FEDERAL COURT OF AUSTRALIA

Fletcher, in the matter of Secured Mortgage Management Limited v Pope (No 2) [2014] FCA 808

IN THE MATTER OF SECURED MORTGAGE MANAGEMENT LIMITED (IN LIQUIDATION) ACN 089 571 184

THE COURT ORDERS THAT:

1.    the respondent pay the applicant’s costs as to the issue concerning the scope of the summons on a party and party basis;

2.    the respondent pay the balance of the applicant’s costs on an indemnity basis; and

3.    the parties have liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF SECURED MORTGAGE MANAGEMENT LIMITED (IN LIQUIDATION) ACN 089 571 184

REASONS FOR JUDGMENT

1    In this matter I published reasons for judgment on 24 December 2013. The proceedings concerned a summons issued by William John Fletcher and Katherine Elizabeth Barnet as liquidators of Secured Mortgage Management Pty Ltd (in liquidation) (the “company”). The summons was addressed to Michael Conrad Pope (“Mr Pope”). It required him to attend before the Federal Court on 5 October 2012 to be examined, on oath or affirmation, concerning the examinable affairs of the company and to produce a wide range of documents, largely relating to his own financial affairs. The liquidators consider that the company has a cause of action against Mr Pope. They issued the summons for the purpose of ascertaining his capacity to meet any judgment which the company may obtain against him.. Mr Pope applied to set aside the summons. He was unsuccessful. The liquidators now seek an order for costs, including their reserved costs and ask that the costs be taxed on an indemnity basis.

2    Failure in litigation does not necessarily lead to an order that the unsuccessful party pay costs on an indemnity basis. The question of costs is generally at large. It is a matter of discretion. If there be a starting point for the exercise of the discretion, it is that the unsuccessful party should pay the successful party’s costs, taxed on a party and party basis. However, as my reasons for judgment demonstrate, the application to set aside the summons was misconceived, having regard to numerous decisions concerning the circumstances in which a summons of the kind in question will be issued on the application of a liquidator. Where an application can be characterized as misconceived, there may be grounds for awarding costs on an indemnity basis.

3    In one respect, however, Mr Pope raised an arguable question. He submitted that the summons was unduly wide. Although he has failed on that point, it was reasonable for him to challenge the scope of the summons. His lack of success should not lead to an order for costs on an indemnity basis on that issue.

4    As to the other costs of the proceedings, I see no reason why the creditors of the company should bear any part of the costs incurred by the liquidators in resisting a misconceived application. Save as to the costs incurred in defending the challenge to the scope of the summons, the liquidators should have their costs on an indemnity basis. As to the balance, they should have their costs on a party and party basis.

5    Consideration of the scope of the summons took up a small, but not insignificant part of the time involved in the hearing. I note that prior to the hearing the liquidators proposed that the terms of the summons be narrowed somewhat, apparently in answer to Mr Pope’s complaints about its scope. It follows that Mr Pope has been less successful in these proceedings than he would have been, had he accepted the liquidators’ offer to settle the matter. However, in the circumstances of this case, I do not consider the offer to be of particular significance. It is not unreasonable that the recipient of a summons in such broad terms should seek the Court’s views as to such breadth.

6    I order that Mr Pope pay:

    as to the issue concerning the scope of the summons, the liquidators’ costs taxed on a party and party basis; and

    as to the balance of the proceedings, the liquidators’ costs taxed on an indemnity basis.

I hope that the parties will be able to agree on the costs without resorting to a complex taxation.

7    I have already dismissed the summons.

Associate:

Dated:    1 August 2014