Re Punters Show Pty Limited

[2017] NSWSC 605

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Punters Show Pty Limited [2017] NSWSC 605
Hearing dates:	20 March, 27–28 April 2017, last written submissions 10 May 2017
Decision date:	17 May 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Order that the order made on 13 March 2017 dismissing the proceedings be vacated and that the Plaintiffs’ Statement of Claim be struck out. Order that the Plaintiffs pay the Defendants’ costs thrown away by the defence of the Statement of Claim and any amendment of the Originating Process and Statement of Claim, as agreed or as assessed. Order that the Plaintiffs pay the Defendants’ costs of and incidental to the Interlocutory Processes returnable on 13 March 2017 up to and including that date, including the costs of and incidental to the hearing on 13 March 2017, on an indemnity basis, as agreed or as assessed. There be no order as to the costs of the hearing on 20 March 2017, that part of the hearing on 27 April 2017 relating to this application or the hearing on 28 April 2017.
Catchwords:	PROCEDURE – Application to vacate orders that proceedings be dismissed which were stayed when made – where Plaintiffs did not attend directions hearing and hearing of interlocutory application – where pleading embarrassing – where Plaintiffs seek to replead their case – where detriment to Defendants sufficiently addressed by an order for costs – whether order that proceedings be dismissed should be vacated – whether Statement of Claim should be struck out   PRODEDURE – Costs – Departing from the general rule – whether Plaintiffs should pay costs thrown away by striking out of Statement of Claim and costs of hearings they did not attend on an indemnity basis – whether order should be made as to costs of Defendants’ application that proceedings be dismissed – whether costs should be payable forthwith – whether costs should be payable on a gross sum basis
Legislation Cited:	- Civil Procedure Act 2005 (NSW), ss 56–58, 61, 98 - Corporations Act 2001 (Cth), ss 180–183, 233, 237, 249F - Legal Profession Uniform Law (NSW) - Uniform Civil Procedure Rules 2005 (NSW), rr 12.7, 14.28, 15.3, 42.1, 42.2, 42.7(2), 52.5
Cases Cited:	- Airservices Australia v Jeppeson Sanderson Inc [2006] FCA 906 - Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 14) (unreported, 18 August 1995) - Banque Commerciale SA (en liqn) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 - Bi v Mourad [2010] NSWCA 17 - Brasington v Overton Investments Pty Ltd [2001] FCA 571 - Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 - Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77 - Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 - Ghosh v Ninemsn Pty Ltd [2015] NSWCA 334; (2015) 90 NSWLR 595 - Gunns Ltd v Marr [2005] VSC 251 - Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 - Hamod v State of New South Wales [2011] NSWCA 375 - Hoser v Hartcher [1999] NSWSC 527 - Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 - Iacullo v Iacullo [2013] NSWSC 1517 - Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135 - Lahoud v Lahoud [2006] NSWSC 126 - Liverpool City Council v Estephan [2009] NSWCA 161 - McGuirk v University of New South Wales [2009] NSWSC 1424 - Ng v Chong [2010] NSWSC 127 - Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2) [2010] FCA 1347 - Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503 - Re Vangory Holdings Pty Ltd [2015] NSWSC 801 - Ritson v Gay & Lesbian Community Publishing Ltd [2012] NSWSC 586 - Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 - Singh v Singh [2017] NSWCA 15 - Taylor v Lederman [2013] VSC 99 - UGL Services Pty Ltd v F1 Solutions Pty Ltd [2012] FCA 245 - Webster v Super Smart Strategies Pty Ltd [2017] NSWSC 531 - Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433; (2011) 83 ACSR 206 - Young v Hones [2013] NSWSC 580
Texts Cited:	Ritchie’s Uniform Civil Procedure NSW
Category:	Procedural and other rulings
Parties:	Marc Alan Lambourne (First Plaintiff) Glenn Craig Pollett (Second Plaintiff) Dallas Matthew Baker (First Defendant) Todd Cameron Buckingham (Second Defendant) Topbetta Holdings Limited (Third Defendant) 12 Follow Pty Limited (Fourth Defendant) Operis Momentus Pty Limited (Fifth Defendant)
Representation:	Counsel: C R de Robillard (Plaintiffs) P Silver (First Defendant) N M Bender (Second to Fifth Defendants)   Solicitors: Cockburn & Co (First Defendant) Addisons (Second to Fifth Defendant)
File Number(s):	2016/344608

Judgment

1. By an Interlocutory Process filed on 3 March 2017, each of the First Defendant and the Second–Fifth Defendants sought orders that these proceedings be dismissed either under s 61(3)(a) of the Civil Procedure Act 2005 (NSW) or under r 12.7 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) and that the Plaintiffs pay the Defendants' costs of the proceedings. The matters in issue have developed since those applications were brought, as will emerge below.

2. I will first set out the history of the proceedings; then deal with the question whether orders that I made on 13 March 2017, but then stayed to allow a further hearing which has now occurred, should be vacated, and with consequential questions as to costs; then with the questions whether the existing Statement of Claim should be struck out and the Plaintiffs should be granted leave to replead, as they have indicated they wish to do, and on what terms, including as to costs. I will then address the question whether such costs should be payable on an indemnity basis and forthwith and/or on a gross sum basis.

The history of the proceedings and the affidavit evidence

3. The Plaintiffs commenced these proceedings by an Originating Process filed on 17 November 2016, supported by an affidavit of the First Plaintiff, Mr Lambourne filed on the same date. On 28 November 2016, the matter was referred by the Registrar to Brereton J, and the First Defendant, Mr Baker, who is presently the sole director of Punter’s Show Pty Ltd (“Company”), gave an undertaking to the Court, by consent and without admission of liability, not to effect any transaction on behalf of the Company including incurring expenses or encumbering any of its assets. Brereton J then made orders, apparently by consent (although that matter is now disputed by the Plaintiffs) that, if a mediation was unsuccessful, the proceedings should continue on pleadings and the Plaintiffs should file and serve their Statement of Claim by 15 January 2017. That mediation was unsuccessful but the Plaintiffs did not comply with those orders.

4. By letter dated 8 February 2017, the Plaintiffs’ then solicitor confirmed their intention to file a Statement of Claim prior to the next directions hearing on 13 February 2017 (Cockburn, Annexure “C”). That Statement of Claim was not filed by that date. On 13 February 2017, Mr de Robillard appeared for the Plaintiffs and advised that the Statement of Claim that was to have been filed on 15 January had not been filed and informed the Court that:

“What happened there is that it became obvious that the one main issue would become a quantum of any final damage as a result of the plaintiff’s claim, and we are still waiting for an assessment of those damages from an accountant and it is not a simple matter.”

The outcome of any accountant’s assessment of that matter is not disclosed by the evidence led in this application and the Statement of Claim that was subsequently filed by the Plaintiffs on 9 March 2017 gives no indication of the basis of such an assessment, although a single figure of $750,000 is claimed for damages without further explanation. The Court then extended the time for the Plaintiffs to file and serve their Statement of Claim to 27 February 2017. The Statement of Claim was also not filed within the time provided in that order.

5. When the matter was next listed for directions on 27 February 2017, there was no appearance for the Plaintiffs. It now appears that the Plaintiffs’ failure to appear on that date reflected either illness on the part of their Counsel, Mr de Robillard, or that he forgot to attend that hearing and instead attended a medical appointment, or both. Mr de Robillard submits (in reply) that he was at a medical consultation at the MLC Centre at 11am and could have been present in Court within five minutes had the Defendants’ solicitors (as distinct from the Plaintiffs or the solicitor instructing him) contacted him and reminded him to attend. If the reason for Mr de Robillard’s non-attendance was illness, it would obviously have been preferable if arrangements had been made for another Counsel or another legal representative to attend in his absence.

6. On 27 February 2017, when the Plaintiffs were then in default of two orders made by the Court as to filing of the Statement of Claim, which needed to be filed before the proceedings could further progress, the Court granted leave to the Defendants to file and serve any interlocutory process seeking dismissal of the proceedings by reason of non-compliance with the Court’s orders by 3 March 2017, that motion to be returnable in the Corporations Motions List on 13 March 2017. I also made an order for the Plaintiffs to pay the Defendants’ costs of the directions hearing on that day on an indemnity basis. I then observed that:

“I am satisfied that an order for costs on an indemnity basis should be made today, since this is the second occasion, within a short period, within which a directions hearing has effectively been wasted by reason of the Plaintiffs’, on the last occasion, failure to comply with directions and failure to communicate its position prior to the directions hearing and, today, those failures combined with a further failure to appear on the day allocated. I am satisfied that that matter supports an order for indemnity costs.”

I did not then make an order that those costs be paid forthwith.

7. On 3 March 2017, the Defendants filed and served Interlocutory Processes seeking the dismissal of the proceedings, as permitted by the direction I had made on 27 February 2017. It appears that Mr de Robillard subsequently departed for overseas, and was overseas from 5–15 March 2017. On 9 March 2017, the Plaintiffs, Mr Lambourne and Mr Pollett, filed a Statement of Claim to which I will refer below. That Statement of Claim indicated they were by then self-represented, although a notice of ceasing to act by their former solicitor had not yet taken effect, and it appears they continued to retain Mr de Robillard. By email dated 9 March 2017 (Ex A1.1, 13.3.17), which served that Statement of Claim, Mr Lambourne advised the First Defendant’s solicitor that the Plaintiffs’ solicitor was no longer acting for them; that he had been informed that there was a further “directions hearing” on 13 March “due to the [Plaintiffs’] failure to file and serve the Statement of Claim as previously directed”; that Mr de Robillard had been overseas and was only back on 18 March; and requested an adjournment of the “directions hearing” on 13 March to the following week. On 10 March 2017, the First Defendant’s solicitor advised Mr Lambourne that the listing on 13 March was not only for a directions hearing and that the Defendants’ application for dismissal of the proceedings was listed on that date and also advised that the First Defendant would seek to proceed with that application on that date.

8. By a further email dated 10 March 2017, Mr Lambourne advised the First Defendant’s solicitor that, implicitly, he would not attend the hearing on 13 March and requested that solicitor to apologise to the Court on his behalf, or provide an email address for the Court. He stated that:

“I have important work commitments on Monday [13 March] immediately after I have taken the children to school.”

He also stated that he had “not yet been in a position to retain a new solicitor” and that Mr de Robillard “will be overseas.” The First Defendant’s solicitor then provided an email address for my Associate as Mr Lambourne had requested but Mr Lambourne did not then advise the Court of his position. The Defendants properly drew this correspondence to my attention when the matter was heard on 13 March.

9. The Defendants’ application seeking dismissal of the proceedings was returnable on 13 March 2017. On that date, the Plaintiffs' solicitor, who had given notice of his intention to cease to act and sought to file a notice ceasing to act which had not yet become effective, appeared in the morning but was excused from attendance in the afternoon when the application was to be argued. He gave further notice to the Plaintiffs of the hearing on that day, of which they were already aware from the correspondence to which I have referred above, in accordance with a direction made by the Court. The Plaintiffs did not attend the hearing. Mr de Robillard, who it now appears was overseas, obviously could not attend and did not, as is the common and appropriate practice, arrange for any other Counsel to attend in his place.

10. The First Defendant relied, at the hearing on 13 March, on the affidavits of his solicitor, Mr Cockburn, dated 2 March and 9 March 2017. The first of Mr Cockburn's affidavits set out the history of the proceedings and pointed to ongoing prejudice to the Defendants in respect of the conduct of the proceedings, including Counsel's fees that were being incurred in respect of directions hearings that had been wasted when the Plaintiffs did not attend. The second affidavit of Mr Cockburn referred to service of documents on the Plaintiffs and to correspondence with Mr Lambourne who had, as I noted above, proposed an adjournment of the hearing on 13 March in Mr de Robillard’s absence, a proposal which the Defendants had not accepted. It seems to me that, contrary to submissions of Mr de Robillard to which I refer below, the Defendants were not obliged to agree to such an adjournment. They had been given leave to file an Interlocutory Process seeking dismissal of the proceedings for non-compliance with previous court orders, returnable on that date; this was not the first occasion on which the Plaintiffs had not attended a hearing directed to progress the matter; and the First Defendant was then still subject to an undertaking given to the Court (although I recognise that a dispute has now arisen, which cannot be resolved on the evidence before me, as to the extent to which that undertaking involved any practical detriment or constrained his or the Company’s activities).

11. The Defendants’ application to dismiss the proceedings was heard in the Plaintiffs’ absence. In my ex tempore judgment delivered on 13 March (“13 March Judgment”), I observed that:

“I will not seek to summarise [Counsel for the First Defendant’s] submissions which are detailed, and point to the Plaintiffs’ failure to prosecute the claim in accordance with the Court orders, including a failure to file the Statement of Claim within time, and to the fundamental difficulties with the Statement of Claim in its present form. [Counsel for the First Defendant] submits, and it seems to me clear, that the present version of the Statement of Claim is likely to be held to be embarrassing and is liable to be struck out, at least by reason of a failure to plead material facts, and a structure which will make it difficult for the parties to determine what allegations are made by the Plaintiffs personally, what are made by the Company, and on what basis the Plaintiffs claim to be entitled to pursue claims on behalf of the Company, including for damages payable to them personally. The Plaintiffs have not yet obtained leave to bring a derivative claim, and such a claim would not authorise a personal claim for damages for loss suffered by the Company in any event.”

12. I also there noted that undertakings given by the First Defendant had been in place for nearly three months; the undertakings had been given in circumstances where the proceedings were commenced as a matter of urgency (although, I interpolate, the urgency of the matter is now contested by the Plaintiffs); there had been non-compliance by the Plaintiffs with the directions made by the Court; the Statement of Claim that had recently been filed by the Plaintiffs, without explanation for its lateness, had fundamental difficulties as to its content; and there had again been no appearance by the Plaintiffs on that day, although the First Defendant was still unable to operate the Company by reason of the undertakings in place. (I again note that a dispute has now arisen as to that last matter). I also noted that, as Mr Bender (who appeared for the Second–Fifth Defendants) had pointed out, there was uncertainty as to the extent of the Second Plaintiff's involvement in the proceedings, where there was no evidence of communications from him in respect of the proceedings, his address for service was not disclosed in the Statement of Claim, and he had neither signed nor verified the Statement of Claim. I noted that there was potentially a real unfairness, not only to the Defendants but also to the Second Plaintiff, if the proceedings were being conducted in his name and if he had no continuing involvement in them. I noted that it was not possible to address those difficulties by case management where the Plaintiffs had not attended the recent directions hearings. I also observed, in the 13 March Judgment, that:

“The position in respect of the Second–Fifth Defendants, is, in one respect, stronger than that of the First Defendant, so far as the Statement of Claim now filed by the Plaintiffs out of time, barely articulates a case against the Second–Fifth Defendants, and plainly does not articulate the material facts of such a case.”

13. I observed that, as matters then stood:

“… the present position is untenable. The First Defendant is subject to a continuing restraint, by way of an undertaking he gave in urgent proceedings, which are not being pursued by the Plaintiffs with any urgency or even with any diligence. Both Defendants are faced with failures to comply with directions made by the Court, appear at directions hearings or progress the matter and with the consequential waste of costs. The community is also faced with the waste of costs, where additional time is consumed in these proceedings, which cannot be progressed when the Plaintiffs do not comply with directions made in them. None of these matters can be addressed by intervention of the Court, unless the Plaintiffs appear to allow such intervention to occur. It seems to me that these matters, subject to a stay which I will impose, support an order that the proceedings be dismissed for want of prosecution and by reason of failure to comply with the Court's directions, that is, on both of the grounds for which the Defendants contend.”

14. I nonetheless indicated that I would stay the order dismissing the proceedings for a week since I recognised that, although the Plaintiffs' position was then that their solicitors had ceased to act for them, the notice period for the solicitors to cease to act under the UCPR had not yet expired, and the orders had been made in their absence. I also observed that:

“I am also conscious that it may be that, when informed of the orders, the Plaintiffs will attend on the next occasion the matter is listed, so that the Court may take steps to regularise the proceedings. It seems to me that those steps are likely to involve consideration of whether the undertakings that have been given by the First Defendant should now be released, on the basis that these proceedings are not being conducted with a degree of urgency that will support their continuance, and that the Plaintiffs should pay the costs of the Defendants to date, potentially calculated on a gross sum basis, on an indemnity base and payable forthwith. If, in effect, these proceedings will have to commence again, with the Plaintiffs' active involvement, after three months of wasted time, then it seems to me at least arguable that that should not be permitted to occur until the Defendants are made whole for the costs that they have incurred to date. It also seems to me that such an order should arguably take effect, and compliance with it should be required, before the Defendants are required to take any substantive further steps in the proceedings, because a failure to comply with such an order for payment of the costs of the proceedings to date may well provide an independent basis for their dismissal.”

15. I therefore made the following orders on 13 March:

“1. The proceedings be dismissed pursuant to s 61(3)(a) of the Civil Procedure Act 2005 and rule 12.7(1) of the Uniform Civil Procedure Rules 2005 (NSW).

2.    The Plaintiffs pay the Defendants' costs of the proceedings, as agreed or as assessed.

3.    Reserve liberty to the Defendants, within seven days, to apply for an order for costs on a gross sum basis or payable on an indemnity basis or payable forthwith.

4.    Orders 1-3 be stayed to 4pm, 20 March 2017.

5.    The First Defendant be released from his undertakings to the Court given on 28 November 2016, such order also be stayed to 4pm on 20 March 2017.

6.    Specially fix the matter for further case management directions at 2pm, 20 March 2017 before Black J, on the basis that the Plaintiffs, if each of them attend personally, together with any legal representatives who may be retained by them, may seek to have these orders varied or discharged, subject to such terms as may properly be required to protect the Defendants' interests.

7.    Direct the Defendants to give notice to the Plaintiffs of the orders made today, by 4pm, 14 March 2017, it being sufficient notice of such orders if they are emailed to Mr Mukul Dey at email address [omitted] and to the First and Second Plaintiffs at the email address [omitted].

8.    Dispense with the need for the Defendants to file any formal interlocutory processes to the extent that they may seek orders for costs on an indemnity basis, or payable forthwith or on a gross sum basis, it being sufficient if such an application is addressed by affidavit evidence served on the Plaintiffs at the email addresses noted above, within a reasonable time before the listing or on 20 March 2017.”

16. The Plaintiffs then appeared on 20 March 2017, represented by Mr de Robillard. They then read evidence that had not been read at the hearing on 13 March, namely the affidavit of the First Plaintiff, Mr Lambourne, dated 14 November 2016, a further affidavit of Mr Lambourne dated 20 March 2017 and an affidavit of the Second Plaintiff, Mr Pollett dated 20 March 2017. Mr Lambourne's first affidavit dated 14 November 2017 had been sworn before the proceedings commenced and was directed to the substance of the Plaintiffs’ claim. It did not address the issues that had arisen after the proceedings were commenced.

17. Mr Lambourne's second affidavit dated 20 March 2017 referred to his having received a final draft Statement of Claim from Counsel on 7 March 2017, well after the Statement of Claim was initially required to be filed by 15 January 2017; to his assumption that the Plaintiffs’ solicitor would file that Statement of Claim; and to his having become aware that his solicitor would not do so two days later, on 9 March 2017, nearly two months after that Statement of Claim was first directed or ordered to be filed. Mr Lambourne also referred to an issue in respect of the payment of mediator's fees which, he says, contributed to the breakdown in his relationship with his former solicitor, as to which he seeks to attribute blame to the Defendants or their solicitors. That matter is collateral to the matters raised in this application and I do not propose to determine it, particularly in the absence of the Plaintiffs’ former solicitor.

18. Mr Lambourne also explained why he preferred not to attend Court on 13 March 2017, as a result of personal and business commitments, acknowledged that he did not expect his solicitor who was then ceasing to act to attend (although his solicitor in fact did so for part of the matter, as I noted above) and noted that Mr de Robillard was also then away. Mr Lambourne also referred to the fact that the Defendants had not agreed to adjourn the proceedings on 13 March 2017. As I noted above, it seems to me that the Defendants could have done so, but were not obliged to do so, where that listing followed the Plaintiffs' previous failure to appear on 27 February, their applications had been made returnable on 13 March and the undertaking given by the First Defendant remained in place. To the extent that Mr Lambourne’s affidavits and Mr de Robillard’s submissions assume that the Defendants (or the Court) were obliged to agree to adjourn the Defendants’ application listed for that date if Mr de Robillard was away and Mr Lambourne did not attend, I do not accept that assumption. Mr Lambourne did not address the failure to make arrangements for another Counsel to attend on that day, when at least Mr Lambourne knew that the matter had been listed on that date and that Mr de Robillard would then be overseas.

