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
On 25…
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- Case
- [2020] FCA 1631
- Decision Date
CaseChat Overview and Summary
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
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