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[2010] NSWSC 896
Supreme Court of NSW
2010-05-27
Brereton J
Original judgment source is linked above.
CITATION : Sturesteps v A G McGrath & ors [2010] NSWSC 896
HEARING DATE(S) : 21 & 27 May 2010 JURISDICTION : Equity Division
DECISION : Period as employee/director of related company did not count as non priority days. Retrenchment pay was not attributable to non priority days. Plaintiff not entitled to interest. Mandatory direction for payment not made. Defendants to pay plaintiff's costs, not on an indemnity basis.
CATCHWORDS : CORPORATIONS - Winding up - Winding up in insolvency - (CTH) Corporations Act 2001, s 556 - whether period during which plaintiff was a director as well as an employee counts as non priority days - whether plaintiff's retrenchment payment attributable to non priority day - CORPORATIONS - Winding up - Liquidators - Other matters - whether liquidator should be given a direction that payment take place within any particular timeframe - CORPORATIONS - Winding up - Winding up in insolvency - (CTH) Corporations Act 2001 s 563B - whether plaintiff entitled to interest of judgment debt in his favour - PROCEDURE - Costs - Departing from the general rule - whether costs should be ordered on an indemnity basis - whether proof of debt can be treated as a Calderbank offer
(CTH) Companies and Securities Legislation (Miscellaneous Amendments) Act (No 192) 1985 LEGISLATION CITED : (CTH) Companies Code 1981, s 441 (CTH) Corporate Law Reform Act 1992 (CTH) Corporations Act 2001, s 556, s 563B, s 1321
Central Asbestos Co v Dodds [1973] AC 518 International Harvester Expert Co v International Harvester Australia Ltd (1982) 7 ACLR 391 CASES CITED : Roncevich v Repatriation Commission (2005) 222 CLR 115 Rundell v Bedford (1998) 28 ACSR 66 Sturesteps v McGrath [2010] NSWSC 169 Walsh v Rother District Council [1978] 1 All ER 510
TEXTS CITED : "General Insolvency Inquiry" (The Harmer Report), ALRC Report No 45, 1988
George Osvald Sturesteps (plaintiff) PARTIES : Anthony Gregory McGrath (first defendant) Christopher John Honey (second defendant) HIH Casualty & General Insurance Ltd (in Liq) (third defendant)
COUNSEL : BW Rayment QC w G McDonald (plaintiff) ST White SC w RM Foreman (defendants)
SOLICITORS : Benjamin & Khoury (plaintiff) Blake Dawson (defendants)
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
2006/258096 George Osvald Sturesteps v A G McGrath & ors; In the Matter of HIH Casualty & General Insurance Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: On 19 February 2010, I gave reasons for judgment [Sturesteps v McGrath [2010] NSWSC 169], which provide the background to the present judgment, and directed that the parties bring in short minutes to give effect thereto. That has been done, and there remained in dispute five issues of principle, the resolution of which should permit the remaining questions of quantification and mechanisms of the judgment to be resolved. They are: 2 First, as to the application of (CTH) Corporations Act 2001, s 556: (a) whether the period during which the plaintiff was a director as well as an employee of MW Payne Liability Agencies Pty Limited counts as "non priority days"; and
(b) whether the payment to which the plaintiff is entitled under clause 17.1 of the 1999 Employment Agreement, or any of it, is entitled to priority under s 556(1)(h). 3 Secondly, whether the plaintiff is entitled to interest on the amounts to which I have held him to be entitled. 4 Thirdly, whether certain declarations proposed by the plaintiff, said to reflect findings made in the judgment or conclusions expressed in it, should be made. 5 Fourthly, whether the court should make orders that payment be made and dividends distributed to the plaintiff within a specific time. 6 Fifthly, whether the defendants should pay the plaintiff's costs, or any of them, on an indemnity basis. 7 A further issue sought to be raised by Mrs Sturesteps in the proceedings for recovery of the loan to her, is whether she should be granted leave to amend her defence to raise a limitation point. Argument on that question has been deferred to permit the liquidators to consider it and adduce evidence if they wish to do so. Argument has also been deferred in respect of issues pertaining to the calculation of annual leave and long service leave.