19. Mr Lambourne also advances allegations as to the use of Company funds by Mr Baker which are collateral to this application and which I should not address, since they are matters for a final hearing or a contempt application. Mr Lambourne also refers to a deterioration in his financial position since the arrangements were entered into by the Defendants which are under attack in these proceedings and he refers to difficulties in meeting his children's school fees and everyday living expenses and contends, by way of assertion, that he could not meet costs claimed by the Defendants prior to the completion of the proceedings by settlement or otherwise. No evidence was read indicating any incapacity of the Second Defendant, Mr Pollett, to meet such an order for costs. (I note, for completeness, an affidavit has subsequently been filed, but not read, addressing that matter.)

20. Mr Pollett’s affidavit dated 20 March 2017 indicates that he left the “details”, presumably of the proceedings, to Mr Lambourne and indicates that he was not told of any requirement to verify the Statement of Claim that was filed in his name and needed to attend a race meeting on 13 March 2017 for business reasons.

21. At the further hearing on 20 March, the First Defendant relied on the affidavit of his solicitor, Mr Cockburn, dated 16 March 2017, in support of an application for a lump sum costs order claimed in the amount of $56,957.36. Mr Cockburn’s affidavit also refers to aspects of the conduct of the proceedings, the delays involved in the costs assessment process, the costs that he has charged to the First Defendant pursuant to a costs agreement, and the fees charged by Mr Silver, who appears for the First Defendant. The Second–Fifth Defendants relied on the affidavit of their solicitor, Mr Martin, dated 16 March 2017, which seeks costs on a gross sum basis of $45,310.35 exclusive of GST, or alternatively an order for costs on an indemnity basis and that those costs be payable forthwith.

22. I will address the parties’ further submissions made on and after 20 March 2017 below. In the course of submissions on 20 March 2017, there were discussions between Counsel as to the terms on which the existing Statement of Claim might be amended; there were differences between them as to the extent to which those discussions were then properly reflected in a statement made by Mr de Robillard to the Court; and I sought to summarise what I understood to be the Plaintiffs’ position and the areas of dispute as to that position which included whether costs should be on the ordinary basis; whether costs should be payable forthwith; and whether costs should be determined on a lump sum basis (T18–19). The hearing on 20 March was not completed. The hearing was listed to continue on 22 March, but that hearing was vacated and relisted on 5 April 2017 at Mr de Robillard’s request, after the receipt of submissions made by Mr Bender on 21 March by leave; and then, by reason of the need to complete another hearing, the hearing of the application on 5 April was vacated and relisted on 27 April 2017. I should note, for completeness, that I did not make an express order extending the stay of the order dismissing the proceedings, when the matter was not completed on the afternoon of 20 March 2017, but have since done so by an order made nunc pro tunc.

The parties’ submissions

23. It will be convenient now to refer to the parties’ submissions generally, which cover a significantly wider range of issues than it is necessary or appropriate for me to address to determine these applications, before turning to the matters that it is necessary to decide.

24. The Plaintiffs did not attend the hearing on 13 March 2017 and, obviously, made no submissions on that occasion. Mr Silver and Mr Bender each made submissions at the hearing on that date, to which I referred in the 13 March Judgment and which I need address only briefly. Mr Silver drew attention to the fact that the proceedings had been commenced on an urgent basis (a matter now contested by the Plaintiffs); an undertaking had then been given by the First Defendant; there had been delays in filing the Statement of Claim and failures by the Plaintiffs to attend directions hearings; and the Statement of Claim that had been filed on 9 March sought to bring a derivative action in the name of the Company, to which the Company had not been joined, and as to which leave under s 237 of the Corporations Act 2001 (Cth) would be required. Mr Bender pointed out that the only claim brought by the Plaintiffs against the Second–Fifth Defendants in the Statement of Claim filed on 9 March was a claim in the name of the Company, for which leave to bring a derivative action under s 237 of the Corporations Act would be required. Mr Bender also submitted that it was not apparent why the Court should grant such leave, when the Plaintiffs owned a controlling interest in the Company and had the capacity to remove Mr Baker as its sole director and exercise control of the Company if they wished to do so. Mr Bender also indicated that the Second–Fifth Defendants sought an order that their costs of the application be paid by the Plaintiffs, in any event, on an indemnity basis and forthwith, where a Statement of Claim was only served after the Interlocutory Processes to dismiss the proceedings were filed, the Plaintiffs’ conduct of the “supposedly urgent” proceedings had been “extremely poor” and the Second–Fifth Defendants’ application had been necessitated by the Plaintiffs’ conduct. I have referred to the orders I made, but stayed, on that occasion above.

25. As I noted above, the matter was relisted on 20 March 2017 so that the Plaintiffs could apply to have the orders made on 13 March varied or discharged, subject to such terms that may properly be required to protect the Defendants' interests. Much of the further hearing on 20 March 2017 was taken up by Mr de Robillard’s oral submissions, and unsuccessful attempts to explore whether there existed any common ground between the parties. Mr de Robillard’s oral submissions are recorded in the transcript and it is not necessary to summarise them here, where they were repeated and substantially expanded in Mr de Robillard’s submissions in reply which I will address below.

26. In his written submissions for the further hearing on 20 March, Mr Silver initially resisted an order vacating the dismissal of the proceedings. He submitted that there was no explanation of the Plaintiffs’ delay in filing a Statement of Claim, when the proceedings were commenced by the Plaintiffs on an urgent basis (a matter now disputed, as I noted above); there was no explanation of why no plans were made for anyone else to attend on 27 February in Mr de Robillard’s absence when he was ill (or, I, interpolate, possibly forgot to attend, or possibly both) and on 13 March when he was overseas; and that the Plaintiffs made no proposal to address the alleged deficiencies in the existing Statement of Claim, although Mr de Robillard then addressed that matter in oral submissions by seeking leave to file an amended pleading. Mr Silver also indicated that Mr Baker sought costs on an indemnity basis and also referred to the circumstances in which the Court can make an order for costs on a gross sum basis, inter alia, where a party had unnecessarily contributed to the other parties’ costs. Mr Silver also submitted that it was just and equitable that the proceeding should be stayed until those costs were paid. Mr Silver made brief oral submissions on 20 March, in the short time that remained after Mr de Robillard had completed submissions. There was insufficient time to hear Mr Bender at the hearing on 20 March. On 21 March 2017, by leave, Mr Bender provided a written outline of submissions in respect of matters that he had not been able to address in oral submissions at the hearing on 20 March 2017. I will refer to those submissions below.

27. On 21 March 2017, at my request, my Associate advised Counsel that, as I understood it, Mr de Robillard had not accepted in submissions on 20 March that the existing Statement of Claim was defective and should be struck out with a consequential order for costs, which was the alternative position for which the Defendants had contended if the proceedings were not dismissed. My Associate also advised the parties that I considered that matter would need to be determined, notwithstanding Mr de Robillard's indication that the Plaintiffs would seek to file an Amended Statement of Claim. My Associate also noted that that matter, which had been addressed in the Defendants’ submissions for the hearing on 13 March, could be addressed in the Plaintiffs’ submissions in reply. I note, for completeness, that Mr de Robillard responded to that email by an email which appeared to advance a contentious submission. I will address Mr de Robillard’s submissions below to the extent that they were raised in written submissions as directed by the Court or in oral submissions in Court, rather than by email to my Associate.

28. Mr Bender submitted, in his written submissions dated 21 March 2017, that there should be no variation to the orders made on 13 March 2017, other than that costs should be payable by the Plaintiffs on a gross sum basis. Alternatively, he submitted that the stay of the order dismissing the proceedings should be extended to permit the Plaintiffs to apply to amend their Statement of Claim, but on the basis that the Plaintiffs pay the Second–Fifth Defendants’ costs of the proceedings to date on a gross sum basis prior to the application being filed, and that the existing Statement of Claim now be struck out. Mr Bender submitted that the better course was that the order dismissing the proceedings take effect, so that the Plaintiffs could properly consider their position without the threat of summary dismissal, and commence new proceedings if a proper claim existed and the costs of these proceedings were paid. Mr Bender repeated the submission that there was no reason for a derivative claim to be permitted, or brought, where the Plaintiffs could simply replace the First Defendant as a director of the Company if they so wished.

29. Mr Bender submitted that the claim pleaded in the Statement of Claim against the Second–Fifth Defendants seeks to establish an equitable charge over the assets of the Third Defendant and a personal damages claim of the Plaintiffs in the amount of $750,000, and seeks an order for production of certain correspondence and injunctive relief. Mr Bender pointed out that those claims were based on a pleading for inducement of breach of unspecified contracts leading to the claimed loss of $750,000, and that that pleading alleged breaches of a duty of confidentiality which were alleged to have the consequence that the Defendants held assets on constructive trust for the Plaintiffs. Mr Bender submitted that the Statement of Claim did not identify the assets alleged to be held on trust; that it did not identify the contracts as to which the allegation of inducement of breach of contract was made; that the claim for breach of confidentiality did not identify the information said to be confidential or the facts said to give rise to the breach of confidentiality; and that no facts were pleaded to support a personal damages claim by the Plaintiffs against the Second–Fifth Defendants, other than an alleged claim for a debt of $30,000. These are, on the face of it, significant deficiencies in the pleading as against the Second–Fifth Defendants. Mr Bender also submitted that every step in the proceedings, prior to the filing of the Statement of Claim on 9 March 2017, was wasted by reason of the Plaintiffs’ failure to attend Court or serve a proper Statement of Claim.

30. Mr Bender also submitted that the claims now brought against the Second–Fifth Defendants in the Statement of Claim did not correspond to those brought by the Originating Process which commenced the proceedings, which alleged, inter alia, that they were shadow directors and should be restrained from dealing with the Company’s assets and also sought a remedy by way of account. Mr Bender also submitted, by analogy with the position in respect of an application to set aside default judgment, that the Plaintiffs had not established either that they had a good claim on the merits or given an adequate explanation for the relevant defaults, being the failures to file a Statement of Claim when due on 15 January 2017, then by the extended date of 20 February 2017, or to appear on 27 February 2017 or 13 March 2017. Mr Bender also submitted that those defaults were not cured, when the Statement of Claim that had been filed was liable to be struck out. I do not accept that submission, since it does not seem to me that the determination whether a Statement of Claim was filed in compliance with an order or direction for that to occur should ordinarily require an assessment of the substance of its pleading.

