Flinders Diamonds Ltd v Tiger International Resources Incorporated

[2006] SASC 139

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

FLINDERS DIAMONDS LTD v TIGER INTERNATIONAL RESOURCES INCORPORATED & OTHERS

[2006] SASC 139

Judgment of The Honourable Justice Layton

11 May 2006

EQUITY - GENERAL PRINCIPLES - EQUITABLE DOCTRINES AND PRESUMPTIONS - CONTRIBUTION

PROCEDURE - COSTS - AGREEMENTS AS TO COSTS

PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - CO-DEFENDANTS

Application for contribution by first and second defendants (applicants) from third, fourth and fifth defendants (respondents) - costs order made joint and severally against all five defendants in favour of the plaintiff following a trial and confirmed on appeal by the Full Court- respondents entered into a deed of settlement with plaintiff and paid $11,000.00 to plaintiff - applicants did not know terms of the settlement - all five defendants consented to a costs allocatur of $200,000.00 plus interest - applicants paid the full amount of the consent costs - whether payment discharged joint liability of all defendants- whether applicants can claim equitable contribution from respondents – whether respondents were released from contribution by agreement or common intent or by entering into a deed of settlement - whether respondents liable to contribute only with reference to their share percentage in the plaintiff company – whether contribution based on differing fault or benefit - whether respondents to be treated as one entity for purposes of determining contributions - consideration of legal and equitable principles of contribution - Held: application granted - equal contribution between all defendants to the consent costs including interest- respondents to pay three fifths of the consent costs plus interest, to the applicant.

Corporations Act 2001 (Cth) s 606; s 671B; s 672B; Supreme Court Act 1935 s 40(1); Supreme Court Rules 1987 R 101, referred to.
Salim v Ingham Enterprises Pty Ltd (1998) 55 NSWLR 7, distinguished.
Albion Insurance Co Ltd v GIO (NSW) (1969) 121 CLR 342; Burke v LFOT Pty Ltd (2002) 209 CLR 282; Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd  (Unreported, Supreme Court of New South Wales, Equity Division, Young J, 15 July 1996, Judgment No 2092/1992); Oshlack v Richmond River Council (1998) 193 CLR 72, discussed.
Accident Compensation Commission v Baltica General Insurance Co Ltd [1993] 1 VR 467; Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460; Flinders Diamonds Ltd v Tiger International Resources Inc (2003) 86 SASR 353; Flinders Diamonds Ltd v Tiger International Resources Inc (2004) 88 SASR 281; In Re Cartwright [1975] 1 WLR 573; Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (1995) 122 FLR 294; Morgan Equipment Co v Rodgers [No 2] (1993) 32 NSWLR 467; Muschinski v Dodds (1985) 160 CLR 583; Robinson v Campbell (No 2) (1992) 30 NSWLR 503; Salomon v A Salomon and Co Ltd [1987] AC 22; Stec v Orfanos [1999] FCA 457; Thiess Watkins White Constructions Ltd (In Liq) v Witan Nominees (1985) Pty Ltd [1992] 2 Qd R 452; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Walker v Bowry (1924) 35 CLR 48, considered.

FLINDERS DIAMONDS LTD v TIGER INTERNATIONAL RESOURCES INCORPORATED & OTHERS
[2006] SASC 139

1. LAYTON J:          This is an application brought by Tiger International Resources Inc (“the first defendant”) and Mr Patric Barry (“the second defendant”) for contribution from the third, fourth and fifth defendants.  The second defendant is the chief executive officer of the first defendant, a company incorporated in Canada.  The third defendant, Mr Anthony Campbell, is the sole director and shareholder of both the fourth and fifth defendant companies, Campbell Corporation Pty Ltd and Balance Tax Pty Ltd.  The claim for contribution arises out of an order that the defendants pay the plaintiff’s costs of the trial in this matter, which was heard before Williams J in 2002 and 2003.  The plaintiff, Flinders Diamonds Ltd, takes no part in this application. 

2. The first and second defendants between them have paid $200,000 of the plaintiff’s costs plus interest of $3,366.08,[1] and they now seek to recover from the third, fourth and fifth defendants a percentage of those costs. This is a dispute over how much, if any, of the amount paid to the plaintiff by the first and second defendants (who will be referred to collectively as “the applicants”) can be recovered from the third, fourth and fifth defendants (who will be referred to collectively as “the respondents”).

   [1] Exhibit 4 “Letter from Corsers Solicitors” dated 17 January 2006.

   The trial before Williams J and the order as to costs

3. The plaintiff brought proceedings in 2002 alleging wrongful conduct under the Corporations Act 2001 (Cth) (“the Act”) and seeking to restrain the holding of a meeting.  The trial took place during November and December 2002, and there was further argument in March of 2003.  Shortly before the commencement of the trial solicitors acting for all defendants ceased to act.  None of the defendants were represented professionally at the trial but the trial Judge noted in his reasons for judgment at [21] that “the defendants…put up a spirited defence through Messrs Barry and Campbell” and in addition noted that the first and second defendants provided extensive written submissions through a firm of solicitors, which submissions were adopted by the respondents.  Both the second and third defendants gave evidence at the trial. 

4. On 29 May 2003 Williams J delivered his decision in which he found that the defendants had acted in breach of the Act in reaching an arrangement to use their respective shares to remove the directors of the plaintiff company and replace them with their own nominees. All defendants were found liable for breaches of s 606 and s 671B of the Act and the first, second and third defendants were also found to be in breach of s 672B of the Act.  On 12 June 2003 Williams J made formal orders including declarations of the breaches of particular sections of the Act, and that the general meeting of the plaintiff company, requested by Mr Barry, was to be held for an improper purpose.  In relation to costs, Williams J ordered that:

   The defendants pay the plaintiff’s costs to be taxed or agreed:

   (a)     on a party and party basis with respect to costs incurred on or before 23 December 2002; and

   (b)     on a solicitor and client basis with respect to costs incurred after 23 December 2002.

   The Appeal to the Full Court

5. On 26 June 2003 Mr Scerri filed a Notice of Acting in respect of all defendants and also filed on their behalf a Notice of Appeal.  The Full Court, in a judgment delivered on 23 April 2004, dismissed the appeal against the declarations that the defendants had acted in breach of the Act, but allowed the appeal in relation to the declaration that the general meeting requested by Mr Barry was to be held for an improper purpose.  The Full Court set aside a number of the orders made by Williams J, but importantly found that his Honour’s order as to the costs of the proceedings at first instance should stand.  The Full Court also declined to make any order as to the costs of the appeal. 

   The plaintiff’s costs

6. The plaintiff lodged a Short Form Bill of Costs on 22 June 2004, claiming an amount of $295,372.43.[2]  The defendants attempted to negotiate an agreement with the plaintiff to also settle outstanding matters in relation to the proceedings as well as to the quantum of the plaintiff’s costs.  These attempts are discussed later in these reasons.  As a result of negotiations between the plaintiff and the respondents, to which the applicants were not privy, a deed of settlement was entered between them on 22 June 2004 (“the Deed of Settlement”).  In that Deed of Settlement, the plaintiff agreed to accept the amount of $11,000 from the respondents, reserving its rights to pursue the applicants for the balance of the costs claimed.  The applicants were not made aware of the terms of that settlement, including the amount of $11,000, until the respondents produced the Deed of Settlement as part of the discovery process for this trial, some time after 17 June 2005.[3]

   [2] Affidavit of P J Kupniewski sworn 25 June 2004.

   [3] List of Documents filed by the Third, Fourth and Fifth Defendants 17 June 2005; Transcript of Proceedings, 16 January 2006, 50.

7. There was a taxation of the plaintiff’s costs listed before Judge Kelly on 10 August 2004.  During an adjournment on that day, the plaintiff’s costs were agreed by the defendants at $200,000 (“the consent costs”) and in the presence of legal representatives for the applicants and the respondents Judge Kelly made the following orders:

   1.     By consent the bill of costs has been allowed at $200,000.00.

   2.     Undertakings noted.

   2.1     That the first and second defendants give an undertaking that subject to selling their shares in the plaintiff to satisfy their payment obligations in respect of the consent allocatur in the sum of $200,000.00, they will not deal in any of their shares in the plaintiff in any way until the amount of the said allocatur in the sum of $200,000.00 has been paid in full to the plaintiff.

   2.2     The first and second defendants undertake to sign blank share transfer forms in respect of a sufficient number of shares in the plaintiff held by either of them to satisfy the consent allocatur in the sum of $200,000.00.  The first and second defendants’ solicitor undertakes to hold those share transfer forms pending payment of the consent allocatur.

   2.3     The first and second defendants undertake jointly and severally to pay the plaintiff the sum of $200,000.00 in satisfaction of the allocatur within 60 days of today.

   2.4     In default of payment within 60 days of the consent allocatur, the defendants’ solicitors will deliver the share transfer forms to a broker nominated by the plaintiff who shall be appointed by the parties to conduct the sale and complete the transfer of the said shares.

   2.5     The plaintiff undertakes not to enforce the costs allocatur subject to compliance with the terms of settlement.

   2.6     The plaintiff undertakes to discontinue its application for special leave to appeal to the High Court in Action No. A29 of 2004, with each party bearing their own costs.

   2.7     The parties undertake to execute a deed reflecting the terms of the agreement between the parties…

8. On 16 August 2004 the consent allocatur was filed and sealed.  There was some dispute about the fact that the allocatur has the words “first and second” inserted in biro, so that the allocatur read:

   first and second

   IT IS CERTIFIED that by consent the costs payable herein by the ^ defendants to the plaintiff have been fixed at TWO HUNDRED THOUSAND DOLLARS ($200,000.00)…

9. On 6 October 2004 the applicants applied for an extension of time for compliance with the consent costs order, as well as a variation in respect of the share transfer.  On 7 October 2004 Judge Kelly extended time but did not make any orders in regards to the variation application. 

10. On 19 October 2004 the applicants filed a further application seeking the following orders:

    1.That orders be made as between the defendants and each of them rateably to pay and be liable as between themselves for the plaintiffs costs order payable for costs assessed in the amount of $200,000.

    2.That the plaintiff and the third, fourth and fifth defendants discover to the first and second defendants all correspondence and agreements relating to all payments and/or any consideration made by the third, fourth and or fifth defendants or other persons on their behalf to the plaintiff.

    3.That any moneys or benefit and/or consideration made or paid by the third, fourth and fifth defendants to the plaintiff be deducted from the costs award of $200,000.

    Judge Kelly adjourned that application on 3 November 2004. 

11. An application was filed by the first and second defendants on 26 November 2004 seeking:

    That the allocatur for the plaintiff’s costs entered pursuant to the orders made by Master Kelly on 10 August 2004 be varied pursuant to Supreme Court Rule 84.12 to delete the words “first and second” in the first line thereof.

    This application was not resolved before trial, however, it was agreed before me that the words “first and second” had been added to the allocatur in error, most likely by someone in the Supreme Court Registry.  Further, the respondents did not rely on those words for the purposes of their argument.

12. On 17 June 2005 the respondents filed an application for security for costs.  The applicants also filed an application for security for costs on 1 July 2005.  In his reasons for decision on those applications Judge Withers described the situation between the parties in this way:

    …it became reasonably clear…that there was a dispute of fact as to what had been agreed between the Barry interests and the Campbell interests or put on their behalf prior to the recording of the order by Judge Kelly of 10 August 2004.  The Campbell entities in particular alleged that before August 2004 they had already resolved any liability they had for costs towards the plaintiff and that in August 2004 they had not knowingly agreed to enter into any arrangement which exposed them to contributing further costs to the plaintiff.  The dispute was such that after considering the affidavits it appeared clear that the matter would not be resolved other than by way of an oral hearing.  On 13 April 2005…I directed that the first and second defendants file points of claim against the third, fourth and fifth defendants.  I directed the third, fourth and fifth defendants to file points of defence.

    It is as a result of those orders that this matter was listed for hearing before me.

    Agreed facts

13. The parties were able to agree a number of facts at trial, including the amounts paid by the applicants and the respondents to the plaintiff in satisfaction of the costs claim, the percentages of shareholdings each party held in the plaintiff company, and a number of other matters set out below. 

14. It was agreed between the parties that the applicants paid the amount of $203,366.08 to the plaintiff, and that pursuant to the Deed of Settlement (which is referred to in more detail later in these reasons) the respondents paid to the plaintiff the amount of $11,000.  It was also agreed between the parties that the parties held the following shares in the plaintiff company:[4]

    ·The first defendant held 17,269,292 shares, representing 29.77 per cent of the total shares of the plaintiff, and 76.35 per cent of those shares held by the defendants.

    ·The second defendant held 4,000,000 shares, 6.9 per cent of the total shares and 17.68 per cent of those held by the defendants.

    ·The third defendant held 1,000,000 shares, 1.72 per cent of the total shares and 4.42 per cent of those held by the defendants.

    ·The fourth defendant held 250,000 shares, 0.43 per cent of the total shares and 1.11 per cent of those held by the defendants.

    ·The fifth defendant held 100,000 shares, 0.17 per cent of the total shares and 0.44 of those held by the defendants.

    ·The respondents collectively held 2.32 per cent of the total shares of the plaintiff, and 5.97 per cent of those held by the defendants.

    [4] Exhibit 1, “Agreed Share Percentages”.

15. The further facts agreed between the parties in Exhibit 2 are set out in full below:

    1.     The quantum of the plaintiff’s costs was set down for taxation on 10 August 2004.

    2.During an adjournment of the taxation, the parties agreed to consent to an order setting the quantum of the plaintiff’s costs at $200,000. 

    3.The only issue not resolved during the adjournment was the pre-existing dispute among the defendants as to the issue of contributions among them to this sum.

    4.The first and second defendants undertook to pay the $200,000 to the plaintiff in satisfaction of the costs order of 12 June 2003 as an initial matter and to adjourn the contribution claims that had been foreshadowed by the first and second defendants against the third, fourth and fifth defendants to a separate hearing.

    5.The court was informed of the parties’ agreement on quantum and the dispute among the defendants as to the contribution claims that had been foreshadowed by the first and second defendants.

    6.The orders and undertakings of 10 August 2004 did not constitute a waiver by the first and second defendants of any right or claim to contribution against the third, fourth and fifth defendants and did not operate to release the third, fourth and fifth defendants from any existing liability they might have with regard to the costs order of 12 June 2003.

    7.The consent of the third, fourth and fifth defendants to an order setting the quantum of plaintiff’s costs at $200,000 did not constitute an agreement on the part of the third, fourth and fifth defendants to be liable to the plaintiff for any additional costs.

    8.The dispute concerning the contribution claims was adjourned until 8 September 2004 at which time the first and second defendants made a formal oral application for contribution from the third, fourth and fifth defendants.

    9.The form of the consent allocatur submitted by the plaintiff to the Registry on 12 August 2004 should not have been altered by inserting the words “first and second”.

    Evidence

16. In addition to the agreed facts referred to above, the parties provided an agreed book of documents, which contained relevant court orders, correspondence between the parties, the plaintiff’s Short Form Bill of Costs, and the Deed of Settlement.  There were also several other exhibits tendered in Court, namely the share percentages held by all parties,[5] details of costs payments to the plaintiff detailed in a letter dated 17 January 2006 from Corsers Solicitors,[6] two lists of documents filed by the applicants,[7] a letter dated 3 September 2005 from Talbot Olivier to Mr Campbell,[8] an affidavit of Mr Campbell dated 15 March 2005,[9] and a letter from Mr Ken Robson to Mr Campbell dated 6 January 2006.[10]

    [5] Exhibit 1.

    [6] Exhibit 4.

    [7] Exhibit D1-D2 5; Exhibit D1-D2 6.

    [8] Exhibit D1-D2 7 “Letter of 3 September 2005 from Talbot Olivier”.

    [9] Exhibit D1-D2 8 .

    [10] Exhibit D3-5 9.

17. The second defendant Mr Barry and the third defendant Mr Campbell also gave evidence.  The evidence of both witnesses primarily focussed on the discussions and the legal advice which they each received about the legal proceedings, including the Full Court decision; defending an application by the plaintiff for special leave to the High Court with potential for a cross-appeal; as well as evidence about discussions and correspondence between them regarding possible settlement with the plaintiff. 

    The applicants’ submissions

18. The applicants seek rateable contribution from the respondents in respect of the costs paid by them to the plaintiff.  In support of this claim they rely on the principles of equitable contribution, founded on the doctrine of equality, and concepts of fairness and justice. 

19. The applicants submit that the defendants became jointly and severally liable to the plaintiff by virtue of the costs order of the trial Judge, and confirmed by the Full Court.  They further submit that the quantum of the plaintiff’s costs was agreed between the plaintiff and all defendants at $200,000, and that they have paid the whole of the costs due to the plaintiff.  In paying the consent costs they submit that they have discharged a joint liability of all defendants, and are entitled to contribution from the respondents.  The applicants seek contribution of three fifths of the consent costs.

    The respondents’ submissions

1. The respondents submit that they are not liable to contribute to the consent costs paid by the applicants pursuant to the consent allocatur.  In the alternative, if they are liable to make contribution, they submit that their contribution should be limited to reflect the percentage of shares in the plaintiff company held by them.  In the further alternative, they submit that their contribution should give them credit for $11,000 they have already paid pursuant to the Deed of Settlement. The respondents also submit that the maximum that they should contribute is one third of the total costs, on the basis that Mr Campbell and the fourth and fifth defendants should be treated as one entity for the purposes of determining the appropriate contributions.

2. In addition, the respondents indicated that they did not intend to pursue the set off issue raised in paragraph 16 of their points of defence.[11]

   [11] Transcript of Proceedings, 16 January 2006, 94.

   Legal principles

3. Before discussing the particular circumstances of the discussion between the defendants and their legal advisers as evidenced in emails and documents as well as the court testimony of the second and third defendants, it is important to address the legal framework and principles which apply to this application.

4. The order for costs which founds the claim for contribution was imposed by an order of Williams J on 12 June 2003.  This order for costs was made against all defendants which makes each of them jointly and severally liable.[12]  As previously indicated, it was agreed that the allocatur for the costs order of 10 August 2004 previously set out, incorrectly refers to the applicants only, but in any event, the liability for costs is created by the order of Williams J and not the allocatur.[13]

   [12] Thiess Watkins White Constructions Ltd (In Liq) v Witan Nominees (1985) Pty Ltd [1992] 2 Qd R 452.

   [13] In Re Cartwright [1975] 1 WLR 573, 577; Stec v Orfanos [1999] FCA 457.

5. The power to order costs arises from s 40(1) of the Supreme Court Act1935 and is governed by R 101 of the Supreme Court Rules1987.  It is a discretionary power.  Importantly, the common liability of all defendants for costs does not arise as an order for the payment of a specific amount by way of statutory remedy for the breaches of the Act, but instead arises as an order to indemnify the plaintiff for its costs of successfully prosecuting the action against the defendants.[14]  Therefore the application for contribution is not made under the Act, instead it is an application of common law principles, which have as their foundation equitable principles. 

   [14] Oshlack v Richmond River Council (1998) 193 CLR 72 [67].

6. Kitto J in discussing the principles of contribution in Albion Insurance Co Ltd v GIO (NSW)[15] stated that:

   Persons who are under co-ordinate liabilities to make good the one loss … must share the burden pro rata. [16]

   His Honour then continued:

   The general doctrine of contribution, as I have said, forms part of the common law … This was because the basic concept was accepted by both law and equity as one of natural justice…[17]

   [15] (1969) 121 CLR 342.

   [16] (1969) 121 CLR 342, 350.

   [17] Albion Insurance Co Ltd v GIO (NSW) (1969) 121 CLR 342, 350.

7. The case of Albion and the concept of natural justice are further discussed in Meagher Gummow and Lehane’s Equity Doctrine and Remedies[18] in which the authors quote the following passage from Commentaries on Equity Jurisprudence:[19]

   The claim [for contribution] has its foundation in the clearest principles of natural justice; for, as all are equally bound and are equally relieved, it seems but just that in such a case all should contribute in proportion towards the benefit obtained by all…And the doctrine has an equal foundation in morals; since no one ought to profit by another man’s loss where he himself has incurred a like responsibility…It would be against equity for the creditor to exact or receive payment from one, and to permit, or by his conduct to cause, the other debtors to be exempt from payment…

   [18] R P Meagher, J D Heydon & M J Leeming (2002, 4^th ed) at [10-015].

   [19] A E Randall (ed), (1920, 3^rd ed), ¶ 493.

8. Co-ordinate liabilities attracting the application of contribution have historically fallen into categories involving tortious liability in various forms including matters of contribution between co-sureties, co-insurers, partners, co-owners and tenants in common.[20]  Co-ordinate liabilities to which contribution may apply can arise from a variety of circumstances and it has been stated that the list of co-ordinate liabilities is not closed.[21]  However, the co-ordinate liability must be of the same nature and the same extent of obligation or loss, or comparable culpability.[22] 

   [20] Burke v LFOT Pty Ltd (2002) 209 CLR 282, 292 [14].

   [21] Accident Compensation Commission v Baltica General Insurance Co Ltd [1993] 1 VR 467, 482.

   [22] Burke v LFOT Pty Ltd (2002) 209 CLR 282, 293 [16]; 300 [41]; 303 [49].

9. The preliminary question in this case is whether contribution can apply in relation to costs ordered against unsuccessful defendants in relation to statutory breaches which do not of themselves give rise to orders for damages or loss but which consequentially gives rise to an order for costs.  In my view the answer is yes.  Applying the equitable principles of contribution to the liability of the defendants jointly and severally to pay costs to the plaintiff, leads me to conclude that this is a co-ordinate liability and that as a matter of justice and fairness that each of the defendants should be able to seek contribution from each other in respect of that liability. [23]

   [23] See also G E Dal Pont, Law of Costs, (2002), 329 citing Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (Unreported, Supreme Court of New South Wales, Equity Division, Young J, 15 July 1996, Judgment No. 2092/1992).

10. As to the proportion of such contribution, it has been stated that equal sharing of contribution “should not be lightly departed from”,[24] and that as a “general rule” there should be equal contribution.[25]

    [24] Morgan Equipment Co v Rodgers [No 2] (1993) 32 NSWLR 467, 477.

    [25] Morgan Equipment Co v Rodgers [No 2] (1993) 32 NSWLR 467, 477.

11. In this case all defendants were found liable for breaches of ss 606 and 671, and the first, second and third defendants were also found to be in breach of s 672B of the Act.  In relation to the breach of s 672B, I note that the Full Court in relation to the collective voting (being the subject of a breach of s 672B) also considered that the collective shares extended to the shares held by the fourth and fifth defendants.[26]  In those circumstances it seems to me that prima facie the general rule should apply and that the starting point in this case is appropriately that the costs order should be the subject of equal contribution between all defendants.

    [26] Flinders Diamonds Ltd v Tiger International Resources Inc (2004) 88 SASR 281, [37].

12. I will now consider the various factors addressed to me in submissions as to why such contribution should not be ordered.

    Agreement in June 2004

13. One factor that has been recognised by case law as affecting contribution, is if there is a common intention of those with a co-ordinate liability, to modify or exclude apportionment between them.  Common intention does not have to be such as would amount to an express or implied agreement.[27]  Further, the common intention of the parties is to be determined by adopting an objective approach and is not to be reliant on the subjective intention or understanding of the parties.[28]

    [27] Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460, 488; Muschinski v Dodds (1985) 160 CLR 583, 597, 617; Robinson v Campbell (No 2) (1992) 30 NSWLR 503.

    [28] Toll(FGCT) Pty Ltd  v Alphapharm Pty Ltd (2004) 219 CLR 165, 179.

14. In this case the respondents argue that there was an agreement between themselves and the applicants that each of them would be entitled to reach a separate and independent settlement with the plaintiff “as to the costs of trial and appeal and/or pursue further appeals, as they may be advised”.[29]  As can be seen from this description of the respondents’ argument, it was more embracing than simply the costs of the trial.  It was alleged that this agreement was expressed, both orally and in writing in June 2004 and that the agreement culminated in a Deed of Settlement dated 22 June 2004. 

    [29] Points of Defence filed 19 May 2005.

15. The respondents agree that there was no express agreement or specific discussion between the parties as to the contribution amongst themselves[30] and that the common intention is to be implied.  The argument of the respondents continued that it was to be inferred from this agreement, that there was a common intent that if any defendant reached a separate and independent agreement with the plaintiff as to costs, that such defendant would not seek contribution from or alternatively be liable to contribute to, the liability of another defendant for such costs.  The respondents submitted that this should be inferred because if the respondents settled with the plaintiff, the respondents would forgo any benefit which may arise from the applicants continuing pursuit of the High Court cross appeal against the costs order.

    [30] Transcript of Proceedings, 17 January 2006, 182.

16. The applicants in response to this argument deny that any such agreement was reached. They submit that the alleged agreement post-dated the time when the joint and several liability for costs arose.  They also submit that documents particularly emails, together with the evidence of Mr Barry, demonstrate that there was no such agreement or common intention to impliedly exclude contribution by the respondents in respect of costs paid by the applicants. 

17. I will consider this issue in three stages.  First, the initial documentary evidence in conjunction with the evidence given by Mr Barry and Mr Campbell up until the time just prior to entering into the Deed of Settlement.  Second, the conditions contained in the Deed of Settlement.  Third, the circumstances and events between the time of entering the Deed of Settlement and the consent order of Judge Kelly on 10 August 2004.

    Prior to the Deed of Settlement

18. There are a number of emails which were sent between the parties which largely demonstrate the respective positions of the applicants and the respondents up until the time of the entering the Deed of Settlement.  I will set out what I regard as the most salient of the communications and I have added highlighting for emphasis before referring to the oral evidence of Mr Barry and Mr Campbell.

