Brewer v Martin
[2013] FMCA 239
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BREWER & ANOR v MARTIN & ORS | [2013] FMCA 239 |
| CONSUMER LAW – Trade Practices proceedings– application for summary dismissal of portion of claim – uncertainty about identity of trustee of family superannuation trust fund – objection to subpoena – allegation of improper conduct by applicants and solicitor for applicants – cost consequences – abuse of process – indemnity costs ordered – stay of proceedings until costs paid. |
| Federal Magistrates Act 1999 (Cth), s.42 Federal Magistrates Court Rules 2001 (Cth), r.1.03 |
| Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Thunderdome Racetiming & Scoring Pty Ltd & Anor v Dorian Industries Pty Ltd & Anor (1992) 36 FCR 297 Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (unreported decision of Lindgren J on 18 August 1995) Life Air Bag Company of Australia Pty Ltd v Life Air Bag Company (New Zealand) Ltd (unreported decision of Branson J on 22 May 1998) Harris v Cigna Insurance Australia Ltd (1995) ATPR 41 - 445 Wolton v Gardner (1993) 177 CLR 378 |
| First Applicant: | ALAN BREWER |
| Second Applicant: | BREWER FAMILY INVESTMENTS PTY LTD ACN 127 512 896 |
| First Respondent: | KAYE MARTIN |
| Second Respondent: | AMICI CORPORATION PTY LTD ACN 133 058 908 |
| Third Respondent: | AMICI PROPERTY HOLDINGS PTY LTD ACN 132 050 296 |
| File Number: | ADG 276 of 2010 |
| Judgment of: | Simpson FM |
| Hearing dates: | 4 July 2011, 5 October 2011, 21 November 2011, 6 March 2012, 22 June 2012 and 17 July 2012 |
| Date of Last Submission: | 17 July 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 11 April 2013 |
REPRESENTATION
| Counsel for the Applicants: | At various times: Mr Finlayson, Mr Hoyle, Mr Dal Cin, Mr Burnett |
| Solicitors for the Applicants: | Allen Burtt Legal Services |
| Counsel for the Respondents: | Mr Robertson QC, with Mr C Abbott, Mr Stratton-Smith |
| Solicitors for the Respondents: | Foster Nicholson Jones Lawyers |
ORDERS
The Application in a Case filed on 14 June 2011 is dismissed.
The applicants shall forthwith pay the respondents their costs of the proceeding on an indemnity basis for the period 20 April 2011 to 2 December 2011 to be agreed or taxed.
If costs are not agreed they shall be taxed forthwith in accordance with the Federal Court Scale of Costs.
The proceedings be stayed until payment of the respondent’s costs as provided for in these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 276 of 2010
| ALAN BREWER |
First Applicant
And
| BREWER FAMILY INVESTMENTS PTY LTD ACN 127 512 896 |
Second Applicant
And
| KAYE MARTIN |
First Respondent
And
| AMICI CORPORATION PTY LTD ACN 133 058 908 |
Second Respondent
And
| AMICI PROPERTY HOLDINGS PTY LTD ACN 132 050 296 |
Third Respondent
REASONS FOR JUDGMENT
Introduction
In these reasons, a statement of fact is a finding of fact arrived at on the balance of probabilities after a consideration of the evidence and the submissions made.
For clarity, in these reasons Alan Brewer and Brewer Family Investments Pty Ltd will be referred to as the applicants and Kaye Martin, Amici Corporation Pty Ltd and Amici Property Holdings Pty Ltd will be referred to as the respondents.
I have before me an application seeking summary dismissal of a portion of the applicants’ case. During the many lengthy hearings that have taken place over an 11 month period the issues have been reduced to the question of what costs orders of the application are appropriate.
The orders sought
The respondents now concede that their application for partial summary dismissal should be dismissed but, for reasons that will become apparent in these reasons, say that there should be orders as follows:
“1. The applicants and Greg Finlayson pay the respondent’s costs of this proceeding on an indemnity basis forthwith upon taxation.
2. The respondent’s costs be referred to taxation under Part 40 of the Federal Court Rules 2011 to be calculated in accordance with the Federal Court Scale of Costs.
3. The proceeding is stayed until payment of the respondent’s costs as taxed in accordance with order 2.”
The applicants oppose the orders sought. They say the appropriate order for costs is that costs be ordered in the applicants’ favour for costs incurred after 2 December 2011 and that there be no order for costs incurred prior to that date.
It is necessary to look closely at the conduct of the applicants and their solicitor, Mr Finlayson, to determine the cost orders that would be appropriate.
The proceedings
The applicants, Alan Brewer and Brewer Family Investments Pty Ltd (“Mr Brewer” and “BFI” respectively), commenced these proceedings on 7 October 2010. The proceedings were brought against the first respondent, Kaye Martin (“Ms Martin”) a director of both the second respondent, Amici Corporate Pty Ltd (“Amici Corporate”) and the third respondent, Amici Property Holdings Pty Ltd (“Amici Property”).
The brief facts put forward in the Statement of Claim supporting the Initiating Application were as follows: Mr Brewer became an employee of Amici Corporate for the period 2 February 2009 until 27 April 2010. His employment was terminated summarily on 27 April 2010 with three months pay being paid in lieu of notice. The principal claims were that during September and October 2009 BFI agreed to pay Amici Corporate the sum of $170,000 for shares in it. The applicants’ case is that, firstly, the respondents made false representations that resulted in Mr Brewer accepting employment with Amici Corporate and that, secondly, the respondents made further misrepresentations resulted in BFI paying the sum of $170,000 earlier referred to.
The applicants sought the following final orders:
“1. Judgment for a debt of Amici Property to Brewer in the sum of $67,687.00.
2. Damages as against Amici Property for breach of contract in the sum of $18,707.17.
3. Damages as against Martin, Amici Corporate and Amici Property for breach of certain statutory provisions.
4. Restitution of funds paid by Brewer Family to Amici Corporate in the sum of $170,000.
5. An injunction be granted and Amici Corporate be restrained from enforcing the agreement.
6. Interest.
7. Costs.”
The litigation did not proceed smoothly. On 24 November 2010, the respondents were successful in having the applicants’ Statement of Claim struck out. The applicants were ordered to file and serve an affidavit annexing a proposed amended statement of claim on or before 21 January 2011. The respondents’ costs were reserved.
The applicants made a number of attempts to put forward a Statement of Claim that could be filed. Problems with the particulars provided in these attempts continued to occur. On 12 April 2011, judgment was reserved in relation to an application by the respondents for the Court to disallow the applicants from filing its latest machination of the Statement of Claim.
Respondents’ Application in a Case
Before judgment could be delivered, on 14 June 2011 an Application in a Case was filed by the respondents seeking the following orders.
“1. Pursuant to (rule 13.10) of the Federal Magistrates Court Rules, or alternatively pursuant to the inherent jurisdiction of the Court, the claim of the second applicant be dismissed summarily.
2. Further, or alternatively, pursuant to Order 6 Rule 9(b) of the Federal Court Rules, that the second applicant cease to be a party to the proceedings.
3. The second applicant pay the respondent’s costs of the proceedings and this application on an indemnity basis.”
To understand the reasons for this application, it is necessary to examine the events that led up to the Application in a Case being filed on 14 June 2011.
In about April 2011, the respondents conducted a company search of BFI and discovered that Mr Brewer and his wife, Louise Brewer (“Mrs Brewer”), were directors of BFI, that Mr Brewer was Secretary of BFI and that on 22 October 2010, BFI ceased to be a special status proprietary company. It is suggested on behalf of the respondents that if BFI is not a special status proprietary company, it can not be trustee of a superannuation fund.
Solicitors for the respondents also conducted a search of a company named Ruthwill Pty Ltd (“Ruthwill”) and discovered that Ruthwill was incorporated on 22 October 2010, that the directors of Ruthwill were Mr and Mrs Brewer, that the Secretary of Ruthwill was Mr Brewer and that Ruthwill was classified as a Superannuation Trustee Proprietary Company. Understandably, solicitors for the respondents concluded that BFI was no longer trustee of the family trust and had been replaced by Ruthwill. If this were the case, BFI’s claim would fail.
On 20 April 2011, solicitors for the respondents wrote a letter to solicitors for the applicants attaching the company searches for BFI and Ruthwill and requesting that solicitors for the applicants “… explain (BFI’s) continued prosecution of the claim in light of its change in corporate status”.
Solicitors for the applicants did not respond to the email.
On 27 April 2011, solicitors for the respondents sent a further email to solicitors for the applicants requesting a response to their email of 20 April 2011.
On 27 April 2011, solicitors for the respondents received a facsimile from solicitors for the applicants requesting that an explanation be provided about the relevance of the company searches attached to the email of 20 April 2011 “… on the matters currently before the Court.”
On 9 May 2011, solicitors for the respondents sent an email to solicitors for the applicants which stated in part (emphasis added):
“As you are aware, your clients are attempting to articulate two claims against our clients. The first relates to Mr Brewer’s employment and the second is brought by Brewer Family Investments Pty Ltd as trustee for the Brewer Inc. Super Fund relating to its subscription for shares in Amici Corporate Pty Ltd.
The documents supplied to you in our email of 27 April indicate that Brewer Family Investments, being the plaintiff in this proceeding, that purports to make a claim under the share subscription agreement (which agreement is specifically pleaded in paragraph 33.2 of the latest draft proposed statement of claim) no longer has capacity to bring that claim. Put simply, your client changed the trustee of the Brewer Inc. Super Fund on 22 October 2011, prior to the first directions hearing in this proceeding, yet it has continued to pursue claims on behalf of Brewer Family Investments as trustee of the Brewer Inc. Superannuation Fund. This significant matter has never been brought to our attention or the attention of the Court.
We consider this matter to be fatal to the claim alleged by Brewer Family Investments and accordingly, unless Brewer Family Investments agrees to discontinue its claim and pay our client’s costs on a party/party basis, our client shall make application to strike out the claim brought by Brewer Family Investments on this basis and seek costs on an indemnity basis. In seeking those costs, our client shall rely on the rules of court and on cases such as Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 and Colgate-Palmolive Co. v Cussons Pty Ltd (1993) 118 ALR 248, on the ground that the claim was pursued contrary to the known facts and clearly established law.
We consider these circumstances to raise serious questions about your firm having litigated this matter, and you having signed a certificate under the Federal Court Rules. Accordingly, our client also reserves the right to seek costs against your firm.
Kindly provide your response by noon on 12 May 2011.”
A response was not provided within the time stated in the email as a result of which, on 14 June 2011, the respondents filed their Application in a Case with supporting affidavit with a return date of 4 July 2011.
When the matter came before the Court on 4 July 2011 solicitors for the applicants appeared but, somewhat surprisingly, no-one appeared for the respondents. The Court noted before the orders were made that day that “ … a decision on the interim argument in relation to the pleadings heard on 12 April 2011 will be postponed until the outcome of the application lodged by email on 14 June 2011 is determined”. The Court considered this to be an appropriate course as the outcome of the application to summarily dismiss BFI’s claim would, if successful, at very least have a significant effect on the content of the pleadings. The respondents’ Application in a Case to summarily dismiss the claim brought by Brewer Family was adjourned and listed for hearing on 11 October 2011. A regime was set for the filing of affidavits and outlines.
Respondent’s subpoenas
On 7 September 2011, the respondents had subpoenas issued directed to the proper officers of Lachlan Wealth Management Limited and Ruthwill Investments Pty Ltd. The subpoena to Lachlan Wealth Management Limited sought production of the following documents:
“1.…
2.In the period 1 July 2010 to 31 August 2011, all correspondence relating to the Brewer Inc. Super Fund passing between Mr Alan Brewer and/or Mrs Louise Brewer, and any of:
(a) Peleton Private Clients Ltd;
(b) Notolep Private Clients Ltd;
(c) Lachlan Wealth Management Ltd and any associated entity, as that term is described in s.50AAA of the Corporations Act 2001;
3.All signed resolutions of the trustees for the time being of the Brewer Inc. Super Fund in the period 1 July 2010 to 31 August 2011.”
The subpoena directed to Ruthwell Investments Pty Ltd sought the following documents:
“1.…
2.A copy of the Brewer Inc. Super Fund Trust Deed and any amending deeds.
3.A copy of the signed Financial Position Statement and the Operating Statement for the Brewer Inc. Super Fund for the financial year ending 30 June 2011.
4.A copy of the Income Tax Return of the Brewer Inc. Super Fund for the year ending 30 June 2011.
5.A copy of any resolution by which Ruthwell Investments Pty Ltd consented to becoming or acting as the Trustee of the Brewer Inc. Super Fund.”
Solicitors for Ruthwell Investments Pty Ltd filed a Notice of Objection to Subpoena on 4 October 2011.
The matter came before the Court on 5 October 2011 at which time the Court heard submissions about Ruthwill’s objection. The objection was dismissed and the respondents’ costs were reserved. Further orders were made vacating the interim hearing listed for 11 October 2011 and the matter was re-listed for interim hearing on 21 November 2011.
During submissions at the hearing on 5 October 2011 Mr Finlayson, solicitor for the applicants, informed the Court in response to questions from the Court that Ruthwell was not the current trustee of the Brewer Superannuation Fund and that the current trustee was BFI. As will be seen from my findings later in these reasons, Mr Finlayson was not being frank and honest with the Court.
On 21 November 2011, substantial submissions were heard but not completed in relation to the respondents’ application for summary dismissal of BFI’s claim. Issues arose during the hearing that required the parties’ further consideration and submissions. Documents produced by subpoena by Lachlan Partners Advisory Service, and tendered by the respondents included a document titled “Brewer Inc. Superannuation Trust Deed” and dated 13 September 2007. That deed indicated that BFI was appointed trustee of the Brewer Inc Superannuation Fund (“Fund”).
A further document subpoenaed and tendered in the summary dismissal application was a document titled “Brewer Inc Superannuation Fund Deed of Amendment and Consolidation” and dated 22 October 2010. It was in the following terms (emphasis added):
“THIS DEED is made on 22 October 2010
BY: Ruthwill Investments Pty Ltd
ACN 146 982 603
8 Aquarius Court
DONVALE VIC 3111Hereby known as “The New Trustee”
AND: Brewer Family Investments Pty Ltd
ACN 127 512 896
8 Aquarius Court
DONVALE VIC 3111Hereby known as “The Resigning Trustee”
WHEREAS:
A.By deed made on 13 September 2007, to be referred to as the “Original Deed” an indefinitely continuing superannuation scheme was established to provide superannuation benefits for the members.
B.The Original Deed has been amended from time to time so that the Original Deed and all its duly authorised amendments shall be referred to as the “Original Deed (as amended)”.
C.The superannuation scheme referred to in Recital A is named as the Brewer Inc. Superannuation Fund and for the purposes of this deed shall be referred to as “The Fund”.
D.The operative provisions of the Original Deed (as amended) and any Rules attached to the Original Deed (as amended) shall for the purposes of this deed be known as the “Governing Provisions” of The Fund.
E.“The Rules” shall mean the Rules as attached to this Deed.
F.All the parties who execute this Deed hereby resolve and confirm that:
1.all of the beneficiaries of The Fund have executed this Deed;
2.notwithstanding any prior event or contrary term, condition, rule or requirements contained within the Original Deed (as amended), the Original Deed (as amended) is now substituted and replaced by deleting all of the recitals, definitions, operative terms and schedules contained within the Original Deed (as amended) and replacing same with the recitals, definitions, operative terms and schedules contained within this Deed; and
3.the amendments made by this Deed are binding and effective notwithstanding any prior event or contrary term, condition, rule or requirement contained within the Original Deed (as amended), including without limitation any requirement for consent. The Trustee and members now wish to replace the Governing Provisions of The Fund by the adoption of the operative provisions and rules as contained in this Deed.
G.The Resigning Trustee is the trustee of The Fund.
H.The Resigning Trustee is desirous of resigning as trustee and appointing a new trustee. The New Trustee consents to act as trustee of The Fund.
NOW THIS DEED WITNESSES as follows:
1. The Governing Provisions of The Fund are, without termination of The Fund, now governed by the provisions of the Deed and the Rules attached which incorporate the Original Deed (as amended).
2. The assets of The Fund will continue to be vested in the Trustee upon trust to apply the same in the manner set out in The Rules.
3. The Fund shall be managed and administered in all respects accordingly to The Rules.
4. The power of appointing and removing Trustees shall be provided in The Rules.
5. The provisions of this Deed may be amended in the manner set out in The Rules.
6. The primary purpose of The Fund is to provide old age pensions to members upon eligibility.
7. Operations of The Fund, conflicts and issues of law or practice between the Original Deed (as amended) and the Deed that may arise with this Deed are to be settled by reference to The Rules.
8. The trustee hereby declares that the amendment of the provisions of the Trust Deed and Rules affected by virtue of the Deed does not prejudicially vary or affect the benefits already accrued to any member of The Fund.
9. The Deed and The Rules shall be governed by the laws of Victoria.
10. The New Trustee is hereby appointed as trustee of The Fund. The Resigning Trustee is hereby removed as trustee of The Fund.”
It will be seen that the information in the deed of 22 October 2010 conflicted with the statement made in open court by Mr Finlayson, solicitor for the applicants, on 5 October 2011 as the deed stated that Ruthwill became trustee of the Fund on and from 22 October 2010.
The Court advised the parties on 21 November 2011 that the Court’s existing commitments prevented it from adjourning the matter to a date earlier than 6 March 2012. The matter was adjourned to 6 March 2012 and orders were made for a regime of filings further affidavits and outlines of argument in preparation for the resumption of the hearing on the adjourned date.
On 2 December 2011 a deed prepared by Mr Finlayson was executed by BFI, Ruthwill and Mr and Mrs Brewer. A copy of the executed deed was sent by Mr Finlayson to solicitors for the respondents with a covering letter suggesting that the Deed should remove any doubt about BFI being the trustee of the Fund and inviting the respondents to discontinue their application for summary judgment. The deed was in the following terms (emphasis added):
“Deed of Confirmation of Trustee of the Brewer Inc Superannuation Fund
Between:
BREWER FAMILY INVESTMENTS PTY LTD (CAN 127 512 896) (“BFI”);
8 Aquarius Court, Donvale in the State of Victoria
RUTHWILL INVESTMENTS PTY LTD (CAN 146 982 603) (“Ruthwill”);
8 Aquarius Court, Donvale in the State of Victoria
ALAN WILLIAM BREWER and LOUISE RUTH BREWER (“the Members”).
8 Aquarius Court, Donvale in the State of Victoria
Made the 2nd day of December 2011
RECITALS
A. The Brewer Inc Superannuation Fund (“the Fund”) was established by a deed poll entitled “Brewer Inc Superannuation Fund Trust Deed” (“the Fund deed”) executed by BFI on the 13th September 2007 (“the establishment date”).
B. BFI was appointed trustee of the Fund by the Fund deed.
C. The Members are the only members of the Fund and have been the only members of the Fund at all times since the establishment date.
D. A document entitled “Deed of Amendment and Consolidation” was executed by BFI and Ruthwill on or about 22 October 2010. (“the 22 October 2010 deed”).
E. The 22 October 2010 Deed purports to record the resignation of BFI as trustee of the Fund and the appointment of Ruthwill as trustee of the Fund and purports to amend the terms of the Fund deed.
F. The Recitals to the 22 October 2010 deed are inaccurate in that:
a. Recital B records that the Fund Deed, referred to as the Original Deed, has been amended from time to time, whereas the true position is that is was not.
b. Recital E records the attachment of Rules to the 22 October 2010 Deed whereas the true position is that no Rules were attached.
c. Recital F records that all the beneficiaries of the Fund executed the 22 October 2010 Deed whereas the true position is that they did not.
d. Recital F.3 records that the members of the Fund wished to replace the “Governing Provisions” as defined in the 22 October 2010 Deed with the adoption of the operative provisions and rules as contained in the 22 October 2010 Deed whereas the true position is that they did not.
G. At no time prior to the execution of the 22 October 2010 Deed nor subsequent to its execution have the Members voted to appoint Ruthwill trustee of the Fund.
H. BFI has continued to act as trustee of the Fund at all times since the execution of the 22 October 2010 deed.
I. BFI is an applicant in Federal Magistrates Court of Australia Action No. ADG 276 of 2010 (“Action No 276 of 2010”) in which it has sought remedies upon causes of action held by it in its capacity as trustee of the Fund.
J. BFI has, since the commencement of Action No. 276 of 2010, conducted the proceedings for the benefit of the Fund.
K. Each of BFI, Ruthwill and the Members hold the view that the 22 October 2010 deed was ineffective to cause BFI to cease to be the trustee of the Fund and to appoint Ruthwill as trustee of the Fund, to amend the terms of the Fund deed and in all other respects.
L. Each of BFI, Ruthwill and the Members wish to eliminate any doubt as to the identify of the trustee of the Fund and enter into this deed for that purpose.
OPERATIVE PART
1. The parties to this deed warrant the accuracy of the recitals to this deed.
2. The parties to this deed agree and acknowledge that:
2.1BFI has at all times been and remains the trustee of the Fund.
2.2The terms of the Fund deed and the terms upon which the Fund is held on trust by the trustee of the Fund have at all times been and remain those set out in the Fund deed as at the date of its execution and any Rules made pursuant to it.
2.3BFI has conducted Action No. 276 of 2010 at all times for the benefit of the Fund.
2.4BFI is to be indemnified out of the assets of the Fund in respect of all costs incurred in the conduct of Action No. 276 of 2010, irrespective of whether such costs or costs orders relate to any period before or after the date of this deed.
3. If, as a matter of law, the 22 October 2010 Deed was effective to vary the terms of the Fund deed, any Rules made under it, or the terms on which the Fund is held by its trustees, then:
3.1Any variation to the Fund Deed or the terms on which the Fund is held by its trustee as was effected by the 22 October 2010 Deed is revoked.
3.2The parties agree that the terms on which the Fund is held by its trustee shall be those set out in the Fund Deed in the terms of that deed as at the date of its execution.
3.3The parties agree that the terms of the Fund Deed shall be taken to have applied unchanged for the whole of the period between 22 October 2010 and the date of execution of this deed.
4. If, as a matter of law, the 22 October 2010 Deed was effective to record the resignation of BFI as trustee of the Fund and to effect the appointment Ruthwill as trustee of the Fund in its place, then Ruthwill in its capacity as trustee of the Fund:
4.1Acknowledges that BFI has conducted Action No 276 of 2010 as constructive trustee for the benefit of the Fund.
4.2Ratifies and adopts all conduct by BFI in Action No. 276 of 2010 as conduct for the benefit of the Fund.
4.3Agrees to indemnify BFI in respect of all costs incurred and in respect of any costs orders as may be against it in Action No. 276 of 2010, irrespective of whether such costs or costs orders relate to any period before or after the date of this deed.
5. If, as a matter of law, the 22 October 2010 Deed was effective to record the resignation of BFI as trustee of the Fund and to effect the appointment Ruthwill as trustee of the Fund in its place, then the Members:
5.1Acknowledges that BFI has conducted Action No. 276 of 2010 as constructive trustee for the benefit of the Fund.
5.2Agree that BFI be indemnified out of the assets of the Fund in respect of all costs incurred and in respect of any costs orders as may be made against it in Action No. 276 of 2010, irrespective of whether such costs or costs orders relate to any period before or after the date of this deed.
6. If, as a matter of law, the 22 October 2010 Deed was effective to record the resignation of BFI as trustee of the Fund and to effect the appointment Ruthwill as trustee of the Fund in its place, then:
6.1Subject to clause 4 hereof, Ruthwill resigns as trustee of the Fund.
6.2BFI consents to its appointment as trustee of the Fund.
6.3The Members agree to the resignation of Ruthwill as trustee of the Fund and to the appointment of BFI as trustee of the Fund.
6.4The Members agree that clause 6.3 shall have the effect of the members of the Fund by a majority vote removing Ruthwill as trustee of the Fund and appointment BFI trustee of the Fund.
7. To the extent that 22 October 2010 Deed may have any operation or effect following execution of this deed, the 22 October 2010 Deed is discharged and released.”
The fact that this Deed was prepared by Mr Finlayson makes it clear that he knew that there was doubt about whether BFI was in truth the current trustee of the Fund.
On 6 March 2012, the Court was advised that for unavoidable personal reasons, Senior Counsel for the respondents was unable to appear. The matter was adjourned by consent to 15 June 2012 for further hearing with one day set aside.
On 15 June 2012 Mr Brewer and Mr Finlayson were both cross-examined on their affidavits and further lengthy submissions were put. The matter was then adjourned to 22 June 2012 for further submissions.
On 22 June 2012 Mr Burnett of counsel appeared for the applicants and made an application for a short adjournment. He informed the court that Mr Dal Cin, who had been acting as counsel for the applicants, had recently informed the applicants’ solicitors that he would no longer be acting. Mr Burnett sought an adjournment so that he could read the extensive materials involved and prepare for the continuation of the hearing. The interim hearing was adjourned to 17 July 2012 for further hearing.
On 17 July 2012, final submissions were put and judgment was reserved.
Conclusions
I find that Mr Finlayson was not being frank and honest with the Court when he said on 5 October 2011 that the trustee of the Brewer Superannuation Fund was BFI and not Ruthwill.
I am also satisfied that Mr Brewer knew of the importance and relevance of the Deed of 22 October 2010 but decided to withhold the document from the respondents and from the Court.
I note that the evidence before me indicates that Mr Finlayson’s conduct has been referred to the Legal Practitioner’s Conduct Board.
The Court has an obligation to proceed without undue formality and to use streamlined processes[1]. Parties must avoid undue delay, expense and technicality. The applicants and their lawyers were obliged to provide the respondents and the Court with the Deed of 22 October 2010 as soon as it became apparent that the respondents had concerns about BFI’s capacity to bring the action.
[1] Section 42 Federal Magistrates Act; r.1.03 Federal Magistrates Court Rules 2001.
The document certainly should have been brought to the Court’s attention when the Court asked Mr Finlayson on 5 October 2011 who the trustee of the Fund was. Mr Finalyson could have responded to the Court’s question in a number of ways, he could have declined to answer. He could have said that he was uncertain of the position. He could have said he would take advise and inform the court at a later point in time if he had wished to do so. Instead he decided to say that BFI was the trustee and to say nothing about the deed of 22 October 2010. What is of particular concern is that neither the applicants nor Mr Finlayson took immediate steps to correct the false statement made.
The conduct of Mr Finlayson and Mr Brewer has put the respondents to significant extra expense and has delayed the proceedings. I consider a cost order should be made in the respondents’ favour.
Orders sought by the respondents
The respondents seek costs orders on an indemnity basis, that there be payment forthwith and that there be a stay until the costs have been paid.
Indemnity costs
I should only order indemnity costs if there is “… some special or unusual feature in the case to justify the Court in departing from the ordinary practice.”[2] The conduct of the applicants and Mr Finlayson provides, in my opinion, sufficient cause to justify making an order for indemnity costs.
[2] Colgate-Palmolive Co. v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
Costs payable forthwith
The respondents submit that costs should be payable forthwith. It is appropriate to make an order for costs that are to be taxed and payable forthwith where it is in the interests of justice to do so[3], when the final determination of the proceedings is far away[4] or where there is unreasonable conduct by the other party.
[3] Thunderdome Racetiming & Scoring Pty Ltd & Anor v Dorian Industries Pty Ltd & Anor (1992) 36 FCR 297 at 312.
[4] Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (unreported decision of Lindgren J on 18 August 1995).
