Whymark Nominees Pty Ltd v Australian Civils Pty Ltd
[2020] WASC 62
•28 FEBRUARY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WHYMARK NOMINEES PTY LTD -v- AUSTRALIAN CIVILS PTY LTD [2020] WASC 62
CORAM: ACTING MASTER WHITBY
HEARD: 11 FEBRUARY 2020
DELIVERED : 28 FEBRUARY 2020
FILE NO/S: CIV 2074 of 2019
BETWEEN: WHYMARK NOMINEES PTY LTD
Plaintiff
AND
AUSTRALIAN CIVILS PTY LTD
First Defendant
ANDREW DEAN MITCHELL
Second Defendant
Catchwords:
Procedure - Costs - Unusual order as to costs - Determination of successful party - Conduct of successful party - Waiver of conferral O 59 r 9 Rules of the Supreme Court 1971 (WA) - Indemnity costs pursuant to contractual provisions
Legislation:
Personal Property Securities Act 2009
Rules of the Supreme Court 1971, O 59 r 9, O 66 r 1
Shipping Registration Act 1981
Result:
First and second defendants pay the plaintiff's costs of the Interlocutory Application dated 21 June 2019 on a party-party basis
Category: B
Representation:
Counsel:
| Plaintiff | : | R W Douglas |
| First Defendant | : | A Nair |
| Second Defendant | : | A Nair |
Solicitors:
| Plaintiff | : | K J Levy |
| First Defendant | : | Cocks Macnish |
| Second Defendant | : | Cocks Macnish |
Case(s) referred to in decision(s):
Frigger v Professional Services of Australia Pty Ltd [No 2] [2011] WASCA 103(S)
Koonara Management Pty Ltd (Receivers and Managers Appointed) v Fabriano Pty Ltd [2019] SASC 99
O'Keefe Nominees Pty Ltd v BP Australia Ltd, Trade Practices Commission (1991) 128 ALR 718
Oshlack v Richmond River Council (1998) 193 CLR 72; (1998) HCA 11
Ritter v Godfrey (1918‑1919) All ER Rep 714
Rumball v Mortimore [2000] WASC 126
Strzelecki Holdings v Jorgensen [2019] WASCA 96
Verna Trading Pty Ltd v New India Assurance Co Ltd (1991) 1 VR 129
ACTING MASTER WHITBY:
Background
On 25 June 2019 Master Sanderson made the following orders:
1. The time for hearing of this application be abridged.
2.The Court declares that:
(a)from 23 April 2015 to 9 March 2018, the second defendant, Andrew Dean Mitchell of 3 Chauncy Street, East Fremantle, in the State of Western Australia at postcode 6158, was the registered owner of the Sports Cruiser vessel known as 'Satisfaction I', registered on the Australian General Shipping Register, Official Number 861323 and having its home port in Fremantle, Western Australia, together with all her gear (including a dingy tender), equipment, keys, logs and documents (Vessel);
(b)by a document dated 6 March 2018 being that 'Agreement for the sale and purchase of Sports Cruiser Vessel known as "Satisfaction"' (Agreement), duly executed by the plaintiff (as purchaser) and the first defendant (as Vendor) and the second defendant (as sole director of the first defendant), title to the Vessel was conveyed by the true owner to the plaintiff;
(c)the Agreement stated, mistakenly, that the true owner was the first defendant, whereas it was in truth the second defendant;
(d) on the proper construction of the Agreement, as is admitted by the plaintiff, first defendant and the second defendant, all title and interest in the Vessel was conveyed from the second defendant, and to any extent extant from the first defendant, to the plaintiff, on and from 9 March 2018; and
(e) as at and from 9 March 2018, the plaintiff, Whymark Nominees Pty Ltd ACN 008 834 080, of 16 Cormorant Way, Wannanup, in the State of Western Australia at postcode 6210 became and today remains the owner of the Vessel and entitled to be registered in all respects as owner of the Vessel;
(f) by a document dated 6 March 2018 being that 'Agreement for the licence and option to purchase of Sports Cruiser Vessel known as "Satisfaction"', duly executed by the plaintiff (as Licensor) and the first defendant (as Licensee) and the second defendant (as sole director of the first defendant), the plaintiff granted to the first defendant a licence (Licence) and option to purchase the Vessel (Option); and
(g) the Licence was validly terminated on 18 June 2019 and the Option was disclaimed and surrendered by first defendant on 25 June 2019.
3. The first and second defendant do immediately deliver up the Vessel to the plaintiff, and to deliver to the plaintiff a bill of sale in the form of exhibit 'C'.
4. There be liberty to apply.
5. The plaintiff's application be otherwise adjourned sine die.
6. The costs of today be reserved.
(25 June Orders).
This is the plaintiff's application for orders that the first defendant and the second defendant jointly pay the plaintiff's costs of:
(a)and incidental to the plaintiff's interlocutory application filed 21 June 2019 (Interlocutory Application); and
(b)effecting the transfer of title of the Vessel[1],
(Plaintiff's Costs Application).
[1] The parameters of the Plaintiff's Costs Application are set out in the Orders of Master Sanderson dated 10 December 2019.
The plaintiff seeks an order that the first defendant pay the costs on an indemnity basis (pursuant to a contractual term) and that the second defendant pay the costs on a party-party basis.
The first and second defendants oppose the plaintiff's application and seek their costs of the Interlocutory Application from the plaintiff on a party-party basis (First and Second Defendants' Costs Application).
The evidence
The plaintiff sought to rely upon the following documents in support of the Plaintiff's Costs Application:
(a)affidavit of Jeffery Mark Hall sworn 20 June 2019 (First Hall Affidavit)[2];
(b)affidavit of Katja Jane Levy sworn 23 December 2019 (Levy Affidavit);
(c)affidavit of Jeffery Mark Hall sworn February 2020 (Second Hall Affidavit);
(d)plaintiff's submissions on costs filed 22 December 2019; and
(e)plaintiff's reply submissions on costs filed 10 February 2020.
[2] The first and second defendants object to the admissibility of the entirety of the First Hall affidavit, or, in the alternative, to various paragraphs thereof. I will address the admissibility of the First Hall Affidavit in these reasons.
In opposition to the Plaintiff's Costs Application and in support of the First and Second Defendants' Costs Application, the first and second defendants seek to rely upon:
(a)the affidavit of Andrew Dean Mitchell sworn 15 January 2020; (Mitchell Affidavit); and
(b)the first and second defendants' responsive submissions on costs filed 15 January 2020.
For reasons articulated below, I read all of these affidavits into evidence.
Interlocutory Application
It is important to distinguish the relief sought by the plaintiff in the Interlocutory Application from the substantive relief sought by the plaintiff in the writ of summons dated 20 June 2019.
By the Interlocutory Application the plaintiff sought the following orders:
1.Mr Clifford Stuart Rocke and Mr Jeremy Joseph Nipps of Cor Cordis, each an official liquidator be appointed joint and several receivers without security until after judgment or further order, in this action:
(a)to receive the rents, profits, and moneys receivable in respect of the interest of the first and or second defendant in the following property, namely the Sports Cruiser vessel known as 'Satisfaction', registered on the Australian General Shipping Register, Official Number 861323 and having its home port in Fremantle, Western Australia, together with all her gear and equipment and documentation (Vessel);
(b)for the following purposes, namely to take immediate possession, custody and control of the Vessel and to take any and all actions the receiver deems necessary to maintain, operate and preserve the Vessel during the pendency of the Receivership; and
(c)on the following terms, namely the receiver shall have authority to gather, protect and oversee the Vessel, authority to hold, rent, lease, manage, maintain, operate and otherwise use or permit the use of the Vessel or sell at a reasonable market price under the terms and conditions the receiver deems to be prudent and reasonable under the circumstances.
2.The receiver's authority shall include to:
(a) enter upon, take and maintain possession and control of the Vessel;
(b)manage and or sell the Vessel and to secure the services of any such persons as are required to do so;
(c)take any and all actions deemed necessary by the receiver in the receiver's sole discretion of the extent necessary to protect and preserve the Vessel;
(d)incur expenses that are normal and customary for the operations, maintenance, protection and sale of the Vessel and where reasonably appropriate to borrow such funds as may be required for such expenses and to provide the Vessel as collateral security for any such borrowings, provided always that any funds borrowed are not to be applied in payment of the receiver's remuneration; and
(e)employ or contract with such consultants, managers, employees, agents, independent contractors, lawyers or other professionals as may be appropriate in the receiver's discretion to effectuate the rights, duties or responsibilities of the receiver pursuant to these orders and that any expenses incurred pursuant to this paragraph are authorised and do not require court approval.
3.The receiver be entitled to charge remuneration in accordance with his rates as disclosed on the Consent to appointment, with such remuneration to be approved by the Court and payment to be taken from the proceeds of the sale of the Vessel in priority any other interest in it.
4.Such further or other orders as the court thinks fit.
5.The costs of this application be paid by the first and second defendant.
The Plaintiff's Costs Application is in relation to the costs of the Interlocutory Application, not the substantive action.
Costs follow the 'event'
Order 66 rule 1 of the Rules of the Supreme Court 1971 (WA) (RSC) provides as follows:
[66.1] General rules as to costs
(1)Subject to the express provisions of any statute and of these rules the costs of and incidental to all proceedings including the administration of estates and trusts shall be in the discretion of the Court but, without limiting the general discretion conferred on the Court by the Act, and subject to this Order, the Court will generally order that the successful party to an action or matter recover his costs.
(2)If the Court is of the opinion that the conduct of a party either before or after the commencement of the litigation or that a claim by a party for an unreasonably excessive amount has resulted in costs being unnecessarily or unreasonably incurred it may deprive that party of costs wholly or in part, and may further order him to pay the costs of an unsuccessful party either wholly or in part.
(3)Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increase the costs the Court may order such party to pay the costs of such issue or issues.
Accordingly, the starting point in deciding any costs application is to determine which party was successful.
In Oshlack v Richmond River Council[3] McHugh J said:
By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] (1953) 1 WLR 1481 at 1484, when setting aside an arbitrator's costs award:
The arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure …
Apart from anonymous examples in the equity jurisdiction, there are very few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct. The Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages. However, this practice can be justified on the basis that, in reality, the successful party lost the litigation and the unsuccessful party won.
[3] Oshlack v Richmond River Council (1998) 193 CLR 72; (1998) HCA 11 [66].
In Frigger v Professional Services of Australia Pty Ltd [No 2] (S)[4] the Court of Appeal said:
However, deciding what amounts to success is not always revealed merely by reading the orders of the court. Where an appellant has been successful in obtaining what is, in effect, a variation in their favour of orders below, there may remain valid reasons not to award costs in favour of the appellant where the appellant has not been successful in the underlying, real contest (emphasis added) (Citations omitted).
[4] Frigger v Professional Services of Australia Pty Ltd [No 2] [2011] WASCA 103(S) [12].
In considering whether a party has been successful, the issue to be determined is whether the objective sought by the litigation is achieved, even though a party may not succeed on all issues raised in the litigation.[5]
[5] O'Keefe Nominees Pty Ltd v BP Australia Ltd, Trade Practices Commission (1991) 128 ALR 718 per Spender J [720].
Which party succeeded?
The 25 June Orders were made as the result of agreement between the plaintiff and the first and second defendants, without the requirement for a substantive hearing. The relief sought in the Interlocutory Application was not granted in the 25 June Orders.
The plaintiff submits that it ultimately succeeded on the Interlocutory Application because the commercial objective of the plaintiff was to obtain final title of the Vessel – the 25 June Orders achieved this objective – rendering the appointment of a receiver to the Vessel unnecessary.
The first and second defendants submit that where an application is compromised without the necessity for a hearing, each party will ordinarily be ordered to bear its own costs, provided that the party's conduct has not been unreasonable.[6]
[6] Koonara Management Pty Ltd (Receivers and Managers Appointed) v Fabriano Pty Ltd [2019] SASC 99 [79].
It is instructive to have regard to the relief sought in the plaintiff's Indorsement of Claim indorsed on the Writ of Summons filed on 20 June 2019. The relief sought therein includes the following:
12.An order pursuant to section 59 of the Shipping Registration Act 1981 (Cth) that the Registrar of Ships do rectify the General Register of Ships to record the plaintiff as the registered proprietor of the Vessel as provided for in the Sale Agreement.
…
14.An order that the first and or second defendant deliver up of (sic) the Vessel and all her gear, equipment and documentation to the plaintiff.
It is clear that the commercial objective of the plaintiff in commencing these proceedings was to secure registered title to, and possession of, the Vessel. The relief sought in the Interlocutory Application was consistent was this commercial objective. The plaintiff did, in fact, secure registered title to, and possession of, the Vessel pursuant to the 25 June Orders. The 25 June Orders rendered the relief sought in the Interlocutory Application unnecessary. The fact that no hearing was required does not alter the nature of the relief granted in the 25 June Orders. In these circumstances, I consider that the plaintiff was successful in the underlying, real contest between the parties and therefore, was successful on the Interlocutory Application.
Given the plaintiff's success, the usual costs order would be that the first and second defendants pay the plaintiff's costs of the Interlocutory Application to be taxed if not agreed.
However, this is not the end of the matter. The authorities confirm that, in certain circumstances, the court has the discretion to depart from the general rule and modify a costs order to take into account matters such as any unreasonable conduct of a successful party.[7]
[7] Strzelecki Holdings v Jorgensen [2019] WASCA 96 [50].
Plaintiff's conduct
The first and second defendants submit that the plaintiff's conduct was such that the plaintiff should be deprived of any costs order in its favour. The first and second defendants' submissions rely upon the following contentions:
(a)prior to filing the Interlocutory Application, the plaintiff failed to confer with the first and second defendants as required by O 59 r 9 RSC;
(b)the Interlocutory Application arose in circumstances where the plaintiff failed to take reasonable and timely steps to protect its own interests in the Vessel; and/or
(c)the plaintiff refused to accept the first and second defendants' offer of an adjournment of the Interlocutory Application to enable the parties to discuss a reasonable compromise on terms which were subsequently reflected in the 25 June Orders.
In Oshlack v Richmond River Council,[8] McHugh J held that 'misconduct' by the successful party was generally required in order to justify a departure from the usual costs order and observed, at [69]:
'Misconduct' in this context means misconduct relating to the litigation …, or the circumstances leading up to the litigation … thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation …; unnecessarily protracts the proceedings …; succeeds on a point not argued before a lower court …; prosecutes the matter solely for the purpose of increasing the costs recoverable …; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
[8] Oshlack v Richmond River Council (1998) 193 CLR 72; (1998) HCA 11 [66]
In Verna Trading Pty Ltd v New India Assurance Co Ltd[9] the Victorian Court of Appeal upheld the decision of the trial judge to order that the successful defendant, an insurance company, pay part of the costs of the plaintiff, on the basis that the defendant had failed to disclose the basis of its successful defence until the first day of the trial. Kaye J relied upon this statement of Aitkin LJ in Ritter v Godfrey[10]:
In the case of a wholly successful defendant, in my opinion, the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation; or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense; or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains.
[9] Verna Trading Pty Ltd v New India Assurance Co Ltd (1991) 1 VR 129.
[10] Ritter v Godfrey (1918‑1919) All ER Rep 714, 723.
The first and second defendants submit that the conduct of the plaintiff was 'misconduct' with the result being that I should depart from the usual costs order and make orders in terms of the First and Second Defendants' Costs Application.
In order to characterise the conduct of the plaintiff, it is necessary to have regard to the evidence of both parties.
Admissibility of the Second Hall Affidavit
Counsel for the first and second defendants submit that the Second Hall Affidavit should not be read into evidence because it was not filed in accordance with the orders of Master Sanderson dated 10 December 2019.[11]
[11] The Orders of Master Sanderson dated 10 December 2019 required the plaintiff to file and serve any affidavits in support of its application for costs by 20 December 2019. The Second Hall Affidavit was filed on 6 February 2020.
It is submitted that the matters to which the Second Hall Affidavit pertain are matters that were raised in correspondence between the parties prior to the institution of the proceedings. It is submitted that the plaintiff had notice of the issues which would be raised in the first and second defendants' submissions, such that a further responsive affidavit was not required on behalf of the plaintiff.
In support of the admissibility of the Second Hall Affidavit, counsel for the plaintiff submits that the plaintiff was only aware of the First and Second Defendants' Costs Application upon receipt of the first and second defendants' submissions. The plaintiff should be entitled to file further responsive material given that the orders of Master Sanderson made on 10 December 2019 did not contemplate the First and Second Defendants' Costs Application.
I find that the Second Hall Affidavit is admissible. It is responsive to the First and Second Defendants' Costs Application – an application which was only made by the first and second defendants' submissions. The Orders of Master Sanderson dated 10 December 2019 only required affidavits in support of the plaintiff's application for costs to be filed by 20 December 2019 (emphasis added). To deny the plaintiff the opportunity to adduce evidence in response to the First and Second Defendants' Costs Application would amount to a denial of procedural fairness.
The first and second defendants contend that, in the event that the Second Hall Affidavit is admissible, certain paragraphs are inadmissible on the basis of relevance. I decline to strike out any paragraphs of the Second Hall Affidavit as irrelevant – I consider that it is a matter of the weight to be given to various facts deposed to therein.
Failure to confer in accordance with O 59 r 9(1) RSC
Order 59 rule 9 provides as follows:
(1)No order shall be made on an application in chambers unless the application was filed with a memorandum stating -
(a)that the parties have conferred to try to resolve the matters giving rise to the application; and
(b)the matters that remain in issue between the parties.
(2)The Court may waive the operation of subrule (1) in a case of urgency or for other good reason.
The plaintiff filed a memorandum of waiver of conferral on 21 June 2019 pursuant to O 59 r 9(2) RSC, together with a letter to the Supreme Court of the same date in which the plaintiff stated:
The plaintiff holds grave concerns that a sale of the [V]essel may imminently take place to a third party and the proceeds of such sale thereafter be unrecoverable.
The relevant chronology is as follows:
(a)on 6 March 2018 the plaintiff entered into a written agreement with the first defendant for the sale and purchase of the vessel (Sale Agreement);[12]
[12] First Hall affidavit annexure JMH.01.
(b)the Sale Agreement was executed by the second defendant as sole director of the first defendant;
(c)at the same time as entering into the Sale Agreement, the plaintiff and the first defendant entered into an agreement for the licence and option to purchase the vessel by the first defendant (Licence Agreement);[13]
[13] First Hall affidavit annexure JMH.02.
(d)clause 2(d)(4) of the Licence Agreement required the first defendant to register the plaintiff's security interest in the Vessel on the Personal Properties Securities Register (PPSR);
(e)on 28 May 2019, the plaintiff obtained a search of the PPSR which recorded no security interest or other registration against the Vessel;[14]
(f)on 28 May 2019, the plaintiff emailed the first defendant a notice of event of default, requiring the failure of the first defendant to register the plaintiff's security interest in the Vessel on the PPSR to be rectified within five business days;[15]
(g)on or about 28 May 2019, Mr Hall went to see the vessel in Fremantle and spoke with Mr Adam Scahill. Mr Hall deposes that Mr Scahill advised him that he had been engaged by the first defendant and/or the second defendant as agent to sell the Vessel. Mr Scahill provided Mr Hall with a copy of the advertisement for sale of the Vessel;[16]
(h)Mr Hall deposes that, on or about 13 June 2019, he unsuccessfully tried to meet with the second defendant. Mr Hall annexes a number of text messages to the Second Hall affidavit evidencing exchange of correspondence between the second defendant and himself;[17]
(i)Mr Hall deposes that he made personal visits to Mills Signs and Paint, Bellevue premises, where the second defendant worked, on three occasions between 13 June and 20 June 2019. On each occasion Mr Hall says he gave advance notice by telephone of his visit and upon arrival was informed that the second defendant had left the premises;[18]
(j)on or around 17 June 2019, Mr Hall received a telephone call from Mr Jimmy Trpcevski, the administrator of Viewtop Pty Ltd (the company of which the second defendant is a director) during which Mr Trpcevski requested that Mr Hall stop attending the Mill Signs and Paint premises as it was upsetting the staff;[19]
(k)on or about 18 June 2019, Mr Hall instructed his solicitor to issue the first defendant a notice of termination of licence and demand for payment under the licence fee pursuant to the Licence Agreement;[20]
(l)on 19 June 2019, Mr Hall hand delivered a copy of the termination of licence pursuant to the Licence Agreement to the residence of the second defendant;[21]
(m)on 20 June 2019, the plaintiff commenced these proceedings. On 22 June 2019 the first and second defendant were served with the Interlocutory Application and supporting documents; and
(n)on 24 June 2019 the first and second defendants' solicitors wrote a letter to the plaintiff's solicitor proposing an adjournment of the hearing listed for 25 June 2019 on certain conditions.[22]
[14] First Hall affidavit annexure JMH.09.
[15] First Hall affidavit par 11 and annexure JMH.10.
[16] First Hall affidavit par 12 and annexure JMH.11.
[17] Second Hall affidavit par 33 and annexure JMH.17.
[18] Second Hall affidavit par 33(f).
[19] Second Hall affidavit par 33(h).
[20] First Hall affidavit par 17 and annexure JMH.13.
[21] First Hall affidavit par 18.
[22] Mitchell affidavit par 27 and annexure ADM.2.
The plaintiff's basis for seeking such a waiver was the urgency of the Interlocutory Application. The plaintiff, by Mr Hall, deposes that unless the orders sought in the Interlocutory Application were granted there was a real and imminent risk that the Vessel would be sold to a third party and any proceeds of that sale would be unrecoverable.[23]
[23] First Hall affidavit par 21.
The first and second defendants submit that the urgency was unjustified and that, in any event, the perceived need for urgency was a result of the plaintiff's own failure to reasonably protect its interests in the Vessel.
The first and second defendants rely upon the following evidence in support of the contention that there was no urgency sufficient to justify a waiver of conferral:
(a)Mr Hall, as the plaintiff's director:
(1)knew of the Vessel's location and had ready access to it;[24] and
(2)was aware of, and consented to, the advertisement for sale of the Vessel;[25]
(b)the sale of the Vessel could not take place instantaneously, it typically involves the conduct of sea trials, due diligence, rectification work and the exchange of documentation before title and possession can be granted to a purchaser;[26] and
(c)it was not the first and second defendants' intention to sell the Vessel;[27]
(d)even if there was a risk of the Vessel being sold imminently, the plaintiff was able to take a number of steps to protect its own interest and to nullify that risk. The steps that the plaintiff failed to take were:
(1)the plaintiff failed to take possession of the Vessel in circumstances where it was entitled to do so;[28] and
(2)the plaintiff failed to lodge a caveat with the Register of Ships which it was entitled to do pursuant to s 47A of the Shipping Registration Act 1981 (Cth).
[24] Mitchell affidavit pars 10 and 17.
[25] Mitchell affidavit par 15.
[26] Mitchell affidavit par 22.
[27] Mitchell affidavit pars 19 – 21.
[28] Mitchell affidavit pars 10 and 17.
On the basis of the above facts, the first and second defendants say it was not urgent for the plaintiff to file the Interlocutory Application in the absence of conferral.
In response, the plaintiff submits that Mr Mitchell, by signing a Marine Brokers Institute agency listing agreement on either 6 or 10 April 2019, had asserted to the marine broker that he was the vendor of the Vessel and that there were no encumbrances or restrictions on title.[29] In those circumstances, the plaintiff submits that there was an imminent risk that the Vessel would be sold without regard to the plaintiff's interest in the Vessel.
[29] Second Hall affidavit annexure JMH.26.
In my view, the plaintiff's failure to confer was reasonable and appropriate given the following:
(a)the second defendants' failure to respond to text messages from Mr Hall either at all or in a meaningful way; and
(b)the second defendant's conduct in entering into an agency listing agreement in which he represented to a marine broker that he was the owner of the Vessel and that there were no encumbrances or restrictions on title.
It was reasonable and appropriate for the plaintiff to commence the proceedings and file the Interlocutory Application as a matter of urgency in order to protect its interest in the Vessel. The fact that the plaintiff may have had other options available to it as alternatives to protecting its interest does not mean that this option was unreasonable.
I find that the plaintiff's failure to comply with O 59 r 9 RSC does not amount to misconduct such that the usual costs order should be departed from.
Plaintiff's failure to protect its own interests
The first and second defendants submit that the circumstances leading to the filing of the Interlocutory Application are consistent with an attempt on the plaintiff's part to use the court's processes to rectify the plaintiff's own failure of due diligence and reasonable conduct. These submissions overlap with the submissions in relation to the failure to comply with O 59 r 9 RSC. However, they go further. The first and second defendants submit that the plaintiff failed to provide the defendants with a bill of sale for execution and/or request from the defendants the original registration certificate in relation to the Vessel until 13 June 2019, some 15 months after the sale.[30] Further the plaintiff failed to register any security interest in the Vessel under s 12(3)(c) of the Personal Property Securities Act 2009 (Cth) (PPSA).
[30] Mitchell affidavit par 13(a), (b).
Clause 2(d)(4) of the Licence Agreement provides that the obligation is on the first defendant to register the security interest in the Vessel under the PPSA.[31]
[31] First Hall affidavit par 26.
As I stated earlier, the fact that the plaintiff had other avenues available to it to seek to protect its interests in the Vessel does not mean that commencing proceedings and seeking relief by way of the Interlocutory Application was unreasonable or inappropriate on the part of the plaintiff.
I consider that the plaintiff did not fail to protect its own interest, it sought to do so by commencing these proceedings and filing the Interlocutory Application. Accordingly, there is no failure upon which to rest an allegation of misconduct on the part of the plaintiff.
Plaintiff's failure to accept first and second defendants' compromise offer
The first and second defendants rely upon the letter from their solicitors dated 24 June 2019 in which the first and second defendants accepted the plaintiff's title and invited the plaintiff to adjourn the hearing on 25 June 2019 so that appropriate measures could be agreed to dispose of the Interlocutory Application. The plaintiff did not accept the invitation and sought the continuation of the proceedings.[32]
[32] Mitchell affidavit par 27 and annexure ADM2.
On 25 June 2019 the hearing was adjourned for a short time in order to allow the parties to confer - ultimately resulting in the parties reaching a compromise in terms of the 25 June 2019 Orders. The first and second defendants say that the 25 June Orders largely reflect the proposals set out in the letter of 24 June 2019 - the plaintiff's conduct in refusing to accept the first and second defendants' invitation for an adjournment was unreasonable.
Having reviewed the letter dated 24 June 2019, I am satisfied that it does not go far enough to assuage the concerns of the plaintiff in relation to a potential sale of the Vessel by a third party. For example, no minute of proposed orders is submitted to the plaintiff for consent or transfer documents for the Vessel are provided with that letter. In all of the circumstances, I consider that it was reasonable for the plaintiff to continue with the hearing on 25 June 2019, which ultimately resulted in the plaintiff's success.
Accordingly, I find that there is no conduct of the part of the plaintiff sufficient to constitute misconduct. The plaintiffs' costs of the Interlocutory Application should be paid by the first and second defendants. There is no issue that the second defendant should pay those costs on a party/party basis. There is, however, a submission from the plaintiff that the first defendant ought pay those costs on an indemnity basis pursuant to clauses of the Sale Agreement.
Indemnity costs
The plaintiff relies upon cl 12.2 and cl 16 of the Sale Agreement in support of its submission that the first defendant is required to pay its costs on an indemnity basis. Those clauses provide as follows:
12.2If [the first defendant] shall default in the execution of his part of the contract [the plaintiff] shall, without prejudice to any other rights he may have, be entitled to … his reasonable costs, expenses and compensation for any associated loss which he may have sustained as a result of [the first defendant's] default.
…
16.[The first defendant] is responsible for all of the costs (including any legal costs on a full indemnity basis) in connection with this vessel sale agreement, whether or not the Vessel Sale Agreement is completed (including without limitation, the preparation and negotiation of any Heads of Agreement, for negotiation and drafting of this Vessel Sale Agreement and any documents contemplated by it).
In Rumball v Mortimore [2000] WASC 126 [15], Owen J made the following observation in relation to costs pursuant to a contract:
The Court has a broad discretion over the basis upon which it orders the costs of an action. However, where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a certain basis, the Court should ordinarily exercise its discretion in a manner consistent with the contractual provisions (citations omitted).
Counsel for the plaintiff submits that it is clear that the first defendant was in breach of the Sale Agreement. The plaintiff submits that:
(a)cl 12.2 of the Sales Agreement is clear and unambiguous with the result that the costs of the Interlocutory Application must be paid on an indemnity basis; and
(b)cl 16 of the Sale Agreement is applicable because it refers to all of the costs in connection with the Sales Agreement being paid by the first defendant on a full indemnity basis.
Counsel for the first and second defendant submits that it is not possible to determine whether cl 12.2 and/or cl 16 of the Sale Agreement provide a right to indemnity costs in circumstances where the underlying issues, that is whether in fact there has been a breach of cl 12.2 or a matter rightly falling within cl 16, have not been judicially determined. The costs that are sought relate to the Interlocutory Application, not to the writ of summons. Therefore, it is not appropriate for the court to determine at this stage of the proceedings whether there has been a default in the execution of the Sale Agreement by the first defendant.
I do not consider that indemnity costs pursuant to the Sale Agreement ought be ordered against the first defendant for the following reasons:
(a)These are the costs of the Interlocutory Application and it is premature for me to determine the enforceability of cl 12.2 in circumstances where the court has not determined whether there has been a default in the execution of the Sale Agreement by the first defendant;
(b)in any event, cl 12.2 refers to the reasonable costs of the plaintiff. I consider that reasonable costs are those payable on a party/party basis and do not extend to indemnity costs; and
(c)clause 16 is not clear and unambiguous. It is open on the interpretation of that clause to assert that it applies merely to the preparation and negotiation of various documents associated with and including the Sale Agreement.
Summary
For the reasons detailed above, I consider that the first and second defendants ought pay the plaintiffs' costs of the Interlocutory Application on a party/party basis. I will hear the parties as to final orders and as to the costs of this application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson28 FEBRUARY 2020
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