New Price Retail Services Pty Limited and Anor v David Hanna

Supreme Court of NSW|2014-10-31|Before: Sackar J

Proceedings 1These proceedings concern a notice of motion filed by the plaintiffs on 6 September 2013, seeking a number of orders in relation to the reports of a referee. There is also before me a motion filed 17 October 2014 by the defendant. 2The plaintiffs by their motion seek the adoption of the reports of the referee dated 24 July 2013 and 16 August 2013, an order that the defendant pay the sum of $732,799.44 into court, an order pursuant to UCPR rule 20.18 that the defendant pay the whole of the costs of the referee of and incidental to the reference and provide security for those costs pending their final determination. The plaintiffs also seek an order that the sum of $9,000 paid to the referee be released and costs. 3I previously gave judgment in this matter on 9 May 2014 in relation to the adoption of the referee's report. I proposed to make an order that the report be adopted for the reasons set out in New Price Retail Services Pty Limited and Anor v David Hanna [2014] NSWSC 553 (principal judgment). I have not yet made a formal order that the report be adopted, despite raising this with counsel for the plaintiffs on a later occasion (transcript of 31 July, T10/28). That said, I am satisfied that appropriate attempts were made on the part of the plaintiffs to suggest to the defendant what orders should be made as a result of the principal judgment. The defendant has simply not co-operated. 4I also heard the parties on 31 July and gave judgment on 4 August in relation to the application by the plaintiffs to join the former solicitor of the defendant, Mr George Hanna, for the purpose of making him liable for all or part of the referee's fees. I dismissed that application for the reasons set out in New Price Retail Services Pty Limited and Anor v David Hanna [2014] NSWSC 1051 (joinder judgment). As noted in those reasons, the defendant appeared by telephone at the hearing on 31 July and made an application for an adjournment. Although I proceeded to hear the application for joinder, I adjourned the motion of the referee in relation to the fixing of his fees, and the balance of the plaintiff's motion of 6 September 2013. I also indicated that I was minded to direct that the remuneration of the referee be determined by a Registrar. That has been done by orders made in chambers on 14 August. 5On 10 October, with Mr Hanna again appearing by telephone, I adjourned the matter which was listed for 13 October, despite the opposition of counsel for the plaintiffs, to 31 October. It was made clear that the hearing on 31 October would only be in relation to the motion of the plaintiffs and would not cover the fee issue concerning the referee (transcript of 10 October, T4/18; T5/16). It was also made clear that the plaintiffs sought costs thrown away and the costs of 10 October, and that would be dealt with on 31 October (T4/33). 6On 31 October, after receiving written submissions and hearing oral argument, I announced my decision and indicated that I would provide reasons at a later point. These are those reasons.

The adoption of the report and Mr Hanna's motion 7In the principal judgment, I proposed to adopt the reports in their entirety: see [196]. However, as I have said, a formal order to that effect has not yet been made. 8Subsequent to 10 October, Mr Hanna filed a notice of motion dated 17 October 2014 in which he sought that the sum determined by the referee be "adjusted after consideration of the proof of delivery documentation obtained from Linfox", the liability of the Referee's fees be finalised after such an adjustment, and an order that the plaintiffs provide security for his costs. Mr Hanna filed an affidavit which described and exhibited an email from an employee of Linfox, Mr Steve Goltz, in relation to proof of delivery documentation, although that documentation is not before me and does not appear to have been provided to the defendant, let alone the plaintiffs. Mr Hanna also provided some short written submissions in support of his notice of motion. The effect of acceding to Mr Hanna's motion would be to permit him, in my view, to re-open a matter which was central to the referee's investigation and analysis. 9The email to which I referred responded to an earlier email from Mr Hanna to Mr Goltz dated 10 October 2014 at 5.21pm. It provided relevantly as follows: Dear Steve, Thank you for your time and the opportunity in explaining your role and responsibility at Linfox and how you are able to further assist me, and other franchisees subjected to the same issue, in accurately identifying what Priceline stock Linfox delivered to Priceline stores, and when it was delivered. My understanding from our lengthy discussion was that your role was the National Distribution Manager at Linfox, which involved overseeing all warehouse distribution of stock from API's Dandenong Warehouse Distribution Centre from 2005-2009, which is the entirety of my Franchise period. As per our discussion, I wish to confirm the following: 1. API solely used Linfox for the distribution of stock from the API Dandenong Warehouse Distribution Centre, from 2005 to 2009, for deliveries to Priceline Franchisees and company owned stores. 2. Linfox has kept records of all proof of delivery documentation for each Priceline delivery, and all of these records have been individually marked and retained and can be easily retrieved for audit purposes. 3. The proof of delivery records kept by Linfox has a direct reference to Priceline invoice numbers and delivery manifests, and so invoices can be accurately correlated with the Linfox proof of delivery records. (As per the attached proof of delivery record example) 4. Linfox have kindly offered to supply the records associated with ray particular store at no expense. I appreciate your willingness and proactive commitment to obtain within the next 2-3 weeks all proof of delivery records and manifests stored at Linfox which specifically relate to my store. For ease I provide you with my exact store details; My store number - 291 Priceline Pharmacy Liverpool 228 Macquarie St Liverpool NSW 2170 The Linfox proof of delivery records for my store are necessary as I am not in possession of these in spite of my numerous requests from API and Priceline who allege that they do not hold these records, and in spite of being instructed to send all documentation pertaining to delivery records back to Priceline head office on a weekly basis, to be compliant with the Franchise. Your assistance is greatly appreciated. With your permission, I would like to pass on your details to other franchisees whom I am aware are facing the same issue. I sincerely wish to thank you in advance for your support in assisting me with the task at hand and look forward to hearing from you soon. Kind regards David Hanna - [XXX] [emphasis added] 10Mr Goltz replied at 5.35pm on the same day in the following terms: Good day David Your attachment above is correct in following from our earlier conversation and I confirm the same. Apologies for the very late response I have been continually traveling, I will be in Melbourne all next week, also I will make sure I go to line haul to find the information you require to assist you on what stock was sent from Priceline Dandenong Warehouse to your store in Sydney, as per our discussions I am 100% certain that I will be able to supply full documentation on all your deliveries. David I know are probably sick of hearing my apologies again but I will do everything in my power to assist you in your endeavours As mentioned, David, I kept all records of delivery from the very start of the commencement of Priceline, in 2005, to the very end date of 2009. This was a requirement of Priceline, and also of Linfox. We were the sole distributors of Priceline, and I was the National Manager of distribution during this time. If we could make a suitable time to meet in Melbourne, we can arrange a time for you to view the records. We have a full manifest of each load that was delivered to each store, including yours. Please contact me should you require any further assistance on [XXX]. Regards Steve Goltz Linfox Logistics [emphasis added] 11In response to my questioning, Mr Hanna confirmed that the attachment referred to in his email to Mr Goltz was the same as the documents provided to the referee by Mr Hanna on 15 August 2013 and found in the court book prepared for the hearing the subject of the principal judgment. Although the attachment was tendered by the plaintiffs as Exhibit P1, it was merely a copy of the version found in that earlier court book at CB2/523 (T4/27-T5/4). 12Mr Hanna also acknowledged, in response to my questioning, that he had not availed himself of the opportunity to arrange to view the records in Melbourne over the course of the intervening three weeks (T4/15). 13Counsel for the plaintiffs referred me to the decision of Stevenson J in Madden v Madden [2014] NSWSC 1098, whose reasoning I respectfully adopt. His Honour held, in relation to an application to re-open a case after judgment was pronounced but before final orders were entered and in which the material relied on in support of application was available but not tendered at the hearing, that the relevant principles were: [19] The question whether leave should be granted to re-open is one which must be exercised with great caution and having regard to the public interest in maintaining the finality of litigation: Wentworth v Woollahra Municipal Council (No 2) [1982] HCA 41; 149 CLR 672 at 684 per Mason ACJ and Wilson and Brennan JJ. [20] In Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300, the High Court said that a case may only be re-opened where a party has, without fault on his or her part, not had the opportunity to be heard (per Brennan J at 309 and Dawson J at 317). [21] In Autodesk Mason CJ said at 303: "...it must be emphasised that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing." 14His Honour then observed that the availability at the initial hearing of those documents that were subsequently sought to be tendered was a "fundamental hurdle to [the plaintiff's] application in this matter": at [22]. 15In the present case, the issue of proof of delivery of goods has long been on the table. Indeed, the issue could be described as being at the centre of the dispute between the parties. During the reference, the focus of the referee was directed towards understanding, by examining such records as were provided to him by the plaintiffs and the defendants, what was delivered and what was owed. Mr Hanna took every opportunity to make the point during the reference that it was the plaintiffs that had to prove that goods had not just been invoiced but had actually been delivered. 16However, Mr Hanna must have known which carrier or carriers were delivering goods to his premises. Indeed, towards the end of the reference he provided examples to the referee (CB2/523) and sought to encourage the referee to obtain third party documentation. As I set out in the principal judgment at [159]-[163], the referee had identified in his supplementary report of 16 August 2013 the reasons for his refusal to adopt the course suggested by Mr Hanna in relation to obtaining third party documentation. 17Mr Hanna made no attempt, although he could have, to subpoena Linfox (or indeed obtain their co-operation) or any other carrier. Again, as I pointed out in the principal judgment, the defendant was legally represented, at least during the course of the reference, by Mr George Hanna: see [5], [46]. The evidence he now seeks to advance, by reference to an unspecified volume of "delivery manifests", is that Linfox was the sole distributor from Priceline's warehouse located in Dandenong: see affidavit of Mr Hanna dated 17 October 2014 at [6]. That of course was not the only source of goods to his premises, as was made clear to the referee. 18Mr Hanna of course could have made enquiries of Linfox, and Mr Goltz if he was willing to co-operate at that point, at any time during the reference, but obviously chose not to do it. 19The issue was also squarely on the table during the adoption hearing before me in April (being the hearing that led to the principal judgment). Mr Hanna identified a "proof of delivery document" as a "piece of paper that has a reference number, it has an invoice number and it has an identifier. It is from a third party company, normally it could be either Linfox or DHL" (transcript of 29 April, T110/48). Mr Hanna agreed that he or his solicitor Mr George Hanna had never requested third parties provide documents, but had sought that the referee request those documents (T112/7). Most importantly, Mr Hanna was questioned by me about whether the delivery manifest in the court book (for the sake of precision, at CB2/523) showed anything other than a reference number and a weight (T112/36): HIS HONOUR: I'm just looking at the documents that are annexed to the BRI Ferrier letter you took me to. The manifests don't even have a signature or time delivery, but leave that to one side. They seem to show a reference number and a weight, et cetera, but they don't show else than that. FIRST DEFENDANT: That's right, your Honour, the delivery manifest won't show anything else. 20It is simply not appropriate, given the history of this matter, to allow Mr Hanna any indulgence to investigate whether there is any evidence which would be capable of leading to an adjustment of the amounts determined by the referee as owing. It would be time consuming, undoubtedly expensive and the outcome is by no means clear. There is nothing to suggest that any carrier was ever privy to the precise composition of any delivery, nor any reason to anticipate that such records would be kept. As was noted in the supplementary report of the referee dated 16 August 2013 (CB2/486): As I noted in the Principal Report and in my meeting with the Retailer, I expect delivery documents to be an indirect and imperfect record of what is delivered. It is of the nature of these documents that they are highly aggregated, and generally do not refer to individual items, orders or invoices. Where they do so refer, it is very unlikely that the information has been checked against the actual Stock items supplied. Rather, to identify what has been supplied it would be necessary to assess the Stock Receiving Reports created after delivery on the Retailer's Merman System. My analysis of those reports was contained in Analysis 6 appended to the Principal Report. 