Northwest Capital Management v Westate Capital Ltd
[2012] WASC 121 (S)
•5 APRIL 2012
NORTHWEST CAPITAL MANAGEMENT -v- WESTATE CAPITAL LTD [2012] WASC 121 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 121 (S) | |
| Case No: | CIV:1118/2012 | 12-15 MARCH 2012 & 12 JUNE 2012 | |
| Coram: | EDELMAN J | 5/04/12 | |
| 14/06/12 | |||
| 24 | Judgment Part: | 1 of 1 | |
| Result: | Costs orders made | ||
| B | |||
| PDF Version |
| Parties: | NORTHWEST CAPITAL MANAGEMENT GRANITE CREEK INVESTMENTS PTY LTD BRIAN JAMES GODFREY SOPHIE JANE RAVEN BIMBURY SUPER PTY LTD WESTATE CAPITAL LTD BLUE ANCHOR PTY LTD McLARTY (NWDF) PTY LTD SHANE EDWARD THOMPSON MARK JON KEENE PAUL BERRESFORD CHRISTOPHER STANLEY KAIN NORTHWEST PROPERTIES LTD |
Catchwords: | Practice and procedure Costs Separate causes of action Correct approach in this case generally to focus on success in causes of action rather than upon individual issues Where causes of action are inextricably linked an overall assessment of success in relation to those causes of action is appropriate Special costs orders uplifting item of Scale imposing maximum hours for originating process Practice and Procedure Costs Indemnity costs in company proceedings Calderbank offer made on the evening before commencement of trial Ambiguity in offer Not unreasonable to refuse offer Practice and Procedure Costs Indemnity costs sought in third party proceedings where third party proceedings abandoned shortly after commencement and shortly before trial Circumstances in which third party proceedings brought involve extremely expedited trial |
Legislation: | Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) Legal Profession Act 2008 (WA), s 280 Rules of the Supreme Court 1971 (WA), O 66 r 2 Trustees Act 1962 (WA), s 77 |
Case References: | Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56 Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S) Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586 EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) Fazio v Fazio [2008] WASC 161 Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95, 97 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 Frigger v Lean [2012] WASCA 66 Godfrey v Berresford [2012] WASC 77 Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty ltd (in liq) [2007] WASC 254 (S) IMF (Australia) Ltd v Sons Of Gwalia Ltd (Administrator Appointed) [2004] FCA 1390; (2004) 211 ALR 231 Keet v Ward [2011] WASCA 139 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Northwest Capital Management v Westate Capital Ltd [2012] WASC 121 Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 14 JUNE 2012 FILE NO/S : CIV 1118 of 2012 BETWEEN : NORTHWEST CAPITAL MANAGEMENT
- First Plaintiff
GRANITE CREEK INVESTMENTS PTY LTD
Second Plaintiff
BRIAN JAMES GODFREY
SOPHIE JANE RAVEN
Third Plaintiffs
BIMBURY SUPER PTY LTD
Fourth Plaintiff
AND
WESTATE CAPITAL LTD
First Defendant
BLUE ANCHOR PTY LTD
Second Defendant
McLARTY (NWDF) PTY LTD
Third Defendant
(Page 2)
FILE NO/S : COR 14 of 2012 BETWEEN : BRIAN JAMES GODFREY
- SHANE EDWARD THOMPSON
MARK JON KEENE
Plaintiffs
AND
PAUL BERRESFORD
First Defendant
CHRISTOPHER STANLEY KAIN
Second Defendant
NORTHWEST PROPERTIES LTD
Third Defendant
BLUE ANCHOR PTY LTD
Fourth Defendant
McLARTY (NWDF) PTY LTD
Fifth Defendant
Catchwords:
Practice and procedure - Costs - Separate causes of action - Correct approach in this case generally to focus on success in causes of action rather than upon individual issues - Where causes of action are inextricably linked an overall assessment of success in relation to those causes of action is appropriate - Special costs orders uplifting item of Scale imposing maximum hours for originating process
Practice and Procedure - Costs - Indemnity costs in company proceedings - Calderbank offer made on the evening before commencement of trial - Ambiguity in offer - Not unreasonable to refuse offer
Practice and Procedure - Costs - Indemnity costs sought in third party proceedings where third party proceedings abandoned shortly after commencement and shortly before trial - Circumstances in which third party proceedings brought involve extremely expedited trial
(Page 3)
Legislation:
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA)
Legal Profession Act 2008 (WA), s 280
Rules of the Supreme Court 1971 (WA), O 66 r 2
Trustees Act 1962 (WA), s 77
Result:
Costs orders made
Category: B
Representation:
CIV 1118 of 2012
Counsel:
First Plaintiff : Mr M P Bruce
Second Plaintiff : Mr M P Bruce
Third Plaintiffs : Mr M P Bruce
Fourth Plaintiff : Mr M P Bruce
First Defendant : Mr M D Howard SC
Second Defendant : No appearance
Third Defendant : No appearance
Solicitors:
First Plaintiff : Bennett & Co
Second Plaintiff : Bennett & Co
Third Plaintiffs : Bennett & Co
Fourth Plaintiff : Bennett & Co
First Defendant : Corrs Chambers Westgarth
Second Defendant : No appearance
Third Defendant : No appearance
COR 14 of 2012
Counsel:
Plaintiffs : Mr M P Bruce
First Defendant : Mr M D Howard SC
Second Defendant : Mr M D Howard SC
