The defendant applies by motion to dismiss these proceedings for want of due dispatch. The principal point at issue on the motion is whether dismissal for want of due dispatch should be granted, where continuation of the proceedings is conditional upon the plaintiff paying previous costs orders, and where those previous costs orders are unpaid and are unlikely to be paid in future. An additional point at issue is whether any costs order against the plaintiff should be paid by a third party, who has played a role in the plaintiff maintaining these proceedings, and who stands to benefit from them.
The plaintiff, Maylord Equity Management Pty Ltd ("Maylord") filed its Summons and Commercial List Statement commencing these proceedings on 22 April 2016, joining Mr Marcel Nauer as defendant. The defendant twice sought by motion to strike out the Commercial List Statement on the grounds that it did not disclose a reasonable cause of action. The defendant's motions led to the making of two previous sets of costs orders that are the basis of the defendant's present motion for dismissal. These previous costs orders provide the structure for the determination of the issues now before the Court.
[2]
The Previous Costs Orders Against Maylord
Orders made by Bergin CJ in Eq. The defendant's motion was successful. On 24 October 2016, Bergin CJ in Eq made orders on the defendant's motion striking out the Commercial List Statement. Her Honour refused Maylord leave to file the draft Amended Commercial List Statement that it had by then served in the proceedings, on the basis it also did not disclose a reasonable cause of action.
The application before Bergin CJ in Eq to strike out was on the basis of a deficiency in pleadings and on the basis that the defendant had the benefit of a deed of settlement in respect of the pleaded causes of action. Her Honour decided the matter on the basis of the deficiencies in the pleadings. Counsel for Maylord foreshadowed that an application would be made to set aside the settlement deed as having been entered into under economic duress. Her Honour dismissed an application that costs not be payable forthwith.
Bergin CJ in Eq's strike-out orders also required Maylord to pay Mr Nauer's costs in the fixed sum of $25,000 by 21 November 2016 ("the October 2016 costs orders"). Maylord was granted leave to file an Amended Commercial List Statement but on the condition that it first paid Mr Nauer the $25,000 in costs. The time for compliance with the October 2016 costs orders was extended on two occasions: first to 8 December 2016 to accommodate a mediation on 5 December and then, after the parties had apparently reached a settlement in principle, to 22 December 2016. These extensions were ultimately to no avail as the court-ordered mediation and subsequent settlement in principle collapsed, after Maylord terminated its lawyers retainer.
Once the settlement negotiations had failed, with Bergin CJ in Eq's leave, Maylord filed two separate motions to set aside the October 2016 costs orders: the first on 6 February 2017 and the second on 24 March 2017. Hammerschlag J dismissed the 6 February motion. But the Court granted Maylord leave to file a further iteration of its motion within six months. Maylord then filed its 24 March motion. Hammerschlag J dismissed this motion on 7 April 2017 due to Maylord's non-appearance at the hearing of the motion. Mr Ohlson later explained he was late for the hearing before Hammerschlag J. But he was not there and the proceedings were dealt with in his absence.
Orders made by Ward CJ in Eq. On 12 May 2017, Ward CJ in Eq heard two notices of motion, one from each side of these proceedings. Ward CJ in Eq delivered reasons dealing with these motions on 22 May 2017: Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund v Nauer [2017] NSWSC 634 (the "May 2017 judgment").
Maylord's motion filed on 7 April 2017 sought to set aside Hammerschlag J's dismissal of its 24 March motion. And Mr Nauer had filed a motion on 28 April 2017, seeking the stay or dismissal of the proceedings, on the basis that Maylord was in a position neither to commence nor continue the proceedings in its capacity as trustee for the Batterham Retirement Fund ("BRF"). Mr Nauer contended on the motion that Maylord was disabled from taking an active role as a trustee/plaintiff in the proceedings because it was not compliant with its obligations under the Superannuation Industry (Supervision) Act 1993 (Cth) ("the SIS Act") and as a result now lacked authority to act as trustee of the BRF.
