(6) In consequence, Macquarie should indemnify NCRA for all costs incurred by NCRA in relation to the litigation, except its costs of the "independent" claims against Guy Carpenter and the directors and officers.
175 Mr Coles QC, who appeared with Mr Cook of counsel for NCRA in relation to costs, submitted that the categories in which the Court might order indemnity costs were not closed. If the reference to "categories" is intended to be a reference to the classes of case that Sheppard J distilled from the authorities in Colgate Palmolive (see [25] above), the submission is correct. The discretion to award costs on some basis other than the party and party basis is not confined to specific categories of case; it is a discretion to be exercised judicially if the justice of the case so requires. Mr Coles relied on the decision of the English Court of Appeal in Andrews v Barnes (1888) 39 Ch D 133 at 141. That decision turned specifically on the practice and powers of the Court of Chancery, and their Lordships expressed no view on the position at law.
176 Mr Coles submitted that, when someone who claimed to be a creditor of a company in liquidation chose to sue the company rather than to prove in the winding up, the justice of the case required the claimant to indemnify the company for the costs thereby incurred, so that other creditors of the company would not suffer by depletion of its assets. Alternatively, he submitted, there was in those circumstances "some special or unusual feature… to justify the Court in departing from the ordinary practice": Preston v Preston [1982] 1 All E R 41 at 581 (Brandon LJ, with whom Ormrod LJ and on this point Hollings J agreed).
Macquarie's submissions
177 Macquarie submitted that there was no general principle that a company in liquidation is, simply by reason of that fact, entitled to an order for indemnity costs where a claim against it is pressed through litigation rather than by proof of debt. Macquarie referred to a number of cases in which companies in liquidation had sought and been awarded costs, and in which no general rule of the kind for which NCRA contended had been enunciated. Macquarie submitted further that there was no relevant delinquency on its part.
The joinder application
178 The parties referred in some detail to the circumstances in which NCRA had been joined, and to the judgment of Bergin J on the joinder application (Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSWSC 406).
179 As Bergin J noted at [6], the principal debate before her was whether there were any good reason shown for departing from the usual procedure, namely proof of debt (referring to the decision of McPherson J in Ogilvie Grant v East (1983) 7 ACLR 669 at 672). The good reason upon which Macquarie relied was that, following the grant of leave to the plaintiffs to amend their case in the form that was expounded by the fifth further amended summons (see my judgment in Ingot Capital Investment & Ors v Macquarie Equity Capital Markets and Ors [2003] NSW SC 1012), there was a proper basis for Macquarie to make what became the 30th cross-claim against NCRA.
180 Macquarie first of all asked NCRA's liquidator to admit that NCRA was liable to Macquarie for the full amount of any liability that Macquarie might be held to owe the plaintiffs, together with costs. The liquidator declined. Macquarie sought in the alternative that the liquidator agree that NCRA would be bound by findings of fact and law to be made in what I might call the main proceedings and in any appeal therefrom, for the purposes of any proof of debt that Macquarie might lodge. Again, the liquidator did not agree. (See the reasons of Bergin J at [10].)
181 It is apparent that Bergin J took into account the likely heavy costs that would be incurred if NCRA were joined (see her Honour's reasons at [14] and following). Her Honour considered the alternative that might arise where the liquidator had declined to agree that NCRA would be bound by all findings made: namely, that there might be re-litigation with the usual complications of increased costs and the risk of inconsistent findings. The liquidator had apparently indicated that he "would pay close regard to the judgment and reasons for judgment" in considering any proof of debt that Macquarie might lodge. Her Honour regarded this as inadequate, because "[t]he permutations and combinations of findings possible in this case… on the pleadings, both in the main pleadings and in the 28 [to that date] cross-claims, are such that paying close regard to the findings… may not mean anything else than [that] the liquidator might grant some portion of the claims in the proofs of debt, all of them or none of them" (see her Honour's reasons at [24]).
182 Bergin J granted leave to proceed on terms (at [29]). One of those terms was the usual one, that any judgment recovered on the cross-claim would not be enforced without the further leave of the Court. Another condition was "that the Macquarie parties will use their best endeavours to ensure that case management of the cross-claim against NCRA and NCRA's involvement at any trial are proceeded with so as to minimise the costs that will be incurred by NCRA." NCRA did not suggest that Macquarie had breached this second condition.
