Orrong Strategies Pty Ltd v Village Roadshow Ltd (No 2)
[2007] VSC 205
•15 June 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2066 of 2003
F5593
| ORRONG STRATEGIES PTY LTD (ACN 060 554 985) | Plaintiff |
| v | |
| VILLAGE ROADSHOW LIMITED (ACN 010 672 054) | Defendant |
| ___ | |
| VILLAGE ROADSHOW LIMITED (ACN 010 672 054) | Plaintiff by Counterclaim |
| v | |
| ORRONG STRATEGIES PTY LTD (ACN 060 554 985) | First Defendant by Counterclaim |
| - and - | |
| PETER ZIEGLER | Second Defendant by Counterclaim |
| - and - | |
| REMUT PTY LTD (ACN 070 127 990) | Third Defendant by Counterclaim |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 16 MAY 2007 | |
DATE OF JUDGMENT: | 15 JUNE 2007 | |
CASE MAY BE CITED AS: | ORRONG STRATEGIES PTY LTD v VILLAGE ROADSHOW LIMITED [No. 2] | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 205 | |
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Practice and Procedure – Costs – Whether costs payable to successful party should be reduced because of it being unsuccessful on some issues, including the making of an allegation of fraud – Whether the rejection of a Calderbank offer of settlement was reasonable – Whether director of unsuccessful corporate plaintiff should be ordered to pay the costs of the claim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Dreyfus QC with Mr MA Robins | Nathan Kuperholz |
| For the Defendant | Mr JL Sher QC with Mr ND Hopkins | Minter Ellison |
HIS HONOUR:
On 29 January 2007 I handed down lengthy reasons for judgment in this proceeding following a hearing lasting 71 days. The parties then filed a series of written submissions concerning the orders and declarations to be made as part of the judgment and the appropriate wording of the same. Thus, on 4 April 2007 I entered judgment for the defendant, Village Roadshow Limited (“VRL”) in the following terms:
THE COURT:
1. Orders that the plaintiff’s claim is dismissed.
2.Declares that the second defendant by counterclaim was a related party of the plaintiff by counterclaim at all times from 20 November 1995 to 31 December 2001.
3.Declares that the entry by the plaintiff by counterclaim and the first defendant by counterclaim into the agreement on 30 November 1995, as defined in paragraph 73 of the reasons for judgment (“1995 Agreement”) and the agreement on 8 September 1997, as defined in paragraph 140 of the reasons for judgment (“1997 Agreement”), and the making of payments of profit share or performance bonuses to the first defendant by counterclaim or nominees thereunder, constituted the giving of a financial benefit to the second defendant by counterclaim in contravention of s.243H(1) of the Corporations Law 1995–1999.
4.Orders that the defendants by counterclaim pay the plaintiff by counterclaim, as a debt due pursuant to s.1317HD(1)(a) of the Corporations Law 1995–1999, the sum of $1,749,975.
5.Declares that the entry by the plaintiff by counterclaim and the first defendant by counterclaim into the agreement on 21 June 2000, as defined in paragraph 214 of the reasons for judgment (“2000 Agreement”), and the making of payments of profit share or performance bonuses to the first defendant by counterclaim or nominees thereunder, constituted the giving of a financial benefit to the second defendant by counterclaim in contravention of s.208 of the Corporations Law 2000.
6.Orders the defendants by counterclaim to compensate the plaintiff by counterclaim, for damage resulting from the contravention, by paying the plaintiff by counterclaim the sum of $10,270,874, pursuant to s 1317H(1) of the Corporations Law 2000.
7.Orders that the defendants by counterclaim pay the plaintiff by counterclaim interest pursuant to statute in the amount of $4,566,810.43.
8.Orders that the hearing of argument on the question of the costs of this proceeding be adjourned to 11 May 2007 at 10am.
9.Orders that the time within which any notice of appeal is to be served be extended to 14 days after the Court makes an order as to the costs of this proceeding.
