Ruma Mundi & Anor v John Peter August Hesse & Ors

First National terminates Quakers' membership

1. On 14 June 2018, First National wrote to the respondents indicating that it was considering terminating Quakers' membership. First National gave the respondents 30 days to resolve their dispute with Ms Mundi. Further correspondence ensued: the respondents requested further information and queried First National's ability to terminate Quakers' membership.
2. On 20 July 2018, First National met with Ms Mundi and Mr Hesse to explore ways to resolve their dispute. First National advised that its board would be considering the termination of Quakers' membership on 23 July 2018 on the basis that Quakers was not the trading company for "First National Hills Direct". On 23 July 2018, the respondents' solicitor emailed First National (copying the applicants' solicitor) maintaining that it was not open to First National to terminate Quakers' membership and seeking an undertaking not to do so, failing which the respondents would seek urgent interlocutory relief from the Duty Judge in Equity of this Court. The respondents contended inter alia that they had been denied natural justice. A flurry of telephone calls and emails followed (to which the applicants' solicitors were not party) in which First National advised that the decision on Quakers' membership would not be made that day.
3. On 24 July 2018, First National's solicitors wrote to Mr and Mrs Hesse (copied to Ms Mundi) outlining a number of irregularities with "First National Hills Direct" membership which required resolution, said to be: 1. The membership application submitted by Quakers was invalid as the applicants should have been HDA and HDPM. 2. Contrary to what was stated on the application for membership, Ms Mundi was not a director of Quakers and had never been a director of that company. 3. Membership payments with respect to "First National Hills Direct" were paid by HDA. 4. The registered holder of the business name "First National Hills Direct" was not Quakers but NRM. 5. Although the business initially was to operate from Quakers Hill, Rouse Hill and Schofields, in fact Mr and Mrs Hesse operated from The Ponds, Ms Mundi operated from Stanhope Gardens and no-one operated from Quakers Hill. 6. First National expressed concern as to whether Mr and Mrs Hesse and Ms Mundi had complied with their obligations under the Property, Stock and Business Agents Act.
4. First National set out its efforts to resolve the dispute between the parties, including on the basis that Ms Mundi and Mr and Mrs Hesse continue as First National members but under separate entities and with appointment in separate locations. According to First National's letter, Ms Mundi was amenable to this possibility but Mr Hesse voiced his objection to First National granting membership to Ms Mundi in any location proximate to his appointed location. The letter continued: From First National's perspective, it has granted membership, and hence the right to use intellectual property rights and receive other benefits, to an incorrect entity based on false information and that needs to be corrected. One solution would be that the membership be changed to [HDA] and [HDPM] but there would seem little point in doing so and indeed it is highly probable given the conflict between the parties that membership would not be granted by the Board. … There is no basis upon which we can see that a Court would have the power or inclination to grant injunctive relief to prevent First National from taking action to correct its membership register in the situation where the material provided to it by the current member to support its application for membership was clearly wrong and not in keeping with the actual situation. If the Board forms a preliminary view that it would be appropriate to terminate the membership of a member (and not offer alternative membership) the member is afforded the opportunity to show cause and be heard as to why it should not be terminated. … Given the foregoing, are there any matters your clients wish to place before the Board?
5. Mr and Mrs Hesse did not place any matters before the Board.
6. On 2 August 2018 First National sent a letter to the solicitors for Mr and Mrs Hesse and Ms Mundi (Termination Letter) informing them that the Board had determined the following: 1. That [Quakers] be terminated as a member of First National with effect from 30 September 2018 on the basis that the Membership Application was incorrect and that [Quakers] is not the entity carrying on the business of First National Hills Direct. 2. That Mr & Mrs Hesse be invited to submit a Membership Application on their own behalf, or if through an entity one which does not include Ms Mundi, for appointment as a member to the area comprising The Ponds and Schofields. In the absence of Ms Mundi relinquishing ownership of the business name, this entity cannot trade as First National Hills Direct. 3. That Ms Mundi be invited to submit a Membership Application on her own behalf, or if through an entity one which does not include Mr & Mrs Hesse, for appointment as a member to the area comprising Stanhope Gardens. It would be appropriate, in the absence of agreement from Mr & Mrs Hesse, that this entity not trade as First National Hills Direct.
7. On 8 August 2018, First National sent Ms Mundi and Mr Hesse an application form for future membership with First National, to be submitted by Friday, 31 August 2018.
8. On 9 August 2018, the respondents' solicitor wrote to First National stating that his clients did not accept that First National was entitled to terminate Quakers' membership. This letter was not copied to the applicants.

