Management 3 Group Pty Ltd (in liq) v Lenny's Commercial Kitchens Pty Ltd

Federal Court of Australia|2011-06-28|Before: Mr J, Dodds-Streeton J, Streeton J

Counsel for the Applicants: Mr F Tiernan SC

Solicitor for the Applicants: Russell Kennedy

Solicitor for the First Respondent: DLA Phillips Fox

Solicitor for the Second Respondent: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 350 of 2009

BETWEEN: MANAGEMENT 3 GROUP PTY LTD (IN LIQ) (ACN 100 863 036)

ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI (AS LIQUIDATORS OF MANAGEMENT 3 GROUP PTY LTD (IN LIQ) (ACN 100 863 036)

AND: LENNY'S COMMERCIAL KITCHENS PTY LTD (ACN 009 044 295)

JUDGE: DODDS-STREETON J DATE OF ORDER: 28 JUNE 2011 WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The applicants pay the respondents' costs of and incidental to the proceeding on a party/party basis. 2. Orders 6 and 7 of the order made by Justice Dodds-Streeton on 6 April 2011 be vacated. 3. The amount of $55,000 paid to the Court by or on behalf of the applicants pursuant to the orders made on 6 April 2011 by way of security for the first respondent's costs be released to the first respondent forthwith by way of interim and partial satisfaction by the applicants of Order 1 hereof. 4. The amount of $182,500 paid to the Court by or on behalf of the applicants pursuant to the orders made herein on 6 April 2011 by way of security for the second respondent's costs be released to the Second respondent forthwith by way of interim and partial satisfaction by the applicants of Order 1 hereof. 5. The time for the applicants to file any appeal in the principal proceeding be extended to 6 July 2011. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 350 of 2009

BETWEEN: MANAGEMENT 3 GROUP PTY LTD (IN LIQ) (ACN 100 863 036)

ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI (AS LIQUIDATORS OF MANAGEMENT 3 GROUP PTY LTD (IN LIQ) (ACN 100 863 036)

AND: LENNY'S COMMERCIAL KITCHENS PTY LTD (ACN 009 044 295)

JUDGE: DODDS-STREETON J DATE: 28 June 2011 PLACE: MELBOURNE

INTRODUCTION 1 On 10 June 2011, I published reasons for judgment in this proceeding in which I concluded that the applicants, Management 3 Group Pty Ltd (In Liq) ("M3G") and Andrew Reginald Yeo and Gess Michael Rambaldi (as liquidators of M3G), had not established any of their claims including, principally, conversion and breach of s 440C of the Corporations Act 2001 (Cth) and restitution made by statement of claim dated 18 December 2009. I ordered that the applicants' application be dismissed and adjourned the further hearing of the proceeding to 22 June 2011 for submissions on costs. 2 The second respondent, Sino Iron Pty Ltd ("Sino"), sought the following orders: 1. The Applicants pay the Second Respondent's costs of and incidental to this Proceeding: (a) on the scale provided for in the Second Schedule to the Federal Court Rules in relation to costs incurred during the period to 5 April 2011; and (b) on an indemnity basis in relation to costs incurred during the period on and from 6 April 2011. 2. The amount of $182,500 paid to the Court by or on behalf of the Applicants pursuant to the orders made herein on 6 April 2011 by way of security for the Second Respondent's costs be released to the Second respondent forthwith by way of interim and partial satisfaction by the Applicants of Order 1 hereof. 3 The first respondent, Lenny's Commercial Kitchens Pty Ltd ("Lenny's"), also sought its costs on an indemnity basis from 5 April 2011 and the release of $55,000 paid as security for its costs pursuant to the orders made on 6 April 2011. 4 The applicants submitted that they should be ordered to pay the respondents' costs only on a party/party basis and that the security should not be released until costs were ordered and taxed pursuant to the orders made by consent on 6 April 2011. 5 The respondents relied on the affidavits of Christopher John Connor sworn 17 June 2011 and 21 June 2011, Sino's outline of submissions dated 17 June 2011 and Lenny's outline of submissions dated 17 June 2011. 6 The applicants relied on the affidavit of Andrew Reginald Yeo sworn 17 June 2011 and an outline of submissions dated 17 June 2011.

BACKGROUND 7 Mr Connor, a partner of the solicitors for Sino, deposed that Sino forwarded a letter dated 4 April 2011 ("Sino letter") to the applicants on behalf of both respondents, which relevantly stated: … This offer is made on behalf of Sino Iron Pty Ltd (Sino Iron) the Second Respondent in Federal Court proceeding No VID 350/2009 (Proceedings) with the knowledge and authority of the First Respondent in the Proceedings (Lennys). The Respondents offer to settle the Proceedings with the Applicants on the following basis: 1 Subject to compliance with paragraph 2 and 3 below, Sino Iron shall pay to the Applicants within 30 days hereof, the sum of AU$200,000 inclusive of GST, interest and costs, including all reserved costs in full and complete settlement of all of the Applicants' claims in the Proceedings against Sino Iron and Lennys and generally; 2 The Applicants shall enter into a form of release providing for full and complete mutual releases between the Applicants, Sino Iron and Lennys, including any of their directors, officers, agents, employees, contractors and related parties (including their directors, officers, agents and employees), from: (a) all claims by the Applicants in the proceedings; and (b) all other actual or potential claims, liabilities, demands, actions or proceedings whatsoever. 3 The proceedings shall be dismissed with no order as to costs 4 Neither the Applicants, Sino or Lennys will pursue the other parties for any adverse costs orders associated with the proceedings; 5 Sino shall withdraw its Formal Proof of Debt as lodged against the First Applicant. The offer is made "Without Prejudice Save as to Costs" in accordance with the principles set out in Calderbank v Calderbank 3 All ER 333, and if not accepted, will be relied upon by the Second Respondent on the question of costs. The offer is open to be accepted at any time prior to 5.00pm EST on Tuesday 5th April 2011 … 8 The formal proof of debt referred to in the Sino letter was dated 30 March 2011. It alleged that M3G was indebted to Sino in an amount of not less than $15,450,000 as damages for breach of contract, misleading and deceptive conduct (referred to an attached letter) and a contractual claim for the difference between costs for completion taken out of the company's hands compared with if M3G had completed the works (referred to an attached letter). 9 Mr Connor deposed that: 1. The proof of debt had not been admitted or adjudicated by the liquidators of M3G as at the date of the letter. 2. M3G had not formally made or foreshadowed any claims other than the present proceeding against Sino. 3. The order made 6 April 2011 required the applicants to provide security for costs for Lenny's of $55,000 and $182,000 for Sino, and Mr Connor in his affidavit sworn 31 March 2011 estimated Sino's party/party costs as $387,516. 10 By his affidavit sworn 21 June 2011, Mr Connor exhibited a chronology of steps in the proceeding which indicated, inter alia, delays, including postponement of the trial until 2011 at the applicants' solicitor's request. 11 Mr Yeo, the second applicant and a liquidator of M3G, deposed that the Sino letter was emailed to the applicants' solicitors at 3.19pm on 4 April 2011. Further, both as administrator and liquidator of M3G, he had conducted investigations (which were continuing) into claims against Lenny's and Sino, including: whether Lenny's obtained a $93,000 preference; Sino's failure to ensure that the superintendent and/or representative under the construction agreement honestly, fairly and independently fulfilled its certification duties, including the failure to make interim certifications; Sino's failure to inform M3G before execution of the construction agreement that an agreement with the union required higher labour rates for contractors at the site, which resulted in about $2.196 million additional labour costs; and Sino's failure to pay M3G all money owed under the construction agreement. 12 Mr Yeo deposed that in late December 2010, he had flagged the possibility of the further claims against Sino with Ms Oh of Sino's principal contractor, CITIC Pacific, and Mr Hsin-Luen Tan of Sino. He exhibited emails in which Mr Tan asserted that M3G had not previously foreshadowed other claims, and, as Sino wished them to be heard in the present proceeding, it would not continue settlement discussions without a full release. Mr Yeo responded that the investigations were continuing and he was not in a position to provide the blanket release Sino sought. 13 On 1 April 2011, Mr Yeo telephoned Mr Northey of Sino to see if they could settle the case. He deposed that Mr Northey was adamant that any settlement must include a full release of all M3G's potential claims against Sino relating to the contract. Mr Yeo offered to settle for a payment of $650,000. Mr Northey made clear that any settlement would require M3G to give Sino a full release for all current and potential claims against it. The parties agreed to consider the position and continue communications. 14 The next communication was the Sino letter. 15 The applicants did not accept the offer of settlement.

