Findex Group Limited v McKay (No 2)
[2023] ACTSC 43
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Findex Group Limited v McKay (No 2) |
Citation: | [2023] ACTSC 43 |
Hearing Dates: | 30 January, 9 March 2023 |
DecisionDate: | 10 March 2023 |
Before: | McWilliam AsJ |
Decision: | (1) The defendant is to pay the plaintiffs’ costs of and in relation to the following matters: a. The plaintiffs’ application filed 12 November 2019, seeking to amend the statement of claim, with such costs limited to commence from the date the application was served on the defendant, b. The defendant’s application seeking summary dismissal filed 6 April 2020, c. The plaintiffs’ costs thrown away by the defendant’s amended application filed 22 June 2020, which was then not pursued, including: i. The costs of responding to the affidavit of the defendant affirmed 1 June 2020, ii. The plaintiffs' application filed 25 August 2020 and notice to produce, and iii. The directions hearings on 22 June and 2 October 2020. (2) The costs payable in order 1 above are to be either agreed or assessed forthwith, but any resulting assessment is not to be enforced by way of judgment or otherwise until the conclusion of this proceeding. (3) The Court certifies for the appearance of all counsel, including senior counsel, on the hearing of the interlocutory application. |
Catchwords: | COSTS – whether indemnity costs should be ordered – whether defendant unreasonably conducted application |
Legislation Cited: | Court Procedures Act 2004 (ACT) s 5A Court Procedures Rules 2006 (ACT) rr 505, 513, 1701, 1739 Protection of Public Participation Act 2008 (ACT) |
Cases Cited: | B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd (No 2) [2019] FCA 925 Dibeek Holdings Pty Ltd v Notaras [1998] ACTSC 9; 143 FLR 132 Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 |
Parties: | Findex Group Limited (First Plaintiff) Findex Services Pty Ltd (Second Plaintiff) Financial Index Australia Pty Limited (Third Plaintiff) Spiro Paule (Fourth Plaintiff) Danielle Bartholomeusz (Fifth Plaintiff) Phillip Hart (Sixth Plaintiff) David McKay (Defendant) |
Representation: | Counsel M A Friedgut (Plaintiffs) M A Karam (Defendant) |
| Solicitors Harmers Workplace Lawyers (Plaintiffs) Just Dispute Resolution (Defendant) | |
File Number: | SC 464 of 2019 |
McWilliam AsJ
On 27 July 2022, judgment was delivered on an interlocutory application for summary dismissal. A paragraph of the statement of claim relating to damages was struck out, but summary judgment was not ordered: see Findex Group Limited v McKay [2022] ACTSC 192 (Findex v McKay).
The parties have each sought to be heard on costs. The opportunity to do so via oral hearing was delayed due to the various unavailability of counsel who had appeared on the application. There was a degree of procedural history and complexity to the interlocutory application that meant it was preferable for those counsel who were involved in the hearing to also be involved in arguing the question of costs. That complexity has been repeated in the costs hearing, which had two oral hearings, two tranches of affidavit evidence and three rounds of written submissions.
The plaintiff has objected to an affidavit affirmed by the defendant’s solicitor on 14 February 2023, which was filed pursuant to a grant of leave following the substantive oral hearing. I indicated at the second oral hearing that I would consider the objections and rule upon them. I have taken into account Annexure B as a submission on costs. I have also admitted Annexures C and D as relevant to the issue of costs of the application to file an amended statement of claim. I have admitted [7] and [8] as relevant to establishing the fact of the defendant having the benefit of outstanding costs orders in other proceedings which are yet to be assessed but otherwise I have rejected the contents of the affidavit.
Orders sought
The defendant sought an order that costs be reserved. The effect of seeking such an order was that either a further hearing on costs would be necessary, or if the matter was not separately revisited and determined, the costs would form part of any overarching costs order ultimately made at the conclusion of the proceedings.