The motion to appoint a provisional liquidator

1. On 13 August 2018 the applicants filed a motion seeking orders pursuant to s 472(2) of the Corporations Act 2001 (Cth) to appoint provisional liquidators to HDA and HDPM, together with orders for the appointment of receivers over the property, assets and undertaking of the unit trusts of which those companies are trustees (the Motion). As I understand it, there is no dispute that HDA and HDPM were solvent. Rather, the applicants say that the sole basis of the Motion was the Termination Letter. Certainly, that letter was referred to, amongst other things, in an affidavit of Ms Mundi sworn in support of the Motion. Ms Mundi deposed that in light of the Termination Letter, "I understand that as of 1 October the business cannot continue to operate as there will be no Membership with First National".
2. The respondents complain, validly I think, that the applicants did not specify, prior to filing the Motion or during the course of preparation of evidence, that the sole ground of the application was the termination of Quakers' membership. As a result, the respondents incurred costs in meeting the application more generally. The respondents also complain that the Motion was filed without prior notice to them and submit that the failure to give any warning is a powerful discretionary consideration in relation to the reasonableness of the applicants' conduct. The applicants submit that nothing turns on this as, given the level of disputation between the parties, no different result would have occurred if notice had been given. The applicants' assessment of the situation does appear to me to be correct on this point. It does not seem likely to me that, if the applicants had warned the respondents of the proposed Motion, the respondents would have agreed to the orders sought: cf. Nichols v NSW Agribusiness Pty Ltd [2018] NSWCA 84 at [6] per Basten JA.

Respondents dispute termination

1. On 17 August 2018, the proceedings were listed for directions before Hammerschlag J. Shortly before the directions hearing, the respondents' solicitor sent an email and letter to First National challenging its purported termination of Quakers' membership, requesting a large amount of material and also an undertaking by 5.00pm on 24 August 2018 that First National would not act on the termination until the resolution of the proceedings between Ms Mundi and Mr and Mrs Hesse. The respondents explained, perhaps oddly, that as First National's letter of 24 July 2018 did not nominate a time for providing any response to the Board, they took comfort in and relied upon this in not seeking relief from the courts at that stage. Had we known of First National's intention to act in the way that it now purports to do, we would have taken steps earlier to dissuade or prevent you from doing so. The timing of First National's communications has injected an urgency into this issue which is entirely of First National's making.
2. On my reading of the letter, the respondents' preferred course was for the issue as to whether Quakers was entitled to membership as "First National Hills Direct" to be determined in these proceedings, and for First National to await the outcome of those proceedings rather than take matters into its own hands. Although the respondents reserved their rights to bring proceedings for injunctive relief without further notice, it was not apparent from the letter that the respondents intended to commence urgent proceedings against First National.
3. On 17 August 2018, Hammerschlag J listed the Motion for hearing on 18 September 2018 for two days. The hearing date was selected having regard to the respondents' submission that it should be heard after expiry of the 7 days given to First National to respond and any challenge to First National's termination had been dealt with.
4. Mr and Mrs Hesse also served Notices to Produce on the applicants for the purpose of the Motion.

