Westpac Banking Corporation v Hilliard
[2001] VSC 198
•21 June 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2127 of 2000
| WESTPAC BANKING CORPORATION | Plaintiff |
| v | |
| ROY CHARLES HILLIARD and INFORMATION AGE TRAVEL PTY LTD | First Defendant Second Defendant |
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JUDGE: | McDonald J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Written submissions 13 June 2001 | |
DATE OF JUDGMENT: | 21 June 2001 | |
CASE MAY BE CITED AS: | Westpac Banking Corporation v Hilliard & Ors | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 198 | |
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Costs - ex parte order of a Mareva type, non-disclosure of facts material to making order, order made affecting a person not a party to the proceedings, order discharged on application of person affected, order for costs on a solicitor and client basis.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | R. Strong | Mallesons Stephen Jaques |
| For the Defendant | P. Hayes QC with R. Rosenberg | Rudstein Kron |
HIS HONOUR:
On 8 June 2001, in these proceedings and on an application made on behalf of Margaret McCready by summons filed in the proceedings, I ordered that the order made by paragraph 3 of orders made in the proceedings on 19 February 2001 be discharged. Ms McCready is not and has not been a party to these proceedings. The order made by paragraph 3 of the orders made on 19 February 2001 was a Mareva type order. It directly affected Ms McCready in that it prevented her from receiving the net proceeds of the sale of a property of which she was the sole registered proprietor. Although by its form the order made on 19 February 2001 was made by consent, for the reasons stated in my judgment the order so made was treated as an ex parte order insofar as it affected Ms McCready.
Application has now been made to the court on behalf of Ms McCready that it be ordered that the plaintiff pay her costs of the summons filed on 10 April 2001 and that such costs be taxed on a solicitor and client basis. Counsel for the plaintiff, while not opposing an order that the plaintiff pay the costs of Ms McCready, opposed the application insofar as it was sought that such costs be taxed on a solicitor and client basis.
As directed I have now received written submissions on behalf of each of the plaintiff and Ms McCready.
On behalf of Ms McCready it is submitted that it should be ordered that she should have her costs of the summons against the plaintiff not on a party and party basis but on a solicitor and client, or indemnity, basis. A number of submissions made on behalf of Ms McCready have as their underlying foundation the proposition that on a party making an ex parte application to a court for a Mareva type order against another, such as Ms McCready, that party has a duty to the court and an obligation to make full and fair disclosure of all facts material to the determination by the court, in exercise of its discretion whether to make the order sought. That such an obligation or duty is imposed on a party making an ex parte application for a Mareva type order of the nature made against Ms McCready cannot be disputed. As to this matter I refer to my judgment in this proceeding and the authorities therein cited which establish and support such a proposition.
Relying on such proposition it has been submitted on behalf of Ms McCready, in substance, that as it has been determined that there was a failure on the part of the plaintiff to make a full and fair disclosure of the facts known to it and material to the application, that on the order being discharged, Ms McCready should not be out of pocket as to costs and that it should be ordered that the plaintiff pay her costs on a solicitor and client basis or an indemnity basis. That basic submission has been put on behalf of Ms McCready in a number of ways. They include:
¨ that the plaintiff misconducted itself in the application for an ex parte party order;
¨ that the plaintiff did not make full, proper or fair disclosure of material facts consistent with the plaintiff’s, duty of utmost good faith upon the hearing of the ex parte application, for an order in the nature of an injunction;
¨ that the circumstances of the plaintiff’s non-disclosure have not been explained;
¨ that in the proceedings the plaintiff continued to maintain that it had not breached its duty thereby persisting with its conduct and not purging it;
¨ that the plaintiff’s conduct involved a breach of duty and was misconduct;
¨ that the misconduct was not inadvertent or innocent;
¨ that in consequence of the plaintiff’s non-disclosure of material facts it should be deprived of any advantage that it may derive in breach of that duty and that it should follow that the innocent party be not left with a disadvantage or detriment in consequence of the breach of duty;
¨ that it would be perverse for Ms McCready to be out of pocket as to costs when Ms McCready, not being a party to the proceedings, was affected by an order of a Mareva nature made against her where the plaintiff failed to make a full and fair disclosure to the court on material facts known to it;
¨ that the failure of the plaintiff to make a full and fair disclosure to the court of facts material to the exercise of its discretion was not brought about by any need for haste in making the application or maintaining the orders made;
¨ that notwithstanding the first order made against Ms McCready on 20 December 2000 the plaintiff did not thereafter seek to correct or correct its failure to make a full and fair disclosure to the court of facts material to the exercise of its discretion.
On behalf of the plaintiff it was submitted in substance that there was no matter or circumstance relevant to the present proceedings which would warrant the court from departing from its usual practice which is to award costs to a successful party on a party and party basis.
The power of the court to make an order for costs of and incidental to a matter in the court is vested in it pursuant to s. 24(1) of the Supreme Court Act 1986. That power vests in the court a wide discretion as to costs, which discretion must be exercised judicially. Ordinarily the court will order costs against a party to proceedings on a party and party basis. That such is the settled practice or ordinary rule of the court has been accepted by the court over a long period of time. It is reflected in Rule 63.31 which provides that:
“Except as provided by these rules or any order of the court costs should be taxed on a party and party basis.”
In the exercise of its discretion to award costs against a party to proceedings, the court may order costs on a measure higher than on a party and party basis if there exists circumstances which warrant the court from departing from the ordinary rule as to costs. The question that must be addressed in each case where costs are sought other than on a party and party basis is whether in the circumstances as existing, justice requires that an order for costs be made other than on a party and party basis: Spencer v Dowling[1].
[1](1997) 2 VR 127 Winneke P at 147.
In Colgate Palmolive v Cussons[2] Sheppard J at p. 233, after noting that the categories of circumstances, in which the discretion of the court to award costs on a measure higher than a party and party basis was not closed, he set out a number of circumstances which have been thought to warrant a court, in the exercise of its discretion, departing from the ordinary rule or practice as to costs. I set out those circumstances as identified by Sheppard J without reference to the authorities cited by his Honour. They were:
“The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of cases by groundless contentions; an imprudent refusal of an offer of compromise and an award of costs on an indemnity basis against a contemnor.”
[2](1993) 46 FCR 225.
In Czerwinski v Syrena Royal Pty Ltd[3] Warren J at p. 1-2 of her judgment said:
[3][2000] VSC 135.
“A review of the authorities reveals that there are a number of grounds whereby the court in the exercise of the discretion should award solicitor and client costs. These grounds may be briefly set out as follows:
1.Where the bringing of the application was high handed: AGC Limited v De Jager (1984) VR 483, 502.
2.If the application had no chance of success: Colgate-Palmolive Company v Cussons Pty Ltd, supra, 231.
3.If the application was hopeless: J. Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No. 2) (1993) 46 IR 301, 303.
4.If the application was unnecessary: Regata Developments Pty Ltd v Westpac Banking Corporation, unreported judgment of the Federal Court, 5 March 1993.
5.If the application was not brought for a bona fides purpose but to achieve an ulterior purpose: Regata Developments Pty Ltd, supra.
6.If the application was commenced in wilful disregard of known facts or contrary to well established law: Fountain Selected Meats [(1998) 81 ALR 397].
7.If the justice of the case warrants solicitor and client or indemnity costs: Andrews v Barnes (1887) 39 Ch D 133.
8.If there are special or unusual features that warrant the exercise of the discretion to order solicitor and client or indemnity costs: Fountain Selected Meats, supra, 400.”
On behalf of the plaintiff while counsel accepted that those categories of circumstances as identified by Warren J were circumstances where the ordinary rule as to costs may be departed from he submitted that for the court to depart in this instance from awarding costs on a party and party basis it would require the court to conclude that the grounds on which the plaintiff resisted the application of Ms McCready were so obviously hopeless as to make it in effect a waste of the court’s time to have resisted the application. He submitted that conclusion should not be reached in this case. To accept that submission would in effect be to conclude that unless such was the case as contended for, the court should not in exercise of its discretion depart from the usual rule as to costs. That cannot be so.
Further on behalf of the plaintiff it was submitted that in a number of cases to which reference was made it would appear that although an ex parte order had been set aside for the non-disclosure of the material facts, costs were not awarded on a party and party or indemnity basis. In Lloyds Bowmaker Ltd v Britannia Barrow Holdings Plc [1988] 1 WLR 1337 the Court of Appeal, as appears from the report allowed the appeal with costs in the Court of Appeal and below and ordered that “costs be taxed and paid forthwith”. In that case the ex parte order had been obtained by a defendant against a third party joined as a party by the defendant in the proceedings. In Brink’s-MAT Ltd v Elcombe[4] it was found that there had been a non-disclosure of material facts on an ex parte application which resulted in a Mareva injunction being granted. Nevertheless it was determined to continue the order. The disposition as to costs does not appear from the report. In Westwind Air v Hawker de Havilland[5] it appears from the report that the defendant was successful in recovering its costs of its application to dissolve the ex parte injunction to the extent that it was found to be justified in making that application. As pointed out by counsel for the plaintiff such costs were not ordered on a solicitor and client, or indemnity, basis. Although that may be so it does not appear that there was any adjudication as to whether such costs should be on a party and party basis or on a more generous basis than that ordered if the usual rule as to costs is followed.
[4][1988] 3 All ER 188.
[5](1990) 3 WAR 71.
In Project Development Co Ltd SA v K.M.K. Securities Ltd[6] an intervener in the proceeding, a bank, was an innocent third party which was subject to a Mareva injunction which had been granted to the plaintiff against several defendants. The bank applied successfully to vary the Mareva injunctions so as to permit it to set off a sum standing to the credit of a defendant against whom the injunction had been granted in order to reduce that defendant’s indebtedness to the bank. The bank applied for an order for costs on an indemnity basis. At p. 1471-2 Parker J said:
“In my judgement an innocent third party affected by a Mareva injunction ought, if he has to apply to the court for variation of the order and is successful in doing so, to have all costs incurred so long as they are not unreasonable in amount or unreasonably incurred and a plaintiff who resorts to the draconian remedy of a Mareva injunction should expect to pay such costs. If in pursuit of his rights against a defendant he initiates an order of the court affecting assets in the hands of third parties, and that order is later varied at the instance of third parties so as to exclude assets in their hands, justice appears to me to require that all the innocent third parties’ costs should be paid by the plaintiff unless they are unreasonable.”
[6][1982] 1 WLR 1470.
Again at p. 1473 Parker J further said:
“It should, I think, be stressed that a party who resorts to the Mareva jurisdiction must expect to pay, and should in justice pay, all reasonable expenses and all reasonable costs to which innocent third parties may be put by their actions and it is on that basis which I make the order which I do.”
In that case it was ordered the intervener should have its costs against the plaintiff, to be taxed in accordance with R.S.C. Ord. 62 R. 29 on a solicitor and own client basis, however it was directed that on such taxation it was for the intervener to establish that the costs were reasonably incurred and reasonable in amount.
For the reasons expressed in my judgment I concluded that not only had the plaintiff failed to make a full and fair disclosure to the court of facts known to it and material to it obtaining the Mareva type order against Ms McCready, but also when regard was had to the material facts which were not disclosed by the plaintiff the order made affecting Ms McCready should not stand against her.
Ms McCready was not a party to the proceedings instituted by the plaintiff and at no time did it seek to have her made a party to the proceeding. Rather the plaintiff on its ex parte application successfully obtained an order preventing her from having the use of the net proceeds of sale of the property which was registered solely in her name in circumstances which were known to the plaintiff, but not disclosed to the court. Further Ms McCready was successful in her application when consideration was given to the facts known to the plaintiff and not disclosed to the court when the ex parte order was made. In my view it is in such circumstances that she should now have her costs against the plaintiff on a more generous scale than on a party and party basis. It is just such a case as this that illustrates that there are categories of cases other than those identified by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd and by Warren J in Czerwinski that warrant the court making an order for costs against a party to proceedings on a “higher measure” than on a party and party basis. In my view in the circumstances existing in this proceeding on which Ms McCready has been successful she should have her costs against the plaintiff to be taxed on a solicitor and client basis. It is ordered that the plaintiff pay to Ms McCready her costs, of and incidental to the summons filed on her behalf in the proceedings on 10 April 2001 and that such costs be taxed on a solicitor and client basis.
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