Players Pty Ltd (in Liquidation) (Receivers Appointed) v Clone Pty Ltd (No 2) - [2015] SASC 178

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
PLAYERS PTY LTD (IN LIQUIDATION) (RECEIVERS APPOINTED) & ORS v CLONE PTY LTD (No 2)
[2015] SASC 178
Judgment of The Honourable Auxiliary Justice Hargrave
9 November 2015
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
Procedure – Costs – Order for new trial following malpractice of lawyers in conduct of litigation – Whether special or unusual feature existed for indemnity costs to be justified – NMFM Property Pty Ltd & Ors v Citibank Ltd (No 2) (2001) 109 FCR 77 – Hypec Electronics Pty Ltd (in liq) v Mead & Ors (2004) 61 NSWLR 169 considered.

INTEREST - RECOVERABILITY OF INTEREST - IN GENERAL
Procedure – Interest – Whether pre-judgment or post-judgment interest rate to be applied – Maidment v Davis [2000] SASC 191 considered.
Players Pty Ltd & Ors v Clone Pty Ltd [2015] SASC 133, discussed.
Brookfield v Yevad Products Pty Ltd [2004] FCA 1717; Clone Pty Ltd v Players Pty Ltd (in liq) (receivers appointed) & Ors [2012] SASC 12; Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225; DJL v The Central Authority (2000) 201 CLR 226; Hypec Electronics Pty Ltd (in liq) v Mead & Ors (2004) 61 NSWLR 169; Jonesco v Beard [1930] AC 298; Maidment v Davis [2000] SASC 191; NMFM Property Pty Ltd & Ors v Citibank Ltd (No 2) (2001) 109 FCR 77; Opie v Collum (No 2) [1999] SASC 500; Quade & Ors v Commonwealth Bank of Australia (1991) 27 FCR 569; TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381; Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445, considered.

PLAYERS PTY LTD (IN LIQUIDATION) (RECEIVERS APPOINTED) & ORS v CLONE PTY LTD (No 2)
[2015] SASC 178
Civil
HARGRAVE AJ:

Following publication of the Court’s reasons for ordering a new trial (the ‘principal reasons’),[1] the Court directed the parties to file submissions as to the precise form of orders and as to costs. I adopt the terms used in the principal reasons in these reasons.
[1] Players Pty Ltd & Ors v Clone Pty Ltd [2015] SASC 133.
The parties have agreed the form of all orders except for:
(1)the basis on which Clone should pay the costs of the Application for a new trial; and
(2)whether Clone should pay interest on costs (and interest thereon) already paid by Players and which are to be repaid under the Court’s orders.
Clone does not resist an order that it pay the costs of the Application as between party and party. Players seeks indemnity costs on the basis that the Court has found serious malpractice by Clone’s lawyers in the conduct of the trial before Vanstone J.
Clone resists an order for indemnity costs on three grounds:
(1)The malpractice constituted antecedent conduct giving rise to the Application, made in a fresh proceeding, and its conduct in the Application was reasonable.
(2)It was not involved in or aware of its lawyers’ malpractice at trial. In these circumstances, the malpractice should not be attributed to it as a ground for ordering indemnity costs.
(3)Indemnity costs have not been awarded in similar cases.
Before turning to the three issues, it is convenient to refer to some relevant principles governing the exercise of the Court’s discretion to depart from the usual order that the losing party pay costs on a party and party basis.
First, each case must depend upon its own facts. Indemnity costs may be ordered wherever the Court is of the opinion that there is ‘some special or unusual feature in the case to justify the Court in departing from the ordinary practice.’[2] Although there have been judicial attempts to catalogue the kinds of circumstances justifying an award of indemnity costs, the categories are not closed, and the discretion is unfettered.[3]
[2] Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225, 233.
[3] Ibid.
Second, it is usually the case that, in assessing whether a party’s conduct justifies an award of indemnity costs, the relevant conduct is that of the party ‘as a litigant’ and not its underlying or background conduct giving rise to the litigation.[4]
[4] NMFM Property Pty Ltd & Ors v Citibank Ltd (No 2) (2001) 109 FCR 77, 92–5 [56]–[63]; Hypec Electronics Pty Ltd (in liq) v Mead & Ors (2004) 61 NSWLR 169, 178–181 [40]–[46].
With these principles in mind, I turn to consider the first ground relied upon by Clone.
Clone contends that the Application by fresh proceeding should be considered as entirely separate litigation from the original proceeding and that, on this basis, the malpractice of its lawyers was antecedent conduct giving rise to the litigation and thus not relevant conduct for the purpose of determining whether it should pay indemnity costs. I do not accept that submission. As stated in [6] of the principal reasons, the Application was made in both the original proceeding (by notice of specific directions dated 17 December 2010) and by a fresh proceeding commenced on 25 June 2010. The application in the original proceeding and the issues in the fresh proceeding were identical and were litigated at the same time. In substance, the fresh proceeding was simply a mechanism to seek a new trial of the original proceeding.
Although authority suggests that ‘the preferable course’ is to commence a fresh proceeding to set aside a judgment obtained by fraud, the equitable jurisdiction to impeach a judgment on those or like grounds by application in the original proceeding remains.[5] The preference for a fresh proceeding is in my view for a procedural purpose only, to enable pleadings and particulars of the fraud or malpractice to be exactly pleaded as a matter of fairness, as happened in this case.[6] Of course, in modern litigation, the points of claim and defence could easily have been ordered in the original proceeding, without the need for a fresh proceeding.
[5] DJL v The Central Authority (2000) 201 CLR 226, 245 [37]; Clone Pty Ltd v Players Pty Ltd (in liq) (receivers appointed) & Ors [2012] SASC 12 [105] (per Kourakis J, as his Honour then was).
[6] Jonesco v Beard [1930] AC 298, 300-1.
It would in my opinion be artificial to treat the fresh proceeding as separate and distinct from the original proceeding. The malpractice was engaged in by Clone’s lawyers in the conduct of the original proceeding as a litigant. It did not precede the commencement of the original proceeding or have any relevance to the issues to be determined in the original proceeding. The malpractice is a special or unusual feature of the conduct by Clone’s lawyers in their carriage of the original proceeding.
I turn to consider the second ground relied upon by Clone to oppose an order for indemnity costs.
Clone’s argument involved the following steps.
First, that Clone’s corporate officers had no knowledge or involvement in the malpractice. I accept that the evidence establishes this.
Second, that although the conduct of Clone’s lawyers was rightly attributed to it for the purpose of the Application, that conduct should not be attributed to Clone for the purpose of characterising its behaviour in connection with the litigation. The relevant focus should be on Clone’s own conduct. Reliance was placed upon the decision of Martin J in this Court in Opie v Collum (No 2).[7]The defendant in that case authorised her husband to act as her agent in negotiating a contract between the defendant and the plaintiffs. The trial judge found that the defendant’s husband engaged in misleading conduct in the course of the negotiations and that such conduct was attributable to the defendant. But that was conduct antecedent to the litigation. As there was no special or unusual feature about the defendant’s conduct as a litigant, the application for indemnity costs against her was refused. This case is of no assistance to Clone’s argument.
[7] [1999] SASC 500.
In my opinion, Clone is saddled with the conduct of its lawyers in acting as its agent in the conduct of the original proceeding. The malpractice in which they engaged was clearly a special or unusual feature justifying an award of indemnity costs. That malpractice has caused a very significant waste of time and money. Without it there would have been no need for the Application or for the new trial which has been ordered. As to causation, it was contended by Clone that Players’ own lack of reasonable diligence was also a cause of the trial miscarrying. While I accept that is so, as I said in the principal reasons, Mr Tisato’s error of judgment fell well short of the reckless malpractice engaged in by Clone’s legal team.[8]
[8] Players Pty Ltd & Ors v Clone Pty Ltd [2015] SASC 133 [291].
As to the third ground relied upon by Clone, I note that party and party costs were awarded in Quade & Ors v Commonwealth Bank of Australia[9] and Brookfield v Yevad Products Pty Ltd.[10] But those cases do not contain any discussion of principle applicable to all similar cases. Each case must depend upon its own facts. In this case, as the principal reasons demonstrate, there was serious malpractice of a reckless kind justifying an indemnity costs order.
[9] (1991) 27 FCR 569.
[10] [2004] FCA 1717.
I turn to consider the interest issue. Players paid Clone’s costs of the original trial and the appeal to the Full Court, and also interest on some of those costs (collectively ‘costs paid’). Clone concedes that it must repay the costs paid. That concession was properly made. The position here is comparable to that where an order setting aside a judgment and ordering a new trial is made on appeal — in which case it is clear that, on restitutionary grounds, any payment in satisfaction of the judgment must be repaid with interest.[11]
[11] Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445, 449-50 [25]; TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381; K Mason, JW Carter and CJ Tolhurst, Restitution Law in Australia (LexisNexis Butterworths, 2^nd ed, 2008), 268 [707], 271 [710].
Notwithstanding Clone’s concession that it should repay the costs paid, it contends that its obligation to pay interest from the times of payment of those amounts should be deferred pending resolution of the new trial. Clone contends that this course should be adopted because the trial judge in the new trial will have no power to backdate any costs orders at the conclusion of that trial, and will accordingly lack the power to redress Clone’s loss arising from payment of interest should it succeed on the issues to be retried.
I do not accept Clone’s contentions. If Clone succeeds on the issues in the new trial, the trial judge will have power to order restitution of the principal amounts it repays (the costs paid) and the interest paid on those amounts, together with interest from the time it pays Players those amounts.
Players seeks interest at post-judgment rates. Clone contends that interest should be fixed at pre-judgment rates, as the purpose of interest in this case is to compensate Players and not to punish Clone – because Clone was entitled to rely on the judgments of Vanstone J and the Full Court until they were set aside. I accept that submission and will fix the interest at pre-judgment rates. Post‑judgment rates include a penalty component,[12] which is not appropriate in the circumstances of this case.
[12] Maidment v Davis [2000] SASC 191 [127].
There will otherwise be orders in accordance with those agreed by the parties.