Supreme Court New South Wales Medium Neutral Citation: Allardyce Lumber Company Limited and Ors v Quarter Enterprises Pty Limited and Anor (No. 3) [2012] NSWSC 579 Hearing dates: On written submissions Decision date: 01 June 2012 Jurisdiction: Common Law Before: Johnson J Decision: 1. The Applicants are to pay the Respondents' costs of the Notices of Motion filed 27 September 2010 and 22 July 2011 assessed on the ordinary basis. 2. The stay granted on 4 May 2012 is dissolved. Catchwords: PRACTICE AND PROCEDURE - costs - unsuccessful application to set aside registration of judgment under Foreign Judgments Act 1991 (Cth) - application for costs on indemnity basis - whether relevant delinquency or unreasonableness - whether failure to comply with s.56 Civil Procedure Act 2005 - application to set aside not hopeless - proceedings not conducted efficiently by unsuccessful party - however delinquency or unreasonableness not established - costs to be assessed on ordinary basis Legislation Cited: Foreign Judgments Act 1991 (Cth) Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Cases Cited: Allardyce Lumber Company Limited and Ors v Quarter Enterprises Pty Limited and Anor (No. 2) [2012] NSWSC 438 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Calderbank v Calderbank [1974] All ER 333 Harrison v Schipp [2001] NSWCA 13 White Constructions (ACT) Pty Limited (in liquidation) v White and Ors [2004] NSWSC 303 Chaina v Alvaro Homes Pty Limited [2008] NSWCA 353 Category: Costs Parties: Allardyce Lumber Company Limited, John Henry Howden Beverley and Devon George Minchin (Plaintiffs/Respondents) Quarter Enterprises Pty Limited and Ronald Harry Gibbs (Defendants/Applicants) Representation: Mr F Assaf (Plaintiffs/Respondents) Mr PE King (Defendants/Applicants) Jackson Lalic Lawyers Pty Limited (Plaintiffs/Respondents) Hayes Partners (Defendants/Applicants) File Number(s): 2010/54251 Judgment 1JOHNSON J: On 4 May 2012, I gave judgment rejecting an application to set aside registration of a judgment under the Foreign Judgments Act 1991 (Cth): Allardyce Lumber Company Limited and Ors v Quarter Enterprises Pty Limited and Anor (No. 2) [2012] NSWSC 438. 2Following judgment, I fixed a short timetable for written submissions on the question of costs. 3Mr Assaf, counsel for the successful Respondents, makes application that the Applicants pay his clients' costs on an indemnity basis. Mr King, counsel for the Applicants, resists that application. In light of my judgment, Mr King accepts that costs should follow the event, but submits that costs should be assessed on the ordinary basis. 4Both Mr Assaf and Mr King were content to have the costs application determined on written submissions. Neither counsel sought an opportunity to make oral submissions with respect to the application. 5On the application of Mr King, I made an order on 4 May 2012, pending determination of the costs issue, staying orders made that day dismissing the Applicants' Notices of Motion filed 27 September 2010 and 22 July 2011. 6That stay will be lifted as part of the orders to be made in this judgment on the costs application. Submissions of the Parties on the Question of Costs 7It is not necessary to repeat in detail the written submissions of counsel on the costs application. 8Mr Assaf submits that an indemnity costs order is appropriate in this case as the Applicants' case was hopeless from the outset, and the conduct of the Applicants has been unreasonable and has been accompanied by a demonstrated failure to comply with the obligations under s.56 Civil Procedure Act 2005. 9Mr Assaf points to the history of the litigation, including the contested application before Davies J to register the foreign judgment, and the conclusions reached by Davies J and myself with respect to the various issues ventilated on behalf of the Applicants. 10Mr Assaf submits that there was delinquency on the part of the Applicants such as to render their conduct unreasonable and sufficient to warrant an order for indemnity costs: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at 89 [44]. 11Mr Assaf referred to a number of aspects of the proceedings which were said to constitute unreasonable conduct on the part of the Applicants. He submitted that these were: (a) the commencement and prosecution of a case which was hopeless from the outset; (b) deliberately failing to raise all issues before Davies J; (c) making a misconceived application for an adjournment of the proceedings (see [23]-[25] of my judgment); (d) seeking to tender and rely upon material that was voluminous and not relevant (the attempt to tender the appeal books - see [182] of my judgment); (e) reading voluminous material, much of which was inadmissible (see [27] of my judgment); and (f) seeking leave to reopen to adduce further (inadmissible and irrelevant) evidence in circumstances where the Applicants had already had ample opportunity to present their case (see [32]-[34], [176]-[190] of my judgment). 12Mr Assaf submitted that the Applicants had failed to assist the Court in conducting this litigation in a just, quick and cheap manner in contravention of s.56(3) Civil Procedure Act 2005. In particular, he submitted that the Applicants had: (a) made spurious and misconceived allegations (especially those relating to fraud) and brought a hopeless case; (b) used the hearing before Davies J as a "trial run" for the present proceedings; (c) read, and sought to rely upon, voluminous material, a substantial part of which was inadmissible; and (d) wasted the Court's time with misconceived applications (the failed adjournment application and the failed application to reopen). 13Mr Assaf submitted that the Applicants had now taken up many days of Court time unnecessarily, and that much of this extra time had been wasted as a result of the unreasonable conduct of the Applicants. In these circumstances, he submitted that an order for costs on an indemnity basis was appropriate. 14Mr King submitted that the grounds relied upon by the Applicants to set aside the judgment were clearly arguable, although each failed on the merits. With respect to the application that the judgment be set aside upon the ground that it had been obtained by fraud, Mr King emphasised that there was controversy as to the relevant legal test of fraud in this context, with this issue being considered in the judgment. He submitted that the Applicants had not persisted in a hopeless argument, although acknowledging that it had been rejected by the Court. 15With respect to the submissions of the Respondents based upon the conduct of the proceedings and s.56 Civil Procedure Act 2005, Mr King submitted that no basis had been demonstrated by the Respondents for a costs order assessed on an indemnity basis. Determination of Application 16In civil proceedings, costs are in the discretion of the Court: s.98 Civil Procedure Act 2005. The usual rule is that costs follow the event: Rule 42.1 Uniform Civil Procedure Rules 2005 ("UCPR"). 17The Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis: s.98(1)(c) Civil Procedure Act 2005. Costs are to be assessed on the ordinary basis unless the Court orders otherwise: Rule 42.2 UCPR. 18The present application for indemnity costs is not based upon the making of any offer of compromise or any offer in accordance with the principles in Calderbank v Calderbank [1974] All ER 333. 19It is for the Respondents to demonstrate that costs should be awarded on an indemnity basis in the circumstances of this case. Departure from the settled practice of costs on the ordinary basis is discretionary. Beyond the need for a sufficient special or unusual feature in the case, no fixed rule can be laid down: Harrison v Schipp [2001] NSWCA 13 at [139]. 20An order for indemnity costs may be appropriate where the case involves some relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council at 89 [44]. 21In this context, some "relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: White Constructions (ACT) Pty Limited (in liquidation) v White and Ors [2004] NSWSC 303 at [10]-[11]. 22Self-evidently, to contest and lose litigation does not of itself expose the losing party to an order for costs on an indemnity basis. As Basten JA (Giles JA and Young CJ in Eq agreeing) said in Chaina v Alvaro Homes Pty Limited [2008] NSWCA 353 at [113]: "While the general rule remains that costs should be assessed on a party and party basis, it is important that the standard to be applied in awarding indemnity costs not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part. A test of unreasonableness should not be upheld on other than clear grounds." 23The present proceedings were brought under the Foreign Judgments Act 1991 (Cth). 24The hearing before me lay towards the end of long and no doubt bitterly contested civil litigation commenced in Solomon Islands in 2000. The history of the litigation appears sufficiently from my judgment (at [8]-[18]). 25It was necessary for the Respondents to seek to register the foreign judgment in the application heard and determined by Davies J. It was open to the Respondents to proceed with that application on an ex parte basis. However, perhaps in the hope that there would be a saving of time and cost in the long term, the Respondents proceeded in a manner whereby the Applicants appeared to contest the registration application. The Respondents succeeded in the application to register the judgment and Davies J ordered that costs should follow the event (to be calculated on the ordinary basis in the absence of any application to Davies J for indemnity costs). 26As is apparent from my judgment (at [43]-[71]), Davies J raised the question as to whether the Applicants, having elected to appear to contest the registration application, ought be expected (if not required) to advance at that time all arguments which were sought to be raised in opposition to registration, including arguments which could be deployed in support of the application to set aside the judgment, if registered. 27Notwithstanding the observations of Davies J, the Applicants advanced some, but not all, of the arguments made on the registration application, with further submissions being advanced before me on the application to set aside the registration of the judgment. 28In the circumstances of the case, I accepted (at [67]) that the Applicants should not be shut out from pressing an application to set aside registration of the judgment given the statutory scheme under the Foreign Judgments Act 1991 (Cth), including the different onus of proof arising at these two statutory stages. 29The grounds relied upon by the Applicants before me were not, in my view, strong. It is the case that some arguments advanced were similar to those considered and rejected by Davies J. However, the evidence adduced before me was different in significant respects to that placed before Davies J. In particular, the fraud ground advanced before me was based upon a different factual foundation, with submissions being made which were not ventilated before Davies J. 30Before me, competing legal submissions were advanced concerning the correct legal approach where it is said that a foreign judgment was obtained by fraud. Having considered the submissions, and stated my conclusion on that legal question, I determined that the Applicants failed to establish this ground whichever legal test was to be applied (see [116]-[150] of my judgment). 31My conclusions at [142]-[144] indicate that the Applicants did not have a strong case in support of this ground. 32It was open to the Applicants to seek to set aside the registration of the judgment following the orders made by Davies J. Although none of the arguments advanced by the Applicants in support of this application were strong (with some being weaker than others), I am not persuaded that the Applicants advanced a hopeless case. In reaching this conclusion, I bear in mind that the test of unreasonableness should not be upheld on other than clear grounds (see [22] above). 33In my view, the stronger basis for the indemnity costs application lies in the conduct of the litigation by the Applicants. In circumstances where it was open to the Applicants to make application to set aside the registration of the judgment, even on grounds which were not strong, there remained nevertheless a requirement to litigate the proceedings in a manner that complied with their obligations under the Civil Procedure Act 2005. 34That the hearing before me could have been conducted by the Applicants in a more efficient manner is not in doubt. The question is whether the conduct of the proceedings by the Applicants involved relevant delinquency so that a finding of unreasonableness should be made to found an order for costs on an indemnity basis. 35Having considered the arguments advanced by the parties, I have concluded that this line has not been crossed in the present case. Although the conduct of these proceedings by the Applicants can hardly be characterised as a model of efficient litigation, the point has not been reached where a finding of unreasonableness ought be made. 36Although there is considerable force in a number of the submissions advanced by the Respondents, I am not persuaded that clear grounds have been demonstrated for an order for costs on an indemnity basis. Conclusion and Orders 37I propose to order that the Applicants pay the Respondents' costs of the two Notices of Motion, to be assessed on the ordinary basis. 38As the stay upon the orders dismissing the Notices of Motion made on 4 May 2012 was a temporary one, made for the purpose of keeping a temporal connection between the operation of those orders and the costs order, that stay should come to an end today. 39Should the Applicants seek any further stay, I will keep in mind that they have had my judgment since 4 May 2012, and ought be well familiar with its contents for the purpose of determining whether appellate review is to be sought. 40I make the following orders: (a) the Applicants are to pay the Respondents' costs of the Notices of Motion filed 27 September 2010 and 22 July 2011 assessed on the ordinary basis; (b) the stay granted on 4 May 2012 is dissolved. ********** 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. Decision last updated: 01 June 2012