Supreme Court New South Wales Medium Neutral Citation: Renton v Kelly [2018] NSWSC 1377 Hearing dates: On the papers Date of orders: 06 September 2018 Decision date: 06 September 2018 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. No order as to costs. Catchwords: COSTS – Party/Party – Application for preliminary discovery resolved without need for contested hearing – Application for costs based on alleged unreasonableness of defendant's conduct – No general rule in relation to orders for costs on preliminary discovery applications – No order as to costs made Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 98 Corporations Act 2001 (Cth), ss 198F, 232, 237 Uniform Civil Procedure Rules 2005 (NSW), rr 5.3, 5.4, 5.8, 42.1 Cases Cited: Boulos v Carter [2005] NSWSC 891; 54 ACSR 827 Gooley v Breda Pty Ltd (No 2) [2017] NSWSC 1505 Guest v Guest (No 2) [2016] VSC 76 Hardy v Gillette [1976] VR 392 Holman v Holman (1964) 81 (WN) (Pt 1) (NSW) 374 J & A Vaughan Super Pty Ltd v Becton Property Group Ltd [2013] FCA 340 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Liu v The Age Company Ltd (2016) 92 NSWLR 679; [2016] NSWCA 115 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304 Re Minister for Immigration and Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 187 CLR 622; [1997] HCA 6 Repatriation Commission v Reid (1984) 54 ALR 157 Richards v Jager [1909] VLR 140 Sheahan v Woulfe [1927] St R Qd 128 Steffen v Australia and New Zealand Banking Group Limited [2009] NSWSC 883 Swinburne v David Syme & Co [1909] VLR 550 Young v Medical Board of Australia [2010] VSC 584 Category: Costs Parties: Frederick William Renton (First Plaintiff) Dinomyte Pty Ltd (Second Plaintiff) Frederick Norman Kelly (Defendant) Representation: Counsel: D M Farrar (Solicitor) (Plaintiffs) Mr J Dooley (Defendant) Solicitors: Farrar Lawyers (First Plaintiff) Farrar Lawyers (Second Plaintiff) Makinson & d'Apice Lawyers (Defendant) File Number(s): 2017/00317427 Publication restriction: Nil Judgment 1. HER HONOUR: In this matter, by summons filed on 20 October 2017, the plaintiffs (Frederick William Renton and Dinomyte Pty Limited) sought orders in the nature of preliminary discovery including an order pursuant to r 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) against Frederick Norman Kelly, the sole defendant to the proceedings. (An application by prayer 2 of the summons for preliminary discovery of documents falling within Schedule 2 (pursuant to r 5.4 of the UCPR) from various third parties was ultimately not pressed.) 2. Mr Renton, a retiree, swore an affidavit on 18 October 2017 in support of the application for preliminary discovery in which he deposed to his belief that he or Dinomyte Pty Ltd (of which he is a director and shareholder) may have a claim against Mr Kelly in respect of acts done by Mr Kelly whilst acting as an officer/director of a company called Hanwood Pastoral Co Pty Ltd (Hanwood Pastoral), which is now deregistered, under s 232 of the Corporations Act 2001 (Cth) for oppression or a derivative claim under s 237 of the Corporations Act (see [3] of his affidavit). The matters of concern to Mr Renton were summarised at [4] of his affidavit and need not here be set out. Suffice it to note that Mr Renton's complaint appears to relate to his removal as a director of Hanwood Pastoral and to the sale by that company (pursuant to a contract for sale dated 7 January 2015) of certain property in North Rothbury and disbursement of the sale proceeds (without his knowledge). Dinomyte Pty Ltd is said to have been, since 16 October 2010, the holder of the only two shares in the paid up capital of Hanwood Pastoral. 3. The application for preliminary discovery is said to have been brought "[d]ue to an inability to obtain relevant documents/information from the Defendant [Mr Kelly], and the continued assertion by the Defendant that Renton was in possession of [Hanwood Pastoral]'s books and records" ([11], plaintiffs' submissions on costs dated 24 July 2018 (plaintiffs' primary submissions)). Mr Kelly is said to have provided accounting services to Mr Renton since about the 1970s ([3], plaintiffs' primary submissions). 4. The matter came before me in the applications list call-over list on 17 July 2018. On that occasion, I was informed that the documents that were sought under the summons to be produced had been produced without the necessity of court orders and that the parties had agreed to the only outstanding issue in the proceedings (costs) being dealt with on the papers. A timetable had been agreed for submissions in relation to that remaining issue and I ordered by consent that the question of costs be referred for determination by the applications list judge on the papers. 5. For administrative convenience in managing the Equity Division diary, at my instigation determination on the papers of the question of costs was subsequently referred to me. For the reasons set out below I am of the view that there should be no order as to costs with the intent that (without prejudice to any claim that might later be able to be made in respect of those costs in substantive proceedings in relation to the underlying dispute) each party should bear his or its own costs of the preliminary discovery application. Background Procedural history of the proceedings 1. It is not necessary here to set out the general background which preceded the commencement of proceedings in this Court (which was outlined in the plaintiffs' primary submissions). Sufficient of the background has been set out in the introduction to these reasons. What is relevant, however, is to set out some of the procedural history of the proceedings, which is drawn from the plaintiffs' primary submissions (but which is not disputed by the defendant). 