Searle, B.A. v Keayes, P

[1995] FCA 406

LIMITED DISTRIBUTION
  CATCHWORDS

PRACTICE and PROCEDURE - form of short minutes of orders following publication of reasons for judgment - no discussion of principles.

COSTS - indemnity costs - whether conduct of party so unsatisfactory that it calls out for a special costs order - whether action has been commenced or continued in circumstances where respondents should have known they had no prospect of success.

Packer v Meagher [1984] 3 NSWLR 486

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

Degmam Pty Ltd (In Liq) v Wright [1983] 2 NSWLR 348

Baltic Shipping Company v Dillon (1991) 22 NSWLR 1

Jackson v Sterling Industries Ltd (1987) 162 CLR 612

BRONWYN ANN SEARLE v
PETER KEAYES & ORS

No NG 309 of 1994

Tamberlin J
Sydney
26 May 1995

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 309 of 1994
GENERAL DIVISION                 )

BETWEEN:               BRONWYN ANN SEARLE
  Applicant

AND:                   PETER KEAYES
  First Respondent

RICHARD KEAYES
  Second Respondent

BRISALEBE AG LIMITED
  (ACN 060 401 827)
  Third Respondent

BRISALEBE AG
  Fourth Respondent

WSB (No 15) PTY LIMITED
   Fifth Respondent

WSB (No 17) PTY LIMITED
  Sixth Respondent

THE GOOD OF THE WORLD
  FOUNDATION LTD
  (ACN 067 152 541)
  Seventh Respondent

CORAM:       TAMBERLIN J
PLACE:       SYDNEY
DATED:       26 MAY 1995

REASONS FOR JUDGMENT

In this matter I published my reasons for decision on 19 May 1995 and stood the matter over until today so that the applicant could bring in draft orders and submissions could be made on those draft orders.

The purpose of the hearing this morning was to settle the terms of orders appropriate to be made in this matter.  The applicant's counsel has submitted draft orders. He made submissions and all other parties have made submissions.  I will turn to the draft orders.

Draft order 1 deals with the appropriate declarations.  In relation to this draft order I am satisfied that the declarations are appropriate and should be made.  This case is not concerned with the value or merits of the technology, but rather with the contractual arrangements which control its ownership.  Accordingly, if the patents or any of them are challenged or are objected to, that is not relevant to the matter presently before me.

In relation to draft order 3, the second respondent, Richard Keayes, submits that he has no legal or equitable interest in the patents or the confidential information.  However, I am told that he is named as a co-inventor in relation to two of the patents, namely, the Convention applications.  It is evident from the hearing that he was at all times closely associated with and acted in the same interest as his brother, Peter Keayes, and in these circumstances it is highly probable in my view, that he was privy to confidential information relating to the patents.  It is therefore appropriate that he should be required to co-operate in the transfer of the technology to those entitled under the agreement which I have found to exist.
In relation to draft order 4, I consider that it should be modified so that each of the first to sixth respondents should be restrained from dealing with the assets, the subject of the declaration, in any way inconsistent with the orders hereby made. That involves a minor change of wording and I do not think anything turns on it.

In respect of draft order 6, which relates to the way in which the Good of the World Foundation Limited should hold the interests in the technology and the shares in which they should be held, Mr Peat on behalf of Brisalebe AG Ltd ("BAGL"), the third respondent, submits that some of the parties entitled under the agreement may be doubling up in the sense that they would each take a separate share in BAGL and then also participate under the agreement, which I have found to exist.  BAGL is to receive a 12½ per cent interest in the technology.  The shareholders and investors in that company will be entitled to this interest.  It is pointed out by way of example, that the applicant, Mrs Searle, is entitled to a 3 per cent beneficial interest in the technology and that in addition, she may be entitled as an investor in BAGL to participate in the 12½ per cent interest in that company.

In my view, there is no substance in the submission.  The entitlement as investors in BAGL represents a distinct interest and entitlement from that which they receive under the agreement as evidenced in relation to participating
interests by the Mankato statement.  I do not consider that there is any doubling up in this situation.

The corporate structure set out in my reasons and submitted by Peter Keayes indicates that there are approximately 135 shareholders in BAGL who have contributed about $3 million.  If Mrs Searle or Craig Jones or Warwick Fulton or Carla Harper, for example, have invested in BAGL they are entitled to participate in the 12½ per cent interest in the technology to the extent of their investment which that company receives in relation to the interest, which is evidenced under the Mankato statement in accordance with these orders.

Draft order 7 requires the third to sixth respondents to pay the applicant's costs on a party and party basis.  Submissions have been made that these parties should not pay any costs or at least have their costs apportioned to the time taken in Court as a result of their participation, and otherwise resulting from their involvement in these proceedings.

These parties having made submissions and participated in the proceedings as active parties, should bear the cost together with the first and second respondents.  The third to sixth respondents did not submit to orders of the court, nor did they participate with any reservations or limitations as to costs.  They took part in the proceedings as full and plenary parties.  In the end result their submissions were rejected. 
I do not accept that there should be any apportionment in the manner suggested.

The fourth to sixth respondents were under the effective control of Peter Keayes according to the diagram set out in my reasons for judgment, and it is clearly appropriate that they should fully bear costs, along with the other respondents, with the exception of course of the seventh respondent.  BAGL took an active role and did not seek to impose any reservations or limits as to its participation and accordingly it should be liable also for the costs of the proceedings, along with the other five respondents.

In relation to order 8, the applicant seeks an award of costs on an indemnity basis against the first and second respondents.  The relevant guidelines as to whether costs so far as relevant should be imposed on an indemnity basis for present purposes are, firstly, whether the conduct of the party is so unsatisfactory that it calls out for a special costs order.  One instance of this may be where there is an abuse of process of the court, see Packer v Meagher [1984] 3 NSWLR 486. Secondly, whether an action has been commenced or continued in circumstances where the applicants, properly advised, should have known that they had no prospect of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law.
This principle also applies equally to respondents in the conduct of the litigation.  See Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401.

The third guideline is whether the allegations made as the basis of defences were false or deliberately concocted in an attempt to deny the applicant its rights and to shift blame and legal liability to the applicant.  This could include conduct such as gross prevarication leading to prolongation of litigation and the incurring of costs.  See Degmam Pty Ltd (In Liq) v Wright [1983] 2 NSWLR 348 at 358.

In the present matter none of the above circumstances were present and I do not consider that costs should be awarded on an indemnity basis or on a solicitor-client basis. 

I note that there is some doubt as to whether courts have power to make an award on a full indemnity basis as opposed to a solicitor-client basis.  See Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 at 33 per Kirby P with whom Gleeson CJ and Mahoney J agreed.

Although I form the view that Peter Keayes was not a credible witness and that the version of Richard Keayes should not be accepted, this alone does not require the award of costs on an indemnity basis.  The question is always one for the exercise of discretion which must of course be exercised judicially. 
The chain of events resulting in this action was complex and lengthy and was not, in my view, so completely hopeless as to warrant the description that the action should never have been brought. 

Accordingly, in relation to costs, I consider the appropriate order is that the first to sixth respondents inclusive should bear the applicant's cost of the action. 

In relation to order 9, the applicant seeks in effect a Mareva injunction to restrain Peter Keayes from dealing in any way with his interest in the technology until the costs awarded against him have been paid or until 18 months have expired.  Although such injunctions can be granted as an ancillary order after judgment so as to protect a successful applicant against the dissipation of the fruits of his judgment in the applicant's favour, I am not satisfied that this is a case where such an order should be made.  There is no evidence before me that Peter Keayes intends to dispose of his 5 per cent interest in the technology, nor do I think it appropriate to restrain him from dealing with property to which he is entitled under the agreement. 

It seems fairly clear, from evidence given in the course of the hearing that he is impecunious but on its own I do not think this is sufficient to warrant the restraint of his proprietary interests in order to secure the payment of costs. As the High Court pointed out in Jackson v Sterling Industries
Limited (1987) 162 CLR 612, the purpose of such an injunction is not to provide security for the applicant but rather it is to prevent the abuse or frustration of the Court's process in relation to matters coming within its jurisdiction. There should be shown, before granting such an injunction, a danger that the defendant might abscond or dispose of assets. There is no evidence before me that there is any present likelihood that Peter Keayes will take such a course in relation to the 5 per cent interest under the Mankato statement.

Accordingly, for these reasons, I make the following orders: 

(1)Declaration 1 as in the draft orders;

(2)Order 2 as in the draft orders;

(3)Order 3 as in the draft orders;

(4)Order 4 will read: Order that each of the first, second, third, fourth, fifth and sixth respondents is restrained from dealing with any of the assets the subject of the declaration in (1) in any way inconsistent with these orders; 

(5)The order I make is in terms of the draft order 5;

(6)The order that I make will be in the terms of draft order 6; 

(7)In lieu of draft order 7 I order that the first to sixth respondents inclusive pay the costs of the applicant in this proceeding.  That will include, of course, any costs raised in the course of the interlocutory proceedings.  I make no order that there should be any costs paid by Peter or Richard Keayes on an indemnity basis;

(8)I make no order restraining Peter Keayes from transferring his interest in the property;

(9)In relation to the original draft order 10, I order that the security of $23,000 provided by the applicant and held in the joint names of Mr Michael Rhodes and Mr Stephen Blanks at Westpac Banking Corporation together with all interest thereon be released to the applicant.  I do not think it appropriate that I should give directions that Michael Rhodes and Stephen Blanks be directed to assist in such release.  I think that is implicit in the order which I make. 

So far as further orders, I order that all previous injunctions or undertakings are hereby dissolved.  I order that exhibits should be returned to the parties at the expiration of 21 days.  They will be held with the court for the period of 21 days.  I make no order in relation to any suspension of the operation of the declarations or orders which I make. 

I do not propose to stay any of the above orders. The Court will keep the exhibits for 21 days.  I will initial these draft orders and place them with the papers.  Parties can obtain  copies.

I certify that this and
the preceding nine (9)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.

Associate:

Date:  26 May 1995               

Counsel for Applicant:               Mr G M McGrath

Solicitors for Applicant:             Aitken & Magney

For First and Sixth Respondents:       Mr P J Keayes appeared in person  

For Second Respondent:               Mr R W Tregenza

For Third Respondent:                Mr G Peat appeared in person

Date of Hearing:  26 May 1995

Date Judgment Delivered:                   26 May 1995