JAB Nominees (Aust) Pty Ltd v Auswild [2020] VSC 731

299 The evidence of the expert called by the Plaintiff Companies (Ms Paver) was, in summary, that a gross sum costs order would likely take longer and cost more than the costs of a taxation.

300 In summary, their evidence as to time and cost was as follows:

Average time/cost of taxation of Company Defendants' costs

Average time/cost of gross sum assessment of Company Defendants' costs

Average time/cost of gross sum assessment of JRA's costs

301 In my opinion, the resolution of costs in this matter requires that the matter be assessed by the Costs Court because of the complexities arising from the following:

(a) The Plaintiff Companies may wish to contend that a substantial part of the defendants' costs in the Company Proceeding should be apportioned to the JFJ Shareholders, as the plaintiffs in the Shareholders Proceeding.

(b) As a result of the orders to be made in the third party proceedings, James Bergmuller, JAB Nominees, Peter Parker and/or Martina Parker may be entitled to be separately represented as to their interests with respect to the quantum of costs to be ordered against the Plaintiff Companies and the allocation of costs between the proceedings.

(c) The costs orders in the Shareholders Proceeding require separate consideration of the following costs:

(i) Costs payable to the defendants consequent on the discontinuance of the plaintiffs' claims in the Shareholders Proceeding with:

1. the first plaintiff being liable for the costs of the discontinued claim; and

2. the second to fourth plaintiffs being liable for costs of the discontinued claim up to 20 April 2020.

(ii) Costs payable by the defendants by counterclaim to the plaintiffs by counterclaim.

(iii) Cost payable by the third parties to the defendants on the third party claim.

(iv) Costs incurred with respect to the (yet to be determined) claim of the first plaintiff in the statement of claim filed 9 June 2020, as amended by the amended statement of claim filed 15 June 2020.

(d) The costs orders in the Company Proceeding require separate consideration of the costs of and incidental to the first defendant's and second to tenth defendants' respective applications for special costs orders, which I propose to order be paid by those defendants.

302 I am not satisfied that the 'broad brush' approach,[115] which is applied in assessing costs on a gross sum basis, could properly and fairly accommodate:

(a) the allocation of costs between the proceedings; and

(b) the need to ensure procedural fairness is afforded to all persons with separate and distinct interests in the outcome of the assessments.

303 In the Company Proceeding I propose to order that:

(a) the first defendant pay the plaintiffs' costs of and incidental to his claims in the notice of costs orders filed 18 October 2019, as amended by the further amended notice of costs orders dated 22 June 2020;

(b) the second to tenth defendants pay the plaintiffs' costs of and incidental to their claims in the amended notice of orders to be sought filed 25 October 2019; and otherwise

(c) the plaintiffs pay the second to tenth defendants' costs of and incidental to the proceeding up to and including the entry of judgment on 30 October 2019.

304 In the Shareholders Proceeding, I propose to order that:

(a) the third parties reimburse the plaintiffs in the Company Proceeding for the costs and disbursements incurred in the Company Proceeding up to and including the entry of judgment on 30 October 2019, together with the costs payable to the first defendant,[116] and the costs payable to the second to tenth defendants in the Company Proceeding (being the costs referred to in paragraph 303(c) above);

(b) the third parties pay the defendants' costs of and incidental to the third party proceedings;

(d) the plaintiffs by counterclaim pay the defendants by counterclaim's costs of and incidental to the counterclaim.

305 All of the above costs orders include reserved costs and are to be assessed on a standard basis.

306 It is confirmed that the claim of the first plaintiff in the amended statement of claim filed 15 June 2020 in the Shareholders Proceeding is adjourned to 26 March 2021.

307 I will hear the parties on the final form of orders.

[1] In the amended statement of claim filed 15 November 2017, the JFJ Shareholders did not seek the relief referred to in subparagraph (c).

[2] On occasions the initials 'JFA' were adopted by the parties to refer to the JFJ Family. To avoid confusion I have changed all such references to 'JFJ'.

[3] See Company Proceeding Reasons [176]-[212].

[4] [2006] NSWSC 126. This claim was ultimately not pressed.

[5] With respect to the second to fourth plaintiffs, the costs were up to 20 April 2020 with the basis for the taxation of costs in relation to all plaintiffs to be determined at the trial commencing 15 June 2020.

[6] Company Proceeding Reasons [477]. Project Statesman was the negotiation for the separation of the Auswild and Webb interests in Rossfield: at [397], [432].

