Huntley Management Limited (ACN 089 240 513) v Australian Olives Limited

HISTORY OF PROCEEDINGS 1 These proceedings were filed by the Applicants on 18 March 2009. The nature and content of the proceedings was summarised in Huntley Management Limited (ACN 089 240 513) v Australian Olives Limited (ACN 078 885 042) [2009] FCA 1081.

PRESENT APPLICATION AND CONCLUSION 2 The Respondents seek an order that their costs thrown away by reason of the vacation of the four week preliminary trial which was listed to commence on 31 May 2010 (the Preliminary Trial) be paid by the Applicants. The Applicants oppose such an order and submit that the costs be reserved or be costs in the cause. 3 For the reasons that follow, I consider the Applicants should pay the Respondents' costs incurred in the period from 3 December 2009 to 23 April 2010, thrown away by reason of the vacation of the Preliminary Trial.

ANALYSIS 4 Unsurprisingly, the Applicants concede that "from as early as correspondence dated 21 September 2009, and from the directions hearing on 2 October 2009, there was a realisation [by the Applicants] that there would be commercial utility in having some issues determined before others". For the period, the Applicants "advocated" for a split trial and not a trial on all issues. 5 From September 2009 until 23 April 2010, that course was not only attractive to, but was pursued by the Applicants, because the question of the reliance on the allegedly misleading prospectus by each Applicant who invested in the project (the Investor Applicants) was at that time to be inferred from the fact that each signed a form that was at the back of the prospectus. The Court was informed of that decision at a directions hearing on 3 December 2009. According to the Applicants, adoption of that course had certain consequences. First, there would be no need to call the Investor Applicants, as it was unlikely that the signatures on those forms would be disputed. In fact, as a result of earlier Orders, the execution of most of the forms by the investors had been admitted by the First Respondent, Australian Olives Limited (AOL). The second consequence was that, subject to an assessment of damages, a favourable result on those claims (described as the "prospectus claim") would resolve the whole of the Applicants' case without the Court needing to deal with what were described as the "non-prospectus claims". Why? Because each Applicants' prospectus claim was put on a "no transaction" basis - the Applicants' position was that the prospectus was misleading and, but for the misrepresentation, they would not have entered into the transaction to purchase a grove interest or interests. 6 At the same directions hearing on 3 December 2009, AOL's Counsel said that it was "not resistant to the idea of splitting the case ... on the basis that there might be matters that don't need to be dealt with if certain issues are decided in a particular way ... [provided] that the dividing line has been put in the right place". Where the "right place" was could not be resolved at that directions hearing and was to be the subject of discussion between Counsel. Counsel for the Second to Seventh Respondents (the Director Respondents) stated he had nothing to add to that of AOL's Counsel. 7 At the next directions hearing, on 18 December 2009, the matters proceeded by reference to two documents filed by the Applicants on 17 December 2009 - "Applicants' Outline of Proposed Evidence on Reliance" (the Reliance Document) and "Time Frame for 'Prospectus' and breach of contract and duty claims and other considerations relevant to their separate determination". The position adopted by the Applicants was that three categories of issues (described as Participation, Prospectus Claims and Breach of Contract and Duty Claims) except for issues of loss and damage would be determined at the Preliminary Trial but that the "factual enquiry relevant to the determination of the breaches of contract and duty claims [would] not travel beyond that raised by the prospectus claims". The Court was also advised that the "right place" would be a "line in the sand time wise" and that the time would be the date that the prospectus was issued, April 2003, or alternatively June 2003 when the offer the subject of the prospectus closed. As Counsel for the Director Respondents noted, the Applicants' submission at that time was that any allegations based on facts and matters that arose "after the allocation to the [I]nvestor [A]pplicants of their grove interests" would be hived off. 8 On 18 December 2009, interlocutory Orders were made for the Preliminary Trial which was to be limited to the evidence identified by the Applicants in the Reliance Document and which involved all Applicants. The Applicants were directed to file and serve their evidence to be relied upon at that trial by 26 February 2010. 9 At the next directions hearing on 18 February 2010, it was acknowledged by the Applicants' Counsel then engaged that it was "understood" that the Applicants' proposal for a split trial was not intended to include an assessment of damages. The Applicants' Counsel stated that the Applicants were on track in relation to the filing of their lay evidence. 10 What then happened has been described in various and colourful ways. Leaving the rhetoric to one side, the Applicants simply changed their team of Counsel. The Applicants did not file their lay evidence by 26 February 2010 and, contrary to directions made concerning experts, the Applicants sent letters of instruction to experts. The lay evidence was filed and served on 2 and 30 March 2010. 11 On 16 March 2010, the Applicants' solicitors informed the Court in correspondence "I confirm that Mr John Dixon SC and Mr Albert Dinelli have now been retained as [C]ounsel for the Applicants. … Mr Dixon has asked that I ascertain her Honour's availability next week, with a view to having a directions hearing at which Mr Dixon can explain the current position from the Applicants' perspective …". Those directions were held on 22 March 2010. 12 At that hearing, the Applicants' new Counsel stated "I'm not going to pretend that I'm fully on top of all of the issues". He also submitted that "[t]he position in relation to the Applicants' preparation for trial is that, as a result of this process, we've fallen behind". The Applicants' Counsel then sought to contend that his clients' delay had been caused by issues raised by the Respondents' amended defences in respect of the pleas of contributory negligence and concurrent responsibility. The amended defences did raise these issues. However, until that point in time, it had been common ground that there would be utility in having some issues determined before others in the manner proposed. 13 Having failed in establishing that the delay was caused by the Respondents, the Applicants' Counsel then foreshadowed that they were revisiting the issue of the way in which reliance was going to be proved by the Applicants. The Court provided the Applicants with a few days to formalise their position. 14 In short, the Applicants' new Counsel disagreed with the way the case had been conducted in the past by the Applicants and informed the Respondents and the Court that it intended to alter the way in which they intended to prove their case. The Applicants are entitled to retain Counsel of their choice. They have done so. The question is where the costs thrown away by that decision to change course should lie and whether the costs should be paid forthwith. 15 The Applicants' abandonment of the inferred reliance position was formalised at the next directions hearing, held on 26 March 2010. The Applicants' new Counsel informed the Court that evidence would need to be called by the individual Investor Applicants to prove their actual reliance. Various categories of Investor Applicants were identified. A sampling was suggested by the Applicants' Counsel - an alternative form of Preliminary Trial. That "new proposal" was rejected by the Court. There was no common question or questions. The "new proposal" was contrary to the way in which the Applicants' had filed their lay evidence at that date and contrary to their pleadings. In fact, the "new proposal" suggested that at least some of the Investor Applicants may have relied on matters beyond the prospectus when they invested. 16 The Court invited the parties to consider calling evidence from what was identified as "Group 2" Investor Applicants, (namely "first-time investors without advice") at the Preliminary Trial on the basis that if that course was adopted it would allow the determination of sufficient common issues to still justify the Preliminary Trial. That position was suggested, in part at least, because it did not suffer from the complications associated with other Investor Applicants who were either not first-time investors or had received advice beyond that in the prospectus at the time of investing. At that time, the Applicants' Counsel identified 11 Investor Applicants within the class of Group 2 Investor Applicants. 17 Ultimately, that proposal also failed for a number of reasons. First, the Applicants initially said that of the 11 Group 2 Investor Applicants identified at the directions hearing, only four were in fact members of such a class. However, after the evidence was received from the Group 2 Investor Applicants, that evidence revealed that at least three of the four investors appeared to refer to representational conduct beyond the terms of the prospectus. Secondly, the position became further complicated by the content of the written submissions filed by the Applicants on 20 April 2010. Those submissions stated that all issues of causation associated with each Group 2 Investor Applicants' claim needed to be determined at the Preliminary Trial. 18 At the last relevant directions hearing, held on 23 April 2010, the position adopted by the Applicants about the scope of the Preliminary Trial was one which was totally at odds with that advanced and accepted by the Court and the Respondents on 18 December 2009. As a result, I informed the Applicants that they had a choice - either run the Preliminary Trial on the basis that the Court had understood it was to be run since December 2009 or abandon the Preliminary Trial because they accepted that the Respondents would not be ready for a trial on any other issues. The Applicants abandoned the Preliminary Trial and requested a trial on all issues. 19 As noted above, the Respondents submit that the vacation of the Preliminary Trial was directly attributable to the Applicants' decision to depart from the Reliance Document and seek to adduce direct evidence of reliance and, accordingly, the Applicants should pay the Respondents' costs thrown away because of this change of position. AOL also submitted that given the nature of the lay evidence now filed by the Applicants, the suggestion of a Preliminary Trial on the basis agitated for by the Applicants' original Counsel in December 2009 was either a device to avoid the need to call actual Investor Applicants or because insufficient instructions had been taken from each Investor Applicant, at that time, to confirm the actual basis upon which those Applicants chose to make their investment. In my view, it is not necessary to resolve either of those contentions. 20 In the circumstances, I consider that it is appropriate that the Applicants pay the Respondents' costs thrown away as a result of the Applicants abandoning the Preliminary Trial just a little over a month before it was set to commence. As a result of the Applicants' conduct, AOL submits that the matters the subject of and incidental to each of the directions hearings that occurred during that period and compliance with those directions have been predominantly, if not totally, wasted including meetings between Counsel, correspondence between solicitors, written submissions prepared for and the drafting and consideration of the iterations of the forms of orders required to facilitate the proposed Preliminary Trial. In addition, AOL submits that it will need to revisit pleadings, discovery, inspection of documents and witnesses to prepare for a trial on all issues. Whether those costs have been thrown away is ultimately a matter for the taxing Registrar, in default of agreement.

COSTS FORTHWITH 21 The final issue to be resolved concerns an application by the Director Respondents for the costs thrown away to be paid forthwith: see O 62 r 3(2) of the Federal Court Rules. The applicable principles are well established: see Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545; McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [13] - [20]. 22 I do not consider that such an Order should be made. As the Applicants submitted, there may well be factual questions about whether costs have in fact been thrown away that can only be determined after, for example, further preparation. Moreover, the task of identifying or listing today those particular steps (and the cost of them) in fact thrown away by reason of the change of course would, in my view, be an additional cost which is likely to be disproportionate to the actual costs thrown away. 23 Accordingly, I would order the Applicants to pay the Respondents' costs thrown away by reason of vacation of the Preliminary Trial, such costs to be taxed in default of agreement. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.