Clunies-Ross v Davis [No 3]
[2024] WASC 95
•26 MARCH 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CLUNIES-ROSS -v- DAVIS [No 3] [2024] WASC 95
CORAM: WHITBY J
HEARD: ON THE PAPERS
DELIVERED : 26 MARCH 2024
FILE NO/S: COR 114 of 2020
BETWEEN: JOY DELISSA CLUNIES-ROSS
Plaintiff
AND
GAVIN JOHN DAVIS
First Defendant
SOIL SOLVER PTY LTD
Second Defendant
SUE CHRISTIANSEN
Third Defendant
TARAU PTY LTD
Fourth Defendant
FILE NO/S: CIV 1154 of 2021
BETWEEN: SOIL SOLVER PTY LTD
First Plaintiff
GAVIN JOHN DAVIS
Second Plaintiff
AND
JOY DELISSA CLUNIES-ROSS
First Defendant
WARWICK WILLIAM HOWARD
Second Defendant
Catchwords:
Practice and procedure - Costs - Costs determination - Costs order - Varying interlocutory order - Costs thrown away - Amendments to statement of claim - Trial vacated
Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1935 (WA)
Result:
Order made as to costs
Category: B
Representation:
COR 114 of 2020
Counsel:
| Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Cullen Macleod Lawyers |
| First Defendant | : | Hale Legal |
| Second Defendant | : | Hale Legal |
| Third Defendant | : | Hale Legal |
| Fourth Defendant | : | Hale Legal |
CIV 1154 of 2021
Counsel:
| First Plaintiff | : | No appearance |
| Second Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Hale Legal |
| Second Plaintiff | : | Hale Legal |
| First Defendant | : | Cullen Macleod Lawyers |
| Second Defendant | : | Cullen Macleod Lawyers |
Case(s) referred to in decision(s):
Ashwin v Minara Resources Ltd [No 2] 2010 WASC 330
Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44
Caratti v Caratti [2012] WASC 357
Clunies-Ross v Davis [2020] WASC 461
Commonwealth of Australia v Albany Port Authority [2006] WASCA 185
Re Sinanovic's Application (2001) 180 ALR 448
Sobey v Commission of Taxation [2008] FCA 1621
Wilkshire v Commonwealth of Australia (1976) 9 ALR 325
WHITBY J:
The plaintiff applies for the following costs orders against the defendants:[1]
(1)pursuant to O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA) (RSC), the first and third defendants pay the plaintiff's costs of the third defendant's unsuccessful application to remove the third defendant (application to remove party);
(2)pursuant to O 66 r 1(1) of the RSC, the first defendant pay the plaintiff's costs as reserved by the order of Master Sanderson on 22 February 2022 on the defendants' unsuccessful strike out application (strike out application);
(3)pursuant to O 66 r 1(3) of the RSC, the first defendant pay the plaintiff's costs thrown away by reason of the amendments made without leave by a substituted defence filed 14 April 2023 and an amended substituted defence filed 31 May 2023, payable forthwith (application for costs thrown away by amendment); and
(4)pursuant to O 66 r 1(3) of the RSC, the first defendant pay the plaintiff's costs thrown away in CIV 1154 of 2021 in compliance with the orders made by consent on 18 October 2023 (application for costs thrown away because trial vacated).
[1] The application for costs is made by the plaintiff's chamber summons filed 31 October 2023.
The plaintiff also seeks an order vacating an order that the plaintiff pay the first and second defendants' costs of her unsuccessful application for leave to prosecute claims of breach of directors' duties (application to vacate costs).
The plaintiff relies upon the affidavit of Joshua Stuart Burton sworn on 12 December 2023 (Burton Affidavit), submissions filed on 12 December 2023 and reply submissions filed on 17 January 2024.
The defendants rely upon submissions filed on 8 January 2024.
The parties have consented to the determination of the plaintiff's applications for costs on the papers.
Background
By originating process filed on 4 September 2020, the plaintiff commenced these proceedings against the defendants seeking relief pursuant to s 232 and s 233 of the Corporations Act 2001 (Cth) (Corporations Act). The plaintiff alleged that the affairs of the second defendant were being conducted in a manner which was oppressive and unfairly prejudicial, and she sought a buy-out order of her shares in the second defendant by the first defendant.
At a hearing before Master Sanderson on 5 November 2020, the first and third defendant moved for orders to remove the third defendant, for the matter to proceed on pleadings and to permit the first and second defendants to file a counterclaim. Master Sanderson ordered that the plaintiff file a statement of claim, the defendants (other than the second defendant) file a defence and that evidence be by affidavit.
On 11 December 2020, Master Sanderson decided that the third defendant was a proper party to these proceedings and ordered that the first and third defendants' application to remove the third defendant be dismissed with costs in the cause.[2]
[2] Clunies-Ross v Davis [2020] WASC 461.
On 30 November 2020, the plaintiff filed a statement of claim. On 21 December 2020, the first and third defendants each filed a defence.
From late 2020 through to early 2021, the defendants raised concerns with the plaintiff's statement of claim and requested further and better particulars. As a result, the plaintiff filed an amended statement of claim and provided further and better particulars.
On 5 March 2021, the first and third defendants commenced a separate proceeding against the plaintiff and Warwick Howard. This matter is CIV 1154 of 2021 (CIV 1154).
On 30 March 2021, the plaintiff filed a further amended statement of claim. On 11 November 2021, the defendants applied to strike out the amended statement of claim. On 22 February 2022, Master Sanderson dismissed the strike out application and ordered the costs be reserved.
On 25 March 2022, the plaintiff applied for leave to prosecute the first defendant for breach of director duties, an order to allow inspection of the second defendant's books, an order to require the defendants to prepare financial reports, and to join Tarau Pty Ltd (a member of the second defendant and whom the plaintiff alleged was the alter-ego of the first defendant) as the fourth defendant.
The parties consented to the joinder of the fourth defendant at the special appointment hearing before Master Sanderson on 23 June 2022.
On 13 September 2022, the master found that there was no reason to order preparation of financial reports and inspection of books in circumstances where the second defendant had instructed accountants to prepare financial statements and for copies to be provided to the plaintiff. The master dismissed the plaintiff's application for leave to prosecute the first defendant in a derivative action and ordered the plaintiff to pay the defendants' costs of the application forthwith.
On 14 April 2023, the first and second defendant filed a joint substituted defence. On the 31 May 2023, the first and second defendants filed an amended substituted defence.
The trial of these proceedings and CIV 1154 was listed to commence on 13 November 2023.
On 20 October 2023, the second defendant went into voluntary administration. As a result, on 3 November 2023, I made orders that the trial to be vacated.
On 31 October 2023, the plaintiff filed a chamber summons seeking, amongst other things, costs orders in relation to the interlocutory applications referred to above.
Legal principles
Before considering the merits of each of the costs orders sought by the plaintiff, I will outline the relevant legal principles that inform that consideration.
Order 66 r (1) of the RSC provides that, without limiting the general discretion conferred on the court by s 37 of the Supreme Court Act 1935 (WA), the court will generally order that the successful party to any action or matter will recover their costs. This is referred to as the general rule that 'costs follow the event'.
Unique cases aside, a successful party should receive their costs. This principle, known as 'costs follow the event', has been so greatly adopted that it is incorporated within the RSC O 66 r 1 and often referred to as the 'usual rule'.
Costs thrown away refers to work reasonably incurred that relate to work done and wasted.[3] For an order for costs thrown away to be made, the work conducted must be reasonably incurred and relate to the circumstances in which they have been wasted. A causal connection must be demonstrated between costs incurred and the event in question.[4]
[3] Sobey v Commission of Taxation [2008] FCA 1621 [21].
[4] Ashwin v Minara Resources Ltd [No 2] 2010 WASC 330 [8].
A Supreme Court judge has the inherent power to vary or discharge an order made by another judge on the basis that there is a change in circumstances that make it just and proper to do so.[5]
[5] Re Sinanovic's Application (2001) 180 ALR 448, 450; Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44, 46.
The court is more open to varying interlocutory orders that are procedural in nature, if the judge considering variation is not wrongly assuming an appellate jurisdiction.[6] If an order is objected to on the basis that it was made in error, the objection must be made by way of appeal, noting that appeals from interlocutory orders shall not lie to the Court of Appeal except by leave of the Court of Appeal pursuant to s 101(2)(e) of the Supreme Court Act 1935 (WA).
[6] Wilkshire v Commonwealth of Australia (1976) 9 ALR 325, 330; Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [27].
I now turn to consider each of the costs orders sought by the plaintiff having regard to these legal principles.
Costs of application to remove party
The plaintiff seeks an order that the first and third defendants pay the plaintiff's costs of the third defendant's unsuccessful application to remove the third defendant and that these costs be payable forthwith. The plaintiff says that the court should make this order because:
(1)the order of Master Sanderson that costs of the application to remove the third defendant be in the cause, were made on the understanding that the proceedings would either be settled or final orders would be made;
(2)given that a liquidator has been appointed to the second defendant and the trial has been vacated (and that there is an indefinite stay of the action against the second defendant pursuant to s440D of the Corporations Act), the order that costs be in the cause results in an injustice to the plaintiff;
(3)the first and second defendants have not denied the allegations made in the statement of claim and therefore, the plaintiff says that the allegations are taken to be admitted;
(4)in these circumstances, if these proceedings were to go to trial, the plaintiff would prevail; and
(5)in any event, Master Sanderson's order that costs be in the cause should be vacated on the basis the plaintiff did not have an opportunity to make submissions in relation to costs at the hearing before the master.
The defendants say that the proceedings have only been stayed against the second defendant; the plaintiff is at liberty to pursue her claims against the other defendants. The defendants say that the stay against the second defendant does not prevent final determination or settlement of the proceedings with the other defendants.
In my view, there is no merit in the plaintiff's submission that the fact that the proceedings have been stayed indefinitely against the second defendant undermines the premise upon which the costs order was made by the master. The proceedings have only been stayed against the second defendant. The plaintiff is not prevented from resolving the proceedings against the other defendants either by way of trial or settlement.
Further, the orders of Master Sanderson which the plaintiff seeks to have varied were made on 11 December 2020. The plaintiff's submission that she was denied procedural fairness should not be entertained after such a delay.
Costs of the strike out application
The plaintiff seeks an order that the first defendant pay the plaintiff's costs as reserved by the order of Master Sanderson on 22 February 2022 on the defendants' unsuccessful strike out application.
The plaintiff submits that the master unilaterally ordered costs be reserved without inviting or receiving submissions from either party.
Order 66 r 50 of the RSC provides that when the costs of a motion, application, or other proceeding are reserved by the court or a judge, those costs shall not be allowed to a party without an order of the court or a judge. The usual practice is for the court to make a further order at the conclusion of the proceedings once the outcome of the proceedings has been determined.
Order 66 r 10 of the RSC provides that costs may be dealt with by the court at any stage of the proceedings or after the conclusion of the proceedings, and any order of the court for the payment of costs may require the costs to be paid forthwith notwithstanding that the proceedings are not concluded.
Given the trial has been vacated, I consider that it is appropriate to now make an order that the first defendant pay the plaintiff's costs of the unsuccessful strike out application in which the plaintiff was wholly successful. It is also appropriate that the costs be paid forthwith.
Application for costs thrown away by amendment of defence
The plaintiff seeks an order that the first defendant pay the plaintiff's costs thrown away by reason of the amendments made without leave by a substituted defence filed 14 April 2023 and an amended substituted defence filed 31 May 2023, and that those costs be payable forthwith.
It is not in dispute that the plaintiff has an entitlement, pursuant to O 66 r 3(1) of the RSC, to costs thrown away by reason of the first defendant's amendments to the defence. What is in dispute is whether those costs should be ordered to be paid forthwith.
The defendant submits that, given the substantive proceedings are still on foot, it would be difficult for the quantum of the costs thrown away to be determined by a taxing officer.
Paragraph 3 of Supreme Court Consolidated Practice Direction 4.7.1 provides that as a general rule, where an order for costs is to be made against a party in interlocutory proceedings, the costs will be fixed and ordered to be paid forthwith or by a particular date.
In Caratti v Caratti,[7] Allanson J ordered that costs thrown away by reason of amendment of the statement of claim be paid by the plaintiff forthwith in circumstances where the matter would not be proceeding to trial for years. This was despite a submission by the plaintiff that it would only be possible to say with accuracy what costs were thrown away after the defendants had put on a defence and the proceedings had been heard.[8]
[7] Caratti v Caratti [2012] WASC 357.
[8] Caratti v Caratti [31].
