Robinson-Page Management Pty Ltd ATF the Beggs-Page Superannuation Fund v Trackem Holdings Pty Ltd
[2019] WASC 194
•8 OCTOBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: ROBINSON-PAGE MANAGEMENT PTY LTD ATF THE BEGGS-PAGE SUPERANNUATION FUND -v- TRACKEM HOLDINGS PTY LTD [2019] WASC 194
CORAM: ACTING MASTER WHITBY
HEARD: 31 MAY 2019
DELIVERED : 7 JUNE 2019
FILE NO/S: CIV 3127 of 2018
BETWEEN: ROBINSON-PAGE MANAGEMENT PTY LTD ATF THE BEGGS-PAGE SUPERANNUATION FUND
Plaintiffs
AND
TRACKEM HOLDINGS PTY LTD
First Defendant
KASHIF SALEEM
Second Defendant
Catchwords:
Practice and procedure - Inadequate indorsement of claim on writ - Setting aside a writ pursuant to O 6 r 1 Rules of the Supreme Court 1971 (WA)
Legislation:
Competition and Consumer Act 2010 (Cth), Sch 2
Corporations Act 2001 (Cth), s 236, s 237
Fair Trading Act 2010 (WA)
Rules of the Supreme Court 1971 (WA), O 6 r 1, O 20 r 2, O 20 r 19
Result:
Defendants' application's granted
Category: B
Representation:
Counsel:
| Plaintiffs | : | Mr W Spyker |
| First Defendant | : | Mr M L Bennett |
| Second Defendant | : | Mr A J Papamatheos |
Solicitors:
| Plaintiffs | : | Spyker Legal |
| First Defendant | : | Bennett + Co |
| Second Defendant | : | Barry Nilsson Lawyers |
Case(s) referred to in decision(s):
ABB Service Pty Ltd (formerly known as ABB Engineering Construction Pty Ltd) v Hetherington [2001] WASCA 235.
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18.
Bell Group Ltd (In liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1.
Glendinning v Cuzens [2009] WASCA 21.
South Johnstone Mill Ltd v Dennis & Scales [2007] FCS 1448.
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.
ACTING MASTER WHITBY:
There are two applications before me. First, the first defendant's amended application dated 10 April 2019 to set aside the Amended Writ of Summons dated 18 February 2019 (Amended Writ) pursuant to Order 6 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) and/or to strike out part of the Indorsement of Claim (Indorsement) pursuant to Order 6 RSC as an abuse of the court's process. Second, the second defendant's application dated 11 April 2019 to set aside the Amended Writ pursuant to O 6 r 1 RSC, and/or to strike out parts of the Indorsement pursuant to O 20 r 19(1)(a) RSC.
The first defendant relies upon the affidavit of Kashif Saleem sworn 10 April 2019 (Saleem Affidavit) in support of its application.
The plaintiffs rely upon the Affidavit of High Robinson Beggs sworn 27 May 2019 (Beggs Affidavit) in opposition to the defendants' applications.
The Indorsement states:
1.The plaintiffs' claim against the first defendant and/or second defendant is for damages, alternatively equitable compensation, arising out of the following conduct and representations made by the second defendant both personally and for and on behalf of the first defendant to each of the plaintiffs in or about February 2018:
(a)that Revenue Partners would continue to be engaged by the first defendant as its business consultants and key executives for the long term;
(b)that the first defendant had entered into a binding contract with Revenue Partners for the long term;
(c)that the ongoing services of Revenue Partners were necessary for the business development of the first defendant;
(d)that in his view Revenue Partners were capable of providing the required business consultancy and key executive services to the first defendant;
(e)that all moneys being invested by the plaintiffs would be used for working capital for rapid growth of the business; and
(f)that the business of the first defendant was able to pay its debts as and when they fell due;
which conduct and representations were relied upon by the plaintiffs and induced the plaintiffs to invest the sum of $900,000 in the first defendant, and which conduct and representations were:
(a)false and misleading, in contravention of s 18 of the Australian consumer law as set out in schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian consumer law) and as applied by s 19 of the Fair Trading Act 2010 (WA);
(b)unconscionable conduct, in contravention of sections 20 and/or 21 of the Australian consumer law, including as applied by s 19 of the Fair Trading Act 2010 (WA);
(c)misrepresentations; and/or
(d)negligently made; - in that the first defendant and/or the second defendant
(a)terminated the first defendant's engagement with Revenue Partners in or about July 2018;
(b)considered that the first defendant did not at any time have a binding contract with Revenue Partners;
(c)considered that the ongoing services of Revenue Partners were not necessary for the business development of the first defendant;
(d)considered that Revenue Partners were not capable of providing the required business consultancy and key executive services to the first defendant;
(e)use the moneys invested by the plaintiffs towards the payment of existing debts of the business; and
(f)were as at February 2018 unable to pay their debts as and when they fell due.