Respondents' submissions 16 The respondents, in reliance on MT Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No 3) [2000] VSC 163 ("MT Associates") and like authorities, submitted that on the better view, the Sino letter constituted a Calderbank letter. Accordingly, the applicants should pay their costs on an indemnity basis from 6 April 2011, because the rejection of the offer in the Sino letter was unreasonable. The respondents relied on the applicants' unsatisfactory conduct of the litigation to fortify their claim for indemnity costs. 17 The respondents submitted that the Sino letter offered M3G significant benefits of $200,000 cash and concessions, including waiver of its debt claim for over $15 million, in return for settling the present proceeding, together with the release of M3G's potential claims. As M3G would thus receive far more under the Sino letter than it was required to surrender, the rejection of the offer was unreasonable. Nor was the late stage at which the offer was made a basis to refuse to order indemnity costs. Immediately prior to trial, the applicants had the benefit of much of the evidence and the written contentions. Although the offer was open for, effectively, only one day, the applicants were well placed to assess the prospective outcome of the litigation, the value of their claims both in and outside the proceeding, and the value of the Sino offer. 18 Further, although the Sino offer was "rolled up" and included claims extraneous to the proceeding, it was "overly technical" to assert that the applicants had inadequate time to consider it given that several days before, they had also made a "rolled up" offer of settlement (albeit omitting M3G's potential claims against Sino), which must have been based on a calculation of costs, interest and their likelihood of success at trial. Mr Yeo had, moreover, been considering M3G's potential claims since December 2010. 19 The respondents submitted that the court could assume that M3G's potential causes of action were, and the applicants assessed them as, valueless at the date of Sino's offer. The applicants did not bring them in the present proceeding (thus raising the likelihood of Anshun estoppel). Mr Yeo also claimed merely to be investigating the potential claims, the pursuit of some of which (including the central conversion claim) would involve reliance on the evidence of Mr Robertson, to whom (as Mr Yeo acknowledged at trial) he had not yet spoken, although two years had elapsed since the administration of M3G commenced. The respondents submitted that in such circumstances, the applicants should have apprehended that their case was weak. 20 The respondents also submitted that the applicants misconducted the litigation by delays, non-compliances, changes of direction and eleventh hour applications, which particularly in the context of a docket list, justified an order for indemnity costs. They submitted that the applicants' "last minute" abandonment of a retention of title clause argument suggested that the issue had been kept alive for form's sake (which, as Giles J recognised in Segenhoe Ltd v Akins & Ors (1990) 29 NSWLR 569, might favour a special costs order) and indicated an awareness of the serious obstacles they faced.

Applicants' submissions 21 The applicants, in reliance on Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 ("Smallacombe") and Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 ("Dr Martens"), submitted that a rolled up offer could not amount to a Calderbank offer and indeed, could be adduced in evidence only pursuant to s 131(2) of the Evidence Act 1995 (Cth). Alternatively, the applicants contended that rejection of the letter was not unreasonable when judged by reference to all the circumstances the offeree faced at the time. 22 The applicants contended that the timing of the Sino offer was a tactical manoeuvre to force them to settle both the proceeding and M3G's actual or potential claims against Sino and third parties, rather than a bona fide attempt to settle the proceeding. At the date of the Sino offer, Sino had taken no steps to progress its proof of debt and there was no evidence to establish that M3G's other actual or potential claims were devoid of merit or valueless. Nor were the central conversion and s 440C claims in the proceeding manifestly hopeless or untenable. They depended to a large extent on the evidence to be given at trial. The additional goods claim involved genuine issues and the total failure of consideration claim was not, in the context of a developing area, untenable. 23 The applicants submitted that as the respondents had not raised the misconduct of the litigation in the written submissions, it should not be taken into account in relation to costs, but contended that, in any event, there was nothing to establish that it had increased the costs of the proceeding or that its conduct was of the type described in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 or Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189. 24 The applicants summarised the applicable principles as follows: … (5) the onus always lies upon the offeror to demonstrate that it was unreasonable for the offeree to reject the Calderbank offer; (6) the matter of unreasonableness is to be judged by reference to the circumstances facing the offeree at the time of the offer; (7) there is no presumption that the party rejecting a Calderbank offer should pay the offeror's costs on an indemnity basis if the offeree's claim fails or if the offeree receives a less favourable result. Rather, the correct approach is to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs. In the end, the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants a departure from the usual rule as to costs - "the critical question is whether the rejection of the offer was unreasonable in the circumstances"… (emphasis and footnotes omitted)