The defendant's point arose in the following way. The BRF is established by deed of trust as a superannuation plan. Mr Batterham is the sole member of the BRF. Maylord has been the corporate trustee of the BRF since 2002. Mr Batterham has been bankrupt since November 2014.
Ward CJ in Eq found that the effect of the SIS Act, s 17A was that Mr Batterham is now, by virtue of his bankruptcy, disqualified from acting as a director of Maylord, which as a result does not satisfy the requirements of the SIS Act to qualify as a self-managed superannuation fund ("SMSF"). A superannuation entity that no longer meets the definition of an SMSF, must appoint an approved superannuation entity as trustee or wind up the fund.
Maylord cannot now be the trustee of the BRF. But despite that, Ward CJ in Eq decided in accordance with established authority on the subject (Berowra Holdings Pty Limited v Gordon (2006) 225 CLR 364; [2006] HCA 32 at [11]) that these proceedings commenced by Maylord are not a nullity but rather are liable to be stayed or dismissed for want of authority: May 2017 judgment at [56]. Ward CJ in Eq considered it appropriate to stay the proceedings pending payment by Maylord of the costs orders against it, because "it is not beyond doubt that the defect in the commencement of the proceedings could not be rectified in some fashion": May 2017 judgment at [56].
But Ward CJ in Eq warned that if "steps are not taken to clothe Maylord with the necessary authority to continue to prosecute the proceedings, then the defendant can apply for the matter to be struck out on the basis of the proceedings that have been commenced are sought to be continued without authority": May 2017 judgment at [57]. Her Honour considered it appropriate, "to allow Maylord an opportunity to rectify the position, given that there will inevitably be some delay pending payment of the Court's costs", having regard to Maylord's impecuniosity: May 2017 judgment at [57]. So her Honour stayed the proceedings and dismissed Maylord's motion.
Her Honour's reasons indicate it was in possible contemplation that Maylord would be able to rectify its SIS Act compliance issues and that it would perhaps be able to restore Maylord's authority to act as trustee of the BRF. Her Honour formally ordered: (1) that the proceedings be stayed until Maylord had paid the costs orders made in the proceedings to date; (2) that Maylord pay all the defendant's costs in the proceedings, incurred since the October 2016 costs orders; and (3) under Civil Procedure Act 2005, s 98(4)(c) her Honour assessed those costs in the gross sum of $55,000 ("the May 2017 costs orders").
Her Honour's judgment sets out further background to these proceedings in addition to the summary given here: May 2017 judgment at [5] to [34]. Some of the background dealt with by her Honour is gathered below. These reasons may usefully be read in conjunction with her Honour's May 2017 judgment.
As a footnote to this history, it should be mentioned that Mr Batterham's November 2014 bankruptcy has already raised other issues. On 19 December 2014 the plaintiff had commenced earlier proceedings dealing with substantially the same subject matter as the current proceedings ("the 2014 proceedings"). But Mr Batterham did not inform this Court of his bankruptcy and sought leave to appear as Maylord's director. He had also signed the Summons in the 2014 proceedings in his purported capacity as a director of Maylord. The 2014 proceedings were dismissed by Hammerschlag J on 24 April 2015 for unrelated reasons: for non-compliance with the Court's directions. But Mr Nauer says that Mr Batterham misrepresented his status as a bankrupt.
In the 2014 proceedings Mr Batterham represented the plaintiff, Maylord, in Court with leave and held himself out as a director of the plaintiff despite being an undischarged bankrupt. There is perhaps a slight risk that his discharge from bankruptcy may be delayed on this account. But Mr Batterham contests that there will be any delay in his discharge.
[3]
From the May 2017 Judgment to the Present Motion
Thus, by May 2017 Maylord was liable to pay Mr Nauer a total of $80,000 under the combined October 2016 and May 2017 costs orders. Maylord has complied with neither the October 2016 nor the May 2017 costs orders.
The May 2017 costs orders had also granted Mr Nauer liberty to apply for an order that the proceedings be dismissed for want of due dispatch. On 7 July 2017, the defendant's solicitors, Esplins Solicitors, sent a letter to the plaintiff, care of Maylord's director, Mr Garry Ohlson, requesting payment of the $80,000 owed pursuant to the October 2016 and the May 2017 costs orders. Esplins notified Mr Ohlson that the defendant intended to file a Notice of Motion to dismiss the proceedings for want of prosecution.
Mr Ohlson responded to the letter from Esplins. His email in response of 19 July said the following:
"…when the BRF is properly represented by a complying trustee the proceedings will be prosecuted. We have accepted that there is an issue to be rectified and as such, until this occurs it is not possible for Maylord to take any action in the proceedings, including any appeal of
other aspects of the judgment. These activities are currently underway and your concerns will be addressed.
In any case, on 3 December 2017 Mr Batterham will be able to become the sole director of Maylord or some other corporate entity as a complying trustee of the BRF…"
On 2 August 2017 Mr Nauer filed the present motion for the dismissal of the proceedings for want of due dispatch ("the dismissal motion") supported by an affidavit of Mr Nauer's solicitor, Mr Stephen John Rush of 31 July 2017. The dismissal motion seeks: that the plaintiff's Summons in the proceedings be dismissed for want of due dispatch; an order under Civil Procedure Act 2005, s 98(4)(c) that Maylord pay Mr Nauer's costs of the proceedings in the fixed sum of $218,759.20; and an order that Mr Peter Batterham (the second respondent to the motion) pay Mr Nauer all the costs for which Maylord is liable to Mr Nauer.
Mr JR Clarke SC appeared on the dismissal motion for the applicant/defendant, Mr Nauer, instructed by Mr Stephen John Rush of Esplins Solicitors. Mr Ohlson Maylord's sole director was granted leave to appear for the company. The defendant/applicant joined Mr Peter Batterham as another respondent to the dismissal motion. Mr Peter Batterham appeared without legal representation to argue in his interests as the second respondent to the motion. He incidentally also put argument related to Maylord's interests.
Maylord does not presently have the financial resources to pay the $80,000 owed to Mr Naur under the combined October 2016 and May 2017 costs orders. The plaintiff's straightened financial position is not in contest.
And Mr Batterham remains an undischarged bankrupt. Prior to his bankruptcy he had been a director of Maylord. He is due to be discharged from bankruptcy on 3 December 2017. If and when he is discharged from bankruptcy he says that he intends to resume his former position as the sole director of Maylord.
[4]
The 1 September Hearing of the Dismissal Motion
The Court heard the dismissal motion in the Equity Division Applications List on 1 September 2017. The Court heard the parties' oral submissions on the dismissal motion on 1 September 2017. But those oral submissions canvassed the possibility of applications for leave to appeal against each of the October 2016 and May 2017 costs orders.
To accommodate supplementary submissions on the issue of leave to appeal, the Court made the following orders at the conclusion of the 1 September 2017 hearing:
The Court:
1. Directs that within 7 days, the respondents to the motion should put on a short statement of the posited grounds of appeal upon which they would rely if Mr Batterham emerged from bankruptcy in December 2017, resumed as a director of Batterham Retirement Fund and sought to set aside previous orders made by Bergin CJ in Eq (as she then was) and Ward CJ in Eq, together with a short submission in support of those grounds.
2. Directs that by Friday, 15 September 2017 the applicant on the Motion is to file any submissions in reply.
3. Adjourns the balance of the Motion to the judgment on the strike-out application.
Maylord filed its submissions on the draft appeal outline on 8 September 2017. Mr Nauer filed submissions in reply on 14 September 2017. The Court then reserved judgment.
[5]
The Parties' Submissions and the Court's Consideration of the Motion
The defendant/applicant, Mr Nauer submits these proceedings should be dismissed for want of due dispatch. His submissions are persuasive.
