PRC Capital Pty Ltd v The Trust Company Ltd

PRC Capital's submissions

1. PRC Capital now seeks an order that the prospective defendants pay its costs of and incidental to the summons.
2. It is accepted that there is a broad discretion in relation to the making of orders as to costs (see s 98 of the Civil Procedure Act ) (reference being made by PRC Captial to Liu v Age Company Ltd (2016) 92 NSWLR 679, [2016] NSWCA 115 at [270] per McColl JA)); and that, where a proceeding has been settled without a hearing on the merits (and where the parties have acted reasonably in commencing and defending the proceeding), the proper exercise of the costs discretion will usually mean that there will be no order as to costs (see Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624 per McHugh J; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Nichols v NFS Agribusiness) at [8]-[9] per Basten JA and at [30] per Payne JA).
3. However, in the present case, PRC Capital complains that it was "forced" to file the summons due to the prospective defendants' refusal, over the course of two months commencing on 27 January 2021, to agree to provide the documents comprising the terms of the joint venture. PRC Capital says that what has now occurred has been a "complete capitulation" by the defendants.
4. Further, complaint is made that the conduct of the prospective defendants (both before and following the filing of the summons) was not consistent with the principles in s 56 and following of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act).
5. PRC Capital says that its costs were far greater than ought to have been the case had the documents, which the defendants ultimately agreed to provide, been provided over four months earlier (when first requested). Accordingly, PRC Capital submits that the defendants have not acted reasonably and that an order different from the usual order as explained in Lai Qin is appropriate.
6. As to the conduct of which complaint is made, among other things, PRC Capital says that there was no substantive response to Hall & Wilcox' 12 March 2021 letter prior to the summons being filed on 24 March 2021, pointing out that, on multiple occasions, including in the initial request and the 12 March 2021 letter, Hall & Wilcox reiterated their client's position that it would seek preliminary discovery of the documents requested if they were not provided and that the summons was filed some two months after the initial request.
7. PRC Capital submits that it gave "extraordinary leniency" to the requests of the prospective defendants to involve Fife Group (which PRC Capital points out was not a party to the Consideration Deed or the Call Option Deeds).
8. As to the conduct of the prospective defendants after the filing of the summons, PRC Capital points to the fact that, although Ms Fong in her affidavit of 6 May 2021 deposed that the joint venture was constituted by 37 documents (at [7]), Ms Fong also deposed to the searches that it was were said would need to be undertaken to comply with the summons (and to the effect that a vast amount of material would be required to be produced and reviewed). PRC Capital says that, prior to Ms Fong's affidavit, it had made plain that it only sought one copy of the terms of whatever documents comprised the joint venture (referring to the communications of 20 April 2021, 3 May 2021 and 5 May 2021). PRC Capital says that Annexure A was in standard form; that there could have been no reasonable doubt as to what was sought; and that the approach by the prospective defendants (and their evidence) was at odds with s 56 of the Civil Procedure Act and one which increased costs and encouraged delay.
9. As to the confidential affidavit, PRC Capital says that it is not clear whether the prospective defendants have consented to its Counsel reviewing that affidavit; and that the issue of access to Ms Fong's confidential affidavit resulted in an extraordinary amount of correspondence. Complaint is made that no substantive answer was given to Hall & Wilcox's request (by email sent on 12 May 2021) for an explanation to be given as to why the affidavit was said to be confidential (it being said that it contained no confidential information, as opposed to the exhibit thereto); and that this correspondence also increased costs and delay.
10. PRC Capital says that, following the agreement by the prospective defendants to provide the 37 documents, it acted reasonably in agreeing to modest redactions to be made to four of the documents.
11. PRC Capital thus submits that an order to the effect it seeks is appropriate.

Prospective defendants' submissions as to costs

1. The prospective defendants rely upon the principles articulated in Lai Qin (at 624) and Nichols v NFS Agribusiness (at [2], [8]-[9] and [25]-[30]) (as adverted to above) to the effect that where there has been no hearing on the merits the usual position is that there is no order as to costs; that in exceptional cases, costs may be awarded (for example, where a party has acted unreasonably and the other has acted reasonably); and that such an exceptional order should only be made where a finding of unreasonable behaviour is manifest by reference to known and undisputed circumstances. They emphasise that if the question of whether a party has behaved unreasonably cannot be answered without reviewing large swathes of evidence and resolving on a tentative basis disputed questions of fact, then the authorities make clear that the Court should not embark upon that task. (PRC Capital cavils with the proposition that this is such a case.)
2. The prospective defendants say that PRC Capital's submission that they acted unreasonably should be rejected ad limine as this would require (contrary to the principles above and referring in particular to Nichols v NFS Agribusiness at [8]) the review of large swathes of evidence in order to determine the question of unreasonableness.
3. Insofar as the essence of PRC Capital's submissions (see at [5], [12]-[20]) is that the documents which were ultimately provided should have been provided prior to the commencement of proceedings, the prospective defendants say that this ignores the fact that the prospective defendants owed contractual obligations of confidence to a third party (the Fife Group), which prevented them from providing the joint venture documents. Reference is made, in this regard, to cl 16.1 of the Security Holder's Agreement (included in the prospective defendants' much smaller bundle of documents on this application), with the definitions of "Confidential Information" and "Transaction Documents".
4. The prospective defendants point out that they gave notice of these obligations as early as 17 February 2021 and continued to refer to them in the correspondence (referring by way of example to the letter of 19 March 2021 referred to above). The prospective defendants say that the correspondence records the attempts made by them to progress PRC Capital's request for documents (including by seeking to engage with Fife Group), referring to HWL Ebsworth's letters of 8 February 2021, 11 February 2021, 17 February 2021, 16 March 2021 and 19 March 2021).
5. The prospective defendants say that the correspondence also records unsuccessful attempts made to engage with PRC Capital, noting that PRC Capital would not consent to Fife Group receiving even the letters from PRC Capital's solicitors absent a confidentiality undertaking by Fife Group (and even then only agreeing to letters being provided on a case by case basis), referring to the communications from Hall & Wilcox of 18 February 2021 and 17 March 2021. The prospective defendants say that this meant that they could not even inform Fife Group of what was being requested without first obtaining an undertaking from it (much less have a sensible discussion with Fife Group), pointing out that Fife Group (as a third party) was under no obvious obligation to provide such an undertaking or consent. To the extent that PRC Capital (at [13]-[20] of its submissions) complains of the speed with which the inquiries were progressed, it is said that that was caused by the prospective defendants' obligations to Fife Group and contributed to by the stance taken by PRC Capital.
6. The prospective defendants cavil with the suggestion by PRC Capital in its submissions that the letter of 26 February 2021 indicated that the two redacted documents were provided as constituting the joint venture. It is noted that the letter stated that the documents were provided for PRC Capital to assess the claim it was considering making; and it is said that this was a continuation of the prospective defendants' attempts to resolve the issue pragmatically.
7. Insofar as PRC Capital has taken issue with the prospective defendants' conduct following the filing of the summons (see the submissions at [2], [6], [21]-[27]), the prospective defendants say that PRC Capital's submissions do not fairly set out the sequence of events.
8. In particular, it is said (and I agree) that the prospective defendants did not capitulate by providing the very same documents sought by the summons.
9. It is noted that the summons (see as extracted earlier) sought orders that for the production of, relevantly, any document (in unredacted form) "constituting or otherwise recording the terms of any joint venture …" whereas the order made by consent on 10 June 2021 required the production of any document "constituting any joint venture …" (thus omitting the words "or otherwise recording the terms of"). The prospective defendants say that any capitulation came from PRC Capital (in that it did not press for documents "otherwise recording the terms of any joint venture"). The prospective defendants say that the expression "otherwise recording the terms of" is clearly broader than "constituting the joint venture" and extends to any document which happens to record the terms of the joint venture (such as emails, letters of advice, correspondence, drafts of the documents which became the joint venture documents and the like).
10. The prospective defendants note that they identified this issue on 9 April 2021, and invited PRC Capital not to press the words "or otherwise recording the terms of" but that the correspondence on this issue continued, with PRC Capital continuing to press those words, until 21 May 2021 (when those words were removed from the then agreed consent orders).
11. The prospective defendants say that, in the interim, the Court timetable required the prospective defendants to serve their evidence by 6 May 2021; that the open affidavit of Ms Fong affirmed 6 May 2021 identified the documents that constituted the joint venture ([7]-[9]), despite there being at that stage no obligation on the prospective defendants to do so), and explained the anticipated searches required for documents "otherwise recording the terms of" the joint venture and the anticipated time and costs of doing so ([11]-[24]).
12. Insofar as PRC Capital has suggested (at [21]) that there is a contradiction between Ms Fong's evidence that the joint venture was constituted by 37 documents and her evidence as to the searches and review of vast material required to comply with the summons, the prospective defendants say that this submission overlooks the distinction between the 37 documents "constituting" the joint venture and what would be required to locate documents "otherwise recording the terms of" the joint venture.
13. The prospective defendants say that their conduct in seeking to narrow the proposed wording of the order sought, and suggesting a form of order which resolved the dispute, was reasonable. They point out that, had PRC Capital agreed in a timely fashion to the narrower formulation of the order to which it ultimately agreed, then the prospective defendants would have been spared the expense of preparing the evidence concerning the scope of the searches required on the original formulation of the order.
14. As to the submission by PRC Capital (at [22]) that, prior to Ms Fong's affidavit, it had made plain that it sought "only one copy of the terms of whatever documents comprised the joint venture", the prospective defendants say that this is not made out on the evidence (pointing to the fact that the 3 May 2021 email from Hall & Wilcox sought production of "documents that set out the terms of the joint venture", which the prospective defendants say is in terms no narrower than the wording of the summons). It is submitted that restricting production to one copy of all of the documents caught by this formulation is no concession.
15. As to the fact that problems in the framing of the summons were not raised prior to the proceeding (see PRC Capital's submissions at [23]), the prospective defendants say that the correspondence before the proceeding was commenced was not directed to the appropriate wording of a Court order, and they cavil (as noted above) with the proposition that the provision of the two documents on 26 February 2021 was suggested to be all of the documents recording the terms of the joint venture.
16. The prospective defendants reject the submission made (at [24]) that Annexure A was in standard form (which they note is unsupported by any evidence) and they cavil with proposition that there could have been no reasonable doubt as to what was sought (pointing to the letter of 9 April 2021 where such doubt was explained and noting that PRC Capital ultimately agreed to narrow the order).
17. As to the 20 May 2021 letter, the prospective defendants say that this was a proposal for consent orders which would encompass the 37 documents and resolve the matter; and that there was no distinct agreement (absent the making of orders) to provide any documents.
18. Insofar as complaint is made by PRC Capital (at [26]-[27]) as to the exchange of correspondence concerning the confidentiality undertaking sought by the prospective defendants, the prospective defendants say that this is unremarkable (and they point out that the correspondence shows that a regime for redactions was agreed). Further, it is noted that the debate over the confidentiality undertakings was shortly after overtaken by the consent orders (which resolved the substantive proceedings and made the undertaking debate otiose).
19. Thus, the prospective defendants submit that there was no unreasonableness in their conduct (particularly when weighed against PRC Capital's conduct in not agreeing earlier to the narrower form of order), let alone such unreasonableness as to justify the making of a costs order (referring to Lai Qin at 624); and that the submission that they acted contrary to s 56 of the Civil Procedure Act should be rejected.
20. The prospective defendants maintain that the present application for costs should not have been brought; and that the bringing of such an application by PRC Capital (accompanied by a 472 page bundle of documents) is itself unreasonable and (having regard to the fact that the inappropriateness of such an application was raised in correspondence and that an application for the costs of any such costs argument was foreshadowed by the prospective defendants) the prospective defendants say that PRC Capital should pay the prospective defendants' costs of the present costs application.

PRC Capital's reply submissions

1. PRC Capital in reply to the submissions of the prospective defendants says: first, there are no disputed questions of fact to be determined on the present application (that being the issue to which Basten JA was referring in Nichols v NFS Agribusiness at [8]); rather, that there has been much correspondence because of the prospective defendants' failure promptly to provide the documents sought - reiterating the complaints made in the original submissions in this regard; second, that PRC Capital promptly provided any consent requested of it in respect of Fife Group (and that, even after the prospective defendants informing Fife Group, only two documents were provided; and not the 37 ultimately said to comprise the joint venture); it being said (again) that, had all the relevant documents been provided on 26 February 2021, the summons would not have been needed; and, third (and, again, reiterating the original submission), that there was a "complete capitulation" by the prospective defendants.
2. It is said (and as I have noted this is disputed by the prospective defendants) that the "very" documents sought on 27 January 2021 were provided following the summons and the orders made on 10 June 2021. Complaint is made that the prospective defendants "continue to focus on matters of form and not of substance". It is again submitted that no reasonable person could have had any doubt as to what was sought as PRC Capital consistently had made clear in all its correspondence from 27 January 2021; and that it was only because the summons was filed that the documents sought initially on 27 January 2021 were provided.

Determination

1. As I indicated at the outset, this is yet another dispute as to costs; particularly unedifying because it has required an excursus through the correspondence between the respective solicitors from which it is clear that an inordinate amount of time and cost has been wasted that could more profitably have been put to focussing on identifying the real issues (if any) in dispute.
2. The principles applicable on an application such as the present are not in dispute. Both parties have referred to the well-known principles articulated in Lai Qin and as applied in Nichols v NFS Agribusiness. I would simply emphasise that satellite litigation of the present kind should be firmly discouraged even though I accept that what is here sought is not a determination of disputed issues of fact as to the matters the subject of the substantive dispute (c.f., Nichols v NFS Agribusiness), noting that on the present application PRC Capital has put forward a voluminous amount of correspondence to which the prospective defendants were required to respond and which has been required to be reviewed.
3. A review of the correspondence between the respective solicitors (unedifying as it most assuredly has been) makes clear to my mind that the conduct of the prospective defendants was not unreasonable.
4. First, whatever the merits of the complaint that there may have been a breach of cl 6.1 of the Consideration Deed, what was being made clear to PRC Capital at a very early stage was that Stockland was in a joint venture of some kind with Fife Group, or entities in the Fife Group, such that the prospective defendants were concerned that they owed confidentiality obligations to the Fife Group and required consent to the production of the documents that had been sought by PRC Capital. (The suggestion that PRD Capital was required to see the very documents over which confidentiality was claimed, in order to satisfy itself whether Fife Group was a "capital partner" and therefore had been an entity to which the prospective defendants could properly have disclosed the Consideration Deed in the first place, seems to me to involve no little an element of circularity but in any event begs the question as to the reasonableness of the prospective defendants' perceived need to refer the request to Fife Group before acceding to the demand for production of the joint venture documents.)
5. Second, I see force in the complaint that the potential breadth of the expression "or otherwise recording the terms of" would or might require extensive searches to be made for the documents that had been sought (bearing in mind that Annexure A sought "any document" falling within its terms; and that there was for some time ongoing doubt as to what would be required by an order in those terms, as evidenced by the communications).
6. I do not propose here to address each of the complaints made in the submissions for either side as to the conduct of the other, save to say that it is unfortunate that the solicitors (if not their clients) were seemingly unable to explore a sensible regime to address the concerns that had been raised as to the breadth of the documents sought, a proposed access and confidentiality regime and the perceived need for consent from Fife Group to the production of the joint venture document(s). It is not insignificant, in this regard, that it appears that the prospective defendants' solicitors at an early stage sought to engage in sensible discussions and were (somewhat unceremoniously) rebuffed on various occasions (including with the unhelpful stance of PRC Capital at one stage, to which I have referred to above, that it did not propose to engage in further correspondence).
7. I certainly do not consider that the prospective defendants were acting so unreasonably as to justify a costs order against them; nor do I consider that they can fairly be accused of non-compliance with the statutory mandate pursuant to s 56 of the Civil Procedure Act to conduct litigation with a view to the just, quick and cheap resolution of the real issues in dispute. Moreover, I cannot help but feel that some of the difficulty (and no doubt increased costs engendered) in this matter has been a result of the stance taken by PRC Capital to the concern expressed by the prospective defendants as to the potential breadth of the orders sought by reference to the wording of Annexure A and the (not unreasonable) apparent concern of the prospective defendants to ensure that they not be accused of being in breach of any order for production of documents.
8. Therefore, I dismiss the application by PRC Capital for an order for its costs of the summons for preliminary discovery.
9. Finally, as to the application made by the prospective defendants in their submissions (of which PRC Capital was put squarely on notice in advance) that their costs of the costs application itself should be borne by PRC Capital, it seems to me that the general rule that costs follow the event should here apply. In saying this, I have regard to the fact that this application was accompanied by a very large bundle of documents in support (some of which it was said were included for completeness and were documents that it was said "need not be reviewed (if at all) beyond the limited provisions referred to" in the submissions by PRC Capital), which can only have added to the costs of the costs application.

Orders

1. Accordingly, I make the following orders. 1. No order as to costs of the summons for preliminary discovery. 2. Order that the plaintiff pay the prospective defendants' costs of the costs application.

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: 12 August 2021