First National proceedings

1. On 24 August 2018, the time which the respondents had given First National to provide an undertaking expired. On 29 August 2018, Quakers commenced proceedings in the general list of the Equity Division before Duty Judge Kunc J ex parte and orders were made for short service. His Honour stood the Summons over before Duty Judge Robb J on 5 September 2018.
2. On 31 August 2018, Mr Hesse and his solicitor swore affidavits in respect of the applicants' Motion to appoint a provisional liquidator. Mr Hesse's affidavit was largely identical to that filed in support of the Summons in the First National proceedings.
3. On 4 September 2018, Ms Mundi's solicitor served a motion in the First National proceedings, seeking to be joined as a defendant and for the proceedings to be transferred to the Commercial List and to be listed for hearing on 18 and 19 September 2018. Mr and Mrs Hesse opposed Ms Mundi being joined to the First National proceedings. On 5 September 2018, Robb J joined Ms Mundi to the First National proceedings and referred her motion for hearing in the Commercial List on 7 September 2018. On that day, the applicants also filed a motion in these proceedings to amend the pleadings and set aside the respondents' Notices to Produce.
4. On 7 September 2018, Stevenson J dealt with both proceedings. 1. First National gave an undertaking to maintain the status quo in respect of Quakers' membership for 7 days. The transcript is not clear as to the precise terms of that undertaking. 2. The applicants submitted that the hearing dates set aside on 18 and 19 September 2018 should be used to hear the First National proceedings rather than the Motion, in part because the applicants would rely on the determination by the Court as to the validity of the Board's decision of 2 August 2018 in support of their application for a provisional liquidator to be appointed. 3. The respondents submitted that, by reason of First National's undertaking, there was no need to determine the First National proceedings and informed the court that the only reason that First National brought the membership proceedings urgently was because the respondents did not want the membership to lapse by reason of the effluxion of time. 4. Stevenson J listed the First National proceedings for hearing on 18 September 2018 instead of the Motion to appoint a provisional liquidator. That Motion was listed for hearing on 25 September 2018. 5. His Honour proceeded to deal with the dispute in relation to the Notices to Produce. During this argument, the applicants' counsel made clear that the only argument to be put on the motion to appoint provisional liquidators was that, after 30 September 2018, HDA and HDPM would have no right to trade as "First National Hills Direct" and therefore could not, for practical purposes, trade at all. To trade in some other manner would require the consent of Ms Mundi and Mr and Mrs Hesse and there was no prospect of such consent. Whether the applicants would have succeeded on the Motion on this sole basis is, of course, not known.
5. From my reading of the correspondence and transcript, it appears that Mr and Mrs Hesse were content for Quakers' membership of First National to be determined in the hearing of these proceedings in November 2018 or shortly thereafter, whilst Ms Mundi was keen for the issue to be determined before 30 September 2018. Both had their own strategic reasons for pressing for the outcome for which they each vied.
6. On 18 September 2018, the hearing of the First National proceedings commenced before Stevenson J. Mr and Mrs Hesse argued that the Termination Letter was invalid and Ms Mundi argued that it was valid. I understand that First National took no active part in the hearing. On the morning of 19 September 2018, First National's solicitor emailed the parties noting that the parties had raised an issue at the hearing as to whether procedural fairness could now be afforded to the respondents by offering them an opportunity to put such submissions as they proposed in order to be heard by the Board as to the termination of Quakers' membership. I am instructed to advise both parties that the First National Board can convene in order to take into account written or verbal submissions by Hesse/Quakers next Monday 23 or Wednesday 25 September 2018.
7. This email was brought to the attention of Stevenson J. First National's solicitor came to Court and informed his Honour that First National proposed to withdraw its decision of 2 August 2018 to terminate Quakers' membership. In light of this, the parties agreed that the First National proceedings should be dismissed. Neither the applicants nor respondents sought any costs order against First National. The applicants' and respondents' counsel indicated to the Court that, following the withdrawal of the termination, the hearing of the Motion to appoint a provisional liquidator would not proceed on 25 September 2018. As such, a week before the hearing of the Motion, the parties knew that it would not proceed in any substantive way.

Should the Motion be adjourned?

1. On 25 September 2018 before me, Ms Mundi sought to adjourn the hearing of the Motion until after First National makes any subsequent decision in relation to Quakers' membership. Ms Mundi's counsel submitted that such a course was recommended by considerations of practicality: in the event that First National makes another decision similar to that in the Termination Letter, then Ms Mundi may wish to again apply for the same relief as that sought in the Motion.
2. Mr and Mrs Hesse do not consent to this. Nor do I think it is the appropriate course. In circumstances where the sole basis on which the Motion was pressed no longer exists, I do not think it is appropriate that the Motion be left hanging 'just in case'. I am not prepared to adjourn the hearing of the Motion until such time as First National makes another decision.
3. In this event, the applicants do not press the Motion and agree to it being dismissed.