10. Orders that there be liberty to apply.
A hearing on the question of costs was held on 16 May 2007 following the parties filing their written submissions. Although counsel for the plaintiff, Orrong Strategies Pty Ltd (“Orrong”), and for the defendants by counterclaim, Orrong, Mr Peter Ziegler and Remut Pty Ltd (“the Ziegler parties”) acknowledged that there should be some order for costs in favour of VRL, in accordance with the rule that “costs ordinarily follow the event”,[1] there was disagreement about the form of that order. The dispute raised three separate and significant issues.
[1]Nikolaou v Papasavas, Phillips & Co (No. 2) (1989) 166 CLR 407 per Mason CJ, Wilson, Brennan, Dawson, Toohey and Gaudron JJ.
Reduction in Costs Payable to Successful Party?
Although costs are always in the discretion of the Court,[2] the usual order in a case such as this is that there be an order for the costs of both the claim and counterclaim in favour of the successful party, VRL. The first issue was, therefore, whether any circumstances existed which warranted a departure from such an order.
[2]Supreme Court Act 1986, s.24.
Counsel for the Ziegler parties submitted that an accepted exception to the usual order for costs was where a party has added to the costs of the litigation by raising issues on which it has failed. They submitted that although an order apportioning costs on an issues basis was generally regarded as undesirable, it could be made where the successful party has not been wholly successful.[3]
[3]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 30 ACSR 20 at 24-25 per Young J.
The Ziegler parties submitted that, because VRL had raised a “multiplicity of failed and hopeless or baseless defences”, including allegations of fraud or dishonesty against Mr Ziegler, all of which had “unreasonably added to the duration, complexity and overall cost of the litigation”, there should be a departure from the usual order as to costs. Initially, it was submitted by the Ziegler parties in their written submissions that Orrong should be ordered to pay 40% of VRL’s party and party costs of the claim and that VRL should be ordered to pay 50% of the costs of the defendants by counterclaim, such costs to be taxed as between solicitor and client.
The figure of 40% was reached in the following way. Counsel submitted that approximately 25% costs of the trial had been devoted to VRL’s hopeless or baseless defences. They further submitted (sensibly in my opinion) that rather than making two costs orders, namely that Orrong pay 75% of VRL’s costs of the claim and VRL pay 25% of Orrong’s costs of the claim, a single order offsetting such costs ought to be made. Thus, the costs payable by Orrong to VRL would be reduced to 50%. A further reduction of 10% was sought on the basis that “special” circumstances existed, such as the making and pursuing to judgment of “irrelevant and failed allegations of fraud and other serious misconduct against Orrong and Mr Ziegler”. That was also the basis for the proposed order on the counterclaim.
Two days later amended written submissions were filed by the Ziegler parties in which the proposed orders were changed to a submission that there should be a further reduction of 10% on the costs payable by Orrong on the claim and that there should be no order for the costs of the counterclaim.
In support of the submission that VRL had unsuccessfully raised numerous unmeritorious or baseless issues, the Ziegler parties identified the following matters:
(a) that the 1997 Agreement was void for uncertainty;
(b) that the 2000 Agreement was void for uncertainty;
(c)that Orrong and Mr Ziegler misrepresented to VRL the nature of the Project Ballarat and Project Bendigo finance and were liable for misleading conduct;
(d)that Orrong and Mr Ziegler were guilty of negligence or negligent misstatement by which VRL suffered loss and damage;
(e) that Mr Ziegler breached directors’ duties owed by him to VRL;
(f)that Mr Ziegler breached fiduciary duties to VRL by which VRL suffered loss and damage; and
(g)that Orrong acted in breach of the Legal Practice Act 1996 and all amounts paid to it by VRL were recoverable by it.
In support of the submission that VRL had made unwarranted allegations of fraud or dishonesty against Mr Ziegler, the Ziegler parties identified the “baseless and opportunistic attack on Mr Ziegler’s credit” in relation to the employment agreement between Orrong and Mr Ziegler (“Employ.doc”). The Ziegler parties described the submission by VRL that Mr Ziegler had backdated the document to 1993 when it had actually been executed in 2003 as a “fraud allegation”. In respect of that issue I had concluded that I was not satisfied to the relevant degree that the document had not been created in 1993.[4]
[4][2007] VSC 1 at [279].
Counsel for VRL submitted that the Ziegler parties’ approach to the question of costs was not correct. They first submitted that there was no reason to depart from the normal rule that costs should follow the event and that one did not complicate the question of costs by attempting to divide a case into various issues on which one or other of the parties had been successful. They submitted that an order for all of the costs of the claim and counterclaim was particularly appropriate where as here, VRL had successful defended a claim which at one time was said, completely without justification, as the Ziegler parties well knew,[5] to exceed $200 million and had obtained a judgment in its favour of more than $12 million, plus interest of another $4.5 million.
[5][2007] VSC 1 at [977]-[978].
Secondly, it was submitted by VRL that it was not correct to say, as had the Ziegler parties, that VRL had lost all of the issues identified by them as “hopeless or baseless”. Thus, reference was made to my finding that Mr Ziegler had breached his duty as a director in failing to disclose his claim to a 5% commission and thus participating in decisions in which he had a financial interest,[6] which meant that the sweeping assertion that VRL had unsuccessfully raised a “hopeless or baseless” issue, namely that Mr Ziegler had breached directors’ duties owed by him, was simply not accurate.
[6][2007] VSC 1 at [807] and [810].
Thirdly, counsel for VRL submitted that it was not correct to characterise the above issues raised by them as “hopeless or baseless” or “unmeritorious”. For example, they submitted that the uncertainty defences were properly arguable even if they did not succeed in their entirety. They pointed out that in fact I had held that Orrong lost its argument that it was entitled to a shareholding in VRP pursuant to the 1997 Agreement[7] and that I had commented that there was “considerable difficulty with the wording of the declarations sought by Orrong with respect to its claim to a 7.5% interest in VRP”.[8]
[7][2007] VSC 1 at [447].
[8][2007] VSC 1 at [457].
Fourthly, counsel for VRL submitted that with many of the remaining issues it was simplistic to look only at the end result and not at the issue as a whole in order to decide whether VRL should be denied costs for needlessly extending the length and complexity of the trial. By way of example, VRL referred to the Legal Practice Act defence. Here, a considerable time was spent receiving and analysing the evidence about whether Mr Ziegler on his own behalf or on behalf of Orrong was engaging in legal practice, which the Ziegler parties unsuccessfully denied. VRL only failed on this issue because it was unable to link the invoices sent by or on behalf of Orrong with the undoubted legal work done by Mr Ziegler.
This summary of the competing submissions illustrates the difficulty the Court faces when an issue by issue analysis is attempted. In my opinion, generally such an approach would only be appropriate in the clearest of cases, where the successful party has wholly failed in a separate and discrete issue or issues. I do not consider that this is the case here. All of the many issues relied on by the Ziegler parties were closely related to the other issues on which they lost.
Nevertheless, it does seem to me that in this case there should be some reduction in the costs otherwise ordered to be paid to VRL. I say this for two reasons. First, the misleading conduct and negligence arguments advanced by VRL failed, apart from any other reasons, because I held that it had made no attempt to prove that Mr Ziegler’s conduct had caused it loss.[9] It was, or should have been, known that an essential part of these causes of action would not be, or be able to be, the subject of any attempt at proof. In those circumstances, in my opinion, it should have been understood that to persist with these causes of action was a fruitless exercise. Thus, it can be fairly argued, in my opinion, that the pursuit to judgment of these issues led to some costs being incurred unnecessarily, although I do not accept that it would be all of the costs said to result from these issues being raised as they had other relevance, such as whether the amount of the claimed termination bonus was justified by the alleged enormous benefit to VRL as a result of Mr Ziegler’s work in arranging the relevant finance.
[9][2007] VSC 1 at [603].
Secondly, I consider that some reduction should be made in respect of the Employ.doc issue. As VRL pointed out, some of the time taken up by this issue was due to the refusal by the Ziegler parties to act reasonably in relation to the discovery of the document (only undertaken under compulsion of an order by the Court) and to access to the electronic version of the document (again only provided under compulsion of an order by the Court). Nevertheless, although I upheld VRL’s rights in this regard, its allegation that Mr Ziegler had fraudulently backdated the document and given false evidence about it was in the end rejected by me.[10] Further, as the Ziegler parties pointed out in their submissions, I had expressed the view that I was “strengthened in this conclusion by the lack of any apparent motive for Mr Ziegler to belatedly prepare an employment agreement between Orrong and himself and to back date it”.[11] It therefore seems to me to be appropriate to reduce the costs otherwise payable to VRL to some extent in recognition of the fact that it had made an allegation of fraud against Mr Ziegler, which was not upheld.[12]
[10][2007] VSC 1 at [279].
[11][2007] VSC 1 at [280].
[12]Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J; Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 at 502 per Tadgell J.
Just what reduction should be made is very difficult, and the parties appeared to accept that any figure was largely a matter of impression for the Court. As I have previously said, a single order offsetting the two costs order that would otherwise be made seems to me to be a sensible way to proceed. I also consider that the reduction should be applied across both the claim and counterclaim given their close inter-relationship. Doing the best I can, I have concluded that VRL should be entitled to an order that it be paid 90% of its costs of the claim and counterclaim.
The Calderbank Offer
The second issue was whether VRL’s costs should be paid on some basis other than party and party given its “Calderbank” offer of settlement made by letter dated 16 February 2005 from VRL’s solicitors to Orrong’s solicitor. The relevant part of that letter read as follows:
1.The Defendant will pay the Plaintiff $4.5 million (inclusive of interest and GST (if any)) in respect of the claims contained in paragraphs A-F (inclusive), HH and I of the prayer for relief contained in the Plaintiff’s Second Further Amended Statement of Claim dated 18 November 2004.
2.The Defendant will consent to a declaration substantially to the effect that the Plaintiff is entitled in respect of the VRP Division Business (as defined in paragraph 2C of the Second Further Amended Statement of Claim):
(a)until the Plaintiff disposes of its entitlement or the Defendant disposes of the VRP Division Business (whichever occurs earlier) – to 7.5% of the net profit of the VRP Division Business; and
(b)upon the disposal by the Defendant of the VRP Division Business – to 7.5% of the net profit derived by the Defendant from any such disposal.
3.The Defendant will pay the Plaintiff’s costs of the Proceeding, including the counterclaim.
The Defendant’s offer is open for acceptance until 5.00 pm on Friday 4 March 2005.
If this offer is accepted, the Defendant will consent to orders that the cross-claims against Peter Ziegler and Remut Pty Ltd be dismissed and that the Defendant pay the cost of the cross-claims.
The letter went on to foreshadow an application for indemnity costs in accordance with the principles applied in Calderbank v Calderbank[13] should the matter proceed to judgment and Orrong not obtain a result more favourable than the offer.
[13][1975] 3 All ER 333.
VRL submitted that, as the offer was plainly more favourable than the judgment both to Orrong in respect of the claim and to the Ziegler parties in respect of the counterclaim there should be an order that it have its costs after the date of the offer on an indemnity basis. On the other hand, the Ziegler parties submitted that the Calderbank letter should be disregarded.
In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No. 2),[14] the Court of Appeal held that there was no presumption that the party rejecting a Calderbank offer should pay the offeror’s costs on an indemnity basis if the offeree received a less favourable result. Rather, the correct approach was to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs. The critical question was whether the rejection of the offer was unreasonable in the circumstances. The Court of Appeal further held that although it was neither possible nor desirable to give an exhaustive list of relevant circumstances, regard should be had to the following matters when considering a submission that the rejection of a Calderbank offer was unreasonable:
[14](2005) 13 VR 435 at [17]-[29] per Warren CJ, Maxwell P and Harper AJA.
(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;
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
The reasons advanced by the Ziegler parties for their submission that the rejection of the Calderbank offer was reasonable were as follows:
(a)the offer was late, in that it was served some six weeks before the long and complex trial commenced;
(b)the terms of the offered declaration were vague and uncertain, particularly as the offer did not spell out the actual declaration to which VRL offered to consent, but merely set out the substantial effect of a possible declaration;
(c)the terms of the interest offered by VRL to Orrong in the VRP Division Business were vague and uncertain, in particular the type or degree of disposal and the method of assessment of the net profits;
(d)the offer suffered from the same problem that led to Orrong losing its claim namely that shareholder approval was required due to the related party benefit provisions, and the offer was not accompanied by any assurance that VRL would co-operate in obtaining that approval; and
(e)as the case was exceedingly complex it was very difficult to assess the Ziegler parties’ prospects of success.
I reject these reasons. In my opinion, the rejection of the offer made by VRL was quite unreasonable in the circumstances. The offer was not “late”. As VRL pointed out, at the time it was made the interlocutory steps had been largely completed and the massive Court Book settled. By then, the Ziegler parties should have had a clear appreciation of what lay ahead and of the considerable cost benefits to them if they accepted the offer. The task of finalising the witness statements was about to commence. Further, the offer was expressed to be open for a period of 16 days.
I do not accept that the arguments about the vagueness and uncertainty of the offer have any merit. The difficulties of expressing just what interest Orrong had or sought to have in the VRP Division Business were inherent in its claim. I have previously referred to my comment in the reasons for judgment that there was “considerable difficulty with the wording of the declarations sought by Orrong with respect to its claim to a 7.5% interest in VRP.”[15] In any event, I see no substantial deficiency in the wording of this part of the offer. It is similar to what I found to be Orrong’s interest in VRP. Moreover, Orrong made no attempt to take up the issue of these supposed uncertainties with VRL in the 16 day period the offer was said to be open to be accepted.
[15][2007] VSC 1 at [457].
I also reject the argument that acceptance of the offer by Orrong would have required shareholder approval. By February 2005 Mr Ziegler was no longer a related party, so that this was simply not an issue. Further, this is an example of ex post facto rationalisation, as this supposed problem with the offer can have played no part in Orrong’s decision to reject it, because Mr Ziegler did not then, and still does not, agree that he was a related party at the relevant times.
Finally, I do not consider that the supposed difficulty of assessing the Ziegler parties’ prospects of success is a persuasive argument. In my opinion, this was a generous offer of settlement. As VRL pointed out, it carried with it a payment of the substantial sum of $4.5 million, recognition of an equity interest in VRP, the effective withdrawal of VRL’s counterclaim which sought at least $18 million, and payment of the costs of the claim and the counterclaim. Further, I agree with VRL’s submission that the Ziegler parties should have understood that the termination bonus claim had little or no prospect of success, or at the very least that it was not worth anything like the extraordinary amounts being claimed.
Whilst I accept that the Corporations Law issues, in particular, were complex, the possible outcome was still capable of being assessed. Complicated disputes are frequently able to be resolved, despite all of the difficulties. Moreover, even if the Corporations Law defences had not succeeded, the outcome of the claim would still have not been more favourable to Orrong on my findings. On that basis, Orrong would have received its equity interest in VRP and some $3.455 million for profit shares and “taxes saved” performance bonuses.[16] Even allowing for interest this amount would have fallen well short of the $4.5 million offered. This illustrates, in my opinion, just how unreasonable it was for the Ziegler parties to reject the Calderbank offer of settlement.
[16][2007] VSC 1 at [1007].
Accordingly, I consider that in respect of costs incurred after 16 February 2005, being the day the Calderbank offer was made and rejected, they should be ordered to be paid on an indemnity basis.
There is one further aspect to consider. The evidence disclosed that the letter of offer was emailed at 11.08 a.m. on 16 February 2005. In his response rejecting the offer, which was emailed at 12.08 p.m. on the same day, the defendant’s solicitor stated that he had received the offer at 11.30 a.m. Thus, the rejection letter was sent 38 minutes after the offer had been received. VRL submitted that the speed with which the offer was rejected indicated that it had not been seriously considered and that this was therefore a further indicator of unreasonableness. The Ziegler parties submitted that this consideration was irrelevant. Given the prohibition on disclosure of matters discussed at a mediation it is not possible to know what, if anything, had preceded the making of the Calderbank offer. I was warned about making any assumptions. As I have already concluded that the rejection of the offer was unreasonable I do not need to decide this further issue. I do add, however, that in my opinion it would not normally assist a party trying to justify its rejection of an offer if that offer has only been considered for a period as short as 38 minutes.
Payment of Costs by Mr Ziegler
The third issue was whether Mr Ziegler should be ordered to pay the costs of the claim, in addition to any order against Orrong. In support of its application that there be such an order, VRL referred to the decision of the High Court of Australia in Knight v FP Special Assets Limited[17]. In that case, Mason CJ and Deane J said:
Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made.
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.[18]
[17](1992) 174 CLR 178.
[18](1992) 174 CLR 178 at 192-193.
VRL submitted that Orrong was clearly a “man of straw” and deliberately so. Mr Ziegler had given evidence that this $2 company, his corporate “alter ego”, had been deliberately left with no assets. Moreover, he had agreed that shortly before the trial commenced, he arranged for a charge to be granted to himself over the assets of Orrong, including the proceeds of any recovery from the proceeding, to ensure that he would receive the benefit of any judgment. Thus, Mr Ziegler was the person who stood to benefit in the event of a judgment in Orrong’s favour.
The Ziegler parties submitted that exceptional or unusual circumstances of a compelling nature were required before a natural person should be made liable for the costs of a proceeding initiated by a company, whether or not that person was a director of the company.[19] They referred in particular to the relevance as a factor in the exercise of discretion of the ability of, but failure by, the other party to seek security for costs against the insolvent corporate litigant. Reference was made to the fact that VRL had raised the issue of Orrong’s inability to meet a costs order due to its poor financial position on 13 October 2003, some 20 days after this proceeding had commenced, and again on 4 March 2005, some 26 days before the trial commenced. Reference was also made to a letter dated 16 October 2003 from Orrong’s then solicitors to VRL’s solicitors in response to the raising of this issue. In that letter it was said:
… in order to avoid a sterile debate in relation to this issue, our client will provide security for costs in an appropriate amount by way of a bank guarantee.
When we have the defence and any counterclaim of your client, we will let you know what we consider to be an appropriate amount of security to be given by our client in relation to its claim and by your client in relation to any counterclaim.
[19]Bent v Gough (1992) 36 FCR 204; Gatt v Norlin [1998] VSCA 140.
VRL responded to this point about its failure to pursue the issue of security for costs by referring again to the joint judgment of Mason CJ and Deane J in Knight, where their Honours said:
The appellants contend that the availability of an order for security for costs where the plaintiff is suing on behalf or for the benefit of another is a strong reason for denying the existence of a jurisdiction to order costs against a non-party. Indeed, it has been said that the practice of making such an order for security for costs and of staying the proceedings until it is given is the appropriate remedy. No doubt it is an appropriate remedy in many cases but there are limitations attaching to the availability of security for costs. These limitations are such that security for costs is not a remedy in all cases in which justice calls for an order for the award of costs against a non-party. Security cannot be ordered against a defendant or a plaintiff who is an individual and who resides in the jurisdiction. The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient. And the availability of the remedy is scarcely a reason for denying the existence of jurisdiction to make an order for costs against the "real party" at the end of the trial of an action. The availability of an order for security for costs at an earlier stage of the litigation would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction.
VRL also pointed out that Orrong’s offer, which was not mentioned again by Orrong, was conditional on VRL also providing security. Further, VRL argued that if it had sought an order for security for costs against Orrong’s opposition it would almost certainly have been unsuccessful given that it had brought a counterclaim.
In my opinion, in circumstances where Orrong, Mr Ziegler’s corporate alter ago, had brought this extraordinarily large claim, where the claim concerned the work performed by Mr Ziegler for VRL, where Mr Ziegler was the person who stood to benefit from the claim, where Mr Ziegler had arranged Orrong’s affairs so that it had virtually no assets and was effectively “judgment proof” despite being paid some $25 million over nine years by VRL, where Mr Ziegler as defendant by counterclaim stood to benefit from Orrong successfully pursuing its claim and where Mr Ziegler had played an extremely active part in the conduct of the litigation, the interests of justice are best served by making an order that Mr Ziegler also be liable for the costs of the claim.
The Order for Costs
Subject to hearing further from counsel on the precise wording, the order for costs that I would make is as follows:
1.Order that the plaintiff and the second defendant by counterclaim pay 90% of the defendants’ costs of the claim, such costs to be assessed on a party and party basis up to and including 16 February 2005 and thereafter on an indemnity basis.
2.Order that the defendants by counterclaim pay 90% of the plaintiff by counterclaim’s costs of the counterclaim, such costs to be assessed on a party and party basis up to and including 16 February 2005 and thereafter on an indemnity basis.
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