FEDERAL COURT OF AUSTRALIA
Bideena Pty Ltd v Growth Super Fund Pty Ltd (No 2) [2017] FCA 327
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. As between the plaintiff and the second, third and fourth defendants the costs of the interlocutory process filed by the plaintiff on 29 March 2016 be costs in the cause.
2. As between the plaintiff and the fifth defendant the costs of the interlocutory process filed by the plaintiff on 29 March 2016 be costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
MARKOVIC J:
1 On 29 March 2016 Bideena Pty Ltd (Bideena), concurrently with the filing of the originating process commencing this proceeding, filed an interlocutory process in which it sought orders, among others, for interlocutory relief against the third defendant, Agricultural and Rural Finance Pty Ltd (ARF), the fourth defendant, Anastasia Patakas, the fifth defendant, Evangelos Patakas trading as Evangelos Patakas & Associates Solicitors (Mr Patakas), and the sixth defendant, Goeke Investment Finance Pty Ltd (Goeke), to preserve the status quo until final determination of the substantive proceeding. Orders of that nature were not sought against the first defendant, Growth Super Fund Pty Ltd (Growth), or the second defendant, ARF Investments Pty Ltd (Investments).
2 As between Bideena and Goeke the interlocutory process was resolved by the giving of undertakings and the making of orders including in relation to costs, such that there are presently no outstanding issues between Bideena and Goeke in relation to the interlocutory process. As between Bideena and Investments, ARF and Ms Patakas (referred to collectively as the ARF Parties) and Mr Patakas the substantive aspects of the interlocutory process were resolved by the giving of undertakings. The outstanding issue in relation to the interlocutory process as between Bideena and those parties is that of costs.
3 Bideena submitted that there should be no order as to costs. As an alternative, in response to a suggestion made by me during the course of argument, it further submitted that an order that costs of the interlocutory process be costs in the cause would be appropriate. Mr Patakas submitted that Bideena should pay his costs of the interlocutory process or, in the alternative, that the costs of the interlocutory process should be his costs in the cause. The ARF Parties submitted that Bideena should pay their costs of the interlocutory process on an indemnity basis.
facts
4 The interlocutory process sought 12 orders including, relevantly:
1. An order that [ARF], [Ms Patakas] and [Mr Patakas] be restrained from transferring, gifting, paying, assigning, encumbering, charging, transferring or crediting to another account or otherwise dealing with any money which is beneficially owned by [ARF], and whether held in the controlled money account or trust account of [Mr Patakas] as the solicitor for [ARF] or in any bank accounts, including any accounts held with the Australia and New Zealand Banking Group Limited and the Bendigo/Adelaide Bank, which stand in, or are held in, the name of [ARF] or of which it is the beneficial owner, until further order of the Court.
2. An order that [Ms Patakas] and [Mr Patakas] disclose to the Court, by affidavits sworn by each of them and filed and served within 7 days, all the particulars, including account names, account numbers, branch numbers, branch locations and names of all account signatories of all bank accounts in which any money which is beneficially owned by [ARF] is currently held or stands to the credit of [ARF], including but not limited to the payment of about $2.1m made to [Mr Patakas] as the solicitor for [ARF] by Abadee Dresdner Freeman Lawyers in about December 2014.
3. An order that [Ms Patakas] and [Mr Patakas] do all things and take all steps necessary to enable or procure [Investments] and [ARF] to deliver up to the Registrar at the Sydney Registry all original registers, books, financial records and financial reports (as defined in s.9 of the Corporations Act) of each of [Investments] and [ARF], and whether held by [Investments, ARF, Ms Patakas or Mr Patakas] or their agents, and do all things and take all steps otherwise necessary to procure [Investments] and [ARF] to produce all such original registers, books, financial records and financial reports to the Registrar at the Sydney Registry within 14 days of this order.
…
9. An order that [Ms Patakas] and [Mr Patakas] disclose to the Court by an affidavit sworn by each of them, which shall be filed and served within 7 days, all the particulars, including the dates, amounts, account details and purposes for the making of each and every advance, withdrawal, payment and repayment of loan principal, interest on any loans or legal costs, charges, expenses, fees and legal costs paid by [ARF] to [Mr Patakas] or [Goeke] under the security agreement supporting the charge registered on 29 August 2013 under the Personal Property Securities Act 2009 as charge no. 201308290049861 or under any costs agreements or bill of costs or bills of costs or tax invoices made or issued pursuant to the provisions of the Legal Profession Act 2004 or the Legal Profession Uniform Law (NSW) 2015.
5 The balance of the orders sought in the interlocutory process were for:
interlocutory relief against Goeke;
leave pursuant to s 237 of the Corporations Act 2001 (Cth) (Corporations Act) for Bideena to bring proceedings in the names of Investments and ARF against Growth, Ms Patakas, Mr Patakas and Goeke;
an order that Bideena have leave to serve a sealed copy of any orders made on the manager of the bank or banks disclosed in the affidavits filed pursuant to the relevant orders, if made; and
orders that the matter proceed on pleadings and that the Court make a suitable timetable for the further conduct of the proceeding including the interlocutory process.
6 On 29 March 2016 Bideena’s solicitors, W M Lawyers, sent letters together with sealed copies of the originating process, the interlocutory process and four supporting affidavits to each of Growth, Investments, ARF, Ms Patakas and Mr Patakas (29 March Letters). Save for the addressees those letters were substantially identical and relevantly provided:
Both the originating process and initiating process are listed for directions at 9.30am on 14 April 2016 next at the Federal Court of Australia, Law Courts Building. Queen’s Square, Sydney.
Subject to our receipt, prior to the return date of the interlocutory process, of unconditional written undertakings, firstly, by the sixth defendant, Goeke Investment Finance Pty Ltd (Goeke), not to take any steps to appoint a receiver to the property of the third defendant, Agricultural and Rural Finance Pty Ltd (ARF) (the Goeke undertaking), and secondly, by the fourth and fifth defendants, Anastasia Patakas and Evangelos Patakas, not to procure ARF to withdraw, transfer or otherwise pay any funds from its bank accounts or controlled money account with Mr Patakas (the Patakas undertakings) until the final determination of this proceeding, Bideena proposes that directions be made for the filing of pleadings and that a timetable be made for the filing of those pleadings and substantive and interlocutory affidavits, together with the allocation of an urgent date for the hearing of the interlocutory process, at that first directions hearing.
However, in the event that no such undertakings are forthcoming, Bideena will ask the Court to hear, at the very least, the prayers in paragraphs 1, 4 and 5 of the interlocutory process, upon Bideena giving to the Court the usual undertaking as to damages, either on its return date or, if sufficiently urgent, on such earlier date as is convenient to the Docket Judge on short notice.
We enclose proposed short minutes of order for the first directions hearing. Kindly advise whether they are acceptable to you by close of business this coming Monday, 4 April next. Your attitude to those proposed undertakings and orders will determine whether or not we apply to have the proceeding listed at an earlier date in order to agitate the prayers for injunctive relief in the interlocutory process (being the prayers in paragraphs 1, 4 and 5).
The proposed short minutes of order enclosed with the 29 March Letters included:
UPON THE COURT NOTING THE FOLLOWING UNDERTAKINGS TO THE COURT:
…
2. The undertaking by the fourth and fifth defendants, in their capacities as the director (or the directors) and the solicitor respectively of the third defendant, not to withdraw, transfer, assign, encumber, pay or otherwise deal in the proceeds of the bank accounts of the third defendant held at any bank or the controlled money account of the third defendant maintained by the fifth defendant as the trustee for the third defendant until the final determination of this proceeding;
…
THE COURT ORDERS THAT:
…
8. The defendants file and serve their affidavits in response to each of the originating process and the interlocutory process by [blank] April 2016.
9. The plaintiff file and serve its affidavits in reply to those affidavits by [blank] May 2016.
…
11. The interlocutory process be listed for hearing for one day before the Docket Judge at 10.15am on [blank] 2016.
7 On 4 April 2016 W M Lawyers sent further letters to each of Growth, Investments, ARF, Ms Patakas and Mr Patakas. Those letters, which were identical in their terms, enclosed copies of three further affidavits which were intended to be read on the hearing of the originating process and the interlocutory process. The letters relevantly provided:
We refer to the originating process, the interlocutory process and the four supporting affidavits which have been filed to commence this proceeding and which were served on you last week.
…
Please note that, in default of you and your co-defendants giving undertakings in terms of the invitation made in our letter dated 29 March 2016, we propose applying to the docket judge assigned to determine this proceeding, Markovic J, to hear the interlocutory process on the first available date after 14 April 2016 suitable to her Honour.
Please advise us, as a matter of urgency, of the name and address of your solicitors.
Please also note that if you or any of the other defendants engage in any of the conduct sought to be restrained in the interlocutory process after the date of service of that process on you last week, and before injunctions to restrain such conduct are granted by the Court, the plaintiff will apply to have the relevant defendant(s) dealt with for contempt of court, including attachment.
(original emphasis)
8 On 4 April 2016 the solicitors for Growth and Mr Patakas, Judd Commercial Lawyers, wrote to W M Lawyers (Mr Patakas’ 4 April Letter) relevantly stating that:
Your client has requested undertakings from Mr Patakas. We are instructed:-
1. Mr Patakas has no power or authority to deal in the proceeds of the bank accounts of the Third Defendant. Mr Patakas is not a signatory to the Third Defendant’s bank accounts nor does he have capacity to give nay (sic) instructions in respect to the Third Defendant’s bank accounts.
2. Mr Patakas is not in a position to procure the doing of anything by the Third Defendant.
3. However, to avoid unnecessary costs of delay, and on the basis that your client gives the usual undertakings to Mr Patakas as to damages, Mr Patakas is prepared, without admissions, to give the following undertakings:-
(a) Without admissions, the Fifth Defendant undertakes not to withdraw, transfer, assign, encumber, pay or otherwise deal in the proceeds of the controlled money account of ARF maintained by the Fifth Defendant as the trustee for ARF until 5 pm on 14 April 2016 or earlier order by the Court.
(b) Without admissions, the Fifth Defendant undertakes not to procure that the Third Defendant withdraw, transfer, assign, encumber, pay or otherwise deal in the proceeds of the bank account of the Third Defendant or the controlled money account of ARF maintained by the Fifth Defendant as the trustee for ARF until 5 pm on 14 April 2016 or earlier order by the Court.
9 On 4 April 2016 the solicitor for the ARF Parties, Jim Biady of J Biady & Associates, also wrote to W M Lawyers by email sent at 8.17 pm. Mr Biady’s email relevantly provided:
…
Undertaking by Fourth Respondent
As to the undertaking sought from the Fourth Respondent, at this stage, having only just come into the matter we are not yet acquainted with the complex matrix of facts and transactions that have given rise to these proceedings.
As such we propose the following might be suitable as an undertaking from the Fourth Defendant to maintain the status quo for a short period until the merits of your client's claims can be considered.
Proposed Undertaking by Fourth Respondent:-
Subject to the usual undertaking as to damages being given by the Applicant, and without any admissions, Anastasia Patakas undertakes that other than for Permitted Payments (as defined below) she will not procure ARF to withdraw, transfer or otherwise pay any funds from its bank accounts or controlled money account with Mr E Patakas until 5pm on 14 April 2016 or earlier order of the Federal Court.
For the purposes of this undertaking Permitted Payments are:-
a) Payments made in the usual course of business;
b) Legal costs and disbursements incurred in connection with these proceedings;
c) Accountancy fees and expenses incurred by ARF in connection with taxation matters and advices required.
However Permitted Payments do not include the payment of any amounts to Evangelos Patakas.
Could you please let us have your comments as to the proposed undertaking.
Generally
Given the very tight time limits in your letter we have sent the above draft to our client this evening and are also awaiting her instructions as to the draft.
We have proposed the above undertaking to obviate the need for any ex-parte applications. In doing so we do not agree or admit that there was any entitlement on your client's part to seek ex-parte injunctions.
If any ex-parte application is to be made you are nonetheless required to give us adequate notice so we can be in attendance when the matter is dealt with by the court.
10 By letter dated 5 April 2016 W M Lawyers responded to Mr Biady’s email sent the previous evening. In that letter, among other things, W M Lawyers set out why the terms of Ms Patakas’ proposed undertaking were unacceptable. First, Bideena opposed Ms Patakas making any payments, “let alone ‘Permitted Payments’”, out of ARF’s bank account pending the final determination of the proceeding and said that ARF’s money could only be “legitimately spent in furtherance of ARF’s commercial purposes, as recognised in its constitution”. Secondly, Bideena noted that the proposed undertaking expired at 5.00 pm on 14 April 2016, a date on which the Court was only to make directions for the further conduct of the matter, with the hearing of the interlocutory process not occurring until 21 April 2016. The letter concluded:
Unless an undertaking is given by Ms Patakas, as sole director of ARF and Investments, and by Mr Evangelos Patakas, as the de facto (shadow) director of both companies, not to procure either company to spend any money held in its bank or in any trust account of controlled money account on its behalf, until 5.00 pm on 21 April next, Bideena reserves the right to relist the matter before Markovic J to seek injunctive relief on an urgent basis.
11 On 15 April 2016 Judd Commercial Lawyers wrote to W M Lawyers noting that the undertaking offered in Mr Patakas’ 4 April Letter had expired. Because of the “expiration, costs and the status of the proceedings” those solicitors offered further undertakings on behalf of Mr Patakas. Those undertakings were in substantially the same terms as those included in Mr Patakas’ 4 April Letter save that:
(1) the first undertaking was framed not only in terms of Mr Patakas’ capacity as trustee for ARF but also as its solicitor;
(2) the undertakings were framed so that they would be in place until the determination of the originating process or until earlier order of the Court; and
(3) the undertaking not to deal with the proceeds of the controlled moneys in the name of ARF was expressed to be subject to an additional undertaking in the following terms:
Subject to written instructions from ARF, Mr Patakas can withdraw, transfer or pay monies at ARF’s direction from the controlled monies account held for ARF, provided that such payments are Permitted Payments within the meaning of ARF’s undertaking provided such withdrawals, transfers or payments are not made in favour of Mr Patakas until the determination of the Originating Process filed 29 March 2016 or until earlier order of the Court.
The letter continued:
We note that Mr Patakas, as your client is acutely aware, is a solicitor that has been practicing for over 25 years and in that respect has obligations to the Court. We are of the view that these undertakings are sufficient and entirely reasonable in the circumstances of the proceedings, particularly where they are given by our Client in his capacity as a solicitor.
If your client is of the view that the undertakings are not sufficient or reasonable, please provide us with full details and particulars as to why your client says that the undertakings offered herein are unsatisfactory. If we do not receive a response by 12:00pm 18 April 2016 we will assume that the undertakings provided herein are satisfactory and satisfy all your client's requirements.
12 By letter dated 18 April 2016 W M Lawyers notified Judd Commercial Lawyers that the undertaking proffered by Mr Patakas was unacceptable to Bideena because of the definition of “Permitted Payments”, which allowed payments for legal costs and disbursements incurred in connection with this proceeding. W M Lawyers noted that they had rejected Ms Patakas’ undertaking because there was no basis for her, as a director, to spend ARF’s money defending the allegations made against her in the proceeding. Those solicitors also indicated that there was no basis for Mr Patakas to be withdrawing for his own benefit the money held in his corporate client’s trust account to defend allegations made against him.
13 On 19 April 2016 Judd Commercial Lawyers sent two letters to W M Lawyers. One of those letters referred to W M Lawyers' letter dated 18 April 2016 and Judd Commercial Lawyers’ letter dated 15 April 2016. That letter included:
We do not understand paragraph 3 of Your Letter. Contrary to Your Letter, the undertaking provided in Our Letter does not provide for ARF to make any payments to Mr Patakas. Our Client's proffered undertaking provides "provided such withdrawals, transfers or payments are not made in favour of Mr Patakas" which therefore expressly excludes any payments being made to him.
If you have an alternative to the undertaking Our Client has provided we invite you to put it to us for consideration.
14 The other letter concerned ARF’s files. It confirmed that, as at 18 April 2016, all of ARF’s legal files were located at the offices of Evangelos Patakas & Associates and that ARF’s original registers, books, records, financial records and financial reports were and had always been located at those offices. It continued in the following terms:
In order to avoid what would appear to us and our Client to be an unnecessary distraction to the real issues, our Client (subject to the denials in our letter to you dated 13 April 2016) is prepared to give the following undertakings to your client:-
1. Without admissions, Mr Patakas undertakes not to move or transfer the legal files of ARF from the offices of Mr Patakas located at Level 7, 67 Castlereagh Street, Sydney without giving your client 7 days prior written notice. This undertaking to continue until the determination of the Originating Process filed 29 March 2016 or until earlier order of the Court.
2. Without admissions, Mr Patakas undertakes not to move or transfer the ARF Records from the offices of Mr Patakas located at Level 7, 67 Castlereagh Street, Sydney without giving your client 7 days prior written notice. This undertaking to continue until the determination of the Originating Process filed 29 March 2016 or until earlier order of the Court.
15 By letter dated 19 April 2016 J Biady & Associates wrote to W M Lawyers enclosing “an updated version of the undertaking that [their] client offer[ed] to execute simply so as to preserve the status quo until such time as the Court determines the plaintiff’s claims”. The letter noted that the undertaking would “cease to operate should [Bideena] fail to comply with any order for security for costs that might be made by the Court”. The enclosed undertaking was in the following terms:
Subject to the usual undertaking as to damages being given by the Applicant, subject to the provision of any Security as to costs that may be ordered by the Court, and without any admissions, Anastasia Patakas undertakes that other than for Permitted Payments (as defined below) she will not procure ARF to withdraw, transfer or otherwise pay any funds from its bank accounts or controlled money account with Mr Evangelos Patakas solicitor until 5 pm on [blank] or earlier order of the Federal Court.
For the purposes of this undertaking Permitted Payments are:-
(a) Payments made in the usual course of business;
(b) Legal costs and disbursements incurred in connection with these proceedings;
(c) Accountancy fees and expenses incurred by the second and third defendant’s (sic) in connection with taxation matters and advices required.
However Permitted Payments do not include the payment of any amounts to Evangelos Patakas, Growth Super Fund Pty Ltd and Goeke Investment Finance Pty Ltd.
16 On 19 April 2016 W M Lawyers wrote to J Biady & Associates. In their letter W M Lawyers referred to J Biady & Associates’ letter of the same date and informed J Biady & Associates that the undertaking proffered was unacceptable to Bideena for the same reasons as set out in their letter dated 4 April 2016 (presumably intending to refer to their letter dated 5 April 2016) “because of the definition of ‘Permitted Payments’ which constitute an exception to the undertaking”.
17 On 20 April 2016 Mr Biady sent an email to Mr Musgrave of W M Lawyers attaching a copy of the undertaking which the ARF Parties proffered without admission. In that email Mr Biady relevantly said:
You will see that [the undertaking] has been updated so that it is slightly different to the version we previously sent you.
If this is not acceptable and there is an alternate form or (sic) words to achieve that purpose, please forward to us and we will seek instructions.
You will see that we maintain the ability of ARF to pay the legal costs of each of the defendants for whom we act in the proceedings, for the reasons set out in our submissions filed with the Court.
We consider that this undertaking, combined with that proffered by the 1st and 5th Defendants appropriately protects the Plaintiff until the final hearing of the case, and that no further injunctive relief is necessary.
The enclosed undertaking was in the following terms:
Subject to the usual undertakings as to damages, with appropriate security, being given by the Applicant (and the provision of any security as to costs that may be ordered by the Court), the Second, Third and Fourth Defendants undertake, without admissions, that other than for the Permitted Payments (as defined below) they will not withdraw, transfer or otherwise pay any funds from the Third Defendant’s bank accounts or controlled money account with Mr Evangelos Patakas solicitor until the determination of these Proceedings or earlier order of the Court, except with the prior written consent of the Plaintiff and Fifth Defendant by joint direction.
For the purposes of this undertaking Permitted Payments are:-
(a) Payments in the usual course of business;
(b) Legal costs and disbursements incurred by the Second, Third and Fourth Defendants in connection with these proceedings;
(c) Accountancy fees and expenses incurred by the Second and Third Defendants in connection with taxation matters and advices required.
However Permitted Payments do not include the payment of any amounts to Evangelos Patakas, Growth Super Fund Pty Ltd and Goeke investment (sic) Finance Pty Ltd.
18 On 12 May 2016 W M Lawyers wrote to Judd Commercial Lawyers. Their letter included the following:
We refer to the plaintiff’s interlocutory process filed on 29 March 2016 and to the affidavit of CBS Roberts sworn on 20 April 2019 (sic) responding to that interlocutory process.
The plaintiff has considered the terms of the extensive undertakings proffered in that affidavit and now accepts the undertakings proffered in that affidavit on behalf of Mr Evangelos Patakas as constituting a satisfactory response to the plaintiff’s interlocutory process …
…
Accordingly, we enclose proposed short minutes of order which provide for the determination of the plaintiff’s interlocutory process as between the plaintiff and the first and fifth defendants.
The enclosed short minutes were relevantly in the following terms:
UPON THE PLAINTIFF GIVING TO THE COURT THE USUAL UNDERTAKING AS TO DAMAGES, AND UPON THE FIFTH DEFENDANT GIVING TO THE COURT THE FOLLOWING UNDERTAKINGS:
1. An undertaking not to move or transfer the legal files of the third defendant from the offices of the fifth defendant located at Level 7, 67 Castlereagh Street, Sydney (the Premises) without giving the plaintiff 7 days' prior written notice.
2. An undertaking not to move or transfer the financial records of the third defendant from the Premises without giving the plaintiff 7 days' prior written notice.
3. Subject to paragraph 5 below, an undertaking not to withdraw, transfer, assign, encumber, pay or otherwise deal in the proceeds of the controlled money account of the third defendant.
4. An undertaking not to procure that the third defendant to (sic) withdraw, transfer, assign, encumber, pay or otherwise deal in the proceeds of the bank account of the third defendant or the controlled money account of the third defendant.
5. An undertaking not to withdraw, transfer or pay monies from the fifth defendant's controlled money account held for the third defendant's benefit save and except, subject to instructions from the third defendant, for making withdrawals, transfers or payments at the direction of the third defendant which are Permitted Payments, within the meaning of paragraph 6 below, provided that such Permitted Payments are not made in favour of the fifth defendant.
6. In paragraph 5 above, "Permitted Payments" means:
(a) payments made in the ordinary course of business of the third defendant;
(b) payments made for the legal costs of the second and third defendants in defence of this proceeding; and
(c) payments of any accounting fees incurred by the second and third defendants in satisfying their outstanding taxation obligations; but
"Permitted Payments" expressly excludes:
(d) any payments made to the first, fifth or sixth defendants for any purpose, save and except for the payment by the third defendant of the amount of $30,685 referred to in paragraph 4(d) of the affidavit of Sean Jolly sworn on 20 April 2016 (being the balance of the debt alleged to be due and owing to the sixth defendant under its loan to the third defendant (the Goeke loan) which is secured by a registered charge over the property of the third defendant on the PPSR register), together with interest accrued on that amount after 8 April 2016, in the event that the third defendant elects to repay the alleged balance owing under the Goeke loan before the final determination of this proceeding.
THE COURT ORDERS THAT:
7. The plaintiffs interlocutory process filed on 29 March 2016 be dismissed as against the first and fifth defendants with no order as to the costs of that interlocutory process.
19 Mr Roberts’ affidavit referred to in W M Lawyers’ letter dated 12 May 2016 annexed Judd Commercial Lawyers’ letters dated 15 April 2016 and 19 April 2016 and W M Lawyers’ letter dated 18 April 2016. Among other things, the affidavit summarised the undertakings which had been proffered by Mr Patakas in the correspondence from Judd Commercial Lawyers.
20 On 12 May 2016 W M Lawyers also wrote to J Biady & Associates. That letter was in substantially the same terms as the letter of the same date to Judd Commercial Lawyers. It included:
We refer to the plaintiff’s interlocutory process filed on 29 March 2016 and to your letter dated 19 April 2019 (sic) proffering new undertakings in response to that interlocutory process. They appear to be the third iteration of undertakings proffered by Ms Anastasia Patakas in an effort to resolve the claims for relief made in Bideena's interlocutory process against Ms Patakas.
The plaintiff has now considered the terms of your clients' latest offer to resolve its interlocutory process and now accepts the undertakings proffered in that letter on behalf of Ms Anastasia Patakas as constituting a satisfactory response to the plaintiff’s interlocutory process.
Accordingly, we enclose short minutes of order which provide for determination of the plaintiff's interlocutory process between the plaintiff and second, third and fourth defendants.
We ask you to countersign the proposed short minutes of order and return them to us with a view to the orders being made on 9 June next when the matter is next before the Court.
The enclosed short minutes of order relevantly provided:
UPON THE PLAINTIFF GIVING TO THE COURT THE USUAL UNDERTAKING AS TO DAMAGES, AND UPON THE FOURTH DEFENDANT GIVING TO THE COURT THE FOLLOWING UNDERTAKINGS:
l. An undertaking that, other than for Permitted Payments (as defined in paragraph 2 below), the fourth defendant will not procure the third defendant to withdraw, transfer or otherwise pay out any funds from its bank accounts or from the controlled money account held by the fifth defendant as its solicitor until the final determination of this proceeding against all the defendants.
2. In paragraph 1 above, “Permitted Payments” means:
(a) payments made in the ordinary course of business of the third defendant;
(b) payments of the legal costs of the second and third defendants in defence of this proceeding; and
(c) payments of accounting fees incurred by the second and third defendants in satisfying their outstanding taxation obligations; but
“Permitted Payments” expressly excludes:
(d) any payments made to the first, fifth or sixth defendants for any purpose, save and except for the payment of the amount referred to in the affidavit of Sean Jolly sworn on 19 April 2016 as being the balance of the debt alleged to be due and owing to the sixth defendant under its loan to the third defendant which is secured by a registered charge over the property of the third defendant on the PPSR register,
THE COURT ORDERS THAT:
3. The plaintiff's interlocutory process filed on 23 March 2016 be dismissed as against the second, third and fourth defendants with no order as to the costs of that interlocutory process.
21 On 30 May 2016 W M Lawyers wrote to each of Judd Commercial Lawyers and J Biady & Associates in substantially the same terms as their letters dated 12 May 2016 to those solicitors. Once again the letters enclosed short minutes of order which, save for two matters, were in identical terms to the short minutes of order provided under cover of the letters dated 12 May 2016. First, the definition of “Permitted Payments” now included the legal costs of Ms Patakas. No explanation has been given for why she was omitted from the short minutes of order provided under cover of the 12 May 2016 letters or how the change came about. Secondly, the paragraph concerning the treatment of the interlocutory process going forward now provided that the interlocutory process would be dismissed as against Growth and Mr Patakas on the one hand and the ARF Parties on the other and that the costs of the interlocutory process would be reserved.
22 On 9 June 2016 the Court noted the following undertakings given to the Court by the ARF Parties and Mr Patakas:
…
a. the existing undertakings of the second, third and fourth defendants in the form annexed and marked “A” and of the fifth defendant continue until the interlocutory process filed on 29 March 2016 is finally determined or otherwise dealt with;
…
The document marked “A” annexed to the Court’s orders provided:
The second, third and fourth defendants undertake, without admissions, that other than for Permitted Payments (as defined below) they will not withdraw, transfer or otherwise pay any funds from the third defendant's bank accounts or controlled money account with Mr Evangelos Patakas solicitor until the determination of these Proceedings or earlier order of the Court, except with the prior written consent of the plaintiff and fifth defendant by joint direction.
For the purposes of this undertaking Permitted Payments are:-
a) Payments in the ordinary course of business;
b) Legal costs and disbursements incurred by the second, third and fourth Defendants in connection with these proceedings;
c) Accountancy fees and expenses incurred by the second and third defendants in connection with taxation matters and advices required.
However Permitted Payments do not include the payment of any amounts to Evangelos Patakas, Growth Super Fund Pty Ltd and Goeke Investment Finance Pty Ltd.
23 The notation provides that the undertaking will continue until the “interlocutory process filed on 29 March 2016” is finally determined or otherwise dealt with. That is an error in the order. It was intended by the parties that the undertaking would continue until the originating process filed on 29 March 2016 was finally determined or otherwise dealt with.
24 On 15 June 2016 W M Lawyers wrote to each of Judd Commercial Lawyers and J Biady & Associates. The letters referred to the interlocutory process; Mr Bevan’s affidavit sworn on 10 June 2016; in the case of Judd Commercial Lawyers, their letters dated 15 and 19 April 2016; and, in the case of J Biady & Associates, their letter dated 20 April 2016. The letters were otherwise in substantially the same terms and relevantly included:
We confirm that the plaintiff has considered the terms of the extensive undertakings proffered in that [correspondence] and accepts the undertakings proffered in that correspondence on behalf of [on the one hand, Mr Patakas, and on the other, Ms Patakas, Investments and ARF] as constituting a satisfactory response to the plaintiff’s interlocutory process.
Accordingly, we enclose proposed short minutes of order which provide for the determination of the plaintiff’s interlocutory process as between the plaintiff and [the relevant defendants].
The enclosed short minutes of order set out the undertakings as between Bideena and each of Mr Patakas on the one hand and the ARF Parties on the other in the same terms as the short minutes of order referred to at [21] above. The short minutes of order once again included a paragraph proposing that in each case Bideena’s interlocutory process be dismissed as against the relevant defendants with the costs of the interlocutory process to be reserved.
LEgal principles
25 Section 43 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) confers a broad discretion on the Court to award costs which is not to be read down otherwise than by judicial principle conformable with the amplitude of the power: DSE (Holdings) Pty Limited v InterTAN Inc (2004) 51 ACSR 555; [2004] FCA 1251 at [14] (per Allsop J, as his Honour then was). Without limiting the Court’s discretion, s 43(3) provides what the Court or a Judge may do on the issue of costs, including that the Court or Judge may make an order that the costs awarded against a party be assessed on an indemnity basis: s 43(3)(g).
26 In Hughes v Western Australian Cricket Association (Inc.) (1986) ATPR ¶40-748 at 48,136 Toohey J identified three principles relevant to the exercise of the discretion:
(1) ordinarily costs follow the event;
(2) where a litigant has only been partially successful on its claim, a costs order may reflect the degree of success attained; and
(3) a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered to pay the other party’s costs of them.
27 Also relevant is the principle that costs are compensatory and not punitive in nature: Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 at 135 (White J).
28 In circumstances where it appears that the parties have acted reasonably until the resolution of the proceeding, a court will ordinarily make no costs order. But where it appears to the court that a party has acted unreasonably, the court may make an order for costs in favour of the other party or parties. In Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin) at 624-625 McHugh J said:
In an appropriate case, a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant’s taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties 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. This approach has been adopted in a large number of cases.
(footnotes omitted)
29 In ONE.TEL Ltd v Commissioner of Taxation (2000) 101 FCR 548 (ONE.TEL) at 552-553 Burchett J said:
5. It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624. But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or “a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried”, as McHugh J put it in Ex parte Lai Qin at 625.
…
As Sackville J pointed out in Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334 at [16], the remarks made by McHugh J evince “a somewhat more flexible approach” than that taken by the Court in Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287, when it suggested that “there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party”. What is well established is that frequently the determining factor will be the reasonableness of the conduct of the parties, a matter which was emphasised in each of the decisions I have cited, and also in Reddy v Hughes (1996) 37 IPR 413; Sun Zhan Qui v Minister for Immigration and Ethnic Affairs [1999] FCA 119; and Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772. …
6. In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs …
30 In Oxford Funding Pty Ltd v Oxford Asia Pacific Investments Pty Ltd (No 2) [2006] FCA 1542 at [5] Heerey J summarised the principles as follows:
The Court has undoubted jurisdiction to make an order for costs notwithstanding that the proceeding has otherwise settled; see for example Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 (Hill J), Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625 (McHugh J), We Two Pty Ltd v Shorrock [2002] FCA 875 (Finkelstein J). While any question of costs always remains a matter of discretion, the approach in the cases is usually that the Court will not try a hypothetical action to decide which party would have won. Rather, the Court will assess the conduct of the parties including, in appropriate cases, the conduct prior to the commencement of proceedings, to see whether that conduct was “reasonable”. This rather suggests that an order will only be made where the party seeking costs has acted reasonably and the other party has not. Where both parties have acted reasonably, or unreasonably, the costs should lie where they fall. “Unreasonableness” in this context could include rejecting a reasonable offer or an invitation to engage in discussions which hold out reasonable prospects of a compromise.
31 In Yperion Technology SAS v Luminex Pty Ltd [2013] FCAFC 38 a Full Court of this Court (North, Barker and Nicholas JJ) considered the issue of costs of an application for leave to appeal where the substantive aspects of that application had been resolved by the making of consent orders. At [10]-[12] the Full Court said:
10 There are two factors which guide the determination of the issue of costs in the circumstances of this appeal.
11 The first factor is that the Court has not determined the merits of the appeal but has acceded to consent orders proposed by the parties. In the absence of a determination on the merits the Court should not ordinarily make an order for costs by reference to a prediction of what the likely outcome of the appeal would have been had the matter been resolved on the merits. There may be some cases in which the outcome is so obvious that it would not be wrong in principle to make an order for costs by reference to the likely outcome of the appeal after a determination on the merits. However, that is not the case in this appeal.
12 The second factor is that this appeal concerned an interlocutory, not a final, order. There is more force in the argument that each side should bear their own costs where a matter is resolved by final orders. Where there is no such finality it may be appropriate to reflect in the order for costs on the interlocutory matter the result ultimately to be achieved on a final hearing by making an order for costs in the cause. Then the party which achieves success in the final outcome obtains its costs for the interlocutory application which, by its nature, was part of the process of achieving success at the final determination of the case.
32 Insofar as an order that costs be paid on an indemnity basis is concerned there must usually be some special circumstance to warrant the Court departing from the usual course that an award of costs is on a party-party basis. The categories of case in which the Court will depart from the usual course and exercise its discretion to make an award of costs on an indemnity basis are not closed: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 (Colgate-Palmolive) (Sheppard J) at 233. Notwithstanding that, Sheppard J in Colgate-Palmolive identified several of the circumstances in which an order for indemnity costs had been made, including where allegations of fraud had been made knowing them to be false; where there was evidence of particular misconduct that caused loss of time to the Court and to other parties; where proceedings were commenced or continued for some ulterior purpose or in wilful disregard of known facts or clearly established law; where there had been an imprudent refusal of an offer of compromise; where allegations had been made which ought never to have been made; or where there had been undue prolongation of a case by groundless contentions: at 233-234.
The parties’ submissions
Bideena
33 As against the ARF Parties, Bideena submitted that:
(1) on 29 March 2016, on serving the originating process and the interlocutory process, Bideena sought an undertaking from the ARF Parties which sought to either freeze or constrain dealings with ARF’s bank accounts, including a controlled money account, until final determination of the substantive proceeding;
(2) six days later a response was received from the ARF Parties in which a short-term undertaking was proffered by Ms Patakas. During those six days three affidavits were prepared by Bideena;
(3) the initial undertaking proffered by Ms Patakas, which Bideena described as “an opening position”, went through two further iterations. Bideena contended that the third iteration, provided on 20 April 2016, compromised the opening position in five respects, namely:
(a) the undertaking was to be provided by Investments and ARF as well as Ms Patakas;
(b) the undertaking was to be in place until determination of the proceeding or earlier order of the Court;
(c) the definition of “Permitted Payments” was to be narrowed so that the permitted legal costs and disbursements were limited to those incurred by the ARF Parties;
(d) the definition of “Permitted Payments” was amended by adding Investments as a party that could claim and have paid its accountancy fees and expenses; and
(e) Growth and Goeke were expressly excluded as parties to whom “Permitted Payments” could be made;
(4) although Bideena had sought the exclusion of the payment of legal costs in connection with this proceeding as a “Permitted Payment” it ultimately did not press that point and accepted the undertaking in the form proffered by the ARF Parties on 20 April 2016;
(5) despite the inclusion of additional relief in the interlocutory process, from the outset Bideena only sought one undertaking in each of the 29 March Letters. There was a process of compromise in relation to that undertaking and on 12 May 2016 Bideena accepted the undertaking which was at that stage proffered by the ARF Parties. That undertaking was noted by the Court on 9 June 2016;
(6) Bideena contended that neither it nor any of the defendants acted unreasonably and that there was neither a clear winner nor had one party capitulated. Rather, the parties went through a process to arrive at the outcome they did;
(7) insofar as the ARF Parties submitted that there was no need for the interlocutory process to be filed at all, six days passed between its request for an undertaking on 29 March 2016 and the initial proffering of an undertaking which resembled the undertaking finally given. Bideena asked for an undertaking on 29 March 2016 which was, in effect, a freezing order. The ARF Parties grafted a “Permitted Payments” exception upon it and that exception was what was negotiated over the following weeks. It was the ARF Parties who compromised;
(8) there is a clear inference to be drawn on the documentary evidence that had Bideena written a letter before commencing proceedings the ARF Parties would not have simply capitulated and agreed to what it sought;
(9) there was no “event” because there was no hearing and no determination. This was a compromise and it is not relevant to talk about costs following the event;
(10) to the extent that the ARF Parties seek an order that Bideena pay its costs on an indemnity basis, none of the recognised grounds for an order for indemnity costs is available in this case. It could not be said that Bideena ran an utterly hopeless case or was acting in an unreasonable fashion. Even if the Court were to order that Bideena should pay the ARF Parties’ costs of the interlocutory process it would comfortably reject any suggestion that those costs should be paid on an indemnity basis; and
(11) having regard to the authorities, this case does not fall into any of the categories which might justify an order for costs against Bideena: there was no unreasonable behaviour on the part of Bideena; it is not a case of a clear winner, nor a case of capitulation or effective surrender; and it is not a case of a supervening event. Bideena submitted that this is an ordinary case of settlement of a debate that occurred in the course of litigation. There was a compromise of what Bideena first sought on 29 March 2016 and it could not be said that Bideena did anything to enliven a costs order against it.
34 As between Bideena and Mr Patakas, Bideena submitted that:
(1) on 29 March 2016, at the time of service of the originating process and the interlocutory process, it wrote to Growth and Mr Patakas seeking an undertaking which was in effect a freezing order;
(2) it heard nothing for six days and then on 4 April 2016 a short-term undertaking was proffered;
(3) on 15 April 2016 a further undertaking was proffered by Mr Patakas, this time to be in effect until determination of the originating process or earlier order of the Court. The further undertaking included a carve out which permitted Mr Patakas, subject to receiving written instructions from ARF, to withdraw moneys from the relevant accounts provided they were for “Permitted Payments”, as defined in the undertaking then proffered by the ARF Parties. The undertaking proffered by the ARF Parties at that time was not acceptable to Bideena;
(4) it was only when Bideena received satisfactory clarification of the undertaking proffered by the ARF Parties on 20 April 2016 that it proceeded to accept the position advanced by Mr Patakas;
(5) on 15 June 2016 Bideena circulated short minutes setting out the undertakings that had already been proffered by Mr Patakas and noted by the Court on 9 June 2016. The purpose of circulating those short minutes was because of proposed paragraph 7 of the short minutes, by which an order was sought that the interlocutory process be dismissed as against Growth and Mr Patakas with costs to be reserved;
(6) to the extent that Mr Patakas alleges that there was a substantial delay in Bideena seeking or pressing for interlocutory relief which should count against it on the question of costs, Bideena submitted that the delay cannot be relevant to costs. It may have been relevant in the exercise of discretion in relation to the substantive relief sought but, unless the delay caused costs to be incurred that would not otherwise have been incurred, which is not suggested, then it is not relevant on the costs argument;
(7) insofar as Mr Patakas contended that Bideena did not seek an undertaking prior to issuing and serving the interlocutory process, Bideena repeated its submission set out at [33(7)] above and added that, because of the nature of a freezing order it is not typical for a party to write a letter before action;
(8) to the extent that Mr Patakas offered undertakings on 4 April 2016, they were insufficient because of the unsatisfactory breadth of the definition of “Permitted Payments” first propounded by Ms Patakas. The debate as to “Permitted Payments” was only resolved on 20 April 2016 and the undertakings which Bideena ultimately accepted were subject to amendments to the definition of “Permitted Payments”;
(9) while it accepted that a range of orders were sought by its interlocutory process, the only undertaking it sought on 29 March 2016 was that relating to the freezing of funds. It did not seek any further undertaking and it did not act unreasonably;
(10) it essentially got the order it sought at the outset but with a “Permitted Payments” regime added as a result of a process of compromise. After that process of compromise was complete, on 12 May 2016 Bideena wrote to the parties indicating its acceptance of the undertakings proffered as at that date. It was those undertakings that were noted by the Court on 9 June 2016; and
(11) Bideena ought not be paying the costs of Growth and Mr Patakas based on what has occurred, nor should those parties be the only ones to obtain their costs if they happen to succeed in the proceeding.
The ARF Parties
35 The ARF Parties submitted that this is a case where the reasonableness of the parties provides the basis for a costs order, in that Bideena acted unreasonably in relation to the interlocutory process. The ARF Parties further submitted that the “compromise” in relation to the undertaking was in fact a capitulation; that the five changes referred to by Bideena were all matters of clarification and not made as a result of any negotiation or compromise on their part; that the only issue that was ever raised against them concerned Ms Patakas’ ability to pay her legal fees out of the assets of ARF; and that on that issue there was ultimately a complete capitulation by Bideena. The ARF Parties thus contended that a costs order is justified because one party “effectively surrender[ed]” to the other, in the terms used by Burchett J in ONE.TEL.
36 The ARF Parties submitted that the interlocutory application was unreasonably brought and that there was no need for urgency. In their submission all Bideena had to do was to ask for an undertaking prior to filing and it would have been provided without any application being filed. This, they contended, was evidenced by the fact that appropriate undertakings were proffered upon service of the interlocutory process within the time requested by Bideena. They also contended that the balance of the relief sought in the interlocutory process was misconceived, unnecessary and did not justify any need for urgency.
37 The ARF Parties further submitted that because of the terms of the 29 March Letters, by which Bideena indicated that if undertakings were not forthcoming then it would ask the Court “at the very least” to hear “the prayers in paragraphs 1, 4 and 5 of the interlocutory process”, they were forced to prepare for an interlocutory hearing scheduled to take place on 22 April 2016. They submitted that it was simply not correct for Bideena to say that the only relief it was seeking by the 29 March Letters was an injunction. In support of those submissions, they referred to the submissions which they filed for the interlocutory hearing scheduled for 22 April 2016 and to an affidavit sworn on 19 April 2016 by Mr Bevan, a director of Bideena, served in support of the interlocutory process. At [17]-[18] of that affidavit Mr Bevan deposed to the following matters:
17. I ask the Court to grant the relief sought in Bideena's interlocutory process listed for hearing on 22 April next which restrains these two defendants –indeed all the defendants – from utilising the money of ARF, which properly is payable for its creditors and sole member, Investments, thereafter, to fund the payment of their own personal legal costs of the proceedings.
18. I also ask the Court to grant relief which requires those two defendants to give a sworn accounting for the money of ARF which they have expended since the commencement of the proceeding – indeed since they assumed their joint control of the company from the previous directors, Anthony and Richard Sarks, on 26 September 2012 – for their own personal benefit, including their legal costs in this proceeding, if that be the case.
38 The ARF Parties submitted that it would be fundamentally unjust if at the conclusion of this proceeding, even if Bideena were successful, Bideena would get its costs of the interlocutory process including all of the unnecessary work done by it. It would be fundamentally unjust if the ARF Parties were not able to recover their costs of having to deal with the interlocutory process, which they submitted was without justification, unreasonably brought and in which Bideena effectively surrendered.
39 The ARF Parties finally submitted that the principle in Lai Qin says that judicial time is at a premium and that, because the commencement of the interlocutory process was “ill-advised”, “precipitous” and “hopeless”, there has been a “massive waste” of judicial time in this case. They submitted that it would be fundamentally unjust if there was no costs consequence to Bideena in those circumstances.
Mr Patakas
40 Mr Patakas submitted that, despite the breadth of orders sought against him in orders 1, 2, 3, 7, 8 and 9 of the interlocutory process, the undertakings given by Mr Patakas related only to, and only to a limited extent, the relief sought in orders 1 and 3. Orders 2 and 9 (concerning the provision of an affidavit about, among other things, ARF’s assets) and orders 7 and 8 (concerning s 237 of the Corporations Act) were not pressed. On that basis Mr Patakas submitted that when one looks at the interlocutory process as a whole it is clear that Bideena’s application against him failed.
41 Mr Patakas further submitted that the debate between him and Bideena was whether the Court should order that costs of the interlocutory process be costs in the cause, rather than order that Mr Patakas have his costs or have his costs in the cause. That is, the question revolves around the recoverability of the plaintiff’s costs of the interlocutory process. In that regard Mr Patakas submitted that 10 affidavits were served by Bideena, including two affidavits of service; submissions were filed; and appearances were made in support of the interlocutory process, all of which were for nothing.
42 Mr Patakas contended that the interlocutory application was made belatedly. This was said to be relevant to costs, particularly in light of the submission put by Bideena that the defendants did not respond to the 29 March Letters quickly enough, and where, without explanation, no step was taken by Bideena to try to address the issues prior to commencing the proceeding and filing the interlocutory process. Mr Patakas submitted that from the outset it was unreasonable to make the application: the parties ought to have had some exchange of correspondence and had that not led to a resolution then it may have been reasonable to bring the application. In relation to Bideena’s omission to take steps before filing the interlocutory process and Bideena’s submission that when a party seeks a freezing order it does not usually give the other side an opportunity to address the matter prior to doing so, Mr Patakas submitted that that is only correct when such an order is sought ex parte, which was not the case here.
43 In relation to the correspondence that passed between the parties and the conduct of the interlocutory process Mr Patakas submitted that:
(1) the 29 March Letters by their terms invited a response prior to the return date of the interlocutory process, which is what occurred: Mr Patakas responded to the 29 March Letters on 4 April 2016, 10 days prior to the return date of the interlocutory process;
(2) the 29 March Letters specified that in the event that no undertakings were forthcoming Bideena would ask the Court to hear, at the very least, the prayers in paragraphs 1, 4 and 5 of the interlocutory process. While the prayers in paragraphs 4 and 5 did not concern Mr Patakas, Bideena’s approach in the letter illustrated that the interlocutory process was bifurcated and that presumably the balance of the relief sought against Mr Patakas would be pursued at another time, although ultimately it was abandoned;
(3) there was an exchange of correspondence between 15 April 2016 and 19 April 2016 by which Mr Patakas renewed his offer of an undertaking until the determination of the originating process but subject to a carve out for “Permitted Payments”. Bideena’s response noted that the undertaking proffered was unacceptable because of the definition of Permitted Payments and its concern that Mr Patakas would be withdrawing money for his own benefit. Mr Patakas’ response noted that the proposed undertaking did not provide for ARF to make any payments to him but included an express carve out excluding him from receiving any payments. No response was received to that letter;
(4) on 19 April 2016 Mr Patakas also proffered an undertaking in relation to the ARF files to which no response was received from Bideena;
(5) on 21 April 2016 the defendants’ applications for security for costs were listed before the Court. The hearing on that day resulted in Bideena deciding to seek judicial advice. As a result the hearing of the interlocutory process which had been fixed for 22 April 2016 was vacated;
(6) nothing further happened until 12 May 2016 when Bideena sent its letter accepting the undertaking which had been proffered by Mr Patakas and enclosing short minutes which included an order that the interlocutory process be dismissed with no order as to costs; and
(7) ultimately what was offered or volunteered on 19 April 2016 represented the substantive orders that were made and everything since that date, including the affidavits filed by Bideena, has been a waste.
44 Mr Patakas submitted that Lai Qin and the other cases relied on by Bideena are all cases in which a substantive proceeding had been compromised or become otiose; that the Court would hesitate before applying the principles in relation to substantive proceedings where there has been unreasonableness in bringing or pursuing an interlocutory application; and that, to the extent that the Court would have regard to general principle, the Court would consider “the need to discipline the parties before the Court in terms of the just, quick and cheap resolution of the proceedings and the overarching objectives”. Mr Patakas submitted that to award costs to Bideena would encourage unreasonable behaviour; that the proper practice in bringing an interlocutory application is to write a letter beforehand and request the relief which would otherwise be sought in an interlocutory application; that only if the matter cannot be resolved between the parties should the Court be approached; and that, if a party chooses to approach the Court having not adopted that practice and thus put the machinery of the Court in motion unnecessarily, then that party is at risk of an adverse costs order.
45 Mr Patakas submitted that he should have his costs of the interlocutory process, that he should have his costs from 19 April 2016 or that the costs of the interlocutory process should be his costs in the cause.
consideration
46 In the present case there has been no relevant “event”. There was no hearing of the interlocutory process on the merits. It was resolved by the giving of undertakings which were noted by the Court on 9 June 2016.
47 The resolution of the competing applications for costs of the interlocutory process largely turn on the characterisation of the interactions between the parties that occurred from 29 March 2016 and until undertakings were given to the Court by each of the ARF Parties on the one hand and Mr Patakas on the other. Having considered the evidence I am of the opinion that the interactions were negotiations which led to an agreed position on undertakings to be given, thereby obviating the need for Bideena to proceed to a hearing of its interlocutory process. My reasons for coming to that view follow.
48 First, upon service of the interlocutory process Bideena clearly made an offer to compromise the interlocutory process in part. In the 29 March Letters it said that if undertakings were provided, relevantly, by Ms Patakas and Mr Patakas “not to procure ARF to withdraw, transfer or otherwise pay any funds from its bank accounts or controlled money account … until the final determination of this proceeding” then it proposed that directions be made for the filing of pleadings and affidavits and for the allocation of a hearing date for the interlocutory process. It was only if such undertakings were not forthcoming that Bideena would ask the Court to hear “at the very least, prayers 1, 4 and 5 in the interlocutory process” either on its return date or earlier. As Bideena submitted, from the outset it only sought one undertaking in the 29 March Letters. But the terms of those letters do not evidence an intention to otherwise abandon the balance of the interlocutory process. I would infer that at that stage, even if the undertakings sought were forthcoming, Bideena intended to pursue the balance of the interlocutory process. It is not surprising that the defendants undertook work in anticipation of the proposed hearing of the interlocutory process on 22 April 2016. Notwithstanding that, the 29 March Letters were the start of a course of negotiation which led to the provision of satisfactory undertakings such that there was never a need to hear and determine the interlocutory process.
49 Secondly, the correspondence which followed the 29 March Letters showed the parties engaging with Bideena to achieve a negotiated outcome. Initially that correspondence dealt with the matter of greatest immediacy, namely the approaching return date of the interlocutory process, with undertakings being offered by Ms Patakas and Mr Patakas until 5.00 pm on 14 April 2016 or earlier order of the Court. The principal issue that arose, initially on the undertaking proffered by Ms Patakas but which also became relevant to the undertaking proffered by Mr Patakas, was the carve out for “Permitted Payments” and the definition of that term. It was that issue that engaged the parties both prior to and after 14 April 2016, when the interlocutory process was first before the Court.
50 The form of undertaking which was ultimately accepted from the ARF Parties was provided to Bideena on 20 April 2016, on the eve of the hearing of the security for costs applications brought by all of the defendants and one day prior to the date fixed for hearing of the interlocutory process. The covering email from the ARF Parties’ solicitor included that: “[w]e consider that this undertaking, combined with that proffered by the 1st and 5th Defendants appropriately protects the Plaintiff until the final hearing of the case, and that no further injunctive relief is necessary”. That is, the undertaking proffered by those parties was an attempt on their part to compromise the interlocutory process and to reach a position where the prayers for injunctive relief would not be pressed. By this stage Mr Patakas had proffered an undertaking in terms that were ultimately accepted by Bideena including an undertaking concerning ARF’s legal files and records. The negotiations were brought to an end when, by letters dated 30 May 2016, Bideena communicated its acceptance of undertakings in the form proffered by Mr Patakas on 15 April 2016 and 19 April 2016 and by the ARF Parties on 20 April 2016 and, in effect, conceded the issue it had with the carve out for “Permitted Payments”.
51 Thirdly, in accepting the undertakings, Bideena enclosed with its letters dated 30 May 2016 (and in its earlier letters dated 12 May 2016) “short minutes of order which provide for determination of the plaintiff’s interlocutory process” as between the plaintiff and the relevant defendants. Bideena clearly no longer pressed the balance of its interlocutory process, being the prayers for relief beyond the injunctive relief. I would infer that this was part of the compromise made by Bideena in reaching a resolution of the interlocutory process.
52 The ARF Parties and Mr Patakas submitted that there was delay in seeking interlocutory relief and that it was filed without prior notice. They invited the Court to find that in those circumstances Bideena’s conduct was unreasonable. The ARF Parties and Mr Patakas say that the fact that Mr Bevan, on his own evidence, became aware of the concerns giving rise to the relief sought in the interlocutory process some considerable time earlier meant that there was no urgency in it. They say that there could be no reason why Bideena needed to approach the Court and file the interlocutory process without notice to them.
53 Bideena did not notify the defendants prior to the filing and service of the interlocutory process. More particularly it did not attempt to secure undertakings from the defendants prior to filing and serving the interlocutory process, thereby potentially obviating the need for its filing. No reason has been given for that approach save for the submission that, in circumstances where an order in the nature of a freezing order is sought, no notice is ordinarily given. I accept Mr Patakas’ submission that approaching a court without notice is usual in the case of ex parte applications, but is not necessarily usual practice in cases where a party does not proceed ex parte. But the question of whether it was unreasonable for Bideena to proceed without notice as it did can only be determined by reference to the particular circumstances of this case rather than by reference to what may be general practice.
54 Here, there is no evidence given by Bideena as to why it filed the interlocutory process without prior notice or why it did not seek undertakings prior to filing. The ARF Parties submitted that all Bideena had to do was to ask for an undertaking prior to filing and it would have been forthcoming. But that submission is speculative. The outcome had Bideena given notice of its intention to file the interlocutory process and invited the ARF Parties and Mr Patakas to provide undertakings prior to its filing is entirely unknown. The fact that the ARF Parties and Mr Patakas proffered undertakings within six days of the interlocutory process being filed and prior to its first return date is not evidence that those parties would have provided undertakings absent the filing of the interlocutory process. There is simply no evidence of what would have occurred had notice of the interlocutory process been given prior to filing and I am not able to infer that the issues would have been resolved in the fashion contended by the ARF Parties and Mr Patakas. One could equally speculate that it was the filing of the interlocutory process and the threat of imminent argument of the relevant issues that led to the proffering of the undertakings. I am not in a position to form a view on what would have occurred.
55 Bideena’s conduct in not putting the ARF Parties and Mr Patakas on notice of its intention to file the interlocutory process and in not seeking to elicit undertakings prior to doing so was not prudent and, indeed, is not a practice to be encouraged. But it is not possible for me to conclude that Bideena’s conduct was so unreasonable in the circumstances of this case that the ARF Parties and Mr Patakas should have their costs of the interlocutory process, let alone have an order made on an indemnity basis as sought by the ARF Parties, nor that those costs should be their costs in the cause. Bideena’s conduct does not fall into a category that would justify such an order.
56 There has been no hearing on the merits of the interlocutory process. The Court will not embark on an exercise of conducting a mini-trial to predict the outcome of the interlocutory process and quite properly the parties do not urge that course. Nor is this a case where the outcome is so obvious that it would be correct to make an order for costs by reference to the likely outcome of the interlocutory process.
57 There was no capitulation or surrender by Bideena. The circumstances of this case can be distinguished from those that presented themselves to the Court in ONE.TEL. That proceeding concerned a challenge to the validity of certain notices issued by the respondent, the Commissioner of Taxation. The respondent initially defended the notices but after acknowledging what Burchett J described as “at least an evidentiary difficulty” accepted that the notices should be set aside. His Honour found that meant that the applicants had succeeded and that the “matter involve[d] a clear winner”: at 554. The result sought by the applicants in ONE.TEL was achieved without a hearing, but not by a settlement “in the ordinary sense” or by extra-curial processes. Here there was no acknowledgment by Bideena that the relief it sought could not be obtained; Bideena was prepared to proceed to a hearing of its interlocutory process. But a settlement was reached by a process of negotiation so that no hearing of the interlocutory process was required.
58 Mr Patakas submitted that I not would determine the issue of costs on the principle enunciated in Lai Qin and the cases which followed it because those cases were all concerned with a substantive proceeding that had been compromised or become otiose. Rather, he submitted that I would determine the issue of costs by reference to general principles and ss 37M and 37N of the Federal Court Act, which set out the overarching purpose of the civil practice and procedure provisions and require parties to a civil proceeding to conduct the proceeding (including settlement negotiations) in a way that is consistent with the overarching purpose. That purpose is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
59 Considering the issues on that basis does not lead me to a different conclusion. The principal issue that arises in that context is whether Bideena should have notified the parties of its intention to file the interlocutory process prior to doing so, which I have addressed at [53]-[55] above. As I have already observed, while Bideena may not have adopted best practice in proceeding as it did, in the context of what appears to the Court to be a highly contested proceeding on all issues based on the conduct of the proceeding to date, the issues that arose from the interlocutory process were quickly resolved. I do not accept that awarding costs to Bideena would encourage unreasonable behaviour. The way in which parties chose to run matters will depend on the particular circumstances of a case. The way in which the Court will resolve an issue such as the one currently before me will equally depend on the facts as they relate to the particular case.
60 I do not propose to make an order that Bideena pay the ARF Parties’ and Mr Patakas’ costs of the interlocutory process generally or from the date nominated by Mr Patakas, 19 April 2016. Nor do I propose to make an order that the ARF Parties’ and Mr Patakas’ costs of the interlocutory process be their costs in the cause.
61 Bideena submitted that the appropriate order is that there be no order for costs of the interlocutory process in accordance with the principles set out in Lai Qin. However, here I am concerned with an interlocutory process in a proceeding which has not yet been finally determined. Similar circumstances faced a Full Court of this Court in Yperion Technology, which considered the costs to be awarded on an interlocutory application for leave to appeal which had been compromised. There the Full Court expressed the view that, in the absence of a determination on the merits, the Court should not ordinarily make an order for costs based on a prediction of likely outcome but that it would be appropriate to “reflect in the order for costs … the result ultimately to be achieved on a final hearing by making an order for costs in the cause”.
62 I put that alternative to the parties and gave them an opportunity to make submissions on it. The ARF Parties and Mr Patakas submitted that it would be unjust for Bideena to have its costs of work that was ultimately unnecessary and in respect of relief that was never pressed and that it was unreasonable for Bideena to bring the application in the manner it did. I have already addressed the question of whether Bideena’s conduct was reasonable. Relevantly, costs are compensatory in nature and not punitive. Any issue as to whether work was necessary and whether the costs of that work ought to be recovered, once a costs order is made, is a matter for the taxing officer.
CONCLUSION
63 In my opinion the appropriate order, given that the costs which I am considering relate to the interlocutory process, is that costs should be costs in the cause. I will make orders accordingly.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. |
NSD 425 of 2016 | |
ANASTASIA PATAKAS | |
Fifth Defendant: | EVANGELOS PATAKAS TRADING AS EVANGELOS PATAKAS & ASSOCIATES SOLICITORS |
Sixth Defendant: | GOEKE INVESTMENT FINANCE PTY LTD ACN 165 354 718 |
