Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (in Liquidation) and Ors (No.2)
[2019] FCCA 3690
•20 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOTTERSHEAD INVESTMENTS PTY LTD v AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD (IN LIQUIDATION) & ORS (No.2) | [2019] FCCA 3690 |
| Catchwords: CONSUMER LAW – COSTS – Claim by successful applicant for indemnity costs of the whole proceedings – claim opposed by the second respondent who seeks costs of various interlocutory applications. |
| Legislation: Corporations Act 2001 (Cth), s.500 Federal Court Rules 2011 (Cth) |
| Cases cited: Langbein v Mottershead Investments Pty Ltd [2019] FCA 1619 Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (In Liquidation) & Ors [2019] FCCA 1375 |
| Applicant: | MOTTERSHEAD INVESTMENTS PTY LTD ACN 119 740 304 |
| First Respondent: | AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD ACN 151 103 552 (IN LIQUIDATION) |
| Second Respondent: | MARK CALVIN LANGBEIN |
| Third Respondent: | ANDREW BILL ANGELO PSALTI |
| Fourth Respondent: | SV PARTNERS ADVISORY (NSW) PTY LTD ACN 108 727 975 |
| File Number: | SYG 1248 of 2018 |
| Judgment of: | Judge Driver |
| Hearing date: | Decided without oral hearing |
| Date of Last Submission: | 9 September 2019 |
| Delivered at: | Sydney |
| Delivered on: | 20 December 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr N Cotman SC |
| Solicitors for the Applicant: | Terrett Lawyers |
| Counsel for the Respondent: | Mr J Johnson |
| Solicitors for the Respondent: | JT Law |
ORDERS
Subject to Order 2, the second respondent shall pay the costs of the applicant generally in these proceedings as agreed, or in the absence of agreement, as assessed and if necessary taxed in accordance with the Federal Court Rules 2011 (Cth).
The applicant shall pay the second respondent’s costs of the following Applications in a Case, as agreed, or in the absence of agreement, as assessed or if necessary taxed, in accordance with the Federal Court Rules 2011 (Cth):
(a)Application in a Case filed 11 February 2019 insofar as it sought summary judgment;
(b)Application in a Case filed 6 March 2019;
(c)Application in a Case lodged on 29 April 2019 and filed 3 May 2019;
There will be no order as to costs of the following applications:
(a)Application in a Case filed 11 February 2019 insofar as it sought a freezing order; and
(b)Application in a Case filed 24 July 2019.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1248 of 2018
| MOTTERSHEAD INVESTMENTS PTY LTD |
Applicant
And
| AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD (IN LIQUIDATION) |
First Respondent
| MARK CALVIN LANGBEIN |
Second Respondent
| ANDREW BILL ANGELO PSALTI |
Third Respondent
| SV PARTNERS ADVISORY (NSW) PTY LTD |
Fourth Respondent
REASONS FOR JUDGMENT
Introduction and background
On 2 July 2019 I gave judgment for the applicant, Mottershead Investments Pty Ltd (Mottershead) against the second respondent (Mr Langbein). My orders relevantly stipulated that Mr Langbein was to pay Mottershead the sum of $209,000 plus interest up to judgment from funds then held in trust by the solicitors for Mr Langbein.
I also made the following orders:
5.The Court notes that the applicant proposes to file and serve on the second respondent an application for costs within 28 days, together with any affidavit material upon which it relies.
6.The second respondent is to file and serve, within 28 days following service of the costs application, any material in opposition or in relation to the application for costs.
7.The issue of costs will be dealt with on the papers with the agreement of the parties.
No Application in a Case relating to costs was filed by either party but both Mottershead and Mr Langbein pursued claims for costs in the form of written submissions. Mottershead also filed two affidavits in support of its claim for costs. The first is by its solicitor (Peter Terrett) made on 30 July 2019 and the second is by Ross Mottershead made on the same day. Mottershead also relies upon an affidavit made on 7 February 2019 by Mr Terrett in the principal proceedings.
