In the matter of Matcove Pty Limited

[2020] NSWSC 897

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Matcove Pty Limited [2020] NSWSC 897

Hearing dates:

14-16 and 21 April 2020

Decision date:

14 July 2020

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Proceedings dismissed. First Plaintiff pay First, Fourth, Fifth and Sixth Defendants’ costs of the proceedings on an ordinary basis as agreed or as assessed. No order as to costs against Second, Third or Fourth Plaintiffs.

Catchwords:

COSTS — Party/Party — Orders when proceedings involve multiple parties — First Plaintiff was the only active plaintiff — Other plaintiffs were shareholders joined as interested parties — Bases of quantification — Indemnity basis — Whether proceeding was hopeless — Calderbank offer — Whether unreasonable not to accept offer — Where offer contained complex arrangement including terms going beyond issues in proceedings

Legislation Cited:

- Civil Procedure Act 2005 (NSW), s 98

- Personal Property Securities Act 2009 (Cth)

- Uniform Civil Procedure Rules 2005 (NSW), rr 42.2. 42.5

Cases Cited:

- Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131

- Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816

- Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

- Re Alsafe Security Products Pty Ltd atf The Alsafe Trust (in liq) [2016] NSWSC 575

Category:

Costs

Parties:

Eric Andrew Fuller (First Plaintiff)
Andrew Simon John Fuller (Second Plaintiff)
Todd Christopher Fuller (Third Plaintiff)
Daniel Eric Neill Fuller (Fourth Plaintiff)
Kerry Albert (First Defendant)
Matcove Pty Limited (Second Defendant)
Moonee Developments Pty Ltd (Third Defendant)
Cassie Albert (Fourth Defendant)
Tristan Albert (Fifth Defendant)
Sandra May Albert (Sixth Defendant)

Representation:

Counsel:
D Cook SC/P Afshar (Plaintiffs)
CRC Newlinds SC/M Hall (First, Fourth-Sixth Defendants)

Solicitors:
Crowther Sim Lawyers (Plaintiffs)
Pure Legal (First, Fourth-Sixth Defendants)

File Number(s):

2017/213055

Judgment

Background

1. On 25 May 2020, I delivered judgment in these proceedings (Re Matcove Pty Ltd [2020] NSWSC 625) (“Principal Judgment”). I held that the Plaintiffs’ claims which largely related to the ownership of a share in Matcove Pty Ltd (“Company”) and to a claim for specific performance of an alleged agreement in relation to certain land should be dismissed. I expressed the preliminary view (in paragraph 162 of the Principal Judgment) that, where only the First Plaintiff, Mr Fuller, and not the several other Plaintiffs, had sought substantive relief, he rather than other Plaintiffs should pay the costs of the proceedings, as agreed or as assessed. I directed the parties to bring in agreed Short Minutes of Order to give effect to the judgment and as to costs within 7 days or, if there was no agreement between them, their respective draft orders and submissions as to the differences between them.

2. The parties did not reach agreement as to the form of orders that should be made. On 9 June 2020, Mr Afshar, who appears for the Plaintiffs made submissions on their behalf. Mr Afshar there foreshadowed that Mr Fuller would reply to the costs submissions of the First and Fourth to Sixth Defendants (“Relevant Defendants”) and any evidence filed or served in support of them, to the extent that they sought indemnity costs for a longer period. The parties did not agree any timetable between themselves for reply submissions; no application for leave for reply submissions has been made by Mr Fuller after the Relevant Defendants served their submissions; and Mr Fuller ultimately did not make such reply submissions. In the event, it is not necessary to allow him any further opportunity to do so, because I do not propose to order indemnity costs against Mr Fuller for a longer period than that which he has conceded.

3. An unnecessary dispute then arose between the parties as to a short delay in the filing of the Relevant Defendants’ costs submissions, and the Relevant Defendants relied on an affidavit of their solicitor, Ms Perry, sworn 17 June 2020 addressing the circumstances of that delay. On that date, Ms Perry also forwarded submissions as to costs and the Relevant Defendants proposed orders as to costs. I do not consider the short delay in service of those submissions would warrant the Court not having regard to them.

Whether an order for costs should be made against Mr Fuller alone

4. Mr Afshar submitted that costs orders should only be made against Mr Fuller, because he was the only active Plaintiff in the proceedings, and the other Plaintiffs were merely interested parties in the proceedings because they were shareholders of the Company and could equally have been joined to the proceedings as Defendants. I accept that submission, with the qualification that it does not seem to me that the other Plaintiffs remained interested parties in the proceedings after an amendment made by Mr Fuller in 2019 which abandoned any relief which would have affected shareholders in the Company other than Mr and Mrs Albert, and it seems to me that there was no need for the other Plaintiffs to have remained party to the proceedings after that amendment. On that basis, Mr Fuller supported the preliminary view which I had expressed in paragraph 162 of the Principal Judgment. The Relevant Defendants accepted that an order for costs should only be made against Mr Fuller, with no order being made in respect of other Plaintiffs.

Costs to 26 April 2019

5. Mr Fuller accepted that he should pay the Defendants’ costs incurred before the service of the Plaintiffs’ Notice of Motion for leave to amend on 26 April 2019 on the indemnity basis. Not surprisingly, the Relevant Defendants accepted Mr Fuller’s concession that costs should be ordered against him on an indemnity basis up to 26 April 2019.

Costs from 26 April 2019

6. Mr Afshar submitted that costs after the service of the Plaintiffs’ Notice of Motion for leave to amend on 26 April 2019 should be ordered against Mr Fuller on the ordinary basis.

7. The Relevant Defendants sought an order that Mr Fuller pay the costs of the proceedings as a whole on an indemnity basis. The Relevant Defendants submitted that, even after the amendment of the Plaintiffs’ case on 26 April 2019, the case brought by the Plaintiffs was hopeless and such as to warrant that costs be ordered on an indemnity basis. In support of that submission, the Relevant Defendants relied on findings in the Principal Judgment as to inconsistencies between Mr Fuller’s evidence and the case put at trial; submitted that Mr Fuller’s claim under the Personal Property Securities Act 2009 (Cth) (“PPSA”) relied on provisions relating to seizure and disposal of the share which were not available in the relevant circumstances; submitted that Mr Fuller’s claim in respect of the equity of redemption was brought where no offer had been made by Mr Fuller to pay the costs of the redemption proceedings until oral closing submissions made by Counsel on his behalf; and also referred to other findings in the Principal Judgment that were adverse to the case brought by Mr Fuller. Alternatively, they submitted that at least an order as to indemnity costs should be made in respect of the claim as to the share transfer issue.

8. I accept that, in a particular case, a plaintiff’s claim may be so hopeless, or the conduct of the proceedings so unreasonable, that an order for indemnity costs should be made. That is a particular application of the wider principles as to when such an order would be made. Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court. That discretion must be exercised judicially. Section 98(1)(c) permits the Court to order costs on an ordinary or an indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, unless the Court orders otherwise or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 deals with an order for costs on an indemnity basis. The jurisdiction to order costs is compensatory and not punitive and whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 89. The relevant principles were also considered by the Court of Appeal in Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6] where the Court observed that an order for indemnity costs may be made where conduct in proceedings is plainly unreasonable or involves an element of delinquency.

9. However, this case involved a complex factual history and many disputed conversations. Although I accepted Mr Albert’s evidence in respect of a number of those conversations, it was not inevitable that I would do so. The issue as to the application of the PPSA to the transfer of the share in Matcove to Mrs Albert was complex, as are many issues involving the application of the PPSA, although Mr Albert was ultimately successful in his contention that the relevant provisions did not apply unless there had been a seizure and disposal of the share, which was not established. A dispute as to the contract on which Mr Fuller relied also raised complex issues, and he failed on an issue which had been given limited attention by the parties, before the Court sought supplementary submissions as to that issue. No doubt, the result of complex proceedings may seem obvious after they have been determined, and unless an appeal is brought, but it does not follow that it is obvious prior to that determination or that the pursuit of those proceedings is unreasonable. I am not satisfied that the Relevant Defendants have established the basis for an order for indemnity costs of the proceedings generally, or the issues arising under the PPSA.

10. Alternatively, the Relevant Defendants sought an order that Mr Fuller pay their costs on an indemnity basis up to and including 15 May 2019 and from 15 October 2019 onward. That contention is based on an offer dated 15 October 2019 made by the Relevant Defendants’ solicitors to the Plaintiffs’ solicitors. That offer provided, first, that Mr Fuller would pay Ms Albert a substantial amount, on settlement of the sale of the property, and Ms Albert would then effect a transfer of her ordinary share in the Company to him. It contemplated that Mr Fuller would then be paid an amount on the sale of the property (presumably Lot 1, as described in the Principal Judgment) on account of his rights and entitlements under the Page 552 Agreement (as defined in the Principal Judgment). The letter also contemplated detailed provisions in respect of a sale process for Lot 1, including the real estate agents to be used, permission to commence negotiation with a third party for the sale of Lot 1, the price at which an offer for sale of Lot 1 would be accepted, and the position which would be adopted if Lot 1 remained unsold six months after the grant of the development approval. That offer also provided for the manner in which the sale proceeds of Lot 1 would be applied, including providing for payment of accounting fees claimed by Mr Albert’s firm, and provided for the liquidation of the Company following the sale of Lot 1 and the manner in which surplus funds in the liquidation would be distributed to shareholders in the Company.

11. The Relevant Defendants submit that, having regard to the usual principles governing Calderbank offers, they obtained a better result in the Principal Judgment than that offered on 15 October 2019 and the Plaintiffs obtained a worse result, because the Relevant Defendants are not required to pay damages in relation to Lot 2 (as described in the Principal Judgment) or the Page 552 Agreement and Ms Albert is not required to transfer the share in the Company to Mr Fuller. They submit that their offer was open for a reasonable period of time and contained a genuine compromise on behalf of the Relevant Defendants, involving a transfer of the share in the Company back to Mr Fuller and payment of a sum to Mr Fuller in relation to the Page 552 Agreement. The Relevant Defendants submit that it was unreasonable for Mr Fuller to reject the offer. They also submit that the effectiveness of the offer is not compromised by the fact that it was premised on the basis that there would be a sale of Lot 1 at some time in the future and the proceeds used to effect specified terms of payment, because it was the acknowledged intention of the parties that Lot 1 would be redeveloped and sold.

12. The principles in respect of a Calderbank v Calderbank offer are well established, and it is not necessary to deal with them at length. Those principles were summarised by Ward J (as her Honour then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[15] and, in Re Alsafe Security Products Pty Ltd atf The Alsafe Trust (in liq) [2016] NSWSC 575 at [8], I summarised those principles as follows:

“[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]–[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16]. In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that:

“If a Calderbank offer is made, but not accepted, the court’s discretion to make a special order is enlivened. The court’s discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]–[8].””

13. The offer on which the Relevant Defendants rely proposed complex arrangements, in respect of the sale of a property that may have significant value, where the sale process for that property was not directly in issue in these proceedings. While I recognise, and noted in the Principal Judgment, that it is the parties’ intention that that property be sold, there is no suggestion that they had previously agreed on arrangements of this detailed character. It does not seem to me that it could be said that it was unreasonable for Mr Fuller not to accept that offer, where it would require him to accept arrangements as to the sale of Lot 1 and the liquidation of the Company which travelled well beyond matters in issue in these proceedings. I am also not satisfied that the Relevant Defendants have established the basis for an order for indemnity costs of the proceedings from the date of that offer.

14. For these reasons, I make the following orders:

1.   The Sixth Defendant be released from her obligations with respect to the undertaking provided to the First Plaintiff on 30 May 2019.

2.   The proceedings otherwise be dismissed.

3.   The First Plaintiff pay the First, Fourth, Fifth and Sixth Defendants’ costs of the proceedings on an indemnity basis up to and inclusive of 26 April 2019.

4.   The First Plaintiff pay the First, Fourth, Fifth and Sixth Defendants’ costs of the proceedings on an ordinary basis after 26 April 2019, as agreed or as assessed.

5.   No order as to costs as against the Second, Third or Fourth Plaintiffs.

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Decision last updated: 21 July 2020