the appeal had merit. He further deposes that Mr Metaxas advised him, 'in a robust manner, words to the following effect: "You have to appeal, otherwise you are giving them a blank cheque"'. Mr Carey deposes that as a consequence of those words being spoken he 'considered the decision to institute the appeal to be beyond question'.

17 There are two reasons why this evidence provides no answer to the application for costs against Mr Carey. First, the assessment of whether costs should be awarded on an indemnity basis because the proceedings had no prospect of success is undertaken on an objective basis by reference to an assumption that proper legal advice had been given in relation to the proceedings. The actual legal advice given is irrelevant. Were it otherwise, difficult questions would arise with respect to the waiver of legal professional privilege and in relation to possible conflicts of interest between the lawyer providing the advice and the client. Further, it would be wrong in principle for liability for indemnity costs to depend upon the competence or otherwise of the legal advisors engaged.

18 Second and in any event, it appears from Mr Carey's affidavit that the advice which he received from Mr Metaxas was given in the most general of terms, and appears to have been based more upon the consequences of failure rather than the merits of the appeal itself. If Mr Carey received more detailed or considered advice prior to instructing the commencement of the application for leave to appeal, he does not depose to it. The commencement of appellate proceedings on the basis of such general and non-specific advice can only be characterised as rash and foolhardy.

19 In this case, Mr Carey is the controlling mind of the applicants. He is the person who stands to benefit from the litigation which he is causing them to conduct. There is no reason to distinguish between Mr Carey and the applicants in relation to the basis upon which the receivers' costs are to be ordered, and every reason why both he and the applicants should be ordered to pay the receivers' costs on an indemnity basis.

20 For these reasons there should be an order that the applicants and Mr Norman Phillip Carey jointly and severally do pay the first respondents' costs of the application for leave to appeal and of the appeal, including the application for security for costs of the appeal, the application to rely on the affidavit of Ms Stephanie Alexandra Puris sworn 8 September 2014, and all reserved costs, including the costs of the argument with respect to the costs of the application, such costs to include all costs incurred except insofar as they are unreasonable in amount or have been unreasonably incurred so that, subject to those exceptions, the first respondents will be completely indemnified by the applicants and Mr Carey for their costs, such costs to be taxed in default of agreement.

[1] Silbert v Steinberg [2010] WASCA 113 (Newnes JA and Mazza J agreeing).

[3] Huntingdale Village Pty Ltd (Receivers and Managers Appointed) ATF Huntingdale Village Unit Trust v Perpetual Nominees Ltd [No 2] [2014] WASC 217 [28].

[18] Those proceedings were matter COR 173 of 2009.

[22] Carey v Korda & Winterbottom [No 2] [2011] WASC 220.

[24] Carey v Korda [2012] WASCA 228 (S).

[26] Relying upon Willey v Synan [1935] HCA 76; (1935) 54 CLR 175, 185, 187.

[27] See Oswal v Carson [2012] FCA 341 [36] - [37].

[28] Korda and Winterbottom v Silkchime Pty Ltd [2010] WASC 155.

[30] House v The King [1936] HCA 40; (1936) 55 CLR 499.

[31] Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Korda [2015] WASCA 101.

[32] Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Perpetual Nominees Ltd [2013] WASC 352 (S).

[34] Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Perpetual Nominees Ltd [21] - [23].

[35] Affidavit of Stephanie Alexandra Puris sworn 27 May 2015.

[36] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 192 - 193; Owston Nominees [No 2] Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 (S) [29]; Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516 [37] - [42].

[37] Yara Australia Pty Ltd v Oswal [2012] WASCA 264; Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195; Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).

[38] Relying on Quancorp Pty Ltd v McDonald [1999] WASCA 101 [7].

[39] Receivers' written submissions [16] - [17].

[40] House v The King [1936] HCA 40; (1936) 55 CLR 499.

Securities and Investments Commission Act 2001

HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2015] WASCA 101 (27 May 2015)

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HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2015] WASCA 101 (15 September 2015)

Legislation Cited (3)

Cases Cited (9)