Morris v McConaghy Australia Pty Ltd (No 5)

[2018] FCA 1582

FEDERAL COURT OF AUSTRALIA

Morris v McConaghy Australia Pty Ltd (No 5) [2018] FCA 1582

File number:	NSD 1195 of 2017
Judge:	PERRAM J
Date of judgment:	19 October 2018
Catchwords:	COSTS – whether indemnity costs should be ordered against respondent – where respondent successfully defended application for deemed service – where applicant not at fault for ineffective foreign service
Legislation:	Federal Court of Australia Act 1976 (Cth) s 37M
Cases cited:	Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 801; 46 FCR 225
Date of hearing:	19 October 2018
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Category:	Catchwords
Number of paragraphs:	5
Counsel for the Applicant:	Mr E Cox SC
Solicitor for the Applicant:	Aus Ship Lawyers
Counsel for First and Fourth Respondents:	The First and Fourth Respondents did not appear
Counsel for the Second Respondent:	Mr A Woods
Solicitor for the Second Respondent:	Lander & Rogers
Counsel for the Third Respondent:	Ms S Scott
Solicitor for the Third Respondent:	Mahony Law

ORDERS

NSD 1195 of 2017

BETWEEN:

JONATHAN MORRIS

Applicant

AND:

MCCONAGHY AUSTRALIA PTY LTD ACN 52 168 218 380

First Respondent

MC2 COMPOSITES LTD (A COMPANY INCORPORATED IN THE CAYMAN ISLANDS)

Second Respondent

MARK EVANS

Third Respondent

TIGER YACHT MANAGEMENT LTD (A COMPANY INCORPORATED IN THE CAYMAN ISLANDS)
Fourth Respondent

JUDGE:	PERRAM J
DATE OF ORDER:	19 OCTOBER 2018

THE COURT ORDERS THAT:

1.The Second Respondent pay the Applicant’s costs of Prayer 1 of the interlocutory application filed 27 July 2018 on an indemnity basis payable forthwith.

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

REASONS FOR JUDGMENT

PERRAM J:

1. On 10 October 2018 I determined an application by the Applicant for deemed service on the Second Respondent: Morris v McConaghy Australia Pty Ltd (No 4) [2018] FCA 1516. The Second Respondent (‘MC²’) is incorporated in the Cayman Islands. In the circumstances which were set out in those reasons, it appeared that it had not been correctly served through no fault of the Applicant. Following argument, I concluded that r 10.48 of the Federal Court Rules 2011 (Cth) did not permit an order for deemed service to be made because the matters which would enliven that rule had not been made out. At [22] of the reasons for judgment I foreshadowed that I would entertain an application that MC² and some of the persons standing behind it should have to pay the Applicant’s costs of the application for deemed service.

2. When the matter was called on today, Mr Cox SC, who appeared for the Applicant, indicated that he did not wish at this time to proceed in relation to the persons who stood behind MC², but he did pursue an application for indemnity costs in relation to MC²  itself.  Mr Woods, who appeared on a conditional basis for MC², pointed out that the application which had been brought by the Applicant had been unsuccessful and that his client had succeeded in resisting the deemed service application.  The ordinary rule was that costs follow the event and it followed that, far from the appropriate order being one that would require his client to meet the Applicant’s costs on an indemnity basis, the correct order was that the Applicant should pay MC²’s costs.

3. Mr Cox submitted that the kind of conduct which was being displayed by MC² ran contrary to provisions such as s 37M of the Federal Court of Australia Act 1976 (Cth). In commercial causes such as the present, the time had long passed when it was appropriate for ‘technical games’ such as those currently being engaged in by MC² would be tolerated.  In my view, there is force in the proposition that a technical game is being played here.  MC² was not correctly served in the Cayman Islands because the Chief Bailiff of the Grand Court of the Cayman Islands accidentally served the documentation at the wrong office, although on the correct road.  This had nothing to do with the Applicant whatsoever.

4. The Applicant will now undoubtedly make a fresh application to a designated Authority in this country, which would be a Registrar of this Court, to arrange for service again.  This will be a slow process.  It will involve a Registrar of this Court contacting again the Grand Court of the Grand Cayman Islands and the same documents will again be conveyed to the Cayman Islands, where no doubt the same bailiff will go down the same road and, hopefully, this time serve the correct office.  This is not how commercial litigation should be conducted.  Although I accept the force of Mr Woods’ submission that, ordinarily, the rule is that costs follow the event, it seems to me that there are circumstances present in this case which probably justify a departure from the ordinary rule.  In those circumstances, I do not think that costs should follow the event.

5. Further, it seems to me that what is taking place can be correctly characterised as a form of litigation misconduct of the kind described by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 801; 46 FCR 225 at 233. Therefore, it seems to me appropriate not only that the costs should not follow the event, but that MC² should pay the Applicant’s costs of the deemed service application on an indemnity basis and forthwith.  I grant the Applicant leave to present their costs for taxation.

I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate: 

Dated:        19 October 2018