19. On 6 June 2003 Mr Scerri, acting as solicitor for all defendants, attended before Williams J.  On that date Williams J delivered the reasons for judgment, but adjourned the making of formal orders to 12 June 2003.  Mr Scerri said, in relation to the issue of costs, that:

    I wish to engage counsel to be briefed by all defendants and to sort out the issue of costs between these defendants because they have to determine, between themselves, their apportionment of costs.[31]

    [31] Transcript of Proceedings, 6 June 2003, 5.

20. Two days later on 8 June 2003 at 8.34am Mr Scerri emailed Mr Campbell as follows:

    I refer to our telephone discussion on Friday following the hearing and your email of the 6^th June 2003 requiring that I take measures to argue for an apportionment of costs…

    With regard to the apportionment of costs, please note:

    §I will urgently consult with my barrister

    §It is my understanding, however, (to be confirmed with counsel) that a successful party may attack all or any of the unsuccessful parties…

    On the 6^th June 2003, I did seek an adjournment of the argument for that day.  Unfortunately, this was not allowed…

    I opposed that there be a costs order on an indemnity basis.

    I opposed that the costs be paid from the sale of the shares.

    It is important to stress that whatever order is made, the APPEAL should be urgently attended to, and upon appeal I can apply for a stay of execution…

    Given that I have spoken with both yourself and Mr Barry, and given the possibility of a conflict of interest, you may both wish to now seek alternative and separate representation.  Please urgently consider this.

    My belief, however, is that I am probably correct on the issue of an apportionment of costs given your 5% holding (Again, successful parties may usually claim on some or all of the unsuccessful parties, and the whole amount).  I would be happy to provide further assistance in this matter.  Rather than the parties act on their own, it is best to act together, share costs equally, and concentrate on the appeal.  Again, however, I will speak to my barrister in this regard…[32]

    [32] Exhibit 3, 80.

21. On the same day at 9.08am Mr Scerri also sent an email to Mr Barry, which he copied to Mr Campbell.  The relevant portions of the email are as follows:

    …Mr Campbell has expressed concern to me concerning his belief that he should only pay a 5% apportionment of costs.  I did not raise this at the court.  I have told him that I will urgently discuss this aspect with a barrister.  I have informed him of my own opinion on this.

    On the 6^th June 2003, I did seek an adjournment of the argument for that day.  Unfortunately, this was not allowed…

    I opposed that there be a costs order on an indemnity basis.

    I opposed that the costs be paid from the sale of the shares.

    Williams J did indicate that he was not happy to allow costs be paid from the sale of the shares.

    It is important to stress that whatever order is made, the APPEAL should be urgently attended to, and upon appeal I can apply for a stay of execution…

    Given that I have spoken with both yourself and Mr. Campbell, and given the possibility of a conflict of interest, you may both wish to now seek alternative and separate representation.  Please urgently consider this.  At the same time, it is my belief that I may continue to act for you both, but subject to my clearing up the concern of Mr Campbell about my failure to raise the issue of his payment of only a proportion of costs…[33]

    [33] Exhibit 3, 82.

22. Later that day, at 6.12pm, Mr Campbell replied to Mr Scerri.  That email states that:

    Please don’t tell me you told Pat that I only wanted to pay 5% of the costs…this is something that would bring conflict between us…I asked you to find him different representation…I wanted you to put to the court as I only own approx 5% of the shares that they have taken off us, therefore I should pay only 5% of the costs…I made this very clear…I don’t want half the costs or 3/5ths as I was 3/5ths of the defendants etc…nothing to do with ypour [sic] costs, that’s fine to be 50/50 with pat on appeal…

    I expect you to add to the courts notice that I wish to accept only 5% as per above and I would expect you may have to get it in asap or sent it to DMAW…for there [sic] approval…I would love to pay costs out of the sale of these shares if they take them off us…did you argue for me that I paid 20c fro [sic] them and don’t deserve them to be taken from, let alone sol[d]off at a low price…I need to sell them within a 3 month period not asic who would dump them at any price etc,

    Anthony[34]

    [34] Exhibit 3, 82.

23. On 10 June 2003 Mr Scerri replied by email to Mr Campbell, and said that:

    Dear Mr Campbell

    I have today checked with counsel on the issue of costs.

    I am able to say that it is unlikely that a court would allow you to pay only 5% of the costs.

    This is in line with my own opinion.

    The plaintiff did take the action on several parties.  The respective parties have been found liable (jointly and severally).  The court will not require one party to pay more than the other.

    Again, it is far better to concentrate on the issue of the appeal, rather than allow this to be the main issue at this time…

    You have not been prejudiced by my not raising this beforehand.

    If you wish to obtain an alternative opinion, I may suggest other solicitors.[35]

    [35] Exhibit 3, 86.

24. On 12 June 2003 Williams J made the formal order with injunction, including the order for costs.  The appeal before the Full Court was heard on 1 December 2003, and the judgment of the Full Court was delivered on 23 April 2004.  On 5 May 2004 the plaintiff served on the defendants the Short Form Bill of Costs for the amount of $295,372.43, which was prepared pursuant to the order of Williams J dated 12 June 2003. 

25. On 20 May 2004 Mr Scerri emailed Mr Campbell and Mr Barry and said that:

    …I wish to bring the matter to a final settlement.

    I will accept $10,000 in full settlement, but I must also receive the $15,000 for Ken [Robson, the barrister] (but I will need his confirmation that he is willing to accept this – I am following this up).

    Please urgently confirm the above.

    This is made without prejudice and an urgent and final settlement, so that I will be able to withdraw my application.

    I would like to keep assisting you, if that is what you wish.

    With regard to the costs of FDL, we must file a “NOT AGREED” for each of the items in the bill.  I can do this by simply writing this for each item on my copy BY 26/5.  I hope that you will have the matter settled by then.[36]

    [36] Exhibit 3, 174.

26. On 2 June 2003 at or about 1.30pm Mr Scerri wrote the following file note of a telephone conversation with Mr Campbell:

    T/C Anthony   2/6/04

    1.30pm

    He said he had just spoken with Pat.

    Pat engaged Rob McDonald.

    Anthony try to settle with FDL.

    He wants me to put in an offer [illegible]

    I am not to put in an offer for Pat.  I said I would confirm this.[37]

    [37] Exhibit 3, 212.

27. At 1.48pm that day Mr Campbell emailed Kevin Wills of the plaintiff company, with copies to Mr Scerri and the barrister Mr Robson.  The email reads as follows:

    Dear Kevin

    WITHOUT PREJUDICE

    I am at a stage I can go 2 ways.

    My preference is not to waste my money or shareholders money.  If FDL accepts my offer then it might all happen, I am guessing.  Pat to follow suit.

    At this stage Pat is evaluating it all…especially item 6 of your offer.  The USA group of appellants, defendants have suffered a $1.5 million plus in damages I guess

    Forgetting them…

    I have suffered approx $35000 in lost capital from the sale of the shares (which relates to item 6 of your offer)

    I would like you to revise your offer to myself and company’s

    Basically, that I be exonerated from any other costs or appearances in any courts and item 1 be adjusted to prorata the number of shares i/coys own…that is I own approx 5% therefore I will not proceed with my claim on item 6 of $35000 which is far greater than the $11,000 as per aboves 5% of $220,000 (your item 1)…I will sell my shares, I am not threat to you anyway…you can make an offer to buy mine and all my options, including the unlisted ones.  I would think the meeting wouldn’t go ahead then as per our discussions…

    You can fight it out with tiger and pat

    I don’t think I will accept it any other way, I have council [sic] ready to go on all areas including cross-appeal on costs for all my losses and legal fees.   Both my previous legal reps look like they have made errors and I will be taking legal action against them and there [sic] insurance coys… belief is I will win both…[38]

    [38] Exhibit 3, 213.

28. Also on 2 June 2004 Robert Kennedy of the plaintiff company wrote to Mr Barry rejecting an offer of settlement put forward in an earlier letter and making an alternative offer, conditional upon acceptance by all defendants.  In that letter Mr Kennedy says that:

    I note from your letter that you purport to be negotiating a settlement of the above action on behalf of all defendants to that action.[39]

    [39] Exhibit 3, 209.

29. On 15 June 2004, at 12.39pm Mr Campbell emailed Mr Scerri as follows:

    Hi Peter,

    …

    Yes I will probably have my shares back and settle out of court with FDL b[y] late this afternoon.  I would say you are waisting [sic] your time with Pat.  Please do not advise him of anything I tell you…I have yet to accept and will tell Pat wehn [sic] I am ready…another $50,000 is not really for me…I walk away with some cash and no headache…

    Thanks so far

    Will advise on whats [sic] happening when I know and hear from FDL.[40]

    [40] Exhibit 3, 217.

1. At 8.17pm that day Mr Barry emailed Mr Campbell and said that:

   If there is an award of costs against Flinders then you will receive the taxed portion – that is correct.  There will be claims against the directors – you’ve mentioned that to me before – and they are a separate issue.  However this will be part of a separate claim in the Superior Court of South Australia for the decline in market value during the injuncted period.

   As for settling out, this has always been an option for any of the five defendants – however the latest reply of Flinders has just come in and I’ve sent that on for you.  They totally reject any offer, so this closes the door on that aspect.  If you are able to settle out individually that has always been your right and privilege – based on the reply it doesn’t seem that they have much interest since they state that the costs is an asset of the company that they won’t let go…[41]

   [41] Exhibit 3, 220.

2. At 11.02pm that night Mr Campbell emailed Mr Barry and said that:

   I know nothing of Peter, he seems to be on record and doing what he likes.  I have yet to advise him further, other then [sic] from 3 weeks ago.  I am considering my position on all this and really would like it to go away.  I may seek settlement on the grounds that I cant move forward and its getting annoying, I don’t want to waste any more dollars.[42]

   [42] Exhibit 3, 224.

3. At 8.58am the next morning, 16 June 2004 Mr Campbell sent a further email to Mr Barry in which he said that:

   yes…

   well I want out only because of the costs of going forward and already paid, will never recover, we might win, but win what, nothing in the end.[43]

   [43] Exhibit 3, 226.

4. That evening at 7.18pm Mr Barry replied to Mr Campbell by email, stating that:

   Had they agreed to my offers then that is what we would have had.  I thought the lure was to withdraw the request for the special meeting, but that didn’t persuade them…they don’t offer anything in return – their response was that they wanted the costs paid, the meeting requisition withdrawn, and to be able to choose to whom the shares were sold – which offers absolutely nothing.  Their offer to drop the costs to $220k was frivolous since it will end up being that much, or less (I estimated $200k).

   … However we seem to be on an endless treadmill with these guys, which is going on and on, but there is little choice at this point (as I see it) other than to counter their High Court application and to deal with the situation.  They won’t settle.  Your only offer can be to surrender your shares, and that may be of interest to them, but of little offset towards the costs.

   It’s a shame to break up the defence at this late stage in the program since I’ve seen you and me go to hell and back on this case.  However, as I said, it could be interesting…[44]

   [44] Exhibit 3, 230.

5. Mr Campbell emailed Mr Barry again that evening, also at 7.18pm, and said:

   Well, yes I suppose, but why win when you lose, awaiting on FDL on an offer…better offer.[45]

   [45] Exhibit 3, 230.

6. Another email was sent by Mr Barry to Mr Campbell the following day, 17 June 2004, at 12.41pm.[46]  In that email Mr Barry writes that:

   …They are fighting to stave off the eventual meeting – but why they wouldn’t do a walkaway deal is puzzling me?  It seems to give them everything that they need, including indemnity from other actions …  

   I hope you can do better with getting a reasonable settlement than I could for us – it’ll be interesting.[47]

   [46] Mr Barry’s emails seem to have been sent from the United States, and so may have been received in Australia at a local time earlier than they appear to have been sent.

   [47] Exhibit 3, 231.

7. Mr Campbell again emailed Mr Barry at 9.54pm on 16 June 2004 and wrote that:

   They can’t justify the costs awarded to them to be written off, as you know it was shareholders money used to save there [sic] jobs.  They have to have there [sic] costs covered.

   It could be cheaper to pay them some money rather than continue, even if we win we wont get costs from a shell and then to chase them for it…just might be too hard and demanding.

   At this stage I am attempting to settle for myself, so I can move forward with my new ventures.[48]

   [48] Exhibit 3, 232.

8. In a further email Mr Campbell said to Mr Barry:

   Hi Pat,

   yes, they seemed determined to carry on, I thin[k] its Kennedy… I refuse to speak to him, only Kevin… I have almost agreed to terms with them for myself… they have sent me another offer, Ken is reading over weekend… its confidential and encloses a confidentiality clause, so I cant discuss… if agreed and signed, you may be on your own…[49]

   [49] Exhibit 3, 233.

9. Mr Barry replies in an email sent at 12.06pm on 18 June 2004:

   Well, that’s interesting. As long as it does not admit guilt or prejudice my position.[50]

   [50] Exhibit 3, 234.

10. Mr Campbell emailed Mr Barry at 9.27pm on 17 June 2004 and wrote:

    From tmy [sic] understanding, it doesn’t… it just deaks [sic] with me and my coys, you are free to negotiate and it doesn’t admit anything, basically… I lose, but I win… its just to get rid of the problem… you can still continue, no harm to you.[51]

    [51] Exhibit 3, 235.

11. Mr Campbell emailed Mr Barry again on 21 June 2004 and wrote:

    Hi Pat..

    2 incoming emails came in,,one from you and one from them… I am settled and have a confidential agreement with them. I am know [sic] longer part of the proceedings, as of when some terms and conditions have been met…

    Goodluck.[52]

    [52] Exhibit 3, 236.

12. On the following day, 22 June 2004, the plaintiff and the respondents entered the Deed of Settlement.

13. Mr Barry gave evidence before me that on 18 May 2004 he had drafted a letter to the plaintiff regarding a possible settlement of the appeal proceedings.  Mr Barry emailed this letter to both Mr Campbell and the plaintiff, and both Mr Barry and Mr Campbell gave evidence that it was their understanding that this offer was on behalf of all five defendants.  The plaintiff subsequently rejected this offer of settlement, and an extract from that letter is set out above.[53] 

    [53] Transcript of Proceedings, 17 January 2006, 110 – 111; Exhibit 3 “Letter from R Kennedy at Flinders Diamonds to P Barry 2 June 2004,” 209.

14. After the settlement offer was rejected, Mr Barry and Mr Campbell both gave evidence as to a series of phone calls and email exchanges between them.  The evidence of Mr Barry was that he had three telephone conversations in June 2004 with Mr Campbell in relation to possible settlement negotiations by Mr Campbell with the plaintiff.  Mr Barry was unable to be specific as to the dates of such discussions.  His evidence was that in the first telephone conversation with Mr Campbell, he had been asked by Mr Campbell whether he (Mr Campbell) could settle a lawsuit, to which Mr Barry confirmed that he could.  He said that Mr Campbell indicated that he had been talking with Mr Kevin Wills from the plaintiff company concerning settlement. 

15. Mr Barry said he indicated to Mr Campbell that he was pleased, as the previous efforts made by himself on behalf of them all had been getting nowhere.  Mr Barry said he assumed that Mr Campbell was intending to talk settlement with Mr Wills on behalf of all defendants.[54]  The evidence of Mr Campbell as to this conversation was similar to the evidence given by Mr Barry, save that Mr Campbell did not purport to be speaking about a settlement on behalf of all defendants but a settlement concerning himself and the fourth and fifth defendants only.

    [54] Transcript of Proceedings, 16 January 2006, 53-54.

16. Mr Barry gave evidence of a second telephone conversation about a week later.  This timing also coincided with Mr Campbell's evidence of another telephone conversation.  Mr Barry said that Mr Campbell told him that he was seeking a settlement with the plaintiff “of his own interests, not mine, and that we’re on our own”.[55]  Mr Barry said he asked Mr Campbell about the terms of the settlement to which Mr Campbell indicated he was “sworn to secrecy”.  This conversation was not dissimilar to the evidence of Mr Campbell of a similar conversation.

    [55] Transcript of Proceedings, 16 January 2006, 89.

17. Mr Barry gave evidence as to a third telephone call in which Mr Campbell told him that he had reached a settlement with the plaintiff and that the barrister Kevin Robson was reviewing the settlement document.  Mr Barry said that Mr Campbell reiterated that he couldn't tell him about the terms of the settlement.  This evidence also is not dissimilar to that given by Mr Campbell and accords with an email from Mr Campbell to Mr Barry of 17 June 2004.

18. In cross-examination Mr Barry said there was no conversation with Mr Campbell to the effect that if he, Mr Campbell, settled with the plaintiff, Mr Campbell would not be able to get the benefits of any successful High Court proceedings pursued by the first and second defendants.  This evidence differed from that given by Mr Campbell who said he “believed” that Mr Barry had told him that if he (Mr Campbell) settled with the plaintiff, he would lose the option of obtaining costs back from the trial and the appeal and that this was confirmed by subsequent emails.  Mr Campbell indicated in his evidence that he was prepared to waive the ability to obtain such benefits by reaching an early settlement with the plaintiff.[56]

    [56] Transcript of Proceedings, 17 January 2006, 117, 134.

19. Whilst there may have been some discussion between Mr Campbell and Mr Barry about High Court proceedings, I am not satisfied that there was any agreement reached between them, that upon Mr Campbell reaching a settlement, Mr Barry required him to waive any rights he may have if the High Court proceedings were successfully pursued.  I also do not agree with Mr Campbell’s evidence that such alleged discussion with Mr Barry on this point was confirmed later by emails between them.  Further, I am not satisfied that any waiving of such rights would have resulted in the forgoing of any real benefit to the respondents, instead it appears to be proffered as a part justification by Mr Campbell for the small percentage of costs which were paid by the respondents.

20. In my view apart from the latter aspect concerning High Court proceedings, the emails of 15 June 2004 to 17 June 2004 essentially confirm the common evidence of Mr Barry and Mr Campbell.  Whilst Mr Barry was not prepared to similarly interpret those emails, I regarded his evidence as being somewhat overcautious.  However, the important point is that Mr Barry on his own evidence confirmed that he was aware that the negotiations between Mr Campbell and the plaintiff were for settlement on behalf of the respondents only and Mr Barry did not express any objection to a settlement so long as it did not prejudice the position of the applicants.

21. Mr Barry gave evidence that he never made any promises to Mr Campbell about the apportionment of the plaintiff’s costs nor did he make any promise not to sue the respondents, in the event that the plaintiff pursued Mr Barry for the entire costs.  Mr Campbell in his evidence also agreed that there had been no discussion with Mr Barry as to how the costs of the plaintiff would be shared among the five defendants and confirmed that he had not discussed with Mr Barry the proposal to only pay five per cent of the costs of the plaintiff.

22. In relation to the period prior to entering into the Deed of Settlement, I am not satisfied by the oral and documentary evidence that there was either expressly or impliedly an agreement reached or a common intention between the defendants to exclude any right which the applicants would have to contribution in respect of the consent costs.

23. Applying an objective approach to the evidence, there was a lack of any agreement or common intent as to the fundamental requirements which would impliedly exclude contribution.  The documentation covers a number of outstanding issues arising between the plaintiff and the defendants notwithstanding the discrete issue of the payment of costs.  Those matters included the High Court proceedings, the surrender of shares and the holding of a special meeting.

24. At best the common intent was that the respondents were free to negotiate a settlement with the plaintiff so long as the settlement did not prejudice the position of the applicants.  There was no agreement reached between the defendants as to the amount of costs to which the plaintiff was entitled to recover from the defendants.  There was also no reference in any communication to the proportion of the plaintiff’s costs to be paid by each defendant, save for the communication of legal advice which was to the effect that each of the defendants would be equally responsible for costs.[57]  There was no agreement or common intent as to the component parts of any proposed settlement between the plaintiff and the respondents.

    [57] See eg email from Mr Scerri to Mr Campbell dated 10 June 2003 (Exhibit 3, 86) and email from Mr Scerri to Mr Barry (Exhibit 3, 270).

25. Further, the actions of the parties are not consistent with any implied agreement or common intent as to contribution.  The evidence suggests that Mr Barry was indicating that any proposed settlement should not prejudice the position of the applicants.  At the same time the evidence reveals that Mr Campbell was trying to negotiate a settlement with the plaintiff for the respondents’ benefit alone, which enabled them to limit their exposure to the plaintiff’s costs to five per cent without informing the applicants.  There was an attempt by Mr Campbell to disguise the small percentage which he was endeavouring to negotiate with the plaintiff, knowing that the applicants would not agree to it and that it was contrary to the express indication given by the applicants.  This subterfuge also sought the complicity of the then solicitor acting for all of the defendants, who was clearly in a conflict of interest when he was instructed by Mr Campbell, particularly in not informing the applicants of the percentage being sought. 

26. There was a pretence of candour by Mr Campbell in indicating that a separate settlement was being negotiated but at the same time not alerting the applicants to the content of the settlement.  Further, there was no indication given that the settlement would expose the applicants to the overwhelming share of the costs, namely 95 per cent of the balance of the costs.  The respondents had agreed the full amount of the Short Form Bill of Costs, namely $295,372.43, when it was already known that the plaintiff was prepared to reduce costs to $220,000 on condition of settlement.  Finally, there was a false assurance given by Mr Campbell in an email of 17 June 2004 at 12.06pm from Mr Campbell to Mr Barry. 

27. For the above reasons I do not consider that there was either an implied agreement or a common intention indicated by any documents or action prior to entering the Deed of Settlement which should exclude the applicants’ right to seek contribution for the consent costs.

    Deed of Settlement dated 22 June 2004

28. Turning now to the Deed of Settlement.  The issue here is whether the agreement reached between the plaintiff and the respondents involving the payment of $11,000 to the plaintiff, prevents the respondents or any of them being liable for contribution to the applicants in relation to the consent costs.

29. In my view the answer is that the Deed of Settlement[58] reached between the respondents and the plaintiff does not preclude the applicants from seeking contribution against the respondents for a proportion of the consent costs sum of $200,000. 

    [58] Exhibit 3, Deed of Settlement, 22 June 2004.

30. First, the Deed of Settlement is clearly between the plaintiff and the respondents and cannot bind the applicants. 

31. Second, the Deed of Settlement expressly excludes from the compromise contained in that deed, any rights that the plaintiff may have in respect of the applicants both generally, in relation to the proceedings or disputed matters, but more particularly in relation to the consent costs. 

32. Third, the agreement between the plaintiff and the respondents does not release the respondents from their joint and several obligations to the plaintiff in relation to the costs order.  Instead the deed was an agreement “not to sue” in relation to the costs order and relevantly reserved to the plaintiff the right to enforce the costs order if there was a default under the deed.  The fact that the Deed of Settlement did not “release” the respondents from their liability under the costs order is important in that such a release could have had the effect also of releasing the applicants from any liability to the plaintiff for costs.[59]  If there had been a release of the respondents from their obligation to pay the plaintiff in respect of the costs order, that would have meant that the payment by the applicants of $200,000 could not have “discharged a common obligation”[60] of the respondents to the plaintiff, as the obligation of the respondents to the plaintiff would already have been discharged by the earlier payment of $11,000 pursuant to the Deed of Settlement.

    [59] Walker v Bowry (1924) 35 CLR 48, 50, 58.

    [60] See Burke v LFOT Pty Ltd (2002) 209 CLR 282, 300 [42], 302 [47], 303 [50].

33. Fourth, the Deed of Settlement does not expressly or indeed impliedly refer to any rights which any of the defendants collectively may have against each other in respect of the consent costs.

34. Finally, the Deed of Settlement was entered into more than one year after the common obligation had arisen for costs between all of the defendants.  At the time of the making of the court order they shared a common burden in respect of the obligation to pay the plaintiff and there was no agreement between any of the parties at that point which in any way altered that common burden.

35. In summary, in my view the Deed of Settlement does not prevent the applicants from seeking contribution from the respondents. 

    Events after the Deed of Settlement until the order of Judge Kelly

36. Again the documentation at this time largely reflects the positions of the applicants and the respondents.  I again set out excerpts from the most relevant emails with added highlighting for emphasis.

37. In the first of the emails on 6 July 2004, a copy of a letter from Mr Robert  Kennedy, Chairman of Flinders Diamonds Limited was attached and sent to Mr Michael Marchand, a director of Tiger International.  Mr Marchand then forwarded this email to Mr Barry.  The letter was addressed to the independent directors of Flinders Diamonds and read:

    Flinders has reached a settlement with Mr Campbell and his two companies.  There is no settlement with Mr Barry.

    The costs judgment Flinders has against Tiger is a significant asset of the company… Flinders has lodged a bill of costs… in an amount of approximately $295,000.  The costs judgement is not the subject of any appeal.

    Flinders is prepared to settle this matter with Tiger on the following basis:…

    4.  from the proceeds of the share and option sales… Tiger will pay to Flinders within 7 days of the sale of the amount of A$162,000, being equal to approximately 77.5% of 75% of its costs.  The percentage of 77.5 has been used as it is Tiger’s percentage of the total number of shares used in the illegal agreement… [61]

    [61] Exhibit 3, 258, 262.

38. On 12 July 2004 at 10.18am, Mr Barry sent an email to Mr Scerri which read:

    …Anthony Campbell has settled out and, while he has signed a confidentiality agreement, it seems that the basis was on a percentage of shares held.  He has sold his shares in the market from which his portion of costs will be paid, but it leaves Tiger and myself exposed.

    Since I did not consent to the percentage of ownership adjustment I will claim that the costs be apportioned jointly and severally, being 20% to me and 20% to Tiger.  The preliminary hearing may be to get an award as to this apportionment, and it worries me that I knew nothing about it.

    My feeling is that since the GST has to be credited back anyway, reducing the total to some $260,000, and since there are numerous areas which I wish to review and contest, the outcome will be around $200,000, of which I will seek to be obligated to pay 20% and Tiger 20% - a total of $40,000 and $40,000.  That will be the offer.[62]

    [62] Exhibit 3, 267.

1. On the same day, Mr Scerri faxed a letter to Cogan & Co and this was copied to DMAW Lawyers.  There was a handwritten note on the top of the letter indicating that the letter was incorrectly dated as 11 July 2004.  In the letter Mr Scerri stated:

   I refer to the preliminary hearing tomorrow before Judge Kelly with regard to costs.

   I enclose a copy of the affidavit which will be sworn today, to be filed today.

   You will see that the time for providing a notice of opposition has not yet expired.  Please note the remainder of the affidavit.

   I have received instructions with regard to an offer of settlement.  I am advised that GST does not apply to the overseas parties.  This will reduce the total to approximately $260,000.  There are various areas which my client wishes to review and contest.  This will bring the outcome to approximately $200,000.

   Mr. Barry and Tiger did not consent to a percentage arrangement with regard to Mr. Campbell and the other defendants.  They therefore propose that all five defendants should be liable to 20 percent each.  Please advise the instructions of your client.

   I will provide a copy of this letter to DMAW Lawyers.

   Mr. Brohier is likely to be attending tomorrow.[63]

   [63] Exhibit 3, 268.

2. On 22 July 2004 at 11.45am, Mr Scerri sent an email to Mr Barry which said:

   Dear Pat

   In my email of the 19 July 2004 I did indicate to you that you need Counsel for the costs application.

   …I have yesterday received a fax from DMAW.

   They state the following:

   ·The liability re Campbell etc is joint and several, meaning that Tiger and yourself can still be liable.  THIS MAY NEED FURTHER COUNSEL OPINION.

   ·They offer to accept $200,000 in full settlement (payable by 28 July, but the offer is only open until Friday 23 July at 5.00pm).

   I will need OPINION OF COUNSEL on the following:

   Does the fact that settlement with Campbell etc having taken place mean that Tiger and yourself are let off?

   Do we need to seek a stay of execution of the costs order pending the appeal (You may CROSS APPEAL for your costs if FDL obtain leave to appeal?)

   Will you be getting Corsers to do this?  If you wish myself to do this then I will need funds.  I have suggested $10,000.00, but it may be more than this.

   Please urgently telephone myself.[64]

   [64] Exhibit 3, 270.

3. On 29 July 2004, two letters were sent from Mr Kurtze, solicitor at Corsers representing the applicants to Mr Scerri.  The first letter said:[65]

   We now act for the first and second defendants…

   Finally we note your advice to us that you have reached a settlement in accord in part between the third, fourth and fifth defendants and the plaintiff that you act for them.  You have a conflict of interest clearly and we are writing to you under separate cover in relation to any settlement and the liability between the parties as to any taxation which may ensue in due course so that your clients have an opportunity to assess and be involved in the determination of any costs as they are jointly and severally liable for same notwithstanding any settlement between themselves and the company.

   [65] Exhibit 3, 271.

4. The second letter of the same date, read as follows:[66]

   [66] Exhibit 3, 272.

   We note that you act for the Third, Fourth and Fifth Defendants and that some settlement has arisen between them and the plaintiff.  You have a conflict of interest to act for Tiger Resources and Barry.

   The parties are jointly and severally liable for the costs and the purpose of this letter is to invite you to participate in any taxation of costs.

   Whilst our client intends to fully investigate the actual costs and the entitlement of the other party to costs your client is invited to attend and be involved.

   We intend to furnish this letter to the Court on any application for contribution as between the parties to meet any award ultimately made.

   Clearly the parties are jointly and severally liable for the whole of the costs of the plaintiff.

   Should our client propose to settle the costs claim we will give you notice of any settlement so that you can comment prior to any settlement being reached but your clients having settled already have not waived their entitlement to be involved further and must have been advised of course that they would still be jointly and severally liable for the whole of any claim for costs upon them being determined.

   We look forward to any comments that you may have if you continue to act for the Third, Fourth and Fifth Defendants and ask that you communicate this correspondence to them urgently.

5. On 4 August 2004, at 5.42pm Mr Scerri sent an email to Mr Campbell indicating that he had just heard from the solicitors acting for the first and second defendants and said:

   …I have heard from the solicitors now acting for Pat and Tiger.

   While you have settled with FDL, Barry and Tiger are arguing that they are not bound by that settlement, and can seek a contribution from you.

   In other words, if they settle with FDL for whatever amount, they (Pat and Tiger) may still come to you for a contribution.

   This is something which I could have no opposition to.

   I understand that Pat and Tiger (who now have Corsers, Solicitors) are trying to negotiate for about $200,000.00.

   Strictly I should not be acting, as there is a conflict of interest.[67]

   [67] Exhibit 3, 273.

6. Less than a week after this email, at a hearing before Judge Kelly on 10 August 2004 an order was made by consent for a taxation of the Bill of Costs.

7. This documentation reveals that the plaintiff was seeking to pursue its costs on the basis of the Short Form Bill of Costs and it was seeking a contribution from the first defendant of 77.5 per cent of such costs.  The emails also reveal that Mr Scerri was still providing advice and purporting to act for the applicants and also continuing to act for the respondents.  Eventually, Corsers were instructed to act on behalf of the applicants.  Thereafter, efforts were made to ensure that the respondents were represented and would be present at the taxation of the Short Form Bill of Costs before Judge Kelly on 10 August 2004.

8. At the hearing before Judge Kelly, Mr McDonald from Corsers and Mr Ower of counsel, together with Mr Ericson from Finlaysons who was acting as costs counsel, appeared for the applicants.[68]  Mr Kupniewski from DMAW together with Mr Cogan appeared for the plaintiff.  Mr Scerri appeared for the respondents.[69]  After a short adjournment, the legal representatives for all parties, including Mr Scerri on behalf of the respondents, agreed that the costs of the plaintiff be fixed in the amount of $200,000 and that this sum was payable to the plaintiff by all defendants.

   [68] Affidavit of R McDonald sworn 6 October 2004 [7].

   [69] Affidavit of R McDonald sworn 25 November 2004.

9. Therefore at the time of the fixing of the consent costs, the respondents agreed through their solicitor a quantum of additional costs were due to the plaintiff and payable by all defendants apart from the amount they had already paid to the plaintiff.  They were also aware that the applicants would be paying such consent costs and had undertaken to pay the plaintiff within 60 days and further that the applicants would be claiming contribution against them for a proportion of the consent costs.

10. At that point the applicants still did not have a copy of the Deed of Settlement[70] and had no reason to know of any additional costs already paid to the plaintiff.

    [70] This was not provided until after the respondents’ List of Documents was filed on 17 June 2005.

11. Subsequently, there was payment by the applicants of the consent costs, as well as interest of $3,366.08.  Of the total consent costs plus interest, the first defendant paid $93,366.08 and the second defendant paid $110,000.[71]  These payments resulted in a total release in respect of all defendants with regard to the cost order of the plaintiff.[72]  It was on the payment of the costs to the plaintiff that the applicants right to contribution crystallised as they had discharged an obligation of all defendants, and if the respondents are liable to contribute, had paid more than their portion.

    [71] See Exhibit 4.

    [72] The consent costs order was agreed to by all parties and the payment of the $200,000 by the applicants as a consequence of that order discharged them all from their common obligation.

12. In conclusion, having regard to these three stages, I am not satisfied that an agreement was reached or a common intent between the defendants to exclude the right of the applicants to contribution in respect of their payment of the consent costs.

    Percentage of shareholding

13. In the alternative to their first argument of a common intent which excluded the right of contribution, the respondents submit that any apportionment should not be on the basis of equality but on the respective shareholding of each of the defendants.  Such an argument based on the differing shareholding of the defendants in the plaintiff company would result in apportionment as follows:

    ·First defendant            76.35%

    ·Second defendant       17.68%

    ·Third defendant 4.42%

    ·Fourth defendant        1.11%

    ·Fifth defendant           0.44%

14. The outcome of this if looked at collectively for the third, fourth and fifth defendants, approximates the five per cent already paid by them. 

15. I am not persuaded that the percentages of shareholding in the plaintiff is an appropriate basis to apportion contribution between the defendants.  The foundation for the order for costs is the successful prosecution by the plaintiff against each of the defendants in relation to the breaches of the Act.  The respective liability of each of the five defendants for such breaches was not dependent on the extent of their respective shareholding in the plaintiff.  Each of them was found to be liable regardless of the percentage of their shareholding.  This does not, in my view, suggest that there should be a variation to the proportion of any contribution between them for indemnifying the plaintiff in respect of the costs incurred in the litigation.

