FEDERAL COURT OF AUSTRALIA

Byrnes v Brisconnections Management Company Limited (No. 2)

[2009] FCA 1432

COSTS – application for indemnity costs on a lump sum basis – original pleading struck out – proceeding subsequently summarily dismissed – whether unreasonable conduct in the course of the litigation on the part of the plaintiff

Corporations Act 2001 (Cth) s 252C

Federal Court Rules O 62 r 4(2)(c)

JAMES WARREN BYRNES v BRISCONNECTIONS MANAGEMENT COMPANY LIMITED (AS RESPONSIBLE ENTITY FOR THE BRISCONNECTIONS INVESTMENT TRUST AND THE BRISCONNECTIONS HOLDING TRUST) (ACN 128 614 291), MACQUARIE CAPITAL ADVISORS LIMITED (ACN 123 199 548) and MACQUARIE BANK LIMITED (ACN 008 583 542)

NSD 348 of 2009

EMMETT J

27 OCTOBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.         The applicant pay the costs of the second and third respondents in the sum of $185,000.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          On 2 June, the Court ordered that this proceeding be dismissed.  The Court also ordered the plaintiff, Mr James Byrnes, to pay the defendants’ costs of the proceeding.  Liberty was reserved to the defendants to file, within seven days, any application they wished to make as to further costs orders.  On 9 June 2009, pursuant to that liberty, Macquarie Capital Advisers Limited (Macquarie Capital) and Macquarie Bank Limited (Macquarie Bank), who were originally named as second and third defendants in the proceeding (together the Macquarie Companies), filed an application for an order for the payment of costs on an indemnity basis, and an order for the payment of those costs in a lump sum. 

2                          Therefore, there are now two issues before the Court.  The first is whether Mr Byrnes should be ordered to pay the costs of the Macquarie Companies on an indemnity basis, and the second is whether those costs should be calculated as a lump sum.  In dealing with those issues, it is necessary to say something about the background to, and the course of, the litigation. 

3                          The first defendant is BrisConnections Management Company Limited (BrisConnections), to which the State of Queensland awarded a concession to design, construct, operate, maintain and finance a connection road between suburbs of Brisbane, including a physical tunnel, roadwork, facilities and other systems (the Airport Link).  BrisConnections was to receive toll road revenue from the roadway for a period of 45 years.

4                          BrisConnections is the responsible entity of two trusts, being the BrisConnections Investment Trust and the BrisConnections Holding Trust (together, the Trusts).  By way of initial public offering on 24 June 2008, BrisConnections offered units in the Trusts to members of the public, on terms described in a product disclosure statement.  Units in the Trusts were described as “partly paid stapled units” and units in the Trusts were to be traded together.  Each unit had an issue price of $3, which was to be payable by way of instalments, as follows: 

·          $1 on application,

·          $1 nine months after the allotment date, and

·          the final instalment of $1 payable no later than 18 months after the allotment date. 

The second instalment of $1 for each unit was due to be paid by 29 April 2009.  The third instalment was due to be paid by 29 January 2010.  In excess of 390 million units were issued to subscribers, who became members of the Trusts. 

5                          On 2 March 2009, BrisConnections issued a call notice to members of the Trusts for the payment of the second instalment by 29 April 2009.  Macquarie Capital was an underwriter of the initial public offering and Macquarie Bank lent money to BrisConnections under an equity bridge syndicated facility agreement.  By that facility agreement, Macquarie Bank made available a revolving cash advance loan facility to BrisConnections.  The funding for the project to construct the Airport Link was structured such that payments in respect of the second and third instalments for the units would be applied by BrisConnections to repay borrowings under the syndicated facility agreement.

6                          Things did not necessarily go according to plan.  On 12 February 2009, Australian Style Investments Pty Ltd (Australian Style), which was a unit holder in the Trusts, requested BrisConnections to call a meeting of members of the Trusts to consider a resolution to wind up each of the Trusts.  On 20 February 2009, Australian Style also requested BrisConnections to call a meeting of members of the Trusts to consider six further resolutions, in the event that the resolutions to wind up were not passed.  Those steps gave rise to two separate pieces of litigation. 