The plaintiffs sought more complicated orders. In summary, the plaintiffs sought that the defendant pay their costs of the following:
(a)The costs of the defendant’s application for summary dismissal filed 6 April 2020;
(b)The costs of the plaintiffs’ application filed 12 November 2019 for leave to amend their statement of claim, which was granted in October 2020;
(c)The costs relating to and thrown away by the abandonment of an amended application served on the plaintiffs on 1 June 2020 and filed on 22 June 2020, which include the following:
(i)The directions hearings on 22 June and 2 October 2020;
(ii)Responding to the amended application and affidavit of the defendant affirmed 1 June 2020 (including preparing evidence, a notice of objections to the affidavit and a notice to produce); and
(iii)The preparation of an application in proceedings filed on 26 August 2020, which was then unnecessary.
(d)The costs referred to in (c) above were sought on either an indemnity or solicitor and client basis.
(e)Orders that the costs payable by the defendant be assessed and payable forthwith.
(f)Certification for the use of two counsel in the proceedings by the plaintiffs, in accordance with rule 1739.
I will deal with the orders sought in turn.
Should the Court determine costs now or reserve the question for determination at the conclusion of the hearing
It is not always possible at an interlocutory stage to know what the final result of the proceedings will be. In Dibeek Holdings Pty Ltd v Notaras [1998] ACTSC 9; 143 FLR 132 (Dibeek Holdings) at [80] and 140, Higgins J (as his Honour then was) discussed the importance of bearing in mind, in the case of any interlocutory application, that the final result of the action may reveal that a successful party at the interlocutory stage ultimately had no merit in relation to the action. That risk does not deprive the Court of the power to make an order at an interlocutory stage: see, for example, Doyle v Gillespie [2010] ACTSC 21; 4 ACTLR 188 at [135]-[136]. It does, however, give rise to the need to consider whether to delay resolving questions of costs of particular applications until the conclusion of a trial. Ultimately the result will depend on the interests of justice in all the circumstances: Dibeek Holdings at [87] and 140.
Where the decision concerns a procedural question such as whether to make or defer a costs order, those circumstances include s 5A of the Court Procedures Act 2004 (ACT) (Court Procedures Act). The objectives there set out refer to the efficient use of judicial resources and disposal of a court’s overall caseload, along with the resolution of the dispute at a cost that is proportionate to the importance and complexity of the matter in dispute.
The dispute in question is for specific orders about costs of various applications which were amended or filed and then abandoned. The orders sought require consideration of the detailed procedural history of the application and rely on matters that arose in previous directions hearings, all of which have already been collected, dissected, and argued with varying points of emphasis in written and oral submissions before the Court as presently constituted. Deferring the argument for another day would not be in the interests of justice, as it would require the parties to expend further costs in arguing the question of costs many months after the conduct the subject of the orders sought had occurred, and potentially before a different judicial officer who was not involved in the earlier procedural skirmishes. As I indicated to the parties during the oral hearing, the preferable course was for the judicial officer who heard the interlocutory application to determine the question now, rather than the trial judge following a final hearing of the matter.
For those reasons, I will not accede to the defendant’s application to reserve the question of costs.
Costs of the defendant’s application for summary dismissal filed April 2020
I have previously set out in Pesec v Consolidated Builders Ltd (No 4) [2021] ACTSC 188 (Pesec) at [6]-[7] the principles guiding the exercise of the Court’s discretionary power to award costs, applying in a proceeding (including an interlocutory proceeding) where there were multiple issues. In their written submissions, the plaintiffs have also helpfully collected the applicable authorities. It suffices here to provide a brief explanation without repeating the comprehensive references set out in Pesec or those submissions:
(a)A substantially successful party is entitled to recover its costs from the opposing party, because it is just and reasonable that the party who has caused the other party to incur costs should reimburse that party for the liability incurred: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [35]; Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ, at 562-3 per Toohey J, at 566-7 per McHugh J (Latoudis).
(b)That principle has been described as the “ordinary rule” that “costs follow the event”: Kone Elevators Pty Ltd v Shipton [2021] ACTCA 33 (Kone) at [294]. The event is determined by reference to the outcome of the matter in substance: Latoudis at 566-7; Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 at [34]-[35].
