Mighty River International Ltd v Mineral Resources Ltd [No 2]
[2019] WASC 197
•12 JUNE 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MIGHTY RIVER INTERNATIONAL LTD -v- MINERAL RESOURCES LTD [No 2] [2019] WASC 197
CORAM: LE MIERE J
HEARD: 10 MAY 2019
DELIVERED : 12 JUNE 2019
FILE NO/S: CIV 2474 of 2016
BETWEEN: MIGHTY RIVER INTERNATIONAL LTD
Plaintiff
AND
MINERAL RESOURCES LTD
Defendant
Catchwords:
Practice and procedure - Consent orders - Self-executing orders - Non-compliance with time stipulation - Consent orders for the payment of security for costs - Where consent orders provide for proceedings to be immediately dismissed if failure to comply with consent orders - Whether orders should be varied to provide extension of time for compliance - Whether plaintiff's explanation for non-compliance is adequate - Power to extend time discretionary - Grounds for exercising - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 3 r 5
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Ms V E Long-Droppert |
| Defendant | : | Mr M L Bennett & Mr D Banda |
Solicitors:
| Plaintiff | : | Justice Legal |
| Defendant | : | Bennett + Co |
Case(s) referred to in decision(s):
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198
Mighty River International Ltd v Hughes & Bredenkamp [2017] WASC 69
Mighty River International Ltd v Hughes [2017] WASCA 152
Mighty River International Ltd v Hughes [2018] HCA 38
Mighty River International Ltd v Mineral Resources Ltd [2017] WASC 298
Paino v Hofbauer (1988) 13 NSWLR 193
Trust Co (Nominees) Ltd v Angas Securities Ltd (No 4) [2016] FCA 1240
Westpac Banking Corporation v Kekatos [2015] NSWSC 1629
LE MIERE J:
Summary
On 13 February 2019, I made an order by consent that the plaintiff give security for the defendant's costs of the action up to and including the preparation and attendance at mediation in the sum of $30,000 by payment of that amount into court by 1 May 2019. I further ordered that if the plaintiff failed to comply with the first order, the proceedings be immediately dismissed and the plaintiff pay the defendant's costs of the proceedings to be taxed if not agreed.
The plaintiff did not give security for the defendant's costs in the sum of $30,000 by payment of money into court by 1 May 2019. The plaintiff paid $30,000 into court on 3 May 2019.
The defendant seeks orders that the proceedings be dismissed and the plaintiff pay the defendant's costs to be taxed if not agreed.
On 10 May 2019, the plaintiff applied for an order extending the time for it to comply with the security for costs order to 3 May 2019. For the reasons which follow, the plaintiff's application should be dismissed.
The plaintiff's claim
It is necessary to make only a brief reference to the nature of the plaintiff's case and the issues in the proceeding.
A very broad outline of the case of the plaintiff, Mighty River International Ltd (Mighty River), is as follows. Mighty River and the defendant, Mineral Resources Ltd (Mineral Resources), each held shares in Mesa Minerals Ltd (Mesa), a company listed on the ASX. Mineral Resources controlled Mesa by reason of its shareholding in Mesa. Mineral Resources made a takeover offer for the whole of the issued shares in Mesa. The offer included shares in Mineral Resources in exchange for shares in Mesa. In the course of the takeover Mineral Resources made representations, including representations about a future matter. The representations were misleading or deceptive. Mineral Resources did not have reasonable grounds for making the representations. Mighty River refrained from accepting the takeover offer in reliance on Mineral Resources' representations, and it would otherwise have accepted the takeover offer and sold its shares in Mesa in exchange for shares in Mineral Resources. Mineral Resources engaged in conduct that was misleading or deceptive or likely to mislead or deceive. Mineral Resources' conduct was contrary to s 52 of the Trade Practices Act 1974 (Cth), s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) and contrary to s 670A(1)(a), (d), (h), (i) and (j) and s 1041H of the Corporations Act 2001 (Cth). Mighty River has suffered loss and damage as a result of Mineral Resources' conduct and its contraventions of the various statutory provisions. The loss suffered by Mighty River is the difference between the value of its shares in Mesa and the value of the shares in Mineral Resources it would have received if it had accepted the takeover offer.
Mineral Resources denies it made the representations, as alleged by Mighty River, or that it engaged in misleading or deceptive conduct, or conduct in contravention of the statutory provisions alleged by Mighty River. Mineral Resources denies that Mighty River relied on the alleged misrepresentations, or that Mighty River has suffered any loss or damage. Mineral Resources further claims that if any cause of action accrued to Mighty River entitling it to relief under the various statutory provisions referred to, the cause of action is statute‑barred.
Merits of Mighty River's claim
Mineral Resources submits that Mighty River's case lacks merit. I am unable to make any assessment of the strength of Mighty River's case. I observe that Mighty River's claim relates to representations arising from statements made in 2010.
Mighty River's case depends, amongst other things, upon disputed questions of fact, states of mind, reliance and counter‑factuals. I make no attempt to assess the relative strengths of Mighty River's and Mineral Resources' cases. I will proceed on the basis that Mighty River's claim is prima facie regular on its face, discloses a cause of action and is bona fide.
History of proceedings
It is convenient to refer to some aspects of the history of these proceedings, and related proceedings, because Mineral Resources submits that Mighty River has unduly delayed in prosecuting these proceedings and has failed to comply with court orders on a number of occasions.
The Mesa DOCA proceedings
On 13 July 2016, Mesa was placed into voluntary administration and Bryan Hughes and Daniel Bredenkamp (the Administrators) were appointed as Administrators under s 436A of the Corporations Act.
On 3 November 2016, the Administrators and Mesa executed a deed of company arrangement (the DOCA). The DOCA has subsequently been amended.
On 16 November 2016, Mighty River commenced COR 247 of 2016 in this court. The defendants were the Administrators and Mesa. Mighty River sought declarations that the DOCA was of no force and effect and orders terminating or setting aside the DOCA.
On 3 February 2017, Mineral Resources commenced COR 13 of 2017. The defendants were Mesa, the Administrators and Mighty River. Mineral Resources claimed that the DOCA complied with pt 5.3A of the Corporations Act and alternatively, if there were any defects in the DOCA then those defects could be cured under s 445G(2) and (3) of the Corporations Act.
On 16 March 2017, Master Sanderson dismissed Mighty River's claim in COR 247 of 2016: Mighty River International Ltd v Hughes & Bredenkamp [2017] WASC 69. The Master decided it was not necessary to make any orders in COR 13 of 2017.
Mighty River unsuccessfully appealed to the Court of Appeal: Mighty River International Ltd v Hughes [2017] WASCA 152.
Mighty River's appeal to the High Court was dismissed on 19 June 2018: Mighty River International Ltd v Hughes [2018] HCA 38.
Mighty River, in their applications to the High Court, has failed to fully satisfy outstanding costs orders made and assessed by the High Court in Mineral Resources' favour.
On 9 May 2019, Master Sanderson made orders in CIV 1715 of 2019 in favour of Mineral Resources for the appointment of a receiver over shares held by Mighty River in Mesa, upon Mineral Resources' application for enforcement of the outstanding costs assessed by the High Court of Australia in favour of Mineral Resources.
Mighty River lodges proof of debt
Mighty River had lodged a proof of debt in the Mesa DOCA administration claiming as follows:
[Mighty River] has legal claims against [Mesa] under the Australian Consumer Law … for misleading and deceptive representations made in the target statement with respect to a takeover bid by Mineral Resources of Mesa which concluded on 7 September 2010.
The value of the claim is $15,746,090 - $26,897,753.19.
On 6 December 2016, the Administrators requested information to support the proof of debt. On 22 December 2016, Mighty River replied asking why the Administrators intended to adjudicate claims when there was no provision in the DOCA for distribution of proceeds, and challenging the involvement of the Administrators' solicitors due to an alleged conflict of interest.
On 13 April 2017, Mighty River provided an amended proof of debt. The amended proof of debt sets out complaints relating to Utah Point, the Boodarie lease and the placing of certain projects on care and maintenance, which are also raised in this proceeding. It recites a representation alleged in this proceeding, reliance on that representation, that the representation was misleading or deceptive, and claims relief against Mesa in an amount of at least $16 million.
Mighty River commences this action
Mighty River's claims against Mineral Resources in this action relate to representations alleged to arise from, and conduct in relation to, a Bidder's Statement issued to Mesa's shareholders in April 2010 and an Investor Presentation released to the ASX in May 2010 in the course of the Mineral Resources takeover bid to acquire the whole of the shares in Mesa. The Mineral Resources takeover bid expired on 27 August 2010.
Mighty River brought no proceedings in relation to its claims until 26 August 2016 when it commenced this action by a writ of summons with indorsement of claim against Mineral Resources, and 11 other defendants, who were directors of Mineral Resources or Mesa.
Mighty River did not serve the writ on any defendant.
Mineral Resources became aware of the writ and on 17 January 2017 entered an appearance. Subsequently, the action was entered into the Commercial and Managed Cases List and certain programming orders were made between Mighty River and Mineral Resources.
Mighty River applies to extend writ
A writ is valid for 12 months from the date of its issue. Accordingly, the writ became stale on 26 August 2017.
On 29 August 2017, Mighty River applied for an order under O 7 r 1(2) of the Rules of the Supreme Court 1971 (RSC) extending the validity of the writ.
Mighty River's primary argument was that before deciding whether to serve the writ, it was awaiting the progress and investigations into the affairs of Mesa, which was under administration and against which Mighty River had a claim.
Banks‑Smith J dismissed Mighty River's application to extend the validity of the writ on the grounds that the factors against an extension of the validity of the writ outweighed those in favour: Mighty River International Ltd v Mineral Resources Ltd [2017] WASC 298. Her Honour considered the most significant issue was the strategic decision by Mighty River to await the outcome of the investigations by the Administrators into the potential claims that Mesa might have, and also to await the adjudication of its proof of debt. Her Honour considered that awaiting decisions of the Administrators to assess their impact was not a good reason to extend the validity of the writ. Her Honour concluded that the interests of justice and the balancing of hardship did not require that discretion be exercised in favour of extending the validity of the writ.
Proceedings against Mineral Resources continue
After the proceedings against the defendants, other than Mineral Resources, were dismissed Mighty River filed and served a substituted statement of claim. There were further directions hearings. Mineral Resources filed and served a defence. Orders were made for discovery and inspection.
After I took over the case management of this action I made orders on 13 August 2018 by consent which required, amongst other things, Mighty River to file and serve its witness statements and expert evidence by 19 October 2018. Mighty River failed to do so.
On 30 October 2018, I ordered that the time for Mighty River to file and serve its witness statements and to provide Mineral Resources with a copy of its expert evidence be extended to 30 November 2018. Mighty River failed to comply with those orders.
On 3 December 2018, by consent I further extended the time for Mighty River to comply with the orders to file and serve its witness statements and its expert evidence to 4 December 2018.