DISCUSSION 25 The Sino letter did not constitute a formal offer of compromise pursuant to Order 23 of the Federal Court Rules 1979 (Cth). 26 The Sino letter sought to settle matters beyond the issues in the present proceeding, instead extending to M3G's other actual or potential claims against the respondents and categories of related third parties, and to Sino's proof of debt against M3G. It was also an "all-up" offer inclusive of the claims, GST, interest and costs in the proceedings. According to some authorities discussed below, it therefore did not constitute a proper Calderbank letter. 27 In Dr Martens, Goldberg J observed that while the policy of promoting sensible compromise underpinned giving effect to the Calderbank offers by imposing a risk of indemnity costs where an outcome less favourable than the offer was achieved, it did not automatically follow that any applicant who rejected an offer more favourable than the result it achieved in the litigation should be at risk of indemnity costs. 28 There was, Goldberg J stated, a countervailing policy against deterring parties from pursuing claims to which they reasonably believed themselves entitled. 29 His Honour stated at [17]: Thus, whenever a Calderbank offer is made, and is enlivened by a result more favourable to the offeror and less favourable to the offeree, it is necessary to look at all the surrounding circumstances and not simply the fact that an offer was made and rejected and the offeree has achieved a less favourable result than the offer. It is necessary to look at the genuineness of the offer, whether it was realistic, the point of time at which it was made and that whether, in all the circumstances, it was such a reasonable offer as required the offeree to give careful consideration to it. If, in all the circumstances, it was unreasonable for the offeree to reject the offer and not accept it then there are strong grounds for the Court ordering indemnity costs on the basis that the offeror has made a fair and reasonable attempt to resolve the proceeding and has given the offeree the opportunity at a relevant point of time in the proceeding to consider the reasonableness of the offer. The Full Court (Neaves, Ryan and Lee JJ) underscored this approach in Donnelly v Edelsten (1994) 121 ALR 333 where it said at 345: "The foundation for the order is the need for the costs order to do equity where a party who has succeeded in the proceeding has made a reasonable attempt to terminate the proceeding by an offer of compromise shown to have been a fair offer in all the circumstances and to have provided appropriate opportunity for the offeree to consider and deal with the offer." 30 Goldberg J accepted that, as relevant authority had held, an offer inclusive of claim and costs should not be considered a Calderbank offer, as it did not "enable an offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in the proceeding in all its aspects" (at [24]). His Honour observed that an all-up offer prevents the offeree from determining the appropriate amount to attribute to the money sum it is seeking, as its costs could only be estimated, rather than taxed in default of agreement (at [24]). Further, his Honour agreed that, as Spender J stated in Smallacombe at 101 102, giving effect to an all-up offer might ultimately penalise firms which conduct lean and efficient litigation. 31 In contrast, in MT Associates, Gillard J, contrary to the view expressed in Smallacombe (and endorsed in Dr Martens), considered that an offer on an all-inclusive basis was a Calderbank letter. He considered that such offers were commonplace and had many advantages, including the avoidance of uncertainties arising from taxation. 32 Gillard J stated that the court should consider any form of offer on the question of costs and should reject overly technical reasons for rejecting offers (at [74]). 33 In WSA Online Ltd v Arms (No 2) [2006] FCAFC 108 ("WSA") at [18], the Full Court appeared, without expressly so stating, to regard an offer which did not "break up the amounts proposed for costs of the hearing at first instance, and of the appeal, separately from the amount of the judgment plus interest" as a Calderbank offer (at [18]). 34 Their Honours referred in that context to Smallacombe and Dr Martens with apparent approval, but nevertheless indicated (at [18]) that the "roll up" was "not a decisive consideration, but weighs in the balance in this matter…" and was one of the reasons for concluding that it was not unreasonable to reject the relevant offer (at [19]). Thus, in WSA, the Full Court seemed to consider that an offer which rolled up the claim and costs could be a Calderbank offer but thought that the roll up weighed against judging rejection of the offer unreasonable. 