Scott v Second Skin Pty Ltd

[2015] WASC 126

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   SCOTT -v- SECOND SKIN PTY LTD [2015] WASC 126

CORAM:   PRITCHARD J

HEARD:   17 DECEMBER 2014

DELIVERED          :   17 APRIL 2015

FILE NO/S:   CIV 1492 of 2014

BETWEEN:   ROBERT CHARLES SCOTT

Plaintiff

AND

SECOND SKIN PTY LTD (ACN 009 350 467)
First Defendant

MORGAN HOWARD SOLOMON
FIONA MELANIE WOOD
Second Defendants

Catchwords:

Costs - Indemnity costs - Relevant principles - Factors to be considered - Whether conduct of the litigation is improper or unreasonable - Whether cause of action is hopeless - Whether order for indemnity costs would make any practical difference on taxation - Turns on own facts

Legislation:

Nil

Result:

Application for indemnity costs dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr M D Cuerden SC

First Defendant             :     Mr M N Solomon SC

Second Defendants       :     No appearance

Solicitors:

Plaintiff:     Macdonald Rudder

First Defendant             :     Thompson Downey Cooper

Second Defendants       :     No appearance

Cases referred to in judgment:

Australian Competition and Consumer Commission (ACCC) v Allergy Pathway Pty Ltd [2009] FCA 960

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665

Bass v Permanent Trustee Co Ltd (Homefund Case) [1999] HCA 9; (1999) 198 CLR 334

BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 76 FLR 141

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195

Crosbie v Commissioner of Taxation [2003] FCA 922; (2003) 130 FCR 275

Dean-Willcocks v Commissioner of Taxation (No. 2) [2004] NSWSC 286; (2004) 57 ATR 413

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397

NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] FCA 480; (2001) 109 FCR 77

Quancorp Pty Ltd v MacDonald [1999] WASCA 101

Re Bond Corp Ltd (1990) 1 WAR 465

Re Malley SM; Ex parte Gardner [2001] WASCA 83

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Trafalgar West Investments Pty Ltd As Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70

1. PRITCHARD J:  In this action Mr Scott sought a declaration that he was the beneficial owner of one of two equal shares in Second Skin Pty Ltd (the Share) and various ancillary orders relating to the provision of financial information to Mr Scott in relation to Second Skin.  The other share in Second Skin was owned by Ms Jennifer Ballantyne, who died in July 2012.  (Mr Scott and Ms Ballantyne were in a de facto relationship for some years, which appears to have come to an end by about 1995.)

2. The second defendants to this action are the executors of Ms Ballantyne's will, and were sued in that capacity.  They filed a notice of their intention to abide by the decision of the Court.

3. On 24 September 2014, I made orders by the consent of all of the parties to the action, granting a declaration that Mr Scott was the legal and beneficial owner of the Share and various ancillary orders.  I explain below how I came to make those orders.

4. I also made three orders with the consent of the parties which related to costs.  Two of those costs orders have present relevance.  First, I made an order that Second Skin pay Mr Scott's costs of and relating to the action, including without limitation the application for summary judgment, without regard to the upper limits of the applicable scale (special costs order).  Secondly, I made an order that Mr Scott have liberty to apply within 30 days for any special costs orders against Second Skin and its solicitors.

5. Pursuant to that liberty to apply, Mr Scott now seeks an order for indemnity costs against Second Skin (the application) in the following terms:

   The first defendant do pay the plaintiff's costs of and concerning or in any way relating to or arising out of the subject matter of this action, including the costs of and concerning this application, on an indemnity basis and further that such costs are to include all costs except so far as they are of an unreasonable amount or have been unreasonably incurred so that subject to the above exceptions the plaintiff will be completely indemnified by the first defendant for his costs.[1]

   [1] Minute of proposed orders for indemnity costs against first defendant, dated 24 October 2014 [1].

6. Second Skin opposes the application.  For the reasons set out below, I am not persuaded that the circumstances of this case warrant the making of an order for indemnity costs. 

7. In these reasons for decision I deal with the following matters:

   1.the factual background to the application and the bases for the application;

   2.the principles in relation to the grant of indemnity costs orders; and

   3.why an order for indemnity costs is not warranted in this case.

1. The factual background to the application and the bases for the application

The statement of claim and the defence

1. Mr Scott commenced the action in April 2014 after a dispute arose with Second Skin in 2013 as to whether he was in fact the owner of the Share.  In his statement of claim he pleaded that on or about 7 February 2013 Second Skin notified the Australian Securities and Investments Commission (ASIC) that Mr Scott was the beneficial owner of one share in the capital of Second Skin (although the company failed to record, in its register of members, Mr Scott's ownership of the share).  However, following requests by Mr Scott for the provision to him of financial information in relation to Second Skin, Second Skin's solicitors refused those requests.  They asserted that the second defendants, as the executors of Ms Ballantyne's estate, were the beneficial owners of the Share, and threatened to transfer the Share to the second defendants. 

2. In its defence, Second Skin pleaded that in August 1995, after their de facto relationship came to an end, Mr Scott and Ms Ballantyne reached an oral agreement with respect to the division of their assets (the alleged agreement).  Second Skin pleaded that Mr Scott and Ms Ballantyne agreed that Mr Scott would transfer his share in Second Skin to Ms Ballantyne on certain conditions.  Second Skin claimed that the alleged agreement was effective as at 10 August 1995, and after that date Ms Ballantyne performed all of her obligations under the alleged agreement.  It was on that basis that Second Skin denied that Mr Scott had any beneficial or legal interest in the Share.

The application for summary judgment and Second Skin's opposition to that application

1. On 8 May 2014, Mr Scott made an application for summary judgment.[2]  That application was resisted by Second Skin, not on the basis that there was an issue or question in dispute which ought to be tried, but on the narrow basis 'that there ought for some other reason to be a trial of [Mr Scott's] claim'.[3]  The submission advanced by counsel for Second Skin was that Second Skin did not have evidence on which it could positively assert the existence of the alleged agreement, sufficient to enable the Court to be satisfied that 'leave to defend should be granted in the usual way'.[4]  Instead, counsel submitted that there was evidence that suggested the possibility of an agreement by which Mr Scott assigned his interest in the Share to Ms Ballantyne in around 1995, and that in all of the circumstances, Second Skin should be given the opportunity to investigate further whether the alleged agreement had been reached.[5] 

   [2] Rules of the Supreme Court 1971 (WA) O 14 r 1(1).

   [3] Rules of the Supreme Court 1971 (WA) O 14 r 3(1).

   [4] ts 57 (8 September 2014).

   [5] ts 10 - 11 (8 September 2014).

2. The basis for the approach taken by Second Skin was as follows.  It was not disputed that:

   1.the share capital of Second Skin comprises two shares;

   2.one share had always been held by Ms Ballantyne and now forms part of her estate;

   3.the Share was initially held by Second Skin's accountant, Mr Ronald Magerl, on trust for Mr Scott; and

   4.ASIC extracts record Mr Scott as holding the Share both legally and beneficially from 8 February 2013, but that the register of members maintained by Second Skin did not record Mr Scott as a shareholder.[6] 

   [6] Submissions of first defendant in opposition to summary judgment, dated 3 September 2014 [8].

3. Against those undisputed facts, counsel for Second Skin pointed to the existence of two sets of documents which were consistent with the existence of the alleged agreement.  First, counsel for Second Skin relied upon an affidavit of Mr Giovanni Groppoli, one of Ms Ballantyne's former solicitors.  Mr Groppoli deposed that in 1995, he recalled a meeting with Ms Ballantyne at which she told him that she had reached an agreement with Mr Scott regarding the division of their assets and that certain transactions formed part of that agreement.[7] 

   [7] Affidavit of Giovanni Groppoli sworn 20 August 2014 [9].

4. Mr Groppoli attached copies of several documents to his affidavit.  They included a copy of a letter to Ms Ballantyne dated 15 March 1995 in which he referred to her instructions that she had 'agreed with Mr Scott that Mr Scott will direct Mr Magerl to transfer the one share held by Mr Magerl in Second Skin to your nominee, in consideration of you entering into a deed …'.[8]  In addition, Mr Groppoli attached a letter dated 31 March 1995 to Ms Ballantyne in which he enclosed a draft Share Sale Deed in relation to the acquisition of the Share.[9]  Mr Groppoli also attached a copy of a letter dated 2 June 1995 to Mr Magerl enclosing various documents including a draft Deed of Settlement (one of the terms of which pertained to the transfer of the Share by Mr Scott to Ms Ballantyne) and a draft Declaration of Trust to be executed by Mr Magerl (which reflected that he had acquired the Share using funds provided by Ms Ballantyne, and had become a shareholder of Second Skin, and was acting as Ms Ballantyne's trustee in doing so).[10]  Mr Groppoli deposed that he would not have prepared those documents had he not been instructed that Ms Ballantyne and Mr Scott had reached accord on the fundamental terms of the agreement, and that all that remained was to document the agreement and implement it.[11]

   [8] Affidavit of Giovanni Groppoli sworn 20 August 2014, attachment GG-1.

   [9] Affidavit of Giovanni Groppoli sworn 20 August 2014, attachment GG-2.

   [10] Affidavit of Giovanni Groppoli sworn 20 August 2014, attachment GG-3.

   [11] Affidavit of Giovanni Groppoli sworn 20 August 2014 [17].

5. Finally, Mr Groppoli attached a copy of a letter dated 31 July 1995 to Mr Magerl.[12]  The terms of that letter suggested that there had been negotiations between the parties about whether an arrangement could be put in place which would result in Mr Scott retaining the Share.  Mr Groppoli deposed that he had no recollection of the circumstances in which he sent that letter, but that he did recall that 'Mr Scott would not agree to the terms of the documents I had prepared'.[13]  In addition, Mr Groppoli attached a handwritten file note made by a solicitor in his firm at the time, which stated 'JB thinks it all too much for Scott to handle so she wants to leave things for now'.[14]

   [12] Affidavit of Giovanni Groppoli sworn 20 August 2014, attachment GG-4.

   [13] Affidavit of Giovanni Groppoli sworn 20 August 2014 [19].

   [14] Affidavit of Giovanni Groppoli sworn 20 August 2014, attachment GG-5.

6. The second set of documents relied upon by counsel for Second Skin were the minutes of a meeting of the directors of Second Skin, and of an extraordinary general meeting of the shareholders of Second Skin, both of which were held on 4 October 1996 (the Minutes).[15]  The Minutes and related documentation for the meeting of shareholders were signed by Ms Ballantyne, and by Mr Magerl 'as trustee for Jennifer Ballantyne', 'being all the members of Second Skin'.[16]  If Mr Magerl held the Share on trust for Ms Ballantyne, that would be consistent with the existence of the alleged agreement.  For Mr Magerl to have signed the documents in that capacity was at odds with his holding the Share on trust for Mr Scott.  Given Mr Magerl's position as the accountant for Second Skin, the existence of these documents, signed in that capacity by Mr Magerl, appeared to be of some potential significance.  That was all the more the case in light of the correspondence attached to Mr Groppoli's affidavit.

   [15] Affidavit of Shirley Ann Fletcher sworn 21 August 2014, attachments SAF-7, SAF‑9.

   [16] Affidavit of Shirley Ann Fletcher sworn 21 August 2014, attachment SAF-10.

7. I should say that in setting out these matters, I do not purport to be summarising the entirety of the case advanced by Second Skin on the summary judgment application, but rather have focused on the key aspects of that case.

8. Clearly, in circumstances where one of the two key witnesses in relation to the existence of the alleged agreement (Ms Ballantyne) was deceased, and where some documentary evidence existed which was consistent with the existence of the alleged agreement, any evidence able to be given by Mr Magerl might be very significant in resolving the issues in dispute.  Counsel for Second Skin submitted that

   Mr Magerl … hasn't been enthusiastic about assisting with a written statement for the purposes of summary judgment.  But plainly, his evidence will be important in a trial and it may be that the prospect of a trial and a subpoena to give evidence will encourage Mr Magerl to disclose his position to everyone.  That may or may not make a difference.[17]

   [17] ts 12 (8 September 2014).

9. Counsel for Mr Scott submitted that the evidence before the Court permitted the conclusion that no share transfer had ever taken place between Mr Scott and Ms Ballantyne.[18]  It is unnecessary for present purposes to deal with the totality of the evidence, other than to say that none of the evidence on which Mr Scott relied resolved the question raised by the documents to which I have specifically referred above.

The hearing of the summary judgment application

[18] ts 27 - 43 (8 September 2014).

1. The summary judgment application was heard on 8 September 2014.  In the course of the hearing of the summary judgment application, the parties relied upon affidavits which annexed all of the available documentary evidence in relation to Mr Scott's ownership of the Share, and relating to the existence of an agreement, including the evidence to which I have specifically referred above.

2. It is appropriate to mention that at the outset of the hearing, a claim to legal professional privilege was made in respect of a document upon which Mr Scott sought to rely in support of his application (the disputed document).  To avoid delaying the hearing of the application for summary judgment on that date, I took the view that the preferable course would be for the parties to make their submissions in relation to the application, other than by reference to the disputed document.  I would then provide a preliminary view about the application, and if Mr Scott then wished to press his reliance upon the disputed document I would deal with the claim to privilege, and if appropriate, any further argument in relation to the application.

3. After having heard the submissions of counsel and having considered all of the affidavit material which was relied upon (other than the disputed document) I provided the parties with a preliminary view in relation to the application.  My preliminary view was that on the basis of the material before the Court (other than the disputed document) I was not persuaded to grant the application.  That conclusion was particularly based on the Minutes signed by Mr Magerl as a shareholder and as a trustee for Ms Ballantyne, combined with the possibility, if not the probability, that Mr Magerl would be able to shed light on the matter.[19] 

   [19] ts 90 (10 September 2014).

4. The hearing of the application was then adjourned so that the privilege claim, and the balance of the summary judgment application, could be dealt with after the filing of submissions.

5. Very shortly thereafter, the Court was advised that the second defendants intended to waive their claim of privilege in respect of the disputed document.

6. On 17 September 2014, the Court received a Minute of Consent Orders signed by the solicitors for Mr Scott and Second Skin, consenting to final judgment in favour of Mr Scott, and to the orders to which I have referred.

7. It was apparent, from the terms of the proposed consent orders, that Second Skin had formed the view that at trial, it would not be able to advance a case that the alleged agreement had been made, and thus that it was not in a position to resist Mr Scott's claim to ownership of the Share.

8. Having reviewed all of the available documentation for the purpose of the summary judgment application I formed the view that this was a case where it was appropriate to take the unusual step of making a declaration with the consent of the parties,[20] in relation to the ownership of the Share, and to make the other, ancillary orders, including the orders as to costs to which I referred at [4].

   [20] See, for example, Bass v Permanent Trustee Co Ltd (Homefund Case) [1999] HCA 9; (1999) 198 CLR 334; BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 76 FLR 141; Australian Competition and Consumer Commission (ACCC) v Allergy Pathway Pty Ltd [2009] FCA 960; Crosbie v Commissioner of Taxation [2003] FCA 922; (2003) 130 FCR 275; cf Dean-Willcocks v Commissioner of Taxation (No. 2) [2004] NSWSC 286; (2004) 57 ATR 413; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665.

9. I note for completeness that in an affidavit sworn on 6 November 2014 in relation to the present application, Mr David Thompson, Second Skin's solicitor, deposed that Second Skin consented to the final orders made in the action following a conversation between Mr Solomon SC and Mr Cuerden about further evidence that the plaintiff would adduce at trial.  He deposed that Second Skin agreed to the orders as soon as possible after this information was provided to its counsel and before further substantial costs were incurred.[21]

   [21] Affidavit of D W Thompson sworn 6 January 2014, attachment DWT- 1, pages 2 - 3.

10. In an affidavit of 12 December 2014, Mr Morton Stuart McDonald, the solicitor for Mr Scott, shed further light on the nature of the information provided by Mr Scott's counsel to Second Skin's counsel.  That information was that Mr Magerl had been shown copies of the Minutes, and Mr Magerl had advised that none of the documents refreshed his memory and he had no recollection of signing any document as the trustee for Ms Ballantyne.  In addition, there was a suggestion that the solicitors for Mr Scott had other information which might militate against reliance on Mr Magerl should he be called to give evidence.[22]

    [22] Affidavit of M S MacDonald sworn 12 December 2014, attachment MSM1.

1. The principles in relation to the grant of indemnity costs orders

1. The principles governing indemnity costs orders are well established.  They were summarised by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[23]After pointing out that an order for indemnity costs will only be made in exceptional circumstances,[24] the Court summarised the relevant principles as follows:[25]

   [23] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).

   [24] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [7], referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.

   [25] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10] (citations omitted).

   1.A superior court, in its inherent jurisdiction, may make an indemnity costs order.

   2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis.

   3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially.  In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J said:

   Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way'. (emphasis added)

   4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party.  In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2), French J, by reference to the observations of Woodward J in Fountain Selected Meats, said:

   It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.

   5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, French J observed that 'the categories in which the discretion may be exercised are not closed'.

   6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs.  In Quancorp Pty Ltd v MacDonald, Wheeler J observed:

   On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as 'hopeless' so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as 'hopeless' is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.

   7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers.

   8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.

   9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance.  In Unioil (No 2), Ipp J observed:

   However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.

   10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct.  In Flotilla, Pullin J said:

   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.

1. An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or the clearly established law.[26]  That having been said, the fact that a case is weak or marginal, or unlikely to succeed, is not the same as a 'hopeless' case which merits the sanction of an indemnity costs order.[27]  The Court should not be too ready find that a case is hopeless,[28] not the least because there is uncertainty in many areas of the law and the law changes with changing circumstances.[29]

   [26] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401.

   [27] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [86] (Newnes JA, Murphy JA & Hall J agreeing).

   [28] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [84] (Newnes JA, Murphy JA & Hall J agreeing), see also Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7] (Wheeler J).

   [29] Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7] (Wheeler J).

2. In assessing whether a party engaged in 'improper or unreasonable' conduct, attention needs to be focused on what the party knew, or ought to have reasonably known, in the circumstances.[30] 

   [30] Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70 [12] (Kenneth Martin J).

3. Furthermore, indemnity costs will not be ordered simply because

   the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.  Even in a proved case of fraud, … the presumption is that a costs order against the fraudulent party will be on the party and party basis.  The conduct of a party that is relevant to the issue of indemnity costs is the party's conduct as litigant.  But … the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.[31]

   [31] NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] FCA 480; (2001) 109 FCR 77, 92 [56] (Lindgren J).

1. Why an order for indemnity costs is not warranted in this case

1. Mr Scott seeks indemnity costs on the basis that Second Skin's conduct in relation to the action was unreasonable. 

2. Much of the focus of the submissions of counsel for Mr Scott at the hearing of the present application concerned the conduct of Second Skin and its solicitors prior to the commencement of the action.  It was submitted that Second Skin had, in effect, created a dispute as to Mr Scott's status as a shareholder when no dispute otherwise existed.[32] 

   [32] Submissions in support of the application for indemnity costs, dated 17 November 2014, page 2.

3. In so far as the conduct of the litigation was concerned, counsel for Mr Scott submitted that the unreasonableness of Second Scott's conduct lay in defending the action on the basis of the alleged agreement, when clearly there was no evidence as to an agreement, inquiries had not been made of Mr Magerl, and Second Skin had no legitimate interest in questioning Mr Scott's ownership of the Share.

4. Having carefully considered the submissions advanced on Mr Scott's behalf, I am not persuaded that this is one of those exceptional cases where an order for indemnity costs should be made as a mark of disapproval for unreasonable or improper conduct.  I have reached this conclusion for four reasons.

5. First, in considering the question of indemnity costs, the starting point must be the conduct of the litigation.  The steps taken in this action comprised the filing of short pleadings, and thereafter focused on the summary judgment application.  Some criticism can justifiably be made of the terms of the defence, in so far as it asserted the existence of the alleged agreement, when the documentary evidence clearly fell short of establishing the existence of that agreement.  However, given that the focus of the litigation moved immediately thereafter to the summary judgment application, which was defended on a far more precise basis, I am not persuaded that the way in which the defence was pleaded is of itself sufficient to sound in indemnity costs. 

6. Furthermore, in my view, the approach taken by Second Skin in defending the summary judgment application cannot be regarded as improper or unreasonable.  The basis on which the application was defended was narrow, and focused, as I have already observed, on the existence of some evidence which suggested the possibility of the alleged agreement, in circumstances where the Court was informed that there had been some difficulty obtaining a statement from Mr Magerl.  That evidence was sufficient for me to form the preliminary view that without more, the application for summary judgment should not be granted, but that the matter should proceed to trial, so that Mr Magerl could be subpoenaed to give evidence of his knowledge of the existence of the alleged agreement.

7. Finally, as soon as information was provided to Second Skin about the likely tenor of Mr Magerl's evidence, at which point it became apparent that Second Skin could not successfully resist Mr Scott's claim of ownership of the Share, Second Skin consented to orders for judgment.  That was an entirely appropriate course of action.

8. I digress to observe that although there was no obligation on Mr Scott's solicitors to advise Second Skin's solicitors of the tenor of communications that they had had with Mr Magerl, or to advise of other information in their possession which might bear on any evidence he might give at trial, it is regrettable that at no point prior to the hearing of the summary judgment application was that information shared with Second Skin's solicitors.  If that information had been shared at some earlier point, it seems likely that an earlier resolution of the action may have been possible. 

9. Secondly, I do not accept the submission that Second Skin had no legitimate interest in questioning Mr Scott's ownership of the Share.  In this respect, I accept the submissions advanced by counsel for Second Skin that it was not unreasonable for the directors of Second Skin to be cautious about Mr Scott's assertion of ownership of the Share.  Mr Scott's assertion of ownership occurred in circumstances where evidence had come to light which suggested room for some doubt about whether Mr Scott was the owner of the Share at the time that the ASIC register was updated to reflect that fact. 

10. Thirdly, the conduct of the officers of Second Skin, and of its former solicitors, prior to the commencement of the action, must be considered.  Although the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as a litigant, I am not persuaded that such information as is before the Court about the conduct of the officers of Second Skin, or its former solicitors prior to the commencement of this action, warrants an order for indemnity costs in all of the circumstances.  Counsel for Mr Scott submitted that the documents before the Court permitted the inference that the dispute in relation to Mr Scott's ownership was pursued for strategic purposes and without instructions, and that Second Skin's conduct was motivated by the personal financial interests of its directors. 

11. In circumstances where Ms Ballantyne was deceased, where there were some documents which raised the possibility of the alleged agreement (but where it was not clear that those documents had been seen, or their contents appreciated, until 2013) and where the question of ownership of the Share arose in the context of the administration of Ms Ballantyne's estate which had generated a number of acrimonious disputes, I am not prepared to draw serious, adverse consequences against Second Skin's directors, or its former solicitors, without hearing from them.  In any event, the key point for present purposes is that I am not persuaded that this litigation has been conducted in an unreasonable or improper way so as to warrant an order for indemnity costs.

12. Fourthly, it is far from apparent that an order for indemnity costs in this case would make any practical difference on a taxation, in light of the special costs order I have already made.  In view of the scope of that special costs order, the only point of difference referred to by counsel for Mr Scott which might have had a practical impact is the conceptual difference that if an order for indemnity costs is made, that will encompass all costs save where those costs have been unreasonably incurred.[33]  But that is a point of difference which exists in every case where an indemnity costs order is sought instead of the usual order as to costs, and is not sufficient of itself to warrant an order for indemnity costs.  In my view, this doubt as to whether an indemnity costs order would make any practical difference at a taxation in view of the special costs order also supports the conclusion that an order for indemnity costs is not warranted in this case. 

    [33] Re Bond Corp Ltd (1990) 1 WAR 465, 479 (Ipp J).

Conclusion

1. For all of these reasons, Mr Scott's application for indemnity costs will be dismissed.