Lidgett v Lidgett (No 2)
[2024] VSC 43
•15 February 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2023 01185
BETWEEN:
| SIMON JOHN LIDGETT | Plaintiff |
| v | |
| JILLIAN ROSEMARY LIDGETT & ANOR (according to the attached Schedule) | Defendants |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 February 2024 |
DATE OF JUDGMENT: | 15 February 2024 |
CASE MAY BE CITED AS: | Lidgett v Lidgett (No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 43 |
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PRACTICE AND PROCEDURE – Costs – Interlocutory application by defendant to appoint a receiver and manager to a partnership business – Interlocutory injunction application by plaintiff to prevent the sale of farm business assets of a partnership – Whether costs should be ordered in favour of the successful applicant – Whether costs should be taxed immediately – Supreme Court (General Civil Procedure) Rules 2015 rr 63.20, 63.20.1 – Dale v Clayton Utz (a firm) (No 3) [2013] VSC 593 referred to – Costs ordered to be paid to successful applicant in the receivership application and parties’ costs of the injunction application be their costs in the proceeding, but no order that costs be taxed and paid forthwith.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Clough | Cinque Oakley Bryant Lawyers |
| For the First Defendant | Mr C Troung KC | Heinz Law |
HER HONOUR:
These reasons concern the costs consequences of two interlocutory applications determined by me on 12 December 2023.[1] The first application was an application by the first defendant (‘Jill’) to appoint a receiver and manager to the assets and undertaking of the SJ & JR Lidgett Partnership (‘partnership business’). Jill is the mother of the plaintiff (‘Simon’). Jill and Simon are also equal partners in the partnership, and are in dispute about the ownership and future ownership of the property from which the partnership business is operated (‘Highton farm’).
[1]Lidgett v Lidgett [2023] VSC 743 (‘primary reasons’).
The receivership application was filed on 3 July 2023. In response, on 21 July 2023 Simon filed an application for an interlocutory injunction to restrain Jill from taking any steps to sell or otherwise dispose of any assets of the partnership business. Both the receivership application and the injunction application (‘applications’) were heard together over one and a half days on 28 and 29 November 2023.
The issues in the proceeding, the applications, and the evidence adduced and submissions advanced in relation to the applications were canvassed at some length in the primary reasons.
In some respects, the subject matter of the applications is subsidiary to Simon’s primary claim in this proceeding. Simon’s primary claim in this proceeding is based upon alleged representations made by Jill with respect to the future ownership of the Highton farm, which is a valuable property. The livestock bred and raised on the Highton farm are assets of the partnership, and were also said to have been the subject of a representation by Jill to Simon regarding their future ownership, but have a relatively modest value compared with the Highton property.
The receivership application was issued following Jill’s decision to dissolve the partnership in February 2023. Jill (who has been a largely passive partner in recent decades) wanted to sell the livestock and the other farm business assets as soon as practicable. Simon, on the other hand, wants to maintain the status quo pending trial, asserting, among other things, that the livestock herd was the product of many decades of work on the part of him and his forebears, such that damages would be an inadequate remedy should the livestock be sold and his position ultimately vindicated at trial.
Jill, in support of the receivership application, and in opposition to the injunction application, relied upon, among other things, a number of allegations of misconduct by Simon in his management of the partnership business, including allegations that he had diverted partnership income and resources for his own benefit and to the exclusion of Jill. Jill also said that there were significant anomalies and irregularities in the partnership accounts, and that she had lost faith in the partnership accountants because of their apparent partisanship towards Simon. Further, owing to the dispute between Jill and Simon, and the total breakdown of the relationship between them, Jill contended that the affairs of the partnership were deadlocked, and in disarray.