21In any event, Mr Goltz in his email says nothing about what Linfox documents contained nor whether the composition of those deliveries was set out. He merely agrees that the attachment provided by Mr Hanna (being the same as that provided to the referee on 15 August 2013) is correct. Mr Hanna may well have had a stronger argument had he obtained some form of evidence from Mr Goltz of a different type to that which had already been provided to the referee on 15 August 2013. Mr Hanna suggested that "there could be further documents which could assist your Honour" (T9/8) but gave no indication of what these might be. The exercise he proposed is in my view entirely speculative without the slightest indication to suggest what documents of any relevance would be uncovered. 22Once again, as I indicated in the principal judgment, the decision of McDougall J in Chocolate Factory Apartments v Westpoint Finance and Others [2005] NSWSC 784 at [7] provides some useful guidance, in particular the following observation: (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. 23Here Mr Hanna is not only seeking to re-agitate the findings of the referee, by seeking to introduce new material, but he is attempting to do so once the findings of the referee have already been the subject of a hearing by the Court as to whether that report should be adopted. It cannot be said that Mr Hanna has not had more than ample opportunity to provide such material as he can obtain, whether on his own initiative or through the processes of the Court. 24That of course puts to one side the necessity, as set out in UCPR rule 20.24(2), of obtaining the leave of the Court before adducing evidence that is additional to the evidence taken before the referee: see, for example, Roads and Traffic Authority of New South Wales v Welling and Comerford [2000] NSWCA 360 (in relation to the predecessor rule in Supreme Court Rules, Part 72 rule 13). 25In this case, Mr Hanna seeks to introduce this material at a point some five months after judgment was delivered in which I proposed to adopt the reports of the referee in their entirety. In my view, the motion of the defendant is a blatant attempt to delay and obstruct the resolution of these proceedings. 26I therefore dismiss the motion of the defendant dated 17 October 2014 in respect of prayers 1, 2 and 4. Prayer 3 relates to the release of $9,000 to the referee. That prayer is also dismissed, for reasons which are described below. 27I should note that Mr Hanna had issued a subpoena to Mr Goltz, who was present in court, and notices to produce to the plaintiffs and the referee in relation to any form of financial arrangement or payment between them. Counsel for the referee, who appeared briefly at the hearing, put it unequivocally on the record that the referee had received no payment other than $9,000 that had been provided by the defendant as a condition of the reference (order 3 of the orders made on 4 May 2012 by McDougall J; T3/15-T3/42). However, to the extent those subpoenas and notices to produce relate to Mr Hanna's notice of motion, I set them aside. 28There is no reason that costs should not follow the event pursuant to rule 42.1 of the Uniform Civil Procedure Rules 2005 and therefore the defendant should pay the plaintiff's costs of his motion filed 17 October 2014. 29As proposed in the principal judgment, I order that the reports of the referee dated 24 July 2013 and 16 August 2013 be adopted.

Payment into court of the amount determined by the referee 30By order 2 of the notice of motion dated 6 September 2013, the plaintiffs seek an order that the defendant pay into court the sum of $732,799.44, being the total liability of the defendant as determined by the referee. 31Given the course that has been adopted, I raised with counsel for the plaintiffs the necessity of requiring Mr Hanna to pay into court the amount determined by the referee, rather than proceeding to judgment in favour of the plaintiffs. UCPR rule 20.24 provides that: 20.24 Proceedings on the report (1) If a report is made under rule 20.23, the court may on a matter of fact or law, or both, do any of the following: (a) it may adopt, vary or reject the report in whole or in part, (b) it may require an explanation by way of report from the referee, (c) it may, on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report, (d) it may decide any matter on the evidence taken before the referee, with or without additional evidence, and must, in any event, give such judgment or make such order as the court thinks fit. (2) Evidence additional to the evidence taken before the referee may not be adduced before the court except by leave of the court. 32That rule makes it plain that once the report has been adopted, the Court may give such judgment or make such order as it thinks fit. 33Counsel for the plaintiffs agreed that since there was "nothing left outstanding" on the Amended Commercial List Summons (T20/17), it was appropriate to seek judgment rather than the relief sought in the notice of motion, and he did not press the paying into court of the judgment amount. 34The defendant made no useful submissions in opposition to that course. 35Therefore I propose to enter judgment for the plaintiffs on their Amended Commercial List Summons filed 30 April 2012 in the sum of $732, 799.44.

Who should pay the costs of the reference? 36By order 3 of the notice of motion dated 6 September 2013, the plaintiffs seek an order that the defendant pay the whole of the costs of the referee of and incidental to the reference, and that the defendant should provide security for those costs pending their final determination. As I have already noted, the question of quantum is being dealt with separately by the Registrar. 37As I noted in the joinder judgment, the provision made by the Court for the funding of the reference is subject to a later application for an order for the costs of the reference to be paid by the unsuccessful party: ACD Tridon Inc v Tridon Australia Pty Ltd [2003] NSWSC 357 at [61] (in relation to the predecessor rule, Supreme Court Rules 1970, Part 72 rule 6). 38Under UCPR rule 20.18, the Court is empowered to direct "how, when and by whom the whole or any part of [the referee's] fees are to be payable". The order made on 4 May 2012 as to the parties joint and several liability was made "without affecting the powers of the Court as to costs". 39Under section 98 of the Civil Procedure Act 2005, subject to rules of court, costs are in the discretion of the Court: section 98(1)(a). Furthermore, the Court has full power to determine by whom, to whom and to what extent costs are to be paid: section 98(1)(b). 40In general terms, the exercise of the discretion in relation to costs depends upon matters of impression and evaluation: James v Surf Nominees Pty Ltd (No 2) [2005] NSWCA 296 (in relation to apportionment). The exercise of the Court's discretion as to costs ultimately requires an assessment of what is fair in all the circumstances: McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 at [22] per Ward J. 41Under rule 42.1 of the Uniform Civil Procedure Rules 2005, the Court is to order that the costs 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. It has been noted that the rule "speaks for itself. However, judicial exposition has noted that it means that a person seeking to displace its prima facie effect must show that there is something out of the ordinary in the case in order to justify the departure": Hastings Point Progress Association v Tweed Council [2010] NSWCA 39 at [18] (per Young JA). 42The plaintiffs submit that the costs of the reference should be borne by Mr Hanna for the simple reason that he failed on all matters submitted to the referee. Had such matters been before the Court, the plaintiffs submit, Mr Hanna would have been liable to pay the costs of the hearing and the situation should be no different in respect of a reference. 43Mr Hanna did not make any submissions in writing on the question of liability for the costs of the reference. 44There is some force in the submission that ordinarily costs would follow the event, as indeed the defendant was unsuccessful before the referee. 45That said, it is clear to me that a substantial period of the referee's time was taken up by his consideration of Priceline's records and his attempts to come to grips with their systems and processes. As I indicated in the principal judgment, many of the communications which the defendant challenged as evidencing a breach of procedural fairness or bias were in fact reflective of those attempts. For example, I observed at [109]-[113]: [109] On 27 July 2012 there was a communication between the Referee and the plaintiffs' solicitors (CB5/1746). The letter indicated that there had been a test sample of 400 stock keeping units (SKUs) taken from the plaintiffs' data. The Referee made observation that "overwhelmingly the total value of credits recorded does not appear to reconcile with the component parts". The defendant submits that this is a key indication of the data not reconciling and a flawed system but because the enquiry was made of the plaintiffs somehow or other this gives rise to a demonstration of bias. I regard this proposition, as indeed many others suggested by the defendant, as fallacious. This was a perfectly sensible and relevant enquiry so that the Referee could understand (assuming his analysis was correct) how the plaintiffs' system worked and if it could be reconciled. The mere fact that the defendant had no knowledge of this communication was entirely his own doing. But putting that to one side, it is inconceivable in my view that the defendant could have made any contribution other than speculation as to the interpretation of the sample taken from the plaintiffs' records and/or data. In my view no contribution of any meaningful nature could likely be made by the defendant. It is implausible that an accountant undertaking such an analysis would ask a third party (not an expert nor a former employee familiar with such matters) what he or she thought of the data or indeed any explanation about what the plaintiffs had proffered. I regard the complaint by the defendant in this regard as having no substance. [110] The defendant points to a further communication on 13 September from the Referee to the plaintiffs' solicitors in which the Referee made a comment again about the incongruous results the Referee had obtained by reviewing a number of instances of SKUs taken randomly (CB5/1756). Again bias is alleged in part because from time to time during the course of his submissions Mr Hanna adverted to what he described as "collaboration" between the Referee and the plaintiffs. He used the term in that context undoubtedly as an epithet. The plain reality is that when one reads the material objectively, and the communication of 13 September is no exception, I regard it as quite a simple request on the part of the Referee to try to understand the data. I do not think it could reasonably be construed otherwise. Again I regard this complaint as having no substance. [111] The next complaint is made about an email of 26 September (CB5/1758). This is a communication from the plaintiffs' solicitor to the Referee. The source of the complaint is the reference to telephone conversations which apparently occurred between somebody from the plaintiffs' solicitor and the Referee on 19 and 25 September. The response from the Referee is reference to further analysis which would be provided for comment "tomorrow". Again the defendant says as he had no knowledge and he should have had knowledge of this communication it is an example of bias. I reject that proposition. The communication is in my view entirely innocuous. Again it is part of a chain of enquiry being undertaken by the Referee to understand the plaintiffs' data. In my view it is wholly unreasonable to suggest this could be evidence of bias, in any sense. [112] A further example of bias is said to be evidenced by a communication from the Referee to the plaintiffs' solicitors of 26 September (CB5/1758). This is a repetition of part of the chain of emails that I have previously referred to. The mere fact that the defendant had no knowledge of the communication is simply in my view not relevant given the regime which is in place. There is nothing on the face of the email that could rationally give rise to any suggestion of bias. It goes without saying given the nature of the email that the defendant in my opinion could have done no more than speculate about these materials even if an opportunity had been given to comment on it. [113] The next complaint is made about an email of 28 September (CB5/1762). The defendant relied heavily upon this email. The email is a communication between the Referee and the plaintiffs' solicitor. The Referee sets out in the communication what he has sought to do, namely compare the electronic inventory supply records extracted from the records of Priceline for "internal consistency" to test the correspondence of inventory ordered, invoiced to and received over the relevant period. This was clearly a relevant line of enquiry. The Referee then set out the exercise he had undertaken and produced a summary of results. In a very large number of cases having examined the complete 26,972 SKUs in various situations there were clear discrepancies shown in the data. The Referee sought further information and assistance from the plaintiff. [emphasis added] 46The referee also wrote to the Court on 11 October 2012 to explain his delay in producing his report, and asserted his understanding of the plaintiff's electronic data was not sufficiently sound to allow him to report in accordance with the timetable: see principal judgment at [27]. 47Any assessment of the time taken by the referee in understanding the records of the plaintiffs is of course difficult. 48Counsel for the plaintiffs suggested that the division of liability between the parties should take into account the large number of concerns put forward by the retailer (T22/26; T25/34-T25/42; T30/28). Any assessment of the time taken by the defendant in unnecessarily communicating with the referee or putting materials before him is also difficult. 49It may well be that the quantum of the referee's fees can be challenged, as the plaintiffs suggested, on matters such as unnecessary duplication of work or that some of the complexity was brought about by the referee's own inability to understand the material provided to him. Nevertheless, that is all subject to ventilation before the Registrar in the process I have already described. 50In my view, taking these factors into account, it is appropriate to apportion the costs of the referee of and incidental to the reference, at least up until 16 August 2013, equally between the parties. 51Additionally, the plaintiffs seek an order that the sum of $9,000 paid to the referee by the defendant pursuant to the orders made on 4 May 2012 be released. Mr Hanna did not take the opportunity to be heard to the contrary. Given the importance of referees to the efficient operation of the Court, I consider this to be entirely appropriate and I so order.

