Webster v Super Smart Strategies Pty Ltd

Case •

[2017] NSWSC 531

•

04 May 2017

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Webster v Super Smart Strategies Pty Ltd;; Courtney v Super Smart Strategies Pty Ltd [2017] NSWSC 531
Hearing dates: 26, 28 April 2017
Date of orders: 26 April 2017
Decision date: 04 May 2017
Jurisdiction:Common Law
Before: Adamson J
Decision:

See paragraphs [96]-[99].

Catchwords:

PRACTICE AND PROCEDURE – defendants’/ cross-claimants’ persistent default in compliance with court directions – failure to engage in court-ordered mediation – inference that they have abandoned proceedings – appropriate to strike out defence to plaintiffs’ claim and enter default judgment and dismiss cross-claim – prejudice to parties – dismissal proportionate to defendants’ default – order that no proceedings be commenced without leave on same or similar facts until cross-defendants’ costs paid – order to prevent further abuse by defendants of court processes

 

CORPORATIONS – liquidation – effect of statutory stay pursuant to s 471B of the Corporations Act 2001 (Cth) – purpose is to protect net assets of a company in liquidation – summary dismissal for want of prosecution not a proceeding against a company under s 471B

 

DAMAGES – breach of contract and misrepresentations – assessment of damages

COSTS – gross sum costs order made rather than assessed costs pursuant to s 98 (4)(c) of the Civil Procedure Act 2005 (NSW)
Legislation Cited: Acts Interpretation Act 1901 (Cth), s15AA
Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth))
Civil Procedure Act 2005 (NSW), Part 6, ss 61, 67, 98, 98(4), 98(4)(c)
Contracts Review Act 1980 (NSW)
Corporations Act 2001 (Cth), ss 471B, 491(1), 1335
Fair Trading Act 1987 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 5(1)(c)
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005 (NSW), rr 12.7, 12.10, 16.2(1)(c), 16.3(1)(a), 16.10, 18.4, 42.20, 42.20(2)
Cases Cited: BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857
Citigroup Pty Limited v Middling (No. 4) [2015] NSWSC 221
Dealquip Australia Pty Ltd v 33 Electra Pty Ltd (No. 2) [2013] NSWSC 1382
DSG Holdings Australia Pty Ltd and Another v Helenic Pty Ltd (2014) 86 NSWLR 293; [2014] NSWCA 96
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Ghosh v NineMSN Pty Ltd (2015) 90 NSWLR 595; [2015] NSWCA 334
Hession v Century 21 South Pacific Ltd (in liquidation) (1992) 28 NSWLR 120
Maureen Courtney and Brett Courtney as trustee for the Courtney Superannuation Fund v Super Smart Strategies Pty Limited [2017] NSWSC 242
Re AJ Benjamin Ltd (in liq) and the Companies Act (1969) 90 WN (Pt 1) (NSW) 107
Singh v Singh [2017] NSWCA 15
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Young v Roads and Maritime Services [2016] NSWCA 238
Category:Principal judgment
Parties:

Proceedings 2013/78666
Richard Webster (First Plaintiff)
Loris Webster (Second Plaintiff)
Webster Superannuation Fund (Third Plaintiff)
Super Smart Strategies Pty Ltd ACN 098 688 085 (now ACN 098 688 085 Pty Ltd (in liq))(First Defendant)
Rick Frank Alfred Manietta (Second Defendant)
Rick Manietta Investments Pty Limited ACN 080 851 207) (Third Defendant)

 

Super Smart Strategies Pty Ltd ACN 098 688 085 (now ACN 098 688 085 Pty Ltd (in liq)) (First Cross-Claimant)
Rick Frank Alfred Manietta (Second Cross-Claimant)
Rick Manietta Investments Pty Limited ACN 080 851 207) (Third Cross-Claimant)
Finn Foster APB Pty Limited ACN 113 527 496 (First Cross-Defendant)
Juan Martinez and the partners of HWL Ebsworth Lawyers (2nd Cross- Defendant and 4th to 113th Cross-Defendants)
ABCD Pty Limited (Third Cross-Defendant)

 

Proceedings 2016/264867

  Maureen Courtney and Brent Courtney as trustee for the Courtney Superannuation Fund (Plaintiff)
Super Smart Strategies Pty Ltd ACN 098 688 085 (now ACN 098 688 085 Pty Ltd (in liq)) (First Defendant)
Rick Frank Alfred Manietta (Second Defendant)
Rick Manietta Investments Pty Limited ACN 080 851 207 (Third Defendant)
Representation:

Counsel:
C Carroll (Plaintiffs)
E Hyde (1st Cross-Defendant)
D A Lloyd (2nd- 113th Cross‑Defendants)

  Solicitors:
Holman Webb (Plaintiff in proceedings 2016/264867)
McCabes Lawyers (1st Cross-Defendant)
Gilchrist Connell (2nd and 4th - 113th Cross- Defendants)
Meridian Lawyers (3rd Cross-Defendant)
File Number(s): 2013/78666; 2016/264867

Judgment

Introduction

  1. These two sets of proceedings involve claims by trustees of private superannuation funds against their investment advisers, who, in turn, cross-claimed against their insurer, solicitors and others. The investment advisers, the defendants, have failed to defend the claims brought against them and failed to prosecute the cross-claims which they have brought against others. The trustees have sought that the defences be struck out, default judgment entered and damages assessed. The cross-defendants have sought that the cross-claims against them be dismissed.

Motions in the Webster proceedings (2013/78666)

  1. The following four notices of motion in proceedings 2013/78666 (the Webster proceedings) were listed to be heard together on 26 April 2016:

  1. The notice of motion filed by the plaintiffs (the Websters) on 22 March 2017 for orders striking out the defence; default judgment; assessment of damages; and costs of the proceedings, including costs of the motion (the Webster motion);

  2. The notice of motion filed on 3 April 2017 by the first cross-defendant (Finn Foster) to the first cross-claim for a permanent stay of the proceedings in so far as they concern claims made in the first cross-claim against Finn Foster, or, in the alternative, for dismissal of the first cross-claim against Finn Foster; and costs of the proceedings, including costs of the motion (the Finn Foster motion);

  3. The notice of motion filed on 4 April 2017 by the second and fourth to one hundred and thirteenth cross-defendants (HWL Ebsworth) to the first cross-claim for orders for dismissal of the first cross-claim against HWL Ebsworth; or, in the alternative, for a permanent stay of the proceedings in so far as they concern claims made in the first cross-claim against HWL Ebsworth; and costs of the proceedings, including costs of the motion (the HWL Ebsworth motion); and

  4. The notice of motion filed on 4 April 2017 by ABCD Pty Ltd, the third cross-defendant (ABCD), to the first cross-claim for dismissal of the first cross-claim; and an order for the costs of the proceedings.

  1. The respondents to all four notices of motion are the three defendants: Super Smart Strategies Pty Ltd (SSS), the first defendant; Rick Manietta, the second defendant; and Rick Manietta Investments Pty Ltd (RMI), the third defendant. Mr Manietta has been the companies’ sole director since 2006.

