FEDERAL COURT OF AUSTRALIA

BAM Property Group Pty Ltd as trustee for BAM Property Trust v Imoda Group Holdings Pty Ltd (No 2) [2019] FCA 2072

ORDERS

THE COURT ORDERS THAT:

1.    The defendants pay the plaintiffs’ costs of the proceeding on the indemnity basis, to be assessed if not agreed.

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

REASONS FOR JUDGMENT

DERRINGTON J:

1    The plaintiffs seek their costs of the proceeding, to be paid on the indemnity basis for the whole proceeding or, alternatively, on the indemnity basis from the relevant date following an offer made pursuant to Part 25 of the Federal Court Rules 2011 (Cth) (the Rules).

Procedural background

2    On 2 August 2019, judgment was delivered in the proceeding in BAM Property Group Pty Ltd as trustee for BAM Property Trust v Imoda Group Holdings Pty Ltd [2019] FCA 1192 (the primary judgment). Orders were made for the filing of written submissions on the question of costs by 16 August 2019. The plaintiffs filed submissions on costs together with an affidavit in support on 14 August 2019.

3    The defendants did not comply with the Court’s order to file submissions, on time or at all. As such, it must be taken that the defendants do not wish to make any submissions in respect of the costs of the proceeding.

Consideration

4    On any view, the plaintiffs were successful in the proceeding, such that costs ordinarily follow: Oshlack v Richmond River Council (1998) 193 CLR 72, 97 [67]. However, the plaintiffs also seek that costs be paid on the indemnity basis, on two grounds. First, that an offer to compromise was made pursuant to Part 25 of the Rules, and second, that the conduct of the defendants in respect of the proceeding was such as to justify an award on the indemnity basis: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

Offer to compromise

5    On 9 May 2018, the plaintiffs’ solicitor made an offer to all of the defendants to compromise the proceeding by emailing a letter and offer in the appropriate form to the then solicitors for the defendants. The offer was to settle the proceeding for the payment to the plaintiffs of the sum of $450,000 within 14 days, plus costs on the standard basis. The offer was open for 14 days. The offer complied with rr 25.02, 25.03(1) and 25.05.

6    The offer was not accepted, in that no response was made. The judgment obtained was for more than $700,000. The judgment was clearly more favourable than the terms of the offer. The plaintiffs are therefore entitled to an order that the defendants pay their costs after 11.00 am on the second business day after the offer was served, being 11 May 2018, on the indemnity basis: r 25.14(3).

Misconduct in the proceeding

7    The plaintiffs also apply for indemnity costs for the period prior to 11 May 2018 on the basis that the Court should exercise its discretion to make such an award: s 43(2) of the Federal Court of Australia Act 1976 (Cth).

8    The plaintiffs rely on the conduct of the defendants as identified in the reasons for the primary judgment:

[4]    These proceedings have had an unfortunate history, the blame for which generally lies with the defendants, mostly Jay, and it is necessary to say something of their conduct over the course of the action. In general terms, it can be said that at every step in the proceeding, the defendants sought to obfuscate and delay its progression. The initial attempt at obstruction was to prevent the plaintiffs from obtaining the documents relevant to the operation of the companies of the family business so that they would be hindered in articulating their case. … The plaintiffs were required to make an application under s 247A of the Act for an order for inspection of the books of the companies. …

[5]    Thereafter, the defendants’ conduct disclosed an apparent attempt to further delay and hinder the progress of this matter. They frequently failed to comply with the Court’s directions and orders. … Otherwise the defendants’ solicitor sometimes found it necessary to inform the Court that he could not obtain instructions so as to enable him to undertake the steps required by the Court. All of this rendered the interlocutory processes somewhat cumbersome.

[6]    On 16 July 2018, extensive directions were made for the purposes of ensuring this matter proceeded to a trial. Amongst other things, the defendants were directed to file an amended defence, their statements of evidence and any expert reports on specific dates. Although they amended their defence and filed it within the stipulated time, they did not then take any step towards complying with the other directions.

[7]    The matter was relisted for a further case management hearing on 5 September 2018 at the request of the plaintiffs. There was no appearance for the defendants at that hearing. The defendants’ persistent failures to comply with various Court directions and their nonattendance at the case management hearings strongly supported the conclusion that they ceased to have any interest in the matter.

…

[11]    No proper explanation was provided by the defendants as to why they had not complied with the timetable set by the Court for the filing of material. Jay, a builder and businessman, claimed the litigation caused him to be emotional and prevented him from providing instructions. I reject that assertion as being highly improbable, and it is not supported by any medical evidence. Moreover, Jay is an obviously intelligent businessman who is astute and rational in the manner in which he conducts himself. There was nothing in his demeanour before the Court which suggested that the conflict between him and his brothers impeded his preparation of the case in any way. The defendants have been given every opportunity to participate in this litigation but have used that to draw it out intolerably. …

…

[13]    … I take the conduct of the defendants in the course of the interlocutory steps to be reflective of the veracity of their defence to the action. That is, they attempted to obfuscate, obstruct and delay the proceedings for the apparent reason that they had no viable defence. That same attitude can also be seen in the manner in which Jay gave his evidence.

9    The plaintiffs refer to the above as “evidence of particular misconduct that causes loss of time to the Court and to other parties”, among various of the other categories restated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234 as providing basis for the award of indemnity costs. The plaintiffs submit that the “consistent and unexplained misconduct on behalf of all defendants” warrants an award of indemnity costs for the entire duration of the proceeding, including prior to 11 May 2019.

10    That submission should be accepted. The defendants’ obstructive conduct extended throughout the entire proceeding, and reflected the absence of a viable defence. It would be a miscarriage of justice were the plaintiffs to be denied the order sought. At the very least it marks the Court’s disapproval of the improper manner in which the defendants conducted themselves.

Orders

11    It follows that the Court will exercise its discretion to order that the defendants pay the plaintiffs’ costs of the proceeding on the indemnity basis, to be assessed if not agreed.

Associate:    

Dated:    9 December 2019

SCHEDULE OF PARTIES