Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) - [2008] NSWSC 199

No judgment structure available for this case.

CITATION: Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No.7] [2008] NSWSC 199

HEARING DATE(S): 4, 5 and 6 February 2008

JUDGMENT DATE :
14 March 2008

JUDGMENT OF: McDougall J at 1

DECISION: See paras [247] and [248] of the judgment.

CATCHWORDS: COSTS – indemnity costs – plaintiffs failed to prove case on damages – cross-claimant failed to prove case on causation – no question of principle. - CORPORATIONS – company in liquidation joined as cross-defendant pursuant to leave of Court – company makes further cross-claims whether party seeking joinder should indemnify company for all costs incurred or payable by it.

LEGISLATION CITED: Corporations Law
Civil Procedure Act 2005
Professional Standards Act 1994
Trade Practices Act 1974

CATEGORY: Consequential orders

CASES CITED: Adams v Thrift [1915] 1 Ch 557
Calderbank v Calderbank [1976] Fam 93
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640
Ingot Capital Investment & Ors v Macquarie Equity Capital Markets and Ors [2003] NSW SC 1012
Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSW SC 406
Ingot v Macquarie [No.3] [2005] NSWSC 255
Ingot v Macquarie (No.6) [2007] NSWSC 124
Lahoud v Lahoud [2006] NSWSC 126
Ogilvie Grant v East (1983) 7 ACLR 669
Potts v Miller (1940) 64 CLR 282
Preston v Preston [1982] 1 All ER 41
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2006] NSWSC 779
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254
Thors v Weekes (1989) 92 ALR 131
Vagrand Pty Limited (In Liquidation) v Fielding (1993) 41 FCR 550
White ACT (in liquidation) v G B White [2004] NSWSC 303

PARTIES: Ingot Capital Investments Pty Limited (First Plaintiff)
Stocks Convertible Limited (formerly AOIT Limited) (Second Plaintiff)
ASC Pty Limited (Third Plaintiff)
Stocks Convertible Trust plc (formerly Australian Opportunities Investment Trust PLC) (Fourth Plaintiff)
Eastern States Securities Limited (Fifth Plaintiff)
Ingot Capital Management Pty Limited (Sixth Plaintiff)
Macquarie Equity Capital Markets Limited (First Defendant)
Macquarie Equities Limited (Second Defendant)
Macquarie Bank Limited (Third Defendant)
Udayan Daniel Ghose (Fourth Defendant)
Jonathan Paul Beach (Fifth Defendant)
Azmin Firoz Daya (Sixth Defendant)
Craig Deery (Seventh Defendant)
Michael J Morrissey (Eighth Defendant)
William Peck (Ninth Defendant)
Paul Lauerence Williams (Tenth Defendant)
Peter Aroney (Eleventh Defendant)
John Trowbridge Consulting Pty Limited (Twelfth Defendant)
Patrick Murray and the persons listed in Schedule "B" to the summons (PwC) (Thirteenth Defendant)
Andrew Mutton and the Persons in NSW Listed in Schedule "A" to the summons (Phillips Fox) (Fourteenth Defendant)
NCRA (36th Cross-claimant)
Guy Carpenter Parties

FILE NUMBER(S): SC 50169/01

COUNSEL: R G Forster SC / P J Dowdy (for the Plaintiffs)
A S Bell SC / J R Williams (for the First, Second and Third Defendants)
P Silver (for the Fourth Defendant)
A P Cheshire (for the Fifth, Seventh and Eighth Defendants)
L Gor (for the Ninth Defendant)
M J Cohen (for the Tenth Defendant)
P S Braham (for the Eleventh Defendant)
S A Goodman (for the Twelfth Defendant)
T F Bathurst QC / S Nixon (for the Thirteenth Defendant)
R Dick / J Watson (for the Fourteenth Defendant)
M A Pembroke SC / L P Menzies (for the Guy Carpenter Parties)
B Coles QC / D Cook (for NCRA)

SOLICITORS: Deacons (for the Plaintiffs)
Mallesons Stephen Jacques (for the First, Second and Third Defendants)
Chang Pistilli & Simmons (for the Fourth Defendant)
Colin Biggers & Paisley (for the Fifth, Seventh, and Eighth Defendants)
William Peck (for the Ninth Defendant)
Dibbs Abbott Stillman (for the Tenth Defendant)
M D Nikolaidis & Co (for the Eleventh Defendant)
Minter Ellison (for the Twelfth Defendant)
Blake Dawson Waldron (for the Thirteenth Defendant)
Freehills (for the Fourteenth Defendant)
TressCox (for the Guy Carpenter parties)
Henry Davis York (for NCRA)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

14 March 2008

50169/01 INGOT CAPITAL INVESTMENTS & ORS v MACQUARIE EQUITY CAPITAL MARKETS & ORS [No 7]

JUDGMENT

1 HIS HONOUR: On 30 March 2007, I gave judgment in these proceedings: Ingot v Macquarie(No.6) [2007] NSWSC 124 (Ingot (No.6). I ordered that:

(1) The plaintiffs’ claim be dismissed against all defendants other than the twelfth, Trowbridge (as between the plaintiffs and Trowbridge, orders had been made already by consent).

(2) All cross-claims for contribution or indemnity in respect of any claim made by the plaintiffs be dismissed.

(3) Two other cross-claims, the 33rd and the 36th, brought by NCRA against various cross-defendants, be dismissed.

2 I reserved for further consideration the question of costs. These reasons deal with some, but not all, of the claims for costs that have been made in consequence of my conclusions in Ingot (No.6).

3 I assume that the reader of these reasons will have read, or at least skimmed, Ingot (No.6). Thus, in these reasons:

(1) I shall not give any background or explanation, except where it is necessary to do so to decide any costs issue with which I am presently concerned; and

Ingot (No.6)

The plaintiffs’ concessions

4 The plaintiffs have taken a sensible attitude to the various claims for costs that have been made. They have accepted liability for many of those claims, including, in some cases, for claims that certain costs be paid on the indemnity basis. In particular:

(1) The plaintiffs accept that they should pay the costs of all defendants of the proceedings.

(2) The plaintiffs accept that they must bear the costs incurred by all defendants in bringing or defending cross-claims for contribution or indemnity by one defendant against another where those cross-claims merely reflect, or (in the words of Dr Bell SC, who appeared with Mr Williams of counsel) are parasitic upon claims made by the plaintiffs against the relevant defendant (the first to 25th and 29th cross-claims).

(3) Further, the plaintiffs accept that they must bear the costs of cross-claims for contribution or indemnity against NCRH or NCRA (the 26th to 28th and 30th to 32nd cross-claims). This concession extends both to costs incurred by the various cross-claimants in bringing those cross-claims and to the costs, prima facie payable by those cross-claimants, of NCRH or NCRA as cross-defendants.

(4) As to all cross-claims falling within subparas (2) and (3) (compendiously, the 1st to 32nd cross-claims) the plaintiffs did not oppose the proposition that the proper order for costs would be that they pay the costs of the various cross-claimants and cross-defendants. The cross-claimants and cross-defendants had pressed for an order that the plaintiffs pay the cross-defendants’ costs direct, although with a reservation of rights in the event that, for whatever presently unforseen reason, the plaintiffs in fact did not in fact pay any costs as agreed or assessed. Clearly, there are substantial practical reasons, relating to the difficulty of separating out and assessing separately costs relating to the prosecution and defence of particular cross-claims, that favour the imposition of direct liability. Equally clearly, the position of the various cross-defendants vis a vis the cross-claimants who joined them should be protected.

Calderbank

(6) The plaintiffs accept that insofar as they are liable to pay the costs of any defendant on the indemnity basis, that liability extends to costs incurred (from the date from which costs become so payable) by that defendant as a cross-claimant or cross-defendant in respect of the 1st to 32nd cross-claims. Thus, the plaintiffs accept that if they are liable to pay costs of a particular defendant on the indemnity basis from a particular date, they should pay that defendant’s costs in relation to those of the 1st to 32nd cross-claims to which that defendant was a party either as cross-claimant or as cross-defendant on the same basis from the same date.

(7) The plaintiffs accept that they should pay interests on costs pursuant to s101(4) of the Civil Procedure Act 2005. In substance, it was accepted that interest should be payable in accordance with the formula developed by Campbell J in Lahoud v Lahoud [2006] NSWSC 126 at [85]; and see order 3 at [91]. In other words, the plaintiffs accepted that interest should be payable, in respect of each payment of costs actually made, on the portion of that payment that reflects the ratio between the total amount of the costs actually ordered to be paid and the total of the costs actually claimed. The parties other than Guy Carpenter accepted that this was an appropriate basis for the calculation of interest on costs.

5 As to the concession recorded in subpara (4): the costs orders that will be made on the 1st to 32nd cross-claims (and on any other cross-claims where I conclude that the plaintiffs should pay the costs of both the cross-claimants and the cross-defendants) will be framed so as to impose the primary costs liability on the plaintiffs, but to reserve the position of the various cross-defendants in the event that the plaintiffs do not pay. This then leads to a complication, having regard to the concession recorded in subpara (6). If the plaintiffs pay, the costs will be assessed on the indemnity basis from whatever is the applicable date. That regime will include not just the costs of any defendant as an unsuccessful cross-claimant, but also the costs of any defendant (or third party to whom the regime is extended) as a successful cross-defendant. However, if the plaintiffs do not pay the costs of any of the parties to any of the cross-claims in question, the cross-defendants will look to the cross-claimants who joined them. The parties accepted that this residuary entitlement (and liability) should be protected. However, no cross-defendant to any of the relevant cross-claims (and at this stage, it is enough to except from “relevant cross-claims” the 33rd and 36th cross-claims) sought an order for indemnity costs against the cross-claimant on the basis that the cross-claimant had been guilty of some relevant misconduct or delinquency in relation to the cross-claim. Thus, if matters proceed one way, relevant cross-defendants will get at least some of their costs on the indemnity basis; but if matters proceed another way, they will not. I do not think that there is any practical way to resolve this potential anomaly.

6 The plaintiffs reached agreement with some defendants on the question of costs. Specifically:

(1) The plaintiffs reached agreement with Mr Daya as to his costs, and effect was given to that agreement in orders made by consent on 10 December 2007.

The issues as between the plaintiffs and the defendants

7 Having regard to the various concessions made by the plaintiffs, the issues that were pressed before me were:

(1) Whether any defendant was entitled to have his or its costs assessed on the indemnity basis either from the commencement of the proceedings or from some other date, even if that defendant had not made a Calderbank offer. I note that all defendants except Mr Daya, Mr Williams and Trowbridge asserted this entitlement. It was based on what was said to be relevantly unreasonable conduct in the way the plaintiffs framed and conducted the litigation. In PwC’s case, and as I have foreshadowed, the alleged unreasonable conduct extended to the rejection of an offer of settlement.

(2) As between the plaintiffs and Mr Beach, there was the question of whether an offer made by Mr Beach on 14 August 2002 was a Calderbank offer and, if it were, whether the plaintiffs had acted unreasonably in rejecting or not accepting it.

