Federal Court of Australia

Sharif v Vitruvian Investments Pty Ltd (No 2) [2023] FCA 619

ORDERS

THE COURT ORDERS THAT:

1.    The application for an order that the costs the subject of the orders made on 4 May 2023 in these proceedings and the related proceedings in WAD 153 of 2022 be paid forthwith is refused.

2.    On or before 23 June 2023, the parties do file and serve a statement of the legal costs and disbursements that have been incurred in the conduct of these proceedings and the related proceedings in WAD 153 of 2022 (including costs incurred while the proceedings were being conducted in the Supreme Court of Western Australia) (Proceedings) together with a breakdown of those costs that will assist in assessing their reasonableness.

3.    On or before 23 June 2023, the parties do file and serve submissions of no more than 5 pages setting out the quantum of costs that the party would seek on a lump sum basis in the event that the Proceedings were found to be determined favourably to that party and costs were assessed on a lump sum basis, together with any submissions as to whether the costs of the Proceedings should be assessed on a lump sum basis by reference to the statement of legal costs and disbursements provided in accordance with these orders.

4.    On or before 23 June 2023, the parties do file and serve any necessary affidavit to verify the statement filed in accordance with order 2 and otherwise to support the quantum of costs sought by the party if the costs of the Proceedings are assessed on a lump sum basis.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Mr Walid Sharif has brought proceedings in this Court in which he seeks relief in respect of his shareholding in Vitruvian Investments Pty Ltd (Vitruvian). There are related proceedings in which Vitruvian seeks relief under s 1322 of the Corporations Act 2001 (Cth) in respect of the purported cancellation of Mr Sharif’s shareholding. The proceedings have been conducted together and with expedition. A final hearing was held in the week commencing 29 May 2023. The decision in both proceedings has been reserved.

2    On 4 May 2023, Mr Sharif sought and obtained leave to amend his statement of claim and reply in his proceedings (and of his defence to the application for relief by Vitruvian). He accepted that as a condition of leave he must pay the costs of the application and any costs thrown away by reason of the amendments. Orders in those terms were made.

3    The defendants to the proceedings brought by Mr Walid (Vitruvian defendants) sought a further order that the costs as ordered be paid forthwith. They were given liberty to apply to seek such an order. They have made an application pursuant to that liberty and the parties have filed written submissions. The Vitruvian defendants seek an order that the costs be assessed on a lump sum basis and paid forthwith. I have determined that the issue as to whether there should be an order for costs to be paid forthwith should be dealt with on the papers.

4    Ordinarily, the costs of an interlocutory application are not to be taxed until the proceeding in which the order is made is finished: r 40.13 of the Federal Court Rules 2011 (Cth). There are good reasons for the assessment and payment of the costs of proceedings to be dealt with at the conclusion of the proceedings. It is more efficient. It enables amounts to be set off. It recognises that in many cases the parties are able to reach agreement in which case there is no need for assessment. It directs the attention of the parties to the resolution of the substantive controversy and discourages satellite litigation about costs.

5    Therefore, the ordinary rule stated in r 40.13 is only departed from where 'the interests of justice in the circumstances sufficiently outweigh the policy considerations behind [the rule]': Capic v Ford Motor Company of Australia Limited (Costs Forthwith) [2019] FCA 1065 at [15]-[18] (Perram J). As was there stated (at [19]):

…An order for costs to be payable forthwith is not to be seen as akin to an indemnity costs order or an adverse costs order. It is to be borne in mind that where a party relies on the unreasonable conduct of the other party in its interlocutory disputation, an order for costs to be payable forthwith will generally only be made where the conduct has caused significant additional costs such that the interests of justice demand a departure from the ordinary rule…

6    The following matters are advanced by the Vitruvian defendants as reasons why there should be a forthwith costs order:

(1)    The proceedings are expedited;

(2)    The quantum of any order as to compensation will be determined separately and this may mean that there is delay until final cost orders are made;

(3)    Mr Sharif has an ongoing dispute with his former solicitors;

(4)    Mr Sharif has limited financial resources;

(5)    Vitruvian’s financial circumstances are affected by the litigation; and

(6)    Mr Sharif has paid some of his legal costs personally but is now being assisted by a litigation funder and, despite request, he has refused or failed to provide the Vitruvian defendants with a copy of the funding agreement.

7    Mr Sharif submits that relief from the operation of r 40.13 should not be given and costs should be dealt with at the end of the proceeding. He says that the expedited trial has been concluded and there is no reason to subject the parties to a separate taxation process in those circumstances. Further, Mr Sharif should be able to set off the costs that have been ordered against any costs ordered in his favour if he is successful. He also opposes lump sum assessment.

8    I am not persuaded that the order sought by the Vitruvian defendants should be made. The decision in the proceedings is to be delivered on an expedited basis. Although part of the costs thrown away concern the abandonment by Mr Sharif of a patent claim, much of the evidence concerning the relevant invention was still led at trial and relied upon as part of the context for the resolution of the issues in dispute. There is no basis to conclude that the quantum of the costs was such as to itself be a reason for ordering there payment forthwith. In any event, the substantive result (save for the assessment of the quantum of any compensation) will soon be known. It is appropriate that the question of costs, including any lump sum order be addressed at that point in time. There is no apparent reason why the costs of any assessment of compensation could not be dealt with separately at a later time so there is very little to be gained in terms of timing of the assessment by making the forthwith orders sought by the Vitruvian defendants.

9    To enable consideration to be given as to whether a lump sum assessment may be undertaken when the reserved decision is delivered, I will make orders now for the parties to file a statement as to the costs that they have incurred and the costs the party would seek on a lump sum basis in the event that the proceedings were determined favourably to that party. I will also direct the parties to file short submissions of no more than 5 pages and any necessary affidavit in support on the question whether there should be such a lump sum assessment and if so, whether it should be made by reference to the lump sum notified by the parties.

Associate:

Dated:    9 June 2023