LPD Holdings (Aust) Pty Ltd v Phillips
[2013] QCA 305
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- Notable Unreported Decision
- Appeal Determined (QCA)
- LPD Holdings (Aust) Pty Ltd v Phillips[2013] QCA 305
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LPD Holdings (Aust) Pty Ltd v Phillips[2013] QCA 305
LPD Holdings (Aust) Pty Ltd v Phillips[2013] QCA 305
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | SC No 6351 of 2012 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 11 October 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 29 July 2013 |
JUDGES: | Holmes JA and Philip McMurdo and Boddice JJ Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | The appeal is dismissed, with costs. |
CATCHWORDS: | PROCEDURE – COSTS – APPEALS AS TO COSTS – MISTAKE OF LAW OR FACT – where the appellants were ordered to pay the respondents’ costs of and incidental to the proceeding on an indemnity basis – where the appellants contend the primary judge acted upon a wrong principle in finding the appellants’ conduct warranted an indemnity costs order – where the primary judge found the appellants’ conduct was unreasonable and improper for pursuing flawed proceedings and that costs of the proceeding were wasted –where no error of principle had been identified by the appellants in relation to the exercise of the primary judge’s discretion – where no finding of the primary judge had been identified by the appellants as not being reasonably open – whether the discretion of the primary judge miscarried Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353, followed Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536, cited Di Carlo v Dubois & Ors [2002] QCA 225, cited House v The King (1936) 55 CLR 499; [1936] HCA 40, applied Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors (No 7) (2008) 65 ACSR 324, [2008] NSWSC 199, cited LPD Holdings (Aust) Pty Ltd & Anor v Phillips, Hickey and Toigo & Ors [2013] QSC 30, related |
COUNSEL: | P J Davis QC, with C Jennings, for the appellants L Kelly QC, with D Pyle, for the first, third and fourth respondents W Sofronoff QC, with D O'Brien, for the second respondent |
SOLICITORS: | Russells for the appellants Clayton Utz for the first, third and fourth respondents Hopgood Ganim for the second respondent |
[1] HOLMES JA: I agree with the reasons of Boddice J and the order he proposes.
[2] Philip McMurdo J: I agree with Boddice J.
[3] BODDICE J: On 22 March 2013, the appellants were granted leave to appeal costs orders made on 22 February 2013 by which the appellants were ordered to pay the respondents’ costs of and incidental to the proceeding (including reserved costs), on an indemnity basis. The primary judge had made orders, on 21 November 2012, dismissing the proceeding.
[4] The issue on the appeal is not whether an order for costs should have been made in the respondents’ favour. The appeal concerns the order that costs be paid on an indemnity basis.
Background
[5] The appellants instituted proceedings against the respondents, claiming oppression in the conduct of the affairs of the second respondent. At the time of commencement of those proceedings, the first appellant was the beneficial owner of a significant number of shares in the second respondent. It was not the registered holder of any of those shares. The second appellant also was not a registered holder of shares in the second respondent. It had sold its shares in January 2011.
[6] The proceeding, commenced on 18 July 2012 by an originating application supported by affidavit, sought relief pursuant to various provisions of the Corporations Act 2001 (“the Act”). On the day of the commencement of the proceeding, the appellant filed a statement of claim and an application for interlocutory orders seeking, inter alia, the proceeding continue as if started by claim and directions.
[7] On 9 August 2012, the second respondent filed an application to strike out the originating application and statement of claim, insofar as it related to that respondent. A primary ground for that application was that the appellants did not have standing to bring the oppression proceedings as neither appellant was a member of the second respondent or otherwise qualified under s 234 of the Act to bring such a proceeding. The application was returnable on 23 August 2012.
[8] On the return date of the originating application, the appellants relied on affidavit evidence to the effect that the first appellant had been a registered shareholder of the second respondent prior to July 2012 but had transferred those shares to another entity on 5 July 2012 for accounting purposes. The first appellant’s name was restored on the share register on 15 August 2012.
[9] Prior to the return date, the appellants proposed the lack of standing be resolved by leave being given for the filing of a further originating application, identical to the first originating application, with the further application to stand in lieu of the first application. That proposal was not accepted by the respondents, who maintained the appellants lacked standing to seek the relief. The respondents proposed the proceeding be struck out with costs being paid by the appellants.
[10] On the morning of 23 August 2012, agreement was reached between the parties for orders to be made “that avoids that fight today and possibly we’ll have it another day”.[1] The agreed orders provided the proceeding continue as if started by claim, and listed directions for the delivery of a proposed amended originating application and amended statement of claim. The hearing of the application was adjourned to a date to be fixed, with the appellants to pay the respondents’ costs thrown away by the adjournment. Costs were otherwise reserved.
[11] On 24 September 2012, the appellants informed the respondents the second appellant’s claim would be withdrawn. The appellants’ solicitors delivered a proposed amended originating application and proposed amended statement of claim. After further correspondence in respect of the proposed amended statement of claim, the appellants, on 6 November 2012, filed an amended statement of claim which struck out as parties in the heading the second appellant and the third respondent, and amended the prayer for relief accordingly. The appellants did not, however, formally discontinue the second appellant’s claim.
[12] On 15 November 2012, the respondents filed amended applications to strike out the originating application and the amended statement of claim. Those applications were listed for hearing on 21 November 2012. On 20 November 2012, the first appellant filed a new originating application in which the second appellant was not named as an applicant.
[13] At the hearing on 21 November 2012, the appellants accepted that as the first appellant was not registered as a holder of its shares at the time the proceeding was commenced, the original proceeding should be struck out. The primary judge ordered the proceeding be dismissed, save for the issue of costs, and ordered the new proceeding continue as if started by claim.
Costs decision
[14] The primary judge found that whilst the new proceeding would litigate similar issues, the costs of the initial proceeding had been wasted as there were differences between those processes. In particular, costs had been incurred agitating other defects in the various versions of the originating application and statement of claim which were recognised by the appellants to have merit.
[15] The primary judge noted that senior counsel for the first appellant conceded the initial proceeding was flawed in that the first appellant, not being a shareholder at the time, could not bring properly constituted proceedings. The primary judge found this circumstance was not a mere technicality. It was a critical matter going to the heart of the originating application.
[16] The primary judge found the first appellant brought the proceeding, notwithstanding that it knew it was not a registered shareholder for the purpose of the Act, and persisted with those proceedings despite being alerted to the incompetent nature of those proceedings. Further, the second appellant did not discontinue its claim on 6 November 2012, despite the delivery of an amended statement of claim striking out its name. This conduct involved a wilful disregard of those pertinent matters, and was unreasonable and improper justifying an order for indemnity costs.
Appellants’ submissions
[17] The appellants submit the primary judge acted upon a wrong principle in finding the appellants’ conduct fell into the category of cases warranting an indemnity costs order. Such an order is an exceptional order made only in special or unusual circumstances. The abandonment of these proceedings occurred in circumstances where new proceedings seeking similar relief were being pursued, and an indemnity costs order was unreasonable and unjust. It was particularly unjust to order the second appellant pay indemnity costs as it was clear early in the proceeding that its claim was not being pursued in the proceeding.
[18] The appellants contend the primary judge made two errors. First, in finding the appellants’ conduct was unreasonable and improper in pursuing flawed proceedings despite knowledge of their lack of standing and demands by the respondents to end the proceeding. Second, in finding that all of the costs of the proceeding were wasted notwithstanding the new proceedings will litigate the same issues.
[19] The appellants submit a review of the correspondence revealed a lack of standing was no longer an issue after the hearing on 21 August 2012. Further, there was no determination as to the merits of other complaints raised by the respondents in relation to the originating application and amended statement of claim. Finally, all of the costs of the proceeding would not have been wasted as the issues the subject of the new proceeding were substantially the same.
Respondents’ submissions
[20] The respondents submit the appeal ought to be dismissed as there was no challenge to the primary judge’s critical findings, and no error of principle had been identified by the appellants in the exercise of the primary judge’s discretion to award costs on an indemnity basis. The primary judge correctly identified the applicable principles, and findings that the appellants’ conduct in pursuing the flawed proceedings was unreasonable and improper conduct justifying an order for indemnity costs, and that the costs of the proceeding were wasted, were open.
Applicable principles
[21] The applicable principles for the awarding of indemnity costs were usefully summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd.[2] However, those principles operate as a guide to the exercise of the relevant discretion. They do not define all of the circumstances in which the discretion is to be exercised and do not limit the width of that discretion.[3] Further, the categories in which the discretion to award indemnity costs may be exercised are not closed.[4]
[22] Whilst the awarding of costs on an indemnity basis will always ultimately depend upon the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case. As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd,[5] the general rule remains that costs should be assessed on a party and party basis, and the standard to be applied in awarding indemnity costs ought not “be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part”.
Discussion
[23] The primary judge referred to the circumstances in which the discretion to award indemnity costs has been warranted, correctly noting that the categories in which the discretion to award indemnity costs may be exercised are not closed. The primary judge also correctly observed that misconduct, unreasonableness and the commencing and continuing of a hopeless case were but examples of the relevant conduct in which the discretion to award costs may be exercised. The appellants have not identified any error of law in the enunciation of those relevant principles by the primary judge.
[24] As to the application of those principles, oppression proceedings were commenced by the appellants in circumstances where neither appellant was a member of the second respondent at the time of commencement of the proceedings. This lack of competency to bring the proceedings was raised by the respondents at a very early stage. Despite recognition of the substance of that contention, the appellants persisted in the proceedings. That persistence included not discontinuing proceedings in respect of the second appellant, notwithstanding an indication in proposed amended pleadings to not pursue its claim any further.
[25] Whilst the legal correctness of an assertion that the proceeding as commenced was fatally flawed may be doubted, having regard to the provisions of r 375 of the Uniform Civil Procedure Rules allowing the joinder of causes of action which accrued after the commencement of proceedings, the primary judge correctly noted that senior counsel for the first appellant conceded the proceedings were “flawed” and “not properly constituted”.[6] That concession provided ample grounds upon which the primary judge could conclude that the appellants’ lack of status as a shareholder was a critical matter going to the heart of the proceeding.
[26] That the appellants were not registered shareholders of the second respondent was, as the primary judge found, a fact known at the time of the commencement of the proceedings. Further, despite being alerted to the incompetent nature of those proceedings, it was a fact the appellants persisted with the proceeding until the return of the respondents’ application, at which time a concession was made that the proceeding was properly to be struck out. Those factual findings amply supported the primary judge’s conclusion that the proceedings were “hopeless”, and that there was a wilful disregard of those pertinent matters.
[27] At the hearing, the appellants sought to challenge the underlying findings for the primary judge’s conclusion that the appellants persisted with the proceedings despite knowing of the incompetent nature of those proceedings. However, the grounds of appeal can only properly be read as seeking to challenge the finding of impropriety of conduct on the facts found, not as a challenge to the underlying findings of fact. In circumstances where leave to appeal was obtained on specific grounds, which did not seek to challenge the underlying findings of fact, there is no basis to broaden those grounds. This is particularly so where the particular challenge now sought to be made did not form the basis of any argument before the primary judge.
[28] The appellants contend the lack of standing issue became superfluous after the appellants proposed a means to overcome any objection to the proceeding continuing in correspondence on 20 August 2012. However, a review of the subsequent correspondence reveals the respondents never accepted the appellants’ lack of standing could be overcome by a process other than the striking out of the proceeding. Submissions filed in support of the application to strike out also maintained a reliance upon the appellants’ lack of standing to bring the proceeding.
[29] Although another judge may have concluded the appellants’ conduct, overall, did not constitute unreasonableness of the type necessary to justify an award of costs on an indemnity basis, it cannot be said a finding of unreasonableness on the appellants’ part in pursuing the flawed proceedings despite repeated demands by the respondent to end those proceedings, was not open in all of the circumstances.
[30] As to the finding as to wasted costs, the primary judge found the costs incurred in the initial proceedings included agitating other defects in the court documents which had been the subject of substantial amendments in the final version of the new proceedings. That finding, which is not challenged on appeal, amply supported a rejection of a contention that the costs of the initial proceedings had not been wasted having regard to the differences between the two initiating processes. Those defects had been the subject of voluminous correspondence. Ultimately, substantially amended documentation was relied upon by the appellants in the new proceeding.
[31] The appellants submitted the primary judge also erred in finding the second appellant should pay costs on an indemnity basis as the second appellant, at an early stage, had indicated an intention not to proceed further with the claim. However, both appellants brought the proceedings against the respondents, and neither discontinued those proceedings. Against that background, it was open to the primary judge to find the making of a different order in respect of the second appellant was inappropriate.
Conclusion
[32] The appellants have not identified any error of principle in respect of the awarding of indemnity costs by the primary judge. The appellants have also not identified any finding of the primary judge which was not reasonably open. The relevance of those findings was ultimately a matter for the evaluative judgment of the primary judge. The appellants have not demonstrated the discretion of the primary judge miscarried having regard to the principles in House v The King.[7]
[33] I would dismiss the appeal, with costs.
Footnotes
[1] AB 3.
[2] (1993) 46 FCR 225 at 232-234.
[3] Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors (No 7) [2008] NSWSC 199 at [26].
[4] Di Carlo v Dubois & Ors [2002] QCA 225 at [37].
[5] [2008] NSWCA 353 at [113].
[6] LPD Holdings (Aust) Pty Ltd & Anor v Phillips Hickey and Toigo & Ors [2013] QSC 30 at [47].
[7] (1936) 55 CLR 499.