[7] Project Fluffy was the code name adopted by the JFJ Family for the investigation into the disputes that later became the subject of both proceedings. For an explanation about Project Fluffy, see Company Proceeding Reasons, in particular [371]-[372].

1. [8] Midlands Finance Co was a vehicle employed by the PMG for the purpose of distributing profits and lending back for investment purposes as part of what was known as the Auswild Accounting Practice. See Company Proceeding Reasons [180]-[186].

[10] Finance & Guarantee Company Pty Ltd v Auswild (No 2) [2016] VSC 559. For the previous application see Finance & Guarantee Company Pty Ltd v Auswild [2015] VSC 361.

[11] Finance & Guarantee Company Pty Ltd v Auswild (No 2) [2016] VSC 559.

[16] The claims by the JFJ Shareholders having being discontinued or resolved (see paragraphs 16(m) to (o) above), I am now only required to determine issues relating to the counterclaim and third party notice.

[17] (1992) 174 CLR 178 ('Knight').

[18] Breen v Williams (1996) 186 CLR 71, 107 (Gaudron and McHugh JJ).

[19] [2015] VSCA 9; (2015) 318 ALR 302, 317 [58] (emphasis added).

[20] RP Austin and IM Ramsay, LexisNexis Australia, Ford, Austin & Ramsay's Principles of Corporations Law (online at July 2020) [9.010].

[21] [1966] UKHL 2; [1967] 2 AC 46, 124.

[22] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 104, quoting Phelan v Middle States Oil Corporation, [1955] USCA2 324; 220 F 2d 593, 602-3 (2nd Cir, 1955). See also Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 199 [79] (McHugh, Gummow, Hayne and Callinan JJ).

[23] [1995] HCA 18; (1995) 182 CLR 544, 557-8 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ). See also Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, 397 (Gibbs J).

[24] (2008) 39 WAR 1, 560 [4512] ('Bell Group').

[25] Ibid. Adopted in Ying Mui Pty Ltd v Hoh (No 3) [2017] VSC 29; (2017) 349 ALR 296, 362-3 [408] (Vickery J) ('Ying Mui').

[26] (2008) 39 WAR 1, 558 [4504] (citations omitted) (emphasis added).

[27] See Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557-8 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[28] Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 48 WAR 1, 51 [266] (Edelman J) ('Agricultural Land Management'). Edelman J described as 'pertinent' the fact that Owen J prefaced his statement (quoted at paragraph 129 above) with the words 'generally speaking': at 51 [265].

[29] Ibid 51-2 [266]-[268] (emphasis in original). See also the following examples cited in the judgment: Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 42 FCR 390, 392; Maguire & Tansey v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 461; Birtchnell v Equity Trustees, Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408 (Dixon J); Bristol & West Building Society v Mothew [1998] Ch 1, 18-9 (Millett LJ); Buitendag v Ravensthorpe Nickel Operations Pty Ltd [2014] WASCA 29, [55] (McLure P); Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143, [70]-[74], [76] (McLure P).

[30] As to benefiting family members see Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2015] VSCA 9; (2015) 318 ALR 302, 317-8 [61]-[64] (Warren CJ), 333 [134] (Neave JA), 352 [234] (Garde AJA); Ying Mui [2017] VSC 29; (2017) 349 ALR 296, 362 [406] (Vickery J); Company Proceeding Reasons [210].

[31] The defendants' alternative submission was that, if the Company Proceeding did proceed first, the parties to the Shareholders Proceeding should be bound by the factual findings.

[32] Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77, [1]-[2] (Harper J); Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd (2018) 56 VR 557, 578 [50] (Riordan J).

[33] Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279, 296-7 (Dawson J).

[34] Bauer Consumer Media Ltd v Evergreen Television Pty Ltd [1999] FCAFC 1020; (2019) 367 ALR 393, 455-6 [250] (Burley J) citing Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279, 286-7.

[35] Ying Mui [2017] VSC 29; (2017) 349 ALR 296, 359 [398] (Vickery J).

[36] [2018] NSWSC 314; (2018) 354 ALR 711, 750 [129].

[37] [2011] WASCA 17; (2011) 278 ALR 291, 303 [69] ('Streeter'), citing RP Austin and IM Ramsay, Ford's Principles of Corporations Law (LexisNexis Butterworths, 13th ed, 2007) 441-2 [9.060]; Mills v Mills [1938] HCA 4; (1938) 60 CLR 150.

