Ford Motor Company of Australia Ltd v Tallevine Pty Ltd (In Liq)

[2021] NSWSC 1192

Supreme Court

New South Wales

Medium Neutral Citation:

Ford Motor Company of Australia Ltd v Tallevine Pty Ltd (In Liq) [2021] NSWSC 1192

Hearing dates:

31 August 2021

Date of orders:

20 September 2021

Decision date:

20 September 2021

Jurisdiction:

Common Law

Before:

Fagan J

Decision:

1 The cross-defendant’s costs of the cross-claim are assessed in the lump sum of $295,000.

2 Direct the Registrar to call upon the bank guarantee for the full amount of $150,000 and to pay the proceeds when received to the cross-defendant.

Catchwords:

CORPORATIONS – Winding up – Members voluntary winding up – Proceedings and execution – Leave not required

COSTS – Lump sum assessment

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Corporations Act 2001 (Cth)

Evidence Act 1995 (NSW)

Cases Cited:

Awada v Linknarf Ltd (In Liq) (2002) 55 NSWLR 745; [2002] NSWSC 873

Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63

Ford Motor Company of Australia Limited v Tallevine Pty Ltd (as trustee for the Thornleigh Trading Trust) [2017] NSWSC 1703

Category:

Consequential orders

Parties:

Ford Motor Company of Australia Ltd (plaintiff)
Tallevine Pty Ltd (in liq) (defendant)

Representation:

Solicitors:
N Ilardo (ex parte)
Lander & Rogers (plaintiff)

File Number(s):

2017/75192

Publication restriction:

Nil

Judgment

1. The plaintiff has applied by notice of motion filed 17 August 2021 for a lump sum assessment of costs payable to it by the defendant under an order for costs made on 31 May 2021. The plaintiff also seeks an order that the Registrar call up a bank guarantee for $150,000 that was provided by the defendant under an earlier order, made on 8 December 2017, for the provision of security for costs. The defendant is the subject of a members voluntary winding up pursuant to a resolution passed on 12 April 2021. The liquidator does not oppose relief being granted as claimed by the plaintiff.

2. In April 2011 the plaintiff entered into a Dealer Agreement with the defendant whereby the defendant was appointed an Authorised Dealer for vehicles manufactured by the plaintiff or by related corporations. In August 2013 the principal of the defendant, David Charles Creak, was convicted in the Local Court of a number of offences including tampering with odometers. As a result the plaintiff gave notice of intention to terminate the Dealer Agreement. On 21 October 2013 the parties entered into a settlement agreement under which the defendant was afforded an opportunity to sell its Ford dealership business, with the intention that the Dealer Agreement would be kept on foot and assigned or novated to the defendant’s purchaser.

3. No sale of the defendant’s business took place under these arrangements. The plaintiff therefore terminated the Dealer Agreement on 19 February 2014. In May 2014 the plaintiff alleged that, despite the termination, the defendant was continuing to use the plaintiff’s trademarks and was holding itself out as an authorised dealer when it was not. The plaintiff commenced proceedings in the County Court of Victoria for relief in respect of this alleged conduct. That litigation was mediated on 16 September 2015 and the parties entered into a Settlement Deed by which the County Court litigation was resolved. Pursuant to the terms of the Settlement Deed, the plaintiff commenced proceedings in this Court and filed therein the terms of consent orders, which were made on 28 October 2015.

4. The present proceedings were commenced on 10 March 2017 upon the plaintiff filing a summons alleging that the defendant had breached the consent orders of 25 October 2015 and was in contempt of court. During May and July 2017 Mr Creak swore three affidavits in answer to the charge of contempt. In those affidavits he deposed to certain communications that he said had taken place in the course of the mediation of the Victorian County Court proceedings that had led to the Deed of Settlement and, in turn, to the making of the consent orders. On 7 August 2017 the defendant filed a cross-claim in these proceedings seeking orders that the Deed of Settlement be set aside and that the consent orders be vacated. This relief was claimed on the basis that the plaintiff had engaged in misleading and deceptive conduct by way of representations in the course of the mediation and that this had induced the defendant to enter into the Settlement Deed.

5. The plaintiff’s initial response to this cross-claim was to file a notice of motion on 7 September 2017 seeking, principally, the following relief:

1. advance rulings pursuant to s 192A of the Evidence Act 1995 (NSW) to the effect that substantial parts of Mr Creak’s affidavits were inadmissible because they concerned communications that were part of settlement negotiations (ss 131 and 134 of the Evidence Act), or because the communications deposed to were confidential according to the terms of a mediation agreement, or because evidence of them would be prejudicial (s 135 of the Evidence Act);

2. that the cross-claim be summarily dismissed or that significant parts of the cross-claimant’s pleading be struck out and

3. security for costs.

6. The defendant filed an opposing notice of motion, seeking a stay of the consent orders of 25 October 2015. Harrison J heard these applications together over three days in late November 2017 and gave judgment on 8 December 2017: Ford Motor Company of Australia Limited v Tallevine Pty Ltd (as trustee for the Thornleigh Trading Trust) [2017] NSWSC 1703. The plaintiff was unsuccessful in obtaining advance rulings to exclude the disputed parts of Mr Creak’s affidavits. His Honour found that s 131 was inapplicable by reason of an exception provided for in subs (2)(f) and he declined to resolve the other bases of objection before all the evidence from both parties had been served. His Honour said that the defendant’s “prospects of establishing that the representations were made [by the plaintiff] in the first place or that it relied upon them in the second place could be described as slim or improbable” but he was unable to conclude that cross-claim was so hopeless as to warrant dismissing it summarily, according to the demanding test for such dismissal established by the authorities.

7. Security for costs was ordered in the sum of $150,000. The defendant’s notice of motion was dismissed. Harrison J ordered that the costs of both notices of motion should be costs in the proceedings on the cross-claim. On 12 January 2018 the defendant provided security for the plaintiff’s costs of defending the cross-claim, by way of an unconditional bank guarantee in favour of the Registrar. Thereafter interlocutory proceedings on the cross-claim continued.

8. The cross-claim rested upon allegations concerning conduct of the plaintiff throughout the six years of their business association, from about early 2011. The following preparations for hearing were all directed to the cross-claim. Between the two parties, 12 witnesses were deposed and more than 20 affidavits were served. Extensive discovery was sought by each party. In November 2018 this gave rise to contested notices of motion to resolve the categories of discoverable documents. A judge of this Division heard those issues over two days in December 2018 and made orders on 13 February 2019. The plaintiff issued a number of subpoenas to third parties. By 9 October 2020 the proceedings were ready for determination and they were listed for final hearing commencing in November 2021.

9. On 31 May 2021 the following orders were made:

1.   The cross-claim filed on 7 August 2017 is dismissed.

2.   The cross-claimant [defendant] is to pay the cross-defendant’s [plaintiff’’s] costs of the cross-claim.

10. Although the winding up of the defendant had commenced on 12 April 2021, leave of the Court for the making of those orders was not required: Awada v Linknarf Ltd (In Liq) (2002) 55 NSWLR 745; [2002] NSWSC 873. Section 500(2) of the Corporations Act 2001 (Cth) applies to a creditors voluntary winding up and has an effect equivalent to s 468(4), pursuant to which the leave of the Court must be obtained before any proceeding may be taken or continued against a company that is being wound up by a court appointed liquidator. There is no equivalent stay on proceedings or execution under a members voluntary winding up.

11. The plaintiff has a very strong case for asking that a lump-sum assessment be made under s 98(4)(c) of the Civil Procedure Act 2005 (NSW). The plaintiff’s costs of the cross-claim are not provable in the winding up because the order that they be paid had not been made before the relevant date: s 553(1) of the Corporations Act; Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63. Likewise, the plaintiff would not be able to prove in winding up for any further costs that it might now incur in having its costs of the cross-claim assessed. It is unlikely that the plaintiff will ever recover in respect of its costs of defending the cross-claim anything beyond the $150,000 that can be called up under the bank guarantee. The plaintiff’s costs of the cross-claim are well in excess of $150,000. The justice of the case requires that the jurisdiction to make a lump sum assessment be exercised, to save the plaintiff from incurring further irrecoverable expenditure upon an assessment and to enable it to proceed as expeditiously as possible to have the registrar call up the security, which was ordered to cover precisely this situation.

12. The majority of legal costs incurred by the plaintiff in these proceedings are attributable to its defence of the cross-claim. A lesser proportion would relate to the contempt charge brought by the plaintiff. In factual, legal and procedural terms that was a relatively simple proceeding. On the other hand, the cross-claim was factually complex. It concerned communications over several years and involved strongly contested allegations of misrepresentation and reliance.

13. The plaintiff relies upon two affidavits filed in connection with its present application, showing that its solicitor and client costs of defending the cross-claim are $347,575.10, inclusive of disbursements but exclusive of GST. The affidavits provide an analysis of the work undertaken, divided up between the following elements or stages:

1. Initial review of the cross-claim and advice to the plaintiff: $22,765.

2. Work in connection with the notices of motion heard by Harrison J in November 2017: $180,787.50.

3. Work in connection with the notices of motion concerning categories of discoverable documents, heard in December 2018: $36,912.50.

4. Preparation of defence to cross claim: $12,010.

5. Review of defendant’s evidence in support of cross-claim and taking affidavits in reply: $39,910.

6. Discovery in relation to cross-claim: $21,160.

7. Ancillary work not included in the above elements: $34,030.10

14. The total of $347,575.10 includes $198,903 in solicitors’ costs and $ 148,672.10 in disbursements, mainly counsel’s fees. The plaintiff’s affidavits in support of the lump sum assessment indicate the hourly rates that have been charged by counsel, partners, senior associates and more junior solicitors. All of these rates appear to me to be reasonable, based upon my knowledge of rates generally charged during period in question as disclosed in other proceedings that have come before the Court concerning disputed claims for costs. The plaintiff’s affidavits also state the number of hours worked by lawyers at each level of seniority in connection with each element or stage of the proceedings on the cross-claim.

15. I am satisfied that the number of hours charged at each of the respective rates is reasonable, having regard to the extent of the work involved. As a check on this, I have considered the subtotal attributed to each separate element of the proceedings and the additional amount attributed to ancillary, uncategorised work. The respective subtotals and the additional amount all appear to be in the order of magnitude that one would expect to have been incurred, given the wide-ranging factual issues on the cross-claim and the extent of contest through interlocutory stages.

16. In the hands of an experienced costs assessor I would expect around 80% of the solicitors’ costs charged to the client would be certified between the parties, following a thorough assessment. I consider that a lesser percentage of the solicitors’ costs should be assessed as a lump-sum to allow for the inherent crudity and inaccuracy of the process. I am not a costs assessor and a lump-sum assessment necessarily involves a broad and relatively superficial approach. I will apply a factor of 75% with some slight rounding-down. There is no reason to doubt that the full amount of the disbursements has been incurred and that amount should be allowed in full, as I expect an assessor would do. I will therefore assess the plaintiff’s costs of the cross-claim, including disbursements, at $295,000.

Orders

17. The following orders will be entered:

1. The costs of the cross-claim payable by the cross-claimant to the cross-defendant pursuant to the order made in that behalf on 31 May 2021 are assessed pursuant to s 98 of the Civil Procedure Act 2005 (NSW) in the lump sum of $295,000.

2. Direct that the Registrar call upon the bank guarantee from the National Australia Bank Ltd dated 11 January 2018 that was provided by way of security for costs pursuant to the order of Harrison J made on 9 December 2017, for the full amount of the said guarantee, being $150,000, and upon receipt of the proceeds of that guarantee pay out the full amount to the cross-defendant, Ford Motor Company of Australia Pty Ltd.

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Decision last updated: 21 September 2021