These reasons relate to the question of costs of the proceedings consequent upon the judgment in the proceedings delivered on 7 October 2016: RinRim Pty Ltd v Deutsche Bank AG [2016] NSWSC 1377 (the Judgment). These reasons should be read with the Judgment.
The defendants seek an order pursuant to s 98(1)(c) of the Civil Procedure Act 2005 that the plaintiff pay their costs on an indemnity basis from the commencement of the proceedings.
The defendants relied upon the following passage of the Judgment in support of its submissions that costs should be awarded on an indemnity basis:
295. Although Mr Gyles submitted that Dr Volfneuk's evidence might be described as retrospectively inaccurate or wishful thinking, I am afraid that does not sit comfortably with reality. The defendant's diligent preparation for trial in obtaining the relevant documents to test Dr Volfneuk's claims and their forensic deployment in challenging his claims in cross-examination ultimately exposed a reality that might otherwise have remained hidden. I do not accept Dr Volfneuk's claims that he was not really intending at any stage to be a "buyer". Whether as Mr Gyles submitted there was an element of "wishful thinking" in Dr Volfneuk's approach to his evidence, I am satisfied that he intended to be a "buyer" and that he knew at the time of his cross-examination this was the true position.
The "relevant documents" referred to in paragraph [295] of the Judgment formed part of Exhibit 2 at the trial. The documentary material in Exhibit 2 was pivotal to the determination of the question whether the plaintiff intended to take up its entitlements in the Retail Offer. After some of these documents were returned in answer to subpoenae issued by the defendants, the plaintiff was granted first access to the documents. After that process was concluded the plaintiff filed a Supplementary List of Documents which included copies of some of the documents that had been obtained on subpoena. This process was concluded by mid-July 2016.
RinRim Pty Ltd v Deutsche Bank AG [2016] NSWSC 1510 | Case summary | Zoe
The defendants accepted that the finding in the last sentence of paragraph [295] of the Judgment is a finding of knowledge at the time of cross-examination. However, they submitted that such finding should not be confined to that particular time. It was submitted that it is not realistic to suggest that the truth just dawned on Dr Volfneuk when he was in the witness box and that he always knew that the plaintiff was a buyer in the Retail Offer. It was also submitted that the plaintiff had access to the documentary material in Exhibit 2 and must have known the true position prior to his cross-examination. It is the finding that Dr Volfneuk's evidence in cross-examination was not truthful, combined with the fact of the plaintiff's access to the documents that ultimately became Exhibit 2 (some of which were in the plaintiff's original disclosure), from which the defendants submit an inference may be drawn that Dr Volfneuk always knew the reality and knowingly proceeded with the case on a false basis from the outset.
The plaintiff submitted that there was no finding that Dr Volfneuk knew prior to the time of his cross-examination that the plaintiff intended to be a "buyer" at the relevant time. It was submitted that one cannot infer that Dr Volfneuk's state of mind was the same at all times prior to his cross-examination. It was submitted that notwithstanding that Dr Volfneuk had access to the documents that ultimately became Exhibit 2 at trial, a setting in which documents are reviewed is quite different to the circumstance of being cross-examined about the contents of the documents.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Woodward J identified a category of case appropriate for indemnity costs as one in which there is "wilful disregard of the known facts" (at 401). To a similar effect in Thors v Weekes (1989) 92 ALR 131 Gummow J referred to the case that proceeds on the basis of a "knowingly false account of various conversations" (at 152). In Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225, after a thorough analysis of the relevant authorities, Sheppard J referred to the category referred to by Woodward J in Fountain Selected Meats v International Produce Merchants in which a party has a "disregard of known facts" (at 223).
In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd (2006) 196 FLR 419 Chesterman J referred to Roberts-Smith J's judgment in Lee v Mavaddat [2005] WASC 68 at [23], where his Honour referred to the defendant in that case as having known at all material times that he had no chance of success in his defence or counterclaim (at 423). In Southern Cross Mine Management v Ensham Resources Chesterman J concluded that the plaintiff's claim and its resistance to the relief sought against it were "essentially dishonest" and depended upon "deliberately false testimony advanced to conceal the real basis" of its claim (at 423).
The plaintiff submitted that these cases are distinguishable from the present case. Thors v Weekes involved knowingly false evidence about an historical fact, namely, what was said in certain conversations. Southern Cross Mine Management v Ensham Resources involved deliberately false testimony about the basis on which a party had given its consent to a transaction. The plaintiff submitted that these situations are to be contrasted with the putative "known fact" in the present case, which concerned the hypothetical question of what the plaintiff would have done if offered inclusion in the Institutional Offer.
The plaintiff submitted that the findings in the Judgment upon which the defendants rely do not support the conclusion that the plaintiff commenced and prosecuted the proceedings in wilful disregard of known facts so as to warrant the award of indemnity costs.
The plaintiff also submitted that the "staggering" nature of the defendants' costs in defending the proceedings would not incline a court towards making a special costs order. One of the difficulties in this case was that the evidence given by Dr Volfneuk in relation to what the plaintiff would have done in certain circumstances was not admissible in the negligence suit. The legislature has made this type of evidence inadmissible in negligence suits requiring the court to determine what would have happened by taking into account all of the matters that are before the court at the time, as opposed to allowing a party to express a retrospective view of what it claims would have happened at a particular time: s 5D(3)(b) Civil Liability Act 2002. However, the defendants had to deal with that evidence because it was admissible in the plaintiff's misleading or deceptive conduct claim.
In those circumstances one of the options for the defendant was the garnering of evidence by appropriate mechanisms to test the evidence that was called by the plaintiff in this regard. That requires the application of thoughtful analysis and advice from experienced forensic practitioners. It is not a simple process. The costs that had to be expended to expose the reality of the situation in this case were caused by the plaintiff's claims that were based on evidence that was found to have been untruthful. I do not regard the plaintiff's description of the defendants' costs as helpful. This was a novel claim and the defendants were justified in retaining the most experienced legal advisers of their choice to assist them in exposing the defects in the claims against them.
It was clear to the plaintiff that the acceptance of Dr Volfneuk's evidence that the plaintiff was not a buyer in the Retail Offer was pivotal to the success of its claims. It was to be relied upon in support of a submission that, if invited into the Institutional Offer, the plaintiff would have accepted the offer, but would not have purchased shares (because it was not a buyer) and would have renounced its entitlement. Notwithstanding the clear intent exposed in the documents in Exhibit 2, Dr Volfneuk sought to maintain his claim in his oral evidence that the plaintiff was not a buyer, which was ultimately rejected for the reasons stated in the Judgment.
The date by which the plaintiff had concluded its review of the subpoenaed material and finalised its disclosure was no later than mid-July 2016. I am satisfied that from this time the plaintiff must have known, or certainly should have, that any claim that it did not intend to be a buyer in the Retail Offer was not sustainable.
The parties made submissions in respect of the costs of the Notice of Motion brought by the plaintiff to amend its claim just prior to hearing: (Judgment [313]). The plaintiff was successful in some aspects of that application but unsuccessful in other aspects. That application was heard after the completion of the plaintiff's review of the documents. I am satisfied that it is appropriate to deal with the costs of that Motion in the costs of the proceedings as a whole.
I am satisfied that the appropriate costs order in the circumstances is that the plaintiff should pay the defendants' costs of the proceedings and should do so on an indemnity basis from 14 July 2016.
[2]
Orders
The plaintiff is to pay the defendants' costs of the proceedings. Those costs are to be paid on an indemnity basis from 14 July 2016.
[3]
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Decision last updated: 02 November 2016