Monarch Advisory Group Pty Ltd v Puxty (No 3)

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FEDERAL COURT OF AUSTRALIA

Monarch Advisory Group Pty Ltd v Puxty (No 3) [2021] FCA 1120

File number: NSD 951 of 2020
Judgment of: MARKOVIC J
Date of judgment: 16 September 2021
Catchwords: COSTS – application for costs of two interlocutory applications to be paid on an indemnity basis – where applicant successful in both applications – whether respondents’ conduct caused loss of time to the Court and to other parties – whether respondents pressed applications in wilful disregard of known facts or clearly established law – whether respondents imprudently refused applicant’s offer to compromise – application dismissed
Legislation:

Federal Court of Australia Act 1976 (Cth) s 43

Federal Court Rules 2011 (Cth) rr 39.05, 40.02, 40.13
Cases cited:

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318

Clifton (Liquidator) v Kerry J Investment Pty Ltd t/as Clenergy No 2 (2020) 277 FCR 382

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; (1988) 81 ALR 397

Francis v GPI Graphics Ltd [2011] NSWSC 317

LFDB v Ms SM (No 2) [2018] FCA 2062

Luo v Zhai (No 6) [2016] FCA 805

Monarch Advisory Group Pty Ltd v Puxty [2021] FCA 341

Monarch Advisory Group Pty Ltd v Puxty (No 2) [2021] FCA 801
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 45
Date of last submissions: 6 August 2021 (Applicant)
20 August 2021 (Respondents)
Counsel for the Applicant: Mr D Mahendra
Solicitor for the Applicant: Madison Marcus Law Firm
Counsel for the Respondents: Mr M Luitingh
Solicitor for the Respondents: Edge Legal Group

ORDERS

NSD 951 of 2020
BETWEEN:

MONARCH ADVISORY GROUP PTY LTD

Applicant
AND:

MR BRETT JAMES PUXTY

First Respondent

MR FRANCIS COGGAN

Second Respondent

ODYSSEY ADVISORY SERVICES ACN 155 549 705

Third Respondent

ORDER MADE BY:

MARKOVIC J

DATE OF ORDER:

16 SEPTEMBER 2021

THE COURT ORDERS THAT:

1.The respondents are to pay the applicant’s costs of the respondents’ interlocutory application filed on 8 December 2020 seeking to restrain the applicant’s solicitors from acting for it in this proceeding as agreed or taxed.

2.The applicant’s interlocutory application filed on 9 August 2021 is dismissed.

3.The applicant is to pay the respondents’ costs of the interlocutory application referred to in Order 2 above.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

MARKOVIC J:

  1. On 27 April 2020 the applicant, Monarch Advisory Services Pty Ltd, commenced this proceeding against the respondents, Brett James Puxty, Francis Coggan and Odyssey Advisory Services Pty Ltd.

  2. On 8 December 2020 the respondents filed two interlocutory applications: one in which they sought orders that Monarch pay security for their costs of the proceeding (Security Application) and one in which they sought orders “removing and/or barring” Monarch’s lawyers, Madison Marcus Law Firm Pty Limited, from acting for it in this proceeding (Removal…

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Details
Case
[2021] FCA 1120
Decision Date

CaseChat Overview and Summary

In the case of Monarch Advisory Group Pty Ltd v Puxty (No 3), the Federal Court considered an application by Monarch Advisory Group Pty Ltd (Monarch) to vary an order that the respondents, Puxty and Coggan, pay Monarch's costs of a previous application on an ordinary basis. Monarch sought for the costs to be paid on an indemnity basis instead. The application was based on the premise that the respondents had unreasonably pursued the previous application and refused to withdraw it despite being warned of the consequences.

The legal issues before the Court involved determining whether the respondents' conduct warranted an order for indemnity costs. This included assessing whether the respondents' actions caused a loss of time to the Court and other parties, whether they acted in wilful disregard of known facts or established law, and if they imprudently refused Monarch's offer to compromise. Additionally, the Court had to consider whether it was in the interests of justice to vary the original costs order.

The Court found that while Monarch had been successful in its previous application, the circumstances did not justify an order for indemnity costs. The Court noted that the respondents' application had been heard and dismissed, and while their conduct could be criticised, it did not meet the threshold for indemnity costs. The Court emphasised the need to exercise caution when varying interlocutory orders and concluded that the interests of justice did not require a departure from the general practice of awarding costs on an ordinary basis.

Consequently, the Court dismissed Monarch's application for indemnity costs and ordered that the respondents pay Monarch's costs of the interlocutory application as agreed or taxed. Monarch was also ordered to pay the respondents' costs of the same application.

Orders

Orders of the court

1. The respondents are to pay the applicant’s costs of the respondents’ interlocutory application filed on 8 December 2020 seeking to restrain the applicant’s solicitors from acting for it in this proceeding as agreed or taxed.

2. The applicant’s interlocutory application filed on 9 August 2021 is dismissed.

3. The applicant is to pay the respondents’ costs of the interlocutory application referred to in Order 2 above.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

As I have already observed Monarch seeks to vary the order made on 13 April 2021 that the respondents pay its costs of the Security Application in that it now seeks an order that the respondents pay its costs on an indemnity basis in a lump sum forthwith or, in the alternative, on an indemnity basis as agreed or assessed. Background Monarch relies on an affidavit sworn by Johnathon De La Hoyde on 6 August 2021 (De La Hoyde Affidavit). Mr De La Hoyde is a solicitor in the employ of Madison Marcus who is responsible for the day to day conduct of this proceeding on Monarch’s behalf. Mr De La Hoyde annexes correspondence which passed between Madison Marcus and the respondents’ solicitors, Edge Legal, in relation to the Security Application in the period between 11 December 2020 and 5 May 2021. Among other things: (1)by letter dated 11 December 2020 Madison Marcus pointed out what it perceived to be deficiencies in the Security Application and invited the respondents to withdraw that application. Madison Marcus informed the respondents that, should they refuse to withdraw the Security Application, their client would rely on the letter in support of an application for indemnity costs;(2)on 14 December 2020 Edge Legal provided a substantive response to the issues raised by Madison Marcus and declined to withdraw the Security Application;(3)on 13 April 2021 after Monarch (No 1) was published Madison Marcus wrote to Edge ‍Legal. Among other things, Madison Marcus contended that having regard to the judgment, and in particular the respondents’ failure to discharge their onus as set out in the letter, the respondents’ refusal to withdraw the Security Application was “wholly unreasonable”. The letter continued as follows:In the premises, our client is entitled to indemnity costs in respect of your clients’ application and intends to apply for a variation of the costs order made by her Honour Markovic J pursuant to the Judgment, such that your clients are ordered to pay our client’s costs as follows (Proposed Costs Order):(a) on an ordinary basis up to and including 11 December 2020; and(b) on an indemnity basis thereafterPlease confirm by no later than 4pm on 16 April 2021 whether your clients will consent to the Proposed Costs Order.In the event such consent is not forthcoming, our client will relist the matter to seek a variation of the costs order made by her Honour in the terms described above. If our client is required to apply for a variation of the costs order, it:(a)reserves its right to seek a gross sum costs order; and(b)will rely on this letter in support of an application for your clients to pay our client’s costs of and incidental to such application on an indemnity basis.(Emphasis in original); and(4)on 5 May 2021 Edge Legal informed Madison Marcus that the respondents did not consent to the “Proposed Costs Order" as set out in Madison Marcus’ letter dated 13 April 2021. Mr De La Hoyde has also set out a breakdown of the costs incurred by Monarch in relation to the Security Application. In summary, he gives the following evidence:(1)Monarch has been charged for the services provided by solicitors within the employ of Madison Marcus working on the matter at the hourly rates set out in his affidavit and on the basis of time spent on the matter;(2)as at 6 August 2021 Monarch incurred professional costs and disbursements referrable to the Security Application totalling $24,017.62 (incl GST). Mr De La Hoyde provides a summary of how that amount has been calculated; and (3)based on his experience, if Monarch was awarded costs on an indemnity basis in respect of the Security Application and those costs were assessed, in his opinion it would recover 90% or more of its professional costs and 100% of its disbursements. Applying those percentages Mr De La Hoyde estimates that the total costs Monarch would recover is $22,625.15 (incl GST).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Accordingly, I decline to make the orders sought by Monarch in paragraphs 3 and 4 of its interlocutory application. Rather, an order should be made that the respondents pay Monarch’s costs of the Removal Application as agreed or taxed.CONCLUSION The respondents should pay Monarch’s costs of the Removal Application as agreed or taxed and Monarch’s interlocutory application should be dismissed. Given that Monarch has not enjoyed any success on its interlocutory application it should pay the respondents’ costs of that application. I will make orders accordingly.

Ratio Decidendi

Legal Principle Established

Monarch submitted that, despite the ordinary operation of r 40.13 of the Rules, the Court should exercise its discretion and order that the indemnity costs be paid forthwith. It contended that the ordinary rule may be departed from when a party has unreasonably brought an application; where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted with competent and diligence; or where a discrete issue has been resolved, again referring in each case to a relevant authority. Monarch submitted that the conduct of the respondents, its efforts to resolve the matter which were rejected by the respondents, as well as the subject matter and outcome of, relevantly, the Security Application, give rise to those circumstances and reaffirm that the demands of justice require that there be a departure from the general practice. Consideration In December 2020 Monarch invited the respondents to withdraw the Security Application and forewarned them of its intention to apply for an order that its costs be paid on an indemnity basis if that invitation was not taken up. However, the respondents pressed their application which was subsequently heard. In contrast to the Removal Application (see below), at the conclusion of argument the parties did not request the Court to reserve on the question of costs. Thus Monarch is in a position where it needs to seek a variation of the costs order made upon dismissal of the Security Application The Court may vary a judgment or order after it has been entered if, among other things, it is interlocutory: r 39.05(c) of the Rules. The discretion to vary an order is not, in terms, confined but is to be exercised with caution: see Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318 at [6]. In Luo v Zhai (No 6) [2016] FCA 805 at [15] Perram J observed that the power to recall an interlocutory order is “confined only by the interests of justice”. Having regard to the relevant circumstances I am not satisfied that it is in the interests of justice to accede to Monarch’s application for variation of the costs order made in relation to the Security Application. I am not satisfied that the circumstances warrant the making of an order that the respondents pay Monarch’s costs on an indemnity basis either in a lump sum payable forthwith or as agreed or taxed. My reasons follow. The threshold issue which is common to both orders sought by Monarch is the question of whether the respondents should pay the costs of the Security Application on an indemnity basis. In that regard, Monarch relies on the findings at [34]-[37] of Monarch (No 1) where I set out why it was that the respondents had failed to establish by credible testimony that Monarch would be unable to pay their costs if they were successful in their defence of the proceeding. Relevantly I said:34.The first issue to be determined is whether the respondents, who bear the onus, have established by credible testimony that there is reason to believe that Monarch will be unable to pay their costs if they are successful in their defence. Having considered the evidence before me for the following reasons I am not satisfied that they have done so.35.Having regard to the matters set out at [15] above the respondents, who bear the onus on the application, have not led any evidence about Monarch’s financial position. Their evidence goes no higher than to ask the Court to infer that Monarch will be unable to meet an adverse costs order because of comments made by Ms Coulter in two emails when trying to negotiate what seems to be a payout upon Messrs Puxty’s and Coggan’s departure from Monarch and the fact that Monarch did not respond to a letter which referred in closing, after addressing a number of other matters, to the filing of this application if a proposed mediation did not succeed.36.Based on the evidence before me the respondents have never put to Monarch in correspondence or otherwise their basis for their belief that it will be unable to pay their costs of the proceeding if they are successful in their defence. That being so, it is difficult put any weight on Mr Stols’ evidence that Monarch has not taken any steps to demonstrate an ability to pay its debts as and when they fall due or its ability to pay a substantial costs order.37.On that basis there is no credible testimony led by the respondents based on which there is reason to believe that Monarch will be unable to pay their costs if they are successful in their defence of the proceeding. Nor, for the reasons set out below and to the extent they are permitted to rely on it, are the respondents assisted by the evidence led by Monarch.