Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd (Costs)

On 7 May 2024, I delivered judgment in this matter: Macarthur Farm Pty Ltd (Receivers and Managers Appointed) v Warneet Super Pty Ltd [2024] NSWSC 535. Definitions in that judgment are used here.

The Plaintiffs failed. I provisionally ordered that they pay the Defendants’ costs of the proceedings. That order was to solidify unless, within seven days of delivery of that judgment, any party to it notified, in writing, myself and the opposing parties that some other order is sought.

On 14 May 2024, I received an email from the Defendants’ solicitors containing the following submission in relation to costs (citations omitted):

In the circumstances, the provisional costs order did not take effect. This judgment deals with costs. I gave directions for written submissions and I received submissions from both sides.

Clauses 11.1(c) and (d) of the Agreement provide:

Clauses 9.1(a), (b) and (g) of the Mortgage provide:

Clause 5.1(a) of the Deed of Appointment and Indemnity provides:

By Uniform Civil Procedure Rules 2005 (NSW) r 42.1, costs are to follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. The Defendants had a comprehensive victory and are entitled to their costs. The only question is whether those costs should be on the indemnity basis.

The Defendants argue that the contractual provisions recited above entitle them to an order that their costs be on the indemnity basis. In their principal submissions on costs they did not contend for such an order on any other basis.

They cited, in support of their contention, my decision in International Skin Care Suppliers Pty Ltd v Commonwealth Bank of Australia (No 2) [2013] NSWSC 1768 (International Skin) at [9]-[10]. There, a guarantee and indemnity upon which a bank had sued contained provisions that guarantors must pay the costs incurred by the bank on default or in connection with the exercise of the bank’s rights under the guarantee and indemnity. A further provision provided that the costs in connection with legal advisors were to be on the full indemnity basis or solicitor and own client basis, whichever is higher. I concluded that there was no reason why effect should not be given to these contractual arrangements, and that the bank was entitled to the costs of its claim and defences against the guarantors on the indemnity basis.

The contractual provisions here, in particular, cl 11.1 of the Agreement and cl 5.1(a) of the Deed of Appointment and Indemnity, are distinguishable from the provisions in International Skin, in that, cl 11.1 provides for indemnity costs “without the necessity for any taxation or assessment” and cl 5.1(a) of the Deed of Appointment and Indemnity incorporates a requirement of reasonableness. Nevertheless, the Plaintiffs concede that an indemnity costs order is justified against the First Plaintiff on the basis of the contractual arrangements, and I will accordingly so order.

I observe that, whilst contractually the First Defendant is entitled to indemnity costs without necessity for any taxation or assessment, under the orders which I shall make, taxation or assessment (or agreement) is required. If the First Defendant wishes to stand on its right under cl 11.1 not to tax or assess, it will have to enforce that right separately.

Crown, the Second Plaintiff, opposes an indemnity costs order on the basis that he is not a party to the contractual arrangements which justify an indemnity costs order against the First Plaintiff. I uphold this submission.

In their submissions in reply, the defendants argue, for the first time, that even though Crown is not a party, the First Plaintiff and Crown should be treated as one and he should pay indemnity costs. I reject this submission.

Nothing Crown himself did in the context of the proceedings warrants an order for indemnity costs against him and he has no contractual liability to pay costs, let alone on an indemnity basis.

I make the following orders: