Northern Australia Land & Agency Co & Ors v Sheahan

[1996] HCATrans 402

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A3 of 1996

B e t w e e n -

NORTHERN AUSTRALIA LAND & AGENCY CO PTY LTD

First Applicant

DEAN KIVERTON LE POIDEVIN

Second Applicant

GLORIA DAWN LE POIDEVIN

Third Applicant

and

JOHN SHEAHAN

First Respondent

LE POIDEVIN INDUSTRIES PTY LTD (IN LIQUIDATION)

Second Respondent

Application for special leave to appeal

BRENNAN CJ
GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 13 DECEMBER 1996, AT 11.16 AM

Copyright in the High Court of Australia

_________________________

MR D.K. LE POIDEVIN:   May it please the Court, I appear on behalf of the applicants.

BRENNAN CJ:   Are you an applicant?

MR LE POIDEVIN:   Yes, I am one of the applicants, your Honour.

BRENNAN CJ:   Are you appearing as counsel, as well?

MR LE POIDEVIN:   For the other two applicants.

BRENNAN CJ:   I see.

MR J.M. CUDMORE:   May it please the Court, I appear for the respondents.  (instructed by Ward & Partners)

BRENNAN CJ:   Thank you.  Mr Le Poidevin?

MR LE POIDEVIN:   This matter has been before the Court about 18 months ago, that is 30 March 1995.  The Court referred the matter back to the Full Supreme Court of South Australia for that court to reconsider the question of an order for costs.  Now, the Full Supreme Court in South Australia has reconsidered in December 1995 and has made an order confirming the previous order for costs.  In other words, all three applicants were to be liable for the full amount of the costs on a solicitor and client basis.  Now, the matter comes back to this Court by way of appeal from a decision ‑ ‑ ‑

GUMMOW J:    It does not come back here by way of appeal.

MR LE POIDEVIN:   Well, an application for leave.

GUMMOW J:    Yes, it is a rather different thing.

MR LE POIDEVIN:   I am sorry, an application for leave to appeal on this same question of whether or not, particularly the personal applicants, the two directors of the company, should be made personally liable for costs or whether the costs should simply follow the action or follow the cause and that the company called Northern Australia Land & Agency should be liable for the costs but not the directors of the company.  Obviously the directors of the company are not satisfied or not happy with the decision of the Full Supreme Court and for that reason an appeal was lodged seeking leave of this Court to appeal against the decision of the Full Supreme Court to have the matter reviewed.

BRENNAN CJ:   Are you saying that the costs order should have gone against Northern Australia Land & Agency Co Pty Ltd but not against the two personal applicants?

MR LE POIDEVIN:   The two directors of the company.

BRENNAN CJ:   Is that right?

MR LE POIDEVIN:   Yes, that is basically correct.

BRENNAN CJ:   Then what is your interest in appearing for Northern Australia Land & Agency Co Pty Ltd?

MR LE POIDEVIN:   The company - I am not sure that I can actually distinguish that company against the other two but the substance of the matter ‑ ‑ ‑

BRENNAN CJ:   Well, you have said that you are appearing for them.

MR LE POIDEVIN:   Well, because the name of the company is on the file.

BRENNAN CJ:   What is your interest in appearing for them?

MR LE POIDEVIN:   I am not sure what you mean by “interest”.  There were three defendants in the action.

BRENNAN CJ:   What interest does Northern Australia Land & Agency Co Pty Ltd have in the success of your application?

MR LE POIDEVIN:   Perhaps none, although there is a reference to the question of solicitor and client costs.  An order for costs against all three was on a solicitor and client basis and I think even the company would have the right to appeal against that decision, or seek leave to appeal against that decision.  In reference to the two individual directors, of course, those two are seeking leave to appeal against the complete order for costs including the fact that it is on a solicitor and client basis.  Does that help, your Honour, on the question of ‑ ‑ ‑

BRENNAN CJ:   I understand what you say.  What is the ground of challenge to the decision in the court below?

MR LE POIDEVIN:   Yes, can I just refer to one preliminary matter that I have just read outside the Court today that the application book does not make any reference to two of the three judges in the Full Court.  There seems there was a judgment of one judge.  I am asking the Court whether that in any way makes the application book defective or whether they need to correct that situation.  On page 18 of the application book there is simply no reference to two of the Supreme Court judges’ decision.

GAUDRON J:   Their Honours agreed, however, with the judgment that was, in fact, delivered, did they not?

MR LE POIDEVIN:   Is that on page 18?

GAUDRON J:   No, but is that the case?

