Perpetual Nominees Limited v Rytelle Pty Ltd (No. 3)
[2013] VSC 8
•5 February 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6858 of 2009
| PERPETUAL NOMINEES LIMITED (ACN 000 733 700) | Plaintiff |
| v | |
| RYTELLE PTY LTD (RECEIVERS & MANAGERS APPOINTED) & ORS (ACCORDING TO SCHEDULE ATTACHED) | Defendants |
AND BETWEEN:
| RYTELLE PTY LTD (RECEIVERS & MANAGERS APPOINTED) & ORS (ACCORDING TO SCHEDULE ATTACHED) | Plaintiffs by Counterclaim |
| v | |
| PERPETUAL NOMINEES LIMITED (ACN 000 733 700) & ANOR (ACCORDING TO SCHEDULE ATTACHED) | Defendants by Counterclaim |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Written submissions filed by the parties | |
DATE OF JUDGMENT: | 5 February 2013 | |
CASE MAY BE CITED AS: | Perpetual Nominees Limited v Rytelle Pty Ltd & Ors (No. 3) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 8 | |
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Interlocutory injunction – Costs – Application Dismissed – Whether indemnity costs should be ordered – Applicant unsuccessful in main proceedings
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff / First Defendant by Counterclaim | Mr R. Moore | HWL Ebsworth |
| For the Defendants / Plaintiffs by Counterclaim | Mr P. Bick QC and Mr B. Gibson | Slater & Gordon |
| For the Second Defendant by Counterclaim | Mr P.H. Morrison QC and Mr S.R. Senathirajah | Hall & Wilcox (as town agents for McCullough Robertson) |
| For Wellington Capital Ltd | Mr W.T. Houghton QC and Mr J.D.S. Barber | Ashurst |
| For Asset Resolution Ltd | Mr M. Stewart SC | Maddocks Lawyers |
HIS HONOUR:
In this proceeding, I published my reasons for judgment on the interlocutory application for injunctive relief and joinder of Asset Resolution Limited (“ARL”) and Wellington Capital Limited (“Wellington Capital”) on 24 September 2012.[1] I found that in all the circumstances, and in the exercise of my discretion, it was not appropriate to grant the injunctive relief sought by the Defendants and Plaintiffs by Counterclaim restraining Wellington Capital from assigning to ARL any asset belonging to the Premium Income Fund (“the Fund”). Further, I declined to join Wellington Capital and ARL to the proceeding. Wellington Capital had previously given an undertaking to be bound by the decision in this proceeding when I declined a previous joinder application in May 2012 and ARL provided a similar undertaking.
[1][2012] VSC 440.
Each party filed and served written submissions in relation to costs. I will not rehearse the facts and will assume familiarity with my reasons for judgment published on 24 September 2012.
Wellington Capital’s submissions as to costs
Wellington Capital contends that the plaintiffs by counterclaim should pay the costs of Wellington Capital of and incidental to the application on a solicitor and client or indemnity basis for the following reasons:
(a) An application for joinder was bound to fail from the outset given that a similar application failed in May this year upon Wellington Capital giving an undertaking to be bound by the decision in this proceeding and that nothing had changed since the undertaking was given.
(b) The NSX release announcing the transaction made it clear that the transaction had already been completed and that the shares in ARL (which constituted the consideration for the transaction) had already been transferred to Premium Income Fund unit holders.
(c) As a consequence of the transaction being completed, there was no possibility of the injunctive relief sought being granted because there was no evidence that a further transfer of assets to ARL was proposed and in any event unit holders would need to be joined.
(d) In the absence of quantification of the plaintiffs by counterclaim’s claim, it was impossible to obtain an injunction because the Fund was still left with substantial assets (tens of millions of dollars) and further there was no indication that the transaction rendered the Fund unable to satisfy a judgment on a counterclaim should judgment be entered against the Fund.
(e) The application was proposed to be supported by an insubstantial undertaking as to damages that could never be satisfied .
(f) The application was misconceived for the reasons set out in (a) to (e) above and was brought in disregard of the known facts and when the plaintiffs by counterclaim and their advisers must have known there was no real prospect of success.
(g) If solicitors for the plaintiffs by counterclaim had communicated with Wellington Capital, features of the transaction that excited the applications could have been explained and misconceptions could have been corrected, including for example, why 60% of the Forest Resort assets were being transferred and 40% retained and whether ARL would take on debt.
(h) The failure to communicate is inconsistent with the overarching obligations of the plaintiffs by counterclaim’s and their advisers to use reasonable endeavours to resolve the dispute, to cooperate and to narrow the issues in dispute under sections 20, 22 and 23 Civil Procedure Act 2010 (Vic) (‘CPA’). Contravention of these obligations can be taken into account when a Court is exercising its discretion in regard to costs under section 28(2) CPA.