  2. On 5 April 2017 the motions and assessment of damages were listed before me as Duty Judge. I adjourned the motions to 26 April 2017 because of the applicants’ concerns regarding service. Service had been effected on SSS and RMI at 28 Moncur Street, Woollahra, which was the address given by Mr Manietta in his email dated 12 December 2016 and was also the last known address identified by his former solicitors in their notice of ceasing to act. However, a company search of SSS and RMI revealed that their registered office was Strategic Accounting Advisers, Level 2, 116-118 Christie Street, St Leonards and that their current principal place of business was 294 Glenmore Road, Paddington.

  3. I am satisfied, on the basis of the evidence adduced in support of the motions, including the affidavit of Catherine Osborne, solicitor for ABCD, sworn 19 April 2017; paragraphs [1] and [3]-[11] of the affidavit of Mr Webster sworn 24 April 2017; and the affidavit of Lisa Schumacher, solicitor for HWL Ebsworth, sworn 21 April 2017, are sufficient to establish that the defendants have been served and have been put on ample notice of the motions, the evidence in support and the hearing date. The question of the service of the HWL Ebsworth motion will be addressed in further detail below.

  4. On 19 April 2017, which was the date on which the defendants’ affidavit evidence in reply to the cross-defendants’ affidavit evidence was due to be served, an order was made on the application of Mr Manietta, for the voluntary winding up of SSS, which is now known as ACN 098 688 085 Pty Ltd (in liquidation). Mr Vardy, its liquidator, appeared at the hearing of the notice of motion on 26 April 2017 and told me that, having regard to his recent appointment, he had not had an opportunity to review the documents. He did not seek an adjournment of the motions and told me that he neither consented nor opposed the motions. As he did not seek to be heard on the motions, I acceded to his application that he be excused.

  5. The effect of the liquidation of SSS is that the Websters can no longer proceed against it, unless the Court grants leave, as the statutory stay effected by s 471B of the Corporations Act 2001 (Cth) applies. I am persuaded that, for reasons given below, the statutory stay does not apply to inhibit the cross-defendants from seeking the orders in their motions against SSS.

  6. It is appropriate that I deal with the motions of the cross-defendants first since the cross-defendants have indicated that they would resist the relief the plaintiffs seek on their motion unless orders had already been made to dismiss the first cross-claim as against them. However, if such orders were made to dismiss the first cross-claim, the cross-defendants would not oppose the plaintiff’s motion and, indeed, would not wish to be heard on the motion.

Motions in the Courtney proceedings (2016/264867)

  1. Proceedings 2016/264867, which arise out of related circumstances, were brought by Maureen and Brent Courtney as trustee for the Courtney Superannuation Fund (the Courtney proceedings). The plaintiffs in the Courtney proceedings (the Courtneys) filed a notice of motion on 13 January 2017 for default judgment and damages to be assessed. The motion was heard by Campbell J, who, on 9 March 2017, ordered judgment for the plaintiffs with damages to be assessed: Maureen Courtney and Brett Courtney as trustee for the Courtney Superannuation Fund v Super Smart Strategies Pty Limited [2017] NSWSC 242. The balance of the notice of motion, for the assessment of damages, was listed before me to be heard with the motions in the Webster proceedings. This assessment was heard on 28 April 2017. The Courtneys also sought, by notice of motion filed on 12 April 2017, a declaration that their notice of motion dated 13 January 2017 and affidavits in support had been effectively served on the first and third defendants.

  2. Because of the overlap in the relevant facts and circumstances of the Webster and Courtney proceedings, it is convenient to address the motions together in these reasons.

The plaintiffs’ claims

  1. The factual allegations in the pleadings in the Webster and Courtney proceedings, most, if not all, of which have been established by the unchallenged evidence, can be shortly summarised.

  2. Richard and Loris Webster are trustees of the Webster Superannuation Fund. Maureen Courtney and her son, Brent Courtney, are trustees of the Courtney Superannuation Fund. The Websters and the Courtneys sought and obtained investment advice from the defendants regarding investments to be made by their respective superannuation funds.

The Websters’ Austcorp Towers investment

  1. In December 2005 Mr Manietta, on behalf of SSS and his own behalf, recommended that the Websters invest $200,000 from their fund in the construction of a high-rise building in Brisbane, Austcorp Towers, by way of debenture stock. They were paid interest on their debentures, which amounted to $56,534.48 on various dates not revealed by the evidence. On 5 May 2009 Mr Manietta’s wife sent the Websters an email which attached an article from the Financial Review about Austcorp Towers. On 6 May 2009, Austcorp Funds Management Ltd, the responsible entity and trustee of the Austcorp Towers Trust, was placed into administration. On about 2 May 2014, the Websters received a first and final dividend of $715.13, which represented 0.3576 cents in the dollar of the $200,000 investment they had made in Austcorp Towers.

  2. The Websters alleged that the defendants were negligent when they advised them to make this investment and claim that the defendants are liable for the loss they suffered as a result.

The Silk investment

  1. In October 2010 Mr Manietta, on his own behalf and also on behalf of the first and third defendants, recommended to the Websters and the Courtneys that they both invest $1 million through a new trust, in which they would become unit holders. There was also to be a third investor, Asset Trust, which ultimately invested $915,000. The Courtneys and the Websters accepted the advice of the defendants to lend the money to the unit trust. It was to be a three-month loan which was due to be repaid in full by January 2011. Mr Manietta informed the Websters and the Courtneys that the money would be secured by first mortgages and that it would fit the risk profile of their superannuation fund. The defendants knew, but did not reveal to the Websters or the Courtneys, that the monies would largely be used to pay the tax liabilities of the proposed borrowers on the loan.

  2. On 30 September 2010 Mr Webster arranged for $1 million to be transferred from the superannuation fund to the nominated account which was in the name of RMI “as trustee for the Super Trust”. On 4 October 2010 the Courtneys also arranged for $1 million to be transferred from their superannuation fund to the nominated account.

  3. The Take-Out Facility Deed for this transaction, which was not provided to the Websters or the Courtneys, revealed the borrowers to be Graham and Erin Silk and Damien Silk to be the guarantor. It provided the following background to the transaction in the recitals as follows:

“BACKGROUND

A. The Borrowers are indebted to Suncorp and Borrowers and the Guarantor have provided the Securities to Suncorp to secure the Suncorp Debt.

B. The Borrowers and the Guarantor have procured an offer from Suncorp to assign the Suncorp Debt and Securities to a third party in return for payment of an amount equal to the Security Acquisition Sum.

C. AIB, SFI, Tinsar and Welcome are indebted to the DCT [Deputy Commissioner of Taxation]. The Borrowers and the Guarantor have procured an offer from the DCT to discharge the ATO [Australian Tax Office] Debt in return for the payment of that ATO Debt.