My consideration of the issue of costs was initially deferred as Mr Langbein appealed to the Federal Court of Australia and made application for a stay of my principal judgment. However, on 26 September 2018 Stewart J dismissed the stay application with costs.[1]
[1] Langbein v Mottershead Investments Pty Ltd [2019] FCA 1619
Consideration
Mottershead claims indemnity costs on two bases: first asserted unreasonable conduct by Mr Langbein and secondly based upon the service of “Calderbank” offers of compromise. Mottershead has quantified its cost claim at $168,217.34 comprising $120,756.20 solicitor’s professional costs, solicitor’s disbursements of $2,040.20, counsel’s fees of $39,448.75 and other disbursements (court fees and transcript etc) of $5,992.19.
Mr Mottershead deposes that the money held in trust by Mr Langbein’s solicitors would be insufficient to meet the costs claim, given that that sum is $300,000, of which $209,000 is the judgment sum, and he estimates $21,000 would be payable for interest up to judgment.
Mottershead seeks a lump sum costs order, having regard to the likely cost of a taxation.
Mr Langbein does not dispute that costs should follow the event, however, he opposes an award of indemnity costs and a lump sum order for costs. For his part, Mr Langbein seeks his costs of various interlocutory applications, the plethora of which characterised these proceedings.[2]
[2] See Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (In Liquidation) & Ors [2019] FCCA 1375 at [6]
As noted above, there is no dispute that costs should follow the event in these proceedings. The “event”, however, comprises not just the ultimate outcome but various interlocutory outcomes. The various interlocutory proceedings added layers of complexity which in my view were unnecessary. The proceedings were hard fought on both sides and in my view costs were incurred unnecessarily. The fault for that, however, does not rest wholly with Mr Langbein, as will appear from the discussion of the interlocutory proceedings below. I am unpersuaded that the conduct of the proceedings on behalf of Mr Langbein calls for an indemnity costs order.
The other reason why Mottershead seeks costs on an indemnity basis concerns two Calderbank offers. Mr Terrett in his costs affidavit at [16]-[18] deposes as to offers of compromise made on 17 May 2018 and 24 January 2019.
In relation to the first offer of compromise Mr Terrett deposes that the offer was to settle for $209,000 (being the ultimate judgment sum) plus $1,000 for pre-judgment interest.
The letter forms annexure “G” to his affidavit. Mr Terrett’s description of the offer in the letter is not accurate. The offer was to settle for $210,000 plus $20,000 for interest and costs from the date of the letter until the claims had been paid in full in accordance with a strict series of instalment payments.
In my view, it cannot be said with any certainty that Mottershead has done as well in the judgment as was offered in the letter of 17 May 2018. In my view, it was reasonable for the three respondents (to whom the offer was made) to reject it on the basis of their individual estimates of their liability and the terms of the offer itself. In that regard, the individual respondents pleaded in their defence filed on 26 July 2018 that the first respondent had been wound up and enjoyed the protection of s.500 of the Corporations Act 2001 (Cth). That defence was not disputed. Further, proceedings against the third respondent were discontinued on 19 February 2019 during the trial of the matter.
Mr Terrett deposes that in the second offer of compromise dated 24 January 2019 Mottershead offered to settle the claim for $209,000 judgment sum plus interest and costs up to that date.
In that letter[3] Mr Terrett values the claim as at the date of the letter at $280,000 and further values it at $350,000 if the matter proceeded to a hearing. The letter threatens a freezing order over the proceeds of the sale of property owned by Mr Langbein.
[3] Annexure H to the affidavit of Mr Terrett made on 30 July 2019
It is not entirely clear what the offer of compromise in the letter is. The letter refers to an oral offer made in a telephone conversation that day of $265,000 inclusive of costs and interest. There is a schedule to the letter providing a subtotal of $280,153.63 inclusive of interest and costs to the date of the letter plus a further total figure of $350,153.63 which appears to incorporate anticipated costs should the matter go to a trial.
