Rilgar Nominees Pty Ltd v BHA Holdings Pty Ltd (Costs)

[2015] VSC 6

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2014 00456

BETWEEN

RILGAR NOMINEES PTY LTD (ACN 006 469 629)	Plaintiff
and
BHA HOLDINGS PTY LTD (ACN 128 764 803) & ORS (in accordance with the attached schedule)	Defendants

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 December 2014
DATE OF JUDGMENT:	13 February 2015
CASE MAY BE CITED AS:	Rilgar Nominees Pty Ltd v BHA Holdings Pty Ltd (Costs) (No 2)
MEDIUM NEUTRAL CITATION:	[2015] VSC 6

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COSTS – Plaintiff’s case having no real prospects of success ‑ Summary Judgment for defendants – Whether indemnity costs should be awarded.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M W Wise	K & L Gates
For the First Defendant	Mr B Gibson	SBA Law
For the Second, Third and Fourth Defendants	Mr C E Shaw	Norton Gledhill

HIS HONOUR:

1. On 9 September 2014, the plaintiff (’Rilgar’) filed an Originating Process[1] seeking relief against the second, third and fourth defendants, for allegedly oppressive conduct pursuant to ss 232, 233(1) and 1324 of the Corporations Act 2001 (Cth), in relation to the first defendant (‘BHA‘) (‘the Oppression Proceeding’).

   [1]The Originating Process was filed in proceeding number S ECI 2014 000084.

1. The Oppression Proceeding was the subject of a mediation conducted on 25 September 2014, attended by representatives of the plaintiff and the second, third and fourth defendants (‘the Mediation‘).  The Mediation was not attended by or on behalf of BHA.

1. The plaintiff contended that the Oppression Proceeding and the matters in issue between the parties, were resolved by oral agreement at the Mediation (‘the Settlement Agreement’).

1. On 7 November 2014, the plaintiff commenced this proceeding seeking amongst other things specific performance of the Settlement Agreement.

1. On 11 November 2014 the second, third and fourth defendants (‘HPE Defendants‘) filed an application seeking summary judgment pursuant to r 23.03 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules‘) and/or s 62 of the Civil Procedure Act 2010 (Vic) (‘the Act‘) and costs.

1. On 12 November 2014 BHA filed an application seeking summary judgment and costs against Rilgar on the same basis.

1. The defendants contended that Rilgar’s claim for specific performance had no real prospects of success and should be dismissed.  Four grounds were relied on –

·BHA, a relevant and necessary party, did not attend the Mediation and is not a party to the Settlement Agreement.

·The Settlement Agreement was required to be in writing and signed by the parties.

·Uncertainty – the defendants contended that important matters were not agreed and the Settlement Agreement is uncertain and incomplete.

·The Settlement Agreement affects the pre-emptive rights agreed by the parties.

1. The applications were heard on 2 December 2014.  The defendants succeeded on the first three points and I found it unnecessary to deal with the fourth point.  I published my reasons on 17 December 2014.[2]  I will assume familiarity with the Judgment.  The remaining issue relates to costs.

   [2][2014] VSC 632 (‘the Judgment’).

1. The defendants seek indemnity costs, essentially on the basis that the case was largely a matter of law and the plaintiff must have known that its case had no real prospects of success. Consequently, it was submitted, the proceeding was not commenced in good faith, was commenced in wilful disregard of clear legal principles and did not have a proper basis. The defendants contended that not only would this entitle them to indemnity costs on the usual basis but that the result was compelled by the Act which, they contended, effected a significant change in the approach to costs orders in adversarial litigation.

1. The plaintiff submitted that although it was not successful there was self-evidently something to argue about.  In relation to indemnity costs it was submitted that in the exercise of my discretion I should not ignore the fact that the parties had actually agreed at the conclusion of the mediation and in fact shook hands.

1. In my opinion the defendants are entitled to costs.  My preliminary view was that the defendants’ costs should be reserved to the trial of the main proceeding.  However, I am satisfied that such an order would not be appropriate in the circumstances.  The case has been decided.  The issues were discrete issues.  The plaintiff lost and should pay the costs of the defendants.  The only remaining question is whether these costs should be on the standard basis or on an indemnity basis.

1. The defendants referred to the usual authorities[3] on indemnity costs and emphasised that the summary judgment application was essentially run on the plaintiff’s own evidence and in circumstances where there were no real disputed facts.  Reference was also made to correspondence prior to the filing of the applications as to the flawed basis of the case. 

   [3]For example,  Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189 and the authorities referred to therein.

1. The Court has a wide discretion in relation to costs as provided in s 24(1) of the Supreme Court Act 1986 and r 63.31 of the Rules.[4]

   [4]See Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237, [538]-[572].

1. In the exercise of my discretion, taking into account all of the facts and circumstances of this proceeding and the context in which the case arose, and notwithstanding the powerful and able argument put on behalf of the defendants, I am not satisfied that it is appropriate to award costs on an indemnity basis.  Although the matter is not free from difficulty, in my opinion the appropriate order for costs is that the plaintiff pay the defendants’ costs on the standard basis. 

1. There is a critical and indeed troubling matter that informs my discretion.  As appears from the Judgment, the reason why the plaintiff’s claim had no real prospects of success was that BHA, a critical and relevant party, did not participate in and was not represented at the Mediation.

1. Further, BHA did not agree to the terms of the Settlement Agreement pursuant to which it incurred obligations.  Yet, the parties shook hands and it may be assumed that the legitimate expectation of all parties was that at the very least agreement in principle had been reached and would be documented.  After all, all of the interested parties and parties capable of bringing about the desired agreement or negotiated position were at the Mediation and one way or another able to bring about the result.  But, the plaintiff could not compel this and the proceeding was doomed to fail. 

1. Of course, this does not serve to elevate or increase the plaintiff’s prospects of success which remained unrealistic as found.  However, I do not consider that this is an irrelevant consideration.  The court clearly has a wide and unfettered discretion and is entitled, in exercising such discretion, to consider all relevant factors and matters that impact upon or relate to the case, whether or not they relate to the quality of the case. 

1. There are other matters that I have taken into account.  Despite the result, it should not (and this may be surprising in retrospect) be assumed or inferred that the plaintiff ‘appreciated the hopelessness’ of the case.[5]  The plaintiff considered in the circumstances that there may be a Masters v Cameron[6] (category 1) argument.  Clause 2.10 of the Mediation Agreement signed prior to the Settlement Agreement, which provided that there was no settlement until the agreement was signed, is of course capable of oral variation, waiver or estoppel.  BHA was inextricably involved in and affected by the proceeding and the Mediation, and it is almost inconceivable to accept that the company was deliberately excluded from the Mediation.  Rather, it is more probable than not that everyone simply accepted that the company would fall into line with whatever was agreed and that there was no need for separate representation.  They acted accordingly.

   [5]A factor considered relevant by Harper J in Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189 [18].

   [6](1954) 91 CLR 353, 360. Category 1 refers to the situation in which the parties reach a final agreement and intend to be immediately bound to the performance of its terms, but at the same time intend to restate the terms in a fuller or more precise manner.

1. For these short reasons costs will be awarded on the standard basis.

SCHEDULE OF PARTIES

RILGAR NOMINEES PTY LTD (ACN 006 469 629)

Plaintiff

BHA HOLDINGS PTY LTD (ACN 128 764 803)

First Defendant

HPE3TA PTY LTD (ACN 127 196 553)

Second Defendant

HPE3TB PTY LTD (ACN 127 197 013)

Third Defendant

HPE3TC PTY LTD (ACN 132 514 508)

Fourth Defendant