In the matter of Macarthur Farm Pty Ltd (No 2)

[2025] NSWSC 206

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Macarthur Farm Pty Ltd (No 2) [2025] NSWSC 206

Hearing dates:

On the papers

Date of orders:

14 March 2025

Decision date:

14 March 2025

Jurisdiction:

Equity - Corporations List

Before:

Nixon J

Decision:

See [36]

Catchwords:

COSTS – where plaintiff succeeded against first defendant but not against remaining defendants – application for Sanderson order in respect of costs of other defendants – whether there was some conduct on the part of the first defendant which would make it fair to impose on him liability for the costs of the other defendants – whether plaintiff should pay costs of second defendant on indemnity basis – whether plaintiff should be ordered to pay costs thrown away by reason of its narrowed case at trial

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56

Cases Cited:

Access Training Group Ltd v Jane [2024] NSWCA 204

In the matter of Macarthur Farm Pty Ltd [2025] NSWSC 40

Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140

Sanderson v Blyth Theatre Co [1903] 2 KB 533

Sved v Council of the Municipality of Woollahra (1998) NSW Con R 55-852

Tonna v Mendonca (No 2) [2020] NSWSC 306

Wilcox v Chapple (No 2) [2024] NSWSC 1655

Category:

Costs

Parties:

Macarthur Farm Pty Ltd (receivers and managers appointed) (Plaintiff)
Thomas Peter Crown (First Defendant)
Vanessa Ann Crown (Second Defendant)
Crown Family Estates Pty Ltd (Third Defendant)

Representation:

Counsel:
RM Foreman SC with KE Holcombe (Plaintiff)
QM Noakhtar (Defendants)

Solicitors:
Arnold Bloch Leibler (Plaintiff)
Marque Lawyers (Defendants)

File Number(s):

2024/125470

JUDGMENT

1. On 12 February 2025, I delivered reasons for judgment in this matter: In the matter of Macarthur Farm Pty Ltd [2025] NSWSC 40 (the Primary Judgment). This judgment assumes familiarity with the Primary Judgment, and adopts defined terms used in that judgment.

2. In the Primary Judgment, I determined that the Plaintiff, Macarthur Farm Pty Ltd, had established its case against the First Defendant, Mr Crown, but had failed to establish its claims against the Second Defendant, Ms Crown, and the Third Defendant, Crown Family Estates Pty Ltd (CFE). I directed the parties to bring in short minutes of order to give effect to the reasons for judgment and, in the event that they were unable to agree on such orders (including orders as to costs), they should exchange and provide the orders which each party proposes and any submissions in support. I also directed that the parties should indicate whether, and if so why, an oral hearing was required to deal with the matters in dispute.

3. The parties agreed on the terms of the order for judgment against Mr Crown; agreed that an order should be made dismissing the proceedings against Ms Crown and CFE; and agreed that Mr Crown should pay Macarthur Farm’s costs, as agreed or assessed. The parties disagreed on the orders that should otherwise be made in respect of costs. Each party was content for the matters remaining in dispute to be determined on the papers.

4. On the same date as the Defendants provided their proposed orders and supporting submissions, they filed a notice of motion seeking that the proceedings be dismissed and the judgment and orders be set aside. The application is based upon a legal issue which had not been raised at the hearing concerning the applicability of the Farm Debt Mediation Act 1994 (NSW) (the Defendants’ FDMA Application).

5. At the time of providing their proposed orders to give effect to the Primary Judgment, the Defendants submitted that “further orders finalising the proceedings should not be made given the [Defendants’ FDMA Application]”.

6. However, at a subsequent directions hearing on 10 March 2025 in relation to the Defendants’ FDMA Application, the parties agreed that the Court should proceed to determine the outstanding issues and to make orders as to the judgment sum and costs, with those orders being stayed pending the determination of the Defendants’ FDMA Application.