The section 556 priorities issue 8 The first issue for determination, then concerns the construction and application of Corporations Act, s 556, which relevantly provides as follows:
556 Priority payments (1) Subject to this Division, in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims: … (e) subject to subsection (1A) - next, wages, superannuation contributions and superannuation guarantee charge payable by the company in respect of services rendered to the company by employees before the relevant date;
(f) next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date; (g) subject to subsection (1B) - next, all amounts due: (i) on or before the relevant date; and (ii) because of an industrial instrument; and (iii) to, or in respect of, employees of the company; and (iv) in respect of leave of absence; (h) subject to subsection (1C) - next, retrenchment payments payable to employees of the company.
… (1A) The amount or total paid under paragraph (1)(e) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non-priority days does not exceed $2,000. … (1B) The amount or total paid under paragraph (1)(g) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non priority days does not exceed $1,500.
(1C) A payment under paragraph (1)(h) to an excluded employee of the company must not include an amount attributable to non priority days.
(2) In this section: company means a company that is being wound up. excluded employee , in relation to a company, means: (a) an employee of the company who has been: (i) at any time during the period of 12 months ending on the relevant date; or (ii) at any time since the relevant date; or who is, a director of the company; (b) an employee of the company who has been: (i) at any time during the period of 12 months ending on the relevant date; or (ii) at any time since the relevant date; or who is, the spouse of an employee of the kind referred to in paragraph (a); or (c) an employee of the company who is a relative (other than a spouse) of an employee of the kind referred to in paragraph (a). non priority day , in relation to an excluded employee of a company, means a day on which the employee was: (a) if paragraph (a) of the definition of excluded employee applies - a director of the company; or (b) if paragraph (b) of that definition applies - a spouse of an employee of the kind referred to in paragraph (a) of that definition; or (c) if paragraph (c) of that definition applies - a relative (other than a spouse) of an employee of the kind referred to in paragraph (a) of that definition; even if the day was more than 12 months before the relevant date. retrenchment payment , in relation to an employee of a company, means an amount payable by the company to the employee, by virtue of an industrial instrument, in respect of the termination of the employee's employment by the company, whether the amount becomes payable before, on or after the relevant date.
9 It is conceded, on behalf of Mr Sturesteps, that he was an "excluded employee", by reason that he was a director of C & G within 12 months prior to the relevant date and that, as he was a director as well as an employee from 24 April 1989 until 12 September 2000 - a period of 4,154 calendar days or 11.38 years - those days are, for the purposes of the applicable definition, "non priority days." The defendants contend that the days constituting the period from 25 June 1973 until 31 December 1986, when Mr Sturesteps was a director as well as an employee of MW Payne, should also count as "non priority days". Their argument is that since, in the substantive proceedings, I determined that Mr Sturesteps' service for the purposes of clause 17.1 of the 1999 Employment Agreement included not only his service with C & G but also his service with predecessor employers, including MW Payne, therefore the definition of "excluded employee" in s 556 should likewise be extended to any period in which he was a director and employee of any company in the HIH Group, and specifically MW Payne. 10 However, the construction of clause 17.1 of the 1999 Employment Agreement, and the application of the definition of "excluded employee" in s 556, are two different questions. Section 556 is concerned only with the company in liquidation - here, C & G - and not with its subsidiaries, let alone with predecessor employers of the relevant employee director. The definition of "the company" is plain. In my view, there is no scope within the legislation for extending the application of s 556 in the manner proposed by the defendants. It is concerned with a person who was an employee of the company in liquidation and also a director of the company in liquidation at the relevant time. It is not concerned with employee/directors of subsidiaries or predecessor employers. 11 The next aspect of the priorities issue relates to the application of s 556(1)(h) to the payment to which I have concluded Mr Sturesteps is entitled under clause 17.1 of the 1999 Employment Agreement which, as will be recalled, provided for the payment upon termination of his employment of a sum equivalent to his annual remuneration package for a year, plus five weeks for each completed year of service up to a maximum total of three times his annual remuneration package - which I concluded meant the initial one year plus up to a further 104 weeks of his annual remuneration package. The issue is to what extent it can be said that the sum to which Mr Sturesteps has been held entitled under that clause - which, it is not controversial, is a "retrenchment payment" within s 556(1)(h) - can be said to be attributable to "non priority days." 12 Initially, there was apparent acceptance on both sides that so much of it as was constituted by the additional 104 weeks was attributable to the whole of Mr Sturesteps' period of employment from 10 January 1969 until 18 April 2001, so that 4,154 out of 11,785 days were non priority days. Argument focused, at first, on the element constituted by the basic annual remuneration package component - it being argued for Mr Sturesteps that it was not attributable to non priority days at all, while the defendants contended that it was entirely attributable to non priority days or, alternatively, was to be apportioned across priority and non priority days, just as with the 104 week component. However, further research and argument has expanded the difference between the parties, Mr Sturesteps now contending that none of the clause 17.1 payment is attributable to non priority days, and the defendants contending that the whole is attributable to non priority days. 13 So far as the researches of counsel and of the court have been able to disclose, the construction of the word "attributable", in the context of s 556(2), has not been the subject of judicial consideration, although the word "attributable" has been considered elsewhere. I begin with a review of the legislative history. Before 1985 and, indeed, as at 1982, the question of priority payments was governed by then (CTH) Companies Code 1981, s 441, which relevantly provided as follows: 441. [Priorities] Subject to the following provisions of this Subdivision, in the winding up of a company the following debts shall be paid in priority to all other unsecured debts:
… (e) fifth, wages in respect of services rendered to the company by employees before the relevant date, but not exceeding $2,000 in respect of an excluded employee of the company; (f) sixth, all amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date;
(g) seventh, all amounts due: (i) on or before the relevant date; (ii) by virtue of an industrial instrument; (iii) to, or in respect of, employees of the company; and (iv) in respect of leave of absence; but not exceeding $1,500 in respect of an excluded employee of the company; … 14 As will be apparent, which that afforded given priority for wages in respect of services rendered to the company by employees before the relevant date, that priority was limited to $2,000; and, it also gave priority for leave entitlements, that priority was limited to $1,500. There was then no provision giving priority for retrenchment payments. 15 It was that legislation which fell for consideration by Beach J of the Supreme Court of Victoria in International Harvester Expert Co v International Harvester Australia Ltd (1982) 7 ACLR 391. His Honour had to consider whether an amount to which an employee became entitled upon termination of employment, pursuant to the provisions of an award, was entitled to priority, it being argued that it fell within the provision in respect of wages. 16 His Honour held that the entitlement was not entitled to priority because, although it fell within the definition of wages, it was not "in respect of services rendered to the company", which was a necessary criteria if it were to be entitled to priority under s 411(e). His Honour said (at 399): Clearly retrenchment payments are amounts payable to an employee of a company under an industrial agreement and thus fall within the definition of 'wages' in Codes. But are they wages in respect of services rendered to the company by employees or expressed in a way pertinent to this case? Are retrenchment payments amounts payable under the Award or Awards in respect of services rendered to the company by employees? On behalf of the employees it is said that they are because employees must render services to the company before they are entitled to a retrenchment payment.
For the receivers and managers it is said they are not, that the payments are not for services rendered. It is said the period of service of a particular employee merely provides a measure of the amount to which that employee is entitled, it does not determine its character. In that connection Mr Myers placed reliance on the dicta of Kitto J in Hobart Bridge Company Limited v Federal Commissioner of Taxation (1951) 82 CLR 372.
At 383 of that decision in that case his Honour said: 'There is no relation between the measure that is used for the purpose of calculating a particular receipt and the quality of the figure that is arrived at by means of the application of the test'.
