Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd (No 2)

[2024] NSWSC 356

Supreme Court

New South Wales

Medium Neutral Citation:

Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd (No 2) [2024] NSWSC 356

Hearing dates:

On the papers

Date of orders:

8 April 2024

Decision date:

08 April 2024

Jurisdiction:

Common Law

Before:

Gleeson J

Decision:

(1)   Vary order (3) made on 31 January 2024 by adding at the end of that order:

“(a)   on the ordinary basis up to 10 July 2020;

and

(b)   on an indemnity basis on and from 11 July 2020”,

such that order (3) as varied reads:

(3)   The defendant to pay the plaintiff’s costs of the proceedings, (a) on the ordinary basis up to 10 July 2020; and (b) on an indemnity basis on and from 11 July 2020.

(2)   Otherwise dismiss the plaintiff’s notice of motion filed 14 February 2024.

(3)   The plaintiff (Gispac) to pay 80 per cent of the defendant’s (Michael Hill) costs of the notice of motion filed 14 February 2024.

Catchwords:

COSTS — Application to vary costs order — Where unsuccessful party rejected offer of compromise made by successful party — Whether indemnity costs should be ordered from date offer made

COSTS — Security for costs — Application to release security monies paid into court by plaintiff — Where plaintiff successful at trial — Where defendant filed notice to appeal — Whether grounds of appeal arguable — Whether reason to doubt financial position of plaintiff seeking release of security

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 42.14

Cases Cited:

A & R Constructions Pty Ltd v Lees (1982) 7 ACLR 900

Boris v Pages Property Investments Pty Ltd (No 2) [2022] NSWCA 43

Carter v Mehmet (No 2) [2021] NSWCA 333

Challenger Group Holdings Ltd v Concept Equity Pty Ltd (No 2) [2008] NSWSC 1002

Gayle v Fairfax Media Publications Pty Ltd (No 2) [2018] NSWSC 1932

Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2020] NSWSC 577

Huon Shipping and Logging Co Ltd v South British Insurance Co Ltd [1923] 23 VLR 216

Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 187

Lym International Pty Ltd v Chen

Marcolongo v Lym International Pty Ltd [2009] NSWSC 167

Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103

Ronneby Road Pty Ltd v ESCO Corp (No 2) [2016] FCA 711

Texxcon Pty Ltd & Anor v Austexx Corporation Pty Ltd & Ors (No 2) [2013] VSC 343

Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 3) [2016] NSWSC 526

Texts Cited:

G E Dal Pont, Law of Costs (5th Ed, 2021, Lexis Nexis)

Category:

Costs

Parties:

Gispac Pty Ltd (Plaintiff)
Michael Hill Jeweller (Australia) Pty Ltd (Defendant)

Representation:

Counsel:
R K Jameson (Plaintiff)
F Roughley SC / B Lambourne (Defendant)

Solicitors:
Bridges Lawyers (Plaintiff)
Otto Martiens (Defendant)

File Number(s):

2019/187098

Judgment

1. GLEESON J: Following the delivery of judgment on 31 January 2024 (Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2024] NSWSC 18), the plaintiff (Gispac) applied by notice of motion filed 14 February 2024 seeking: (1) a variation of the costs order made on 31 January 2024 (Order 3), and (2) the release of the sum of $210,000 (plus any accrued interest) paid into court by Gispac as security for costs, given Gispac’s success in the proceedings.

2. Directions were given for the filing and service of submissions and affidavit evidence on the basis that the application would be determined on the papers. Those submissions and affidavits have now been received, including a supplementary affidavit filed 22 March 2024 for the defendant (Michael Hill) which was supplied to the Court, ultimately without objection by Gispac.

Special costs order

3. Gispac seeks a special costs order by varying Order 3 made on 31 January 2024 such that Michael Hill pay Gispac’s costs (a) on the ordinary basis up to 10 July 2020, and (b) on an indemnity basis on and from 11 July 2020.

4. Michael Hill accepts that having regard to the outcome of the trial and the terms of Gispac’s offer of compromise made on 10 July 2020 (which was not accepted by Michael Hill), the variation to the costs order sought by Gispac is appropriate to reflect Gispac’s success at trial and the application of usual costs principles in such circumstances. That is, the costs consequences in Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.14 apply.

