Supreme Court New South Wales Medium Neutral Citation: International Skin Care Suppliers Pty Ltd -v- Commonwealth Bank of Australia (No.2) Commonwealth Bank of Australia -v- Scott William Michaelson (No.2) Commonwealth Bank of Australia -v- Stephen John Ruskin (No.2) Commonwealth Bank of Australia -v- Scott William Michaelson (No.2) [2013] NSWSC 1969 Hearing dates: 16 & 19 December 2013 Decision date: 19 December 2013 Jurisdiction: Equity Division - Commercial List Before: Hammerschlag J Decision: Orders as to costs and ancillary matters Catchwords: COSTS - no issues of principle Legislation Cited: Civil Procedure Regulation 2012 (NSW) Cases Cited: International Skin Care Suppliers v Commonwealth Bank of Australia [2013] NSWSC 1768 Category: Procedural and other rulings Parties: Proceedings 2010/326659 International Skin Care Suppliers Pty Ltd ACN 134 156 004 - First Plaintiff Mascot Property Group Pty Ltd - Second Plaintiff Eminence Pty Ltd - Third Plaintiff Sunlovers Partners Pty Ltd - Fourth Plaintiff Tanning Systems Australia Pty Ltd - Fifth Plaintiff Barun Concepts Pty Ltd as Trustee of The Macintosh Unit Trust - Sixth Plaintiff CPL Australasia Pty Limited (subject to Deed of Company Arrangement) - Seventh Plaintiff Commonwealth Bank of Australia - Defendant Proceedings 2011/139468 Commonwealth Bank of Australia - Plaintiff/ Cross-Defendant Scott William Michaelson - First Defendant/First Cross-Claimant Suzanna Michaelson - Second Defendant/Second Cross-Claimant Proceedings 2011/260157 Commonwealth Bank of Australia - Plaintiff/ Cross-Defendant Stephen John Ruskin - First Defendant/ First Cross-Claimant Simone Nanette Ruskin - Second Defendant/Second Cross-Claimant Proceedings 2011/260163 Commonwealth Bank of Australia - Plaintiff/Cross- Defendant Scott William Michaelson - First Defendant/ First Cross-Claimant Suzanna Michaelson - Second Defendant/Second Cross-Claimant Kimberley Gay Whyte - Third Defendant/ Third Cross-Claimant Gay Elizabeth Daly - Fourth Defendant/ Fourth Cross-Claimant Representation: Counsel: D.L. Williams SC - Amicus Curiae A. Leopold SC with J.E. Hynes - Defendants/Cross-Claimants H. Alameddine - Related Proceedings Guarantors S.W. Michaelson - Self-Represented Solicitors: Henry Davis York - Defendants/Cross-Claimants Birchgrove Legal - Related Proceedings Guarantors File Number(s): 2010/326659; 2011/139468; 2011/260157; 2011/260163 Judgment 1The principal judgment in these proceedings was handed down on 29 November 2013: International Skin Care Suppliers v Commonwealth Bank of Australia [2013] NSWSC 1768. 2This judgment deals with costs. Definitions in the principal judgment are used here. 3On 29 November 2013 I directed the parties to exchange written submissions in brief form by 9 December 2013, setting out the orders for costs for which they contended. I directed that any response to those submissions served, be served by 13 December 2013. I directed that copies of submissions be delivered to my Associate. 4Written submissions were received from the Bank. None were received from any other party to the proceedings. 5As to its defence of the plaintiffs' claim, the Bank seeks the costs incurred from and including 20 February 2013 of meeting the clawback arrangement claim on the indemnity basis because, it says, from that time, that claim was exposed as being manifestly groundless, and in promoting it thereafter, baseless charges of dishonesty were levelled at the Bank. Otherwise, the Bank seeks the costs of its defence on the ordinary basis. 6The Bank seeks the costs of its Cross-Claim against the plaintiffs and the costs of its proceedings against the guarantors on the indemnity basis under the terms of the contractual documents which apply in each instance. UCPR Pt 42 r 42.1 provides: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to whole or any part of the costs. 7The Bank has succeeded in its defence of the plaintiffs' claim, in its cross-claims against the plaintiffs in debt, in its claims against all personal guarantors, and in its defence of the female guarantors' cross-claims. 8Leaving aside the special orders sought, which are dealt with below, there is no reason why some other order other than that the unsuccessful parties in each instance pay the Bank's costs should be made. 9Under cll 4.1 and 4.3 of the Guarantee and Indemnity - Terms, to which each plaintiff, Michaelson, Ruskin and the female guarantors, bound himself, herself or itself in favour of the Bank, each must pay the costs incurred by the Bank on default, or in connection with the exercise of the Bank's rights under the Guarantee and Indemnity. Under cl 26, the costs in connection with legal advisers are to be on a full indemnity basis or solicitor and own client basis, whichever is higher. The Bank seeks indemnity costs, presumably as the higher. In addition, cll A19.1 to A19.3 of the Standard Terms applicable to the Rate Tracker and the Bridging Loan (principal judgment [515]) contain provisions to the same effect. 10There is no reason why effect should not be given to these contractual arrangements. The Bank is entitled to the costs of its cross-claim against the plaintiffs, and to the costs of its claims and defences against the guarantors, on the indemnity basis. 11Although the clawback arrangement claim was abandoned, I nevertheless dealt with it in [587]-[605] of the principal judgment. 12The indemnity costs order sought against the plaintiffs in connection with the clawback arrangement claim is sought in respect of the period commencing fourteen days after the service of the affidavits of Ogilvy and Porteous, all of which had been served by 20 February 2013. Those affidavits established that the CPL Group facilities were not included in the Specific Provisions List. 13After service of the affidavits, the plaintiffs pressed for and obtained orders by consent for further discovery from the Bank on the issue of the Bank's consideration of the CPL Group facilities in the context of the clawback provisions. This produced nothing. The plaintiffs then issued subpoenas directed to the same thing. This too produced nothing. These steps were taken on the advice of Senior Counsel and were complete before the hearing began on 26 August 2013. 14At that point, the plaintiffs had affidavits that the CPL Group facilities were not part of the review and the Bank had produced no further documents pursuant to discovery orders and subpoenas on the question. 15Whilst it may well have been the case that it should have been obvious earlier (indeed, far earlier) that the clawback arrangement claim was groundless, in my view, this was certainly the case by the time of the commencement of the hearing. During the hearing there was no challenge to the fundamental fact that the CPL Group facilities were not even part of the review. More than this, and significantly, there was no proper basis for the charges of dishonesty levelled at the Bank in the context of this manifestly groundless claim. 16In these circumstances, an order that the plaintiffs pay the Bank's costs on the clawback arrangement claim on the indemnity basis from 26 August 2013 is appropriate. 17Under Consent Orders made on 29 April 2011, 20 February 2012 and 9 August 2013, the plaintiffs have provided for security for the Bank's costs in the amount of $525,000. The Bank seeks an order that this amount be released to it. Clearly its costs will vastly exceed this amount. It is appropriate that I make the order sought. 18Four sets of proceedings have been determined, of which the Bank is plaintiff in three. It is fair to say that the bulk of attention was paid to the plaintiffs' proceedings. Hearing fees payable under the Civil Procedure Regulation 2012 (NSW) are usually paid by the plaintiff. In this case, if the plaintiff in each case paid the fee, the Bank would pay 75% of the total fees and the plaintiffs 25%. The Bank seeks an order that the plaintiffs pay 75% of the total, and it 25%. I do not consider this to be appropriate because the three sets of proceedings brought by the Bank could have been brought in one set of proceedings, indeed as cross-claims in the main proceedings. 19I make the following orders: 2010/326659 1. Judgment for the defendant on the plaintiffs' claim. 2. Judgment for the cross-claimant on its Cross-Claim against the cross-defendants in the sum of $7,672,545 94 as at 26th November 2012. 3. The cross-defendants are to pay interest on the judgment amount referred to in order 2 in accordance with Practice Note SC Gen 16 from 27th November 2012 until 19 December 2013. 4. The plaintiffs are to pay the defendant's costs of and incidental to the plaintiffs' claim concerning the allegation comprised in paragraphs 80 and 81 of the Further Amended Commercial List Statement and Second Further Amended Commercial List Statement [known as the clawback arrangement allegation] for the period commencing from and including 26th August 2013 on the indemnity basis and otherwise in respect of the remainder of the plaintiffs' claim on the ordinary basis. 5. The cross-defendants are to pay the cross-claimant's costs of the Cross-Claim on an indemnity basis. 6. The security for costs in the sum of $210,000 paid into Court by the plaintiffs in accordance with orders made on 29th April 2011 and 9th August 2013 together with any interest thereon, is to be released and paid forthwith to the defendant. The defendant may make demand on the bank guarantee issued by the Australia and New Zealand Banking Group to the defendant in the sum of $305,000 and provided by the plaintiffs to the defendant in respect of security for costs in accordance with the orders of 20th February 2013. 2011/260163 1. Judgment for the plaintiff against the first defendant in the sum of $ 4,521,775.08. 2. Judgment for the plaintiff against the second defendant in the sum of $4,676,775.08. 3. Judgment for the plaintiff against the third defendant in the sum of $4,521,775.08. 4. Judgment for the plaintiff against the fourth defendant in the sum of $4,521,775.08. 5. The defendants are to pay interest on the judgment amount referred to in orders 1 - 4 above in accordance with Practice Note SC Gen 16 from 27th November 2012 until 19th December 2013. 6. Judgment for the cross-defendant on the claims in the cross-claimants' Cross-Claims. 7. The defendants/cross-claimants are to pay the plaintiff's/cross-defendant's costs on the indemnity basis. 2011/260157 1. Order for possession of the property comprised in Certificate of Title folio identifier 3/51/237501 being the land situated at and known as 6 Derna Place, Allambie Heights New South Wales 2100. 2. The plaintiff has leave immediately to apply for the issue of a Writ of Possession in respect of the property referred to in order 1. 3. Judgment for the plaintiff against the first defendant in the sum of $4,521,775.08. 4. Judgment for the plaintiff against the second defendant in the sum of $2,857,517.36 5. The defendants are to pay interest on the judgment amount referred to in orders 3 and 4 in accordance with Practice Note SC Gen 16 from 27 November 2012 until 19th December 2013. 6. Judgment for the cross-defendant on the claims in the cross claimants' Cross-Claims. 7. The defendants /cross-claimants are to pay the plaintiff's/cross-defendant's costs on the indemnity basis. 8. A Writ of Possession may forthwith be issued in respect of the property referred to in order 1 above. The Writ is to lie in the Registry until 30th January 2014 and may be executed thereafter. 2011/139468 1. Order for possession of the property comprised in Certificate of Title folio identifier 7/588700 being the land situated at and known as 21 Seaforth Road, Seaforth, New South Wales 2092. 2. The plaintiff has leave immediately to apply for the issue of a Writ of Possession in respect of the property referred to in order 1. 3. Judgment for the plaintiff against the first and second defendants in the sum of $2,924,825.16. 4. The first and second defendants are to pay interest on the judgment amount referred to in order 3 in accordance with Practice Note SC Gen 16 from 27th November 2012 to 19th December 2013. 5. Judgment for the cross-defendant on the claims in the cross-claimants' Cross-Claims. 6. The defendants/cross-claimants are to pay the plaintiff's /cross-defendant's costs on the indemnity basis. 7. A Writ of Possession may forthwith be issued in respect of the property referred to in order 1 above. The Writ is to lie in the Registry until 30th January 2014 and may be executed thereafter. I note that the bank has undertaken not otherwise to enforce the judgments in its favour until after 31st December 2013. The orders in each instance may be entered forthwith. ********** 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: 26 March 2014