Forrest v Appleyard

[2006] NSWSC 471

CITATION:	Forrest v Appleyard [2006] NSWSC 471
HEARING DATE(S):	08/05/2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	05/08/2006
DECISION:	Defendants to pay plaintiff's costs. No apportionment.
CATCHWORDS:	COSTS - where defendant separately represented - whether costs should be apportioned between defendants
PARTIES:	John James Forrest (P) Leigh Davern Appleyard (D1) Geoffrey Martin Pryke (D2) Bruce Anthony Kenny (D3)
FILE NUMBER(S):	SC 4583/03
COUNSEL:	Mr JL Doyle (P) Mr KP Smark (D1 & D3) Mr EGH Cox (D2)
SOLICITORS:	Forshaws Neill Solicitors (P) Schweizer Kobras (D1 & D3) Kells The Lawyers (D2)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Monday 8 May 2006

4583/03 John James Forrest v Leigh Davern Appleyard

JUDGMENT (re costs)

1 HIS HONOUR: On 13 April 2006 I gave judgment in these proceedings and foreshadowed that I proposed to make an order that the defendants pay the plaintiff's costs of the proceedings to date, there being no sufficient reason why the unsuccessful defendants should not pay Mr Forrest's costs, but reserved leave to the parties to apply for a different costs order. The second defendant, Mr Pryke, has submitted that I should make a different costs order and seeks alternatively (1) an order to the effect that the defendants pay the plaintiff's costs of the proceedings (except any relating to the specific defences he raised of uncertainty or incompleteness raised by Mr Pryke’s amended defence) on a pro rata basis according to their existing interests in the practice known as Appleyard Forrest, and that the second defendant pay the plaintiff's costs of those specific defences; or (2) that the defendants pay the plaintiff's costs of the proceedings up to 16 February 2006 on a pro rata basis, according to their existing interests, and after 16 February in equal shares.

2 This morning Mr Cox, for Mr Pryke, has clarified that what he primarily seeks is an order that the liability of the defendants to the plaintiff for costs be apportioned in the way set out in those proposed orders, but, as I understand it, his alternative position is that even if the defendants, as against the plaintiff, are to be jointly and severally liable for the whole of the plaintiff’s costs, he would seek an order as between the defendants that they contribute amongst themselves in the way reflected in those proposed orders.

3 As between the plaintiff and the defendants, the plaintiff had to defeat the case of the second defendant as well as that of the first and third defendants to succeed in the proceedings. Had the first and third defendants submitted, nonetheless the plaintiff would still have had to conduct the proceedings to succeed against the second defendant, to obtain the relief he sought and ultimately secured. Likewise, had the second defendant submitted, the plaintiff would have had to conduct the proceedings to completion against the first and third defendants.

4 Although Mr Cox has submitted that it is unlikely that any of these defendants would disappear or be insolvent, I simply do not know, because at no stage has the evidence addressed that issue. Prima facie the first defendant, Mr Appleyard, has a substantial interest in the practice which is likely to be of value, but both other defendants have only five percent interests in the practice. Having had to contest the case against the second and third defendants as well as the first, I do not think that the plaintiff should be left to take his chances that the first defendant will be able to meet any order.

5 Accordingly, as between the plaintiff and the defendants, I am of the view that the defendants should be jointly and severally liable for the whole of the plaintiff's costs.

6 As between the defendants, two main arguments are raised on behalf of Mr Pryke for the contention that their costs liability should be born pro rata: first, that such a result would accord with their discrepant interests in the practice - those interests being 45 to Mr Appleyard, 5 to Mr Pryke and 5 to Mr Kenny - and secondly, that it would be consistent with terms of the Shareholders' Agreement, which envisage that at least in some circumstances their liability would be apportioned pro rata.

7 In my substantive judgment, I referred to various aspects of the Shareholders' Agreement which seem to favour the view that the liability to buy out a retiring participant was to be borne pro rata, as I concluded was the case in that judgment. Mr Cox refers also to clause 21.5 of the Shareholders’ Agreement, which provides as follows:

21.5: Each of the principals also jointly and severally guarantees with the others, on demand, to pay all costs, expenses and liabilities incurred by any one of them in the actual or attempted exercise or enforcement by him of this Agreement or a power or remedy under or arising out of this Agreement in proportion to his equity entitlement but excluding the interest in the practice of the principal enforcing this Agreement or such power or remedy. The costs, expenses and liabilities referred to in this paragraph include all legal fees and expenses on an indemnity basis.

8 Clause 21.5, properly construed, does not apply directly in the circumstances, and I do not understand Mr Cox to seek its enforcement as a matter of contractual right. Rather, he submits that in the present circumstances, it is a relevant consideration. I agree that it is a relevant consideration, though far from a conclusive one, and although it is somewhat obscure in its application, I think it does establish that the parties contemplated that, in the event of one participant seeking to enforce his rights arising out of the Shareholders' Agreement against the others, the others would bear any resultant costs, expenses and liabilities pro rata, according to their interests.

9 If the three defendants had defended these proceedings with common representation, presenting a common front, the argument that their liability for the plaintiff’s costs should be borne in that way would be a powerful one. However, in this case the second defendant, who had fallen out, at least commercially, with the others, chose to be separately represented, and raised separate issues which the first and third defendants did not pursue. It was necessary, as I have said, for the plaintiff to defeat the cases of both groups of defendants. It might be possible separately to identify costs attributable to those issues, but it becomes a rather artificial and difficult exercise on assessment to do so.

10 So far as concerns the submission that Mr Pryke played a relatively passive role in the litigation is concerned, the response that (1) he did not submit, and therefore it would follow the plaintiff had to conduct and prove a case against him and (2) ultimately, he raised affirmative defences, including those of uncertainty and incompleteness, not pressed by the other defendants, have force.

11 Ultimately, I do not accept that the initial passive role of Mr Pryke has any significant bearing on the question of costs, once he chose to be separately represented. Although clause 21.5 of the Shareholders' Agreement, and the overall pro-rata interests of the parties, are not without significance as a relevant consideration, the circumstance that Mr Pryke was separately represented, raised separate issues and pursued his own interests I think takes the case out of the coverage of any discretionary consideration which might arise from clause 21.5, which is potentially applicable where there is a joint defence, but of reduced significance if there are separate defences.

12 Accordingly, I do not propose to make any special costs order as between the defendants.

13 I order that the defendants pay the plaintiff's costs of the proceedings to date.

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