Penson v Titan National Pty Ltd

Judgment

1. THE COURT: By Summons filed on 14 September 2015, the applicant, Ms Shirley Penson, seeks leave to appeal against an order made by Black J on 12 June 2015. The order concerned various costs orders that had been made against Aquaqueen International Pty Ltd ("Aquaqueen"), a company of which Ms Penson was a director, and made Ms Penson jointly and severally liable with Aquaqueen to pay the costs. His Honour ordered that the costs be quantified in the gross sum of $77,993.88, and ordered that interest be payable on the costs: In the matter of Aquaqueen International Pty Ltd [2015] NSWSC 739. The issues came before Black J by Interlocutory Process, filed in proceedings before his Honour, which resulted in his making an order for the winding up of Aquaqueen. Costs orders against Aquaqueen in those proceedings had been made by Brereton J on 30 April 2014, and Black J on 20 November 2014. The plaintiffs in those proceedings sought orders: (i) that the costs be determined as a gross sum, in lieu of assessment under the Civil Procedure Act 2005 (NSW), s 98(4)(c); (ii) that the costs be determined on an indemnity basis; (iii) that Ms Penson be jointly and severally liable with Aquaqueen for the costs.
2. On 4 May 2015 Black J delivered reasons for judgment. He indicated that he proposed to order: (i) that the costs be determined, as a gross sum, of 70 per cent of the costs originally claimed by the plaintiffs; and (ii) that Ms Penson be jointly and severally liable with Aquaqueen for the costs. He declined to make an order that the costs be determined on an indemnity basis. He directed that the parties bring in short minutes of order to give effect to his conclusions.
3. The parties were unable to reach agreement as to the orders. The matters returned to Black J, who on 12 June made the orders referred to above.
4. The respondents contend that this application is out of time. By Uniform Civil Procedure Rules 2005 (NSW) 51.6, a Summons seeking leave to appeal must be made within 3 months of "the material date". There is some dispute as to what is "the material date". There are two possibilities: 4 May 2015 (when the first judgment was given, without orders being made), as stated in the Summons, or 12 June 2015 (when orders were finally made). In either case, Ms Penson is out of time, and, if she is to be permitted to proceed on the Summons, needs an extension of time. However, if the later date is "the material date", then she is out of time by only 1 day; if the earlier date is "the material date", she is out of time by a more significant margin.
5. In r 51.2 "material date" is defined as: "(a) in the case of a judgment given in proceedings in the Supreme Court - the date on which the judgment is given, and (b) … (c) in the case of an order in proceedings in the Supreme Court - the date on which the order is made …"
6. The material date is the date of the judgment - 12 June 2015. Three months from that date was 12 September, a Saturday. By UCPR 11.1, Ms Penson had until the following Monday - 14 September - to file the application. She was not out of time.
7. The substance of the appeal Ms Penson seeks to bring lies in that part of the orders that makes her "jointly and severally" liable with Aquaqueen for the costs ordered against it. The relevant facts are as follows.
8. At various stages of the proceedings Ms Penson was granted leave, as director of Aquaqueen, to represent that company. (On at least one occasion that leave was revoked, but was subsequently reinstated.) In seeking that leave, Ms Penson deposed in an affidavit sworn on 5 September 2014: "In my capacity as a director of the Company I have resolved in the past and by resolution today determined that I be authorised that as Managing Director of the Company continue these proceedings without the intervention of a Solicitor and seek to appear on behalf of the Company on its behalf [sic]. I am aware that in appearing on behalf of the Company I may be liable to pay some or all of the costs of the proceedings as may be ordered against the Company."
9. In the course of the judgment of 4 May 2015, the primary judge said: "49 Ms Penson was granted leave to represent Aquaqueen in these proceedings under r 7.2 of the Uniform Civil Procedure Rules. Rule 7.1 of the Uniform Civil Procedure Rules permits a company to commence or carry on proceedings by, relevantly, a director. However, rule 7.1(3) provides that, in the case of proceedings in this Court, a company may only commence proceedings if the director is also a plaintiff in the proceedings. That paragraph is apparently directed only to the commencement (as distinct from the carrying on) of proceedings. In this case, the general provision in rule 7.1(2) applied, to permit Ms Penson to represent Aquaqueen so far as it was a defendant in the proceedings. Rule 7.2(2)(b) of the Uniform Civil Procedure Rules in turn deals with the requirements for an affidavit made by a director of a company where he or she seeks to appear for the company under r 7.1 of the Uniform Civil Procedure Rules. That rule requires an acknowledgment that the director is aware that he or she may be liable to pay some or all of the costs of the proceedings. That rule recognises that a director appearing for a company, particularly in complex proceedings, may increase the costs of other parties to the proceedings and requires that the director acknowledge, for the benefit of other parties, and so that it is plain that he or she understands, that he or she may be liable personally as a result of costs incurred in the proceedings." He proceeded to direct himself as to the relevant legal principles, including those which state the relevant criteria to be applied: see, for example, Knight v FP Special Assets Ltd [1992] HCA 28; 174 CLR 178; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340; May v Christodoulou [2011] NSWCA 75; 80 NSWLR 462.
10. Ultimately, his Honour's reasons for making an order against Ms Penson concerned the manner in which she had conducted Aquaqueen's proceedings, leading to their protraction, and a consequent increase in costs. He characterised Ms Penson's conduct of the proceedings as "inappropriate".