Branson J in Life Air Bag Company of Australia Pty Ltd v Life Air Bag Company (New Zealand) Ltd[5] referred to Kiefel J in Harris v Cigna Insurance Australia Ltd[6] and said:
“[Kiefel J’s] approach appears to reflect a view, with which I am in agreement, that the demands of justice may well require a departure from the ordinary rule that costs are to be paid after the completion of proceedings, where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in the handling of the proceeding with competence and diligence.”
[5] (unreported decision of Branson J on 22 May 1998).
[6] (1995) ATPR 41 – 445.
In the present case, the unreasonable conduct on behalf of the applicants and Mr Finlayson justifies an order that costs be payable forthwith.
Stay until costs paid
The respondents submit that there should be a stay of proceedings until the costs are paid as there has been an abuse of process of the Court. It is submitted that the abuse resulted in a waste of the Court’s time and the waste of the respondents’ time and money and that the circumstances are a sufficient abuse of process to order a stay.
In the case of Wolton v Gardner[7] their Honours Mason CJ, Dean and Dawson JJ said:
“… abuse of process extends to all those categories of cases in which the processes and procedures of the Court which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness.”
[7] (1993) 177 CLR 378 at 393.
I take into account these further submissions put on behalf of the respondents:
· “The continuation of proceedings by the wrong party; a party which was, for some 14 months, not the trustee of Brewer Superannuation Fund, for the benefit of which the shares in the respondent were acquired ….
· The deception in the face of the Court (and thus allowing it to proceed under the misapprehension) in stating, on numerous occasions, that BFI was still the trustee, at the hearing on 4 July 2011, in the Brewer first affidavit sworn on 31 August 2011, at the hearing on 5 October 2011, and in the Finlayson second affidavit sworn on 26 October 2011.
· The misleading of the Court in not providing a copy of the 22 October 2010 Deed for some 13 months and after the issue was raised in April 2011.
· The deliberate failure to provide a copy of the Deed in answer to the subpoena issued to Ruthwell Investments Pty Ltd. The protestations of the first applicant and Mr Finlayson (albeit equivocally) to the contrary effect cannot be accepted in view of the objective facts ….
· … the abject failure of the applicants to abide by the most obvious and rudimentary disclosure obligations would have led to the deception of the Court if the respondents had not subpoena Lachlan Advisory Services. This misconduct has caused the respondent to incur all the costs of the action from the date of the October 2010 Deed until the present when a plain statement of the facts and a production of the Deed would inevitably (have) led to either the joinder of Ruthwell Investments Pty Ltd as an applicant, the joinder of the second applicant or the creation of a Deed purporting to have the effect of the 2nd December Deed. If the applicants had been candid with the Court, no application of the type issued by the respondents on 14th June 2011 would have been necessary. Because of the deception, the case has not proceeded at all. There is no extant statement of claim, and the Court is currently considering a 4th version of the statement of claim.
· That deception, having caused the respondents to have incurred their costs since the date of the Deed can only properly be cured once the respondent’s are returned to the position they would have been in had this matter been prosecuted properly and expeditiously and in accordance with the applicant’s obligations as a litigant in this Court.
· The respondent’s submit that the only way to restore their position, obviate this misconduct and right the action is to order that the matter be stayed unless or until the applicant’s pay the respondents’ costs.”
In my view, the conduct of the applicants and their legal representative amounts to an abuse of process of the Court that justifies an order for costs in the respondents’ favour. I propose to order costs on an indemnity basis for the costs incurred by the respondents for the period from 20 April 2011, at which time solicitors for the respondents sent a letter to solicitors for the applicants requesting an explanation why the applicants continued to have BFI as an applicant prosecuting a claim, until 2 December 2011, at which time solicitors for the applicants sent a copy of the Deed of Confirmation of Trustee to solicitors for the respondents. The costs will be payable forthwith. I also propose to make an order that there be a stay of action until the costs have been paid.
I make the orders to be found at the beginning of these reasons.
I will hear the parties and Mr Finlayson about any consequential orders.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Simpson FM
Date: 11 April 2013
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