Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) (No 3) [2018] FCA 863
ORDERS
DATE OF ORDER: | 12 June 2018 |
THE COURT ORDERS THAT:
1. The defendant pay interest on $197,068.38 in the amount of $43,325.30.
2. The defendant pay the plaintiffs’ costs of the proceeding, including all reserved costs:
(a) on a party and party basis for the period up to 11.00 am on 4 June 2015; and
(b) on an indemnity basis after that time.
3. Grant leave to the plaintiffs to file any application for orders for costs against any third party within 28 days of the date of these orders.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
MARKOVIC J:
1 On 19 April 2018 I made orders pursuant to s 588FA(1)(a) of the Corporations Act 2001 (Cth) (Act) that the defendant, Melrose Cranes & Rigging Pty Ltd (Melrose Cranes), pay Cardinal Project Services Pty Ltd (in liq) (CPS) the sum of $197,068.38 (Sum) and that Melrose Cranes pay interest on the Sum: see Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) (No 2) [2018] FCA 530 (Stone (No 2)) at [290].
2 At the request of the plaintiffs, the liquidators of CPS (Liquidators), I reserved on the question of calculation of interest on the Sum, the period for which interest should be paid and the costs of the proceeding (Outstanding Issues). The parties have now filed written submissions and affidavits upon which they each seek to rely in relation to those issues and have indicated that the Outstanding Issues can be determined on the papers.
3 I am satisfied that the determination of the Outstanding Issues would not be significantly aided by an oral hearing and that it is appropriate to determine them on the papers: see s 20A(2)(c)(ii) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act).
4 I address each of the Outstanding Issues in turn below.
interest
5 There is no dispute between the parties about the Court’s ability to award interest on the Sum. Indeed, as noted at [1] above, on 19 April 2018 I made an order requiring payment of interest on the Sum.
6 The remaining issue is the period for which interest should be paid and, subject to the determination of that issue, calculation of the amount payable.
7 The Liquidators seek payment of interest from 10 September 2012 or alternatively, 3 October 2014, being dates on which they made a demand for the amount claimed in the proceeding. Melrose Cranes submitted that interest should only be payable from the date of commencement of the proceeding.
8 The relevant chronology is as follows:
on 10 September 2012 the Liquidators wrote to Melrose Cranes notifying it that in their opinion it had received an unfair preference within the meaning of Pt 5.7B of the Act and demanding payment of $308,544 to CPS within 14 days of the date of the letter (First Demand);
on 18 September 2012 McLean & Associates, the solicitors for Melrose Cranes, wrote to the Liquidators seeking information in relation to the claim the subject of the First Demand (September 2012 Request);
on 3 October 2014 Stacks Law Firm (Stacks), the solicitors for the Liquidators, wrote to McLean & Associates responding to the September 2012 Request and demanding payment of $308,544.58 by 17 October 2014 (Second Demand). In its penultimate paragraph that letter stated:
If we do not hear from you by this time, we are instructed to commence proceedings against Melrose Cranes in the Federal Court without further notice. If this becomes necessary, we will also seek an order for interest and costs. We will rely on this letter when filing our Genuine Steps Statement with the Originating Application.
on 18 November 2014 Stacks sent a further copy of the Second Demand to McLean & Associates by facsimile and sought their urgent response;
in her affidavit sworn on 8 May 2018 Karen McLean of McLean & Associates said that on 20 November 2014 Melrose Cranes sent a request for information in relation to the Liquidators’ claim. Annexed to Ms McLean’s affidavit is a letter dated 20 November 2014 from McLean & Associates to Stacks which in its terms is said to be a response to Stacks’ correspondence dated 18 November 2014. In that letter McLean & Associates note that their “client continues to maintain its dispute in relation to [the Liquidators’] claim”. It also invites Stacks to provide the documents being prepared for filing with the Court prior to filing, the Liquidators’ evidence relating to the question of solvency and the running balance account so that they can advise Melrose Cranes in relation to the claim; and seeks documents and further information about the liquidation. McLean & Associates also asserted that the September 2012 Request remained unanswered;
it is apparent that the letter dated 20 November 2014 annexed to Ms McLean’s affidavit was not in fact sent to Stacks. Rather, Stacks received a letter dated 24 November 2014 from McLean & Associates in the same terms as the letter dated 20 November 2014 annexed to Ms McLean’s affidavit;
on 3 December 2014 Stacks sent a letter to McLean & Associates providing a copy of the draft originating application, draft statement of claim and some but not all of the other documents requested by Melrose Cranes, noting that unless the Liquidators’ claim could be resolved urgently, because of the “imminent expiry of statutory deadline”, Stacks were instructed to commence proceedings without further delay;
on 9 December 2014 Stacks provided McLean & Associates with a copy of the affidavit of Richard Stone, one of the Liquidators, and the exhibit to that affidavit;
later on 9 December 2014 Mr Davis, principal lawyer at Stacks, sent an email to Ms McLean responding to her facsimile of the same date and attaching Melrose Cranes’ supplier ledger; and
on 11 December 2014 McLean & Associates responded to Mr Davis’ email dated 9 December 2014 and, for the reasons stated therein, invited the Liquidators not to commence the proceeding against Melrose Cranes.
9 Melrose Cranes submitted that interest should only be payable from the date of commencement of the proceeding for two reasons. First, Melrose Cranes said that the Liquidators ignored the September 2012 Request. Secondly, Melrose Cranes contended that it requested particulars and information from the Liquidators’ solicitors in relation to their demand made on 18 November 2014 but the response received was unhelpful and instead the Liquidators commenced this proceeding.
10 In the ordinary course, in the context of a preference claim, interest should be allowed from the date of the demand for payment. That is, the date on which it can be said that the payments were a preference: see Capital Finance Australia v Tolcher (2007) 164 FCR 83 at [143]-[150] per Gordon J (with whom Heerey J agreed at [1] and with whom Lindgren J agreed at [84] on the issue of the date from which interest should be calculated). There is no reason to depart from the ordinary course in this case. Thus, subject only to the question of which demand, there being two in this case, interest should run from the date that the Liquidators made demand of the amount claimed in the proceeding.
11 I am not satisfied that interest should run from the date of commencement of the proceeding as contended by Melrose Cranes. In Kazar v Kargarian (2011) 197 FCR 113 at [78] Foster J (with whom Greenwood and Rares JJ agreed at [1]-[11]) said:
Delay (without more) in the commencement of proceedings will rarely disentitle an applicant from an award of pre-judgment interest pursuant to s 51A of the Federal Court Act (Kalls Enterprises Pty Limited (in liq) v Baloglow (No 3) [2007] NSWCA 298 at [10]–[11]). It may be relevant to the exercise of the discretion to award interest although some reasonable time needs to be afforded to an applicant to allow him or her to investigate whether an action can and should be brought. This is especially so when the claim is brought by a liquidator.
12 Here there was no disentitling conduct at least from the date of the Second Demand. From that point on, contrary to the submission of Melrose Cranes, the Liquidators engaged with Melrose Cranes by responding to its queries and providing it with information about the claim so that it could consider its position.
13 I do not reach the same conclusion in relation to the First Demand. It was not actively pursued. Despite Melrose Cranes promptly seeking information in relation to the claim, it was not until October 2014, some two years later, that the Liquidators responded to the September 2012 Request. No explanation has been proffered by the Liquidators for the delay in responding to the September 2012 Request. This does not seem to be a case where the Liquidators required further time to formulate their case. So much can be inferred from the terms of the First Demand. Even if further time was required before a response to the September 2012 Request could be provided, the delay of two years is, in my opinion, inordinate, particularly in circumstances where it is unexplained.
14 Accordingly, in my opinion, interest should be calculated from the date of the Second Demand, 3 October 2014.
15 The Liquidators have provided two alternative calculations of interest on the Sum: one commencing from the date of the First Demand and the second commencing from the date of the Second Demand. Melrose Cranes does not dispute the accuracy of those calculations. I will thus adopt the calculation of interest provided by the Liquidators for the period commencing 3 October 2014 until 19 April 2018 being $41,138.79.
16 In addition, the Liquidators are entitled to post judgment interest pursuant to s 52 of the Federal Court Act. The Liquidators have provided a calculation for post judgment interest from 20 April 2018 to 3 May 2018 of $566.91 and thereafter continuing at a daily rate of $40.49 per day. The total amount payable for post judgment interest up to the date of these reasons is $2,186.51.