Costs of the Motion

1. The costs of interlocutory applications are dealt with by r 42.7 of the Uniform Civil Procedure Rules 2005 (UCPR), which provides: (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.
2. As explained in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365, albeit in the context of a different costs rule in the UCPR, such rules create a starting point as to what the costs order is to be unless that outcome is displaced by a discretionary decision: at [48]. In this case, the starting point is that the costs of the Motion are the parties' costs in the cause.
3. The respondents ask the Court to exercise its discretion and order that the applicants pay the respondents' costs of the Motion or, alternatively, that the respondents' costs be the respondents' costs in the proceedings, such costs to be payable forthwith. In support of such orders, the respondents' senior counsel handed up detailed written submissions which, regrettably, were not provided to the applicants' counsel or the Court before senior counsel stood to his feet. This is an unhelpful practice. It is always better if written submissions can be provided in accordance with the usual order for hearing or a reasonable time before the hearing so that the Court and other counsel appearing in the case can consider the arguments which are to be put and make best use of the hearing to understand and test those arguments. Whatever strategic advantage is thought to be gained by handing up written submissions as one stands to one's feet is, I think, offset by the fact that the Court does not have any forewarning of what is going to be submitted and what parts of those submissions would be assisted by further explanation, clarification or persuasion.
4. That said, the respondents point to three matters in support of the proposed costs orders. First, the Motion seeking the appointment of a provisional liquidator was a drastic step. Such an application cannot be described as a step "reasonably taken in the management of the proceedings towards a hearing" which should be treated as costs in the proceedings generally (Metlife Insurance Ltd v Visy Board Pty Ltd (Costs) [2008] NSWSC 111 at [10] per Brereton J, referring to the costs of a motion for expedition) and should therefore be distinguished from the usual course of interlocutory applications.
5. There is no doubt that an application to appoint a provisional liquidator is a serious one. The seriousness must, however, be considered in the context of proceedings where both the applicants and respondents seek the appointment of a liquidator as final relief. In that sense, it is somewhat akin to a plaintiff seeking an interlocutory injunction and, as final relief, a permanent injunction. Nor could I find an authority which directly supported the respondents' submission that, if the subject matter of an interlocutory application is serious, different considerations apply in respect of costs.
6. Second, the applicants brought the proceedings on and put the respondents to significant expense in the knowledge that the respondents were challenging the Termination Letter. On becoming aware by 17 August 2018 that the respondents had written to First National, the applicants should not have pressed the Motion. The applicants should have supported the respondents in the First National proceedings rather than contended that the Termination Letter was valid.
7. This submission does not align well with the facts, for two reasons. First, after the Termination Letter was issued, the applicants heard nothing further from the respondents for a week and a half. In circumstances where Quakers' membership was due to lapse on 30 September 2018 and the hearing in these proceedings was not to occur until November 2018 (with judgment delivered sometime after that), it was not unreasonable for the applicants to do something. Indeed, the filing of the Motion may well have prompted the respondents to send a letter on 17 August 2018 to First National, on the morning that the Motion was listed for its first return.
8. Second, on being appraised of the respondents' letter to First National, I do not think it was unreasonable for the applicants to press their Motion for two reasons. One would not divine a sense of urgency from the respondents' letter of 17 August 2018, nor that the respondents were pressing to finally resolve the validity of the Termination Letter before 30 September 2018. The urgency felt by the parties was not the same, because their interests in a speedy determination were not the same. Further, it is not clear to me why the applicants, acting reasonably, should support the respondents' contention that the Termination Letter was invalid. That only favoured the respondents who, it was alleged, had secured Quakers' membership of First National duplicitously and wished to maintain that membership, presumably to the advantage of Mr and Mrs Hesse rather than Ms Mundi, who was not a director or shareholder of Quakers but only HDA and HDMA in whose name membership should apparently have been obtained.
