New South Wales Supreme Court CITATION : Lewis v Nortex Pty Ltd (No 2) [2001] NSWSC 610 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3081/97 HEARING DATE(S) : 09/07/01 JUDGMENT DATE : 19 July 2001 Peter Lawrence Lewis (P) PARTIES : Lamru Pty Ltd (Applicant) Brian Raymond Silvia (Liquidator) JUDGMENT OF : Young CJ in Eq J T Johnson (P) COUNSEL : S J Motbey (Applicant) P A Somerset (S) (Liquidator) Kemp Strang (P) SOLICITORS : Lyons & Lyons (Applicant) Abbott Tout (Liquidator) CATCHWORDS : PROCEDURE [575]- Costs- One party's conduct producing suspicious document- On balance of probabilities document genuine- Conduct good reason to deprive party of costs. LEGISLATION CITED : Supreme Court Act s 76 Supreme Court Rules Part 52A Bostock v Ramsey Urban Council [1900] 2 QB 616 CASES CITED : Harnett v Vise (1880) LR 5 ExD 307 Trenerry v Trenerry [1966] 2 NSWR 221 DECISION : See paras 21-23. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in Eq THURSDAY 19 JULY 2001 3081/97 - LEWIS v NORTEX PTY LTD (NO 2) JUDGMENT 1 HIS HONOUR: On 22 June 2001 I gave judgment on five questions which had been ordered to be considered before the other issues in these proceedings. The five questions and their brief answers were as follows: (1) Was the impugned document signed on 16 April 1991? Answer "Yes". (2) Does the impugned document have the effect of making Peter Lawrence Lewis the sole appointor of the Nortex Unit Trust? Answer "No". (3) Does not arise. (4) What is the effect of the notice bearing date 31 March 1997? Answer "It has no effect before March 1997 and only limited effect after that date. (5) On the true construction of the relevant trust deed and in the events which have happened, were the income splits from 1991 to 1995 validated by valid and effective determinations in accordance with clause 4(1) of that deed? Answer "No". 2 After allowing some time for consideration after those reasons were handed down, costs were argued on 9 July 2001 and there was discussion as to what should now happen to the proceedings. The latter issue was postponed to 5 September 2001 and I reserved judgment on the question of costs and this present judgment deals with that matter. 3 The current proceedings 3081/97 originally started as proceedings to wind up Nortex Pty Ltd. That order was made by Registrar Berecry on 2 September 1997. Thereafter the notices of motion filed have been notices of motion dealing with issues arising out of the winding up. 4 Nortex was a company that was used as a vehicle for trade by Mr Lewis and his company, Kation Pty Ltd, as to 60% and Mr Lamb and his company, Lamru Pty Ltd, as to 40%. 5 All parties lodged proofs of debt with the liquidator Mr Silvia. All were dissatisfied with Mr Silvia's determination and lodged appeals to this Court. 6 In particular, Lamru Pty Ltd lodged a notice of motion on 4 February 2000 appealing against the rejection of part of its proof of debt. An amended notice of motion was filed on 31 July 2000. The notice of motion of 4 February 2000 named as respondents the liquidator and Kation Pty Ltd. There was some discussion as to proper parties to the appeal. Mr Motbey of counsel for the Lamb interests argued that all persons interested in the appeal including the other equity shareholder should be made parties to the motions to appeal. On 10 July 2000, Austin J directed that each of Peter Lewis and Kation Pty Ltd file and serve any application that they or either of them may wish to make to be removed as a respondent to any notice of motion, together with any supporting affidavits on or before 27 July 2000. 7 The solicitor for the Lewis interests advised in due course that no such motion would be made and made a suggestion that fresh proceedings be commenced for a declaration. 8 The various notices of motion came before me on 31 July 2000. I particularly dealt with a notice of motion issued by Lamru on 17 July 2000 on which Kation was named as a respondent and Mr Lewis was not. I stood the matter over to my list on 4 September. On that day I made orders for decision of separate questions. 9 It seems to me, accordingly, that the separate questions were posed in a notice of motion in winding up proceedings in which Lamru was the applicant and Kation was a respondent together with the liquidator. Mr Lewis personally was not a respondent. 10 Mr J T Johnson, who appears for the Lewis interests, put that no matter what else I might do about costs in these proceedings, I cannot make any order against Mr Lewis personally because of Part 52A(4)(2) of the Supreme Court Rules. This would appear to be correct. 11 Mr Somerset, the solicitor for the liquidator, puts that his client should obtain his costs out of the assets of the company. Mr Motbey opposes this on the basis that as Mr Lamb has 40% of the equity of the company, such an order would in fact mean that Mr Lamb would be paying 40% of the liquidator's costs when Mr Motbey submits Kation should be paying the whole of the costs of the liquidator. 12 Mr Johnson says that his clients succeeded on some issues and not on others. His clients succeeded on the issue as to the date when the impugned document was signed, and that this was the issue that took up the greatest amount of time as it involved cross examination extensively of Mr Lewis by Mr Motbey. Mr Motbey, on the other hand, says that the matter is not just a simple one of splitting up the issues and saying that one party succeeded on one and another succeeded on another issue. In fact, the issues are intertwined and the evidence that was taken directly to deal with the first issue was also essential for issue number 5. 13 Mr Motbey also puts that this is one of the cases where the whole of the problems were brought about by Mr Lewis, and accordingly, he or Kation should pay the whole of the costs. It is expedient to deal with that submission next. 14 The Court generally has a discretion about costs under s 76 of the Supreme Court Act and Part 52A of the Rules. Ordinarily, the guideline that the Court follows is that costs follow the event. However, it is a recognised exception that where the conduct of a party, the successful party, has been such as to induce the litigation, then the successful party may be deprived of his or her costs. The principle most frequently cropped up in divorce cases where a co-respondent might have been acquitted of a charge of adultery, but the Court considered that his conduct was such that it brought a reasonable suspicion in the mind of the petitioner; see the cases collected in the judgment of Jenkyn J in Trenerry v Trenerry [1966] 2 NSWR 221. 15 The principle has also been applied in defamation cases; see eg Harnett v Vise (1880) LR 5 ExD 307. 16 Perhaps the best example of the operation of the rule in general litigation is found in Bostock v Ramsey Urban Council [1900] 2 QB 616. In that case the local council had prosecuted Mr Bostock for obstructing a public street with a travelling menagerie. The trial judge had taken the case from the jury and had directed an acquittal. Mr Bostock then sued the council for malicious prosecution. The Lord Chief Justice entered a verdict for the defendant, but he took the view that the fons et origo of the proceedings was the council's reckless conduct in initiating the prosecution in the first place and deprived it of costs. The English Court of Appeal affirmed this view. It however made it clear that before this particular aspect of the discretion could be exercised the Judge must come to the view that there was some good cause for depriving the successful party of costs and that good cause had a relation to the subject matter of the proceedings. 17 In the instant case, Mr Motbey says that the whole of the problems came about because Mr Lewis behaved so suspiciously with respect to the impugned document. In paragraph 22 of my judgment of 22 June I set out a summary of the evidence which Mr Lewis gave in respect of the document. On any view, the document must reasonably have been suspect. It was a self serving document which was irregular on the face of it and was inconsistent with certain other probable happenings. 18 In my view, the facts and circumstances, all of which were in the Lewis camp giving rise to the suspicion are a good reason within the meaning of the authorities to which I have referred for denying Kation any costs to which it might otherwise have been entitled. 19 I now pass to the question of Lamru's costs. Mr Johnson puts that there were various issues raised in the five questions, on some of which the Lewis interests succeeded; on some of which the Lamb interests succeeded. Mr Motbey, on the other hand, says that it is not appropriate in the instant case to divide the matters argued into distinct issues as there was considerable overlap. I consider Mr Motbey's submission is correct. 20 Mr Motbey also says that the Lamb interests were the economic winner as a result of the answers to the questions as the profit split for the relevant years was upset and as a consequence the Lamb interests will be paid more money. This appears to be correct. However, as Mr Johnson says, the majority of the oral evidence went to the question of the impugned document and the finding for the Lamb interests on question 5 to a great degree depended on questions of construction as a result of facts that were almost common ground. The time taken on this issue is also affected by the fact that the Lewis interests did raise a number of irrelevant matters under question 5. 21 In my view, the Lamb interests are entitled to some costs from Kation. The case was dealt with in dribs and drabs, but I would think a fair assessment of the amount of time and energy devoted to evidence and submissions on this issue was about 45%. Accordingly I would order that Kation Pty Ltd pay 45% of the costs of Lamru Pty Ltd and Lamb of the separate questions. There should be no order as to costs otherwise of the Lamb or Lewis interests on the hearing of the separate questions. 22 That then leaves the liquidator's costs. It is clear that the liquidator is entitled to his costs. I believe in the peculiar circumstances of this litigation it would be much fairer for everybody if I were to order the liquidator's costs be paid by the disputants in proportion to their interest in the fund that is behind all of these disputes rather than merely have the costs come out of the assets. Accordingly I will order that the liquidator's costs be paid out of the assets of the company but to be reimbursed as to 60% by Kation Pty Ltd and 40% by Lamru Pty Ltd. 23 As I recorded at the end of the brief hearing on 9 July 2001, these reasons are to be posted to each of counsel involved and Mr Somerset. The matter is now stood over to 5 September 2001 when I will consider what is the most appropriate method of dealing with the remaining disputes involving Nortex Pty Ltd and any underlying trusts which are still before the Court. ***************** Last Modified: 07/23/2001 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.