Radiant Alliance Australia Pty Ltd v Divola

The proceedings in the Court below

1. In the Court below the plaintiff claimed a liquidated sum from the defendant which comprised the following two amounts; $5,380 on account of moneys which Subzero Logistics Pty Ltd (Subzero) paid to the defendant (the Subzero claim); and $27,400, which was alleged to comprise loan advances made by the plaintiff to the defendant repayable on demand (the loan moneys claim). By cross-claim, the defendant claimed $98,427.71 from the plaintiff for alleged unpaid wages, superannuation and leave loading (the wages claim).
2. In the Court below the plaintiff succeeded in the Subzero claim and failed on the loan moneys claim. The defendant was partly successful on the wages claim. The Local Court entered judgment for the plaintiff on the Subzero claim and judgment for the defendant on the cross-claim, the net result of which was that there was an amount outstanding in favour of the defendant of $52,214. An order for costs was made in favour of the defendant.

The appeal

1. On 21 November 2016 the plaintiff filed a notice of intention to appeal in the Court of Appeal. The plaintiff subsequently learned that the proceedings ought to have been commenced in the Common Law Division of this Court. Accordingly, by order of Registrar Bellach made on 6 February 2017, the proceedings which had been commenced in the Court of Appeal were transferred into this Court. In due course a summons was filed on 16 March 2017 which was subsequently amended, as referred to above, on 24 March 2017.
2. Directions were made by this Court, including for service of written submissions by both parties, which were largely complied with. On 20 March 2017 Registrar Kenna listed the appeal for hearing on 2 August 2017 and noted the estimate of one day. On 29 May 2017 the plaintiff's solicitor filed a Notice of Ceasing to Act. On that day, the defendant's solicitor, by email, enquired whether the plaintiff would be represented at the hearing of the amended summons on 2 August 2017. Subsequently the plaintiff's solicitor responded by saying that she was not in a position to comment.

The abandonment of the proceedings by the plaintiff

1. On 13 June 2017, unbeknown to the defendant, the members of the plaintiff company resolved to wind up the plaintiff. Pursuant to s 497 of the Corporations Act 2001 (Cth), the plaintiff's liquidator was required to call a meeting within ten business days after the day of the meeting of the company at which the resolution for voluntary winding up was passed. The liquidator of the plaintiff, in purported compliance with s 497, sent a notice of a meeting of creditors on 23 June 2017 to give notice of a meeting to take place on 4 July 2017. The defendant, who was plainly a creditor of the plaintiff company, did not receive notice of that meeting. I pause to note that I make no criticism of the liquidator, since it may be that the liquidator was simply not aware of the judgment debt in favour of the defendant against the plaintiff which had been ordered by the Local Court.
2. On 31 July 2017 Mr Jessop, the defendant's solicitor, searched the ASIC Register and learned that the plaintiff company had been wound up on 13 June 2017. He also learned of the notice of meeting and the meeting itself, which had already come and gone. On 1 August 2017 Mr Jessop spoke to the liquidator and confirmed the communication in writing. The liquidator informed Mr Jessop that he did not intend to appear on behalf of the plaintiff company at the hearing of these proceedings on 2 August 2017 and understood that, at the hearing on 2 August 2017, the defendant would seek an order dismissing the plaintiff's appeal and also seek an order for costs.
3. When the matter was called this morning Mr Fowler appeared on behalf of the defendant and furnished and read an affidavit of Mr Jessop which established these matters. In these circumstances it is appropriate to order that the amended summons filed on 24 March 2017 be dismissed and that the plaintiff pay the defendant's costs of the proceedings.
4. I note for completeness that Mr Fowler has drawn my attention to s 500(2) of the Corporations Act which provides that no action or other civil proceedings is to be proceeded with or commenced against a company in respect of which a resolution for voluntary winding up has been passed, except by leave of the Court. Mr Fowler contended that, for the reasons given by White J in Dealquip Australia Pty Ltd v 33 Electra Pty Ltd (No 2) [2013] NSWSC 1382 at [21] that proceedings such as these are not a proceedings against a company within the meaning of s 500(2) of the Corporations Act. I have respectfully followed the decision of White J in Webster v Super Smart Strategy Pty Ltd; Courtney v Super Smart Strategy Pty Ltd [2017] NSWSC 531 at [47]-[50]. For the reasons given in that passage, I am satisfied that s 500(2) of the Corporations Act does not impede my making the orders sought on behalf of the defendants for dismissal of the amended summons or in relation to the costs of the proceedings.

