In the Matter of Staway Pty Limited (In Liquidation) (Receivers Appointed)
[2017] NSWSC 485
•07 April 2017
Supreme Court
New South Wales
Medium Neutral Citation: In the Matter of Staway Pty Limited (In Liquidation) (Receivers Appointed) [2017] NSWSC 485 Hearing dates: 7 April 2017 Date of orders: 07 April 2017 Decision date: 07 April 2017 Jurisdiction: Equity Before: McDougall J Decision: Refer to paras [22] and [23] of judgment.
Catchwords: COSTS – costs of an abortive mediation – where mediation was court ordered – where the plaintiffs did not attend the mediation – where the plaintiffs did not notify the defendants – costs awarded to the defendants Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Al Mousawy v JA Byatt Pty Limited [2008] NSWSC 264 Category: Procedural and other rulings Parties: Staway Pty Ltd (1st Plaintiff)
John Stark (2nd Plaintiff)
Liberty Financial Pty Ltd (1st Defendant)
Secure Funding Pty Ltd (2nd Defendant)Representation: Counsel:
Solicitors:
J E Lazarus (Plaintiffs)
R M Foreman (Defendants)
C G Gillis & Co (Plaintiffs)
Arnold Bloch Leibler (Defendants)
File Number(s): 2013/202486
Judgment
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HIS HONOUR: I am concerned today with a notice of motion filed in one of several sets of related proceedings by Liberty Financial and Secure Funding, whom I will call the lenders. The notice of motion seeks two things. One is that what I will call for convenience the plaintiffs (that is to say, the parties opposed to the lenders in the particular proceedings) pay the costs of an abortive mediation, and that the costs be fixed in a particular sum. The other is an order for further security for costs of the proceedings generally. At present I am dealing only with the costs of the mediation.
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The court ordered the parties to mediate. The time for completion of mediation was initially fixed at 9 December 2016. That time was extended to 17 February 2017. The reasons for the extension do not matter.
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The Hon Peter Jacobson QC was to be the mediator. He turned up. The lenders and their retinue of legal advisers turned up. The plaintiffs did not. They were represented by some of their lawyers. Not surprisingly, the mediation got nowhere.
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The starting point is that the order was directed specifically to "the parties":
“The parties are to attend and complete a mediation...”
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The next point is that no order from the court was sought varying that order, save (as I understand it) in respect of the date by which the mediation must be completed.
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The next point is that no notice was given to the lenders of the fact that the plaintiffs themselves would not be there.
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It did not seem to be in doubt that the court has power to make an order for costs in those circumstances. In case that question were in doubt, the doubt should not last very long. Section 98(1) of the Civil Procedure Act 2005 (NSW) provides among other things that costs are in the discretion of the court and that the court has full power to determine by whom, to whom and to what extent costs are to be paid. Section 29 confirms that the power exists.
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If further authority were needed for the proposition that the court may make a costs order in the circumstances with which I am concerned, it is found in the decision of Hoeben J in Al Mousawy v JA Byatt Pty Limited [2008] NSWSC 264. His Honour, dealing with very similar facts, concluded at [25] that he should make a costs order and at [30] made that order.
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The plaintiffs say that they were justified in not attending the mediation, because the position paper for the lenders made clear, in effect, that they were only prepared to negotiate on the extent to which the debts they claimed could be repaid, "including by the realisation of [mortgaged] properties". In those circumstances, Mr Lazarus of counsel (who appeared for the plaintiffs) submitted, the lenders had made it crystal clear that they did not intend to participate in good faith in a mediation. He said that in those circumstances, the court could infer a breach of section 27 of the Civil Procedure Act.
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The position paper was certainly, to put it as neutrally as I can, strongly worded. It made it plain that in the view of the parties for whom it was prepared, the real issue (indeed, the "only real issue") to be resolved was: How are you going to pay us?
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I add that the parties agreed that the position paper should be put into evidence and hence no question of breach of confidence arises.
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The court cannot but be aware that, in negotiation, each side will frequently take a very strong position: what might be called an ambit claim. Having said that, when one looks at the nature of the claims (including the plaintiff's claim for damages and the claim for possession of mortgaged property), it is, in essence, a dispute about money.
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There is no doubt that the corporate plaintiff, Staway, which carried on a motor vehicle dealership, misappropriated money that should have been paid to the lenders under a floor plan finance facility agreement. There is no doubt that some arrangement was made for the admitted misappropriations to be repaid. The consequences of that agreement and its failure are matters to be explored in the final hearing.
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The plaintiffs say that the lenders’ position paper grossly overstated the position because the plaintiffs’ claim for damages (essentially, loss of the value of the dealership business) greatly exceeded the amounts owing under the floor plan facility. In answer to that, Mr Foreman of counsel (for the lenders) pointed to the fact that the plaintiffs’ own expert values the business at less than the admitted amount of the misappropriations (and in fact the admitted amount is not the whole amount claimed). In those circumstances, he submitted, the rest of the claim could justifiably be put to one side, unsupported (so he said) by any evidence.
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The starting point is that this is not a matter where the parties were free to make their own decision. They were compelled by an order of the court to attend and complete the mediation. Mr Lazarus submitted that the individual plaintiffs could well have been available by telephone. That may be so. However, to proceed with a mediation on the basis that the parties who would make the decision would not be present, and could not therefore be subjected to the usual range of tactics employed by mediators, means that what might have proceeded would have been a very empty shell of a mediation, almost self-evidently doomed to failure.
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The plaintiffs did not seek to be dispensed from their obligation to attend the mediation. Nor did they trouble to inform the lenders that they would not be attending. Accordingly, the lenders incurred significant expense in flying up from Melbourne. That expense, together with their share of the mediator's fees, has been entirely wasted.
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Mr Lazarus submitted that the court could comfortably infer that the amount claimed for costs was excessive. However, that submission ignores the fact that about $9,000 of the amount claimed relates to flights and the appropriate share of the mediator's fees. The balance relates to solicitors’ and counsel’s fees. There is a considerable body of evidence to support it.
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The total amount claimed exceeds $26,000. I do not think that this is an appropriate case to make a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act. However, I think, it is an appropriate case not only to make an order but also to specify an amount, without prejudice to either party's right to contend for a different amount on assessment.
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The reasons why I think it is appropriate to make an order are as I have said that the plaintiffs simply disregarded their obligations under the court's orders, produced a situation where the mediation would necessarily fail, and caused the lenders to waste substantial sums of money in coming to Sydney for the mediation, in legal costs preparing for it and (to the extent they did) attending it. Those considerations further suggest to me that the costs should be assessed on the indemnity basis.
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I am not going to attempt to pick and choose between the various figures that have been propounded and come up with some sort of assessment myself. What I do propose to do is take a broad brush approach and fix a figure of $20,000. That figure will be fixed on the basis I have indicated.
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The usual order of proceedings in this list is that if costs are ordered they are to be assessed forthwith. I see no reason why that should not happen in this case. Mr Lazarus suggested that it might impact on the ability of the plaintiffs to conduct the hearing. That is something they should have thought of when they decided, in my view unjustifiably, to ignore the court's order.
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Accordingly, I order the plaintiffs in proceedings 2013/00202486 to pay the defendants' costs of the mediation held on 17 February 2017. I direct that those costs be assessed on the indemnity basis. I order that those costs be payable forthwith. Those orders are made without prejudice to the right of any party to contend on assessment for a different sum.
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I further order that the proceedings be stayed unless the sum of $20,000 pursuant to the orders I have just made is paid within 14 days of today's date.
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Decision last updated: 28 April 2017
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