I dismissed the receivership application, and granted the injunction application. However, the injunction application was granted subject to some reasonably strict conditions regarding the ongoing operation and monitoring of the partnership business in the lead up to the trial of this proceeding, which is scheduled to commence on 4 June 2024. These conditions were consistent with an interim arrangement agreed between the parties in the lead up to the hearing of the applications, but also included conditions imposed in response to some of the issues raised by Jill during the course of the hearing of the applications.
I made the following orders:
1. Until the hearing and determination of the proceeding or further order:
(a)the first defendant be restrained from selling or otherwise disposing of any of the farm business assets (as defined in the further amended statement of claim dated 23 November 2023);
(b)the plaintiff not sell any of the livestock of the partnership without the first defendant’s written consent, such consent not to be unreasonably withheld;
(c)the first defendant not transact on the partnership bank account without the plaintiff’s written consent, such consent not to be unreasonably withheld;
(d)the plaintiff take all necessary steps to ensure that the first defendant has electronic banking access to the partnership account;
(e)the plaintiff ensure that all income of the partnership is banked into the partnership account;
(f)the plaintiff ensure that all expenses of the partnership are paid from the partnership account;
(g)the plaintiff not cause the partnership to borrow funds from any person or lend funds to any person without the first defendant’s prior written consent, such consent not to be unreasonably withheld;
(h)the plaintiff not cause the partnership to repay any existing indebtedness of the partnership;
(i)the plaintiff not cause the partnership to pay wages to any person or drawings to any partner without the first defendant’s prior written consent, such consent not to be unreasonably withheld;
(j)the plaintiff and the first defendant are directed to confer and agree upon the appointment of a new accountant for the partnership, and to facilitate the transfer of the books and records of the partnership to the new accountant;
(k)the plaintiff co-operate with a valuer to be jointly appointed by the plaintiff and the first defendant in due course to value the partnership assets;
(l)the plaintiff permit access to the Highton farm to any livestock agent appointed by Jill to inspect the livestock upon the provision of reasonable notice; and
(m)the plaintiff provide a fortnightly report to the first defendant, in writing, by which he reports on:
(i) any purchases of NLIS tags;
(ii) the application of any NLIS tags to any animals;
(iii) the purchase of any animals or other assets;
(iv) the sale of any animals or other assets;
(v) any known births or deaths of animals;
(vi) income received; and
(vii) expenses incurred.
2.Until the hearing and determination of the proceeding, no partner take any step to prepare, file or lodge any taxation document for the partnership without the prior written consent of the other, save for Business Activity Statements as and when they are due.
3. The plaintiff’s summons filed on 21 July 2023 be otherwise dismissed.
4.The applications in the first defendant’s summons filed on 3 July 2023 be dismissed.
5.Notification of any application by any party with respect to the costs of the current applications be provided to the other party and the Court by 4:00pm on 19 December 2023.
6.The parties’ applications for costs be listed for hearing at 10:00am on 5 February 2024 in a courtroom to be advised.
7.There be liberty to apply on 7 business days notice to the other parties and the Court with respect to paragraphs 1 and 2 of this Order.
On 19 December 2023, the solicitors for Simon notified the solicitors for Jill and the Court that Simon seeks the following orders with respect to costs:
(a) that Jill pay Simon’s costs of the receivership application on a standard basis, to be taxed immediately; and
(b) that Jill pay Simon’s costs of the injunction application on a standard basis, to be taxed immediately.
In the alternative, Simon seeks an order that his costs of the injunction application be his costs in the proceeding, not the parties’ costs in the proceeding, on the basis that, regardless of the ultimate outcome of the proceeding, Simon should not be required to bear the costs associated with the voluminous evidence adduced by Jill for the purpose of the applications.
Jill resists Simon’s application, and submitted that the parties’ costs of both the receivership application and the injunction application should be the parties’ costs in the proceeding.
Rule 63.20 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) provides as follows:
Where an interlocutory or other application is made in a proceeding and —
(a) no order is made on the application; or
(b) the order made is silent as to costs —
the costs are the parties’ costs in the proceeding, unless the Court otherwise orders.