2. Although there was communication in the period from around April 2017 between Mr Kelly and the plaintiffs' solicitor (Mr Farrar), to which reference was made in Mr Renton's affidavit sworn 18 October 2017 (and see plaintiffs' primary submissions at [10](i)-(m)), it appears that the plaintiffs were unable to effect personal service of the originating process in these proceedings on Mr Kelly when they attempted to do so, through a licensed process server in late October and early to mid November 2017 (see affidavit sworn 22 November 2017 by Darrell Willenberg). A notice of motion seeking an order for substituted service of the originating process in these proceedings (the summons and affidavit referred to above) was filed by the plaintiffs on 29 January 2018. Orders were made by Registrar Walton on 30 January 2018 for substituted service and the proceedings were listed for directions on 27 February 2018. 3. On 1 February 2018, service of the originating process was effected in accordance with the Registrar's orders (see affidavit sworn 1 February 2018 of Danielle Francis), including by posting the documents to Mr Kelly's address, and, on 26 February 2018, a notice of appearance was filed on behalf of Mr Kelly. On 27 February 2018, consent orders were made standing the matter over to 13 March 2018. 4. On 13 March 2018, by consent, Registrar Walton ordered, inter alia, that: Pursuant to Part 5.3 the Uniform Civil Procedure Rules 2005 (NSW) (Rules), the Defendant is to give preliminary discovery of the documents referred to in Schedule 1 of the Summons dated 20 October 2017 (Summons), as follows: (a) The Defendant is to file and serve on the Plaintiffs a List of Documents pursuant to Part 21.3 of the Rules on or before 4pm on 3 April 2018; (b) The Defendant to provide the Plaintiffs with access to the documents described in order 1(a) above, pursuant to Part 21.5 of the Rules on or before 4pm on 10 April 2018. (To that extent, the suggestion that the documents were provided without the necessity for Court orders may not paint the complete picture but nothing turns on this. What is relevant is that the orders were made by consent and hence without the need for a contested hearing of the preliminary discovery application.) 1. On 6 April 2018, Mr Kelly served a List of Documents and on 10 April 2018 the plaintiffs were provided with an electronic copy of the documents referred to in the List of Documents. 2. It appears that the plaintiffs formed the view that full discovery had not been given because, on 29 May 2018, Registrar Walton made the following orders: 1. The plaintiffs' solicitor is to write to the defendant's solicitor regarding the sufficiency of the defendant's filed list of documents for discovery by 5pm on 12 June 2018. 2. The defendant's solicitor is to provide a written response to the plaintiff's written notice referred to in order 2 above by 5pm on 3 July 2018. 1. By letter dated 12 June 2018, Mr Farrar, acting for the plaintiffs, wrote to Mr Kelly's solicitors (Makinson d'Apice) setting out the plaintiffs' position regarding the sufficiency of the verified list of documents for discovery (see Annexure J to the plaintiffs' primary submissions), in response to which, by letter dated 25 June 2018, Makinson d'Apice advised that none of the documents the subject of Mr Farrar's letter is or was in Mr Kelly's possession within the last 6 months before the commencement of the proceedings (see Annexure K to the plaintiffs' primary submissions). 2. On 17 July 2018, orders were made by consent that the proceedings be dismissed, save as to the question of costs (which, as already noted, was to be determined on the papers). Submissions Plaintiffs' primary submissions 1. The plaintiffs accept there is no fixed rule or necessary "starting position" in relation to costs in a preliminary discovery application, referring to what was said by Kenny J in J & A Vaughan Super Pty Ltd v Becton Property Group Ltd [2013] FCA 340 (at [16]-[18]); by Perry J in ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304 at [13]; and by Mukhtar AsJ in Guest v Guest (No 2) [2016] VSC 76 at [19]; as well as to the approach adopted in this Court by Slattery J in Gooley v Breda Pty Ltd (No 2) [2017] NSWSC 1505 (Gooley). In Gooley, Slattery J dealt with competing claims for costs following a fully contested application for preliminary discovery and ordered the defendants to pay 85% of the plaintiffs' costs of the proceedings. In making that order, his Honour had regard (see at [6]; [9]) to the adversarial nature of those proceedings and to the plaintiffs' substantial success in obtaining the relief they had sought. 2. The plaintiffs thus accept that there is no automatic entitlement to costs in the sense of a "usual rule" in preliminary discovery proceedings. They also accept that there was no substantive opposition by the defendant during the proceedings to discovery of the documents which the plaintiffs had sought in the summons. However, the plaintiffs submit that Mr Kelly has acted "so unreasonably" (prior to the commencement of the proceedings) that they should obtain an order for the costs of the action (adopting the language used in Re Minister for Immigration and Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 187 CLR 622; [1997] HCA 6 (Lai Qin)). 