35 Dover Beach Pty Ltd & Anor v Geftine Pty Ltd (2008) 21 VR 442 ("Dover Beach"), on which the respondents relied, concerned an offer of settlement under s 112 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), under which there was a presumption that the rejection of "an offer in writing to settle the proceeding" could give rise to a costs order if, in the Tribunal's opinion, the result in the Tribunal was not more favourable. Ashley JA (with whom Redlich JA and Coghlan AJA agreed) stated (at [120]), citing MT Associates and Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 8) [2007] VSC 363 at [16]: [E]mphasising the distinction between the subject matter of an offer of compromise and costs, "all in" offers cannot be made under the court's offer of compromise procedure - although such offers are permissible in the form of Calderbank offers. 36 His Honour did not, however, embark on a detailed analysis of the differing views of whether a "rolled up" offer could constitute a Calderbank offer. 37 While there is thus considerable judicial support for holding offers which roll up the claim and costs to be Calderbank offers, the question is not authoritatively resolved. No case was cited, however, in which an offer such as that in this case, requiring releases of actual and potential claims outside the proceeding (including claims against general categories of third parties), was characterised as a Calderbank letter. If offers such as the Sino offer amounted to a Calderbank offer, it would be necessary to assess the value of the extraneous actual and potential claims in order to determine: (a) whether the offer was in fact less favourable to the offeree than the result in the proceeding, as even if the offeree were wholly unsuccessful in it, the value of the extraneous claims might be such that it was in the offeree's interest to retain them whatever the outcome in the proceeding; and (b) what value the offeree should reasonably have attributed to the extraneous claims at the time of the offer. 38 Whatever the precise delimitation of a proper Calderbank offer, that question is frequently overtaken by the fundamental enquiry of whether the rejection of the offer was unreasonable. 39 As Finn J stated in Australian Medic-Care Co Ltd (a company incorporated in Hong Kong) v Hamilton Pharmaceutical Pty Ltd (No 2) [2009] FCA 1494 (at [14]): The significance for costs purposes to be attributed to a rejected Calderbank offer falls, increasingly, for determination by reference to criteria of reasonableness: Was the offer a reasonable one in the circumstances? Was its rejection unreasonable when viewed in light of the circumstances existing at the time of its rejection? See eg University of Western Australia v Gray (No 21) (2008) 249 ALR 360 at 361; Dal Pont at [13.58]. In making that determination, the circumstances of the litigation and the parties' understanding of the strengths and weaknesses of their respective cases can be relevant considerations: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [34]. 40 In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, the Victorian Court of Appeal (at [25]) set out a non-exhaustive summary of matters which would ordinarily be relevant in determining whether the rejection of a Calderbank offer was unreasonable, including: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it. 41 Irrespective of whether a letter technically constitutes a Calderbank offer and, if so, whether it creates any predisposition, it is clear that any offer may be relevant to the court's discretion on costs, in which context the fundamental question is whether the offeree's rejection of the offer was unreasonable in the circumstances existing at the relevant time. 42 The receipt of an offer at a late stage in the proceeding does not necessarily render its rejection reasonable. In Eric Preston Pty Ltd v Euroz Securities Limited (No 2) [2010] FCA 1068, Siopis J stated that an offer made about one week before trial could be considered timely, as (while there were no absolute standards) the parties were then in a good position to know the strengths and weaknesses of their case, the offer was open for a reasonable period of about a week before trial (thus allowing the applicant to avoid the significant costs of the trial) and there was no evidence that the offeree would have assessed its prospects differently at an earlier time. 43 In the present case, the factors which suggest that the Sino letter was not a Calderbank offer also cast doubt upon the value of the offer, indicate that there was no sufficient opportunity to consider it and establish that its rejection was not unreasonable in all the circumstances at the time. 44 As the applicants submitted: 6. The rolled up offer required the Applicants to assess the likely value of the following items:- (1) the claims the subject of the proceeding; (2) the likely party/party costs to date; (3) the amount for GST; (4) the amount for interest; (5) the other potential or actual claims against the Respondents and third parties. 