5. An order in the terms sought by Gispac will be made.

Release of security

6. On 12 June 2020 Gispac paid into court $210,000 by way of security for Michael Hill’s costs of these proceedings, pursuant to orders made by Adamson J on 15 May 2020: Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2020] NSWSC 577. Following the judgment delivered on 31 January 2024, Gispac sought Michael Hill’s consent to release of the security. Michael Hill refused.

Affidavit evidence on the motion

7. The unchallenged affidavit evidence of Michael Hill establishes the following.

8. Gispac did not respond to Michael Hill’s request for details of Gispac’s financial position, including bank statements and financial statements, on four occasions from November 2019 to February 2020.

9. Michael Hill filed its motion for security for costs on 13 March 2020 and served a notice to produce on Gispac on 16 March 2020 seeking evidence of its financial position. Although the notice was not called on, Gispac resisted the application for security but did not file any evidence in opposition, despite Court orders to do so. Ultimately on 4 May 2020 Gispac agreed to provide security but there was a dispute as to the form of security which was determined by Adamson J on 15 May 2020.

10. In her judgment delivered on 15 May 2020, Adamson J observed that Gispac:

�   had “failed to provide a single business record to corroborate the assertions made on its behalf by solicitors” as to its financial position: at [37];

� “can be taken to have capitulated in the face of an overwhelming application for security for costs”: at [40].

11. On 13 February 2024 Michael Hill’s solicitors again requested financial information concerning Gispac in the context of (a) Gispac’s request for release of the security, (b) Michael Hill giving consideration to filing a notice of intention to appeal and a motion seeking a stay of the judgment, and (c) the assertion that Michael Hill held a genuine and reasonable concern that Gispac would not be in a position to repay any monies paid to it by way of damages, costs and interest awarded at trial should Michael Hill succeed on any appeal.

12. Gispac’s solicitors responded on 14 February 2024 that they did not accept that Gispac was required to provide Michael Hill with any financial information in order to agree to the release of the security.

13. The parties’ solicitors exchanged further correspondence on 27 February and 5 March 2024 in which (a) Michael Hill confirmed that it would file a motion seeking a stay of the judgment given that Gispac had not responded to its request to provide an assurance that “any judgment amount it is paid by Michael Hill will be able to be repaid without delay upon Michael Hill’s successful appeal”, nor had Gispac “provided any material to demonstrate Gispac’s capacity to meet Michael Hill’s reasonable concerns”, and (b) Gispac had not provided the financial information requested by Michael Hill as it took the position that Michael Hill bore the onus of demonstrating that a stay was justified where no notice of appeal had been filed, nor had any reasonably arguable grounds of appeal been identified by Michael Hill.

14. On 15 March 2024 Michael Hill’s solicitors provided Gispac’s solicitors with a draft notice of appeal and draft notice of motion seeking a stay of Orders 1-3 made on 31 January 2024 pending the determination of the appeal, and indicated they anticipated receiving instructions to file those documents by 22 March 2024.

15. On 22 March 2024 Michael Hill filed the foreshadowed notice of appeal and notice of motion seeking a stay of the judgment pending appeal.

16. Searches carried out by Michael Hill’s solicitors establish that Gispac does not own or lease any real property in any Australian State or Territory (save for Victoria, where no search was conducted), nor does it have any security registered over property.

The parties’ competing submissions

17. Gispac says that the return of security is appropriate in light of its success in the proceedings, and in circumstances where no costs orders were made in Michael Hill’s favour. Reference was made to Carter v Mehmet (No 2) [2021] NSWCA 333 and Boris v Pages Property Investments Pty Ltd (No 2) [2022] NSWCA 43.

18. Michael Hill said in its response, which was filed before the notice of appeal was filed, that the release of the security is premature in circumstances where: (i) Michael Hill intends to appeal the judgment and there are reasonable prospects of success such that Gispac may be ordered to pay Michael Hill’s costs of the trial for which security was required, and (ii) Gispac refused to provide any details of its financial position, such that the grounds which warranted the order for security for costs remain.

19. Michael Hill also said that Carter v Mehmet (No 2) and Boris are distinguishable. Reference was made to authorities where the court had refused to release security pending (i) an appeal (Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103), (ii) an application for leave to appeal (Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 187), and (iii) pending further order, if an appeal was filed within a specified period (Challenger Group Holdings Ltd v Concept Equity Pty Ltd (No 2) [2008] NSWSC 1002 ).

20. In reply, Gispac said that Michael Hill had failed in its submissions to address the merits of its proposed grounds of appeal, and the application falls to be determined on the submissions made (or not made). It is said that this is a strong discretionary reason to release the security.