2.The plaintiffs further claim against the second defendant is for damages, alternatively equitable compensation, for breach of his duties as a director and Chief Executive Officer of the first defendant, being the:
(a)duty to act with the degree of care and diligence that a reasonable person might be expected to show in that role, but at common law and pursuant to s 180 of the Corporations Act 2001;
(b)fiduciary duties arising in relation to his role as a director of the first defendant;
(c)duty to act in good faith in the best interests of the first defendant and for a proper purpose;
(d)duty not to improperly use the information gained in the course of his director's duties to gain an advantage for himself and/or another and/or to the detriment of the first defendant;
(e)duty not to improperly use his position to gain an advantage for himself and/or another and/or to the detriment of the first defendant; in respect of inter alia the following actions:
(a)the termination of the first defendant's engagement with Revenue Partners as its business consultants and key executives in or about July 2018.
AND THE PLAINTIFF'S CLAIM AGAINST THE FIRST DEFENDANT AND/OR THE SECOND DEFENDANT:
A.The sum of $900,000;
B.Further and alternatively, damages;
C.Damages pursuant to s 236 of the Australian consumer law; and/or
D.Equitable compensation;
E.Interest pursuant to s 32 of the Supreme Court Act 1935 (WA);
F.Such further orders as the court sees fit; and
G.Costs.
Order 6 r 1 RSC provides:
(1)Before a writ is issued, it must be endorsed with a concise statement of the nature of the claim made, and of the relief or remedy required in the action.
(2)In the case of non‑compliance with par (1) the defendant may apply before appearance to set aside or amend the writ or for particulars.
Further, O 20 r 2(2) RSC provides:
A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action is mentioned in the writ or arises from facts which are the same as, or include or form part of, the facts giving rise to a cause of action so mentioned.
Each of the first defendant and the second defendant have filed applications to set aside the Amended Writ pursuant to Order 6 r 1 RSC.
Given the first and second defendants seek the same relief on the same grounds in this respect, I will deal with their applications as one as opposed to separately.
The Applicable Law – Order 6 rule 1 RSC
In the case of ABB Service Pty Ltd (formerly known as ABB Engineering Construction Pty Ltd) v Hetherington,[1] (ABB) the Full Court considered an application for leave to appeal orders made by Master Sanderson dismissing an application to strike out the writ, or alternatively the indorsement of claim pursuant to O 6 r 1 RSC. In that case the relevant indorsement was:
The plaintiff's claim is for damages:
(1)Pursuant to s 82(1) of the Trade Practices Act (Cth) (the Act) for breach by the defendant of s 52 of the Act; and
(2)for negligent misstatement;
with respect to representations made by the defendant between 1 July 1996 and 28 February 1997 in connection with a contract between the defendant and Monaveen Pty Ltd for the performance of civil engineering services and works.
[1] ABB Service Pty Ltd (formerly known as ABB Engineering Construction Pty Ltd) v Hetherington [2001] WASCA 235.
In ABB, McLure J (as her Honour then was) identified the three functions of an indorsement of claim in a writ as being:[2]
(1)As provided for in O 20 r 2(2) RSC, an indorsement of claim sets the boundaries within which a plaintiff must plead the statement of claim. The causes of action pleaded in the statement of claim cannot exceed those pleaded in the indorsement.
(2)An indorsement in the writ has important limitation ramifications. An open ended or otherwise defective indorsement may be relied on to the advantage of a plaintiff who seeks to amend its writ and then its statement of claim after the expiry of the limitation provided.
(3)The indorsement provides notice to the defendant of the nature of the plaintiff's claim and the relief sought in the action. It is not intended to be a pleading but rather a summary of the nature of the claim.
[2] ABB [7] - [10].
Her Honour held that:
In my opinion, the respondent's indorsement of claim does not comply with O 6 r 1 or O 20 r 19(1) of the RSC. In particular, there is no information in the indorsement which links the respondents or either of them to:
(a)receipt of or reliance on or even knowledge of the representations;
(b)the contract between the applicant and Monaveen Pty Ltd which is said to be the subject matter of the representation;
(c)the damage arising from the representations.
The indorsement does not put the facts in a recognisable legal framework showing how the respondents' claims arise and the relationship between the claims and the loss. Without further information the reader is left to speculate as to how it is the respondents have a claim for damages against the applicant for representations made by the applicant about a contract between the applicant and a third party. There are a number of possible permutations and links which could theoretically give rise to a claim by the respondents against the applicant for breach of the pleaded causes of action. However, the respondents must state those links so that they cannot subsequently be the beneficiary of an open‑ended plea in the event a limitation issue arises.
In order to make the links, the endorsement should identify to who the representations were made and how representations in connection with the contract between the applicant and the third party affected by the respondents (whether it be by way of providing personal guarantees or advancing loan funds to Monaveen Pty Ltd or otherwise) resulting in damage to the respondents.
Causes of Action
The defendants submit that the plaintiffs’ action has been commenced prematurely as the plaintiffs have not suffered any loss and damage. Consequently, as loss and damage are an essential element of any cause of action, the Amended Writ in its entirety ought to be struck out.
The plaintiffs allege that they have the following causes of action:
(a)conduct in breach of the Australian Consumer Law as set out in Sch 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) on the part of the first defendant; and/or conduct in breach of the Fair Trading Act 2010 (WA) in the case of the second defendant;[3]
(b)unconscionable conduct;[4]
(c)misrepresentation;[5]
(d)negligence;[6] and
(e)as against the second defendant, a breach of fiduciary duties owed by the second defendant in his capacity as a director and officer of the first defendant, to shareholders of the first defendant.[7]
Breach of Australian Consumer Law
[3] Indorsement par 1 second a).
[4] Indorsement par 1 second b).
[5] Indorsement par 1 second c).
[6] Indorsement par 1 second d).
[7] Indorsement par 2.
Loss and damage must actually be sustained in order for a cause of action to arise under the Australian Consumer Law[8] (and consequently the Fair Trading Act).
[8] Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 [11].
Counsel for the plaintiff submits that this is a 'no transaction' case (i.e. but for the defendants' representations, the plaintiffs would not have invested in the first defendant). Alternatively, and as deposed to in the Begg's Affidavit,[9] the loss and damage suffered by the plaintiffs is the reduction in value of their shares in the first defendant.
[9] Beggs Affidavit at [21] - [22] and Annexure HRB-4
In my view, it is simply not clear from the Indorsement what loss and damage the plaintiffs allege they have suffered, if, in fact, they have suffered loss and damage at all as at the date of the Amended Writ. Even if I were to accept that the plaintiffs had suffered loss and damage, it is not clear from the Indorsement how that loss and damage is alleged to have been caused by one or other of the defendants. As I have previously stated, loss and damage is an essential element to any cause of action brought under either Australian Consumer Law and/or the Fair Trading Act. Given that the Indorsement does not contain any information to substantiate loss and damage, the Indorsement is deficient.
Unconscionable Conduct
In order to sustain a cause of action for unconscionable conduct, the plaintiffs must establish that they are persons in a position of special disadvantage and that the defendant/s took unfair advantage of that position.[10]
[10] Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18.
The Indorsement does not allege any circumstances of special disadvantage on behalf of the plaintiff, nor any advantage taken by the defendants of such special disadvantage. The Indorsement is therefore defective in this regard.
Misrepresentation
The next cause of action alleged against the defendants is misrepresentation. Although it is not clear from the Indorsement as to how this cause of action arises (which in and of itself is an issue), it appears the plaintiffs claim alleges misrepresentation under contract. The Indorsement does not provide information of any contract said to be the subject of the alleged representations made by the defendants, nor the plaintiff's alleged damage suffered consequent such representations. Further, the Indorsement does not set out the boundaries within which the statement of claim must be framed to substantiate a cause of action for misrepresentation and is therefore defective in this regard.
Negligence
The plaintiffs also allege negligence on the part of the defendants. The Indorsement does not give details of any duty of care owed by either of the defendants to any of the plaintiffs, nor does the Indorsement plead any damage suffered by the plaintiffs as a result of the defendant's alleged negligence. In this regard, the Indorsement is deficient as it does not identify the boundaries within which the statement of claim must be framed.
Breach of Director Duties
Finally, the plaintiffs allege that the second defendant has breached his duties in his capacity as director of the first plaintiff under the Corporations Act 2001 (Cth) (Corporations Act). The plaintiffs claim the second defendant's director duties were owed directly to them as shareholders in the first defendant.
It is well recognised law, and accepted by both parties, that directors of a company do not generally owe duties to individual shareholders, rather a director's duties are owed to the company. Consequently, the company has a cause of action against for breach of director duty, not the shareholders.[11]
[11] Bell Group Ltd (In liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1, 533 [4388] – [4390].
The plaintiffs submit that, in certain circumstances, duties may arise between individual shareholders and a director. In such circumstances, the shareholders may be granted leave to commence proceedings on behalf of the company.[12]
[12] Corporations Act 2001 (Cth) s 236, s 237.
Counsel for the plaintiffs referred to the case of South Johnstone Mill Ltd v Dennis & Scales[13] as authority for the proposition that the plaintiffs can obtain leave, pursuant to s 237 of the Corporations Act 2001, to commence proceedings on behalf of the first defendant against the second defendant nunc pro tunc[14] - and therefore, the requirement for leave prior to the institution of proceedings does not prevent the court from having jurisdiction.
[13] South Johnstone Mill Ltd v Dennis & Scales [2007] FCS 1448.
[14] South Johnstone Mill Ltd v Dennis & Scales [55].
In my view, the fact that the plaintiffs have not obtained leave of the court to commence proceedings on behalf of the first defendant does not preclude the court's jurisdiction in this action. However, it is not until the plaintiffs have obtained leave do they have standing to proceed with this action.
In the current circumstances, being the absence of leave, the plaintiffs do not have standing to commence this cause of action against the second defendant in his capacity as director. Paragraph 2 of the Indorsement is deficient.
Summary
In summary, the Indorsement does not contain the necessary elements of any of the alleged causes of action against the defendants. Significantly, the Indorsement fails to provide information of any loss and damage that the plaintiffs have suffered. In the circumstances, I find that, pursuant to Order 6 r 1 RSC, the entirety of the Indorsement ought be struck out.
Given that the entirety of the Indorsement is defective, it is not necessary to consider the second defendant's application to strike out portions of the Indorsement pursuant to O 20 r 19 RSC (although if I were required to do so, the same reasoning detailed above would apply to the individual paragraphs of the Indorsement such that each would be struck out on the basis that they disclose no reasonable cause of action).
Consequence of Defective Indorsement
In the case of Glendinning v Cuzens[15] the Court of Appeal considered an appeal against a decision of Master Sanderson setting aside an amended writ of summons pursuant to O 6 r 1 RSC. Acting Justice Newnes (as his Honour then was) said:
There can of course be no inflexible rule as to the exercise of the discretion under O 6 r 1(2). That in the exercise of the discretion the loadstar must always be what the interests of justice require in the particular circumstances of the case. What will be appropriate in a particular case will necessarily depend upon the circumstances of the case, but to set aside a writ may have significant consequences, particularly in relation to the plaintiff's position in relation to a limitation period, and it is therefore a step to be taken only where it is necessary in the interests of justice.
Indeed it has been said that a writ should only be set aside by reason of defective or irregular indorsement where the indorsement shows that the action is an abuse of process: Pontin v Wood (1962) 1 QB 594. I would not be inclined to limit the discretion in that way, but, in my view, where an indorsement of claim is deficient the plaintiff should ordinarily be allowed a reasonable opportunity to put it into a proper form, so long as that can be done without remedial prejudice to the defendant. In the absence of such prejudice, little purpose is likely to be served by setting aside the writ and leaving it to the plaintiff to commence a fresh action (if that course is still open). The consequence is likely to be simply that further time will be lost and more expense incurred without any significant countervailing benefit. Such a course would be inconsistent with the stipulation, contained in O 1 r 4B, that the practises and procedures of the court are to be applied so as best to ensure the just, efficient, and timely determination of litigation at a cost affordable to the parties.[16]
[15] Glendinning v Cuzens [2009] WASCA 21.
[16] Glendinning v Cuzens [33], [34].
His Honour also stated:
Where, on an application by defendant, it is established that an indorsement is defective, there are four courses that may (depending upon the nature of the application) be open to the court. The court may:
·Set aside the writ (O 6 r 1(2));
·Strike out the indorsement in whole or in part (O 20 r 19(1));
·Grant leave to the plaintiff to amend the indorsement (O 6 r 1(2), O 20 r 19(1)); or
·Order the plaintiff to provide further particulars of the indorsement (O 6 r 1(2)).[17]
[17] Glendinning v Cuzens [31].
Counsel for each of the defendants submits that the appropriate order for the court to make is to set aside the Writ, rather than to grant the plaintiffs leave to amend.
The defendants submit that the action sought to be commenced by the plaintiffs is an abuse of court process (and therefore ought be set aside) for the following reasons:
(a)the plaintiffs have not suffered any loss and damage – in fact there is evidence that indicates the opposite and that the value of the plaintiffs' shares has increased;[18] and
(b)the first defendant is experiencing difficulty in capital raising as a result of these proceedings commenced by the plaintiffs.[19]
[18] Saleem Affidavit at [21] - [22] and attachment KS-10.
[19] Saleem Affidavit at [16] and attachment KS-6.
The plaintiffs submit that they have suffered damage as a result of the reduction in value of their shares in the first defendant. In their submission, the Plaintiffs rely upon the consolidated financial statements of the Track'em Group as at 30 June 2018 which show a trading loss and a net equity position below the issued share capital.[20]
[20]Beggs Affidavit at [21] – [22] and attachment HRB-4.
The matters which determine a company's share price are rightly the realm of expert evidence and cannot simply be reduced to reviewing its financial statements, or by accepting the price at which shares were recently issued. I do not find either the plaintiffs' or the defendants' evidence to be reliable to determine the current share price of the first defendant.
In any event, I find myself asking the question of the plaintiffs in relation to any alleged reduction in value of their shares in the first defendant: 'what makes the first and/or second defendants responsible to you for this reduction in value?' It is simply not clear from the Indorsement how it is alleged the defendants, by not using Revenue Partners, or otherwise, are said to have caused any such loss. A company does not guarantee the fortunes of its shareholders - a company must have engaged in conduct contrary to law that causes the reduction in value for loss to be attributable to it. The Indorsement simply does not provide information which alleges conduct causative of any loss.
When determining if the Amended Writ should be set aside, I am not confined to finding an abuse of process. The overriding consideration in such a determination is the interests of justice.[21]
[21] Glendinning v Cuzens [31], [34].
I am satisfied that these proceedings may adversely impact upon the first defendant's ability to raise capital. This prejudice to the first defendant, in conjunction with the fact there are no limitation issues arising for the plaintiffs if the Amended Writ were set aside, and that the defendants have afforded the plaintiffs ample opportunity to amend the Indorsement to cure its defects, causes me to form the view that, in the interests of justice, it is appropriate to set aside the Amended Writ pursuant to O 6 r 1(2) RSC with no leave to amend. I therefore grant the defendants' applications.
I will hear the parties as to final orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EP
Associate to Acting Principal Registrar Whitby
7 JUNE 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: ROBINSON-PAGE MANAGEMENT PTY LTD ATF THE BEGGS-PAGE SUPERANNUATION FUND -v- TRACKEM HOLDINGS PTY LTD [2019] WASC 194 (S)
CORAM: ACTING MASTER WHITBY
HEARD: ON THE PAPERS
DELIVERED : 8 OCTOBER 2019
PUBLISHED : 8 OCTOBER 2019
FILE NO/S: CIV 3127 of 2018
BETWEEN: ROBINSON-PAGE MANAGEMENT PTY LTD ATF THE BEGGS-PAGE SUPERANNUATION FUND
Plaintiffs
AND
TRACKEM HOLDINGS PTY LTD
First Defendant
KASHIF SALEEM
Second Defendant
Catchwords:
Costs - Application for indemnity costs - Circumstances where the court will award indemnity costs - Application for special costs order
Legislation:
Legal Profession Act 2008 (WA), s 280
Rules of the Supreme Court 1971 (WA), O 66 r 1
Result:
Final costs order
The plaintiff pay the first and second defendants' costs on a party/party basis to be taxed if not agreed
Category: B
Representation:
Counsel:
| Plaintiffs | : | Mr W Spyker |
| First Defendant | : | Mr M L Bennett |
| Second Defendant | : | Mr A J Papamatheos |
Solicitors:
| Plaintiffs | : | Spyker Legal |
| First Defendant | : | Bennett & Co |
| Second Defendant | : | Barry Nilsson Lawyers |
Case(s) referred to in decision(s):
Currie v Currie [No 2] [2019] WASCA 2 (S)
Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor [2003] WASC 122 (S)
Robinson-Page Management Pty ltd ATF The Beggs-Page Superannuation Fund v Trackem Holdings Pty Ltd [2019] WASC 194
Sino Iron Pty Ltd v Minerology Pty Ltd [No 2] [2017] WASCA 76(S)
Yara Australia Pty Ltd v Oswal [2012] WASCA 264
ACTING MASTER WHITBY:
On 7 June 2019 I made orders that, pursuant to the first defendant's application dated 10 April 2019 and the second defendant's application dated 11 April 2019, the plaintiffs' amended writ of summons dated 18 February 2019 be set aside with no leave to replead.
By minute of proposed orders dated 7 June 2019, the first and second defendants sought orders that the plaintiffs pay their costs on an indemnity basis, except insofar as they are of an unreasonable amount or have been unreasonably incurred. In the alternative, the first and second defendants seek special costs orders that the taxing officer, in taxing the bills of costs, make reasonable allowances without regard to the scale limits under items 10(a), 18 and 33 of the Legal Profession (Supreme and District Court) (Contentious Business) Determination 2018 (Scale), or the Scale limits for hourly rates.
The plaintiffs submit that the court should make costs orders in terms of their minute of proposed orders dated 7 June 2019, which provides that the plaintiffs pay the first and second defendants' costs of the action to be taxed (on a party/party basis) if not agreed.
These reasons deal solely with the question of costs.
The proceedings
I summarised the nature of the first and second defendants' applications to set aside the plaintiff's amended writ in my reasons for granting those applications delivered on 7 June 2019.[22] These reasons are to be read together with that decision.
[22] Robinson-Page Management Pty ltd ATF The Beggs-Page Superannuation Fund v Trackem Holdings Pty Ltd [2019] WASC 194.
Legal principles - indemnity costs
Order 66, r 1(1) of the Rules of the Supreme Court 1971 (WA) provides that the costs of, and incidental to all proceedings shall be in the discretion of the court, but the court will generally order that the successful party to an action or matter recover his costs.
In Yara Australia Pty Ltd v Oswal,[23] Murphy JA (McLure P agreeing) said:
There must be some special or unusual feature of the case to warrant an award of indemnity costs: Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225, 233. The categories of cases in which an indemnity costs order may be made are not closed: Colgate-Palmolive Co v Cussons (233). In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401, Woodward J said that indemnity costs were appropriate where the action 'has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success'. As Pullin J observed in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [25], an order for indemnity costs may be seen as a 'mark of disapproval on the part of the court about the improper or unreasonable conduct of litigation'. It is sufficient to enliven the discretion to award indemnity costs that, for whatever reasons, a party persists in what should on a proper consideration seem to be a hopeless case: Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [6].
[23] Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33] cited with approval in Currie v Currie [No 2] [2019] WASCA 2 (S).
In Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor,[24] Pullin J stated:
In this case, the plaintiff submits that there was unreasonable conduct in the running of the defendant's case. [10]
Even if there has been such conduct, an indemnity costs order will not be made if the costs would be covered by an order for party and party costs … or by a special costs order. [11]
… however, there is still a place for indemnity costs orders. It will be appropriate in cases where there has been improper or unreasonable conduct on the part of a party or his legal advisors. An order for an indemnity costs order is a mark of disapproval on the part of the court about the improper or unreasonable conduct of litigation, even though there should not be much difference in the costs recovered under such an order compared with recovery under a properly formulated special costs order. If the conditions warrant an indemnity costs order, it is likely that the Judge making the order will be more inclined to allow an increase in the hourly rates or an increase in the limits. An order detailing those increases should, in my opinion, be made even where indemnity costs orders are made. [25]
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party. [26]
… it is my opinion that if a party wishes to seek a special costs order or an indemnity costs order to allow costs to be taxed on the rates stated in a cost agreement, then the terms of the costs agreement should be disclosed to the Judge who is being asked to make the order. This should not be left to emerge as an issue before the taxing officer. [30]
[24] Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor [2003] WASC 122 (S) [10] - [11].
Indemnity costs - application of law to the facts
The first and second defendants submit that an indemnity costs order is appropriate for the following reasons:
(a)the deficiencies in the writ were obvious and brought to the attention of the solicitors for the plaintiff by the solicitors for the first defendant in letters dated 19 December 2018 and 25 February 2019.[25] The continuation of an attempt to defend the writ in the face of clear objections and observations as to its defects constitutes unreasonable conduct on the part of the plaintiffs;
(c)the entire indorsement on the amended writ of summons was held to be defective in respect of any of the alleged causes of action against both defendants;[26]
(d)the plaintiffs commenced the proceedings for a collateral purpose, that is in response to the first defendant commencing related proceedings in the District Court of Western Australia on 16 November 2018.[27] When read in conjunction with evidence as to the prejudice occasioned to the first defendant as a result of the commencement of these proceedings,[28] it is clear that the proceedings were issued for a collateral purpose; and
(e)on 5 February 2019, the second defendant's solicitors (in a joint email communication issued by the first defendant's solicitors) reserved their rights in relation to costs.[29] The plaintiffs were therefore, put on notice that the first and second defendants may seek indemnity costs in the event an application to set aside the writ was successful.
[25] Affidavit of Kashif Saleem sworn 10 April 2019 (Saleem affidavit) at 'KS-13', 'KS-15'.
[26] Robinson-Page Management Pty Ltd ATF The Beggs-Page Superannuation [27] - [28].
[27] Plaintiff's amended submissions dated 29 May 2019 para 16(c).
[28] As set out in Saleem affidavit at paras [25] - [28].
[29] Saleem affidavit at 'KS-14'.
The plaintiffs submit that they did not commence or continue the proceedings for a collateral purpose. Rather this proceeding was commenced for a sole legitimate purpose, being to protect and enforce the plaintiffs' rights as against the first and second defendants. Further, the plaintiffs submit that the action was commenced only after attempts by Mr Hugh Beggs to discuss and resolve the dispute with the second defendant were unsuccessful.[30]
[30] Affidavit of Hugh Robinson Beggs sworn 27 May 2019 at paras [26] - [31].
The plaintiffs submit that they should not be discouraged by the prospect of an indemnity costs order from pursuing their legitimate grievances against the first and second defendants.
The plaintiffs submit that this is not a hopeless case for the following reasons:
(a)the plaintiffs' case was arguable as supported by the affidavit of Hugh Robinson Beggs sworn 27 May 2019 (Beggs affidavit);
(b)the plaintiffs' substantive claim has not proceeded to hearing or been determined on the merits;
(c)there has been no finding that the plaintiffs do not, or cannot, have substantive rights. The court noted that the question of share prices was rightly the realm of expert evidence;[31] and
(d)whilst in the interests of justice the court determined that the writ be set aside, the plaintiffs do not face any limitation issues and may reissue proceedings.
[31]Robinson-Page Management Pty ltd ATF The Beggs-Page Superannuation Fund v Trackem Holdings Pty Ltd [34].
I found the indorsement of claim did not contain the necessary elements of any of the alleged causes of action against the defendants. I also found it significant that the plaintiffs had not pleaded loss and damage.[32] In my view, the commencement of the action falls short of constituting improper or unreasonable conduct of litigation on the part of the plaintiffs. These are not circumstances where the court ought give a mark of disapproval of the plaintiffs’ conduct. While the action was weak and may have been commenced prematurely, I do not consider that it was hopeless.
[32] Robinson-Page Management Pty ltd ATF The Beggs-Page Superannuation Fund v Trackem Holdings Pty Ltd [27].
Accordingly, I decline to make an order that the plaintiffs pay the first and second defendants’ costs on an indemnity basis.
Special costs order – legal principles
In the alternative, the defendants seek special costs orders that the taxing officer, in taxing the bills of costs, make reasonable allowances without regard to the scale limits under Items 10(a), 18 and 33 of the Scale or the Scale limits for hourly rates.
Section 280(1) and (2) of the Legal Profession Act 2008 (WA) (Legal Profession Act) provides:
280.Effect of costs determination
(1)Subject to any costs agreement made in accordance with Division 6 or the corresponding provision of a corresponding law, section 306 and the Legal Aid Commission Act 1976 section 14 -
(a) the taxation of bills of law practices; and
(b) any other aspect of the costs charged by law practices,
is regulated by an applicable costs determination.
(2)Despite subsection (1), if a court or judicial officer is of clear opinion that the amount of costs allowable in respect of the matter under a cost determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
The purpose and effect of s 280(1) and (2) of the Legal Profession Act were considered by the Court of Appeal in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2],[33] where the court said:
By s 280(1) of the Act, a party's recoverable costs are confined, in effect, by the scale limits. To that extent, s 280(1) is protective of the party charged and, more generally, serves the due administration of justice by limiting the allowable scope for legal costs. Section 280(2) operates as an exception to s 280(1) of the Act. Section 280(2) of the Act operates to give the successful party the opportunity to recover those costs which have been reasonably and properly incurred where, in the court's opinion, the scale is inadequate because of the unusual difficulty, complexity or importance of the matter. To that extent, s 280(2) of the Act is protective of the successful party to the litigation and, on that account, also serves the administration of justice by facilitating, within the limits imposed by the statutory criteria, the operation of the general principle that a successful party is entitled to its costs of the litigation. Even where orders are made under s 280(2) of the Act, it nevertheless remains the task of the taxing officer to consider the reasonableness of and necessity for the work undertaken, and to make a judgment about the remuneration reasonably required.
