New South Wales Supreme Court CITATION : Berger Investment Group Limited v Coccoon Pty Ltd [2010] NSWSC 221 HEARING DATE(S) : 23 March 2010 JUDGMENT DATE : 29 March 2010 JUDGMENT OF : Harrison J DECISION : 1. Grant leave to amend the statement of claim. 2. Order the plaintiffs to pay the costs thrown away or occasioned by the amendment. CATCHWORDS : COSTS – UCPR 42.7 – interlocutory application – late amendment to pleadings – where costs occasioned or thrown away by reason of the amendment payable at conclusion of proceedings – whether court should order otherwise – whether stay pending payment should be ordered. Civil Procedure Act 2005 LEGISLATION CITED : Fair Trading Act 1987 Trade Practices Act 1974 (Cth) CASES CITED : Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 Berger Investment Group Limited (First Plaintiff) Gabriel Berger (Second Plaintiff) David Berger (Third Plaintiff) PARTIES : Coccoon Pty Ltd (First Defendant) Richard Heseltine (Second Defendant) Susan Heseltine (Third Defendant) P T Samur (Emas) Furindo (Fourth Defendant) Andrew Heseltine (Fifth Defendant) FILE NUMBER(S) : SC 2006/261156 COUNSEL : C Jackson (Plaintiffs) L V Gyles SC (First and Second Defendants) SOLICITORS : Charles G Roth, Solicitor (Plaintiffs) Makinson & d'Apice Lawyers (First and Second Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HARRISON J 29 March 2010 2006/261156 Berger Investments Group Limited v Coccoon Pty Ltd JUDGMENT 1 HIS HONOUR: By notice of motion filed on 17 March 2010 the plaintiffs seek leave to file an amended statement of claim. In making that application the plaintiffs acknowledge and accept that they are liable to pay any costs incurred by the defendants that may have been occasioned or thrown away by reason of the amendment. In those circumstances the defendants do not oppose the amendments as sought. However, by reason of matters to which I will shortly refer, the defendants contend that the plaintiffs should be ordered to pay the costs forthwith, ask that I assess them provisionally without the need for a formal assessment to occur now and request that the proceedings be stayed until that assessed amount is paid. Consideration 2 Gabriel Berger and David Berger are father and son. On 1 October 2003 their company Berger Investments Group Ltd purchased a business from Coccoon Pty Ltd, which it conducted from premises at Chatswood, for the sum of approximately $600,000. The plaintiffs allege that the business lost significant sums and was unsuccessful. They sued the defendants claiming $1.5M as damages under various heads. The original initiating process was a statement of claim filed as long ago as 16 February 2006. 3 The plaintiffs' case in summary is that they were induced to purchase the business by representations made to them by or on behalf of the first defendant about it and in particular about certain exclusive supply arrangements that the first defendant had with the fourth defendant, which is an Indonesian company of which the second and fifth defendants were directors. The original statement of claim particularises various statements and representations that were allegedly made to the plaintiffs, pleads that the representations were false, and pleads breaches of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987. It also pleads a breach of warranty, breaches of a supply agreement against the fourth defendant and breach of certain contractual restraints. 4 The amended statement of claim is considerably more succinct. It retains the claims pursuant to s 52 and s 42 and the claim for misrepresentation. Claims relating to alleged breaches of the supply agreement and breach of warranty are also maintained. The plaintiffs contend that the new pleading is clearer in the way that it relates the underlying facts to the various causes of action. The plaintiffs emphasise that their several claims are based on "substantially the same (though reduced) factual assertions" so that the amended pleading narrows the issues and clarifies the basis upon which the case is to be prosecuted. The plaintiffs submit that because the amended statement of claim does not raise fundamentally new factual assertions, with the exception of some particulars of loss, it does not require the defendants to recast their case to meet it. 5 Significantly the defendants do not appear to disagree with this analysis. They do however point to what they contend is considerable dilatoriness on the plaintiffs' part. For example, there is uncontested evidence before me that the plaintiffs have failed on numerous occasions to comply with timetables for the filing of evidence and the taking of other steps in the conduct of the proceedings. These allegations are to be found helpfully summarised in a history of the proceedings annexed to an affidavit sworn by the defendants' solicitor. The plaintiffs' response to this is to say that the defendants have effectively acquiesced in these defaults and draw upon the absence of any action by the defendants as a matter going to the proper determination of what are the dictates of justice, in particular having regard to the terms of s 58(2)(b)(v) of the Civil Procedure Act 2005. 6 UCPR 42.7 provides as follows: " 42.7 Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings." 7 In support of the submission that I should order otherwise, the defendants contend that their costs, that have been thrown away or occasioned as a result of the amendment, are the result of the plaintiffs' unreasonable conduct. In Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1, Barrett J said this at [10] – [13]: "[10] It becomes necessary now to consider the factors which have caused courts to depart from the normal rule in Part 52A rule 9(1) that costs are payable at the conclusion of the proceedings. A convenient and useful starting point is the following passage in the judgment of Priestley JA in Horrobin v Australia & New Zealand Banking Group Ltd (unreported, NSWCA, 6 June 1997): '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.' [11] This identifies the first recognisable category of case, namely, where the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect. Examples of this may be found in Charlie Brown Pty Ltd v Green (unreported, NSWSC, McLelland CJ in Eq, 3 July 1995) and Bagley v Pinebelt Pty Ltd [2000] NSWSC 830. [12] A second factor which may incline the court to order that costs be payable forthwith is some unreasonable conduct on the part of the party against whom costs have been ordered. That was a factor taken into account by Simpson J in Gattellari v Meagher [1999] NSWSC 1279, although, in the end, her Honour did not think that the particular conduct warranted such an order. [13] A third factor is, as it was put by Giles J in Doran Constructions Pty Ltd v University of Newcastle (unreported, NSWSC, 16 December 1994), that 'there is much to come in the proceedings' and 'one can see a fairly long time before the proceedings are disposed of'. In Horrobin (above), the decision of Priestley JA to order that costs be payable forthwith was influenced to some extent by the fact that the controversy between the parties would run for at least a further year. In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (unreported, FCA, 18 August 1995), Lindgren J said that it may be appropriate for greater use to be made of the analogous provision in the Federal Court Rules, 'particularly in cases such as this one where the final determination of the proceedings is so far away'". 8 Even though there have been these failures by the plaintiffs to comply with some directions, as earlier described, there does not appear to me to be any obvious or necessary connection between that fact and the proposed amendments. If, by way of example, the plaintiffs had persisted with an obviously or even arguably untenable statement of claim in the face of the defendants' urgings that it was causing delay and expense to them, perhaps with associated and clearly identified inconvenience to all concerned, then I could accept that a late-in-the-day proposal to amend in order to lessen or eradicate the consequences that flowed from it might amount to unreasonable conduct sufficient to warrant a special order. In such a case there would be some relationship between the failure to amend earlier and the costs thrown away or occasioned as a result. That is not this case. Indeed, as the plaintiffs contend, their decision to amend is allegedly a manifestation of reasonableness on their part rather than the opposite. 9 The proceedings have a relatively long history but I am not in a position to say who or what was or may have been the cause of this. That question may be answered at some time in the future. It may attract attention when costs are finally assessed. The costs with which the present application is concerned are not in my opinion in respect of a separately identifiable issue because the relationship between the original statement of claim and the extent to which costs incurred by the defendants in responding to it will have been lost is either difficult, or on another view impossible, to determine at this stage of the proceedings. 10 For the same reasons I have considerable difficulty with the notion that I should assess some figure that the defendants might now receive as, in effect, a partial advance on the costs occasioned to them by the amendment, knowing that a full and proper accounting will in all likelihood be undertaken when those costs are finally assessed or some agreement is reached about them. The defendants have provided material, in the form of a very detailed and well-documented assessment of these costs by their solicitor Mr Roberts, which appears to me to be not unusual or unreasonable in the circumstances as I understand them. I am cautious, however, about accepting that I am in the best, or even any, position to form a view about a sum that the plaintiffs should be ordered to pay the defendants, even with the benefit of Mr Roberts' thorough analysis, without a proper costs assessment taking place. I am certainly not in a position to form a view about what costs have, or may have, been thrown away or occasioned by the amendment or what part of the costs in dispute is potentially or arguably referable to work that will not have been wasted and which the defendants can utilise in response to the claim as amended. Also for these reasons I am not in a position, other than in a hypothetical way, to determine whether this application, or more correctly the plaintiffs' failure to make it much earlier, will have had the effect of reducing their financial capacity to defend the proceedings. I am also particularly cautious that the potential for injustice would be correspondingly magnified if I were to order that the proceedings be stayed until some (possibly, if not probably) unsoundly based calculation by me were to condition such a course. Conclusion 11 In my opinion the plaintiffs should be ordered to pay the defendants' costs that may have been occasioned or thrown away by reason of the amendment to the statement of claim. I am not prepared to order that those costs be made payable forthwith, or to assess them myself. It follows that there is no basis upon which to order that the proceedings be stayed pending payment of such costs. ********** 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.