New South Wales Supreme Court CITATION : Corsecure Pty Limited & Anor v Kaldor & Ors [2003] NSWSC 179 HEARING DATE(S) : 6 March 2003 JUDGMENT DATE : 20 March 2003 JURISDICTION: Equity Division Commercial List JUDGMENT OF : McClellan J DECISION : Amended summons dismissed; Amended cross-claim dismissed; Plaintiffs' to pay the defendants' costs CATCHWORDS : COSTS - corporation and a major shareholder both sued - verdict for the defendant - shareholder argued that because only part of the relief sought was for his benefit he should be relieved of part of the costs - the shareholder plaintiff stood to benefit from the whole suit - both the corporation and the shareholder ordered to pay costs LEGISLATION CITED : Supreme Court Act s 76 Corsecure Pty Limited (1st Pltf) Geoffrey Higgins (2nd Pltf) PARTIES : Martin Kaldor (1st Def) Christo Simeonoff (2nd Def) Blue Sky Industries Pty Limited (3rd Def) FILE NUMBER(S) : SC 50129/01 COUNSEL : R G Forster SC (Pltfs) K Smark (Defs) SOLICITORS : Verekers (Pltfs) Ferrier & Associates (Defs) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McCLELLAN J THURSDAY 20 MARCH 2003 50129/01 CORSECURE PTY LIMITED & ORS v KALDOR & ORS JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 28 February 2003 when I indicated that costs may be argued. 2 By an amended summons the first plaintiff, Corsecure Pty Limited and the second plaintiff, Geoffrey Argent Higgins sought various declarations and orders. The first three orders sought declarations in relation to the fiduciary duties which it was alleged were owed by the respective defendants to Corsecure. Paragraphs 4, 5 and 6 sought orders restraining each of the defendants from acting in relation to the products of CyberGuard. 3 By amendments which I allowed in November 2002, further relief was sought. Paragraphs 6A, 6B, 6C, 6D and 7A sought orders in favour of Corsecure. Paragraphs 9 and 10 sought specific relief in favour of Higgins. Paragraphs 10A and 10B, which were added in the amended summons, were not pursued in these proceedings and fall to be determined on another occasion. 4 In my judgment the fundamental claim made by the plaintiffs that there was a contract between the relevant parties fails. As a consequence, the plaintiffs are not entitled to the relief which has been sought. I also found that in the event that a contract did exist and Corsecure was entitled to exploit the rights to CyberGuard products, the relief sought in paras 9 and 10 of the amended summons may have been appropriate. 5 In these circumstances plaintiffs' counsel submits that an order for costs should only be made against Corsecure. The foundation for this submission is as follows: "(a) substantially the whole of the proceedings related to Corsecure's claim against the defendants; (b) Mr Higgins' only claim was that he was entitled to the 150 shares in Corsecure, which Mr Kaldor had promised to transfer to him, but did not; (c) Mr Higgins was successful (or alternatively, was not unsuccessful) in relation to that claim (judgment para 114); (d) very little time was spent on this issue at the trial; (e) had it not been for his claim for the 150 shares, there would have been no need for Mr Higgins to have been a plaintiff in the proceedings. The court should have no difficulty inferring that he would not have sought to be added as a party if he did not need to pursue this claim. There would have been no benefit to him to join as a party, and thereby to expose himself to even the possibility of suffering an order for costs; (f) thus, the court can infer that the only reason for Mr Higgins being a party was Mr Kaldor's refusal (and as the court has found, wrongful refusal) to transfer the 150 shares to him. In that sense, Mr Kaldor will have benefited by his wrongful conduct by forcing Mr Higgins to join as a party and thereby become liable for costs; (g) it is true that Mr Higgins could have commenced separate proceedings against Mr Kaldor. However, that puts form over substance; and in any event the court would very likely have ordered the two proceedings to be heard together, with much the same results." 6 It is submitted that any order for costs made against Higgins should be referable only to the claim expressly advanced on his behalf in the summons. 7 The plaintiffs also point to the fact that the defendants sought security for costs against Corsecure. In that respect security was given in the form of an undertaking by Higgins to indemnify Corsecure in the sum of $15,000. No further application for security was made. 8 It is submitted that having regard to the conduct of the defendants and the approach which they took to security, Higgins was entitled to proceed in the belief that his personal exposure as to costs was limited to: (a) whatever costs orders may properly be made in respect of his claim for 150 shares; plus (b) a maximum of $15,000 in respect of any liability to which Corsecure may be subject. 9 Section 76 of the Supreme Court Act provides that an order for costs is in the discretion of the court. The discretion is to be exercised judicially having regard to the circumstances of the particular case. 10 In the present case the relevant relief was sought by both Corsecure and Higgins. Although a number of the orders sought addressed the obligations which it was alleged the defendants owed to Corsecure, the combined effect of the relief sought in the summons was for the benefit of Higgins. If the proceedings had been wholly successful Corsecure would have obtained the benefit of the arrangements with CyberGuard and Higgins would have been as against the defendants, the only shareholder of Corsecure. Accordingly, in my view it is appropriate to understand the proceedings as being for the benefit of Higgins. By making himself a party to the proceedings he is amenable to an order for costs. 11 In these circumstances I see no reason to confine the order for costs in respect of Higgins. 12 The defendants seek an order for costs on a party and party basis up to and including 6 November 2002 and on an indemnity basis thereafter. This submission is founded upon the fact that the defendants' solicitor wrote to the plaintiffs' solicitor on 7 November 2002 seeking to settle the matter on the basis that the relevant summons be dismissed. The letter also sought indemnities and releases including a release from Andrew Higgins, the brother of the second plaintiff, together with covenants as to confidentiality from Andrew Higgins and Andrew Bewick, who was not a party to the proceedings. 13 The plaintiffs submit that the offer was not one capable of acceptance because it involved a release and covenants from third parties. Accordingly, it is submitted that it would be inappropriate to provide for costs on an indemnity basis. In my opinion the offer which was made went beyond that which the plaintiffs could accept and accordingly it would not be appropriate to award costs on an indemnity basis. 14 Accordingly the orders will be: 1. Amended summons dismissed 2. Amended cross-claim dismissed 3. The plaintiffs' to pay the defendants' costs on a party and party basis. ********** Last Modified: 03/25/2003 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.