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Solicitors:
Plaintiffs : Bennett & Co
First Defendant : Corrs Chambers Westgarth
Second Defendant : Corrs Chambers Westgarth
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Case(s) referred to in judgment(s):
Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)
Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S)
Fazio v Fazio [2008] WASC 161
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95, 97
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1
Frigger v Lean [2012] WASCA 66
Godfrey v Berresford [2012] WASC 77
Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty ltd (in liq) [2007] WASC 254 (S)
IMF (Australia) Ltd v Sons Of Gwalia Ltd (Administrator Appointed) [2004] FCA 1390; (2004) 211 ALR 231
Keet v Ward [2011] WASCA 139
Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85
(Page 5)
Northwest Capital Management v Westate Capital Ltd [2012] WASC 121
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146
(Page 6)
Table of Contents
Introduction 7
Separate considerations apply to each proceeding 7
Costs in COR 14 of 2012 (the company proceeding) 8
- Two causes of action 8
The cause of action concerning the validity of the 18 January 2012 resolutions 11
The cause of action concerning the invalidity of the share issue 12
The open offer and the indemnity costs application 13
The different causes of action 16
Costs in relation to the removal of Westate as trustee and replacement with NW Capital 18
Costs of the third party proceedings 19
Uplifting the scale for the company proceedings and the trust proceedings 21
Conclusion 22
(Page 7)
- EDELMAN J:
Introduction
1 On 5 April 2012, I delivered my decision in these two proceedings which I describe below as the company proceeding (COR 14 of 2012) and the trust proceeding (CIV 1118 of 2012). A further hearing was necessary in relation to the consequential orders. At that lengthy hearing the parties sought the opportunity to make further submissions concerning costs of each proceeding.
2 The saga of these proceedings thus continues. This phase concerns vigorously contested applications for costs. The further hearing sought by the parties occurred on Tuesday.
3 The plaintiffs in the company proceedings (who I will now refer to as the Godfrey parties) seek costs against the first and second defendants (Messrs Berresford and Kain). The plaintiffs in the trust proceedings (who I will now refer to as the NW Capital parties) seek costs of both proceedings against the first defendant, Westate Capital Ltd (Westate).
4 In contrast, Messrs Berresford and Kain seek indemnity costs against the Godfrey parties in the company proceedings and Westate seeks costs against the NW Capital parties.
5 All the relevant parties assert that they were successful. The reason that this stance was taken was that the different parties were successful on different causes of action.
Separate considerations apply to each proceeding
6 As counsel for Messrs Berresford and Kain pointed out in written submissions, the company and the trust proceedings were closely related: both were concerned with matter related to the contest for control of the North West Development Fund.1 The plaintiffs in the company proceeding sought to remove Messrs Berresford and Kain as directors of NWPL. The plaintiffs in the trust proceeding sought to replace Westate (with Messrs Berresford and Kain as directors) as trustee of the North West Property Unit Trust, the units in which were stapled to the shares in NWPL.
7 Although the commercial objectives of the two proceedings were closely related it was common ground that the costs orders should be
(Page 8)
- considered separately for each proceeding. This is the proper approach for several reasons. First, most of the parties in each action were different.2 Secondly, the relief sought in each proceeding was also separate. Thirdly, conclusions and concessions reached as to the matters in one proceeding generally did not affect the other. One exception was the relief sought by the plaintiffs in the form of a declaration that the issue of shares in NWPL (company proceeding) and units in the Trust (trust proceeding) was void ab initio. At trial the defendants did not oppose that relief.
8 There are, however, two background matters to consider in the context of the issues concerning costs. These background matters were common to both proceedings.
9 First, the trials proceeded in an expedited manner. The originating process was filed on 25 January 2012. The trial was held on 12 - 15 March 2012. Secondly, although there were pleadings in the case, they were only in broad outline form. No particulars were formally requested by either side.3
Costs in COR 14 of 2012 (the company proceeding)
Two causes of action
10 Although the company proceeding involved a claim and a counterclaim, the counterclaim merely repeated the defence and set out the relief which Messrs Berresford and Kain said should follow from it. It was common ground that it was appropriate to make the same costs orders for the claim and counterclaim.
11 It was also common ground that there were essentially two causes of action which were brought in the originating process in this matter. The two causes of action were for relief as follows:
(i) A declaration that resolutions made at the 18 January 2012 meeting were valid and effective.
(ii) A declaration that the purported issue of shares in NWPL on 17 January 2012 to the fourth and fifth defendants was void ab initio.
(Page 9)
12 A declaration was also sought that a general meeting of NWPL called for 13 February 2012 was not validly called, and injunctive relief was sought to prevent that meeting. Those orders were sought without conferral; they were conceded by Messrs Berresford and Kain; and there was no necessity for any hearing of those matters. No submissions were made concerning the costs of these matters.
13 The dispute as to both (i) and (ii) above was really between the Godfrey parties, on the one hand, and Messrs Berresford and Kain on the other. The third, fourth and fifth defendants took no real part in the action. The Godfrey parties only joined the fourth and fifth defendants (Blue Anchor Pty Ltd and McLarty (NWDF) Pty Ltd) to the action for the purpose of obtaining a declaration that the issue of shares to them in NWPL, without board approval, was void ab initio (from the beginning).
14 Order 66 r 2(a) of the Rules of the Supreme Court 1971 (WA) provides as follows:
In the absence of any special order -
(a) where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought.
15 This provision was not raised by the parties during the costs hearing, but counsel for the Godfrey parties addressed the essential point of the rule, arguing that if the court considered that the Godfrey parties were unsuccessful in relation to the cause of action concerning the 18 January 2012 resolutions then costs orders should be made separately for each cause of action.4
16 Order 66 r 2(a) was addressed by the Court of Appeal of this Court in Keet v Ward.5In that case, the Court of Appeal in a joint judgment set out four propositions which I reproduce below:6.
a) the expression 'cause of action' in O 66 r 2(a) is a reference to a factual situation, the existence of which entitles the plaintiff to obtain a remedy: Letang v Cooper [1964] EWCA Civ 5; [1965]
- 1 QB 232, 242 (Diplock LJ); Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, 572 (Anderson J);
- (b) the rule does not provide an inflexible rule which prescribes a mandatory approach to the awarding of costs in cases where there are multiple causes of action. The opening words 'in the absence of any special order' indicate that the court retains the discretion to make a special order departing from the rule in O 66 r 2(a): Kimpura Pty Ltd v JWH Group Pty Ltd [2004] WASCA 134 [12] - [15];
(c) however, where there are multiple causes of action and a party has succeeded on only one or some, the other party is prima facie entitled to costs on the others but the court will always attempt to do substantial justice in the circumstances: Permanent Building Society v Wheeler (No 2), 574 - 575 (Anderson J);
(d) it may not be appropriate to make a costs order in accordance with O 66 r 2(a) where there is in substance one contest, that is, where the causes of action arise from the one course of dealings, the one transaction or the same facts: Permanent Building Society v Wheeler (No 2) (574) - (575); R J Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2009] WASC 206(S); Witcombe v Talbot & Olivier [No 2] [2009] WASC 173(S) (Beech J).
17 It is not correct to describe the originating process as involving 'in substance one contest' although, to be fair, neither counsel really sought to do so. Counsel for both parties acknowledged, explicitly or implicitly, that the two causes of action were independent.7
18 There is a further reason why costs in relation to the two causes of action should be treated separately in these proceedings. As I explain below, almost immediately before trial Messrs Berresford and Kain conceded that the share issue was void. The substance of the trial therefore proceeded only on the cause of action concerning the validity of the 18 January 2012 resolutions.
19 For these reasons, although there was some overlap between the two causes of action, the appropriate starting point in this case is that the parties succeeding on each ought to be entitled to their costs.
(Page 11)
The cause of action concerning the validity of the 18 January 2012 resolutions
20 As to this cause of action, the Godfrey parties failed in their claim to uphold the resolutions at the 18 January 2012 meeting. The primary pleaded case for the Godfrey parties was that the 18 January 2012 meeting was 'valid and effective'. The Godfrey parties asserted the validity of the purported meeting chaired by Mr Godfrey. Messrs Berresford and Kain denied that Mr Godfrey was the validly appointed chairperson.
21 Although, on 24 February 2012, Messrs Berresford and Kain initially pleaded that Mr Berresford was the only person who could preside at the 18 January 2012 meeting,8 and although Messrs Berresford and Kain said in their defence that Mr Berresford had chaired the 18 January 2012 meeting,9 they never sought any declarations or relief in relation to Mr Berresford's alleged meeting. Rather, the relief they sought, pleaded in their counterclaim as alternative relief, was that the 18 January 2012 meeting was invalid. By the time of their opening submissions, only seven business days later on 7 March 2012, this was effectively their only case.10
22 At all times the Godfrey parties firmly resisted the submissions of Messrs Berresford and Kain that a new meeting should be held. One of the plaintiffs even said in evidence that he was not prepared to wait another 28 days for a new meeting.11.
