Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd (No 2)

[2006] FCA 552

FEDERAL COURT OF AUSTRALIA

Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd (No 2) [2006] FCA 552

COSTS – outstanding costs

Dodd & Dodd Pty Ltd v Shire of Swan [1999] WASC 206
Homestyle Pty Ltd v Western Australian Builders, Labourers, Painters & Plasterers Union of Workers [2002] WASC 57
Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd [2006] FCA 205
Pedra Holdings v Westfield [2005] FMCA 475
Peterson v Chubb Security Australia Pty Ltd [2003] FMCA 172
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633

PEDRA HOLDINGS PTY LTD, MYRAN HOLDINGS PTY LTD, HENRY AVELING and MARIANNE AVELING v WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD, PT LIMITED, CPM (WA) PTY LTD and CPT MANAGER LIMITED
WAD 104 of 2005

NICHOLSON J
12 MAY 2006
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 104 OF 2005

BETWEEN:

PEDRA HOLDINGS PTY LTD
ACN 064 183 222
FIRST APPLICANT

MYRAN HOLDINGS PTY LTD
ACN 009 105 408
SECOND APPLICANT

HENRY AVELING
THIRD APPLICANT

MARIANNE AVELING
FOURTH APPLICANT

AND:

WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD
ACN 060 037 621
FIRST RESPONDENT

PT LIMITED
ACN 004 454 666
SECOND RESPONDENT

CPM (WA) PTY LTD
ACN 079 927 272
THIRD RESPONDENT

CPT MANAGER LIMITED ACN 054 494 307
FOURTH RESPONDENT

JUDGE:

NICHOLSON J

DATE OF ORDER:

12 MAY 2006

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

In addition to order 5 of 3 March 2006, which reads:

‘5.The first applicant pay the costs of the first and second respondents and the third and fourth respondents on the notice of motion and re-amended notice of motion respectively.’

the second, third and fourth applicants:

(a)pay the respondents’ costs of the applications to strike out the applicants’ statements of claim;

(b)pay the third and fourth respondents’ costs of the application to deconsolidate;

(c)pay so much of the first and second respondents’ costs of the application for security for costs as are attributable to the second, third and fourth applicants;

(d)pay any other outstanding costs in relation to the notice of motion of the first and second respondents dated 3 February 2005 and the third and fourth respondents’ re-amended notice of motion dated 21 December 2004.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 104 OF 2005

BETWEEN:

PEDRA HOLDINGS PTY LTD
ACN 064 183 222
FIRST APPLICANT

MYRAN HOLDINGS PTY LTD
ACN 009 105 408
SECOND APPLICANT

HENRY AVELING
THIRD APPLICANT

MARIANNE AVELING
FOURTH APPLICANT

AND:

WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD
ACN 060 037 621
FIRST RESPONDENT

PT LIMITED
ACN 004 454 666
SECOND RESPONDENT

CPM (WA) PTY LTD
ACN 079 927 272
THIRD RESPONDENT

CPT MANAGER LIMITED
ACN 054 494 307
FOURTH RESPONDENT

JUDGE:	NICHOLSON J
DATE:	12 MAY 2006
PLACE:	PERTH

REASONS FOR JUDGMENT

1. These reasons concern outstanding costs on a notice of motion of the first and second respondents dated 3 February 2005 and a re-amended notice of motion of the third and fourth respondents dated 21 December 2004 (filed in its original form on 25 October 2004 and amended on same date).

2. These notices of motion were heard on 3 February 2006 and orders were made that the sole director/shareholder of the first applicant, Mr Alan Duncan furnish various undertakings to the Court.  The notices of motions were otherwise dismissed and the first applicant was ordered to pay the costs of the ‘first and second respondents and the third and fourth respondents on the notice of motion and re-amended notice of motion respectively’:  see Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd [2006] FCA 205. This was understood to apply only in respect of the first applicant’s costs. Orders were then made for the parties to file written submissions in relation to the outstanding costs, that is, in relation to the second, third and fourth applicants.

