3 Property Group 13 Pty Ltd (in liq) v 3 Property Group 17 Pty Ltd (No 2)
[2021] FCA 1371
•5 November 2021
FEDERAL COURT OF AUSTRALIA
3 Property Group 13 Pty Ltd (in liq) v 3 Property Group 17 Pty Ltd (No 2) [2021] FCA 1371
File number(s): NSD 953 of 2021 Judgment of: HALLEY J Date of judgment: 5 November 2021 Catchwords: COSTS – costs of interlocutory application to vacate an order extending the operation of a caveat – where order made in interlocutory hearing that the respondent pay the applicants’ costs of and incidental to the hearing – where respondents applied for an order that costs be each party’s costs in the cause – discretionary power to award costs –whether principles relevant to the award of costs for interlocutory injunctions are applicable to an interlocutory challenge to the continuation of a caveat – whether order that the applicant’s costs be costs in the cause is an appropriate moderation of the general principle in r 40.04(a) of the Federal Court Rules 2011 (Cth) that costs follow the event – where interlocutory hearing preserved the status quo pending final determination – existing costs order vacated – applicants’ costs are costs in the cause Legislation: Federal Court of Australia Act 1976 (Cth) s 43
Federal Court Rules 2011 (Cth) r 40.04
Cases cited: Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (unreported, Supreme Court of New South Wales, Young J, 24 July 1985)
His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142
International Computer Network Pty Ltd v Lumos International Pty Ltd [2018] NSWSC 1793
InterPharma Pty Ltd v Hospira, Inc (No 4) [2018] FCA 45
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865
Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd (No 2) (2020) ACTSC 357
Summers v Repatriation Commission (No 2) [2015] FCAFC 64
Vantage Holdings Pty Ltd v Huang (No 2) (2015) 232 FCR 556; [2015] FCA 185Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 25 Date of last submission/s: 8 October 2021 Date of hearing: Determined on the papers Counsel for the Plaintiffs: Mr MA Karam with Mr QM Noakhtar Solicitor for the Plaintiffs: McInnes Wilson Lawyers Counsel for the Defendants: Mr D Robens Solicitor for the Defendants: Harrington Hall Lawyers ORDERS
NSD 953 of 2021 BETWEEN: 3 PROPERTY GROUP 13 PTY LTD (IN LIQUIDATION) ACN 621 691 932
First Applicant
STEPHEN JOHN HUNDY IN HIS CAPACITY AS LIQUIDATOR OF 3 PROPERTY GROUP 13 PTY LTD (IN LIQUIDATION) ACN 621 691 932
Second Applicant
AND: 3 PROPERTY GROUP 17 PTY LTD ACN 623 493 952
First Respondent
GARY JAMES KELLY
Second Respondent
JAIME CHARLES FARRELLY
Third Respondent
3 PROPERTY GROUP HOLDINGS 2 PTY LTD ACN 614 453 548
Fourth RespondentLIFESTYLE HOMES (ACT) PTY LTD ACN 144 578 996
Fifth Respondent
ORDER MADE BY:
HALLEY J
DATE OF ORDER:
5 NOVEMBER 2021
THE COURT ORDERS THAT:
1.Order 6 made on 21 September 2021 in these proceedings be vacated.
2.The applicants’ costs of and incidental to the hearing on 21 September 2021 be costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
HALLEY J:
On 21 September 2021, I made an order that the respondents pay the applicants’ costs of and incidental to the hearing on that date of the respondents’ unsuccessful application to vacate an order made by Katzmann J extending the operation of a caveat (Caveat) over a town house unit at 58 Jacka Crescent, Campbell in the Australian Capital Territory (Property). I also made orders on that date providing that if a party sought a different costs order, it could do so by filing written submissions.
Both the applicants and the first respondent have filed written submissions seeking alternative costs orders.
The first respondent seeks an order, in lieu of the costs order that I made on 21 September 2021, that each party’s costs should be its costs in the cause.
The applicants oppose any variation to the costs order that the respondents pay the applicants’ costs of and incidental to the hearing on 21 September 2021.
For the reasons that follow, having now had the benefit of the parties’ submissions on costs, I have concluded that the existing costs order should be vacated and that in its place I should make an order that the applicants’ costs be costs in the cause.
LEGAL PRINCIPLES
The Court has a broad discretionary power to award costs pursuant to s 43(2) of the Federal Court of Australia Act 1976 (Cth) (Act). The discretion must be exercised judicially, not arbitrarily or capriciously, having regard to the relevant principles and the justice of the case in all the circumstances and cannot be exercised on grounds unconnected with the litigation: Summers v Repatriation Commission (No 2) [2015] FCAFC 64 (Summers) at [13]-[14] (Kenny, Murphy and Beach JJ), citing Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) [1979] FCA 143; (1979) 28 ALR 201 at 206-7 (Fisher J); InterPharma Pty Ltd v Hospira, Inc (No 4) [2018] FCA 45 (InterPharma) at [8] (Kenny J).
In the ordinary course, in the absence of special circumstances justifying some other order, the general rule is that costs will be awarded to the successful party, that is, costs will follow the event: Summers at [14]; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865 (Ruddock) at [11] (Black CJ and French J); Vantage Holdings Pty Ltd v Huang (No 2) (2015) 232 FCR 556; [2015] FCA 185 (Vantage Holdings) at [12] (Collier J).
Rule 40.04(a) the Federal Court Rules 2011 (Cth) (FCR) provides that:
If no order for costs is made on an interlocutory application or hearing, the costs of the application or hearing:
(a) if an order is made in favour of any party—follow the event; or
(b) if no order is made in favour of any party—are taken to be costs in the cause of the successful party to the proceeding.
Costs orders in favour of parties that have succeeded in obtaining orders on an interlocutory basis, consistently with the default positon, are commonly made in circumstances where a party has succeeded on a discrete issue, such as the determination of a separate question in advance of a final hearing, although each case will turn on its particular facts and circumstances: Taylor (liquidator), in the matter of Heading Contractors Pty Ltd (in liq) v Heading (No 2) [2021] FCA 925 at [18] (Charlesworth J).
There is, however, a distinction between an interlocutory order that disposes of a separate question or a discrete issue in advance of a final hearing and an interim injunction that is obtained for the purpose of preserving the status quo pending a final determination of an applicant’s cause of action. In the latter case, the Court has not conclusively determined any controversy between the parties, it has only made a preliminary assessment of the strength of an applicant’s cause of action and had regard to the balance of convenience pending trial: Australian Securities and Investments Commission, in the matter ofWhitebox Trading Pty Ltd v Whitebox Trading Pty Ltd (No 2) [2017] FCA 385 at [6] (Gleeson J).
An order that each party’s costs be costs in the cause or that an applicant’s costs be costs in the cause following the determination of an application for an interlocutory injunction has been described as the “usual order” and “a shorthand form of giving effect to the principles that govern the court’s discretion … where there are no countervailing or different circumstances to warrant the exercise of the discretion in a different manner”: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142 (Metropolitan Petar) at [27] (Beazley, Giles and Hodgson JJA); Boscolo v TCN Channel Nine Pty Ltd (No 2) (unreported, Supreme Court of New South Wales, Young J, 28 April 1994) at [20].
The following rationale for a costs in the cause order was advanced by the New South Wales Court of Appeal in Metropolitan Petar at [21]:
The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court’s focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.
I stated in RB (Hygiene Home) Australia Pty Ltd v Henkel Australia Pty Ltd (No 2) [2021] FCA 1194 at [14], that the usual but not invariable practice is that, in the absence of any specific disentitling conduct, the appropriate costs order in circumstances in which an applicant has been successful in obtaining an interlocutory injunction is that costs be the applicant’s costs in the cause, rather than each party’s costs in the cause, citing Metropolitan Petar at [32]; Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (unreported, Supreme Court of New South Wales, Young J, 24 July 1985) (Devereaux) at 2; Ausino International Pty Ltd v Apex Sports [2006] NSWSC 1119 at [55]-[56] (Campbell J); Novartis AG v Hospira Pty Limited (No 2) [2012] FCA 1113 at [10] (Yates J); Dincel Construction System Pty Limited v AFS Systems Pty Ltd [2017] FCA 262 (Nicholas J) subsequent to the delivery of reasons as noted in Dincel Construction System Pty Limited v AFS Systems Pty Ltd (No 3) [2017] FCA 919 at [3] (Nicholas J); cf InterPharma at [11]-[12] (Kenny J); Sigma Pharmaceuticals (Australia) Pty Ltd (ACN 004 118 594) v Wyeth (2009) 81 IPR 339; [2009] FCA 595 (Sundberg J); James v Commonwealth Bank of Australia (No 2) [2015] FCA 599 at [20] (Katzmann J) (but the order in that case for costs to be each party’s costs in the cause was made because of late amendments by the successful applicant where an earlier order was made that costs follow the event).
SUBMISSIONS
The first respondent submits, relying on the reasoning of Ward CJ in Eq in International Computer Network Pty Ltd v Lumos International Pty Ltd [2018] NSWSC 1793 (International Computer Network) at [94]-[96], that the usual rule in awarding costs in relation to a challenge to the extension of a caveat, absent any disentitling conduct, was that all parties’ costs should be costs in the cause.
The first respondent otherwise seeks to rely on what it describes as “Facts relevant to costs”. These facts principally comprise a recitation of correspondence between the second applicant (Liquidator) and the solicitors for the first respondent between 18 January 2021 and 17 September 2021. They include an allegation that a contract to sell the Property dated 13 April 2021 was rescinded as a result of the Caveat. The specific relevance of these alleged facts was not made clear. In a broad sense, I understand that they were directed at establishing the absence of any disentitling conduct on the part of the first respondent. It was not suggested that the alleged facts were sought to be relied upon to establish any disentitling conduct on the part of the applicants.
