Duckworth v Water Corporation [No 3] - [2016] WASC 24

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: DUCKWORTH -v- WATER CORPORATION [No 3] [2016] WASC 24

CORAM: MITCHELL J

HEARD: 13 JANUARY 2016

DELIVERED : 13 JANUARY 2016

PUBLISHED : 28 JANUARY 2016

FILE NO/S: CIV 1795 of 2013

BETWEEN: KARL JAMES DUCKWORTH
RACHEL ALICE DUCKWORTH
ANDREW DANIEL DUCKWORTH
CLARE LEONORA DUCKWORTH
Plaintiffs
AND
WATER CORPORATION
Defendant

Catchwords:

Practice and procedure - Extension of time to apply for leave to amend statement of claim following determination of preliminary issue - Costs against interested non-party - Turns on own facts

Legislation:

Nil

Result:

Extension of time granted
Interested non-party to be jointly and severally liable to pay costs previously ordered against plaintiffs

Category: B

Representation:

Counsel:

Plaintiffs:     Mr J M Healy
Defendant:     Mr M C Goldblatt
Non-party:     In person

Solicitors:

Plaintiffs:     Nova Legal
Defendant:     Lavan Legal
Non-party:     In person

Case(s) referred to in judgment(s):

Browne v Onsite Rental Group Operations Pty Ltd [2015] WASCA 153
Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50
HPM Pty Ltd v Fear [2002] WASCA 249
Knight v FP Special Assets Ltd (1992) 174 CLR 178
MITCHELL J:

(This judgment was delivered extemporaneously and has been edited from the court's record of the decision.)

Background

In these proceedings, the plaintiffs seek relief in relation to the drawdown by the Water Corporation of a $3 million Banker's Undertaking. The undertaking secured the performance of obligations of Neil Duckworth under agreements for the construction of water headworks for a subdivisional development. The undertaking was provided under the terms of a 'Customer Constructed Works Agreement' and a 'Land Servicing Bond Agreement' between Neil Duckworth and the Water Corporation. In these proceedings, the plaintiffs claimed that rights held by Neil Duckworth under the agreements were assigned to them by his trustee in bankruptcy.
The Water Corporation challenged the plaintiffs' standing to enforce any rights which Neil Duckworth had under the agreements. In part, it contended that the rights were held by Neil Duckworth as trustee, and so never vested in Neil Duckworth's trustee in bankruptcy so as to be available for assignment by the trustee in bankruptcy.
On 5 November 2015 I determined preliminary issues in the action, finding that Neil Duckworth entered into the agreements with the Water Corporation in his capacity as trustee of the Ocean Farm Trust. I also found that any rights held by Neil Duckworth against the Water Corporation under the terms of the agreements did not vest in his trustee in bankruptcy.[1] I ordered that the plaintiffs jointly and severally pay the Water Corporation's costs of the action to 5 November 2015 forthwith.
[1] See Duckworth v Water Corporation[No 2][2015] WASC 411.
It followed that the plaintiffs' claim, which (as currently formulated) depends on them taking an assignment of those rights from Neil Duckworth's trustee in bankruptcy, was untenable. However, I noted the prospect that one of the plaintiffs, Karl Duckworth, may be able to re‑plead a cause of action as the current trustee of the Ocean Farm Trust. Rather than dismissing the action, I ordered the plaintiffs to file and serve any application to amend the writ and statement of claim by 8 January 2016. I listed the action for further directions today.
The Water Corporation applied for an order that Neil Duckworth pay its costs of the action to date. I listed that application for hearing today, and gave directions for Neil Duckworth to be given notice of the application and the material on which the Water Corporation relied. Neil Duckworth, who is currently imprisoned, filed a minute of proposed orders, submissions and an affidavit and attended the hearing by audio link.
The plaintiffs did not file any application to amend the writ or statement of claim by the required date of 8 January 2016 or at all.
Accordingly, there are three matters to be determined.
First, whether the plaintiffs should have a further opportunity to apply to amend the writ and statement of claim in these proceedings, and if so, on what terms that opportunity should be given.
Secondly, whether an order should be made requiring Neil Duckworth to pay the Water Corporation's costs of the action to 5 November 2015.
Thirdly, whether any of the orders in Neil Duckworth's minute of proposed orders dated 6 January 2016 should be made.