(i) The plaintiffs by counterclaim made serious allegations against Wellington Capital including that it had engaged in conduct with a fraudulent intention to hinder, delay, defeat or defraud creditors and an abuse of process. These allegations lacked any real foundation and this must have been apparent to the plaintiffs by counterclaim.
Asset Resolution Ltd’s submissions as to costs
ARL contends that the plaintiffs by counterclaim should pay its costs of the application on a solicitor client or indemnity basis.
ARL adopted the submissions of Wellington Capital above except in regard to two matters.
First, ARL submits that the position of ARL in regard to the undertaking is different to Wellington Capital because it had not given such an undertaking prior to the plaintiff by counterclaim’s application. Notwithstanding this difference, ARL contends that the plaintiffs by counterclaim could not have thought that there was no realistic prospect that the undertaking given by Wellington Capital would not have been proffered by ARL if it had been sought. ARL submits this for the following reasons:
(a) There was no evidence for thinking that the directors of ARL had anything to do with the facts being litigated.
(b) The sole assets of ARL were the assets of the Fund which were transferred to it and its sole purpose was to realise assets and distribute proceeds to its shareholders.
(c) ARL received very late notice of the application. It received notice by email at 2:58pm the afternoon before the application was heard in Melbourne.
(d) The transaction could not have had the effect of stripping assets from Wellington Capital as it merely replaced those assets with ownership of shares in a company. The vice alleged was in the form of the subsequent transfer of shares by Wellington to unitholders of the Fund. ARL was not a party to this transaction.
Wellington Investment Management Ltd’s submissions as to costs
Wellington Investment Management Ltd (“Wellington IM”) submits that the plaintiffs by counterclaim should pay its costs of and incidental to the application on an indemnity basis or alternatively on a solicitor and client basis.
Wellington IM adopted the submissions of Wellington Capital.
Wellington IM further submits that it was an active party to the trial set to commence on 10 September 2012 and had incurred costs for that trial, the first two days of which were lost as a result of the plaintiffs by counterclaim’s unsuccessful application.
Further, Wellington IM contends that the plaintiffs by counterclaim did not attempt to notify the shareholder at any time, or the named parties to the summons before Monday 10 September 2012, notwithstanding that they attempted to have the Summons issued on Friday 7 September 2012. If they had done so, it would have been unlikely that the hearing of the summons would have been adjourned from 10 September 2012 to the next day.
Further, Wellington IM submits that the futility of the application is evidenced by the decision of the plaintiffs by counterclaim not to cross examine Ms Hudson (the deponent of Wellington Capital’s affidavit in opposition of the application).
Perpetual Nominees Ltd’s submissions as to costs
Perpetual Nominees Limited (“Perpetual”), the plaintiff in this proceeding, seeks its costs of attendance on 11 September 2012 and its costs thrown away of 10 September 2012 which was to be the first day of the trial pursuant to the usual rule as to costs.
Perpetual submits that even though no relief was sought against it in the application, the application had the potential to affect the plaintiff’s claim against the defendant in the proceeding.
Rytelle Pty Ltd, The Forest Resort Operations Pty Ltd
The plaintiffs by counterclaim seek that:
(a) there be no order as to costs; or
(b) alternatively, that the costs of the application of 10 September 2012 be reserved; or
(c) alternatively, that the defendants pay the costs of Wellington Capital and ARL of and incidental to the application made by summons dated 10 September 2012 to be taxed on a party and party basis in the absence of agreement.
The plaintiffs by counterclaim contend that the effect of the transaction between Wellington Capital and ARL was to move the majority of assets of the Fund beyond the reach of creditors or prospective creditors. The transaction also involved the transfer to ARL of 60% of the debt that was the subject of the proceeding, including associated security. As such, the plaintiffs by counterclaim submit that it was necessary and reasonable to seek to join ARL as a party to ensure that, as the acquirer of 60% of the debt the subject of the proceeding, ARL’s interest was bound by the same equitable defences and counterclaims raised by the plaintiffs by counterclaim as Perpetual had in relation to its 40% of the same debt.
The plaintiffs by counterclaim contend that the joinder was necessary to ensure that all issues between the parties were completely and finally determined, the multiplicity of proceedings was avoided and the costs of litigation were reduced as far as possible. The plaintiffs by counterclaim submit further that having obtained the undertaking from ARL to be bound by the decision in the proceeding, they had, in effect succeeded in this aspect of their application.
The plaintiffs by counterclaim contend that the costs of the application should be reserved for the following reasons:
(a) The Court will not be in a position to determine whether the concerns regarding the transaction have the effect of undermining the Fund’s ability to meet any judgment on the counterclaim until the proceeding has been heard and determined and the issue of the indemnity of the responsible entity has been determined.
