Claimant discontinues proceedings, ordered to pay respondent's costs

FEDERAL COURT OF [COMPANY] v [NAME] NL [2010] FCA 214 Citation: [COMPANY] v [NAME] NL [2010] FCA 214

Parties: [COMPANY] [PHONE] IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE [COMPANY] AND THE [NAME], [COMPANY] [PHONE] and [COMPANY] [PHONE] v [NAME] NL ACN [PHONE]

File number: SAD 165 of 2008

Judge: LANDER J

Date of judgment: 9 March 2010

Date of hearing: 9 March 2010

Place: Adelaide

Division: GENERAL DIVISION

Category: No Catchwords

Number of paragraphs: 16

Counsel for the Plaintiffs: [redacted]

Solicitor for the Plaintiffs: [redacted]

Counsel for the Defendant: [redacted]

Solicitor for the Defendant: [redacted]

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION SAD 165 of 2008

BETWEEN: [COMPANY] [PHONE] IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE [COMPANY]

First Plaintiff

[COMPANY] AS THE TRUSTEE OF THE [NAME] Plaintiff

[COMPANY] [PHONE]

[COMPANY] [PHONE]

Fourth Plaintiff

AND: [NAME] NL ACN [PHONE]

Defendant

JUDGE: LANDER J

DATE OF ORDER: 9 MARCH 2010

WHERE MADE: ADELAIDE

THE COURT ORDERS THAT:

1. [COMPANY] as the trustee of the [NAME] be joined as a plaintiff.

2. Leave be granted to the plaintiffs to discontinue the proceeding.

3. The plaintiffs pay the defendant's costs: (a) from the commencement of the proceeding to 11 October 2009 on a party and party basis; and (b) from 12 October 2009 on an indemnity basis.

4. The plaintiffs be restrained from bringing a further proceeding against the defendant that is on the same or substantially the same cause of action until the plaintiffs have paid the costs ordered to be paid in paragraph 3 provided that the defendant files a bill of costs for taxation within six weeks.

5. If a bill of costs for taxation is not filed by the defendant within the time provided in paragraph 4 then paragraph 4 of this order be discharged. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION SAD 165 of 2008

IN THE MATTER OF [NAME] NL ACN [PHONE] BETWEEN: [COMPANY] [PHONE] IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE [COMPANY]

First Plaintiff

[COMPANY] AS THE TRUSTEE OF THE [NAME] Plaintiff

[COMPANY] [PHONE]

[COMPANY] [PHONE]

Fourth Plaintiff

AND: [NAME] NL ACN [PHONE]

Defendant

JUDGE: LANDER J

DATE: 9 march 2010

PLACE: ADELAIDE

REASONS FOR

JUDGMENT 1 This matter was listed for trial this morning. On 2 March 2010 I ordered the plaintiffs to file and serve their opening in relation to the trial which was to commence today by 5 March 2010, which the plaintiffs did. In that opening the plaintiffs claim that their intention was to prove various matters relating to the conduct of the defendant's affairs since 2000 and to prove that two of the directors of the defendant have contravened ss 191, 192, and 195 of the Corporations Act 1974 (Cth) (the Corporations Act). In that opening the plaintiffs assert that the directors have acted in circumstances where they have put their interests, or the interests of parties which they otherwise represent as directors, before the interests of the defendant as a result of which the plaintiffs have been oppressed within the meaning of s 232, which would result in orders under s 233 of the Corporations Act. 2 When the matter came on for trial this morning I raised with counsel for the plaintiffs how these allegations could be made having regard to the statement of claim. I pointed out to counsel that there were no allegations in the statement of claim of the kind which are referred to in paragraphs 7 and 8 of the plaintiffs' opening and unless the statement of claim were amended by leave, the allegations could not be maintained in the trial. There was some debate about those matters, but in the end it was accepted by counsel that the statement of claim does not presently address the matters which the plaintiffs wish to address in paragraphs 7 and 8 of the opening. 3 I also raised with counsel how the plaintiffs would prove their case where I had been advised as long ago as 12 October 2009 that no oral evidence would be called on behalf of the plaintiffs. I inquired how the plaintiffs would establish the circumstances in which the plaintiffs became members of the defendant, the price which the plaintiffs paid for the shares which they acquired or were allotted, and the state of knowledge of the plaintiffs at the time when those shares were acquired, particularly having regard to paragraph 24 of the defendant's defence which asserts certain knowledge on the part of the plaintiffs since the plaintiffs became members of the defendant. 4 The plaintiffs' counsel asked for a short adjournment which was granted. The matter was further debated. [NAME], who appeared for the defendant, contended in succinct submissions that the matters in paragraphs 7 and 8 of the plaintiffs' opening were not addressed in the statement of claim and would be objected to if the plaintiffs tried to proceed upon them. The matter was adjourned again for a short time and when the proceeding was resumed, plaintiffs' counsel asked for the matter to be adjourned sine die so that the plaintiffs could consider: first, whether they wished to join other parties to the proceeding, namely, the directors against whom the allegations have been made; secondly, to enable the plaintiffs to consider what amendments were necessary to the statement of claim to raise the issues in the opening; and thirdly, to obtain a statement from a representative of the plaintiffs on the issue relating to the circumstances in which plaintiffs became members of the defendant and the state of the plaintiffs' knowledge at the particular time. 5 After hearing the parties in relation to the application I refused the adjournment on the ground that it was made far too late. The matters to which I referred should have been obvious to the plaintiffs before today and the defendant would suffer prejudice if the matter were adjourned, because it would be likely that I would not be able to resume hearing the matter this year. The plaintiffs' counsel then sought a short adjournment so that the plaintiffs could consider their position and I adjourned the matter until 2.15 this afternoon. 6 At that time, plaintiffs' counsel asked for leave to discontinue the proceeding pursuant to O 22 r 2(d) of the Federal Court Rules. In making that application, plaintiffs' counsel accepted that a consequence of the application, if granted, would be that the plaintiffs would have to pay the defendant's costs. 7 The defendant does not oppose the grant of leave, but would ask the Court to put two conditions on the grant: first, that the plaintiffs pay the defendant's costs on an indemnity basis from the date when this proceeding was commenced or from a date in June 2009; and secondly, that an order be made that the plaintiffs not be able to bring a proceeding on the same or substantially the same cause of action, as contained in the present proceeding against the defendant, before payment of the order for costs which has been sought. 8 The claim for indemnity costs by the defendant was based upon the conduct of this proceeding. The defendant wrote to the plaintiffs' solicitors on 10 June 2009 seeking particulars of paragraph 38 of the statement of claim, which is the paragraph that the plaintiffs rely upon for the relief which follows. In particular, the defendant sought particulars of the conduct of the defendant's affairs on which the plaintiffs rely other than the omission of the defendant to require repayment of a particular debt due under a mortgage and, secondly, how the conduct referred to in the paragraph was contrary to the interests of the members of the defendant as a whole. 9 The defendant's solicitors also sought similar particulars relating to a second aspect of paragraph 38 of the statement of claim. The plaintiffs replied succinctly, but somewhat tersely, advising the defendant that it should understand that the claim in paragraph 38.2 relied on the matters set out in the preceding paragraphs of the statement of claim and that their clients were not required to provide an answer as to why the conduct was contrary to the interests of the members of the defendant as a whole. 10 The plaintiffs should have been on notice then, if not earlier, that the statement of claim upon which they were relying does not identify, as the opening does, conduct on the part of the defendant's directors which could be ascribed to the defendant which would have given rise to relief under s 232 and s 233 of the Corporations Act. 11 This proceeding was commenced on 2 October 2008 and has had a long interlocutory history. A number of interlocutory skirmishes have taken place and judgments have been delivered in relation to them. 12 It has been clear from the outset that this was a matter that would go to trial one way or the other and it seems to me that the plaintiffs ought to have analysed their own statement of claim, so that they were in a position to present the case which they apparently wished to present at the trial. I was advised probably in June, but certainly on 12 October 2009 that the plaintiffs did not intend to bring any oral evidence at trial. They intended to rely upon documents which were in the public domain or had been discovered by the defendant in the discovery process. They eschewed any reliance upon any oral evidence. 13 As I said to the plaintiffs' counsel this morning, it is difficult to understand how the plaintiffs could put forward a case seeking discretionary relief without the Court having an understanding of the plaintiffs' position; when the plaintiffs purchased their shares and became members of the defendant; and where it would appear from the documents the plaintiffs continued to purchase shares and benefit by allotments over the years that followed. It would appear that, on reflection, the plaintiffs' counsel understands that such evidence will be necessary. The end result is that the plaintiffs were not ready for trial when the matter was called on today and as a result the plaintiffs have been obliged to discontinue. 14 That occasions the defendants the obvious costs which are thrown away by the discontinuance and for that reason they must be recompensed. The question is whether I should grant the defendant's application that costs be on an indemnity basis. In my opinion, a fair result would be to award the defendant costs on an indemnity basis from 12 October 2009, which is the date upon which final directions were given for the hearing of this matter. That was a time when the plaintiffs ought to have provided themselves with an advice on evidence, reflected on the pleadings and determined what evidence was necessary for trial. That was not done and as a result the proceeding must be brought to an end. 15 [NAME] also asked, as I have said, for an order that the plaintiffs be restrained from bringing a further proceeding until such time as the costs which the plaintiffs will be ordered to be paid are paid. Order 22 rule 8 provides, as the plaintiffs' counsel reminded me, that where a party discontinues a proceeding and becomes liable to pay the costs of another party, but before payment of those costs brings a proceeding against another party, the Court may stay the further proceeding until those costs are paid. That would mean that if the plaintiffs are desirous, which I think probably they are, of bringing a further proceeding against the defendant and possibly the defendant's directors in that further proceeding, the defendant could apply for a stay order preventing the prosecution of the proceeding until such time as the costs are paid. 16 There is nothing however, in O 22 r 5 that prevents me from imposing a term for the discontinuance upon the plaintiff that would prevent the plaintiffs from commencing a proceeding until such time as the costs are paid. However, as I pointed out to [NAME] during argument, the rule can be abused by a defendant not bringing into the Court a bill of costs and therefore effectively preventing the plaintiffs from commencing the proceeding. It seems to me that if an order of the kind [NAME] seeks is to be made, it should be made upon terms that the defendant bring a bill of costs into Court within a reasonably short time. I make the following orders: 1. [COMPANY] as trustee of the [NAME] be joined as a plaintiff.

5. If a bill of costs for taxation is not filed by the defendant within the time provided in paragraph 4 then paragraph 4 of this order be discharged. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate: Dated: 17 March 2010