Chapel Road v Australian Securities and Investments Commission

[2007] NSWSC 1185

CITATION:	Chapel Road v ASIC (No 3) [2007] NSWSC 1185 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	05/07/2007
JUDGMENT DATE :	25 October 2007
JUDGMENT OF:	Howie J at 1
DECISION:	The plaintiff pay the costs of the defendant's motion of and incidental to the hearing before Harrison AscJ and otherwise the costs of the motion be costs in the cause.
CATCHWORDS:	Practice and Procedure - Costs following successful appeal against strike application.
LEGISLATION CITED:	Corporations Law (now repealed)
CASES CITED:	Chapel Road v ASIC [2007] NSWSC 975 Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
PARTIES:	Chapel Road Pty Ltd v Australian Securities & Investments Commission
FILE NUMBER(S):	SC 2006/20014
COUNSEL:	R.D. Marshall - Appellant J.R. Clarke - Respondent
SOLICITORS:	Creagh & Creagh - Appellant Blake Dawson Waldron - Respondent
LOWER COURT JURISDICTION:	Supreme Court (Associate Judge)
LOWER COURT JUDICIAL OFFICER :	Associate Justice Harrison
LOWER COURT DATE OF DECISION:	29/09/2006

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOWIE J

THURSDAY 25 OCTOBER 2007

2006/20014 - CHAPEL ROAD PTY LTD v AUSTRALIAN
SECURITIES & INVESTMENTS
COMMISSION
JUDGMENT

1 HIS HONOUR: This was an appeal from an Associate Justice striking out a statement of claim on a notice of motion filed by the defendant. On 31 August 2007 the Court gave judgment in this matter. The appeal was allowed in part: see Chapel Road v ASIC [2007] NSWSC 975. The Court stood over the question of costs on the basis that, if there were no agreement between the parties as to the orders that should be made, the parties would file submissions in writing by 14 September 2007. The parties failed to agree on the appropriate order and have both filed written submissions within the specified time.

2 The plaintiff sought damages from the defendant as a result of action taken by the defendant under the provisions of the Corporations Law (now repealed) that for a period of time deprived the plaintiff of a dealer’s licence. The licence was eventually restored to the plaintiff as a consequence of action taken in the Administrative Appeals Tribunal.

3 The plaintiff’s statement of claim filed on 27 January 2006 relied upon two causes of action: malicious prosecution and misfeasance in public office. By letter dated 8 March 2006 the solicitors for the defendant wrote to the plaintiff’s legal representatives stating:

“The Statement of claim does not, for the reasons outlined in this letter:

(a) plead either alleged Cause of Action against the correct defendant/s;
(b) plead either alleged Cause of Action in such a manner as to display a reasonable alleged Cause of Action; or
(c) plead all integers of either Cause of Action.

In these circumstances, we wish to put you on notice that in so far as your client wishes to:

(d) amend the Statement of Claim,
(e) give full or further particulars of any matter alleged in respect of either alleged Cause of Action,

in light of the concerns we have addressed in this letter, it should do so promptly.”

4 Having invited the plaintiff to amend its pleadings and ”clearly particularise each alleged Cause of Action” by a specified time and date, the defendant’s solicitors wrote:

“If the plaintiff declines this opportunity to amend the Statement of Claim so as to address the concerns addressed in this letter, we will consider filing a Notice of Motion to have the Statement of Claim struck out on these grounds. In the event that the plaintiff does not amend by the above date we will prepare our notice based upon the current pleading. Furthermore, if you oppose any attempt to resolve the deficiencies in the Statement of Claim in this mater, we will rely on this letter in relation to any question of costs.”

5 On 24 March 2006, the solicitors for the plaintiff replied to this letter indicating that they disagreed with its contents and threatening that, if a defence were not filed by 30 March 2006, the defendant would enter judgment.

6 The Associate Justice struck out the statement of claim finding that neither cause of action could succeed. The result of the appeal was that the statement of claim was struck out but the plaintiff was given leave to replead the cause of action for misfeasance in public office. In the result many, if not all, of the defendant’s criticisms of the statement of claim were justified. The cause of action for malicious prosecution could not succeed because there was, contrary to the view taken by the Associate Justice, no reasonable prospect that such a claim would lie in respect of an administrative proceeding and, in any event, the proceedings had not terminated favourably to the plaintiff. The claim for misfeasance in public office was unarguable based upon the conduct of the proceedings before the defendant and those claims that might succeed were poorly drafted and confusing.

7 The plaintiff had been put on notice by the defendant that its pleading were defective for substantially the reasons that resulted in the orders made in this Court. The plaintiff was advised that it should seek to redraft the statement of claim in order to amend these defects but it did not seek to do so.

8 True it is that the plaintiff was better off after the appeal from the decision of the Associate Justice than it was before, but that was merely because it was provided the opportunity to replead one of its allegations rather than have the whole of the statement of claim struck out. If that is to be considered as a successful defence of the notice of motion seeking the striking out of the statement of claim, it was almost pyrrhic and was at least very limited and possibly only temporary. Had the plaintiff reasonably reconsidered its pleadings in response to the letter from the defendant, it might have avoided the proceedings that have occurred so far. Counsel for the plaintiff quite responsibly during the course of the hearing recognised that there were difficulties with both causes of action: in the case of the malicious prosecution action, there was the problem of the application of that action to administrative proceedings and in respect of the action for misfeasance in public office, he abandoned the most substantial allegation in light of the decision of the High Court in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129, a decision to which the defendant had referred in its letter.

9 It is trite that in the normal case costs follow the event. The plaintiff maintains that the appropriate order is that the costs should be costs in the cause. The defendant argues that it was successful and should receive and order in its favour. However it contended that there was no cause of action manifest in the statement of claim and it lost that argument.

10 The plaintiff suggested an alternative order even though it acknowledged that it was “weighted towards the defendant”. It seems to me that this proposed order suits the justice of the case.

11 The order is:

The plaintiff pay the costs of the defendant’s motion of and incidental to the hearing before Harrison AscJ and otherwise the costs of the motion be costs in the cause.
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20/11/2013 - case title amended - Paragraph(s) coversheet