Redmond Family Holdings v GC Access Pty Ltd & Ors

1. [1]

   These proceedings have a difficult history, having taken a substantial time to reach hearing, then having been heard before me on four days on 6–8 and 27 April 2016. I delivered judgment on 16 June 2016 ([2016] NSWSC 796) (“Judgment”) and observed (at [168]–[169) that:

2. [2]

   I directed the parties to bring in Short Minutes of Order to give effect to the judgment and as to costs within 14 days and, if there was no agreement between them, indicated that I would allow an opportunity to be heard in that respect. I summarised the events which followed in a further judgment delivered on 10 November 2016 ([2016] NSWSC 1588) (“November judgment”) in which I made orders, on terms, permitting the Fifth Defendant, Mr Skinner, leave to reopen his case to put further submissions limited to the question of apportionment of liability as between the Defendants, and to file a Second Further Amended Defence to the Amended Statement of Claim, replacing the proportionate liability defence based on Pt 4 of the Civil Liability Act 2002 (NSW) in paragraph 38 of the earlier Further Amended Defence with a proportionate liability defence based on ss 1041L–1041N of the Corporations Act 2001 (Cth).

3. [3]

   It now remains to deal with the questions of orders, apportionment and costs which remain in dispute between the parties.

Orders and costs as against the First–Third Defendants

1. [4]

   The proceedings are stayed as against the First Defendant, GC Access Pty Limited (“GCA”) which entered voluntary administration on 7 April 2014 and ultimately passed into liquidation in July 2015, and there should be no orders as against it.

2. [5]

   The Plaintiff submits that, as against the Second Defendant (“Fullham”) and the Third Defendant (“H Ridge”), which are companies controlled by the Fourth and Fifth Defendants, Messrs Stone and Skinner, the proceedings should be dismissed and there should be no order as to costs. I held, in Judgment [147], that the claim made against H Ridge in respect of the Martin Place meeting (ASC [33]) failed, because there was no reason to attribute the representations made by Mr Stone at that meeting to H Ridge rather than GCA or Mr Stone. The claim based on the representations alleged to have been made by Fullham by the 23 December 2010 email (ASC [41]) also failed, also because there was no reason to attribute the representation made in that email to Fullham rather than GCA or Mr Stone. In paragraph 169 of the Judgment, I had expressed the tentative view that the Plaintiff should be ordered to pay the costs of the parties against which it failed. Fullham and H Ridge were sometimes represented by solicitors and sometimes by Messrs Stone and Skinner prior to the hearing, and shared common representation with Messrs Stone and Skinner at the hearing. An order for costs should be made in their favour where the Plaintiff failed in its case against them.

Substantive orders as against the Fourth–Fifth Defendants

1. [6]

   The Plaintiff proposes that orders be made against the Fourth Defendant, Mr Stone, and the Fifth Defendant, Mr Skinner, which provide for judgment for the Plaintiff in the amount of $900,000, interest on specified amounts and an order that Messrs Stone and Skinner pay 50% of the Plaintiff’s costs of and incidental to the proceedings on an ordinary basis.

2. [7]

   The first question raised by these orders is the substantive orders that should be made. Mr Stone did not seek to be heard in respect of those orders. Mr Skinner raised questions of apportionment, to which I referred above, in respect of the substantive orders against him. The Plaintiff, and Mr Skinner, previously made detailed submissions as to apportionment in respect of the application to reopen, which was determined by the November judgment. Mr Skinner confirmed, prior to that judgment, that he would not seek to make further submissions if leave to reopen was granted, beyond those he had previously made in respect of that application. The Plaintiff advised, by email from his solicitor dated 18 November 2016, that it also did not seek to make further submissions in that respect. The Second–Fourth and Sixth Defendants also did not seek to make further submissions in that respect. Where Mr Skinner was content to rely on his written submissions and had indicated he only needed to be heard, at any oral hearing, in response to Mr Stone or any oral submissions of the Plaintiff, and Mr Stone and the Plaintiff do not seek to make further submissions, there is also no need for a further oral hearing of the matter.

3. [8]

   Mr Skinner submits that an apportionment of liability should be ordered between Messrs Stone and Skinner, such that complete liability should be borne by Mr Stone or such other apportionment as determined by the Court should be made. Mr Skinner submits that, on the findings I had made in the Judgment, it was not possible to establish that Mr Skinner had liability under an omission case, even if that case was open to the Plaintiff. I found to the contrary in the Judgment, and I rejected Mr Skinner’s application to reopen in that respect in the November judgment. Alternatively, Mr Skinner submits that the effect of an apportionment of liability should be that Mr Stone is held wholly liable for the relevant damages. As I noted above, I granted leave to Mr Skinner to reopen on that question by the November judgment, and Mr Skinner also amended that claim, by leave, to refer to the relevant provisions in the Corporations Act 2001 (Cth).

4. [9]

   Mr Loofs, who appears for Mr Skinner, submits, and I accept, that the proportionate liability provisions in Part 7.10 Div 2A of the Corporations Act apply to a claim under s 1041I of the Corporations Act for damages for economic loss caused by conduct done in contravention of s 1041H of the Corporations Act. Mr Loofs submits, and I also accept, that Messrs Stone and Skinner were “concurrent wrongdoers” for the purposes of s 1041L(3) of the Corporations Act, so far as they were persons whose acts or omissions caused, in this case independently of each other, the damage or loss that is the subject of the claim. Mr Loofs submits that Mr Skinner’s conduct was neither intentional or fraudulent so as to attract the operation of the disentitling provision in s 1041M of the Corporations Act and the contrary was not put by Mr Bennett, who appears for the Plaintiff or Mr LePlastrier who appears for Mr Stone.

5. [10]

   Section 1041N(1) of the Corporations Act in turn provides that:

6. [11]

   In Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1468 at [94], Palmer J noted that the corresponding provisions of Pt IV of the Civil Liability Act 2002 (NSW) are intended to visit on each concurrent wrongdoer that amount of liability which the Court considers “just”, having regard to the comparative responsibilities of all wrongdoers for the plaintiff’s loss. The scope of the corresponding provisions in the Civil Liability Act was also considered by the High Court of Australia in Hunt & Hunt Lawyers v Mitchell Morgan Nominees [2013] HCA 10; (2013) 247 CLR 613, where the majority noted (at [16]) that:

7. [12]

   In determining what is just for the purposes of these provisions, the court will also have regard to the relative causal potency of the conduct of each party: Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529; 59 ALJR 492; Nationwide News Pty Ltd v Naidu [2007] NSWCA 377; (2007) 71 NSWLR 471 at [278]; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [60]; Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 at [257].

8. [13]

   I had found, at Judgment [162], that the parties’ initial arrangement contemplated that Holdings would acquire a specified proportion of the shares of GCA and Global Connect Services Pty Ltd (“GCS”), being 28% of those shares; that the Plaintiff (by Mr Redmond) was content to provide a further amount of $400,000 for a 51% shareholding; and that Mr Redmond was not told of the terms on which Messrs Stone and Skinner or their associated entities could bring about the conversion of their loans to equity. I then referred to the Defendants’ submissions in response to the non-disclosure case and observed (at Judgment [163]–[164]) that:

9. [14]

   I then noted a question as to the form of the pleading in paragraph 52 of the Amended Statement of Claim, and, in finding Mr Skinner liable for misleading conduct in respect of the non-disclosure of the conversion rights under the first loan agreements, I observed (at Judgment [165]) that:

10. [15]

    Mr Loofs now submits that it was not alleged that Mr Skinner was involved in, or had otherwise been aware of, the fact that relevant representations had been made by Mr Stone and that there was no evidence that “implicates” Mr Skinner in the making of those representations. Mr Loofs also points to the Court’s finding in respect of Mr Stone at Judgment [164], which I have quoted above, and submits that:

11. [16]

    The Plaintiff points to several matters that, it submits, tend against an apportionment of liability to the exclusion of, or to a reduced extent to, Mr Skinner, including the Court’s reasoning at Judgment [165] which I have also quoted above. Mr Bennett also submits that Mr Skinner stood to benefit from the conversion right alleged to have been connected to the loans by H Ridge; he was closely involved in the steps that led to the Plaintiff’s investment in GCA, including sending an email dated 14 December 2010 to Mr Redmond that was a significant step in the Plaintiff’s assessment of GCA; he attended meetings to advance those investments on 17 December 2010 and 21 December 2010; he had received an email dated 22 December 2010 which made clear that the Plaintiff’s initial investment of $500,000 was made to acquire a specified shareholding level, which would be diluted if the conversion right existed and was exercised (Judgment [18]); he took steps to facilitate the Plaintiff’s investment, so far as H Ridge transferred shares as a step in the Plaintiff’s initial investment (Judgment [19]); and he took steps to implement the conversion of H Ridge’s and Fullham’s loans to shares at a directors’ meeting on 3 May 2011, bringing about the dilution of the Plaintiff’s investment in GCA (Judgment [27]). Mr Bennett also refers to the cross-examination of Mr Skinner (T232–233), in which he acknowledged that he knew that the Plaintiff’s shareholding was to increase from 28% to 51% on the basis of its further investment of $400,000 into GCA; that he also knew that it was critical to the Plaintiff, and its principal Mr Redmond, that it acquire a 51% shareholding and control for its further investment of $400,000; and that he had not taken steps to make Mr Redmond or his advisers aware of the right of conversion which was alleged to be attached to the loan agreements between GCA on the one hand and Fullham and H Ridge on the other.

12. [17]

    Mr Bennett submits, importantly, that the nature of the non-disclosure of the right of conversion that was alleged to attach to the loan agreements was such that either Mr Skinner or Mr Stone could have avoided that non-disclosure and avoided the Plaintiff’s loss by simply informing Mr Redmond of the fact of the loan arrangements and the right of conversion; that the fact that the fault is with one of them does not mean it cannot also be with the other; and that that fault is “entirely with both of them”. Mr Bennett in turn submits, and I accept, that:

13. [18]

    Mr Loofs submits, in reply, that it is uncontroversial that it was Mr Stone who made the representations that did not disclose the conversion rights. I held, in the Judgment, that Mr Stone did not disclose the conversion rights, in circumstances where that non-disclosure was misleading and deceptive. However, Mr Skinner equally did not disclose the conversion rights, in circumstances where the non-disclosure on his part was equally misleading and deceptive, and also causative of the Plaintiff’s loss. Mr Loofs also submits that Mr Skinner was justified in relying upon Mr Stone in some aspects of the matter and the failure of disclosure on Mr Stone’s part was in fact misleading and deceptive and in fact causative of the Plaintiff’s loss. Mr Loofs also submits that the Plaintiff’s submission that either Mr Stone or Mr Skinner could have remedied the problem by informing Mr Redmond of what they (individually) knew applied with force to Mr Stone. I accept that submission, but that proposition applies as much to Mr Skinner as it applies to Mr Stone.

14. [19]

    To recapitulate several matters that I had noted in the Judgment and the November judgment, Mr Skinner knew of the conversion rights in the first loan agreements; those rights were plainly material to whether the Plaintiff would acquire the percentage of shares in the companies for which it had bargained; and Mr Skinner did not disclose the first loan agreements or the conversion rights to the Plaintiff, or its representatives, during his several dealings with the Plaintiff and its representatives in respect of the Plaintiff’s investment in GCA and GCS. I recognise that Mr Skinner had said, in cross-examination, that he did not know either whether a version of the loan agreement that did not include the conversion right was provided to Mr Redmond in November 2011, or whether a version of the loan agreement that provided for converting the loan to capital was first provided to Mr Redmond in January 2012. However, it seems to me that the consequence of the findings in the Judgment, and Mr Skinner’s cross-examination, is that Mr Skinner knew, relevantly, that there had been a non-disclosure by him in his dealings with the Plaintiff and its representatives, just as Mr Stone knew that there had been a non-disclosure by Mr Stone in Mr Stone’s dealings with the Plaintiff and its representatives, irrespective of whether either of them knew what the other of them may have conveyed to the Plaintiff.

15. [20]

    It seems to me that it is just and equitable, and consistent with the legislative policy reflected in these provisions, to make an order for apportionment of liability as between Messrs Stone and Skinner in this case, where each of them would otherwise bear the risk of being held liable for the entire liability, including on the insolvency of the other. It does not seem to me that, for the purposes of s 1041N of the Corporations Act, it would be just and equitable, having regard to Messrs Skinner’s and Stone’s common responsibility for the Plaintiff’s loss, to apportion a lesser share of that liability to Mr Skinner than to Mr Stone, where each of them could, by disclosure, have avoided the Plaintiff’s exposure to that loss. Accordingly, the damages awarded to the Plaintiff should be apportioned equally as between Mr Stone and Mr Skinner.

16. [21]

    I should note, for completeness, that Mr Bennett also submitted that the Plaintiff’s claim had been brought under the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 (Cth), and that Part 7.10 Div 2A of the Corporations Act would not entirely address Mr Skinner’s liability. It was unclear whether Mr Bennett was contending that that submission would have any impact on the ultimate result. I would not accept that the submission had such an impact, since apportionment provisions exist, in broadly similar terms, in respect of each of those regimes.

17. [22]

    A further issue arose so far as the Plaintiff sought interest on the amount of $400,000 (which will be attributed equally to Messrs Stone and Skinner as noted above) from 16 November 2011. I had observed in Judgment [40] that:

Costs orders as against the Fourth–Fifth Defendants

1. [23]

   I now address the costs orders that should be made, as between the Plaintiff and the Fourth and Fifth Defendants. The Plaintiff submits that a discount of 50% of the costs in favour of Messrs Stone and Skinner reflects the fact that the Plaintiff was successful in respect of its non-disclosure case in relation to loans owed by GCA but unsuccessful in relation to other pleaded representations.

2. [24]

   I summarised the relevant principles as to the circumstances in which the Court will differentiate between the issues on which a party was successful and those on which it failed in paragraph 169 of the Judgment, and the Second–Fourth and Sixth Defendants adopt that summary and support the preliminary view expressed in the Judgment, as set out above. They submit that the Plaintiff succeeded in respect of only two of the ten allegations made against Mr Stone. It does not seem to me that a counting of the number of the allegations in this manner is particularly illuminating. However, the Second–Fourth and Sixth Defendants are correct in observing that there was a substantial focus, both in the pleadings, the evidence and at the hearing on misleading or deceptive conduct alleged to have arisen from the provision of financial projections and a presentation to the Plaintiff, which was ultimately not established. The Second–Fourth and Sixth Defendants submit, and I accept, that substantial efforts in preparing and conducting the hearing would have been devoted to the allegations on which the Plaintiff was unsuccessful. The Second–Fourth and Sixth Defendants submit that the appropriate order is that the Plaintiff pay Mr Stone’s costs so far as they relate to those eight unsuccessful allegations; they may implicitly accept, although they do not say, that Mr Stone should pay the Plaintiff’s costs in respect of the case on which the Plaintiff succeeded. It does not seem to me that that approach is justified, where the Plaintiff was ultimately successful in respect of a substantial money judgment in the proceedings.

3. [25]

   Against the contingency that orders would be made against Mr Skinner in respect of liability (as they will be, reflecting the result in the Judgment), Mr Loofs submits that any costs orders that are made against Mr Skinner should reflect the measure of success he had in defending what Mr Loofs describes as the “pleaded case” against him. Mr Loofs submits that the adverse findings against Mr Skinner relate to a “particularly narrow issue” and that it would not be appropriate to award the Plaintiff its entire costs in relation to the claim it brought against Mr Skinner. I accept that the Plaintiff’s successful case against Mr Skinner related to one issue, although that issue was an important issue at the hearing, and I also accept (as does the Plaintiff) that it would not be appropriate to award the Plaintiff its entire costs in relation to its claims against Mr Skinner.

4. [26]

   Mr Loofs submits that the amount of costs ordered against Mr Skinner should be no more than the proportion of costs which reflects his proportionate responsibility for causing the Plaintiff’s loss. I do not accept that submission, where the substantial judgment that the Plaintiff has achieved against Mr Skinner, even after the application of the apportionment regime, supports an order for costs in its favour. Mr Loofs submits that that amount should then be reduced by a further 50% to reflect the measure of success Mr Skinner has had in relation to the various claims brought against him by the Plaintiff. I so consider that the costs that should be awarded against Mr Skinner should be reduced in the manner noted below.

5. [27]

   I accept that an order for costs should be made in favour of the Plaintiff and against Messrs Stone and Skinner, where the Plaintiff has been successful against them, and that success has resulted in a significant monetary judgment in its favour. The question is the extent to which that order should be reduced, by reference to the fact that the Plaintiff pursued other claims, in the circumstances to which I referred in the Judgment, which not only did not succeed, but it would have been apparent could not succeed, had adequate instructions been taken from Mr Redmond in relation to his lack of reliance on important pleaded representations prior to the commencement of the proceedings. Those allegations took up a substantial period of time at the hearing, and undoubtedly increased the costs of the proceedings for all parties. The question of the extent of such a reduction is ultimately a matter of impression. The making of no order as to costs as against Messrs Stone and Skinner would not adequately reflect the Plaintiff’s success in the proceedings; the reduction of 50% for which the Plaintiff contends does not seem to me adequately to reflect the extent of time wasted, and costs incurred, in dealing with claims as to pleaded representations that did not and could not succeed; and it seems to me that the proper result will be an order that the Fourth and Fifth Defendants pay one-third of the Plaintiff’s costs of the proceedings as agreed or as assessed.

Orders as against the Sixth Defendant

1. [28]

   The Plaintiff accepts that, as against the Sixth Defendant, Mr Collins, the proceedings should be dismissed and the Plaintiff should pay Mr Collins’ costs of and incidental to the hearing in April 2016 on the ordinary basis as agreed or as assessed. That order as to costs reflects the fact that Mr Collins had only participated in the hearing and not at earlier stages of the proceedings. The order for costs in favour of Mr Collins is consistent with the preliminary view that I expressed in paragraph 169 of the Judgment.

Previous costs orders

1. [29]

   The Plaintiff submits, and I accept, that previous costs orders in the proceedings should remain, since nothing in this judgment affects those orders, which reflected matters arising from the prior conduct of the proceedings.

Orders

1. [30]

   Accordingly, I make the following orders: