Scott v Kennedy

The relevant background in this matter is set out in my reasons given on 23 April 2025 in Scott v Kennedy [2025] NSWSC 386, which I need not repeat in any detail.

In short, while once united, the first and second plaintiffs have gone their separate ways. By one means or another, the second plaintiff and the defendants have been seeking to bring the proceedings between them to an end. That has been pursued with haste and vigour for reasons I do not understand. It is evident that this litigation is bitterly fought.

By email dated 14 May 2025, the solicitors for the second plaintiff (under administration) wrote to my Associate asking that, with the consent of the defendants, I make orders dated 13 May 2025 in chambers, by which the proceedings by the second plaintiff against the defendants are dismissed with costs. I declined to make those orders in chambers because it was obvious that the first plaintiff would likely wish to be heard, and would be entitled to be heard, about whether the Court should make those orders.

On 22 May 2025, the first plaintiff filed a notice of motion seeking orders as follows:

On 23 May 2025 when the matter came before me, the respective Counsel for the second plaintiff and the defendants confirmed that there is an agreement between them in relation to the proceedings and joined in asking the Court to make orders dismissing those proceedings with costs. Pursuant to UCPR r 36.1A. The first plaintiff contended I should not make those orders, at least not at this time.

It seems on the evidence that there is a continuing debate about whether an agreement between the second plaintiff and the defendants was struck at some earlier time. It was always problematic for the Court to conclude that there was an agreement so long as the second plaintiff, although a party to the proceedings, did not appear and submit that there is an agreement, and there was otherwise underwhelming evidence to prove the agreement. That has now changed because the second plaintiff, through Senior Counsel, now appears and seeks the orders. Any debate about exactly when any agreement was struck is arid.

Where parties join in proposing orders to dismiss proceedings between them, those orders should generally be made unless there is good reason to decline to do so.

The first plaintiff submitted that the Court should decline to make the orders, essentially for two reasons.

The first reason is that the order would cause him prejudice in relation to security for costs that had been given by the second plaintiff but which he had funded. That explains why his notice of motion seeks an order that the $145,000 paid into Court as security for the defendants’ costs by the first plaintiff be transferred back to him. The question about costs has complications, and the defendants, understandably, were not ready to deal with prayer 2 of the first plaintiff’s notice of motion on 23 May 2025. Senior Counsel for the defendants offered an undertaking to the effect that the defendants will not seek a release of the money from Court unless and until prayer 2 of this notice of motion is determined, except with leave of the Court.

I do not propose to deal now with prayer 2 of the first plaintiff’s notice of motion. That open application, together with the undertaking proffered by Senior Counsel for the defendants, provides protection to the first plaintiff in respect of any prejudice in relation to the security for costs that might be occasioned by the dismissal of these proceedings as between the second plaintiff and the defendants. The first plaintiff will have the opportunity to seek to make whatever proper application he has in respect of those costs. I observe that it is desirable that any outstanding issues in respect of those costs be addressed in an orderly way now, rather than being deferred indefinitely. The parties should confer about the most efficient way to deal with that issue.

The second reason advanced by the first plaintiff as to why the Court should defer making the orders dismissing the proceedings, is that such orders will interfere with proceedings that he has commenced in the Federal Court and comity demands that this Court refrains from making the orders. I accept of course, that as a matter of policy, this Court should not take steps to interfere with or undermine the processes of the Federal Court: see Wigmans v AMP Ltd [2018] NSWSC1118 at [18]. The asserted interference is with the Federal Court proceedings lodged by the first plaintiff in that Court on 22 May 2025. By those proceedings, the first plaintiff sues the second plaintiff and the administrators of that company. He seeks to set aside a deed of company arrangement made on 13 May 2025 (DOCA). The DOCA includes as a condition precedent that there is an order that the proceedings in this Court brought by the second plaintiff against the defendants be dismissed with costs. The submission made for the first plaintiff is that this Court is being conscripted into the manoeuvrings of the defendants and that this will interfere with the proceedings before the Federal Court. It was submitted that the proceedings in this Court should be permitted to continue “just for a little bit longer”.

I do not accept the submission that this Court is being conscripted. I cannot see how orders that I am being asked to make will interfere with proceedings in the Federal Court. The evidence before me is that the administrators of the second plaintiff have the benefit of advice from Mr Barnett of Senior Counsel and, based on that advice, consider it to be imprudent to continue with the company’s claims in this Court. As the controllers of the second plaintiff, they wish to bring the proceedings to an end. They should be free to do that unless there is good reason to prevent it.

An order dismissing the proceedings with costs may render the DOCA unconditional, but that would still leave the first plaintiff with the claim it has launched in the Federal Court seeking an order that the DOCA be set aside. Any steps taken pursuant to the DOCA, pending the determination of those proceedings, will be taken under the threat of those proceedings. It does not seem to me that this Court is being conscripted merely because the DOCA includes as a condition precedent that orders are made by this Court. It was suggested for the first plaintiff that if I make the orders “that will somehow seek to be pleaded in a bar against” the first plaintiff in the Federal Court. I do not understand how the first plaintiff could be barred from the relief it seeks by the orders I am asked to make.

I do not accept that there is some demand of public interest that speaks against the making of the orders. That is because I do not accept that orders dismissing these proceedings interferes with the proceedings before the Federal Court. Nor is the commencement of those proceedings a material change of circumstances since the parties agreed to the judgment terms. So far as I am concerned, the agreement was confirmed when the parties came before me last Friday afternoon.

Given that the persons controlling the second plaintiff consider it to be imprudent to continue with the company’s claims, I do not think that it is appropriate that these proceedings be continued until some indefinite time when the Federal Court proceedings are finalised.

The first plaintiff submitted that if I was minded to make orders dismissing these proceedings, I should stay any such order for a short time to enable the first plaintiff to seek interim relief in respect of the implementation of the DOCA in the Federal Court. The second plaintiff opposed that fallback application. The prejudice it pointed to is a delay in the payment of a cash contribution under the DOCA.

In my view, it is appropriate to accede to the first plaintiff’s application for a short stay. Now that the first plaintiff has commenced proceedings concerning the DOCA in the Federal Court, that Court is the proper place for any application for any interim relief concerning the DOCA. Against the possibility that orders in this Court will interfere in any way with those proceedings, I do not consider that a short delay will occasion untoward prejudice to the second plaintiff or the defendants. If there is some lack of comity of which I am not conscious, this will alleviate it.

There is a simple way to achieve this end. I propose to make orders, by consent, dismissing the proceedings as between the second plaintiff and the defendants with costs. I will have those orders entered and, thus made formally, on Thursday 5 June 2025.

I move now to deal with the question of costs on the first plaintiff’s notice of motion dated 2 April 2025. The hearing on 23 May 2025 was scheduled to deal with that question. The parties have made short written submissions and Junior Counsel for the defendants has made some brief oral submissions.

The first plaintiff was successful in that application. It was opposed by the defendants. Costs should follow the event unless there is reason to order otherwise in the exercise of the Court’s discretion: see UCPR r 42.1.

The defendants contended that there should be no order as to costs, or the first plaintiff’s costs should be costs in the cause. They propounded three reasons.

The first was that they did not act unreasonably in assuming the role of contradictor. I do not accept that is a good reason to depart from the usual order, because they adopted the role of contradictor because it was in their interest to do so.

The second reason was that the first plaintiff’s legitimate interest in forcing the second plaintiff to remain a party was a narrow one. This might be true, but it was still a legitimate one.

The third reason was that the first plaintiff’s motion arose while the defendant’s application to dismiss his claims on a summary basis was pending. I do not see why that should deprive the first plaintiff of costs on a discrete motion that was fought and lost by the defendants.

Nor do I consider that the orders that I propose to make dismissing the proceedings with costs means that the relevant “event” is the dismissal or the end of those proceedings, rather than the outcome of the notice of motion dated 2 April 2025.

In my view, there is no good reason to depart from the usual position. The defendants are to pay the first plaintiff’s costs of the notice of motion.

As to the costs of the notice of motion filed on 22 May 2025, that motion remains open because prayer 2 has not been addressed. While it is true that the defendants and second plaintiff have been substantially successful in relation to that application, I propose to reserve the costs of that notice of motion until it is finally determined.