All Options Pty Ltd v Flightdeck Geelong Pty Ltd (No 2)
[2019] FCA 1344
•23 August 2019
FEDERAL COURT OF AUSTRALIA
All Options Pty Ltd v Flightdeck Geelong Pty Ltd (No 2) [2019] FCA 1344
File number: VID 977 of 2016 Judge: STEWARD J Date of judgment: 23 August 2019 Catchwords: PRACTICE AND PROCEDURE – where respondent was deregistered prior to the trial – where the deregistration was not disclosed to the Court – where deregistration was discovered after publication of reasons – where respondent was reinstated after publication of reasons – whether appropriate for the Court to order relief against the respondent on the statutory fiction that it retained corporate existence at the time of the trial pursuant to s 601AH of the Corporations Act 2001 (Cth)
COSTS – where notice of offer to compromise served on the respondents – where offer was not accepted – whether the applicant is entitled to indemnity costs – whether the Court should award costs on a lump sum basis
Legislation: Corporations Act 2001 (Cth) s 601AH
Federal Court Rules 2011 (Cth) r 25.14
Cases cited: All Options Pty Ltd v Flightdeck Geelong Pty Ltd [2019] FCA 588 Date of hearing: Determined on the papers Date of last submissions: 9 August 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 14 Counsel for the Applicant: Mr P Siva Solicitor for the Applicant HWL Ebsworth Counsel for the First Respondent: The first respondent did not appear Counsel for the Second Respondent: The second respondent was self-represented ORDERS
VID 977 of 2016 BETWEEN: ALL OPTIONS PTY LTD
Applicant
AND: FLIGHTDECK GEELONG PTY LTD
First Respondent
DARREN MATHEWS
Second Respondent
JUDGE:
STEWARD J
DATE OF ORDER:
23 AUGUST 2019
THE COURT ORDERS THAT:
1.The respondents pay the applicant damages in the sum of $1,440,730, with such liability to be joint and several.
2.The respondents pay the applicant interest in the sum of $227,783.36, with such liability to be joint and several.
3.The respondents pay the applicant’s costs before 11.00 am on 24 June 2017 on a party and party basis and thereafter on an indemnity basis, with such liability to be joint and several.
4.The applicant be awarded a lump sum for its costs instead of taxed costs.
5.In the absence of any agreement:
(a)within 21 days, the applicant file and serve an affidavit constituting a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS);
(b)within a further 21 days, the second respondent file and serve any Costs Response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-COSTS) ;
(c)that each of the applicant and the second respondent have leave to file with their respective Costs Summary and Costs Response, submissions which shall not exceed 3 pages in length; and
(d)in the absence of any agreement having been reached within a further 21 days, the matter of an appropriate lump sum figure for the applicant’s costs be referred to a Registrar for determination.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
STEWARD J:
On 30 April 2019, I delivered reasons in this matter but made no orders for final relief: All Options Pty Ltd v Flightdeck Geelong Pty Ltd [2019] FCA 588. In what follows I adopt the terminology from that judgment. In general terms, I found that both respondents (namely Mathews and the company identified by me as Flightdeck) had breached s 18 of the ACL.
Following the publication of reasons, it was discovered that prior to and throughout the hearing before me Flightdeck remained deregistered. This had never been disclosed to the Court by Mathews. Before me, Mathews said he did not know that Flightdeck had been deregistered although in his capacity as shareholder/director of that company he knew that he had previously applied for its deregistration. In my view that conduct was reprehensible. The Court should at least have been told about the application for deregistration.
At a mention following the delivery of my reasons for judgment, the applicant informed the Court that an application was on foot to reinstate Flightdeck. I decided to give the parties more time to permit this to take place. I also gave the parties (the applicant and Mathews; Flightdeck remained unrepresented) leave to file further submissions. Mathews subsequently emailed the Court wanting more time so that he could return to Melbourne and supply all of the material to his new solicitors on the record (Aughtersons Lawyers) and to seek their advice about what submissions he might make. I allowed this to happen. As it happens his one-page submission emailed to the Court on 9 August 2019 was prepared by Mathews personally (“9 August 2019 Email”). No explanation for this conduct, or for the failure of his solicitors to file submissions, was forthcoming.
The Court has been told that the Australian Securities and Investments Commission has reinstated Flightdeck. The applicant now presses for orders for the payment of damages and interest and for the Court to make certain orders as to costs, including a timetable for further submissions for an award of lump sum costs. It seeks these orders:
1.The respondents pay the applicant damages in the sum of $1,440,730, with such liability to be joint and several.
2.The respondents pay the applicant interest in the sum of $227,783.36 as at 25 June 2019, with such liability to be joint and several.
3.The respondents pay the applicant’s costs before 11 am on 24 June 2017 on a party and party basis and thereafter on an indemnity basis, with such liability to be joint and several.
4. The applicant be awarded a lump sum for its costs instead of taxed costs.
5.The applicant file and serve within 14 days any evidence upon which it wishes to rely on the amount of the lump sum to be ordered.
6.The respondents file and serve within a further 14 days any evidence upon which they wish to rely on the amount of the lump sum to be ordered.
(Errors in the original.)
In my view, now that Flightdeck has been reinstated, it will be appropriate for the Court to order relief against Flightdeck on the statutory fiction that it retained and retains corporate existence at the time of the trial of this matter. That follows from s 601AH(5) of the Corporations Act 2001 (Cth) which is in the following terms:
Effect of reinstatement
If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
Mathews did not otherwise submit that relief could not now be granted against Flightdeck. In his 9 August 2019 Email, he made a series of contentions as follows:
My responses to the applicant’s submissions are as follows:
1.The sum for damages claimed does not reflect anything that is noted in the judgement.
2.There is no sum for interest “inserted” and no justification for any proposed amount.
3.There is no sum for lump sum costs either on a party to party basis or an indemnity basis, and no justification for any proposed amount.
Items 1-3 notes:
•As to Orders 1 to 3, there is no warrant for orders that the liability of the respondents to damages, interest and costs to be on a joint and several basis. The applicant sued the respondents under multiple causes of action by its Amended Statement of Claim, none of which disclose any basis for a joint and several liability. Moreover, the relief sought by the applicant in the Amended Statement of Claim did not seek joint and several damages.
•The Court should simply award damages, interest and costs against the respondents at Orders 1 to 3 without the words “with such liability to be joint and several” in each order. There is no reason why the Court should elevate the applicant’s relief beyond that claimed, or which would ordinarily be awarded.
4.The Court should not award a lump sum of taxed costs in the absence of an order identifying the quantum of the costs to be awarded. That is because fairness dictates that the applicant inform the respondents of the basis of the claim, the quantum of costs claimed, and the evidence relied upon, with sufficient time to for the respondents properly to respond. It would be necessary for such an application to be accompanied by an affidavit verifying a report of a costs consultant based upon a bill of costs substantially in the form of a taxable bill, especially to the extent the costs are awarded on a party-party basis. In the absence of such an application and evidence, the respondents cannot determine whether they should properly resist the orders sought, or consent to them. The applicant has had ample time to file and serve such an application and supporting evidence since the Court’s decision was handed down and has chosen not to do so, the Court should decline to make Orders 4 to 6 sought by the respondent.
5.That conclusion is further supported by the proposed timeframe of 14-days for the respondents to file any evidence proposed at paragraph 6. As the applicant’s evidence will necessarily require a bill of costs as described above, the respondents would require significantly more time to respond. The time necessary for a costs consultant to review the bill and provide a report to the respondents is likely to be in the order of four months.
6.If contrary to the foregoing submission, the Court were minded to make lump sum costs orders as contemplated by Orders 4 and 5, the respondents seek in the alternative that the proposed Order 6 to be amended by replacing the term “14 days” with a term of “120 days”, and that a further order giving the respondents liberty to apply within 90 days for an extension of that time, and to file and serve affidavits in support thereof.
As I understand his submission, Mathews makes no real complaint about the quantification of the damages sought. The figure of $1,440,730 is simply the aggregate of the three amounts of damages that I found should be ordered ($1,362,500 and the trading losses of $28,756 and $49,474). The interest sought by the applicant was calculated in accordance with the Court’s specified rates. Save in only conclusionary terms, Mathews made no serious submission to the contrary concerning the interest to be paid. Orders should be made using the sums identified in the applicant’s draft proposed orders.
As to the complaint made that the order should not be expressed as one for liability to be joint and several, it is of no moment. I have found that both respondents are principally liable to pay the damages I have found to be owing, and thus also both principally liable to pay interest. The applicant will be entitled to recover all of the amount owing from either Mathews or Flightdeck or from both. In those circumstances, it is appropriate that I make an order that each respondent is jointly and severally liable to pay damages and interest.
The applicant sought an order for indemnity costs for the period from 11.00 am on 24 June 2017. This reflected the service upon the respondents of a Notice of Offer to Compromise in accordance with Pt 25 of the Federal Court Rules 2011 (Cth) (the “Rules”) on 22 June 2017. It contained an offer to settle on the basis that the respondents paid the applicant the sum of $800,000. That offer was not accepted and then lapsed after 14 days.
Rule 25.14(3) of the Rules provides:
If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:
(a)before 11.00 am on the second business day after the offer was served—on a party and party basis; and
(b) after the time mentioned in paragraph (a)—on an indemnity basis.
Mathews made no specific complaint about the applicant’s proposed order for indemnity costs. He did not deny the receipt of the Notice of Offer to Compromise, or that he had declined to accept it. I have examined the notice that was sent and I find that it complies with the Rules. In those circumstances, I find that the applicant in accordance with r 25.14(3) is entitled to the indemnity costs it seeks because it has obtained a judgment that is more favourable than the terms of the offer it made.
The applicant submitted that the Court should award costs on a lump sum basis. In his 9 August 2019 Email, Mathews contested this on the basis that he did not know the quantum of costs the applicant seeks. That submission is misconceived. The applicant proposes a timetable for the filing of evidence by each party concerning the lump sum to be awarded. When Mathews is served with that evidence he will know the quantum sought, and will have a fair opportunity to respond. In that respect, I observe that his solicitors wrote to the Court on 21 May 2019 in relation to the possibility that a lump sum might be ordered stating that Mathews did “not generally oppose such an order provided [he] is afforded the opportunity to file responding Submissions … once the costed figure has been supplied”. That opportunity will be given.
Mathews also complained that he needed more than 14 days (as proposed by the applicant) to provide his response. He wanted instead 120 days with liberty to apply within 90 days for an extension of time to file and serve affidavits. In my view, that request is extravagant. This matter commenced in this Court in 2016. Reasons were delivered over three months ago. Mathews has been on notice that a lump sum award was being sought by the applicant since May 2019. I note that neither he nor his solicitors have responded to repeated attempts made by the applicant to discuss the form of orders that should be made. I reject his request for additional time, save that I will grant him an additional seven days to file his Costs Response (see below).
Not being seriously opposed, I will make an order for an award of costs on a lump sum basis. However, I decline to make the particular form of orders sought by the applicant for a timetable for each of the applicant and Mathews to file evidence on the question of costs. The Court has a practice note, Costs Practice Note (GPN–COSTS), which addresses the procedure for the awarding of a lump sum for costs at paras 4.10 to 4.20. In my view, that procedure should be followed and I will make orders to that effect. In particular, I note that the Costs Practice Note requires the parties to discuss between them the orders that should be made and to co-operate with each other in a practical way. Paragraph 4.18 of the Costs Practice Note is in these terms:
4.18During the lump-sum costs procedure, including in advance of the costs hearing, the parties must at all times adopt a practical approach and co-operate with each other. This includes a costs party promptly responding to any sensible query raised by another costs party arising from the material filed during the procedure which, if clarified, may narrow the issues in dispute or which, if left unclarified, may make the lump-sum costs process less efficient.
The Court expects that the Costs Practice Note procedure be followed.
For the foregoing reasons, I will make the following orders:
(1)The respondents pay the applicant damages in the sum of $1,440,730, with such liability to be joint and several.
(2)The respondents pay the applicant interest in the sum of $227,783.36, with such liability to be joint and several.
(3)The respondents pay the applicant’s costs before 11.00 am on 24 June 2017 on a party and party basis and thereafter on an indemnity basis, with such liability to be joint and several.
(4)The applicant be awarded a lump sum for its costs instead of taxed costs.
(5)In the absence of any agreement:
(a)within 21 days, the applicant file and serve an affidavit constituting a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS);
(b)within a further 21 days, the second respondent file and serve any Costs Response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-COSTS) ;
(c)that each of the applicant and the second respondent have leave to file with their respective Costs Summary and Costs Response, submissions which shall not exceed 3 pages in length; and
(d)in the absence of any agreement having been reached within a further 21 days, the matter of an appropriate lump sum figure for the applicant’s costs be referred to a Registrar for determination.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward. Associate:
Dated: 23 August 2019
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