I refer to my previous judgments dated 3 August 2017 and 14 March 2019.
The Defendants seeks a variation of the costs order made in the last judgment, in that it seeks the following:
1. costs on an indemnity basis;
2. interest; and
3. clarification of order in paragraph 12(3) of the judgment dated 14 March 2019, limiting the costs order to the costs of the Defendants.
When this matter came before me for the first time, it was to determine a straightforward Notice of Motion filed 7 November 2016. My consideration of the history of these proceedings was limited of the scope by which they were enlivened by the orders sought in the Notice of Motion. Since that time, I have been provided a Chronology of the proceedings, being Appendix A to the Submissions of the Defendants filed 29 October 2018.
The Chronology, which the Plaintiff's Counsel had at the time of his submissions on 22 November 2018 and about which no exception was taken, provides as follows:
[2]
Chronology
Any emphasis added is by way of underling and bold text.
The genesis of these 2012 District Court Costs Proceedings was Riva's refusal to pay FCL's costs of acting for Riva as Trustee of the Cavallino Unit Trust ["the Trust"] in 2009 District Court proceedings brought against Riva's former solicitor for negligent advice in relation to the redevelopment of Trust property at Point Piper ["Trust Proceedings" (2009/1762)].
On 14 July 2010 through Angelo Ferella, FCL had been retained to act for Riva as Trustee of the Trust, including in defending an application for security of costs brought by the defendants in the Trust Proceedings.
Angelo Ferella was not a director of Riva but provided instructions on behalf of Riva. Unbeknownst to FCL at that time, in 2006 Angelo Ferella (while a bankrupt) was banned from holding directorships and earned a 6 (six) month suspended jail sentence for failing to comply with Notices to Produce books and records to ASIC. On its website ASIC reports that Angelo Ferella's bankruptcy, 2003 fraud conviction and his banning by ASIC meant that he would be disqualified from managing corporations until September 2011. [Exhibit CPC-1 Doc #1.1 at page/s 25 - 28].
On 10 September 2010, despite Riva's evidence that the Trust had funds to pay costs, Riva was ordered by McLoughlin DCJ to pay security for costs in the Trust Proceedings [Exhibit CPC-1 Doc # 5 page/s 56-63], primarily on the basis that Riva held no assets of its own and the defendants could not attach trust assets to enforce costs orders if there were competing equities. Riva refused to pay security and the proceedings were subsequently dismissed.
FCL rendered its bill to Riva in November 2010. Riva refused to pay FCL's costs, initially on the basis that it had no funds.
On or about 28 November 2010, Riva told FCL that it had difficulty paying FCL because its cash flow was "…now a serious issue…" and that it would only pay FCL what it believed to be "fair and reasonable" and only "…once the matter is over…" Relevant correspondence between FCL and Riva is exhibited as Exhibit CPC-1 Doc #6 page/s 64-66. It is relevant to note from the above that Riva expected FCL to keep working on the substantive issues in the Trust Proceedings whereas Riva argued before Curtis DCJ that FCL's retainer was limited to advising Riva in respect of the security of costs Motion only.
Riva subsequently argued that FCL had done work which it had not been instructed to do and required FCL to proceed to costs assessment. Under cross-examination in 2012, Angelo Ferella conceded that the evidence in his affidavit was false. [Exhibit CPC-7 Doc 10 page/s 84-110 at [34] page 92].
FCL proceeded to costs assessment and the Costs Assessor's determination was made on 19 July 2011. Riva still refused to pay and on 26 July 2011, FCL registered the Certificate of Determination in the Local Court and commenced proceedings to enforce the judgment debt and recover its costs (2011/240531). Riva applied to the Local Court for a stay.
Riva sought a Review (late) of the July 2011 Costs Determination to the Costs Review Panel and then appealed (late) to the District Court in these current District Court Cost Proceedings.
In December 2011 the Costs Review Panel dismissed the application.
On 13 January 2012 (out of time) Riva appealed the decision of the Costs Review Panel to the District Court in these District Court Costs Proceedings.
[3]
Credit Findings in These District Court Proceedings
On 10 August 2012, Curtis DCJ handed down his judgment in the costs appeal in these proceedings finding at [20] that the evidence of Tiziana Ferella was "…wholly unreliable…" and at [32] that he did "…not accept the evidence of Mr Ferella...", while at [22] that Mr Clancy was a "…truthful and reliable witness…". Angelo Ferella and Tiziana Ferella were joined to the proceedings ordered to pay costs jointly and severally with Riva under s98(1) Civil Procedure Act. [Exhibit CPC-7 Doc #10 page/s 84-102 at 89 & 91].
Of the professional fees claimed by FCL of $38,448.30 (excluding Counsel's fees), after considering each and every objection of Riva and its Cost Consultant, Curtis DCJ reduced the professional costs by $1,049 (plus GST) and awarded $37,294.40 or 97% of the fees claimed [Exhibit CPC-7 Doc #10 page/s 84-102 at para [51] page 101]. An indemnity costs order was made on 20 December 2013 on the basis that the proceedings both in the Local Court and in the District Court were "vexatious" and "involved bad faith" and on the basis that no cogent or reliable basis for objecting to the costs had been made out. [Exhibit CPC-7 Doc #15 on page/s 132-137 at page 136].
