Supreme Court New South Wales Medium Neutral Citation: Noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals (No 2) [2016] NSWSC 1960 Hearing dates: In chambers. Date of orders: 30 October 2017 Decision date: 30 October 2016 Jurisdiction: Equity Before: Robb Decision: See par 75 to 78. Catchwords: COSTS — Party/Party — Bases of quantification — Indemnity basis — Whether indemnity costs order should be made. COSTS — Party/Party — Orders against non-parties — Whether non-party costs order should be made against principal of first plaintiff. Legislation Cited: Civil Procedure Act 2005 (NSW) s 95 Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 42.5 Cases Cited: Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 Hamod v New South Wales [2011] NSWCA 375 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 Keen v Telstra Corporation (No 2) [2006] FCA 930 Knight v FP Special Assets Ltd (1992) 174 CLR 178 Noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals [2017] NSWSC 502 Siteberg Pty Ltd v Maples [2010] NSWSC 307 Treloar Constructions Pty Ltd v McMillan (No 2) [2017] NSWCA 146 United Dominions Corporation Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 Zandata Pty Ltd v Riley [2013] NSWSC 49 Category: Costs Parties: Noble Earth Technologies Pty Ltd (first plaintiff) Barry Schwind (second plaintiff) Hampic Pty Limited (in liquidation) trading as Cyndan Chemicals (first defendant) Sami George Raheb (second defendant) Loremo Pty Ltd trading as Cyndan Manufacturing (third defendant) Representation: Counsel: M Galvin (plaintiffs) J Zmood (second and third defendants) Solicitors: Creagh & Creagh (plaintiffs) Baron & Associates (second and third defendants) File Number(s): 2013/258734 Judgment 1. I gave judgment in these proceedings on 2 May 2017: see Noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals [2017] NSWSC 502. 2. I ordered that the plaintiffs' claim should be dismissed with costs. I also ordered that the costs should be payable on the ordinary basis unless the defendants informed the court that they wished to argue that the costs should be payable on some different basis. 3. As I noted in my judgment, an order for the winding up of the first defendant was made at some stage during the course of the proceedings. Leave was not given to the plaintiffs to proceed against the first defendant. The proceedings were subsequently conducted without any involvement of the first defendant. The only active defendants are the second defendant, Mr Raheb, and the third defendant, Loremo Pty Ltd t/as Cyndan Manufacturing. When I refer to the "defendants" I will mean only the active defendants. 4. As commonly occurs, I made directions that have had the effect that the costs issues will be decided on the papers in chambers. The parties provided written submissions. There was no oral argument, and the parties were not given an opportunity to tender additional evidence. I am of the view that it is appropriate for the court in these circumstances to take into account its recollection of the course of the trial, and the various documents that comprise the court's file in so far as they properly bear on the costs issue. Costs orders sought by defendants 1. On 2 May 2017, counsel for the defendants informed the court that the defendants would make an application that their costs be payable by the plaintiffs on an indemnity basis. 2. On 19 June 2017, the defendants filed a notice of motion in which they seek the following order: That [the] cost of the proceeding be awarded against Harry Rex Pearsall, a non-party, on an indemnity basis, pursuant to section 98(2) Civil Procedure Act 2005. 1. As I recorded at [4] of my judgment in these proceedings, Mr Pearsall has at all relevant times been the principal of the first plaintiff. Mr Pearsall for all relevant purposes acted as the agent of the first plaintiff in the dealings the subject of the proceedings. It was not necessary for the purposes of the judgment to identify the precise nature of the relationship between Mr Pearsall and the first plaintiff. 2. The notice of motion was supported by an affidavit made on 19 June 2017 by the solicitor who had the carriage of the proceedings for the defendants, Mr Atanaan Ilango. That affidavit also supports the defendants' claim that the defendants' costs be paid by the plaintiffs on the indemnity basis, and the other orders now sought by the defendants. 3. Written submissions made on 19 June 2017 were also served on behalf of the defendants. Those written submissions stated that the defendants seek the following orders (which I have paraphrased): 1. An order that Mr Pearsall and the second plaintiff, Mr Schwind, pay the defendants' costs on an indemnity basis, being a specified or gross sum of $250,733.51. 2. Alternatively, an order that Mr Pearsall and Mr Schwind pay the defendants' costs on the ordinary basis up to and including 29 May 2015 (the date on which an offer that the defendants say was a Calderbank offer was made) and on the indemnity basis thereafter, being a specified or gross sum of $246,179.01. 3. In the further alternative, if an order is not made that Mr Pearsall pay the defendants' costs personally, the orders sought in (1) and (2) should be made against the plaintiffs. 4. An order that Mr Pearsall and Mr Schwind, or alternatively the plaintiffs, are to pay the costs of the costs hearing on an indemnity basis, being $11,464. 1. The plaintiffs accepted that the costs of the proceedings should follow the event and they should be ordered to pay the defendants' costs on the ordinary basis. They submitted that there was no proper basis for ordering Mr Pearsall to pay the defendants' costs personally, or for an order that anyone pay those costs on the indemnity basis. They opposed the assessment of costs on a gross sum basis, as they submitted that the circumstances did not disentitle them from challenging the amount of the costs sought by the defendants by the ordinary process of assessment. Background 1. This matter was originally set down for hearing before Darke J commencing on 1 June 2015 2. On 1 June 2015, when the proceedings were called on for hearing, Mr Zmood announced his appearance for the first defendant. There was no appearance for Mr Raheb, the second defendant. According to the transcript, Mr Zmood specifically confirmed on a number of occasions that he only appeared for the first defendant. 