Supreme Court New South Wales Medium Neutral Citation: Ian Huntly Philip v JPM Developments Pty Ltd [2015] NSWSC 495 Hearing dates: 29 April 2015 Date of orders: 01 May 2015 Decision date: 01 May 2015 Jurisdiction: Equity Division - Expedition List Before: Sackar J Decision: See [11], [27] Catchwords: PRACTICE AND PROCEDURE – declaratory relief – form of orders – discretionary considerations – basis on which trial conducted – focus of the relief COSTS – costs against non-party – factors to be taken into account – whether party a "man of straw" – interest of non-party in proceedings – discretionary considerations Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Knight v FP Special Assets Limited (1992) 174 CLR 178 FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 Texts Cited: n/a Category: Procedural and other rulings Parties: Ian Huntly Philip & Ors - plaintiffs JPM Developments Pty Ltd - defendant Representation: Counsel: J M Hennessey SC - plaintiffs A Casselden - defendant Solicitors: Allens Linklaters - plaintiffs Bradbury Lawyers - defendant File Number(s): 2014/312093 Publication restriction: n/a Judgment 1. I gave judgment in this matter on 6 March 2015. There are two issues that have arisen. The first is the appropriate declaratory and injunctive orders in light of my judgment. The second is a claim that Mr Maharaj, the sole director and shareholder of the defendant, be responsible for the costs of the litigation in the event the defendant is unable to pay. The defendant accepts that as the unsuccessful party it should pay the costs on an ordinary basis. Form of the orders 1. Both the plaintiffs and the defendant submitted proposed orders. 2. I regarded neither as appropriate. 3. The plaintiffs' proposed orders were too broad and general and would potentially have the effect of preventing any development consistent with the development approval obtained from the Council and/or any proposed amendments thereto. On the other hand the orders proposed by the defendant are again in my view too broad and would potentially have the effect of permitting it to undertake other works on the Property other than those identified in the judgment as causing substantial interference with the right of carriageway. Neither set of proposed orders reflects the way in which the case was conducted and hence decided. 4. The case was conducted before me by both parties on the basis that, although the relief sought by the plaintiffs was in broad and general terms, quite specific matters were focused upon as relevantly comprising the substantial interference with the right of carriageway. The defendant met that limited case. All the factual and expert evidence was directed to that case. 5. The specific complaints said to give rise to the interference were: 1. The proposed permanent car space behind 1 Barcom Avenue; 2. The proposed landscaping behind 1 Barcom Avenue and adjacent to 1A Barcom Avenue; and 3. The proposed height restriction of 2.2 metres or less when accessing the Property from Barcom Avenue. 1. Neither party sought to expand the case beyond those quite precise and limited aspects. For example the plaintiffs did not contend that the whole concept of the development amounted to a substantial interference with the right of carriageway. Nor did the defendant seek to contend that by excluding the matters highlighted by the plaintiffs the development otherwise could not amount to a substantial interference. 2. The power to grant declaratory relief is a discretionary power. The relief must be directed to the determination of the particular legal controversies and not to answering abstract or hypothetical questions. 3. A declaration must be composed and framed with an eye to the efficient administration of justice. The declaration must state the established facts that determine the legal issue involved in the facts. Those facts should be the focus of the relief. 4. For example the form of declaration should not allow a plaintiff to obtain something that plaintiff could not obtain if the words of the order better expressed the real nature of the claim being made. 5. For those reasons I am of the view that the form of the orders should be restricted accordingly. In the course of discussion with Counsel a form of order was proposed by the plaintiffs which in my view satisfied these concerns. I would propose to make those orders. Costs against a non-party 1. The Court is empowered pursuant so s 98(1) of the Civil Procedure Act 2005 (NSW) to order costs against a non-party. In this case, the orders proposed in the plaintiffs' short minutes are based on a number of factors as follows. 2. The defendant company is a $1 company of which Mr Maharaj is the sole director and shareholder. 3. Having seen the Property advertised on Domain on 9 June 2014 Mr Maharaj viewed the Property on 10 June 2014. He made an offer, which was accepted, and personally paid a 5% deposit that day. 4. On 20 June 2014 Mr Maharaj caused the defendant to be incorporated, presumably as a special purpose vehicle. It became the purchaser and is the registered proprietor of the Property. Contracts were exchanged on 23 June 2014. 5. The property was acquired by way of a loan from Zoro Developments Pty Ltd (Zoro), which itself was only incorporated on 30 June 2013. Mr Maharaj's 23 year old son is the sole director and shareholder of Zoro. There is no evidence as to Zoro's source of funds. 6. Mr Maharaj, in evidence before me, indicated that he had sold his family home in Manly and that he and his son proposed to live in the residence once it was constructed, (T55, 10 February 2015). 7. It seems that on 26 September 2014 the defendant entered into a building contract with an entity called Project Built for the construction of the proposed "coachhouse". The cost of the building work is estimated at $300,000 with staged progress payments to be made. The evidence is unclear as to whether any monies have yet been paid to Project Built but it may well be that an amount of $15,000 has been paid as a deposit. Some minor works have been carried out by way of commencement of works which involve some markings on the laneway to identify services and some bore holes. 8. The defendant has only one asset, which is the Property, and it has a mortgage of $350,000, which was the purchase price. It has no other assets, nor does it have any income. On the evidence it will be entirely dependent upon Mr Maharaj or one of his corporate entities to satisfy any liabilities. 9. A notice to produce was served upon the defendant seeking: 1. Any documents identifying the source of funds for JPM's legal costs and disbursements in these proceedings; 2. Any documents recording the transfer of any funds related to JPM's purchase of the Property (whether pursuant to the mortgage between JPM and Zoro or otherwise); (a) from Peter Prasad Maharaj or any other entity associated with him to Zoro or to Zoro's director, Jordan Prasad Maharaj; and/or (b) from Zoro or Jordan Prasad Maharaj to JPM or Peter Prasad Maharaj. 1. When the notice was called upon two pages were produced in answer to those paragraphs. Neither was tendered. 2. It was admitted by the defendant that the defendant's legal fees were being paid by yet another of Mr Maharaj's companies, Pyramid Consulting Pty Ltd. It is also a $1 company. Mr Maharaj is its sole director and shareholder and it is in the business of providing engineering and consultancy services, (TT 19 and 25, 29 April 2015). 3. The authorities suggest that a court should exercise the discretion to order costs against a non-party only in exceptional circumstances. In Knight v FP Special Assets Limited (1992) 174 CLR 178 (Knight), Mason CJ and Deane J considered (footnotes omitted): As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made. For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made. 1. In FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340, Basten JA (with whom Beazley JA agreed) discussed the High Court's decision in Knight at [210]: …It is also true that the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms. A further example, not encompassed by those identified to date, is illustrated by Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429, a decision of the Full Court of the Federal Court in relation to an order sought against a litigation funder. The judgment contains an extensive analysis of the case law, including consideration of the judgment of Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406. It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to a general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not the majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party of its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw. 1. One of the matters a court will take into account is if it forms the view that the unsuccessful party is not, in reality, the "real" party or is only a "nominal" party. 2. Here, there is little doubt the source of funds for the litigation is and/or was Mr Maharaj or one of his corporate entities, but clearly not the defendant. It seems to me that Mr Maharaj's interest in the litigation is equal to, if not greater than, that of the defendant. The defendant is merely a special purpose vehicle. Mr Maharaj has a real interest in the outcome because amongst other things, according to his evidence (which was unchallenged), he plans to reside in the dwelling. It also seems to me that the defendant can legitimately be described as a person of straw. It has no assets beyond the Property which is fully mortgaged. It has no income and there is no valuation of the Property suggesting there is any equity over and above its debt. 3. In the circumstances I am satisfied that I should exercise my discretion, which would have the effect of making Mr Maharaj responsible for the costs of the proceedings if the defendant is unable to pay. ********** 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 May 2015