Costs Awarded on Indemnity Basis for Manifestly Groundless Claims

The court ordered the plaintiffs to pay the defendant's costs on an indemnity basis for certain claims, finding that the plaintiffs' claims were manifestly groundless and baseless charges of dishonesty were levelled at the defendant.

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY] -v- [COMPANY] of Australia (No.2) [COMPANY] of Australia -v- [NAME] (No.2) [COMPANY] of Australia -v- [NAME] (No.2) [COMPANY] of Australia -v- [NAME] (No.2) [2013] NSWSC 1969 Hearing dates: 16 & 19 December 2013 Decision date: 19 December 2013 Jurisdiction: Equity Division - Commercial List Before: Hammerschlag J Decision: Orders as to costs and ancillary matters Catchwords: COSTS - no issues of principle Legislation Cited: Civil Procedure Regulation 2012 (NSW) Cases Cited: [NAME] v [COMPANY] of Australia [2013] NSWSC 1768 Category: Procedural and other rulings Parties: Proceedings 2010/326659 [COMPANY] 134 156 004 - First Plaintiff [COMPANY] - [COMPANY] - [NAME] [COMPANY] - [NAME] Plaintiff [COMPANY] as Trustee of The Macintosh Unit Trust - Sixth Plaintiff CPL Australasia Pty Limited (subject to Deed of Company Arrangement) - Seventh Plaintiff [COMPANY] of Australia - Defendant Proceedings 2011/139468 [COMPANY] of Australia - Plaintiff/ [NAME] - First Defendant/First [NAME]-Claimant [NAME] - [NAME] Defendant/[NAME]-Claimant Proceedings 2011/260157 [COMPANY] of Australia - Plaintiff/ [NAME] - First Defendant/ First [NAME]-Claimant [NAME] - [NAME] Defendant/[NAME]-Claimant Proceedings 2011/260163 [COMPANY] of Australia - Plaintiff/[NAME]- Defendant [NAME] - First Defendant/ First [NAME]-Claimant [NAME] - [NAME] Defendant/[NAME]-Claimant [NAME] - [NAME] Defendant/ [NAME]-Claimant [NAME] - [NAME] Defendant/ [NAME]-Claimant Representation: Counsel: [redacted] A. Leopold SC with J.E. [NAME]/[NAME]-Claimants H. [NAME]-Represented Solicitors: [redacted] [NAME](s): 2010/326659; 2011/139468; 2011/260157; 2011/260163

