In the matter of Samkev Investments Pty Limited (No 2)

[2012] NSWSC 745

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Samkev Investments Pty Limited (No 2) [2012] NSWSC 745
Hearing dates:	1 May 2012
Decision date:	29 June 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Defendant to pay Plaintiff's costs on a party/party basis up to and including the hearing on 1 May 2012. No order for costs after 1 May 2012.
Catchwords:	COSTS - Indemnity costs - Application for indemnity costs in circumstances where the grounds for which statutory demand was set aside were not identified in earlier correspondence between the parties.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) ss 56, 98, 101, 101(4) - Corporations Act 2001 (Cth) s 459H(1)(a) - Uniform Civil Procedure Rules 2005 (NSW) rr 36.7(1), 42.1, 42.2
Cases Cited:	- Advanced Arbor Services Pty Ltd v Phung [2010] NSWSC 158 - Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 - Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 - Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 - Hexiva Pty Ltd v Lederer [2006] NSWSC 1259 - In re Samkev Investments Pty Ltd [2012] NSWSC 527 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 - Lahoud v Lahoud [2006] NSWSC 126 - Liverpool City Council v Estephan [2009] NSWCA 161 - Ng v Chong [2010] NSWSC 127 - White Constructions (ACT) Pty Ltd (in liq) v G B White [2004] NSWSC 303 - Ying v Song [2011] NSWSC 618
Category:	Costs
Parties:	Samkev Investments Pty Ltd (Plaintiff) Berkley Insurance Company (Defendant)
Representation:	Counsel: S. Habib SC/S. Maybury (Plaintiff) M. Pesman (Defendant) Solicitors: William Roberts Lawyers (Plaintiff) C.J. Boyd & Co (Defendant)
File Number(s):	11/383341

Judgment

1. On 21 May 2012, I delivered judgment in these proceedings ([2012] NSWSC 527) in which I ordered that a statutory demand dated 10 November 2011 ("Demand") served on the Plaintiff, Samkev Investments Pty Limited ("Samkev") be set aside under s 459H(1)(a) of the Corporations Act 2001 (Cth).

Samkev's claim for costs

1. Samkev submits that the Defendant, Berkley Insurance Company ("Berkley") should pay its costs, as agreed or as assessed, on an ordinary basis before November 2011 (or alternatively 18 November 2011 or 1 December 2011) and on an indemnity basis from 5 November 2011 (or alternatively 19 November 2011 or 2 December 2011). Samkev submits that, in the alternative, Berkley should pay its costs of and incidental to the proceedings on the ordinary basis. Berkley accepts that it should be ordered to pay Samkev's costs on the ordinary basis.

1. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides that:

"Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."

1. Uniform Civil Procedure Rules 2005 (NSW) r 42.1 ("UCPR") provides that, if an order is made as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. UCPR r 42.2 states the general rule that costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis.

1. It is not necessary to repeat the principles applicable to an order for indemnity costs at length. Those principles were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 at 256-257 and by McDougall J in White Constructions (ACT) Pty Ltd (in liq) v G B White [2004] NSWSC 303 at [5]-[11] in a passage subsequently quoted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]. The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was in turn applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18].

1. Samkev also draws attention the decision of the Full Court of the Federal Court in Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20] where the Court noted that:

"Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs."

1. In Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure.

1. Samkev relies on a letter dated 4 November 2011 from its solicitors to Berkley which asserted that Samkev was not obliged to indemnify Berkley for any payments it made to Strasburger Enterprises (Properties) Pty Ltd ("SEP") in respect of a demand issued by it in respect of a Petroleum Guarantee Bond ("Guarantee"). While that letter identified Samkev's contention that a current guarantee by Berkley in favour of SEP was not in place, it did not identify the grounds for that contention on which it was successful at the hearing before me so as to place Berkley on notice of those grounds. I do not consider that letter warrants an order for indemnity costs against Berkley from that date.

1. Samkev also relies on a letter from its solicitors dated 18 November 2011, which identified a dispute as to whether a binding agreement had been entered into between Samkev and Berkley in respect of the Guarantee. I did not determine the issue raised by this letter in Samkev's favour in my judgment dated 1 May 2012, since it was successful on other grounds in the application before me. As Berkley point out, this letter did not identify the points as to the adequacy of the demand made by SEP on Berkley and as to past consideration as to which Samkev was successful at the hearing, which were first raised in Samkev's written submissions at the hearing. I do not consider that letter warrants an order for indemnity costs against Berkley from that date.

1. Samkev alternatively seeks indemnity costs from 1 December 2011, the date on which it filed and served its application to set aside the Demand. Berkley responds that I had held, in my judgment, that the Demand was not an abuse of process. Indeed, I had observed in paragraph 35 of my judgment that:

"I have held that, on balance, a genuine dispute is established for the purposes of s 459H of the Corporations Act, for the reasons noted above. However, the issues giving rise to that genuine dispute are somewhat technical in nature and I do not consider that it would necessarily have been evident to Berkley, at the time it served the Demand, that a genuine dispute would have been established. For this reason, I would not hold that the service of the Demand was inconsistent with the statutory scheme or that an abuse of process is established so as to require the Demand to be set aside under s 459J(1)(b) of the Corporations Act."

1. While Samkev was successful, on somewhat technical grounds, in setting aside the Demand, the grounds on which it succeeded had not been identified in earlier correspondence and its success was not such as to warrant any criticism of Berkley for its opposition to the application to set aside the Demand, or any order for costs other than the usual order made when costs follow the event.

Samkev's claim for interest

1. Samkev also seeks an order under s 101(4) of the Civil Procedure Act that Berkley pay interest at the prescribed rate on the amount payable under an order for the payment of costs as and from the date or dates on which the costs were paid by Samkev. Section 101(4) of the Civil Procedure Act provides that the Court "may order" that interest is to be paid on any amount payable under an order for the payment of costs. UCPR r 36.7(1) specifies the prescribed rate at which interest is payable under s 101 of the Civil Procedure Act.

1. The principles applicable to an application under s 101 for interest on costs were summarised in Hexiva Pty Ltd v Lederer [2006] NSWSC 1259 at [21], applied in Advanced Arbor Services Pty Ltd v Phung [2010] NSWSC 158 at [22] and in Ying v Song [2011] NSWSC 618. I accept that, particularly where the proceedings have continued over a long period, the Defendants will have been out of pocket by the payment of costs to their lawyers, and an order for interest on costs can be made to compensate them for that matter, in the absence of any countervailing discretionary factor: Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at 4; Ying v Song above at [99]-[103]. However, in Drummond & Rosen Pty Ltd v Easey (No 2) at [49], Handley JA (with whom Tobias JA agreed) observed that the power under s 101(4) should not be exercised without evidence of the amounts paid and the dates of payment. Samkev has not led such evidence in its application for costs before me and accordingly I do not exercise the power to make an order under that section.

Orders

1. Accordingly, I order that the Defendant pay the Plaintiff's costs on a party/party basis up to and including the date of the hearing on 1 May 2012, as agreed or as assessed.

Costs of this application

1. I do not consider that I should make any order as to the costs of this application, incurred after 1 May 2012 when the substantive application to set aside the Demand was heard before me. Samkev has achieved no more than Berkley had offered in respect of the costs application. If either party wishes to contend for a contrary result, it should advise my Associate and I will make directions for further written submissions in that regard.

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Decision last updated: 16 July 2012