Facer v Burke & Anor [2006] NTSC 30

PARTIES: FACER, Lawrence

v

BURKE, Carolyn

and

BURKE, Everild

TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION: SUPREME COURT OF THE NORTHERN TERRITORY exercising Territory jurisdiction

FILE NO: 97/04 (20416373)

DELIVERED: 6 April 2006

HEARING DATES: 1 & 8 December 2005

JUDGMENT OF: THOMAS J

CATCHWORDS:

PRACTICE AND PROCEDURE -- COSTS -- VACATION OF HEARING OF PRELIMINARY QUESTION

Defendants sought vacation of hearing of preliminary question – reason for vacation being that determination of preliminary question not determinative of the substantive question – consent order made – same parties involved in separate litigation of same issue – defendants argued preliminary question not abandoned – plaintiff filed summons in respect of costs of preparation of preliminary question – question whether discontinuing proceedings gives rise to costs – question whether normal rule as to costs applies – “Is preliminary question incidental to, or part of, the action”.

Partnership Act 1997 NT, s 48; Supreme Court Act 1979 NT, s 9, “proceeding”; Supreme Court Rules 1987 NT, O52.01, O63.03, O63.04, O63.11

Leisure Investments Pty Ltd v Bilioara Pty Ltd [2001] NTSC 3, discussed.


REPRESENTATION:

Counsel:
Plaintiff: A Young
Defendants: J Reeves QC

Solicitors:
Plaintiff: Ward Keller
Defendants: Cridlands

Judgment category classification: C
Judgment ID Number: tho200604
Number of pages: 10


IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Facer v Burke & Anor [2006] NTSC 30
No. 97/04 (20416373)

BETWEEN:

FACER, Lawrence
Plaintiff

AND:

BURKE, Carolyn
First Defendant

BURKE, Everild
Second Defendant

CORAM: THOMAS J

REASONS FOR JUDGMENT

(Delivered 6 April 2006)

[1] On 7 March 2005 the Master ordered the “preliminary question in the form agreed by the parties be tried”. The Master noted in the course of his reasons for decision in paragraph [5]:

“The only preliminary question raised has been identified, as have the items that the plaintiff wishes to dispute. If necessary, following the resolution of the preliminary question, the defendant may respond to the plaintiff’s affidavit, and, if so advised, raise other issues in the accounting. I am not persuaded that pleadings are necessary or desirable, or that the matter should proceed otherwise than in the normal course.”

[2] At the callover on 29 September 2005, the preliminary question was listed for hearing on 6 and 7 December 2005. Orders were also made for a mediation of the dispute between the parties. Subsequently, the defendants filed an application on summons dated 8 November 2005 seeking orders that the hearing dates on 6 and 7 December 2005, be vacated and the preliminary question be withdrawn. The defendant sought an order that the question of costs be reserved.

[3] On 10 November 2005, orders were made by consent vacating the dates scheduled for the hearing of the preliminary question. The plaintiff’s application for an order in respect of costs was adjourned to 17 November and then again to 1 December 2005.

[4] On 28 November 2005, the defendants filed an amended summons seeking an order that:

“There be no order as to costs; alternatively the question of costs be reserved.”

[5] This application proceeded to hearing on 1 December 2005. Mr Reeves QC, who appeared on behalf of the applicants/defendants sought to rely on the affidavit of Cameron Ford sworn 1 December 2005.

[6] Mr Young, who appeared on behalf of the plaintiff/respondent had foreshadowed an oral application for costs and lodged written submissions in support of that application. The plaintiff/respondent is seeking orders that:

(1) the defendants pay the plaintiff’s costs of the preliminary question.

(2) the plaintiff’s costs to include the costs of the plaintiff’s application for costs.

(3) the plaintiff’s costs be taxed (unless otherwise agreed) and payable immediately.

(4) certify for counsel.

[7] It was agreed between the parties that Mr Young would proceed first with the plaintiff’s application. He relies on the affidavit of Nicole Dunn sworn 16 November 2005 in support of the application.

[8] The background to this matter is as follows:

[9] The plaintiff commenced an action for the taking of accounts following the dissolution of a partnership between the plaintiff and the two defendants. It was an oral partnership at will and operated Manners Creek pastoral lease in the Northern Territory between 1991 and 2002. The partnership was dissolved at the end of 2002. Liabilities were paid and an interim distribution made of $1.2 million to the plaintiff and $600,000 to each of the defendants. The remaining assets consist of $900,000 cash at a bank.

[10] The defendants contested the partnership proceeding on the basis that the rule for distribution of assets on final settlement of accounts in s 48 Partnership Act 1997 (NT) had been varied so that the distribution would be 50 per cent to Mr Facer and 25 per cent to each of the defendants. The plaintiff, Mr Facer, denied any such agreement.

[11] On 7 March 2005, the Master ordered that the determination of this issue be heard as a preliminary question before a judge of this Court pursuant to Rule 52.01(3) which provides as follows:
“…..
(3) The Court shall not order that an account be taken –

(a) as against a defendant who has not filed an appearance, unless he is in default of appearance; or

(b) if it appears that there is a preliminary question to be tried.”

[12] The preliminary question was listed for hearing and that hearing date subsequently vacated on the defendants withdrawing the preliminary question.

[13] Mr Young, on behalf of the plaintiff, submits that a substantial amount of work was undertaken in preparation for the hearing of the preliminary question and the plaintiff incurred substantial costs.

[14] Mr Young argues that it was the defendants who raised the preliminary question and having now withdrawn it, the situation is indistinguishable from the case where a plaintiff discontinues a proceeding. In such a case the plaintiff is almost invariably ordered to pay costs. Mr Young sought to rely on the decision in Leisure Investments Pty Ltd v Bilioara Pty Ltd [2001] NTSC 3 and the following passage from “Lindley on the Law of Partnership” (16th edition) paragraphs 23 – 112:

“… it has long been an established rule that all the costs of dissolution proceedings should be paid out of the partnership assets, unless there is a good reason for making some other order. Where, however, such proceedings are, in reality, commenced in order to obtain an adjudication on some disputed claim between the partners, the unsuccessful litigant will normally be ordered to pay the costs up to the date of trial.”

[15] Order 63 of the Supreme Court Rules deals with the issue of costs. Order 63.03 provides that subject to the Rules, costs are at the discretion of the Court. Rule 63.04(2), (3) and (4) provides as follows:

“(2) Subject to this rule, the costs a party is required to pay under these Rules or an order of the Court shall be paid immediately.

(3) Subject to subrule (4), where –

(a) the Court makes an interlocutory order for costs; or

(b) costs are payable by virtue of these Rules without an order for costs,
those costs shall not be taxed until the conclusion of the proceeding to which they relate.

(4) If it appears to the Court when making an interlocutory order for costs or at a later time that all or a part of the costs ought to be taxed at an earlier stage, it may order accordingly.”

[16] It is the argument for the plaintiff that Rule 63.11(6) applies in this case. Rule 63.11(6) states:

“(6) A party who discontinues a proceeding or with-draws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.”

[17] It is further submitted that Rule 63.04(3) is not applicable as the “proceeding to which they relate” is the trial of the preliminary question, not the proceeding commenced by the plaintiff for the taking of accounts. “Proceeding” is defined in s 9 of the Supreme Court Act as follows:

“‘proceeding’ means a proceeding in the Court whether between parties or not, and includes –

(a) a cause, action, suit or matter;

(b) an incidental proceeding in the course of, or in connection with, a cause, action, suit or matter;

(c) a criminal proceeding, where the context so permits; and

(d) an appeal;”

[18] The plaintiff’s position is that the preliminary question is an incidental proceeding in the course of, or connected to, the action for account and thus a “proceeding” within the terms of s 9. It is further submitted that the proceeding has reached its “conclusion” within the meaning of Rule 63.04(3). Reference was also made to Rule 63.11(6).

[19] Mr Reeves QC, on behalf of the defendants, submitted that another set of proceedings have issued in which the defendants in this matter are the plaintiffs. In those proceedings the plaintiffs have raised the very issue of the alleged agreement between the parties that was the subject of the now withdrawn preliminary question. Mr Reeves QC stated the reason the defendants in this action withdrew the preliminary question was because it was not going to determine the matter once and for all as had been suggested by Mr Young. As preliminary questions are usually only ordered if the determination of the question is likely to lead to a determination of a whole proceeding, the defendants could see no point in having a hearing on the preliminary question when it became clear it would not resolve all the proceedings between the parties.

