Peter Davis v Halliday Financial Management Pty Limited (No 2)
[2014] NSWSC 1618
•14 November 2014
Supreme Court
New South Wales
Medium Neutral Citation: Peter Davis & Ors v Halliday Financial Management Pty Limited & Ors (No 2) [2014] NSWSC 1618 Hearing dates: 14 November 2014 Decision date: 14 November 2014 Jurisdiction: Equity Division Before: Kunc J Decision: Indemnity costs ordered
Catchwords: COSTS - Indemnity costs - Plaintiffs amend so as to delete claim against one defendant - No issue of principle Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth)
Civil Procedure Act 2005 (NSW)Cases Cited: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Peter Davis v Halliday Financial Management Pty Limited & Ors [2014] NSWSC 1371Category: Costs Parties: Peter Davis (First Plaintiff)
Marlene Davis (Second Plaintiff)
Albatross Investments Pty Ltd (Third Plaintiff)
Zambo Pty Ltd as trustee for The William Cook Superannuation Fund (Fourth Plaintiff)
Nick Falloon and Diane Falloon as trustee for the Falloon Family Trust (Fifth Plaintiff)
Mann SuperCo Pty Ltd as trustee for the Mann Family Superannuation Fund (Sixth Plaintiff)
Trivett Investments Pty Ltd as trustee for Classic Car Centre Superannuation Fund (Seventh Plaintiff)
Halliday Financial Management Pty Limited ACN 079 962 100 (First Defendant)
Michael Halliday (Second Defendant)
John Hart (Third Defendant)
Harvi Chugh (Fourth Defendant)
Gary Loffhagen (Fifth Defendant)
Paul Crowne (Sixth Defendant)Representation: Counsel: M.W. Young SC (Plaintiff)
S Sykes (First, Fifth and Sixth Defendants)C. Bova (Third and Fourth Defendants)
Solicitors: Dixon Holmes Lawyers (Plaintiffs)
Sparke Helmore (First, Fifth and Sixth Defendants)
Watson Mangioni (Third and Fourth Defendants)
File Number(s): 2014/49773 Publication restriction: No
EX TEMPORE Judgment
HIS HONOUR: These proceedings first came before me for the hearing of a motion by the third, fourth, fifth and sixth defendants to strike out certain parts of the statement of claim. I acceded to that application after a hearing on 3 October 2014: PeterDavisvHallidayFinancialManagementPtyLimited&Ors [2014] NSWSC 1371.
The result of my judgment was to give the plaintiffs a further opportunity to replead their case against those defendants and for the matter to come back before me to deal with any dispute as to the adequacy of a further pleading.
The parties have now agreed that the plaintiffs should be given leave to file an amended statement of claim in the form that was apparently served on the defendants on 20 October 2014.
As part of their amendments the plaintiffs no longer press their case against the fourth defendant, Mr Chugh. The parties have agreed that the plaintiffs should pay the fourth defendant's costs of the proceedings, assessable forthwith. The fourth defendant applies for an additional order, namely that his costs of the proceedings be payable on the indemnity basis.
The original allegation against the fourth defendant was:
The Fourth Defendant is a person involved with the contravention of s 12DA of the ASIC Act (or, in the alternative, the contravention of s 18 of the Australian Consumer Law) because the Fourth Defendant:
(a) Was a director and an employee of the First Defendant; and
(b) Had as part of his duty as a director and employee of the First Defendant oversight of the First Defendant's promotion of investment in the Trust; and (sic)
When the strike out motion came on for hearing before me there was a concession by Senior Counsel for the plaintiffs that the pleading in that form against the fourth defendant was inadequate. There was evidence on that occasion of instructions given by the plaintiffs to their solicitor that formed the basis of a proposed amendment to the relevant paragraph of the pleading which was the subject of argument before me:
The Fourth Defendant is a person involved with the contravention of s 12DA of the ASIC Act (or, in the alternative, the contravention of s 18 of the Australian Consumer Law) in relation to the Sixth Plaintiff because the Fourth Defendant:
(a) Was a director and an employee of the First Defendant; and
(b) Had as part of his duty as a director and employee of the First Defendant oversight of the First Defendant's promotion of investment in the Trust; and
(c) Was one of the persons who, on behalf of the First Defendant, made the Representations to the Sixth Plaintiff;
(d) Had actual knowledge that the Representations made to the Sixth Plaintiff were untrue; and
(e) Had actual knowledge that there was no reasonable basis to make the representation set out in subparagraph (c) of paragraph 15 to the Sixth Plaintiff.
It will be apparent from the proposed form of the pleading that was handed up on the last occasion that it was intended to make allegations against the fourth defendant that he had in fact made some of the relevant representations, knew them to be untrue and had no reasonable basis to make those representations.
Two things emerge from this brief recitation of the pleading history of the case against the fourth defendant.
First, the plaintiffs accepted that it could not be sustained as it was originally pleaded. I would go further and draw the conclusion that properly advised it should have been obvious to them that a pleading in that form as against the fourth defendant had no chance of success.
The second matter is that, whatever the instructions may have been on 3 October 2014, for reasons about which there is no evidence, the case in the amended statement of claim that was provided to me on 3 October (see paragraph [6] above) that was intended to be made against the fourth defendant is no longer pressed.
Why that should be so is not the subject of any evidence. Nevertheless, I draw the inference that, without being critical, for some forensic or other reason the decision has been taken that the claim is not to be pursued.
Taking those two matters together, this is an appropriate case to exercise the Court's discretion to order the plaintiffs to pay the fourth defendant's costs of the proceedings on the indemnity basis. In doing so I apply the principles as set out by Woodward J in FountainSelectedMeats(Sales)PtyLtdvInternationalProduceMerchantsPtyLtd (1988) 81 ALR 397 at 401 (a case which itself concerned a claim against a director as an alleged accessory to conduct said to have been engaged in by the company of which he was a director):
I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
The case as originally pleaded against the fourth defendant was plainly hopeless. The foreshadowed amended case has now been abandoned. No evidence has been adduced to explain that abandonment. Those circumstances are sufficient, without more, to engage the jurisdiction to award costs on the indemnity basis and I will so order.
Decision last updated: 14 November 2014
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