In my opinion retrenchment payments are not payments in respect of services to the company. The length of service is simply used as a measure for calculating a particular result, namely the length of notice of the retrenchment. Indeed it is clear from the provisions of clause (f)(3)(1) of the Award that the sum paid is not wages but a sum in lieu of the wages the employee would have received had he continued in the employee of the company between the termination of his employment and the expiry of the notice required by clause (f)(2). To hold the contrary would have the curious result of giving retrenchment payments preference over long service leave payments and the other amounts covered by s 441(g) of the Code. 17 It was, I infer, in light of that decision, that in 1985 Parliament amended the legislation by introducing the predecessor of s 556(1)(h), namely s 441(1)(ga). This was introduced by the Companies and Securities Legislation (Miscellaneous Amendments) Act (No 192) 1985, the Explanatory Memorandum to which includes the following: 452. Background. In the winding-up of a company, certain types of debts are to be paid out of the property of the company in priority to all other unsecured debts (CA S441).
One class of employee that will, however, not gain the benefit of these amendments is that of directors who may be employed in another capacity of the company. It is important that directors not be provided with any incentive to allow a company to continue trading an insolvent position in the secure belief of that their personal entitlements will be protected. The directors, as controllers of the company, are also in a unique position, not shared by other employees, of being able to largely determine their own levels of remuneration and other entitlements and to direct such payments to their relations. 20 It is apparent, from the Explanatory Memorandum and from the Second Reading Speech, that the policy that underlay exclusion of directors from the removal of the upper limit for the priority for wages and leave and from any priority for retrenchment benefits, was that the directors not be provided with an incentive to allow a company to continue trading while insolvent, knowing that their personal entitlements would be protected. 21 The next relevant step in the legislative history appears to be the Harmer Report "General Insolvency Inquiry" ALRC 45, 1988, paragraph 731 of which, entitled "Excluded Employees", was as follows (emphasis added): 731. The problem with the existing provisions.
The Commission supports the principle of certain classes of employees being excluded from the benefit of part or all of the priorities for employees specified in s441.
It has, however, come to the attention of the Commission that the present basis on which an employee is excluded may have unintended consequences and be unfair in some circumstances. One situation is where a person has been an ordinary employee of a company for a considerable time and is then appointed a director of the company. If the company becomes insolvent and is wound up within a relatively short time after the appointment, the operation of s441(2) excludes the person from all employee priorities, including those which have accrued before the person became an excluded employee.
The Commission considers that a person in this situation should only be excluded from those priorities relevant to the period of service as a director of the company. The person should not be excluded from entitlements (if any) accrued while an ordinary employee. The Commission also received submissions arguing that the definition of 'excluded employee' should be extended to include a de facto spouse, the Commission accepts this proposal.
The Commission recommends that s441(2) be amended to make clear that the 'Exclusion' from priority applying to an excluded employee should only relate to the claims of that employee for the period that the person is regarded as an 'excluded' employee...
22 It may be instructive that the terminology used in that passage includes that of claims which "accrued" before the person became an excluded employee", entitlements "accrued while an ordinary employee, entitlements "relevant to the period of service as a director", and claims "for the period that the person is regarded as an excluded employee". 23 The recommendation of the Harmer Report was given effect by the Corporate Law Reform Act 1992. The former legislation having in the meantime been replaced by the Corporations Act, and former section 441 having become section 556 in the meantime. The Explanatory Memorandum accompanying the Bill introducing that Act contained the following (emphasis added): 925. Proposed paragraph 556(1)(h) replicates current paragraph 556(1)(h) and accords priority next to retrenchment payments payable to employees of the company.
Proposed subsection 556(1)(c) also implements in part the Harmer Report's recommendation that that be made clear in the legislation, that the limits applying to the debts which may be paid in priority to exclude employees, only apply in relation to the amount of the debt which arose during the period in which the person was an excluded employee. The Harmer Report's recommendations on this issue are discussed in the detail in paragraphs of this memorandum relating to proposed subsections 556(1)(a), (1)(b) and (1)(c). 24 Subsequently, the Explanatory Memorandum says in respect of those subsections (emphasis added): 929. Proposed subsections 556(1)(a), (1)(b) and (1)(c) relate to provisions which restrict special priorities accorded to employees under section 556 where the particular employee is an excluded employee...
33 Mr White has also referred to two judicial decisions: that of Donaldson MR in Walsh v Rother District Council [1978] 1 All ER 510, in which his Lordship cited, with apparent approval, what had been said by Reid LJ in Central Asbestos Co v Dodds [1973] AC 518 at, namely:
'Attributable'. That means capable of being attributed. 'Attribute' has a number of cognate meanings; you can attribute a quality to a person or thing, you can attribute a product to a source or author, you can attribute an effect to a cause. The central element is connection of some kind. 34 Donaldson MR then proceeded: Suffice it to say that these are plain English words involving some causal connection between the loss of employment and that to which the loss is said to be attributable. However, this connection need not be that of a sole dominant direct or proximate cause and effect. A contributory causal connection is quite sufficient. 35 The other case referred to by Mr White was the judgment of the High Court of Australia in Roncevich v Repatriation Commission (2005) 222 CLR 115, in which, in a joint judgment of McHugh, Gummow, Callinan and Heydon JJ, it was said (at 27) with reference inter alia, to Walsh v Rother District Council: The use disjunctively in s 70(5) of the expressions 'arose out of' and 'attributable' manifest a legislative intention to give 'defence cause' a broad meaning and certainly one not necessarily to be circumscribed by considerations such as whether the relevant act of the appellant was one that he was obliged to do as a soldier. A causal link alone or a causal connection is capable of satisfying a test of attributability without any qualifications conveyed by such terms as 'sole', 'dominant', 'direct' or 'proximate'. 36 Each of those cases depended on the statutory context in which the term "attributable" was used. The statutory context here is informed, in the case of ambiguity, by the extraneous material to which I have referred. That extraneous material - together with identification of the mischief intended to be remedied, both by the 1995 amendments and by the 1992 amendments - facilitates a conclusion that Parliament intended, by the concept of amounts "attributable to" particular days, amounts that accrued on or in respect of those days. 37 As Beach J pointed out in International Harvester, retrenchment pay does not accrue or arise over a period. It accrues or arises upon a particular event. That event is the fact which triggers the entitlement to retrenchment pay - not the original entry into the service from which the entitlement potentially arises, but may never arise if the applicable circumstances triggering the entitlement do not occur. 38 In this case, Mr Sturesteps had no entitlement to retrenchment pay until he was actually retrenched. The 1999 Employment Agreement gave him no more than a potential entitlement to retrenchment pay, which it had not accrued before he became a director, did not accrue while he was a director, and accrued or arose only when his employment was terminated, after he ceased to be a director. 39 The date upon which it accrued or arose - or in the language of the legislation, the date to which it was attributable - was not a non priority day. In my view, none of the clause 17.1 payment was attributable to a non priority day. It was attributable to the fact and date of his termination, which did not occur on a non priority day but occurred after he had ceased to be a director. 40 I do not consider that this conclusion undermines or is inconsistent with the basic policy of the 1985 amendments and the exclusion from priority claims of employees while they are directors. As I have sought to illustrate, the prime policy reflected in those amendments was to ensure that directors were disincentivised from continuing the trading of insolvent companies. Once a director ceases to be a director, there is no further need for the application of such a policy to a person who remains an employee. 41 Accordingly, my conclusion is that none of the clause 17.1 payment is attributable to a non priority day. The whole of it is entitled to priority under s 556(1)(h). Interest 42 I turn then to the second issue, which is whether interest should be included in the amounts to which I have held Mr Sturesteps is entitled to receive. 43 Corporations Act 2001, s 563B, relevantly provides as follows: 563B Interest on debts and claims from relevant date to date of payment (1) If, in the winding up of a company, the liquidator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the winding up, interest, at the prescribed rate, on the amount of the payment in respect of the period starting on the relevant date and ending on the day on which the payment is made. (2) Subject to subsection (3), payment of the interest is to be postponed until all other debts and claims in the winding up have been satisfied, other than debts owed to members of the company as members of the company (whether by way of dividends, profits or otherwise). 