Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No 4)

[2022] NSWSC 24

Supreme Court

New South Wales

Medium Neutral Citation:

Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No 4) [2022] NSWSC 24

Hearing dates:

On the papers

Date of orders:

20 January 2022

Decision date:

20 January 2022

Jurisdiction:

Equity - Expedition List

Before:

Williams J

Decision:

See paragraph [82].

Catchwords:

COSTS – whether costs should follow the overall event or whether separate costs orders should be made in relation to specific issues – where unsuccessful defendants/cross-claimants contend that costs outcomes of individual issues are so complex that no costs order should be made at this stage, or at all – where plaintiffs contend that the one successful defendant should be ordered (together with the unsuccessful defendants) to pay the plaintiffs’ costs and the plaintiffs should not be ordered to pay the successful defendant’s costs - held that costs should follow the event of the plaintiffs’ successful claims and successful defence of the cross-claims, but the costs order in favour of the plaintiffs should be made against the unsuccessful defendants only – held further that the plaintiff should pay the costs of the successful defendant.

COSTS – INDEMNITY BASIS - whether unsuccessful defendants should pay plaintiffs’ costs on ordinary or indemnity basis having regard to their conduct that gave rise to the proceedings, the manner in which they conducted the proceedings, or a Calderbank offer – where all parties’ conduct of the proceedings was unsatisfactory – where unsuccessful defendants’ unsatisfactory conduct of the proceedings did not increase costs incurred by plaintiffs – where Calderbank offer made to all defendants and not capable of acceptance by unsuccessful defendants only - held that costs payable on the ordinary basis.

PRACTICE AND PROCEDURE – informal application for stay of execution of judgment and orders (including costs orders) pending appeal – application dismissed – no question of principle.

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98

Uniform Civil Procedure Rules 2005 (NSW), r 36.17, Pt 42

Cases Cited:

Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333; [2019] HCA 29

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2021] NSWSC 1374

Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (Supreme Court of New South Wales, Sackar J, 28 April 2020)

Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No. 2) [2020] NSWSC 745

Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No. 3) [2021] NSWSC 1482

Taheri v Vitek [2013] NSWCA 438

Vieria v O’Shea (No. 2) [2012] NSWCA 121

Ziegler as trustee for the Doris Gayst Testamentary Trust v CenricProeprty Group Pty Ltd [2020] NSWCA 85

Texts Cited:

N/A

Category:

Costs

Parties:

Overdean Developments Pty Ltd as trustee of the Dean Super Fund (First Plaintiff/First Cross-Defendant)
Brian Dean (Second Plaintiff/Second Cross-Defendant)
B.A.D Nominees (NSW) Pty Ltd (Third Plaintiff/Third Cross-Defendant)
Garslev Holdings Pty Ltd (First Defendant/First Cross-Claimant)
Leonardus Gerardus Smits (Third Defendant/Third Cross-Claimant)
Peter Shah Mahommed (Fourth Defendant/Fourth Cross-Claimant)
Vestecorp Financial Services Pty Ltd (Fifth Defendant/Fifth Cross-Claimant)
Jacobus Smits (Sixth Defendant/Sixth Cross-Claimant)

Representation:

Counsel:
D Allen (Plaintiffs/Cross-Defendants)
L Smits, solicitor (Defendants/Cross-Claimants)

Solicitors:
Kekatos Lawyers (Plaintiffs/Cross-Defendants)
Leonardus Smits (Defendants/Cross-Claimants)

File Number(s):

2018/384191

Publication restriction:

N/A

Judgment

Introduction

1. These reasons concern:

1. the costs of these proceedings in which the principal judgment was delivered on 17 November 2021; [1]

2. the quantification of the pre-judgment interest payable by the defendants pursuant to order 7 made on that date;

3. the plaintiffs’ application for an order that interest accrued on the monies paid into court referred to in orders 5 and 6 made on that date be paid to the first plaintiff; and

4. the defendants’ informal applications for a stay of enforcement of the judgment and orders made on 17 November 2021 and a stay of enforcement of any costs orders, pending appeal.

   1. Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No. 3) [2021] NSWSC 1482 (the principal judgment).

2. The same defined terms are used in these reasons as in the principal judgment.

Relevant procedural history and outcome of the proceedings

3. The principal judgment was delivered following a final hearing of the proceedings that was conducted before me on 22 to 25 June 2020 and 23 to 31 July 2020. Prior to that hearing, a final hearing had commenced before Sackar J on 20 May 2019. That hearing was adjourned on 21 May 2019 as a result of the plaintiffs’ application for leave to amend their pleading. The final hearing was listed to resume before Sackar J on 27 April 2020. In the meantime, the statement of claim went through two further iterations and the defendants filed their cross-claim. The resumed hearing was vacated on 28 April 2020 due to technical difficulties with the conduct of the hearing by audio visual link described by Sackar J in reasons for judgment delivered on that day. His Honour did not regard himself as part-heard. [2]

   2. See Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (Supreme Court of New South Wales, Sackar J, 28 April 2020) at [15].

4. The final hearing that subsequently commenced before me on 22 June 2020 was interrupted by a further adjournment granted on the morning of 25 June 2020 on the application of the defendants/cross-claimants on the grounds of the ill-health of their solicitor, Mr Leonardus Smits, who is also the third defendant and third cross-claimant in these proceedings. Following that further adjournment, the final hearing resumed on 23 July and concluded on 31 July 2020.

5. The costs of each of those adjournments referred to above were reserved. Pursuant to r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW), those costs will be paid and dealt with in the same way as the general costs of the proceedings unless the Court orders otherwise.

6. The same position applies in relation to other reserved costs, including the costs of the defendants/cross-claimants’ further amended notice of motion filed on 30 August 2019 which was dismissed on 16 June 2020. [3]

   3. Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No. 2) [2020] NSWSC 745.

7. Whilst familiarity with the principal judgment is assumed, it is convenient for present purposes to briefly summarise the outcome of the parties’ claims, cross-claims and defences.

8. By the time of the final hearing, there were three plaintiffs: Overdean Developments Pty Ltd (as trustee of the Dean Super Fund) (referred to as “Overdean”), Mr Brian Dean (who was the director of Overdean and the former trustee of the Dean Super Fund, and also the beneficiary of the Dean Super Fund) and BAD Nominees Pty Ltd (the former trustee of the Dean Super Fund) (referred to as “BAD Nominees”). Mr Dean is the sole director of BAD Nominees. When the proceedings were commenced on 13 December 2018, a power of attorney granted by BAD Nominees to Mr Leonardus Smits and Mr Peter Mahommed on 6 May 2016 for a term of three years was still current. There was apparently some doubt about whether the power of attorney precluded any person other than the attorneys from causing BAD Nominees to commence these proceedings. In those circumstances, Overdean and Mr Dean named BAD Nominees as the second defendant to the proceedings. Amendments made by the plaintiffs after 6 May 2019 removed BAD Nominees as the second defendant and joined it as the third plaintiff.

9. There were five defendants: Garslev Holdings Pty Limited (the first defendant, referred to as “Garslev”), Mr Leonardus Smits (the third defendant, who also acted as the solicitor for all defendants and cross-claimants as referred to above), Mr Peter Mahommed (the fourth defendant), Vestecorp Financial Services Pty Ltd (the fifth defendant, referred to as “Vestecorp”), and Mr Jacobus Smits (the sixth defendant).

10. Each of those five defendants was also a cross-claimant.

11. Each of the three plaintiffs was a cross-defendant.

12. The substance of the principal relief sought by the plaintiffs at final hearing, in various forms and under various causes of action, was to recover the value of nine lots of land that BAD Nominees (in its capacity as trustee of the Dean Super Fund) had successfully negotiated with the administrators of Beechworth Land Estates Pty Ltd to have transferred to it (or its nominee) in partial satisfaction of its proof of debt submitted in the administration of that company. By reason of a deed that Mr Leonardus Smits and Mr Mahommed (as attorneys) had caused BAD Nominees to enter into on 20 March 2018 (referred to as the “20 March 2018 deed”) and two further deeds that they caused BAD Nominees to enter into on 5 November 2018 (referred to as the “Garslev deeds”), the nine lots had been transferred to Garslev as nominee of BAD Nominees.

13. The plaintiffs failed in their claims for orders rescinding of the power of attorney (and all subsequent deeds and agreements entered into in purported exercise of the power of attorney) on the grounds that Mr Leonardus Smits and Mr Mahommed had procured the power of attorney by breach of fiduciary duties owed to BAD Nominees and/or Mr Dean at the time that it was negotiated and executed. The doctrine of Anshun estoppel precluded the plaintiffs from maintaining those claims in these proceedings. [4]

    4. Principal judgment at [511]-[524].

14. However, the plaintiffs achieved the substance of the relief claimed by other means. Orders were made against Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev rescinding the 20 March 2018 deed and the Garslev deeds ab initio on the grounds that those deeds had been entered into in breach of fiduciary duties owed by Mr Leonardus Smits and Mr Mahommed as attorneys of BAD Nominees which were a dishonest and fraudulent design that Garslev had knowingly assisted. Garslev was held liable to account as constructive trustee for the benefits it received from knowingly assisting in the breaches. Mr Leonardus Smits and Mr Mahommed were held liable to pay equitable compensation to Overdean as the current trustee of the Dean Super Fund. The defendants’ contentions that the attorneys owed no fiduciary duties to BAD Nominees or, alternatively, that there was no breach of any fiduciary duties that may be found to have been owed, failed. [5]

    5. Principal judgment at [569]-[766].

15. The plaintiffs pleaded three conspiracies, of which only one featured in the case that they ran at trial. That conspiracy was relied on only in support of the plaintiffs’ contention that the breaches of fiduciary duty by Mr Leonardus Smits and Mr Mahommed were a dishonest and fraudulent design in which Garslev and Mr Jacobus Smits knowingly assisted. The plaintiffs failed to prove that alleged conspiracy, but nevertheless succeeded in establishing that the breaches were a dishonest and fraudulent design and that Garslev knowingly assisted those breaches. [6]

    6. Principal judgment at [614]-[616], [676]-[682], [704], [717]-[735].

16. The plaintiffs’ claims against Mr Jacobus Smits failed due to the failure of the conspiracy allegation referred to above and because the conduct on which the plaintiffs relied in support of their allegation that Mr Jacobus Smits knowingly assisted the attorneys’ breaches of fiduciary duties was conduct of Garslev rather than Mr Jacobus Smits. Accordingly, no orders were made against Mr Jacobus Smits. [7]

    7. Principal judgment at [741]-[743].

17. The defendants/cross-claimants failed in their challenge to the plaintiffs’ standing to commence and maintain the proceedings. [8]

    8. Principal judgment at [479]-[485].

18. The defendants/cross-claimants contended that the plaintiffs were precluded from maintaining all of their claims in these proceedings by the doctrine of res judicata, issue estoppel or Anshun estoppel. [9]

    9. Principal judgment at [486]-[535].

19. As I have already referred to at [13]-[14] above, the defendants/cross-claimants succeeded in establishing that the doctrine of Anshun estoppel precluded the plaintiffs from claiming in these proceedings that the Power of Attorney had been, or should be, rescinded on the grounds that it had been procured by breaches of fiduciary duty by Mr Leonardus Smits and Mr Mahommed. [10] That defeated one of the pathways to the substance of the relief claimed by the plaintiffs, but the plaintiffs succeeded by other means.

    10. Principal judgment at [511]-[524].

20. The defendants/cross-claimants also succeeded in establishing that the doctrine of Anshun estoppel precluded the plaintiffs from challenging the validity or enforceability of BAD Nominees’ retainer of Mr Leonardus Smits as a solicitor in 2017. [11] However, that did not assist the defendants to defeat the plaintiffs’ claims for rescission of the 20 March 2018 deed and the Garslev deeds and equitable compensation. Nor did it assist Mr Leonardus Smits’ cross-claim for fees under that retainer.

