Federal Court of Australia

Malone v B&M Aboriginal Corporation (In Administration) (No 2) [2025] FCAFC 51

ORDERS

THE COURT ORDERS THAT:

1.    The appellants’ costs of the appeal, quantified on an indemnity basis, be paid out of the funds being held by the Court for the benefit of the Daylight Family in priority to any other distribution of those funds.

2.    In order 1:

(a)    the phrase “funds being held by the Court for the benefit of the Daylight Family” means that proportion of the funds paid into Court in proceeding QUD 334 of 2018 by QGC Pty Limited pursuant to the Indigenous Land Use Agreement included on the register of the National Native Title Tribunal as QI2010/006 (ILUA) for the benefit of the Daylight Family plus the interest earned on those funds; and

(b)    the phrase “Daylight Family” has the same meaning as used in the ILUA.

3.    The payment in order 1 be made upon the appellants providing to the Court a certificate of taxation issue by a taxing officer under r 40.32 of the Federal Court Rules 2011 (Cth) quantifying the appellants’ costs on an indemnity basis.

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

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    On 6 March 2025, the Court made orders allowing this appeal and delivered reasons in Malone v B&M Aboriginal Corporation (In Administration) [2025] FCAFC 24 (appeal reasons). The orders also provided for the parties to file written submissions in relation to the costs of the appeal, with that question to be determined on the papers. Both parties filed written submissions on 20 March 2025.

2    These reasons concern the question of costs and assume familiarity with the appeal reasons.

3    The appellants submitted that orders should be made that they receive indemnity costs and that the costs be paid by:

(a)    three of the directors of the respondent company (BMAC), being Ian Brown, Grace Munro, and Sharmaine Dodds;

(b)    a lawyer who purported to represent BMAC in the proceeding below until BMAC was placed into administration, Jovan Sarai of Safe Harbour Lawyers; and

(c)    the administrator of BMAC, Bruce Gleeson of Jones Partners.

4    The respondent company, BMAC, submitted that:

(a)    s 85A of the Native Title Act 1993 (Cth) (NTA) applies to the proceeding and that the appropriate order is that the parties bear their own costs;

(b)    alternatively, even if s 85A does not apply, the appropriate order is that the parties bear their own costs having regard to the parties’ success on the issues raised on the appeal;

(c)    alternatively, if a costs order is made in favour of the appellants, it should only be made against BMAC and not against the administrator; and

(d)    alternatively, if a costs order is made against the administrator, the administrator’s liability should be limited to the extent that the administrator is indemnified from the assets of BMAC.

5    For the reasons that follow, we have concluded that:

(a)    s 85A of the NTA has no application to this proceeding;

(b)    an order for costs should be made in favour of the appellants;

(c)    the circumstances of the case do not justify non-party costs orders being made against the three directors of BMAC who resolved to place BMAC into administration, the lawyer who purported to represent BMAC in the proceeding up until the appointment of the administrator, or the administrator of BMAC; and

(d)    as BMAC is insolvent and will be unable to satisfy an order for costs, an order should be made that the appellants’ costs of the appeal, quantified on an indemnity basis, be paid out of the funds being held by the Court for the benefit of the Daylight family in priority to any other distribution of those funds.

Legislative provisions governing the power to award costs

6    Section 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) gives the Court a broad discretion in awarding costs. The discretion must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation: Northern Territory v Sangare (2019) 265 CLR 164 (Sangare) at [24]. While not a rigid rule, usually the discretion to award costs is exercised in favour of a successful party: Oshlack v Richmond River Council (1998) 193 CLR 72 (Oshlack) at [35] (Gaudron and Gummow JJ), [66]-[67] (McHugh J) and [134] (Kirby J); Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at [25] (Gleeson CJ, Gummow, Hayne and Crennan JJ); Sangare at [25]. The basis for this “usual order as to costs” is not to penalise a losing party, but to compensate a successful party against the costs incurred by reason of the legal proceeding: Oshlack at [67] (McHugh J).

7    The Court also has express powers under s 43(3) of the FCA Act to order that costs be paid in a specified sum or on an indemnity basis and to order a party’s lawyer to bear the costs personally.

8    In respect of proceedings to which it applies, s 85A of the NTA affects the usual approach to the award of costs in this Court. Section 85A provides as follows:

(1)    Unless the Federal Court orders otherwise, each party to a proceeding must bear his or her own costs.

Unreasonable conduct

(2)    Without limiting the Court’s power to make orders under subsection (1), if the Federal Court is satisfied that a party to a proceeding has, by any unreasonable act or omission, caused another party to incur costs in connection with the institution or conduct of the proceeding, the Court may order the first‑mentioned party to pay some or all of those costs.

9    In Cheedy on behalf of the Yindjibarndi People v State of Western Australia (No 2) 199 FCR 23, the Full Court explained the relationship between s 43 of the FCA Act and s 85A of the NTA in the following terms (at [9]):

It is now well established that in proceedings to which s 85A applies:

(1)     s 85A(1) removes the expectation that costs will follow the event, but the Court retains its discretion as to costs under s 43 of the FCA Act;

(2)     the “unreasonable conduct” of the parties is not a jurisdictional fact which pre-conditions the exercise of the discretion, and on the other hand, s 85A(2) does not control or limit the discretion in s 85A(1);

(3)     whilst the exercise of the discretion when making a costs order should be judicial, the starting point is that each party will bear its own costs; and

(4)     it is not proper to use the power to award costs to punish either a successful or an unsuccessful party or as a deterrent to other would-be applicants: Reid v South Australia [2007] FCA 1479 at [54].

Does s 85A apply to this proceeding?

10    As noted in the appeal reasons (at [137]), the reference to “a proceeding” in s 85A is a reference to a proceeding within the meaning of s 80, being a proceeding in relation to applications filed in the Federal Court that relate to native title. Whilst the language of s 80 is broadly framed, decisions of the Court indicate that the description of proceedings in s 80 is intended to be confined to proceedings in respect of applications made under Pt 3 of the NTA that “relate to native title”: see for example Lardil Peoples v State of Queensland (2001) 108 FCR 453 at [156] (Dowsett J, with whom French J, as his Honour then was, relevantly agreed); O’Mara v Minister for Lands (2008) 167 FCR 145 at [34]; Corunna v South West Aboriginal Land and Sea Council (No 2) (2015) 235 FCR 53. Broadly, applications made under Pt 3 of the NTA that relate to native title are applications for determinations of native title and for compensation (see s 61 within Div 1 of Pt 3).

11    Although BMAC submitted that s 85A applies to this proceeding, it presented no argument in support of that submission. Instead, it argued that s 85A is relevant to the Court’s discretion with respect to costs, referring to Murray v Registrar of National Native Title Tribunal (2003) 132 FCR 402 (Murray FC), Fesl v Delegate of the Native Title Registrar (No 2) (2008) 173 FCR 176 (Fesl) and Burragubba v State of Queensland (2015) 236 FCR 160 (Burragubba) at [27]-[28].

12    The underlying proceeding from which this appeal was brought was an interpleader proceeding by way of originating application issued under Pt 18 of the Federal Court Rules 2011 (Cth) (FCR). As stated in the appeal reasons (at [27]), an interpleader is a procedure by which a person, faced with conflicting claims in respect of a debt or personal property not claimed to be owned by them, can be protected from the uncertainty and expense of dealing with separate legal proceedings brought by the respective claimants by asking the Court to resolve, as between the claimants, their entitlement to payment or to the property. Whilst the subject of the interpleader proceeding were payments due under an Indigenous Land Use Agreement (ILUA), the interpleader application was not an application under Pt 3 of the NTA that relates to native title. It follows that s 85A does not apply to the proceeding.

13    In both Murray v Native Title Registrar [2003] FCA 45 at [9] (approved by the Full Court in Murray FC at [28] in so far as it applied to an original, as opposed to an appellate, proceeding) and Fesl at [19], the Court had regard to the apparent policy underpinning s 85A when exercising the discretion with respect to the award of costs, even though the section was not applicable to the proceeding. In Burragubba, however, Edelman J expressed the view that the approach taken in Fesl and Murray should be confined to cases that involve construction of the NTA (at [23]-[32]). His Honour reasoned that, when s 85A was introduced into the NTA, the general costs principles were well understood. Section 85A altered the general costs principles, but only in relation to matters falling within the scope of “proceedings” covered by s 85A. Parliament could have, but did not, extend s 85A to all proceedings that relate to native title rights and interests.

14    The reasoning of Edelman J is persuasive. The present proceeding concerned the proper construction of an ILUA and whether the respondent company, BMAC, fulfilled the requirements to receive payments under the ILUA. It is not a proceeding that is covered by s 85A, and there is no reason to suspend the usual principles concerning the award of costs in this Court.

Should an order for costs be made?

15    As stated above, usually the discretion to award costs is exercised in favour of a successful party. The basis for this “usual order as to costs” is not to penalise a losing party, but to compensate a successful party against the costs incurred by reason of the legal proceeding.

16    BMAC submitted that the modern approach to an order for costs is to assess success having regard to the outcome of particular issues in the proceedings, relying upon Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 (Apotex). BMAC argued that, while the appellants raised nine grounds of appeal (and which the Court found to be unnecessarily prolix), they succeeded on one ground which the Court described as the central ground. BMAC submitted that it incurred considerable costs in opposing the prolix grounds which the appellants either abandoned or were unsuccessful. In those circumstances, the appropriate order is for the parties to bear their own costs.

17    It is correct that this Court criticised the formulation of the appellants’ grounds of appeal. However, the criticism was principally directed to the form in which the grounds were stated. The grounds were unnecessarily prolix because they intermingled grounds of appeal with argument and contentions. The central ground of appeal, which was determined by the Court, was recognised by BMAC in its written and oral submissions. We do not accept that the formulation of the appellants’ grounds of appeal caused BMAC additional costs.

18    Further, the mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to apportion costs on an issue-by-issue basis: Australian Trade Commission v Disktravel [2000] FCA 62 at [3]-[4]; The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8]. In Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192 (Firebird), the High Court observed (at [6]) that, if the event of success cannot be seen as contestable by reference to how separate issues have been determined, then applications regarding costs on an issue-by-issue basis should not be encouraged. Those principles were accepted in Apotex, which (at [298]) cited the High Court’s observations in Firebird.

19    The appellants’ success on this appeal is not contestable. There was no significant issue on which BMAC was successful and the outcome of the appeal cannot be described as mixed. In the circumstances, costs should be awarded in favour of the appellants.

Who should be liable for the appellants’ costs?

20    The ordinary rule is that the unsuccessful party is required to pay the costs of the successful party. In this case, BMAC has been placed into administration and has no source of funds. It follows that BMAC would be unable to satisfy any order for the payment of costs to the appellants.

21    For that reason, the appellants have applied for an order that their costs be paid by certain non-parties to the proceeding, being the three directors of BMAC who resolved to place BMAC into administration (Ian Brown, Grace Munro, and Sharmaine Dodds), the lawyer who purported to represent BMAC in the proceeding up until the appointment of the administrator (Jovan Sarai of Safe Harbour Lawyers), and the administrator of BMAC (Bruce Gleeson of Jones Partners).

22    The Court has power to make costs orders against non-parties: Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 229. However, the court will only make a non-party costs order where the interests of justice justify a departure from the general rule that only parties to proceedings may be subject to costs orders. Although the categories of cases in which a non-party cost order may be made are not closed, such orders are usually made where the non-party has a close connection with the proceeding, typically through controlling or funding the proceeding or standing to benefit from the proceeding.

23    As the appeal reasons disclose, the conduct of the three directors, Mr Brown, Ms Munro, and Ms Dodds, and their legal advisor, Mr Sarai, in the events leading up to the proceeding below warrants criticism. However, that is not a sufficient basis upon which the Court will make a non-party costs order. There is no evidence before the Court to show that the three directors and their legal advisor funded or controlled the proceeding, and no finding can be made that they are the “real party” to the litigation. Certainly, it was by their conduct that BMAC was placed into administration, but as far as the evidence reveals it was the administrator who decided to bring the application for the distribution of the funds held by the Court for the benefit of the Daylight family. As far as the Court is aware, the administrator funded the proceeding from his own resources. A further difficulty with the appellants’ submission that a costs order should be made against the three directors and their legal advisor is that no application has been served on them and those persons have not been given an opportunity to be heard on such an application. It would be procedurally unfair for the Court to make an order against them in those circumstances: see generally Knight v FP Special Assets Ltd (1992) 174 CLR 178 (Knight) at 203 (Dawson J); Ruhani v Director of Police (2005) 222 CLR 489 at [238] (Kirby J).

24    It remains to consider whether an order for the payment of costs should be made against BMAC’s administrator, Mr Gleeson. The interlocutory application filed on behalf of the appellants, in respect of which they were successful on appeal, sought an order for the payment of their costs by the administrator. Although the notice of appeal did not expressly seek an order for the payment of costs by Mr Gleeson, we consider that Mr Gleeson was sufficiently on notice from the underlying interlocutory application that, if they were successful, the appellants would seek costs against him personally. The submissions filed by BMAC on the question of costs anticipated that the appellants would seek an order for costs from the administrator personally.

25    In certain circumstances, the Court will make an order for costs against a controller (including liquidators and receivers) of an insolvent company. In Knight, Mason CJ and Deane J observed (at 192-193, Gaudron J agreeing):

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.

