John Frederick Hillam v Leduva Pty Limited

(2) Possible proceedings for contempt of Court 9Leduva's submissions as to the appropriate form of final orders and Foster J's second judgment raise the question whether CFM and Mr Hillam have: committed a contempt of Court in the giving and continuation of the undertaking, Exhibit P, when it is said that they both knew that Ample was claiming that the $175,000 be restored to Bonython; and breached that undertaking by making an alleged payment of $175,000 from Holman Webb's trust account to Bonython in December 2010. In my second judgment I left open questions of any impropriety associated with the giving and withdrawal of the undertaking: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [46], [47] and [48]. 10I have raised with Leduva whether it proposes to bring an application for contempt of Court in respect of these matters and whether it says that it has suffered any loss by reason of the giving or breaching of the undertaking. Leduva is considering whether it wishes to take this course. In the meantime Mr Hillam says that he wishes to file an affidavit (I understand on his own behalf and on behalf of CFM) explaining the circumstances of the giving of the undertaking and dealing with the suggestion that it has been breached. Mr Hillam proposes this course in order to put to rest the idea that a contempt charge could be maintainable against it. This is not a course which the Court has required of CFM or Mr Hillam. But rather it is a course they have themselves proposed. 11I have decided that I should give Mr Hillam and CFM the opportunity to file such an affidavit and put such submissions as they are advised about the circumstances of the giving and operation of the undertaking. Directions to that effect are included in the orders made today. Mr Hillam's and CFM's offer to provide an explanation of the giving and withdrawal of the undertaking is timely. The Court foreshadowed in the second judgment that the Court itself will examine those circumstances even if Leduva does not bring an application for contempt: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [47].

(3) Leduva's Claim for Arrears of Occupation Fees 12Leduva seeks an order for the repayment of occupation fees alleged to be outstanding in November 2010 and for the period between 26 May 2010 and 26 August 2010. Leduva says that Mr Hillam still owes it approximately $15,000 for these periods of unpaid occupation fees. Mr Hillam resists this claim on the grounds: (1) that Leduva did not file a cross claim in the proceedings for relief including for the payment of any such monetary sum; (2) that to allow the claim would be procedurally unfair to Mr Hillam, as he has not had an opportunity to contradict the claim with evidence; and (3) that the principal judgment covers this area, in paragraph [114], but does not make any findings about Mr Hillam paying occupation fees other than to foreshadow a requirement for such payment being a possible condition upon the grant of the remedy of specific performance. 13Both sides are partly right about this issue. There is no cross claim in the proceedings. But the basis of any claim for occupation fees after 31 August 2010 is otherwise well grounded in the orders of Schmidt J, which made the payment of such fees a condition of her Honour's grant of a stay upon Leduva's writ for possession . Leduva's claim for alleged unpaid occupation fees after 31 August 2010 must be determined even without a cross claim as part of ensuring that the terms of the Court's stay orders have been fully complied with and are properly enforced. 14Determining Mr Hillam's liability for occupation fees after 31 August 2010 increases the logic for dealing with the closely related question of allegedly unpaid occupation fees incurred before that date. Whether Mr Hillam is liable for occupation fees for the period 26 May to 31 August 2010 , and if so , whether those occupation fees have been paid or not, is a matter still in issue between the parties. But it is an issue not covered by any existing pleading and one that Mr Hillam has not addressed in his evidence. It is desirable for the Court to deal with all matters in issue between these parties relating to the Alexandria apartment. This Court is already aware of this dispute. It would be both inefficient and a waste of resources for the parties to be forced to commence other proceedings to resolve this issue which has already been the subject of some evidence before this Court. 15The course most likely to achieve efficient justice and the one I will therefore take is for the Court to give directions to allow Leduva to file a cross claim seeking recovery of any occupation fees that it alleges are unpaid. Any such cross claim may only claim the recovery of occupation fees and will not permit the opening up of any other issue in the proceedings. I will also give directions for the filing of any further evidence and submissions in relation to allegedly unpaid occupation fees. This is an issue that should be able to be wholly resolved either on the papers or in the course of a short one-hour hearing commencing one morning at 9.30am. Given the small amount at stake the hearing will not be permitted to take any longer.

