Mainland Property Holdings Pty Ltd (Receivers and Managers Appointed) v Naplend Pty Ltd

1. Mr Mawhinney pay the respondents' costs of and incidental to the interlocutory application filed on 17 March 2023 on a party/party basis, to be taxed in default of agreement.
2. The question of the respondents' entitlement (if any) to the balance of their actual costs of and incidental to the application otherwise be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

O'CALLAGHAN J: 1 By way of interlocutory application filed 17 March 2023, the applicants sought an order to the effect that Mr Daryl Williams AM KC be restrained from acting for the respondents in this proceeding and that written submissions settled by him be removed from the court file. 2 I dismissed the application and ordered that the parties file brief written submissions about costs. See Mainland Property Holdings Pty Ltd (Receivers and Managers Appointed) v Naplend Pty Ltd (No 2) [2023] FCA 243. 3 These reasons assume familiarity with those reasons. 4 The submissions about costs were duly filed. 5 The applicants say that I should order that each party bear its own costs or that any costs ordered to be paid against them be limited to half the costs of the hearing. 6 The applicants say, in effect, that they enjoyed a degree of success because I found that: (a) "each category of confidential information identified by the Applicants retains the requisite character of confidentiality"; (b) "it was sufficiently obvious that any more detailed description [of the confidential information] than that which was provided might do that very thing [i.e. eviscerate the very confidentiality sought to be protected]". 7 They also relied on the fact that the respondents, in the face of the application, proffered an undertaking that "Mr Williams will not be engaged to participate in settlement discussions with the applicants or their representatives, nor consulted in respect of any such discussions, and will not provide any information to the respondents for the purposes of those discussions". 8 The applicants say that this is a case in which the respondents should not be awarded their costs because: (a) the respondents (unsuccessfully) "went to some length at the hearing" to persuade the court that the evidence relied upon by the applicants did not refer to confidential information; and (b) the respondents provided the undertaking, which "constituted an acknowledgement of a significant part of the substance of the complaint made by the [a]pplicants and Mr Mawhinney". 9 In the alternative, the applicants submitted that costs should be limited to those incurred from the time the undertaking was proffered in clear terms, that is half the costs of the hearing only. 10 The respondents say that although they "have been content to reserve all questions of costs in this proceeding, on the basis that, at its conclusion, they intend to seek indemnity costs orders against the applicants to reflect their contractual entitlements", here the position is different. 11 They submit that: 2. To date, the respondents have been content to reserve all questions of costs in this proceeding, on the basis that, at its conclusion, they intend to seek indemnity costs orders against the applicants to reflect their contractual entitlements. [Footnote: As foreshadowed in the respondents' submissions on the quantum of security dated 14 March 2023, [9], [30]-[31]. The relevant instruments are the 'Facility Agreement' dated 20 December 2019 (see cll 13.1(f) and 14.3) and the 'General Security Deed' dated 20 December 2019 (see cll 9.3 and 12.1(a)). Each of these documents can be found in the affidavit of David McIntosh affirmed on 17 June 2022 (McIntosh Affidavit), exhibits DM1-604 and DM1-1223 respectively.] However, that approach would not be wholly appropriate in this discrete instance. For the reasons which follow, the [c]ourt ought to exercise its discretion as to costs by making orders that: (a) Mr Mawhinney pay the respondents' costs of and incidental to the [r]estraint [a]pplication on a standard basis, to be taxed in default of agreement; and (b) the question of the respondents' entitlement to the balance of their actual costs of and incidental to the [r]estraint [a]pplication be otherwise reserved. 12 The submissions referred to in the footnote set out above were filed in the hearing before McElwaine J. See Mainland Property Holdings Pty Ltd (Receivers and Managers Appointed) v Naplend Pty Ltd [2022] FCA 1305. 