Stern v National Australia Bank Ltd

[1999] FCA 1656

FEDERAL COURT OF AUSTRALIA

Stern v National Australia Bank Ltd [1999] FCA 1656

PRACTICE and PROCEDURE – application for a stay of proceedings pending an appeal to the Full Court – hardship – danger of execution or bankruptcy proceedings – assets divested – period of time from foreign judgment now enforced in Australia

COSTS – application for indemnity costs – costs usually awarded on a party-party basis – public interest in control of costs – judicial discretion – special circumstances required to depart from general rule

Trade Practices Act (1974) (Cth)
Federal Court of Australia Act 1977 (Cth) ss 23 and 43
Federal Court Rules O 62

Berry v British Transport Commission [1962] 1 QB 306 cited
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 applied
Huntsman Chemical Company Australia Ltd v International PoolsAustralia Ltd (1995) 36 NSWLR 242 cited
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 cited

ILANA ELENKA STERN AND JOSEPH POLLAK v NATIONAL AUSTRALIA BANK LIMITED
NG 149 OF 1996, NG 81 OF 1998, N 303 OF 1999
AND
NATIONAL AUSTRALIA BANK LIMITED v
JOSEPH POLLAK AND ILANA ELENKA STERN
NG 936 OF 1996

TAMBERLIN J
SYDNEY
26 NOVEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 149 of 1996 NG 81 of 1998 N 303 of 1999

BETWEEN:

ILANA ELENKA STERN
FIRST APPLICANT

JOSEPH POLLAK
SECOND APPLICANT

AND:

BETWEEN:

AND:

NATIONAL AUSTRALIA BANK LIMITED
RESPONDENT

  NG 936 of 1996

NATIONAL AUSTRALIA BANK LIMITED
APPLICANT

JOSEPH POLLAK
FIRST RESPONDENT

ILANA ELENKA STERN
SECOND RESPONDENT

JUDGE:

TAMBERLIN J

DATE OF ORDER:

26 NOVEMBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The National Australia Bank Ltd is to pay the costs of Ilana Elenka Stern and Joseph Pollak on its application for indemnity costs which has been dismissed.

2.Ilana Elenka Stern and Joseph Pollak are to pay the costs of National Australia Bank Ltd on their application for a stay of proceedings in NG 936 of 1996 which has been dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 149 of 1996 NG 81 of 1998 N 303 of 1999

BETWEEN:

ILANA ELENKA STERN
FIRST APPLICANT

JOSEPH POLLAK
SECOND APPLICANT

NATIONAL AUSTRALIA BANK LIMITED
RESPONDENT

  NG 936 of 1996

BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED
APPLICANT

AND:

JOSEPH POLLAK
FIRST RESPONDENT

ILANA ELENKA STERN
SECOND RESPONDENT

JUDGE:	TAMBERLIN J
DATE:	26 NOVEMBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. Reasons for judgment in these matters were delivered on 15 October 1999 when the parties were ordered to bring in Short Minutes of Order to give effect to those reasons for judgment. 

2. Draft Short Minutes were drawn up, and orders were agreed to, and there was a hearing last Friday, 19 November 1999 on two outstanding questions concerning indemnity costs and a stay pending appeal.  I will refer to the parties as the applicants and the Bank respectively.

   Indemnity costs

3. The first outstanding matter was the Bank’s application for its costs on an indemnity basis.  After hearing argument from the parties, I refused this application and indicated I would deliver my reasons later.  I now briefly set out my reasons for refusing the application for indemnity costs.

4. The Bank was substantially successful in all points of significance in the proceedings brought by it to enforce its judgment, and also in the proceedings brought by the applicant based on alleged breaches of the Trade Practices Act (1974) (Cth) (“the TPA”) which was the principal matter in the litigation.  Although the applicant succeeded on some matters, there is no suggestion on its behalf, and correctly so, that there should be any apportionment of costs.  This is not an appropriate case for that course to be adopted because the issues on which the applicants succeeded did not affect the outcome.

5. The starting point for consideration whether an award of indemnity costs should be made is that costs are usually awarded on a party-party basis.  The reasons for this are to be found in the long settled practice of courts here and in England.  This is said to be because it is in the public interest that litigants should exercise a degree of discipline in the conduct of proceedings in order to control costs, and therefore a successful litigant must show some additional ground for reimbursement on a basis other than party-party costs, over and above the bare fact that it is successful: see Devlin LJ in Berry v British Transport Commission [1962] 1 QB 306 at 323.

6. In the application of ss 23 and 43 of the Federal Court of Australia Act 1977 (Cth) and O 62 of the Federal Court Rules, the Court has a wide discretion which is not circumscribed by any universally applicable principles, but the discretion must be exercised in a judicial manner, which I take to mean not in an irresponsible way or on an arbitrary basis.  In order to justify departure from the general rule there must be some special or unusual features in the circumstances or the way the litigation has been conducted.  Examples can be found in situations where an allegation of fraud was made which was known to be false, or where applicants knew or ought to have known that the proceedings had little or no prospect of success, or where the proceedings were conducted for some ulterior and extraneous objective in wilful disregard of known facts or clearly established law: see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 226-234 where Sheppard J, after reviewing the authorities, helpfully sets out a number of pertinent considerations. See also Huntsman Chemical Company Australia Ltd v International PoolsAustralia Ltd (1995) 36 NSWLR 242 and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401.

7. In the present case serious allegations were made against the Bank, but essentially the claim was one of misleading and deceptive conduct which I found not to have been made out.  This of course does not necessarily allege or require proof of fraud.  The evidence was not sufficient to persuade me that the allegations raised by the applicants were known by them to be false, although in the course of the hearing serious allegations were by them made and in some instances abandoned in submissions.  However, I am not satisfied that this was due to actual knowledge of their falsity.  The oral testimony of the applicants and their affidavits were not accepted on any question of significance, and their response to questioning was in many instances evasive.  These matters, however, do not satisfy me that they actually knew the statements to be false.  I have examined the transcript of oral submissions in this matter and there is no reference to the expressions “fraudulent” or “fraud” in any relevant sense in the applicant’s case.

8. While with the benefit of a full hearing the case advanced for the applicant was, in my view, demonstrated to be weak in a number of substantial respects, I am not satisfied that the case was hopeless or conducted in wilful disregard of known facts or clearly established law within the principles referred to in Colgate, although there was a considerable shifting of ground particularly in relation to the clearly accidental omission of cl 1 in the relevant Assumption Agreement.  Likewise, I am not satisfied that the case was unduly prolonged by groundless contention.  Again, this calls for a finding that there was virtually no possible basis for argument and this is putting the matter too high.  In addition, I am not satisfied of any particular “misconduct” that caused loss of time.  It is further submitted for the Bank that the applicants did not press or seek extradition of the hearing.  It seems to me that this is not a reason for awarding indemnity costs.  It was also open to the Bank to press for an early hearing and seek expedition.

9. So far as the circumstances surrounding the disposal of assets and the Mareva injunction is concerned, I do not consider this has substantial weight on the application for indemnity costs but it is of course significant on the question of whether a stay should be granted pending the hearing of an appeal.

10. Two other matters are in my opinion of some significance.  The first is that many of the relevant events took place many years ago and the applicants to a very large extent relied on their recollections unassisted by any documentary material.  Given the practical impossibility of accurate and precise recall over such a period of time and given the inconsistencies and evasiveness of their evidence I found the documentary material to be far more convincing than their oral and affidavit evidence.  The second matter is that the applicants were successful on several issues which took up a considerable period of time in the course of the hearing and there is no apportionment of the party-party costs.  Having regard to these considerations I have reached the conclusion that costs should be awarded to the Bank on a party-party basis and not an indemnity or solicitor-client basis.

    Stay application

11. The applicants seek by notice of motion a stay of the orders made on 19 November pending the hearing of a foreshadowed appeal to the Full Court from my reasons for judgment.

12. In support of the application, the applicants submit that there will be hardship to them if the stay is refused.  Specifically, they will be exposed to the danger of execution or bankruptcy proceedings before the matter is finally determined.  It is said that they are both without any substantial assets (having divested themselves of many millions of dollars in assets over the period since 1994) in circumstances which are described in my earlier reasons for judgment on the Mareva injunction application which were delivered on 21 December 1998.  The applicants submit that the Bank is satisfactorily protected by the Mareva relief which remains on foot.  It is also said that there will be relatively less hardship to the Bank and that the applicants should be allowed to pursue the appeal which, so it is said, is not without substance. 

13. The Bank, on the other hand, points to the matters raised on the indemnity costs application.  It says that the systematic divesting of assets was clearly done in the light of the Californian proceedings.  The Bank points to the period of time over which it has been kept out of the fruits of its judgment in the Californian proceeding and to the strength of its case in resisting an appeal.  The Bank submits that the appeals lack merit and substance, and that for this reason a stay should be granted.  As indicated earlier, while I do not consider the applicant’s case to be a strong one, it cannot be said to be so unarguable as to warrant a total discounting of its substance.  The Bank says in effect that if there is any present impecuniosity of the applicants then it arose from their own systematic conduct in transferring their assets and divesting themselves of resources.  The Bank says that this was done in order to avoid the consequences of the orders made against them in California and possibly in this Court.

14. I am satisfied that the circumstances point clearly to the refusal of a stay. There is considerable force in the Bank’s submissions.

15. It should be appreciated that if bankruptcy or execution proceedings are commenced, it will be open to the applicants to make any applications in those proceedings and it will be for the Court, after hearing argument and evidence, to determine the progress of those proceedings.  If, for example, a sequestration order is made it will be for the Court to then determine whether any of the transfers of assets by the applicants should be set aside under the Bankruptcy Act.  This is not a matter which has been fully canvassed before me.  The Court on hearing a bankruptcy application has a wide discretion as to the way in which it proceeds.

16. In relation to the indemnity costs application, I have refused the application and have ordered the Bank to pay the applicants’ costs of that application.

17. Having regard to the above considerations and the comparative weakness of the applicants’ case, I refuse the application for a stay of proceedings in matter NG 936 of 1996 brought by the Bank and order that the applicants pay the costs of that application.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated:             26 November 1999

Counsel for Stern and Pollak:	R B S MacFarlan QC J W Stevenson
Solicitor for the Applicant:	Denes Ebner
Counsel for the Respondent:	S M P reeves
Solicitor for the Respondent:	Mallesons Stephen Jaques
Date of Hearing:	19 November 1999
Date of Judgment:	26 November 1999