BETWEEN : TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST

Practice and procedure - Costs - Costs of application - Security for costs - Springing order not engaged - Action not dismissed

1 KENNETH MARTIN J: The defendants seek their costs of a directions hearing held during the second week of the court's winter recess in July this year.

2 On 19 September 2013, I ordered the parties file short submissions as to this disputed costs issue, so the matter could be dealt with on the papers. In consequence, I received the plaintiff's written submissions filed 23 September 2013 and the defendants' submissions advocating costs orders in their favour on 24 September 2013.

3 Costs lie at the discretion of the court. That discretion is to be exercised judicially in accordance with wellrecognised principles.

4 In short, I am of the view that the order sought by the defendants as to taxed costs in their favour is not appropriate, for reasons set out below.

5 This action began in 2011 and has considerable antecedents. On 10 June 2013 in the aftermath of my reasons Trafalgar West Investments Pty Ltd As Trustee For the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] [2013] WASC 143 delivered 29 April 2013, I made a series of administrative orders. Relevantly, I then ordered:

1. The defendants' futility dismissal application dated 8 February 2013 be dismissed.
2. The costs of the defendants' application be reserved to an appointment on 25 June 2013 at 9.00 am.
3. Pursuant to s 1335(1) of the Corporations Act 2001 (Cth), the plaintiff provide to the defendants security for costs in the amount of $150,000 by way of irrevocable bank guarantee in favour of the Principal Registrar of the Supreme Court (Security).
4. The Security be given in tranches, with the first tranche of $32,648 be provided within seven days (First Tranche).
5. The plaintiff to file and serve an affidavit attaching the bank guarantee.

1. Further proceedings in this action are stayed pursuant to s 1335(1) of the Corporations Act 2001 (Cth) and the orders of the Honourable Justice Kenneth Martin of 14 June 2012 pending provision of the First Tranche of Security.
2. The defendants' costs of and incidental to the 'security for costs' application dated 27 July 2011 be reserved to an appointment on 25 June 2013 at 9.00 am.

6 As a result of those orders the First Tranche of Security for $32,648 under order 4, was due not later than 18 June 2013. It was not provided.

7 A directions hearing in the matter was due to be convened at 9.00 am on 25 June 2013.

8 In the lead up to the 25 June 2013 hearing Mr Jebb swore an affidavit, filed 24 June 2013, in which he said:

1. Last week a litigation funder expressed an interest in funding this action (including the provision of security for the defendants' costs of the action), and has appointed a law firm to undertake due diligence on the matter.
2. I have a meeting with the funder and a partner of the law firm it has appointed this week.
3. I will ensure that Bennett + Co is informed of the funder's decision as to whether or not it will fund the action promptly upon my receipt of the same.
4. On the basis of the above I respectfully request this court's forbearance while I continue to pursue these avenues of financing the plaintiff's application (including the payment of security for costs).

9 On 25 June 2013, I issued a number of directions and orders concerning outcomes in other related actions (including in COR 76 of 2011 and COR 138 of 2010). For COR 59 of 2011, as regards security for costs, I effectively reissued my orders of 10 June 2013. I then ordered that the First Tranche of $32,648 (by way of irrevocable bank guarantee) be provided within seven days effectively then allowing the plaintiff more time, (until 2 July 2013) to provide the First Tranche of Security and remedy the default that then subsisted.

10 In light of strongly expressed compliance concerns by the defendants at that time, as to the plaintiff's ultimate provision of this security, I was requested to list the matter somewhat unusually, for a further directions hearing at 9.30 am, during the second week of the court's winter recess, namely Wednesday, 17 July 2013. I acceded to that request and listed the matter for directions at that time.

11 Effectively, the orders on 25 June 2013 granted an indulgence to the plaintiff, coupled with an indication that its compliance position would be closely reviewed, in the event of continued default at an extraordinary directions hearing fixed in the court recess period on Wednesday, 17 July 2013.

12 The First Tranche of Security was still not provided by the plaintiff by 2 July 2013 or afterwards. Nothing at all appears to have happened until there followed a standard request from my associate, emailed to the parties on Monday, 15 July 2013, seeking their respective minutes of orders for the looming directions hearing scheduled for Wednesday, 17 July 2013. That request finally drew an email from Mr Jebb, sent on behalf of the plaintiff to the solicitors for the defendants (Mr Tharby), at 2.47 pm on Monday, 15 July 2013. His email said:

Mr Tharby

Further to the email sent this morning from his Honour's research associate requesting minutes of proposed orders for the directions hearing in the above matter scheduled Wednesday 17 July, I attach an affidavit which will be filed tomorrow morning. Please advise whether your clients will consent to orders adjourning the directions hearing on terms set out in my affidavit.

13 A short affidavit by Mr Jebb on behalf of Trafalgar of Tuesday, 16 July, was filed in support of his request that the Wednesday directions hearing be adjourned. In this affidavit Mr Jebb now said:

1. I met with the litigation funder and its solicitors on 27 June 2013 in Sydney to discuss the plaintiff's application for litigation funding of this action (including the provision of security for costs).
2. I was subsequently informed by the litigation funder, and verily believe, that it is willing to fund the action, subject to a due diligence report to be prepared by its solicitors.
3. I am informed by the litigation funder and verily believe that its due diligence should be finalised by the end of August 2013, at which time it will make its final decision regarding funding.
4. Accordingly I respectfully request that the directions hearing scheduled 17 July 2013 be adjourned to the end of August on my undertaking that I will provide a further affidavit within 2 business days of learning of the litigation funder's final decision, and at any rate by the end of August 2013.

14 Selfevidently, the affidavit filed by Mr Jebb on behalf of Trafalgar was sketchy at best, in terms of not properly explaining the position concerning what had been said to Mr Jebb by some unnamed person, for an unnamed litigation funder, at some unspecified time post 27 June 2013. At that point Trafalgar had been in ongoing default of my orders to provide its First Tranche of Security, since 18 June 2013.

15 From 2 July 2013 and thereafter, the onus was on Trafalgar to demonstrate some basis upon which another extension of time for permitting its compliance with its required provision of the First Tranche of Security. But the plaintiff did nothing until stimulated into action by the email from my associate, with a scheduled extraordinary directions hearing looming for Wednesday, 17 July 2013.

16 This plaintiff, whilst in default, ought to have been a lot more proactive in initiating steps to reach some accommodation with the defendant, either for a further extension of time for it to comply, or alternatively by the filing of materials earlier in support of its position, rather than leaving matters to the eleventh hour.

17 On Tuesday, 16 July 2013 at 7.17 pm an email was sent to Mr Karp (at Karp Steedman RossAdjie) from the defendants' solicitors, advising that the defendants 'do not agree to any request for an adjournment of the directions hearing' and 'will seek that the proceedings be dismissed at the directions hearing due to the plaintiff's failure to provide security as ordered'.

18 Accompanying that communication from the defendants' solicitors was a written submission in support of an application by the defendants seeking dismissal of the action at 9.30 am on the next morning. Alternatively by par 39 of the submissions the defendants sought the making of a springing order, invoking the observations and approach of McKerrecher J in Capital Webworks Pty Ltd v Adultshop.Com Ltd [2008] FCA 423 [23].

19 However, that 7.17 pm email communication was sent well out of normal working day hours. Unsurprisingly, it did not come to the attention of the plaintiff's (pro bono) counsel and Mr Jebb until shortly before the hearing the following morning.

20 At the directions hearing, I ultimately declined to dismiss the matter completely. Instead I then made a springing order which granted the plaintiff another extension until 17 September 2013 to file its First Tranche of Security (subsequently the First Tranche of Security was provided in accord with my springing order timeline).

21 The only issue then is the question of the costs of that directions hearing, which I reserved on 17 July 2013 to a later directions hearing on 19 September 2013. I did that as I wanted to have some better insight towards whether or not my springing order would be engaged. In the end, it was not engaged.

Determination as to costs of the directions hearing of 17 July 2013

22 In the circumstances, having reviewed the parties' respective written submissions as to costs, I am of the view there should be no order as to costs.

23 In short, neither side covered itself with glory in what unfolded here. The plaintiff defaulted twice in terms of meeting a timeline which I had set for the provision of security and only sought to explain itself rather inadequately, at the very last minute. On the other hand, the defendants only indicated their dismissal stance at 7.17 pm, late on the evening of 16 July 2013, the day before the directions hearing. And it is correct that the overwhelming component of the defendants' written submissions (seeking dismissal), then provided, were not successful.

24 Had the parties conferred earlier and both acted more timeously and reasonably, then either a consensual extension or a reasonable springing order outcome might have been achieved. This would have obviated further unnecessary expenditures and may have avoided the court being troubled in the recess (ie precious judgment writing time) by an application for dismissal that ultimately failed.

25 Given degrees of fault on both sides no costs order is appropriate in respect of this directions hearing. No costs order is also appropriate for my determination of this application on the papers.