16. I therefore reject this argument as a basis for departing from the prima facie position of equal contribution by all defendants in this case.

17. Linked with this argument, was a submission by the respondents that the applicants should pay a greater proportion of the costs of the plaintiff.  This was based on a proposition that as the applicants had a greater shareholding in the plaintiff they stood to benefit more from a potential increase in the plaintiff’s share price as a consequence of the planned removal of directors and replacement with their own nominees.

18. I do not accept that this is a proper basis upon which to alter the prima facie equal contribution between the defendants.  I agree with the submission made by Mr Cox, counsel for the applicants, that it would be “very odd to analyse the relative benefits of illegal conduct rather than condemning all parties equally”.  Further, I agree with the submission of Mr Cox, that to conduct such a benefit analysis would be contrary to the approach which the Full Court adopted in considering the legitimate rights of shareholders to persuade other shareholders to change the composition of the board of a company.[73]  Further, I consider that the benefit postulated by the respondents of increased share price was at best a speculative hope.  Finally, the respondents’ submission ignores other secondary “benefits” which the respondents stood to gain by positioning the third defendant, his father and another, to take control of the plaintiff company, and it also ignores the following matters referred to by the trial Judge:

    The common case presented by the defendants is that Mr Campbell and Mr Barry had parallel interests in securing changes to the Flinders’ board, the former to promote his own career as the intended managing director of a public company, and the latter to protect the interests of Tiger shareholders in terms of a share distribution and general management as affecting the market for Flinders’ shares.[74]

    [73] Flinders DiamondsLtd vTiger International Resources Inc (2004) 88 SASR 281, [66]-[79].

    [74] Flinders Diamonds Ltd v Tiger International Resources Inc (2003) 86 SASR 353, [113].

    Finding of fault or differing liability

19. A possible basis other than equality for the apportionment of costs has been posited by Young J in Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd.[75] In this case Young J was considering the question of apportionment of a joint order for costs in a context which included findings of breach of the Corporations law which he had found in an earlier judgment in the case.[76]

    [75] (Unreported, Supreme Court of New South Wales, Equity Division, Young J, 15 July 1996, Judgment No. 2092/1992).

    [76] Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (1995) 122 FLR 294.

20. His Honour discussed three possible alternatives.  The first was that “equality is equity”.  The second was that each of the defendants should bear the costs in the proportion to the sum of money for which each of them was found to be liable.  The third was that the contribution should be an amount assessed according to the “fault” of each of the respondents for the breaches.  His Honour in the circumstances of the case did not find it relevant to consider the latter.

21. Insofar as Young J is correct in his analysis that “fault” may be a relevant consideration in a given case, I do not think it appropriate for this case.  Whilst the roles of each of the defendants was different, and in particular the first, fourth and fifth defendant companies became liable as a result of the actions of the personal defendants, nonetheless none of the defendants were blameless.  The starting point is that all were at fault.  To the extent that it is the respondents which proffer this argument, I note that it was the third defendant who undertook responsibility for issues of compliance with Australian law.  He professed to have knowledge of such issues and he also received legal advice for that purpose.  I also consider that the fourth and fifth defendants being corporations of which the third defendant was the sole director and shareholder, should not lead to a different contribution.  They were also found liable for breaches of the Act and their responsibility for costs should be the same as that of the third defendant.

22. I therefore reject this argument as a basis to alter equal contribution.

    Misconduct at trial

23. In the case of Oshlack v Richmond River Council,[77] McHugh J made observations generally as to costs.  This was in a context of public interest litigation.  After his Honour had made the observation that the primary purpose of an award for costs was to indemnify the successful party, not punish an unsuccessful party, the “misconduct” of a party may nonetheless affect liability for costs.  In referring to misconduct, McHugh J was adverting to a party who, for example, unnecessarily protracts proceedings, argues points on appeal not argued before a lower court or fails to accept a settlement which offered the same relief as that given by a court.  Whilst those matters were raised by McHugh J in a context which did not involve co-defendants in a contribution situation, nonetheless I accept that these matters may theoretically distinguish the liability of different defendants for costs if they have applied differing approaches to the unsuccessful defence of the case and thereby incur the plaintiff costs which they should not equally share. 

    [77] (1998) 193 CLR 72.

24. In this case each of the defendants was self represented and they all approached the litigation in a substantially common manner.[78] 

    [78] Transcript of Proceedings, 17 January 2006, 111, 113 and 121.

    Contribution according to grouping of Campbell interests

25. The respondents argue that they should be treated as one entity and that this grouping of “Campbell interests” should collectively contribute no more than one third of the consent costs.  The respondents submitted that it was inequitable that the third defendant and the fourth and fifth defendant corporations of which Mr Campbell was the sole director and shareholder, and which were in effect one entity, should bear 60 per cent of the costs order.

26. In putting this submission Mr Dart, counsel for the respondents, relied on the more flexible approach indicated by Kirby J in Burke’s case[79] that:

    If unequal contributions could be ordered, proportionate to the differing responsibilities of the co-obligors, that facility could, in some circumstances, solve the types of argument that were advanced for Mr Burke in this appeal.  It would permit adjustment of contributions by reference to considerations such as culpability, causation and notions of unjust enrichment.[80]

    [79] (2002) 209 CLR 282.

    [80] (2002) 209 CLR 282, 325 [119].

27. It was submitted that the Court should have regard to the substance and not the form and that as the companies were the “alter ego” of Mr Campbell, as a matter of equity they should not have to bear the same burden as the first and second defendants.

28. Such a submission requires the Court to go behind the “corporate veil” of the fourth and fifth defendants to ascertain the extent to which each should be viewed as the alter ego of the third defendant Mr Campbell.[81]  In my view the decision of Williams J does not so distinguish the corporate defendants.  There is no reason for me to so distinguish between them as both corporate entities and individuals are equally liable for breaches as indeed was found by Williams J as well as the Full Court on appeal.[82]  To do so would be contrary to the fact that each of the corporate entities including the fourth and fifth defendants was using its separate shareholding in the plaintiff company to collectively achieve the common goal of spilling the board of the plaintiff.

    [81] See Salomon v A Salomon and Co Ltd [1897] AC 22.

    [82] Flinders Diamonds Ltd v Tiger International Resources Inc (2003) 86 SASR 353, [127]; Flinders Diamonds Ltd v Tiger International Resources Inc (2004) 88 SASR 281, [37].

29. Further, there is inadequate evidence upon which to make a finding that the fourth and fifth defendants are the alter ego of the third defendant for the reasons submitted by Mr Cox.  The case is very different from that of Salim v Ingham Enterprises Pty Ltd[83] which the respondents rely on.  In that case there was sufficient evidence, but it was in a very different contractual context and did not concern breaches of statutory requirements.

    [83] (1998) 55 NSWLR 7.

30. Mr Dart also submitted an alternative clustering of the defendants into the “Barry interests” and the “Campbell interests” with each contributing 50 per cent of the costs.  Mr Dart did not seek to advance this proposition by argument and in my view this submission fails for reasons already given, together with the fact that the interests of Mr Barry and the first defendant company were the subject of special consideration by the trial Judge which tends to contradict this submission.[84]

    [84] Flinders Diamonds Ltd v Tiger International Resources Inc (2003) 86 SASR 353, [132]-[144].

31. I therefore do not consider that these submissions should alter the prima facie position of equal contribution.

    Credit for $11,000

32. The respondents also argue that if there is to be a contribution assessed on any basis, that the respondents should be given full credit for the amount of $11,000 already paid pursuant to the Deed of Settlement.  There was no separate application made for contribution for the $11,000 by the respondents.

33. There is also a question as to whether the $11,000 should be added in effect to the $200,000 so that the total costs paid to the plaintiff was $211,000 plus interest and that the whole sum should be the subject of contribution between them all.

34. Whichever way one looks at it, in my view, there is no basis in equity for the applicants to be regarded as being responsible for any amounts over and above the consent costs of $200,000.  The actions of the respondents are not conducive to suggesting that they should be entitled to credit for the $11,000 paid by them.  They had been covert in negotiating the payment of this particular figure, it was confidential, and they permitted the applicants to be exposed to 95 per cent of the remaining costs.  There is no equitable basis for suggesting that such credit be permitted.

1. In consequence, I find that it is appropriate that each of the defendants should equally contribute to the sum of $200,000 plus interest of $3,366.08 which was paid by the applicants.

2. I will hear the parties as to the precise orders which should be made having regard to this finding.