23 Messrs Berresford and Kain succeeded in impugning the resolutions on three different grounds: there was no validly appointed chairperson; the meeting was in such disarray that no valid resolution was passed; proxy votes were invalidly excluded. Another ground, based on misleading and deceptive conduct, was unsuccessful.
24 Counsel for the Godfrey parties submitted that an order as to costs should look beneath the failure of the Godfrey parties to obtain the relief they sought in relation to (i), ie the failure to obtain declarations of validity of the resolutions at the 18 January 2012 meeting. Counsel submitted that the Court should focus upon those grounds which
(Page 12)
- succeeded and those which failed within this issue, and also upon sub-issues which succeeded and those which failed.12
25 Such an approach is not a general practice because it adds uncertainty and complexity to the outcome of the litigation, derogates from settlement, utilises scarce resources and increases cost, and might dissuade parties from canvassing all material issues.13
26 An issue-based approach to costs is also not the appropriate course to adopt in this case. In this case there was substantial overlap between each of the grounds upon which Messrs Berresford and Kain sought to impugn the resolutions. And each ground was directed to the same ultimate relief of a new meeting sought by Messrs Berresford and Kain and upon which they were successful.
27 The appropriate order is that the Godfrey parties should pay the costs of Messrs Berresford and Kain in relation to the cause of action concerning the validity of the 18 January 2012 resolutions. As I explain below, by the time of the trial that was the only cause of action in issue.
The cause of action concerning the invalidity of the share issue
28 In contrast with the claim concerning the 18 January 2012 meeting, Messrs Berresford and Kain were not successful in relation to the separate cause of action concerning the validity of the share issue in NWPL. The Godfrey parties succeeded in that claim. Until the eve of trial that claim was opposed by Messrs Berresford and Kain.
29 At around 4.00 pm on the Friday afternoon immediately preceding the trial on Monday, Messrs Berresford and Kain abandoned their opposition to a declaration concerning the void nature of the share issue. Their pleading was amended on the morning of the first day of the four day trial to reflect this. I indicated that it was appropriate that any declarations be made at the conclusion of the proceedings.14 On the second day of trial, counsel for Blue Anchor and McLarty NWDF, the recipients of the shares, indicated that the recipients did not wish to be heard and would abide any decision of the court.15
(Page 13)
30 When orders were made after the delivery of my reasons they included those declarations and an order that Messrs Berresford and Kain pay the costs of Blue Anchor and McLarty NWDF.
31 The appropriate order in relation to this cause of action is that Messrs Berresford and Kain pay the costs of the Godfrey parties, to be taxed if not agreed.
The open offer and the indemnity costs application
32 The question then is whether either of these conclusions is affected by an open offer of compromise which was made by Messrs Berresford and Kain prior to the trial. For the reasons set out below, the conclusions are not affected.
33 At 4.45 pm on the day before trial, Sunday 11 March 2012, Messrs Berresford and Kain sent an open letter to the representatives of the Godfrey parties offering to resolve the dispute by holding a new general meeting of NWPL, to be chaired by an independent person.16
34 The offer proposed that:
(a) There be an independent chairperson of the meeting;
(b) The parties agree who is to act as the independent chairperson within seven days of acceptance of the offer, failing which that person is to be nominated by the President of the Australian Institute of Company Directors;
(c) Upon appointment of the independent chairperson, any party may nominate to that person resolutions to be put to the shareholders at the general meeting; and
(d) Each of Messrs Godfrey, Thompson, Keene, Berresford and Kain will resolve as directors or potential directors that NWPL call a general meeting to determine the resolutions accepted by the independent chairperson in accordance with (c) above.
35 The letter also referred to a petition which demonstrated the opposition to the litigation by 54% of shareholders, and said that 'upon acceptance of this offer, the parties are to do all things necessary to discontinue these proceedings with no orders as to costs'. The offer was open only from 4.45 pm on Sunday 11 March 2012 until noon on Monday
(Page 14)
- 12 March 2012. It was expressed to be a Calderbank offer, raising the spectre of indemnity costs if it were unreasonably refused.
36 The response from the representatives of the Godfrey parties was received 10 minutes later. In the response, the legal representative for the Godfrey parties asked (1) what should be done with NWPL and the trust in the meantime before a new meeting? and (2) who the directors were that would be able to deal with urgent matters? He also observed that the petition had been signed by parties who had been invalidly issued with shares. He then said:
If your clients want a meeting they can organise to call a meeting. In the interim they should concede the relief sought by my clients in both actions.
37 Messrs Berresford and Kain relied upon their letter as a Calderbank offer.17 They submitted that the refusal of the offer was unreasonable.
38 In Ford Motor Company of Australia Ltd v Lo Presti,18Buss JA (Wheeler JA agreeing) gave a number of examples of factors to consider in the assessment of whether the rejection of an offer is unreasonable: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.