17 I will thus make an order for payment of interest of $43,325.30 on the Sum.
costs
18 The Liquidators seek their costs on an indemnity basis from the date of the commencement of the proceeding, 11 December 2014, or alternatively from 2 June 2015. In response, Melrose Cranes put three alternative bases upon which it contended the issue of costs should be resolved:
first, that each party should bear its own costs of the proceeding;
secondly, that it pay the Liquidators’ costs on an ordinary basis as and from 30 August 2016. The basis for Melrose Cranes submitting that costs could only be awarded from 30 August 2016 is not explained although I note that on 2 September 2016 the Court made orders, among others, granting leave to the Liquidators to rely on additional evidence and vacating the hearing date; or
thirdly, that costs should only be awarded on the ordinary basis as the Liquidators should not be rewarded for their own dilatory actions.
Offers made by the parties
19 The Liquidators made the following offers by serving notices of offer of compromise pursuant to r 25 of the Federal Court Rules 2011 (Cth) (Rules):
(1) on 2 June 2015 the Liquidators offered to accept $180,000 inclusive of interest and costs in full and final settlement of their claim (First Offer);
(2) on 17 August 2015 the Liquidators offered to accept $195,000 inclusive of interest and costs in full and final settlement of their claim;
(3) on 9 December the Liquidators offered to accept $250,000 inclusive of interest and costs in full and final settlement of their claim;
(4) on 22 December 2016 the Liquidators offered to accept $140,000 inclusive of interest and exclusive of costs in settlement of their claim. This offer was made when the hearing, which commenced on 2 December 2016, was adjourned part heard to 27 February 2017. In response to a request made by Ms McLean in relation to this offer, Mr Davis informed Ms McLean that he estimated that the Liquidators’ total legal costs as at 22 December 2016 were approximately $345,000 excluding GST; and
(5) on 21 February 2017 the Liquidators offered to accept $37,500 in addition to costs but excluding interest in full and final settlement of their claim.
20 Melrose Cranes also made a series of offers over the life of the proceeding which are in evidence before me. However, it is not necessary for me to set them out.
Legal principles
21 Section 43(1) of the Federal Court Act confers on the Court a broad discretion to award costs in proceedings.
22 Part 25 of the Rules concerns offers to settle. Rule 25.01 provides that a party (referred to as the offeror) may make an offer to compromise by serving a notice, in accordance with Form 45, on another party (referred to as the offeree). Rule 25.02 provides that the notice must be signed by the offeror and r 25.03 deals with the required content of an offer to compromise. It provides:
25.03 Offer to compromise—content
(1) The notice must state whether:
(a) the offer is inclusive of costs; or
(b) costs are in addition to the offer.
(2) If the offer is of a sum of money, the notice may separately specify the amount that represents:
(a) the offer in respect to the claim; and
(b) interest (if any).
23 Rule 25.14 provides for the cost consequences where an offer is not accepted. Relevantly, r 25.14(3) provides:
(3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:
(a) before 11.00 am on the second business day after the offer was served—on a party and party basis; and
(b) after the time mentioned in paragraph (a)—on an indemnity basis.
Note 1: Costs on an indemnity basis is defined in the Dictionary.
Note 2: The Court may make an order inconsistent with these rules—see rule 1.35.
24 While an award of costs is discretionary, generally that discretion is exercised in favour of the successful party: see Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at [25].
25 In Kassem and Secatore v Commissioner of Taxation (No 2) [2012] FCA 293 Nicholas J considered the operation of r 25.14(3) of the Rules and its predecessor, O 23 r 11(4) of the Federal Court Rules 1979 (Cth). At [11] his Honour said:
Rule 25.14(3) of the Federal Court Rules 2011 is in a slightly different form to O 23, r 11(4) but for relevant purposes they are to the same effect. As the notes to r 25.14 make clear, the Court may make an order under r 1.35 that would result in costs being awarded otherwise than as provided for by r 25.14(3). However, it is for the party who is prima facie required to pay costs in accordance with the requirements of the rule to persuade the Court that some other order should be made.
Consideration
26 Melrose Cranes submitted that the purpose of an order for costs is to compensate the person in whose favour it is made, not to punish the person against whom the order is made. That is so: see Oshlack v Richmond River Council (1998) 193 CLR 72 (Oshlack) at [44] per Gaudron and Gummow JJ and at [67] per McHugh J. Melrose Cranes submitted that it was reasonable for it not to accept the Liquidators’ offers due to the way in which they chose to run the proceeding and that, relying on Oshlack, the Liquidators’ conduct ought to be sufficient to disentitle them from costs in their favour.
27 Two issues arise for consideration. First, how should the Court exercise its discretion pursuant to s 43 of the Federal Court Act; and secondly, if the discretion is exercised in favour of the Liquidators, has Melrose Cranes satisfied the Court that it should make an order for payment of costs other than as provided by r 25.14(3) of the Rules.
28 In relation to the first issue, Melrose Cranes submitted that:
(1) the fact that the proceeding took two years to get to hearing was due to the way in which the Liquidators approached the proceeding. It contended that so much was clear from a review of the orders made in the proceeding. By way of example, Melrose Cranes referred to nine orders made in the course of case management of the proceeding. Of those orders, four were orders to extend the time by which the Liquidators had to take a step in the proceeding;
(2) it was not until June 2016, after the proceeding had been listed for hearing, that the Liquidators determined that there were flaws in their evidence and that it took the Liquidators a further two months to share that fact with Melrose Cranes which ultimately resulted in the hearing dates being vacated;
(3) the Liquidators failed to readily hand over their documents necessary for it to prepare its case. Melrose Cranes said that they should have willingly provided information to it and not forced it to issue a notice to produce for material such as CPS’ MYOB records. Melrose Cranes contended that, even when the documents were produced, the Liquidators had locked the data files giving rise to a further need for submissions to be made by it on 10 September 2015; that costs were reserved in relation to that appearance; and that those costs should be its costs as the Liquidators’ “obstructive approach caused further delay and unnecessary costs to be incurred”; and
(4) the hearing dates were vacated on two occasions as a result of the Liquidators’ actions.
29 Melrose Cranes submitted that the conduct described above and, I infer, to the extent it is relevant, the conduct referred to at [32]-[34] below, was sufficient to disentitle the Liquidators to an order for costs in their favour and that it was the Liquidators’ conduct that drove the costs in the proceeding, such that the burden of payment of the costs should not be borne by it.
30 To the extent that Melrose Cranes relies on Oshlack in support of its submissions I assume, as it is not specified, that it relies on the observations of McHugh J at [67] and, in particular, at [69] where his Honour said:
67 The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
…
69 The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In. Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
(footnotes omitted)
31 Recognising that s 43 of the Federal Court Act confers a broad power on the Court and that the award of costs is discretionary, I am satisfied that I should exercise that discretion in favour of an order that Melrose Cranes pay the Liquidators’ costs of the proceeding. The Liquidators succeeded substantially in the proceeding and, contrary to the submission made by Melrose Cranes, their conduct in the proceeding was not such that it would disentitle them to an order for costs in their favour.
32 Melrose Cranes has provided some examples of when the Liquidators did not comply with Court orders and when the Liquidators sought extensions of time to complete steps necessary to prepare the matter for hearing. However, Melrose Cranes fails to provide any context for the making of those orders, nor explain what occurred during the periods between the making of those orders. It is not possible to conclude, based on the submissions made and the material before me, that the Liquidators’ conduct unnecessarily protracted the proceeding such that it would disentitle them to an order for costs in their favour.
33 There was a large volume of material filed in the proceeding. I accept the Liquidators’ submission that the volume was necessitated by the fact that CPS’ financial position and insolvency were intertwined with other companies in the corporate group but more relevantly, that the breadth of material filed was a consequence of Melrose Cranes’ own conduct in putting the Liquidators to strict proof of every aspect of their claim, including matters that should not have been controversial. As I observed in Stone (No 2) at [4] the parties seemed unwilling to agree to any matter which might have narrowed the issues in dispute but, tellingly, it was not until the first day of the hearing when Melrose Cranes sought leave to file its further amended defence that it was prepared to withdraw its denial that the payments in issue had in fact been made. That was a matter which would have been evident to Melrose Cranes from its own material.
34 Hearing dates were vacated on two occasions. It is not plain that the reason for vacation of the first dates lies at the feet of the Liquidators. On the second occasion the hearing dates were vacated because the Liquidators sought and were granted leave to rely on additional evidence. On 2 September 2016 an order was made that the Liquidators pay Melrose Cranes’ costs thrown away by reason of the grant of leave to the Liquidators to rely on the additional evidence and by reason of the vacation of the hearing date on an indemnity basis (September Order). In other words, Melrose Cranes was compensated at the time for the additional costs it would incur because of the late reliance on the additional evidence, in circumstances where it had prepared its defence based on the evidence which had been filed at that time, and because of the adjournment of the hearing. That event should not be revisited now such that the conduct would disentitle the Liquidators from an order in their favour for costs of the proceeding.
35 Nor will I, as the Liquidators invite me to do, set aside the operation of the September Order. The Liquidators referred to a number of authorities in support of their submission that there is “no doubt” about the Court’s jurisdiction to do so. The Liquidators also submitted that Melrose Cranes’ conduct in the proceeding was in contravention of s 37N of the Federal Court Act and that consequently under s 37N(4), in exercising the Court’s discretion to award costs, I must take into account that contravention.
36 First, I am not satisfied, based on the authorities referred to by the Liquidators, that there is “no doubt” that the Court has jurisdiction to set aside the September Order. The authorities relied on by the Liquidators to support their submission that the Court has jurisdiction to set aside the operation of the September Order, all of which are decisions of the Supreme Court of Victoria, were determined in the context of that court’s inherent jurisdiction to vary, modify or extend its own rules and its relevant slip rule.
37 Second, even I was satisfied of this Court’s jurisdiction to set aside the September Order and that the principle I was referred to applied to this Court, the circumstances in this case can be distinguished from the circumstances in those cases which justified the variation or modification of orders.
38 The authorities referred to by the Liquidators rely, for the most part, on the principle enunciated in Re Bruce (1886) 12 VLR 696 at 709 where the Victorian Court of Appeal held that relevantly the Court of Insolvency, like every other court, has the power to set aside the order of another judge or its own order in circumstances where that order has been made improvidently or where facts have been withheld from the court that should have been, but were not, disclosed. That is, the court or a judge has the power to set aside any act of its or his or her own shown to have been done under circumstances which operated to deprive its or his or her mind of the power of exercising a fair judgment at the time. Such circumstances are simply not evident here. It has not been shown to be and is not the case that the September Order was made improvidently or that facts, which should have been disclosed, were withheld from the Court at the time the September Order was made.
39 The authorities relied on by the Liquidators also consider the application of the relevant slip rule in a court modifying its own orders. Those cases do not assist the Liquidators.
40 When I made the September Order I exercised my discretion based upon the matters and circumstances before the Court at the time. They included first, that the Liquidators accepted that, in circumstances where leave was granted to rely on the additional evidence and the hearing date was vacated, Melrose Cranes was entitled to its costs thrown away by reason of that leave and the vacation of the hearing date on an indemnity basis; and secondly, that the late filing of the additional evidence was caused by an “admitted oversight or omission on the Liquidators’ part”: see Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) [2016] FCA 1113 at [51] and [53].
41 In the circumstances, it is not appropriate that I, in effect, re-exercise the discretion as I am invited to do by the Liquidators because they now allege that Melrose Cranes failed to comply with s 37N in the conduct of the whole proceeding. If any issue arose about Melrose Cranes’ non-compliance with s 37N of the Federal Court Act when the Court made the September Order, that was a matter for submission and consideration at that time. No such submission was made.
42 I am also not persuaded that it is in the interests of justice to stay the September Order. The Liquidators have not demonstrated why the interests of justice would be served by a stay.
43 In my opinion, the Liquidators are entitled to an order that Melrose Cranes pay its costs of the proceeding. I do not propose to take up Melrose Cranes’ invitation to make an order that the Liquidators pay the reserved costs of the case management hearing on 10 September 2015. There is nothing before me that would justify the making of such an order. Those costs will form part of the costs of the proceeding.
44 I turn then to the second issue, the effect of the offers of compromise made by the Liquidators and the operation of r 25.14(3).
45 The Liquidators made five offers of compromise in accordance with r 25 of the Rules, none of which were accepted by Melrose Cranes. It is not in dispute that the Liquidators have obtained judgment more favourable than the terms of each of those offers. Pursuant to r 25.14(3) of the Rules the Liquidators are entitled to an order for indemnity costs from 11.00 am on the second business day after the First Offer was served. It is for Melrose Cranes to persuade me that an alternative order should be made, namely, that costs be ordered on the ordinary basis.
46 Melrose Cranes submitted that it was reasonable for it not to accept the Liquidators’ offers given the following circumstances:
(1) the Liquidators did not file an expert report on the issue of insolvency as they said they would in their statement of claim. Melrose Cranes contended that had the Liquidators done so, their position as to the insolvency of CPS would have been clear and it would have had the benefit of a structured expert opinion to which it could respond. In the absence of an expert report Melrose Cranes said that it was left to “sift through the thousands of documents exhibited to affidavits by the [Liquidators], a large number of which were duplicated, flawed and some incomplete”;
(2) it could not be said that the Liquidators had a reasonable expectation of success from the commencement of the proceeding. Melrose Cranes contended that the material filed by them was “deficient, excessive and largely unintelligible”; the Liquidators realised the deficiency in the material filed in support of their claim and sought to adduce further evidence after the proceeding had been listed for hearing; and the structure and form of the additional material filed with the Court’s leave did not aid in making the Liquidators’ case cohesive or easy to understand;
(3) the Liquidators’ position in relation to the question of solvency was left to be drawn from their submissions and an aide memoir and, despite an indication that the Liquidators would outline with precision what was sought to be proved by the documents exhibited to the affidavits, they did not do so until the final hearing;
(4) the Liquidators’ expansion of the material filed and the form of that material contributed to the hearing time; and
(5) given the state of the Liquidators’ evidence, the offers Melrose Cranes made and its non-acceptance of the Liquidators’ offers ought not be considered unreasonable.
47 Rule 25.14(3) does not require, in its terms, that a respondent’s refusal of an offer made in accordance with Pt 25 be unreasonable. It operates upon the non-acceptance of an offer by a respondent where the applicant then obtains a judgment more favourable than the terms of the offer. But, as set out at [23] and [25] above, the Court may, pursuant to r 1.35 of the Rules, make an order inconsistent with the terms of r 25.14(3). It is for Melrose Cranes to satisfy me that I should make an order inconsistent with the terms of r 25.14(3).
48 Having regard to the circumstances of this case and the submissions made by Melrose Cranes, I am not satisfied that costs should be awarded other than in accordance with r 25.14(3) of the Rules. The offers were made in conformity with Pt 25 of the Rules. Melrose Cranes’ complaint, among other things, seems to be that, because of the way the Liquidators ran their case, they were not able to understand how they would seek to establish insolvency. That was not apparent from the way in which Melrose Cranes ran its defence. It denied that CPS was insolvent and sought to undermine the evidence given by the Liquidators in cross-examination. In any event, after the Liquidators gave evidence, any complaint that Melrose Cranes did not understand how the case was put could no longer be sustained yet, at that point, it still chose not to accept the offers made in December and February when the hearing was adjourned part heard.
49 Melrose Cranes should pay the Liquidators’ costs of the proceeding in accordance with r 25.14(3). That is, they should pay the Liquidator’s costs on a party and party basis up to 11.00 am on 4 June 2015, being the second business day after service of the first offer made in accordance with Pt 25 of the Rules, and thereafter on an indemnity basis.
50 I am not satisfied that the Liquidators are entitled to an order for indemnity costs from the date of commencement of the proceeding. The basis on which they seek such an order seems to be because they contend that Melrose Cranes unnecessarily prolonged the time and costs involved in the proceeding contrary to s 37N of the Federal Court Act by denying allegations for which there was no basis, which they say should have been obvious to a party properly advised, and by imprudently failing to accept offers made to settle the proceeding. The effect of the non-acceptance of the offers made by the Liquidators is addressed by cost consequences that follow from the application of r 25.14(3). The additional period for which an order for costs on an indemnity basis is sought is approximately six months and covers the early part of the proceeding when few steps were taken and when no offers were made to settle the proceeding by the Liquidators. An order for costs on an indemnity basis is not justified to cover that period.
conclusion
51 The Liquidators have also sought an order reserving their rights to file any applications for orders for costs against any third party, including Melrose Crane's legal practitioners. While the Liquidators should be permitted to make any such application if they wish, it should be done in a timely fashion so that the matter is brought to finality. Accordingly, I will grant leave to the Liquidators to file any application for orders for costs against any third parties within 28 days of the date of these reasons.
52 I will make orders giving effect to these reasons.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. |
Associate:
