Reches Pty Ltd v Tadiran Ltd

REASONS FOR JUDGMENT 1 The respondent in the proceeding seeks, by notice of motion filed on 13 June 2000, an order that part of the costs payable by the applicant to it pursuant to an order which I made on 12 August 1999 be assessed as a gross sum, and an order directing payment to the respondent by the Registrar of a sum of $25,000 lodged by the applicant in accordance with an order requiring the provision of security for costs. The respondent did not appear, but the evidence satisfies me that the notice was served and that the respondent had ample notice of the hearing. 2 The trial of the proceeding occupied four days in December 1998 and February 1999. Both parties were represented by senior and junior counsel. There is no reason to take any view other than that it was reasonable that the parties be represented at that level. The respondent was successful in the proceeding: the application was dismissed and the applicant was ordered to pay the respondent's costs. To the extent that those costs were incurred after 8.30 am on 18 December 1998, they were to be paid on the indemnity basis. The amount for which the respondent now seeks a gross sum order is the sum of the disbursements which it incurred after 8.30 am on 18 December 1998: that is, during the period covered by the order for indemnity. 3 Evidence before me on the motion establishes that the fees charged by senior and junior counsel appearing for the respondent during that period and fees paid by the respondent for the transcript of the trial amount to a sum substantially in excess of $25,000, somewhat more than $30,000. I see nothing unreasonable in the amount of the fees charged by either senior or junior counsel, and I have no serious doubt that those fees would be recoverable virtually in full upon taxation on the indemnity basis. Equally, I have no doubt that the fees paid for the transcript of the trial would be recoverable by the respondent upon taxation on that basis. Accordingly, it seems to me that there is no difficulty in making the order requested in paragraphs 1 and 2 of the respondent's motion - that the disbursements concerned be assessed, pursuant to O 62 r 4(2), as a gross sum of $25,000 - and I propose to make that order. 4 The evidence establishes also that the respondent is without funds; that Mr Reches, who was a director and the effective manager of the respondent, is bankrupt; that there is no serious prospect that any dividend will be paid in his bankruptcy; and that equally, to the extent that it may be relevant, the remaining director, Mrs Reches, appears also to be without substantial funds. Those circumstances have, of course, the consequence that, if the respondent were compelled to tax its costs, it would simply be required to spend a substantial further amount of money which it would have no serious prospect of recovering. That is, of course, an additional circumstance favouring the making of the order which I have already indicated I shall make. It also makes it clear, in my view, that it is appropriate for me to order that the sum of $25,000 held by way of security for costs be paid out by the Registrar to the respondent as requested in paragraph 3 of the motion. Accordingly, the orders which I make are those orders requested in paragraphs 1, 2 and 3 of the motion, and order 5, that is, that the applicant pay the respondent's costs of the motion. 5 There is one further matter, however, with which I must deal. It is that the security for costs did not comprise only the sum of $25,000 in cash which was lodged with the Court. In accordance with orders which I made on 20 July 1998, the security included also personal guarantees of the two then directors of the applicant, Mr and Mrs Reches, and a written undertaking which each of them gave to the Court. 6 The personal guarantees were supported by a bill of sale. The property which was the subject of the bill of sale principally comprised certain jewellery and works of art which, according to the evidence read on behalf of the applicant on the motion for security, had a substantial value. Plainly, one of the concerns, where security for costs includes a bill of sale over property of that kind, is that the property is maintained safely so that it will be available if the occasion arises for the security to be called upon. To meet that concern, the bill of sale itself contained standard provisions for keeping the property safe. More particularly, the written undertaking dated 16 July 1998 given by each of the two directors to the Court comprised the following two paragraphs: "1. That we shall comply with all covenants, obligations and provisions of the Bill of Sale dated 16 July 1998 granted by us to the Respondent in these proceedings, a copy of which is annexed hereto and marked 'A'; 2. That we shall keep the property referred to in the Schedule to the said Bill of Sale in the premises occupied by us, namely Unit 12/442 Edgecliff Road, Edgecliff, New South Wales, but subject to those items listed as 'jewellery' being able to be removed from those premises from time to time in the course of their ordinary and reasonable day to day use." 7 The principal evidence read on the motion was an affidavit of the solicitor for the respondent, Mr Philip Brand. Mr Brand gives evidence of a conversation which he had with Mr Reches on 28 January 2000. He deposes that Mr Reches, on that day, informed him of certain matters which Mr Brand subsequently recorded in a letter to Mr Reches dated 19 May 2000. Those matters, according to the letter of 19 May, included the following: first, that Mr Reches had given the jewellery covered by the bill of sale charged in favour of the respondent to his son for delivery to his daughter in Israel; and secondly, that the balance of the items covered by the bill of sale were given to another creditor in part satisfaction of, or security for, moneys lent by him. Mr Reches, according to Mr Brand, also made certain statements both about the value of the property subject to the bill of sale and about other creditors which are at odds with evidence given on the application for security for costs heard some eighteen months earlier. 8 If indeed Mr Reches did the things in relation to the property which, according to Mr Brand's evidence, he said he had done, then prima facie Mr and Mrs Reches breached the undertakings which they gave to the Court and it is not easy to see, in the circumstances, that the breach is likely to have been accidental. 9 The respondent, in the circumstances and quite understandably, does not, I have been informed, propose itself to move in the proceeding for the punishment of Mr and Mrs Reches for the contempt which, on Mr Brand's evidence, appears to have been committed by way of breach of the undertaking. The question necessarily arises, however, whether the Court ought to take action of its own motion. The only action which it is open to the Court to take under the Federal Court Rules is, I think, that contemplated by O 40 r 10. That rule provides: "1. Where it is alleged, or appears to the Court on its own view, that a person is guilty of contempt of the Court, the Court may, by order, direct the Registrar to apply by motion for, or to commence a proceeding for, punishment of the contempt. 2. Sub‑rule (1) does not affect such right as any person other than the Registrar may have to apply by motion for, or to commence a proceeding for, punishment of contempt." 10 I have no wish unnecessarily to add to the misfortunes which plainly have befallen Mr and Mrs Reches since the conclusion of these proceedings. Inescapably, however, it seems to me that the Court ought not simply overlook what appears, on the basis of evidence given by a solicitor, to be a clear and apparently deliberate breach of undertakings given to the Court by two persons who, at the time they gave the undertakings, must have had available to them advice not only of solicitors but also senior counsel then appearing for the applicant. In other words, there is no reason why I should think it likely that Mr or Mrs Reches had any doubt as to the effect of the undertaking which they gave or as to the possible consequences of breach of it. Again, the evidence is that Mr Brand informed Mr Reches of the possible consequences of what he claimed to have done, and warned Mr Reches that he would bring the matter to the attention of the Court. 11 In those circumstances, I do not think I can ignore the evidence given by Mr Brand of clear admissions of breach. Accordingly, in addition to the orders that I have already made, I direct the Registrar to commence a proceeding against each of Isaac Reches and Yael Reches for punishment of the contempt which prima facie they appear to have committed by breaching their undertaking to the Court of 16 July 1998. 12 I add only, obvious as it may be, that any such proceeding would be dealt with by another judge of the Court. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.