183 It is apparent from the transcript of the hearing before Bergin J that Mr Coles (who then appeared, as he appeared before me, for NCRA) sought, as a condition of the grant of leave, "orders that protected the NCRA's estate from the deprivation [sic] that costs would occasion. We would be suggesting… there be somebody identified who must be responsible for the payment of the liquidator's costs. That must be the party at whose instance the company is joined" (T29.30 - 45). Mr Jackman SC, who then appeared for Macquarie, submitted that no such condition should be imposed as a condition of the grant of leave, and that the question should be reserved to the trial court (T32.40-55). He referred, although not by name, to the decision of the Full Court of the Federal Court of Australia in Vagrand Pty Limited (In Liquidation) v Fielding (1993) 41 FCR 550 at 557 (a case in which Mr Coles appeared for the appellant and advanced before the Full Court the argument that some years later he advanced to Bergin J). The Full Court referred to this question at 557, summarising Mr Coles' submission as being that the court below "should have imposed upon the applicants for leave a condition that they undertake to pay the liquidator's costs of the principle proceedings, regardless of its outcome". Their Honours said that "[t]his proposition has only to be stated to be rejected." In substance, their Honours' reasoning was that where there was a demonstrated case for the grant of leave to proceed, the imposition in advance of a condition as to payment of costs regardless of the outcome might result in "the court closing its door to the applicants" because of fear of the costs burden.
184 Nonetheless, as is apparent, NCRA's position is not foreclosed by the decision of Bergin J; and Macquarie recognised as much in its submissions to Bergin J.
Analysis and decision
185 The underlying premise of NCRA's position in the dispute with which I am now concerned was that Macquarie had chosen to depart from the usual procedure - proof of debt - and should therefore carry the consequences - including payment of all of NCRA's costs save its costs of the "independent claims (see [174(6)] above). The submission overlooks the proposition that, as Bergin J said, Macquarie needed to show good reason for departing from the usual procedure, and that, in her Honour's view, it had discharged that burden.
186 The liquidator could have accepted that NCRA would be bound by findings of fact and law to be made in the main proceedings (including, of course, in any appeal in those main proceedings). He chose not to do so. It follows that, whilst no doubt the liquidator was sincere in saying that he would pay close regard to the Court's findings, he was reserving as a real possibility that he would not regard NCRA as bound by them (as, in law, it would not be bound if it were not a party) if it suited him, or NCRA, so to act.
187 It should be noted that NCRA did not seem to submit before Bergin J, and certainly did not submit before me, that the case that Macquarie sought to advance (being the case that was ultimately expounded in the 30th cross-claim) was untenable, or so frail that Macquarie's desire to pursue it was unreasonable. The submission instead was that it was unreasonable for Macquarie to proceed by seeking leave to join NCRA rather than by waiting until the end of the proceedings and, if necessary, utilising the statutory mechanism of proof of debt.
188 It is apparent from the reasoning of Bergin J that she did not regard it as unreasonable of Macquarie to proceed in the way that it sought to do. I respectfully agree. The question of reasonableness is to be judged at the time that the application for leave was made, not now; and at the time the application was made, the liquidator's attitude made it plain that there was a real risk of re-litigation of any conclusions of fact and law with which the liquidator might wish to disagree.
189 This deals with the primary submission of NCRA: that, Macquarie having chosen to proceed by joining it rather than utilising the mechanism of proof of debt, "the justice of the case" requires Macquarie to indemnify NCRA for all of its costs incurred. That being so, the remaining ground for ordering indemnity costs is the search for some relevant misconduct or delinquency. It is sufficient to say that, to the extent that this second level test was pressed, there is no basis for finding any relevant misconduct or delinquency.
190 It follows, as to the 30th cross-claim, that the costs orders should reflect the plaintiffs' concessions (including as to the payment of costs on the indemnity basis from, in the case of Macquarie, 6 July 2003); but that NCRA's rights against Macquarie should be reserved in the event that the plaintiffs do not pay NCRA's costs of the 30th cross-claim.
191 Because I have concluded that Macquarie should not indemnify NCRA for all NCRA's costs incurred as cross-defendant or cross-claimant in respect of any cross-claim, it is unnecessary to consider Macquarie's further submission recorded at [12] above.