3. Senior counsel for the plaintiffs advised Darke J that his solicitors had previously served a proposed draft amended statement of claim on the then solicitors for the first defendant, who the legal representatives for the plaintiffs understood also acted for Mr Raheb. 4. Senior Counsel acknowledged that it would be difficult to deal with the proposed amendment, as there was no appearance for Mr Raheb, and no arrangements had been made to bring him to court from Parklea Correctional Centre where he was incarcerated at the time. 5. Darke J adjourned the proceedings to 2 June 2017, and arrangements were made for Mr Raheb to be brought to court on that day. 6. The transcript for 2 June 2015 records that Mr Raheb was present in court. He was not legally represented, and had made no preparations to conduct a defence of the plaintiffs' claim. Mr Raheb said that he thought he was represented by the legal representatives of the first defendant, and was somewhat nonplussed to learn that he was not so represented and nothing had been done to advise him of the hearing. 7. Darke J vacated the hearing. His Honour directed the plaintiffs to file and serve any amended statement of claim within 7 days. He noted that a copy of the court book and a copy of the bundle of emails had been given to the correctional services officer who accompanied Mr Raheb to court. He directed Mr Raheb to take reasonable steps to engage a solicitor within 14 days. He adjourned the matter to 29 June 2015 for directions. Finally, his Honour reserved all costs of and incidental to the vacation of the hearing. 8. On 29 June 2015, Darke J granted the plaintiffs leave to file an amended statement of claim, and ordered the plaintiffs to pay the costs of, and occasioned by, the amendment. The defendants were ordered to file and serve defences, and directions were made for the filing and service of affidavits. 9. One aspect of the amended statement of claim that was filed on 29 June 2015 was that the third defendant was joined to the proceedings. Power of court to award costs 1. The primary source of the court's power to award costs is s 98 of the Civil Procedure Act 2005 (NSW), which relevantly provides: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. … (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount… 1. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) in turn provides that, where the court makes an order as to costs, the court is to order that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. The manner in which costs ordered to be paid on the indemnity basis are to be assessed is set out in r 42.5 of the UCPR. Claim for indemnity costs from plaintiffs 1. The defendants' first ground for the claim that the plaintiffs should be ordered to pay their costs on the indemnity basis rests on the plaintiffs' conduct of the proceedings. The defendants rely upon the following aspects of the plaintiffs' claim: 1. The plaintiffs alleged that Mr Raheb and the third defendant in various ways participated with knowledge in a dishonest and fraudulent design by the first defendant, when there was no evidence of such design, and in closing submissions the plaintiffs abandoned the primary fiduciary claim against the first defendant and Mr Raheb. 2. The plaintiffs alleged that a joint-venture was entered into between the plaintiffs and the first defendant when the plaintiffs' own evidence confirmed that no agreement had been reached. 3. The plaintiffs pleaded that a joint-venture existed when they ought to have known that this claim was bound to fail because there was no evidence of the agreement to an essential term, being the share of profits between the parties. 4. The plaintiffs prosecuted a claim for an account of profits from the defendants when there was no evidence of any further sales than were alleged in the statement of claim and admitted by the defendants. 1. It is appropriate that I make a number of introductory observations before I deal with the substance of the defendants' arguments that the plaintiff should be ordered to pay their costs on the indemnity basis. 2. It is true, to use the vernacular, that the plaintiffs lost the case hands down. There are quite a few places in my primary judgment where I explained that it was my view that the plaintiffs' case simply could not succeed on the evidence before the court. The defendants have relied upon those aspects of the primary judgment in their submissions in support of their claim for indemnity costs, and those aspects form the basis of some of the grounds for the plaintiffs' claim that I have identified above. 3. There has been many a case that has been conducted responsibly and with a genuine belief in its merits that has failed completely. That is a frequent consequence of the vicissitudes of litigation. The court should be careful when it considers the appropriate basis for a costs order in respect of a case that has entirely failed to distinguish between cases that involve an element of delinquency that should not have been commenced or continued, and cases that are genuine and have been approached conscientiously by the parties who have initiated them, but where the outcome at the end of the day is total failure. 4. I am clearly of the opinion, having observed Mr Pearsall and Mr Schwind under cross-examination and by observing their attentiveness throughout the seven days of the hearing that they were genuine and believed they had a meritorious claim against the defendants. 5. The plaintiffs' case faced forensic difficulties in that it ultimately depended upon proving that there was sufficient evidence that one or other of the defendants had made substantial sales of Vitroglaze to Emirates Glass or other purchasers in the Middle East to justify the court in making an order against the defendants for an account. The court could only make such an order if the plaintiffs also established some breach of duty by the defendants that made them accounting parties to the plaintiffs. 6. While proof that substantial sales of Vitroglaze were made was only one of the crucial issues, if it had been established it would probably have had significant consequential effects on the outcome of the court's findings in relation to other issues. It is not appropriate to venture too far into this issue as it is a matter of speculation, but if the court had found that one or other of the defendants had sold substantial quantities of Vitroglaze to Emirates Glass that would have substantially undermined the credibility of Mr Raheb's evidence. 