9. The respondents submit that it was always open to First National to withdraw the Termination Letter, and the applicants pressed for a hearing of the Motion in circumstances where they understood the possibility that First National would withdraw the Termination Letter, as it did. In this regard, the respondents relied on the judgment of Finn J in ACN 116 149 092 Pty Ltd v Coopers Brewery Limited [2006] FCA 1119, in one of a number of proceedings instigated by Lion Nathan Australia Pty Ltd in the context of an ultimately unsuccessful attempt to take over Coopers Brewery Ltd. The proceedings were discontinued and the question was whether a costs order should be made. At [22]: … I am satisfied that an order for costs is appropriate. While it cannot be said that the institution of this proceeding was in any way unreasonable - it was one of a complex of legal manoeuvres in a hostile take over bid - it was done in the full knowledge that, consequent upon the decision of Perry CJ, Coopers would act to alter its constitution to remove Lion Nathan Australia's pre-emptive rights and exemptions unless either that decision was reversed on appeal or the holding of the necessary extraordinary general meeting could be prevented. Neither of these contingencies eventuated. From its inception this matter contained the seeds of its own futility, yet ACN was prepared to proceeding and to put Coopers to its defence. In so doing ACN assumed the risk of the proceedings becoming futile. It cannot escape the consequences of that by the assertion that it nonetheless conducted itself reasonably. It gambled and it lost. It is entirely appropriate that it pay Coopers' costs occasioned by the discontinued claim including reserved costs and its costs of this motion.
10. I agree that it was possible that First National may withdraw the Termination Letter, in the sense that anything is possible. But to say that the applicants "gambled and lost" puts matters too high. Here, First National issued the Termination Letter and a further email requesting that the applicants and respondents make any application for membership by a particular date. That is all that the applicants knew before the Motion was filed. There was no indication in the material I have seen that it was likely or suggested that First National might withdraw the termination at any time before it did on 19 September 2018.
11. Third, the respondents submit that the treatment of the Motion is arguably analogous to the dismissal of a part of a claim in that it is the dismissal or abandonment of a motion which is a separate and severable part of the proceedings. It is submitted that the principles arising in relation r 42.20 of the UCPR are accordingly relevant in the exercise of the discretion. Rule 42.20(1) provides: If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
12. Where rule 42.20 applies, its express terms apply such that "unless the court orders otherwise, the plaintiff must pay the defendant's costs": Australiawide Airlines Ltd v Aspirion Pty Ltd at [10]. The rule does not apply, by its terms, to interlocutory applications. I do not see how this rule is relevant to the exercise of my discretion in the circumstances before me which are governed by rule 42.7 which is in different terms and directs that I approach the question of costs from a different starting point.
13. Against this, the applicants submitted that each party should bear their own costs of the Motion because the applicants acted reasonably in filing the Motion in circumstances where the respondents had been reluctant to have the validity of Termination Letter determined; both parties acted reasonably in relation to First National's decision; but a supervening event occurred when First National withdrew its termination. The applicants relied on Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625, where McHugh J stated: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. His Honour's approach set out above has been adopted in a large number of cases.
14. In Lai Qin, Ms Qin commenced proceedings against the Minister for Immigration and Ethnic Affairs, but the proceedings became redundant when the Minister granted her a protection visa. Ms Qin sought a costs order against the Minister under Order 71 r 39 of the High Court Rules 1952 (Cth) which provided, When for any reason the further prosecution of a proceeding becomes unnecessary, except for the purpose of determining by whom the costs of the proceedings should be paid, any party may apply to the Court or a Justice to determine that question, and thereupon the Court or Justice may make such order as is just.
15. McHugh J considered the principles which govern an application for costs "when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means": at 624. His Honour noted that such an order may be made where the Court is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the cost of the action, or a Judge may feel confident that, although both parties acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
