Sacha Mason & Anor v Fenwick Financial Management Solutions Pty Ltd [2006] NSWSC 1243

New South Wales Supreme Court

CITATION : Sacha Mason & Anor v Fenwick Financial Management Solutions Pty Ltd [2006] NSWSC 1243

HEARING DATE(S) : 06/11/06

JUDGMENT DATE : 6 November 2006

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 11/06/2006

DECISION : See para 15 of the judgment.

CATCHWORDS : COSTS – Departing from the general rule – Indemnity costs – Director of defendant filed interlocutory process seeking order that costs order made against him in earlier proceedings be overturned – Correct procedure to overturn costs order was application for leave to appeal to NSW Court of Appeal –Interlocutory process discontinued – Whether defendant should pay costs of interlocutory process on indemnity basis – Whether defendant relevantly delinquent – Application refused.

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW)

CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 Australian Competition and Consumer Commission v Amcor Printing Papers Group Limited [2000] FCA 163

Sacha Mason & Anor PARTIES : v Fenwick Financial Management Solutions Pty Ltd

FILE NUMBER(S) : SC 1416/06

COUNSEL : Plaintiff: J T Johnson Defendant: Mr Fenwick - director of the defendant

SOLICITORS : Plaintiff: Macedone Christie Willis Defendant: N/A

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

WHITE J

Monday, 6 November 2006

1416/06 Sacha Mason & Anor v Fenwick Financial Management Solutions Pty Ltd JUDGMENT 1 HIS HONOUR: The present applications concern the costs of an interlocutory process filed by Mr Kevin William Fenwick on 25 September 2006. In that interlocutory process, he sought an order that an order for costs made against him by Austin J on 15 May 2006 in proceedings no. 1416/06 be overturned. That application was discontinued by a notice of discontinuance filed in court on 2 November 2006. It is not clear from the file whether the notice of discontinuance was filed pursuant to leave given under r 12.1 of the Uniform Civil Procedure Rules 2005 (NSW), or whether the notice was filed with the consent of the other parties to the proceedings. 2 The relevant rule is r 42.19 of the Uniform Civil Procedure Rules. Unless the Court otherwise orders, Mr Fenwick will be required to pay the costs of the respondents to the interlocutory process as at the date on which the notice of discontinuance was filed, namely, 2 November 2006. 3 Both Mr Fenwick and the respondents to the interlocutory process, namely, the plaintiffs, seek an order in relation to the costs of that process. As I understand it, Mr Fenwick seeks an order that each party pay his and her own costs of that process. The plaintiffs seek an order that the costs of the interlocutory process be paid by Mr Fenwick on an indemnity basis. 4 It appears from the affidavit filed in support of the interlocutory process that Mr Fenwick sought to contend that the order of Austin J as to costs should be set aside on two grounds. First, that the order for the winding-up of Fenwick Financial Management Solutions Pty Limited should not have been made, either because the company was not insolvent, or because the winding-up order was obtained through false evidence. Secondly, it was contended that the order for costs should be set aside because Mr Fenwick was not given an adequate opportunity to be heard and to make submissions before Austin J when the order was made. It appears that the order was made against him at a hearing before Austin J, at which he, as a director of the defendant company, resisted the winding-up order which was sought. 5 On 28 September 2006, the solicitors for the plaintiff invited Mr Fenwick to withdraw his application "without cost penalty on the part of the respondent to the application", provided that that step was taken by 4 October 2006. They contended that the claim made by Mr Fenwick in the interlocutory process was untenable and, in support of that claim, they asserted various matters as to the course which the proceedings before Austin J took before the order for costs was made. 6 In an affidavit filed with the notice of discontinuance, Mr Fenwick repeated the grounds upon which he contended that the order for costs should not have been made. He complained about the quantum of the plaintiffs' assessment of costs. He also deposed that he was given advice as to what should be done to correct what he contended to be the injustice by a "duty registrar", and said that on 31 October, he was told by a different "duty registrar" that the advice previously received was incorrect, and that if he wished to overturn the order made against him, it would be necessary to seek the leave of the Court of Appeal. 7 In his last affidavit, Mr Fenwick objects to the plaintiffs' claim for indemnity costs and says that had the plaintiffs consented to the filing of the notice of discontinuance delivered to them on 1 November 2006, no further costs would have been generated. 8 In fact, such costs would have been generated had he sought, as he now does, an order that each party pay his and her own costs of the interlocutory process. 9 That process was not persisted in. It is clear that it was necessary for Mr Fenwick to have sought leave to appeal if he wished to disturb the orders made by Austin J on 15 May 2006. There is no reason to disturb the usual rule that he pay the costs occasioned by the interlocutory process which was discontinued. 10 The question then is whether the plaintiffs should have their costs on an indemnity basis. Such costs are awarded in circumstances involving "some relevant delinquency on the part of the unsuccessful party" (Oshlack v Richmond River Council (1998) 193 CLR 72 at 89.) 11 In Australian Competition and Consumer Commission v Amcor Printing Papers Group Limited [2000] FCA 163 (at [7]-[8]), Sackville J summarised the relevant authorities as follows: [7] By s43(2) of the Federal Court of Australia Act 1976 (Cth), the award of costs is in the discretion of the Court or Judge. See also Federal Court Rules , O62, r4. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, at 152-153, Black CJ stated the principles applicable to a claim for indemnity costs: "... it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the court exercising its discretion in that way: see John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J ... But as Hill J pointed out in John S Hayes (at 203): '...care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed. ... In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.'"

See also at 156-157, per Cooper and Merkel JJ.

[8] In Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, at 232-234, Sheppard J set out circumstances in which costs may be appropriately awarded on a basis other than a party and party basis. The circumstances identified by his Honour include the making of allegations that ought never to have been made, the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise. Other decisions have recognised that it is sufficient to enliven the discretion to award costs on an indemnity basis that a party, for whatever reason, persists in what should have been seen to be a hopeless case: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301, at 303, per French J. In Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR 41-383, at 40,303, Drummond J said that if a respondent, at an appropriate stage, puts an applicant on notice that it regards the action as misconceived and sets out detailed reasons for so thinking, and if the applicant nevertheless proceeds and fails, there may be good reason to consider an order for indemnity costs."

12 The question is whether Mr Fenwick persisted in what he should have seen was a hopeless application. There is a dispute about the course of events at the hearing before Austin J. That dispute is not resolved in the present application. In the letter of 28 September 2006 from the plaintiffs' solicitors to Mr Fenwick, assertions were made as to the course of events at the hearing on 15 May 2006. I am not able to say whether that description is correct or incorrect. The solicitors did not say that even if the matters contended for in Mr Fenwick's supporting affidavit were correct, his application would be bound to fail because his only recourse would be by appeal, or application for leave to appeal, to the Court of Appeal. 13 Mr Fenwick deposes to having received some advice from the registry that the interlocutory process which he filed was the appropriate means of seeking redress for the matters about which he complained. He deposes that immediately following his obtaining different advice, he sought to discontinue the present application. 14 In those circumstances, I am not persuaded that there has been a relevant delinquency on Mr Fenwick's part which warrants an order for indemnity costs. However, the plaintiffs' presence has been required today in any event in order to deal with Mr Fenwick's application that he not be required to pay the costs of the discontinued application. In my view, the plaintiffs' cost of the proceedings today should be paid by Mr Fenwick, although not on an indemnity basis. 15 Accordingly, I decline to make any contrary order in relation to the discontinuance of the interlocutory process. The effect of r 42.19 of the Uniform Civil Procedure Rules will be that Mr Fenwick is required to pay the plaintiffs' costs of that interlocutory process up to the time of discontinuance. 16 I order that he pay the plaintiffs' costs of the further hearing or hearings following the filing of that notice of discontinuance.

******

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 any person 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.