Australian Securities & Investments Commission v Emu Brewery Mezzanine Ltd
[2004] WASC 241 (S)
•19 NOVEMBER 2004
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : AUSTRALIAN SECURITIES & INVESTMENTS |
COMMISSION -v- EMU BREWERY MEZZANINE
LTD [2004] WASC 241 (S)
| CORAM | : SIMMONDS J | ||
| HEARD |
| ||
| DELIVERED | : 19 NOVEMBER 2004 | ||
| SUPPLEMENTARY | |||
| DECISION | : 24 FEBRUARY 2005 | ||
| FILE NO/S |
| ||
| MATTER |
|
and
EMU BREWERY MEZZANINE LTD
(ACN 104 639 410)
| BETWEEN | : AUSTRALIAN SECURITIES & INVESTMENTS |
COMMISSION
Plaintiff
AND
EMU BREWERY MEZZANINE LTD
(ACN 104 639 410)Defendant
| FILE NO/S | : | CIV 1623 of 2004 |
[2004] WASC 241 (S)
| BETWEEN | : | BAYSHORE MEZZANINE PTY LTD (ACN 090 759 272) Plaintiff |
| AND | ||
| AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Defendant | ||
| Catchwords: |
Practice and procedure - Costs - Two Cases Stated in two consolidated matters - Parties successful on some issues arising out of the cases stated and unsuccessful on other issues - Whether costs orders should be made pursuant to O 66 r 2(a) of the Rules of the Supreme Court 1971 (WA)
Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA), O 66 r 2(a)
Result:
Costs orders made
Category: B
Representation:
COR 120 of 2004
Counsel:
| Plaintiff | : | Mr C G Colvin SC & Mr A R Beech |
| Defendant | : | Mr T F Bathurst QC & Mr P D Evans |
[2004] WASC 241 (S)
Solicitors:
| Plaintiff | : | Australian Securities & Investments |
Commission
| Defendant | : | Freehills |
CIV 1623 of 2004
Counsel:
| Plaintiff | : | Mr T F Bathurst QC & Mr P D Evans |
| Defendant | : | Mr C G Colvin SC & Mr A R Beech |
Solicitors:
| Plaintiff | : | Freehills |
| Defendant | : | Australian Securities & Investments |
Commission
Case(s) referred to in judgment(s):
JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39
Mackenzie v Albany Finance Ltd [2003] WASC 100
Permanent Building Society v Wheeler (No 2) (1998) 10 WAR 569
Phillips Fox v Westgold Resources NL [2000] WASCA 85
Westgold Resources NL v St George Bank Ltd, unreported; SCt of WA
(Anderson J); Library No 980717; 9 December 1998
Case(s) also cited:
Nil
[2004] WASC 241 (S)
SIMMONDS J
SIMMONDS J: Judgment was delivered on the Cases Stated in these two consolidated matters on 19 November 2004. The question of costs was reserved so that written submissions could be lodged with the Court.
2 These proceedings arose out of specific financing activities of Emu
Brewery Mezzanine Ltd and Bayshore Mezzanine Pty Ltd, both members of the Westpoint Group. Emu Brewery Mezzanine was formed to finance a redevelopment project on the old Emu Brewery site in Perth, and Bayshore Mezzanine was formed to finance a redevelopment on land in Port Melbourne. The financing methods used by both companies were essentially the same, and involved the issue of promissory notes under Information Memoranda. Both companies' Information Memoranda were similar in content, but with variations between them.
3 These financing methods gave rise to litigation between ASIC and
the two companies, and this in turn led to the Cases Stated before me. The questions for me went to whether certain conditions that determine, or help to determine, whether or not certain regulatory schemes in the Corporations Act 2001 (Cth) applied to the companies' financing methods.
4 The questions in both Cases Stated were for the most part
substantially the same, and they gave rise to three main issues, which are identified in my reasons. The first issue was whether the promissory notes issued under the Information Memoranda were securities that would engage the requirements of Corporations Act, Ch 6D (the "security" issue); the second issue was whether the Information Memoranda offered interests in a managed investment scheme, which would attract the requirements of Corporations Act, Ch 5C (the "managed investment scheme" issue); and the third issue, the questions for which were only put for Emu Brewery Mezzanine, was whether, in publishing its information memorandum, that company made false statements or engaged in misleading or deceptive conduct in breach of relevant provisions of the Australian Securities & Investments Commission Act 2001 (Cth) (the "misleading or deceptive conduct" issue). A fourth issue was also raised by the Cases Stated, which went to whether the promissory notes were a financial product for the purposes of Corporations Act, Ch 7. The parties made no submissions to me on this issue, and I did not address it in my reasons.
5 On the security issue I answered in favour of the companies, by
finding that the promissory notes were not securities for the purposes of Corporations Act, Ch 6D. On the managed investment scheme issue I
[2004] WASC 241 (S)
SIMMONDS J
answered in favour of ASIC, at least to the extent of finding that the Information Memoranda did offer an interest in a managed investment scheme for the purposes of Corporations Act, Ch 5C. With regard to the misleading or deceptive conduct issue I answered in favour of Emu Brewery Mezzanine, by finding that the company had not made representations of the sort claimed by ASIC.
6 In their submissions on costs, Emu Brewery Mezzanine and
Bayshore Mezzanine ask for an order pursuant to or informed by the principle of O 66 r 2(a) of the Rules of the Supreme Court 1971 (WA). The rule provides that:
"In the absence of any special order, where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought."
7 The companies submit that there are six issues emerging from the
Cases Stated, which I note are subsumed by the four issues I identified above. They submit that these six issues should be treated, for the purpose of exercising my discretion, as separate and distinct causes of action. As the financial products issue was "abandoned" before the hearing, ASIC should be treated as having succeeded on one out of the five remaining issues, and on that basis Emu Brewery Mezzanine and Bayshore Mezzanine submit that ASIC should pay 80 per cent of the companies' costs, and the companies' should pay 20 per cent of ASIC's costs.
8 On the other hand ASIC submit that the pre-conditions for an order
under O 66 r 2(a), that is a statement of claim contending one or more causes of action, are not met in this case. This, in ASIC's submission, is because a case stated is not a statement of claim and the issues raised are not separate causes of action. In ASIC's submission, any application of O 66 r 2(a) to a case stated may only be by analogy.
9 In any event, ASIC submit, even if such an analogy can be drawn,
there is only a prima facie entitlement to a costs order under O 66 r 2(a), and a court will not make such an order as a matter of course. The exercise of my discretion requires me to look at the realities of the case and attempt to do substantial justice: see Permanent Building Society v
[2004] WASC 241 (S)
SIMMONDS J
Wheeler (No 2) (1998) 10 WAR 569 per Anderson J at 574. The case may be that there are multiple causes of action (or by analogy issues in a case stated), all of which arise out of the one course of dealings, transaction or the same facts. Where that is the case, "there will usually be one order for the general costs of the action, moulded as necessary to ensure that, however rough and ready it may be, substantial justice is done": Permanent Building Society (supra) per Anderson J at 575.
10 ASIC submit that the relevant principle in the exercise of my
discretion in this case is that in Phillips Fox v Westgold Resources NL
[2000] WASCA 85, where Owen J said at [28] that:"Where a party has succeeded in some issues and failed on others it is a legitimate exercise of the discretion as to costs to make an overall percentage deduction from the costs that would otherwise be awarded. This is especially so where it would be difficult to compartmentalise the costs from issue to issue. There are practical and pragmatic reasons to deal with costs in this way rather than attempt to award the costs of one issue to party 'A' and the costs of another issue to party 'B'."
11 In ASIC's submission, the reality in this case is that the Cases Stated
centre on ASIC's claim that the Information Memoranda "offer something" which engage provisions of either or both of Ch 6D or Ch 5C of the Corporations Act. ASIC submit that they are the overall successful party because the outcome of the Cases Stated was that such an "offer of something" was found to exist, by virtue of my finding in the affirmative on the "managed investment scheme" issue. On this basis, ASIC submitted to me that costs should follow the event and, "giving weight to the ASIC's substantial success", the companies should pay one-half of ASIC's costs.
12 ASIC referred me to examples of where this Court has taken an
overall percentage approach in favour of making orders under O 66 r 2(a). These cases involved mixed outcomes where no party had been wholly successful. In Mackenzie v Albany Finance Ltd [2003] WASC 100, McLure J at [18] rejected submissions put to her that all the causes of action in that case were "in substance one contest". However, her Honour declined to make an order under O 66 r 2(a) in recognition of the time and costs that such an order would involve at taxation. Her Honour awarded costs to the "overall winning party reduced by a percentage to reflect the areas of loss" [13]. ASIC also referred me to the decision of Pullin J in JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39, where his
[2004] WASC 241 (S)
SIMMONDS J
Honour reduced the plaintiff's costs by half to reflect the amount of time spent at trial on the issues on which it had failed. In that case, the plaintiff was not ordered to pay any of the defendant's costs.
13 However, in my view, these cases are purely illustrative of the broad
nature of the Court's discretion. I too must exercise my discretion so as to
achieve substantial justice given the realities of this case.14 I am of the view that my consideration of the costs issues is
appropriately informed by an analogy drawn from O 66 r 2(a). It is indeed the case, as ASIC submits, that it is not in terms applicable here. The "proceedings" are the Cases Stated, not the underlying litigation. It is only the costs on the Cases Stated that the parties are seeking. However, the Cases Stated raise distinct sets of legal questions, even if there is (as I will shortly explain) a measure of overlap in the analysis that needs to be undertaken to answer them. Those questions can indeed be characterised, as ASIC indicated, as different forms of the broad question of what the Information Memoranda offered. However, such a characterisation obscures the distinctiveness of each form that was reflected in the construction of the Cases Stated, and of the parties' written and oral submissions.
15 On the face of it, it would be appropriate to put aside the financial
product issue. That is because the parties did not seek, and therefore I did not provide, answers to the questions relevant to those issues. While there were undoubtedly costs incurred in getting up and considering the questions, no significant space was devoted to them in the written submissions of any party, nor was any significant time devoted to them at the hearing. Whether or not it is correct to treat the issue as having been "abandoned", there was no event that costs could follow, nor is there any other basis apparent to me for awarding one party or parties' costs against another or others.
16 However, in their written submissions the parties did not indicate to
me that the costs relevant to the financial product issue were significant. Given all of the circumstances I have referred to, separating those costs out would seem to me to be an exercise that would not be worth the effort. In those circumstances, I would not have those costs taken account of for any of the parties by way of deduction from any award of costs to them.
17 I am of the view that it is appropriate to award costs to the parties in
respect of the issues on which they succeeded. The awards should be ones for the relevant proportion of the party's costs represented by the
[2004] WASC 241 (S)
SIMMONDS J
relative weight of the issue in the proceedings before me. For that purpose, the appropriate indicator of relative weights is the time and space taken up on each issue in the oral and written submissions made to me, assessed against the complexity of each issue as it emerged during the course of my deliberations and reflected in my judgment.
18 On the basis of such analysis, the security and the misleading and
deceptive conduct issues combined, on which Emu Brewery Mezzanine and (as to the dominant issue of the two, the security one) Bayshore Mezzanine succeeded and ASIC failed, should be weighted at 75 per cent. The managed investment scheme issue, on which ASIC succeeded and the companies failed, should be weighted at 25 per cent.
19 In the course of arriving at these weights I considered two particular
complications. One, from the submissions for the companies, was that the written submission space and the hearing time devoted to the misleading or deceptive conduct issue might not be an accurate indicator of the weight that should be given to it. The companies referred me to the factual complexity of the issue, and to its place in the interlocutory proceedings in this matter, over which, however, I did not preside. In the event, I gave greater weight to the issue than the space and time aspects before me would have indicated. I did this by reference to the treatment I concluded I had to give it in my judgment, and to the way in which it overlapped with an aspect of the security issue (see par 123 of my judgment).
20 The second complication is that the misleading or deceptive conduct
issue is relevant to Emu Brewery Mezzanine only. However, no point was taken by either side as to the different pattern of results as between the two companies and ASIC. In view of the overlap between an aspect of the security issue and the false and misleading conduct one, as well as the common legal representation of the two companies, I do not consider a different set of weights should be used for them.
21 It will have become apparent that I have concluded I cannot do better
here than work what appears to me to be "substantial justice". I note the wisdom of the view expressed in Westgold Resources NL v St George Bank Ltd, unreported; SCt of WA (Anderson J); Library No 980717; 9 December 1998, at page 5:
"The court should not get involved in an excessively detailed analysis of the various issues in an attempt to make intricate dollar-perfect costs orders. To adopt that practice would be to
[2004] WASC 241 (S)
SIMMONDS J
add an extra dimension to litigation which, by and large, is
already these days complicated and expensive enough."
22 My orders are that ASIC pay three-quarters of EMU Brewery
Mezzanine and Bayshore Mezzanine's costs, and EMU Brewery Mezzanine and Bayshore Mezzanine pay one-quarter of ASIC's costs. There will be a certificate for second counsel for each party. In each case, the costs are to be taxed if not agreed.
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