7. There were forensic difficulties involved in the plaintiffs proving that sales of Vitroglaze had taken place. It is unlikely that the plaintiffs were in a position to compel the production of documents by Emirates Glass. There was apparently an application for preliminary discovery and notices to produce were served on various defendants. There was apparently a threat made on behalf of the plaintiffs at one stage to seek an order for discovery, but that was apparently not pursued. Those efforts yielded nothing more than the evidence of the few sales pleaded in the amended statement of claim and admitted by the defendants. It also yielded the testimonial that I set out at [206] of the primary judgment. That testimonial stated that Emirates Glass had been purchasing Vitroglaze for more than three years. 8. In the absence of any other evidence, I accepted the evidence given by the principal of the third defendant concerning the significance of the testimonial: see [208]. At some stage, the time of which is unclear to me, the first defendant went into liquidation. The first defendant was the primary defendant and if substantial sales of Vitroglaze were made to Emirates Glass, they were likely made by the first defendant. It cannot be known whether the fact of the first defendant's winding up had any negative effect on the capacity of the plaintiffs to obtain evidence from sources in Australia that substantial sales of Vitroglaze had been made to Emirates Glass. At one point counsel for the defendants suggested that if any documentary evidence was available it could have been found by issuing a subpoena to Australian Customs. I do not know whether that course would have been feasible to the plaintiffs. 9. I mention these matters because of an incident that occurred on the fourth day of the hearing, 11 July 2016, that in my view is important to the court's determination of whether the plaintiffs acted reasonably in pursuing their claim against the defendants. The case was originally set down for hearing over the three days between 8 and 10 February 2016. At the end of 10 February 2016, Mr Pearsall and Mr Schwind had finished giving their evidence, but the plaintiffs' case was not closed. One issue that had arisen during the first part of the hearing was the need for the plaintiffs to prove that at least substantial sales of Vitroglaze had been made by one or other of the defendants to Emirates Glass that would satisfy the court that the ordering of accounts against the defendants would not be futile. The case was then set down for 11 and 12 July 2016 for a continuation of the hearing (which also required 16 December 2016 and 6 March 2017). 10. On 11 July 2016, the plaintiffs applied for leave to read the affidavit of Thomas Moore sworn 3 June 2016. The affidavit had been served on the defendants' solicitors on 6 June 2016, but it had not come to their counsel's attention until shortly before the resumed hearing, for reasons that are not now material. The principal problem faced by the plaintiffs was that Mr Moore was apparently in New Zealand, and for reasons that were not disclosed the plaintiffs were unable to bring him to court to be cross-examined. The defendants objected to the plaintiffs being given leave to read Mr Moore's affidavit because of his unavailability for cross-examination, and also because they had not had enough time to prepare a response to his evidence. 11. I rejected the plaintiffs' application for leave to read Mr Moore's affidavit notwithstanding his absence for the purposes of cross-examination in an ex tempore judgment that I gave on 11 July 2016. The reasons for my decision are not now material, but it will be important that I set out the part of the judgment in which I described the effect of Mr Moore's evidence. I said: Mr Moore describes himself as a senior technical director and CEO of Glass Expert Services. Put shortly, Mr Moore appears to have some expertise in the use of glass in construction. He says that between June 2010 and March 2012 he was employed by Emirates Glass as senior technical director. He gives certain evidence of the dealings between Emirates Glass and other glass companies in the Middle East. He says that whilst employed by Emirates Glass one of his tasks was to investigate the application of Vitroglaze, and eventually, in paragraphs 9 to 11 he gives certain generally worded evidence of his recollection of the purchase of supplies of Vitroglaze by Emirates Glass from the first defendant. He gives evidence in a very general way of what he describes as his observations concerning the quantity of Vitroglaze in Emirates Glass's storeroom, and he gives a general statement of the approximate price per litre of Vitroglaze, and then finally, makes an assertion in round figures of the quantity of Vitroglaze purchased by Emirates Glass calculated as a round figure in United States dollars. He says that he left his employment with Emirates Glass in 2012, and does not have any direct knowledge of the company's dealings thereafter. 1. Mr Moore's affidavit became MFI 2 in the proceedings. Mr Moore said that he personally signed orders for the purchase by Emirates Glass of 110,000 L of Vitroglaze, and there was approximately 20,000 L of the product in the store room when he commenced employment. Mr Moore estimated that the cost of the 130,000 L of Vitroglaze would be approximately US $13 million. As Mr Moore had left the employee of Emirates Glass, he could not support his evidence by any documentation. 2. As Mr Moore's affidavit was not read, it was not tested by cross-examination. I therefore cannot draw any conclusions of fact based upon the contents of the affidavit, but on the issue of costs in my view it is proper to have regard to the fact that the affidavit exists, it was apparently made by a person in a position of authority who was able to observe the matters of which he deposed, and its contents were made known to the plaintiffs before they closed their case at the hearing. It is reasonable to infer that the evidence that Mr Moore would have given is broadly consistent with the belief of Mr Pearsall and Mr Schwind concerning sales made by one or more of the defendants to Emirates Glass. 3. At the time the court rejected the plaintiffs' application for leave to read Mr Moore's affidavit, the plaintiffs still had the opportunity to cross-examine Mr Raheb. While it is true that they were bereft of documentary evidence to assist them in the cross-examination on the issue of sales of Vitroglaze that the first defendant may have made to Emirates Glass before its winding up, it would not in my view have been unreasonable for the plaintiffs to hope to gain admissions from Mr Raheb of at least sufficient sales to justify the court ordering an accounting to take place. As it happened, the plaintiffs got no joy on this issue from Mr Raheb. 4. The court was then required to put the contents of Mr Moore's affidavit entirely out of mind for the purpose of deciding the plaintiffs' claim. 5. The circumstances in which a court may order that costs be paid on the indemnity basis rather than the ordinary basis have been considered in many cases. It is not necessary to canvass all of those authorities. The judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 at 256–257 has been frequently cited. His Honour said: It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred: … 2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. … In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity. 3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. … 4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require". Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston [1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: "the categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata. 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice. 1. For the purposes of the present case it is to be noted that Sheppard J said in relation to allegations of fraud that the discretion to order that the unsuccessful plaintiff should pay costs on the indemnity basis may be enlivened if the plaintiff knew that the allegations were false or made them notwithstanding that they were irrelevant to the proceedings. His Honour referred to misconduct in relation to the causation of the loss of the court's time, to commencing proceedings with an ulterior motive, or wilfully disregarding known facts and established principles. It may be relevant if allegations are made that ought never to have been made. A common theme of these examples is that they involve some form of misconduct or unjustifiable behaviour. 2. It will be sufficient to refer to the following part of the judgment of McDougall J in White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 at [5]–[11], which his Honour repeated in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]. McDougall J summarised the applicable principles for an award of indemnity costs as follows: [5] The basic rule is that a successful party is entitled to its costs on a party and party basis: see for example Pt 52A r 32. See also the judgment of Mason P in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616 . [6] It is clear, of course, that there is a discretion to award costs on the indemnity basis. That follows from, among other sources, s 76(1) of the Supreme Court Act and Pt 52A r 32. [7] The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 , 256–257. [8] What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant. In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard. [9] At the most basic level, the statements of principle indicate — not unsurprisingly — that there must be some sufficient special or unusual feature to justify departure from the ordinary rule. [10] I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 9. Their Honours said at [44] (I omit citations): It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part. . [11] I read what their Honours said on the basis that "some relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412, 415; NMFM Property Pty Ltd v Citibank Ltd (No 2) (2000) 109 FCR 77. 1. While the circumstances in which the court may order that costs be paid on the indemnity basis are more complex than could be described by the use of single words such as "misconduct" or "delinquency", these words are useful to distinguish situations where an award of indemnity costs may be appropriate from others where in reality all that can be distilled from a retrospective examination of the proceedings is that one party has comprehensively lost the case. 2. In the exercise of my discretion, I have decided that this is not an appropriate case for the court to order the unsuccessful plaintiffs to pay the defendants' costs on the indemnity basis. 3. Having had the benefit of observing the manner in which this hard-fought case was conducted, I have not detected any relevant misconduct or delinquency in the way the plaintiffs commenced or conducted of the case. As it has turned out, their inability to obtain objective admissible evidence of any significant sales of Vitroglaze by the first defendants to Emirates Glass has proved destructive of their case. It cannot be known whether if more determined steps had been taken on their behalf the plaintiffs would have succeeded in obtaining documentary evidence from the liquidator of the first defendant that would have proved the making of sales, or whether more timely preparation and the availability of Mr Moore to attend the court for cross-examination would have improved their position. I am satisfied on the materials that are available that the plaintiffs had a genuine and not entirely baseless belief that they could succeed in their case against the defendants. 4. The ultimate inability of the plaintiffs to establish a significant level of sales of Vitroglaze by the first defendant to Emirates Glass had damaging consequences to the plaintiffs' case based upon the claim that the joint-venture that was being negotiated had reached a sufficient stage that fiduciary obligations were imposed upon the first defendant to the knowledge of Mr Raheb, and ultimately the third defendant who sold limited amounts of Vitroglaze to Emirates Glass. The plaintiffs' case was not based upon a final and complete joint-venture, but on the claim that the arrangements between the parties had proceeded sufficiently to a point where fiduciary obligations may have arisen in advance of the formal commencement of a joint-venture: United Dominions Corporation Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 at 11-12. 5. It is clear, speaking briefly, that the plaintiffs introduced the first defendant and Mr Raheb to the opportunity of making sales of Vitroglaze to customers in the Middle East, and Mr Pearsall, Mr Schwind and Mr Raheb visited Dubai together to interview contacts made available by Mr Schwind, with the objective of establishing a joint-venture of some form. Had the plaintiffs been able to establish that the first defendant had made significant sales of Vitroglaze behind their backs, there may well have been a basis for them to succeed in an equitable claim notwithstanding that the negotiations for the terms of the joint-venture were incomplete. In this regard it should be noted that the three gentlemen initially visited Dubai in September and October 2009, and Mr Moore's affidavit contained a statement that he observed approximately 20,000 L of Vitroglaze in Emirates Glass' store room in about June 2010. 6. In conclusion, I am satisfied that the present is a case where it would be wrong for the court to reason retrospectively from the outcome that the plaintiffs were delinquent in pursuing their claims against the defendants. Claim for indemnity costs based upon 'Calderbank offer' 1. The defendants seek an order that the plaintiffs pay their costs on the indemnity basis from the 29 May 2015, as a result of exchanges of emails between counsel. 2. On 29 May 2015, Mr Zmood of counsel sent a without prejudice email to the then senior counsel for the plaintiffs, in the following terms: Further to our telephone conversation earlier today, we are instructed that our client make (sic) the following counterproposal: 1. An account, by way of audit, be taken of profits made by the First Defendant from sales of Vitroglaze by the First Defendant to Emirates Glass LLC and that the First Defendant pay to the Plaintiffs their respective proportions of the amount as determined subject to para [37] of the Defence; 2. Where the audit referred to above discloses no further sales of Vitroglaze from the First Defendant to Emirates Glass LLC, other than those already known to the Plaintiffs and/or disclosed by the Defendants, the Plaintiffs agree to pay the Defendants (sic) costs of these proceedings in full and forthwith. 3. Where further sales of Vitroglaze from the First Defendant to Emirates Glass LLC, other than those already known to the Plaintiffs and/or disclosed by the Defendants, are disclosed in the audit (referred to above), costs of the proceedings await the outcome of the account, and once the costs of the account enquiry are quantified, each party may make submissions as to costs of the proceeding. I am told this offer is (sic) shall expire at COB/5 PM today. Please do let me know your thoughts by then? 1. The plaintiffs' senior counsel responded by email on the same day to Mr Zmood, without prejudice, as follows: I have formal instructions to propose that the hearing for next week can be resolved as follows: 1. Your clients (sic) consent to an account as pleaded in the statement of claim. 2. Costs of the proceedings await the outcome of the account. (with the intent that each party could make submissions as to costs having regard to the result of any account). 3. There be agreed directions as to the steps necessary, including preparation of evidence, issuing of subpoenas and the like, to have the account. If your clients are agreeable to this course, we could prepare consent orders to give effect to the agreement and send them to the Associate to Darke J or have him make them on Monday morning. I am happy to discuss any aspect of this offer. I have to leave chambers by 5pm. 1. Mr Zmood in turn responded by email on 29 May 2015, by saying: Client confirms: 1. MYOB accounting records – these contain all accounting records / orders and can they can (sic) attend & he can provide a printout discrete to EG, which will show all sales records; 2. If they want, he can provide bank statements re same; 3. Timing: he can make those available today at his place of business – and if they wish to take-up the offer they should do so today. 4. Subject to 1-3, Plffs should then be prepared to say whether they are willing to withdraw the claim or not. The offer stands for today. If any of the above is unclear, please do call. 1. There is no statement in Mr Zmood's emails that they were intended to have the effect of a Calderbank offer or that they would be relied upon on the question of costs if not accepted by the plaintiffs. 2. This email correspondence occurred on 29 May 2015, in anticipation of the commencement of the hearing that was then fixed for 1 June 2015 before Darke J. 3. The circumstances that I have outlined above provide the first reason why the defendants are not entitled to rely upon the emails as if they had the effect of a Calderbank offer. The reason is that when Mr Zmood communicated with the then senior counsel for the plaintiffs, he only did so as counsel for the first defendant. Mr Zmood's own statements to Darke J establish that he did not represent Mr Rehab, and he could not have represented the third defendant, as it was not then a party. There is no evidence that any offer made in the emails was renewed on behalf of the defendants. 4. In any event, Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 at [42] and Treloar Constructions Pty Ltd v McMillan (No 2) [2017] NSWCA 146 at [10] establish that an indication that an offer will be relied on in relation to the question of costs should a verdict more favourable be achieved is the essence of a Calderbank offer. There was no such indication in the emails relied upon by the defendants, and accordingly the court should not read the emails together as having the effect of a valid Calderbank offer. Claim for gross sum costs orders 1. The defendants seek a gross sum costs order. The court has power to make that order under s 98(4)(c) of the Act. 2. The principles that are to be applied to decide whether the court should make a gross sum costs order, and if so, how the court should determine the proper amount of those costs, have been authoritatively and conveniently set out by Beazley JA (as her Honour then was), with the agreement of Giles and Whealy JJA, in Hamod v New South Wales [2011] NSWCA 375, as follows: [813] I have already set out the relevant provisions of s 98. The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]–[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]: The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available. [814] See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW, LexisNexis, Sydney, 2005 to date, "Civil Procedure Act", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd; Lorenzato v Lorenzato (No 2) [2011] NSWSC 790 per Black J. [815] In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; 135 ALR 160, von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable. [816] The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie's Uniform Civil Procedure NSW at [s 98.45]. [817] The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]–[195]; Hadid v Lenfest Communications Inc [2000] FCA 628. [818] The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]). [819] The assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing: Smoothpool v Pickering [2001] SASC 131. In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5 ; [1999] FCA 673. [820] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills): Beach Petroleum NL v Johnson (No 2); Leary v Leary; Harrison v Schipp at 743 ; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164–165; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164–165. 1. The decisions relied upon by the defendants, being Keen v Telstra Corporation (No 2) [2006] FCA 930 at [5], Siteberg Pty Ltd v Maples [2010] NSWSC 307 at [22], and Zandata Pty Ltd v Riley [2013] NSWSC 49 at [89] are consistent with these principles. 2. In seeking the making of a gross sum costs order by the court, the defendants rely upon the following factors: 1. the plaintiffs' conduct of the proceedings; 2. whether the plaintiffs would be able to meet any liability which is likely to result from assessment; and 3. whether the cost of assessment would be disproportionate to the amounts claimed. 1. As the defendants seek a gross sum costs order against the plaintiffs, it will be appropriate to make the following observations concerning the tax invoices that were put into evidence as an exhibit to Mr Ilango's affidavit in support of that claim. 2. Relevantly: 1. The invoices cover the period from 30 October 2013 to 24 June 2017. 2. Senses Legal were the original defendants' solicitors up to about 25 February 2015 and Baron & Associates issued tax invoices for acting for the defendants between 29 May 2015 and 24 June 2017. 3. All of the solicitors' tax invoices only contain a general description of the work done, and none of them approximate a detailed bill of costs suitable for an assessment. 4. Two junior barristers acted for the defendants: Mr Maltz and Mr Zmood. Counsel's tax invoices were relatively detailed and self-explanatory, and in the usual way were addressed to the solicitors who acted at the time. 5. The solicitors' tax invoices must be considered on the basis that, at least at and around the time of the first hearing on 1 June 2015, no solicitor acted for Mr Raheb. 6. Senses Legal's tax invoices were addressed to the first defendant and Mr Raheb, except for the first one dated 30 October 2013, which was only addressed to the first defendant. 7. Baron & Associates' invoices dated 29 May 2015, 5 June 2015, 24 July 2015, 16 October 2015, 17 November 2015, 2 June 2017 and an amended tax invoice dated 29 April 2016 were addressed to the first defendant alone. 8. Baron & Associates' 1 September 2015 invoice was addressed to the first defendant and Mr Raheb and their invoice dated 2 June 2017 was addressed to Mr M Snounou of the first defendant. Their invoices between 14 July 2016 and 14 June 2017 were addressed to Mr Raheb and the third defendant. 9. At least three tax invoices, being Baron & Associates 29 May 2015, 17 November 2015 and 2 June 2017 contained substantial barrister's fees as disbursements. It is not clear whether or not those disbursements have separately been included in the barristers' tax invoices. 10. I have not noticed in the evidence any information concerning when the first defendant was placed into liquidation, or what has happened concerning the winding up of that company. I do not think that the evidence establishes whether or not the first defendant has been deregistered. 11. The evidence does not establish who paid the solicitors' and barristers' tax invoices at times when the first defendant was the only represented party, or at other times when the first defendant and Mr Raheb may have been represented, but in many cases the client identified in the remittance instructions that formed part of the solicitors' tax invoices was only the first defendant. 1. In summary, while the tax invoices submitted by counsel for the defendants are reasonably informative, the solicitors' tax invoices are not, and they are not conducive to the court's forming an objective judgment as to the necessity and reasonableness of the fees claimed. It is not sufficiently clear in all cases before the joinder of the third defendant whether both the first defendant and Mr Raheb were liable to pay the fees or only one of them. It at least appears that only the first defendant was liable for some of the fees. There is reason to think that most of the fees were paid by the first defendant and not Mr Raheb. It is not clear whether both the first defendant and Mr Raheb are entitled to be reimbursed by any costs order or only the first defendant (and, as I have mentioned, it is not even clear whether the first defendant still exists). 2. In the exercise of my discretion, I do not accept that this is an appropriate case for the court to make a gross sum costs order on the evidence that is before the court. 3. Even though my reasons for judgment establish that the plaintiffs' case has failed comprehensively, I do not think that there is anything exceptional about this case that takes it out of the ordinary situation where the unsuccessful parties who have been ordered to pay the costs of the successful parties are entitled to the benefit of an assessment to quantify the amount of the costs that are payable. 4. According to Mr Ilango's affidavit, the total costs and disbursements incurred to date are $277,990.19. As the plaintiffs have not succeeded in obtaining an order that an account be given by the defendants, there is no objective measure of the result of the proceedings against which the amount of the costs expended could be considered to be disproportionate. Nonetheless, while the amount of the costs incurred by the defendants is a substantial sum, I do not consider it to be exceptional in proportion to the forensic contest between the parties, and the length of the hearing that took place. 5. I do not consider the present to be a particularly complex case. Nor do I consider the process of assessment of costs in the ordinary way to be necessarily protracted. I consider the plaintiffs to have conducted the case conscientiously, notwithstanding their lack of success. Mr Pearsall was unhelpful on the issue of providing information to the defendants after the judgment was handed down, but it does not follow that he will have great scope for protracting the ordinary process of assessment. I do not see that there will be any particular expense, delay and aggravation in any contested cost assessment. 6. There is evidence that casts doubt on the capacity of Noble Earth to contribute to the payment of costs. Noble Earth's income tax return for 30 June 2015 states that it had a total income of $101,158, and a taxable income of $28,242. It had total assets of $203 and total liabilities of $192,966. It had total carried forward losses of $190,196. Noble Earth's financial statements for the same period contain equivalent information. 7. Mr Schwind is, however, jointly liable to pay the defendants' costs. My understanding of the submissions that have been made on this issue is that Mr Schwind is the owner of real property jointly with his wife, and he has given an undertaking not to dispose of his interest pending the satisfaction of the costs order made against him. The defendants have asserted that the property owned by Mr Schwind and his wife is encumbered by a mortgage, and that Mr Schwind's equity may be insufficient to meet the whole of the costs order, to the extent that Noble Earth is unable to contribute to the costs payable. 8. However, I do not consider that these matters justify the court in treating this matter in an exceptional way and depriving the plaintiffs of the benefit of the assessment process in respect of the costs they have been ordered to pay. Claim for costs order against Mr Pearsall 1. There was no issue between the parties in this case about the court having power to award costs against a non-party in an appropriate case: see Knight v FP Special Assets Ltd (1992) 174 CLR 178. The question was whether such an order should be made against Mr Pearsall. 2. It will therefore be necessary to consider the principles that govern the circumstances in which the court will make a costs order against a non-party. It will be appropriate to consider the reasons on this issue of Basten JA in FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 (with whom Beazley JA – as her Honour then was – and Giles JA agreed) in some detail, as his Honour not only considers the principles, but provides guidance as to how they are to be applied by reference to the facts of that case: [204] The issue in contention is thus the considerations which should govern the exercise of a discretionary power in the present case. The statement of principle relied upon by the primary judge in the District Court was extracted from the joint judgment of Mason CJ and Deane J in Knight v FP Special Assets at 192–193 to the following effect: Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation … For our part, we consider it appropriate to recognise 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 a 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. At 202, Dawson J referred to the principle in the following terms: The cases therefore establish a long-asserted jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the court. Even if the cases were confined to ejectment proceedings (and clearly they are not), the principle lying behind the ejectment cases is that the real litigant rather than the nominal party may be made liable for costs. Gaudron J agreed with the joint judgment and McHugh J dissented. … [206] In the present case, it could not be said that FPM Constructions was merely a nominal party or that Mr Yazbek was the "real party" to the proceedings. No doubt it is true, as his Honour found, that Mr Yazbek was the driving force behind FPM Constructions and was its representative for the purposes of the litigation. That does not mean, however, that the benefit of the proceedings brought by FPM Constructions for progress payments, in law, flowed to anyone other than FPM Constructions, nor that the company was other than the proper defendant in proceedings brought by the Council. Nor is the fact that Mr Yazbek was the sole director and secretary of the company inconsistent with that conclusion. Were it otherwise, the corporate veil would, in effect, be nullified at the very point at which it provides protection against personal liability for the shareholders and directors. The carefully crafted exceptions to the principle would overtake the principle itself were that the case. [207] The primary judge found: Mr Yazbek had an important and integral role in these proceedings. He was frequently mentioned during the course of the hearing and he swore a number of affidavits. He was the sole witness called by FPM. Mr Yazbek certainly had an interest in these proceedings and I draw a comfortable inference from all of that, that the litigation was effectively run for his own benefit. The reference to Mr Yazbek's "role in these proceedings" is a reference to the earlier comment of his Honour that, from his observations of Mr Yazbek's participation in the proceedings, his Honour inferred that Mr Yazbek "had a specific role in instructing counsel to the extent that I observed". With respect, that consideration is neutral. Further, the fact that he was mentioned during the proceedings and swore affidavits merely reflects the fact that he was the guiding force behind the company and the individual responsible for its actions. Again, those factors are, on their face, neutral. The inferences sought to be drawn in the last sentence of the quotation set out above, that Mr Yazbek had "an interest" in the proceedings and that they were run "for his own benefit" would appear to use language ambiguously, so as to encompass indirect economic interests and benefits. Mr Yazbek was no stranger to FPM Constructions: he was, as already noted, its sole director and a 50% shareholder. [208] In Knight v FP Special Assets, the order for costs, approved by the High Court, was made against the receiver and manager of a company which sought specific performance of a contract. A judgment was entered against the company by default. As noted in the joint judgment at 181: Special leave to appeal to this Court from the decision of the Full Court was specifically confined to the question whether the Supreme Court had jurisdiction to make the orders. This Court is not concerned therefore to examine the exercise of any discretion to make an order, that being the point on which there was a division of opinion in the Full Court. McHugh J dissented on the question of jurisdiction, noting that the companies were not nominal parties to the proceedings. Further he noted that, to the extent that the benefit of successful proceedings would pass through the companies to their creditors, they would not pass to the receivers, but to the banks which placed the receivers in control of the company. No costs order had been made against the banks. His Honour continued at 217: In instituting and defending the various proceedings, the appellants were the agents of the companies. In principle, the actions of the appellants cannot be distinguished from those of the directors of a company who bring or defend an action on its behalf. If, under the summary jurisdiction, the Supreme Court could order the appellants to pay the costs of this action, it must follow that the Supreme Court has jurisdiction to order the payment of costs by the directors of any company which commences or defends an action in that court. As a matter of policy, provision for security for costs is a better remedy for protecting persons involved in litigation with insolvent companies than ordering a receiver to pay the costs of litigation after verdict. The importance of these comments, albeit in dissent, is that they give guidance as to the limited circumstances in which, as a matter of discretion, the power should be exercised. … [210] …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 the 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 a 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 or 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. At [208], Basten JA noted the importance of the observation made by McHugh JA, in dissent, that: "As a matter of policy, provision for security for costs is a better remedy for protecting persons involved in litigation with insolvent companies than ordering a receiver to pay the costs of litigation after verdict". Experience suggests that there are many cases where a company sues to enforce obligations owed to it, but the financial circumstances of the company are marginal. The claim by the company is genuine, but in various ways it may be the principals of the company who stand to benefit from the success of the plaintiff's claim. The defendant has the ability to protect itself by applying for an order for security for costs if it can establish that the plaintiff may not have the financial resources to meet any order for costs in favour of the defendant. If an order for security for costs is made, the principals of the company will know where they stand and can provide the security to avoid the company's claim being stayed, or not, as they may choose. There is a serious risk of injustice if the defendant does not apply for security for costs in an appropriate case, and then seeks an order for costs personally against the principals after the event. 2. The defendants seek a costs order against Mr Pearsall personally in this case for the reasons set out in par 81 of their written submissions. In outline, the defendants submit that Mr Pearsall was the 'real party' and the person standing behind the litigation. They submit that the first plaintiff is a 'straw man', and that it appears that Mr Pearsall has removed all cash from the company's bank account. They submit that Mr Pearsall was the true source of funds for the litigation and that Mr Pearsall had a substantial financial interest in the outcome. The defendants submit that the conduct of the litigation was unreasonable and improper. 3. I do not accept that this is a special case that warrants Mr Pearsall being treated any differently than the usual case where a plaintiff is effectively the corporate embodiment of the business conducted by a single person. The corporate veil should not so lightly be cast aside. The evidence in the proceedings as a whole satisfies me that the first plaintiff was intended by Mr Pearsall as the real vehicle through which he would participate in the proposed joint-venture. The first plaintiff had for a significant period engaged in the business of marketing chemicals of various types. The first plaintiff sued to enforce its own rights. Mr Pearsall was in the present case in very much the same position as was Mr Yazbeck as considered by Basten JA in the extract from the FPN Constructions case set out above. The first plaintiff was not a nominal party. The only way it could act was through Mr Pearsall. This is a case where, to use Basten JA's words, for the court to order that Mr Pearsall is to be personally liable to meet the first plaintiff's liability for costs, the exception to the principle would overtake the principle. 4. Accordingly, I reject the defendants' application for an order making Mr Pearsall liable to pay the costs payable by the first plaintiff. Conclusion 1. As I have rejected the defendants' claim that the plaintiffs be ordered to pay their costs on the indemnity basis, the conclusions I reached at [236] and [237] of the primary judgment will stand, and the plaintiffs must pay the defendants' costs on the ordinary basis. 2. As the defendants' claim for indemnity costs and the claim in their notice of motion filed on 19 June 2017 have failed, the defendants must pay the plaintiffs' costs of the costs argument on the ordinary basis. 3. I have noted above that on 2 June 2015, Darke J reserved the costs of the vacation of the first hearing in this matter. The parties have not made any submissions directed at whether any special order should be made in relation to those reserved costs. On the one hand, the hearing could not proceed because Mr Raheb was not legally represented, he did not have notice of the proceedings, and was not in a position to represent himself. On the other hand, the plaintiffs proposed to file an amended statement of claim, and even though the amendments were not substantial, they ultimately involved joining the third defendant as a new party. In the absence of submissions to the contrary, I propose to treat both sides as equally responsible for the vacation of the first hearing, so that the costs involved will be costs in the cause, and will accordingly be payable by the plaintiffs on the ordinary basis. 4. I have noted from the review of the court's record of proceedings that a number of interlocutory costs orders have been made, including against the defendants. All interlocutory costs orders should stand. ********** 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: 31 October 2017