Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 2] - [2017] WASC 61

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: COMMONWEALTH BANK OF AUSTRALIA -v- THE LAW DEBENTURE TRUST CORPORATION PLC [No 2] [2017] WASC 61

CORAM: PRITCHARD J

HEARD: 2 MARCH 2017

DELIVERED : 16 MARCH 2017

FILE NO/S: CIV 2061 of 1996

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Plaintiff
NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937)
Second Plaintiff
SOCIETE GENERALE AUSTRALIA LTD (ACN 002 093 021)
Third Plaintiff
STANDARD CHARTERED BANK AUSTRALIA (ACN 008 262 897)
Fourth Plaintiff
WESTPAC BANKING CORPORATION (ARBN 007 457 141)
Fifth Plaintiff
HONGKONGBANK OF AUSTRALIA LTD (ACN 006 434 162)
Sixth Plaintiff
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
CREDITANSTALT-BANKVEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
BANQUE INDOSUEZ
Seventh Plaintiffs
LLOYDS BANK PLC
CAISSE NATIONALE DE CREDIT AGRICOLE
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
KREDIETBANK NV
GULF BANK KSC
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK
Eighth Plaintiffs
SKOPBANK
Ninth Plaintiff
AND
THE LAW DEBENTURE TRUST CORPORATION PLC
First Defendant
INSURANCE COMMISSION OF WESTERN AUSTRALIA
Second Defendant
BELL GROUP NV (IN LIQ) (ARBN 073 576 702)
Third Defendant
COMMONWEALTH OF AUSTRALIA
Fourth Defendant
(BY ORIGINAL ACTION)
THE LAW DEBENTURE TRUST CORPORATION PLC
First-named Plaintiff by Counterclaim
INSURANCE COMMISSION OF WESTERN AUSTRALIA
Second-named Plaintiff by Counterclaim
AND
AUSTRALIAN CONSOLIDATED INVESTMENTS LTD (ACN 008 670 924)
GODINE DEVELOPMENTS PTY LTD (ACN 009 237 307)
BELL RESOURCES DEVELOPMENTS PTY LTD (ACN 009 152 569)
First Defendants by Counterclaim
LLOYDS BANK PLC as representative of Lloyds Bank PLC, Banco Espirito Santo E Comercial De Lisboa, Bank Fur Gemeinwirtschaft AG, The Governor and Company of the Bank of Scotland, Caisse Nationale De Credit Agricole, Creditanstalt-Bankverein, Credit Lyonnais, Dresdner Bank AG, Kredietbank NV, Skopbank, DG Bank KSC, Gentra Ltd (formerly Royal Trust Bank) and Banque Indosuez
Second Defendant by Counterclaim
W A GLENDINNING & ASSOCIATES PTY LTD (ACN 008 762 721)
W U INVESTMENTS PTY LTD (ACN 008 985 644)
EXPECTATION PTY LTD (ACN 009 030 102)
Third Defendants by Counterclaim
COMMONWEALTH OF AUSTRALIA as representative of Commonwealth of Australia, Western Interstate Pty Ltd (ACN 000 224 395) (Provisional Liquidator Appointed), Bell Publishing Group Pty Ltd (In Liq) (ACN 008 704 452), TBGL Enterprises Ltd (In Liq) (ACN 008 669 216), Belcap Enterprises Pty Ltd (In Liq) (ACN 009 264 537), WAON Investments Pty Ltd (In Liq) (ACN 008 937 166), Wigmores Tractors Pty Ltd (In Liq) (ACN 008 679 221), Wanstead Pty Ltd (In Liq) (ACN 009 264 537), Bell Bros Pty Ltd (In Liq) (ACN 008 672 375), W&J Investments Ltd (In Liq) (ACN 008 068 888), Maradolf Ltd (In Liq) (ACN 005 482 806), West Australian Newspapers Ltd (ACN 008 667 632), Wesavel Pty Ltd (formerly Western International Travel Pty Ltd) (ACN 008 771 720), R S Linfoot Investments Pty Ltd (t/a Linfoot Cleaning Service) (CRN 008 848 511), Rendezvous Hotels Management Pty Ltd (t/a Radisson Observation City Hotel) (ACN 063 157 728), Corrs Chambers Westgarth, Bennett & Co, Robinson Cox, Ernst & Young Registry Services Pty Ltd (formerly Registry Managers (Australia) Pty Ltd) (ACN 005 273 647), Honeywell Ltd (ACN 000 646 882), Opera Foundation Australia (ACN 001 265 345, Telstra, Bell Group NV (In Liq) (ARB 073 576 502), J N Taylor Holdings Ltd (In Liq) (ACN 007 600 339) and Bond Corporation Pty Ltd (ACN 008 684 133)
Fourth Defendant by Counterclaim
WESTPAC BANKING CORPORATION (ARBN 007 457 141) as representatvie of Westpac Banking Corporation, Coopers & Lybrand, Parker & Parker and Mallesons Stephen Jacques
Fifth Defendant by Counterclaim
(BY COUNTERCLAIM)

Catchwords:

Jurisdiction - Action between a State and the Commonwealth - Whether Court has jurisdiction - Order to be made on finding of no jurisdiction

Legislation:

Corporations Law (Cth), s 564
Rules of the Supreme Court 1971 (WA), O 23 r 2(3)
Judiciary Act 1903 (Cth), s 38(d), s 44(2)

Result:

Counterclaim permanently stayed

Category: B

Representation:

Original Action

Counsel:

First Plaintiff                  :     Ms K Lendich
Second Plaintiff             :     Ms K Lendich
Third Plaintiff                :     Ms K Lendich
Fourth Plaintiff              :     Ms K Lendich
Fifth Plaintiff                 :     Ms K Lendich
Sixth Plaintiff                 :     Ms K Lendich
Seventh Plaintiffs           :     Ms K Lendich
Eighth Plaintiffs             :     Ms K Lendich
Ninth Plaintiff                :     Ms K Lendich
First Defendant              :     No appearance
Second Defendant         :     Mr S Finch SC & Mr I Ahmed
Third Defendant            :     Mr A D'Arcy
Fourth Defendant           :     No appearance

Solicitors:

First Plaintiff                  :     Herbert Smith Freehills
Second Plaintiff             :     Herbert Smith Freehills
Third Plaintiff                :     Herbert Smith Freehills
Fourth Plaintiff              :     Herbert Smith Freehills
Fifth Plaintiff                 :     Herbert Smith Freehills
Sixth Plaintiff                 :     Herbert Smith Freehills
Seventh Plaintiffs           :     Francis Burt Chambers
Eighth Plaintiffs             :     Francis Burt Chambers
Ninth Plaintiff                :     Francis Burt Chambers
First Defendant              :     No appearance
Second Defendant         :     State Solicitor for Western Australia
Third Defendant            :     Lipman Karas
Fourth Defendant           :     No appearance

Counterclaim

Counsel:

First-named Plaintiff by Counterclaim       :        Mr S Finch SC & Mr Ahmed
Second-named Plaintiff by Counterclaim   :        No appearance
First Defendants by Counterclaim         :        No appearance
Second Defendant by Counterclaim         :        Ms K Lendich
Third Defendants by Counterclaim         :        No appearance
Fourth Defendant by Counterclaim         :        No appearance
Fifth Defendant by Counterclaim     :        Ms K Lendich
Bell Group NV (In Liq)  :        Mr A D'Arcy (By Leave)

Solicitors:

First-named Plaintiff by Counterclaim       :        State Solicitor for    Western Australia
Second-named Plaintiff by Counterclaim   :        No appearance
First Defendants by Counterclaim         :        No appearance
Second Defendant by Counterclaim         :        Herbert Smith Freehills
Third Defendants by Counterclaim         :        No appearance
Fourth Defendant by Counterclaim           :        No appearance
Fifth Defendant by Counterclaim     :        Herbert Smith Freehills
Bell Group NV (In Liq)  :        Lipman Karas

Cases referred to in judgment:

Bajaj v Bajaj [2010] WASC 1
Bell Group NV (In Liq) v The State of Western Australia [2016] HCA 21; (2016) 331 ALR 408
Federated Engine-Drivers' and Firemen's Association of Australasia v The Broken Hill Pty Co Ltd [1911] HCA 31; (1911) 12 CLR 398
Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 231 CLR 531
Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23
Landsheer v Morris Corporation (WA) Pty Ltd [2014] WASCA 186
Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd [1999] FCA 1572; (1999) 94 FCR 384
New South Wales v Kable [2013] HCA 26; (2013) 252 CLR 118
O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356
Old UGC Inc v Industrial Relations Commission (NSW) [2006] HCA 24; (2006) 225 CLR 274
Palmer v Ayres [2017] HCA 5
Vitzdamm-Jones v Vitzdamm‑Jones [1981] HCA 8; (1981) 148 CLR 383
Walter v Buckeridge [No 4] [2011] WASC 313

PRITCHARD J: The Insurance Commission of Western Australia (ICWA) made an application (the Application) for the following orders:
1.The Plaintiffs by Counterclaim have leave to discontinue the Counterclaim.
2.Any orders for unpaid or reserved costs made against or in favour of the Second and Fifth Defendants by Counterclaim be, and hereby are, vacated.
3.There be no order as to costs.
The Third Defendant in the present action, Bell Group NV (BGNV), opposed the first order sought by ICWA, and instead made an application that the Court dismiss the Counterclaim on the basis that it had no jurisdiction to deal with the Counterclaim.
The hearing of the Application ultimately concerned only two issues. The first was whether the Court has jurisdiction to deal with the Counterclaim. The second issue concerned the orders which should be made if the Court concluded that it had no jurisdiction to deal with the Counterclaim.
For the reasons which follow, the Court does not have jurisdiction to deal with the Counterclaim. The order which in my view is most apposite in all of the circumstances is an order that the Counterclaim be permanently stayed for want of jurisdiction. No consequential orders (in relation to costs orders already made in the Counterclaim) should be made.
In these reasons I deal with the following matters:
1.An overview of the parties to the present action, the issues raised by the present action, and the procedural history of the present action which is relevant to the Application;
2.The Application;
3.Why the Court does not have jurisdiction to determine the Counterclaim; and
4.The orders which should be made.

An overview of the parties to the action, the issues raised by the present action, and the procedural history of the present action which is relevant to the Application

This action has a very long procedural history, which need not be recited in any detail for present purposes, and need only be referred to selectively to give some context to the discussion which follows. Before turning to that procedural history, however, it is necessary to first give a brief overview of the parties and of the issues in the present action. What follows is a simplified overview, drawn from the pleadings (that is, the Fifth Amended Statement of Claim (ASOC), and the Third Further Re‑Amended Defence and Counterclaim (ADCC), each dated 7 October 2004), from the orders made by the Court to date, and supplemented, to a lesser extent, by the affidavits of Craig Matthew Sullivan Bailey sworn 1 September 2015 and 15 February 2017, and two affidavits of David Jonathan Hargreaves sworn 8 February 2017, upon which ICWA relied in support of the Application.[1]

The Original Action

[1] ICWA's submissions dated 23 February 2017 [2].

The present action was commenced in 1996, by a number of banks (the Banks) against the Law Debenture Trust Corporation PLC (LDTC), The Bell Group Limited (In Liquidation) (TBGL), Bell Group Finance Limited (In Liquidation) (BGF), the liquidators of those companies, and the State Government Insurance Commission of Western Australia (SGIC), which is now known as ICWA[2] (the Original Action). BGNV and the Commonwealth of Australia were added as defendants to the Original Action in 2001.
[2] See s 4 of the Insurance Commission of Western Australia Act 1986 (WA) (formerly the State Government Insurance Commission Act 1986 (WA)).
The starting point for the Original Action was the issue of subordinated bonds, by TBGL in 1985, and by BGF in 1987, which were not repayable for 10 years (the subordinated bonds).[3] The Banks alleged that in 1988, TBGL, BGF, TBGF in its capacity as a guarantor for BGF, the LDTC (as a trustee), and the holder of the subordinated bonds at that time, entered into trust deeds in respect of the subordinated bonds issued by TBGL, and by BGF, respectively (the Trust Deeds).[4] The Banks alleged that the terms of the Trust Deeds included terms that when the subordinated bonds became due, TBGL and BGF (respectively) would pay the monies due, plus interest, to the LDTC. In the event that TBGL or BGF were wound up, the claims of the holders of the subordinated bonds would be postponed to the claims of unsubordinated non‑bondholder creditors of TBGL or BGF (called Senior Creditors, which included the Banks). In that event, the LDTC would hold any amounts paid to it in the winding up on certain trusts, including for the benefit of the Senior Creditors of TBGL and BGF, and towards the payment of monies due upon the subordinated bonds.[5] The Banks further alleged that each Trust Deed included a term that the Deed would bind persons who were the holders of the subordinated bonds from time to time.[6] (It does not appear to have been in dispute that in 1988, the SGIC became the sole holder of the subordinated bonds.)
[3] Amended Statement of Claim (ASOC) [7], [9].
[4] ASOC [11], [13].
[5] ASOC [12], [14].
[6] ASOC [12], [14].
The Banks also alleged that the Trust Deeds and the conditions of the subordinated bonds contained certain promises for the benefit of the Senior Creditors. These were said to include a promise that the liabilities of TBGL or BGF (pursuant to the subordinated bonds and the Trust Deeds) constituted subordinated obligations of TBGL or BGF respectively on a winding up of either company, and a promise that in the event of a winding up, the claims of the subordinated bond holders would be postponed to the claims of the Senior Creditors, and LDTC would hold any amounts paid to it in the winding up for the benefit of the Senior Creditors.[7] The Banks alleged that the LDTC (as a Trustee under the Trust Deeds, and as a Trustee for the Senior Creditors of TBGL and BGF) and the SGIC (as a trustee for the Senior Creditors of TBGL and BGF) were obliged to act in the interests of the Senior Creditors as a whole and not to act to advantage any person in preference to the Senior Creditors as a whole.[8]
[7] ASOC [15], [16].
[8] ASOC [21], [22].
The Banks alleged that in March 1995, BGNV, the LDTC, the SGIC and the Commonwealth entered into an agreement, known as the Inter Creditor Agreement, whereby they agreed to ensure that any amount recovered or payable to any of them (from the liquidations of TBGL or BGF) pursuant to s 564 of the Corporations Law, and any consideration payable to any of them for discontinuing indemnities provided to TBGL, BGF and their liquidators, would be pooled and distributed in agreed ratios amongst them.[9] The Banks alleged that entry into the Inter Creditor Agreement was a breach of the duties owed by the LDTC and the SGIC to act in the best interests of the Senior Creditors.[10] The Banks also alleged that the Commonwealth, the SGIC and BGNV knew that any funds they received pursuant to the Inter Creditor Agreement, which otherwise would have enured for the benefit of the Senior Creditors, would be funds received in breach of trust.[11]
[9] ASOC [23].
[10] ASOC [24], [25].
[11] ASOC [26].
The Banks alleged that in the windings up of TBGL and BGF which followed, any amounts paid to the LDTC in respect of the subordinated bonds would be insufficient to satisfy the LDTC's costs and expenses, and the claims of the Senior Creditors.[12] The Banks therefore alleged that in consequence of the alleged breaches of trust by the LDTC and the SGIC, the Banks would suffer damage, namely the loss of their share of the funds in the liquidations of TBGL and BGF which they would have received had the breaches of trust not occurred.[13]
[12] ASOC [20].
[13] ASOC [29].
The Banks sought various forms of relief against the LDTC, including an order that it pay any distribution in the liquidations of TBGL or BGF in accordance with the requirements of the Trust Deeds; an order requiring it to account to the Banks and the other Senior Creditors in relation to any distribution it received in the liquidation of TBGL or BGF; an injunction restraining the LDTC from giving effect to the Inter Creditor Agreement; and an order that it compensate the Banks for any loss in respect of the LDTC's entry into the Inter Creditor Agreement. The Banks sought similar relief against the SGIC.
The Banks also sought relief against the Commonwealth and BGNV including declarations that at the time of entry into the Inter Creditor Agreement they had knowledge that funds received by the LDTC pursuant to that Agreement, which would otherwise have enured for the benefit of the Senior Creditors, would be funds received in breach of trust, and an order that they account to the Senior Creditors for any benefit they received pursuant to the Inter Creditor Agreement.

ICWA's Defence and Counterclaim

The LDTC and the SGIC jointly filed a defence to the Banks' statement of claim in the Original Action, together with the Counterclaim. The tenor of the ADCC, as amended as at 7 October 2004, was to deny that the terms of the Trust Deeds bound the holders of the subordinated bonds from time to time,[14] to deny that the Trust Deeds or the conditions of the subordinated bonds contained the covenants or promises by the LDTC or the SGIC which were alleged by the Banks,[15] and to deny that the LDTC or the SGIC were obliged to act in the interests of the Senior Creditors as alleged by the Banks.[16]
[14] ADCC [4(b)], [5(c)].
[15] ADCC [6(a)], [7(a)].
[16] ADCC [10].
As at October 2004, the defendants to the Counterclaim were the Banks, numerous other companies, accountants and law firms, and the Commonwealth. The plaintiffs by Counterclaim alleged that in 1988, TBGL and BGF each entered into trust deeds in respect of their subordinated bonds with the LDTC (as trustee) and the then bondholder, that the SGIC subsequently became the sole holder of the subordinated bonds, and that subsequently the Trust Deeds were altered in accordance with their terms.[17] The plaintiffs by Counterclaim alleged that the liquidators of TBGL and BGF considered that the Banks had entered into certain transactions with knowledge of the insolvency of TBGL and BGF, and as knowing participants in breaches of fiduciary duties by the directors of TBGL and BGF, but the liquidators had no funds to commence and maintain proceedings against the Banks.[18]
[17] ADCC [11] - [14].
[18] ADCC [18] - [19].
The plaintiffs by Counterclaim alleged that the SGIC had offered to fund the liquidators' action against the Banks on condition that the liquidators would make an application under s 564 of the Corporations Law for a distribution in favour of the funding creditors, including the SGIC.[19] They also alleged that if an order were made under s 564 of the Corporations Law in favour of the LDTC or the SGIC, then any distribution of property made pursuant to such order would not be a distribution subordinated to any other creditor, and would not in any event be subject to the provisions of the Trust Deeds or the subordinated bonds as pleaded in the ASOC.[20] They claimed a declaration that on its proper construction, s 564 of the Corporations Law had that effect.[21]

Relevant aspects of the procedural history of the present action

[19] ADCC [20].

[20] ADCC [21].

[21] ADCC [46].

Because of the large number of necessary parties to the Counterclaim, the then case manager of the action, Owen J, made orders in March 1997 for the appointment of representative defendants. Those orders included an order that the Commonwealth be appointed as a representative defendant, on its own behalf, and on behalf of various creditors of TBGL and BGF, including BGNV.[22] It appears that at that stage, none of those creditors wished to play any active role in the Counterclaim, because his Honour made orders that the Commonwealth be excused from filing a defence in the Counterclaim, taking any steps in the Counterclaim, appearing at any interlocutory applications in the Counterclaim, or appearing at the trial of the Counterclaim.
[22] When the present action was reactivated in 2014, BGNV made an application to be made a defendant to the Counterclaim in its own right, rather than being represented by the Commonwealth. To date, it has not been necessary to deal with that application, and as a consequence of the outcome of the Application, BGNV's application to be represented in its own right is now otiose.
Some of the issues raised in the present action overlapped with issues raised in other proceedings which by then were being pursued in this Court in CIV 1464 of 2000 (the Bell Proceedings). For that reason, the present action was largely dormant between 1998 and 2014 while the Bell Proceedings proceeded to trial, and to an appeal, in this Court.

Following the settlement of the Bell Proceedings and the commencement of other proceedings in this Court (in CIV 146 of 2014 and CIV 2666 of 2016), which concern the distribution of the funds now held by the liquidator of TBGL and of BGF, the parties to the present action have revived it from its dormancy. That is partly attributable to the fact that the pleadings in the Counterclaim concerning the question of the operation of s 564 of the Corporations Law, and the status of any distribution which might be made to any funding creditor, including ICWA, pursuant to s 564, overlap with some of the issues raised in those other proceedings, especially CIV 2666 of 2016. It now appears that none of the parties to the Counterclaim wish to use the Counterclaim as the vehicle for ventilating those overlapping claims. BGNV says that the Court has no jurisdiction to deal with the Counterclaim in any event. The only question in those circumstances is what orders should be made by the Court.

The Application

The Application was made in 2015. After the Application was made, the present action went into abeyance again as a result of the passage of the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA), and the subsequent successful challenge to the validity of that Act in the High Court.[23] The present action was reactivated in 2016, and in July 2016 I made programming orders setting a timetable for the filing of evidence and submissions in respect of the Application.
[23] Bell Group NV (In Liq) v The State of Western Australia [2016] HCA 21; (2016) 331 ALR 408.
The orders originally sought in the Application included the following orders:
•an order that 'without prejudice to any application to release and discharge' the LDTC, TBGL, BGF, and the liquidator of each of those companies, from certain undertakings given to this Court (the terms of which need not be set out for present purposes):
•the plaintiffs to the Original Action 'have leave to discontinue the original action herein, and the original action is hereby discontinued'; and
•'the Plaintiffs by Counterclaim have leave to discontinue the Counterclaim against the Second and Fifth Defendants by Counterclaim (including each of the entities represented by the Fifth Defendant by Counterclaim) and the Counterclaim against those parties is hereby discontinued'.
•'any orders for unpaid or reserved costs made against or in favour of the Plaintiffs by original action, or the Second and Fifth Defendants by Counterclaim, be and hereby are, vacated'; and
•'these proceedings otherwise be stayed until further order'.
At the commencement of the hearing of the Application, however, counsel for ICWA indicated that he no longer sought the first of these orders (namely that the plaintiffs - that is, the Banks - have leave to discontinue the Original Action), and that he sought only the orders set out in par [1] above.
Counsel for the Banks requested, and was granted, an adjournment to consider the Banks' position in light of that development. I made programming orders in the event that any party wished to make any application in respect of the original action, in light of the amended orders now sought by ICWA. BGNV sought an order that ICWA pay its costs thrown away by the adjournment, calculated on an indemnity basis. I reserved to a further hearing the question of the costs order which should be made in light of the adjournment, and in particular, the question whether an order for costs on an indemnity basis should be made against ICWA, and if so, in respect of which specific costs claimed to have been thrown away.

The parties heard on the Application

Only ICWA, the various Plaintiffs to the original action (the Banks), and BGNV, sought to be heard on the Application.
Although BGNV is a defendant to the original action, it is not a party to the Counterclaim in its own right. As I have already noted, in 2004 Owen J made an order that BGNV, together with a number of other parties, be represented in the Counterclaim by the Commonwealth. As the orders originally sought in the Application pertained to both the original action and the Counterclaim, I did not consider it appropriate to take an unduly technical approach to whether BGNV was entitled to be heard, in its own right, in respect of the question of the Court's jurisdiction to deal with the Counterclaim, and thus in respect of the orders sought by BGNV in relation to the Counterclaim. That view was not altered by virtue of the amendment of the orders sought by ICWA on the Application, in view of the nature of the issues requiring determination and the approach taken by the parties to those issues.
BGNV's position in respect of the Counterclaim has been clearly elucidated since September 2015. It says that the Court has no jurisdiction to deal with the Counterclaim, and that the Counterclaim should therefore be dismissed.
Counsel for the Banks advised the Court that her clients did not oppose the orders now sought by ICWA, and did not wish to be heard in respect of the form of the orders now sought. Counsel for the Banks was therefore excused from the balance of the hearing of the Application.
All other parties to the original action and the Counterclaim were put on notice of the Application when it was first made, and given the opportunity to be heard in respect of the orders sought in the Application (as originally framed).[24] The Commonwealth filed submissions in related proceedings, where a similar jurisdictional question was raised.[25] However, in July 2016, its solicitors advised the other parties that the Commonwealth agreed that the Counterclaim against the Second and Fifth Defendants by Counterclaim (the Banks) should be discontinued and that the Commonwealth would not oppose a stay of the Counterclaim (as against the other Defendants by Counterclaim) following that discontinuance.[26] The Commonwealth's solicitors subsequently advised the Court that the Commonwealth did not wish to be heard in relation to the orders which were then sought by ICWA in the Application.[27]
[24] Orders made on 26 July 2016.
[25] Commonwealth's Outline of Submissions dated 25 November 2015 filed in COR 208 of 2014.
[26] Affidavit of David Jonathan Hargreaves sworn 8 February 2017 [8.3], and Annexure DJH4.
[27] Annexure DJH 7 to the affidavit of David Jonathan Hargreaves sworn 8 February 2017.
Given that the LDTC is one of the Plaintiffs by Counterclaim, it is appropriate to expressly mention its position. The representation of the LDTC as a Plaintiff by Counterclaim is presently subject to a procedural irregularity, the basis for which need not be set out here. However, the solicitors who presently act for the LDTC advised the other parties in July 2016 that the LDTC agreed that the Counterclaim against the Second and Fifth Defendants by Counterclaim should be discontinued and that the LDTC would not oppose a stay of the Counterclaim (as against the other defendants) following that discontinuance.[28] At a directions hearing on 26 July 2016, counsel for the LDTC (who appeared pursuant to a grant of leave to do so) submitted that his client's position on the Application was 'neutral'.[29]
[28] Annexure DJH 6 to the affidavit of David Jonathan Hargreaves sworn 8 February 2017.
[29] Directions Hearing ts 90 (26 July 2016).
On 26 July 2016, I made orders that the LDTC, the Commonwealth and all remaining parties who did not seek to be heard on the Application were excused from attendance at the hearing of the Application.[30]
[30] See affidavit of David Jonathan Hargreaves sworn 8 February 2017 [8], and annexures DJH3, DJH5, DJH8 and DJH9 to that affidavit.

Why the Court does not have jurisdiction to determine the Counterclaim

I turn now to consider the question whether the Court has jurisdiction to deal with the Counterclaim. Counsel for ICWA submitted that because he sought leave to discontinue the Counterclaim, it was not necessary for the Court to determine the question of its jurisdiction. However, as the question of the Court's jurisdiction has been raised, it is incumbent on me to deal with that question to determine what power the Court has, and therefore what orders it is open to the Court to make.[31]
[31] Federated Engine-Drivers' and Firemen's Association of Australasia v The Broken Hill Pty Co Ltd [1911] HCA 31; (1911) 12 CLR 398, 415 (Griffith CJ); Old UGC Inc v Industrial Relations Commission (NSW) [2006] HCA 24; (2006) 225 CLR 274 [51] (Kirby J).
Initially the question of jurisdiction was vigorously contested. Multiple sets of submissions were filed. By the time of the hearing, however, although counsel for ICWA did not concede that the Court was without jurisdiction to deal with the Counterclaim, he did not press a contrary conclusion with any vigour.[32]
[32] ts 133.
The Counterclaim is a suit brought by the SGIC (now known as ICWA), which is an emanation of the State of Western Australia,[33] against a number of parties, including the Commonwealth of Australia. On its face, the Counterclaim is thus a suit brought by a State (by one of its emanations) against the Commonwealth. In matters of that kind, the High Court has exclusive jurisdiction,[34] subject to the possibility that the High Court may remit such a matter, or part thereof, to the Federal Court or to a Supreme Court of a State or Territory.[35]
[33] Section 4(3) of the State Government Insurance Commission Act 1986 (WA) provided that the SGIC was an 'agent of the Crown in right of the State', and s 4A of the Insurance Commission of Western Australia Act 1986 (WA) now provides that ICWA is an 'agent of the Crown in right of the State'.
[34] Judiciary Act 1903 (Cth) s 38(d).
[35] Judiciary Act 1903 (Cth) s 44(2).
There is no doubt that if an action in terms identical to the Counterclaim had been commenced, or were now to be commenced, in the High Court, and remitted to this Court, this Court would have jurisdiction to deal with that action. But that is not what occurred here. The Counterclaim was commenced in this Court. Consequently, at least in so far as the Counterclaim is a suit against the Commonwealth, this Court has no jurisdiction ‑ that is, no authority to adjudicate[36] ‑ that matter.
[36] Palmer v Ayres [2017] HCA 5 [24] (Keifel, Keane, Nettle & Gordon JJ).
What has been in dispute, to date, is whether that want of jurisdiction extends to the entirety of the Counterclaim, in so far as it is brought against defendants other than the Commonwealth, but more particularly, whether ICWA can 'cure' the jurisdictional deficiency, without the entirety of the Counterclaim being dismissed, or stayed for want of jurisdiction. ICWA initially sought to advance some interesting, and to some extent novel, submissions in support of that argument. Those submissions in essence proceeded on the basis that ICWA could discontinue the Counterclaim against the Commonwealth, that the Court does (and would continue to) have jurisdiction to deal with the balance of the Counterclaim in so far as it pertained to the other defendants by Counterclaim, and that the Court could thereafter stay the Counterclaim while ICWA commenced an action in the High Court against the Commonwealth (in the same terms as the Counterclaim). ICWA would then seek to have that action remitted to this Court, and once that occurred the stay of the Counterclaim could be lifted, and (presumably) consolidated with the remitted action in respect of which the Court would then have jurisdiction.
It is now not necessary to determine whether that proposed 'fix' of the jurisdictional deficiency in the Counterclaim would be efficacious. That is because it is now apparent that ICWA no longer proposes to proceed in the manner initially proposed. Its application for leave to discontinue the Counterclaim in its entirety (rather than solely against the Commonwealth) made that plain. So too did the indication by its counsel that ICWA now 'assume[d] no jurisdiction'[37] and did not press 'with any vigour',[38] or at all,[39] an argument that the Court had jurisdiction to deal with the Counterclaim, nor did he submit that the Court should find it has jurisdiction.[40]
[37] ts 132.
[38] ts 132 - 3.
[39] ts 140.
[40] ts 140.
It suffices to say that for the reason identified at [33] above, and in the absence of any argument that the claims made against the various Defendants by Counterclaim are discrete and severable 'matters',[41] and in the absence of an application to discontinue the Counterclaim as against the Commonwealth, I am not persuaded that the Court has jurisdiction to deal with the Counterclaim.
[41] Cf Palmer v Ayres [2017] HCA 5 [26] (Keifel, Keane, Nettle & Gordon JJ).
In view of that conclusion, I turn to consider the orders which should be made by the Court.

The orders which should be made

The substantive order sought by ICWA on the Counterclaim was that the Plaintiffs to the Counterclaim have leave to discontinue the Counterclaim. While that order was sought on the basis that the Court could make it, and avoid the need to deal with jurisdictional questions, the order to discontinue was also sought in the event that the Court concluded it had no jurisdiction. In any event, I am not persuaded that the order sought by ICWA should be made. There are three reasons why I have reached that view.
First, the order sought by ICWA is not that the Counterclaim actually be discontinued, but rather than the Plaintiffs by Counterclaim (that is, ICWA and the LDTC) have leave to discontinue. Counsel for ICWA submitted that an order of that kind would then permit each plaintiff to file a notice of discontinuance. Given my view that the Court has no jurisdiction to deal with the Counterclaim, it is not appropriate to make an order which apparently leaves it open to the Plaintiffs by Counterclaim to decide whether or not to continue with the Counterclaim.
Secondly, an order which carried with it such uncertainty about the future conduct of the action would not only be inconsistent with the conclusion that the Court did not have jurisdiction, but would, in any event, have been undesirable from a proper case management perspective. In the present case, there have already been disputes between the parties about the effect of orders for leave to discontinue made by Owen J. It is not desirable to add another potential source of disputation.
Thirdly, in so far as the order sought is for the grant of leave to discontinue, it is not appropriate to make an order in those terms.[42] Under O 23 r 2(3) of the Rules of the Supreme Court 1971 (WA), it is not competent for a plaintiff to discontinue an action without leave (save in the circumstances provided for in O 23 itself). But as O 23 r 2(3) itself makes clear, the form of the order which the plaintiff seeks, and which the Court then makes, is an order that 'the action be discontinued'.
[42] Walter v Buckeridge [No 4] [2011] WASC 313 [10] (Le Miere J); Bajaj v Bajaj [2010] WASC 1 [1] (Simmonds J).
Counsel for ICWA did not seek an order that the Counterclaim actually be discontinued, for the reason that ICWA is not the only Plaintiff by Counterclaim. (The LDTC is a co-plaintiff, but it did not itself move for an order to discontinue the Counterclaim, and ICWA did not bring the Application on behalf of the LDTC.[43]) It is far from clear that O 23 r 2 RSC permits a party to make an application to discontinue an action other than an action commenced by that party. However, it is not necessary to resolve that issue for present purposes, and I express no concluded view on it.
[43] ts 135.
Counsel for BGNV submitted that the order which should be made by the Court was that the Counterclaim be dismissed for want of jurisdiction. He referred the Court to a number of cases said to support that proposition. In one of those cases, orders were made dismissing the proceedings where it was held that the Court in question had no jurisdiction.[44] In the other cases, various members of the High Court indicated an order of that kind should be made in the case in question.[45] However, none of those cases establishes any principle that where a court lacks jurisdiction to deal with an action or other proceeding, the only appropriate order is the dismissal of the proceeding in question. There is no doubt that when a court determines it has no jurisdiction, it is open to the court to make an order to dismiss the proceeding. But the orders which may be made by a court in that circumstance are clearly not confined to an order to dismiss the proceeding. It is also open to this Court, in the exercise of its inherent jurisdiction to determine its own jurisdiction, and to control its own processes,[46] to order a permanent stay of a matter in respect of which it has no jurisdiction.[47] Counsel for BGNV did not dispute that this Court could grant a permanent stay of the Counterclaim, in the event that it found it had no jurisdiction to deal with the Counterclaim.[48]
[44] Landsheer v Morris Corporation (WA) Pty Ltd [2014] WASCA 186 [2], [31] (Buss J), [88] (K Martin J, Le Miere J agreeing).
[45] Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 231 CLR 531 [119] (Kirby J); O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356, 367 (Brennan J, McHugh J agreeing); Vitzdamm-Jones v Vitzdamm‑Jones [1981] HCA 8; (1981) 148 CLR 383, 416 (Gibbs J), 420 (Mason J), 422 ‑ 423 (Murphy J).
[46] Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23, 74 (Gaudron J).
[47] Cf Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd [1999] FCA 1572; (1999) 94 FCR 384, 389 (French J), in relation to the power of the Federal Court to order a stay of proceedings, which power derives from its jurisdiction to determine its own jurisdiction, and which in turn derived 'either from s 23 of the Federal Court of Australia Act, or from an incidental power of the Court implied from its constating statute or from the Constitution'.
[48] ts 136.
I have formed the view that in this case the preferable course is to make an order permanently staying the Counterclaim, rather than to dismiss the Counterclaim. An order to dismiss the Counterclaim could, in this case, give rise to arguments that the Counterclaim (and the issues it raises) have been determined on their merits. Given the overlap between the issues raised in the Counterclaim and the issues raised in CIV 2666 of 2016, it is desirable to avoid any possible basis for dispute about the effect of the orders made in the present case.
In addition, to my mind, the grant of a permanent stay more accurately reflects the position reached in the present case, which is that by virtue of my conclusion that the Court has no jurisdiction in respect of the Counterclaim, the Court has no authority to determine the Counterclaim, and thus no power to continue to deal with it. The grant of a permanent stay of the Counterclaim thus reflects the fact that the Court can simply take the Counterclaim no further.

Consequential orders in relation to costs

The final question is whether the Court should make any consequential orders (in relation to costs orders already made in the Counterclaim) in view of the conclusion that the Court has no jurisdiction to deal with the Counterclaim.
As I have noted at par [1], ICWA sought an order that 'any orders for unpaid or reserved costs made against or in favour of the Second and Fifth Defendants by Counterclaim be, and hereby are, vacated'. Counsel confirmed that that order was sought even if the Counterclaim was dismissed or stayed.[49]
[49] ts 142.
At the Court's request, BGNV's solicitors advised the Court by email, following the hearing, that BGNV's position on this question was that:
because this Court has no jurisdiction in the counter-claim (so that the counter-claim should be dismissed), it is not necessary to vacate previous costs orders made in the counter-claim. An order dismissing the counter‑claim is all that is required. In any event, the previous costs orders, having been made in a proceeding in which the Court has no jurisdiction, are ineffective and cannot be enforced.

The last sentence of that submission is not, strictly speaking, correct. It is firmly established that the orders of a superior court of record are valid until set aside, even if the orders are made in excess of jurisdiction.[50]
[50] New South Wales v Kable [2013] HCA 26; (2013) 252 CLR 118.
However, while it is not correct to say that any previous costs orders made in the Counterclaim are now invalid, the prospect that any party to the Counterclaim would now seek to enforce a costs order against any other party to the Counterclaim, in the knowledge that that order was made in the absence of jurisdiction, seems to me to be negligible.
For the sake of completeness, one further observation should be made. It cannot be assumed that any costs orders made in relation to the Counterclaim were necessarily made without jurisdiction. Although I have concluded that the Court has no jurisdiction to deal with the Counterclaim, it was not always thus. The Counterclaim was filed in 1996. As the Counterclaim stood when it was originally filed, the only defendants were the First Defendants by Counterclaim. The Second Defendant by Counterclaim was joined by order of the Court in November 1996. It was not until March 1997 that the Commonwealth was added as a Fourth Defendant by Counterclaim (representing both itself and various other non-objecting creditors) from which point the question of the Court's jurisdiction arose. Accordingly, if any costs orders were made in relation to any party prior to March 1997, it cannot be said that those orders were made without jurisdiction.
Accordingly, in my view, it is neither necessary nor appropriate to make any consequential order with respect to the costs orders made in the Counterclaim.
As for the costs of the Application, and of BGNV's application that the Counterclaim be dismissed for want of jurisdiction, I will hear from the parties and make orders about those costs upon the delivery of these reasons.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: COMMONWEALTH BANK OF AUSTRALIA -v- THE LAW DEBENTURE TRUST CORPORATION PLC [No 2] [2017] WASC 61 (S)

CORAM: PRITCHARD J

HEARD: 31 MARCH 2017

DELIVERED : 1 FEBRUARY 2018

FILE NO/S: CIV 2061 of 1996

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA
First Plaintiff
NATIONAL AUSTRALIA BANK LTD
Second Plaintiff
SOCIETE GENERALE AUSTRALIA LTD
Third Plaintiff
STANDARD CHARTERED BANK AUSTRALIA
Fourth Plaintiff
WESTPAC BANKING CORPORATION
Fifth Plaintiff
HONGKONGBANK OF AUSTRALIA LTD
Sixth Plaintiff
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
CREDITANSTALT-BANKVEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
BANQUE INDOSUEZ
Seventh Plaintiffs
LLOYDS BANK PLC
CAISSE NATIONALE DE CREDIT AGRICOLE
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
KREDIETBANK NV
GULF BANK KSC
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK
Eighth Plaintiffs
SKOPBANK
Ninth Plaintiff
AND
THE LAW DEBENTURE TRUST CORPORATION PLC
First Defendant
INSURANCE COMMISSION OF WESTERN AUSTRALIA
Second Defendant
BELL GROUP NV (IN LIQ)
Third Defendant
COMMONWEALTH OF AUSTRALIA
Fourth Defendant
(BY ORIGINAL ACTION)
THE LAW DEBENTURE TRUST CORPORATION PLC
First-named Plaintiff by Counterclaim
INSURANCE COMMISSION OF WESTERN AUSTRALIA
Second-named Plaintiff by Counterclaim
AND
AUSTRALIAN CONSOLIDATED INVESTMENTS LTD
GODINE DEVELOPMENTS PTY LTD
BELL RESOURCES DEVELOPMENTS PTY LTD
First Defendants by Counterclaim
LLOYDS BANK PLC as representative of Lloyds Bank PLC, Banco Espirito Santo E Comercial De Lisboa, Bank Fur Gemeinwirtschaft AG, The Governor and Company of the Bank of Scotland, Caisse Nationale De Credit Agricole, Creditanstalt-Bankverein, Credit Lyonnais, Dresdner Bank AG, Kredietbank NV, Skopbank, DG Bank KSC, Gentra Ltd (formerly Royal Trust Bank) and Banque Indosuez
Second Defendant by Counterclaim
WA GLENDINNING & ASSOCIATES PTY LTD
WU INVESTMENTS PTY LTD
EXPECTATION PTY LTD
Third Defendants by Counterclaim
COMMONWEALTH OF AUSTRALIA as representative of Commonwealth of Australia, Western Interstate Pty Ltd (Provisional Liquidator Appointed), Bell Publishing Group Pty Ltd (In Liq), TBGL Enterprises Ltd (In Liq), Belcap Enterprises Pty Ltd (In Liq), WAON Investments Pty Ltd (In Liq), Wigmores Tractors Pty Ltd (In Liq), Wanstead Pty Ltd (In Liq), Bell Bros Pty Ltd (In Liq), W&J Investments Ltd (In Liq), Maradolf Ltd (In Liq), West Australian Newspapers Ltd, Wesavel Pty Ltd (formerly Western International Travel Pty Ltd), R S Linfoot Investments Pty Ltd (t/a Linfoot Cleaning Service), Rendezvous Hotels Management Pty Ltd (t/a Radisson Observation City Hotel), Corrs Chambers Westgarth, Bennett & Co, Robinson Cox, Ernst & Young Registry Services Pty Ltd (formerly Registry Managers (Australia) Pty Ltd), Honeywell Ltd, Opera Foundation Australia, Telstra, Bell Group NV (In Liq), J N Taylor Holdings Ltd (In Liq) and Bond Corporation Pty Ltd
Fourth Defendant by Counterclaim
WESTPAC BANKING CORPORATION as representatvie of Westpac Banking Corporation, Coopers & Lybrand, Parker & Parker and Mallesons Stephen Jacques
Fifth Defendant by Counterclaim
(BY COUNTERCLAIM)

Catchwords:

Costs - Indemnity costs - Application for indemnity costs - Where party abandoned part of application on day before hearing - Whether party's conduct was improper or unreasonable

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Original Action

Counsel:

First Plaintiff                  :     Ms K Lendich
Second Plaintiff             :     Ms K Lendich
Third Plaintiff                :     Ms K Lendich
Fourth Plaintiff              :     Ms K Lendich
Fifth Plaintiff                 :     Ms K Lendich
Sixth Plaintiff                 :     Ms K Lendich
Seventh Plaintiffs           :     Ms K Lendich
Eighth Plaintiffs             :     Ms K Lendich
Ninth Plaintiff                :     No appearance
First Defendant              :     No appearance
Second Defendant         :     Mr S Finch SC & Mr I Ahmed
Third Defendant            :     Mr A D'Arcy
Fourth Defendant           :     No appearance

Solicitors:

First Plaintiff                  :     Herbert Smith Freehills
Second Plaintiff             :     Herbert Smith Freehills
Third Plaintiff                :     Herbert Smith Freehills
Fourth Plaintiff              :     Herbert Smith Freehills
Fifth Plaintiff                 :     Herbert Smith Freehills
Sixth Plaintiff                 :     Herbert Smith Freehills
Seventh Plaintiffs           :     Herbert Smith Freehills
Eighth Plaintiffs             :     Herbert Smith Freehills
Ninth Plaintiff                :     No appearance
First Defendant              :     No appearance
Second Defendant         :     State Solicitor for Western Australia
Third Defendant            :     Lipman Karas
Fourth Defendant           :     No appearance

Counterclaim

Counsel:

First-named Plaintiff by Counterclaim       :        No appearance
Second-named Plaintiff by Counterclaim   :        Mr S Finch SC & Mr I Ahmed
First Defendants by Counterclaim    :        No appearance
Second Defendant by Counterclaim :        Ms K Lendich
Third Defendants by Counterclaim :        No appearance
Fourth Defendant by Counterclaim :        No appearance
Fifth Defendant by Counterclaim :    Ms K Lendich
Bell Group NV (In Liq)   :     Mr A D'Arcy (By Leave)

Solicitors:

First-named Plaintiff by Counterclaim       :        No appearance
Second-named Plaintiff by Counterclaim   :        State Solicitor for Western Australia
First Defendants by Counterclaim    :        No appearance
Second Defendant by Counterclaim :        Herbert Smith Freehills
Third Defendants by Counterclaim :        No appearance
Fourth Defendant by Counterclaim :        No appearance
Fifth Defendant by Counterclaim :    Herbert Smith Freehills
Bell Group NV (In Liq)   :     Lipman Karas

Cases referred to in judgment:

Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 2] [2017] WASC 61
Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 3] [2017] WASC 382
Ford Motor Company of Australia v Lo Presti [2009] WASCA 115
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Huntsman Chemical Company Australia Ltd v International Pools Ltd (1995) 36 NSWLR 242
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA) (No 2) [1993] FCA 70; (1993) 46 IR 301
Shamir v Commonwealth of Australia [2015] FCA 1463
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

PRITCHARD J: These reasons deal with an application by the Third Defendant in the action (BGNV) for costs on an indemnity basis (the indemnity costs application) arising out of a decision made on 2 March 2017, by the Second Defendant in the action (ICWA) to abandon part of an application it had made by chamber summons dated 1 September 2015 (Application).
BGNV seeks the following order:
ICWA pay, on an indemnity basis, BGNV's costs:
1.thrown away by the adjournment granted on 2 March 2017; and
2.the costs of and incidental to paragraphs 2 and 4 of ICWA's chamber summons dated 1 September 2015.
The basis for the indemnity costs application was that ICWA's conduct was improper and unreasonable.
For the reasons which follow, the indemnity costs application will be dismissed. There will, however, be an order that ICWA pay BGNV's costs thrown away in consequence of its decision to abandon part of the Application, namely the order it sought in paragraph 2 of the Application, and its costs thrown away by the adjournment granted on 2 March 2017. The terms of the order I will make are set out at the conclusion of these reasons.

The Application and the decision by ICWA to abandon part of the Application

The background to this action, and to the Application, are set out in reasons for decision which I published in respect of that part of the Application which ICWA did not abandon.[51] I do not intend to repeat that background here.
[51] Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 2] [2017] WASC 61.
The Application was listed for hearing on 2 March 2017.
Relevantly, for present purposes, the orders ICWA sought in the Application were in the following terms:
2.Without prejudice to any application to release and discharge the First Defendant and each of the Second, Third, Fourth and Fifth Defendants from undertakings given to the Court on 7 October 2004:
(a)The Plaintiffs have leave to discontinue the original action herein, and the original action is hereby discontinued; and
(b)the Plaintiffs by Counterclaim have leave to discontinue the Counterclaim against the Second and Fifth Defendants by Counterclaim (including each of the entities represented by the Fifth Defendant by Counterclaim), and the Counterclaim against those parties is hereby discontinued.
3.Any orders for unpaid or reserved costs made against or in favour of the Plaintiffs by original action, or the Second and Fifth Defendants by Counterclaim, be and hereby are, vacated.
4.These proceedings otherwise be stayed until further order.
When the Application was heard on 2 March 2017, the orders sought by ICWA differed from those set out in its chamber summons. ICWA abandoned that part of the Application in which it sought orders concerning the original action (the abandoned orders) and applied only for the following orders:
1.The Plaintiffs by Counterclaim have leave to discontinue the Counterclaim.
2.Any orders for unpaid or reserved costs made against or in favour of the Second and Fifth Defendants by Counterclaim be, and hereby are, vacated.
3.There be no order as to costs.
Counsel for ICWA only advised the other parties of its intention not to seek the abandoned orders on 1 March 2017.
Counsel for the plaintiffs in the action sought an adjournment so that the plaintiffs could consider whether they would apply for orders in terms of the abandoned orders.[52]
[52] ts 108 ‑ 109 (2 March 2017).
Counsel for BGNV opposed an adjournment,[53] and made an oral application for an order that the plaintiffs have leave to discontinue the original action, on the same basis as that on which ICWA had relied, namely pursuant to O 23 r 2(3) of the Rules of the Supreme Court 1971 (WA) (RSC). He submitted that the Court should proceed to deal with that oral application immediately.[54]
[53] ts 113 - 114 (2 March 2017).
[54] ts 111 (2 March 2017).
I determined to grant an adjournment to enable the plaintiffs to consider their position in respect of any orders concerning the original action. That also enabled BGNV to consider precisely what orders it wished to pursue in relation to the original action.
Ultimately, BGNV made an application by a chamber summons dated 17 March 2017 for an order that the original action be dismissed with no order as to costs. That application was heard on 31 March 2017. The plaintiffs neither consented to, nor opposed, the orders sought by BGNV. My determination of BGNV's application to dismiss the original action is the subject of separate reasons for decision.[55]
[55] Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 3] [2017] WASC 382.
Following ICWA's decision not to pursue the abandoned orders, I proceeded to hear the balance of the Application at the hearing on 2 March 2017, and delivered reasons for decision on 16 March 2017.[56] I made orders, including costs orders on that occasion, in respect of that part of the Application which ICWA had pursued.
[56] Commonwealth Bank of Australia v The Law Debenture Trust Corporation PLC [No 2] [2017] WASC 61.
The indemnity costs application thus pertains solely to the consequences of ICWA's decision not to pursue the abandoned orders.[57]
[57] ts 114.

Principles in relation to the award of costs on an indemnity basis

The principles in relation to the award of costs on an indemnity basis are well known. The Court, in its inherent jurisdiction, may make an indemnity costs order, but it will only do so in exceptional circumstances. There must be some special or unusual feature about the case to justify the court exercising its costs discretion other than by an award of costs on the more usual party‑party basis.[58]
[58] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [7].
The principles governing when an indemnity costs order will be made were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[59] It is unnecessary to repeat all of those principles here. For present purposes, it suffices to say that one of the recognised categories in which it may be appropriate for a court to exercise its discretion to make an order for indemnity costs is where a party has, by unreasonable conduct, unnecessarily increased the cost of litigation. Examples of cases within that category include those where a party persists with a case which is obviously hopeless,[60] where a party has unreasonably refused to accept a Calderbank offer,[61] or where the circumstances are shown to involve some element of improper, or at least unreasonable, conduct by a party or a party's legal adviser.
[59] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).
[60] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA) (No 2) [1993] FCA 70; (1993) 46 IR 301, 303 (French J) referring to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 (Woodward J).
[61] Ford Motor Company of Australia v Lo Presti [2009] WASCA 115 [16] - [32] (Buss JA, Wheeler JA agreeing).
Further, any party contemplating an application for an order for costs on an indemnity basis should not lose sight of the financial implications of such an order, including by comparison with an ordinary costs order, which covers party-party costs. Sometimes (and I do not speak of the present case) the temptation may exist to make an application for an indemnity costs order solely to ensure that an opponent is chastised by the Court for unreasonable or improper behaviour. Parties should resist that temptation. If a complaint about an opponent's conduct is warranted, for example to avoid prejudice to a party's case, a submission made in open court will suffice to achieve that objective. In my view, an application for indemnity costs (especially if that application itself involves the cost of preparing an affidavit or submissions in support) would not be warranted unless a party concluded that in the absence of an indemnity costs order they would be unlikely (having regard to the applicable scale of costs) to recover the costs they had incurred as a result of the unreasonable conduct of their opponent. Furthermore, even if that were the case, it would be necessary to consider whether any deficiency in the costs which might be recovered could be remedied by a special costs order, as opposed to an indemnity costs order. As the Court of Appeal in Swansdale observed:[62]
[62] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10].
An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance ... . In Unioil (No 2), Ipp J observed:
… counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.

The reasons given by ICWA's counsel for the decision not to pursue the abandoned orders

Having regard to the submissions of counsel for ICWA at the hearing on 2 March 2017, it appeared that the decision not to pursue the abandoned orders was reached as a result of a consideration of several factors. These included whether the abandoned orders were necessary at that stage, having regard to the broader context of the litigation in CIV 2666 of 2016; the possibility that pursuit of the abandoned orders might constitute a breach of a contractual obligation to which ICWA is subject;[63] the consequences for the plaintiffs if the original action was not dismissed at that stage (in circumstances where ICWA sought leave to discontinue the counterclaim), and the most efficient use of the Court's resources in dealing with the issues raised in CIV 2666 of 2016 and COR 146 of 2014.[64]
[63] ts 103 - 104 (2 March 2017).
[64] ts 103, 105 (2 March 2017).
Counsel for ICWA acknowledged that the decision not to pursue the abandoned orders had been made only very shortly before the hearing on 2 March 2017, so that ICWA had not been in a position to advise the other parties about its decision until very shortly before the hearing. He accepted that they had been 'caught on the hop about this'.[65]
[65] ts 104 (2 March 2017).

The basis for BGNV's application for indemnity costs

Counsel for BGNV submitted that ICWA's conduct had been improper and unreasonable for three reasons.
First, he pointed to a variety of circumstances that he said rendered ICWA's conduct unreasonable, so as to warrant an order for costs on an indemnity basis. He submitted that ICWA 'fundamentally changed its position on the morning of the hearing on 2 March 2017 and presented a case vastly different from that which it had advanced'[66] in the Application.
[66] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [4].
He also submitted that ICWA notified the other parties of its intention not to press for orders to discontinue the original action only the night before the hearing on 2 March 2017.
Counsel for BGNV also submitted that when BGNV sought to make an oral application, in the same terms as par [2(a)] of the abandoned orders, and relying on O 23 r 2(3) RSC, ICWA had submitted that course was not open to a party other than the plaintiffs.[67] Counsel for BGNV submitted that this was evidence of a recognition by ICWA that its own application for the abandoned orders had been doomed to fail.[68] He submitted that ICWA's conduct in opposing BGNV's application was 'particularly egregious'[69] given it had been willing to seek orders on the same basis itself, and that ICWA's conduct in this respect was 'an opportunistic change of position purely for tactical reasons to try and avoid BGNV's oral application being heard'.[70]
[67] ts 116 - 117 (2 March 2017).
[68] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [6].
[69] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [14].
[70] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [15].

