Simmons, Andrew Nicholas v Levene Pty Limited
[1996] FCA 54
•7 FEBRUARY 1996
CATCHWORDS
PRACTICE AND PROCEDURE - summary judgment application - claim for moneys had and received for total failure of consideration - the nature of the consideration "bargained for" considered - claim dismissed - Court's power to enter judgment for damages to be assessed pursuant to O 35 r 1 and O 38 r 1 the Federal Court Rules discussed
Federal Court Rules - O 35 r 1, O 38 r 1
Trade Practices Act 1974 (Cth) - ss 52 and 53
Cases Considered
Australian Securities Commission v Macleod (1994) 54 FCR 309
Baltic Shipping Company v Dillon (1993) 176 CLR 344
Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 117 ALR 253
Hadley v Baxendale (1854) 9 Ex 371
Andrew Nicholas Simmons & Ronald Lee Stephens
v Levene Pty. Limited & Ors.
QG 39 of 1995
Drummond J
Brisbane
7 February, 1996
IN THE FEDERAL COURT OF AUSTRALIA ) No. QG 39 of 1995
QUEENSLAND DISTRICT REGISTRY )
GENERAL DIVISION )
BETWEEN: ANDREW NICHOLAS SIMMONS
First Applicant
AND:RONALD LEE STEPHENS
Second Applicant
AND: LEVENE PTY. LIMITED (ACN 000 432 637)
(Formerly known as CLEARVIEW ALUMINIUM WINDOWS (AUST.) PTY. LTD. ACN 000 432 637)
First Respondent
AND:NASIB PTY. LIMITED (ACN 062 086 426)
Second Respondent
AND:STEPHEN CHARLES MARROW
Third Respondent
AND:NATIONAL AUSTRALIA BANK LIMITED
(ACN 004 044 937)
Fourth Respondent
AND BETWEEN: NASIB PTY. LIMITED (ACN 062 086 426)
Cross-Claimant
AND:ANDREW NICHOLAS SIMMONS
First Cross-Respondent
AND:RONALD LEE STEPHENS
Second Cross-Respondent
AND:NICHOLAS FOX
Third Cross-Respondent
AND:MICHAEL McGOLDRICK
Fourth Cross-Respondent
MINUTES OF ORDERS
JUDGE MAKING ORDER: Drummond J
DATE OF ORDER: 7 February, 1996
WHERE MADE: Brisbane
THE COURT ORDERS THAT:
The applicants' action and further amended statement of claim as against the second and third respondents be struck out, with costs, including reserved costs, save for the reserved costs of the hearing of 15 December, 1995.
The claim sought by the second and third respondents in the notice of motion filed 25 January, 1996 for judgment on the cross-claim be refused.
The question of costs, in so far as they relate to the claim in the notice of motion filed 25 January 1996 for judgment on the cross-claim, be reserved to 11 April, 1996.
Mr. Thomas Stevens and Mr. Grant McCartney pay the second and third respondents' costs of the hearing of 15 December, 1995, to be taxed on an indemnity basis.
The second and third respondents pay the costs of Messrs. Walsh James and Mr. Crowley, limited to the costs incurred by them in engaging counsel to appeal on their behalf on 6 February, 1996.
THE COURT DIRECTS THAT:
The second respondent be at liberty to file and serve an amended cross-claim by 28 February, 1996.
The applicants file and serve their defence to the second respondent cross-claimant's cross-claim, if any, by 20 March, 1996.
In the event that an amended cross-claim is filed and served but no defence is filed and served, the second respondent cross-claimant shall be at liberty to apply for such judgment as it considers itself to be entitled to, such cross-claim to be heard on 11 April, 1996 at 10.15 a.m.
If an application for judgment is filed and served by the second respondent cross-claimant, the second respondent cross-claimant shall file and serve the material upon which it proposes to rely on by 29 March, 1996.