3. The first and second respondents’ notice of motion as filed sought, amongst other things, that the applicants’ amended statement of claim be struck out and security for costs be given by all applicants.  At the hearing on 3 February 2006 only [3] of the notice of motion remained before the Court, that is, the portion seeking security for costs having by then being only directed to the first applicant.

4. The third and fourth respondents’ notice of motion as filed sought, amongst other things, that parts of the applicants’ amended statement of claim be struck out, for deconsolidation of the proceeding and for security for costs from the first applicant.  At the hearing on 3 February 2006 only [4]-[5] of the motion remained, that is, the portion seeking security for costs but only in respect of the first applicant.

5. This proceeding has an extensive interlocutory history and it is necessary to outline this background to understand the parties’ submissions. 

   BACKGROUND

6. The following table summarises the history of the proceeding. 

Date

Event

17 September 2004

Applicants commenced proceeding in the Federal Magistrates Court.

7 October 2004

McInnis FM ordered the proceeding continue on the pleadings and makes directions.  The applicants filed an amended application and an amended statement of claim. 

23 December 2004

The third and fourth respondents’ notice of motion dated 21 December 2004 filed.

3 February 2005

The first and second respondents’ notice of motion of the same date filed.

7 February 2005

The applicants filed a further amended statement of claim.

15 April 2005

Raphael FM ordered the transfer of the proceeding to the Federal Court, referring the questions of strike out, deconsolidation and security for costs.  Raphael FM said that the respondents’ has been substantially successful and ordered that costs of the application be the respondents’ costs in the cause. 

6 May 2005

The applicants filed a notice of appeal against the order for transfer.

27 May 2005

The applicants filed a notice of discontinue of the appeal against the order for transfer.

10 June 2005

The applicants filed a notice of motion to transfer the proceeding back to the Federal Magistrates Court.

19 July 2005

The applicants’ notice of motion dismissed as incompetent and the applicants ordered to pay the respondents’ costs of the motion.

4 November 2005

The notices of motions of the first and second respondents and the third and fourth respondents listed. During the listing:

(a)       the applicants seek and are given leave to file a substituted further amended application and statement or statements of claim;

(b)       the applicants ordered to file affidavits attesting to their assets and liabilities;

(c)       the applications for strike out, deconsolidation and security for costs held over to 8 February 2006;

(d)       the applicants ordered to pay the respondents’ costs of the day and costs thrown away.

15 December 2005

The first applicant filed a substituted statement of claim and the second, third and fourth applicants filed a substituted statement of claim.

8 February 2006

At the directions hearing the first and second respondents advised the Court they will proceed with the application for security for costs against the first applicant only.

The third and fourth respondents advised they no longer seek deconsolidation of the proceeding and will continue with their application for security for costs against the first applicant.

Orders made dismissing pars of the notices of motion to reflect the advice of the parties and costs in relation to the second, third and fourth applicants reserved in relation to each notice of motion of the respondents.

The remaining portions of the notices of motion are listed for 3 March 2006.

3 March 2006

The first applicant ordered to provide security by way of undertaking or bank guarantee and the first applicant ordered to pay the respondents’ costs of the respondents’ motions.  The notices of motion of the first and second respondents and the third and fourth respondents were otherwise dismissed and parties ordered to file submissions on outstanding costs.

1. It is submitted by the first and second respondents that the outstanding costs relate to (1) strike out (all, other than those of 4 November 2005 including those thrown away); (2) deconsolidation (all); and (3) security for costs (in relation to the second, third and fourth applicants).  The third and fourth respondents submit the applicants should pay all of their costs of the notice of motion both up to and including 4 April 2005 and thereafter.