(b) It would be unfair for the plaintiffs by counterclaim to have been ordered to pay the costs of the application if it is later determined that they are successful on their counterclaim, an indemnity is found to apply to the responsible entity and there are insufficient funds within the Premium Income Fund to meet the full amount of the judgment. It is submitted that such circumstances are those that the application sought to prevent.
(c) It is open for the Court to find that both Wellington Capital and ARL should not have resisted the application.
The plaintiffs by counterclaim contend that a special costs order should only be awarded in exceptional circumstances and only where the losing party has misconducted itself in relation to the proceeding where the institution of the proceeding was unreasonable or where the proceeding was issued for an ulterior or collateral purpose.[2] As such, a special costs order should not be awarded against the plaintiffs by counterclaim for the following reasons:
[2]PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24, [36].
(a) It is clear that the application was bona fide and not made for an ulterior purpose.
(b) The matters set out in the affidavit of Ms Hudson in opposition to the application were not known to the plaintiffs by counterclaim at the time of making the application.
(c) The matters raised in the application were arguable and cannot be said to have had no prospect of success. This is particularly so considering that the Court accepted that the effect of the transaction was to diminish the assets of the fund to the extent that the transaction involved a distribution of assets of the Fund to unit holders which were a significant proportion of the total assets of the Fund.
Decision
Section 24(1) Supreme Court Act 1986 (Vic) confers a broad discretion on the Court to determine by whom and to what extent costs are to be paid. Further, Rule 63.31 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provides that unless provided for by the rules or an Order of the Court, costs will be taxed on a party and party basis. Rule 63.28 provides that a Court can make costs orders on a more generous basis, that is, a solicitor and client basis or an indemnity basis.
Rule 63.20 of the Supreme Court (General Civil Procedure) Rules 2005 provides that each party shall bear its own costs of an interlocutory application in a proceeding, whether made on or without notice, unless the court otherwise orders.
In my opinion, the plaintiffs by counterclaim should pay the costs of Wellington Capital and ARL on a party and party basis. I accept the submissions made by Wellington Capital and ARL as set out above. In particular, there was no legal basis to restrain, let alone reverse, any disposition of assets by the Fund. Further, the evidence suggested that the Fund was still left with substantial assets which would presumably be available to satisfy any claim for damages which remained unquantified. In all of the circumstances and as pointed out in my decision refusing injunctive relief, such relief was not warranted. Costs should follow the event.
In my opinion, the matters that caused the plaintiffs by counterclaim some anxiety called for some explanation, particularly given the history of the matter and the proximity of the transaction to the trial. An uncontradicted and plausible explanation was given by Ms Hudson. In the circumstances, no special costs order is warranted.
I should also note that in a separate judgment delivered this day I have rejected all of the claims made by the plaintiffs by counterclaim. Had the costs of the injunction been in the cause or reserved, I would have, in the circumstances, ordered in any event that (in relation to Wellington Capital and ARL) they be paid by the plaintiffs by counterclaim on the usual basis.
I do not propose to order costs in relation to the injunction in favour of Wellington IM and Perpetual. Although they were served with a copy of the summons and were present at the hearing, neither party participated in the hearing. Whether they are entitled to costs on another basis, namely the scheduled commencement of the trial which was delayed because of the injunction application, will depend on the costs disposition in the main case.
Proposed Orders
I propose to make the following orders:
(1) The plaintiffs by counterclaim’s summons dated 10 September 2012 is dismissed.
(2) The plaintiffs by counterclaim pay the costs of Wellington Capital Limited and Asset Resolution Limited of the application made by summons dated 10 September 2012 to be taxed on a party and party basis in the absence of agreement.
SCHEDULE OF PARTIES
| PERPETUAL NOMINEES LIMITED (ACN 000 733 700) | Plaintiff / First Defendant by Counterclaim |
| RYTELLE PTY LTD (ACN 105 101 639) | First Defendant / First Plaintiff by Counterclaim |
| THE FOREST RESORT OPERATIONS PTY LTD (ACN 100 823 201) | Second Defendant / Second Plaintiff by Counterclaim |
| JOAN PAMELA WALSH | Third Defendant / |
| JAMES WILLIAM WALSH | Fourth Defendant/ |
| WELLINGTON INVESTMENT MANAGEMENT LIMITED (ACN 101 634 146) | Second Defendant by Counterclaim |
| THE FOREST RESORT PTY LTD | Fifth Plaintiff by Counterclaim |
| THE FOREST RESORT HOTEL PTY LTD | Sixth Plaintiff by Counterclaim |
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