Rule 63.20.1 of the Rules provides as follows:
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
The parties’ submissions in support of their respective positions follow.
Simon submitted that it would be grossly unfair for Simon to be liable to pay any of Jill’s costs associated with either of the applications. Rule 63.20 of the Rules does not apply, because the Court has made an order inviting an application for a further order with respect to costs. In any event, Simon submitted that the usual order with respect to the costs of an interlocutory application is that costs follow the event, and that there is no reason to depart from the usual rule in the current case.
As for the question of when the costs of the receivership application should be taxed and paid, Simon submitted as follows (omitting footnotes):
In the Court’s exercise of discretion, exercised judicially: “the default position may be upset where - (1) there is a prospect of considerable delay in completion of the proceeding; (2) the issue the subject of the interlocutory order was discrete from what will finally require determination; (3) the party against whom the substantive order was made was guilty of unsatisfactory conduct-described variously as ‘unreasonable’ or ‘reprehensible’, or as involving a want of competence and diligence’”. It is insufficient to establish merely one of those reasons to justify an order for immediate taxation.
Simon submitted that Jill’s conduct in bringing the receivership application, which was wholly misconceived, was sufficiently unreasonable to justify the immediate taxation and payment of Simon’s costs. Further, the receivership application concerned ‘separately identifiable, self-contained, and discrete matters’, which will not be the subject of further consideration and determination at the trial of this proceeding. Further, given that the period of relevant delay is calculated from the date upon which the relevant application was made, there will be a substantial period of delay between the time the receivership application was filed and the likely final determination of this proceeding.
To elaborate upon what Simon says was the relevant misconduct on Jill’s part, Simon relied upon a number of findings and observations I made during the course of the primary reasons, including the following:
(a) the consequences of many of Jill’s claims with respect to Simon’s management of the partnership business were somewhat overstated;
(b) in particular, the farm business assets were not at risk of dissipation or waste;
(c) Jill’s submission to the effect that Simon’s evidence could not be accepted was untenable given that neither party’s evidence was capable of being tested during the hearing of the applications;
(d) a number of Jill’s allegations against Simon concerned trivial matters, and/or appeared to have been motivated by considerations other than a genuine concern for the health of the partnership business;
(e) the appointment of a receiver to the partnership business could not address or resolve Jill’s concerns about the accuracy of the partnership accounts, as many of these disputes concerned factual matters which could only be resolved at a trial;
(f) the proposition that the affairs of the partnership were in disarray was somewhat overstated;
(g) Jill failed to file any evidence about the likely cost of a receiver, failed to file the proposed receiver’s written consent to the appointment, and failed to ensure that the receiver provided the security guarantee required by the Rules; and
(h) the vast bulk of the voluminous court book was made up of the material filed on behalf of Jill, which was of questionable relevance to any of the issues arising from the pleadings, and the volume of material and the length of the oral submissions unnecessarily extended the hearing of the applications into a second day.
As for the question of whether the receivership application was a discrete, self-contained application, Simon submitted that the fact that some of the factual matters traversed by Jill’s affidavits will be relevant to the issues at trial does not detract from the fact that the question of whether a receiver should be appointed to the partnership business will not arise again in this proceeding. Accordingly, a lot of the work done on Simon’s behalf will be wasted, given that much of the affidavit evidence relied upon by Jill was directed toward the criteria for the appointment of a receiver, concerned largely unparticularised allegations of misconduct, and/or included assertions of opinion by Jill and her solicitor which will be inadmissible at trial.
