Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd (Costs)

[2024] NSWSC 621

Supreme Court

New South Wales

Medium Neutral Citation:

Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd (Costs) [2024] NSWSC 621

Hearing dates:

In Chambers

Date of orders:

23 May 2024

Decision date:

23 May 2024

Jurisdiction:

Equity

Before:

Hammerschlag CJ in Eq

Decision:

First Plaintiff pay the Defendants’ costs on the indemnity basis.

Second Plaintiff pay the Defendants’ costs on the ordinary basis.

Catchwords:

COSTS – Where defendants are successful and the first plaintiff accepts the underlying contractual instruments entitle the defendants to costs on the indemnity basis – Where second plaintiff is not a party to those instruments but the defendants argue that he and first plaintiff should be treated as one – HELD: Indemnity costs ordered against the first plaintiff but costs on the ordinary basis ordered against the second plaintiff.

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd [2024] NSWSC 535

International Skin Care Suppliers Pty Ltd v Commonwealth Bank of Australia (No 2) [2013] NSWSC 1768

Category:

Costs

Parties:

Macarthur Farm Pty Ltd ACN 667 935 971 (Receivers and Managers Appointed) (First Plaintiff)

Thomas Peter Crown (Second Plaintiff)

Warneet Super Pty Ltd ACN 163 164 921 as trustee for Warneet Super Fund ABN 67 810 588 968 (First Defendant)

Rahul Goyal (Second Defendant)

Barry Wight (Third Defendant)

Representation:

Counsel:

TE O’Brien with HAX Rodgers (First and Second Plaintiff)

RM Foreman SC with KE Holcombe (First, Second and Third Defendants)

Solicitors:

Marque Lawyers (First and Second Plaintiff)

Arnold Bloch Leibler (First, Second and Third Defendants)

File Number(s):

2024/00106380

Publication restriction:

Nil

JUDGMENT

1. On 7 May 2024, I delivered judgment in this matter: Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd [2024] NSWSC 535. Definitions in that judgment are used here.

2. The Plaintiffs failed. I provisionally ordered that they pay the Defendants’ costs of the proceedings. That order was to solidify unless, within seven days of delivery of that judgment, any party to it notified, in writing, myself and the opposing parties that some other order is sought.

3. On 14 May 2024, I received an email from the Defendants’ solicitors containing the following submission in relation to costs (citations omitted):

As foreshadowed in the defendants’ written outline of opening submissions, the defendants seek their costs on an indemnity basis. Such an order is consistent with clause 11.1 of the Loan Agreement, clause 9.1 of the Mortgage, and clause 5.1(a) of the Deed of Appointment and Indemnity.

4. In the circumstances, the provisional costs order did not take effect. This judgment deals with costs. I gave directions for written submissions and I received submissions from both sides.

5. Clauses 11.1(c) and (d) of the Agreement provide:

The Borrower must pay the Lender’s costs in relation to:

[…]

(c)   any exercise or enforcement of any right conferred on the Lender; and

(d)   the enforcement, attempted enforcement, protection or waiver of any rights or Powers,

under any Finance Document, or any document or agreement executed or effected under this document or any consents given under a Finance Document, including any legal costs and expenses and any professional consultant’s fees, on a full indemnity basis and without the necessity for any taxation or assessment.

6. Clauses 9.1(a), (b) and (g) of the Mortgage provide:

The Mortgagor must indemnify the Mortgagee and each Receiver (and their respective officers, agents and employees) against any loss which they incur in connection with:

(a)   an Event of Default;

(b)   the exercise, non-exercise or purported exercise of any power, right or remedy of the Mortgagee contained in or implied by this document;

[…]

(g)   any act, omission or default by a Receiver, except if it is due to fraud, gross negligence or wilful misconduct of the Receiver or any of its agents or delegates.

7. Clause 5.1(a) of the Deed of Appointment and Indemnity provides:

Subject to clause 5.3 below, the Secured Party indemnifies the Receivers and Managers for:

(a)   their costs, expenses or charges reasonably incurred in connection with their appointment as receivers and managers of the Grantor under this Deed, including their own remuneration.

8. By Uniform Civil Procedure Rules 2005 (NSW) r 42.1, costs are to follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. The Defendants had a comprehensive victory and are entitled to their costs. The only question is whether those costs should be on the indemnity basis.

9. The Defendants argue that the contractual provisions recited above entitle them to an order that their costs be on the indemnity basis. In their principal submissions on costs they did not contend for such an order on any other basis.

10. They cited, in support of their contention, my decision in International Skin Care Suppliers Pty Ltd v Commonwealth Bank of Australia (No 2) [2013] NSWSC 1768 (International Skin) at [9]-[10]. There, a guarantee and indemnity upon which a bank had sued contained provisions that guarantors must pay the costs incurred by the bank on default or in connection with the exercise of the bank’s rights under the guarantee and indemnity. A further provision provided that the costs in connection with legal advisors were to be on the full indemnity basis or solicitor and own client basis, whichever is higher. I concluded that there was no reason why effect should not be given to these contractual arrangements, and that the bank was entitled to the costs of its claim and defences against the guarantors on the indemnity basis.

11. The contractual provisions here, in particular, cl 11.1 of the Agreement and cl 5.1(a) of the Deed of Appointment and Indemnity, are distinguishable from the provisions in International Skin, in that, cl 11.1 provides for indemnity costs “without the necessity for any taxation or assessment” and cl 5.1(a) of the Deed of Appointment and Indemnity incorporates a requirement of reasonableness. Nevertheless, the Plaintiffs concede that an indemnity costs order is justified against the First Plaintiff on the basis of the contractual arrangements, and I will accordingly so order.

12. I observe that, whilst contractually the First Defendant is entitled to indemnity costs without necessity for any taxation or assessment, under the orders which I shall make, taxation or assessment (or agreement) is required. If the First Defendant wishes to stand on its right under cl 11.1 not to tax or assess, it will have to enforce that right separately.

13. Crown, the Second Plaintiff, opposes an indemnity costs order on the basis that he is not a party to the contractual arrangements which justify an indemnity costs order against the First Plaintiff. I uphold this submission.

14. In their submissions in reply, the defendants argue, for the first time, that even though Crown is not a party, the First Plaintiff and Crown should be treated as one and he should pay indemnity costs. I reject this submission.

15. Nothing Crown himself did in the context of the proceedings warrants an order for indemnity costs against him and he has no contractual liability to pay costs, let alone on an indemnity basis.

16. I make the following orders:

1. The First Plaintiff is to pay the Defendants’ costs of the proceedings on the indemnity basis.

2. The Second Plaintiff is to pay the Defendants’ costs of the proceedings on the ordinary basis.

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Decision last updated: 23 May 2024