39 Some of these factors point towards unreasonableness in the rejection of the offer. In particular, the suggestion that Messrs Berresford and Kain should call their own meeting was remarkable, in circumstances in which the board was deadlocked and the Godfrey parties had brought proceedings for an injunction to prevent a meeting which had been called for 13 February 2012.
40 On the other hand, there are three independent reasons why I consider it was not unreasonable for the offer to be rejected.
41 First, there were significant uncertainties arising from the offer. It is also noteable that the offer did not concede all the relief which the Godfrey parties were seeking, or the relief which they obtained. In particular, there was no mention of the treatment of the share issue to Blue
(Page 15)
- Anchor and McLarty (NWDF). Although Messrs Berresford and Kain had indicated that they proposed to amend their pleading to remove opposition to the invalidity of the share issue, it was not clear whether the offer would maintain this position. As the reply email from the Godfrey parties observed, it appeared that Messrs Berresford and Kain were relying upon the validity of those shares in their reference to the petition. Nor was it clear whether the invalidity of the share issue would be accepted by the recipients of those shares (as occurred on the second day of trial). Further, although the two questions asked by counsel for the Godfrey parties raised matters beyond the litigation, no response was received to those questions.
42 Secondly, even if the offer had been completely clear, and even if it had clearly set out the position of Messrs Berresford and Kain concerning the validity of the share issue, the position of the recipients of the issued shares was not known. A trial may still have been necessary to resolve that question. The position of the recipients was only made clear on the second day of trial when Blue Anchor and McLarty (NWDF) indicated that they did not seek to be heard on any issue.19
43 Thirdly, in the circumstances of this trial it was not unreasonable to reject the offer in the very short time period in which it was left open. There may be circumstances in which it is a reasonable time period for an offer which is made at 5.00 pm on a Sunday evening and left open only until noon the next day (of the trial). But in the context of this expedited trial it was not unreasonable to reject an offer with such a short time frame for consideration. The circumstances include the following: the position of the parties had been evolving rapidly; thousands of pages of affidavit evidence including annexures had been filed over a very short period; and the legal issues involved were of real complexity and both parties might reasonably have thought that they had reasonable prospects of success at that time. On the Sunday evening before the expedited trial commenced, the legal representatives and the parties would also have been in heavy preparation.
44 The terms of an offer which is made so late and open for such a short period should be clear and succinct. As Basten JA observed in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2)20although parties will generally have a clear perception of the strengths and weaknesses of their position, and the rapidly increasing costs provide a heightened incentive to respond quickly, this is counterbalanced by the
(Page 16)
- significant distraction from final preparation which arises from the need to address the terms of an offer, provide advice and obtain instructions.
45 The nature of the offer made in this case was such that it was not unreasonable for it to be rejected.
Costs in CIV 1118 of 2012 (the trust proceeding)
The different causes of action
46 The relief sought in the trust proceeding can be broadly described as involving four matters.
(i) A declaration that, by circulating resolution, Westate was removed as trustee and replaced by NW Capital.
(ii) Alternatively that the court should make an order that Westate be removed as trustee and replaced by NW Capital under s 77 of the Trustees Act 1962 (WA), including by reference to the circulating resolution.
(iii) A declaration that the issue of units in the Northwest Properties Unit Trust (the Trust) were contrary to the Trust Deed and in any event for an improper purpose (with the effect that the issue would be voidable).
(iv) A declaration that the issue of units in the Trust was void ab initio.
47 It was common ground that the cause of action, and relief sought, in relation to (iv) was a separate and independent cause of action from (i) - (iii).21 This approach is correct. Like the void issue of shares, the issue of units amounting to 30% of the total issue, without power to do so, was separate from the removal cause of action.
48 This cause of action, (iv), was not opposed by Westate at the trial, and Blue Anchor and McLarty (NWDF) did not oppose orders that the share issue was void ab initio. It is appropriate that Westate should pay the costs of the NW Capital parties in relation to this issue.
49 In contrast, the first three causes of action (or four if the removal and replacement of the trustee in (ii) is treated as two causes of action) were inextricably bound up with one another. This was also common ground, with the only exception raised by senior counsel for Westate being the possible separation of the cause of action concerning the circulating
(Page 17)
- resolution.22. There are three reasons why these causes of action are appropriately treated jointly for the purposes of costs.
50 First, the facts underlying the circulating resolution, in particular the circulation of the resolution only to a majority of unit holders, were not merely relevant to the reason why the circulating resolution was invalid. The conduct of directors of NW Capital in not circulating the resolution to all unit holders was also a central reason why I did not exercise the power under s 77 to appoint NW Capital as a replacement trustee, even though I had concluded that Westate should be replaced as trustee.23.
