Four Air Leitchville Pty Ltd v Hurlad Pty Ltd
[2022] FCA 1372
•10 November 2022
FEDERAL COURT OF AUSTRALIA
Four Air Leitchville Pty Ltd v Hurlad Pty Ltd [2022] FCA 1372
File number: VID 120 of 2020 Judgment of: LEE J Date of judgment: 10 November 2022 Date of publication of reasons: 24 November 2022 Catchwords: PRACTICE AND PROCEDURE – application for further security for costs – where costs incurred exceed those anticipated when security ordered by consent – whether conduct of the third and fourth respondents tends against the exercise of discretion to award further security – “broad brush” assessment – orders for security for costs made Legislation: Competition and Consumer Act2010 (Cth) Sch 2 s 18
Federal Court of Australia Act 1976 (Cth) Pt VB
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 14 Date of hearing: 10 November 2022 Counsel for the Applicant: Mr D Shirrefs Solicitor for the Applicant: Maitland Lawyers Counsel for the First and Second Respondents: Mr J Waters Solicitor for the First and Second Respondents: Frenkel Partners as town agents for PS Law Counsel for the Third and Fourth Respondents: Mr C G Juebner SC Solicitor for the Third and Fourth Respondents: SBA Law ORDERS
VID 120 of 2020 BETWEEN: FOUR AIR LEITCHVILLE PTY LTD (ACN 006 929 219)
Applicant
AND: HURLAD PTY LTD (ACN 063 476 415)
First Respondent
GAVIN BULLAS
Second Respondent
INTERAIR PTY LTD (ACN 005 884 042) (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
LEE J
DATE OF ORDER:
10 NOVEMBER 2022
THE COURT ORDERS THAT:
1.The matter be stood over for a further case management hearing at 9:30am on 14 November 2022.
THE COURT DIRECTS THAT:
2.Either agreed or competing short minutes of order reflecting the orders that his Honour indicated at the case management hearing today be provided by 5pm on 11 November 2022.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Delivered ex tempore, revised from the transcript)LEE J:
Before the Court is an application made by the third and fourth respondents (Interair parties) seeking further security for costs from the applicant, Four Air Leitchville Pty Ltd (Four Air), in the sum of $203,062.
Orders were made by Anderson J for security for costs as long ago as 2 April 2020. On that occasion, his Honour ordered security in an amount to be agreed or, failing agreement, an amount ordered by the Court. His Honour then made orders by consent on 30 April 2020 that Four Air pay $101,500 into Court as security for the costs of the Interair parties up to the conclusion of the mediation, and extended the date by which the security was required to be paid until 4 May 2020. If the proceeding did not settle (as turned out to be the case), Four Air was to pay an amount of security for the balance of the costs of the proceeding. The order that security be paid for the entire proceeding is an unsurprising one, given that Four Air is a special purpose vehicle company that purchased the aircraft the subject of this proceeding.
On 27 August 2021, a Registrar of the Court made orders fixing a further sum of security of $155,000. Accordingly, $256,500 presently stands as security for costs for the Interair parties for the entire proceeding.
The amount of further security sought by the Interair parties is $203,062, calculated in accordance with the submissions filed by the Interair parties on 26 August 2022. It suffices to say that, given the tardy progress of the current proceedings and the ongoing collateral disputation between the parties, the costs incurred by the Interair parties to date far exceed those estimated by the orders for security made on 27 August 2021.
The arguments deployed against the exercise of discretion to award security can be placed into four broad categories.
The first relates to the airworthiness of the aircraft in dispute. Although the Interair parties no longer contest this issue, they pursued it for some time, despite the fact that during a joint conclave process (which proceeded without the intervention of the legal representatives of the parties), it became apparent that the aircraft was not airworthy at any material time. Four Air pointed to the fact that significant costs were incurred in relation to proving a lack of airworthiness. Somewhat remarkably, even today, the first and second respondents (Hurlad parties) are apparently not prepared to concede that the aircraft was not airworthy, notwithstanding the joint expert report dated 26 July 2022.
Secondly, there was a significant dispute over subpoenas, the subject of a costs order in favour of Four Air.
Thirdly, sufficient security has already been provided. Counsel for Four Air submitted that the award of security is not intended as an underwriting of the entire costs of a respondent. It is a discretionary step taken to ensure that a fund for the payment of costs is available in the event that the respondent is ultimately successful.
The fourth category somewhat overlaps with the earlier three. The conduct of the Interair parties has at times tended against the exercise of the Court’s discretion to award further security. Put bluntly, I have been concerned with the conduct of this matter by all of the parties since it came into my docket for case management. Consistently with the conduct of this matter on past occasions, today the parties had a less than laser-like focus on resolving this matter as quickly, inexpensively and efficiently as possible.
It is necessary to temper that criticism slightly: there has been some measure of common sense as between Four Air and the Interair parties in identifying a valuer to be a referee to assist resolving issues of quantum. Regrettably, however, the Hurlad parties, in a manner that seems characteristic of their approach to this proceeding, are not in a position to agree upon this sensible course. Further, the Hurlad parties now wish to put in issue whether representations made in relation to the sale of an aircraft were made in trade or commerce for the purposes of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act2010 (Cth). This, at least prima facie, seems a most unusual and surprising proposition. It goes without saying that any decision to pursue this point should be made after carefully taking into account the duty to act consistently with the overarching purpose in Pt VB of the Federal Court of Australia Act 1976 (Cth).
In any event, it suffices to say that at the last case management hearing, the Interair parties provided the most assistance to the Court in simplifying the issues in dispute.
Accordingly, I do not think there is anything about the conduct of the Interair parties which militates strongly against an award of security. In circumstances where Anderson J was satisfied it was appropriate to award security for the entire proceeding, and given the way the matter has been conducted, it does seem to me unsurprising that the costs estimate made on 27 August 2021 has been exceeded. Despite this, counsel for the Interair parties frankly conceded that some duplication has occurred by reason of a change of solicitors. Further, as counsel for Four Air pointed out, there are two further factors at play: (1) additional costs which should have been avoided in relation to proving the question of airworthiness; and (2) the existence of a costs order to the benefit of the Interair parties.
Finally, a further factor that I take into account in exercising my discretion to make an award of security is that, on a broad brush view, it does seem to me that the defence of the Interair parties is one which, at least on a very preliminary basis, has some prospect of success.
Accordingly, in all the circumstances, and adopting that broad brush approach, I consider it appropriate that further security in the amount of $130,000 be paid by Four Air. This amount should be enough.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee. Associate:
Dated: 24 November 2022
SCHEDULE OF PARTIES
VID 120 of 2020 Respondents
Fourth Respondent:
ERMIS SHAPANIS
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