FEDERAL COURT OF AUSTRALIA

Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy (No 2) [2020] FCAFC 112

ORDERS

THE COURT ORDERS THAT:

1.    The appellant/cross-respondent pay the respondent/cross-appellant’s costs of the appeal and ground 1A of the Further Amended Notice of Cross-Appeal (“cross-appeal”) on an indemnity basis to be taxed in default of agreement.

2.    The appellant/cross-respondent pay 75% of the respondent/cross-appellant’s costs of grounds 1 to 5 inclusive of the cross-appeal on a party and party basis to be taxed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The appellant/cross-respondent pay the respondent/cross-appellant’s costs of the appeal and ground 1A of the Further Amended Notice of Cross-Appeal (“cross-appeal”) on an indemnity basis to be taxed in default of agreement.

2.    The appellant/cross-respondent pay 75% of the respondent/cross-appellant’s costs of grounds 1 to 5 inclusive of the cross-appeal on a party and party basis to be taxed in default of agreement.

3.    The order in paragraph 1 of the orders made in SAD 276 of 2014 on 6 December 2017 be set aside and in lieu thereof, there be an order that the plaintiffs pay the defendant’s costs of and incidental to the hearing of the separate question on a party and party basis to be taxed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    These reasons address the issue of the orders as to costs which should be made by the Court in two appeals and two cross-appeals heard and determined by the Court. When we refer to the cross-appeals, we are referring to the Further Amended Notices of Cross-Appeal identified in paragraph 1 of this Court’s previous orders. These reasons should be read with the Court’s substantive reasons in the appeals and cross-appeals (Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5 (“the substantive reasons”)). The appellants in each appeal and cross-respondents in each cross-appeal are Timothy James Clifton and Mark Christopher Hall as Joint and Several Liquidators of Solar Shop Australia Pty Ltd (in liq) (“the Liquidators”). In SAD 341 of 2017, the respondent and cross-appellant is Kerry J Investment Pty Ltd trading as Clenergy (“Kerry J”). In SAD 343 of 2017, the respondent and cross-appellant is SMA Solar Technology AG (Joint Stock Company) (Germany) (“SMA”). There was a third appeal and cross-appeal involving the Liquidators as appellants and cross-respondents and Wuxi Suntech Power Co, Limited, (People’s Republic of China) (“Wuxi Suntech”) as respondent and cross-appellant (SAD 342 of 2017). The parties in that appeal and cross-appeal have settled their differences.

Background

2    Solar Shop Australia Pty Limited (in liquidation) (“Solar Shop”) carried on business as a supplier and installer of solar energy systems and, until 2009, solar water heating systems. Kerry J, SMA and Wuxi Suntech each supplied goods to Solar Shop from time to time.

3    On 21 October 2011, the directors of Solar Shop appointed voluntary administrators. On 25 November 2011, a meeting of creditors resolved that Solar Shop should be wound up and the Liquidators were appointed joint and several liquidators of Solar Shop.

4    The Liquidators brought proceedings against each of Kerry J, SMA and Wuxi Suntech seeking the recovery of amounts paid to them by Solar Shop on the basis that they were unfair preferences within s 588FF of the Corporations Act 2001 (Cth). The relation back day for Solar Shop is 21 October 2011 and the relation back period is 22 April 2011 to 21 October 2011. There were a total of 18 payments made to the suppliers between the period from 13 May 2011 and 19 August 2011. Two payments were made to Kerry J, 12 payments to SMA and four payments to Wuxi Suntech.

5    The three proceedings raised a common issue as to the date upon which Solar Shop became insolvent. In addition to that issue, each respondent raised defences to unfair preference claims available to them under the Corporations Act. Because of the common issue, the proceedings were heard together during various interlocutory hearings and eventually a separate question as to the date by which Solar Shop had become insolvent was formulated pursuant to r 30.01 of the Federal Court Rules 2011 (Cth) for hearing in each of the three proceedings.

6    The separate question proceeded to hearing before the primary judge and his Honour answered the separate question by stating that Solar Shop had become insolvent by 31 July 2011 (Clifton v Kerry J Investment Pty Ltd trading as Clenergy [2017] FCA 1379). The Liquidators had contended for earlier dates of 31 January 2011, or 30 April 2011, or 31 May 2011 and the effect of the primary judge’s conclusion that Solar Shop had become insolvent by 31 July 2011 was to eliminate from consideration 13 payments which had been made by Solar Shop before 31 July 2011. The effect of his Honour’s answer to the separate question can be seen by reference to the schedule of payments in our substantive reasons (at [30]) which sets out details i.e., date and amount, of the payments made by Solar Shop.

7    By their appeals, the Liquidators sought an order that the answer to the separate question be set aside and that the question be answered by reference to an earlier date of 30 April 2011, or 22 or 31 May 2011, or 30 June 2011. By their cross-appeals, the respondents sought to displace the date of 31 July 2011 and to substitute, in effect, no date within the period during which the relevant payments were made.

8    The grounds of appeal raised by the Liquidators in their Notices of Appeal were relevantly the same in each appeal and are described and analysed in the substantive reasons (at [211]–[471]) and the matters raised on the cross-appeals are described and analysed in the substantive reasons (at [424]–[662]). The Notices of Contention in the appeals and in the cross-appeals are described and analysed in the substantive reasons (at [663]–[686]).

9    The Court found that ground 1A of each cross-appeal, to the effect that the Liquidators had failed to comply with orders for discovery made by the Court, had been made out in that there had been and was an ongoing failure by the Liquidators to make proper discovery. The Court held that the Liquidators had not complied with their obligations to make proper discovery of documents and that that failure was ongoing in that at the time of the appeals and cross-appeals the failure had not been remedied. The history of the development of the discovery issue in the appeals is described in detail in our substantive reasons commencing at [77]. We described the orders for discovery at first instance (at [91]–[94]), the three sources of documents held by the Liquidators, namely, the Hard Copy Documents, Electronic Documents and Third Party Documents (at [98]–[127]) and details of the review of discovery carried out by or on behalf of the Liquidators since the commencement of the hearing of the appeals (at [128]–[131]).

10    The Court said that it was conceded by the Liquidators that the discovery made by them was inadequate. However, the extent to which it was inadequate and the consequences that flowed from the inadequacy were in issue between the parties (at [135]). The Liquidators contended that they had remedied any failure to make proper discovery. The Court found that the Liquidators failed to make proper discovery, that the failure was not de minimis and it has not been remedied (at [175]).

11    The Court then turned to consider the consequences of the Liquidators’ failure to make proper discovery. The Court reviewed the relevant authorities and then said the following (at [185]):

The Liquidators’ failure to comply with the Court’s orders for discovery is not confined to those documents they have now identified and made available as a result of their additional searches undertaken since this issue was raised but extends beyond those documents. Repositories of material were not searched or not sufficiently searched at the time that the Liquidators gave discovery and that remains the case. That is, there has been and is an ongoing failure to comply with the orders for discovery made in the First Instance Proceedings. In those circumstances the question of whether there is a real possibility that there would have been a different outcome had the Liquidators complied with their discovery obligations cannot be answered by considering only those documents recently identified by the Liquidators.

12    As we have said, the Court found that ground 1A of each cross-appeal, namely, that the Liquidators had failed to comply with the orders for discovery made at first instance, was made out.

13    One of the orders sought by Kerry J and SMA in their respective cross-appeals was an order dismissing the proceedings at first instance on the ground that the Liquidators had failed to make proper discovery and that that failure was ongoing. The Court said that it was not prepared to dismiss the proceedings at first instance (at [195]). The Court decided that in the somewhat unique circumstances of the appeals, the appropriate order in relation to the appeals was that they be dismissed. The Court said (at [204]):

We then turn to the appropriate orders with respect to the appeals. In our view and for the reasons already given, the appeals cannot be allowed for the purposes of substituting different (and earlier) dates. Nor can they be allowed for the purposes of a remitter (subject to proper discovery now being given) as to the earlier dates of alleged insolvency for that would be to reward the defaulting party for its default. In other circumstances one approach might be for this Court to give the defaulting party a further short period to comply with its discovery obligations. However, in this case that time has well and truly passed.

14    The Court decided that the primary judge’s answer to the separate question should be set aside (at [206]) and that the question should be remitted to the primary judge or another judge on the basis that it will not be open to the Court to find a date before 31 July 2011. The Court said (at [206]):

… The Respondents who were otherwise successful should not be put to the expense of having to re-litigate all issues and the Liquidators who were the defaulting party should not be given a second chance to establish insolvency at an earlier date. On the remitter, the primary judge would have all the Court’s existing powers to deal with the Liquidators’ failure to make proper discovery

15    The Court otherwise declined to limit the terms of the remitter (at [207]):

As is apparent from the wording of ground 1A of the relief sought in the cross appeals, the Respondents ask this Court to limit the remitter in various ways should the Court find that a remitter was appropriate. Other than excluding any date earlier than 31 July 2011, we do not consider that any of the proposed limitations are appropriate. We consider that once the Court decides (as it has) that the matter should be remitted, then it should be on the basis that the judge is able to reach the correct result and not on the potentially artificial basis of limitations imposed by this Court.

16    The Court then considered whether it should address the merits of the appeals and cross-appeals respectively. It is important to repeat what the Court said on that issue (at [208]–[210]):

In case we are wrong, the Court proposes to consider the merits of the appeals. We do that on the basis of the evidence before the primary judge. We have considered carefully whether we should embark on this exercise. On balance we have decided that we should because of the unique nature of the circumstances before the Court and in case we are wrong: Boensch v Pascoe [2019] HCA 49 at [8] (Kiefel CJ, Gageler and Keane JJ).

What then is to be done with the cross appeals (leaving aside ground 1A)? The situation that the parties now find themselves in is not occasioned by any fault on the part of the Respondents. If their cross appeals have merit then they should be entitled to succeed. However, having considered the merits of the cross appeals on the evidence before the primary judge, we do not consider that they should be allowed. Whilst an appeal or cross appeal might be dismissed on a basis other than the merits, we do not consider that, in the ordinary case at least, an appeal or cross appeal should be allowed other than on the merits. We do not need to address the Court’s power to proceed in that way. We note the Respondents’ submission that there is power to do that in s 23 of the Federal Court Act and in the Rules. In our opinion, the exercise of such a power, assuming it to exist, is not warranted. The prejudice to the Respondents to date can be remedied by appropriate orders as to costs.

We will now turn to address the grounds of the appeals and cross appeals (and, briefly, the notices of contention). However, it must be borne steadily in mind that throughout our analysis and conclusions we are proceeding on the basis of the evidence before the primary judge and without regard to the ramifications of the inadequate discovery subsequently disclosed.

17    For reasons we will give, there is an important difference between our reasons for considering the merits of the appeals and our reasons for considering the merits of the cross-appeals. As to the former, we considered the merits because of the unique nature of the circumstances before the Court and in case we were wrong in our conclusions with respect to the discovery failures, whereas in the case of the latter, we considered the merits because if those grounds, or one or more of them were such that they should succeed, then the cross-appellants, as the innocent parties, should have the benefit of that conclusion now rather than face a further hearing.

18    The primary judge reserved the question of the costs of and incidental to the hearing of the separate question. That is not surprising because, although his answer to the separate question had a major effect in terms of the payments which could be recovered, it did not finally resolve the proceedings between the parties. We refer to those costs as the costs of the proceedings at first instance.

19    It is important to note the terminology which we will use in these reasons. Kerry J and SMA each referred to the costs of the appeal, cross-appeal and the interlocutory application. When the discovery issue arose, each of Kerry J and SMA issued an interlocutory application seeking various orders, including, notably, an amendment to the cross-appeal to add ground 1A to which we have previously referred. The Liquidators referred to the costs of the appeals and cross-appeals. We consider the more appropriate classification than that advanced by Kerry J and SMA is, on the one hand, the costs of the appeal and ground 1A of the cross-appeal, and on the other, the costs of grounds 1 to 5 inclusive of the cross-appeal. We make it clear that the costs of ground 1A of the cross-appeal include all the costs associated with the discovery issues in the appellate proceedings.

Kerry J’s Application for Costs

The Proceeding at First Instance

20    Unlike SMA and Wuxi Suntech, the only payments made by Solar Shop to Kerry J were made after 31 July 2011. Other than resisting the earlier dates contended for by the Liquidators, Kerry J did not enjoy success before the primary judge. Kerry J seeks an order that the Liquidators pay its costs of the proceeding at first instance and that those costs be awarded on an indemnity basis.

21    From the point of view of Kerry J, the effect of this Court’s orders is that, subject to the Liquidators making proper discovery, there is to be a retrial limited to the date of 31 July 2011. Whether Kerry J will ultimately achieve any success in terms of the date of Solar Shop’s insolvency is, at present, unknown.

22    Kerry J acknowledges that there is a general rule of practice that where a trial is aborted and a new trial ordered, the costs of the aborted trial will be ordered to abide the result of the new trial and ultimately paid by the party who is unsuccessful. However, Kerry J submits that general rule should not be applied in this case for two reasons. First, the proceeding at first instance miscarried because of the fault of the Liquidators in that they failed to make proper discovery and the Court will order the defaulting party to pay the costs of the aborted trial in those circumstances. An example is Oswald v Australian Steamships Ltd [1914] VLR 329 at 335 per a’Beckett J. Further, it is not necessary to prove actual misconduct by the defaulting party (Keddie v Foxall [1955] VLR 320). The general principles were not in dispute on this application and it is not necessary for us to refer to the authorities any further (see generally, the discussion in Dal Pont GE, Law of Costs (4th ed, LexisNexis Butterworths, Australia, 2018) at 20.19–20.27 (“Dal Pont”)). Secondly, Kerry J submits that the vast majority of costs of the proceeding at first instance related to the Liquidators’ case as to earlier dates of insolvency and those costs “have been permanently wasted because of the conduct (misconduct) of the liquidators”.

23    As we have said, Kerry J further submits that the costs should be awarded on an indemnity basis.

24    The Liquidators seek an order with respect to the costs of the proceeding at first instance that the issue be referred to the trial judge as part of the remitter under order 5(b) made on 7 February 2020. They seek an order that would, in effect, add to the remitter in order 5(b) the words “and for the determination of the costs of the proceeding”. Alternatively, there is no need for such an order.

25    We consider that the question of the costs of the proceeding at first instance should be determined by the judge who is to hear the question as remitted. We think that this is the appropriate course because we do not know how events will unfold in the future. At one end of the spectrum, it is possible that the Liquidators will not remedy their failure to make proper discovery and the proceeding against Kerry J will be dismissed. We do not wish to pre-empt any decision the judge may make on the remitter, but in the circumstances we have identified, it may be difficult for the Liquidators to resist an order for costs to be awarded on an indemnity basis. At the other end of the spectrum, a significantly different order might be made if, after a short hearing, the date of 31 July 2011 is maintained. The point is that the judge hearing the question as remitted will be in the best position to determine the issue. The question of the costs of the proceeding at first instance have been reserved and we do not think that that order needs to be amended or varied.

The Appeal, Ground 1A of the Cross-Appeal and Grounds 1 to 5 inclusive of the Cross-Appeal

26    In their written submissions, the Liquidators submit that the appropriate order is that they pay 75% of Kerry J’s costs of the appeal and cross-appeal on a party and party basis. However, almost immediately thereafter, the Liquidators say that it is appropriate that Kerry J has its costs of the appeal and that the only question is the scale upon which those costs are awarded.

27    At all events, and as we will explain, we consider that Kerry J should have its costs of the appeal and ground 1A of the cross-appeal on an indemnity basis.

28    We do not need to consider Kerry J’s alternative submission that costs be awarded on an indemnity basis up to and including 7 August 2018 and thereafter on a party and party basis. The significance of 7 August 2018 in the alternative sought by Kerry J is that it was the second day of hearing and, according to Kerry J, it was the date upon which the failures in discovery began to be exposed.

29    Before examining the respective submissions, we address briefly the relevant principles in relation to an award of indemnity costs.

30    In Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225, Sheppard J said (at 233–234):

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. … 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 p 8) in Tetijo, “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at p 6) similar views in Ragata (supra).

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 (supra)); 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 Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). 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.

31    A failure to comply with obligations to make discovery has been recognised as a class of case in which an order for indemnity costs may be appropriate (National Australia Bank Ltd v Petit-Breuilh (No 2) [1999] VSC 395 at [15]; Masha Nominees Pty Ltd v Mobile Oil Australia Pty Ltd (No 2) [2006] VSC 56 at [17]–[21]). We also refer to the discussion by Kenny J in Morad v El-Ashey (No 2) [2017] FCA 1612 at [6]–[10] and the detailed discussion of the relevant principles in Dal Pont at 16.46 and following. The point which we wish to emphasise is that to justify a special costs order, there must be conduct deserving of criticism and resulting in greater expense to the innocent party. Reference was made to the overarching purpose in s 37M and the provisions of s 37N(1) and (4) of the Federal Court of Australia Act 1976 (Cth). As important as those provisions are, we are not disposed to think that they add a great deal in this context. The ongoing failure to make proper discovery is clear.

32    Kerry J points out, correctly in our view, that the appeal was dismissed because of the Liquidators’ delinquency or unreasonable conduct in failing to make proper discovery and that that delinquency or unreasonable conduct was continuing (at [204]–[205]). It nevertheless had to prepare for and argue the merits of the appeal in circumstances in which it should not have had to do so. Those circumstances are sufficient to justify a departure from the usual rule and an award of costs on an indemnity basis. None of the matters put against this conclusion by the Liquidators are persuasive. Those arguments seem to relate to the conduct of the Liquidators in resisting the discovery issue and the merits of their appeal. They submit that it was not unreasonable for the Liquidators to defend their position that they had not failed to give proper discovery. They point out that the Court described the issue that arose on the appeal as unique and that the discovery issue itself was unusual, where production orders had been obtained against 36 non-parties (see substantive reasons at [119], [121] and [126]). In our opinion, these submissions miss the point. The Liquidators were entitled to put such arguments on the discovery issue as they considered appropriate, but it is the result of the appeal and the basis for it that are the determining factors. The Court did describe the circumstances of the appeals as “somewhat unique” (at [205]), but that was primarily because the Liquidators’ failure to make proper discovery was ongoing at the time of the appeals. The Liquidators did undertake a number of processes to obtain third party documents as we described in our substantive reasons, but, for costs purposes, that does not act as a counter-weight to our finding that there was a failure to provide proper discovery, that failure was not de minimis and it had not been remedied and the consequences of that finding (at [175]).

33    The other matter relied on by the Liquidators is the fact that this Court held, according to the Liquidators, “that the Charge Issue” was at least an arguable case on the appeal, despite the argument regarding discovery. Whilst the Court did say that “the Liquidators appear to be right about the issue at least up to the point of the question of whether it is likely that Westpac would have consented to a sale of the RECs holding” (at [203]), that was in a context of considering the issue in case the Court was wrong about the discovery issue, and did not form the basis of the orders which the Court made with respect to the appeal.

34    We are of the opinion that the Liquidators should pay Kerry J’s costs of the appeal and ground 1A of the cross-appeal on an indemnity basis.

35    We consider that the costs associated with the merits of grounds 1 to 5 inclusive of the cross-appeal stand in a different position. It was for the benefit of the parties that we considered those grounds because had one or more of them succeeded, that may have led to different orders, including (had the cross-appellants succeeded) an order dismissing the proceeding. It is true that, in the result, the grounds “failed”, subject to the important qualification about the ongoing failure to make proper discovery (at [455] and [661]). However, it is difficult to see how the discovery failures might have any effect on the Confined Dates Issue and more generally, it is difficult to think that the discovery failures have, or may have, an effect on all the grounds of the cross-appeal. Having regard to those matters, we consider that the appropriate order is that the Liquidators pay 75% of Kerry J’s costs of grounds 1 to 5 inclusive of the cross-appeal on a party and party basis.

Conclusions with respect to Kerry J’s Application for Costs

36    We will not make an order in relation to the costs of the proceeding at first instance.

37    The Liquidators must pay Kerry J’s costs of the appeal and of ground 1A of the cross-appeal on an indemnity basis. The Liquidators must pay 75% of Kerry J’s costs of grounds 1 to 5 inclusive of the cross-appeal on a party and party basis.

SMA’s Application for Costs

38    Ten of the 12 payments by Solar Shop to SMA were made before 31 July 2011 and these 10 payments total an amount in the order of €2.297 million. The two payments after 31 July 2011 total an amount of €158,528.37. SMA had substantial success at first instance and that was maintained as a result of the appeal and cross-appeal. Its maximum potential liability in the proceeding is now the amount of €158,528.37.

The Proceeding at First Instance

39    SMA submits that the Liquidators should pay its costs of the proceeding at first instance and that those costs should be awarded on an indemnity basis. SMA’s argument is that the hearing at first instance miscarried because of the Liquidators’ failure to provide proper discovery in accordance with the orders of the Court. It submits that the costs it has incurred to date have been almost entirely wasted by reason of the Liquidators’ defaults and that that is apparent from the fact that those costs were incurred in the absence of full and proper discovery and “where nearly the entirety of the evidence and submissions before the primary judge were directed to the question of whether the Company was insolvent on dates earlier than 31 July 2011”. SMA relies on the following observation by the Court about remedying any prejudice to it to date by an appropriate order as to costs as follows (at [209]):

… Whilst an appeal or cross appeal might be dismissed on a basis other than the merits, we do not consider that, in the ordinary case at least, an appeal or cross appeal should be allowed other than on the merits. We do not need to address the Court’s power to proceed in that way. We note the Respondents’ submission that there is power to do that in s 23 of the Federal Court Act and in the Rules. In our opinion, the exercise of such a power, assuming it to exist, is not warranted. The prejudice to the Respondents to date can be remedied by appropriate orders as to costs.

40    In the alternative to this order, SMA submits that the costs of the proceeding at first instance until the date upon which the Court made the order that the Liquidators provide discovery (i.e., 21 September 2015) or the date upon which the Liquidators served their list of documents in relation to this order (i.e., 26 October 2015) should be reserved to the primary judge, but that the costs thereafter should be paid by the Liquidators and that this should be on an indemnity basis because the initial trial miscarried and the parties have wasted time and expense because of the Liquidators’ failure to provide proper discovery. SMA submits that this dichotomy in the orders as to costs reflects the costs that have been permanently wasted by reason of the Liquidators’ defaults and residual costs that may not have been permanently wasted.

41    The Liquidators submit that the appropriate order is that they be ordered to pay the costs of the trial of the separate question in the proceeding at first instance on a party and party basis. They submit the following: (1) SMA had substantial success in the proceeding at first instance and it is not clear why it is said by SMA that a large amount of costs have been almost entirely wasted or that the trial costs have been thrown away; (2) unless further discovery renders the findings unsound, the findings of the trial judge will stand. There is no need to recall witnesses as none were called at the trial; (3) SMA is in the same position it would have been had it run a trial on insolvency and been successful; and (4) if there is any doubling up on costs as to 31 July 2011, then the judge can deal with this by way of a fresh order on the remittal.

42    We accept the Liquidators’ submissions. SMA is in substantially the same position it would have been had it succeeded in the normal way. It seems to us that one could only say the costs of the proceeding at first instance have been wasted if it is unlikely the proceeding at first instance would have gone ahead at all had the Liquidators made proper discovery. That possibility, on all that we have seen in this case, is such an unlikely one that it may be put to one side.

The Appeal, Ground 1A of the Cross-Appeal and Grounds 1 to 5 inclusive of the Cross-Appeal

43    SMA submits that it should have its costs of the appeal, cross-appeal and interlocutory application. As we have already said, we would not make a separate order in relation to the interlocutory application. For the reasons we have given, we would distinguish between the appeal and ground 1A of the cross-appeal on the one hand, and grounds 1 to 5 inclusive of the cross-appeal on the other.

44    As with Kerry J, the Liquidators submit that the appropriate order is that they pay 75% of SMA’s costs of the appeal and cross-appeal on a party and party basis. Again, it is not entirely clear to us how they get to the 75% when they later seem to accept that they should pay the costs of the appeal, albeit on a party and party basis.

45    At all events, SMA’s arguments in favour of an order for indemnity costs in relation to the appeal and cross-appeal focused on the costs “entirely wasted” (e.g., responding to each of the grounds of appeal) because of the Liquidators’ ongoing failure to comply with the orders of the Court and costs “only necessary” (e.g., in prosecuting ground 1A of the cross-appeal) because of the same ongoing failure. For their part, the Liquidators advanced the same, or very similar, arguments in favour of the order they proposed to those arguments they advanced in the case of Kerry J.

46    We are unable to see any material difference between this case and that involving Kerry J and we will make the same orders in this matter as we will make in that matter.

Conclusions with respect to SMA’s Application for Costs

47    The primary judge’s order made on 6 December 2017 reserving the costs of and incidental to the separate question should be set aside. In lieu of that order, there should be an order that the plaintiffs pay the defendant’s costs of and incidental to the separate question on a party and party basis.

48    The Liquidators must pay SMA’s costs of the appeal and ground 1A of the cross-appeal on an indemnity basis, and 75% of its costs of grounds 1 to 5 inclusive of the cross-appeal on a party and party basis.

Associate:    

Dated:    26 June 2020