The applicants file and serve their material in response to the second respondent cross claimant's material by 4 April, 1996.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) No. QG 39 of 1995
QUEENSLAND DISTRICT REGISTRY )
GENERAL DIVISION )
BETWEEN: ANDREW NICHOLAS SIMMONS
First Applicant
AND:RONALD LEE STEPHENS
Second Applicant
AND: LEVENE PTY. LIMITED (ACN 000 432 637)
(Formerly known as CLEARVIEW ALUMINIUM WINDOWS (AUST.) PTY. LTD. ACN 000 432 637)
First Respondent
AND:NASIB PTY. LIMITED (ACN 062 086 426)
Second Respondent
AND:STEPHEN CHARLES MARROW
Third Respondent
AND:NATIONAL AUSTRALIA BANK LIMITED
(ACN 004 044 937)
Fourth Respondent
AND BETWEEN: NASIB PTY. LIMITED (ACN 062 086 426)
Cross-Claimant
AND:ANDREW NICHOLAS SIMMONS
First Cross-Respondent
AND:RONALD LEE STEPHENS
Second Cross-Respondent
AND:NICHOLAS FOX
Third Cross-Respondent
AND:MICHAEL McGOLDRICK
Fourth Cross-Respondent
Coram: Drummond J
Date: 7 February, 1996
Place: Brisbane
REASONS FOR JUDGMENT
The second and third respondents seek orders that the whole of the claim made by the applicants against each of the second and third respondents in the statement of claim be struck out. I understand by that that they seek an order terminating the applicants' action against those two respondents on the ground of the applicants' failure to comply with directions. The second respondent, Nasib Pty. Limited ("Nasib"), also seeks judgment against the applicants on Nasib's cross-claim. Certain costs orders are also sought.
The history of the action is as follows: on 20 March, 1995, the proceedings were commenced and a statement of claim was filed. The papers were served on the respondents on 3 April, 1995. On 21 April, 1995 the first directions hearing took place, at which the second and third respondents foreshadowed an attack on the applicants' statement of claim. Directions were then given for the hearing of that attack on 9 May, 1995.
On 9 May, 1995 the statement of claim, as against the second and third respondents, was struck out. The applicants were given leave to re-plead by 30 May, 1995. Directions were given on what was, in effect, a second directions hearing, which included a direction that a defence and cross-claim be filed by the second and third respondents by 20 June, 1995. On the appointed day, 30 May, 1995, the amended statement of claim was filed and served. On 8 June, 1995 the second and third respondents promptly foreshadowed a further attack on the amended statement of claim, for the reasons they then gave. They expanded their reasons for dissatisfaction with the amended pleading in their letter of 22 June, 1995.
On 5 July, 1995 the applicants indicated they intended to provide further particulars in about a week. On 7 July, 1995, at the third directions hearing, the applicants were directed to file a further amended statement of claim by 14 July, 1995 and the second and third respondents were directed to file their defence and cross-claim by 28 July, 1995. On 1 August, 1995 the further amended statement of claim was filed by the applicants about two weeks late, without complaint by the second and third respondents. No defence and cross-claim was filed.
On 25 August, 1995 at the fourth directions hearing, the applicants foreshadowed delivery of yet another version of the statement of claim. It was directed that they file that by 28 August, 1995. No directions were given on that occasion with respect to the delivery by the second and third respondents of a defence and cross-claim. The applicants, however, did not file any further version of the statement of claim. On 31 August, 1995 they indicated that they did not intend to file any further pleading.
The fifth directions hearing took place before Kiefel J on 1 September, 1995. The applicants confirmed on 31 August, 1995, as I have said, that their pleading of 1 August, 1995 was the final version of the claim they wished to make. Directions were given on 1 September, 1995 for delivery of a defence and cross-claim by 22 September, 1995 and for delivery of the applicants' reply and defence to the cross-claim by 6 October, 1995. Other directions were given for the progress of the action, including directions with respect to discovery. On 6 October, 1995 the second and third respondents filed their defence and cross-claim two weeks late.
The next directions hearing, however, was set some time away for 24 November, 1995. The applicants, therefore, had plenty of time to file the reply and defence to the cross-claim before that directions hearing, even if they were not under any obligation to do so because of late service by the second and third respondents of their defence and cross-claim. They did not, however, file that pleading.
On 24 November, 1995, the sixth directions hearing was held. There was no appearance on behalf of the applicants, although the principal solicitors on the record, Messrs Walsh James of Sydney, were told by their town agent, Mr. Crowley, by facsimile on 6 September, 1995, of the directions given on 1 September, 1995, which included the adjournment of the matter to 24 November, 1995 for further directions.
In the circumstances of this case, in which Messrs Walsh James had previously appeared on directions hearings after instructing Mr. Crowley not to attend, I regard Mr. Crowley as free of blame for the applicants' non-representation on 24 November, 1995. Responsibility for the waste of time and costs incurred by the second and third respondents in attending on 24 November, 1995, on the evidence before me, rests with the Cairns firm of solicitors, Messrs Thomas Stevens & Company, who have been acting for the applicants, who were Cairns residents.
According to what Mr. Deutsch, a principal of Messrs Walsh James, says in the affidavit I directed he have opportunity to file as to his firm's role in the proceedings, Mr. Stevens and Mr. McCartney, members of the Cairns firm, undertook responsibility for the further conduct of the proceedings on behalf of the applicants, including the arranging of an appearance on their behalf on 24 November, 1995 at the directions hearing held that day. During a telephone conference that took place on the morning of 24 November, 1995 in which the applicants, Mr. Deutsch and other members of Messrs Walsh James, and Mr. Stevens and Mr. McCartney participated, this arrangement for Messrs Thomas Stevens & Company to take responsibility for the further conduct of the action on behalf of the applicants was to stand, pending entry by the applicants into a fee agreement with Messrs Walsh James. This fee agreement was faxed to Messrs Thomas Stevens & Company by Messrs Walsh James on 8 December, 1995, but Messrs Walsh James has not yet received the executed agreement from the applicants.
On 24 November, 1995, at the sixth directions hearing, because of the failure of the applicants to appear, I adjourned the action for further directions to 15 December, 1995 and extended the time for the applicants to file and serve their reply and defence to the cross-claim from 6 October, 1995 to 12 December, 1995. I also ordered that the applicants pay the second and third respondents' costs of the abortive hearing on 24 November, 1995 and gave leave to those respondents to tax those costs forthwith. On the material before me, the applicants would appear to have a good claim to be indemnified by Messrs Thomas Stevens & Company for these costs.
On 15 December, 1995, at the seventh directions hearing, despite prior complaint by the second and third respondents, no reply and defence to their cross-claim was filed by the applicants. The submissions of counsel who appeared for the applicants, in explanation of the applicants' failure to deliver the long-outstanding defence to the second and third respondents' counter-claim, were limited to informing me of settlement discussions which Messrs Thomas Stevens & Company had that morning told Mr. Crowley were on foot. The facsimile of 15 December, 1995 received by Mr. Crowley from those Cairns solicitors is now exhibited to Mr. Crowley's affidavit, which he has filed pursuant to my directions of 15 December, 1995. Counsel for the second and third respondents on that occasion disputed the existence of any settlement discussions and then made oral application to strike out the applicants' proceedings, an application foreshadowed in the facsimile sent by the second and third respondents' solicitors to Messrs Walsh James the previous day.
On 15 December, 1995, I gave the following directions: firstly, that the second and third respondents have leave to bring a motion at 10.15 on 6 February, 1996 to strike out the action and to seek judgment on the cross-claim on the basis of the applicant's continued failure to comply with the directions of the Court; secondly, any motion brought by the second and third respondents was to be filed and served on the solicitors on the record for the applicants by 25 January, 1996; thirdly, any material in response to the second and third respondents' material was to be filed and served by 2 February, 1996; fourthly, the partner responsible in each of the Brisbane, Cairns, and Sydney firms acting on behalf of the applicants was required personally to swear and file an affidavit in the Brisbane Federal Court by 12 January, 1996 setting out the reason why that partner should not be ordered personally to pay the costs of and incidental to the hearing of 15 December, 1995 and why any costs ordered against that person should not be taxed on an indemnity basis; fifthly, I directed that the question of the second and third respondents' costs of 15 December be reserved to 6 February, 1996. And finally I adjourned the action to yesterday, 6 February, 1996.
Counsel for the solicitors for the applicants informed me yesterday that immediately following this hearing he faxed to Messrs Walsh James and to Messrs Thomas Stevens & Company a note of these directions. Today, the second and third respondents seek an order striking out the applicants' proceedings. The applicants still have not filed a reply and defence to the second respondent's cross-claim, which was filed as long ago as 4 October, 1995, despite the directions of 24 November, 1995 and despite the notice the applicants were given by the directions of 15 December, 1995 of the fate likely to follow for them if the pleading in question was not filed before yesterday's hearing.