(4) Costs of the application before Hall J 16My second judgment summarised the course of the proceedings before this Court and before the Federal Court of Australia leading to Mr Hillam's application for leave to withdraw CFM's undertaking to the Court (Exhibit P): Hillam v Leduva Pty Limited [No.2] [2011] NSWSC 247 at [19], [20] and [21]. On 10 January 2011 Foster J ordered Mr Hillam and CFM to restore the $175,000 in Holman Webb's trust account to Bonython. As compliance with Foster J's order would have placed CFM in breach of its undertaking to this Court, if he were not already in breach, CFM made the application to Hall J on 13 January 2011 to be released from the undertaking. Hall J granted that application. 17Leduva now seeks an order for recovery of its costs of that application against CFM, Mr Hillam and Holman Webb on an indemnity basis . There is an immediate problem with a claim for costs against Holman Webb. This firm of solicitors no longer acts for Mr Hillam. Leduva has not served the firm with notice of the present application. It would be a denial of procedural fairness to make a costs order against the firm as Leduva requests. Moreover it is not clear on what basis a costs order is sought against the firm as distinct from the firm's former clients CFM and Mr Hillam. 18Leduva's claim for indemnity costs against Mr Hillam and CFM for the appearance before Hall J raises the same issues as to its claim for indemnity costs in the proceedings as a whole. There is an overlap between this claim and Leduva's possible application for contempt, which is discussed in the next section. 19But I see no reason why any order for costs made against Mr Hillam should not include the costs of the application before Hall J. CFM sought the Court's leave to be released from its undertaking. The circumstances that led to the Federal Court of Australia's orders and CFM's approach to the Court for a release from its undertaking were entirely of its own and Mr Hillam's making. Leduva was in no way responsible for them. CFM's application for release from its undertaking occasioned Leduva's appearance before Hall J and Leduva's costs on that occasion.

(5) Indemnity Costs 20This leaves the question of indemnity costs. Leduva claims that it should have its costs of the whole proceedings paid on the indemnity basis: (1) because it is said Mr Hillam was well aware that he was never ready , willing nor able to complete the contract for purchase of the Alexandria apartment; (2) because it is said Mr Leibeskind's loan was a fiction unsupported by any direct evidence; and (3) because it is said Mr Hillam always knew that Bonython Metals was claiming the return of the $175,000 that Mr Hillam was using to attempt to show that he was ready willing and able to complete the contract. 21The Court will not order indemnity costs based on Leduva's argument that Mr Hillam was well aware that he was never ready, willing nor able to complete the contract for purchase of the Alexandria apartment. Even findings of unconscionable conduct, breaches of fiduciary duty and fraud or other deplorable conduct in litigation, will usually lead to an order for costs on the ordinary basis and will not automatically result in an indemnity costs order against that party: Harrison v Schipp; Cameron v Schipp [2001] NSWCA 13 at [136]. The focus of a claim for indemnity costs is the conduct of the losing party as litigant: Baillieu Knight Frank (NSW) v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 392. It is not clear on the evidence presently available that Mr Hillam always knew that none of the bases on which he claimed he was ready willing and able to complete the contract could succeed . Mr Hillam put up several alternatives, which were at least arguable although in the result they failed. In my view Mr Hillam's failure to prove that he was ready, willing and able to complete does not establish a basis for a special order for costs against him. 22But the issue of indemnity costs based on Mr Hillam being aware that Ample and Bonython were likely to recover the $175,000 before the contract was completed is more complicated. The evidence on that subject does at least found a prima facie inference that Mr Hillam knew that Ample regarded Mr Hillam's use of Bonython's funds for Mr Hillam's private purposes as unauthorised and that Mr Hillam was aware that there was a risk of Mr Hillam's and CFM's use of those funds being restrained by a Court . But these circumstances overlap closely with questions of (1) whether CFM and Mr Hillam committed a contempt of Court by misleading the Court when giving the undertaking, exhibit P, and (2) whether CFM and Mr Hillam breached the undertaking before the Court released CFM from it. The Court could not award indemnity costs against Mr Hillam on these grounds without making findings about Mr Hillam's conduct that overlap closely with the possible allegations of contempt that Leduva may make. In these circumstances the better course appears to be to defer consideration of any application for indemnity costs based on these matters until the opportunity to raise and resolve any issues of contempt of Court has been given . 23But there is no reason why Leduva should not even at this stage have a costs order on the ordinary basis made in its favour: UCPR , s 42.2. It has been successful in the proceedings. The usual rule applies that costs follow the event: UCPR , r 42.2. The costs that Leduva may recover under this order will include Leduva's costs of the motion dated 21 February 2011 to reopen the proceedings. Leduva was successful on this motion. I give leave to Leduva to revisit the question of an indemnity costs order after any issues of contempt of Court have been considered . A finding of contempt may provide the basis for an indemnity costs order: Degm am Pty Ltd (in liq) v Wright (No.2) [1983] 2 NSWLR 354, at 358 and EMI Rec ords Ltd v Ian Cameron Wallace Limited [ 1983 ] Ch 59.