[38] [1938] HCA 4; (1938) 60 CLR 150, 169 (Rich J with whom Evatt J agreed), 164 (Latham CJ), 185 (Dixon J) ('Mills').

[40] RP Austin and IM Ramsay, Ford's Principles of Corporations Law (LexisNexis Butterworths, 13th ed, 2007) 442 [9.060], cited in Streeter [2011] WASCA 17; (2011) 278 ALR 291, 303 [69] (McLure P).

[41] [2016] FCA 675; (2016) 113 ACSR 483, 498 [42]-[43].

[43] Short v Crawley (No 30) [2007] NSWSC 1322, [1004]-[1005] (White J).

[45] See Company Proceeding Reasons [527]-[541].

[47] As defined at paragraph 11(b) above.

[48] See, eg, Company Proceeding Reasons [354]-[355].

[54] Australian Securities and Investments Commission v Vines [2005] NSWSC 738; (2005) 55 ACSR 617, 861 [1077] (Austin J).

[55] Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, 542-3 [4429]-[4430], 578-9 [4599]-[4603].

[56] [2003] HCA 15; (2003) 212 CLR 484, 501-2 [43]-[44], 508 [69] ('Youyang').

[57] Ibid 504 [50], quoting Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] AC 421, 437.

[58] [2003] HCA 15; (2003) 212 CLR 484.

[59] [2014] WASC 102; (2014) 48 WAR 1, 67-9 [350]-[359].

[71] [2018] HCA 43; (2018) 265 CLR 1, 37 [88].

[72] Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 473 (Brennan CJ, Gaudron, McHugh and Gummow JJ), quoted in Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2019] SASCFC 151, [96] (Kourakis CJ, Stanley and Lovell JJ).

[73] GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113, [66] (Warren CJ, with whom Chernov JA and Dodds-Streeton AJA agreed).

[74] Ibid [71], citing Charles Lo Presti Pty Ltd v Karabalios [2000] NSWSC 395, [60], [66] (Austin J); Maguire v Makaronis [1997] HCA 23; (1998) 188 CLR 449, 492-3 (Kirby J) explicating the principle that 'once a breach of fiduciary duty is shown, the inquiry is not a simple one as to what caused subsequent losses', as enunciated by Lord Thankerton in Brickenden v London Loan & Savings Co [1934] UKPC 25; [1934] 3 DLR 465 and Street J in Re Dawson Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211.

1. [75] Houghton v Immer (No 155) Pty Ltd [1997] NSWSC 608; (1997) 44 NSWLR 46, 59 (Handley JA with whom Mason P and Beazley JA agreed), citing LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1990) 24 NSWLR 499, 508 (Hodgson J in Eq). Quoted with approval in Libertarian Investments Ltd v Hall [2013] HKCFA 93; (2013) 16 HKCFAR 681, 725-6 [138] (Ribeiro PJ); Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2019] SASCFC 151, [99]-[101] (Kourakis CJ, Stanley and Lovell JJ); Pitcher Partners Consulting Pty Ltd v Neville's Bus Service Pty Ltd (2019) 271 FCR 392, 419-20 [124] (Allsop CJ, Yates and O'Bryan JJ). Discussed in Berry v CCL Secure Pty Ltd (2020) 381 ALR 427, 441-2 [34] (Bell, Keane and Nettle JJ), 455 [74] (Gageler and Edelman JJ). See also Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388, 415-6 [74] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ).

[76] Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2019] SASCFC 151, [99], citing JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) [23275]; Houghton v Immer (No 155) Pty Ltd [1997] NSWSC 608; (1997) 44 NSWLR 46, 59 (Handley JA).

1. [77] Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333, [246] (Giles JA); approved in McCartney v Orica Investments Pty Ltd [2011] NSWCA 337, [149]-[155] (Giles JA with whom Macfarlan and Young JJA agreed).

[78] Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 609, [163] (Robson J).

[79] See, eg, Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 618, [102] (Austin J); Denis Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976; (2008) 68 ACSR 132, 144 [73] (Sackville AJ). See also Power v Ekstein [2010] NSWSC 137; (2010) 77 ACSR 302, 330 [108] (Austin J), applied in Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 609, [160] (Robson J).

[80] [2013] VSCA 27, [21] ('True Value Solar Holdings'), citing V_inciguerra v MG Corrosion Consultants Pty Ltd_ [2010] FCA 763; (2010) 79 ACSR 293, [123], affd [2011] FCAFC 31; (2011) 82 ACSR 367.

