Frigger v Professional Services of Australia Pty Ltd [No 2]
[2011] WASCA 103
•3 JUNE 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: FRIGGER -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2011] WASCA 103
CORAM: PULLIN JA
NEWNES JA
MAZZA J
HEARD: 11 APRIL 2011
DELIVERED : 3 JUNE 2011
FILE NO/S: CACV 51 of 2010
BETWEEN: ANGELA FRIGGER
HARTMUT FRIGGER
AppellantsAND
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD (Subject to Deed of Company Arrangement)
First RespondentDONALD CAMPBELL-SMITH as Executor of the Estate of MARTIN PAUL BANNING (Dec)
Second RespondentCOMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
Third RespondentMERVYN KITAY Liquidator of the Third Respondent
Fourth Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD (Administrator Appointed) -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 3] [2010] WASC 93
File No :COR 2 of 2010
Catchwords:
Costs - Appeal from costs orders against directors not formally joined as parties - Whether leave required - Exercise of discretion to fix costs - Inadequacy of reasons
Legislation:
Corporations Act 2001 (Cth), s 459P(1), s 459A, s 461(1)(k), s 471A(2), s 471A(2A)
Supreme Court (Corporations) (WA) Rules 2004 (WA), r 2.13
Supreme Court Act 1935 (WA), s 60(1)(e)
Result:
Leave to appeal granted
Appeal allowed in part
Category: B
Representation:
Counsel:
Appellants: Mr D W Thompson
First Respondent : Mr B W Ashdown
Second Respondent : Mr B W Ashdown
Third Respondent : Mr D W John
Fourth Respondent : Mr D W John
Solicitors:
Appellants: David Thompson
First Respondent : Holborn Lenhoff Massey
Second Respondent : Holborn Lenhoff Massey
Third Respondent : Freehills
Fourth Respondent : Freehills
Case(s) referred to in judgment(s):
Carter v Mallesons Stephen Jaques (1993) 11 WAR 159
Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd [2003] QCA 516; (2004) 2 Qd R 11
Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93
Re Union Accident Insurance Co Ltd (1972) 1 WLR 640
REASONS OF THE COURT: This is an appeal against costs orders made by Master Sanderson on 6 May 2010. The orders were made following the hearing of an originating process for an order that the third respondent (the company) be wound up under s 459P(1), s 459A and s 461(1)(k) of the Corporations Act 2001 (Cth). The reasons the master gave for making the winding up order are in Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93.
Background
On 8 January 2010, the first and second respondents (plaintiffs) filed an originating process seeking an order that the company be wound up. On the same day, the plaintiffs filed an application for the appointment of a provisional liquidator.
On 21 January 2010, Simmonds J appointed the fourth respondent (Mr Kitay) as provisional liquidator: see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38. He ordered that the costs of the application be costs in the cause of the winding up.
On 8 February 2010, the appellants made an application to terminate the appointment of Mr Kitay as provisional liquidator. On 15 February 2010, this application was heard and dismissed by Simmonds J, who ordered that Mr and Mrs Frigger pay the costs of the application to be taxed.
On 18 February 2010, the application to wind up the third respondent came on for hearing before Acting Master Chapman. Counsel appeared for the plaintiffs and Mr Kitay and the first‑named appellant (Mrs Frigger) sought leave to appear 'on behalf of the members of the … company'.
After the hearing lasting an hour and 11 minutes, the acting master said:
I have an application before me, several applications really, but the main one that has been pressed this morning is the winding‑up application. I am conscious of the fact that a rather large affidavit was filed. I am not even sure it has been filed yet but it was prepared and served on Mrs Frigger apparently very late yesterday. It seems to me that the company ought be given an opportunity to digest that and to respond to as it sees fit, so I am prepared to adjourn the matter to 4 March. I will reserve the question as costs.
So far as I understand it, leave was sought by Mr and Mrs Frigger to appear on behalf of the company in regard to the winding‑up application. I would refuse that leave.
On 4 March 2010, there was a short hearing. The plaintiffs were represented. The transcript reveals that a lawyer, Mr T M Clavey, appeared and announced that he appeared for the directors on instructions from Mrs Frigger. The master enquired whether he appeared for the directors or for the company. Mr Clavey said that he appeared for the directors and the master pointed out that the directors were not party to the proceedings. Mr Clavey referred to Re Union Accident Insurance Co Ltd (1972) 1 WLR 640. The master then said that before he considered the matter of the appearance of Mr Clavey for the directors, he wished to point out that there were other matters in the list for that day. As a result, the winding up application was adjourned sine die. The hearing lasted for 16 minutes.
On or about 16 March 2010, Clavey Legal filed an application on behalf of Mrs Frigger under r 2.13 of the Supreme Court (Corporations) (WA) Rules 2004 (WA), alternatively, s 471A(2A)(d) of the Corporations Act seeking an order that Mrs Frigger have leave pursuant to r 2.13 of the rules to be heard on the application to wind up or, in the alternative, Mrs Frigger have leave to exercise her powers as a director to oppose the application for the winding up of the company.
Rule 2.13 reads:
(1)The Court may grant leave to any person who is, or who claims to be -
(a)a creditor, contributory or officer of a corporation;
(b)an officer of a creditor, or contributory, of a corporation; or
(c)any other interested person,
to be heard in a proceeding without becoming a party to the proceeding.
(2)If the Court considers that the attendance of a person to whom leave has been granted under subrule (1) has resulted in additional costs for any party, or the corporation, which should be borne by the person to whom leave was granted, the Court may -
(a)direct that the person pay the costs; and
(b)order that the person not be heard further in the proceeding until the costs are paid or secured to the Court’s satisfaction.
Section 471A(2) and (2A) of the Corporations Act 2001 reads:
471APowers of other officers suspended during winding up
(2)While a provisional liquidator of a company is acting, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company.
(2A)Subsection (2) does not apply to the extent that the performance or exercise, or purported performance or exercise, is:
(a)as a provisional liquidator of the company; or
(b)as an administrator appointed for the purposes of an administration of the company beginning after the provisional liquidator was appointed; or
(c)with the provisional liquidator's written approval; or
(d)with the approval of the Court.
It appears that there was a hearing on 16 or 18 March 2010. Mr Kitay's counsel advised this court from the bar table that it was a short hearing and there was no transcript. He informed the court that Mr Clavey attended. No information was provided to the court about what happened on that day. The application seems to have been adjourned to 28 April 2010. This court was also informed from the bar table that the application by Mrs Frigger for leave pursuant to r 2.13 or, alternatively, approval under s 471A(2A) of the Corporations Act, was never expressly dealt with.
On 28 April 2010, there was a hearing lasting one hour and 32 minutes. Counsel for the provisional liquidator was there for only about five minutes and withdrew with the leave of the court. The master then heard submissions from counsel for the plaintiffs and from Mr Dutton, who announced that he appeared for Mrs Frigger.
After hearing submissions, the master said that he was satisfied that he should wind up the company and that he would give his reasons later. However, the master said that he would delay making the order until he had produced his reasons and that when he did so, the question of costs could then be ventilated. At that point, counsel appearing for the plaintiffs said:
I should probably mention that some of the costs may be sought against the Friggers since they have intervened effectively on their own behalf. as ‑‑‑
The master then said:
What I would suggest you do is come up with a figure that might be fixed so that you don't have to go through the agony of taxation.
The proceedings were then adjourned.
It appears from the file COR 2 of 2010 that Dutton Legal subsequently filed a 'Notice of Appointment of Solicitor' on 4 May 2010 stating that Mr and Mrs Frigger were represented by Dutton Legal.
On 6 May 2010 the master published his reasons. On that day there was a further hearing. Counsel appeared for the plaintiffs and for Mr Kitay. Mr Dutton announced that he appeared for 'the defendant - the director of the defendant'.
After hearing submissions, including submissions about whether Mr Dutton should be ordered to pay costs personally, the master then made orders which followed closely several paragraphs of a minute of orders which had been proffered by the plaintiffs. Mr Kitay and the plaintiffs had taken up the master's suggestion about the possibility of fixing costs. Both had prepared tables of costs they sought. The table of costs disclosed a claim by the plaintiffs for $34,033.15 for solicitors' costs, $29,566.80 for counsel's costs (a total of $50,399.40 after excluding costs relating to the application to set aside the appointment of Mr Kitay) including disbursements totalling $2,942.40. The disbursements included the filing fee of $768 for filing the originating process for winding up, $411.40 for publication of advertisements in The West Australian newspaper and $82.50 for service fees relating to the originating process.
Mr Kitay's table disclosed a claim for solicitors' costs totalling $10,929.50, counsel costs of $7,655 (a total of $18,584.50) plus disbursements of $1,436.80 for the costs associated with the hearings on 18 February 2010, 26 February 2010, 4 March 2010, 16 March 2010 and 28 April 2010. The table disclosed a further claim of $5,635 for counsel fees which were sought in relation to the application by Mr and Mrs Frigger to set aside the appointment of a provisional liquidator and $818 for solicitors' costs for preparation of an affidavit of the provisional liquidator dated 11 February 2010. As mentioned, Simmonds J ordered those costs to be taxed.
Dutton Legal made submissions that the fees and expenses of the provisional liquidator were excessive and that the costs should be taxed if not agreed. It was also submitted that the plaintiffs, by seeking fixed costs in relation to the hearing of 15 February 2010 before Simmonds J, were seeking to circumvent the necessity of having costs taxed in circumstances where Simmonds J had ordered that costs be taxed.
The master's reasons
After the submissions from the parties, the master then said:
THE MASTER: I am satisfied that I ought make orders in terms of paragraphs 1 through to 9 of the plaintiffs' orders, save that in relation to paragraph 2 I think the liability for costs should be jointly and severally between Mr Dutton, Ms Frigger and Mr Frigger. Order 2 will read:
Mr Geoffrey Dutton, Angela Cecilia Theresa Frigger and Hartmut Hubert Joseph Frigger be jointly and severally liable to pay the plaintiffs' costs of the interlocutory process fixed at $1500.
I have expressed some views in the judgment about the way in which the Friggers and their solicitors have approached this matter and I don't think I need to say anything further. What I will say is that I can't see any circumstance which would justify a stay. If I am wrong in that view, then it can be taken up either with the Court of Appeal or with the High Court.
As to the expenses and costs, I think they ought be fixed. There is no point in long and detailed taxation in this matter. I think having looked at the costs, they are reasonable and I see no reason to do anything other than order costs in terms of the plaintiffs' minute. That does reflect I think the way in which Mr and Mrs Frigger have approached this matter.
It is worth bearing in mind that when the judgment sum was paid by the present plaintiff, there was a contest as to whether or not, given a successful appeal, the amount of the judgment sum could be repaid. It was made plain, as I read the affidavits particularly of Mrs Frigger, that the money would be there to repay any judgment sum that was paid. The money is not there now and that I think is a circumstance which the liquidator ought closely investigate, and which I think should be visited on Mr and Mrs Frigger with respect to costs.
Therefore, with the amendment to paragraph 2 of the plaintiffs' minutes, I will make orders in terms of paragraphs 1 through to 9. In relation to paragraphs 10 and 11 of the minute, I don't think I have jurisdiction to order costs in a fixed amount in relation to orders made by Simmonds J. Therefore, I won't make orders 10 and 11.
By pars 10 and 11 of the minute the first and second respondents sought to have costs fixed in relation to the hearing of 15 February 2010 before Simmonds J, his Honour having ordered that those costs be taxed.
Grounds of appeal
The appellants appeal on the following grounds:
Ground One
1.The learned Master erred in law in ordering the appellants, as non‑parties, to pay costs of 1st, 2nd and 4th respondents.
…
Ground Two
2.The learned Master erred in law by fixing costs without applying the relevant principles in relation to fixing costs.
…
Ground 3
3.The learned master erred in law in failing to conform to the principles of natural justice by failing to give reasons or adequate reasons for his decision to award costs against a non‑party and for failing to give reasons for fixing the costs at the quantum which he did.
The capacity in which Mr and Mrs Frigger appeared
If Mrs Frigger participated in the proceedings (and if Mr Frigger occasionally did so), it seems they did so as persons appearing with leave as interested persons pursuant to r 2.13. They had no authority to exercise, as of right, what are referred to as residual powers of directors in Re Union. Section 471A(2) makes it plain that while a provisional liquidator of a company is acting, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company.
However, under s 471A(2A), subsection (2) does not apply to the extent that the performance or exercise or purported performance or exercise is with the approval of the court. Thus, when a provisional liquidator is acting, a director may gain the approval of the court to perform or exercise a function or power of an officer of the company. Although an application for such an order was filed, it was not pursued and neither Mr nor Mrs Frigger asserted at any of the hearings that they represented the company. On 18 February, Mrs Frigger said that she sought leave to appear on behalf of members of the company. Affidavit material suggested that included Mr Frigger. When Mr Clavey appeared on 4 March, he announced that he was appearing for the directors of the company. On 28 April 2010 when Mr Dutton appeared he said that he appeared for 'the director' of the company, 'Mrs Frigger', and on 6 May, Mr Dutton announced that he appeared for 'the director of the defendant'. The 4 May 2010 notice filed by Dutton Legal stated that it represented Mr and Mrs Frigger.
Because counsel was permitted to appear either for Mrs Frigger or the 'directors', it must be assumed that leave was granted to them as 'interested persons' under r 2.13(1)(c) or under r 2.13(1)(b) as 'officers of the [company]'. Subject to one issue, no issue has been raised about the appropriateness of orders for costs against Mr Frigger, so the rest of these reasons will continue to refer to Mr and Mrs Frigger.
Were Mr and Mrs Frigger parties or non‑parties?
There was a somewhat arid debate raised by ground 1 of the appeal and by the written submissions about whether or not the Friggers were parties or non‑parties. Save for one matter relating to whether notice of a claim for costs should have been given earlier than 28 April 2010, it is an arid debate because there can be no doubt in this case that whether the Friggers should be designated as parties or non‑parties appearing with the leave of the court, a costs order could properly be made against them. Further, whether they were parties or non‑parties does not matter in relation to the issue raised about whether leave to appeal was necessary: Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd [2003] QCA 516; (2004) 2 Qd R 11. Leave was necessary because no appeal lies to the Court of Appeal 'without the leave of the judge or the master or of the Court of Appeal, from the order of a judge or a master … as to costs only which by law are left to the discretion of the judge or the master': see s 60(1)(e) Supreme Court Act 1935 (WA). Leave will be granted if the decision appealed from is shown to be wrong or is shown to be attended by sufficient doubt to justify the grant of leave, and if there would be a substantial injustice if the decision were not reversed.
Insofar as it is necessary to decide the issue, Mr and Mrs Frigger were parties. A 'party' is defined in s 4 of the Supreme Court Act as including 'every person served with notice of or attending any proceeding, although not named on the record'. Mr and Mrs Frigger did attend the proceedings and fully participated. As a result, the complaint that notice of intention to claim costs from Mr and Mrs Frigger should have been given earlier than 28 April 2010, has no merit. However, even if the Friggers were 'non‑parties', there was jurisdiction to order costs pursuant to s 37(1) of the Supreme Court Act. This power is not limited to ordering costs against persons who are formally on the record, but also extends to other persons before the court: Carter v Mallesons Stephen Jaques (1993) 11 WAR 159, 180. Rule 2.13(2) authorised the master to make orders in relation to 'additional costs' caused by the attendance of a party granted leave to be heard in the proceedings without becoming a party. This rule does not require notice of an intended claim for costs to be given before an order for costs can be made.
Ground 3
Ground 3 complains about the inadequacy of the master's reasons. The law is settled that there is a duty on a judicial officer to give reasons for a judgment. Fairness requires that parties should know why they have won or lost. Further, a requirement to give reasons is likely to produce a more soundly based rational judgment. Where there is a right of appeal, the reasons must be sufficient to give effect to that right. Although reasons need not be lengthy or elaborate, the basis for the decision must be apparent, as otherwise the losing party cannot know whether there has been a mistake of law or of fact: Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 [26] ‑ [27].
The master's reasons are not lengthy or elaborate. The master's conclusion that costs orders should be made against Mr and Mrs Frigger were sufficiently revealed because the master incorporated, by reference, written reasons concerning the appointment of the liquidator. They reveal why a costs order was justified against Mr and Mrs Frigger in relation to those proceedings. However, the master's decision to fix costs, and to fix them at the level claimed by the plaintiffs and Mr Kitay, was only explained by the master on the basis that he thought they ought to be fixed because there was 'no point in long and detailed taxation' and that 'having looked at the costs, they are reasonable' and that he saw no reason to do anything other than order costs in terms of the minutes which had been filed by the plaintiffs and Mr Kitay (ts 207, 6 May 2010).
The master then added a reference to an additional matter which provided no justification for the fixing of costs and no justification for fixing the costs at the level at which he fixed them, rather than ordering taxation. The reference was to the circumstances which preceded the service of the statutory notice by the plaintiffs. The circumstances were that the company had obtained a judgment for a large sum against the plaintiffs which sum had been paid by the plaintiffs after an unsuccessful stay application. On appeal, the judgment sum was reduced. The company did not repay the amount the plaintiffs had won back on appeal. This failure to repay led to the winding up application. The master referred to the fact that affidavits, particularly of Mrs Frigger, were to the effect that the money would be there to repay any judgment sum that was paid. The master then said:
The money is not there now and that I think is a circumstance which the liquidator ought closely investigate and which I think should be visited on Mr and Mrs Frigger with respect to costs. (ts 207, 6 May 2010)
As stated above, this provides no justification for orders fixing costs rather than ordering taxation and provides no justification for fixing costs at the level requested. However, it may explain why the master decided to make inappropriate costs orders.
Inadequacy of reasons does not necessarily amount to appellable error. An appellate court will only intervene when no reasons have been given in circumstances in which they were required, or when the inadequacy is such as to give rise to a miscarriage of justice: Mount Lawley v WAPC [29]. In this case the lack of reasons does give rise to a miscarriage of justice. It is obvious that by making the order that the master did, he allowed the plaintiffs and Mr Kitay to recover all of their costs, even costs which would have been incurred even if Mr and Mrs Frigger had not intervened. Counsel for the first and second respondents properly conceded that even if the Friggers had not become involved, some of the costs would have been incurred by the plaintiffs in seeking the winding up order.
The master's reasons were entirely silent about why costs of the amount being sought in this case were ordered to be fixed rather than taxed. Normally, costs of the amount sought here would be made the subject of an order for taxation. The Friggers opposed an order fixing costs and they were entitled to know why that submission was rejected. Ground 3 should be upheld.
It is not necessary to deal with ground 2 because assuming, without deciding, that the court does have jurisdiction to fix costs, this was not an appropriate case for fixing costs. It was a case which required that costs be taxed.
It is not necessary to deal with ground 1 because Mr and Mrs Frigger were parties not non‑parties.
As a result, leave to appeal should be granted, the appeal allowed in part, and the costs orders in pars 2, 7, 8 and 9 should be set aside and in lieu there should be orders in the following terms:
(2)Mr Geoffrey Dutton and Mrs Frigger or Mr and Mrs Frigger should be jointly and severally liable to pay the plaintiffs' costs of the interlocutory process dated 30 April 2010 to be taxed.
(7)The additional costs of the plaintiffs of the originating process dated 8 January 2010 seeking a winding up order which resulted from the attendance of Mr and Mrs Frigger be taxed and paid by Mr and Mrs Frigger (as the case may be), and the remaining costs of the originating process incurred by the plaintiffs be taxed and paid by the company (out of the assets of the company).
(8)The provisional liquidator's costs of the originating process dated 8 January 2010 which resulted from the attendance of Mr and Mrs Frigger (as the case may be) being granted leave to appear, be taxed and paid jointly and severally by Mr and Mrs Frigger (as the case may be) and the remaining costs of the originating process incurred by the provisional liquidator be taxed and paid by the company (out of the assets of the company).
The parties should be given the opportunity to consider the proposed form of the orders. Whether Mr Frigger should be ordered to pay all the costs should be the subject of consideration when the form of orders is discussed.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: FRIGGER -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2011] WASCA 103 (S)
CORAM: PULLIN JA
NEWNES JA
MAZZA J
HEARD: 11 APRIL, 3 JUNE 2011 & ON THE PAPERS
DELIVERED : 3 JUNE 2011
SUPPLEMENTARY
DECISION :1 AUGUST 2011
FILE NO/S: CACV 51 of 2010
BETWEEN: ANGELA FRIGGER
HARTMUT FRIGGER
AppellantsAND
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD (Subject to Deed of Company Arrangement)
First RespondentDONALD CAMPBELL-SMITH as Executor of the Estate of MARTIN PAUL BANNING (Dec)
Second RespondentCOMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
Third RespondentMERVYN KITAY Liquidator of the Third Respondent
Fourth Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD (Administrator Appointed) -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 3] [2010] WASC 93
File No :COR 2 of 2010
Catchwords:
Determination of costs of appeal - Whether appellants successful in the appeal - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 471A(2), s471A(2A)
Supreme Court Act 1935 (WA), s 37(1)
Result:
Appellants jointly and severally pay 50% of first and second respondents' costs of the appeal including all reserved costs to be taxed
Appellants jointly and severally pay the third and fourth respondents' costs of preparing their written submissions on costs dated 13 June 2011 and the affidavit of David William John made 10 June 2011 but otherwise there be no order as to the costs of the appeal as between the appellants and the third and fourth respondents
There be liberty to apply
Category: B
Representation:
Counsel:
Appellants: Mr D W Thompson
First Respondent : Mr B W Ashdown
Second Respondent : Mr B W Ashdown
Third Respondent : Mr A D Kirk
Fourth Respondent : Mr A D Kirk
Solicitors:
Appellants: David Thompson
First Respondent : Holborn Lenhoff Massey
Second Respondent : Holborn Lenhoff Massey
Third Respondent : Freehills
Fourth Respondent : Freehills
Case(s) referred to in judgment(s):
Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394
Keet v Ward [2011] WASCA 139
Laws v Australian Broadcasting Tribunal (1989) ALD 522; (1989) 85 ALR 659
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
REASONS OF THE COURT: The parties are in dispute about the costs orders to be made concerning the appeal. At the hearing on 3 June 2011 when reasons for judgment were published, the appellant sought an order that the respondents pay 90% of the appellants' costs of the appeal to be taxed. The first and second respondents sought an order that the appellants pay 50% of the first and second respondents' costs to be taxed and the third and fourth respondents sought an order that there be no order as to costs as between the appellant and the third and fourth respondent. An order was made on 3 June 2011 that the parties should file written submissions and affidavits and that the decision about costs of the appeal would be made on the papers.
In the written submissions filed by the appellants, they again seek an order that the respondents pay 90% of their costs to be taxed. The first and second respondents still seek an order that the appellants pay 50% of the first and second respondents' costs to be taxed but now, in the alternative, seek an order that the appellants pay the costs incurred after 5 August 2010, being the date of rejection of a Calderbank offer. The third and fourth respondents submit that they proposed, on 3 June 2011, that there be no order for costs if 'the matter could be resolved without the need for more costs to be incurred'.
The appeal was instituted by Mr and Mrs Frigger as second appellants. The Friggers also named the third respondent as the first appellant. They should not have done so because a liquidator had been appointed and there was no consent of the liquidator or leave of the court to institute the appeal on behalf of the company: s 471A(2) and s 471A(2A), Corporations Act 2001 (Cth). The appeal notice revealed that the appellants sought to set aside the winding up order and the costs orders made against the Friggers.
The institution of proceedings in the name of the third respondent meant that the liquidator had to become involved even though the real protagonists were the Friggers and the first and second respondents. Ultimately, the irregularity in the name of the parties was dealt with by consent at a hearing before Newnes JA on 13 August 2010 when there was an order made that the third respondent cease to be the first appellant and be joined as the third respondent. At the same time, the liquidator was joined as the fourth respondent.
When the appellant's case was filed on 21 July 2010, the grounds of appeal contained a par 1 reading:
The appeal in relation to the order to wind up the first appellant is not pressed.
The reference to the first appellant is a reference to the party which is now the third respondent. At a hearing on 28 July 2010 before Newnes JA, the appellants confirmed that the Friggers intended to only appeal against the costs orders of the matter below.
As a result, on 3 August 2010, the solicitors for the first and second respondents wrote a Calderbank letter offering, inter alia, to consent to the appeal being allowed on various terms including that the order for fixed costs be set aside and that the costs be taxed but with uplift orders. This was adopted by the third and fourth respondents in a letter from their solicitors dated 5 August 2010. These proposals were rejected out of hand by Mrs Frigger who sent an email to the first and second respondents' solicitors which read '[t]here will be no early settlement of the appeal'.
Before and at the hearing of the appeal, the primary and perhaps the only objective of the Friggers was to overturn the costs order so that they had no liability at all to pay costs. This was evidenced by the fact that in the appellant's case, the 'orders sought' proposed orders setting aside the costs orders. There was no alternative proposal that there should be an order that costs be paid by the Friggers but to be taxed rather than fixed. During the hearing of the appeal, counsel for the Friggers, in effect, stated that in the alternative, they sought an order that the Friggers pay costs to be taxed (ts 76 ‑ 77). The Friggers failed to achieve their primary objective. They won on the alternative which left them liable to pay costs to be taxed.
If regard is only paid to the orders made by this court then the appellants appear to have succeeded. The orders that they pay costs to be fixed were set aside and in lieu an order was made that they pay costs to be taxed. An examination only of the orders does not disclose that the appellants failed in their primary objective.
However, the victory in obtaining the orders that costs be taxed rather than fixed may be a pyrrhic victory. An example is provided in relation to another costs order made in the proceedings below (COR 2 of 2010). Simmonds J made an order that the Friggers pay costs to be taxed regarding their unsuccessful application to set aside the appointment of a provisional liquidator. At the hearing before the master on 6 May 2010, the first and second respondents asked for those costs to be fixed at $13,200.55. This was resisted and the master refused to make an order fixing the costs which had been ordered by Simmonds J to be taxed. Subsequently, those costs were taxed and allowed in the sum of $13,644.54 which was higher than the costs which the respondents had proposed as the costs to be fixed. If that is the outcome after taxation of the costs in question here, then the Friggers will have had no victory at all. The appeal will have been a futile and disadvantageous exercise for them.
However, if costs are taxed out at less than the fixed costs orders, then they will have gained some advantage out of the appeal. In that sense the appellants will have succeeded to some extent depending on the outcome of the taxation. However, one thing is clear and that is that the Friggers will have to pay some costs.
Principles governing costs
In Keet v Ward [2011] WASCA 139, this court made the point that costs of and incidental to all proceedings in court are in the discretion of the court: s 37(1) of the Supreme Court Act 1935 (WA), but that the discretion conferred is not an unfettered discretion. It is a discretion which must be exercised judicially: [17]. The court went on to say:
The Rules of the Supreme Court 1971 (WA) provide guidance about the sound exercise of the discretion. Order 66 r 1(1) Rules of the Supreme Court provides that subject to the express provisions of any statute and of the rules of court, and without limiting the generality of the discretion to make a costs order, the court will generally order that the successful party to any action or matter recovers his costs. Order 66 r 1(3) provides that, 'where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the court may order such party to pay the costs of such issue or issues'. These rules reflect the general law. Notwithstanding O 66 r 1(3), courts are generally reluctant to apportion costs on the basis of success or failure on particular issues arising in the course of the trial. In Cretazzo v Lombardi (1975) 13 SASR 4, at 16, Jacobs J said:
I would wish to sound a note of cautious disapproval of applications … to apportion costs according only to the success or failure of one party or the other on the various issues of fact or law, which arise in the course of a trial … trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.
His Honour noted that:
There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.
See also Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282; (2002) 54 IPR 495 [10] (Hely J). See also Australian Trade Commission v Disktravel [2002] ATPR 41-85. [18] ‑ [20].
However, deciding what amounts to success is not always revealed merely by reading the orders of the court. Where an appellant has been successful in obtaining what is, in effect, a variation in their favour of orders below, there may remain valid reasons to not award costs in favour of the appellant where the appellant has not been successful in the underlying, real contest: Laws v Australian Broadcasting Tribunal (1989) ALD 522; (1989) 85 ALR 659, 677. Where appellants have only won a nominal victory then the court may not award costs. Success in proceedings is to be determined by the 'reality' of the circumstances involved: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [70] (McHugh J); Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394, 401.
Application of principles to the circumstances of this case
The Friggers failed on the primary issue which was about whether the Friggers should be ordered to pay any costs at all. In that sense the appellant has not succeeded. It is the respondents who have succeeded on that primary contest. On the other hand, the Friggers have succeeded in obtaining an order that costs be taxed in lieu of the order that costs be fixed. The costs should, therefore, follow success on the primary issue but with an adjustment to recognise that the Friggers did succeed in obtaining an order that the costs be taxed in the usual way rather than being fixed.
The first and second respondents have proposed that the appellants should jointly and severally pay 50% of the first and second respondents' costs of the appeal including all reserved costs to be taxed and that is the order that should be made.
The third and fourth respondents proposed at the hearing on 3 June 2011, that there be no order as to costs of the appeal as between the appellants and the third and fourth respondents, but have subsequently filed submissions asking for an order for costs. Because they had to incur further costs making their submissions on costs of the appeal and having convinced the court that the appellants should not be awarded costs, the third and fourth respondents should have the costs of preparing their written submissions concerning the costs of the appeal. Thus, there should be an order that the appellants pay the third and fourth respondents' costs of preparing written submissions concerning costs of the appeal dated 13 June 2011 and the preparation of the affidavit of David William John, dated 10 June 2011.
The third and fourth respondents say in their submissions that as a consequence of conferral between the solicitors for the appellants and the third and fourth respondents, the third and fourth respondents understand that the appellants do not seek an order that the sum of $20,021.30 already paid by the appellants to the liquidator, be repaid, on the understanding that there will only be an obligation to repay the appellants if costs are taxed at a figure lower than the costs already paid. Nevertheless, there should be liberty to apply about this aspect. The orders of the court will be:
(a)the appellants jointly and severally pay 50% of the first and second respondents' costs of the appeal including all reserved costs to be taxed;
(b)the appellants jointly and severally pay the third and fourth respondents' costs of preparing their written submissions on costs dated 13 June 2011 and the affidavit of David William John made 10 June 2011 but otherwise there be no order as to the costs of the appeal as between the appellants and the third and fourth respondents;
(c)there be liberty to apply.
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