Prospect Resources v Molyneux (No.2) - [2014] NSWSC 1448

Supreme Court

New South Wales

Medium Neutral Citation: Prospect Resources v Molyneux (No.2) [2014] NSWSC 1448
Hearing dates: On the papers
Decision date: 27 October 2014
Jurisdiction: Equity Division - Commercial List
Before: McDougall J
Decision:
Defendants' costs to be payable on the indemnity basis from 3 February 2014.

Catchwords: PROCEDURE - costs - departing from the general rule - order for costs on indemnity basis - where Calderbank offer made - where Calderbank offer ignored - whether failure to engage with Calderbank offer was unreasonable - whether unreasonable for plaintiff to have commenced proceedings without engaging with the defendants' reasoning in letter sent prior to Calderbank offer was made - where defendants failed to engage with further offers
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Prospect Resources v Molyneux [2014] NSWSC 1096
Calderbank v Calderbank [1975] 3 All ER 333
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
Category: Costs
Parties: Prospect Resources Limited (Plaintiff)
Alexander Molyneux (First Defendant)
Blumont Group Ltd (Second Defendant)
Pacific Advisers Pty Ltd (Third Defendant)
Representation: Counsel:
JC Giles (Plaintiff)
AC Willinge (First, Second and Third Defendants)
Solicitors:
Whittens Lawyers and Consultants (Plaintiff) Allion Legal (First, Second and Third Defendants)

File Number(s): 2013/360199

Judgment

HIS HONOUR: On 15 August 2014, I gave judgment, [2014] NSWSC 1096, concluding and ordering that the plaintiff's claim should be dismissed with costs. The defendants have now made an application for indemnity costs, based on a "Calderbank" offer.

The nature of the proceedings is sufficiently summarised in paras 1 to 3 of my earlier reasons:

[1] On 5 July 2013, the plaintiff (Prospect Resources) and the defendants (collectively, "the Consortium") entered into a "Subscription Agreement". Under that agreement, and on the terms set out in it, the Consortium agreed to subscribe for 325 million ordinary shares in the capital of Prospect, at an issue price of $0.012 per share. The total amount to be subscribed was $3.9 million.

[2] Prospect says that the conditions governing the obligation to subscribe were satisfied, and that the Consortium was required to pay up. The Consortium says that the conditions were not satisfied and that accordingly it was entitled to (and did) terminate the subscription agreement.

[3] The essential question for decision is whether a number of so-called "conditions precedent" set out in the subscription agreement were satisfied or waived.

Basis of the application for indemnity costs

The application was made by notice of motion filed on 29 August 2014. It is supported by an affidavit of Mr Sims, a solicitor in the employ of the defendants' solicitor. Mr Sims deposes, and it is uncontentious, that:

(1) On 15 November 2013, Mr Joseph Havlin wrote on behalf of the defendants to the plaintiff's solicitors. That letter seems to have been written in response to a letter of demand. In substance, Mr Havlin pointed out what he perceived to be problems with the case that the plaintiff sought to advance.

(2) On 3 February…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Prospect Resources v Molyneux (No.2)

Details

AGLC: Prospect Resources v Molyneux (No.2) [2014] NSWSC 1448
Case: [2014] NSWSC 1448
Decision Date: 27 October 2014

CaseChat Overview and Summary

The case of Prospect Resources v Molyneux (No.2) involved a dispute between Prospect Resources, the plaintiff, and Molyneux, the defendant. The primary issue was the assessment of costs, specifically whether the trial judge departed from the general rule of awarding costs on an indemnity basis. The case came before the court after a Calderbank offer was made by the defendants, which was subsequently ignored by the plaintiff. The court was required to determine whether the plaintiff's failure to engage with the Calderbank offer was unreasonable and whether it was unreasonable for the plaintiff to have commenced proceedings without first engaging with the defendants' reasoning outlined in a letter sent prior to the Calderbank offer.

The court considered the principle that a party who rejects a Calderbank offer may be ordered to pay the other party's costs on an indemnity basis if the rejection was unreasonable. In this instance, the court examined whether the plaintiff's decision not to engage with the Calderbank offer was unreasonable, given the content of the defendants' letter sent before the offer was made. The court also assessed whether it was unreasonable for the plaintiff to have commenced proceedings without first considering the defendants' reasoning in the letter. Ultimately, the court found that the plaintiff's failure to engage with the Calderbank offer was unreasonable, and that it was also unreasonable for the plaintiff to have commenced proceedings without first engaging with the defendants' reasoning in the letter.

Based on these findings, the court concluded that the trial judge did not depart from the general rule in ordering costs on an indemnity basis. The court found that the plaintiff's failure to engage with the Calderbank offer was unreasonable, and that the plaintiff's decision to commence proceedings without first engaging with the defendants' reasoning in the letter was also unreasonable. As a result, the court upheld the trial judge's order for costs on an indemnity basis. The defendants were therefore entitled to recover their costs from the plaintiff, including the costs of the Calderbank offer.

Orders