MR LE POIDEVIN:   Well, I am not sure after nearly a year ago, and I am not sure of the exact words used, and I think when the judgment was given ‑ ‑ ‑

GUMMOW J:   If you look at page 11, about line 6:

Judgment of the Honourable Justice Olsson
(The Honourable Justice Mohr and the Honourable Justice Nyland concurring)

Page 11, line 6.

MR LE POIDEVIN:   What line, your Honour?

GUMMOW J:   Line 6.

MR LE POIDEVIN:   Line 6.  Yes, I did not notice that this morning, but I was looking at page 18, and there is no reference of it at the end of the judgment. 

BRENNAN CJ:   We will proceed on the footing that there is a concurring judgment from those two judges with the judgment of Justice Olsson.

MR LE POIDEVIN:   The grounds for this appeal are on page 29 of the application book and I ask if I may simply go through each ground of the appeal and give a brief explanation.  Ground of appeal which is No 16, because when the matter was before the High Court 18 months ago it also bore the same number and what I said this morning essentially is ground of appeal No 16 is the basis of the parties seeking leave to appeal on the basis that they are only directors and, effectively, non‑parties to the action.  In this action when the summons was issued a defence and counter‑claim was issued, in effect, the combined defence and counter‑claim on behalf of all three defendants.  The substance of the matter was that the defence and counter‑claim was in relation to each party’s interest.  For example, the company filed a defence and counter‑claim based on its claim for the land. 

The two directors filed a defence and counter‑claim based on allegations in the summons there had been fraud by the directors and so in some part of the earlier judgments in the Supreme Court of South Australia there was the suggestion that there was only one defence and counter‑claim and because of that the directors should be made liable for costs.  What I am submitting is that the defence and counter‑claim really could be broken up into the parts appropriate to each of the defendants and the fact that there was only one defence as against three separate defences should not make the directors personally liable for costs. 

If I can continue with ground of appeal No 26, the whole tenet of the judgment produced by Justice Olsson in the Supreme Court of South Australia was that there was something defective about the whole series of transactions.  He simply, sort of, picked out entries which he thought favoured setting aside these land transfers, but at the same time he did not seem to recognise the facts that, for example, all the expenses in relation to the two farm properties from this disputed date in August 1990 had, in fact, been paid by the company called Northern Australia Land & Agency.  I mean, the truth of the matter is there was no evidence that the land continued to be owned by Le Poidevin Industries after August 1990 by virtue of the fact that possession of the land had transferred to the new company and also that the new company had paid all of the expenses such as rates, taxes and, particularly, some mortgage payments.  There were two mortgages on the titles and all those repayments were paid by Northern Australia Land & Agency. 

Now, Justice Olsson has simply ignored all that, and said, “I will look at other aspects of the case and I’ll make the directors personally liable.”  If he had been fair and reasonable he would have looked at all of the evidence including the fact that the indications were that all these expenses were paid by Northern Australia Land & Agency Co, but he simply chose to ignore anything to that effect and said, “Well, we’ll make the directors of the company personally liable.”  Surely, given that Northern Australia Land & Agency Co has paid all these expenses, surely the defence and counter‑claim which was entered was perfectly proper in all the circumstances.

GUMMOW J:   These do not sound like special leave points, Mr Le Poidevin.

MR LE POIDEVIN:   I am asking the Court to consider that there was some reason to file the defence and counter‑claim.  The defence and counter‑claim was not totally without merit, which is one of the allegations that Justice Olsson made in his judgment, that the defendants had no right on all the circumstances of the case to even file a defence and counter‑claim.  They should have simply sat back and done nothing.  What I am saying to this Court is, or to ask this Court to consider is, that it is being very unfair not to weigh up the pros and cons and make a reasonable decision.

GAUDRON J:   Can you point to any question of legal principle that arises, Mr Le Poidevin?

MR LE POIDEVIN:   The whole case depends on the Court acting judicially on the question of costs and the Court takes into account a series of matters such as the evidence before it, whether an application was made for security for costs, which there was no application for security for costs.  An attempt is made to find out who were the real parties if that becomes relevant.  I submit that the question of real parties when people are only acting as directors of a company are not really relevant in this case, but it is up to the Court to sort of choose the various elements of how a court is acting judicially in making an order for costs, and, particularly against non‑parties and what criteria should be used to establish who is a party and who is a non‑party and if they are non‑parties whether they should be make liable for the costs.  They are the questions of law that are involved in this application. 

The best I can do is, simply, go through each ground of appeal and refer each ground of appeal back to the basic question of whether the Court has acted judicially in making the directors of the company personally liable for the whole of the costs in a matter in substance of which, and, perhaps legally, they were non‑parties.  The summons was issued against three parties, the two directors and the company.  The trial proceeded only against the company on the understanding that the judge wanted to make an order setting aside these two land transfers.  So the part of the action against the two directors with these allegations of fraud has not yet been heard.  It may well go back to the trial judge and he may conduct a second trial involving the two directors, but so far, the elements in the summons against the two directors have not yet been to trial.  They have not yet been argued.  The only matters ‑ ‑ ‑

BRENNAN CJ:   Mr Le Poidevin, on page 16 there is an extract from the judgment of Justice Perry at line 17, where his Honour sets out the principle in relation to the award of costs, do you challenge that as a proposition of law:

I acknowledge that it is only in exceptional circumstances -

MR LE POIDEVIN:   That seems perfectly reasonable to me and I do not challenge that question. 

BRENNAN CJ:   Then turn back to page 15 where Justice Olsson says at line 12:

the decision of Justice Perry constituted a finding that the personal appellants (and specifically D.K. Le Poidevin) had been guilty of quite improper behaviour, which was, I must say, all the more reprehensible when it is borne in mind that D.L. Le Poidevin was a legal practitioner who must have well appreciated the enormity not only of his conduct at the time, but also of maintaining or promoting before this court a case which he must have known was false and utterly without merit.

Now, given that assessment of your conduct, where was the error of principle in the order made?

MR LE POIDEVIN:   I am asking you to simply consider the facts which I put before you this morning to say that the truth of the matter is that where he talks about improper behaviour, the improper behaviour is filing a defence and counter‑claim.  That is improper behaviour.  Now, I have read other cases that say a director of a company is perfectly entitled to file a defence and counter‑claim in an action involving a company, to say nothing of the fact that the defence and counter‑claim involved the individuals in allegations of fraud, but, surely the mere filing of a defence and counter‑claim does not constitute improper behaviour.

BRENNAN CJ:   Then your application for special leave is to invite this Court to consider the sufficiency of your conduct to justify those comments by his Honour?

MR LE POIDEVIN:   That is the substance of the matter, your Honour, that is the substance.

BRENNAN CJ:   Now, what is the special leave point in that?

MR LE POIDEVIN:   Well, the reason for special leave naturally is to reverse the decision of the Supreme Court and I am asking this Court to grant leave to change the order for costs and to simply say that the directors of the company are not personally liable in a situation such as this.  I mean, obviously, Justice Olsson, when he prepared his judgment, is simply going to state in his judgment what he thinks supports his decision but if the truth of the matter is that the improper behaviour is nothing more than filing a defence and counter‑claim, surely this Court should decide that that is not sufficient, or not even improper behaviour.  The filing of a defence and counter‑claim in a court action is within reason for directors of a company to do.  I mean, otherwise, a director in a company would be completely paralysed and would never be in a situation where they could file a defence and counter‑claim on behalf of a company without always constantly running this risk.  Does your Honour wish to hear me further.  I would like to go through the grounds of appeal in sequence, if I can?

BRENNAN CJ:   Your time has not expired, Mr Le Poidevin.

MR LE POIDEVIN:   I think I have about 16 or 17 grounds of appeal and, obviously, I have listed each separate element which the Court may consider relevant or they may consider it too trivial, but the sort of matter that Justice Olsson took into account which presumably relates to my behaviour, is the fact that one page in a journal, in a loose‑leaf book where the pages are taken out and put back in when they were written up was of a different colour.  Now, as an accountant myself, I can tell you that pages are frequently changed around for some reason.  They might be damaged or something of this nature and what I submit to the Court is that the colour of the paper does not make the entries on the paper wrong.  For that reason Justice Olsson erred in finding simply that the colour of the paper in which the books were written up in some way affected the bona fide entries on the paper itself.  I mean, the entries in a set of books can be checked independently.  The colour of the paper really is irrelevant.  That is item No 18 on page 30. 

Item No 30 refers to this question of being false and utterly without merit, and, as I said a few minutes ago, it refers essentially to the filing of a defence and counter‑claim and I ask the Court to consider that the filing of a defence and counter‑claim is not - and there is a copy of the defence and counter‑claim in the application book, and I am asking the Court to say that this is not without merit and the Court can read the defence and counter‑claim and see the substance of the matter and what I submit is the substance of it is that it is a perfectly usual and normal type of defence and counter‑claim in this type of action. 