31. Mr Bender also submitted that the Plaintiffs had, in effect, admitted that they had insufficient information properly to plead a case against the Second–Fifth Defendants, so far as they complained that that information was in the First Defendant’s possession. He submitted that that difficulty could not be cured by simply allowing the Plaintiffs more time or a further opportunity for an amended pleading. Whether that is the case will emerge, in due course, from any Amended Statement of Claim sought to be filed by the Plaintiffs.

32. Mr Bender submitted that it would be wrong to limit the scope of any costs orders to the costs of the existing Statement of Claim, the appearances on 27 February 2017 and those associated with the Defendants’ Interlocutory Processes filed on 3 March 2017 where, he submitted, nothing productive had been achieved in the proceedings by reason of the Plaintiffs’ conduct. While there is some force in that submission, it seems to me that an order for costs directed to the Plaintiffs’ particular defaults would be appropriate in principle and would allow a costs assessor to identify the costs that are in fact attributable to those defaults. I will address the substance of that issue below. Mr Bender submits that an order that costs be payable “forthwith” is appropriate, by reason that the costs of the proceedings to date have been wasted, and the Plaintiffs will effectively be “starting over” and referred to the decision in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at [18], which I will address below, in that respect.

33. Mr de Robillard’s “reply” submissions served on 21 April 2017 extended to 163 paragraphs over some 21 pages of closely typed text, and Mr de Robillard introduced new matters in those submissions, or at least substantially expanded matters he had addressed in chief, including issues arising from the circumstances in which directions or orders (a matter of characterisation to which I will return) as to the conduct of the proceedings were made by Brereton J when they were first listed on 28 November 2016. Some of those matters do not seem to be responsive to the Defendants’ submissions and would not fairly or properly be raised in reply. Mr de Robillard also referred to several matters of fact that, as I will note below, were put from the bar table but not supported by affidavit evidence.

23. Mr de Robillard submitted, in his written submissions in “reply” that, first:

“The sins of the Plaintiffs, should not have resulted in the Defendants being provided with ‘carte blanche’ at the 13 March 2017 ‘ex parte’ hearing”.

This submission was not, in those terms, made in chief and did not seem to me to be a submission properly made in reply. The language of that submission also seems to me to be inappropriate. There is no suggestion that the Plaintiffs have engaged in any morally culpable act that could be characterised as a “sin” or that the Court has treated their conduct as such. The Plaintiffs had simply not complied with the Court’s directions as to their pleadings until 9 March or attended the directions hearings on 27 February or the further hearing on 13 March. The matters that I was required to address related to the just, quick and cheap resolution of the real issues in dispute and were not matters of moral fault. Mr de Robillard also advanced detailed submissions in explanation of the non-compliance with directions for the filing of the Statement of Claim, including by reference to his personal lack of knowledge of the directions and his absence overseas for a period. Mr de Robillard also submits that the Plaintiffs are not personally responsible for the delays. I accept that these matters would support a result that the Plaintiffs should be permitted to pursue the proceedings, if they will now comply with directions and properly plead their claim, although they do not necessarily exclude a result that the Plaintiffs should also be required to compensate the Defendants for the costs wasted in the conduct of the proceedings to date by reason of the existing defaults.

35. Second, Mr de Robillard submitted that both Interlocutory Processes under consideration were misconceived and flawed at law. Mr de Robillard relied, to establish that proposition, on matters that were not available when those Interlocutory Processes were heard. Third, and consequentially, Mr de Robillard submits that my purported exercise of power miscarried on 13 March, although that submission also relied on evidence that was not available when the application was heard to suggest there was an error in its result. Mr de Robillard also drew attention to the factors which have been identified in the case law as relevant to an order dismissing proceedings: Hoser v Hartcher [1999] NSWSC 527 at [19]ff; Bi v Mourad [2010] NSWCA 17; Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433; (2011) 83 ACSR 206; at [502]. As will emerge below I accept that, as the evidence now stands, as distinct from how it stood on 13 March, when it was not apparent whether the Plaintiffs were prepared to participate in the case management of the proceedings or whether the Second Plaintiff was prepared to verify the Statement of Claim, those matters would not support a dismissal of the proceedings.

36. Mr de Robillard also submitted that “dismissal of the proceedings constituted a disproportionate exercise of power, once a balanced view of the relevant facts is reached”. I recognise that an order for dismissal of proceedings should only be made where it is a proportionate response to the relevant defaults: Singh v Singh [2017] NSWCA 15 at [25]. There is plainly a distinction in that respect between the position if a plaintiff fails to comply with the Court’s directions without explanation, and then fails to attend directions hearings at which such an explanation could be given or further case management powers exercised, and the position where a plaintiff offers such an explanation and attends further hearings so that the Court’s case management powers can then be exercised. I accept below that the proceedings should not now be dismissed on the evidence as it now stands, although I again note that a substantial part of that evidence was not available on 13 March 2017, because of the Plaintiffs’ non-attendance on that date.

37. In his written submissions in reply, Mr de Robillard also made submissions as to the basis for the exercise of the Court’s powers under s 61 of the Civil Procedure Act at the hearing on 13 March 2017. The directions or orders made by Brereton J on 28 November 2016 and by me on 13 February 2017 were directions or orders for the future conduct of the proceedings, by the filing of a pleading by specified dates. I consider that the Court’s powers under s 61 of the Civil Procedure Act extend to non-compliance with directions made by the Court and if, as Mr de Robillard contended, those powers do not extend to “orders” as distinct from “directions”, then the Court has inherent jurisdiction to deal with non-compliance with its orders. A similar issue was addressed by Adamson J in Webster v Super Smart Strategies Pty Ltd; [2017] NSWSC 531 where her Honour noted (at [55]) that there was no doubt the Court had power to make an order dismissing proceedings for non-compliance with its orders or directions; that the limitations of s 61 of the Civil Procedure Act had been addressed in submissions before her; and that her Honour preferred to make the orders she then made dismissing the relevant proceedings in the Court’s inherent jurisdiction “to avoid such nice questions”; see also Ghosh v Ninemsn Pty Ltd [2015] NSWCA 334; (2015) 90 NSWLR 595. I therefore do not accept any submission that the Court did not have power to dismiss the proceedings for non-compliance with the directions or orders it had previously made, if Mr de Robillard’s submissions as to the scope of s 61 of the Civil Procedure Act were intended to establish that proposition. However, I conclude below that, on the evidence as it now stands, the order for dismissal of the proceedings should be vacated on terms that sufficiently protect the Defendants’ interests.

38. In his oral submissions in reply on 28 April, Mr de Robillard also raised, as far as I am aware for the first time, criticisms of a summary of the parties’ then position that was put by Mr Silver to Brereton J on 28 November 2016. That summary was not at that time contested by the Plaintiffs’ then solicitor and his Honour then made directions or orders as to the further conduct of the proceedings. Mr de Robillard also submitted that he was not present on that occasion, which is consistent with the report of listing in the Court file, which recorded that the Plaintiffs’ then solicitor was present when those directions or orders were made. I am unable to identify any matter raised by Mr Silver or Mr Bender to which these propositions were a reply, and they also do not seem to me to advance the Plaintiffs’ position. Accepting that Mr de Robillard was not present when the directions or orders were made by Brereton J, and even if (as Mr de Robillard contends from the bar table) the Plaintiffs’ then solicitor had not understood their content and had not informed Mr de Robillard of them, that did not mean that they were not binding upon the Plaintiffs. The Plaintiffs, of course, are equally bound by orders made in the presence of their then solicitor as by orders made in the presence of their Counsel.

39. Mr de Robillard also submitted, again in a submission that did not seem to be made in reply, that there was a question whether a direction was then given for the Plaintiffs to file a Statement of Claim. Unless this submission is limited to distinguishing a “direction” from an “order”, it does not seem to me to be supportable. The Court file records that Brereton J then ordered that:

“In the event that the mediation is unsuccessful the proceedings continue on pleadings and the Plaintiffs file and serve their Statement of Claim by 15 January 2017.”

40. Mr de Robillard also contended that the Plaintiffs did not intend to consent to the orders that were then made by Brereton J. That submission does not seem to me to advance their position, where those orders were in fact made, no attempt was later made to set them aside and they were not set aside. A further direction was made by the Court on 13 February 2017 that extended the time for the Plaintiffs’ compliance with the direction that had been made by Brereton J on 28 November 2016, and no suggestion was then made by the Plaintiffs, then represented by Mr de Robillard, that the earlier directions were made in error or were not binding upon the Plaintiffs. Mr de Robillard combined these submissions with the submission which I have addressed above, that non-compliance with an order by the Court did not give rise to a basis for orders under s 61 of the Civil Procedure Act.

41. Fourth, in his written submissions in reply, Mr de Robillard submitted that:

“Retribution ought not to have been a consideration, notwithstanding the Defendants’ insistent demands for same.”

I do not accept that the Defendants’ submissions can properly be characterised in that way. In any event, the decision on 13 March and this decision are not directed to retribution but to the considerations identified in ss 56–58 of the Civil Procedure Act.

42. Fifth, in his written submissions in reply, Mr de Robillard submitted that:

“The hearing of 13 March 2017, with respect, had the hallmarks of a misdirected and opportunistic attempt by the Defendants to permanently prevent the ‘real issues’ being considered.”

I also do not accept that characterisation of the Defendants’ position, where the Interlocutory Processes were filed pursuant to the leave granted by the Court; the Plaintiffs’ Statement of Claim was only filed on 9 March 2017 after they were filed; the pleading issues addressed on that date have real significance for the future conduct of the proceedings; and the delays in the proceedings had real significance for the Defendants and the Company, not only in respect of the continuance of Mr Baker’s undertaking (the practical significance of which is now disputed) but also in respect of the escalation of the costs of the proceedings. Mr de Robillard also advanced the submission that the Defendants’ legal representatives “may have considered” the hearing on 13 March 2017 presented “an opportunity to ambush the unrepresented Plaintiffs”. It seems to me that proposition cannot properly be put where the Defendants had given the Plaintiffs notice of the application and an opportunity to appear. I also do not accept, as I have noted above, Mr de Robillard’s submission that the refusal to agree to an adjournment of the application, given the history of the proceedings, the fact that the First Defendant’s undertaking remained in place (although its practical significance is now disputed) and the escalation of costs through delay, was in breach of any duty owed by the Defendants or their legal representatives to the Court.

43. Mr de Robillard also submitted that the Defendants breached duties to the Court and to the Plaintiffs in respect of the hearing on 13 March 2017, arising from ss 56–58 of the Civil Procedure Act, the principles relating to “ex parte” proceedings and making a claim for excessive and disproportionate costs, and submitted that the Defendants’ actions “could amount” to an abuse of process. I do not accept the first of those submissions, so far as it turns upon the Defendants having proceeded with their application on the date it was returnable rather than adjourning it as Mr Lambourne had requested, for the reasons noted above. I do not accept the second submission, because it seems to me that the hearing on 13 March was an inter partes hearing which the Plaintiffs did not attend, rather than an “ex parte” hearing. Mr de Robillard went so far as to suggest that the costs claimed by the First Defendants “may be” in breach of the relevant provisions of the Legal Profession Uniform Law (NSW). The submission that the Defendants’ claims for costs are “excessive” or “disproportionate” is a bare assertion, unsupported by evidence of, for example, a costs assessor, although their claims are certainly large. It seems to me that any allegation of breach of the relevant provisions of the Legal Profession Uniform Law cannot properly be made by a bare submission as to possibility, unsupported by evidence.

44. Mr de Robillard also referred, in his reply submissions, to Mr Lambourne’s first affidavit dated 14 November 2016 which he characterised as “undisputed” affidavit evidence establishing the merits of the Plaintiffs’ claims. The questions in issue in this application relate to the Plaintiffs’ compliance with the Court’s orders made to date and the adequacy of their pleading, and the question of the underlying merits of the parties’ cases must properly be left for determination, on evidence, at a final hearing. It seems to me that the characterisation of Mr Lambourne’s evidence as “undisputed” also cannot be accepted where the Plaintiffs’ delay in filing their Statement of Claim has had the result that neither of the Defences nor any evidence in response to Mr Lambourne's evidence could or should have been filed by the Defendants. It remains to be seen whether Mr Lambourne’s evidence will be accepted at a final hearing, but it is presently untested rather than undisputed.

45. Mr de Robillard also submitted that it was not “proper” for the Defendants to raise issues about pleadings during an “ex parte” hearing on 13 March 2017. I do not accept that submission, first, because that hearing was inter partes and the Plaintiffs had the opportunity to attend; second, because the status of the pleadings was relevant to the exercise of the Court’s discretion; and, third, because the Plaintiffs had the opportunity to respond to the submissions, had they attended on that occasion. For completeness, I should note that Mr de Robillard also placed substantial weight on a proposition that the First Defendant was not entitled to take any step in the proceedings until 3 March 2017, because the Registry had not accepted a notice of appearance which his solicitors had sought to file on his behalf, apparently with an incorrect file number. I do not accept that matter has any significance for the conduct of the proceedings. Mr de Robillard also responds to several aspects of the Defendants’ submissions which seem to me to be overstated, and which I have not accepted, including suggestions of “culpable default” or “deliberate disobedience” to Court orders on the part of the Plaintiffs.

46. In his written reply submissions, Mr de Robillard also foreshadowed that the Plaintiffs would file an Interlocutory Process seeking orders to discharge the orders made on 13 March 2017, and they did so on 27 April 2017. Mr de Robillard also foreshadowed that the Plaintiffs would no longer pursue derivative proceedings, as pleaded in the Statement of Claim filed on 9 March, but will now instead seek orders under s 233 of the Corporations Act. That will involve a further, and significant, departure from the existing Originating Process and the existing Statement of Claim.

47. The extent of new matters raised by Mr de Robillard in his written and oral submissions in reply was such that I considered that I had to allow Mr Silver and Mr Bender an opportunity to respond to those submissions, a course that was necessarily productive of delay and additional costs for all parties. On 3 May 2017, my Associate emailed the parties, at my request, as follows:

“His Honour has again reviewed Mr de Robillard’s written reply submissions, as he indicated he would do, and Mr de Robillard’s oral submissions on 28 April. His Honour has formed the preliminary view that those submissions raise matters that were not in reply in the usual sense. His Honour has previously expressed a concern that a further submission stage will increase the costs of all parties to all parties’ disadvantage. However, he considers that he is bound, because new matters have been raised and as a matter of procedural fairness, to allow the defendants an opportunity to make further written submissions by 4pm on 10 May 2017, strictly limited to responding to new matters raised in Mr de Robillard’s written submissions in reply and his oral reply submissions on 28 April 2017.”

48. Mr Silver, in his submissions responding to the new matters raised in Mr de Robillard’s reply, submitted that Mr de Robillard’s characterisation of the hearing on 13 March 2017 as an “ex parte” application was not correct, because the case law on which Mr de Robillard relied related to an application brought in the other party’s absence, not to an application made on notice to the other party, where that other party did not appear. I have addressed that matter in paragraph 43 above. Mr Silver also pressed the proposition that the proceedings had been commenced by the Plaintiffs on an urgent basis, which is (as I noted in paragraph 24 above) now contested by the Plaintiffs, although he also submitted that that matter was of limited relevance, where, he submitted, an undertaking had been given by the First Defendant to protect the Plaintiffs’ position, had continued during the delays in the hearing and had now been discharged with the Plaintiffs’ consent. I have not found it necessary to determine the dispute as to whether the proceedings were commenced on an urgent basis in order to determine this application.

49. Mr Silver also addressed the question whether the Defendants were obliged to accept the Plaintiffs’ request for an adjournment of the hearing on 13 March 2017, when the Plaintiffs were then in default of the Court’s orders, and I have addressed that question in paragraph 18 above. Mr Silver also responded to Mr de Robillard’s submission as to the First Defendant’s delay in, or difficulties in, filing a notice of appearance, which I have addressed in paragraph 45 above. Mr Silver took issue with a submission of Mr de Robillard that time had not been wasted by reason of the Plaintiffs’ non-compliance with the Court’s directions as to the filing of their Statement of Claim, and pointed to the delays that had occurred in the conduct of the proceedings and repeated the submission that the case will “effectively start again” if a further Statement of Claim is filed. I have also addressed these issues above.

50. Mr Silver also took issue with Mr de Robillard’s submission that the orders made by Brereton J on 28 November 2016 were not by consent, or at least that the Plaintiffs’ solicitor had not intended to consent to those orders, notwithstanding that the Court’s record of listing recorded them as made by consent. Mr Silver submitted, rightly, that no evidence had been led by the Plaintiffs to support that claim, which was put by Mr de Robillard from the bar table but not supported by affidavit evidence. I have addressed that matter in paragraph 40 above. It seems to me that nothing ultimately turns on that matter, where those orders were made by Brereton J and were binding upon the Plaintiffs, whether or not they had intended to consent to them. Mr Silver also referred to several matters which he contended had not been addressed by Mr de Robillard’s submissions in reply, and took issue with several of Mr de Robillard’s more extravagant submissions, including the characterisation of the Defendants’ application as a demand for “retribution”, as involving an abuse of process or as oppressive and as an attempt to take advantage of the Plaintiffs’ vulnerable position. I have also addressed these issues above.

51. Mr Bender, in his submissions responding to the new matters raised in Mr de Robillard’s reply, responded to Mr de Robillard’s submission that an order for costs payable forthwith would “stultify the proceedings”, sought to distinguish the case law dealing with stultification in security for costs applications and also pointed to the absence of evidence for the proposition that Mr Pollett was impecunious or that the Defendants were “well-resourced” as Mr de Robillard contended. As I noted above, an affidavit dealing with Mr Pollett’s financial position was filed after the hearing of this application but has not been read in it. It seems to me that the Court may fairly infer that a listed company, which is one of the Defendants for which Mr Bender acts, is likely to be well-resourced. It seems to me that the risk of stultification, arising from orders to pay costs “forthwith” in interlocutory applications, is not necessarily limited to the position where there is compelling evidence of a plaintiff’s impecuniosity. I otherwise address the question whether an order for costs payable forthwith should be made below.

48. Mr Bender also referred to Mr de Robillard’s submission, in reply, as to why the Plaintiffs had not replaced the First Defendant as a director of the Company, and pointed to the fact that the Plaintiffs had not sought to adopt the procedure available for a majority to call a general meeting to remove a director on 21 days’ notice under s 249F of the Corporations Act. I do not consider it necessary to address that question, where Mr de Robillard has indicated that the Plaintiffs will no longer pursue a derivative claim in the Amended Statement of Claim. Mr Bender also addressed the status of the order made on 28 November 2016 by Brereton J for service of a Statement of Claim, raised by Mr de Robillard in reply, which I have addressed in dealing with Mr Silver’s similar submissions above.

49. Mr Bender in turn responded to Mr de Robillard’s formulation of the proposed case against the Second–Fifth Defendants, as outlined in oral submissions in reply, and submitted that that proposed case was hopeless. It seems to me preferable to defer any consideration of that question until the Plaintiffs’ proposed case is formulated in an Amended Statement of Claim. If the Second–Fifth Defendants can then establish that the case is hopeless, then leave to file an Amended Statement of Claim against them would likely not be granted. Mr Bender also took issue with several submissions made by Mr de Robillard as to the conduct of the Defendants’ Counsel and as to submissions made by Mr de Robillard directed to the Court. It does not seem to me that it will advance the just, quick and cheap resolution of the matters in dispute for me to address those matters at this point and I do not do so.

Whether orders 1 and 2 made on 13 March 2017 should be vacated and on what terms as to costs

54. I had, in the 13 March Judgment, stayed the orders I had then made as to the dismissal of the proceedings and as to costs, against the contingency that the Plaintiffs would indicate, when the matter was brought back before the Court on 20 March, that they wished to pursue the proceedings and would participate in them in a way that would allow their proper case management. I had also recognised, in that judgment, the possibility that any detriment suffered by the Defendants by the delays in the proceedings to date could be addressed by the discharge of the undertaking given by Mr Baker and an order for costs, possibly on an indemnity, gross sum or forthwith basis.

55. In the course of submissions on 20 March 2017, I again noted that the Plaintiffs might well be allowed the opportunity to address any difficulties with the Statement of Claim, but that there was a question as to the terms on which that could occur where a significant amount of time had passed, significant costs would have been incurred by the Defendants, including in attending hearings which the Plaintiffs had not attended, and those matters would need to be addressed (T3). There have been at least some points where there appeared to be some ground between the parties as to this question, subject to the dispute as to costs that I will address below.

56. I am, of course, required to exercise my discretion in respect of this question and the other questions I must address having regard to ss 56–58 of the Civil Procedure Act. Section 56 provides that the overriding purpose of the Act and rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The Court is required to give effect to the overriding purpose when it exercises any power given to it by the Act or by the rules of Court. Section 58 provides that the Court, in deciding whether to make any order or direction for the management of proceedings, must act in accordance with the dictates of justice, and I must have regard to the provisions of ss 56 and 57 in that regard, and may have regard to other specified matters. I also have regard to the observations of Allsop ACJ in Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [37], where Allsop ACJ emphasised the public interest in the avoidance of delay in the proceedings. I also recognise the need for proportionality in the order made to which I have referred above.

57. It is now plain that the Plaintiffs do seek to pursue the proceedings; they have indicated a wish to seek to amend the Statement of Claim so as properly to plead their case, a matter I will address below; the undertaking given by Mr Baker was discharged with the Plaintiffs’ consent; and an order for costs will, subject to the matters noted below, be sufficient to address the detriment the Defendants have suffered. Order 1 made on 13 March 2017, dismissing the proceedings, should be vacated on that basis. Order 2, dealing with costs, should also be vacated since I will make further orders as to costs below.

58. I should first address the question of costs of the hearing on 27 February (which is the subject of an existing costs order) and then deal with the question of costs of the hearing on 13 March, which the Plaintiffs did not attend. The Plaintiffs had already been ordered to pay the costs of the directions hearing on 27 February, when they did not appear, on an indemnity basis on that date. When the matter was again heard on 20 March 2017, Mr de Robillard accepted that the Plaintiffs should be required to pay the costs of that date. It seems to me that concession was rightly made, although it now appears that Mr de Robillard was ill and at a doctor’s appointment on that date, or forgot to attend, or both, where alternate representation could have been arranged for the Plaintiffs but was not. The Defendants in fact incurred the costs of their Counsels’ appearance on that occasion at a directions hearing that was wasted without fault on their part. I do not understand Mr de Robillard to have submitted to the contrary.

59. When the matter was heard on 20 March 2017, Mr de Robillard also (at least initially) accepted that the Plaintiffs should be ordered to pay the costs of 13 March 2017 when they did not appear to address the Defendants’ Interlocutory Processes seeking the orders to which I have referred above. Mr de Robillard did not accept that such an order for costs should be made on an indemnity basis or should be payable forthwith. I note that Mr Bender submitted, when the matter was last heard on 28 April 2017, that he had not made submissions as to that question. It seems to me that question was in issue, Mr Bender has had the opportunity to make submissions about it and I should not now permit further submissions as to that matter.

60. The circumstances in which an order for indemnity costs can be made are well established and I have drawn here on my summary of them in Re Vangory Holdings Pty Ltd [2015] NSWSC 801. Section 98 of the Civil Procedure Act relevantly provides that:

“Subject to rules of court and to this or any other Act:

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.”

61. Rule 42.1 of the UCPR in turn provides that, if an order is made as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. UCPR r 42.2 states the general rule that costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis. UCPR r 42.5 provides for orders for indemnity costs.

62. In Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232–234, Sheppard J noted that the Court ought not usually make an order for the payment of costs other than on the party and party basis and that some special or unusual feature in the case is needed to justify the Court in departing from the ordinary practice. His Honour noted several circumstances recognised in the authorities in which indemnity costs may be ordered, including the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions and observed that, ultimately (at 234):

“The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”

63. In Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20], the Full Court of the Federal Court noted that indemnity costs:

“…serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.”

64. The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was in turn applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18]. In Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA (with whom McColl JA agreed) observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure.

65. I am satisfied that the Plaintiffs should pay the costs of and incidental to the motions heard on, and the hearing on, 13 March 2017 on an indemnity basis. I recognise that the Plaintiffs were otherwise occupied with their business affairs and Mr de Robillard was overseas, but it is commonplace for parties and Counsel to deal with travel or other commitments by arranging for other legal representatives to attend on their behalf so as to avoid putting other parties to the wasted costs of their failure to attend. It also seems to me that the Plaintiffs, although they were not represented by solicitors and had other business commitments, could not fairly proceed on the basis that, when the Defendants did not agree to the adjournment they had requested, they would simply not attend the hearing and obtain that adjournment by default. The Defendants were put to the costs of the conduct of their applications on that date, which will now be wasted where the orders that were then made will be set aside to allow the Plaintiffs to continue the proceedings. An order for costs is properly made on an indemnity basis to ensure that the Defendants are not left out-of-pocket for the costs incurred on that occasion which involved no default on their part. I will address the costs of the further hearings on 20 March, that part of the hearing on 27 April 2017 that related to this application and 28 April 2017 below.

Whether the Statement of Claim should be struck out and whether the Plaintiffs’ should be granted leave to replead and on what terms

66. At the hearing on 20 March 2017, Mr de Robillard sought leave to replead the Plaintiffs’ Statement of Claim. I recognise that, as Mr de Robillard points out, the Defendants did not, in their Interlocutory Processes filed on 3 March 2017, seek to strike out the Statement of Claim under r 14.28 of the UCPR. That was perhaps not surprising, where the Statement of Claim was not filed until 9 March 2017, after those Interlocutory Processes had been filed and served. The alleged deficiencies in the Statement of Claim were squarely raised in the Plaintiffs’ submissions for the hearing on 13 March and again on 20 March. My Associate drew attention to my view that I would need to determine that question in her email of 21 March to the parties so that the Plaintiffs have had an opportunity to address that question. I consider that I must address that question, since the just, quick and cheap resolution of the real issues in dispute would not be promoted by leaving that question unresolved, where it would then need to be addressed again if the Plaintiffs do not proceed with their application for or are unable to obtain leave to file any Amended Statement of Claim.

67. The role of pleadings is, of course, to define the issues in the proceedings and provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664. It is, of course, also well-established that pleadings should state with sufficient clarity the case that must be met by a defendant so as to define the issues for decision and ensure the basic requirements of procedural fairness, namely that a party should have the opportunity to meet a case against him or her: Banque Commerciale SA (en liqn) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286, 296, 302–3; Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135 at 142–143. In Gunns Ltd v Marr [2005] VSC 251 at [57], in a passage subsequently approved by Garling J in Young v Hones [2013] NSWSC 580 at [82], which I followed in Iacullo v Iacullo [2013] NSWSC 1517 (on which I have drawn for the observations which follow), Bongiorno J observed that:

“Not only must the pleading inform the defendants of the case they must meet now, but it must clearly set out the facts which the plaintiffs must assert to make good their claim with sufficient particularity to enable any eventual trial to be conducted fairly to all parties. Vague allegations on very significant matters may conceal claims which are merely speculative. If this be not the case, the plaintiffs must put their allegations clearly.”

68. In Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77 at [2]–[4], Harper J (as he then was) observed that “one of their primary purposes [of pleadings] is to reveal to the opposite party how the party pleading puts its case”, and then dealt with a common response to criticism of a pleading:

“A complaint that the pleadings do not achieve this end is often met with the response that the opposite party knows very well, from documents and perhaps other sources, what the case against it is. This is no answer at all, at least unless the relevant documents are properly incorporated into the pleading. It is, as a general proposition, true to say that each pleading should be sufficient in itself. And although an element in an adversarial process, pleadings are themselves intended to be the opposite of adversarial, at least to the extent that they must, if they are to perform one of their proper functions, inform the opposite party of the case that party will have to meet at trial.

But pleadings have another important audience: the Judge or Magistrate. In most cases, the opposite party will have the assistance of some knowledge of the factual background — some knowledge, in other words, of the facts against which the pleadings can be assessed. The tribunal of fact will never be in that position. The pleadings must therefore be drawn so as to allow the impartial and uninformed reader to know what the case is about. This end cannot be achieved unless the pleadings form a coherent narrative, of material fact, with the necessary detail included as particulars. They must be drawn with a careful eye to the evidence that will necessarily be called if the case is to be made out. If the party pleading does not have that evidence, then the case ought not go to trial. Indeed, it is generally true to say that it ought not to proceed beyond the point at which the party pleading appreciates, perhaps because the very act of pleading reveals it, that there is and will remain a gap in the evidence upon which the cause of action or defence is based and without which that cause of action or defence will fail.”

That passage was in turn approved by Ferguson J in Taylor v Lederman [2013] VSC 99 at [3].

69. The relevant authorities were summarised in McGuirk v University of New South Wales [2009] NSWSC 1424 at [21]–[35], where Johnson J noted that the function of pleadings is to state with sufficient clarity the case that must be met by a defendant, and pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her, and that proper pleading is of fundamental importance in assisting courts to achieve the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings, as prescribed by s 56 of the Civil Procedure Act: McGuirk above at [21], [24].

70. Mr Bender in turn refers (27 April, T26) to UCPR r 14.28 which permits the Court to order that the whole or any part of a pleading be struck out if the pleading, relevantly, has a tendency to cause prejudice, embarrassment or delay in the proceedings or is otherwise an abuse of the process of the Court. Mr Bender submits that such an order could be made on the Court’s own motion. In McGuirk v University of New South Wales above at [30], [33], Johnson J noted, inter alia, that a pleading is embarrassing for the purposes of that rule when it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him, or if the allegations are made at such a level of generality that the defendant does not know in advance the case he has to meet, and that the appropriate remedy in such a case is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading. His Honour also observed (at [35]) that it is not the court’s function to settle a party’s pleading; the court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist; and the co-mingling of objectionable matter with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action and ought to be struck out.

71. I noted in my 13 March Judgment that the Statement of Claim did not appear to plead material facts, did not identify which allegations are made by the Plaintiffs personally and which are made by the Company, and did not identify on what basis the Plaintiffs claim to be entitled to pursue claims on behalf of the Company, including for damages payable to them personally. I also noted that the Plaintiffs had not then obtained leave to bring a derivative claim and such a claim would not authorise a personal claim by them for damages for loss suffered by the Company in any event. The parties have now had a further opportunity for submissions as to this matter. Mr Silver submits that the allegations made in the Statement of Claim are generally pleaded in a conclusory manner, without identification of the material facts, and are unclear as to what allegations are made by the Plaintiffs personally, what allegations are made by the Company, and on what basis the Plaintiffs claim to be entitled to pursue claims on behalf of the Company, including for damages payable to them personally. Mr Bender submits that the Statement of Claim also does not properly plead a case against the Second-Fifth Defendants, including identifying the contracts with which they are alleged to have interfered, or the material facts of a claim for breach of confidentiality, including the information that is alleged to be confidential and the matters that constituted the alleged breach of that duty. Mr de Robillard’s reply submissions indicate that the Statement of Claim does not reflect the case that the Plaintiffs now seek to bring, which is to be an oppression case rather than a derivative action. Mr de Robillard addressed the criticisms of the Statement of Claim made by the Plaintiffs in oral submissions in reply, when I drew particular paragraphs to which those criticisms may apply to his attention.

69. I should address some specific examples of the issues that arise within the Statement of Claim, of the kind to which Mr Silver and Mr Bender referred, and to which I drew to Mr de Robillard’s attention in the course of his submissions in reply to allow him an opportunity to address them. I should first recognise that some parts of the Statement of Claim are sufficient to allow the Defendants notice of the case which they have to meet, including, for example, paragraphs 10–11 which identified the basis on which derivative proceedings were sought to be brought, although that claim is no longer pressed, and paragraphs 13–17 which identified the basis of a claim for access to the Company’s books.

70. As I noted above, Mr Silver submits that the allegations made in the Statement of Claim are generally pleaded in a conclusory manner, without identification of the material facts. It seems to me that, for example, paragraphs 20(c)–(f) of the Statement of Claim are of that character. Those subparagraphs plead that the First Defendant, Mr Baker had:

“(c)   misused his position within the company for his personal benefit and at the expense of the company;

(d)   misused his position within the company at the personal expense of the First and Second Plaintiff in breach of the partnership agreement as well as in breach of his duties to his fellow shareholders and/or the company;

(e)   misrepresented to the First and Second Plaintiff the true financial position of the company;

(f)   failed to properly and faithfully advise the First and Second Plaintiff of the true agreement/s between himself and the Second Defendant as such agreements were reached from time to time between 1 January 2015 and 31 August 2016.”

74. It seems to me that, to adequately plead these matters, the Plaintiffs would need to identify what, specifically, Mr Baker is alleged to have done, for example, in what respect Mr Baker is alleged to have misused his position or how that is alleged to have benefited him or been at the Company’s expense; in what respect that conduct is alleged to have been in breach of the “partnership agreement” (as pleaded in paragraph 19 of the Statement of Claim) or to have breached the relevant duties; and whether the duties referred to are only the duties under ss 180–183 of the Corporations Act (as the heading of the section would suggest) or also other duties, including the suggested duties to the First Defendant’s “fellow shareholders”. The Plaintiffs would also need to identify when or in what terms the misrepresentations alleged in paragraph 20(e) were made, and that paragraph would also need to comply with the requirement in r 15.3 of the UCPR that a pleading must give particulars of any misrepresentation on which a party relies. The Plaintiffs would also need to identify what are the true agreements which the First Defendant is alleged to have failed to disclose in paragraph 20(f). The matters that are not identified seem to be material facts and matters that would need to be pleaded to allow the parties and the Court to identify the factual matters that are in dispute. Mr de Robillard’s response to these matters, in oral submissions in reply, was that the relevant evidence was found in Mr Lambourne’s first affidavit filed in the proceedings. That is not an answer to the difficulties with the Statement of Claim. Even if that were the case, it is a matter for the Plaintiffs properly to plead the case they seek to put, not to leave the Defendants and the Court to seek to deduce that case from the evidence.

75. By way of another example, paragraph 33 of the Statement of Claim pleads that:

“At all material times, while engaging in negotiations, the First Defendant promoted his personal interests while disregarding his fiduciary duties towards the First and Second Plaintiff as well as the company in his capacity as the company’s sole director.”

This seems to me also to be a conclusory allegation, which does not inform the Defendants or the Court what the First Defendant is alleged to have done that is said to have promoted his personal interests, or when, so as to allow the First Defendant to plead to the allegation and the Court to determine it.

76. The Plaintiffs also plead allegations of considerable complexity, which appear to depend on factual matters which are not identified. For example, paragraph 35 pleads:

“By the time the First and Second Plaintiff understood the true nature of the arrangements between themselves and the Second Defendant on the one hand, and between the Company and the Second Defendant (and his associated entity the Third Defendant) on the other, the First Defendant had already used his position as sole director (and being aware of the inability of the First and Second Plaintiff to take action due to their intensive and time-consuming commitment for providing the ongoing online services) to prevent and/or effectively reduce the First and Second Plaintiff’s ability to circumvent the unfair and unlawful actions in which the First and Second Defendants had been jointly involved against the interests of the partnership and of the Company.”

It seems to me that this pleading is so complex and so lacking in identification of the material facts on which it is based that it would be impossible for the parties (including the Plaintiffs) or the Court to identify the constituent elements of this pleading to know what ultimately has to be proved or determined at a hearing in that respect.

77. Paragraph 36 of the Statement of Claim pleads that:

“By that time, the First and Second Defendants (in their own rights and as agents for the Third Defendant) had already caused the providers and affiliates who had previously been contractually engaged with the company, to transfer their custom to the Third Defendant, either directly or through the Third Defendant’s wholly-owned subsidiary, the Fourth Defendant.”

This paragraph depends on an allegation of an agency relationship between the First Defendant and the Second Defendant on the one hand and the Third Defendant on the other, the material facts of which are not identified, and does not identify the steps that the First and Second Defendants are alleged to have taken to bring about the pleaded result or the particular providers and affiliates to whose contracts the allegation is directed. It seems to me that, in order to plead to the paragraph, the First and Second Defendants would be left to speculate both as to the basis on which such an agency might be alleged and as to the providers and affiliates as to whom the allegation might be made. It is not a sufficient response to suggest, for example, that the First and Second Defendants ought to know the providers and affiliates with which they had dealings, because that does not identify the way in which the Plaintiffs put their case in that respect.

78. The Statement of Claim also contains allegations of behaviour in the nature of fraud or wilful default that do not seem to me to comply with the requirements that such allegations be particularised under UCPR r 15.3. For example, paragraphs 44–46 appear to be in the nature of allegations of fraud or wilful default, as follows:

“44.   The overwhelming purpose and effect of the joint and several actions of the First, Second and Third Defendants was to unfairly deprive the company (as well as the First and Second Plaintiff) of the assets and benefits flowing from ‘the Punters Show’ business.

45.   Conversely, the said overwhelming purpose and effect of the actions of the First, Second and Third Defendant was to transfer the assets and revenue flow for the benefit of the First, Second and Third Defendant without the First and Second Plaintiff being remunerated or paid any consideration for the company’s business.

46.   The true purpose and/or practical effect of the First Defendant’s actions were to transfer control of the commercially viable activities (being provided through the company’s Punters Show platform) to the benefit [sic] Second and Third Defendants without the company or the First and Second Plaintiff being fairly compensated (or proper consideration being paid) or the transferred services.”

These paragraphs seem to me to have a conclusory character, do not identify the material facts relied on for the allegation and are without the particulars required by UCPR r 15.3 in respect of such allegations.

79. Paragraph 54 also appears to be both an allegation of fraud or wilful default, for which particulars would be required under UCPR r 15.3 but are not provided, and a conclusory allegation as to the value of the Plaintiffs’ and the Company’s goodwill and business, as to which the material facts are not identified, as follows:

“Prior to the First and Second Defendants (in conjunction with the Third and Fourth Defendants) commencing their campaign to damage the company’s as well as the First and Second Plaintiff’s commercial activities, the goodwill and business generated by the First and Second Plaintiff as well as the company, was worth approximately $750,000.”

80. Mr de Robillard’s response to these matters, in oral submissions in reply, was that they were not intended as allegations of fraud, although he appeared to accept that they were unparticularised allegations of wilful default and volunteered that they could be struck out on that basis. I do not consider that the Court should edit the pleading in that manner, even with the Plaintiffs’ consent, and there would be no utility in doing so given the other difficulties to which I have referred above. These matters support a striking out of the Statement of Claim, particularly where the Plaintiffs have indicated that they wish to replead it.

81. As I noted above, Mr Bender also submits that the Statement of Claim does not plead the material facts of the claim for breach of confidentiality. Paragraph 25 of the Statement of Claim refers to Mr Baker having held “confidential information”, and the subject matter of that confidential information is identified as relating to:

“The contractual relationships between the company and ‘providers’ promoting their products through the company’s digital platform known as ‘Punters Show’ in consideration for fees paid to the company.”

82. Paragraph 26 in turn refers to confidential information relating to the Company’s dealings with bookmakers and paragraph 27 refers to confidential information as to client identities. I will assume, without deciding, that that pleading is sufficient, although abbreviated, where the Defendants could have sought further particulars of that information. However, paragraph 28 pleads that the First Defendant held that information “in trust” for the partners and the Company, without identifying the facts or matters that are alleged to have given rise to such a trust. Paragraph 31 in turn pleads an allegation of breach of confidentiality against the First Defendant, but does not identify the particular information that is alleged to have been provided to the Second Defendant, or when or how it was provided, and is ambiguous as to whether the substance of the breach is that the information was provided to the Second Defendant or is instead a failure to impose conditions or safeguards on the basis on which the information was provided. Paragraph 34 in turn pleads that the Second and Third Defendant “rewarded” the First Defendant for the provision of that information, but does not identify the matters which are said to have constituted such a reward, or when or how it was provided. It seems to me that these matters will cause difficulty for the Defendants in pleading to the allegation and for the Court in determining it.

83. It seems to me that, for these reasons, the existing Statement of Claim is embarrassing in the sense noted above. As Johnson J noted in McGuirk v University of New South Wales above, it is not the Court’s function to settle the Plaintiffs’ pleading and it seems to me that the defects noted above are such that the Statement of Claim as a whole would tend to embarrass the fair trial of the action and should be struck out. It seems to me that the Statement of Claim in its present form is likely to place all parties and the Court in a situation that they are unable to identify the real issues in dispute between the parties, at a factual level, or to identify the factual matters to which evidence should properly be directed, or what factual matters must ultimately be determined at a trial. It also seems to me that the costs of the proceedings would be materially increased if the parties and the Court were left in that position. In these circumstances, it seems to me that striking out of the Statement of Claim in its present form will promote the just, quick and cheap resolution of the matters in dispute.

84. I recognise that the Plaintiffs have themselves, since 20 March 2017, indicated their wish to file an Amended Statement of Claim; have indicated their wish to abandon their derivative claim in the present Statement of Claim; have now filed a further Interlocutory Process that seeks, inter alia, leave to file an Amended Statement of Claim; and have indicated that they will shortly serve that draft Amended Statement of Claim on the Defendants. An order striking out the Statement of Claim is nonetheless necessary, at least to address the contingency that the Plaintiffs do not proceed with their amendment application or are not successful in obtaining leave to amend because their proposed Amended Statement of Claim has the same difficulties as the present Statement of Claim. Accordingly, the present Statement of Claim should be struck out. The question whether the Plaintiffs should be permitted to file their proposed Amended Statement of Claim may be resolved by consent between the parties and, if not, will be resolved by the Interlocutory Process already filed by the Plaintiffs seeking leave to file an Amended Statement of Claim.