51 Secondly, NW Capital had relied upon the circulating resolution as a factor for the exercise of the court's discretion to appoint a replacement trustee. But in circumstances in which not all beneficiaries had been given the opportunity of expressing their opinion in the circulating resolution, another reason not to appoint NW Capital was the desirability of obtaining the views of the beneficiaries of the Trust.24.
52 Thirdly, the reason why I concluded that Westate should be removed as trustee25 was also based upon the same facts as the cause of action concerning the issue of units in the Trust for an improper purpose, even though it was neither necessary nor appropriate to make the declaration of improper purpose.
53 In other words, in relation to the causes of action and relief sought in (i), (ii) and (iii) above, they involved what was in 'substance one contest, that is, where the causes of action arise from the one course of dealings, the one transaction or the same facts'.26 It is appropriate that the assessment of success on those issues, and the award of costs, proceed by a joint assessment of those causes of action.
54 Further, and in any event, any separate assessment of costs in relation to the causes of action (i), (ii) and (iii) above would be near impossible. If it could be done it would be horrendously complicated. As Anderson J said in Permanent Building Society v Wheeler (No 2),27in a passage approved by the Court of Appeal in Keet v Ward,28.'[t]he court will always look at the realities of the case and attempt to do substantial justice'.
(Page 18)
Costs in relation to the removal of Westate as trustee and replacement with NW Capital
55 The substance to which the relief in (i), (ii) and (iii) above was directed was a common point. It was the NW Capital parties' desire to remove Westate as trustee, replacing it with NW Capital. Westate opposed its removal, and it opposed the appointment of NW Capital.
56 In my reasons I concluded that this goal had not been achieved by the circulating resolution because the circulating resolution was not sent to a significant number of unit holders. This was a conscious decision which deprived a significant number of unit holders of the opportunity to vote. It meant that the resolution was not validly passed.
57 But although the circulating resolution did not remove Westate as trustee, and although no order was made which required Westate to be removed, I concluded that Westate should be removed as a trustee. If Westate did not exercise its power to remove itself as trustee after calling a meeting as it proposed to do, then the court would do so.
58 In substance, the plaintiffs in the trust proceeding were successful in their submission that Westate should be removed as trustee. The plaintiffs were not successful in their submission that NW Capital should be appointed.
59 Westate submitted that it had been successful because the orders which it sought in the alternative, namely the holding of a meeting to determine the identity of the appropriate trustee, were made. This is not accurate. In my reasons I explained that a meeting of unit-holders could not dictate to the trustee the identity of a new trustee. I also concluded, contrary to Westate's submissions, that Westate's primary submission (that it should remain trustee) failed. Although Westate submitted in the alternative that a meeting be held, it vigorously resisted its removal as trustee.
60 As a broad overall assessment of the inter-related matters of relief (i), (ii) and (iii) above, I do not accept that either party was successful. My conclusion was that Westate should be replaced as trustee, as the NW Capital parties sought, and a meeting held to facilitate that replacement. But I did not accept the NW Capital parties' claim that NW Capital was an appropriate replacement trustee. On this point Westate was successful.
(Page 19)
61 I do not consider that it is appropriate to descend to any greater level of detail in the underlying issues than this for the same reasons set out above at [25]. But even if that exercise were performed it would probably reach the same conclusion. On some issues the NW Capital parties were successful, such as whether the units had been issued for an improper purpose and whether Westate should be removed; on others Westate was successful such as whether the circulating resolution was valid and whether NW Capital was a proper person to be appointed as a replacement trustee.
62 The appropriate order is that there be no order as to the costs of the causes of action (i), (ii) and (iii) between the Godfrey parties and Messrs Berresford and Kain.
Costs of the third party proceedings
63 On 2 March 2012, Messrs Berresford and Kain applied for leave to bring third party proceedings against Pauline Hind Nominees Pty Ltd. By leave, granted early on 8 March 2012, Messrs Berresford and Kain commenced third party proceedings and served a third party notice upon the solicitors for the plaintiffs.
64 On 8 March 2012, a mediation was held. By email on Friday, 9 March 2012 at approximately 4.00 pm Messrs Berresford and Kain advised the plaintiffs of their intention to discontinue the third party proceedings. On Monday, 12 March 2012, the first day of trial, those proceedings were discontinued.
65 Messrs Berresford and Kain accepted that they should pay the costs of the third party. But submissions were made by Pauline Hind Nominees Pty Ltd seeking indemnity costs for the third party proceedings.
66 Pauline Hind Nominees Pty Ltd submitted that the circumstances of the third party notice fell within the principles which justify an indemnity costs order. Although those circumstances are generally expressed very broadly as being whenever the interests of justice require, Pullin J (as his Honour was then) has explained that many instances involve some instance of improper, or at least unreasonable, conduct by the party against whom the order is sought, or its legal advisers.29
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67 Pauline Hind Nominees Pty Ltd relied upon seven factors which it was submitted, individually and collectively, warranted an order for indemnity costs. This submission should be rejected.
68 The first, second and seventh factors were that the third party proceedings were issued only two working days prior to trial; that they were abandoned 24 hours later, at the end of the last working day before trial; and that the third party was required to deal with the proceedings urgently.
69 As to these three matters, Pauline Hind Nominees Pty Ltd does not mention that the application to issue the third party notice was brought only on 2 March 2012. This was only a week after the defence and counterclaim had been filed. The Godfrey parties had only filed their points of claim on 20 February 2012. Everything in the trial moved with great speed.
70 There was nothing improper in the conduct of Messrs Berresford and Kain bringing a third party notice only a week after their points of defence and not even two weeks after the points of claim were filed and served. Although their case was necessarily evolving, the very short period of time in which everything had to be completed before trial meant that it was essential that Messrs Berresford and Kain brought their application as soon as possible. It was brought quickly and that is to be commended.
71 Nor was there anything improper in Messrs Berresford and Kain seeking to abandon the third party claim 24 hours after leave was granted. Rather, it was entirely appropriate for that claim to be abandoned immediately when, as their case rapidly developed, it became apparent that this relief would not be sought.
72 The third, fourth, fifth and sixth factors were all generally focused upon the merits of the proposed claim and a suggestion of ulterior purpose. It was suggested that the affidavit evidence of Pauline Hind strongly indicated that the proceedings had no reasonable prospect of success; that the proceedings were abandoned without explanation, and as soon as it become apparent that the third party proceedings would not delay the commencement of the trial; and that there is a reasonable inference that the proceedings were instigated for an ulterior purpose or to delay the trial.
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73 Pauline Hind also provided an affidavit in which she said that before these proceedings Mr Berresford had never suggested that her stapled securities had been invalidly issued.30
74 The evidence does not even come close to justifying the suggestion in these factors of ulterior purpose. My best assessment of the evidence and the legal issues, as they had unfolded prior to trial, is that it was reasonable for the third party claim to be brought and it was reasonable for Messrs Berresford and Kain to seek to discontinue it.
75 Further, contrary to the submissions on behalf of Pauline Hind Nominees Pty Ltd, in their submissions in support of their application for the third party notice, counsel for Messrs Berresford and Kain submitted that the third party proceedings would not delay the trial. As I observed at the end of my judgment on the leave application, the submission to the contrary was made by the Godfrey parties who did not provide any evidence in support of it.31.
76 The application for indemnity costs by Pauline Hind Nominees Pty Ltd must be refused.
Uplifting the scale for the company proceedings and the trust proceedings
77 At the oral hearing of these costs issues it was common ground between the parties that there should be special orders as to costs.
78 It also became common ground that the only order which should be made is an order that the costs should be taxed without regard to the maximum hour limit referred to in item 11 or item 17 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) (the Scale). Item 11 provides for a maximum 50 hour limit for hearing and getting up. It is possible, although I doubt it, that the applicable item might be item 17 on the basis that although these proceedings were commenced by originating process they involved a substantive, and contested, trial. That item provides for a maximum of 120 hours for getting up for trial.
79 In either case I am satisfied that such an order should be made.
80 Section 280(2) of the Legal Profession Act 2008 (WA) provides that:
[I]f 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
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- because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
...
(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.
81 It is well established that before a discretion can be exercised as to whether a special costs order should be made, the court must be of the opinion that (i) the Scale or a Scale item is inadequate, and (ii) that the inadequacy arises because of the unusual difficulty, or complexity, or importance of the matter.32
82 The inadequacy will be demonstrated if there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination.
83 As I explained in my reasons, there were 14 substantial issues which emerged in dispute in the two cases. Many of these involved numerous sub-issues. There were 2,500 pages of affidavit evidence and annexures which were tendered as exhibits. Numerous legal issues were canvassed and dozens of cases were cited in submissions.
84 Many of the legal and factual issues in this case involved questions of complexity and general importance as well as of importance to the parties. And I am satisfied that there is a fairly arguable case that the bill will tax at a rate involving more than 50 hours of preparation, and arguably more than 120 hours, although the argument as to this latter limit is plainly weaker.
85 I note that these questions are to be resolved as a matter of impression rather than detailed evaluation.33 Evidence of costs actually incurred is not always required.34
Conclusion
86 As costs continue to escalate in this matter I have, with the agreement of counsel, taken the step of emailing this judgment to the legal
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- representatives of the parties in the hope that it will not be necessary to have a further hearing. My conclusions as to the appropriate costs orders are set out in each section. The parties are to provide a minute of proposed orders within three days. If necessary I will hear from the parties as to the precise form of orders but a broad summary of my reasons, above together with matters agreed between the parties at the oral hearing, is as follows:
(i) The Godfrey parties should pay the costs of Messrs Berresford and Kain, to be taxed if not agreed, of the cause of action concerning the validity of the 18 January 2012 resolutions (Amended originating process relief 2.1);
(ii) Messrs Berresford and Kain should pay the costs of the Godfrey parties, to be taxed if not agreed, of the cause of action concerning the invalidity of the share issue (Amended originating process relief 2.2).
(iii) Westate should pay the costs of the NW Capital parties concerning the declaration that the issue of units in the Northwest Properties Unit Trust was void ab initio (Amending original summons relief 5).
(iv) There be no order as to the costs of the other causes of action in the trust proceedings.
(v) The costs in (i) - (iii) above should be taxed without regard to the maximum hour limit referred to in item 11(a) of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) or, if applicable, item 17.
87 The parties also agreed that:
(i) The costs of (i) - (iii) above should include the costs reserved on 10 February 2012, and the costs of the hearings on 9 March 2012 and 5 April 2012 and 12 June 2012 and the costs of joinder of the third, fourth and fifth defendants in the company proceedings and the second and third defendants in the trust proceedings.
(ii) The costs of (i) - (iii) above should exclude the costs of the application by the Godfrey parties dated 28 May 2012, which costs include the costs of the hearing on 30 May 2012. The Godfrey parties should pay the costs of Messrs Berresford and Kain of that application dated 28 May 2012.
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88 Neither the Godfrey parties, nor Messrs Berresford and Kain, has succeeded in the costs orders which each sought at the costs hearing.
89 I turn finally from the legal considerations in this case to those of practicality. In the affidavit material before me at this costs hearing, there was annexed an email on behalf of a group of investors in the fund. The email makes a powerful point. It was addressed to Messrs Berresford, Keene, Thompson, Godfrey and Kain. It said:
I act for several clients who represent around 5% of the North West Development Fund, all of which are retired and are dependent on the fund assets performing by way of capital and/or income returns. In the last 6 months I have witnessed ALL of the directors jockeying to win control of this fund, trying to get the upper hand in communications, and to out-manoeuvre each of their other Directors - I can't help but ask why the efforts of the Directors weren't actually being spent to ensure that each and every shareholder gets what they are entitled to - a well governed, efficient, independent and transparent management team which will, by its own admission, provide positive results for the benefit of the shareholders.
I ask you all, for the sake of the shareholders, to resolve of your own volition that the entire board will resign and that a new independent board be appointed to oversee, report to and to represent all the shareholders.
1. Costs submissions of the first and second defendants [2].
2 The exceptions were Mr Godfrey, and Blue Anchor Pty Ltd and McLarty (NWDF) Pty Ltd. The latter two took no part in the proceedings.
3 ts 76.
4 Keet v Ward [2011] WASCA 139.
5 Keet v Ward [2011] WASCA 139 [24].
7 First and second defendants' submissions on costs [9], [11], [15]; ts 563.
8 24 February 2012 Points of Defence and Points of Counterclaim [7(b)].
9 24 February 2012 Points of Defence and Points of Counterclaim [12].
10 See opening submissions for the first and second defendants [88] - [105]. The amendments to the counterclaim on 12 March 2012 put the claims as primary relief sought.
11 Northwest Capital Management v Westate Capital Ltd [2012] WASC 121 [6] - [7] (Northwest).
12 Plaintiffs' submissions in relation to costs [12.8] - [12.10].
13 Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S) [6] - [7] (the Court).
14 ts 94. See also IMF (Australia) Ltd v Sons Of Gwalia Ltd (Administrator Appointed) [2004] FCA 1390; (2004) 211 ALR 231, 244 [47] (French J); Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56 [30] (the Court).
15 ts 92.
16 See affidavit of Mr Carl Ellinghaus sworn 2 May 2012, pages 5 - 6.
17 Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586.
18 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 [16] - [17], [23], [28].
19 ts 92.
20 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 [20].
21 ts 570 - 571; 577 - 578.
22 Although senior counsel properly acknowledged that this might 'split that issue too finely': ts 577.
23 Northwest [293] - [299].
24 Northwest [277] - [280] referring to Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 [152].
25 Northwest [263].
26 Keet v Ward [2011] WASCA 139 [24].
27 Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, 574.
28 Keet v Ward [2011] WASCA 139 [24].
29 Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95, 97 [8] - [9]. See also Fazio v Fazio [2008] WASC 161 [16] (Martin CJ) referring to conduct meriting censure or reproof or the pursuit of a claim for a collateral or improper purpose.
30 Affidavit of Pauline Hinds sworn 19 March 2012 [6].
31 Godfrey v Berresford [2012] WASC 77 [26].
32 Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ).
33 EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7] (Martin CJ).
34 Frigger v Lean [2012] WASCA 66 [81] (Allanson J; Newnes & Murphy JJA agreeing)
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