FEDERAL COURT OF AUSTRALIA

Mulhern v Bank of Queensland (No 2) [2015] FCA 579

THE COURT ORDERS THAT:

1.    The plaintiffs pay the defendant’s costs of the proceeding, including the costs of the interlocutory application dated 12 September 2014, such costs to be assessed on an indemnity basis.

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

REASONS FOR JUDGMENT

1    On 5 February 2015, I made orders including that the statement of claim in this proceeding be struck out in its entirety, that judgment be given for the defendant (“Bank”) against each of the first and third to tenth plaintiffs, and that judgment be given for the Bank against the second and eleventh plaintiffs in respect of most of the claims for relief made by those parties. To the extent that judgment was not given in the Bank’s favour, I stayed the proceedings until the conclusion of the second and eleventh plaintiffs’ bankruptcies or further order: Mulhern v Bank of Queensland [2015] FCA 44.

2    The Bank seeks an order for indemnity costs, pursuant to its interlocutory application dated 12 September 2014. The precise order sought is an order that the Bank’s costs of the proceedings including the costs of the interlocutory application be paid by the plaintiffs, such costs to be assessed on an indemnity basis.

Relevant principles

3    Section 43 of the Federal Court of Australia Act 1976 (Cth) (“the Act”) confers jurisdiction on the Court to award costs. In DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; (2004) 51 ACSR 555, Allsop J (as he was then) said at [14]:

Section 43 of [the Act] is a broad and ample power not to be read down otherwise than by judicial principle conformable with the amplitude of the power.

In the particular circumstance of a case involving some “relevant delinquency” on the part of the unsuccessful party, an order may be made for costs on an indemnity basis: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [44] per Gaudron and Gummow JJ referring to Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 and Re Smith; Ex parte Rundle (No 2) (1991) 6 WAR 299 at 301. See also Growth Equities Corporation Ltd v Genesis Growth Investments Pty Ltd [2010] NSWSC 1302 at [18].

4    In Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160 at [1102], Dowsett and Lander JJ said:

Usually costs are ordered on a party and party basis but if there is "some special or unusual feature in the case to justify the Court exercising its discretion" costs may be ordered on some other basis: Preston v Preston [1982] 1 All ER 41 at 58. There must, however, be some justification to depart from the ordinary rule. The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires: Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727. The categories of case in which it might be appropriate to do so are not closed: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225. An applicant who should have known that his or her proceeding was foredoomed to failure could be obliged to pay costs on an indemnity basis: Smolle v Australia and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967. A clearly hopeless proceeding may mean that the unsuccessful applicant should be subjected to an order for indemnity costs. An applicant who persists in prosecuting a proceeding without regard to the evidentiary difficulties in the case may be called upon to pay costs on some basis other than the usual basis: Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685. Specific examples of cases which might attract the exercise of the discretion to award indemnity costs were given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited 46 FCR at 233.

Bank’s argument for indemnity costs

5    The Bank contends that it has been subjected to repeated abuses of process by the plaintiffs. In support of its contention, the Bank relies on Court’s findings in its favour in Mulhern v Bank of Queensland [2015] FCA 44 at [71], [77], [87], [88], [94], [95], [97] and [107]. The relevant findings are:

(1)    That this was a plain and obvious case warranting that the statement of claim be struck out in its entirety, the defects of the pleading being pervasive and the plaintiffs not seeking to maintain any particular part of the statement of claim;

(2)    The solicitor for the eleventh plaintiff Mr Mulhern and the second plaintiff Mrs Mulhern accepted that, as bankrupts “[o]n the purely legal point of view” neither of them “have standing to do anything”;

(3)    To the extent that the plaintiffs’ claims were based upon contentions that orders were wrongfully obtained in the Supreme Court of Queensland, the proceedings were an abuse of process because they were a collateral attack upon a final decision of that Court;

(4)    As to the third and ninth plaintiffs, there was no evidence to support a contention that either of those entities has or may have a cause of action against the Bank and no possible cause of action was identified;

(5)    There was no evidence that the fourth plaintiff Mr Quinert has or may have a cause of action against the Bank;

(6)    As to the fifth and sixth plaintiffs, there was no identified cause of action in favour of either company against the Bank and no apparent factual basis to found any cause of action; and

(7)    The proceedings brought by Mrs Mulhern should be dismissed as an abuse of process to the extent that they are based upon the claims that receivers and managers were wrongfully appointed to the Mulhern Group of companies, the alleged unlawfulness of freezing orders made by the Supreme Court of Queensland and the making of the sequestration order obtained by the Bank against Mrs Mulhern’s estate.

6    The Bank also contends that the interlocutory applications filed by the plaintiffs on 22 October 2014 and 1 December 2014 were abuses of process so that indemnity costs should be payable in relation to those applications. Each application was dismissed with costs on 26 February 2015.

7    As to the October 2014 application, the Bank noted that the plaintiffs sought the following relief while the Bank’s summary judgment application was pending:

a.     Payment of the sum of $118,000.00 representing the overcharging of interest by the Bank of Queensland.

b.    Payment of $30,000,000.00 being Mr & Mrs Mulhern’s prior equitable interests in the Australian companies.

c.    The loss of commission to Andrew Quinert in the sum of $900,000.00.

d.    Payment in the sum of $435,000.00 to Cougan Corporation Pty Ltd.

8    As to the December 2014 application, it is said to have been “even more preposterous and abusive of the Court’s process”. The relief sought included “Summary Judgment for the entire sum Claimed by the Plaintiffs as described in the first amended Statement of Claim”, an amount of $228,014,088.14.

Plaintiffs’ submissions

9    The plaintiffs submit that the proposed order “could be seen as punitive and a departure from normal principles”. They raise the following matters:

(1)    The plaintiffs believe that they have been wronged and are entitled to “ventilate that dispute”. Many of their grievances remain without relief. “Victims ought not be further punished because the Claim was not able to be maintained because of technical legal reasons”;

(2)    Although the statement of claim always required substantial amendment, it contained sufficient detail to enable the Bank to know the case put against it;

(3)    The claims previously determined against members of the Mulhern family and associated companies have been dismissed “based upon procedural flaws in the pleadings or the lack of faith of lawyers previously engaged to represent” them;

(4)    The standing of Mr and Mrs Mulhern has always been a barrier to them seeking relief;

(5)    The Bank’s conduct in attempting “to remove the Plaintiff’s [sic] legal representation under the threat of a “Costs Order” against the solicitor” was misconduct that should disentitle it from obtaining indemnity costs.

10    The submissions on behalf of the plaintiffs also refer to procedural matters, including that there was only one “substantive appearance” by the parties in the proceedings, a previous payment of $7,500 to the Bank and the necessity to attend the Court on two occasions.

Consideration

11    The proceedings involved a multiplicity of claims by multiple parties in respect of which no cause of action was identified, with the possible exception of claims that might have been available to Mr and Mrs Mulhern were they not bankrupts. The claims involved abuses of process in significant respects. The total claim of $428,014,088.14 is simply outrageous: it bears no relationship to any discernible reality.

12    I am persuaded that the plaintiffs’ conduct in bringing and maintaining the proceedings involved delinquency of a kind and degree that warrants an order for indemnity costs for the following reasons:

(1)    The plaintiffs must have known, or at least should have realised, from the incoherence of the statement of claim, that their proceedings were foredoomed to failure. They should have realised this from the time that the proceedings were commenced on 29 August 2014 or at least from the time that they received the Bank’s summary dismissal application;

(2)    The plaintiffs were put on notice that the Bank would seek indemnity costs of its application for summary dismissal when that application was served in September 2014. They resisted the Bank’s application even though they accepted that, at the hearing of the application, the statement of claim was liable to be struck out in its entirety;

(3)    While I accept that Mr and Mrs Mulhern consider themselves aggrieved in various respects, the plaintiffs’ failure to maintain any claim is not based on technicalities, contrary to what they seem to contend. It is based on their inability to identify a viable cause of action based on the wrongs that Mr and Mrs Mulhern claim to have suffered, and their persistence in seeking to reagitate issues determined adversely to them. That persistence, including by device of seeking to reagitate those issues through other parties, who had no legal basis for a claim against the Bank, was abusive of the Court’s process;

(4)    To the extent that the plaintiffs sought, by the proceedings, to obtain documents from the Bank which Mr Mulhern believed would demonstrate wrongdoing by the Bank (see [65] of my earlier reasons), that was also a misuse of the Court’s process.

13    In their submissions on the application for indemnity costs, the plaintiffs did not adduce evidence of the Bank’s asserted misconduct and I do not make any findings about that claim. However, I do not accept that, even the claim was substantiated, it would be a matter that would deprive the Bank of an entitlement to indemnity costs, if it were otherwise entitled to costs on that basis.

Conclusion

14    The plaintiffs should pay the Bank’s costs of the proceeding on an indemnity basis.

Associate:

Dated:    12 June 2015