Re Ikon Group Ltd [No 3]

[2015] NSWSC 982

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Ikon Group Ltd (No 3) [2015] NSWSC 982
Hearing dates:	13 May 2015
Date of orders:	25 May 2015
Decision date:	25 May 2015
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	First and second defendants have liberty to proceed forthwith to assessment of costs referred to in order 2 of 25 May 2015.
Catchwords:	PROCEDURE – costs – application for stay of proceedings to refer dispute to arbitration under arbitration agreement – where stay application opposed by plaintiff – whether defendant entitled to indemnity costs – held, defendant not entitled to indemnity costs.
Cases Cited:	A v B [2007] EWHC 54 Ansett Australia Limited v Malaysian Airline System Berhad (No 2) [2008] VSC 156 John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [No 2] [2015] NSWSC 564 Mio Art Pty Ltd v Mango Boulevard Pty Ltd and Ors (No 3) [2013] QSC 95 Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 (S) University of Western Australia v Gray (No 28) [2010] FCA 586; (2010) 185 FCR 335
Category:	Procedural and other rulings
Parties:	Ikon Group Limited (plaintiff) Ikon (Australia) Pty Limited (first defendant) Naser Taher (second defendant) Multitrade Financial Group Limited (third defendant) Yehya El-Taher (fourth defendant) Dominic Lim (fifth defendant)
Representation:	Counsel: M Condon SC w M Karram (plaintiff) P S Braham SC w K J Williams (first and second defendants) A d’Arville (fifth defendant)   Solicitors: Sophie Grace (plaintiff) Thomson Geer (first and second defendants) Marque Lawyers (fifth defendant)
File Number(s):	2015/128405

Judgment (ex tempore)

1. HIS HONOUR: On 13 May 2015, for reasons given on that occasion, I made orders that the claim for relief against the first and second defendants contained in claims 1 through 6, 8 through 12 and 14 through 18 of the originating process be stayed, and that the plaintiff and the first and second defendants be referred for arbitration in respect of those matters. I further ordered that the plaintiff pay the first and second defendants’ costs of the interlocutory process. The first and second defendants have applied for an order that those costs be payable on the indemnity basis and forthwith.

2. The argument that the defendants’ costs should be paid on an indemnity basis was founded on a view originating from the judgment of Colman J in the High Court of England and Wales in A v B [2007] EWHC 54 and followed recently by Malcolm CJ in the Supreme Court of Western Australia in Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 (S), to the effect that that ordinarily the proper cost order on a meaningful application for a stay of proceedings to give effect to an arbitration agreement is that the costs be payable on an indemnity basis.

3. That view has not commended itself to other Australian Courts, some reservations having been expressed about it in the Supreme Court of Queensland [Mio Art Pty Ltd v Mango Boulevard Pty Ltd and Ors (No 3) [2013] QSC 95] and in the Supreme Court of Victoria [Ansett Australia Limited v Malaysian Airline System Berhad (No 2) [2008] VSC 156] and it now having been not followed by Hammerschlag J in this Court in a judgment delivered last Friday week [John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [No 2] [2015] NSWSC 564].

4. Independently of Hammerschlag J's judgment, I had come to the conclusion that the application for an indemnity costs order should fail, essentially on the basis that, contrary to the reasoning of Colman J that was embraced by Malcolm CJ, in principle the Court does not recognise the difference between party/party costs and indemnity costs as damage occasioned to the person liable to pay those costs [University of Western Australia v Gray (No 28) [2010] FCA 586; (2010) 185 FCR 335]. Essentially, the Court values the costs that a party is reasonably caused to incur in proceedings as the party/party costs, taking the view that the difference between party/party costs and the (solicitor/client) costs actually incurred by the party are incurred at that party's own choice, over and above what is necessary for the reasonable defence of the proceedings. In other words, it recognises that while it can be said that the unsuccessful party caused the successful party to incur costs to the extent of party/party costs, in so far as the costs exceed party/party costs, they were incurred not as a necessary and reasonable response to the unsuccessful party's claim, but voluntarily by the successful party such as to, in effect, break the chain of causation or represent a novus actus interveniens. This is all the more so under the costs regime in New South Wales, where the relevant considerations which inform assessment on a party/party basis are not markedly different from those applicable to a solicitor/client amount, so that a party/party order, though not a perfect indemnity, is often not far removed from it.

5. The award of indemnity costs should be reserved for cases in which one party has wantonly or recklessly caused the other party to incur costs. That is not this case.

6. Of course, in addition to those reasons, it would be contrary to the dictates of the (NSW) Civil Procedure Act 2005 to apply a presumption or general rule that a case involving a stay in order to permit arbitration should ordinarily attract indemnity costs.

7. For those reasons, and for the reasons recently given by Hammerschlag J, I decline to order that the costs be paid on an indemnity basis.

8. However, having regard to the circumstance that the proceedings will be stayed for some considerable time until the arbitration is determined and that effectively this brings to an end a phase of the proceedings, it is appropriate that there be liberty to proceed to assessment forthwith.

9. The Court therefore orders that the first and second defendants have liberty to proceed forthwith to assessment of the costs referred to in order 2 of 25 May 2015.

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Decision last updated: 21 July 2015