In the matter of Sirrah Pty Limited (In Liquidation) (No 2)
[2021] NSWSC 1326
•18 October 2021
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Sirrah Pty Limited (In Liquidation) (No 2) [2021] NSWSC 1326 Hearing dates: On the papers Date of orders: 18 October 2021 Decision date: 18 October 2021 Jurisdiction: Equity - Corporations List Before: Williams J Decision: The plaintiff is to pay the costs of the first defendant, second defendant and fifth defendant of these proceedings on the ordinary basis, as agreed or assessed. Catchwords: COSTS – costs follow the event – costs to be paid on an ordinary basis – no issue of principle
Legislation Cited: Corporations Act 2001 (Cth) s 1323
Cases Cited: In the matter of Sirrah Pty Ltd (In Liq) [2021] NSWSC 1274
Category: Costs Parties: Sirrah Pty Limited (In Liquidation) (ACN 000 417 247) (Plaintiff)
Domenic Calabretta in his Capacity as the Receiver & Manager of the Assets of William Francis Harris (First Defendant)
A.C.N 640 543 979 Pty Limited ATF the YBL 2020 Trust Trading as Yates Beaggi Lawyers (Second Defendant)
Masud Behnia (Fifth Defendant)Representation: Counsel:
Solicitors:
Mr J S Tobin (Plaintiff)
Ms S Agosta (Solicitor) (First Defendant)
Mr A F Fernon SC with Mr E A Walker (Second Defendant)
Mr A Cornish (Fifth Defendant)
Watson Mangioni Lawyers Pty Ltd (Plaintiff)
Nelson McKinnon Lawyers (First Defendant)
Yates Beaggi Lawyers (Second Defendant)
Carmody Lawyers (Fifth Defendant)
File Number(s): 2021/210960 Publication restriction: N/A
Judgment
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These reasons relate to the costs of the plaintiff’s application for the appointment of a receiver that I dismissed in my reasons for judgment published on 8 October 2021: In the matter of Sirrah Pty Ltd (In Liq) [2021] NSWSC 1274 (the principal judgment). Familiarity with the principal judgment is assumed.
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Only the first, second and fifth defendants played an active role in the proceedings.
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The plaintiff accepts that it should pay the first and second defendants’ costs on the ordinary basis. The first and second defendants seek an order that the plaintiff pay their costs on an indemnity basis. They submit an indemnity costs order is warranted because the application for the appointment of a receiver was “groundless and was doomed to fail from the outset”.
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In my view, that submission suffers from the benefit of hindsight analysis, which should not inform the exercise of the discretion to award indemnity costs. The proceedings were commenced urgently and in circumstances where the plaintiff was taken by surprise that a receiver had been appointed to the Bali property in respect of which Mr Harris had given an undertaking to the Court in other proceedings.
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It is true that, for the reasons set out in the principal judgment, none of the plaintiff’s arguments were strong and some of them were not articulated with clarity. However, I do not consider that it can be said that the application was entirely groundless or doomed to fail from the outset, bearing in mind that it was arguable that the Court had the power to make the orders sought under s 1323 of the Corporations Act 2001 (Cth) and that power is a discretionary one. [1]
1. Principal judgment at [68]-[78].
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For those reasons, there will be an order that the plaintiff pay the first and second defendants’ costs of the proceedings on an ordinary basis.
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There will be no order in relation to the third and fourth defendants’ costs, with the intention that they pay their own costs of the proceedings (if any).
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The fifth defendant seeks an order that the plaintiff pay his costs of the proceedings on the indemnity basis or alternatively on the ordinary basis. The plaintiff opposes an order requiring it to pay the fifth defendant’s costs on any basis.
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In my opinion, the appropriate order is that the plaintiff pay the fifth defendants cost of the proceedings on the ordinary basis. The plaintiff’s submissions did not advance any reason why the fifth defendant should not have an order for his costs for complying with the production order that was made in the context of the plaintiff’s application for the appointment of a receiver. But for one matter, I would have accepted the plaintiff’s contention that the fifth defendant should bear his own costs of electing to appear at the hearing in circumstances where he presently claims no security or other proprietary interest in the Bali property and therefore has no apparent interest in being heard on the application to appoint a receiver to that property. The one matter that leads me to reject that contention is the plaintiff’s very vague submission referred to at [65] of the principal judgment. That submission stated that the fifth defendant had entered into “private (undisclosed) arrangements” with the first defendant, whose appointment and subsequent conduct as receiver the plaintiff contented involved a breach of an undertaking given to the Court in other proceedings. The plaintiff’s submission also stated that those arrangements revealed “issues” that “require ventilation before the Court”. The terms of that submission implied that there was something improper or irregular in the alleged arrangements between the first defendant and the fifth defendant. In those circumstances, it was reasonable for the fifth defendant to appear at the hearing of the plaintiff’s application so as to be in a position to respond to any alleged wrongdoing on his part if the plaintiff did seek to “ventilate” the unspecified issues during the hearing. The plaintiff cannot deploy the vague terms of this submission to avoid a costs order after failing to follow through with its stated intention to “ventilate” the alleged issues.
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In seeking an order that his costs be paid on an indemnity basis rather than on the ordinary basis, the fifth defendant adopts the submissions of the first and second defendants to the effect that the application was groundless and doomed to fail. I have rejected those submissions for the reasons set out above.
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The fifth defendant also relies on a Calderbank offer served on the plaintiff which was open for acceptance for less than one day. The terms of the offered involved dismissal of the proceedings against the fifth defendant, with the plaintiff to pay the fifth defendant’s costs either in a specified sum or as agreed or assessed. I do not consider that the plaintiff acted unreasonably in failing to accept that offer in circumstances where there was uncertainty about whether the fifth defendant claimed or was in fact entitled to a security or other proprietary interest in the Bali property that was the subject of the proceedings. That uncertainty was generated, in part, by the fifth defendant claiming to have an interest in Mr Harris’ property but maintaining the position that the Bali property is not Mr Harris’ property (contrary to Mr Harris’ own position and for reasons that were not explained by any evidence in these proceedings). That uncertainty was perpetuated by the submissions made by counsel for the fifth defendant at the hearing, with the fifth defendant reserving its right to claim in the future that the Bali property is indeed Mr Harris’ property and that the fifth defendant therefore does have an interest in it: see principal judgment at [22]-[23]. By the fifth defendant remaining a party to the proceedings, this ensured that he had an opportunity to be heard against the appointment of a receiver if he exercised his reserved right to claim an interest in the Bali property after all.
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There will therefore be an order that the plaintiff pay the fifth defendant’s costs on the ordinary basis.
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I note for completeness that the first, second and fifth defendants did not seek any order that their costs be paid by the liquidator of the plaintiff personally as opposed to being paid by the plaintiff.
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For all of those reasons, I make the following order:
The plaintiff is to pay the costs of the first defendant, second defendant and fifth defendant of these proceedings on the ordinary basis, as agreed or assessed.
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Endnote
Decision last updated: 18 October 2021
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