Authorities concerning release of security

21. It is necessary first to say something about the authorities referred to by the parties.

22. In Huon Shipping and Logging Co Ltd v South British Insurance Co Ltd [1923] 23 VLR 216, Irvine CJ ordered the release of security for costs at the conclusion of the trial. He said:

It is not a question of discretion but of what is the proper effect of an order that the Plaintiff do pay into Court the sum of a hundred pounds as security for costs of the defendant in this action. At first I was disposed to think that the order should be construed to include the costs of the action, and the costs of any proceeding that might subsequently be taken by way of appeal. I think however that that is not so, and the Plaintiff having secured a judgment in his favour has complied with the terms of the order.

23. The decision in Huon Shipping has been followed on a number of occasions: for example, A & R Constructions Pty Ltd v Lees (1982) 7 ACLR 900; Lym International Pty Ltd v Chen; Marcolongo v Lym International Pty Ltd [2009] NSWSC 167; Texxcon Pty Ltd & Anor v Austexx Corporation Pty Ltd & Ors (No 2) [2013] VSC 343; Gayle v Fairfax Media Publications Pty Ltd (No 2) [2018] NSWSC 1932.

24. With respect to the Huon Shipping line of authority, Prof Dal Pont (G E Dal Pont, Law of Costs (5^th Ed, 2021, Lexis Nexis)) observed at [28.66]:

Case authority dictates that a plaintiff who pays money into court as security for the defendant's costs of the action, and succeeds in the action and secures a costs order in his or her favour, is entitled to have that money paid out of the court as soon as judgment is entered notwithstanding the fact that the defendant has been granted a stay of execution with a view to an appeal. This continues to represent the law unless modified by the express terms of a statute or court rules.

25. In Carter v Mehmet (No 2), the Court of Appeal ordered the return of security provided for the respondent’s costs of an appeal in circumstances where the unsuccessful respondents opposed the return of security to the appellants on the basis that they were considering applying for special leave to appeal to the High Court. After referring at [11] to the observation by Prof Dal Pont in Law of Costs at [28.66], the Court said at [12]:

The prospects of any prospective [special leave] application are, for present purposes, irrelevant. The judgment of this Court stands unless and until it is overturned by the High Court.

26. In Boris, the unsuccessful respondent opposed the return of security for the costs of the appeal on the basis that the respondent had obtained two interim costs orders in its favour. In ordering the return of security, the Court referred at [4] to the observation by Prof Dal Pont and said that the purpose of the security was “to provide a fund from which at least some of [the respondent’s] costs could be paid” if the appellant failed on his appeal: at [11]. That is, the order for security was made in respect of particular costs (the preparation and hearing of the appeal) which did not encompass either of the interlocutory applications in respect of which the respondent had obtained costs orders in its favour: at [12].

27. Gispac did not dispute Michael Hill’s submission that Carter v Mehmet (No 2) and Boris are distinguishable. In Carter v Mehmet (No 2), there was no evidence of any intended appeal, nor were submissions filed opposing the release of security: at [8], [12]. In Boris, no application for special leave to appeal to the High Court had been filed and the security was sought to be retained by the respondent as security for two separate interlocutory costs orders, not referrable to the costs in respect of which the order for security was made. By contrast, here there is evidence of an appeal by Michael Hill.

28. Michael Hill emphasised that in opposing the release of security it is not seeking security for its costs of the appeal, it is seeking continuing security for its costs of trial. Reference was made to Penrith and Kiri Te Kanawa.

29. Penrith concerned whether there should be an order for release of security given by a successful plaintiff who appeared to be insolvent pending an appeal, as to which McColl JA said at [30]-[31]:

[30]   The critical question in my view is what would happen if the appeal was successful. In that event, subject to any matter which may be argued in the course of the appeal, one would ordinarily expect that the costs order below would be reversed. There is, therefore, a continuing possibility that there will be a call on the bank guarantee.

[31]   I am mindful of the starting principle for an application for a stay that the successful parties are entitled to the fruits of their judgment. However where it appears that there is an arguable case on the appeal that the primary judge ought to have characterised the agreement which he found and, in circumstances where that agreement related to an interest in land, that there may also be arguments concerning Statute of Fraud issues and a matter relating to delegated authority, the bank guarantee ought, in my opinion, to remain in place to constitute security for the costs of the proceedings at first instance. It does not, in other words, constitute security for the claimants’ costs of appeal. The first instance proceedings were those in relation to which the bank guarantee was ordered. In circumstances where, as I have concluded, the claimants are at risk if the judgment is paid over, the risk which Bell J identified in granting security for costs also appears to me to remain a live concern as to the first instance costs.

30. Although Huon Shipping was not referred to in Penrith, no argument was advanced by Gispac suggesting that the decision in Penrith was wrong. Rather Gispac characterised the decision in Penrith as one in which McColl JA “appears to have been able to assess whether the prospective appeal was arguable”.

31. The reasoning in Penrith has been accepted at first instance in several cases determining whether security should be released: Challenger at [5]-[8] (Young CJ in Eq); Ronneby Road Pty Ltd v ESCO Corp (No 2) [2016] FCA 711 at [4] (Jessup J); and Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 3) [2016] NSWSC 526 at [7] (Ball J).

32. Kiri Te Kanawa concerned an application for leave to appeal in respect of an order for costs: at [1], [3]. The trial judge had granted an interim stay of the order discharging the security provided for the plaintiff’s costs: at [2]. Beazley JA made an order extending the stay until the determination of the summons for leave to appeal, and if leave is granted, the hearing of the appeal, subject to a condition that the stay should be revoked upon the plaintiff providing alternative security in a particular form. Her Honour proceeded upon the basis (at [22]) that leave to appeal would be granted and there was an arguable prospect that the appeal would be allowed. Her Honour continued at [22]:

… It is sufficient to judicially notice that there is an argument available to the first defendant that her costs should not have been conflated with those of the corporate fourth defendant. In that circumstance, I am of the opinion that the first defendant should be in no worse position than she was at trial in relation to her costs being secured.

Disposition of the motion

33. It is common ground that the Court’s decision to release the security involves an exercise of discretion. The debate in the present case focused on whether (i) the appeal grounds are reasonably arguable, and (ii) there is a reason to doubt that Gispac would be able to satisfy any order to pay Michael Hill’s costs of the trial, if the appeal succeeds.

Whether the appeal grounds are arguable

34. Gispac did not submit that the draft appeal grounds which are now contained in the notice of appeal were not arguable. Its submission was more nuanced. Gispac said that “whether or not the draft grounds of appeal which are directed to [disturbing substantive orders] are arguable should be explained [by Michael Hill] to permit the Court, in the exercise of its discretion, to balance the competing interests of the parties and to assess whether it is appropriate for the security to be released”, and that Michael Hill had not done so in its written submissions.

35. Gispac described the grounds of appeal as “detailed and layered”. That is a fair characterisation of the grounds but should not be seen as a criticism; rather the grounds can be seen as reflecting a more focused approach on appeal than the approach taken by Michael Hill at trial. The grounds challenge (i) factual findings and advance a construction argument with respect to the reference in the sales agreements to Gispac’s standard terms and conditions (ground 1), (ii) the construction of the reference to “QTY” in the schedule to the sales agreements (ground 2), and (iii) in the alternative, the construction and quantification of liability in respect of the exclusivity claim under cl 17 (grounds 3-5). Importantly for the prospects of the appeal, the notice of appeal acknowledges that, if and to the extent that any aspects of the arguments the subject of ground 2 and/or grounds 3-5 were not run at trial, Michael Hill seeks leave to advance those arguments on appeal.

36. Grounds 3-5, which are in the alternative to ground 1, seem barely arguable taking into account the difficulties that (i) they rely on matters acknowledged not to have been advanced at trial, (ii) they involve the belated re-characterisation of Mr Temple-Cole’s “scenario 2”, and (iii) the construction argument in ground 4(b) appears to me to be weak. Aside from these difficulties there is a more fundamental point of present relevance. Given the limited monetary relief sought on appeal if any of these grounds were to succeed, it is difficult to see how success of any of these grounds would likely diminish in any material way the basis of the costs order at trial in Gispac’s favour, such that it is inappropriate to release the security to Gispac.

37. The position in relation to grounds 1 and 2 is different. Contrary to Gispac’s submission, notwithstanding the absence of detailed submissions from Michael Hill (or for that matter from Gispac), I am in a position as the trial judge to assess for the purpose of the present application whether these grounds are arguable on appeal.

