Alphena Pty Limited v PS Securities Pty Limited as Trustee of the Joseph Family Trust (No 2)

[2013] NSWSC 647

Supreme Court

New South Wales

Medium Neutral Citation:	Alphena Pty Limited v PS Securities Pty Limited as Trustee of the Joseph Family Trust (No 2) [2013] NSWSC 647
Hearing dates:	20 May 2013
Decision date:	20 May 2013
Jurisdiction:	Equity Division
Before:	Kunc J
Decision:	Defendant to pay all of the Plaintiff's costs of and incidental to these proceedings incurred up to an including 4 May 2012 and 70% of those costs incurred thereafter.
Category:	Costs
Parties:	Plaintiff: Alphena Pty Limited Defendant: PS Securities Pty Limited as Trustee of the Joseph Family Trust
Representation:	Counsel: Mr M Condon SC (Plaintiff) Mr D.L. Cook (Defendant)
File Number(s):	2011/72723
Publication restriction:	nil

EX TEMPORE Judgment

1. HIS HONOUR: This is a judgment on a costs application.

Introduction

1. I delivered the primary judgment in this matter on 29 April 2013 (Alphena Pty Limited (In Liquidation) v P S Securities Pty Limited as Trustee of the Joseph Family Trust [2013] NSWSC 447). At that time I provided the parties with draft orders for their consideration to give effect to the judgment, and invited submissions as to costs. Having considered those submissions and heard the parties, this judgment deals with those matters.

Summary

1. The parties have agreed on the form of orders to give effect to the primary judgment, save as to costs. They are agreed that the defendant should pay the plaintiff's costs up to and including 4 May 2012. As for the costs after that date, the plaintiff submits that costs should "follow the event" so that the defendant should pay the plaintiff's costs on the ordinary basis.

1. The defendant takes a diametrically opposed position and submits that the plaintiff should pay the defendant's costs on the indemnity basis. The result is that the defendant should pay 70% of the plaintiff's costs of and incidental to the proceedings incurred on and from 5 May 2012 on the ordinary basis.

The Facts

1. On 4 May 2012 the defendant made a Calderbank offer to consent to these orders ("the "defendant's offer"):

(1) The Defendant pay the Plaintiffs costs as agreed or assessed from 26 March 2012 to the date of this letter;

(2) the Defendant pay the liquidator's fees as agreed or as fixed by the Court; and

(3) the proceedings be otherwise dismissed.

1. On the same day the plaintiff responded with a Calderbank offer to consent to these orders (the "plaintiff's offer"):

By consent, the Court:

1 Grants leave to the Plaintiff to file its Amended Statement of Claim;

2 Declares that the Plaintiff is entitled to be indemnified from the assets of the Joseph Family Trust for the remuneration properly due to the liquidators of the plaintiff, together with all costs and disbursements incurred by them, arising out of services performed by them referable to the plaintiff's status as trustee of the Trust and/or the enforcement of the plaintiff's rights as a trustee or former trustee of the Trust (including the plaintiff's right of indemnity);

3 Orders that the Defendant pay to the Plaintiff the remuneration properly due to the liquidators of the plaintiff, together with all costs and disbursements incurred by them, arising out of services performed by them referable to the plaintiff's status as trustee of the Trust and the enforcement of the plaintiff's rights as a trustee or former trustee of the Trust (including the plaintiff's right of indemnity), as agreed within 42 days, or failing agreement, as determined by the Court upon further application of the Plaintiff in these proceedings;

4 Orders that the Defendant pay the Plaintiff's costs of the Proceedings as agreed or assessed;

5 Adjourns these proceedings to 25 June 2012; and

6 Grants liberty to restore on 3 days notice.

1. The plaintiff rejected the defendant's offer by making the plaintiff's offer. The defendant never accepted the plaintiff's offer. However, in the ensuing months the parties did resolve a number of the issues between them. That process continued up to the hearing before me.

1. As the issues narrowed further, further offers were exchanged between the parties in March 2013. It is not necessary for me to set those out.

1. At the hearing two issues were presented for determination against a background of significant agreements summarised in para 34 of the primary judgment. In my judgment I referred to those two issues as the assessment issue and the costs issue.

1. The plaintiff failed on the assessment issue (i.e. contrary to its submissions, I found the relevant costs of the plaintiff's liquidator should be dealt with by the Registrar on the basis usually applicable to the remuneration of an official liquidation rather than the more generous trustee basis contended for by the plaintiff). However, it did succeed on the costs issue.

The Plaintiff's Submissions

1. The plaintiff refers to the orders proposed by the plaintiff's offer and submits that, in the end, it obtained orders to that effect plus the ancillary declaration and orders sought in its amended statement of claim. In particular it points to the fact that the defendant never offered or agreed to a declaration that the plaintiff was entitled to indemnity from the assets of the Joseph Family Trust of which the plaintiff is the former trustee.

1. For this reason, it is said, the plaintiff did not act unreasonably in rejecting the defendant's offer. On the other hand, the litigation would have been avoided had the defendant accepted the plaintiff's offer.

The Defendants' Submissions

1. The defendant's arguments may be summarised into four points. First, the defendant submits that "as a matter of substance" the plaintiff has not achieved any more than what was offered by the defendant's offer, subject to the question of legal costs. It says that the plaintiff wrong headedly persisted in the stance that the plaintiff's costs (which the defendant accepted it should pay) should be determined by a Judge. The ultimate result was that they are to be assessed by a Registrar in the way contemplated by the defendant's offer.

1. Second, putting the same complaint in a slightly different context, the defendant submits that the plaintiff acted unreasonably in continuing to insist, until quite late in the piece, that the plaintiff's costs would be assessed by a Judge assisted by the expert evidence of another liquidator. The plaintiff obtained, and exercised, leave to file an expert's report, which was ultimately never read because this aspect of the matter was resolved before the hearing.

1. Third, the "event" at hearing was primarily the resolution of the assessment issue, which the plaintiff lost.

1. Fourth, at hearing the defendant has today submitted that if the Court was not disposed to accede to the defendant's application for costs, it should both heavily discount the plaintiff's costs for which the defendant might be liable, and excise the costs of and incidental to the expert liquidator's report that was ultimately never read.

Resolution

1. Two legal principles inform the exercise of the Court's discretion in this case. First, what constitutes the "event" was a fluid concept not confined to its ordinary accepted basic meaning of the practical resolution of a particular claim. (see the discussion in Ritchie's Uniform Civil Procedure New South Wales at [42.1.10]). That is especially true of a case such as this where the scope and nature of the issues underwent some transformation through ongoing discussions between the parties.

1. Second, each of the plaintiff's offers and defendant's offers was a Calderbank offer. The unreasonable rejection by the offeree of such an offer will be relevant to (but not determinative of) the exercise of the Court's costs discretion in favour of the offeror (including to award indemnity costs) where the offeree achieves a result no more favourable than the offer.

1. The plaintiff was not unreasonable in rejecting the defendant's offer. This is because the defendant's offer did not give the plaintiff the certainty which it sought (and to which it was entitled) that it be indemnified from the assets of the Joseph Family Trust. Looking at the matter in another way, the plaintiff in the end did better than the defendant's offer.

1. For those reasons I reject the defendant's first submission referred to in para 13 above.

1. On the other hand, neither was the defendant unreasonable in rejecting the plaintiff's offer. There are two reasons for this: first, I accept the defendant's second submission summarised in 14 above in that the final result (although the product of agreement rather than determination) on any assessment being done by the Registrar bears out the reasonableness of the defendant's rejection of the plaintiff's offer. That offer was premised on any dispute being dealt with by a judge.

1. Had the matter fallen to me for determination I have no doubt that I would have in any event ordered that any assessment ultimately be conducted by a Registrar rather than by the Court.

1. Second, the plaintiff's offer left the assessment issue latent. I infer from what happened afterwards, including at the hearing before me, that acceptance of the plaintiff's offer would not have ended matters insofar as the assessment issue would almost certainly have had to be agitated in one way or another.

1. These conclusions in relation to the parties' respective offers mean the rejection of neither is relevant to the exercise of the Court's discretion as to costs. The Court will apply the principle that costs should follow the event but not be confined to the ultimate result. Looking at the event more holistically requires consideration being given to the matters to which I will refer in the next paragraph.

1. The prima facie position is, therefore, that the defendant should pay the plaintiff's costs on and from 5 May 2012. However, the following matters would make it unjust for all of those costs to be payable by the defendant:

(a) Most of the hearing before me was devoted to the assessment issue, which the plaintiff lost. To this extent I accept and give effect to the defendant's third submission summarised in para 15 above.

(b) From at least the time of the defendant's offer, the defendant (correctly) maintained the position that any assessment ultimately necessary of the plaintiff's liquidator's costs and expenses should be carried out by the Registrar.

(c) Given that many issues were resolved by agreement between the parties, an order for all of the plaintiff's costs would necessarily visit costs on the defendant in respect of matters which the parties resolved. This consideration particularly applies to the expert liquidator's report. In the absence of agreement otherwise, or the presence of circumstances which neither party has sought to advance in the present case, such costs should lie where they fall.

1. An allowance for the matters to which I have just referred cannot be arrived at scientifically but calls for an impressionistic evaluation. In particular there is insufficient evidence about the detail of what passed between the parties before hearing for me to conclude whether or not the costs of the liquidator's report should be excised in their entirety from what should otherwise be payable by the defendant.

1. In my view justice will be done and any necessary costs assessment facilitated, by reducing the amount of the plaintiff's costs which the defendant will otherwise be required to pay, by some percentage to take into account the factors I have identified in para 25 above, including the plaintiff's costs of the expert liquidator's report. I have reached the conclusion that a 30% reduction will achieve a just resolution in all the circumstances.

1. The Court's orders will therefore be in accordance with the short minutes of order initialled by me, dated today and placed with the papers.

oOo

Decision last updated: 27 May 2013