If the offer was for $265,000, the respondents were entitled to reject it as there was no specification of the claim for interest and costs. Rather, there was just a rolled up lump sum figure. Again, it is unclear whether the offer was made to all three respondents who would need to assess their individual liability or to Mr Langbein alone.
In my view, the respondents did not act unreasonably in failing to accept the offer.
It follows, in my view, that Mottershead should receive its costs of the proceedings generally on a party and party basis.
I am not persuaded in this case that costs should be fixed in a lump sum. First, Mottershead has not indicated what, in its view, an appropriate lump sum assessed on a party and party basis would be. Secondly, the solicitor and own client costs incurred by Mottershead are extremely high and should, in my opinion, be subjected to the rigour of a taxation in the absence of agreement. Thirdly, account needs to be taken of the various interlocutory applications and the costs consequences of those interlocutory applications.
Mottershead lodged an Application in a Case on 8 February 2019. It was filed on 11 February 2019. Mottershead sought orders setting aside the defence of the second and third respondents, summary judgment, interest, costs and a freezing order over real property at Mangrove Creek NSW and Manly NSW. A further Application in a Case seeking a freezing order was lodged and filed on 6 March 2019. Orders were made on 6 March and 25 March 2019 in relation to the real property with costs reserved. Mottershead lodged a further Application in a Case on 29 April 2019 which was filed on 3 May 2019 and dismissed with costs on 2 May 2019.
Mr Langbein lodged an Application in a Case on 19 July 2019, which was filed on 24 July 2019, seeking a stay of the Court’s judgment. Orders were made on that application on 12 August 2019.
In relation to the interlocutory applications, I find as follows:
a)Application in a Case filed 11 February 2019: on 6 March 2019 the Court rejected the orders sought (which included a freezing order) and in substitution made provision for security to be held following sale of the relevant property in the trust account of the solicitor for the second respondent and notification of any further encumbrance upon the property. Costs were reserved. I find that there ought be no order as to costs in relation to this aspect of the Application in a Case;
b)Balance of the Application in a Case filed 11 February 2019: on 6 March 2019 the Court in substance rejected or deferred the balance of this application, being an application for summary judgment at the commencement of the trial.[4] In the circumstances, costs associated with this particular application where the trial of the proceeding was listed for hearing were an unnecessary incurring of relevant costs on the part of the applicant and therefore the applicant ought pay the costs of this Application in a Case on a party and party basis;
c)Application in a Case filed 6 March 2019: on 25 March 2019 the Court ordered that the applicant remove caveats lodged by it upon properties in respect of which the second respondent was registered proprietor of a leasehold estate from the “Catholic Church”. The caveats were lodged following orders concerning the provision of security referred to in subparagraph (a) above; were against the title of someone other than the second respondent; suggested without any basis a breach of the undertakings given to the Court leading to the orders referred to in subparagraph (a) above, resulting in the caveats being ordered to be removed. The applicant ought pay the costs of the second respondent of this application on a party and party basis;
d)Application in a Case lodged 29 April 2019: on 2 May 2019 the Court ordered that this Application in a Case be dismissed with costs. The costs of the second respondent should be paid by the applicant on a party and party basis; and
e)Application in a Case filed 24 July 2019: this was an opposed application for a stay of the operation of orders made by the Court at the time of delivery of judgment, by the second respondent following the lodgement of a Notice of Appeal. The issue was subsequently pursued on appeal in the Federal Court and there should be no order as to costs of that application.
[4] Transcript 6 March 2019
Conclusion
Mottershead should receive its costs of the proceedings generally on a party and party basis as agreed, or in the absence of agreement upon a taxation in accordance with the Federal Court Rules 2011 (Cth).
Mr Langbein should receive his costs of the interlocutory applications as detailed above, and otherwise there will be no order as to costs.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 20 December 2019
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