Over Fifty Mutual Friendly Society Ltd & Anor v Smithies & Ors

The judgment delivered on 2 April 2007 [2007] NSWSC 291 reserved costs for argument. The second and third defendants have contended that the plaintiffs ought to pay their costs of the proceedings on an indemnity basis and that the proceedings should be dismissed. The principles

It is trite that a departure from the settled practice of ordering costs on a party and party basis requires the need for a sufficient special or unusual feature. In that regard the categories for the award of indemnity costs are not rigid as was made plain by Davies J in Ragata Developments Pty Ltd v Westpac Banking Corporation [unreported, Federal Court of Australia, Davies J, 5 March 1993]. There his Honour reiterated that each case must be considered on its own facts, having regard to the general principle that the usual award of party/party costs to the successful party should be made unless there are special circumstances to justify the making of a different order.

The many authorities to which reference may be made include those identified by Sheppard J in Colgate Palmolive Co & Anor v Cussons Pty Ltd [1993] 118 ALR 248: referred to with approval by Giles JA [with whom Handley and Fitzgerald JJ agreed] in Harrison v Schipp [2001] NSWCA 13 at [139]. Dealing with the issue

Notwithstanding the care with which the Court approaches any application for indemnity costs there are cases which justify such an order. The present is such a case. The reason for the making of such an order presently is that the interlocutory application was brought in circumstances in which if properly advised, the plaintiffs should have known that they had no chance of success: cf Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 at 401; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [52].

As counsel for the second and third defendant has contended the following particular matters justified the holding that there was no substance in any parameter of the case put forward by the plaintiffs: i. The plaintiffs lead no evidence that they were even recognised financial institutions: reasons at [21-24]. ii. The plaintiffs did not even address the relevant question of whether the arrangement as found by the adjudicator was included in or incorporated into the loan agreement: reasons at [26]. iii. On no conceivable view did the arrangement found by the adjudicator form part of the finance instruments: reasons at [27]. iv. It was plain that the adjudicator did bona fide attempt to address the requirements of the Act and the plaintiffs did not demonstrate a seriously arguable denial of natural justice: reasons at [34], [37]. Indeed in respect of the larger adjudication, the plaintiffs’ Senior Counsel, quite properly, conceded that he could not submit otherwise: reasons at [49]. v. The plaintiffs attempt to “outflank” and “undermine” the scheme of the Act involved a “fundamental misconception”: reasons at [2], [39], [53]. vi. On the balance of convenience, the plaintiffs “failed dismally”: reasons at [40], [43], [54]. vii. The plaintiffs had entirely misconceived the proper approach to the onus of proof as to any suggested impecuniosity: reasons at [44]. viii. The plaintiffs’ submission was “woefully misconceived”: reasons at [48].

These matters together amount to a special or unusual feature in the case where the plaintiffs persisted in what should, on proper consideration, have been seen to be a hopeless case: cf French J in J Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers-Western Australian Branch [unreported, Federal Court of Australia, French J, 19 February 1993] at [5]. In the circumstances this constituted a form of relevant delinquency: the bringing of the subject interlocutory application, a form of conduct which was plainly unreasonable: Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [No 2] [1999] NSWCA 133 cited with approval in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 at [108] – [119] and in Sydney City Council v Geftlick [2006] NSWCA 280 at [90].

In consequence the principled exercise of the discretion is to order that the plaintiffs pay the costs of the second and third defendant on an indemnity basis. The way forward

The remaining issue concerns the fate of the proceedings.

The plaintiffs have contended for an entitlement to effectively replead in order to litigate ultimate liability. This is their entitlement. Orders

The Court orders as follows: i. The plaintiffs are to pay the costs of the second and third defendants on an indemnity basis. ii. The proceedings be stood over to the Technology and Construction List Judge’s directions list on Friday 27 April 2007.