Acumen Finance Pty Ltd v Larapinta Project Pty Ltd (Costs)

[2023] VCC 2039

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

 Revised
Not Restricted
 Suitable for Publication

Case No. CI-20-02985

Acumen Finance Pty Ltd (ACN 617 819 217)	Plaintiff
v
Larapinta Project Pty Ltd (ACN 611 352 106) & Ors	Defendants

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JUDGE:	Judicial Registrar Muller
WHERE HELD:	Melbourne
DATE OF HEARING:	22 August 2023
DATE OF RULING:	8 November 2023
CASE MAY BE CITED AS:	Acumen Finance Pty Ltd v Larapinta Project Pty Ltd & Ors (Costs)
MEDIUM NEUTRAL CITATION:	[2023] VCC 2039

RULING
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Subject:COSTS – NON-PARTY COSTS ORDER – INDEMNITY COSTS

Catchwords:              Whether non-party costs order ought to be made – Whether costs should be paid on a standard or indemnity basis

Legislation Cited:      County Court Act 1958 (Vic); County Court Civil Procedure Rules 2018

Cases Cited:M C Wholesaling Pty Ltd & Anor v Che & Ors (No 5) [2023] VSC 267; Gdanski v Palms Court Management Pty Ltd (2017) VSCA 348; Knight v FP Special Assets Ltd (1992) 174 CLR 178; Bakers Investment Group (Australia) Pty Ltd v Caason Investment Pty Ltd (No 3) [2015] VSC 644; JAB Nominees (Aust) Pty Ltd v Auswild [2020] VSC 731; Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2004] QSC 47; Aljade and MKIC v OCBC [2004] VSC 351; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248

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APPEARANCES:	Counsel	Solicitors
For the Defendants	S V Palmer	Oakley Thompson
For the Non-Party	--	--

RULING:

Introduction

1The plaintiff, Acumen, claimed finance broking fees for arranging loans for the defendants.  The defendants asserted that they had paid the plaintiff in full for the invoices rendered by payment from the loan funds in accordance with their agreement with Acumen.

2Twelve months after those transactions were completed, Acumen issued new invoices seeking additional fees from the same loans, asserting that the fees were payable at the rate of 3% of the loan amounts, rather than the 2% to which it had agreed, invoiced and received payment 12 months earlier). When those invoices were not paid, Acumen, amongst other things, issued this proceeding.

3Prior to issuing this proceeding, Acumen lodged a caveat over land owned by the second defendant claiming an interest pursuant to an alleged agreement with the second defendant.  The defendants applied to the Supreme Court of Victoria for orders that the caveat be removed.  At the last moment, Acumen withdrew the caveat.  Her Honour Incerti J ordered that Acumen pay the costs of the application on an indemnity basis because she found Acumen had lodged the caveat to pressure the second defendant into paying Acumen.  Her Honour found there was no evidence that the amount claimed was owed and that Acumen had been paid in full for its services.  The costs were subsequently taxed but, despite demand, Acumen has not paid.  Despite that, Acumen continued with these proceedings.

4Also prior to issuing this proceeding, Acumen lodged a caveat over properties owned by the first and second defendants in New South Wales claiming an interest pursuant to finance broking agreements.  As a result, the defendants were forced to make an application in the Supreme Court of New South Wales for orders that the caveats be removed.

5In the New South Wales proceeding, Acumen agreed to remove the caveats, provided that an amount of $65,000.00 was paid into trust pending the hearing and determination of this proceeding.  The amount paid into trust was returned to the defendants in 2022.  His Honour Darke J ordered that the costs of the New South Wales proceeding be determined after the determination of this proceeding.

6As if that was not enough, Acumen also commenced a second proceeding in this Court (proceeding No. CI-21-02782) seeking to enforce personal property security interests it had registered on the Personal Properties Securities Register against the defendants, again to secure the commissions it falsely alleged it was owed.  A few months after issuing, it sought to amend its claim to include an amount of over $6.6million for commission from a loan offer that was never accepted.  That amendment was refused.

7Ultimately, in the second County Court proceeding, his Honour Judge Macnamara dismissed Acumen’s claim and ordered that they remove the security interests registered against the defendants’ assets.  His Honour also ordered that the defendants’ costs in that proceeding be costs in the cause of this proceeding.

8On 15 May 2023, I dismissed the plaintiff’s claim against the defendants and ordered the plaintiff pay the defendants’ costs of this proceeding and the costs of the second proceeding.

9On 18 May 2023, the Queensland Supreme Court ordered that Acumen be wound up.

10The defendants now seek a non-party costs order pursuant to s78A of the County Court Act 1958 (Vic) against Nathan Patrick Daly. They rely on the materials set out in Annexure A.

11Daly is, and was at all material times, the sole director and secretary of Acumen.  The sole shareholder of Acumen is Seven Mountains Capital (HK) Limited, a company registered in Hong Kong.  Daly is the sole shareholder of Seven Mountains Capital. 

12I find that all the way through this proceeding, Acumen was controlled by its sole director and secretary, Daly.  There is no one else who has a say in what Acumen does.

13Daly was served on 3 August 2023 with, amongst other things, a copy of the summons and the Vagg affidavit dated 10 July 2023.  Daly did not file any documents in opposition to the defendants’ application and did not appear at the hearing.

14The defendants say that Daly should pay the defendants’ costs of and incidental to this proceeding, and the second proceeding including reserved costs, on an indemnity basis; and that all previous orders that the plaintiff pay costs on a standard basis should be varied to provide that they be paid by Daly on an indemnity basis.

15For the reasons below, I am ordering that Daly pay the defendants’ costs of this proceeding and proceeding CI-21-02782 on an indemnity basis.  I am leaving unchanged the existing costs orders made against the plaintiff.

Issues

A. Costs against a non-party

A.1          When will costs be awarded against a non-party?

16Section 78A of the County Court Act 1958 provides that the costs of and incidental to all proceedings are in the discretion of the Court.

17The Court may determine by whom and to what extent the costs are to be paid.[1]

[1] M C Wholesaling Pty Ltd & Anor v Che & Ors (No 5) [2023] VSC 267.

18The making of an order for costs against a non-party is an exceptional course for a court to take.[2] 

[2] Gdanski v Palms Court Management Pty Ltd (2017) VSCA 348 at [1].

19“Exceptional” in this context means no more than outside the ordinary run of cases.  The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order.[3]

[3] Knight v FP Special Assets Ltd (1992) 174 CLR 178 (“Knight”) at [12].

20Although there are recognised circumstances and established categories of cases where a court has exercised its discretion to make a non-party costs order,[4] the discretion is unfettered.  Each case must depend on its own facts, and no restriction should be placed upon the court’s discretion other than it is to be exercised judicially.  There is no onus of proof.[5]

[4] For example, the specific category of cases identified in Knight.

[5] Bakers Investment Group (Australia) Pty Ltd v Caason Investment Pty Ltd (No 3) [2015] VSC 644 at [13] & [16].

21However, to enliven the discretion as against the director of a company which is a named party to the proceeding, something more is required than the director merely assisting the corporate litigant in the conduct of litigation, which may be in accordance with his or her fiduciary duties. The “something more” may be:

(a)   a director giving instructions to pursue a claim or defence which has no real prospects of success;

(b)   the institution of a proceeding based on fraud without reasonable grounds; or

(c)   the continuation of such a proceeding based on a “stubbornly and totally unreasonably” held belief. [6]

[6] JAB Nominees (Aust) Pty Ltd v Auswild [2020] VSC 731 at 273.

22The requirement for “something more” remains even if the person was the corporation’s sole, principal, or ultimate decision maker in relation to the litigation.[7]

[7] Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2004] QSC 47 at [12]–[13].

A.2          Is this case exceptional?

23The defendants submit that Daly brought this proceeding to extract commissions from the defendants to which Acumen was not entitled and that he knew this to be true from the outset. 

24While I am cognisant of the fact that there was not a trial or findings of fact made in this proceeding, it is clear on the evidence before me, or from inferences drawn from that evidence, that:

(a)   Acumen’s claim was based, in substantial part, upon an alleged oral conversation with Rosario Pelligra.  Daly gave contradictory versions of the alleged conversation in an email dated 4 May 2020, an affidavit he swore on 8 June 2020 and a letter from Acumen’s solicitors on 8 June 2020.

(b)   The letters of offer and the loan documentation directly contradicted Daly’s claim that Acumen was entitled to brokerage fees of 3%.  In fact, the documentation drawn by Acumen’s solicitors referred to a rate of 2% and set out the precise dollar amount of the fees and commission which Acumen agreed it would charge.  Acumen was paid in full at the time of the loans on the 2% rate.  It was not until a year later that Acumen asserted further amounts were owing.

(c)   Acumen and, I infer, Daly, failed to give proper and timely instructions to the various legal representatives that acted for Acumen.  This caused Acumen to breach court orders which resulted in delay, the vacation of trial dates, significant inconvenience to the Court and the defendants, and wasted costs.

(d)   Acumen was wound up in insolvency after failing to pay costs ordered against it in proceedings in another court.  Acumen’s liquidator has reported that Daly failed to co-operate with him and that there is unlikely to be any funds available to pay its creditors which include parties that Acumen was ordered to pay costs in a raft of claims it made against its former clients.  It follows that Acumen will be unable to pay the costs orders made against it in this proceeding.

25Further:

(a)   In December 2020, Acumen, without warning, or proper basis, registered personal property security interests on the Personal Property Securities Register against the defendants, apparently for the purpose of obtaining payment from the defendants of the commissions Acumen falsely alleged it was owed.  Acumen refused to withdraw the registered security interests and instead commenced the second proceedings to enforce those personal property security interests.  Relatively shortly after that proceeding commenced, his Honour Judge Macnamara made orders that Acumen forthwith remove the security interests and otherwise dismissed the second proceeding with the costs of the defendants ordered to be costs in the cause of this proceeding. 

(b)   On 3 February 2023, a Creditors’ Statutory Demand was served on Acumen for unpaid costs ordered against Acumen in another proceeding.  Acumen did not comply with the statutory demand and winding up proceedings were commenced against Acumen in the Supreme Court of Queensland.  Acumen did not disclose any of this to me at a directions hearing on 17 April 2023.  Instead, Acumen’s solicitor informed the Court that Acumen still wished to prosecute the proceeding.  Unsurprisingly, given its previous conduct, and given that, very shortly after 17 April, it was placed in external administration, Acumen did not comply with any of the orders I made on 17 April 2023.

(c)   When the proceeding returned before the Court on 15 May 2023, Acumen failed to appear and did not inform the Court or the defendants that it would not be appearing, again displaying a contumelious attitude towards the Court.

26The defendants submit that Daly, as the controlling mind, caused Acumen to be in breach of orders for discovery, the filing of witness statements and the payment of the setting down for trial fees.  They submit that Daly failed to give proper instructions to his own solicitors, caused Acumen to make claims for fees to which it was not entitled, tried to amend Acumen’s claims to claim over $6m for fees to which it was not entitled, and pretended that he intended to run the plaintiff’s case despite being aware that Acumen was being placed into liquidation.

27As if that was not enough, during the litigation, Daly communicated directly with the defendants and their legal representatives, making baseless and defamatory allegations of fraud, money laundering, and criminal conduct. Daly sent copies of his correspondence to the Australian Federal Police, legal profession regulatory bodies, other legal practitioners, the Australian Taxation Office and the Environmental Protection Agency.

28Daly also, at various stages, threatened to sue the defendants’ legal practitioners and to report them to various authorities if they did not comply with his demand that they cease acting for the defendants.

29I accept the defendants’ submission that Acumen’s conduct of the proceeding was deplorable.  This was not a case run in the ordinary manner of litigation.  It was an exceptional case. 

A.3Is there “something more” present that warrants Daly, as a director, being personally liable?

30Based on the circumstances and events described above, and the fact that he was the only person controlling Acumen, Daly:

(a)   gave instructions to pursue claims that had no proper basis and/or no real prospects of success;

(b)   must have known, and most likely had been given advice by his solicitors and counsel, that the claims he was causing Acumen to bring did not have a proper basis and/or had no real prospect of success;

(c)   continued with the proceeding based on a “stubbornly and totally unreasonably” held belief as to the entitlement to do so, even as winding up proceedings had commenced.

31I conclude from these matters that there is “something more” present that warrants Daly being personally liable for the costs of the proceeding.

A.4          Conclusion

32This is an exceptional case.  In the interests of justice, I am compelled to exercise my discretion to make Daly personally liable for the defendants’ costs of the proceeding.

B. Should costs be ordered against Daly on an indemnity basis?

B.1          When will costs be ordered on an indemnity basis?

33Generally, the Court will order costs to be taxed on the standard basis.[8] The discretion to make a special costs order is an unlimited one, though it must be exercised judicially and not unreasonably, and the circumstances should be “special”.[9]

[8] County Court Civil Procedure Rules 2018 (“Rules”) r63A.31 (see r63A.30 regarding the meaning of “standard basis”).

[9] Aljade and MKIC v OCBC [2004] VSC 351 at [10].

34Special circumstances can include where:[10]

(a)   there is evidence of particular misconduct that causes loss of time to the court and to other parties;

(b)   the fact that the proceedings were commenced or continued for some ulterior motive or with wilful disregard of known facts or clearly established law; and

(c)   the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.

[10] See Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248.

B.2          Should costs be ordered against Daly on an indemnity basis?

35I am satisfied that Daly, as a sole director of Acumen, failed to give timely instructions to Acumen’s solicitors on multiple occasions, which caused Acumen to be in breach of Court orders, the prolonging of the proceeding, the wasting of Court time and the defendants incurring extra costs.

36I accept the defendants’ submission that Daly caused Acumen to commence the proceeding by making false claims to wrongfully extract commission to which Acumen was not entitled, lodge baseless caveats, lodge baseless personal security interests and vex and harass the defendants who had paid Acumen in full and were not indebted to it.  Daly clearly commenced and continued both this proceeding and proceeding CI-21-02782 in wilful disregard of the known facts.

37Therefore, I exercise my discretion to award indemnity costs in this proceeding.  The appropriate costs order should be that Daly pay the costs of the proceeding, and proceeding CI-21-02782, on an indemnity basis. 

C. Is the Court required to “unmake” its previous order as to costs against the company on a standard basis to order costs against Daly on an indemnity basis?

38In my opinion, the costs order I am making against Daly is separate to the costs order made against Acumen.  It is based on separate and different considerations.  To make these costs orders, it is not necessary to disturb the orders that have previously been made against Acumen.

39I also note, for completeness, that the orders I am making against Daly include orders in respect of proceeding CI-21-02782.  In my view, to do so falls within the scope of the order made by his Honour Judge Macnamara that the costs of that proceeding be costs in the cause of this proceeding.

Conclusion and orders

40For the forgoing reasons, I consider that it is in the interests of justice for there to be a costs order made against Daly on an indemnity basis.

41Accordingly, I order that:

Nathan Daly pay the defendants’ costs of this proceeding (including the defendants’ costs of its summons dated 10 October 2023) and proceeding CI-21-02782 on an indemnity basis.

Annexure A

The defendants’ application was supported by:

(a)   the affidavits of Julian Michael Vagg, solicitor for the defendants, sworn 14 April 2023, 10 July 2023 and 18 August 2023;

(b)   the affidavit of service of Melinda Ann Reece sworn 18 August 2023; and

(c)   written submissions dated 16 August 2023.