16. The applicants pointed to the application of this principle by the Court of Appeal in Fordyce v Fordham (2006) 67 NSWLR 497, which concerned a costs order made in the Equity Division of the Supreme Court after an injunction was granted in aid of orders made in the Local Court. The plaintiff commenced proceedings in the Local Court to enter the defendants' property to cut down trees so as to complete work to stabilise the land and replace a retaining wall on the boundary. Orders were made by consent but a dispute arose as to the meaning of the Orders and the defendants sought to vary the orders. Meanwhile, the plaintiff's tree-lopper began cutting down the trees. The defendants obtained an injunction from the Supreme Court. The matter came before the Local Court again and the plaintiff's interpretation of the Orders was held to be correct. Both parties applied to the Supreme Court for discontinuance or dismissal of the proceedings, and their costs. As such, rr 40.19 and 42.20 of the UCPR applied, that is, if proceedings are discontinued or dismissed, the applicant must pay the defendant's costs "unless the Court orders otherwise".
17. Their Honours McColl and Beazley JJA held that, notwithstanding the terms of rr 40.19 and 42.20, the costs discretion was unconfined and the matters referred to in Lai Qin remained pertinent although not determinative: at [87]. Her Honour McColl JA considered the plaintiff's conduct was "indubitably provocative" and the defendant's conduct in commencing the Supreme Court proceedings was reasonable. Discontinuance was sought only in circumstances where further prosecution of the proceedings was unnecessary and her Honour did not regard it as appropriate to order the defendants to pay the plaintiff's costs of the proceedings. Each party was ordered to pay their own costs.
18. The respondents submitted, correctly, that Fordyce v Fordham has been overtaken by a more recent decision of the Court of Appeal. In Australiawide Airlines v Aspirion per Bryson JA at [48]: … Lai Qin is not readily applicable to decision under r.42.20(1). UCPR r.42.20 is not entirely consistent with McHugh J.'s observation that the proper exercise of the costs discretion will usually mean that the Court will make no order as to costs. Justice McHugh's observations were directed to the discretionary power in O71 r39 of the High Court Rules (Cth) …which was discretionary overall, whereas in contrast r.42.20(1) creates a starting point by requiring "… the plaintiff must pay the defendant's costs of the proceedings …" unless that outcome is displaced by a discretionary decision. It should in my opinion no longer be said that if the moving party, or if both parties have acted reasonably in commencing and defending proceedings the proper exercise of the costs discretion will usually mean that the Court will make no order as to the costs of the proceedings; observance of the starting point under r.42.20 will make this outcome less usual than it earlier was.
19. We are not here concerned with an application for a costs order under rr 42.19 or 42.20, where the starting point is that the plaintiff must pay the defendant's costs "unless the court otherwise orders". Rather, we are here concerned with r 42.7 which has a different starting point: the costs of an interlocutory application follow the outcome of the proceedings "unless the court otherwise orders". Australiawide Airlines v Aspirion makes plain that the Court should observe the starting point in the relevant rule and only make a different order if that starting point is displaced by a discretionary decision.
20. Lai Qin continues to assist in respect of costs orders which are not constrained by rules such as rr 42.19 or 42.20. The Court of Appeal's consideration of Lai Qin in such circumstances is helpfully collated by Payne JA in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 at [26] to [29]. One recent example is Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 where the Council commenced proceedings challenging the Minister's amalgamation of local government areas. Two days before the hearing of the appeal, the Minister decided not to proceed with the amalgamations. The appellant discontinued the appeal and sought an order for costs on the basis that the Minister's abandonment of the proposed amalgamation was "a complete capitulation" and, if the appeal had proceeded, the Council would "almost certainly" have succeeded. Whilst the Court of Appeal agreed that, if either characterisation was correct, the Court could award costs against a party who has capitulated, the Court did not find the descriptions by the Council to be correct. The Court found that, whilst the Council obtained the result it sought in the litigation as a result of a political decision by the Government, the resistance by the Minister to the proceedings was not unreasonable and there was no basis to make a different costs order.