13 The relevant parts of those paragraphs of the respondents' submissions on the quantum of security, referenced in the footnote set out above, were in the following terms: [9] … Should [Mr Mawhinney's failure to obtain an adequate bank guarantee be fatal to his continuation of this proceeding], there will be no good reason for the respondents to bear the difference between their recoverable costs and their actual costs of a case which, it will have ultimately transpired, ought never have been brought. Worse yet would be the prejudice to PAG if and when the respondents recoup that gap from the proceeds of sale of the Properties, pursuant to their rights under the Facility Agreement [Footnote: See cll 13.1(f) and 14.3] and / or the General Security Deed. [Footnote: See cll 9.3 and 12.1(a)]. … [30] … In fact, the respondents were substantially successful. They established that the claims Mr Mawhinney caused the applicants to bring are assets captured by the PAG security and falling within the control of the PAG receivers. And they obtained, in substance, the alternative relief sought by paragraph 2 of their interlocutory application, the issues giving rise to which were inextricably linked to the relief sought by paragraph 1 thereof. They did so having first requested that Mr Mawhinney provide an indemnity without the need for judicial involvement. He refused to do so. Costs have been reserved because the respondents intend to raise and rely on their contractual rights at the conclusion of the proceeding; but even absent those rights, there is good reason to believe that the Court will ultimately award the costs of the interlocutory application in the respondents' favour. [31] … [R]elatedly, the applicants have failed to instruct Ms Dealehr in respect of the respondents' entitlements to claim the costs of and incidental to this proceeding under the contractual rights just referred to. 14 The respondents say that the usual rule that costs follow the event should apply, because I found that there could be no nexus between the matters of which Mr Williams was alleged to have knowledge and the task confronting the Judicial Registrar in the discrete aspect of the proceeding in which Mr Williams was briefed and that it was "difficult if not impossible to imagine how Mr Williams could consciously or subconsciously invoke any confidential information of the type [described by the applicants]" for the purposes of that engagement. 15 As to the undertaking, the respondents say that the fact that the respondents and Mr Williams volunteered limited undertakings should not impact the question of costs, because they were made in response to Mr Mawhinney's newly minted suggestion that he was concerned that Mr Williams might use confidential information in negotiations concerning the quantum of the security. 16 The respondents say that their costs should be paid by Mr Mawhinney personally because the restraint application was brought at his direction and for his benefit, because: (a) the application concerned Mr Williams' representation of Mr Mawhinney and Mr Mawhinney's other companies during a mediation in an unrelated Supreme Court proceeding; (b) Mr Williams never acted for the applicants, and there is no evidence that their interests were impacted by the Supreme Court proceeding; (c) to the extent that Mr Williams also acted for other entities on that occasion, those entities are not relevantly connected to this proceeding; (d) the restraint application sought (unnecessarily) to protect confidential information relating only to Mr Mawhinney: his business model, his priorities in respect of the (since settled) Supreme Court proceeding, his appetite for risk; his concern for his reputation, the likely use to which he might put assets coming into his control, and his access to financing and his finances; and (e) the restraint application sought to restrain Mr Williams from now acting in a discrete aspect of this proceeding pertaining directly to Mr Mawhinney: the quantification of a bank guarantee to be provided by him as security for his indemnity as ordered by the court. 17 It is also worth noting that, as McElwaine J observed in Mainland Property Holdings Pty Ltd (Receivers and Managers Appointed) v Naplend Pty Ltd [2022] FCA 1305 at [3]: The appointments of each receiver and manager were made prior to the commencement of this proceeding and Mr Mawhinney was solely responsible for the decision to commence it. He did not consult nor seek permission from any of the receivers. 18 It is of course true that a successful party may be awarded less than its costs, or costs may be apportioned based upon success on the issues. But here it seems to me that the respondents succeeded in resisting the application to restrain counsel from appearing, and that no good reason has been pointed to why an apportionment is appropriate. As to the undertaking, it seems to me that the proffering of it should not affect the exercise of the discretion, for the reasons given by the respondents. 19 I am persuaded, for the reasons advanced by the respondents, that Mr Mawhinney should bear the respondents' party and party costs of the interlocutory application, and that the applicants should bear only those costs to which the court might subsequently find the respondents are entitled as a result of their contractual entitlements referred to in the respondents' submissions set out at paragraph [11] above. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.