This matter was listed on 27 July 2020 for further directions and specifically to address the question of what should occur as to the future conduct of the proceedings, depending on whether the Plaintiffs had or had not paid the costs payable under a costs order which I made on 3 July 2020 ("Costs Order"). As it emerges, those costs have not been paid, in the circumstances to which I refer below. Following a brief oral hearing at 10am, and a more substantial hearing at 2.30pm, I delivered an oral judgment and ordered that these proceedings be stayed until the end of the Court term. I have revised that oral judgment for clarity of expression and structure, to reduce a degree of repetition in my oral judgment, to specify the timing of several steps taken by the Plaintiffs in the course of the hearing and to identify (in a footnote) case law to which the parties did not refer in respect of a matter that it was not necessary for me to decide.
By way of background, the issues addressed in this judgment arise from a series of detailed judgments which record the unfortunate history of these proceedings. In my judgment delivered on 8 May 2020 ([2020] NSWSC 509) ("8 May Judgment"), I referred to the "long and unfortunate history of delay" in these proceedings and to the fact that the proceedings had been commenced in 2015, and, by May 2020, some 37 sets of directions had been made seeking to obtain compliance and to bring the proceedings to hearing in an orderly and prompt way, and referred to the issues arising from that delay. I also there referred to the circumstances in which the Plaintiffs had not complied with discovery orders made in September and October 2019, and to the several differing explanations given by the Plaintiffs and their legal representatives in respect of that non-compliance and particularly as to whether discovery was complete, any aspects in which it was not complete and when it would be completed.
I also there referred (at [67]ff) to the orders which can be made by a Court where there is a history of non-compliance within a matter. I observed (at [71]) that:
"I am satisfied that the history of delay in the conduct of the proceedings, the length and scale of the Plaintiffs' default as to discovery, the Plaintiffs continuing failure to comply with the Court's discovery orders in respect of financial records and the real detriment to the Defendants and the public interest in the delivery of justice arising from these matters, would warrant an order dismissing the proceedings (notwithstanding that order is a last resort, and recognising the prejudice to the Plaintiffs involved in making it) unless the Plaintiffs now make good the resulting detriment to the Defendants."
The last sentence of that paragraph recognised that what was required to address these issues was not merely orders made by the Court, but the making good of the detriment that the Defendants had suffered by the Plaintiffs as a matter of fact.
I also observed (at [72]) that an order short of dismissal of the proceedings would address the detriment to the Defendants from the delays in discovery and the costs incurred in seeking to address them, and noted that that could be:
"achieved only if the Defendants are fully and properly compensated for the costs that have been wasted through the months of delay after discovery was due and several discovery order compliance hearings, and that requires not only the making of an order as to costs, but also compliance with that order."
Again, I there recognised that it was not the making of a costs order that would make good the detriment that the Defendants had suffered, but compliance with it, by way of payment of the wasted costs that had been incurred in consequence of the Plaintiffs' lengthy non-compliance with the discovery orders and the consequential steps taken to address that non-compliance.
In a second judgment delivered on 24 June 2020 ([2020] NSWSC 797), I observed (at [45]) that the proceedings may well be dismissed if the Costs Order was not complied with, given the extended non-compliance with the Court's orders recorded in the 8 May Judgment and the real prejudice that the Defendant would suffer if they were left to a costs order that was also not complied with.
By a third judgment delivered on 3 July 2020 ([2020] NSWSC 861) ("3 July Judgment"), I observed that it seemed to me preferable not to specify a time for payment of the Costs Order, but to make an order that used the common term that costs be paid "forthwith" and to relist the matter today, a little more than 21 days after delivery of that Judgment "to confirm whether that payment had been made and, if not, what consequential order should be made". I then made orders that:
"1. The Plaintiffs pay the Defendants' wasted costs of and incidental to (1) the Plaintiffs' failure to give discovery and access to discovered documents from 21 December 2019 until 30 April 2020; and (2) the determination whether the proceedings should be dismissed, on an indemnity basis, quantified in the gross sum of $94,864.00, such costs to be paid forthwith.
2. The matter be listed for directions in the Corporations Directions List at 10am on 27 July 2020.
3. The Plaintiffs pay the Defendants' costs of the Interlocutory Process filed on 22 May 2020 as agreed or as assessed."
Mr Amirbeaggi, who appears for the Plaintiffs, submits, without reference to authority, that a "forthwith" order does not require immediate payment of costs or, implicitly, payment within the period that has elapsed since the Costs Order was made. It is not necessary to address the correctness of that submission [1] given the conclusions that I reach on other grounds, which do not depend on any finding that the Plaintiffs are presently in breach of the Costs Order, as distinct from a finding that the detriment that I identified in the 8 May judgment has not in fact been remedied, as it would have been had those costs been paid.
