FEDERAL COURT OF AUSTRALIA Entirity Business Services Pty Limited v Garsoft Pty Limited (No 3) [2012] FCA 334 Citation: Entirity Business Services Pty Limited v Garsoft Pty Limited (No 3) [2012] FCA 334 Parties: ENTIRITY BUSINESS SERVICES PTY LIMITED v GARSOFT PTY LIMITED, SCION BUSINESS SERVICES PTY LIMITED and ANTHONY GARRARD File number(s): NSD 1418 of 2008 Judge: EMMETT J Date of judgment: 2 March 2012 Date of hearing: 2 March 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 11 Counsel for the applicant: The applicant did not appear Counsel for the first and second respondents: The first and second respondents did not appear Counsel for the third respondent: The third respondent appeared in person IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1418 of 2008 BETWEEN: Entirity Business Services Pty limited Applicant AND: garsoft pty limited Respondent SCION BUSINESS SERVICES PTY LIMITED Second Respondent ANTHONY GARRARD Third Respondent JUDGE: EMMETT J DATE OF ORDER: 2 MARCH 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The proceeding be listed for further directions at 9.30am on Friday, 16 March 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1418 of 2008 BETWEEN: Entirity Business Services Pty limited Applicant AND: garsoft pty limited Respondent SCION BUSINESS SERVICES PTY LIMITED Second Respondent ANTHONY GARRARD Third Respondent JUDGE: EMMETT J DATE: 2 MARCH 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This proceeding arose out of a relationship between two businessmen, Messrs Paul Barlow and Anthony Garrard, who entered into a joint business venture. The principal vehicle for their joint venture was the applicant, Entirity Business Services Pty Limited (Entirity). The dissolution of the joint venture gave rise to claims and counter-claims by various participants in the joint venture, both corporate and individual. 2 The matter was the subject of reasons delivered by Moore J on 10 February 2011. Having published his conclusions, his Honour directed the parties to file and serve draft orders to give effect to the reasons. On 8 April 2011, his Honour made orders giving effect to the reasons. His Honour ordered that the first respondent, Garsoft Pty Limited (Garsoft), pay to Entirity the sum of $39,982.50 plus interest and ordered that Entirity pay to Garsoft the sum of $28,673.08 plus interest. 3 Moore J also made orders for costs. First, he ordered Garsoft to pay 55 per cent of Entirity's costs of its application. Secondly, he ordered Entirity to pay 45 per cent of the respondents' costs of the application. Thirdly, he ordered that Entirity pay Garsoft's costs of Garsoft's cross-claim. Finally, he ordered Entirity to pay the respondents' costs of their application for summary dismissal of Entirity's application. 4 It appears that, in January 2009, Entirity had provided a bank guarantee in the sum of $50,000 as security for the costs of the proceeding. In addition, Mr Barlow provided an undertaking to the respondents that he would pay all legal costs and disbursements ordered to be paid by Entirity in respect of its claim that might be incurred by the respondents in the period from 28 May 2010 up to the conclusion of the proceeding, limited to the sum of $30,000. It may be significant that the undertaking relates to the costs of the proceeding. That may not extend to the costs of the cross-claim, in respect of which Garsoft was partially successful, and in respect of which it has the benefit of an order for costs. I do not have before me the terms of the bank guarantee. It may also be limited to the costs of the proceeding. 5 Entirity subsequently went into liquidation, and Garsoft has applied for payment of its costs from the security. The application has been brought on behalf of the respondents by Mr Garrard, who is the third respondent. Entirity's liquidator has indicated that Entirity will submit to such orders the Court makes, except as to costs, in relation to the present application. At present, however, Mr Barlow has not been notified of the application. 6 Because of the expense involved, Mr Garrard has not taken any steps to have any of the costs of the respondents taxed or assessed. However, he has made a calculation based on his estimates of the costs. The total costs actually incurred by the respondents amount to approximately $301,000. Mr Garrard has estimated that the costs of the application for summary dismissal amount to $49,150 and that Garsoft's costs of its cross-claim amount to $20,000. He has assumed that 75 per cent of the costs would be recoverable on taxation. On that basis, he estimates that Garsoft's costs of the proceeding would be $232,555 and that the costs recoverable would be $174,416. 7 Moore J ordered that Entirity pay 45 per cent of the costs. That would give a figure of $78,487. Three quarters of the estimate of the costs of the application for summary dismissal would be $36,862, and three quarters of the estimate of $20,000 for costs of the cross-claim would be $15,000. Mr Garrard therefore estimates that the respondents would be entitled to costs in the sum of $130,350. 8 Mr Garrard has made the assumption that Entirity's costs would be the same as the respondents' costs, and, on that basis, has calculated costs of 55 per cent of $127,185, giving a total of $69,952. He says that that would be reduced by one third under O 62 r 36A of the applicable version of the Federal Court Rules, by reason that the amount of the verdict was less than $100,000. He therefore arrives at a figure of $46,634 as the costs to which Entirity would be entitled, and deducts that from the figure of $130,350 to arrive at a figure of $83,715. From that he deducts the difference between the two verdicts, arriving at a figure of $70,370 after provision for interest. 9 In effect, Mr Garrard seeks an order that the bank guarantee and the undertaking be called on for payment of that sum. As I have said, the liquidator has indicated that Entirity will submit to such order as the Court may make, except as to costs. However, Mr Barlow has not yet been notified of this application. Further, as I have said, I have not seen the terms of the bank guarantee, and it may well be that the bank needs to be notified of the claim on the bank guarantee. 10 Further, there may be flaws in the rationale for Mr Garrard's calculations. For example, Mr Garrard has brought into account the difference in the verdicts, which would be irrelevant for security for costs purposes. As I have said, the undertaking and the guarantee may not extend to costs of the cross claim. 11 Subject to those matters and any submissions that Mr Barlow and the bank wish to make, I may, on the basis of the material presently before me, be disposed to make some order along the lines now sought. However, I will defer doing so until such time as Mr Barlow and the bank have been notified, and a proper calculation has been made, on the basis of anything they submit to the Court, as to the amount that is owing after allowing the set-offs that I have indicated. I will stand the present application over to enable Mr Garrard and Garsoft to take such further steps as they may be advised. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 4 April 2012