    11. Principal judgment at [511]-[524].

21. The defendants/cross-claimants also succeeded in establishing that the doctrine of issue estoppel precluded the plaintiffs from contending in these proceedings that the Power of Attorney granted to Mr Leonardus Smits and Mr Mahommed was not coupled with an interest in earning 25 per cent of recoveries, and that the 25 per cent that was recoverable under the IAD related to recoveries in respect of Griffith Estates Pty Limited only and not Beechworth Land Estates Pty Limited. [12] Again, the defendants/cross-claimants’ success on those issues did not defeat the plaintiffs’ claims or any aspect of those claims. Nor did it assist the cross-claim maintained by Mr Leonardus Smits, Mr Mahommed and Vestecorp for a sum of $250,000 allegedly payable under the recoveries clause in the IAD.

    12. Principal judgment at [504].

22. The defendants/cross-claimants otherwise failed in their contention that the plaintiffs were precluded from maintaining their claims in these proceedings by the doctrine of res judicata, issue estoppel or Anshun estoppel.

23. The defendants/cross-claimants failed in their contentions that the plaintiffs were estopped from maintaining some or all of their claims in these proceedings, including on the grounds of various alleged conspiracies by Mr Dean and others. [13]

    13. Principal judgment at [537]-[558].

24. The defendants/cross-claimants also failed in their claims that the proceedings were an abuse of process. [14]

    14. Principal judgment at [559]-[568].

25. As explained in the principal judgment, the cross-claimants sought an amount of $769,397 against the cross-defendants, comprising principally consideration allegedly payable to Mr Mahommed in respect of certain assignments of debt to BAD Nominees in May 2016, fees allegedly payable to Mr Leonardus Smits and Vestecorp (including substantial fees for legal and consulting services relating to the earlier proceedings that were the subject of the res judicata, issue estoppel and Anshun estoppel contentions) and the sum of $250,000 allegedly payable to Mr Leonardus Smits, Mr Mahommed and Vestercorp under the IAD that was executed at the same time as the Power of Attorney. This sum was claimed under five causes of action, all of which failed. [15]

    15. Principal judgment at [753], [767]-[855].

Costs

26. I have considered the parties’ submissions in relation to costs filed on 30 November and 1 December 2021 and the parties’ submissions in reply filed on 8 December 2020.

27. The plaintiffs [16] submit that the costs of the proceedings should follow the events of their successful claim and the unsuccessful cross-claim. Referring to the judgment of Ward CJ in Eq in Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2021] NSWSC 1374 at [746]-[747], the plaintiffs emphasised that the usual order is that costs follow the event and that, in cases involving a multiplicity of issues, the Court does not ordinarily seek to differentiate between the issues on which each party succeeded and failed. The plaintiffs submit that this is not an appropriate case for an issues-based costs order because there were no issues that were dominant or separable and that: [17]

“The dominant factual issue was the conduct of Messrs Smits and Mahommed. It was appropriate to examine their conduct throughout the course of their reslationship with Mr Dean. The factual issues were relevant to determination of most, if not all, legal issues.

The legal issues upon which the plaintiffs failed cannot be separated from the factual issues that had to be addressed to determine the cases on which the plaintiffs succeeded. For instance, the history of the proceedings before Gleeson JA and Brereton J, were relevant to the settlement of the claim against the Administrators of Beechworth Land Estates, the execution of the Garslev Deed and the fees charged. The inception of the relationship was informative of Messrs Smits and Mahommed’s conduct and credit.

All of these factual issues just identified were matters informing whether there had been a breach of duty and knowing involvement in a dishonest and fraudulent design by Garslev.

… the cross-claim in itself gave rise to factual inquiries, including the initial engagement, the work done in the first month and the efforts of Mr Dean to have Messrs Smits and Mahommed reign in their charging. The conduct of Messrs Smits and Mahommed during May 2016 and whilst proceedings were afoot before Gleeson JA and Brereton J were issues raised on the cross-claim. Likewise, the proceedings before Parker J were relevant to the fees charged.”

16. I will refer to the plaintiffs/cross-defendants simply as the plaintiffs and the defendants/cross-claimants as the defendants.

17. Plaintiffs’ costs submissions in reply dated 8 December 2021, paragraphs 20-23.

28. The plaintiffs therefore seek an order that their costs of the proceedings be paid by the defendants (including Mr Jacobus Smits). The plaintiffs submit that those costs should be paid on an indemnity basis for three reasons.

29. First, the plaintiffs submit that those defendants against whom the first plaintiff succeeded, acting reasonably and properly advised, should have recognised that the Garslev Deeds were a fraud on the power and should have agreed to the rescission of those deeds ab initio. The plaintiffs further submit that Mr Leonardus Smits and Vestecorp should have known that their claims made in the cross-claim “emanated from the fraud”.

30. Second, the plaintiffs submit that the initial wrongdoing of Mr Leonardus Smits, Mr Mahommed and Vestecorp informed their conduct of the proceedings, which made the proceedings more time consuming and complex than ought to have been the case. The plaintiffs refer in particular to the defendants’ voluminous evidence and submissions. [18]

    18. Principal judgment at [34]-[35].

31. Third, the plaintiffs rely on an offer that they made to the defendants on 28 May 2019 for judgment in favour of the first plaintiff against the defendants in the sum of $923,501.24 and no order as to costs. The offer was open for 29 days, but was rejected by the defendants’ counteroffer on 7 June 2019. The plaintiffs acknowledge that they cannot rely on the offer under UCPR, Pt 42 because it was addressed to all defendants. However, the offer expressly stated that it was also made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586 and the plaintiffs submit that the defendants’ rejection of the offer supports an order for indemnity costs.

32. As referred to above, the plaintiffs’ claims against Mr Jacobus Smits did not succeed. The plaintiffs submit that he should nevertheless be included in the defendants who are ordered jointly and severally to pay the plaintiffs’ costs because he was the person through whom Garslev (the first defendant) knowingly assisted Mr Leonardus Smits and Mr Mahommed (the third and fourth defendants) in their breaches of fiduciary duty that were a dishonest and fraudulent design. [19]

    19. See principal judgment at [735] and [743].

28. The plaintiffs also submit that they should not be ordered to pay the costs of Mr Jacobus Smits because Mr Leonardus Smits represented all defendants in these proceedings and there are therefore no professional legal costs to be paid. Alternatively, even if Mr Leonardus Smits is entitled to charge professional fees to Mr Jacobus Smits, an order for costs in favour of Mr Jacobus Smits would “induce more mischief rather than justice between the parties” because it would be difficult to separate his costs from the costs of the other defendants. Moreover, an order for costs in favour of Mr Jacobus Smits would enable Mr Leonardus Smits, who has been found liable for breaches of fiduciary duty that constituted a dishonest and fraudulent design, to make money from the proceedings.

29. In response, the defendants submit that Mr Jacobus Smits is entitled to his costs as the plaintiffs’ claims against him failed. Referring to Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333; [2019] HCA 29 (Bell Lawyers), the defendants submit that Mr Jacobus Smits is entitled to recover under a costs order any professional legal costs that he has incurred in defending the plaintiffs’ claims notwithstanding that Mr Leonardus Smits would not be entitled to recover his own costs of acting for himself if his defence had succeeded.

30. The defendants submit that there should be no order as to costs. They contend that the discretion in relation to costs under s 98 of the Civil Procedure Act 2005 (NSW) and Part 42 of the UCPR should not be exercised “overall in a broad brush way [in] favour of one side” but in a manner that reflects the various issues on which the plaintiffs succeeded or failed against each individual defendant. They submitted that this is a complex exercise involving “complicated questions of segregation, set-off, apportionment and assessment of legal costs as between different combinations of parties, across the multiplicity of factual and legal issues that cannot be dealt with adequately, expediently or justly in this short Submission.”

31. Notwithstanding their submission that an issues-based approach to costs is necessary but too complex to attempt, the defendants’ submissions identify the “major issues” decided in their favour as the three conspiracy claims to which I have referred at [15] above, the plaintiffs’ claim for rescission of the power of attorney and other 9 May 2016 documents, and the Anshun estoppels and issue estoppels referred to at [13] and [19]-[21] above. The defendants submit that these issues “absorbed prohibitive amounts of costs”.

32. In addition to identifying matters on which the defendants’ succeeded (or the plaintiffs failed), the defendants also identify various matters in respect of which they contend that they should have succeeded.

33. Despite identifying issues on which they succeeded (or the plaintiffs failed or abandoned), the defendants do not articulate the terms of a costs order that they contend would appropriately reflect each party’s measure of success and failure in the proceedings. The defendants’ primary submission is that this is too complex and that no costs order should be made at all, or no costs order should be made “at this stage”.

34. The defendants’ costs submissions in reply took these arguments further, stating (emphasis in original): [20]

    20. Defendants’ submissions in reply dated 8 December 2021, paragraphs 15-21.

“15.    For each Claim made by the Plaintiffs (vide Table 5), a proper assessment of costs upon any party basis or under the indemnity principle necessitates due consideration and tracing of the Claim through an itemized account that deals with:

(a)    the relevant contracts, proceedings and findings based upon privities or mutualities- e,g., neither Garslev, nor JJS was privy to any Contract made before 20 March 2018;

(b)    commonality of facts, evidence, and issues and application thereto of the relevant rules of law or equity and findings;

(c)    the steps of reasoning applicable to that Claim;

(d)    the success or failure of the Claim or related Claim under the Judgment.

16.    Material differences exist between many permutations of parties, claims, issues, timeframes and findings, won and lost in respect of each Claim.

17.    Such differences were generally disregarded in the Plaintiffs’ Submissions on costs, which only represent an ambit claim mistakenly based upon an assumed total victory.

18.    In a proper assessment, a clinical, auditable determination would be necessary to avoid duplication, overreaching and to award, set off, account for or quantify costs in favour of defendants for unsuccessful Claims.

19.    The plaintiffs bear and have not discharged the onus of establishing sufficient nexii or proportionality for any costs attributable to each successful Claim and avoidance or reductions for costs liabilities on Claims that were lost or costs otherwise thrown away. e.g. through pleading amendments and discontinuance of the original hearing, that was not due to any fault of defendants or of any benefit to them that was not available otherwise.

20.    They also bear and have not discharged the onus to demonstrate the bases and extent to which each charge for costs is fair, reasonable and proportionate, properly attributable to that Claim and each Defendant, such that it can be verified or objected to by each Defendant upon a properly itemized basis.

21.    No expert evidence on costs was adduced by any plaintiff in the Hearing or in support of their Submissions on costs.”

40. Alternatively, the defendants propose that costs orders should be made against Mr Leonardus Smits and Mr Mahommed only “after due consideration of the said matters and after taking a full and proper accounting”. I understand the “said matters” to refer to the issues in respect of which the plaintiffs failed. I understand the “full and proper accounting” to be a reference to an accounting that the defendants contend is necessary in order to reflect certain “equitable principles of restitution and counter indemnities” that the defendants contend should have been applied in their favour in formulating the terms of the orders made. Again, the defendants do not articulate the terms of a costs order against Mr Leonardus Smits and Mr Mahommed that they contend would reflect the matters raised in their submissions. In response, the plaintiffs observe that the defendants do not identify the basis for their submission that a costs order should not be made against Garslev, and submit that this gives rise to a concern that Garslev may be the only defendant with sufficient assets to meet a costs order.

41. The defendants also submit that the plaintiffs should be ordered to pay the defendants’ costs thrown away as a result of the vacation of the hearing on 21 May 2019 and as a result of the plaintiffs’ various amendments to their statement of claim. In response, the plaintiffs submit that the defendants already have the benefit of orders made in May 2019 and November 2019 requiring the plaintiffs to pay their costs thrown away by reason of the amendments to the statement of claim and that the costs of the May 2019 adjournment and all other reserved costs should be dealt with in the same way as the costs of the proceedings generally – that is, the defendants should pay the plaintiffs’ costs. In relation to the May 2019 adjournment, the plaintiffs submit that this adjournment facilitated the defendants filing their cross-claim in addition to the plaintiffs’ amendments to their statement of claim, and it was beneficial to all parties to have the cross-claims determined in the same final hearing as the plaintiffs’ claims.