(3) Whether any defendant should be permitted to call upon guarantees given by financial institutions on behalf of the plaintiffs in satisfaction of orders for security for costs. The plaintiffs submitted that I should not deal with this claim. They submitted further that if I were to deal with it, I should hesitate before accepting the evidence given on behalf of those defendants as to the amounts of costs allegedly expended and, in some cases, their likely recoverability on the party and party basis of assessment. It might be noted that the only objection to that evidence was on the ground of relevance (saving one particular case, where I rejected the evidence because of its completely unsatisfactory and inadmissible nature). The objection as to relevance was based on the proposition that the issue was not one of those ordered to be dealt with in the hearing with which these reasons are concerned. There was otherwise no challenge to the evidence, cross-examination of the witnesses in question, nor evidence in answer.

Separate issues relating to the 30th to 32nd cross-claims

8 The 30th cross-claim was brought by Macquarie against NCRA. The 31st cross-claim was brought by PwC against NCRA. The 32nd cross-claim was brought by Trowbridge against NCRA. Each was brought pursuant to leave earlier granted by the Court. Each sought contribution or indemnity from NCRA in the event that the cross-claimant were found liable to the plaintiffs. Each was based upon the proposition that if the plaintiffs made good their case against the directors and officers of NCRA, the actions of those directors or offices should be imputed to NCRA and it should be held liable for the consequences of those actions.

9 As an aside: similar cross-claims were brought on similar bases against NCRH. NCRH submitted save as to costs. There is no extant costs issue in relation to the cross-claims against NCRH.

10 It will be seen that the costs relating to the 30th to 32nd cross-claims are covered by the plaintiffs’ concession recorded at [4(6)] above. However, NCRA insisted that it was entitled to have its costs of each cross-claim from the relevant cross-claimant.

11 Further, in the case of the 30th cross-claim, NCRA sought an order that Macquarie indemnify NCRA for costs incurred by it as cross-defendant or cross-claimant in respect of any cross-claim. The order sought did not extend to what might be called the independent aspects of the 33rd and 36th cross-claims: i.e, the claims made by NCRA against Guy Carpenter (33rd cross-claim) and the directors and officers (36th cross-claim) that did not simply reflect any claim against those cross-defendants that had been advanced against them by another party in the proceedings. (The qualification in relation to the 33rd cross-claim is illusory rather than real, because the paragraphs of the contentions referred to in NCRA’s notice of motion do not repeat any claim made against Guy Carpenter by any other party but, rather, claims made by NCRA against the directors and officers in the 36th cross-claim.) NCRA submitted that such an order was needed so that the funds available to its creditors would not be depleted, in circumstances where Macquarie could have chosen, but did not choose, to prove in the winding up.

12 Macquarie opposed the making of such an order. It submitted further that if such an order were made, the plaintiffs should pick up the tab pursuant to their concession in relation to the 30th cross-claim. It submitted further that if such an order were made, the costs burden should be shared between all three cross-claimants against NCRA: i.e. Macquarie, PwC and Trowbridge. The plaintiffs, PwC and Trowbridge did not embrace those further submissions.

13 NCRA sought also an order that Macquarie indemnify it for the costs of the 33rd and 36th cross-claims that simply reflected, and were parasitic upon, claims for relief brought by other parties against the cross-defendants to those cross-claims. For the reasons that I have indicated at [11], this issue is really relevant only to the parasitic or reflexive aspect of the 36th cross-claim; but even so limited, Macquarie opposed the order sought.

The issues relating to the 33rd and 36th cross-claims

14 The 33rd cross-claim was brought by NCRA against Guy Carpenter. The 36th cross-claim was brought by NCRA against its directors and officers Messrs Ghose, Daya, Peck, Williams and Aroney. I described the elements of those cross-claims at [1346] to [1351] of Ingot (No.6).

15 The discrete costs issues arising out of the 33rd and 36th cross-claims were:

(1) Whether NCRA should pay Guy Carpenter’s costs of the 33rd cross-claim on the indemnity basis, either from the date of filing the 33rd cross-claim or from one of various specified later dates.

(2) The extent to and basis upon which Guy Carpenter’s costs in proceedings 2371 of 2002 should be paid as costs in these proceedings. (The earlier proceedings were brought by NCRA against Guy Carpenter, based in substance on the matters alleged in the 33rd cross-claim in these proceedings. There were various interlocutory applications in those earlier proceedings. Ultimately, Young CJ in Eq ordered that Guy Carpenter’s costs in those earlier proceedings be dealt with as costs in these proceedings.)

16 There are questions between NCRA and Guy Carpenter as to whether Guy Carpenter is entitled to recover, as disbursements in these proceedings, certain costs charged by its solicitors in London, Herbert Smith LLP, and Value Added Tax on those costs. Although initially those questions were said to require my consideration, NCRA and Guy Carpenter ultimately agreed – at the conclusion of submissions – that they were matters to be dealt with in the first instance by a costs assessor. (Guy Carpenter has not claimed an order for gross sum assessment.)

17 Either shortly before or in the course of the hearing with which these reasons are concerned, orders were made by consent as between NCRA and each of Messrs Daya, Peck, Williams and Aroney for the costs of the 36th cross-claim.

Issues relating to the 37th cross-claim

18 The 37th cross-claim was brought by Macquarie against Guy Carpenter. Macquarie sought contribution or indemnity from Guy Carpenter in respect of NCRA’s cross-claim against Macquarie. It is thus one of the cross-claims referred to in para [7(4)] above.

19 Guy Carpenter sought an order that Macquarie (the unsuccessful cross-claimant) pay those costs. Macquarie opposed this order on the basis that the 37th cross-claim was “only brought after Guy Carpenter had been joined to the proceedings by NCRA” and “was entirely parasitic of NCRA’s claim against Guy Carpenter under the 33rd cross-claim” (Macquarie’s written submissions in reply to NCRA, Trowbridge and Guy Carpenter dated 13 July 2007, para 41). Macquarie sought in the alternative an order that any costs payable by it to Guy Carpenter in respect of the 37th cross-claim “should be limited to those costs specifically and solely attributable to [Guy Carpenter’s] response to the 37th cross-claim” (ibid, para 42). As flagged at [7(4)] above, Macquarie submitted that if such an order were made, the plaintiffs should either pay, or indemnify it for, those costs.

Indemnity costs: applications not depending on Calderbank offers

20 In this section, I deal with the defendants’ applications for indemnity costs that were based on the alleged unreasonable or “delinquent” conduct of the plaintiffs generally, and not on the making and rejection (or nonacceptance) on Calderbank offers.

The competing cases

21 The defendants submitted that the plaintiffs’ commencement of the proceedings had been relevantly unreasonable, or “delinquent”, because the plaintiffs must have appreciated, or if properly advised should have appreciated, that the proceedings had no real prospects of success. Alternatively, the defendants submitted, the plaintiffs’ continuation of the proceedings became unreasonable by reason of events that should have brought home to them that they had no real prospects of success.

22 The plaintiffs submitted that the factors on which the defendants relied did not amount to misconduct or relevant delinquency. They submitted that this was so whether the matters were considered individually (as the plaintiffs submitted they should be) or cumulatively.

23 Further, the plaintiffs submitted that the conduct of some of the defendants was such as to disentitle them from receiving any order for indemnity costs, even if I were to conclude that the plaintiffs’ conduct of the proceedings and other matters did exhibit the required misconduct or relevant delinquency. The plaintiffs relied on findings that I had made as to the credibility of the relevant defendants or their witnesses, and on what the plaintiffs said were those defendants’ roles in the misfortunes of which the plaintiffs had complained.

The principles

24 I attempted to summarise the applicable principles in my judgment on costs in White ACT (in liquidation) v G B White [2004] NSWSC 303 at paras [5]-[11]. The parties accepted that what I there said could be applied to the present case, although they referred to additional authority. I said:

“The basic rule is that a successful party is entitled to its costs on a party and party basis: see for example Pt 52A r 32. See also the judgment of Mason P in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616.

It is clear, of course, that there is a discretion to award costs on the indemnity basis. That follows from, among other sources, s 76(1) of the Supreme Court Act and Pt 52A r 32.

The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, 256-257.

At the most basic level, the statements of principle indicate - not unsurprisingly - that there must be some sufficient special or unusual feature to justify departure from the ordinary rule.

I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 9. Their Honours said at [44] (I omit citations):

“It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part.”

Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories

NMFM Property Pty Limited v Citibank Limited (No 2)

25 The defendants referred also to the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 428. His Honour dealt at length with the principles relating to indemnity costs. In a passage that is frequently quoted and applied, his Honour at 256-257 distilled a number of principles out of the cases to which he had referred.

It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:

1. The problem arises in adversary litigation, ie litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.

Berry v British Transport Commission

Cachia v Hanes

Qantas

Andrews v Barnes

Fountain Selected Meats

Preston v Preston

Tetijo

Ragata

Fountain

Thors v Weekes

Tetijo

Ragata)

Fountain

J-Corp

Ragata

Messiter v Hutchinson

Maitland Hospital v Fisher (No 2)

Crisp v Kent

EMI Records

6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.

26 Nonetheless, it is important to bear in mind that the principles distilled by his Honour out of the authorities are guides to the exercise of the discretion. They neither define the circumstances in which the discretion is to be exercised nor limit its width. It remains, as I said in White ACT, a discretion that is constrained only by the requirement that it be exercised judicially. That is to say, it is a discretion to be exercised on a consideration of all (and only) relevant facts, taking into account relevant statements of principle and revealing a conclusion supported by principled and logical reasoning. A party is not entitled to indemnity costs simply because (for example) one or more of the factors identified in cases such as Colgate Palmolive is present. Nor is a party disentitled to indemnity costs simply because none of those factors is present.

27 As I have noted, the plaintiffs submitted that the conduct of certain defendants was such as to disentitle them to an order for indemnity costs even if (contrary to the plaintiffs’ principal submission) any ground for awarding indemnity costs had been made out. The defendants at whom this submission was directed appeared to accept in principle that their conduct could be relevant to a decision on the question of indemnity costs. At the level of principle, that must be so. It is unnecessary and probably unhelpful to give examples of what might be called disentitling conduct. However, the defendants submitted that many of the matters of which the plaintiffs complained were attempts to traverse my findings in Ingot (No.6), or to rerun the case that had failed against them; and that other matters relied upon did not amount to disentitling conduct.

The circumstances on which the defendants relied

28 The defendants relied on a number of matters. Although individual defendants put their submissions in different ways, it is convenient to list and consider the various factors on which they relied. Those factors were:

(1) My conclusion that, in general, I should not accept Mr Saville’s uncorroborated evidence ( Ingot (No.6 ) at [146]) and my rejection of Mr Saville’s evidence of reliance ( Ingot (No.6 ) at [427] and following). The defendants submitted that the plaintiffs must have known, or properly advised should have known, that they would fail on reliance and therefore on a crucial aspect of their case.

(2) The complex and indiscriminate way in which the plaintiffs pleaded their case (referred to from time to time as a “scattergun” approach); and in particular the failure of the plaintiffs to confine particular allegations of misleading or deceptive conduct to particular defendants. The defendants who relied on this submitted that the proceedings had been vastly complicated and extended in duration by the plaintiffs’ approach to the articulation of their case.

