Federal Court of Australia Michael Wilson & Partners Ltd v Porter (No 3) [2022] FCA 998 File number: NSD 767 of 2021 Judgment of: STEWART J Date of judgment: 26 August 2022 Catchwords: COSTS – application for indemnity costs – where application in respect of which costs are sought was shockingly poorly prepared and run, cast scandalous allegations about like confetti, was hopeless, and should never have been brought – application granted Legislation: Federal Court of Australia Act 1976 (Cth) s 37N(1) Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (NSW) r 17.1 Costs Practice Note (GPN-COSTS) Cases cited: Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; 269 CLR 333 Charisteas v Charisteas [2021] HCA 29; 393 ALR 389 Dyer v Chrysanthou (No 2) (Injunction) [2021] FCA 641; 402 ALR 659 Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 House v The King [1936] HCA 40; 55 CLR 499 Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 McIlraith v Ilkin (Costs) [2007] NSWSC 1052 Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 Michael Wilson & Partners Ltd v Porter [2022] FCA 336 Michael Wilson & Partners Ltd v Porter (No 2) [2022] FCA 901 Michael Wilson & Partners Ltd v Porter (High Court of Australia, Keane J, 17 August 2022) Mumbin v Northern Territory (No 2) [2020] FCA 475 Porter v Dyer [2022] FCAFC 116; 402 ALR 659 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 31 Date of last submissions: 24 August 2022 Date of hearing: Determined on the papers Solicitor for the Applicant: M E Wilson Counsel for the Respondents: S Golledge SC and N Bailey Solicitor for the Respondents: Mills Oakley Table of Corrections 29 August 2022 Corrected the reference on the cover page and in [15] from Christeas v Christeas to Charisteas v Charisteas. ORDERS NSD 767 of 2021 BETWEEN: MICHAEL WILSON & PARTNERS LTD Applicant AND: JASON LLOYD PORTER First Respondent RICHARD MORETTI Second Respondent order made by: STEWART J DATE OF ORDER: 26 August 2022 THE COURT ORDERS THAT: 1. The applicant pay the respondents' costs of the applicant's interlocutory application filed on 6 May 2022 on an indemnity basis. 2. The respondents' costs of the interlocutory application be determined on a lump-sum basis. 3. On or before 16 September 2022, the respondents file and serve an affidavit constituting a costs summary in accordance with paragraphs 4.10 to 4.12 of the Costs Practice Note (GPN-COSTS). 4. Within 14 days of service on it of the respondents' costs summary pursuant to order 3, the applicant file and serve any affidavit constituting a costs response in accordance with paragraphs 4.13 to 4.14 of GPN-COSTS. 5. Within seven days of service of the applicant's costs response pursuant to order 4, the parties file and serve any submissions (not exceeding five pages) in support of their respective positions. 6. The determination of the lump-sum costs referred to in order 2 be referred to the Registrar of the Court to whom the determination of the lump-sum costs of the application for leave to appeal has been referred. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT STEWART J: Introduction 1 On 1 April 2022, I dismissed the applicant's (ie, MWP's) application for leave to appeal against a decision of Markovic J: Michael Wilson & Partners Ltd v Porter [2022] FCA 336 (MWP No 1). 2 On 3 August 2022, I dismissed MWP's interlocutory application that I reconsider some of the final orders made by me on 1 April 2022: Michael Wilson & Partners Ltd v Porter (No 2) [2022] FCA 901 (MWP No 2). I also made provision for the parties to file and serve written submissions on the question of costs of that application. The respondents filed and served written submissions on 10 August 2022 in accordance with the timetable that I set. MWP was required to file and serve written submissions in response by 17 August 2022, but it failed to do so. It eventually filed submissions on 24 August 2022 without any explanation for the delay or a request for the delay to be excused and which exceeded the page limitation I had set. I have nevertheless received and considered those submissions. I will address them where appropriate in what follows. The respondents have recorded in correspondence that they do not wish to file any reply submissions. The costs issues are accordingly ripe for decision. 3 The respondents seek orders that: (1) MWP pay their costs of its interlocutory application; (2) their costs be payable on an indemnity basis; and (3) their costs be quantified on a lump-sum basis, such quantification to be referred to a Registrar of the Court for determination. 4 MWP opposes that relief and submits that there should be no order as to costs. 5 It is convenient to deal with each issue in turn. Liability for costs? 6 The usual rule is that the successful party is entitled to its costs. MWP submits that it was successful in establishing various factual matters, but that is irrelevant because it is the ultimate result that is the event on which the ordinary liability for costs turns. The respondents were wholly successful in the application which was dismissed. Indeed, MWP failed to establish any basis to reconsider the orders, let alone rescind or vary them. There is not a single issue in contention between the parties on which MWP succeeded. MWP must therefore pay the respondents' costs of the interlocutory application. Indemnity costs? 7 With reference to the factors identified in Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 at [5], the respondents submit that indemnity costs are justified in this case on account of the following: (1) MWP was required to demonstrate a House v The King [1936] HCA 40; 55 CLR 499 error, but failed to identify any such error. (2) MWP made allegations regarding the "apparent collusion and improper sharing, use and possession of documents", the respondents' alleged breach of the Harman undertaking and other breaches, and a deliberate attempt to "mislead" the Court, none of which allegations were made out and all of which were improper. MWP also sought to rely on affidavit material containing allegations of impropriety on the part of the respondents' lawyers that were struck out as being "scandalous and vexatious". (3) The hearing of the application was unduly prolonged by MWP, including as a result of availability issues raised by it, repeated adjournment requests, including throughout the hearing of the application, arguments against orders that had already been made, references to irrelevant and inapplicable authorities, and submissions about evidence that was not read. (4) The bringing of and persisting in the application constituted the propounding of a hopeless case. 8 The factors identified in Melbourne City Investments at [5] are expressed there as follows (authorities omitted): In broad terms an order for indemnity costs requires that some special or unusual feature arises… Indemnity costs are not punitive but are designed for "compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs"… Such circumstances may include where allegations are made "which ought never to have been made", where the case is "unduly prolonged by groundless contentions" … and where "the applicant, properly advised, should have known that he had no chance of success" … or "persists in what should on proper consideration be seen to be a hopeless case" … 9 It must be borne in mind that in substance MWP's interlocutory application was very limited, despite its approach to the matter. All that was sought to be reconsidered and set aside or varied were the orders made pursuant to MWP No 1 that the costs of the application for leave to appeal be assessed on a lump-sum basis and that those costs include the costs of the respondents' application for security for costs which was rendered moot by leave to appeal having been refused. Moreover, as I explained in MWP No 2 (at [49]), "what is at stake turns out to be a relatively trivial amount of costs on an interlocutory application – the respondents' costs summary for the whole proceeding claims $50,000 of which only a part is in respect of the security for costs application". The only relevant evidence, beyond what was before me on 1 April 2022 (almost all of which was itself irrelevant), was the transcript of the hearing on that day. 10 In my assessment the following are relevant circumstances to the question of indemnity costs in the present case. I identify only circumstances arising after the 1 April 2022 orders because events prior to that date are captured by the costs orders that I made on that day. It will be apparent that those circumstances include the conclusion that much of what MWP sought to rely on and what was submitted on its behalf was irrelevant. It is just as well to explain why that is so. Much of MWP's case in relation to the security for costs application was based on the contention that in that application the respondents relied on documents in contravention of their implied undertakings to the High Court of Justice of England and Wales and the Supreme Court of the ACT not to use documents obtained under compulsory process in proceedings in those courts for any purpose other than that for which they were obtained. However, as the security for costs application was never heard, none of the material in question was relied on by the respondents so MWP's case about breach of the implied undertakings never arose. See MWP No 2 at [30]-[31]. 11 Turning now to the identified circumstances, first, the interlocutory application was shockingly poorly prepared and run which had the result that the respondents were unreasonably subjected to the expenditure of costs which they should not have had to face. In that regard: (1) The judgment which MWP by its interlocutory application sought to reopen was delivered on 1 April 2022, whereas the interlocutory application was not filed until 6 May 2022. In the meanwhile, the respondents had already acted on one of the orders, namely order 6 which required them to file and serve a costs summary affidavit by 21 April 2022, which action would have been wasted had MWP's application to reopen and rescind the order that the costs be determined on a lump-sum basis been successful. In short, MWP substantially delayed bringing the application, leading to inevitable expense. (2) Compounding the delay, MWP did not file its affidavit supporting the application until 16 May 2022. That affidavit is 16 pages and is referred to as the fifth affidavit of Michael Wilson. Mr Wilson is a NSW solicitor – albeit based not in Australia but in Kazakhstan, a principal of MWP, represented MWP in the proceeding and appeared remotely for MWP at all case management hearings and at the hearing of the interlocutory application. (3) The fifth affidavit of Michael Wilson consisted entirely of irrelevant material. Paragraphs 1-7 are introductory and attest to no relevant fact. Paragraph 8 is submission. Paragraph 9 is irrelevant background. Paragraphs 10-12 refer to a parallel although irrelevant proceeding brought by MWP in the High Court of Australia (which, incidentally, was dismissed by an unreported judgment of Keane J on 17 August 2022). Paragraph 13 is submission. Paragraphs 14-29 deal with historical matters preceding the 1 April orders, including proceedings in the Eastern Caribbean Supreme Court and the High Court of England and Wales, which are entirely irrelevant. Paragraphs 30-51 deal with proceedings in the Supreme Court of the ACT which are wholly irrelevant to the interlocutory application. Paragraphs 52-56 are submissions. Paragraphs 57-60 are irrelevant. Paragraphs 61-71 are submission. (4) The fifth affidavit of Michael Wilson referred to Exhibit MEW-5, but the exhibit was not filed with the affidavit. (5) On 3 June 2022, there was a case management hearing on the interlocutory application. At the case management hearing, I proposed that the application be heard a week later, but Mr Wilson for MWP said that that was not possible because he was going to instruct "leading counsel" – which, if that was intended, should already have been done – and because he (Mr Wilson) was "not able to work normally until after 30 June" on account of unidentified and obscurely referred to medical issues. By indulgence to MWP, orders were made for the matter to be heard in mid-July with a timetable for submissions. I drew to Mr Wilson's attention that "the biggest hurdle" that MWP was going to face in its interlocutory application was "the principle of finality" and that "the focus of the submissions" should be on that. (6) On 3 June 2022, after the case management hearing, MWP again filed the fifth affidavit of Michael Wilson, this time with the 164-page Exhibit MEW-5 attached – presumably because it was pointed out in the case management hearing that the exhibit had not been filed, despite Mr Wilson's insistence to the contrary. The only part of that exhibit relevant to the interlocutory application is the 30-page transcript of the hearing on 1 April 2022. (7) On 6 July 2022, MWP filed the sixth affidavit of Michael Wilson. Like the fifth affidavit, it contained only irrelevant material. Paragraphs 1-10 are introductory and attest to no relevant fact. Paragraph 11 deals with MWP's case in the High Court of Australia, which is irrelevant. Paragraphs 12-17 deal with a judgment in the High Court of England and Wales on 17 June 2022, ie, long after the 1 April orders, which is irrelevant. Paragraphs 18-19 are submission. (8) The sixth affidavit of Michael Wilson refers to Exhibit MEW-6. It is 50 pages and is wholly irrelevant. (9) On 8 July 2022, two days later than it was required to have done pursuant to the orders of 3 June 2022, MWP filed its submissions on the interlocutory application. The submissions failed to identify the basis on which it was said that the orders of 1 April 2022 should be reconsidered, failed to address the principle of finality and canvassed a number of irrelevant matters. As I said in MPW No 2 (at [18]), "in form, style and substance they have no hallmarks of having been prepared by a barrister" despite having been told that MWP intended briefing "leading counsel". The submissions were of essentially no value and merely burdened the Court and the respondents. (I mention as an aside that, in its submissions on costs, MWP says that its submissions on the interlocutory application were prepared by Mr A Tokley QC and that I had been wrong to "jump to the conclusion" that they were not prepared by counsel. MWP submits that they "were clearly in the style, layout and format and had all of the hallmarks of having been" prepared by counsel. Aside from noting that the submissions were signed by Mr Wilson and not by counsel and that in answer to a direct question from me after I had dismissed MWP's application for an adjournment on 15 July 2022, Mr Wilson said, in conflict with what he now says, that MWP's submissions had been prepared by Mr R Thomas of counsel (T8:9-11), I find it quite unbelievable that senior counsel prepared the embarrassingly rambling, irrelevant and hopeless submissions that were filed by MWP on the interlocutory application. If indeed the submissions were prepared by counsel, it is no wonder that counsel did not sign them – no self-respecting counsel, let alone senior counsel, would have.) (10) At the hearing, MWP also relied on the fourth affidavit of Michael Wilson which had been filed in the security for costs application. It is 522 pages including its exhibit and wholly irrelevant to the issues on the interlocutory application. In it, Mr Wilson makes many scathing and irrelevant personal attacks on the respondents' solicitor. The result was that significant time was taken up in the hearing having to deal with objections to that material, much of which was struck out, on the basis that it was scandalous and vexatious. (11) In oral submissions, Mr Wilson for MWP canvassed irrelevant material and presented a truly scatter-gun, or, perhaps, kitchen-sink, argument. He repeatedly applied for an adjournment even after his application for an adjournment had been (repeatedly) dismissed. He also referred to many irrelevant authorities, in particular English authorities when the issue at hand was one of practice and procedure of this Court, a matter on which the English authorities said nothing relevant. Mr Wilson even referred to the European Convention on Human Rights, without explaining how it could possibly have applied or been relevant on the interlocutory application. That conduct wasted time in the hearing. 12 Also relevant to the poor conduct of the interlocutory application is MWP's submissions on costs. Those submissions seek to re-argue points that Mr Wilson argued and which I rejected in the interlocutory application. They take issue with my findings and conclusions in the interlocutory application and again seek to argue the irrelevant point about the respondents allegedly having relied on evidence contrary to implied undertakings made by them to other courts. 13 Secondly, MWP made scandalous allegations that ought never to have been made, which were irrelevant to the issues on the interlocutory application and for which there was no apparent foundation. To identify those allegations in these reasons would serve merely to make the allegations public and thereby defeat the reason they were struck out. I will therefore say no more about them. It suffices to observe that MWP's Mr Wilson casts allegations around like confetti at a wedding without the least regard for their relevance to the issues at hand or whether they can be substantiated. 14 Also relevant to the scandalous allegations made by MWP are MWP's submissions on costs. Those submissions include the following: (1) It is apparent from MWP No 2, "and indeed the prior judgments of Stewart J, unfortunately, it has become clear that His Honour is apparently and actually biased against MWP and has lost all sense of justice, even handedness" (sic). (2) "The Court and His Honour have entirely lost sight of the reality of this matter". (3) "The Court's conduct losing the sight of all these matters is bringing and has brought the administration of justice into disrepute." 15 It is to be noted that despite those allegations, MWP has made no application that I disqualify myself. Beyond bald statements of conclusion, it has also not identified any basis upon which it is said that I am both apparently and actually biased in the matter. Considering all the circumstances on the fiction that MWP's submissions constitute an application that I disqualify myself from continuing to deal with the matter, I am satisfied that a fair‑minded lay observer would not reasonably apprehend that I might not bring an impartial mind to the resolution of the question I am required to decide: see Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 at [6]; Charisteas v Charisteas [2021] HCA 29; 393 ALR 389 at [11]. Rather, MWP's allegations ironically serve only to demonstrate the extent to which Mr Wilson has entirely lost sight of the reality of the matter and how, if anything, it is MWP's approach to the litigation that brings the administration of justice into disrepute. 16 Thirdly, MWP's interlocutory application was hopeless and should never have been brought. Despite the very considerable amount of material filed by MWP in the application, and the broad ranging and scandalous submissions, the application ultimately boiled down to only two issues. 17 The one issue was whether there was any basis to reconsider the order that the costs be determined on a lump-sum basis and, if the order was reconsidered, whether it should be rescinded or varied. No reasonably arguable basis was advanced in support of MWP's position on either of those matters: MWP No 2 at [42]. It was plainly just and proper to order that the costs be assessed on a lump-sum basis, and in any event there could be no possible prejudice to MWP arising from such an order. It is scandalous that MWP sought to revisit that order. 18 The second issue was whether there was any basis to reconsider the order that the costs of the application for leave to appeal include the costs of the security for costs application and, if the order were reconsidered, whether it should be rescinded or varied. As ultimately clarified in the supplementary submissions MWP filed on 25 July 2022, which by their nature do appear (helpfully) to have been prepared, although not signed, by counsel, the only basis advanced for reconsidering that order was that MWP had not been given a reasonable opportunity to be heard on that question. As demonstrated in MWP No 2 at [33]-[41] and [44]-[47], there was no basis for such a contention. MWP was represented by very experienced senior counsel (Mr DMJ Bennett AC QC) who did not once complain that MWP had not been given an opportunity to be heard on the point in issue. 19 Fourthly, as mentioned, the interlocutory application sought to reconsider and rescind or vary orders the consequences of which caused MWP limited prejudice – the lump-sum costs order caused no prejudice and the costs of the security for costs application amount to considerably less than $50,000. In short, there was very little at stake in the interlocutory application. To have brought the interlocutory application, and in particular in such a delayed and burdensome way and with so little foundation, was contrary to the obligations of MWP to conduct the proceeding consistent with the overarching purpose of the civil practice and procedure provisions, namely as quickly, inexpensively and efficiently as possible – as required by s 37N(1) of the Federal Court of Australia Act 1976 (Cth). 20 For those reasons, the respondents should be fully indemnified for their costs on the interlocutory application – costs to which they should never have been put. There should be an order for indemnity costs. Lump-sum costs? 21 The costs of the application for leave to appeal, including the costs of the application for security for costs, are already being assessed on a lump-sum basis by a Registrar of the Court. There is a process in place for that assessment. It would be sensible and efficient for the costs of the interlocutory application to be included in that process. 22 Section 3 of the Costs Practice Note (GPN-COSTS) identifies a number of principles with regard to the approach of the Court to the assessment of costs. The Court recognises that the procedure for determining the quantum of costs for a party successful at a final hearing should not be delayed and should be as inexpensive and efficient as possible. To that end, the Court expects parties to make a genuine effort, whenever it is practicable to do so, to negotiate with a view to resolving costs issues between them at the earliest opportunity. For costs issues that are not resolved by negotiation and that require the involvement of the Court, the Court's preference is to avoid, where possible, the making of costs orders that lead to potentially expensive and lengthy taxation of costs hearings. Rather, the Court will seek to adopt, and will encourage parties to utilise, the appropriate use of sophisticated costs orders and procedures, including lump-sum costs orders. 23 Taking those matters into account, it makes eminent sense for the costs of the interlocutory application to be determined on a lump-sum basis. Indeed, para 4.1 of the Costs Practice Note provides that "[t]he Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order". 24 Against that, MWP submits the following: MWP also opposes the quantification of any costs on a lump sum basis, since no application seeking an order of and for lump sum costs, together with evidence in support, was ever filed and served, and no fee paid, with the result that MWP never had the chance to review, reply and respond to the same, in breach of its rights. Contrary to the statements by His Honour at [42] of the Judgment, it is indeed the practice before the NSWSC and NSWCA that an actual application with evidence in support has to be filed and served with all of the usual and normal safeguards that entails and protections provided for. 25 There are two responses to that submission. The first is that para 4.10 of the Costs Practice Note provides that "[u]nless the Court otherwise directs, no formal application for a lump-sum costs order is required". 26 The second is that a similar submission was rejected by me in MWP No 2 at [42] as follows: Thirdly, no submission has been made, even now, as to why a lump-sum costs order should not have been made, other than the submission by Mr Wilson that no application for such an order was filed. That is obviously no obstacle to such an application being made orally, as Mr Golledge did from the Bar. Indeed, r 17.01(3) expressly provides that a party may make an oral application for an interlocutory order at a hearing. Mr Wilson's submission that his "experience" in the NSW Supreme Court and Court of Appeal is against such an approach is not only doubtful but also entirely irrelevant to the practice and rules of this Court. 27 That applies equally to the present case, save that MWP's opposition to a lump-sum costs determination is even weaker in the present case since the respondents' written submissions amount to an application for an order for such a determination and, by its submissions, MWP has had every opportunity to respond to the application. It has, however, failed to articulate a single consideration against such an order. 28 In the result, I conclude that there should be a lump-sum costs determination. Disposition 29 The following orders should accordingly be made: (1) that MWP pay the respondents' costs of MWP's interlocutory application filed on 6 May 2022 on an indemnity basis; (2) that those costs be determined on a lump-sum basis; (3) setting a timetable for a costs summary, costs response and submissions; and (4) that the determination of the lump-sum be referred to the Registrar of the Court to whom the determination of the lump-sum costs of the application for leave to appeal has been referred. An excursus 30 These reasons for judgment, as well as many others in this Court and courts abroad, including in the Court of Appeal of England and Wales, have been critical of Mr Wilson's conduct of this and other related cases on behalf of MWP. Mr Wilson is a principal of MWP and apparently has a financial interest in it. He has pursued, and continues to pursue, this and related litigation on MWP's behalf in an obsessive, unrelenting and burdensome way which is, perhaps, borne of his personal interest in it. None of that need be explored any further, let alone decided, now. 31 However, a question arises whether in any further litigation by MWP in Australian courts Mr Wilson should continue to appear on its behalf, or represent it as a solicitor, having regard to the principles identified in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; 269 CLR 333 at [19]; Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 at [76]; McIlraith v Ilkin (Costs) [2007] NSWSC 1052 at [25]; Mumbin v Northern Territory (No 2) [2020] FCA 475 at [39]; Dyer v Chrysanthou (No 2) (Injunction) [2021] FCA 641; 402 ALR 659 at [138] and Porter v Dyer [2022] FCAFC 116; 402 ALR 659 at [113]-[114]. See also r 17.1 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (NSW) which requires that a solicitor representing a client in a matter that is before the court must not act as the mere mouthpiece of the client and must exercise the forensic judgments called for during the case independently. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 26 August 2022