The proposed grounds of appeal

1. In accordance with UCPR 51.12 Ms Penson filed a White Folder, containing, inter alia, a Draft Notice of Appeal, and a summary of argument. Five points were made in the summary of argument. The first arises out of [49] of the judgment, extracted above. The simple point sought to be made was that UCPR 7.1 and 7.2 deal with the commencement or carrying on of proceedings. This, it was suggested, necessarily implies that they apply only to an initiating party, which Aquaqueen was not - it was at all times a defendant to the winding up application.
2. That argument was abandoned, and properly so, having regard to the definition of "carry on proceedings" contained in s 19(2) of the Civil Procedure Act, which provides that, for the purposes of the Civil Procedure Act and the Uniform Civil Procedure Rules, "carry on proceedings" includes "defend proceedings".
3. The second point (and the third, to which no submissions were directed) challenged the asserted reliance by his Honour on certain authorities set out in [51] of the judgment. In that paragraph, which opens with the words "the Plaintiffs rely" his Honour does no more than set out the authorities on which the plaintiffs relied.
4. It was then submitted that the logic applicable to making a costs order against a director of an impecunious plaintiff "can never apply to a defendant unless they cross-claim". The submission went on: "In particular, this logic should never apply to the defence of proceedings to wind up a company under section 459G of the Corporations Law."
5. Just why this was so was not explained. It was then submitted that to allow costs orders to be made against a director who defended winding up proceedings would: "… penalise any director who tried to defend the winding up of their company even if there was a proper basis for doing so." This submission ignores the fact that the power to make an order is discretionary, and would not ordinarily be made where there was a proper basis for an advanced defence. Moreover, following [51], the judgment went on to recognise the circumstances mentioned in the authorities that tell against, rather than in favour of, making an order against a non-party to proceedings. There is no substance in this complaint.
6. By the fourth point a challenge was made, not to the order that Ms Penson be liable for the costs of the winding up proceedings, but to the inclusion of Ms Penson in the order that the costs be determined as a gross sum. It was asserted that different considerations come into play with respect to a company and its director. No such different considerations were postulated. In the absence of any identification of relevant different considerations, I can see no reason why the same considerations do not generally apply. There is no substance in this complaint.
7. The final point raised by the summary of argument concerned a reference made by the primary judge to the conduct of related District Court proceedings. However, his Honour expressly accepted that criticisms of Ms Penson's conduct in those proceedings "generally [were] not relevant" to the issues before him, with the qualification that the delays faced by the plaintiffs in the assessment and recovery of the costs of those proceedings were "of significant relevance" to the assessment of the utility and desirability of making a gross sum costs order in respect of the winding up proceedings. There is no error in this. It was submitted that it appeared that his Honour was persuaded that the actions of Ms Penson were "improper or vexatious", and that there was no evidence upon which to base such a conclusion.
8. We do not read anything in the judgment as a conclusion that Ms Penson's conduct in relation to the District Court proceedings was in any way "improper or vexatious". All the primary judge did was take into account that delays were relevant in the overall consideration of the utility and desirability of making a gross sum costs order. There is no substance in this complaint.
9. At the hearing, an additional argument was advanced, to the effect that the order that the costs be payable by Ms Penson as a director of Aquaqueen was inconsistent with s 466(4) of the Corporations Act 2001 (Cth), which requires, unless the court otherwise orders, that the liquidator of a company, reimburse the applicant, out of the property of the liquidated company for the taxed costs incurred in the proceedings.
10. Two short answers may be made to this argument. The first is that s 466 itself expressly authorises the court to make a different order. The second is that UCPR 7.1(2) and (3) also expressly contemplate an order of the kind made by Black J. This argument fails.
11. No reasonably arguable ground of error in the reasoning of Black J has been advanced. Accordingly leave to appeal is refused.
12. The orders of the Court are: 1. Leave to appeal is refused; 2. The applicant is to pay the respondents' costs.

Amendments 16 December 2015 - Date of decision corrected on coversheet 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: 16 December 2015