Sodhi v Whitby Land Company Pty Ltd (in Liquidation) (Receiver and Manager Appointed)
[2024] WASC 437 (S)
•23 DECEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SODHI -v- WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED) [2024] WASC 437 (S)
CORAM: LUNDBERG J
HEARD: ON THE PAPERS
DELIVERED : 23 DECEMBER 2024
FILE NO/S: CIV 2332 of 2024
BETWEEN: JASKARAN SINGH SODHI & PUSHPINDER KAUR
Plaintiffs
AND
WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED)
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Practice and procedure - Costs - Appropriate order following determination of caveat extension application - Whether costs should follow the event - Whether conduct of plaintiff and failure on issues such as to modify usual position - Costs sought against receiver and manager of first defendant as a non-party - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 66 r 1
Supreme Court Act 1935 (WA), s 37
Result:
Costs orders made in favour of the plaintiffs and against the non-party, as set out at [52] of the reasons
Category: B
Representation:
Counsel:
| Plaintiffs | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiffs | : | Duckham & Co |
| First Defendant | : | HWL Ebsworth |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Frigger v Lean [2012] WASCA 66
Huntingdale Village Pty Ltd (receivers and managers appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352
Knight v FP Special Asset Ltd [1992] HCA 28; 174 CLR 178
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Table of Contents
A. Introduction
B. The hearing on 25 November 2024
C. The plaintiffs' position as to costs
D. The first defendant's position as to costs
E. Disposition
Whether costs which should be made in favour of the plaintiff?
Should costs be awarded against the Receiver himself?
F. Conclusion and orders
LUNDBERG J:
A. Introduction
These reasons concern the costs orders which should now be made in light of the reasons published by the Court on 25 November 2024 (Primary Reasons).[1]
[1] Definitions used in the Primary Reasons will be employed in these reasons.
In the Primary Reasons, the Court concluded that the plaintiffs' application to extend the Caveat should be granted. That is, the Caveat should remain on foot and the plaintiffs ought be permitted to proceed with their proposed substantive action to establish the interest they claim. The Court ordered that the plaintiffs commence any such action within 7 days of the order, which the plaintiffs have now instituted.[2]
[2] Namely, action CIV 2428 of 2024.
B. The hearing on 25 November 2024
On 25 November 2024, the Court delivered its reasons. Ordinarily, in this Court, it is to be expected that costs issues will be addressed when reasons are delivered, particularly in non-complex proceedings such as this.[3] That was the intention in the present case.
[3] Mak Industrial Water Solutions Pty Ltd v Doherty [No 3] [2023] WASC 313 [1] - [5] (Quinlan CJ).
It was not possible to resolve the costs issues at that hearing. Some brief explanation of the circumstances is required.
First, when the Court made it known to the parties on 19 November 2024 that it would deliver reasons on 25 November 2024, the solicitor for the plaintiffs indicated he would not be available as he would be overseas. As the matter was brought on by the plaintiffs in circumstances of some urgency, the view I took was that the matter should be listed regardless of this availability issue, and another practitioner would need to appear. The plaintiffs' solicitor was informed accordingly.
Second, the solicitor for the plaintiff subsequently sought leave for a paralegal to appear at the judgment delivery hearing. That leave was sought by email on 21 November 2024. That email was not dealt with by the Court, given the other matters before the Court over this period. It is not apparent why arrangements could not have been made for a barrister to be briefed for the appearance. Leave was again sought for the paralegal to appear for the plaintiffs, by email sent by the paralegal on the morning of the hearing. The Court responded by email as follows, granting leave, albeit reluctantly:
[The paralegal] seeks leave to appear at the hearing for the above matter at 10:30am this morning. His Honour notes it is quite unusual for a paralegal to appear on any matter in this Court.
In the present circumstances, though, his Honour is prepared to grant leave. The parties will need to be prepared to address the orders which should be made consequent upon the decision, including as to costs.
Third, the paralegal who appeared at the hearing was not in a position to address the Court on costs issues. That is not surprising and is no criticism of her. It is not the function or role of a paralegal to attend at hearings and address the Court on matters of substance which may affect the rights of their firm's clients and other parties in the proceedings.
Fourth, counsel for the first defendant, Mr Mariotto, made it plain he would not press for the costs issues to be determined in the circumstances, and he had no intention of taking advantage of his opponent's inability to properly address matters. The Court should expect nothing less of a legal practitioner, given the ethical duties owed to the Court and to fellow practitioners. Nonetheless, the approach adopted by counsel for the first defendant at the hearing was commendable and should formally be acknowledged by the Court.
In the circumstances, it was necessary for the Court to make directions on 25 November 2024 to facilitate the determination of the costs issues in this proceeding, through the filing and serving of affidavit evidence and submissions.
Pursuant to those directions, the Court received an outline of submissions from the plaintiffs dated 5 December 2024, settled by counsel who had been briefed following the hearing, together with an affidavit sworn by a paralegal employed by the law firm representing the plaintiffs. The Court also received an outline of submissions from the first defendant dated 12 December 2024, together with the affidavit of Ronan David Devahasdin (a solicitor at HWL Ebsworth) affirmed on that date.
C. The plaintiffs' position as to costs
The plaintiffs submit that costs should follow the event. The plaintiffs refer to the general rule when exercising the discretion to order costs that the successful party should recover its costs.
Further, the plaintiffs quite properly recognise the Court has power, where it is of the opinion the conduct of a party has resulted in costs being unnecessarily or unreasonably incurred, to deprive that party of costs wholly or in part, and may further order that party pay the costs of an unsuccessful party either wholly or in part: O 66 r 1(2) RSC.
In relation to this last point, the plaintiffs submit that their conduct in seeking to extend the caveat was entirely reasonable in order to protect their interest in the property. Further, it is submitted by the plaintiffs that there is no evidence of misconduct by the plaintiffs that might warrant a departure from the general rule.
In examining the particular issues and sub-issues which were raised by each party during the proceedings, and the particular outcome on each such issue, the plaintiffs correctly submit that the power to apportion costs on an issue-by-issue basis should be exercised with some caution. Ultimately, whilst the plaintiffs acknowledge that not all of their arguments were accepted, and not all of their affidavit evidence was admitted, it is contended that it cannot definitively be said that such matters significantly added to the cost of the proceedings from their inception.
An additional point is agitated by the plaintiffs. The plaintiffs seek an order that the costs of the proceedings be paid by a non-party, namely the receiver and manager appointed to the first defendant, being Mr Kimberley Stewart Wallman (the Receiver).
The plaintiffs submit there is a well-established power to award costs against a non-party. It is submitted that the category of case in which such an order would be made includes circumstances where the party to the litigation is an insolvent person or company, and where the non-party has played an active role in the conduct of the litigation, and has an interest in the litigation. Reliance is placed on the decision of the High Court in this regard, in Knight v FP Special Asset Ltd[4] and the decision of this Court in Huntingdale Village Pty Ltd v Perpetual Nominees Ltd.[5]
[4] Knight v FP Special Asset Ltd [1992] HCA 28; (1994) 174 CLR 178, 193.
[5] Huntingdale Village Pty Ltd (receivers and managers appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352 [19].
The plaintiffs submit there can be no question that it was the Receiver who was the real party playing an active adversarial role in these proceedings, and who caused the incurrence of costs by the plaintiffs. The plaintiffs submit the solicitors for the Receiver maintained that stance at all times.
D. The first defendant's position as to costs
I next turn to the submissions advanced by the first defendant, who views the matter through a somewhat different prism.
The first defendant seeks an order, firstly, that the plaintiff pay its cost of the proceeding to be assessed if not agreed. Alternatively, the first defendant seeks an order that the plaintiffs pay 50% of its costs of the proceeding and there be no order as to costs (it being intended by this order that the plaintiffs are not entitled to any costs). The final alternative order is that the costs of the proceedings be in the cause of action CIV 2428 of 2024 (being the substantive action filed by the plaintiffs).
In support of its position the first defendant draws attention to a number of features of the case and the conduct of the plaintiffs, or more correctly, the solicitors for the plaintiffs. In particular, the first defendant highlights the following matters.
First, a significant amount of time was spent on 18 and 19 November 2024 dealing with the first defendant's objections to the plaintiffs' evidence, which were largely upheld by the Court. The first defendant submits 'a not insignificant amount of court time was consumed by dealing with the admissibility of the plaintiffs' swathe of affidavits it sought to rely on'.[6]
[6] DS [14].
Second, allied to the above point, the first defendant points to a lack of preparation of the plaintiffs' case by their solicitor, which meant inadmissible evidence and generally unhelpful submissions were filed, as a result of which the hearing was conducted in an inefficient manner and was otherwise unnecessarily protracted and fragmented.
Third, the plaintiffs were ultimately only successful on a point which was raised by them at the eleventh hour, being the 'waiver' contention. The first defendant observes that the issue of waiver was not raised in any substantive manner until the morning of 18 November 2024 when the plaintiffs filed their submissions. The waiver issue was not identified or supported by any relevant evidence in the affidavit of Mr Sodhi sworn 12 November 2024 and was not articulated by the plaintiffs in any obvious way until the second day of the hearing, and even then it was difficult to discern the arguable case the plaintiffs sought to establish.
Fourth, had the 'waiver' point been raised earlier, it is submitted that meaningful conferral could then have been undertaken and it would have been reasonable to expect the first defendant to consent to the Caveat being extended and to focus on the substantive proceedings for specific performance of the contract.
As to this conferral point, the conduct of the plaintiffs and the manner in which their solicitor liaised with the first defendant's solicitors was sub-optimal. The first defendant observes that the proceedings were not promptly served on his office, nor on HWL Ebsworth. It was only because the matter was observed in the Daily Court List that the listing of the Caveat extension application became known to the first defendant at all. It is said there was no proper conferral by the plaintiffs with either the first defendant or with HWL Ebsworth, in circumstances in which the plaintiffs knew, or ought reasonably to have known, that it was the Receiver who would have conduct of these proceedings.
As the plaintiffs' solicitor was aware of the role of HWL Ebsworth in the matter, it was more than a little unusual not to see the plaintiffs' solicitors give direct and prompt notice to HWL Ebsworth of the Caveat extension application hearing, following the grant of leave by the Master on 12 November 2024: Primary Reasons [9] - [10].
However, I am ultimately not certain, in the end, it mattered much to the manner in which the argument developed at the hearing. The correspondence between the parties and their representatives had begun well before November 2024. It is apparent that the first defendant's solicitors had made quite plain their opposition to the Caveat at an early point in time.
Fifth, the plaintiff raised two threshold points, namely a standing issue and a question of compliance with the Sale of Land Act 1970 (WA), the first of which was rejected and the second of which was not advanced by the plaintiffs in any meaningful way at the hearing. The first defendant submits that the plaintiffs raised threshold issues which it knew, or ought reasonably to have known, were baseless.
E. Disposition
Whether costs which should be made in favour of the plaintiff?
The Court has a wide discretion to award costs, pursuant to the power in s 37 of the Supreme Court Act 1935 (WA). The discretion regarding costs has been described as 'absolute, unconfined or unfettered although a discretion that must be exercised judicially, not arbitrarily or capriciously, or on grounds unconnected with the litigation': Frigger v Lean.[7]
[7] Frigger v Lean [2012] WASCA 66 [53] (Allanson J, Newnes & Murphy JJA).
The general rule is that costs should follow the event. That is, the successful party should recover their costs from the opposing party. The rationale for this rule is that where a party has unjustifiably brought another party before the court, that party should be liable to compensate the other in costs. It is therefore incumbent on an unsuccessful party to satisfy the court that there are good reasons it should not pay the successful party's costs.
In Strzelecki Holdings Pty Ltd v Jorgensen,[8] the Court of Appeal observed:
[50]What constitutes 'success' in proceedings is to be determined by the reality of the circumstances involved in the case. The Court may depart from the general rule that costs follow the event and modify a costs order to take into account matters such as any unreasonable conduct of a generally successful party, or to the failure of that party on one or more specific issues. The exercise of the discretion in that way is recognised by a number of rules…, together with the practice of the Court, and authority. So, for example, if the Court is of the opinion that the conduct of a successful party - either before or after the commencement of the litigation - has resulted in costs being unnecessarily or unreasonably incurred, the Court may deprive that party of costs, either wholly or in part, and it may further order that party to pay the costs of an unsuccessful party, either wholly or in part. In the present case, Strzelecki did not contend that the issues raised by the Jorgensens, and on which they were unsuccessful, were raised unreasonably or improperly.
[51]Under O 66 r 1(3) RSC, where a party, though generally successful in an action, has, by the introduction of some issue or issues on which it has failed, increased the costs, the Court may order such party to pay the costs of such issue or issues. It is well-recognised that an order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation, and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. Furthermore, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if, by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case.
[52]Where the Court decides, in the exercise of its discretion, to modify the usual costs orders to reflect the limited success of the successful party, that power will be exercised broadly, and as a matter of impression, and without any attempt at mathematical precision (which is likely to prove illusory in any event). That approach reflects the fact that it may be difficult to separate the factual and evidentiary substratum of different issues, the fact that some issues are more important than others, and the fact that some issues are subsidiary to others. (footnotes omitted)
[8] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [50] - [52] (Murphy, Mitchell and Pritchard JJA).
The plaintiffs were successful in the proceedings. They obtained the relief sought in the originating summons. For some time, the plaintiffs had agitated with the first defendant the issue whether the Caveat should remain on the title, a position which the first defendant opposed. So far as I can see, at all times, the first defendant maintained the validity of the termination notice it issued on 15 April 2024. The first defendant then saw fit to engage the process under s 138B(1) of the TLA, which led to the Registrar of Titles issuing a notice under that provision requiring the plaintiffs as caveators to commence these proceedings to justify their position.
For the reasons set out in the Primary Reasons, the Court has found that there is a serious question to be tried as to whether the first defendant waived its termination right under the Contract. The waiver argument was not articulated with precision and was perhaps identified by the plaintiffs later than might be expected, but given the evident circumstances apparent to the first defendant, the raising of the issue could not have been surprising. Given the balance of convenience issues, the Court concluded that the Caveat should be extended. The plaintiffs are prima facie entitled to a costs order to reflect this success.
However, I accept the circumstances of this case warrant a modification of this order, as submitted by counsel for the first defendant. The unsuccessful party has, in my view, properly demonstrated that the successful party should not be entitled to the benefit of a costs order for all of its costs.
The general power of the Court is found in O 66 r 1(1) RSC, with the Court permitted to reduce the costs or apportion the costs in two broad circumstances as set out in O 66 r 1(2) and r 1(3) RSC:
1. General rules as to costs
(1)Subject to the express provisions of any statute and of these rules the costs of and incidental to all proceedings including the administration of estates and trusts shall be in the discretion of the Court but, without limiting the general discretion conferred on the Court by the Act, and subject to this Order, the Court will generally order that the successful party to any action or matter recover his costs.
(2) If the Court is of opinion that the conduct of a party either before or after the commencement of the litigation or that a claim by a party for an unreasonably excessive amount has resulted in costs being unnecessarily or unreasonably incurred it may deprive that party of costs wholly or in part, and may further order him to pay the costs of an unsuccessful party either wholly or in part.
(3) Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
I would emphasise the matters set out below at [37] to [42], in the context of the above powers of the Court. In this regard, I generally accept the force of the matters identified by the first defendant in its submissions, and which I have summarised at [21] to [28] above, other than the impact on the conferral process as I have noted.
First, as is readily apparent from the Primary Reasons, the hearing of this matter was conducted in something of a fragmented and disjointed fashion, including a directions hearing on 13 November 2024, and two days of hearings on 18 and 19 November 2024. Bearing in mind an application to extend or remove a caveat is to be conducted in a summary manner, the present hearing was longer than it ought to have been.
In my view, the length of those hearings was substantially contributed to by the approach taken by the plaintiffs' solicitor, through the preparation of the affidavit material and the presentation of its argument. As is explained in the Primary Reasons, and will be further evident from the separate table of evidentiary rulings provided to the parties, a significant portion of the affidavit evidence which was filed on behalf of the plaintiffs was inadmissible: see Primary Reasons [22] to [28]. A significant amount of hearing time was required to address the admissibility issues. It should have been necessary for only one affidavit, or perhaps two affidavits at most, to be prepared and filed by Mr Sodhi. In the wash up, some nine affidavits were prepared and filed (from both Mr Sodhi and his solicitor, although some had already been filed in the leave proceedings), with the final affidavit being filed on 19 November 2024. That affidavit was filed without leave, which the Court refused.
Second, in order to supplement the deficiencies in the evidence, I granted leave for Mr Sodhi to be called to give viva voce evidence on 18 November 2024. As it transpired, that evidence did not advance the plaintiffs' case in any substantial way. A further application was made on 19 November 2024 for Mr Sodhi to give additional viva voce evidence, which the Court refused.
Third, the primary case advanced by the plaintiffs did not find favour with the Court, at least on the interlocutory assessment required as part of a caveat extension hearing. I regarded that argument as very weak and I did not assess it as rising to the level of a prima facie case. Argument on the first issue occupied a significant part of the hearing. Ultimately, it was the alternative argument which found favour with the Court, at least on an interlocutory basis. This argument concerned the waiver by the first defendant of the termination right in the Contract. It must be said that the presentation of this alternative argument was undertaken in the most general of ways by the plaintiffs' solicitor, and it was difficult at times to understand the precise manner in which the case was being put.
Fourth, I have also noted in the Primary Reasons that the threshold issues raised by the plaintiffs were either baseless or not advanced before the Court in any meaningful way. These issues did not occupy a substantial amount of time at the hearing, but nonetheless still contributed to the inefficient hearing of the matter.
Fifth, I hold concerns as to the manner in which the first hearing was brought on before the Court on 13 November 2024. As has been observed by the first defendant, his lawyers only became aware of the hearing at least in the first instance by seeing the matter listed in the Daily Court List. Part of this difficulty appears to have arisen from the plaintiffs' solicitors misunderstanding as to differential roles of the liquidator and the Receiver, who were represented by different law firms. This is a matter that, with some proper attention, the plaintiffs' solicitors could more efficiently have addressed. As noted above, though, I doubt further conferral would have modified the approach adopted by the first defendant.
In all these circumstances, a proper exercise of the discretion is that an order should be made to reflect that, while the plaintiffs were the successful party in the proceedings, the order should be modified to reflect that costs were incurred unnecessarily and unreasonably in the course of the matter through the conduct of the plaintiffs and their failure on a discrete issue, and the plaintiffs ought be deprived of a proportion of their costs as a result. The proportion of costs attributable to this conduct can only be assessed in a broad brush manner.
The best assessment I can make in the circumstances is that the costs should be reduced by 40% to recognise the impact of this conduct on the overall course of the proceedings between the initiation of the proceedings on 13 November 2024 and the judgment delivery on 25 November 2024. Further, given the circumstances outlined at [3] to [9] above, the costs payable by the first defendant should not include any costs incurred in relation to the hearing on 25 November 2024.
Should costs be awarded against the Receiver himself?
The Court has power to award costs against a non-party.
The principles relevant to the determination of non-party costs applications can be found in Knight v FP Special Assets Limited. In that decision, Mason CJ and Deane J observed:[9]
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
[9] Knight v FP Special Asset Ltd (192 – 193).
The present case falls within this principle.
It is necessary that a party seeking costs against a non-party demonstrate that the non-party was on notice of the possibility of such costs being sought. That is particularly important because the non-party may not have complete visibility of the steps in the proceeding, and prior notice forms an important part of the procedural fairness requirement associated with orders such as these.
The nature of the present proceedings is such that the Receiver himself was well aware of the proceedings and no doubt aware of the risk of costs orders being made against the first defendant.
While I cannot discern from the materials any specific notification by the plaintiffs that a costs order would be sought against the Receiver himself, no complaint was raised in the first defendant's submissions on this issue and it is relatively clear the Receiver was involved with the proceedings throughout and was the guiding hand behind the decisions taken by the first defendant. I would infer the risk of such a costs order being sought was in the contemplation of the Receiver (and the secured creditor who stands behind the Receiver) in these circumstances.
The Receiver in this case has shaped the course of this litigation and is, I can reasonably infer, through the secured creditor, the source of the funds to instruct solicitors to defend the proceedings. The Receiver ought bear the costs of the proceeding, jointly and severally with the first defendant itself.
F. Conclusion and orders
For the foregoing reasons, the Court will order that:
1.The plaintiffs are entitled to their costs of the proceedings other than any costs incurred in respect of the hearing on 25 November 2024, to be assessed if not agreed.
2.Pursuant to O 66 r 1(2) and r 1(3) of the Rules of the Supreme Court 1971 (WA), the plaintiffs' costs in order 1 are to be reduced by 40%.
3.The first defendant and Kimberley Stuart Wallman, in his capacity as the receiver and manager of the first defendant, shall jointly and severally be liable to pay the plaintiffs' costs of the proceedings in the terms set out in orders 1 and 2 above.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LM
Associate to the Honourable Justice Lundberg
23 DECEMBER 2024
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