   STRIKE OUT APPLICATIONS

2. The first and second respondents submit that until the filing of the substituted statements of claim on 15 December 2005 (drafted by counsel), the applicants’ pleadings were defective despite having been amended on two prior occasions.  In support, Raphael FM’s judgment dealing with the transfer of the proceeding to this Court, is referred to (see Pedra Holdings v Westfield [2005] FMCA 475 at [19]-[23]). His Honour noted at [19]:

   ‘... .  The pleadings as they presently stand do give cause for concern.  They do not to my mind comply with the requirement of pleading with clarity so that the respondents can known [sic] the case they have to answer …’

   His Honour decided however to not deal with the pleadings so as to not interfere with the discretion of the docket judge to whom the proceeding would be transferred.  It is also submitted that had the applicants improved their pleadings to the extent requested by the first and second respondents in a letter from its solicitors dated 6 October 2004, their application for strike out would not have been made.

3. The submissions of the third and fourth respondents also refer to Raphael FM’s reasons.  The third and fourth respondents’ notice of motion sought (amongst the other things referred to above) that the proceeding be transferred to the Western Australian District Registry of the Federal Court.  In particular [25] is relied on to demonstrate that his Honour intended to award the third and fourth respondents the costs of their notice of motion.  His Honour stated at [25]:

   ‘… .  In regard to the costs of the motion I am of the view that the respondents were substantially successful.  It may well be that before the matter receives it [sic] first directions in the Federal Court the applicants take some steps to deal with the matters referred to in this judgment.  If that was the case then the hearing before me would have been of some considerable utility.  I believe the appropriate order in those circumstances is that the costs of the application shall be the respondent’s [sic] costs in the cause.’

4. It is submitted that the notices of motion have been considered four times since the proceeding was transferred to this Court.  These were on 2 August 2005 when by consent, it was ordered that they be listed on a date and time to be fixed and the directions hearing listed for the same date be vacated with costs in the cause, 4 November 2005, 8 February 2006 and 3 March 2006 (details of what occurred on this dates be obtained from the table above at [6]).  The third and fourth respondents only withdrew the parts of its notice of motion seeking to  strike out parts of the statement of claim at the outset of the listing on 8 February 2006 in light of substantive amendments that had been made to it.  The substantive amendments, it is said, significantly affected the merits of the strike out application.

5. Further the third and fourth respondents contend that the strike out application was properly and reasonably made and was withdrawn without any concession or admission as to its merits.  Like the first and second respondents, it is submitted that the strike out application would not have been made if the applicants had properly pleaded their statement of claim at the outset of the proceeding.  In support, correspondence sent to the applicants’ solicitor dated 11 October 2004 and 20 October 2004 is referred to.  The correspondence agreed with the letter of the first and second respondents dated 6 October 2004 and drew attention to other perceived difficulties with the statement of claim. 

6. The third and fourth respondents refer to two authorities to support the submission that when the Court exercises its discretion in relation to costs on an interlocutory application it should look at all the circumstances and should not order costs against the party bringing the application merely because it is withdrawn.  It is said that if the Court is satisfied that the party bringing the application acted reasonably, and effectively caused the other party to take action which effectively resolved the issue at the heart of the application in the moving party’s favour (as it is claimed occurred in the present circumstances) then the Court should order costs of the application in favour of the party who brought the application:  Dodd & Dodd Pty Ltd v Shire of Swan [1999] WASC 206, at [2] and [8] and Homestyle Pty Ltd v Western Australian Builders, Labourers, Painters & Plasterers Union of Workers [2002] WASC 57 at [7]. The third and fourth respondents submit the Court should exercise its discretion to award in its favour any un-awarded costs.

7. In response, the applicants submit that as the orders of 3 March 2006 dealt with only the security for costs application and costs were ordered against the first applicant so the only outstanding costs relate to the costs of the second, third and fourth applicants in ‘resisting’ the application of the first and second respondent for security for costs.  

8. The applicants’ primary submission is that the costs of the respondents are not recoverable (as discussed under the ‘security for costs’ heading).  Alternative submissions are made in relation to its pleadings.  The Federal Magistrates Court, it is submitted, is not a court of pleadings, with the consequence that pleadings are not the primary documents rather the affidavits filed prior to a hearing are the primary documents.  See Peterson v Chubb Security Australia Pty Ltd [2003] FMCA 172 at [14]-[18]. The applicants state that they accepted, prior to the order transferring the proceeding from the Federal Magistrates Court, and at all times since, that the ‘case’ would need to be pleaded to a higher standard in the Federal Court. It is said this is reflected in correspondence between the parties. It follows that the applicants did not file substituted statements of claim because the respondents caused them to, but rather because the new jurisdiction required it.