34. The challenge to the correctness of the factual findings the subject of ground 1 face the difficulty that there is no challenge to the relevant factual findings based on the credibility and reliability of the evidence of Mr Bogatez. Insofar as ground 1(b) challenges, in the alternative, my reasons at [72]-[73], and grounds 1(c)-(e) assert a construction argument with respect to the reference in the sales agreements to Gispac’s standard terms and conditions, I refrain from expressing any view on whether the former reflects a misunderstanding of my reasons and whether the later reflects the way the case was put at trial. Similarly, with respect to the construction argument the subject of ground 2, I refrain from expressing any view on whether this argument was put at trial. In each case that can be debated on appeal.

35. I proceed on the basis that Michael Hill has some prospect of obtaining leave to advance its new arguments on appeal. That assumption is appropriate on this application, there being no contrary argument advanced by Gispac.

36. Without detracting from my reasons for judgment, in light of the construction arguments advanced in grounds 1 and 2, I am prepared to accept for the purpose of the present application that these grounds are arguable on appeal.

Whether reason to doubt Gispac would be able to satisfy any order to pay Michael Hill’s costs of the trial, if the appeal succeeds

41. In Challenger, Young CJ in Eq rejected the plaintiff’s argument that Penrith was distinguishable because in Challenger there was no finding of insolvency or impecuniosity on behalf of the defendant/cross-claimant. His Honour said at [7], “… prima facie the fact that the parties agreed that there should be security for costs indicates that the facts of this case are not sufficiently far removed from those in [Penrith] for me to distinguish it”.

42. Gispac sought to distinguish Challenger emphasising that no appeal had been filed at the time the orders to release the bank guarantees were sought (at [4]) and that Young CJ in Eq made an order that if no appeal was filed within 35 days of the publication of his Honour’s reasons, then the guarantee should be released, otherwise it was to be held “pending further order of the Court” (at [8]). Neither of these matters diminishes the force of his Honour’s remarks at [7] concerning the significance of the fact that the parties agreed that there should be security for costs.

43. Given the observation of Adamson J that Gispac can be taken to have capitulated in the face of an overwhelming application for security for costs (see [10] above), the remarks in Challenger are apposite.

44. Ronneby Road is distinguishable. There Jessup J referred to Penrith and Challenger but refused to stay an order releasing security in circumstances where there was no evidence as to the financial or other circumstances of the applicant and the Court was informed that the provision of security was a matter of consensus as between the parties, and that the Court was never required to rule upon the respondent’s entitlement to it: at [3]-[5].

45. Each case turns on its own facts. Unlike Ronneby Road, in this case the relevant circumstances include (i) the finding of Adamson J at [40] that Gispac can be taken to have capitulated in the face of an overwhelming application for security for costs, (ii) the evidence of Gispac’s refusal of Michael Hill’s most recent requests for financial information, and (iii) the results of searches by Michael Hill’s solicitors which establish that Gispac does not presently hold any real property. Taken together, these matters justify the conclusion that, if the security was released, there is reason to doubt that Gispac would be able to satisfy any order to pay Michael Hill’s costs of the trial, which order could follow as a result of a successful appeal.

46. Given the matters referred to at [40] and [45] above, there are good discretionary reasons to refuse Gispac’s application for release of the security at this point. The matter can be revisited by Gispac in the Court of Appeal in the event of any material change in circumstances.

Conclusion

47. For the above reasons, Gispac’s application for release of security is refused. As to costs, although both parties have had a measure of success on the motion, the overwhelming proportion of the parties’ submissions were devoted to the release of security, on which Michael Hill succeeded, not the variation of the costs order, on which Gispac succeeded, ultimately unopposed.

48. Accepting that the motion involved two discrete issues, it is appropriate to apportion costs of the motion. Adopting the usual broad-brush approach to such an apportionment, in my view, the appropriate order is that Gispac pay 80 per cent of Michael Hill’s costs of the motion.

Orders

49. The Court makes the following orders:

1. Vary order (3) made on 31 January 2024 by adding at the end of that order:

“(a)   on the ordinary basis up to 10 July 2020; and

(b)    on an indemnity basis on and from 11 July 2020”,

such that order (3) as varied reads:

(3)   The defendant to pay the plaintiff’s costs of the proceedings, (a) on the ordinary basis up to 10 July 2020; and (b) on an indemnity basis on and from 11 July 2020.

2. Otherwise dismiss the plaintiff’s notice of motion filed 14 February 2024.

3. The plaintiff (Gispac) to pay 80 per cent of the defendant’s (Michael Hill) costs of the notice of motion filed 14 February 2024.

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Decision last updated: 08 April 2024