On 14 August 2012 (in the presence of Riva and Angelo Ferella) the District Court had ordered the transfer of the Local Court proceedings to the District Court. On 28 August 2012, contrary to the judgment of Curtis DCJ on 10 August 2012 in favour of FCL, and in a manner which has never been ascertained, Riva irregularly approached the Local Court and obtained judgment and an order for payment by FCL to Riva of $19,067.58, as well as a Garnishee Order on FCL's trust account held with the Commonwealth Bank. [Exhibit CPC-7 Doc #11 page/s 103-121, Annexures marked "E" & "F"].
On 28 August 2012, Riva also advised the Commonwealth Bank in writing that Riva had been successful in the District Court Proceedings (when Riva had not been successful), "…was awaiting an order for costs which will be substantial...", and that the bank should "…forthwith make payment [to Riva] in accordance with the garnishee order served…". The said garnishee being the irregularly obtained Garnishee Order issued by the Local Court against FCL's trust account referred to in the affidavit of Mitchell Davis supra [52]. [Exhibit CPC-7 Doc #11 page/s 103-121 Annexure "G"].
Curtis DCJ asked FCL to unravel the circumstances surrounding the wrongful issue of the irregular Local Court Garnishee Order of 28 August 2012 and I instructed my employed solicitor Mitchell Davis to attend the Local Court to view the file. Mitchell Davis prepared an affidavit to inform Curtis DCJ. It was never determined how Riva managed to obtain such irregular orders in the Local Court after they had been transferred to this Court.
FCL forwarded demands for payment of the costs which demands were unsatisfied.
Riva did not appear before the Court for the appointed cost hearing dates on 11 and 20 December 2013 despite correspondence between the Court and Riva.
On 10 February 2014 FCL demanded payment of the District Court costs.
On 6 March 2014, a Garnishee Order was issued by the District Court at FCL's request on Riva's MBL account to recover FCL's District Court costs judgments totalling $106,325.81. On 7 March 2014 MBL issued a cheque to FCL in compliance with the Garnishee Order which was banked by FCL on 10 March 2014.
On 10 March 2014, Riva filed an ex parte Notice of Motion in the District Court seeking an injunction to stop payment by MBL to FCL and orders setting aside the garnishee order and cancelling the cheque drawn by MBL, on the grounds that the Trust was not a party to the proceedings.
In the supporting affidavit sworn 10 March 2014, Angelo Ferella asserts at [7] that the garnishee order is "defective and unenforceable" and at [8] that the conduct of FCL in obtaining it was "misleading and deceptive". [Exhibit CPC-1 Doc #20 page/s 147-151].
On 11 March 2014, Riva's ex parte Motion for an injunction on MBL was refused by Curtis DCJ. The Associate to Curtis DCJ emailed a copy of those orders to FCL [Exhibit CPC-7 Doc #16 at page/s 138-143].
Riva threatened its bank, MBL, with a mandatory injunction on 12 March 2014. Riva wrote to MBL and attaching a copy of the Motion refused by Curtis DCJ on 11 March 2014. Riva did not advise MBL that the Motion had been refused. Instead, Riva intimated that the Motion had been successful, advising MBL that the FCL garnishee order was "incompetent and unenforceable" and that the conduct of FCL was "misleading and deceptive" and reportable to the "legal commission". Riva also claimed in this letter that Riva had commenced the District Court Cost Proceedings in a "sole capacity." [Exhibit CPC-7 Doc #18 page/s 146-148].
On 12 March 2014, the Commonwealth Bank advised FCL that MBL had dishonoured its own bank cheque in the amount of $106,325.81 which FCL had deposited with the Commonwealth Bank. [Exhibit CPC-7 Doc #17 at page/s 144-145].
On 20 March 2014, Riva filed the Incompetent Appeal against the 14 August 2012 and 20 December 2013 judgments of Curtis DCJ out of time. Riva persisted with the Incompetent Appeal despite FCL advising in writing that the appeal was incompetent [Exhibit CPC-1 Doc #22 on page/s 156-161]. The appeal was listed for directions on 18 June 2014 and struck out as incompetent on that day. A gross sum costs order on an indemnity basis was awarded to FCL on 1 May 2015. [Exhibit CPC-1 Doc #32 on page/s 239-241].
[4]
2014 Freezing Order
On 4 April 2014, FCL sought an urgent ex parte freezing order over $106,325.81 of Trust monies held by Riva in an MBL Cash Management Account, being the amount then owed by Riva to FCL for the first two District Court costs judgments.
FCL applied for the 2014 Freezing Order in circumstances where Riva had claimed that it had no ability to pay FCL and FCL was unaware of Riva's true financial position, not having subpoenaed Riva's financial records at that time.
