Targus Group (UK) v Targus Australia

Supreme Court of NSW|2018-11-16|Before: McDougall J

Solicitors: Corrs Chambers Westgarth (Plaintiff/First Cross-Respondent) Yeldham Price O'Brien Lusk (First Defendant/Cross-Claimant) Watson Mangioni Lawyers (Second and Third Defendants) File Number(s): 2018/173956

Judgment

HIS HONOUR: Over four days from 13 to 21 August 2018, I heard a notice of motion filed on 31 July 2018 for the first defendant (Targus Australia). The motion sought interlocutory injunctive relief against the plaintiff (Targus UK). I gave judgment on 29 August 2018 [1] .
I concluded that with one exception, the motion should fail. As to the exception, I concluded that one of the orders sought by way of interlocutory relief would be granted if the third defendant (Mrs Tindale), not Targus Australia, gave the usual undertaking as to damages. Since Mrs Tindale declined to do so, I dismissed the motion.
The relevant background was set out at [2] to [22] of my earlier reasons. What I understood to be the fundamental issues in dispute (in the substantive proceedings) were described at [23], [24]. I do not propose to repeat, or to summarise, what I said in those paragraphs. The relief sought by Targus Australia in its notice of motion was set out at [25].

The costs dispute

These reasons deal with the costs of the motion. Targus UK seeks an order that it have its costs of the motion, and that Mrs Tindale pay those costs; otherwise, that Targus Australia do so. It seeks an order that the costs so payable should be assessed on the indemnity basis.
Targus Australia opposes the orders sought by Targus UK. It seeks an order that the costs of the motion be costs in the cause.
Mrs Tindale also opposes the orders sought by Targus UK. She submits that there is no basis for a costs order to be made against her, and that the costs of the motion be costs in the cause.
The parties provided detailed written submissions in support of their respective claims. Each relied upon further affidavit evidence. I do not propose to refer to that evidence, or to do more than summarise the submissions, more than is necessary to indicate the arguments for each party.

My decision on the notice of motion

I start by setting out [25] of my earlier reasons, and thereby identifying the prayers for relief in Targus Australia's notice of motion: 25. These reasons deal only with the substantive disputes between the parties. They deal with a notice of motion filed by Targus Australia on 31 July 2018, in which it seeks wide-ranging relief, on an interlocutory basis, against Targus UK, Targus International and Messrs Williams and Dussinger. I set out the prayers for relief in that notice of motion: 1. Pursuant to the equitable jurisdiction of the Court and/or s 234 of the Australian Consumer Law, an order that, pending the determination of the proceedings or further order of the Court, Targus Group (UK) Limited: 1.1 be restrained from imposing cash on delivery payment terms instead of 60 days after delivery payment terms in respect of purchase orders submitted by Targus Australia Pty Ltd (Targus Australia) for the supply of Targus goods to Targus Australia; 1.2 be restrained from requiring Targus Australia, in connection with the placement of Targus Australia purchase orders and the supply of Targus goods to Targus Australia, "to accept the extension of the delivery time to the Targus UK standard lead times, subject to potential delay by the factories" or any such similar requirement; 1.3 be restrained from requiring Targus Australia, in connection with the placement of Targus Australia purchase orders and the supply of Targus goods to Targus Australia, to "acknowledge and agree that orders for stock with restricted or short supply will only be accepted by Targus UK on the basis that Targus Australia agrees to an extended delivery period and such other terms as Targus UK may require" or any such similar requirement; 1.4 deal promptly with production orders submitted by Targus Australia and within 8 weeks of the order being submitted by Targus Australia to Targus Group (UK) Limited or its representative; 1.5 require its suppliers to sequence its production and fulfilment of purchase orders so that in respect of Targus goods destined for Targus Australia, the production will be shipped by the ninth week after the production order has been accepted and confirmed by Targus Group (UK) Limited or its representative and if not so shipped, Targus Group (UK) Limited arrange to pay for the airfreight costs less the shipping costs that would have been incurred to mitigate against delay; 1.6 withdraw the instructions issued to suppliers in or about December 2017 (and any subsequent instructions to similar effect) directing them not to accept purchase orders submitted by Targus Australia directly or communicate with Targus Australia directly; 1.7 be restrained from issuing any further instruction to suppliers to the effect that they not accept purchase orders submitted by Targus Australia directly or not communicate with Targus Australia directly in respect of such purchase orders; 1.8 be restrained from taking any discriminatory or punitive action against Targus Australia in respect of its refusal to assign intellectual property rights in the Power Management Device or to pay the 10% mark-up demanded of it or to pay any other additional amounts to Targus Group (UK) Limited or Targus International LLC (or any other entity within the Targus global group). 2. Pursuant to s 234 of the Australian Consumer Law, an order that, pending the determination of the proceedings or further order of the Court, Targus International LLC: 2.1 withdraw the instructions issued to suppliers in or about December 2017 (and any subsequent instructions to similar effect) directing them not to accept purchase orders submitted by Targus Australia directly or communicate with Targus Australia directly; 2.2 be restrained from issuing any further instruction to suppliers to the effect that they not accept purchase orders submitted by Targus Australia directly or not communicate with Targus Australia directly in respect of such purchase orders; 2.3 reinstate Targus Australia's access rights and privileges in respect of the IT systems ordinarily used by it in its operations processes immediately prior to 6 December 2017 and in connection with the ordering and supply of Targus goods to Targus Australia, including access to information on global demand consolidation and purchase order consolidation; 2.4 be restrained from excluding Targus Australia from demand planning and operational meetings; 2.5 be restrained from taking any discriminatory or punitive action against Targus Australia in respect of its refusal to assign intellectual property rights in the Power Management Device or to pay the 10% mark-up demanded of it or to pay any other additional amounts to Targus Group (UK) Limited or Targus International LLC (or any other entity within the Targus global group). 3. Pursuant to the equitable jurisdiction of the Court and/or s 1324 of the Corporations Act 2001 (Cth), an order that pending the determination of the proceedings or further order of the Court, each of Mikel Howard Williams (Williams) and Michael Dussinger (Dussinger) be restrained from preventing or impeding Targus Australia obtaining external legal advice and representation in respect of the issues the subject of these proceedings, and the authorisation and expenditure of Targus Australia funds in respect of same. 4. Pursuant to s 1324 of the Corporations Act 2001 (Cth), an order that, pending the determination of the proceedings or further order of the Court, Targus Group (UK) Limited and Targus International LLC be restrained from directing or attempting to aid, abet, counsel, or procure a director of Targus Australia to exercise his or her powers with respect to the funding, conduct or resolution of the proceedings brought by Targus Group (UK) Limited against Targus Australia, and in the enforcement and protection of Targus Australia's legal rights against Targus Group (UK) Limited and/or Targus International LLC and any person connected with the present dispute, for the purposes of furthering the interests of Targus Group (UK) Limited and/or Targus International LLC. 5. Such further or other orders as the Court thinks fit. 6. Costs.
I concluded that there was a serious question to be tried as to the relief sought by prayer 1.1. Accordingly, I said that if Mrs Tindale were prepared to give the usual undertaking, I would grant relief to the effect of that prayer [2] .
I add, in terms of the relief sought by prayer 1.1, that Targus UK had made an offer to re-extend 60 day credit terms. That offer was made belatedly, in the break between the first two days and the last two days of the hearing. I said that the belated offer did not really assist Targus UK [3] . I do however note that in its costs submissions, Targus UK relied upon the making of that offer (and on its being remade after I had given judgment) in support of a submission that the 60 day terms issue was not really of commercial significance to Targus Australia.
I dealt with prayers with 1.2 and 1.3 together. I concluded that there was no utility in granting relief in terms of prayer 1.3, because it was based on a particular email in circumstances where there was no evidence of likelihood of repetition of the conduct in question [4] . As to prayer 1.2, I concluded that there was no serious question to be tried because it was based upon an untenable construction of the relevant clause of the agreement between the parties [5] . I added that even if I had not so concluded the question of construction, I would have declined to grant the relief sought for other reasons [6] .
There was a separate argument based on what the parties called the "risk buy" process. There is no need to explain or elaborate upon that dispute. The curious will find it treated at [125] to [153] of my earlier reasons. In the last of those paragraphs, I concluded that "[t]he evidence falls a long way short of showing a serious question to be tried as to this particular element of Targus Australia's case".
I concluded that Targus Australia had failed to show either a factual or a legal basis for the relief claimed by prayers 1.4 and 1.5, and that in any event (as to prayer 1.4), there were discretionary reasons for refusing relief [7] .
As to prayers 1.6 and 1.7, I concluded that there was no basis for granting the relief sought, even if (as Targus Australia argued) the reason for introducing the new order system at which the prayers were targeted was to compel Targus Australia to pay Targus UK a 10% mark-up on the cost price of goods supplied to Targus Australia [8] . However, in the absence of any evidence of prejudice, I declined to grant relief [9] .
I declined to grant relief in terms of prayer 1.8 because of its imprecision, and because as a result there would be disputes as to breach [10] .
There is little point in elaborating my decision on prayer 2. To the extent that it sought, as against Targus International, relief in terms of that sought against Targus UK, it failed for the reasons that the relief sought against Targus UK failed. As to the residue of prayer 2, I declined to grant relief because there was no demonstrated utility [11] .
I declined to grant relief in terms of prayer 3 because there was no evidence to show that Messrs Williams and Dussinger, whose conduct was sought to be restrained, proposed to act in the manner suggested [12] .

Should Targus UK have its costs of the notice of motion?

The general position is that, subject to the rules and any other legislation, costs are in the discretion of the court. See s 98(1)(a) of the Civil Procedure Act 2005 (NSW).
UCPR r 42.1 provides, as a general guide, that costs should follow the event. However, where what is at issue is the costs of an interlocutory application, r 42.7 applies. In effect, unless the court orders otherwise, the costs of an interlocutory application should be costs in the cause.

The parties' submissions

Targus UK submitted that, with a qualification as to prayer 1.1 [13] , the application had failed. As to the exception, Targus UK submitted that its position had always been that if any relief were to be granted, it should be Mrs Tindale, not Targus Australia, that gave the usual undertaking as to damages. It based that submission on the fact that it held 51% of the issued shares in Targus Australia, with the remaining 49% being held by Mrs Tindale through her company Heathmere Pty Ltd, the second defendant. In those circumstances, Targus UK submitted, the economic effect of Targus Australia's giving the usual undertaking would be that, if it were called upon, Targus UK would effectively bear 51% of the liability [14] .
Targus UK submitted, correctly, that its position (as to Mrs Tindale's giving the usual undertaking as to damages) had been stated clearly before the interlocutory hearing, and that Mrs Tindale, although represented throughout the hearing, had declined to indicate whether she was prepared to give that undertaking, should it be required, until, upon delivery of my reasons, she stated (through Counsel) that she was not.
Targus Australia submitted that it had demonstrated that there was a serious question to be tried. That is correct to some extent, as will be apparent from a perusal of my earlier reasons. Thus, it submitted, costs should not follow the event of dismissal of the notice of motion, but, rather, should follow the event of the disposition of the substantive proceedings.
The submissions for Mrs Tindale effectively mirrored those of Targus Australia. That is to say, Mrs Tindale submitted that the costs of the notice of motion should be costs in the cause, for the reasons identified in the submissions for Targus Australia.
Targus UK submitted, in response, that it had accepted at the outset that there were some serious questions to be tried as to some issues. Its opposition to the relief sought by the notice of motion was based in part upon the fact that as to specific prayers for relief, there was no serious question to be tried; as to others, that the relief sought went well beyond anything to which Targus Australia could possibly be held entitled on a final hearing; and in part upon the point as to Mrs Tindale.

Decision

In my view, this is not a case where it is appropriate that the costs of the notice of motion should be costs in the cause. There are several reasons why that is so.
First, the hearing of the notice of motion was prolonged inordinately by the way that it was conducted on behalf of Targus Australia. The notice of motion was fixed for hearing for two days. At the conclusion of those two days, the case for Targus Australia had not closed. The following then occurred, as I described at [26] of my earlier reasons: 26. The notice of motion was heard over 4 days, between 13 and 21 August 2018. It is to be noted that on 20 July 2018 an order was made fixing the substantive proceedings for hearing for 2 days on 10 and 11 October 2018. In the course of hearing the interlocutory application, it became clear that 2 days would be woefully inadequate. I offered the parties an 8-day hearing to commence on 17 September 2018, on the basis that the interlocutory hearing proceed no further and that the parties focus their efforts on getting ready for the final hearing. The respondents were content to accept that proposal. Targus Australia was not. Its stated reason was that the delay between 14 August 2018 (when the offer was made) and the likely date when judgment would be given on the proposed final hearing would be financially ruinous if there were not some interlocutory regime in place to protect its position.
The notice of motion could have been heard and decided in one day, and in any event, should have been dealt with well within the two days allocated. It was not, because of the prolix and undisciplined way in which the application was presented. In particular, although Targus UK had conceded (as its written submissions provided prior to the commencement of the interlocutory hearing made clear) that there were, in part at least, serious questions to be tried, Targus Australia insisted upon adducing detailed evidence, and making detailed submissions, to reinforce that conceded point.
I should say a little more about the concession made by Targus UK. As will be seen from the notice of motion, the prayers for relief (set out at [8] above) were in the main based on the proposition that Targus UK had engaged in unconscionable conduct in contravention of Part 2-2 of the Australian Consumer Law. Targus UK conceded, for the purposes of the interlocutory application, that there was a serious question to be tried as to whether, overall, its conduct had been unconscionable. That concession, although it did not necessarily extend to the whole of the conduct alleged, was nonetheless sufficient to satisfy the requirement that there be a serious question to be tried as to the characterisation of its conduct.
Targus UK's opposition to the relief sought was not based on the proposition that there was no arguable case of unconsionability. It was based on precise and limited arguments as to the specific prayers for relief. Those arguments were identified in its written submissions filed and served prior to the hearing of the notice of motion.
Targus Australia did not seek to confine itself to the arguments upon which Targus UK relied (indeed, to a large extent, Targus Australia did not engage with those arguments). Instead, its submissions ranged far more widely, and canvassed at length the factual matters that were the subject of Targus UK's concession.
Another, and significant, factor is that in my view, many of the prayers for relief, in the terms in which they were framed, were not reasonably arguable. The relief that they sought (and I am referring in particular to prayers 1.2 to 1.8, and prayer 2) went well beyond anything that could be justified having regard to the terms of the contracts that the parties made, and that formed the basis of their business relationship. Those were not the only difficulties. Some of the prayers for relief could not be supported by the evidence upon which Targus Australia relied. Further, some of the orders sought were imprecise or ambiguous, and if they were to be made, would quite probably lead to endless disputes as to allegations of breach. Those concerns were reflected in my earlier reasons, as summarised at [8] to [17] above.
I raised those problems with Counsel for Targus Australia several times during the second day of hearing [15] . No satisfactory response was given when I raised them. Nor was any satisfactory response given on the third and fourth days of hearing, despite the lapse of almost a week in which those and other matters could and should have been considered.
Finally, for present purposes, there is the attitude of Mrs Tindale. I accept of course that Targus Australia's position was that it alone should give the undertaking as to damages. I accept also that it was Mrs Tindale's right to decline to give that undertaking. My concern, for present purposes, is based on her silence - her failure to inform the court, at the outset, of her attitude to giving the undertaking.
The "undertaking" point was flagged at the outset. There was always the possibility that I might agree with it (as indeed I did). In those circumstances, if Mrs Tindale were not prepared to give the usual undertaking, the court should have been informed immediately. It seems to me to be entirely inconsistent with the requirements of s 56 of the Civil Procedure Act that Targus Australia and Mrs Tindale should have remained silent on this point until, after four days of hearing and a delay of about a week before judgment was delivered, they chose to inform the court of her attitude.
It will be noted that what I have just said assumes that Targus Australia and Mrs Tindale were in communication over the course of the interlocutory hearing. They were. It was common ground that Mrs Tindale was present in court over the whole of the interlocutory hearing. She was represented by Counsel. She was involved in giving instructions from time to time to the solicitors for Targus Australia. Targus UK submitted, without contradiction (and I assume that if what it submitted were incorrect, I would have been told), that during adjournments, Mrs Tindale had been closeted with Targus Australia's legal representatives.
Mrs Tindale must have known, from the outset, that the fall-back position for Targus UK was that if any interlocutory relief were to be granted, it should be on terms that she, rather than Targus Australia, would give the usual undertaking. She ought to have decided, at the outset, whether she was prepared to do so. She ought to have communicated her decision to Targus Australia and, either through Targus Australia or through her own Counsel, to the court. In the absence of any evidence to the contrary, I infer, from Mrs Tindale's silence, that her attitude as communicated when judgment was given on 29 August 2018 was what it had always been. That is to say, I infer that she was never prepared to give the usual undertaking.
Had that attitude been communicated to the court when it should have been, then less than a day would have been required for the interlocutory hearing. Had I then decided (as, ultimately, after four days of hearing and eight days to prepare reasons I did) that Mrs Tindale should be required to give any undertaking as to damages, the notice of motion could have been dismissed at that point. Three days of hearing would have been saved.
I return to the point made at [27] above. Even if Mrs Tindale's unwillingness to give the usual undertaking as to damages had not been identified and resolved at the outset, the two days originally allowed was more than generous, bearing in mind Targus UK's acceptance of the proposition that there were some serious questions to be tried. The real issues were whether, bearing in mind that acceptance, orders of the kind sought could and should be made on an interlocutory basis. Indeed, in my view, with a proper and disciplined focus, those real issues could have been dealt with in one day.
Had the notice of motion been dealt with within one day, there might have been some basis for arguing, even in the event of its dismissal, that the costs should be costs in the cause. But that is no more than speculation, because, as I have recounted, the postulated event did not occur.
The result of the way in which the application was conducted on behalf of Targus Australia is that even if (contrary to my view) the notice of motion did require two days for hearing, Targus UK has been required to defend itself for a further two days. That is due entirely to the way in which the application was conducted on behalf of Targus Australia.
One reason why, as a matter of policy, the costs of interlocutory applications ought follow the event of the main proceedings is that it will often be impossible to determine, until the ultimate issues have been heard and decided, where the balance of justice lies as between the parties. However, where a notice of motion raises separate and distinct issues, that consideration may become less relevant.
In this context, it is necessary to bear in mind that the relief sought by Targus Australia's notice of motion on an interlocutory basis was not entirely reflected in the final relief sought by its cross-claim. Thus, there is not the usual risk that the true justice of the case, as to those claims for relief, may not emerge until after a final hearing. To that extent, the policy justification underlying r 42.7 is of less significance in this case.
Even if Targus Australia succeeds on a final hearing, it would be the case that Targus UK has been forced to defend an application, conducted at excessive length, that was unlikely to succeed. The duration of the hearing was not of Targus UK's making. Its evidence was limited, and its submissions were precise. There is no principled basis on which Targus UK's success on the notice of motion ought be subordinated to the outcome of the final hearing.
In all the circumstances, the combination of the factors to which I have referred leads inevitably to the conclusion that Targus UK ought have its costs of the notice of motion.

Background

It was common ground that the court had power to make a costs order against Mrs Tindale personally, even though she was not an applicant on (or for that matter, a respondent to) the notice of motion. The question for decision is whether the court ought exercise that power.
The shareholders of Targus Australia have always been Targus UK or its predecessors as to 51%, and Heathmere (Mrs Tindale's company) as to 49%. Until very recently, the board of Targus Australia has comprised, for the most part, two nominees of each shareholder. In recent times, Heathmere's nominees have been Mrs Tindale and her account Ms Helen Argiris. The identity of Targus UK's nominees is irrelevant.
Recently, and over the opposition of Mrs Tindale and Heathmere, Targus UK used its majority vote in general meeting to appoint two independent directors. Their identity is irrelevant. What is presently relevant is that they were appointed well after these proceedings were commenced, and indeed after the notice of motion was filed on 31 July 2018. There is no evidence that those independent directors are anything other than independent; nor is there any evidence that they have involved themselves in the day to day management of Targus Australia.
Mrs Tindale is, and for many years has been, the managing director of Targus Australia. It is clear that, subject to the direction and ultimate control of the board, she has the full responsibility for the day to day and longer-term conduct of its business. It is clear, in particular, that she caused Targus Australia to defend the proceedings brought by Targus UK, and to file the notice of motion of 31 July 2018.

The parties' submissions

The submissions for Mrs Tindale invoked the well-known proposition that the court should exercise caution before making a costs order against a non-party. The submissions referred to Heath v Greenacre Business Park Pty Ltd [16] , Yu v Cao [17] and FPM Constructions Pty Ltd v Council of the City of Blue Mountains [18] .
Mrs Tindale's submissions emphasised that the notice of motion had been brought for the benefit of Targus Australia. She submitted that in those circumstances there was no reason to pierce the corporate veil, so as to make her liable for costs. She was not, she submitted, the "real party"; nor was Targus Australia "merely a nominal party" [19] .
The submissions for Mrs Tindale referred to what Basten JA said in FPM Constructions at [210]. I set out so much as is relevant of that paragraph of his Honour's reasons: … It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw.
Mrs Tindale accepted that Targus Australia, the unsuccessful party, was the moving party. However, she submitted, the remaining circumstances identified by Basten JA had not been shown to exist, save that Mrs Tindale has "a financial interest in the ongoing financial viability and prosperity" in Targus Australia, just as Targus UK does.
Targus UK submitted that Mrs Tindale was a party to the proceedings. Thus, Targus UK submitted, authorities dealing with non-parties properly so called were of less significance. It noted that neither she nor Targus Australia had ever sought to refute the proposition advanced by Targus UK that Mrs Tindale was in effect the decision-maker driving the conduct of the litigation (including the notice of motion) on behalf of Targus Australia.
More fundamentally, Targus UK submitted, the underlying economic reality was that if Targus Australia, and not Mrs Tindale, were ordered to pay the costs, Targus UK would effectively bear 51% of those costs. The result would be, Targus UK submitted, that it would be forced to subsidise litigation against itself.

Decision

I proceed on the basis that although cases dealing with costs orders against non-parties strictly so called might not be directly applicable, nonetheless they offer guidance, at least by way of analogy, in this case. The question remains as to the extent to which the guidance is applicable to the particular facts that bear on the exercise of the costs discretion.
The essential issue in the proceedings is as to the way in which the business relationship between Targus UK and (through Heathmere) Mrs Tindale should be conducted. Targus Australia is the corporate vehicle for the conduct of that business. Its shareholders, the beneficiaries of its successes and the losers by its failures, are effectively Targus UK and Mrs Tindale. I accept that the relief claimed by Targus Australia in its cross-claim, if granted, would be to its benefit. I accept also that Targus Australia is a legal entity distinct from its shareholders. The consequence, that the grant of that relief might be more beneficial to one shareholder than the other, does not impinge directly upon this point. Nonetheless, the reality is that the dispute is one between the shareholders as to how the business relationship should be conducted.
The closeness of the relationship between Targus Australia and Mrs Tindale is demonstrated by a startling submission put by Targus Australia on the question of costs. It opposed not only the costs orders sought against it, but also the costs order sought against Mrs Tindale [20] .
That submission is extraordinary because an order that Mrs Tindale, not Targus Australia, pay the costs of the notice of motion would be for the benefit of Targus Australia. The only person who would benefit from an order that Targus Australia pay costs is Mrs Tindale, because the economic effect of the order would be that the depletion of Targus Australia's funds, by whatever the amount of costs might be, would be borne be effectively as to 49% by her through Heathmere and as to 51% by Targus UK.
I simply do not understand how it could be said to be in the interests of Targus Australia to make the submission to which I have referred.
It is clear, in my view, that Mrs Tindale has directed Targus Australia's conduct of the litigation, and in particular its decision to file and prosecute the notice of motion. That proposition was raised directly in Targus UK's submissions on the notice of motion, and never disputed, let alone refuted. It was raised directly with Counsel for Targus Australia in the course of the hearing [21] , in the context of the undertaking as to damages. Although the submissions sought to deal with the undertaking point at some length [22] , the basal proposition - that Mrs Tindale was motivating the litigation on behalf of Targus Australia - was again never disputed, let alone refuted.
To my mind, the unique circumstances of this case are such that the factors enumerated by Basten JA in FPM Constructions at [210] [23] have little relevance. As his Honour observed, the power is in terms unconstrained. Decided cases offer valuable guidance but they cannot dictate the mode of exercise of the power in markedly different factual circumstances.
In the particular circumstances of this case, I consider that the appropriate order is that Mrs Tindale personally, not Targus Australia, should pay Targus UK's costs of the notice of motion. On the evidence as a whole, the available and unanswered inference is that she was the person who motivated Targus Australia to bring and prosecute the notice of motion. It would be unjust to leave the adverse costs consequences with Targus Australia because to do so would have the economic effect of impairing, to the extent of 51% of the costs assessed, Targus UK's economic interest in Targus Australia.
To my mind, the situation is directly analogous to the question of who should provide the usual undertaking as to damages. Thus, what I said in my earlier reasons on that point at [197] to [202] is relevant. I set out those paragraphs: Undertaking as to damages 197. Targus Australia provided the usual undertaking as to damages. Mr Elliott did not attack the company's ability to meet the undertaking if called upon to do so. What he did submit was that, in circumstances where Targus Australia is owned 51% by Targus UK, and Targus UK is entitled to share equally in Targus Australia's profits, the undertaking should be given by Mrs Tindale personally. 198. Ms Roughley responded that the application was one brought by Targus Australia for the benefit of itself and, thus, all its members. She submitted that if it succeeded, the benefit would accrue to Targus UK as well as to Mrs Tindale. In those circumstances, she submitted, it was appropriate that those who would enjoy the fruits of success should bear the burden necessarily incurred in obtaining that success. 199. Targus UK, and Messrs Williams and Mortensen, have sought to portray the dispute only as one between shareholders. That analysis has been reflected in some of the correspondence emanating from Corrs. In a practical sense, the analysis may be correct. In a legal sense, however, the cross-claim is one undertaken by Targus Australia in its own right. If it succeeds, the success will endure for the benefit of the company as a whole. 200. That legal analysis is a little artificial, given that any success enjoyed may very well be at the expense of one of those members: Targus UK. 201. Regardless of the legal and practical analysis, the real point seems to me to be as follows. The undertaking as to damages is required to secure the position of the party against whom interlocutory relief is sought, in the event that the relief is granted and, on a final hearing, it becomes apparent that it should not have been granted. It would be wholly inconsistent with that purpose to require the party entitled to the benefit of the undertaking to pay half the cost of meeting it. In a practical sense, the undertaking is only of significance where, interlocutory relief having being granted, the court later concludes that the successful applicant should not have obtained it. Thus, as Mr Elliott submitted, it is the event of failure, rather than the event of success, that ought determine analysis and its outcome. 202. When one views the matter in that way, it seems to me to be plain that, as a matter of justice, the limited relief that I propose to grant, in terms of prayer 1.1, ought be granted only on terms that Mrs Tindale rather than Targus Australia give the undertaking as to damages. I had considered whether it ought be given by them both, jointly and severally, but that would not really answer the question. If Targus UK became entitled to enforce the undertaking, and chose to do so only against Mrs Tindale, she would be entitled to be exonerated, as to one-half of any amount paid by her, by Targus Australia. That exoneration in turn would be borne as to half by Targus UK. That is the very situation that ought not arise.
I conclude that Mrs Tindale should pay directly Targus UK's costs of the notice of motion.

The parties' submissions

Targus UK submitted that its costs, or alternatively part of its costs, ought be assessed on the indemnity basis. It relied upon various matters that have been covered already, including specifically: 1. that Targus Australia never addressed the real issues, as they were raised both in Targus UK's written submissions and in the course of the hearing; and 2. the prolongation of the hearing by reason of the way that it was conducted for Targus Australia.
Targus Australia submitted that there ought be no order for indemnity costs. It submitted that it had demonstrated that there were serious questions to be tried, and that there were aspects of the conduct of Targus UK that were, to put it mildly, unsatisfactory. That last point may be accepted; I referred to aspects of that behaviour in my earlier reasons at [22], [29].

Decision

In my view some order for assessment on the indemnity basis must be made. I base that not only on the proposition that aspects of the relief claimed were plainly untenable but, also, on the prolongation of the hearing.
The real question is as to whether all, or some part only, of the costs ought be so assessed; and if some part only, what part. The reasons why that is so will be, in large part, apparent from what I have said already.
To my mind, the fundamental point is that Targus UK was compelled to defend itself for far longer than should have been required. Even making generous allowances in favour of Targus Australia, the maximum time that should have been required to complete the hearing was two days. I have said already why, in my view, that did not happen, and why a further two days were needed. If the hearing had been completed in two days, Targus UK would have been spared the cost of a further two days in court, and the preparation for those further two days.
I accept that the fundamental purpose of a costs order is to compensate, so far as money can, a party that has been compelled to go to court either to enforce a right (in the case of the successful plaintiff) or to defend an unmeritorious claim (in the case of a defendant). I accept, further, that the costs discretion does not exist to punish a party. That principle was expressed by McHugh J in Oshlack v Richmond River Council [24] at [67]. His Honour there said: 67. The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party (104). If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
However, focusing on the compensatory character of costs orders, I consider that it is appropriate to order that some part of the costs be assessed on the indemnity basis. In particular, I consider, the way in which the notice of motion was prosecuted on behalf of Targus Australia could be described as "involving some relevant delinquency on the part of the unsuccessful party": see the reasons of Gaudron and Gummow JJ in Oshlack at [44]. To leave Targus UK out of pocket for part of the costs consequences of that delinquency would be unjust.
In this case, I think, the appropriate order is that costs be assessed on the ordinary basis up until and including 14 August 2018 (the second of the two days originally allocated for the hearing of the notice of motion) and on the indemnity basis thereafter. Such an order would reflect: 1. the general principle that costs are to be assessed on the ordinary basis, even though, inevitably, assessment on that basis will not fully indemnify the beneficiary of the costs order; and 2. the exceptional case, where a party has incurred further costs by reason of unjustifiable conduct that may be described as "involving some relevant delinquency".
I add that although I did not and do not approve of some of the correspondence written for Targus UK, that is not a reason for depriving it of a partial indemnity costs order. First, as I have said, the power is not punitive. And secondly, there is no demonstrable relationship between that conduct and the factors that in my judgment justify the order that I have described.

Conclusion and orders

What I have said deals with the only costs orders that were sought. I say that because no one sought any other costs order - for example, an order that Mrs Tindale, or Heathmere, should indemnify Targus Australia for the costs that it incurred in prosecuting its notice of motion.
I make the following orders: 1. order the third defendant to pay the plaintiff's costs of the first defendant's notice of motion filed on 31 July 2018. 2. Order that those costs be assessed on the ordinary basis up until and including 14 August 2018, and on the indemnity basis thereafter. 3. Direct that those costs may be assessed before the conclusion of the proceedings. 4. Make no other order as to costs.

Endnotes

Targus Group (UK) v Targus Australia (No 2) [2018] NSWSC 1322.
See my earlier reasons at [89] - [92], [197] - [202].
See at [83] - [85] of my earlier reasons.
See at [94] of my earlier reasons.
See at [101] - [118] of my earlier reasons.
See at [119] - [124] of my earlier reasons.
See at [154] - [162] of my earlier reasons.
See at [163] - [179] of my earlier reasons.
See at [180] of my earlier reasons.
See at [181] - [184] of my earlier reasons.
See at [186], [187] of my earlier reasons.
See at [188] - [193] of my earlier reasons.
See at [2], [9] above.
I dealt with this, accepting Targus UK's position, at [197] to [202] of my earlier reasons.
See for example T88-89, T101, T106-107.
[2016] NSWCA 34.
(2016) 91 NSWLR 190.
[2005] NSWCA 340.
Referring to Basten JA in FPM Constructions at [206].
Written submissions on costs dated 26 October 2018 at [12], [13].
See T163.32-.45.
T163.47-164.44.
See at [51] above.
(1998) 193 CLR 72. 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: 16 November 2018

At a glance

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Judgment (14 paragraphs)

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Legislation Cited (4)

Cases Cited (5)