Dismissal for want of Due Dispatch. The legal principles applicable to motions for dismissal under UCPR, r 12.7 for want of due dispatch in prosecuting proceedings may be shortly stated. Although useful guidance may be provided by the manner of exercise of the Court's discretion in other cases to dismiss proceedings for want of prosecution, each case must depend on its own facts and fixed formulae cannot be prescribed to limit the judicial discretion to do what is just between the parties in the circumstances: Stollznow v Calvert (1980) 2 NSWLR 749 ("Stollznow"), citing Walsh J in Witten v Lombard Australia Ltd (1968) 88 WN (Pt 1) (NSW) 405, at 411 and 412 ("Witten"). Stollznow was applied Micallef v ICI Australia Operations Pty Limited [2001] NSWCA 274 at [62].
Factors commonly considered in deciding whether or not to strike out proceedings for want of due dispatch are - the length of delay, the explanation for the delay, hardship to the plaintiff, especially if the cause of action will be statute-barred, any prejudice to the defendant if the action is allowed to proceed despite the delay, and the conduct of the defendant in the litigation: Ulowski v Miller [1968] SASR 277.
I accept the defendant's' submission that these proceedings are likely to remain in paralysis for the foreseeable future, even if Mr Batterham is discharged from bankruptcy next month. Maylord is unable to trace out any viable path that would demonstrate that it will ever be in a position to advance these proceedings. Two potential paths are available to Maylord. Both of these potential paths were explored in the 1 September 2017 hearing and thereafter.
Neither path is available. The first path is to show that Maylord is in a present position to or has plans to pay the costs orders. The second path is for Maylord to show that it has some realistic prospect of appealing against the costs orders. Maylord has not been able to show that either path is realistically open to it.
Paying Costs. The October 2016 and the May 2017 costs orders have been outstanding for some time. No offer to pay those costs has been made on Maylord's behalf. No balance sheet or funding sources have been put before the Court to show that there is even a possibility of future payment of these costs orders. No balance sheets or other financial statements of Maylord are available after 30 June 2012, contrary to the accounting requirements of the SIS Act. Demands for the payment of the costs outstanding have been made and the existing orders remain unsatisfied. Mr Batterham deposes that BRF is without funds. Because Maylord appears to have been acting in contravention of the SIS Act and therefore without proper authority, it is doubtful whether Maylord would be entitled to an indemnity against the BRF for its liabilities as trustee, even if Maylord were motivated to take action and BRF had the funds to meet Maylord's liabilities. On this material alone, the Court would infer that there is no realistic prospect of the existing costs orders being paid in the future. But the evidence went even further.
Both Mr Ohlson and Mr Batterham have been disarmingly frank in admitting at the hearing on 1 September 2017, not only Maylord's lack of present financial means to pay the existing costs orders, but the lack of any plan to put itself in a position where it may be able to pay those costs orders.
The admissions made on Maylord's behalf were unambiguous. Mr Ohlsen said "Whilst there has been very little activity [by Maylord] other than that this particular matter, simply because a superannuation [Fund] has no assets, it has no funds whatsoever, so the involvement with myself and Maylord at this particular point is just basically of a functionary signing off on accounts and approving general meetings and those type of things". And to the question from the Court about the $80,000 in costs already ordered to be paid: "…if I don't strike the proceedings out, what is the plan for paying the outstanding costs orders that have been quantified?" Mr Ohlson said "[a]t this particular point, your Honour, the superannuation fund [BRF] itself has no funds. It does not have any prospect of them". Mr Ohlson did not really dissent from the Court's summary back to him of that answer: that he was really saying "there is no plan [for paying the outstanding costs orders]". And no evidence has been filed on his behalf of such a plan.
Although Mr Batterham is not an officer of Maylord and is not in a position to make admissions on Maylord's behalf, he is nevertheless the person who, if and when he were to be discharged from bankruptcy in December 2017, plans to take back control and direction of the company. To that extent what he said to the Court about his future plans for Maylord is of relevance about Maylord's financial future.
Mr Batterham was equally frank. When the Court suggested to Mr Batterham that it looked as though there was "no plan" to fund Maylord, Mr Batterham said that he was in discussions with the litigation Funder "on this issue". But he said, "when you say there is no plan, there is a strategy but of course not a plan, if you get the difference in meaning". He went on to say that there is "definitely a strategy". But Maylord did not identify any litigation funder or put evidence before the Court to indicate that litigation funding was a realistic prospect.
Setting aside the Costs orders. The only other way for Maylord to break out of the BRF's present procedural paralysis, is for it to show that it has some prospect of being able to have the existing costs order set aside. To ensure this possibility was fully explored, the Court gave Maylord and Mr Batterham the opportunity to put in written submissions after the hearing, to demonstrate whether there was any prospect that the existing cost orders could be set aside, once Mr Batterham was in a position to become a director of the company again.
But nothing new emerged from these post-hearing submissions. They tended rather to demonstrate the unlikelihood of any variation to the existing costs orders. It is not for this Court to speculate as to what would happen on appeal. It is sufficient for present purposes to accept the costs orders as they are. But nothing in the supplementary material raises a serious challenge to these costs orders.
The post-hearing written submissions do not explain how Ward CJ in Eq's discretionary judgment in making the May 2017 costs orders, which are substantial on their own (at $55,000), can be directly challenged. And as to the October 2016 cost orders, Ward CJ in Eq has already concluded in her May 2017 judgment that she could see "no error in principle or material misapprehension of fact" effecting the exercise of Bergin CJ in Eq's costs discretion in making those costs orders. Neither party asked Bergin CJ in Eq for reasons for her decision. Maylord's submissions about her Honour's decision are based on speculation from the transcript of argument before her Honour's decision.
Moreover, it is objectively difficult to see how an appeal could succeed in circumstances where there have been multiple failed attempts to rely upon similar pleadings to those struck out and resulting in the $80,000 costs orders. Maylord's underlying cause of action should not have been difficult to plead. It is therefore somewhat surprising that Maylord has been incapable of filing a competent pleading, after so many failed attempts. One of Maylord's contentions is that it was a joint-venturer in a joint-venture vehicle in the strata management industry. The defendant was a director of the joint venture vehicle. Maylord contends against the defendant that he conspired with another director to transfer at least $7.5 million out of the joint-venture vehicle into another company, in which the defendant was interested, fraudulently and in breach of his fiduciary duties as a joint-venturer. The joint-venture agreement was apparently unwritten and Maylord relies upon a case that Mr Nauer breached the duties of a joint-venturer that the High Court defined in United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1. Maylord puts its case in a number of other ways, which all involve alleged misconduct by the defendant to secure benefits for himself from the joint venture without Maylord's knowledge.
Maylord's Other Arguments. Maylord advances a number of other arguments to repel dismissal for want of due dispatch. First, it contends that its delay is not great; it does not persist over years. But in only 18 months Maylord's own conduct of these proceedings has paralysed any realistic possibility of their continuation. No basis to lift the existing stay is established, even if Mr Batterham is discharged from bankruptcy. And in that 18-month period Maylord has sought several times without success to set aside the October 2016 costs orders. Whilst there has undoubtedly been litigious activity on the plaintiff's part, that activity has neither advanced Maylord's case, nor offered any realistic prospect of its advancement.
Secondly, Maylord contends that if its claim is struck out that it will be statute-barred. But Maylord's claim is to set aside a deed of settlement dated July 2011 for economic duress and unconscionable conduct. It says that a six-year limitation period applies to setting aside this deed and that it ran out in July 2017. But it may be that the purely equitable remedies to set aside the settlement deed are not time-barred: see Meagher, Gummow and Lehane, Equity Doctrines and Remedies, Turner, Leeming and Heydon, 5th Edition, LexisNexis, 2015 [36-075], [36-080] and [36-085]. Nevertheless the issue should be approached on the basis that there is at least some risk of the loss of a right of action, if the proceedings are struck out.
But Maylord has deliberately courted the possibility of these proceedings being struck out and has done nothing to prevent that course. It is too late for Maylord now to complain about its claims being statute-barred as a result of a dismissal. Ward CJ in Eq made clear in the May 2017 judgment (at [56] - [57]) that if "…steps are not taken to clothe Maylord with the necessary authority to continue to prosecute the proceedings, the Defendant can apply for the matter to be struck out". Maylord has done nothing to clothe itself with authority other than to wait until it hopes Mr Batterham is thought to be discharged from bankruptcy on 3 December 2017.