In my view, the appropriate order is that the first defendant pay the plaintiff's costs thrown away by reason of the amendments made without leave by a substituted defence filed 14 April 2023 and an amended substituted defence filed 31 May 2023 and that those costs be payable forthwith. That is for two reasons. Firstly, the trial has been vacated due to the second defendant being placed into liquidation. It is unclear whether the matter will proceed to trial. Secondly, although it may be difficult to quantify the amount attributable to costs thrown away at this stage, that will be the case even at the conclusion of the proceedings.
Application for costs thrown away in CIV 1154 because trial vacated
The plaintiff seeks an order that the first defendant pay the plaintiff's costs thrown away by reason of orders made vacating the trial.
The plaintiff submits that the court should exercise its discretion to order costs thrown away against Mr Davis, the second plaintiff, in CIV 1154. The plaintiff says that the claim by Mr Davis was not stayed as a result of the liquidation of Soil Solver Pty Ltd, the first plaintiff in CIV 1154, rather it was vacated due to Mr Davis' failure to comply with the trial directions of Hill J.
I do not accept that the trial in CIV 1154 was vacated due to the failure of Mr Davis to comply with the trial directions. Rather the trial in CIV 1154 was vacated because it was to be heard together with the trial in these proceedings. The parties consented to the trial in CIV 1154 being vacated on this basis. Further, the plaintiff did not seek to proceed with the trial in these proceedings, instead the plaintiff sought directions to amend their originating summons to include a declaration that the second defendant was solvent.
In my view, there is no proper basis for ordering that Mr Davis pay the costs thrown away as a result of the trial in CIV 1154 being vacated as it cannot be said that it was vacated through the fault of Mr Davis.
Application to vacate costs order
On 13 September 2022, Master Sanderson dismissed the plaintiff's interlocutory application dated 25 March 2022 to bring a derivative action and to inspect the financial records of the second defendant. The master ordered that the plaintiff pay the first and second defendant's costs of the application forthwith.
The plaintiff agreed to pay, and did pay, the sum of $7,500 to the first and second defendants in satisfaction of the costs order.[9]
[9] Burton Affidavit [21]; annexure JSB-8.
The plaintiff submits that the costs order should be vacated as the order was procured by a misapprehension of the true facts. The plaintiff says that the second defendant's books and records in her possession were collected by the first defendant's solicitors around 20 February 2020, and that the defendants' solicitors did not inform the master of this fact. The plaintiff submits that this had an adverse effect on her prospects of success in relation to her application to inspect the second defendant's records.
The plaintiff also says that, given leave for Tarau Pty Ltd to be joined was ultimately not contested, the defendants ought to have consented to the application, rather than oppose it from the outset.
The plaintiff says the appropriate order is that costs be in the cause.
I am of the view that the matters complained of by the plaintiff concern facts found by the master. It is not appropriate for the plaintiff to now make allegations that the defendants' solicitors did not bring important facts to the attention of the master - these matters ought to have been the subject of submissions from the plaintiff's solicitors at the time the costs order was made. I also note that the plaintiff's application primarily related to leave to bring a derivative action - upon which the plaintiff was unsuccessful.
I consider that the appropriate avenue for any challenge of the order of the master is by way of appeal, noting that leave to appeal this interlocutory order is required.
Costs of this application
The defendants seek an order that the plaintiff pay their costs of this application in the event that she is unsuccessful. Each party has had success in either obtaining the orders sought or in opposing them.
I do not require further submissions from the parties in relation to the costs of the application - I am aware of the effect of the very decision I have delivered on the plaintiff's application. I am also reticent to allow the parties an opportunity to incur further costs to argue about costs, and even worse the costs of an application for costs. The costs should end.
It is a matter of overall impression rather than a mathematical equation in determining any apportionment of costs.
I consider that the appropriate costs order is, given that as a matter of overall impression both parties had equal success, no order as to costs.
Orders
For the reasons above I make the following orders:
(1)The defendants pay the costs thrown away by the plaintiff by filing their substituted defence filed on 14 April 2023 and the amended substituted defence filed 31 May 2023 without leave of the court, to be taxed if not agreed, payable forthwith.
(2)The first defendant pay the plaintiff's costs as reserved by the order of Master Sanderson on 22 February 2022 on the defendant's unsuccessful strike out application.
(3)The plaintiff's application for costs orders by chamber summons dated 31 October 2023 is otherwise dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to the Hon Justice Whitby
26 MARCH 2024
0
6
2