[20] Mr Reeves QC stated that the plaintiff has two areas of dispute with the defendants:

(1) that the plaintiff says the accounts prepared by the accountants in relation to the partnership dealings are inaccurate;

(2) the assets should have been divided in accordance with s 48, namely, rateably to the capital contributions made by the parties.

[21] The defendants seek to raise other issues including:

(1) whether or not this partnership was from the outset an equal partnership as provided by s 28(a) of the Partnership Act;

(2) payments made to the plaintiff of amounts from the partnership assets of debts, which the defendants assert were not genuine debts but created to allow the plaintiff to obtain monies from the partnership that he would not otherwise have been able to obtain and the payment of salaries.

(3) the dissipation of partnership assets by the plaintiff including the disappearance of a large number of cattle during the process of selling the property. It is asserted on behalf of the defendants that it could be as many as 10,000 head of cattle unaccounted for in the process of the sale.

[22] Mr Reeves QC states all these issues will be raised by the defendants, who will be the plaintiffs in the subsequent proceeding. Mr Reeves QC’s point is that it is not correct to say the preliminary question has been abandoned.

[23] The defendants’ position is that the preliminary question was in the nature of an interlocutory application and for that reason the normal principles should apply and there should be no order for costs (s 63.18). Mr Reeves QC argues that the normal approach is that no order is made for costs unless there are exceptional circumstances.

[24] It is the submission, on behalf of the defendants, that the defendants have not acted unreasonably and that in the circumstances it was not unreasonable to withdraw the preliminary question from a hearing.

[25] Alternatively, it is submitted that if an order for costs is made in favour of the plaintiff then the usual course established by Order 63.19 should be followed and costs paid out of the asset of the partnership.

[26] Mr Reeves QC argues that the plaintiff cannot sustain an argument that Order 63.11(6) applies because the clear tenor of that rule is that it is directed to the discontinuance of the whole or a part of the substantive claim in the proceedings. The plaintiff has not yet produced a statement of claim so the defendants have not lodged a document by way of defence or counterclaim. Accordingly, on the argument for the defendants the withdrawing of the preliminary question was the equivalent of withdrawing an interlocutory application which is not the same as withdrawing a claim or counterclaim.

[27] The defendants’ case is that there are rules which specifically apply to this situation in particular Rule 63.18 and there should be no order for costs. Mr Reeves QC points to the fact that there has been no judicial determination in this matter. He referred to the decision of Mildren J in Parap Hotel Pty Ltd & Ors v Northern Territory Planning Authority & Anor (1993) 112 FLR 336 for the principle that unless there is an exceptional circumstance, a Court should not try and resolve an issue of costs when there has been no judicial determination, and in that situation there should be no order for costs. Reference was also made to the decision in Parkmore Investments Pty Ltd v Acer Forester (Darwin) Pty Ltd [2005] NTSC 9.

[28] The defendants maintain they acted quite reasonably in raising the preliminary question, pursuing it and then withdrawing it in light of revised circumstances that prevailed at the mediation.

[29] If the Court were to make an order for costs, then the defendants’ position is that Order 63.19 applies and the costs should be paid out of the partnership property.

[30] In his submissions in reply, Mr Young argued that Rule 63.11(6) does not require a determination on the merits. His argument is the cost consequence follows from abandoning the proceeding which he asserts is what has happened here.

[31] In this matter, the preliminary question was withdrawn following a mediation between the parties. I am not privy to what occurred at the mediation. There is a letter dated 28 October 2005 annexure NSD3 to the affidavit of Nicole Dunn sworn 16 November 2005, in which solicitors for the defendants clearly indicate the preliminary question will not proceed to hearing.

[32] The issues between the parties are clearly not resolved. The defendants have issued other proceedings between the parties raising the matters that were the subject of the preliminary question. The subject of the preliminary question has not been abandoned by the defendants, it continues as part of the matters that are in contention between the parties.

[33] There has been no judicial determination of the issues between the parties. In the circumstances of this case, the withdrawal of the preliminary question is, in effect, an interlocutory application.

[34] I am not persuaded that there are exceptional circumstances such that there should be an order for costs.

[35] Accordingly, I make no order for costs with respect to the preliminary question.
_____________________________________