EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd (No. 2) - [2018] NSWSC 339

Supreme Court

New South Wales

Medium Neutral Citation: EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd (No. 2) [2018] NSWSC 339
Hearing dates: On the papers
Date of orders: 16 March 2018
Decision date: 16 March 2018
Jurisdiction: Equity - Commercial List
Before: McDougall J
Decision:
Plaintiff to pay defendants’ costs in the gross sum of $1.2 million.

Catchwords:
COSTS – costs follow the event – where defendants successful on substantive proceedings – where plaintiff seeks to pay only part of defendants’ costs – where plaintiff ran case in entirely inefficient and disorganised manner – where plaintiff’s conduct so derelict as to enliven discretion to order costs on indemnity basis

COSTS – application for gross sum costs order – where such order sought in lieu of indemnity costs – where costs of assessment are disproportionately high – where plaintiff has demonstrated propensity to challenge extensively prior costs assessments – where no detriment to plaintiff by virtue of mathematical relation between the gross sum sought and the amount likely to be assessed – application granted
COSTS – application for third party costs order – whether principal of corporate plaintiff should be made joint and severally liable for costs where principal was person who directed litigation and stood to gain from it – insufficient reason for piercing corporate veil – application dismissed
Legislation Cited: Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd [2017] NSWSC 1310
eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284
Oshlack v Richmond River Council (1998) 193 CLR 72
Category: Costs
Parties: EIFY Systems Pty Ltd (Plaintiff)
3D Safety Services Pty Ltd (First Defendant)
Anthony Ian Conacher (Second Defendant)
Simon Paul Morrow (Third Defendant)
3D Safety Systems Pty Ltd (Fourth Defendant)
Wishbone Consulting Pty Ltd (Fifth Defendant)
Representation:
Counsel:
F Corsaro SC / S Baron-Levi (Plaintiff)
K Andronos SC / S Keizer (Defendants)
Solicitors:
Proctor Phair Lawyers (Plaintiff)
Henry Davis York (Defendants)

File Number(s): 2012/323876

Judgment

HIS HONOUR: In these reasons, I deal with the costs consequences of my principal judgment given on 28 September 2017: EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd [2017] NSWSC 1310.

Background

I shall assume that the reader of these reasons has had the misfortune to read my earlier reasons, and shall, so far as possible, avoid repetition of what I there said. However, there are a number of points, emerging from my earlier reasons, that require summary statement:

the plaintiff’s case was prepared and conducted in an extraordinarily inefficient and disorganised way.

At least partly in consequence, the hearing was prolonged, and indeed required double the number of hearing days initially estimated and allotted.

My earlier reasons were, on the face of things, unconscionably long, comprising 465 paragraphs over 117 pages. That length reflected in no small part the way in which the plaintiff’s case had been prepared and presented, the inadmissible nature of much of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NSWSC 339
Decision Date: 16 March 2018

CaseChat Overview and Summary

EIFY Systems Pty Ltd sought to recover damages from 3D Safety Services Pty Ltd for alleged breaches of contract. The Federal Circuit and Family Court of Australia was tasked with resolving the dispute and determining the costs associated with the litigation. The central legal issues revolved around the allocation of costs, particularly given the plaintiff's inefficient conduct throughout the proceedings and the defendants' success on the substantive claims.

The court first addressed the plaintiff's conduct, which it found to be entirely inefficient and disorganised. This conduct was so derelict that it warranted the exercise of the court's discretion to order costs on an indemnity basis. The court considered the plaintiff's approach to costs, which included attempts to pay only a fraction of the defendants' costs. Given the plaintiff's conduct, the court determined that it was appropriate to order costs on an indemnity basis. Additionally, the plaintiff's application for a gross sum costs order was considered in lieu of indemnity costs. The court found that the costs of assessment were disproportionately high and that the plaintiff had demonstrated a propensity to challenge prior costs assessments extensively. The court also noted that there would be no detriment to the plaintiff due to the mathematical relation between the gross sum sought and the amount likely to be assessed. Consequently, the application for the gross sum costs order was granted. The court then examined whether the principal of the corporate plaintiff should be made jointly and severally liable for the costs, given that the principal directed the litigation and stood to gain from it. However, the court found insufficient reason to pierce the corporate veil, and the application was dismissed.

The final orders of the court included an indemnity costs order against the plaintiff and a gross sum costs order, while the application for third-party costs was dismissed. The plaintiff was required to pay the defendants' costs on an indemnity basis and to comply with the gross sum costs order. The court's decision emphasised the importance of efficient and organised litigation conduct and the consequences of failing to meet these standards.

Orders