Court of Appeal (WA)|1999-07-30|Before: White J, Anderson J, Templeman J, Wheeler J

Quancorp Pty Ltd & Anor v Macdonald & Ors [1999] WASCA 101 (30 July 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : QUANCORP PTY LTD & ANOR -v- MACDONALD & ORS [1999] WASCA 101

Costs - Indemnity costs - Circumstances where awarded - Hopeless case - Turns on own facts

Colgate-Palmolive v Cussons [1993] FCA 536; (1993) 46 FCR 225

Giles v Randall [1915] 1 KB 290

In the matter of Bond Corporation Holdings Ltd (1990) 1 WAR 465

Quancorp v MacDonald & Ors (1998) 28 ACSR 520

Quancorp v MacDonald & Ors [1999] WASCA 33

Quancorp v MacDonald (1997) 24 ACSR 745

Quancorp v MacDonald (1997) 25 ACSR 123

Quancorp v MacDonald (1998) 28 ACSR 520

Spargos Mining NL (1990) 8 ACLC 1218

Zytan Nominees Pty Ltd v Laverton Gold NL [1989] 1 WAR 227

1 WHEELER J: The proceedings from which this matter arose were commenced by writ issued on 2 September 1997. The appellants (plaintiffs) claimed an injunction restraining the respondents from declaring and paying a dividend to the second respondent's shareholders and convening a meeting of members of the second respondent to consider the solvent voluntary winding-up of the second respondent, together with a declaration that certain actions of the second respondent were void as contravening the listing rules of the Australian Stock Exchange (ASX).

2 On 8 September 1997 the appellants' application for an interlocutory injunction was dismissed by Justice Templeman, who found that the appellants did not have standing to obtain the orders sought. On 15 September 1997 the appellants' application for a stay pending an appeal against the orders made by Justice Templeman was dismissed. Judgment was given for the respondents on 19 August 1998 following a three day trial by Justice Anderson. The reasons for that decision included a finding that the appellants did not have standing to bring the proceedings. On 4 June 1998 White J had dismissed an application by the appellants to join the ASX on the basis that, having regard to the belated nature of the application and the fact that the matter was within the Expedited List, it was not in the interests of justice to permit the joinder. On 12 March 1999, the Full Court dismissed an appeal from the decision of Anderson J, having not found it necessary to call upon the respondents to make any oral submissions in response to the appeal. The reasons for the decision of the Full Court included findings that the appellants could not obtain the relief they sought without the ASX being a party to the proceedings, and that the appellants lacked standing to bring the proceedings.

3 The respondents now seek orders that their costs in the appeal be paid on an indemnity basis. Essentially, they assert that the appellants' case was doomed from the beginning and that any reasonable person in the appellants' position, properly advised, would have known that there were no reasonable prospects of success on the appeal.

4 In its application for indemnity for costs, the respondent relies upon the well-known passage from Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 at 400 - 401 per Woodward J:

"[The court's discretion in the award of costs] is 'absolute and unfettered' but must be exercised judicially. Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way'.

I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law." (Citations omitted)

5 The respondent asserts that by the time at which the appeal was argued, the appellant had on three occasions had the benefit of views of single Judges pointing out the two fatal flaws in its case, in relation to its own lack of standing and its lack of joinder of the ASX.

6 In J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 42; (1993) 46 IR 301, French J made certain comments in relation to Fountain Selected Meats, which may be of relevance. His Honour said (at 303):

"Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reasons, a party persists in what should on proper consideration be seen to be a hopeless case."

7 There appear to me to be two competing principles. On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full. It is with these considerations in mind that I have read the various judgments that have dealt with this matter, together with the reasons of the Full Court on the appeal.

8 So far as the non-joinder of the ASX is concerned, the appellants themselves clearly thought that it was at least a prudent course, but were unsuccessful in their application for joinder. Malcolm CJ, with whom Ipp and Wallwork JJ agreed, described non-joinder of the ASX as a "fundamental obstacle" in the way of the appellants. The description can be easily understood when one remembers that the appellants' action was founded on an assertion that the actions of the respondents were void as contravening the listing rules of the ASX. The Chief Justice further pointed out that in any event, the consequence of a breach of the relevant listing rule provided in the rules themselves, is that "if an entity breaks this rule, ASX may require it to take the corrective action set out in r 10.9." Rule 10.9 sets out various possible forms of corrective action and there is no suggestion within the rules or elsewhere that the impugned transaction is void. The sole remedy for a party complaining of a breach of the rule is to apply to the ASX.

9 So far as the issue of standing was concerned, Malcolm CJ set out in his reasons relevant passages from the reasons of Templeman J and of Anderson J concerning this issue and observed:

"With all due respect to the submissions to the contrary by counsel for the appellants, it is sufficient to say that I consider the views expressed by Templeman J and Anderson J to be entirely correct."

I do not think it is necessary to set out the relevant passages again. They are to be found at 12 and 13 of his Honour the Chief Justice's reasons in the Full Court. With all respect to the appellants, it is difficult to see how any contrary view could possibly be maintained.

10 The appellants were unsuccessful at every turn before both Templeman and Anderson JJ at first instance. The deficiencies in their standing were plainly pointed out to them at each stage. They realised for themselves the desirability of joining the ASX, but sought to do so at too late a stage in the proceedings. In relation to those two issues, I am of the view that the case which they sought to mount would properly be described as "hopeless". The legal issues which they sought to raise may well have been of significance. I make no finding in respect of them. However, they are not parties entitled to relief in respect of those issues.

11 Finally, I should note that the appellants point to the respondents' engagement of senior counsel for the appeal and to the Full Court's granting of a certificate for second counsel in respect of the appeal, as indicating that the issues were not clear-cut. The respondents asserted that the use of senior counsel was necessary because of the very significant consequences for the respondents in the unlikely event that the appellants had been successful.

12 In my view, this is a matter in which, at least by the time the appellate stage was reached, the difficulties facing the appellants were so glaring that no reasonable appellant, properly advised, could have seen an appeal as other than a hopeless course. It is therefore appropriate that the appellants should be ordered to pay indemnity costs. I would order that the appellants pay all costs incurred by the respondents except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to the above exceptions, the respondents are completely indemnified by the appellants for their costs of the appeal.

13 I should note, for the sake of completeness, that in my view there remains an issue as to whether engaging senior counsel in respect of an appeal which was obviously hopeless, could be described as an "unreasonable incurring of expense". I think it is appropriate to leave the question for the Taxing Officer, but would make the observation that much may depend upon the amount of time expended by senior counsel in relation to the matter. Employing senior counsel where significant issues are at stake may well be a wise precaution, even if on its face the appeal appears doomed, but one would not expect that, in respect of such a matter, senior counsel would have a very great deal to do.

Quancorp Pty Ltd & Anor v Macdonald & Ors [1999] WASCA 101

At a glance

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Judgment (32 paragraphs)

Quancorp Pty Ltd & Anor v Macdonald & Ors [1999] WASCA 101 (30 July 1999)

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Cases Cited (4)