44 Section 563B largely reflects the scheme that debts and liabilities are to be admitted at the value which they have at the relevant date (typically, the commencement of the winding-up), that all bear interest once all are satisfied in full, but if not satisfied in full do not bear interest. Under that scheme there is no room for interest pursuant to section 563B in respect of the Mr Sturesteps' claim. Mr Sturesteps accepts that section 563B governs any claim for interest against C & G, but puts his claim as against its liquidators, the first and second defendants, personally, on the basis that they ought to have paid him earlier and that their wrongful rejection of its claim has kept him out of funds in the meantime, all the moreso in the context that other priority creditors, in particular former employees of C & G, were paid their entitlements promptly following termination of their employment. 45 I am inclined to accept, without presently having to decide, that upon an inquiry under Corporations Act, s 536, into the conduct of a liquidator, the court could make an order in the nature of interest to compensate a person aggrieved for having been kept out of funds due to some default of the liquidator. However, there is no such inquiry before the court. These proceedings have not, other than coincidentally, examined the conduct of the liquidators, but merely the correctness of their decision to reject the plaintiff's proof of debt. There has been no need, in these proceedings, for the liquidators to adduce evidence or otherwise take steps, to explain or justify the course of action that they have adopted. It would be quite inappropriate, in that context, to impose any personal liability on them, for what has turned out to be erroneous decision to reject Mr Sturesteps' claim, without prior examination of their conduct in question and upon appropriate notice to them that it was under review.
46 I therefore decline to make the order for interest sought. Declaratory relief
47 The third issue, then, is the declarations proposed by the plaintiff in the short minutes. 48 The Second Further Amended Statement of Claim contained no claim for declaratory relief. Notwithstanding that, the plaintiff now seeks the following declarations:
b. The employment of the Plaintiff continued with the Third Defendant until it was terminated on 18 April 2001.
… 9. Declaration that the Plaintiff was paid a bonus, by or on behalf of the Third Defendant, in an amount equal to the US$300,000 equity in the unit 3408, 1650 Jackson Street, San Francisco, California, USA. 49 For Mr Sturesteps, it is submitted that such declarations will clarify and set to rest matters in issue, and that they reflect conclusions expressed in the judgment - in particular, in paragraphs 19, 32 and 48 to 49. Against that, the defendants submit that there is no utility in making the declaration in paragraph 1, and that proposed in paragraph 9 does not reflect the reasons for judgment. 50 The case was litigated and decided on the basis and for the purposes which were then pleaded, and for the relief that was then claimed. The findings expressed in paragraphs 19, 32 and 48 to 49 may or may not give rise to issue estoppels between the parties. If they do, they will bind the parties in the future. However, it is not apparent to me that the declarations proposed would be of much if any utility. If they were to convert, into matters of res judicata, matters which otherwise did not establish estoppels between the parties, that would be an undesirable course where they had not been the subject of a specific claim. 51 I do not propose to make the declarations sought. Mandatory orders 52 The fourth issue is whether mandatory orders, to the effect that the liquidators pay Mr Sturesteps the amount for which he is admitted to proof within a specified time, should be made. 53 The current proceedings are an appeal from the liquidators' (deemed) decision to reject Mr Sturesteps' claims. On such an appeal, the court may, pursuant to Corporations Act, s 1321, "confirm, reverse or modify the Act or decision of the liquidator and make such orders and give such directions as it thinks fit". 54 It is conceivable that an order to the effect sought might be made under that provision. But, generally speaking, the appropriate course, when the court allows an appeal from a liquidator's rejection for proof of debt, is to direct that the proof be admitted, and then to leave matters of implementation to the liquidators who, after all, are officers of the court. Again, a direction of the kind proposed might well be made in an inquiry into the liquidators' conduct, but no such inquiry is before the court. 55 Importantly, I do not know what other issues there may be in the liquidation, nor do I know what funds the liquidator has available, how they are invested and what commercial considerations might impact on realising investments and paying Mr Sturesteps. 56 On a proceeding of the present kind I do not consider it appropriate to direct the liquidators to make payment within any particular timeframe. As officers of the court, the liquidators can be expected to respond appropriately to this judgment, having regard to all the other issues in the liquidation, including to the circumstance that, as the evidence suggests, other priority creditors may already have been paid, and other unsecured creditors may already have received a dividend.