Mighty River has filed one witness statement - a statement of Mr Xie. They have also filed a substance of expert report of a chartered accountant and official liquidator, about the value of Mighty River's shares in Mineral Resources at 26 August 2016, if Mighty River had accepted Mineral Resources' takeover offer and made certain decisions since.
First orders for security for costs
On 17 July 2017, Banks‑Smith J by consent ordered that by 4.00 pm on 14 July 2017, Mighty River provide security for Mineral Resources' legal costs in the action up to and including discovery in the sum of $40,000, with liberty for Mineral Resources to apply to uplift the amount of security. Her Honour ordered that the amount was to be paid into the trust account of Mighty River's then solicitors, Nova Legal, and not to be released without the written consent of Mineral Resources, or pursuant to an order of the court. Her Honour further ordered by consent that in the event Mighty River failed to comply with that order, the proceedings be immediately dismissed with Mighty River to pay Mineral Resources' costs of the proceedings.
Further security for costs orders
On 22 November 2018, I made orders by consent that within 10 days of the order, Nova Legal pay the sum of $40,000 then held in that firm's trust account as security for Mineral Resources' costs pursuant to order 2 of the consent orders made by Banks‑Smith J on 11 July 2017, into court and that within 10 days from the date of the order, Mighty River provide additional security for Mineral Resources' costs in the sum of $40,000 by payment of that amount into court. I further ordered that in the event that the plaintiff failed to comply with the latter order, the proceedings be immediately dismissed with Mighty River to pay Mineral Resources' costs of the proceedings. Mighty River paid both sums of $40,000 on 29 and 30 November 2018 respectively.
On 13 February 2019, I made the following orders by consent:
1.By 1 May 2019, the plaintiff do give security for the defendant's costs of the action up to and including the preparation and attendance at mediation in the sum of $30,000 by payment of that amount into court.
2.By 3 June 2019, the plaintiff do give security for the defendant's costs of the action up to and including the trial, in the sum of $70,000 by payment of that amount into court.
3.In the event that the plaintiff fails to comply with either order 1 or 2 above, the proceedings be immediately dismissed with the plaintiff to pay the defendant's costs of the proceedings to be taxed if not agreed.
(the February 2019 orders)
Mighty River did not comply with order 1 of those orders. It did not pay $30,000 into court on or before 1 May 2019.
On 2 May 2019, Mineral Resources' solicitors, Bennett + Co, sent an email to the court with a copy to Mighty River's solicitor. The letter said that Mighty River had not complied with the order requiring it to give security for Mineral Resources' costs in the sum of $30,000 by payment of that amount into court by 1 May 2019, and requested that the court enter judgment for Mineral Resources in terms of an attached minute of proposed orders. The minute provided that the proceedings be dismissed and Mighty River pay Mineral Resources' costs.
On 3 May 2019, Mighty River paid $30,000 into court.
The February 2019 orders and the underlying agreement
On 19 December 2018 Mineral Resources' solicitors, Bennett + Co, wrote to Mighty River's solicitors, Pragma Legal, pressing for an uplift to the security for its costs in the amount of an additional $120,000. Bennett + Co proposed that the $120,000 be payable in two tranches, and in the event Mighty River failed to pay either or both of the tranches, the proceedings be immediately dismissed with Mighty River to pay Mineral Resources' costs of the proceedings.
On 16 January 2019 Pragma Legal replied. Pragma Legal stated that Mighty River did not agree to the proposal set out in Bennett + Co's letter. On 24 January 2019 Pragma Legal wrote again to Bennett + Co. Pragma Legal said, in effect, that Mighty River had assets within Australia worth approximately $880,000 and therefore Mineral Resources may not be entitled to any further security.
Bennett + Co responded on 29 January 2019. Bennett + Co did not accept that Mighty River had the financial capacity to meet any adverse costs order in favour of Mineral Resources.
On 30 January 2019 Pragma Legal again wrote to Bennett + Co. Pragma Legal referred to the considerable resources which would be required if an application for security for costs was made, and stated that 'on a commercial basis only' Mighty River would consent to providing Mineral Resources with security over certain shares held by it. Later on 30 January 2019, Pragma Legal sent an email to Bennett + Co which referred to a recent conversation between Nathan Ebbs of Bennett + Co and Aaron McDonald of Pragma Legal regarding security for costs. The email stated that, as foreshadowed, Pragma Legal were forwarding a proposed memorandum of consent orders for execution.
On 4 February 2019 Bennett + Co sent an email to Pragma Legal. The email stated that Mineral Resources 'is prepared to accept Mighty River's offer for further security for MRL's cost on the basis of the attached minute of consent orders'. The attached minute of consent orders was substantially in the form of the consent orders proposed by Pragma Legal, except that the memorandum inserted a date for the provision of the second tranche rather than specifying that it be within 14 days after the completion of mediation.
On 5 February 2019, Pragma Legal sent to Bennett + Co a signed copy of the consent orders proposed by Bennett + Co. Later on 5 February 2019, Bennett + Co sent to Pragma Legal a copy of the minute which was countersigned on behalf of Mineral Resources. The memorandum of consent orders was subsequently filed by Pragma Legal on 5 February 2019. On 13 February 2019, I made the February 2019 orders which are in the terms of the memorandum of consent orders.
At the hearing of this present application, counsel for Mineral Resources submitted that the consent orders made on 13 February 2019 were made pursuant to an agreement between the parties and relied upon the principle stated by the court in Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198, which in turn was based upon the principle expressed in Paino v Hofbauer (1988) 13 NSWLR 193. The principle is that, where a party asks that a consent order based on an underlying agreement should be varied and the underlying agreement cannot be set aside or varied, the case would need to be an exceptional one before the court would exercise the discretion to vary the order.