[81] [2011] QSC 341, [115] Atkinson J.

[83] Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588, 619-20 (Powell J in Eq); Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359, 386-7 [121] (Giles JA), 397-8 [173] (Basten JA), 429-30 [353] (Young CJ in Eq).

[84] [2013] VSCA 27, [21] (with whom Neave and Priest JJA agreed).

[85] [1998] NSWSC 413; (1998) 28 ACSR 688, 737-8.

[86] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 763 [527] (Priestley JA). See also 696 [142]-[143] (Spigelman CJ) (citations omitted).

[87] (2018) 366 ALR 557, 588-9 [130] (Beach, Kyrou and Hargrave JJA) (citations omitted).

[88] Reid v Bagot Well Pastoral Co Pty Ltd [1993] SASC 4323; (1993) 61 SASR 165, 175 (DeBelle J with whom King CJ and Millhouse J agreed).

[89] Re DG Brims & Sons Pty Ltd (1995) 16 ACSR 559, 591-2 (Byrne J); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688, 734 (Young J); Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452, 477 (Hodgson J).

[90] Gdanski v Palms Court Management Pty Ltd [2017] VSCA 348, [72] (Maxwell P, McLeish JA and Keogh AJA) ('Gdanski'); Queenfield Pty Ltd v Gordon Finance Pty Ltd (costs) [2020] VSC 292 (Riordan J).

[91] Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J); Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588, 606 [10] (Powell J); Walker v New South Wales Bar Association (2016) 114 ACSR 269, 293 [92] (Besanko J).

[92] Advance Bank Australia v FAI Insurances Ltd (1987) 9 NSWLR 464, 485C.

[93] Re a company; O'Neill and Another v Phillips and Others [1999] UKHL 24; [1999] 2 All ER 961, 967-8 (Lord Hoffmann); Walker v New South Wales Bar Association (2016) ACSR 269, 292 [91] (Besanko J).

[95] (1992) 174 CLR 178, 192-3.

[96] [2005] NSWCA 340, [210] ('FPM Constructions').

[97] Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] UKPC 39; [2005] 1 NZLR 145, 156 [25(1)] (Lord Brown for the Court); cited with approval in Yu v Cao [2015] NSWCA 276; (2015) 91 NSWLR 190, 216 [139] (McColl JA, with whom Sackville AJA and Adamson J agreed).

[98] [2017] VSCA 348, [66] (Maxwell P, McLeish JA and Keogh AJA).

[99] Ibid [69], approving the formulation in Kebaro Pty Ltd v Saunders [2003] FCAFC 5, [111], [113]-[114].

[100] Gdanski [2017] VSCA 348, [69], [71] (Maxwell P, McLeish JA and Keogh AJA).

[101] [2005] NSWCA 340, [214] (with whom Beazley and Gyles JJA agreed).

[102] [2017] VSCA 348, [72] (Maxwell P, McLeish JA and Keogh AJA).

[103] FPM Constructions [2005] NSWCA 340, [212].

[104] Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34, [87]-[88] (Gleeson JA, with whom Macfarlan JA and Leeming JA agreed); Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 32; (2001) 179 ALR 406, 412 (Callinan J).

[105] QBH Commercial Enterprises Pty Ltd v Dalle Projects Pty Ltd [2018] VSC 383, [77] (Riordan J).

[106] Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 32; (2001) 179 ALR 406, 412 [30] (Callinan J).

[107] Queenfield Pty Ltd v Gordon Nominees Pty Ltd [2020] VSC 292, [23] (Riordan J).

[108] Vestris v Cashman (1998) 72 SASR 449, 467 (Lander J), quoted with approval in Gdanski [2017] VSCA 348, [89] (Maxwell P, McLeish JA and Keogh AJA).

1. [110] [2004] QSC 47, [12]-[13], quoted with approval in Gdanski [2017] VSCA 348, [43] (Maxwell P, McLeish JA and Keogh AJA).

[111] See, eg, ShineWing report dated 28 March 2013, 68-72 [5.1].

[112] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [22] (Croft J).

[113] [1986] FCA 85; (1986) 10 FCR 177, 178.

[115] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [84] (Croft J).

[116] By orders made by consent on 22 June 2020, the plaintiffs were ordered to pay the first defendant's costs of the Company Proceeding in the sum of $2,300,000.