9. In submissions in reply, the first and second respondents submit that the standard of pleadings in the Federal Magistrates Court is not inferior to that required by this Court.  The applicants chose to commence their application supported by pleadings when the ordinary procedure in the Federal Magistrates Court is to file an application supported by an affidavit and further, on 7 October 2004 an order was made that the proceeding continue on pleadings.  At all times the applicants had the obligation to comply with the rules of pleadings and to state their case with clarity and to allow the respondents to know what case they had to meet: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633. The first and second respondents do not accept that the substituted statements of claim were filed only to accord with the higher standard of pleadings in this Court.

10. In its submissions in reply the third and fourth respondents state that the applicants’ submission that the Federal Magistrates Court is not a court of pleadings ignores the fact the rules of that Court allow a proceeding to commence by pleadings, that the applicants chose to file a statement of claim with the application when they commenced the proceeding and that there was an order that the proceeding continue on pleadings.

11. The third and fourth respondents reject the applicants’ submission that the standards for pleadings are lower in the Federal Magistrates Court than standards in this Court and refer to Raphael FM’s reasons at [24] where his Honour stated:

    ‘… .  Merely because a court is set up to be speedier, cheaper and more informal does not mean that its judgments should not follow the settled law. If a case is determined to be heard on pleadings then those pleadings must be as good as they would be in any other court. Informality does not mean that a case is subject to a lower standard of proof or that suspect assertions of law will be accepted without demur. …’

12. The third and fourth respondents also refer to factual elements of the history of the proceeding to show inconsistencies with the proposition that the applicants only improved their pleadings because the proceeding has been transferred to this Court and maintain that the amendments appear to have been motivated by the respondents’ notices of motion for strike out. 

13. In my view, the weight of submissions and circumstances substantially favours the respondents.  The proceeding having been commenced by pleading, the strike out applications were legitimately brought and had a significant effect on the formulation of all of the applicants’ cases.  The respondents are entitled to their costs in respect of the applications for strike out so far as those costs relate additionally to the second, third and fourth applicants.

    DECONSOLIDATION

14. The portions of the third and fourth respondents’ notice of motion seeking to separate the claims made by the first applicant from that of the second, third and fourth applicants was withdrawn at the outset of the listing on 8 February 2006 in light of the substantive amendments that the applicants had made to their statement of claim. 

15. The third and fourth respondents’ submissions in support of their seeking the outstanding costs in relation to its deconsolidation application are the same as that relating to its strike out application.  That is, the deconsolidation application was only withdrawn after the pleadings had been substantively amended and the merits of the application were thus significantly affected, the application was withdrawn without any concession or admission as to its merits, the application was properly and reasonably made and would not have been made if the applicants had properly pleaded their statement of claim from the outset.  Finally, it is submitted that its actions have caused the applicants to amend their statement of claim in a manner which ultimately resolved the issues.

16. Although their notice of motion did not seek an order for the deconsolidation of the applicants’ pleadings, the first and second respondents make some brief submissions.  First, the first applicant on the one hand, and the second, third and fourth applicants on the other, chose to bring their application together although they do not have a common claim.  This is best exemplified by the fact that they were able to file separate substituted statements of claim on 15 December 2005.  Second, the applicants sought a ‘short-cut’ by making one application without seeking the Court’s direction whether it was appropriate to do so.  It was incumbent upon the applicants to seek such direction without there being a need for the respondents to raise it.  Third, even though the third and fourth respondents decided to not pursue its application in this regard, this only occurred once the applicants had made their claims clear.  As the applicants failed to ‘adopt the proper procedure in the first place’ they should bear the costs incidental to the third and fourth respondents’ application including those of the first and second respondents. 