On 11 April 2014, Curtis DCJ granted the 2014 Freezing Order. The injunction specifically identified monies held in MBL "in the name of Riva NSW Pty Ltd and/or Riva NSW Pty Ltd ATF Cavallino Unit Trust" [Exhibit CPC-7 Doc #20 page/s 152-154].
At the ex parte hearing of the 11 April 2014 His Honour observed at T2.31 - "What's the bank's position? It wouldn't matter that Riva NSW Pty Limited was a trustee or otherwise. So why do they say it's a different legal entity?" and in a reference to the irregular garnishee order obtained against FCL in 2012, His Honour refers at T3.26 to the orders provided to MBL by Angelo Ferella on 12 March 2014 - "…Macquarie Bank say that Mr Ferella sent a copy of the orders. Is there a copy of those orders - sorry, a copy of the purported orders because this is what happened in the Local Court way back?" Here Curtis DCJ was making reference to Riva irregularly obtaining orders in the Local Court. [Exhibit CPC-7 Doc #21 on page/s 155-160].
On 11 April 2014 FCL issued a Notice to Produce to Riva returnable on 17 April 2014. Riva did not comply with that Notice.
On 17 April 2014, the 2014 Freezing Orders were continued by consent and a Notice of Motion filed by Riva to set aside the orders was set down for hearing on 2 June 2014.
On 9 May 2014 Riva again did not comply with the Notice to Produce and it was stood over to 2 June 2014.
On 2 June 2014, Riva did not produce documents and sought to withdraw its consent to the April 2014 Freezing Order (consented April 17 April 2014). Riva submitted the 2014 Freezing Orders were impermissible because [Exhibit CPC-7 Doc #25 on page/s 173-179]:
1. Riva as Trustee has never been a party to the proceedings.
2. Even if Riva was a party, nonetheless the only enforcement available to FCL is by way of an order for subrogation (i.e. appointment of a Receiver).
3. Riva in its sole capacity was the judgment debtor.
Curtis DCJ refused Riva's application to vary the orders on 2 June 2014, pending the outcome of Appeal proceedings commenced by Riva in the Supreme Court on 20 March 2014.
FCL advised Riva in writing that the Supreme Court appeal was incompetent and out of time. Riva continued with the Appeal which was dismissed as incompetent on 18 June 2014, with final orders made 28 July 2014 and an indemnity costs order made against Riva on 1 May 2015 [Exhibit CPC-1 Doc #33 on page/s 242-244].
[5]
First Judicial Review Of Costs Judgment And 2014 Freezing Order
On 16 September 2014, Riva then filed an Application to the Court of Appeal for judicial review of the December 2013 Costs Orders and the 2014 Freezing Order made 11 April 2014. The Application was 4 months beyond the 3 month period fixed by the UCPR within which any claim for prerogative relief could be bought. [Exhibit CPC-1 Doc #29 on page/s 186-191].
On 29 October 2014, His Honour Emmett JA refused to extend time for the Application and dismissed the proceedings (2014/273003) on the basis that the review had no prospects of success. [Exhibit CPC-1 Doc #31 on page/s 219 - 238]. On 19 December 2014, His Honour made a gross sum costs order (for the purpose of avoiding the cost of a further costs assessment) in favour of FCL and costs were ordered on an indemnity costs basis. [Exhibit CPC-1 Doc #32 on page/s 239 - 241].
Emmett JA ordered indemnity costs against Riva because Riva had not accepted offers of settlement made by FCL, including an offer by FCL in respect of these underlying District Court proceedings to accept $5,000 less than the costs order made 20 December 2013 (i.e. $73,256). [Exhibit CPC-1 Doc #31 at [J27]-[J28] on page/s 230]. Emmett JA also considered that Riva's conduct exhibited a "contumelious failure to comply with the UCPR". [Exhibit CPC-1 Doc #31 at [J17] on page/s 227].
Despite the judgment of Emmett JA, followed by various demands for payment by FCL [Exhibit CPC-1 Docs #34, 35, 41, 43 respectively at page/s 245-249, 250-254, 304-313 and 338-342], Riva continued to not comply with the court orders and did not pay FCL its judgment debts thereby forcing FCL to take further enforcement action and commence the Examination proceedings.
Riva did not either pay the costs orders nor pursue its Motion to set aside the 2014 Freezing Order.
Riva's failure to pay the costs judgments notwithstanding that its Appeal and Judicial Review applications were unsuccessful forced FCL to initiate Examination proceedings to determine Riva's financial position as well as that of Angelo Ferella and Tiziana Ferella as well as other matters relevant to legal enforcement and equitable enforcement.
On 19 August 2016, FCL initiated the cheap and quick option of Examination by serving an Examination Notice upon Riva, Angelo Ferella and Tiziana Ferella returnable at the offices of FCL on 16 September 2016. [Exhibit CPC-1 Doc # 36 p 256]. The Notices also sought the production of Riva's accounting documents. [Exhibit CPC-1 Doc #36 page/s 255-277].
The examinees, Riva, Angelo Ferella and Tiziana Ferella, ignored the Examination Notices and did not attend or produce any of the documents or information requested.