Judgment 1The principal judgment in these proceedings was handed down on 29 November 2013: [NAME] v [COMPANY] of Australia [2013] NSWSC 1768. 2This judgment deals with costs. Definitions in the principal judgment are used here. 3On 29 November 2013 I directed the parties to exchange written submissions in brief form by 9 December 2013, setting out the orders for costs for which they contended. I directed that any response to those submissions served, be served by 13 December 2013. I directed that copies of submissions be delivered to my Associate. 4Written submissions were received from the [COMPANY]. None were received from any other party to the proceedings. 5As to its defence of the plaintiffs' claim, the [COMPANY] seeks the costs incurred from and including 20 February 2013 of meeting the clawback arrangement claim on the indemnity basis because, it says, from that time, that claim was exposed as being manifestly groundless, and in promoting it thereafter, baseless charges of dishonesty were levelled at the [COMPANY]. Otherwise, the [COMPANY] seeks the costs of its defence on the ordinary basis. 6The [COMPANY] seeks the costs of its [NAME]-Claim against the plaintiffs and the costs of its proceedings against the [NAME] on the indemnity basis under the terms of the contractual documents which apply in each instance. UCPR Pt 42 r 42.1 provides: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to whole or any part of the costs. 7The [COMPANY] has succeeded in its defence of the plaintiffs' claim, in its [NAME]-claims against the plaintiffs in debt, in its claims against all personal [NAME], and in its defence of the female [NAME]' [NAME]-claims. 8Leaving aside the special orders sought, which are dealt with below, there is no reason why some other order other than that the unsuccessful parties in each instance pay the [COMPANY]'s costs should be made. 9Under cll 4.1 and 4.3 of the Guarantee and Indemnity - Terms, to which each plaintiff, [NAME] and the female [NAME], bound himself, herself or itself in favour of the [COMPANY], each must pay the costs incurred by the [COMPANY] on default, or in connection with the exercise of the [COMPANY]'s rights under the Guarantee and Indemnity. Under cl 26, the costs in connection with legal advisers are to be on a full indemnity basis or solicitor and own client basis, whichever is higher. The [COMPANY] seeks indemnity costs, presumably as the higher. In addition, cll A19.1 to A19.3 of the Standard Terms applicable to the Rate Tracker and the Bridging Loan (principal judgment [515]) contain provisions to the same effect. 10There is no reason why effect should not be given to these contractual arrangements. The [COMPANY] is entitled to the costs of its [NAME]-claim against the plaintiffs, and to the costs of its claims and defences against the [NAME], on the indemnity basis. 11Although the clawback arrangement claim was abandoned, I nevertheless dealt with it in [587]-[605] of the principal judgment. 12The indemnity costs order sought against the plaintiffs in connection with the clawback arrangement claim is sought in respect of the period commencing fourteen days after the service of the affidavits of [NAME], all of which had been served by 20 February 2013. Those affidavits established that the [COMPANY] were not included in the Specific Provisions List. 13After service of the affidavits, the plaintiffs pressed for and obtained orders by consent for further discovery from the [COMPANY] on the issue of the [COMPANY]'s consideration of the [COMPANY] in the context of the clawback provisions. This produced nothing. The plaintiffs then issued subpoenas directed to the same thing. This too produced nothing. These steps were taken on the advice of Senior Counsel and were complete before the hearing began on 26 August 2013. 14At that point, the plaintiffs had affidavits that the [COMPANY] were not part of the review and the [COMPANY] had produced no further documents pursuant to discovery orders and subpoenas on the question. 15Whilst it may well have been the case that it should have been obvious earlier (indeed, far earlier) that the clawback arrangement claim was groundless, in my view, this was certainly the case by the time of the commencement of the hearing. During the hearing there was no challenge to the fundamental fact that the [COMPANY] were not even part of the review. More than this, and significantly, there was no proper basis for the charges of dishonesty levelled at the [COMPANY] in the context of this manifestly groundless claim. 16In these circumstances, an order that the plaintiffs pay the [COMPANY]'s costs on the clawback arrangement claim on the indemnity basis from 26 August 2013 is appropriate. 17Under Consent Orders made on 29 April 2011, 20 February 2012 and 9 August 2013, the plaintiffs have provided for security for the [COMPANY]'s costs in the amount of $525,000. The [COMPANY] seeks an order that this amount be released to it. Clearly its costs will vastly exceed this amount. It is appropriate that I make the order sought. 18Four sets of proceedings have been determined, of which the [COMPANY] is plaintiff in three. It is fair to say that the bulk of attention was paid to the plaintiffs' proceedings. Hearing fees payable under the Civil Procedure Regulation 2012 (NSW) are usually paid by the plaintiff. In this case, if the plaintiff in each case paid the fee, the [COMPANY] would pay 75% of the total fees and the plaintiffs 25%. The [COMPANY] seeks an order that the plaintiffs pay 75% of the total, and it 25%. I do not consider this to be appropriate because the three sets of proceedings brought by the [COMPANY] could have been brought in one set of proceedings, indeed as [NAME]-claims in the main proceedings. 19I make the following orders: 2010/326659 1. Judgment for the defendant on the plaintiffs' claim.

2. Judgment for the [NAME]-claimant on its [NAME]-Claim against the [NAME] in the sum of $7,672,545 94 as at 26th November 2012.

3. The [NAME] are to pay interest on the judgment amount referred to in order 2 in accordance with Practice Note SC Gen 16 from 27th November 2012 until 19 December 2013.

4. The plaintiffs are to pay the defendant's costs of and incidental to the plaintiffs' claim concerning the allegation comprised in paragraphs 80 and 81 of the Further Amended [NAME] List Statement [known as the clawback arrangement allegation] for the period commencing from and including 26th August 2013 on the indemnity basis and otherwise in respect of the remainder of the plaintiffs' claim on the ordinary basis.

5. The [NAME] are to pay the [NAME]-claimant's costs of the [NAME]-Claim on an indemnity basis.

6. The security for costs in the sum of $210,000 paid into Court by the plaintiffs in accordance with orders made on 29th April 2011 and 9th August 2013 together with any interest thereon, is to be released and paid forthwith to the defendant. The defendant may make demand on the [COMPANY] guarantee issued by the [COMPANY] to the defendant in the sum of $305,000 and provided by the plaintiffs to the defendant in respect of security for costs in accordance with the orders of 20th February 2013. 2011/260163 1. Judgment for the plaintiff against the first defendant in the sum of $ 4,521,775.08.

2. Judgment for the plaintiff against the [NAME] defendant in the sum of $4,676,775.08.

3. Judgment for the plaintiff against the [NAME] defendant in the sum of $4,521,775.08.

4. Judgment for the plaintiff against the [NAME] defendant in the sum of $4,521,775.08.

5. The [NAME] are to pay interest on the judgment amount referred to in orders 1 - 4 above in accordance with Practice Note SC Gen 16 from 27th November 2012 until 19th December 2013.

6. Judgment for the [NAME] on the claims in the [NAME]-claimants' [NAME]-Claims.

7. The [NAME]/[NAME]-claimants are to pay the plaintiff's/[NAME]'s costs on the indemnity basis. 2011/260157 1. Order for possession of the property comprised in Certificate of Title folio identifier 3/51/237501 being the land situated at and known as [ADDRESS], [ADDRESS] South Wales 2100.

2. The plaintiff has leave immediately to apply for the issue of a Writ of Possession in respect of the property referred to in order 1.

3. Judgment for the plaintiff against the first defendant in the sum of $4,521,775.08.

4. Judgment for the plaintiff against the [NAME] defendant in the sum of $2,857,517.36 5. The [NAME] are to pay interest on the judgment amount referred to in orders 3 and 4 in accordance with Practice Note SC Gen 16 from 27 November 2012 until 19th December 2013.

6. Judgment for the [NAME] on the claims in the [NAME] claimants' [NAME]-Claims.

7. The [NAME] /[NAME]-claimants are to pay the plaintiff's/[NAME]'s costs on the indemnity basis.

8. A Writ of Possession may forthwith be issued in respect of the property referred to in order 1 above. The Writ is to lie in the Registry until 30th January 2014 and may be executed thereafter. 2011/139468 1. Order for possession of the property comprised in Certificate of Title folio identifier 7/588700 being the land situated at and known as [ADDRESS], Seaforth, New South Wales 2092.

3. Judgment for the plaintiff against the [NAME] in the sum of $2,924,825.16.

4. The [NAME] are to pay interest on the judgment amount referred to in order 3 in accordance with Practice Note SC Gen 16 from 27th November 2012 to 19th December 2013.

5. Judgment for the [NAME] on the claims in the [NAME]-claimants' [NAME]-Claims.

6. The [NAME]/[NAME]-claimants are to pay the plaintiff's /[NAME]'s costs on the indemnity basis.

7. A Writ of Possession may forthwith be issued in respect of the property referred to in order 1 above. The Writ is to lie in the Registry until 30th January 2014 and may be executed thereafter. I note that the [COMPANY] has undertaken not otherwise to enforce the judgments in its favour until after 31st December 2013. The orders in each instance may be entered forthwith.

********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on [NAME] using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 March 2014