(3) An associated matter: the plaintiffs’ failure to trim from their case trivial and manifestly unsustainable allegations of misleading or deceptive conduct: for example, the allegation relating to exchange rates (i.e, that the draft prospectus and prospectus were misleading or deceptive because they presented AUD figures calculated by reference to an exchange rate that was not current at the date the draft prospectus was given to Mr Saville or the date the prospectus was registered).

(4) The serious nature of the allegations made by the plaintiffs against many of the defendants. PwC in particular relied on this, referring to the allegation (which I rejected) that Mr Murray knew of leg two of the GCR transaction.

(Ingot) (No.6)

29 In addition, particular defendants relied on particular matters. For example, Macquarie referred to the “hopeless” implied term case (6 FAS paras 91-103; Ingot (No.6) at [592] – [600]). It stressed that in continuing this aspect of their case, the plaintiffs had not sought to advance the arguments to which I referred at [597].

30 Messrs Beach, Deary and Morrissey asserted that their limited involvement in the matters of which the plaintiffs complained, and their reliance on the work and conclusions of the DDC, had been overlooked or ignored by the plaintiffs; and that the plaintiffs had failed to take into account what had been learnt through the lengthy and detailed examination of various witnesses conducted by the liquidator of NCRH and NCRA.

31 I deal with these matters in turn.

Failure to prove reliance

32 There is a difficulty with this aspect of the defendants’ submissions. If Mr Saville’s statements were to be taken at face value, there would have been at least an arguable case of reliance. To put the matter another way: a person who read Mr Saville’s witness statements, in the process of analysing the plaintiff’s claim, could well conclude that if Mr Saville came up to proof, the plaintiffs might make good their case on reliance.

33 It was not suggested that the various statements made by Mr Saville, and relied upon as his evidence in chief in the proceedings, did not reflect instructions given by him at the time those statements were prepared. Had Mr Saville adhered to the substance of what he had said in those statements, and, more importantly, if Mr Saville had been accepted as a witness on whose evidence the Court could rely, the plaintiffs may well have made good their case on reliance. The difficulty is that Mr Saville did not come up to proof; and I did not accept him as a reliable witness.

34 Macquarie in particular submitted that if the plaintiffs had thought about the matter, they must have realised that Mr Saville’s evidence on the topic of reliance would fall short of what was required. In essence, Macquarie’s submission was that if Mr Saville had been subjected to some sort of private cross-examination, the deficiencies in his evidence might have been exposed.

35 It must be remembered that Mr Saville was subjected to a detailed and searching cross-examination, extending over some ten days of hearing. It is not surprising that the process exposed some deficiencies in his recollection, and difficulties in his evidence. It is quite another thing to say that Mr Saville, or those advising the plaintiffs, should have realised that his testimony would be damaged to the extent that it would be found unreliable.

36 It may be – I do not know – that Mr Saville underestimated the ordeal that he was to face; and that for this and other reasons he devoted insufficient time in preparation to rereading his statements and the numerous documents to which he referred in them. It may be that more could have been done, within the bounds of propriety and not extending to coaching, to prepare him to give evidence. It does not follow that, if these things were not done so that in consequence Mr Saville’s evidence suffered the fate that I have described, the plaintiffs should pay costs on the indemnity basis.

37 It is frequently the case in litigation that a witness – including a party – is not believed. That is an incident of the adversary system. Party and party costs are another incident of the adversary system, and will remain so until the legislature takes a different view (see Mason P in Rosniak at 616). If indemnity costs were available as a matter of course whenever a party was disbelieved, there would be a shift de facto in the “normal” basis of assessment of costs.

38 Thus, I do not regard the failure of the plaintiffs’ case on reliance, for the reasons that it did fail, as justifying the conclusion that the plaintiffs so misconducted themselves as to incur a liability to pay costs on the indemnity basis.

The “scattergun” approach; trivial and unsustainable allegations

39 It is convenient to consider together the matters referred to in [28(2), (3)] above.

40 The plaintiffs’ case was complex. The difficulties in its articulation may be gathered from the fact that it took the plaintiffs at least nine attempts to formulate it in a way that they wished to take to trial (the hearing proceeded on the basis of the 6th further amended summons (6 FAS); and in addition, there were a number of drafts formulated and circulated in respect of which leave to amend was either not sought or, if sought, refused). It is correct that the plaintiffs maintained a number of allegations that should not have been made or, more accurately, should not have been taken to trial. However, I do not think that either of those matters had a significant impact on the costs that were incurred.

41 The Macquarie parties in particular raised this point at the conclusion of the plaintiffs’ evidence in chief. Issue 26 reflects this (the issues, which are set out in Ingot (No.6) at [116], were revised from time to time). Further, some responsibility for the complexity of the issues at trial must be attributed to the defendants: see in particular the statement of the issues as between the plaintiffs and Macquarie, and the plaintiffs and Phillips Fox.

42 I do not think that the way in which the plaintiffs formulated their case, or the fact that they maintained a number of trivial and ultimately unsustainable allegations of misleading or deceptive conduct, substantially enlarged either the work undertaken by the defendants in preparation or the duration of the hearing; let alone that they (in particular, the first matter) did so “unreasonably”.

43 Thus, I do not see in these matters any justification for the award of indemnity costs.

Failure to prove loss

44 I said in Ingot (No.6) at [1135] that the plaintiffs accepted “that the assessment of their damages requires a comparison of the price they paid with the real or fair value of what they brought”. The parties referred to this as the “Potts v Miller “ approach (Potts v Miller (1940) 64 CLR 282). As the headnote to Potts states, “[t]he measure of damage in a case in which a person is induced by fraud to take up shares in a company is the difference between the amount he paid for the shares and the real value of the shares at the time of allotment, and not at any subsequent period …”.

45 Mr Forster appeared to suggest that the plaintiffs had not confined, or articulated, their case at trial in this way (T109.1-.15):

Your Honour did ask me as to our position in relation
to paragraph 1135, where your Honour says in the first
sentence:

The plaintiffs accept that the assessment
of their damages requires a comparison of
the price they paid with the real or fair
value of what they bought.

46 He then made the following submission (T109.38-110.05):

as there is a reasonable attempt in a reasonable manner to

against us.

47 Mr Forster submitted that there was a difference between the direct reliance case and the indirect causation case, and that this was relevant to the quantification of loss (T110.27-111.05):

MR FORSTER: I accept that, your Honour, but, as
I understand it, amongst the arguments that were put was
that there was the indirect causation. Your Honour
rejected that, but if your Honour had accepted that and if
your Honour takes the view - and in our submission your
Honour ought to take the view - that there was at least a
reasonable basis for putting that argument, and of course
if that argument had succeeded, the plaintiffs would have
at least succeeded against some people and your Honour
would have had to consider other issues --

HIS HONOUR: But damages are still an essential part of
that cause of action. It is still a cause of action for
misleading or deceptive conduct in one or other of the
statutory analogues, isn't it?

MR FORSTER: Yes.

HIS HONOUR: And damages is the gist of the action.

48 There are real difficulties in these submissions. The first is that what I said in Ingot (No.6) at [1175] reflected accurately the way in which the plaintiffs put their case at trial, as articulated in their closing written submissions. In section 1.5(1) of those submissions, the plaintiffs referred to two authorities: the decision of the High Court of Australia in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, and the decision of Eve J in Adams v Thrift [1915] 1 Ch 557. From the former case, they took the proposition that “[w]here a contract for the acquisition of land, chattels, businesses or shares is induced by misleading or deceptive conduct, it is permissible for the court to calculate damages (apart from consequential loss) as is done in deceit cases, by taking the difference from the price paid and the real value of the land at the relevant date. The relevant date is strictly speaking not the date when the contract is completed, but the date when it is made – the day on which the buyer became obliged to pay the purchase price on completion… . The law does not limit the buyer to market value for various reasons.”

49 From the second case, the plaintiffs took the proposition that, in the case of an allotment of shares pursuant to an application based on false statements as to minimum subscriptions received, “[t]he true measure [of damages] is the difference between the amount paid and the value of the shares at the date of allotment”.

50 In section 4.7.2 of their closing written submissions, the plaintiffs submitted, based on the evidence of Mr Gibbons to which I referred to Ingot (No.6) at [1128] to [1134], “that the true value of the Shares and Notes from at latest 31 December 1998 were [sic] zero.” The plaintiffs submitted that evidence of market sales should be disregarded, because the market was misinformed: a point that I accepted in part (Ingot (No.6) at [1138]).

51 The plaintiffs’ oral submissions on damages did not qualify, let alone depart from, the basis of assessment set out in the written submissions. It is plain from those written submissions that the plaintiffs did indeed accept - I might say, did indeed embrace – the Potts v Miller basis of assessment.

52 The plaintiff’s case on damages, as articulated in their written and oral submissions, is not inconsistent with their pleaded case. I say “not inconsistent” because there is not to be found in 6 FAS any express allegation that the rights, notes or shares acquired by the plaintiffs had no value at any particular time. The case on damages is set out in 6 FAS paragraphs 272 to 299. Paragraphs 273 to 295 set out the rights, notes or shares acquired by the various plaintiffs, and the amounts paid. Paragraphs 296 to 298 set out dealings between the plaintiffs in respect of those rights etc. Paragraph 299 alleges that in the premises each of the plaintiffs is the person who has suffered loss. There are then given particulars of “losses incurred.” Those particulars set out the rights etc acquired by each plaintiff and the prices at which they were acquired. They then allege the “Total Cost”: a sum in excess of $41 million. That appears to be the quantification of the “losses incurred”. It is at most implicit in the particulars that the rights etc acquired had no value, although the plaintiffs did not condescend to allege the date (or dates) at which the quantification of their loss by that means was undertaken.

53 For the reasons that I gave in Ingot (No.6) at [1126] to [1141], the plaintiffs failed to prove that they had suffered any loss. They thus failed to prove an element of each cause of action against each defendant.

54 The defendants’ attitude can hardly have come as a surprise to the plaintiffs. Macquarie’s solicitor, Mr Ashley Black of Mallesons Stephen Jaques, referred to “[t]he issue of quantification of the plaintiffs’ loss” in an affidavit sworn 18 December 2003. That affidavit was sworn in connection with an application for security for costs. In paragraphs 8 and 9 of that affidavit, Mr Black said:

[8] It is my understanding that the measure of the plaintiffs’ recoverable loss, should they succeed in establishing their claim that their investment in converting notes and other securities in NCRH was made in reliance on misrepresentations allegedly made by the Macquarie Parties, is the difference between the price paid for those securities and their true value at the date of allotment or acquisition by the plaintiffs. For the significant majority of the plaintiffs’ investments, that date will be 12 January 1999, the date on which the converting notes were allotted to the plaintiffs.