45 The Sino offer was complex and incorporated M3G's release of unspecified claims against the respondents and categories of third parties, which necessarily involved imponderables. The applicants, nevertheless, had only one business day to consider and clarify the components of the total amount offered, the additional claims, and the additional parties involved. 46 The applicants' ability to assess the strength of their claims in the proceeding may have been facilitated by the stage at which the offer was made and there are some indications that the applicants were aware of weaknesses in their position. The outcome of their significant claims depended, to some degree, however, on the evidence to be given at trial. It cannot be concluded, and the respondents did not submit, that the applicants' claims were hopeless or untenable. Further, while the applicants' preceding offer also rolled up costs and damages, it is not clear whether it also extended to M3G's release of all other claims against the respondents, and there is nothing to suggest that it included releases for third parties. 47 Mr Yeo was not cross-examined on his assertion that he was conducting continuing investigations, and although the applicants had not commenced litigation in relation to M3G's other potential claims, the evidence does not permit me to conclude that the investigations are other than bona fide or that all the extraneous claims are valueless or should have been assessed as such at the date of the offer. 48 Moreover, the Sino offer was open for a short time only. The respondents identified no authority in which it was held unreasonable to reject an offer open only for a business day. 49 In Auswest Timbers Pty Ltd v The Secretary to the Department of Sustainability and Environment [2010] VSC 513 ("Auswest Timbers"), Croft J ordered indemnity costs when an offeree rejected an offer which it did not better at trial, which was effectively received on a Friday and remained open until the morning of the following Monday on which the trial commenced. 50 In contrast to the present case, the Calderbank offer in Auswest Timbers was only to settle all claims in the proceeding and specifically apportioned the sums to be paid to damages, including interest, and on account of costs. 51 In MT Associates, the Calderbank offer was open for about six days prior to a final hearing on valuation in the context of complex litigation. It was based on mutual releases by all the parties in relation to the subject matter of the proceeding, and involved the transfer or surrender of share holdings in associated entities. Further, it did not involve release of claims held by categories of third parties who were strangers to the litigation. 52 While a single day might afford a sufficient opportunity to consider some offers, in the present case, given the conjunction of the rolled up offer (the value of which, by its inclusion of extraneous components and imponderables, is doubtful), with the very short time available, I am not persuaded that there was a sufficient opportunity to consider it or that its rejection was, in all the circumstances, unreasonable. Further, while, as the respondents submitted, and as noted in my previous reasons in this matter, the applicants' conduct of the litigation was in many respects unsatisfactory, it was not of a nature or degree to justify the sanction of indemnity costs. 53 Therefore, in my opinion, the applicants should pay the respondents' costs of and incidental to the proceeding on a party/party basis.

rELEASE OF sECURITY 54 The respondents sought the release of the security for costs which required vacation of the order made on 6 April 2011, pursuant to which the costs were to be taxed prior to the payment out of the security. The applicants resisted that course, as the 6 April 2011 order was made by consent and contemplated that the applicants may not succeed in the litigation. As the present outcome was not unforeseen, the consent order should stand. Further, while Mr Connor of the solicitors for Sino deposed that Sino's costs on a party/party basis would exceed the amount of the security, he was not a costs expert. 55 Although the 6 April 2011 orders were made by consent, in circumstances where the applicants concede that they should pay the respondents' costs (albeit on a party/party basis); the applicants were wholly unsuccessful; Mr Connor, as an experienced litigator, estimated that Sino's costs on a party/party basis would far exceed the amount provided as security appears realistic; the amount of security for Lenny's costs of the proceeding including a six day trial does not appear excessive; there is no suggestion that the respondents would be unable to repay any amount if, improbably, the payments to them proved excessive; and the applicants asserted no particular prejudice, I consider that the consent order made on 6 April 2011 should be vacated and the security released to the respondents. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton.

Federal Court Rules 1979(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (22 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (16)

Cited By (2)