26    However, an order for costs is not made against a controller of an insolvent company merely because the controller is the relevant decision maker for the company. Liquidators have been recognised as holding a special position in relation to the company by virtue of their statutory position such that some impropriety in the conduct of the proceeding must be shown before a non-party costs order would be made against a liquidator: see generally Bent v Gough (1992) 36 FCR 204 at 210-211 (Black CJ) and Macks v Hedley (1999) 94 FCR 188 at 216-217. In our view, the same principles are applicable to an administrator appointed pursuant to s 436A of the Corporations Act 2001 (Cth). A useful summary of the applicable principles was given by Hodgson JA (with whom Ipp and Basten JJA agreed) in Silvia v Brodyn Pty Limited [2007] NSWCA 55; 25 ACLC 385 at [48]-[55].

27    In our view, the circumstances of the present case do not justify a costs order being made against Mr Gleeson personally. The application brought by Mr Gleeson in the interpleader proceeding on behalf of BMAC was ultimately unsuccessful, but we would not characterise the application as unreasonable. Further, the evidence before us does not support a conclusion that Mr Gleeson brought the application for his personal benefit or acted with impropriety. It is concerning that, after being placed into administration, BMAC incurred substantial expenses comprising fees charged by the administrator and his legal representatives and that, if BMAC succeeded on its application, the fees charged by the administrator and his legal representatives to BMAC would have constituted a very large proportion of the amount of the funds held by the Court for the benefit of the Daylight family (see appeal reasons at [96] and [158]). Despite that, we do not consider that Mr Gleeson’s conduct of the proceeding can be described as improper.

28    For those reasons, we do not consider that a non-party costs order should be made against the three directors of BMAC who resolved to place BMAC into administration, the lawyer who purported to represent BMAC in the proceeding up until the appointment of the administrator, or the administrator of BMAC.

29    In the circumstances of the present case, the appropriate order is for the appellants’ costs to be paid out of the funds in Court held for the benefit of the Daylight family. As explained by Rares J in QGC Pty Limited v Alberts (No 2) [2021] FCA 540 at [80], the money held in Court pursuant to the orders made in the interpleader proceeding is held on trust for the person or persons that the Court finds beneficially entitled to receive it based on the outcome of the proceeding; and the money will need to be paid ultimately to, or at the direction of, the persons beneficially entitled, which are likely to be the families as provided in cl 1.1 of the ILUA. The appellants have an interest in the funds in Court held for the benefit of the Daylight family, and the application was brought by them to protect those funds for the benefit of all members of the Daylight family who have an interest in the funds. The application was properly pursued and the appellants were successful. It would be unfair for the appellants to bear the burden of the costs that have been incurred to protect the funds held in Court for the benefit of all members of the Daylight family.

30    The circumstances of the present case are analogous to those concerning beneficiaries of a trust who properly and reasonably incur legal costs in connection with the administration of the trust. Without stating a rigid rule, such costs are ordinarily payable out of the trust (although the beneficiary will usually be ordered to pay the costs of an unsuccessful appeal): Sheehy v Mitchell Crane Hire Pty Ltd (1991) 104 FLR 96 at 106; see generally GE Dal Pont, The Law of Costs, (LexisNexis, 5th ed 2021) at [10.16]. The usual order in these circumstances is for the costs to be quantified on an indemnity basis, being an indemnity for all costs properly and reasonably incurred. This reflects the usual order made in favour of a trustee who has reasonably incurred costs in acting for the benefit of the trust (see Re Beddoe [1893] 1 Ch 547 at 558 (Lindley LJ) and 562 (Bowen LJ)), and an analogous approach is taken in the case of beneficiaries (see Re Buckton [1907] 2 Ch 406 at 413-15). Under the FCR, the phrase “costs on an indemnity basis” is defined in Sch 1 to mean “costs as a complete indemnity against the costs incurred by the party in the proceeding, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them”.

Conclusion

31    In conclusion, the appellants should receive their costs of the appeal on an indemnity basis. In circumstances where the respondent company, BMAC, is insolvent, the appropriate order is that the appellants’ costs of the appeal, quantified on an indemnity basis, be paid out of the funds being held by the Court for the benefit of the Daylight family in priority to any other distribution of those funds. The payment should be made upon the appellants providing to the Court a certificate of taxation issued by a taxing officer under r 40.32 of the FCR quantifying the appellants’ costs on an indemnity basis.

Associate:

Dated:    11 April 2025

SCHEDULE OF PARTIES