(c)Where there are multiple issues in proceedings, the Court generally does not differentiate between those on which the party succeeded or failed: see Pesec at [13] and the cases there-cited.
(d)Apportionment may be appropriate in circumstances where a party has wholly failed on a separate and discrete issue (Kone at [294]), or on an issue which was dominant or to which a substantial period of the hearing was devoted. A party who is successful may still be subject to the amelioration of what would otherwise be a favourable costs order so as to reflect that party's failure on particular issues, even though the successful party did not act unreasonably in raising or defending those issues: see the discussion in Pesec at [17] and the authority there-cited.
The plaintiffs were substantively successful in defending the application, the primary objective of which was summary dismissal. One paragraph was struck out of the plaintiffs’ amended statement of claim, but it cannot be said that was a separate and discrete point. Nor can it be said that the issue was dominant or occupied a substantial portion of hearing time.
Accordingly, the defendant should pay the plaintiffs’ costs of the application.
Costs of the plaintiffs’ application to amend the statement of claim filed 12 November 2019
This application to amend the statement was unnecessary, as r 505 of the Court Procedures Rules 2006 (ACT) (Rules) provides that a plaintiff may amend the statement of claim once before the pleadings have closed. No prior amendment had been made and no defence had yet been filed, it appears by agreement. The amendments were not such as to otherwise require leave under the Rules.
The plaintiff drew attention to authority supporting the proposition that a party who has unreasonably opposed an application for leave may be ordered to pay the costs of the application, citing Media Ocean Ltd v Optus Mobile Pty Ltd (No 6) [2009] FCA 1319 at [34]; Public Trustee v Nash (1921) 38 WN (NSW) 142 at 143. The same principle has been applied more recently in cases such as J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd (No 4) [2015] FCA 218 at [5], and B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd (No 2) [2019] FCA 925 at [4].
That concept also finds support in s 5A(4) of the Court Procedures Act, which obliges the parties to a civil proceeding to help the court to achieve the objectives there specified, which includes the obligation to resolve disputes as quickly, inexpensively and efficiently as the just determination allows.
The defendant argued that there is no justification for departing from the usual order (contained in r 513, set out below) that the amending parties pay the costs thrown away occasioned by the amendment. That is the usual order, but it does not operate here. The amendments were:
(a)the addition of alternative statutory sources of power to make restraining orders, to award damages and for the payment of interest (mostly arising from the matter being transferred from NSW to Territory jurisdiction);
(b)the addition of the facts, matters and circumstances supporting the allegation that a particular representation (already pleaded) was with respect to a future matter;
(c)an additional pleading of Findex Services as suing on behalf of the other plaintiffs;
(d)the inclusion of other emails alleged to have been sent by the defendant which contained the same content as an email already pleaded; and
(e)the fixing of typographical or grammatical errors, and changes to descriptions in the pleading without affecting the substance of the allegations.
The above list suffices to disclose that there was nothing deleted from the statement of claim or any specific change made that meant any work that was done was wasted. In circumstances where no defence had yet been filed, it is difficult to see what costs were thrown away by a claim that was expanded by the amendments and moreover, where such amendments, properly characterised, were minor.
I do accept the defendant’s separate argument that the application should never have been brought. Rule 505 is clear in stating that where the pleadings have not yet closed, the plaintiff is entitled to amend once without leave. To that extent at least, the plaintiffs should bear responsibility for the cost of preparing and filing the application. It cannot be said that the defendant’s objection is what brought about a perceived need to file the application.
However, thereafter it was the defendant who was responsible for the costs of pursuing the motion. Costs being compensatory, the plaintiff is entitled to those costs notwithstanding that the application was unnecessary. In Dibeek Holdings, Higgins J referred to a number of guidelines (at [86] and 140), one of which was that if a party makes an unsuccessful motion that should not have been made at all, the successful party should have the costs of the motion in any event, citing Harry Smith Care Sales Pty Ltd v Claycom Vegetables Supply Co Pty Ltd (1978) 29 ACTR 21. On one view, that may apply with greater force here, in circumstances where no leave was required because the plaintiffs could simply amend as of right.
Critically though, such an application having been filed, there were no grounds for the defendant to oppose it. As is made clear by the correspondence contained in the supplementary affidavit filed for the defendant, and the supplementary submissions relying on it, the defendant’s opposition to the filing of an amended statement of claim was based on concerns about matters that were in the existing pleading, not the minor amendments sought to be made. The defendant’s concerns included:
(a)that no cause of action had been properly pleaded by the natural person plaintiffs, and
(b)that the claim for damages had not been properly pleaded.
While I agree that those matters were determined in the defendant’s favour following a two-day hearing (see Findex v McKay at [94]-[105]), they were not matters that in any way related to the minor amendments that were the subject of the amended statement of claim. The appropriate course was that which eventually prevailed, namely, to file the amended statement of claim and then argue the strike out of the paragraphs that had previously been the subject of dispute.
In those circumstances, the defendant’s continued opposition to the minor amendments proposed was unreasonable. The defendant should pay the plaintiffs’ costs in relation to the application but limited to the date from which the application was served on the defendant.
Costs thrown away by the defendant’s amended application filed 22 June 2020 which was abandoned
The plaintiffs seek an order for the costs that were thrown away when the defendant filed an amended application on 22 June 2020 but informed the Court in October 2020 that the amended application would not be pursued and reverted to the original application for summary dismissal.
The amendments had added two grounds (7A and 8) relating to relief under the Protection of Public Participation Act 2008 (ACT) (the PoPP Act). The amendments were accompanied by an affidavit affirmed by the defendant on 1 June 2020. The defendant later notified the plaintiffs (in September 2020) that he would not be pressing the PoPP Act issue at the hearing of either the plaintiffs’ application to amend their statement of claim or his own application for summary dismissal or strike out.
The plaintiffs had incurred what was submitted to be very substantial expense in undertaking work in response to those amendments. It included a responsive application filed by the plaintiffs, and a notice to produce issued to the defendant. The plaintiff claims that work was wasted when the defendant abandoned the grounds seeking to rely on the PoPP Act.
The defendant argued that the withdrawal of the amended application or the decision not to press the allegations was made well in advance of the hearing, such that neither party made submissions about those orders. Parties should not be punished for appropriately narrowing the scope of interlocutory disputes in the course of proceedings.
It was further argued that the defendant may yet rely upon the PoPP Act in defending the substantive proceedings. The allegations have not been “abandoned”, as submitted by the plaintiffs. Whether they ultimately have merit has not yet been tested, and will not be tested until the substantive hearing. Accordingly, the defendant submitted that the Court is not in a position to accept any submissions about the allegations contained in the grounds.
The position is that the Court was not required to adjudicate on the merits of that amended application, because it was either withdrawn or not prosecuted by the defendant, which was confirmed at a directions hearing on 2 October 2020. At that time, the question of the costs of the amended application was expressly deferred until the conclusion of the interlocutory proceeding as to whether the Amended Claim ought to be dismissed.
Here, I consider that the usual order as to costs of amending documents referred to above does have operation. It is contained in r 513 of the Rules as follows:
513 Amendment—costs
(1) This rule applies to the following costs:
(a) costs of an amendment under this part;
(b) costs thrown away because of the amendment.
(2) Unless the court otherwise orders, the costs are payable by the party making the amendment.
Note Pt 6.2 (Applications in proceedings) applies to an application for an order otherwise ordering.
Although what was heard and determined was the orders sought in the original application, the formal adding of additional grounds for the relief by way of amended application, followed by the removal of those grounds before the application was heard and determined, cannot be ignored. The defendant’s decision not to pursue issues in the application in proceeding are properly characterised as an amendment to the application, and they are governed by r 513. The application of this rule is not to be viewed as a punishment, but rather a measure that is consistent with compensating parties for work that is later wasted.
It may be accepted that ultimately, the defendant may pursue an argument based on the PoPP Act at the substantive hearing. In that event, some or all of the work carried out may in due course be utilised. However, the difference is that the argument was brought at an application dealing with the threshold question of whether the proceeding ought to be summarily dismissed. That is a different issue with a much higher hurdle for the defendant to overcome and the nature of the evidence and submissions may also be different.
The concern of the defendant can further be accommodated by an order that only relates to the costs thrown away by the changed position of the defendant on the interlocutory application. If the defendant later does pursue an argument, and the plaintiffs in turn have recourse to work that was previously done, then those earlier costs will not be wasted.
If I am wrong about that, or as a separate reason for arriving at the same result, if the application for summary dismissal is viewed as a whole, it includes the work that was done to deal with the application in its amended form. I have already found that the plaintiff should have its costs of the application. The wasted expenses of responding to grounds 7A and 8 are part of the costs that have already been awarded to the plaintiff.
Accordingly, the defendant will be ordered to pay the plaintiffs’ costs thrown away by the defendant’s amended application filed 22 June 2020.
Should the Court order the costs in respect of the abandoned amended application to be payable on an indemnity basis or solicitor and client basis?
Extensive submissions were devoted to this issue by the plaintiffs. However, it is unnecessary to go through each one because none of them can change the fact that the PoPP Act issue has yet to be decided. If it is later argued and found to be utterly baseless, then the plaintiffs may seek indemnity costs in respect of that issue at that time.
The plaintiffs submitted that the indemnity costs order was sought in respect of the work done to respond to the PoPP Act grounds because those arguments were plainly not a threshold matter to be added to an application for summary dismissal, a permanent stay or the striking out of the statement of claim. Grounds 7A and 8 were said to be ‘doomed to fail’, in that there was no proper basis upon which the defendant could have succeeded in establishing those grounds at an interlocutory summary dismissal application.
The difficulty is that again, the additional grounds under the PoPP Act were not pursued to a determination at the summary threshold level. It is not for a court when considering costs following an interlocutory strike out application to go back through the procedural history of that application and traverse old grounds in order to work out what it would have determined in respect of those grounds and then whether the mere raising of them was conduct so unreasonable as to warrant indemnity costs. This is not a case where the Court can determine that either party would have been certain to succeed without engaging in such an exercise, particularly where no submissions were made during the hearing. That is the case even if the question had been considered immediately following the defendant’s decision not to press the grounds in October 2020. It would not have been appropriate for the Court to then proceed to make findings about the merit of issues that had not been argued, even at the high summary threshold level.
I have already found that the defendant should pay the costs thrown away by arguing and then abandoning grounds raising the PoPP Act. I am not persuaded that those costs should be made payable on an indemnity or solicitor and client basis.
Should the costs payable pursuant to any orders made be assessed and payable forthwith?
Rule 1701 of the Rules provides that if the Court awards the costs of an application in a proceeding, it may order that the costs not be assessed until the proceeding ends.
In Richmond v Ora Gold Ltd [2020] FCA 70, Colvin J stated at [28]:
Ordinarily, costs are awarded on the basis that they will be paid when the proceedings have concluded. Approaching the matter in that way avoids the considerable burden of multiple taxations and allows for set-offs as between costs orders made in the course of the same proceeding …
His Honour went on to summarise the relevant considerations, including referring to the view expressed by Olney J in Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312, which included the following:
… I take the view that the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule …
It must be remembered that in the Territory, the Rules are different, so that any costs order made in a proceeding may be immediately assessed, unless the court makes an order pursuant to r 1701. Nevertheless, the various considerations that a Court takes into account are equally applicable in determining whether to depart from the default position under the Rules, and make an order that costs be payable at the conclusion of the proceedings. They are taken from Richmond v Ora at [33] (references omitted):
(1)whether there has been unreasonable conduct in the bringing of the application;
(2)the capacity of a costs order to stultify proceedings, particularly where they are brought by persons who may be seen (even without specific evidence) to have limited resources;
(3)whether costs thrown away could be more accurately assessed after the determination of the proposed substantive proceeding;
(4)whether a party will not have the benefit of an award of costs for a considerable period of time;
(5)whether security for costs has been provided; and
(6)whether the interlocutory application concludes a discrete aspect of the proceedings;
The plaintiffs relied on the costs having been incurred as a result of unreasonable conduct of the defendant, citing Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1 at [12]. The plaintiffs further submitted that the plaintiffs have no security for their costs, and the defendant has threatened that he will hide his assets so that the plaintiffs will never receive anything from him. This concern is based on correspondence from the defendant’s solicitor which included the following:
A moment’s pause for thought should lead you to some highly relevant conclusions:
…
Mr McKay is a financial planner and knows how to protect his family’s assets. I’m sure you have conducted the appropriate searches in that respect already.