Costs 57 The final issue is the question of costs and, in particular, whether the plaintiff's costs, which I have indicated the defendants will be required to pay, should be assessed on an indemnity basis. 58 Although in indicating that such seemed the appropriate order, I referred to "the defendants". I accept that, in the context of this type of proceeding, the appropriate order is against C & G, the company in liquidation, rather than as against the liquidators personally. 59 The defendants submitted that having regard to the issues on which they succeeded at trial, Mr Sturesteps should recover only 50 per cent of its costs. In my view, this was a case in which the plaintiff substantially succeeded. It is not one in which it is appropriate to segregate the costs between particular issues, none of which can be identified as having been associated with any particular elaboration or elongation of the litigation and many of which overlapped. I would decline to apportion the plaintiff's costs in the way suggested. 60 As to the application for indemnity costs, I have repeatedly said, an indemnity costs order is exceptional. Typically, it is made where a party's conduct of or in proceedings is sufficiently unreasonable to render it unjust that the opposing party to have to bear even those of its own costs which were not necessary as between party and party. 61 In this case, the factors said to warrant an indemnity costs order include (1) that the liquidators failed to admit anything at all to proof, even on account of an unanswerable statutory claim for long service leave; (2) that Mr Sturesteps' original proof was for less than the amount ultimately recovered; (3) that the liquidators did not deal with the proof at all, leaving Mr Sturesteps to proceed on the basis of a deemed rejection; (4) that any offers made by the liquidators were practically contemptuous of Mr Sturesteps' claim, and certainly inadequate to amount to genuine offers of compromise; (5) that the liquidators had made no Calderbank offer; and (6) that the liquidators had caused the costs of the mediation to be wasted. 62 At the outset, I will address the costs of the mediation generally. Because this was a court-ordered mediation, I regard the costs of the mediation as sufficiently associated with the proceedings, that they should be regarded as costs of the proceedings and included in the costs that the third defendant must pay the plaintiff. 63 Although it is true that the Mr Sturesteps' entitlement to some amount for long service leave could not have been genuinely in dispute, there were many well arguable issues in the case, as I think the substantive reasons for judgment demonstrate. It may be that the defendants did not make a relevant offer, by which I mean an offer that they bettered at the hearing, but neither did the plaintiff. The fact that neither party made an offer which that party bettered does not expose the defendants to an indemnity costs order any more than it does the plaintiff. 64 I do not accept that the initial proof of debt can be treated as a Calderbank offer. First, it was subsequently amended, at least twice, and the ultimate version of the proof of debt was for an amount well in excess of that for which the plaintiff ultimately succeeded. Secondly, there was no indication that an amount corresponding with the original proof of debt remained acceptable to the plaintiff after proceedings had been commenced. 65 It seems to me that the only possible aspect of the defence which might be characterised as unreasonable was that no concession was made in respect of any amount for long service leave. However, in the context of the case as a whole, Mr Sturesteps' total claim was the subject of reasonable dispute, and I do not think the absence of legitimate dispute as to one component of it is enough to characterise the defence of the proceedings as a whole as unreasonable. 66 I decline to make an indemnity costs order. The plaintiff is entitled to all of his costs, but not on an indemnity basis, and except insofar as any costs order previously made otherwise prevails. Conclusion 67 That, I think, disposes of the issues of principle which have been raised so far by the short minutes brought in, and should enable the parties further to refine them, leaving for consideration on the next occasion the application for leave to amend Mrs Sturesteps' defence, and the remaining issues as to annual holiday leave and long service leave.
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Sturesteps
A G McGrath & ors