Before such a power will be exercised, the court must form an opinion that has two components. First, the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination. Secondly, the court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the 'unusual difficulty, complexity or importance of the matter'. Issues of the kind which arise are addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.
For the purposes of exercising the powers conferred by s 280(2) of the Act, it will not ordinarily be necessary for the court to determine what amount should be allowed on taxation, but only whether there is a fairly arguable case that a greater amount should be allowed than that which is allowable under the relevant determination.
A fairly arguable case to that effect will not be established merely because a party incurred greater costs than those allowable under the relevant determination. However, depending on the particular case and all the circumstances, the fact that a party has applied significantly greater legal resources to each step in the litigation than those for which allowance is made under items of the relevant determinations, when viewed in the context of the difficulty, complexity or importance of the matter, may sustain the conclusion that there is a fairly arguable case that each of the items identified is inadequate (and thereby the amount of costs allowable in respect of the matter is inadequate) because of the unusual difficulty, complexity or importance of the matter.
… the reference to 'importance' in this context allows the court to have regard to the significance of the issues that arose in the litigation. Significance can arise either because of the significance of the issues to the parties, or because of the significance of the issues to other prospective parties, or to the public or community generally.
… the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the relevant costs determination.[34] (references to authority omitted).
[33] Sino Iron Pty Ltd v Minerology Pty Ltd [No 2] [2017] WASCA 76(S).
[34] Sino Iron Pty Ltd [11] - [16].
The relevant Scale sets out the maximum allowable rates for the application. The Scale allowance under:
(a)Item 10(a) is based on two days' preparation and one day hearing;
(b)Item 18 is based on 120 hours at the rate applicable for a senior practitioner;
(c)Item 33 is per hour for time spent by a legal practitioner at the applicable Scale rate. However, allowances are only made under Item 33 if costs are awarded on an indemnity basis.
Special costs order – application of law to the facts
The threshold question is whether the amount of costs allowable in respect of the matter under the Scale is inadequate. I must be satisfied that each of the defendants has a fairly arguable case that the bill of costs to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the Scale.
The chronology of the proceeding is as follows:
(a)the plaintiffs commenced the proceedings by writ filed on 11 December 2018;
(b)the plaintiffs filed an amended writ on 19 February 2019;
(c)the first defendant filed its application to set aside the amended writ on 27 February 2019;
(d)the second defendant filed his application to set aside the amended writ on 1 March 2019;
(e)the first defendant filed the affidavit of Kashif Saleem sworn 10 April 2019 and an outline of submissions in support of its application on 10 April 2019;
(f)the second defendant filed an outline of submissions in support of his application on 11 April 2019;
(g)the plaintiffs filed the Beggs affidavit and an outline of submissions in opposition to the first and second defendants' applications on 27 May 2019; and
(h)the applications were heard before me on 31 May 2019 (for approximately one hour and 10 minutes).
Neither of the defendants has disclosed any costs agreement or hourly rates payable under such agreements. Nor do either of the defendants provide any evidence as to the amount their respective bill of costs may be taxed as if there was no limit imposed on either Items 10(a) and Item 18 of, or the hourly rates under, the Scale.
Given the early stage of the proceedings at which the applications were filed, together with the absence of disclosure of any costs agreements or estimate of taxed costs by either of the defendants, I am not satisfied that the amounts provided for in the Scale are inadequate.
Having formed the view that the amounts provided for in the Scale are not inadequate, it is not necessary that I consider whether the matter was one of 'unusual difficulty, complexity or importance'. However, if I had found the Scale to be inadequate, I am not persuaded that this matter was of unusual difficulty, complexity or importance so as to justify a special costs order.
The matter required consideration of well-established legal principles and pleading rules. It did not require difficult or complex legal analysis. Further, while I accept that the matter was of commercial importance to the defendants, it was not a case where that importance was so exceptional as to render it unusual.
Orders
I order that the plaintiffs pay the first and second defendants' costs of the action on a party/party basis to be taxed if not agreed. For the avoidance of doubt, the costs of the action do not include any costs associated with this costs application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EP
Associate to Registrar Whitby
8 OCTOBER 2019
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