Since the 3 July Judgment, White JA, then sitting in the Corporations List, has dismissed an application for a freezing order brought by the Plaintiffs, by consent, with an order that the costs of that application be paid by the Plaintiffs' solicitor personally, on 6 July 2020. Mr Amirbeaggi made several submissions as to the circumstances in which that occurred which I need not address for the purposes of this judgment.
As I noted above, the matter was then listed today, for the purposes set out in paragraph 5 of the 3 July Judgment to which I referred above. There were then a number of late developments immediately prior to and during the hearing today. First, on the Sunday evening prior to the hearing, the Defendants served an affidavit affirmed 26 July 2020 of their solicitor, Mr Grossman, which refers to the fact payment had not been made pursuant to the Costs Order and to the fact that, shortly after the dismissal of the Plaintiffs' previous application for a freezing order, the Plaintiffs had procured the issue of a subpoena by the Court, apparently directed to a further application for a freezing order which had not yet been brought. I will refer below to the Plaintiffs' filing of that further application, which apparently occurred after the first part of the hearing at 10.00am and before its continuance at 2.30pm.
The Plaintiffs in turn rely on an affidavit of Mr Amirbeaggi, sent to my Associate at 10.15am, after the commencement of the hearing at 10.00am, which referred to a summons for leave to appeal from the Costs Order, which the Plaintiffs had filed at 9.22am and indicated that, given the filing of that application for leave to appeal, the Plaintiffs would seek a stay of the Costs Order. That stay application was then filed by the Plaintiffs at 10.15am this morning, by electronic filing, again during the hearing that had commenced at 10.00am. It has been allocated a hearing date in the Corporations Motions List on 3 August 2020 by the Court Registry. Mr Amirbeaggi fairly relies on the fact of that application as relevant to the orders that I should make today. The exhibit to his affidavit includes materials that have been filed before the Court of Appeal in respect of the summons for leave to appeal from the Costs Order.
Mr Amirbeaggi also referred, in the course of submissions when the hearing continued at 2.30pm, to two further matters. The first was that he had sent proposed orders to my Associate at 1.37pm today. Those orders were not received at that time, but an email containing them was sent to my Associate at 3.25pm, during the hearing that had commenced at 2.30pm. As Mr Amirbeaggi pointed out in submissions, those orders contemplate that any application by the Plaintiffs for preservation of property be made returnable on 10 August 2020. That appears to be a reference to the further application for a freezing order that was filed by the Plaintiffs today. The Plaintiffs also seek an order that the Defendants file and serve their expert evidence by 31 August 2020 which, as Mr Amirbeaggi fairly accepted in submissions, would have them incur the costs of that expert evidence when the Plaintiffs had not made payment pursuant to the Costs Orders.
[3]
The parties' submissions
Turning now to the parties' submissions, Ms Dolenec, who appears for the Defendants, refers to the history of the application before me, commencing with the issues in respect of the Plaintiffs' failure to comply with the discovery orders made in late 2019, and the several hearings that were involved in addressing that failure. She refers to the fact that the costs payable under the Costs Order have not been paid, in the period since it was made, and submits that there is prejudice to the Defendants where the Plaintiffs did not seek to stay that order, or bring an application promptly for leave to appeal from it, and had not complied with that order during the 21 days on which it has been on foot; and that the Plaintiffs have brought one freezing order application which was abandoned in that period, and now, it appears, a second. Ms Dolenec also sought to address the merits of the Plaintiffs' Summons for leave to appeal from the Costs Order so far as it was relevant to their application filed today and returnable next week for a stay of that order. It is not necessary to address that question, at least for the application today, because of the findings that I will reach on other grounds. Ms Dolenec also submitted that the proceedings should be dismissed, and not stayed, and foreshadowed that, if the proceedings were stayed, the Plaintiffs proposed to bring an application for security for costs. I should note that any stay of the proceedings will not be structured to permit multiple further interlocutory applications brought by the parties, other than the Plaintiffs' existing stay application as to the Costs Order and the determination of what is to occur when the stay of the proceedings will otherwise expire.
Mr Amirbeaggi in turn submitted, as I noted above, that costs that are payable forthwith are not payable immediately and that the Plaintiffs have exercised their statutory rights to seek leave to appeal from the Costs Order. I recognise that, of course, any party has an ability to seek leave to appeal from an order made by the Court, which is of a kind that requires leave, but it does not follow that that order ceases to have effect, where it is not stayed, still less that it ceases to have effect before either an application for leave to appeal or an application for a stay of it is brought. In any event, as I have noted above, the order that I make below staying the proceedings reflects the unremedied detriment to the Defendants identified in the 8 May Judgment and does not depend on any present breach of the Costs Order by the Plaintiffs.