21. To the extent that the principles in Lai Qin have any role to play in the context of r 42.7, the parties disagreed as to whether the circumstances in Lai Qin were present in this case. The applicants adopted a submission made by the respondents that an email to my Associate recorded an agreement that the Motion be dismissed (with subsequent argument as to costs) as evidencing the hearing having "settled" (save as to costs). As such, it was submitted that the principles set out in Nichols v NFS Agribusiness Pty Ltd (at [2], per Basten JA, and at [30], per Payne JA, with whom Meagher JA agreed) are applicable such that the parties "should usually expect that the court will not award costs" (at [2] per Basten JA) and "the proper exercise of the cost discretion will usually mean that the court will make no order as to costs of the proceedings" (at [30] per Payne JA). The respondents disagreed. Rather than record any settlement between the parties, the email reflected the proper open prior notice by the applicants to the Court and to the respondents that they did not intend to press for the provisional liquidator and of the applicants' "intended capitulation". The email permitted the Court to make appropriate arrangements in relation to the Court's Diary but did not reflect any agreement or settlement between the parties in relation to the Motion. I agree that it cannot fairly be said that the Motion has settled.
22. As to whether the Motion was rendered futile, the applicants submitted that a supervening event in the form of First National's withdrawal of the termination effectively caused the Motion to be rendered futile and, both parties having acted reasonably, costs should lie where they fall. First National's termination decision was presumed to be valid unless and until steps were taken to set it aside. The applicants submitted that the respondent did not take steps for a long period of time for unexplained reasons and only two days before the evidence was due on the Motion. The applicants submitted that the respondents did not intend to prosecute the First National proceedings for their own strategic reasons in advance of 30 September 2018. They had to effectively be dragged to Court and to utilise the dates of 18 and 19 September to have a determination.
23. The respondents submitted that the proper characterisation of the applicants' position is that they "effectively surrendered", capitulated and wholly abandoned the Motion as absolutely hopeless. The applicants made a forensic decision to try and achieve the final relief in the proceedings and then capitulated. The respondents rely on One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 in which Burchett J stated at [6]: In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
24. The respondents submit that this is not a situation in which the action is rendered futile by events beyond the control of the applicants. Rather, Ms Mundi took steps to maintain control of the consideration of the Termination Letter. She was well aware of the potential for the Termination Letter to be withdrawn, or for it to be found to be void. Having adopted the defence of the First National proceedings, the applicants should not now be permitted to rely on the withdrawal of the termination as the basis for a departure from the "default position". I consider that reference to the default position does not assist the respondents where r 42.7 prescribes the default position as being that in the costs of the Motion will follow the costs of the proceedings.
25. It is not necessary for me to consider whether the approach in Lai Qin warrants any different order than that sought by the respondents, as I haven't been persuaded that the costs order sought by the respondents should be made. I am not persuaded that I should depart from the starting point specified in r 42.7. A factor which favours a different costs order is, I think, that the applicants should have identified the sole basis of their application for the appointment of a provisional liquidator earlier, as it was not readily apparent from the affidavit in support of the Motion. Failure to do so had the result that the respondents put on evidence which was more expansive than it needed to be. However, as matters turned out, the respondents' evidence on the Motion was largely identical to the evidence already prepared for the First National proceedings. In addition, the respondents were aware on 19 September 2018 - a week before the hearing date of the Motion - that the Motion would not be pressed on that occasion. Further, the issues arising and evidence on the Motion appear likely to be canvassed at the final hearing in any event.
26. The sense in r 42.7 is perhaps illustrated by this application for a different costs order. To consider the application, the Court has had to canvass a detailed and complicated procedural history in not one, but two hard fought proceedings and the detailed submissions made in support of and against the costs orders. Rule 42.7 appears to be directed to discouraging parties from expending further resources on such costs disputes and to focus on the substantive proceedings. If I might use an imperfect sporting analogy: if litigation is compared to a sporting match, then r 42.7 indicates that the normal result after an interlocutory application is that the parties should "play on" until the final hearing.

Payable forthwith

1. Whilst it is not strictly necessary for me to consider the remaining submissions, in deference to the respondents' detailed submissions I will do so. The Commercial List Practice Note SC Eq 3, part 57, provides: Unless otherwise ordered, a party in whose favour an order for costs is made may proceed to assessment of such costs forthwith.
2. As such, no order is required for the parties to proceed to assessment. Enforcement of a costs assessment is, however, another matter. In this respect, an order is required to displace the operation of r 42.7(2) of the UCPR: Welzel & Anor v Francis (2010) NSWLR 92 at [12]. The respondents submit that such an order should be granted on the basis that the determination relates to a discrete or self-contained issue and because the costs were incurred by the unreasonable or unnecessary conduct of the applicant in pressing the Motion in the knowledge that the basis for that application was the subject of challenge (Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at [11]-[13]).
3. As to the first limb of this submission, the issues the subject of the Motion seem to me to overlap considerably with the issues which will be dealt with in the final hearing, being inter alia whether a liquidator should be appointed to HDA and HDMA. As to the second limb of this submission, I do not consider the applicants' conduct in filing or pressing the Motion to be unreasonable or unnecessary in circumstances where the respondents were content to let the issue of the validity of the Termination Letter await the final hearing in the furtherance of their own strategic interests. The respondents were perfectly entitled to do this, of course.
4. The respondents further submit that the existence of a provision in the Practice Note allowing for assessment forthwith also reflects the general practice of the Commercial List and this should be taken into account in exercising the Court's discretion under r 42.7(2) of the UCPR. This submission is at odds with the clear terms of the Practice Note which provides for assessment of costs, but not enforcement. The ability to have costs orders assessed says nothing about whether the Court should in Commercial List matters be inclined to an order that such assessed costs be paid forthwith. I find nothing untoward in the applicants' filing or pursuit of the Motion which would support a departure from the Court's ordinary practices in this regard.

Costs of the argument about costs

1. The respondents also seek the costs of the application to adjourn the Motion and of the dispute at to the costs of the Motion on an indemnity basis. The respondents submit that the applicants' conduct exhibited the "relevant delinquency" to found such an order: Oshlack v Richmond River Council (1998) 193 CLR 72. The "relevant delinquency" was said to be seeking to adjourn the Motion so as to avoid the inevitability of a dismissal of the Motion with a clear basis for an order for costs against the applicant. The actions of the applicant in pursuing the adjournment, and in seeking to avoid a subsequent order for costs, is said to be conduct which justifies the award of costs of the adjournments and costs applications on an indemnity basis.
2. I agree that the applicants' request to adjourn the Motion was doomed to fail and, presumably for that reason, faintly put and readily abandoned. The bulk of the hearing before me was taken up with the respondents' submissions in respect of costs. In the result, I have not been persuaded by those submissions.

Another motion

1. On 3 August 2018, the respondents filed a Motion seeking orders to establish interim arrangements in respect of the payment of fees, commissions and disbursements, IT requirements, the management of rent rolls and for the production of documents by Ms Mundi and directions for discovery of electronic records maintained by Ms Mundi, NRM or HDPM.
2. On 6 August 2018, the respondents filed an Amended Notice of Motion. This Motion came before McDougall J for directions on 10 August 2018, where his Honour stood the matter over to 17 August 2018 without making substantive orders. There was also a Further Amended Notice of Motion signed on 13 August but apparently not filed.
3. The motion did return on 17 August 2018, but by that time the Motion for the appointment of a provisional liquidator had been filed. The applicants' counsel submitted that the respondents' motion had been partially dealt with, but there remained issues to be resolved, or, if not, there remained the question of costs of that motion. His Honour Hammerschlag J listed both motions on 18 and 19 September 2018. As noted above, Stevenson J, in light of the First National proceedings, vacated those hearing dates. No specific order was made with respect to the respondents' motion. It was thus left in abeyance.
4. The applicants asked that I stand respondents' motion over to the hearing so that the remainder of any relief sought in that motion, and the costs of that motion, can be finally determined. The respondents opposed this course, apparently on the basis that they wished to leave the motion hanging in the same manner which they opposed the Motion to appoint a provisional liquidator being left. I will accede to the applicants' request in this regard.

Orders

1. The Court makes the following orders and directions: 1. The applicants' motion filed on 13 August 2018 is dismissed. 2. The defendants' motion filed on 3 August 2018 as amended is stood over to the hearing on 12 November 2018.

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: 15 October 2018