The defendant's application for a gross sum costs order pursuant to s 98(4) of the

1. The defendant has sought a gross sum costs order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW). The defendant has tendered, in support of that application, material which establishes the rates at which counsel and solicitors agree to provide legal services to the defendant as well as the amounts charged by those legal representatives to the defendant.
2. The relevant principles that apply to the consideration whether it is appropriate to make a gross sum costs order were set out by Giles JA in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213, in which his Honour considered the statutory predecessor to s 98(4) of the Civil Procedure Act at [21]-[22]. The Court of Appeal recently reaffirmed the correctness of this approach in the context of an application under s 98(4) of the Civil Procedure Act in Bechara (t/as Bechara & Co) v Bates [2016] NSWCA 294 at [12]-[16]. In that passage the Court confirmed that the power to order a lump sum should only be exercised where the Court considers it can do so fairly between the parties. Their Honours also said that the power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings. The Court of Appeal emphasised that a broad brush approach is appropriate and that to require the same or a similar level of detail as in a formal costs assessment would defeat the purpose of a lump sum order.
3. I am satisfied that it is appropriate to make a gross sum costs order in the present case. When proceedings come before this Court on a question of law from the Local Court there is almost necessarily a disparity between the amount claimed and the costs necessarily incurred in raising questions of law before this Court. There is such a disparity in the present case.
4. Further, I am satisfied on the basis of the chronology which I have set out above, that the plaintiff's conduct has unnecessarily added to the defendant's costs of the proceedings. Had the defendant been aware that the plaintiff would be the subject of a members' resolution to wind it up on 13 June 2017, many of the costs involved in preparing this matter for hearing could have been avoided. As it happened, it was only the diligence and prudence of the defendant's solicitor, Mr Jessop, in conducting an ASIC search on the plaintiff company on 31 July 2017 which resulted in his learning of the winding up and indeed in this Court being informed of that matter by the filing of the affidavit sworn by Mr Jessop on 1 August 2017.
5. I am conscious of the principles enunciated in Bechara (t/as Bechara & Co) v Bates in working out the appropriate sum for gross sum costs order. I am satisfied that the material adduced in respect of Mr Fowler's fees shows that the sum of $8,250 exclusive of GST is a reasonable sum. Mr Fowler informs me that he was responsible for drafting the detailed and helpful written submissions which have been filed on behalf of the defendant, although they were signed by Mr Coleman SC. Having read these submissions in preparation for the hearing, I am satisfied that the preparation of these submissions required significant reading and analysis, having regard to the two grounds of appeal for which the plaintiff contended. I note that no application has been made in respect of the fees of senior counsel.
6. On occasions when Mr Fowler was not available to appear at directions hearings, Mr Weaver of counsel appeared on behalf of the defendant. I am satisfied that his fees of $1,347.50 are reasonable. The defendant's solicitors claimed an amount of $7,240.82 for their professional fees. Mr Fowler tendered two detailed documents which set out the charge-out rate, units and time and, with a considerable degree of detail, the work performed by the solicitors in liaising with counsel, dealing with the clients and performing other tasks, including administrative tasks such as photocopying. The charge-out rates and work performed appears to me to be reasonable. However, the making of a gross sum costs order requires a broad brush approach. It is conventional to apply a discount to the fees claimed unless a discount has already been built into the application.
7. In the circumstances, I consider it to be appropriate to discount the total amount of $17,663.32. I propose to apply a discount which will not be expressed in percentage terms but which will round down the figure claimed to the figure of $15,000, which includes GST.
8. Accordingly for the reasons set out above, I make the following orders: (1) Dismiss the amended summons filed on 24 March 2017; (2) Order the plaintiff to pay the defendant's costs of the proceedings; (3) In respect of the costs payable pursuant to order (2) above, order the plaintiff pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) to pay to the defendant the amount of $15,000 (including GST) within 28 days of the date of this order. 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: 03 August 2017