And as the defendant rightly submits, without a funding plan waiting to 3 December will not remove the stays in place to allow the plaintiff to take any steps forward in the proceedings. Mr Batterham could have chosen to demonstrate to the Court what course of action he planned for the period after 3 December to remove the stays over Maylord's conduct of these proceedings, once Maylord was clothed with authority to continue the proceedings.
Despite Maylord's casual approach to its own financial planning to date, the Court can and should fashion orders to do justice between these parties, to preserve Maylord's and Mr Batterham's rights to keep these proceedings on foot for a short period after Mr Batterham ceases to be a bankrupt. The Court will dismiss these proceedings for want of due dispatch but will stay the dismissal order for 10 days after Mr Batterham's exit from bankruptcy, when id so motivated he can take charge of Maylord's affairs again himself: that is, Maylord will have a stay until 13 December 2017. That will give Maylord an opportunity to appeal against this order for dismissal and to seek a further stay pending appeal. In the meantime, this Court will deal with a number of matters that are reserved for further consideration.
Finally, it should be observed that of the other factors commonly considered in applications to dismiss for want of due dispatch, few assist Maylord's position. Maylord has not given any adequate explanation for its failure before now to remove the existing stay or otherwise to clothe itself with authority to continue these proceedings. Mr Nauer has not contributed to the delay in any way but instead has sought by the timely filing of motions to have the proceedings brought to decision in the near term. And Mr Nauer's expenditure on these proceedings is already substantial, at an estimated $218,759.20 to this point. Their continuation will be costly.
Conclusion. In my view it neither serves the interests of the administration of justice nor is it fair to the defendant to require him to expend further costs in litigation, which presently has no prospect of advancement by any identifiable means to benefit the plaintiff. This is a proper case in my view for the Court to exercise its discretion to dismiss the proceedings for want of due dispatch under UCPR, r 12.7. To use the words of Walsh J in Witten (at 411) "…on balance justice demands that the action should be dismissed". The Court will so order.
Costs will follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs: UCPR, r 42.1. There is no reason here to make any other order. The proceedings have been dismissed. Maylord should pay Mr Nauer's costs, not only of this application but of the proceedings.
[6]
Mr Batterham's Liability for Costs
The defendant/applicant contends that Mr Batterham should be made liable to meet any costs order to which Maylord is liable. The basis of the contention is that Mr Batterham has been the moving force behind these proceedings. He certainly has been the moving force behind the present application as the evidence identified below demonstrates.
But whether or not he was the moving force behind the proceedings generally, and beyond both the present application and the applications before Bergin CJ in Eq and Ward CJ in Eq, may have to be the subject of further consideration. But for the reasons shortly to be discussed, the Court is prepared to make a personal costs order against Mr Batterham in respect of the current application and in respect of the applications before Bergin CJ in Eq and Ward CJ in Eq (which have already been quantified against Maylord in the total sum of $80,000) and the December 2016 mediation. More detailed evidence and argument would be required to establish that Mr Batterham should be made liable for the whole of Maylord's costs of the proceedings.
The Court will leave that question open. As the next section of these reasons shows, the parties will have to return to Court to deal with the quantification of a gross sum costs order, in lieu of an assessment of costs under Civil Procedure Act, s 98 (4) (c). The question of the extent of Mr Batterham's costs liability in these proceedings beyond the costs of the present application and the $80,000 in costs for the applications before Bergin CJ in Eq and Ward CJ in Eq, can be dealt with at the same time as the Court considers the quantum of the Civil Procedure Act s 98 (4) (c) orders.
The law relating to the liability of third parties for costs orders made in proceedings may be shortly stated. Orders for costs may be made against non-parties where the unsuccessful party to the litigation is at an insolvent person or "a man of straw" and when the non-party has played an active role in the conduct of litigation and where the non-party has an interest in the subject of the litigation: Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 192 - 193 and FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [210]. The role of the non-party will commonly include the sourcing of funds for the litigation. But the mere funding of litigation on its own will not permit the ordering of costs against the funder: Jeffrey & Katauskas Pty Ltd v SST Consulting Pty Limited (2009) 239 CLR 75; [2009] HCA 43 at [43]. The non-party will usually have an interest in the litigation which is equal to or greater than that of the party, or at least a substantial interest in it.
Mr Batterham should be made personally liable for the costs of the present application. Mr Batterham generally satisfies the requirements for a costs order against a third party. He has shown himself to be substantially in control of Maylord's actions and has been initiating and directing the impecunious Maylord's steps on this application. He alone stands to benefit from any success Maylord has against Mr Nauer, as the sole beneficiary of the BRF.
Mr Batterham effectively ran the hearing on 1 September 2017. Mr Ohlson made short submissions and then deferred to Mr Batterham. Mr Batterham claimed to know more than Mr Ohlson about the underlying facts and history of the proceedings. Mr Batterham put himself forward as the person who could speak not only in his own interests as respondent to the motion, but on behalf of Maylord at the oral hearing. Mr Ohlson signed Maylord's submissions on the application dated 21 August 2017 but Mr Batterham prepared them, as they declare.
But beyond the 1 September hearing, there is much objective evidence to support the conclusion that Mr Batterham ran aspects of these proceedings before Bergin CJ in Eq and Ward CJ in Eq for his own benefit, through Maylord, a company without financial substance. Mr Batterham was then too the sole member of the BRF and the person for whose financial benefit Maylord acted as trustee for BRF in conducting the litigation.
It is also obvious from the transcript of the previous applications before Bergin CJ in Eq and Ward CJ in Eq that Mr Batterham has appeared and has interrupted whilst Mr Ohlson was appearing on behalf of the plaintiff to provide Mr Ohlson with instructions, or to try and speak to the Court directly, just as he did in the application on 1 September 2017. On several occasions Bergin CJ in Eq and Ward CJ in Eq had to make clear to Mr Batterham that only one person should speak on behalf of the company. Even Mr Batterham himself declared that Mr Ohlson is merely "standing in his shoes," while he remains an undischarged bankrupt. Mr Batterham has declared his intention to become the sole director of the plaintiff once he is discharged from bankruptcy. Mr Batterham has paid all ASIC fees on Maylord's behalf despite his bankruptcy and has paid filing fees and transcript fees in the current proceedings and arranged the mediation fees, and which mediation he alone attended on Maylord's behalf rather than Mr Ohlsen.
This is enough in my view to support the conclusion that Mr Batterham is responsible for driving this litigation before Bergin CJ in Eq, Ward CJ in Eq, in the mediation and on the present application. More detailed analysis would be required for the Court to conclude that Mr Batterham should be responsible for all costs awarded against Maylord in these proceedings, although the evidence points in that direction.
There is no obstacle to the Court making a costs order against Mr Batterham even though he is bankrupt: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52.
[7]
A Gross Sum Costs order
The defendant seeks a gross some costs order under Civil Procedure Act s 94(4)(c), in respect of the costs orders already made. Such orders are not uncommonly made in situations such as the present, where the person or the entity against which costs orders have been made is not of financial substance and substantial further costs would be expended in assessing the costs order so made: Hamod v New South Wales [2011] NSWCA 375 at [816] - [818].
The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. Civil Procedure Act, s 98(4)(c) is expressed in general terms and is not limited to cases of a particular class or type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 (von Doussa J).
Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 ("Schipp") at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 ("Hadid") (Lehane J).
How does the gross sum assessment take place? The specified gross sum under s 98(4)(c) can be fixed broadly, having regard to all the information available to the Court: Schipp at [22] and Hadid at [27]. The approach taken to the estimation of costs must be "logical, fair and reasonable" and the powers should only be exercised when the Court considers it can do so "fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available": Schipp at [22] per Giles JA.
I summarised the law regarding the powers available under Civil Procedure Act, s 98(4)(c) in Simone Starr-Diamond v Talus Diamond (No. 4) [2013] NSWSC 811.
In my view this is a classic case for the making of a Civil Procedure Act s 94(4)(c) order. Maylord is by its own representatives' admission an entity of no financial substance. It has no plans to pay the existing costs orders made against it, or to put itself in a position to pay those costs orders in the future. Maylord has already shown itself ready to generate multiple forms of pleading without success. Maylord's submissions on the present application show that it is not prepared to accept much, if anything, in the May 2017 judgment. It can reasonably be anticipated that any future costs assessment in relation to the costs orders already made against Maylord and Mr Batterham, will be protracted, disputatious and costly for the defendant. The Court will accordingly make a gross sum costs order instead of assessed costs under Civil Procedure Act, s 94(4)(c) against Maylord and against Mr Batterham, in respect of the costs orders made against each of them respectively.
But here neither the plaintiff nor Mr Batterham have had a proper opportunity to answer the affidavit evidence put on by the defendant in relation to the quantification of the costs of the proceedings under Civil Procedure Act, s 94(4)(c), which quantification is also being sought on the present application. Very little argument was addressed to this question on 1 September 2017. Maylord and Mr Batterham should be given a fair opportunity to say what they wish against the quantification that is being sought.
Accordingly, the Court will provide an opportunity for the respondents to the motion to put on any evidence or put any specific submissions that they wish directed towards the issue of the quantification of a gross some costs order under Civil Procedure Act, s 94 (4)(c) in respect of the costs orders already made, but not as yet quantified.
[8]
Conclusions and Orders
For the reasons given, the Court makes the following orders and directions:
1. These proceedings are dismissed pursuant to Uniform Civil Procedure Rules, r 12.7 for want of due dispatch;
2. The plaintiff is ordered to pay the defendant's costs of the whole of the proceedings including this motion, in addition to any existing costs orders in the defendant's favour;
3. The second respondent to the motion, Mr Peter Batterham, is also ordered to pay the applicant's costs of this motion for dismissal, the costs of the mediation held in December 2016, and the $80,000 in costs the subject of the applications before Bergin CJ in Eq and Ward CJ in Eq and he will be jointly and severally liable with the plaintiff for the payment of those costs;
4. The Court makes a gross sum costs order instead of assessed costs under Civil Procedure Act s 98(4)(c):
1. against Maylord, in respect of the costs orders made in orders (2), and
2. against Mr Batterham in respect of the costs orders made in order (3) above;
1. The Court reserves for further consideration:
1. the quantification of any gross sum costs order made under Civil Procedure Act s 98(4)(c) against Maylord, in respect of the proceedings, and the quantification of any gross sum costs order made under Civil Procedure Act s 98(4)(c) against Mr Batterham in respect of the present application and the December 2016 mediation, and
2. whether the second respondent to the motion, Mr Peter Batterham, should pay more of the costs which the plaintiff has been ordered to pay the defendant than have already been ordered against him pursuant to order (3).
1. Direct Maylord and Mr Batterham to file by 15 November 2017 any further evidence on the question of the quantification of any gross sum costs order made under Civil Procedure Act s 98(4)(c) against Maylord, in respect of the proceedings, or against Mr Batterham in respect of the present application and the December 2016 mediation.
2. The proceedings are adjourned to 22 November 2017 before me at 9:30 am, for any short supplementary hearing in relation to the quantification of any gross sum costs order made under Civil Procedure Act s 98(4)(c) against Maylord, in respect of the proceedings, or against Mr Batterham in respect of the present application.
3. At the hearing on 22 November 2017 the parties are also at liberty to contest the question of whether the second respondent to the motion, Mr Batterham, should pay all the costs payable by Maylord that are being quantified, in addition to the costs he has been directed to pay in order (3) above; and
4. Stay the operation of Order (1) until 13 December 2017.
5. Grant liberty to apply.
[9]
Amendments
06 November 2017 - coversheet- citation of text
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Decision last updated: 06 November 2017
Parties
Applicant/Plaintiff:
Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund