Federal Court of Australia

Generate Group Pty Ltd v Harris (Costs) [2023] FCA 1358

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff’s application for a lump sum costs order payable forthwith be dismissed, with costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    Generate Group Pty Ltd’s application for costs against the interested persons be dismissed with costs.

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

REASONS FOR JUDGMENT

STEWART J:

1    On 8 June 2023, I delivered reasons in each of these proceedings determining various applications before me. The costs of those applications were initially reserved. Thereafter there was some agreement in relation to costs, which I will come to, as well as some issues of continuing disagreement that now fall to be determined. These reasons assume familiarity with the reasons of 8 June. Nonetheless, it is necessary to briefly summarise what relief was claimed and the outcome of those applications.

2    In proceeding NSD196/2023, being the later proceeding, the liquidator of Sea-Tech Automation Pty Ltd sought approval, nunc pro tunc, under s 477(2B) of the Corporations Act 2001 (Cth) of her entry into a heads of agreement and deed of assignment with Generate Group Pty Ltd in terms of which she assigned various claims of Sea-Tech to Generate. The parties to proceeding NSD1124/2022 were granted leave to be heard in NSD196/2023.

3    In proceeding NSD1124/2022, commenced by Generate as plaintiff against six defendants, Generate sought the joinder of two additional defendants, Sandra Drew and Secom Technology Pty Ltd ACN 161 035 276. The six original defendants (Gregory Harris, Mark Griffiths, Sint Pty Ltd, Jason Drew, Sea-Tech Systems Pty Ltd and Sint Group Pty Ltd) sought summary dismissal on the basis that when Generate commenced proceeding NSD1124/2022 it did not have standing because the assignment from Sea-Tech on which it relied had not been approved by the Court as required by s 477(2B).

4    As is apparent, the applications in NSD196/2023 and NSD1124/2022 were interrelated to some degree because it was agreed that if approval of the heads of agreement and deed of assignment were not granted, the summary dismissal applications must succeed.

5    After hearing the parties, in NSD196/2023 I granted authorisation to the plaintiffs to enter the heads of agreement and deed of assignment nunc pro tunc. In NSD1124/2022, I dismissed the defendants’ interlocutory applications for summary dismissal and granted Generate’s application to join Ms Drew and Secom. I directed the parties to jointly arrange a listing in both proceedings to hear submissions on costs.

6    The parties were agreed that:

(1)    In NSD196/2023: the plaintiffs’ costs in the amount of $8,000 (inclusive of GST) should be paid by the six original defendants.

(2)    In NSD1124/2022:

(a)    The six original defendants should pay Generate’s costs of defending their applications for summary dismissal; and

(b)    The costs of Generate’s joinder application should be costs in the cause.

7    Orders were made accordingly on 24 August 2023. The plaintiffs in NSD196/2023 were excused from further appearance.

8    The remaining unresolved costs questions arise as between Generate and the six original defendants. Generate sought for those questions to be determined on the papers following the opportunity for the filing of submissions. The six original defendants opposed that course on the basis that it was wasteful of resources. Ultimately, I made orders on 24 August providing for the filing of submissions to give Generate the opportunity to agitate a claim for additional costs orders in its favour.

Generate’s additional costs applications

9    Generate seeks the following additional costs orders:

(1)    An order that the six original defendants pay Generate’s costs of appearing and being heard in proceeding NSD196/2023 on an ordinary basis;

(2)    An order that the six original defendants pay Generate’s costs in proceeding NSD196/2023 and the costs of defending the summary dismissal applications in NSD1124/2022 as a single lump sum; and

(3)    An order that Generate’s costs be payable forthwith.

10    Generate submits that the six original defendants’ challenge to the relief sought by the plaintiffs in proceeding NSD196/2023 was an element of their summary dismissal applications in NSD1124/2022. Given the liquidator’s limited financial and commercial incentives to advance its claims in proceeding NSD196/2023, Generate was obliged to apply to be heard to protect its valuable interests. Generate submits that by reason of the conceptual and factual intermingling of the six original defendants’ applications in both proceedings, the interests of justice call for Generate’s costs to be the subject of a single, lump sum costs order.

11    Specifically, Generate submits that it ought to have its costs of appearing in proceeding NSD196/2023 because:

(1)    It was the target of the six original defendants’ intervention in that proceeding because the challenge to the retrospective approval of the heads of agreement and deed of assignment was a prerequisite to the success of their applications for summary dismissal in proceeding NSD1124/2022;

(2)    Generate was the only party that stood to lose from the six original defendants’ intervention in NSD196/2023 because Generate was obliged to pay the price of the assignment regardless of whether the Court’s approval was granted nunc pro tunc;

(3)    Generate knew that the liquidator had limited funds and there was a risk that the application in NSD196/2023 would not be comprehensively pressed and indeed it fell to Generate to raise certain arguments in favour of the application, including for example the possibility of seeking a declaration pursuant to s 1322(4)(a) of the Corporations Act; and

(4)    Generate put on valuable evidence that was germane to the resolution of the novel controversy raised by the six original defendants.

12    Generate acknowledges that it bears the onus of establishing why its costs should be payable forthwith. It submits that the costs it claims are the product of standalone applications that do not bear upon the substantive issues to be determined in NSD1124/2022 and concern the now concluded application in NSD196/2023 and that were incurred in the context of “not … particularly strong” applications for summary dismissal.

13    Generate relies on the affidavit of Nicholas Dale sworn on 14 September 2023 in support of the orders it proposes. Mr Dale deposes that Generate has incurred costs and disbursements totalling $110,058.61 excluding GST in connection with NSD196/2023 and NSD1124/2022. Of that sum, should Generate’s additional costs applications succeed, Mr Dale expects that Generate would be entitled to recover $95,880.49 excluding GST. Some of the costs incurred by Generate are said to relate to work that cannot be separately itemised between NSD196/2023 and NSD1124/2022 including preparing for jointly held case management hearings and instructing counsel.

The six original defendants’ position

14    The orders sought by Generate set out in [9] above are opposed by the six original defendants. Submissions opposing Generate’s additional costs applications were filed by Mr Drew, Sint Pty Ltd and Sint Group Pty Ltd (the Sint parties). The other relevant defendants did not file submissions, but Mr Kabilafkas who appears for those parties indicated at the case management hearing of 24 August that his clients “are in furious agreement” with the Sint parties’ opposition to Generate’s applications. Accordingly, I take them to adopt the submissions advanced by the Sint parties.

15    The Sint parties submit that Generate ought to pay its own costs of appearing in NSD196/2023. The Sint parties stress that it is “extraordinary and exceptional” for costs to be ordered in favour of a non-party against a party, citing Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; 48 ACSR 681 at [20] and they reiterate that in fact neither Generate nor the six original defendants were parties to proceeding NSD196/2023, rendering any order in favour of Generate “even more extraordinary and exceptional”: Aspirio Pty Ltd (in liquidation) [2022] NSWSC 579 at [17] and [19]. The Sint parties also submit that the additional costs orders sought by Generate are inappropriate because the Sint parties have already been the subject of an adverse costs order, paying the plaintiffs in NSD196/2023 the costs incurred as a result of their intervention in that proceeding, and Generate claims costs for the same interest. Contrary to Generate’s claims that its intervention was necessary and valuable to the resolution of proceeding NSD196/2023, the Sint parties submit that the plaintiffs’ application in that proceeding was straightforward, and the point raised by Generate concerning s 1322(4)(a) of the Corporations Act did not in fact arise.

16    If the Court were minded to make additional costs orders in Generate’s favour, the Sint parties submit that a lump sum costs order should not be made and the costs should not be made payable forthwith. The Sint parties note that evidence and submissions for each of NSD196/2023 and NSD1124/2022 were prepared and filed separately and the hearing of the applications in both proceedings on 30 May 2023 was consecutive rather than concurrent. Further, under r 40.13 of the Federal Court Rules 2011 (Cth), if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceedings are finished. The Sint parties submit that the party who seeks an order that the Court depart from that general rule bears the onus of establishing that there is a good reason to do so, and that Generate has not discharged that onus: Wilson v Britten-Jones (No 3) [2021] FCA 63 at [8]; Karpik v Carnival plc [2021] FCA 1290 at [3].

17    The Sint parties rely on an affidavit of Howard Howard sworn on 5 October 2023 to resist Generate’s applications for additional costs orders. Mr Howard deposes that Mr Dale’s affidavit lacks analysis of how Mr Dale came to his final figure and Mr Howard expresses his belief that the amount claimed by Generate includes costs which do not properly fall within the costs orders made or sought and have been improperly calculated. For example, Mr Howard notes that several of the items claimed as part of Generate’s solicitors’ costs include work that is apparently unrelated to the summary dismissal applications in NSD1124/2022 or the plaintiffs’ application in NSD196/2023 including, for example, letters sent and discussion with counsel relating to the joinder of Ms Drew and Secom and concerning Generate’s statement of claim in NSD1124/2022. The Sint parties therefore submit that the evidence is inadequate and fails to establish an entitlement to the costs claimed.

Disposition

18    The award of costs is discretionary: s 43 of the Federal Court of Australia Act 1976 (Cth). Although the Court’s discretion is broad, it must be exercised judicially: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [65]; Northern Territory v Sangare [2019] HCA 25; 265 CLR 164 at [24].

19    I am not satisfied that Generate’s additional costs applications should be granted. The six original defendants have already been ordered to pay the plaintiffs’ costs of proceeding NSD196/2023 resulting from their intervention. I am not satisfied that it is in the interests of justice for the six original defendants to in effect pay for their intervention a second time by paying Generate’s costs in circumstances where Generate was not a party to that proceeding. I accept the Sint parties’ submission that to order a non-party to pay another non-party’s costs would be exceptional and it is not clear that such a course is merited in this case.

20    I do accept Generate’s submission that there was a close relationship between the plaintiffs’ application in proceeding NSD196/2023 and the six original defendants’ summary dismissal applications in NSD1124/2022. However, this is not a case where the two proceedings were so intermingled that the costs of them are indistinguishable given that evidence and submissions were filed separately in each case.

21    Generate’s decision to intervene in proceeding NSD196/2023 may have been a prudent one for the protection and advancement of Generate’s legitimate interests, but it cannot be said, in the result, to have been a necessary one for the just disposition of the plaintiffs’ application. The liquidator was capably represented and Generate’s application raising an alternative ground supporting the plaintiffs’ application under s 1322(4)(a) of the Corporations Act was not required to be dealt with, and it was doubtful whether such an application could have been properly made in any event given that Generate did not also apply to intervene as a party.

22    Even if I had been minded to order that the six original defendants pay Generate’s costs of appearing and being heard in proceeding NSD196/2023, I would not have made those costs payable forthwith. Generate has not demonstrated cogent or persuasive reasons why the usual course established by r 40.13 should not be followed. Proceeding NSD1124/2022 is ongoing and there is nothing exceptional about the interlocutory applications for summary dismissal or the circumstances of the case that would justify Generate’s costs being paid immediately, particularly in the absence of any suggestion that Generate would be unable to continue to prosecute its case or suffer significant prejudice if such an order were not made.

23    Generate’s additional costs applications should therefore be dismissed. By those applications, Generate has put other parties to unnecessary costs. Following the usual rule, Generate should pay the costs of its unsuccessful applications. In addition, the Court wishes to discourage additional applications dealing with supplementary issues about costs that have otherwise been resolved on a basis that is not obviously unfair or unreasonable.

Associate:

Dated:    3 November 2023

SCHEDULE OF PARTIES