Counsel for Mighty River did not dispute that the consent orders were made following an agreement between the parties. Counsel submitted this case is distinguishable from Lachlan v HP Mercantile Pty Ltd because payment has been made and there is no evidence of prejudice to Mineral Resources.
I find that the February 2019 orders were based on the memorandum of consent orders signed by the parties on 5 February 2019, which in turn was based on an underlying agreement between the parties. I reach that finding having regard to the following matters. First, the orders were made following substantial negotiations between the parties. Mighty River first argued that Mineral Resources was not entitled to further security for costs, then proposed that it give security in the form of security over shares held by it, and finally agreed it would give security in the terms proposed by Mineral Resources and consent to orders to give effect to that agreement. Secondly, Bennett + Co's email of 4 February 2019 stated that Mineral Resources was prepared 'to accept' Mighty River's 'offer' for further security for Mineral Resources' costs. That is the language of contract. Thirdly, on the hearing of the application Mighty River did not dispute the submission of counsel for Mineral Resources that the February 2019 orders were made pursuant to an agreement between the parties.
Extension of time ‑ self‑executing orders ‑ principles
RSC O 3 r 5(1) provides that the court may extend the period within which a person is required by any order to do any act in any proceedings. RSC O 3 r 5(2) provides that the court may extend such period although the application for extension is not made until after the expiration of that period. This gives the court power to extend the time for compliance with a self‑executing order (often referred to as a springing order), such as the February 2019 orders, even after judgment has been entered by its automatic operation: FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268.
The power to extend time is a power to extend time to relieve against injustice. It is a discretionary power. There is seldom one factor or one set of factors which are prescriptive of a particular result. Ultimately, the question is: what does justice, in all its notions or senses of it that are relevant, require in the circumstances of the case?
Mighty River seeks an extension of time to comply with an order that was made by consent. Counsel for Mineral Resources, Mr Bennett, submitted that the party seeking an extension of time must make out an exceptional case before the court would vary times fixed by a consent order based on an agreement, where the underlying agreement could not be set aside or varied. Mr Bennett referred to Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198, where the New South Wales Court of Appeal dismissed an appeal from the decision of the trial judge to refuse an application for an extension of time by which to comply with consent orders. The appellant contended that the trial judge had taken into account an irrelevant consideration in finding that it was necessary to establish an exceptional case to extend time to comply with consent orders that were based on an underlying contract. The trial judge had applied Paino v Hofbauer (1988) 13 NSWLR 193. The appellants submitted that Paino was plainly wrong and ought not be followed.
In Paino, judgment had been entered in accordance with an agreement between the parties to settle the litigation. The judgment provided that the respondents pay to the appellants the sum of $750,000. Order 5 provided that execution of the judgment be stayed provided that the respondents pay the judgment sum by specified instalments. The respondents commenced paying the instalments in accordance with the judgment, but failed to pay the later instalments on time. The consequence was that, unless an order was made extending the time for payment of the instalments which were in default, the respondents became liable for the verdict of $750,000 and lost the right conferred by the judgment to a stay of the judgment upon payment of $530,000. The trial judge extended the time for making the payments to the date upon which the payment was actually made by the respondents. McHugh JA, with whom Samuels and Clarke JJA agreed, found that the trial judge had erred in the exercise of her discretion and therefore the Appeal Court must exercise the discretion itself.
McHugh JA referred to English authority, that a consent order based on an agreement cannot be set aside unless the agreement can be invalidated. His Honour did not accept that approach and stated that the discretion conferred by the Supreme Court Rules 1970 (NSW) to extend time is not to be equated with the extent of the court's powers to vary or set aside contracts. Nevertheless, his Honour continued:
…when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant. Moreover, by itself the failure of the applicant to comply with the terms of a consent order based on a contract could rarely, if ever, be a sufficient ground to vary the order. This is particularly so when the parties have stipulated that time for the performance of the parties' obligations was to be of the essence of the agreement. (page 198)
His Honour held that, in the circumstances of that case, the court ought not to exercise its discretionary power to confer a further benefit on the respondents when to do so would conflict with the parties' free and voluntary agreement.
Lachlan v HP Mercantile Pty Ltd also involved an agreement to settle legal proceedings. The settlement was recorded in a deed. Consent orders were made to give effect to the settlement. Order 5 of the consent orders provided that the appellant will pay to the respondent $300,000 in accordance with the payment schedule contained in the deed. Order 6 provided that if there was a default under the deed that entitled the respondent to commence recovery action against the appellant, the respondent was granted 'leave to immediately enter judgment under its cross‑claim' in the amount of $1,570,292.12, less payments made under the deed together with interests and costs. The appellant failed to make the last instalment in accordance with the deed and failed to rectify the default after being given notice to do so in accordance with the provisions of the deed. The appellant applied for an extension of time by which to comply with the consent orders pursuant to r 1.12 of the Uniform Civil Procedure Rules 2005 (NSW). The primary judge refused to extend time. As I have said, the appellant contended that the primary judge had taken into account an irrelevant consideration in finding that it was necessary to establish an exceptional case to extend time to comply with consent orders that were based on an underlying contract in accordance with Paino. The appellants submitted that Paino was plainly wrong and ought not to be followed.
The court rejected the appellant's submission that Paino impermissibly fettered the general discretion conferred on the court to extend time. The court said that the remarks of McHugh J in Paino:
were directed to a case where parties have bound themselves to a contract which underpins the court's orders. In such a case, the court's general discretion has to be exercised in the context of the respect the law gives to parties being held to their bargain. To relieve a party from the bargain they had clearly entered, would, as McHugh J remarked, require an exceptional case. Such an approach does not fetter the discretion of a judicial officer. Rather, it is a statement of an appropriate exercise of discretion in a particular type of case. [27]
The court rejected the appellant's argument that Paino was plainly wrong. The court dismissed the appeal.
Paino was distinguished by Adamson J in Westpac Banking Corporation v Kekatos [2015] NSWSC 1629. Adamson J at [73] said that in Paino, McHugh J considered that a party could not, except in exceptional circumstances, avoid the operation of an essential time clause in a settlement agreement by relying on the court's power to vary time stipulations in a consent order where there was no entitlement to relief with respect to the underlying agreement. Adamson J said that in the case before her where there was no enforceable underlying agreement, there was no impediment (such as in Paino) to the court setting aside or varying the order to set aside the default judgment.
Adamson J found that the proposed consent orders, which were handed to the court and subsequently made by the court, were neither an enforceable contract per se nor based on an enforceable contract. Her Honour found that they reflected no more than an acceptance by the plaintiff of the orders that were likely to be made by the court if the motion were contested, and its consent to them being made without the need for the court to hear and determine the defendant's notice of motion.
In Trust Co (Nominees) Ltd v Angas Securities Ltd (No 4) [2016] FCA 1240, Angas Securities sought a variation to consent orders made pursuant to an interim settlement agreement between Angas and the Trust Co. Beach J set out some general principles concerning the power of the court to vary consent orders including the following principles. First, the court had power to vary an interlocutory order even if made by consent and pursuant to an agreement between the parties. Secondly, the power to vary is more readily exercisable in the context of an interlocutory order as compared with a final order. Thirdly, in the context of a consent order or judgment that is final and which gives effect to an underlying agreement, if the underlying agreement or its enforceability is not impeached then the consent order or judgment should not be set aside or varied except in an exceptional case. Fourthly, the rigidity applying to varying final orders does not apply where the consent order, based upon an agreement, is interlocutory. Fifthly, where the consent order is made in implementation of an agreement between the parties in order to finally resolve the proceeding, then adjectives such as 'exceptional' or 'rare' are not inapposite. The circumstances justifying variation should be more limited given the intended finality sought to be achieved. But where the consent order is made to resolve an interlocutory dispute, there is not such a paramountcy of finality.
RSC O 3 r 5(1) is set out in [51]. The court must consider all of the circumstances and make such order as in the circumstances, is in the interests of justice.
The weight to be given to the consideration that an order is agreed will vary according to the nature of the order and thus the agreement. Where the agreement is the compromise of a substantive dispute or the settlement of proceedings, that will have great and perhaps decisive weight. Where the agreement is to resolve an interlocutory dispute, the weight to be accorded to the parties' agreement as to the consequences of non‑compliance are real and substantial but correspondently less and rarely decisive. Everything must depend on the circumstances.
In a case such as the present where the consent order is made to implement an agreement between the parties to resolve an interlocutory dispute, rather than to finally resolve the proceeding, the circumstances in which the court may extend time need not be characterised as 'exceptional'. However, the circumstances that a party failed to comply with a consent order based on an agreement, and will suffer prejudice if the time within which to comply with the order is not extended, will rarely if ever be a sufficient ground to vary the order.
Public confidence in the court and the administration of justice will be undermined if a party may disregard with impunity, and without any adequate reason, a court order giving effect to an agreement between the parties. Where a party seeks an extension of time to comply with a court order made to give effect to an agreement between the parties, it is incumbent on the party to give an explanation as to why it had not complied with the court order.
Mighty River's explanation for failure to make payment in time
Yuzheng Xie is the sole director of Mighty River. Mr Xie has affirmed an affidavit of 9 May 2019 in support of Mighty River's application. The affidavit is to the following effect.
In February 2019, Mr Xie instructed Mighty River's lawyers, Pragma Lawyers, to agree to the February 2019 orders. Mr Xie was aware that the orders provided for automatic dismissal if the payment was not made on time. He discussed the matter, and the reasons for it, with Mighty River's lawyers.
Pragma Lawyers ceased acting for Mighty River at the end of March 2019. Mr Cockman of Justice Legal was subsequently appointed as the solicitor for Mighty River. For a couple of weeks in late April 2019, Mr Xie was in discussions with Pragma Lawyers regarding the possibility that they would again take over carriage of the action. On 23 April 2019, Pragma Lawyers gave Mr Xie reminders orally and by email of the need to pay monies by way of security for costs on 1 May 2019, and that the order provided for dismissal of the proceeding if this was not paid.
On 29 April 2019, Mr Xie was in his office in West Perth. He flew to Kununurra at lunchtime. While in the West Perth office he was attending to other business of Mighty River. He was planning to be out of Perth on 1 May 2019. He prepared and signed a cheque for payment of the security. He left the cheque on his desk because he was not clear whether Pragma Lawyers would resume conduct of the matter. He planned to have a further discussion with Pragma Lawyers that morning regarding them acting in the action, but did not have time before boarding the plane for Kununurra. He returned to Perth late in the afternoon on 1 May 2019. It was not until he returned to the office mid‑morning on 2 May 2019 that he realised that he had forgotten to make arrangements to pay the cheque he had prepared into court. The cheque for the security together with the necessary court form was filed at the court at about 9.30 am on 3 May 2019.
Mr Xie's statement, that it was not until he returned to the office mid‑morning on 2 May 2019 that he realised that he had forgotten to make arrangements to pay the cheque into court, must be considered in light of the statements made by his solicitor, Mr Cockman, in his email of 9 May 2019 to Bennett + Co. In that email Mr Cockman said:
Mr Xie realised his oversight on returning to the office on Thursday 2 May 2019 and the consequences of that oversight when he was forwarded Bennett & Co's correspondence with the court.
Mr Xie did not give instructions for the payment into court to be made until after he had been informed that Mineral Resources had requested that the court enter judgment.
Mr Xie's evidence is that on the morning of 29 April 2019 he knew that the payment for security of costs must be made on 1 May 2019. He was planning to leave his office at lunchtime and was planning to be out of Perth on 1 May 2019. He drew the cheque and left it on his desk. He made no arrangements for the cheque to be paid into court. He does not claim that he intended to make any such arrangements. To the contrary, he chose to fly to Kununurra at lunchtime on 29 April 2019, intending to be out of Perth on 1 May 2019, and chose to make no arrangements for the cheque to be paid into court. Mr Xie made no arrangements for the payment into court to be made until he learned that Mineral Resources had applied to the court for judgment to be entered.
Exercise of discretion
There are a number of factors weighing in favour of extending the time for compliance with the February 2019 orders. First, if the time for compliance with the order is not extended, the action will stand dismissed and Mighty River will have lost its claimed cause of action. Secondly, the payment into court has been made and was only two days late. Thirdly, the matter is at an advanced stage. Witness statements have been filed and the matter has been set down for trial commencing on 29 July 2019. Fourthly, extending time will not cause prejudice to the defendant beyond the delay in preparing the case caused by awaiting the payment into court and attending to this application.
There are a number of factors which weigh against extending the time for compliance with the consent order. First, the fact that the order is a consent order based on an agreement between the parties, is a factor upon which the court should place great weight. Secondly, Mighty River has been dilatory in commencing and then pursuing these proceedings. Thirdly, Mighty River has previously failed to comply with case management directions made by the court. Fourthly, Mighty River was reminded orally and by email of 23 April 2019 from its former solicitors, Pragma Lawyers, of the need to pay monies by way of security for costs on 1 May 2019, and that if the payment was not made the proceeding would be immediately dismissed and Mighty River would be liable for Mineral Resources' costs. Fifthly, Mighty River has provided no adequate explanation for its failure to make the payment in accordance with the consent orders.
In my opinion, the factors against exercising my discretion to extend the time for compliance with the February 2019 orders outweigh the factors in favour of exercising the discretion to extend the time.
The application for an extension of time is not to be considered solely or predominantly by reference to whether Mineral Resources will suffer any particular prejudice by an extension of time, or whether any prejudice can be compensated by costs.
Mighty River will suffer hardship by the refusal of an extension of time in that it will not be able to pursue its claim against Mineral Resources. However, that hardship is of Mighty River's own making. Mighty River made a bargain with Mineral Resources that it would pay into court the agreed amount for security for Mineral Resources' costs by 1 May 2019 and if it did not do so, its action would be dismissed. That bargain was made in circumstances where Mighty River had been dilatory in commencing and pursuing its claim, had failed to comply with court orders and had previously agreed to self‑executing orders if it did not comply with court orders. Mighty River, by Mr Xie, knew of the requirement to make the payment by 1 May 2019 and the consequences if it did not. Mr Xie was reminded of those matters by Pragma Legal orally and by email in late April 2019.
There is no evidence that Mighty River could not have made the payment at any time prior to 3 May 2019 if it had chosen to do so. Mr Xie turned his mind to the requirement to make the payment as late as 29 April 2019 and went as far as writing out a cheque. He decided to leave Perth and planned to be out of Perth on 1 May 2019, and made no arrangements for the payment to be made. He returned to Perth on 1 May 2019, but did nothing to cause Mighty River to make the payment until after he had been informed by Justice Legal that Mineral Resources had requested the court to enter judgment in consequence of Mighty River's failure to comply with the order for payment into court. Mighty River has provided no explanation for its failure to comply with the February 2019 orders.
In all the circumstances there is no good or sufficient reason to relieve Mighty River from the consequences of its failure to comply with the February 2019 orders.
Conclusion
Mighty River's application for an extension of time to comply with the February 2019 orders should be dismissed. The proceedings will be dismissed. Mighty River must pay Mineral Resources' costs of the application and of the action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MS
Associate to the Honourable Justice Le Miere
12 JUNE 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MIGHTY RIVER INTERNATIONAL LTD -v- MINERAL RESOURCES LTD [No 2] [2019] WASC 197 (S)
CORAM: LE MIERE J
HEARD: ON THE PAPERS
DELIVERED : 2 OCTOBER 2019
FILE NO/S: CIV 2474 of 2016
BETWEEN: MIGHTY RIVER INTERNATIONAL LTD
Plaintiff
AND
MINERAL RESOURCES LTD
Defendant
Catchwords:
Costs - Special costs order - Whether there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount greater than the limit - Turns on own facts
Costs - Special costs order - Whether matter is of unusual difficulty, complexity or importance to warrant exercise of discretion to order a special costs order - Turns on own facts
Legislation:
Legal Profession Act 2008 (WA)
Result:
The defendant's costs of the proceedings be assessed without regard to the time limits imposed by the relevant Legal Profession (Supreme Court) (Contentious Business) Determinations
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Justice Legal |
| Defendant | : | Bennett + Co |
Case(s) referred to in decision(s):
Mighty River International Ltd v Mineral Resources Ltd [No 2] [2019] WASC 197
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S)
LE MIERE J:
Summary
On 13 February 2019, I made an order by consent that the proceedings be immediately dismissed, with the plaintiff to pay the defendant's costs of the proceedings, unless by 1 May 2019 the plaintiff complied with the order to give security for the defendant's costs of the action, up to and including the preparation and attendance at mediation, in the sum of $30,000 by payment of that amount into court. The plaintiff did not give security for the defendant's costs in the sum of $30,000 by payment of money into court by 1 May 2019. The plaintiff applied for an order extending the time for it to comply with the security for costs order (the extension of time application).
On 12 June 2019, I dismissed the plaintiff's extension of time application and ordered the plaintiff to pay the defendant's costs of the application. It was adjudged that, given the plaintiff failed to comply with the security for costs order, the proceedings be dismissed and the plaintiff pay the defendant's costs of the proceeding.
The defendant has applied for orders that its costs of the proceeding and its costs of the extension of time application be assessed without regard to the time limits imposed by the items of the relevant Legal Profession (Supreme Court) (Contentious Business) Determinations, in respect of the items defence, discovery, inspection and preparation of case. The plaintiff opposes the application.
For the reasons which follow there will be an order that the defendant's costs of the proceeding be assessed without regard to the time limits imposed by Items 3, 7 and 17 of the relevant Determinations.
The proceedings
I summarised the nature of the plaintiff's claim in this proceeding and the history of the proceeding in my reasons for dismissing the plaintiff's extension of time application.[1] Those reasons should be read with these reasons.
Legal Profession Act
[1] Mighty River International Ltd v Mineral Resources Ltd [No 2] [2019] WASC 197.
The authority for making a special costs order of the kind sought by the defendant is s 280(2) of Legal Profession Act 2008 (WA) (Act). Section 280(1) and (2) provide:
280.Effect of costs determination
(1)Subject to any costs agreement made in accordance with Division 6 or the corresponding provision of a corresponding law, section 306 and the Legal Aid Commission Act 1976 section 14 -
(a)the taxation of bills of law practices; and
(b)any other aspect of the costs charged by law practices,
is regulated by an applicable costs determination.
(2)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed. (emphasis added)
Legal principles
The purpose and effect of s 280(1) and (2) of the Act were expounded by the Court of Appeal in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2].[2] The court said:
By s 280(1) of the Act, a party's recoverable costs are confined, in effect, by the scale limits. To that extent, s 280(1) is protective of the party charged and, more generally, serves the due administration of justice by limiting the allowable scope for legal costs. Section 280(2) operates as an exception to s 280(1) of the Act. Section 280(2) of the Act operates to give the successful party the opportunity to recover those costs which have been reasonably and properly incurred where, in the court's opinion, the scale is inadequate because of the unusual difficulty, complexity or importance of the matter. To that extent, s 280(2) of the Act is protective of the successful party to the litigation and, on that account, also serves the administration of justice by facilitating, within the limits imposed by the statutory criteria, the operation of the general principle that a successful party is entitled to its costs of the litigation. Even where orders are made under s 280(2) of the Act, it nevertheless remains the task of the taxing officer to consider the reasonableness of and necessity for the work undertaken, and to make a judgment about the remuneration reasonably required.
Before such a power will be exercised, the court must form an opinion that has two components. First, the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination. Secondly, the court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the 'unusual difficulty, complexity or importance of the matter'. Issues of the kind which arise are addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.
For the purposes of exercising the powers conferred by s 280(2) of the Act, it will not ordinarily be necessary for the court to determine what amount should be allowed on taxation, but only whether there is a fairly arguable case that a greater amount should be allowed than that which is allowable under the relevant determination.
A fairly arguable case to that effect will not be established merely because a party incurred greater costs than those allowable under the relevant determination. However, depending on the particular case and all the circumstances, the fact that a party has applied significantly greater legal resources to each step in the litigation than those for which allowance is made under items of the relevant determinations, when viewed in the context of the difficulty, complexity or importance of the matter, may sustain the conclusion that there is a fairly arguable case that each of the items identified is inadequate (and thereby the amount of costs allowable in respect of the matter is inadequate) because of the unusual difficulty, complexity or importance of the matter.
… the reference to 'importance' in this context allows the court to have regard to the significance of the issues that arose in the litigation. Significance can arise either because of the significance of the issues to the parties, or because of the significance of the issues to other prospective parties, or to the public or community generally.
… the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the relevant costs determination.[3] (references to authority omitted).
[2] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S).
[3] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] ‑ [16].
Costs allowable inadequate
Ms Comley, a solicitor assisting the principal solicitor with the conduct of the matter on behalf of the defendant, has reviewed invoices issued by the defendant's solicitors, Bennett + Co, to the defendant, to FilePro and third parties. I understand FilePro to be a provider of legal practice management and, in particular, document management services.
I will consider the adequacy of the costs allowable for each item under the relevant costs Determinations.
Defence
The plaintiff filed or exchanged six versions of its statement of claim between 2 March 2017 and 10 November 2017, including a substituted statement of claim. Ms Comley has sworn that the actual costs incurred by the defendant in respect of drafting its defence and subsequent amendments as a consequence of amendments to the statement of claim totalled approximately $47,512.50. The amount allowable under the relevant costs Determination is $4,840.
The plaintiff says that nine months elapsed between the filing of the initial statement of claim and the filing of the substituted statement of claim. During that period there were: two case management hearings; an application to strike out and an application for security for costs, which settled just prior to the hearing; a contested application to extend the period for service; and extensive conferral between counsel regarding alleged defects in the pleading. The plaintiff says that the costs of that work are properly captured in other items of the 2016 Determination (Item 6, 10, 11, 15, 24 and 25) rather than requiring the raising of the time limits for Item 3 of the 2016 Determination.
On an application for a special costs order it is not appropriate for the court to undertake an item by item review of the work undertaken by a party, which caused that party to incur costs which exceed the amount allowable under the relevant costs Determination. The task of the court is to consider, as a matter of impression, whether there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant costs Determination. It will be for the taxing officer to undertake, if necessary, an item by item review of the work undertaken by the defendant.
I am satisfied that there is a fairly arguable case that the bill to be presented to the taxing officer in relation to the preparation, drafting and setting the defendant's defence may properly tax at an amount which is greater than the limit which would be imposed by the relevant costs Determination. A fairly arguable case to that effect is not established merely because the defendant incurred greater costs than those allowable under the relevant costs Determination. However, from my knowledge as case manager of the circumstances of the case, the nature of the pleadings and the multiple iterations of the statement of claim, I am satisfied that there is a fairly arguable case that the amount allowable under the costs Determination is inadequate.
I find there is a fairly arguable case that the amount allowed for the preparation, drafting and settling of the defence under the relevant costs Determination is inadequate because of the importance of the matter. I find that this action is relevantly important to the defendant because of the significance of the issues in the action to the defendant.
The plaintiff claimed about $25 million from the defendant. That is a significant amount but, having regard to the jurisdiction of this court and what might be described as the usual run of cases determined in the court, merely the amount claimed by the plaintiff does not make it important for the purposes of s 280(2) of the Act.
The requisite importance arises from the allegations by the plaintiff and their potential to damage the reputation of the defendant. The defendant is a public company listed on the ASX. It is the majority shareholder in Mesa Minerals Ltd which is also a public company listed on the ASX. In this proceeding the plaintiff alleged that in the course of a takeover bid to acquire all of the issued shares in Mesa, the defendant made representations in its bidder statement that were misleading or deceptive. Further, the plaintiff alleged that in its bidder statement the defendant failed to disclose that if the defendant obtained control of Mesa it intended to use assets of Mesa for the benefit of the defendant or its related entities. Those are serious allegations with the potential to seriously damage the defendant's corporate reputation.
Matters going to the improper use of assets of a related company and misleading or deceptive conduct towards shareholders, if established by the judgment of a court, is a threat to the defendant's reputation. The reputation of a listed company is very important. The importance of the case to the defendant justified applying significantly greater legal resources to the litigation than those for which allowance is made under items of the relevant costs Determination.
The plaintiff submits that the defendant has not provided evidence or explanation as to why the inadequacy of costs allowed under the costs Determinations arises as a result of the importance of the matter. The plaintiff says that the only evidence that is provided by the defendant is evidence of the costs incurred by the defendant, and the defendant has not provided evidence of how many hours were spent on each of the items in respect of which a special costs order is sought or the level of experience of the relevant practitioner or counsel undertaking the work.
It is open to infer from the evidence adduced by Ms Comley, the pleadings and my knowledge of the case as case manager that the costs allowable under the relevant costs Determination for the preparation, drafting and settling of the defence is inadequate because of the importance of the matter. I draw that inference.
The court has said on many occasions that the power conferred by s 280(2) of the Act to make a special costs order is to be exercised as a matter of impression and the judge's knowledge of the matter as case manager. The court is not to be blighted by satellite litigation applications for special costs orders taking up resources of the parties and the court disproportionate to the issue involved. Approaching the matter at the level of impression and whether the defendant has made out a fairly arguable case, I am satisfied that it has.
Discovery and inspection
Both parties provided discovery electronically in accordance with an agreed protocol for the electronic exchange of documents. The defendant discovered 2581 documents. The plaintiff discovered about 856 documents. Ms Comley has given evidence that the costs actually incurred by the defendant in giving discovery and attending to inspection totalled approximately $63,905 and $7,960 respectively. The maximum amounts allowable under the relevant costs Determinations are $4,840 and $4,950 for discovery under the 2016 costs scale and 2018 costs scale respectively. I find there is a fairly arguable case that the amount allowable under the relevant costs Determinations is inadequate because of the importance of the matter.
The relevant costs Determinations provide no limit on the amount allowable for inspection. The scale allows an hourly amount for inspection. The defence does not seek to raise the hourly rate. There is no need to raise the limit for the time allowable for inspection.
Preparation of case
The amount allowable for preparation of case is $58,080 under the 2016 costs scale and $59,400 under the 2018 costs scale. Ms Comley has provided evidence that the costs actually incurred by the defendant for preparation of case totalled approximately $129,885.
The plaintiff says that given discovery was not completed until July 2018, it is difficult to see how there could have been work preparing the case in the period to which the 2016 Determination applies, and the defendant has not provided any evidence or explanation to justify a special costs order in relation to preparation of case under the 2018 Determination.
I find that there is a fairly arguable case that the bill to be presented to the taxing officer in relation to the defendant's preparation of its case, may properly tax at an amount which is greater than the limit which would be imposed by the relevant costs Determination, and that the inadequacy arises because of the importance of the extension of time application.
Application for extension of time
There is no evidence that the actual costs incurred by the defendant, in responding to the plaintiff's application for an extension of time, exceeds the maximum amount allowable under the relevant scale. The defendant read one affidavit in opposition to the extension of time application. The affidavit consisted of 142 pages but most of that was annexures; the body of the affidavit was 18 paragraphs occupying five pages. The defendant did not file any written submissions. The hearing of the application lasted 46 minutes. I am not satisfied that the maximum amount allowable under the relevant scale item is inadequate.
Conclusion
There will be an order that the defendant's costs of the proceeding be assessed without regard to the time limits imposed by Items 3, 7 and 17 of the relevant Determinations.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MS
Associate to the Honourable Justice Le Miere
2 OCTOBER 2019
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