Pleash (Liquidator) v Tucker

1. The respondents are to bear their own costs of the affidavits removed from the Court record in accordance with the orders of the Court made 9 May 2018 and of the affidavits filed by the respondents dated 16 May 2018.
2. Subject to order 1, the appellant (Liquidators) pay the respondents' costs of the application for leave to appeal, the appeal and the interlocutory application filed 25 May 2018 on a party and party basis.
3. Subject to order 1, the Liquidators pay the respondents' costs of the Production Application: (a) before 11.00 am on 26 April 2018 on a party and party basis; (b) after 11.00 am on 26 April 2018 on an indemnity basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 On 29 August 2018 we granted leave to appeal but dismissed the appeal, and also dismissed an application for production of documents: Pleash (Liquidator) v Tucker [2018] FCAFC 144. At the time that judgment was given the respondents indicated that they wished to seek costs on an indemnity basis, and an order was therefore made that the parties file submissions, with the question of costs to be determined on the papers. 2 Put generally, the parties made submissions as to the costs of the application for leave to appeal, the appeal itself and an application for production of documents. 3 It is necessary to set out some of the relevant events. 4 On 3 January 2018 the appellant (Liquidators) filed an application for leave to appeal and supporting affidavits. 5 Early correspondence with the Court was to the effect that counsel for the parties were of the view that the leave application should be dealt with separately and before the appeal was to be determined. 6 At a case management hearing before Greenwood J on 1 March 2018 there was discussion about how the matters should proceed. By then it seemed the Liquidators had formed the view that both matters should be dealt with at the same time. Greenwood J ordered that the question of leave be dealt with at the same time as the appeal. 7 On 26 March 2018 the Court ordered that the Liquidators provide security for costs of the appeal. Orders as to the costs of that application have already been made. Security is currently held by the Liquidators' solicitors on trust. 8 On 6 and 9 April 2018 the Liquidators served notices to produce pursuant to r 20.31(1) of the Federal Court Rules 2011 (Cth) (Rules) on the respondents with respect to documents referred to in affidavits filed by the respondents in support of the leave application and appeal. 9 On 10 April 2018 the respondents made what they refer to as the First Offer. It was sent to the solicitors for the Liquidators by email at approximately 2.53 pm. 10 That offer was made by 'Notice of Offer to Compromise' under r 25.01 of the Rules. Rule 25.14(2) provides: If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served-on a party and party basis; and (b) after the time mentioned in paragraph (a)-on an indemnity basis. 11 The First Offer provides that the respondents offered to compromise the proceedings by consenting to orders that the application for leave to appeal and the appeal be dismissed and that there be no order as to costs. The offer was expressed to be open for 15 days. The offer was, in essence, a walk away offer. The covering letter enclosing the offer stated that it 'ought to be apparent that there is no utility to the application for leave or for leave to appeal'. It stated that the offer was a substantive one as the respondents had at that time incurred approximately $30,000 (excluding GST and disbursements) in solicitors' fees, $30,000 in counsels' fees and other disbursements. It noted that estimates of costs had already been provided as part of the security for costs application. 12 The Liquidators did not respond to the offer. 13 On 11 April 2018 the respondents wrote to the Liquidators informing them they would not be producing the documents in response to the notices to produce, and that they were issued in circumstances that comprise an abuse of process. 14 On 13 April 2018 the Liquidators filed an application for production of the documents under r 20.31(3) of the Rules (Production Application). 15 On 24 April 2018 the respondents served a further offer, which they refer to as the Second Offer, in relation to the Production Application. The offer was an open offer and offered that the respondents compromise the Production Application by consenting to orders that the application be dismissed and that there be no order as to costs. The respondents received no response to the Second Offer. 16 On 9 May 2018 the Production Application was listed before Gleeson J. Her Honour ordered that three affidavits filed by Mr Tucker, Mr Bannister and Mr Murphy respectively be removed from the Court file and adjourned the Production Application to the hearing of the appeal. 17 On 11 May 2018 the respondents made what they refer to as the Third Offer, being an offer made by email to the effect that the respondents offered to compromise the proceedings by consenting to orders that the Production Application, the application for leave to appeal and the appeal be dismissed and that there be no order as to costs. The offer was said to be made under the principles of Calderbank v Calderbank [1975] 3 All ER 333. 18 On 11 May 2018 the Liquidators rejected the Third Offer. 19 On 25 May 2018 the Liquidators filed an application seeking to rely on new evidence, being transcript excerpts from Mr Tucker's public examination. 20 As already noted, we delivered reasons and made orders on 29 August 2018. 21 The respondents seek orders that: (a) the Liquidators pay the respondents' costs of the application for leave to appeal and the appeal to be assessed on a party and party basis until 11.00 am on 12 April 2018 and after that time on an indemnity basis; (b) the Liquidators pay the respondents' costs of the Production Application on an indemnity basis; (c) the Liquidators pay the respondents' costs of the interlocutory application filed on 25 May 2018 seeking to rely on new evidence on the appeal (the transcript excerpts) on an indemnity basis; and (d) the Liquidators direct the solicitors for the Liquidators to release the funds in the sum of $55,000 held in their trust account for security for costs, in accordance with the order of the Court made 26 March 2018, to the trust account of the solicitors for the respondents. 