Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd
[2005] WASC 189 (S)
•23 AUGUST 2005
ALPHA WEALTH FINANCIAL SERVICES PTY LTD & ORS -v- FRANKLAND RIVER OLIVE COMPANY LTD [2005] WASC 189 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 189 (S) | |
| Case No: | CIV:1757/2005 | 18, 23 AUGUST & 19 OCTOBER 2005 | |
| Coram: | HASLUCK J | 23/08/05 | |
| 19/10/05 | |||
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application for costs allowed | ||
| B | |||
| PDF Version |
| Parties: | ALPHA WEALTH FINANCIAL SERVICES PTY LTD (ACN 081 560 349) SAXBY BRIDGE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 057 915 312) SAXBY BRIDGE FINANCIAL PLANNING PTY LTD (ACN 073 889 979) JEFFREY JOSEPH BRAYSICH FRANKLAND RIVER OLIVE COMPANY LTD (ACN 089 521 997) |
Catchwords: | Practice and procedure Application for interim injunction Application for costs by successful party Liability of solicitors for costs Effect of new Practice Direction as to costs Issue as to retrospectivity Practice Direction held to have retrospective effect |
Legislation: | Rules of the Supreme Court 1971 (WA), O 66 r 5 |
Case References: | Galvin v Forests Commission of Victoria [1939] VLR 284 Maxwell v Murphy (1957) 96 CLR 261 Ridehalgh v Horsefield [1994] Ch 205 Rodway v The Queen (1990) 169 CLR 515 Fiduciary Ltd v Morningstar Research Pty Ltd [2001] NSWSC 1087 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 19 OCTOBER 2005 FILE NO/S : CIV 1757 of 2005 BETWEEN : ALPHA WEALTH FINANCIAL SERVICES PTY LTD (ACN 081 560 349)
- SAXBY BRIDGE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 057 915 312)
SAXBY BRIDGE FINANCIAL PLANNING PTY LTD (ACN 073 889 979)
JEFFREY JOSEPH BRAYSICH
Plaintiffs
AND
FRANKLAND RIVER OLIVE COMPANY LTD (ACN 089 521 997)
Defendant
(Page 2)
Catchwords:
Practice and procedure - Application for interim injunction - Application for costs by successful party - Liability of solicitors for costs - Effect of new Practice Direction as to costs - Issue as to retrospectivity - Practice Direction held to have retrospective effect
Legislation:
Rules of the Supreme Court 1971 (WA), O 66 r 5
Result:
Application for costs allowed
Category: B
Representation:
Counsel:
Plaintiffs : Mr J C Giles
Defendant : Ms H H Htin
Solicitors:
Plaintiffs : Solomon Brothers
Defendant : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Galvin v Forests Commission of Victoria [1939] VLR 284
Maxwell v Murphy (1957) 96 CLR 261
Ridehalgh v Horsefield [1994] Ch 205
Rodway v The Queen (1990) 169 CLR 515
Case(s) also cited:
Fiduciary Ltd v Morningstar Research Pty Ltd [2001] NSWSC 1087
John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503
(Page 3)
1 HASLUCK J: This is an application by the defendant company, Frankland River Olive Company Ltd, for orders as to the costs arising out of an application made by the defendant for an interim injunction.
2 The background to the application before me is that the defendant had applied for an injunction restraining the plaintiffs from retaining Mr Martin Bennett and the law firm with which he is associated, Bennett & Co, from continuing to act for the plaintiffs in these proceedings.
3 The application made by the defendant came before me on 18 August 2005. Evidentiary materials were provided by the parties to the matter. On 23 August 2005 I delivered written reasons for judgment in which I referred to the history of the matter and set out the circumstances giving rise to the application for a restraining order.
4 There is no need for me to repeat everything that was said in my written judgment. It will be sufficient to note for present purposes that in the subject proceedings the plaintiffs had challenged the entitlement of the defendant company to claim certain fees. These fees were said to be payable pursuant to provisions in the scheme now known as the Preston Vale Managed Investment Scheme.
5 In the course of my judgment I noted that, from the outset, the scheme made provision for the recovery of additional fees from investor/growers. Mr Bennett played an active role both as a director of the managerial company and as a legal adviser to the subject Scheme in making provision for the recovery of fees. He was still in office as a director when steps were taken by the defendant's predecessor to impose additional fees.
6 I noted also that, according to the decided cases, Mr Bennett's fiduciary duties as a lawyer associated with the creation of the scheme were underpinned by an overriding duty of loyalty to the investors/growers; that is, the parties who were operating within the framework of the scheme that he had helped to set up.
7 My judgment refers to a contention made on behalf of the plaintiffs, and on behalf of Bennett & Co, that the passage of time had distanced Mr Bennett from the present controversy. It was said that there was no conflict of interest between what he was now seeking to achieve as a legal adviser to one of the parties involved in this litigation and his former role as a person involved in the creation of the scheme.
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8 Nonetheless, as appears from what I said at par 54 of my reasons for judgment, I was of the view that this was a case in which there was an appearance that a lawyer had changed sides, and a reasonably informed observer would see the matter in that light. I was of the view that in the circumstances of this case such an appearance was subversive to the requirement that justice be seen to be done.
9 It followed from this conclusion that, in my view, a restraining order should be made in the terms applied for by the defendant. I proceeded to make an order accordingly. The consequence of that was that Mr Bennett and Bennett & Co were to have no further involvement in assisting the plaintiffs in the prosecution of their claim.
10 However, I went on to say that I would allow an opportunity to Bennett & Co to be heard in regard to the question of costs if a costs order could not be agreed between the parties. As a matter of formality, on 23 August 2005 I ordered that the costs of the application be reserved with liberty to Bennett & Co to be heard as to costs. I allowed the parties liberty to apply.
11 It is against this background that the defendant has now applied for orders as to costs. The nature of the defendant's basic contention is reflected in its outline of submissions dated 14 October 2005. It is said in those submissions that the general rule is that the successful party recovers its costs.
12 Counsel for the defendant noted in the submissions that the unsuccessful plaintiffs in this matter assert that there should be no order as to costs on the basis that no prejudice to the defendant arose from Bennett & Co continuing to act for the plaintiffs. On the plaintiffs' case concerning costs, the defendant's interest in restraining Bennett & Co was in the nature of a busybody's interest.
13 Counsel for the defendant went on to say that if the general rule as to costs was applied, the subject costs would ordinarily be paid by the unsuccessful party, being, in this case, the plaintiffs. Additionally, it was said on behalf of the defendant that the Court also has jurisdiction to order costs to be paid by solicitors under O 66 r 5 of the Rules of the Supreme Court 1971 (WA).
14 It was noted in the defendant's submissions that Bennett and Co have asserted that costs should be reserved until the outcome of the litigation is known. The defendant was opposed to any such order on the grounds that it was the successful party. Counsel for the defendant mentioned also that
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- under Practice Direction No 5 of 2005, which took effect on 19 September 2005 (subsequent to the handing down of my reasons for judgment), provision is made under the new regime for costs in respect of interlocutory applications to be fixed and to be ordered to be paid forthwith or by a particular date. This can be done by drawing upon the schedule of standard costs orders annexed to the 19 September Practice Direction.
15 I note in passing that submissions have been put before me on behalf of the plaintiffs and on behalf of Bennett & Co. Those submissions are to the effect that the usual order on a successful application for an interlocutory injunction is that costs be reserved or be in the cause; Seaman's Civil Procedure Western Australia at par 52.1.47.
16 It is said further that notwithstanding the power to order the costs against a solicitor contained in O 66 r 5, there is no basis or sufficient basis for such a power to be exercised in the circumstances of the present case because such a power should only be exercised in circumstances of impropriety or where there is unreasonable or negligent conduct disclosed. It is said that none of those pre-conditions can be held to apply to the involvement of Bennett & Co in the present proceedings, having regard to the circumstances giving rise to the dispute as I described them a moment ago.
17 As to this last matter, counsel for the plaintiffs and counsel for Bennett & Co placed particular reliance on the decision of the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205.
18 The headnote in Ridehalgh's case indicates that a court, in exercising a power of the kind I have just referred to, which is designed to ensure that litigants should not be financially prejudiced by the unjustifiable conduct of litigation, is to be exercised with care. A court will only make an order requiring legal advisers to be responsible for costs if it is satisfied that the conduct characterised as improper, unreasonable or negligent directly caused the wasted costs complained of. The Court will be astute to safeguard against wasted costs orders becoming a backdoor means of recovering costs not otherwise recoverable against a legally aided or impoverished litigant.
19 The Court of Appeal said that the meaning of the words "improper, unreasonable or negligent" was well-established and not open to serious doubt. "Improper" covered any significant breach of a substantial duty imposed by the relevant code of professional conduct, as well as conduct
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- which would be improper according to the consensus of professional opinion, whether it violated the letter of a professional code or not. "Unreasonable" described conduct which was vexatious, designed to harass the other side rather than advance the resolution of the case. It made no difference that the conduct was the product of excessive zeal and not improper motive since the acid test was whether the conduct permitted of a reasonable explanation. "Negligent" was to be understood in an untechnical way, denoting failure to act with the competence reasonably expected of ordinary members of the profession.
20 In support of his opposition to the orders sought by the defendant, counsel for the plaintiffs submitted that there were good reasons why the position as to the costs of an interim injunction should be reserved or be in the cause. It was said that a Judge hearing an application for an interlocutory injunction almost invariably does so on an incomplete factual basis. Evidence usually has to be accepted or given weight without cross examination and, as is particularly important in the circumstances of the present case, without knowing fully the importance of that evidence as the case develops at trial. It is only the trial Judge who has had the benefit of cross-examination and knows how the case unfolded. At trial you can determine whether the assumptions which had to be made by the Judge hearing the interlocutory application were actually correct.
21 It is against this background that I come to the matters before me.
22 I see considerable force in the submissions made on behalf of the plaintiffs, as I outlined them a moment ago. It will indeed often be the case that the Judge dealing with an interlocutory application has to proceed in a climate of expedition and is not always able to fully inform himself as to the complexity of matters underlying the dispute between the parties. It follows that there will be certainly be many cases in which the discretion concerning costs, when fairly exercised, will give rise to an order that the costs be reserved or be in the cause, in the manner contemplated by the passage from Seaman Civil Procedure I touched on a moment ago.
23 However, I have to say that in the circumstances of the present case I am not persuaded that such an approach should govern the application before me. It follows from everything I have said that the involvement of Bennett & Co and Mr Bennett as parties associated with the creation of the scheme can be regarded as a discrete issue, being a matter which
(Page 7)
- stands to one side of the matters centrally in controversy between the parties.
24 In determining the application that comes before me concerning the involvement of the legal advisers to the plaintiffs I am not persuaded that I was obliged to act on assumptions that will ultimately need to be considered at trial or will be fully tested at trial.
25 It would perhaps be different if the allegation concerning Mr Bennett and Bennett & Co concerned confidential information or the possession of important matters of knowledge or documents which bore upon the alleged conflict of interest. In such a case it might emerge at trial, when all of the evidence was fully before the Court and witnesses had been cross-examined, that the apprehensions of the defendant as to the presence of a conflict of interest were illusory.
26 However, it is clear from my written reasons for judgment that my ruling was not based upon considerations of that kind. As I have noted, my ruling was based essentially upon the notion that in the circumstances of this case there was an appearance that a lawyer had changed sides and a reasonably informed observer would see the matter in that light. It seems to me that this is a discrete issue which stands to one side of the central controversy between the parties as to whether certain fees are payable by the investor/growers or not.
27 That being so, some of the factors pressed upon me by counsel for the plaintiffs in regard to the issue of costs fall away. I am therefore of the view that in the circumstances of this case I should resolve the application concerning costs pursuant to the familiar rule that in the exercise of the discretion the successful party in respect of an application should be allowed the costs of the application.
28 It follows that, as to the first of the various issues that come before me this morning, I consider that the defendant, as the successful party in respect of the application for an interim injunction, should be allowed the costs of that application.
29 This brings me to the further question of the proper responsibility for those costs. I pause here to note that counsel for the plaintiffs accepted that if an order were to be made in favour of the defendant as the successful party, then the appropriate course would be for that order to be made against the plaintiffs and not against Bennett & Co.
(Page 8)
30 Counsel recognised that the circumstances of the matter did not allow for a conclusion to be drawn that the pre-conditions of an order for costs against solicitors involved in the matter prescribed by O 66 r 5 had been satisfied. I have to say that in my view, his stance in that regard was indeed a realistic and appropriate stance.
31 I am of the view, having regard to the reasoning in Ridehalgh v Horsefield (supra), that this is not a matter in which it can be said that the conduct of either Mr Bennett or Bennett & Co can be characterised as improper, unreasonable or negligent. It will be apparent from my reasons for judgment that the controversy between the parties was finely balanced. It is true that, in the end, having regard to the matter of appearance I mentioned a moment ago, I ruled against the plaintiffs' stance. However, there is nothing in my reasons for judgment which would lend support to a proposition that Mr Bennett or his firm had acted improperly, unreasonably or negligently. The fact is that a considerable period of time had elapsed between Mr Bennett's earlier involvement in the creation of the subject scheme and the current controversy concerning the fees being claimed by the plaintiffs.
32 In summary then, I am not persuaded that any order for costs should be made against Mr Bennett or Bennett & Co. My order is that the defendant is to have the costs of the application upon the basis that those costs are to be paid by the plaintiffs.
33 There is, however, a further matter to be considered, and that is the application of the new Practice Direction No 5 of 2005 which came into force on 19 September 2005.
34 As I have noted, that Practice Direction came into force after the application for an interim injunction in this matter was dealt with. Broadly described, the Practice Direction makes provision, pursuant to a change in the Court's practice, for costs orders in interlocutory proceedings to be fixed and ordered to be paid forthwith by a particular date. This may be contrasted with an order allowing for taxation of costs, being the mechanism provided for under the earlier regime.
35 It was put to me by counsel for the defendant that the new Practice Direction should be characterised as a procedural matter. Thus, any rule or presumption against retrospectivity in the operation of such a practice direction should not apply. Some reliance was placed upon Rodway v The Queen (1990) 169 CLR 515; Maxwell v Murphy (1957) 96 CLR 261; Galvin v Forests Commission of Victoria [1939] VLR 284.
(Page 9)
36 I accept that the various cases relied upon by counsel establish that a practice direction of this kind concerning costs should be regarded as a procedural matter. Further, I accept that enactments or provisions dealing with procedure operate retrospectively where their application is related to or based on past events.
37 It therefore seems to me that the presumption against retrospectivity does not stand in the way of an order being made of the kind applied for, namely, that costs be fixed and be payable by the plaintiffs forthwith in the manner allowed for by the new Practice Direction pursuant to the order for costs I made earlier in the course of my reasoning.
38 However, as to this matter, I have to say that I find force in and am persuaded by the submissions made by counsel for the plaintiffs. Notwithstanding that the presumption against retrospectivity does not stand in the way of the new Practice Direction being applied with immediate effect, I consider that in the fair exercise of my discretion as to costs I should look at the position as it was in August, prior to the introduction of the new Practice Direction. At that time it could not be assumed that an application for an interim injunction would give rise to an immediate order for costs with the quantum being determined by the schedule of standard costs order which now accompanies the Practice Direction. Accordingly, I am not persuaded that I should now seek to fix the costs and make provision for their immediate payment.
39 There is a further matter which bears upon the exercise of my discretion and that is the size of the costs proposed to be paid. The application for an interim injunction was a matter of some complexity. It was fully argued. Senior Counsel was instructed on behalf of the defendant, and quite clearly, the costs involved, having regard to the evidentiary materials placed before the Court, are likely to be substantial.
40 With these considerations in mind, it seems to me that if I simply yield to the figure proposed by counsel for the defendant, which is calculated by reference to the schedule of standard costs orders forming part of the new Practice Direction, I would be proceeding in a rather peremptory and simplistic way. To my mind, the fair ruling to be made in the present case is that the costs ordered to be paid by the plaintiffs should be the subject of a taxation. I will make an order in those terms, namely, that the plaintiffs are to pay to the defendant the costs of the application, such costs to be taxed.
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