Turning now to the costs of the injunction application, Simon accepted that the usual order for costs of a successful interlocutory application is that the parties’ costs be their costs in the proceeding. However, Simon submitted that the current case warrants a departure from the usual order, as Jill unreasonably opposed the injunction application, and unreasonably inflated the costs associated with the injunction application. Simon submitted further that:
(a) the injunction application was issued in response to the receivership application, and the evidence and submissions covered much of the same ground;
(b) it was irrational for Jill to oppose the injunction application in circumstances where the parties had already agreed to an interim arrangement in substantially similar terms to what the Court finally ordered with respect to the injunction application;
(c) it can be inferred from the primary reasons that the balance of convenience overwhelmingly favoured the grant of the injunction;
(d) Jill’s submission that granting the injunction would wrongfully authorise a breach of s 42 of the Partnership Act 1958 (Vic) was misconceived; and
(e) Simon submitted as follows:
Further, there is a possibility that the First Defendant might argue in the Costs Court that some or all of the First Defendant’s 2593 pages of affidavit material, and lengthy oral submissions concerning it, were materially relevant to the Injunction Application. It is submitted it would be quite unfair if the Plaintiff were to bear any of the First Defendant’s costs in those respects under any circumstances, and quite unfair for him to miss out on having all his costs paid in those respects, simply due to ambiguity between the Receiver Application and the Injunction Application. To avoid that lack of clarity, the costs of the Injunction Application should follow the event of that application, to mirror an order that the costs of the Receiver Application should follow the event of that application.
Even if the First Defendant’s affidavit material was relevant to the Injunction Application, it is submitted that unreasonably inflated the costs of that application, also leading to the proposition that costs should follow the event of the application.
Simon submitted that, in the alternative, his costs of the injunction application should be his costs in the proceeding, not the parties’ costs in the proceeding, in order to avoid the possibility of him being ultimately required to pay part or all of Jill’s costs of the applications. He submitted further that, consistent with his submissions with respect to the receivership application, his costs of the injunction application should be taxed simultaneously with the costs of the receivership application, which would be the most efficient course of action.
Jill conceded that the receivership application was unsuccessful and that the injunction application was largely successful. However, Jill submitted that the costs of the applications should be the parties’ costs in this proceeding. Alternatively, should an adverse costs order be made against Jill, there is no reason why those costs should be taxed and paid prior to the conclusion of this proceeding. Ultimately, the litmus test is where the interests of justice lie.
Jill relied upon the following observations in the authorities to support her position with respect to the question of costs:
(a) the relevant rules ‘reflect the fact that interlocutory applications usually do not conclude a proceeding, so that the court is often not in a position at that stage of the proceeding to determine where the justice lies between the parties in any costs order’;[2]
[2]Dale v Clayton Utz (a firm) (No 3) [2013] VSC 593 (‘Dale’) [13].
(b) ‘…it is common on the grant or dismissal of an interlocutory injunction to order either that costs be in the proceeding or be reserved’;[3]
[3]Ibid [18].
(c) ‘…most interlocutory injunction applications involve a consideration of the very issues which are the subject of the pleadings and will be examined more fully by the trial judge in due course. The position is different where … an applicant seeks interlocutory injunctive relief of an uncommon and discrete nature, which is wholly unrelated to the dispute between the parties’;[4]
[4]Ibid [20].
(d) the reasons in support of introducing rules such as r 63.20.1 include avoiding multiple taxations, avoiding interlocutory applications being used as a means of exhausting the resources of the other party, and avoiding the unfairness which might arise if an ultimately successful party is unable to set off their judgment against an earlier incurred costs liability;[5]
(e) there may be a departure from the default position established by r 63.20.1 of the Rules where the conduct of the unsuccessful party has been unreasonable or unsatisfactory, where there is likely to be a lengthy delay before the completion of the proceeding, and where the interlocutory application involves a separate or discrete issue;[6] and
(f) what amounts to unsatisfactory conduct includes conduct which can be described as ‘unreasonable’, ‘reprehensible’ or as involving ‘a want of competence and diligence’.[7]
[5]Ibid [58].
[6]Ibid [65]. See also Abbott v Setka (No 2) [2013] VSCA 376 [27].
[7]Abbott v Setka (No 2) [2013] VSCA 376 [27].