7                          On 3 March 2009, BrisConnections commenced proceedings in the Supreme Court of Victoria, concerning the validity of the requests to convene meetings.  On 5 March 2009, BrisConnections issued a notice of meeting of members to consider the winding up resolutions.  On 20 March 2009, Australian Style called a meeting of members, pursuant to s 252C of the Corporations Act 2001 (Cth), to consider the further resolutions on the basis that BrisConnections had failed to call a meeting to consider those resolutions in accordance with the request of 20 February 2009.  On 2 April 2009, the Supreme Court of Victoria dismissed the Victorian proceedings.  The meetings scheduled for 9 and 14 April 2009 were adjourned by the Court, subject to BrisConnections undertaking to call a new meeting on 14 April 2009, to consider the winding up resolution and the additional resolutions.  On 6 April 2009, BrisConnections issued a notice of meeting accordingly.  At the meetings of members held on 14 April 2009, all of the proposed resolutions were rejected. 

8                          On 30 March 2009, Macquarie Capital and Macquarie Bank commenced proceedings in the Supreme Court of Queensland, seeking declaratory relief designed to enforce contractual rights that they asserted would be breached if the Trusts were wound up, or if the additional resolutions were passed and implemented.  On 14 April 2009, the Supreme Court of Queensland dismissed the claims brought by the Macquarie Companies, insofar as urgent relief was sought, and adjourned the balance of the claims, together with cross-claims, to a date to be fixed. 

9                          In the meantime, Mr Byrnes engaged in correspondence with BrisConnections and others concerning the affairs of the Trusts, and in particular, concerning the product disclosure statement.  On 4 March 2009, Mr Byrnes wrote to BrisConnections about a proposal to restructure BrisConnections.  He said that, if the board ignored his offer to meet and discuss a proposal, which he said would have the support of a substantial number of unit holders, BrisConnections and its directors would be opened up to a raft of claims from unit holders, funders and underwriters.  Mr Byrnes’ proposal included a capital reduction, a capital raising, amendments to the terms of the Trusts to accelerate depreciation, and various other matters.  BrisConnections declined to meet with Mr Byrnes until he had provided more detail concerning the proposal. 

10                        On 5 March 2009, Mr Byrnes wrote again, stating that if the board refused to take the opportunity that was being offered, it was opening the doors for 100% of unit holders to mount a class action against the directors personally and against BrisConnections.  Mr Byrnes said that the Macquarie Companies were facing an $800 million write-off, and that the professional indemnity insurance of the directors of BrisConnections might not cover the losses. 

11                        On 12 March 2009, Mr Byrnes wrote to various journalists, noting that he had made a proposal and that BrisConnections refused to meet with him.  He asserted that he had told BrisConnections to put the professional indemnity insurer on notice. 

12                        Mr Byrnes then turned his attention to the holders of units, writing to them on 13 March 2009, seeking proxies for the proposed meeting of 9 April 2009.  Mr Byrnes asserted that he had been a full-time consultant to Australian Litigation Funders Pty Limited for several years, and had established relationships with firms that specialise in class actions.  He expressed the belief that, with a united front, holders of units could mount a competent defence and cross-claim to any action to recover calls on the units. 

13                        On 17 March 2009, Mr Byrnes somewhat extraordinarily wrote to legal counsel appearing for BrisConnections in the Victorian proceeding.  He suggested that BrisConnections had not kept the market informed as to his proposal, and that the failure to meet with him may cause unit holders to suffer as a result of negligence and give rise to a complete off-setting claim.  He threatened to vote his proxies in favour of winding up at the forthcoming meetings.  Also attached to that communication, was a letter from Mr Byrnes to Australian Securities Exchange, asserting that BrisConnections had misled the market. 

14                        On 30 March 2009, Mr Byrnes sent a message to Ms Tamira Herbst, the secretary of BrisConnections. In that communication, he threatened proceedings for the appointment of a liquidator to BrisConnections. 