22 The Liquidators argue that as leave to appeal was granted, they should have the costs of the application for leave to appeal, and that in any event costs should not be ordered with respect to the leave application or appeal on an indemnity basis. They accept that they should pay the costs of the Production Application on an indemnity basis with some carve outs, to which we will return. 23 We do not consider it appropriate to distinguish the costs relating to the leave application from those relating to the appeal. A scientific separation of such costs is artificial in a scenario where the arguments relating to leave overlapped with the arguments on the appeal. After consideration of the options, the Court directed that the leave application be heard at the same time as the appeal. That direction, which we respectfully consider to have been sensible, saved both parties the costs of a separate hearing and reinforces the argument that in this case, there was little distinction as to the matters to be dealt with on the leave application as against the appeal. We are not persuaded that the Liquidators should have the costs of the application for leave to appeal, albeit that they were successful in that regard. In circumstances where leave is granted but an appeal is dismissed, the usual position is that the appellants pay the respondents' costs of the appeal including of the application for leave, and we see no reason to depart from that approach. 24 The question then is whether such costs should be paid on an indemnity basis. 25 The respondents argue that the offers comprised a genuine compromise in that the costs incurred by them (as indicated by estimates in the security application and as reflected at least in the correspondence attaching the First Offer) were substantial and that by the offers, those costs would be borne by the respondents. They argue that the Liquidators therefore acted unreasonably in not accepting the offers. They say this is so in light of the appeal being dismissed. 26 Leaving aside the costs of the Production Application, the Liquidators argue that they did not act unreasonably in not accepting the offers. At the time of the First Offer, the parties had not exchanged submissions in the application for leave to appeal or in the appeal, the indices for the appeal book had not been exchanged, and the appeal book had not been prepared. They contend that the First Offer does not fall within r 25 of the Rules because it was not a genuine offer, but rather was no more than an attempt to obtain an advantage on costs. They say it was no more than an offer that the Liquidators capitulate. 27 Further, they point to the terms of the offers, which were to the effect that both the application for leave and the appeal be dismissed. They say that the fact that leave to appeal was granted indicates the outcome was better than as proposed by the First and Third offers. 28 The Liquidators also submit that their decision not to accept the offers cannot be said to be unreasonable in circumstances where the appeal was arguable, being the premise of a grant of leave to appeal. 29 There is no question that in appropriate circumstances, a walk away offer may still be a genuine commercial offer of substance: see, for example, Visscher v Teekay Shipping (Australia) Pty Ltd (No 5) [2013] FCA 28 at [25] (Katzmann J). We do not deny that the respondents in offering to bear their own costs under the offers were offering to bear costs potentially of some significant amount. 30 However, in our view the outcome of the indemnity costs application is determined by the fact that the appeal raised arguable grounds, involved questions of importance to creditors of Equititrust and more generally, and that even the respondents contended that certain authorities in the area should be reconsidered: Pleash (Liquidator) v Tucker at [79]. The fact that leave was granted reflects the fact that novel and legitimate matters, including questions of law, were raised for consideration in the appeal. Against that backdrop, we do not consider it was unreasonable for the Liquidators to have rejected the First or Third Offers, noting also that such offers did not provide for any compromise as to production of any documents, but were limited to questions of allocation of costs. The Liquidators may have validly reasoned that the benefit of a costs saving by acceptance of the First and Third Offers was disproportionate to the potential benefit to creditors by the Liquidators' use of documents for their continuing inquiries had the appeal succeeded. 31 As to the cost of the Production Application, the Liquidators accept that r 25.14(1) of the Rules applies, but submit that certain costs should not be recovered by the respondents. We agree that the respondents should not recover the costs of the affidavits that were removed from the Court record. The Liquidators also contend that the respondents should not recover the costs of the hearing before Gleeson J. We do not agree. The hearing took place because the Production Application was filed. The Liquidators should otherwise pay the respondents' costs of the Production Application on an indemnity basis, particularly as we determined that the Production Application was an abuse of process. 32 There were other affidavits dated 16 May 2018 prepared by the respondents for the leave application or appeal that we declined to accept: Pleash (Liquidator) v Tucker at [23]. The respondents ought to bear their own costs of those affidavits. 33 We consider the order sought by the respondents as to the release of funds held by way of security for costs is unnecessary in this case. The Liquidators' solicitors have assured the Court by their written submissions that following assessment (and we assume any agreement) of costs, the proper amount of the funds will be released by them from trust to the respondents' solicitors. We accept that assurance. 34 In the circumstances, the appropriate orders are that: (1) The respondents are to bear their own costs of the affidavits removed from the Court record in accordance with the orders of the Court made 9 May 2018 and of the affidavits filed by the respondents dated 16 May 2018. (2) Subject to order 1, the appellant (Liquidators) pay the respondents' costs of the application for leave to appeal, the appeal and the interlocutory application filed 25 May 2018 on a party and party basis. (3) Subject to order 1, the Liquidators pay the respondents' costs of the Production Application: (a) before 11.00 am on 26 April 2018 on a party and party basis; (b) after 11.00 am on 26 April 2018 on an indemnity basis. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices McKerracher, Farrell and Banks-Smith JJ.