On 10 October 2016, Riva filed an affidavit of Angelo Ferella in support of the Application seeking the 11 April 2014 be set aside on the basis that FCL's judgment was against Riva in its sole capacity and on the basis that FCL could not enforce the judgment in the District Court but only by appointment of a Receiver. [Exhibit CPC-1 at Docs #37 at pages 278-282].
On 18 October 2016, Curtis DCJ directed inter alia FCL file an application for an Examination Order returnable 22 November 2016, pursuant to UCPR r38. [Exhibit CPC-7 at Doc #29 at pages 195-196].
On 22 October 2016 the District Court granted leave to FCL to issue Examination Orders requiring each of Riva, Angelo Ferella and Tiziana Ferella to attend Court for examination on 22 November 2016.
On 26 October 2016 the Motion for an Examination Summons was filed and served on each of Riva, Angelo Ferella and Tiziana Ferella.
On 7 November 2016, the court issued an Examination Order on each of the parties returnable 22 November 2016. Angelo Ferella attended court on behalf of Riva and himself and gave evidence as the "manager" of Riva. Tiziana Ferella was the sole director but did not attend because of illness.
Also on 7 November 2016 (2 years after Riva had exhausted its procedural grounds for appeal) Riva filed another Motion seeking to have set aside on jurisdictional grounds the 2014 Freezing Order made ex parte 11 April 2014 (and consented to 17 April 2014); and which Curtis DCJ had refused to vary on 2 June 2014 pending the outcome of Riva's appeal proceedings. [Exhibit CPC-7 at Doc #30 at pages 197-199].
The Examination of Riva was originally listed for 1 day but Riva ignored the Examination notice and separate Notices to Produce and various orders made by Curtis DCJ during the proceedings to produce documents and records to the court, thereby causing the proceedings to be adjourned on 3 occasions.
The Examination was thus heard before Curtis DCJ over 4 days on 22 November 2016, 5 December 2016; 8 February 2017 and 24 February 2017 and then Riva's Motion seeking to set aside the Freezing Order was adjourned until 13 March 2017. [Exhibit CPC-1 Doc #40 at page/s 288-303; Doc #42 at page/s 314-337; #47 at page/s 385-395; and Doc#49 at page/s 400-404].
[6]
Riva Fails To Comply With Court Orders To Produce Financial Records
At the conclusion of the Examination proceedings Riva had not produced documents and records it had been ordered to produce at the commencement of those proceedings. Riva gave various explanations for its failure. Set out below are specific instances of Riva frustrating the examination proceedings and ignoring the direct orders of Curtis DCJ to produce documents and records giving the following various reasons [Exhibit CPC-1 Docs #40, #42, #47 and #49]:
[7]
22 November 2016
Angelo Ferella claimed to not know what was required -"I don't have a copy of that examination order here." [Exhibit CPC-1 Doc#40 at page 299 (T11.44)]
And "Unfortunately, I'm reading off the notice to produce, and I don't have the examination document in front of me." [Exhibit CPC-1 Doc#40 at page 300 (T12.31)]
Riva failed to produce any books and records in answer to a Notice to Produce [Exhibit CPC-1 Doc#40 at page 296.30 (T8.30)] or to the Examination Notice arguing that there was nothing to produce because the notices were directed to "…to Riva in its own right…" and that "...there is no account in the name of Riva NSW Pty Limited." [Exhibit CPC-1 Doc #40 at page 298 (T10.03-T10.05)].
Neither Angelo Ferella or Tiziana Ferella produced any documents to the Court that had been the subject of the Examination Order.
Accordingly, His Honour Curtis DCJ adjourned the proceedings saying - "This is useless. What you need is some document against which you may contrast the evidence. The documents exist in relation to the Trust. Why don't we come back when they are produced…What I propose to do is to stand the matter over until you have produced the documents within the order of the Court. Do you understand?" [Exhibit CPC-1 page 302.43- - 303.03 (T14.43-T15.03)]
[8]
5 December 2016
Riva produced bank statements for a single MBL cash management account but again failed to produce any of the other documents called for in the Examination Notice, such as loan agreements, tax returns, BAS statements, deposit books or cheque butts. No lease documentation between Riva and its tenant was produced [Exhibit CPC-1 Doc #42 at page/s 319 (T5.20)]. Angelo Ferella claimed that:
1. Riva had not produced a single document in relation to the Examination Order on the basis that "There is nothing to produce". [Exhibit CPC-1 Doc #42 at page/s 332 (T18.40];
2. Riva's cheque books had been "misplaced". [Exhibit CPC-1 Doc#42 at page/s 335 (T21.32)];
3. Cheque butts could not be produced because "I [Angelo] cannot locate the book" [Exhibit CPC-1 Doc #42 on page/s 323 (T9.40)];
4. Riva had not lodged tax returns since 2013 and that the 2014, 2015 and 2016 returns were not available. [Exhibit CPC-1 Doc #42 at page/s 328 (T14.11 - T14.32)];
5. Riva has not instructed its accountants, Crowe Horwath, since 2014 [Exhibit CPC-1 Doc #42 at page 327 (T13.22)];
6. Riva has not prepared its accounts for the years ended 30 June 2014, 2015 or 2016 [Exhibit CPC-1 Doc #42 at page/s 327 - 328 (T13.25 - T14.08)];
7. Riva has not done its BAS statements as these were to be done by Crowe Horwath which accountants have not been engaged since 2014 [Exhibit CPC-1 Doc 42 at page/s 328 (T14.35- T14.50];
8. Nida Ferella was a creditor of the Trust but no loan agreement between Riva and Nida Ferella could be produced [Exhibit CPC-1 Doc#42 at page/s 326.35 (T12.35)];
9. Riva's accounts in relation to monies owed to Nida Ferella and bank accounts in Nida Ferella's name which were beneficially owned by Riva were not produced as they were "misplaced" [Exhibit CPC-1 Doc #42 at page/s (T11.38)].
Accordingly, after Riva failed to produce the lease, cheque butts and spreadsheets Curtis DCJ adjourned the matter part heard (it was relisted to 8 February 2017) saying - "I think that without the lease which was fairly called for and either the cheque butts or the spreadsheets of the affairs, we can't take it any further." [Exhibit CPC-1 Doc #42 on page/s 337 (T23.09)].
[9]
8 February 2017
Riva did not produce accounts and spreadsheet showing ingoings and outgoings because Angelo Ferella: "… only finished them a week ago", even though they had been produced to the accountants, Crowe Horwath. [Exhibit CPC-1 Doc #47 at page/s 391 (T7.46)];
Riva did not produce the Deed/Loan Agreement showing that Angelo's mother, Nida Ferella, had lent money to Riva, pursuant to which repayments of $23,000 per month were being removed from Riva's MBL account [Exhibit CPC-1 page 388-389 (T4.50- T5.06];
The cover page to the lease of the Trust property which indicates the rental amount was not produced although it was annexed to the lease "Because it's a separate document". [Exhibit CPC-1 Doc #47 at page/s 393 (T9.24)];
Angelo Ferella did not produce any personal tax returns claiming he had not done a tax return since 2005. [Exhibit CPC-1 Doc #47 at page/s (T4.16)].
Accordingly, the proceedings were again adjourned until 24 February 2017 for the production of documents on behalf of Riva NSW Pty Ltd in its own right or as trustee for the Cavallino Unit Trust, including the spreadsheets that had not been produced on 8 February 2018. His Honour commented that - "Look, is this going anywhere? You're going to have to get more documents. You've got to come back". [Exhibit CPC-1 Doc #47 at page/s 394 (T10.25)].
HH Curtis DCJ refused Riva's request on 8 February 2017 to lift the 11 April 2014 Freezing Order -
Curtis DCJ: "No. I think that given the history of this matter, the repeated failure of Mr Ferella to produce documents the order should not be lifted." [Exhibit CPC-1 Doc #47 at page/s 399 (T11.33-T11.35)].
[10]
24 February 2017
Riva failed to produce the spreadsheets of its accounts (expenses and income) as ordered by Curtis DCJ on 8 February 2018. [Exhibit CPC-1 Doc #49 at page/s 400 (T1.30)]; and
Angelo Ferella gave evidence that the spreadsheets were lost - "Because the data contained a virus, and all the hard drive basically went on the fritz and the email sent to the accountant and the attachment was apparently not received". [Exhibit CPC-1 Doc #49 at page/s 401 (T2.18)]; and No documents supporting the alleged loan to Nida Ferella were produced.
Accordingly, the matter was again adjourned until 13 March 2017 for further directions as to production of documents subpoenaed and to deal with Riva's 7 November 2016 Motion seeking to set aside the freezing order.
On 24 February 2017 whilst the prolonged Examination proceedings were continuing, Riva filed a Statement of Claim in the Supreme Court seeking damages against FCL on the basis that FCL had acted unconscionably in seeking an asset freezing order (despite the Court of Appeal having dismissed Riva's Review application against the Freezing Order) ["Damages Proceedings"] [Exhibit CPC-7 Doc #31 at page/s 200-208].
In particular, Riva alleged that FCL unconscionably failed to notify this Court that the MBL account was held by Riva as Trustee and contained Trust assets and that Riva held no beneficial interest in the account. This allegation has no factual basis because Angelo Ferella's affidavit sworn 11 March 2014 and Christopher Clancy's affidavit filed 11 April 2014 both disclosed this issue and the garnishee the subject of the dispute, specifically sought to garnishee Trust assets. Further, Riva as Trustee, has a preferred beneficial interest in the Trust funds. In any event, Riva consented to the 2014 Freezing Order on 17 April 2014, so any purported damages are for 7 days. These damages proceedings have not been determined but are the subject of a strike out Motion and are awaiting judgment on that application from the Supreme Court.
On 27 March 2017 Riva's Motion to set aside the 11 April 2014 orders was listed for directions.