D. The Guarantor agrees to guarantee the obligations of the Borrowers under this Deed.”

  1. The Take-Out Facility Deed provided for an “Initial Establishment Fee” of $50,000 and a “Deferred Establishment Fee” of $50,000 to be paid. The “Loan” was defined as the $2 million advanced by the Courtneys and the Websters and the “AT [Asset Trust] Contribution” was said to be $915,000.

  2. Settlement of the loan was delayed and did not take place on 28 October 2010. The cheque directions for the settlement of the loan revealed that about $1.3 million was to be paid, in three separate cheques, to the Deputy Commissioner of Taxation. Various other amounts were to be paid to revenue authorities; $915,0000 (the amount of Asset Trust’s investment) was to be paid to Suncorp-Metway Ltd and $60,000 was to be paid to “Ti Amo Strategies Partnership”, a company with which Mr Manietta was associated. The sum of $244,192.80 was paid to RMI. There were also sums payable to lawyers, including HWL Ebsworth (who acted for the defendants) and Clarke Kann (who acted for the borrowers).

  3. The evidence established that the $60,000 paid to Ti Amo Strategies Partnership comprised a “fee” (the “Initial Establishment Fee”) of $50,000 plus GST of $5,000 and a further $5,000 for preparation of the trust documentation. Mr Webster was never informed that such a fee would be paid. The sum of $244,192.80 was paid to RMI. According to an email dated 28 October 2010 from Greg Vidler, the settlor of the unit trust, to Paul Hunt, a solicitor at Clarke Kann, the firm which at that time acted for the borrowers:

“The $244,192.80 represents interest of $240,000 + $4,192.80 holding interest for the past 37 days since we held the funds from the clients. Damian [Silk] agreed to pay this at 1.5% which is the approx loss of interest the clients have had since breaking their Term deposit.”

  1. I find that the reference to “the clients” is a reference to the Websters and the Courtneys. The amount of $4,192.80 was retained by RMI and neither disclosed nor paid to the Websters or the Courtneys.

  2. I infer that the principal purpose of the transaction was to assist the borrowers to repay pressing debts. There was a suggestion that assets would be sold and the investors repaid at the end of the three-month period but this did not eventuate. On about 29 October 2010, an advance payment of interest in the sum of $120,000 was paid to each of the Courtneys and the Websters. These monies were the only monies they recovered from the Silk investment. No part of the principal sums advanced was repaid.

  3. On 4 February 2011, Mr Hunt, on behalf of the borrowers, informed RMI, through HWL Ebsworth, that they intended to pay $50,000 to RMI by way of “Deferred Establishment Fee”, although they did not accept that there was a legal obligation that they do so.

  4. Mr Webster first learned that the Initial Establishment Fee had been paid to Ti Amo Strategies when he received an email informing him of that matter from Mr Vidler on 20 July 2012.

The motions in the Webster proceedings

  1. In order to address the motions, it is necessary to set out the nature of the plaintiffs’ claim as well as the procedural history of the Webster proceedings.

The commencement of the proceedings

  1. By statement of claim filed on 14 March 2013 the Websters commenced proceedings against SSS, Mr Manietta and RMI for damages as a result of investment advice alleged to have been given negligently or to amount to misleading or deceptive conduct with respect to the Austcorp Towers investment and the Silk investment. The latest form of the pleading is the second further amended statement of claim filed on 15 August 2016.

The defence and first cross-claim

  1. The defendants filed a defence to the current pleading on 14 September 2016 in which they largely denied or did not admit the allegations. It is not possible to identify, from a review of the defence, the real issues, if any, in dispute. The defendants also alleged in the defence that, if they were liable to the plaintiffs, the claims are apportionable and arise by reason of the plaintiffs’ failure to take reasonable care; and the conduct of Damien Silk (who was a guarantor of the loan to Graham and Erin Silk, who were the borrowers); HWL Ebsworth (the defendants’ solicitors); and Clarke Kann (now ABCD) and Mr Hunt (the Alleged Concurrent Wrongdoers). Accordingly, they alleged that any liability they may have to the plaintiffs ought be reduced to reflect their proportionate responsibility.

  2. The defendants also filed the first cross-claim. The cross-defendants to the first cross-claim include, in addition to the Alleged Concurrent Wrongdoers, Finn Foster, the insurance broker for the defendants. The defendants alleged that Finn Foster breached its duty of care by failing to arrange appropriate cover for claims such as the plaintiffs’ and were, accordingly, liable to indemnify them for the whole of the plaintiffs’ claim. Finn Foster denied that it was liable to the defendants, alleged contributory negligence and raised apportionable defences against HWLE and Clarke Kann (now ABCD). The defendants seek damages for breach of contract and alleged misrepresentations pursuant to the Australian Consumer Law, the Fair Trading Act 1987 (NSW) and the Trade Practices Act 1974 (Cth).

  3. The following findings regarding the defendants’ conduct of the proceedings are derived from the following unchallenged evidence, on which all of the applicants to the Webster motion, the Finn Foster motion, the HWLE motion and the ABCD motions relied:

  1. The following paragraphs of the affidavit of Mr Webster sworn 21 March 2017: [1]-[2]; [4]-[5]; [10]-[46], together with those pages of Exhibit RW3 (marked Ex A) referred to in those paragraphs;

  2. The affidavits of Andrew Sharpe, solicitor for Finn Foster, sworn 24 September 2014; 15 October 2014; 3, 4 and 21 April 2017;

  3. The affidavit of Catherine Osborne, solicitor for ABCD, sworn 3 April 2017; and

  4. The affidavit of Alexander Haslam, solicitor for HWL Ebsworth, sworn 4 April 2017

  1. My attention was particularly drawn to the procedural chronology behind Tab 3 of Exhibit A, which covers the period from 14 March 2013 when the Webster proceedings were commenced until 15 September 2016. All parties who appeared before me submitted that the chronology was an accurate record of what had occurred and what was otherwise recorded on the Court file and Justice Link. There are 32 entries, of which most relate to hearings, including directions hearings, before this Court, many of which were required by the defendants’ defaults. As at 24 April 2017, there had been no fewer than 37 appearances before the Court since the statement of claim was filed in March 2013.

  2. The evidence established that the defendants have persistently failed to comply with the directions of the Court over a lengthy period. They have sought indulgence after indulgence. They have filed defences which are opaque and do not reveal the real issues in the proceedings. They have toyed with the Court and with the plaintiffs and cross-defendants to cause delay and cost to all parties. Several specific costs orders have been made against them, which I take to be an indication of the extent to which they have defaulted in compliance with directions or sought indulgences.

  3. In the latter part of 2016, I am satisfied that the defendants created the false impression that they would engage bona fide in a mediation ordered by the Court which had been set down for 14 December 2016 and in respect of which a mediator had been appointed and arranged. There was a pre-mediation conference on 24 October 2016 which the parties’ legal representatives in both the Webster and the Courtney proceedings attended.

  4. On 4 November 2016 the defendants’ solicitors, Yates Beaggi Lawyers, filed a notice of ceasing to act. Mr Manietta confirmed, by email dated 14 November 2016, that he would attend the mediation. On this basis, the parties continued to prepare for the mediation. The mediator, Anthony Lo Surdo SC, attempted to communicate with the defendants by email but they failed to respond. After several attempts by the parties to communicate with Mr Manietta (who was relevantly the controlling mind of SSS and RMI), Mr Manietta finally responded at 10.12am on 12 December 2016 by email in the following terms:

“I agree there is little point in proceeding with the mediation at this time due to me being unable to put forth my complete mediation bundle. As of this morning I am still unable to supply this to you however I am still trying to have these documents sent to you from my previous Lawyers. I have paid my portion of the fees required for the rooms as requested and would hope that we may be able to find a new date in the near future.”

  1. The email was signed as follows:

Rick Manietta

Principal

Ti Amo Strategies Partnership & Supersmart Strategies Pty Ltd

28 Moncur Street, Woollahra 2125

PO Box 988, Woollahra 1350

  1. Mr Sharpe, the solicitor for Finn Foster, responded by email on 12 December 2016 at 10.12am to Mr Manietta reminding him that the Court had ordered the mediation and that his failure to submit documents for the mediation bundle was not a valid reason for non-attendance. Mr Lo Surdo spoke with Mr Manietta who told him that he did not propose to attend the mediation. Mr Manietta has not communicated at all with any of the plaintiffs in either the Webster or Courtney proceedings, or any of the cross-defendants who are applicants on motions before the Court, since that time. As referred to below, I note that Mr Manietta has, however, put SSS into liquidation and communicated with Mr Vardy about these proceedings.

  2. On 15 December 2016 the Court made further directions, including a direction that the parties attend a mediation by 28 February 2017. There was no appearance on behalf of the defendants on that date. The defendants have continued to fail to comply with the Court’s directions. Since the defendants’ solicitors ceased to act, the defendants have not appeared at the directions hearings on 6 December 2016, 15 December 2016, 13 February 2017 or 9 March 2017. They did not appear at the return date of 5 April 2017.

  3. The defendants have not only failed to provide any explanation for their egregious and contumelious disregard of the processes of the Court, but they have also failed to attend to oppose the orders sought in the notices of motion. On the evidence adduced on the motions, I infer that the defendants do not intend to defend the Websters’ claims at all and do not intend to prosecute the first cross-claim. The inference is irresistible that they have walked away from the proceedings.

  4. On 19 April 2017, Mr Manietta resolved to wind up SSS pursuant to s 491(1) of the Corporations Act 2001 (Cth) and chose to appoint SV Partners as the liquidator. Darren Vardy and Jason Porter were appointed as joint and several liquidators. On 26 April 2017, being the adjourned date, Mr Vardy appeared on behalf of SSS and was excused as he did not wish to be heard in response to any of the motions brought against SSS and did not seek an adjournment of such motions. Neither of the other two defendants appeared at the adjourned dates of 26 April 2017 and 28 April 2017.

  5. I accept the unchallenged evidence of Mr Webster in his affidavit of 28 April 2017 that Mr Vardy and Mr Webster spoke outside Court on that day. Mr Vardy confirmed to Mr Webster that he had spoken to Mr Manietta on two occasions to that date and that Mr Manietta had told him that he intended to go bankrupt and put RMI into liquidation the following week (being the week commencing 1 May 2017).

The Finn Foster motion

  1. Mr Hyde, who appeared on behalf of Finn Foster, submitted that the statutory stay imposed by s 471B of the Corporations Act did not inhibit the cross-defendants’ motions for dismissal. He relied on BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 at 859, which was cited with approval in Dealquip Australia Pty Ltd v 33 Electra Pty Ltd (No. 2) [2013] NSWSC 1382 at [21] per White J.

  2. In addition to the defendants’ defaults summarised above, Mr Hyde raised the following matters as relevant to the discretion to grant the relief sought by Finn Foster on its motion: lack of prejudice to the defendants if the relief were granted; prejudice to Finn Foster if the relief were not granted; and merits of the application. These will be considered in turn.

  3. In support of his submission that there was no prejudice to the defendants, if the relief were granted, Mr Hyde contended that the relevant dates on which time began to run on the causes of action alleged by the defendants against Finn Foster were as follows:

  1. For the contract claim, the date of first breach, being 31 August 2011 being the date of the 2011/2012 Vero Policy of insurance; and

  2. For the tort claim, the date on which damage first accrued, being 25 September 2012, being the date on which the Websters made the claim; or, alternatively, 21 May 2013, being the date on which Vero declined the defendants’ claim on the policy.

  1. On this basis the contract claim will become time-barred on 31 August 2017 and the tort claim will become time-barred on 25 September 2018 or 21 May 2019. He submitted that, as these dates are still some time in the future, even if the RMI went into liquidation (as SSS has done) and Mr Manietta went bankrupt, the liquidator or trustee in bankruptcy would have sufficient time to decide whether to pursue the cross-claim against Finn Foster.

  2. Mr Hyde submitted that, if the first cross-claim against Finn Foster is not dismissed, Finn Foster will suffer the prejudice of continuing to expend substantial sums in defending a cross-claim that is not being prosecuted, where it is potentially exposed to the prejudice of the plaintiffs’ claims against the defendants being assessed without any active contradiction from the defendants, to the detriment of the cross-defendants, including Finn Foster.

  3. Mr Hyde also submitted that, although I could not embark on any final determination of the merits of the cross-claim against Finn Foster, such material as had been filed indicated that the prospects of the cross-claim were poor. He submitted that the affidavit evidence adduced by Finn Foster established that Mark Finn, a principal at Finn Foster, specifically informed Mr Manietta of the exclusion in the policy regarding “mezzanine finance” and warned him that if he had placed any of his clients into those types of investments, the exclusion would apply. He also deposed that Mr Manietta had never told him that he had recommended that his clients invest in “non-first ranking securities”. This evidence was supported by Antonella Brescia. In his evidence in response, Mr Manietta confirmed his belief that the defendants did not advise their clients to invest in “mezzanine finance or subordinated debt”. Mr Hyde contended that, in light of this evidence, the cross-claim, which alleged that the defendants told Finn Foster that they engaged in activities which included advising clients to invest “by way of subordinated debts” could not be made out.

  4. Mr Hyde submitted, in effect, that the evidence, taken as a whole, supported the proposition that Finn Foster had done nothing wrong: it had drawn the exclusion clause to Mr Manietta’s attention and explained it to him. Mr Manietta had mischaracterised the investment advice that the defendants gave to clients such as the Websters as not falling within the exclusion because he failed to appreciate that it was not a first-ranking investment. Mr Hyde contended that Mr Manietta’s error was not one for which Finn Foster was liable.

Whether the statutory stay inhibits the defendants from seeking the orders in their motions against SSS

  1. Section 15AA of the Acts Interpretation Act 1901 (Cth) requires preference to be given to the interpretation that would best achieve the object of the Act. The purpose behind s 471B is to protect the net assets of a company in liquidation from being depleted by the expenditure of legal costs by the company in defending claims made against it which could be more efficiently dealt with by proof of debt in the liquidation: DSG Holdings Australia Pty Ltd and Another v Helenic Pty Ltd (2014) 86 NSWLR 293; [2014] NSWCA 96 citing Re AJ Benjamin Ltd (in liq) and the Companies Act (1969) 90 WN (Pt 1) (NSW) 107 with approval at [56], per Leeming JA, Meagher JA and Bergin CJ in Eq agreeing. It is no part of the purpose of s 471B to give a company in liquidation any kind of immunity from actions by a “defendant” (in this case, a cross-defendant) to protect itself from actions against it. Were s 471B construed so as to prevent “defendants” from taking such defensive measures against actions brought by companies in liquidation, the prejudice could be substantial and the purpose of s 471B would not be advanced.

  2. The availability of security for costs to such a “defendant” against a company in liquidation (s 1335 of the Corporations Act) is an indication of the concern on the part of Parliament to ensure that parties who are sued by companies in liquidation are not thereby prejudiced: Hession v Century 21 South Pacific Ltd (in liquidation) (1992) 28 NSWLR 120 at 123 (Meagher JA, Kirby P and Cripps JA agreeing).

  3. Section 471B is concerned to stay actions against a company in liquidation. It is not concerned with what might be described as defensive procedural mechanisms, such as the present motion brought by Finn Foster against SSS. The metaphor of sword and shield is as apt to the present situation as it is to the identification of the true “plaintiff” for the purposes of an application for security for costs (BPM Pty Ltd v HPM Pty Ltd at 859 per Anderson J, Kennedy and Ipp JJ agreeing); or the effect of the limitation period under the Contracts Review Act 1980 (NSW) (Citigroup Pty Limited v Middling (No. 4) [2015] NSWSC 221 at [121]-[124] per Adamson J). The sword of the first cross-claim is wielded against Finn Foster, which is, in my view, entitled to use the procedural avenue of an application to dismiss the cross-claim as a shield to defend itself against the action by the defendants.

  4. I respectfully adopt the conclusion of White J in Dealquip Australia Pty Ltd v 33 Electra Pty Ltd (No. 2) at [21] that an application for summary dismissal for want of prosecution is not a proceedings against a company within the meaning of s 471B. However, I also propose to adopt the course taken by White J in that decision: if leave were found to be required I would have granted leave in order to permit the motions to be considered on their merits.

Whether the discretion to dismiss the first cross-claim against Finn Foster ought be exercised

  1. In deciding whether to make the orders sought by Finn Foster, I am obliged to take into account the matters provided for by Division 1 of Part 6 of the Civil Procedure Act 2005 (NSW). The matters identified by Mr Hyde referred to above, including the merits of the first cross-claim (in so far as they can be determined at this stage), are relevant to the exercise of my discretion.

  2. As referred to above, I am satisfied that the defendants have evinced an intention to abandon their defence of the plaintiffs’ claim and not to pursue the cross-claim. Their failures to comply with directions and their general conduct of the litigation have caused the other parties to incur substantial costs. The making of the orders would cause no particular prejudice to the defendants since the claims they make against Finn Foster are not yet time-barred; the refusal to make them would cause substantial prejudice to Finn Foster since they would have to continue to incur costs in participating in the proceedings, lest they be bound by an assessment of damages in the plaintiffs’ claim.

  3. As to the merits of the first cross-claim, I am neither satisfied of the substantive merits of the claim; nor am I satisfied that it is devoid of merit. It is, in my view, too early to form a judgment about that matter, notwithstanding the evidence to which Mr Hyde has referred.

  4. I have had regard to whether dismissal of the first cross-claim against Finn Foster would be a proportionate response to the defendants’ defaults: Singh v Singh [2017] NSWCA 15 at [25] (Beazley P; Macfarlan JA; Emmett AJA). In my view, the defendants’ conduct of the litigation, including the defence of the plaintiffs’ claim and the prosecution of the first cross-claim has been such as to demonstrate a cavalier and reckless disregard of the Court’s directions and the administration of justice. Although dismissal of a claim is a serious consequence, I am satisfied that it is no more than is proportional to the defendants’ defaults. The defendants have aggravated their defaults not only by not attending the mediation but also by failing to appear at directions hearings, or the hearing of the motion and failing to give any explanation whatsoever for their delinquencies. I am persuaded that it is in the interests of justice to summarily dispose of the first cross-claim as against Finn Foster.

  5. Submissions were made as to the source of my power to make such orders, although there was no question that this Court does have such power. The limitations of s 61 of the Civil Procedure Act (whether it is confined to circumstance of non-compliance with directions) and Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 12.7 (whether it also applies to a cross-claimant, or only to a plaintiff) were addressed. I consider that UCPR r 12.7 ought be construed to include “cross-claimant” within the expression “plaintiff” since this would appear to be the clear intention of the rule and there is no conceivable reason why it ought be confined to those parties who are, strictly speaking, plaintiffs, rather than those, including cross-claimants, who bring a positive claim. However, I would prefer to base the power to make the orders disposing of the Finn Foster motion on the inherent jurisdiction to avoid such nice questions: cf. Ghosh v NineMSN Pty Ltd (2015) 90 NSWLR 595; [2015] NSWCA 334.

  6. Mr Hyde submitted that it would be preferable to grant a permanent stay of the first cross-claim but sought, in the alternative, that the first cross-claim be dismissed. In my view, it is appropriate to dismiss the proceedings. Costs ought follow the event. A gross sum costs order under s 98(4)(c) of the Civil Procedure Act would appear to be called for and will be addressed if such an application is made.

  7. Mr Hyde also sought an order that no originating process to commence proceedings based on the same or similar allegations as those made against Finn Foster in the first cross-claim be permitted to be filed unless the defendants have paid Finn Foster’s costs of these proceedings.

  8. There are constraints on this Court’s power to prevent a litigant from exercising his, her or its right to file proceedings in this Court. An order which is expressed too widely may be found to be without power. For example, in Young v Roads and Maritime Services [2016] NSWCA 238, the Court of Appeal (Simpson JA, Beazley P agreeing) considered, without deciding, that there may be no authority for an order preventing a litigant from filing “any further pleading in either of the proceedings in this Court” unless leave had been granted by a Judge of the Court.

  9. I note that UCPR r 12.10 provides a measure of protection to defendants (or, as in this case, cross-defendants) who have successfully had claims against them dismissed. It provides:

12.10 Stay of further proceedings to secure costs of proceedings dismissed

If:

(a)    as a consequence of the dismissal of proceedings, a party is liable to pay the costs of another party in relation to those proceedings, and

(b)    before payment of the costs, the party commences further proceedings against that other party on the same or substantially the same cause of action, or for the same or substantially the same relief, as that on or for which the former proceedings were commenced,

the court may stay the further proceedings until those costs are paid and make such consequential orders as it thinks fit.

  1. Section 67 of the Civil Procedure Act provides for the terms on which a stay may be granted, and UCPR r 42.20 makes provision for the costs payable in relation to proceedings that are dismissed.

  2. Having regard to the defendants’ conduct, I am concerned that the procedure in UCPR r 12.10 would require the cross-defendants to be the moving party and to draw this Court’s attention to any non-payment of costs in support of an application for a stay. In the circumstances of the present case, I am persuaded that an order imposing some restraint on the defendants is appropriate, having regard to the defendants’ conduct, including their failure to explain their several defaults or to play any active role in the motions which are presently before the Court. Mr Lloyd made a similar application on behalf of his clients. For the same reasons, I consider that such an order ought be made, not only to protect the cross-defendants, but also to protect the Court’s processes. The order must, accordingly, be proportional and be directed to the prejudice which would be occasioned if the restriction were not included. In my view, it is appropriate to order that the defendants not be permitted to file proceedings in this Court, without leave, which are based on the same or similar facts as the first cross-claim, unless the costs of the cross-defendants have been paid. The provision for leave would allow for the chance that there is some delay in the assessment of costs or for some other matter which could work to the prejudice of the defendants.

The HWL Ebsworth motion and the ABCD motion

Service of the HWL Ebsworth motion

  1. The evidence established that the HWL Ebsworth motion and affidavits in support were served on each of the defendants on 20 April 2017, which was a Thursday. Unless the Court makes an order abridging time, this was insufficient time for service under UCPR 18.4, which provides, that “unless the court orders otherwise, a notice of motion must be served at least 3 days before the date fixed for the motion”. Service of documents on a Thursday would ordinarily be sufficient for a motion to be heard on the following Wednesday. However as the intervening Tuesday was the ANZAC Day holiday, service was effected less than three clear days before the hearing. I am satisfied, for the reasons set out below, that it is appropriate to abridge time for the service of the HWL Ebsworth motion under UCPR r 18.4.

  2. The affidavit of Ms Schumacher referred to above established that on 4 April 2017 the HWL Ebsworth motion and the affidavit in support of Mr Haslam were served on the email address: [email protected], which was the email address which Mr Manietta had used to correspond with the mediator and was also the email address identified by the defendants’ former solicitors on the notice of ceasing to act as being the last known email address of Mr Manietta. The company searches indicate that Mr Manietta was the sole director of SSS and RMI. Accordingly, SSS and RMI were notified of the motion by the email to Mr Manietta. Mr Vardy, SSS’s liquidator appeared at the proceedings on 26 April 2017, which indicates that Mr Manietta received the email and acted on it. I am, accordingly, satisfied that the defendants were notified of the HWL Ebsworth motion and of the evidence in support. In these circumstances, the fact that the material was not served on the registered offices of SSS and RMI, did not prevent the matter from being brought to the attention of the companies, as their human agent, Mr Manietta, was aware of the motion. In these circumstances, it is appropriate to make an order abridging time for service of the HWL Ebsworth motion on SSS and RMI.

The substantive orders sought by HWL Ebsworth and ABCD

  1. Mr Lloyd appeared on behalf of HWL Ebsworth and ABCD. He did not seek to distinguish between the orders which should be made on these motions and largely made the same submissions in support of both. Unlike Mr Hyde, he did not rely on any assessment of the merits of the first cross-claim against his clients as supportive of the orders sought. Nor did he argue the absence of prejudice to the defendants if the first cross-claim was dismissed. However, Mr Lloyd argued that it would be highly prejudicial to his clients if an order dismissing the cross-claim was not made before damages were assessed if default judgment were given in favour of the Websters. He submitted that the cross-defendants would be bound to intervene in that situation to protect their interests even though the plaintiffs’ claim was not being defended by the defendants and the defendants were not prosecuting the first cross-claim in other than a colourable way.

  2. Mr Lloyd submitted that the Court ought protect its own processes and the administration of justice by dismissing the first cross-claim, having regard to the defendants’ conduct of the proceedings.

  3. Mr Lloyd accepted that, if I dismissed the first cross-claim against his clients, the defendants would potentially suffer prejudice in that the Silk investment, which was the reason for most of the loss suffered by the Webster plaintiffs and the reason for the whole of the loss suffered by the Courtney plaintiffs (see further below) suffered loss, settled in October 2010. He submitted that, applying the test laid down in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 525-534 per Mason CJ, Dawson, Gaudron and McHugh JJ, time would have expired in October 2016, or that it was at least arguable that it did.

  4. Mr Lloyd noted, for completeness, that although his clients were among the Alleged Concurrent Wrongdoers, no claim for contribution under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) had been pleaded in the first cross-claim (although it would seem to be available). He submitted that the limitation period for a claim for contribution is the sum of six years (for the primary claim) and four years (from the expiry of that time), being ten years. Mr Lloyd contended, on that basis, that it could not be said with any degree of certainty that all claims brought or which could be brought by the defendants against his clients would be time-barred if the first cross-claim against them were dismissed.

  5. However, Mr Lloyd submitted that the prejudice which would be occasioned by dismissal of the first cross-claim against his clients was more apparent than real. He contended that the defendants’ conduct demonstrated that they had no inclination to defend the proceedings or to prosecute the cross-claim and that therefore there was no actual prejudice to them in the dismissal of the cross-claim.

  6. I am persuaded that it is appropriate to grant the orders sought by HWL Ebsworth and ABCD. Nothing short of dismissal would be adequate to deal proportionately with the defendants’ default. The defendants’ conduct of the proceedings has shown what I regard as a contumelious disregard of the directions of the Court. They have caused the proceedings to become costly and, possibly, futile. They appear to have walked away from the proceedings. An order for dismissal is, in my view, called for.

The Webster motion

  1. Having indicated to Finn Foster, HWL Ebsworth and ABCD that I would grant the relief sought in their respective notices of motion I excused Mr Hyde and Mr Lloyd from the Court in order to determine the Webster motion.

  2. Mr Carroll, who appeared on behalf of the plaintiffs in the Webster proceedings, adduced the following evidence in support of the Webster motion:

  1. The affidavit of Mr Webster sworn 21 March 2017 and RW3 to that affidavit (marked Exhibit A); and

  2. Paragraphs [1]-[2], [36], [38], [51]-[52], [55]-[57], [70], [75], [80]-[[81], [85], [91], [113]-[114], [121]-[122], [140] and [158] of the affidavit of Mr Webster sworn 11 November 2015 and the documents behind tabs 14, 29, 47, 52, 63, 64, 70, 77 and 79 of Exhibit RW1 to that affidavit (marked Exhibit B).

  1. On 28 April 2017, Mr Carroll sought and was granted leave to re-open the evidence on the Webster motion to read the affidavit of Mr Webster sworn 28 April 2017, in which Mr Webster deposed to his communications with Mr Vardy on 26 April 2017.

  2. Mr Carroll accepted that the leave of the Court would be required for the motion to proceed against SSS by reason of the statutory stay in s 471B. Accordingly, he confirmed that he pressed the Websters’ application only against Mr Manietta and RMI, but indicated that he wished to preserve his clients’ position with respect to an application for leave to proceed against SSS.

The striking out of the defence

  1. Mr Carroll referred to the evidence which I have set out and summarised above regarding the defendants’ conduct of the proceedings. I am satisfied that the defendants have consistently breach directions in relation to the filing and serving of pleadings, service of evidence, discovery and other interlocutory matters. Their conduct since October 2016, which has been summarised above, has been nothing short of reprehensible. They have not only failed to prosecute their defence with due despatch, but they also appear to have abandoned the proceedings entirely.

  2. In these circumstances it is appropriate that the second and third defendants’ defence to the second further amended statement of claim filed on 14 September 2016 be struck out.

The order for costs consequent on the striking out of the defence

  1. In these circumstances I am satisfied that it is appropriate, under UCPR r 42.20(2), that Mr Manietta and RMI be ordered to pay the plaintiffs’ costs of the proceedings.

Judgment to be given following the striking out of the defence

  1. As the defence has been struck out, the defendants are in “default” for the purposes of UCPR r 16.2(1)(c) and the plaintiffs are, accordingly, entitled to apply for judgment to be given under Part 16: UCPR r 16.3(1)(a). The judgment may be given on the basis of what appears in the statement of claim: UCPR r 16.10. However, in the present case, the plaintiffs have augmented the allegations in the statement of claim with the evidence to which I have referred above in which the allegations are substantiated by the evidence of Mr Webster and the exhibits to his affidavits. I am satisfied that it is appropriate to assess damages on the basis of this material, rather than to cause further delay and cost by standing the matter over to another date for that purpose.

The assessment of damages for the purposes of quantifying the judgment sum

  1. Mr Carroll accepted that the damages for which Mr Manietta and RMI were liable were to be determined in accordance with what the High Court said in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13-15. This means that the plaintiffs are entitled to be put in the position they would have been in but for the defendants’ negligence.

  2. There are two parts to the Websters’ claim for damages: damages relating to the Austcorp Towers investment (which do not concern the third defendant) and damages relating to the Silk Investment. Their case in respect of each investment was that the relevant defendants were negligent in advising them to make the investment and that, but for the defendants’ negligence they would not have made either of the investments. In these circumstances, they would not have invested either sum and would have had the benefit of the use of the investment monies. They must account for the benefits they received in respect of each investment since this must be unwound for the purposes of assessing damages on this basis.

The Austcorp Towers investment

  1. In respect of the Austcorp Towers investment, the plaintiffs paid a principal amount of $200,000 on 14 December 2005. They received interest of $56,534.48 in the period to 6 May 2009. In my view they are entitled to pre-judgment interest rates on the principal sum to compensate them for the loss of the use of the money, which they would otherwise have invested. This is a difficult calculation if it is to reflect exactly what was paid and when. The evidence does not permit it to be done, even if it were appropriate since the timing of the interest payments is not established.

  2. In my view, it is appropriate that the damages in respect of the Austcorp Towers investment be assessed as at 28 April 2017 (being the date of entry of judgment) at $265,500. This is calculated by using a principal of $150,000 (being roughly equivalent to the principal minus the interest payments but disregarding the time element between the payment of principal and the last interest payment). To this must be added an amount for pre-judgment interest. I have used a blended rate of 7% (to take account of the changes in pre-judgment interest over that period) over 11 years using the principal sum of $150,000. Thus of the total of damages for the Austcorp Towers investment, $150,000 is referable to the principal and $115,000 is referable to pre-judgment interest. Because the second defendant gave the relevant advice and the third defendant was not involved in advising the plaintiffs on the Austcorp Towers investment, this sum forms part of the judgment sum against the second defendant but not the third defendant.

The Silk investment

  1. The assessment of damages for the Silk investment is more straightforward since there was a single payment of interest on a known date. The principal amount of $1 million was paid on 4 October 2010. The plaintiffs are entitled to pre-judgment interest on that amount to 28 October 2010 since the pre-payment of interest of $120,000 was paid on 29 October 2010, thereby reducing the principal sum to $880,000. I am satisfied that the plaintiffs ought be awarded damages that include pre-judgment interest on $880,000 from the end of October 2010 to 28 April 2017, being the date on which judgment was entered.

  2. As this head of damages is the same for the Websters and for the Courtneys, I asked the solicitors for the Courtneys to calculate the pre-judgment interest in accordance with what I have set out above. Their calculation, which I respectfully adopt for the assessment of both the Webster and Courtney damages, was that $5,821.92 was payable as interest for the principal sum of $1 million for the period from 4 October 2010 to 28 October 2010 and that $394,107.40 was payable by way of interest at pre-judgment rates on the principal sum of $880,000 to the date on which judgment was entered, being 28 April 2017. Thus the damages for the Websters (and the Courtneys, see below) for the Silk investment is $1,279,928.32.

  3. It is also appropriate to reflect that the plaintiffs have an equitable interest in a portion of this sum since the $55,000, which was paid from the total amount invested in the Silk investment of $2.195 million by way of initial establishment fee, was an undisclosed commission to the second and third defendants, for which they are liable to account to the plaintiffs. Of the total of $55,000, $18,867 was referable to the Websters’ share of the total amount invested. Interest ought form part of the damages on that sum. The Courtneys’ solicitors have calculated the amount at pre-judgment interest rates at $8,440.79. Accordingly, of the total judgment sum, the Websters, and the Courtneys, each have an equitable interest in the amount of $27,307.79. I consider it to be appropriate to make a declaration to that effect so that they will have priority over other unsecured creditors for that amount.

The measure of costs and the mechanism for their assessment

  1. I am satisfied that it is appropriate to make an order under s 98(4) of the Civil Procedure Act for a specified gross sum instead of assessed costs. In [54] and [55] of Mr Webster’s affidavit of 21 March 2017, he deposed as to the quantum of such costs, which are summarised in a schedule at Tab 31 of that affidavit. Mr Carroll informed me from the bar table that, for some time, he has acted on the basis of a direct access brief, due to the plaintiffs’ financial position and the quantum of costs already spent on the litigation. He informed me of the amount which has not yet been billed. I am satisfied on the basis of the evidence and what Mr Carroll has told me that it is appropriate to order that the costs be paid on the basis of a specified gross sum of $150,000.

The motions in the Courtney proceedings

  1. The Courtneys commenced proceedings against the defendants on 5 September 2016 alleging breach of contract, breach of duty of care and statutory causes of action based on misleading and deceptive conduct. Despite repeated directions that they do so, the defendants failed to file a defence. As referred to above, Campbell J ordered default judgment.

  2. The only outstanding applications made by the Courtneys were for assessment of damages (sought in the notice of motion filed on 13 January 2017); a gross sum costs order (sought at the hearing) and confirmation that the notice of motion had been validly served on the defendants (sought in the notice of motion filed on 12 April 2017).

  3. The Courtneys relied on the affidavits of Ms Le, their solicitor, affirmed: 13 January 2017, together with exhibit CDL-1 (marked Exhibit A on the motion of 12 April 2017); 9 March 2017, 12 April 2017; 26 April 2017; and 28 April 2017. They also relied on the affidavits of Mr Wakefield, their solicitor, affirmed on 5 April 2017 and Exhibit AJW-1 (marked Exhibit A on the motion filed 13 January 2017) and 28 April 2017. On 28 April 2017, Mr Carroll also read the affidavit of Mr Webster sworn 28 April 2017, which was also read in the Webster proceedings, in which Mr Webster deposed to his communications with Mr Vardy on 26 April 2017.

Service on the defendants

  1. I am satisfied on the basis of Ms Le’s evidence that the defendants have been put on ample notice of the motions, the evidence in support and the hearing date. Mr Manietta was served and he was the sole director of RMI. The only reason for the question about service was that the plaintiffs’ solicitors, not unreasonably, relied on the address which Mr Manietta had indicated was the address of RMI, being 28 Moncur Street, Woollahra, when in fact the registered office was an address in St Leonards. As RMI can only act through human agents and as Mr Manietta is the relevant human agent through which it acts, service on him, was sufficient to bring to the attention of the company, the motions, the evidence and the hearing date. For the reasons given above in respect of service by HWL Ebsworth, I am satisfied that RMI knew of the motions and the evidence in support and has chosen not to appear to resist the motions.

  2. I note further that Mr Vardy, who was appointed on 19 April 2017 as the liquidator of SSS, was notified on 24 April 2017 of the order for judgment and the date for assessment of damages. As noted above, he appeared at the commencement of the hearing of all motions on 24 April 2017 and asked to be excused.

  3. In these circumstances I am satisfied that it is appropriate to make a declaration in terms of prayer 1 of the motion of 12 April 2017 that the notice of motion of 13 January 2017 and the affidavit in support have been effectively served on the first and third defendants.

Assessment of damages

  1. The position of the Courtneys in respect of the Silk investment (being the only investment in respect of which they make a claim) is identical to that of the Websters. They advanced $1 million and received $120,000 by way of pre-payment of interest. They are entitled to an equitable interest in their proportional share of the $55,000 initial establishment fee. They are entitled to pre-judgment interest which forms part of the judgment sum and reflects the time during which they have not had the benefit of their money by reason of the defendants’ negligence.

  2. For the reasons given in more detail above with respect to the Webster proceedings, I assess the damages for the Courtneys in the amount of $1,279,928.32 and declare that they have an equitable interest in $27,307.79 of this amount.

Costs

  1. The plaintiffs are entitled to their costs of the proceedings and the motion: s 98 of the Civil Procedure Act and UCPR r 42.20(2)

The measure of costs and the mechanism for their assessment

  1. I am satisfied that it is appropriate to make an order under s 98(4) of the Civil Procedure Act for a specified gross sum instead of assessed costs. The costs are quantified in [21]-[29] of the affidavit of the plaintiffs’ solicitor, Mr Wakefield, affirmed on 5 April 2017, and the corresponding annexures and Mr Wakefield’s further affidavit of 28 April 2017. I am satisfied on the basis of the evidence and Mr Carroll’s submissions that it is appropriate to order that the costs be paid on the basis of a specified gross sum of $58,000.

Orders

Orders in proceedings 2013/78666

  1. I make the following orders in proceedings 2013/78666:

  1. In respect of the motion filed on 3 April 2017 by the first cross-defendant:

  1. Dismiss the first cross-claim against the first cross-defendant.

  2. Order the cross-claimants to pay the first cross-defendant’s costs of the proceedings.

  3. Grant leave to the first cross-defendant to make an application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

  4. Direct that, until such time as the first cross-defendants’ costs have been paid, the cross-claimants are not, without leave, to file any proceedings against the first cross-defendants which arise from the same or similar facts as the first cross-claim.

  1. In respect of the motion filed on 4 April 2017 by the second and fourth to 113th cross-defendants:

  1. Abridge the time for service of the motion and affidavits in support on the cross-claimants to the first cross-claim to two clear days and order that service on 19 April 2017 was effective service.

  2. Dismiss the first cross-claim against the second and fourth to 113th cross-defendants.

  3. Order the cross-claimants to pay the second and fourth to 113th cross-defendants costs of the proceedings.

  4. Grant leave to the second and fourth to 113th cross-defendants to make an application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

  5. Direct that, until such time as the second and fourth to 113th cross-defendants’ costs have been paid, the cross-claimants are not, without leave, to file any proceedings against the second and fourth to 113th cross-defendants which arise from the same or similar facts as the first cross-claim.

  1. In respect of the motion filed on 4 April 2017 by the third cross-defendant:

  1. Dismiss the first cross-claim against the third cross-defendant.

  2. Order the cross-claimants to pay the third cross-defendant’s costs of the proceedings.

  3. Grant leave to the third cross-defendants to make an application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

  4. Direct that, until such time as the third cross-defendant’s costs have been paid, the cross-claimants are not, without leave, to file any proceedings against the third cross-defendant which arise from the same or similar facts as the first cross-claim.

  1. On 26 April 2017 I made the following orders in respect of the motion filed by the plaintiffs on 22 March 2017 in proceedings 2013/78666:

  1. Order that the defences of the second and third defendants be struck out.

  2. Order default judgment in favour of the plaintiffs against the second defendant in the sum of $1,545,428.32.

  3. Order default judgment in favour of the plaintiffs against the third defendant in the sum of $1,279,928.32.

  4. Declare that the plaintiffs have an equitable interest in $27,301.79 of the judgment sums referred to in orders (2) and (3) above.

  5. Order the second and third defendants to pay the plaintiffs’ costs of the proceedings, including the costs of the notice of motion filed on 22 March 2017.

  6. Order, pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), that the plaintiffs are entitled to a specified gross sum of costs instead of assessed costs and specify a gross sum of $150,000.

Orders in proceedings 2016/264867

  1. On 28 April 2017 I make the following orders in proceedings 2016/264867:

  1. Order that judgment be entered in favour of the plaintiffs against the second and third defendants in the sum of $1,279,928.32.

  2. Declare that the plaintiffs have an equitable interest in $27,301.79 of the judgment sum referred to in order (1) above.

  3. Order the second and third defendants to pay the plaintiffs’ costs of and incidental to the proceedings including the hearing on assessment of damages and the application for costs including a gross sum costs order. 

  4. Order, pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), that the plaintiffs are entitled to a specified gross sum of costs instead of assessed costs and specify a gross sum of $58,000.

  5. Stand over the plaintiffs’ notice of motion insofar as it concerns the first defendant to 9.30 am on 24 May 2017 before me for a determination for consideration of whether the plaintiffs will seek leave to proceed against the first defendant.

  1. I make the following additional order in proceedings 2016/264867:

  1. A declaration that the plaintiff's Notice of Motion and affidavit in support filed 13 January 2017 have been effectively served on the first defendant and the third defendant by those documents having been sent by email and by post in accordance with annexures "A", "B" and "C" to the affidavit of service of Ms Cari- Dee Le sworn 9 March 2017.

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Decision last updated: 04 May 2017

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