and (B) Oakcure Pty Ltd as trustee for the Parry Trust v Commonwealth Bank of Australia

[2018] WASC 156

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   WESTGEM INVESTMENTS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATOR APPOINTED) IN ITS OWN RIGHT AND AS TRUSTEE FOR:  (1) HOSSEAN POURZARD AND JENNY MARIA POURZAND AS TRUSTEES FOR THE HELEN TRUST; AND (2) PAKWEST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) AS TRUSTEE FOR THE PAKWEST TRUST; AND (B) OAKCURE PTY LTD AS TRUSTEE FOR THE PARRY TRUST -v- COMMONWEALTH BANK OF AUSTRALIA [2018] WASC 156

CORAM:   TOTTLE J

HEARD:   16 MAY 2018

DELIVERED          :   16 MAY 2018

FILE NO/S:   CIV 2340 of 2013

BETWEEN:   WESTGEM INVESTMENTS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT AND AS TRUSTEE FOR:  (1) HOSSEAN POURSAND AND JENNY MARIA POURZAND AS TRUSTEES FOR THE HELEN TRUST; AND (2) PAKWEST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) AS TRUSTEE FOR: (A) NEWPORT SECURITIES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) AS TRUSTEE FOR THE PAKWEST TRUST; AND (B) OAKCURE PTY LTD AS TRUSTEE FOR THE PARRY TRUST

First Plaintiff

HOSSEAN POURZAND AND JENNY MARIA POURZAND IN THEIR OWN RIGHT AND AS TRUSTEES FOR (1) THE HELEN TRUST; AND (2) THE SHERIN TRUST (3) THE POURZAND FAMILY TRUST

Second Plaintiffs

PAKWEST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT AND AS TRUSTEE FOR:  (1) NEWPORT SECURITIES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) AS TRUSTEE FOR THE PAKWEST TRUST; (2) OAKCURE PTY LTD AS TRUSTEE FOR THE PARRY TRUST; (3) WESTVIEW ASSET PTY LTD AS TRUSTEE FOR THE WESTVIEW TRUST; (4) OAKCURE PTY LTD AS TRUSTEE FOR THE ZAHRA NO 2 TRUST; (5) CITYSCAPE INVESTMENTS PTY LTD AS TRUSTEE FOR THE FARAMAZ TRUST; AND (6) RANGEWAY INVESTMENTS PTY LTD AS TRUSTEE FOR THE RANGEWAY INVESTMENTS TRUST

Third Plaintiff

NEWPORT SECURITIES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) IN ITS OWN RIGHT AND AS TRUSTEE FOR: (1) THE PAKWEST TRUST; AND (2) THE NEWPORT FAMILY TRUST

Fourth Plaintiff

OAKCURE PTY LTD IN ITS OWN RIGHT AND AS TRUSTEE FOR THE PARRY TRUST

Fifth Plaintiff

SEAPORT PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT AND AS TRUSTEE FOR THE SEAPORT TRUST

Sixth Plaintiff

LUKE SARACENI

Seventh Plaintiff

AND

COMMONWEALTH BANK OF AUSTRALIA LTD

First Defendant

BOS INTERNATIONAL (AUSTRALIA) LTD

Second Defendant

BOSI SECURITY SERVICES LTD

Third Defendant

MARK FRANCIS XAVIER MENTHA

Fourth Defendant

THE TRUST COMPANY (AUSTRALIA) LTD AS CUSTODIAN OF CHARTER HALL WHOLESALE MANAGEMENT LTD AS TRUSTEE OF THE RAINE SQUARE TRUST

Fifth Defendant

Catchwords:

Practice and procedure - Costs - Discontinued claim - No reason to deviate from general rules

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Plaintiff pay the first to fourth defendants' costs to be taxed

Category:    B

Representation:

Counsel:

First Plaintiff	:	Mr W A D Edwards
Second Plaintiffs	:	Mr W A D Edwards
Third Plaintiff	:	Mr W A D Edwards
Fourth Plaintiff	:	Mr W A D Edwards
Fifth Plaintiff	:	Mr W A D Edwards
Sixth Plaintiff	:	Mr W A D Edwards
Seventh Plaintiff	:	Mr W A D Edwards
First Defendant	:	Mr J Thomson SC & Ms S E Russell
Second Defendant	:	Mr J Thomson SC & Ms S E Russell
Third Defendant	:	Mr J Thomson SC & Ms S E Russell
Fourth Defendant	:	Mr P W Collinson QC
Fifth Defendant	:	No appearance

Solicitors:

First Plaintiff	:	Jackson McDonald
Second Plaintiffs	:	Jackson McDonald
Third Plaintiff	:	Jackson McDonald
Fourth Plaintiff	:	Jackson McDonald
Fifth Plaintiff	:	Jackson McDonald
Sixth Plaintiff	:	Jackson McDonald
Seventh Plaintiff	:	Jackson McDonald
First Defendant	:	King & Wood Mallesons
Second Defendant	:	King & Wood Mallesons
Third Defendant	:	King & Wood Mallesons
Fourth Defendant	:	Norton Rose Fulbright Australia
Fifth Defendant	:	No appearance

Case(s) referred to in decision(s):

Nil

TOTTLE J:

(These reasons were delivered on 16 May 2018 and have been edited from the transcript of that hearing.)

Introduction

1. By leave granted by this court on 23 March 2018 the plaintiff has discontinued this action.  There is a dispute as to who should pay the costs.  For the reasons which follow, I order that the plaintiffs should pay the defendants' costs.

Background

1. I need to identify the link between this action (the discontinued action) and proceedings CIV 2722 of 2012 (the main action).  The plaintiff in the discontinued action is one of several plaintiffs in the main action.  The trial of the main action is under way and the hearing is expected to be completed at the end of July 2018.  Until shortly before the trial of the main action, one of the claims advanced by the plaintiffs was a claim known as 'the fit-out claim'.  It is unnecessary to explain the nature of this claim.

2. One of the defences raised by the first defendant to the fit-out claim was that pursuant to a deed of covenant, and separately pursuant to a settlement and release deed entered into by Westgem in June 2013 (through or by the receivers and managers of Westgem), Westgem assigned away all rights, title and interest to the benefits of an agreement, known as the agreement for lease, upon which Westgem's fit-out claims rested, at least in part.  Furthermore, pursuant to the settlement and release deed, Westgem released the first defendant from the fit-out claims.

3. In the discontinued action, the plaintiffs sought declaratory relief to the effect that the deed of covenant and the settlement release deed did not release or adversely affect the plaintiffs' claim in the main action, including the fit-out claim.

4. The plaintiffs alleged that:

   (a)in entering the deed of covenant and the settlement release deed, the receivers had acted in breach of the duties they owed to Westgem;

   (b)the first to third defendants had knowingly assisted in those breaches;

   (c)the deed of covenant, the settlement release deed and the relevant provisions of those documents did not bear the construction that the first defendant put upon them; and

   (d)the first to third defendants had acted unconscionably.

5. In the main action in a different factual context, that is, in the context of what is termed 'the cost over-run claims', the plaintiffs allege that the first to third defendants acted unconscionably.  In the main action the fit-out claim was discontinued on or about 29 March 2018.  No explanation has been offered by the plaintiffs for the discontinuance of the fit-out claim.  I infer that they either lacked confidence in the merit of that claim or concluded that it was uneconomic to run the claim or that the claim was not pursued due to a combination of both of those factors.

The plaintiff's submissions

1. The plaintiff acknowledges that the default position is that a discontinuing party pays the costs of a discontinued action pursuant to O 23 of the Rules of the Supreme Court 1971 (WA). They say, however, that the general rule that the successful party should have its costs paid by the unsuccessful party and that, on discontinuance, the discontinuing party pays the other party's costs, are not inflexible rules.

2. The plaintiff says that the discontinued action was required because the defendant banks acted unconscionably in advancing the defence that the fit-out claim had been released by the deed of covenant and the settlement release deed.  The plaintiffs invite the court to make findings to that effect, albeit they say that those findings should not be made now.

3. The plaintiff argues that the costs of the proceedings be reserved for a determination on a date to be fixed following the completion of the evidence in the proceedings numbered CIV 2722 of 2012 with judgment on the issue of costs in this action to be delivered contemporaneously with judgment in the main action.

4. Alternatively, the plaintiff contends that the first to third defendants should pay the plaintiffs' costs together with the sum of $20,711, being the sum that the plaintiff has paid the fifth defendant in respect of its costs.  The plaintiff seeks a special costs order that its costs be taxed without reference to the amounts fixed in the relevant costs determinations and also on an indemnity basis.

The defendants' submissions

1. The defendants respond by saying that the general rules should be applied.  They say that the bank's reliance on the deed of covenant and the settlement release deed was not unreasonable and that the court could not and should not conclude that the bank had acted either unreasonably or unconscionably in relying upon those documents or the relevant provisions of those documents in its defence.

2. The defendants submit that the course proposed by the plaintiff amounts, in effect, to a determination of the merits of the parties' positions in the discontinued action, which is the very thing they submit that the authorities say should not take place.

3. The first to third defendants contend that the plaintiff should pay their costs and that a special costs order should be made in their favour.  The fourth defendants contend likewise, that the plaintiff should pay their costs, either on an indemnity basis or that a special costs order be made in their favour.

Disposition

1. In my judgment, the plaintiff should pay the defendants' costs.  The reasoning that leads me to this conclusion is as follows.  Firstly, the discontinued action arose from the fit-out claim in the main action and that claim is no longer pursued.  That engages the general rules to which I have referred.  There is no warrant in this case for departing from those rules.

2. Secondly, it seems to me that the plaintiff's submissions amount to an invitation to make a determination of the merits of the defences raised by the banks in the main action, insofar as the fit-out claim was concerned, and in the present action, insofar as those defences relied upon the deed of covenant and the settlement release deed.  I do not accept that findings of the nature contended for by the plaintiff could safely be made about the relevant issues on the basis of the documentary materials that have been put before the court by the plaintiff.  The plaintiffs' submissions invite the Court to embark upon parasitic litigation about costs of the kind that the Court should avoid and which the application of the two general rules to which I have referred are calculated or intended to avoid.

   I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

   JB
   ASSOCIATE TO THE HONOURABLE JUSTICE TOTTLE

   24 MAY 2018