On 12 April 2017, Riva served submissions in these District Court Cost Proceedings asserting that, despite the specific provisions in the UCPR providing for freezing orders, the District Court did not have jurisdiction to do so. [Exhibit CPC-7 Doc #32 at page/s 209-216].
On 18 April 2017 Riva served the affidavit of Angelo Ferella sworn 18 April 2017 [Exhibit CPC-7 Doc #33 at page/s 217-221].
On 7 June 2017, pursuant to the orders of the court in the Riva Damages Proceedings, FCL sought to have a Receiver appointed ["Receiver Proceedings"] in the Equity Division of the Supreme Court.
On 18 July 2017 FCL filed and served a Subpoena upon MBL returnable 25 July 2017. On 25 July 2017 FCL filed its Submissions against Riva's Motion.
On 28 July 2017 in preparation for the Motion on 3 August 2017 FCL served the following affidavits:
1. 27 August 2010 Dragan Gasic;
2. 20 August 2010 Angelo Ferella;
3. 8 September 2012 Mitchell Davis;
4. 28 July 2017 Christopher Clancy; and
5. 19 May 2017 Christopher Clancy.
On 3 August 2017, His Honour Wilson DCJ dismissed with costs Riva's 2016 Motion to set aside the 11 April 2014 orders and gave leave for the FCL to apply to the Court to seek a gross sum costs order for that Motion and the other Motions heard before Curtis DCJ, including the costs of the Examination hearings.
On 30 August 2017 FCL filed and served a Motion seeking a Gross Sum Costs Order.
On 6 September 2017, Riva filed an application for Judicial Review (2017/270892) of the decision of Wilson DCJ on 3 August 2017 ["Second Judicial Review"].
On 8 September 2017 Riva sought a stay of the District Court costs orders pending the outcome of the Second Judicial Review. On 13 December 2017 these proceedings were listed for directions hearing. There was no appearance by Riva.
On 8 February 2018 these proceedings were listed for directions hearing. There was no appearance by Riva.
On 12 June these proceedings were listed for directions hearing. There was no appearance by Riva.
On 17 July these proceedings were listed for directions hearing. There was no appearance by Riva.
On 22 March 2018, Simpson JA in the Court of Appeal allowed FCL's security for costs application in the Second Judicial Review proceedings and ordered the proceedings dismissed should Riva not comply with the order within 21 days. Riva did not comply with the order.
[11]
2018 - Riva Finally Pays District Court Judgment Debts Of 2012 & 2013
On 11 April 2018, on the third hearing date in the FCL Receiver Proceedings, Riva offered in writing to pay the sum of $220,884.72 in settlement of the two (2) outstanding District Court costs judgments and the two (2) outstanding Court of Appeal costs judgments (plus interest) from Trust assets. [Exhibit CPC-7 Doc #37 at page/s 259-261].
In court that day (11 April 2018), Slattery JA ordered Riva pay FCL the proposed amount by 4pm on 26 April 2018 and at Order [2] of the short minutes noted that -
[2] "The Court notes that in default of the payment in order 1 by the said date and time, in respect of which time shall be of the essence, Riva NSW Pty Ltd as trustee of the Cavallino Unit Trust and otherwise, hereby agrees to the Court appointing a Receiver on the terms set out in the Summons filed in these proceedings, with the further power to collect and pay any legal costs ordered or yet to be ordered or yet to be agreed or assessed in any proceedings between Riva NSW Pty Ltd and Mark A Fraser and Christopher P Clancy."
On 13 April 2018, out of time, Riva sought to vary the 22 March 2018 security for costs orders despite there being no change in circumstances and no error by Her Honour.
On 26 April 2018, with the appointment of a Receiver imminent, Riva paid FCL's costs, comprising two District Court costs judgments and the two Court of Appeal costs judgments.
On 17 August 2018, the Full Bench of the Court of Appeal (Emmett JA, Leeming JA and Gleeson JA), dismissed Riva's out of time application to vary the security for costs order made by Simpson JA, and the proceedings remained dismissed as per her Honour's orders. [Exhibit CPC-7 Doc #40 at page/s 269-282].
On 20 August 2018, FCL requested this Court list FCL's Amended Motion seeking a gross sum costs order and indemnity costs for hearing.
Consent orders were subsequently filed in these proceedings vacating and discharging the 11 April 2014 freezing orders. Those orders were entered on 4 September 2018. [Exhibit CPC-7 Doc #42 page/s 269-282 at page 289].
[12]
Legal Principles
Costs are in the discretion of the Court (s98(1)(a) Civil Procedure Act). The Court may order that costs are to be awarded on the ordinary basis or an indemnity basis (s98(1)(c)). The Court's discretion must be exercised judicially. That is, on the evidence and having regard to the circumstances which inform the question of costs. The discretion must be exercised on a principled basis (Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11]) and in accordance with the principles of proportionality (s60).
Whilst there is power to order costs against legal practitioners in cases where costs are incurred by the serious neglect, serious incompetence or serious misconduct of a legal practitioner (s99(1)(a)), no such application has been made in this case. Costs may also be ordered against a legal practitioner where such costs are incurred improperly, or without reasonable excuse in the circumstances where a legal practitioner is responsible (s99(1)(b)). Whilst the circumstances here may warrant such orders, the application by the Defendants is that costs be paid by the Plaintiff.
