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Dominion Transport Company Ltd, In re [2016] FJHC 84; HBE10.2015 (10 February 2016)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION
AT LAUTOKA

Companies (Winding Up)
No. HBE 10 of 2015

IN THE MATTER of DOMINION TRANSPORT COMPANY LIMITED

AND

IN THE MATTER of THE COMPANIES ACT (CAP 247)

(Ms) Natasha Feroz Khan for the Petitioning Creditor.
Mr. Sushil Chand Sharma for the Respondent Debtor.

Date of Hearing : - 20th October, 2015
Date of Ruling : - 10th February 2016

RULING

(1) The matter before me stems from an application by Counsel for the Petitioning Creditor for costs on an indemnity basis.

(2) The Petitioning Creditor, “On The Go Limited”, filed a Petition on 13th March 2015 to Wind up the Respondent Debtor “Dominion Transport Company Ltd”, pursuant to Section 221 (a) of the Companies Act, 1983, for a debt of $5,828.53.

(3) On 24th June 2015, the Winding up proceedings were concluded since the Respondent Debtor paid the whole amount of $5,828.53. On 07th July 2015, the Petitioning Creditor filed a Notice of Motion with a supporting affidavit seeking indemnity costs.

(4) What is the basis upon which the Petitioning Creditor seeks indemnity costs?

Mr. Heshan Dissanayake, the Group Credit Manager of “On The Go Limited” (Petitioning Creditor) in his Affidavit in Support deposes inter alia: (as far as relevant)

Para 4. On 5 February 2015, On the Go Limited’s solicitors, Haniff

Tuitoga Lawyers issued a Section 221 notice to the Debtor Company, Dominion Transport Company Limited. Annexed hereto and marked “HD 1” is a copy of the Demand Notice. The Demand Notice was served on DTCL on 9 February 2015. Annexe4d hereto and marked “HD 2” is a copy of the affidavit of service.

5. On 25 February 2015, Samusamuvodre Sharma Law (“SS Law) wrote to Haniff Tuitoga seeking a month to pay the outstanding sum of $5,828.53. Annexed hereto and marked “HD 3” is a copy of SS Law’s letter of 25 February 2015.

6. SS Law’s letter of 25 February 2015 was referred to me by Haniff Tuitoga for instructions. I instructed Haniff Tuitoga to accept the proposal by DTCL to pay the outstanding amount in installments.

7. On 26 February 2015, Haniff Tuitoga wrote to SS Law informing that OTGL has accepted DTCL’s proposal to pay off the debt in 2 installments. Haniff Tuitoga also provided SS Law the bank account details of OTGL for the money to be deposited. Annexed hereto and marked “HD 4” is a copy of Haniff Tuitoga’s email of 26 February 2015 to SS Law.

8. The first installment was not received by 27 February 2015. However on 3 March 2015, SS Law wrote to Haniff Tuitoga seeking to pay the “outstanding amount owing to On The Go Limited by the end of business day today or early tomorrow morning”. Annexed hereto and marked “HD 5” is a copy of SS Law’s email of 3 March 2015.

9. On the same day i.e. on 3 March 2015 Haniff Tuitoga replied that “I am sorry but this is simply not good enough. Promises have been made since last Friday for payment of the 50%. We are proceeding.” Annexed hereto and marked “HD 6” is a copy of Haniff Tuitoga’s email of 3 March 2015.

10. Until 9 March 2015, there was still no response from SS Law on paying the installments. On 9 March 2015, I instructed Haniff Tuitoga to commence winding up proceedings against DTCL.

11. On 12 March 2015, Haniff Tuitoga sent the Winding Up Petition to Natasha Khan Associates of Lautoka for filing at the High Court Registry. Annexed hereto and marked “HD 7” is the instructions to Natasha Khan Associates to file the winding up petition.

12. The Winding Up Petition was filed by NKA on 13 March 2015. The Petition was presented on 16 March 2015 and was fixed for hearing on 29 April 2015. On 19 March 2015, Haniff Tuitoga sent my affidavit verifying petition for filing at the Lautoka High Court Registry. Annexed hereto and marked “HD 8” is the instruction sent to NKA to file the affidavit verifying the petition. The affidavit verifying the petition was filed on 20 March 2015.

13. On 9 April 2015, Haniff Tuitoga filed the Affidavit of Advertisement of Setoki Galuvakadua for the publication of Winding Up Petition in the Fiji Times and in the Government of Fiji Gazette. Haniff Tuitoga then filed a Memorandum of Due Compliance on 22 April 2015.

14. On 28 April 2015, Haniff Tuitoga instructed NKA to appear on its behalf on 29 April 2015 and seek a winding up order of DTCL. On 29 April 2015, NKA reported to Haniff Tuitoga that the Winding Up order was not made by the Court because it had an issue with the time within which the affidavit verifying the debt was to be filed. The matter was adjourned to 28 May 2015 for further submissions on this preliminary issue.

15. On 28 May 2015, the matter was adjourned to 5 June 2015 for hearing of the preliminary issue. However on 5 June 2015, DTCL lawyers sought further time to file an affidavit for enlargement of time to oppose the winding up petition. This was an untenable position given that DTCL had admitted the debt and wanted to pay the debt in installments.

16. The matter was then adjourned to 24 June 2015 for hearing. On 24 June 2015, the hearing did not proceed because DTCL undertook to pay the whole amount of $5,828.53 by 2.00pm on 24 June 2015.

17. OTGL has incurred significant legal costs because DTCL and/or its solicitors did not pay the undisputed debt despite given time to do so. If DTCL has paid off OTGL as it promised to do by 25 March 2015, OTGL would not have incurred these costs.

(5) The Respondent Debtor filed an Affidavit in Opposition sworn by Mr Krishneel Kishal Prasad, which is substantially as follows (as far as relevant)

Para 5. THAT saves and except Samusamuvodre Sharma Law wrote to

Hanif Tuitoga Lawyers, the contents of the letter was without prejudice. The respondent company upon receiving the winding up notice proceeded to hiring of chartered accountants to calculate the amount owing to the petitioning company. In order to safeguard the name and reputation of the respondent company instructions were given by the director to write to Hanif Tuitoga Lawyers to withhold the filing of the petition and subsequent advertisement of the winding up until the accounts were audited.

6. THAT paragraphs 5 and 6 are admitted. The respondent company was advised by their accountants that after reconciling the receipts and payments there were no outstanding sum due and owing to the petitioning company as a result the respondent company Dominion Transport Limited instructed Messrs Samusamuvodre Sharma Law to oppose the winding up application. Dominion Transport Limited had voluminous of receipts which would have taken time for the accountants to reconcile before reaching the conclusion. (Enclosed herewith and marked with annexure “A” some copies of receipts and copies of cheque leaf).

13. THAT save and except further time was granted on 5th day of June 2015 for Samusamuvodre Sharma Law to file application for enlargement of time to oppose the winding up petition, the other contents of paragraph 15 are strictly denied.

14. THAT after the Honorable Court granted leave for the respondent company to file application for enlargement of time to oppose the winding up petition Messrs Samusamuvodre Sharma Law drafted and prepared notice of motion and affidavit seeking orders for enlargement of time and the same was lodge in the High Court Registry for filing.

15. THAT I verily believe and informed by the Court Registry that the notice of motion and affidavit was lodged in the Court Registry for filing.

16. THAT on 5th day of June our office instructed Messrs Babu Singh and Associates to appear on our behalf and seek order in terms of the notice of motion.

17. THAT our office received feedback from Messrs Babu Singh and Associates from which we understood that the petitioning company is opposing our application and they have been given 7 days to file affidavit in opposition. (Enclosed here and marked with annexure “B” is a copy of letter from Samusamuvodre Sharma Law to Babu Singh and Associates and handwritten feedback on our letter).

18. THAT our Mr. Sharma who had the conduct of the respondent company matter was advised by me that the notice of motion and affidavit filed by our office seeking enlargement of time is listed for hearing on the 24th day of June 2015.

19. THAT I have further advised Mr. Sharma that the petitioning company has not file any affidavit in opposition to our application and till this date I was not aware that notice of motion filed by our office was not issued by the Court and the solicitors for the petitioning company has consented for respondent company to file affidavit in opposition.