15                        On 30 and 31 March 2009, there were communications from Mr Byrnes and from his solicitors to the Macquarie Companies, raising the purchase by the Macquarie Companies of units that had previously been the subject of a contract with a company associated with Mr Byrnes.  At this stage, Mr Byrnes was not a unit holder in either of the Trusts.  However, on 6 April 2009, he acquired units in the Trusts. 

16                        On 8 April 2009, Mr Byrnes wrote again to Ms Herbst, with copies to various people, including Freehills, who were acting for the Macquarie Companies.  The email was in poor taste.  It contained a picture with a sign saying, “Shit Creek Paddle Store Franchises Available.”  Beside the picture was a note saying:

You’ve been there before… With your firsthand experience with misfortune, you know that when you’re up shit creek without a paddle, you’ll pay whatever it takes.  Perhaps, that includes talking nicely to your unit holders and getting Mac Bank to actually ring someone who can resolve this.  Jim Byrnes at your service… 

Other comments directed at Freehills were also contained in the communication. 

17                        Following his acquisition of units in the Trusts, Mr Byrnes took further steps towards the commencement of this proceeding.  A website of Australian Litigation Funders Pty Limited lists Mr Byrnes as the only point of contact.  Between 17 and 23 April 2009, a website described as “Aussie Stock Forums” included a number of postings under the name of Mr Byrnes.  On 20 April 2009, he said that he was looking for an original, initial public offering purchaser, preferably being someone who believed what was said in the product disclosure statement.  He said that the person he was looking for should have little in the way of assets, and that such a person would be the perfect person to be the plaintiff in a proposed class action.

18                        On 21 April 2009, Mr Byrnes said, on Aussie Stock Forums, that a class action was now almost ready to be filed which would include all unit holders.  He asserted that false and misleading statements had been identified in the product disclosure statement.  He also said that the proposed class action would include all current unit holders and all previous unit holders, and that the class action would seek additional damages equal to the next two instalments that had been ruled on by the Supreme Court of Queensland.  He said that one of the Macquarie Companies would be a second defendant for a claim within a range deemed to be between $1.3 billion and $1.8 billion.  He asserted that the Macquarie Companies would no doubt seek to get unit holders who agreed to sell to them to give up their rights. 

19                        Later on the same day, another posting referred to a little bit of relief being in sight, in that Macquarie Bank had agreed to make some form of conditional offer to the small unit holders.  The posting exhorted that unit holders beware, since they are likely to have large claims against BrisConnections and the Macquarie Companies.  He asserted that the Macquarie Companies wanted to mop up the people who have real and proper claims, but that the class action would automatically catch every person and would require an application of the Court to be released in the short term.  He said that that would scuttle the offer, presumably referring to an offer that had been made by one of the Macquarie Companies. 

20                        Later still on 21 April 2009, another posting carried what seems to have been a rhetorical question, “Do you think we would have arranged for a funder to commit $1 million in funding if they did not believe there was a good case?”  Still later on the same day, Mr Byrnes said that he was “going after the deep pockets first.”  Then finally, just before midnight on 21 April 2009, another posting from Mr Byrnes appreared, saying that there is one point that was unable to be proved correct, namely, the statement in the product disclosure statement, in big letters, to the effect that Brisbane is the fastest growing capital city in Australia.

21                        On the following day, 22 April 2009, Mr Byrnes returned to the forum, saying that he apologised for not being specific on causes of action.  He said that he may have thrown in a few red herrings, as he knows that Macquarie Bank and BrisConnections read the blogs.  He said, however, that he could confirm that a very, very high profile QC had agreed to act on the class action, and that two senior juniors had also been engaged.  On 23 April 2009, another posting by Mr Byrnes said that, as soon as they had filed the claim in the Federal Court, he would scan and cut and paste it onto the site.  He warned Macquarie Bank shareholders to beware, because the share price of Macquarie Bank was likely to be hammered.

22                        Later on in the evening of 23 April 2009, Mr Byrnes invited readers to have a look at the website of the product disclosure statement, because he was very keen for good readers and bloggers to provide him with information concerning mistakes in the product disclosure statement.  And finally, later in the evening of 23 April 2009, Mr Byrnes said that he and his associates had formulated a plan of attack, and had prepared a class action, and had arranged to fund the class action.  He said that, while the funder makes a tidy fee of about 33%, the aggrieved gets 66%, and that 66% of something is better than 100% of nothing.  Mr Byrnes said that a second payoff was very personal to him.  He said Macquarie Bank had been a little unkind to him in the past and that this was a little payback.  He wondered whether anyone understood what sort of personal satisfaction one derives in not only being paid to do a service, but in helping thousands of people who have been badly affected by their dealings.

23                        This proceeding was commenced on 24 April 2009, with an appointment for directions at 9.30 am on 27 April 2009, for the purposes of hearing an application for abridgement of time for service.   The application claimed both final relief and interlocutory relief.  The final relief included:

·          a declaration that the contracts to purchase units were void, or in the alternative, were voidable, 

·          a declaration that the calls for the second and third instalments were unenforceable, and

·          damages for the loss of commercial opportunity in an amount of about 1.3 billion dollars.

The claim for interlocutory relief was for a declaration that the call for the second and third instalments be deferred until final determination of the proceeding. 

24                        Late in the afternoon of 24 April 2009, Messrs Whittens, who were acting for Mr Byrnes, sent an email to Freehills, attaching a copy of the application and statement of claim that had been filed.  The email said that the application and statement of claim were enclosed as a matter of courtesy and asked whether Freehills had instructions to accept service. 

25                        At 7.28 pm on 24 April 2009, Freehills sent an email to Whittens, asking whether an undertaking as to damages would be provided, and if so, seeking evidence of Mr Byrnes’ ability to meet that undertaking.  On the morning of Saturday, 25 April 2009, Whittens again requested confirmation that Freehills had instructions to act and accept service of the application and statement of claim.  Freehills responded at 11.08 am, saying that they had instructions to accept service, and repeating the inquiry of their email of the previous evening.  That was repeated, in substance, at 3.58 pm on 25 April 2009.  At 3.09 pm on Sunday 26 April 2009, Freehills again emailed Whittens, asking them to advise as soon as possible whether Mr Byrnes was providing an undertaking as to damages.  No response was received to that email.  In none of the communications received by Freehills from Whittens was there any indication that the purpose of the directions hearing listed for 27 April 2009 was merely to seek an order for abridgement of time for service of the application and statement of claim.  Nor was there any indication that Mr Byrnes would not press for any of the interlocutory relief when the matter came before the Court. 

26                        At all times between the time when Freehills first received the pleading on the evening of 24 April 2009 and commencement of the directions hearing on 27 April 2009, Freehills prepared urgently for a substantive interlocutory hearing, which was expected to take place on 27 April 2009, or Tuesday 28 April 2009, as well as a directions hearing on 27 April 2009.  In those circumstances, a significant amount of work was required to be undertaken by Freehills, and counsel retained by them on behalf of the Macquarie Companies on the evening of 24 April 2009 and the weekend of 25 and 26 April 2009 in preparing for the proposed hearing on 27 April 2009 and if need be, on 28 April 2009.  That work included a substantive review of the original pleading, including the basis for the interlocutory relief, preparation of evidence on behalf of the Macquarie Companies, demonstrating the significant injury that might be caused should the interlocutory relief be granted, and preparation of submissions in relation to the position to be adopted by the Macquarie Companies in response to the interlocutory relief. 

27                        At about 10 am on 27 April 2009, before the matter was called on for hearing, Mr Renzie Duncan from Whittens, who had the carriage of the matter on behalf of Mr Byrnes, told Mr Marjoribanks of Freehills that Mr Byrnes was no longer pressing for interlocutory relief.  Shortly after the commencement of the directions hearing, counsel for Mr Byrnes indicated to the Court that Mr Byrnes was no longer pressing for interlocutory relief.  Counsel confirmed that the matter was listed that morning, initially to get short service of the application, but that service had, in effect, been arranged, and that the parties were present.  He said that the purpose was to obtain an early hearing date for an interlocutory hearing, but that he was now instructed that Mr Byrnes did not wish to proceed with the interlocutory matter, and therefore asked that the matter be stood over for about six weeks.  Counsel said that it was their intention to make some amendments to the application, that some information was needed, but that they were not in a position to make amendments at that stage.  In light of that observation, the matter was adjourned to enable the respondents to obtain some instructions. 

28                        On resumption, senior counsel for the Macquarie Companies intimated that he wished to move to strike out the present pleading for a number of reasons and forewarned Mr Byrnes and those appearing for him that, at the end of that, if successful, they would seek indemnity costs as a result of being brought to Court on that day.  After some further dialogue with counsel, I indicated to counsel for Mr Byrnes that I was disposed to strike out the statement of claim but give leave to re-plead.  Counsel was unable to justify six weeks as the time needed to amend the pleading, but said that he wished to have that time to make inquiries as to evidence and the obtaining of information in connection with the proposed proceeding.  

29                        Counsel for Mr Byrnes indicated that the proposed amendments were not designed to overcome any deficiency, but were simply designed to make the pleading clearer.  He said that the pleading, as it stood, could go forward but that he wished to make it clearer, so that there was no argument about some matters.  He asserted that there was no wish to change the cause of action, or causes of action, but that what they wanted to do was particularise the causes of action in more detail.  After further dialogue and another brief adjournment, the Court granted leave to the Macquarie Companies to file a motion returnable on 6 May 2009 for the purpose of considering a strikeout application.

30                        Following the directions hearing, a significant amount of work was undertaken by Freehills and counsel for the Macquarie Companies in preparing for the proposed strikeout application.  That included:

·          review of the original pleading, including the basis for the primary relief claimed; 

·          preparation of written submissions in support of the strikeout application; 

·          preparation of a further affidavit dealing with evidence relevant to the point intended to be advanced by the Macquarie Companies in support of the strikeout application; 

·          preparation of the notice of motion; and

·          further investigation of Mr Byrnes’ postings on the Aussie Stock Forums website and other public statements made by Mr Byrnes in various media sources.

31                        On the morning of 30 April 2009, those acting for Mr Byrnes served on the Macquarie Companies an undated notice to produce returnable at 9.30 am on the following day.  Shortly after 10 am on 30 April 2009, Freehills sent an email to Whittens asking them to explain why the notice to produce had been issued in circumstances where the current pleading faced a strikeout challenge.  Whittens were asked to explain why the documents were needed, and why they were needed so urgently.  There was no response to the email.  At 8.49 am on 1 May 2009, Whittens sent an email to Freehills indicating that Mr Byrnes was prepared to limit the call on the notice to produce to two documents.  Freehills responded, saying that any production of documents at that stage would be resisted. 

32                        The notice to produce was called on 1 May 2009.  At an early stage, I asked Mr Duncan, who was appearing for Mr Byrnes, what the relevance the documents had to the strikeout application.  Mr Duncan responded that, on the previous occasion, counsel for Mr Byrnes had made it clear that they intended to amend, and that they wanted six weeks to carry out the amendments.  When it was suggested that counsel had indicated that they were really simply tinkering and tidying up and giving further particulars, Mr Duncan responded that they were always trying to improve the pleading.  The documents in question included the product disclosure statement and Mr Duncan said that the documents were needed in order to be satisfied that what had been assumed up to date was, in fact, correct.  He said that the documents were not available to the public or anybody who had subscribed for units in the Trusts.  That seems somewhat curious, since the whole thrust of the complaint was that people subscribed for units on the basis of misleading statements in the product disclosure statement.

33                        Mr Duncan confirmed that the documents were wanted so that a case could be formulated that was not presently formulated.  It was put to Mr Duncan that it appeared that there is a defect in the pleading that he was trying to cure and he was effectively conceding that the pleading should be struck out, something that had been suggested to counsel for Mr Byrnes on the earlier occasion.  In response to a suggestion it would be easier for the pleading to be struck out, if it is defective, Mr Duncan responded that that would be the most efficient way of going forward. 

34                        Accordingly, by consent, I ordered that the statement of claim that had been filed on 24 April 2009, be struck out.  I gave Mr Byrnes leave to file an amended statement of claim no later than 8 May 2009 and said that I would stand the matter over to 22 May 2009 for further directions after the defendants had had a chance to consider the new pleading.  Counsel for the Macquarie Companies then announced that the Macquarie Companies would seek an order for costs on an indemnity basis.  Mr Duncan indicated that that would be opposed. 

35                        An amended statement of claim was filed on 15 May 2009.  Surprisingly, without any prior intimation, Ms Cynthia Lachat was joined as applicant.  Macquarie Bank was no longer shown as a defendant.  Rather, Mr Trevor Rowe was named as the third defendant.  The claim for interlocutory relief was abandoned entirely.  No amended application was filed and no application for leave to remove parties or join parties was made on behalf of Mr Byrnes. 

36                        On 19 May 2009, Whittens wrote to Freehills, saying that they had considered the material in the affidavit of Mr Jason Betts of Freehills, and that, as a result, it appeared to Whittens that there may be an issue as to whether Mr Byrnes can adequately represent group members in the proceedings.  That may be an allusion to the fact that Mr Byrnes clearly had not acquired any units on the basis of any representation in the product disclosure statement, since he had not acquired his units until well after he was aware of any matters about which he now complains.  The letter went on to say that, in order to avoid any issues arising from Mr Byrnes being named as the representative party, Ms Lachat had consented to be named.  The letter said that, in those circumstances, it was proposed to seek an order that Ms Lachat be substituted as the representative plaintiff.  A proposed form of notice of motion to that effect was enclosed. 

37                        Freehills responded on 20 May 2009, outlining their concern that the application to substitute Ms Lachat was designed to defeat an argument that the proceeding was an abuse of process.  The letter sought confirmation as to Mr Byrnes’s continuing role in the proceeding and requested information in relation to the preparedness of Mr Byrnes and Ms Lachat to meet orders for costs. 

38                        Whittens replied on 21 May 2009, saying that Mr Byrnes would have no further role in the proceeding, apart from his role as a class member, being the holder of 3000 units.  The letter said that Mr Byrnes would provide no undertaking to pay any costs and that the costs to date was a matter for the Court.  The letter confirmed that neither Mr Byrnes, nor Ms Lachat would offer security for the costs of the proceeding. 

39                        On 22 May 2009, the proceeding was adjourned to 2 June 2009.  On that day, submissions were made on behalf of BrisConnections and Mr Rowe in support of an application for summary dismissal. Senior counsel for the Macquarie Companies adopted the submissions made on behalf of BrisConnections and Mr Rowe.  Counsel for Mr Byrnes opposed the making of any summary order at that stage and submitted that the appropriate course was to give further leave to re-plead.  For the reasons I then gave, I ordered that the proceeding be dismissed summarily.

40                        It is against that background that this application has been brought.  In addition to evidence in the form of affidavits by Mr Jason Betts, of Freehills, I also have affidavit evidence from Ms Suzanne Ward, a director of Pattison Hardman Pty Ltd, cost consultants, and Mr Timothy Rybak, who is also a legal cost consultant.  Ms Ward was retained by Freehills, Mr Rybak by Whittens.  Mr Betts’ affidavit was read without objection, as were the affidavits of Ms Ward and Mr Rybak.  There was no cross-examination of Mr Betts or of either of the cost consultants. 

41                        Mr Betts explained the possible detrimental consequences to the Macquarie Companies if interlocutory relief had been granted.  First, it would have interfered with the repayment to Macquarie Bank of the significant loans that it had made to BrisConnections pursuant to the syndicated facility agreement.  The repayments were due to be made in the first instance in early May 2009 from the proceeds of the first call.  Second, there was the possibility of breach of contractual obligations owed to Macquarie Bank pursuant to the syndicated facility agreement, to ensure that calls were due and payable on or before the relevant call payment date.

42                        Either of those breaches would give rise to an event of default under the syndicated facility agreement and the underwriting agreement with Macquarie Capital.  Deferring of the call would prevent Macquarie Capital from exercising the rights provided to it under the underwriting agreement to pursue unit holders in respect of unpaid calls.  The Macquarie Companies were of the view that the size and significance of the Airport Link project, and the potential impact of the interlocutory relief that was claimed, required that work necessary to resist the grant of any relief in the proceedings be undertaken on an urgent basis, as thoroughly as was permitted. 

43                        I referred earlier to an offer made by Macquarie Capital to unit holders to transfer their units.  The terms of the offer involved eligible unit holders transferring 100 per cent of their units to Macquarie Capital, in consideration for which their liability to pay the second and third instalments would be cancelled.  Eligible unit holders were those on the register as at 14 April 2009 as the holders of 50,000 or fewer units.  The deadline for acceptance was 4 May 2009.

44                        Ms Ward was provided with a detailed narrative of Freehills’ professional fees in the proceeding from 29 April 2009 to 2 June 2009, together with records of disbursements made by the Macquarie Companies in connection with the proceeding during that period.  Freehills’ total fees amounted to $240,304 including GST, or $218,458 excluding GST.  Disbursements totalled $71,755 including GST, or $65,232 excluding GST. 

45                        The thrust of the case advanced on behalf of the Macquarie Companies is that an order for indemnity costs is justified on four bases, either separately or considered together.  First, they say urgent interlocutory relief was foreshadowed and then the possibility of interlocutory relief was abandoned on 27 April 2009, causing unnecessary expense to the Macquarie Companies.  Secondly, pleadings were filed that were misconceived, hopeless, pleaded no cause of action against the Macquarie Companies, and were subsequently disowned.  Thirdly, pleadings were filed and the proceeding was purportedly reconstituted without reference to or the leave of the Court.  Finally, the conduct of Mr Byrnes in relation to the proceeding was unacceptable and an inference should be drawn that the proceeding was brought for an ulterior purpose and was an abuse of process.

46                        The approach adopted on behalf of Mr Byrnes was, in a sense, somewhat curious.  He adopted the position that it should have been apparent to the lawyers representing the Macquarie Companies that the proceeding as formulated could not succeed without significant amendment.  His contention appears to be that, therefore, they should not have been concerned about the case brought against them, notwithstanding the severe detriment that might be occasioned if by chance it succeeded.  I should say that counsel who advanced these contentions in relation to costs on behalf of Mr Byrnes did not appear at the earlier hearing in relation to the pleadings.

47                        Mr Byrnes’ conduct, as I have summarised it, was out of the ordinary.  He acknowledged in some of the things that he said that he wished to pay back Macquarie Bank for some unarticulated grievance that he felt in relation to their conduct.  He clearly had no possible basis for saying that he suffered some loss or damage by conduct on the part of Macquarie Bank or BrisConnections that was misleading or deceptive in relation to the initial public offering and the product disclosure statement.  He was not a unit holder until well after he knew everything that was the subject of the claims made in both the initial statement of claim and the amended statement of claim. 

48                        Mr Byrnes was never a possible or appropriate class leader, for the purposes of conducting an action in relation to the product disclosure statement.  When I summarily dismissed the proceeding on 2 June 2009, I intimated that that would not prejudice the recommencement of a proceeding making some claims in relation to the product disclosure statement.  That, however, was a reference to the possibility that there may be a class capable of being constituted, which has a cause of action along the lines hinted at in the pleadings.  There is no basis whatsoever, however, for Mr Byrnes having such a claim.  Mr Byrnes’ claim was always hopeless. 

49                        The conduct of the proceeding in the initial days was extraordinary.  The Court was put to considerable inconvenience in dealing with the matter as one of urgency, because it was said that interlocutory relief was required before the due date for the call on 29 April 2009.  Mr Byrnes’ announcement, on Monday morning, that he did not wish to proceed with any interlocutory relief whatsoever, involved considerable discourtesy to everybody.  Either there was a change of heart somewhere or, alternatively, there never was any intention to seek interlocutory relief.  Mr Byrnes has not seen fit to give evidence as to the circumstances in which the proceeding was conducted on his behalf.  This proceeding should never have been commenced by Mr Byrnes.  The Macquarie Companies have been put to significant inconvenience and very substantial cost.  I consider that it is an appropriate case for an order to be made on the indemnity basis. 

50                        There are no fixed or prescribed bases upon which such an order for indemnity costs is made.  The Court will normally require some evidence of unreasonable conduct in the course or conduct of the litigation.  I consider that the matters to which I have referred, being the four bases upon which the Macquarie Companies seek indemnity costs, justify such an order.

51                        The second question is whether or not it is appropriate in this case to order that costs be assessed on a lump sum by the Court, rather than to afford Mr Byrnes the opportunity of having the costs taxed.  The power conferred by Order 62, rule 4(2)(c) is particularly suited to complex litigation, where the costs of taxing a bill might be quite considerable, and the delay and inconvenience involved might also be considerable.  That is not necessarily this case, in that, while the issues raised by the pleading were complex and significant, the proceeding was snuffed at an early stage by summary dismissal.  Alternatively, the Court might choose to fix a lump sum where the matter is more conveniently dealt with by reason of the relative simplicity of the matter.  In a sense, that is this case. 

52                        While the costs incurred have been quite significant, considerable further costs would be occasioned by the requirement to tax a bill.  It has been clear that Mr Byrnes has had solvency difficulties in the past, although the precise state of his financial affairs at the present time is unclear.  He chose not to assist the Court in any way in that regard.  I consider that an inference is capable of being drawn from the evidence that is before me that Mr Byrnes would probably be unable to meet an order for costs in the order of $200,000, such as is foreshadowed by Freehills invoices.  That is a reason why there should be no further costs thrown away in taxing a bill.

53                        The approach of Mr Rybak was to challenge some of the approaches taken by Ms Ward.  Ultimately, Mr Rybak expressed the opinion that he accepted that some $283,690 in fees and disbursements had been incurred by the Macquarie Companies.  His estimate of the proper and necessary fees and disbursements on a party and party or ordinary basis was between $114,751 and $134,751, without GST.  His estimate of the proper and necessary solicitors’ fees and disbursements on an indemnity basis was between $175,751 and $195,751, without GST.  Counsel for Mr Byrnes contended, however, that that was on the basis of assumptions that were not necessarily accepted by Mr Byrnes. 

54                        I did not entirely follow the submission, I must say.  It seemed to be along the lines that there was some disparity between what was necessary in the circumstances of this case and what was actually done by Freehills.  However, there was no evidence to support that contention and there was no cross-examination of Mr Betts to elicit the extent to which it might be said that, on taxation, notwithstanding what Mr Rybak said, the costs that would be allowed on an indemnity basis would be less than the estimate given by Mr Rybak. 

55                        Ms Ward estimated that the costs that would be recoverable on an indemnity basis would be a figure discounted by between 10% and 17% from the amount actually charged by Freehills.  However, counsel for the Macquarie Companies indicated that, in the light of Mr Rybak’s affidavit, they would press for an order for costs on an indemnity basis in the lump sum of $185,000, which is midway between the two figures estimated by Mr Rybak.  I, frankly, do not quite follow the contention advanced on behalf of Mr Byrnes that, in some way, Mr Rybak’s assessment should not be accepted as his view as to what is likely to be allowed on taxation on an indemnity basis.

56                        The position, of course, may have been different had Mr Betts been tested as to the need to engage in the work that I have briefly described.  Mr Betts’ evidence described that work in considerably more detail but, as I have said, there was no attempt made to impugn its reasonableness or necessity in all the circumstances.  I consider, therefore, that it is appropriate to order that costs be paid in a lump sum.  Accordingly, I propose to order Mr Byrnes pay the costs of the Macquarie Companies in the lump sum of $185,000. 

Associate:

Dated:         2 December 2009