In this matter, the Defendants seek costs on an indemnity basis against the Plaintiff. As stated, the power to do so is found in s98(1)(c) and also UCPR r42.5. The discretion, although absolute, must be exercised judicially (Mead v Watson as Liquidator for Hypec Electronics (2005) 23 ACLC 718 at [8]) and be the subject of careful reasoning (Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354). The Courts must exercise caution in making costs orders on an indemnity basis (Leichhardt Municipal Council v Green [2004] NSWCA 341).
There is no fixed rule or rationale as to when the discretion might be exercised (Harrison v Schipp [2001] NSWCA 13 at [139]), except that it requires a "sufficient or unusual feature" (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234) or some "relevant delinquency" (Oshlack v Richmond River Council (1998) 193 CLR 72) bearing a relevant relation to the conduct of the case (Ingot Capital Investment v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324 at [24]).
An award for indemnity costs is compensatory and not punitive (Hamod v State of NSW (2002) 188 ALR 659).
For the reasons which follow in the analysis of the history of these proceedings, I find, in accordance with the authorities referred to, that an award of costs on an indemnity basis is well justified.
[13]
Analysis
I have now taken some considerable time to consider the history of these unfortunate proceedings.
The Plaintiff has failed to comply with the overriding purpose of the Court Rules and the Civil Procedure Act generally, set out in s56 of that Act:
56 Overriding purpose
(cf SCR Part 1, rule 3)
(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
(4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3):
(a) any solicitor or barrister representing the party in the proceedings,
(b) any person with a relevant interest in the proceedings commenced by the party.
(5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs.
(6) For the purposes of this section, a person has a
"relevant interest" in civil proceedings if the person:
(a) provides financial assistance or other assistance to any party to the proceedings, and
(b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings.
Note: Examples of persons who may have a relevant interest are insurers and persons who fund litigation.
[Emphasis by underline and bold added].
In my opinion, virtually every step taken by the Plaintiff has fallen foul of the overriding purpose referred to in s56(1). They have done nothing to facilitate the just, quick and cheap resolution of the real issues in the proceedings. In fact, the Plaintiff has frustrated the administration of justice by making ill-informed and misconceived applications, in this Court, the Supreme Court and the Court of Appeal.
The Plaintiff has failed in its duty to assist the Court to further the overriding purpose of the Rules and is therefore in breach in s56(3) of the Act.
Further, the Solicitors and/or Barristers representing the Plaintiffs at various stages of the proceedings have, by their conduct, caused the Plaintiff to be put in breach of its duty arising under s56, contrary to their obligations as officers of the Court and under s56(4)(a).
As the Chronology above demonstrates, virtually every application made on behalf of the Plaintiff was baseless and/or without any reasonable prospects of success.
I also observe that the individuals behind the Plaintiff company have themselves failed to act reasonably and further, on occasions, have acted so as to mislead this Court and others. The Plaintiff repeatedly failed to comply with Court orders. It would also appear that both Angelo Ferella and Tiziana Ferella swore Affidavits which they knew were false and admitted doing so.
In relation to the director of the Plaintiff company, Tiziana Ferella, her conduct was also grossly wanting. I note the observations by Curtis DCJ on 10 August 2012 that she was a "wholly unreliable" witness, whose evidence his Honour did not accept. I further note that Ms Ferella, failed to comply with a number of Court orders, without any reasonable excuse.
In my opinion, neither Angelo Ferella nor Tiziana Ferella are persons suited to hold any office in any registered corporation and I direct the Registrar of this Court to refer those two individuals for investigation by the Australian Securities and Investments Commission, with my recommendation that they ought to be placed permanently on the list of persons disqualified from having any involvement in managing corporations.
I further direct the Registrar of this Court to refer these proceedings to the Director of Public Prosecutions for consideration of prosecuting Angelo Ferella and Tiziana Ferella for swearing affidavits they knew to be false.
Further, I make the following directions in relation to the Plaintiff's various legal representatives:
1. that the Solicitor for the Defendants provide the Registrar of this Court with a list of all Solicitors or Barristers who acted on behalf of the Plaintiff in relation to these proceedings and any proceedings arising out of same;
2. that the Registrar notify the Law Society of New South Wales and the New South Wales Bar Association of any Solicitor or Barrister, respectively, who has acted in relation these proceedings or any related proceedings, for their failure to comply with their duty to the Court and their legal obligation to facilitate the administration of justice in accordance with s56 of the Civil Procedure Act.