In this action, item No 31, on the grounds of appeal, page 31, the order for costs is made against my mother who was the second director of the company and the Court may or may not be aware of the fact that she was a director of the company but what I am saying is - and also Justice Olsson was aware of the fact and Justice Perry was aware of the fact, that she was not called to give any evidence.  She is an elderly person in her mid‑sixties.  She played a very little part in the affairs of the company and what I am submitting is that the mere fact that she did not give evidence should not be sufficient to make her liable for costs in this action.  Surely her action of simply not giving evidence, because of her age and the limited knowledge of the affairs of the company, should not be sufficient to make a director of a company personally liable for costs.

Ground of appeal No 32 on page 31 refers to the fact that when I went to court it was my intention to seek the leave of the court to give evidence.  Now, in South Australia the court would have had the power to make a decision to allow me to give evidence.  It is within the discretion of the court as to who can give evidence, I submit, and what I am submitting in this case is that whether I gave evidence or not should not be a criteria used, especially when the court ordered that I could not give evidence, that that fact should not be used against me to make me personally liable for the costs of the action.  I did not give evidence.  I was prepared to give evidence.  The decision was made that I could not give evidence, and Justices Perry and Olsson have then come along and said, “Well, there’s a lack of evidence on behalf of the defendants, therefore, the defendants should bear the costs and the directors also.”  What I am submitting is that is a wrong principle and I am asking this Court to change the order for costs on that basis.

Item No 33 on page 31 refers to the statement by Justice Olsson that the directors were the real parties to this transaction.  Now, there are some cases where the real party may not be named on the file and there are many cases involving solicitors and other people who have direct financial interests in cases, but here the allegation is that the real parties are the directors of the defendant company.  Now, surely, it is not sufficient to simply say that the directors of a company become the real parties because they file a defence and counter‑claim, because the matter proceeds to court and because the only evidence which the defendants could put before the court was a copy of the general ledger and the general journal of the company, the plaintiff company. 

I am asking this Court to grant leave on the basis that the real parties, or the real party, was Northern Australia Land & Agency Co, that the real parties were not the directors; that the directors never did anything which is so unusual or so unreasonable that they should be called the real parties and, therefore, as real parties made liable for the costs.  I am asking this Court to consider granting leave on the basis that the directors are not the real parties and that the company itself is the real party.

Ground of appeal No 34 on page 31 refers to Justice Olsson’s statements that the directors acted in their own interest.  Now, I submitted a couple of days ago a summary of argument and it refers to Knight’s Case, which I am sure members of the Court are familiar with, and one of the statements made in Knight’s Case, Part V which has the table of authorities which is part of the summary of argument in this case, item 1(b) refers to page 187 at the top of the page which is the Knight’s decision where the statement is made that no order for costs against a non‑party “merely because he has an interest in the event of the suit” is sufficient to make the person act in their own interests. 

So, a person, merely because he is a director and perhaps a shareholder in a company, it is not sufficient to say that that person acted in their own interest.  The mere fact that they have an interest as a shareholder or they are involved as a director of a company does not make them legally act in their own interest for the purpose of awarding costs.  I am asking the Court to follow the general principles in Knight’s Case as to when costs should be awarded against non‑parties or not against non‑parties.

BRENNAN CJ:     Your time has expired, Mr Le Poidevin.  We need not trouble you, Mr Cudmore.

This application is without merit.  Special leave will be refused.

MR CUDMORE:   I ask for an order for costs, if the Court pleases, on the application and also for the adjourned application which was listed to be heard in Adelaide on 15 August and which was adjourned by the Court on that occasion because of Mr Le Poidevin’s unavailability, he having written a letter to the Court setting out those circumstances.  So I seek an order for costs.

BRENNAN CJ:   What do you have to say, Mr Le Poidevin?

MR LE POIDEVIN:   I oppose the order, sir.  There is no point in repeating what I have said this morning, but surely in all the circumstances of the case there was sufficient doubt that an application for leave should have been lodged.  I ask that no order be made for costs.

BRENNAN CJ:   Special leave will be refused with costs, including the costs of the earlier appearance on which the application was adjourned.

MR LE POIDEVIN:   Can I ask whether that applies to all defendants - presumably it is against all defendants.  It raises the same question again as to whether it is against all defendants or against the Northern Australia Land & Agency Co.

BRENNAN CJ:   The order is made against each of the applicants, jointly and severally.

The Court will adjourn in order to reconstitute

AT 11.40 AM THE MATTER WAS CONCLUDED