42. In relation to the Calderbank offer relied on by the plaintiffs, the defendants submit that it was not a valid Calderbank offer and that it was not unreasonable for the defendants to reject the offer given the complexity of the issues (as evidenced by the principal judgment) and given that the offer was addressed to all defendants.

43. Having considered the parties’ submissions in relation to costs summarised above, I have determined that the appropriate exercise of the discretion under s 98 of the Civil Procedure Act in all the circumstances of this case is to order that the defendants’ costs thrown away by reason of the adjournment of the final hearing in May 2019 be paid by the plaintiffs, that the plaintiffs costs of the proceedings otherwise be paid by the unsuccessful defendants (Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev) on the ordinary basis (subject to any previous specific costs orders), and that the costs of Mr Jacobus Smits of successfully defending the plaintiffs’ claims be paid by the plaintiffs.

44. My reasons are as follows.

45. I reject the defendants’ submission that the proceedings and the principal judgment are too complex to address the costs orders that should be made. As I have already noted in summarising their submissions, the defendants have identified the issues in respect of which they succeeded or that were abandoned by the plaintiffs. The question then becomes whether it is appropriate in all the circumstances to apportion the costs between issues: Broadway Plaza at [746]-[747] and the authorities there referred to. Rather than addressing the substance of that question, the defendants’ submissions strive to manufacture complexity by insisting that costs should be determined not even on an issue-by-issue basis but on a finding-by-finding and submission-by-submission basis, with no costs orders being made until the various costs ordered in favour of and against each party are quantified and set off.

46. The defendants’ submissions advocating for such a finely dissected analysis of the parties’ successes and failures in the proceedings are misconceived. The analysis that the defendants assert is required would involve significant further effort, time and cost. Such an approach is unsupported by authority and is inconsistent with s 56 of the Civil Procedure Act. In addition, issues of quantification that the defendants contend must be addressed before costs orders are made are matters to be addressed during the assessment process after costs orders are made.

47. However, the plaintiffs’ submissions referred to at [27] above are expressed at a level of generality that is too high to meaningfully inform the exercise of the discretion whether to make specific costs orders in respect of issues on which the plaintiffs failed or the defendants succeeded.

48. In my opinion, putting to one side the position of Mr Jacobus Smits whose defence was wholly successful, no apportionment of costs is warranted in relation to the issues on which the defendants succeeded, namely the three conspiracy claims referred to at [15] above and the Anshun estoppels and issue estoppels [19]-[21] above.

49. The three conspiracy claims concerned the conduct of Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev in the period after the power of attorney was exected on 9 May 2016 until the execution of the Garslev deeds on 5 November 2018. That conduct was also relevant to the question whether Mr Leonardus Smits and Mr Mahommed breached their fiduciary duties as attorneys in entering into the 20 March 2018 deed and the Garslev deeds, and Garlsev’s knowledge in respect of those breaches. Those were the issues on which the plaintiffs succeeded in their claims and were also part of the basis on which the plaintiffs successfully defended the cross-claim in respect of Mr Leonardus Smits’ and Vestecorp’s fees. [21] The three conspiracy claims were not severable or distinct from the other issues in the proceedings on which the plaintiffs succeeded: Broadway Plaza at [746]-[747] and the authorities there referred to.

    21. Principal judgment at [829]-[839].

50. The defendants’ res judicata, issue estoppel and Anshun estoppel contentions were wide ranging but succeeded only in the limited respects referred to at [19]-[21] above. That limited measure of success did not result in the defendants successfully defending any of the plaintiffs’ claims. In those circumstances, I reject the defendants’ submissions that their limited success should be the subject of a special costs order in their favour.

51. In addition, the defendants’ successful Anshun estoppel contention referred to at [19] above raised factual issues concerning the conduct of the May 2016 negotiations that were also relevant to the defendants’ allegation that Mr Dean and his advisers engaged in a conspiracy to obtain financial advantages from Mr Leonardus Smits and Mr Mahommed by inducing them to enter into the power of attorney and the IAD. The defendants failed to establish any such conspiracy. [22]

    22. Principal judgment at [544]-[558].

52. As to the defendants’ reliance on issues in respect of which they contend that they should have succeeded, those are matters that may be relevant to any appeal but they are not relevant to my determination of the costs of the proceedings. There is no reason why Garslev, as one of the unsuccessful defendants and cross-claimants, should not be included in a costs order in favour of the plaintiffs.

53. For those reasons, costs should follow the events of the plaintiffs’ success as against Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev and the plaintiffs’ successful defence of the cross-claim.

54. I reject the plaintiffs’ submissions that Mr Jacobus Smits should be included in the defendants and cross-claimants who are ordered to pay the plaintiffs’ costs. The fact that Mr Jacobus Smits was the person through whom Garslev knowingly assisted in the attorneys’ breaches of fiduciary duty was not a basis for any substantive judgment or order against him [23] and it is therefore no basis for a costs order against him. I do not consider that Mr Jacobus Smits’ role as a cross-claimant requires a different conclusion. Although the cross-claim failed, it was principally defensive insofar as it concerned Mr Jacobus Smits. The abuse of process and res judicata, issue estoppel and Anshun estoppel contentions were made in defence of the plaintiffs’ claims in their statement of claim. Mr Jacobus Smits succeeded in defending the plaintiffs’ claims on other grounds and, as I have already mentioned and as I refer to in more detail below, the plaintiffs devoted no meaningful attention to those contentions in the cross-claim. Indeed, insofar as the cross-claim was concerned, the plaintiffs’ efforts were directed almost exclusively to the monetary claims of Mr Leonardus Smits, Mr Mahommed and Vestecorp.

    23. Principal judgment at [743].

55. I now turn to the question whether the costs order to be made in favour of the plaintiffs against Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev should require payment of the plaintiffs’ costs on the ordinary basis or, as the plaintiffs contend, on an indemnity basis.

56. I reject the plaintiffs’ submission referred to at [29] above that their costs should be paid on an indemnity basis because those defendants, acting reasonably and properly advised, should have agreed to the rescission of the Garslev deeds ab initio and should not have prosecuted their cross-claim which “emanated from the fraud”. In substance, this amounts to a complaint about the conduct of those defendants in defending the proceedings and prosecuting the cross-claim at all, rather than capitulating from the outset. In other words, it is an extension of the plaintiffs’ complaints about the defendants’ conduct that was in issue in the proceedings, rather than a complaint about the manner in which the litigation was conducted on behalf of those defendants. A costs order is not an additional or alternative remedy for a plaintiff aggrieved by conduct in respect of which it has succeeded in obtaining substantive relief. Nor is it a reward for the plaintiffs’ success or a means of penalising unsuccessful defendants for such conduct: Bell Lawyers at [33] (Kiefel CJ, Bell, Keane and Gordon JJ). I also note that the plaintiffs’ submission does not sit well with the terms of their May 2019 Calderbank offer, which did not make any reference to rescission of the 20 March 2018 deed or the Garslev deeds and sought only judgment in a monetary amount in favour of the plaintiffs.

57. The plaintiffs made the further submission referred to at [30] above that their costs should be paid on an indemnity basis because the defendants’ conduct of the litigation made the proceedings more time consuming and complex than ought to have been the case.

58. Cases in which a party has unduly prolonged a case by groundless contentions or made allegations that ought never to have been made are one example of the kinds of case in which an order for indemnity costs may be warranted: see Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234 (Sheppard J).

59. The defendants’ conduct of these proceedings was highly unsatisfactory. Their pleadings and evidence were unnecessarily voluminous. [24] They pressed a number of conspiracy allegations against Mr Dean and others and also made serious allegations that Mr Dean caused BAD Nominees to contravene statutory obligations in relation to taxation and superannuation. These allegations were unsupported by evidence and were not put to Mr Dean in cross-examination. [25] The defendants made other allegations and submissions that were unsupported by evidence, inconsistent with other aspects of their submissions and/or lacking in any rational or principled foundation. These included an allegation of abuse of process. [26] The defendants’ submissions in relation to res judicata, issue estoppel and Anshun estoppel were devoid of any coherent and meaningful analysis of the principles applicable to each doctrine or the application of those specific principles to the earlier proceedings in question. [27] Those submissions were further marred by the defendants’ insistence on misstating the substance and effect of the judgment of Brereton J (as his Honour then was) in the 2017 proceedings. [28] The defendants’ pleadings and submissions repeatedly deployed language that appeared to me to be designed to attempt to obscure the real issues in the proceedings. [29]

    24. See principal judgment at [33]-[34].

    25. For example, principal judgment at [537]-[548].

    26. For example, principal judgment at [479]-[485], [559]-[568], [612].

    27. Principal judgment at [487].

    28. For example, principal judgment at [506]-[509].

    29. For example, references the attorneys’ alleged “vested interests” and “accrued rights” which misstated the effect of the judgment of Brereton J (as to which see principal judgment at [609]-[610]) and references to Mr Dean or BAD Nominees allegedly defrauding or attempting to defraud creditors of the Dean Super Fund (as to which see principal judgment at [611]).

60. However, to my observation, none of those matters increased the plaintiffs’ costs by making the proceedings more time consuming and complex for the plaintiffs. The plaintiffs did not file any reply to the defendants’ unnecessarily voluminous defence. For the most part, the plaintiffs’ submissions did not respond directly to the defendants’ voluminous submissions, which were made in writing with only limited supplementation by oral submissions. As I said in the principal judgment, the plaintiffs scarcely bothered to respond to the defendants’ res judicata, issue estoppel and Anshun estoppel contentions. [30] The limited response that the plaintiffs did make misstated the applicable principles [31] and misled the Court about the matters that fell to be determined at the hearing before Brereton J in the 2017 proceedings. [32] I do not suggest that the plaintiffs deliberately misled the Court about this, but counsel for the plaintiffs could not have made the submission recorded at [500] of the principal judgment if even a cursory review of the evidence concerning the proceedings before Brereton J had been undertaken. Finally, one aspect of the plaintiffs’ pleaded case was inconsistent with the position that had been taken by Overdean in earlier proceedings. The plaintiffs offered no explanation for this inconsistency and merely asserted that this was an irrelevant detail. However, the inconsistency excited the attention of the defendants in their submissions and created an additional issue to be addressed in the principal judgment. [33]

    30. Principal judgment at [487].

    31. Principal judgment at [523].

    32. Principal judgment at [500].

    33. Principal judgment at [567].

40. In summary, the manner in which the defendants and the plaintiffs conducted these proceedings was most unsatisfactory in different ways. The result was to cast wholly on the Court the burden of sifting through the evidence of the earlier proceedings in order to determine whether any of the plaintiffs’ claims in these proceedings were precluded by the doctrines of res judicata, issue estoppel or Anshun estoppel. In addition, the Court was left to discern by a process of comparing the lengthy statement of claim with the plaintiffs’ submissions those claims and contentions that the plaintiffs had impliedly abandoned without having afforded the Court or the defendants the courtesy of expressly withdrawing them. [34] Contrary to the plaintiffs’ submissions in relation to costs, abandonment of claims and contentions in this manner is not consistent with s 56 of the Civil Procedure Act. The Court was also required to address the issues raised in the defendants’ extensive pleadings and submissions, unaided in many instances by any submissions from the plaintiffs. This significantly increased the time required to deliver the principal judgment. However, having regard to the manner in which the plaintiffs and their legal representatives conducted the proceedings, I do not consider that the defendants’ unsatisfactory conduct of the litigation increased the length of the hearing or increased the plaintiffs’ costs.

    34. For example, principal judgment at [614].

41. In all of the circumstances, I do not consider that the defendants’ conduct of the litigation warrants an order for indemnity costs in favour of the plaintiffs.

42. In relation to the Calderbank offer on which the plaintiffs rely in support of their claim for an indemnity costs order, I accept the defendants’ submissions that the offer, being addressed to all defendants, was not capable of acceptance by Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev only. It follows that the non-acceptance of the offer by those defendants does not warrant an indemnity costs order against them: see Vieria v O’Shea (No. 2) [2012] NSWCA 121 at [10]-[13] (Basten and Meagher JJA and Handley AJA) and the authorities there referred to. That renders it unnecessary to consider whether the offer, which invited the defendants to capitulate, was a genuine offer of compromise and, if so, whether it was unreasonable for the defendants not to accept it: see Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Proeprty Group Pty Ltd [2020] NSWCA 85 at [66]-[76] (Gleeson JA, Meagher and McCallum JJA agreeing) and the authorities there referred to.

43. Those are my reasons for concluding that Mr Leonardus Smits, Mr Mahommed, Vestecorp and Garslev should be ordered to pay the plaintiffs’ costs of the proceedings (including the cross-claim) on the ordinary basis.

44. That leaves the question of whether the plaintiffs should be ordered to pay the costs of the successful defendant, Mr Jacobus Smits.

45. I have recorded the three grounds on which the plaintiffs resist such an order at [33] above. I reject the first ground. As the defendants submitted, the fact that Mr Leonardus Smits (if he had successfully defended the proceedings) would not have been entitled to recover his “costs” of acting for himself following the abolition of the Chorley exception in Bell Lawyers has no bearing on Mr Jacobus Smits’ ability to recover any “costs” within the meaning of s 3 of the Civil Procedure Act that he may have incurred in successfully defending the plaintiffs’ claims by way of fees or disbursements payable to Mr Leonardus Smits. Difficulties that may be incurred in quantifying those costs and separating them from costs incurred by other defendants are capable of resolution in the assessment process and I reject the plaintiffs’ second ground for that reason. I also reject the plaintiffs’ third ground. A costs order in favour of Mr Jacobus Smits will operate to provide him with some indemnity against any professional legal costs that he has incurred in successfully defending the plaintiffs’ claims. As a successful defendant, he is entitled to that indemnity irrespective of whether it also results in a benefit being conferred on his solicitor who, in the unusual circumstances of this case, was one of the unsuccessful defendants: Bell Laywers at [33] (Kiefel CJ, Bell, Keane and Gordon JJ).

46. It is convenient at this point to reject the assertion implicit in the defendants’ submissions that the Court sanctioned or approved Mr Leonardus Smits acting for himself and all other defendants. The true position is that he had acted as the solicitor for himself and all other defendants from the outset of the proceedings. No objection or issue had been raised about this until shortly after the matter was refered to me for case management in the weeks leading up to the final hearing that commenced on 22 June 2020. At that stage, I raised with the parties whether the Court should make an order of its own motion restraining Mr Leonardus Smits from acting for defendants other than himself in the exercise of the Court’s inherent jurisdiction over its officers. By then, it was apparent that Mr Leonardus Smits was to act as the solicitor and advocate for himself and all defendants as he was no longer briefing counsel to appear. It was also apparent that he would be a material witness. Even at that late stage, the plaintiffs raised no objection to Mr Leonardus Smits acting for all defendants. The Court was not informed of any conflict or potential conflict between his interests and the interests of other defendants. In those very unusual circumstances, I did not consider that the Court should make an order of its own motion restraining Mr Leonardus Smits from acting. Such an order would inevitably have required yet another adjournment of the proceedings to permit all other defendants sufficient time to prepare to represent themselves at the final hearing in circumstances where they contended that they lacked the resources to engage an alternative solicitor and where they had been proceeding on the assumption that they would be represented by Mr Leonardus Smits. Even if those defendants had been in a position to engage an alternative solicitor, that solicitor would have required further time to prepare for the final hearing. The hearing had already been adjourned on two occasions and a further adjournment occasioned by a state of affairs that had existed since the commencement of the proceedings without objection from the plaintiffs would have been highly undesirable and, in my view, contrary to s 56 of the Civil Procedure Act. It does not follow that it was desirable for Mr Leonardus Smits to represent all defendants: see Bell Lawyers at [18]-[20] (Kiefel CJ, Bell, Keane and Gordon JJ). Refraining from taking action of the Court’s own motion to prevent this was simply the least undesirable option of the two alternatives that were available in the unusual circumstances that existed when Mr Leonardus Smits’ conduct in acting for all defendants was first questioned.

47. Unless the Court orders otherwise, all reserved costs will be dealt with and paid in the same manner as the costs of the proceedings pursuant to UCPR, r 42.7. The only reserved costs that the defendants submitted should be the subject of a different order were the costs of the May 2019 adjournment.

48. In my opinion, the plaintiffs should pay the defendants’ costs thrown away by reason of the May 2019 adjournment. Even if the defendants derived some benefit from the adjournment by taking the time to file their cross-claim, the plaintiffs used the time to replead their claims in a manner that Sackar J later described as changing the entire character and scope of the litigation. [35] The adjournment was granted on the plaintiffs’ application in circumstances where it can be seen from the subsequent amendments that the plaintiffs had not yet articulated the substance of the claims that they wished to pursue. The plaintiffs should not have caused the defendants to appear before the Court for a final hearing in May 2019 without having articulated their claims.

    35. See Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (Supreme Court of New South Wales, Sackar J, 28 April 2020) at [10].

49. That disposes of the parties’ submissions in relation to costs.

Quantification of interest up to judgment

71. An order for interest under s 100 of the Civil Procedure Act has already been made. The plaintiffs nevertheless seek an additional order quantifying the amount of that interest. The plaintiffs’ calculation is incorrect, as it commences from 30 March 2019 rather than 30 April 2019 in accordance with order 7 made on 17 November 2021. The 30 April 2019 date was selected so that the period in respect of which interest was payable on the equitable compensation (the amount of which reflected the net sale proceeds of the nine lots) commenced at the time when all of the nine lots had been sold. [36] I would not make the order sought by the plaintiffs given the error in their calculation. In my opinion, order 7 made on 17 November 2021 is sufficient for the plaintiffs to enforce payment of interest up to judgment.

    36. Principal judgment at [451].

72. As the order for interest has already been made, the defendants’ submission that there should be no order for interest must be rejected.

Interest on monies paid into court

73. The plaintiffs have also raised an issue about interest on moneys to be paid out of Court to the successful plaintiff in accordance with order 6 made on 17 November 2021. As recorded in the principal judgment at [760], I had intended to make an order that the monies that had been paid into court, together with any interest thereon, be paid out to Overdean. My omission of interest from order 6 was an accidental omission that should be corrected pursuant to UCPR, r 36.17. I will make an order correcting order 6.

Stay pending appeal

74. The defendants’ submissions in relation to costs referred to a prospective appeal, asserted that it was “inevitable” that the proceeds of the judgment would be dissipated by the plaintiffs thereby deprive the defendants of the benefit of any successful appeal, and stated that the prospects of success on appeal “are real”. The submission then stated that the defendants “seek leave to file a stay application”. [37]

    37. Defendants’ costs submissions dated 1 December 2021, paragraph 16.

75. The defendants also submitted that enforcement of any costs orders against them should be stayed pending appeal. [38]

    38. Defendants’ costs submissions in reply dated 8 December 2021, paragraph 37.

76. On 9 December 2021, the defendants/cross-claimants filed a notice of intention to appeal against the whole of the principal judgment and any costs order made against any of them. No notice of appeal in relation to the principal judgment has subsequently filed. Accordingly, no grounds of appeal have been articulated.

77. Leave is not required to apply for a stay of execution of judgment pending appeal. No notice of motion applying for a stay has been filed to date. I am prepared to treat the defendants’ submissions referred to above as an informal application for a stay. The principles applicable to such an application are conveniently summarised in the following passage from the judgment of Leeming JA in Taheri v Vitek [2013] NSWCA 438 at [4]:

“The applicable principles were not in dispute. In Alexander v Cambridge Credit Corporation Ltd (recs apptd)(1985) 2 NSWLR 685 the court said that “special or exceptional circumstances” did not need to be made out in order for a stay to be granted, and that it was sufficient that the applicant demonstrated ‘a reason or an appropriate case to warrant the exercise of discretion’ in the applicant’s favour: at 694. However, as the court said Kalifair Pty Ltd v Digi-Tech (Aust) Ltd[2002] NSWCA 383; 55 NSWLR 737 at [28]:

‘A successful party is prima facie entitled to the fruits of his judgment. He is entitled to be protected, as far as practicable, from the risk that if the appeal fails assets which earlier were available to satisfy the judgment will no longer be available for that purpose. The Court will endeavour to see that a stay does not cause that kind of prejudice to a judgment creditor.’

In Vaughan v Dawson[2008] NSWCA 169 at [17] Campbell JA applied what had been said in Kalifair at [18] to the effect that the principles resembled those governing the grant of an interlocutory injunction, namely, whether it had been shown that there was a serious question to be tried and, if there is, where the balance of convenience lies. These principles have regularly been applied, including in Boutros v Nationwide Capital Pty Ltd[2013] NSWCA 246 at [27]–[31]. It is helpful, as a guard against inappropriate fettering of the discretion, to bear in mind that ultimately, as Spigelman CJ said in New South Wales Bar Association v Stevens[2003] NSWCA 95 at [83], with the agreement of Meagher and Sheller JJA:

‘The overriding principle to apply when determining an application for a stay is to ask what the interests of justice require.’”

78. In the present case, the defendants have not demonstrated that this is an appropriate case to exercise the discretion in their favour.

79. As I have said, no appeal grounds have been articulated because no notice of appeal has been filed. The defendants’ submissions in relation to costs complain about aspects of the principal judgment but do not articulate alleged errors by reference to the applicable legal principles and specific relevant evidence. In those circumstances, the defendants have not demonstrated that the prospective appeal raises serious questions, let alone that it has real prospects of success as their costs submissions assert.

80. Given the defendants’ conduct of these proceedings, as referred to earlier in these reasons, I have no confidence that any appeal will be conducted expeditiously on the part of the appellants. In the meantime, a stay would deprive the successful plaintiff of the fruits of the judgment and the defendants offer no undertakings or conditions to be attached to any stay that would protect the successful plaintiff from the risk that, if the appeal fails, assets that are presently available to satisfy the judgment will no longer be available for that purpose.

81. For those reasons, I do not consider that the interests of justice require that enforcement of the judgment and orders made on 17 November 2021 and the costs orders to be made as set out below be stayed pending appeal.

Conclusion and orders

82. For all of the reasons above, I make the following orders:

1. Order that the plaintiffs are to pay the defendants’ costs thrown away by reason of the adjournment of the final hearing in May 2019, being the costs that were reserved by order 3 made on 24 May 2019.

2. Order that the first, third, fourth and fifth defendants and the first, third, fourth and fifth cross-claimants are to pay the plaintiffs’ and cross-defendants’ costs of these proceedings on the ordinary basis in an amount to be agreed or assessed (including any reserved costs but excluding any costs that are the subject of a previous costs order that provides otherwise, including order (1) above).

3. Order that any costs within the meaning of s 3 of the Civil Procedure Act 2005 (NSW) incurred by the sixth defendant in defending the plaintiffs’ claims against him (but excluding any costs incurred by him as the sixth cross-claimant in relation to the cross-claim) are to be paid by the plaintiffs on the ordinary basis in such amount as may be agreed or assessed.

4. Pursuant to r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW), order 6 made on 17 November 2021 is corrected to read as follows:

“Order that the monies held in court that are impressed with the trust in order 5 above, together with any interest accrued thereon whilst those monies have been held in court, be paid to Overdean (as trustee of the Dean Super Fund).”

5. Dismiss the defendants/cross-claimants’ informal application made in their submissions filed on 1 December 2021 and 8 December 2021 for a stay of execution of these orders and the judgment and orders made on 17 November 2021.

Endnotes

Decision last updated: 20 January 2022