Swansdale Pty Ltd v Whitcrest Pty Ltd - [2010] WASCA 129

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: SWANSDALE PTY LTD -v- WHITCREST PTY LTD [2010] WASCA 129

CORAM: PULLIN JA
KENNETH MARTIN J

HEARD: 5 MARCH 2010

DELIVERED : 8 JULY 2010

FILE NO/S: CACV 57 of 2009

BETWEEN: SWANSDALE PTY LTD (ACN 079 005 477)
First Appellant
MUNKBERG PTY LTD (ACN 078 824 567)
Second Appellant
RUSSMEX PTY LTD (ACN 079 030 550)
Third Appellant
AND
WHITCREST PTY LTD (ACN 009 113 473)
First Respondent
ROCHWOOD PTY LTD (ACN 079 005 440)
Second Respondent
MARK JOHN BEESON
Third Respondent
LYNDON EDWARD DYSON
Fourth Respondent
ENDOPINE PTY LTD (ACN 079 030 452)
Fifth Respondent
LUPIN NOMINEES PTY LTD (ACN 008 998 990)
Sixth Respondent

FILE NO/S :CACV 107 of 2009

BETWEEN :SWANSDALE PTY LTD (ACN 079 005 477)
First Appellant
MUNKBERG PTY LTD (ACN 078 824 567)
Second Appellant
RUSSMEX PTY LTD (ACN 079 030 550)
Third Appellant
AND
WHITCREST PTY LTD (ACN 009 113 473)
First Respondent
ROCHWOOD PTY LTD (ACN 079 005 440)
Second Respondent
MARK JOHN BEESON
Third Respondent
LYNDON EDWARD DYSON
Fourth Respondent
ENDOPINE PTY LTD (ACN 079 030 452)
Fifth Respondent
LUPIN NOMINEES PTY LTD (ACN 008 998 990)
Sixth Respondent

ON APPEAL FROM:
For File No              :  CACV 57 of 2009
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :SWANSDALE PTY LTD -v- WHITCREST PTY LTD [2009] WASC 117
File No  :CIV 2156 of 2008
For File No              :  CACV 107 of 2009
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :SWANSDALE PTY LTD -v- WHITCREST PTY LTD [No 2] [2009] WASC 179
File No  :CIV 2156 of 2008

Catchwords:

Interlocutory appeals - Refusal to admit late affidavits - Failure to explain reasons for non-compliance with directions - Late materials relevant to resisting strike out applications - Security for costs principles

Legislation:

Corporations Act 2007 (Cth), s 1335
Federal Court of Australia Act 1976 (Cth), s 56
Rules of the Supreme Court 1971 (WA), O 59 r 9

Result:

CACV 57 of 2009
Leave to appeal refused
CACV 107 of 2009
Application for an extension of time to appeal dismissed

Category: B

CACV 57 of 2009

Counsel:

First Appellant               :     Mr S Owen-Conway QC & Mr T Galic
Second Appellant          :     Mr S Owen-Conway QC & Mr T Galic
Third Appellant             :     Mr S Owen-Conway QC & Mr T Galic
First Respondent           :     Mr P Mendelow
Second Respondent      :     Mr P Mendelow
Third Respondent          :     Mr P Mendelow
Fourth Respondent        :     Mr P Mendelow
Fifth Respondent           :     Mr P Mendelow
Sixth Respondent          :     Mr P Mendelow

Solicitors:

First Appellant               :     Galic & Co
Second Appellant          :     Galic & Co
Third Appellant             :     Galic & Co
First Respondent           :     Haydn Robinson
Second Respondent      :     Haydn Robinson
Third Respondent          :     Haydn Robinson
Fourth Respondent        :     Haydn Robinson
Fifth Respondent           :     Haydn Robinson
Sixth Respondent          :     Haydn Robinson

CACV 107 of 2009

Counsel:

First Appellant               :     Mr S Owen-Conway QC & Mr T Galic
Second Appellant          :     Mr S Owen-Conway QC & Mr T Galic
Third Appellant             :     Mr S Owen-Conway QC & Mr T Galic
First Respondent           :     Mr P Mendelow
Second Respondent      :     Mr P Mendelow
Third Respondent          :     Mr P Mendelow
Fourth Respondent        :     Mr P Mendelow
Fifth Respondent           :     Mr P Mendelow
Sixth Respondent          :     Mr P Mendelow

Solicitors:

First Appellant               :     Galic & Co
Second Appellant          :     Galic & Co
Third Appellant             :     Galic & Co
First Respondent           :     Haydn Robinson
Second Respondent      :     Haydn Robinson
Third Respondent          :     Haydn Robinson
Fourth Respondent        :     Haydn Robinson
Fifth Respondent           :     Haydn Robinson
Sixth Respondent          :     Haydn Robinson

Case(s) referred to in judgment(s):

Allmark v Mossensons (A Firm) [2006] WASCA 127
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Beach Petroleum NL v Johnson (1992) 10 ACLC 525
BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241
Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564
Gartner v Ernst & Young (No 3) [2003] FCA 1437
Harpur v Ariadne Australia Ltd (1984) 2 ACLC 356
Mariotti v Wanneroo North Pty Ltd [2008] WASCA 243
Osgood v Wham [2007] WASCA 178
Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2010] WASCA 43
Swansdale Pty Ltd v Whitcrest Pty Ltd [2009] WASC 117
Swansdale Pty Ltd v Whitcrest Pty Ltd [No 2] [2009] WASC 179
The State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146

PULLIN JA: I agree with Kenneth Martin J's proposed orders. I also agree with his Honour's reasons but would add the following comments which need to be read after reading his Honour's reasons for decision.
The appellants claim that the Chesson affidavit went to the merits of the appellants' claim and that as a result, the affidavit was relevant to the application for security for costs. However, there was no such relevance. In the writ, the appellants claim that there had been a failure to account. If there was such a failure, it existed when the proceedings commenced. What Mr Chesson says happened after the writ issued does not go to the merits of the appellants' claim. Thus, the master did not err in the decisions which he made.
KENNETH MARTIN J:

Overview

These two interlocutory appeals arise in respect of decisions made by the master in action CIV 2156 of 2008 (the 2008 action). Both decisions concern the unresolved respondents' chamber summons dated 29 January 2009 seeking to strike out the 2008 action as an abuse of process, and, or in the alternative, an order for security of costs (strike out application). Each interlocutory appeal concerns the master's rejection of affidavits in opposition to the strike out application.
The 2008 action was commenced by writ on 11 September 2008. The appellants seek equitable relief against the six respondents. It is alleged that trusts, of which the first and second respondents are trustees, have either failed to account, or have not accounted adequately to the appellants, in respect of the activities of what would appear to be trading trusts.
A degree of insight into the 2008 action emerges in the statement of claim of 25 November 2008. The pleading contends that the appellants are unit holders in respective trusts, namely the Whitcrest and Complete trusts, and that they pursue an account in respect of the activities of the trusts in the period 1 July 2004 to the present.
In each case, it is necessary for the appellants to obtain leave to appeal against the interlocutory decisions of the master dismissing the affidavits.

