Lucky v Ives

1. Paragraph 6 of Mr Ives' interlocutory application dated 15 August 2024 be dismissed.
2. Mr Ives pay the costs of and incidental to the claim made in paragraph 6 of that application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKMAN J: 1 On 8 December 2023, I made orders granting the plaintiff (Mr Lucky), one of the two directors of the second defendant (Chief), leave pursuant to s 237 of the Corporations Act 2001 (Cth) to engage Polczynski Robinson to act for Chief in defence of Federal Court proceedings NSD1063/2021 (the Marketlend proceedings) and, until further order, to provide instructions to Polczynski Robinson in relation to the conduct of those proceedings: Lucky v Ives [2023] FCA 1571. I also ordered that the first defendant (Mr Ives) pay the costs of and incidental to the hearing that day. 2 By interlocutory application dated 15 August 2024, Mr Ives sought to set aside or vary both the substantive orders made under s 237 and the order for costs. On 22 August 2024, the orders of 8 December 2023 were varied so as to permit Mr Lucky to give instructions on behalf of Chief in relation to another set of proceedings, number NSD919/2022 (the Sealoud proceedings), and to retain Ms Peterson of McLachlan Thorpe Partners to act for Chief in both proceedings: Lucky v Ives (No 2) [2024] FCA 970. Other than the costs order, the only disputed matter was whether Mr Ives, rather than Mr Lucky, should have leave to give instructions on behalf of Chief, which I resolved in favour of Mr Lucky. 3 The hearing of paragraph 6 of Mr Ives' interlocutory application, which sought to set aside the costs order made on 8 December 2023, was initially adjourned to 10 September 2024, and subsequently adjourned to today. The basis of the application to set aside the costs order was articulated by Mr Ives' legal representatives in an email yesterday and further expounded upon in oral submissions by counsel today. 4 Other than order 1, which had only a very temporary operation, the substantive orders made under s 237 on 8 December 2023 were expressed to have effect "until further order", the intention being that Mr Ives would have an opportunity to challenge the leave that I granted (see [11] of my judgment that day). The costs order, however, was made for the stated purpose of disposing of the question of costs of and incidental to the hearing that day (see [12]). 5 The costs order made on 8 December 2023 is subject to the usual principles governing the variation or discharge of interlocutory orders, which require Mr Ives to demonstrate either a material change of circumstances or the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application: Deloitte Touche Tohmatsu v Sadie Ville Pty Ltd [2020] FCAFC 23; (2020) 144 ACSR 1, [274]-[275] (Markovic and O'Callaghan JJ). That principle applies as much to urgent interlocutory applications as it does to others. 6 Mr Ives advances various criticisms of the accuracy and completeness of the evidence adduced by Mr Lucky at the hearing on 8 December 2023. However, those criticisms are not directed to any change of circumstances or new material which could not reasonably have been put before the Court that day. Accordingly, the application to vary the costs order made that day must fail. I will deal with the other matters which are raised by Mr Ives in argument for completeness, although it is not strictly necessary to do so. 7 First, Mr Ives complains that the evidence led by Mr Lucky on 8 December 2023 was inaccurate in material respects, including with respect to what Mr Lucky had disclosed to Mr Ives before the relevant policy of insurance was renewed, and his refusal to obtain counsel's opinion about the proposed paragraphs of the cross-claim which were in controversy between the parties, the cost of which, Mr Ives submits, would have been considerably less than the derivative leave application. 8 Those matters relate to what I found at [6] of my judgment of 8 December 2023 to have been two superfluous subparagraphs in the draft cross-claim, to the effect that the plaintiff did not disclose his dealing with Marketlend to Mr Ives, and that his dealings were unauthorised and not attributable to the company. Mr Ives does not challenge that finding. Those matters were said to go to whether or not Mr Lucky, and not Mr Ives, was the appropriate person to give instructions about the Marketlend and Sealoud proceedings. This is an issue which I have resolved against Mr Ives, and the present application is not a further occasion for Mr Ives to seek to re-litigate that matter. 