Further opportunity to apply to amend the writ and statement of claim

The plaintiffs have not taken up the opportunity, provided for in the orders of 5 November 2015, to seek leave to amend their writ of summons or statement of claim. An affidavit filed by the plaintiffs' solicitor indicates that they do not have sufficient funds to pursue this action, but are in discussions with a litigation funder. That position is also supported by the affidavit of Karl Duckworth sworn 13 January 2016.
Both counsel for the plaintiffs and counsel for the defendant accept that the opportunity given to the plaintiffs to recast their claim cannot be open ended.
Having regard to the submissions which have been made today, it does not appear that it would be productive to direct the parties to confer further as to whether Karl Duckworth is the current trustee of the Ocean Farm Trust. However, the plaintiffs must make a decision about whether they are going to pursue this action and, if so, the appropriate form of that action.
Dismissal of the action might affect the plaintiffs' capacity to pursue any fresh claim they may have against the Water Corporation in new proceedings. Counsel for the Water Corporation reserved its right to resist any new claim on procedural grounds, and suggested that the Water Corporation might well contend that it was not open to bring new proceedings. I will not make any final ruling on the consequences of dismissal of the current proceedings which would inevitably follow if a further extension of time was not granted. However, given the position stated by the Water Corporation, such a dismissal of the current proceedings has the potential to prejudice the plaintiffs' interests.
If the plaintiffs are granted a further opportunity to apply to amend the writ and statement of claim, the Water Corporation will be prejudiced by the continuation of this long-running litigation. No doubt it would prefer to see these proceedings brought to an end. However, that prejudice must be understood as prejudice to a large public utility which is obviously well resourced. Also, a further extension of time would not require the Water Corporation to incur substantial further costs.
Having regard to all of those matters, I am prepared to order that the plaintiffs' time for compliance with the orders made on 5 November 2015 be extended to 29 February 2016.
If the plaintiffs do not apply to amend the writ and statement of claim by that time then, in the absence of a very good reason for non-compliance, the plaintiffs can anticipate a springing order providing that the action be dismissed unless such an application is filed within a short further period (probably 2 ‑ 3 weeks from the making of the springing order).

Application for costs against Neil Duckworth

Neil Duckworth does not oppose an order that he pay the Water Corporation's costs. However, he seeks an order that he alone be responsible for the costs, contrary to the order I made on 5 November 2015 requiring the plaintiffs to pay the Water Corporation's costs jointly and severally.
Although Neil Duckworth does not oppose the costs orders sought by the Water Corporation, given that he is unrepresented, I will briefly consider the principles and indicate why I am satisfied that such an order is appropriate in all the circumstances of this case.
It is established that the discretion to make orders as to costs, conferred by s 37 of the Supreme Court Act 1935 (WA) and O 66 r 1 of the Rules of the Supreme Court 1971 (WA), extends to making an order that a non‑party pay costs in an appropriate case.[2] However, an order that a non‑party pay a party's costs of proceedings is exceptional, and the discretion to make such an order is rarely exercised.[3]
[2] Knight v FP Special Assets Ltd (1992) 174 CLR 178; HPM Pty Ltd v Fear [2002] WASCA 249 [3].
[3] HPM [4]; Browne v Onsite Rental Group Operations Pty Ltd [2015] WASCA 153 [110].
The courts have recognised some categories of case in which it will ordinarily be appropriate to make an order for costs against a non-party.
In Knight, Mason CJ, Deane and Gaudron JJ identified cases where the party to the litigation is insolvent or a person of straw, where the non-party has played an active part in the conduct of the litigation, and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. In that category of cases, an order for costs should be made against the non-party if the interests of justice require that it be made.[4]
[4] Knight (192 ‑ 193).
In Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4),[5] the court identified the following category of case:
where the non‑party is connected with the unsuccessful party to the proceeding, and has caused that party to start, continue or prosecute the proceeding in circumstances where the non-party's conduct makes it just and equitable that the non-party be visited with an order for costs in favour of the successful party either in addition to such an order against the unsuccessful party or in substitution for such an order.
[5] Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50 [88].
The question is then whether the present case is one in which the interests of justice require that an order for costs be made in favour of the Water Corporation against Neil Duckworth.
The Water Corporation has, as I have noted, already obtained an order that the plaintiffs pay its costs of the proceedings to 5 November 2015. Neil Duckworth's affidavit deposes that the plaintiffs and he are 'clearly in an indigent situation'.[6] The plaintiffs' solicitor has deposed that he is informed by Karl Duckworth and believes that the plaintiffs do not have sufficient funds to pursue action against the Water Corporation or for Neil Duckworth to fulfil his obligations to the Ocean Farm Trust.[7] A letter from the plaintiffs' solicitors to the Water Corporation's solicitors of 5 January 2016 asserted that:[8]
Whether the Water Corporation's costs are $120,000 or $400,000 the current plaintiffs are not in a position to pay either amount.
[6] Affidavit of Neil James Duckworth sworn 23 December 2015, par 14.
[7] Affidavit of Kevin Albert Gerard Gammage sworn 8 January 2016, par 5.
[8] Attachment KAGG3 to the Gammage affidavit, par 21.
Karl Duckworth has also sworn an affidavit deposing as to his financial position and that of the other plaintiffs, which suggests that the plaintiffs have limited assets and no real estate. The affidavit also deposes as to the income received by each of the plaintiffs.
In light of all of that evidence, it appears to me that the plaintiffs may well lack capacity to satisfy the costs order made in favour of the Water Corporation, at least in the short term.
The Water Corporation invites the court to conclude that Neil Duckworth has provided funding or other financial assistance to the plaintiffs for the purposes of conducting this action, and exercises control over the way in which the plaintiffs conduct their prosecution of the action. There are two parts of the evidence which support that conclusion. The first is an email sent by the plaintiffs' solicitors to the Water Corporation's solicitors on 26 August 2013 which said:[9]
I confirm that NJ Duckworth is an interested non-party pursuant to Order 9A r 1.
[9] Attachment LBH1 to the affidavit of Lital Bella Hymans sworn 26 November 2015.
Order 9A r 2 of the Rules requires a party to notify the Principal Registrar and each other party of the identity of a person who is 'an interested non‑party in relation to the party to the case'. Order 9A r 3 imposes certain duties on an interested non-party in relation to the conduct of the case. Order 9A r 1 defines the term 'interested non‑party' in the following manner:
interested non‑party, in relation to a party to a case, means a person, other than a practitioner for the party, who:
(a)provides funding or other financial assistance to the party for the purposes of conducting the case; and
(b)exercises direct or indirect control or influence over the way in which the party conducts the case.
The second part of the evidence which supports that conclusion is the affidavit of Karl Duckworth sworn on 13 January 2016, which indicates that it was Neil Duckworth's idea for the plaintiffs to commence the action and that he recommended commencing this action to the plaintiffs as the best way to progress the claims against the Water Corporation relating to the Ocean Farm subdivision. Karl Duckworth also indicates that his father paid the legal fees associated with the action until the second half of 2015, and that in around February 2015, Karl Duckworth began to pay some of the legal fees to keep the case going.
This occurred in circumstances where Neil Duckworth had commenced proceedings making essentially the same claim against the Water Corporation in 2010. That action was stayed when Neil Duckworth became a bankrupt,[10] and was subsequently discontinued. An attempt by Neil Duckworth to reinstate his action was unsuccessful, in part because he lacked standing to pursue the claim. This was on the basis that if (as I subsequently found) Neil Duckworth entered into the agreements as trustee, he had been replaced as trustee by Karl Duckworth.[11] There is an unsatisfied order that Neil Duckworth pay the Water Corporation's costs of the earlier action, which have been taxed in the amount of $123,808.66.[12]
[10] Duckworth v Water Corporation [2012] WASC 30.
[11] Duckworth v Water Corporation [No 2] [2012] WASC 163 [21].
[12] Attachment LBH3 to the Hymans affidavit, par 12 of the Neil Duckworth affidavit.
It seems to me that in many ways Neil Duckworth has been the effective litigant in this case. Certainly, he procured the plaintiffs to make the claim and funded their legal representation, at least until mid‑2015. I do take into account the fact that the evidence does not establish that Neil Duckworth has any continuing beneficial interest in the subject matter of the current action. On the evidence, he is no longer the trustee of the Ocean Farms Trust, and is not a beneficiary of that Trust.
In his most recent affidavit, Neil Duckworth makes a number of assertions as to the trust arrangements. In large part I received those paragraphs of the affidavit not as evidence, but as submissions. In any event, those assertions are inconsistent with the documentary evidence and findings which I have made in these proceedings.
Recognising that Neil Duckworth has no continuing beneficial interest, and taking all of the above considerations into account, I am satisfied that this is one of the exceptional cases where the interests of justice require that Neil Duckworth, as a non‑party, should pay the Water Corporation's costs of the current action. I will order that Neil Duckworth pay the Water Corporation's costs of the action to 5 November 2015, and that Neil Duckworth pay the Water Corporation's costs of the application for that order.
It is not appropriate to interfere with the existing order that the plaintiffs pay the costs of proceedings to 5 November 2015. The plaintiffs commenced the proceedings and must have appreciated that there was a risk of an adverse costs order in doing so. While it is understandable that Neil Duckworth, as a father, does not wish his children to be burdened with the financial consequences of action which he has encouraged and procured, that does not provide a reason for the court to decline to make the usual order that costs follow the event. Nor does it provide a basis for the court recalling the order which it has already made in relation to costs.