(6) Other Matters 24A number of other matters remain. Mr Hillam first says that the Court should give effect to its findings in the principal judgment that (1) the costs orders in the possession proceedings entered pursuant to clause 7(iii) of the June 2010 agreement are a penalty, and (2) the acceleration of the payment of the sum of $140,000, otherwise payable 25 May 2011 is also a penalty: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [69] and [71]. It follows from my principal judgment that these orders should be set aside. The orders made today provide for that result. But if the sum of $140,000 is not paid by 25 May 2011 then Leduva may then be entitled to judgment for this sum from that date in any event. Leduva may also then be able to argue for a costs order in the possession proceedings without placing any reliance on the June 2010 agreement. The Court's grant of liberty to apply to Mr Hillam and to Leduva encompasses the making of an application about the costs of the possession proceedings and the entry of judgment for $140,000 after 25 May 2011. I see no reason to disturb the judgment for possession in the possession proceedings for the reasons explained above. 25Leduva also claims damages in prayer 3 of its 21 February 2011 motion. A motion is not the correct procedural vehicle for a claim for damages. Mr Hillam says in any event that such a claim is not maintainable and says that the jurisdiction under Supreme Court Act 1970 s 68 is only available in favour of a claimant for specific performance such as Mr Hillam, not an opponent such as Leduva. On the face of s 68, this submission may possibly be correct, although the matter has not been fully argued. But Leduva may possibly be entitled to claim compensation from CFM or Mr Hillam arising out of CFM's giving, possible breach of and the withdrawal of the undertaking. But the extent of any such claim has not yet been explored and should in my view await determination of whether contempt charges will proceed against either CFM or Mr Hillam. This is an issue to which Leduva may return if so advised under the liberty to apply granted in today's orders.

Orders and Directions 26The Court will make the following orders and directions in addition to the orders and directions made on 31 March 2011:

1. Dismiss orders 1,2,3,4,5 and 6 of the relief sought in the Statement of Claim in these proceedings;
2. Dismiss orders 7,8,9,10,11,12 of the orders sought in the Statement of Claim;
3. Set aside the judgment for $140,000 in the possession proceedings (being proceedings numbered 295808/2009 in the common law division) entered in favour of Leduva on 30 July 2010;
4. Vacate the order for costs made in the possession proceedings in favour of Leduva on 30 July 2010;
5. The stay imposed by Schmidt J in the possession proceedings on 31 August 2010 on the issue of a writ for possession will continue until 25 May 2011 inclusive and the stay will be lifted from that time;
6. Direct that the defendant file and serve by Friday 6 May 2011 any cross claim upon which it seeks to rely to claim occupation fees from the plaintiff in respect of the Alexandria apartment (the occupation fee issue);
7. Direct the plaintiff to file and serve by Friday 13 May 2011 any defence to the cross claim filed on the occupation fee issue;
8. Direct the parties to file and serve by 20 May 2011 any supplementary evidence upon which they seek to rely in relation to the occupation fee issue.
9. Direct the parties to exchange and to file by 27 May 2011 their submissions in relation to the occupation fee issue;
10. The occupation fee issue will be dealt with on the papers provided by the parties unless either party seeks an oral hearing, in which case such request for a hearing must be made by 31 May 2011and such hearing will be fixed for one hour only at 9.30am on Thursday 2 June 2011;
11. Order the plaintiff, Mr Hillam to pay the defendant's costs of these proceedings including the costs of the application before Hall J and the costs of Leduva's motion of 21 February to reopen its case;
12. Direct that if Mr Hillam and CFM wish to file any evidence and any submissions upon which they propose to rely to explain more fully the circumstances of the giving and the withdrawal of CFM's undertaking Exhibit P and to explain whether or not any breach of such undertaking may have occurred that they do so by Friday 13 May 2011.
13. Grant Leduva liberty to apply to raise the question of whether the plaintiff should pay the whole or part of the defendant's costs of the proceedings on the indemnity basis;
14. Otherwise grant liberty to apply to both parties on three (3) days notice.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 April 2011