[9] In my opinion, based on the experience to which I refer in paragraph 2 above, the true value of converting notes and other securities in NCRH as at 12 January 1999 will depend on NCRH’s true consolidated net assets as at that date, which would in turn depend on the true value at that date of the assets and liabilities of its subsidiaries including NCRA. In my opinion, those assets will or may include the value of any rights of action which had already accrued at that date to NCRH or its subsidiaries, including NCRA, even though proceedings in respect of those causes of action were not commenced until a later date.

55 The plaintiffs cannot have thought that the issue disappeared thereafter. Phillips Fox prepared before the commencement of the hearing an outline of issues and topics to be addressed. That document was dated 29 September 2005. It raised, among the “[p]rincipal issues relating to Phillips Fox”, the following:

56 The matter was raised on day 28 of the hearing, when Mr Douglas QC for the plaintiffs foreshadowed that the plaintiffs might seek to lead further evidence dealing with the value of the notes (T2320 and following). That was after Mr Saville had been cross-examined; indeed, it was at a time when the plaintiffs were proposing to close their case “subject to” this point. Mr Dick of counsel for Phillips Fox referred to the outline of issues, and Mr Oslington QC for Macquarie referred to Mr Black’s affidavit. Mr Douglas said in answer (T2329.34):

“Your Honour, I am well aware of Mr Black’s contention in his affidavit in December 2003 that it is the difference between what we paid for them and what the market value was. But that is a matter for legal argument and I will address your Honour on that at the end of the day. There is plenty of evidence in court already as to what the effect of the disclosures which were made in February and March [1999] was upon the value of these shares. That of itself indicates what the effect of this information was on the market value of those shares.”

57 In their submissions in reply on the question of costs, the plaintiffs referred to the exchange on day 28. They said (para 2.1.6):

“well aware”

58 That submission is correct so far as it goes. But it overlooks the fact that, as I have demonstrated, the plaintiffs in their closing written submissions did put their case on damages on “the basis on which the Macquarie Parties contended that the Plaintiffs should calculate their damages”.

59 In amplification of the submission recorded at [57] above, the plaintiffs submitted (in the same document, para 2.1.10) that “[t]here were two alternative ways in which the Plaintiffs could reasonably have expected to succeed even if they did not attempt to prove their loss in the manner that the Macquarie Parties considered that that loss should have been proved.” Even if that is to be accepted – and I have to say that either of the ways then advanced would still require a comparison of the amount paid with the value of that for which it was paid – it fails to meet the basic point that the plaintiffs did not put their case in this way at the hearing.

60 In this context, the plaintiffs in their submissions on costs relied on what the Court had said in HTW Valuers at 666-667 [63]. Their Honours there considered the decision of the House of Lords in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254. They referred in particular to the speech of Lord Steyn, who as their Honours said “pointed out that the fundamental rule was that the plaintiff should be compensated; that the rule that turns on an assessment of value is only a means of giving effect to the overriding compensatory rules; and that the valuation of assets as at the date of the transaction is “simply a second order rule applicable only where the valuation method is employed…”. Their Honours said at 667 [65] that the approach might be open under s82 of the Trade Practices Act 1974.

61 The plaintiffs overlook the Court’s observations at 667 [65] that “a primary reason for the common adoption, in assessing damages in deceit, of the test of comparing the price paid for an asset with its true value when acquired is the desirability of separating out losses resulting from extraneous factors in the later history of the asset.”

62 In this case, it is clear that there were factors other than the alleged misleading or deceptive conduct that bore on the value of the assets – the notes and shares – acquired by the plaintiff. No doubt that explains the plaintiffs’ adoption of the Potts v Miller approach in their closing written submissions. The plaintiffs did not submit on the costs hearing that the approach to proof of damages adopted by them in their final submissions was something forced upon them by unforeseen circumstances, or anything other than the approach that they had intended all along to take. Nor do they suggest that the approach in fact taken by them in closing submissions was novel; and no such submission, if made, could be upheld.

63 I repeat that in final submissions the plaintiffs:

(1) Asserted that damages were to be quantified in accordance with the Potts v Miller measure (although they did not refer to that decision); and

Ingot (No.6)

64 The inference that I draw from all of this is that the plaintiffs, knowing or accepting that they would have to prove damages by comparing the amounts paid by them for the rights, notes or shares with their true value at the relevant time, elected to do so on the basis of evidence that suffered from the fundamental defects to which I adverted in the relevant paragraphs of Ingot (No.6).

65 It seems to me to be inevitable that the plaintiffs, properly advised, must have realised that the evidence led by them at the trial could not prove that they had sustained any loss according to the methodology for quantification of loss that they advanced. I think that this is an example of relevant delinquency sufficient to justify an award of indemnity costs. The inevitable result of the plaintiffs’ approach was to subject the defendants to what turned out to be a six month hearing, to defend a case that was bound to fail. It follows that, in principle, the defendants have made out their claim to have costs assessed on the indemnity basis.

Three further questions

66 That conclusion means that there are three further questions to be considered:

(1) If indemnity costs are to be awarded, from what date should they be payable?

(2) Is the conduct of any defendant sufficient to deprive him or it of the benefit of indemnity costs?

Operative date

67 The defendants submitted, although with varying degrees of enthusiasm, that if I were to conclude that the plaintiffs were guilty of relevant misconduct of or delinquency, in going to trial without evidence of proof of damages, then indemnity costs should run from the commencement of the proceedings. I do not accept that proposition. There is no basis for inferring that the plaintiffs never turned their mind to the question of quantification of loss. They did, but in a way that failed to address, or provide evidence in accordance with, the appropriate measure of damages.

68 From time to time, orders were made for the plaintiffs to serve the evidence on which they proposed to rely at the hearing. They served evidence more or less in accordance with those directions. The evidence so served did not include any affidavit or statement by Mr Gibbons. It appears that his statement (exhibit PX14) was not available until shortly before Mr Gibbons was called to give evidence on 5 December 2005 (T2354.34). For the reasons appearing from the cross-examination of Mr Gibbons and summarised in Ingot (No.6) at [1129] and following, that evidence did not prove the plaintiffs’ loss as at the relevant date; and for this purpose it matters not whether the relevant date is the date on which the offer closed (or the antecedent dates when the plaintiffs committed themselves to their underwriting and firm placement offers) or the date of allotment, 12 January 1999.

69 In circumstances where Macquarie drew to the plaintiffs’ attention what it contended to be, and the plaintiffs subsequently accepted was, the proper basis for the assessment of damages (Mr Black’s affidavit; Ingot (No.6) at [1135]), the date from which indemnity costs should run is I think sometime between 14 December 2003 and the commencement of the hearing on 17 October 2005.

70 The selection of a commencement date is not a matter of precise science. It needs to take account of the fact that, had the plaintiffs turned their minds to the question of proof of loss, they could have served appropriate evidence at some time during 2005 but well in advance of the date for trial without prejudicing (at least in any significant way) the hearing date that had been allocated. (It may be noted that the hearing date did shift to some extent in any event, because of perfectly understandable pre-trial developments and difficulties).

71 6 FAS was filed on 14 April 2005, pursuant to leave granted on 4 April 2005 (Ingotv Macquarie[No.3] [2005] NSWSC 255 at [71]). By then, the time for the filing of the plaintiffs’ evidence had passed, and there were directions for the filing of the defendants’ evidence by 3 August 2005 – that time was extended, in the case of some defendants). The 6 FAS did not change the way in which the plaintiffs put their case on damages.

72 In the circumstances, I think, the plaintiffs, properly advised, should have reviewed their case on damages and should have served appropriate evidence, before the question of amendment, which led ultimately to the filing of 6 FAS, was agitated and disposed of. Taking what I acknowledge is a somewhat broad brush approach, I think that the appropriate balancing of the considerations to which I have referred requires that the order for indemnity costs operate generally (but subject to individual considerations in the case of individual defendants) from 1 January 2005.

Disentitling conduct

73 As I have noted at [27] above, the defendants in question appear to have accepted in principle that a defendant’s conduct may be relevant to the question of whether that defendant should be awarded indemnity costs if otherwise a ground for the award of costs on that basis has been made out.

74 The plaintiffs referred to the evidence given by or for many of the defendants in question. They submitted that my findings as to the credibility of those witnesses mean that they, or the party who called them, should not have indemnity costs. I do not understand why this should be so. The plaintiffs did not submit that (for example) the hearing was extended in some material way by reason of the alleged unsatisfactory aspects of the evidence to which they referred. Nor did the plaintiffs submit that their conduct of the proceedings was in some way influenced by, or a reaction to, the alleged unsatisfactory evidence. Indeed, having noted the findings that I made as to various witnesses, the plaintiffs did not really explain how those findings might operate to disentitle a particular witness, or the party by whom he was called, from receiving indemnity costs.

75 The plaintiffs submitted, in relation to Mr Saville’s unsatisfactory evidence, that my findings did not mean that he was “knowingly giving false evidence nor… that the evidence that he was giving was necessarily untrue “(submissions in reply on costs dated 1 February 2008, para 2.3.4). Those comments apply equally to at least some of the other witnesses whose evidence was unsatisfactory, although it is correct to say that I found that some features of the evidence given by Mr Peck, Mr Aroney and Mr Williams were evasive or untruthful. Indemnity costs are not awarded to punish an unsuccessful party, but more fully to compensate the successful party. They should not be withheld to punish a party. If a party’s conduct (including the evidence of the party or its witnesses), is to amount to a ground for withholding indemnity costs, it must be because it is demonstrative of some relevant misconduct or delinquency on its part. Thus, I think, there must be some causal connection between the conduct alleged against the party and the relevant misconduct or delinquency of which (by hypothesis) the other party has been found guilty. In this case, there is no such connection; and the plaintiffs’ submissions did not seek to demonstrate one.

Should all defendants have the benefit of indemnity costs?

76 Although not all defendants raised the point relating to failure to prove loss, they all took it in final submissions. It was a failure that was fatal as against all of them. This is most conspicuous in the case of Mr Daya, whom I had found to have been guilty of misleading or deceptive conduct in relation to his concealment of material matters from the DDC (Ingot (No.6) at [908] to [926] and in particular at [931]). As I have noted at [7(1)] above, Mr Daya did not assert an entitlement to indemnity costs.

77 A notable feature of this case was that some defendants undertook a disproportionate burden in meeting the plaintiffs case. In very general terms, those defendants with the most resources appeared to undertake the bulk of the work in defending the plaintiffs’ claims. Inevitably, having regard to the structure of 6 FAS and the way that the plaintiffs put their cases against the various defendants, much of the work undertaken by one defendant or group of defendants enured for the benefit of all defendants, to the extent that it attacked the general basis on which the plaintiffs put their case rather than considerations peculiar to a particular defendant or group of defendants.

78 In those circumstances, I do not think that the plaintiffs’ submission is of any particular significance, although that is not to say that a similar submission in a different case might not attract some support. In this context, it is necessary to bear in mind that the basis for the awarding of indemnity costs is some relevant misconduct or delinquency on the part of a party. Where that misconduct or delinquency is constituted by the advancing of a case that, on proper reflection, should have been seen to be doomed to fail, it is not necessary that the party should have been warned of this in advance. In circumstances where the party was warned in advance, it is not necessary that all other parties should have undertaken the warning. The question is really one of the assessment of the conduct of the party against whom indemnity costs are sought in the light of all relevant circumstances. To my mind, the relevant circumstances include the warnings that were given; and the warnings do not become irrelevant in the case of parties who did not give them.

