Hylepin Pty Ltd v Doshay Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Hylepin Pty Ltd v Doshay Pty Ltd (No 2) [2020] FCA 1631

File number(s): VID 1438 of 2016
Judgment of: O'BRYAN J
Date of judgment: 11 November 2020
Catchwords: COSTS – whether costs to be ordered on an indemnity basis or a party and party basis – whether order for apportionment of costs appropriate – whether defendants entitled to indemnity costs due to offers of compromise rejected by plaintiff – where plaintiff has made multiple claims against several defendants – where plaintiff successful in one claim against one defendant but otherwise wholly unsuccessful – where equitable fraud has been alleged but not proven by the plaintiff – costs ordered on a party and party basis
Legislation:

Federal Court of Australia Act 1976 (Cth) s 43

Federal Court Rules 2011 (Cth) r 40.02(b)

Cases cited:

Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602

Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; 81 ALR 397

Hylepin Pty Ltd v Doshay Pty Ltd [2020] FCA 1370

Kazar v Kargarian (2011) 197 FCR 113

Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116

Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd (No 2) [2020] FCA 351

Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 32
Date of last submissions: 26 October 2020
Date of hearing: Determined on the papers
Counsel for the Plaintiff: G D Dalton QC with D J Fahey
Solicitor for the Plaintiff: KHQ Lawyers
Counsel for the Defendants: M S Osborne QC with D F McAloon
Solicitor for the Defendants: B2B Lawyers

ORDERS

VID 1438 of 2016
BETWEEN:

HYLEPIN PTY LTD

Plaintiff

AND:

DOSHAY PTY LTD ACN 006 575 202

First Defendant

JOHN SO

Second Defendant

GLOBAL 2000 MELBOURNE PTY LTD (and another named in the Schedule)

Third Defendant

ORDER MADE BY:

O'BRYAN J

DATE OF ORDER:

11 NOVEMBER 2020

THE COURT ORDERS THAT:

1.The third defendant pay the plaintiff’s costs of the share register claim (as described in the reasons accompanying these orders).

2.The plaintiff pay the costs of the second, third and fourth defendants of the proceeding, other than the share register claim.

3.The costs referred to in orders 1 and 2 be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules2011 (Cth).

4.The quantification of the costs awarded under orders 1, 2 and 3, and the making of such further orders and directions in connection therewith, be referred to a Registrar of the Court for determination.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

  1. On 25…

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Details
Case
[2020] FCA 1631
Decision Date

CaseChat Overview and Summary

Hylepin Pty Ltd brought proceedings against several defendants, including Doshay Pty Ltd, seeking rectification of a share register and alleging equitable fraud. The proceedings resulted in Hylepin being successful in its claim for rectification of the share register but unsuccessful in all other claims. The defendants sought costs orders on the basis of the unsuccessful claims. The primary issue for determination was whether the plaintiff was entitled to indemnity costs for rejecting offers of compromise made by the defendants. A further issue was whether the defendants were entitled to indemnity costs due to Hylepin's unsuccessful claims.

The court found that Hylepin was not entitled to indemnity costs for rejecting the offers of compromise. The court held that the offers were not as favourable as the outcome at trial, as Hylepin was successful in establishing that Doshay owned 50% of the shares in Global 2000, rather than 40% as the defendants had offered. The court also found that the refusal of the offers did not warrant indemnity costs because Hylepin's conduct was not unreasonable. The court rejected Hylepin's allegations of equitable fraud and found that there was no wrongdoing on the part of the defendants. The court concluded that the defendants were entitled to indemnity costs due to Hylepin's unsuccessful claims, and ordered that the costs be awarded in a lump sum, with the quantification of the costs and the making of such further orders and directions to be referred to a Registrar of the Court for determination.

Orders

Orders of the court

1. The third defendant pay the plaintiff’s costs of the share register claim (as described in the reasons accompanying these orders).

2. The plaintiff pay the costs of the second, third and fourth defendants of the proceeding, other than the share register claim.

3. The costs referred to in orders 1 and 2 be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth).

4. The quantification of the costs awarded under orders 1, 2 and 3, and the making of such further orders and directions in connection therewith, be referred to a Registrar of the Court for determination.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Rule 40.02(b) of the Federal Court Rules 2011 (Cth) provides that a party entitled to costs may apply to the Court for an order that costs be awarded in a lump sum instead of, or in addition to, any taxed costs. I discussed the applicable principles in Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd (No 2) [2020] FCA 351 at [34]-[45]. In my view, this is an appropriate case for such an order, particularly where it is jointly sought by the parties.Conclusion In conclusion, the orders that I will make are that:(a)Global 2000 must pay Hylepin’s costs of the share register claim;(b)Hylepin must pay the costs of John So, Global 2000 and Wendy Cheng other than in respect of the share register claim; and(c)the costs be awarded in a lump sum with the quantification of the costs and the making of such further orders and directions to be referred to a Registrar of the Court for determination.

Ratio Decidendi

Legal Principle Established

In relation to the offers that had been made to Hylepin prior to trial to settle the proceeding, Hylepin submitted that the refusal of the offers does not warrant an order for indemnity costs because Hylepin’s conduct was not unreasonable. Hylepin argued that it cannot be concluded that the outcome at trial was less favourable to Hylepin than the offers. Both offers were premised on Doshay owning 40% of the shares in Global 2000 whereas Hylepin succeeded at trial in establishing that Doshay owns 50%. Doshay’s shares in Global 2000 are its most valuable asset.Consideration The principles with respect to the Court’s power to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) are well known. The discretion is broad and is not bound by rigid or inflexible rules. The discretion must be exercised judicially, consistently with the purpose of the power and taking account of relevant facts and circumstances of the litigation: Kazar v Kargarian (2011) 197 FCR 113 at [4] per Greenwood and Rares JJ.Costs of the share register claim In my view, it is appropriate to make an order that Hylepin receive its costs of the share register claim. It was a discrete claim on which Hylepin was successful. This is not to apportion costs on an “issues” basis (c.f. Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ); rather, it is to recognise that the proceeding involved a number of discrete claims and, on this claim, Hylepin was successful. I consider that the order to pay those costs should be made against the third defendant, Global 2000. The claim was for rectification of Global 2000’s register of members and the relief given solely concerned Global 2000. Although the claim arose by reason of erroneous instructions given by John So to Doshay’s account, Paul Tjioe, I concluded that there was no wrongdoing on the part of John So. In particular, I rejected Hylepin’s allegations that the purported alteration to Global 2000’s register involved a breach by John So of his fiduciary duties, and involved dishonesty and was dishonestly concealed (at [232]-[234] of the Principal Judgment). Further, this is not a case where it might be appropriate to offset orders for costs (reflecting the relative success of the parties) and make one overall order for costs with a percentage discount, as proposed by the defendants. That is for two reasons. First, I have concluded that the costs awarded in favour of Hylepin should be paid by Global 2000 and not by the other defendants, with the result that the costs cannot be offset. Second, and in any event, it is not possible for the Court to make a fair assessment of the relative quantum of the costs to arrive at a percentage discount. The costs that will be payable by Global 2000 in favour of Hylepin will be very modest in comparison to the costs that will be awarded in favour of the defendants as a result of their success on all other claims in the proceeding. As noted earlier, the share register claim was made by amendment to the pleadings shortly before trial and occupied very little time during the trial and was primarily the subject of evidence and written submissions at the conclusion of the trial (see Principal Judgment at [219]-[221]). The costs order in favour of Hylepin will relate to those aspects of the case only.Cost of the proceeding other than the share register claim