Security for the costs of the referee and directions 52By order 3(b) of the notice of motion dated 6 September 2013, the plaintiffs sought an order that the defendant provide security for the costs of the referee pending their final determination. 53As I have already stated, the process of determining quantum is currently underway before the Registrar. I have also determined that the parties share the costs of the referee equally (for the avoidance of doubt, the plaintiffs as to 50% and the defendant as to 50%). 54 The plaintiffs submit that the security should be provided in such form as is acceptable to the Court within 28 days, and pending the provision of security, the defendant's cross-claim be stayed. Further or in the alternative, the plaintiffs seek an order that the cross-claim be stayed pending payment of the referee's costs. 55The defendant's cross claim against the plaintiffs was filed 5 April 2012. It did not form any part of the reference. The defendant alleges that the plaintiffs engaged in misleading and deceptive conduct and/or unconscionable conduct in relation to the supply of excess quantities of designated stock, that certain fees were not disclosed, and that agreed amounts for fixtures and certain incentive fee refunds were not provided at the end of the franchise agreement. The cross-claim does not appear to give a global figure for the damages sought, but Mr Hanna indicated that in was in the region of $500,000 (T19/15). 56It seems to me that the general principle for ordering security for costs is to provide a defendant, in appropriate circumstances, with some assurance that it will be able to recover its costs of defending the proceedings if it is ultimately successful. However, in the present case, the plaintiffs seek an order that Mr Hanna provide security for the costs of the referee which have already been incurred and are the subject of quantification. I therefore do not think it appropriate to order the provision of security for those costs. 57That said, I do think it appropriate to order the defendant's cross-claim be stayed until the payment of the referee's fees by the defendant in the proportion I have described above. That may well be subject to some delay while the issue of quantification is resolved. Such delay appears unavoidable but would not seem to prejudice the defendant (or the plaintiffs for that matter). 58Section 67 of the Civil Procedure Act 2005 provides that: Subject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day. 59In State of New South Wales v Plaintiff A [2012] NSWCA 248, Basten JA observed at [15] that: Section 67 does not identify any particular criteria as relevant to the exercise of the power but, at least in the Supreme Court, it may be understood to cover a variety of circumstances in which the court's inherent jurisdiction to prevent abuse of its process may be invoked. 60None of the foregoing is to suggest that Mr Hanna's cross-claim should be regarded as an abuse of process. However I accept the submission of the plaintiffs that a stay is justified on the basis that Mr Hanna is bound to discharge an obligation incurred to a third party exercising, in substance, the functions of the Court. 61Referees undertake their work in good faith, and save courts time which may otherwise be taken up with the resolution of contested expert evidence, often of a specialised or technical nature. They are entitled to be fairly renumerated for their work, and both parties are obliged to pay their share (as I have determined above) of whatever amount it is found to have been properly charged. 62In my view therefore, it is entirely appropriate to stay the defendant's cross-claim until such time as the referee has been paid, and I would make such an order accordingly.

Costs 63Mr Hanna submitted that he should not pay the costs thrown away of the hearing on 13 October because he had previously informed the plaintiffs by email and verbally of his need for an adjournment, and in any event the preparation required for the hearing on 13 October was equally applicable to the hearing on 31 October. In the alternative, he seeks an assessment of those costs, which of course he would be entitled to in the fullness of time if agreement cannot be reached. 64While I accept that Mr Hanna may well have advised the plaintiffs in advance, his reason for seeking an adjournment can only be described as somewhat specious in light of the previous applications for adjournments. He was aware for a significant period of time of the date that had been set, indeed counsel for the plaintiffs indicated that the parties were aware of the hearing date of 13 October as early as 6 August. 65In those circumstances, it is entirely appropriate that the defendant pay the costs thrown away as a result of his adjournment application on 13 October. The quantum of those costs of course may well be a matter for assessment by a taxing officer if agreement between the parties cannot be reached. 66More generally, I see no reason why the plaintiffs should not have their costs of their motion dated 6 September 2013, including of course the costs of the adoption proceedings. I have already dismissed the motion of the defendant dated 9 December 2013 (see principal judgment at [197]) and the defendant is to pay the costs of that motion as well.

Orders 67I invited counsel for the plaintiffs to draft orders giving effect to my decision and circulate them to the defendant and the referee.

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: 05 November 2014

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