85. The same liability for costs thrown away would arise from my order striking out the pleading in its present form and the Plaintiffs’ own proposal to amend the Statement of Claim. I should make the usual order that the Plaintiffs pay the costs that will be thrown away by the striking out of the Statement of Claim. That order should, in the present case, extend to the Defendants’ costs thrown away by the defence of the existing Statement of Claim and any amendment of the Originating Process and Statement of Claim, as agreed or as assessed. Although the deficiencies in the Statement of Claim to which I have referred above are significant, they do not seem to me to be of a nature that would warrant an order for costs on an indemnity basis.

Costs of 20 March, that part of 27 April that related to this application and 28 April 2017

86. For the reasons set out below, I have concluded that there should be no order as to the costs of and incidental to the hearings on 20 March, that short part of 27 April that related to this application and the short further hearing on 28 April 2017. None of the parties has sustained the substance of the positions for which they contended. The manner in which the applications were conducted has extended their length and increased their costs in a manner that would have the result that allowing costs to either party would now be disproportionate.

87. Mr de Robillard’s oral submissions on 20 March were lengthy and overlapped with matters then repeated or expanded in his written and oral submissions in reply. A large part of the hearing time on 27 April was lost to the Plaintiffs’ unsuccessful application that I should disqualify myself from further hearing the matter, as to which costs have been reserved, and short further hearings of this application took place in the limited time that was left on 27 April and on 28 April 2017. The further hearings on 20 March, 27 April (to the limited extent that it related to this application) and 28 April would likely have been substantially abbreviated, or the latter hearings would likely not have been required, had the Plaintiffs not maintained their opposition to an order for costs on an indemnity basis in respect of the hearing on 13 March, which I have held was justified. As I noted above, Mr de Robillard’s submissions in reply also went well beyond the matters he had raised in chief, beyond the evidence that was led in the application and beyond the scope of the matters that could properly be raised in reply.

88. Conversely, the Defendants seem to me to have continued to press for the dismissal of the proceedings beyond the point at which it should have been apparent that that outcome would not be consistent with the just, quick and cheap resolution of the real issues in dispute, once the Plaintiffs had led evidence at the hearing on 20 March to explain their previous defaults and had committed themselves to seeking to address the deficiencies in the Statement of Claim by seeking to file an amended pleading. The further hearings on 20 March, 27 April (to the limited extent it related to this application) and 28 April would likely have been substantially abbreviated, and the latter hearings would likely not have been required, had the Defendants abandoned their primary position that the proceedings should be dismissed and limited their submissions to the question of the wasted costs to which they had been exposed by the Plaintiffs’ previous conduct of the proceedings.

89. In these circumstances, there should be no order as to the costs of 20 March, 27 April (to the limited extent that it related to this application) and 28 April 2017. However, I will hear the parties as to whether the Plaintiffs should be required to pay the Defendants’ costs of and incidental to their further submissions made after 28 April 2017, which were arguably only necessary because, and which they were only granted leave to make because, Mr de Robillard’s submissions in “reply” and his oral submissions on part of 27 April and on 28 April had extended beyond the proper scope of reply.

Whether costs should be payable forthwith

90. The next question which arises is whether any part of the costs payable to the Defendants should be payable forthwith. Rule 42.7(2) of the UCPR provides that, unless the Court otherwise orders, the costs of any interlocutory application in proceedings are to be paid and otherwise dealt with in the same way as the general costs of the proceedings and do not become payable until the conclusion of the proceedings. An order that costs be payable forthwith is most commonly made where a costs order is relevant to a discrete, separately identifiable part of the proceedings or the costs liability will not be affected by the final outcome of the proceedings. The question when the Court could make such an order was considered by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd above where his Honour observed (at [18]) that it was appropriate to make such an order where an interlocutory hearing involved a separate and completed phase of the proceedings; the orders made had the result that, in effect, there would be a new beginning of the proceedings after that application; the defendant’s costs of the application were increased by the service of voluminous material, much of which was not referred to; and the likely timing of a final hearing, in that case, was in the order of a year after the interlocutory hearing.

91. In Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13], Emmett J identified the rationale of the principle that costs of interlocutory proceedings were not ordinarily payable forthwith as that:

“[s]ince an interlocutory proceeding does not resolve the final issues between the parties, it would, in ordinary circumstances, be inappropriate that an unsuccessful party in an interlocutory proceeding be required to pay costs immediately, since that party might ultimately be entitled to an order for costs in the substantive proceedings. The general principle appears to be that costs ought to be resolved when the proceeding has been concluded, and the rights of the parties have been finally determined.”

On the other hand, his Honour noted at [14] that the principle might not be applied where costs have been incurred by reason of an application that is misconceived and should never have been brought, and that it would be relevant that a final decision is some way off in a proceeding, because it is lengthy and complex or for some other reason.

92. The authorities as to when such orders should be made were comprehensively reviewed by Katzmann J in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2) [2010] FCA 1347 at [13]ff, where her Honour noted that different views had been expressed in the Federal Court of Australia in that regard and referred, inter alia, to the fact that the provision for costs to be paid forthwith was “possibly under-utilised” (quoting Graham J in Airservices Australia v Jeppeson Sanderson Inc [2006] FCA 906) in “lengthy and complex cases where substantial costs have been thrown away as a result of ill-considered pleadings being drawn” and to Brasington v OvertonInvestments Pty Ltd above. In Power Infrastructure, her Honour held that an applicant’s position in resisting an order for security for costs had been unreasonable and misconceived, but did not make an order that costs be payable forthwith in the relevant circumstances.

93. In Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503, Besanko J observed that the usual approach that costs are not resolved until the end of a proceeding serves the general interests of justice because it avoids multiple taxations and an apparent unfairness where a party who is initially successful is ultimately unsuccessful or vice versa, and prevents interlocutory proceedings being used as a weapon to exhaust the financial resources of one of the parties, and also recognised (at [21]) that:

“[T]he Court may order that costs be paid forthwith, and the cases suggest that [this] power may be exercised in circumstances in which there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceeding and the conclusion of the principal proceeding.”

94. Such an order has been made in this Court, for example, where the result of a motion represents complete success for a party on a discrete and substantial part of the proceedings and, absent that order, costs would not be payable for a significant period: Ritson v Gay & Lesbian Community Publishing Ltd [2012] NSWSC 586 at [4]. In UGL Services Pty Ltd v F1 Solutions Pty Ltd [2012] FCA 245, Jagot J departed from the usual rule and made an order for costs forthwith where she was satisfied that a summary judgment application was misconceived. I applied those principles in Iacullo v Iacullo above although I was not persuaded to make an order that costs should be paid forthwith in that case.

95. I am not satisfied that the costs payable by the Plaintiffs of and incidental to the hearing on 13 March 2017 should be payable forthwith, although I recognise that several of the matters that would support such an order are present here. It seems to me that, in this case, as in Fiduciary Ltd v Morningstar Research Pty Ltd above, the interlocutory hearing involved a separate and completed phase of the proceedings; the Plaintiffs wish to plead a new claim, and the corresponding order striking out the existing Statement of Claim will have the effect that there will be a new beginning of the proceedings, if the Plaintiffs are now able to plead their claims in a proper manner; and the likely timing of a final hearing is at least several months off, where the case will now be returned to its beginning. I was satisfied, as I noted above, that the Plaintiffs’ failure to organise alternate representation in Mr de Robillard’s absence on 13 March, or to attend themselves if they were not able to organise alternate representation and where an adjournment was not agreed, was sufficient to support an order for indemnity costs in order fully to compensate the Defendants for their wasted costs. Matters that support an indemnity costs order may, but will not always, support an order for costs forthwith. In this case, it does not seem to me that the level of unreasonableness in the Plaintiffs’ conduct was such that it would warrant such an order in respect of the costs of and incidental to the hearing of 13 March, given the risks of such orders in stultifying proceedings which have been recognised in the case law to which I have referred. Although the deficiencies in the Statement of Claim to which I have referred above are significant, I do not consider they warrant an order that costs be paid forthwith.

96. In reaching these conclusions, it has not been necessary to address Mr Lambourne’s claim in his affidavit that he cannot pay the costs of the proceedings until they are settled or determined, or the affidavit of Mr Pollett that was later filed (but not read) as to his financial position.

Whether costs should be ordered on a gross sum basis

97. I have also given consideration to whether the Court should make an order for costs on a gross sum basis, a matter that I had raised at the hearing on 13 March, in order to avoid the parties incurring the costs and delays referable to a further assessment. Section 98(4) of the Civil Procedure Act relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. That power is commonly exercised where costs have been incurred in a lengthy or complex case although it is not in its terms limited to such a case: Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 at [8].

98. The power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis: Ritchie’s Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. In Hamod v State of New South Wales [2011] NSWCA 375 at [816]–[817], Beazley JA (with whom Giles and Whealy JJA agreed) summarised factors relevant to the making of a gross sum costs order as follows:

“The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie’s Uniform Civil Procedure NSW at [s 98.45].

The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]–[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.”

99. With some hesitation, I have concluded that it is not practically possible to make a gross sum costs order, where the amounts involved are large, the hearing is ongoing, and some costs are to be paid on an indemnity basis and others on an ordinary basis.

Orders

100. Accordingly, I make the following orders:

1.   Orders 1 and 2 made on 13 March 2017 be vacated.

2.   The Plaintiffs’ Statement of Claim filed 9 March 2017 be struck out.

3.   The Plaintiffs pay the Defendants’ costs thrown away by the defence of the Statement of Claim filed on 9 March 2017 and any amendment of the Originating Process and Statement of Claim, as agreed or as assessed.

4.   The Plaintiffs pay the Defendants’ costs of and incidental to the Interlocutory Processes returnable on 13 March 2017 up to and including that date, including the costs of and incidental to the hearing on 13 March 2017, on an indemnity basis, as agreed or as assessed.

5.   There be no order as to the costs of the hearing on 20 March 2017, that part of the hearing on 27 April 2017 relating to this application or the hearing on 28 April 2017.

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Decision last updated: 18 May 2017