3. In particular, the plaintiffs argue (at [31], plaintiffs' primary submissions) that Mr Kelly's conduct was unreasonable by reference to the following matters: (a) Prior to the commencement of the proceedings, the Defendant maintained the nonsensical positon that the Defendant could not provide access to the Company's records because they were in the possession of Renton. Patently, the Plaintiffs would not have been seeking access to documents that they already had in their possession; (b) Unlike other cases for preliminary discovery, the types of documents which the Plaintiffs sought the Defendant to discover were company records, not the personal records of the Defendant; (c) Up until late April 2017 (when the proceedings were commenced in October 2017), the Defendant had been in communications with Farrar and could have provided access to the documents/information at any time as required by section 198F of the Corporations Act 2001 (Cth) then the proceedings would have been wholly avoided; (d) Following the commencement of the proceedings, the Defendant avoided service requiring the Plaintiffs to make an application for substituted service and incur unnecessary further costs; (e) The Plaintiffs then served OP [the summons and affidavit] on the Defendant in accordance with the orders for substituted service and only then did the Defendant "emerge from the shadows" and play an active role; (f) The role the Plaintiff [sic – Defendant] played was to engaged [sic] lawyers, wholly capitulate and abandon previous assertions that the Defendant could not allow access to records because they were in the possession of Renton and actually provide the documents which the Defendant stated he did not have, and (g) The Defendant having refused all previous requests to voluntarily [sic] provide access to the documents, has never explained, or attempted to be explain, why this position was maintained and ultimately abandoned after the orders for substituted service. 1. It is submitted that Mr Kelly has had the opportunity to respond to the matters deposed to by Mr Renton in his affidavit in the proceedings and to explain the conduct set out at [10] of the plaintiffs' primary submissions (relevantly, including the communications received from Mr Kelly, to which reference has been made at [7] above) and elected not to file or serve any evidence in the proceedings. The plaintiffs ask the Court to infer that Mr Kelly's evidence would not have assisted him in relation to the question of costs (here invoking the principles in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8). 2. It is submitted that it flows from the "unreasonable conduct" of Mr Kelly (referred to in the plaintiffs' primary submissions and extracted above) that there was no "genuine dispute" as to the plaintiffs' entitlement to access the documents and that the application for preliminary discovery should never have had to be made. 3. Accordingly, the plaintiffs seek an order that Mr Kelly pay their costs of the proceedings. Defendant's submissions 1. Not surprisingly, perhaps, for Mr Kelly it is submitted that the appropriate exercise of the Court's costs discretion is that there be no order as to costs. 2. Mr Kelly refers to the following observation by McColl JA in Liu v The Age Company Ltd (2016) 92 NSWLR 679, [2016] NSWCA 115 at [270]: In my view the court should approach the question of costs of a preliminary discovery application, recognising the exceptional nature of the jurisdiction, but nevertheless applying s 98(1)(b) and UCPR 42.1. That leaves it open to the court in each case to consider whether, in all the circumstances of the case, to exercise the court's discretion to make some other order as to the whole or any part of the costs. and to what was said by each of Payne JA and Basten JA in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols) (set out below) as to the appropriate considerations in cases where there has been no hearing on the merits. 1. In Nichols, Payne JA said (at [30]): If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 1. At [8]-[9], Basten JA said: Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. Thirdly, if contrary to the views set out above, it was appropriate to investigate whether the applicants or the respondent had been unreasonable, either in their conduct prior to the proceedings, or in their conduct of the proceedings, the approach adopted was untenable. Thus, regard was had to the motives of the respondent in commencing proceedings, but no account was taken of the motives of the applicants in capitulating. Further, once it is clear that there is a real dispute as to a significant fact in issue in the proceedings, it is inappropriate to determine that matter, other than in making an interlocutory ruling, by accepting one party's case without permitting the other party an opportunity to challenge the opposing party's witnesses. 1. In the present case there has been no hearing on the merits and Mr Kelly submits that nothing in his correspondence or conduct is sufficient to establish that he has engaged in unreasonable behaviour of a sort that would warrant an award of costs against him. 2. As to the general background to the proceedings set out at [1]-[9] of the plaintiffs' primary submissions, Mr Kelly does not accept the accuracy of that factual narrative and points out that the evidence to which reference is made in those submissions is untested and has not been responded to by him. It is submitted that that factual narrative, if it comes to be the foundation for substantive proceedings, will require analysis of acts from possibly the 1970s (referring to [3] of the plaintiffs' primary submissions) or at least the 1990s, the scope of which exercise is "likely to be large, time-consuming, and complicated"; and that resolution of those facts is not possible on the present costs argument. Mr Kelly takes issue with some of the assertions in the plaintiffs' primary submissions that he argues are not supported by the evidentiary references (see [14](c)-(d) of Mr Kelly's submissions on costs), noting the admonition by Basten JA at [8] in Nichols that, if the question of costs cannot be answered "without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact", the Court should not embark upon such a task in an application of this sort. 3. Insofar as the plaintiffs principally rely, in seeking their costs, on the correspondence engaged in prior to commencement of the proceedings (see [10] of the plaintiffs' primary submissions), Mr Kelly points out that not all of the correspondence there referred to is relevant to him (pointing in that regard to the correspondence with others to which reference is made at [10](c); [10](d); and [10](f)-(h) of the plaintiffs' primary submissions). As to the balance of the correspondence referred to at [10] of the plaintiffs' primary submissions, a more detailed response is given (see [18]-[19] of Mr Kelly's submissions), including that some of that correspondence indicates that there was a dispute as to whether records had been delivered to or received by Mr Renton. It is submitted that this correspondence does not establish unreasonable conduct on the part of Mr Kelly for a number of reasons. 4. First, that the only request made for "books and records" (by letter dated 10 August 2015) was made under s 198F of the Corporations Act, and that the correspondence made no reference to the necessary condition precedent of proposed legal proceedings (Mr Kelly submitting in this regard that it is for the applicant to establish the factual background for a request under s 198F, noting that this "may not be done by unsubstantiated assertions" – see Boulos v Carter [2005] NSWSC 891; 54 ACSR 827 at [31] per Barrett J). 5. Second, the defendant submits that the request for "books and records" was addressed to the secretary of Hanwood Pastoral (Mr Kelly being one of two secretaries of the company); not specifically addressed to Mr Kelly in his personal capacity or at all. It is submitted that reliance on correspondence between plaintiffs and the company (not Mr Kelly) as evidence of unreasonable conduct by Mr Kelly personally, in order to ground a costs order against him, fails to pay sufficient attention to the different legal personalities involved. 6. Third, it is noted that the breadth of the request for "books and records" made in the correspondence was replaced by the specific categories in Schedule 1 of the summons. It is submitted that there is no evidence that those categories were served prior to their appearance in the summons and that the "surest guide" to reaching a conclusion as to what would have happened had the categories been served on Mr Kelly personally is what in fact happened after the categories were served (namely, the provision of the documents in reasonably short order). 7. Finally, reference is made to Mr Kelly's assertion (disputed by the plaintiffs) in the correspondence that he had previously delivered the company's "books and records" to the plaintiffs. It is submitted that the resolution of that factual dispute is not an exercise upon which the court can or should readily embark. It is submitted that, absent resolution of this factual dispute, which would require cross-examination of both parties, the pre-trial correspondence does not permit the plaintiffs to establish the necessary level of unreasonableness. 8. Mr Kelly submits that, rather than acting unreasonably, he has acted "promptly and pragmatically" in consenting to the provision of preliminary discovery which has permitted these proceedings to be resolved quickly and cheaply (with few, and short, Court appearances and minimal use of Court time). It is submitted that both the suggestion that he has "wholly capitulated" and the invitation to draw an adverse Jones v Dunkel inference from the fact that he did not put on affidavit evidence "appear to invite the conclusion that the defendant may have been better off engaging in a relatively combative and inefficient conduct of the matter, rather than agreeing to what is an order sought in an ancillary proceeding, having regard to what appears to be a looming and complicated oppression/derivative action suit". 9. As to the particular matters relied upon by the plaintiffs as specific aspects of Mr Kelly's conduct said to make that conduct unreasonable (see [31] of the plaintiffs' primary submissions; extracted at [16] above), Mr Kelly responds as follows: (a) As to [31](a), the question of whether the defendant's position was "nonsensical" is in dispute between the parties. As noted above, resolution of it is not a task that the court would readily embark upon given the absence of any testing of witnesses or exploration of the facts; (b) As to [31](b), the fact that the plaintiffs sought, in the Summons, company records is neutral; (c) As to [31](c), the fact that the request under s 198F did not, on its face, engage the section has been dealt with above [see [19(a)] of the defendant's submissions referred to at [31] above]; as has the fact that the categories in the Summons were not served (or a request of any kind, whether in the categories or otherwise, made personally of the defendant) until these proceedings; (d) As to [31](d), the proposition that the defendant "avoided service" is contentious and in dispute. The affidavit relied on in footnote 29 has not been, so far as the defendant is aware, served - and the orders for substituted service did not require it to be served. No such finding should be made in this application as to costs, particularly where it is determined on the papers and the proposition has not been put to the defendant in cross-examination; (e) As to [31](e), the proposition that the defendant "emerged from the shadows" is similarly contentious and in dispute. No such finding should be made. The fact that the defendant played an active role only after being served is unremarkable; (f) As to [31](f), the first point made is that the defendant engaged lawyers. That goes nowhere. The second point is that the defendant wholly capitulated and abandoned previous assertions. To say that consenting to orders for preliminary discovery, without ever having opposed those orders, is a capitulation is not correct - it is simply taking a pragmatic approach as mandated by the Civil Procedure Act. To say that previous assertions were abandoned fails to give sufficient attention to the differences in the wording of the initial requests under s 198F, and the refined categories in the Summons. (g) As to [31](g), there has never been a need for the defendant to go into details as to pre-trial issues. Moreover, to incur costs in doing so and to promote a dispute about pre-trial correspondence - the resolution of which would require a court hearing and cross-examination - in circumstances where that would only be relevant to costs (not costs of the main issues in dispute regarding oppression and the like, but costs of an ancillary application for preliminary discovery) would be contrary to the way in which the Civil Procedure Act requires parties to conduct themselves. For example, see Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [1], where the Court of Appeal expressed concern over a security for costs application that had taken many hearing days where that application had "nothing to do" with the real issues. The Court found it difficult to see how the parties and their legal representatives had complied with the duties imposed by s 56 of the Civil Procedure Act. 1. For Mr Kelly it is noted that a significant amount of pre­-trial correspondence was engaged in between the plaintiffs' solicitor and third parties. It is submitted that the abandonment of part of the relief in the summons (relating to third parties) weighs against any award of costs in favour of the plaintiffs. Plaintiffs' reply submissions in reply on the question of costs 1. In reply to the defendant's 8 page submissions dated 3 August 2018 (in perhaps the clearest illustration of the wisdom of courts not embarking upon the resolution of disputed questions of fact in applications for costs of this kind where the matter has been resolved without a hearing on the merits), the plaintiffs then filed, on 20 August 2018, a 6 page submission (to be read with their earlier 9 page primary submissions). 2. In their reply submissions, the plaintiffs identify six groups of challenges to their primary submissions and proceed to deal with each. The reply submissions on each of those identified six groups of challenges can be summarised as follows. 3. First, it is said that the defendant's submissions argue that the absence of a hearing on the merits means that each party should pay their own costs. (I interpose here that, to be fair to the defendant, the submission made by him was that there has been no hearing on the merits and that in those circumstances, in light of the statements of principle extracted in his submissions, an appropriate exercise of the discretion is to make no order as to costs "unless the court is satisfied – based on known circumstances, which are not in dispute between the parties – that a party has engaged in unreasonable behaviour".) In any event, plaintiffs refer to their acknowledgement in their primary submissions that the "usual rule as to costs" was impacted by the unique nature of the application, being one for preliminary discovery. They say that the primary matter upon which they rely is the defendant's unreasonable behaviour prior to the commencement of the proceedings "not simply that the Defendant wholly capitulated following the making of the substituted service order against him and subsequent service of the originating process in the Proceedings"; and point out that the authorities cited at [10] and [11] of the defendant's submissions recognise that unreasonable behaviour on the part of one party can provide a foundation to award costs against the other party. 4. The second of the six identified groups of challenges is that which is referred to as a generalised challenge to the "factual narrative" that cannot be determined in the proceedings, as opposed to later substantive proceedings. In this regard, the plaintiffs argue that a fundamental flaw in the defendant's submission (as to the inability of the Court to determine disputed factual matters in the proceedings) is that the defendant has not led any evidence to give rise to such a conflict. It is submitted that, in the absence of contradictory evidentiary positions, the Court should proceed to determine the issue of costs based on the uncontradicted evidence of the plaintiffs "unless that evidence is in itself so incredible and so unreasonable that no reasonable man could accept it" (citing Madden CJ in Richards v Jager [1909] VLR 140 at 147; as well as Swinburne v David Syme & Co [1909] VLR 550; Sheahan v Woulfe [1927] St R Qd 128 at 131; Holman v Holman (1964) 81 (WN) (Pt 1) (NSW) 374 at 378; Hardy v Gillette [1976] VR 392 at 396; Repatriation Commission v Reid (1984) 54 ALR 157 at 162-163; and Young v Medical Board of Australia [2010] VSC 584 at [48]). 5. The plaintiffs point out that it was open to the defendant to adduce evidence on which he wished to rely either in respect of the proceedings or on the question of costs; and submit that, having elected not to do so, the defendant "cannot be permitted to remain silent (in evidentiary terms) and then raise in his submissions that there are challenges (or potential challenges) to the Plaintiffs' evidence". It is submitted that the Court can only properly make findings based on the evidence before it, and draw any available inferences from the same evidence; and cannot be asked to assume any disputation of factual matters in the absence of competing admissible evidence from the defendant. 6. Pausing here, insofar as this is a complaint by the plaintiffs in relation to the submission made by the defendant at [14] of his submissions, that submission relates to the general background set out in the plaintiffs' primary submissions at [1]-[9]. None of that factual background (whether disputed or not) is relevant in my opinion to the question as to what costs order should be made consequent upon the consensual dismissal of the preliminary discovery application. 7. The plaintiffs identify a third area of challenge made by the defendant to the plaintiffs' primary submissions as the "[c]laimed absence of factual underpinning for specific submissions" in the plaintiffs' primary submissions. The plaintiffs maintain, to the contrary, that the evidence does support the submissions contained in their primary submissions. They submit that the reference at [14](b) of the defendant's submissions to a large, time-consuming and complicated exercise in resolving disputed factual matters "confuses the task the Court is required to undertake on an application such as this". The plaintiffs argue that the relevant question is whether they should bear their "not insignificant costs" in bringing these proceedings or have the defendant pay the plaintiffs' costs that would have been otherwise wholly avoided (on the assumption, I assume, that the documents been provided without the need for commencement of the preliminary discovery proceedings). 8. It is submitted that whether the plaintiffs bring, and ultimately succeed in subsequent legal proceedings, and receive costs in those proceedings, is of no significance in the context of the claim for costs in the present proceedings; that these are discrete legal proceedings; and that the plaintiffs "would be deprived of such costs in the event they did not pursue further substantive proceedings" (citing Steffen v Australia and New Zealand Banking Group Limited [2009] NSWSC 883, per McDougall J.) 9. As to the complaints by the defendants contained in [14](c) and [14](d) of the defendant's submissions, the plaintiffs appear to accept that incomplete references were contained in footnotes 4, 5, 6 and 9 of their primary submissions but maintain that the evidence supports the submissions that were made (setting out a table of the evidence they "specifically rely upon" to support those footnotes). (If nothing else, a debate as to the accuracy of matters set out or referred to in footnotes to submissions to my mind highlights the undesirability of embarking upon a resolution of factual issues on the current application.) 10. The fourth of the categories of challenge identified by the plaintiffs in the defendant's submissions on costs relates to the submissions made as to the pre-litigation correspondence not being addressed to the defendant personally but, rather, to the "Secretary of Hanwood Pastoral Co Pty Ltd" with demands made under s 198F of the Corporations Act and that the categories of documents sought were too broad. 11. The plaintiffs' response is that all letters were sent to the registered address of Hanwood Pastoral as recorded with ASIC; that there is no evidence that any of the letters was not received (it being asserted that the defendant was the sole director of Hanwood Pastoral at the time of dispatch of each of the letters by reference to the affidavit evidence of Mr Renton at [26]); and that there is no evidence that any of the letters was returned as undeliverable. It is submitted that the Court ought find that each of the letters was sent to the company on or about the dates that it bears and was received in the ordinary course of the post. 12. It is further noted that Mr Kelly has not sworn any evidence that the letters were not received by him or brought to his attention. Reference is made to the fact that letters were sent in response to each of the letters dated 6, 7 and 27 April 2017 by the defendant; and to the communications between the defendant and the plaintiffs' solicitor (referring to the communications underlined at [10](i) and [10](j) of the plaintiffs' primary submissions). It is submitted that it is clear that Mr Kelly was aware, prior to the commencement of the proceedings, that the plaintiffs were seeking access to the books and records of the company and that he "had taken the deliberate and considered position that he could not provide the Plaintiffs with access because the books and records were in the possession of the Plaintiffs". The plaintiffs point out that, notwithstanding that stated position, Mr Kelly consented to orders requiring him to discover the documents listed in the summons on 13 March 2018; served a verified list of documents on 6 April 2018; and later provided the documents referred to in the verified list of documents on 10 April 2018. It is submitted that the only sensible conclusion that can be drawn from the defendant's assertion that the plaintiffs were in possession of the documents is that the defendant did not wish to provide them with access to the books and records of the company (noting the absence of any evidence from the defendant as to why the books and records were not made available to the plaintiffs at any earlier time). 13. The fifth matter to which the plaintiffs refer in reply to the defendant's submissions is the claim that there was prompt and pragmatic action by the defendant, after commencement of the proceedings, voluntarily to discover documents. The plaintiffs dispute that this is the case. It is noted that the proceedings were commenced on 20 October 2017. Reference is made to numerous unsuccessful attempts to effect personal service on the defendant at an apartment address (as set out at [5]-[13] of the affidavit from the licensed process server to which I have referred above at [7]) and to the application for substituted service in respect of which orders were made on 30 January 2018. Complaint is made that it was only after service in accordance with those orders (which included posting the documents to the address at which the defendant lives) that a notice of appearance was filed and the defendant consented to the orders. It is also noted that there is no evidence from the defendant as to his whereabouts during the eight visits by the process server. (Pausing here, the fact that a notice of appearance was not filed before the originating process was served is hardly surprising. As to the unsuccessful attempts to effect service, they comprise occasions on which the process server rang the security intercom to Mr Kelly's unit with no answer and the fact that there was no response to voicemail messages left on a mobile phone number given to the process server by someone apparently resident in the same building.) 14. Sixth, the plaintiffs respond in some detail to the specific responses made at [21] of the defendant's submissions to their primary submissions (set out above at [32]). 15. As to [31](a) of the plaintiffs' primary submissions ([21](a) of the defendant's submissions), it is said that this has never been raised in correspondence and does not appear anywhere in the plaintiffs' evidence. It is submitted that in the absence of any evidence seeking to contradict the plaintiffs' evidence, the Court should accept the unchallenged and uncontradicted evidence of the plaintiffs on this issue. 16. As to [31](b) of the plaintiffs' primary submissions ([21](b) of the defendant's submissions), it is submitted that the documents sought to be discovered in the summons were documents to which the plaintiffs had a statutory entitlement and did not involve an incursion into the personal rights of the defendant; and that the defendant ought to have given access to the books and records of the company following receipt of the initial letter seeking access to the books and records first made on 10 August 2015 but chose not to do so. Reference is made to the following in the last letter sent by the plaintiffs' solicitor to the defendant on 9 August 2017 prior to the institution of the proceedings, to which it is said there was no response: It is obvious that you do not intend to make the Company's records available for inspection by [the Plaintiffs] or provide copies. It appears that you do hold some of the Company's records in your possession as referred to in your letter dated 11 April 2017. Given your refusal to provide the records and maintenance of the positions that [the Plaintiffs have] the records, [the Plaintiffs are] left with no alternative but to approach the Court for orders in relation to the provision of relevant information and the production of documents. We put you on notice that this letter will be tendered on this issue of the costs at the appropriate time and that a special costs order will be sought against you. 1. As to [31](c) of the plaintiffs' primary submissions ([21](c) of the defendant's submissions), the plaintiffs contend that s 198F of the Corporations Act was properly "enlivened"; and that whether there was any difference between a general request for access to the books and records of the company, as opposed to a request for the specific categories set out in the summons, is irrelevant. They argue that the defendant was aware from at least 2015 that the plaintiffs were seeking access to the books and records of the Company and that the defendant "did all he could to frustrate the Plaintiffs' ability to access the records and indeed would never have provided any records but for the institution of the Proceedings". It is also noted that the defendant was put on notice by letter dated 23 August 2017 from the plaintiffs' solicitor that the company was about to be struck off by ASIC, demanding that the defendant pay the requisite fee to avoid the company being struck off and that there was no response thereto. The plaintiffs also refer to a letter from their solicitor on 6 October 2017 to ASIC requesting that the company not be deregistered but note that it has since been deregistered. It is submitted that the inference should be drawn that the defendant "was seeking to avoid responding in any sensible way to communications from the Plaintiffs' solicitors and allow the Company to be deregistered so that no action could be pursued by it against the Defendant or those who have assisted him in breach of duties". 2. As to [31](d) of the plaintiffs' primary submissions ([21](d) of the defendant's submissions), reference is made to the eight unsuccessful attempts that were made to effect personal service and that the documents were served in accordance with the substituted service order. It is submitted that until this time, the defendant was taking steps to avoid service "in the hope of the company being deregistered". 3. As to [31](e) of the plaintiffs' primary submissions ([21](e) of the defendant's submissions), it is submitted that reference to the "emergence from the shadows" needs to be viewed against the context in which the defendant came to file an appearance in the proceedings (following communications commencing in 2015 up until August 2017 where the defendant "staunchly" maintained that he could not provide access to the books and records because they were in the possession of the plaintiffs, a position said to be untenable and wholly contradicted by the consent to give discovery on 13 March 2018). 4. As to [31](f) of the plaintiffs' primary submissions ([21](f) of the defendant's submissions), reference is again made to the timeline referred to above. 5. Finally, as to [31](g) of the plaintiffs' primary submissions ([21](g) of the defendant's submissions), it is submitted that it is not reasonably open to the defendant to maintain that there are various disputes on the evidence incapable of being resolved where the defendant has led no evidence. Determination 1. There is no dispute that s 98 of the Civil Procedure Act 2005 (NSW) confers a broad discretion in relation to the making of orders as to costs (and see UCPR 5.8(1), which provides that on any application for an order under that Part, the court may make orders for the costs of the applicant). 2. While r 42.1 of the UCPR provides that the general rule is for costs to follow the event, the authorities referred to by the plaintiffs make clear (and the plaintiffs accept) that there is no conventional or usual rule applicable to preliminary discovery applications, which applications depend on the facts of the relevant case. More relevant are the authorities which deal with the circumstances in which costs will be ordered on an application that has been resolved without a hearing as to the merits (as was the case in Lai Qin). In Lai Qin, McHugh J referred to the situation where it could be concluded that one party had acted "so unreasonably" that the other should obtain the costs of the action; the use of the word "so" indicating a level of unreasonableness which is established by the circumstances in which the costs were incurred. 3. Also relevant to note is that the overriding mandate in respect of the conduct of litigation in this Court (see s 56 of the Civil Procedure Act) is for the just, quick and cheap resolution of the real issues in dispute. There is force to the submission by the defendant on this costs application that, in effect, the plaintiffs' submissions would require him (if not to engage in adversarial opposition to the application for preliminary discovery), at this stage (after consenting to the preliminary discovery sought) to incur costs in putting on evidence deposing to the existence of the disputes as to the factual matters referred to in his submissions (or as to circumstances in which the calls to the security intercom or messages left on a mobile phone number were not answered or returned). 4. Whatever may be the position as to the accuracy of the general factual background referred to in the plaintiffs' primary submissions (and in the evidence referred to therein) is not to the point on the present costs application. Nor do I propose to engage in a determination of or make findings of fact on issues such as whether Mr Kelly was (as the plaintiffs contend) avoiding personal service or hoping to allow the company to be deregistered (in the hope of stultifying any substantive proceedings or otherwise). That is the kind of factual enquiry that clearly should not be embarked upon in the context of an application of this kind (and in my opinion that is the case even in the absence of evidence from Mr Kelly formally putting those matters in issue). The drawing of an adverse Jones v Dunkel inference by reference to the failure of Mr Kelly to put on evidence explaining his whereabouts at particular times on particular days is not in my opinion warranted. On the evidence adduced by the plaintiffs, there is nothing more than the fact that attempts were made (via the security intercom and through voicemail) to effect service or alert Mr Kelly to the proceedings. That does not to my mind call for an inference to be drawn that Mr Kelly was avoiding service. And the prospect of engaging in a mini-enquiry to ascertain Mr Kelly's whereabouts (as would presumably have been the case if he had deposed to those whereabouts and been cross-examined on that issue) seems to me to be an uncalled for waste of court time and costs. 5. The real question is whether, from the correspondence prior to commencement of the proceedings (that being material about which there can be no contest) it can be concluded that Mr Kelly's conduct was so unreasonable as to warrant the making of a costs order against him. I am not persuaded that the correspondence leads to that conclusion. And it is not appropriate to entertain an application based on the assumption that, because there was no affidavit evidence from Mr Kelly, his assertion that Mr Renton was already in possession of the documents sought was baseless or obstructive. Nor is it patently obvious, from the fact that the plaintiffs were calling for books and records, that they could not already have been provided with some or all of the relevant documents. 6. The plaintiffs maintain that what has here occurred was capitulation on Mr Kelly's part. It can equally be seen as a sensible way of resolving a preliminary skirmish with minimal cost and expense. True it is that it seems likely that the plaintiffs would not have obtained the preliminary discovery sought from Mr Kelly without these proceedings. Whether or not they could have obtained some or all of the material by pursuing the application that was not pressed against the third parties is not known and is not to the point. However, I am not persuaded that the conduct of Mr Kelly was so unreasonable as to warrant a costs order against him. 7. Accordingly, I make no order as to costs with the intent that (without prejudice to any claim that might be able later to be made in substantive proceedings in relation to the underlying dispute) each party should bear his or its own costs of the preliminary discovery application. ********** 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: 06 September 2018