7. There are, broadly, three issues as to costs which are in dispute:

1. first, Macarthur Farm seeks a “Sanderson” order in respect of Ms Crown’s and CFE’s costs, to the effect that Mr Crown pay those costs;

2. secondly, Ms Crown seeks an order that the Receivers pay her costs on an indemnity basis; and

3. thirdly, the Defendants seek an order that Macarthur Farm pay the Defendants’ costs thrown away by reason of its narrowed case at trial (save to the extent that such costs are covered by the preceding orders).

8. I deal with each of these issues below.

Sanderson order?

9. Macarthur Farm submits that, while it did not succeed against Ms Crown and CFE, the general rule that costs follow the event ought not apply. Macarthur Farm submits that the Court should instead make a Sanderson order in respect of the costs of Ms Crown and CFE, consistent with the principles set out in Sanderson v Blyth Theatre Co [1903] 2 KB 533.

10. The relevant principles were summarised by Ward CJ in Eq (as her Honour then was) in Tonna v Mendonca (No 2) [2020] NSWSC 306 at [84]-[85]:

1. “the overriding consideration for the exercise of the discretion to make either a Sanderson or Bullock order is whether, as between the contending parties, it is proper or fair to order the particular unsuccessful party to pay the costs involved”;

2. “in determining whether it is fair to make such an order, two issues arise”:

1. first,“it must have been reasonable for the plaintiff to have brought the proceedings against the successful defendant”; and

2. secondly, “there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the successful defendant(s)”.

11. The second condition has been satisfied where, for example, the unsuccessful defendant has indicated to the plaintiff “in one way or another that it should look to the successful defendant for its remedy”: Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140 at [30] per Giles JA (Spigelman CJ and Handley JA agreeing), quoting Sved v Council of the Municipality of Woollahra (1998) NSW Con R 55-852 at 55,605.

12. Macarthur Farm did not originally join Ms Crown or CFE as defendants to the proceeding. It took that course only after Mr Crown pleaded a positive defence to the allegation that he had acted in breach of trust by paying the September BAS Refund into his personal account and then into his Joint Account. In particular, Mr Crown pleaded that the BAS Refunds were paid into Mr Crown’s personal account for payment of fees said to be due under an agreement or arrangement between Macarthur Farm and CFE, and that these moneys were then paid into the Joint Account in the name of Mr Crown and Ms Crown to be held on trust for CFE.

13. I rejected this positive defence, for the reasons set out in the Primary Judgment, including that there was no contemporaneous documentary evidence supporting the allegation that Macarthur Farm and CFE had reached any agreement or arrangement for the purported fees, or the allegation that the funds paid into the Joint Account were received on behalf of or held on trust for CFE (at [89]-[120]).

14. Macarthur Farm contended that it would not have joined either Ms Crown or CFE to the proceeding if it had not been for Mr Crown’s positive defence, and submitted that Mr Crown’s conduct in pleading and running that defence made it fair to impose liability on him for the costs of Ms Crown and CFE.

15. I accept this submission so far as CFE is concerned. As I explained in the Primary Judgment, the claim against CFE was very narrow. Macarthur Farm’s primary position was that it did not have any claim against CFE because the BAS Refunds were received by Mr Crown and Ms Crown, and not by CFE. Its claim against CFE was pleaded to arise only in the event that Mr Crown succeeded in establishing that when the BAS Refunds were paid into the Joint Account of Mr Crown and Ms Crown, they were received on behalf of and held on trust for CFE (at [12], [146]-[148]). Mr Crown’s conduct in raising an allegation that the BAS Refunds were received on behalf of and held on trust for CFE made it reasonable for Macarthur Farm to join CFE and to advance claims framed specifically on the basis of that allegation being established.

16. However, the claims pleaded against Ms Crown were much broader. She was not joined simply on the basis that, if she did (as Mr Crown alleged) hold the BAS Refunds on trust for CFE, then she was a proper party to the proceedings for the purposes of any claim against CFE. Instead, Macarthur Farm made allegations that Ms Crown had knowingly received moneys paid in breach of trust, had knowingly assisted in a dishonest breach of trust or fiduciary duties, and had been involved in a breach of Mr Crown’s statutory duties as a director of Macarthur Farm. Those claims were abandoned at trial (Primary Judgment at [132]). This broad case based on allegations of knowledge on the part of Ms Crown was not advanced as the result of any information provided by Mr Crown or as a result of his conduct of his defence.

17. For those reasons, I am satisfied that a Sanderson order should be made in respect of CFE’s costs, but not in respect of Ms Crown’s costs. Accordingly, I will order that Mr Crown pay CFE’s costs, but that Macarthur Farm pay Ms Crown’s costs.

Ms Crown’s costs on an indemnity basis?

18. The next issue which arises is whether Macarthur Farm should be ordered to pay Ms Crown’s costs on the ordinary basis, or on an indemnity basis.

19. In Wilcox v Chapple (No 2) [2024] NSWSC 1655 at [15], Ward P observed as follows (citations omitted):

“Where a party claims indemnity costs on the basis of unreasonable conduct of proceedings, the language of delinquency is often used, i.e., there must be a level of ‘delinquency in the conduct of the proceedings’ to justify a departure from the usual order as to costs … . Such delinquency may arise where ‘the applicant, properly advised, should have known that he had no chance of success’ …, or where the party ‘persists in what should on proper consideration be seen to be a hopeless case’ … . These instances of delinquency (together with the making of allegations of fraud …) illustrate the kind of circumstances in which an indemnity costs order is warranted in the exercise of the costs discretion.”

20. As regards the making of allegations of fraud, her Honour made the following observations (at [28]-[31], citations omitted):

1. “One ‘special or unusual feature’ which may justify the exercise of this discretion is the making of an allegation of fraud which is subsequently not sustained … . However, the mere making of an allegation of fraud, later ruled to be without merit, is not in and of itself a basis to award indemnity costs – something more is required…” (at [28]).

2. “The making of such allegations may rise to the level of ‘something more’ where the allegations of fraud ‘ought never to have been made’ (i.e., where they lack any evidentiary foundation), or where the case is ‘unduly prolonged by groundless contentions’ …” (at [29]).

3. “Thus, while the mere making of an allegation of fraud (later found to be unsustained) is not sufficient, without more, to justify a departure from the usual order as to costs, if the making of such an allegation is attended by some degree of delinquency (whether by reason of its falsity or lack of evidentiary foundation or the like), then a special costs order may be justified” (at [31]).

21. On 5 August 2024, Macarthur Farm filed the Amended Statement of Claim which, for the first time, pleaded claims against Ms Crown and CFE. At that stage, no evidence had been filed in the proceedings.

22. Whereas the claims of accessorial liability against CFE were based on an allegation of actual knowledge (by reason of the knowledge of Mr Crown, as its controller, being imputed to CFE), the claims of accessorial liability were based on Ms Crown wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make, or on Ms Crown having knowledge of circumstances that would indicate the facts to an honest and reasonable person.

23. The documentary records established that Mr Crown and Ms Crown were the joint holders of a bank account, which Ms Crown operated for day-to-day living expenses, into which a deposit of $9m had been made on 10 October 2023, with a sum of around $7.193m being transferred from that account within less than two weeks in order to purchase a property in Ms Crown’s name for $22.65m (Primary Judgment, [66]-[71]).

24. In the absence of any evidence by Ms Crown in relation to those matters, I am satisfied that those matters provided a reasonable basis to allege that knowledge within one of the categories that gives rise to liability for knowing assistance or knowing receipt.

25. Ms Crown and Mr Crown filed their affidavit evidence on 20 November 2024, one week before the hearing commenced. In opening address on 27 November 2024, Macarthur Farm did not abandon its pleaded case of knowledge against Ms Crown, but did focus on the particular allegation of knowledge which was ultimately pressed, with Senior Counsel stating that:

“I want to highlight one matter which is that we anticipate there may be controversy as to what notice or knowledge Ms Crown had at the particular points in time, but there can be no dispute that she had relevant notice and knowledge after 29 July 2024, when she was served with the claim in the proceeding. There would be no doubt about that.

Again, I’m not giving up any earlier point in time, but I just emphasise that matter. At that point in time, she retained the property, which entitles us to relief being a volunteer, which is not in contest. Being a volunteer we’re entitled to relied at that point in time. [Senior Counsel then handed up and referred to the decision in Heperu v Belle (2009) 76 NSWLR 230.]”

26. After cross-examining Ms Crown on the first day of the hearing, Senior Counsel for Macarthur Farm indicated that he “would like the opportunity to consider the claims that are pressed and not pressed overnight”. On the morning of the second day of the hearing, Senior Counsel confirmed that the only claims pressed against Ms Crown were those “based on her having notice from 29 July 2024 and liability that arises in those circumstances where Ms Crown was a volunteer and retained the benefit that she had received at the time when she had notice of the claim, which is the case of Heperu that I took your Honour to in opening.”

27. Having regard to those matters, I do not consider that this is a case which was “unduly prolonged by groundless contentions”.

28. Further, the Defendants have not advanced any contention that the case which was pressed against Ms Crown, based on the use of funds from the Joint Account to purchase the Bronte property and her knowledge from July 2024 of the allegations against Mr Crown, was not reasonably arguable.

29. For those reasons, I am not satisfied that there is a basis to make an indemnity costs award. I will therefore make an order that Macarthur Farm pay Ms Crown’s costs on the ordinary basis, as agreed or assessed.

Order for costs thrown away?

30. The Defendants sought an order in the following terms:

“The plaintiff to pay the defendants’ costs thrown away by reason of its narrowed case at trial, save to the extent the costs are covered by the preceding orders.”

31. In support of the contention that there were “costs thrown away”, the Defendants relied on the narrowing of the case against Ms Crown. However, since I have determined that Macarthur Farm should pay Ms Crown’s costs, any such costs “thrown away” by the narrowing of the case against her are “costs covered by the preceding orders”.

32. In respect of Mr Crown, the Defendants identified the following matters as giving rise to “costs thrown away”:

1. on the first day of the hearing, Macarthur Farm indicated that it would not read two affidavits of Mr Goyal (who is one of the Receivers); and

2. in closing address, Senior Counsel for Macarthur Farm indicated that it was not necessary to decide a particular factual issue which had been the subject of competing affidavit evidence.

33. Such matters are unremarkable in the course of a hearing, particularly in circumstances where legal practitioners are complying with their duties under section 56 of the Civil Procedure Act 2005 (NSW) and ensuring that hearings are confined to the issues which are genuinely in dispute and which are necessary to determine.

34. Generally, a successful party should have the whole of its costs of the proceedings, including costs on an issue on which it has failed. However, in an appropriate case, a costs order may be formulated to reflect the degree of success on distinct issues. Relevant circumstances in which apportionment across different issues has been said to be appropriate include where a successful party has, in respect of one or more issues, unfairly, improperly or unnecessarily increased costs; where the bulk of the time has been taken on an issue on which the unsuccessful party has succeeded; or where a particular issue or group of issues is clearly dominant or separable: see Access Training Group Ltd v Jane [2024] NSWCA 204 at [190]-[191] (Ward P, Payne JA agreeing).

35. I am not satisfied that the particular matters referred to above – Macarthur Farm’s decision not to read the affidavits of one witness and not to press a specific factual issue in closing address (which was unnecessary to decide) – provide a basis for departing from the usual rule that Macarthur Farm, having established its claims against Mr Crown, is entitled to its costs of the proceedings.

ORDERS

36. For the reasons given above, I make the following orders.

1. Judgment for the Plaintiff against the First Defendant in the sum of $2,616,500, plus interest of $292,400 pursuant to Civil Procedure Act 2005 (NSW) s 100.

2. The First Defendant pay the Plaintiff’s costs, as agreed or assessed.

3. The Plaintiff’s claims against the Second and Third Defendants be dismissed.

4. The Plaintiff pay the Second Defendant’s costs, as agreed or assessed.

5. The First Defendant pay the Third Defendant’s costs.

6. Orders (1)-(5) be stayed pending the determination of the Notice of Motion filed by the Defendants on 26 February 2025.

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Decision last updated: 14 March 2025