In short, any victory by your client will be pyrrhic and of little practical effect.
First, I do not accept that the correspondence gives rise to any probable inference about the conduct of the defendant attempting to move assets beyond the jurisdiction or otherwise dissipate assets in the event that the plaintiffs are successful on their claims. If anything, it suggests that the defendant had already arranged his financial affairs such that no assets of substance, such as real property, are held in his name.
Second, as was set out in Findex v McKay at [17]-[23], these parties have been, and are, involved in protracted litigation across at least three jurisdictions. At least three proceedings are extant in this Court. Costs orders made in those and earlier proceedings may ultimately be set off against any costs orders made in this proceeding. The plaintiffs have not raised impecuniosity or hardship. While I would not be minded to prevent the costs being assessed when the matters are more fresh in the minds of the parties and their representatives than they may be at the conclusion of the matter, I am concerned that such assessment should not then be capable of founding a judgment which is then enforceable – including permitting the issuing of a bankruptcy notice – when the litigation is still proceeding.
As I indicated to the parties during the hearing, I will not depart from the default position of this jurisdiction that the costs payable be agreed or assessed forthwith, but I will include an order that any assessment resulting from that process not be payable or enforced pending the conclusion of this proceeding.
Should the court certify for counsel, including senior counsel?
This issue is more directly concerned with questions of assessment when the time comes, but the procedural rules clearly envisage that the judicial officer who heard the proceeding may play a determinative role in assisting the assessor when considering whether it was appropriate for counsel to appear. Rule 1739(1) of the Rules provides:
If the court certifies the use of counsel on an application in a proceeding, the registrar must allow counsel’s fees for the application.
The judgment in Findex v McKay demonstrates that the procedural arguments were complex. Even the arguments made on the question of costs were not straightforward because of the acrimonious history between these parties. The consequences were significant for the plaintiffs, in that it was an application to extinguish the entire claim at a threshold level. It was also the type of summary judgment or dismissal dispute that required extensive and detailed argument over a number of days. The Court was assisted by both the detailed submissions and the advocacy of all counsel involved in the case. For those reasons, I certify for the costs of two counsel, including senior counsel, for the plaintiff, as well as the costs of counsel for the defendant if such certification later becomes necessary.
Conclusion
The orders of the Court are as follows:
(1) The defendant is to pay the plaintiffs’ costs of and in relation to the following matters:
a. The plaintiffs’ application filed 12 November 2019, seeking to amend the statement of claim, with such costs limited to commence from the date the application was served on the defendant,
b. The defendant’s application seeking summary dismissal filed 6 April 2020,
c. The plaintiffs’ costs thrown away by the defendant’s amended application filed 22 June 2020, which was then not pursued, including:
i. The costs of responding to the affidavit of the defendant affirmed 1 June 2020,
ii. The plaintiffs' application filed 25 August 2020 and notice to produce, and
iii. The directions hearings on 22 June and 2 October 2020.
(2) The costs payable in order 1 above are to be either agreed or assessed forthwith, but any resulting assessment is not to be enforced by way of judgment or otherwise until the conclusion of this proceeding.
(3) The Court certifies for the appearance of all counsel, including senior counsel, on the hearing of the interlocutory application.
| I certify that the preceding fifty [50] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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