Mr Amirbeaggi also submitted that there had been ongoing delays in the proceedings, which had been delayed by both parties. That, with respect, is not a matter that seems to me to assist the Plaintiffs in the present circumstances, given the history to which I had referred in the 8 May Judgment. Mr Amirbeaggi submits that the Plaintiffs now wish to press on with the proceedings, a submission that is in stark contrast with the approach which I had recorded in that judgment, and has the difficulty to which I have referred above, that it seeks to expose the Defendants to the costs of their undertaking further work in respect of the preparation of their expert report, where the costs payable pursuant to the Costs Order have not been paid, and where the detriment to which I had referred in the 8 May Judgment is not remedied.
Mr Amirbeaggi submitted that a stay should not be ordered, because it will prevent the Plaintiffs from pursuing their further application for a freezing order. That, I accept, will be a consequence of a stay of the proceedings, just as a stay will prevent the Defendants from pursuing their foreshadowed application for security for costs. That, however, does not seem to me to be sufficient reason not to make such an order, where it is otherwise appropriate, where the Plaintiffs have the question of payment pursuant to the Costs Order within their own power. No doubt, they could have complied with the Costs Order, during the last 21 days in which it has been on foot, reserving their right to seek leave to appeal from it, and no question of a stay of the proceedings would then have arisen; or, within those 21 days, they could have brought an application for leave to appeal and an application for a stay, promptly, and had that application determined. I should add to my oral judgment, for completeness, that it will also remain open to the Plaintiffs to choose to make payment pursuant to the Costs Order, even if it is not yet due, so as to remedy the detriment to the Defendants identified in the 8 May Judgment, reserving their rights in any appeal, and then seek to have any stay of the proceedings lifted. In these circumstances, if a stay of the proceedings is now ordered, and has consequences for either party, it does not seem to me that the Plaintiffs can complain where that is the consequence of the course that they have taken, among the several alternatives open to them.
I must exercise the discretion whether to make further orders for the conduct of the proceedings or to dismiss or stay them judicially and having regard to ss 56-58 and 61 of the Civil Procedure Act 2005 (NSW). I addressed the scope of those sections and the applicable authorities at length in paragraphs 57ff of the 8 May Judgment and I need not repeat those matters. It seems to me that I should not accede to Ms Dolenec's submissions and dismiss the proceedings today, where an application for leave to appeal from the Costs Order has today been brought in the Court of Appeal. I reach that view notwithstanding that there is a real prospect that the proceedings may ultimately have to be dismissed, where they have already been on foot for nearly 6 years, and given the continuing delays in them, which may be exacerbated by the unremedied detriment to the Defendants of the Plaintiffs' discovery failures and any consequential stay of the proceedings. I also recognise that, as Ms Dolenec's submission implies, the question of security for costs may now become a real one, where the costs ordered by the Costs orders are not paid and that detriment is not remedied. As I have observed in earlier hearings as to the Plaintiffs' discovery failures, it is also difficult to see how the Court can make orders for the continued conduct of the proceedings, if such orders are regularly not complied with, whether by the Plaintiffs in the recent past in respect of discovery, or by both parties, and the Court cannot in fact bring about the just, quick or cheap resolution of the proceedings.
At the same time, it seems to me that the Court should not now make orders that require the Defendants to incur the costs of further steps in the proceedings, while the Plaintiffs have not paid the costs ordered by the Costs Order and the detriment identified in the 8 May Judgment continues, and the proceedings should be stayed since no orders can fairly be made to progress them. As matters stand, and without the need to have regard to the subtleties of Ms Dolenec's and Mr Amirbeaggi's submissions, one straightforward fact remains. I observed in the 8 May Judgment that the proceedings would then be properly dismissed, on the basis of matters as they stood, but a lesser course could be taken where the Defendants were compensated for the detriment to which they had been exposed by the Plaintiffs' default in discovery. On that basis, I did not dismiss the proceedings, and I observed (as I have noted above) that that required not only that the Court make an order as to costs, but that those costs be paid. I do not need to find that the Plaintiffs' failure to pay those costs, now 21 days after a forthwith costs order was made, was a breach of that order in a strict sense, and I recognise that it is related to an exercise, albeit in a relatively dilatory way, of the Plaintiffs' right to seek leave to appeal from the Costs Order.
However, the fact is that the detriment to the Defendants of the delays in discovery has not been remedied by payment of their wasted costs, and there is no reason to think that it will now be remedied in the near future. It will not be remedied if the order for a stay of the Costs Order sought by the Plaintiffs is granted, and the Plaintiffs offer no commitment to pay those costs in the near future if the stay of the Costs Order is refused. [2] A stay of the proceedings will at least prevent the Defendants being required to incur further costs, while that detriment is unremedied, although it will also prevent both the Plaintiffs and the Defendants taking yet further interlocutory steps they may wish to take, whether by way of applications for freezing orders or applications for security for costs. That stay could be lifted, as I noted above, if the position changes and that detriment is remedied.
[4]
A further matter
For completeness, I should address one further matter. There was reference in Mr Grossman's affidavit, to which I referred above, to a subpoena issued at the request of the Plaintiffs who, shortly after their previous freezing application had been dismissed by consent, before any further application for a freezing order had been filed and before the Court had any opportunity to consider whether that application should be entertained where it immediately followed an application that had just been dismissed by consent, caused the Court to issue that subpoena in anticipation of that further application. Mr Amirbeaggi fairly acknowledges that that subpoena was issued in anticipation of the application that had not then been brought. It seems to me that subpoenas, which involve the exercise of the Court's compulsory process, should not be issued to explore matters which a party anticipates might in future be in issue in the proceedings when it brings a future application. It is not necessary to resort to any label as to a "fishing" expedition to identify that fundamental proposition. Mr Amirbeaggi submits that that application has now been brought. That is no answer to the fact that the subpoena was not properly founded when it was issued. For those reasons, the subpoena would be set aside. In any event, it will also be set aside because it is returnable in a period in which the proceedings will be stayed, there will be no occasion for production of documents while the proceedings are stayed, and there is no basis on which the recipient(s) of the subpoena should be put to the costs of production.
I should add, as matters stand, it seems to me that the proceedings will need to be stayed until at least the end of this Court term, in the hope that the Plaintiffs' summons for leave to appeal the Costs Order and any appeal are determined in that period. It may be, given the exigencies of the appellate process, that the Plaintiffs' summons for leave to appeal and any appeal of the Costs Order will not be determined by the end of this Court term, and the stay may then need to be continued further. I have recognised the difficulty as to the existing delay in these proceedings in earlier judgments, and above. It is not a solution to that difficulty, in my view, instead to expose the Defendants to further costs when the detriment identified in the 8 May Judgment has not been remedied.
For these reasons, I make the following orders:
1. The proceedings, other than the Interlocutory Process filed by the Plaintiffs at 10.15am on 27 July 2020 seeking a stay of the Costs Order and the steps required by orders 3-6 below, be stayed until 18 December 2020.
2. Set aside the subpoena issued at the request for the Plaintiffs on 22 July 2020, no further subpoenas or notices to produce to be issued, and no further interlocutory processes to be filed or served, without leave.
3. The Defendants file and serve any affidavits and submissions in respect of the continuance of the stay, or the dismissal of the proceedings, by 4.00pm on 30 November 2020, no evidence to be relied on if not filed and served by that date without leave.
4. The Plaintiffs file and serve any affidavits and submissions in response by 4.00pm on 7 December 2020, no evidence to be relied on if not filed and served by that date without leave.
5. The question of whether the stay should be continued, or the proceedings should be dismissed, be specially fixed for hearing before Black J at noon on 14 December 2020.
6. The costs of the hearing today be reserved.
[5]
Endnotes
For completeness, I should add to the observations made in my oral judgment that the former proposition put by Mr Amirbeaggi is correct and the latter is also likely to be correct, although Mr Amirbeaggi did not identify any authority to support them. An order for costs to be paid forthwith "ordinarily does not dictate that the costs be paid at a particular time, 'or with any special promptness', but that the costs are payable before the conclusion of the proceedings": G E Dal Point, Law of Costs (LexisNexis Butterworths, 4th ed, 2018) at [14.47]; State of New South Wales v Hamod [2011] NSWCA 376 at [47]. In Hamod, the Court of Appeal also noted (at [47]-[48]) that "[a]ny costs order carries with it that the costs are to paid within a reasonable time of any [agreement or finalisation of the assessment process]"; and that "if a party exercises the review or appeal rights under the legislation, the costs must be paid within a reasonable time after such review or appeal has been determined". There is here no need for agreement or assessment because the Costs Order was made on a gross sum basis. It does not, of course, follow from these matters that the Court could not or should not stay the proceedings, absent a breach of the Costs Order, for as long as the detriment identified in the 8 May Judgment remains unremedied.
Adding to my oral judgment, I should note an unanswered question - what is the utility in the Plaintiffs seeking or the Court granting a stay of the Costs Order if the Plaintiffs contend that costs are not payable in any event, at least until after their summons for leave to appeal and appeal are determined, and do not propose to pay them if the stay of the Costs Judgment is refused?
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Decision last updated: 31 July 2020