Applying the principles above to the current case, Jill submitted, in summary, as follows:
(a) the injunction application was brought by Simon to preserve the value of the farm business assets, the ownership of which will ultimately be determined at trial;
(b) similarly, the Court proceeded on the basis that Simon had a viable claim, to which Jill had valid defences, the strengths and weaknesses of which will need to be determined at trial, such that the injunction application falls within the usual category of injunction applications;
(c) the Court considered it appropriate to impose conditions upon Simon’s continued management of the partnership business pending trial;
(d) while the receivership application could not be described as a usual interlocutory application, an analysis of the primary reasons shows that most, if not all of the evidence adduced in relation to that application will be highly relevant to the issues to be determined at trial, including Simon’s alleged misconduct and his alleged mismanagement of the partnership business; and
(e) while the receivership application was unsuccessful, the application raised concerns about the impartiality of the partnership accountants, which was an important issue, and which was addressed by a condition imposed upon the grant of the injunction, such that it could not be said that Jill was wholly unsuccessful.
In the alternative, Jill submitted that if the Court makes a costs order in favour of Simon, there is no reason to depart from the default position that any taxation occur after the completion of the trial, given that:
(a) the trial is scheduled to commence in June 2024, only a few months away;
(b) the applications did not involve discrete issues unrelated to the matters to be dealt with at trial; and
(c) while the applications were fiercely contested, ‘there can be no suggestion of any unreasonable or reprehensible conduct on the part of Jill and her lawyers in connection with either application’. That there were a large number of documents in evidence does not of itself establish that Jill’s conduct was unreasonable, or that the costs associated with the applications were wasted.
For the reasons which follow, I will make the following orders with respect to the question of costs:
(a) that Jill pay Simon’s costs of the receivership application;
(b) the parties’ costs of the injunction application be their costs in the proceeding; and
(c) the parties’ costs of and incidental to the hearing on 5 February 2024 be reserved.
Turning first to the receivership application, I accept that this is a discrete application, which is, having regard to my conclusions in the primary reasons, unlikely to be renewed before trial. Given that, and given that the parties’ submissions needed to deal with issues peculiar to the receivership application, there is no basis for departing from the usual practice that costs follow the event. The question is whether those costs should be taxed and paid forthwith, or after the conclusion of the proceeding.
There are sound arguments in support of making an order that the costs of the receivership application be taxed and paid forthwith. It is a discrete application, and, for the reasons set out in the primary reasons, it was, to say the least, an ambitious application. However, there are three reasons why the making and conduct of the receivership application does not clear the relatively high hurdle required to justify a departure from the usual rule.
First, while there will be a delay between the making of the application and the hearing and determination of the proceeding, it will not be an inordinate delay in the context of civil litigation generally. The application was issued in July 2023. If the trial proceeds as scheduled on 4 June 2024, it is likely to commence before any taxation of costs can be conducted, and the proceeding is likely to be determined by the end of this year. The delay, of itself, does not justify a departure from the usual position, as prescribed by the Rules.
Secondly, I accept that there is, and will be some overlap between the evidence relevant to the receivership application, the evidence relevant to the injunction application and the evidence to be adduced at trial. Essentially, the injunction application was responsive to the receivership application, albeit that the legal issues were different, such that there was a significant overlap in the factual issues in both applications. Further, while I accept that much of the evidence relied upon by Jill at the hearing of the applications will be inadmissible at trial in its current form, that does not necessarily mean that all of that work (and the work done by Simon’s legal representatives in response) will be wasted. For example, one might expect that the affidavits and exhibits filed in the applications will form the basis of instructions and briefs to experts.
Thirdly, while I agree that the receivership application was arguably misconceived, given the potential costs involved and the absence of any real utility in such an appointment, and I accept that the materials and submissions advanced in support of the receivership application were on the excessive side, I do not consider that there was such unreasonable or unsatisfactory conduct on the part of Jill and her legal team such as to justify a departure from the usual rule as to costs.
