GFS Management Services Pty Ltd v Ground and Foundation Supports Pty Ltd - [2001] WASC 287

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: GFS MANAGEMENT SERVICES PTY LTD -v- GROUND AND FOUNDATION SUPPORTS PTY LTD & ORS [2001] WASC 287

CORAM: SCOTT J

HEARD: 25 JUNE & 11 SEPTEMBER 2001

DELIVERED : 19 OCTOBER 2001

FILE NO/S: COR 164 of 1999

BETWEEN: GFS MANAGEMENT SERVICES PTY LTD (ACN 051 681 077)
Applicant
AND
GROUND AND FOUNDATION SUPPORTS PTY LTD (ACN 009 432 964)
First Respondent
KERIN FRANCIS SMART
Second Respondent
BRENCOLDA NOMINEES PTY LTD (ACN 008 783 175)
Third Respondent

Catchwords:

Procedure - Costs - General rule - Costs follow the event - Application for leave to re-open after judgment delivered and appeal lodged - Discretion to be exercised sparingly to prevent injustice - Application refused

Legislation:

Nil

Result:

Application for leave to re-open refused
Respondents to be jointly and severally liable for the applicant's costs to be taxed

Category: B

Representation:

Counsel:

Applicant:     Mr P I Jooste QC & Ms I C K Burford
First Respondent           :     Mr J C Vaughan
Second Respondent       :     Mr A R Beech & Mr P G Donovan (Mr P G Donovan appearing only on 11 September 2001)
Third Respondent         :     Mr A R Beech & Mr P G Donovan (Mr P G Donovan appearing only on 11 September 2001)

Solicitors:

Applicant:     MacKinlay & Co
First Respondent           :     Deacons Graham & James
Second Respondent       :     McCallum Donovan & Sweeney
Third Respondent         :     McCallum Donovan & Sweeney

Case(s) referred to in judgment(s):

GFS Management Services Pty Ltd v Ground and Foundation Supports Pty Ltd & Ors [2001] WASC 143

Case(s) also cited:

Dragut v West Australian Conference of the Seventh Day Adventist Church, unreported; FCt SCt of WA; Library No 950523S; 29 September 1995
Home Management Maintenance Pty Ltd v Doyle (1992) 107 FLR 225

SCOTT J: In this application two matters remain for resolution namely:
1. A determination as to who should pay the costs of the proceedings and
2. The reasons for dismissing the applicant's application for leave to re‑open its case and call additional evidence in relation to the value of the share portfolio of the first respondent.
In relation to the question of costs, these reasons need to be read together with the published reasons in the main action, GFS Management Services Pty Ltd v Ground and Foundation Supports Pty Ltd & Ors [2001] WASC 143
The application arose out of a claim by Graham Menz ("Menz") alleging that he was treated oppressively by the second and third respondents in relation to his position as managing director and shareholder of the first respondent. The applicant succeeded in that application and orders were made for the first respondent to acquire the shares of the applicant.
There were a number of claims of oppression by the applicant set out in the principal reasons in 2001 WASCA 143 at par 27. The application succeeded because of the finding that the summary dismissal of Menz was an act of oppression within that section. The other alleged acts were not made out.
In the end result a valuation was placed on the applicant's shareholding in the first respondent and a compulsory purchase order was made.
The second and third respondents denied that there was any oppressive conduct and denied that the plaintiff was entitled to the relief sought.
In considering the question of the costs of the application I have taken into account the various offers that were made by the parties for settlement of the application prior to the matter coming on for hearing. Those offers are contained in correspondence between the parties and are conveniently summarised in the document entitled "Chronology of letters of offer to settle". The offers are also annexed to the affidavit of Alaistair Robert MacKinlay sworn 22 June 2001.
Those offers of settlement have been considered but on examination it is apparent that all of the offers were conditional, and based upon the resolution of a number of matters, not merely this application. In addition, the offers to settle included reference to legal costs.
Senior counsel for the applicant submitted that the appropriate order for costs was for the respondents to pay the applicant's costs on a party and party basis up to 29 March 2001 and that the respondents pay the applicant's costs on a solicitor and client (or indemnity) basis thereafter because of an offer to settle by the plaintiffs of 23 March 2001. Again however, it is important to note that this offer of settlement referred to the settlement of all claims. In that respect it is to be kept in mind that there was a claim made by the first respondent against Menz in the District Court to recover monies which it was alleged were overpaid by the first respondent to Menz whilst he was working as managing director of the first respondent.
All of those matters have been taken into account together with the submission of senior counsel for the applicant and counsel for each of the respondents.
On the question of costs I have come to the conclusion that the appropriate order is that the respondents should be jointly and severally liable for the applicant's costs to be taxed. I am not prepared to order that any of those costs be awarded on an indemnity basis but I order that the costs exclude that part of the original application which sought the winding up of the first respondent. That application was ultimately withdrawn by the applicant.
In relation to costs I point out that counsel for the first respondent following the publication of the judgment in this matter said:
"I am saying that there are good arguments as to why (an order for costs against the first respondent) ought not be made, but, putting that aside, the first respondent will stand with the second and third respondents so that whatever order is made affecting the second and third respondents, the same order can be made as against the first respondent. I don't have any quibble with the joint and several obligation there your Honour."
Counsel for the first respondent made clear however that the order for costs should exclude any costs relating to the application to wind up the first respondent which, as I have said, was abandoned before the trial of this action.
I have considered all of the arguments on the question of costs including the applicant's claim for indemnity costs but have come to the conclusion that the appropriate order is that the respondents should be jointly and severally liable for the applicant's costs of the application to be taxed. The applicant should have a certificate for second counsel. I am also prepared to make an order increasing the scale limits.
The second matter relates to the reasons why the applicant's application to re‑open the evidence was dismissed.
The basis of that application was that the applicant sought to put before the Court further evidence relating to the updated value of the first respondent's share portfolio. The accounting evidence at the trial accepted by the Court was based upon historic values rather than market value.
In dealing with that application it was important to note the applicant did not put before the Court at trial up to date valuations of the share portfolio of the first respondent. The applicant sought to do so by way of re‑opening the evidence after judgment had been delivered and after the first respondent had lodged a notice of appeal. Senior counsel for the applicant made it clear, when the judgment was published that consideration had been given to re‑opening the evidence but it had been decided not to pursue that course. The position changed after the first respondent lodged the notice of appeal.
The second matter of importance is that the application to re‑open the applicant's case was made long after judgment was delivered. The notice of motion was filed on 10 September 2001 and judgment was delivered on 11 June 2001.
In dealing with an application to re‑open, the principles and authorities are well collected in "Civil Procedure Western Australia" (Seaman) in the commentary at 34.5.17. That commentary indicates that such an application should be treated with caution and that the discretion to permit a party to re‑open should be exercised sparingly and upon strict terms so as to prevent or limit the working of injustice to the other side. In that respect issues of prejudice are important. In this case it is not simply a matter of the applicant placing before the Court up to date values of the share portfolio as other considerations would then have to be taken into account. In particular, complexities arising out of liability for capital gains tax would need to be taken into account, and evidence would need to be called on that issue, so that an accurate net value of the share portfolio could be determined. Having heard the submissions both for and against the application to re‑open, I concluded that this was not a case in which the exercise of discretion to permit the re‑opening of the applicant's case should be exercised in its favour.
I accept that in the end result there may be some injustice to the applicant, in that the true value of the share portfolio was not taken into account in determining the value to be placed upon the applicant's shares in the first respondent. That is a consequence in the way in which the case was fought and evidence placed before the Court. To have allowed the application might well have resulted in further protracted and expensive proceedings. In addition no convincing reason was advanced as to why that issue could not have been properly pursued at trial.
As I have said, on 25 June 2001 when final orders were sought, senior counsel for the applicant made it clear that the applicant did not wish to put forward any submissions seeking leave to re‑open the case. It would appear that the applicant only decided to take that course after the first respondent filed a notice of appeal.
For these reasons the application to re‑open the applicant's case was refused.