PETER ROBERT HORROBIN and ANOR v AUSTRALIA and NEW ZEALAND BANKING GROUP LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY JA 24 and 28 February 1997, 6 June 1997 [1997] NSWCA 154 Priestley JA The principal contestants in the motions before me are Mr P Horrobin and Mr R Sands on the one side and ANZ Banking Group Ltd (ANZ) on the other. The motions raise two sets of issues. One is whether Messrs Horrobin and Sands (whom I will call H and S for shortness' sake) should be allowed to enforce against ANZ costs orders made against it in summary judgment proceedings in which ANZ was unsuccessful before the conclusion of the principal proceedings still pending between H and S and ANZ. The other issue is whether an order should now be made for the costs of a motion which, in the way the proceedings turned out which were the subject of the costs orders, was never heard or decided. For a reader to understand the nature of the considerations I must bear in mind in exercising discretion in deciding these motions, I need to set out in a simplified form what, in detail, would be quite a lengthy history. In doing so I will not give the names of all the parties involved in the various stages of the various litigations or the full names of those parties I do mention. Mrs Horrobin was a party to the proceedings. Her position is substantially the same as that of H, and I will leave separate mention of her until later. In 1987 H and S were principal persons concerned in the acquisition of a business called Trawl Industries. In taking part in the acquiring of this business, H and S participated in the borrowing of funds from the National Mutual Royal Bank (NMRB). In later litigation they claimed that in the course of the borrowing they acted on representations made by ANZ. The business failed. In 1989 Trawl Industries began proceedings in the New South Wales Supreme Court against a company called Effem Foods on a number of bases, including breach of contract. This part of Trawl Industries' case alleged that Effem Foods had caused it considerable damage by Effem Foods' wrongful repudiation of an agreement for the purchase of Trawl Industries' products. This part of the proceedings was heard and dismissed by Cole J in 1989. Trawl Industries then appealed to the Court of Appeal. In 1990 H and S commenced proceedings in the Federal Court against Effem Foods, alleging causes of action based on the Trade Practices Act and representations which were false or likely to mislead. In 1991 an Act of Parliament was passed which had the effect, broadly speaking, of making ANZ and NMRB one bank, so that in later proceedings it was ANZ which relied on causes of action which had previously been NRMB's in seeking to recover moneys and enforce other rights against H and S. In 1992 ANZ commenced proceedings against H and sin the Supreme Court of Victoria for the recovery of moneys owing pursuant to guarantees for which they had given securities. H and S filed a defence and cross claim in which they alleged ANZ had made a series of misrepresentations and had acted fraudulently causing them damage. 2 UNREPORTED JUDGMENTS In 1992 the New South Wales Court of Appeal dismissed Trawl Industries' appeal against Cole J's judgment in favour of Effem Foods. In 1994 H and S commenced proceedings in the Supreme Court of Victoria against ANZ making claims similar to the defences and cross claims they had raised in ANZ's 1992 Victorian proceedings against them. In 1994 and 1995 Tamberlin J heard H and S's Federal Court proceedings against Effem Foods. He delivered judgment for the defendant on 29 June 1995. H and S appealed. In 199.4 ANZ began proceedings in the Supreme Court of New South Wales to recover possession of property mortgaged to it by H and sand for the amount claimed due under guarantees by them. H and S filed a defence and cross claim raising the same allegations against ANZ as they had raised in the proceedings in the Victorian Supreme Court. A motion by ANZ for summary judgment in these New South Wales proceedings was heard by Grove J on 29 March 1996. In the summary judgment proceedings, an application was made by H and S that the whole proceedings be ordered to be cross vested in the Victorian Supreme Court, to be heard with the related proceedings there. The ANZ opposed the cross vesting of its claim and Grove J refused to cross vest it. He did however order the cross vesting of H and S's cross claim. He heard and granted the ANZ's application for summary judgment against H and S for possession of the mortgaged property and for $6,746,094. The Court of Appeal granted leave to appeal against this decision, and stayed the judgment pending the appeal, on onerous terms, reserving leave to H and S to apply for variation of the terms. This reservation of leave was because the court had not had the opportunity at the hearing of the summons for leave to get a sufficient grip of the detail relevant to the stay application to form any workable view about the terms of the stay, which were contested. Subsequently H and S made use of the liberty to apply and both they and ANZ made extensive preparations for the hearing of H and S's application to vary the terms of the stay. A central issue was to have been the financial situation of H and S. Broadly speaking, they claimed to have very few assets but ANZ was seeking to show that they had the means of controlling asset holding entities or of obtaining financial assistance from entities their connection with which was, according to ANZ, such that they could influence the entities into making finance available. The application to vary was never heard. An order was made for the expedition of the hearing of the appeal itself which was decided on 16 September 1996, subsequently reported as Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89. The court upheld the appeal and ordered that ANZ's motion for summary judgment should be dismissed with costs both in the Court of Appeal and before Grove J. In February 1997 H and S filed a notice of motion seeking that their costs of the summary judgment proceedings both at first instance and on appeal be payable forthwith. They also sought an order that their costs of the notice of motion to vary the terms of the stay of execution imposed at the time when leave to appeal was granted should be paid by the ANZ and be payable forthwith. The ANZ also filed a notice of motion. The motions of the two sides were thereafter dealt with together. The ANZ's motion was for a stay of the costs orders made against it by the Court of Appeal, or alternatively a stay of the enforcement of any certificate issued pursuant to those orders, until the cross vested Victorian proceedings were determined. UWHETER ROBERT HORROBIN and ANOR v AUSTRALIA and NEW ZEALAND BANKING GROUP LTD (Priestley JA) The motions came on for hearing on 24 February 1997. There was then some argument and discussion about the basic issues, and also some procedural aspects of the conduct of the motion proceedings. In the event, the parties agreed that further affidavit evidence beyond that already before the court would be filed, that there should be no cross examination on any affidavits which would all be treated as read, that this procedure would not prevent the parties criticising, contradicting or making submissions about the reliability of the affidavit evidence, and that argument in the motion should be completed by written submission. Affidavits and submissions were afterwards received during March and April 1997, and a last communication was made by letter dated 9 May 1997 which informed the court that the appeal of H and S against Tamberlin J's judgment in the Federal Court in favour of Effem Foods had been upheld by a judgment delivered by the Full Federal Court on 24 April 1997. The Full Court ordered a new trial of H and S's claims that Effem Foods had engaged in conduct in trade or commerce that was misleading or deceptive, or likely to be so, contrary to s52 of the Trade Practices Act. I will deal first with the submissions concerning the costs of the summary judgment proceedings generally. The parties were agreed that the relevant costs rules were those contained in SCR Pt52A. A preliminary question in the costs argument concerned the meaning of r9 of Pt52A. That rule provides that where costs orders are made "before the conclusion of any proceedings" they "shall not, unless the Court otherwise orders, be payable until the conclusion of the proceedings". For H and sit was argued that the summary judgment proceedings were separate and self contained proceedings completed by the decision of the Court of Appeal, so that the rule contemplated payment of the costs without any requirements for the court to make any order. For the ANZ it was said that the summary judgment proceedings were part of the proceedings commenced by the bank against H and sand that the rule prevented enforcement of the costs order until the conclusion of the overall proceedings, unless the court otherwise ordered. I was not referred to any authorities directly on the point. There is some room for reading the rule either way. Taking into account the policy which seems clearly enough to lie behind the rule, which is manifested also in the court's exercise of jurisdiction from time to time to stay the payment of costs orders not made in the same proceedings but in related proceedings, before the overall result is known, my view is that the better interpretation of the rule is that contended for by ANZ. On the assumption that H and S needed to persuade the court to order otherwise than r9 prima facie required, their counsel relied on a number of discretionary considerations. One was that even if the summary judgment proceedings were part of the overall money recovery proceedings of ANZ, they were nevertheless substantially self contained. There was no way that the costs orders made by the Court of Appeal could be affected by anything that happened later in the proceedings. Another consideration was that ANZ had now agreed that the entirety of the Bank's New South Wales recovery proceedings should be cross vested by being transferred to the Supreme Court of Victoria, and I had indicated that I was prepared to make the appropriate order. (I will do this amongst the orders made at the end of these reasons.) For H and sit is submitted, in effect, that ANZ should have agreed on this course before embarking on the summary judgment 4 UNREPORTED JUDGMENTS proceedings in New South Wales, particularly as the issues which H and S sought to raise in their defence and cross claim were, in substance, going to be litigated in any event in the Victorian proceedings. That is, it was submitted that the costs of ANZ's failed summary judgment proceedings were not only costs of substantially self contained proceedings but should not have been incurred in New South Wales at all. A further submission was that, on the evidence available about when there would be a hearing of the substantive proceedings between ANZ and H and sin Victoria, it seemed clear the hearing date was at least a year away. There was also evidence that the proceedings were likely to take at least six weeks. On past experience, there were also possibilities that the proceedings would be subject to appeal which would mean a final result could be still further away. The ordering of the new trial in the Effem case with its not concurrent but nevertheless overlapping issues might also cause further complications as to time. A further argument was that considerable expense had been incurred by H and sin their eventually successful contesting of the summary judgment proceedings and that this expense, if not reimbursed, would hamper their ability to meet their legal costs and expenses in contesting the probably lengthy proceedings in Victoria. There was controversy about this last point. For the ANZ it was argued that the evidence supported the view that H and shad funds available to them from sources difficult to specify but nevertheless real enough when occasion arose. H and S contested this. Both sides relied on affidavits originally prepared for use in the motion (never heard) for variation of the terms of the stay pending H and S's (successful) appeal. H and S filed additional affidavits on the subject. Their earlier affidavits presented a detailed but complicated account of their position. ANZ criticised it as incomplete. H and S's later affidavits did not go further than saying that they would "have considerable difficulty in finding sufficient resources or funds... to ensure that those various proceedings in Victoria are properly run". In the circumstances of the case and the available materials I take this to mean that as things stand at present, H and swill be able, although with considerable difficulty, to raise funds for the continuing legal proceedings with ANZ. I approach my exercise of discretion on that footing. For ANZ there were said to be considerations countervailing those advanced by H and S. The position under Pt52A r9 was relied on and it was said there was no reason to depart from the prima facie position indicated by the rule. It was also said that the summary judgment proceedings were simply part of an overall contest between ANZ and H and sand that the question of offsetting and payment of the various costs orders bound to be made from time to time should be left until the contest ended. It was also submitted that (even though ANZ was contending that H and shad the ability to lay their hands on sufficient moneys to finance their legal proceedings) when, as ANZ said it had good reason for expecting, it prevailed against H and S, the amounts it would become entitled to by judgment would exceed H and S's ability to pay, so that if ANZ had had to pay to H and S their costs of the summary judgment proceedings in the meantime, the probabilities were that that payment would, for practical purposes, unfairly increase ANZ's overall loss. For my consideration in dealing with these arguments my attention was drawn by counsel for ANZ to cases such as Thunderdome Race Time and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297, in which Olney J said that a court should make an order "otherwise" under the rule where "the demands of UWHETER ROBERT HORROBIN and ANOR v AUSTRALIA and NEW ZEALAND BANKING GROUP LTD (Priestley JA) justice require... a departure from what appears to be the general practice envisaged by the rule" (at 312). Counsel for H and S relied on three decisions in particular: Doran Constructions Pty Ltd v University of Newcastle, 16 December 1994, Giles J; Charlie Brown Pty Ltd v Green, 3 July 1995, McLelland CJ in Eq; and Australian Flight Test Services Pty Ltd v Minister for Industry, Science and Technology, 26 April 1996, O' Loughlin J. (The last of these also refers to further authorities in the Federal Court.) None of the cases is on all fours with the present one; indeed, a reading of them emphasises the need for cases to be considered by reference to their own particular facts. Nevertheless, those relied on by counsel for H and S show there is a tendency for costs orders to be made payable forthwith and without waiting for the conclusion of further proceedings when the proceedings in respect of which the costs orders have been made are regarded as sufficiently self contained and detached or detachable from proceedings yet to be heard, whether between the same or associated parties, as to make it seem just for an actual payment to be made in the meantime. Considerations of this kind seem to me to be strong in the present case. The indications are that it will be at least a year before the Victorian proceedings come to trial. H and shave actually borne the expense of their successful contesting of the summary judgment proceedings. That result and the costs orders flowing from it will not be affected by the proceedings yet to be decided. It is impossible for me to forecast the likely result of the Victorian proceedings. It seems to be clear that H and S made themselves responsible for the repayment of ascertainable amounts of money connected with the purchase of Trawl Industries. ANZ appear to have that much firm ground in the proceedings. H and S's defences and cross-claims however go to the making of the arrangements whereby they became liable for the amounts which can be proved by ANZ. If H and S succeed in establishing their allegations then the whole or a significant part of their liability to ANZ may be invalidated. I have no means of evaluating the strength of their chances. I know that the summary judgment against them was set aside on the basis that their claims had an arguable chance of success. Taking all these things together, I have come to the conclusion I should, pursuant to Pt52A 19, order that the costs of the summary judgment proceedings at first instance and on appeal, ordered by the Court of Appeal to be paid to H and S by ANZ, shall be payable forthwith. The foregoing orders are subject to what I am about to say in regard to the never decided application by H and S to vary the terms of the stay granted in their favour at the time of the granting of leave by this court to appeal against Grove J's summary judgment orders. As I mentioned before, this application to vary the conditions of the grant of the stay was a matter of considerable importance to both sides. They both made extensive preparations for it. It looked as if the time to be taken up by the determination of the application, if it went ahead, would be considerably longer than the hearing of the summary judgment appeal itself. In the event it was unnecessary to determine the application. The sensible course was taken of deciding the appeal, thus saving the parties the further expenses that would have been incurred on both sides had the application been fought and decided. In these circumstances it seems to me that me two sides should be left to bear their own costs referable to the application for variation and that the only order the court should make in respect of such costs is that no order be made. 6 UNREPORTED JUDGMENTS I mentioned earlier that I would need to refer to Mrs Horrobin's position in these motions. I was told that before Grove J she and H and S were represented together, but for reasons not explained she was separately represented in the appeal against Grove J's summary judgment orders. Some submissions were made in the course of the present motions that costs incurred by her were unnecessary. I was told by her representative on the basis of documents filed on her behalf that I should treat her as making the same applications by motion before me as those made by H and S. The Court of Appeal in making its orders upon upholding the appeal against Grove J's decision, did not differentiate between the appellants. No point was taken by ANZ at that time concerning the possible consequences of Mrs Horrobin's separate representation. I think the only course I should take is to make it clear that the orders that I have been describing as those sought by H and S were sought also by Mrs Horrobin and that the orders I make on the motions apply to her in the same way as they do to H and S, as they did when the Court of Appeal upheld the appeal. In regard to the now joint application for cross vesting that part of the ANZ's New South Wales proceedings not yet cross vested to Victoria, I note that joint submissions in writing were forwarded to me under cover of letter of 8 April 1997, that these submissions show that it is appropriate for a cross vesting order to be made, and I will accordingly make such an order. The formal orders that I make are: 1. ANZ's motions filed 30 December 1996 dismissed with costs. 2. O1 in H and S's amended notice of motion filed 17 February 1997 made as asked. O2 refused. H & S to have two thirds of their costs of the motion paid by ANZ. 3. The same orders as in 2 are made in favour of Mrs Horrobin; liberty is reserved to apply to a single judge of this court on two days notice for directions concerning this order, such liberty being reserved solely for the purpose of putting this order into final form in the event of any difficulty about it. 4. By consent, pursuant to s5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) the proceeding comprised in the amended statement of claim filed 14 June 1994 and amended defence of the first, second and third defendants dated 11 October 1995 be transferred to the Supreme Court of Victoria. Counsel for the Claimant P Horrobin: J Whittle Counsel for the Claimant E Horrobin: S Thompson Counsel for the Opponent: J Thomson Solicitors for the Claimant P Horrobin: Heidtman and Co Solicitors for the Claimant E Horrobin: Michell Sillar Solicitors for the Opponent: Norton Smith and Co