9 As to the question of seeking counsel's advice in relation to whether those two superfluous subparagraphs of the cross-claim should be retained, Mr Ives submits that it was reasonable to rely on counsel having drafted the cross-claim which included those two paragraphs and it was unreasonable for Mr Lucky to have opposed seeking further advice from counsel, which, it is submitted by Mr Ives, may have resolved the conundrum. However, as Mr Ives accepts, it is not known what the outcome of any request for advice from counsel would have been and it cannot be assumed that counsel would have changed his or her mind in relation to the two superfluous subparagraphs. It therefore cannot be concluded that seeking the advice of counsel who drafted the cross-claim would have resolved the problem. 10 Mr Ives also complains that the evidence led by Mr Lucky on 8 December 2023 was incomplete in that Mr Ives submits that Polczynski Robinson knew about the Sealoud proceedings by no later than 14 November 2023, and only when pressed about the issue of a conflict at the subsequent hearing was the affidavit of Mr Lyne read in the proceedings, and that affidavit was incomplete in that it was said not to disclose the real potential for a conflict of interest to arise. Polczynski Robinson was ultimately unable to act for Chief in the Sealoud proceedings to which Chief was joined by Marketlend pursuant to orders made well after the hearing on 8 December 2023. That was because Polczynski Robinson had previously acted for BCC Trade Credit Pty Ltd (BCC) and Tokio Marine & Nichido Fire Insurance Co Ltd (Tokio Marine) and on 26 July 2024 those entities filed cross-claims against Chief in the Sealoud proceedings. In those circumstances, Mr Lucky accepted that Ms Peterson should be retained to act for Chief in both proceedings to avoid duplicating work. 11 None of that raises a question about the propriety of the costs order made on 8 December 2023. As I said at [12] of my judgment that day, it was necessary for Mr Lucky to approach the Court given the stance which had been taken by Mr Ives. The need for Mr Lucky to approach the Court arose from the impending threat of default judgment and the deadlock between Mr Ives and Mr Lucky as to who should give instructions in relation to the cross-claim, not, or not merely, from the proposal to retain Polczynski Robinson. 12 Further, there was nothing improper about the original retainer of Polczynski Robinson, which was, and remains, able properly to act for Chief in the Marketlend proceedings. Indeed, at the hearing on 8 December 2023, Mr Ives conceded that Polczynski Robinson should be retained for at least the limited purpose of entry and appearance and filing a defence and cross-claim in the Marketlend proceedings, as I said at [8] of my judgment that day. 13 Mr Lucky accepts that he and Polczynski Robinson knew of the Sealoud proceedings before 8 December 2023. It is apparent that Mr Ives also knew of the Sealoud proceedings in that he had the same information about the Sealoud proceedings as Mr Lucky and Polczynski Robinson, namely that Marketlend had foreshadowed on 18 May 2023 that it expected to join Chief to the proceedings but at the time of hearing on 8 December 2023 still had not done so. There is no evidence that either Mr Lucky or Polczynski Robinson were aware of the prospect of BCC and Tokio Marine bringing cross-claims against Chief in the Sealoud proceedings. Mr Lucky submits, and I accept, that there has been no discovery of new information or material that could justify setting aside the order for costs of and incidental to the hearing of 8 December 2023. 14 A further matter relied upon by Mr Ives is that, in his submission, the reason why the policy of insurance maintained by Chief did not respond was because the insurer formed the view that, by reason of Mr Lucky providing assistance to Marketlend in respect of the Marketlend proceedings in the form of a draft affidavit which he did not disclose to Mr Ives, there existed a real threat of a conflict of interest in the Marketlend proceedings. However, the reason actually given by the insurer for the denial of coverage was that Marketlend's claim against Chief fell within a prior known circumstances exclusion, not that there was some threat to the insurer of a conflict of interest. In any event, I do not understand how an insurer would be able to deny coverage because of a perceived threat to the insurer of a conflict of interest. 15 It follows that Mr Ives has identified no basis consistent with principle for setting aside the costs order made on 8 December 2023. Accordingly, I dismiss paragraph 6 of his interlocutory application dated 15 August 2024. I order that Mr Ives should pay the costs of and incidental to the claim made in paragraph 6 of the interlocutory application dated 15 August 2024. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.