I have referred to the suggestion emanating from Messrs Thomas Stevens & Company in their facsimile of 15 December, 1995 to Mr. Crowley that the applicants' explanation for not complying with these directions necessary to progress the action they brought against the second and third respondents is that there were settlement discussions on foot between the applicants and the second and third respondents and I have also referred to the rejection of that suggestion by counsel for the second and third respondents on 15 December, 1995. If there was anything in that suggestion and, in particular, if the existence of such discussions might provide an explanation for the applicants' still continuing failure to file the outstanding pleading, a failure which has put a stop to the progress of the action against the second and third respondents, receipt by Messrs Thomas Stevens & Company of notice of my directions of 15 December, 1995 coupled with service on the applicants of the second and third respondents' striking-out application on 25 January, 1996, could have been expected to provoke the applicants to put evidence before the Court to explain their default.
If there was anything in the settlement suggestion as an explanation for the applicants' inaction up to 15 December, 1995, Messrs Thomas Stevens & Company themselves could be expected to have taken advantage of the opportunity given to them to explain on oath why they were not themselves responsible for the failure of the applicants to file the outstanding pleading and why they made no attempt by communicating with the solicitors for the second and third respondents to avoid the hearing on 15 December, 1995, which may well have been unnecessary if such settlement negotiations were, in truth, under way.
Although counsel appeared, on instructions of the applicants' Sydney principals on the record and their town agent, only on behalf of those solicitors and not on behalf of the applicants themselves, yesterday to show cause why a costs order should not be made against the solicitors personally, Messrs Walsh James and Mr. Crowley remain on the record as the applicants' solicitors and Mr. Crowley was present in Court yesterday morning in his capacity as town agent for the solicitors on the record for the applicants. Not only is there no explanation from the applicants for their failure to comply with the directions of 24 November, 1995, but they have also not put anything before me to indicate that they now have any further intention to pursue this action, which they saw fit to bring against the second and third respondents back in March last year.
I take into account the delay until the end of August 1995 that occurred on the applicants' part in pleading a case they were prepared to stand on, as well as the other matters to which I have referred. That they appear to have reached a settlement of their claim against the fourth respondent, National Australia Bank Limited, is of no relevance to the proceedings as between the applicants and the second and third respondents.
For the reasons I have given, I will strike out the applicants' further amended statement of claim as against the second and third respondents and I will also strike out the applicants proceeding against those two respondents, both with costs, including reserved costs, save for the reserved costs of the hearing of 15 December, 1995, which I will deal with later.
The second respondent also applies for judgment on its cross-claim against the applicants for $150,000, pursuant to O. 10, r. 7(1)(b) the Federal Court Rules. Provided the second and third respondents have sufficient evidence to prove their cross-claim, a matter discussed in Australian Securities Commission v Macleod (1994) 54 F.C.R. 309 at 314, I am satisfied, for the reasons I have given for striking out the applicants' claim against these two respondents, that their default in complying with directions given on 24 November, 1995, together with the other circumstances of the case, is sufficient to entitle the second respondent to the discretionary judgment it seeks on its cross-claim.
The cross-claim is based on an agreement entered into in October 1993, which is also the subject of the applicants' claim. The applicants plead this agreement with precision in this way (paragraph 21):
"In about late October 1993, an agreement was entered into between NQGD, the Marrows, Nasib, Fox, McGoldrick, Stephens and Simmons ("the Marrow Agreement") whereby it was agreed:-
(a)the Marrows and/or Nasib would pay the sum of $450,000 in accordance with the terms and conditions outlined hereunder in consideration for 20% of the total shareholding in NQGD being transferred by Simmons, Stephens, Fox and/or McGoldrick to Nasib;
(b)the Marrows and/or Nasib would pay to the Applicants:
(i)the sum of $100,000 forthwith;
(ii)the sum of $50,000 within sixty (60) days or thereabouts;
(iii)a further sum of $100,000 within six months;
(c)The Marrows (or alternatively Marrow) would arrange a credit facility ("the facility")in favour of NQGD for a minimum sum of $200,000 forthwith ... ;
(d)Fox, McGoldrick, Stephens and Simmons would transfer to Nasib 80, 40 and 80 shares on payment of the aforesaid sums of $100,000, $50,000 and $100,000 respectively;
(e)Marrow would be appointed a Director of NQGD forthwith."
In its defence, Nasib makes these allegations with respect to the agreement of October 1993 (paragraph 18.1):
"... in or about late October 1993 ... an agreement was entered into between NQGD, Marrow (but not Mrs Marrow), Nasib, Fox, McGoldrick, Simmons and Stephens, whereby in consideration of promise to Nasib to pay a cash sum of $250,000.00 payable in the sum of $100,000.00 forthwith, $50,000.00 within 60 days and a further $100,000.00 within six months or such reasonable extended period as may be required by Nasib, the other parties would cause the transfer of 200 shares in NQGD from Fox, McGoldrick, Simmons and Stephens, or alternatively to be issued by NQGD to Nasib."
Nasib does not identify to whom it was required by the agreement to pay the moneys, including the $150,000, the subject of its cross-claim. At paragraph 18.6 of its pleading, Nasib denies all the allegations in paragraph 21 of the further amended statement of claim, including the allegation by the applicants that the moneys were to be paid to the applicants, other than those allegations made by the applicants in their pleading, which are admitted. By paragraph 18.3 of its pleading, Nasib alleges that:
"... it was a further express term of the Marrow agreement that Marrow would be made a director of NQGD and would be permitted to freely participate in its day to day (impliedly) business affairs and be remunerated for this."
The applicants plead performance in part of this October 1993 agreement in their further amended statement of claim in this way (paragraph 22):
"Pursuant to Marrow Agreement:-
(a)Nasib paid the aforesaid instalments of $100,000 and $50,000 respectively;
(b)a letter of credit facility was arranged with the Bank for the sum of $147,000;
(c)Marrow was appointed a director of NQGD on or about 11 November 1993."
Nasib admits these allegations, but in view of its denial that payment of $150,000 was required to be made to the applicants, I do not consider this admission amounts to an acknowledgment that the agreement required the $150,000 to be paid to the applicants rather than to some other entity, including NQGD, a company now in liquidation, and which company was to use the moneys in expanding its aluminium fabrication business. For these reasons, I do not regard the allegations by the applicants in paragraph 21(b) of the further amended statement of claim, that the $150,000 was to be paid to them rather than to some other entity, as an admission against them capable of providing sufficient evidence in support of Nasib's claim to judgment that it was the applicants who received the $150,000 and not someone else. That omission in Nasib's proofs is sufficient, in my opinion, to prevent it being able to make out the cross-claim as pleaded.
There are other problems for Nasib in obtaining the judgment it seeks on the cross-claim now. Nasib alleges that, in breach of the agreement, (paragraph 20.3):
"... NQGD, Simmons, Stephens, Fox and McGoldrick:-
20.3.1failed to cause the transfer of shares in NQGD to Nasib;
20.3.2failed to permit Marrow to freely participate in the daily business affairs of NQGD;
20.3.3failed to remunerate or cause remuneration of Marrow as a director of NQGD."
It is common ground that the term of the agreement requiring the third respondent to be appointed a director of NQGD was performed on 11 November, 1993, soon after the agreement was made. It appears that the third respondent remained a director of NQGD until January 1994, when action was taken by the respondents to cancel the agreement. Nasib, in its defence, also alleges that as a result of the breaches I have referred to, NQGD, Simmons, Stephens, Fox and McGoldrick repudiated the Marrow agreement and that Nasib and Marrow accepted such repudiation in January 1994 by Marrow ceasing commercial activity with NQGD and demanding a return of the sum of $150,000, thereby terminating the Marrow agreement.
Nasib's counter-claim is briefly pleaded. It incorporates the allegations in its defence and alleges:
"By reason of the breach of the Marrow agreement and its termination the moneys paid by Nasib constituted:-
2.1:moneys had and received by Simmons, Stephens, Fox and McGoldrick jointly and severally to the use of Nasib;
2.2:the subject matter of damages payable to Nasib by them and each of them;
2.3:moneys impressed by a trust held by them and each of them as trustees with Nasib as beneficiary, which trust was breached by dissipation of such moneys."
The cross-claim goes on to claim the following relief: one, as against the cross-respondents, $150,000 as moneys had and received for the use of the cross-claimant as damages for breach of contract or, alternatively, as damages for breach of trust; secondly, interest on such moneys.
The only evidence adduced by Nasib in support of the judgment sought on the cross-claim was in the form of a short affidavit by the third respondent. Mr. Marrow deposes to the truth of the facts pleaded in the defence and cross-claim. He is a director of Nasib and authorised to swear this affidavit. He also says that in January 1994, following the repudiation by the applicants and others of the October 1993 agreement, he demanded the return of the sum of $150,000, and he also says that this sum is currently due and owing by the applicants in the action.
Counsel did not abandon reliance on Nasib's claims to recovery of the $150,000 based on contract and trust. But no submissions were put to me to show how Nasib would, in reliance on the breach that led to its repudiation of the agreement and cancellation of that agreement in January 1994 so far as it then remained executory, be entitled to repayment of the same sum it had paid in performance of its obligations under the agreement before Nasib cancelled it, by way of damages for breach of that contract. Nor were any submissions put to me to show how the $150,000 paid might be recoverable in trust. It is not immediately apparent that Nasib has any entitlement to recover the $150,000 on either of these bases. The rule in Hadley v Baxendale, applicable in a case like this in which the contract is only cancelled in futuro, is inconsistent with the claim to the refund of $150,000. That the $150,000 was paid as part of the money consideration for certain promised property rights and other benefits is inconsistent with the payment imposing trust obligations on the recipient.
I therefore do not intend to consider whether Nasib is entitled to the judgment it seeks on either of these two grounds. Counsel, however, submitted that the $150,000 was recoverable as moneys had and received by the applicants for the use of Nasib on a total failure of consideration. In my opinion, taking the agreement as alleged by Nasib, it is clear that the consideration which Nasib bargained for in return for the $250,000 to be paid by it (of which the $150,000, in fact paid, formed part) was an entire indivisible consideration comprising, firstly, the issue or transfer to it of 200 shares in NQGD; secondly, the right to participate through its own principal, Mr. Marrow, in the business of NQGD, which involved the appointment of Mr. Marrow as a director of NQGD. It is not possible to apportion the moneys required to be paid by Nasib under the October 1993 agreement as paid in part in respect of the share transfer and, in part, for the right of Nasib's principal to participate in the business of NQGD, of which his appointment as the director was one element.
The third respondent was, in fact, appointed to be a director of the company and he retained that position until, as I say, the agreement was cancelled. There has, in my view, therefore, not been a total failure of consideration and there is no basis for giving Nasib the judgment it seeks: see Baltic Shipping Company v Dillon (1993) 176 C.L.R. 344 at 350 and at 351.
Nasib submits that, if I am not prepared to give it judgment now for the $150,000, I should enter judgment for damages to be assessed. The Court's power to give judgment for damages to be assessed is governed by O. 35, r. 1 and O. 38, r. 1 the Federal Court Rules. There is no basis, on the case set up by Nasib so far, for giving it a judgment that would entitle it to damages. Moreover, in the absence of a pleading that showed how the damages claim was quantified, it is not possible to form a view, required by O. 38, r. 1, as to whether the assessment of those damages is a matter of calculation only. Nasib is not entitled to the alternative judgment sought by counsel.
If Nasib wishes to recover damages for the breach of contract alleged, it must, I think, show by an amendment to its pleading, the damages it claims and the basis on which those damages are quantified. Nasib will therefore have liberty to file and serve an amended counter-claim or cross-claim and the applicants will also have liberty to plead to any such amended cross-claim. The applicants are, I think, entitled to know any new case made against them by Nasib and to have an opportunity to decide whether to defend a claim so formulated. It will be for Nasib to decide whether to make a further application for judgment once the applicants have had that opportunity.
The remaining question concerns the second and third respondents' costs of the seventh directions hearing of 15 December, 1995. Nothing was achieved by that hearing because of the applicants' continued failure to comply with the directions to file the outstanding pleading. I have explained why I do not accept that the applicants' failure by 15 December, 1995 to file that pleading was justified by the submission then made by counsel of the existence of settlement negotiations.
The applicants are entitled to their costs of the hearing on 15 December, 1995. The only questions are whether the applicants should pay them or whether one or more of the three firms of solicitors acting for them should pay them and whether those costs should be taxed on an indemnity basis. Section 43 the Federal Court of Australia Act 1976 (Cth) gives the Court power to order a non-party to pay the costs of a party to litigation - see Caboolture Park Shopping Centre Pty. Ltd. v White Industries (Qld) Pty. Ltd. (1993) 117 A.L.R. 253.
I gave the direction on 15 December, 1995 that each solicitor have opportunity to show cause why a costs order should not be made against him personally because of concern generated by the unexplained absence of legal representation for the applicants at the directions hearing of 24 November, 1995 and by the rejection, on 15 December, 1995, by the second and third respondents' counsel of the suggestion then made by counsel for the applicants of the existence of those settlement discussions.
Mr. Crowley and Mr. Deutsch of Messrs Walsh James have filed affidavits seeking to explain their positions. Messrs Thomas Stevens & Company have not filed any material. I therefore infer that anything that they could say would not assist them to resist an order being made against them personally. Although Messrs Walsh James remain on the record as the applicants' solicitors, I accept what Mr. Deutsch says about the arrangement made on the morning of 24 November, 1995 with Mr. Stevens and Mr. McCartney of Messrs Thomas Stevens & Company that, until the applicants entered into the fees agreement with Messrs Walsh James, Messrs Walsh James would do nothing further in the matter.
I accept that Messrs Thomas Stevens & Company expressly undertook responsibility to arrange for the applicants' representation at the directions hearing, fixed for later that day, something they failed to attend to. I infer from what Mr. Deutsch says, and from the absence of any information to the contrary from Messrs Thomas Stevens & Company, that Messrs Thomas Stevens & Company, as the solicitors retained by the applicants, would also assume responsibility for the conduct of the action including the arranging of all necessary representation for the applicants from the morning of 24 November, 1995 until the question of Messrs Walsh James' fees was resolved, although Messrs Walsh James were to remain solicitors on the record for the applicants.
On the material before me, it appears that Messrs Thomas Stevens & Company knew of the directions hearing on 24 November, 1995 but failed to take any action to ensure that the applicants' representation on that day. Nor did they take any action to protect the applicants' interests at the hearing on 15 December, 1995 that was fixed on 24 November, 1995 until Mr. Jackson, of Messrs Walsh James, on the morning of 15 December, 1995 telephoned Mr. McCartney and told him of the hearing fixed for that morning and of the facsimile received the previous day from the solicitors for the second and third respondents.
As solicitors on the record for the applicants, Messrs Walsh James remain responsible to the Court and to the other parties for the proper conduct of the action by the applicants. However, in view of their arrangement with the applicants and Messrs Thomas Stevens & Company, they sufficiently discharged those responsibilities by informing Messrs Thomas Stevens & Company promptly of the communication they received from the solicitors for the second and third respondents on 14 December, 1995 as to the hearing to take place the next day.
There is no ground for ordering Messrs Walsh James to pay the costs of the hearing of 15 December, 1995.
Mr. Crowley is on the record as Messrs Walsh James' town agent. However, he has not been required by his principal to attend all directions hearings, only those he was specifically instructed to attend. He has had no contact with the applicants and his role has been limited, apart from attending a number of directions hearings, to the filing of documents forwarded to him by Messrs Walsh James. He arranged for counsel to attend on 15 December, 1995, at short notice, on instructions from Messrs Thomas Stevens & Company direct. He sufficiently discharged his responsibilities to the Court and the other parties by informing his principals, Messrs Walsh James, of what occurred on 24 November, 1995 even though not instructed to attend that day, something he says he did in his oral evidence. There is no ground for ordering him to pay the second and third respondents' costs of the hearing of 15 December, 1995.
As the solicitors retained by the applicants in the action who had, as between the applicants' solicitors on the record and Messrs Walsh James and themselves, assumed responsibility for the conduct of the action from 24 November last, Messrs Thomas Stevens & Company were duty bound in my view to take all necessary steps for the proper conduct of the action on their clients' behalf. They failed to ensure that their clients were properly represented on 24 November, 1995. They failed to monitor the progress of the proceedings after that date and only gave belated instructions for the applicants' representation on 15 December, 1995 when Messrs Walsh James drew their attention to that hearing. They have not provided any information, despite the opportunity given them to explain why the applicants' pleading was not filed on 12 December, 1995. I reject, for the reasons given, the suggestion coming from them that settlement discussions explain all this.
On the material before me, it was Messrs Thomas Stevens & Company's responsibility to do everything they reasonably could to ensure that their conduct of the action on behalf of the applicants would not cause other parties needlessly to incur costs in connection with the litigation. Messrs Thomas Stevens & Company failed to give any proper attention to the litigation from 24 November, 1995 to 15 December, 1995. They made no attempt to have the outstanding pleading prepared, nor did they attempt by communicating with the solicitors for the second and third respondents to avoid the need for those respondents to incur the costs of being represented at the hearing on 15 December, 1995, which Messrs Thomas Stevens & Company should have known would achieve nothing with respect to the progress of the litigation. Only minutes before the hearing on 15 December, 1995, after having that drawn to their attention by others, did Messrs Thomas Stevens & Company give instructions to Mr. Crowley to put the explanation for the applicants' default to the Court that I consider to be without substance.
Their failure to put any information before the Court now that might suggest that they are not personally at fault by failing to give attention to their retainer confirms me in my view that it was their breach of duty to conduct the action in proper fashion that caused the second and third respondents to incur the wasted costs of the appearance on 15 December, 1995.
It is therefore appropriate that Mr. Thomas Stevens and Mr. Grant McCartney, as the members of Messrs Thomas Stevens & Company with responsibility for the applicants' retainer, should pay the second and third respondents' costs of the hearing of 15 December, 1995 rather than the applicants themselves. The history of Messrs Thomas Stevens & Company's inattention to their retainer prior to 15 December, 1995 and, in particular, in failing to arrange for their clients to be represented on 24 November, 1995, indicates that Messrs Thomas Stevens & Company are guilty of more than an isolated breach of that duty with respect to the conduct of the litigation.
I will therefore order that the costs that Mr. Stevens and Mr. McCartney must pay be taxed on an indemnity basis. I expect that Messrs Walsh James, as solicitors on the record for the applicants, will ensure that the applicants are informed of what I have said in these reasons and of the orders I have made.
Having ruled that certain members of Messrs Thomas Stevens & Company pay the second and third respondents' costs of 15 December to be taxed on an indemnity basis, counsel for the solicitors for the applicants applied for an order that the second and third respondents pay the costs incurred by Mr. Crowley and Messrs Walsh James in engaging him to appear on their behalf yesterday to show cause why neither of those firms should bear any personal cost liability. Counsel for the second and third respondents, in my view, chose to take a part in the proceedings in so far as they involved the question whether the solicitors, as opposed to the applicants,
should pay the second and third respondents' costs of 15 December, 1995.
It was unnecessary for that to be done, since his client was assured of obtaining a costs order anyway, although it may be that some advantage, in terms of recoverability, was thought to accrue to the second and third respondents if the order for costs could be obtained not against the applicants but against the solicitors personally. In any event, counsel for the second and third respondents took an adversarial part, as I see it, in that element of the dispute heard yesterday in respect of which the second and third respondents failed. It therefore seems to me that it is appropriate to order that the second and third respondents pay the costs of Messrs Walsh James and Mr. Crowley, limited to the costs incurred by them in engaging counsel to appear on their behalf yesterday.
I certify that this and the preceding
24 pages are a true copy of the
reasons for judgment herein of the
Honourable Justice Drummond.
Associate:
Date: 7 February, 1996
Solicitor for the applicants: Paul Crowley
Counsel for the second and
third respondents: Mr. C.L. Francis
Solicitors for the second and
third respondents: Bain Gasteen
Counsel for the solicitors
for the applicants: Mr. P.E. Hackett
Solicitors for the solicitors
for the applicants: Paul Crowley
Date of Hearing: 6 February, 1996
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