Furthermore, in the second appeal CACV 107 of 2009, the appellants filed the application for leave to appeal out of time and require an extension of time of one day.

Underlying events

On 19 January 2009, the solicitor for the respondents sent a lengthy letter to the appellants' solicitors. It advised (in part):
As was mentioned at the status conference on 22/12/08, the defendants intend to make an application as follows:
1.Action CIV 2156/2008 be struck out as an abuse of process.
2.Alternatively the plaintiffs provide security for costs in the amount of $500K and pending provision of security the action be stayed.
3.Alternatively the SOC be struck out and the action dismissed.
The reason for Order 1 is that in CIV 2302/2005 the CA made an order on 3/8/07 requiring Munkberg and Swansdale to pay security of $100K within 21 days and that order has still not been complied with.
Munkberg and Swansdale should not be permitted to commence another action while this order remains unsatisfied, a fortiori where the new action is against the same parties who have the benefit of the costs order and the subject matter of the new action in part deals with the same matter in CIV 2302/2005.
Russmex has the same apparent financial limits and so it too should provide security in the new action, but in any event Russmex is complicit in the abuse of process by Munkberg and Swansdale because it has full knowledge of the abuse of process by those companies. Relevantly the shareholders of Russmex are Swansdale and Munkberg and the directors of Russmex are Pearson and Hamilton, the same directors of the other 2 companies.
In our view the abuse by the plaintiffs in the new action could be characterised as a contempt of court.
The letter went on to address alternative relief. It set out 25 alleged pleading deficiencies in the statement of claim, contending 'the pleading as an entire document is in conflict with Order 20 rule 19 (1)(a)-(d)'.
The letter also traversed the prospect of alternative relief for security for costs. Reference was made to a failure to meet a security for costs order of the Court of Appeal in another matter involving two of the same three appellants in the 2008 action, namely CIV 2302 of 2005 (the 2005 proceedings) ‑ a failure extant since 3 April 2007. That failure was the first of a series of considerations relied upon. But the respondents' solicitor also identified the following matters regarding the security for costs demand:
Third, the subject matter of the new action is much wider than the subject matter of CIV 2302/2005. Fourth, Swansdale and Munkberg have not taken any steps to proceed with CIV 2302/2005, an action which commenced in November 2005; in CIV 2156/2008 it required a springing order to compel the plaintiffs to complete the SOC. Fifth, if the SOC sent on 25/11/08 stands, it will require an enormous amount of work to deal with the discovery and related matters pertaining to the numerous entities referred to, in particular in paras 16.2 and 17.2.
Conferral between the parties, required under the Rules of the Supreme Court 1971 (WA) O 59 r 9, did not resolve the respondents' above concerns.
Accordingly, the respondents' solicitor filed and served the chamber summons of 29 January 2009, seeking relief in the alternative, as foreshadowed. First, the summons sought an order that the action be struck out as an abuse of process and that there be an award of costs on an indemnity basis. Alternatively, it sought to strike out both the statement of claim and the writ on the basis of multiple alleged pleading deficiencies. Alternatively again, security for costs was sought relying upon s 1335 of the Corporations Act 2001 (Cth) (chamber summons heading) in the sum of $366,577 by payment of that amount into court, and in the meantime that all further proceedings be stayed.
In support of this relief, the respondents' solicitor, Haydn Robinson swore an affidavit of 29 January 2009. The affidavit annexed a considerable amount of material, particularly concerning the CIV 2302/2005 proceedings, including a transcript of proceedings in the Court of Appeal dated 3 August 2007 (in appeal CACV 146 of 2006) and Mr Robinson's letter of 19 January 2009.
The respondents' chamber summons was returnable before the master in chambers on Thursday 12 February 2009, for first directions.
On that day, orders were made by consent between the parties, in terms of the appellants' minute. Programming directions were agreed and ordered in relation to routine steps towards a substantive hearing of the respondents' chamber summons at a special appointment before the master.
As of 12 February 2009, a $100,000 security for costs order made by the Court of Appeal in the 2005 proceedings (on 3 August 2007) remained unmet. This state of affairs underpinned the respondents' abuse of process challenge. It was also relevant to the security for costs issue in these proceedings.
The programming directions of 12 February 2009 provided for filing of any affidavits on behalf of the appellants resisting the relief sought under the respondents' chamber summons by 12 March 2009. An allowance of four weeks for filing those affidavit materials was made. The respondents were relying upon only one affidavit, by the respondents' solicitor, Mr Robinson, which was already filed and had been in the appellants' solicitor's possession since 29 January 2009.
The programming directions, as is customary, also dealt with the issue of outlines of written submissions preceding a substantive hearing of oral argument. The appellants' outline of written submissions were ordered to be filed by 16 April 2009.
The chamber summons was then listed for substantive argument at a special appointment before the master in chambers at 2.15 pm on Thursday 30 April 2009.
The 12 March 2009 deadline passed without the appellants filing affidavit materials. Nor did the appellants' solicitor apply to vary the directions timetable of 12 February 2009, such as by seeking orders extending the time for filing materials on behalf of the appellants.
On 2 April 2009, the respondents' solicitor wrote to the accountants for the appellants (AustAsia Accounting Services Pty Ltd). The amended writ of summons in the 2008 proceedings (of 6 November 2008) and the statement of claim (of 25 November 2008) show on their face, that they were prepared by an apparently related corporate entity, AustAsia Legal Pty Ltd (AustAsia), of Level 1, 412-414 Newcastle Street, West Perth, acting as the appellants' solicitor.
The respondents' solicitor's letter of 2 April 2009 dealt with a number of issues. It conveyed the respondents' blanket negative response to a series of lengthy requests received during March 2009 from AustAsia (authored by a Mr Simon Chesson) seeking accounting information concerning Whitcrest Pty Ltd and Rochwood Pty Ltd. These requests for information commenced on 11 March 2009 (with a 64‑page requisition sent to the accountant for the respondents, followed by a further requisition of 29 pages on 17 March 2009, finally followed by a further four‑page requisition on 18 March 2009 concerning Whitcrest).
The respondents' solicitor rebuffed all requests for accounting information by Mr Chesson, in these terms:
8.Further, there is existing litigation between our clients in the Supreme Court being CIV 2302/2005 and CIV 2156/2008.
9.Your clients have elected to use the Supreme Court as the forum for resolution of their disputes involving our clients and it is simply wrong on every level for your clients to insist that they can in addition, compel our clients to process requests being made by AustAsia and Gallic and Co outside of the litigation. There can be no suggestion our clients are doing or have done anything to deny it to your clients the right to exercise their lawfully remedies, however, with respect, we contend your clients are not going about this in the proper way.
I will return to the alleged significance of requests for accounting information and the negative response of the respondents in greater detail later in these reasons.
The 2 April 2009 letter then addressed matters concerning the 2005 and 2008 actions:
13.As to the litigation, prosecution of CIV 2302/2005 has been stayed pursuant to the security for costs order made on 3/8/07. Unbelievably, your clients have caused the required $100k payment to be made into Court on 11/3/09, apparently assuming this belated payment cures what has been an outrageous and contumelious disregard of the order made on 3/8/07.
14.Prosecution of CIV 2156/08 is following a similar process to CIV 2302/2005, that is, the SOC was late and virtually nothing has been done to take that action any further. For example consent orders were made on 11/2/09 requiring the plaintiffs to file and serve affidavits by 12/3/09, but no affidavits have been filed or served. If an attempt is made to file a belated affidavit we will object ‑ the plaintiffs will be required to persuade the Court they should be granted an extension of time to comply with this order. (my emphasis in italics)
There is no suggestion that the respondents' solicitor's communication of 2 April 2009 did not come to the attention of the appellants' legal advisors. Paragraph 14 above contained a blunt reminder that the appellants had not filed or served affidavit materials within a timeline of 12 March 2009, and a warning that there was no acquiescence in the appellants' failure to do so.
The appellants' solicitor ought not to have let the 12 March 2009 timeline slip without seeking an extension of time (either by consent, or by application to the master for an extension). But the clear warning in par 14 of the 2 April 2009 letter, expressly put the appellants' advisors on notice, of the objection to belated affidavit materials. This warning, like the timeline of 12 March 2009, was also ignored. No application was filed on behalf of the appellants seeking an extension of time, or any variation in the directions of 12 February 2009.
With the special appointment for substantive argument before the master looming at 2.15 pm on 30 April 2009, there was a last minute flurry of activity from the appellants. What transpired is explained at [4] ‑ [5] of the master's reasons: Swansdale Pty Ltd v Whitcrest Pty Ltd [2009] WASC 117 delivered 5 May 2009:
The plaintiffs did not comply with the programming orders. On 28 April 2009, without leave, the plaintiffs filed an affidavit of Mr Gallic sworn 24 April 2009. I was advised from the Bar table that they also filed or attempted to file on the same day an affidavit of Simon James Sydney Chesson sworn the same day. There is no record on the court file of that document being filed. The first time I saw the affidavit was when a copy was tendered by counsel for the plaintiffs at the hearing. At 12.30 pm on the day of the hearing, the plaintiffs' solicitors faxed through what was described as a supplementary affidavit of the plaintiffs' solicitor sworn 30 April 2009. The plaintiffs' outline of submissions was lodged at 4.00 pm on 29 April 2009.
When the application was called on for hearing, counsel for the plaintiffs sought leave to rely on the three late affidavits. It was counsel's submission that these affidavits, and in particular the affidavit of Mr Chesson, were necessary to allow the plaintiffs to properly put their case. Counsel for the defendants objected to the tendering of these affidavits in the strongest possible terms.
No explanation was provided to the master to explain, justify or rationalise the late filing by the appellants of the three affidavits.
By 12 February 2009, the appellants had had, as I have observed, four weeks to provide any affidavit materials in opposition to the application (by 12 March 2009). A further 43 days then elapsed after that date, until the appointment of Thursday 30 April 2009.
Late filing of the three affidavits required the master to consider their content in order to rule upon them, in the face of the objections. As he observed at [6]:
This meant reading the affidavit of Mr Chesson. That affidavit ran to 28 paragraphs and, with exhibits, the entire document ran to 162 pages. Given that considerable time was expended in arguing about the admissibility of the affidavits and that it would take some time to read Mr Chesson's affidavit, I had no option but to adjourn the matter pending a ruling on the admissibility issue.
The late affidavits effectively derailed the prospect of a substantive hearing or resolution of the respondents' chamber summons on 30 April 2009. Indeed, the respondents' substantive application on the chamber summons has still not been argued.
The master assessed the late affidavits. Appropriately, he observed the potential relevance of their content in the context of the respondents' chamber summons arguments. He observed, as to the proposed affidavit of Mr Galic sworn 24 April 2009, that it dealt with Mr Galic's (the appellant's solicitor) efforts, to pay moneys into court as security for costs in the 2005 action. Payment of the monies occurred on 11 March 2009 (almost 18 months after being ordered). The master observed:
Whatever else may be said about the affidavit, it is clear that the events with which it is concerned were well and truly concluded by 12 March 2009. In other words, there is no reason at all why the affidavit could not have been filed in conformity with the programming orders [7].

That observation is, temporally, correct and what may be further observed, is that Mr Galic's affidavit of 24 April 2009 only addressed events surrounding a belated 2009 payment into court of $100,000 in the 2005 action. There is no explanation in Mr Galic's proposed affidavit, as one would have expected in all the circumstances, as to why the directions of 12 February 2009 were ignored in respect of the filing of affidavit materials on behalf of the appellants by 12 March 2009, or why no application had been made seeking an extension or variation of that timeline.
The master then assessed the proposed affidavit of Mr Simon Chesson sworn 24 April 2009. He observed:
As I understand the thrust of the affidavit and relying upon counsel for the plaintiffs' oral and written submissions, it seems that the affidavit is directed to discretionary considerations as to whether or not security ought be granted. In essence, the argument is that the defendants have been obstructive, the plaintiffs have a very strong case and therefore this is not an appropriate instance in which to order security for costs. I accept that the affidavit addresses these discretionary considerations squarely and the material it contains as [sic: is] relevant to the disposition of the application [9]. (my emphasis in italics)
The proposed supplementary affidavit of Mr Galic, sworn 30 April 2009 at par 3 states:
The purpose of the affidavit of Mr Simon Chesson sworn 24 April 2009 which was filed after the due date, for the filing of the Plaintiffs' answering affidavit(s) is to bring to this Honourable Court's attention all relevant changed circumstances that have happened since the due date for filing of the affidavit. Accordingly leave is sought to rely upon the affidavit of Simon Chesson sworn 24 April 2009. (my emphasis in italics)
But the par 3 reference by Mr Galic to 'relevant changed circumstances' (since 15 March 2009) presents as rather shallow ‑ once a degree of scrutiny is directed at the content of the proposed Chesson affidavit of 24 April 2009. The substantive content of Mr Chesson's proposed affidavit deals with communications passing between himself and the respondents' accountant, which only commence with Mr Chesson's communication of 11 March 2009 (of 64 pages), to which I have earlier referred. Mr Chesson requests detailed accounting information from the respondents' accountants on a basis that the information was necessary 'in order to complete my investigation into the affairs of Rochwood and Complete' (see proposed par 8).
Bearing in mind the 2008 action commenced in September 2008 with programming orders consensually made on 12 February 2009 (with a view to obtaining the appellants' affidavit materials by 12 March 2009) ‑ the requests for accounting information that were despatched by Mr Chesson from mid‑March 2009 and their ensuing rebuff, are events that arise far too late in the piece to justify a description of 'relevant changed circumstances'. Indeed, Mr Chesson's 64-page facsimile communication of 11 March 2009 bears the stigma of an 11th‑hour communication sent with a view to manufacturing a (weak) basis for non‑compliance with a looming compliance deadline the following day. In any event, accountant to accountant communications can hardly constitute 'relevant changed circumstances', as Mr Galic seeks to contend under his supplementary affidavit.
The master rightly observed at [10] of his reasons, that most, if not all, of Mr Chesson's efforts to obtain this accounting information and the alleged obstruction of the appellants by the respondents had occurred after 12 March 2009. He said:
In other words, Mr Chesson's affidavit could not have been filed by the due date because events had not then occurred which it is now said justify the refusal to make the order for security for costs [10].
The appellants made some point in their favour out of this sentence, contending that it contains, in effect, a recognition by the master that the events had indeed occurred after the designated time (12 March 2009) for filing affidavits by the appellants. That, however, is not how I assess the observation. The master was observing upon a base incongruity in the appellants' conduct, in writing to demand extensive accounting information a day before a stipulated due date for the filing of the appellants' affidavits. The appellants cannot be allowed to manufacture a 'crutch' out of the indolence exhibited up to 11 March 2009.
The master correctly observed that if the Chesson affidavit was admitted, the respondents would likely need an opportunity to respond, and so, the matter could not proceed. He observed at [12] and [14]:
It is clear what should have happened in this case. The plaintiffs' solicitor should have realised sometime prior to 12 March 2009 that the plaintiffs were not in a position to comply with directions. He should have made an application for an extension of time for the filing of affidavits and have applied to adjourn the special appointment. There is no reason whatsoever why such an application could not have been made. There is no explanation as to why it was not made.
Sufficient attention has not been paid to the court's orders. They have been ignored. Now the plaintiffs seek an indulgence. In my view, to grant such an indulgence would be unfair to the defendants. The defendants are entitled to expect that programming orders will be complied with and that their application will be disposed of in a timely fashion. Through no fault of their own, the defendants have been thwarted in that ambition. They should not have to deal with this material which was filed well out of time.
Again, in my view, these observations were appropriate.
The master's decision refusing to allow three late affidavits to be read, preceded the High Court's decision in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, delivered 5 August 2009. In Aon, the plurality (Gummow, Hayne, Crennan, Kiefel & Bell JJ) observed that (in the context of a late application for leave to amend a pleading):
Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future [111].
I would mention from the Aon plurality's reasons, further observations at [103], concerning need for an explanation generally speaking, where a discretion is sought to be exercised in favour of a party, in the face of exhibited delay. In the present case of course, no explanation was offered for the delay in the late filing of the three affidavits.

CACV 57 of 2009

In CACV 57 of 2009 the appellants raise amended grounds of appeal. Ground 1 complains about the adverse result in terms of the master's refusal to allow the appellants to read the three late affidavits. It is put that the refusal ruling deprived the appellants of raising an 'arguable defence on the merits upon the hearing of the respondents' chamber summons to strike out the action as an abuse of process, or, alternatively for security for costs'.
Ground 2 contends (surprisingly) that the delay in filing the three affidavits was explained, and was not extensive. Akin to ground 1, it is put that there was 'an arguable case' disclosed on the merits, in the affidavits. And, it is said, there was no prejudice to the respondents. I defer consideration of grounds 1 and 2, for the present.
Ground 3 contends that the master erred in law by observing that principles of law, as explained by Steytler P in Mariotti v Wanneroo North Pty Ltd [2008] WASCA 243, had application to the facts of this case. There is no merit in ground 3. It was perfectly appropriate for the master to refer to the principles identified in that decision. The decision in Aon, explaining the High Court's previous decision in The State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 [45], buttresses the observations in Mariotti. Steytler P in Mariotti had referred to earlier observations of McLure JA in Osgood v Wham [2007] WASCA 178 [20] to the effect that a misconceived view of JL Holdings had produced, in the legal profession of this State, a culture of non‑compliance with court rules, practice directions and court orders (see further observations of Steytler P at [52] ‑ [53]).
The observations by the plurality in Aon concerning JL Holdings (at [111]) coupled with further remarks of French CJ (at [30]) and Heydon J (at [133] and [134]) in Aon, are wholly in line with Steytler P's observation in Mariotti (at [53]) that:
A failure to comply with case flow management orders will be relevant. That will especially be so if the failures are repeated. It will even more especially be so if the failures are deliberate and unexplained, or if there is no acceptable explanation for repeated deliberate failures.
I will now briefly observe the circumstances underlying the second appeal, CACV 107 of 2009.

CACV 107 of 2009

Arrival of the late affidavit materials required their consideration by the master, albeit that they were ultimately rejected. As a consequence, the master was unable to deal with the respondents' substantive application at the appointment, on 30 April 2009. The master delivered written reasons for decision rejecting the three affidavits, on 5 May 2009. The master then asked the parties to provide their counsels' unavailable dates to his associate, so the matter could be re‑listed for a substantive hearing of the respondents' chamber summons. To that end, a directions hearing was set for 4 June 2009.
But before the directions hearing, the appellants, on 18 May 2009, applied for leave to appeal against the decision refusing to allow the three affidavits proffered by the appellants to be read (in CACV 57 of 2009).
On 4 June 2009, counsel for the appellants foreshadowed to the master that he intended to file an application in CIV 2156 of 2008 seeking leave to rely on two further affidavits on behalf of the appellants, in opposition to the respondents' chamber summons.
On 5 June 2009, the appellants did file their chamber summons seeking leave to 'rely upon affidavit evidence in opposition to the respondents' strike out/security for costs application'.
The affidavits now sought to rely upon further affidavits of Mr Galic sworn 28 May 2009, and Mr Chesson sworn 5 June 2009.
The appellants chamber summons was listed for hearing before the master on 9 June 2009 ‑ together with the unresolved substantive application of the respondents (to strike out, alternatively seeking security).
The master briefly described the content of the two further proffered affidavits. As to Mr Galic's affidavit, (which ran to five paragraphs), he observed, Swansdale Pty Ltd v Whitcrest Pty Ltd [No 2] [2009] WASC 179:
It annexes a copy of the appeal notice in these proceedings presumably to confirm that an appeal has been brought. Importantly, what is annexed to the affidavit (as annexure TG1) is a copy of a letter from Mr Robinson, the defendants' solicitor dated 7 May 2009. That letter attaches financial accounts for two companies and various trusts. The companies are Rochwood Pty Ltd and Whitcrest Pty Ltd [10].
The affidavit of Mr Galic was directed towards establishing that accounting information, enclosed under the respondents' solicitor's letter of 7 May 2009, was only recently received. Indeed the information had been provided two days subsequent to publication of the master's first reasons for decision.
As to the newly proffered Chesson affidavit of 5 June 2009, the master observed:
Mr Chesson says that although he has not had an opportunity to consider in detail the financial statements, he is in a position to make some general comments about them. The rest of the affidavit contains those general comments. Without the benefit of detailed submissions, it is somewhat difficult to know at what issue the affidavit is directed. Presumably it goes to the question of the strength of the plaintiffs' case. There is certainly nothing in the affidavit which says anything about the capacity of the plaintiffs to meet a costs order if called upon to do so [11]. (my emphasis in italics)
The master proceeded to reject the appellants' application for leave to read the two further affidavits, under his reasons for decision published on 25 June 2009. He said:
Neither of these affidavits takes the matter any further. Defendants who seek security for costs are required to bring an application promptly. That necessarily means the material available to the court is limited. As a rule, discovery will not have been provided. There may be cases where the materials made available in discovery might be relevant to the issue of the merits of the plaintiffs' claim. But that is beside the point. An application for security for costs is not an occasion to try the action as a whole.
The defendants in this action were entitled to have their application dealt with expeditiously and in conformity with the agreed timetable. In essence, that was the reason why I refused leave to the plaintiffs to rely on further affidavits. The position has not changed. If I were to allow these affidavits into evidence, the defendants may well feel they need to provide answering affidavits. In doing so, they may be acting out of an abundance of caution. However, the last thing they would want is by not filing an answering affidavit, to be seen to be conceding the plaintiffs' position. The result is a pile of affidavits dealing with an issue of limited importance. That surely is in no-one's interest [12] ‑ [13].
Three amended grounds of appeal in CACV 107 of 2009, seek to challenge the master's decision refusing leave to the appellants to rely upon the further affidavits. But the grounds, as expressed, are largely directed at challenging the result of the master's adverse decision, rather than seeking to identify a specific error or errors of legal principle. Perhaps what might just be distilled from the grounds overall, is a challenge grounded upon the premise that some accounting materials emerged only with the respondents' solicitor's letter of 7 May 2009 (to which I have already referred), and that the master had erred, in observing that these further accounting materials dealt with issues of limited importance.
The proposed affidavit from Mr Chesson raised issues going well beyond the scope of the relief claimed in the 2008 action, which (to date) pursues only accounts of profits from trustees to the unit holders in the trusts. Mr Chesson's (self‑described as cursory) analysis of accounting materials provided under cover of Mr Robinson's letter of 7 May 2009, saw him to contend at par 15, in terms:
My general observation and belief is that the accounts have been manipulated to suit the directors Mr Beeson and Mr Dyson in order to direct all of the funds of the trust and the company to themselves in disregard of creditors and the other beneficiaries of the trust which include the Plaintiffs.
At the appeal hearing, counsel for the respondents indicated that pars 15 (and 16) of this affidavit would have been objected to as inadmissible, in any event. Self‑evidently, that objection would be correctly made. No underlying factual basis is provided for the pejorative opinions sought to be expressed by Mr Chesson. But par 15 by its content indicates that the appellants would appear to be seeking to ventilate grievances through Mr Chesson extending well beyond the asserted obligation of the respondents as trustees to provide an account, as seen under the current prayers for relief, via the statement of claim.
In my view, the master was correct in rejecting these two further affidavits. The appellants' submission was an attempt to undermine the basis of his first decision, rejecting the first three late affidavits. After that initial decision, the acceptance of any further affidavit materials, save in truly extraordinary circumstances, was inappropriate. That some further accounting information had been volunteered from the respondents' solicitor on 7 May 2009, was not an event of that order.

Relevance of materials rejected to security for costs application

Given the appellants' submission as to the significance of the rejected affidavit materials, it is necessary to address some considerations pertinent to security for costs applications. I pass over issues of the rejected materials being used in opposition to the respondents' application to strike out - arising out of failure to meet the security for costs order of the Court of Appeal in August 2007 ‑ until 11 March 2009 in the 2005 proceedings. There can be no serious question of any alleged abuse of process in the 2008 action as a result of inaction in the 2005 litigation, once the security for costs orders of the Court of Appeal, were met. That is all a matter of record. The master, in effect, recognised as much in his June reasons, at [6].
As far as the application for security for costs in the 2008 action is concerned, it is to be observed that the respondents' chamber summons of 29 January 2009 in its heading, raised reliance only upon s 1335 of the Corporations Act 2001 (Cth) in support of the application.
Section 1335(1) of the Corporations Act provides:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
In FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241, Pidgeon and Owen JJ observed as to s 1335, that:
We consider that the wording of the section and the weight of the authorities supports the proposition that there is initially the jurisdictional question as to whether it appears by credible testimony that there is reason to believe that the corporation had been able to pay the costs. Once the Court has jurisdiction there is an unlimited discretion [21].
Two points of present relevance emerge from FFE. First (at [11]) regarding the use in s 1335 of the phrase 'credible testimony', the phrase 'reason to believe', is of significance. There is no requirement for proof that a party will not be able to meet a costs order made against it. The operative requirement is as to establishing a basis for belief (see [22] of FFE).
Second, no evidentiary burden is to be undertaken or discharged by a party seeking the security order. Their Honours in FFE said at [24]:
We would not see any burden as nothing is sought to be proved. The legislature that first enacted the words, used them to replace words referring to proof and in our view, were dispensing with a requirement to prove a matter. What is required is an evaluation of the evidence led by the applicant to see whether that leads to a reason to believe that the corporation will be unable to pay the costs of the defendant.
In Gartner v Ernst & Young (No 3) [2003] FCA 1437, Mansfield J in the Federal Court of Australia assessed applications for security pursued under s 56 of the Federal Court of Australia Act 1976 (Cth), in respect of corporate applicants, as well as under s 1335 of the Corporations Act. He observed at [11] upon the unfettered judicial discretion to order security, and said:
Provided that there is credible testimony that there is a reason to believe that the applicants are unable to pay the costs of the bank if the bank is successful in its defence, the Court may make an order for security for costs without being restricted as to how it should exercise its discretion to do or not to do so. The relevant factors commonly considered in such applications are discussed, for instance, by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197 ‑ 198 (KP Cable). See also Beach Petroleum NL v Johnson (1992) 10 ACLC 525 at 527 and 529.

In the judicial exercise of the unfettered discretion to make a security for costs order in pending litigation, potential factors that may arise, on a case by case basis, for potential consideration upon the application could encompass a range of considerations, including (non-exclusively):
(a)the public interest;
(b)the timing of the application, in terms of its promptitude;
(c)whether the impecuniosity of an applicant(s) arises out of (mis)conduct alleged against the defendant/respondent;
(d)whether the making of an order for security for costs would essentially prevent the plaintiff from pursuing the claim; and
(e)the merits of the claims.
As to consideration (e) above, Mansfield J in Gartner at [10] observed:
[T]he prospects of success in the proceedings, subject to the practical circumstance that the Court will generally not be required to investigate in considerable detail the likelihood or otherwise of success in the action.
Master Sanderson's observation at [8] in his June reasons was to like effect.
As was observed in Gartner, obviously there may arise practical limits which constrain the extent to which, on an interlocutory application seeking security, a reliable assessment can be made as to the substantive merits of the positions of the respective parties in litigation. Each case will be different and presents its own unique considerations; see the observations of Austin J in Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 at [37] and [38].
In the present case, it would appear that the affidavit materials, particularly the two Chesson affidavits, were prepared with a view towards establishing before the master, that the appellants' case had substantive merit. But merit in the appellants' case whilst obviously relevant, could hardly advance the appellants' position to a significant extent opposing the security application under s 1335, where the appellants have been shown to be impecunious.
We were provided with a copy of the appellants' written outline of submissions, provided to Master Sanderson on 29 April 2009. Paragraph 6 of those submissions reads:
In the exercise of discretion, security for costs should not be awarded against the plaintiffs. It is the defendants' conduct in refusing to provide the plaintiffs full access to the financial records which they claim an entitlement to which has led to this litigation being brought.
That submission is acknowledged in the master's observation in [2009] WASC 117 at [9] that, 'In essence, the argument is that the defendants have been obstructive, the plaintiffs have a very strong case and therefore this is not an appropriate instance in which to order security for costs'.
Contextually, I do not discern in the affidavit materials sought to be read on behalf of the appellants anything to the effect that considerations (c) or (d) outlined above arise. Hence, it is not put for instance, that the making of an order for security would either, stifle the litigation, or that the appellants find themselves impecunious by reason of wrongs the subject matter of the 2008 action. I make those last observations provisionally of course, bearing in mind that the respondents' application has not yet been argued, let alone resolved.
But from the examination of materials filed to date, the appellants seem here only to make a merits submission, by reference to invoking, it would seem, security consideration (e) above as to general merit ‑ contending that the appellants have a strong, arguable case, and that this consideration is relevant to the exercise of judicial discretion against making an order for security for costs.
Given the appellants' stance, it is appropriate to observe, as Anderson J did in BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857, (by reference to earlier observations of Connolly J in Harpur v Ariadne Australia Ltd (1984) 2 ACLC 356, at 361), that when an application for security is made invoking s 1335:
[O]nce the legislature has made it legitimate to take into account the lack of means of the plaintiff and its likely inability to meet an order for costs, this must always be a consideration of great weight and will frequently be the determining factor.
The observation is, of course, made in the context of the unfettered discretion to make an order for security for costs and if so, in what amount.
In BPM his Honour was concerned in that appeal with wider submissions raising considerations (d) and (e) - going to potential stultification, were an order for security be made, as well as the submission that the respondents were causatively responsible, by the (mis)conduct raised in that litigation, for the resulting impecuniosity in the appellants. That is not this case.
In present circumstances the affidavit materials rejected by the master, particularly the two Chesson affidavits, provide the appellants with no forensic shield against their strongly disadvantaged position vis‑á‑vis a security for costs exposure arising by reason of each corporate appellants' impecuniosity. Senior counsel for the appellants, in effect, accepted the prevailing impecuniosity in all three appellants at the appeal hearing.
In the context of the leave to appeal that is required from this court, the rejected affidavit materials are not capable of eliciting material of sufficient gravitas to counter the consequences of the appellants corporate impecuniosity. Even were that not the case, the base culpability of the appellants in failing to meet the clear directions governing the filing of their materials by 12 March 2009, provides, in its own right, a more than sufficient basis (applying modern principles of case flow management) to deny the appellants the opportunity to belatedly rely upon late materials. That is particularly so, where no explanation for the failure to meet the court's timetable was ever provided. Both the master's interlocutory decisions, were correct.
Principles governing the grant of leave to appeal in relation to interlocutory appeals were dealt with in the joint reasons in Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2010] WASCA 43, [35] ‑ [36]. It is unnecessary to repeat those well-understood principles.
I would in CACV 57 of 2007 refuse leave to appeal, on the basis that no arguable merit can be established in the proposed grounds.
I would refuse the extension of time sought in respect of CACV 107 of 2009, on the basis that any extension of time is pointless, in circumstances where no arguable merit in an appeal can be established: see Allmark v Mossensons (A Firm) [2006] WASCA 127 [27].

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: SWANSDALE PTY LTD -v- WHITCREST PTY LTD [2010] WASCA 129 (S)

CORAM: PULLIN JA
KENNETH MARTIN J

HEARD: 5 MARCH 2010 AND ON THE PAPERS

DELIVERED : 8 JULY 2010

SUPPLEMENTARY
DECISION :13 OCTOBER 2010

FILE NO/S: CACV 57 of 2009

BETWEEN: SWANSDALE PTY LTD (ACN 079 005 477)
First Appellant
MUNKBERG PTY LTD (ACN 078 824 567)
Second Appellant
RUSSMEX PTY LTD (ACN 079 030 550)
Third Appellant
AND
WHITCREST PTY LTD (ACN 009 113 473)
First Respondent
ROCHWOOD PTY LTD (ACN 079 005 440)
Second Respondent
MARK JOHN BEESON
Third Respondent
LYNDON EDWARD DYSON
Fourth Respondent
ENDOPINE PTY LTD (ACN 079 030 452)
Fifth Respondent
LUPIN NOMINEES PTY LTD (ACN 008 998 990)
Sixth Respondent

FILE NO/S :CACV 107 of 2009

BETWEEN :SWANSDALE PTY LTD (ACN 079 005 477)
First Appellant
MUNKBERG PTY LTD (ACN 078 824 567)
Second Appellant
RUSSMEX PTY LTD (ACN 079 030 550)
Third Appellant
AND
WHITCREST PTY LTD (ACN 009 113 473)
First Respondent
ROCHWOOD PTY LTD (ACN 079 005 440)
Second Respondent
MARK JOHN BEESON
Third Respondent
LYNDON EDWARD DYSON
Fourth Respondent
ENDOPINE PTY LTD (ACN 079 030 452)
Fifth Respondent
LUPIN NOMINEES PTY LTD (ACN 008 998 990)
Sixth Respondent

ON APPEAL FROM:
For File No              :  CACV 57 of 2009
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :SWANSDALE PTY LTD -v- WHITCREST PTY LTD [2009] WASC 117
File No  :CIV 2156 of 2008
For File No              :  CACV 107 of 2009
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :SWANSDALE PTY LTD -v- WHITCREST PTY LTD [No 2] [2009] WASC 179
File No  :CIV 2156 of 2008

Catchwords:

Costs - Special costs orders - Fixed, alternatively, indemnity costs sought - Principles underlying indemnity costs orders

Legislation:

Nil

Result:

Indemnity costs awarded to successful respondents

Category: A

Representation:

CACV 57 of 2009

Counsel:

First Appellant               :     Mr S Owen-Conway QC & Mr T Galic
Second Appellant          :     Mr S Owen-Conway QC & Mr T Galic
Third Appellant             :     Mr S Owen-Conway QC & Mr T Galic
First Respondent           :     Mr P Mendelow
Second Respondent      :     Mr P Mendelow
Third Respondent          :     Mr P Mendelow
Fourth Respondent        :     Mr P Mendelow
Fifth Respondent           :     Mr P Mendelow
Sixth Respondent          :     Mr P Mendelow

Solicitors:

First Appellant               :     Galic & Co
Second Appellant          :     Galic & Co
Third Appellant             :     Galic & Co
First Respondent           :     Haydn Robinson
Second Respondent      :     Haydn Robinson
Third Respondent          :     Haydn Robinson
Fourth Respondent        :     Haydn Robinson
Fifth Respondent           :     Haydn Robinson
Sixth Respondent          :     Haydn Robinson

CACV 107 of 2009

Counsel:

First Appellant               :     Mr S Owen-Conway QC & Mr T Galic
Second Appellant          :     Mr S Owen-Conway QC & Mr T Galic
Third Appellant             :     Mr S Owen-Conway QC & Mr T Galic
First Respondent           :     Mr P Mendelow
Second Respondent      :     Mr P Mendelow
Third Respondent          :     Mr P Mendelow
Fourth Respondent        :     Mr P Mendelow
Fifth Respondent           :     Mr P Mendelow
Sixth Respondent          :     Mr P Mendelow

Solicitors:

First Appellant               :     Galic & Co
Second Appellant          :     Galic & Co
Third Appellant             :     Galic & Co
First Respondent           :     Haydn Robinson
Second Respondent      :     Haydn Robinson
Third Respondent          :     Haydn Robinson
Fourth Respondent        :     Haydn Robinson
Fifth Respondent           :     Haydn Robinson
Sixth Respondent          :     Haydn Robinson

Case(s) referred to in judgment(s):

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Brookvista Pty Ltd v Meloni [2009] WASCA 180
Colgate‑Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
J‑Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301
Quancorp Pty Ltd v MacDonald [1999] WASCA 101
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, FCA, 3 May 1991)
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190

REASONS OF THE COURT: The successful respondents to these two appeals seek orders by which the respondents' costs of both appeals would be fixed by the court and ordered to be payable forthwith. Alternatively, the respondents seek costs on an indemnity basis. The issue of costs, with the parties' consent, is being determined on the papers.
The respondents' written submissions of 20 July 2010 are supported by an affidavit sworn by the respondents' solicitor, Haydn Ross Robinson, of the same date. Mr Robinson's affidavit contains a breakdown of the respondents' solicitor and counsel costs by reference to hourly charges, generating, in aggregate, a figure claimed of $34,181.40.
The respondents' first proposal would circumvent a taxation and seek to have this court immediately fix the respondents' costs of both appeals. This approach is rationalised on the very general basis that a taxation would incur additional expense and delay for the respondents.
The respondents say that the level of costs they seek is substantially below a maximum amount that could be awarded in their favour on a (party and party) taxation. Hence it is put that the level of the fixed costs claimed is reasonable. The respondents' written submission proceeds:
15.The Court has a proper basis to determine the costs claimed are, [sic] logical, fair and reasonable.
16.For these reasons the Court should fix the costs of these appeals, a fortiori because this will avoid the expense and delay involved in taxation.
17.If taxation is required, extra costs will be incurred which under Item 29 in the Table of the 2008 Determination, are such amounts as are reasonable in the circumstances. Taxation in these appeals will be unproductive and complicated because of there being 2 appeals not consolidated but heard together, albeit the Respondents do not make too much noise about this complication.
18.The conduct of the Appellants has already wasted the scarce resources of the Court including two special appointments and these appeals. The Court should not provide further indulgences to the Appellants by allowing them to unproductively consume more of the Court resources [sic] by the parties being committed to taxation.
19.The utility in the Court now fixing costs is potentially amplified because it is possible the taxing officer would tax and allow costs to the Respondents in the amounts now claimed.
In the alternative, the respondents seek an order for indemnity costs against the unsuccessful appellants. The respondents' submission as to the alternative orders is (in part):
23.The Respondents are cognisant of the principle [that] an indemnity costs order will not be made if the costs would be covered by an order for party and party costs or by a special costs order: Flotilla at [11].
24.In these appeals it cannot be said costs of $34,181.40 sought by the Respondents will be awarded as party and party costs.
25.The Respondents do not here contend a special costs order should be made because they do not say these appeals involve unusual difficulty, complexity or importance, as is required by s280(2) of the Legal Practitioners [sic: Profession] Act 2008.
26.But it is contended an indemnity costs order should be made, albeit that may result in the same outcome - an order for the Appellants to pay $34,180.40.
27.Where the conduct of the defaulting party deserves sanction by the Court, that may properly be reflected in an order for indemnity costs: Oshlack v Richmond River Council (1998) 193 CLR 72 at [44]; Brookvista at [32].
28.The conduct of the Appellants referred to above and otherwise in the Reasons of the Court of Appeal clearly falls within the conduct proscribed by Pullin J. in Flotilla. The conduct caused the undue prolongation of appeals based on groundless contentions, the appeals were commenced or continued in circumstances where the Appellants, properly advised, should have known that they had no chance of success and substantial irrelevant and inadmissible evidence was sought to be adduced by the Appellants.
The appellants resist both alternatives advocated by the respondents, albeit they appear to accept (as they must) that the successful respondents are at least entitled to their taxed costs of the appeal.
The appellants point out (correctly) that an order for indemnity costs will only be made in exceptional circumstances, referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83. The appellants contend that, had their senior counsel not advised that the appeals enjoyed 'reasonable prospects of success', the appeals would not have been commenced (more correctly, that the application for leave to appeal in CACV 57 of 2009 and the application for an extension of time within which to seek leave to appeal in CACV 107 of 2009 would not have been brought).
The appellants' submission of 17 August 2010 concludes:
3.There is no finding that the unsuccessful Appellants engaged in any form of misconduct. There is no finding that the unsuccessful Appellants unreasonably prosecuted the appeal or that the appeal was prosecuted for some collateral or improper purpose. There is no finding that the appeal constituted an abuse of process. The appeal was simply dismissed on its merits. That is not a basis on which to award indemnity costs.
No sufficient basis has been established for the ordinary course of a taxation of costs to be avoided.
It remains to assess the respondents' alternative proposal seeking indemnity costs orders.

Indemnity costs orders principles

The principles applicable to the making of indemnity costs orders in litigation may be briefly summarised, as follows:
1.A superior court, in its inherent jurisdiction, may make an indemnity costs order (see also Supreme Court Act 1935 s 37, and Legal Profession Act 2008 s 280).
2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59.
3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 400 Woodward J said:
Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way'. (emphasis added)
4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party. In J‑Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 303 French J by reference to the observations of Woodward J in Fountain Selected Meats, said:
It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, FCA, 3 May 1991) (referred to by Ipp J in Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190, 191) French J observed:
The categories in which the discretion may be exercised are not closed.
6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs. In Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7], Wheeler J observed:
On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as 'hopeless' so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as 'hopeless' is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.
7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers: see Colgate‑Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 233 (Sheppard J), referred to by Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [9].
8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling: see Flotilla [20] ‑ [24].
9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance: Flotilla [11]. In Unioil (No. 2) (193), Ipp J observed:
However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.
10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct: see Brookvista Pty Ltd v Meloni [2009] WASCA 180 [32], Flotilla [25]. In Flotilla Pullin J said [26]:
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.

Disposition as to alternative special costs orders sought by respondents

The materials filed in support of the respondents' application suggest that an award of party and party costs would cover the solicitor/client costs of both appeals. The respondents, in par 14 of the written submissions (referred to above), suggest that the amount of fixed costs that is sought is 'substantially below' the maximum level that could be awarded on a taxation and, at par 26, contend that if an indemnity costs order is made, the result on taxation would result in the same outcome as a taxation on a party/party basis. In those underlying circumstances, as explained by Ipp J in Unioil (No 2) and by Pullin J in Flotilla [11], unless the conduct of the appellants has been conduct which amounts to improper or unreasonable conduct by the appellants or their legal advisers, indemnity costs orders would not be appropriate. The question is whether that threshold has been met in present circumstances.
The mere fact that a party advances an argument or ground of appeal which is regarded as unmeritorious by the court will usually not be sufficient to provide a foundation for an indemnity costs order. However, the court is not limited to an examination of the events involved in the appeal. If the unmeritorious argument or ground is advanced in the course of an interlocutory appeal in circumstances where, in the proceedings under review, the party against whom the order is made has been guilty of delay, a flouting of court programming orders and the proffering of irrelevant material, then those circumstances may be taken into account in determining whether there has been improper or unreasonable conduct.
The respondent makes the following submissions about the conduct of the appellants in relation to the respondents' application to strike out the 2008 action as an abuse of process or, in the alternative, for an order for security for costs. The applications were scheduled for a hearing and the appellants ignored the programme and attempted to file late affidavits. The master's rejection of the affidavits then led to the application for leave to appeal. Two appeals were instituted and one of them was filed out of time. The respondents submit that the appellants:
(a)acted in flagrant disregard of the orders of Master Sanderson made on 12 February 2009 without providing any explanation and without seeking an extension of time;
(b)failed to heed the warning of the solicitor for the respondents that if any attempt was made to file a belated affidavit there would be an objection;
(c)derailed the prospect of the substantive hearing or resolution of the respondents' chamber summons by reason of their conduct in filing the affidavits late; and
(d)included in the affidavits irrelevant opinions which also lacked any underlying factual basis.
In the interlocutory appeals, the appellants complained about the master's proper decision to reject the affidavits.
The respondents' submissions should be accepted. They are supported by the recital of events found in the decision of this court refusing leave to appeal. The conduct of the litigation and the pursuing of the unmeritorious interlocutory appeals was unreasonable, if not improper. The appellants were resisting an order to strike out the claims or to provide a substantial sum by way of security. By their contumelious conduct, they successfully prevented a timely disposition of the interlocutory applications. It is no refuge for the appellants to excuse such conduct by saying they were acting on the advice of senior counsel. The conduct speaks for itself. To allow unreasonable or improper conduct to pass without disapproval has the potential to cause a loss of public confidence in the legal system: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [30].
The unreasonable conduct of the appellants in pursuing unmeritorious appeals in the circumstances of these appeals constitutes a continuation of the conduct displayed in the proceedings under review and warrants the court's mark of disapproval and an indemnity costs order should therefore be made.
The court's order will be that the appellants pay the respondents' costs of both appeals to be taxed on an indemnity basis with the usual proviso that such an order does not authorise the recovery of costs of an unreasonable amount, or which have been unreasonably incurred: see Flotilla [28]; Unioil (No 2) (194).