In relation to the application made by the Defendants, I have no hesitation in finding that the Plaintiff ought to pay the Defendants' costs on an indemnity basis, for the following reasons:
1. by its conduct, the Plaintiff has caused the Defendants to incur gross and unnecessary costs in these proceedings;
2. costs on any other basis would not adequately compensate for the Defendants for the costs unnecessarily incurred by the conduct of the Plaintiff;
3. the Plaintiff has, through its representatives, misled the Court, conducted proceedings on a false basis, given untruthful evidence, lacked any objective or other evidence to support their positions;
4. the Plaintiff has maintained hopeless proceedings, which they knew or ought to have known, particularly with legal advice, had no prospects, let alone reasonable prospects of success; and
5. the Plaintiff failed to accept reasonable offers of settlement made by the Defendants.
To describe the conduct of the Plaintiff and its legal representatives as delinquent would be a gross understatement. The litigation which has been incited by the conduct of the Plaintiff was spurious and vexatious.
The costs which the Defendants have incurred are out of all proportions to the amount initially in issue and are a direct result of the conduct of the Plaintiff.
I accept the submission advanced on behalf of the Defendants that the conduct of the Plaintiff amounts to contempt of court as well as wilful and unconscionable behaviour in the face of the orders of the Court. The conduct of the Plaintiff has been dishonest, vexatious and in bad faith. I note the findings of Curtis DCJ that both Angelo Ferella and Tiziana Ferella were untruthful and gave false evidence in respect of the proceedings at an earlier stage.
In addition, I note that the Plaintiff, through its representatives, had misrepresented to third parties, in particular Macquarie Bank, orders said to have been made by the Court which in fact had not been made. This conduct was misleading and unconscionable.
In addition, I accept and rely upon the submissions made on behalf of the Defendants in paragraph 103 of their submissions dated 29 October 2018 and make findings in accordance with those matters. In accordance with those matters, as follows:
1. that the underlying costs appeal to this Court had no cogent or arguable basis and was hopeless, with the Plaintiff's costs objections resulting in only a 3% reduction in the Defendants' costs;
2. that the Plaintiff's subsequent applications in these proceedings were hopeless and the Defendants have been successful in every application;
3. that the Plaintiff's case proceeded on several false and contradictory bases;
4. that the Plaintiff misled this Court and was found by this Court to have given unreliable and untruthful evidence;
5. that the Plaintiff's attacks on the freezing order were contrary to the overriding purpose set out in s56;
6. that the jurisdictional objection to the freezing order was without merit but was pursued in this Court and on appeal;
7. that the second motion to set aside the freezing order was vexatious given the previous decision of the Court of Appeal;
8. that the Examination proceedings were necessitated by the Plaintiff's refusal to pay the costs and to comply with the Examination Notices; and
9. that on more than one occasion the Plaintiff failed to comply with the orders of this Court.
Further, I find that the circumstances of these proceedings are such as to warrant an order for interest pursuant to s101 of the Civil Procedure Act.
Further, in the interests of the Defendants being put to no further greater expense, I am prepared to reconsider its application for costs to be assessed on a specified gross sum basis, in the event they wish me to do so. The Defendants should contact my Associate within 14 days to arrange for the matter to be listed before me in the event that they wish to pursue that course.
In addition, the Court would entertain any further freezing orders in order to preserve the Plaintiff's assets to meet its current costs exposure.
[14]
Orders
I make the following orders:
1. I direct the Registrar of this Court to refer Angelo Ferella and Tiziana Ferella for investigation by the Australian Securities and Investments Commission, with my recommendation that they be placed on the list of persons disqualified from having any involvement in the management of corporations;
2. I further direct the Registrar of this Court to refer these proceedings to the Office of the Director of Public Prosecutions for consideration of prosecuting Angelo Ferella and Tiziana Ferella for swearing affidavits which they knew to be false;
3. I make the following directions in relation to the Plaintiff's legal representatives:
1. that the Solicitor for the Defendants provide the Registrar of this Court with a list of all Solicitors or Barristers who acted on behalf of the Plaintiff in relation to these proceedings and any proceedings arising out of same;
2. that the Registrar notify the Law Society of New South Wales and the New South Wales Bar Association of any Solicitor or Barrister who has acted in relation these proceedings or any related proceedings, of their failure to comply with their duty to the Court and legal obligations under s56 of the Civil Procedure Act;
1. the Plaintiff pay the Defendants costs in relation to these proceedings, including all Notices of Motion and other applications on an indemnity basis;
2. the Plaintiff pay interest on the Defendant's costs outstanding from time to time pursuant to s101(5) of the Civil Procedure Act, from the date that the costs were incurred;
3. liberty to the Defendants to apply to the Court in the event that it wishes to remake the application for a gross sum costs order, pursuant to s98(4)(c) of the Civil Procedure Act;
4. liberty to the Defendants to make a further application for a freezing order;
5. I direct that a copy of this judgment be sent to the following:
1. the Plaintiff;
2. the Defendants;
3. Angelo Ferella;
4. Tiziana Ferella; and
5. any legal practitioner identified by the Defendants as having acted for the Plaintiff in the course of these proceedings.
[15]
Amendments
25 July 2019 - Change catchword
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Decision last updated: 25 July 2019
Parties
Applicant/Plaintiff:
Riva NSW Pty Ltd (ACN 113 881 815)
Respondent/Defendant:
Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers