Conway v Critchley (No 2)

[2012] NSWSC 1542

Supreme Court

New South Wales

Medium Neutral Citation:	Conway v Critchley (No 2) [2012] NSWSC 1542
Hearing dates:	30 November 2012
Decision date:	14 December 2012
Jurisdiction:	Equity Division - Expedition List
Before:	Pembroke J
Decision:	See paragraph [2]
Catchwords:	COSTS - indemnity costs - separate question - knowingly false allegations of fact relating to severable claim - prolonging litigation - sanction to mark improper conduct COSTS - payable forthwith - separate question - departure from rule justified - just, quick and cheap resolution of real issues
Cases Cited:	Ajkay v Hickey & Co Pty Ltd [2011] NSWSC 822 Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd (1986) 10 FCR 177 Conway v Critchley [2009] NSWSC 499 Conway v Critchley [2012] NSWSC 1405 Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Spencer v Dowling [1997] 2 VR 127 Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Category:	Costs
Parties:	David Conway - plaintiff Stephen Christopher Critchley - first defendant Mudgee Wines Pty Ltd - second defendant Eurunderee Wines Pty Ltd - third defendant William James Whaley - fourth defendant Jane Margaret McLean - fifth defendant Mark Norman Thompson - sixth defendant
Representation:	Counsel: G W McGrath SC - for the plaintiff C D Freeman - for the first to fifth defendants No appearance for the sixth defendant Solicitors: Hall Partners - for the plaintiff Leonard Legal - for the first to fifth defendants No appearance for the sixth defendant
File Number(s):	2008/282302

Judgment

1. On 15 November 2012 I gave judgment in relation to two separate questions: Conway v Critchley [2012] NSWSC 1405. The matter was then listed for directions in order for the parties to prepare short minutes of order. On 30 November 2012 the parties made competing claims for costs both in relation to my judgment and to an earlier judgment of Debelle AJ in Conway v Critchley [2009] NSWSC 499. I directed the defendant to provide submissions in relation to the following issues:

(1)   Whether the plaintiff should pay the costs of the first to fifth defendants of the proceedings on an indemnity basis in relation to the claim for the 33 wine storage tanks;

(2)   Whether the order for costs made by Acting Justice Debelle made on 5 June be set aside.

1. The defendant provided those submissions on 5 December 2012. I make the following orders:

(1)   The plaintiff should pay the costs of the first to fifth defendants of the proceedings on an indemnity basis in relation to the plaintiff's claim for ownership and possession of the wine storage tanks.

(2)   The plaintiff should pay the costs of the first to fifth defendants of the proceedings on the ordinary basis in relation to the agreement alleged in paragraph 18 and 19 of the second further amended statement of claim.

(3)   I set aside the order for costs made by Debelle AJ on 5 June 2009 and substitute that order with an order that the first to fifth defendants pay 50% of the plaintiff's costs of and incidental to the application for summary judgment.

(4)   I order that these cost orders (Orders 1, 2 and 3) be assessable forthwith.

(5)   I refuse the plaintiff's application for a stay of the enforcement or execution of any assessed costs.

1. My reasons for those orders are what follow.

Indemnity Costs

1. The defendants seek an order for indemnity costs in relation to their costs incurred in litigating the separate question regarding the existence and ownership of 33 wine storage tanks. The principles that attach to the exercise of discretion to award indemnity costs are well known. The discretion is absolute and unfettered but must be exercised judicially: Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd (1986) 10 FCR 177 at 178 (Woodward J); Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) at [10] (Pullin JA and Kenneth Martin J). Such costs can be awarded where there is some special or unusual feature in the case to justify the court departing from its usual course: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 (Woodward J); Spencer v Dowling [1997] 2 VR 127 at 147 (Winneke P) and 163 (Callaway JA). An indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [44] (Gaudron and Gummow JJ).

1. I have found that the plaintiff's claim for the ownership and possession of wine tanks was based on dissimulation. The plaintiff made allegations of fact that were knowingly false. Those allegations required the defendants to spend considerable time and effort unpicking the detail of the plaintiff's dishonest conduct: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 542 (Kirby P, Hope and Samuels JJA agreeing). The plaintiff's claim in relation to the wine storage tanks also deceived an Acting Justice of this Court on an application for summary judgment.

1. I have now found that the relevant wine storage tanks did not exist and that the plaintiff made false declarations and provided false documents to the Bank of Queensland based on the supposed existence of the wine tanks: Conway v Critchley [2012] NSWSC 1405 at [29]-[36]. In these proceedings the plaintiff sought to maintain the fiction of the non-existent tanks and brought a claim in respect of them. The conduct of the plaintiff in this regard calls for the imposition of an indemnity costs order. The defendants are entitled to be indemnified because the claim should never have been made. The exposition and undoing of the plaintiff's conduct was in the interests of more than just the parties to the litigation. And the claim for the wine tanks represents a sufficiently severable claim justifying the separate treatment of the costs of that aspect of the proceedings.

Setting aside costs order of Debelle AJ

1. The same reasoning applies in relation to the proceedings before Debelle AJ. His Honour heard and determined the summary judgment application on a wrong basis. He was significantly misled in relation to the plaintiff's claims for possession of the wine storage tanks. The defendants seek to have the costs order made by Debelle AJ set aside and a substitute order made. A judgment or order can be set aside if the judgment or order was entered irregularly or against good faith: UCPR 36.15. Setting aside the costs order of Debelle AJ is within my discretion.

1. The plaintiff submitted that the Court of Appeal specifically considered the costs of the summary judgment application and made no costs orders in that respect. However, it is clear that the Court of Appeal, in finding that there was a triable issue on this point and remitting it for determination, left open the possibility of reviewing the costs order by Debelle AJ after the issue had been tried. This is the usual practice. The plaintiff also submitted that the defendants should not "be permitted to remedy early costs penalties well after the event, by curing deficiencies in their earlier evidence or case". This submission fails to take into account my finding that the plaintiff did more than just make a claim that he knew was false, but also relied on his fraudulent conduct in obtaining finance from the Bank of Queensland. That the defendants were circumspect in making an allegation of fraud reflects only the care with which the serious allegation was made, in the context of the considerable extent to which the plaintiff went to support his case.

1. The costs order made by Debelle AJ should be set aside and substituted with an order that the defendants pay 50% of the plaintiff's costs in respect of the application for summary judgment. This amount reflects the fact that the plaintiff was successful in respect of other items claimed in the summary judgment application.

Stay of execution

1. I accept that the plaintiff's entitlement to 50% of its costs incurred in relation to the hearing before Debelle AJ should be assessed forthwith. So should the assessment of the defendants' entitlement to their costs in relation to the separate questions determined by me. I refuse the plaintiff's application for a stay of those costs orders until after the final resolution of the balance of the proceedings. The separate questions are sufficiently discrete elements of the proceedings to enable the costs assessment in relation to them to be undertaken conveniently before the conclusion of the proceedings: Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1.

1. In addition, for the policy reasons I referred to in Ajkay v Hickey & Co Pty Ltd [2011] NSWSC 822 at [21]-[22] and [28]-[29], delaying costs orders in relation to a determined separate question does not assist the just, quick and cheap resolution of the real issues in the proceedings. A discrete aspect of the proceedings has been determined finally and the consequent liability for costs should not be left in limbo: Fiduciary v Morningstar at 4 (Barrett J).

Decision last updated: 14 December 2012