Just how much of the work undertaken by the parties for the purpose of the receivership application will ultimately have been wasted will be capable of being more accurately assessed at the conclusion of the trial. And, while the receivership application was unsuccessful, the lack of success was largely due to matters unconnected with the merit of Jill’s complaints regarding Simon’s management of the partnership business and the state of the partnership accounts. While I did find some of Jill’s allegations to be somewhat overstated, ultimately, these allegations are matters for trial. Rather, the receivership application failed largely on the basis that there was little or no risk that the assets of the partnership would be dissipated, that Jill had failed to establish that the appointment of a receiver to the partnership business would have any practical utility given that most of the disputes between Jill and Simon would need to be determined by this Court, not a receiver, and on the basis that Jill had failed to provide any evidence of the likely costs of appointing a receiver in circumstances where the value of the farm business assets was quite modest.
However, as a consequence of the applications, Jill did achieve a measure of success, in that I imposed a condition upon the grant of the injunction to the effect that the partnership accountants be replaced, noting however that the basis upon which I formed the view that this condition was necessary and appropriate was not the subject of detailed evidence and submissions.
For much of the same reasons outlined above, I also consider that the circumstances do not justify a departure from the usual practice with respect to applications for interlocutory injunctions: that is, that the parties’ costs of the injunction application be their costs in the proceeding. As stated in the primary reasons, it was not possible to make any real assessment of the merits of the parties’ positions in this proceeding prior to trial, such that it could not be said that there was no basis for opposing the injunction application. Indeed, the injunction application was directed at restraining Jill from exercising what would otherwise be her rights as a departing partner to take steps to realise the assets of the partnership and to wind up the partnership business.
Further, the fact that a number of conditions were imposed upon Simon’s continued custody of the farm business assets is relevant to the question of costs. While I accept that a number of those conditions were agreed by the parties in the lead up to the hearing of the applications, this was an interim arrangement covering a period of weeks, not six months. While it might have been reasonable for Jill to agree to extend that interim regime until trial, one can understand her reluctance to do so, given Simon’s less than perfect compliance with the terms of the interim regime in the period that the interim regime was in place. And I cannot recall there being evidence of any offer on Simon’s part to do so: indeed, I understand Simon’s position to have been that he should be permitted to manage the partnership business without any real input or supervision by Jill whatsoever.
Finally, the imposition of a condition upon the grant of an injunction that the parties cooperate to facilitate the appointment of a new accountant to the partnership amounted to a partial vindication of Jill’s position in both applications.
Accordingly, I shall order that Jill pay Simon’s costs of the receivership application, that the parties’ costs of the injunction application be their costs in the proceeding, and that there be no departure from the usual rule that the costs of any interlocutory application be taxed and paid until after the hearing and determination of the proceeding. Apart from the fact that the circumstances do not justify a departure from the rule, it seems to me that it will be after the conclusion of the proceeding that the parties (and the Costs Court) will be in a better position to assess how much of the costs incurred by the parties in the course of the applications are truly referable to the receivership application alone, and which costs should appropriately be considered to be the parties’ costs in the proceeding.
Given the parties’ respective positions with respect to the question of the costs of the applications compared with the outcome, I shall order that the parties’ costs of and incidental to the hearing on 5 February 2024 be reserved. If either or both of the parties wish to agitate the question of those costs prior to trial, they can do so at the directions hearing scheduled for 13 May 2024.
SCHEDULE OF PARTIES
| S ECI 2023 01185 | |
| BETWEEN: | |
| SIMON JOHN LIDGETT | Plaintiff |
| - v - | |
| JILLIAN ROSEMARY LIDGETT | First Defendant |
| ANNA ELIZABETH LIDGETT (in her own capacity and in her capacity as Trustee of the LIDGETT PROPERTY TRUST) | Second Defendant |
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