Other orders sought by Neil Duckworth

Neil Duckworth also filed a minute of orders which sought a variety of orders which would effectively reinstate in these proceedings, and expand upon, his claim advanced in his previous action against the Water Corporation. I am not satisfied that it is appropriate to make orders of that kind at this stage in the present proceedings.
The orders sought do not relate to the issues of costs which were the issues between Neil Duckworth and the Water Corporation programmed for hearing today. There is no evidence of any conferral taking place. To permit Neil Duckworth to reinstate the claim in these proceedings would be inconsistent with Edelman J's decision that Neil Duckworth lacked standing. It would also be inconsistent with my determination of the preliminary issues between the plaintiffs and the Water Corporation in these proceedings.
If Neil Duckworth wishes to again pursue a claim against the Water Corporation, the appropriate course would be to commence fresh proceedings. Nothing in these reasons should be taken as encouraging that course of action. This hearing is not the appropriate forum in which to agitate issues related to such a claim.
For these reasons, I decline to make any of the orders proposed in Neil Duckworth's minute dated 6 January 2016.

Costs

It remains to decide who should pay the costs of today's hearing, other than those related to the application for costs against Neil Duckworth. Both the plaintiffs and the Water Corporation have had some measure of success. The hearing provided a forum for the Water Corporation to articulate its position in relation to certain matters which could have been addressed in a response to a letter from the plaintiffs' solicitors which, in my view, was an appropriate attempt at conferral. In those circumstances, the appropriate order as between plaintiffs and defendant is that costs be in the cause.