79 The plaintiffs appear to characterise as in some way opportunistic the attitude of those defendants who did not refer in express terms to the Potts v Miller approach to quantification of damages or to the inadequacy of the plaintiffs’ evidence in that regard. However, I think, that submission to a large extent overlooks the way in which these proceedings were run. In the particular circumstances with which I am faced, I do not regard the failure of a particular defendant to add his or its voice to the warnings given as a reason for depriving that defendant of the benefit of indemnity costs if otherwise the entitlement is made out.

Conclusion

80 I therefore conclude that the costs payable by the plaintiffs to all defendants except Mr Daya, Mr Williams and Trowbridge should be paid on the party and party basis up until 31 December 2004 and on the indemnity basis from 1 January 2005, unless in the case of any relevant defendant an entitlement to indemnity costs has been engendered by an antecedent unaccepted or rejected Calderbank offer.

Indemnity costs: Calderbank offers and related considerations

81 In this section, I deal with Calderbank or alleged Calderbank offers. It is not however necessary to consider the plaintiff’s concessions based on Calderbank offers made after January 2005.

Macquarie

82 The plaintiffs concede that they are liable to pay Macquarie’s costs on the indemnity basis from 6 July 2003, by reason of an unaccepted or rejected Calderbank offer of that date.

Mr Beach

83 Mr Beach relies on a letter dated 14 August 2002. The plaintiffs appear to accept that it was a Calderbank offer. They submit however that they did not act unreasonably in not accepting it.

84 The letter set out various (more or less non-contentious) matters relating to Mr Beach, including that he was never a member of the audit committee or the DDC. (My observation in Ingot (No.6) at [33] that “Mr Beach was also a member of the audit committee…” was incorrect, and the plaintiffs accept that. I note that this observation was not intended to be a finding of fact: see Ingot (No.6) at [10]. The correct position was recorded at [878].)

85 One of the matters stated in the letter was “that Mr Beach relied upon the efforts of the Due Diligence Committee, Management, PriceWaterHouseCoopers [sic], Trowbridge and Messrs Phillips Fox in the preparation of the prospectus and the verification of the contents thereof.

86 The operative part of the letter reads as follows:

“Against the above background, we are instructed to offer to settle the proceedings brought by the Plaintiffs against Mr Beach on the basis that there be a verdict in favour of Mr Beach with the Plaintiffs and Mr Beach making payment of their own respective costs and disbursements. Mr Beach would waive any entitlement to costs pursuant to the costs order on the security for costs application and would also return the guarantee providing security for costs.”

87 The offer was expressed to be open until 6 September 2002: i.e., in effect, for some three weeks. The plaintiffs did not submit that this was an inadequate time for them to consider and respond to the offer.

88 As the letter of 14 August 2002 indicated, an order had been made that the plaintiffs give Mr Beach security for costs, and the plaintiffs had been ordered to pay Mr Beach’s costs of the application for security for costs. It was agreed between the plaintiffs and Mr Beach that the costs payable to him on that application were quantified (I think, by consent, but it does not matter) at some $23,000.00. The total costs incurred by Mr Beach as at 14 August 2002 were said to be approximately $192,000.00.

89 Mr Forster submitted that the value of Mr Beach’s offer was therefore $23,000.00 foregone, as part of his offer to assume responsibility for all of his costs to the date of the offer. He submitted that it was not unreasonable for the plaintiffs to reject the offer.

90 In my view, the offer if accepted would have given something of value to the plaintiffs. On any view, and as must have been appreciated at the time, it would relieve them of the burden of Mr Beach’s costs of his application for security for costs. With hindsight, it would have relieved them also of the burden of his costs of defending the proceedings; but hindsight is not a safe tool to assist the exercise of the discretion as to indemnity costs.

91 It is correct to say, as the plaintiffs did, that if the proceedings had been settled against Mr Beach, they would have continued against his fellow non-executive directors Mr Deery and Mr Morrissey. It is correct to say that there was little (if anything) to distinguish the position and potential liability of Mr Beach from the position and potential liability of either of Mr Deery or Mr Morrissey. It is correct to say that the plaintiffs would have continued to incur the expenses of running their case against Messrs Deery and Morrissey. But it does not follow that the plaintiffs were entitled to ignore Mr Beach’s offer.

92 The letter of 14 August 2002 pointed out facts that should have made the plaintiffs aware (if they were not already aware) of the very limited nature of Mr Beach’s role in the circumstances leading up to the preparation of the draft prospectus and the issue of the registered prospectus. They should also have made the plaintiffs aware that Mr Beach may well have had the benefit of the statutory defences (ss1011 and 1318 of the Corporations Law as it then stood).

93 Thus, both because the offer proposed something of value and because it raised very serious questions as to Mr Beach’s role and his prospects of successfully defending the litigation, I think that it was incumbent on the plaintiffs to give it more consideration than apparently they did. In this context, I note that the plaintiffs have not put on any evidence as to their consideration of, or reasons at the time for rejecting or not accepting, Mr Beach’s offer.

94 In the circumstances, I conclude that Mr Beach is entitled to have his costs paid on the indemnity basis from a date earlier than 1 January 2005. Since his offer gave the plaintiffs until 6 September 2002 to accept it, I think that indemnity costs should flow from the date of expiry of the offer. In other words, in Mr Beach’s case, I think that the appropriate order is that the plaintiffs pay his costs on the ordinary basis up until 6 September 2002 and on the indemnity basis thereafter.

Mr Peck

95 Mr Peck submits that his costs should be paid on the indemnity basis either ab initio (by reason of the plaintiffs’ failure to prove their loss; and I have rejected this approach) or from 9 September 2004. The latter alternative appears to be based on a mediation which took place on that date. Mr Peck’s submissions in support of the latter order suggest that the mediations (there were in fact three occasions when the parties sought to resolve their differences through mediation) offered the plaintiffs an opportunity “to discontinue these proceedings on the basis of payment of all the parties’ costs” and submit that “[t]he court can infer that no such offer was made” (written submissions dated 25 June 2007, para 11).

96 All I know about the mediations is that they failed to produce a resolution of the matters in dispute. There is no evidence from which I can infer that the failure of the mediations was due to some unreasonable conduct on the part of the plaintiffs. The failure of the mediations does not entitle Mr Peck to the particular order sought.

Interest

97 As I have noted at [4(7)] above, the plaintiffs and the defendants agree that interest should be payable in accordance with what I might call the “Lahoud” formula. I will so order.

Access to security

98 There are two separate matters that require consideration under this heading. The first is whether the Court should deal with it. The second, assuming a favourable answer to the first, is whether any order should be made, and if so in what form.

Is the question of access to guarantees to be decided at this stage?

99 The plaintiffs submitted that the question of access to the guarantees given to the various defendants was not among those ordered to be dealt with in the hearing to which these reasons relate.

100 When the matter was before the Court on 15 June 2007, orders were made that parties seeking an order for costs file and serve, within a specified time, a notice of motion setting out the costs orders sought and the evidence on which they relied in support of orders in respect of indemnity costs, costs of cross-claims and interest.

101 A number of the notices of motion filed pursuant to that order did include prayers for access to guarantees. Those defendants who did not seek this initially sought to do so by amendment. The plaintiffs submit that those prayers were not within the terms of the orders made on 15 May 2007.

102 The written submissions served and filed by the various defendants addressed the question of access to the guarantees. In very general terms, each defendant submitted that the costs incurred by him or it vastly exceeded the total of the amount for which he or it had been given security, and that on any basis the costs recoverable on assessment could not be less than the amount of the security.

103 There is no doubt that the plaintiffs were aware that the question of access to the guarantees was one which the defendants wished to canvas at this hearing. The plaintiffs did not submit that they were taken by surprise; nor could they. Indeed, the plaintiffs put on evidence (in the form of an affidavit from Mr Bass sworn 1 February 2008) dealing with issues relevant to some of the claims for access to the guarantees. Further, the plaintiffs addressed the substance or merits of those claims in their written submissions in reply.

104 In those circumstances, and regardless of the strict terms of the orders made on 15 May 2007, I think that the claims for access should be dealt with on their merits. I turn now to those merits.

The issues

105 The particular issues relating to the merits were:

(1) Whether having regard to the terms of the guarantees the Court could (or, if it could, should) make an order giving a defendant access to them;

(2) Whether an order for access should be made without first giving the plaintiffs the opportunity to pay the amount that would be demanded of the guarantor;

(3) Whether any defendant or group of defendants had made out a sufficient reason for an interim costs order;

(4) Whether the defendants’ evidence was sufficient to demonstrate that each defendant or group of defendants must recover, on any assessment, costs at least equal to the amount of the guarantees given in favour of that defendant or group of defendants;

(5) Whether in the case of particular defendants there was any credit risk: i.e, a risk that if costs were paid, and the plaintiffs’ appeal in respect of that defendant later succeeded and the costs orders were set aside, that defendant would have the means to repay any amount paid to him or it. The plaintiffs did not put any submission as to credit risk against Macquarie. They were ambivalent as to whether such a submission was put against PwC (saying that it was in one place and that it was not in another). They put it against the other defendants excluding Trowbridge (with whom, as I have said, the plaintiffs had reached a settlement); and

Terms of the guarantees

106 From time to time, the plaintiffs were ordered to provide security for the defendants’ costs. Security was provided by way of bank guarantee given by HSBC Bank Australia Limited (“the Bank”) in favour of the relevant defendant or defendants. The guarantees were in a standard form. Each stated that at the request of the various plaintiffs, “the Bank guarantees payment to the Beneficiaries [i.e., the defendant or defendants to whom the guarantee was addressed] up to a maximum of [the amount for which security was ordered]… in respect of any cost order entered in favour of the Beneficiaries or any one of them against the Client [i.e., the plaintiffs] or any of them (“Order”)” in the Ingot proceedings.

107 Each guarantee stated also:

“The Bank unconditionally hereby undertakes to pay the Beneficiaries, upon receipt of your written demand from the Beneficiary [sic] attaching a sealed copy of the Order, the whole or any part of the amount of costs due pursuant to the Order (as set out in a certificate issued by a costs assessor in respect of that order… or as otherwise determined by a costs assessment or court order specifying the amount of costs or as agreed as between the parties…” up to the total amount of the guarantee.

108 The plaintiffs’ primary – and in my view correct – submission was that no defendant could have access to any guarantee until there was an “amount of costs due” pursuant to an order of the Court, assessment or agreement. The plaintiffs submitted that since there was no order, assessment or agreement, there was no basis on which the Court could (or, if it could, should) permit any defendant to have access to a guarantee issued in its favour. The defendants sought to counter the plaintiffs’ submission by seeking an order now for the payment of costs, to any defendant, in an amount equal to the total of guarantees issued in favour of that defendant. However, no defendant except Mr Peck and PwC had sought such an order in his or its notice of motion or amended notice of motion seeking costs orders. In Mr Peck’s case, such an order was sought by paragraph 25AA of his amended notice of motion dated 30 January 2008. That notice of motion was circulated on or shortly after its date, and was filed in Court during the costs hearing with which these reasons are concerned.

First issue – the terms of the guarantees

109 For the reasons that I have indicated, I think that the terms of the guarantees do not permit a defendant to have access to any guarantee in his or its favour unless there is a costs order in his or its favour. Thus, I think, the only way that the Court could make an order in relation to access to the guarantees is if it first makes an interim costs order in favour of a defendant. The relevant question is, therefore, whether any such order should now be made.

Second issue – opportunity to the plaintiffs to pay

110 If the pre-condition - the making of an interim costs order - is satisfied, I think that the plaintiffs should be given a reasonable opportunity themselves to pay without having their guarantees called upon. There was no serious opposition to this, although there might have been differing views as to what might be a reasonable time.

111 The plaintiffs submitted that if an interim costs order were made in favour of a particular defendant, and the plaintiffs satisfied that costs order, then any guarantee given in favour of that defendant should be returned for cancellation. (It is of course implicit in this that the amount ordered and paid be at least equal to the amount of the guarantee.) Although the defendants did not address that submission at length, it should be accepted. The defendants are entitled to the benefit of the guarantees so long as any sum ordered to be paid for which guarantees stand as security is unpaid. They are not entitled to retain guarantees once costs in at least the amount of the guarantees, and for which the guarantees stand as security, have been paid.

188 It is apparent from the reasoning of Bergin J that she did not regard it as unreasonable of Macquarie to proceed in the way that it sought to do. I respectfully agree. The question of reasonableness is to be judged at the time that the application for leave was made, not now; and at the time the application was made, the liquidator’s attitude made it plain that there was a real risk of re-litigation of any conclusions of fact and law with which the liquidator might wish to disagree.

189 This deals with the primary submission of NCRA: that, Macquarie having chosen to proceed by joining it rather than utilising the mechanism of proof of debt, “the justice of the case” requires Macquarie to indemnify NCRA for all of its costs incurred. That being so, the remaining ground for ordering indemnity costs is the search for some relevant misconduct or delinquency. It is sufficient to say that, to the extent that this second level test was pressed, there is no basis for finding any relevant misconduct or delinquency.

190 It follows, as to the 30th cross-claim, that the costs orders should reflect the plaintiffs’ concessions (including as to the payment of costs on the indemnity basis from, in the case of Macquarie, 6 July 2003); but that NCRA’s rights against Macquarie should be reserved in the event that the plaintiffs do not pay NCRA’s costs of the 30th cross-claim.

191 Because I have concluded that Macquarie should not indemnify NCRA for all NCRA’s costs incurred as cross-defendant or cross-claimant in respect of any cross-claim, it is unnecessary to consider Macquarie’s further submission recorded at [12] above.

Guy Carpenter’s claim

192 I have set out at [15] above the issues between NCRA and Guy Carpenter. NCRA did not appear to dispute that Guy Carpenter was entitled to interest on costs, or that the formula propounded by Guy Carpenter was appropriate.

193 The second issue can be dealt with shortly. NCRA submitted that the costs relating to proceedings 2371 of 2002 should exclude all costs claimed by Guy Carpenter in earlier applications for assessment following costs orders made in those proceedings on 4 April 2005. Guy Carpenter accepts this is so. Thus, as to the second issue, the costs order should be to the effect that NCRA pay Guy Carpenter’s costs in proceedings No.2731 of 2002 to the extent that those costs have not been the subject of applications for assessment in respect of any existing costs order. The question, whether those costs should be assessed and paid on the party and party basis or the indemnity basis, stands or falls with Guy Carpenter’s principal application, to which I now turn.

Guy Carpenter’s application for indemnity costs

194 Guy Carpenter claimed indemnity costs from one of four alternative dates (see prayer 1 of its amended notice of motion filed in court):

(1) The commencement of the proceedings against it (i.e, from service of the 33rd cross-claim on 18 June 2004);

(3) The date of expiry of an alleged Calderbank offer; 16 March 2006; or

Ingot (No.6)

195 It is convenient to discuss the first, second and fourth of those dates together.

The fundamental flaw in NCRA’s case against Guy Carpenter

196 NCRA’s case on causation was in substance that NCRA’s results were overstated because leg one of the GCR transaction was brought to account as at 30 June 2006 and leg two was not (and thereby, on consolidation, NCRH’s results were equally overstated); that thereby NCRH was able to report compliance with the net worth covenant in the Dresdner facility; and if the results had not been so overstated, so that the compliance certificate could not be issued, Dresdner would have enforced its securities and effectively “pulled the plug” on the capital raising.

197 I set out the pleaded case on causation in Ingot (No.6) at [1357]. As I observed at [1359], it was clear that if Dresdner had decided to terminate the facility, call up the loan and exercise its powers on default, the capital raising would not have proceeded. Thus, as the subheading preceding that paragraph suggested, Dresdner’s attitude was the key to the question of causation.

198 The evidence available to NCRA on the question of Dresdner’s attitude included memoranda and the like produced by Mr Valencourt and his colleagues, and (at least at some stage) a statement from Mr Valencourt. I analysed the documentary evidence at some length in Ingot (No.6) at [1360] to [1387], and in the last of those paragraphs concluded that “Dresdner would have continued to negotiate with NCRH for an amended facility even if the “true” net worth as at 30 June 1998 had been disclosed to it, and that it would not have acted… to terminate the facility, call up the loan and exercise its rights on default in that hypothetical event”.

199 Thus, the documentary evidence did not support NCRA’s case on causation. I have to say that I do not understand how anyone who read that documentary material carefully and objectively could have thought that it did.

200 NCRA did however have available to it a statement from Mr Valencourt. With some reluctance, I am prepared to assume, from the circumstance that Mr Valencourt was prepared to make a statement, that at some time he might have been willing to travel to Australia for the purpose of giving evidence, or at least to make himself available for cross-examination via video link. I say “with some reluctance” because NCRA put on no evidence as to Mr Valencourt’s willingness at any time to give evidence.

201 Mr Valencourt’s statement dealt with a number of topics, including:

(1) His education and employment history;

(2) His functions in relation to the New Cap Group; and

202 Taking Mr Valencourt’s statement at face value, his role was as “Dresdner’s principal contact person with… NCRH … and, by extension, for its operating subsidiaries”. It is reasonably clear from the documents that although Mr Valencourt had responsibility for managing the relationship, and making recommendations, he did not have ultimate decision - making responsibility: either in relation to making the facility available or in relation to terminating it for default.

203 In dealing with the events of 1998, Mr Valencourt referred to the net worth covenant and to the attempts from time to time to renegotiate it. He dealt also with the renegotiation of the facility (whereby in effect the facility limit was reduced and all lenders other than Dresdner – the original facility was syndicated among a number of lenders – were paid out). He dealt with the attempts further to renegotiate that facility.

204 In general, Mr Valencourt’s evidence proceeded by referring to relevant documents and offering some commentary on or analysis of them. At no stage, at least so far as his statement discloses, did Mr Valencourt suggest that his attitude at the time might have been anything other than as disclosed in documents created by him.

205 Thus, there is nothing in Mr Valencourt’s statement to dispel what in my view was the strong and clear inference available from the Dresdner documents: namely, the conclusion that I recorded in Ingot (No.6) at [1387], that I have extracted at [198] above.

206 NCRA did not submit that it had any other material available to it that bore on the key question of causation, at least in so far as that question related to the attitude of Dresdner. Thus, this aspect of the costs debate must proceed on the basis that at no time did NCRA have any realistic prospect of adducing evidence on the key question of causation except through the documents to which I have referred and the statement of Mr Valencourt (in circumstances where the statement did no more than refer to and comment on, without in any way affecting the inferences to be drawn from, the documents).

The flaw is pointed out

207 There was a mediation on 7 and 8 September 2004. Guy Carpenter’s position paper at that mediation was put into evidence (without objection). It adverted, although briefly, to the causation argument. There was a second mediation a little over a year later, on 27 September 2005. If Guy Carpenter prepared a separate position paper for that mediation, it was not referred to in evidence. However, the question of causation may have been raised at that second mediation, because Mr Valencourt’s statement was signed a few weeks later, on 5 October 2005.

208 One of the key documents on the question of causation was a memorandum of 11 October 1998 to Dresdner’s credit committee. I dealt with that briefly in Ingot (No.6) at [389], and more extensively at [1383] to [1385]. For the reasons that I gave in those paragraphs, that memorandum raised immense difficulties for NCRA’s case on causation. The memorandum does not appear to be among the documents considered by Mr Valencourt in his statement. It would appear that it came into NCRA’s possession in October 2005, and certainly no later than 13 October 2005. The date of 13 October 2005 can be fixed because on that date Henry Davis York (for NCRA) sent to TressCox (for Guy Carpenter) a list of the documents to be included in NCRA’s tender bundle. Those documents included the memorandum in question. It was one of those with which Mr Pembroke dealt in his opening when he referred to the causation issue.

209 On 14 October 2005, Guy Carpenter’s London lawyers, Herbert Smith LLP, wrote to Henry Davis York. That letter set out what its author considered to be weaknesses in NCRA’s case against Guy Carpenter. It dealt (among other things) with the question of causation, and in the course of doing so referred specifically to Dresdner’s attitude. By then, Mr Valencourt’s statement had been made available. The letter said of this statement that [n]othing in [it] is to the effect that Dresdner would have stopped negotiating and called in the facility.” For reasons that will be apparent from what I have said, I agree with that proposition.

210 Further, the letter noted that “the evidence points the other way”. It illustrated the point by referring to relevant documents. In substance, it made relatively briefly the points that I made at greater length in Ingot (No.6) at [1360] to [1387].

211 As a follow-up to the letter of 14 October 2005, there was a meeting between the legal representatives of Guy Carpenter and NCRA on 19 October 2005. Settlement was discussed but not achieved.

212 Mr Pembroke opened Guy Carpenter’s case on 1 November 2005. He referred to the question of causation at T869.9 – 870.21. He made the point that the case on causation “is not… born out… by the documents” (T869.22) and that “Dresdner … was prepared to assist New Cap to the fullest to ensure the successful issue of a prospectus to the public. The issue of the prospectus offered Dresdner an exit strategy…”. He identified, although he did not refer specifically to, the documents that supported his submission; they were in substance the documents on which my analysis was based.

213 There was subsequent correspondence and discussions between the legal representatives of Guy Carpenter and NCRA, in the course of which suggestions were made as to possible ways in which their disputes might be resolved. As I have indicated, the correspondence after 1 November 2005 included what Guy Carpenter said was a Calderbank offer dated 16 February 2006, which expired on 16 March 2006.

214 Finally, in this context, it is necessary to note that senior counsel then appearing for NCRA informed the court on 3 May 2006 that Mr Valencourt would not make himself available to give evidence (T6782.3).

Guy Carpenter’s submissions

215 Guy Carpenter submitted in essence that it was relevantly unreasonable for NCRA to have commenced proceedings, by filing the 33rd cross-claim, when it could not be certain that it would succeed on the critical question of causation. Alternatively, Guy Carpenter submitted, it was relevantly unreasonable for NCRA to have continued the prosecution of the 33rd cross-claim, in circumstances where the deficiencies in its case on causation had been pointed out at the mediations of September 2004 and September 2005, and at length in the letter of 14 October 2005, and again in Mr Pembroke’s opening; and where the material available to it (including the key memorandum of 11 October 1998, and Mr Valencourt’s statement) either supported the criticisms made or (in the case of Mr Valencourt’s statement) did not address them.

216 Guy Carpenter submitted that NCRA’s failure to consider the question fully was all the more egregious in circumstances where the proceedings were commenced by its liquidator, and where funds otherwise available to meet the claims of creditors were diverted into the litigation.

NCRA’s submissions

217 NCRA noted that its case against Guy Carpenter included a “parasitic” claim to which the Dresdner issue was irrelevant. That may be so (although I refer to what I have said at [11] and elsewhere above on this topic); but it goes nowhere. To the extent that there was in truth a parasitic claim, it was immaterial in terms of costs. The real issue between NCRA and Guy Carpenter, to which virtually all the evidence and submissions were directed, was the case of involvement in the breaches of duty alleged against the directors and officers relating to the GCRA transaction.

218 NCRA submitted that its case on causation was not one recklessly undertaken or prosecuted. In essence, this aspect of its submissions on costs rehashed its submissions on causation in the main proceedings. Those submissions did not grapple with the Dresdner documents or the inferences to be drawn from them, but pointed to what was said to be “evidence that the motivations of certain NCRA directors and officers at the time… was to permit results to be reported to Dresdner which did not reveal a breach, for fear that a breach would prompt the obligation to repay” (submissions in reply on costs filed 8 August 2007, para 27).

219 Further, NCRA submitted that nothing in Ingot (No.6) “suggests that the Court apprehended that [case on causation] to be an unarguable hypothesis” (ibid, para 29). That may be so; but the question is not whether it was unarguable but whether, in all of the circumstances, it was relevantly unreasonable for NCRA to have commenced or prosecuted a case to which that causation element was crucial.

Analysis

220 In my view, it was not relevantly unreasonable for NCRA to commence proceedings against Guy Carpenter by filing the 33rd cross-claim. To this limited extent, its reliance on evidence as to the views of some of the directors and officers – that if the “true” financial position were revealed, Dresdner would “pull the plug” and the capital raising would not proceed – provided a sufficient justification for the commencement of proceedings. One might think that directors or officers who had had dealings with Dresdner would have some appreciation of its likely attitude if unfavourable financial results, showing a breach of the net worth covenant, were released.

221 However, that can provide no explanation for the decision to continue with the proceedings once the question of causation had been highlighted as a key issue and once the evidence on that point had been assembled. NCRA’s submissions really did not grapple with this point.

222 Although Guy Carpenter relied on the first mediation as an alternative commencement date for indemnity costs, I do not think that it was relevantly unreasonable of NCRA to continue with prosecution of the 33rd cross-claim after the date of that first mediation. The documentary evidence had not been assembled, and NCRA had no statement from Mr Valencourt. However, the very fact that the issue had been raised at that mediation (and, I would infer, raised again at the September 2005 mediation) ought to have focussed NCRA’s attention on causation, even if the ordinary processes of preparation did not.

223 Further, in this context, I think that the Herbert Smith letter of 14 October 2005 is of key significance. That letter, written with the benefit of both Mr Valencourt’s statement and the 11 October 1998 memorandum, pointed out in what I think was an accurate way the essential flaw in the causation case. Of course, a party to litigation is not obliged to accept everything that its opponent says. But even if preceding events had not focused attention on the question of causation, the letter of 14 October 2005 should have done so. The issues that it raised demanded the closest consideration.

224 That letter is the background to Mr Pembroke’s opening on 1 November 2005. The points made in the letter were reinforced, and the relevant documents were identified. The evidence was complete. As I have said, I am prepared to assume that NCRA then had some reasonable ground for thinking that Mr Valencourt would give evidence. But even if it did have that reasonable ground, it had no reasonable ground (at least, so far as the evidence on the question of costs has shown) for thinking that he could be of any real assistance in dispelling the inference available from the contemporaneous documents.

Decision

225 In those circumstances, I think that it was relevantly unreasonable for NCRA to have continued the prosecution of the 33rd cross-claim after 1 November 2005. In circumstances where the issue of causation had been drawn repeatedly to the attention of NCRA and its legal advisers, I think that the unreasonable conduct to which I have referred is sufficient to justify an order that NCRA pay Guy Carpenter’s costs on the indemnity basis after 1 November 2005.

The alleged Calderbank offer

226 The conclusion to which I have come makes it unnecessary to consider the competing submissions in relation to the offer of 16 February 2006 which expired on 16 March 2006. I should however note that although the offer was to pay a sum of money ($500,000.00), NCRA did not accept that it should properly be characterised as a “Calderbank” offer, or at least as an offer, the nonacceptance of which would engender the costs consequences commonly sought to be invoked by reference to Calderbank v Calderbank [reference].

Conclusion

227 NCRA should pay Guy Carpenter’s costs on the party and party basis up until 1 November 2005, and on the indemnity basis thereafter. To the extent that there are outstanding unresolved costs questions relating to proceedings 2371 of 2002 then NCRA, subject to any existing costs order, should pay the costs in question on the party and party basis.

Parasitic aspects of the 33rd and 36th cross-claims

228 So far, I have excluded from consideration the parasitic aspects of the 33rd and 36th cross-claims. The 33rd may be dealt with briefly.

229 Although NCRA’s written submissions suggested that the 33rd cross-claim as well as the 36th cross-claim had some parasitic element, that can be disregarded essentially for the reasons indicated at [11] above: namely, that it was parasitic not on any claim brought by another party against Guy Carpenter but upon one aspect of NCRA’s cross-claims against the directors and officers.

230 In the 36th cross-claim, NCRA advanced three claims against the cross-defendant directors or officers. The first was based on the GCR transaction, and the circumstances relating to the non-disclosure of leg two. The second related to the failure to put the company into run-off. The third was simply a case for contribution or indemnity, which was entirely parasitic upon the plaintiffs’ claims against those directors and officers. There was a question as to what costs order should be made in respect of the costs of the parasitic claim.

231 The reality is that the separable costs relating to the parasitic aspect of the 36th cross-claim will be minimal or less. It is difficult to imagine how the directors and officers could have incurred costs in relation to that aspect of the 36th cross-claim that they have not already incurred in relation to their defence of the equivalent claims brought by the plaintiffs against them. The directors and officers will have their costs from the plaintiffs, and will also have their costs of the 36th cross-claim from NCRA. I have difficulty in understanding how any significant costs will have been incurred either by NCRA in pursuing the parasitic aspect of the 36th cross-claim or by the cross-defendants in defending it. I have great difficulty in understanding how the amounts involved could be sufficient to justify the difficulty and expense of seeking to isolate and quantify them. In circumstances where the directors and officers will not be out of pocket in any relevant way (because of the costs orders that will be made in their favour against the plaintiffs and against NCRA), I have very great difficulty in seeing why the question should be pursued.

232 I therefore see no reason for including in the costs recoverable by NCRA such costs (if any) as may relate purely to the parasitic aspect of the 36th cross-claim.

Costs of the 34th and 35th cross-claims and related cross-claims

233 As I have noted at [4](3), (4)], the plaintiffs accepted that they should bear the costs of the 1st to 32nd cross-claims. Those cross-claims include cross-claims brought by defendants against NCRA for contribution or indemnity in respect of the plaintiff’s claims against those defendants. Those cross-claims against NCRA were parasitic upon the plaintiffs’ case against the directors and officers of NCRA. The relevant cross-claimants said that if the plaintiffs made good that case, the relevant acts or omissions of those directors and officers should be imputed to NCRA.

234 In those circumstances, it was hardly surprising that NCRA brought its own cross-claims against other defendants, seeking contribution or indemnity in relation to the 30th to 32nd cross-claims against it. (For present purposes, I exclude from NCRA’s cross-claims the 33rd and 36th cross-claims). The “relevant” cross-claims by NCRA (i.e., the 34th and 35th) were parasitic upon the plaintiffs’ claims against the relevant defendants. They simply asserted that if the plaintiffs made good their case against those defendants then those defendants were thereby liable to indemnify NCRA for any liability that it might have as cross-defendant, or to contribute to any such liability.

235 The 34th and 35th cross-claims failed, because the cross-claims against NCRA (and in any event, the plaintiffs’ claims upon which they were parasitic) failed. NCRA as cross-claimant is prima facie liable for the costs of those cross-claims. However, in the circumstances to which I have referred – including that the 34th and 35th cross-claims were responsive to the 30th to 32nd cross-claims in respect of which the plaintiffs have accepted a liability for all costs incurred – I see no reason why the plaintiffs should not bear the costs of the cross-defendants to the 34th and 35th cross-claims. Given the nature of those cross-claims, the amount of costs (or separate costs) is likely to be relatively small, if not insignificant.

The 37th cross-claim

236 This can be dealt with briefly. Guy Carpenter seeks its costs from Macquarie. There is no reason why Macquarie should not pay those costs, although the limitation sought by Macquarie – that the costs so payable “be limited to those costs specifically and solely attributable to [Guy Carpenter’s response to the 37th cross-claim” (see [18] above) – is appropriate.

237 I see no reason why the plaintiffs should pay those costs or indemnify Macquarie for them. The 37th cross-claim did not arise out of anything alleged by the plaintiffs against Macquarie, nor can it be said to be reflexive of or parasitic upon any claim made by the plaintiffs against Guy Carpenter, because the plaintiffs made no claim against Guy Carpenter.

Costs to date of the application for costs

238 My tentative view is that, as between the plaintiffs and the defendants, the plaintiffs should pay the costs to date of the applications for costs, but that those costs should be paid on the party and party basis. This is reflected in the draft orders to which I shall shortly turn. The regime for notification in respect of those draft orders applies as much to the proposed order for the costs of the applications to date as it does to any other draft order.

239 As to the 33rd cross-claim, my tentative view is that the costs of the application for costs in respect of it should be paid by NCRA, on the party and party basis.

240 As to the 36th cross-claim, my tentative view is that the costs of the applications for costs in respect of it should be paid by NCRA, on the party and party basis.

241 Again, the direction for notification extends to the costs orders proposed in relation to the 33rd and 36th cross-claims.

Draft orders

242 As indicated in the course of hearing, I will set out in draft the orders that I think should be made. I will give the parties an opportunity to consider and respond to those draft orders.

243 Unless any of the matters raised in the notifications that I will direct to be given in relation to the draft orders is such as to require further hearing (and if any party considers this to be so, it should so state in its notification) I will consider the notifications, and the appropriate form of orders to be made, without further hearing from the parties.

244 Before I set out the draft orders, I will mention a matter that is relevant to the next step that has been flagged: the applications for the making of gross sum orders for costs. There are conceptually two steps embodied in those applications. The first is to consider whether it is appropriate to make gross sum orders. The second, assuming a positive answer to the first, is the assessment of the amounts. The plaintiffs appeared to take the view that those two steps should be dealt with separately. As indicated in argument, I do not agree. I think that to do so would lead to prolongation and yet further expense. Thus, in principle, the parties should be ordered to file all evidence on which they rely in support of or answer to the claim for gross sum assessments, on the basis that there will be a hearing at which the Court will consider not only whether to make gross sum orders but, if they are to be made, in what sums they should be made.

245 I have to say that I feel less than fully qualified to decide questions of quantification of costs, as opposed to questions of principle that may arise before or in the course of quantification. One course might be to refer the question of quantification (should it arise) to a referee. That course will certainly lead to prolongation and further expense. Another course might be to appoint an expert to inquire into and report on any issues that are unresolved between the plaintiffs and any defendant on the question of gross sum costs. That again would lead to prolongation and further expense, but would give the Court independent assistance on what are likely to be very difficult questions. A third course might be to make an order under UCPR Rule 31.54 for the Court to obtain the assistance of an appropriate specially qualified person to advise on the questions in dispute. If that were done, I would envisage the appointment of a qualified costs consultant or costs assessor, who would consider all of the material relied upon by the parties, provide assistance to me in relation to the matters in dispute (which assistance of course would be disclosed to enable the parties to address it), and who would sit with me in effect as an assessor.

246 The parties should consider the difficulties with which the Court will be faced, and the possible means of alleviation of those difficulties to which I have referred. If the parties are able to suggest any other course, it will be considered. If the parties agree that any of the courses that I have proposed should be followed, then they should cooperate in the nomination of a suitably qualified person (or panel of persons) to act as a referee, court expert or “assessor”.

247 The orders that, as at present advised, I propose to make are:

(1) Subject to order (2), order the plaintiffs to pay the first to eleventh, thirteenth and fourteenth defendants’ (“relevant defendants”) costs of the proceedings.

(a) Are in addition to and not in derogation of any costs order already made in these proceedings, and do not include or extend to the costs the subject of any such order.

(b) Include each relevant defendant’s costs of prosecuting or defending those of the first to 32nd, 34th and 35th cross-claims to which he or it was a party, and extend to costs payable by him or it to any cross-defendant in any of those cross-claims.

(c) As between the plaintiffs and the first to third defendants, be paid on the party and party basis up until 5 July 2003 and on the indemnity basis thereafter.

(d) As between the plaintiffs and the fifth defendant, be paid on the party and party basis up until 6 September 2002 and on the indemnity basis thereafter.

(e) As between the plaintiffs and all other relevant defendants, be paid on the party and party basis up until 31 December 2004 and on the indemnity basis thereafter.

Uniform Civil Procedure Rules

(b) On the Allowed Percentage of each amount of costs and disbursements actually paid by that defendant; and

(c) From the date of payment by each relevant defendant of each such amount of costs and disbursements until the costs due under these orders have been paid.

Note:

(d) The “Allowed Percentage” is a percentage calculated as (Y/X) * 100;

(e) X = the total amount of costs and disbursements which each relevant defendant has paid or is liable to pay in connection with these proceedings, and

(f) Y = the total amount of costs and disbursements payable pursuant to order (1) as agreed, assessed or fixed as a specified gross sum.

(4) Dismiss all applications for interim costs orders and access to securities given by the plaintiffs for payment of any defendant’s costs.

(5) Order each cross-claimant on each of the first to 32nd, 34th and 35th cross-claims to pay the cross-defendant’s or cross-defendants’ costs of each such cross-claim, in each case on the basis that the costs so payable are limited to those costs specifically and solely attributable to the cross-defendant’s or cross-defendants’ response to that cross-claim.

(6) Order that enforcement (save for quantification by agreement, assessment or otherwise of the amount of costs involved) of order (5) be stayed until the further order of the Court.

(7) As between the cross-claimant on and the cross-defendant to the 30th cross-claim: dismiss the cross-defendant’s application for indemnity costs.

(8) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendants’ costs of that cross-claim.

(9) Order that the costs payable pursuant to order (8) be paid on the party and party basis up until 31 October 2005 and on the indemnity basis thereafter.

(10) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendants’ costs, as defendants, of proceedings 2371 of 2002 to the extent that those costs are not the subject of any existing order of the court.

Uniform Civil Procedure Rules

(b) On so much of each amount of costs and disbursements actually paid by the cross-defendants as they recover by agreement or assessment; and

(c) From the date of payment by the cross-defendants of each amount of costs and disbursements until the costs due under these orders have been paid.

(12) Order the cross-claimant on the 36th cross-claim to pay the cross-defendants’ costs of that cross-claim.

(13) Order the cross-claimant on the 37th cross-claim to pay the cross-defendant’s costs of that cross-claim, on the basis that the costs so payable are limited to those costs specifically and solely attributable to the cross-defendant’s response to that cross-claim.

(14) Order as between the plaintiffs and the relevant defendants that the plaintiffs pay each relevant defendant’s costs to date of his or its application for costs.

(15) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendant’s costs to date of that cross-defendant’s application for costs.

(16) Order the cross-claimant on the 36th cross-claim to pay the cross-defendants’ costs to date of that cross-defendants’ application for costs.

(17) Order (for the avoidance of doubt) that the costs payable pursuant to orders (5), (10), (12), (13), (14), (15) and (16) be assessed on the party and party basis.

(18) Direct each party seeking an order to the effect that his or its costs be paid in a specified gross sum to serve his or its evidence in support of such an order by [ insert ].

(19) Direct each party against whom there is sought an order to the effect that the party pay the costs of another party in a specified gross sum to serve his or its evidence in answer to that order by [insert].

(20) Stand proceedings over to the directions list on [insert] .

Orders

248 I make the following orders:

(1) Direct any party seeking a variation in any of the draft orders just set out, or any additional order, in relation to the matters that are the subject of these reasons to give written notice within 28 days of the date of publication of these reasons to my Associate and the other parties. That written notice should set out both the variation or other orders sought and, in brief, the reasons why it is sought; and whether the party desires to be heard further.

(2) Direct any other party opposing the making of the variation or other order to give written notice to my Associate and the other parties within a further 14 days. That written notice should set out in brief the reasons why the variation or further order is opposed; and whether the party desires to be heard further.

(3) Stand the proceedings over to 9:30am on Friday 9 May 2008 before me for the making of orders and for directions in respect of the applications for gross sum costs orders.

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Citations

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199

Most Recent Citation

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82

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Cases Cited

16

Statutory Material Cited

4

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 124

Lahoud v Lahoud [2006] NSWSC 126

White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303

CITATION:	Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No.7] [2008] NSWSC 199
HEARING DATE(S):	4, 5 and 6 February 2008
JUDGMENT DATE :	14 March 2008
JUDGMENT OF:	McDougall J at 1
DECISION:	See paras [247] and [248] of the judgment.
CATCHWORDS:	COSTS – indemnity costs – plaintiffs failed to prove case on damages – cross-claimant failed to prove case on causation – no question of principle. - CORPORATIONS – company in liquidation joined as cross-defendant pursuant to leave of Court – company makes further cross-claims whether party seeking joinder should indemnify company for all costs incurred or payable by it.
LEGISLATION CITED:	Corporations Law Civil Procedure Act 2005 Professional Standards Act 1994 Trade Practices Act 1974
CATEGORY:	Consequential orders
CASES CITED:	Adams v Thrift [1915] 1 Ch 557 Calderbank v Calderbank [1976] Fam 93 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 Ingot Capital Investment & Ors v Macquarie Equity Capital Markets and Ors [2003] NSW SC 1012 Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSW SC 406 Ingot v Macquarie [No.3] [2005] NSWSC 255 Ingot v Macquarie (No.6) [2007] NSWSC 124 Lahoud v Lahoud [2006] NSWSC 126 Ogilvie Grant v East (1983) 7 ACLR 669 Potts v Miller (1940) 64 CLR 282 Preston v Preston [1982] 1 All ER 41 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2006] NSWSC 779 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 Thors v Weekes (1989) 92 ALR 131 Vagrand Pty Limited (In Liquidation) v Fielding (1993) 41 FCR 550 White ACT (in liquidation) v G B White [2004] NSWSC 303
PARTIES:	Ingot Capital Investments Pty Limited (First Plaintiff) Stocks Convertible Limited (formerly AOIT Limited) (Second Plaintiff) ASC Pty Limited (Third Plaintiff) Stocks Convertible Trust plc (formerly Australian Opportunities Investment Trust PLC) (Fourth Plaintiff) Eastern States Securities Limited (Fifth Plaintiff) Ingot Capital Management Pty Limited (Sixth Plaintiff) Macquarie Equity Capital Markets Limited (First Defendant) Macquarie Equities Limited (Second Defendant) Macquarie Bank Limited (Third Defendant) Udayan Daniel Ghose (Fourth Defendant) Jonathan Paul Beach (Fifth Defendant) Azmin Firoz Daya (Sixth Defendant) Craig Deery (Seventh Defendant) Michael J Morrissey (Eighth Defendant) William Peck (Ninth Defendant) Paul Lauerence Williams (Tenth Defendant) Peter Aroney (Eleventh Defendant) John Trowbridge Consulting Pty Limited (Twelfth Defendant) Patrick Murray and the persons listed in Schedule "B" to the summons (PwC) (Thirteenth Defendant) Andrew Mutton and the Persons in NSW Listed in Schedule "A" to the summons (Phillips Fox) (Fourteenth Defendant) NCRA (36th Cross-claimant) Guy Carpenter Parties
FILE NUMBER(S):	SC 50169/01
COUNSEL:	R G Forster SC / P J Dowdy (for the Plaintiffs) A S Bell SC / J R Williams (for the First, Second and Third Defendants) P Silver (for the Fourth Defendant) A P Cheshire (for the Fifth, Seventh and Eighth Defendants) L Gor (for the Ninth Defendant) M J Cohen (for the Tenth Defendant) P S Braham (for the Eleventh Defendant) S A Goodman (for the Twelfth Defendant) T F Bathurst QC / S Nixon (for the Thirteenth Defendant) R Dick / J Watson (for the Fourteenth Defendant) M A Pembroke SC / L P Menzies (for the Guy Carpenter Parties) B Coles QC / D Cook (for NCRA)
SOLICITORS:	Deacons (for the Plaintiffs) Mallesons Stephen Jacques (for the First, Second and Third Defendants) Chang Pistilli & Simmons (for the Fourth Defendant) Colin Biggers & Paisley (for the Fifth, Seventh, and Eighth Defendants) William Peck (for the Ninth Defendant) Dibbs Abbott Stillman (for the Tenth Defendant) M D Nikolaidis & Co (for the Eleventh Defendant) Minter Ellison (for the Twelfth Defendant) Blake Dawson Waldron (for the Thirteenth Defendant) Freehills (for the Fourteenth Defendant) TressCox (for the Guy Carpenter parties) Henry Davis York (for NCRA)