Counsel for BGNV also pointed out other departures by ICWA from the form of the abandoned orders it had initially sought. These included the fact that the orders ICWA in fact sought on 2 March 2017 included an order that the plaintiffs by counterclaim have leave to discontinue, but did not seek that that leave be granted without prejudice to any application for the release of the defendants from any undertakings given to the Court. In addition, he noted that ICWA did not in fact seek an order, in the proper form, that the counterclaim be discontinued, but only an order that leave be given to discontinue. He submitted that the failure of a party to give proper notice of the case to be advanced was a ground for awarding indemnity costs against that party.[71]
[71] Counsel relied on Shamir v Commonwealth of Australia [2015] FCA 1463 [32].
Counsel for BGNV submitted that as a result of ICWA's change of position, 'preparation of the parties' written submissions for the hearing on 2 March 2017 was largely a waste of time',[72] and that the fact that ICWA's conduct resulted in a loss of time to the Court and the other parties was also a basis on which to award indemnity costs.
[72] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [12].
Secondly, counsel for BGNV submitted that ICWA had ignored a suggestion I made to the parties in July 2016 that they consider whether there was an alternative to arguing about the abandoned orders, and which instead involved focusing on getting the issues in CIV 2666 of 2016 to trial as expeditiously as possible. In his submissions outlining the decision not to pursue the abandoned orders, counsel for ICWA conceded that ICWA had not given earlier consideration to what the Court had suggested.[73]
[73] ts 100, 105 (2 March 2017).
Thirdly, counsel for BGNV submitted that ICWA's reliance on a possible argument that its pursuit of the abandoned orders would constitute a breach of its contractual obligations was 'yet another shift in ICWA's position'[74] and that ICWA had been on notice of BGNV's arguments since March 2015. He submitted that if ICWA was correct about its contractual obligations, then it followed that ICWA should never have pursued the abandoned orders in the first place.
[74] BGNV's Submissions in supports of its Application for Indemnity Costs dated 17 March 2017 [20].
I am not persuaded that these arguments warrant an indemnity costs order being made, for the following reasons.
First, it was regrettable that the decision not to pursue the abandoned orders was only made very shortly before the hearing on 2 March 2017. However, that conduct in and of itself was not, in my view, unreasonable or improper, so as to warrant the sanction of an indemnity costs order. It is not infrequently the case that in the course of preparing for a hearing, counsel sees the case in a new light, thinks of new arguments, or determines that some arguments would be better pursued on another occasion, or not at all. That is not unreasonable or improper. It is an inevitable consequence of the focused consideration by counsel of the arguments to be advanced, and faced, in a case, which tends to occur proximately to a hearing.
There is nothing to suggest that the late notice of ICWA's decision not to pursue the abandoned grounds was in any way deliberate. It did not seek to take advantage, in any way, of the late notice of its change of position. It accepted that an adjournment would be required. It does not dispute that it should pay the costs thrown away by its change in position. And it did not dispute that BGNV was entitled to make an application itself, although it opposed the order sought by BGNV.
Further, ICWA's decision not to pursue the abandoned grounds was explained by counsel. In so far as ICWA relied, at least in part, on the potential for an argument that by pursuing the abandoned grounds it would be acting in breach of a contractual obligation, it is neither necessary nor appropriate to determine whether that concern was well founded. It suffices to say that there was nothing to suggest that that concern was not genuinely held. It is also of note that the same concern appears to have contributed to the subsequent decision by the plaintiffs not to bring their own application to discontinue, or to support or oppose BGNV's application to dismiss the original action, which was made by its chamber summons dated 17 March 2017.[75]
[75] See affidavit of John Hugh Paynter sworn 24 March 2017, Annexure JHP 1.
Secondly, although the decision not to pursue the abandoned grounds meant that some of the work done by BGNV in responding to those grounds was wasted, the Court should not be too hasty to criticise a decision not to run an argument about which counsel has determined, after reflection, that it is unnecessary to trouble the Court. In the course of its submissions, ICWA sought to rely on the judgment of Kirby P in Huntsman Chemical Company Australia Ltd v International Pools Ltd.[76] That resulted in a debate about the applicability of that decision other than in appeals, and outside New South Wales. It is unnecessary to engage with the detail of those arguments. It suffices to say that while a party's decision to abandon a claim may be relevant to an application for indemnity costs, it does not inevitably warrant an order for indemnity costs. Instead, whether abandonment of an argument is unreasonable conduct which warrants the sanction of an indemnity costs order will depend on all of the circumstances of the case. It would be absurd to suggest that the preferable course for a party who forms the view that an argument should not be advanced ‑ either on the basis of its merits, or having regard to case management principles, or for some other legitimate reason ‑ is nevertheless to advance that argument, and in doing so, to take up the time of the Court and other parties, or else face the prospect of an order for indemnity costs if it abandons the argument.
[76] Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, 247 - 248.
Thirdly, ICWA's opposition to BGNV's reliance on O 23 r 2(3) RSC, as the basis for its oral application for orders in the same terms as the abandoned orders, does not advance the indemnity costs application. The oral application was not pursued, as an adjournment was granted at the request of the plaintiffs. In any event, ICWA's opposition merely echoed doubts I had earlier raised as to whether it was open to a party other than a plaintiff to rely on O 23 r 2(3) RSC to seek the grant of leave to the plaintiff to discontinue the plaintiff's case. And, BGNV ultimately did not rely on O 23 r 2(3) RSC in the application it advanced at the hearing on 31 March 2017.
Fourthly, ICWA's decision not to pursue the abandoned grounds did not have the result that the hearing on 2 March 2017 was entirely wasted. I proceeded to deal with the balance of the Application, which concerned the counterclaim.
Fifthly, in so far as ICWA's decision not to pursue the abandoned grounds, or the fact that it sought orders in different terms from those set out in the Application, had the result that BGNV's preparation was wasted, or that it incurred other costs which were thrown away, or that it incurred, or would incur, additional costs, such as by having to refresh its case following the adjournment, those costs can be recovered by an ordinary costs order against ICWA. There was nothing to suggest that such costs would not be covered by an ordinary costs order under the applicable scale of costs. The Court of Appeal has made it clear that an indemnity costs order will not be warranted in such circumstances.
I should say that it is not at all clear how much of BGNV's preparation costs were wasted or thrown away as a result of ICWA's change in approach. The hearing of the Application proceeded, albeit on a truncated basis, on 2 March 2017. As I have already mentioned, BGNV's costs in respect of the balance of the Application were the subject of a costs order, which I made on 16 March 2017. In addition, there was clearly an overlap in the material relevant to BGNV's response to the Application, as originally framed, and BGNV's own application, in its chamber summons of 17 March 2017. The extent of the overlap is not something I need to resolve for present purposes. That will be a matter for the taxing officer if the parties are unable to agree on a costs figure. The costs associated with BGNV's application, in its chamber summons of 17 March 2017, for a different order (that is, for an order that the original action be dismissed) cannot properly be characterised as costs attributable to ICWA's decision not to pursue the abandoned orders.
Finally, I am not persuaded that it is appropriate to make an order that ICWA pay BGNV's costs of, and incidental to, the relief sought in paragraph 4 of ICWA's chamber summons of 1 September 2015. That relief, namely an order that the proceedings in CIV 2061 of 1996 be stayed until further order, was very similar to the order I made on 16 March 2017 in respect of the Counterclaim in CIV 2061 of 1996 (namely that the Counterclaim be permanently stayed). Although ICWA did not, itself, seek an order that the Counterclaim be stayed, I am not persuaded that any costs incurred by BGNV in considering relief of that kind can properly be said to have been thrown away, in view of the arguments which were advanced on 2 March 2017. The costs order I made on 16 March 2017 adequately addresses the outcome of the Application heard on 2 March 2017.

The order which should be made

Accordingly, the appropriate costs order is that:
1.ICWA is to pay:
1.1BGNV's costs thrown away by the adjournment granted on 2 March 2017,
1.2BGNV's costs of, and incidental to, ICWA's abandonment of its application for the orders set out in paragraph 2 of its chamber summons dated 1 September 2015,
those costs to be taxed if not agreed.
I will hear from the parties as to the precise terms of this order.