McDonald v Shone

[2010] NSWSC 856

CITATION:	McDonald v Shone & Ors [2010] NSWSC 856
HEARING DATE(S):	29 July 2010
JUDGMENT DATE :	6 August 2010
JUDGMENT OF:	Schmidt J
DECISION:	Each party bear its own costs of the motion.
CATCHWORDS:	PROCEDURE - costs - departing from the general rule - conduct of parties - no indemnity costs order in favour of plaintiff - no misconduct by first defendant - circumstances require that each party bear its own costs of the motion
LEGISLATION CITED:	Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005
CATEGORY:	Procedural and other rulings
CASES CITED:	General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 McDonald v Shone and Ors [2010] NSWSC 467 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
PARTIES:	Gerard McDonald - Plaintiff Stephen John Shone - First Defendant Steering International Business Limited - Second Defendant Horwath Management Services Limited - Third Defendant IBI Limited - Fourth Defendant Interlease Limited - Fifth Defendant Yaringa Investments Limited - Sixth Defendant
FILE NUMBER(S):	SC 2008/288996
COUNSEL:	Plaintiff - Mr DJ Fagan SC First Defendant - Mr JC Giles
SOLICITORS:	Plaintiff - Grace Lawyers Pty Limited First Defendant - Deacons

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IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SCHMIDT J

FRIDAY, 6 AUGUST 2010

2008/288996 GERARD McDONALD v STEPHEN JOHN SHONE & ORS

JUDGMENT

1 HER HONOUR: By judgment of 28 April 2008 (see McDonald v Shone and Ors [2010] NSWSC 467), I made orders dismissing a motion brought by Mr Shone, observing that the usual order would be that he must bear Mr McDonald's costs and giving the parties liberty to approach in the event of disagreement.

2 Mr McDonald sought a costs order in his favour, payable forthwith on an indemnity basis. Mr Shone’s case was that each side should bear their own costs of the motion.

3 An offer to settle Mr Shone’s motion was made in December 2009, it being claimed that Mr Shone was seeking to avoid the jurisdiction of the Court by his motion. It was proposed that the motion be dismissed with each side bearing its own costs. In May 2010, it was proposed that Mr Shone bear Mr McDonald's costs on the usual basis, given that he had succeeded in resisting the motion. The right to seek indemnity costs was reserved. Neither offer was accepted.

4 The competing claims must be assessed in light of the requirements of the Civil Procedure Act 2005. They include s 56, which provides that the Act has as its overriding purpose the ‘just, quick and cheap resolution of the real issues in the proceedings’ and requires that parties assist the Court to further that purpose; s 57 which requires that the Court pay regard to how the parties have fulfilled their obligations in the proceedings, including in relation to any lack of expedition; and ensuring that the Court’s practices and procedures are implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute.

5 On the evidence, I am satisfied that justice does not permit that the Court’s discretion as to costs under Rule 42 of the Uniform Civil Procedure Rules 2005 be exercised in the way sought by Mr McDonald. There is certainly no basis on which an order for indemnity costs, payable forthwith could be made in favour of Mr McDonald. Mr Shone’s conduct of the proceedings in relation to his motion has not proceeded on a basis which would warrant such an order being made. That requires some misconduct to be shown. (See Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72.)

6 I am, however, satisfied that in the circumstances, justice demands that there be a departure from the usual costs order, on the basis sought by Mr Shone, for the following reasons.

7 These proceedings were commenced in 2008. Mr McDonald's pleadings were obviously deficient from the outset, as was conceded at the hearing of Mr Shone’s motion.

8 Originally Mr McDonald sought to recover over $400,000 from Mr Shone and a Hong Kong company, Horwath Management Services Limited ('Horwath'), which had provided certain services in relation to shares in a company in which Mr McDonald had invested. This investment lay at the heart of Mr McDonald's claims. Mr Shone is alleged to have breached various agreements made in relation to that investment.

9 In the April judgment the claim against Horwath was dismissed, following an announcement for Mr McDonald at the commencement of the hearing, that he no longer intended to proceed against it. An indemnity costs order was made against Mr McDonald, in favour of Horwarth, for reasons explained in the April judgment.

10 In relation to Mr Shone’s motion, the dismissal of the proceedings against Horwath also removed the basis for part of the case which he sought to advance in his motion. By its motion, Horwath had sought to argue that the appropriate forum for the proceedings was Hong Kong. Mr Shone sought dismissal of the proceedings on a number of bases, including inappropriate forum; that there had been a failure to fully disclose the relevant circumstances, when an extension of time to serve the proceedings had been granted by Registrar Atkinson; and that the pleaded case was hopeless.

11 The forum argument disappeared when the claims advanced against Horwarth were abandoned.

12 Mr McDonald defended the alleged failure to make adequate disclosure to the Registrar, but also conceded that the statement of claim required substantial amendment, given its present inadequacy. On balance, I came to the view that the inadequacies were not such that the claim could be dismissed, having in mind the test in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, and that pleading amendment had to be permitted. I also concluded that while there should have been greater disclosure of the circumstances to the Registrar, the Registrar was not sought to be misled and that no basis had been established for setting aside the leave to serve the claim out of time.

13 The considerations which led to an indemnity costs order in favour of Horwath, thus are also relevant to the conduct of the case advanced against Mr Shone. He, too, was arguing that the case should be brought in Hong Kong, having in mind the allegations advanced against Horwath, against whom it was contemplated a cross claim would be brought, given the nature of the allegations advanced.

14 I concluded in April that the proceedings against Horwath should have been discontinued earlier, when its affidavits were put on, rather than only upon commencement of the hearing. That had resulted in Horwath unnecessarily incurring the costs of preparing for the hearing of its motion. It also resulted in Mr Shone being put to unnecessary expense in relation to this aspect of his motion.

15 Two other matters lead to the conclusion that Mr Shone should not bear Mr McDonald’s costs of the motion. The first, that the evidence led on the motion in relation to service departed significantly from that put by Mr McDonald before the Registrar. There were various matters not disclosed. Clearly a fuller explanation ought to have been given. I concluded on the evidence that there had been no intention to mislead the Registrar. It was a conclusion which led to the refusal of this aspect of Mr Shone’s motion.

16 The second and more important consideration was that in defending the dismissal application, it was also conceded for Mr McDonald that if the matter was to proceed, his case would have to be repleaded, because essential elements of his claim had not been advanced in the statement of claim. It was only on the basis of that repleading, that I was able to conclude that the claim would not be a hopeless one, which would have to be dismissed.

17 The statement of claim has now been amended. Had adequate and timely attention been paid to the difficulty with the cases advanced against Horwath and Mr Shone, and the inadequacy of Mr McDonald's pleadings, it is evident that Mr Shone would not have been put to the cost of the pursuit and argument of the motion. In those circumstances, it would not be just to make a costs order in favour of Mr McDonald, notwithstanding his success on the motion.

Order

18 For these reasons, I order that each party bear its own costs of the motion.

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