20. THAT on 24th day of June 2015, our Mr. Sharma appeared and discovered from the clerk that notice of motion and affidavit filed by our office was not issued by the Court Registry and further our office was given seven (7) days to file affidavit in opposition which has not been filed.

21. THAT our Mr. Sharma advised the Master of the High Court of the misunderstanding of the directions given by the court on 5th day of June 2015 the outcome of which was communicated to our office by Babu Sing and Associates.

22. THAT the Master did not grant further adjournment and our Mr. Sharma had no option since our office has not filed affidavit in opposition opposing the petition and therefore Mr. Sharma called our client to settle the alleged outstanding sum as per the winding up notice and further advised the respondent company that Samusamuvodre Sharma Law will institute separate proceedings to claim the damages against the petitioning company.

23. THAT paragraph 17 is denied. The winding up petition was not contested as our office could not file affidavit in opposition due to the miscommunication as stated herein above,

24. THAT on 25th day of June 2015 the matter did not proceed to hearing and the total costs claimed by Natasha Khan Lawyers are high and excessive in all circumstances and are not in accordance with the scale of legal costs. Natasha Khan Lawyers appeared only on instructions and their appearance in court did not last for more than 15 minutes and the court record will reflect the same.

25. THAT paragraph 19 is denied and strict proof is required of the same. The legal costs and charges seek by Hanif Tuitoga Lawyers are also high and excessive and not in accordance with the scale of legal fees.

26. THAT I verily believe and informed by my solicitors that this application is misconceive and does not have any merits as the petitioning company have not sought for the indemnity cost in the winding up petition and it is a general principle that if a party did not plead for specific indemnity costs in the prayers the court will not grant such orders for indemnity cost.

27. THAT initially the respondent company agreed to pay the outstanding sum and a letter without prejudice was written to Hanif Tuitoga Lawyers but after a thorough reconciliation the respondent company was advised that there were no arrears or outstanding amount to the petitioning company and therefore the respondent company instructed Samusamuvodre Sharma Law to oppose the application. The respondent company had a meritorious defence.

28. THAT the Director of the respondent company and the petitioning company Director and the Manager of On The Go Limited Mobil Fuel Nadi branch had a meeting whereby it was agreed that the petitioning company will grant rebate to the respondent company after purchase of $100,000.00 worth of fuel and after the calculations the petitioning company owes the sum of $6,800.00 as rebate.

29. THAT I verily believe and informed by my solicitors that winding up proceedings falls under the ambit of summary proceedings and even in contested winding up petition the court does not grant indemnity cost or cost exceeding $2,500.00.

30. THAT I respectfully pray to this Honorable Court that the petitioning company’s application be struck out with cost on client solicitor indemnity basis.

(6) Against this factual background, it is necessary to turn to the applicable law and the judicial thinking in relation to the principles governing “indemnity costs”.

(7) Order 62, rule 37 of the High Court Rules empower courts to award indemnity costs at its discretion.

For the sake of completeness, Order 62, rule 37 is reproduced below.

Amount of Indemnity costs (O.62, r.37)

37.- (1) The amount of costs to be allowed shall (subject to rule 18 and to any order of the Court) be in the discretion of the taxing officer.

(8) G.E. Dal Pont, in “Law of Costs”, Third Edition, writes at Page 533 and 534;

‘Indemnity’ Basis

“Other than in the High Court, Tasmania and Western Australia, statute or court rules make specific provision for taxation on an indemnity basis. Other than in the Family Law and Queensland rules – which define the ‘indemnity basis’ in terms akin to the traditional ‘solicitor and client basis’ – the ‘indemnity basis’ is defined in largely common terms to cover all costs incurred by the person in whose favour costs are ordered except to the extent that they are of general law concept of ‘indemnity costs’. The power to make such an order in the High Court and Tasmania stems from the general costs discretion vested in superior courts, and in Western Australia can arguably moreover be sourced from a specific statutory provision.

Although all costs ordered as between party and party are, pursuant to the ‘costs indemnity rule’, indemnity costs in one sense, an order for ‘indemnity costs’, or that costs be taxed on an ‘indemnity basis’, is intended to go further. Yet the object in ordering indemnity costs remains compensatory and not penal. References in judgments to a ‘punitive’ costs order in this context must be seen against the backdrop of the reprehensible conduct that often justifies an award of indemnity costs rather than impinging upon the compensatory aim. Accordingly, such an order does not enable a claimant to recover more costs than he or she has incurred.”

(9) Now let me consider what authority there is on this point.

The principles by which Courts are guided when considering whether or not to award indemnity costs are discussed by Hon. Madam Justice Scutt in “Prasad v Divisional Engineer Northern (No. 02)” (2008) FJHC 234.

As to the “General Principles”, Hon. Madam Justice Scutt said this;

• A court has ‘absolute and unfettered’ discretion vis-à-vis the award of costs but discretion ‘must be exercised judicially’: Trade Practices Commission v. Nicholas Enterprises (1979) 28 ALR 201, at 207
  
• The question is always ‘whether the facts and circumstances of the case in question warrant making an order for payment of costs other than by reference to party and party’: Colgate-Palmolive Company v. Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, at 234, per Sheppard, J.
  
• A party against whom indemnity costs are sought ‘is entitled to notice of the order sought’: Huntsman Chemical Company Australia Limited v. International Cools Australia Ltd (1995) NSWLR 242
  
• That such notice is required is ‘a principle of elementary justice’ applying to both civil and criminal cases: SayedMukhtar Shah v. Elizabeth Rice and Ors(Crim Appeal No. AAU0007 of 1997S, High Court Crim Action No. HAA002 of 1997, 12 November 1999), at 5, per Sir MotiTikaram, P. Casey and Barker, JJA
  
• ‘... neither considerations of hardship to the successful party nor the over-optimism of an unsuccessful opponent would by themselves justify an award beyond party and party costs. But additional costs may be called for if there has been reprehensible conduct by the party liable’: State v. The Police Service Commission; Ex parte BeniaminoNaviveli(Judicial Review 29/94; CA Appeal No. 52/95, 19 August 1996), at 6
  
• Usually, party/party costs are awarded, with indemnity costs awarded only ‘where there are exceptional reasons for doing so’: Colgate-Palmolive Co. v. Cussons Pty Ltd at 232-34; Bowen Jones v. Bowen Jones [1986] 3 All ER 163; Re Malley SM; Ex parte Gardner []2001] WASCA 83; SDS Corporation Ltd v. Pasonnay Pty Ltd &Anor [2004] WASC 26 (S2) (23 July 2004), at 16, per Roberts-Smith, J.
  
• Costs are generally ordered on a party/party basis, but solicitor/client costs can be awarded where ‘there is some special or unusual feature of the case to justify’ a court’s ‘exercising its discretion in that way’: Preston v. Preston [1982] 1 All ER 41, at 58
  
• Indemnity costs can be ordered as and when the justice of the case so requires: Lee v. Mavaddat [2005] WASC 68 (25 April 2005), per Roberts-Smith, J.
  
• For indemnity costs to be awarded there must be ‘some form of delinquency in the conduct of the proceedings’: Harrison v. Schipp [2001] NSWCA 13, at paras[1], [153]
  
• Circumstances in which indemnity costs are ordered must be such as to ‘take a case out of the "ordinary" or "usual" category ...":MGICA (1992) Ltd v. Kenny & Good Pty Ltd (No. 2) [1996] FCA 862; (1996) 140 ALR 707, at 711, per Lindgren J.
  
• ‘... it has been suggested that the order of costs on a solicitor and client basis should be reserved to a case where the conduct of a party or its representatives is so unsatisfactory as to call out for a special order. Thus, if it represents an abuse of process of the Court the conduct may attract such an order’: Dillon and Ors v. Baltic Shipping Co. (‘The Mikhail Lermontov’) (1991) 2 Lloyds Rep 155, at 176, per Kirby, P.
  
• Solicitor/client or indemnity costs can be considered appropriately ‘whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known ... he had no chance of success’: Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Ltd

&Ors [1988] FCA 202; (1998) 81 ALR 397, at 401, per Woodward, J.

