Woodgate v M J Leonard Pty Ltd

[2006] NSWSC 783

CITATION:	Woodgate v M J Leonard Pty Ltd [2006] NSWSC 783
HEARING DATE(S):	19/06/06 Written submissions: 21/06/06, 23/06/06
JUDGMENT DATE :	8 August 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Second defendant to pay plaintiffs' costs of claims brought against second defendant. No order as to costs between plaintiffs and first defendant
CATCHWORDS:	PROCEDURE - costs - where no determination on the merits - whether there should be departure from principle that costs lie where they fall
LEGISLATION CITED:	Corporations Act 2001 (Cth), Part 5.3A, ss.
CASES CITED:	Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
PARTIES:	Giles Geoffrey Woodgate - First Plaintiff Herd Bars & Bodies Pty Limited - Second Plaintiff M.G.B. Chadd Pty Limited - Third Plaintiff M J Leonard Pty Limited t/as Leonard Legal - First Defendant Mark Douglas Fawcett - Second Defendant
FILE NUMBER(S):	SC 2269/06
COUNSEL:	Mr J.T. Johnson - Plaintiffs Mr C.R.C. Newlinds SC/Mr A.F. Fernon - Defendants
SOLICITORS:	Sally Nash & Co - Plaintiffs Leonard Legal - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 8 AUGUST 2006

2269/06 GILES GEOFFREY WOODGATE & 2 ORS v M J LEONARD PTY LIMITED t/as LEONARD LEGAL & ANOR

JUDGMENT

1 The only question for determination in these proceedings is that of costs.

2 The proceedings were commenced on 7 April 2006. The first plaintiff (“the plaintiff”) had been appointed administrator of two companies (Herd Bars & Bodies Pty Limited and MGB Chadd Pty Limited, which are the second and third plaintiffs) under Part 5.3A of the Corporations Act on 28 March 2006. In that capacity, he demanded of each of the first defendant (a solicitor corporation which had acted for each company) and the second defendant (a director of the company) delivery up of books and records of each company. Demands were made on 28 March 2006, 31 March 2006, 3 April 2006 and 5 April 2006. The proceedings were commenced on 7 April 2006. The first return date was 10 April 2006. On that day, orders for delivery of documents were made by consent. The orders required each defendant to deliver up certain documents by 5 pm on 13 April 2006. There was also an order that the second defendant furnish by the same deadline an affidavit concerning property of the company. The proceedings were stood over to 24 April 2006.

3 On 24 April 2006, the first defendant sought an order that the proceedings against it be dismissed. The court noted that such an order would be made in chambers if the plaintiff did not indicate by 5 pm on 27 April 2006 that he opposed that course. The matter was stood over to 1 May 2006. It does not appear that any order was made in chambers as foreshadowed.

4 On 1 May 2006, the proceedings were further adjourned to 15 May 2006. On the latter date, certain affidavits were filed in court and there was a further adjournment to 29 May 2006. Finally, there was an adjournment to 19 June 2006, on which day it was indicated that the only issue remaining to be agitated was that of costs and directions for the filing of submissions on costs were made.

5 Some documents were provided by the first defendant on 6 April 2006, that is, the day before the proceedings were commenced. The first defendant produced further documents on 13 and 24 April 2006. There was subsequent correspondence about the sufficiency of compliance but no further production of documents and no action directed towards enforcement of the consent orders.

6 Compliance by the second defendant is accepted by him as having been incomplete. He does not oppose the making of a costs order against him but says that there is no basis for ordering assessment on the indemnity basis. The second defendant is now a bankrupt but it is accepted on both sides that the Bankruptcy Act 1966 presents no obstacle to the making of a costs order against him.

7 Subject to the second defendant’s indication that he does not oppose a costs order against him, this matter falls to be dealt with according to principles stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at pp.624-625:

“In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd , the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.”

8 The expected outcome will accordingly be that the plaintiff and the first defendant pay their own costs unless some particular factor indicates otherwise.

9 In relation to the claim against the first defendant, the first question is whether it acted unreasonably in defending. This question must be answered in the negative: the first defendant did not defend at all. It submitted to the orders on the first return date.

10 The next question is whether the first defendant acted so unreasonably that the plaintiff should have a costs order. The plaintiff points essentially to four matters: first, that the first defendant did not act on the early requests made before the proceedings were commenced; second, that, after the consent orders were made, the first defendant maintained that one of the documents (or files) he was required to deliver up related to advice given to someone other than the company of which the plaintiff was administrator; third, that the first defendant was slow in complying with the orders; and, fourth, that the first defendant, as a solicitor, should have been more attuned and attentive to the duty to hand over documents.

11 In my opinion, none of these matters can be viewed as unreasonable in such a way as to warrant a departure from the ordinary expectation as to costs where there has been no determination on the merits. The period between the initial request and commencement of proceedings was relatively short. The first defendant no doubt had to give attention to the difference between documents belonging to the client and documents belonging to the solicitor. If one of the documents covered by the order eventually made may have related to some other client, the first defendant was under a duty to consider that matter and the question whether he should seek some variation of the order, rather than blindly complying.

12 Finally, there is the question whether the court can and should conclude that, as between the plaintiff and the first defendant, the plaintiff was “almost certain to have succeeded if the matter had been fully tried”. I am satisfied that the plaintiff would very likely have succeeded in the claims as made, which related to “books” as defined by the Corporations Act and described various categories of such “books”. But it was to that claim that the first defendant succumbed. This was after he had not acted upon pre-action demands in much wider terms, that is, demands for “All files held by you … in relation to the Company”. That was unacceptably wide and did not warrant obedience.

13 I am not persuaded as to the existence of circumstances warranting, as between the plaintiff and the first defendant, any conclusion other than that costs should lie where they have fallen.

14 In relation to the second defendant, I accept that he does not oppose a costs order but I am not persuaded that he exhibited delinquency warranting an order for assessment of costs on the indemnity basis. I order that the second defendant pay the plaintiffs’ costs of the proceedings insofar as they are costs of the claims brought against the second defendant.

15 I make no order as to costs between the plaintiffs and the first defendant.

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