17. I agree with these submissions for the third and fourth respondents.  As the first and second respondents did not bring a deconsolidation application they cannot properly be included in the costs order in that respect. 

    SECURITY FOR COSTS

1. The first and second respondents submit that they sought security from the applicants early in the proceeding and refer to correspondence to this effect dated 2 February 2005.  It is said that a substantive response was not received from the applicants with respect to their financial affairs and therefore it was not possible to make a proper assessment of the need for security until the affidavits as ordered on 4 November 2005 had been received attesting to the assets and liabilities of each applicant.  On the basis of the information contained in the affidavit of the third applicant sworn 18 November 2005, the first and second respondents decided to not proceed with their application for security against the second, third and fourth applicants.  It is submitted this information should have been provided to the respondents without an order of the Court and therefore the second, third and fourth applicants should be liable for the costs of the application for security for costs up to 8 February 2006 as attributable to them.

2. The portion of the third and fourth respondents’ notice of motion seeking security for costs related only to the first applicant.  Accordingly, the listings on 8 February 2006 and 3 March 2006 did not concern the second, third and fourth applicants.  It is submitted that no order was made on the hearing of the notice of motion on 8 February 2006 as between the first applicant and the third and fourth respondents, presumably because the Court intended that those costs would follow the hearing of the remaining part of the notice of motion, that is, the security for costs application.  The third and fourth respondents submit that, subject to the submission as described above at [7], the only costs which are outstanding are the costs of the hearing on 8 February 2006 as between the first applicant and the third and fourth respondents.  In this regard, the outstanding costs should follow the event on the remaining parts of the notice of motion on which they were successful on 3 March 2006. 

3. It has already been mentioned that the applicants submit the only outstanding costs relate to the costs of the second, third and fourth applicants in ‘resisting’ the application of the first and second respondents for security for costs.  The applicants submit the usual order, that costs follow the event should be made and the first and second respondents pay the second, third and fourth applicants’ costs of the security for costs application.  It is submitted no evidence was filed to suggest that the second, third and fourth applicants did not have sufficient assets to meet a costs order, being necessary for the first and second respondents to enliven the discretion to order security for costs.  This issue was raised on prior occasions, it is said, and on this basis, the application was unsustainable at all times. 

4. The third and fourth respondents did not bring any motion for security for costs against the second, third and fourth applicants so they have no foundation for an order for costs in that regard.

5. The first and second respondents sought security but it was considered by them to be unsustainable when the second, third and fourth applicants provided appropriate information.  However, those applicants had failed to do so when requested earlier.  The first and second respondents resorted to the application because of the unresponsiveness of the relevant applicants.  In those circumstances I consider the second, third and fourth applicants should pay the costs relating to them in respect of the application for security of costs by the first and second respondents.

   TIMING OF PAYMENT OF COSTS

6. The first and second respondents submit that a considerable period has lapsed since the institution of the proceeding with a large amount of costs incurred due to the applicants’ actions, part of which they are already liable for.  Given the delay, the respondents should not be held out of any further costs and in relation to the first applicant, it is felt that the respondents are required to monitor the costs situation overall and the determination of the outstanding costs will assist in an adequate assessment of sufficiency of the security already provided in the future.  In response, the applicants submit that the delay since the institution of the proceeding is not attributable to them and there is no reason to depart from the normal practice that costs of interlocutory proceedings are not recoverable until the proceeding is complete. 

7. I am not satisfied that the case is made out for the payment of the outstanding costs forthwith.  No such order was made against the first applicant.  The applicable circumstances are not such as to make an order to that effect applicable against the second, third and fourth applicants.

I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.

Associate:

Dated:             12 May 2006

Counsel for the Applicants:	A Rumsley
Counsel for the First and Second Respondents:	HO Moser
Solicitor for the First and Second Respondents:	Watts & Woodhouse
Counsel for the Third and Fourth Respondents:	SP Crabb
Solicitor for the Third and Fourth Respondents:	Clayton Utz
Date of Last Written Submissions:	12 April 2006
Date of Judgment:	12 May 2006