• Albeit rare, where action appears to have commenced/continued when ‘applicant ... should have known ... he had no chance of success’, the presumption is that it ‘commenced or continued for some ulterior motive or ... [in] willful disregard of the known facts or ... clearly established law’ and the court needs ‘to consider how it should exercise its unfettered discretion’: Fountain Selected Meats, at 401, per Woodward, J.
  
• Where action taken or threatened by a defendant ‘constituted, or would have constituted, an abuse of the process of the court’, indemnity costs are appropriate: Baillieu Knight Frank (NSW) Pty Ltd v. Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359, at 362. per Power, J.
  
• Similarly where the defendant’s actions in conducting any defence to the proceedings have involved an abuse of process of the court whereby the court’s time and litigant’s money has ‘been wasted on totally frivolous and thoroughly unjustified defences’: Baillieu Knight Frank, at 362, per Power, J.
  
• Indemnity costs awarded where ‘the defendant had prima facie misused the process of the court by putting forward a defence which from the outset it knew was unsustainable ... such conduct by a defendant could amount to a misuse of the process of the court’: Willis v. Redbridge Health Authority (1960) 1 WLR 1228, at 1232, per Beldam, LJ
  
• ‘Abuse of process and unmeritorious behaviour by a losing litigant has always been sanctionable by way of an indemnity costs order inter parties A party cannot be penalised [for] exercising its right to dispute matters but in very special cases where a party is found to have behaved disgracefully or where such behaviour is deserving of moral condemnation, then indemnity costs may be awarded as between the losing and winning parties’: Ranjay Shandil v. Public Service Commission (Civil Jurisdiction Judicial Review No. 004 of 1996, 16 May 1997), at 5, per Pathik, J. (quoting Jane Weakley, ‘Do costs really follow the event?’ (1996) NLJ 710 (May 1996))
  
• ‘It is sufficient ... to enliven the discretion to award [indemnity] costs that, for whatever reasons, a party persists in what should on proper consideration be seen to be a hopeless case’: J-Corp Pty Ltd v. Australian Builders Labourers Federation Union of Workers (WA Branch)(No. 2) [1993] FCA 70; (1993) 46 IR 301, at 303, per French, J.
  
• ‘... where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" ... may lead the court to [determine] that the party whose conduct gave rise to the costs should bear them in full’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
  
• However, a case should not be characterised as ‘hopeless’ too readily so as to support an award of indemnity costs, bearing in mind that a party ‘should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain’ for ‘uncertainty is inherent in many areas of law’ and the law changes ‘with changing circumstances’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
  
• The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the court allowed the matter to be tried: Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002), at 11, per Lord Steyn
  
• Purpose of indemnity costs is not penal but compensatory so awarded ‘where one party causes another to incur legal costs by misusing the process to delay or to defer the trial and payment of sums properly due’; the court ‘ought to ensure so far as it can that the sums eventually recovered by a plaintiff are not depleted by irrecoverable legal costs’: Willis v. Redbridge Health Authority, at 1232, per Beldam, LJ
  
• Actions of a Defendant in defending an action, albeit being determined by the trial judge as ‘wrong and without any legal justification, the result of its own careless actions’, do ‘not approach the degree of impropriety that needs to be established to justify indemnity costs ... [R]egardless of how sloppy the [Defendant] might well have been in lending as much as $70,000 to [a Plaintiff], they had every justification for defending this action ... The judge was wrong to award [indemnity costs] in these circumstances. He should have awarded costs on the ordinary party and party scale’: Credit Corporation (Fiji) Limited v. Wasal Khan and MohdNasir Khan (Civil Appeal No. ABU0040 of 2006S; High Court Civil Action No. HBC0344 of 1998, 8 July 2008), per Pathik, Khan and Bruce, JJA, at 11
  

Defining ‘Improper’, ‘Unreasonable’ or ‘Negligent’ Conduct in Legal Proceedings as Guide to Indemnity Costs Awards: Cases where ‘wasted costs’ rules or ‘useless costs’ principles have been applied against solicitors where their conduct in proceedings has led to delay and/or abuse of process can provide some assistance in determining whether conduct in proceedings generally may be such as to warrant the award of indemnity costs. These cases specifically relate to solicitors’ conduct rather than directly touching upon the indemnity costs question; nonetheless the analysis or findings as to what constitutes conduct warranting an award of costs can be helpful. See for example:

• Ridehalgh v. Horsefield and Anor [1994] Ch 205
• Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002)
• Harley v. McDonald [2001] UKPC 18; [2001] 2 AC 678
• Kemajuan Flora SDN Bh v. Public Bank BHD &Anor(High Court Malaya, Melaka, Civil Suit No. 22-81-2001, 25 January 2006)
• Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004)
• SZABF v. Minister for Immigration (No. 2) [2003] FMCA 178
• Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008)
  

Some of the matters referred to include:

• At the hearing stage, the making of or persisting in allegations made by one party against another, unsupported by admissible evidence ‘since if there is not admissible evidence to support the allegation the court cannot be invited to find that it has been proved, and if the court cannot be invited to find that the allegation ahs been proved the allegation should not be made or should be withdrawn: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
  
• At the preparatory stage, in relation to such allegations – not necessarily having admissible evidence but there should be ‘material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
  
• Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples of wasting the time of the court or an abuse of its processes resulting in excessive or unnecessary costs to litigants: Harley v. McDonald, at 703, para[50] (English Privy Council)
  
• Starting an action knowing it to be false is an abuse of process and may also involve knowingly attempting to mislead the court: Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004), at para[43], per Ribeiro, PJ (Li, CJ, Bokhary and Chan, PJ and Richardson, NPJ concurring)
  
• Lending assistance to proceedings which are an abuse of the process of the court – using litigious procedures for purposes for which they were not intended, ‘as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest’ or evading rules intended to safeguard the interests of justice ‘as by knowingly failing to make full disclosure on ex parte application[s] or knowingly conniving at incomplete disclose rue of documents’: Ridehalgh v. Horsefield [1994] Ch 205, at 234, per Bingham, MR
  
• Initiating or continuing multiple proceedings which amount to abuse of process: Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008), per Hickie, J.
  

Specific Circumstances of Grant/Denial Indemnity Costs:Specific instances supporting or denying the award of indemnity costs include:

• Indemnity costs follow per a ‘Calderban offer’, that is, where a party makes an offer or offers prior to trial, which is/are refused, and that party succeeds at trial on a basis which is better than the prior offer: Calderbank v. Calderbank [1975] 3 WLR 586
  
• However, no indemnity costs awarded where Calderbank letter contains no element of compromise, making it not unreasonable for the party not to accept the offer. The question is ‘... whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs ...’: SMEC Testing Services Pty Ltd v. Campbelltown City Council [2000] NSWCA 323, at para[37], per Giles, JA Hence, if the offer is not a genuine offer of compromise and/or there is no appropriate opportunity provided to consider and deal with it, then no indemnity costs follow: Richard Shorten v. David Hurst Constructions P/L; D. Hurst Constructions v. RW Shorten [2008] AdjLR 06/17 (17 June 2008), per Einstein, J. (NSW Supreme Court, Equity Division T&C List); Leichhardt Municipal Council v. Green [2004] NSWCA 341, at paras[21]-24], [36], per Santow, JA, Stein, JA (concurring); Herning v. GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375, at paras[4]-[5], per Handley, Beazley and Basten, JJA; Elite Protective Personnel v. Salmon [2007] NSWCA 322, at para[99]; Donnelly v. Edelsten [1994] FCA 992; [1994] 49 FCR 384, at 396
  
• Indemnity costs awarded:
  
  • upon a winding-up petition’s being presented on a debt known to the petitioner to be genuinely disputed on substantial grounds;
    
  • the clearly established law being that a winding up order will not be granted in such circumstances, meaning that the petitioner ‘had no chance of successfully obtaining a winding up order’;
    
  • where in these circumstances the filing of the petition ‘constituted a deliberate tactical manipulation of the winding up process by the [petitioner, the State Government Insurance Commission ‘SGIC’] for the purposes of bringing very substantial pressure to bear’ on Bond Corp Holdings ‘BCH’;
    
  • this in the circumstances meant that the ‘filing of the petition was an abuse of process of the court in the true sense of that expression’;
    
  • the discretion to stay the petition should not be exercised because this would ‘cause BCH serious harm’ meaning it would be ‘extremely difficult for BCH to be able to conduct its business normally if the petition [were] not dismissed’: citing Re Lympne Investments [1972] 1 WLR 523, at 527, per Megarry, J.; also Re Glenbawn Park Pty Ltd [1977] 2 ACLR 288, at 294, per Yeldham, J.
    
  • an abuse of process ‘having been established in the circumstances outlined, justice requires the award of solicitor and client, or, rather, "indemnity" costs’ so that ‘the SGIC should be ordered to pay all the costs incurred by BCH except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to [these] exceptions, BCH be completely indemnified by the SGIC for its costs’, citing Foundation Selected Meats (Sales) Pty Ltd v. International Produce Merchants [1988] FCA 202; (1988) 81 ALR 397, at 410, per Woodward J.: Re Bond Corp Holdings Ltd (1990) 1 ACSER 350, at 13, per Ipp, J.
    
• Indemnity costs are appropriate where an applicant (in an unfair dismissal):
  
  • 'insists' over a respondents' objections that an application should proceed to trial rather than await the outcome of other possible litigation (including a police investigation);
    
  • fails repeatedly, despite allowances, to meet deadlines for lodgment of a witness statement;
    
  • fails to advise her lawyers of her whereabouts so denying them of the ability to inform the court of reasons for seeking an unqualified adjournment less than a week prior to trial;
    
  • fails to comply with directions to provide a current address, consult a medical specialist and obtain a report of fitness to attend the trial;
    
  • fails to appear at the final hearing when on notice that the application will be dismissed in event of such failure: Nicole Pender v. Specialist Solutions Pty Ltd (No. B599 of 2004. 17 May 2005), per Bloomfield, Commissioner
    
    • Indemnity costs denied as against a Plaintiff who discontinued a claim for a permanent injunction to restrain a Defendant's industrial action, where the Defendant had filed a chamber summons seeking to have the Plaintiff's claim struck out as an abuse of process: Cooperative Bulk Handling Ltd v. Australian Manufacturing Workers Union (WA Branch)(Unreported, WASC, Lib. No. 970190, 30 April 1997), per Wheeler, J.
      
    • Indemnity costs cannot be awarded in a criminal appeal, albeit 'in criminal appeals, as in civil cases, unreasonable conduct by the unsuccessful party might increase a usual award': SayedMukhtar Shah v. Elizabeth Rice and Ors(Crim Appeal No. AAU0007 of 1997S, High Ct Crim Action No. HAA02 of 1997, 12 November 1999), at 4, per Sir MotiTikaram, P., Casey and Barker, JJA
      
    • Indemnity costs awarded then reversed on appeal where solicitor held liable for costs (under a 'wasted costs' order) in initiating action for clients where solicitor taken to have known that the basis of the clients' action was wholly false"
      

(10) Before passing to the substance of the application, let me record that the Petitioning Creditor and the Respondent Debtor in their written submissions have done a fairly exhaustive study of the judicial decisions and other authorities which they considered to be applicable.

I interpose to mention that I have given my mind to the oral submissions made by the Counsel for both parties as well as to the written submissions and the judicial authorities referred to therein.

(11) As I apprehend, now comes a most material and crucial fact.

I ask myself, what is the question in these proceedings?

The Petitioning Creditor is seeking costs on an indemnity basis.

Therefore, the only question I am called upon to determine, in the present proceedings, is, whether or not the Petitioning Creditor, ought to be an Order on an "indemnity basis".

(12) What is the basis upon which the Petitioning Creditor seeks indemnity costs?

The Petitioning Creditor seeks "indemnity costs" on the following ground.

Reference is made to paragraph (17) of the Affidavit in Support.

"OTGL has incurred significant legal costs because DTCL and/or its solicitors did not pay the undisputed debt despite given time to do so. If DTCL has paid off OTGL as it promised to do by 25 March 2015, OTGL would not have incurred these costs."

(13) In adverso, the Counsel for the Respondent Debtor submitted;

Reference is made to paragraph (27) and (28) of the Affidavit in Opposition.

Para 27. THAT initially the respondent company agreed to pay the

outstanding sum and a letter without prejudice was written to Hanif Tuitoga Lawyers but after a thorough reconciliation the respondent company was advised that there were no arrears or outstanding amount to the petitioning company and therefore the respondent company instructed Samusamuvodre Sharma Law to oppose the application. The respondent company had a meritorious defence.

28. THAT the Director of the respondent company and the petitioning company Director and the Manager of On The Go Limited Mobil Fuel Nadi branch had a meeting whereby it was agreed that the petitioning company will grant rebate to the respondent company after purchase of $100,000.00 worth of fuel and after the calculations the petitioning company owes the sum of $6,800.00 as rebate.

(14) Let me now proceed to examine the ground adduced by the Petitioning Creditor.

Is it a correct exercise of the Court's discretion to direct the Respondent Debtor to pay costs on an indemnity basis to the Petitioning Creditor for exercising its right to dispute the debt?

Is it a correct exercise of the Court's discretion to direct the Respondent Debtor to pay costs on an indemnity basis to the Petitioning Creditor because the Respondent debtor failed and/or refused to make any arrangement for the payment?

Let me see what authority there is on this point?

In "Public Service Commission v Naiveli";(FCA ABU 005211/955) The Fiji Court of Appeal held;

"However, neither considerations of hardship to the successful party nor the over optimism of an unsuccessful opponent would by themselves justify an award beyond party and party costs. But additional costs may be called for if there has been reprehensible conduct by the party liable – see the examples discussed in Thomson v. Swan Hunter and Wigham Richardson Ltd [1954] 2 All ER 859 and Bowen-Jones v. Bowen Jones [1986] 3 All ER 163."

In Ranjay Shandill v Public Service Commission [Civil Jurisdiction Judicial Review No: - 004 of 1996] Pathik J held;

"[A party] cannot be penalised [for] exercising its right to dispute matters but in very special cases where a party is found to have behaved disgracefully or where such behaviour is deserving of moral condemnation, and then indemnity costs may be awarded as between the losing and winning parties."

In Quancorp PVT Ltd & Anor v. MacDonald & Ors [1999] WASC 101, Wheeler J held;

".... 'hopeless' too readily so as to support an award of indemnity costs, bearing in mind that a party 'should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain' for 'uncertainty is' inherent in many areas of law' and the law changes' with changing circumstances"

In an article "Do costs really follow the event?" by Jane N.L.J. May 1996 p.710) the basis of indemnity costs is very well summed up and is pertinent to the matter in issue before me. She said:

"An abuse of process and unmeritorious behavior by a losing litigant has always been sanctionable by way of an indemnity costs order inter parties. A party cannot be penalized by exercising its right: to dispute matters but in very special cases, where a party is found to have behaved disgracefully or where such behavior is deserving of moral condemnation, then indemnity costs may be awarded as between the losing and winning parties."

On the strength of the authority in the aforementioned cases, I venture to say beyond a peradventure that neither considerations of hardship to the Petitioning Creditor nor the over optimism of the unsuccessful Respondent Debtor would by themselves justify an award beyond party and party costs.

In the result, I am constrained to hold that the ground adduced by the Petitioning Creditor does not warrant me to depart from the normal rule and invoke my discretion to award indemnity costs.

In my view, the Respondent Debtor has done no more than to exercise its legal right to dispute the debt. This simply does not approach the degree of impropriety that needs to be established to justify indemnity costs. The Respondent Debtor is not guilty of any conduct deserving of condemnation as disgraceful or as an abuse of the process of the Court and ought not to be penalised by having to pay indemnity costs.

Finally, I desire to emphasise that there is no iota of evidence to establish that the Respondent Debtor had an ulterior motive, or is in wilful disregard of known facts or the established law.

In light of the above, I have no hesitation in holding that an award of indemnity costs is not warranted.

FINAL ORDERS

(1) The Petitioning Creditor's Notice of Motion seeking indemnity costs is dismissed.

(2) The costs of the Winding Up process is summarily assessed in the sum of $500.00. The costs is to be paid to the Petitioning Creditor by the Respondent Debtor within 14 days from the date hereof.

.......................................
Jude Nanayakkara
Master of the High Court

At Lautoka
10th February 2016