The applicants submit that the correspondence identified by the first respondent as relevant to a re-exercise of the costs discretion was not canvassed at the hearing nor referred to in the respondents’ written submissions, and was therefore not the subject of any findings in the judgment. They submit that, in substance, the first respondent seeks to reagitate matters that were the subject of evidence and submissions at the hearing and about which findings were made.
The applicants otherwise submit, relying on the reasoning of Collier J in Vantage Holdings at [12] and r 40.04(a) of the FCR, that the default position for interlocutory applications in the Federal Court is that costs follow the event. The applicants submit that the first respondent’s reliance on Ward CJ in Eq’s reasoning in International Computer Network is misplaced because, first, it concerned a successful application by a defendant to remove a caveat in circumstances where the plaintiff had declined to proffer an undertaking as to damages, and second, the Supreme Court of New South Wales has a different default regime for awarding interlocutory costs pursuant to r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW).
CONSIDERATION
Contrary to my initial view, I now consider that for the following reasons, the appropriate costs order is that the applicants’ costs be costs in the cause.
First, I accept that the principles relevant to the award of costs following the grant of an interlocutory injunction are generally applicable to an award of costs following an unsuccessful challenge to the continuation of a caveat pending a final determination of the claims advanced by the party seeking to maintain the caveat: see International Computer Network at [94]-[96] (Ward CJ in Eq); Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd (No 2) [2020] ACTSC 357 (McWilliam AsJ) at [16]-[17] and [26].
Second, I do not consider that, in circumstances where an applicant successfully maintains a caveat and in the absence of any disentitling conduct by a respondent, making an order that costs follow the event is consistent with the principles that I have outlined above. I do not consider that the respondent here engaged in any conduct in relation to the hearing of the interlocutory application that would cause me to depart from those principles. Further, declining to make an order that costs follow the event recognises that, ultimately, the Liquidator may not succeed in his voidable transactions case.
Third, given that the applicants were entirely successful at the interlocutory hearing in establishing that the balance of convenience favoured a continuation of the Caveat, I consider that the more appropriate order is that the applicants’ costs be costs in the cause, rather than an order that each parties’ costs be costs in the cause. An order in those terms recognises that the applicants have been wholly successful in maintaining the Caveat, but at the same time recognises that there has not yet been any substantive determination of the voidable transaction claims sought to be advanced by the Liquidator in the proceedings.
I acknowledge that a different approach was taken by Ward CJ in Eq in International Computer Network, but the consideration of an appropriate costs order must have regard to the particular circumstances of a case, the applicable practice and procedure rules of the Court and the interests of justice. The costs order in International Computer Network was made in circumstances where the party seeking to maintain the caveat did not proffer an undertaking as to damages, the Court was not satisfied that the balance of convenience favoured a continuation of the caveat and there was no equivalent rule to r 40.04(a) of the FCR.
As explained above, the general rule in the Federal Court is that a successful party recovers its costs, even on an interlocutory application, by reason of r 40.04(a) of the FCR. I accept that the interests of justice may require a moderation of that rule in circumstances where either an interlocutory injunction is obtained, or, relevantly for present purposes, the Court is satisfied that the balance of convenience favours the continuation of a caveat pending a final hearing. In my view, an order that a successful applicant’s costs be costs in the cause is a sufficient qualification to the usual order. If the applicant is ultimately unsuccessful it will lose the benefit of its costs order. An order that each parties’ costs be costs in the cause, particularly in circumstances where the continuation of the Caveat is the subject of a significant challenge, does not, in my view, give sufficient weight to the principle that costs follow the event reflected in r 40.04(a).
It is necessary to give due weight to the success achieved by the applicants, to take into account that the applicants were at risk of an adverse costs order in the event that they failed to maintain the Caveat and to be mindful that the specific principles and considerations relevant to the continuation of the Caveat differ from the principles and considerations relevant to the final determination of the claims sought to be advanced by the Liquidator. The Court is not in a position to adjudicate on the ultimate outcome of the proceedings at this stage. Rather, the Court’s focus is on other considerations, particularly whether the Caveat ought to be maintained on the balance of convenience. A failure by the Liquidator to succeed at a final hearing does not necessarily carry with it any necessary implication that the maintenance of the Caveat pending the final determination of the Liquidator’s substantive claims was not “justified”. This is not least because the interlocutory hearing was concerned with preserving the status quo, not with the final determination of the Liquidator’s claims. Further, this was in circumstances where the respondents did not seek to contend that the applicants did not have a prima facie case and had not otherwise demonstrated the existence of a serious question to be tried.
DISPOSITION
For the reasons outlined above, the existing costs order should be vacated and an order should be made that the applicants’ costs be costs in the cause.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. Associate:
Dated: 5 November 2021
0
19
2